<PAGE>
As Filed with Securities and Exchange Commission on February ___, 1998
Registration No. 333-___
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
COMPUTERIZED THERMAL IMAGING, INC.
(EXACT NAME OF THE REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
NEVADA 3815 87-0458721
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
476 HERITAGE PARK BOULEVARD, SUITE 210
LAYTON, UTAH 84041
(801) 776-4700
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF THE REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
DAVID A. PACKER WITH A COPY TO:
PRESIDENT NORMAN T. REYNOLDS, ESQ.
476 HERITAGE PARK BOULEVARD, SUITE 210 LOOPER, REED, MARK & MCGRAW
LAYTON, UTAH 84041 1300 POST OAK BOULEVARD, SUITE 2000
(801) 776-4700 HOUSTON, TEXAS 77056
(NAME, ADDRESS, INCLUDING ZIP CODE, (713) 986-7000
AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE FOR THE REGISTRANT)
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement has been declared effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE (1) OFFERING PRICE (1) FEE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Newly Issued Shares . . . . . . . . . . 18,229,167 $0.675 $12,304,688 $3,629.88
Shares Underlying Compensation Warrants 2,552,083 $0.675 $1,722,656 $508.18
---------- --------- ------------- ---------
Common Stock to be Resold (2):
Shares Outstanding . . . . . . . . . 5,287,633 $0.675 $3,569,152 $1,052.90
Shares Underlying Resale Warrants . . 839,300 $2.50 $2,098,250
2,090,550 $2.50 $5,226,375
344,100 $5.00 $1,720,500
100,000 $2.00 $200,000
50,000 $1.50 $750,000
416,665 $0.72 $299,997 $3,037.68
Shares Underlying Options . . . . . . 2,000,000 $1.25 $2,500,000
1,250,000 $0.70 $875,000
500,000 $1.25 $625,000
500,000 $0.97 $485,000
2,000,000 $0.60 $1,200,000
275,000 $0.75 $206,250 $1,737.92
Shares Underlying Debentures . . . . . 297,619 $0.675 $200,893 $59.26
---------- --------- ------------- ---------
Total . . . . . . . . . . . . . . . . . 36,732,117 $33,985,861 $10,025.82
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c).
(2) Common Stock to be resold includes shares of the Common Stock underlying
certain outstanding securities which are exercisable for or convertible
into shares of the Common Stock which have not yet been exercised or
converted.
(3) Based upon the average of the bid and ask prices of the Common Stock
reported on the OTC Bulletin Board on February 25, 1998.
-------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
COMPUTERIZED THERMAL IMAGING, INC.
Cross-Reference Sheet
showing location in the Prospectus of
Information Required by Items of Form SB-2
<TABLE>
FORM SB-2 ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
--------------------------------- ----------------------
<S> <C> <C>
1. Front of Registration Statement and
Outside Front Cover of Prospectus . . . . . . . . . . . . Outside Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus . . . . . . . . . . . . . . . . . . . Inside Front Cover Page; Outside Back Cover Page
3. Summary Information and Risk Factors. . . . . . . . . . . Prospectus Summary; Risk Factors; The Company
4. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . Use of Proceeds
5. Determination of Offering Price . . . . . . . . . . . . . Outside Front Cover Page; Risk Factors
6. Dilution. . . . . . . . . . . . . . . . . . . . . . . . . Dilution
7. Selling Security-Holders. . . . . . . . . . . . . . . . . Plan of Distribution and Selling Stockholders
8. Plan of Distribution. . . . . . . . . . . . . . . . . . . Plan of Distribution and Selling Stockholders
9. Legal Proceedings . . . . . . . . . . . . . . . . . . . . Business - Litigation
10. Directors, Executive Officers, Promoters
and Control Persons . . . . . . . . . . . . . . . . . . . The Company; Management - Executive Officers and
Directors
11. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . . . . . . Principal Stockholders
12. Description of Securities . . . . . . . . . . . . . . . . Description of Securities
13. Interest of Named Experts and Counsel . . . . . . . . . . *
14. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities. . . . . . *
15. Organization Within Last Five Years . . . . . . . . . . . The Company
16. Description of Business . . . . . . . . . . . . . . . . . Business
17. Management's Discussion and Analysis
or Plan of Operation. . . . . . . . . . . . . . . . . . . Management's Discussion and Analysis of Financial
Condition and Results of Operations
18. Description of Property . . . . . . . . . . . . . . . . . Business
19. Certain Relationships and Related Transactions. . . . . . Management - Certain Transactions
20. Market for Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . Risk Factors; Price Range of Common Stock and
Dividend Policy; Description of Securities
21. Executive Compensation. . . . . . . . . . . . . . . . . . Management - Executive Compensation
22. Financial Statements. . . . . . . . . . . . . . . . . . . Financial Statements
23. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure. . . . . . . . . . . . . . . . . . . . . . . . *
</TABLE>
- ----------
(*) None or Not Applicable
<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY 27, 1998
COMPUTERIZED THERMAL IMAGING, INC.
ISSUANCE OF 20,781,250 SHARES OF COMMON STOCK
RESALE OF 15,950,867 SHARES OF COMMON STOCK
This Prospectus relates to the issuance by Computerized Thermal Imaging,
Inc., a Nevada corporation (the "Company") to an unrelated investor of an
aggregate of 20,781,250 shares of the common stock of the Company, $0.001 par
value per share (the "Common Stock"). Of the 20,781,250 shares to be issued
by the Company (i) 18,229,167 shares are to be issued in connection with the
purchase of such shares by the investor (the "Newly Issued Shares"), and (ii)
2,552,083 shares are to be issued upon the exercise of warrants to be issued
to such investor (the "Compensation Warrants") which become exercisable upon
issuance at variable prices based on the sales price of shares of the Common
Stock and expire on the fifth anniversary of the date of issuance. This
Prospectus also relates to the resale of 15,950,867 shares of the Common
Stock which may be sold by the holders thereof (the "Selling Stockholders")
from time to time as market conditions permit in the market, or otherwise, at
prices and terms then prevailing or at prices related to the then current
market price, or in negotiated transactions. The shares to be resold include
(i) 5,287,633 shares issued and outstanding; (ii) 3,840,615 shares underlying
outstanding warrants exercisable at prices ranging from $0.72 to $5.00 per
share which expire on various dates ranging from March 31, 1999 to March 13,
2002 (the "Resale Warrants"); (iii) 6,525,000 shares underlying outstanding
options exercisable at prices ranging from $0.60 per share to $1.25 per share
which expire automatically on various dates ranging from July 21, 2000 to
June 12, 2005 (sometimes hereinafter collectively referred to as the
"Options"); and (iv) 297,619 shares underlying an outstanding debenture of
the Company in the original principal amount of $125,000, which bears
interest at eight percent, matures on March 13, 2000, and is convertible
following the effective date of this Prospectus at a conversion price equal
to the lesser of 77 percent of the average closing bid price of the Common
Stock for the five consecutive trading days prior to conversion or the
average bid price of the Common Stock for the five consecutive trading days
prior to closing of the debenture offering (sometimes hereinafter referred to
as the "Debenture"). Unless otherwise specified, the Compensation Warrants
and the Resale Warrants are sometimes collectively referred to herein as the
"Warrants." See "Management - Stock Options and Restricted Stock,"
"- Certain Transactions," "Description of Securities," and "Plan of
Distribution and Selling Stockholders." As used herein, the term "Offering"
includes all shares of the Common Stock covered by this Prospectus. Shares
offered by the Selling Stockholders may be sold in unsolicited ordinary
brokerage transactions or privately negotiated transactions between the
Selling Stockholders and purchasers without a broker-dealer. A current
prospectus must be in effect at the time of the sale of the shares of the
Common Stock to which this Prospectus relates. Each Selling Stockholder or
dealer effecting a transaction in the registered securities, whether or not
participating in a distribution, is required to deliver a current prospectus
upon such sale. The Newly Issued Shares and the shares of the Common Stock
to be issued by the Company upon the exercise of the Compensation Warrants
are being offered on a "best efforts, no minimum" basis. The Company will
retain all proceeds from the sale of the Newly Issued Shares and from the
exercise of the Compensation Warrants, regardless of the number purchased or
exercised. Such proceeds (approximately $8,429,166) will be used for working
capital and general corporate purposes. The Company will not receive any
proceeds from the resale of the Common Stock by the Selling Stockholders.
The Common Stock is quoted on the OTC Bulletin Board of the National
Association of Securities Dealers, Inc. (the "NASD") under the symbol "COII."
On January 30, 1998, the closing bid and ask prices of the Common Stock were
$0.51 and $0.53 per share, respectively. There can be no assurance that an
active trading market will be sustained. See "Price Range of Common Stock
and Dividend Policy."
---------------------------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE
A HIGH DEGREE OF RISK AND SHOULD NOT BE PURCHASED BY
ANYONE WHO CANNOT AFFORD THE LOSS OF HIS ENTIRE INVESTMENT.
SEE "RISK FACTORS" ON PAGE 7.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------------
THE DATE OF THIS PROSPECTUS IS ______, 1998
<PAGE>
Information contained herein is subject to completion or amendment.
A registration statement relating to
these securities has been filed with the Securities and Exchange
Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute
an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any State in which such
offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such State.
<PAGE>
CAUTIONARY STATEMENT
INFORMATION CONTAINED IN THIS PROSPECTUS CONTAINS "FORWARD-LOOKING
STATEMENTS" WHICH CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY
SUCH AS "MAY," "WILL," "SHOULD," "EXPECT," "ANTICIPATE," "ESTIMATE" OR
"CONTINUE" OR THE NEGATIVES THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE
TERMINOLOGY. THE CAUTIONARY STATEMENTS SET FORTH UNDER THE CAPTION "RISK
FACTORS" AND ELSEWHERE IN THIS PROSPECTUS IDENTIFY IMPORTANT FACTORS WITH
RESPECT TO SUCH FORWARD-LOOKING STATEMENTS, INCLUDING CERTAIN RISKS AND
UNCERTAINTIES, THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE IN SUCH FORWARD-LOOKING STATEMENTS.
TABLE OF CONTENTS
PAGE
----
Available Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Price Range of Common Stock And Dividend Policy. . . . . . . . . . . . . . . 18
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Principal Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Description of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . 44
Plan of Distribution And Selling Stockholders. . . . . . . . . . . . . . . . 50
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Index to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . .F-1
2
<PAGE>
No person is authorized to give any information or to make any
representation other than those contained in this prospectus, and if given or
made, such information or representation must not be relied upon as having
been authorized by the Company or any underwriter. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby to or from any person in any jurisdiction in which
such offer or solicitation would be unlawful. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that there has been no change in the business or affairs of
the Company since the date hereof or that the information in this Prospectus
is correct as of any time subsequent to the date as of which such information
is furnished.
AVAILABLE INFORMATION
The Company has not been previously subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), although it will become subject to the reporting
requirements of the Exchange Act following the registration of the securities
described herein. In accordance with the Exchange Act, the Company will file
reports, proxy statement, and other information with the Securities and
Exchange Commission (the "Commission"). In addition, the Company intends to
furnish its stockholders with annual reports containing audited financial
statements and such interim reports as it deems appropriate.
Pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), the Company has filed a Registration Statement on Form SB-2 with the
Commission of which this Prospectus forms a part. This Prospectus does not
contain all of the information contained in the Registration Statement and
the exhibits thereto, certain parts of which have been omitted in accordance
with rules of the Commission. Any statements contained herein concerning the
provisions of any document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission are not necessarily complete, and, in
each instance, reference is made to the copy of the document so filed for a
more complete description of the matter involved, and each such statement is
qualified in its entirety by such reference. The Registration Statement and
the exhibits thereto are on file with, and may be examined without charge, at
the following public reference facilities of the Commission: 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549; 7 World Trade Center, Suite
1300, New York, New York 10048; and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such material may be
obtained, at prescribed rates, from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. The
Commission maintains an Internet web site that contains information,
including registration statements, of issuers who file electronically with
the Commission. The address of that web site is http://www.sec.gov.
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES
THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED
HEREIN, THE FINANCIAL, BUSINESS ACTIVITIES, MANAGEMENT AND OTHER PERTINENT
INFORMATION HEREIN RELATE ON A CONSOLIDATED BASIS TO THE COMPANY AND ITS 80
PERCENT OWNED SUBSIDIARY, THERMAL MEDICAL IMAGING, INC. INVESTORS ARE URGED
TO READ THIS PROSPECTUS IN ITS ENTIRETY AND CAREFULLY CONSIDER THE
INFORMATION SET FORTH UNDER THE HEADING "RISK FACTORS." ADDITIONALLY, UNLESS
OTHERWISE INDICATED, ALL COMMON STOCK SHARE AND PER SHARE DATA AND
INFORMATION IN THIS PROSPECTUS ASSUME NO CONVERSION OF OUTSTANDING DEBENTURES
OR EXERCISE OF OUTSTANDING OPTIONS OR WARRANTS INTO SHARES OF THE COMMON
STOCK, OR THE ISSUANCE OF ANY UNVESTED SHARES OF THE RESTRICTED STOCK.
MOREOVER, UNLESS OTHERWISE INDICATED, ALL MONETARY AMOUNTS HAVE BEEN
EXPRESSED IN UNITED STATES DOLLARS.
THE COMPANY
Computerized Thermal Imaging, Inc. (the "Company") was incorporated on
June 10, 1987 in the State of Nevada as Business Helpers, Inc. The Company
amended its Articles of Incorporation on August 25, 1989 to effect a name
change to DTI Dorex, Ltd. and again on November 3, 1989 to its current name.
In April 1992, the Company further amended its Articles of Incorporation to
provide for a capital structure of 100,000,000 shares of common stock, par
value of $0.001 per share, and 3,000,000 shares of preferred stock with such
designations, preferences and other features as may be required by the
Company's Board of Directors. In 1988, the Company, through the issuance of
shares of its Common Stock, acquired substantially all of the assets of
Thermal Imaging, Inc., an Oregon corporation (hereinafter sometimes referred
to as "TII"), which assets consisted primarily of certain intellectual
property regarding thermal imaging intellectual property.
The Company is a development stage company that is a medical imaging
systems integrator producing a computerized clinical thermal imaging
diagnostic system (the "CTI System") that has been trademarked under the name
COMPUTERIZED THERMAL IMAGING. The Company's plans to license the CTI System
to various health care providers such as hospitals, HMOs and free standing
image centers through "Use Agreements." Revenues will be generated under the
Use Agreements by charging the health care providers monthly for time usage
and for the disposable supplies purchased in conjunction with the CTI System.
The Company also plans to sell the CTI System to certain countries in Asia,
such as the People's Republic of China (the "PRC"), where use of thermal
imaging for medical use is more prevalent than the United States. As of the
date of this Prospectus, the PRC's Ministry of Public Health has been unable
to obtain funding for a project for which the Company initially contracted in
1995, although it maintains its intention to pursue placement of the CTI
System in its hospitals. The Company does not intend to make material
expenditures for this project until funding is obtained for the PRC.
The CTI System is currently composed of four elements. One element is a
climate controlled lab (herein referred to as a "QTA Lab"). The second
element is the examination unit, consisting of an infrared camera, imaging
monitor, high resolution printer, computer and proprietary software. The
third element of the CTI System is a digital health card that encodes a
patient's thermal image for subsequent comparison by physicians, or even the
patient's entire medical record, in a digital format on a plastic card the
size of a credit card. The fourth element is a proprietary medical protocol.
The Company's 80 percent owned subsidiary, Thermal Medical Imaging, Inc., a
Nevada corporation (herein sometimes referred to as "TMI") utilizes the CTI
System specially configured as a breast cancer system which is a
non-invasive, non-contact procedure that does not involve breast compression
or exposure to radiation (the "TMI System"), and which is comprised of an
infrared camera, a central processing unit, a display unit, examination
equipment for which a patent application has been filed, and a power
distribution unit. The TMI System employs a proprietary patient positioning
system in the data acquisition process. On the date of this Prospectus, the
TMI System is undergoing clinical testing at three independent sites
conducted by university teaching hospitals in accordance with a protocol
which management expects to lead to pre-market approval (hereinafter
sometimes referred to as "PMA") by the United States Food and Drug
Administration (the "FDA"). See "Business."
The Company's principal executive office is located at 476 Heritage Park
Boulevard, Suite 210, Layton, Utah 84041, and its telephone number is (801)
776-4700. TMI's principal executive office is located at 1760 South
Telegraph Road, Suite 202, Bloomfield Hills, Michigan 48302, and its
telephone number is (248) 745-4960.
4
<PAGE>
THE OFFERING
Common Stock Outstanding Prior
to the Offering................ 44,568,975 shares (1)
Common Stock to be Issued........ 20,781,250 shares (2). See "Plan of
Distribution and Selling Stockholders."
Common Stock to be Resold........ 15,950,867 shares (3). See "Plan of
Distribution and Selling Stockholders."
Use of Proceeds.................. Working capital. See "Use of Proceeds."
OTC Bulletin Board Symbol........ COII
- ----------
(1) Includes shares of the Common Stock issued and outstanding as of
February 6, 1998. Does not include (i) 3,840,615 shares underlying the
Resale Warrants; (ii) 7,825,000 shares issuable upon exercise of
outstanding options; and (iii) 297,619 shares underlying the Debenture.
See "Management - Stock Options and Restricted Stock" and "Description of
Securities."
(2) Includes (i) 18,229,167 Newly Issued Shares; and (ii) 2,552,083 shares to
be issued upon the exercise of the Compensation Warrants. The number of
Newly Issued Shares and shares underlying Compensation Warrants being
registered hereby generally are calculated based on the formula set forth
in the Bristol Asset Management, L.L.C. Investment Agreement (the
"Investment Agreement"). The formula used to calculate the number of Newly
Issued Shares being registered hereunder is as follows: 7,000,000 DIVIDED
BY 74 percent x $0.52 (the lowest sales price for the Common Stock on the
principal exchange of the Company during the 10 trading days prior to
January 30, 1998) = 18,229,167 shares of the Common Stock. The number of
shares of the Common Stock underlying the Compensation Warrants was
calculated as follows: 18,229,167 x 14 percent = 2,552,083 shares. If the
sales price for the Common Stock used in the formula is different than the
example of $0.52 contained herein, then the number of Newly Issued Shares
and the number of shares underlying the Compensation Warrants will change.
However, for the purposes of this Prospectus, the formula price of $0.52
per share is being used. If the sales price is greater than $0.52 per
share, a lesser number of shares of the Common Stock will be issued. See
"Plan of Distribution and Selling Stockholders."
(3) Includes (i) 5,287,663 shares issued and outstanding; (ii) 3,840,615 shares
underlying the Resale Warrants; (iii) 6,525,000 shares underlying the
Options; and (iv) 297,619 shares underlying the Debenture (calculated based
on the outstanding principal amount of $125,000 and assuming a conversion
rate of $0.42 per share of the Common Stock which represents 77 percent of
the average closing bid price for the five consecutive trading days prior
to January 30, 1998). See "Plan of Distribution and Selling Stockholders."
5
<PAGE>
SUMMARY SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table presents summary historical data of the Company on a
consolidated basis as of June 30, 1997 and 1996 and for the fiscal years
ended June 30, 1997 and 1996, respectively, which present the consolidated
results of continuing operations of the Company and its 80 percent owned
subsidiary, Thermal Medical Imaging, Inc. This historical data as of June
30, 1997 and 1996 and for the fiscal years then ended has been derived from
the Company's audited Financial Statements included elsewhere in this
Prospectus. The summary historical consolidated financial information should
be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Company's Consolidated
Financial Statements and the Notes thereto appearing elsewhere in this
Prospectus.
<TABLE>
Six Months Ended Years Ended
December 31, June 30,
------------ --------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA: (Unaudited) (Unaudited)
Revenues, net $ -- $ 55,815 $ 55,815 $ 125,000
Other income 1,247 3,097 5,762 9,869
----------- ----------- ----------- -----------
Total revenue 1,247 58,912 61,577 134,869
Loss from operations (1,615,916) (723,245) (2,112,843) (2,828,250)
Net loss (1,615,916) (723,245) (2,112,843) (2,828,250)
Net loss per weighted-average share
of Common Stock outstanding (0.04) (0.02) (0.06) (.0.09)
Number of weighted-average shares
of Common Stock outstanding 39,004,006 32,906,563 33,803,045 30,875,600
BALANCE SHEET DATA:
Current assets $ 263,184 $ 81,509 $ 196,056 $ 163,928
Total assets 2,899,914 959,613 2,257,737 770,974
Current liabilities 1,967,344 588,577 1,671,448 226,674
Total liabilities 2,292,344 608,557 2,346,448 226,674
Stockholders' equity (deficit) 607,570 (178,944) (88,711) 544,300
Working capital (deficit) (1,704,160) (507,069) (1,475,392) (62,746)
</TABLE>
6
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE COMPANY INVOLVES CERTAIN RISKS. PROSPECTIVE INVESTORS
SHOULD CAREFULLY REVIEW THE FOLLOWING FACTORS TOGETHER WITH THE OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS PRIOR TO MAKING AN INVESTMENT DECISION.
DEVELOPMENT STAGE COMPANY. Since inception, the Company has been engaged
almost exclusively in organizational and research and development activities,
and has only recently begun product commercialization. Accordingly, as a
development stage company, the Company has a limited operating history upon
which an evaluation of the Company's prospects can be made. Consequently, the
likelihood of success must be considered in view of all of the risks, expenses
and delays inherent in the establishment of a new business, including, but not
limited to, expenses and delays of commencing a new business, slower than
forecasted manufacturing and marketing activities, the uncertainty of market
assimilation of the Company's products and other unforeseen factors.
Furthermore, there can be no assurance that the Company's proposed business as
described herein will prove successful or that the Company will ever be able to
operate profitably.
LIMITED OPERATING HISTORY; CONTINUING OPERATING LOSSES. The Company was
formed in June 1987 and has not generated significant revenues to date. As of
June 30, 1997, the Company had an accumulated deficit of $13,010,022. For the
fiscal years ended June 30, 1997 and 1996, the Company had operating losses of
$2,112,843 and $2,828,250, respectively, resulting principally from costs
incurred in research and development efforts and other costs of operations. The
Company expects that operating losses will continue until such time as product
sales generate sufficient revenues to fund its continuing operations, as to
which there can be no assurance.
INDEPENDENT ACCOUNTANTS' REPORT; GOING CONCERN QUALIFICATION. The report
from the Company's independent accountants includes an explanatory paragraph
which describes substantial doubt concerning the ability of the Company to
continue as a going concern, without continuing additional contributions to
capital. The Company may incur losses for the foreseeable future due to the
significant costs associated with manufacturing, marketing and distributing its
CTI System and TMI System (hereinafter sometimes collectively referred to as the
"Systems" and individually referred to as a "System") and due to continual
research and development activities which will be necessary to develop
applications for the Company's thermal imaging technology. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Financial Statements - Report of Independent Accountants."
UNCERTAINTIES CONCERNING FUTURE PROFITABILITY. The Company's ability to
achieve profitability will depend, in part, on its ability to successfully
develop clinical applications and obtain regulatory approvals for its products
and to develop the capacity to manufacture and market such products on a wide
scale. There is no assurance that the Company will be able to successfully make
the transition from research and development to manufacturing and selling
commercial thermal imaging products on a broad basis. While attempting to make
this transition, the Company will be subject to all risks inherent in a growing
venture, including the need to produce reliable and effective products, develop
marketing expertise and enlarge its sales force. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
UNCERTAIN ABILITY TO MEET CAPITAL NEEDS. The Company will require
substantial additional funds for its research and development programs,
preclinical and clinical testing, development of its sales and distribution
efforts, operating expenses, regulatory processes and manufacturing and
marketing programs. The Company's capital requirements will depend on numerous
factors, including the progress of its research and development programs,
results of preclinical and clinical testing, the time and cost involved in
obtaining regulatory approvals, the cost of filing, prosecuting, defending and
enforcing any patent claims and other intellectual property rights, competing
technological and market developments, developments and changes in the Company's
existing research, licensing and other relationships and the terms of any new
collaborative, licensing and other arrangements that the Company may establish.
The Company believes that its available short-term assets will be sufficient to
meet its operating expenses and capital expenditures for a limited time, but the
Company will need to raise additional capital to meet its needs for the next 12
months. In order to meet its expected capital needs, the Company executed the
Investment Agreement with Bristol Asset Management, L.L.C. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources." The Company's cash requirements may vary
materially from
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those now forecasted due to potential future acquisitions, the progress of
research and development programs, results of clinical testing, relationships
with strategic partners, if any, competitive and technological advances,
decisions of the FDA and foreign regulatory processes and other factors.
There can be no assurance, however, that additional capital or financing will
be available when needed, or if available, will be available on acceptable
terms. Insufficient funds may prevent the Company from implementing its
business strategy or may require the Company to delay, scale back or
eliminate certain of its research and product development programs or to
license to third parties the rights to commercialize products or technologies
that the Company would otherwise seek to develop on its own.
SECURITIES LAWS ISSUES. Within the last three years of the date of this
Prospectus, the Company has raised working capital by means of the sale of its
securities through various private offerings thought to be exempt from the
registration requirements of the Securities Act or various applicable state
securities laws. In the event that any of the exemptions from registration with
respect to the sales of such securities under the Securities Act and applicable
state securities laws were not in fact available, the Company may face exposure
to claims by federal and state regulators for any such violations. In addition,
if any purchaser of the Company's securities were to prevail in a suit resulting
from a violation of the Securities Act or applicable state securities laws with
respect to the unavailability of such exemption, the Company could be liable to
return the amount paid for such securities with interest thereon, less the
amount of any income received thereon, upon tender of such securities, or for
damages if the purchaser no longer owns the securities. As of the date of this
Prospectus, management is not aware of any alleged specific violation or the
likelihood of any claim. There can be no assurance that litigation asserting
such claims will not be initiated, or that the Company would prevail in any such
litigation.
PREEMPTIVE RIGHTS ISSUES. Pursuant to Title 7, Chapter 79 of the Nevada
Revised Statutes, stockholders of corporations organized before October 1,
1991, with certain limited exceptions, have preemptive rights to acquire
unissued shares, treasury shares or securities convertible into such shares,
except to the extent limited or denied by the corporation's articles of
incorporation or by statute. The Company was incorporated on June 10, 1987,
and prior to February 1998, its Articles of Incorporation did not provide for
any limitation with respect to preemptive rights. In the various offerings
of its securities, the Company did not offer to the existing stockholders
preemptive rights to acquire any of the securities so offered. If an action
were brought for the failure by the Company to offer to its stockholders the
preemptive rights to which they were entitled, the Company could be liable in
damages. However, to the extent that any stockholders were entitled to the
right to purchase shares of the Common Stock upon the exercise of any such
preemptive rights, the Company plans to allow any such stockholders the right
to purchase their pro rata amount of such shares at the same price per share
to which they would have been entitled if such preemptive rights had been
offered in conformity with Nevada law. Any such offering of preemptive
rights will be in conformity with the Securities Act and the various states
where any such stockholders may be located. As of the date of this
Prospectus, management is not aware of any stockholder who intends to make
any claim with respect to the failure by the Company to offer any such
preemptive rights. There can be no assurance that litigation asserting such
claims will not be initiated, or that the Company would prevail in any such
litigation. On February 4, 1998, a majority of the stockholders, by written
consent, amended the Articles of Incorporation of the Company to deny
preemptive rights from and after that date with respect to the issuance of
shares of the Common Stock. However, the amendment to the Articles of
Incorporation will have no effect with respect to preemptive rights which may
have existed prior to such amendment.
SELECT CAPITAL ADVISORS, INC. DEBENTURES AND WARRANTS. On December 9,
1997, the Company filed suit against Select Capital Advisors, Inc. ("Select"),
Ronald G. Williams ("Williams"), and various other parties in the United States
District Court for the Southern District of Florida for damages and recision
with respect to the fraudulent sale of certain 12 percent convertible debentures
issued by the Company. In March 1997, the Company was introduced to Select and
Williams for the purpose of raising capital and a line of credit. Select,
Williams and several of the other defendants represented they had the
experience, reputation and resources to raise the needed money. The Company
entered into an agreement with Select to raise the needed money and paid a
$10,000 retainer. In April 1997, Select agreed to raise $1,500,000 through the
issuance of the Company's convertible debentures through an offering of the
debentures to foreign investors pursuant to an exempt offering under Regulation
S permitted by the Securities Act. Eventually, approximately $530,000 worth of
the debentures were sold. However, the Company discovered that numerous false
and misleading statements were made in connection with the sale of the
debentures, various documents were changed without the knowledge of the Company,
unlicensed broker-dealers sold the debentures, and the purchasers were not
qualified foreign investors. Beginning in June 1997, the investors began to
demand the conversion
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of the debentures and the issuance of registered shares of the Common Stock
of the Company. While the Company permitted one of the investors to
partially convert a debenture, the Company refused to issue the remaining
shares requested by other investors. In addition to its claim for damages
and rescission, the Company has alleged breach of contract with respect to
the issuance of the debentures, violations of Section 10(b) and Rule 10b-5
under the Exchange Act, misrepresentations, and market manipulation. If the
Company is successful, it will offer to repay the debentures (approximately
$530,000), less the substantial damages incurred due to the wrongful acts of
the purchasers of the debentures and/or their agents. If the Company is
unsuccessful, it will be required to issue a large number of shares of the
Common Stock, thereby diluting the existing stockholders of the Company.
Management believes that it will prevail in the litigation. See "Business -
Litigation."
CLAIMS INVOLVING STOCKHOLDERS. One stockholder has raised claims against
the Company and certain of its officers alleging misrepresentation, potential
securities violations and breach of fiduciary duties. The stockholder has made
a settlement offer to obtain additional shares of the Common Stock; however
certain directors of the Company refute the allegations and the settlement offer
has been rejected by the Company. See "Business - Litigation."
In an another matter, during the year ended June 30, 1994, the Company
issued 1,000,000 shares of the Common Stock to a former director of the Company
based upon the director's representation that he would arrange large-scale
financing by certain proposed contributors. During the year ended June 30,
1997, actions were taken to cancel the shares of the Common Stock because the
Company contends that the issuance was conditional upon the former director's
ability to arrange large-scale financing. However, the Company was recently
contacted by a lender that asserts that he had relied upon a pledge of 500,000
shares of the Common Stock by the former director as collateral for a loan. The
500,000 pledged shares of the Common Stock issued to the director are included
as issued and outstanding shares in the accompanying Consolidated Financial
Statements at June 30, 1997 and 1996. See "Business - Litigation."
PAST DUE ACCOUNTS. The Company is involved in discussions with two of its
primary vendors regarding past due accounts. The first vendor is TRW, an Ohio
corporation, performing contract software development, and strategic integration
and management services regarding the testing, development and deployment of the
Systems. The Company has become delinquent in the payment of costs and fees
under contracts with TRW (see Note 6 to the Consolidated Financial Statements
that are included elsewhere in this Prospectus) and, accordingly, TRW, although
not having filed formal legal actions, has threatened the Company that it will
be withholding delivery of source codes of developed software if the past due
amounts are not paid. If TRW carries through with its threat and withholds the
delivery of the source codes, the Company's operations would be shut down. See
"Business - Litigation."
The Company is also delinquent in payments to its primary legal counsel,
Looper, Reed, Mark & McGraw, Incorporated (the "Attorneys") for legal services
and at June 30, 1997 owed the Attorneys $198,717, and at December 31, 1997 owed
the Attorneys $296,524. In order to provide security for the amounts owed, the
Company has executed pledge agreements granting the Attorneys a security
interest in the common stock of TMI owned by the Company and in the intellectual
property of both the Company and TMI. In the event that the Attorneys are not
paid as agreed, the Attorneys could foreclose on their security interests, and
thereby become the owners of the primary assets of the Company to the exclusion
of the stockholders. See "Business - Litigation."
It should be pointed out, however, that the Company has made periodic
payments to both TRW and the Attorneys, and management believes that the
Company will continue to do so.
NEW PRODUCT DEVELOPMENT AND INTEGRATION; TECHNOLOGICAL CHANGE. The market
for the Systems is characterized by rapid technological advances, changes in
customer requirements and frequent new product introductions and enhancements.
The Company's future success will depend upon its ability to enhance and
integrate its current product line, to complete products currently under
development, to develop and introduce new products that keep pace with
technological developments, and to respond to evolving customer requirements.
Any failure by the Company to anticipate or respond adequately to technological
developments by its competitors or to changes in customer requirements, or any
significant delays in product integration, development or introduction could
result in a loss of competitiveness or revenues. Timeliness of delivery of
either a System when ordered or services for a System delivered is of critical
importance to certain customers, and the Company's failure to successfully
develop and ship such products in a timely manner could result in cancellation
of customer orders which would have a material adverse
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effect on the Company's business and results of operations. TMI has no
assurance that it can finance its development, marketing, or production
costs. In an effort to raise the needed capital, the Company has executed
the Investment Agreement with Bristol Asset Management, L.L.C. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources." However, since at the date of
this Prospectus, there is no known financing source, the Company must fund or
finance the balance of the clinical trials and any subsequent development,
operating costs, marketing and production costs until TMI develops its
business and is successful. All risk factors set out in this Prospectus for
the Company also apply to the risks of the Company's investment in TMI.
There can be no assurance that the Company will be successful in completing
its product integration efforts or in developing and marketing new products
or product enhancements on a timely or cost-effective basis, and such failure
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business -Products."
DEPENDENCE ON THE CTI SYSTEM AND THE TMI SYSTEM; UNCERTAINTY OF MARKET
ACCEPTANCE. The Company's success is dependent on the development and market
acceptance of its CTI System and the TMI System. All of the Company's revenues
will be derived from the placement or sale of the Systems for the health care
market. The market for the Systems is still relatively undeveloped and may not
experience material expansion in the near future as planned by management. In
the event that the Company's market does not develop as anticipated, the
Company's business, financial condition and results of operations would be
adversely effected. The rate of deploying the TMI System will depend upon the
degree to which clinics and physicians accept, after FDA approval, the TMI
System as complementary to mammography to detect breast cancer or as an
independent examination technology, due to the worldwide existence of
mammography equipment. TMI management believes the TMI System results will be
accepted by the medical community.
The commercial success of the Systems will depend upon their acceptance by
the medical community as useful and cost-effective. There can be no assurance
that the Company can market the Systems or that the Company will introduce new
products that achieve significant market acceptance in the future. Moreover,
when the Systems are being marketed for sale or use, new product introductions
or enhancements by the Company's competitors or the use of other technologies
could cause a decline in sales or loss of market acceptance of the Systems. In
addition, third-party payors, such as governmental programs and private
insurance plans, can indirectly affect the pricing or the relative
attractiveness of the Systems by regulating the maximum amount of reimbursement
that they will provide for the taking, storing and interpretation of medical
images. A decrease in the reimbursement amounts for imaging procedures may
decrease the amount which physicians, clinics and hospitals are able to charge
patients for such services. In management's view, the acceptability and
adaptability of the Systems could be enhanced by such a decrease because the
Systems are less costly to use and deploy than magnetic resonance imaging
("MRI") or computed tomography ("CAT") scan. In the event that the Systems and
products under development do not achieve market acceptance, the Company's
business, financial condition and results of operations could be adversely
effected. See "Business - Products" and "- Third-Party Reimbursement."
TMI DEPENDENCE ON THE COMPANY. TMI is an 80 percent owned subsidiary
of the Company that has developed the TMI System exclusively using
contributions of capital from the Company. The efficacy of the TMI System is
currently subject to confirmation in FDA clinical trials. TMI has no source
of revenue, other than contributions to its capital made by the Company,
until the clinical trials are successfully concluded and TMI is then able to
market the sale or use of the TMI System. TMI has no assurance that it can
finance its development, marketing, or production costs. Because there is no
known financing source, the Company must fund or finance the balance of the
clinical trials and any subsequent development, operating, marketing and
production costs until TMI develops its business and is successful. The
management believes that the Investment Agreement should provide the Company
with a sufficient amount of capital to fund the completion of FDA clinical
trials on the TMI System. All risk factors set forth in this Prospectus for
the Company also apply to the risk of the Company's investment in TMI.
RISKS APPLICABLE TO FOREIGN SALES. Sales of the Company's products to
foreign markets may account for a substantial portion of the Company's
forecasted revenues. Foreign sales expose the Company to certain risks,
including the difficulty and expense of maintaining foreign sales distribution
channels, barriers to trade, potential fluctuations in foreign currency exchange
rates, political and economic instability, availability of suitable export
financing, accounts receivable collections, tariff regulations, quotas, shipping
delays, foreign taxes, export licensing requirements and other
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United States and foreign regulations that may apply to the export of medical
equipment. Since a core technology component of the Systems is a highly
developed, high quality infra-red camera system, the U.S. Department of
Defense may regulate its sale to certain countries. The regulation of
medical devices worldwide also continues to develop, and there can be no
assurance that new laws or regulations will not have an adverse effect on the
Company. In addition, the Company may experience additional difficulties in
providing prompt and cost effective service of its thermal imaging systems in
foreign countries. The Company does not carry insurance against such risks.
The occurrence of any one or more of these events may individually or in the
aggregate have a material adverse effect upon the Company's business,
financial condition and results of operations. See "Business - Risks of
Doing Business in the PRC and Other Foreign Countries."
DEPENDENCE ON CONTRACTS WITH THIRD PARTIES. The Company does not
manufacture the hardware components of its Systems but rather purchases these
components from third parties in accordance with specific design specifications.
Although there is more than one manufacturer capable of manufacturing these
components, the failure of any one manufacturer to deliver its components in a
timely manner could result in a loss of business for the Company and further
result in time delays for installation of the Systems, if the Company is
required to seek and make arrangements for different manufacturers to produce
the components. Moreover, even though the Company may seek a remedy from a
manufacturer, any thermal imaging component manufactured by such third party may
be defective, resulting in a type of claim for damages against the Company for
which the Company may not have the right to claim from the manufacturer.
NEED FOR FDA AND FOREIGN GOVERNMENTAL APPROVALS; GOVERNMENT REGULATION.
The Company does not have specific FDA approval for the CTI System, and as
result, the Company must rely on nonspecific payment codes for billing purposes
in connection with third party reimbursement. In the opinion of management,
without a payment code, many physicians will not use the CTI System. Management
believes no FDA approval is required for health care physicians or radiologists
to use the CTI System, but the Company believes that broad acceptance for use of
the CTI System will require verification of clearance from the FDA. The
Company's products may be regulated as medical devices by the FDA under the
Federal Food, Drug and Cosmetic Act (the "FDC Act") and the regulations
promulgated thereunder. As such, these devices require compliance with either
FDC Act Section 510(k) under which the Company currently relies, or approval of
a premarket approval application (herein referred to as "PMA") by the FDA prior
to commercialization. Satisfaction of applicable regulatory requirements may
take several years and varies substantially based upon the type, complexity and
novelty of such devices, as well as the clinical procedure. Filings and
governmental approvals may be required in foreign countries before the devices
can be marketed in these countries. There can be no assurance that further
clinical trials of the Systems or of any future products will be successfully
completed or, if they are completed, that any requisite FDA or foreign
governmental clearances or approvals will be obtained. FDA or other
governmental clearances or approvals of products developed by the Company in the
future may require substantial filing fees, or costs to conduct clinical trials,
which could limit the number of applications sought by the Company and may
entail limitations on the indicated uses for which such products may be
marketed. In addition, approved or cleared products may be subject to
additional testing and surveillance programs required by the FDA and other
regulatory agencies, and product approvals and clearances could be withdrawn for
failure to comply with regulatory standards or by the occurrence of unforeseen
problems following initial marketing. The Company is also required to adhere to
applicable requirements for current good manufacturing practices and other
health requirements, to engage in extensive record keeping and reporting and to
comply with the FDA's product labeling, promotional and advertising
requirements. See "Business - Government Regulation."
DEPENDENCE UPON KEY PERSONNEL. Although the Systems may have application
for detection or diagnosis of numerous soft tissue ailments, physicians must
broadly accept the Systems as complementary detection technology to prescribe
its use to create a material market for its use. Many physicians generally
equate the Systems, upon first introduction, with the predecessor technology of
"thermography," an analog infra-red camera system without the Company's computer
algorithm analysis of computed thermal data using high quality thermal imaging
cameras. Educating doctors of the fact that the Systems are new technology
could take time and result in delays in financial revenues forecasts. Although
the Company depends on outside manufacturing and servicing capabilities, there
are and will be acute dependence upon certain key members of management and
technical personnel. Particular reliance will be made on David A. Packer, the
President of the Company, formerly an employee of TRW. Furthermore, a part of
the Company's current marketing emphasis is based upon opportunities in the PRC
and Thailand. General Richard V. Secord, the Company's Chief Operating Officer,
has been a key person in negotiating the Company's inroads into
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these markets. Moreover, Kenneth M. Dodd, the Company's Executive Vice
President, and TMI's President, and two other key employees of TMI have been
developing the TMI System configured for breast cancer detection. Those
three employees of TMI have conducted all communications with the FDA in
obtaining a PMA for TMI's use. Certain other key personnel will be added on
an "as needed" basis to complete the tactical management group. Because of
the specialized nature of the Company's business, the Company's ability to
maintain its competitive position will depend, in part, upon its ability to
attract and retain highly qualified people in the areas of management and
technology while maintaining relationships with leading research institutions.
However, if the Company wishes to expand its scope of product and market
coverage, there can be no assurance that the Company will be able to attract
the personnel on a timely basis to accomplish such advancements. The loss of
the services of Messrs. Packer or Dodd or General Secord, or other key
individuals may adversely affect the Company's business and prospects. At
this time, the Company does not carry key man life insurance on any of its
employees. See "Business" and "Management."
ABILITY TO MANAGE PROJECTED GROWTH. Should the Company's growth strategy
prove successful, a significant strain may be placed on the Company's customer
service and support operations, sales, administrative personnel and other
resources. The Company's ability to manage future growth, if any, effectively
will require the Company to continue to improve its operational, management and
financial systems and controls and to train, motivate and manage its employees.
In particular, if financing or equity raising efforts are successful, the
Company will be required in the near future to recruit a significant number of
technically qualified personnel to expand its direct sales force and customer
support group. As a result, the Company is subject to certain growth-related
risks, including the risk that it will be unable to retain the necessary
personnel or acquire other resources necessary to service such growth
adequately. There can be no assurance that the Company can expand this resource
as rapidly as necessary or finance the working capital needed for such
expansion. If the Company's management is unable to effectively manage future
growth, if any, the Company's business, financial condition and results of
operations could be adversely effected.
COMPETITION. Competition in some markets for the Systems may be intense.
A large number of companies offer imaging systems which may be offered as
competitive with those of the Company. Many of the Company's competitors are
larger and more established and have substantially more financial, technical,
research and development and marketing resources than the Company. Several
large multi-national corporations, including Siemens, offer competitive
products, such as X-ray or MRI equipment. Other large corporations have the
technical and financial ability to design and market competitive products, and
some of them have produced and marketed such products in the past. There can be
no assurance that such large potential competitors will not elect to reenter the
market competing with the Systems, which could have a material adverse effect on
the Company's ability to sell the Systems. There can be no assurance that the
Company will be able to compete successfully in the future, or that future
competition for product sales will not have a material adverse effect on the
business, financial condition and results of operations of the Company. See
"Business - Competition." Most other imaging devices address "anatomical or
structural patient issues" and are therefore complementary and not competitive
to the CTI System. Large companies such as GE, Siemens and others have the
resources to attempt to compete in the long term with the Company in the
physiological assessment of medical issues, but at present are not deemed by
management to be a threat.
UNCERTAIN PROTECTION FOR INTELLECTUAL PROPERTY; POSSIBLE CLAIMS OF OTHERS.
The Company generally does not rely solely on patent protection with respect to
its products. However, the Company does rely on a combination of copyright and
trade secret laws, employee and third-party nondisclosure agreements, and other
protective measures to protect intellectual property rights pertaining to its
products and technology. As of the date of this Prospectus, no patents have
been issued to the Company, but TMI has filed one patent application with
respect to the TMI System, and expects to file additional patent applications in
the future. In the meantime, there can be no assurance that applicable
copyright or trade secret law or nondisclosure agreements will provide
meaningful protection of the Company's copyrights, trade secrets, know-how or
other proprietary information in the event of any unauthorized use,
misappropriation or disclosure of such copyrights, trade secrets, know-how or
other proprietary information. In addition, the laws of certain foreign
countries do not protect the Company's intellectual property rights to the same
extent as do the laws of the United States. There can be no assurance that the
Company or TMI will be able to protect its intellectual property successfully.
The Systems and technology incorporate subject matter that the Company
believes is in the public domain or that it otherwise has the right to use.
There can be no assurance that third parties will not assert patent, copyright
or other intellectual property infringement claims against the Company with
respect to the Systems or technology or
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other matters. There may be third party patents, copyrights and other
intellectual property relevant to the Systems and technology which are not
known to the Company. Although no third party has asserted that the Company
is infringing such third party's patent rights, copyrights or other
intellectual property, there can be no assurance that litigation asserting
such claims will not be initiated, that the Company would prevail in any such
litigation, or that the Company would be able to obtain any necessary
licenses on reasonable terms if at all. Any such claims against the Company,
with or without merit, as well as claims initiated by the Company against
third parties, can be time consuming and expensive to defend or prosecute and
to resolve. See "Business - Patents and Intellectual Property."
UNCERTAINTY IN HEALTH CARE INDUSTRY. Cost containment measures instituted
by health care providers as a result of regulatory reform or otherwise could
result in greater selectivity in the allocation of capital funds. Such
selectivity could have a material adverse effect on the Company's ability to
sell the Systems and services. See "Business - Third Party Reimbursement."
PRODUCT LIABILITY RISK; LIMITED INSURANCE COVERAGE. The manufacture and
sale of medical image information systems entail significant risk of product
liability claims. There can be no assurance that the Company can obtain
insurance coverage with limits adequate to protect the Company from any
liabilities it might incur in connection with the sale of the Systems. In
addition, the Company may require increased product liability coverage as
additional products are commercialized. Such insurance is expensive and in the
future may not be available on acceptable terms, if at all. A successful
product liability claim or series of claims brought against the Company in
excess of its insurance coverage could have a material adverse effect on the
Company's business, financial condition and results of operations. The Company
believes thermal imaging is a completely safe procedure, without harmful
radiation produced with X-rays, but the Company could still be required to
defend claims or be a defendant for a claim for failure to detect a malady,
requiring devotion of needed capital toward defense costs.
DILUTION. If all of the Newly Issued Shares are sold, the purchasers of
such shares will suffer an immediate dilution in book value of approximately
$0.25 per share of the Common Stock. However, due to the Company's current
stockholders' deficit, the current stockholders of the Company before this
Offering will receive an immediate increase in the net book value of their
shares of approximately $0.13 per share. The current stockholders of the
Company before this Offering paid an average consideration of $0.38 per share of
the Common Stock for their interests in the Company, while the new investors
will pay $0.38 per share for theirs. See "Dilution."
NO COMMITMENT TO PURCHASE SHARES. No entity or individual, including
any selling agent, the Company, its officers or its directors, has any
obligation to purchase any of the shares of the Common Stock to be resold or
underlying Compensation Warrants, Resale Warrants, Options or the Debenture
and being registered hereby. Any of the shares of the Common Stock which may
be offered for sale by the Selling Stockholders will be offered through the
secondary market, and consequently no assurance can be given that any such
shares will be sold or that the Selling Stockholders or subsequent purchasers
will be able to sell their shares of the Common Stock for the same price as
they were purchased. Pursuant to the terms of the Investment Agreement, the
Company may require Bristol Asset Management, L.L.C. ("Bristol") to purchase
Newly Issued Shares. However, the number of Newly Issued Shares which the
Company may require Bristol to purchase is subject to various monthly and
aggregate limitations. Moreover, Bristol is not required to purchase any
Newly Issued Shares until the Company has fulfilled certain conditions
precedent set forth in the Investment Agreement.
CONFLICTS OF INTEREST. Prior to the Offering, certain officers, directors
and related parties have engaged in business transactions with the Company.
Primarily, the Company has sold shares of the Common Stock for cash and in
exchange for services rendered to the Company by Thermal Imaging, Inc. (herein
sometimes referred to as "TII"), a company controlled by affiliates (the
"Affiliates") of David B. Johnston, the Chairman of the Board, and to PDH, Ltd.,
a company controlled by Doug Holt, a consultant to the Company, who has received
shares of the Common Stock in exchange for services rendered and cash
contributed to the Company. All sales of shares of the Common Stock to these
Affiliates of the Company, as shares restricted pursuant to Rule 144 promulgated
under the Securities Act ("Rule 144"), were priced at a value of about 50
percent of the then current trading price of free trading shares. Management
believes that the terms of these transactions were as favorable to the Company
as those which could have been obtained from unaffiliated third parties under
similar circumstances. Most material affiliated transactions consisted of
purchases of the Common Stock by Affiliates of officers and directors at prices
below the then current trading prices of free trading shares of the Common
Stock. All future transactions between the Company and its Affiliates will be
on terms no less favorable than could be obtained from unaffiliated third
parties and will be approved by a majority of the disinterested members of the
Board of Directors of the Company. See "Management - Certain Transactions."
POSSIBLE CONFLICTS OF INTEREST. Many of the officers and directors of the
Company are also officers and/or directors of other companies, some of which are
Affiliates of the Company. David B. Johnston is the Chairman of the
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Board and Chief Executive Officer of the Company and also is a director and
controlling shareholder (by attribution among family members) of TII, owning
approximately 27 percent of the outstanding shares of the Common Stock of the
Company. Potential conflicts could arise in the future when the Company
prices restricted shares to be sold to TII or any Affiliate, and some
decisions to be made by Mr. Johnston as a director on behalf of the Company
could be in conflict with the interest of a Selling Stockholder. General
Richard V. Secord is an officer and director of the Company and is also a
director of TMI and the Chief Operating Officer without additional
compensation of TriSun/CTI Asia, Ltd., a no-asset company formed in Cyprus to
purchase the Systems for installation in hospitals in the PRC. Each of the
foregoing companies can be construed as affiliated with the Company or a
company with which the Company has material contracts. Kenneth M. Dodd is
the Executive Vice President of the Company and also holds various positions
in TMI. The Company owns 80 percent of TMI, and Mr. Dodd has a 7.5 percent
position in TMI, thus giving CTI and him an aggregate equity position in that
company of 87.5 percent. There are numerous possibilities of conflicts of
interest which could arise based upon the common control of the Company and
the roles of Messrs. Johnston and Dodd and General Secord on behalf of the
Company and their respective roles in management of the Affiliates. Although
each of the officers and directors of the Company will make every effort to
work in the best interest of the Company, there is no assurance that if a
conflict arises it will be resolved in favor of the Company.
RETENTION OF CONTROL. The Company's officers, directors and principal
stockholders beneficially will own approximately 36.4 percent of the outstanding
shares of the Common Stock at the completion of the Offering, without taking
into account any of the Newly Issued Shares or any shares of the Common Stock
underlying the Compensation Warrants. As a result, the officers, directors and
principal stockholders of the Company will have the ability to control the
day-to-day affairs and the fundamental policies of the Company. Voting
together such stockholders, including the officers and directors of the
Company, could possibly block any major corporate transactions, such as a
merger or sale of substantially all of the Company's assets, that under
Nevada law requires the affirmative vote of holders of a majority of the
outstanding shares of the Common Stock of the Company. See "Management" and
"Principal Stockholders."
ANTI-TAKEOVER PROVISIONS. The Company's Articles of Incorporation and
Bylaws contain provisions that may have the effect of discouraging certain
transactions involving an actual or threatened change of control of the Company.
In addition, the Board of Directors has the authority to issue up to 3,000,000
shares of the Preferred Stock in one or more series and to fix the preferences,
rights and limitations of any such series without stockholder approval. The
ability to issue shares of the Preferred Stock could have the effect of
discouraging unsolicited acquisition proposals or making it more difficult for a
third party to gain control of the Company, or otherwise could adversely affect
the market price of the Common Stock. See "Description of Securities." In
addition, TMI's Articles of Incorporation likewise provide for the issuance of
preferred shares which could have anti-takeover implications, but the Company
maintains an 80 percent controlling interest to change those terms if the
Company desires to do so.
DIVIDEND POLICY. The Company has not paid or declared any cash dividends
with respect to the Common Stock, nor does it anticipate any such payments or
declarations in the foreseeable future. Any future dividends will be declared
at the discretion of the Board of Directors and will depend, among other things,
on the Company's earnings, if any, its financial requirements for future
operations and growth, and such other factors as the Company may then deem
appropriate. Investors should not rely on the receipt of dividends in the near
future or at any time in the future when evaluating the merits of an investment
in the shares of the Common Stock. See "Price Range of Common Stock and
Dividend Policy."
SHARES ELIGIBLE FOR FUTURE SALE. Sales of substantial amounts of the
Common Stock in the public market following the completion of the Offering
could have an adverse effect on the market price of the Common Stock. There
will be approximately 44,568,975 shares of the Common Stock outstanding
immediately after the Offering. Upon completion of the Offering, all of the
shares of the Common Stock being registered hereby and approximately
25,457,077 shares of the Common Stock held by current stockholders of the
Company will be immediately eligible for public sale without restrictions,
except for shares purchased by Affiliates (those controlling or controlled by
or under common control with the Company and generally deemed to include
officers and directors) of the Company. The remaining approximately
13,824,265 shares of the Common Stock are "restricted securities" as that
term is defined under Rule 144 promulgated under the Securities Act.
Approximately 1,393,300 shares of the Company's currently outstanding
restricted securities are eligible for sale under Rule 144(k). No prediction
can be made as to the effect, if any, that future sales of additional shares
of the Common Stock or the
14
<PAGE>
availability of such shares for sale under Rule 144, other applicable
exemptions or otherwise will have on the market price of the Common Stock
prevailing from time to time. Sales of substantial amounts of the Common
Stock in the public market, or the perception that such sales could occur,
could adversely affect prevailing market prices of the Common Stock. See
"Principal Stockholders."
IMPACT ON MARKET OF DEBENTURE CONVERSION OR WARRANT OR OPTION EXERCISE. In
the event of the conversion into the Common Stock of the Company's outstanding
Debenture or the exercise of a substantial number of the outstanding warrants
and options of the Company within a reasonably short period of time after the
right to convert or exercise commences, the resulting increase in the amount of
the Common Stock in the trading market could substantially affect the market
price of the Common Stock. See "Description of Securities."
NO ASSURANCE OF ACTIVE PUBLIC MARKET; POSSIBLE VOLATILITY OF THE COMMON
STOCK. Although the Common Stock is quoted on the OTC Bulletin Board, there can
be no assurance that an active public market for the Common Stock will be
sustained after the Offering. The trading price of the Common Stock could be
subject to wide fluctuations in response to quarter to quarter variations in
operating results, announcements of innovations or new products by the Company
or its competitors, and other events or factors. In addition, the stock market
has from time to time experienced extreme price and volume fluctuations which
affects the market price of securities of publicly traded companies and which
have often been unrelated to the operating performance of these companies.
Broad market fluctuations may adversely affect the market price of the Common
Stock. See "Price Range of Common Stock and Dividend Policy" and "Description
of Securities."
"PENNY STOCK" ISSUES. The shares of the Common Stock are "penny stocks" as
defined in the Exchange Act, which are traded in the over-the-counter market on
the OTC Bulletin Board. As a result, an investor may find it more difficult to
dispose of or obtain accurate quotations as to the price of the shares of the
Common Stock being registered hereby. In addition, the "penny stock" rules
adopted by the Commission under the Exchange Act subject the sale of the shares
of the Common Stock to certain regulations which impose sales practice
requirements on broker-dealers. For example, broker-dealers selling such
securities must, prior to effecting the transaction, provide their customers
with a document which discloses the risks of investing in such securities.
Furthermore, if the person purchasing the securities is someone other than an
accredited investor or an established customer of the broker-dealer, the
broker-dealer must also approve the potential customer's account by obtaining
information concerning the customer's financial situation, investment
experience and investment objectives. The broker-dealer must also make a
determination whether the transaction is suitable for the customer and
whether the customer has sufficient knowledge and experience in financial
matters to be reasonably expected to be capable of evaluating the risk of
transactions in such securities. Accordingly, the Commission's rules may
limit the number of potential purchasers of the shares of the Common Stock.
If the Company can meet the listing requirements in the future, the Company
intends to apply to include the shares of the Common Stock being registered
hereby for quotation on The Nasdaq SmallCap Market operated by the NASD. The
Common Stock has not yet been approved for quotation on The Nasdaq SmallCap
Market and there can be no assurance that an active trading market will develop
or if such market is developed that it will be sustained. The NASD recently
approved changes to the standards for companies to become listed on The Nasdaq
SmallCap Market, including, without limitation, new corporate governance
standards, a new requirement that companies seeking listing have net tangible
assets of $2,000,000, market capitalization of $35,000,000 or net income of
$500,000 and other qualitative requirements. If the Company is unable to
satisfy the requirements for quotation on The Nasdaq SmallCap Market, trading in
the Common Stock being registered hereby would continue to be conducted on the
OTC Bulletin Board. Even if the shares of the Common Stock are listed for
quotation on The Nasdaq SmallCap Market, the market price of the shares must
remain above $5.00 per share or else such shares will be subject to the "penny
stock" rules of the Commission discussed above. If the market price of such
shares falls below $1.00 per share, such shares will be delisted from The Nasdaq
SmallCap Market and will once again be quoted on the OTC Bulletin Board.
In addition to the recent changes in The Nasdaq SmallCap Market listing
requirements discussed above, NASD has recently announced changes in the
requirements for continued quotation on the OTC Bulletin Board. Essentially the
new rules require OTC Bulletin Board companies to file quarterly statements with
the Commission or appropriate banking or insurance regulators. If companies
currently quoted on the OTC Bulletin Board do not comply with the new NASD
rules, their shares will only be quoted in the less automated "Pink Sheets," a
system run by the National Quotation Bureau, Inc. As stated in this Prospectus,
the Company is seeking registration under the Exchange
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<PAGE>
Act and consequently will be obligated to make all filings required under the
Exchange Act. If for some reason the Company should fail in its registration
efforts described in this Prospectus or not file its required reports
pursuant to the Exchange Act, it is possible that the Company would no longer
be eligible for quotation on the OTC Bulletin Board and would be relegated to
the "Pink Sheets." There can be no assurance that an active trading market
will develop for the shares of the Common Stock in the "Pink Sheets" or if
such market is developed that it will be sustained.
NEED TO MAINTAIN A CURRENT PROSPECTUS. The Company must maintain a current
prospectus in order for the Selling Stockholders to sell the shares of the
Common Stock to which this Prospectus relates. In the event that the Company is
unable to maintain a current prospectus due to lack of sufficient financial
resources or for other reasons, the Selling Stockholders may be unable to resell
their shares of the Common Stock in any public market.
SHARES RESERVED FOR ISSUANCE. The Company has 10,663,234 shares of the
Common Stock reserved for issuance upon the exercise of the Warrants, the
Options, and the conversion of the Debenture. These convertible securities
are convertible or exercisable at prices that range from fixed prices of
$0.60 to $5.00 per share and variable prices depending on market price of the
Common Stock and expire on various dates extending to June 12, 2005. The
20,781,250 shares to be issued as Newly Issued Shares and upon the exercise
of the Compensation Warrants are being offered on a "best efforts - no
minimum" basis, and the Company will retain all proceeds from the sale of the
Newly Issued Shares and the exercise of the Compensation Warrants regardless
of the amount sold or exercised. There can be no assurance that any of these
securities will be sold or converted or exercised, or that the Company will
receive any proceeds from the conversion or the exercise thereof. The
exercise or conversion of these securities, and the resale of the underlying
shares of the Common Stock, could have a dilutive effect on the prevailing
market price of the Common Stock. See "Dilution," "Management - Stock
Options" and "Description of Securities."
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISK. Management believes that
this Prospectus contains forward-looking statements, including statements
regarding, among other items, the Company's future plans and growth strategies
and anticipated trends in the industry in which the Company operates. These
forward-looking statements are based largely on the Company's expectations and
are subject to a number of risks and uncertainties, many of which are beyond the
Company's control. Actual results could differ materially from these
forward-looking statements as a result of the factors described herein,
including, among others, regulatory or economic influences. In light of
these risks and uncertainties, there can be no assurance that the
forward-looking information contained in this Prospectus will in fact
transpire or prove to be accurate. The inclusion of such information should
not be regarded as a representation by the Company or any other person that
the objectives and plans of the Company will be achieved.
USE OF PROCEEDS
Assuming the sale of the Newly Issued Shares and the exercise of the
Compensation Warrants at the assumed prices (see "Prospectus Summary - The
Offering"), the Company will receive aggregate proceeds of approximately
$8,429,166 prior to deducting estimated expenses of the Offering of
approximately $200,000. The Company will use the proceeds, if any, for working
capital and will have broad discretion in the application of such proceeds. As
there are several contingencies which must be met before the investor (Bristol
Asset Management, L.L.C.) becomes obligated to purchase the Newly Issued Shares
and the concomitant right to the Compensation Warrants (and the ultimate
exercise of the Compensation Warrants), there can be no assurance that the Newly
Issued Shares will be purchased or that the Compensation Warrants will be
exercised. The Company will receive no proceeds from the resale of shares of
the Common Stock by the Selling Stockholders. The only proceeds the Company
will derive, if any, with respect to shares other than the Newly Issued Shares
or any shares to be covered by the Compensation Warrants, would be indirectly if
any of the Selling Stockholders elect to convert and/or exercise their
outstanding Debenture, Resale Warrants, or Options. Of the 15,950,867 shares of
the Common Stock being registered for resale hereby, 297,619 shares are issuable
upon conversion of the outstanding Debenture, 3,840,615 shares are issuable upon
the exercise of the Resale Warrants, and 6,525,000 shares are issuable upon the
exercise of the Options. If the Debenture holder elects to convert all of its
Debenture into shares of the Common Stock, the Company will not be required to
repay $125,000 of indebtedness represented by the Debenture. If all of the
Resale Warrants were exercised, the Company would receive a total of $9,445,124.
If all of the Options were exercised, the Company would receive a total of
$5,891,250. It is not likely that many, if any, of the Debenture, Resale
Warrants, or Options will be converted and/or exercised anytime soon.
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<PAGE>
This estimate of proceeds may not be achieved, depending primarily on the
market price of Company's free trading shares of the Common Stock, because the
intended investor that may be obligated to purchase the Newly Issued Shares may
only be obligated to purchase shares from the Company, if called, to the extent
of the lower of $7,000,000 in shares or a maximum of 4.9 percent of the
outstanding shares, subject to volume trading limitations set forth in the
Investment Agreement. See "Principal Stockholders - Bristol Asset Management
L.L.C. Investment Agreement." Aggregate calls made with the Common Stock at the
current share market price would only yield approximately $1,100,000. Likewise,
sales to other purchasers of the Newly Issued Shares if the share market price
were dramatically increased could result in greater proceeds.
DILUTION
In the event of the sale of all of the Newly Issued Shares, the current
stockholders of the Company will own 70.97 percent of the issued and outstanding
shares of the Common Stock and the purchasers of the Newly Issued Shares will
own 29.03 percent of the issued and outstanding shares of the Common Stock.
Before the date of this Prospectus, the Company had 44,568,975 shares of the
Common Stock issued and outstanding. If all of the Newly Issued Shares are
purchased, there will be 62,798,142 shares of the Common Stock issued and
outstanding.
The audited net book value of the Company at June 30, 1997 was $(83,711) or
$(0.00) per share of the Common Stock. Also, at June 30, 1997, after giving
effect to the sale of by the Company of all of the Newly Issued Shares and the
receipt of the proceeds therefrom, the pro forma net book value of the Company
would have been $6,911,289 or $0.13 per share of the Common Stock. This
represents an immediate increase in the pro forma net book value of $0.13 per
share to the current stockholders immediately before the Offering and an
immediate dilution of $0.25 per share of the Common Stock to the purchasers of
the Newly Issued Shares. The following table illustrates this per share of the
Common Stock dilution.
<TABLE>
<S> <C> <C>
Offering Price to New Investors $0.38
Net Book Value Before the Offering $0.00
Increase Attributable to Sale of the Common Stock $0.13
Pro Forma Net Book Value After the Offering $0.13
Dilution of Net Book Value to the New Investors (1) $0.25
</TABLE>
- --------------------
(1) Dilution is determined by subtracting pro forma net book value after the
Offering from the Offering Price.
The following table summarizes, as of June 30, 1997, and after the sale of
all of the Newly Issued Shares offered hereby, the total consideration paid and
the average price per share paid to the Company for shares of the Common Stock
held by the current stockholders and by the purchasers of the Newly Issued
Shares.
<TABLE>
PERCENT OF
NUMBER OF TOTAL TOTAL EFFECTIVE
SHARES PURCHASED PERCENT OF CONSIDERATION CONSIDERATION PRICE
OR OWNED TOTAL SHARES PAID PAID (2) PER SHARE
---------------- ------------ ------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Current Stockholders 35,737,649 (1) 66.22% $13,446,311 62.70% $0.38
New Investors 18,229,167 33.78 7,000,000 32.63 $0.38
---------- ------ ----------- ------
Total 53,966,816 100.00% $21,446,311 100.00%
---------- ------ ----------- ------
---------- ------ ----------- ------
</TABLE>
- --------------------
(1) The current stockholders will receive no additional shares of the Common
Stock as a result of this Offering.
(2) Total consideration paid includes shares issued for services.
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<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock is traded on the OTC Bulletin Board under the symbol
"COII." The following table sets forth the range of high and low closing bid
prices for the Common Stock for the periods indicated as reported by the NASD.
These prices represent inter-dealer prices, without adjustment for retail
mark-ups, mark-downs or commissions and do not necessarily represent actual
transactions. There can be no assurance that an active trading market in the
shares of the Common Stock will be sustained.
<TABLE>
Common Stock
Bid Price
------------------
Low High
----- -----
<S> <C> <C>
CALENDAR YEAR 1995
Third Quarter $1.19 $2.28
Fourth Quarter $0.88 $2.38
CALENDAR YEAR 1996 LOW HIGH
----- -----
First Quarter $1.00 $2.19
Second Quarter $1.06 $1.56
Third Quarter $0.94 $2.84
Fourth Quarter $1.19 $2.13
CALENDAR YEAR 1997 LOW HIGH
----- -----
First Quarter $1.00 $2.00
Second Quarter $0.50 $1.25
Third Quarter $0.56 $1.69
Fourth Quarter $0.52 $1.06
</TABLE>
As of December 31, 1997, 42,330,362 shares of the Common Stock were issued
and outstanding. The Company believes that the Common Stock is held of record
and beneficially by approximately 4,800 persons.
The Company has not paid or declared any dividends with respect to the
Common Stock, nor does it anticipate paying any cash dividends or other
distributions on the Common Stock in the foreseeable future. Any future
dividends will be declared at the discretion of the Board of Directors and will
depend, among other things, on the Company's earnings, if any, its financial
requirements for future operations and growth and such other facts as the
Company may then deem appropriate.
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at June
30, 1997. This table should be read in conjunction with the Company's Financial
Statements and Notes thereto that are included elsewhere in this Prospectus.
<TABLE>
June 30, 1997 (1)
-----------------
<S> <C>
Stockholders' deficit:
Common Stock, $0.001 par value, 100,000,000 shares
authorized; 35,737,649 shares issued and outstanding $ 35,738
Additional paid-in capital 13,410,573
Subscription receivable (525,000)
Accumulated deficit 13,010,022
-----------
Total stockholders' deficit $ (88,711)
-----------
-----------
</TABLE>
- -------------
(1) Does not give effect to the issuance of (i) 18,229,167 shares of the Common
Stock upon the purchase of the Newly Issued Shares; (ii) 2,552,083 shares
of the Common Stock upon exercise of the Compensation Warrants; (iii)
3,840,615 shares of the Common Stock upon exercise of the Resale Warrants;
(iv) 6,525,000 shares of the Common Stock upon exercise of the Options; (v)
297,619 shares of the Common Stock upon conversion of the Debenture; and
(vi) 8,831,326 shares of the Common Stock issued subsequent to June 30,
1997.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the combined financial condition
and results of operations should be read in conjunction with the Consolidated
Financial Statements of the Company and Notes thereto contained in this
Prospectus. Statements contained in this "Management's Discussion and Analysis
of Financial Conditions and Results of Operations," which are not historical
facts may be forward-looking statements. Such information involves risks and
uncertainties, including those created by general market conditions, competition
and the possibility that events may occur which could limit the ability of the
Company to maintain or improve its operating results or execute its primary
growth strategy. Although the Company believes that the assumptions underlying
the forward-looking statements are reasonable, any of the assumptions could be
inaccurate, and there can therefore be no assurance that the forward-looking
statements included herein will prove to be accurate. The inclusion of such
information should not be regarded as a representation by the Company or any
other person that the objectives and plans of the Company will be achieved.
Moreover, such forward-looking statements are subject to certain risks and
uncertainties which could cause actual results to differ materially from those
projected. Readers are cautioned not to place undue reliance on these forward-
looking statements that speak only as of the date hereof.
GENERAL
Since 1987, the year of its incorporation, through the fiscal year ended
June 30, 1995, the Company operated by raising capital to perform research and
development. In the fiscal year ended June 30, 1996, the Company took steps to
eventually transition beyond the development stage. Although the Company ended
with a net loss of $2,828,250, the Company generated its first gross revenues of
$125,000. The Company also entered into several contracts and initiated
business relationships which form the framework for the business operations for
the next year.
RESULTS OF OPERATIONS
The Company relies upon independent contractors to perform much of its
software development, systems integration and installations. Although Mr. David
A. Packer, President of the Company hired in 1997 from TRW, and Messrs. Kenneth
M. Dodd and Bill Black, employed by TMI in 1995 from EDS, all have extensive
systems integration, systems development and installation experience, the
Company and TMI have no other employees to perform the tasks of developing and
installing the CTI System and the TMI System. Both the Company and TMI have
contracted with TRW since late 1995 for specific "scope of work" development.
The costs incurred to engage TRW have totaled
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<PAGE>
approximately $2,000,000 for research, systems development, software
development and data analysis. TRW is presently owed past due amounts for
services. TRW by September 1997 completed its software development required
to enable TMI to conduct clinical trials. The Company and TMI have slowed
down additional development work with TRW until this past due amount is
substantially reduced from new Company financing. TRW is being paid currently
for its maintenance and data analysis work being performed for TMI's clinical
trials.
The report from the Company's independent accountants includes an
explanatory paragraph which describes substantial doubt concerning the ability
of the Company to continue as a going concern, without substantial additional
contributions to capital. The Company may incur losses for the foreseeable
future due to the significant costs associated with manufacturing, marketing and
distributing the CTI System and TMI System, and due to continual research and
development activities which will be necessary to develop applications for the
Company's thermal imaging technology.
The Company's ability to achieve profitability will depend, in part, on its
ability to successfully develop clinical applications and obtain regulatory
approvals for its products and to develop the capacity to manufacture and market
such products on a wide scale. There is no assurance that the Company will be
able to successfully make the transition from research and development to
manufacturing and selling commercial thermal imaging products on a broad basis.
While attempting to make this transition, the Company will be subject to all
risks inherent in a growing venture, including the need to produce reliable and
effective products, develop marketing expertise and enlarge its sales force.
LIQUIDITY AND CAPITAL RESOURCES
The Company has had no significant revenues from operations in either of
the last two fiscal years nor in the first six months of the fiscal year
beginning July 1, 1997. The Company's cash requirements consist of its
salaries, office expenditures, legal and accounting fees to comply with
securities registration needs, legal fees for contracting, TMI's operational
budget requirements, and the costs of maintaining TMI's clinical trials.
Available funds are insufficient to pay incurred TRW development costs
(approximately $315,000) and incurred legal fees (approximately $296,524). The
Company plans to use its available funds to pay necessary fixed expenses for the
Company and TMI through February 1998. The Company intends to raise additional
equity funds from the sale of the Common Stock through private offerings to meet
its cash requirements through 1998. The Company has no assured source of
liquidity from the sale of assets nor from financing.
The Company will require substantial additional funds for its research and
development programs, preclinical and clinical testing, development of its sales
and distribution force, operating expenses, regulatory processes and
manufacturing and marketing programs. The Company's capital requirements will
depend on numerous factors, including the progress of its research and
development programs, results of preclinical and clinical testing, the time and
cost involved in obtaining regulatory approvals, the cost of filing,
prosecuting, defending and enforcing any patent claims and other intellectual
property rights, competing technological and market developments, developments
and changes in the Company's existing research, licensing and other
relationships and the terms of any new collaborative, licensing and other
arrangements that the Company may establish. The Company believes that its
available short-term assets will be sufficient to meet its operating expenses
and capital expenditures for a limited time, but the Company will need to raise
additional capital to meet its needs for the next 12 months. The Company's cash
requirements may vary materially from those now forecasted due to potential
future acquisitions, the progress of research and development programs, results
of clinical testing, relationships with strategic partners, if any, competitive
and technological advances, decisions of the FDA and foreign regulatory
processes and other factors. There can be no assurance, however, that
additional capital or financing will be available when needed, or if available,
will be available on acceptable terms. Insufficient funds may prevent the
Company from implementing its business strategy or may require the Company to
delay, scale back or eliminate certain of its research and product development
programs or to license to third parties the rights to commercialize products or
technologies that the Company would otherwise seek to develop on its own.
CLINICAL TRIALS. Although the Company expects in 1998 to raise funds
needed for paying its newly incurred expenses and for paying its past due
obligations to TRW and its law firm, the Company plans to delay the anticipated
clinical trial schedule to defer costs if necessary. The FDA clinical trials
requirements for TMI to receive its PMA approval requires three separate medical
facilities to conduct examinations, and produce clinical statistical data, from
20
<PAGE>
use of the TMI System. Those clinical trials are being conducted at Howard
University Hospital in Washington, D.C. (through the end of February 1998, and
thereafter at Providence Hospital in Washington, D.C.), where the pretests were
conducted to qualify to proceed with clinical trials for a PMA, and at two
Los Angeles hospitals managed by the University of Southern California. Medical
School. The rate of conducting examinations determine the monthly cash flow
requirements and the time for qualifying for the PMA. TMI also incurs costs for
FDA legal counsel and for QBRI, a consulting firm recognized by the FDA for
overseeing clinical trial data collection and adherence to FDA requirements.
With additional equity available to complete scheduled TMI clinical trials, in
the amount of approximately $3,000,000, TMI could complete its schedule for PMA
submission by August 1998. Fewer funds available would require TMI to depend
more on its three employees and less on independent contractors, resulting in
delays in the schedule. The Company intends to fund the cost of completing
TMI's clinical trials. If the Company were incapable of raising those funds
plus funds needed to conduct the Company's business, TMI would have to abort its
FDA plans. Management believes it can raise the funds through private sales of
the Common Stock. In 1997, most of the equity funds raised by the Company in
exchange for the Common Stock was contributed by Affiliates (primarily TII).
Many of those contributions were originated by private sales of the Common
Stock. Management believes those Affiliates would continue to contribute the
funds necessary to achieve the Company's business plan, although the cash flow
from such funding has been, and probably would continue to be, slower than if a
substantial new investor would invest.
CTI SYSTEM DEVELOPMENT. When the Company is successful in arranging new
equity to complete TMI clinical trials, the Company will use some of those
available funds to conduct multiple clinical trials using the CTI System for
separate identified soft tissue maladies. Although such clinical trials may not
be necessary for physicians to use the Systems, the benefit of specific purpose
clinical trials will be to obtain the designation of insurance payment codes for
particular CTI System procedures and to enhance marketing efforts. If the
Company raises the money it expects to raise in early 1998, the Company intends
to initiate these efforts by summer 1998. Management believes that the market
in the United States alone for the CTI System would be dramatically impacted if
clinical trials were to substantiate the Company's assertion that the CTI System
can distinguish and verify fraudulent (versus real muscular) lower back pains.
Management believes that statistics show insurance companies pay millions of
dollars annually for workers compensation claims of lower back pains, many of
which are fraudulent.
MARKETING. The Company cannot assure investors that expenditures for
clinical trials will result in confirming results or an FDA approval, nor can
the Company be sure that any FDA approval or successful clinical trial will
result in a profitable business activity. Physicians must choose to use the
Systems, and management intends to initiate a marketing effort to educate
physicians on the detection/diagnosis advantages of the Systems. The Company
understands that this marketing effort will require substantial funds. During
the next 12 months, TMI expects to incur approximately $1,000,000 in marketing
efforts if it completes clinical trials successfully and can obtain the funds
either from software sales or the TMI System use, or if the Company or other
investors choose to invest funds in TMI at that time. During the next 12
months, the Company does not know the source of capital it must have for
financing its plans to enter clinical trials and its plans to install the CTI
System. Those funds are not now available. When they are available, management
intends, as its primary marketing plan, to build Quantitative Assessment
Laboratories ("QTA") and install the CTI System in various hospitals and clinics
around the United States that have indicated a willingness to use them now under
Use Agreements. Management believes that results from those installations will
be dramatic, thus producing a revenue stream to enable the Company to obtain
customary equipment financing loans.
BUSINESS
GENERAL
Computerized Thermal Imaging, Inc. (the "Company") was incorporated on June
10, 1987 in the State of Nevada as Business Helpers, Inc. The Company amended
its Articles of Incorporation on August 25, 1989 to effect a name change to DTI
Dorex, Ltd. and again on November 3, 1989 to its current name. In April 1992,
the Company further amended its Articles of Incorporation to provide for a
capital structure of 100,000,000 shares of common stock, par value of $0.001 per
share, and 3,000,000 shares of preferred stock with such designations,
preferences and other features as may be required by the Company's Board of
Directors. In 1988, the Company , through the issuance of shares of the Common
Stock, acquired all of the assets of Thermal Imaging, Inc., an Oregon
corporation ("TII"), which assets consisted primarily of certain thermal imaging
intellectual property, proprietary ideas, or technology.
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The Company is a development stage company that is a medical imaging
systems integrator and proprietary protocol developer producing a computerized
clinical thermal imaging diagnostic system (the "CTI System") that has been
trademarked under the name COMPUTERIZED THERMAL IMAGING. The Company has not
filed any applications for patents covering specific aspects of the CTI System.
But, the Company owns computer software which is not generally subject to the
protection afforded by patents. However, the software is proprietary and
subject to protection as a "trade secret." Since 1995, the Company has spent
approximately $3,000,000 on research, software development, and further
development of the Systems.
The Company plans to place the CTI System in various health care providers
such as hospitals, HMOs and free standing image centers through Use Agreements.
Revenues will be generated under the Use Agreements by charging the health care
providers monthly for time usage and for the disposable supplies purchased in
conjunction with the CTI System. Once the CTI System is inserted into the
marketplace, the Company does not expect to rely on any one or a few major
customers. Consequently, it is anticipated that the CTI System will be
attractive to a widely dispersed number of customers.
PRODUCTS
CTI SYSTEM. The basis of the CTI System is predicated on the principle
that every externally or internally triggered physiological event causes an
associated caloric reaction. In the opinion of management, any such abnormal
caloric activity will stimulate the body's three temperature and thermal
regulatory systems. These responses are believed to be detectable and
interpretable through tell-tale thermal symptoms and temperature regulatory
response patterns over time. Management believes that the body's thermatome
(temperature) "map" has been well established by medical science, and can
provide a reliable set of clues for diagnostic and patient management purposes,
so long as the thermal symptoms are present. At other times, symptoms such as
pain or numbness and information from other medical tests, will triangulate to
indicate a disorder. Thus, the CTI System may be used by physicians to
eliminate or identify certain possible soft tissue ailments in the process of
making a diagnosis.
"Thermal imaging" as the observation technique is called generically, is a
methodology that long has held great promise, but has not realized its potential
because of deficiencies in the enabling technology. Thus, thermal imaging has
found fairly limited acceptance by the mainstream medical community because,
until the invention and development of the Company's technology, the testing and
evaluation techniques simply have not been scientifically completed, nor
medically reliable for most disorders. The CTI System represents an integration
of state-of-the-art thermal imaging technology hardware and software components,
most of which are configured to the Company's specific needs. The CTI System is
driven by sophisticated software developed over many years by the Company and
its research contractors. The software allows for quantification of data, and
significant flexibility in data manipulation, among other advantages. However,
equally important as the CTI System's components are, the CTI System's
scientifically structured patient examination administration protocols and
standards are expected to assure the accuracy, consistency and reliability of
the CTI System's generated data.
The CTI System is suitable for use as a screening or directional tool for
imaging or diagnosis modalities, some of which are surgical, chemical and
otherwise extremely invasive. By knowing where in the body to begin looking
because of thermal irregularities, other imaging and testing can proceed more
efficiently and economically; obviously an important advantage in containing
health care costs. Additionally, management believes that as a result of the
CTI System's comparatively low user cost (less than the cost of an MRI or CAT
scan), accuracy and non-invasive procedure, the CTI System will be advantageous
for diagnostic and patient therapy purposes, in both pre- and post-therapy
assessment and with any frequency deemed necessary by the physician. The CTI
System can examine patients dynamically to enable the physician to observe
thermal reactions while the patient moves and while the patient undergoes
thermal applications.
The CTI System is currently composed of four elements. The primary
component is the examination unit, consisting of a highly sensitive and accurate
infrared camera, imaging monitor, high resolution printer, computer and
proprietary software. The most unique feature of the CTI System is the
application specific software that drives and integrates the entire system, not
only providing user friendliness and analytical flexibility for physicians and
technicians, but enabling scientifically essential calibration corrections.
Management believes that the Company will be the first thermal imaging company
to provide a consistently objective diagnostic assessment tool that will measure
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multiple thermal parameters, including facile enclosure of thermal features,
dynamic graphing of temperature distribution in the inset domain, and the use of
temperature gradient profiles in diagnostic testing.
The CTI System is a non-invasive imaging modality scientifically applicable
for an extremely wide range of patient diagnostics and therapy management
situations. The CTI System provides precise, quantitative observation, as well
as computer-assisted interpretation of irregularities in the body's temperature
and thermal regulatory systems. It is expected that with the generated data
available, physicians will be able to detect or at least infer the presence of
many diseases, disorders and injuries within the body's physiological,
neurological and vascular systems that rarely can be detected or confirmed
through conventional dense-tissue/skeletal imaging modalities such as X-ray, CAT
scan, MRI and others. The CTI System is non-dosage limited and has no
detrimental side-effect.
The second element of the CTI System is the proprietary medical protocols
that will be developed by the Company for each malady assessment. Computer
analysis requires consistently applied patient preparation and examination
application protocols.
Conformity is assured by using the third element, a climate controlled
laboratory (herein the Quantitative Thermo Assessment Laboratory or "QTA") in
which the patient examination occurs for equilibrating all patient examination
environments. In employing the CTI System, the Company anticipates constructing
QTAs for various potential customers including large hospital facilities, HMOs,
free-standing diagnostic centers and mobile clinics. The customer's own
technicians and physicians will operate the QTA after training. Each
installation will be linked electronically to the Company's main image archive.
A QTA center which consists of a three room suite will be constructed within a
standard 16 x 20 x 8 feet two-bed hospital room. The rooms will be precisely
temperature and humidity controlled by the erection of a modular room-within-a-
room. The patient temperature equilibrium rooms will consist of two rooms
within the suite for stabilization of patient temperature as well as other
preparations for testing. The imaging room is a room within the climate
controlled suite in which the patient is placed for infrared scanning and in
which the camera, computer console and one technician is present during the
testing.
The fourth element of the CTI System is the use of a digital health card
that encodes a patient's thermal image (capable of storing the patient's entire
medical record) in a digital format on a plastic card the size of a credit card.
Only recently has the technology been improved to be capable of storing the
quantity of data for accurately carrying images from the CTI System. More than
one manufacturer now can produce such cards. The Company plans to embed in the
CTI System a "reader/writer" to permit recording the images on the cards to
enable subsequent comparisons of the images by physicians at different clinical
sites.
TMI SYSTEM. The Company also owns 80 percent of Thermal Medical Imaging,
Inc., a Nevada corporation (herein sometimes referred to as "TMI"). TMI
utilizes the CTI System specially configured as a breast cancer screening system
which is a non-invasive, non-contact procedure that does not involve breast
compression or exposure to radiation (the "TMI System"), and which is comprised
of an infrared camera, a central processing unit, input devices, a display
unit, and a power distribution unit. The TMI System also employs a proprietary
patient positioning system (for which an application for a patent has been
filed) in the data acquisition process, which replaces the need for a QTA
construction. The positioning system was designed to maximize breast area
viewed and to include surrounding areas of interest, to limit patient movement
during the examination, to ensure consistent cooling, to permit applications of
localized thermal changes during the examination, and to accommodate any
residual patient breathing movement. Currently, the TMI System is undergoing
clinical testing in accordance with an FDA approved protocol which management
expects to lead to pre-market approval (herein referred to as "PMA") by the FDA.
TMI expects to file for PMA in the summer of 1998, as long as the Company can
obtain its financing for contributions to TMI to maintain its current budget
schedule.
The TMI System performs three independent but interrelated functions; data
acquisition, data analysis and clinical evaluation. The TMI System will use the
Company's infrared detection system for use in data acquisition. The thermal
data acquired will consist of a time sequence of digitized thermal images. The
images will then be post-processed on specially developed data analysis software
to generate images for clinical assessment. The interpreting physician will
view an image and the supporting mathematical data underlying that image.
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The TMI System is currently in clinical testing at Howard University
Hospital in Washington, D.C. (through the end of February 1998, and thereafter
at Providence Hospital in Washington, D.C.), and in two hospitals managed by the
University of Southern California, Norris Cancer Center in Los Angeles and
Los Angeles County Hospital.
COMPETITION
CTI SYSTEM. The Company faces limited direct competition from the latest
versions of conventional thermal technology. In the opinion of management,
thermography is comparatively crude and unscientific and otherwise seen as
inferior to the CTI System and is not considered an economic barrier to market
penetration. The CTI System should not be seen as competitive to other
diagnostic imaging products, such as MRI, CAT scan, X-ray, ultrasonography,
laser, and Doppler mapping (any more than any one modality of that list is
considered competitive to another). Each of these anatomical modalities has
established a niche in the hospital diagnostics market, free standing imaging
centers or physicians' offices. Each modality is better for some disorder
diagnosis situations and less effective for others. The adoption pattern of the
modalities is dictated by the degree of advantage perceived by one modality as
compared to the others.
By comparison to all of the above-described modalities, the CTI System has
no direct competition from existing modalities in many diagnostic situations
because the CTI System gathers data regarding the physiological and functional
domain of human health, as opposed to the anatomical or structural facets.
MRIs, CAT scans, and X-rays all image hard or dense structures such as bones,
organs and other material masses within the body. Many soft tissue disorders
simply are not detectable by conventional modalities until they become
manifested as relatively advanced anatomical abnormalities such as irregular
tissue density or damage.
TMI SYSTEM. Mammography is an X-ray technology most widely used in the
United States as the imaging mode for detection of breast cancer. Statistics
have been published establishing a low reliability percentage of close to 75
percent for "false positive" indications, where mammography indicates a
suspicious tumor and a follow-up surgical biopsy establishes that the tissue is
benign. An even more frightening statistic is the percentage of mammography
"false negative" indications, by which a breast cancer is not detected.
Mammography is significantly less effective in dense breast tissue; women under
the age of 40 years typically have more dense breast tissue than women of the
age of 40 years. Therefore, mammography is currently most effective in women
over the age of 40 years. The initial clinical trials approved by the FDA for
TMI are designed to establish the TMI System as complementary to mammography.
The first PMA uses will be to employ the TMI System to examine any patient with
"suspicious tissue" indications resulting from a mammography image.
Potential competition for the TMI System includes an imaging device for the
detection of breast abnormalities being developed by Imaging Diagnostics
Systems, Inc. located in Sunrise, Florida, known as a Computer Tomography Laser
Mammography System ("CTLM"). This device relies on ultra-fast laser imaging
technology which can acquire data to allow visualization of the interior
structure of the breast. The ability to localize an abnormality within the
breast is greatly enhanced by the slice plane lateral and cranio-caudal images
produced by CTLM. Such images can be stored on CD-ROM and allow the physician
to recall previous studies instantly for immediate comparison with the current
study. The advantage of CTLM over mammography is its use of laser technology to
produce the image, which does not use harmful radiation. Management, however,
believes the TMI System will prove superior to CTLM for detection of cancer
because laser images still require density of tissue, as with mammography, to
produce an image. Dense tumor formations are a later stage of cancer and
management believes the TMI System detection of physiological thermal changes
will prove to be more accurate (because some tumors are benign) and detectable
at an earlier stage.
Also, an ultrasound technique is being developed by Advanced Technology
Laboratories ("ATL"), known as High-Definition Imaging. Ultrasound sends high-
frequency sound waves into the body, which are reflected back to create images.
While ultrasound is used in numerous medical procedures, ATL's system is the
first to provide adjunctive diagnostic capability for breast cancer.
COMPONENT COMPETITION. If the Company and TMI are successful with their
product development and marketing, some component parts for the CTI System could
be in short supply. There are few manufacturers that produce an infrared
camera and unit cooling systems of a high quality to satisfy the specifications
for a CTI System. The systems integration and software development contractor
for both CTI and TMI, TRW Systems in its TRW
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Healthcare Technology Division (herein referred to as "TRW"), has tested
numerous manufacturer's products for certain parts. If the demand for CTI
Systems and TMI Systems increased dramatically, some parts may not be
immediately available.
FUTURE PRODUCT AND SERVICE PLANS
The Company will continue to invest substantially in 1998, to the extent of
its available financing, to improve the effectiveness of its proprietary
application software. In addition, the Company will continue to source from
vendors who can improve the precision and reliability of the patient testing of
the CTI System. However, the area of innovation that the Company believes will
create the next quantum leap, will be the integration of the CTI System with
anatomical and other imaging data. Because the CTI System is digitally
quantifiable, the Company believes it is highly technically and economically
feasible for the CTI System to be the foundation of inter-modality imaging,
where, for instance, image data of the CTI System is overlaid on CAT scan or MRI
or X-ray or sonographic imaging data to create a multi-dimensional "picture."
This development is not forecast until after 1998, after significant market
penetration.
At present, other advanced modalities generally are what might be termed
"neo" or non-quantifiable. That is, even if the information from an MRI is
processed by computers digitally, the eventual interpretation of the image still
is subjective on the part of the technicians and diagnosing doctors. The
Company's plan is to first build quantified data bases of tests on the same
patient by other modalities and then develop the necessary interfaces to allow
overlay. Then, with this capability and the combined data base at hand, the
Company can begin offering computerized disorder pattern recognition assistance
based upon a multi-dimensional image of patients.
GOVERNMENT REGULATION
The FDA has no prohibiting regulations preventing the use of thermal
imaging equipment, generally perceived as an infrared camera, for medical
purposes. There can be no assurance that any state regulatory bodies or the FDA
might not impose some restrictions, with which the Systems, or the users, must
comply. The Company believes no FDA approval is required for health care
physicians or radiologists to use the CTI System, but the Company believes that
broad acceptance for use of the CTI System will require verification of
clearance from the FDA. The Company's products may be regulated as medical
devices by the FDA under the FDC Act and the regulations promulgated thereunder.
As such, these devices require either compliance with FDC Act Section 510(k)
under which the Company currently relies, or approval of a premarket approval
application (herein referred to as "PMA") by the FDA prior to commercialization.
Satisfaction of applicable regulatory requirements may take years and varies
substantially based upon the type, complexity and novelty of such devices, as
well as the clinical procedure. Filings and governmental approvals may be
required in foreign countries before the devices can be marketed in these
countries. There can be no assurance that further clinical trials of the
Company's thermal imaging systems or of any future products will be successfully
completed or, if they are completed, that any requisite FDA or foreign
governmental clearances or approvals will be obtained. FDA or other
governmental clearances or approvals of products developed by the Company in the
future may require substantial filing fees, or costs to conduct clinical trials,
which could limit the number of applications sought by the Company and may
entail limitations on the indicated uses for which such products may be
marketed. In addition, approved or cleared products may be subject to
additional testing and surveillance programs required by the FDA and other
regulatory agencies, and product approvals and clearances could be withdrawn for
failure to comply with regulatory standards or by the occurrence of unforeseen
problems following initial marketing. The Company is also required to adhere to
applicable requirements for current good manufacturing practices, to engage in
extensive record keeping and reporting and to comply with the FDA's product
labeling, promotional and advertising requirements. Noncompliance with state,
federal or foreign requirements can result in fines, injunctions, civil
penalties, recall or seizure of products, total or partial suspension of
production, delay, denial or withdrawal of premarket clearance or approval of
devices, recommendations by the FDA that the Company not be allowed to enter
into government contracts, and criminal prosecution, all of which would have a
material adverse effect on the Company's business, financial condition and
results of operations.
THIRD PARTY REIMBURSEMENT
Although use of the CTI System and the TMI System is permitted now by
physicians, the absence of FDA approval is a practical impediment. Most
physicians prescribe procedures and imaging modalities acceptable for third
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party reimbursement (E.G., insurance, Medicare, etc.) to enable patients to
obtain medical treatment payment assistance. The Health Insurance Care Finance
Administration ("HICFA") is the agency that establishes for Medicare/Medicaid a
payment code approval for certain imaging modalities for particular suspected
ailments. Generally, HICFA does not set payment codes for use of new technology
unless it has obtained FDA approval. Most insurance company reimbursement plans
establish payment codes for its insureds based upon its own experience, and for
new procedures or imaging modalities, based upon HICFA's determination.
Therefore, FDA approval is needed, at least at the inception, for each ailment
examination for which the CTI System or the TMI System is used seeking
reimbursement, if not covered by other general payment codes.
Neither CTI nor TMI currently have FDA approval for any imaging procedure.
TMI clinical trials are in process for use of the TMI System for breast cancer
detection. CTI has initiated no process to obtain separate FDA approval to
proceed with clinical trials of the CTI System. Therefore, the Company's
efforts to market the CTI System in Asia (the PRC and Thailand) may result in
revenues quicker, if further contracts are entered to sell the CTI System there,
than with the Company's plan to place the CTI System in U.S. hospitals, clinics,
and HMO facilities subject to Use Agreements.
PATENTS AND INTELLECTUAL PROPERTY
On June 8, 1996, the Company entered into a Licensing Agreement with
Thermal Medical Imaging, Inc. ("TMI") which granted an exclusive license to
TMI to distribute, research, and develop the CTI System and related
technology. The license covered applications of the CTI System to the field
of breast cancer detection and was limited in scope to North America. The
Licensing Agreement also provided for a joint research program whereby the
parties would share research data relating to the CTI System and
cross-license any developed technologies. In addition, the terms of the
Licensing Agreement established that the agreement would automatically
terminate in the event of any consolidation, merger, share exchange or other
event causing a change in more than 50 percent control of the voting shares
of TMI or the Company. As a result of the Stock Transfer Agreement executed
on January 28, 1997 by the Company and TMI, the Company gained control of 80
percent of the common stock of TMI. While the provisions of the Stock
Transfer Agreement manifest the parties' intent to execute a new licensing
agreement and outline the terms of such an arrangement, no new licensing
agreement has been reached. Although no written licensing or research
agreements presently exist between the Company and TMI, management believes
that the cross-licensing arrangement between the two companies is still in
place and, by virtue of the Company's 80 percent controlling ownership
interest in TMI, it has the requisite ability to ensure access for the Company
to all material technological developments.
Neither the Company nor TMI currently holds registered U.S. or foreign
patents. TMI has acquired, by assignment, a patent application on a Functional
Thermal Imaging Apparatus which has been filed with the U.S. Patent and
Trademark Office. Management believes other developed technologies or
components of either the CTI or TMI System may warrant patent protection in
the future. Substantial engineering costs and legal fees will be incurred in
order to research, develop and file additional patent applications. The
Company and TMI intend to explore this possibility when funds become
available to support such expenditures.
RISKS OF DOING BUSINESS IN THE PRC AND OTHER FOREIGN COUNTRIES
The Company intends to continue its efforts to market the CTI System to the
PRC, Thailand and other foreign hospitals. Doing business in the PRC, as well
as in other developing countries, has risks not prevalent in the United States
or Canada. Judicial systems for enforcement of contracts in those counties is
not reliable. The Company has inserted arbitration clauses in its foreign
contracts to date, but there is risk to arbitration results, because the holding
is not subject to appeal, regardless of error in application of law.
Furthermore, foreign government laws or regulations can change in a method not
customary to American companies, including the extreme measure of
nationalization of assets.
The Company's existing contracts with a company owned by the Ministry of
Public Health in the PRC require letters of credit enforceable outside the PRC
to be issued as a precondition of performance by the Company. Management
intends to continue to take such financial precautions to protect against
financial risks of doing business in the PRC and developing countries.
Successful operations in developing countries usually require a joint
venture with a respected citizen of that country. The Company has maintained
one full time employee in the PRC who maintains his relationships with the
Ministry of Public Health. The initial sale of the CTI System to the Orchard
Hospital in Thailand was initiated through a personal relationship established
in earlier years by General Richard V. Secord, the Chief Operating Officer of
the Company. There is no assurance that a venture will be formed in Thailand,
but the Company's contacts in Thailand have been successfully using and
demonstrating the CTI System and providing a recurring downloading of patient
information. Thailand and the PRC are countries where thermography (a
technology predecessor to the CTI System without computer data analysis and
without high definition cameras) has been accepted for years, largely due to its
use in proving the efficacy and proper location of acupuncture. Management
intends to use this relationship to establish a financing venture in Thailand.
There is no assurance that any venture will be profitable, but the Company
intends to pursue such ventures when it is successful to raise he necessary
capital to pay start up costs.
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EMPLOYEES
The Company and TMI currently employ eight persons on a full time basis.
The Company has in the past, and will continue in the future, to employ
independent contractors, and make extensive use of its outside directors and
other consultants. None of the employees of the Company and its subsidiaries
and joint operations are represented by a labor organization. The Company
believes its relationships with all of these employees are satisfactory.
FACILITIES
The Company leases approximately 1,000 square feet of office space in Lake
Oswego, Oregon for an annual rental of approximately $24,000, approximately
2,065 square feet of office space in Bloomfield Hills, Michigan for an annual
rental of approximately $30,000, and approximately 2,000 square feet of office
space in Layton, Utah for an annual rental of approximately $34,800. The
Company believes that its facilities are adequate for its current operations.
LITIGATION
SELECT CAPITAL ADVISORS, INC. DEBENTURES AND WARRANTS. On December 9,
1997, the Company filed suit against Select Capital Advisors, Inc. ("Select"),
Ronald G. Williams ("Williams"), and various other parties in the United States
District Court for the Southern District of Florida for damages and recision
with respect to the fraudulent sale of certain 12 percent convertible debentures
issued by the Company. In March 1997, the Company was introduced to Select and
Williams for the purpose of raising capital and a line of credit. Select,
Williams and several of the other defendants represented they had the
experience, reputation and resources to raise the needed money. The Company
entered into an agreement with Select to raise the needed money and paid a
$10,000 fee. In April 1997, Select agreed, to comply with one of its
commitments in the initial agreement, to raise $1,500,000 through the issuance
of the Company's convertible debentures through an offering of the debentures to
foreign investors pursuant to an exempt offering under Regulation S permitted by
the Securities Act. Eventually, approximately $530,000 face value of the
debentures were sold. However, the Company discovered that numerous false and
misleading statements were made by Select, Williams, and possibly several of the
other defendants in connection with the sale of the debentures; that various
documents were changed by Select, Williams, and several of the other defendants
without the knowledge of the Company; and that unlicensed broker-dealers sold
the debentures. Beginning in June 1997, the investors began to demand the
conversion of the debentures and the issuance of registered shares of the Common
Stock of the Company. The Company issued the shares according to the debenture
conversion terms, but refused to deliver the share certificates due to the
evidence of fraud in connection with Select's conduct of the offering. The
shares have since been canceled. In addition to its claim for damages and
rescission, the Company has alleged breach of contract with respect to the
issuance of the debentures, violations of Section 10(b) and Rule 10b-5
promulgated under the Exchange Act, misrepresentations, and market manipulation.
If the Company is successful, it will offer to repay the debentures
(approximately $530,000), less the substantial damages incurred due to the
wrongful acts of Select, Williams, the purchasers of the debentures and/or their
agents, and the other defendants. If the Company is unsuccessful, it will be
required to issue a large number of shares of the Common Stock, thereby diluting
the existing stockholders of the Company. Management believes that it will
prevail in the litigation.
CLAIMS INVOLVING STOCKHOLDERS. A stockholder has raised claims against the
Company and certain of its officers alleging misrepresentation, potential
securities violations and breach of fiduciary duties. The stockholder has made
a settlement offer to obtain additional shares of the Common Stock; however
certain directors of the Company refute the allegations and the settlement offer
has been rejected by the Company.
In an another matter, during the year ended June 30, 1995, the Company
issued 1,000,000 shares of the Common Stock to Richard Thompson, a former
director of the Company, based upon the director's representation that he would
arrange large scale financing by certain proposed contributors. During the year
ended June 30, 1997, actions were taken to cancel the Common Stock because the
Company contended that the issuance was conditioned upon Mr. Thompson's ability
to arrange large scale financing which has never materialized. However, the
Company was recently contacted by a lender who asserts that he relied upon a
pledge of 500,000 shares of the Common Stock by Mr. Thompson as collateral for a
loan and, as such, is a protected purchaser under the Uniform Commercial Code.
See "Description of Securities - Canceled Shares." An agreement has been
reached between the Company and the
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lender to permit the lender to liquidate the number of shares required to
satisfy the outstanding indebtedness and recoverable costs secured by the
shares. The certificate representing the 500,000 shares of the Common Stock
allegedly secured by a pledge was re-instated for purposes of the agreement
and are included as issued and outstanding shares in the accompanying
Consolidated Financial Statements at June 30, 1997.
PAST DUE ACCOUNTS. The Company is involved in discussions with two of its
primary vendors regarding past due accounts. The first vendor is TRW, an Ohio
corporation, performing contract software development, and strategic planning
and management services regarding the testing, development and deployment of the
Systems. The Company has become delinquent in the payment of costs and fees
under contracts with TRW (see Note 6 to the Consolidated Financial Statements
that are included elsewhere in this Prospectus) and, accordingly, TRW, although
not having filed formal legal actions, has notified the Company that it will be
withholding delivery of source codes of developed software until the past due
amounts are paid. If TRW carries through with its threat and withholds the
delivery of the source codes, the Company's operations would be shut down.
The Company is also delinquent in payments to its primary legal counsel,
Looper, Reed, Mark & McGraw, Incorporated (the "Attorneys") for legal services
and at June 30, 1997 owed the Attorneys $198,717, and at December 31, 1997 owed
the Attorneys $296,524. In order to provide security for the amounts owed, the
Company has executed pledge agreements granting the Attorneys a security
interest in the common stock of TMI and in the intellectual property of both the
Company and TMI. In the event that the Attorneys are not paid as agreed, the
Attorneys could foreclose on their security interests, and thereby become the
owners of the primary assets of the Company to the exclusion of the
stockholders.
It should be pointed out, however, that the Company has made periodic
payments to both TRW and the Attorneys, and management believes that the
Company will continue to do so.
In addition to the above, the Company, in the normal course of its
business, is subject to claims and litigation in the areas of product and
general liability. The Company believes that it has adequate insurance coverage
for most claims that are incurred in the normal course of business. In such
cases, the effect on the Company's financial statements is generally limited to
the amount of its insurance deductibles. Management does not believe at this
time that any such claims have a material impact on the Company's financial
position, operations and liquidity.
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below are the directors and executive officers of the Company,
together with their ages as of the date of this Prospectus.
<TABLE>
NAME AGE POSITION DIRECTOR SINCE
---- --- -------- --------------
<S> <C> <C> <C>
David B. Johnston (1) 55 Chairman of the Board and Chief Executive August 1987
Officer
David A. Packer 47 President and Treasurer N/A
Richard V. Secord 63 Chief Operating Officer, Secretary, and February 1996
Director
Kenneth M. Dodd 37 Executive Vice President N/A
Brent M. Pratley, M.D. (1)(2) 61 Director June 1994
Milton R. Geilmann (1)(2) 61 Director January 1998
Harry C. Aderholt (2) 78 Director January 1998
</TABLE>
- --------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
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<PAGE>
The Company may employ such additional management personnel as the Board
of Directors deems necessary. The Company has not identified or reached an
agreement or understanding with any other individuals to serve in such
management positions, but does not anticipate any difficulty in employing
qualified personnel.
A description of the business experience during the past several years
for each of the directors and executive officers of the Company is set
forth below.
David B. Johnston has served as Chairman of the Board of the Company
since August 1987 and Chief Executive Officer, effective July 1, 1997. He
currently serves as an officer and/or director of Thermal Imaging, Inc.
(herein sometimes referred to as "TII"), and Technology Selection, Inc.,
both of which are Affiliates of the Company. From 1984 through 1989, Mr.
Johnston was President of Funding Selection, Inc., an Oregon investment
banking and mergers and acquisitions firm. Prior to that, Mr. Johnston was
Chairman of Grace Capital, Ltd. in Oregon, a specialized medical and
computer high technology private placement firm. Mr. Johnston received a
Bachelor of Science degree in Business Administration from Brigham Young
University and a graduate degree in banking and corporate finance from the
University of Southern California.
David A. Packer was elected President of the Company in April 1997.
Effective July 1, 1997, he was also elected to be Treasurer of the Company.
Before joining the Company Mr. Packer served as a senior manager for TRW's
engineering office in Ogden, Utah from 1976 until 1997. Mr. Packer
received a Bachelor of Science in Electronics from Brigham Young University
in 1975.
Richard V. Secord (Major General, United States Air Force, Retired)
was elected Chief Operating Officer of the Company in June 1995, and
concurrently serves in that same position for TriSun/CTI Asia, Ltd., an
Affiliate of the Company. He was elected as a director of the Company
effective February 1996 and Secretary of the Company effective July 1,
1997. General Secord previously served as President of the Company from
February 1996 to April 1997. He is also Executive Vice President and a
director of Thermal Medical Imaging, Inc., an 80 percent owned subsidiary
of the Company. General Secord was instrumental in securing the Company's
contracts in Thailand and with the Chinese government through TriSun/CTI
Asia, Ltd., a joint venture between the Company and TriSun Medical America,
Inc., which was formed at the direction of the PRC Ministry of Public
Health to effect the GOLDEN HEALTH CARE PLAN for the People's Republic of
China. General Secord was awarded THE ORDER OF THE WHITE ELEPHANT, one of
the highest decorations awarded a non-Thai military officer, for his
distinguished valor and service in assisting the Thai military. General
Secord served in many positions while performing military service. He was
the first military officer to be appointed Deputy Assistant Secretary of
Defense (Near East, Africa and South Asia). General Secord received a
Bachelor of Science from the United States Military Academy. He is also a
graduate of the United States Air Force Command and Staff College, and the
United States Naval War College. In addition, he holds a Masters degree in
International Affairs from George Washington University.
Brent M. Pratley, M.D. was elected as a director of the Company in
June 1994 and served as the Secretary of the Company from June 1994 to
September 1997. Dr. Pratley is currently licensed to practice medicine in
Utah and California, and since 1978 has been in private practice in General
Orthopedics and Sports Medicine at Utah Valley Regional Medical Center
located in Provo, Utah, as well as in Los Angeles, California. Dr. Pratley
received his Doctor of Medicine degree in Orthopedic Surgery in 1968 from
the College of Medicine at the University of California, Irvine,
California.
Kenneth M. Dodd has been the Executive Vice President of the Company
since October 1995. In addition to his position with the Company, he is
also President, Chief Executive Officer and a director of Thermal Medical
Imaging, Inc., an 80 percent owned subsidiary of the Company. He began as
an intern in 1984 in General Motor's financial department and moved through
the organization to become Director of International Sales, Document
Processing/Imaging Division of Electronic Data Systems, a subsidiary of GM,
where his responsibilities included developing global market plans and
recruiting, training and leading the sales force worldwide. Mr. Dodd
graduated from the Northwood Institute in Midland, Michigan in 1985 with
honors in two majors, Business and Economics.
Milton R. Geilmann was elected as a director of the Company in
January 1998. Mr. Geilmann has been associated with the medical field for
over 32 years. From 1985 to 1993, he worked at E. R. Squibb and Sons, where
29
<PAGE>
he held many positions, including Nuclear Consultant for Diagnostic Medicine.
Mr. Geilmann received a Masters of Science in Pharmacology in 1957 from
State University of New York.
Harry C. Aderholt (Brigadier General, United States Air Force, Retired)
was elected as a director of the Company in January 1998. General Aderholt
served in Southeast Asia, particularly Thailand, for many years both in and
out of the U.S. Air Force. Following his retirement from military service in
1976, General Aderholt engaged in various private business ventures, including
serving as Vice President of Air Siam in Bangkok, Thailand.
Directors of the Company are elected by the stockholders at each annual
meeting and serve until the next annual meeting of stockholders or until
their successors are duly elected and qualified. Officers are elected to
serve, subject to the discretion of the Board of Directors, until their
successors are appointed or their earlier resignation or removal from office.
The Company does not have an Executive Committee. However, the Company does
have an Audit Committee and a Compensation Committee which were created in
January 1998. The Audit Committee reviews and reports to the Board Directors
on the financial results of the Company's operations and the results of the
audit services provided by the Company's independent accountants, including
the fees and costs for such services. The Compensation Committee reviews
compensation paid to management, including administration of the Company's
1997 Stock Option and Restricted Stock Plan, and recommends to the Board of
Directors appropriate executive compensation. There is no family relationship
between or among any of the directors and executive officers of the Company,
except for the relationship between Mr. Johnston and Mr. Packer, who are
cousins by marriage.
EXECUTIVE COMPENSATION
Two of the Company's officers or directors were paid a salary and
bonus exceeding $100,000 with respect to the fiscal year ended June 30,
1997, although Mr. Dodd's salary was partially paid by the Company and
partially paid by the Company's 80 percent owned subsidiary, Thermal
Medical Imaging, Inc. Mr. Johnston, the Chairman of the Board and Chief
Executive Officer, takes his compensation in the form of periodic issuances
of restricted shares of the Common Stock and stock options and $1.00 in
cash per year. These restricted shares of the Common Stock and stock
options are not issued directly to Mr. Johnston, but are issued to Thermal
Imaging, Inc. (herein referred to as "TII"), a company controlled by Mr.
Johnston. TII compensates Mr. Johnston and bears all expenses that he
incurs on behalf of the Company. The periodic issuances of restricted
shares of the Common Stock to TII are in settlement of both services
provided and expenses incurred by Mr. Johnston. The total compensation
paid to officers and directors for the fiscal year ended June 30, 1997 was
$___ (which does not take into account an additional $___ paid to Mr. Dodd
by Thermal Medical Imaging, Inc.), $___ in reimbursed expenses, ___ shares
of the restricted Common Stock issued to Thermal Imaging, Inc., an
Affiliate of Mr. Johnston, and options to purchase _________ shares of the
Common Stock issued to various officers and directors.
All corporate decisions regarding employee compensation and stock option
awards during the last three year period have been approved by the Board of
Directors. In January 1998, the Board of Directors created a Compensation
Committee composed of Dr. Pratley, Mr. Geilmann and General Aderholt, all
non-employee directors. The committee will assume responsibility for
reviewing all executive compensation matters and administering the Company's
1997 Stock Option and Restricted Stock Plan.
30
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------- ------------------------------
SECURITIES
UNDERLYING
NAME AND PRINCIPAL FISCAL ALL OTHER RESTRICTED OPTIONS AND
POSITION YEAR SALARY BONUS COMPENSATION (1) COMMON STOCK WARRANTS (3)
-------- ------ ------ ----- ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
David B. Johnston, 1997 -0- -0- -0- -0- -0-
Chairman of the Board, and 1996 -0- -0- -0- -0- -0-
Chief Executive Officer, 1995 -0- -0- -0- 690,000 (2) -0-
Treasurer (6)(7)
Richard V. Secord, 1997 -0- -0- -0- -0-
President and 1996 -0- -0- -0- -0- -0-
Chief Operating Officer (4)(7) 1995 -0- -0- -0- -0- 2,000,000
Kenneth M. Dodd, 1997 -0- -0- -0- -0-
Executive Vice President (5) 1996 -0- -0- -0- -0- -0-
1995 -0- -0- -0- -0- 500,000
David A. Packer, 1997 -0- -0- -0- -0- 500,000
President and Treasurer (6)
</TABLE>
- --------------------
(1) Certain of the officers of the Company routinely receive other benefits
from the Company, including travel reimbursement, the amounts of which are
customary in the industry. The Company has concluded, after reasonable
inquiry, that the aggregate amounts of such benefits during the year ended
June 30, 1997, which cannot be precisely ascertained, did not exceed the
lesser of $50,000 or 10 percent of the total compensation reported for the
named executive officers excepting Mr. Johnston who has foregone annual
monetary compensation in favor of the issuance of restricted shares of the
Common Stock. Mr. Johnston's travel reimbursement is listed under All
Other Compensation. Nearly all of the reimbursement under All Other
Compensation for Mr. Johnston is travel, some of which is reimbursement for
airplane, hotel and rental cars which Mr. Johnston paid out on behalf of
executives from other companies. Although General Secord's All Other
Compensation which is comprised of reimbursed travel and a $500 per month
car allowance did not exceed 10 percent of annual compensation in 1997, it
did in 1995 and therefore both years have been reported. This category
does not include restricted stock issued to employees as compensation.
(2) Issued in the name of Thermal Imaging, Inc., an Affiliate of Mr. Johnston,
and based upon fair market value at the time the shares were awarded at
prices ranging from $0.28 to $0.70 per share. Mr. Johnston's Affiliate is
the owner of all of the outstanding securities of Thermal Imaging, Inc.
Based on the information contained in the Company's stockholder list,
Thermal Imaging, Inc. is the owner of ____ percent of the issued and
outstanding shares of the Common Stock of the Company. Mr. Johnston, over
the last three years, has been issued 690,000 shares of the Common Stock as
compensation, which based on the fair market value at the time of issuance
equals an aggregate of $474,500. Mr. Johnston is either the record or
beneficial owner of a total of _________ shares of the Common Stock of the
Company as of June 30, 1997 (including shares of the Common Stock held in
the names of Thermal Imaging, Inc. and various individual stockholders.
See "Plan of Distribution and Selling Stockholders." The aggregate value
of Mr. Johnston's Common Stock as of June 30, 1997 based upon the closing
market price of the Company's unrestricted shares of the Common Stock as of
June 30, 1997 was $___.
(3) None of the options granted to employees have been exercised. Of
Mr. Johnston's options on 1,000,000 shares, only 275,000 shares are vested
as of the date hereof. Of General Secord's options on 3,250,000 shares,
only 1,312,500 shares are vested as of the date hereof. Of the 500,000
optioned shares granted to Mr. Packer, none of the options are vested as of
the date hereof. Of Mr. Dodd's options on 500,000 shares, only __________
shares are vested as of the date hereof.
(4) General Secord served as President of the Company from February 1996 to
April 1997. He was elected Secretary of Company effective July 1, 1997.
(5) Although Mr. Dodd received only $___ during the Company's fiscal year ended
June 30, 1997, he has been included in this table due to the fact that he
has an employment agreement in effect with the Company which agrees to
compensate him a total of $150,000 per year starting on October 11, 1995,
increasing to $175,000 per year in the event that certain sales quotas are
met. Even though his employment agreement remains in effect and he is
still Executive Vice President of the Company, Mr. Dodd is also employed by
the Company's 80 percent owned subsidiary, Thermal Medical Imaging, Inc.,
with the understanding that Thermal Medical Imaging, Inc. shall be
responsible for Mr. Dodd's compensation. Options to purchase 500,000
shares of the Common Stock of the Company, were granted on October 11,
1995.
(6) Mr. Packer was elected President of the Company in April 1997 and Treasurer
of the Company effective July 1, 1997.
(7) Mr. Johnston was granted options to purchase 1,000,000 shares of the Common
Stock of the Company on September 18, 1997. General Secord was granted an
option to purchase 1,250,000 shares of the Common Stock of the Company on
September 18, 1997. See "Employment Contracts."
EMPLOYMENT CONTRACTS
David B. Johnston, the Chief Executive Officer of the Company, and the
Company entered into an Employment Agreement dated October 29, 1997, but
effective September 18, 1997. The term of the agreement is for three years,
automatically renewable for additional periods of one year thereafter unless
terminated upon the giving of notice at least 14 days prior to the annual
renewal date. The agreement calls for no mandatory annual cash compensation,
but does provide for compensation in the form of non-statutory stock options
covering 1,000,000 shares of the Common Stock at an exercise price of $0.75 per
share. Twenty-five percent of the options vested upon the execution of the
agreement, and 25 percent of the remaining options vest on each anniversary date
of the agreement. The options granted to Mr. Johnston must be exercised within
five years from the date of grant. To the extent
31
<PAGE>
applicable, the options granted to Mr. Johnston are subject to the Company's
1997 Stock Option and Restricted Stock Plan. At the cost of the Company, Mr.
Johnston has "piggyback" registration rights with respect to the shares of
the Common Stock derived from the exercise of the options. As of the date of
this Prospectus, none of the options granted to Mr. Johnston under the
agreement have been exercised. The agreement subjects Mr. Johnston to a two
year non-compete restriction, the obligation not to induce any employee of
the Company to leave his employment with the Company during the term of the
agreement or for two years after the termination thereof, and the duty not to
reveal any confidential information about the business of the Company.
None of the shares of the Common Stock to be issued to Mr. Johnston in
connection with the exercise of the options is being registered under the
Securities Act pursuant to this Prospectus.
David A. Packer, the President of the Company, and the Company entered into
an Employment Agreement dated April 30, 1997. The term of the agreement is for
three years and calls for compensation of $135,000 per year, plus non-statutory
stock options covering 500,000 shares of the Common Stock at an exercise price
of $0.97 per share. One-third of the options vest on each anniversary date of
the agreement. The options granted to Mr. Packer must be exercised within five
years from the date of the agreement. If the agreement is terminated for
"cause" as defined in the agreement, or Mr. Packer voluntarily terminates the
agreement, all of the options granted to Mr. Packer thereunder, and which have
not been exercised, shall be forfeited. At the cost of the Company, Mr. Packer
has "piggyback" registration rights with respect to the shares of the Common
Stock derived from the exercise of the options. The agreement subjects Mr.
Packer to a two year non-compete restriction, the obligation to give the Company
the right to take advantage of any business opportunity, and the duty not to
reveal any confidential information about the business of the Company.
The resale of 500,000 shares of the Common Stock to be issued to Mr. Packer
in connection with the exercise of the options is being registered under the
Securities Act pursuant to this Prospectus.
Richard V. Secord, the Chief Operating Officer of the Company, and the
Company entered into an original Employment Agreement dated June 12, 1995, which
was superseded by a new agreement dated September 18, 1997. The term of the new
agreement is for three years and calls for compensation of $175,000 per year.
In addition to the cash compensation, the agreement ratifies an original grant
to General Secord of non-statutory stock options covering 2,000,000 shares of
the Common Stock at an exercise price of $1.25 per share, 50 percent of which
vested on June 12, 1996 and 50 percent of which will vest on June 12, 1998. The
options granted pursuant to the original agreement must be exercised within ten
years from the date of grant. In addition, General Secord was granted
additional non-statutory options covering 1,250,000 shares of the Common Stock
at an exercise price of $0.70 per share. Twenty-five percent of these
additional options vested on September 18, 1997, and 25 percent of the remaining
options vest on each anniversary date of the agreement (September 18). These
options must be exercised within five years from the date of grant. To the
extent applicable, the additional options granted to General Secord are subject
to the Company's 1997 Stock Option and Restricted Stock Plan. At the cost of
the Company, General Secord has "piggyback" registration rights with respect to
the shares of the Common Stock derived from the exercise of the options. As of
the date of this Prospectus, none of the options granted to General Secord under
the agreement have been exercised. The agreement subjects General Secord to a
two year non-compete restriction, the obligation not to induce any employee of
the Company to leave his employment with the Company during the term of the
agreement or for two years after the termination thereof, and the duty not to
reveal any confidential information about the business of the Company.
The resale of 3,250,000 shares of the Common Stock to be issued to General
Secord in connection with the exercise of the options is being registered under
the Securities Act pursuant to this Prospectus.
Kenneth M. Dodd, the Executive Vice President of the Company, and also the
President of Thermal Medical Imaging, Inc., an 80 percent owned subsidiary of
the Company, executed an Employment Agreement with the Company on October 11,
1995. The term of the agreement is for three years and calls for compensation
of $150,000 per year, plus non-statutory stock options covering 500,000 shares
of the Common Stock at an exercise price of $1.25 per share. The annual cash
compensation shall increase to $175,000, if and when the Company sells its 100th
CTI System. One-half of the options vested on June 1,1996, 125,000 options
vested on June 2, 1997, and the remaining 125,000 options will vest on October
11, 1998. The options granted to Mr. Dodd must be exercised within 10 years
from the date of the agreement. If the agreement is terminated for "cause" as
defined in the agreement, or Mr. Dodd
32
<PAGE>
voluntarily terminates the agreement, all of the options granted to Mr. Dodd
thereunder, and which have not been exercised, shall be forfeited. At the
cost of the Company, Mr. Dodd has "piggyback" registration rights with
respect to the shares of the Common Stock derived from the exercise of the
options. As of the date of this Prospectus, none of the options granted to
Mr. Dodd under the agreement have been exercised. The agreement subjects Mr.
Dodd to a two year non-compete restriction, the obligation to give the
Company the right to take advantage of any business opportunity, and the duty
not to reveal any confidential information about the business of the Company.
As part of the consideration for the agreement, Mr. Dodd was appointed the
Chief Executive Officer of Thermal Medical Imaging, Inc. and received
2,830,959 shares of the common stock of Thermal Medical Imaging, Inc.
(approximately 7.6 percent of its issued and outstanding common stock).
The resale of 500,000 shares of the Common Stock to be issued to Mr. Dodd
in connection with the exercise of the options is being registered under the
Securities Act pursuant to this Prospectus.
DIRECTOR COMPENSATION
By appropriate resolution of the Board of Directors, directors may be
reimbursed or advanced cash for expenses, if any, relating to attendance at
meetings of the Board of Directors and may be paid a fixed sum (as determined
from time to time by the vote of a majority of the directors then in office) for
attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the Company
in any other capacity and receiving compensation therefor. Members of special
or standing committees may, by appropriate resolution of the Board of Directors,
be allowed similar reimbursement of expenses and compensation for attending
committee meetings.
STOCK OPTIONS AND RESTRICTED STOCK
In June 1995, the Board of Directors adopted the Company's 1995 Stock
Option Plan, which was never ratified by the stockholders and formally
terminated by the Board of Directors on September 18, 1997. On September 18,
1997, the Board of Directors adopted the Company's 1997 Stock Option and
Restricted Stock Plan (the "Plan") subject to the approval of the stockholders
of the Company. The Plan was formally adopted by the stockholders of the
Company on February 6, 1998. The Plan provides for the grant by the Company to
employees of the Company of (i) options to purchase shares of the Common Stock,
and (ii) shares of the Company's restricted Common Stock (the "Restricted
Stock"). The options and the Restricted Stock are hereinafter sometimes
collectively referred to as the "Plan Awards." Options granted under the Plan
may include non-statutory options that do not meet the requirements of Sections
421 through 424 of the Internal Revenue Code of 1986, as amended (the "Code"),
as well as incentive stock options ("ISO") intended to qualify under Section 422
of the Code. An aggregate of 5,125,000 shares of the Common Stock may be issued
pursuant to the provisions of the Plan. The Plan shall be administered by the
Board of Directors or by a committee of the Board composed solely of two or more
non-employee directors (the "Administrator"). The Administrator shall
administer the Plan so as to comply at all times with the Exchange Act,
including Rule 16b-3 (or any successor rule), and, subject to the Code, shall
otherwise have absolute and final authority to interpret the Plan. The Plan
shall continue in effect for a term of 10 years unless sooner terminated
pursuant to its provisions.
As mentioned above, the 1995 Stock Option Plan was to be submitted to the
stockholders in order to qualify for statutory stock option treatment under the
Code, but such submittal never occurred. Employees of the Company who were
awarded options pursuant or in reference to the 1995 Stock Option Plan have
ratified their agreements to reflect that the plan was never submitted to the
stockholders for approval but that such options shall incorporate, as
contractual terms, the terms and conditions of the 1995 Stock Option Plan.
STOCK OPTIONS. Pursuant to the Plan, the term of each option shall be 10
years from the date of grant or such shorter term as may be determined by the
Administrator; provided, in the case of an ISO granted to a 10 percent
stockholder, the term of such ISO shall be five years from the date of grant or
such shorter time as may be determined by the Administrator. Each option
granted under the Plan may only be exercised to the extent that the optionee is
vested in such option. Except as otherwise provided, all options issued under
the Plan shall vest 20 percent each year over a five year period.
Notwithstanding the foregoing, the Administrator shall have the discretionary
power to establish the vesting periods for any option granted under the Plan,
except that in no case may the Administrator permit more than 25 percent of any
option to vest before the first anniversary of the earlier of the date of grant
or the date on
33
<PAGE>
which the optionee began providing services to the Company. The exercise
price shall be such price as is determined by the Administrator in its sole
discretion; provided, however, the exercise price shall not be less than 100
percent of the Fair Market Value of the shares of the Common Stock subject to
such option on the date of grant (or 110 percent in the case of an option
granted to an employee who is a 10 percent stockholder on the date of grant).
A 10 percent stockholder shall mean a person that owns more than 10 percent
of the total combined voting power of all classes of outstanding stock of the
Company or any subsidiary, taking into account the attribution rules set
forth in Section 424 of the Code. Any shares of the Common Stock issued upon
exercise of an option shall be subject to such rights of repurchase and other
transfer restrictions as the Administrator may determine in its sole
discretion. To the extent that the aggregate Fair Market Value (determined
on the date of grant) of the shares with respect to which ISOs are
exercisable for the first time by an individual during any calendar year
under the Plan, and under all other plans maintained by the Company, exceeds
$100,000, such options shall be treated as non-statutory options. "Fair
Market Value" shall be the mean between the closing bid and asked prices of
the shares of the Common Stock on the date in question (on the principal
market in which the shares are traded), or if the shares were not traded on
such date, the mean between closing bid and asked prices of the shares on the
next preceding trading day during which the shares were traded.
RESTRICTED STOCK. The Administrator shall have the authority to grant
shares of the Common Stock to employees that are subject to certain terms,
conditions, and restrictions (the "Restricted Stock"). The Restricted Stock may
be granted by the Administrator either separately or in combination with
options. The terms, conditions and restrictions of the Restricted Stock shall
be determined from time to time by the Administrator without limitation, except
as otherwise provided in the Plan; provided, however, that each grant of
Restricted Stock to an employee shall require the employee to remain an employee
of the Company or any of its subsidiaries for at least six months from the date
of grant. Restricted Stock shall be granted to employees for services rendered
and at no additional cost to the employee, provided, however, that the value of
the services performed must, in the opinion of the Administrator, equal or
exceed the par value of the Restricted Stock to be granted to the employee. The
terms, conditions, and restrictions of the Restricted Stock shall be determined
by the Administrator on the date of grant. No certificates will be issued to an
employee with respect to the Restricted Stock until the date the Restricted
Stock becomes vested in accordance with the Plan. The Restricted Stock may not
be sold, assigned, transferred, redeemed, pledged or otherwise encumbered during
the period in which the terms, conditions and restrictions apply (the
"Restriction Period"). More than one grant of Restricted Stock may be
outstanding at any one time, and the Restriction Periods may be of different
lengths. Receipt of the Restricted Stock is conditioned upon satisfactory
compliance with the terms, conditions and restrictions of the Plan and those
imposed by the Administrator. On the date the Restriction Period terminates,
the Restricted Stock shall vest in the employee. If an employee (i) with the
consent of the Administrator, ceases to be an employee of, or otherwise ceases
to provide services to, the Company or any of its subsidiaries, or (ii) dies or
suffers from permanent and total disability, the vesting or forfeiture
(including without limitation the terms, conditions and restrictions) of any
grant under the Plan shall be determined by the Administrator in its sole
discretion, subject to any limitations or terms of the Plan. If the employee
ceases to be an employee of, or otherwise ceases to provide services to, the
Company or any of its subsidiaries for any other reason, all grants of
Restricted Stock under the Plan shall be forfeited (subject to the terms of the
Plan).
As of the date of this Prospectus, no shares of the Restricted Stock have
been granted under the Plan.
34
<PAGE>
As of the date of this Prospectus, the following options were outstanding
under the Plan:
<TABLE>
NAME OF PERSON TO
WHOM OPTIONS NUMBER OF SHARES EXPIRATION DATE
WERE GRANTED UNDER OPTION OF OPTION VESTING DATE
------------ ------------ --------- ------------
<S> <C> <C> <C>
David B. Johnston, 275,000 09/18/02 (1) 09/18/97 (2)
Chairman of the Board, 275,000 09/18/02 (1) 09/18/98 (2)
Chief Executive Officer, 275,000 09/18/02 (1) 09/18/99 (2)
and Treasurer 275,000 09/18/02 (1) 09/18/00 (2)
Richard V. Secord, 312,500 09/18/02 (1) 09/18/97 (2)
Chief Operating Officer (3)(4) 312,500 09/18/02 (1) 09/18/98 (2)
312,500 09/18/02 (1) 09/18/99 (2)
312,500 09/18/02 (1) 09/18/00 (2)
Kenneth M. Dodd, -0- N/A N/A
Executive Vice President (3)
David A. Packer, -0- N/A N/A
President and Treasurer (3)(4)
</TABLE>
- ------------
(1) The option may terminate prior to this date. An option will automatically
terminate and revert to the Company upon the termination of employment with
"cause," as defined in the employee's Employment Agreement. In addition,
an option will automatically terminate and revert to the Company if vested
as of the date of resignation or termination "without cause," as defined in
the employee's Employment Agreement, but not exercised on or before the
expiration of 90 days after the termination date of employment.
(2) Conditioned on the employee's continued employment with the Company.
(3) The employee holds options granted prior to the adoption of the Plan. The
options were originally granted pursuant to the terms of the Company's 1995
Stock Option Plan which was never ratified by the stockholders and formally
terminated by the Board of Directors on September 18, 1997. See "- Stock
Options and Restricted Stock" and "- Employment Contracts." The terms of
the employee stock option agreements were amended to ratify and incorporate
the terms of the 1995 Stock Option Plan into the respective stock option
agreements as contractual provisions.
(4) General Secord was President of the Company from February 1996 to April
1997, and was elected Secretary effective July 1, 1997. Mr. Packer was
elected President in April 1997 and Treasurer effective July 1, 1997.
The resale of 1,250,000 shares of the Common Stock to be issued upon the
exercise of the above described options granted pursuant to the Plan and in
favor of General Secord is being registered under the Securities Act pursuant to
this Prospectus.
35
<PAGE>
The following table shows, as to the named executive officers,
information concerning individual grants of options during the fiscal year
ended June 30, 1997.
OPTION/WARRANT GRANTS IN LAST FISCAL YEAR
<TABLE>
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS/WARRANTS
OPTIONS/WARRANTS GRANTED TO EXERCISE PRICE EXPIRATION
NAME GRANTED EMPLOYEES IN FY97 PER SHARE DATE
---- ------- ----------------- --------- ----
<S> <C> <C> <C> <C>
David B. Johnston, -0- N/A N/A N/A
Chairman of the Board,
Chief Executive Officer,
and Treasurer (4)
-0- N/A N/A N/A
Richard V. Secord,
Chief Operating Officer (1)(4) -0- N/A N/A N/A
Kenneth M. Dodd,
Executive Vice President 500,000 (2) 100 $0.97 04/30/02 (3)
David A. Packer,
President and Treasurer (1)
</TABLE>
- -----------
(1) General Secord was President of the Company from February 1996 to April
1997, and was elected Secretary effective July 1, 1997. Mr. Packer was
elected President in April 1997 and Treasurer effective July 1, 1997.
(2) Represents options to purchase Common Stock.
(3) The option may terminate prior to this date. An option will automatically
terminate and revert to the Company upon the termination of employment with
"cause," as defined in the employee's Employment Agreement. In addition,
an option will automatically terminate and revert to the Company if vested
as of the date of resignation or termination "without cause," as defined in
the employee's Employment Agreement, but not exercised on or before the
expiration of 90 days after the termination date of employment.
(4) Mr. Johnston was granted an option to purchase 1,000,000 shares of the
Common Stock of the Company on September 18, 1997. General Secord was
granted an option to purchase 1,250,000 shares of the Common Stock of the
Company on September 18, 1997. See "Employment Contracts."
No warrants to purchase shares of the Common Stock have been granted to
any officer, director, or employee of the Company.
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<PAGE>
The following table shows, as to the named executive officers,
information concerning aggregate option and warrant exercises during the
fiscal year ended June 30, 1997 and the option and warrant values as of June
30, 1997.
AGGREGATED OPTION AND WARRANT EXERCISES IN LAST FISCAL YEAR
AND YEAR END OPTION AND WARRANT VALUES
<TABLE>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/WARRANTS OPTIONS/WARRANTS AT
SHARES ACQUIRED AT JUNE 30, 1997 JUNE 30, 1997
NAME ON EXERCISE VALUE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE (1)
---- ----------- -------------- ------------------------- -----------------------------
<S> <C> <C> <C> <C>
David B. Johnston, -0- -0- -0- -0-
Chairman of the Board,
Chief Executive Officer,
and Treasurer
Richard V. Secord, -0- -0- 1,000,000/1,000,000 -0-
Chief Operating Officer (2)
Kenneth M. Dodd, -0- -0- 375,000/125,000 -0-
Executive Vice President
David A. Packer, -0- -0- 0/500,000 -0-
President and Treasurer (2)
</TABLE>
- -----------
(1) The value of the unexercised in-the-money options/warrants at June 30, 1997
was determined by calculating the difference between the exercise price per
share of the Common Stock, as set forth in the respective stock option
agreement, and the closing price per share of the Common Stock on June 30,
1997. The resulting amount is deemed to be the value of the
options/warrants for purposes of this table. In the event the exercise
price per share of the Common Stock exceeded the closing price per share of
the Common Stock on June 30, 1997, a "zero" value is shown.
(2) General Secord was President of the Company from February 1996 to April
1997, and was elected Secretary effective July 1, 1997. Mr. Packer was
elected President in April 1997 and Treasurer effective July 1, 1997.
LONG-TERM INCENTIVE PLANS
The Company has not established, nor does it provide for, long-term
incentive plans or defined benefit or actuarial plans.
CERTAIN TRANSACTIONS
Management believes that all prior related party transactions are on
terms no less favorable to the Company as could be obtained from unaffiliated
third parties. All ongoing and future transactions with such persons,
including any loans or compensation to such persons, will be approved by a
majority of disinterested, independent outside members of the Board of
Directors.
Since its inception the Company has been dependent upon certain
individuals, consultants, officers/stockholders and the related corporations
under their control (collectively referred to as the "Affiliates") to provide
capital, management services, assistance in finding new sources for debt and
equity financing and guidance in the development of the Company's thermal
imaging system. The Affiliates have generally provided services and incurred
expenses on behalf of the Company in exchange for shares of the Common Stock.
The Company has issued Form 1099's for all such share issuances for services
rendered after July 1, 1996.
PROCEEDS FROM THE SALE OF SECURITIES. In certain instances in years
prior to 1997, Affiliates accepted cash raised through the issuance of short
term promissory notes and private placements of securities, including shares
of the Common Stock and debentures, on behalf of the Company. Such amounts
were deposited into the separate bank accounts of certain Affiliates and
either transferred directly to the account of the Company or transferred to
third parties in payment of debts of the Company. In a majority of these
instances, Thermal Imaging, Inc. ("TII"), an Affiliate of Mr. Johnston, the
Chief Executive Officer of the Company, received funds raised from investors
and
37
<PAGE>
deposited the amounts in an account over which Mr. Johnston had sole control.
The funds received in the TII account were commingled with other assets of
TII.
In an effort to account for such proceeds, the auditors have assumed
that all funds raised during the past three fiscal years which were not paid
by investors directly to the Company were initially transferred to TII. In
those cases where reliable evidence is not available to accurately verify the
subsequent transfer of funds from TII to the Company or to creditors of the
Company, or to distinguish contributions made by TII to the Company in return
for shares of the Common Stock from transfers of funds collected on behalf of
the Company for which shares of the Common Stock had been issued to
subscribers, the discrepancies have been treated as compensation to Mr.
Johnston and charged as a compensation expense to the Company and reflected
as operating, general and administrative expenses in the accompanying
financial statements. This resulting amount constitutes the total of all
compensation paid during such period to Mr. Johnston, other than the cash
payment of $1.00 per year; he was not compensated otherwise by any salary or
bonuses.
DOREX SETTLEMENT. Between July and October 1995, the Company reached
various settlements with former stockholders of Dorex, Inc. ("Dorex")
regarding threats of litigation arising out of the Company's acquisition of
certain research contracts with the State University of New York - Buffalo
("SUNY") and intellectual property relating to thermal imaging technology.
In 1989, Dorex entered into a research agreement with SUNY regarding the
development and application of computerized thermography analysis. After
Dorex became unable to meet funding obligations under the research program,
TII, an Affiliate of Mr. Johnston and a stockholder in Dorex, paid arrearages
due under the agreement and assumed future payment obligations in order to
continue the project. As a result of an arrangement negotiated, TII gained
an assignment of the research agreement and related technology to the
exclusion of Dorex. TII subsequently transferred all of its contractual and
proprietary rights in the project to the Company. According to management,
certain Dorex stockholders threatened litigation against the Company as a
result of its role in the acquisition of the research agreement and related
technology. In order to avoid litigation, the management issued 630,000
shares of the Common Stock to Dorex stockholders in 1995 in consideration of
their discharge and release of the Company from all claims and liabilities
relating to the technology. Settling Dorex stockholders executed written
agreements acknowledging their release of the Company. Some remaining
stockholders have not settled. In an effort to protect the Company from
future costs associated with the Dorex transaction, the Company entered into
an Assumption of Liability Agreement (the "Liability Agreement") with TII,
effective April 17, 1996. The terms of the Liability Agreement provide that
in exchange of the issuance of 112,500 shares of the Common Stock to TII, TII
agrees to assume liability for all claims made by Dorex stockholders against
the Company after April 17, 1996.
STOCK TRANSACTIONS WITH AFFILIATES. A substantial portion of the cash
contributed to the Company over the past several years has come from
Affiliates. The primary Affiliate contributors have been TII, an Affiliate of
Mr. Johnston, and Paul D. Holt d/b/a PDH, Ltd., an independent contractor who
provides various administrative services to the Company. All of the
restricted shares of the Common Stock issued to the Affiliates, unless
otherwise noted, has been valued at 50 percent of the average monthly trading
price of free trading shares of the Common Stock. Management believes that
such a valuation method fairly and accurately reflected the fair market value
of restricted shares of the Common Stock at the respective dates of issue.
38
<PAGE>
The following is an analysis of transactions involving the Affiliates
during the fiscal years ended June 30, 1997 and 1996:
<TABLE>
TII PDH, LTD.
-------------------- -------------------
YEAR ENDED JUNE 30, 1997 SHARES AMOUNT SHARES AMOUNT
------------------------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares of the Common Stock issued as
compensation and repayment of
expenses incurred on behalf of the
Company by the Affiliates at prices
ranging from $0.50 to $0.73 per share 213,494 $ 124,998 400,000 $223,000
Investment in the Company 1,856,924 1,032,709 -- --
--------- ---------- ------- --------
Total - 1997 2,070,418 $1,157,707 400,000 $223,000
--------- ---------- ------- --------
--------- ---------- ------- --------
YEAR ENDED JUNE 30, 1996
------------------------
Shares of the Common Stock issued as
compensation and repayment of
expenses incurred on behalf of the
Company by the Affiliates at prices
ranging from $0.53 to $1.50 per share 962,250 $ 840,375 194,383 $291,575
Investment in the Company 800,000 672,000 -- --
--------- ---------- ------- --------
Total - 1996 1,762,250 $1,512,375 194,383 $291,575
--------- ---------- ------- --------
--------- ---------- ------- --------
</TABLE>
39
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table presents certain information regarding the
beneficial ownership of all shares of the Common Stock at February 6, 1998
(i) each person who owns beneficially more than five percent of the
outstanding shares of the Common Stock, (ii) each director of the Company,
(iii) each named executive officer, and (iv) all directors and officers as a
group. See "Management - Stock Options and Restricted Stock" and "- Certain
Transactions."
<TABLE>
Shares Beneficially Owned
-------------------------
Name of Beneficial Owner (1) Number Percent (7)
---------------------------- ------ -----------
<S> <C> <C>
David B. Johnston (2) 12,325,381 27.5
Richard V. Secord (3) 1,312,500 2.9
Brent M. Pratley, M.D 600 *
Kenneth M. Dodd (4) 375,000
David A. Packer 90,739 *
Harry C. Aderholt 45,000 *
Milton R. Geilmann 15,000 *
Daron Dillia (5) 3,765,250 8.0
All directors and officers
as a group (seven persons) (6) 14,164,220 30.5
</TABLE>
- ----------
* Less than one percent.
(1) Unless otherwise indicated, each person named in the above-described table
has the sole voting and investment power with respect to his shares of the
Common Stock beneficially owned. The business address of each individual
is the same as the address of the Company's principal executive offices
except for Dr. Pratley whose business address is 1055 North 300 W., No.
501, Provo, Utah 84604; Mr. Geilmann, whose business address is 20660 S.W.
Shoshone Drive, Tualatin, Oregon 97062; and General Aderholt, whose address
is 23 Miracle Strip Parkway, N.E., Ft. Walton Beach, Florida 32548.
(2) Includes no shares of the Common Stock actually issued and; 250,000 shares
of the Common Stock which are covered by options exercisable within 60 days
from February 6, 1998. Also includes 12,075,381 shares of the Common Stock
owned by Thermal Imaging, Inc., an Affiliate of Mr. Johnston.
(3) Includes no shares of the Common Stock actually issued; 1,312,500 shares of
the Common Stock which are covered by options exercisable within 60 days
from February 6, 1998.
(4) Includes no shares of the Common Stock actually issued; 375,000 shares of
the Common Stock which are covered by options exercisable within 60 days
from February 6, 1998.
(5) Includes 259,000 shares of the Common Stock issued and outstanding and
700,000 shares of the Common Stock underlying the Resale Warrants in the
name of Daron Dillia. Also includes 600,000 shares of the Common Stock
issued and outstanding, 2,000,000 shares of the Common Stock which are
covered by options exercisable within 60 days of February 6, 1998, and
206,250 beneficially held, in the name of Manhattan Financial Group. See
"Plan of Distributions and Selling Stockholders."
(6) Includes an aggregate of 12,226,720 shares of the Common Stock issued and
outstanding and an aggregate of 1,937,500 shares of the Common Stock which
are covered by options exercisable within 60 days from February 6, 1998.
(7) Unless otherwise provided, the calculation of percentage ownership is based
on the total number of shares of the Common Stock outstanding as of
February 6, 1998. Any shares of the Common Stock which are not outstanding
as of such date but are subject to options, warrants, or rights of
conversion exercisable within 60 days of February 6, 1998 shall be deemed
to be outstanding for the purpose of computing percentage ownership of
outstanding shares of the Common Stock by such person but shall not be
deemed to be outstanding for the purpose of computing the percentage
ownership of any other person.
MANHATTAN FINANCIAL GROUP CONSULTING AGREEMENT
Effective January 1, 1997, the Company and Manhattan Financial Group of
Manhattan Beach, California ("MFG"), executed a Consulting Agreement covering
financial services. The term of the agreement is for one year, automatically
renewable for additional periods of one year thereafter unless terminated
upon proper notice. The consideration for the agreement was 100,000 shares
of the Common Stock and an option to purchase 2,000,000 shares of the Common
Stock at an exercise price of $0.60 per share (the original executed
agreement referenced an exercise price of $0.75 per share, but the agreement
was amended to reflect a reduced exercise price of $0.60 per share). Fifty
percent of the options vested upon the execution of the agreement, and the
remaining 50 percent of the options vested on December 31, 1997. At the cost
of the Company, MFG has "piggyback" registration rights with respect to the
shares of the Common Stock derived from the exercise of the options. As of
the date of this Prospectus, none of the options granted to MFG under the
agreement have been exercised. In the event of termination of the agreement
before its expiration date, all options exercisable must be exercised on or
before the expiration of three years following the termination date, extended
by agreement, from an original exercise period of 90 days following the
termination date.
40
<PAGE>
In addition, the agreement subjects MFG to a duty not to reveal any
confidential information about the business of the Company.
In a related transaction, on July 9, 1997, MFG and the Company entered
into a Restricted Stock Purchase Agreement wherein the Company would issue to
MFG 500,000 shares of the Common Stock in consideration for, and subject to,
total contributions of up to $150,000 to the Company in conjunction with the
PR Expense Administration Agreement between the Company and Liberty Capital
Group, Inc. As of the date of this Prospectus, MFG has funded approximately
$50,000 pursuant to its obligation. The effective purchase price of the
Common Stock was set at $0.30 per share.
The resale of 2,600,000 shares of the Common Stock issued, or to be
issued, to MFG in connection with the above described Consulting Agreement
and Restricted Stock Purchase Agreement, including any shares to be issued
upon the exercise of any options, is being registered under the Securities
Act pursuant to this Prospectus.
AMBIENT CAPITAL GROUP, INC. FINANCIAL ADVISORY AGREEMENT
On October 29, 1997, the Company appointed Ambient Capital Group, Inc.
("Ambient") to act as its financial adviser with respect to planning and
executing capital structure strategies, revising the Company's business plan,
and certain other matters related thereto. The term of the agreement is for
12 months, with month-to-month extensions thereafter, until terminated upon
60 days notice by either party. Ambient received an initial retainer fee for
its services of 83,333 shares of the Common Stock and 83,333 warrants giving
Ambient the right to purchase five shares of the Common Stock at $0.72 per
share for each warrant issued. These warrants are valid for a period of four
years from the date of issue. In addition, Ambient will receive success fees
for raising equity and debt capital, for advising on mergers and
acquisitions, and for other corporate finance transactions pursuant to
separate engagement agreements for each transaction to be negotiated in good
faith at such time as the specific type transaction and/or amount of capital
to be raised is determined. If Ambient terminates the engagement before the
initial 12 month term, then Ambient agreed to a pro-rated cancellation of all
unexercised warrants based on the number of months that the agreement was in
effect. The agreement provides Ambient with anti-dilution protection for
stock splits, stock dividends, and similar corporate events. Moreover, the
shares of the Common Stock issued pursuant to the agreement and all shares of
the Common Stock underlying the warrants shall have standard "piggyback"
registration rights at no cost to Ambient.
The resale of 499,998 shares of the Common Stock to be issued to Ambient
in connection with the above described agreement, including any shares to be
issued upon the exercise of any warrants, is being registered under the
Securities Act pursuant to this Prospectus.
LIBERTY CAPITAL GROUP, INC. SERVICES AGREEMENT
On July 21, 1997, the Company and Liberty Capital Group, Inc. ("Liberty
Capital") executed that certain Services Agreement whereby the Company
engaged Liberty Capital to perform services associated with the development
of a comprehensive business plan, future acquisition strategies, and any
other ancillary services relating to the foregoing. In consideration of such
services, the Company granted to Liberty Capital options to purchase all or
any portion of 300,000 shares of the Common Stock at a purchase price equal
to $0.60 per share. Options for up to 100,000 shares shall become
exercisable on or after the first date, following the effective date, that
the "stock price" (defined as the low bid price for the Common Stock over
three consecutive business days) reaches a level of $2.00 per share. Options
for up to an additional 100,000 shares shall become exercisable on or after
the first date thereafter that the stock price reaches a level of $3.00 per
share, and options for up to an additional 100,000 shares shall become
exercisable on or after the first date thereafter that the stock price
reaches a level of $5.00 per share. In the event the Company terminates the
agreement for "cause" then any options that are exercisable as of the date of
such termination shall be deemed earned by Liberty Capital surviving
termination and exercisable on or before three years after the effective
date, and any options that are not yet exercisable as of the date of such
termination will terminate automatically without notice and be of no further
force or effect. The options will terminate automatically without notice and
be of no further force or effect to the extent the options are not yet
exercised within three years after the effective date. If an event has
occurred which would permit Liberty Capital to exercise the options, Liberty
Capital has the right to demand registration of the shares when issued. In
addition, if shares of the Common Stock covered
41
<PAGE>
by the options have been exercised but not yet registered, Liberty Capital
shall have "piggyback" registration rights to require the shares which have
been issued to be registered in the event the Company is filing any other
registration statement to register any other shares of the Common Stock.
In conjunction with the Liberty Capital Group, Inc. Consulting
Agreement, the Company, Liberty Capital and MFG executed the PR Expense Funds
Administration Agreement discussed above. See "Management - Manhattan
Financial Group Consulting Agreement."
None of the shares of the Common Stock to be issued to Liberty Capital
in connection with the exercise of the options is being registered under the
Securities Act pursuant to this Prospectus.
WILLARD HARPSTER CONSULTING AGREEMENT
Effective January 1, 1997, the Company and Willard Harpster ("Harpster")
executed a Consulting Agreement covering financial services associated with
the development of a comprehensive business plan, future acquisition
strategies, capital development and fund raising. In consideration of such
services, Harpster was granted an option to purchase all or any portion of
275,000 shares of the Common Stock at a purchase price of $0.75 per share.
All of the options are currently exercisable. The agreement shall remain in
effect for a period of one year commencing on the effective date, but shall
automatically renew, if not terminated as therein provided, for successive
one year periods. Notwithstanding the foregoing, the Company or Harpster may
terminate the agreement at any time upon 10 days written notice. In the
event Harpster terminates the agreement or the Company terminates the
agreement for "cause" then any options that are exercisable as of the date of
such termination shall be deemed earned by Harpster, surviving termination,
but in all cases must be exercised on or before the expiration of 90 days
following the termination date, and any options that are not yet exercisable
as of the date of such termination will terminate automatically without
notice and be of no further force or effect. In the event the Company
terminates the agreement without cause then any portion of the options which
Harpster has the right to exercise as of the date of such termination of
employment must be exercised on or before 90 days after the date of
termination. All options not exercisable as of the date of termination of
employment and all options earned by Harpster, if any, not exercised on or
before the expiration of the 90 day period will terminate automatically
without notice and be of no further force or effect. The options will
terminate automatically without notice and be of no further force or effect
to the extent the options are not yet exercised before January 1, 2002. All
shares of the Common Stock which Harpster obtains from the exercise of
options will be subject to "piggyback" registration rights.
The resale of 275,000 shares of the Common Stock to be issued to
Harpster in connection with the exercise of the options as described in the
above described agreement is being registered under the Securities Act
pursuant to this Prospectus.
PDH, LTD. AGREEMENT
PDH, Ltd. has been issued shares of the Common Stock valued at $124,406
as compensation and reimbursement of expenses for public relations services
rendered from July 1, 1995 through June 30, 1996, and $163,000 as
compensation and reimbursement of expenses for public relations services
rendered through June 30, 1997. The resale of all of the shares of the
Common Stock issued to PDH, Ltd. is being registered under the Securities Act
pursuant to this Prospectus. PDH, Ltd. is the d/b/a business name for Paul
Douglas Holt and any persons engaged by him. This consultant has been
engaged by the Company for several years to assist the Company with advisory
and administrative duties, including stockholder communications. The Company
engages PDH, Ltd. in lieu of full time employees. PDH, Ltd. has been
familiar with Company administrative expense and operations requirements and
has on occasion paid such costs in exchange for shares of the Common Stock in
the Company.
BRISTOL ASSET MANAGEMENT, L.L.C. INVESTMENT AGREEMENT
On January 20, 1998, the Company entered into an Investment Agreement
(herein referred to as the "Investment Agreement") with Bristol Asset
Management, L.L.C., a Delaware limited liability company ("Bristol"),
regarding the periodic purchase of shares of the Common Stock. Ambient
produced this Investment Agreement for the Company, and the Company has no
financial information available to confirm the financial capability of
Bristol
42
<PAGE>
to perform. Subject to the provisions of the Investment Agreement, the Company
shall issue and sell to Bristol, and Bristol shall be obligated to purchase
from the Company, up to $7,000,000 worth of the Common Stock during the term
of the Investment Agreement.
The determination of the timing and amount of the Common Stock to be
sold shall be made by the Company, in its sole discretion, to the extent not
limited by the terms of Investment Agreement. The Company is permitted to
deliver written notices to Bristol (the "Put Notice") stating a dollar amount
of the Common Stock which the Company intends to sell to Bristol five
business days following the date (the "Put Notice Date") on which the Put
Notice is given to Bristol; provided the Company may not deliver a Put Notice
if (i) trading of the Common Stock on the principal market on which it is
then traded (the "Principal Exchange") is suspended or the Common Stock has
been delisted, (ii) the closing price of the Common Stock on the Principal
Exchange is less than $0.15 per share, (iii) a registration statement filed
with the Commission is not effective or is subject to a stop order or is
otherwise suspended, (iv) the Dow Jones Industrial Average has dropped more
than five percent within the preceding five business days, or (v) the Common
Stock to be sold is not then registered under the Exchange Act. The maximum
amount to be purchased under a Put Notice may not exceed the lesser of (i)
$7,000,000 less all amounts previously paid by Bristol, and (ii) the product
of (x) the number of shares of the Common Stock of the Company traded on the
Principal Exchange on which the Common Stock traded for the preceding
calendar month, multiplied by (y) the average of the closing bid prices for
the Common Stock during the prior calendar month, multiplied by (z) 14
percent.
Unless otherwise provided, Bristol shall be required to contribute the
amount of funds specified in the Put Notice. Simultaneously with the receipt
of the funds from Bristol in the amount specified in the Put Notice, the
Company shall issue and sell to Bristol the number of shares of the Common
Stock equal to the draw down divided by 74 percent of the lowest sales price
for the Common Stock on the Principal Exchange (the "Lowest Sale Price")
during the 10 trading days prior to the Put Notice Date (the "Look Back
Period"). In the event that the Lowest Sale Price during the 20 trading days
after a particular closing is less than 95 percent of the Lowest Sale Price
applicable to such closing, then the Company shall promptly issue to Bristol
an additional number of shares of the Common Stock with respect to such
closing such that the number of shares of the Common Stock issued to Bristol
at such closing plus such additional number of shares are equal to the funds
drawn down at such closing divided by 74 percent of the Lowest Sale Price
during such 20 trading day period. Bristol shall also be issued additional
warrants equal to 12 percent of the number of additional shares so issued and
the exercise price of such additional warrants and the warrants issued at
such closing shall be adjusted to 100 percent of the Lowest Sale Price during
such 20 trading day period.
Generally, at each closing, the Company shall also deliver to Bristol
warrants to purchase shares of the Common Stock (the "Warrant Shares"). The
warrants shall expire on the fifth anniversary of the date of issuance.
Generally, the warrants shall entitle the holder thereof to purchase a number
of Warrant Shares equal to 12 percent of the number of shares of the Common
Stock purchased at the closing in question at an initial exercise price equal
to 100 percent of the average closing sales price for the Common Stock on the
Principal Exchange during the Look Back Period in question.
The Company agrees that all shares of the Common Stock issued to Bristol
pursuant to the Investment Agreement shall, at the time of such issuance and
for so long thereafter as is required by the Investment Agreement, be subject
to an effective registration statement on Form S-1 or an equivalent thereof,
covering both the issuance of such shares by the Company to Bristol
thereunder and the resale or other disposition thereof by Bristol at any time
and from time to time after each such issuance, and with respect to the
Warrant Shares, covering both the issuance of the Warrant Shares and the
resale or other disposition by the holders thereof at any time and from time
to time after each such issuance.
As conditions precedent to the obligation of Bristol to purchase any
shares of the Common Stock, the Company must meet numerous organizational,
financial, and reporting criteria, including the ability to engage in the
contemplated transactions, unrestrained trading of the Common Stock on the
Principal Exchange, effectiveness of the Company's registration statement,
certification of corporate authority to engage in the contemplated
transactions, and the elimination of preemptive rights for the stockholders.
In addition to conditions precedent which must be satisfied prior to
Bristol's obligation to purchase the Common Stock under the Investment
Agreement, the total amount of the Common Stock which the Company can
43
<PAGE>
require Bristol to purchase may be limited to a percentage of the total
shares of the Common Stock outstanding. Under the Investment Agreement,
Bristol may refuse to purchase the Common Stock, as requested in a properly
delivered Put Notice, if the purchase of the Common Stock would result in
Bristol beneficially owning more than 4.9 percent of the Common Stock
outstanding, determined in accordance with Section 13(d) of the Exchange Act
and including shares of the Common Stock acquired pursuant to the Investment
Agreement or through unrelated transactions. As a result, it is possible that
Bristol's total investment under the Investment Agreement could be limited to
an aggregate dollar amount well below $7,000,000.
The Investment Agreement may be terminated at any time only with the
mutual consent of the Company and Bristol. The Investment Agreement shall
automatically terminate without any further action of either party when
Bristol has invested an aggregate of $7,000,000 in Common Stock pursuant to
the Investment Agreement.
Pursuant to the Investment Agreement, 20,781,250 shares of the Common
Stock to be issued to Bristol, including any shares to be issued upon the
exercise of the Compensation Warrants, are being registered under the
Securities Act pursuant to this Prospectus. The number of shares described
in this section includes (i) 18,229,167 Newly Issued Shares; and (ii)
2,552,083 shares to be issued upon the exercise of the Compensation Warrants.
The number of Newly Issued Shares and shares underlying Compensation
Warrants being registered hereby are generally calculated based on the
formula set forth in the Investment Agreement. The formula used to calculate
the number of Newly Issued Shares being registered hereunder is as follows:
7,000,000 DIVIDED BY 74 percent x $0.52 (the lowest sales price for the
Common Stock on the principal exchange of the Company during the 10 trading
days prior to January 30, 1998) = 18,229,167 shares of the Common Stock. The
number of shares of the Common Stock underlying the Compensation Warrants was
calculated as follows: 18,229,167 x 14 percent = 2,552,083 shares. If the
sales price for the Common Stock used in the formula is different than the
example of $0.52 contained herein, then the number of Newly Issued Shares and
the number of shares underlying the Compensation Warrants will change.
However, for the purposes of this Prospectus, the formula price of $0.52 per
share is being used. If the sales price is greater than $0.52 per share, a
lesser number of shares of the Common Stock will be issued.
DESCRIPTION OF SECURITIES
Under the Company's Articles of Incorporation, the authorized capital
stock of the Company consists of 103,000,000 shares, of which 100,000,000 are
shares of common stock, par value $0.001 per share (the "Common Stock") and
3,000,000 are shares of preferred stock (the "Preferred Stock"). As of
February 6, 1998, 44,568,975 shares of the Common Stock were issued and
outstanding, while no shares of the Preferred Stock were issued or
outstanding. The Company has reserved 18,229,167 shares of the Common Stock
for issuance upon the purchase of the Newly Issued Shares, 2,552,083 shares
of the Common Stock for issuance upon the exercise of the Compensation
Warrants, 3,840,615 shares of the Common Stock for issuance upon the exercise
of the Resale Warrants, 7,825,000 shares of the Common Stock for issuance
upon exercise of the options, and 297,619 shares of the Common Stock for
issuance upon conversion of the Debenture.
The following description of certain matters relating to the Common
Stock, the Preferred Stock, the Debenture, and the Resale Warrants is a
summary and is qualified in its entirety by the provisions of the Company's
Articles of Incorporation and Bylaws.
COMMON STOCK
The holders of the Common Stock are entitled to one vote per share on
all matters submitted to a vote of the stockholders of the Company. The
holders of the Common Stock have the sole right to vote, except as otherwise
provided by law or by the Company's Articles of Incorporation, including
provisions governing any shares of the Preferred Stock. In addition, such
holders are entitled to receive ratably such dividends, if any, as may be
declared from time to time by the Board of Directors out of funds legally
available therefor, subject to the payment of preferential dividends with
respect to any shares of the Preferred Stock that from time to time may be
outstanding. In the event of the dissolution, liquidation or winding up of
the Company, the holders of the Common Stock are entitled to share ratably in
all assets remaining after payment of all liabilities of the Company and
subject to the prior distribution rights of the holders of any shares of the
Preferred Stock that may be outstanding at that time. All outstanding shares
of the Common Stock being registered for resale hereby, will be fully paid
and nonassessable. The resale of (i) 5,287,633
44
<PAGE>
shares of the Common Stock issued and outstanding, (ii) 6,525,000 shares of
the Common Stock pursuant to the exercise of the Options, and (iii)
18,229,167 shares of the Common Stock with respect to the Newly Issued Shares
are being registered hereby.
CUMULATIVE VOTING RIGHTS
The holders of the Common Stock do not have cumulative voting rights.
Accordingly, the holders of more than 50 percent of the issued and
outstanding shares of the Common Stock voting for the election of directors
can elect all of the directors if they choose to do so, and in such event,
the holders of the remaining shares of the Common Stock voting for the
election of the directors will be unable to elect any person or persons to
the Board of Directors.
PREEMPTIVE RIGHTS
From and after February 4, 1998, the holders of the Common Stock do not
have preemptive rights to acquire or subscribe for additional, unissued or
treasury shares. However, pursuant to Title 7, Chapter 79 of the Nevada
Revised Statutes, stockholders of corporations organized before October 1,
1991, with certain limited exceptions, have preemptive rights to acquire
unissued shares, treasury shares or securities convertible into such shares,
except to the extent limited or denied by the corporation's articles of
incorporation. The Company was incorporated on June 10, 1987, and prior to
February 1998, its Articles of Incorporation did not provide for any
limitation with respect to preemptive rights. In the various offerings of
its securities, the Company did not offer to the existing stockholders
preemptive rights to acquire any of the securities so offered. If an action
were brought for the failure by the Company to offer to its stockholders the
preemptive rights to which they were entitled, the Company could be liable in
damages. However, to the extent that any stockholders were entitled to the
right to purchase shares of the Common Stock upon the exercise of any such
preemptive rights, the Company plans to allow any such stockholders the right
to purchase their pro rata amount of such shares at the same price per share
to which they would have been entitled if such preemptive rights had been
offered in conformity with Nevada law. Any such offering of preemptive
rights will be in conformity with the Securities Act and the various states
where any such stockholders may be located. As of the date of this
Prospectus, management is not aware of any stockholder who intends to make
any claim with respect to the failure by the Company to offer any such
preemptive rights. There can be no assurance that litigation asserting such
claims will not be initiated, or that the Company would prevail in any such
litigation. On February 4, 1998, a majority of the stockholders, by written
consent, amended the Articles of Incorporation of the Company to deny
preemptive rights from and after that date with respect to the issuance of
shares of the Common Stock. However, the amendment to the Articles of
Incorporation will have no effect with respect to preemptive rights which may
have existed prior to such amendment.
PREFERRED STOCK
The Board of Directors is authorized, without action by the holders of
the Common Stock, to provide for the issuance of the Preferred Stock in one
or more series, to establish the number of shares to be included in each
series and to fix the designations, powers, preferences and rights of the
shares of each such series and the qualifications, limitations or
restrictions thereof. This includes, among other things, voting rights,
conversion privileges, dividend rates, redemption rights, sinking fund
provisions and liquidation rights which shall be superior to the Common
Stock. The issuance of one or more series of the Preferred Stock could
adversely affect the voting power of the holders of the Common Stock and
could have the effect of discouraging or making more difficult any attempt by
a person or group to attain control of the Company. As of the date of this
Prospectus, there are no shares of the Preferred Stock issued and outstanding.
DEBENTURE
8% CONVERTIBLE DEBENTURE. On March 13, 1997, the Company issued its 8%
Convertible Debenture due March 13, 2000 in the principal amount of $125,000
(the "8% Convertible Debenture"). This debenture includes a provision under
which a penalty equal to two percent of the then outstanding principal shall
be payable monthly, in addition to the six percent interest otherwise due to
be paid, if the shares of the Common Stock issuable upon conversion of the 8%
Convertible Debenture were not the subject of a registration statement filed
with the Commission pursuant to the Securities Act on or before May 15, 1997
and declared effective on or before July 15, 1997. The 8%
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<PAGE>
Convertible Debenture is convertible into shares of the Common Stock upon the
effective date of this Prospectus at a price per share equal to the lesser of
the average closing bid price of the Common Stock for the five consecutive
trading days immediately preceding the date of the 8% Convertible Debenture,
or 77 percent of the average closing bid price of the Common Stock for the
five consecutive trading days prior to conversion. The resale of 297,619
shares of the Common Stock underlying the 8% Convertible Debenture (assuming
a conversion rate of $0.42 per share of the Common Stock which represents 77
percent of the average closing bid price for the five consecutive trading
days prior to January 30, 1998) are being registered hereby. In connection
with the issuance of the 8% Convertible Debenture, the Company also issued to
the holder a warrant to purchase 50,000 shares of the Common Stock at $1.50
per share. See "Description of Securities - Warrants."
WARRANTS
PRIVATE PLACEMENT WARRANTS. During the period from November 1995 though
February 1996, in connection with a private placement of 2,000,000 shares of
the Common Stock at $1.00 per share, the Company also granted to the
investors warrants to acquire an equal number of shares at $5.00 per share
for a two-year period. Warrants for an additional 203,150 shares of the
Common Stock were issued to the investors in the private placement in
September 1996 due to the failure by the Company to file a registration
statement covering the shares of the Common Stock offered in the private
placement. These additional warrants were likewise exercisable at $5.00 per
share. In the spring of 1997, the Company effected a further settlement with
investors in the private placement regarding the Company's obligation to
register the shares of the Common Stock offered in the private placement.
The terms of the settlement provided that certain investors would turn in the
warrants held at that time in exchange for warrants equal to one and one-half
times the warrants held at a new exercise price of $2.50 per share. Due to
the various settlements effected by the Company, as of February 6, 1998 such
investors held warrants which upon exercise would represent 3,273,950 shares
of the Common Stock (the "PPM Warrants").
DEBENTURE WARRANTS. In connection with the purchase of the Company's 6%
Convertible Debenture, (which was fully converted and canceled by the Company
on February 6, 1998) on August 15, 1996 the Company issued a warrant for
100,000 shares of the Common Stock at $2.00 per share which expires on August
15, 2001 (the "6% Convertible Debenture Warrant"). In connection with the
purchase of the Company's 8% Convertible Debenture, on March 13, 1997 the
Company issued a warrant for 50,000 shares of the Common Stock at $1.50 per
share which expires on March 13, 2002 (the "8% Convertible Debenture
Warrant").
AMBIENT WARRANTS. As additional compensation to Ambient Capital Group,
Inc. ("Ambient") for providing services relating to capital structure
strategies and the revision of the Company's business plan, the Company
issued Ambient 83,333 warrants on October 29, 1997 (the "Ambient Warrants").
The Ambient Warrants entitle the holder to purchase five shares of the Common
Stock at $0.72 per share for each warrant issued. The Ambient Warrants are
valid for a period of four years from the date of issuance.
The resale of 3,273,950 shares of the Common Stock underlying the PPM
Warrants, 100,000 shares of the Common Stock underlying the 6% Convertible
Debenture Warrant, 50,000 shares of the Common Stock underlying the 8%
Convertible Debenture Warrant and 416,665 shares of Common Stock underlying
the Ambient Warrants (collectively, the "Resale Warrants") is being
registered hereby pursuant to registration rights granted to the holders
thereof. The Company has agreed to pay all expenses in connection with such
registration, except for underwriting discounts and commissions and legal
fees for counsel to the holders.
COMPENSATION WARRANTS. In conjunction with purchase of the Newly Issued
Shares under the Investment Agreement, Bristol shall generally be issued
warrants to purchase a number of shares of the Common Stock equal to 12
percent of the number of Newly Issued Shares purchased at each closing at an
initial exercise price equal to 100 percent of the average closing sales
price for the Common Stock on the Principal Exchange during the Look Back
Period (the "Compensation Warrants"). See "Principal Stockholders - Bristol
Asset Management, L.L.C. Investment Agreement." The Compensation Warrants
will expire five years from the date of issuance. The resale of 2,552,083
shares of the Common Stock underlying the Compensation Warrants is being
registered pursuant to this Prospectus.
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<PAGE>
CANCELED SHARES
As a result of an internal audit conducted by the Company's management,
including a review of all stock transactions within the past four years, the
Board of Directors approved the cancellation of 5,897,960 shares of the Common
Stock during 1997. The shares of the Common Stock were canceled for various
reasons, including the failure of consideration and the disparity in value
between the number of shares issued and the services rendered to the Company by
the respective stockholders. The cancellations have been effected by the
Transfer Agent as follows:
<TABLE>
Name Number of Shares Canceled
---- -------------------------
<S> <C>
Thermal Imaging, Inc (1).. . . . . 4,330,000
PDH, Ltd (2).. . . . . . . . . . . 467,260
Bin Zhou (3) . . . . . . . . . . . 250,000
Richard Thompson (4) . . . . . . . 500,000
Maxwell Rabb (4. . . . . . . . . . 250,000
Robert Gray (4). . . . . . . . . . 100,000
Bruce Huddleston (5) . . . . . 700
</TABLE>
- --------------------
(1) Several stock issuances to Thermal Imaging, Inc., an Affiliate of Mr.
Johnston, were canceled due to failure of consideration. The
cancellations included the following: (i) cancellation of 300,000
shares of the Common Stock originally issued on February 22, 1995 as a
finder's fee relating to funding which never materialized; (ii)
cancellation of 1,400,000 shares of the Common Stock originally issued
on September 22, 1995 in anticipation of cash contributions to the
Company which never materialized; (iii) cancellation of 630,000 shares
of the Common Stock originally issued on April 18, 1996 due to the
fact that the shares had been directly issued to Dorex shareholders in
settlement of claims for which Thermal Imaging, Inc. had assumed
liability pursuant to the Assumption of Liability Agreement (the
Company canceled certificates totaling 700,000 shares of the Common
Stock and re-issued a certificate to Thermal Imaging, Inc.
representing 70,000 shares of the Common Stock); and (iv) cancellation
of 2,000,000 shares of the Common Stock originally issued on February
27, 1997 in anticipation of cash contributions to the Company which
never materialized.
(2) The Company formally canceled 167,260 shares of the Common Stock
originally issued to PDH, Ltd. on November 18, 1996 due to the fact
that the value of the shares issued was in excess of the value of the
services rendered to the Company. In addition, the Company canceled
and set-off 300,000 shares of the Common Stock originally issued on
April 4, 1996 against approximately 300,000 shares of the Common Stock
due to PDH, Ltd. for services rendered and expenses incurred through
June 30, 1997. The cancellation was to due to the fact that the value
of the shares issued exceed the value of the services rendered to the
Company. Due to the fact that the set-off was made against unissued
shares of the Common Stock, the transaction did not involve the
formal cancellation of additional certificates.
(3) Pursuant to an understanding reached between the Company and Dr. Ben
Zhou, a former director of the Company, Zhou was to receive 250,000
shares of the Common Stock in the event the China Project was
implemented by November 1997. The China Project was not implemented
by November 1997. The parties never executed a written document to
memorialize the agreement. While the minutes of the Company evidence
that the 250,000 shares of the Common Stock have been recorded as
issued, delivery of the certificates never took place, consistent with
the Company's representation and understanding that the shares would
not be earned until first revenues were generated from the delivery
and installation of CTI systems in China. The Company's position was
clarified in letters to Zhou dated June 1996 and January 1997.
(4) The Company has taken action to cancel certain stock certificates that
were conditionally issued and delivered to Richard Thompson, a former
director of the Company, and Maxwell Rabb and Robert Gray, both
consultants to the Company. The Company conditionally issued shares
of the Common Stock to Thompson (1,000,000), Rabb (275,000) and Gray
(100,000) based on Thompson's representation that he had arranged
large scale financing by SPRINT and another proposed contributor.
Relying on Thompson's representations that such agreements had been
reached, the shares were issued and delivered directly to Thompson.
When the Company discovered that no financing agreements had been
reached with SPRINT, the Company demanded return of the certificates
from Thompson. After numerous attempts to persuade Thompson to return
the certificates, the Board of Directors canceled the certificates,
along with other certificates issued to Rabb and Gray by resolutions
adopted on February 18, 1997 and April 21, 1997. As of the date of
this Prospectus, the certificates have not been returned.
Unfortunately, Mr. Thompson apparently pledged one of the
certificates, Certificate No. 8313, to a lender in January 1997, who
claims to be a protected purchaser under the Uniform Commercial Code.
An agreement has been reached to permit the lender to liquidate the
number of shares required to satisfy the outstanding indebtedness and
recoverable costs allegedly secured by the shares.
(5) The Company canceled these shares of the Common Stock due to the failure
of consideration.
STOCK NOT PAID UP
On February 28, 1996 the Company accepted a "Personal Note - Secured"
(the "Note") in the principal amount of $525,000 from Daron Dillia d/b/a
Manhattan Financial Group ("MFG") in exchange for the issuance of 525,000 units
(one unit = one share of the Common Stock and one warrant) offered by the
Company in conjunction with its Private Placement Memorandum dated November 13,
1995. The Note matured on February 28, 1997 and interest has been accruing on
the outstanding amount due since such date at a rate of nine percent per annum.
The terms of the Note also provide that the amount due will be secured by the
525,000 units issued to MFG which shall be held by the Company until the Note is
paid in full. Pursuant to an agreement between MFG and Benjamin W. and Nancy L.
Anderson which was incorporated into the terms of the Note (the "Collateral
Guarantee"), the Andersons' pledged 500,000 shares of the Common Stock and
200,000 units as additional security under the Note. As consideration under
47
<PAGE>
the Collateral Guarantee, MFG agreed to transfer 200,000 shares of the Common
Stock from the 525,000 units acquired pursuant to the Note to the Andersons.
In accordance with N.R.S. 78.211, the Company may authorize the
issuance of shares in consideration of any tangible or intangible property or
benefit delivered to the Company, including promissory notes. Upon receipt of
the consideration for which the Board of Directors authorized the issuance of
the shares, the shares issued therefor are fully paid. An issuance of 325,000
shares to Daron C. Dillia and 200,000 shares to Benjamin or Nancy Anderson was
approved by the Board of Directors on February 29, 1996 in consideration for
"money received as a result of the Private Placement Memorandum dated November
13, 1995." According to management, the certificates representing all shares and
warrants issued in connection with the Note are held by the Company.
As of the date of this Prospectus no payments have been made by MFG
towards the outstanding indebtedness due under the Note, nor has the Company
made any effort to collect such amounts.
CERTAIN PROVISION OF THE ARTICLES OF INCORPORATION AND BYLAWS
GENERAL. A number of provisions of the Articles of Incorporation
("Articles") and Bylaws ("Bylaws") of the Company concern matters of corporate
governance and the rights of stockholders. Certain of these provisions, as well
as the ability of the Board of Directors to issue shares of the Preferred Stock
and to set the voting rights, preferences and other terms thereof, may be deemed
to have an anti-takeover effect and may discourage takeover attempts not first
approved by the Board of Directors (including takeovers which certain
stockholders may deem to be in their best interests). To the extent takeover
attempts are discouraged, temporary fluctuations in the market price of the
Common Stock, which may result from actual or rumored takeover attempts, may be
inhibited. These provisions, together with the ability of the Board of
Directors to issue the Preferred Stock without further stockholder action, also
could delay or frustrate the removal of incumbent directors or the assumption of
control by the stockholders, even if such removal or assumption would be
beneficial to the stockholders of the Company. These provisions also could
discourage or make more difficult a merger, tender offer or proxy contest, even
if they could be favorable to the interests of the stockholders, and could
potentially depress the market price of the Common Stock. The Board of
Directors believes that these provisions are appropriate to protect the
interests of the Company and all of its stockholders.
MEETINGS OF STOCKHOLDERS. The Bylaws provide that a special meeting
of the stockholders may be called by the Chairman of the Board, the President,
the Board of Directors, or the holders of not less than 10 percent of the
outstanding shares of the capital stock of the Company entitled to vote at such
a meeting unless otherwise required by law. The Company's Bylaws provide that
only those matters set forth in the notice of the special meeting may be
considered or acted upon at the special meeting.
INDEMNIFICATION AND LIMITATION OF LIABILITY. The Company's Articles
provide that a director of the Company will not be personally liable to the
Company or its stockholders for monetary damages for any act or omission in good
faith. By its terms, and in accordance with applicable state law, however, this
provision does not eliminate or limit the liability of a director of the Company
for any breach of duty based upon an act or omission (i) involving appropriation
in violation of duty of any business opportunity of the Company, (ii) involving
acts or omissions that are not in good faith or which involve intentional
misconduct or a knowing violation of the law, or (iii) involving unlawful
distributions or transactions from which the director derived an improper
personal benefit. The Articles provide further that the Company shall indemnify
its directors, except in such matters as to which the director shall be adjudged
liable for his own negligence or intentional misconduct in the performance of
his duty. A similar indemnification and limitation of liability provision in
the Company's Bylaws also extends such protection to officers of the Company.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers, or persons controlling the Company pursuant
to the foregoing provisions, or otherwise, the Company is aware that, in the
opinion of the Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
AMENDMENT OF BYLAWS. The Bylaws provide that the Bylaws may be
altered, amended or repealed by the Board of Directors or the stockholders of
the Company. Such action by the Board of Directors requires the affirmative
vote of a majority of the directors present at such meeting.
48
<PAGE>
CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK
Until the issuance of all of the shares of the Common Stock covered by
the Warrants, the Options, and the Debenture, the Company's authorized but
unissued capital stock will consist of approximately 55,431,025 shares of the
Common Stock. One of the effects of the authorized but unissued capital stock
may be to enable the Board of Directors to render more difficult or to
discourage an attempt to obtain control of the Company by means of a tender
offer, proxy contest or otherwise, and thereby to protect the continuity of the
Company's management. If in the due exercise of its fiduciary obligations, for
example, the Board of Directors were to determine that a takeover proposal was
not in the Company's best interests, such shares could be issued by the Board of
Directors without stockholder approval in one or more private or public
offerings or other transactions that might prevent or render more difficult or
costly the completion of the proposed takeover transaction by diluting the
voting or other rights of the proposed acquirer or insurgent stockholder or
stockholder group, by creating a substantial voting block of institutional or
other investors that might undertake to support the position of the incumbent
Board of Directors, by effecting an acquisition that might complicate or
preclude the takeover, or otherwise. In this regard, the Company's Articles
grant the Board of Directors broad power to establish the rights and preferences
of the authorized, but unissued Preferred Stock, one or more series of which
would be issued entitling holders to vote separately as a class on any proposed
merger or consolidation, to convert Preferred Stock into a larger number of
shares of the Common Stock or other securities, to demand redemption at a
specified price under prescribed circumstances related to a change in control,
or to exercise other rights designed to impede a takeover.
The issuance of shares of the Preferred Stock pursuant to the Board's
authority described above could decrease the amount of earnings and assets
available for distribution to holders of the Common Stock, and adversely affect
the rights and powers, including voting rights, of such holders and may have the
effect of delaying, deferring or preventing a change in control of the Company.
The Board of Directors does not currently intend to seek stockholder approval
prior to any issuance of authorized, but unissued stock, unless otherwise
required by law.
TRANSFER AGENT
The Company's transfer agent for the Common Stock is Merit Transfer
Company, 68 South Main Street, Suite 708, Salt Lake City, Utah 84101.
49
<PAGE>
PLAN OF DISTRIBUTION AND SELLING STOCKHOLDERS
This Prospectus relates to (i) the issuance of 18,229,167 shares of
the Common Stock in connection with the purchase of such shares by an investor
(the "Newly Issued Shares"), and (ii) 2,552,083 shares to be issued upon the
exercise of warrants to be issued to such investor (the "Compensation
Warrants"). This Prospectus also relates to the resale of 15,950,867 shares of
the Common Stock which may be sold by the Selling Stockholders. The shares to
be resold include (i) 5,287,633 shares issued and outstanding; (ii) 3,840,615
shares underlying outstanding warrants (the "Resale Warrants"); (iii) 6,525,000
shares underlying outstanding options (sometimes hereinafter collectively
referred to as the "Options"); and (iv) 297,619 shares underlying an outstanding
debenture (sometimes hereinafter referred to as the "Debenture").
The following tables set forth certain information with respect to the
issuance by the Company of the Newly Issued Shares and shares of the Common
Stock upon the exercise of the Compensation Warrants, as well as the resale of
the Common Stock by the Selling Stockholders as described in this Prospectus.
The Company will not receive any proceeds from the resale of Common Stock by the
Selling Stockholders. However, the Company will receive the proceeds from the
sale of the Newly Issued Shares and the exercise price per share upon the
exercise of the Compensation Warrants.
ISSUANCE OF NEWLY ISSUED SHARES ("NS") AND
EXERCISE OF COMPENSATION WARRANTS ("CW")
<TABLE>
PROPOSED INVESTOR SHARES BEING REGISTERED
----------------- -----------------------
<S> <C>
Bristol Asset Management, LLC (NS) 18,229,167
Bristol Asset Management, LLC (CW) 2,552,083
</TABLE>
RESALE BY SELLING STOCKHOLDERS OF SHARES CURRENTLY OUTSTANDING ("S"); AND
SHARES UNDERLYING RESALE WARRANTS ("W"), OPTIONS ("O"), AND THE DEBENTURE ("D")
<TABLE>
SHARES SHARES
BENEFICIALLY BENEFICIALLY
OWNED AMOUNT OWNED
STOCKHOLDER BEFORE RESALE (1) OFFERED (2) AFTER RESALE PERCENTAGE
----------- ----------------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Fritz Abendroth (S) 41,250 41,250 -0- -0-
Fritz Abendroth (W) 61,875 61,875 -0- -0-
Ambient Capital Group, Inc. (S) 83,333 83,333 -0- -0-
Ambient Capital Group, Inc. (W) 416,665 416,665 -0- -0-
Benjamin or Nancy Anderson (S) 440,000 440,000 440,000 1.0
Benjamin Anderson (W) 568,750 568,750 568,750 1.3
Jeremy Brent Andrus (S) (4) 60,500 60,500 60,500 *
Jeremy Brent Andrus (W) 60,500 60,500 -0- -0-
Mary Ellen Ashby (S) 30,250 30,250 -0- -0-
Mary Ellen Ashby (W) 45,375 45,375 -0- -0-
James E. & Hong Z. Bass (JTWROS) (S) (3) 27,500 27,500 27,500 *
Lynn Beckman (S) 27,500 27,500 -0- -0-
Lynn Beckman (W) 41,250 41,250 -0- -0-
Randall S. Benson (S) 13,750 13,750 -0- -0-
Randall S. Benson (W) 20,625 20,625 -0- -0-
Joanne L. Bingo (S) (4) 63,250 63,250 63,250 *
Joanne L. Bingo (W) 94,875 94,875 -0- -0-
Charles W. Brinkman (S) 27,500 27,500 -0- -0-
Charles W. Brinkman (W) 41,250 41,250 -0- -0-
Cameron Capital, Ltd. (S) 603,489 603,489 -0- -0-
Cameron Capital, Ltd. (W) 150,000 150,000 -0- -0-
Cameron Capital, Ltd. (D) 297,619 297,619 -0- -0-
Brent L. Cox (S) 27,500 27,500 -0- -0-
</TABLE>
50
<PAGE>
<TABLE>
SHARES SHARES
BENEFICIALLY BENEFICIALLY
OWNED AMOUNT OWNED
STOCKHOLDER BEFORE RESALE (1) OFFERED (2) AFTER RESALE PERCENTAGE
----------- ----------------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Brent L. Cox (W) 41,250 41,250 -0- -0-
Crown Development, Inc. (S) (4) 55,000 55,000 55,000 *
Crown Development, Inc. (W) 82,500 82,500 -0- -0-
Cheryl Demler (S) 10,000 10,000 -0- -0-
Cheryl Demler (W) 7,150 7,150 -0- -0-
Daron C. Dillia (S) 32,500 32,500 35,000 *
Daron C. Dillia (W) 700,000 700,000 700,000 1.6
Kenneth M. Dodd (O) 500,000 500,000 500,000 1.1
Misty Dorman (S) 1,540 1,540 -0- -0-
Misty Dorman (W) 25,410 25,410 -0- -0-
Donna L. Doxey (S) 55,000 55,000 -0- -0-
Donna L. Doxey (W) 82,500 82,500 -0- -0-
Robert A. Dresser (S) 138,000 138,000 -0- -0-
Douglas Emery (S) 12,000 12,000 -0- -0-
Sylvia Epstein (S) 50,000 50,000 -0- -0-
Dennis W. Ferchland (S) 13,750 13,750 -0- -0-
Dennis W. Ferchland (W) 20,625 20,625 -0- -0-
David Finney (S) 96,000 96,000 -0- -0-
Merrill Fowler (S) 50,000 50,000 -0- -0-
Jack Gately (S) 50,000 50,000 -0- -0-
Ursula Anne Gately (S) 7,000 7,000 -0- -0-
Joseph K. Grote (S) 27,500 27,500 -0- -0-
Joseph K. Grote (W) 41,250 41,250 -0- -0-
Sandra Hale (S) 15,000 15,000 -0- -0-
Bruce B. Hall (S) 27,500 27,500 -0- -0-
Bruce B. Hall (W) 41,250 41,250 -0- -0-
Willard Harpster (O) 275,000 275,000 -0- -0-
Gerald Lynn Hayward (S) 27,500 27,500 -0- -0-
Gerald Lynn Hayward (W) 41,250 41,250 -0- -0-
Darrell J. Horne (S) 55,000 55,000 -0- -0-
Darrell J. Horne (W) 82,500 82,500 -0- -0-
Soon-Yon Jin (S) 27,500 27,500 -0- -0-
Soon-Yon Jin (W) 41,250 41,250 -0- -0-
Lance J. Larson (S) (4) 27,500 27,500 27,500 *
Lance J. Larson (W) 41,250 41,250 -0- -0-
M & S Acquisition Corporation (S) 35,000 35,000 -0- -0-
Manhattan Financial Group (S) 600,000 600,000 600,000 1.3
Manhattan Financial Group (O) 2,000,000 2,000,000 2,000,000 4.5
Masahisa Masuda (S) 220,000 220,000 -0- -0-
Masahisa Masuda (W) 330,000 330,000 -0- -0-
Brad Mefford (S) 27,500 27,500 -0- -0-
Brad Mefford (W) 41,250 41,250 -0- -0-
Larry R. Metler (S) (3) 27,500 27,500 27,500 *
Meto Miteff (S) 6,752 6,752 -0- -0-
Orlando Nickerson (S) 27,500 27,500 -0- -0-
Orlando Nickerson (W) 41,250 41,250 -0- -0-
Stephen A. Oliver Trust (S) 13,750 13,750 -0- -0-
Stephen A. Oliver Trust (W) 20,625 20,625 -0- -0-
David Packer (O) 500,000 500,000 500,000 1.1
Partagee, L.L.C. (S) 494,383 494,383 -0- -0-
PDH, Ltd. (S) 933,926 933,926 933,926 2.1
</TABLE>
51
<PAGE>
<TABLE>
SHARES SHARES
BENEFICIALLY BENEFICIALLY
OWNED AMOUNT OWNED
STOCKHOLDER BEFORE RESALE (1) OFFERED (2) AFTER RESALE PERCENTAGE
----------- ----------------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Carol T. Racine (S) 27,500 27,500 -0- -0-
Carol T. Racine (W) 33,750 33,750 -0- -0-
Max B. Reece (S) 27,510 27,510 -0- -0-
Max B. Reece (W) 41,415 41,415 -0- -0-
Max & Gayle Reece (JTWROS) (S) 100 100 -0- -0-
Steven M. Rhodes (S) 13,750 13,750 -0- -0-
Steven M. Rhodes (W) 20,625 20,625 -0- -0-
James P. Roake (S) 82,500 82,500 -0- -0-
James P. Roake (W) 123,750 123,750 -0- -0-
Susan D. Scott (S) 13,750 13,750 -0- -0-
Susan D. Scott (W) 20,625 20,625 -0- -0-
Larry R. Sears (S) 27,500 27,500 -0- -0-
Larry R. Sears (W) 41,250 41,250 -0- -0-
Richard V. Secord (O) 3,250,000 3,250,000 3,250,000 7.3
Peter P. Smith (S) 27,500 27,500 -0- -0-
Peter P. Smith (W) 41,250 41,250 -0- -0-
Gerald N. Stanley (S) 25,000 25,000 -0- -0-
Gerald N. Stanley (W) 41,250 41,250 -0- -0-
Richard Stevens (S) 2,500 2,500 -0- -0-
Jack M. & Geraldean Stevens (JTWROS)(S) 50,000 50,000 -0- -0-
Jack M. & Geraldean Stevens (JTWROS)(W) 82,500 82,500 -0- -0-
Richard M. & Carolyn Stevens (JTWROS)(S) 25,000 25,000 -0- -0-
Richard M. & Carolyn Stevens (JTWROS)(W) 41,250 41,250 -0- -0-
David D. Stewart (S) 27,500 27,500 -0- -0-
David D. Stewart (W) 41,250 41,250 -0- -0-
Ross D. Stokes (S) 25,000 25,000 -0- -0-
Ross D. Stokes (W) 25,000 25,000 -0- -0-
Bee Bee Tan (S) 27,500 27,500 -0- -0-
Bee Bee Tan (W) 41,250 41,250 -0- -0-
Charles Howard Thomas (S) (3) 28,600 28,600 28,600 *
Charles Howard Thomas (W) 28,600 28,600 -0- -0-
Daniel G. Thomas (S) (3) 27,500 27,500 27,500 *
Daniel G. Thomas (W) 27,500 27,500 -0- -0-
Eric Wagner and Jeri Wagner (S) 4,000 4,000 -0- -0-
Alice G. Watts (S) 1,000 1,000 -0- -0-
Harold Werth, Jr. (S) 163,500 163,500 -0- -0-
Harold Werth, Jr. (W) 6,875 6,875 -0- -0-
Louis Woodworth (S) 50,000 50,000 -0- -0-
</TABLE>
- --------------------
* Less than one percent.
(1) Shares Beneficially Owned Before Resale include shares of the Common
Stock underlying outstanding Warrants ("W"), Options ("O"), and the
Debenture ("D").
(2) Shares offered include outstanding shares of the Common Stock subject
to the restrictions of the Securities Act and held by the Selling
Stockholder less than two years as of the date of this Prospectus, and
shares of the Common Stock underlying outstanding Warrants ("W"),
Options ("O"), and the Debenture ("D").
(3) Shares are beneficially owned by PDH, Ltd.
(4) Shares are beneficially owned by Manhattan Financial Group.
The 15,950,867 shares of the Common Stock offered by the Selling
Stockholders for resale may be sold by the Selling Stockholders from time to
time as market conditions permit in the market, or otherwise at prices and terms
then prevailing or at prices related to the current market price, or in
negotiated transactions. The Selling Shareholders may sell their shares in
unsolicited ordinary brokerage transactions or privately negotiated transactions
between the Selling Stockholders and purchasers without a broker.
52
<PAGE>
A current prospectus must be in effect at the time of the sale of the
Common Stock to which this Prospectus relates. Any Selling Stockholder or
dealer effecting a transaction in the registered securities, whether or not
participating in a distribution, is required to deliver a Prospectus.
LEGAL MATTERS
Certain legal matters relating to the issuance and resale of shares
hereby will be passed upon for the Company by Looper, Reed, Mark & McGraw,
Incorporated, Houston, Texas.
EXPERTS
The Consolidated Financial Statements and schedules for the years
ended June 30, 1997 and 1996, and for the period from inception, June 30, 1987,
to June 30, 1997 included in this Prospectus and in the Registration Statement
have been audited by Ham, Langston & Brezina, LLP, independent certified public
accountants, to the extent and for the periods set forth in their reports
appearing elsewhere herein and in the Registration Statement, and are included
in reliance upon such reports given upon the authority of said firm as experts
in auditing and accounting.
The unaudited compilation for the six months ended December 31, 1996
and December 31, 1997 included in this Prospectus and in the Registration
Statement have been prepared by Randy Simpson, CPA P.C., independent certified
public accountant, to the extent and for the periods set forth in his reports
appearing elsewhere herein and in the Registration Statement, and are included
in reliance upon such reports given upon the authority of said firm as experts
in auditing and accounting.
53
<PAGE>
COMPUTERIZED THERMAL IMAGING, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
TABLE OF CONTENTS
----------
PAGE(S)
-------
Report of Independent Accountants F-2
Consolidated Financial Statements:
Consolidated Balance Sheet as of June 30, 1997
and 1996 F-4
Consolidated Statement of Operations for the years
ended June 30, 1997 and 1996, and for the period
from inception, June 10, 1987, to June 30, 1997 F-5
Consolidated Statement of Stockholders' Equity (Deficit)
for the years ended June 30, 1997 and 1996, and for
the period from inception, June 10, 1987, to June 30,
1997 F-6
Consolidated Statement of Cash Flows for the years
ended June 30, 1997 and 1996, and for the period
from inception, June 10, 1987, to June 30, 1997 F-8
Notes to Consolidated Financial Statements F-9
F-1
<PAGE>
[LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders of
Computerized Thermal Imaging, Inc.
We have audited the accompanying consolidated balance sheet of Computerized
Thermal Imaging, Inc. (a development stage enterprise) as of June 30, 1997,
and the related statements of operations, stockholders' equity and cash flows
for the year ended June 30, 1997, and for the period from inception, June 10,
1987, to June 30, 1997 to the extent such financial statements are based upon
1997 information. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based upon our audit.
The financial statements of the Company as of and for the year ended June 30,
1996 and for the period from inception to June 30, 1996 were audited by other
auditors, whose report dated September 10, 1996 expressed an unqualified
opinion on those statements.
We also audited the adjustments described in Note 2 that were applied to
restate the June 30, 1996 financial statements. In our opinion, such
adjustments are appropriate and have been properly applied.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Computerized Thermal Imaging, Inc. as of June 30, 1997, and the results of
its operations and its cash flows for the year then ended and for the period
from inception, June 10, 1987, to June 30, 1997, in conformity with generally
accepted accounting principles.
Continued
F-2
<PAGE>
Computerized Thermal Imaging, Inc.
Page 2
As described in Note 13, since its inception the Company has undertaken
various private placements and other offerings of its common stock without
offering existing stockholders preemptive rights to acquire common stock so
offered. The Company has also offered its common stock for sale in reliance
upon various exemptions under the Securities Act of 1933 and various
applicable state securities laws, when, in all cases, such exemptions may not
have been available. Neither the likelihood of claims nor the range of loss
that could arise from these matters is presently determinable. Accordingly,
the financial statements do not include any adjustments that might result
from the outcome of these uncertainties.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As shown in the
consolidated financial statements and discussed in Note 14, the Company has
incurred significant recurring losses from operations since inception, is in
a negative working capital and stockholders' deficit position at June 30,
1997, and is dependent on outside sources of financing for continuation of
its operations. These factors raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans with regard to
this matter are also discussed in Note 14. These financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
Houston, Texas
February 20, 1998
F-3
<PAGE>
COMPUTERIZED THERMAL IMAGING, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONSOLIDATED BALANCE SHEET
JUNE 30, 1997 AND 1996
----------
<TABLE>
1996
AS RESTATED
ASSETS 1997 (SEE NOTE 2)
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 193,852 $ 163,928
Deposits 2,204 -
------------ ------------
Total current assets 196,056 163,928
Property and equipment, net 350,729 506,671
Software development costs, net 1,493,868 100,375
Stock offering and debt issuance costs, net 217,084 -
------------ ------------
Total assets $ 2,257,737 $ 770,974
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 936,964 $ 127,066
Accrued liabilities 254,602 99,608
Current maturities of convertible debentures 479,882 -
------------ ------------
Total current liabilities 1,671,448 226,674
Convertible debentures, net of current maturities 675,000 -
------------ ------------
Total liabilities 2,346,448 226,674
------------ ------------
Commitment and contingencies (Notes 6, 11, 13 and 14)
Stockholders' equity (deficit):
Convertible preferred stock, $5.00
par value, 100,000 shares authorized - -
Common stock, $.001 par value, 100,000,000 shares
authorized, 35,737,649 and 32,906,563 shares
issued and outstanding at June 30, 1997 and
1996, respectively 35,738 32,907
Additional paid-in capital 13,410,573 11,933,572
Subscription receivable (525,000) (525,000)
Losses accumulated during the development
stage (13,010,022) (10,897,179)
------------ ------------
Total stockholders' equity (deficit) (88,711) 544,300
------------ ------------
Total liabilities and stockholders'
equity (deficit) $ 2,257,737 $ 770,974
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-4
<PAGE>
COMPUTERIZED THERMAL IMAGING, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996 AND
FOR THE PERIOD FROM INCEPTION, JUNE 10, 1987, TO JUNE 30, 1997
----------
<TABLE>
YEAR ENDED
JUNE 30,
YEAR ENDED 1996 INCEPTION
JUNE 30, AS RESTATED TO JUNE 30,
1997 (SEE NOTE 2) 1997
----------- ----------- ------------
<S> <C> <C> <C>
Income:
Interest income $ 5,762 $ 9,869 $ 16,576
Income from sale of prototype 55,815 125,000 180,815
----------- ----------- ------------
Total income 61,577 134,869 197,391
----------- ----------- ------------
Costs and expenses:
Operating, general and adminis-
trative expenses 1,727,879 2,491,090 10,744,028
Research and development costs 359,873 1,811 791,994
Interest expense 86,668 11,938 1,157,011
Litigation settlement - 508,280 514,380
----------- ----------- ------------
Total costs and expenses 2,174,420 3,013,119 13,207,413
----------- ----------- ------------
Net loss $(2,112,843) $(2,878,250) $(13,010,022)
----------- ----------- ------------
----------- ----------- ------------
Weighted average shares outstanding 33,803,045 30,875,600
----------- -----------
----------- -----------
Net loss per common share $ (0.06) $ (0.09)
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-5
<PAGE>
COMPUTERIZED THERMAL IMAGING, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996, AND
FOR THE PERIOD FROM INCEPTION, JUNE 10, 1987 TO JUNE 30, 1997
----------
<TABLE>
PREFERRED STOCK COMMON STOCK
-------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Balance accumulated during the period
from inception to June 30, 1995, as
previously reported 97,000 $ 970 26,934,353 $28,241
Prior period adjustments (See Note 2) (92,000) 24,030 15,470 (1,291)
------ -------- ---------- -------
Balance accumulated during the period
from inception to June 30, 1995,
as restated (See Note 2) 5,000 25,000 26,949,823 26,950
Stock issued for cash in connection
with a Regulation D offering of com-
mon stock - - 1,462,600 1,463
Stock issued for a note receivable in
connection with a Regulation D offer-
ing of common stock - - 525,000 525
Stock issued for offering costs in
connection with a Regulation D offer-
ing of common stock - - 53,650 53
Stock issued in connection with the
settlement of a note payable to an
individual - - 734,942 735
Stock issued in connection with the
settlement of claims by certain
stockholders - - 578,000 578
Conversion of preferred stock (5,000) (25,000) 14,700 14
Stock issued in repayment of certain
notes payable and interest expense - - 146,590 147
Stock issued for cash - - 1,163,625 1,164
Stock issued for services - - 1,277,633 1,278
Net loss accumulated in 1996 - - - -
------ -------- ---------- -------
Balance at June 30, 1996, as restated
(See Note 2) - - 32,906,563 32,907
Stock issued as a bonus to investors in
connection with the Company's 1996
Regulation D offering of common stock - - 211,900 212
Conversion of debentures to common
stock - - 98,768 99
Stock issued for cash - - 1,833,152 1,833
Stock issued for services - - 687,266 687
Net loss accumulated in 1997 - - - -
------ -------- ---------- -------
Balance at June 30 ,1997 - - 35,737,649 $35,738
------ -------- ---------- -------
------ -------- ---------- -------
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-6
<PAGE>
COMPUTERIZED THERMAL IMAGING, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT), CONTINUED
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996, AND
FOR THE PERIOD FROM INCEPTION, JUNE 10, 1987 TO JUNE 30, 1997
----------
<TABLE>
LOSSES
ACCUMULATED
ADDITIONAL DURING THE
PAID-IN SUBSCRIPTION DEVELOPMENT
CAPITAL RECEIVABLE STAGE TOTAL
----------- ---------- ------------ -----------
<S> <C> <C> <C>
Balance accumulated during the period
from inception to June 30, 1995, as
previously reported $ 1,535,805 $ - $ (838,875) $ 725,171
Prior period adjustments (See Note 2) 5,317,935 - (7,180,054) (1,863,410)
----------- --------- ------------ -----------
Balance accumulated during the period
from inception to June 30, 1995,
as restated (See Note 2) 6,853,740 - (8,018,929) (1,138,239)
Stock issued for cash in connection
with a Regulation D offering of com-
mon stock 1,461,137 - - 1,462,600
Stock issued for a note receivable in
connection with a Regulation D offer-
ing of common stock 524,475 (525,000) - -
Stock issued for offering costs in
connection with a Regulation D offer-
ing of common stock (53) - - -
Stock issued in connection with the
settlement of a note payable to an
individual 721,345 - - 722,080
Stock issued in connection with the
settlement of claims by certain
stockholders 507,702 - - 508,280
Conversion of preferred stock 24,986 - - 25,000
Stock issued in repayment of certain
notes payable and interest expense 153,060 - - 153,207
Stock issued for cash 795,306 - - 796,470
Stock issued for services 891,874 - - 893,152
Net loss accumulated in 1996 - - (2,878,250) (2,878,250)
----------- --------- ------------ -----------
Balance at June 30, 1996, as restated
(See Note 2) 11,933,572 (525,000) (10,897,179) 544,300
Stock issued as a bonus to investors in
connection with the Company's 1996
Regulation D offering of common stock (212) - - -
Conversion of debentures to common
stock 64,026 - - 64,125
Stock issued for cash 1,008,376 - - 1,010,209
Stock issued for services 404,811 - - 405,498
Net loss accumulated in 1997 - - (2,112,843) (2,112,843)
----------- --------- ------------ -----------
Balance at June 30 ,1997 $13,410,573 $(525,000) $(13,010,022) $ (88,711)
----------- --------- ------------ -----------
----------- --------- ------------ -----------
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-7
<PAGE>
COMPUTERIZED THERMAL IMAGING, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996, AND
FOR THE PERIOD FROM INCEPTION, JUNE 10, 1987, TO JUNE 30, 1997
----------
<TABLE>
YEAR ENDED
JUNE 30,
YEAR ENDED 1996 INCEPTION
JUNE 30, AS RESTATED TO JUNE 30,
1997 (SEE NOTE 2) 1997
------------ ------------ -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(2,112,843) $(2,878,250) $(13,010,022)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Common stock issued as compensation
for services 405,498 893,152 7,611,325
Common stock issued for interest
expense 2,105 11,147 267,765
Common stock issued in settlement
of litigation - 508,280 514,380
Depreciation expense 186,274 87,625 284,548
Amortization of debt issuance costs 43,418 - 43,418
Changes in operating assets and
liabilities:
Increase in deposits (2,204) - (2,204)
Increase in accounts payable and
accrued liabilities 964,892 5,919 1,191,566
----------- ----------- ------------
Net cash used in operating
activities (512,860) (1,372,127) (3,099,224)
----------- ----------- ------------
Cash flows from investing activities:
Capital expenditures (30,332) (590,025) (635,277)
Software development costs (1,393,493) (100,375) (1,493,868)
----------- ----------- ------------
Net cash used in investing
activities (1,423,825) (690,400) (2,129,145)
----------- ----------- ------------
Cash flows from financing activities:
Proceeds from sale of common stock 1,010,209 2,259,070 4,298,322
Payment of stock offering costs (125,000) - (125,000)
Proceeds from notes payable and
convertible debentures 1,205,000 8,000 1,723,798
Payment of debt issuance costs (123,600) - (133,600)
Repayment of notes payable - (60,750) (341,299)
----------- ----------- ------------
Net cash provided by financing
activities 1,966,609 2,206,320 5,422,221
----------- ----------- ------------
Net increase in cash and cash equivalents 29,924 143,793 193,852
Cash and cash equivalents at beginning
of period 163,928 20,135 -
----------- ----------- ------------
Cash and cash equivalents at end of
period $ 193,852 $ 163,928 $ 193,852
----------- ----------- ------------
----------- ----------- ------------
Supplemental disclosure of cash flow
information:
Cash paid for interest expense $ - $ - $ 5,293
----------- ----------- ------------
----------- ----------- ------------
Cash paid for income taxes $ - $ - $ -
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-8
<PAGE>
COMPUTERIZED THERMAL IMAGING, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Computerized Thermal Imaging, Inc. (the "Company") is a Nevada
Corporation, involved in the development of a thermal imaging system
for applications in the health care industry. The Company's system
is based upon computer interpretation of thermal photography using
proprietary software developed by the Company. The Company was
originally incorporated as Business Helpers, Inc. on June 10, 1987
and subsequently adopted name changes to DTI Dorex, Ltd. and,
finally, to Computerized Thermal Imaging, Inc. The Company is
considered a development stage enterprise because it has not yet
generated significant revenue from sale of its products. Since its
inception, the Company has devoted substantially all of its efforts
in three areas: 1) the development of a system for commercial
application of thermal imaging technology in the medical industry; 2)
the development of markets for thermal imaging technology; and 3) the
search for sources of capital to fund its efforts. Following is a
summary of the Company's significant accounting policies:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its majority-owned subsidiary, Thermal Medical Imaging,
Inc. ("TMI"). All significant intercompany transactions and accounts
have been eliminated in consolidation. TMI was not a majority owned
subsidiary at June 30, 1996; however, the Company exercised control
over TMI and was responsible for funding its operations.
Accordingly, the operations of TMI have been consolidated with those
of the Company during the years ending June 30, 1997 and 1996.
SIGNIFICANT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the dates of the financial statements and the reported amounts of
revenues and expenses during the periods. Actual results could
differ from estimates making it reasonably possible that a change in
the estimates could occur in the near term.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid short-term investments with
an original maturity of three months or less when purchased to be
cash equivalents.
Continued
F-9
<PAGE>
COMPUTERIZED THERMAL IMAGING, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
CONTINUED:
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is
provided on the straight-line method over the estimated useful lives
of the assets, which range from three to seven years. Expenditures
for major renewals and betterments that extend the original estimated
economic useful lives of the applicable assets are capitalized.
Expenditures for normal repairs and maintenance are charged to
expense as incurred. The cost and related accumulated depreciation
of assets sold or otherwise disposed of are removed from the
accounts, and any gain or loss is included in operations.
SOFTWARE DEVELOPMENT COSTS
The Company has capitalized certain costs related to the development
of software which is the basis of its thermal imaging system. In
accordance with Statement of Financial Accounting Standards ("SFAS")
No. 86 "Accounting for the Cost of Computer Software to be Sold,
Leased or Otherwise Marketed", capitalization of such costs began
upon establishment of technological feasibility and will cease when
the Company's thermal imaging system is available for general release
to customers.
INVESTMENT IN JOINT VENTURE
The Company's investment in a joint venture is accounted for using
the equity method.
ISSUANCE COSTS
Debt issuance costs are deferred and recognized over the term of the
related debt.
Stock issuance costs are deferred and offset against proceeds from
sale of common stock upon closing.
INCOME TAXES
The Company uses the liability method of accounting for income taxes.
Under this method, deferred income taxes are recorded to reflect the
tax consequences on future years of temporary differences between the
tax basis of assets and liabilities and their financial amounts at
year-end. The Company provides a valuation allowance to reduce
deferred tax assets to their net realizable value.
Continued
F-10
<PAGE>
COMPUTERIZED THERMAL IMAGING, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
CONTINUED:
RESEARCH AND DEVELOPMENT EXPENSES
Research and development costs are expensed as incurred. These costs
consist of direct and indirect costs associated with specific
projects.
STOCK-BASED COMPENSATION
Stock-based compensation is accounted for using the intrinsic value
method prescribed in Accounting Principles Board Opinion ("APB") No.
25, "Accounting for Stock Issued to Employees", rather than applying
the fair value method prescribed in SFAS No. 123, "Accounting for
Stock-Based Compensation".
LOSS PER SHARE
Loss per share is computed on the basis of the weighted average
number of shares of common stock outstanding during each period.
Common equivalent shares from common stock options and warrants are
excluded from the computation as their effect would dilute the loss
per share for all periods presented.
In February 1997, the Financial Accounting Standards Board issued
SFAS No. 128, "Earnings per Share". SFAS No. 128, which is effective
for periods ending after December 15, 1997, requires changes in the
computation, presentation, and disclosure of earnings per share. All
prior period earnings per share data must be restated to conform with
the provisions of SFAS No. 128. The Company will adopt SFAS No. 128
during the year ended June 30, 1998, but does not expect the new
accounting standard to have a material impact on the Company's
reported financial results.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company includes fair value information in the notes to financial
statements when the fair value of its financial instruments is
different from the book value. When the book value approximates fair
value, no additional disclosure is made.
Continued
F-11
<PAGE>
COMPUTERIZED THERMAL IMAGING, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
2: PRIOR PERIOD ADJUSTMENTS:
During the period from inception, June 10, 1987, to June 30, 1995,
and during the year ended June 30, 1997, the Company issued common
stock to repay certain notes payable, to compensate key employees and
consultants, to pay interest expense on debt, to pay syndication
costs and to settle various litigation and stockholder disputes. The
issuance of such stock was not afforded consistent accounting
treatment but was generally recorded at par or some other nominal
value in the Company's financial statements. Generally accepted
accounting principles require that common or preferred stock
issuances be recorded at the estimated fair value of the stock issued
(or at the fair value of consideration received or services provided
if such value is more readily determinable). Company management has
determined that a value equal to one-half of the average of the high
and low bid prices of the Company's common stock during the month of
issuance is a reasonable estimate of the fair value of common stock
issued for services or the satisfaction of obligations. Accordingly,
values based upon management's formula have generally been used for
recognition of common stock issuances in non-cash transactions in the
accompanying financial statements.
During years prior to 1995, the Company incurred and capitalized a
significant amount of expense related to the development and
protection from claims of certain data that now forms the basis for
software that operates and analyzes information produced by the
Company's thermal imaging systems. Generally accepted accounting
principles require that research and development expenses be charged
to expense as incurred. Accordingly, these costs were written off to
expense prior to June 30, 1995.
During the year ended June 30, 1995, the Company was involved in
litigation concerning a default under a $500,000 loan agreement. The
litigation was resolved in 1995; however, the $722,080 impact of the
settlement, which essentially covered interest that would have
accrued over the term of the loan agreement, was not recorded until
shares of the Company's common stock were issued to settle the debt
in 1996. Generally accepted accounting principles require that
liabilities be recognized as incurred and, accordingly, the impact of
this settlement should have been recorded in the Company's financial
statements prior to 1996.
Continued
F-12
<PAGE>
COMPUTERIZED THERMAL IMAGING, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
2. PRIOR PERIOD ADJUSTMENTS, CONTINUED:
During years prior to 1996, the Company issued 47,000 shares of $5.00
preferred stock to certain individuals that provided debt financing
to the Company. These shares were recorded at $0.01 per share;
however, generally accepted accounting principles require that
preferred shares (which in this circumstance are convertible to $5.00
of common stock, based upon the market value of the common shares at
the date of conversion or on a share per share basis, whichever
method produces a more favorable outcome for the preferred
stockholder) be recorded at $5.00 per share as a cost of the related
financing. Such financing cost should then be amortized as interest
expense over the term of the related debt.
During the year ended June 30, 1996, the Company improperly accounted
for its majority owned subsidiary, TMI and its investment in
Trisun/CTI Asia, Ltd. (See Note 5). These entities were accounted
for using the cost method; however, generally accepted accounting
principles require that TMI be consolidated and that Trisun/CTI Asia,
Ltd. be accounted for using the equity method. Accordingly, the
impact of using proper methods of accounting for these entities is
reflected in the 1996 financial statements.
The effect of correcting these errors in application of generally
accepted accounting principles on the Company's financial statements
at June 30, 1996 and 1995 is shown below.
<TABLE>
JUNE 30, JUNE 30,
1996 1995
------------ -----------
<S> <C> <C>
Increase (decrease) in total assets $(3,898,786) $ 1,404,405
----------- -----------
----------- -----------
Increase (decrease) in total liabilities $(2,469,002) $ 434,975
----------- -----------
----------- -----------
Increase in common and preferred stock
and additional paid-in capital $ 5,658,673 $ 5,340,674
----------- -----------
----------- -----------
Increase in accumulated deficit $(7,088,457) $(7,180,054)
----------- -----------
----------- -----------
Decrease in net loss for the year ended
June 30, 1996 $ 141,597
-----------
-----------
Increase in net loss per common share
for the year ended June 30, 1996 $ -
-----------
-----------
</TABLE>
Continued
F-13
<PAGE>
COMPUTERIZED THERMAL IMAGING, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
3: PROPERTY AND EQUIPMENT:
Property and equipment at June 30, 1997 and 1996 consists of the
following:
<TABLE>
1997 1996 LIFE
---------- ---------- ---------
<S> <C> <C> <C>
Office furniture, fixtures and
equipment $ 165,112 $ 134,780 5-7 years
Thermal imaging diagnostic units 470,165 470,165 3 years
---------- ----------
635,277 604,945
Less accumulated depreciation (284,548) (98,274)
---------- ----------
$ 350,729 $ 506,671
---------- ----------
---------- ----------
</TABLE>
The thermal imaging diagnostic units are prototypes currently
undergoing clinical trials in the United States and being tested in a
hospital located in Bangkok, Thailand. Depreciation expense during
the years ended June 30, 1997 and 1996 was $186,274 and $87,625,
respectively.
4. DEFERRED DEBT ISSUANCE AND STOCK OFFERING COSTS:
During the year ended June 30, 1997, the Company incurred significant
costs in connection with the issuance of convertible debentures and
in connection with a planned registration and offering of its common
stock under the Securities and Exchange Act of 1933. Deferred debt
issuance and stock offering costs at June 30, 1997 consist of the
following:
<TABLE>
<S> <C>
Debt issuance costs $ 92,084
Stock offering costs 125,000
---------
$ 217,084
---------
---------
</TABLE>
Continued
F-14
<PAGE>
COMPUTERIZED THERMAL IMAGING, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
5. INVESTMENT IN TRISUN/CTI ASIA, LTD.:
Effective May 24, 1995, the Company formed Trisun/CTI Asia, Ltd. (the
"Joint Venture"), a 50%-50% joint venture with Tri Sun Medical China,
Inc., a corporation established under the direction of the Chinese
Ministry of Health. The Joint Venture's primary purpose is to
install a telemedicine network and thermal imaging diagnostic
equipment in medical centers in China. The Joint Venture has
obtained deployment contracts with the Peoples Republic of China,
however, the Ministry of Health has to date been unable to obtain
funding for the project. Management believes that China represents a
promising source of future business; however, the Company does not
intend to make capital contributions to the Joint Venture until
funding is obtained by the Chinese Ministry of Health and
development and testing of its thermal imaging diagnostic units are
completed. During the year ended June 30, 1996, the company incurred
expenses of approximately $200,000 related to its involvement in the
Joint Venture and such expenses are reflected as operating, general
and administrative expenses in the statement of operations, because
operations through the Joint Venture have been insignificant.
6. SOFTWARE DEVELOPMENT COSTS:
In June 1996 and October 1996, the Company, through TMI, entered into
two significant contracts (the "Contracts") with TRW, Inc. ("TRW").
Under the terms of the Contracts, TRW will provide the Company with
software enhancements and ultimately a fully integrated thermal
imaging system. TRW will also develop a plan for deployment of the
Company's thermal imaging systems in major health care markets
including systems installation, training, testing and logistic
support. Following is an analysis of amounts incurred and committed
in connection with the Contracts through June 30, 1997:
<TABLE>
<S> <C>
Total commitment $4,700,000
Amount incurred under the contracts
through June 30, 1997 1,490,922
----------
Remaining commitment $3,209,078
----------
----------
</TABLE>
The remaining commitment does not include amounts totaling $673,540
that are included in accounts payable at June 30, 1997. Subsequent
to June 30, 1997, the Company became delinquent on payments under the
Contracts; however, the Company has established a payment plan under
which partial payments, to which TRW has informally agreed, are now
being made. (See Note 13)
Continued
F-15
<PAGE>
COMPUTERIZED THERMAL IMAGING, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
6. SOFTWARE DEVELOPMENT COSTS, CONTINUED:
Of the amounts incurred under the Contracts, $1,193,711 has been
capitalized as software development cost and $297,211 has been
charged to expense. In addition to amounts incurred under the
contracts, the Company has also capitalized internal costs totaling
$300,157.
7. CONVERTIBLE DEBENTURES:
Convertible debentures at June 30, 1997 consist of the following:
<TABLE>
<S> <C>
Convertible debenture due to an investment
company bearing interest at 6% per year and
maturing in August 1999. This debenture is
payable in semi-annual payments of interest
only and includes a provision under which a
penalty of 1.5% of the principal is payable
monthly until such time as the Company com-
pletes a registration under the Securities and
Exchange Act of 1933 of the shares of common
stock to be issued upon conversion of the
debenture. This debenture is convertible
to shares of the Company's common stock at a
conversion price per share equal to the lesser
of the average closing bid price of the common
stock for the five consecutive trading days
immediately preceding the date of this debenture
or 77% of the average closing bid price of the
common stock for the five consecutive trading
days prior to conversion. In connection with the
issuance of this debenture, the Company also
issued the investment company a warrant to pur-
chase 100,000 shares of the Company's common
stock at $2.00 per share.(See Note 10) $ 550,000
Continued
F-16
<PAGE>
COMPUTERIZED THERMAL IMAGING, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
7. CONVERTIBLE DEBENTURES, CONTINUED:
<S> <C>
Senior Convertible Debenture due to an investment
company bearing interest at 8% per year and
maturing in March 2000. This debenture is payable
in semi-annual payments of interest only and is
convertible to shares of the Company's common
stock at a conversion price per share equal to
the lesser of the average closing bid price of
the common stock for the five consecutive trading
days immediately preceding the date of this de-
benture or 77% of the average closing bid price
of the common stock for the five consecutive
trading days prior to conversion. In connection
with the issuance of this debenture, the Company
also issued the investment company a warrant to
purchase 50,000 shares of the Company's common
stock at $1.50 per share. (See Note 10) 125,000
Series A Senior Subordinated Convertible
Redeemable Debentures bearing interest at 12%
per year based upon the face value of the debt
(however these debentures were issued at a 20%
discount to face value and the effective in-
terest rate to maturity is approximately 40% per
year). These debentures mature in April 1998 and
are convertible to shares of the Company's
common stock at a conversion price per share
equal to the lower of 90% of the average closing
bid price of the common stock for the five bus-
iness days immediately preceding the notice of
conversion or 90% of the closing bid price of
the common stock on the business day immediately
preceding the date of subscription by the holder. 479,882
----------
Total convertible debentures 1,154,882
Less current maturities (479,882)
----------
$ 675,000
----------
----------
</TABLE>
Continued
F-17
<PAGE>
COMPUTERIZED THERMAL IMAGING, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
7. CONVERTIBLE DEBENTURES, CONTINUED:
Future annual maturities of convertible debentures at June 30, 1997
are as follows:
<TABLE>
YEAR ENDED
JUNE 30, AMOUNT
---------- ----------
<S> <C>
1998 $ 479,882
1999 -
2000 675,000
----------
$1,154,882
----------
----------
</TABLE>
Subsequent to June 30, 1997, certain of the convertible debentures
were converted to common stock.
8. INCOME TAX:
The composition of deferred tax assets and the related tax effects at
June 30, 1997 and 1996 are as follows:
<TABLE>
1997 1996
----------- ----------
<S> <C> <C>
Benefit from carryforward of net
operating losses $ 1,454,584 $ 924,086
Less valuation allowance (1,454,584) (924,086)
----------- ----------
Net deferred tax asset $ - $ -
----------- ----------
----------- ----------
</TABLE>
The difference between the income tax benefit in the accompanying
statement of operations and the amount that would result if the U.S.
Federal statutory rate of 34% were applied to pre-tax loss is as
follows:
<TABLE>
1997 1996
---------------------- -----------------------
PERCENTAGE PERCENTAGE
OF PRE-TAX OF PRE-TAX
AMOUNT LOSS AMOUNT LOSS
---------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Benefit for income tax at
federal statutory rate $ 718,367 34.0% $ 961,605 34.0%
Non-deductible expenses (187,869) (8.9) (303,671) (10.7)
Increase in valuation
allowance (530,498) (25.1) (657,934) (23.3)
---------- ----- ------------ -----
Total $ - - % $ - - %
---------- ----- ------------ -----
---------- ----- ------------ -----
</TABLE>
Continued
F-18
<PAGE>
COMPUTERIZED THERMAL IMAGING, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
8. INCOME TAX, CONTINUED:
The non-deductible expenses shown above related primarily to the
issuance of common stock for services using different valuation
methods for financial and tax reporting purposes.
At June 30, 1997, for federal income tax and alternative minimum tax
reporting purposes, the Company has approximately $5,000,000 of
unused net operating losses available for carryforward to future
years. The benefit from carryforward of such net operating losses
will expire in various years between 2002 and 2012. The benefit from
utilization of net operating loss carryforwards could be subject to
limitations if significant ownership changes occur in the Company.
9. STOCKHOLDERS' EQUITY:
Following is an analysis of activity in the Company's stockholder
equity accounts during the year ended June, 30, 1997:
<TABLE>
PRICE RANGE SHARES TOTAL
-------------- --------- ----------
<S> <C> <C> <C>
Common stock issued for services based upon
the estimated fair value of the shares at
the date of issue $0.50 to $0.73 687,266 $ 405,498
Common stock issued as compensation to in-
vestors for failure to promptly issue shares
in connection with the a Regulation D offering
of common stock and common stock warrants
completed during 1996. These shares were not
valued but were considered an offering cost of
the Regulation D Offering. - 211,900
Common stock issued upon conversion of
debentures $0.64 98,768 64,125
Common stock issued for cash $0.50 to $0.60 1,833,152 1,010,209
--------- ----------
Totals for 1997 2,831,086 $1,479,832
--------- ----------
--------- ----------
</TABLE>
Continued
F-19
<PAGE>
COMPUTERIZED THERMAL IMAGING, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
9. STOCKHOLDERS' EQUITY, CONTINUED:
Following is an analysis of activity in the Company's stockholder equity
accounts during the year ended June, 30, 1996:
<TABLE>
PRICE RANGE SHARES TOTAL
----------- ------ -----
<S> <C> <C> <C>
Common stock issued for cash in connection
with a Regulation D offering of common stock
and common stock warrants $1.00 1,462,600 $1,462,600
Common stock issued for a note receivable in
connection with a Regulation D offering of
common stock and common stock warrants $1.00 525,000 525,000
Common stock issued for offering costs - 53,650 -
Common stock issued in connection with the
settlement of a note payable to an individual $0.98 734,942 722,080
Common stock issued to settle claims of
stockholders $0.81 to $0.91 578,000 508,280
Preferred stock converted to common stock based
upon a ratio equal to $5.00 over the quoted
market price of the common stock at the date of
issue $1.67 to $1.70 14,700 25,000
Common stock issued upon conversion of notes
and in payment of related interest expenses $0.95 to $1.77 146,590 153,207
Common stock issued for cash $0.35 to $1.00 1,163,625 796,470
Common stock issued for services based upon
the estimated fair value of the shares at the
date of issue $0.53 to $1.50 1,277,633 893,152
--------- ----------
Totals for 1996 5,956,740 $5,085,789
--------- ----------
--------- ----------
</TABLE>
10. STOCK WARRANTS AND OPTIONS:
During the year ended June 30, 1996, in connection with a Regulation D
offering under which the Company sold 1,987,600 shares of common stock at
$1.00 per share, the Company granted the participating investors warrants
to acquire an equal number of shares at $5.00 per share for a two-year
period. Additional warrants for 211,900 shares were issued to the
participating investors during 1997 due to a failure by the Company to
promptly issue shares sold in the Regulation D offering. Accordingly,
warrants for a total of 2,199,500 shares at $5.00 per share were issued in
connection with this offering.
Continued
F-20
<PAGE>
COMPUTERIZED THERMAL IMAGING, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
10. STOCK WARRANTS AND OPTIONS, CONTINUED:
The Company has recently made an offer to the investors that participated
in the Regulation D offering under which the number of shares covered by
the original warrants is increased by 50%, the exercise price is lowered to
$2.50 per share and the expiration date is extended to March 31, 1999.
During the year ended June 30, 1997, the Company issued a warrant for
50,000 shares of the Company's common stock at $1.50 per share in
connection with the funding of a $125,000 convertible debenture. (See Note
7) The Company also issued a warrant for 100,000 shares at $2.00 per share
in connection with the funding of a $550,000 convertible debenture. Each
of the warrants issued with the convertible debentures expires five years
from the date of issuance. (See Note 7)
The Company has issued stock options to employees as follows:
<TABLE>
NUMBER
OF SHARES EXERCISE PRICE
--------- --------------
<S> <C> <C>
Options outstanding at July 1, 1995 2,000,000 $1.25
Options granted 500,000 1.25
---------
Options outstanding at June 30, 1996 2,500,000
Options granted 1,750,000 $0.70 - $0.97
---------
Options outstanding at June 30, 1997 4,250,000
---------
---------
</TABLE>
Following is a summary of outstanding options at June 30, 1997:
<TABLE>
NUMBER OF SHARES VESTED EXPIRATION DATE EXERCISE PRICE
---------------- ------ --------------- --------------
<S> <C> <C> <C>
500,000 375,000 October, 2000 $1.25
1,250,000 312,500 August, 2001 0.70
500,000 - April, 2002 0.97
2,000,000 1,000,000 June, 2005 1.25
</TABLE>
In February 1998, the Company adopted the 1997 Stock Option and Restricted
Stock Plan (the "Plan") that provides for the grant by the Company to
employees of up to 5,125,000 options for shares of the Company's common
stock or actual shares of restricted common stock. The Plan will continue
in effect for a term of ten years unless sooner terminated pursuant to its
terms. To date, no restricted stock or stock options have been issued
under the Plan.
Continued
F-21
<PAGE>
COMPUTERIZED THERMAL IMAGING, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
11. LEASE COMMITMENTS:
The Company has entered into a lease agreement for office space which is
accounted for as an operating lease. Rent expense for each of the years
ended June 30, 1997 and 1996 was $30,300.
At June 30, 1997, the future minimum payments required under this
noncancelable operating lease are as follows:
<TABLE>
YEAR ENDED
JUNE 30,
----------
<S> <C>
1998 $30,300
1999 30,300
2000 5,050
-------
Total $65,650
-------
-------
</TABLE>
12. RELATED PARTY TRANSACTIONS:
Since its inception, the Company has been dependent upon certain
individuals, officers/stockholders and the related corporations under
their control (collectively referred to as the "Affiliates") to provide
capital, management services, assistance in finding new sources for debt
and equity financing and guidance in the development of the Company's
thermal imaging system. The Affiliates have generally provided services and
incurred expenses on behalf of the Company in exchange for shares of the
Company's common stock. However, in certain instances in years prior to
1996, one such Affiliate deposited directly to its account, cash collected
on behalf of the Company. Such cash was raised through issuance of notes
payable and common stock of the Company for which a complete accounting for
the proceeds was not made by the Affiliate. In this circumstance the
difference has been charged to compensation expense and reflected as
operating, general and administrative expenses in the accompanying
financial statements. Following is an analysis of transactions involving
the Affiliates during the years ended June 30, 1997 and 1996:
Continued
F-22
<PAGE>
COMPUTERIZED THERMAL IMAGING, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
12. RELATED PARTY TRANSACTIONS, CONTINUED:
<TABLE>
AFFILIATE 1 AFFILIATE 2
SHARES AMOUNT SHARES AMOUNT
--------- ---------- ------- --------
<S> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 1997
Shares of the Company's Common
Stock issued as compensation and
repayment of expenses incurred
on behalf of the Company by the
Affiliates at prices ranging
from $0.18 to $0.73 287,266 $ 152,498 400,000 $253,000
Investment in the Company 1,960,418 980,209 - -
--------- ---------- ------- --------
Total - 1997 2,247,684 $1,132,707 400,000 $253,000
--------- ---------- ------- --------
--------- ---------- ------- --------
YEAR ENDED JUNE 30, 1996
Shares of the Company's Common
Stock issued as compensation and
repayment of expenses incurred
on behalf of the Company by the
Affiliates at prices ranging
from $0.53 to $0.70 530,000 $ 474,500 194,383 $122,461
Investment in the Company 1,120,000 672,000 - -
--------- ---------- ------- --------
Total - 1996 1,650,000 $1,146,500 194,383 $122,461
--------- ---------- ------- --------
--------- ---------- ------- --------
</TABLE>
The Company has been involved in certain stockholder disputes concerning
its technology and has generally been successful in settling such disputes
primarily through issuances of common stock. Affiliate 1 has agreed to
indemnify the Company should additional stockholder disputes regarding the
Company's technology arise.
13. LITIGATION AND CONTINGENCIES:
At June 30, 1997, the Company is involved in various matters of litigation
or dispute and other contingencies, as follows:
Continued
F-23
<PAGE>
COMPUTERIZED THERMAL IMAGING, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
13. LITIGATION AND CONTINGENCIES, CONTINUED:
In April 1997, the Company entered into an agreement (the "Investment
Agreement") with a financial services company that committed the
financial services company to initially raise $1,500,000 in capital for
the Company. Under the Investment Agreement the financial services
company was also obligated to provide a loan of $2,000,000 to the Company
immediately upon completion of a due diligence period. After completing
the due diligence period, the financial services company began an
alternative interim fund raising effort that generated 530,000 of loans
through the issuance of convertible debentures and certain of the
debentures have been converted to common stock of the Company. Upon
conversion, the debenture holders received restricted common stock
subject to a statutory holding period although such debenture holders
assert that they were told by the financial services company that they
would receive free trading shares. Both the debenture holders and the
financial services company have threatened litigation against the
Company; however, the Company believes that it has no liability for
misrepresentations made by the financial services company and believes
that issuance of free trading shares would be in direct violation of
federal securities laws. Furthermore, the Company contends that it has
been damaged by the financial services company's failure to perform under
the Investment Agreement. Nevertheless, the Company is considering the
preparation of a recision offer to resolve this matter.
In second matter, a stockholder in the Company has raised claims against
the Company and certain of its officers alleging misrepresentation,
potential securities violations and breach of fiduciary duties. The
stockholder has made a settlement offer to obtain additional shares of
the Company's common stock; however certain directors of the Company
refute the allegations and the settlement offer has been rejected by the
Company. In a third matter, during the year ended June 30, 1994, the
Company issued 1,000,000 shares of its common stock to a former director
of the Company based upon the directors representation that he would
arrange large-scale financing by certain proposed contributors. During
the year ended June 30, 1997, actions were taken to cancel the common
stock because the Company contends that the issuance was conditional upon
the former directors' ability to arrange large-scale financing. However,
the Company was recently contacted by a lender that asserts that he had
relied upon a pledge of 500,000 shares of the Company's common stock by
the former director as collateral for a loan. The 500,000 shares of
common stock issued to the director are included as issued and
outstanding shares in the accompanying financial statements at June 30,
1997, 1996, and 1995.
Continued
F-24
<PAGE>
COMPUTERIZED THERMAL IMAGING, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
13. LITIGATION AND CONTINGENCIES, CONTINUED:
The Company is also involved in discussions with two of its primary
vendors regarding past due accounts. The first vendor is TRW, an Ohio
corporation performing contract software development, and strategic
planning and management services regarding the testing, development and
deployment of the Company's thermal imaging systems. The Company has
become delinquent in the payment of costs and fees under contracts with
TRW (See Note 6) and, accordingly, TRW, although not having filed formal
legal actions, has threatened the Company that it will be withholding
delivery of source codes of developed software until past due amounts are
paid. If TRW follows through with its threats and withholds delivery of
the source codes, the Company's operations will be shut down.
The Company is also delinquent in payments to its primary legal counsel
(the "Attorneys") for legal services and at June 30, 1997 owed the
Attorneys $198,717. In order to provide security for the amounts owed,
the Company has executed pledge agreements granting the Attorneys a
security interest in the Company's common stock and in the common stock
of TMI and in the intellectual property of both the Company and TMI. The
Company has made partial payment on amounts due the Attorneys; however,
if the Company does not continue to make payments as agreed, the
Attorneys could foreclose on their security interests.
The Company has funded its operations in part by means of various
offerings thought to be exempt from the registration requirements of the
Securities Act of 1933 or various applicable state securities laws. In
the event that any of the exemptions upon which the Company relied were
not, in fact, available, the Company could face claims from federal and
state regulators and from purchasers of their securities. Management and
legal counsel, although not aware of any alleged specific violations,
cannot predict the likelihood of claims or the range of potential
liability that could arise from this issue.
Continued
F-25
<PAGE>
COMPUTERIZED THERMAL IMAGING, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
13. LITIGATION AND CONTINGENCIES, CONTINUED:
As a Nevada Corporation organized prior to October 1, 1991, the Company's
stockholders have generally had preemptive rights to acquire the
Company's common stock when such securities were offered for sale.
However, in various offerings of the Company's securities, the Company
failed to properly offer their existing stockholders the preemptive
rights to which they were entitled. Should any stockholder assert
preemptive rights for past offerings, the Company plans to make available
the shares of stock and at the price to which the stockholder was
originally entitled. Management is not aware of any stockholder who
intends to make any claim with respect to the failure by the Company to
offer preemptive rights. However, there can be no assurance that
litigation asserting such claims will not be initiated, or that the
Company would prevail in any such litigation. Subsequent to year end a
majority of the stockholders, by written consent, amended the Articles of
Incorporation of the Company to deny preemptive rights from and after
that date with respect to the issuance of shares of the common stock.
However, the amendment to the Articles of Incorporation with have no
effect with respect to preemptive rights which may have existed prior to
such amendment.
The Company is also involved various other legal disputes arising in the
normal course of business that, in the opinion of management, should not
result in significant liability, if any.
14. GOING CONCERN CONSIDERATIONS:
Since its inception, as a development stage enterprise, the Company has
generated insignificant revenue and has been dependent on debt and equity
raised from individual investors to sustain its operations. The Company
has been successful in conserving cash by issuing its common and
preferred stock to satisfy obligations, to compensate individuals and
vendors and to settle disputes that have arisen. However, during the
years ended June 30, 1997 and 1996, the Company incurred net losses of
$2,112,843 and $2,878,250, respectively, and negative cash flows from
operations of $512,860 and $1,372,727, respectively. These factors along
with a $1,475,392 negative working capital position at June 30, 1997 and
delinquencies in payments to major vendors (See Notes 6 and 13) raise
substantial doubt about the Company's ability to continue as a going
concern.
Continued
F-26
<PAGE>
COMPUTERIZED THERMAL IMAGING, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
14. GOING CONCERN CONSIDERATIONS, CONTINUED:
Management plans to take specific steps to address its difficult financial
situation as follows:
- In the near term the Company plans additional private placements
of debt and common stock to fund its current operations.
- In the intermediate term, the Company plans a public offering of
its common stock under the Securities and Exchange Act of 1933 to
provide the funds necessary to bring its thermal imaging system to
the commercial market.
- In the long-term, the Company believes that cash flows from
commercialization of its thermal imaging systems will provide the
resources for continued operations.
There can be no assurance that the Company's planned private placements
of debt and equity securities or its planned public offering of common
stock will be successful or that the Company will have the ability to
commercialize its thermal imaging systems and ultimately attain
profitability. The Company's long-term viability as a going concern is
dependent upon three key factors, as follows:
- The Company's ability to obtain adequate sources of debt or equity
funding to meet current commitments and fund the commercialization
of its thermal imaging system.
- The ability of the Company to obtain positive test results of its
thermal imaging system in clinical trials currently in progress.
- The ability of the Company to ultimately achieve adequate
profitability and cash flows to sustain its operations.
15. NON-CASH INVESTING AND FINANCING ACTIVITIES:
During the years ended June 30, 1997 and 1996, the Company engaged
in certain non-cash investing and financing activities as follows:
<TABLE>
1997 1996
------- --------
<S> <C> <C>
Common stock issued in settlement of
notes payable $142,900
--------
--------
Common stock issued upon conversion
of debentures $62,020
-------
-------
</TABLE>
F-27
<PAGE>
COMPUTERIZED THERMAL IMAGING, INC.
----------
CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996
(UNAUDITED)
F-28
<PAGE>
[RANDY SIMPSON, CPA LETTERHEAD]
To the Board of Directors
Computerized Thermal Imaging, Inc.
The accompanying consolidated condensed interim balance sheet of Computerized
Thermal Imaging, Inc. as of December 31, 1997 and 1996, and the related
consolidated condensed interim statements of operatings and accumulated
development stage costs for the six months then ended were not audited by me,
and accordingly, I do not express an opinion on them.
Sandy, Utah
February 25, 1998
F-29
<PAGE>
COMPUTERIZED THERMAL IMAGING, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONSOLIDATED CONDENSED INTERIM BALANCE SHEET
DECEMBER 31, 1997 AND 1996
----------
(UNAUDITED)
<TABLE>
ASSETS 1997 1996
------------ ------------
<S> <C> <C>
Current assets:
Cash $ 260,980 $ 81,509
Deposits 2,204 -
------------ ------------
Total current assets 263,184 81,509
------------ ------------
Property and equipment, net 277,395 446,146
------------ ------------
Other assets:
Software development costs 2,144,919 336,625
Stock offering and debt issuance
costs, net 214,416 95,333
------------ ------------
2,359,335 431,958
------------ ------------
Total assets $ 2,899,914 $ 959,613
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 1,113,595 $ 127,066
Advances from affiliates 69,315 317,058
Accrued liabilities 232,279 144,433
Current maturities of convertible
debentures 552,155 -
------------ ------------
Total current liabilities 1,967,344 588,557
------------ ------------
Convertible debentures, net of current
maturities 325,000 550,000
------------ ------------
Commitments and contingencies
Stockholders' equity:
Convertible preferred stock, $5.00 par
value, 100,000 shares authorized - -
Common stock, $.001 par value; 100,000,000
shares authorized, 42,137,598 and
32,906,563 shares issued and outstanding
on December 31, 1997 and 1996, respec-
tively 42,138 32,907
Additional paid-in capital 15,716,370 11,933,573
Subscription receivable (525,000) (525,000)
Losses accumulated during the development
stage (14,625,938) (11,620,424)
------------ ------------
Total stockholders' equity (deficit) 607,570 (178,944)
------------ ------------
Total liabilities and stockholder's
equity (deficit) $ 2,899,914 $ 959,613
------------ ------------
------------ ------------
</TABLE>
The accompanying selected notes are an integral
part of these interim financial statements.
F-30
<PAGE>
COMPUTERIZED THERMAL IMAGING, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONSOLIDATED CONDENSED INTERIM STATEMENT OF OPERATIONS
AND ACCUMULATED DEVELOPMENT STAGE COSTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996, AND THE
PERIOD FROM INCEPTION, JUNE 10, 1987, THROUGH DECEMBER 31, 1997
-----------
(UNAUDITED)
<TABLE>
SIX MONTHS SIX MONTHS
ENDED ENDED INCEPTION TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997
----------- ----------- ------------
<S> <C> <C> <C>
Interest income $ 1,247 $ 3,097 $ 17,823
Income from sale of prototype - 55,815 180,815
----------- ----------- ------------
Total income 1,247 58,912 198,638
----------- ----------- ------------
Operating, general and admin-
istrative expenses 1,333,137 689,702 12,077,165
Research and development costs 161,003 81,455 952,997
Interest expense 123,023 11,000 1,280,034
Litigation settlement - - 514,380
----------- ----------- ------------
Total expenses 1,617,163 782,157 14,824,576
----------- ----------- ------------
Net loss $(1,615,916) $ (723,245) $(14,625,938)
----------- ----------- ------------
----------- ----------- ------------
Weighted average shares
outstanding 39,004,006 32,906,583
----------- -----------
----------- -----------
Loss per common share $ (0.04) $ (0.02)
----------- -----------
----------- -----------
</TABLE>
The accompanying selected notes are an integral
part of these interim financial statements
F-31
<PAGE>
COMPUTERIZED THERMAL IMAGING, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS
-----------------
1. INTERIM FINANCIAL STATEMENTS:
The unaudited consolidated condensed interim financial statements have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC). Certain information and note disclosures
normally included in annual financial statements prepared in accordance
with generally accepted accounting principles have been omitted pursuant
to those rules and regulations, although the Company believes that the
disclosures made are adequate to make the information presented not
misleading. In the opinion of management, all adjustments necessary for
a fair presentation of results of operations have been made to the
interim financial statements. Results of operations for the six-month
periods ended December 31, 1997 and 1996 are not necessarily indicative
of results of operations for the respective full years.
A summary of the Company's significant accounting policies and other
information necessary to understand these consolidated condensed interim
financial statements is presented in the Company's audited financial
statements for the years ended June 30, 1997 and 1996. Accordingly, the
Company's audited financial statements should be read in connection with
these financial statements.
F-32
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation do not specifically address
indemnification of directors and officers, except to make a general reference
that the directors "may exercise all rights, powers, and privileges . . .
conferred upon similar corporations organized under and by virtue of the laws of
the State of Nevada." Sections 78.751 and 78.752 of the Nevada Revised Statutes
permit a corporation to indemnify, among others, any officer or director against
certain liabilities under specified circumstances, and to purchase and maintain
insurance on behalf of its officers and directors.
Consistent with the overall scope of section 78.751 of the Nevada
Revised Statutes, Article VI of the Company's Bylaws, included in Exhibit 3.2
hereto and incorporated herein by reference, provides, in general, that any
director or officer of the Company who is the subject of or a participant in
a threatened, pending or completed legal action by reason of the fact that
such individual is or was a director or officer shall be indemnified and held
harmless by the Company from and against the consequences of such action if
it is determined that he acted in good faith and reasonably believed (i) his
conduct was in the Company's best interest, (ii) in all other cases, that his
conduct was not opposed to the best interests of the Company, and (iii) with
respect to criminal proceedings, that he had no reasonable cause to believe
his conduct was unlawful; provided that if it is determined that such person
is liable to the Company or is found liable on the basis that personal
benefit was improperly received by such person, the indemnification is
limited to reasonable expenses actually incurred by such person in connection
with the legal action and shall not be made in respect of any legal action in
which such person shall have been found liable for willful or intentional
misconduct in the performance of his duty to the Company. Any indemnification
(unless ordered by a court of competent jurisdiction) shall be made by the
Company only upon a determination that indemnification of such person is
proper in the circumstances by virtue of the fact that it shall have been
determined that such person has met the applicable standard of conduct.
The Bylaws also provide that reasonable expenses, including court
costs and attorneys' fees, incurred by officers and directors in connection
with a covered legal action shall be paid by the Company at reasonable
intervals in advance of the final disposition of such action, upon receipt by
the Company of a written affirmation by such person of his good faith belief
that he has met the standard of conduct necessary for indemnification, and a
written undertaking by or on behalf of such person to repay the amount paid
or reimbursed by the Company if it is ultimately determined that he is not
entitled to be indemnified.Bylaws also provide that reasonable expenses,
including court costs and attorneys' fees, incurred by officers and directors
in connection with a covered legal action shall be paid by the Company at
reasonable intervals in advance of the final disposition of such action, upon
receipt by the Company of a written affirmation by such person of his good
faith belief that he has met the standard of conduct necessary for
indemnification, and a written undertaking by or on behalf of such person to
repay the amount paid or reimbursed by the Company if it is ultimately
determined that he is not entitled to be indemnified.
The Board of Directors of the Company may also authorize the Company
to indemnify employees or agents of the Company, and to advance the
reasonable expenses of such persons, to the same extent, following the same
determinations and upon the same conditions as are required for the
indemnification of and advancement of expenses to directors and officers of
the Company. As of the date of this Registration Statement, the Board of
Directors has not extended indemnification rights to persons other than
directors and officers.
The Bylaws also provide that the Company has the power and authority to
purchase and maintain insurance or another arrangements on behalf of any
director, officer, employee, or agent of the Company or any affiliate of the
Company on similar terms as those described in Section 78.752 of the Nevada
Revised Statutes. The Company's Articles of Incorporation relieve its directors
from liability for monetary damages to the full extent permitted by Nevada law.
Sections 78.751 and 78.752 of the General Corporation Law of the State of Nevada
authorize a corporation to indemnify, among others, any officer or director
against certain liabilities under specified circumstances, and to purchase and
maintain insurance on behalf of its officers and directors.
II-1
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be incurred
in connection with the distribution of the securities being registered. The
expenses shall be paid by the Registrant. No expenses will be paid by the
security holders.
<TABLE>
<S> <C>
SEC Registration Fee............................................. $
Printing and Engraving Expenses..................................
Legal Fees and Expenses..........................................
Accounting Fees and Expenses.....................................
Blue Sky Fees and Expenses.......................................
Transfer Agent Fees..............................................
Miscellaneous.................................................... 0000
----
Total.......................................................... $0000
----
----
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Set forth below is certain information regarding securities that the
Company has sold in the past three years to directors ("D"), officers ("O"),
employees ("E"), consultants ("C"), institutional investors ("I"), affiliates
("A"), and non-affiliates ("N").
In February 1995, the Company issued 5,000 shares of the Common
Stock to Ronald O. Kirk (N) in consideration for a cash contribution of
approximately $3,550.
In February 1995, the Company conditionally issued 500,000 shares of
the Common Stock to Richard Thompson (D, C) valued at $413,750. The issuance
was based on Thompson's representations that he had secured a large scale
financing agreement with certain institutional investors and had earned a
finder's fee negotiated with the Company. During the year ending June 30,
1997, action was taken by the Company to cancel the shares of the Common
Stock issued to Thompson due to the failure of Thompson to provide the agreed
upon consideration. However, in August 1997, the Company was contacted by a
lender who asserts that he accepted a pledge of the shares as collateral for
a loan granted to Thompson. In an effort to avoid litigation, the Company has
reached an agreement with the lender wherein the prior cancellation of the
shares has been revoked, and the shares reinstated, for the limited purpose
of permitting the lender to exercise his rights with regard to the collateral.
In March 1995, the Company issued 72,000 shares of the Common Stock
to Steve Ricketts (N) in consideration for a cash contribution of
approximately $37,500.
In March 1995, the Company issued 100,000 shares of the Common Stock
to Charles S. Crawford (C) in consideration for services rendered, including
the drafting of a business plan. The value of the services rendered were
valued at approximately $71,000.
In March 1995, the Company issued 10,000 shares of the Common Stock
to Lynn E. Hall (N) in consideration for a cash contribution of approximately
$10,000.
In April 1995, the Company issued 26,800 shares of the Common Stock
to Robert Aul (N) in connection with the conversion of the principal and
interest due under two corporate notes. An outstanding amount of $45,360 was
converted into the Common Stock at a price of $1.68 per share.
In April 1995, the Company issued 74,000 shares of the Common Stock
to D. M. Cary II (N) in connection with the conversion of 25,000 shares of
the Preferred Stock issued by the Company. The Preferred Stock was valued at
$5.00 per share and converted into the Common Stock at a price of $1.68 per
share.
In June 1995, the Company issued 16,500 shares of the Common Stock
to John Loos (C) as compensation for financial consulting services rendered
to the Company valued at approximately $16,995.
II-2
<PAGE>
In June 1995, the Company issued 39,375 shares to Lindsay Brehm (N)
in connection with the conversion of the principal and interest due under a
corporate note. An outstanding amount of approximately $39,375 was converted
at a price of $1.00 per share.
In June 1995, the Company issued 29,600 shares of the Common Stock
to Aul & Associates (N) in connection with the conversion of 10,000 shares of
the Preferred Stock issued by the Company. The Preferred Stock was valued at
$5.00 per share and was converted into the Common Stock at a price of $1.68
per share.
In July 1995, the Company issued an aggregate of 378,000 shares of
the Common Stock to certain stockholders of Dorex, Inc. (N) in settlement of
a threatened lawsuit arising out of the Company's acquisition of certain
research contracts with the State University of New York - Buffalo and
intellectual property relating to thermal imaging technology. The estimated
value of the stock issued to the settling stockholders equaled $343,980.
In July 1995, the Company issued 734,942 shares of the Common Stock
to Paige-Ruane, Inc. (N) as partial consideration for the settlement and
dismissal of a lawsuit pending against the Company in the State of Florida.
The estimated value of the shares of the Common Stock issued in settlement of
the lawsuit equaled $574,724.64.
In July 1995, the Company issued 10,000 shares of the Common Stock
to Benjamin Anderson (A) in consideration for a cash contribution of
approximately $12,500.
In July 1995, the Company issued 16,500 shares of the Common Stock
to Benjamin Anderson (A) in connection with the conversion of the principal
and interest due under a corporate note and additional cash consideration. An
outstanding amount of approximately $6,500 was converted into the Common
Stock at a price of $1.00 per share.
In July 1995, the Company issued 26,250 shares of the Common Stock
to Stuart Drange (N) in connection with the conversion of the principal and
interest due under a corporate note. An outstanding amount of approximately
$26,250 was converted at a price of $1.00 per share.
In July 1995, the Company issued 7,000 shares of the Common Stock to
Robert Kamrow (N) and 3,000 shares of the Common Stock to Thomas Kamrow (N)
in connection with the conversion of the remaining principal and interest due
under a corporate note identifying Robert Kamrow as payee. An outstanding
amount of approximately $10,000 was converted at a price of $1.00 per share.
In July 1995, the Company issued 6,600 shares of the Common Stock to
Michael P. Kelley (N) in connection with the conversion of the principal and
interest due under a corporate note. An outstanding amount of approximately
$6,600 was converted at a price of $1.00 per share.
In July 1995, the Company issued 19,700 shares of the Common Stock
to David R. Moncrief (N) in connection with the conversion of principal and
interest due under two corporate notes. An outstanding amount of
approximately $19,700 was converted at a price $1.00 per share.
In July 1995, the Company issued 6,600 shares of the Common Stock to
Eric Wagner (N) in connection with the conversion of the principal and
interest due under a corporate note. An outstanding amount of approximately
$6,600 was converted at a price of $1.00 per share
In July 1995, the Company issued 19,690 shares of the Common Stock
to Lois White (N) in connection with the conversion of the principal and
interest due under a corporate note. An outstanding amount of approximately
$19,690 was converted at a price of $1.00 per share.
In August 1995, the Company issued 1,600,000 shares of the Common
Stock to Thermal Imaging, Inc. (A) in consideration for a cash contribution
of approximately $672,000 and as compensation to David B. Johnston (D, O)
with an estimated value of $448,000.
II-3
<PAGE>
In August 1995, the Company issued 14,700 shares of the Common Stock
to John Weidner (N) in connection with the conversion of 5,000 shares of the
Preferred Stock. The Preferred Stock had a value of $5.00 per share and was
converted to the Common Stock at a price of $1.00 per share.
In September 1995, the Company issued an aggregate of 295,000 shares
of the Common Stock to The Elmo Group (N), Steve G. Ushijima (N), Douglas J.
Emery (N), Harold Werth, Jr. (N), Jennifer Forbes (A), Lori Forbes (A),
Merrill Fowler (N), and Gary Scrutton (N) in consideration for an aggregate
cash contribution to the Company of approximately $192,070.
In September 1995, the Company issued 10,000 shares of the Common
Stock to Dave Braman (N), a stockholder of Dorex, Inc., in settlement of
threatened litigation arising out of the Company's acquisition of certain
research contracts with the State University of New York - Buffalo and
certain thermal imaging technologies. The estimated value of the settlement
equaled approximately $8,400.
In September 1995, the Company issued 6,000 shares of the Common
Stock to Richard Haddad (C) as a finder's fee for bringing in certain
equipment financing investors. The Company valued the services rendered at
$5,055.
In September 1995, the Company issued 1,000 shares of the Common
Stock to Philip Heyde (N) as an interest payment of approximately $840 on a
corporate note.
In September 1995, the Company issued an aggregate of 21,000 shares
of the Common Stock to Jack Gately (N), Christopher John Gately (N), and
Ursula Gately (N) in connection with the conversion of 7,000 shares of the
Preferred Stock held by Jack Gately. The Preferred Stock was valued at $5.00
per share and was converted into the Common Stock at a price of $1.68 per
share.
In September 1995, the Company issued 20,000 shares of the Common
Stock to Benjamin Anderson (A) in consideration for a cash contribution of
approximately $20,000.
In October 1995, the Company issued an aggregate of 140,000 shares
of the Common Stock to William Carpenter (N), Donald B. Gartland (N), and Bob
Ihle (N), all stockholders in Dorex, Inc., in consideration for the
settlement of threatened litigation against the Company arising out of the
Company's acquisition of certain research contracts with the State University
of New York - Buffalo and thermal imaging technologies. The estimated value
of the settlement equaled approximately $113,400.
In October 1995, the Company issued 6,500 shares of the Common Stock
to Jack Gately (N) in connection with the conversion of the outstanding
principal and interest of $3,870 due under a corporate note. An outstanding
amount of $10,803 was converted at a price of $1.68 per share.
In December 1995, the Company issued 20,000 shares of the Common
Stock to Keith Bessinger (C) for legal services rendered to the Company with
an approximate value of $10,600.
In December 1995, the Company issued 50,000 shares of the Common
Stock to Thermal Imaging, Inc. (A) as compensation due to David B. Johnston
(O, D) for services rendered to the Company. The value of the services
rendered equaled approximately $26,500.
In December 1995, the Company issued 10,000 shares of the Common
Stock to Douglas J. Emery (N) in consideration for a cash contribution of
approximately $5,300.
In December 1995, the Company issued 10,000 shares of the Common
Stock to Willard Harpster (C) in consideration for customer relations
services rendered. The Company has valued the services at approximately
$9,500.
In December 1995, the Company issued 60,000 shares of the Common
Stock to Mark Lewis (N) in connection with the settlement of a threatened
lawsuit against the Company arising out of a transaction relating to the
lease of certain thermal imaging equipment and the donation of such equipment
to the State University of New York - Buffalo.
II-4
<PAGE>
From November 1995 through February 1996, the Company issued an
aggregate of 2,000,000 shares of the Common Stock and 2,000,000 warrants,
entitling holders to purchase one share of the Common Stock at an exercise
price of $5.00 per share, to various subscribers in conjunction with the
Private Placement Memorandum dated November 13, 1995 for an aggregate amount
of approximately $2,000,000.
In February 1996, in conjunction with the Private Placement
Memorandum dated November 13, 1995, the Company also issued an aggregate of
52,500 shares of the Common Stock and 31,500 warrants at an exercise price of
$5.00 per share to various underwriters who provided services to the Company
in connection therewith. The shares of the Common Stock and warrants issued
were valued at approximately $49,500.
In February 1996, the Company issued 50,000 shares of the Common
Stock to Lewis Woodworth (N) in consideration for the settlement of a
threatened lawsuit arising out of the Company's acquisition of a certain
research contracts with the State University of New York - Buffalo and
thermal imaging technologies. The Common Stock issued was valued at
approximately $42,500.
In March 1996, the Company issued 30,000 shares of the Common Stock
to M&S Acquisition (C) in consideration for valuation and financial
consultant services rendered to the Company and valued at approximately
$45,000.
In April 1996, the Company issued 494,383 shares of the Common Stock
to PDH, Ltd.(A, C), in consideration for administrative and shareholder
relations services rendered to the Company and valued at $214,160.
In April 1996, the Company issued 112,250 shares of the Common Stock
to Thermal Imaging, Inc. (A) in connection with the Assumption of Liability
Agreement wherein Thermal Imaging agreed to assume responsibility for and
indemnify the Company from all claims asserted or to be asserted by Dorex,
Inc. stockholders in connection with the Company's acquisition of certain
research contracts with the State University of New York - Buffalo and
thermal imaging technologies. The stock issued to Thermal Imaging, Inc. was
valued at approximately $67,350.
In April 1996, the Company issued 4,000 shares of the Common Stock
to Eric Wagner (N) in connection with the conversion of principal and
interest due under a corporate note. An outstanding amount of approximately
$7,000 was converted at a price of $1.75 per share.
In June 1996, the Company issued 5,000 shares of the Common Stock to
M&S Acquisition (C) as reimbursement for expenses totaling $7,500 incurred in
the performance of services.
In August 1996, the Company issued its 6% Convertible Debenture due
August 15, 1999 in the principal amount of $550,000 (the "6% Convertible
Debenture") to Cameron Capital, Ltd. The 6% Convertible Debenture is
convertible into shares of the Common Stock at a price per share equal to the
lesser of the average closing bid price of the Common Stock for the five
consecutive trading days immediately preceding the date of the 6% Convertible
Debenture, or 77 percent of the average closing bid price of the Common Stock
for the five consecutive trading days prior to conversion. In connection with
the issuance of the 6% Convertible Debenture, the Company also issued to the
holder a warrant to purchase 100,000 shares of the Common Stock at $2.00 per
share.
In September 1996, the Company issued an additional 203,150 warrants
to investors in the Private Placement Memorandum dated November 13, 1995, as
a penalty due as a result of the failure of the Company to timely file a
registration statement covering the shares of the Common Stock in the
Offering.
In November 1996, the Company issued 100,000 shares of the Common
Stock to PDH, Ltd. (A, C) in consideration for services rendered and as
reimbursement for expenses incurred from March 1, 1996 through November 15,
1996. The estimated value of the stock issued equaled $73,000.
In January 1997, the Company issued 250,000 shares of the Common
Stock to Thermal Imaging, Inc. (A), in consideration for a cash contribution
of approximately $70,000.
II-5
<PAGE>
In January 1997, the Company issued 50,000 shares of the Common
Stock to Jack Gately (N) in connection with the settlement of obligations
with Fred Redolfy. The estimated value of the Common Stock issued equaled
$30,000.
In February 1997, the Company issued 750,000 shares of the Common
Stock to Thermal Imaging, Inc. (A) in consideration for a cash contribution
of approximately $427,500.
In February 1997, the Company issued 87,816 shares of the Common
Stock to Thermal Imaging, Inc. (A) in consideration for a cash contribution
of approximately $50,055.
In March 1997, the Company issued an aggregate of 982,602 shares of
the Common Stock to Thermal Imaging, Inc. (A) in consideration for cash
contributions in the aggregate amount of $530,137.12.
In March 1997, the Company issued its 8% Convertible Debenture due
March 13, 2000 in the principal amount of $125,000 (the "8% Convertible
Debenture") to Cameron Capital, Ltd. The 8% Convertible Debenture is
convertible into shares of the Common Stock upon the effective date of this
Registration Statement at a price per share equal to the lesser of the
average closing bid price of the Common Stock for the five consecutive
trading days immediately preceding the date of the 8% Convertible Debenture,
or 77 percent of the average closing bid price of the Common Stock for the
five consecutive trading days prior to conversion. In connection with the
issuance of the 8% Convertible Debenture, the Company also issued to the
holder a warrant to purchase 50,000 shares of the Common Stock at $1.50 per
share.
In April 1997, the Company issued 12 % Series A Senior Subordinated
Convertible Redeemable Debentures (aggregate face value of $662,500), through
Select Capital Advisors, Inc., to various investors for an aggregate cash
contribution of approximately $530,000.
From April through June 1997, the Company issued warrants covering
3,273,950 shares of the Common Stock to warrant holders (N, A) who were
subscribers to the Private Placement Memorandum dated November 13, 1995. The
Warrants were issued as a further settlement with investors in the private
placement regarding the Company's obligation to register the shares of the
Common Stock in the private placement. The terms of the settlement provided
that settling investors would turn in the warrants held in exchange for new
warrants entitling the holder to purchase 1 1/2 shares of the Common Stock at
$2.50 per share.
In July 1997, the Company issued 50,000 shares of the Common Stock
to Sylvia Epstein (C) in consideration for services rendered and valued at
approximately $50,000.
In July 1997, the Company issued 500,000 shares of the Common Stock
to Manhattan Financial Group (A, C) in consideration for contributions up to
$150,000 pursuant to the terms of the Restricted Stock Purchase Agreement.
In July 1997, the Company issued 322,545 shares of the Common Stock
to Cameron Capital, Ltd. in connection with the conversion of $150,000 of the
amount outstanding under the 6% Convertible Debenture ($550,000).
In July 1997, the Company issued 138,000 shares of the Common Stock
to Robert A. Dresser (C) in consideration for services rendered in connection
with the Company's marketing efforts. The services were valued at
approximately $42,780.
In July 1997, the Company issued an aggregate of 740,656 shares of
the Common Stock to Thermal Imaging, Inc. (A) in consideration for cash
contributions in the aggregate amount of $339,000.
In September 1997, the Company issued 666,666 shares of the Common
Stock to PDH, Ltd. (A, C), in consideration for a cash contribution of
approximately $250,000.
II-6
<PAGE>
In September 1997, the Company issued 941,176 shares of the Common
Stock to Thermal Imaging, Inc. (A) in consideration for a cash contribution
of approximately $320,000.
In November 1997, the Company issued 551,429 shares of the Common
Stock to Thermal Imaging, Inc. (A), in consideration for a cash contribution
of approximately $193,000.
In November 1997, the Company issued 478,894 shares of the Common
Stock to Cameron Capital, Ltd. in connection with the conversion of $200,000
of the outstanding amount due under the 6% Convertible Debenture ($550,000).
From October to November 1997, the Company issued 83,333 shares of
the Common Stock to Ambient Capital Group, Inc. (C), as a retainer fee for
acting as a financial advisor. The estimated value of the shares issued
equaled $29,166.55. In addition, the Company issued 83,333 warrants to
Ambient Capital Group, Inc., at an exercise price of $ 0.72 per share. The
terms of the warrants entitle the holder to purchase five shares of the
Common Stock for each warrant issued and such warrants are valid for a period
of four years from the date of issuance.
In January 1998, the Company issued 100,000 shares of the Common
Stock to Manhattan Financial Group (A, C) in consideration for services
rendered pursuant to the Consulting Agreement. The estimated value of the
stock issued is equal to $30,000.
In January 1998, the Company issued an aggregate of 3,482,786 of the
Common Stock to Thermal Imaging, Inc. (A), in consideration for cash
contributions of approximately $975,130.
In January 1998, the Company issued an aggregate of 112,752 shares
of the Common Stock to David Finney (C) and Meto Miteff (C) in consideration
for legal services rendered and valued at approximately $64,220.
During January and February 1998, the Company issued an aggregate of
603,489 shares of the Common Stock to Cameron Capital, Ltd. in connection
with the conversion of $200,000 of the outstanding amount due under the 6%
Convertible Debenture and payment of penalties due for non-registration.
Unless otherwise indicated above, the issuance of securities was
exempt from registration under the Securities Act under Section 4(2) as a
transaction by an issuer not involving any public offering. In each instance,
the purchaser had a pre-existing relationship with the Company, the offers
and sales were made without public solicitation, the certificates bear
restrictive legends, and appropriate stop-transfer orders have been given to
the transfer agent. No underwriter was involved in the transactions and no
commissions were paid.
ITEM 27. EXHIBITS
The following exhibits are filed as part of this Registration
Statement:
<TABLE>
<CAPTION>
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
----------- -------------------------
<S> <C>
3(a)(1) Articles of Incorporation filed June 10, 1987.
3(b)(1) Amendment to Articles of Incorporation filed July 31, 1987.
3(c)(1) Amendment to Articles of Incorporation filed September 12, 1989.
3(d)(1) Amendment to Articles of Incorporation filed November 6, 1989.
3(e)(1) Amendment to Articles of Incorporation filed April 22, 1992.
3(f)(1) Amendment to Articles of Incorporation dated February 17, 1998.
3(g)(1) Bylaws, as Amended January 15, 1998.
4(1) Common Stock Specimen.
5(a)(1) Opinion Regarding Legality.
10(a)(1) PR Expense Funds Administration Agreement dated July 9, 1997 between
the Company, Liberty Capital Group, Inc. and Manhattan Financial
Group.
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
----------- -------------------------
<S> <C>
10(b)(1) Financial Advisory Agreement dated October 29, 1997 between the
Company and Ambient Capital Group, Inc.
10(c)(1) Assumption of Liability Agreement dated April 17, 1996 between the
Company and Thermal Imaging, Inc.
10(d)(1) Investment Agreement dated January 20, 1998 between the Company and
Bristol Asset Management, LLC.
10(e)(1) Consulting Agreement dated November 5, 1997 between the Company and
Daron Dillia d/b/a Manhattan Financial Group.
10(f)(1) Consulting Agreement dated November 5, 1997 between the Company and
Willard Harpster.
10(g)(1) Subscription Agreement dated August 15, 1996 between the Company and
Cameron Capital Management Ltd. With respect to 6% Convertible
Debentures aggregating $550,000.
10(h)(1) Subscription Agreement dated March 13, 1997 between the Company and
Cameron Capital Management Ltd. With respect to 8% Convertible
Debentures aggregating $125,000.
10(i)(1) 12% Series A Senior Subordinated Convertible Redeemable Debenture due
April 30, 1998.
10(j)(1) Signatories to Dorex Release.
10(k)(1) Employment Agreement dated October 11, 1995 between the Company and
Kenneth M. Dodd.
10(l)(1) Letter Agreement dated June 12, 1995 between the Company and Richard
V. Secord Confirming terms for Personal Services Agreement.
10(m)(1) Employment Agreement dated April 30, 1997 between the Company and
David A. Packer.
10(n)(1) Escrow Agreement dated November 20, 1997 between the Company, Roger
Sack and First Nebraska Trust Company.
10(o)(1) Golden Health Card Contract dated April 24, 1995 between TriSun
Medical Corporation and TriSun/CTI Asia, Ltd.
10(p)(1) Golden Health Plan Hospital Systems Integration Contract dated April
24, 1995 between TriSun Medical Corporation and TriSun/CTI Asia, Ltd.
10(q)(1) Computerized Thermal Imaging, Inc. Employee Stock Option Agreement
dated October 29, 1997 between the Company and David B. Johnston.
10(r)(1) Employment Agreement dated October 29, 1997 between the Company and
David B. Johnston.
10(s)(1) Letter Agreement dated July 10, 1997 between the Company and Liberty
Capital Group, Inc.'s with respect to public relations.
10(t)(1) License Agreement dated June 8, 1996 between the Company and Thermal
Imaging, Inc.
10(u)(1) Participation Option Notices by various signatories to a Private
Placement Subscription Participation Option.
10(v)(1) Pledge Agreement dated September 11, 1997 between the Company and
Looper, Reed, Mark & McGraw Incorporated.
10(w)(1) Pledge Agreement dated September 11, 1997 between Thermal Medical
Imaging, Inc. and Looper, Reed, Mark & McGraw Incorporated.
10(x)(1) Employment Agreement dated November 13, 1997 between the Company and
Richard V. Secord.
10(y)(1) Computerized Thermal Imaging, Inc. Employee Stock Option Agreement
dated January 15, 1998 between the Company and Richard V. Secord.
10(z)(1) Computerized Thermal Imaging, Inc. Employee Stock Option Agreement
dated June 12, 1995 between the Company and Richard V. Secord.
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
----------- -------------------------
<S> <C>
10(aa)(1) Computerized Thermal Imaging, Inc. Employee Stock Option Agreement
dated June 12, 1995 between the Company and Richard V. Secord.
10(bb)(1) Commitment Letter Agreement dated March 6, 1997 between the Company
and Select Capital Advisors, Inc.
10(cc)(1) Services Agreement dated July 1997 between the Company and Liberty
Capital Group, Inc.
10(dd)(1) Stock Transfer Agreement dated January 28, 1997 between the Company
and Thermal Medical Imaging, Inc.
10(ee)(1) Amendment to Employee Stock Option Agreement dated January 26, 1998
between the Company and David Packer.
10(ff)(1) Amendment to Employee Stock Option Agreement dated January 22, 1998
between the Company and Kenneth M. Dodd.
10(gg)(1) Amendment to Employee Stock Option Agreement dated January 26, 1998
between the Company and Richard V. Secord.
10(hh)(1) Computerized Thermal Imaging, Inc. Consultant Stock Option Agreement
dated November 5, 1997 between the Company and Willard Harpster.
10(ii)(1) Computerized Thermal Imaging, Inc. Consultant Stock Option Agreement
dated November 18, 1997 between the Company and Daron Dillia D/b/a
Manhattan Financial Group.
10(jj)(1) Computerized Thermal Imaging, Inc. Restricted Stock Purchase
Agreement dated July 9, 1997 between the Company and Manhattan
Financial Group.
10(kk)(1) Computerized Thermal Imaging, Inc. 1995 Stock Option Plan.
10(ll)(1) Computerized Thermal Imaging, Inc. 1997 Stock Option and Restricted
Stock Plan.
10(mm)(1) Offshore Securities Subscription Agreement relating to 12% Series A
Senior Subordinated Convertible Redeemable Debentures of the Company.
10(nn)(1) 12% Series A Senior Subordinated Convertible Redeemable Debentures of
the Company.
10(oo)(1) Golden Health Telemedicine Contract dated April 24, 1995 between
TriSun Medical Corporation - China and TriSun/CTI Asia, Ltd.
10(pp)(1) Contract between TRW Systems Integration Group and Computerized
Thermal Imaging, Inc. dated October 29, 1996.
10(qq)(1) Clinical Trial Agreement dated September 16, 1997 between Thermal
Medical Imaging, Inc. and Health Research Association.
10(rr)(1) Contract between TRW Systems Integration Group and Thermal Medical
Imaging, Inc. dated June 19, 1997.
10(ss)(1) Clinical Trial Agreement dated November 7, 1997 between Thermal
Medical Imaging, Inc. and the University of Southern California.
11(1) Computation of Per Share Earnings.
15(1) See Exhibit 23(b).
21(1) Subsidiaries of the Registrant.
23(1) Consent of Counsel (included in Exhibit 5.1).
23(a)(1) Consent of Ham, Langston & Brezina, LLP.
23(b)(1) Consent of Randy Simpson, CPA P.C.
24(1) Powers of Attorney.
27(1) Financial Data Schedule.
</TABLE>
- -------------
(1) Filed herewith.
II-9
<PAGE>
ITEM 28. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required in Section 10(a)(3)
of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the Registration Statement;
and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the Registration Statement or any material change to
such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(4) That for purposes of determining any liability under the
Securities Act, (i) the information omitted from the
Prospectus filed as part of this Registration Statement, as
permitted by Rule 430A of the Securities Act and to be
contained in the form of Prospectus to be filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under
the Securities Act, shall be deemed to be incorporated by
reference into this Registration Statement at the time it is
declared effective, and (ii) each post-effective amendment
that contains a form of prospectus shall be deemed to be a new
Registration Statement relating to the securities offered
therein and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on the Registration Statement on Form SB-2 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Layton, State of Utah, on the 20th day of February, 1998.
II-10
<PAGE>
COMPUTERIZED THERMAL IMAGING, INC.
By /s/ David A. Packer
------------------------
David A. Packer, President
II-11
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ David B. Johnston* Chairman of the Board and February 27, 1998
- ------------------------------------ Chief Executive Officer
DAVID B. JOHNSTON
/s/ Richard V. Secord* Chief Operating Officer, Secretary February 27, 1998
- ------------------------------------ and Director
RICHARD V. SECORD
/s/ Brent M. Pratley, M.D.* Director February 27, 1998
- ------------------------------------
BRENT M. PRATLEY, M.D.
/s/ Milton R. Geilmann* Director February 27, 1998
- ------------------------------------
MILTON R. GEILMANN
/s/ Henry C. Aderholt* Director February 27, 1998
- ------------------------------------
HENRY C. ADERHOLT
/s/ David A. Packer President and Treasurer February 27, 1998
- ------------------------------------
DAVID A. PACKER
*By /s/ David A. Packer February 27, 1998
---------------------------------
David A. Packer,
Attorney in Fact
</TABLE>
II-12
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NO. IDENTIFICATION OF EXHIBIT NUMBERED PAGES
---------- ------------------------- -----------------
<S> <C> <C>
3(a)(1) Articles of Incorporation filed June 10, 1987.
3(b)(1) Amendment to Articles of Incorporation filed July 31, 1987.
3(c)(1) Amendment to Articles of Incorporation filed September 12, 1989.
3(d)(1) Amendment to Articles of Incorporation filed November 6, 1989.
3(e)(1) Amendment to Articles of Incorporation filed April 22, 1992.
3(f)(1) Amendment to Articles of Incorporation dated February 17, 1998.
3(g)(1) Bylaws, as Amended January 15, 1998.
4(1) Common Stock Specimen.
5(a)(1) Opinion Regarding Legality.
10(a)(1) PR Expense Funds Administration Agreement dated July 9, 1997
between the Company, Liberty Capital Group, Inc. and Manhattan
Financial Group.
10(b)(1) Financial Advisory Agreement dated October 29, 1997 between the
Company and Ambient Capital Group, Inc.
10(c)(1) Assumption of Liability Agreement dated April 17, 1996 between
the Company and Thermal Imaging, Inc.
10(d)(1) Investment Agreement dated January 20, 1998 between the Company
and Bristol Asset Management, LLC.
10(e)(1) Consulting Agreement dated November 5, 1997 between the Company
and Daron Dillia d/b/a Manhattan Financial Group.
10(f)(1) Consulting Agreement dated November 5, 1997 between the Company
and Willard Harpster.
10(g)(1) Subscription Agreement dated August 15, 1996 between the
Company and Cameron Capital Management Ltd. With respect to 6%
Convertible Debentures aggregating $550,000.
10(h)(1) Subscription Agreement dated March 13, 1997 between the Company
and Cameron Capital Management Ltd. With respect to 8%
Convertible Debentures aggregating $125,000.
10(i)(1) 12% Series A Senior Subordinated Convertible Redeemable
Debenture due April 30, 1998.
10(j)(1) Signatories to Dorex Release.
10(k)(1) Employment Agreement dated October 11, 1995 between the Company
and Kenneth M. Dodd.
10(l)(1) Letter Agreement dated June 12, 1995 between the Company and
Richard V. Secord Confirming terms for Personal Services
Agreement.
10(m)(1) Employment Agreement dated April 30, 1997 between the Company
and David A. Packer.
10(n)(1) Escrow Agreement dated November 20, 1997 between the Company,
Roger Sack and First Nebraska Trust Company.
10(o)(1) Golden Health Card Contract dated April 24, 1995 between TriSun
Medical Corporation and TriSun/CTI Asia, Ltd.
10(p)(1) Golden Health Plan Hospital Systems Integration Contract dated
April 24, 1995 between TriSun Medical Corporation
and TriSun/CTI Asia, Ltd.
10(q)(1) Computerized Thermal Imaging, Inc. Employee Stock Option
Agreement dated October 29, 1997 between the Company and David
B. Johnston.
10(r)(1) Employment Agreement dated October 29, 1997 between the Company
and David B. Johnston.
10(s)(1) Letter Agreement dated July 10, 1997 between the Company and
Liberty Capital Group, Inc.'s with respect to public relations.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NO. IDENTIFICATION OF EXHIBIT NUMBERED PAGES
---------- ------------------------- -----------------
<S> <C> <C>
10(t)(1) License Agreement dated June 8, 1996 between the Company and
Thermal Imaging, Inc.
10(u)(1) Participation Option Notices by various signatories to a
Private Placement Subscription Participation Option.
10(v)(1) Pledge Agreement dated September 11, 1997 between the Company
and Looper, Reed, Mark & McGraw Incorporated.
10(w)(1) Pledge Agreement dated September 18, 1997 between Thermal
Medical Imaging, Inc. and Looper, Reed, Mark & McGraw
Incorporated.
10(x)(1) Employment Agreement dated November 13, 1997 between the
Company and Richard V. Secord.
10(y)(1) Computerized Thermal Imaging, Inc. Employee Stock Option
Agreement dated January 15, 1998 between the Company and
Richard V. Secord.
10(z)(1) Computerized Thermal Imaging, Inc. Employee Stock Option
Agreement dated June 12, 1995 between the Company and Richard
V. Secord.
10(aa)(1) Computerized Thermal Imaging, Inc. Employee Stock Option
Agreement dated June 12, 1995 between the Company and Richard
V. Secord.
10(bb)(1) Commitment Letter Agreement dated March 6, 1997 between the
Company and Select Capital Advisors, Inc.
10(cc)(1) Services Agreement dated July 1997 between the Company and
Liberty Capital Group, Inc.
10(dd)(1) Stock Transfer Agreement dated January 28, 1997 between the
Company and Thermal Medical Imaging, Inc.
10(ee)(1) Amendment to Employee Stock Option Agreement dated January 26,
1998 between the Company and David Packer.
10(ff)(1) Amendment to Employee Stock Option Agreement dated January 22,
1998 between the Company and Kenneth M. Dodd.
10(gg)(1) Amendment to Employee Stock Option Agreement dated January 26,
1998 between the Company and Richard V. Secord.
10(hh)(1) Computerized Thermal Imaging, Inc. Consultant Stock Option
Agreement dated November 5, 1997 between the Company and
Willard Harpster.
10(ii)(1) Computerized Thermal Imaging, Inc. Consultant Stock Option
Agreement dated November 18, 1997 between the Company and Daron
Dillia D/b/a Manhattan Financial Group.
10(jj)(1) Computerized Thermal Imaging, Inc. Restricted Stock Purchase
Agreement dated July 9, 1997 between the Company and Manhattan
Financial Group.
10(kk)(1) Computerized Thermal Imaging, Inc. 1995 Stock Option Plan.
10(ll)(1) Computerized Thermal Imaging, Inc. 1997 Stock Option and
Restricted Stock Plan.
10(mm)(1) Offshore Securities Subscription Agreement relating to 12%
Series A Senior Subordinated Convertible Redeemable Debentures
of the Company.
10(nn)(1) 12% Series A Senior Subordinated Convertible Redeemable
Debentures of the Company.
10(oo)(1) Golden Health Telemedicine Contract dated April 24, 1995
between TriSun Medical Corporation - China and TriSun/CTI Asia,
Ltd.
10(pp)(1) Contract between TRW Systems Integration Group and Computerized
Thermal Imaging, Inc. dated October 29, 1996.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NO. IDENTIFICATION OF EXHIBIT NUMBERED PAGES
---------- ------------------------- -----------------
<S> <C> <C>
10(qq)(1) Clinical Trial Agreement dated September 16, 1997 between
Thermal Medical Imaging, Inc. and Health Research Association.
10(rr)(1) Contract between TRW Systems Integration Group and Thermal
Medical Imaging, Inc. dated June 19, 1997.
10(ss)(1) Clinical Trial Agreement dated November 7, 1997 between Thermal
Medical Imaging, Inc. and the University of Southern California.
11(1) Computation of Per Share Earnings.
15(1) See Exhibit 23(b).
21(1) Subsidiaries of the Registrant.
23(1) Consent of Counsel (included in Exhibit 5.1).
23(a)(1) Consent of Ham, Langston & Brezina, LLP.
23(b)(1) Consent of Randy Simpson, CPA P.C.
24(1) Powers of Attorney.
27(1) Financial Data Schedule.
</TABLE>
- --------------
(1) Filed herewith.
<PAGE>
EXHIBIT 3(a)
ARTICLES OF INCORPORATION
OF
BUSINESS HELPERS, INC.
I, the undersigned, have this day formed a corporation under and by virtue
of the laws of the State of Nevada and I do hereby state and certify:
FIRST: That the name of said corporation shall be Business Helpers, Inc.
SECOND: That the location of the principal office of the corporation,
within the State of Nevada shall be at 2205 Driscoll Drive, Reno, NV 89509.
It is hereby expressly provided that other office or offices for the
transaction of the business of the corporation may be maintained at such
place or places, either within or without the State of Nevada as may from
time to time be named and selected by its Board of Directors, or may be
provided in the By-laws of this corporation, and any and all business
transacted by Stockholders' or Directors' meeting of said corporation held
outside of the State of Nevada shall be as effectual for all purposes as
though said meetings were held at the principal office and place of business
of said corporation within the State of Nevada.
THIRD: That the nature of the business and the objects and purpose proposed
to be transaction, promoted or carried on by this corporation are as follows:
Generally to carry on any lawful business or businesses, and to engage in
any and every line of activity and business enterprise which the Board of
Directors may from time to time deem to be reasonably incident to any of the
objects and purposes above named, or to be beneficial or helpful to the interest
of this corporation, or which may be calculated, directly or indirectly, to
enhance the value of its property, and to carry on any and all of its business
and the other operations in any City, County, State, Province, territory or
place in the world; and to establish head and branch offices and places of
business wherever it may deem advisable; and to do any and all of the matters
and things hereinabove set forth to the extent that natural persons might or
could do, and in any part of the world, either as persons, agents, contractors,
trustees or otherwise, alone or in the company of others.
FOURTH: That the total authorized capital stock of the corporation shall
consist of 25,000 shares, with a per value of $1.00 all of which shall be
entitled to voting power.
FIFTH: The object and powers specified in any clause contained in these
Articles shall not in any wise limit or restrict by reference to, or inference
from the terms of any other clause of these Articles; and the foregoing
enumeration of powers, as specified, shall not be held to limit or restrict in
any manner the general powers of the corporation and the enjoyment thereof as
conferred by the laws of the State of Nevada upon corporations organized under
the general corporation of said State.
SIXTH: The members of the governing board shall be styled "Directors", and
the number of such directors shall be one (1).
1
<PAGE>
The Board of Directors, or the stockholders, at any regular meeting or
special meeting called for that purpose, by resolution may increase the number
of members of the Board of Directors as deemed advisable, provided that the
number may not be increased to more than nine (9).
SEVENTH: The name and post office address of the Director and Stockholder
is as follows:
John H. Convery
1340 Arnold Drive, Suite 120
Martinez, CA 94553
EIGHTH: The private property of the stockholders of this corporation shall
be, and is hereby made, forever exempt from the debts of the corporation.
NINTH: This corporation shall have perpetual existence.
TENTH: The corporation, through its By-laws, shall have power and authority
to make such provisions as may from time to time be deemed necessary or
advisable for the promotion of the interests of this corporation, and the
corporation may though its By-laws, confer such powers, privileges, authorities
and duties upon its Board of Directors as it may deem necessary or advisable
upon an executive committee or other committees; and this corporation and its
Board of Directors shall and may execute all rights, powers and privileges of
whatsoever kind or nature, whether specifically provided herein or not, which
may now or hereafter be conferred upon similar corporations organized under and
by virtue of the laws of the State of Nevada.
IN WITNESS WHEREOF, the undesigned incorporator has executed these Articles
of Incorporation this 1st day of December, 1986.
/s/ John H. Convery
-------------------
John H. Convery
State of California
County of Contra Costa
On this 1st day of December 1986, before me, Roy Gary Hallquist a notary
public personally appeared John Convery known to me to the person whose name
subscribed to the within instrument and acknowledged to me that he executed the
same.
Date: /s/ Roy Gary Hallquist
----------------------
Notary Public
[FILED IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA JUNE 10, 1987]
2
<PAGE>
EXHIBIT 3(b)
CERTIFICATE OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
BUSINESS HELPERS, INC.
The undersigned, President and Secretary of Business Helpers, Inc., does
hereby certify:
That the Board of Directors of said corporation at a meeting duly convened
and held on 8th July, 1987, adopted a resolution to amend the Articles as
follows:
Further passed that the Authorized Capital of the Corporation be
increased to 500,000,000 shares of Common Stock at $0.001 par value.
The number of shares of the corporation outstanding and entitled to vote on an
amendment to the Articles of Corporation is 100; that the said change and
amendment has been consented to and approved by a majority vote of the
stockholders holding at least a majority of each class of stock outstanding and
entitled to vote thereon.
Signed by /s/ John H. Convery
-----------------------
President/Secretary
State of California )
) SS
County of Contra Costa )
On this the 14th day of July, 1987, before me, Richard Olson the undersigned
Notary Public, personally appeared John H. Convery personally known to me to
be the person whose name is subscribed to the within instrument, and
acknowledged that he execute it.
WITNESS my hand and official seal.
/s/ Richard Olson
---------------------------
Notary's Signature
[FILED IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA JULY 31, 1987]
<PAGE>
EXHIBIT 3(c)
AMENDMENT TO ARTICLES OF INCORPORATION
OF
BUSINESS HELPERS, INC.
Pursuant to Nevada Code for Corporations, the undersigned Corporation
adopts the following Amended Articles of Incorporation which shall supersede
and replace Articles I of all previous Articles and Amendments.
ARTICLE I
NAME
The name of the Corporation is hereby changed to, and shall hereafter be
"DTI DOREX, LTD."
ARTICLE X
AMENDMENT ADOPTED
These Amended Articles of Incorporation were presented to the
shareholders of this Corporation for the purpose of amending and replacing
Article I of the Articles of Incorporation of this Corporation, at a special
meeting of shareholders held August 25, 1989. As of August 25, 1989, there
were 5,000,000 shares of the Corporation's common stock outstanding and
entitled to vote on the Amendment. The Amendment does not alter the amount
of authorized capital of Five-Hundred Million (500,000,000) shares with
$0.001 par value. There is only one class of shares, that being Common
voting stock.
The number of shares voted for and against the adoption of these amended
Articles of Incorporation to replace all previous Articles of Incorporation
and Amendments was:
4,370,000 SHS. For 0 Against
ATTEST: DTI DOREX, LTD.
(Formerly BUSINES HELPERS, INC.)
/s/ David H. Timms By /s/ D. Brian Johnston
- ------------------- --------------------------
Secretary President
STATE OF UTAH )
COUNTY OF SALT LAKE )
On this the 25th. day of August, 1989, before me, Edward Holt the undersigned
Notary Public, personally appeared D. Brian Johnston and David H. Timms
personally known to me to be the persons whose names are subscribed to the
within instrument, and acknowledged that they executed it.
Witness my hand and official seal.
/s/ Edward R. Holt
--------------------------
Notary Signature
[FILED IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA SEPTEMBER 12, 1989]
<PAGE>
EXHIBIT 3(d)
AMENDMENT TO ARTICLES OF INCORPORATION
OF
DTI DOREX, LTD.
Pursuant to Nevada Code for Corporations, the undersigned Corporation
adopts the following Amended Articles of Incorporation which shall supersede
and replace Articles I of all previous Articles and Amendments.
ARTICLE I
NAME
The name of the Corporation is hereby changed to, and shall hereafter be
"Computerized Thermal Imaging, Inc."
ARTICLE X
AMENDMENT ADOPTED
These Amended Articles of Incorporation were presented to the
shareholders of this Corporation for the purpose of amending and replacing
Article I of the Articles of Incorporation of this Corporation, at a special
meeting of shareholders held August 25, 1989. As of August 25, 1989, there
were 5,000,000 shares of the Corporation's common stock outstanding and
entitled to vote on the Amendment. The Amendment does not alter the amount
of authorized capital of Five-Hundred Million (500,000,000) shares with
$0.001 par value. There is only one class of shares, that being Common
voting stock.
The number of shares voted for and against the adoption of these amended
Articles of Incorporation to replace all previous Articles of Incorporation and
Amendments was:
4,370,000 For 0 Against
ATTEST: Computerized Thermal Imaging, Inc.
(Formerly DTI DOREX, LTD.)
/s/ David H. Timm By /s/ D. Brian Johnston
- ----------------- ------------------------
Secretary President
STATE OF UTAH )
COUNTY OF SALT LAKE )
On this the 3rd day of November, 1989, before me, Edward Holt the undersigned
Notary Public, personally appeared D. Brian Johnston and David Timms
personally known to me to be the persons whose names are subscribed to the
within instrument, and acknowledged that they executed it.
Witness my hand and official seal.
/s/ Edward Holt
----------------------
Notary Signature
[FILED IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA NOVEMBER 6, 1989]
<PAGE>
EXHIBIT 3(e)
AMENDMENT TO ARTICLES OF INCORPORATION
OF
COMPUTERIZED THERMAL IMAGING, INC.
Pursuant to Nevada Code for Corporation, the undersigned Corporation
adopts the following Amended Articles of Incorporation which shall supersede
and replace Articles IV of all previous Articles and Amendments.
ARTICLE IV
NAME
The authorized capital of the Corporation is hereby changed to, and
shall hereafter be:
The Corporation shall have authorized capital of one hundred million
(100,000,000) shares of common stock with $0.001 par value and three million
shares of preferred stock with a proper legend to be provided by the Board of
Directors when required.
AMENDMENT ADOPTED
These Amended Articles of Incorporation were presented to the
shareholders of this Corporation for the purpose of amending and replacing
Article IV of the Articles of Incorporation of this Corporation, at a special
meeting of shareholders held August 25, 1989. As of August 25, 1989, there
were 5,000,000 shares of the Corporation's common stock outstanding and
entitled to vote on the Amendment. This amendment was inadvertently omitted
on the previous filing of amendment to the Articles of Incorporation on the
name change of the Corporation.
The number of shares voted for and against the adoption of these amended
Articles of Incorporation to replace all previous Articles of Incorporation
and Amendments was:
4,370,000 shares for 0 Against
ATTEST: COMPUTERIZED THERMAL IMAGING, INC.
/s/ Fred H. Rodofly By: /s/ David B. Johnston
- -------------------- ------------------------
Secretary President
STATE OF UTAH )
: ss
COUNTY OF SALT LAKE )
On this the 1st day of April, 1992, before me, Robin J. Moffitt, the undersigned
Notary Public, personally appeared David B. Johnston and Fred Rodofly personally
known to me to be the persons whose names are subscribed to the within
instrument, and acknowledged that they executed it.
Witness my hand and official seal.
/s/ Robin J. Moffitt
-----------------------
Notary Signature
[FILED IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA APRIL 22, 1992]
<PAGE>
EXHIBIT 3(f)
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
COMPUTERIZED THERMAL IMAGING, INC.
* * * * *
PURSUANT to the provisions of Chapter 78 of the Nevada Domestic Corporation
Code, the undersigned corporation (the "Corporation") adopted the following
Articles of Amendment to its Articles of Incorporation:
ARTICLE ONE
The name of the Corporation is COMPUTERIZED THERMAL IMAGING, INC.
ARTICLE TWO
The following amendment to the Articles of Incorporation was adopted by
written consent of the stockholders of the Corporation dated February 4, 1998:
The Articles of Incorporation of the Corporation are amended by revising
Article IV thereof to read as follows:
ARTICLE IV
1. AUTHORIZED STOCK. The total number of shares of stock which the
Company shall have authority to issue is 103,000,000, consisting of
100,000,000 shares of common stock, par value $0.001 per share (the
"Common Stock"), and 3,000,000 shares of preferred stock (the
"Preferred Stock").
2. PREFERRED STOCK. The Preferred Stock may be issued from time to
time in one or more series. The Board of Directors is hereby
authorized to create and provide for the issuance of shares of
Preferred Stock in series and, by filing a certificate pursuant to the
applicable law of the State of Nevada (the "Preferred Stock
Designation"), to establish from time to time the number of shares to
be included in each such series, and to fix the par value,
designations, powers, preferences and rights of the shares of each
such series and the qualifications, limitations or restrictions
thereof. The authority of the Board of Directors with respect to each
series shall include, but not be limited to, determination of the
following:
(a) The designation of the series, which may be by
distinguishing number, letter or title.
(b) The number of shares of the series, which number the
Board of Directors may thereafter (except where otherwise
provided in the Preferred Stock Designation) increase or
decrease (but not below the number of shares thereof then
outstanding).
(c) The par value thereof.
(d) Whether dividends, if any, shall be cumulative or
noncumulative and the dividend rate of the series.
(e) The dates at which dividends, if any, shall be payable.
1
<PAGE>
(f) The redemption rights and price or prices, if any, for
shares of the series.
(g) The terms and amount of any sinking fund provided for
the purchase or redemption of shares of the series.
(h) The amounts payable on, and the preferences, if any, of
shares of the series in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the
affairs of the Company.
(i) Whether the shares of the series shall be convertible
into shares of any other class or series, or any other
security, of the Company or any other corporation, and, if
so, the specification of such other class or series of such
other security, the conversion price or prices or rate or
rates, any adjustments thereof, the date or dates at which
such shares shall be convertible and all other terms and
conditions upon which such conversion may be made.
(j) Restrictions on the issuance of shares of the same
series or of any other class or series.
(k) The voting rights, if any, of the holders of shares of
the series.
(l) Such other powers, preferences and relative,
participating, optional and other special rights, and the
qualifications, limitations and restrictions thereof as the
Board of Directors shall determine.
3. COMMON STOCK. The Common Stock shall be subject to the express
terms of the Preferred Stock and any series thereof. Each share of
Common Stock shall be equal to each other share of Common Stock. The
holders of shares of Common Stock shall be entitled to one vote for
each such share upon all questions presented to the stockholders.
4. VOTING RIGHTS. Except as may be provided in these Articles of
Incorporation or in a Preferred Stock Designation, or as may be
required by applicable law, the Common Stock shall have the exclusive
right to vote for the election of directors and for all other
purposes, and holders of shares of Preferred Stock shall not be
entitled to receive notice of any meeting of stockholders at which
they are not entitled to vote. At each election for directors every
stockholder entitled to vote at such election shall have the right to
vote, in person or by proxy, the number of shares owned by him for as
many persons as there are directors to be elected and for whose
election he has a right to vote. It is expressly prohibited for any
stockholder to cumulate his votes in any election of directors.
5. DENIAL OF PREEMPTIVE RIGHTS. No stockholder of the Company shall
by reason of his holding shares of any class have any preemptive or
preferential right to purchase or subscribe to any shares of any class
of the Company now or hereafter to be authorized or any notes,
debentures, bonds, or other securities convertible into or carrying
options or warrants to purchase shares of any class, now or hereafter
to be authorized, whether or not the issuance of any such shares, or
such notes, debentures, bonds or other securities would adversely
affect dividend or voting rights of such stockholder, other than such
rights, if any, as the Board of Directors in its discretion may fix;
and the Board of Directors may issue shares of any class of the
Company, or any notes, debentures, bonds, or other securities
convertible into or carrying options or warrants to purchase shares of
any class, without offering any such shares of any class, either in
whole or in part, to the existing stockholders of any class.
2
<PAGE>
ARTICLE THREE
The number of shares of the Corporation outstanding at the time of such
adoption was 43,862,734 shares with $0.001 par value.
ARTICLE FOUR
The holders of 22,383,631 shares, constituting a majority of the shares of
stock outstanding and entitled to vote on this amendment, have signed a written
consent adopting this amendment.
DATED: February 17, 1998
By: /s/ David A. Packer
-------------------------
David A. Packer
President
By: /s/ Richard V. Secord
-------------------------
Richard V. Secord
Secretary
THE STATE OF UTAH Section
Section
COUNTY OF DAVIS Section
BEFORE ME, the undersigned authority, on this day personally appeared
David A. Packer, the President of Computerized Thermal Imaging, Inc., known to
me to be the person whose name is subscribed to the foregoing instrument and
acknowledged to me that he executed the same for the purposes therein expressed
and in the capacity therein stated.
Given under my hand and seal of office this the 17th day of February, 1998.
/s/ L. Terry Hilton
-------------------------
Notary Public
3
<PAGE>
CORPORATE BYLAWS OF
COMPUTERIZED THERMAL IMAGING, INC.
(A NEVADA CORPORATION)
<PAGE>
TABLE OF CONTENTS
SECTION SUBJECT MATTER PAGE
ARTICLE I.
NAME AND OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 NAME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 REGISTERED OFFICE AND AGENT. . . . . . . . . . . . . . . . . . . . 1
(a) REGISTERED OFFICE. . . . . . . . . . . . . . . . . . . . . . 1
(b) REGISTERED AGENT . . . . . . . . . . . . . . . . . . . . . . 1
1.3 OTHER OFFICES. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II.
SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 PLACE OF MEETINGS. . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 ANNUAL MEETINGS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 SPECIAL MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.4 NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5 VOTING LIST. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.6 QUORUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.7 REQUISITE VOTE . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.8 WITHDRAWAL OF QUORUM . . . . . . . . . . . . . . . . . . . . . . . 2
2.9 VOTING AT MEETING. . . . . . . . . . . . . . . . . . . . . . . . . 2
(a) VOTING POWER . . . . . . . . . . . . . . . . . . . . . . . . 2
(b) EXERCISE OF VOTING POWER; PROXIES. . . . . . . . . . . . . . 2
(c) ELECTION OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 3
2.10 RECORD DATE FOR MEETINGS; CLOSING TRANSFER RECORDS . . . . . . . . 3
2.11 ACTION WITHOUT MEETINGS. . . . . . . . . . . . . . . . . . . . . . 3
2.12 RECORD DATE FOR ACTION WITHOUT MEETINGS. . . . . . . . . . . . . . 3
2.13 PREEMPTIVE RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III.
DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 MANAGEMENT POWERS. . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 NUMBER AND QUALIFICATION . . . . . . . . . . . . . . . . . . . . . 4
3.3 ELECTION AND TERM. . . . . . . . . . . . . . . . . . . . . . . . . 4
3.4 VOTING ON DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . 4
3.5 VACANCIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.6 NEW DIRECTORSHIPS. . . . . . . . . . . . . . . . . . . . . . . . . 4
3.7 REMOVAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.8 MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) PLACE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) ANNUAL MEETING . . . . . . . . . . . . . . . . . . . . . . . 4
(c) REGULAR MEETINGS . . . . . . . . . . . . . . . . . . . . . . 5
(d) SPECIAL MEETINGS . . . . . . . . . . . . . . . . . . . . . . 5
(e) NOTICE AND WAIVER OF NOTICE. . . . . . . . . . . . . . . . . 5
(f) QUORUM . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(g) REQUISITE VOTE . . . . . . . . . . . . . . . . . . . . . . . 5
3.9 ACTION WITHOUT MEETINGS. . . . . . . . . . . . . . . . . . . . . . 5
3.10 COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(a) DESIGNATION AND APPOINTMENT. . . . . . . . . . . . . . . . . 5
(b) MEMBERS; ALTERNATE MEMBERS; TERMS. . . . . . . . . . . . . . 5
(c) AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . . . 5
(d) RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(e) CHANGE IN NUMBER . . . . . . . . . . . . . . . . . . . . . . 6
(f) VACANCIES. . . . . . . . . . . . . . . . . . . . . . . . . . 6
i
<PAGE>
(g) REMOVAL. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(h) MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(i) QUORUM; REQUISITE VOTE . . . . . . . . . . . . . . . . . . . 6
(j) COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . 6
(k) ACTION WITHOUT MEETINGS. . . . . . . . . . . . . . . . . . . 6
(l) RESPONSIBILITY . . . . . . . . . . . . . . . . . . . . . . . 6
3.11 COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.12 MAINTENANCE OF RECORDS . . . . . . . . . . . . . . . . . . . . . . 6
3.13 INTERESTED DIRECTORS AND OFFICERS. . . . . . . . . . . . . . . . . 6
ARTICLE IV.
NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.1 METHOD OF NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.2 WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE V.
OFFICERS AND AGENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.1 DESIGNATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.2 ELECTION OF OFFICERS . . . . . . . . . . . . . . . . . . . . . . . 7
5.3 QUALIFICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.4 TERM OF OFFICE . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.5 AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.6 REMOVAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.7 VACANCIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.8 COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.9 CHAIRMAN OF THE BOARD. . . . . . . . . . . . . . . . . . . . . . . 8
5.10 CHIEF OPERATING OFFICER. . . . . . . . . . . . . . . . . . . . . . 8
5.11 PRESIDENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.12 VICE PRESIDENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.13 SECRETARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.14 ASSISTANT SECRETARIES. . . . . . . . . . . . . . . . . . . . . . . 9
5.15 TREASURER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ASSISTANT TREASURERS . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE VI.
INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.1 MANDATORY INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . 9
6.2 DETERMINATION OF INDEMNIFICATION . . . . . . . . . . . . . . . . .10
6.3 ADVANCE OF EXPENSES. . . . . . . . . . . . . . . . . . . . . . . .10
6.4 PERMISSIVE INDEMNIFICATION . . . . . . . . . . . . . . . . . . . .10
6.5 NATURE OF INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . .10
6.6 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
6.7 NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
ARTICLE VII.
STOCK CERTIFICATES AND TRANSFER REGULATIONS. . . . . . . . . . . . . . . . . .11
7.1 DESCRIPTION OF CERTIFICATES. . . . . . . . . . . . . . . . . . . .11
7.2 DELIVERY . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
7.3 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
7.4 ISSUANCE OF CERTIFICATES . . . . . . . . . . . . . . . . . . . . .11
7.5 PAYMENT FOR SHARES . . . . . . . . . . . . . . . . . . . . . . . .11
(a) CONSIDERATION. . . . . . . . . . . . . . . . . . . . . . . .12
(b) VALUATION. . . . . . . . . . . . . . . . . . . . . . . . . .12
(c) EFFECT . . . . . . . . . . . . . . . . . . . . . . . . . . .12
(d) ALLOCATION OF CONSIDERATION. . . . . . . . . . . . . . . . .12
7.6 SUBSCRIPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .12
7.7 CLOSING OF TRANSFER RECORDS; RECORD DATE FOR ACTION WITH MEETINGS.12
7.8 REGISTERED OWNERS. . . . . . . . . . . . . . . . . . . . . . . . .12
7.9 LOST, STOLEN OR DESTROYED CERTIFICATES . . . . . . . . . . . . . .12
ii
<PAGE>
(a) PROOF OF LOSS. . . . . . . . . . . . . . . . . . . . . . . .13
(b) TIMELY REQUEST . . . . . . . . . . . . . . . . . . . . . . .13
(c) BOND . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
(d) OTHER REQUIREMENTS . . . . . . . . . . . . . . . . . . . . .13
7.10 REGISTRATION OF TRANSFERS. . . . . . . . . . . . . . . . . . . . .13
(a) ENDORSEMENT. . . . . . . . . . . . . . . . . . . . . . . . .13
(b) GUARANTY AND EFFECTIVENESS OF SIGNATURE. . . . . . . . . . .13
(c) ADVERSE CLAIMS . . . . . . . . . . . . . . . . . . . . . . .13
(d) COLLECTION OF TAXES. . . . . . . . . . . . . . . . . . . . .13
(e) ADDITIONAL REQUIREMENTS SATISFIED. . . . . . . . . . . . . .13
7.11 RESTRICTIONS ON TRANSFER AND LEGENDS ON CERTIFICATES . . . . . . .13
(a) SHARES IN CLASSES OR SERIES. . . . . . . . . . . . . . . . .13
(b) RESTRICTION ON TRANSFER. . . . . . . . . . . . . . . . . . .14
(c) PREEMPTIVE RIGHTS. . . . . . . . . . . . . . . . . . . . . .14
(d) UNREGISTERED SECURITIES. . . . . . . . . . . . . . . . . . .14
ARTICLE VIII.
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
8.1 DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .14
(a) DECLARATION AND PAYMENT. . . . . . . . . . . . . . . . . . .14
(b) RECORD DATE. . . . . . . . . . . . . . . . . . . . . . . . .15
8.2 RESERVES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
8.3 BOOKS AND RECORDS. . . . . . . . . . . . . . . . . . . . . . . . .15
8.4 ANNUAL STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . .15
8.5 CONTRACTS AND NEGOTIABLE INSTRUMENTS . . . . . . . . . . . . . . .15
8.6 FISCAL YEAR. . . . . . . . . . . . . . . . . . . . . . . . . . . .15
8.7 CORPORATE SEAL . . . . . . . . . . . . . . . . . . . . . . . . . .15
8.8 RESIGNATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .15
8.9 AMENDMENT OF BYLAWS. . . . . . . . . . . . . . . . . . . . . . . .15
8.10 CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . .16
8.11 TELEPHONE MEETINGS . . . . . . . . . . . . . . . . . . . . . . . .16
8.12 TABLE OF CONTENTS; CAPTIONS. . . . . . . . . . . . . . . . . . . .16
iii
<PAGE>
BYLAWS
OF
COMPUTERIZED THERMAL IMAGING, INC.
(A NEVADA CORPORATION)
ARTICLE I.
NAME AND OFFICES
1.1 NAME. The name of the Corporation is Computerized Thermal Imaging,
Inc., hereinafter referred to as the "Corporation."
1.2 REGISTERED OFFICE AND AGENT. The Corporation shall establish,
designate and continuously maintain a registered office and agent in the State
of Nevada, subject to the following provisions:
(a) REGISTERED OFFICE. The Corporation shall establish and
continuously maintain in the State of Nevada a registered office which may
be, but need not be, the same as its place of business.
(b) REGISTERED AGENT. The Corporation shall designate and
continuously maintain in the State of Nevada a registered agent, which
agent may be either an individual resident of the State of Nevada whose
business office is identical with such registered office, or a domestic
corporation or a foreign corporation authorized to transact business in the
State of Nevada, having a business office identical with such registered
office.
(c) CHANGE OF REGISTERED OFFICE OR AGENT. The Corporation may change
its registered office or change its registered agent, or both, upon the
filing in the Office of the Secretary of State of Nevada of a statement
setting forth the facts required by law, and executed for the Corporation
by its President or a Vice President.
1.3 OTHER OFFICES. The Corporation may also have offices at such other
places within and without the State of Nevada as the Board of Directors may,
from time to time, determine the business of the Corporation may require.
ARTICLE II.
SHAREHOLDERS
2.1 PLACE OF MEETINGS. Each meeting of the shareholders of the
Corporation is to be held at the principal offices of the Corporation or at such
other place, either within or without the State of Nevada, as may be specified
in the notice of the meeting or in a duly executed waiver of notice thereof.
2.2 ANNUAL MEETINGS. The annual meeting of the shareholders for the
election of Directors and for the transaction of such other business as may
properly come before the meeting shall be held within one hundred twenty (120)
days after the close of the fiscal year of the Corporation on a day during such
period to be selected by the Board of Directors; provided, however, that the
failure to hold the annual meeting within the designated period of time or on
the designated date shall not work a forfeiture or dissolution of the
Corporation.
2.3 SPECIAL MEETINGS. Special meetings of the shareholders, for any
purpose or purposes, may be called by the Chairman of the Board or the
President. Special meetings of the shareholders shall be called by the
President or Secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of shareholders owning ten percent (10%)
of the capital stock of the Corporation issued and outstanding and entitled to
vote. Such request shall state the purpose or purposes of the proposed meeting
and the business to be transacted at any such special meeting of shareholders,
and shall be limited to the purposes stated in the notice therefor.
2.4 NOTICE. Written or printed notice of the meeting stating the place,
day and hour of the meeting, and in the case of a special meeting, the purpose
or purposes for which the meeting is called, shall be delivered not less than
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ten (10) nor more than sixty (60) days before the date of the meeting, either
personally or by mail, by or at the direction of the Chairman of the Board or
the President, the Secretary or a majority of the members of the Board of
Directors calling the meeting, to each shareholder entitled to vote at such
meeting as determined in accordance with the provisions of Section 2.10 hereof.
If mailed, such notice shall be deemed to be delivered when deposited in the
United States Mail, with postage thereon prepaid, addressed to the shareholder
entitled thereto at his address as it appears on the share transfer records of
the Corporation.
2.5 VOTING LIST. The officer or agent having charge and custody of the
share transfer records of the Corporation, shall prepare, at least ten (10) days
before each meeting of shareholders, a complete list of the shareholders
entitled to vote at such meeting, arranged in alphabetical order and containing
the address and number of voting shares held by each, which list shall be kept
on file at the registered office or principal place of business of the
Corporation for a period of not less than ten (10) days prior to such meeting
and shall be subject to inspection by any shareholder at any time during usual
business hours. Such list shall also be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any shareholder
during the entire time of the meeting. The original share ledger or transfer
book, or a duplicate thereof, shall be prima facie evidence as to identity of
the shareholders entitled to examine such list or share ledger or transfer book
and to vote at any such meeting of the shareholders.
2.6 QUORUM. The holders of a majority of the shares of the capital stock
issued and outstanding and entitled to vote thereat, represented in person or by
proxy, shall be requisite and shall constitute a quorum at all meetings of the
shareholders for the transaction of business except as otherwise provided by
statute or by the Articles of Incorporation or by these Bylaws. The
shareholders represented in person or by proxy at a meeting of the shareholders
at which a quorum is not present may adjourn the meeting until such time and to
such place as may be determined by a vote of the holders of a majority of the
shares represented in person or by proxy at that meeting. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified.
2.7 REQUISITE VOTE. If a quorum is present at any meeting, the vote of
the holders of a majority of the shares of capital stock having voting power,
present in person or represented by proxy, shall determine any question brought
before such meeting, unless the question is one upon which, by express provision
of the Articles of Incorporation or of these Bylaws, a different vote shall be
required or permitted, in which case such express provision shall govern and
control the determination of such question.
2.8 WITHDRAWAL OF QUORUM. If a quorum is present at the time of
commencement of any meeting, the shareholders present at such duly convened
meeting may continue to transact any business which may properly come before
said meeting until adjournment thereof, notwithstanding the withdrawal from such
meeting of sufficient holders of the shares of capital stock entitled to vote
thereat to leave less than a quorum remaining.
2.9 VOTING AT MEETING. Voting at meetings of shareholders shall be
conducted and exercised subject to the following procedures and regulations:
a. VOTING POWER. In the exercise of voting power with respect
to each matter properly submitted to a vote at any meeting of
shareholders, each shareholder of the capital stock of the Corporation
having voting power shall be entitled to one (1) vote for each such
share held in his name on the records of the Corporation, except to
the extent otherwise specified by the Articles of Incorporation.
b. EXERCISE OF VOTING POWER; PROXIES. At any meeting of the
shareholders, every holder of the shares of capital stock of the
Corporation entitled to vote at such meeting may vote either in
person, or by proxy executed in writing by such shareholder. A
telegram, telex, cablegram, or similar transmission by a shareholder,
or a photographic, photostatic, facsimile, or similar reproduction of
a writing executed by a shareholder, shall be treated as an execution
in writing. No proxy shall be valid after the expiration of eleven
(11) months from the date of its execution, unless otherwise stated
therein. A proxy shall be revocable unless expressly designated
therein as irrevocable and coupled with an interest. Proxies coupled
with an interest include the appointment as proxy of: (a) a pledgee;
(b) a person who purchased or agreed to purchase or owns or holds an
option to purchase the shares voted; (c) a creditor of the Corporation
who extended its credit
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under terms requiring the appointment; (d) an employee of the
Corporation whose employment contract requires the appointment; or
(e) a party to a voting agreement created pursuant to the Nevada
Domestic Corporation Code, as amended. Each proxy shall be filed
with the Secretary of the Corporation prior to or at the time of the
meeting. Voting for directors shall be in accordance with the
provisions of paragraph (c) below of this Section 2.9. Any vote may be
taken by voice vote or by show of hands unless someone entitled to
vote at the meeting objects, in which case written ballots shall be
used.
c. ELECTION OF DIRECTORS. In all elections of Directors
cumulative voting shall be prohibited.
2.10 RECORD DATE FOR MEETINGS; CLOSING TRANSFER RECORDS. As more
specifically provided in Article 7, Section 7.7 hereof, the Board of Directors
may fix in advance a record date for the purpose of determining shareholders
entitled to notice of or to vote at a meeting of shareholders, such record date
to be not less than ten (10) nor more than sixty (60) days prior to such
meeting, or the Board of Directors may close the share transfer records for such
purpose for a period of not less than ten (10) nor more than sixty (60) days
prior to such meeting. In the absence of any action by the Board of Directors,
the date upon which the notice of the meeting is mailed shall be deemed the
record date.
2.11 ACTION WITHOUT MEETINGS. Any action permitted or required to be taken
at a meeting of the shareholders of the Corporation may be taken without a
meeting, without prior notice, and without a vote, if a consent or consents in
writing, setting forth the actions so taken, shall be signed by shareholders
entitled to vote with respect to the subject matter thereof and holding at least
a majority of the voting power, except that if a different proportion of voting
power is required for such an action at a meeting then that proportion of
written consents is required. In no instance where action is authorized by
written consent need a meeting of shareholders be called or notice given. In
order to be effective, the written consent(s) must be filed with the minutes of
the proceedings of the shareholders within sixty (60) days after the date of the
earliest dated consent.
2.12 RECORD DATE FOR ACTION WITHOUT MEETINGS. Unless a record date shall
have previously been fixed or determined by the Board of Directors as provided
in Section 2.10 hereof, whenever action by shareholders is proposed to be taken
by consent in writing without a meeting of shareholders, the Board of Directors
may fix a record date for the purpose of determining shareholders entitled to
consent to that action, which record date shall not precede, and shall not be
more than ten (10) days after, the date upon which the resolution fixing the
record date is adopted by the Board of Directors. If no record date has been
fixed by the Board of Directors and the prior action of the Board of Directors
is not required by statute or the Articles of Incorporation, the record date for
determining shareholders entitled to consent to action in writing without a
meeting shall be the first date on which a signed written consent setting forth
the action taken or proposed to be taken is delivered to the Corporation by
delivery to its registered office, to its principal place of business, or to an
officer or agent of the Corporation having custody of the books in which
proceedings of meetings of shareholders are recorded. Delivery shall be by hand
or by certified or registered mail, return receipt requested. Delivery to the
Corporation's principal place of business shall be addressed to the President or
chief executive officer of the Corporation. If no record date shall have been
fixed by the Board of Directors and prior action of the Board of Directors is
required by statute, the record date for determining shareholders entitled to
consent to action in writing without a meeting shall be at the close of business
on the date in which the Board of Directors adopts a resolution taking such
prior action.
2.13 PREEMPTIVE RIGHTS. Unless otherwise determined by the Board of
Directors in the manner provided under the Nevada Domestic Corporation Code, as
amended, no holder of shares of capital stock of the Corporation shall, as such
holder, have any right to purchase, acquire, or subscribe for any capital stock
or other securities of any class which the Corporation may issue or sell,
whether convertible into or exchangeable for any capital stock of the
Corporation of any class or classes, whether issued out of unissued shares
authorized by the Articles of Incorporation, as amended, or out of shares of
capital stock of the Corporation acquired by it after the issue thereof, whether
any such securities have attached or appurtenant thereto warrants, options or
other instruments which entitle the holders thereof to purchase, acquire or
subscribe for shares of capital stock of any class or classes, or otherwise.
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ARTICLE III.
DIRECTORS
3.1 MANAGEMENT POWERS. The powers of the Corporation shall be exercised
by or under the authority of, and the business and affairs of the Corporation
shall be managed under the direction of, its Board of Directors which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Articles of Incorporation or by these
Bylaws directed or required to be exercised or done by the shareholders.
3.2 NUMBER AND QUALIFICATION. The Board of Directors shall consist of not
less than one (1) member nor more than seven (7) members. Directors need not be
residents of the State of Nevada nor shareholders of the Corporation. Each
Director shall qualify as a Director following election as such by agreeing to
act or acting in such capacity. The number of Directors may be increased or
decreased from time to time by resolution of the Board of Directors or
shareholders without the necessity of a written amendment to the Bylaws of the
Corporation; provided, however, no decrease shall have the effect of shortening
the term of any incumbent Director.
3.3 ELECTION AND TERM. Members of the Board of Directors shall hold
office until the annual meeting of shareholders and until their successors shall
have been elected and qualified. At the annual meeting of the shareholders, the
shareholders entitled to vote in an election of Directors shall elect Directors
to hold office until the next succeeding annual meeting. Each Director shall
hold office for the term for which he is elected, and until his successor shall
be elected and qualified or until his death, resignation or removal, if earlier.
3.4 VOTING ON DIRECTORS. Directors shall be elected by the vote of the
holders of a plurality of the shares entitled to vote in the election of
Directors and represented in person or by proxy at a meeting of shareholders at
which a quorum is present. Unless otherwise expressly provided by the Articles
of Incorporation, as amended, of the Corporation, cumulative voting in the
election of Directors is expressly prohibited.
3.5 VACANCIES. Any vacancy occurring in the Board of Directors may be
filled by the affirmative vote of a majority of the remaining Directors then in
office, though less than a quorum of the Board of Directors. For purposes of
these Bylaws, "vacancy" shall mean an unfilled directorship arising by virtue of
the death, resignation, or removal of a Director theretofore duly elected to
serve in such capacity in accordance with the relevant provisions of these
Bylaws. A Director elected to fill a vacancy shall be elected for the unexpired
portion of the term of his predecessor in office.
3.6 NEW DIRECTORSHIPS. Any directorship to be filled by reason of an
increase in the number of Directors actually serving as such shall be filled by
election at an annual meeting of the shareholders or at a special meeting of
shareholders called for that purpose, or by the Board of Directors for a term of
office continuing only until the next election of one or more Directors by the
shareholders, provided that the Board of Directors may not fill more than two
(2) such directorships during the period between any two (2) successive annual
meetings of shareholders.
3.7 REMOVAL. Any Director may be removed either for or without cause at
any duly convened special or annual meeting of shareholders, by the affirmative
vote of a majority in number of shares of the shareholders present in person or
by proxy at any meeting and entitled to vote for the election of such Director,
provided notice of intention to act upon such matter shall have been given in
the notice calling such meeting.
3.8 MEETINGS. The meetings of the Board of Directors shall be held and
conducted subject to the following regulations:
(a) PLACE. Meetings of the Board of Directors of the Corporation,
annual, regular or special, are to be held at the principal office or place
of business of the Corporation, or such other place, either within or
without the State of Nevada, as may be specified in the respective notices,
or waivers of notice, thereof.
(b) ANNUAL MEETING. The Board of Directors shall meet each year
immediately after the annual meeting of the shareholders, at the place
where such meeting of the shareholders has been held (either within or
without the State of Nevada), for the purpose of organization, election of
officers, and consideration of any
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other business that may properly be brought before the meeting. No notice
of any kind to either old or new members of the Board of Directors for such
annual meeting shall be required.
(c) REGULAR MEETINGS. Regular meetings of the Board of Directors may
be held without notice at such time and at such place or places as shall
from time to time be determined and designated by the Board.
(d) SPECIAL MEETINGS. Special meetings of the Board of Directors may
be called by the Chairman of the Board or the President of the Corporation
on notice of two (2) days to each Director either personally or by mail or
by telegram; special meetings shall be called by the Chairman of the Board
or the President or Secretary in like manner and on like notice on the
written request of two (2) Directors.
(e) NOTICE AND WAIVER OF NOTICE. Attendance of a Director at any
meeting shall constitute a waiver of notice of such meeting, except where a
Director attends for the express purpose of objecting to the transaction of
any business because the meeting is not lawfully called or convened.
Neither the business to be transacted at, nor the purpose of, any regular
meeting of the Board of Directors need be specified in the notice or waiver
of notice of such meeting.
(f) QUORUM. At all meetings of the Board of Directors, a majority of
the number of Directors fixed by these Bylaws shall constitute a quorum for
the transaction of business, unless a greater number is required by law or
by the Articles of Incorporation. If a quorum shall not be present at any
meeting of Directors, the Directors present thereat may adjourn the
meeting, from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
(g) REQUISITE VOTE. In the exercise of voting power with respect to
each matter properly submitted to a vote at any meeting of the Board of
Directors, each Director present at such meeting shall have one (1) vote.
The act of a majority of the Directors present at any meeting at which a
quorum is present shall be the act of the Board of Directors.
3.9 ACTION WITHOUT MEETINGS. Unless otherwise restricted by the Articles
of Incorporation or these Bylaws, any action required or permitted by law to be
taken at any meetings of the Board of Directors, or any committee thereof, may
be taken without a meeting, if prior to such action a written consent thereto is
signed by all members of the Board or of such committee, as the case may be, and
such written consent is filed in the minutes or proceedings of the Board of
Directors or committee.
3.10 COMMITTEES. Committees designated and appointed by the Board of
Directors shall function subject to and in accordance with the following
regulations and procedures:
(a) DESIGNATION AND APPOINTMENT. The Board of Directors may, by
resolution adopted by a majority of the entire Board, designate and appoint
one or more committees under such name or names and for such purpose or
function as may be deemed appropriate.
(b) MEMBERS; ALTERNATE MEMBERS; TERMS. Each Committee thus
designated and appointed shall consist of two or more of the Directors of
the Corporation, one of whom, in the case of the Executive Committee, shall
be the President. The Board of Directors may designate one or more of its
members as alternate members of any committee, who may, subject to any
limitations imposed by the entire Board, replace absent or disqualified
members at any meeting of that committee. The members or alternate members
of any such committee shall serve at the pleasure of and subject to the
discretion of the Board of Directors.
(c) AUTHORITY. Each Committee, to the extent provided in the
resolution of the Board creating same, shall have and may exercise such of
the powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation as the Board of Directors may
direct and delegate, except, however, those matters which are required by
statute to be reserved unto or acted upon by the entire Board of Directors.
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(d) RECORDS. Each such Committee shall keep and maintain regular
records or minutes of its meetings and report the same to the Board of
Directors when required.
(e) CHANGE IN NUMBER. The number of members or alternate members of
any Committee appointed by the Board of Directors, as herein provided, may
be increased or decreased (but not below two) from time to time by
appropriate resolution adopted by a majority of the entire Board of
Directors.
(f) VACANCIES. Vacancies in the membership of any committee
designated and appointed hereunder shall be filled by the Board of
Directors, at a regular or special meeting of the Board of Directors, in a
manner consistent with the provisions of this Section 3.10.
(g) REMOVAL. Any member or alternate member of any committee
appointed hereunder may be removed by the Board of Directors by the
affirmative vote of a majority of the entire Board, whenever in its
judgment the best interests of the Corporation will be served thereby.
(h) MEETINGS. The time, place and notice (if any) of committee
meetings shall be determined by the members of such committee.
(i) QUORUM; REQUISITE VOTE. At meetings of any committee appointed
hereunder, a majority of the number of members designated by the Board of
Directors shall constitute a quorum for the transaction of business. The
act of a majority of the members and alternate members of the committee
present at any meeting at which a quorum is present shall be the act of
such committee, except as otherwise specifically provided by statute or by
the Articles of Incorporation or by these Bylaws. If a quorum is not
present at a meeting of such committee, the members of such committee
present may adjourn the meeting from time to time, without notice other
than an announcement at the meeting, until a quorum is present.
(j) COMPENSATION. Appropriate compensation for members and alternate
members of any committee appointed pursuant to the authority hereof may be
authorized by the action of a majority of the entire Board of Directors
pursuant to the provisions of Section 3.11 hereof.
(k) ACTION WITHOUT MEETINGS. Any action required or permitted to be
taken at a meeting of any committee may be taken without a meeting if a
consent in writing, setting forth the action so taken, is signed by all
members of such committee. Such consent shall have the same force and
effect as a unanimous vote at a meeting. The signed consent, or a signed
copy, shall become a part of the record of such committee.
(l) RESPONSIBILITY. Notwithstanding any provision to the contrary
herein, the designation and appointment of a committee and the delegation
of authority to it shall not operate to relieve the Board of Directors, or
any member or alternate member thereof, of any responsibility imposed upon
it or him by law.
3.11 COMPENSATION. By appropriate resolution of the Board of Directors, the
Directors may be reimbursed or advanced cash for expenses, if any, relating to
attendance at meetings of the Board of Directors and may be paid a fix sum (as
determined from time to time by the vote of a majority of the directors then in
office) for attendance at each meeting of the Board of Directors or a stated
salary as Director. No such payment shall preclude any Director from serving
the Corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may, by appropriate resolution of the
Board of Directors, be allowed similar reimbursement of expenses and
compensation for attending committee meetings.
3.12 MAINTENANCE OF RECORDS. The Directors may keep the books and records
of the Corporation, except such as are required by law to be kept within the
State, outside the State of Nevada or at such place or places as they may, from
time to time, determine.
3.13 INTERESTED DIRECTORS AND OFFICERS. No contract or other transaction
between the Corporation and one or more of its Directors or officers, or between
the Corporation and any firm of which one or more of its Directors or officers
are members or employees, or in which they are interested, or between the
Corporation and any corporation or association of which one or more of its
Directors or officers are shareholders, members, directors, officers, or
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employees, or in which they are interested, shall be void or voidable solely
because of the presence of such Director or Directors or officer or officers at
the meeting of the Board of Directors of the Corporation, which acts upon, or in
reference to, such contract, or transaction, or solely because his or their
votes are counted for such purpose, if (a) the material facts of such
relationship or interest shall be disclosed or known to the Board of Directors
and the Board of Directors shall, nevertheless in good faith, authorize, approve
and ratify such contract or transaction by a vote of a majority of the Directors
present, such interested Director or Directors to be counted in determining
whether a quorum is present, but not to be counted in calculating the majority
of such quorum necessary to carry such vote; (b) the material facts of such
relationship or interest as to the contract or transaction are disclosed or are
known to the shareholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by the vote of the
shareholders; or (c) the contract or transaction is fair to the Corporation as
of the time it is authorized, approved or ratified by the Board of Directors, a
committee thereof or the shareholders. The provisions of this Section shall not
be construed to invalidate any contract or other transaction which would
otherwise be valid under the common and statutory law applicable thereto.
ARTICLE IV.
NOTICES
4.1 METHOD OF NOTICE. Whenever under the provisions of the Nevada
Domestic Corporation Code, the Articles of Incorporation, or these Bylaws notice
is required to be given to any Director or shareholder, it shall not be
construed to mean personal notice, but such notice may be given in writing, by
mail, addressed to such Director or shareholder, at his address as it appears on
the records of the Corporation, with postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be deposited in the
United States Mail. Notice to Directors or shareholders may also be given by
telegram.
4.2 WAIVER. Whenever any notice is required to be given under the
provisions of the Nevada Domestic Corporation Code, the Articles of
Incorporation, or these Bylaws, a waiver thereof in writing signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice. Attendance by
such person or persons, whether in person or by proxy, at any meeting requiring
notice shall constitute a waiver of notice of such meeting, except as provided
in Section 3.8(e) hereof.
ARTICLE V.
OFFICERS AND AGENTS
5.1 DESIGNATION. The officers of the Corporation shall be chosen by the
Board of Directors and shall consist of the offices of:
(a) Chief Executive Officer, Chief Operating Officer, President and
Secretary; and
(b) Such other offices and officers (including a Chairman of the
Board, one or more Vice Presidents and a Treasurer) and assistant officers
and agents as the Board of Directors shall deem necessary.
5.2 ELECTION OF OFFICERS. Each officer designated in Section 5.1(a)
hereof shall be elected by the Board of Directors on the expiration of the term
of office of such officer, as herein provided, or whenever a vacancy exists in
such office. Each officer or agent designated in Section 5.1(b) above may be
elected by the Board at any meeting.
5.3 QUALIFICATIONS. No officer or agent need be a shareholder of the
Corporation or a resident of Nevada. No officer or agent is required to be a
Director, except the Chairman of the Board. Any two or more offices may be held
by the same person.
5.4 TERM OF OFFICE. Unless otherwise specified by the Board of Directors
at the time of election or appointment, or by the express provisions of an
employment contract approved by the Board, the term of office of each officer
and each agent shall expire on the date of the first meeting of Directors next
following the annual meeting of shareholders each year. Each such officer or
agent shall serve until the expiration of the term of his office or, if earlier,
his death, resignation or removal.
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5.5 AUTHORITY. Officers and agents shall have such authority and perform
such duties in the management of the Corporation as are provided in these Bylaws
or as may be determined by resolution of the Board of Directors not inconsistent
with these Bylaws.
5.6 REMOVAL. Any officer or agent elected or appointed by the Board of
Directors may be removed by the Board of Directors whenever in its judgment the
best interests of the Corporation will be served thereby. Such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights.
5.7 VACANCIES. Any vacancy occurring in any office of the Corporation (by
death, resignation, removal or otherwise) shall be filled by the Board of
Directors.
5.8 COMPENSATION. The compensation of all officers and agents of the
Corporation shall be fixed from time to time by the Board of Directors.
5.9 CHAIRMAN OF THE BOARD. If a Chairman of the Board is elected, he
shall be chosen from among the Directors and shall be the chief executive and
principal officer of the Corporation. He shall have the power to call special
meetings of the shareholders and of the Directors for any purpose or purposes,
and he shall preside at all meetings of the shareholders and of the Board of
Directors, unless he shall be absent or unless he shall, at his election,
designate the President to preside in his stead. The Chairman of the Board
shall be responsible for the operations and business affairs of the Corporation
and shall possess all of the powers granted by the Bylaws to the President,
including the power to make and sign contracts and agreements in the name and on
behalf of the Corporation. He shall, in general, have supervisory power over
the President and all other officers and the business activities of the
Corporation, subject to the discretion of the Board of Directors.
5.10 CHIEF OPERATING OFFICER. If a Chief Operating Officer is elected he
shall have general and active management of the business operations of the
Corporation. The Chief Operating Officer shall further perform such other
duties and have such additional authority and powers as from time to time may be
assigned to or conferred upon him or her by the Board of Directors.
5.11 PRESIDENT. Subject to the authority and supervision of the Chairman
of the Board, the President shall have general and active management of the
day-to-day business of the Corporation and shall see that all orders and
resolutions of the Board of Directors are carried into effect. The President
shall execute bonds, mortgages and other contracts requiring a seal, under the
seal of the Corporation, except where required or permitted by law to be
otherwise executed and except where the execution thereof shall be expressly
delegated by the Board of Directors to some other officer or agent of the
Corporation. The President shall perform such other duties and possess such
other authority and powers as the Board of Directors may from time to time
prescribe.
5.12 VICE PRESIDENTS. The Vice President, or if there shall be more than
one, the Vice Presidents in the order determined by a majority vote of the Board
of Directors, shall, in the prolonged absence or disability of the President
(and Chairman of the Board, if one is elected), perform the duties and exercise
the powers of the President and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe or the
chief executive officer may from time to time delegate. The Board of Directors,
by majority vote, shall have the option to appoint one of the Vice Presidents as
Executive Vice President who shall be superior to all other Vice Presidents.
5.13 SECRETARY. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the shareholders of the Corporation and record all
proceedings of the meetings of the Corporation and of the Board of Directors in
a book to be maintained for that purpose and shall perform like duties for the
standing committees when required. The Secretary shall give, or cause to be
given, notice of all meetings of the shareholders and special meetings of the
Board of Directors, and shall perform such other duties as may be prescribed by
the Board of Directors, the Chairman of the Board, or President. He shall have
custody of the corporate seal of the Corporation, and he, or an Assistant
Secretary, shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such Assistant Secretary. The Board of Directors may give general authority to
any other officer to affix the seal of the Corporation and to attest the
affixing by his signature.
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5.14 ASSISTANT SECRETARIES. The Assistant Secretary, or if there be more
than one, the Assistant Secretaries in the order determined by the Board of
Directors, shall in the absence or disability of the Secretary, perform the
duties and exercise the powers of the Secretary and shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe or the chief executive officer may from time to time delegate.
5.15 TREASURER. The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors. The Treasurer
shall disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the President (and Chairman of the Board, if one is elected) and the Board of
Directors, at its regular meetings, or when the Board of Directors so requires,
an account of all his transactions as Treasurer and of the financial condition
of the Corporation. If required by the Board of Directors, he shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money, and other property of whatever kind in his possession or under
his control owned by the Corporation. The Treasurer shall perform such other
duties and have such other authority and powers as the Board of Directors may
from time to time prescribe or as the chief executive officer may from time to
time delegate.
5.16 ASSISTANT TREASURERS. The Assistant Treasurer, or, if there shall be
more than one, the Assistant Treasurers in the order determined by the Board of
Directors, shall, in the absence or disability of the Treasurer, perform the
duties and exercise the powers of the Treasurer and shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe or as the chief executive officer may from time to time delegate.
ARTICLE VI.
INDEMNIFICATION
6.1 MANDATORY INDEMNIFICATION. Each person who was or is made a party or
is threatened to be made a party, or who was or is a witness without being named
a party, to any threatened, pending or completed action, claim, suit or
proceeding, whether civil, criminal, administrative or investigative, any appeal
in such an action, suit or proceeding, and any inquiry or investigation that
could lead to such an action, suit or proceeding (a "Proceeding"), by reason of
the fact that such individual is or was a Director or officer of the
Corporation, or while a Director or officer of the Corporation is or was serving
at the request of the Corporation as a director, officer, partner, venturer,
proprietor, trustee, employee, agent or similar functionary of another
corporation, partnership, trust, employee benefit plan or other enterprise,
shall be indemnified and held harmless by the Corporation from and against any
judgments, penalties (including excise taxes), fines, amounts paid in settlement
and reasonable expenses (including court costs and attorneys' fees) actually
incurred by such person in connection with such Proceeding if it is determined
that he acted in good faith and reasonably believed (i) in the case of conduct
in his official capacity on behalf of the Corporation that his conduct was in
the Corporation's best interests, (ii) in all other cases, that his conduct was
not opposed to the best interests of the Corporation, and (iii) with respect to
any Proceeding which is a criminal action, that he had no reasonable cause to
believe his conduct was unlawful; provided, however, that in the event a
determination is made that such person is liable to the Corporation or is found
liable on the basis that personal benefit was improperly received by such
person, the indemnification is limited to reasonable expenses actually incurred
by such person in connection with the Proceeding and shall not be made in
respect of any Proceeding in which such person shall have been found liable for
willful or intentional misconduct in the performance of his duty to the
Corporation. The termination of any Proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself be determinative of whether the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any Proceeding which is a
criminal action, had no reasonable cause to believe that his conduct was
unlawful. A person shall be deemed to have been found liable in respect of any
claim, issue or matter only after the person shall have been so adjudged by a
court of competent jurisdiction after exhaustion of all appeals therefrom.
6.2 DETERMINATION OF INDEMNIFICATION. Any indemnification under the
foregoing Section 6.1 (unless ordered by a court of competent jurisdiction)
shall be made by the Corporation only upon a determination that
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<PAGE>
indemnification of such person is proper in the circumstances by virtue of
the fact that it shall have been determined that such person has met the
applicable standard of conduct. Such determination shall be made (1) by a
majority vote of a quorum consisting of Directors who at the time of the vote
are not named defendants or respondents in the Proceeding; (2) if such quorum
cannot be obtained, by a majority vote of a committee of the Board of
Directors, designated to act in the matter by a majority of all Directors,
consisting solely of two or more Directors who at the time of the vote are
not named defendants or respondents in the Proceeding; (3) by special legal
counsel (in a written opinion) selected by the Board of Directors or a
committee of the Board by a vote as set forth in Subsection (1) or (2) of
this Section, or, if such quorum cannot be obtained and such committee cannot
be established, by a majority vote of all Directors (in which Directors who
are named defendants or respondents in the Proceeding may participate); or
(4) by the shareholders of the Corporation in a vote that excludes the shares
held by Directors who are named defendants or respondents in the Proceeding.
6.3 ADVANCE OF EXPENSES. Reasonable expenses, including court costs and
attorneys' fees, incurred by a person who was or is a witness or who was or is
named as a defendant or respondent in a Proceeding, by reason of the fact that
such individual is or was a Director or officer of the Corporation, or while a
Director or officer of the Corporation is or was serving at the request of the
Corporation as a director, officer, partner, venturer, proprietor, trustee,
employee, agent, or similar functionary of another corporation, partnership,
trust, employee benefit plan or other enterprise, shall be paid by the
Corporation at reasonable intervals in advance of the final disposition of such
Proceeding, and without the determination specified in the foregoing Section
6.2, upon receipt by the Corporation of a written affirmation by such person of
his good faith belief that he has met the standard of conduct necessary for
indemnification under this Article 6, and a written undertaking by or on behalf
of such person to repay the amount paid or reimbursed by the Corporation if it
is ultimately determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article 6. Such written undertaking shall be
an unlimited obligation of such person and it may be accepted without reference
to financial ability to make repayment.
6.4 PERMISSIVE INDEMNIFICATION. The Board of Directors of the Corporation
may authorize the Corporation to indemnify employees or agents of the
Corporation, and to advance the reasonable expenses of such persons, to the same
extent, following the same determinations and upon the same conditions as are
required for the indemnification of and advancement of expenses to Directors and
officers of the Corporation.
6.5 NATURE OF INDEMNIFICATION. The indemnification and advancement of
expenses provided hereunder shall not be deemed exclusive of any other rights to
which those seeking indemnification may be entitled under the Articles of
Incorporation, these Bylaws, any agreement, vote of shareholders or
disinterested Directors or otherwise, both as to actions taken in an official
capacity and as to actions taken in any other capacity while holding such
office, shall continue as to a person who has ceased to be a Director, officer,
employee or agent of the Corporation and shall inure to the benefit of the
heirs, executors and administrators of such person.
6.6 INSURANCE. The Corporation shall have the power and authority to
purchase and maintain insurance or another arrangement on behalf of any
person who is or was a Director, officer, employee or agent of the
Corporation, or who is or was serving at the request of the Corporation as a
director, officer, partner, venturer, proprietor, trustee, employee, agent,
or similar functionary of another foreign or domestic corporation,
partnership, joint venture, sole proprietorship, trust, employee benefit plan
or other enterprise against any liability, claim, damage, loss or risk
asserted against such person and incurred by such person in any such capacity
or arising out of the status of such person as such, irrespective of whether
the Corporation would have the power to indemnify and hold such person
harmless against such liability under the provisions hereof. If the
insurance or other arrangement is with a person or entity that is not
regularly engaged in the business of providing insurance coverage, the
insurance or arrangement may provide for payment of a liability with respect
to which the Corporation would not have the power to indemnify the person
only if including coverage for the additional liability has been approved by
the shareholders of the Corporation. Without limiting the power of the
Corporation to procure or maintain any kind of insurance or other
arrangement, the Corporation may, for the benefit of persons indemnified by
the Corporation, (1) create a trust fund; (2) establish any form of
self-insurance; (3) secure its indemnity obligation by grant of a security
interest or other lien on the assets of the Corporation; or (4) establish a
letter of credit, guaranty, or surety arrangement. The insurance or other
arrangement may be procured, maintained, or established within the
Corporation or with any insurer or other person deemed appropriate by the
Board of Directors regardless of whether all or part of the stock or other
securities of the insurer or other person are owned in whole or part by the
Corporation. In the absence of fraud, the judgment of the
10
<PAGE>
Board of Directors as to the terms and conditions of the insurance or other
arrangement and the identity of the insurer or other person participating in the
arrangement shall be conclusive and the insurance or arrangement shall not be
voidable and shall not subject the Directors approving the insurance or
arrangement to liability, on any ground, regardless of whether Directors
participating in the approval are beneficiaries of the insurance or arrangement.
6.7 NOTICE. Any indemnification or advance of expenses to a present or
former director of the Corporation in accordance with this Article 6 shall be
reported in writing to the shareholders of the Corporation with or before the
notice or waiver of notice of the next shareholders' meeting or with or before
the next submission of a consent to action without a meeting and, in any case,
within the next twelve month period immediately following the indemnification or
advance.
ARTICLE VII.
STOCK CERTIFICATES AND TRANSFER REGULATIONS
7.1 DESCRIPTION OF CERTIFICATES. The shares of the capital stock of the
Corporation shall be represented by certificates in the form approved by the
Board of Directors and signed in the name of the Corporation by the Chairman of
the Board, the President, or a Vice President and the Secretary or an Assistant
Secretary of the Corporation, and sealed with the seal of the Corporation or a
facsimile thereof. Each certificate shall state on the face thereof the name of
the holder, the number and class of shares and the designation of the series, if
any, which such certificate represents, the par value of shares covered thereby
or a statement that such shares are without par value, and such other matters as
are required by law. At such time as the Corporation may be authorized to issue
shares of more than one class or any class in series, every certificate shall
set forth upon the face or back of such certificate a statement of the
designations, preferences, limitations and relative rights of the shares of each
class or series authorized to be issued, as required by the laws of the State of
Nevada.
7.2 DELIVERY. Every holder of the capital stock in the Corporation shall
be entitled to have a certificate signed in the name of the Corporation by the
Chairman of the Board, the President, or a Vice President and the Secretary or
an Assistant Secretary of the Corporation, certifying the class of capital stock
and the number of shares represented thereby as owned or held by such
shareholder in the Corporation.
7.3 SIGNATURES. The signatures of the Chairman of the Board, the
President, Vice President, Secretary, or Assistant Secretary upon a certificate
may be facsimiles. In case any officer or officers who have signed, or whose
facsimile signature or signatures have been placed upon any such certificate or
certificates, shall cease to serve as such officer or officers of the
Corporation, whether because of death, resignation, removal or otherwise, before
such certificate or certificates are issued and delivered by the Corporation,
such certificate or certificates may nevertheless be adopted by the Corporation
and be issued and delivered with the same effect as though the person or persons
who signed such certificate or certificates or whose facsimile signature or
signatures have been used thereon had not ceased to serve as such officer or
officers of the Corporation.
7.4 ISSUANCE OF CERTIFICATES. Certificates evidencing shares of its
capital stock (both treasury and authorized but unissued) may be issued for such
consideration (not less than par value, except for treasury shares which may be
issued for such consideration) and to such persons as the Board of Directors may
determine from time to time. Shares shall not be issued until the full amount
of the consideration, fixed as provided by law, has been paid.
7.5 PAYMENT FOR SHARES. Consideration for the issuance of shares shall be
paid, valued and allocated as follows:
(a) CONSIDERATION. The consideration for the issuance of shares
shall consist of money paid, labor done (including services actually
performed for the Corporation), or property (tangible or intangible)
actually received. Neither promissory notes nor the promise of future
services shall constitute payment of consideration for shares.
(b) VALUATION. In the absence of fraud in the transaction, the
determination of the Board of Directors as to the value of consideration
received shall be conclusive.
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<PAGE>
(c) EFFECT. When consideration, fixed as provided by law, has been
paid, the shares shall be deemed to have been issued and shall be
considered fully paid and nonassessable.
(d) ALLOCATION OF CONSIDERATION. The consideration received for
shares shall be allocated by the Board of Directors, in accordance with
law, between the stated capital and capital surplus accounts.
7.6 SUBSCRIPTIONS. Unless otherwise provided in the subscription
agreement, subscriptions of shares, whether made before or after organization of
the Corporation, shall be paid in full in such installments and at such times as
shall be determined by the Board of Directors. Any call made by the Board of
Directors for payment on subscriptions shall be uniform as to all shares of the
same class and series. In case of default in the payment of any installment or
call when payment is due, the Corporation may proceed to collect the amount due
in the same manner as any debt due to the Corporation.
7.7 CLOSING OF TRANSFER RECORDS; RECORD DATE FOR ACTION WITH MEETINGS.
For the purpose of determining shareholders entitled to notice of or to vote at
any meeting of shareholders, or any adjournment thereof, or entitled to receive
a distribution by the Corporation (other than a distribution involving a
purchase or redemption by the Corporation of any of its own shares) or a share
dividend, or in order to make a determination of shareholders for any other
proper purpose (other than determining shareholders entitled to consent to
action by shareholders proposed to be taken without a meeting of shareholders),
the Board of Directors may provide that share transfer records shall be closed
for a stated period of time not to exceed, in any case, sixty (60) days. If the
share transfer records shall be closed for the purpose of determining
shareholders, such records shall be closed for at least ten (10) days
immediately preceding such meeting. In lieu of closing the share transfer
records, as aforesaid, the Board of Directors may fix in advance a date as the
record date for any such determination of shareholders, such date in any case to
be not more than sixty (60) days, and in the case of a meeting of shareholders,
not less than ten (10) days prior to the date on which the particular action
requiring such determination of shareholders is to be taken. If the share
transfer records are not closed and no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive a distribution (other than a
distribution involving a purchase or redemption by the Corporation of any of its
own shares) or a share dividend, the date on which notice of the meeting is
mailed or the date on which the resolution of the Board of Directors declaring
such distribution or share dividend is adopted, as the case may be, shall be the
record date for such determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this Section, such determination shall be applied to any adjournment
thereof except where the determination has been made through the closing of the
stock transfer books and the stated period of closing has expired.
7.8 REGISTERED OWNERS. Prior to due presentment for registration of
transfer of a certificate evidencing shares of the capital stock of the
Corporation in the manner set forth in Section 7.10 hereof, the Corporation
shall be entitled to recognize the person registered as the owner of such shares
on its records (or the records of its duly appointed transfer agent, as the case
may be) as the person exclusively entitled to vote, to receive notices and
dividends with respect to, and otherwise exercise all rights and powers relative
to such shares; and the Corporation shall not be bound or otherwise obligated to
recognize any claim, direct or indirect, legal or equitable, to such shares by
any other person, whether or not it shall have actual, express or other notice
thereof, except as otherwise provided by the laws of Nevada.
7.9 LOST, STOLEN OR DESTROYED CERTIFICATES. The Corporation shall issue a
new certificate in place of any certificate for shares previously issued if the
registered owner of the certificate satisfies the following conditions:
(a) PROOF OF LOSS. Submits proof in affidavit form satisfactory to
the Corporation that such certificate has been lost, destroyed or
wrongfully taken;
(b) TIMELY REQUEST. Requests the issuance of a new certificate
before the Corporation has notice that the certificate has been acquired by
a purchaser for value in good faith and without notice of an adverse claim;
(c) BOND. Gives a bond in such form, and with such surety or
sureties, with fixed or open penalty, as the Corporation may direct, to
indemnify the Corporation (and its transfer agent and registrar, if
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<PAGE>
any) against any claim that may be made or otherwise asserted by virtue of
the alleged loss, destruction, or theft of such certificate or
certificates; AND
(d) OTHER REQUIREMENTS. Satisfies any other reasonable requirements
imposed by the Corporation.
In the event a certificate has been lost, apparently destroyed or wrongfully
taken, and the registered owner of record fails to notify the Corporation within
a reasonable time after he has notice of such loss, destruction, or wrongful
taking, and the Corporation registers a transfer (in the manner hereinbelow set
forth) of the shares represented by the certificate before receiving such
notification, such prior registered owner of record shall be precluded from
making any claim against the Corporation for the transfer required hereunder or
for a new certificate.
7.10 REGISTRATION OF TRANSFERS. Subject to the provisions hereof, the
Corporation shall register the transfer of a certificate evidencing shares of
its capital stock presented to it for transfer if:
(a) ENDORSEMENT. Upon surrender of the certificate to the
Corporation (or its transfer agent, as the case may be) for transfer, the
certificate (or an appended stock power) is properly endorsed by the
registered owner, or by his duly authorized legal representative or
attorney-in-fact, with proper written evidence of the authority and
appointment of such representative, if any, accompanying the certificate;
(b) GUARANTY AND EFFECTIVENESS OF SIGNATURE. The signature of such
registered owner or his legal representative or attorney-in-fact, as the
case may be, has been guaranteed by a national banking association or
member of the New York Stock Exchange, and reasonable assurance in a form
satisfactory to the Corporation is given that such endorsements are genuine
and effective;
(c) ADVERSE CLAIMS. The Corporation has no notice of an adverse
claim or has otherwise discharged any duty to inquire into such a claim;
(d) COLLECTION OF TAXES. Any applicable law (local, state or
federal) relating to the collection of taxes relative to the transaction
has been complied with; AND
(e) ADDITIONAL REQUIREMENTS SATISFIED. Such additional conditions
and documentation as the Corporation (or its transfer agent, as the case
may be) shall reasonably require, including without limitation thereto, the
delivery with the surrender of such stock certificate or certificates of
proper evidence of succession, assignment or other authority to obtain
transfer thereof, as the circumstances may require, and such legal opinions
with reference to the requested transfer as shall be required by the
Corporation (or its transfer agent) pursuant to the provisions of these
Bylaws and applicable law, shall have been satisfied.
7.11 RESTRICTIONS ON TRANSFER AND LEGENDS ON CERTIFICATES.
(a) SHARES IN CLASSES OR SERIES. If the Corporation is authorized to
issue shares of more than one class, the certificate shall set forth,
either on the face or back of the certificate, a full or summary statement
of all of the designations, preferences, limitations, and relative rights
of the shares of each such class and, if the Corporation is authorized to
issue any preferred or special class in series, the variations in the
relative rights and preferences of the shares of each such series so far as
the same have been fixed and determined, and the authority of the Board of
Directors to fix and determine the relative rights and preferences of
subsequent series. In lieu of providing such a statement in full on the
certificate, a statement on the face or back of the certificate may provide
that the Corporation will furnish such information to any shareholder
without charge upon written request to the Corporation at its principal
place of business or registered office or that copies of the information
are on file in the office of the Secretary of State.
(b) RESTRICTION ON TRANSFER. Any restrictions imposed or agreed to
by the Corporation on the sale or other disposition of its shares and on
the transfer thereof must be copied at length or in summary form on the
face, or so copied on the back and referred to on the face, of each
certificate representing shares to which the restriction applies. The
certificate may however state on the face or back that such a restriction
13
<PAGE>
exists pursuant to a specified document and that the Corporation will
furnish a copy of the document to the holder of the certificate without
charge upon written request to the Corporation at its principal place of
business.
(c) PREEMPTIVE RIGHTS. Any preemptive rights of a shareholder to
acquire unissued or treasury shares of the Corporation which are limited or
denied by the articles of incorporation must be set forth at length on the
face or back of the certificate representing shares subject thereto. In
lieu of providing such a statement in full on the certificate, a statement
on the face or back of the certificate may provide that the Corporation
will furnish such information to any shareholder without charge upon
written request to the Corporation at its principal place of business and
that a copy of such information is on file in the office of the Secretary
of State.
(d) UNREGISTERED SECURITIES. Any security of the Corporation,
including, among others, any certificate evidencing shares of the Common
Stock or warrants to purchase Common Stock of the Corporation, which is
issued to any person without registration under the Securities Act of 1933,
as amended, or the Blue Sky laws of any state, shall not be transferable
until the Corporation has been furnished with a legal opinion of counsel
with reference thereto, satisfactory in form and content to the Corporation
and its counsel, to the effect that such sale, transfer or pledge does not
involve a violation of the Securities Act of 1933, as amended, or the Blue
Sky laws of any state having jurisdiction. The certificate representing
the security shall bear substantially the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAW BUT HAVE BEEN ACQUIRED FOR
THE PRIVATE INVESTMENT OF THE HOLDER HEREOF AND MAY NOT BE
OFFERED, SOLD OR TRANSFERRED UNTIL EITHER (i) A REGISTRATION
STATEMENT UNDER SUCH SECURITIES ACT OR SUCH APPLICABLE STATE
SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO,
OR (ii) THE CORPORATION SHALL HAVE RECEIVED AN OPINION OF COUNSEL
ACCEPTABLE TO THE CORPORATION AND ITS COUNSEL THAT REGISTRATION
UNDER SUCH SECURITIES ACT OR SUCH APPLICABLE STATE SECURITIES
LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED OFFER, SALE
OR TRANSFER.
ARTICLE VIII.
GENERAL PROVISIONS
8.1 DISTRIBUTIONS. Subject to the provisions of the Nevada Domestic
Corporation Code, as amended, and the Articles of Incorporation, distributions
of the Corporation shall be declared and paid pursuant to the following
regulations:
(a) DECLARATION AND PAYMENT. Distributions on the issued and
outstanding shares of capital stock of the Corporation may be declared by
the Board of Directors at any regular or special meeting and may be paid in
cash, in property, or in shares of capital stock. Such declaration and
payment shall be at the discretion of the Board of Directors.
(b) RECORD DATE. The Board of Directors may fix in advance a record
date for the purpose of determining shareholders entitled to receive
payment of any distribution, such record date to be not more than sixty
(60) days prior to the payment date of such distribution, or the Board of
Directors may close the stock transfer books for such purpose for a period
of not more than sixty (60) days prior to the payment date of such
distribution. In the absence of action by the Board of Directors, the date
upon which the Board of Directors adopts the resolution declaring such
distribution shall be the record date.
8.2 RESERVES. There may be created by resolution of the Board of
Directors out of the surplus of the Corporation such reserve or reserves as the
Directors from time to time, in their discretion, think proper to provide for
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<PAGE>
contingencies, or to equalize distributions, or to repair or maintain any
property of the Corporation, or for such other purposes as the Directors shall
think beneficial to the Corporation, and the Directors may modify or abolish any
such reserve in the manner in which it was created.
8.3 BOOKS AND RECORDS. The Corporation shall maintain books and records
of account and shall prepare and maintain minutes of the proceedings of its
shareholders, its Board of Directors and each committee of its Board of
Directors. The Corporation shall keep at its registered office or principal
place of business, or at the office of its transfer agent or registrar, a record
of the original issuance of shares issued by the Corporation and a record of
each transfer of those shares that have been presented to the Corporation for
registration of transfer. Such records shall contain the names and addresses of
all past and present shareholders of the Corporation and the number and class of
shares issued by the Corporation held by each of them.
8.4 ANNUAL STATEMENT. The Board of Directors shall present at or before
each annual meeting of shareholders a full and clear statement of the business
and financial condition of the Corporation, including a reasonably detailed
balance sheet and income statement dated within sixty (60) days prior to such
meeting date.
8.5 CONTRACTS AND NEGOTIABLE INSTRUMENTS. Except as otherwise provided by
law or these Bylaws, any contract or other instrument relative to the business
of the Corporation may be executed and delivered in the name of the Corporation
and on its behalf by the Chairman of the Board, the Chief Executive Officer, or
the Chief Operating Officer, if any, or the President of the Corporation. The
Board of Directors may authorize any other officer or agent of the Corporation
to enter into any contract or execute and deliver any contract in the name and
on behalf of the Corporation, and such authority may be general or confined to
specific instances as the Board of Directors may determine by resolution. All
bills, notes, checks or other instruments for the payment of money shall be
signed or countersigned by such officer, officers, agent or agents and in such
manner as are permitted by these Bylaws or as, from time to time, may be
prescribed by resolution of the Board of Directors. Unless authorized to do so
by these Bylaws or by the Board of Directors, no officer, agent or employee
shall have any power or authority to bind the Corporation by any contract or
engagement, or to pledge its credit, or to render it liable pecuniarily for any
purpose or to any amount.
8.6 FISCAL YEAR. The fiscal year of the Corporation shall be fixed by
resolution of the Board of Directors.
8.7 CORPORATE SEAL. The Corporation seal shall be in such form as may be
determined by the Board of Directors. The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any manner reproduced.
8.8 RESIGNATIONS. Any director, officer or agent may resign his office or
position with the Corporation by delivering written notice thereof to the then
chief executive officer of the Corporation or the Secretary. Such resignation
shall be effective at the time specified therein, or immediately upon delivery
if no time is specified. Unless otherwise specified therein, an acceptance of
such resignation shall not be a necessary prerequisite of its effectiveness.
8.9 AMENDMENT OF BYLAWS. These Bylaws may be altered, amended, or
repealed, and new Bylaws adopted, by the affirmative vote of a majority of the
Directors present or shareholders entitled to vote pursuant to Section 2 hereof,
at any meeting of the Board of Directors or any annual or special meeting of the
shareholders at which a quorum is present, provided notice of the proposed
alteration, amendment or repeal be contained in the notice of such meeting.
8.10 CONSTRUCTION. Whenever the context so requires herein, the masculine
shall include the feminine and neuter, and the singular shall include the
plural, and conversely. If any portion or provision of these Bylaws shall be
held invalid or inoperative, then, so far as is reasonable and possible: (1)
the remainder of these Bylaws shall be considered valid and operative, and (2)
effect shall be given to the intent manifested by the portion or provision held
invalid or inoperative.
8.11 TELEPHONE MEETINGS. Shareholders, Directors, or members of any
committee may hold any meeting of such shareholders, Directors or committee
by means of conference telephone or similar communications equipment which
permits all persons participating in the meeting to hear each other, and
actions taken at such meetings shall have
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the same force and effect as if taken at a meeting at which persons were
present and voting in person. The Secretary of the Corporation shall prepare
minutes of such meeting or a memorandum of the action(s) taken.
8.12 TABLE OF CONTENTS; CAPTIONS. The table of contents and captions used
in these Bylaws have been inserted for administrative convenience only and do
not constitute matter to be construed in interpretation of the Bylaws.
IN DUE CERTIFICATION WHEREOF, the undersigned, being the Secretary of
Computerized Thermal Imaging, Inc. confirms the adoption and approval of the
foregoing Bylaws, effective as of the ______ day of ________________, 199__.
-------------------------------------------
Richard V. Secord, Secretary
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NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
CUSIP NO. 20557C 10 8
NUMBER SHARES
10756 0
COMPUTERIZED THERMAL IMAGING, INC.
AUTHORIZED COMMON STOCK: 100,000,000 SHARES
PAR VALUE $.001
THIS CERTIFIES THAT John Doe
IS THE RECORD HOLDER OF **ZERO**
**Shares of Computerized Thermal Imaging, Inc. common stock --
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This Certificate
is not valid until countersigned by the Transfer Agent and registered by the
Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
DATED: February 17, 1998
/s/ (ILLEGIBLE) /s/ (ILLEGIBLE)
- ----------------------- -----------------------
SECRETARY PRESIDENT
CORPORATE SEAL
NEVADA
COMPUTERIZED THERMAL IMAGING, INC.
Countersigned Registered:
MERIT TRANSFER COMPANY
P.O. Box 292
Salt Lake City, UT 84110
By:
------------------------------------------------
Authorized Signature
<PAGE>
NOTICE: Signature must be guaranteed by a firm which is a member of a
registered national stock exchange, or by a bank (other than a saving
bank), or a trust company. The following abbreviations, when used in the
inscription on the face of this certificate, shall be construed as
though they were written out in full according to applicable laws or
regulations:
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- ......Custodian......
(Cust) (Minor)
TEN ENT -- as tenants by the entireties under Uniform Gifts to Minors
JT TEN -- as joint tenants with right of
survivorship and not as tenants Act.........................
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For Value Received, _______________________ hereby sell, assign and transfer
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------Shares
of the capital stock represented by the within certificate, and do hereby
irrevocably constitute and appoint
- ------------------------------------------------------------------------Attorney
to transfer the said stock on the books of the within named Corporation
with full power of substitution in the premises.
Dated
-------------------
-------------------------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER
<PAGE>
EXHIBIT 5(a)
LOOPER, REED, MARK & MCGRAW
INCORPORATED
1300 POST OAK BOULEVARD, SUITE 2000
HOUSTON, TEXAS 77056
TELEPHONE (713) 986-7000
TELECOPIER (713) 986-7100
February 27, 1998
Computerized Thermal Imaging, Inc.
476 Heritage Park Boulevard
Suite 210
Layton, Utah 84041
Re: Form SB-2 Registration Statement
Gentlemen:
As counsel for Computerized Thermal Imaging, Inc. (the "Company"), you
have requested our firm to render this opinion in connection with the
Registration Statement on Form SB-2 filed under the Securities Act of 1933,
as amended (the "Securities Act") with the Securities and Exchange Commission
relating to the registration of (i) 18,229,167 shares of the common stock of
the Company, par value $0.001 per share (the "Common Stock") to be issued in
connection with the purchase of such shares by an investor (the "Newly Issued
Shares"), and (ii) 2,552,083 shares of the Common Stock to be issued upon the
exercise of warrants to be issued to such investor (the "Compensation
Warrants") which become exercisable upon issuance at variable prices based on
the sales price of shares of the Common Stock and expire on the fifth
anniversary of the date of issuance. The Registration Statement also relates
to the resale of 15,950,867 shares of the Common Stock which may be sold by
the holders thereof. The shares to be resold include (i) 5,287,633 shares
issued and outstanding; (ii) 3,840,615 shares underlying outstanding warrants
exercisable at prices ranging from $0.72 to $5.00 per share which expire on
various dates ranging from March 31, 1999 to March 13, 2002 (the "Resale
Warrants"); (iii) 6,525,000 shares underlying outstanding options exercisable
at prices ranging from $0.60 per share to $1.25 per share which expire
automatically on various dates ranging from July 21, 2000 to June 12, 2005
(the "Options"); and (iv) 297,619 shares underlying an outstanding debenture
of the Company in the original principal amount of $125,000, which bears
interest at eight percent, matures on March 13, 2000, and is convertible
following the effective date of the Registration Statement at a conversion
price equal to the lesser of 77 percent of the average closing bid price of
the Common Stock for the five consecutive trading days prior to conversion or
the average bid price of the Common Stock for the five consecutive trading
days prior to closing of the debenture offering (the "Debenture").
We are familiar with the Registration Statement and the registration of
the shares of the Common Stock contemplated thereby. In giving this opinion,
we have reviewed the Registration Statement and such other documents and
certificates of public officials and officers of the Company with respect to
the accuracy of the factual matters contained therein as we have felt
necessary or appropriate in order to render the opinions expressed herein.
In making our examination, we have assumed the genuineness of all signatures,
the authenticity of all documents presented to us as originals, the
conformity to original documents of all documents presented to us as copies
thereof, and the authenticity of the original documents from which any such
copies were made, which assumptions we have not independently verified.
Based upon and subject to the foregoing, and upon such other matters as
we have determined to be relevant, we are of the opinion that:
<PAGE>
Computerized Thermal Imaging, Inc.
February 27, 1998
Page 2
1. The Company is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Nevada.
2. The shares of the Common Stock to be issued upon the purchase of the
Newly Issued Shares are validly authorized and, when purchased, will be validly
issued, fully paid and nonassessable.
3. The shares of the Common Stock underlying the Compensation Warrants to
be issued upon the exercise thereof are validly authorized and, upon exercise,
will be validly issued, fully paid and nonassessable.
4. The shares of the Common Stock underlying the Resale Warrants, the
Options and the Debenture to be issued upon the exercise/and or the conversion
of such Resale Warrants, Options and Debenture are validly authorized and, upon
exercise or conversion, will be validly issued, fully paid and nonassessable.
We hereby consent to use in the Registration Statement of the reference to
Looper, Reed, Mark & McGraw, Incorporated under the heading "Legal Matters."
This opinion is conditioned upon the Registration Statement being declared
effective and upon compliance by the Company with all applicable provisions of
the Act and such other state securities laws, rules and regulations as may be
applicable.
Very truly yours,
LOOPER, REED, MARK & MCGRAW
<PAGE>
EXHIBIT 10(a)
PR EXPENSE FUNDS ADMINISTRATION AGREEMENT
This Administration Agreement ("Agreement") is entered into effective on
the 9th day of July, 1997 ("Effective Date"), by and between COMPUTERIZED
THERMAL IMAGING, INC., a Nevada corporation ("CTI"), LIBERTY CAPITAL GROUP,
INC., a Washington corporation ("Liberty"), and Manhattan Financial Group
("Administrator").
W I T N E S S E T H:
WHEREAS, CTI and Liberty entered into an agreement on the Effective Date
wherein Liberty has agreed to provide public relations services to CTI (the
"Public Relations Agreement"); and
WHEREAS, the terms and conditions of the Public Relations Agreement
provide for the establishment of an account from which approved expenses of
Liberty incurred in the performance of public relations services will be
paid; and
WHEREAS, CTI is required to fund the account pursuant to the terms and
conditions of the Public Relations Agreement; and
WHEREAS, CTI and Liberty desire to appoint the Administrator to be
solely responsible for the receipt and handling of invoices, confirmation of
proper purpose for the expenses, and disbursement of funds with regard to
such account;
NOW THEREFORE, and in consideration of the premises and covenants
hereinafter contained, the parties do hereby agree as follows:
1. APPOINTMENT AND ACCEPTANCE. CTI and Liberty hereby appoint and
authorize the Administrator to set up and administer an account pursuant to
the Public Relations Agreement (the "Account"). The Administrator hereby
accepts such appointment and agrees to take all necessary action to maintain
the Account in accordance with the terms of this Agreement, including the
acceptance, handling and disbursement of deposited funds.
2. DELIVERY OF THE FUNDS. Liberty agrees to accept payment (or
reimbursement) for its incurred fees and expenses on the terms set forth in
this paragraph 2, which amends and supersedes the installment provisions set
forth in the Public Relations Agreement. CTI shall deposit, or have deposited
on its behalf, an aggregate amount of up to $150,000.00 (the "Funds") into
the Account as needed to satisfy the requirements for payment of fees and
expenses under the Public Relations Agreement.
At least monthly, the Administrator shall facilitate CTI's requirement
to deposit into the Account such amount as is necessary to pay the sum of all
approved expenses incurred or to be incurred or paid by Liberty for the
invoice period. Liberty shall submit a proper invoice to the Administrator in
advance of payment when possible, or for immediate reimbursement or payment
of such expense incurred, but not to exceed five (5) business days for
acceptance of the invoice. Said invoice shall include: explanation of service
performed and classification of the persons performing this service and the
method of calculating the fee; detail for expenses incurred identifying the
item and purpose for which the expense is incurred; cost method for
calculation of expense; and detail of expenses incurred for prior billing
periods with any adjustments required if payments have been made on budgets
in prior months. Faxed copies of invoices shall be sufficient. Some billing
periods may include invoices for expenses from prior months, such as
telephone companies, internet services, advertising services, but the
Administrator shall receive invoicing copies within sixty (60) days for
payment of any expense.
Liberty may submit a monthly budget to the Administrator estimating
costs to be incurred, and the Administrator shall review and discuss the
budget with Liberty and make such adjustments as the Administrator deems
advisable, approving the remaining budget for payment. If the Administrator
has approved any budget, all of those
1
<PAGE>
expenses shall be deemed approved and paid when incurred or in advance. If
payment is made in advance, Liberty shall provide invoices upon performance
of services or receipt of invoices for expenses.
Liberty shall include in a monthly expense budget an estimate of travel
related expenses to be incurred for a maximum of $5,000.00 per month, subject
to approval by the Administrator (with counsel from CTI management). Liberty
shall detail any services which its employee(s) will charge based on hourly
salary wages or contracts set forth in the budget. The budget may estimate
telephone charges at the rate of 12CENTS per minute, subject to adjustment
when actual telephone bills are received and submitted to the Administrator.
Adjustments may be recovered or added to subsequent months budget advance
payments. Mailing costs will be budgeted at $500.00 per month, but Liberty
shall submit to the Administrator actual mailing costs in subsequent months
budget for reimbursement or adjustment. Liberty will bill for services data
entry at the rate of $10.00 per hour if performed by Liberty. All other
miscellaneous expenses shall be billed upon receipt and verification of
invoices. All reasonable expenses will be paid by the Administrator, but the
Administrator has the discretion to review and approve all expenses in
advance. Once the Administrator has approved the budget, the expenses will be
deemed approved, even though the actual expenditure may vary reasonably from
the budgeted expense amount. Any reimbursement fee expense not approved by
the Administrator shall be subject to the Administrator's reasonable
approval. An expense shall be deemed approved when the Administrator provides
written confirmation or signs an invoice.
The parties anticipate that most expenses will be set forth on budgets
in advance, against which the Administrator will make payment. Expenses may
not exceed the $150,000.00 cap without the approval of the Administrator. CTI
recognizes that it may request extra, unanticipated costs or unanticipated
printing levels which may require expenditures to exceed the $150,000.00 cap
account, but Liberty may not incur expenses under the Public Relations
Agreement (including all services, expenses, printing, and advertising)
without the approval of the Administrator.
It is expressly understood that the intent of this Agreement is to
facilitate the work of Liberty in its completion of the Public Relations
Agreement. It is in the best interest of CTI to permit Liberty to execute its
campaign as it deems professionally advisable and for the Administrator to
facilitate the effectiveness of Liberty by making the Funds readily available
and promptly paid. The spirit of this Agreement is that Liberty will do its
best to conserve the Funds and that it will work within the budget approved
by CTI.
3. ADMINISTRATOR'S RIGHTS AND DUTIES.
(a) The Administrator is hereby authorized to use the Funds to pay
those costs and expenses incurred or to be incurred by Liberty in the
performance of services pursuant to the Public Relations Agreement and which
are approved by the Administrator (in amount or estimated amount) prior to
being incurred ("Approved Expenses"). All other expenses submitted by
Liberty, but not approved in advance, shall be reimbursed from the Funds at
the sole discretion of the Administrator. All requests for reimbursement of
expenses shall be in writing and supported by relevant documentation. The
Administrator is further authorized to withdraw from the Funds any amounts
required to satisfy the costs and expenses associated with the regular
maintenance of the Account, but is not authorized to withdraw any other
amounts for the benefit of CTI not requested by Liberty.
(b) The Administrator shall be protected and not subject to claims
in acting upon any written notice, request, waiver, consent, certificate,
receipt, authorization, or other paper or document which the Administrator
believes to be genuine and what it purports to be.
(c) The Administrator may confer with legal counsel in the event
of any dispute or question as to the construction of any of the provisions
hereof, or its duties hereunder, and it shall incur no liability and it shall
be fully protected in acting in accordance with the opinions of such counsel.
CTI shall pay all such legal fees incurred.
(d) The Administrator shall not be liable for anything which it
may do or refrain from doing in connection with this Agreement, including the
exercise of discretion in approving requests for expenditures, except for its
own gross negligence or willful misconduct. The parties hereto agree to
indemnify the Administrator for, and to hold it harmless against, any loss,
liability or expense (including, without limitation, reasonable attorney's
fees)
2
<PAGE>
incurred by it without gross negligence or willful misconduct on its part
arising out of or in connection with its entering into this Agreement and the
carrying out of its duties hereunder.
(e) The Administrator may resign for any reason, upon thirty (30)
days written notice to the parties to the Agreement. Upon expiration of such
thirty (30) days notice period, the Administrator may deliver all cash or
property in its possession under this Agreement to any successor
Administrator appointed by the other parties hereto, or if no successor
Administrator has been appointed, to Liberty. Upon either such deliver,
Administrator shall be released from any and all liability under this
Agreement.
4. LIBERTY'S RIGHTS. If Administrator fails to pay expenses needed by
Liberty to perform the Public Relations Agreement after approval and delivery
of proper documentation to Administrator, Liberty's recourse shall be against
CTI, not against the Administrator. If failure to pay expenses for Liberty
prevents its reasonable performance of the Public Relations Agreement,
Liberty shall be entitled to delay its performance until the Funds necessary
are made available.
5. EVENTS OF TERMINATION. The Administrator shall distribute the Funds
remaining in the Account, as provided for in Section 5, upon the occurrence
of any of the following events: (i) receipt of written notice from CTI and
Liberty advising the Administrator that the Public Relations Agreement has
been terminated; (ii) receipt of written instructions from CTI and Liberty
directing the Administrator to close the Account; or (iii) the Account has
not been closed by July 16, 1998. This Agreement shall terminate and the
Administrator shall be discharged of all responsibility hereunder at such
time as the Administrator shall have distributed any Funds remaining in the
Account upon such events and completed its duties hereunder. Liberty shall
have thirty (30) days within which to summarize and submit all unpaid
expenses to the Administrator.
6. ALLOCATION OF REMAINING FUNDS. Upon the occurrence of any of the
events described in Section 5, the Administrator shall distribute the Funds
in accordance with this Section 6. All approved expenses will be paid by
Administrator within five (5) business days of receipt of closing invoices.
Any Funds remaining after payment of approved expenses shall be distributed
according to the joint instructions, or if there are no joint instructions,
the Administrator shall distribute the first $10,000 plus 50% of any amount
in excess of $10,000 of the Funds remaining in the Account to the
Administrator as compensation for services provided under this Agreement. The
balance of the Funds remaining in the Account shall be delivered to CTI.
7. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the state of Washington, without regard to any
conflicts of laws provisions thereof.
8. ALTERNATIVE DISPUTE RESOLUTION. Any controversy or claim arising
out of or relating to this Agreement, or the breach, termination, or validity
thereof, shall be settled by final and binding arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration Association
("AAA Rules") in effect as of the Effective Date of this Agreement. The
American Arbitration Association ("AAA") shall be responsible for (i)
appointing a sole arbitrator, and (ii) administering the case in accordance
with the AAA Rules. The situs of the arbitration shall be Seattle,
Washington. Any order or judgement rendered by the arbitrator may be entered
by any court having jurisdiction.
9. NOTICE. Any notice required or permitted hereunder shall be in
writing and shall be sufficiently given if personally delivered, transmitted
via confirmed telecopy or mailed by certified or registered mail, return
receipt requested, addressed as follows:
If to CTI: David B. Johnston
141 North State Street, Suite 161
Lake Oswego, Oregon 97034
(503) 650-8551 Telecopier
3
<PAGE>
If to Liberty: Jay Allen Greig
814 Lakeway Drive, Suite 262
Bellingham, WA 98226
(360) 676-6580 Telecopier
If to the Administrator: Jim Forbes
1147 Manhattan Avenue, #134
Manhattan Beach, California 90266
(310) 796-4546 Telecopier
(or to such other address as may be stated in written notice furnished by any
party to the other party), and shall be deemed to have been delivered as of
the date so personally delivered or mailed.
10. DUPLICATE ORIGINALS. This Agreement may be executed in one or more
counterparts, each of which shall be treated and deemed an original, but all
of which together shall constitute one and the same document.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed this 9th day of July, 1997.
COMPUTERIZED THERMAL IMAGING, INC.
By: /s/ David B. Johnston
--------------------------------------------
Name: David B. Johnston, Chief Executive Officer
LIBERTY CAPITAL GROUP, INC.
By: /s/ Jay Allen Greig
--------------------------------------------
Name: Jay Allen Greig
Title: President
----------------------------------------
ADMINISTRATOR
By: /s/ James Forbes
--------------------------------------------
James Forbes
4
<PAGE>
EXHIBIT 10(b)
COMPUTERIZED THERMAL IMAGING, INC.
("CTII"OR THE "COMPANY")
TERMS OF ENGAGEMENT
- --------------------------------------------------------------------------------
FINANCIAL ADVISOR Ambient Capital Group, Inc. ("Ambient")
ROLE: As Financial Advisor to the Company Ambient agrees to
render consulting advice with respect to issues such
as:
1. Completing additional due diligence on the Company and providing ideas
to the Company for revisions to its Business Plan.
2. Assisting the Company in selecting and supervising a recognized expert
to write an independent research report on the Company's technology.
3. Planning and executing capital structure strategies.
4. Developing approaches for linking clinical trial strategies to
financing and corporate partnering strategies.
5. Developing analytic information useful in determining the best
financial strategies such as financial modeling and valuation and
review of the Company with respect to comparable public company
investment options.
6. Developing approaches for improving access to capital markets and
improving shareholder value by assisting in the creation of investor
oriented communications (such as "road show" slides), selecting and
managing financial public relations and other professionals, market
markers, security research, and other elements useful in increasing
shareholder value.
7. Attend road show meetings for any Ambient lead or co-managed financing
not attended by the co-manager.
8. With reasonable notice, review and comment on the Company's press
releases and significant communications to its shareholders.
9. Meet, or talk on the telephone, with significant potential investors
relating to an Ambient led or co-managed financing, or at the
Company's request with any 5% holder of the Company's common stock to
discuss Company matters involving Ambient.
During the terms of this agreement, Ambient shall provide the Company
with regular and customary consulting advise as is reasonably
requested by the Company with respect to the above and other
reasonably requested topics. However, it is understood and
acknowledged that the value of Ambient's advice and consulting
services cannot be measured by time alone. Thus, while Ambient shall
be obligated to render advice upon the request of the Company and
Ambient shall endeavor to do so in good faith, it is agreed that
Ambient shall not be obligated to spend any specific amount of time is
preforming its role pursuant to this agreement.
TERM Twelve months continuing month to month until either party gives 60
days notice. If Ambient terminates this engagement before the 12
month term is over, then Ambient agrees to a pro-rated cancellation of
all unexercised warrants based on the number of months that this
engagement agreement is in effect.
1
<PAGE>
ADDITIONAL TRANSACTIONS The Company shall offer Ambient the opportunity to be
engaged to raise debt and equity for the Company during
the term of the engagement. This right of first offer
shall extend to activities to which Ambient is
reasonably qualified to perform, including, but not
limited to private placements of debt and equity and
mergers and acquisitions. Each of these transactions
will be subject to separate engagement agreements which
will cover, among other things, fees and warrants that
may be earned by Ambient. Cash fees and warrants shall
be separately negotiated in good faith for each
transaction. However, the following is a general range
of the cash fees that may be anticipated for certain
types of capital raising: senior secured debt-2 to 3%
of capital amount raised, mezzanine debt-4 to 5%,
equity capital-6 to 10%. The cash fee percentages
relate to the size of the capital amount raised and the
complexity of the transaction. If Ambient refuses the
first offer to be engaged, then the Company will be
free to employ another financial advisor or manager at
its discretion, but with the advise and consul of
Ambient.
RETAINER FEE Ambient shall receive an initial retainer fee for its
services of 83,333 shares of common stock of the Company and
83,333 stock purchase warrants giving Ambient the right to
purchase five shares of common stock at $0.72 per share for
each warrant issued. These stock purchase warrants shall be
valid for a period of four years from the date of issue.
Stock and stock purchase warrants described in this section
shall be issued immediately upon signing of this agreement.
SUCCESS FEES Ambient shall receive success fees for raising equity and
debt capital, for advising on mergers and acquisitions, and
for other corporate finance transactions pursuant to
separate engagement agreements for each transaction to be
negotiated in good faith such time as the specific type
transaction and/or amount of capital to be raised is
determined. Excluded from Ambient's exclusivity, until
further review and agreement, are the following entities or
individual investors: DAW, Candland, Frazier, and Mark
Neuhaus.
EXPENSES/OTHER Reimbursement of all reasonable out-of-pocket expenses
(including fees and disbursements of legal counsel, if
required). Ambient will cooperate and consult with the
Company to control costs generally and will advise the
Company of the need and potential cost if Ambient is
required to use separate counsel. Customary indemnification
pursuant to a separate agreement. Standard anti-dilution
protection for stock splits, stock dividends, and similar
corporate events. Common stock purchased pursuant to this
agreement and all common stock underlying the stock purchase
warrants shall have standard piggy back registration rights
at no cost to Ambient. The Company agrees to pay up to
$10,000 to a consultant selected in cooperation with and
reasonably satisfactory to Ambient for the purpose of
researching and writing a summary report assessing the
Company's technology and its current and likely competing
modalities. Ambient shall not receive any part of the fee
paid to this consultant.
AGREED TO AND ACCEPTED
COMPUTERIZED THERMAL IMAGING, INC.
By: /s David B. Johnston 10-29-97
--------------------------- ----------------
David B. Johnston Date
Chairman and CEO
2
<PAGE>
AMBIENT CAPITAL GROUP, INC.
By: /s Gary M. Post 10-29-97
--------------------------- ----------------
Gary M. Post Date
Managing Director
3
<PAGE>
EXHIBIT 10(c)
ASSUMPTION OF LIABILITY AGREEMENT
THIS AGREEMENT is entered effective April 17, 1996, between COMPUTERIZED
THERMAL IMAGING, INC., a Nevada corporation ("CTI") and THERMAL IMAGING, INC.,
an Oregon corporation ("TII").
WHEREAS, CTI acquired certain technology from TII prior to 1993 which TII
had previously acquired from Dorex, Inc. (the "Dorex Technology"), for which TII
received stock in 1992; and
WHEREAS, after the acquisition of such technology by TII, and after TII
contributed that technology to CTI, Dorex, Inc. shareholders ("Dorex
Shareholders") raised claims and threatened actions against CTI for CTI's use of
the Dorex Technology; and
WHEREAS, CTI agreed on April 17, 1996, to issue 742,250 shares of stock to
TII in exchange for TII's agreement to assume the full responsibility for such
claims and the defense of CTI.
W I T N E S S E T H:
NOW, THEREFORE, in consideration of the premises, the sufficiency and
adequacy of which is hereby acknowledged, the parties agree as follows:
1. CTI issued Certificate Nos. 9194-9200 and No. 9221 for 742,250 shares
of its common stock to TII on April 17, 1996 (the "Dorex Shares") in exchange
for TII's assumption and acknowledgment of full liability for any and all
further claims, causes of action, or controversies, known or unknown as of the
Effective Date, arising out of or related to the Dorex Technology or Dorex
Shareholders.
2. TII agreed to assume the responsibility for satisfying the former
Dorex shareholders, which were identified. TII agreed to assume all liability
for any such claims made against CTI, and to assume the cost of defense for CTI
of any claims, filed by those former identified Dorex shareholders after the
Effective Date and to hold it harmless from such claims. If any agreement were
reached with any former Dorex shareholders for either cash, CTI common stock
shares, or other consideration, TII agreed to assume the responsibility to make
such payment.
3. Prior to entering this Agreement between the parties, CTI has issued
to former Dorex shareholders a total of 630,000 shares of its common stock to
satisfy such claims as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Judy Allred 1,000 Curtis Holt 50,000
Sharon Blair 1,000 Bob Ihle 50,000
Dave Braman 10,000 Richard Johnston 30,000
William Carpenter 80,000 Susan Marchant 15,000
David Fogle 3,000 Don Minson 1,000
Blake Geilmann 15,000 Robert Packer 40,000
Milton Geilmann 15,000 John Pillari 2,000
Donald B. Gartland 20,000 Kenny Roberts 40,000
Bob Grace 15,000 Paul W. Roberts 20,000
Rod Grant 1,000 John Toronto 6,000
Lloyd Hale 15,000 Holly Vance 15,000
Sandra and Lloyd Hale 15,000 Louis Woodworth 50,000
Edwin C. Harris 20,000 Reed Oldroyd 100,000
</TABLE>
4. In addition to the above identified shareholders who have satisfied
their claims, CTI and TII acknowledge potential or threatened claims from former
Dorex shareholders for which TII remains responsible (for example: Milton
Drucker and Dr. Lindsey Curtis).
1
<PAGE>
5. TII acknowledges its continuing responsibility for those shareholders
for whom the claims have not yet been satisfied. TII hereby consents to assign
its Share Certificate Nos. 9194-9200 and No. 9221 for 742,500 and to cancel
630,000 of those shares, corresponding to the claims which have been satisfied
with payment of CTI stock. CTI will accept such share certificate and will
reissue to TII 112,250 shares to TII, subject to TII's continuing liability
assumed hereunder. Any further issuance of CTI shares or other consideration
for satisfaction of such claims will be paid by TII.
6. CTI shall notify TII of any further claims made. TII shall have the
obligation to defend CTI. TII shall have the right to select counsel and to
instruct the defense counsel and to make all decisions in settlement or suit.
TII shall pay all defense costs when due. These covenants are independent. If
TII fails to provide an adequate and timely defense, CTI may provide the defense
and seek reimbursement for costs, in which case TII is liable for any reasonable
judgment or settlement.
7. CTI hereby releases TII of all claims it may have with respect to any
deficiencies in the transfer of technology originated from or related to the
Dorex technology or trade secrets.
8. This Agreement shall be governed by and construed under the laws of
the State of Nevada. Any dispute between the parties arising from or related to
this Agreement shall be resolved by binding arbitration held in Salt Lake City,
Utah. If either party notifies the other party of a dispute, the arbitration
shall be conducted in accordance with the Texas General Arbitration Act for the
selection of one arbitrator. If the parties cannot mutually agree upon an
arbitrator within fifteen (15) days of notice by either party, then the Texas
General Arbitration Act shall determine how the sole arbitrator shall be
selected. Any decision of the arbitrator shall be binding. Both parties shall
divide all arbitration costs in advance until the final award is rendered to
award costs.
9. The parties agree that the contents of this Agreement, prepared on the
19th day of June 1997 to acknowledge the agreement among the parties made on or
before April 17, 1996, and to acknowledge the claims which have now been
resolved, are confidential and should not be disclosed to any party for general
publication, other than disclosure to auditors of the parties and as may be
required by law. The party disclosing the contents of this Agreement shall be
liable to the other for any foreseeable damages arising from inducement or
encouragement of a former shareholder to file a claim.
COMPUTERIZED THERMAL IMAGING, INC.
By: /s/ David B. Johnston
-------------------------------
THERMAL IMAGING, INC.
By: /s/ David B. Johnston
-------------------------------
2
<PAGE>
EXHIBIT 10(d)
INVESTMENT AGREEMENT
INVESTMENT AGREEMENT (this "AGREEMENT") dated as of January ____, 1998
between Bristol Asset Management LLC, a limited liability company organized and
existing under the laws of Delaware (the "INVESTOR"), and Computerized Thermal
Imaging, Inc., a corporation organized and existing under the laws of the State
of Nevada (the "COMPANY").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Investor shall invest up to $7,000,000 in the
Company's Common Stock, par value $.0001 per share (the "COMMON STOCK").
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE OF COMMON STOCK; ISSUANCE OF WARRANTS
Section 1.1 Purchase and Sale of Common Stock. Upon the terms and
subject to the conditions set forth herein, the Company shall issue and sell to
the Investor, and the Investor shall purchase from the Company, up to $7,000,000
of Common Stock, such stock to be valued as provided in Section 1.3(b) herein.
Section 1.2 Delivery of Put Notices.
(a) At any time prior to the earlier of (i) the date which is three
years from the effective date of the Registration Statement (as defined below)
or (ii) termination of this Agreement in accordance with Article 5 herein, the
Company may deliver written notices to the Investor (each such notice
hereinafter referred to as a "PUT NOTICE") in the form of the Put Notice annexed
to this Agreement as Exhibit A stating a dollar amount (the "DOLLAR AMOUNT") of
Common Stock which the Company intends to sell to the Investor five business
days following the date (the "PUT NOTICE DATE") on which the Put Notice is given
to the Investor by the Company in accordance with Section 6.4 herein, provided
that each Put Notice Date and Dollar Amount shall be subject to Section 1.3(a)
below. "BUSINESS DAY(S)" shall mean any day on which the New York Stock
Exchange is open for trading. The Dollar Amount designated by the Company in
any given Put Notice shall be an amount equal to at least $50,000, which may be
increased by the Company in increments of $25,000, provided that the Investor,
in its sole discretion, may refuse to invest a portion of a Dollar Amount
designated by the Company in a Put Notice to the extent that such portion of the
Dollar Amount would result in the Investor beneficially owning more than 4.9% of
the Common Stock outstanding on the Put Notice Date (including without
limitation Common Stock deemed beneficially owned by the Investor pursuant to
the Warrants (as defined below)), as determined in accordance with Section 13(d)
of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and the
regulations promulgated thereunder. The Put Notice shall include a
representation of the Company as to the Common Stock outstanding on the Put
Notice Date as determined in accordance with Section 13(d) of the Exchange Act.
In the event that the amount of Common Stock outstanding as determined in
accordance with Section 13(d) of the Exchange Act and the regulations
promulgated thereunder is different on a Closing Date (as defined below) than on
the Put Notice Date associated with such Closing Date, the amount of Common
Stock outstanding on such Closing Date shall govern for purposes of determining
whether the Investor would own more than 4.9% of the Common Stock as of such
Closing Date.
(b) Notwithstanding any of the foregoing, the Company may not deliver
a Put Notice if (i) trading of the Common Stock on the principal market on which
it is then traded (the "PRINCIPAL MARKET") is then suspended or the Common Stock
is then delisted from the Principal Market, (ii) the closing price of the Common
Stock on the Principal market is less than $.15 per share (appropriately
adjusted for any stock splits, reverse splits or combinations, stock dividends
and similar events) and, (iii) the Registration Statement is not effective or is
subject to a stop order or is otherwise suspended, (iv) the Dow Jones Industrial
Average has dropped more than 5% within the preceding five business days, or (v)
the Common Stock is not then registered under the Exchange Act. If any of the
events described in clauses (i), (ii), (iii), (iv) or (v) above occurs after a
Put Notice is delivered but prior to the Closing
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associated with such Put Notice, such Put Notice shall be null, void and of
no force and effect and a new Put Notice shall be required following the
termination of any such event.
Section 1.3 Determination of Share Number; Valuation Period
(a) Within ten days after the end of each calendar month at the
option of the Company it may require a purchase of Common Stock by the Investor,
subject to the procedures set forth in Section 1.2(a), in a maximum amount not
to exceed the lesser of (i) $7,000,000 less all amounts previously paid by the
Investor pursuant to this Section 1.3(a) and (ii) the product of (x) the number
of shares of Common Stock of the Company traded on the Principal Exchange on
which the Common Stock traded for the preceding calendar month, multiplied by
(y) the average of the closing bid prices noted in Bloomberg (or other
appropriate published source) for the Common Stock during the prior calendar
month, multiplied by (z) 14%.
For example, if a total of 1,000,000 shares of Common Stock traded
during January of a particular year on the Principal Exchange and the average of
the closing bid prices was $2.00, on or before February 10 the Company could
request a draw down not to exceed 14% of the $2,000,000 or $280,000, so long as
such amount was available under this Agreement.
(b) Simultaneously with the receipt of the funds from the Investor in
the amount of the draw down the Company shall issue and sell to the Investor and
the Investor shall be deemed to have purchased, in consideration of the funds so
drawn down, the number of shares of Common Stock equal to the draw down divided
by 74% of the lowest sales price for the Common Stock on the Principal Exchange
and as noted in Bloomberg (or other appropriate published source) (the "LOWEST
SALE PRICE" during the ten trading days prior to the Put Notice Date (the "LOOK
BACK PERIOD"). For example, if the Lowest Sale Price for the Look Back Period
was $2.00 and the draw down was $500,000, the number of shares of Common Stock
to be issued would be 337,837 shares.
(c) Notwithstanding the foregoing, in the event that the Lowest Sale
Price during the twenty trading days after a particular Closing (as defined
below) is less than 95% of the Lowest Sale Price applicable to such Closing,
then the Company shall promptly issue to the Investor an additional number of
shares of Common Stock with respect to such Closing such that the number of
shares of Common Stock issued to the Investor at such Closing plus such
additional number of shares are equal to the funds drawn down at such Closing
divided by 74% of the Lowest Sale Price during such twenty trading day period.
The Investor shall also be issued additional Warrants equal to 12% of the number
of additional shares so issued and the exercise price of such additional
Warrants and the Warrants issued at such Closing shall be adjusted to 100% of
the Lowest Sale Price during such twenty trading day period.
(d) The Company shall not be required to issue fractions of shares of
Common Stock and instead shall refund to the Investor an amount equal to the
fraction which would otherwise have been issued times 74% of the lowest sales
price for the Common Stock during the Look Back Period determined as provided in
Section 1.3(b) above.
Section 1.4 Closing.
(a) Each Closing of a purchase and sale of Common Stock (a "CLOSING")
shall take place at the offices of the Company, at 10:00 a.m., local time on the
fifth business day following the Put Notice Date to which such Closing relates
or the earliest date thereafter on which all conditions to Closing have been
satisfied. Each date on which a Closing occurs is referred to herein as a
"CLOSING DATE."
(b) On each Closing Date, the Investor shall deliver to the Company
the Dollar Amount with respect to such Closing by cashier's check or wire
transfer to such account as shall be designated in writing by the Company. On
each Closing Date, the Company shall deliver to the Investor certificates
representing the number of shares to be issued and sold to the Investor on such
date and registered in the name of the Investor. In addition, each of the
Company and the Investor shall deliver all documents, instruments and writings
required to be delivered by either of them pursuant to this Agreement at or
prior to each Closing.
(c) On each Closing Date, except as provided in Section 1.4(d) below,
the Company shall also deliver to the Investor warrants in the form annexed to
this Agreement as Exhibit B ("WARRANTS") to purchase shares
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of Common Stock (the "WARRANT SHARES"), which Warrants shall expire on the
fifth anniversary of the date of issuance thereof. The Warrants issuable at
any Closing shall entitle the holder thereof to purchase a number of Warrant
Shares equal to 12% of the number of shares of Common Stock purchased at the
Closing in question at an initial exercise price, subject to the provisions
of Section 1.3(c) above, equal to 100% of the average closing sales price for
the Common Stock on the Principal Exchange and as noted by Bloomberg (or
other appropriate published source) during the Look Back Period in question.
(d) (i) To the extent that the Company has not delivered Put
Notices to the Investor on or before one year from the date of this Agreement
in an aggregate Dollar Amount equal to the lesser of (a) $2,333,333 and (b)
the maximum Dollar Amount with respect to which Put Notices could have been
delivered prior to such date, then any Warrants which have not theretofore
been delivered to the Investor which would have been issued had such Put
Notices been delivered shall promptly be issued to the Investor.
(ii) To the extent that the Company has not delivered Put
Notices to the Investor on or before two years from the date of this
Agreement in an aggregate Dollar Amount equal to the lesser of (a) $4,666,667
and (b) the maximum Dollar Amount with respect to which Put Notices could
have been delivered prior to such date, then any Warrants which have not
theretofore been delivered to the Investor which would have been issued had
such Put Notices been delivered shall promptly be issued to the Investor.
(iii) To the extent that the Company has not delivered Put
Notices to the Investor on or before the termination of this Agreement in an
aggregate Dollar Amount equal to the lesser of (a) $7,000,000 and (b) the
maximum Dollar Amount with respect to which Put Notices could have been
delivered prior to such date, then any Warrants which have not theretofore been
delivered to the Investor which would have been issued had such Put Notices been
delivered shall promptly be issued to the Investor.
On each Closing Date subsequent to the issuance of Warrants pursuant to
this Section 1.4(d), notwithstanding the provisions of Section 1.4(b) above, the
Company shall only be obligated to issue Warrants pursuant to Section 1.4(b) at
such times as and to the extent that the total Dollar Amount of Put Notices
delivered to the Investor exceeds the Dollar Amount set forth in the clause
pursuant to which the Warrants were issued. For example, if Warrants are issued
pursuant to clause (i) above, then no Warrants shall thereafter be issuable
pursuant to Section 1.4(b) until such time as the aggregate Dollar Amount of Put
Notices delivered to the Investor pursuant to this Agreement exceeds $2,333,333.
Section 1.5. Registration.
(a) The Company agrees that all shares of Common Stock issued to the
Investor pursuant to this Agreement shall, at the time of such issuance and for
so long thereafter as is required by this Agreement, be subject to an effective
registration statement on Form S-1 or an equivalent thereof, covering both the
issuance of such shares by the Company to the Investor hereunder and the resale
or other disposition thereof by the Investor at any time and from time to time
after each such issuance and, with respect to the Warrant Shares, covering both
the issuance of the Warrant Shares and the resale or other disposition by the
holders thereof at any time and from time to time after each such issuance. The
shares of Common Stock to be issued to the Investor pursuant to this Agreement
and any Warrant Shares are collectively referred to as the "SHARES." The
Company agrees that the Registration Statement described in this Section 1.5(a)
(together with all amendments and supplements thereto, the "REGISTRATION
STATEMENT") shall, in accordance with Section 1.5(c) below, remain effective
pursuant to the provisions of the Securities Act of 1933, as amended (the
"SECURITIES ACT"), or otherwise, (x) in the case of any Registration Statement
covering Shares issued pursuant to this Agreement at all times during the term
of this Agreement and for a period of 90 days after termination of this
Agreement and (y) in the case of any Registration Statement covering the Warrant
Shares at all times during the term of the Warrant and for a period of three
years thereafter (as applicable, the "REGISTRATION PERIOD").
(b) The Company shall use its best efforts in order that the
Registration Statement may become effective within 90 days of the date of this
Agreement.
(c) The Company shall, as expeditiously as reasonably possible and in
accordance with Section 1.5(a) herein:
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(i) Prepare and file with the Securities and Exchange Commission
(the "SEC") such amendments and supplements to such Registration Statement and
the prospectus used in connection therewith as may be necessary to comply with
this Agreement and the provisions of the Securities Act with respect to the
issuance and disposition of all securities covered by such Registration
Statement.
(ii) Furnish to the Investor and any Warrant Holders, as the case
may be, such numbers of copies of a prospectus, in conformity with the
requirements of the Securities Act, and such other documents as the Investor and
Warrant Holders, as the case may be, may reasonably require in order to
facilitate the disposition of shares sold pursuant to this Agreement or issued
pursuant to the Warrant.
(iii) Insure that all Shares subject to the Registration
Statement shall at all times during the applicable Registration Period be
registered and qualified under such other securities or "Blue Sky" laws of such
jurisdictions as shall be reasonably requested by the Investor and/or the
Warrant Holders, as the case may be, provided that the Company shall not be
required in connection herewith or as a condition hereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions.
(iv) Notify the Investor and/or any Warrant Holders of the
happening of any event or the existence of any circumstance as a result of which
the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing and as soon as may be
practicable prepare and file with the SEC such amendments and supplements to
such Registration Statement and prospectus used in connection therewith as may
be necessary to eliminate or correct such untrue statement or omission and
otherwise to cause such Registration Statement and prospectus to remain current
and useable for the purposes intended hereunder.
(v) Make available for inspection by the Investor's designated
representatives upon request from time to time, all documents filed by the
Company with the SEC (including any documents which may be filed pursuant to the
Exchange Act), require the Company's officers and, to the extent reasonably
necessary to enable the Investor's designated representatives to conduct
reasonably appropriate due diligence with respect to each Put Notice, the
Company's employees to supply all information reasonably required by the
Investor's designated representatives in connection with the Registration
Statement, require the Company's officers and, to the extent reasonably
necessary to enable the Investor's designated representatives to conduct
reasonably appropriate due diligence, the Company's employees to meet with
representatives of the Investor's designated representatives during normal
business hours and on such basis as the Investor's designated representatives
may reasonably request, and make available to the Investor's designated
representatives, contemporaneously with the provision of such information, any
and all information about the Company provided by the Company to securities
analysts. In addition, the Company will permit Investor's designated
representatives access to the Company's premises and personnel, consultants,
agents, attorneys, accountants, customers, suppliers, bankers and others who
have significant relationships or agreements with the Company and the Company's
assets, books and records and the Company will provide Investor's designated
representatives with information (financial and otherwise) concerning the
Company to enable the Investor's designated representatives to conduct
reasonably appropriate ongoing due diligence review of the Company. The Company
will disseminate to the Investor's designated representatives all press releases
and public information disseminated by the Company at the same time it
disseminates such releases and information to others.
As a condition to the Company's obligations under this subparagraph (v),
Investor's designated representatives shall enter into a confidentiality
agreement with the Company in form and substance reasonably satisfactory to the
Company.
(vi) Except as required, in the opinion of the Company's counsel,
by law or consented to in advance by the Investor (which consent shall not be
unreasonably withheld), refrain from using the name of the Investor in the
Registration Statement or other regulatory filings.
(d) (i) The Company shall indemnify, defend and hold harmless
the Investor and Warrant Holders and each of their respective officers,
directors, partners, employees, agents and counsel and each person, if any, who
control any such person within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act
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(each, an "INDEMNIFIED PARTY") from and against, and shall reimburse the
Indemnified Parties with respect to, any and all claims, suits, demands,
causes of action, losses, damages, liabilities, costs or expenses
("LIABILITIES") to which such Indemnified Parties may become subject under
the Securities Act or otherwise, arising from or relating to (A) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement or any prospectus contained therein, or (B) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, however,
that the Company shall not be liable in any such case to the extent that any
such Liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission so made in conformity with
information furnished by the Investor or any Warrant Holder in writing
specifically for use in the preparation thereof.
(ii) The Investor and/or the Warrant Holder, as the case may be,
shall indemnify, defend and hold harmless the Company and each of its respective
officers, directors, partners, employees, agents and counsel and each person, if
any, who control any such person within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act (each, an "INDEMNIFIED PARTY")
from and against, and shall reimburse the Indemnified Parties with respect to,
any and all Liabilities to which such Indemnified Parties may become subject
under the Securities Act or otherwise, arising from or relating to (A) any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement or any prospectus contained therein, or (B) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, in each case to the
extent and only to the extent that any such Liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by the Investor or the
Warrant Holder, as the case may be, in writing specifically for use in the
preparation thereof.
(iii) Promptly after receipt by the an Indemnified Party of
notice of the commencement of any action, the Indemnified Party shall, if a
claim in respect thereof is to be made against the other party (the
"Indemnifying Party") hereunder, notify the Indemnifying Party in writing
thereof, but the omission so to notify the Indemnifying Party shall not relieve
the Indemnifying Party from any Liability which it may have to any Indemnified
Party other than under this section and shall only relieve it from any Liability
which it may have to the Indemnified Party under this section if and to the
extent the Indemnifying Party is materially prejudiced by such omission. In
case any such action shall be brought against an Indemnified Party and the
Indemnified Party shall notify the Indemnifying Party of the commencement
thereof, the Indemnifying Party shall be entitled to participate in and, to the
extent it shall wish, to assume and undertake the defense thereof with counsel
reasonably satisfactory to the Indemnified Parties and, after notice from the
Indemnifying Party to the Indemnified Parties of its election so to assume and
undertake the defense thereof, the Indemnifying Party shall not be liable to the
Indemnified Parties under this section for any legal expenses subsequently
incurred by the Indemnified Party in connection with the defense thereof other
than reasonable costs of investigation and of liaison with counsel so selected,
provided, however, that if the defendants in any such action include both the
Indemnifying Party and an Indemnified Party and the Indemnified Party shall have
reasonably concluded that there may be reasonable defenses available to it which
are different from or additional to those available to the Indemnifying Party
if the interests of an Indemnified Party reasonably may be deemed to conflict
with the interests of the Indemnifying Party, the Indemnified Parties, shall
have the right to select a separate counsel and to assume such legal defenses
and otherwise to participate in the defense of such action, with the reasonable
expenses and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the Indemnifying Party as incurred. If the
Investor is a defendant in such action, the Investor shall select such separate
counsel to represent the Investor and all Indemnified Parties; however, if the
Investor is not a defendant, such separate counsel shall be selected by the
majority of the Indemnified Parties named as defendants. The legal fees and
expenses of any Indemnified Party choosing not to be represented by such
separate counsel selected by the Investor or the majority of the Indemnified
Parties , as the case may be, shall be borne by such Indemnified Party.
(e) If the indemnification provided for in Section 1.5(c) above is
unavailable to an Indemnified Party in respect of any Liabilities, then the
Indemnifying Party, in lieu of indemnifying the Indemnified Party shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Liabilities, such proportion of such Liabilities as is appropriate to
reflect the relative fault of the Indemnifying Party and of the Indemnified
Party in connection with such statements or omissions described in Section
1.5(d)(i) or (ii) above, as well as any other relevant equitable considerations.
The relative fault of the Indemnifying Party and of the Indemnified Party shall
be
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determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Indemnifying
Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. "Liabilities" pursuant to this Section 1.5(e) and
Section 1.5(d) shall be deemed to include without limitation any legal or
other expenses reasonably incurred by the Indemnified Parties in connection
with investigating or defending any action or claim by a third party and in
connection with any enforcement of this Section 1.5(e) and Section 1.5(d).
(f) (i) All legal, accounting and other fees, costs and expenses of
and incidental to the Registration Statement (including without limitation the
fees, costs and expenses of the designated representatives as provided in
Section 1.5(c)(v) and the fees, costs and expenses of the Investor's counsel)
shall be borne by the Company (other than such fees, costs and expenses as are
in the nature of commissions incurred in connection with the sale of Shares by
the Investor or any Warrant Holder).
(ii) The fees, costs and expenses or registration to be borne by
the Company as provided in this subsection (e) shall include, without
limitation, all registration, filing and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for the Company and all legal fees and
disbursements and other expenses of complying with state securities or "Blue
Sky" laws of any jurisdiction or jurisdictions in which securities to be offered
are to be registered and qualified.
Section 1.6 Distributions. In the event the Company delivers a Put
Notice, the Company shall not make any distributions to its shareholders
(including without limitation any rights to purchase securities or properties)
from the beginning of the Look Back Period to the Closing.
Section 1.7 Delisting and Registration Statement Suspension. If within
30 days after a Closing the Common Stock is delisted from the Principal Market
or the Common Stock is not registered under the Exchange Act, the Investor shall
have the right, at its option in its sole discretion, which right shall be
exercised within 30 days of such delisting or deregistration, to sell to the
Company, and the Company agrees to buy, promptly upon the exercise of such right
by Investor, all or any part of the Shares purchased by the Investor at such
Closing at a price equal to the purchase price therefor. In addition if at any
time during the Registration Period the Registration Statement is not effective
for a 30-day period or if the Investor and/or the Warrant Holders are not
otherwise able to sell their Shares pursuant to the Registration Statement for a
30-day period, then the Investor and/or the Warrant Holder, as the case may be,
shall have the right, at their option in their sole discretion, which right
shall be exercised within 90 days after such 30-day period, to sell to the
Company, and the Company agrees to buy, promptly upon the exercise of such
right, all or any part of the Shares then held by the Investor and/or the
Warrant Holder, as the case may be and/or the Warrants held by the Warrant
Holder at a price equal to the average closing sales prices for the Common Stock
on the Principal Market and as noted by Bloomberg (or other appropriate
published source) for the ten trading days prior to the exercise of such right
(less any applicable exercise price for unexercised Warrants).
Section 1.8 Right to Verify Information. The Investor shall have the
right, at the Company's expense, on a quarterly basis to have an accounting firm
selected by the Investor verify such financial and numeric information
concerning the Company as the Investor may reasonably request, including without
limitation any such information which is included in and/or incorporated by
reference in the Registration Statement. The Company shall give such accounting
firm full access to its officers, directors, personnel and records and to such
other parties as the accounting firm may reasonably request. Such verification
shall be conducted during the Company's normal business hours and upon
reasonable notice, and may not be conducted more than once during any calendar
quarter during the term of this Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of the Company. The Company
makes the following representations and warranties to the Investor as of the
date hereof and as of each Closing Date:
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(a) Organization and Qualification. The Company is a corporation
duly incorporated and existing in good standing under the laws of the State of
Nevada and has the requisite corporate power to own its properties and to carry
on its business as now being conducted. Each of the Company and its
subsidiaries 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 and where
the failure to so qualify would have a Material Adverse Effect. "MATERIAL
ADVERSE EFFECT" means any adverse effect on the operations, properties,
prospects or financial condition of the Company and its subsidiaries which is
material to the Company and its subsidiaries taken as a whole.
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and perform this Agreement and to
issue all Shares and Warrants in accordance with the terms hereof and thereof.
The execution and delivery of this Agreement and the Warrants by the Company and
the consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors or stockholder is
required. This Agreement has been and the Warrants will be duly executed and
delivered by the Company. This Agreement constitutes and the Warrants will
constitute a valid and binding obligation of the Company enforceable against the
Company in accordance with their respective terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application.
(c) Capitalization. As of January __, 1998 the authorized capital
stock of the Company and the shares thereof currently issued and outstanding
(and shares subject to issuance upon outstanding options, warrants and/or
convertible securities) are as follows: _____________________________________
____________________. All of the outstanding shares of Common Stock have been
validly issued and are fully paid and non-assessable.
(d) Issuance of Shares. The issuance of all Shares and Warrants to
be issued hereunder has been duly authorized and all such Shares, when paid for
and issued in accordance with the terms hereof and the Warrants, shall be
validly issued, fully paid and non-assessable. The Company has authorized and
reserved for issuance the requisite number of shares of Common Stock to be
issued pursuant to the Warrants.
(e) Agreements. There has been no breach or default by the Company
or by any other party thereto of any provisions of any material agreements to
which the Company is a party which would result in a Material Adverse Effect,
and nothing has occurred which, with lapse of time or the giving of notice of
both, would constitute such a breach or default by the Company by any other
party thereto.
(f) Brokers. The Investor shall not be responsible for any fees of
any broker, finder, commission agent or other person employed by the Company in
connection with this Agreement and the transactions contemplated hereby.
(g) No Conflicts. The execution, delivery and performance of this
Agreement and the Warrants by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby do not and will not (i) result
in a violation of the Company's charter documents or by-laws or (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company is a party, or 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). The business of the Company is not
being conducted in violation of any law, ordinance or regulations of any
governmental entity, except for violations which either singly or in the
aggregate do not have a Material Adverse Effect. The Company is not required
under 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 any shares in accordance with the terms hereof
(other than the filing and effectiveness of the Registration Statement and
compliance with applicable state securities or "Blue Sky" laws).
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(h) SEC Documents, Financial Statements. Upon the effectiveness of
the Registration Statement and at all times thereafter the Common Stock will be
registered pursuant to Section 12(g) of the Exchange Act, and the Company will
timely file all reports, schedules, forms, statements and other documents,
together with all exhibits, financial statements and schedules thereto, required
to be filed by it with the SEC pursuant to the reporting requirements of the
Exchange Act, including material filed pursuant to Section 13(a) or 15(d) (all
of the foregoing, including materials hereafter filed with the SEC, and the
Registration Statement, when declared effective, being hereinafter referred to
herein as the "SEC DOCUMENTS"). As of their respective dates, the SEC Documents
will comply in all material respects with the requirements of the Exchange Act
or the Securities Act, as the case may be, and the rules and regulations of the
SEC promulgated thereunder and other Federal, state and local laws, rules and
regulations applicable to such SEC Documents, and none of the SEC Documents will
contain any untrue statement of a material fact or omit 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 are made, not
misleading. As of the date of delivery by the Investor and/or a holder of
Warrant Shares of the prospectus contained in the Registration Statement in
connection with sales of Shares by the Investor and/or holder of Warrant Shares,
such prospectus will comply in all material respects with the requirements of
the Securities Act and the rules and regulations of the SEC promulgated
thereunder, and other Federal, state and local laws, rules and regulations
applicable to such prospectus. The financial statements of the Company included
in the SEC Documents will comply as to form 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 will have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except (x) as may be otherwise indicated in such financial statements
or the notes thereto or (y) in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed or summary statements)
and will 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).
(i) The SEC has not issued an order preventing or suspending the use
of any prospectus relating to the offering of any Shares nor instituted
proceedings for that purpose.
(j) No Material Adverse Change. No Material Adverse Effect has
occurred since the date of this Agreement or exists with respect to the Company.
(j) No Undisclosed Events or Circumstances. No material event or
circumstance has occurred or exists with respect to the Company or its business,
properties, prospects, operations or financial condition, which would be
required to be disclosed by the Company under the Exchange Act or other
applicable law but which has not been so publicly announced or disclosed.
Section 2.2 Representations and Warranties of the Investor. The
Investor makes the following representations and warranties to the Company as of
the date hereof and as of each Closing Date (or such later date as the Investor
makes the deliveries referred to in Section 3.1(d)):
(a) Authorization; Enforcement. The Investor is duly organized and
validly existing under the laws of Delaware. The Investor has the requisite
power and authority to enter into and perform this Agreement and to purchase the
Shares to be sold hereunder. The execution and delivery of this Agreement by
the Investor and the consummation by it of the transactions contemplated hereby
have been duly authorized by all necessary corporate or other action, and no
further consent or authorization of the Investor is required. This Agreement
has been duly authorized, executed and delivered by the Investor. This
Agreement constitutes a valid and binding obligation of the Investor enforceable
against the Investor in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application.
(b) No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by the Investor of the transactions contemplated
hereby or relating hereto do not and will not (i) result in a violation of the
Investor's charter documents or (ii) conflict with, or constitute a default (or
an event which with notice of lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Investor is
a party, or result in
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a violation of any law, rule, or regulation, or any order, judgment or decree
of any court or governmental agency applicable to the Investor or any of its
properties (except for such conflicts, defaults and violations as would not
individually or in the aggregate have a material adverse effect on the
Investor or a Material Adverse Effect on the Company or the transactions
contemplated hereunder). The Investor is not required 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 purchase securities in accordance
with the terms hereof.
(c) Opportunity for Review. The Investor has been afforded, to the
satisfaction of the Investor, the opportunity to review the SEC Documents and
obtain such additional information concerning the Company and its business, and
to ask such questions and receive such answers, as the Investor deems necessary
to make an informed investment decision and to evaluate the merits and risks of
an investment in shares of Common Stock and the Warrants.
(d) Investment Representation. The Investor is an "accredited
investor" as that term is defined by the Securities Act. The Investor is
purchasing the shares of Common Stock and the Warrants for its own account.
The Investor has no present intention to sell any such securities (or shares
of Common Stock issuable upon exercise of the Warrants) except in compliance
with the Securities Act, and the Investor has no present arrangement (whether
or not legally binding) at any time to sell any such securities (or shares of
Common Stock issuable upon exercise of the Warrants) to or through any person
or entity except in compliance with the Securities Act.
ARTICLE 3
COVENANTS
Section 3.1 Securities Compliance.
(a) The Company shall notify the SEC and the Principal Market and any
other applicable market in accordance with their requirements, if any, of the
transactions contemplated by this Agreement and shall take all other necessary
action and proceedings as may be required by applicable law, rule and regulation
for the legal and valid issuance of all securities to be issued to the Investor
hereunder.
(b) The Company will cause its Common Stock to continue to be
registered under Section 12 of the Exchange Act, will comply in all material
respects with its reporting and filing obligations under said act, will comply
in all material respects with its reporting and filing obligations under said
act, will comply with all requirements related to the Registration Statement,
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
Statement or to terminate or suspend its reporting and filing obligations under
the Exchange Act, expect as permitted herein. The Company will take all action
necessary to continue the listing or trading of its Common Stock on the
Principal Market and will comply in all material respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the
Principal Market.
Section 3.2 Preliminary Put Notice. The Company shall deliver to the
Investor, at least ten calendar days prior to the delivery of each Put Notice, a
Preliminary Put Notice which notice shall state that the Company is considering
delivery of a Put Notice to the Investor ten or more calendar days following
delivery of the Preliminary Put Notice. In no event shall delivery of a
Preliminary Put Notice to the Investor obligate the Company to deliver any Put
Notice to the Investor.
ARTICLE 4
CONDITIONS
Section 4.1 Conditions Precedent to the Obligation of the Company to
Issue Warrants and Sell Shares. The obligation hereunder of the Company to
issue Warrants and/or sell shares of Common Stock hereunder to the Investor is
further subject to the satisfaction at or before each Closing of each of the
following conditions set forth
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below. These conditions are for the Company's sole benefit and may be waived
by the Company at any time in its sole discretion.
(a) Accuracy of the Investor Representations and Warranties. The
representations and warranties of the Investor shall be true and correct in all
material respects as of the date when made and as of the date of each Closing
Date as though made at that time.
(b) Performance by the Investor. The Investor shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Investor at or prior to such Closing.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
Section 4.2 Conditions Precedent to the Obligation of the Investor to
Purchase any Shares. The obligation of the Investor to purchase any Shares
under this Agreement is subject to the satisfaction, at or before each Closing,
of each of the following conditions set forth below. These conditions are for
the Investor's sole benefit and may be waived by the Investor at any time in its
sole discretion.
(a) 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 the date when made and as of each Closing Date as though
made at that time (except for representations and warranties that speak as of a
particular date or refer to a particular point in time).
(b) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to such Closing.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(d) No Adverse Change. There shall have been no adverse change in
the business, assets, liabilities or prospects of the Company since the date of
this Agreement which the Investor reasonably believes would have a Material
Adverse Effect.
(e) Principal Market. Trading in the Company's Common Stock shall
not have been suspended by the SEC or the Principal Market, and trading in
securities generally as reported by the Principal Market shall not have been
suspended or limited or minimum prices shall not have been established on
securities whose trades are reported by the Principal Market.
(f) Opinion of Counsel, Etc. At each Closing the Investor shall have
received an opinion of Looper, Reed, Mark and McGraw, counsel to the Company,
dated the effective date of such Closing concerning such matters as the Investor
shall reasonably require, and such other certificates, opinions of other
counsel, and documents as the Investor or its counsel shall reasonably require
incident to such Closing.
(g) Effectiveness of Registration Statement. The Registration
Statement shall be effective at the time of each Closing and no stop order
suspending the effectiveness of the Registration Statement shall have been
instituted or shall be pending.
(h) Accuracy of Registration Statement. The Registration Statement
(including information or documents incorporated by reference therein) and any
amendments or supplements thereto shall 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 light of the circumstances under
which they were made, not misleading.
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(i) Officer's Certificate. At each Closing the Investor shall have
received a certificate(s) from the CEO and/or CFO of the Company concerning such
matters as the Investor shall reasonably require incident to such Closing.
(j) The Investor shall be satisfied with the verifications
theretofore provided by the accounting firm selected by the Investor in
accordance with Section 1.8 hereof.
(k) The Company shall no longer have pre-emptive rights with respect
to its Common Stock.
ARTICLE 5
TERMINATION
Section 5.1 Optional Termination. This Agreement may be terminated at
any time by the mutual consent of the Company and the Investor, or at any time
upon written notice delivered to the Investor by the Company, provided that the
provisions of Article 6 and the representations, warranties and covenants
contained in this Agreement shall survive its termination for four years or the
period of any applicable statute of limitations, if longer.
Section 5.2 Automatic Termination. This Agreement shall automatically
terminate without any further action of either party hereto when (a) the
Investor has invested an aggregate of $7,000,000 in the Common Stock pursuant to
this Agreement, provided that the provisions of Article 6 and the
representations, warranties and covenants contained in this Agreement shall
survive its termination for four years or the period of any applicable statute
of limitations, if longer.
Section 5.3 Change in Control. From and after the date hereof, at the
Investor's election upon any Change of Control (as defined below) the Company
shall no longer have the right to deliver any Put Notice to the Investor. A
"CHANGE OF CONTROL" shall mean any transaction or series of transactions which
results in any person or affiliated group of persons gaining control of 50% or
more of the voting stock of the Company or the right to elect 50% or more of the
Company's Board of Directors.
ARTICLE 6
MISCELLANEOUS
Section 6.1 Fees and Expenses. The Company shall pay the fees and
expenses of the Investor incident to the negotiation, preparation, execution and
delivery of this Agreement. The Company shall pay all stamp and other taxes and
duties levied in connection with the issuance of any Shares issued pursuant
hereto.
Section 6.2 Specific Enforcement; Consent to Jurisdiction.
(a) The Company and the Investor acknowledge and agree that
irreparable damage would occur 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 parties 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, this
being in addition to any other remedy to which either of them may be entitled by
law or equity.
(b) Each of the Company and the Investor (i) hereby irrevocably
submits to the exclusive jurisdiction of the Federal and state courts in Los
Angeles County, California for the purposes of any suit, action or proceeding
arising out of or relating to this Agreement and (ii) hereby waives, and agrees
not to assert in any such suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that the suit, action
or proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. Each of the Company and the Investor consents
to process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this paragraph shall affect
or limit
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any right to serve process in any other manner permitted by law. The
prevailing party in any such suit, action or proceeding shall be entitled to
attorney's fees and costs.
Section 6.3 Entire Agreement; Amendments. This Agreement contains the
entire understanding of the parties with respect to the transactions
contemplated hereby and, except as specifically set forth herein, neither the
Company nor the Investor makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement may be
waived or amended other than by a written instrument signed by the party against
whom enforcement of any such amendment or waiver is sought.
Section 6.4 Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be effective upon
hand delivery or delivery by facsimile at the address or number designated below
(if delivered on a business day during normal business hours where such notice
is to be received). The addresses for such communications shall be:
to the Company: Computerized Thermal Imaging, Inc.
141 North State Street
Suite 161
Lake Oswego, OR 97034
Facsimile No. (503) 650-8551
with copies to: Jim Forbes
1147 Manhattan Avenue, #134
Manhattan Beach, CA 90266
Facsimile No. (310) 796-4546
to the Investor: Bristol Asset Management LLC
10990 Wilshire Boulevard, Suite 1800
Los Angeles, CA 90024
Attn: Paul Kessler
Facsimile No. (310) 451-8704
with copies to: Christensen, Miller, Fink, Jacobs,
Glaser, Weil & Shapiro, LLP
2121 Avenue of the Stars, l8th fl.
Los Angeles, CA 90067
Attn: Stephen D. Silbert, Esq.
Facsimile No. (310) 556-2920
Either party hereto may from time to time change its address for notices
under this Section 6.4 by giving written notice of such changed address to
the other party hereto.
Section 6.5 Waivers. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof, nor shall any delay or omission
of either party to exercise any right hereunder in any manner impair the
exercise of any such right accruing to it thereafter. The parties hereto
waive any and all rights to a jury trial in connection with any action or
proceeding arising under this Agreement or the transactions contemplated
hereby.
Section 6.6 Headings. The headings herein are for convenience only,
do not constitute a part of this Agreement and shall not be deemed to limit
or affect any of the provisions hereof.
Section 6.7 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their permitted successors
and permitted assigns. The parties hereto may amend this Agreement without
notice to or the consent of any third party. Neither the Company nor the
Investor shall assign this Agreement or any rights or obligations hereunder
without the prior written consent of the other (which consent may be withheld
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for any reason in the sole discretion of the party from whom consent is
sought); provided, however, that the Company may assign its rights and
obligations hereunder as a result of any merger or to any acquirer of
substantially all of the assets of the Company.
Section 6.8 No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted
successors and assigns and is not for the benefit of, nor may any provisions
hereof be enforced by, any other person.
Section 6.9 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of
California, without regard to the principles of conflict of laws.
Section 6.10 Execution. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event any signature is delivered by
facsimile transmission, the party using such means of delivery shall cause
two additional executed signature pages to be physically delivered to the
other party within five days of the execution and delivery hereof.
Section 6.11 Publicity and Confidentiality. The Company and the
Investor shall consult and cooperate with each other in issuing any press
releases or otherwise making public statements with respect to the
transactions contemplated hereby, provided the foregoing shall not interfere
with the legal obligations of either party with respect to public disclosure.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the date hereof.
"The Company"
Computerized Thermal Imaging, Inc.
By: /s/ David B. Johnston
----------------------------------------
Name:
Title:
By: /s/ Richard V. Secord
----------------------------------------
Name:
Title: Secretary
"The Investor"
Bristol Asset Management LLC
By: /s/ Paul Kessler
----------------------------------------
Name: Paul Kessler
Title: President/Founding Member
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EXHIBIT A
Computerized Thermal Imaging, Inc.
141 North State Street
Suite 161
Lake Oswego, OR 97034
--------------------, -----
Bristol Asset Management LLC
10990 Wilshire Boulevard, Suite 1800
Los Angeles, CA 90024
Attn: Paul Kessler
Gentlemen:
Reference is made to that certain Investment Agreement (the
"Agreement") dated as of January __, 1998 between you and the undersigned.
This is a Put Notice as that term is defined in Section 1.2 of the Agreement.
This is to advise you that the undersigned intends to sell to you
five business days (as that term is defined in the Agreement) following the
date this Put Notice is given to you in accordance with Section 6.4 of the
Agreement $______________ of the undersigned's Common Stock.
Very truly yours,
COMPUTERIZED THERMAL IMAGING, INC.
By
-----------------------------
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EXHIBIT 10(e)
CONSULTING AGREEMENT
This Consulting Agreement ("Agreement") is entered into this 5th of
November, 1997, and effective as of January 1, 1997 (the "Effective Date"),
between Computerized Thermal Imaging, Inc., a Nevada corporation ("CTI") and
Daron Dillia d/b/a Manhattan Financial Group ("Consultant").
W I T N E S S E T H:
WHEREAS, CTI wishes to obtain the advice, contacts and expert judgement of
the Consultant with respect to the conduct of CTI's business; and
WHEREAS, CTI desires to have the Consultant act as an independent
contractor for the purpose of providing such services to CTI; and
WHEREAS, Consultant is qualified and willing to provide such services
pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and other consideration,
the sufficiency of which is hereby acknowledged, the parties do hereby covenant
and agree as follows:
1. SCOPE. CTI hereby engages and retains the Consultant as an independent
contractor to provide the services set forth herein. The Consultant hereby
agrees to provide all reasonable and necessary services associated with the
following: (i) the development of a comprehensive business plan; (ii)
future acquisition strategies; (iii) capital development and fund raising;
and (iv) any other ancillary services relating to the aforementioned
(collectively, the "Services").
2. REPRESENTATIONS. Consultant hereby agrees to use its best efforts in
providing the Services and loyally representing the interests of CTI in
accordance with CTI's reasonable requirements and objectives. Consultant
and CTI acknowledge that Consultant is experienced in providing the
Services and will provide such Services with the diligence and care of
others in the industry. Consultant further represents that it has not, and
shall not, enter into any agreement during the term of this Agreement which
might prevent it from performing its obligations hereunder.
3. FEES. In full consideration of the Services provided hereunder and prior
to the Effective Date, CTI hereby grants to Consultant (i) 100,000 shares
of restricted common stock, to be issued within a reasonable time after the
execution of this Agreement, and (ii) an option to purchase all or any
portion of 2,000,000 shares of common stock of CTI on the terms and
conditions as set forth in the Consultant Stock Option Agreement, attached
hereto as EXHIBIT "A".
4. EXPENSES. All expenses, including travel and lodging, incurred by the
Consultant in the performance of Services shall be the sole responsibility
of the Consultant, unless otherwise agreed to in writing. During the
continuance of this Agreement, Consultant shall certify as regular and
guarantee Consultant's situation towards all relevant tax authorities,
social administrations and professional organizations, if applicable, as
being in conformity with Consultant's status as an independent contractor.
5. CONFIDENTIAL INFORMATION. During the term of consultation with CTI, the
Consultant hereby acknowledges that it will have access to and become
acquainted with sensitive and confidential information regarding CTI and
its business, including, but not limited to, trade secrets (technical and
non-technical), know-how, marketing plans, pricing data, contracts, client
lists, employee records, patents, applications for patents, and other
proprietary information. Consultant acknowledges that the confidential
information has been developed or acquired by CTI through the expenditure
of substantial time, effort and money and serves to provide CTI with an
advantage over it competitors. Consultant hereby agrees that such
confidential information may not be directly or indirectly disclosed to
third parties except as required to conduct the business of CTI. The
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Consultant further agrees not to use any information made available to or
coming into its possession or knowledge in a manner that is adverse to the
business of CTI. This provision shall survive the termination of this
Agreement.
6. INSURANCE. The parties agree that CTI shall not be required to carry
insurance or in any way insure the activities of the Consultant, his/her
agents, servants or employees, nor shall CTI be liable for any of the acts
or omissions of the Consultant, his/her agents, servants or employees.
Consultant further agrees to indemnify, defend, and hold harmless CTI from
any and all claims, penalties, fines, causes of action, liabilities, or
threats of such actions which arise out of or relate to this Agreement or
the performance of Services. This provision shall survive the termination
of this Agreement.
7. DURATION. This Agreement shall remain in effect for a period of one (1)
year commencing on the Effective Date, but shall automatically renew, if
not terminated as provided for herein, for successive one (1) year periods.
Notwithstanding the foregoing, CTI or the Consultant may terminate this
Agreement at any time upon ten (10) days written notice.
8. GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, without regard
to any conflicts of laws provisions thereof. Each party hereby irrevocably
submits to the personal jurisdiction of the United States District Court
for Harris County, Texas, as well as of the District Courts of the State of
Texas in Harris County, Texas over any suit, action or proceeding arising
out of or relating to this Agreement. Each party hereby irrevocably
waives, to the fullest extent permitted by law, any objection which it may
now or hereafter have to the laying of the venue of any such mediation,
arbitration, suit, action or proceeding brought in any such county and any
claim that any such mediation, arbitration, suit, action or proceeding
brought in such county has been brought in an inconvenient forum.
9. ARBITRATION. Any controversy or claim arising out of or relating to this
Agreement, or the breach, termination, or validity thereof, shall be
settled by final and binding arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association ("AAA Rules") in
effect as of the effective date of this Agreement. The American Arbitration
Association ("AAA") shall be responsible for (i) appointing a sole
arbitrator, and (ii) administering the case in accordance with the AAA
Rules. The situs of the arbitration shall be Houston, Texas. Upon the
application of either party to this Agreement, and whether or not an
arbitration proceeding has yet been initiated, all courts having
jurisdiction hereby are authorized to: (a) issue and enforce in any lawful
manner, such temporary restraining orders, preliminary injunctions and
other interim measures of relief as may be necessary to prevent harm to a
parties interest or as otherwise may be appropriate pending the conclusion
of arbitration proceedings pursuant to this Agreement; and (b) enter and
enforce in any lawful manner such judgments for permanent equitable relief
as may be necessary to prevent harm to a parties interest or as otherwise
may be appropriate following the issuance of arbitral awards pursuant to
this Agreement. Any order or judgement rendered by the arbitrator may be
entered and enforced by any court having competent jurisdiction.
10. ASSIGNMENT. This Agreement shall inure to the benefit of and be binding
upon the parties, their respective successors and permitted assigns. This
Agreement may not be assigned by any party without the prior written
consent of the other parties.
11. HEADINGS. Headings used in this Agreement are used for convenience only and
do not constitute substantive matters to be considered in construing the
terms of this Agreement.
12. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter thereof and
supersedes all documents, verbal consents, or understandings made before
the conclusion of this Agreement. The terms of this Agreement may be
amended or modified only by written agreement signed by all of the parties
hereto. All changes, supplements or amendments to this Agreement will be
valid only when agreed upon by the parties and made in writing.
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<PAGE>
13. NOTICES. Any notices or consents required or permitted by this Agreement
shall be in writing and shall be deemed to have been sufficiently given if
delivered in person, or if sent by certified mail, return receipt
requested, or telexed or telefaxed to the party entitled thereto with
confirmation of transmission, addressed as set forth on the signature pages
hereto, unless such address is changed by written notice hereunder. If so
mailed the same shall not be deemed effective until three (3) business days
after posting.
14. WAIVERS. No waiver of any term or condition of this Agreement shall be
valid except by an instrument in writing expressly waiving such term or
condition signed by the waiving party. A waiver by any party of any term
or condition of this Agreement in any one instance shall not be deemed or
construed as a waiver of such term or condition for any similar instance in
the future or of any subsequent breach hereof. All rights, remedies,
undertakings, obligations and agreements contained in this Agreement shall
be cumulative and none of them shall be a limitation of any other remedy,
right undertaking, obligation or agreement of either party.
15. SEVERABILITY. Should any part or provision of the Agreement be judicially
held to be unenforceable or in conflict with the law of any jurisdiction,
the validity of the remaining parts or provisions shall not be affected by
such holding and shall remain in full force and effect.
16. GENERAL ASSURANCES. The parties agree to execute, acknowledge, and deliver
all such further instruments, and do all such other acts, as may be
necessary or appropriate in order to carry out the intent and purposes of
this Agreement.
17. CONSTRUCTION OF AGREEMENT. The parties hereto acknowledge and agree that
neither this Agreement nor any of the other documents executed in
connection herewith shall be construed more favorably in favor of one than
the other based upon which party drafted the sane, it being acknowledged
that all parties hereto contributed substantially to the negotiation and
preparation of this Agreement and the documents executed in connection
herewith.
18. NO THIRD PARTY BENEFICIARIES. Except as otherwise expressly forth in this
Agreement, no person or entity not a party to this Agreement shall have
rights under this Agreement as a third party beneficiary or otherwise.
19. RELATIONSHIP OF PARTIES. Consultant is providing services on an
independent contractor basis. Notwithstanding anything to the contrary
herein, this agreement shall not in any manner be construed to create a
joint venture, partnership, agency or other similar form of relationship,
and neither party shall have the right or authority to: (i) commit the
other party to any obligation or transaction not expressly authorized by
such other party, or (ii) act or purport to act as agent or representative
of the other, except as expressly authorized in writing by such other
party.
[THIS SPACE INTENTIONALLY BLANK]
[SIGNATURES NEXT PAGE]
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IN WITNESS WHEREOF, the undersigned have executed this Consent in multiple
counterparts, to be effective as of the date and time first mentioned above,
each of which together shall be considered one original, and whether by original
or facsimile signature shall be effective in all respects as though an original.
CTI:
COMPUTERIZED THERMAL IMAGING, INC.
Address:
- -------
141 North State Street
Suite 161
Lake Oswego, Oregon 97034 By: /s/ David B. Johnston
(503) 650-0119 ------------------------------------------
David B. Johnston, Chief Executive Officer
CONSULTANT:
Address:
- -------
MANHATTAN FINANCIAL GROUP
1147 Manhattan Avenue, #134
Manhattan Beach, CA 90266
(310)786-4546 Telecopier By: /s/ Daron Dillia
------------------------------------------
Daron Dillia
Title: DBA
------------------------------------
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EXHIBIT 10(f)
CONSULTING AGREEMENT
This Consulting Agreement ("Agreement") is entered into this 5th day of
November, 1997, and effective as of January 1, 1997 (the "Effective Date"),
between Computerized Thermal Imaging, Inc., a Nevada corporation ("CTI") and
Willard Harpster ("Consultant").
W I T N E S S E T H:
WHEREAS, CTI wishes to obtain the advice, contacts and expert judgement of
the Consultant with respect to the conduct of CTI's business; and
WHEREAS, CTI desires to have the Consultant act as an independent
contractor for the purpose of providing such services to CTI; and
WHEREAS, Consultant is qualified and willing to provide such services
pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and other consideration,
the sufficiency of which is hereby acknowledged, the parties do hereby covenant
and agree as follows:
1. SCOPE. CTI hereby engages and retains the Consultant as an independent
contractor to provide the services set forth herein. The Consultant hereby
agrees to provide all reasonable and necessary services associated with the
following: (i) the development of a comprehensive business plan; (ii)
future acquisition strategies; (iii) capital development and fund raising;
and (iv) any other ancillary services relating to the aforementioned
(collectively, the "Services").
2. REPRESENTATIONS. Consultant hereby agrees to use its best efforts in
providing the Services and loyally representing the interests of CTI in
accordance with CTI's reasonable requirements and objectives. Consultant
and CTI acknowledge that Consultant is experienced in providing the
Services and will provide such Services with the diligence and care of
others in the industry. Consultant further represents that it has not, and
shall not, enter into any agreement during the term of this Agreement which
might prevent it from performing its obligations hereunder.
3. FEES. In full consideration of the Services provided hereunder and prior
to the Effective Date, CTI hereby grants to Consultant an option to
purchase all or any portion of 275,000 shares of common stock of CTI on the
terms and conditions as set forth in the Consultant Stock Option Agreement,
attached hereto as EXHIBIT "A".
4. EXPENSES. All expenses, including travel and lodging, incurred by the
Consultant in the performance of Services shall be the sole responsibility
of the Consultant, unless otherwise agreed to in writing. During the
continuance of this Agreement, Consultant shall certify as regular and
guarantee Consultant's situation towards all relevant tax authorities,
social administrations and professional organizations, if applicable, as
being in conformity with Consultant's status as an independent contractor.
5. CONFIDENTIAL INFORMATION. During the term of consultation with CTI, the
Consultant hereby acknowledges that it will have access to and become
acquainted with sensitive and confidential information regarding CTI and
its business, including, but not limited to, trade secrets (technical and
non-technical), know-how, marketing plans, pricing data, contracts, client
lists, employee records, patents, applications for patents, and other
proprietary information. Consultant acknowledges that the confidential
information has been developed or acquired by CTI through the expenditure
of substantial time, effort and money and serves to provide CTI with an
advantage over it competitors. Consultant hereby agrees that such
confidential information may not be directly or indirectly disclosed to
third parties except as required to conduct the business of CTI. The
Consultant further agrees not to use any information made available to or
coming into its possession or
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knowledge in a manner that is adverse to the business of CTI. This
provision shall survive the termination of this Agreement.
6. INSURANCE. The parties agree that CTI shall not be required to carry
insurance or in any way insure the activities of the Consultant, his/her
agents, servants or employees, nor shall CTI be liable for any of the acts
or omissions of the Consultant, his/her agents, servants or employees.
Consultant further agrees to indemnify, defend, and hold harmless CTI from
any and all claims, penalties, fines, causes of action, liabilities, or
threats of such actions which arise out of or relate to this Agreement or
the performance of Services. This provision shall survive the termination
of this Agreement.
7. DURATION. This Agreement shall remain in effect for a period of one (1)
year commencing on the Effective Date, but shall automatically renew, if
not terminated as provided for herein, for successive one (1) year periods.
Notwithstanding the foregoing, CTI or the Consultant may terminate this
Agreement at any time upon ten (10) days written notice.
8. GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, without regard
to any conflicts of laws provisions thereof. Each party hereby irrevocably
submits to the personal jurisdiction of the United States District Court
for Harris County, Texas, as well as of the District Courts of the State of
Texas in Harris County, Texas over any suit, action or proceeding arising
out of or relating to this Agreement. Each party hereby irrevocably
waives, to the fullest extent permitted by law, any objection which it may
now or hereafter have to the laying of the venue of any such mediation,
arbitration, suit, action or proceeding brought in any such county and any
claim that any such mediation, arbitration, suit, action or proceeding
brought in such county has been brought in an inconvenient forum.
9. ARBITRATION. Any controversy or claim arising out of or relating to this
Agreement, or the breach, termination, or validity thereof, shall be
settled by final and binding arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association ("AAA Rules") in
effect as of the effective date of this Agreement. The American Arbitration
Association ("AAA") shall be responsible for (i) appointing a sole
arbitrator, and (ii) administering the case in accordance with the AAA
Rules. The situs of the arbitration shall be Houston, Texas. Upon the
application of either party to this Agreement, and whether or not an
arbitration proceeding has yet been initiated, all courts having
jurisdiction hereby are authorized to: (a) issue and enforce in any lawful
manner, such temporary restraining orders, preliminary injunctions and
other interim measures of relief as may be necessary to prevent harm to a
parties interest or as otherwise may be appropriate pending the conclusion
of arbitration proceedings pursuant to this Agreement; and (b) enter and
enforce in any lawful manner such judgments for permanent equitable relief
as may be necessary to prevent harm to a parties interest or as otherwise
may be appropriate following the issuance of arbitral awards pursuant to
this Agreement. Any order or judgement rendered by the arbitrator may be
entered and enforced by any court having competent jurisdiction.
10. ASSIGNMENT. This Agreement shall inure to the benefit of and be binding
upon the parties, their respective successors and permitted assigns. This
Agreement may not be assigned by any party without the prior written
consent of the other parties.
11. HEADINGS. Headings used in this Agreement are used for convenience only and
do not constitute substantive matters to be considered in construing the
terms of this Agreement.
12. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter thereof and
supersedes all documents, verbal consents, or understandings made before
the conclusion of this Agreement. The terms of this Agreement may be
amended or modified only by written agreement signed by all of the parties
hereto. All changes, supplements or amendments to this Agreement will be
valid only when agreed upon by the parties and made in writing.
13. NOTICES. Any notices or consents required or permitted by this Agreement
shall be in writing and shall be deemed to have been sufficiently given if
delivered in person, or if sent by certified mail, return receipt
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requested, or telexed or telefaxed to the party entitled thereto with
confirmation of transmission, addressed as set forth on the signature pages
hereto, unless such address is changed by written notice hereunder. If so
mailed the same shall not be deemed effective until three (3) business days
after posting.
14. WAIVERS. No waiver of any term or condition of this Agreement shall be
valid except by an instrument in writing expressly waiving such term or
condition signed by the waiving party. A waiver by any party of any term
or condition of this Agreement in any one instance shall not be deemed or
construed as a waiver of such term or condition for any similar instance in
the future or of any subsequent breach hereof. All rights, remedies,
undertakings, obligations and agreements contained in this Agreement shall
be cumulative and none of them shall be a limitation of any other remedy,
right undertaking, obligation or agreement of either party.
15. SEVERABILITY. Should any part or provision of the Agreement be judicially
held to be unenforceable or in conflict with the law of any jurisdiction,
the validity of the remaining parts or provisions shall not be affected by
such holding and shall remain in full force and effect.
16. GENERAL ASSURANCES. The parties agree to execute, acknowledge, and deliver
all such further instruments, and do all such other acts, as may be
necessary or appropriate in order to carry out the intent and purposes of
this Agreement.
17. CONSTRUCTION OF AGREEMENT. The parties hereto acknowledge and agree that
neither this Agreement nor any of the other documents executed in
connection herewith shall be construed more favorably in favor of one than
the other based upon which party drafted the sane, it being acknowledged
that all parties hereto contributed substantially to the negotiation and
preparation of this Agreement and the documents executed in connection
herewith.
18. NO THIRD PARTY BENEFICIARIES. Except as otherwise expressly forth in this
Agreement, no person or entity not a party to this Agreement shall have
rights under this Agreement as a third party beneficiary or otherwise.
19. RELATIONSHIP OF PARTIES. Consultant is providing services on an
independent contractor basis. Notwithstanding anything to the contrary
herein, this agreement shall not in any manner be construed to create a
joint venture, partnership, agency or other similar form of relationship,
and neither party shall have the right or authority to: (i) commit the
other party to any obligation or transaction not expressly authorized by
such other party, or (ii) act or purport to act as agent or representative
of the other, except as expressly authorized in writing by such other
party.
[THIS SPACE INTENTIONALLY BLANK]
[SIGNATURES NEXT PAGE]
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IN WITNESS WHEREOF, the undersigned have executed this Consent in multiple
counterparts, to be effective as of the date and time first mentioned above,
each of which together shall be considered one original, and whether by original
or facsimile signature shall be effective in all respects as though an original.
CTI:
COMPUTERIZED THERMAL IMAGING, INC.
ADDRESS:
141 North State Street
Suite 161
Lake Oswego, Oregon 97034 By: /s/ David B. Johnston
(503) 650-0119 -------------------------------------------
David B. Johnston, Chief Executive Officer
CONSULTANT:
ADDRESS:
- -------------------------
- -------------------------
(___)___-____Telecopier By: /s/ Willard Harpster
--------------------------------
Willard Harpster
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EXHIBIT 10(g)
SUBSCRIPTION AGREEMENT
COMPUTERIZED THERMAL IMAGING INC.
Computerized Thermal Imaging Inc.
141 North State Street
Lake Oswego, OR 97034
Ladies and Gentlemen:
The undersigned Cameron Capital Ltd. ("Cameron") and Cameron Capital
Management Ltd. ("CCM") and together with Cameron (the "Subscriber")
understand that Computerized Thermal Imaging Inc., a Nevada corporation (the
"Company"), is offering for sale one or more of its 6% Convertible Debentures
in the aggregate original principal amount of U.S. $550,000, in the form one
or more of attached hereto as EXHIBIT A (the "Debentures") and a warrant, in
the form attached hereto as EXHIBIT B (the "Warrant"), subject to adjustment
for stock splits, reverse stock splits and similar recapitalizations
affecting such shares, for the purchase of One Hundred Thousand (100,000)
shares of its common stock (the "Common Stock"), at an exercise price of
US$2.00 per share. The Subscriber further understands that the offering is
being made without registration of the Debenture, Warrant and shares of
Common Stock issuable upon conversion or exercise thereof (the Debenture,
Warrant, and such Common Stock are hereinafter sometimes referred to as the
"Securities") under the Securities Act of 1933, as amended (the "Securities
Act"), and is being made only to "accredited investors" (as defined in Rule
501 of Regulation D under the Securities Act).
1. SUBSCRIPTION. Subject to the terms and conditions hereof, the
Company agrees to issue and deliver, and Cameron hereby offers to purchase
and subscribes for the Debenture for a price of Five Hundred Fifty Thousand
Dollars (U.S. $550,000). The Company further agrees, subject to the terms and
conditions hereof, to issue and deliver the Warrant to CCM for no additional
consideration.
2. THE CLOSING. The closing of the transactions contemplated hereby
shall take place on August 15, 1996 at the offices of Freeborn & Peters, at
9:30 a.m. or at such other time and place as shall be agreed to by the
Company and the Subscriber (the "Closing Date"). At the closing of the
transactions contemplated hereby (the "Closing") payment shall be made by
wire transfer against delivery of the Debentures and Warrant. In addition,
the Company shall deliver to the Purchaser the following; an opinion of
Company counsel in the form attached hereto as EXHIBIT C; (ii) a certificate
of the Company's President and Chief Executive Officer certifying that the
Company's representations and warranties are true and correct on and as of
the Closing Date as if made on such date; (iii) a secretary's certificate, to
which copies of (x) the resolutions of the Company's Board of Directors
relating to this agreement, (y) the Company's Articles of Incorporation as
amended and (z) the Company's Bylaws are attached; and (iv) a copy of the
most recent draft of the Company's proposed registration statement on Form
SB-2.
3. SECURITIES ACT REGISTRATION.
3.1. The Company shall use its best efforts to register under the
Securities Act, at the Company's expense, all of the shares of Common Stock
issuable upon the conversion of the Debenture and upon exercise of the
Warrant (the "Registrable Shares") by October 31, 1996 and in that connection
shall file a registration statement with respect to the Registrable Shares
(the "Registration Statement") with the Securities and Exchange Commission
(the "SEC") on or before August 30, 1996. Notice of effectiveness of the
Registration Statement shall be furnished promptly to the Subscriber. The
Company shall maintain the effectiveness of the Registration Statement and
from time to time will amend or supplement such Registration Statement and
the prospectus contained therein as and to the extent necessary to comply
with the Securities Act. The effectiveness of the Registration Statement
shall be maintained with respect to the Registrable Shares until the later to
occur of the second anniversary of the Closing Date or such date as
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all of the Registrable Shares may be sold during any one period of three (3)
consecutive months pursuant to Rule 144 under the Securities Act or otherwise
without registration.
3.2. In the event that the Company registers under the Securities
Act any of the Registrable Shares held by the Subscriber, the Company shall
indemnify and hold harmless the Subscriber and each underwriter of such
shares (including any broker or dealer through whom such of the shares may be
sold) and each person, if any, who controls the Subscriber or any such
underwriter within the meaning of Section 15 of the Securities Act or Section
20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
from and against any and all losses, claims, damages, expenses or
liabilities, joint or several, to which they or any of them become subject
under the Securities Act or the Exchange Act or otherwise, and, except as
hereinafter provided, shall reimburse the Subscriber and each of the
underwriters and each such controlling person, if any, for any legal or other
expenses reasonably incurred by them or any of them in connection with
investigating or defending any actions whether or not resulting in any
liability, insofar as such losses, claims, damages, expenses, liabilities or
actions arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, or in
the prospectus (or the Registration Statement or prospectus as from time to
time amended or supplemented by the Company) or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading, unless such untrue statement or omission was made in
such Registration Statement or prospectus in reliance upon and in conformity
with information furnished in writing to the Company in connection therewith
by the Subscriber (insofar as indemnification of the Subscriber is concerned)
or any underwriter (insofar as indemnification of any such underwriter is
concerned) relating thereto expressly for use therein. Promptly after
receipt by the Subscriber or any underwriter or any person controlling any of
them, as the case may be, of notice of a claim to which the foregoing
indemnification applies, the Subscriber or such other person shall notify the
Company in writing of the commencement thereof, and, subject to the
provisions hereinafter stated, the Company shall assume the defense of such
action (including the employment of counsel, who shall be counsel
satisfactory to the Subscriber or such underwriter or controlling person, as
the case may be, and the payment of expenses) insofar as such action shall
relate to any alleged liability in respect of which indemnity may be sought
against the Company. The Subscriber or any underwriter or any such
controlling person shall have the right to employ separate counsel in any
such action and to participate in the defense thereof but the fees and
expenses of such counsel shall not be at the expense of the Company unless:
(i) the employment of such counsel has been specifically authorized by the
Company, (ii) the Company has failed to assume the defense and employ
counsel, or (iii) the named parties of any such action, suit or proceeding
(including any impleaded parties) include both the person or persons seeking
indemnification (the "indemnified person") and the Company and such
indemnified person shall have been advised by its counsel that representation
of the indemnified person and the Company by the same counsel would be
inappropriate under applicable standards of professional conduct (whether or
not such representation by the same counsel has been proposed) due to actual
or potential differing interests between them (in which case the Company
shall not have the right to assume the defense of such action, suit or
proceeding on behalf of such indemnified person). The Company shall not be
liable to indemnify any person for any settlement by such person of any such
action effected without the Company's consent.
3.3. The Subscriber shall indemnify the Company, its officers and
directors and each person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act, against all losses, claims, damages, expenses or liabilities or actions
to which they or any of them become subject under the Securities Act or the
Exchange Act or otherwise, and shall reimburse the Company, its officers and
directors and each such controlling person, if any, for any legal or other
expenses reasonably incurred by them or any of them in connection with
investigating or defending any actions whether or not resulting in any
liability, insofar as such losses, claims damages, expenses, liabilities or
actions arise out of or are based upon any information relating to the
Subscriber furnished by or on behalf of the Subscriber in writing
specifically for inclusion in such Registration Statement. Notwithstanding
the above, the liability of the Subscriber under this Section 3.3 shall not
exceed the proceeds (net of underwriting discounts or commissions) received
by the Subscriber upon the sale of the Registrable Shares.
3.4. Any losses, claims, damages, liabilities and reasonable
expenses for which an indemnified party is entitled to indemnification under
Sections 3.2 and 3.3 of this Agreement shall be paid by the indemnifying
party to the indemnified party as such losses, claims, damages, liabilities
and expenses are incurred.
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3.5. The Company shall prepare and file with the SEC such
amendments and supplements to the Registration Statement, and the prospectus
used in connection with such Registration Statement as, in the opinion of the
counsel to the Company, may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
such Registration Statement.
3.6. The Company shall furnish to the Subscriber such numbers of
copies of a prospectus in conformity with the requirements of the Securities
Act, and such other documents as may reasonably be requested in order to
facilitate the disposition of the Registrable Shares owned by the Subscriber.
3.7. The Company shall use its best efforts to register and qualify
the securities covered by such Registration Statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Subscriber; provided, however, that the Company shall not be
required in connection therewith, or as a condition thereto, to qualify to do
business or to file a general consent to service of process in any such
states or jurisdictions, unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities Act.
3.8. The Company shall notify each holder of Registrable Shares
covered by such Registration Statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act and of the
happening of any event as a result of which the prospectus included in such
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of
the circumstances then existing.
3.9. The Company shall provide a transfer agent and registrar for
all Registrable Shares to be registered hereunder and a CUSIP number of all
Registrable Shares, in each case not later than the effective date of such
registration.
3.10. In the event the Registration Statement is not filed on or
before August 30, 1996, or is not declared effective by the SEC on or before
October 31, 1996, the Company shall, for each month or portion thereof that
said Registration Statement is not filed or declared effective, as the case
may be, in addition to the six percent (6%) interest otherwise payable
pursuant to the terms of the Debenture, pay the Subscriber a premium equal to
one and one half percent (1.5%) of the outstanding principal amount of the
Debenture, payable monthly, commencing September 1, 1996 or November 1, 1996,
as the case may be. The premium, if any, shall constitute liquidated damages
for the Company's failure to timely file a Registration Statement with the
SEC or failure to cause the Registration Statement to become effective, as
the case may be. The parties agree that the foregoing damages are reasonable
and that the anticipated damages for the failure of the Company to effect
such registration are uncertain in amount and difficult to be proved. The
premium shall be payable in coin or currency or, in lieu of a cash premium
payment, the Subscriber may require the Company to issue shares of its Common
Stock or a combination of Common Stock and cash as payment of the premium
then due and payable, until such time as the Subscriber receives notification
of either the filing of the Registration Statement or effectiveness of the
Registration Statement. If the Subscriber elects to receive all or a portion
of the premium in Common Stock, the Company shall issue to the Subscriber
such number of fully paid and non-assessable shares of Common Stock as shall
have an aggregate Market Value (as defined in the Debentures and determined
as of the date such premium is payable) equal in amount to the premium which
the Subscriber has elected to receive in kind.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The
Company represents and warrants to the Subscriber as follows, such
representations and warranties to be true and correct as of the Closing Date.
(a) The Common Stock issuable upon the conversion of the Debenture
and exercise of the Warrant has been duly authorized and, when issued and
delivered to the Subscriber in accordance with the terms of said Debentures
and Warrant, will be validly issued, fully paid and nonassessable.
(b) The Company is a corporation duly organized and validly
existing in good standing under the laws of the State of Nevada with full
corporate power and authority to own, lease and operate its properties and to
conduct its business as currently conducted, and is duly registered and
qualified to conduct its business and is in good standing in each
jurisdiction or place where the nature of its properties or the conduct of
its business requires such
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registration or qualification, except where the failure so to register or
qualify does not have a material adverse effect on the condition (financial
or other), business, properties, net worth or results of operations of the
Company.
(c) Neither the issuance and sale of the Securities, the
execution, delivery or performance of this Agreement by the Company, nor the
consummation by the Company of the transactions contemplated hereby (A)
requires any consent, approval, authorization or other order of or
registration or filing with, any court, regulatory body, administrative
agency or other governmental body, agency or official or conflicts or will
conflict with or constitutes or will constitute a breach of, or a default
under, the certificate or articles of incorporation or by-laws, or other
organizational documents, of the Company or any of its subsidiaries or (B)
conflicts or will conflict with, or constitutes or will constitute a material
breach of, or default under, any material agreement, indenture, lease or
other instrument to which the Company or any of its subsidiaries is a party
or by which any of them or any of their respective properties may be bound,
or violates or will violate any statute, law, or any of its subsidiaries or
any of their respective properties, or will result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of
the Company or any of its subsidiaries pursuant to the terms of any agreement
or instrument to which any of them is a party or by which any of them may be
bound or to which any of the property or assets of any of them is subject.
(d) The execution and delivery of, and by the performance by the
Company of its obligations under this Agreement have been duly and validly
authorized by the Company, and this Agreement has been duly executed and
delivered by the Company and constitutes the valid and legally binding
agreement of the Company, enforceable against the Company in accordance with
its terms, and the Company has full corporate and legal power to enter into
this Agreement and perform all of its obligations hereunder.
(e) As of June 18, 1996, the Company has authorized One Hundred
Million (100,000,000) shares of Common Stock, and the Company has issued and
outstanding 37,068,009 shares of Common Stock, and 97,000 shares of preferred
stock, par value of $.01, of which 30,000 are issued and outstanding. All
such shares have been duly and validly issued and are fully paid and
nonassessable. The Company has outstanding no other shares of any class of
capital stock. There are no subscriptions, options, warrants, scrip, rights,
calls, convertible securities, or any other similar agreements, arrangements
or commitments of any character relating to the issued or unissued capital
stock, or other securities of the Company obligating, or which may obligate
the Company to issue, deliver or sell or cause to be issued, delivered or
sold, additional shares of its capital stock or obligating or which may
obligate the Company to grant, extend or enter into any such subscription,
option, warrant, scrip, right, call, convertible security, or other similar
agreement, arrangement, or similar commitment.
(f) There are no legal or administrative proceedings or
investigation of any kind or nature now pending or to the knowledge of the
Company, threatened before any court or administrative body against the
Company nor is the Company subject to any unsatisfied judgment, order or
decree of any court of law, administrative board, regulatory agency,
arbitrator or arbitration panel except as disclosed in the Investment
Materials.
(g) Since June 30, 1996, the business of the Company has been
operated only in the ordinary and normal course, and there has not been,
after such date, any material adverse change in the earnings, assets,
liabilities, financial condition or in the operation of its businesses.
(h) The most recent draft of the Company's registration statement
in Form SB-2 which is to be delivered to the Subscriber pursuant to Section
2, does not (and will not) as of the dates it is filed with the SEC, and as
of the date it is declared), contain any untrue statement of a material fact
or omit to state any material fact necessary to make the statements therein
misleading.
(i) The Company's (i) audited balance sheet and statement of
changes in stockholder's equity as of June 30, 1996, and its audited
statements of operations and cash flows for the periods then ended and (ii)
unaudited balance sheet and statement of operations as of and for the year
ended June 30, 1996, as previously delivered to Subscriber, are complete in
all material aspects, and have been prepared in accordance with generally
accepted accounting principals consistently applied (except, in the case of
the unaudited financial statements, for the absence of notes thereto) and
fairly present the Company's financial condition and results of operations.
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(j) The Company shall use its best efforts to have its Common
Stock, including the Registrable Shares, listed on The Nasdaq SmallCap Market
on or before October 31, 1996. Thereafter, the Company shall use its best
efforts to comply with the requirements for maintaining listing of the Common
Stock on The Nasdaq SmallCap Market.
5. REPRESENTATIONS AND WARRANTIES OF THE SUBSCRIBER. The Subscriber
hereby represents and warrants to the Company as follows:
(a) The Subscriber is aware that no federal or state agency has
passed upon the Common Stock or made any finding or determination concerning
the fairness of this investment
(b) The Subscriber has had an opportunity to ask questions of and
receive answers from representatives of the Company, concerning the terms and
conditions of this investment.
(c) The Securities for which the Subscriber hereby subscribes will
be acquired for the Subscriber's own account, for investment only and not
with a view toward resale or distribution in a manner which would require
registration under the Securities Act of 1933.
(d) The Subscriber, if a corporation, partnership, trust or other
form of business entity, is authorized and otherwise duly qualified to
purchase and hold the subscribed for Securities. If such entity has been
formed for the specific purpose of acquiring the Securities subscribed to
hereunder, it hereby agrees to supply any additional written information that
may be required by the Company.
(e) The Subscriber acknowledges that, until the Registration
Statement is declared effective by the SEC, there are substantial
restrictions on the transferability of shares of Common Stock as required
pursuant to federal and state securities laws. The Subscriber further agrees
to be responsible for compliance with all conditions on transfer imposed by
any State Blue Sky or securities law.
(f) The Subscriber is an "accredited investor" as defined in Rule
501(a) under the Securities Act. The Subscriber is an organization described
in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, and is
a corporation, Massachusetts or similar business trust or partnership not
formed for the specific purpose of acquiring the securities offered, with
total assets in excess of $5,000,000. The Subscriber agrees to furnish any
additional information requested to assure compliance with applicable federal
and state securities laws in connection with the purchase and sale of the
Securities.
6. BROKERS. Each of the Company and Subscriber hereby indemnifies and
holds the other harmless from any liability for any brokers' or finders' fee
with respect to this Agreement or the transactions contemplated hereby for
which the Company or the Subscriber, as the case may be, is responsible.
7. WAIVER, AMENDMENT. Neither this Agreement nor any provisions hereof
shall be modified, changed, discharged or terminated except by an instrument
in writing, signed by the party against whom any waiver, change, discharge or
termination is sought.
8. ASSIGNABILITY. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof shall be
assignable by either the Company or the Subscriber without the prior written
consent of other party.
9. CERTAIN AGREEMENTS. The Company covenants and agrees that it will
not enter into any subsequent private placement or Regulation S offering with
any third party prior to December 31, 1996 without first offering the
Subscriber the opportunity (which shall remain open for a period of five (5)
business days from the date the Subscriber receives notice thereof) to
purchase up to all of such additional securities (in the discretion of the
Subscriber) on the terms and provisions on which the Company proposes to
offer such additional securities to such third parties. The Company further
covenants and agrees to provide the Subscriber with prompt notice (in any
event not later than two (2) business days after the fact) of the date of
closing and the substantive terms and provisions of any such offering with
any third party which was the subject of the right of first offer described
in this Section 9. In addition, the
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Company covenants and agrees that it shall in no event undertake any such
offering prior to September 30, 1996, without the prior written consent of
the Subscriber.
10. APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Nevada.
11. SECTION AND OTHER HEADINGS. The section and other headings
contained in this Agreement are for reference purposes only and shall not
affect the meaning or interpretation of this Agreement.
12. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which together shall be deemed to be one and the
same agreement.
13. NOTICES. All notices and other communications provided for herein
shall be in writing and shall be deemed to have been duly given if delivered
personally or sent by telecopier or registered or certified mail, return
receipt requested, postage prepaid:
If to the Company:
Computerized Thermal Imaging Inc.
141 North State Street
Lake Oswego, OR 97034
Attn.: David B. Johnston
Telephone: (503) 650-0119
Facsimile: (503) 650-8551
If to the Subscriber:
Cameron Capital Management Ltd.
10 Cavendish Road
Hamilton HM 19
Bermuda
Attn.: Nic Snelling
Telephone: (441) 295-5455
Facsimile: (441) 295-9022
or at such other address as either party shall have specified by notice in
writing to the other.
14. EXPENSES Each party shall bear its own expenses incurred in
connection with this agreement and the transactions contemplated hereby.
15. BINDING EFFECT. The provisions of this Agreement shall be binding
upon and accrue to the benefit of the parties hereto and their respective
heirs, legal representatives, successors and assigns.
[SIGNATURE PAGE FOLLOWS]
6
<PAGE>
The undersigned acknowledges that this Agreement shall not be effective
unless and until accepted by the Company as indicated below.
Dated this 15th day of August, 1996.
CAMERON CAPITAL LTD.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
CAMERON CAPITAL MANAGEMENT
LTD.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE 15TH DAY OF
AUGUST, 1996.
COMPUTERIZED THERMAL IMAGING
INC.
By:
-----------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
7
<PAGE>
EXHIBIT A
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED OR OFFERED FOR SALE OR
TRANSFER UNLESS A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND OTHER
APPLICABLE SECURITIES LAWS WITH RESPECT TO SUCH SECURITIES IS THEN IN EFFECT,
OR IN THE OPINION OF COUNSEL, SUCH REGISTRATION UNDER THE SECURITIES ACT AND
OTHER APPLICABLE SECURITIES LAWS IS NOT REQUIRED. THE SECURITIES REPRESENTED
HEREBY ARE ALSO SUBJECT TO AND MAY NOT BE OFFERED, SOLD, TRANSFERRED,
ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT UPON SATISFACTION OF CERTAIN TERMS
AND CONDITIONS SET FORTH IN A CERTAIN SUBSCRIPTION AGREEMENT DATED AS OF
August 15, 1996 BETWEEN THE COMPANY AND THE PURCHASER NAMED THEREIN.
U.S. $
COMPUTERIZED THERMAL IMAGING INC.
6 % CONVERTIBLE DEBENTURE DUE August 15, 1999
THIS DEBENTURE is one of a duly authorized issue of Debentures of
Computerized Thermal Imaging Inc., a Nevada corporation (the "Company"),
designated as its 6% Convertible Debentures due August 15, 1999, in an
aggregate principal amount not exceeding U.S. $550,000.
FOR VALUE RECEIVED, the Company promises to pay to Cameron Capital
Ltd., registered holder hereof (the "Holder"), the principal sum of U.S.
$550,000 on August 15, 1999 (the "Maturity Date") and to pay interest on the
principal sum outstanding from time to time in arrears at the rate of 6% per
annum, compounded annually and payable on a semi-annual basis commencing six
months after the date of this Debenture, computed on the basis of the actual
number of days elapsed in a 365-day year. Any accrued and unpaid interest
shall be payable in full on the Maturity Date and on each Conversion Date
(hereinafter defined). Accrual of interest shall commence on the date hereof
until payment in full of the principal sum has been made or duly provided
for. All accrued and unpaid interest shall bear interest at the same rate
from and after the due date of the interest payment until so paid. The
interest so payable, less any amounts required by law to be deducted or
withheld, will be paid to the person in whose name this Debenture is
registered on the records of the Company regarding registration and transfers
of the Debentures (the "Debenture Register"); provided, however, that the
Company's obligation to a transferee of this Debenture arises only if such
transfer, sale or other disposition is made in accordance with the terms and
conditions of the Subscription Agreement executed by the original Holder in
connection with the purchase of this Debenture (the "Subscription
Agreement"). The principal of, and interest on, this Debenture is payable in
such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts, at the
address last appearing on the Debenture Register of the Company as designated
in writing by the Holder from time to time. In lieu of a cash interest
payment, the Holder may require the Company to issue shares of its Common
Stock (hereinafter defined)or a combination of Common Stock and cash as
payment of the interest then due and payable. If the Holder elects to receive
all or a portion of the interest in Common Stock, the Company shall issue to
the Holder such number of fully paid and non-assessable shares of Common
Stock as shall have an aggregate Market Value (as hereinafter defined) equal
in amount to the interest which the Holder has elected to receive in kind.
For these purposes, Market Value shall mean the average closing bid price of
the Company's Common Stock for the five days ending on the trading day
preceding the date on which such interest is payable.
This Debenture is subject to the following additional provisions:
1. The Company shall register the shares of Common Stock
issuable upon the conversion of the Debentures (the "Registrable Shares") by
October 31, 1996 and in that connection shall file a Registration Statement
with respect to the Registrable Shares (the "Registration Statement") with
the Securities and Exchange Commission (the "SEC") on or prior to August 30,
1996. In the event the Registration Statement described in the Subscription
Agreement is not filed with the SEC on or before August 30, 1996 or is not
declared effective by the SEC
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<PAGE>
on or before October 31, 1996, the Company shall, for each month or portion
thereof that said Registration Statement is not filed or declared effective,
as the case may be, in addition to the six percent (6%) interest otherwise
payable pursuant to the terms of this Debenture, pay the Holder a premium
equal to one and one half percent (1.5%) of the then outstanding principal
amount of the Debentures, payable monthly, commencing September 1, 1996 or
August 30, 1996, as the case may be. The premium, if any, shall constitute
liquidated damages for the Company's failure to timely file a Registration
Statement with the SEC or failure to cause the Registration Statement to
become effective, as the case may be. The parties agree that the foregoing
damages are reasonable and that the anticipated damages for the failure of
the Company to effect such registration are uncertain in amount and difficult
to be proved. The premium shall be payable in coin or currency or, in lieu of
a cash premium payment, the Holder may require the Company to issue shares of
its Common Stock or a combination of Common Stock and cash as payment of the
premium then due and payable, until such time as the Holder receives
notification of either the filing of the Registration Statement or
effectiveness of the Registration Statement. If the Holder elects to receive
all or a portion of the premium in Common Stock, the Company shall issue to
the Holder such number of fully paid and non-assessable shares of Common
Stock as shall have an aggregate Market Value (as defined in the Debentures
and determined as of the date such premium is payable) equal in amount to the
premium which the Holder has elected to receive in kind.
2. The Debentures are issuable in denominations of Fifty Thousand
Dollars (U.S. $50,000) and integral multiples thereof. The Debentures are
exchangeable for an equal aggregate principal amount of Debentures of
different authorized denominations, as requested by the Holders surrendering
the same. No service charge will be made for such registration or transfer or
exchange.
3. The Company shall be entitled to withhold from all payments of
interest on this Debenture any amounts required to be withheld under the
applicable provisions of the United States income tax laws or any other
applicable laws at the time of such payments.
4. This Debenture has been issued subject to certain investment
representations of the original Holder hereof (set forth in Section 5 of the
Subscription Agreement) and may be offered, sold, transferred or exchanged
only in compliance with the Securities Act. Prior to due presentment for
transfer of this Debenture, the Company and any agent of the Company may
treat the person in whose name this Debenture is duly registered on the
Debenture Register as the owner hereof for the purpose of receiving payment
as herein provided and for all other purposes, whether or not this Debenture
be overdue, and neither the Company nor any such agent shall be affected by
notice to the contrary.
5. Subject to the provisions of Section 6 hereof, the Holder of
this Debenture shall have the option to convert up to (i) Thirty-three and
one-third percent (33 1/3%) of the Debentures originally issued to the Holder
at any time from and after the 45th day following the date of this Debenture,
(ii) Sixty-six and two-thirds percent (66 2/3%) of the Debentures originally
issued to the Holders at any time from and after the 70th day following the
date of this Debenture and (iii) One Hundred Percent (100%) of the Debentures
originally issued to the Holders at any time from and after the 95th day
following the date of this Debenture, of the original principal amount of
this Debenture into shares of the Company's common stock, $.001 par value
(the "Common Stock") at a conversion price for each share of Common Stock
equal to the lesser of (i) the average closing bid price of the Company's
Common Stock for the five (5) trading days ending the trading day immediately
preceding to the date of this Debenture (the "Fixed Conversion Price") or,
(ii) Seventy-seven percent (77%) of the average closing bid price of the
Company's Common Stock for the five (5) trading days ending the trading day
immediately preceding the Conversion Date (hereinafter defined) (such lesser
value is hereinafter referred to as the "Conversion Price"). Such conversion
shall be effectuated by surrendering the Debenture to be converted to the
Company with the form of Notice of Conversion attached hereto as SCHEDULE 1,
executed by the Holder of this Debenture evidencing such Holder's intention
to convert this Debenture or a specified portion (as provided for above)
hereof. The amount of accrued but unpaid interest as of the Conversion Date
shall be subject to conversion and paid in shares of Common Stock valued at
the Conversion Price. No fractional shares of the Common Stock or scrip
representing fractional shares will be issued on conversion, but the number
of shares of Common Stock issuable shall be rounded to the nearest whole
share. The date on which Notice of Conversion is given shall be deemed to be
the date on which the Holder has delivered this Debenture, with the Notice of
Conversion duly executed, to the Company, or if earlier, the date such Notice
of Conversion is delivered to the Company provided the Debenture is received
by the Company within five (5) trading days thereafter. Such date is referred
to herein as
2
<PAGE>
the "Conversion Date." Facsimile delivery of the Notice of Conversion shall
be accepted by the Company. In lieu of physical delivery of certificates to
the Holder representing the shares of Common Stock issuable upon the
conversion of the Debenture, the Company shall issue and register, within
five (5) trading days after delivery to the Company of such Notice of
Conversion, if the Company has received the original Notice of Conversion and
Debenture being so converted by such date, the number of shares of Common
Stock to which the Holder shall be entitled, in such street or nominee name
as may be directed by the Holder in the Notice of Conversion. The Company
shall ensure that the shares of Common Stock are at all times Depository
Trust Corporation eligible. In addition to any other remedies which may be
available to the Holder, in the event the Company fails so to issue and
deliver shares of its Common Stock within five (5) trading days after the
Notice of Conversion is delivered in accordance with the procedures set forth
above, the applicable Conversion Price provided for in this Section 4 shall
decrease by .5% for each full day the delivery of such instructions is
delayed after the delivery period required above. In the event that the
Company fails for any reason to effect delivery of such shares of Common
Stock within such five (5) trading day period, the Holder may revoke the
relevant Notice of Conversion by delivering a notice to such effect to the
Company whereupon the Company and the Holder shall each be restored to their
respective positions immediately prior to delivery of such Notice of
Conversion.
6. The Conversion Price and number of shares of Common Stock
issuable upon conversion shall be subject to adjustment from time to time as
provided in this Section 6.
(a) In the event the Company should at any time or from time to
time after the date of this Debenture fix a record date for the effectuation
of a split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or
other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock
(hereinafter referred to as "Common Stock Equivalents") without payment of
any consideration by such holder for the additional shares of Common Stock or
the Common Stock Equivalents (including the additional shares of Common Stock
issuable upon conversion or exercise thereof), then, as of such record date
(or the date of such dividend, distribution, split or subdivision if no
record date is fixed), the Fixed Conversion Price shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion
of this Debenture shall be increased in proportion to such increase in the
aggregate number of shares of Common Stock outstanding and those issuable
with respect to such Common Stock Equivalents.
(b) If the number of shares of Common Stock outstanding at any
time after the date of this Debenture is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the Fixed Conversion Price shall be appropriately increased so
that the number of shares of Common Stock issuable on conversion of this
Debenture shall be decreased in proportion to such decrease in outstanding
shares.
7. If the current market price per share of the Company's Common
Stock is less than fifty percent (50%) of the Fixed Conversion Price on the
date the Company receives a Notice of Conversion, the Company may, upon one
(1) trading day's prior written notice, in lieu of converting this Debenture
into Common Stock, redeem such portion of this Debenture as shall have been
requested to be converted by paying Holder the sum of: (i)the product of (x)
the number of shares of Common Stock issuable upon conversion of the
principal amount so to be converted multiplied by (y) the current Market
Value per share of the Common Shares, plus (ii) all accrued and unpaid
interest on this Debenture, such redemption payment to be made by wire
transfer of immediately available funds to an account designated by the
Holder within five (5) trading days of the Notice of Conversion.
8. The Company shall at all times reserve and keep available out
of its authorized but unissued shares of Common Stock, solely for the purpose
of effecting the conversion of this Debenture, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the
conversion of all of the outstanding principal amount and accrued interest
thereon; and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of this
Debenture, in addition to such other remedies as shall be available to the
Holder, the Company will take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such
purposes, including, without limitation, using its best efforts to obtain the
requisite stockholder approval necessary to increase the Company's authorized
Common Stock.
3
<PAGE>
9. In no event shall the holder of this Debenture be entitled to
convert the outstanding principal of this Debenture to the extent such
conversion would result in such holder's beneficially owning more than five
percent (5%) of the outstanding shares of the Company's Common Stock. For
these purposes, beneficial ownership shall be defined and calculated in
accordance with Rule 13d-3, promulgated under the Securities Exchange Act of
1934, as amended.
10. Any of the following shall constitute an "Event of Default":
a. The Company shall fail to make any payment (whether principal,
interest or otherwise) on this Debenture as and when the same
shall be due and payable and such default shall continue for five
(5) business days after the due date thereof;
b. Any of the representations or warranties made by the Company
herein, in the Subscription Agreement, or in any certificate or
financial or other written statements heretofore or hereafter
furnished by or on behalf of the Company in connection with the
execution and delivery of this Debenture or the Subscription
Agreement shall be false or misleading in any material respect as
of the date made;
c. The Company shall fail to perform or observe, in any material
respect, any other covenant, term, provision, condition,
agreement or obligation of the Company under this Debenture or
the Subscription Agreement and such failure shall continue
uncured for a period of five (5) business days after the first
date on which such failure arises (it being understood that in
the case of defaults which can not reasonably be cured within a
5-day period no grace period shall be necessary as a precondition
to the failure to perform such covenant constituting an Event of
Default);
d. The Company shall (1) make an assignment for the benefit of its
creditors or commence proceedings for its dissolution; or (2)
apply for or consent to the appointment of a trustee, liquidator,
custodian or receiver thereof, or for a substantial part of its
property or business;
e. A trustee, liquidator, custodian or receiver shall be appointed
for the Company or for a substantial part of its property or
business without its consent and shall not be discharged within
sixty (60) days after such appointment;
f. Bankruptcy, reorganization, insolvency or liquidation proceedings
or other proceedings for relief under any bankruptcy law or any
law for the relief of debtors shall be instituted by or against
the Company and, if instituted against the Company, shall not be
dismissed within sixty (60) days after such institution or the
Company shall by any action or answer approve of, consent to, or
acquiesce in any such proceeding or admit the material
allegations of, or default in answering a petition filed in any
such proceeding;
g. The Company shall default on the payment of any debts in excess
of $100,000 beyond any applicable grace period;
h. Any judgments, levies or attachments shall be rendered against
the Company or any of its assets or properties in an aggregate
amount in excess of $100,000 and such judgments, levies or
attachments shall not be dismissed, stayed, bonded or discharged
within thirty (30) days of the date of entry thereof; or
i. The Company shall be a party to any merger or consolidation or
shall dispose of all or substantially all of its assets in one or
more transactions or shall redeem more than a DE MINIMIS amount
of its outstanding shares of capital stock.
Upon the occurrence of any Event of Default or at any time thereafter, and in
each and every such case, unless such Event of Default shall have been waived in
writing by the Holder (which waiver shall not be deemed to be a waiver
4
<PAGE>
of any subsequent Event of Default) at the option of the Holder in the
Holder's sole discretion, the Holder may, upon written notice to the Company,
accelerate the maturity hereof, whereupon all principal and interest
hereunder shall be immediately due and payable without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived,
anything herein or in any note or other instruments contained to the contrary
notwithstanding, and the Holder may immediately, and without expiration of
any period of grace, enforce any and all of the Holder's rights or remedies
afforded by law.
10. The Company, should an Event of Default occur, expressly
waives demand and presentment for payment, notice of nonpayment, protest,
notice of protest, notice of dishonor, notice of acceleration or intent to
accelerate, bringing of suit and diligence in taking any action to collect
amounts called for hereunder and shall be directly and primarily liable for
the payment of all sums owing and to be owing hereon, regardless of and
without any notice, diligence, act or omission as or with respect to the
collection of any amount called for hereunder. In all other situations, the
Company requires that twenty-four (24) hours notice be given to the Company.
12. No provision of this Debenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Debenture at the time, place, and rate,
and in the coin or currency, herein prescribed. This Debenture and all other
Debentures now or hereafter issued of similar terms are direct obligations of
the Company. This Debenture ranks equally with all other Debentures now or
hereafter issued under the terms set forth herein.
13. This Debenture shall be governed by and construed in
accordance with the laws of the State of Nevada without regard to the choice
of law provisions thereof.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized
Dated: August 15, 1996 COMPUTERIZED THERMAL IMAGING INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
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<PAGE>
Schedule 1
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert the above
Debenture No._____ into shares of Common Stock of Computerized Thermal
Imaging Inc. (the "Company") according to the conditions hereof, as of the
date written below.
----------------------------------------
Date of Notice
----------------------------------------
Signature
----------------------------------------
Name
Address:
----------------------------------------
----------------------------------------
----------------------------------------
* The original Debenture and a manually signed original of this Notice of
Conversion must be received by the Company by the third business day
following the date of delivery of this Notice of Conversion by facsimile.
7
<PAGE>
EXHIBIT B
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED OR OFFERED FOR SALE OR
TRANSFER UNLESS A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND OTHER
APPLICABLE SECURITIES LAWS WITH RESPECT TO SUCH SECURITIES IS THEN IN EFFECT,
OR IN THE OPINION OF COUNSEL, SUCH REGISTRATION UNDER THE SECURITIES ACT AND
OTHER APPLICABLE SECURITIES LAWS IS NOT REQUIRED.
WARRANT
TO PURCHASE SHARES
OF
COMMON STOCK
OF
COMPUTERIZED THERMAL IMAGING INC.
AUGUST 15, 1996
This certifies that, for value received, Cameron Capital Management Ltd.
("CCM") and any subsequent transferee pursuant to the terms of the Agreement
(as defined below) of even date and this Warrant (each, a "Holder") is
entitled to purchase, subject to the provisions of this Warrant, from
Computerized Thermal Imaging Inc., a Nevada corporation (the "Issuer"), at
any time or from time to time on or after the date hereof and on or before
August 15, 2001 (the "Expiration Date"), One Hundred Thousand (100,000) fully
paid and nonassessable shares of common stock (the "Common Stock"), of the
Issuer at an exercise price of two Dollars (U.S. $2.00) per share, subject to
adjustment pursuant to the terms hereunder (the "Exercise Price")(such shares
of Common Stock and other securities issued and issuable upon exercise of
this Warrant, the "Warrant Shares").
Section 1. DEFINITIONS. Except as otherwise specified herein, terms
defined herein shall have the meanings assigned to them in the Subscription
Agreement of even date herewith by and between CCM, Cameron Capital Ltd., and
the Issuer (the "Agreement").
Section 2. EXERCISE OF WARRANT.
(a) Subject to the provisions hereof, this Warrant may be exercised,
in whole or in part, but not as to a fractional share, at any time or from
time to time on or after the date hereof and on or before the Expiration
Date, by presentation and surrender hereof to the Issuer at the address
which, in accordance with the provisions of Section 9 hereof, is then
effective for notices to the Issuer, with the Election to Purchase Form
annexed hereto as SCHEDULE ONE, duly executed and accompanied by payment to
the Issuer as further set forth below in this Section 2, for the account of
the Issuer, of the Exercise Price for the number of Warrant Shares
specified in such form. If this Warrant should be exercised in part only,
the Issuer shall, upon surrender of this Warrant, execute and deliver a new
Warrant evidencing the rights of the Holder hereof to purchase the balance
of the Warrant Shares purchasable hereunder. The Issuer shall maintain at
its principal place of business a register for the registration of this
Warrant and registration of transfer of this Warrant. The Exercise Price
for the number of Warrant Shares specified in the Election to Purchase Form
shall be payable in United States Dollars by certified or official bank
check payable to the order of the Issuer or by wire transfer of immediately
available funds to an account specified by the Issuer for that purpose.
(b) Certificates representing Warrant Shares shall bear the following
restrictive legend:
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<PAGE>
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"). They may not be offered or transferred
by sale, assignment, pledge or otherwise unless (i) a
registration statement for the securities under the Securities
Act is in effect or (ii) the corporation has received an opinion
of counsel, which opinion is satisfactory to the corporation, to
the effect that such registration is not required under the
Securities Act."
Section 3. RESERVATION OF SHARES; PRESERVATION OF RIGHTS OF HOLDER. The
Issuer hereby agrees that there shall be reserved for issuance and/or
delivery upon exercise of this Warrant, such number of Warrant Shares as
shall be required for issuance or delivery upon exercise of this Warrant. The
Warrant surrendered upon exercise shall be canceled by the Issuer. After the
Expiration Date, no shares of Common Stock shall be subject to reservation in
respect of this Warrant. The Issuer further agrees (i) that it will not, by
amendment of its Articles of Incorporation or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other
voluntary act, avoid or seek to avoid the observation or performance of any
of the covenants, stipulations or conditions to be observed or performed
hereunder by the Issuer, (ii) promptly to take such action as may be required
of the Issuer to permit the Holder to exercise this Warrant and the Issuer
duly and effectively to issue shares of its Common Stock or other securities
as provided herein upon the exercise hereof, and (iii) promptly to take all
action required or provided herein to protect the rights of the Holder
granted hereunder against dilution. Without limiting the generality of the
foregoing, should the Warrant Shares at any time consist in whole or in part
of shares of capital stock having a par value, the Issuer agrees that before
taking any action which would cause an adjustment of the Exercise Price so
that the same would be less than the then par value of such Warrant Shares,
the Issuer shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Issuer may validly and legally issue
fully paid and nonassessable shares of such Common Stock at the Exercise
Price as so adjusted. The Issuer further agrees that it will not establish a
par value for its Common Stock while this Warrant is outstanding in an amount
greater than the Exercise Price.
Section 4. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. Any
attempted transfer of this Warrant, the Warrant Shares or any new Warrant not
in accordance with this Section shall be null and void, and the Issuer shall
not in any way be required to give effect to such transfer. No transfer of
this Warrant shall be effective for any purpose hereunder until (i) written
notice of such transfer and of the name and address of the transferee has
been received by the Issuer, and (ii) the transferee shall first agree in a
writing deposited with the Secretary of the Issuer to be bound by all the
provisions of this Warrant and the Agreement. Upon surrender of this Warrant
to the Issuer by any transferee authorized under the provisions of this
Section 4, the Issuer shall, without charge, execute and deliver a new
Warrant registered in the name of such transferee at the address specified by
such transferee, and this Warrant shall promptly be canceled. The Issuer may
deem and treat the registered holder of any Warrant as the absolute owner
thereof for all purposes, and the Issuer shall not be affected by any notice
to the contrary. Any Warrant, if presented by an authorized transferee, may
be exercised by such transferee without prior delivery of a new Warrant
issued in the name of the transferee.
Upon receipt by the Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Warrant, if mutilated, the Issuer
will execute and deliver a new Warrant of like tenor and date. Any such new
Warrant executed and delivered shall constitute a separate contractual
obligation on the part of the Issuer, whether or not the Warrant so lost,
stolen, destroyed or mutilated shall be at any time enforceable by anyone.
Section 5. RIGHTS OF HOLDER. Neither a Holder nor his transferee by
devise or the laws of descent and distribution or otherwise shall be, or have
any rights or privileges of, a shareholder of the Issuer with respect to any
Warrant Shares, unless and until certificates representing such Warrant
Shares shall have been issued and delivered thereto.
Section 6. ADJUSTMENTS IN EXERCISE PRICE AND WARRANT SHARES. The
Exercise Price and Warrant Shares shall be subject to adjustment from time to
time as provided in this Section 6.
(a) If the Issuer is recapitalized through the subdivision or
combination of its outstanding shares of Common Stock into a larger or
smaller number of shares, the number of shares of Common Stock for
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<PAGE>
which this Warrant may be exercised shall be increased or reduced, as of
the record date for such recapitalization, in the same proportion as the
increase or decrease in the outstanding shares of Common Stock, and the
Exercise Price shall be adjusted so that the aggregate amount payable
for the purchase of all Warrant Shares issuable hereunder immediately
after the record date for such recapitalization shall equal the
aggregate amount so payable immediately before such record date.
(b) If the Issuer declares a dividend on Common Stock, or makes a
distribution to holders of Common Stock, and such dividend or distribution
is payable or made in Common Stock or securities convertible into or
exchangeable for Common Stock, or rights to purchase Common Stock or
securities convertible into or exchangeable for Common Stock, the number of
shares of Common Stock for which this Warrant may be exercised shall be
increased, as of the record date for determining which holders of Common
Stock shall be entitled to receive such dividend or distribution, in
proportion to the increase in the number of outstanding shares (and shares
of Common Stock issuable upon conversion of all such securities convertible
into Common Stock) of Common Stock as a result of such dividend or
distribution, and the Exercise Price shall be adjusted so that the
aggregate amount payable for the purchase of all the Warrant Shares
issuable hereunder immediately after the record date for such dividend or
distribution shall equal the aggregate amount so payable immediately before
such record date.
(c) If the Issuer declares a dividend on Common Stock (other than a
dividend covered by subsection (b) above) or distributes to holders of its
Common Stock, other than as part of its dissolution or liquidation or the
winding up of its affairs, any shares of its capital stock, any evidence of
indebtedness or any cash or other of its assets (other than Common Stock or
securities convertible into or exchangeable for Common Stock), the Holder
shall receive notice of such event as set forth in Section 8 below.
(d) In case of any consolidation of the Issuer with, or merger of the
Issuer into, any other corporation (other than a consolidation or merger in
which the Issuer is the continuing corporation and in which no change
occurs in its outstanding Common Stock), or in case of any sale or transfer
of all or substantially all of the assets of the Issuer, or in the case of
any statutory exchange of securities with another corporation (including
any exchange effected in connection with a merger of a third corporation
into the Issuer, except where the Issuer is the surviving entity and no
change occurs in its outstanding Common Stock), the corporation formed by
such consolidation or the corporation resulting from such merger or the
corporation which shall have acquired such assets or securities of the
Issuer, as the case may be, shall execute and deliver to the Holder
simultaneously therewith a new Warrant, satisfactory in form and substance
to the Holder, together with such other documents as the Holder may
reasonably request, entitling the Holder thereof to receive upon exercise
of such Warrant the kind and amount of shares of stock and other securities
and property receivable upon such consolidation, merger, sale, transfer, or
exchange of securities, or upon the dissolution following such sale or
other transfer, by a holder of the number of shares of Common Stock
purchasable upon exercise of this Warrant immediately prior to such
consolidation, merger, sale, transfer, or exchange. Such new Warrant shall
contain the same basic other terms and conditions as this Warrant and shall
provide for adjustments which, for events subsequent to the effective date
of such written instrument, shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 6. The above
provisions of this paragraph (d) shall similarly apply to successive
consolidations, mergers, exchanges, sales or other transfers covered
hereby.
(e) If the Issuer shall, at any time before the expiration of this
Warrant, dissolve, liquidate or wind up its affairs, the Holder shall, upon
exercise of this Warrant have the right to receive, in lieu of the shares
of Common Stock of the Issuer that the Holder otherwise would have been
entitled to receive, the same kind and amount of assets as would have been
issued, distributed or paid to the Holder upon any such dissolution,
liquidation or winding up with respect to such shares of Common Stock of
the Issuer had the Holder been the holder of record of such shares of
Common Stock receivable upon exercise of this Warrant on the date for
determining those entitled to receive any such distribution. If any such
dissolution, liquidation or winding up results in any cash distribution in
excess of the Exercise Price provided by this Warrant for the shares of
Common Stock receivable upon exercise of this Warrant, the Holder may, at
the Holder's option, exercise this Warrant without making payment of the
Exercise Price and, in such case, the Issuer shall, upon distribution to
the Holder, consider the Exercise Price to have been paid in full and, in
making settlement to
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the Holder, shall obtain receipt of the Exercise Price by deducting an
amount equal to the Exercise Price for the shares of Common Stock
receivable upon exercise of this Warrant from the amount payable to the
Holder. For purposes of this paragraph, the sale of all or substantially
all of the assets of the Issuer and distribution of the proceeds thereof
to the Issuer's shareholders shall be deemed a liquidation.
(f) If an event occurs which is similar in nature to the events
described in this Section 6, but is not expressly covered hereby, the Board
of Directors of the Issuer shall make or arrange for an equitable
adjustment to the number of Warrant Shares and the Exercise Price.
(g) The term "Common Stock" shall mean the Common Stock of the
Issuer as the same exists at the Closing Date or as such stock may be
constituted from time to time, except that for the purpose of this Section
6, the term "Common Stock" shall include any stock of any class of the
Issuer which has no preference in respect of dividends or of amounts
payable in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Issuer and which is not subject to
redemption by the Issuer.
(h) The Issuer shall retain a firm of independent public accountants
of recognized standing (who may be any such firm regularly employed by the
Issuer) to make any computation required under this Section 6, and a
certificate signed by such firm shall be conclusive evidence of the
correctness of any computation made under this Section 6.
(i) Whenever the number of Warrant Shares or the Exercise Price shall
be adjusted as required by the provisions of this Section 6, the Issuer
forthwith shall file in the custody of its secretary or an assistant
secretary, at its principal office, and furnish to each Holder hereof, a
certificate prepared in accordance with paragraph (h) above, showing the
adjusted number of Warrant Shares and the Exercise Price and setting forth
in reasonable detail the circumstances requiring the adjustments.
(j) Notwithstanding any other provision, this Warrant shall be
binding upon and inure to the benefit of any successors and assigns of the
Issuer.
(k) No adjustment in the Exercise Price in accordance with the
provisions of this Section 6 need be made if such adjustment would amount
to a change in such Exercise Price of less than $.01; PROVIDED HOWEVER,
that the amount by which any adjustment is not made by reason of the
provisions of this paragraph (k) shall be carried forward and taken into
account at the time of any subsequent adjustment in the Exercise Price.
(l) If an adjustment is made under this Section 6 and the event to
which the adjustment relates does not occur, then any adjustments in
accordance with this Section 6 shall be readjusted to the Exercise Price
and the number of Warrant Shares which would be in effect had the earlier
adjustment not been made.
Section 7. TAXES ON ISSUE OR TRANSFER OF COMMON STOCK AND WARRANT. The
Issuer shall pay any and all documentary stamp or similar issue or transfer
taxes payable in respect of the issue or delivery of shares of Common Stock
or other securities on the exercise of this Warrant. The Issuer shall not be
required to pay any tax which may be payable in respect of any transfer of
this Warrant or in respect of any transfers involved in the issue or delivery
of shares or the exercise of this Warrant in a name other than that of the
Holder and the person requesting such transfer, issue or delivery shall be
responsible for the payment of any such tax (and the Issuer shall not be
required to issue or deliver said shares until such tax has been paid or
provided for).
Section 8. NOTICE OF ADJUSTMENT. So long as this Warrant shall be
outstanding, (a) if the Issuer shall propose to pay any dividends or make any
distribution upon the Common Stock, or (b) if the Issuer shall offer
generally to the holders of Common Stock the right to subscribe to or
purchase any shares of any class of Common Stock or securities convertible
into Common Stock or any other similar rights, or (c) if there shall be any
proposed capital reorganization of the Issuer in which the Issuer is not the
surviving entity, recapitalization of the capital stock of the Issuer,
consolidation or merger of the Issuer with or into another corporation, sale,
lease or other transfer of all or substantially all of the property and
assets of the Issuer, or voluntary or involuntary dissolution, liquidation or
winding up of the Issuer, or (d) if the Issuer shall give to its stockholders
any notice, report or other communication respecting
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any significant or special action or event, then in such event, the Issuer
shall give to the Holder, at least ten days prior to the relevant date
described below (or such shorter period as is reasonably possible if thirty
days is not reasonably possible), a notice containing a description of the
proposed action or event and stating the date or expected date on which a
record of the Issuer's stockholders is to be taken for any of the foregoing
purposes, and the date or expected date on which any such dividend,
distribution, subscription, reclassification, reorganization, consolidation,
combination, merger, conveyance, sale, lease or transfer, dissolution,
liquidation or winding up is to take place and the date or expected date, if
any is to be fixed, as of which the holders of Common Stock of record shall
be entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such event.
Section 9. NOTICES. All communications hereunder shall be in writing,
and, if sent to the Holder shall be sufficient in all respects if delivered,
sent by registered mail, or by facsimile and confirmed to the Holder at:
Cameron Capital Management Ltd.
10 Cavendish Road
Hamilton, Bermuda HM19
Attention: Nic Snelling
Telephone: (441) 295-5455
Facsimile: (441) 295-9022
or if to any other Holder, addressed to such Holder at such address as it
shall have specified to the Issuer in writing, or, if sent to the Issuer,
shall be delivered, sent by registered mail or by facsimile and confirmed to
the Issuer at:
Computerized Thermal Imaging Inc.
141 North State Street
Lake Oswega, OR 97034
Attn.: David B. Johnston
Telephone: (503) 650-0119
Facsimile: (503) 650-8551
Section 10. GOVERNING LAW. This Warrant shall be governed by, and
interpreted in accordance with, the laws of the State of Nevada.
Dated: August 15, 1996
COMPUTERIZED THERMAL IMAGING
INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
ATTEST:
- -----------------------------------
, Secretary
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SCHEDULE ONE
ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise this Warrant and
to purchase ______ shares of Computerized Thermal Imaging Inc. Common Stock
issuable upon the exercise of this Warrant, and requests that certificates
for such shares be issued in the name of:
- ------------------------------------------------------------------------------
(Name)
- ------------------------------------------------------------------------------
(Address)
- ------------------------------------------------------------------------------
(United States Social Security or other taxpayer
identifying number, if applicable)
and, if different from above, be delivered to:
- ------------------------------------------------------------------------------
(Name)
- ------------------------------------------------------------------------------
(Address)
and, if the number of Warrant Shares so purchased are not all of the Warrant
Shares issuable upon exercise of this Warrant, that a Warrant to purchase the
balance of such Warrant Shares be registered in the name of, and delivered
to, the undersigned at the address stated below.
Date:
----------- --, ----
Name of Registered Owner:
-----------------------------------------------------
- ------------------------------------------------------------------------------
Address:
----------------------------------------------------------------------
- ------------------------------------------------------------------------------
Signature:
--------------------------------------------------------------------
<PAGE>
EXHIBIT C
August 15, 1996
Cameron Capital Ltd.
Cameron Capital Management Ltd.
10 Cavendish Road
Hamilton HM 19
Bermuda
RE: COMPUTERIZED THERMAL IMAGING INC.
Ladies and Gentlemen:
We have acted as counsel for Computerized Thermal Imaging Inc., a Nevada
corporation (the "Company"), in connection with the private placement of the
Company's 6% Convertible Debentures due August 15, 1996 (the "Debentures")and
a warrant (the "Warrant") to purchase shares of common stock, no par value
(the "Common Stock"). The private placement has been made without
registration under the Securities Act of 1933, as amended (the "Securities
Act") pursuant to the exemption from registration set forth in Rules 501 to
508, inclusive, promulgated under the Securities Act ("Regulation D").
Capitalized terms used herein and not otherwise defined shall have the
meaning assigned to them in the Subscription Agreement dated as of August 15,
1996 (the "Agreement") by and between the Company, Cameron Capital Ltd. and
Cameron Capital Management Ltd. (the "Purchasers"). The Agreement, the
Warrant, and the Debentures are sometimes hereinafter referred to
collectively as the "Documents".
In connection with the opinions expressed herein, we have made such
examination of matters of law and of fact as we considered appropriate or
advisable for purposes hereof. As to matters of fact material to the opinions
expressed herein, we have relied upon the representations and warranties as
to factual matters contained in and made by the Company pursuant to the
Documents and upon certificates and statements of certain government
officials and of officers of the Company. We have also examined originals or
copies of such corporate documents or records of the Company as we have
considered appropriate for the opinions expressed herein.
In rendering this opinion, we have assumed that the signatures on
documents and instruments examined by us are authentic, and that all
documents submitted to us as copies conform with the originals, which facts
we have not independently verified. We have also assumed: (A) that the
Documents have been duly and validly executed and delivered by you or on your
behalf and constitute your valid, binding and enforceable obligation; and (B)
that the representations and warranties made in the Documents by you are true
and correct.
As used in this opinion, the expression "we are not aware" or the phrase
"to our knowledge" means as to matters of fact, based on the actual knowledge
of individual attorneys within the firm principally responsible for handling
matters for the Company and after an examination of documents referred to
herein and after inquiries of certain officers of the Company and
governmental authorities, we find no reason to believe the opinions expressed
are factually incorrect; but beyond that we have made no factual
investigation for the purpose of rendering this opinion.
This opinion relates solely to the laws of the State of Nevada and
applicable federal laws of the United States, and we express no opinion with
respect to the effect or application of any other laws. Special rulings of
authorities administering such laws or opinions of other counsel have not
been sought or obtained by us in connection with rendering the opinions
expressed herein.
Based upon our examination of and reliance upon the foregoing and
subject to the limitations, exceptions, qualifications and assumptions set
forth below, we are of the opinion that as of the date hereof:
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1. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Nevada, and has all
requisite corporate power and authority to carry on its business as now
conducted and as proposed to be conducted.
2. The Company has all requisite corporate power and authority to
execute and deliver the Documents and to perform its respective obligations
under the terms of the Documents. The Documents have been duly authorized,
executed and delivered by the Company and constitute the legal, valid and
binding obligations of the Company, enforceable against it in accordance with
their terms.
3. Neither the issuance and sale of the Securities, the execution,
delivery or performance of this Agreement by the Company, nor the
consummation by the Company of the transactions contemplated hereby (A)
requires any consent, approval, authorization or other order of or
registration or filing with, any court, regulatory body, administrative
agency or other governmental body, agency or official or conflicts or will
conflict with or constitutes or will constitute a breach of, or a default
under, the certificate or articles of incorporation or by-laws, or other
organizational documents, of the Company or any of its subsidiaries or (B)
conflicts or will conflict with, or constitutes or will constitute a material
breach of, or default under, any material agreement, indenture, lease or
other instrument to which the Company or any of its subsidiaries is a party
or by which any of them or any of their respective properties may be bound,
or violates or will violate any statute, law, or any of its subsidiaries or
any of their respective properties, or will result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of
the Company or any of its subsidiaries pursuant to the terms of any agreement
or instrument to which any of them is a party or by which any of them may be
bound or to which any of the property or assets of any of them is subject.
4. The authorized capital of the Company consists, or will consist
prior to the closing of One Hundred Million (100,000,000) shares of common
stock, no par value, (the "Common Stock"), of which 37,068,009 shares are
issued and outstanding, and 97,000 shares of preferred stock, par value $.01
per share, of which 30,000 are issued and outstanding. All of such shares
have been duly authorized and validly issued, and are fully paid, and
nonassessable.
5. Upon receipt by the Company of the purchase price for the
Debentures pursuant to the Agreement, and upon issuance and delivery of the
Debentures to the Purchaser pursuant to the terms and conditions of the
Agreement, the Debentures so issued and delivered will be duly authorized and
validly issued. The Company has reserved, solely for the purpose of effecting
the conversion of the Debenture, such number of shares of its Common Stock
sufficient to effect the conversion of all of the principal amount of the
Debentures.
6. Upon the issuance and delivery of the Warrant pursuant to the terms
and conditions of the Agreement, the Warrant so issued and delivered will be
duly authorized and validly issued. The Company has reserved, solely for the
purpose of issuance upon exercise of the Warrant, such number of shares of
its Common Stock sufficient to effect the exercise of the Warrant.
7. The payment of all interest, premiums and other amounts payable
under and pursuant to the Documents is not usurious under applicable law.
8. Assuming and relying upon the truth and accuracy of the
representations and warranties contained in the Agreement, the offer,
issuance, sale and delivery of the Debentures and the Warrant in accordance
with the terms of the Agreement are exempt from the registration requirements
of the Securities Act pursuant to Regulation D.
Our opinions expressed above are specifically subject to the following
limitations, exceptions, qualifications and assumptions:
A. The effect of bankruptcy, insolvency, reorganization, moratorium
and other similar laws relating to or affecting the relief of debtors or the
rights and remedies of creditors generally, including without limitation the
effect of statutory or other law regarding fraudulent conveyances and
preferential transfers.
B. Limitations imposed by state law, federal law or general equitable
principles upon the specific enforceability of any of the remedies, covenants
or other provisions of any applicable agreement and upon the
2
<PAGE>
availability of injunctive relief or other equitable remedies, regardless of
whether enforcement of any such agreement is considered in a proceeding in
equity or at law.
This opinion is rendered as of the date first written above solely for
the benefit in connection with the Agreement and may not be delivered to,
quoted or relied upon by any person other than you, or for any other purpose,
without our prior written consent. We assume no obligation to advise you of
facts, circumstances, events or developments which hereafter may be brought
to our attention and which may alter, affect or modify the opinions expressed
herein.
Very truly yours,
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<PAGE>
EXHIBIT 10(h)
SUBSCRIPTION AGREEMENT
COMPUTERIZED THERMAL IMAGING, INC.
Computerized Thermal Imaging, Inc.
141 North State Street
Lake Oswego, Oregon 97034
Ladies and Gentlemen:
The undersigned, Cameron Capital Ltd. (the "Subscriber"), understands
that Computerized Thermal Imaging Inc., a Nevada corporation (the "Company"),
is offering for sale one or more of its 8% Senior Convertible Debentures, in
the form attached hereto as EXHIBIT A, in the aggregate original principal
amount of One Hundred Twenty Five Thousand ($125,000) Dollars (the
"Debentures"). The Subscriber further understands that the offering is being
made without registration of the Debentures and shares of Common Stock
issuable upon conversion thereof under the Securities Act of 1933, as amended
(the "Securities Act"), and is being made only to "accredited investors" (as
defined in Rule 501 of Regulation D under the Securities Act).
1. SUBSCRIPTION. Subject to the terms and conditions hereof, the
Company agrees to sell, issue and deliver, and Subscriber hereby offers to
purchase and subscribes for (i) Debentures in the aggregate original
principal amount of $125,000 for a purchase price equal to the aggregate
original principal amount of the Debentures so to be purchased (the "Purchase
Price").
2. THE CLOSING. The closing of the transactions contemplated hereby
shall take place on March 11, 1997 at the offices of Freeborn & Peters, 950
17th Street, Denver, Colorado 80202, at 9:30 a.m. or at such other time and
place as shall be agreed to by the Company and the Subscriber (the "Closing
Date"). At the closing of the transactions contemplated hereby (the
"Closing"), payment shall be made by wire transfer against delivery of the
Debentures. In addition, the Company shall deliver to the Subscriber an
opinion of Company counsel in the form attached hereto as EXHIBIT B.
3. SECURITIES ACT REGISTRATION.
3.1. The Company shall register under the Securities Act, at the
Company's expense, all of the shares of Common Stock issuable upon (i) the
conversion of the Debentures and upon exercise of the warrant of even date
herewith, in the form attached hereto as EXHIBIT C (the "Warrant") issued to
Cameron Capital Management Ltd. ("CCM") and (ii) the conversion of the 6%
Convertible Debentures and the Warrant issued to the Subscriber and CCM,
respectively, pursuant to that certain Subscription Agreement dated August
15, 1996 (the "Prior Subscription Agreement") (the "Registrable Shares") by
July 15, 1997 and in that connection shall file with the Securities and
Exchange Commission (the "SEC") a registration statement with respect to the
Registrable Shares (the "Registration Statement") on or before May 15, 1997.
Notice of effectiveness of the Registration Statement shall be furnished
promptly to the Subscriber. The Company shall maintain the effectiveness of
the Registration Statement and from time to time will amend or supplement
such Registration Statement and the prospectus contained therein as and to
the extent necessary to comply with the Securities Act. The effectiveness of
the Registration Statement shall be maintained with respect to the
Registrable Shares until the later to occur of the second anniversary of the
Closing Date of the Prior Subscription Agreement or such date as all of the
Registrable Shares may be sold during any one period of three (3) consecutive
months pursuant to Rule 144 under the Securities Act or otherwise without
registration.
3.2. In the event that the Company registers under the Securities
Act any of the Registrable Shares held by the Subscriber, the Company shall
indemnify and hold harmless the Subscriber and each underwriter of such
shares (including any broker or dealer through whom such of the shares may be
sold) and each person, if any,
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<PAGE>
who controls the Subscriber or any such underwriter within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") from and against any and all
losses, claims, damages, expenses or liabilities, joint or several, to which
they or any of them become subject under the Securities Act or the Exchange
Act or otherwise, and, except as hereinafter provided, shall reimburse the
Subscriber and each of the underwriters and each such controlling person, if
any, for any legal or other expenses reasonably incurred by them or any of
them in connection with investigating or defending any actions whether or not
resulting in any liability, insofar as such losses, claims, damages,
expenses, liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, or in the prospectus (or the Registration Statement
or prospectus as from time to time amended or supplemented by the Company) or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary in order
to make the statements therein not misleading, unless such untrue statement
or omission was made in such Registration Statement or prospectus in reliance
upon and in conformity with information furnished in writing to the Company
in connection therewith by the Subscriber (insofar as indemnification of the
Subscriber is concerned) or any underwriter (insofar as indemnification of
any such underwriter is concerned) relating thereto expressly for use
therein. Promptly after receipt by the Subscriber or any underwriter or any
person controlling any of them, as the case may be, of notice of a claim to
which the foregoing indemnification applies, the Subscriber or such other
person shall notify the Company in writing of the commencement thereof, and,
subject to the provisions hereinafter stated, the Company shall assume the
defense of such action (including the employment of counsel, who shall be
counsel satisfactory to the Subscriber or such underwriter or controlling
person, as the case may be, and the payment of expenses) insofar as such
action shall relate to any alleged liability in respect of which indemnity
may be sought against the Company. The Subscriber or any underwriter or any
such controlling person shall have the right to employ separate counsel in
any such action and to participate in the defense thereof but the fees and
expenses of such counsel shall not be at the expense of the Company unless:
(i) the employment of such counsel has been specifically authorized by the
Company, (ii) the Company has failed to assume the defense and employ
counsel, or (iii) the named parties of any such action, suit or proceeding
(including any impleaded parties) include both the person or persons seeking
indemnification (the "indemnified person") and the Company and such
indemnified person shall have been advised by its counsel that representation
of the indemnified person and the Company by the same counsel would be
inappropriate under applicable standards of professional conduct (whether or
not such representation by the same counsel has been proposed) due to actual
or potential differing interests between them (in which case the Company
shall not have the right to assume the defense of such action, suit or
proceeding on behalf of such indemnified person). The Company shall not be
liable to indemnify any person for any settlement by such person of any such
action effected without the Company's consent.
3.3. The Subscriber shall indemnify the Company, its officers and
directors and each person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act, against all losses, claims, damages, expenses or liabilities or actions
to which they or any of them become subject under the Securities Act or the
Exchange Act or otherwise, and shall reimburse the Company, its officers and
directors and each such controlling person, if any, for any legal or other
expenses reasonably incurred by them or any of them in connection with
investigating or defending any actions whether or not resulting in any
liability, insofar as such losses, claims damages, expenses, liabilities or
actions arise out of or are based upon any information relating to the
Subscriber furnished by or on behalf of the Subscriber in writing
specifically for inclusion in such Registration Statement. Notwithstanding
the above, the liability of the Subscriber under this Section 3.3 shall not
exceed the proceeds (net of underwriting discounts or commissions) received
by the Subscriber upon the sale of the Registrable Shares.
3.4. Any losses, claims, damages, liabilities and reasonable
expenses for which an indemnified party is entitled to indemnification under
Sections 3.2 and 3.3 of this Agreement shall be paid by the indemnifying
party to the indemnified party as such losses, claims, damages, liabilities
and expenses are incurred.
3.5. The Company shall prepare and file with the SEC such
amendments and supplements to the Registration Statement, and the prospectus
used in connection with such Registration Statement as, in the opinion of the
counsel to the Company, may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
such Registration Statement.
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<PAGE>
3.6. The Company shall furnish to the Subscriber such number of
copies of a prospectus in conformity with the requirements of the Securities
Act, and such other documents as may reasonably be requested in order to
facilitate the disposition of the Registrable Shares owned by the Subscriber.
3.7. The Company shall use its best efforts to register and qualify
the securities covered by such Registration Statement under such other
securities or blue sky laws of such jurisdictions as shall be reasonably
requested by the Subscriber; provided, however, that the Company shall not be
required in connection therewith, or as a condition thereto, to qualify to do
business or to file a general consent to service of process in any such
states or jurisdictions, unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities Act.
3.8. The Company shall notify each holder of Registrable Shares
covered by such Registration Statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act and of the
happening of any event as a result of which the prospectus included in such
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of
the circumstances then existing.
3.9. The Company shall provide a transfer agent and registrar for
all Registrable Shares to be registered hereunder and a CUSIP number of all
Registrable Shares, in each case not later than the effective date of such
registration.
3.10. In the event the Registration Statement is not filed on or
before May 15, 1997, or the Registration Statement is not declared effective
by the SEC on or before July 15, 1997, the Company shall, for each month or
portion thereof that said Registration Statement is not filed or declared
effective, as the case may be, in addition to the eight percent (8%) interest
otherwise payable pursuant to the terms of the Debentures, pay the Subscriber
a premium equal to two percent (2%) of the outstanding principal amount of
the Debentures, payable monthly, commencing May 16, 1997 or July 16, 1997, as
the case may be. The premium to be paid, if any, shall constitute liquidated
damages for the Company's failure to timely file the Registration Statement
with the SEC or failure to cause such Registration Statement to become
effective, as the case may be. The parties agree that the foregoing damages
are reasonable and that the anticipated damages for the failure of the
Company to effect such registration are uncertain in amount and difficult to
be proved. The premium shall be payable in coin or currency or, in lieu of a
cash premium payment, the Subscriber may require the Company to issue shares
of its Common Stock or a combination of Common Stock and cash as payment of
the premium then due and payable, until such time as the Subscriber receives
notification of the filing or effectiveness. If the Subscriber elects to
receive all or a portion of the premium in Common Stock, the Company shall
issue to the Subscriber such number of fully paid and non-assessable shares
of Common Stock as shall have an aggregate Market Value (as defined in the
Debentures and determined as of the date such premium is payable) equal in
amount to the premium which the Subscriber has elected to receive in kind.
Subscriber hereby waives the premiums on the 6% Convertible Debenture issued
pursuant to the Prior Subscription Agreement to the extent such premiums
would have accrued through March 31, 1997. After March 31, 1997, such
premiums shall commence accruing in accordance with the terms of the Prior
Subscription Agreement.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The
Company represents and warrants to the Subscriber as follows, such
representations and warranties to be true and correct as of the Closing Date.
4.1 The Common Stock issuable upon the conversion of the
Debentures and exercise of the Warrant has been duly authorized and, when
issued and delivered to the Subscriber in accordance with the terms of said
Debentures and Warrant, will be validly issued, fully paid and nonassessable
(the Debentures, Warrant and shares of Common Stock issuable upon conversion
or exercise thereof are hereinafter sometimes referred to as the
"Securities").
4.2 The Company is a corporation duly organized and validly
existing in good standing under the laws of the State of Nevada with full
corporate power and authority to own, lease and operate its properties and to
conduct its business as currently conducted, and is duly registered and
qualified to conduct its business and is in good standing in each
jurisdiction or place where the nature of its properties or the conduct of
its business requires such
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registration or qualification, except where the failure so to register or
qualify does not have a material adverse effect on the condition (financial
or other), business, properties, net worth or results of operations of the
Company.
4.3 Neither the issuance and sale of the Securities, the
execution, delivery or performance of this Agreement, nor the consummation by
the Company of the transactions contemplated hereby (i) requires any consent,
approval, authorization or other order of or registration or filing with, any
court, regulatory body, administrative agency or other governmental body,
agency or official or conflicts or will conflict with or constitutes or will
constitute a breach of, or a default under, the certificate or articles of
incorporation or by-laws, or other organizational documents, of the Company
or any of its subsidiaries or (ii) conflicts or will conflict with, or
constitutes or will constitute a material breach of, or default under, any
material agreement, indenture, lease or other instrument to which the Company
or any of its subsidiaries is a party or by which any of them or any of their
respective properties may be bound, or violates or will violate any statute,
law, or any of its subsidiaries or any of their respective properties, or
will result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any of its subsidiaries
pursuant to the terms of any agreement or instrument to which any of them is
a party or by which any of them may be bound or to which any of the property
or assets of any of them is subject.
4.4 The execution and delivery of, and the performance by the
Company of its obligations under this Agreement has been duly and validly
authorized by the Company, and this Agreement has been duly executed and
delivered by the Company and constitutes the valid and legally binding
agreement of the Company, enforceable against the Company in accordance with
its terms, and the Company has full corporate and legal power to enter into
this Agreement and perform all of its obligations hereunder.
4.5 As of February 28, 1997, the Company has authorized One
Hundred Million (100,000,000) shares of Common Stock, no par value, of which
37,068,009 shares are issued and outstanding, and 97,000 shares of preferred
stock, par value of $.01, of which 30,000 are issued and outstanding. All
such shares have been duly and validly issued and are fully paid and
nonassessable. The Company has outstanding no other shares of any class of
capital stock. Except as set forth in Schedule 4.5 attached hereto, there
are no subscriptions, options, warrants, scrip, rights, calls, convertible
securities, or any other similar agreements, arrangements or commitments of
any character relating to the issued or unissued capital stock, or other
securities of the Company obligating, or which may obligate the Company to
issue, deliver or sell or cause to be issued, delivered or sold, additional
shares of its capital stock or obligating or which may obligate the Company
to grant, extend or enter into any such subscription, option, warrant, scrip,
right, call, convertible security, or other similar agreement, arrangement,
or similar commitment.
4.6 Except as set forth in Schedule 4.6 attached hereto, there are
no legal or administrative proceedings or investigation of any kind or nature
now pending or to the knowledge of the Company, threatened before any court
or administrative body against the Company nor is the Company subject to any
unsatisfied judgment, order or decree of any court of law, administrative
board, regulatory agency, arbitrator or arbitration panel.
4.7 Since January 1, 1997, the business of the Company has been
operated only in the ordinary and normal course, and there has not been,
after such date, any material adverse change in the earnings, assets,
liabilities, financial condition or in the operation of its businesses.
4.8 Provided that the Company meets the qualification requirements
established by the National Association of Securities Dealers, the Company
will use its best efforts to cause its Common Stock, including the
Registrable Shares, to be duly approved for listing on The Nasdaq SmallCap
Market on or before the effective date of the Registration Statement.
4.9 The Company will use its best efforts to maintain the listing
of its Common Stock on The Nasdaq SmallCap Market, for a thirty-six (36)
month period commencing on the date said Common Stock is duly approved for
listing.
4.10 The Company will make and keep public information regarding
the Company available as those terms are understood and defined in Rule 144
under the Securities Act, at all times from and after ninety (90) days
following the effective date of the initial registration statement filed by
the Company under the Securities Act; and
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4.11 The Company will file with the SEC in a timely manner all
reports and other documents required of the Company under the Securities Act
and the Securities Exchange Act of 1934, as amended.
4.12 Until the Debentures are no longer outstanding, except for (i)
the secured bond placement described in paragraphs (2) and (3) of the
commitment letter dated March 6, 1997 from Select Capital Advisors, Inc. to
the Company (the "Select Advisors Commitment Letter"), and (ii) security
interests in equipment securing indebtedness for the purchase price of such
equipment, the Company will not, and will not permit any subsidiary of the
Company to, create or suffer to exist any mortgage, pledge, lien, security
interest, assignment or transfer upon, or of, any of its property or assets,
now owned or hereafter acquired, to secure any indebtedness in excess of Two
Hundred Fifty Thousand Dollars ($250,000) without making effective provision
whereby the Debentures shall be directly secured equally and ratably with the
indebtedness secured by such mortgage, pledge, lien, security interest,
assignment or transfer.
4.13 The Purchase Price to be paid by the Subscriber shall be
disbursed as follows:
(i) Payment of One Hundred Thousand Dollars ($100,000) for
fees and expenses incurred in connection with the Registration Statement
shall be made by wire transfer to the client trust account so designated by
Looper, Reed, Mark & McGraw, or such other law firm retained to represent the
Company in fulfilling its registration obligations under Section 3 and shall
be held in trust by such firm, to be applied against its invoices for
services related to the filing of the Registration Statement.
(ii) Payment of Twenty Thousand Dollars ($20,000) for fees
and expenses incurred in connection with the Registration Statement shall be
made by wire transfer to the client trust account so designated by King
Griffin & Adamson P.C.
(iii) Payment of Five Thousand Dollars ($5,000) for fees and
expenses incurred in connection with this Agreement shall be made by wire
transfer to an account so designated by Freeborn & Peters.
5. REPRESENTATIONS AND WARRANTIES OF THE SUBSCRIBER. The Subscriber
hereby represents and warrants to the Company as follows, such
representations and warranties to be true and correct as of the Closing Date:
5.1 The Subscriber is aware that no federal or state agency has
passed upon the Common Stock or made any finding or determination concerning
the fairness of this investment.
5.2 The Subscriber has had an opportunity to ask questions of and
receive answers from representatives of the Company, concerning the terms and
conditions of this investment.
5.3 The Securities for which the Subscriber hereby subscribes will
be acquired for the Subscriber's own account, for investment only and not
with a view toward resale or distribution in a manner which would require
registration under the Securities Act.
5.4 The Subscriber is an "accredited investor" as defined in Rule
501(a) under the Securities Act. The Subscriber is an organization described
in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, and is
a corporation, Massachusetts or similar business trust or partnership not
formed for the specific purpose of acquiring the securities offered, with
total assets in excess of $5,000,000. The Subscriber agrees to furnish any
additional information requested to assure compliance with applicable federal
and state securities laws in connection with the purchase and sale of the
Securities.
5.5 The Subscriber acknowledges that, until the Registration
Statement is declared effective by the SEC, there are substantial
restrictions on the transferability of shares of Common Stock as required
pursuant to federal and state securities laws. The Subscriber further agrees
to be responsible for compliance with all conditions on transfer imposed by
any state blue sky or securities law. The Subscriber acknowledges that each
certificate representing the Registrable Shares shall be stamped with a
restrictive legend substantially similar to the following:
"The securities evidenced by this certificate may not be offered or
sold, transferred, pledged, hypothecated or otherwise disposed of
except (i) pursuant to an effective registration statement
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under the Securities Act of 1933, as amended (the "Act"), (ii) to the
extent applicable, Rule 144 under the Act (or any similar rule under the
Act relating to the disposition of securities) or (iii) If an exemption
from registration under such Act is available.
Notwithstanding the foregoing, the securities evidenced by this
certificate are also subject to the registration rights set forth in
that certain Subscription Agreement by and between the Holder hereof
and the Company, a copy of which is on file at the Company's principal
executive office."
5.6 The Subscriber agrees to cooperate with the Company's listing
of Common Stock on the Nasdaq Stock Market and registration of the
Registrable Shares, by responding to any reasonable requests for information
required in connection with such listing and registration. If a condition to
such listing is imposed that would require the Subscriber's consent, and if
the Subscriber is unwilling so to consent, the Company shall have the right
to redeem, in whole but not in part, the Debentures and the debentures issued
pursuant to the Prior Subscription Agreement for a price equal to 120% of the
then outstanding principal amount plus accrued interest.
6. CONDITIONS PRECEDENT TO SUBSCRIBER'S OBLIGATION TO CLOSE.
Subscriber's obligation to make payment of the Purchase Price is subject to
the satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by the Subscriber, in whole or in
part):
6.1 The Company shall have retained the services of a well
qualified independent certified public accounting firm for the purposes of
examining the financial statements of the Company and its subsidiaries in
connection with the filing of the Registration Statement. Such independent
certified public accounting firm shall have substantial experience with
public company reporting and registration statements, shall meet the SEC's
requirements for an independent certified public accountant as set forth in
Article 2 of Regulation S-X, shall be a member of the SEC Practice Section of
the AICPA and shall have adequate insurance coverage; and
6.2 The Company shall have retained Looper, Reed, Mark & McGraw,
or another well qualified law firm to represent the Company in fulfilling its
registration obligations under Section 3. Such law firm shall have prepared
and delivered to Subscriber a reasonably detailed time and responsibility
checklist relating to the filing of the Registration Statement.
6.3 The Company shall have acquired eighty percent (80%) or more
of the outstanding shares of common stock of Thermal Medical Imaging, Inc.
7. BROKERS. Each of the Company and Subscriber hereby indemnifies and
holds the other harmless from any liability for any brokers' or finders' fee
with respect to this Agreement or the transactions contemplated hereby for
which the Company or the Subscriber, as the case may be, is responsible.
8. WAIVER, AMENDMENT. Neither this Agreement nor any provisions
hereof shall be modified, changed, discharged or terminated except by an
instrument in writing, signed by the party against whom any waiver, change,
discharge or termination is sought.
9. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the parties hereto, their respective successors and
assigns, and no other person shall have any right or obligation hereunder.
Neither this Agreement nor any right, remedy, obligation or liability arising
hereunder or by reason hereof shall be assignable by either the Company or
the Subscriber without the prior written consent of other party and any
assignment in violation hereof shall be void.
10. CERTAIN AGREEMENTS. The Company represents, warrants and covenants
as follows:
10.1 Except for (i) any securities offering registered under the
Securities Act or (ii) any securities offering contemplated by the Select
Advisors Commitment Letter, the Company shall not agree to enter, enter into,
or consummate any subsequent securities offering ("Future Offering") from the
period commencing with Closing Date and terminating on September 30, 1997,
without first offering the Subscriber the opportunity (which shall remain
open for a period of five (5) business days from the date the Subscriber
receives notice thereof) to purchase up to all of such
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additional securities (in the discretion of the Subscriber) on the terms and
provisions which the Company proposes to offer such additional securities to
such third parties. Any proposed sale of securities on terms and conditions
different from those offered to the Subscriber, as well as any subsequent
proposed sale of any such additional securities by the Company, shall again
be subject to the first refusal rights of the Subscriber and shall require
compliance by the Company with the procedures described in this Agreement.
The Company further covenants and agrees to provide the Subscriber with
prompt notice (in any event not later than two (2) business days after the
fact) of the date of closing and the substantive terms and provisions of any
such offering with any third party which was the subject of the right of
first offer described in this Section 10.
10.2 Should the Company consummate any Future Offering providing
for the registration and resale of the Company's securities prior to the
effectiveness of the Registration Statement, the Company shall so notify the
Subscriber, whereupon the Subscriber shall have the right, exercisable upon
10 days' written notice at any time prior to the effectiveness of the
Registration Statement, to require the Company to redeem the Debentures and
the 6% Convertible Debentures issued pursuant to the Prior Subscription
Agreement for a price equal to 120% of the then outstanding principal amount
plus accrued interest, such redemption to be effected within five business
days of such notice.
11. CHOICE OF LAW; CONFLICT OF LAW; JURISDICTION AND VENUE. Except as
otherwise expressly provided herein, the terms, conditions and enforceability
of this Agreement shall be governed by and interpreted under the laws of the
State of Illinois. Any claim, dispute or disagreement relating to the terms
and conditions of this Agreement, or arising from this Agreement or the
subject matter of this Agreement, may be brought only in the Circuit Courts
of Cook or DuPage Counties in the State of Illinois or in the United States
District Court for the Northern District of Illinois, which shall have
exclusive jurisdiction thereof. The parties to this Agreement consent to
such jurisdiction and venue and hereby knowingly and voluntarily waive all
objections thereto on the basis of lack of personal jurisdiction, venue or
convenience.
12. SECTION AND OTHER HEADINGS. The section and other headings
contained in this Agreement are for reference purposes only and shall not
affect the meaning or interpretation of this Agreement.
13. MULTIPLE COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which will be deemed to be an original but all of
which will constitute one and the same instrument. However, in enforcing any
party's rights under this Agreement it will be necessary to produce only one
copy of this Agreement signed by the party to be charged.
14. NOTICE. Any notice to be given or to be served upon any party in
connection with this Agreement must be in writing and will be deemed to have
been given and received upon confirmed receipt, if sent by facsimile, or two
(2) days after it has been submitted for delivery by Federal Express or an
equivalent carrier, charges prepaid and addressed to the following addresses
with a confirmation of delivery:
If to the Company, to:
Computerized Thermal Imaging Inc.
141 North State Street
Lake Oswego, Oregon 97034
Attn.: David B. Johnston
Telephone: (503) 650-0119
Facsimile: (503) 650-8551
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If to the Subscriber, to:
Cameron Capital Ltd.
10 Cavendish Road
Hamilton HM 19
Bermuda
Attn.: Nic Snelling
Telephone: (441) 295-5455
Facsimile: (441) 295-9022
Any party may, at any time by giving notice to the other party, designate any
other address in substitution of an address established pursuant to the
foregoing to which such notice will be given.
15. FEES AND EXPENSES. Except as set forth in Section 4.14 each of
Subscriber and the Company agrees to pay its own expenses incident to the
performance of its obligations hereunder including, but not limited to, the
fees and disbursements of such party's legal counsel; provided, however, that
the prevailing party in any action, suit or proceeding brought before or by
any court or governmental agency or body, domestic or foreign arising out of
the transactions contemplated hereby shall be entitled to be reimbursed for
its reasonable legal fees and expenses.
16. BINDING EFFECT. The provisions of this Agreement shall be binding
upon and accrue to the benefit of the parties hereto and their respective
heirs, legal representatives, successors and assigns.
[SIGNATURE PAGE FOLLOWS]
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The undersigned acknowledges that this Agreement shall not be effective
unless and until accepted by the Company as indicated below.
Dated this 13th day of March, 1997.
CAMERON CAPITAL LTD.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE 13TH DAY OF MARCH,
1997.
COMPUTERIZED THERMAL
IMAGING, INC.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
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EXHIBIT A
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED OR OFFERED FOR SALE OR
TRANSFER UNLESS A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND OTHER
APPLICABLE SECURITIES LAWS WITH RESPECT TO SUCH SECURITIES IS THEN IN EFFECT,
OR IN THE OPINION OF COUNSEL, SUCH REGISTRATION UNDER THE SECURITIES ACT AND
OTHER APPLICABLE SECURITIES LAWS IS NOT REQUIRED. THE SECURITIES REPRESENTED
HEREBY ARE ALSO SUBJECT TO AND MAY NOT BE OFFERED, SOLD, TRANSFERRED,
ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT UPON SATISFACTION OF CERTAIN TERMS
AND CONDITIONS SET FORTH IN A CERTAIN SUBSCRIPTION AGREEMENT DATED AS OF
MARCH 13, 1997 BETWEEN THE COMPANY AND THE SUBSCRIBER NAMED THEREIN.
U.S. $125,000
COMPUTERIZED THERMAL IMAGING, INC.
8% SENIOR CONVERTIBLE DEBENTURE DUE MARCH 10, 2000
THIS DEBENTURE is one of a duly authorized issue of Debentures of
Computerized Thermal Imaging, Inc., a Nevada corporation (the "Company"),
designated as its 8% Secured Convertible Debentures due March 12, 2000, in an
aggregate principal amount not exceeding One Hundred Twenty Five Thousand
($125,000) Dollars (the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to Cameron Capital
Ltd., registered holder hereof (the "Holder"), the principal sum of One
Hundred Twenty Five Thousand ( $125,000) Dollars on March 13, 2000 (the
"Maturity Date") and to pay interest on the principal sum outstanding from
time to time in arrears at the rate of eight percent (8%) per annum,
compounded annually and payable on a semi-annual basis commencing six months
after the date of this Debenture, computed on the basis of the actual number
of days elapsed in a 365-day year. Any accrued and unpaid interest shall be
payable in full on the Maturity Date and on each Conversion Date (hereinafter
defined). Accrual of interest shall commence on the date hereof until
payment in full of the principal sum has been made or duly provided for. All
accrued and unpaid interest shall bear interest at the same rate from and
after the due date of the interest payment until so paid. The interest so
payable, less any amounts required by law to be deducted or withheld, will be
paid to the person in whose name this Debenture is registered on the records
of the Company regarding registration and transfers of the Debentures (the
"Debenture Register"); provided, however, that the Company's obligation to a
transferee of this Debenture arises only if such transfer, sale or other
disposition is made in accordance with the terms and conditions of the
Subscription Agreement of even date herewith executed by the original Holder
and the Company in connection with the purchase of this Debenture (the
"Subscription Agreement"). The principal of, and interest on, this Debenture
is payable in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts, at
the address last appearing on the Debenture Register of the Company as
designated in writing by the Holder from time to time. In lieu of a cash
interest payment, the Holder may require the Company to issue shares of its
Common Stock (hereinafter defined) or a combination of Common Stock and cash
as payment of the interest then due and payable. If the Holder elects to
receive all or a portion of the interest in Common Stock, the Company shall
issue to the Holder such number of fully paid and non-assessable shares of
Common Stock as shall have an aggregate Market Value (as hereinafter defined)
equal in amount to the interest which the Holder has elected to receive in
kind. For these purposes, Market Value shall mean the average closing bid
price (as reported on the OTC Bulletin Board or The Nasdaq Stock Market, as
the case may be) of the Company's Common Stock for the five consecutive
trading days ending on the trading day preceding the date on which such
interest is payable.
This Debenture is subject to the following additional provisions:
1. This Debenture is issued pursuant to and shall have the benefit of
the Subscription Agreement dated as of the same date hereof by and between
the Company and the Holder.
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2. The Company shall register all of the shares of Common Stock
issuable upon the conversion of the Debentures, in accordance with the
provisions of Section 3 of the Subscription Agreement, by July 15, 1997. In
the event the Company fails to register all of the shares of Common Stock
issued or issuable upon conversion of the Debentures (the "Registrable
Shares") pursuant to Section 3 of the Subscription Agreement, the Company
shall, in addition to the eight percent (8%) interest otherwise payable
pursuant to the terms of the Debentures, pay the Holder the premium set forth
in Section 3.10 of the Subscription Agreement.
3. The Debentures are issuable in denominations of Twenty Five
Thousand Dollars ($25,000) and integral multiples thereof. The Debentures
are exchangeable for an equal aggregate principal amount of Debentures of
different authorized denominations, as requested by the Holders surrendering
the same. No service charge will be made for such registration or transfer
or exchange.
4. The Company shall be entitled to withhold from all payments of
interest on this Debenture any amounts required to be withheld under the
applicable provisions of the United States income tax laws or any other
applicable laws at the time of such payments.
5. This Debenture has been issued subject to certain investment
representations of the original Holder hereof (set forth in Section 5 of the
Subscription Agreement) and may be offered, sold, transferred or exchanged
only in compliance with the Securities Act. Prior to due presentment for
transfer of this Debenture, the Company and any agent of the Company may
treat the person in whose name this Debenture is duly registered on the
Debenture Register as the owner hereof for the purpose of receiving payment
as herein provided and for all other purposes, whether or not this Debenture
be overdue, and neither the Company nor any such agent shall be affected by
notice to the contrary.
6. (a) Subject to the provisions of Section 7 hereof, from and after
the effective date of the Registration Statement, the Holder of this
Debenture shall have the option to convert up to One Hundred percent (100%)
of the of the principal amount of the Debentures originally issued to the
Holder at any time and from time to time into shares of the Company's Common
Stock, no par value (the "Common Stock"), at a conversion price for each
share of Common Stock equal to the lesser of: (i) the average closing bid
price (as reported on the OTC Bulletin Board or The Nasdaq Stock Market, as
the case may be) of the Company's Common Stock for the five (5) consecutive
trading days ending on the trading day immediately preceding to the date of
the Debentures (the "Fixed Conversion Price") or, (ii) Seventy-seven percent
(77%) of the average closing bid price (as reported on the OTC Bulletin Board
or The Nasdaq Stock Market, as the case may be) of the Company's Common Stock
for the five (5) consecutive trading days ending on the trading day
immediately preceding the Conversion Date (hereinafter defined) (such lesser
value is hereinafter referred to as the "Conversion Price").
(b) Conversion of the Debentures shall be effectuated by
surrendering the Debentures to be converted to the Company with the form of
Notice of Conversion attached hereto as SCHEDULE 1, executed by the Holder of
this Debenture evidencing such Holder's intention to convert this Debenture
or a specified portion (as provided for above) hereof. The amount of accrued
but unpaid interest as of the Conversion Date shall be subject to conversion
and paid in shares of Common Stock valued at the Conversion Price. No
fractional shares of the Common Stock or scrip representing fractional shares
will be issued on conversion, but the number of shares of Common Stock
issuable shall be rounded to the nearest whole share. The date on which
Notice of Conversion is given shall be deemed to be the date on which the
Holder has delivered this Debenture, with the Notice of Conversion duly
executed, to the Company, or if earlier, the date such Notice of Conversion
is delivered to the Company, provided the Debenture is received by the
Company within five (5) trading days thereafter. Such date is referred to
herein as the "Conversion Date." Facsimile delivery of the Notice of
Conversion shall be accepted by the Company.
(c) In lieu of physical delivery of certificates representing the
shares of Common Stock issuable upon the conversion of the Debenture(s) to
the Holder, the Company shall issue and register, within three (3) trading
days after delivery to the Company of such Notice of Conversion, if the
Company has received the original Notice of Conversion and Debenture(s) being
so converted by such date, the number of shares of Common Stock to which the
Holder shall be entitled, in such street or nominee name as may be directed
by the Holder in the Notice of Conversion. The Company shall ensure that the
shares of Common Stock are at all times Depository Trust Corporation
eligible. In the event that the Company fails for any reason to effect
delivery of such shares of Common Stock within such three
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<PAGE>
(3) trading day period; (i) the Company shall pay the Holder a premium equal
to one percent (1%) of the aggregate principal amount of the Debentures then
outstanding and held by the Holder, payable daily, commencing on the fourth
(4th) trading day after delivery to the Company of such Notice of Conversion
or (ii) the Holder may, in its sole discretion, revoke the relevant Notice of
Conversion by delivering a notice to such effect to the Company whereupon the
Company and the Holder shall each be restored to their respective positions
immediately prior to delivery of such Notice of Conversion. The parties
agree that the foregoing damages are reasonable and that the anticipated
damages for the failure of the Company to effect such delivery are uncertain
in amount and difficult to be proved.
7. The Conversion Price and number of shares of Common Stock
issuable upon conversion shall be subject to adjustment from time to time as
provided in this Section 7.
(a) In the event the Company should at any time or from time to
time after the date of this Debenture fix a record date for the effectuation
of a split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or
other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock
(hereinafter referred to as "Common Stock Equivalents") without payment of
any consideration by such holder for the additional shares of Common Stock or
the Common Stock Equivalents (including the additional shares of Common Stock
issuable upon conversion or exercise thereof), then, as of such record date
(or the date of such dividend, distribution, split or subdivision if no
record date is fixed), the Fixed Conversion Price shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion
of the Debentures shall be increased in proportion to such increase in the
aggregate number of shares of Common Stock outstanding and those issuable
with respect to such Common Stock Equivalents.
(b) If the number of shares of Common Stock outstanding at any
time after the date of the Debentures is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the Fixed Conversion Price shall be appropriately increased so
that the number of shares of Common Stock issuable on conversion of the
Debentures shall be decreased in proportion to such decrease in outstanding
shares.
8. The Company shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the Debentures, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the
conversion of all of the outstanding principal amount and accrued interest
thereon; and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of the
Debentures, in addition to such other remedies as shall be available to the
Holder, the Company will take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such
purposes, including, without limitation, using its best efforts to obtain the
requisite stockholder approval necessary to increase the Company's authorized
Common Stock.
9. In no event shall the holder of this Debenture be entitled to
convert the outstanding principal of this Debenture to the extent such
conversion would result in such holder's beneficially owning more than five
percent (5%) of the outstanding shares of the Company's Common Stock. For
these purposes, beneficial ownership shall be defined and calculated in
accordance with Rule 13d-3, promulgated under the Securities Exchange Act of
1934, as amended.
10. Any of the following shall constitute an "Event of Default":
a. The Company shall fail to make any payment (whether principal,
interest or otherwise) on the Debentures as and when the same
shall be due and payable and such default shall continue for five
(5) business days after the due date thereof;
b. Any of the representations or warranties made by the Company
herein, in the Subscription Agreement, or in any certificate or
financial or other written statements heretofore or hereafter
furnished by or on behalf of the Company in connection with the
execution and delivery of the Debentures or the Subscription
Agreement shall be false or misleading in any material respect as
of the date made;
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c. The Company shall fail to perform or observe, in any material
respect, any other covenant, term, provision, condition,
agreement or obligation of the Company under the Debentures or
the Subscription Agreement and such failure shall continue
uncured for a period of five (5) business days after the first
date on which such failure arises (it being understood that in
the case of defaults which can not reasonably be cured within a 5
day period, no grace period shall be necessary as a precondition
to the failure to perform such covenant constituting an Event of
Default);
d. The Company shall (1) make an assignment for the benefit of its
creditors or commence proceedings for its dissolution; or (2)
apply for or consent to the appointment of a trustee, liquidator,
custodian or receiver thereof, or for a substantial part of its
property or business;
e. A trustee, liquidator, custodian or receiver shall be appointed
for the Company or for a substantial part of its property or
business without its consent and shall not be discharged within
sixty (60) days after such appointment;
f. Bankruptcy, reorganization, insolvency or liquidation proceedings
or other proceedings for relief under any bankruptcy law or any
law for the relief of debtors shall be instituted by or against
the Company and, if instituted against the Company, shall not be
dismissed within sixty (60) days after such institution or the
Company shall by any action or answer approve of, consent to, or
acquiesce in any such proceeding or admit the material
allegations of, or default in answering a petition filed in any
such proceeding;
g. The Company shall default on the payment of any debts in excess
of $100,000 beyond any applicable grace period;
h. Any judgments, levies or attachments shall be rendered against
the Company or any of its assets or properties in an aggregate
amount in excess of $100,000 and such judgments, levies or
attachments shall not be dismissed, stayed, bonded or discharged
within thirty (30) days of the date of entry thereof;
i. The Company shall be a party to any merger or consolidation or
shall dispose of all or substantially all of its assets in one or
more transactions or shall redeem more than a DE MINIMIS amount
of its outstanding shares of capital stock;
j. The Company's Common Stock shall be suspended from trading on the
OTC Electronic Bulletin Board, and the Company shall not have its
Common Stock relisted or have such suspension lifted, as the case
may be, within five (5) business days;
k. The Company does not make and keep public information regarding
the Company available, as those terms are understood and defined
in Rule 144 under the Securities Act, at all times from and after
ninety (90) days following the effective date of the initial
registration statement filed by the Company under the Securities
Act; and
l. The Company does not file with the SEC in a timely manner all
reports and other documents required of the Company under the
Securities Act and the Securities Exchange Act of 1934, as
amended.
Upon the occurrence of any Event of Default or at any time thereafter, and in
each and every such case, unless such Event of Default shall have been waived
in writing by the Holder (which waiver shall not be deemed to be a waiver of
any subsequent Event of Default) at the option of the Holder in the Holder's
sole discretion, the Holder may, upon written notice to the Company,
accelerate the maturity hereof, whereupon all principal and interest
hereunder shall be immediately due and payable without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived,
anything herein or in any note or other instruments contained to the contrary
notwithstanding, and
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the Holder may immediately, and without expiration of any period of grace,
enforce any and all of the Holder's rights or remedies afforded by law.
11. The Company, should an Event of Default occur, expressly waives
demand and presentment for payment, notice of nonpayment, protest, notice of
protest, notice of dishonor, notice of acceleration or intent to accelerate,
bringing of suit and diligence in taking any action to collect amounts called
for hereunder and shall be directly and primarily liable for the payment of
all sums owing and to be owing hereon, regardless of and without any notice,
diligence, act or omission as or with respect to the collection of any amount
called for hereunder.
12. No provision of this Debenture shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the principal of,
and interest on, this Debenture at the time, place, and rate, and in the coin
or currency, herein prescribed. This Debenture and all other Debentures now
or hereafter issued of similar terms are direct obligations of the Company.
This Debenture ranks equally with all other Debentures now or hereafter
issued under the terms set forth herein.
13. Any notice to be given or to be served upon any party in connection
with the Debentures must be in writing and will be deemed to have been given
and received upon confirmed receipt, if sent by facsimile, or two (2) days
after it has been submitted for delivery by Federal Express or an equivalent
carrier, charges prepaid and addressed to the following addresses with a
confirmation of delivery:
If to the Company, to:
Computerized Thermal Imaging Inc.
141 North State Street
Lake Oswego, Oregon 97034
Attn.: David B. Johnston
Telephone: (503) 650-0119
Facsimile: (503) 650-8551
If to the Holder, to:
Cameron Capital Ltd.
10 Cavendish Road
Hamilton HM 19
Bermuda
Attn.: Nic Snelling
Telephone: (441) 295-5455
Facsimile: (441) 295-9022
Any party may, at any time by giving notice to the other party, designate any
other address in substitution of an address established pursuant to the
foregoing to which such notice will be given.
14. Except as otherwise expressly provided herein, the terms,
conditions and enforceability of the Debentures shall be governed by and
interpreted under the laws of the State of Illinois. Any claim, dispute or
disagreement relating to the terms and conditions of the Debentures, or
arising from the Debentures or the subject matter of the Debentures, may be
brought only in the Circuit Courts of Cook or DuPage Counties in the State of
Illinois or in the United States District Court for the Northern District of
Illinois, which shall have exclusive jurisdiction thereof. The parties to
the Debentures consent to such jurisdiction and venue and hereby knowingly
and voluntarily waive all objections thereto on the basis of lack of personal
jurisdiction, venue or convenience.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed by an officer thereunto duly authorized
Dated: March 13, 1997 COMPUTERIZED THERMAL IMAGING, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
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SCHEDULE 1
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert the above
Debenture No. ______ into shares of Common Stock of Computerized Thermal
Imaging, Inc. (the "Company") according to the conditions hereof, as of the
date written below.
-----------------------------------------
Date of Notice
-----------------------------------------
Signature
-----------------------------------------
Name
Address:
-----------------------------------------
-----------------------------------------
-----------------------------------------
* The original Debenture and a manually signed original of this Notice of
Conversion must be received by the Company by the third business day
following the date of delivery of this Notice of Conversion by facsimile.
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EXHIBIT B
March 11, 1997
Cameron Capital Ltd.
10 Cavendish Road
Hamilton HM 19
Bermuda
RE: COMPUTERIZED THERMAL IMAGING, INC.
Ladies and Gentlemen:
We have acted as counsel for Computerized Thermal Imaging, Inc., a
Nevada corporation (the "Company"), in connection with the private placement
of the Company's 8% Convertible Debentures due March 10, 2000 (the
"Debentures") and a warrant, issued to Cameron Capital Management Ltd.
("CCM") as payment of fees incurred by CCM in connection with Agreement
(hereinafter defined) (the "Warrant"), to purchase shares of common stock,
$.01 par value (the "Common Stock"). The private placement has been made
without registration under the Securities Act of 1933, as amended (the
"Securities Act") pursuant to the exemption from registration set forth in
Rules 501 to 508, inclusive, promulgated under the Securities Act
("Regulation D"). Capitalized terms used herein and not otherwise defined
shall have the meaning assigned to them in the Subscription Agreement dated
as of March 11, 1997 (the "Agreement") by and between the Company and Cameron
Capital Ltd. (the "Purchaser"). The Agreement, the Warrant, and the
Debentures are sometimes hereinafter referred to collectively as the
"Documents".
In connection with the opinions expressed herein, we have made such
examination of matters of law and of fact as we considered appropriate or
advisable for purposes hereof. As to matters of fact material to the
opinions expressed herein, we have relied upon the representations and
warranties as to factual matters contained in and made by the Company
pursuant to the Documents and upon certificates and statements of certain
government officials and of officers of the Company. We have also examined
originals or copies of such corporate documents or records of the Company as
we have considered appropriate for the opinions expressed herein.
In rendering this opinion, we have assumed that the signatures on
documents and instruments examined by us are authentic, and that all
documents submitted to us as copies conform with the originals, which facts
we have not independently verified. We have also assumed: (A) that the
Documents have been duly and validly executed and delivered by you or on your
behalf and constitute your valid, binding and enforceable obligation; and
(B) that the representations and warranties made in the Documents by you are
true and correct.
As used in this opinion, the expression "we are not aware" or the phrase
"to our knowledge" means as to matters of fact, based on the actual knowledge
of individual attorneys within the firm principally responsible for handling
matters for the Company and after an examination of documents referred to
herein and after inquiries of certain officers of the Company and
governmental authorities, we find no reason to believe the opinions expressed
are factually incorrect; but beyond that we have made no factual
investigation for the purpose of rendering this opinion.
This opinion relates solely to the laws of the State of Nevada and
applicable federal laws of the United States, and we express no opinion with
respect to the effect or application of any other laws. Special rulings of
authorities administering such laws or opinions of other counsel have not
been sought or obtained by us in connection with rendering the opinions
expressed herein.
Based upon our examination of and reliance upon the foregoing and
subject to the limitations, exceptions, qualifications and assumptions set
forth below, we are of the opinion that as of the date hereof:
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1. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Nevada, and has all
requisite corporate power and authority to carry on its business as now
conducted and as proposed to be conducted.
2. The Company has all requisite corporate power and authority to
execute and deliver the Documents and to perform its respective obligations
under the terms of the Documents. The Documents have been duly authorized,
executed and delivered by the Company and constitute the legal, valid and
binding obligations of the Company, enforceable against it in accordance with
their terms.
3. Neither the issuance and sale of the Securities, the execution,
delivery or performance of this Agreement by the Company, nor the
consummation by the Company of the transactions contemplated hereby (A)
requires any consent, approval, authorization or other order of or
registration or filing with, any court, regulatory body, administrative
agency or other governmental body, agency or official or conflicts or will
conflict with or constitutes or will constitute a breach of, or a default
under, the certificate or articles of incorporation or by-laws, or other
organizational documents, of the Company or any of its subsidiaries or (B)
conflicts or will conflict with, or constitutes or will constitute a material
breach of, or default under, any material agreement, indenture, lease or
other instrument to which the Company or any of its subsidiaries is a party
or by which any of them or any of their respective properties may be bound,
or violates or will violate any statute, law, or any of its subsidiaries or
any of their respective properties, or will result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of
the Company or any of its subsidiaries pursuant to the terms of any agreement
or instrument to which any of them is a party or by which any of them may be
bound or to which any of the property or assets of any of them is subject.
4. As of February 28, 1997, the Company has authorized One Hundred
Million (100,000,000) shares of Common Stock, no par value, of which
37,068,009 shares are issued and outstanding, and 97,000 shares of preferred
stock, par value of $.01, of which 30,000 are issued and outstanding. All
such shares have been duly and validly issued and are fully paid and
nonassessable. The Company has outstanding no other shares of any class of
capital stock. Except for options issued to General Richard Secord,
President of the Company entitling him to purchase two million (2,000,000)
shares of Common Stock of the Company at a price of $1.25 per share. There
are no subscriptions, options, warrants, scrip, rights, calls, convertible
securities, or any other similar agreements, arrangements or commitments of
any character relating to the issued or unissued capital stock, or other
securities of the Company obligating, or which may obligate the Company to
issue, deliver or sell or cause to be issued, delivered or sold, additional
shares of its capital stock or obligating or which may obligate the Company
to grant, extend or enter into any such subscription, option, warrant, scrip,
right, call, convertible security, or other similar agreement, arrangement,
or similar commitment.
5. Upon receipt by the Company of the purchase price for the
Debentures pursuant to the Agreement, and upon issuance and delivery of the
Debentures to the Purchaser pursuant to the terms and conditions of the
Agreement, the Debentures so issued and delivered will be duly authorized and
validly issued. The Company has reserved, solely for the purpose of effecting
the conversion of the Debentures, such number of shares of its Common Stock
sufficient to effect the conversion of all of the principal amount of the
Debentures.
6. Upon the issuance and delivery of the Warrant pursuant to the terms
and conditions of the Agreement, the Warrant so issued and delivered will be
duly authorized and validly issued. The Company has reserved, solely for the
purpose of issuance upon exercise of the Warrant, such number of shares of
its Common Stock sufficient to effect the exercise of the Warrant.
7. The payment of all interest, premiums and other amounts payable
under and pursuant to the Documents is not usurious under applicable law.
8. Assuming and relying upon the truth and accuracy of the
representations and warranties contained in the Agreement, the offer,
issuance, sale and delivery of the Debentures and the Warrant in accordance
with the terms of the Agreement are exempt from the registration requirements
of the Securities Act pursuant to Regulation D.
Our opinions expressed above are specifically subject to the following
limitations, exceptions, qualifications and assumptions:
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<PAGE>
A. The effect of bankruptcy, insolvency, reorganization, moratorium
and other similar laws relating to or affecting the relief of debtors or the
rights and remedies of creditors generally, including without limitation the
effect of statutory or other law regarding fraudulent conveyances and
preferential transfers.
B. Limitations imposed by state law, federal law or general equitable
principles upon the specific enforceability of any of the remedies, covenants
or other provisions of any applicable agreement and upon the availability of
injunctive relief or other equitable remedies, regardless of whether
enforcement of any such agreement is considered in a proceeding in equity or
at law.
This opinion is rendered as of the date first written above solely for
the benefit in connection with the Agreement and may not be delivered to,
quoted or relied upon by any person other than you, or for any other purpose,
without our prior written consent. We assume no obligation to advise you of
facts, circumstances, events or developments which hereafter may be brought
to our attention and which may alter, affect or modify the opinions expressed
herein.
Very truly yours,
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<PAGE>
EXHIBIT C
THIS WARRANT AND THE SHARES OF COMMON STOCK OF COMPUTERIZED THERMAL
TECHNOLOGIES, INC. TO BE ISSUED UPON ANY EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT (I)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (II) TO THE
EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT
RELATING TO THE DISTRIBUTION OF SECURITIES) OR (III) IF AN EXEMPTION FROM
REGISTRATION UNDER THE ACT IS AVAILABLE.
WARRANT
TO PURCHASE SHARES
OF
COMMON STOCK
OF
COMPUTERIZED THERMAL IMAGING, INC.
MARCH 13, 1997
This certifies that, for value received, Cameron Capital Management Ltd.
("CCM") and any subsequent transferee pursuant to the terms of the Agreement
(as defined below) of even date and this Warrant (each, a "Holder") is
entitled to purchase, subject to the provisions of this Warrant, from
Computerized Thermal Imaging, Inc., a Nevada corporation (the "Issuer"), at
any time or from time to time on or after the date hereof and on or before
March 13, 2002 (the "Expiration Date"), Fifty Thousand (50,000) fully paid
and nonassessable shares of common stock (the "Common Stock"), of the Issuer
at an exercise price of One Dollar Fifty Cents ($1.50) per share, subject to
adjustment pursuant to the terms hereunder (the "Exercise Price")(such shares
of Common Stock and other securities issued and issuable upon exercise of
this Warrant, the "Warrant Shares").
Section 1. DEFINITIONS. This Warrant is issued pursuant to, and
shall have the benefit of, Section 3 of the Subscription Agreement of even
date herewith by and between Cameron Capital Ltd., and the Issuer (the
"Agreement"). Except as otherwise specified herein, terms defined herein
shall have the meanings assigned to them in the Agreement.
Section 2. EXERCISE OF WARRANT. Subject to the provisions hereof,
this Warrant may be exercised, in whole or in part, but not as to a
fractional share, at any time or from time to time on or after the date
hereof and on or before the Expiration Date, by presentation and surrender
hereof to the Issuer at the address which, in accordance with the provisions
of Section 10 hereof, is then effective for notices to the Issuer, with the
Election to Purchase Form annexed hereto as SCHEDULE ONE, duly executed and
accompanied by payment to the Issuer as further set forth below in this
Section 2, for the account of the Issuer, of the Exercise Price for the
number of Warrant Shares specified in such form. If this Warrant should be
exercised in part only, the Issuer shall, upon surrender of this Warrant,
execute and deliver a new Warrant evidencing the rights of the Holder hereof
to purchase the balance of the Warrant Shares purchasable hereunder. The
Issuer shall maintain at its principal place of business a register for the
registration of this Warrant and registration of transfer of this Warrant.
The Exercise Price for the number of Warrant Shares specified in the Election
to Purchase Form shall be payable in United States Dollars by certified or
official bank check payable to the order of the Issuer or by wire transfer of
immediately available funds to an account specified by the Issuer for that
purpose.
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Section 3. REPRESENTATIONS AND WARRANTIES OF THE HOLDER. The Holder
hereby represents and warrants to the Issuer as follows, such representations
and warranties to be true and correct as of the date of Exercise:
(a) The Holder is aware that no federal or state agency has passed
upon the Warrant Shares or made any finding or determination concerning the
fairness of this investment
(b) The Holder has had an opportunity to ask questions of and
receive answers from representatives of the Issuer, concerning the terms and
conditions of this investment.
(c) The Warrant Shares will be acquired for the Holder's own
account, for investment only and not with a view toward resale or
distribution in a manner which would require registration under the
Securities Act.
(d) The Holder is an "accredited investor" as defined in Rule
501(a) under the Securities Act. The Holder is an organization described in
Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, and is a
corporation, Massachusetts or similar business trust or partnership not
formed for the specific purpose of acquiring the securities offered, with
total assets in excess of $5,000,000. The Holder agrees to furnish any
additional information requested to assure compliance with applicable federal
and state securities laws in connection with the purchase and sale of the
Warrant Shares.
(e) The Holder acknowledges that there are substantial
restrictions on the transferability of the Warrant Shares as required
pursuant to federal and state securities laws. The Holder further agrees to
be responsible for compliance with all conditions on transfer imposed by any
state blue sky or securities law. The Holder acknowledges that each
certificate representing the Warrant Shares shall be stamped with a
restrictive legend substantially similar to the following:
"The securities evidenced by this certificate may not be offered or
sold, transferred, pledged, hypothecated or otherwise disposed of
except (i) pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Act"), (ii) to the extent
applicable, Rule 144 under the Act (or any similar rule under the Act
relating to the disposition of securities) or (iii) If an exemption
from registration under such Act is available.
Notwithstanding the foregoing, the securities evidenced by this
certificate are also subject to the registration rights set forth in
that certain Subscription Agreement by and between the Holder hereof
and the Issuer, a copy of which is on file at the Issuer's principal
executive office."
Section 4. RESERVATION OF SHARES; PRESERVATION OF RIGHTS OF HOLDER.
The Issuer hereby agrees that there shall be reserved for issuance and/or
delivery upon exercise of this Warrant, such number of Warrant Shares as
shall be required for issuance or delivery upon exercise of this Warrant.
The Warrant surrendered upon exercise shall be canceled by the Issuer. After
the Expiration Date, no shares of Common Stock shall be subject to
reservation in respect of this Warrant. The Issuer further agrees (i) that
it will not, by amendment of its Articles of Incorporation or through
reorganization, consolidation, merger, dissolution or sale of assets, or by
any other voluntary act, avoid or seek to avoid the observation or
performance of any of the covenants, stipulations or conditions to be
observed or performed hereunder by the Issuer, (ii) promptly to take such
action as may be required of the Issuer to permit the Holder to exercise this
Warrant and the Issuer duly and effectively to issue shares of its Common
Stock or other securities as provided herein upon the exercise hereof, and
(iii) promptly to take all action required or provided herein to protect the
rights of the Holder granted hereunder against dilution. Without limiting
the generality of the foregoing, should the Warrant Shares at any time
consist in whole or in part of shares of capital stock having a par value,
the Issuer agrees that before taking any action which would cause an
adjustment of the Exercise Price so that the same would be less than the then
par value of such Warrant Shares, the Issuer shall take any corporate action
which may, in the opinion of its counsel, be necessary in order that the
Issuer may validly and legally issue fully paid and nonassessable shares of
such Common Stock at the Exercise Price as so adjusted. The Issuer further
agrees that it will not establish a par value for its Common Stock while this
Warrant is outstanding in an amount greater than the Exercise Price.
Section 5. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. Any
attempted transfer of this Warrant, the Warrant Shares or any new Warrant not
in accordance with this Section shall be null and void, and the
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<PAGE>
Issuer shall not in any way be required to give effect to such transfer. No
transfer of this Warrant shall be effective for any purpose hereunder until
(i) written notice of such transfer and of the name and address of the
transferee has been received by the Issuer, and (ii) the transferee shall
first agree in a writing deposited with the Secretary of the Issuer to be
bound by all the provisions of this Warrant and the Agreement. Upon
surrender of this Warrant to the Issuer by any transferee authorized under
the provisions of this Section 5, the Issuer shall, without charge, execute
and deliver a new Warrant registered in the name of such transferee at the
address specified by such transferee, and this Warrant shall promptly be
canceled. The Issuer may deem and treat the registered holder of any Warrant
as the absolute owner thereof for all purposes, and the Issuer shall not be
affected by any notice to the contrary. Any Warrant, if presented by an
authorized transferee, may be exercised by such transferee without prior
delivery of a new Warrant issued in the name of the transferee.
Upon receipt by the Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Warrant, if mutilated, the Issuer
will execute and deliver a new Warrant of like tenor and date. Any such new
Warrant executed and delivered shall constitute a separate contractual
obligation on the part of the Issuer, whether or not the Warrant so lost,
stolen, destroyed or mutilated shall be at any time enforceable by anyone.
Section 6. RIGHTS OF HOLDER. Neither a Holder nor his transferee by
devise or the laws of descent and distribution or otherwise shall be, or have
any rights or privileges of, a shareholder of the Issuer with respect to any
Warrant Shares, unless and until certificates representing such Warrant
Shares shall have been issued and delivered thereto.
Section 7. ADJUSTMENTS IN EXERCISE PRICE AND WARRANT SHARES. The
Exercise Price and Warrant Shares shall be subject to adjustment from time to
time as provided in this Section 7.
(a) If the Issuer is recapitalized through the subdivision or
combination of its outstanding shares of Common Stock into a larger or
smaller number of shares, the number of shares of Common Stock for which
this Warrant may be exercised shall be increased or reduced, as of the
record date for such recapitalization, in the same proportion as the
increase or decrease in the outstanding shares of Common Stock, and the
Exercise Price shall be adjusted so that the aggregate amount payable for
the purchase of all Warrant Shares issuable hereunder immediately after the
record date for such recapitalization shall equal the aggregate amount so
payable immediately before such record date.
(b) If the Issuer declares a dividend on Common Stock, or makes a
distribution to holders of Common Stock, and such dividend or distribution
is payable or made in Common Stock or securities convertible into or
exchangeable for Common Stock, or rights to purchase Common Stock or
securities convertible into or exchangeable for Common Stock, the number of
shares of Common Stock for which this Warrant may be exercised shall be
increased, as of the record date for determining which holders of Common
Stock shall be entitled to receive such dividend or distribution, in
proportion to the increase in the number of outstanding shares (and shares
of Common Stock issuable upon conversion of all such securities convertible
into Common Stock) of Common Stock as a result of such dividend or
distribution, and the Exercise Price shall be adjusted so that the
aggregate amount payable for the purchase of all the Warrant Shares
issuable hereunder immediately after the record date for such dividend or
distribution shall equal the aggregate amount so payable immediately before
such record date.
(c) If the Issuer declares a dividend on Common Stock (other than a
dividend covered by subsection (b) above) or distributes to holders of its
Common Stock, other than as part of its dissolution or liquidation or the
winding up of its affairs, any shares of its capital stock, any evidence of
indebtedness or any cash or other of its assets (other than Common Stock or
securities convertible into or exchangeable for Common Stock), the Holder
shall receive notice of such event as set forth in Section 9 below.
(d) In case of any consolidation of the Issuer with, or merger of the
Issuer into, any other corporation (other than a consolidation or merger in
which the Issuer is the continuing corporation and in which no change
occurs in its outstanding Common Stock), or in case of any sale or transfer
of all or
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<PAGE>
substantially all of the assets of the Issuer, or in the case of any
statutory exchange of securities with another corporation (including any
exchange effected in connection with a merger of a third corporation into
the Issuer, except where the Issuer is the surviving entity and no change
occurs in its outstanding Common Stock), the corporation formed by such
consolidation or the corporation resulting from such merger or the
corporation which shall have acquired such assets or securities of the
Issuer, as the case may be, shall execute and deliver to the Holder
simultaneously therewith a new Warrant, satisfactory in form and substance
to the Holder, together with such other documents as the Holder may
reasonably request, entitling the Holder thereof to receive upon exercise
of such Warrant the kind and amount of shares of stock and other securities
and property receivable upon such consolidation, merger, sale, transfer, or
exchange of securities, or upon the dissolution following such sale or
other transfer, by a holder of the number of shares of Common Stock
purchasable upon exercise of this Warrant immediately prior to such
consolidation, merger, sale, transfer, or exchange. Such new Warrant shall
contain the same basic other terms and conditions as this Warrant and shall
provide for adjustments which, for events subsequent to the effective date
of such written instrument, shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 6. The above
provisions of this paragraph (d) shall similarly apply to successive
consolidations, mergers, exchanges, sales or other transfers covered
hereby.
(e) If the Issuer shall, at any time before the expiration of this
Warrant, dissolve, liquidate or wind up its affairs, the Holder shall, upon
exercise of this Warrant have the right to receive, in lieu of the shares
of Common Stock of the Issuer that the Holder otherwise would have been
entitled to receive, the same kind and amount of assets as would have been
issued, distributed or paid to the Holder upon any such dissolution,
liquidation or winding up with respect to such shares of Common Stock of
the Issuer had the Holder been the holder of record of such shares of
Common Stock receivable upon exercise of this Warrant on the date for
determining those entitled to receive any such distribution. If any such
dissolution, liquidation or winding up results in any cash distribution in
excess of the Exercise Price provided by this Warrant for the shares of
Common Stock receivable upon exercise of this Warrant, the Holder may, at
the Holder's option, exercise this Warrant without making payment of the
Exercise Price and, in such case, the Issuer shall, upon distribution to
the Holder, consider the Exercise Price to have been paid in full and, in
making settlement to the Holder, shall obtain receipt of the Exercise Price
by deducting an amount equal to the Exercise Price for the shares of Common
Stock receivable upon exercise of this Warrant from the amount payable to
the Holder. For purposes of this paragraph, the sale of all or
substantially all of the assets of the Issuer and distribution of the
proceeds thereof to the Issuer's shareholders shall be deemed a
liquidation.
(f) If an event occurs which is similar in nature to the events
described in this Section 7, but is not expressly covered hereby, the Board
of Directors of the Issuer shall make or arrange for an equitable
adjustment to the number of Warrant Shares and the Exercise Price.
(g) The term "Common Stock" shall mean the Common Stock of the
Issuer as the same exists at the Closing Date or as such stock may be
constituted from time to time, except that for the purpose of this Section
7, the term "Common Stock" shall include any stock of any class of the
Issuer which has no preference in respect of dividends or of amounts
payable in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Issuer and which is not subject to
redemption by the Issuer.
(h) The Issuer shall retain a firm of independent public accountants
of recognized standing (who may be any such firm regularly employed by the
Issuer) to make any computation required under this Section 7, and a
certificate signed by such firm shall be conclusive evidence of the
correctness of any computation made under this Section 7.
(i) Whenever the number of Warrant Shares or the Exercise Price shall
be adjusted as required by the provisions of this Section 7, the Issuer
forthwith shall file in the custody of its secretary or an assistant
secretary, at its principal office, and furnish to each Holder hereof,
showing the adjusted number of Warrant Shares and the Exercise Price and
setting forth in reasonable detail the circumstances requiring the
adjustments.
4
<PAGE>
(j) Notwithstanding any other provision, this Warrant shall be
binding upon and inure to the benefit of any successors and assigns of the
Issuer.
(k) No adjustment in the Exercise Price in accordance with the
provisions of this Section 7 need be made if such adjustment would amount
to a change in such Exercise Price of less than $.01; PROVIDED HOWEVER,
that the amount by which any adjustment is not made by reason of the
provisions of this paragraph (k) shall be carried forward and taken into
account at the time of any subsequent adjustment in the Exercise Price.
(l) If an adjustment is made under this Section 7 and the event to
which the adjustment relates does not occur, then any adjustments in
accordance with this Section 7 shall be readjusted to the Exercise Price
and the number of Warrant Shares which would be in effect had the earlier
adjustment not been made.
Section 8. TAXES ON ISSUE OR TRANSFER OF COMMON STOCK AND WARRANT.
The Issuer shall pay any and all documentary stamp or similar issue or
transfer taxes payable in respect of the issue or delivery of shares of
Common Stock or other securities on the exercise of this Warrant. The Issuer
shall not be required to pay any tax which may be payable in respect of any
transfer of this Warrant or in respect of any transfers involved in the issue
or delivery of shares or the exercise of this Warrant in a name other than
that of the Holder and the person requesting such transfer, issue or delivery
shall be responsible for the payment of any such tax (and the Issuer shall
not be required to issue or deliver said shares until such tax has been paid
or provided for).
Section 9. NOTICE OF ADJUSTMENT. So long as this Warrant shall be
outstanding, (a) if the Issuer shall propose to pay any dividends or make any
distribution upon the Common Stock, or (b) if the Issuer shall offer
generally to the holders of Common Stock the right to subscribe to or
purchase any shares of any class of Common Stock or securities convertible
into Common Stock or any other similar rights, or (c) if there shall be any
proposed capital reorganization of the Issuer in which the Issuer is not the
surviving entity, recapitalization of the capital stock of the Issuer,
consolidation or merger of the Issuer with or into another corporation, sale,
lease or other transfer of all or substantially all of the property and
assets of the Issuer, or voluntary or involuntary dissolution, liquidation or
winding up of the Issuer, or (d) if the Issuer shall give to its stockholders
any notice, report or other communication respecting any significant or
special action or event, then in such event, the Issuer shall give to the
Holder, at least thirty (30) days prior to the relevant date described below
(or such shorter period as is reasonably possible if thirty days is not
reasonably possible), a notice containing a description of the proposed
action or event and stating the date or expected date on which a record of
the Issuer's stockholders is to be taken for any of the foregoing purposes,
and the date or expected date on which any such dividend, distribution,
subscription, reclassification, reorganization, consolidation, combination,
merger, conveyance, sale, lease or transfer, dissolution, liquidation or
winding up is to take place and the date or expected date, if any is to be
fixed, as of which the holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities or other property
deliverable upon such event.
Section 10. NOTICE. Any notice to be given or to be served upon any
party in connection with the Debentures must be in writing and will be deemed
to have been given and received upon confirmed receipt, if sent by facsimile,
or two (2) days after it has been submitted for delivery by Federal Express
or an equivalent carrier, charges prepaid and addressed to the following
addresses with a confirmation of delivery:
If to the Issuer, to:
Computerized Thermal Imaging Inc.
141 North State Street
Lake Oswego, Oregon 97034
Attn.: David B. Johnston
Telephone: (503) 650-0119
Facsimile: (503) 650-8551
5
<PAGE>
If to the Holder, to:
Cameron Capital Management Ltd.
10 Cavendish Road
Hamilton HM 19
Bermuda
Attn.: Nic Snelling
Telephone: (441) 295-5455
Facsimile: (441) 295-9022
Any party may, at any time by giving notice to the other party, designate any
other address in substitution of an address established pursuant to the
foregoing to which such notice will be given.
Section 11. CHOICE OF LAW; CONFLICT OF LAW; JURISDICTION AND VENUE.
Except as otherwise expressly provided herein, the terms, conditions and
enforceability of the Debentures shall be governed by and interpreted under
the laws of the State of Illinois. Any claim, dispute or disagreement
relating to the terms and conditions of the Debentures, or arising from the
Debentures or the subject matter of the Debentures, may be brought only in
the Circuit Courts of Cook or DuPage Counties in the State of Illinois or in
the United States District Court for the Northern District of Illinois, which
shall have exclusive jurisdiction thereof. The parties to the Debentures
consent to such jurisdiction and venue and hereby knowingly and voluntarily
waive all objections thereto on the basis of lack of personal jurisdiction,
venue or convenience.
[SIGNATURE PAGE FOLLOWS]
6
<PAGE>
Dated: March 13, 1997
COMPUTERIZED THERMAL
IMAGING, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
ATTEST:
- ----------------------------------------------
, Secretary
7
<PAGE>
SCHEDULE ONE
ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise this Warrant and
to purchase ______ shares of Computerized Thermal Imaging, Inc. Common Stock
issuable upon the exercise of this Warrant, and requests that certificates
for such shares be issued in the name of:
- --------------------------------------------------------------------------------
(Name)
- --------------------------------------------------------------------------------
(Address)
- --------------------------------------------------------------------------------
(United States Social Security or other taxpayer
identifying number, if applicable)
and, if different from above, be delivered to:
- --------------------------------------------------------------------------------
(Name)
- --------------------------------------------------------------------------------
(Address)
and, if the number of Warrant Shares so purchased are not all of the Warrant
Shares issuable upon exercise of this Warrant, that a Warrant to purchase the
balance of such Warrant Shares be registered in the name of, and delivered
to, the undersigned at the address stated below.
Date: __________ __, _____
Name of Registered Owner:
------------------------------------------------------
- --------------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature: ---------------------------------------------------------------------
1
<PAGE>
EXHIBIT 10(i)
DEBENTURE
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY
NOT BE OFFERED OR SOLD IN THE UNITED STATES (AS DEFINED IN REGULATION
S UNDER THE ACT) OR TO, OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS
(AS DEFINED IN REGULATION S UNDER THE ACT) EXCEPT PURSUANT TO
REGISTRATION UNDER THE ACT OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND APPLICABLE STATE SECURITIES LAWS.
No. US $
COMPUTERIZED THERMAL IMAGING, INC.
12% SERIES A SENIOR SUBORDINATED CONVERTIBLE REDEEMABLE
DEBENTURE DUE APRIL 30, 1998
THIS DEBENTURE is one of a duly authorized issue of Debentures of
Computerized Thermal Imaging, Inc., a corporation duly organized and existing
under the laws of ________ (the "Company") designated as its 12% Series A
Senior Subordinated Convertible Redeemable Debentures Due April 30, 1998, in
an aggregate principal face amount not exceeding One Million, Eight Hundred
Seventy-Five Thousand Dollars (U.S. $1,875,000) which Debentures are being
purchased at 80% of the face amount of such Debentures.
FOR VALUE RECEIVED, the Company promises to pay to
______________________ the registered holder hereof and its successors and
assigns (the "Holder"), the principal face sum of __________________________
Dollars (US $___________) on April 30, 1998 (the "Maturity Date"), and to pay
interest on the principal sum outstanding, at the rate of 12% per annum due
and payable quarterly commencing ________________, 1997 pursuant to paragraph
4(b) herein. Accrual of interest shall commence on the date hereof and shall
continue until payment in full of the outstanding principal sum has been made
or duly provided for. The interest so payable will be paid to the person in
whose name this Debenture (or one or more predecessor Debentures) is
registered on the records of the Company regarding registration and
transfers of the Debentures (the "Debenture Register"); provided, however,
that the Company's obligation to a transferee of this Debenture arises only
if such transfer, sale or other disposition is made in accordance with the
terms and conditions of the Offshore Securities Subscription Agreement dated
as of __________________________ between the Company and
________________________ (the "Subscription Agreement"). The principal of,
and interest (with the exception of the prepaid interest set forth in Section
4(b) herein) on, this Debenture are payable in such coin or currency of the
United States of America as at the time of payment is legal tender for
payment of public and private debts, at the address last appearing on the
Debenture Register of the Company as designated in writing by the Holder
hereof from time to time. The Company will pay the outstanding principal due
upon this Debenture before or on the Maturity Date, less any amounts required
by law to be deducted or withheld, to the Holder of this Debenture no later
than the tenth (10th) day prior to the Maturity Date by check or on the
Maturity Date by wire transfer and addressed to such Holder at the last
address appearing on the Debenture Register. The forwarding of such check or
wire transfer shall constitute a payment of outstanding principal hereunder
and shall satisfy and discharge the liability for principal on this Debenture
to the extent of the sum represented by such check or wire transfer plus any
amounts so deducted. Interest shall be payable in Common Stock (as defined
below) pursuant to paragraph 4(b) herein.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of Ten Thousand
Dollars (US $10,000) and integral multiples thereof. The Debentures are
exchangeable for an equal aggregate principal amount of Debentures of
different authorized denominations, as requested by the Holders surrendering
the same but not less than U.S. $10,000. No service charge will be made for
such registration or transfer or exchange, except that transferee shall pay
any tax or other governmental charges payable in connection therewith.
1
<PAGE>
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax or
other applicable laws at the time of such payments.
3. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged in the U.S. only in compliance with the Securities Act of 1933, as
amended (the "Act") and applicable state securities laws. Prior to due
presentment for transfer of this Debenture, the Company and any agent of the
Company may treat the person in whose name this Debenture is duly registered
on the Company's Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or
not this Debenture be overdue, and neither the Company nor any such agent
shall be affected or bound by notice to the contrary. Any holder of this
Debenture, electing to exercise the right of conversion set forth in Section
4(a) hereof, in addition to the requirements set forth in Section 4(a), and
any prospective transferee of this Debenture, is also required to give the
Company (i) written confirmation that it is not a U.S. Person and the
Debenture is not being converted on behalf of a U.S. Person ("Notice of
Conversion") or (ii) an opinion of U.S. counsel to the effect that the
Debenture and shares of common stock issuable upon conversion or transfer
thereof have been registered under the 1933 Act or are exempt from such
registration. In the event a Notice of Conversion or opinion of counsel is
not provided the Holder hereof will not be entitled to exercise the right to
convert or transfer the Debentures.
4. (a) The Holder of this Debenture is entitled, at its option, at
any time commencing 45 days after closing of the Offering hereof to convert
all or any amount over $10,000 of the principal face amount of this Debenture
then outstanding into shares of common stock, $0.001 par value per share, of
the Company (the "Common Stock"), at a conversion price for each share of
Common Stock equal to the lower of (a) 90% of the average closing bid price
of the Common Stock for the five (5) business days immediately preceding the
date of receipt by the Company of notice of conversion ("Conversion Shares")
or (b) 90% of the one closing bid price of the Common Stock day immediately
preceding the date of subscription by the Holder as reported by the National
Association of Securities Dealers Electronic Bulletin Board ("NASDAQ") (the
"Conversion Price"). If the number of resultant Conversion Shares would as a
matter of law or pursuant to regulatory authority require the Company to seek
shareholder approval of such issuance, the Company shall, as soon as
practicable, take the necessary steps to seek such approval. If such
approval is not received within 30 days then Company shall be required to
redeem the Debenture pursuant to paragraph 4(c) herein. Such conversion
shall be effectuated by surrendering the Debentures to be converted (with a
copy, by facsimile or courier, to the Company) to the Company with the form
of conversion notice attached hereto as Exhibit I, executed by the Holder of
this Debenture evidencing such Holder's intention to convert this Debenture
or a specified portion (as above provided) hereof, and accompanied by proper
assignment hereof in blank. Accrued but unpaid interest shall be subject to
conversion. No fractional shares or scrip representing fractions of shares
will be issued on conversion, but the number of shares issuable shall be
rounded to the nearest whole share. The transferee or issues shall execute
such investment representations or other documents as are respectively
required by counsel in order to ascertain the available registration
exemption. The date on which notice of conversion is given shall be deemed
to be the date on which the Holder has delivered this Debenture, with the
assignment and conversion notice duly executed, to the Company or, if
earlier, the date set forth in such notice of conversion if the Debenture is
received by the Company within five (5) business days thereafter. The
transferee or issuee shall execute such investment representations or other
documents as are reasonably required by counsel in order to ascertain the
available registration exemption.
(b) Interest at the rate of 12% per annum shall be payable in advance,
monthly commencing ________ ___, 1997. However, at Closing, the Company
shall prepay the first 3 months interest by issuing in Common Stock of the
Company as follows: Based on the closing bid prices of the Common Stock for
the last 5 consecutive trading days prior to Closing ("Market Price") the
Company shall issue to the Holder shares of Common Stock in an amount equal
to the total monthly interest accrued and due divided by 80% of the Market
Price (the "Interest "Shares"). Common Stock issued pursuant hereto shall be
issued pursuant to Regulation S in accordance with the terms of the
Subscription Agreement. Thereafter, commencing 91 days after Closing the
Company shall pay interest on a monthly basis in cash (or Common Stock, based
on the above formula, at the Company's option).
(c) At any time within 90 days the Company shall have the option to pay
to the Holder 110% of the principal amount of the Debenture, in full, to the
extent conversion has not occurred pursuant to paragraph 4(a) herein, or pay
upon maturity if the Debenture is not converted. The Company shall give the
Holder 5 days written notice and the Holder during such 5 days shall have the
option to convert the Debenture or any part thereof into shares of Common
2
<PAGE>
Stock at a conversion price equal to 90% of the average of the closing bid
price of the Common Stock for the 5 consecutive trading days prior to the
date of such conversion or accept the cash repayment. Any shares issued
pursuant to the options shall be issued pursuant to Regulation S or a
Registration Statement.
5. No provision of this Debenture shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the principal of,
and interest on, this Debenture at the time, place, and rate, and in the coin
currency, herein prescribed.
6. The Company hereby expressly waives demand and presentment for
payment, notice of nonpayment, protest, notice of protest, notice of
dishonor, notice of acceleration or intent to accelerate, bringing of suit
and diligence in taking any action to collect amounts called for hereunder
and shall be directly and primarily liable for the payment of all sums owing
and to be owing hereon, regardless of and without any notice, diligence, act
or omission as or with respect to the collection of any amount called for
hereunder.
7. The Company agrees to pay all costs and expenses, including
reasonable attorneys' fees, which may be incurred by the Holder in collecting
any amount due under this Debenture.
8. If one or more of the following described "Events of Default" shall
occur and continue for 30 days unless a different time frame is noted below:
(a) The Company shall default in the payment of principal or interest
on this Debenture; or
(b) Any of the representations or warranties made by the Company
herein, in the Subscription Agreement, or in any certificate or
financial or other written statements heretofore or hereafter
furnished by or on behalf of the Company in connection with the
execution and delivery of this Debenture or the Subscription
Agreement shall be false or misleading in any material respect at
the time made; or
(c) The Company shall fail to perform or observe, in any material
respect, any other covenant, term, provision, condition,
agreement or obligation of the Company under this Debenture [and
such failure shall continue uncured for a period of thirty (30)
days after notice from the Holder of such failure]; or
(d) The Company shall (1) become insolvent; (2) admit in writing its
liability to pay its debts generally as they mature; (3) make an
assignment for the benefit of creditors or commence proceedings
for its dissolution; or (4) apply for or consent to the
appointment of a trustee, liquidator or receiver for its or for a
substantial part of its property or business; or
(e) A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business
without its consent and shall not be discharged within thirty
(30) days after such appointment; or
(f) Any governmental agency or any court of competent jurisdiction at
the instance of any governmental agency shall assume custody or
control of the whole or any substantial portion of the properties
or assets of the Company and shall not be dismissed within thirty
(30) days thereafter; or
(g) Any money judgment, writ or warrant of attachment, or similar
process, in excess of One Hundred Thousand ($100,000) Dollars in
the aggregate shall be entered or filed against the Company or
any of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of fifteen (15) days
or in any event later than five (5) days prior to the date of any
proposed sale thereunder; or
(h) Bankruptcy, reorganization, insolvency or liquidation proceedings
or other proceedings for relief under any bankruptcy law or any
law for the relief of debtors shall be instituted by or
3
<PAGE>
against the Company and, if instituted against the Company, shall
not be dismissed within thirty (30) days after such instruction
of the Company shall by any action or answer approve of, consent
to, or acquiesce in any such proceedings or admit the material
allegations of, or default in answering a petition filed in any
such proceedings; or
(i) The Company shall have its Common Stock delisted from the over-
the-counter market.
(j) Subject to the provisions of Section 5(b) of the Offshore
Securities Subscription Agreement and applicable federal and
state securities laws, the Company shall not deliver the Common
Stock pursuant to paragraph 4 herein without restrictive legend.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which
waiver shall not be deemed to be a waiver of any subsequent default) at the
option of the Holder and in the Holder's sole discretion, the Holder may
consider this Debenture immediately due and payable, without presentment,
demand, protest or (further) notice of any kind (other than notice of
acceleration), all of which are hereby expressly waived, anything herein or
in any note or other instruments contained to the contrary notwithstanding,
and the Holder may immediately, and without expiration of any period of
grace, enforce any and all of the Holder's rights and remedies provided
herein or any other rights or remedies afforded by law.
9. (a) This Debenture represents a secured obligation of the Company
pursuant to paragraph 9 herein. However, no recourse shall be had for the
payment of the principal of, or the interest on, this Debenture, or for any
claim based hereon, or otherwise in respect hereof, against any incorporator,
shareholder, officer or director, as such, past, present or future, of the
Company or any successor corporation, whether by virtue of any constitution,
state or rule of law, or by the enforcement of any assessment or penalty or
otherwise, all such liability being, by the acceptance hereof and as part of
the consideration for the issue hereof, expressly waived and released.
(b) Company shall contemporaneously with the issuance of this
Debenture grant the Holder a lien against the Company's assets having a value
of not less then US. $2,250,000 as detailed on Exhibit B hereto.
10. The Holder of this Debenture, by acceptance hereof, agrees that
this Debenture is being acquired for investment and that such Holder will not
offer, sell or otherwise dispose of this Debenture or the Shares of Common
Stock issuable upon exercise thereof except under circumstances which will
not result in a violation of the Act or any applicable state Blue Sky law or
similar laws relating to the sale of securities.
11. In case any provision of this Debenture is held by a court of
competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if
possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Debenture
will not in any way be affected or impaired thereby.
12. This Debenture and the agreements referred to in this Debenture
constitute the full and entire understanding and agreement between the
Company and the Holder with respect to the subject hereof. Neither this
Debenture nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the Company and the
Holder.
13. This Debenture shall be governed by and construed in accordance
with the laws of New York. Holder hereby waives trial by jury and consents
to exclusive jurisdiction and venue in the State of New York.
14. As set for herein, the Company shall use all reasonable efforts to
issue and deliver, within three business days after the Holder has fulfilled
all conditions and submitted all necessary documents duly executed and in
proper form required for conversion (the "Deadline"), to the Holder or any
part receiving a Debenture by transfer from the Holder (together, a
"Holder"), at the address of the Holder on the books of the Company, a
certificate or certificates for the number of Shares of Common Stock to which
the Holder shall be entitled. The Company understands that a delay in the
issuance of the Shares of Common Stock beyond the Deadline could result in
economic loss to the Holder. As compensation to the Holder for such loss,
the Company agrees to pay liquidated damages to the Holder for late issuance
of Shares upon conversion in accordance with the following schedule (where
"No. Business Days Late" is
4
<PAGE>
defined as the number of business days beyond seven (7) business days from
the date of receipt by the Company of a Notice of Conversion and the transfer
agent of all necessary documentation duly executed and in proper form
required for conversion, including the original Debenture to be converted,
all in accordance with the Debenture, Subscription Agreement and the
requirements of the transfer agent):
<TABLE>
<CAPTION>
Liquidated Damages per
NO. BUSINESS DAYS LATE $100,000 OF DEBENTURE
---------------------- ----------------------
<S> <C>
1 $500
2 $1,000
3 $1,500
4 $2,000
5 $2,500
6 $3,000
7 $3,500
8 $4,000
9 $4,500
10 $5,000
10 $5,000 + $1,000 each
Business Day Late beyond 10 days
</TABLE>
The Company shall pay the Holder any liquidated damages incurred under
this Section by check upon the earlier to occur of (i) issuance of the Shares
to the Holder or (ii) each monthly anniversary of the receipt of the Company
of such Holder's Notice of Conversion. Nothing herein shall limit the
Holder's right to pursue actual damages for the Company's failure to issue
and deliver shares of Common Stock to the Subscriber in accordance with the
terms of the Debenture.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated:
-------------------
COMPUTERIZED THERMAL IMAGING, INC.
By:
----------------------------------------
Title:
-------------------------------------
5
<PAGE>
EXHIBIT 1
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $___________ of the
above Debenture No. _____ into Shares of Common Stock of Computerized Thermal
Imaging, Inc. (the "Company") according to the conditions set forth in such
Debenture, as of the date written below.
The undersigned represents that it is not a U.S. Person as defined in
Regulation S promulgated under the Securities Act of 1933, as amended, and is
not converting the Debenture on behalf of any U.S. Person and the
representations contained in the Subscription Agreement are true. If Shares
are to be issued in the name of a person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect thereto.
Date of Conversion*
-------------------------------------------------------------
Applicable Conversion Price
----------------------------------------------------
Signature
-----------------------------------------------------------------------
[Print Name of Holder and Title of Signer]
Address:
------------------------------------------------------------------------
------------------------------------------------------------------------
- ----------------------------------
Medallion Signature Guaranty
*This original Debenture and Notice of Conversion must be received by the
Company by the fifth business date following the Date of Conversion.
PATH:
1
<PAGE>
12% SERIES A SENIOR SUBORDINATED
CONVERTABLE REDEEMABLE DEBENTURES
<TABLE>
<CAPTION>
Subscriber FACE VALUE OF
---------- DEBENTURE
-------------
<S> <C>
Reg. S Intercontinental Investments, Ltd. $93,750.00
Banco Cooperative $87,500.00
Mardi International Corporation $43,750.00
W.Y. Hirsch $187,500.00
Lockwood Resources $187,500.00
Mr. A.M.H.C. Wehmeijer De Asfiliatie B.V. $62,500.00
</TABLE>
2
<PAGE>
EXHIBIT 10(j)
I acknowledge receipt of ________________ shares of common stock in
Computerized Thermal Imaging, Inc. ("CTI") in full and complete satisfction
of any claims outstanding against CTI or Thermal Imaging, Inc. related to my
former interest in Dorex, Inc.
Signature:
------------------------------
Name:
-----------------------------------
Address:
--------------------------------
--------------------------------
Phone #:
--------------------------------
1
<PAGE>
SIGNATORIES TO DOREX RELEASE
Judy Allred
Dave E. Braman
William S. Carpenter
David Fogle
Bob Grace
Rod Grant
Llyod Hale
Sandra Hale
Edwin Harris
Curtis Holt
Bob Ihle
Richard W. Johnston
Don Minson
Reed J. Oldroyd
Robert Packer
John Pillari
Paul W. Roberts
R. Kenny Roberts
John Toronto
Louis Woodworth
2
<PAGE>
EXHIBIT 10(k)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of the Effective Date (as defined
below) between Computerized Thermal Imaging, Inc., a Nevada corporation (the
"Company"), and Kenneth M. Dodd, an individual residing in Oakland County,
Michigan (the "Employee") (hereinafter collectively, the "Parties").
W I T N E S S E T H:
1. EMPLOYMENT. The Company hereby employs the Employee, and Employee
accepts such employment by the Company, upon all the terms and conditions
hereinafter stated, and as subject to termination as provided in Section 4
hereof. Employee is employed as an Executive Vice President of the Company,
and in such capacity will report to the President of the Company in the
performance of his duties hereunder. Employee will be appointed CEO of the
company to be formed which is described in Paragraph 3(c) hereof, in which
the Company expects to have an interest, for the licensing of thermal imaging
units for the detection of breast cancer in the United States.
2. EXTENT OF SERVICE.
(a) While employed by the Company, the Employee shall devote
substantially three-quarters time to the business of the Company, and, except
as provided in paragraphs (b) and (c) below or as may be specifically
permitted by the Board of Directors of the Company, shall not be engaged in
any other business activity or engage in any other activity in conflict with
the interests of the Company.
(b) During the term hereof Employee shall be entitled to work up
to ten (10) hours per week in developing international real estate
recordation and out-sourcing projects, and related support businesses, which
Employee originates for a venture in which the Company shall have no
interest.
(c) During the term hereof Employee shall devote a reasonable
amount of time as determined by the Board of Directors for the development of
a company to be formed for breast cancer detection.
3. COMPENSATION.
(a) SALARY. (1) As payment for the services to be rendered during
the term of this Agreement, Employee shall be entitled to receive a salary of
One Hundred Fifty Thousand and No/100 Dollars ($150,000.00) per year, payable
in accordance with the payroll policies of the Company in effect from time to
time. During the term of this Agreement, the Employee shall be entitled to
participate in all employee benefit plans maintained from time to time by the
Company for the benefit of its employees, in accordance with the policies of
the Company in effect from time to time. No such benefit plans or policies
are in effect as of the date of this Agreement. The Employee shall be
entitled to annual vacation time determined in accordance with the vacation
policies of the Company in effect from time to time. All such benefit plans
are subject to change or termination from time to time by Company in its sole
and absolute discretion.
(2) Employee shall be entitled to have the annual salary provided
for in Paragraph (a)(1) above increased to One Hundred Seventy-Five Thousand
and No/100 Dollars ($175,000.00) per year, payable in accordance with the
payroll policies of the Company in effect from time to time, commencing if,
as, and when the Company sells its fiftieth (50th) "CTI Unit" (which shall
include regular and breast cancer configurations of diagnostic equipment of
the Company) at a profit after the Effective Date.
(b) OPTIONS. In addition to the salary and employee benefits
described in Paragraph (a) above, the Company hereby grants to Employee two
(2) options to purchase common stock of the Company, each as more fully
described and subject to: (i) the conditions set forth in EXHIBIT A and
EXHIBIT B, respectively, attached hereto and incorporated by reference herein
and (ii) if approved, that certain 1995 Incentive Stock Plan (the "Plan") of
the Company attached hereto as EXHIBIT C, which plan is yet to be approved by
the Board of Directors of the Company.
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(c) EQUITY IN BREAST CANCER ENTITY. In addition to the
compensation described in Paragraphs (a) and (b) above, the Company agrees to
obtain for Employee as formation stock or venture interest a seven and
one-half percent (7.5%) initial equity ownership position in an entity yet to
be formed, if, as, and when so formed during Employee's employment hereunder,
the principal business of which will be to pursue development, manufacture
and marketing of breast cancer screening technology. The terms and
conditions of such interest shall be determined as and when the entity and
its prospective ownership group agree on the requirements for investment and
ownership in such entity. In the event such entity is formed, the Company
shall have Employee appointed as the chief executive officer or such other
officer designation as may be deemed appropriate by the managers or directors
of such entity at the time of its formation.
(d) RELOCATION EXPENSES. If, as, and when any initial relocation
of Employee and his family may be deemed necessary by the Company, Company
agrees to provide a reasonable time for the sale of Employee's residence and
to reimburse Employee for reasonable expenses incurred in such family
relocation, which shall include moving expenses plus up to $20,000 of
reasonable costs incurred in selling Employee's personal residence in
Michigan, which shall include real estate brokers selling fees and ordinary
points to assist a purchaser thereof to obtain a new mortgage on such
residence; provided, however, that nothing in this Paragraph shall require
the Company to reimburse Employee for any losses sustained by Employee in the
sale of his residence.
(e) REGISTRATION RIGHTS. All stock in the Company which you
obtain from the exercise of options granted to you under paragraph (b) of
this Section 3 will be subject to the following "piggy-back" registration
rights:
If the Company at any time proposes to file, or does file, any registration
statement covering the class of securities of the Company which you then
hold, whether that registration is for securities to be issued by the Company
or then held by another party, you will have the right to have any part or
all of the securities of the Company you then hold to be registered under
such proposed registration statement. If you wish to have any securities you
then hold to be so registered, you will notify the Company in writing of your
desire within thirty (30) days after the date you receive your notice of
proposed registration from the Company. Upon receipt of your timely request
for registration under this paragraph, the Company will add the securities
you requested be registered to the proposed registration statement; provided,
that if after you make a request for registration the Company decides not to
register or delay such registration, for any reason, the Company will give
you written notice of its decision. However, no such determination will
prejudice your rights to other and further registrations made by the Company
or with respect to Company securities from time to time. The Company will
bear all costs and expenses of each and all such registrations incurred in
connection with the exercise of rights by you under this paragraph.
4. TERM; TERMINATION.
(a) The term of this Employment Agreement shall commence on the
first date when Employee reports for work for the Company after the date
hereof (the "Effective Date") and shall continue thereafter for a period of
three (3) years, subject to the terms and conditions herein stated; provided
that Employee may terminate this Agreement at any time hereafter by giving
the Company at least fourteen (14) days' prior written notice. If Employee
voluntarily terminates this Agreement: (i) Company shall have no further
financial liability to Employee beyond the effective date of such
termination, and (ii) Employee's equity interest, if any, in the entity
described in Paragraph 3(c) shall be conveyed, transferred and assigned,
without reservation, to the Company.
(b) If during the term of this Agreement Employee is prevented for
a continuous period of thirty (30) days from performing his duties hereunder
by reason of physical or mental disability ("Disability"), then the Company,
on seven days' prior written notice to the Employee, may terminate this
Agreement. In the event of a termination pursuant to this paragraph 4(b), the
Company shall be relieved of all of its obligations under this Agreement,
except that: (i) the Company shall pay to the Employee that portion of the
Employee's wages earned and accrued by Employee prior to Employee's
termination, (ii) Employee shall be entitled to retain, if then previously
issued, the equity interest described in Paragraph 3(c) hereof, and (iii) to
the extent provided in the Plan, to exercise the Options described in
Paragraph 3(b) hereof.
(c) The Company may at any time discharge the Employee for Cause (as
hereinafter defined) and terminate this Agreement without any further liability
hereunder to the Employee or his spouse or estate, except
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for the obligation of the Company to pay the Employee's wages earned to the
date of discharge. For purposes of this Agreement, the Company shall have
"Cause" to terminate the Employee's employment upon (i) the gross negligence
of the Employee in performing his duties hereunder (other than any such
failure resulting from the Employee's incapacity due to physical or mental
illness), (ii) the willful engaging by the Employee in conduct amounting to
fraud or embezzlement or any other act by Employee which is negligently or
willfully performed which has the effect of damaging the reputation of the
Company or its business, (iii) breach of fiduciary duty as an officer and/or
director of the Company, (iv) the violation by the Employee of any material
provision of this Agreement, including but not limited to the provisions of
Sections 5, 6, 7, 8 or 10 hereof; or (v) after 30 days notice from the
Company after June 30, 1996 if the breast cancer detection license company
described in Paragraph 3(c) fails to be formed (or a substitute business
venture commenced) and the China Project has not commenced.
5. BUSINESS OPPORTUNITIES. Subject to the provisions of Paragraph
2(b), for as long as the Employee shall be employed by the Company, the
Employee agrees that with respect to any new and future business opportunity
or other new and future business proposal which is offered to, or comes to
the attention of, the Employee during employment and which is in any way
related to, or connected with, the business of the Company or its affiliates,
the Company shall have the right to take advantage of such business
opportunity or other business proposal for its own benefit. The Employee
agrees to promptly deliver notice to the board of directors of the Company in
writing (the "Notice of Opportunity") of the existence of such opportunity or
proposal and the Employee may take advantage of such opportunity only if the
Company does not elect to exercise its right to take advantage of such
opportunity within thirty (30) days after receipt of the Notice of
Opportunity. Thereafter, the Company shall be deemed to have waived its
rights to such opportunity and the Employee shall have the right to pursue
such opportunity upon the terms and conditions set forth in this Agreement,
specifically subject to the terms of Section 2 of this Agreement.
6. INTELLECTUAL PROPERTY. Employee hereby assigns to the Company all
inventions, processes, discoveries and improvements (whether or not
patentable) which are conceived, made or learned by Employee alone or jointly
with others in the course of his employment with the Company that pertain to
the business interests of the Company or relating to areas which may be
reasonably anticipated to be encompassed by such business interests of the
Company at the time of conception. Employee at any time during or after his
employment will promptly disclose to the Company all such processes,
inventions, discoveries or improvements assigned hereby. Employee will also
at the Company's expense cooperate in all lawful acts which may be necessary
or desirable in the judgment of the Company to protect or vest title to such
inventions, processes, discoveries or improvements in the Company or its
nominee including, without limitation, applying for, obtaining, maintaining,
and enforcing patents thereon in all countries of the world, and including
execution of papers appropriate thereto.
7. CONFIDENTIAL INFORMATION. The Employee acknowledges that he will
receive or come in contact with, among other things, trade secrets (both
technical and non-technical), know-how, lists of customers, suppliers,
contractors, customers, employee records and other confidential and
proprietary information about the business of the Company (hereinafter
collectively referred to as "information"), all of which the Company
considers highly confidential, giving the Company significant advantage over
competitors, and which the Company desires to protect. The Employee
understands that such information is the sole property of the Company, and
that the information is confidential, and he agrees that both during and
after his employment with the Company he will not at any time use or reveal
such information to anyone except as permitted by the Company or required by
Employee's employment duties with the Company. Upon termination of
employment hereunder, the Employee agrees to surrender to the Company all
papers, documents, writings and other property produced by him or coming into
his possession by or through his employment hereunder, and the Employee
agrees that all such materials and information will at all times remain the
property of the Company.
8. RESTRICTIVE COVENANT. In consideration of $10.00 and other good and
valuable separate consideration given by Company to Employee, Employee agrees
that during the period of time that the Employee is employed by the Company
and for a period of two (2) year(s) following the termination of this
Agreement for any reason, the Employee shall not, directly or indirectly:
(a) (i) cause or be instrumental in the formation of, or
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(ii) within any state in which the Company then conducts business
engage in, whether as principal, agent, trustee, member or
employee or through the agency of any corporation, partnership,
association, agent or agency,
any business competitive with the business then conducted by the Company or
its subsidiaries or affiliates (a "Competing Business");
(b) be the owner of more than one percent (1%) of the equity (whether
capital stock, membership or partnership interests) of any entity
(except for stock publicly traded on any recognized stock exchange)
which is engaged, directly or indirectly, in a Competing Business; or
(c) through any person, firm, association or corporation with which he is
now or may hereafter become associated, cause or induce any present or
future employee of the Company to leave the employ of the Company or
to accept employment with the Employee or with any Competing Business.
The foregoing agreement not to compete shall not be held invalid or
unenforceable because of the scope of the territory or actions subject
thereto or restricted thereby, or the period of time within which such
agreement is operative, but any judgment of a court of competent jurisdiction
may define the maximum territory and actions subject to and restricted by
this Section 8 and the period of time during which such agreement is
enforceable. In the event the Company shall cease to do business, this
Section 8 shall not apply.
9. SPECIFIC PERFORMANCE; SURVIVAL. The Employee acknowledges that a
remedy at law for any breach or attempted breach of Sections 5, 6, 7 or 8 of
this Agreement will be inadequate, agrees that the Company shall be entitled
to specific performance and injunctive and other equitable relief in case of
any such breach of attempted breach, and further agrees to waive any
requirement for the securing or posting of any bond in connection with the
obtaining of any such injunctive or any other equitable relief. The Parties
hereto acknowledge that the covenants contained in Sections 5, 6, 7, 8 and 9
shall survive the termination of this Agreement, by either party, for any
reason.
10. SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by
or invalid under applicable law, such provision shall be ineffective to the
extent of such provision or invalidity only, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
11. BINDING EFFECT. This Agreement shall be binding on the parties
hereto when executed by Employee and the President of Company. Employee
acknowledges and agrees that no representative of Company other than the
President has any authority to enter into any employment contract or bind
Company unless authorized in writing by the President of Company to do so.
12. TEXAS LAW TO APPLY; ARBITRATION. This Agreement shall be governed
by and construed pursuant to the laws of the State of Texas, notwithstanding
conflicts of laws principles thereof. Company and Employee hereby submit to
the jurisdiction of the courts, mediations and arbitral panels located in,
and agree that venue shall lie for all purposes in, Harris County, Texas.
EXCEPT FOR ACTIONS INVOLVING REQUESTS BY COMPANY FOR RELIEF UNDER PARAGRAPH 9
HEREOF, EMPLOYEE AND COMPANY HEREBY KNOWINGLY AND VOLUNTARILY AGREE THAT ANY
DISPUTES OR CONFLICTS IN ANY WAY ARISING OUT OF OR RELATING TO THE EMPLOYMENT
RELATION BETWEEN EMPLOYEE AND COMPANY CREATED BY THIS AGREEMENT SHALL BE
MEDIATED OR ARBITRATED, AT THE WRITTEN ELECTION OF EITHER PARTY HERETO. IF
EITHER EMPLOYEE OR COMPANY MAKE A PROPER ELECTION TO MEDIATE UNDER THIS
PARAGRAPH 12, BUT SUCH MEDIATION EFFORTS FAIL TO RESOLVE THE SUBJECT
DISPUTE(S) BETWEEN THE PARTIES, THE PARTIES SHALL BE BOUND TO RESOLVE THE
SUBJECT DISPUTE(S) BY BINDING ARBITRATION. WHERE THE SUBJECT DISPUTE(S) ARE
ULTIMATELY RESOLVED BY ARBITRATION, THE PARTIES HERETO IRREVOCABLY AGREE TO
BE BOUND BY ALL FINDINGS OF FACT AND CONCLUSIONS OF LAW OF THE ARBITRATOR(S)
SELECTED. Either party may elect under this paragraph 12 to proceed either
to mediation or arbitration by delivery of written notice to the opposing
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Party and to the Judicial Arbitration and Mediation Services office where
such proceeding is to be held. Each mediation or arbitration proceeding
hereunder will be conducted in accordance with the rules of the Judicial
Arbitration and Mediation Services (the "JAMS Rules"), including selection of
mediator(s) or arbitrator(s). The mediation or arbitration will be held in
Houston, Texas, unless both parties agree to another location. All federal
and state laws applicable to this agreement relating to arbitration or
mediation of conflicts shall be fully complied with by the parties.
13. NOTICES. Any notices required by this Agreement shall be
effectively given if given in writing by personal delivery or by depositing
same in the United States mail, registered or certified, postage prepaid,
return receipt requested. For purposes of this provision, Company's address
shall be 141 North State St. #161, Lake Oswego, Oregon 97034, or at such
other place as may be designated by Company from time to time. Employee's
address shall be that set forth below or at such other place as may be
designated by Employee from time to time.
14. ASSIGNMENT. This Agreement may not be assigned by the Employee.
Neither the Employee, his spouse nor their estates shall have any right to
commute, encumber or dispose of any right to receive payments hereunder, it
being that such payments and the right thereto are nonassignable and
nontransferable.
15. ENTIRE AGREEMENT. This Agreement, together with all exhibits and
attachments hereto and all documents and instruments executed and delivered
in connection herewith, constitutes the entire agreement of the parties
hereto, and supersedes all prior understandings with respect to the subject
matter hereof.
16. ACKNOWLEDGMENT. Employee acknowledges that he has read and
understands this Agreement, and that he has received a fully executed copy of
same.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be effective as of the Effective Date.
THE COMPANY:
COMPUTERIZED THERMAL IMAGING, INC.
By: /s/ David B. Johnston
----------------------------
David B. Johnston, President
THE EMPLOYEE:
Dated: October 11, 1995 /s/ Kenneth M. Dodd
-------------------------------
Kenneth M. Dodd
1860 Carla Hills Drive
White Lake, MI 48383
Exhibits
- --------
A - CTI Stock Option 1 (250,000 shares)
B - CTI Stock Option 2 (250,000 shares)
C - 1995 Incentive Stock Plan
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<PAGE>
EXHIBIT "A"
COMPUTERIZED THERMAL IMAGING, INC.
EMPLOYEE STOCK OPTION AGREEMENT
Pursuant to that certain Employment Agreement (the "Employment
Agreement") dated of even date herewith between Computerized Thermal Imaging,
Inc. (the "Company") and Kenneth M. Dodd (the "Employee"), and, if approved,
under and subject to all terms and conditions of that certain Computerized
Thermal Imaging, Inc. 1995 Stock Option Plan (the "Plan") of the Company, a
copy of which is attached hereto and incorporated by reference herein for all
purposes, the Company hereby grants to Employee the option to purchase
250,000 shares of the Company's Common Stock, $0.001 par value, at a price of
$1.25 per share, subject to adjustment as provided in the Plan and to all
terms and conditions set forth herein.
Subject to forfeiture as hereafter provided, this Option becomes fully
vested and may be exercised by Employee after June 1, 1996, and must be
exercised, if at all, on or before the expiration of ten (10) years from the
date hereof.
The Option evidenced hereby shall be forfeited in its entirety by the
Employee if on or before June 1, 1996 Employee's employment with the Company
is terminated by the Company for Cause (as defined in the Employment
Agreement) or is voluntarily terminated by the Employee.
If, as, and when Employee desires to exercise this Option, he may do so
by delivering written notice of such exercise to the Company at its offices
in Lake Oswego, Oregon, together with appropriate payment for the number of
shares covered by such notice.
The Employee hereby accepts and agrees to be bound by all the terms and
conditions of the Plan, to which this Option is subject.
Computerized Thermal Imaging, Inc.
By: /s/ David B. Johnston
------------------------------
David B. Johnston, President
AGREED TO AND ACCEPTED this
______ day of __________________,
1995.
/s/ Kenneth M. Dodd
- -------------------------------
Kenneth M. Dodd, Employee
Date: 10-11, 1995
<PAGE>
EXHIBIT "B"
COMPUTERIZED THERMAL IMAGING, INC.
EMPLOYEE STOCK OPTION AGREEMENT
Pursuant to that certain Employment Agreement (the "Employment
Agreement") dated of even date herewith between Computerized Thermal Imaging,
Inc. (the "Company") and Kenneth M. Dodd (the "Employee"), and, if approved,
under and subject to all terms and conditions of that certain Computerized
Thermal Imaging, Inc. 1995 Stock Option Plan (the "Plan") of the Company, a
copy of which is attached hereto and incorporated by reference herein for all
purposes, the Company hereby grants to Employee the option to purchase
250,000 shares of the Company's Common Stock, $0.001 par value, at a price of
$1.25 per share, subject to adjustment as provided in the Plan and to all
terms and conditions set forth herein.
Subject to forfeiture as hereafter provided, this Option becomes vested
to the extent hereafter provided and may be exercised by Employee, as
follows: (i) this Option may be exercised as to 125,000 shares (the "Initial
Shares"), and this Option becomes fully vested with respect to the Initial
Shares, from and after the second anniversary date of Employee's continuous
employment with the Company, and (ii) this Option may be exercised as to the
second 125,000 shares (the "Additional Shares"), and this Option becomes
fully vested with respect to the Additional Shares, from and after the third
anniversary date of Employee's continuous employment with the Company. The
rights granted under this Option must be exercised, if at all, on or before
the expiration of ten (10) years from the date hereof.
The Option with respect to the Initial Shares and to the Additional
Shares, respectively, shall be forfeited, to the extent not previously
exercised, if Employee's employment with the Company is terminated on or
before Employee's second anniversary date and Employee's third anniversary
date, respectively, by the Company for Cause (as defined in the Employment
Agreement) or is voluntarily terminated by the Employee.
If, as, and when Employee desires to exercise this Option, he may do so
by delivering written notice of such exercise to the Company at its offices
in Lake Oswego, Oregon, together with appropriate payment for the number of
shares covered by such notice.
The Employee hereby accepts and agrees to be bound by all the terms and
conditions of the Plan, to which this Option is subject.
Computerized Thermal Imaging, Inc.
By: /s/ David B. Johnston
-------------------------------
David B. Johnston, President
AGREED TO AND ACCEPTED this
________ day of ________________, 1995.
/s/ Kenneth M. Dodd
- -------------------------------
Kenneth M. Dodd, Employee
Date: 10-11, 1995
<PAGE>
EXHIBIT 10(l)
COMPUTERIZED THERMAL IMAGING, INC.
141 North State Street, Suite 161
Lake Oswego, Oregon 97034
June 12, 1995
Mr. Richard V. Secord
11753 Arbor Glen Way
Reston, Virginia 22094
Re: Confirmation of terms for Personal Services Agreement
Dear Mr. Secord:
This letter will confirm our terms of agreement between Computerized
Thermal Imaging, Inc., a Nevada corporation (the "Company") and you, under which
you will render advisory services to the Company, as follows:
1. You will be engaged as the Chief Operating Officer - International
Operations of the Company beginning on the later to occur of (a) July
3, 1995 or (b) within 180 days of the date on which the first CTI
thermal imaging unit (a "Unit") is ordered by the Ministry of Public
Health (or its subsidiaries or affiliates; "MOPH") for the People's
Republic of China under the "China Project" (as defined in that
certain Consulting Agreement between the Company and American Recovery
Corporation dated December 22, 1994, and amended January 27, 1995).
The date on which your engagement with the Company begins under the
immediately preceding sentence is hereafter referred to as the "Start
Date". The term of our agreement will be for a period of three (3)
years from and after the Start Date (the "Initial Term"), and will be
renewed automatically thereafter in consecutive one year terms, unless
otherwise terminated by written notice given by either party not less
than 90 days prior to the end of the Initial Term or any renewal
period. Any timely termination of this agreement prior to 90 days
before the end of the Initial Term shall be deemed effective as of the
last day of the Initial Term. All post-Initial Term terminations
complying with the required 90-day notice period will be effective as
of the last day of the annual period in which such notice is given.
All other terminations will be effective as of the last day of the
next succeeding annual period after which notice is given under this
paragraph.
2. Your employment will require full time duties with the primary
responsibility for supervising and causing to be performed the TriSun
CTI/Asia, Ltd. project. It is anticipated and understood that this
project will provide the basis for your compensation. Nevertheless,
you may be requested in the alternative to assist CTI with its
domestic or other international operations.
3. Your compensation will be as follows:
(a) You will be paid annual compensation of $175,000, payable in 12
equal monthly installments of $14,583.33 each, each payable in
advance, beginning on the Start Date, and continuing thereafter
on the same day of the month as the Start Date (or as near
thereto as possible) for each succeeding month. If, as and when
a letter of credit under the China Project for the benefit of the
MOPH is in place which provides for payment, among others, of the
twenty-first (21st) Unit to be ordered by the MOPH, your annual
compensation under this paragraph will be increased to $200,000,
again payable in advance in equal monthly installments of
$16,666.67 each;
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Mr. Richard V. Secord
June 12, 1995
Page 2
(b) You will be provided with coverage under the Company's health and
dental insurance substantially similar to that provided to
employees of the Company, life insurance of $1,000,000 and a
company executive automobile (or automobile allowance of
$500.00/month);
(c) An option in your favor to purchase 1,000,000 shares of Company
common stock of a class presently registered for trade on a U.S.
public exchange (or successor traded class), for an exercise
price of $1.25 per share. Such option will be exercisable for a
period of five (5) years from and after the Start Date; and
(d) A second option in your favor to purchase 1,000,000 shares of
Company common stock of a class then registered for trade on a
U.S. public exchange (or successor traded class) for an exercise
price of $1.25 per share. Such second option will be exercisable
for a period of five (5) years from and after the date on which a
letter of credit under the China Project for the benefit of the
MOPH is in place which provides for payment, among others, of the
twenty-first (21st) Unit to be ordered by the MOPH.
Payments to you under paragraphs (a) of this Section 2 will not begin
until revenues of the Company from the China Project are sufficient to
begin funding the monthly amounts payable to you. The compensation
payable to you under paragraphs (a) and (b) of this Section 2 may be
paid either by the Company or TriSun/CTI Asia, Ltd.
4. All stock in the Company you obtain from the exercise of either of the
options to be granted to you under paragraphs (c) and (d) of Section 3
above will be subject to the following "piggy-back" registration
rights:
If the Company at any time proposes to file, or does file, any
registration statement covering any securities of the Company, whether
for securities to be issued by the Company or then held by another
party, you will have the right to have any part or all of the
securities of the Company you then hold to be registered under such
proposed registration statement. If you wish to have any securities
you then hold to be so registered, you will notify the Company in
writing of your desire within thirty (30) days after the date you
receive your notice of proposed registration from the Company. Upon
receipt of your timely request for registration under this paragraph,
the Company will add the securities you requested be registered to the
proposed registration statement; provided, that if after you make a
request for registration the Company decides not to register or delay
such registration, for any reason, the Company will give you written
notice of its decision. However, no such determination will prejudice
your rights to other and further registrations made by the Company or
with respect to Company securities from time to time. The Company
will bear all costs and expenses of each and all such registrations
incurred in connection with the exercise of rights by you under this
Section 4.
5. This agreement may be terminated by the Company for "cause" only.
"Cause" shall mean only the following events: (1) conviction of any
felony or other crime involving moral turpitude, (2) knowing breach of
fiduciary duty as an executive officer of the Company, (3) any act or
omission constituting gross negligence, and (4) any fraud committed by
you against the Company.
6. The terms of this agreement have been consented to, approved and
ratified by the board of directors of the Company, and I am authorized
in all respects as President of the Company to engage you for the
Company's benefit in accordance with the terms of our agreement,
without any further consent
2
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of the directors or any other officer of the Company. We each agree
to take any and all other actions that are necessary and incident to
accomplishing the purposes of and fulfilling the terms of the
agreement described in this letter. This Agreement may be executed
in multiple counterparts, and by facsimile signature, each of which
shall be considered together one Agreement.
If the above correctly describes your understanding of our agreement,
please indicate by your acknowledgment in the spaces provided below and return
one copy of this agreement to me at your earliest convenience.
COMPUTERIZED THERMAL IMAGING, INC.
By: /s/ David B. Johnston
------------------------------------
David B. Johnston,
President
AGREED AND ACCEPTED as of
June 16 , 1995:
----
/s/ Richard V. Secord
- ------------------------------
Richard V. Secord
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EXHIBIT 10(m)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of the Effective Date (as defined below)
between Computerized Thermal Imaging, Inc., a Nevada corporation (the
"Company"), and David Packer, an individual residing in Kaysville, Utah (the
"Employee") (hereinafter collectively, the "Parties").
W I T N E S S E T H:
1. EMPLOYMENT. The Company hereby employs the Employee, and Employee
accepts such employment by the Company, upon all the terms and conditions
hereinafter stated, and as subject to termination as provided in Section 4
hereof. Employee is employed as President of the Company, and in such capacity
will report to the Chief Operating Officer of the Company in the performance of
his duties hereunder.
2. EXTENT OF SERVICE. The Employee shall devote his full time, attention
and energy to the business of the Company, and, except as may be specifically
permitted by the Board, shall not be engaged in any other business activity
during the term of this Agreement. The foregoing shall not be construed as
preventing the Employee from making passive investments in other businesses or
enterprises, if (i) such investments will not require services on the part of
the Employee which would in any way impair the performance of his duties under
this Agreement, (ii) such other businesses or enterprises are not engaged in
any business competitive with the business of the Company, and (iii) the
Employee has complied with Section 8 of this Agreement with respect to such
passive investment.
3. COMPENSATION.
(a) SALARY. (1) As payment for the services to be rendered during
the term of this Agreement, Employee shall be entitled to receive a salary of
One Thirty Five Thousand and No/100 Dollars ($135,000.00) per year, payable in
twelve (12) equal monthly installments of Eleven Thousand Two Hundred Fifty and
No/100 Dollars ($11,250.00), payable in accordance with the payroll policies of
the Company in effect from time to time. During the term of this Agreement,
the Employee shall be entitled to participate in all employee benefit and
insurance plans maintained from time to time by the Company for the benefit of
its employees, in accordance with the policies of the Company in effect from
time to time. The Employee shall be entitled a minimum of three weeks annual
vacation time and to any additional annual vacation time as determined in
accordance with the vacation policies of the Company in effect from time to
time. All such benefit plans are subject to change or termination from time to
time by Company in its sole and absolute discretion.
(b) OPTIONS. Employee shall receive, in addition to the salary,
employee benefits, and bonus specified in Section 3(a) above, an option to
purchase common stock of the Company, as more fully described and subject to:
(i) the conditions set forth in EXHIBIT A attached hereto and incorporated by
reference herein and (ii) that certain 1995 Incentive Stock Plan (the "Plan")
of the Company attached hereto as EXHIBIT B.
(c) REGISTRATION RIGHTS. All stock in the Company which Employee
obtains from the exercise of options granted to Employee in paragraph (b) of
this Section 3 will be subject to the following "piggy-back" registration
rights:
If the Company at any time proposes to file, or does file, any registration
statement covering the class of securities of the Company which you then hold,
whether that registration is for securities to be issued by the Company or then
held by another party, you will have the right to have any part or all of the
securities of the Company you then hold to be registered under such proposed
registration statement. If you wish to have any securities you then hold to be
so registered, you will notify the Company in writing of your desire within
thirty (30) days after the date you receive your notice of proposed
registration from the Company. Upon receipt of your timely request for
registration under this paragraph, the Company will add the securities you
requested be registered to the proposed registration statement; provided, that
if after you make a request for registration the Company decides not to
register or delay such registration, for any reason, the Company will give you
written notice of its decision. However, no such determination will prejudice
your rights to other and further registrations made by the Company or with
respect to Company securities
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from time to time. The Company will bear all costs and expenses of each and
all such registrations incurred in connection with the exercise of rights by
you under this paragraph.
4. TERM; TERMINATION.
(a) The term of this Employment Agreement shall commence on the
first date when Employee reports for work for the Company after the date hereof
(the "Effective Date") and shall continue thereafter for a period of three (3)
years, subject to the terms and conditions herein stated; provided that
Employee may terminate this Agreement at any time hereafter by giving the
Company at least fourteen (14) days' prior written notice. If Employee
voluntarily terminates this Agreement, Company shall have no further financial
liability to Employee beyond the effective date of such termination.
(b) If during the term of this Agreement Employee is prevented for a
continuous period of thirty (30) days from performing his duties hereunder by
reason of physical or mental disability ("Disability"), then the Company, on
seven days' prior written notice to the Employee, may terminate this Agreement.
In the event of a termination pursuant to this paragraph 4(b), the Company
shall be relieved of all of its obligations under this Agreement, except that:
(i) the Company shall pay to the Employee that portion of the Employee's wages
earned and accrued by Employee prior to Employee's termination, and (ii) to the
extent provided in the Plan, to exercise the Options described in Paragraph
3(c) hereof.
(c) The Company may at any time discharge the Employee for Cause (as
hereinafter defined) and terminate this Agreement without any further liability
hereunder to the Employee or his spouse or estate, except for the obligation of
the Company to pay the Employee's wages earned to the date of discharge. For
purposes of this Agreement, the Company shall have "Cause" to terminate the
Employee's employment upon (i) the gross negligence of the Employee in
performing his duties hereunder (other than any such failure resulting from the
Employee's incapacity due to physical or mental illness), (ii) the willful
engaging by the Employee in conduct amounting to fraud or embezzlement or any
other act by Employee which is negligently or willfully performed which has the
effect of damaging the reputation of the Company or its business, (iii) breach
of fiduciary duty as an officer and/or director of the Company, (iv) the
violation by the Employee of any material provision of this Agreement,
including but not limited to the provisions of Sections 5, 6, 7, 8 or 10 hereof.
5. BUSINESS OPPORTUNITIES. Subject to the provisions of Paragraph 2(b),
for as long as the Employee shall be employed by the Company, the Employee
agrees that with respect to any new and future business opportunity or other
new and future business proposal which is offered to, or comes to the attention
of, the Employee during employment and which is in any way related to, or
connected with, the business of the Company or its affiliates, the Company
shall have the right to take advantage of such business opportunity or other
business proposal for its own benefit. The Employee agrees to promptly deliver
notice to the board of directors of the Company in writing (the "Notice of
Opportunity") of the existence of such opportunity or proposal and the Employee
may take advantage of such opportunity only if the Company does not elect to
exercise its right to take advantage of such opportunity within thirty (30)
days after receipt of the Notice of Opportunity. Thereafter, the Company shall
be deemed to have waived its rights to such opportunity and the Employee shall
have the right to pursue such opportunity upon the terms and conditions set
forth in this Agreement, specifically subject to the terms of Section 2 of this
Agreement.
6. INTELLECTUAL PROPERTY. Employee hereby assigns to the Company all
inventions, processes, discoveries and improvements (whether or not patentable)
which are conceived, made or learned by Employee alone or jointly with others
in the course of his employment with the Company that pertain to the business
interests of the Company or relating to areas which may be reasonably
anticipated to be encompassed by such business interests of the Company at the
time of conception. Employee at any time during or after his employment will
promptly disclose to the Company all such processes, inventions, discoveries or
improvements assigned hereby. Employee will also at the Company's expense
cooperate in all lawful acts which may be necessary or desirable in the
judgment of the Company to protect or vest title to such inventions, processes,
discoveries or improvements in the Company or its nominee including, without
limitation, applying for, obtaining, maintaining, and enforcing patents thereon
in all countries of the world, and including execution of papers appropriate
thereto.
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7. CONFIDENTIAL INFORMATION. The Employee acknowledges that he will
receive or come in contact with, among other things, trade secrets (both
technical and non-technical), know-how, lists of customers, suppliers,
contractors, customers, employee records and other confidential and proprietary
information about the business of the Company (hereinafter collectively
referred to as "information"), all of which the Company considers highly
confidential, giving the Company significant advantage over competitors, and
which the Company desires to protect. The Employee understands that such
information is the sole property of the Company, and that the information is
confidential, and he agrees that both during and after his employment with the
Company he will not at any time use or reveal such information to anyone except
as permitted by the Company or required by Employee's employment duties with
the Company. Upon termination of employment hereunder, the Employee agrees to
surrender to the Company all papers, documents, writings and other property
produced by him or coming into his possession by or through his employment
hereunder, and the Employee agrees that all such materials and information will
at all times remain the property of the Company.
8. RESTRICTIVE COVENANT. In consideration of $10.00 and other good and
valuable separate consideration given by Company to Employee, Employee agrees
that during the period of time that the Employee is employed by the Company and
for a period of two (2) year(s) following the termination of this Agreement for
any reason, the Employee shall not, except as expressly approved in writing by
the Board of Directors of the Company, directly or indirectly:
(a) (i) cause or be instrumental in the formation of, or
(ii) within any state in which the Company then conducts business
engage in, whether as principal, agent, trustee, member or
employee or through the agency of any corporation, partnership,
association, agent or agency,
any business competitive with the business then conducted by the Company or
its subsidiaries or affiliates (a "Competing Business");
(b) be the owner of more than one percent (1%) of the equity (whether
capital stock, membership or partnership interests) of any entity
(except for stock publicly traded on any recognized stock exchange)
which is engaged, directly or indirectly, in a Competing Business; or
(c) through any person, firm, association or corporation with which he is
now or may hereafter become associated, cause or induce any present or
future employee of the Company to leave the employ of the Company or
to accept employment with the Employee or with any Competing Business.
The foregoing agreement not to compete shall not be held invalid or
unenforceable because of the scope of the territory or actions subject thereto
or restricted thereby, or the period of time within which such agreement is
operative, but any judgment of a court of competent jurisdiction may define the
maximum territory and actions subject to and restricted by this Section 8 and
the period of time during which such agreement is enforceable. In the event
the Company shall cease to do business, this Section 8 shall not apply.
9. SPECIFIC PERFORMANCE; SURVIVAL. The Employee acknowledges that a
remedy at law for any breach or attempted breach of Sections 5, 6, 7 or 8 of
this Agreement will be inadequate, agrees that the Company shall be entitled to
specific performance and injunctive and other equitable relief in case of any
such breach of attempted breach, and further agrees to waive any requirement
for the securing or posting of any bond in connection with the obtaining of any
such injunctive or any other equitable relief. The Parties hereto acknowledge
that the covenants contained in Sections 5, 6, 7, 8 and 9 shall survive the
termination of this Agreement, by either party, for any reason.
10. SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by
or invalid under applicable law, such provision shall be ineffective to the
extent of such provision or invalidity only, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.
11. BINDING EFFECT. This Agreement shall be binding on the parties
hereto when executed by Employee and the Chief Executive Officer of Company.
Employee acknowledges and agrees that no representative of Company
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other than the Chief Executive Officer has any authority to enter into any
employment contract or bind Company unless authorized in writing by the Chief
Executive Officer of Company to do so.
12. TEXAS LAW TO APPLY; ARBITRATION. This Agreement shall be governed by
and construed pursuant to the laws of the State of Texas, notwithstanding
conflicts of laws principles thereof. Company and Employee hereby submit to
the jurisdiction of the courts, mediations and arbitral panels located in, and
agree that venue shall lie for all purposes in, Harris County, Texas. EXCEPT
FOR ACTIONS INVOLVING REQUESTS BY COMPANY FOR RELIEF UNDER PARAGRAPH 9 HEREOF,
EMPLOYEE AND COMPANY HEREBY KNOWINGLY AND VOLUNTARILY AGREE THAT ANY DISPUTES
OR CONFLICTS IN ANY WAY ARISING OUT OF OR RELATING TO THE EMPLOYMENT RELATION
BETWEEN EMPLOYEE AND COMPANY CREATED BY THIS AGREEMENT SHALL BE MEDIATED OR
ARBITRATED, AT THE WRITTEN ELECTION OF EITHER PARTY HERETO. IF EITHER EMPLOYEE
OR COMPANY MAKE A PROPER ELECTION TO MEDIATE UNDER THIS PARAGRAPH 12, BUT SUCH
MEDIATION EFFORTS FAIL TO RESOLVE THE SUBJECT DISPUTE(S) BETWEEN THE PARTIES,
THE PARTIES SHALL BE BOUND TO RESOLVE THE SUBJECT DISPUTE(S) BY BINDING
ARBITRATION. WHERE THE SUBJECT DISPUTE(S) ARE ULTIMATELY RESOLVED BY
ARBITRATION, THE PARTIES HERETO IRREVOCABLY AGREE TO BE BOUND BY ALL FINDINGS
OF FACT AND CONCLUSIONS OF LAW OF THE ARBITRATOR(S) SELECTED. Either party
may elect under this paragraph 12 to proceed either to mediation or arbitration
by delivery of written notice to the opposing Party and to the Judicial
Arbitration and Mediation Services office where such proceeding is to be held.
Each mediation or arbitration proceeding hereunder will be conducted in
accordance with the rules of the Judicial Arbitration and Mediation Services
(the "JAMS Rules"), including selection of mediator(s) or arbitrator(s). The
mediation or arbitration will be held in Houston, Texas, unless both parties
agree to another location. All federal and state laws applicable to this
agreement relating to arbitration or mediation of conflicts shall be fully
complied with by the parties.
13. NOTICES. Any notices required by this Agreement shall be effectively
given if given in writing by personal delivery or by depositing same in the
United States mail, registered or certified, postage prepaid, return receipt
requested. For purposes of this provision, Company's address shall be 141
North State St. #161, Lake Oswego, Oregon 97034, or at such other place as may
be designated by Company from time to time. Employee's address shall be that
set forth below or at such other place as may be designated by Employee from
time to time.
14. ASSIGNMENT. This Agreement may not be assigned by the Employee.
Neither the Employee, his spouse nor their estates shall have any right to
commute, encumber or dispose of any right to receive payments hereunder, it
being that such payments and the right thereto are nonassignable and
nontransferable.
15. ENTIRE AGREEMENT. This Agreement, together with all exhibits and
attachments hereto and all documents and instruments executed and delivered in
connection herewith, constitutes the entire agreement of the parties hereto,
and supersedes all prior understandings with respect to the subject matter
hereof.
16. ACKNOWLEDGMENT. Employee acknowledges that he has read and
understands this Agreement, and that he has received a fully executed copy of
same.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective as of the Effective Date.
THE COMPANY:
COMPUTERIZED THERMAL IMAGING, INC.
By: /s/ David B. Johnston
-----------------------------------------
David B. Johnston, Chief Executive Officer
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THE EMPLOYEE:
Dated: April 30, 1997 /s/ David Packer
------------------------------
David Packer
1255 North Ivy Place
Keysville, UT 84037
(801) 546-4613 Telecopier
(801) 546-4614 Voicemail
EXHIBITS
A - CTI Stock Option (500,000 shares)
B - 1995 Incentive Stock Plan
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EXHIBIT "A"
COMPUTERIZED THERMAL IMAGING, INC.
EMPLOYEE STOCK OPTION AGREEMENT
Pursuant to that certain Employment Agreement (the "Employment Agreement")
dated of even date herewith between Computerized Thermal Imaging, Inc. (the
"Company") and David Packer (the "Employee"), the Company hereby grants to
Employee, subject to all terms and conditions of the Employment Agreement, this
Option Agreement, and that certain Computerized Thermal Imaging, Inc. 1995
Stock Option Plan (the "Plan") of the Company, a copy of which is attached
hereto and incorporated by reference herein for all purposes, the option to
purchase Five Hundred Thousand (500,000) shares (the "Shares") of the Company's
Common Stock, $0.001 par value per share, at a price per share equal to $0.97
("fair market value" under the Plan as of the execution date of the Employment
Agreement).
Subject to forfeiture as hereafter provided, this Option becomes vested to
the extent hereafter provided and may be exercised by Employee, as follows: (i)
this Option may be exercised as to 166,666.67 shares (the "Initial Shares"),
and this Option becomes fully vested with respect to the Initial Shares, from
and after the first anniversary date of Employee's continuous employment with
the Company, and (ii) this Option may be exercised as to the second 166,666.67
shares (the "First Additional Shares"), and this Option becomes fully vested
with respect to the First Additional Shares, from and after the second
anniversary date of Employee's continuous employment with the Company, and
(iii) this Option may be exercised as to the third 166,666.67 shares (the
"Second Additional Shares"), and this Option becomes fully vested with respect
to the Second Additional Shares, from and after the third anniversary date of
Employee's continuous employment with the Company. The rights granted under
this Option must be exercised, if at all, on or before the expiration of five
(5) years from the date hereof.
The Option shall be forfeited, to the extent not previously exercised,
with respect to all shares for which the Option has not vested in accordance
with the immediately preceding paragraph AND been exercised, if, as, and when
Employee's employment with the Company is terminated by the Company for Cause
(as defined in the Employment Agreement) or is voluntarily terminated by the
Employee.
If, as, and when Employee desires to exercise this Option, he may do so by
delivering written notice of such exercise to the Company at its offices in
Lake Oswego, Oregon, together with appropriate payment for the number of shares
covered by such notice.
The Employee hereby accepts and agrees to be bound by all the terms and
conditions of the Plan, to which this Option and the Shares are subject.
Computerized Thermal Imaging, Inc.
By: /s/ David B. Johnston
-----------------------------------------
David B. Johnston, Chief Executive Officer
AGREED TO AND ACCEPTED this
30 day of April,
1997.
/s/ David Packer
David Packer, Employee
Date: ________________, 1997
Exhibit B - CTI 95 Stock Option Plan - See "DRC/CTI/Exhibit B" or
"DRL/CTI\Stock95.Fnl"
<PAGE>
EXHIBIT 10(n)
ESCROW AGREEMENT
This Escrow Agreement (this "Agreement") is entered into on this ____
day of November, 1997 (the "Effective Date") among Computerized Thermal
Imaging, Inc., a Nevada corporation ("CTI"), Roger Sack ("Sack"), and First
Nebraska Trust Company, a Nebraska corporation (the "Escrow Agent").
RECITAL:
On or about August, 1997, Sack presented Certificate No. 8313 to CTI for
registration into the name of Sack. Sack represented to CTI that he had
taken a pledge of the shares of common stock of CTI represented by that
certificate as collateral for repayment of certain indebtedness to Sack owed
by Richard N. Thompson, the registered holder of the certificate. CTI
maintains the certificate was the subject of a conditional issuance to Mr.
Thompson, the conditions of which have not been satisfied. Sack maintains
that his security interest in the shares represented by the certificate is
free of any claims of CTI because Sack was a bona fide purchaser for value.
CTI and Sack have agreed to finally resolve their dispute pursuant to the
terms of this Agreement.
In consideration for the mutual covenants herein contained, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
12. PURPOSE OF ESCROW.
(a) The purpose of this Agreement is to permit the transfer and
liquidation of certain shares of common stock of CTI evidenced by certificate
no. 8313 (the "Certificate"). The Certificate represents 500,000 shares of
common stock of CTI. Sack represents that the Certificate was pledged to
Sack by Richard Thompson ("Thompson") as collateral for two separate loans
evidenced by the following documents: (a) the Promissory Note, Pledge, and
Option Agreement dated May 2, 1995 ($100,000); (b) the Agreement dated
February 5, 1996 ($73,000); and (c) the Letter Amendment dated May 14, 1996.
Sack further acknowledges and represents that he has advanced the full loan
amounts referenced, no payments towards reducing principal, interest or
penalties have been made by or on behalf of Thompson, and that the loans are
presently in default. While the parties recognize that CTI disputes the
terms and conditions surrounding the initial delivery of the Certificate to
Thompson, including the validity of the issuance, failure of consideration,
and Thompson's actions as they relate to the holding and subsequent pledge of
the Certificate to Sack, CTI has deemed it in its best interests to permit
the transfer of shares as provided for herein. The parties further represent
and acknowledge that by permitting the transfers contemplated herein, CTI in
no way sanctions or recognizes the validity of the alleged security agreement
between Sack and Thompson nor waives any rights with respect to the damages
caused to CTI by Thompson.
(b) Provided, however, that CTI represents and warrants to Sack, and
each purchaser for value of the Escrowed Shares, as provided herein and as
an intended third party beneficiary hereof, that the Escrowed Shares when
issued to such purchaser for value in accordance with the terms of this
Agreement, will be validly issued, fully paid and nonassessable, will not
have been issued in violation of, and will not be subject to any Restriction
or defect of title or otherwise, and CTI has not knowingly taken any action
which would result in the imposition of any such Restriction or claim of
defect of title or otherwise, except for any Restriction under applicable
securities laws of the United States or any state thereof. The parties
acknowledge that the representations set forth in this Section 1(b) shall
apply only to Escrowed Shares sold by the Escrow Agent under this Agreement.
13. DEFINITIONS.
"Account" shall mean the separate interest-bearing account established
by the Escrow Agent to serve as a repository for all proceeds derived from
the sale of Escrowed Shares and to effect transfers pursuant to this
Agreement.
"Certificate" shall have the meaning set forth in Section 1(a).
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"Indebtedness" shall mean the amount of all outstanding principal,
accrued interest, penalties, recoverable expenses, costs and fees relating to
the Loans and all other agreements relating to the debt secured by the
Certificate. The parties agree and acknowledge that Schedule A, attached
hereto and incorporated herein by this reference, sets forth a complete and
accurate accounting of all amounts validly constituting Indebtedness as of
and through November 17, 1997 ("Initial Amount") and, unless otherwise
provided, shall constitute the Indebtedness for purposes of this Agreement.
Provided, that the parties further agree and acknowledge that interest and
costs shall continue to accrue on the outstanding principal portion of the
Indebtedness, as adjusted, until such principal is finally repaid, and that a
final accounting of all additional Indebtedness ("Final Amount"), including
accrued interest and recoverable costs since the date the Initial Amount was
established, shall be provided by Sack to the Escrow Agent not later than
five (5) days before the final liquidation of the Escrowed Shares necessary
to satisfy the Initial Amount. Upon confirmation of the accuracy such
accounting by CTI, which shall not be unreasonably withheld, the Final Amount
shall be added to the Initial Amount to constitute the Indebtedness which
shall be deemed fixed and final.
"Escrowed Shares" shall refer to the shares of common stock of CTI
represented by or derived from the Certificate, including all subsequent
certificates evidencing the remaining share balance.
"Losses" shall mean any and all demands, claims, actions or causes of
action, assessments, losses, diminution in value, damages, liabilities, costs
and expenses, including without limitation, interest, penalties, cost of
investigation and defense, and reasonable attorneys' and other professional
fees and expenses.
"Loans" shall collectively refer to (a) the Promissory Note, Pledge,
and Option Agreement dated May 2, 1995 ($100,000), (b) the Agreement dated
February 5, 1996 ($73,000), and (c) the Letter Amendment dated May 14, 1996.
"Restriction" shall mean any claim, action, proceeding, power of
attorney, agreement, contract, arrangement or understanding which (a)
restricts or may restrict the transfer of, or the exercise of any rights of
the enjoyment of any benefits arising by reason of ownership of such shares
or (b) creates or may create any lien, charge, liability, claim or challenge
to title, encumbrance, adverse interest, constructive trust or other trust.
14. APPOINTMENT, ACCEPTANCE AND COMPENSATION.
(a) APPOINTMENT AND ACCEPTANCE. CTI and Sack hereby appoint and
authorize the Escrow Agent to perform the duties assigned to the Escrow Agent
in accordance with the terms set forth in this Agreement. Escrow Agent
hereby accepts such appointment and agrees to accept, hold and liquidate the
Escrowed Shares, distribute the proceeds from all liquidations, and deliver
the Escrowed Shares upon closing of the escrow in accordance with the terms
set forth in this Agreement.
(b) COMPENSATION. The Escrow Agent shall be compensated for its
services and shall pay all reasonable expenses incurred under this
Agreement, including brokerage fees, out of the proceeds derived from each
sales transaction. The Escrow Agent is authorized to charge and withhold, as
full compensation hereunder, a fee of $0.02 per liquidated Escrowed Share and
pay reasonable brokerage fees out of the gross proceeds generated on each
sale of Escrowed Shares conducted in accordance with Section 5. The net
proceeds shall be deposited pursuant to Section 5(c). CTI agrees to pay a
$500.00 fee to the Escrow Agent in the event fees generated pursuant to this
Section 3(b) do not exceed $500.00.
15. TRANSFER OF CERTIFICATE. CTI hereby agrees to revoke, to the
extent necessary to achieve the purpose of the Agreement, the cancellation of
the Certificate and waives present objection to the transfer of the
Certificate to the Escrow Agent pursuant to the terms set forth herein free
of any restrictive legend. Sack shall submit (a) the Certificate, (b) a
properly executed irrevocable stock power, (c) written instructions directing
Merit Transfer Company, transfer agent for CTI (the "Transfer Agent"), to
effect the transfer of the Escrowed Shares to the Escrow Agent free of any
restrictive legend, and (d) a written legal opinion from Sack's counsel
advising the Transfer Agent that the requested transaction, including removal
of the restrictive legend, is permissible in light of relevant state and
federal securities laws. Within three (3) business days of receipt of notice
from the Transfer Agent that the necessary documentation has been delivered,
CTI shall irrevocably authorize the Transfer Agent to effect the transfer of
Escrowed Shares as provided in the instructions attached hereto as EXHIBIT
"A" (the "Instructions"). The Transfer Agent shall
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<PAGE>
then deliver the Escrowed Shares, reflecting a new registered holder as
provided herein, to the Escrow Agent to be held in escrow, as provided for
herein.
16. LIQUIDATION OF ESCROWED SHARES.
(a) The Escrow Agent shall accept delivery of the Escrowed Shares,
free of any restrictive legend, and place them in a separate account for
safe-keeping. The Escrow Agent is authorized to establish an account with
Bank of New York and register the Escrowed Shares in the street name of Bank
of New York for the benefit of the Escrow Agent. Escrow Agent shall execute
trades with one or more broker-dealers (the "Broker(s)") in order to
liquidate that portion of the Escrowed Shares necessary to generate
sufficient proceeds to satisfy the Indebtedness in full. The Escrow Agent
shall conduct all sales transactions directly from its account with the Bank
of New York, and shall not establish any depository accounts with the
Broker(s).
(b) In order to permit the liquidation of the Escrowed Shares to
proceed in a commercially reasonable manner and to avoid any adverse effects
on the market value of the Escrowed Shares, CTI and Sack agree that the
Escrow Agent shall sell one hundred thousand (100,000) Escrowed Shares in any
one calendar month ("Monthly Sales Amount") until the Indebtedness is
satisfied in full. In the event that market conditions change and it
reasonably appears that an accelerated liquidation schedule may be advisable,
CTI and Sack agree to make a good faith effort to renegotiate the Monthly
Sales Amount. Decisions regarding the timing of the sale of Escrowed Shares
during the month shall be left to the discretion of Sack who shall in turn
instruct the Escrow Agent to effect the sale, provided, that the Escrow Agent
shall not be authorized to sell Escrowed Shares in an amount greater than ten
percent (10%) of the previous day's total trading volume in CTI common stock
during any one day, unless necessary to comply with the Monthly Sales Amount
after attempting to sell at the maximum daily level on at least ten (10) days
during the respective month. However, in the event the closing price per
share of CTI common stock, as reported by the Escrow Agent, is less than
$0.43 per share for three (3) consecutive trading days, then the Escrow Agent
may sell Escrowed Shares as necessary to liquidate the remaining
Indebtedness, not withstanding any limitation set forth in this Section 5 to
the contrary.
(c) Escrow Agent shall deposit all net proceeds from the sale of
Escrowed Shares directly into the Account. Escrow Agent shall transfer all
proceeds derived from the periodic sale of the Escrowed Shares from the
Account to Sack within three (3) business days after the date on which all
monthly Account costs are paid by the Escrow Agent. The proceeds will be
applied by Sack directly to the Indebtedness, according to the priority
provided in NEB. U.C.C. Section 9-504(1) (Reissue 1992). Notwithstanding any
other reporting obligations contained in this Agreement, within three (3)
business days of full payment of the Indebtedness, Sack shall provide the
Escrow Agent with written notice that the Indebtedness has been satisfied.
(d) The parties acknowledge and agree that in the event the
liquidation of Escrowed Shares, pursuant to this Section 5, does not begin on
the first day of the calendar month, then the authorized Monthly Sales Amount
will be reduced on a pro rata basis to compensate for the shortened calendar
period.
17. REPORTING. Not later than five (5) business days following
month-end, the Escrow Agent shall provide Sack and CTI with a written
statement disclosing all sales transactions of Escrowed Shares during such
month, including the amount of shares sold, the date of sale and the
aggregate proceeds thereof; and all transfers to Sack of proceeds of such
sales transactions. The Escrow Agent shall make the final sales transaction
in as small a block of shares as reasonably practicable to satisfy the
remaining Indebtedness, but in no instance shall liquidate Escrowed Shares in
excess of $1,000 of the Indebtedness, unless otherwise agreed to in writing
by the parties..
18. INDEMNITY AGAINST LOSS IN VALUE. In the event that the liquidation
of the Escrowed Shares does not generate sufficient proceeds to satisfy the
Indebtedness, Sack agrees to transfer and assign to CTI, and CTI agrees to
purchase, Sack's chose in action to proceed against Thompson on collecting
the deficiency on the Loans. CTI agrees to a purchase price equaling the
remaining Indebtedness due to Sack. CTI further agrees to indemnify, defend
and hold harmless Sack from and against, for and in respect of any and all
Losses asserted against, or paid, suffered or incurred by Sack resulting
from, based upon, or arising out of a claim that the disposition of the
Escrowed Shares, the application of the proceeds to costs associated with
such disposition or the method, manner, time, or the terms thereof, was not
commercially reasonable (this provision shall not cover any such damages
accruing prior to August 7, 1997,
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including Sack's failure to liquidate the Certificate prior to that date);
and a claim or challenge to Sack's right and ability to deliver valid title
to purchasers of the Escrowed Shares free of Restriction or defect of title.
In the event any third party makes a claim or initiates a legal proceeding
against Sack regarding a matter which is covered by this provision, Sack
shall provide immediate written notice of the claim to CTI. Sack hereby
authorizes CTI to make all decisions in connection with such action and
assigns to CTI all rights and obligations with respect to any and all
counter-claims. Sack agrees to provide all reasonable assistance in the
defense of covered claims, including production of requested documents and
testimony.
8. CONFIDENTIALITY. CTI, Sack and the Escrow Agent hereby agree not
to disclose any information arising out of or relating to this Agreement
("Information") without the written consent of CTI and Sack, unless, and to
the extent, required by applicable law. Without limiting the generality of
the foregoing, CTI expressly acknowledges Sack's disclosure obligations to
Thompson under the Nebraska Uniform Commercial Code and consents to such
disclosure. Specifically, the Escrow Agent shall only be authorized to
disclose Information necessary to effect individual sale transactions of
Escrowed Shares, as provided for in Section 5, but shall not disclose any
Information relating to the liquidation schedule provided for in Section 5,
the aggregate number or overall planned liquidation of Escrowed Shares, or
the purpose behind the liquidation of Escrowed Shares, to any person,
including the Broker. The parties acknowledge that any unauthorized
disclosure of such Information may cause a decline in the market value of the
common stock of CTI and the Escrowed Shares.
9. DURATION OF ESCROW. Subject to the provisions of Section 10, this
Agreement shall terminate upon the occurrence of the earlier of: (a) the
satisfaction of the Indebtedness; or (b) joint instructions from CTI and Sack
consenting to the termination of this Agreement. Section 7 and Section 8
shall survive the termination of this Agreement.
10. PROCEDURE FOR CLOSING THE ACCOUNT AND DISTRIBUTING ESCROWED SHARES.
Upon termination of this Agreement as provided for in Section 9, the Escrow
Agent shall promptly close the escrow. All expenses associated with the
maintenance of the escrow or the Account shall be paid as provided for in
Section 3(b) but in the event unpaid expenses remain, such expenses shall be
paid out of the remaining funds in the Account or, if no funds remain, by
CTI. Within two (2) days of the final payment of all Indebtedness and fees
and expenses associated with the maintenance of the escrow and/or the
Account, all remaining funds in the Account shall be disbursed according to
instructions from Sack and all remaining Escrowed Shares shall be delivered
by the Escrow Agent to the Transfer Agent along with the instructions
attached hereto as EXHIBIT "B".
11. MUTUAL RELEASES.
(a) CTI RELEASE. CTI hereby completely and forever releases,
discharges, and acquits Sack and each of his respective officers, directors,
stockholders, attorneys, agents, affiliates, employees, and insurers of and
from any and all manner of accounts, causes of action, suits, debts, sums of
money, recounts, reckonings, covenants, contracts, controversies, oral or
written agreements, promises, torts, damages, judgments, claims or demands
whatsoever, in law or in equity, whether known or unknown or by virtue of any
statute or regulation, or upon any legal theory whatsoever which CTI has now
or at any time hereafter may have by reason of any matter, cause, thing,
occurrence, omission, or of any other factor, situation or event arising out
of or relating to the making of the Loans, the acceptance of a pledge of the
Escrowed Shares as collateral therefor, and the attempted transfer or
transfer of the Certificate.
(b) SACK RELEASE. Except as provided in Section 7, Sack hereby
completely and forever releases, discharges, and acquits CTI and each of its
respective officers, directors, stockholders, attorneys, agents, affiliates,
employees, and insurers of and from any and all manner of accounts, causes of
action, suits, debts, sums of money, recounts, reckonings, covenants,
contracts, controversies, oral or written agreements, promises, torts,
damages, judgments, claims or demands whatsoever, in law or in equity,
whether known or unknown or by virtue of any statute or regulation, or upon
any legal theory whatsoever which Sack has now or at any time hereafter may
have by reason of any matter, cause, thing, occurrence, omission, or of any
other factor, situation or event arising out of or relating to the attempted
transfer or transfer of the Certificate.
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12. SUCCESSOR ESCROW AGENTS. Escrow Agent, or any successor escrow
agent, may resign at any time by giving notice in writing to CTI and Sack and
shall be discharged from its duties under this Agreement on the first to
occur of (a) the appointment of a successor escrow agent, or (b) the
expiration of thirty (30) calendar days after such notice is given. In the
event of any resignation, the successor escrow agent shall be appointed
jointly by CTI and Sack. Any successor escrow agent shall deliver to CTI and
Sack a written instrument accepting appointment under this Agreement, and
thereupon it shall succeed to all of the rights and duties of the Escrow
Agent hereunder. In such event, the former Escrow Agent shall be delivered a
written release executed by a CTI and Sack releasing such Escrow Agent from
its obligations hereunder.
13. RIGHTS, PRIVILEGES, IMMUNITIES AND LIABILITIES OF THE ESCROW AGENT.
The following shall govern the rights, privileges, immunities and liabilities
of the Escrow Agent:
(a) INDEMNIFICATION. In the event Escrow Agent becomes involved
in any suit, litigation or other investigative or legal proceeding in
connection with this Agreement, the Escrowed Shares, the Account or any
matter related hereto or thereto, CTI agrees to indemnify and save the Escrow
Agent harmless from all loss, cost, damage, expense, liability and attorneys'
fees suffered or incurred by Escrow Agent as a result thereof, except any
such loss, cost, damage, expense, liability, or attorneys' fees that arise
directly or indirectly as a result of the Escrow Agent's gross negligence or
willful misconduct.
(b) ACTING ON NOTICES. Escrow Agent shall be protected in acting
on any written notice, request, waiver, consent, certificate, receipt,
authorization, power of attorney, or other paper or document that Escrow
Agent in good faith believes to be genuine.
(c) STANDARD OF CARE. Escrow Agent shall not be liable for
anything that it may do or refrain from doing in connection herewith,
provided it acts in good faith and does not engage in gross negligence or
willful misconduct.
(d) CONSULTATION WITH COUNSEL. The Escrow Agent may consult with
legal counsel in the event of any dispute or question as to the construction
of any of the provisions of this Agreement or its duties hereunder, and it
shall incur no liability and shall be fully protected in acting in accordance
with the opinion and instructions of such counsel.
(e) DISAGREEMENTS. In the event of any disagreement between CTI
or Sack resulting in adverse claims or demands being made in connection with
the Escrowed Shares or the Account, or in the event Escrow Agent, in good
faith, shall be in doubt as to what action it should take hereunder, Escrow
Agent may, at its option, refuse to comply with any claims or demands on it,
or refuse to take any other action hereunder, so long as such disagreement
continues or such doubt exists, and in such event, Escrow Agent shall not be
or become liable in any way or to any person for its failure or refusal to
act; provided, however, that Escrow Agent shall in such event, immediately
deliver any and all Escrowed Shares then in its possession to Sack to be held
by Sack pending resolution of such dispute. Escrow Agent shall be entitled
to continue to refrain from acting until (a) the rights of all interested
parties shall have been fully and finally adjudicated as provided for herein
or (b) all differences shall have been adjusted and all doubt resolved by
agreement between all interested parties, and Escrow Agent shall have been
notified thereof by a written document signed by CTI and Sack.
(f) DISCHARGE OF OBLIGATIONS. The Escrow Agent, having closed the
Account and distributed the Escrowed Shares in accordance with Section 10 of
this Agreement, shall be discharged from any further obligation hereunder.
14. MISCELLANEOUS.
(a) NOTICE. Any notice required or permitted hereunder shall be
in writing and shall be sufficiently given if personally delivered,
transmitted via confirmed telecopy or mailed by certified or registered mail,
return receipt requested, addressed as follows:
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If to CTI Computerized Thermal Imaging, Inc.
1255 North Ivy Place
Kaysville, Utah 84037
Attn: David Packer
(801) 546-4613 Telecopier
with copy to:
Looper, Reed, Mark & McGraw
Nine Greenway Plaza, Suite 1717
Houston, Texas 77046
Attn: Donald R. Looper
(713) 625-9191 Telecopier
If to Escrow Agent: First Nebraska Trust Company
P.O. Box 81667
Lincoln, Nebraska 68501
(402) 477-2292 Telecopier
If to Sack: Roger D. Sack
2745 Eastgate
Lincoln, Nebraska 68502
(402) 420-1086 Telecopier
with copy to:
Sylvestor J. Orsi
Crosby, Guenzel, Davis, Kessner & Kuester
134 South 13th Street, Suite 400
Lincoln, Nebraska 68508
(402) 434-7303 Telecopier
(or to such other address as may be stated in written notice furnished by any
party to the other party), and shall be deemed to have been delivered as of
the date so personally delivered, faxed or mailed.
(b) EFFECT OF AGREEMENT. This Agreement shall be binding on,
inure to the benefit of and be enforceable by and against CTI, Sack and
Escrow Agent and their respective successors.
(c) FURTHER ASSURANCES. Each party to this Agreement agrees to
perform any further acts and execute and deliver any documents that any party
hereto may deem reasonably necessary to carry out the provisions of this
Agreement.
(d) SEVERABILITY. Each provision of this Agreement shall be
viewed as separate and divisible, and in the event that any provision shall
be held to be invalid, the remaining provisions shall continue to be in full
force and effect.
(e) ENTIRE AGREEMENT. This Agreement and the agreements referred
to herein constitute the entire agreement and understanding among the parties
hereto relating to the subject matter hereof and supersede all prior [nb]
understandings, written or oral, with respect to the subject matter hereof.
(f) AMENDMENTS. This Agreement may be amended only by an
instrument in writing executed by the parties hereto.
(g) CAPTIONS. The paragraph headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement.
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(h) SPECIFIC PERFORMANCE. Each party hereto acknowledges that a
remedy at law for any breach or attempted breach of this Agreement will be
inadequate, agrees that each other party hereto shall be entitled to specific
performance and injunctive and other equitable relief in case of any such
breach or attempted breach, and further agrees to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any
such injunctive or any other equitable relief.
(i) REMEDIES CUMULATIVE. The rights and remedies granted herein
are cumulative and not exclusive of any other right or remedy granted herein
or provided by law.
(j) CHOICE OF LAWS; JURISDICTION; VENUE. This Agreement is being
delivered in the State of Nebraska and shall be construed in accordance with
and governed by the laws of such state, without regard to conflicts of laws
principles thereof. All obligations of the parties as created by this
Agreement are performable in Lincoln, Nebraska; venue and jurisdiction for
all proceedings originating by and between the parties and relating to this
Agreement shall be with the Federal District Courts in Lincoln, Nebraska.
The parties acknowledge that the foregoing statements shall in no way be
deemed a general consent to jurisdiction by CTI.
(k) COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(l) ASSIGNMENT. This Agreement shall inure to the benefit of and
be binding upon the parties, their respective successors, and permitted
assigns. This Agreement may not be assigned by either party without the prior
written consent of the other parties.
(m) NO THIRD PARTY BENEFICIARIES. Except as expressly set forth
in this Agreement, no person or entity not a party to this Agreement shall
have rights under this Agreement as a third party beneficiary or otherwise.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK;
SIGNATURES APPEAR ON THE FOLLOWING PAGE]
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IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto effective as of the date first above written.
CTI:
COMPUTERIZED THERMAL IMAGING, INC.
By: /s/ David B. Johnston
---------------------------------------------
David B. Johnston, Chief Executive Officer
SACK:
By: /s/ Roger D. Sack
---------------------------------------------
Roger D. Sack
ESCROW AGENT:
FIRST NEBRASKA TRUST COMPANY
By: /s/ C. John Guenzel
------------------------------------------
Name: C. John Guenzel
-------------------------------------------
Title: President
------------------------------------------
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EXHIBIT 10(o)
GOLDEN HEALTH CARD
CONTRACT
This agreement ("Card Contract") is entered between TriSun Medical
Corporation--China, a corporation formed ("TSM") by the China National Institute
of Hospital Administration for the purpose of promoting advanced technology in
health care, and TriSun/CTI Asia, Ltd, a Cyprus corporation ("TriSun") formed as
a strategic alliance partner for initiating telemedicine capabilities in the PRC
for the health care industry.
WHEREAS, the shareholders of TriSun accepted on October 6, 1994, the joint
responsibility for implementing the major health care plan adopted by the
Ministry of Public Health through the National Institute of Hospital
Administration ("NIHA") to employ for the hospitals of China a telemedicine
capacity to intergrade the hospital management computer systems, and to install
thermal imaging technology in the hospitals for advanced health care in China
(the "Golden Health Plan");
WHEREAS, the Ministry of Public Health through the NIHA adopted the
business plan for TriSun on October 22, 1994, and granted to TriSun the
exclusive right to place thermal imaging and telemedicine technologies in the
hospitals in China; and
WHEREAS, this Card Contract is entered for the purpose of accomplishing the
agreed responsibility of TriSun to formulate and execute a comprehensive plan
for the exclusive placement of laser cards designed to facilitate health care
("Health Cards") in China.
W I T N E S S E T H:
NOW, THEREFORE, in exchange for the premises set forth herein, and in
contemplation of the assistance of third-parties necessary to accomplish the
Golden Health Plan, the parties agree as follows:
1. PURPOSE. TriSun agrees to operate a "National Health Card" service to
promote and improve the delivery of Health Care to citizens of the Peoples
Republic of China. Use of the Health Cards will substantially improve the
efficiency of delivering health care services. Therefore, TriSun and TSM will
encourage patients to use Health Cards by offering substantial benefits through
the hospitals and clinics when obtaining medical services. The TriSun Health
Card service will offer benefits to the hospitals and medical clinics for
cooperating in the use and distribution of Health Cards among patients so that
the benefits of using the Health Cards can commence immediately. The Health
Card is the first stage to accomplish the goals of the Golden Health Plan.
2. THE HEALTH CARD. The Health Cards will be used for admitting and
discharging patients and for recording and recalling medical records. The
Health Cards will eliminate the need for recording and storing paper files for
medical and insurance records of the patient. Nationwide, Health Cards will
result in substantial reduction in health care costs through the elimination of
storage requirements for medical records. The cost savings from utilization of
Health Cards will pay over time for the cost in implementing the telemedicine
system being implemented by TSM pursuant to the Golden Health Telemedicine
Contract. TSM grants TriSun the exclusive right to supply laser cards for use
in all hospitals and clinics supervised by the NIHA to ensure compatibility and
to protect the privacy of medical records. TriSun shall select an effective
Health Card for the PRC to meet the goals set by TSM. The Health Card must be
durable and capable of containing laser information which will impede tampering
with medical records of the patient. TriSun shall adopt a design approved by
TSM which has picture identification. TriSun shall deliver ordered cards to the
persons when they complete their membership applications and pay the membership
fee.
3. THE TRISUN DATABASE. TriSun will invest in the development of a
computer database which will be developed over time to offer numerous benefits
to its members to assist with the delivery of health care. Among the functions
of the database will be the following:
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1) Each member will receive a laser coded Health Card which will store
the member's medical records and interface with the data base.
2) The database is currently updated with each member's medical treatment
with each use of the Health Card.
3) The medical history of each member is recorded on the Health Card and
on a centralized computer archive to avoid loss of medical records and
to enable prompt access by an individual to his own medical records.
4) Over time, the database will be developed to enable Health Card
members to access information about the availability of specific
medical treatments and the locations of doctors and clinics with a
particular medical expertise.
(5) The database will be developed to advise member's of special
treatments or discounts available.
(6) The database will collect digitized thermal images from examinations
and cross reference actual disorders. This database will continually
improve a diagnostic analysis of thermal imaging to assist a member's
attending doctor to diagnose the ailment.
4. TRISUN BUSINESS PLAN. TriSun will invest in the development of the
computer database and in the nationwide system for providing Health Card
benefits to its members. TSM agrees to obtain the cooperation of the hospitals
and clinics supervised by the NIHA to enable the Health Card business plan of
TriSun to succeed to facilitate the delivery of health care in China. A
description of the initial business plan of TriSun is attached as Exhibit A.
5. MEMBERSHIP FOR HEALTH CARD USERS. TriSun will provide membership
application forms for the TriSun Health Card. To become a member in the TriSun
Health Card, each person will submit a completed application form along with
three year membership fee of RMB 125. (This fee will be adjusted for any
material fluctuations in currency.) TSM will distribute TriSun Health Card
membership applications among the hospitals and clinics supervised by the NIHA.
TSM will cause hospitals and clinics to immediately distribute the applications
to patients and to collect the completed applications and membership fees. TSM
will send the membership applications and fees to TriSun. TSM's goal is for
each hospital to collect 100,000 applications and for each small hospital (under
250 beds) and clinic to collect 10,000 applications. TriSun will deliver to
each member, through the participating hospital or clinic, a coded laser Health
Card with picture identification. This code and picture will prevent any other
person from accessing the member's medical records unless the member is present
using the Health Card.
6. LOSS OF HEALTH CARD. The centralized archives of the CTI System will
retain medical records of each member. If a Health Card is lost, no other
person may use the card. The Health Card can be replaced and restored. TriSun
has the exclusive right to provide replacement cards and will charge a minimal
fee for replacing the card and coding the laser chip with the medical records
stored on the CTI System.
7. DEVELOPMENT OF HEALTH CARD SYSTEM. Due to the start up time
requirements of installing the CTI System, TSM will elicit the hospitals and
clinics to immediately order a Reader/Writer from TriSun which can be used
before the CTI System is installed, and to submit an order for a CTI System,
which will be systematically supplied to all hospitals over the next 6 years.
The cost of the Reader/Writer at this time is $5,000 (U.S.), but prices will be
subject to adjustment as technology develops. The ordering hospital may pay
currently or add the cost to the letter of credit to purchase the CTI System.
8. PARTICIPATION BENEFIT TO HOSPITALS AND CLINICS. The hospitals will
benefit by extensive use of Health Cards by patients and by promoting the use of
the technology through the CTI System. Over time, use of the Health Cards will
substantially reduce the hospital space required for storage of physical paper
medical
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records. In addition, TriSun will pay each participating hospital and clinic
a fee to participate in the program. The fee structure will be as follows:
(a) PARTICIPATION FEE. The participation fee is equal to 10% of the
membership fees collected from applications through the
respective hospital or clinic. Therefore, each membership
application must identify the hospital or clinic. The
participation fee will be paid to the hospital each six months
after calculating the number of membership applications collected
from that hospital or clinic.
(b) PROMOTIONAL FEE. During a promotional period beginning June 1,
1995 through June 30, 1996, each participating hospital and
clinic will be entitled to a promotional fee, instead of the 10%
fee, in the following amounts:
(1) If the hospital collects over 10,000 membership application
fees, TriSun will pay a total participation fee of 20%.
(2) If the hospital collects over 100,000 membership application
fees, TriSun will pay a participation fee equal to 30%.
(c) SCANNING CHARGE. Each hospital may charge a service fee for
scanning existing medical records for coding the Health Card if
requested by a Health Card member.
(d) REDUCED STORAGE SPACE. Scanning existing files will enable the
hospital to discard those medical files and reduce hospital
storage space.
(e) ATTRACTS HEALTH CARD USERS. Health Card users will visit only
participating hospitals and clinics.
(f) HOSPITAL CHARGES FOR USER OF CTI SYSTEM. The CTI System will be
owned by the hospital which may charge for customary technology
examination services, subject only to a $5.00 (U.S.) license fee
must be paid to TriSun for each thermal imaging print made.
The Promotional Fee alone could allow a hospital or clinic to earn all or
substantially all of the cost of the CTI System installation. For instance,
collection of 100,000 membership fees would earn approximately $450,000 (U.S.)
for the participating hospital.
9. REQUIREMENTS OF PARTICIPATING HOSPITALS AND CLINICS. To become a
participating hospital or clinic, the medical facility must agree to the
following terms:
(a) Provide all of the benefits listed in paragraph G of the Business
Plan, including separate admission and discharge lines and
discounts for Health Card users.
(b) Agree with TSM to purchase a CTI System (or a CTI Remote System
for hospitals under 250 beds or clinics), and agree to a delivery
date.
(c) At the time specified by TSM, cause a bank acceptable to TriSun
to issue a letter of credit in favor of TriSun for the total
purchase price. The letter of credit amount for a CTI System is
$500,000 (U.S.) and the letter of credit amount for each CTI
Remote System is $80,000 (U.S.) unless additional technology is
ordered. The letter of credit will provide for payments to
TriSun of 30% of the purchase price upon delivery, 20% in 2
months after delivery, and the remaining 50% to be paid 6 months
after delivery. TSM will arrange for installation 5 months from
the date when the letter of credit is issued.
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(d) Purchase from TriSun a Reader/Writer compatible with the CTI
System for interfacing with the Health Cards. TriSun will also
deliver with each Reader/Writer a scanner which may be used by
the hospitals to scan existing medical records and patient images
for coding on Health Cards to enable the hospitals to discard
existing files. Large hospitals may wish to purchase an
additional Reader/Writer to handle patients.
(e) For installation of the CTI System, prepare a room which is at
least 16 feet by 20 feet in dimensions installed with water and
electricity and with access to outside air. The space must be
available on the date of delivery.
(f) For installation of the CTI Remote System in smaller hospitals
and clinics, prepare a work room for the CTI computer work
station, installed where physicians and technicians may readily
access the system.
(g) Train clerks to use the Reader/Writer
(h) Designate two technicians and doctors to be trained by TriSun
upon installation of the CTI System.
10. ARBITRATION. Any dispute between the parties or any hospital or the
Bank pertaining to Card Contract shall be resolved by binding arbitration in
accordance with the UNCITRAL Arbitration Rules administered by the International
Centers for Arbitration ("ICA"). ICA shall be the appointing and administrative
authority. The supplemental procedural rules of the ICA and the laws of Cyprus
shall apply. In the event of a dispute, any party may notify ICA, and each
party shall select an arbitrator to resolve the dispute. ICA shall appoint an
independent third arbitrator who shall be familiar with customs in China and who
shall be acceptable to both arbitrators.
11. MUTUAL COOPERATION. The purpose of this Card Contract is to
facilitate the delivery of health care to the citizens of China and to cause a
substantial reduction in the health care costs in China. TSM shall coordinate
among hospitals to modify hospital procedures and offer incentives, including
discounts, for citizens to use Health Cards to reduce the cost of providing
health care. TriSun will regularly improve its database and offer benefits to
members to improve delivery of health care services. TriSun shall cooperate
with TSM to respond to recommended changes and procedures as the Golden Health
Plan progresses. It is understood that the purpose of this Health Card Contract
is to facilitate the Golden Health Plan for the Ministry of Public Health.
Signed this 24th day of April, 1995.
-------
TRISUN MEDICAL CORPORATION--CHINA
By: /s/ Pei DongHong
-------------------------------------
Dr. Pei Donghong, President
Legal Representative
TRISUN/CTI ASIA, LTD.
By: /s/ Bin Zhou
-------------------------------------
Dr. Bin Zhou (Ben Chou), Chairman
By: /s/ David B. Johnston
-------------------------------------
David B. Johnston, President
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EXHIBIT A
TRISUN CTI/ASIA, LTD.
BUSINESS PLAN
The National Institute of Hospital Administration ("NIHA") has conceived
the enormous task of implementing the Golden Health Plan. The goal of the
Golden Health Plan is to enable all citizens needing medical care in any
hospital, out-patient clinic, village clinic, or other medical facility to
receive efficient delivery of health care with the benefits of advanced medical
technology. The Golden Health Plan calls for those medical facilities to
install computer systems capable of utilizing telemedicine benefits.
Telemedicine offers access to other medical experts and medical research for
diagnosis and treatment. The goals of the Golden Health Plan will be achieved
through the work of TriSun Medical Corporation ("TSM") in cooperation with the
hospitals and clinics supervised by the NIHA. The first stage for achieving the
goals of the Golden Health Plan is the broad distribution and use throughout
China of the Health Card. The Health Card is the key to interconnecting all of
the health care delivery services to be offered through computerized systems.
Without the Health Cards, the existing method of recording medical records on
paper prevents full utilization of the computer system.
TriSun/CTI Asia, Ltd. ("TriSun") will initiate in June 1995 a National
Health Card service to facilitate the delivery of health care to citizens of the
Peoples Republic of China. TriSun is acting in full cooperation with TriSun
Medical Corporation and the hospitals, clinics, and other medical facilities
supervised by the NIHA. Persons who join to become members and use the TriSun
Health Card will receive substantial benefits. Use of the Health Cards will
reduce costs of receiving medical treatment and will access the benefits of
advanced technology in medical care through telemedicine. Each member will be
delivered a Health Card coded with the member's individual medical records on
laser chips which can contain up to 2,000 pages of medical records and medical
images. Health Cards assure members that vital information concerning
medication and allergic reactions is available for instant access by an
attending doctor in any participating hospital or clinic throughout China.
A. CTI SYSTEM NETWORK. The Health Cards will provide direct access to the
TriSun database. The TriSun computer database will be linked to each
participating hospital and clinic through computer systems ("CTI System")
developed by TriSun and installed in each participating medical facility. Each
CTI system delivers telemedicine capability to the hospital and will be linked
to a thermal imaging unit. With the cooperation of the hospital and clinic
administrators, TSM will systematically arrange for TriSun to install the CTI
System in each of China's 6,000 hospitals and to install the CTI Remote System
in 200,000 clinics over the next 6 years.
B. EDUCATIONAL MATERIALS TO HOSPITALS AND CLINICS. TriSun will provide an
information and education brochure on the CTI System. TSM will distribute CTI
System brochures among hospital administrators June through September 1995.
C. TELEMEDICINE BENEFIT. Each CTI System provides the participating
hospital with telemedicine capability. The attending physician can provide
better medical treatment through improved diagnosis capability. The
telemedicine system allows the doctor to seek immediate assistance from
experts at other medical facilities. The CTI System also offers a
continually updated diagnostic capability for thermal imaging to allow the
computer to compare the results of a thermal image to thousands of other
images to offer diagnostic possibilities. This is a diagnostic tool not used
in any country in the world. Furthermore, the CTI system can link to other
modes of imaging, such as medical resonance imaging or x-ray, to cross
examine and compare images to improve the diagnosis of difficult problems.
D. CTI SYSTEM ORDERS. Each hospital and clinic may elect to
participate with TriSun by ordering a CTI System (required for hospitals with
over 250 beds) or a CTI Remote System. The CTI Remote System includes
computer telemedicine capability without a thermal imaging unit. The "Order
Form for CTI Systems," attached as Exhibit B, should be delivered to TSM or
TriSun. Hospitals and clinics will be placed on a priority for installation
determined by TSM (1) in the order in which the hospital or clinic
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advises TSM that it accepts installation of the CTI System and (2) dependent
upon access to telecommunications connections. Hospitals with
telecommunications access compatible for transmission of digitized computer
information will be given priority. As part of the Golden Health Plan, TSM
and TriSun also are developing plans to network every medical facility on a
telecommunications superhighway. The CTI System offers thermal imaging and
computer assisted diagnosis assistance even before telecommunications
connections.
E. USE OF HEALTH CARD. The Health Card offers direct access for the
member into the CTI System and will offer the attending doctor direct access
to the member's private medical records. The Health Card enables a doctor at
any participating hospital in China to have immediate knowledge of his
medical history as if the doctor were the member's own private physician.
This information makes available instantly records of vital information, such
as allergic reactions and effects of medications. The Health Card will
contain the individual's vital medical records even in the event of emergency
medical treatment in a participating village clinic or hospital which may not
have immediate access to the central database.
F. HOSPITAL KEY. Each participating hospital and clinic will have a
TriSun Reader/Writer to read a member's Health Card and record current
medical information. The Health Card is the member's key to the computer
system. The Reader/Writer enables the participating hospital to admit
patients through the Health Card, access prior medical records, update
medical records of the patient, and discharge patients with no paper work
file requirements. Hospitals, outpatient clinics, small hospitals, and
village clinics throughout China may order Reader/Writer equipment at any
time by completing the Order. The Reader/Writer is capable of downloading and
recording patient medical information for retention in central computer
health records if the location is not yet networked by telecommunications.
Current medical treatments will be read and recorded to the TriSun database
in batches until the CTI System is installed at the participating hospital to
enable on-line access to the database.
G. HOSPITAL CONCESSIONS TO HEALTH CARD USERS. Health Cards will improve
the delivery of health care to patients through (a) access to latest medical
technology and expertise at any participating hospital location and (b) the
reduction of time consuming paper processing during admission, treatment, and
discharge from hospitals and medical facilities. Use of the Health Cards will
enable the hospitals to reduce the costs of storing medical records. Therefore,
hospitals and clinics supervised by the NIHA that choose to participate in the
TriSun Health Card system will offer incentives to Health Card users, including
but not limited to the following:
(1) Uniform discounts on charges for medical services, coordinated with
TSM.
(2) Special discounts for use of computerized thermal imaging treatment.
(3) Easier and quicker admission to medical facilities by using separate
admission lines for Health Card users. Separate admission treatment
is justified, because the Health Cards eliminate the need to complete
and maintain paper records.
(4) Easier and quicker discharge from hospitals and clinics by
establishing separate discharge lines for Health Card users. Paper
records of insurance and payment should be eliminated by using Health
Cards.
(5) Participating hospitals will offer free medical check ups after the
patient has been to the participating hospital or clinic for a minimum
number of visits.
(6) Future medical treatments will be recorded currently on the Health
Card upon each visit. Existing records and images may be scanned and
recorded on the Health Card and in the CTI System when it is installed
in the hospital if a member believes existing records contain
important information for knowledge of any attending physician.
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(7) Only a Health Card user has access to his private medical records for
use by the member and his attending physician. No medical records can
be erased or lost.
H. THERMAL IMAGING TECHNOLOGY IN THE CTI SYSTEM. Thermal imaging offers a
completely safe imaging examination, without risk from repeated procedures. The
thermal imaging unit developed by Computerized Thermal Imaging, Inc. offers
examination of soft tissue disorders that might not be detected by other imaging
systems or physical examinations. Computerized thermal imaging digitizes each
examination for computer analysis to continually build and improve diagnostic
capability. The telemedicine system enables participating hospitals and clinics
to access other medical experts at other hospital locations throughout China who
can examine the computerized thermal images and assist the local physician with
diagnosis and treating the ailment.
Business Plan approved jointly by
TriSun Medical Corporation and
TriSun CTI/Asia, Ltd.
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EXHIBIT B
TO
GOLDEN HEALTH CARD CONTRACT
ORDER FORM FOR CTI SYSTEM
NAME OF HOSPITAL OR CLINIC: ("Hospital")
-----------------------
ADDRESS:
-----------------------
-----------------------
The Hospital hereby notifies TriSun/CTI Asia, Ltd., TriSun Medical
Corporation, and the Bank that the Hospital orders, for delivery in five months,
the following:
________ CTI SYSTEM:
(Includes Thermal Imaging equipment, capacity for serving
other imaging procedures, programming for telemedicine
capabilities, networking software, and one work station)
_________ CTI REMOTE SYSTEM:
(Includes one work station)
_________ HEALTH CARD READER/WRITER:
ADDITIONAL ACCESSORIES AND CONNECTED SOFTWARE REQUESTED:
_________ Number of additional work stations.
_________ Scanner for Reading Medical Records on Health Cards
_________ X-Ray and Programming for Telemedicine Imaging
_________ CAT Scan and Programming for Telemedicine Connection
_________ Added Software Capability
Describe Desired Software: _____________________________
_________ Other Technology Describe: _____________________________
The undersigned Administrator of Hospital, or the representative of
TriSun Medical Corporation, hereby confirms that the Hospital guarantees
payment to the Bank. Payment shall be made 30% due 5 days after delivery to
port in China, 20% 60 days after Delivery, and the remaining 50% within 6
months after bill of lading date. Total payment shall be made in the full
amount, as set forth below, of the letter of credit issued for the benefit of
Hospital in favor of TriSun/CTI Asia, Ltd., for the purchase of the items in
this order. Payment by the Hospital to the Bank shall be in the manner
required by the Bank in the amount in U.S. Dollar currency specified in the
letter of credit. The letter of credit shall be paid to TriSun by the Bank
in U.S. Dollars.
HOSPITAL:
By:
---------------------------------
Name:
-------------------------------
Title: Dated:
------------------------------- ---------------------------
(This part to be completed by TriSun and copy sent to TSM:)
TOTAL PURCHASE UNDER THIS ORDER FORM: $
----------------
Send this Order Form by telefax to TriSun at 357/462-8668 in Cyprus with copy
to U.S. at 503/650-8551
<PAGE>
EXHIBIT 10(p)
GOLDEN HEALTH PLAN
HOSPITAL SYSTEMS INTEGRATION CONTRACT
This agreement ("HSI Contract") is entered between TriSun Medical
Corporation--China, a corporation formed ("TSM") by the China National
Institute of Hospital Administration for the purpose of obtaining advanced
technology in health care for the citizens of China, and TriSun/CTI Asia,
Ltd, a Cyprus corporation ("TriSun") formed as a strategic alliance partner
for initiating telemedicine capabilities in the PRC.
WHEREAS, the shareholders of TriSun accepted on October 6, 1994, the
joint responsibility for implementing the Golden Health Plan adopted by the
Ministry of Public Health through the National Institute of Hospital
Administration ("NIHA") to employ for the hospitals of China a telemedicine
network and to intergrade and standardize the hospital computer systems for
all hospitals to enhance the delivery of advanced health care in China;
WHEREAS, the Ministry of Public Health through NIHA adopted the business
plan for TriSun on October 22, 1994, and granted to TriSun the exclusive right
to place thermal imaging and telemedicine technologies in the hospitals in
China; and
WHEREAS, this HSI Contract will achieve the directive for TriSun to
upgrade China's medical services information system as the exclusive company
authorized by the NIHA to assimilate the proper technologies into China to
develop standard management information systems among the hospitals.
W I T N E S S E T H:
NOW, THEREFORE, in exchange for the premises set forth herein, and in
contemplation of the assistance of third-parties necessary to accomplish the
Golden Health Plan, the parties agree as follows:
1. PURPOSE. To achieve the goal of standardizing hospital computer
systems and redesigning the administration of hospital information systems,
TSM engages TriSun as its contractor for designing and computerizing hospital
information systems in China. For the benefit and at the direction of the
NIHA, TriSun will conduct examination of all hospital management functions.
TriSun will design and apply substitute computerized systems for managing
each hospital. Although some aspects of each hospital's operation may need
peculiar applications, TriSun will draw from various international
applications of software and hospital management practices to structure a
standardized approach for managing all hospitals.
2. MANAGEMENT FUNCTIONS. Specifically, TriSun will locate available
software information systems, or construct advanced applications, to
computerize each hospital's financial accounting, personnel records,
inventories, prescription inventories, billing systems, cost accounting,
patient treatment records, drug treatment safeguard procedures, and medical
treatment evaluation systems. TriSun will design and install hospital
management computers and software information systems on a
hospital-by-hospital basis.
3. DELIVERY SCHEDULE. TSM will coordinate with NIHA to determine the
order for application of new information systems. TSM authorizes each
hospital, among the 6,000 primary hospitals in PRC, and any clinic to engage
TriSun to design and install a new information system for the particular
hospital.
4. DEVELOPMENTAL STAGE. TSM understands that a conversion of the initial
hospital projects will require devotion of substantial time and effort by
TriSun. The goal for devising the new information system is not only to
computerize and convert the managerial system for the first hospitals. The goal
is to establish a managerial standard and system for all hospitals. It is
anticipated that the telecommunications superhighway will be completed over time
for the benefit of all hospitals. Then managerial review information may be
shared among the hospitals for comparison of cost information and analysis of
deviations to continually improve the delivery of health care by hospital
administrations. Therefore, the cost for the initial systems will be
substantially greater than the cost for converting hospital information systems
in subsequent hospitals. The interest of TriSun is to serve hospitals under the
NIHA to
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effectively accomplish the goal of the Golden Health Plan to deliver advanced
health care with the finest information systems with improved efficiency.
5. CONTRACTOR COMPENSATION. TriSun will engage the professionals,
purchase the rights to or design the applicable software, and acquire the
necessary computer hardware and systems necessary to intergrade the hospital
management computer systems efficiently. TriSun will cooperate with the
hospitals and TSM for assembly and installation of new information systems
utilizing cost savings measures. TriSun will be paid for each hospital
project a sum of TriSun's cost plus 25% for each of the first 10 hospitals
designated by TSM, or ordered by the hospitals, for review and application of
a new hospital management system. After new hospital information systems
have been installed in 10 hospitals, TriSun will be compensated cost plus 35%
for all subsequent hospital projects.
6. TRISUN'S COSTS. "Cost" for which TriSun will be compensated for
each project shall be all direct expenses incurred by TriSun for review,
analysis, professional services, wages of employees and contractors,
software, hardware, travel costs for professionals and TriSun employees to
and within China to perform this HSI Contract, and a reasonable allocation of
general and administrative costs for performing this HSI Contract. A cost
to TriSun which shall be an appropriate cost under this HSI Contract would be
any and all taxes, fees, or other governmental assessments which might be
imposed, except any income taxes imposed against TriSun, for performing this
HSI Contract. Cost for TriSun shall include any financing cost or standby
letter of credit fee borne by TriSun, including TriSun's interest cost
incurred to pay "Costs" of each project until TriSun receives its payment.
TriSun will maintain a cost accounting system on a hospital-by-hospital
project basis.
7. METHOD OF PAYMENT. Unless a separate agreement is reached between
TSM and the hospitals, the respective hospitals will be liable for payment
for each project. TriSun shall be paid its "cost plus percentage" fee in the
currency of the expense incurred. Much of the expenses will be incurred in
Yuan, and TriSun will be compensated in that currency for those expenses.
TriSun will be compensated its "cost plus percentage" for other expenses, in
U.S. Dollars, including advanced software or hardware systems, general and
administrative costs, and any other expenses paid by TriSun in a currency
other than Yuan. Each hospital may elect whether to pay TriSun through
monthly advances on a current basis or to otherwise finance payment for the
hospital information system.
8. LETTER OF CREDIT FINANCING. Unless the hospital contracts to pay
fixed monthly amounts to be agreed currently, some form of financing shall be
identified for payment of TriSun. TriSun will accept from the respective
hospital a Bank of Construction, Bank of Communications; or Bank of China
(acceptable "Bank") standby letter of credit on its behalf to finance payment
over one year. TSM authorizes Bank to rely upon the liability of each
respective hospital and to issue a standby letter of credit at the
commencement of each project in favor of TriSun. The standby letter of
credit will be issued in an agreed estimated project compensation amount.
The standby letter of credit would provide for payment to TriSun as follows:
(1) an amount of twenty-five percent (25%) of the total estimated
compensation to TriSun is due and payable on the first day of the first month
after the month of commencement of the project; (2) 50% of the unpaid balance
of the fee to TriSun would be due and payable on the first day of the first
month after TriSun submits to the Bank an affidavit verifying that the
project for that hospital is completed; and (3) the balance of the total fee
would be due and payable to TriSun one year from the date of the last
payment. The standby letter of credit fee would be a cost of the project for
purposes of this HSI Contract paid proportionately as each payment is drawn
under the standby letter of credit. Under the standby letter of credit, all
U.S. Dollar payments would be made to TriSun's Cyprus bank account, and all
Yuan payments would be made to TriSun's bank account at the Bank. Final
payment will be based upon proper expense vouchers submitted by TriSun. If
payments are due before the project is completed, subsequent payments will be
adjusted.
9. ARBITRATION. Any dispute between the parties or any hospital or the
Bank pertaining to this HSI Contract shall be resolved by binding arbitration in
accordance with the UNCITRAL Arbitration Rules administered by the International
Centers for Arbitration ("ICA"). ICA shall be the appointing and administrative
authority. The supplemental procedural rules of the ICA and the laws of Cyprus
shall apply. In the event of a dispute,
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<PAGE>
any party may notify ICA to initiate arbitration in either Cyprus or China,
and each party shall select an arbitrator to resolve the dispute. ICA shall
appoint an independent third arbitrator who shall be familiar with customs in
China and who shall be acceptable to both arbitrators.
Signed effective this 24th day of April, 1995.
TRISUN MEDICAL CORPORATION--CHINA
By: /s/ Pei DongHong
-----------------------------------
Dr. Pei Donghong, President
Legal Representative
TRISUN/CTI ASIA, LTD.
By: /s/ Bin Zhou
------------------------------------
Dr. Bin Zhou (Ben Chou), Chairman
By: /s/ David B. Johnston
-----------------------------------
David B. Johnston, President
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<PAGE>
EXHIBIT 10(q)
COMPUTERIZED THERMAL IMAGING, INC.
EMPLOYEE STOCK OPTION AGREEMENT
THIS EMPLOYEE STOCK OPTION AGREEMENT (this "Agreement") is entered
into this 29th day of October , 1997, and effective September 18, 1997
(the "Date of Grant") by and between COMPUTERIZED THERMAL IMAGING, INC., a
Nevada corporation (the "Company"), and DAVID B. JOHNSTON, an individual (the
"Employee").
I. NOTICE OF GRANT
You have been granted an option to purchase certain shares of common
stock of the Company, subject to the terms and conditions of both this
Agreement and the Company's 1997 Stock Option and Restricted Stock Plan as
may be amended from time to time (the "Plan") , as follows:
Date of Grant : September 18, 1997
Total Number of
Option Shares : 1,000,000 shares
Exercise Price : $0.75 per share
Total Exercise Price : $750,000.00
Type of Option : ___ Incentive Stock Option
X Nonstatutory Stock Option
---
Expiration Date : Five (5) years from the Date of
Grant
VESTING SCHEDULE: This Option may be exercised, in whole or in part, in
accordance with the following vesting schedule:
September 18, 1997 : 25% (275,000 shares)
Each year thereafter : 25% (275,000 shares)
Therefore, the Option will be completely vested as of three (3) years after
the Date of Grant.
II. STOCK OPTION AGREEMENT
WHEREAS, the Company and the Employee have entered into that certain
Employment Agreement simultaneously with the execution hereof (the
"EMPLOYMENT AGREEMENT");
WHEREAS, this Agreement is being entered into pursuant to the Employment
Agreement to create options to purchase shares of common stock, $.001 par
value, in the Company (the "SHARES");
WHEREAS, the terms and conditions of the Plan shall govern the Option
granted pursuant to this Agreement; and
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WHEREAS, the Administrator of the Plan of the Company considers it
advisable and in the best interests of the Company to grant said Option to
Employee upon the terms and conditions of this Agreement and the Plan;
NOW, THEREFORE, for and in consideration of the mutual covenants
contained herein and for other good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. GRANT OF OPTION. The Company hereby grants to Employee effective
as of the Date of Grant, as set forth above in the Notice of Grant, an option
(the "OPTION") to purchase all or any portion of the number of Shares set
forth in the Notice of Grant, at the exercise price set forth in the Notice
of Grant (the "EXERCISE PRICE"), subject to the terms and conditions of the
Plan, which is incorporated herein by reference. In the event of a conflict
between the terms and conditions of the Plan and the terms and conditions of
this Agreement, the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option
under Section 422 of the Internal Revenue Code ("CODE"); provided, however,
to the extent this Option exceeds the $100,000 rule of Code Section 422(d),
it shall be treated as a Nonstatutory Stock Option ("NSO").
2. EXERCISE OF OPTION.
(a) RIGHT TO EXERCISE. This Option is exercisable in whole or in
part in accordance with the Vesting Schedule on or before the Expiration
Date all as set forth in the Notice of Grant and the applicable provisions of
the Plan and this Agreement.
(b) TERMINATION WITHOUT CAUSE. In the event the Company
terminates the Employee's employment without "cause" (as defined in Section
4.2 of the Employment Agreement) then any portion of the Option which the
Employee has the right to exercise as of the date of such termination of
employment must be exercised on or before ninety (90) days after the
effective date of termination. The balance of the Option, if any, shall
revert automatically to the Company.
(c) TERMINATION DUE TO RESIGNATION. In the event the Employee
resigns his full time employment with the Company for any reason whatsoever
then any portion of the Option which the Employee has the right to exercise
as of the date of such resignation must be exercised on or before ninety (90)
days after the effective date of such resignation. The balance of the Option,
if any, shall revert automatically to the Company.
(d) TERMINATION DUE TO DEATH OR DISABILITY. In the event of the
death or permanent and total disability of the Employee (as defined in the
Plan) while employed by the Company, then any portion of the Option which is
exercisable as of the date of death or permanent and total disability may be
exercised as provided by the Plan.
(e) FINAL TERMINATION. Notwithstanding anything in this Agreement
to the contrary, the Option will terminate and revert to the Company
automatically without notice and be of no further force or effect:
(i) to the extent the Option is not yet exercised as of and
in the event the Company terminates the Employee's employment with "cause"
(as defined in Section 4.2 of the Employment Agreement); and
(ii) to the extent the Option is not yet exercised prior to
the Expiration Date set out in the Notice of Grant, or as otherwise governed
by the Plan.
3. METHOD OF EXERCISE. The Option may be exercised on one or more
occasions. The Option shall be exercised by Employee delivering to the
Company written notification on or before the dates described above that
Employee desires to exercise the Option and indicating which portion of the
Option is to be exercised. The Option may be exercised only for whole
Shares. The Company and Employee shall then set a mutually convenient time
for a Closing which shall be no more than ten (10) calendar days from receipt
of the notification. At such Closing, the Employee shall deliver to the
Company an amount in immediately available funds equal to the Exercise Price
per share
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as set forth in the Notice of Grant multiplied by that portion of the Option
actually exercised. Additionally, the Employee shall deliver to the Company
at such Closing an amount equal to any applicable employment taxes. Within
ten (10) days of such Closing, the Company shall issue instructions to its
Transfer Agent and Registrar to issue to Employee certificate(s) for said
Shares (collectively, the "OPTION SHARES"). Employee shall execute such
documents and instruments as requested by the Company to evidence the
issuance of the Option Shares. The Company may, in its sole discretion if
requested by the Employee, accept payment for the Option Shares by delivery
of other Shares having a fair market value on the date of delivery equal to
the total Exercise Price of the Shares so exercised and any applicable
employment taxes.
4. REGISTRATION RIGHTS. All Shares in the Company which the Employee
obtains from the exercise of Options will be subject to the following
"piggy-back" registration rights:
If the Company at any time proposes to file, or does file, any registration
statement under the Securities Act of 1933, as amended (the "Securities
Act") covering the class of Shares which Employee holds, whether that
registration is for securities to be issued by the Company or then held by
another party, Employee will have the right to have any part or all of the
Shares then held to be registered under such proposed registration
statement. If Employee wishes to exercise such right, Employee shall
notify the Company in writing of such desire within thirty (30) days after
the date Employee receives notice of the proposed registration from the
Company. Upon receipt of Employee's timely request for registration under
this Section 4, the Company will add the Shares Employee requested be
registered to the proposed registration statement; provided, that if after
Employee makes a request for registration and the Company decides not to
register or delay such registration, for any reason, the Company will give
Employee written notice of its decision. However, no such determination
will prejudice Employee's rights to other and further registrations to be
made by the Company from time to time. The Company will bear all costs and
expenses of each and all such registrations incurred in connection with the
exercise of rights granted under this Section 4.
5. NON-TRANSFERABILITY OF OPTION. Except as hereinafter set forth and
the Plan, the Option shall not be sold, transferred, pledged, or exchanged in
any manner and shall be exercisable only by Employee. Employee may, however,
transfer all or any portion of the Option upon the express written consent of
the Company approving in its sole discretion the terms and conditions of the
transfer and the party or parties to whom all or any portion of the Option is
transferred. Any attempted sale, pledge, assignment, or other transfer of
the Option shall be null and void without force or effect.
6. REQUIREMENTS OF LAW.
(a) COMPLIANCE WITH LAWS. Notwithstanding anything in this
Agreement to the contrary, the Company shall not be required to sell or issue
any Shares under this Agreement if the issuance of such Shares shall
constitute a violation by Employee or the Company of any provisions of any
law or regulation of any governmental authority or the Bylaws of the Company.
The Company shall not be obligated to take any affirmative action other than
that which is specifically set forth in this Paragraph 6 in order to cause
the exercise of the Option or the issuance of Shares pursuant hereto in order
to comply with any law or regulation of any governmental authority.
(b) FEDERAL AND STATE SECURITIES LAWS. Upon exercise of the
Option, unless a registration statement under the Securities Act, is in
effect with respect to the Shares covered hereby, the Company shall not be
required to issue such Shares unless the Company has received evidence
reasonably satisfactory to it that such issuance is exempt from registration
under the Securities Act and all applicable state securities laws. The
Company may, but shall in no event be obligated to, register any securities
covered hereby pursuant to the Securities Act or any applicable state
securities laws. The certificate(s) issued representing the Option Shares
may bear a legend in substantially the following form:
"The shares represented by this certificate have been acquired for
investment and may not be sold or transferred unless the same are
registered under the Securities Act of 1933, as amended, or the
Company receives an opinion from counsel reasonably satisfactory to
the Company that such registration is not required for such sale or
transfer or that the shares have been legally sold in broker
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transactions pursuant to Rule 144 of the rules and regulations of the
Securities and Exchange Commission promulgated under the Securities
Act of 1933."
(c) INVESTMENT INTENT. Consultant hereby represents and warrants
that the Options and Option Shares are being acquired solely for the account
of Consultant for investment purposes only and not with a view to or for the
resale, distribution, subdivision, or fractionalization thereof; Consultant
has no contract, understanding, undertaking, agreement, or arrangement with
any person to sell, transfer or pledge to any person the Options or Option
Shares or any part thereof; Consultant has no present plans to enter into any
such contract, undertaking, agreement or arrangement; Consultant understands
the legal consequences of the foregoing representations and warranties to
mean that Consultant must bear the economic risk of the investment in the
Option Shares for an indefinite period of time; Consultant has such knowledge
and experience in financial and business matters that Consultant is capable
of evaluating the merits and risks of acquiring the Option Shares; and
Consultant acknowledges that the acquisition of the Option Shares involves a
HIGH degree of risk that may result in the loss of the total amount of
Consultant's investment in the Options and Option Shares.
(d) DUE DILIGENCE. Consultant acknowledges that it has for a
reasonable amount of time had an opportunity to ask questions and receive
answers concerning the terms and conditions of the issuance of the Options
and Option Shares and the actual and proposed business and affairs of the
Company, and is satisfied with the results thereof, and been given access, if
requested, to all documents with respect to the Company or this transaction,
as well as to such other information that Consultant has requested to
evaluate an investment in the Options and Option Shares.
7. NO RIGHTS AS STOCKHOLDER. Employee shall have no rights as a
stockholder of the Company with respect to the Option Shares until the date
of issuance of a certificate for such Shares; no adjustment for
distributions, or otherwise, shall be made if the record date therefor is
prior to the date of issuance of such certificate.
8. CHANGES IN THE COMPANY'S STRUCTURE.
(a) CHANGES IN STRUCTURE. The existence of the Option shall not
affect in any way the right or power of the Company or its officers,
directors, or stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or
any issue of bonds, debentures, or any other security or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business or any other corporate act or proceeding, whether of a
similar character or otherwise.
(b) CHANGES IN NUMBER OF SHARES. If, while the Option is
outstanding, the Company shall effect a subdivision or consolidation of
Shares or other capital readjustment, the payment of a stock dividend, or
other increase or reduction of the number of Shares outstanding, without
receiving compensation therefor in money, services, or property, then (i) in
the event of such an increase in the number of Shares outstanding, the number
of Shares then subject to the Option shall be proportionately increased, and
the Exercise Price shall be proportionately reduced and (ii) in the event of
such a reduction in the number of Shares outstanding, the number of Shares
then subject to the Option shall be proportionately reduced, and the Exercise
Price shall be proportionately increased.
(c) CHANGES IN CORPORATE STRUCTURE. After a merger of one or more
corporations into the Company or after a consolidation of the Company and one
or more corporations in which the Company shall be the surviving corporation,
Employee shall, at no additional cost, be entitled upon exercise of the
Option to receive (subject to any required action by the stockholders) in
lieu of the number of Shares as to which the Option shall then be so
exercisable, the number and class of Shares or other securities to which
Employee would have been entitled pursuant to the terms of the agreement of
merger or consolidation if, immediately prior to such merger or
consolidation, Employee had been the holder of record of a number of Shares
equal to the number of Shares as to which the Option shall be so exercised.
(d) ISSUANCE OF SHARES. Except as hereinbefore expressly provided,
the issuance by the Company of shares of any class, or securities convertible
into shares of any class, for cash or property, or for labor or services,
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either upon direct sale or upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of Shares or obligations of the
Company convertible into such Shares or other securities, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the number
or price of the Shares then subject to the Option.
9. EXPENSES. Each party shall pay its own expenses, including legal
expenses and attorneys' fees, which have been or may be incurred in
connection with the preparation, administration, amendment, or modification
of this Agreement and the other documents and instruments executed in
connection herewith.
10. NOTICES. Any notices or consents required or permitted by this
Agreement shall be in writing and shall be deemed to have been sufficiently
given if delivered in person, or if sent by certified mail, return receipt
requested, or telexed or telefaxed to the party entitled thereto with
confirmation of transmission, addressed as set forth on the signature pages
hereto, unless such address is changed by written notice hereunder. If so
mailed the same shall not be deemed effective until three (3) business days
after posting.
11. AMENDMENTS. No amendment, modification or waiver of this Agreement
or any other agreements or documents executed pursuant hereto shall be
effective unless the same is in writing and signed by the person against whom
such amendment is sought to be enforced.
12. BINDING EFFECTS. This Agreement shall be binding upon and inure to
the benefit of each of the parties hereto and its heirs, successors,
permitted assigns and legal representatives.
13. GOVERNING LAW. This Agreement and all matters relating thereto
shall be governed by and construed in accordance with the laws of the State
of Texas, without regard to any conflicts of laws principles thereof.
14. ALTERNATIVE DISPUTE RESOLUTION. ANY CONTROVERSY OR CLAIM ARISING
OUT OF OR RELATING TO THIS AGREEMENT, OR THE BREACH, TERMINATION, OR VALIDITY
THEREOF, SHALL BE SETTLED BY FINAL AND BINDING ARBITRATION IN ACCORDANCE WITH
THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION
("AAA RULES") IN EFFECT AS OF THE EFFECTIVE DATE OF THIS AGREEMENT. THE
AMERICAN ARBITRATION ASSOCIATION ("AAA") SHALL BE RESPONSIBLE FOR (i)
APPOINTING A SOLE ARBITRATOR, AND (ii) ADMINISTERING THE CASE IN ACCORDANCE
WITH THE AAA RULES. THE SITUS OF THE ARBITRATION SHALL BE HOUSTON, TEXAS.
UPON THE APPLICATION OF EITHER PARTY TO THIS AGREEMENT, AND WHETHER OR NOT AN
ARBITRATION PROCEEDING HAS YET BEEN INITIATED, ALL COURTS HAVING JURISDICTION
HEREBY ARE AUTHORIZED TO: (a) ISSUE AND ENFORCE IN ANY LAWFUL MANNER, SUCH
TEMPORARY RESTRAINING ORDERS, PRELIMINARY INJUNCTIONS AND OTHER INTERIM
MEASURES OF RELIEF AS MAY BE NECESSARY TO PREVENT HARM TO A PARTIES INTEREST
OR AS OTHERWISE MAY BE APPROPRIATE PENDING THE CONCLUSION OF ARBITRATION
PROCEEDINGS PURSUANT TO THIS AGREEMENT; AND (b) ENTER AND ENFORCE IN ANY
LAWFUL MANNER SUCH JUDGMENTS FOR PERMANENT EQUITABLE RELIEF AS MAY BE
NECESSARY TO PREVENT HARM TO A PARTIES INTEREST OR AS OTHERWISE MAY BE
APPROPRIATE FOLLOWING THE ISSUANCE OF ARBITRAL AWARDS PURSUANT TO THIS
AGREEMENT. TO THE MAXIMUM EXTENT PERMITTED BY LAW, EACH PARTY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHT TO CONSEQUENTIAL, EXEMPLARY,
OR PUNITIVE DAMAGES REGARDLESS OF THE FORUM FOR THE PROCEEDINGS. ANY ORDER
OR JUDGEMENT RENDERED BY THE ARBITRATOR MAY BE ENTERED AND ENFORCED BY ANY
COURT HAVING COMPETENT JURISDICTION.
15. SUBMISSION TO JURISDICTION. Each party hereby irrevocably submits
to the personal jurisdiction of the United States District Court for Harris
County, Texas, as well as of the District Courts of the State of Texas in
Harris County, Texas over any suit, action or proceeding arising out of or
relating to this Agreement. Each party hereby irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such mediation, arbitration, suit,
action or proceeding brought in any such county and any claim that any such
mediation, arbitration, suit, action or proceeding brought in such county has
been brought in an inconvenient forum.
16. WAIVERS. The observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively
or prospectively) by the party entitled to enforce such term, but such waiver
shall be effective only if in a writing signed by the party or parties
against which such waiver is to be asserted. No delay or omission on the
part of any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver on the part of any party of
any right, power or privilege hereunder operate as a
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waiver of any other right, power or privilege hereunder nor shall any single
or partial exercise of any right, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, power
or privilege hereunder. All remedies, either under this Agreement or by law
or otherwise afforded to any party, shall be cumulative and not alternative.
17. ENTIRE AGREEMENT. This Agreement and the documents expressly
referred to herein constitute the entire agreement between the parties with
respect to the matters covered hereby, and any other prior or contemporaneous
oral or written understandings or agreements with respect to the matters
covered hereby are expressly superseded by this Agreement. There are no
unwritten or oral agreements between the parties.
18. SEVERABILITY. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be
declared judicially to be invalid, unenforceable or void, such decision will
not have the effect of invalidating or voiding the remainder of this
Agreement or affect the application of such provision to other persons or
circumstances, and the parties agree that the part or parts of this Agreement
so held to be invalid, unenforceable or void will be deemed to have been
stricken herefrom and the remainder of this Agreement will have the same
force and effect as if such part or parts had never been included herein.
Any such finding of invalidity or unenforceability shall not prevent the
enforcement of such provision in any other jurisdiction to the maximum extent
permitted by applicable law.
19. THIRD PARTY BENEFICIARIES. This Agreement does not create, and
shall not be construed as creating, any rights enforceable by any person or
entity not a party to this Agreement.
20. HEADINGS. The section headings in this Agreement are for
convenience of reference only and shall not be deemed to alter or affect the
meaning or interpretation of any provisions hereof.
21. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the day and year first above written.
[THIS SPACE INTENTIONALLY BLANK]
[SIGNATURES NEXT PAGE]
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COMPANY:
COMPUTERIZED THERMAL IMAGING, INC.,
a Nevada corporation
ADDRESS:
141 North State Street, Suite 161
Lake Oswego, Oregon 97034 By: /s/ David A. Packer
-------------------------------------
DAVID A. PACKER, President
EMPLOYEE:
ADDRESS:
141 North State Street, Suite 161
Lake Oswego, Oregon 97034 /s/ David B. Johnston
-------------------------------------
DAVID B. JOHNSTON
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CONSENT OF SPOUSE
The undersigned spouse of Employee has read and hereby approves the
terms and conditions of the Plan and this Agreement. In consideration of the
Company's granting his or her spouse the right to purchase Shares as set
forth in the Plan and this Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Agreement
and further agrees that any community property interest shall be similarly
bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or
exercise of rights under the Plan or this Agreement.
-------------------------------------------
Spouse of Employee
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EXHIBIT 10(r)
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into this 29th day
of October , 1997, and effective September 18, 1997 (the "Effective Date")
by and between COMPUTERIZED THERMAL IMAGING, INC., a Nevada corporation
("Company"), and DAVID B. JOHNSTON ("Executive").
W I T N E S S E T H:
WHEREAS, the Executive has served as President and Chief Executive Officer
of the Company and during the period of his service has contributed
significantly to the development, expansion, and management of the business of
the Company in a capable and efficient manner resulting in substantial benefits
to the Company; and
WHEREAS, the Company recognizes that the Executive's experience, knowledge,
reputation and contacts will continue to be of great value to the Company and,
therefore, the Company desires to retain the benefit of such experience,
knowledge, reputation and contacts and to prevent them from being availed of by
the Company's competitors; and
WHEREAS, the Company recognizes that substantial inducements and incentives
must be offered to the Executive so that the Company may retain his services for
the future.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the receipt and sufficiency of which are hereby acknowledged, the Company and
the Executive agree as follows:
1. EMPLOYMENT.
The Company hereby agrees to employ the Executive, and the Executive
hereby accepts employment, upon the terms and conditions specified in this
Agreement.
2. DUTIES AND RESPONSIBILITIES.
2.1 The Executive shall devote his full business time, efforts, and
abilities to the Company for the profit, benefit, and advantage of the Company,
and shall promptly obey and comply with all lawful rules, regulations, and
orders that may be issued from time to time by the Company. The Executive also
agrees to perform, without additional compensation, such other executive,
management, and administrative services for any parent, subsidiary, partnership,
joint venture, or other entity affiliated with the Company as may be reasonably
necessary. The Executive shall not be required to provide such services from
any particular location.
2.2 The Executive shall be employed initially under this Agreement in
the capacity as Chief Executive Officer and shall report to the Board of
Directors of the Company. During the term hereof, the Executive shall perform
such services and functions as may be designated from time to time by the
Company.
2.3 The Executive represents and warrants that Executive has no prior
obligations, written or oral, including confidentiality agreements or other
agreements, which restrict Executive's ability to enter into this Agreement or
to perform any duties for the Company. Executive agrees to indemnify and hold
harmless the Company from any and all legal actions in which it is alleged or
asserted that Executive has such obligations or agreements including, but not
limited to, paying the Company's attorney's fees, costs, and any damages the
Company may be assessed.
3. COMPENSATION.
3.1 In consideration for his services provided hereunder during the
term of the Executive's employment under this Agreement and the covenants
contained in this Agreement, the Executive shall be entitled to receive monetary
compensation as determined by the Board of Directors in its sole discretion
("Salary"). Any Salary
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owed shall be payable in accordance with the usual payroll practices of the
Company and subject to all customary payroll deductions. The Salary may be
increased at any time during the course of the Executive's term of employment
at the sole discretion of the Company.
3.2 The Executive shall receive, in addition to Salary, an option
to purchase common stock of the Company, as more fully described and subject
to: (i) the conditions set forth in the Employee Stock Option Agreement,
attached hereto as EXHIBIT "A" and incorporated by reference herein, and (ii)
that certain 1997 Stock Option and Restricted Stock Plan (the "Plan") of the
Company, attached hereto as EXHIBIT "B".
3.3 During the term of the Executive's employment under this
Agreement, the Executive also shall be entitled to receive the following:
(i) participation in the Company's present and future benefit plans
generally offered to other employees;
(ii) reimbursement of reasonable expenses related to the performance
of his duties hereunder; provided, however, that in order to be reimbursed the
Executive must submit vouchers or other satisfactory evidence of such expenses
as required by Company policies; and
(iii) three (3) weeks of vacation (paid, if a Salary has been set
by the Board of Directors) per work year earned ratably per year and all
holidays for which the Company is not open for business.
4. TERM AND TERMINATION.
4.1 The term of the Executive's employment under this Agreement
shall commence on the Effective Date and shall continue thereafter for a
period of three (3) years, but shall be renewed for successive one (1) year
terms thereafter unless and until either party provides written notice of
non-renewal at least fourteen (14) days prior to the annual renewal date.
Notwithstanding the foregoing, the Executive may terminate this Agreement for
any reason by giving the Company at least fourteen (14) days written notice.
If the Executive voluntarily terminates this Agreement, the Company shall
have no further financial liability to the Executive beyond the effective
date of such termination.
4.2 Notwithstanding anything in this Agreement to the contrary, the
Executive's employment with the Company may be terminated immediately at any
time by the Company for "cause" which shall mean upon the occurrence of any of
the following events:
(i) breach or attempted breach by Executive of any provision of
this Agreement or negligent or unsatisfactory performance of his duties;
(ii) breach or attempted breach by Executive of fiduciary duties owed
to the Company as an officer and/or director, including the misappropriation or
attempted misappropriation of funds or property of the Company;
(iii) attempting to or securing any personal profit or benefit
by Executive not thoroughly disclosed to and approved by the Board of
Directors in connection with any transaction entered or to be entered on
behalf of the Company or any affiliate;
(iv) conduct on any part of the Executive, even if not in connection
with the performance of his duties hereunder, which would result in serious
prejudice to the interests or reputation of the Company including, without
limitation, conviction of a felony criminal offense; or
(v) if, for a continuous period of thirty (30) calendar days, or for
more than thirty (30) calendar days in any calendar year, excluding any
authorized vacation or authorized leave of absence, the Executive is absent or
expected to be absent from his full time employment or is otherwise unable to
perform his duties, as reasonably
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determined by a disinterested physician selected by the Company, by reason of
illness, injury, or mental or physical disability.
4.3 In the event of termination of employment, the Executive shall
be entitled to receive (i) the Salary compensation due, if any, on a pro-rata
basis, (ii) reimbursement of expenses to the effective date of termination,
and (iii) an amount, if any, equal to any earned but unused vacation time
based upon the then Salary, if any, computed on a daily basis subject to all
customary payroll deductions.
5. CONFIDENTIAL INFORMATION AND DISCOVERIES OF THE COMPANY.
5.1. INTELLECTUAL PROPERTY. Executive hereby assigns to the Company
all inventions, processes, discoveries, creations and improvements (whether or
not patentable) which are conceived, made or learned by Executive alone or
jointly with others in the course of his employment with the Company that
pertain to the business interests of the Company or relating to areas which may
be reasonably anticipated to be encompassed by such business interests of the
Company at the time of conception. Executive, at any time during or after his
employment, agrees to promptly disclose to the Company all such processes,
inventions, discoveries, creations or improvements assigned hereby. All works
of authorship created by the Executive on behalf of the Company during the term
of this Agreement, solely or jointly with others, shall be considered works made
for hire under the Copyright Act of 1976, as amended, and shall be owned
entirely by the Company. Executive will also, at the Company's expense,
cooperate in all lawful acts which may be necessary or desirable in the judgment
of the Company to protect or vest title to such inventions, processes,
discoveries, creations or improvements in the Company or its nominee, including,
without limitation, applying for, obtaining, maintaining, and enforcing patents
thereon in all countries of the world, and the execution of documents related
thereto.
5.2. CONFIDENTIAL INFORMATION. The Executive acknowledges that in
the performance of his services and duties hereunder he will receive or come
in contact with, among other things, trade secrets (both technical and
non-technical), know-how, lists of customers, suppliers, contractors,
customers, employee records and other confidential and proprietary
information about the business of the Company (hereinafter collectively
referred to as "Confidential Information"). The Executive further
acknowledges that such Confidential Information was obtained at substantial
cost to the Company and provides the Company with a significant advantage
over competitors. The Executive understands that such Confidential
Information is the sole property of the Company, and agrees that both during
and after his employment with the Company he will not at any time use or
reveal Confidential Information to anyone except as permitted by the Company
or required by Executive's employment duties with the Company. The Executive
further agrees not to use any information made available to or coming into
the possession of the Executive in a manner that is adverse to the business
of the Company. Upon termination of employment hereunder, the Executive
agrees to surrender to the Company all papers, documents, writings and other
property produced by him or coming into his possession by or through his
employment hereunder, and the Executive agrees that all such materials and
Confidential Information will at all times remain the property of the
Company.
6. AGREEMENT NOT TO SOLICIT.
As an express condition to this Agreement, the Executive agrees,
during the term of his employment, and for a period of two (2) years after the
termination of his employment with the Company for any reason, the Executive
will not, directly or indirectly, for his own account or for the account of
others, induce any of the Company's employees to leave their employment, nor
will the Executive in any other way interfere with the employee relations of the
Company.
7. NON-COMPETITION.
7.1 The Executive acknowledges that he shall receive special training
and knowledge from the Company, including access to information as detailed in
Section 5.2. The Executive acknowledges that this information is valuable to
the Company and, therefore, its protection and maintenance constitutes a
legitimate interest to be protected by the Company by this covenant not to
compete. Therefore, the Executive agrees that during his employment with the
Company, and for a period of two (2) years after the termination of his
employment with the
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Company for any reason, the Executive will not, directly or indirectly,
either as an employee, employer, consultant, agent, principal, partner,
stockholder, corporate officer, director, or in any other individual or
representative capacity, engage or participate in any business that is in
competition in any manner whatsoever with the business of the Company on the
date of termination of employment within 50 miles of each city in which the
Company is conducting substantial business. Notwithstanding the preceding
sentence to the contrary, the Executive may purchase or otherwise acquire up
to (but not more than) one percent (1%) of any class of securities of any
enterprise (but without otherwise participating in the activities of such
enterprise) if such securities are listed on any national or regional
securities exchange or have been registered under Section 12(g) of the
Securities Exchange Act of 1934. The Executive represents to the Company
that his experience and capabilities are such that the enforcement of the
restrictions contained in this Section 7 would not be unduly burdensome to
the Executive.
8. REMEDIES.
The Executive acknowledges that the provisions of Sections 5, 6,
and 7 shall survive the termination of Executive's employment with the
Company and are reasonable and necessary for the protection of the Company
and that the Company will be irrevocably damaged if such provisions are not
specifically enforced. Accordingly, in the event of breach or threatened
breach of the provisions of Sections 5, 6, or 7, it is understood and agreed
that the Company shall be entitled to injunctive relief (without bond or
other security being required) as well as any and all other applicable
remedies at law and in equity. Should a court of competent jurisdiction
declare any of these provisions unenforceable due to an unreasonable
restriction, or for any other reason, such court shall have the express
authority of the parties to this Agreement to reform such provisions and/or
to grant the Company any and all other relief, at law or in equity,
reasonably necessary to protect the interests of the Company. The Executive
expressly acknowledges that (i) he has been encouraged to obtain separate
legal counsel in connection with the negotiation of this Agreement who can
explain the legal effects of these provisions and (ii) he considers these
provisions to be reasonable.
9. SUBMISSION TO JURISDICTION.
Each party hereby irrevocably submits to the personal jurisdiction
of the United States District Court for Harris County, Texas, as well as of
the District Courts of the State of Texas in Harris County, Texas over any
suit, action or proceeding arising out of or relating to this Agreement.
Each party hereby irrevocably waives, to the fullest extent permitted by law,
any objection which it may now or hereafter have to the laying of the venue
of any such mediation, arbitration, suit, action or proceeding brought in any
such county and any claim that any such mediation, arbitration, suit, action
or proceeding brought in such county has been brought in an inconvenient
forum.
10. ALTERNATIVE DISPUTE RESOLUTION.
ANY CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT, OR THE BREACH, TERMINATION, OR VALIDITY THEREOF, SHALL BE SETTLED
BY FINAL AND BINDING ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL
ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION ("AAA RULES") IN
EFFECT AS OF THE EFFECTIVE DATE OF THIS AGREEMENT. THE AMERICAN ARBITRATION
ASSOCIATION ("AAA") SHALL BE RESPONSIBLE FOR (i) APPOINTING A SOLE
ARBITRATOR, AND (ii) ADMINISTERING THE CASE IN ACCORDANCE WITH THE AAA
RULES. THE SITUS OF THE ARBITRATION SHALL BE HOUSTON, TEXAS. UPON THE
APPLICATION OF EITHER PARTY TO THIS AGREEMENT, AND WHETHER OR NOT AN
ARBITRATION PROCEEDING HAS YET BEEN INITIATED, ALL COURTS HAVING JURISDICTION
HEREBY ARE AUTHORIZED TO: (a) ISSUE AND ENFORCE IN ANY LAWFUL MANNER, SUCH
TEMPORARY RESTRAINING ORDERS, PRELIMINARY INJUNCTIONS AND OTHER INTERIM
MEASURES OF RELIEF AS MAY BE NECESSARY TO PREVENT HARM TO A PARTIES INTEREST
OR AS OTHERWISE MAY BE APPROPRIATE PENDING THE CONCLUSION OF ARBITRATION
PROCEEDINGS PURSUANT TO THIS AGREEMENT; AND (b) ENTER AND ENFORCE IN ANY
LAWFUL MANNER SUCH JUDGMENTS FOR PERMANENT EQUITABLE RELIEF AS MAY BE
NECESSARY TO PREVENT HARM TO A PARTIES INTEREST OR AS OTHERWISE MAY BE
APPROPRIATE FOLLOWING THE ISSUANCE OF ARBITRAL AWARDS PURSUANT TO THIS
AGREEMENT. TO THE MAXIMUM EXTENT PERMITTED BY LAW, EACH PARTY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHT TO CONSEQUENTIAL, EXEMPLARY,
OR PUNITIVE DAMAGES REGARDLESS OF THE FORUM FOR THE PROCEEDINGS. ANY ORDER
OR JUDGEMENT RENDERED BY THE ARBITRATOR MAY BE ENTERED AND ENFORCED BY ANY
COURT HAVING COMPETENT JURISDICTION.
11. MISCELLANEOUS.
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11.1 NOTICES. Any notice required or permitted under this Agreement
shall be in writing and shall be deemed to be delivered three (3) business days
after deposit in the United States mail, postage prepaid, certified or
registered mail, return receipt requested, addressed as follows:
Company: Computerized Thermal Imaging, Inc.
141 North State Street, Suite 161
Lake Oswego, Oregon 97034
Executive: David B. Johnston
141 North State Street, Suite 161
Lake Oswego, Oregon 97034
Notice given in any other manner shall be effective when delivered to
the addressee. The address for notice may be changed by notice given in
accordance with this provision.
11.2 AMENDMENTS. This Agreement and the documents referred to
herein constitute the entire agreement between the parties with respect to
the employment of the Executive and supersedes any prior agreements and may
not be amended, supplemented, waived, modified, or amended except by written
instrument executed by the parties hereto. There are no oral agreements
between the parties.
11.3 PRESERVATION OF BUSINESS: FIDUCIARY RESPONSIBILITY. The
Executive shall use his best efforts to preserve the business and
organization of the Company, to keep available to the Company the services of
its employees, to preserve the business relations of the Company, and the
Executive shall not commit any act that might reasonably be expected to
injure the Company. The Executive shall observe and fulfill proper standards
of fiduciary responsibility attendant upon his service and office.
11.4 ASSIGNMENTS. The Company may not assign this Agreement without
the consent of the Executive, except in connection with a sale of substantially
all of the assets of the Company or the merger or consolidation of the Company
with a successor entity provided in such events such transferee entity assumes
all of the obligations of the Company pursuant to this Agreement. The rights
and obligations of the Executive hereunder are personal to him, and no such
rights, benefits, duties or obligations shall be subject to voluntary or
involuntary alienation, assignment, or transfer.
11.5 EFFECT OF AGREEMENT. This Agreement shall be binding upon the
Executive and his heirs, executors, administrators, and legal representatives
and upon the Company and its successors and assigns.
11.6 WAIVER OF BREACH. The waiver by either party hereto of a
breach of any provision of this Agreement by the other party hereto shall not
operate or be construed as a waiver by such party of any subsequent breach of
such other party.
11.7 GOVERNING LAW. This Agreement and all matters relating thereto
shall be governed by and construed in accordance with the laws of the State of
Texas without regard to any conflicts of laws provisions thereof.
11.8 SEVERABILITY. If any provision of this Agreement is declared
unenforceable, such declaration shall not affect the validity of any other
provision of this Agreement.
11.9 CONSTRUCTION. The headings contained in this Agreement are
for reference purposes only and shall not affect this Agreement in any manner
whatsoever. Wherever required by the context, any gender shall include any
other gender, the singular shall include the plural, and the plural shall
include the singular.
IN WITNESS WHEREOF, INTENDING TO BE LEGALLY BOUND, the undersigned have
executed this Consent in multiple counterparts, to be effective as of the date
and time first mentioned above, each of which together shall be considered one
original, and whether by original or facsimile signature shall be effective in
all respects as
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though an original. The Executive acknowledges that he has read this
Agreement and has been represented by separate legal counsel and he
understands that executing this Agreement is a condition of his employment by
the Company.
COMPANY:
COMPUTERIZED THERMAL IMAGING, INC.
By: /s/ David Packer
------------------------------------------------
David Packer, President
EXECUTIVE:
/s/ David B. Johnston
------------------------------------------------
David B. Johnston
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EXHIBIT 10(s)
[LIBERTY CAPITAL GROUP, INC. LETTERHEAD]
To: Mr. Dave Johnston
From: Jay Allen Greig
Date: July 10, 1997
Re: Proposal for Public Relations
Whereas: Computerized Thermal Imaging Inc (CTI) is seeking the services of
a Public Relations firm to locate interest from the investment community.
Whereas: Liberty Capital Group Inc (Liberty Capital) is a Public Relations
firm offering its services to CTI.
Therefore the following proposal and contracted agreement between these two
parties the following: Liberty Capital will organize, manage and maintain an
active presence in the market of CTI stock via a Public Relations campaign aimed
at increasing shareholder value and raising the awareness of investors on CTI
stock. The specific plan is outlined below:
Goals
A. Locate interest from retail brokers.
B. Locate interest from private equity investors both domestically and
abroad.
C. Locate research support and interest from Investment Banking,
Institutional, Retail and Wholesale equity firms domestically and in
Europe.
D. Locate news following via Internet, Newsletter, Newsgroup and
Financial publications both on Television and in print.
E. Introduce CTI to these groups in a manner which will bring the market
to bear on the public stock of the company.
Target Audience
Brokers- US Small Cap speculators and Health Care investors-
7,500 total
Researchers- Analysts and research groups who follow Health Care and
small cap stocks-478 total
Funds- Fund Managers and equity funds who invest in Health Care and
small cap stocks- 72 total
News Group- Newsletters and Internet news groups who invest in Health
Care or small cap stocks- 584 total
Individuals- Small cap speculators and Health Care providers-
172,987 total
Hot Lines- health Care and small cap fax, e-mail and phone Hot Lines.
27 total
Strategy
Liberty Capital will use a combination of Media, Telemarketing, Internet
exposure and word of mouth to increase the awareness of your companies existence
in the public marketplace. Once this awareness is present, Liberty Capital will
create groups of interested parties to meet with and explore investment options
with CTI.
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Through Telemarketing and a combination of fax, E-mail and mail, Liberty
Capital will penetrate the retail market to increase the interest level from
equity stock buyers both in the private sector and in the brokerage industry.
This campaign will occur in selected cities and those cities will be covered
completely until maximum benefit is obtained. Road shows will be organized with
CTI either through Liberty Capital or through another firm specializing in these
shows in that city.
Newsletter and research support will be acquired to build up the
credibility of the company and its stock value. These reports will be
distributed to other news agencies to increase their interest level.
Brokerage house sponsorship will be sought to increase the support in the
public market. These brokerage houses will not be paid for their support but
will instead support of their own free will. There is no guarantee that these
houses will continue to support long term. It is hoped that with continued good
news and a strong retail interest provided by Liberty Capital and the continued
news presence will provide these firms with justification for their support.
B. Methodology
1) Blanket a chosen city area of individuals and brokers with
telemarketing, faxing and e-mail.
2) Advertise in local newspapers and financial circulars for the company
to increase the awareness in the area for the name Computerized
Thermal Imaging.
3) Blanket the brokerage houses in the area with telemarketing, faxing
and mailing to increase the following there and pave the way for the
individuals to buy.
4) Locate Research and analyst support from several houses in the area to
use as reference for researches in other geographic locations and to
provide support in the local market.
5) Initiate conversations with newsletters to begin the process of
following the company.
6) Gain access to Television coverage by targeting the local news shows
and developing news story tapes which they can use as fillers for
special interest stories.
7) Use the Internet as a forum for investors to gain more information
about CTI and as a funnel for interested investors.
8) Coordinate with road shows in the local area to maximize the time in
those cities.
9) These actions will stimulate interest in that area so the local retail
brokers will begin to have name recognition and broad support will
ensue.
Reporting
1) Liberty Capital will report their activities at the end of each month
in a letter which will outline the effectiveness of actions taken both
on the lead count, shareholder base and share volume/price. This
should not be construed as in any way guaranteeing a higher price on
the shares of CTI but only that interest in the market can effect
price volume movements whether positive or negative in nature.
2) CTI will report any action they have taken with respect to the
shareholders. All DTC slips will be sent to Liberty Capital so that
monitoring of the stock can begin in earnest.
3) All shareholder or potential shareholders received by CTI while under
contract with Liberty Capital will be turned over to Liberty Capital
so they may be followed up on in accordance with the strategy as set
forth by Liberty Capital.
4) CTI and CTI's securities counsel must co-sign on any and all
information published by Liberty Capital about CTI.
5) Liberty Capital will outline its campaign for the next quarter in a
letter to CTI not less than 5 days prior to the next quarters payment.
This letter will outline the strategy, advertising areas and media to
be used to effect the campaign for that quarter.
Items required by Liberty Capital
1) The complete shareholder list as it sits now. The list may be more
easily transferred if it is on a computer disk. If a database program
is used, the full version of that program should accompany the disk so
Liberty Capital may effect the transfer to the Liberty Capital
software system. If the
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database is on paper please photocopy the list and send the photocopy
to Liberty Capital and we will manually input all the names.
2) 5 Full Due Diligence packages on CTI to that Liberty Capital may have
them on file. One of these packages will be converted to a
computerized version so that we may place it on the Internet for
investors to download.
3) The names and addresses of the current Securities Counsel to CTI.
4) Securities backgrounds on all principals and major shareholders of CTI
in the event that part history of one of those shareholders may hamper
Liberty Capitals efforts.
5) History of any lawsuits filed against CTI in its history.
Acceptance
1) Liberty Capital hereby agrees to the above mentioned covenants and
will, to the best of its ability, represent Computerized Thermal
Imaging in the marketplace and in the Business world as befits their
status and corporate image.
2) Liberty Capital makes no representations outside of what is specified
herein and does not guarantee a price level for CTI stock. Any
representations made outside of this contract should not be relied on.
3) CTI agrees that they will abide by this contract and will represent
Liberty Capital, to the best of their abilities, in the marketplace
and in the business world as befits the corporate image of Liberty
Capital.
4) CTI agrees that no representations outside of what has been laid down
here are relied upon and as such they are null and void.
5) CTI agrees that payment will be forthcoming and that withholding of
payment is a breach of this contract and as such will be subject to
the termination of this contract and the assessment of damages.
Breaches of Contract
1) This contract is entered into for the purpose of creating more value
for CTI and Liberty Capital. Thus the atmosphere of this contract
must by nature be cooperative.
2) All disputes arising out of this contract will be handled through
arbitration in the city of Bellingham by a legal arbitration firm to
be chosen by Liberty Capital. Payment for arbitration services will
be paid by the losing party involved.
3) No lawsuits of any kind shall issue forth from a breach of this
contract in any courts anywhere in the world. Both parties agree that
a fair and reasonable settlement will occur through arbitration.
Projections
Liberty Capital can effect short term buying within a few weeks of
engagement. This buying is a short term fix and the real interest will come
after the initial three month period is up. The time lag is due to the speed at
which contacts can be made, serviced, engaged in useful conversations regarding
CTI and positioned for maximum benefit to CTI and its shareholders. This does
not mean that no response will be received in the first few months. On the
contrary, Liberty Capital expects to see a good deal of interest as long as the
original advertising sources and the brokerage community respond to our prompts.
It is not a wise decision to put short term restrictions on a program such
a this. Liberty Capital must feel as comfortable with CTI as CTI feels with
Liberty Capital. Liberty Capital has risk associated with taking on the
responsibilities of handling Public Relations for CTI. The risks can be
classified as terminal and non terminal risks.
Terminal risks include the loss of relationships with brokerage house or
key investment advisors due to actions taken by the company. This loss would
hinder Liberty Capital in it's future contracts. Also terminal would be the
loss of credibility in the marketplace from newsletters, newsgroups, editors and
media sponsors. These losses could result in million of lost dollars due to bad
decision making on the part of the management of the company.
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Non Terminal losses would include the damage that a flat campaign would
cause from having too many restrictions placed on Liberty Capital's personnel.
A flat campaign is caused by not having the dynamic ability to move within the
investment community or the media to effect coverage for CTI. This damage would
cause Liberty Capital to lose its profit or to lose the ability to effect any
movement of interest due to inherent barriers put in place by the contracting of
this campaign. The loss of opportunity that Liberty Capital would face is also
of relevance to damages in the event of a flat or cancelled campaign.
Value for CTI
CTI will gain value from the presence of Liberty Capital's representatives
and our expertise in negotiation for support in the investment community.
Liberty Capital brings years of experience and one of the largest databanks of
contacts anywhere in the world (475,000 contacts). Corporate consulting and
financing expertise brought to the table will help CTI to bring capital to the
company to expand into a operating capability.
CTI will receive a database at the end of this contract which includes all
of the investors Liberty Capital has located for CTI. This database will be on
a disk and can be maintained wither by CTI or Liberty Capital will maintain it
for a small secretarial fee each month dependent upon how much data entry is
done ($10.00 per hour).
Payment
Total cost for a complete campaign will be $150,000 and does not include a
profit level for Liberty Capital. Liberty Capital will require an option
position on 300,000 shares of CTI to be set at the current price level but
subject to the following restrictions:
100,000 shares will be exercisable when the stock price hits $2.00 per
share.
100,000 shares will be exercisable when the stock price hits $3.50 per
share.
100,000 shares will be exercisable when the stock price hits $5.00 per
share.
Payment shall be lodged in an account to be named and will be jointly
administered by both Liberty Capital and CTI or their assigns. There will be
two signatures required for any funds to be removed from the account.
Payment schedules will be as follows: $50,000 will be made available
immediately to Liberty Capital for the kickoff of the contract. The next
payment will be made on November the 1st, 1997, or the next business day, and
will consist of 1/3 of the remaining value for the account. The third payment
will be made on February the 1st, 1998, and will consist of another 1/3 of the
value of the account. The final payment will be made on the 1st. of May, 1998,
and will consist of the remaining portion of the account.
Terms
This contract is for a 1 year time period from the date of signing. All
parties involved will be required to sign off and at least one senior member of
CTI must sign (CEO, President or COO). Any and all news or information not
already public and created by Liberty Capital for this campaign shall be signed
off on by that same CTI officers. It is therefore proper to have two CTI
officers sign the contract in the event that one officer is replaced or in the
event of the death of one officer.
This contract will be administered by the Better Business Bureau of
Washington in Bellingham, WA. All disputes and contract interpretations will be
arbitrated through the Better Business Arbitration dispute center. In the event
that monetary damages are assessed those damages can be paid in stock equivalent
to the value plus a 20% premium or in US dollars cash. Should a judgement be
deemed for Liberty Capital then the full cost of this contract will be held as
damages to Liberty Capital Group Inc. Upon signing, both parties agree to abide
by these covenants and payment shall issue forth not more than 10 business days
after signing.
David Johnston /s/ David B. Johnston Date 7-10-97
---------------------------- -----------------
Witness
Printed Name Tracy Murphy Phone 503-293-4311
---------------------------- -----------------
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Signature /s/ Tracy Murphy Date 7/10/97
---------------------------- -----------------
Signature /s/ Jay Allen Greig Date 7/14/97
---------------------------- -----------------
Witness
Printed Name Kalli MacDonald Phone 360-398-9678
---------------------------- -----------------
Signature /s/ Kalli MacDonald Date 7-14-97
---------------------------- -----------------
814 LAKEWAY DR., STE-262 BELLINGHAM, WA 98226. 1-360-676-6586,
1-360-676-6580 FAX. www.libertycap.com/Liberty, E-mail Liberty
@nas.com
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EXHIBIT 10(t)
LICENSING AGREEMENT
This Licensing Agreement ("Agreement") is entered into this 8 day of
June, 1996 (the "Effective Date") between COMPUTERIZED THERMAL IMAGING, INC.,
a Nevada corporation ("CTI"), and THERMAL MEDICAL IMAGING, INC., a Nevada
corporation ("TMI").
W I T N E S S E T H
WHEREAS, by applying certain software and database technologies and a
medical protocol to a medical thermal imaging technology system, CTI has
created a thermal imaging device configured for detection of human breast
cancer (the "Detection Unit");
WHEREAS, TMI desires to obtain an exclusive license to use, further
develop, market, and distribute the Detection Unit throughout the North
America and to develop a patient information database from use of the
Detection Unit and to develop and improve technology and software systems for
the accessing, analyzing, and applying such data to breast cancer treatments;
and
WHEREAS, CTI and TMI wish to maintain a continuing relationship
governing subsequent research and development relating to the Detection Unit.
NOW, THEREFORE, for and in consideration of the premises and covenants
hereinafter contained, the parties do hereby agree as follows:
ARTICLE I
DEFINITIONS
1. The term "Use" shall include, the research, development, modification,
marketing, conforming and Distribution of the Detection Unit.
2. The terms "Distribute" and "Distribution" shall include, without
limitation, the sale, lease or other transfer of the Detection Unit.
3. The term "Medical Field" shall mean the practice of medicine relating to,
but solely to detection of human breast cancer, including all research,
diagnosis, treatment, and preventative and ongoing care related thereto.
4. The term "Bio-Medical Field" shall mean the application of biotechnology to
the Medical Field.
5. The term "Intellectual Property" shall include without limitation, each and
all of the following related to the Detection Unit: (i) inventions,
patents, applications for patents, patents obtained or to be obtained
hereon or therefor, reissues, continuations, continuations-in-part, and
divisions thereof; (ii) all copyrights, applications for copyrights,
copyrights obtained or to be obtained thereon or therefor; (iii) rights to
market, sell, lease, or otherwise transfer the Detection Unit to third
parties; (iv) all trade secrets, proprietary information, and all related
technology and intellectual property rights owned by, or accruing to or
claimed by CTI used or useable in connection with, comprising or ancillary
to the Detection Unit as applied to Medical Field or Bio-Medical Field; and
(v) all marketing leads, customer data, customer lists, manufacturing data,
and any other confidential or proprietary technical and non-technical
information, copies of all papers, documents, writings, drawings, diagrams,
and other property or physical embodiments containing such technical and
non-technical information.
6. The term "Licensed Territory" shall mean the United States of America,
Canada and Mexico and their respective territories, if any.
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ARTICLE II
INTELLECTUAL PROPERTY LICENSE
1. SCOPE. Except as otherwise provided in Section 4 below, and subject to
restrictions contained herein, CTI hereby grants TMI an exclusive license
to Use for application to or use within the Medical Field and the
Bio-Medical Field within the Licensed Territory all Intellectual Property
directly related to the Detection Unit. During the term of the Agreement
CTI agrees not to appoint any other licensees or distributors of the
Detection Unit for application to or use within the Medical Field and the
Bio-Medical Field in the Licensed Territory.
2. LIMITATIONS. Nothing herein is intended to grant TMI any rights in or any
property owned by, accruing to or claimed by CTI in the Detection Unit or
other technologies not directly related to the Use of the Detection Unit.
TMI shall use CTI's trademarks or tradenames on all Detection Units in Use.
3. AUTHORITY. Without the express written consent of CTI, TMI is expressly
prohibited from granting sublicenses based on any rights it has acquired
from CTI under this Agreement.
4. OWNERSHIP OF FUTURE DEVELOPMENTS. Notwithstanding anything to the contrary
in this Agreement, the Parties agree that all Intellectual Property and all
other intellectual property developed by either Party, or contractor for
such Party, relating to future configurations or versions of the Detection
Unit shall be owned by the Party for whom it is developed, but each Party
shall have full access to such other Party's information with respect
thereto, and the Party developing new Intellectual Property shall license
without royalty such Intellectual Property to the other party, as needed
and as requested, accomplished by source codes and user manuals, for use in
the conduct of such other Party's business, including to enhance Detection
Units for sale. Such license includes the right to sublicense the
Intellectual Property to a third party or affiliate, but any such
sublicense requires payment of a fair royalty to the developing Party with
respect to revenues from such sublicense. The royalty shall be negotiated
in good faith when sublicensed, and upon any failure to reach an agreement,
the "fair royalty" shall be determined according to the dispute resolution
rules of paragraph 6 of Article VII.
ARTICLE III
PURCHASING AND DISTRIBUTION
1. PURCHASE AND DISTRIBUTION. TMI agrees to buy exclusively from CTI, and CTI
agrees to sell to TMI, such numbers of the Detection Unit (as described in
EXHIBIT A) as TMI may from time to time require. Subject to the provisions
of this Agreement, CTI shall supply to TMI so many of the Detection Units
as TMI shall order from time to time, for so long as this Agreement is in
force and effect, with reasonable notice requirements to permit CTI to
satisfy volume demands.
2. PRICING. The initial price of each Detection Unit ("Unit Price") is Two
Hundred Seventeen Thousand Dollars ($217,000.00) c.i.f. as directed by TMI.
Such Unit Price shall remain in effect from the Effective Date through
December 31, 1997. At that time, and every two years thereafter, price
adjustments will be made based upon the mutual negotiation of the parties
to this Agreement. In no case will a price increase be greater than twenty
percent (20%) of the Unit Price charged during the immediately preceding
pricing term. TMI further agrees that any ancillary services or material
technological changes to the Detection Unit, including without limitation
installation, provided by CTI are not included in the Unit Price.
3. PAYMENT. Terms and conditions of payment shall be mutually determined from
time to time with respect to each Detection Unit based on availability of
medical equipment securities offerings, leasing or other financing
arrangements by the Parties or with third parties, as applicable.
4. TMI DISTRIBUTION. TMI agrees to use its best efforts to develop and promote
the Distribution of the Detection Unit in the Licensed Territory for the
purposes contemplated hereby and, in reasonable stages, to develop a
technically qualified sales force to market the Detection Unit to both the
public and private sectors. TMI further agrees to keep CTI regularly
informed of TMI's Distribution efforts relating to the Detection Unit. Such
information shall be compiled and provided to CTI in writing on a quarterly
basis.
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5. MINIMUM SALES. TMI agrees to Distribute and pay CTI for minimum quantities
of the Detection Units as follows (each year being measured from the
anniversary date of this Agreement; each minimum quantity level being
measured in gross sales revenues [US Dollars] of Detection Units booked by
CTI hereunder during an annual period):
First Year $ 1,000,000
Second Year $ 11,000,000
Third Year $ 45,000,000
Fourth Year $ 100,000,000
Fifth Year and every year thereafter $ 50,000,000
If Distribution by TMI during any year is fifteen percent (15%) or more
lower than the agreed level, CTI shall have the right, in its sole
discretion, to convert to non-exclusive TMI's rights under this Agreement.
All sales made on an installment basis to CTI, if any, shall be credited to
minimum sales under this Section 5 only if, as and to the extent of payment
paid to CTI during the applicable annual period. The first annual period
described above shall commence on the Effective Date. Each subsequent year
shall be the next annual period commencing with the same day and month as
the Effective Date in such year.
6. LICENSE FEES. In addition to the foregoing payments, to maintain its
exclusive rights under this Agreement, TMI shall pay to CTI a one-time
license fee payable as follows: (a) TMI shall transfer to CTI 1,275,000
shares of TMI common stock at $5.00 per share totaling a value of
$6,375,000 (b) a cash payment of $2,000,000 on or before August 31, 1996
and (c) a promissory note in the original principal amount of $500,000
payable in equal amortizing payments over two (2) years, bearing interest
at Wall Street Journal prime plus one-half percent (1/2%).
ARTICLE IV
RESEARCH AND DEVELOPMENT
1. SCOPE. Subject to the restrictions contained in Article II, Section 2, CTI
and TMI agree to cooperate and assist in the continued research and
development of the Detection Unit, related software, algorithms and
applications. The Parties further agree to provide each other with timely
notice of all research and development activities, whether performed by the
Parties or an authorized third party, which relate to the Detection Unit,
related software, algorithms and applications. Such notice shall contain a
brief description of the methods, experiments, or measures employed and any
results observed. The Parties will also provide reasonable updates to each
other apprising of the status of any research and/or development
undertaken.
2. RESEARCH AND DATA. Any and all data, software, algorithms, medical
protocols and applications generated for Use related to the Detection Unit
(collectively, the "Data"), whether undertaken by TMI and CTI jointly, by
TMI separately or jointly with an authorized third party, shall be owned by
TMI, owned by CTI if developed by CTI, but shall be made available and
licensed to the other Party for use without royalty and for sublicense with
a fair royalty. The Parties agree, if necessary, to secure all appropriate
consents, acknowledgments, releases and authorizations to this end, such as
confidentiality and noncompete covenants in all agreements with systems
integrators. All Federal and State laws applicable to this provision shall
be fully complied with by the parties, including without limitation all
patient medical records laws, rules and regulations.
ARTICLE V
GENERAL PROVISIONS
1. TERM. Subject to termination as provided below, this Agreement shall be
valid and enforceable in perpetuity commencing with the Effective Date.
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2. TERMINATION.
(a) If either CTI or TMI commits a material breach of this Agreement, and
such breach is not cured within ninety (90) days after the date on
which notice of breach is sent to the breaching party, the
non-breaching party shall have the right to terminate this Agreement
upon a further thirty (30) days written notice.
(b) Termination of this Agreement for any reason shall not affect
obligations, including the payment of any sums of money, which have
accrued as of the date of termination, and those obligations which,
from the context thereof, are intended to survive the termination of
this Agreement.
(c) In the event of the termination of this Agreement, for whatever cause
provided herein, TMI will deliver to CTI, and undertake to cause to be
delivered to CTI by others involved, all documents supplied to TMI,
its agents, affiliates and authorized third parties, by or on behalf
of CTI or in connection with Use pursuant to Article IV, containing
information which is the subject of this Agreement.
3. CONFIDENTIAL INFORMATION. The Parties agree to maintain as confidential all
information made available to them under or pursuant to the terms of this
Agreement, to the extent protected by a non-disclosure or other
confidentiality agreement between the Parties made applicable thereto. The
Parties agree not to use any information made available to or coming into
their possession or knowledge in a manner that is directly adverse to the
business of the other relating to the Detection Unit.
4. TRANSFERRABLE LICENSES/PERMITS. CTI agrees to assist and reasonably
cooperate with TMI in the preparation and processing of any application for
any and all regulatory approvals required to exercise TMI's rights
hereunder.
5. BANKRUPTCY. In the event that CTI files for or is ever adjudicated as
bankrupt under Title 11 of the United States Code or any successor
provisions thereto, or a Receiver therefor is appointed by a court of
competent jurisdiction, TMI shall be entitled to receive and the trustee
shall provide to TMI all "intellectual property" (including any
embodiment(s) thereof) for which this exclusive license is granted which is
then held by CTI's trustee or bankruptcy estate, as provided in 11 U.S.C.
Section 365(n), including without limitation all items included within the
definition of "intellectual property" under 11 U.S.C. Section 101(35A). It
is the purpose and intention of this Agreement that the parties have
recognized the limits and uncertainty of the Bankruptcy Code provisions
providing protection for licensees, and have structured this Agreement in
an attempt to overcome such limitations and to avoid uncertainty.
6. CTI REPRESENTATIONS AND WARRANTIES. CTI represents and warrants from and
after the Effective Date:
(a) All business information delivered to TMI prior to the date of
execution hereof has been, and all business information delivered
hereafter will be, materially accurate and complete;
(b) Prior to the execution hereof or within thirty (30) days thereafter,
CTI will disclose to TMI all material information relating to the
prospects for issuance of patents, trademarks, and copyrights from any
such patent, trademark, and copyright applications relating to the
Detection Unit and the potential validity and enforceability of such
patents, trademarks, and copyrights;
(c) CTI has the full and exclusive power and authority to execute, deliver
and perform its obligations under this Agreement and grant the license
herein granted, and that neither the execution nor delivery of this
Agreement nor the performance of its obligations hereunder will
constitute a breach of the terms or provisions of any contract or
violate the rights of any third party;
(d) No other person, organization or entity has or will have any lien,
mortgage or other encumbrance or license with respect to the Detection
Unit and that they have not heretofore done or permitted to be done
and will not hereafter do or authorize or permit to be done any act or
thing which is or may
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be in any way inconsistent with or which may in any way curtail,
impair, diminish, or derogate from any right herein granted to TMI;
(e) To the knowledge of CTI, the Intellectual Property licensed hereby
does not infringe on any patent, copyright, trade secret right, or
other proprietary right of any third party; and
(f) CTI will provide TMI with all manuals, product descriptions and
written support materials available to or produced by CTI relating to
the Detection Unit and shall provide, at the reasonable request of
TMI, technical support, training and consultation for TMI employees
and agents to learn all matters necessary for the accurate and proper
operation of the Detection Unit for the normal and intended use
thereof. Such consultation and training may take the form of telephone
or in-person training, consultation and trouble-shooting advice of
qualified programmers or technical personnel or contractor of CTI.
7. TMI REPRESENTATIONS AND WARRANTIES. TMI represents and warrants from and
after the Effective Date as follows:
(a) All business information delivered to CTI prior to the date of
execution hereof has been, and all business information delivered
hereafter will be, materially accurate and complete;
(b) TMI has the full and exclusive power and authority to execute, deliver
and perform their obligations under this Agreement, and that neither
the execution nor delivery of this Agreement nor the performance of
their obligations hereunder will constitute a breach of the terms or
provisions of any contract or violate the rights of any third party;
and
(c) TMI will deliver in readable form to CTI all records and materials,
including without limitation Data, used or useable by or coming into
the possession of TMI in connection with the Use of Detection Units,
all for CTI's use and benefit outside the Licensed Territory.
8. INDEMNITY.
(a) CTI agrees to indemnify and hold harmless TMI of and from any and all
losses, costs, liabilities and obligations arising from claims of
third parties (including without limitation attorneys fees and costs)
that the Detection Unit (or any part thereof) infringes or otherwise
violates any copyright, patent, trade secret, or any other
intellectual property or proprietary rights of any third parties.
(b) TMI shall indemnify and hold harmless CTI and all of CTI's officers,
directors, employees and agents from any and all liabilities, claims,
causes of action, and expenses (including without limitation attorneys
fees and expenses) arising from or relating to TMI's business relating
to the Detection Unit or any technology licensed hereunder; provided
that such indemnity shall not include any obligation of TMI to
indemnify CTI of or from any liability arising from or relating to
CTI's manufacture of the Detection Unit or any components thereof.
9. LITIGATION PROVISIONS.
(a) Infringement Action by a Third Party. In the event any infringement
action is brought by a third party against any party hereto, approved
sublicensees or distributors of any party, on account of the Use of
the Detection Unit or Intellectual Property, such party shall promptly
notify all such other parties of such action. CTI shall then have the
obligation to defend and manage the litigation in such action, in its
own name, and, with TMI's consent, in the name of TMI. TMI may
undertake to enter the defense of such action at its cost.
(b) Infringement Action against a Third Party.
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(i) Should either party to this Agreement have reasonable belief
that any third party has or is about to infringe on any of the
Intellectual Property licensed under this Agreement, the
discovering party shall promptly notify the other party. CTI
shall then have right to either (1) cause such infringement to
terminate, or (2) initiate legal proceedings against the
infringer within three months of notice of infringement. Such
legal action shall be commenced and managed by CTI at its own
expense and in its own name, or in the name of TMI if necessary.
Any monetary recovery in connection with such infringement
action shall belong to CTI.
(ii) Should CTI not take appropriate and diligent action with respect
to any such infringement, then TMI shall have the right to
initiate such legal action, in its own name or in the name of
any approved licensees. CTI shall reimburse TMI for all
reasonable costs and expenses (including reasonable attorney's
fees and expenses) incurred therein. Any monetary recovery in
connection with such infringement action shall be divided fifty
percent (50%) to TMI and fifty percent (50%) to CTI.
(iii) In the event that one party shall initiate or carry on legal
proceedings to enforce any right granted in this Agreement
against an alleged infringer, the other party shall fully
cooperate with and supply all assistance reasonably requested by
the former party. The party which institutes any such suit shall
have sole control of that suit.
ARTICLE VI
MISCELLANEOUS PROVISIONS
1. TAXES. CTI shall be solely responsible for any and all taxes required to
be paid on account of amounts payable to CTI under this Agreement. TMI
shall not be responsible for making any such tax obligations or payments.
2. FORCE MAJEURE. No party hereto shall be liable for failure to perform or
delay in performing obligations set forth in this Agreement and no party
shall be deemed in breach of its obligations, if, to the extent and for so
long as such failure or delay or breach is due to natural disasters or any
causes reasonably beyond the control of that party. Any party desiring to
invoke this Section shall notify the other party promptly of such desire
and shall use reasonable efforts to resume performance of its obligations.
3. LIMITATIONS ON LIABILITY. CTI shall not be responsible to TMI or any
customer of TMI for any damages resulting from delays in shipping caused by
any third party shipper or part manufacturer or resulting from any
installation, use or operation of any Detection Unit. TMI is solely
responsible for installation of Detection Units on the premises of its
customers. TMI's sole remedy in the event any Detection Unit fails to
perform in accordance with manufacturer parameters upon installation is to
require CTI to replace the defective part(s) or Detection Unit, as
applicable, at CTI's cost.
4. ASSIGNMENT. This Agreement shall not be assignable by either CTI or TMI
without the prior written consent of the other party, and this Agreement
shall automatically terminate in the event of any consolidation, merger,
share exchange or other event causing a change in more than fifty percent
(50%) control of the voting shares of TMI or CTI. Consent to assign shall
may be withheld at the sole discretion of either party.
5. CHOICE OF LAWS; JURISDICTION; VENUE. This Agreement shall be construed in
accordance with and governed by the laws of the State of Nevada, without
regard to conflicts of laws principles thereof. Venue for all proceedings
in any way relating to this Agreement, including without limitation
proceedings conducted under paragraph 6 hereof, shall lie in Shonomish
County, Oregon or Harris County, Texas.
6. ALTERNATIVE DISPUTE RESOLUTION. The parties hereto hereby knowingly,
voluntarily and irrevocably agree that any disputes or conflicts in any way
arising out of or relating to (i) this Agreement or (ii) the performance or
breach of any of the matters described herein or (iii) the determination of
a fair royalty for sublicensed Intellectual Property, may be mediated or
arbitrated, at the written election of either party hereto. If a party
makes a proper election to mediate under this paragraph, but such mediation
efforts fail to resolve the subject
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dispute(s) between the parties, the parties shall be bound to resolve the
subject dispute(s) by binding arbitration; provided that nothing in this
sentence shall be read to require a party to first elect to mediate any
dispute hereunder prior to electing to arbitrate. If the subject
dispute(s) are ultimately resolved by arbitration, the parties hereto
irrevocably agree to be bound by all findings of fact and conclusions of
law of the sole arbitrator selected. The election of a party under this
paragraph shall be by delivery of written notice to the opposing party.
Any such mediation or arbitration shall proceed in accordance with the
UNCITRAL Rules, including selection of sole mediator or arbitrator, and the
supplemental procedural rules of the International Centers for Arbitration
(through its affiliates JAMS/Endispute), which shall be the administrative
and appointing body for the arbitration.
7. HEADINGS. Headings used in this Agreement are used for convenience only and
do not constitute substantive matters to be considered in construing the
terms of this Agreement.
8. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter thereof and
supersedes all documents, verbal consents, or understandings made before
the conclusion of this Agreement. The terms of this Agreement may be
amended or modified only by written agreement signed by all of the parties
hereto. All changes, supplements or amendments to this Agreement will be
valid only when agreed upon by the parties and made in writing.
9. NOTICES. Any notice, consent, or approval required or permitted under this
Agreement shall be in English and in writing, and shall be delivered to the
following addresses (a) personally by hand, (b) by certified airmail,
postage prepaid, with return receipt requested or (c) by telefax with
confirmation of receipt thereof:
If to CTI: With copy to:
Computerized Thermal Imaging, Inc. Donald R. Looper
141 North State St. #161 Looper, Reed, Mark & McGraw
Lake Oswego, Oregon 97034 Nine Greenway Plaza, Suite 1717
Telefax: (503) 650-8551 Houston, Texas 77046
Attention: Mr. David B. Johnston Telefax: (713) 625-9191
If to TMI: With a copy to:
Thermal Medical Imaging, Inc. Donald R. Looper
1860 Carla Hills Drive Looper, Reed, Mark & McGraw
White Lake, MI 48383 Nine Greenway Plaza, Suite 1717
Telefax: (810) 889-1352 Houston, Texas 77046
Attention: Mr. Kenneth M. Dodd Telefax: (713) 625-9191
All notices shall be deemed effective upon the dated delivered by hand or
sent. If either party desires to change the address to which notice is
sent to such party, it shall so notify the other party in writing in
accordance with the foregoing.
10. WAIVERS. No waiver of any term or condition of this Agreement shall be
valid except by an instrument in writing expressly waiving such term or
condition signed by the waiving party. A waiver by any party of any term
or condition of this Agreement in any one instance shall not be deemed or
construed as a waiver of such term or condition for any similar instance in
the future or of any subsequent breach hereof. All rights, remedies,
undertakings, obligations and agreements contained in this Agreement shall
be cumulative and none of them shall be a limitation of any other remedy,
right undertaking, obligation or agreement of either party.
11. SEVERABILITY. Should any part or provision of the Agreement be held
unenforceable or in conflict with the law of any jurisdiction, the validity
of the remaining parts or provisions shall not be affected by such holding.
In any litigation involving this Agreement, any court having jurisdiction
thereof is authorized to reform the
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agreement to conform as closely as possible to the original intent of the
parties with respect to any subject matter found to be unenforceable or in
conflict with any law.
12. GENERAL ASSURANCES. The parties agree to execute, acknowledge, and deliver
all such further instruments, and do all such other acts, as may be
necessary or appropriate in order to carry out the intent and purposes of
this Agreement.
13. DUPLICATE ORIGINALS. This Agreement may be executed in one or more
counterparts, each of which shall be treated and deemed an original, but
all of which together shall constitute one and the same document.
14. BENEFITS. This Agreement and the benefits herein granted shall inure to
the benefit of each of the parties hereto, their successors, and the
permitted assigns of the entire business relating thereto of each of the
parties.
15. RELATIONSHIP OF PARTIES. Notwithstanding anything to the contrary herein,
this agreement shall not in any manner be construed to create a joint
venture, partnership, agency or other similar form of relationship, and
neither party shall have the right or authority to: (i) commit the other
party to any obligation or transaction not expressly authorized by such
other party, or (ii) act or purport to act as agent or representative of
the other, except as expressly authorized in writing by such other party.
16. CONSTRUCTION OF AGREEMENT. The parties hereto acknowledge and agree that
neither this Agreement nor any of the other documents executed in
connection herewith shall be construed more favorably in favor of one than
the other based upon which party drafted the sane, it being acknowledged
that all parties hereto contributed substantially to the negotiation and
preparation of this Agreement and the documents executed in connection
herewith.
17. NO THIRD PARTY BENEFICIARIES. Except as otherwise expressly forth in this
Agreement, no person or entity not a party to this Agreement shall have
rights under this Agreement as a third party beneficiary or otherwise.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above in duplicate by their duly
authorized representatives.
THERMAL MEDICAL IMAGING, INC. COMPUTERIZED THERMAL
IMAGING, INC.
By: /s/ Kenneth M. Dodd By: /s/ David B. Johnston
-------------------------------- --------------------------------
Kenneth M. Dodd, President David B. Johnston, Chairman
EXHIBITS:
A - Detection Unit Description
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EXHIBIT "A"
DETECTION UNIT DESCRIPTION
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EXHIBIT 10(u)
Computerized Thermal Imaging, Inc.
c/o Jim Forbes
1147 Manhattan Avenue, Suite 134
Manhattan Beach, CA 90266
Dear Sir:
I acknowledge receipt of your March 21, 1997 Private Placement
Subscription Participation Option Notice and as a subscriber ("Subscriber")
to the Computerized Thermal Imaging, Inc.'s (the "Company") private placement
of common stock and warrants dated November 13, 1995 (the "Offering") have
accordingly selected the option indicted below:
[ ] I elect to receive a refund of the original offering funds submitted
to the Company, without interest. I understand that choosing this
option I will have fully waived my rights as against the Company as a
Subscriber to the Offering and will have unconditionally released the
Company from any and all liabilities under the obligations owed to me
as a result of the Offering. I understand that I will receive payment
on or before April 15, 1997.
[X] I elect to retain the original participation in the Offering subject
only to my willingness to exchange my existing warrants for the
appropriate number of 1997 Warrants. I understand that each 1997
Warrant will entitle me to purchase one and on-half shares of common
stock of the Company at an exercise price of $2.50 per share until
March 31, 1999 and that the 1997 Warrants may be redeemed by the
Company at any time upon 20 days' notice prior to the date set for
redemption for $.01 per 1997 Warrant. I understand that the
appropriate number of 1997 Warrants will be delivered to me upon my
tender to the Company of my current warrants. Accordingly, I
understand that by choosing this option I will have waived my rights
against the Company under the Offering, and will have unconditionally
released the Company from any and all liabilities under and
obligations owed to me as a result of this Offering.
Signed by: Number of
WARRANTS OWNED
- --------------------------------------------------
Printed Name:_________________________ Date:______ ______________
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SIGNATORIES TO THE PRIVATE PLACEMENT
SUBSCRIPTION PARTICIPATION OPTION NOTICE
Mary Ellen Ashby
Lynn Beckman
Randall S. Benson
Charles W. Brinkman
Brent L. Cox
Crown Development, Inc.
Misty L. Dorman
Donna Doxey
Gerald Hayward
Darrell Horne
Soon-Yon Jin
Lance Larson
Stephen A. Oliver
Orlando Nickerson
Carol T. Racine
Steven M. Rhodes
Gerald Stanley
Susan Scott
Peter Smith
Jack M. Stevens
Richard M. Stevens
David Stewart
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EXHIBIT 10(v)
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (the "Agreement") is entered into this ______ day
of August, 1997 by and between LOOPER, REED, MARK & McGRAW INCORPORATED, a
Texas corporation (the "Looper Reed"), and COMPUTERIZED THERMAL IMAGING,
INC., a Nevada corporation ("CTI").
W I T N E S S E T H:
WHEREAS, CTI and Looper Reed have entered into that certain engagement
agreement dated February 28, 1995 (the "Engagement Agreement") wherein Looper
Reed was hired to provide various legal services to CTI under the terms and
conditions of the Engagement Agreement; and
WHEREAS, CTI has an outstanding account balance ("Account Balance") under
the terms of the Engagement Agreement representing unpaid fees, expenses and
accrued interest; and
WHEREAS, CTI has requested that Looper Reed continue to provide ongoing
legal services to CTI; and
WHEREAS, CTI is the record owner of thirty million four hundred fifty
thousand (30,450,000) shares of common stock of THERMAL MEDICAL IMAGING,
INC., a Nevada corporation ("TMI"), and owns or claims rights in intellectual
property relating to certain thermal imaging technology; and
WHEREAS, CTI intends to pledge such property as security for the payment of
all present and future indebtedness evidenced in the Account Balance.
NOW, THEREFORE, for and in consideration of the mutual premises and
covenants herein contained, the parties agree as follows:
1. SCOPE. The purpose of the security interest granted hereby is to
secure the payment of any and all indebtedness and liabilities of CTI to
Looper Reed arising out of or relating to the Engagement Letter or the
performance of legal services or as evidenced in the Account Balance, whether
direct or indirect, absolute or contingent, due or to become due, and whether
now existing or hereafter arising and howsoever evidenced or acquired, and
any and all modifications, renewals, rearrangements, and extensions thereof
(all of which are hereinafter sometimes referred to collectively as the
"Obligations" and individually as an "Obligation").
2. SECURITY INTEREST. CTI hereby grants, transfers, assigns and
conveys to Looper Reed a sole first priority security interest in all of the
right, title and interest of CTI in and to the following types (or items) of
property now owned or hereafter acquired by CTI, and all ascensions and
substitutions therefor, and all products and proceeds thereof:
(a) SECURITIES. Thirty million four hundred fifty thousand
(30,450,000) shares of common stock, $.001 par value, in TMI (the
"Securities"), together with all instruments and general intangibles related
thereto and all benefits attributable or accruing to the Securities,
including, but not limited to, all monies, income, proceeds, stock rights,
options, rights to subscribe, dividends, liquidating dividends, stock
dividends, dividends paid in stock, new security or other properties or
benefits to which the Debtor is or may hereafter become entitled to receive
on account of said property. CTI shall retain all voting rights relating to
the Securities unless otherwise provided.
(b) INTELLECTUAL PROPERTY. All intellectual property, including,
without limitation, inventions, discoveries, improvements, creations, trade
secrets, know-how, patents, applications for patents, FDA pre-market
approvals (#3023197 and FDA #K897191 register #21CFR884.2980(a)), licensing
rights, research data, copyrights, trademarks and other proprietary
information, arising out of or relating to (i) the CTI System, or any
component thereof, or (ii) the thermal imaging technology, and any rights
relating thereto, which is owned by, claimed by or accruing to CTI.
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(c) COLLATERAL. The term "Collateral" shall mean and include all
of the foregoing property, as well as, any accessions, additions and
attachments thereto and the proceeds and products thereof, including without
limitation, all cash, general intangibles, accounts, inventory, equipment,
fixtures, farm products, notes, drafts, acceptances, securities, instruments,
chattel paper and insurance proceeds payable because of loss or damage,
certificates of deposit, or other property, benefits or rights arising
therefrom, arising from or relating to any of the property described herein
or other proceeds of any sale or other disposition of such property.
(d) REQUIRED DOCUMENTATION. CTI agrees to execute such stock
powers, endorse such instruments, or execute such additional collateral
agreements or assignments, security agreements, pledge agreements, financing
agreements or other documents as may be requested by Looper Reed in order to
effectively grant Looper Reed the security interest in the Collateral. CTI
shall execute, contemporaneously with the execution of this Agreement, the
following documents: (i) an Irrevocable Stock Power, executed in blank,
attached as EXHIBIT A, to be used to effect any transfer of the Securities as
provided for hereunder, (ii) financing statements, attached as EXHIBIT B, and
(iii) a Board of Directors resolution, attached as EXHIBIT C, confirming
authorization for the transaction.
3. GENERAL COVENANTS
(a) The security interest granted hereby shall in no way be
affected by any indulgence or indulgences, extension or extensions, change or
changes in the form, evidence, maturity, rate of interest or otherwise of any
of the Obligations secured hereby, nor by want of presentment, notice,
protest, suit or indulgence upon any of such Obligations, nor shall any
release of, or failure to perfect the security interest or lien in, any
security for or of any of the parties liable for the payment of any of the
Obligations secured hereby in any manner affect or impair CTI's obligations
hereunder; the same shall continue in full force and effect in accordance
with the terms hereof until all of the Obligations have been fully paid;
(b) Any and all securities and other properties heretofore, now or
hereafter delivered to Looper Reed to secure payment and/or performance of
the Obligations shall be held and construed to be a part of the Collateral
hereunder to the same extent as fully described herein;
(c) Looper Reed shall have the power to endorse and is hereby
appointed CTI's agent and attorney in fact for the purpose of endorsing, in
the name of CTI, any instrument or documents constituting Collateral or which
may be received in payment of or on account of the Collateral, and CTI shall
furnish to Looper Reed such stock powers and other instruments as may be
required by Looper Reed to assure the transferability of the Collateral when
and as often as may be reasonably requested by Looper Reed;
(d) CTI agrees that in the event of a default Looper Reed may, in
its sole discretion, surrender for payment, and obtain payment of, any
portion of the Collateral, whether such have matured or the exercise of
Looper Reed's rights results in loss of interest or principal, and even
though there may be a substantial interest penalty for early withdrawal, and
in connection therewith, cause payment to be made directly to Looper Reed;
4. WARRANTIES AND COVENANTS OF CTI
CTI hereby represents, warrants, covenants and agrees that:
(a) CTI is the owner of the Collateral free of any adverse claim,
lien, security interest, encumbrance or restriction on transfer of any type;
(b) CTI will not sell, offer to sell, assign, pledge, hypothecate,
encumber or otherwise transfer the Collateral or any interest therein without
the prior written consent of Looper Reed;
(c) CTI will keep the Collateral free from any and all adverse liens,
security interests and encumbrances;
(d) CTI will defend the Collateral against all claims and demands of
all persons at any time claiming the same or any interest therein other than
Looper Reed;
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(e) CTI agrees to pay Looper Reed all expenses and expenditures,
including reasonable attorneys' fees and legal expenses, incurred or paid by
Looper Reed in exercising or protecting its interests, rights and remedies under
this Agreement. CTI additionally agrees to pay interest on such amounts on the
same terms as set forth in the Engagement Letter;
(f) All Securities and certificates representing the Securities are
genuine, duly and validly authorized, issued, and outstanding, fully paid, and
nonassessable, and all the Collateral is hereby duly and validly pledged and
hypothecated to Looper Reed in accordance with applicable law;
(g) The Collateral is not subject to any interest, option, or right
of any third person, and is in compliance with applicable law concerning form,
content, manner of preparation and execution, and CTI granting interests in the
Collateral acquired and hold the Collateral in compliance with all applicable
laws and regulations;
(h) CTI agrees to notify Looper Reed of any change in the location or
status of the Collateral;
(i) This Agreement is legal, valid, and binding, and enforceable
against CTI and the Collateral in accordance with its terms.
5. ADDITIONAL PROVISIONS REGARDING SECURITIES. The following provisions
shall apply to the Securities included within the Collateral:
(a) As to the Securities (including securities hereafter acquired
that are part of the Collateral), CTI further represents and warrants (as of the
time of delivery of same to Looper Reed) as follows: (a) such securities are
genuine, validly issued and outstanding, fully paid and nonassessable, and are
not issued in violation of the preemptive rights of any person or of any
agreement by which the issuer or obligor thereof or CTI is bound; (b) such
securities are not subject to any interest, option or right of any third person;
(c) such securities are in compliance with applicable law concerning form,
content, and manner of preparation and execution; and (d) CTI acquired and holds
the securities in compliance with all applicable laws and regulations.
(b) Any and all payments, dividends, other distributions (including
stock redemption proceeds), or other securities in respect of or in exchange for
the Collateral, whether by way of dividends, stock dividends, recapitalizations,
mergers, consolidations, stock splits, combinations or exchanges of shares or
otherwise, received by CTI shall be held by CTI in trust for Looper Reed and CTI
shall immediately deliver same to Looper Reed to be held as part of the
Collateral.
(c) Looper Reed shall have the right at any time and from time to
time (whether before or after default) to notify and direct the issuer or
obligor to make all payments, dividends, and distributions regarding the
Collateral directly to Looper Reed. Looper Reed shall have the authority to
demand of the issuer or obligor, and to receive and receipt for, any and all
payments, dividends, and other distributions payable in respect thereof,
regardless of the medium in which paid and whether they are ordinary or
extraordinary. Each issuer and obligor making payment to Looper Reed hereunder
shall be fully protected in relying on the written statement of Looper Reed that
it then holds a security interest which entitles it to receive such payment, and
the receipt by Looper Reed for such payment shall be full acquittance therefor
to the one making such payment.
(d) Upon Default, or if Looper Reed deems itself insecure, Looper
Reed shall have the right, at its sole discretion, to transfer to or register in
its name or the name of its nominee, the Securities hereby pledged, or any part
thereof, and to thereafter exercise all voting rights with respect to such
Securities so transferred and to receive the proceeds, payments, moneys, income
or benefits attributable or accruing thereto and to hold the same as security
for the Obligations hereby secured, or at Looper Reed's election, to apply such
amounts to the Obligations, whether or not then due, in such order as Looper
Reed may elect, or, Looper Reed has the right, at its option, without
transferring such securities or property to its nominee, to exercise all voting
rights with respect to the securities pledged hereunder and vote all or any part
of such securities at any regular or special meeting of shareholders, and the
undersigned does hereby name, constitute and appoint as a proxy of the
undersigned Donald R. Looper of Looper Reed, in the undersigned's name, place
and stead to vote any and all such securities, as said proxy may elect, for and
in the name, place and stead of the undersigned, such proxy to be irrevocable
and deemed coupled with an interest.
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(e) Looper Reed shall never be liable for its failure to give
notice to CTI of default in the payment of or upon the Collateral. Looper
Reed shall have no duty to fix or preserve rights against prior parties to
the Collateral and shall never be liable for its failure to use diligence to
collect any amount payable in respect to the Collateral, but shall be liable
only to account to CTI for what it may actually collect or receive thereon.
Without limiting the foregoing, it is specifically understood and agreed that
Looper Reed shall have no responsibility for ascertaining any maturities,
calls, conversions, exchanges, offers, tenders, or similar matters relating
to any of the Collateral or for informing CTI with respect to any of such
matters (irrespective of whether Looper Reed actually has, or may be deemed
to have, knowledge thereof). The foregoing provisions of this paragraph shall
be fully applicable to all Securities or similar property held in pledge
hereunder, irrespective of whether Looper Reed may have exercised any right
to have such Securities or similar property registered in its name or in the
name of a nominee.
(f) CTI hereby agrees to cooperate fully with Looper Reed in order
to permit Looper Reed to sell, at foreclosure or other private sale, the
Collateral pledged hereunder. Specifically, CTI agrees to fully comply with
the securities laws of the United States and of any relevant state
jurisdiction and to take such action as may be necessary to permit Looper
Reed to sell or otherwise transfer the securities pledged hereunder in
compliance with such laws. Without limiting the foregoing, CTI, at its own
expense, upon request by Looper Reed, agrees to effect and obtain such
registrations, filings, statements, rulings, consents and other matters as
Looper Reed may request.
(g) CTI hereby makes, constitutes, and appoints Looper Reed or its
nominee, as its true and lawful attorney in fact and in its name, place and
stead, and on its behalf, and for its use and benefit to complete, execute
and file with the United States Securities and Exchange Commission one or
more notices of proposed sale of securities pursuant to Rule 144 under the
Securities Act of 1933 and/or any similar filings or notices with any
applicable state agencies or other parties, and said attorney in fact shall
have full power and authority to do, take and perform all and every act and
thing whatsoever requisite, proper or necessary to be done, in the exercise
of the rights and powers herein granted, as fully to all intents and purposes
as CTI might or could do if personally present. This power shall be
irrevocable and deemed coupled with an interest. The rights, powers and
authority of said attorney in fact herein granted shall commence and be in
full force and effect from the date of this Agreement, and such rights,
powers and authority shall remain in full force and effect, and this power of
attorney shall not be rescinded, revoked, terminated, amended or otherwise
modified, until all Obligations have been fully satisfied.
(h) The Securities Act of 1933, as amended, and other laws or
regulations may provide legal restrictions or limitations affecting Looper
Reed in any attempts to dispose of certain portions of the Collateral and/or
enforce its rights and remedies hereunder. For these reasons Looper Reed is
hereby authorized by CTI, but not obligated, in the event of any default
hereunder, to sell all or any part of the Collateral at private sale, subject
to investment letter or in any other manner which will not require the
Collateral, or any part thereof, to be registered in accordance with the
Securities Act of 1933, as amended, or the rules and regulations promulgated
thereunder, or any other law or regulation. Looper Reed is also hereby
authorized by CTI, but not obligated, to take such actions, give such
notices, obtain such rulings and consents, and do such other things as Looper
Reed may deem appropriate in the event of a sale or disposition of any of the
Collateral. CTI clearly understands that Looper Reed may in its discretion
approach a restricted number of potential purchasers and that a sale under
such circumstances may yield a lower price for the Collateral or any part or
parts thereof than would otherwise be obtainable if same were registered and
sold in the open market, and CTI agrees that such private sales shall
constitute a commercially reasonable method of disposing of the Collateral.
6. EVENTS OF DEFAULT
Default under this Pledge Agreement shall occur upon the happening of any
of the following events or conditions ("Defaults" or "Events of Default"):
(a) Failure to make payments to Looper Reed based on the following
schedule:
(i) Full payment of the Account Balance as of August 30, 1997
(estimated to be in excess of $260,000.00, plus accrued
interest) by September 15, 1997; or
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(ii) After August 30, 1997, failure to pay any invoices presented
by Looper Reed to CTI, pursuant to the Engagement Agreement,
which evidence the Account Balance and are not paid within
sixty (60) days of receipt.
(b) Any deterioration or impairment of the Collateral or any part
thereof or any decline or depreciation in the market price thereof (whether
actual or reasonably anticipated) which, in the reasonable judgment of Looper
Reed, causes the Collateral to become unsatisfactory as to value or character
and which is not replaced by other suitable collateral within ten (10) days
after CTI's receipt of written notice from Looper Reed of such deterioration
or impairment;
(c) The prosecution of any material lawsuit, arbitration, injunctive
order, attachment, execution, garnishment or other process against CTI or any of
the Collateral in connection with any material liability, tax lien, debt,
judgment, assessment or obligation of CTI that is not dismissed within thirty
(30) days from the date of such filing;
(d) Death, dissolution, termination of existence, insolvency or
business failure of CTI, or any endorser, guarantor or surety of any of the
Obligations, or the commission of an act of bankruptcy by, or the appointment of
a receiver or other legal representative for any part of the property of,
assignment for the benefit of creditors by, or the commencement of any
proceedings under any bankruptcy or insolvency law by or against CTI, or any
endorser, guarantor or surety for any of the Obligations;
(e) Default in the performance of any other covenant or agreement of
CTI to Looper Reed and such default continues unremedied beyond the expiration
of any applicable grace period which may be expressly allowed, whether under
this Agreement or otherwise;
(f) The occurrence of any event which under the terms of any
promissory note, indenture, loan agreement, security agreement or similar
instrument permits the acceleration of maturity of any indebtedness of CTI to
Looper Reed; or the receipt by Looper Reed of notice that another person has or
expects to acquire a security interest in the Collateral or any part thereof.
7. REMEDIES
In the event of a Default under this Agreement, or any modification,
renewal, extension, or rearrangement thereof, and at any time thereafter, at
the option of Looper Reed, any or all of the Obligations shall become
immediately due and payable without presentment, demand, notice of intention
to accelerate, notice of acceleration, notice of non-payment, protest, notice
of dishonor, or any other notice whatsoever to CTI or any person obligated
thereon, and Looper Reed shall have and may exercise with reference to the
Collateral and Obligations any and all of the rights and remedies of a
secured party under the Uniform Commercial Code as then in effect in the
State of Texas, and as otherwise granted or under any other applicable law or
under any other agreement executed by CTI (all of which rights and remedies
shall be cumulative), including, without limitation, the right and power to
sell, at public or private sale or sales, or otherwise dispose of or utilize
the Collateral and any part or parts thereof in any manner authorized or
permitted under this Agreement or under the Uniform Commercial Code after
default, and to apply the proceeds thereof toward payment of any costs and
expenses and reasonable attorneys' fees and legal expenses thereby incurred
by Looper Reed and toward payment of the Obligations, except as otherwise
provided herein, in such order or manner as Looper Reed may elect. To the
extent permitted by law, CTI expressly waives any notice of sale or other
disposition of the Collateral and any other rights or remedies of CTI or
formalities prescribed by law relative to sale or disposition of the
Collateral or exercise of any other right or remedy of Looper Reed existing
after default hereunder, and to the extent any such notice is required and
cannot be waived, CTI agrees that if such notice is mailed, postage prepaid,
to CTI at the address shown hereinbelow at least five (5) days before the
time of the sale or disposition or transmitted via confirmed telefax to CTI
at least five (5) days before the time of sale or disposition, such notice
shall be deemed reasonable and shall fully satisfy any requirement for giving
of said notice.
Notwithstanding any provision hereof to the contrary, Looper Reed is
hereby authorized by CTI, but not obligated, to sell all or any part of the
Collateral at one or more private sales, restricting the prospective bidders
or purchasers of the Stock to persons who will represent and agree that they
are purchasing the Stock for their own
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account for investment and not with a view to distribution or resale of any
of the Stock or in any manner which will require the Stock or any part
thereof, to be registered in accordance with the Securities Act of 1933, as
amended, or the rules and regulations promulgated thereunder, or any other
law or regulation.
CTI hereby agrees to cooperate fully with Looper Reed in order to permit
Looper Reed to sell, at foreclosure or other private sale, the Collateral
pledged hereunder. Specifically, CTI agrees to fully comply with the securities
laws of the United States and of the State of Texas and to take such action as
may be necessary to permit Looper Reed to sell or otherwise transfer the
securities pledged hereunder in compliance with such laws.
8. APPLICATION OF PROCEEDS
The proceeds of sale of Collateral sold pursuant to the terms hereof, shall
be applied by Looper Reed as follows:
FIRST: To payment of the costs and expenses of such sale, including the
out-of-pocket costs and expenses of Looper Reed and the reasonable fees and
out-of-pocket costs and expenses of counsel employed in connection therewith,
and to the payment of all advances made by Looper Reed for the account of CTI
and the payment of all costs and expenses incurred by Looper Reed in
connection with the administration and enforcement of this Agreement, to the
extent that such advances, costs, and expenses shall not have been reimbursed
to Looper Reed;
SECOND: To the payment in full of Obligations; and
THIRD: The balance, if any, of such proceeds shall be paid pro rata to
CTI, its successors and assigns, or as a court of competent jurisdiction may
direct.
No one of CTI shall be subrogated to any rights of Looper Reed until the
Obligations are paid in full.
9. MISCELLANEOUS
Looper Reed, may at its option, demand, sue for, collect or make any
compromise or settlement it deems desirable with reference to the Collateral.
Looper Reed shall not be obligated to take any steps necessary to preserve any
rights in the Collateral against prior parties, which CTI hereby agrees to do.
CTI hereby authorizes Looper Reed to apply all or any part of the
Collateral to the payment of any or all of the indebtedness secured hereby in
such manner and such order as Looper Reed in its reasonable discretion may
elect.
No delay or omission on the part of Looper Reed in exercising any rights
hereunder shall operate as a waiver of any such right or any other right. A
waiver on any one or more occasions shall not be construed as a bar to or
waiver of any right or remedy on any future occasion.
It is the intention of the parties hereto to comply with applicable
usury laws; accordingly, it is agreed that notwithstanding any provision to
the contrary in this Agreement, or in any of the documents evidencing the
Obligations or otherwise relating thereto, no such provision shall require
the payment or permit the collection of interest in excess of the maximum
permitted by such laws. If any excess of interest in such respect is
provided for, or shall be adjudicated to be so provided for, in this
Agreement, or in any of the documents evidencing the Obligations or otherwise
relating thereto, then in such event (a) neither CTI, any guarantors, nor
their respective heirs, executors, administrators, legal representatives,
successors or assigns or any other party liable for the payment hereof, shall
be obligated to pay the amount of such interest to the extent that it is in
excess of the maximum amount permitted by such laws, (b) any such excess
which may have been collected shall be, at the option of Looper Reed, either
applied as a credit against the then unpaid principal amount thereof or
refunded to the party paying such excess, and (c) the effective rate of
interest shall be automatically subject to reduction to the maximum lawful
rate allowed to be lawfully contracted for by CTI under applicable usury laws
as now or hereafter construed by the courts having jurisdiction.
All rights of Looper Reed hereunder shall inure to the benefit of its
successors and assigns; and all obligations of CTI shall bind its respective
heirs, executors, administrators, successors or permitted assigns. The
rights and
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remedies of Looper Reed hereunder are cumulative, and the exercise of any one
or more of the remedies provided herein shall not be construed as a waiver of
any of the other remedies of Looper Reed.
In no event shall CTI be deemed to have any right to a release of any of
the liens or security interests covering the Collateral until the Obligations
have been paid in full.
This Agreement and the security interests herein granted are in addition
to, and not in substitution, novation or discharge of, any and all prior or
contemporaneous collateral agreements, security agreements and security
interests in favor of Looper Reed or assigned to Looper Reed by others. All
rights, powers and remedies of Looper Reed in all such collateral agreements
or security agreements are cumulative, but in the event of actual conflict in
terms and conditions, the terms and conditions of the latest agreement shall
govern and control.
Any provision found to be invalid under the laws of the State of Texas,
or any other State having jurisdiction or other applicable law, shall be
invalid only with respect to the offending provision. All words used herein
shall be construed of such gender or number as the circumstances require.
The law of the State of Texas and the United States of America shall apply to
this Agreement and its construction and interpretation.
CTI hereby acknowledges that it has been given a reasonable opportunity
to seek to advice of independent counsel to advise CTI on this matter, and
that Looper Reed has recommended that CTI seek such advice.
CTI hereby waives (a) notice of acceptance hereof (which acceptance is
conclusively presumed by delivery to Looper Reed); (b) notice of and/or any
right to grace, demand, presentment, and protest with respect to the
Obligations or to any instrument, agreement or document evidencing or
creating same; (c) notice of nonpayment or other default under the
Obligations or intention to accelerate or actual acceleration of the
Obligations; (d) notice of and/or any right to consent or object to (i) the
assignment of any interest in the Obligations, (ii) the creation,
advancement, accrual, renewal, increase, extension, or rearrangement of the
Obligations, or (iii) the amendment and/or modification of any of the
instruments, agreements or documents executed in connection with the
Obligations; (e) filing of suit or diligence by Looper Reed in collection or
enforcement of the Obligations; (f) any other notice regarding the
Obligations; and (g) all rights of redemption in and to the Collateral in the
event any of the Collateral is sold at public or private sale after any
Default hereunder.
CTI hereby agrees that Looper Reed may at any time, and from time to
time, at Looper Reed's discretion and with or without notice or consideration
to or consent from any party: (a) allow substitution or withdrawal of any
collateral or other security for the Obligations; (b) sell, exchange,
release, subordinate its lien on, surrender, release upon or otherwise deal
with in any manner and in any order any property at any time pledged or
mortgaged to secure or securing the Obligations or any liabilities incurred
directly or indirectly hereunder or any offset against any of said
liabilities; (c) release any party liable on the Obligations including CTI or
any other guarantor; (d) extend, renew, or rearrange all or any part of the
Obligations at any time and from time to time, whether or not for a term or
terms in excess of the original term thereof; (e) modify or amend any of the
instruments, agreements, or documents executed in connection with the
Obligations; or (f) exercise or refrain from exercising any rights against
CTI or others, or otherwise act or refrain from acting. Any of such actions
may be taken without impairing or diminishing the Obligations of CTI
hereunder.
This Agreement is intended for and shall inure to the benefit of Looper
Reed and each and every person who shall from time to time be or become the
holder or owner of all or any part of the Obligations, and each and every
reference hereto to "Looper Reed" shall include and refer to each and every
successor or assignee of Looper Reed at any time holding or owning any part
of or interest in any part of the Obligations. This Agreement shall be
transferable and negotiable with the same force and effect, and to the same
extent, that the Obligations are transferable and negotiable, it being
understood and stipulated that upon assignment or transfer by Looper Reed of
any of the Obligations, the legal holder or owner of said Obligations (or a
part thereof or interest therein thus transferred or assigned) shall (except
as otherwise stipulated by Looper Reed in its assignment) have and may
exercise all of the rights granted to Looper Reed under this Agreement to the
extent of that part of or interest in the Obligations thus assigned or
transferred. CTI expressly waives notice of transfer or assignment of the
Obligations, or any part thereof, or of the rights of Looper Reed hereunder.
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This Agreement may be executed in one or more counterparts, with each
counterpart being deemed an original, and all of which together shall
constitute one and the same document.
THIS AGREEMENT, AND ALL DOCUMENTS AND INSTRUMENTS CONTEMPLATED THEREIN
REPRESENT THE FINAL AGREEMENT BETWEEN CTI AND LOOPER REED AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
EXECUTED as of the day and year first written above.
COMPUTERIZED THERMAL IMAGING, INC.
Address:
141 North State Street, Suite 161
Lake Oswego, Oregon 97034
By: /s/ Richard V. Secord
-------------------------------
Richard V. Secord,
Chief Operating Officer
LOOPER, REED, MARK & McGRAW
INCORPORATED
Address:
Nine Greenway Plaza, Suite 1717
Houston, Texas 77046 By: /s/ Donald R. Looper
----------------------------
Donald R. Looper
8
<PAGE>
EXHIBIT "A"
IRREVOCABLE STOCK POWER
KNOW ALL MEN BY THESE PRESENTS,
THAT COMPUTERIZED THERMAL IMAGING, INC., FOR VALUE RECEIVED has
bargained, assigned and transferred and by these presents does bargain,
assign and transfer unto ___________________________ ( _________________ )
Shares of the Common Stock, $0.001 par value per share, of THERMAL MEDICAL
IMAGING, INC., a Nevada corporation, standing in its name on the books of
said Corporation, represented by Certificate Nos._________ herewith AND it
does hereby constitute and appoint ____________________________ , as its
true and lawful attorney, IRREVOCABLY, for it and in its name and stead, to
sell, assign, transfer, hypothecate, pledge and make over all or any part of
the said stock and for that purpose to make and execute all necessary acts of
assignment and transfer thereof, and to substitute one or more persons with
like full power, hereby ratifying and confirming all that its said Attorney
or his substitute or substitutes shall lawfully do by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand effective as of the
________ day of ___________________ , 199__ .
By: /s/ Richard V. Secord
-------------------------------
Richard V. Secord
Chief Operating Officer
SIGNATURE GUARANTEED
Company:
--------------------------
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE>
EXHIBIT "B"
FINANCING STATEMENTS
<PAGE>
EXHIBIT "C"
UNANIMOUS CONSENT OF BOARD OF DIRECTORS
OF
COMPUTERIZED THERMAL IMAGING, INC.
August , 1997
-----
The undersigned, being all the Directors of Computerized Thermal Imaging,
Inc. ("Corporation"), do hereby approve and consent to the adoption of the
following resolutions which shall have the same force and effect as if adopted
by a unanimous vote of the Directors at a formal meeting of the Board of
Directors of the Corporation.
RESOLVED, that the Chief Executive Officer and/or the Chief Operating
Officer of the Corporation be, and hereby are, authorized and directed
to pursue, negotiate and execute a Pledge Agreement, in substantially
the same form attached hereto as EXHIBIT A, with Looper, Reed, Mark &
McGraw Incorporated ("Looper Reed") securing all present and future
indebtedness related to the performance of legal services by Looper
Reed for the Corporation; and
RESOLVED FURTHER, that the Chief Executive Officer and/or the Chief
Operating Officer of the Corporation be and hereby are, authorized, in
the name and on behalf of this Corporation, and under its corporate
seal or otherwise, to execute and deliver any and all agreements,
certificates, instruments and documents and to do and perform, or
cause to be done and performed, all such acts and things as may be
necessary or appropriate, as they deem advisable, to carry out the
intent and accomplish the purposes of the foregoing resolutions and
the transaction contemplated thereby.
IN WITNESS wherefor, the undersigned have executed this ConsEnt of the
Board of Directors, either in a single instrument or in multiple counterparts,
each of which shall be deemed an original, but all of which shall together
constitute one in the same instrument, effective as of the date first mentioned
above.
BOARD OF DIRECTORS:
----------------------------------
David B. Johnston
----------------------------------
Richard V. Secord
----------------------------------
Brent M. Pratley
<PAGE>
EXHIBIT 10(w)
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (the "Agreement") is entered into this ____ day of
August, 1997 by and between LOOPER, REED, MARK & McGRAW INCORPORATED, a Texas
corporation (the "Looper Reed"), and THERMAL MEDICAL IMAGING, INC., a Nevada
corporation ("TMI").
W I T N E S S E T H:
WHEREAS, Computerized Thermal Imaging, Inc. ("CTI") has an outstanding
account balance ("CTI Balance") with Looper Reed representing unpaid fees,
expenses and accrued interest; and
WHEREAS, TMI has agreed to provide collateral to Looper Reed in order to
secure the CTI Balance; and
WHEREAS, TMI and Looper Reed have entered into that certain engagement
agreement dated June 26, 1996 (the "Engagement Agreement") wherein Looper
Reed was hired to provide various legal services to TMI under the terms and
conditions of the Engagement Agreement; and
WHEREAS, TMI has an outstanding account balance ("TMI Balance") under
the terms of the Engagement Agreement representing unpaid fees, expenses and
accrued interest; and
WHEREAS, TMI has requested that Looper Reed continue to provide ongoing
legal services to TMI; and
WHEREAS, TMI owns or claims rights in intellectual property relating to
certain thermal imaging technology; and
WHEREAS, TMI intends to pledge such property as security for the payment
of all present and future indebtedness evidenced in the CTI Balance and TMI
Balance.
NOW, THEREFORE, for and in consideration of the mutual premises and
covenants herein contained, the parties agree as follows:
1. SCOPE. The purpose of the security interest granted hereby is to
secure the payment of any and all indebtedness and liabilities of CTI and TMI
to Looper Reed arising out of or relating to the Engagement Letter or the
performance of legal services for CTI or TMI or as evidenced in the CTI
Balance or TMI Balance, whether direct or indirect, absolute or contingent,
due or to become due, and whether now existing or hereafter arising and
howsoever evidenced or acquired, and any and all modifications, renewals,
rearrangements, and extensions thereof (all of which are hereinafter
sometimes referred to collectively as the "Obligations" and individually as
an "Obligation").
2. SECURITY INTEREST. TMI hereby grants, transfers, assigns and
conveys to Looper Reed a sole first priority security interest in all of the
right, title and interest of TMI in and to the following types (or items) of
property now owned or hereafter acquired by TMI, and all ascensions and
substitutions therefor, and all products and proceeds thereof:
(a) INTELLECTUAL PROPERTY. All intellectual property, including,
without limitation, inventions, discoveries, improvements, creations, trade
secrets, know-how, patents, applications for patents, FDA pre-market
approvals (#3023197 and FDA #K897191 register #21CFR884.2980(a)), licensing
rights, research data, copyrights, trademarks and other proprietary
information which is owned by, claimed by or accruing to TMI.
(b) COLLATERAL. The term "Collateral" shall mean and include all
of the foregoing property, as well as, any accessions, additions and
attachments thereto and the proceeds and products thereof, including without
limitation, all cash, general intangibles, accounts, inventory, equipment,
fixtures, farm products, notes, drafts, acceptances, securities, instruments,
chattel paper and insurance proceeds payable because of loss or damage,
1
<PAGE>
certificates of deposit, or other property, benefits or rights arising
therefrom, arising from or relating to any of the property described herein
or other proceeds of any sale or other disposition of such property.
(c) REQUIRED DOCUMENTATION. TMI agrees to execute such stock
powers, endorse such instruments, or execute such additional collateral
agreements or assignments, security agreements, pledge agreements, financing
agreements or other documents as may be requested by Looper Reed in order to
effectively grant Looper Reed the security interest in the Collateral. TMI
shall execute, contemporaneously with the execution of this Agreement, the
following documents: (i) Financing statements, attached as EXHIBIT A, and
(iii) a Shareholder resolution, attached as EXHIBIT B, confirming
authorization for the transaction.
3. GENERAL COVENANTS
(a) The security interest granted hereby shall in no way be
affected by any indulgence or indulgences, extension or extensions, change or
changes in the form, evidence, maturity, rate of interest or otherwise of any
of the Obligations secured hereby, nor by want of presentment, notice,
protest, suit or indulgence upon any of such Obligations, nor shall any
release of, or failure to perfect the security interest or lien in, any
security for or of any of the parties liable for the payment of any of the
Obligations secured hereby in any manner affect or impair TMI's obligations
hereunder; the same shall continue in full force and effect in accordance
with the terms hereof until all of the Obligations have been fully paid;
(b) Any and all securities and other properties heretofore, now or
hereafter delivered to Looper Reed to secure payment and/or performance of
the Obligations shall be held and construed to be a part of the Collateral
hereunder to the same extent as fully described herein;
(c) Looper Reed shall have the power to endorse and is hereby
appointed TMI's agent and attorney in fact for the purpose of endorsing, in
the name of TMI, any instrument or documents constituting Collateral or which
may be received in payment of or on account of the Collateral, and TMI shall
furnish to Looper Reed such stock powers and other instruments as may be
required by Looper Reed to assure the transferability of the Collateral when
and as often as may be reasonably requested by Looper Reed;
(d) TMI agrees that in the event of a default Looper Reed may, in
its sole discretion, surrender for payment, and obtain payment of, any
portion of the Collateral, whether such have matured or the exercise of
Looper Reed's rights results in loss of interest or principal, and even
though there may be a substantial interest penalty for early withdrawal, and
in connection therewith, cause payment to be made directly to Looper Reed;
4. WARRANTIES AND COVENANTS OF TMI
TMI hereby represents, warrants, covenants and agrees that:
(a) TMI is the owner of the Collateral free of any adverse claim,
lien, security interest, encumbrance or restriction on transfer of any type;
(b) TMI will not sell, offer to sell, assign, pledge, hypothecate,
encumber or otherwise transfer the Collateral or any interest therein without
the prior written consent of Looper Reed;
(c) TMI will keep the Collateral free from any and all adverse
liens, security interests and encumbrances;
(d) TMI will defend the Collateral against all claims and demands
of all persons at any time claiming the same or any interest therein other
than Looper Reed;
(e) TMI agrees to pay Looper Reed all expenses and expenditures,
including reasonable attorneys' fees and legal expenses, incurred or paid by
Looper Reed in exercising or protecting its interests, rights and remedies
under this Agreement. TMI additionally agrees to pay interest on such
amounts on the same terms as set forth in the Engagement Letter;
2
<PAGE>
(f) All Securities and certificates representing the Securities
are genuine, duly and validly authorized, issued, and outstanding, fully
paid, and nonassessable, and all the Collateral is hereby duly and validly
pledged and hypothecated to Looper Reed in accordance with applicable law;
(g) The Collateral is not subject to any interest, option, or
right of any third person, and is in compliance with applicable law
concerning form, content, manner of preparation and execution, and TMI
granting interests in the Collateral acquired and hold the Collateral in
compliance with all applicable laws and regulations;
(h) TMI agrees to notify Looper Reed of any change in the location or
status of the Collateral;
(i) This Agreement is legal, valid, and binding, and enforceable
against TMI and the Collateral in accordance with its terms.
5. EVENTS OF DEFAULT
Default under this Pledge Agreement shall occur upon the happening of
any of the following events or conditions ("Defaults" or "Events of Default"):
(a) Failure by CTI to make payments to Looper Reed based on the
following schedule:
(i) Full payment of the CTI Balance as of August 30, 1997
(estimated to be in excess of $260,000.00, plus accrued
interest) by October 15, 1997; or
(ii) After August 30, 1997, failure to pay any invoices presented
by Looper Reed to CTI, pursuant to the Engagement Agreement,
which evidence the Account Balance and are not paid within
sixty (60) days of receipt.
(b) Failure by TMI to pay any invoices presented by Looper Reed to
TMI, pursuant to the Engagement Agreement, which evidence the TMI Balance and
are not paid within sixty (60) days of receipt.
(c) Any deterioration or impairment of the Collateral or any part
thereof or any decline or depreciation in the market price thereof (whether
actual or reasonably anticipated) which, in the reasonable judgment of Looper
Reed, causes the Collateral to become unsatisfactory as to value or character
and which is not replaced by other suitable collateral within ten (10) days
after TMI's receipt of written notice from Looper Reed of such deterioration
or impairment;
(d) The prosecution of any material lawsuit, arbitration,
injunctive order, attachment, execution, garnishment or other process against
TMI or any of the Collateral in connection with any material liability, tax
lien, debt, judgment, assessment or obligation of TMI that is not dismissed
within thirty (30) days from the date of such filing;
(e) Death, dissolution, termination of existence, insolvency or
business failure of TMI, or any endorser, guarantor or surety of any of the
Obligations, or the commission of an act of bankruptcy by, or the appointment
of a receiver or other legal representative for any part of the property of,
assignment for the benefit of creditors by, or the commencement of any
proceedings under any bankruptcy or insolvency law by or against TMI, or any
endorser, guarantor or surety for any of the Obligations;
(f) Default in the performance of any other covenant or agreement
of TMI to Looper Reed and such default continues unremedied beyond the
expiration of any applicable grace period which may be expressly allowed,
whether under this Agreement or otherwise;
(g) The occurrence of any event which under the terms of any
promissory note, indenture, loan agreement, security agreement or similar
instrument permits the acceleration of maturity of any indebtedness of TMI to
Looper Reed; or the receipt by Looper Reed of notice that another person has
or expects to acquire a security interest in the Collateral or any part
thereof.
3
<PAGE>
6. REMEDIES
In the event of a Default under this Agreement, or any modification,
renewal, extension, or rearrangement thereof, and at any time thereafter, at
the option of Looper Reed, any or all of the Obligations shall become
immediately due and payable without presentment, demand, notice of intention
to accelerate, notice of acceleration, notice of non-payment, protest, notice
of dishonor, or any other notice whatsoever to TMI or any person obligated
thereon, and Looper Reed shall have and may exercise with reference to the
Collateral and Obligations any and all of the rights and remedies of a
secured party under the Uniform Commercial Code as then in effect in the
State of Texas, and as otherwise granted or under any other applicable law or
under any other agreement executed by TMI (all of which rights and remedies
shall be cumulative), including, without limitation, the right and power to
sell, at public or private sale or sales, or otherwise dispose of or utilize
the Collateral and any part or parts thereof in any manner authorized or
permitted under this Agreement or under the Uniform Commercial Code after
default, and to apply the proceeds thereof toward payment of any costs and
expenses and reasonable attorneys' fees and legal expenses thereby incurred
by Looper Reed and toward payment of the Obligations, except as otherwise
provided herein, in such order or manner as Looper Reed may elect. To the
extent permitted by law, TMI expressly waives any notice of sale or other
disposition of the Collateral and any other rights or remedies of TMI or
formalities prescribed by law relative to sale or disposition of the
Collateral or exercise of any other right or remedy of Looper Reed existing
after default hereunder, and to the extent any such notice is required and
cannot be waived, TMI agrees that if such notice is mailed, postage prepaid,
to TMI at the address shown hereinbelow at least five (5) days before the
time of the sale or disposition or transmitted via confirmed telefax to TMI
at least five (5) days before the time of sale or disposition, such notice
shall be deemed reasonable and shall fully satisfy any requirement for giving
of said notice.
Notwithstanding any provision hereof to the contrary, Looper Reed is
hereby authorized by TMI, but not obligated, to sell all or any part of the
Collateral at one or more private sales, restricting the prospective bidders
or purchasers of the Stock to persons who will represent and agree that they
are purchasing the Stock for their own account for investment and not with a
view to distribution or resale of any of the Stock or in any manner which
will require the Stock or any part thereof, to be registered in accordance
with the Securities Act of 1933, as amended, or the rules and regulations
promulgated thereunder, or any other law or regulation.
TMI hereby agrees to cooperate fully with Looper Reed in order to permit
Looper Reed to sell, at foreclosure or other private sale, the Collateral
pledged hereunder. Specifically, TMI agrees to fully comply with the
securities laws of the United States and of the State of Texas and to take
such action as may be necessary to permit Looper Reed to sell or otherwise
transfer the securities pledged hereunder in compliance with such laws.
7. APPLICATION OF PROCEEDS
The proceeds of sale of Collateral sold pursuant to the terms hereof,
shall be applied by Looper Reed as follows:
FIRST: To payment of the costs and expenses of such sale, including the
out-of-pocket costs and expenses of Looper Reed and the reasonable fees and
out-of-pocket costs and expenses of counsel employed in connection therewith,
and to the payment of all advances made by Looper Reed for the account of TMI
and the payment of all costs and expenses incurred by Looper Reed in
connection with the administration and enforcement of this Agreement, to the
extent that such advances, costs, and expenses shall not have been reimbursed
to Looper Reed;
SECOND: To the payment in full of Obligations; and
THIRD: The balance, if any, of such proceeds shall be paid pro rata to
TMI, its successors and assigns, or as a court of competent jurisdiction may
direct.
No one of TMI shall be subrogated to any rights of Looper Reed until the
Obligations are paid in full.
4
<PAGE>
8. MISCELLANEOUS
Looper Reed, may at its option, demand, sue for, collect or make any
compromise or settlement it deems desirable with reference to the Collateral.
Looper Reed shall not be obligated to take any steps necessary to preserve
any rights in the Collateral against prior parties, which TMI hereby agrees
to do.
TMI hereby authorizes Looper Reed to apply all or any part of the
Collateral to the payment of any or all of the indebtedness secured hereby in
such manner and such order as Looper Reed in its reasonable discretion may
elect.
No delay or omission on the part of Looper Reed in exercising any rights
hereunder shall operate as a waiver of any such right or any other right. A
waiver on any one or more occasions shall not be construed as a bar to or
waiver of any right or remedy on any future occasion.
It is the intention of the parties hereto to comply with applicable
usury laws; accordingly, it is agreed that notwithstanding any provision to
the contrary in this Agreement, or in any of the documents evidencing the
Obligations or otherwise relating thereto, no such provision shall require
the payment or permit the collection of interest in excess of the maximum
permitted by such laws. If any excess of interest in such respect is provided
for, or shall be adjudicated to be so provided for, in this Agreement, or in
any of the documents evidencing the Obligations or otherwise relating
thereto, then in such event (a) neither TMI, any guarantors, nor their
respective heirs, executors, administrators, legal representatives,
successors or assigns or any other party liable for the payment hereof, shall
be obligated to pay the amount of such interest to the extent that it is in
excess of the maximum amount permitted by such laws, (b) any such excess
which may have been collected shall be, at the option of Looper Reed, either
applied as a credit against the then unpaid principal amount thereof or
refunded to the party paying such excess, and (c) the effective rate of
interest shall be automatically subject to reduction to the maximum lawful
rate allowed to be lawfully contracted for by TMI under applicable usury laws
as now or hereafter construed by the courts having jurisdiction.
All rights of Looper Reed hereunder shall inure to the benefit of its
successors and assigns; and all obligations of TMI shall bind its respective
heirs, executors, administrators, successors or permitted assigns. The
rights and remedies of Looper Reed hereunder are cumulative, and the exercise
of any one or more of the remedies provided herein shall not be construed as
a waiver of any of the other remedies of Looper Reed.
In no event shall TMI be deemed to have any right to a release of any of
the liens or security interests covering the Collateral until the Obligations
have been paid in full.
This Agreement and the security interests herein granted are in addition
to, and not in substitution, novation or discharge of, any and all prior or
contemporaneous collateral agreements, security agreements and security
interests in favor of Looper Reed or assigned to Looper Reed by others. All
rights, powers and remedies of Looper Reed in all such collateral agreements
or security agreements are cumulative, but in the event of actual conflict in
terms and conditions, the terms and conditions of the latest agreement shall
govern and control.
Any provision found to be invalid under the laws of the State of Texas,
or any other State having jurisdiction or other applicable law, shall be
invalid only with respect to the offending provision. All words used herein
shall be construed of such gender or number as the circumstances require. The
law of the State of Texas and the United States of America shall apply to
this Agreement and its construction and interpretation.
TMI hereby acknowledges that it has been given a reasonable opportunity
to seek to advice of independent counsel to advise TMI on this matter, and
that Looper Reed has recommended that TMI seek such advice.
TMI hereby waives (a) notice of acceptance hereof (which acceptance is
conclusively presumed by delivery to Looper Reed); (b) notice of and/or any
right to grace, demand, presentment, and protest with respect to the Obligations
or to any instrument, agreement or document evidencing or creating same; (c)
notice of nonpayment or other default under the Obligations or intention to
accelerate or actual acceleration of the Obligations; (d) notice of and/or any
right to consent or object to (i) the assignment of any interest in the
Obligations, (ii) the creation, advancement, accrual, renewal, increase,
extension, or rearrangement of the Obligations, or (iii) the amendment and/or
modification of any of the instruments, agreements or documents executed in
connection with the Obligations; (e) filing
5
<PAGE>
of suit or diligence by Looper Reed in collection or enforcement of the
Obligations; (f) any other notice regarding the Obligations; and (g) all
rights of redemption in and to the Collateral in the event any of the
Collateral is sold at public or private sale after any Default hereunder.
TMI hereby agrees that Looper Reed may at any time, and from time to
time, at Looper Reed's discretion and with or without notice or consideration
to or consent from any party: (a) allow substitution or withdrawal of any
collateral or other security for the Obligations; (b) sell, exchange,
release, subordinate its lien on, surrender, release upon or otherwise deal
with in any manner and in any order any property at any time pledged or
mortgaged to secure or securing the Obligations or any liabilities incurred
directly or indirectly hereunder or any offset against any of said
liabilities; (c) release any party liable on the Obligations including TMI or
any other guarantor; (d) extend, renew, or rearrange all or any part of the
Obligations at any time and from time to time, whether or not for a term or
terms in excess of the original term thereof; (e) modify or amend any of the
instruments, agreements, or documents executed in connection with the
Obligations; or (f) exercise or refrain from exercising any rights against
TMI or others, or otherwise act or refrain from acting. Any of such actions
may be taken without impairing or diminishing the Obligations of TMI
hereunder.
This Agreement is intended for and shall inure to the benefit of Looper
Reed and each and every person who shall from time to time be or become the
holder or owner of all or any part of the Obligations, and each and every
reference hereto to "Looper Reed" shall include and refer to each and every
successor or assignee of Looper Reed at any time holding or owning any part
of or interest in any part of the Obligations. This Agreement shall be
transferable and negotiable with the same force and effect, and to the same
extent, that the Obligations are transferable and negotiable, it being
understood and stipulated that upon assignment or transfer by Looper Reed of
any of the Obligations, the legal holder or owner of said Obligations (or a
part thereof or interest therein thus transferred or assigned) shall (except
as otherwise stipulated by Looper Reed in its assignment) have and may
exercise all of the rights granted to Looper Reed under this Agreement to the
extent of that part of or interest in the Obligations thus assigned or
transferred. TMI expressly waives notice of transfer or assignment of the
Obligations, or any part thereof, or of the rights of Looper Reed hereunder.
This Agreement may be executed in one or more counterparts, with each
counterpart being deemed an original, and all of which together shall
constitute one and the same document.
THIS AGREEMENT, AND ALL DOCUMENTS AND INSTRUMENTS CONTEMPLATED THEREIN
REPRESENT THE FINAL AGREEMENT BETWEEN TMI AND LOOPER REED AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
EXECUTED as of the day and year first written above.
THERMAL MEDICAL IMAGING, INC.
Address:
1760 South Telegraph Road
Suite 202
Bloomfield Hills, Michigan 48302
By: /s/ Kenneth M. Dodd
-------------------------------------
Kenneth M. Dodd, President
6
<PAGE>
LOOPER, REED, MARK & McGRAW
INCORPORATED
Address:
Nine Greenway Plaza, Suite 1717
Houston, Texas 77046 By: /s/ Donald R. Looper
------------------------------------
Donald R. Looper
7
<PAGE>
EXHIBIT "A"
FINANCING STATEMENTS
<PAGE>
EXHIBIT "B"
WRITTEN CONSENT OF SHAREHOLDER
OF THERMAL MEDICAL IMAGING, INC.
August ___, 1997
The undersigned, Computerized Thermal Imaging, Inc., a Nevada
corporation ("CTI"), as shareholder and record owner of 30,450,000 shares of
common stock, $.001 per share, in Thermal Medical Imaging, Inc., a Nevada
corporation (the "Corporation"), does hereby approve and consent to the
adoption of the following resolutions which, pursuant to the rights granted
by N.R.S. 78.320 or a similar successor provision, shall have the same force
and effect as if adopted at a formal meeting of the shareholders of the
Corporation.
RESOLVED, that Kenneth M. Dodd, President of Thermal Medical Imaging,
Inc., is hereby authorized and instructed to execute the Pledge
Agreement, in substantially the same form attached hereto as EXHIBIT
"A", with Looper, Reed, Mark & McGraw Incorporated ("Looper Reed")
securing all present and future indebtedness relating to the
performance of legal services by Looper Reed for Computerized Thermal
Imaging, Inc. and Thermal Medical Imaging, Inc.; and
RESOLVED FURTHER, that the proper officers of the Corporation be and
hereby are, authorized, in the name and on behalf of this Corporation,
and under its corporate seal or otherwise, to execute and deliver any
and all agreements, certificates, instruments and documents and to do
and perform, or cause to be done and performed, all such acts and
things as may be necessary or appropriate, as they deem advisable, to
carry out the intent and accomplish the purposes of the foregoing
resolution and the transaction contemplated thereby.
IN WITNESS WHEREOF the undersigned has executed this Consent of Shareholder
of Thermal Medical Imaging, Inc. as of the date first written above.
COMPUTERIZED THERMAL IMAGING, INC.,
a Nevada corporation
By:
---------------------------------------------
Richard V. Secord, Chief Operating Officer
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EXHIBIT 10(x)
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into this 13th day of
November, 1997, and effective September 18, 1997 (the "Effective Date") by and
between COMPUTERIZED THERMAL IMAGING, INC., a Nevada corporation ("Company"),
and RICHARD V. SECORD ("Executive").
W I T N E S S E T H:
WHEREAS, the Executive has served as Chief Operating Officer-International
Operations, then as President and now as Chief Operating Officer, of the Company
and during the period of his service has contributed significantly to the
development, expansion, and management of the business of the Company in a
capable and efficient manner resulting in substantial benefits to the Company;
and
WHEREAS, the Company recognizes that the Executive's experience,
knowledge, reputation and contacts will continue to be of great value to the
Company and, therefore, the Company desires to retain the benefit of such
experience, knowledge, reputation and contacts and to prevent them from being
availed of by the Company's competitors; and
WHEREAS, the Company recognizes that substantial inducements and
incentives must be offered to the Executive so that the Company may retain
his services for the future.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the receipt and sufficiency of which are hereby acknowledged, the
Company and the Executive agree as follows:
1. EMPLOYMENT.
The Company hereby agrees to employ the Executive, and the
Executive hereby accepts employment, upon the terms and conditions specified
in this Agreement. Unless otherwise provided, this Agreement shall supersede
all prior agreements, oral or written, between the parties.
2. DUTIES AND RESPONSIBILITIES.
2.1 The Executive shall devote his full business time, efforts,
and abilities to the Company for the profit, benefit, and advantage of the
Company, and shall promptly obey and comply with all lawful rules,
regulations, and orders that may be issued from time to time by the Company.
The Executive also agrees to perform, without additional compensation, such
other executive, management, and administrative services for any parent,
subsidiary, partnership, joint venture, or other entity affiliated with the
Company as may be reasonably necessary. The Executive shall not be required
to provide such services from any particular location.
2.2 The Executive shall be employed initially under this Agreement
in the capacity of Chief Operating Officer and shall report to the Board of
Directors of the Company. During the term hereof, the Executive shall
perform such services and functions as may be designated from time to time by
the Company.
2.3 The Executive represents and warrants that Executive has no
prior obligations, written or oral, including confidentiality agreements or
other agreements, which restrict Executive's ability to enter into this
Agreement or to perform any duties for the Company. Executive agrees to
indemnify and hold harmless the Company from any and all legal actions in
which it is alleged or asserted that Executive has such obligations or
agreements including, but not limited to, paying the Company's attorney's
fees, costs, and any damages the Company may be assessed.
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3. COMPENSATION.
3.1 In consideration for the services provided hereunder during
the term of the Executive's employment under this Agreement and the covenants
contained in this Agreement, the Executive shall be paid an annual
compensation of $175,000, payable in 12 equal monthly installments of
$14,583.33 each ("Salary"). Any Salary owed shall be payable in accordance
with the usual payroll practices of the Company and subject to all customary
payroll deductions. The Salary may be increased at any time during the
course of the Executive's term of employment at the sole discretion of the
Company.
3.2 The Executive shall retain the options to purchase common
stock of the Company granted to the Executive by the Personal Services
Agreement ("PSA") and the Employee Stock Option Agreement, as amended and
attached hereto as EXHIBIT "A", (2,000,000 shares at $1.25) both deemed
effective June 12, 1995. The terms and conditions of the Employee Stock
Option Agreement, as amended, and "piggy-back" registration rights are
granted to Executive.
3.3 The Executive shall be granted an additional Option to
purchase 1,250,000 shares of common stock of the Company pursuant to the
Employee Stock Option Agreement, attached hereto as EXHIBIT "B", and
incorporated by reference herein.
3.4 During the term of the Executive's employment under this
Agreement, the Executive also shall be entitled to receive the following:
(i) participation in the Company's present and future benefit
plans generally offered to other employees;
(ii) reimbursement of reasonable expenses related to the
performance of his duties hereunder; provided, however, that in order to be
reimbursed the Executive must submit vouchers or other satisfactory evidence
of such expenses as required by Company policies;
(iii) three (3) weeks of vacation (paid, if a Salary has been set
by the Board of Directors) per work year earned ratably per year and all
holidays for which the Company is not open for business; and
(iv) a monthly automobile allowance of $500.00 per month.
4. TERM AND TERMINATION.
4.1 The term of the Executive's employment under this Agreement
shall commence on the Effective Date and shall continue thereafter for a
period of three (3) years, but shall be renewed for successive one (1) year
terms thereafter unless and until either party provides written notice of
non-renewal at least fourteen (14) days prior to the annual renewal date.
Notwithstanding the foregoing, the Executive may terminate this Agreement for
any reason by giving the Company at least fourteen (14) days written notice.
If the Executive voluntarily terminates this Agreement, the Company shall
have no further financial liability to the Executive beyond the effective
date of such termination.
4.2 Notwithstanding anything in this Agreement to the contrary,
the Executive's employment with the Company may be terminated immediately at
any time by the Company for "cause" which shall mean upon the occurrence of
any of the following events:
(i) breach or attempted breach by Executive of any provision of
this Agreement or negligent or unsatisfactory performance of his duties;
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(ii) breach or attempted breach by Executive of fiduciary duties
owed to the Company as an officer and/or director, including the
misappropriation or attempted misappropriation of funds or property of the
Company;
(iii) attempting to or securing any personal profit or benefit
by Executive not thoroughly disclosed to and approved by the Board of
Directors in connection with any transaction entered or to be entered on
behalf of the Company or any affiliate;
(iv) conduct on any part of the Executive, even if not in
connection with the performance of his duties hereunder, which would result
in serious prejudice to the interests or reputation of the Company including,
without limitation, conviction of a felony criminal offense; or
(v) if, for a continuous period of thirty (30) calendar days, or
for more than thirty (30) calendar days in any calendar year, excluding any
authorized vacation or authorized leave of absence, the Executive is absent
or expected to be absent from his full time employment or is otherwise unable
to perform his duties, as reasonably determined by a disinterested physician
selected by the Company, by reason of illness, injury, or mental or physical
disability.
4.3 In the event of termination of employment, the Executive shall
be entitled to receive (i) the Salary compensation due, if any, on a pro-rata
basis, (ii) reimbursement of expenses to the effective date of termination,
and (iii) an amount, if any, equal to any earned but unused vacation time
based upon the then Salary, if any, computed on a daily basis subject to all
customary payroll deductions.
5. CONFIDENTIAL INFORMATION AND DISCOVERIES OF THE COMPANY.
5.1. INTELLECTUAL PROPERTY. Executive hereby assigns to the
Company all inventions, processes, discoveries, creations and improvements
(whether or not patentable) which are conceived, made or learned by Executive
alone or jointly with others in the course of his employment with the Company
that pertain to the business interests of the Company or relating to areas
which may be reasonably anticipated to be encompassed by such business
interests of the Company at the time of conception. Executive, at any time
during or after his employment, agrees to promptly disclose to the Company
all such processes, inventions, discoveries, creations or improvements
assigned hereby. All works of authorship created by the Executive on behalf
of the Company during the term of this Agreement, solely or jointly with
others, shall be considered works made for hire under the Copyright Act of
1976, as amended, and shall be owned entirely by the Company. Executive will
also, at the Company's expense, cooperate in all lawful acts which may be
necessary or desirable in the judgment of the Company to protect or vest
title to such inventions, processes, discoveries, creations or improvements
in the Company or its nominee, including, without limitation, applying for,
obtaining, maintaining, and enforcing patents thereon in all countries of the
world, and the execution of documents related thereto.
5.2. CONFIDENTIAL INFORMATION. The Executive acknowledges that in
the performance of his services and duties hereunder he will receive or come
in contact with, among other things, trade secrets (both technical and
non-technical), know-how, lists of customers, suppliers, contractors,
customers, employee records and other confidential and proprietary
information about the business of the Company (hereinafter collectively
referred to as "Confidential Information"). The Executive further
acknowledges that such Confidential Information was obtained at substantial
cost to the Company and provides the Company with a significant advantage
over competitors. The Executive understands that such Confidential
Information is the sole property of the Company, and agrees that both during
and after his employment with the Company he will not at any time use or
reveal Confidential Information to anyone except as permitted by the Company
or required by Executive's employment duties with the Company. The Executive
further agrees not to use any information made available to or coming into
the possession of the Executive in a manner that is adverse to the business
of the Company. Upon termination of employment hereunder, the Executive
agrees to surrender to the Company all papers, documents, writings and other
property produced by him or coming
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into his possession by or through his employment hereunder, and the Executive
agrees that all such materials and Confidential Information will at all times
remain the property of the Company.
6. AGREEMENT NOT TO SOLICIT.
As an express condition to this Agreement, the Executive agrees,
during the term of his employment, and for a period of two (2) years after
the termination of his employment with the Company for any reason, the
Executive will not, directly or indirectly, for his own account or for the
account of others, induce any of the Company's employees to leave their
employment, nor will the Executive in any other way interfere with the
employee relations of the Company.
7. NON-COMPETITION.
7.1 The Executive acknowledges that he shall receive special
training and knowledge from the Company, including access to information as
detailed in Section 5.2. The Executive acknowledges that this information is
valuable to the Company and, therefore, its protection and maintenance
constitutes a legitimate interest to be protected by the Company by this
covenant not to compete. Therefore, the Executive agrees that during his
employment with the Company, and for a period of two (2) years after the
termination of his employment with the Company for any reason, the Executive
will not, directly or indirectly, either as an employee, employer,
consultant, agent, principal, partner, stockholder, corporate officer,
director, or in any other individual or representative capacity, engage or
participate in any business that is in competition in any manner whatsoever
with the business of the Company on the date of termination of employment
within 50 miles of each city in which the Company is conducting substantial
business. Notwithstanding the preceding sentence to the contrary, the
Executive may purchase or otherwise acquire up to (but not more than) one
percent (1%) of any class of securities of any enterprise (but without
otherwise participating in the activities of such enterprise) if such
securities are listed on any national or regional securities exchange or have
been registered under Section 12(g) of the Securities Exchange Act of 1934.
The Executive represents to the Company that his experience and capabilities
are such that the enforcement of the restrictions contained in this Section 7
would not be unduly burdensome to the Executive.
8. REMEDIES.
The Executive acknowledges that the provisions of Sections 5, 6,
and 7 shall survive the termination of Executive's employment with the
Company and are reasonable and necessary for the protection of the Company
and that the Company will be irrevocably damaged if such provisions are not
specifically enforced. Accordingly, in the event of breach or threatened
breach of the provisions of Sections 5, 6, or 7, it is understood and agreed
that the Company shall be entitled to injunctive relief (without bond or
other security being required) as well as any and all other applicable
remedies at law and in equity. Should a court of competent jurisdiction
declare any of these provisions unenforceable due to an unreasonable
restriction, or for any other reason, such court shall have the express
authority of the parties to this Agreement to reform such provisions and/or
to grant the Company any and all other relief, at law or in equity,
reasonably necessary to protect the interests of the Company. The Executive
expressly acknowledges that (i) he has been encouraged to obtain separate
legal counsel in connection with the negotiation of this Agreement who can
explain the legal effects of these provisions and (ii) he considers these
provisions to be reasonable.
9. SUBMISSION TO JURISDICTION.
Each party hereby irrevocably submits to the personal jurisdiction
of the United States District Court for Harris County, Texas, as well as of
the District Courts of the State of Texas in Harris County, Texas over any
suit, action or proceeding arising out of or relating to this Agreement.
Each party hereby irrevocably waives, to the fullest extent permitted by law,
any objection which it may now or hereafter have to the laying of the venue
of any such mediation, arbitration, suit, action or proceeding brought in any
such county and any claim that any such mediation, arbitration, suit, action
or proceeding brought in such county has been brought in an inconvenient
forum.
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10. ALTERNATIVE DISPUTE RESOLUTION.
ANY CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT, OR THE BREACH, TERMINATION, OR VALIDITY THEREOF, SHALL BE SETTLED
BY FINAL AND BINDING ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL
ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION ("AAA RULES") IN
EFFECT AS OF THE EFFECTIVE DATE OF THIS AGREEMENT. THE AMERICAN ARBITRATION
ASSOCIATION ("AAA") SHALL BE RESPONSIBLE FOR (i) APPOINTING A SOLE
ARBITRATOR, AND (ii) ADMINISTERING THE CASE IN ACCORDANCE WITH THE AAA
RULES. THE SITUS OF THE ARBITRATION SHALL BE HOUSTON, TEXAS. UPON THE
APPLICATION OF EITHER PARTY TO THIS AGREEMENT, AND WHETHER OR NOT AN
ARBITRATION PROCEEDING HAS YET BEEN INITIATED, ALL COURTS HAVING JURISDICTION
HEREBY ARE AUTHORIZED TO: (a) ISSUE AND ENFORCE IN ANY LAWFUL MANNER, SUCH
TEMPORARY RESTRAINING ORDERS, PRELIMINARY INJUNCTIONS AND OTHER INTERIM
MEASURES OF RELIEF AS MAY BE NECESSARY TO PREVENT HARM TO A PARTIES INTEREST
OR AS OTHERWISE MAY BE APPROPRIATE PENDING THE CONCLUSION OF ARBITRATION
PROCEEDINGS PURSUANT TO THIS AGREEMENT; AND (b) ENTER AND ENFORCE IN ANY
LAWFUL MANNER SUCH JUDGMENTS FOR PERMANENT EQUITABLE RELIEF AS MAY BE
NECESSARY TO PREVENT HARM TO A PARTIES INTEREST OR AS OTHERWISE MAY BE
APPROPRIATE FOLLOWING THE ISSUANCE OF ARBITRAL AWARDS PURSUANT TO THIS
AGREEMENT. TO THE MAXIMUM EXTENT PERMITTED BY LAW, EACH PARTY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHT TO CONSEQUENTIAL, EXEMPLARY,
OR PUNITIVE DAMAGES REGARDLESS OF THE FORUM FOR THE PROCEEDINGS. ANY ORDER
OR JUDGEMENT RENDERED BY THE ARBITRATOR MAY BE ENTERED AND ENFORCED BY ANY
COURT HAVING COMPETENT JURISDICTION.
11. MISCELLANEOUS.
11.1 NOTICES. Any notice required or permitted under this
Agreement shall be in writing and shall be deemed to be delivered three (3)
business days after deposit in the United States mail, postage prepaid,
certified or registered mail, return receipt requested, addressed as follows:
Company: Computerized Thermal Imaging, Inc.
141 North State Street, Suite 161
Lake Oswego, Oregon 97034
Executive: Richard V. Secord
515 Pocahontas Drive
Fort Walton Beach, Florida 32547
Notice given in any other manner shall be effective when delivered to
the addressee. The address for notice may be changed by notice given in
accordance with this provision.
11.2 AMENDMENTS. This Agreement and the documents referred to
herein constitute the entire agreement between the parties with respect to
the employment of the Executive and supersedes any prior agreements and may
not be amended, supplemented, waived, modified, or amended except by written
instrument executed by the parties hereto. There are no oral agreements
between the parties.
11.3 PRESERVATION OF BUSINESS: FIDUCIARY RESPONSIBILITY. The
Executive shall use his best efforts to preserve the business and
organization of the Company, to keep available to the Company the services of
its employees, to preserve the business relations of the Company, and the
Executive shall not commit any act that might reasonably be expected to
injure the Company. The Executive shall observe and fulfill proper standards
of fiduciary responsibility attendant upon his service and office.
11.4 ASSIGNMENTS. The Company may not assign this Agreement
without the consent of the Executive, except in connection with a sale of
substantially all of the assets of the Company or the merger or
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consolidation of the Company with a successor entity provided in such events
such transferee entity assumes all of the obligations of the Company pursuant
to this Agreement. The rights and obligations of the Executive hereunder are
personal to him, and no such rights, benefits, duties or obligations shall be
subject to voluntary or involuntary alienation, assignment, or transfer.
11.5 EFFECT OF AGREEMENT. This Agreement shall be binding upon the
Executive and his heirs, executors, administrators, and legal representatives
and upon the Company and its successors and assigns.
11.6 WAIVER OF BREACH. The waiver by either party hereto of a
breach of any provision of this Agreement by the other party hereto shall not
operate or be construed as a waiver by such party of any subsequent breach of
such other party.
11.7 GOVERNING LAW. This Agreement and all matters relating
thereto shall be governed by and construed in accordance with the laws of the
State of Texas without regard to any conflicts of laws provisions thereof.
11.8 SEVERABILITY. If any provision of this Agreement is declared
unenforceable, such declaration shall not affect the validity of any other
provision of this Agreement.
11.9 CONSTRUCTION. The headings contained in this Agreement are
for reference purposes only and shall not affect this Agreement in any manner
whatsoever. Wherever required by the context, any gender shall include any
other gender, the singular shall include the plural, and the plural shall
include the singular.
IN WITNESS WHEREOF, INTENDING TO BE LEGALLY BOUND, the undersigned have
executed this Consent in multiple counterparts, to be effective as of the
date and time first mentioned above, each of which together shall be
considered one original, and whether by original or facsimile signature shall
be effective in all respects as though an original. The Executive
acknowledges that he has read this Agreement and has been represented by
separate legal counsel and he understands that executing this Agreement is a
condition of his employment by the Company.
COMPANY:
COMPUTERIZED THERMAL IMAGING, INC.
By: /s/ David B. Johnston
------------------------------------
David B. Johnston, CEO
EXECUTIVE:
/s/ Richard V. Secord
------------------------------------
Richard V. Secord
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EXHIBIT 10(y)
COMPUTERIZED THERMAL IMAGING, INC.
EMPLOYEE STOCK OPTION AGREEMENT
THIS EMPLOYEE STOCK OPTION AGREEMENT (this "Agreement") is entered into
this 15 day of January, 1998, and effective September 18, 1997 (the "Date
of Grant") by and between COMPUTERIZED THERMAL IMAGING, INC., a Nevada
corporation (the "Company"), and RICHARD V. SECORD, an individual (the
"Employee").
I. NOTICE OF GRANT
You have been granted an option to purchase certain shares of common
stock of the Company, subject to the terms and conditions of both this
Agreement and the Company's 1997 Stock Option and Restricted Stock Plan as
may be amended from time to time (the "Plan"), as follows:
Date of Grant : September 18, 1997
Total Number of
Option Shares : 1,250,000 shares
Exercise Price : $0.70 per share
Total Exercise Price : $875,000.00
Type of Option : ___ Incentive Stock Option
_X_ Nonstatutory Stock Option
Expiration Date : Five (5) years from the Date of
Grant
VESTING SCHEDULE: This Option may be exercised, in whole or in part, in
accordance with the following vesting schedule:
September 18, 1997 : 25% (312,500 shares)
Each year thereafter : 25% (312,500 shares)
Therefore, the Option will be completely vested as of three (3) years after
the Date of Grant.
II. STOCK OPTION AGREEMENT
WHEREAS, the Company and the Employee have entered into that certain
Employment Agreement simultaneously with the execution hereof (the
"EMPLOYMENT AGREEMENT");
WHEREAS, this Agreement is being entered into pursuant to the Employment
Agreement to create options to purchase shares of common stock, $.001 par
value, in the Company (the "SHARES");
WHEREAS, the terms and conditions of the Plan shall govern the Option
granted pursuant to this Agreement; and
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WHEREAS, the Administrator of the Plan of the Company considers it
advisable and in the best interests of the Company to grant said Option to
Employee upon the terms and conditions of this Agreement and the Plan;
NOW, THEREFORE, for and in consideration of the mutual covenants
contained herein and for other good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. GRANT OF OPTION. The Company hereby grants to Employee effective
as of the Date of Grant, as set forth above in the Notice of Grant, an option
(the "OPTION") to purchase all or any portion of the number of Shares set
forth in the Notice of Grant, at the exercise price set forth in the Notice
of Grant (the "EXERCISE PRICE"), subject to the terms and conditions of the
Plan, which is incorporated herein by reference. In the event of a conflict
between the terms and conditions of the Plan and the terms and conditions of
this Agreement, the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option
under Section 422 of the Internal Revenue Code ("CODE"); provided, however,
to the extent this Option exceeds the $100,000 rule of Code Section 422(d),
it shall be treated as a Nonstatutory Stock Option ("NSO").
2. EXERCISE OF OPTION.
(a) RIGHT TO EXERCISE. This Option is exercisable in whole or in
part in accordance with the Vesting Schedule on or before the Expiration
Date all as set forth in the Notice of Grant and the applicable provisions of
the Plan and this Agreement.
(b) TERMINATION WITHOUT CAUSE. In the event the Company
terminates the Employee's employment without "cause" (as defined in Section
4.2 of the Employment Agreement) then any portion of the Option which the
Employee has the right to exercise as of the date of such termination of
employment must be exercised on or before ninety (90) days after the
effective date of termination. The balance of the Option, if any, shall
revert automatically to the Company.
(c) TERMINATION DUE TO RESIGNATION. In the event the Employee
resigns his full time employment with the Company for any reason whatsoever
then any portion of the Option which the Employee has the right to exercise
as of the date of such resignation must be exercised on or before ninety (90)
days after the effective date of such resignation. The balance of the Option,
if any, shall revert automatically to the Company.
(d) TERMINATION DUE TO DEATH OR DISABILITY. In the event of the
death or permanent and total disability of the Employee (as defined in the
Plan) while employed by the Company, then any portion of the Option which is
exercisable as of the date of death or permanent and total disability may be
exercised as provided by the Plan.
(e) FINAL TERMINATION. Notwithstanding anything in this Agreement
to the contrary, the Option will terminate and revert to the Company
automatically without notice and be of no further force or effect:
(i) to the extent the Option is not yet exercised as of and
in the event the Company terminates the Employee's employment with "cause"
(as defined in Section 4.2 of the Employment Agreement); and
(ii) to the extent the Option is not yet exercised prior to
the Expiration Date set out in the Notice of Grant, or as otherwise governed
by the Plan.
3. METHOD OF EXERCISE. The Option may be exercised on one or more
occasions. The Option shall be exercised by Employee delivering to the
Company written notification on or before the dates described above that
Employee desires to exercise the Option and indicating which portion of the
Option is to be exercised. The Option may be exercised only for whole
Shares. The Company and Employee shall then set a mutually convenient time
for a Closing which shall be no more than ten (10) calendar days from receipt
of the notification. At such Closing, the Employee shall deliver to the
Company an amount in immediately available funds equal to the Exercise Price
per share
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as set forth in the Notice of Grant multiplied by that portion of the Option
actually exercised. Additionally, the Employee shall deliver to the Company
at such Closing an amount equal to any applicable employment taxes. Within
ten (10) days of such Closing, the Company shall issue instructions to its
Transfer Agent and Registrar to issue to Employee certificate(s) for said
Shares (collectively, the "OPTION SHARES"). Employee shall execute such
documents and instruments as requested by the Company to evidence the
issuance of the Option Shares. The Company may, in its sole discretion if
requested by the Employee, accept payment for the Option Shares by delivery
of other Shares having a fair market value on the date of delivery equal to
the total Exercise Price of the Shares so exercised and any applicable
employment taxes.
4. REGISTRATION RIGHTS. All Shares in the Company which the Employee
obtains from the exercise of Options will be subject to the following
"piggy-back" registration rights:
If the Company at any time proposes to file, or does file, any registration
statement under the Securities Act of 1933, as amended (the "Securities
Act") covering the class of Shares which Employee holds, whether that
registration is for securities to be issued by the Company or then held by
another party, Employee will have the right to have any part or all of the
Shares then held to be registered under such proposed registration
statement. If Employee wishes to exercise such right, Employee shall
notify the Company in writing of such desire within thirty (30) days after
the date Employee receives notice of the proposed registration from the
Company. Upon receipt of Employee's timely request for registration under
this Section 4, the Company will add the Shares Employee requested be
registered to the proposed registration statement; provided, that if after
Employee makes a request for registration and the Company decides not to
register or delay such registration, for any reason, the Company will give
Employee written notice of its decision. However, no such determination
will prejudice Employee's rights to other and further registrations to be
made by the Company from time to time. The Company will bear all costs and
expenses of each and all such registrations incurred in connection with the
exercise of rights granted under this Section 4.
5. NON-TRANSFERABILITY OF OPTION. Except as hereinafter set forth and
the Plan, the Option shall not be sold, transferred, pledged, or exchanged in
any manner and shall be exercisable only by Employee. Employee may, however,
transfer all or any portion of the Option upon the express written consent of
the Company approving in its sole discretion the terms and conditions of the
transfer and the party or parties to whom all or any portion of the Option is
transferred. Any attempted sale, pledge, assignment, or other transfer of
the Option shall be null and void without force or effect.
6. REQUIREMENTS OF LAW.
(a) COMPLIANCE WITH LAWS. Notwithstanding anything in this
Agreement to the contrary, the Company shall not be required to sell or issue
any Shares under this Agreement if the issuance of such Shares shall
constitute a violation by Employee or the Company of any provisions of any
law or regulation of any governmental authority or the Bylaws of the Company.
The Company shall not be obligated to take any affirmative action other than
that which is specifically set forth in this Paragraph 6 in order to cause
the exercise of the Option or the issuance of Shares pursuant hereto in order
to comply with any law or regulation of any governmental authority.
(b) FEDERAL AND STATE SECURITIES LAWS. Upon exercise of the
Option, unless a registration statement under the Securities Act, is in
effect with respect to the Shares covered hereby, the Company shall not be
required to issue such Shares unless the Company has received evidence
reasonably satisfactory to it that such issuance is exempt from registration
under the Securities Act and all applicable state securities laws. The
Company may, but shall in no event be obligated to, register any securities
covered hereby pursuant to the Securities Act or any applicable state
securities laws. The certificate(s) issued representing the Option Shares
may bear a legend in substantially the following form:
"The shares represented by this certificate have been acquired for
investment and may not be sold or transferred unless the same are
registered under the Securities Act of 1933, as amended, or the
Company receives an opinion from counsel reasonably satisfactory to
the Company that such registration is not required for such sale or
transfer or that the shares have been legally sold in broker
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transactions pursuant to Rule 144 of the rules and regulations of the
Securities and Exchange Commission promulgated under the Securities
Act of 1933."
(c) INVESTMENT INTENT. Consultant hereby represents and warrants
that the Options and Option Shares are being acquired solely for the account
of Consultant for investment purposes only and not with a view to or for the
resale, distribution, subdivision, or fractionalization thereof; Consultant
has no contract, understanding, undertaking, agreement, or arrangement with
any person to sell, transfer or pledge to any person the Options or Option
Shares or any part thereof; Consultant has no present plans to enter into any
such contract, undertaking, agreement or arrangement; Consultant understands
the legal consequences of the foregoing representations and warranties to
mean that Consultant must bear the economic risk of the investment in the
Option Shares for an indefinite period of time; Consultant has such knowledge
and experience in financial and business matters that Consultant is capable
of evaluating the merits and risks of acquiring the Option Shares; and
Consultant acknowledges that the acquisition of the Option Shares involves a
HIGH degree of risk that may result in the loss of the total amount of
Consultant's investment in the Options and Option Shares.
(d) DUE DILIGENCE. Consultant acknowledges that it has for a
reasonable amount of time had an opportunity to ask questions and receive
answers concerning the terms and conditions of the issuance of the Options
and Option Shares and the actual and proposed business and affairs of the
Company, and is satisfied with the results thereof, and been given access, if
requested, to all documents with respect to the Company or this transaction,
as well as to such other information that Consultant has requested to
evaluate an investment in the Options and Option Shares.
7. NO RIGHTS AS STOCKHOLDER. Employee shall have no rights as a
stockholder of the Company with respect to the Option Shares until the date
of issuance of a certificate for such Shares; no adjustment for
distributions, or otherwise, shall be made if the record date therefor is
prior to the date of issuance of such certificate.
8. CHANGES IN THE COMPANY'S STRUCTURE.
(a) CHANGES IN STRUCTURE. The existence of the Option shall not
affect in any way the right or power of the Company or its officers,
directors, or stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or
any issue of bonds, debentures, or any other security or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business or any other corporate act or proceeding, whether of a
similar character or otherwise.
(b) CHANGES IN NUMBER OF SHARES. If, while the Option is
outstanding, the Company shall effect a subdivision or consolidation of
Shares or other capital readjustment, the payment of a stock dividend, or
other increase or reduction of the number of Shares outstanding, without
receiving compensation therefor in money, services, or property, then (i) in
the event of such an increase in the number of Shares outstanding, the number
of Shares then subject to the Option shall be proportionately increased, and
the Exercise Price shall be proportionately reduced and (ii) in the event of
such a reduction in the number of Shares outstanding, the number of Shares
then subject to the Option shall be proportionately reduced, and the Exercise
Price shall be proportionately increased.
(c) CHANGES IN CORPORATE STRUCTURE. After a merger of one or more
corporations into the Company or after a consolidation of the Company and one
or more corporations in which the Company shall be the surviving corporation,
Employee shall, at no additional cost, be entitled upon exercise of the
Option to receive (subject to any required action by the stockholders) in
lieu of the number of Shares as to which the Option shall then be so
exercisable, the number and class of Shares or other securities to which
Employee would have been entitled pursuant to the terms of the agreement of
merger or consolidation if, immediately prior to such merger or
consolidation, Employee had been the holder of record of a number of Shares
equal to the number of Shares as to which the Option shall be so exercised.
(d) ISSUANCE OF SHARES. Except as hereinbefore expressly
provided, the issuance by the Company of shares of any class, or securities
convertible into shares of any class, for cash or property, or for labor or
services,
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either upon direct sale or upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of Shares or obligations of the
Company convertible into such Shares or other securities, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the number
or price of the Shares then subject to the Option.
9. EXPENSES. Each party shall pay its own expenses, including legal
expenses and attorneys' fees, which have been or may be incurred in
connection with the preparation, administration, amendment, or modification
of this Agreement and the other documents and instruments executed in
connection herewith.
10. NOTICES. Any notices or consents required or permitted by this
Agreement shall be in writing and shall be deemed to have been sufficiently
given if delivered in person, or if sent by certified mail, return receipt
requested, or telexed or telefaxed to the party entitled thereto with
confirmation of transmission, addressed as set forth on the signature pages
hereto, unless such address is changed by written notice hereunder. If so
mailed the same shall not be deemed effective until three (3) business days
after posting.
11. AMENDMENTS. No amendment, modification or waiver of this Agreement
or any other agreements or documents executed pursuant hereto shall be
effective unless the same is in writing and signed by the person against whom
such amendment is sought to be enforced.
12. BINDING EFFECTS. This Agreement shall be binding upon and inure to
the benefit of each of the parties hereto and its heirs, successors,
permitted assigns and legal representatives.
13. GOVERNING LAW. This Agreement and all matters relating thereto
shall be governed by and construed in accordance with the laws of the State
of Texas, without regard to any conflicts of laws principles thereof.
14. ALTERNATIVE DISPUTE RESOLUTION. ANY CONTROVERSY OR CLAIM ARISING
OUT OF OR RELATING TO THIS AGREEMENT, OR THE BREACH, TERMINATION, OR VALIDITY
THEREOF, SHALL BE SETTLED BY FINAL AND BINDING ARBITRATION IN ACCORDANCE WITH
THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION
("AAA RULES") IN EFFECT AS OF THE EFFECTIVE DATE OF THIS AGREEMENT. THE
AMERICAN ARBITRATION ASSOCIATION ("AAA") SHALL BE RESPONSIBLE FOR (i)
APPOINTING A SOLE ARBITRATOR, AND (ii) ADMINISTERING THE CASE IN ACCORDANCE
WITH THE AAA RULES. THE SITUS OF THE ARBITRATION SHALL BE HOUSTON, TEXAS.
UPON THE APPLICATION OF EITHER PARTY TO THIS AGREEMENT, AND WHETHER OR NOT AN
ARBITRATION PROCEEDING HAS YET BEEN INITIATED, ALL COURTS HAVING JURISDICTION
HEREBY ARE AUTHORIZED TO: (a) ISSUE AND ENFORCE IN ANY LAWFUL MANNER, SUCH
TEMPORARY RESTRAINING ORDERS, PRELIMINARY INJUNCTIONS AND OTHER INTERIM
MEASURES OF RELIEF AS MAY BE NECESSARY TO PREVENT HARM TO A PARTIES INTEREST
OR AS OTHERWISE MAY BE APPROPRIATE PENDING THE CONCLUSION OF ARBITRATION
PROCEEDINGS PURSUANT TO THIS AGREEMENT; AND (b) ENTER AND ENFORCE IN ANY
LAWFUL MANNER SUCH JUDGMENTS FOR PERMANENT EQUITABLE RELIEF AS MAY BE
NECESSARY TO PREVENT HARM TO A PARTIES INTEREST OR AS OTHERWISE MAY BE
APPROPRIATE FOLLOWING THE ISSUANCE OF ARBITRAL AWARDS PURSUANT TO THIS
AGREEMENT. TO THE MAXIMUM EXTENT PERMITTED BY LAW, EACH PARTY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHT TO CONSEQUENTIAL, EXEMPLARY,
OR PUNITIVE DAMAGES REGARDLESS OF THE FORUM FOR THE PROCEEDINGS. ANY ORDER
OR JUDGEMENT RENDERED BY THE ARBITRATOR MAY BE ENTERED AND ENFORCED BY ANY
COURT HAVING COMPETENT JURISDICTION.
15. SUBMISSION TO JURISDICTION. Each party hereby irrevocably submits
to the personal jurisdiction of the United States District Court for Harris
County, Texas, as well as of the District Courts of the State of Texas in
Harris County, Texas over any suit, action or proceeding arising out of or
relating to this Agreement. Each party hereby irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such mediation, arbitration, suit,
action or proceeding brought in any such county and any claim that any such
mediation, arbitration, suit, action or proceeding brought in such county has
been brought in an inconvenient forum.
16. WAIVERS. The observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively
or prospectively) by the party entitled to enforce such term, but such waiver
shall be effective only if in a writing signed by the party or parties
against which such waiver is to be asserted. No delay or omission on the
part of any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver on the part of any party of
any right, power or privilege hereunder operate as a
5
<PAGE>
waiver of any other right, power or privilege hereunder nor shall any single
or partial exercise of any right, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, power
or privilege hereunder. All remedies, either under this Agreement or by law
or otherwise afforded to any party, shall be cumulative and not alternative.
17. ENTIRE AGREEMENT. This Agreement and the documents expressly
referred to herein constitute the entire agreement between the parties with
respect to the matters covered hereby, and any other prior or contemporaneous
oral or written understandings or agreements with respect to the matters
covered hereby are expressly superseded by this Agreement. There are no
unwritten or oral agreements between the parties.
18. SEVERABILITY. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be
declared judicially to be invalid, unenforceable or void, such decision will
not have the effect of invalidating or voiding the remainder of this
Agreement or affect the application of such provision to other persons or
circumstances, and the parties agree that the part or parts of this Agreement
so held to be invalid, unenforceable or void will be deemed to have been
stricken herefrom and the remainder of this Agreement will have the same
force and effect as if such part or parts had never been included herein.
Any such finding of invalidity or unenforceability shall not prevent the
enforcement of such provision in any other jurisdiction to the maximum extent
permitted by applicable law.
19. THIRD PARTY BENEFICIARIES. This Agreement does not create, and
shall not be construed as creating, any rights enforceable by any person or
entity not a party to this Agreement.
20. HEADINGS. The section headings in this Agreement are for
convenience of reference only and shall not be deemed to alter or affect the
meaning or interpretation of any provisions hereof.
21. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the day and year first above written.
[THIS SPACE INTENTIONALLY BLANK]
[SIGNATURES NEXT PAGE]
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COMPANY:
COMPUTERIZED THERMAL IMAGING, INC.,
a Nevada corporation
ADDRESS:
141 North State Street,
Suite 161 Lake Oswego,
Oregon 97034 By: /s/ David B. Johnston
------------------------------------
DAVID B. JOHNSTON,
Chief Executive Officer
EMPLOYEE:
ADDRESS:
515 Pocahontas Drive
Fort Walton Beach,
Florida 32547 /s/ Richard V. Secord
------------------------------------
RICHARD V. SECORD
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<PAGE>
CONSENT OF SPOUSE
The undersigned spouse of Employee has read and hereby approves the
terms and conditions of the Plan and this Agreement. In consideration of the
Company's granting his or her spouse the right to purchase Shares as set
forth in the Plan and this Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Agreement
and further agrees that any community property interest shall be similarly
bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or
exercise of rights under the Plan or this Agreement.
------------------------------------
Spouse of Employee
8
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EXHIBIT 10 (z)
COMPUTERIZED THERMAL IMAGING, INC.
EMPLOYEE STOCK OPTION AGREEMENT
Pursuant to that certain letter confirming terms for Personal Services
Agreement (the "Employment Agreement") dated June 12, 1995 between
Computerized Thermal Imaging, Inc. (the "Company") and Richard V. Secord (the
"Employee"), and under and subject to all terms and conditions of that
certain Computerized Thermal Imaging, Inc. 1995 Stock Option Plan (the
"Plan") of the Company, a copy of which is attached hereto and incorporated
by reference herein for all purposes, the Company hereby grants to Employee
the option to purchase 1,000,000 shares of the Company's Common Stock, $0.001
par value, at a price of $1.25 per share, subject to adjustment as provided
in the Plan and to all terms and conditions set forth herein.
Subject to forfeiture as hereafter provided, this Option becomes fully
vested and may be exercised by Employee after June 1, 1996, and must be
exercised, if at all, on or before the expiration of five (5) years from and
after the Start Date (as defined in the Employment Agreement). This Option
will expire, if not earlier exercisable and exercised, ten (10) years after
the date hereof.
The Option evidenced hereby shall be forfeited in its entirety by the
Employee if on or before June 1, 1996 Employee's employment with the Company
is terminated by the Company for cause or is voluntarily terminated by the
Employee.
If, as, and when Employee desires to exercise this Option, he may do so
by delivering written notice of such exercise to the Company at its offices
in Lake Oswego, Oregon, together with appropriate payment for the number of
shares covered by such notice.
The Employee hereby accepts and agrees to be bound by all the terms and
conditions of the Plan, to which this Option is subject.
Computerized Thermal Imaging, Inc.
By: /s/ David B. Johnston
------------------------------------
David B. Johnston, President
AGREED TO AND ACCEPTED effective as of
June 12, 1995.
/s/ Richard V. Secord
- ------------------------------------
Richard V. Secord, Employee
<PAGE>
EXHIBIT 10 (aa)
COMPUTERIZED THERMAL IMAGING, INC.
EMPLOYEE STOCK OPTION AGREEMENT
Pursuant to that certain letter confirming terms for Personal Services
Agreement (the "Employment Agreement") dated June 12, 1995 between
Computerized Thermal Imaging, Inc. (the "Company") and Richard V. Secord (the
"Employee"), and, if approved, under and subject to all terms and conditions
of that certain Computerized Thermal Imaging, Inc. 1995 Stock Option Plan
(the "Plan") of the Company, a copy of which is attached hereto and
incorporated by reference herein for all purposes, the Company hereby grants
to Employee the option to purchase 1,000,000 shares of the Company's Common
Stock, $0.001 par value, at a price of $1.25 per share, subject to adjustment
as provided in the Plan and to all terms and conditions set forth herein.
Subject to forfeiture as hereafter provided, this Option becomes fully
vested and may be exercised by Employee after continued employment through
June 12, 1998. This Option will expire, if not earlier exercisable and
exercised, ten (10) years after the date hereof.
The Option evidenced hereby shall be forfeited in its entirety by the
Employee if on or before June 1, 1996 Employee's employment with the Company
is terminated by the Company for cause or is voluntarily terminated by the
Employee.
If, as, and when Employee desires to exercise this Option, he may do so
by delivering written notice of such exercise to the Company at its offices
in Lake Oswego, Oregon, together with appropriate payment for the number of
shares covered by such notice.
The Employee hereby accepts and agrees to be bound by all the terms and
conditions of the Plan, to which this Option is subject.
Computerized Thermal Imaging, Inc.
By: /s/ David B. Johnston
------------------------------------
David B. Johnston, President
AGREED TO AND ACCEPTED effective as
of June 12, 1995.
/s/ Richard V. Secord
- ------------------------------------
Richard V. Secord, Employee
<PAGE>
EXHIBIT 10(bb)
[SELECT CAPITAL ADVISORS, INC.]
March 6, 1997
VIA FACSIMILE
TEL. (503) 650-8551
Dave Johnston
Computerized Thermal Imaging, Inc.
Dear Mr. Johnston:
Please let this letter stand as a commitment by Select Capital Advisors,
Inc., a Florida corporation ("Select") to arrange for the capitalization of
Computerized Thermal Imaging, Inc. (the "Corporation"). For ten dollars and
other good and valuable consideration it is agreed as follows:
(1) Select shall arrange for an equity private placement for up to six million
dollars (USD $6,000,000.00), within thirty (30) days after the completion
of the due diligence period, through an institutional equity placement.
Terms and conditions of such placement shall be subject to the approval of
the Corporation. It is our intention to raise enough capital that the
Corporation can logically spend during the first twelve month period of
this Agreement that can not be debt financed. The exact amount shall be
determined in the due diligence period described below. Select shall act
as an investment banker on behalf of the Corporation, and shall not be an
underwriter of the securities issued by the Corporation.
(2) Select shall arrange to structure a secured bond placement to net the
Corporation a total amount of twenty-five million dollars (USD
$25,000,000.00). This placement would fund within forty-five (45) days
after the completion of the due diligence period described above and be the
first traunche of an up to $200,000,000 proposed secured bond financing,
subject to a successful placement of the first offering. The exact terms
and conditions of the bond placement will be subject to your approval, but
we would contemplate the form of the investment will be convertible
securities.
(3) Select shall arrange a bridge loan for the Corporation for up to two
million dollars (USD $2,000,000.00). The bridge loan shall be secured
against the purchase orders, inventory, account receivable and equipment of
the Corporation, upon terms and conditions acceptable to the Corporation.
This bridge loan shall fund at the end of the due diligence period and
shall be repaid from either the equity funding described in paragraph 1
above or the bond financing described in paragraph 2 above.
(4) At the request of the Corporation, Select shall arrange senior debt for the
Corporation. This debt placement will be upon terms and conditions
acceptable to the Corporation. Such financing shall be secured by the
assets of the Corporation.
(5) At the appropriate time, Select shall arrange for the Corporation's common
stock to be traded on NASDAQ. Select shall also arrange a firm
underwriting commitment for a placement of equity in an amount to be
determined upon terms and conditions acceptable to the Corporation.
(6) Upon listing on NASDAQ, Select shall seek to introduce you to potential
market makers and financial public relations firms in order to improve the
liquidity of the stock and to increase shareholders value. The exact terms
and conditions of such relationship shall be subject to approval of the
Corporation.
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(7) Select shall arrange for the following:
(A) Completion of a business profile, corporate business overview and an
underwriters due diligence book and underwriters proposal (the
"Funding Package").
(B) Completion of negotiations on behalf of the Corporation with the
financial institutions.
(C) Location and funding of equity and debt described in this Agreement,
which shall include the negotiation of the terms of such financing and
overseeing the documentation of such financing.
(D) Coordination of all professionals in order to complete all financings
contemplated by this Agreement.
(E) Coordination of all aspects of the financing in order to assure
funding within the committed time frames, and
(F) Consultation with the officers and Board of Directors of the
Corporation concerning the negotiation of all terms of the funding
described herein, the restructuring of the balance sheet of the
Corporation, if needed, and the proper incentive compensation programs
for officers and directors of the Corporation.
(8) Select will seek strategic alliances for the Corporation in international
markets as well as assisting in the financing of those markets. In the
near term, Select will introduce the Corproation to the international
financial markets to increase the stock's liquidity and enhance shareholder
values.
(9) The Corporation and Select shall immediately begin to compile the necessary
information in order to complete a Funding Package. Such information shall
include but not be limited to:
(A) An audited balance sheet and audited operating income and expense
statements for the last 2 fiscal years of the Corporation or the life
of the Corporation, whichever is less;
(B) An unaudited balance sheet dated within 30 days;
(C) A complete history of the Corporation, including resumes of the
principal officers, directors and employees of the Corporation;
(D) Financial projections for the next 5 fiscal years of the Corporation;
(E) Business plan showing the desired business results over the next 5
years for the Corporation;
(F) Bank, business, legal and accounting references;
(G) A lists of the Corporation's competitors and the competitive position
of other companies in the Corporation's industry;
(H) Projected uses of the capitalization to be provided; and
(I) Business strategies to accomplish the stated business objectives of
the Corporation.
One copy of all the above described material shall be sent to Select's
office in Miami at 1221 Brickell Avenue, Suite 1010, Miami, Florida 33131
and another copy sent to its due diligence office in Dallas at 5525 North
MacArthur Blvd. Suite 550, Irving, Texas 75038.
(10) It is contemplated that the Funding Package shall be completed within 45
days from this date. During such 45 day period, Select shall conduct a
review (the "Review") of the operations and management of the Corporation
to satisfy itself that Select can fulfill its commitments made hereunder.
Select shall commit its employees to the Corporation in order to accomplish
the completion of the Funding Package and the Review within this time
period. Notwithstanding the foregoing, the Corporation shall have the
principal responsibility for gathering the information required for the
Funding Package and the Review. Should the information not be forthcoming
to Select by the Corporation within a reasonable time period as established
by Select, then the time period described in this letter shall be extended
by the time taken by the Corporation to gather the information. The Review
shall be completed and the Funding Package completed when the Corporation
has executed a due diligence release letter to Select.
(11) Upon completion of the Funding Package, Select shall write and issue to the
appropriate metropolitan, business, trade and financial wire services, a
quarterly Press Release announcing the Corporation's recent business
developments and future plans. The Corporation will have final
authorization on any information released to the press, and agrees to bear
the cost of the wire service fees associated with each quarterly release,
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<PAGE>
not to exceed $500 per release. Copies of Press Releases and articles
written shall be utilized in the Corporation's completed Funding Package.
(12) The Corporation agrees to pay to Select a non-refundable US $10,000.00 as a
due diligence fee for the services provided in completing the Funding
Package, which shall be payable at the time of the execution of this
Agreement. There shall be no other fees due to Select prior to the closing
of the financings, and Select shall bear all legal, accounting and travel
expenses associated with performing its services hereunder.
(13) Upon closing of the offering described in paragraphs 1 and 2 of this
Agreement, Select shall be entitled to receive a fee equal to ten percent
(10%) of equity raised by the Corporation.
Upon the funding of the equity and/or debt in a minimum amount of
$6,000,000(USD), Select shall receive, options to purchase 5% of the
Corporation's common stock at book value at the time Select's commitment
letter is executed. The options shall be valid for five years from the
date of issuance.
(14) Select shall charge a fee of five percent (5%) of any bridge financing
received by the Corporation pursuant to the provisions in paragraph 3 of
this letter.
(15) Select shall charge a fee of two percent (2%) of the gross proceeds
received by the Corporation from the firm underwriting described in
paragraph 5 of this letter. Such fees shall be paid at the time of the
closing of this underwriting.
(16) Select shall also assist in the arrangement of debt as described in
paragraph 4 of this Agreement. Select shall charge a 3% of all debt
financing, which shall be payable at the time of debt financing is closed
and funded.
(17) All fees, except the initial non-refundable due diligence fee, shall be
paid to Select from the closing of the financing described herein. The
Corporation hereby authorizes any funding entity, lender, underwriter and
closing attorney to fund these fees directly to Select from the closing
proceeds.
(18) Upon funding, the Corporation agrees that Select shall arrange to place a
tombstone in the U S National edition or the Wall Street Journal indicating
that funding has been successfully completed and that the transaction was
arranged by Select Capital Advisors. The cost of such tombstone shall be
approximately $10,000 which shall be withheld at the closing.
(19) Select agrees to indemnify and hold harmless the Corporation and its
officers, directors, agents and employees to the full extent lawful, from
and against any losses, claims, damages or liabilities relating to or
arising out of the activities of Select in connection with this Agreement,
including, but not limited to, any losses, claims, damages or liabilities
relating to or arising out of any misrepresentation of a material fact made
by Select (including omissions to disclose facts known to Select which
would have been necessary to make any disclosed facts not misleading) in
any information provided to potential investors, and to reimburse the party
entitled to be indemnified hereunder for all reasonable expenses (including
counsel fees) as may be incurred by such party in connection with
investigating, preparing or defending any action or claim, whether or not
in connection with pending or threatened litigation or administrative
proceedings.
The Corporation agrees to indemnify and hold harmless Select and its
officers, directors, agents and employees to the full extent lawful, from
and against any losses, claims, damages or liabilities relating to or
arising out of the activities of the Corporation in connection with this
Agreement, including, but not limited to, any losses, claims, damages or
liabilities relating to or arising out of any misrepresentation of a
material fact made by the Corporation (including omissions to disclose
facts known to the Corporation which would have been necessary to make any
disclosed facts not misleading) in any information provided to potential
investors, and to reimburse the party entitled to be indemnified hereunder
for all reasonable expenses (including counsel fees) as may be incurred by
such party in connection with investigating, preparing or defending any
action or claim, whether or not in connection with pending or threatened
litigation or administrative proceedings.
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Neither Select nor the Corporation will be responsible for any claims,
liabilities, losses, damages or expenses which are finally judicially
determined to have resulted primarily from the gross negligence or willful
misconduct of the other party.
(20) Each party has agreed to the following representations and warranties:
(A) The parties hereto agree that any and all information revealed or
divulged by any of the parties hereto, to any other party hereto, is
privileged and confidential information which may not be used or
communicated by the receiving party without the prior written consent
of the communicating party.
(B) Each and everyone of the parties agree that they will not circumvent
any of the parties to this Agreement. This protection shall continue
during any extensions, additions, parallel agreements, rollovers, and
renewals to any transactions consummated or not consummated as a
result of the efforts of any of the parties hereto: specifically, the
potential funding sources introduced to the Corporation by Select are
recognized as confidential property of Select. Should the Corporation
consummate a transaction with these funding sources within one (1)
year from the date of this letter, the Corporation agrees to
compensate Select in the amount described herein. Select agrees that
the Corporation be allowed to continue dealing with any funding
sources that they have already developed, which were not developed by
Select.
(C) Information, not previously known by the receiving party, relating to,
and the identification of, clients and/or potential client and/or
names of individual lending officers of the potential financiers
and/or financial institutions are to be considered stock in trade of
the revealing or disclosing party. The receiving party shall notify
the disclosing party of any such previously known individuals within
five (5) business days of such disclosure together with evidence of
such prior knowledge; and
(D) Disclosure of any information, to include technological and
intellectual property, protected hereunder, whether through negligence
of inadvertent disclosure, is nevertheless a violation and shall
constitute a breach of this Agreement. This shall apply whether a
commitment or a transaction takes place or not.
(21) This Agreement between Select Capital Advisors, Inc. and the Corporation
shall be exclusive for a period of forty-five day after the completion of
due diligence. Select shall be compensated for any financing resulting
from its introductions made to the Company regardless of whether or not the
financing concludes within forty-five days. Furthermore, it is agreed that
should the Company arrange during the period of exclusivity, through its
own sources, debt or equity financing, that Select shall be compensated by
one-half of the fees stated in the applicable paragraphs of this Agreement.
If any portion of the funds comes in within forty-five days, the period of
exclusivity isshall be automatically extended.
(22) Notwithstanding the foregoing, it is understood that Select shall function
on behalf of the Corporation solely as an investment banker, business
consultant and public relations company. It shall not underwrite, directly
or indirectly, the securities of the Corporation.
(23) This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original but all of which together shall constitute one
and the same instrument. The execution of this Agreement may be by actual
or facsimile signature.
(24) In the event of any material dispute between the parties, both parties
hereby agree to submit the dispute for Binding Arbitration in the State of
Florida.
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If this Agreement meets with your approval, please indicate in the space
provided below. This Offer is only valid for ten business days, thereafter
this Agreement is null and void.
Sincerely,
[NOT SIGNED]
Ronald G. Williams
Chairman
SELECT CAPITAL ADVISORS, INC.
AGREED AND ACCEPTED
This 7th day of Mar. 1997
COMPUTERIZED THERMAL IMAGING, INC.
By: /s/ David B. Johnston
----------------------------
DAVE JOHNSTON
5
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EXHIBIT 10(cc)
SERVICES AGREEMENT
This Services Agreement ("Agreement") is entered into this _____ day of
July, 1997 (the "Effective Date") between Computerized Thermal Imaging, Inc.,
a Nevada corporation ("CTI") and Liberty Capital Group, Inc., a Washington
corporation ("Consultant").
W I T N E S S T H:
WHEREAS, CTI desires to have the Consultant act as an independent agent
for the purpose of providing certain services to CTI; and
WHEREAS, Consultant is qualified and willing to provide such services
pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and other consideration,
the sufficiency of which is hereby acknowledged, the parties do hereby covenant
and agree as follows:
1. SCOPE. CTI hereby engages and retains the Consultant as an independent
contractors to provide the services set forth herein. The Consultant
hereby agrees to provide all reasonable and necessary services associated
with the following: (i) the development of a comprehensive business plan;
(ii) future acquisition strategies; and (iii) any other ancillary services
relating to the aforementioned (collectively, the "Services"). The parties
acknowledge that none of the Services shall involve the performance of
capital development or fund-raising services.
2. REPRESENTATIONS. Consultant hereby agrees to use its best efforts in
providing the Services and loyally representing the interests of CTI in
accordance with CTI's reasonable requirements and objectives. Consultant
and CTI acknowledge that Consultant is experienced in providing the
Services and will provide such Services with the diligence and care of
others in the industry. Consultant further represents that it has not, and
shall not, enter into any agreement during the term of this Agreement which
might prevent it from performing its obligations hereunder.
3. FEES AND EXPENSES. In full consideration of the Services provided
hereunder, CTI hereby grants to Consultant options (the "Options") to
purchase all or any portion of 300,000 shares of common stock of the
Company (the "Shares") at a purchase price equal to $0.60 per Share (the
"Exercise Price") in accordance with the provisions below.
4. AMOUNT AND DATES EXERCISABLE. The Options may be exercised in whole or in
part by Consultant based on the following schedule:
(a) The Options for up to 100,000 Shares shall become exercisable on or
after the first date, following the effective date, that the "Stock
Price" (defined as the Low Bid Price for the Company's common stock
over three consecutive business days) reaches a level of $2.00 per
share;
(b) The Options for up to an additional 100,000 Shares shall become
exercisable on or after the first date thereafter that the Stock Price
reaches a level of $3.00 per share; and
(c) The Options for up to an additional 100,000 Shares shall become
exercisable on or after the first date thereafter that the Stock Price
reaches a level of $5.00 per share.
(d) In the event, CTI terminates this Agreement for "cause" (defined as
the breach of any covenant of this Agreement by Consultant and/or
Consultant's negligence or failure to perform services in accordance
with reasonable industry standards) then (i) any Options that are
exercisable as of the date of such termination shall be deemed earned
by Consultant, surviving termination and exercisable on or before
three (3) years after the effective date, and (ii) any Options that
are not yet
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exercisable as of the date of such termination of employment will
terminate automatically without notice and be of no further force or
effect.
(e) Notwithstanding anything in this Agreement to the contrary, the
Options will terminate automatically without notice and be of no
further force or effect to the extent the Options are not yet
exercised within three (3) years after the effective date.
5. EXERCISE OF OPTIONS. The Options may be exercised on one or more
occasions, but can only be exercised for whole Shares. The Options shall
be exercised by Consultant by delivering to the Company (i) written
notification that any or all of the Options are exercisable, including
evidence reasonably satisfactory to the Company to that effect, (ii) the
cash required to pay in full an amount equal to the total Exercise Price
for the number of Shares so exercised. Then, the Company shall deliver to
Consultant certificate(s) for said Shares (collectively, the "Option
Shares"). Consultant shall execute such documents and instruments as
requested by counsel of the Company to satisfy securities laws or evidence
the issuance and receipt and performance for the Option Shares, including
acknowledgment of all investor representations deemed necessary by Company
counsel.
6. TRANSFERABILITY OF OPTIONS. Except as herein set forth, the Options shall
not be transferable by Consultant and shall be exercisable only by
Consultant.
7. REQUIREMENTS OF LAW.
(a) COMPLIANCE WITH LAWS. The Company shall not be required to sell or
issue any Option Shares under this Agreement if the issuance of such
Option Shares shall constitute a violation by Consultant or the
Company of any provisions of any law or regulation of any governmental
authority. The Company represents that this Agreement does not
violate its by-laws. The Company shall not be obligated to take any
affirmative action other than that which is specifically set forth in
this Section 5 in order to cause the exercise of the Options or the
issuance of Option Shares pursuant hereto to comply with any law or
regulation of any governmental authority.
(b) FEDERAL AND STATE SECURITIES LAWS. Upon exercise of the Options,
unless a registration statement under the Securities Act of 1933, as
amended (the "'33 Act"), is in effect with respect to the Option
Shares covered hereby, the Company shall not be required to issue such
Option Shares unless the Company has received evidence reasonably
satisfactory to it that such issuance is exempt from registration
under the '33 Act and all applicable state securities laws. The
Company shall be obligated to register the Option Shares, if permitted
by applicable state securities laws. Unless registered or exempt from
restriction, the certificate(s) issued representing the Option Shares
shall bear a legend in substantially the following form:
The Shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or
under the securities laws of any state and may not be sold
or transferred except upon such registration or upon receipt
by the Company of an opinion of counsel reasonably
satisfactory to the Company that registration is not
required for such sale or transfer.
(c) OBLIGATION TO REGISTER SHARES. If an event has occurred which would
permit the Consultant to exercise the Options and purchase the Shares,
the Consultant has the right to demand registration of the Shares when
issued. In addition, if Option Shares have been exercised but not
yet registered, the Consultant shall have piggy back registration
rights to require the Shares which have been issued be registered in
the event the Company is filing any other registration statement to
register any other shares of stock of the Company.
(d) INVESTMENT INTENT. Consultant hereby represents and warrants that the
Options and Option Shares are being acquired solely for the account of
Consultant for investment purposes only and not with a view to or for
the resale, distribution, subdivision, or fractionalization thereof;
Consultant has no
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contract, understanding, undertaking, agreement, or arrangement
with any person to sell, transfer or pledge to any person the
Options or Option Shares or any part thereof; Consultant has no
present plans to enter into any such contract, undertaking,
agreement or arrangement; Consultant understands the legal
consequences of the foregoing representations and warranties to
mean that Consultant must bear the economic risk of the investment
in the Option Shares for an indefinite period of time; Consultant
has such knowledge and experience in financial and business
matters that Consultant is capable of evaluating the merits and
risks of acquiring the Option Shares; and Consultant acknowledges
that the acquisition of the Option Shares involves a HIGH degree
of risk that may result in the loss of the total amount of
Consultant's investment in the Options and Option Shares.
(e) DUE DILIGENCE. Consultant acknowledges that it has for a reasonable
amount of time had an opportunity to ask questions and receive answers
concerning the terms and conditions of the issuance of the Options and
Option Shares and the actual and proposed business and affairs of the
Company, and is satisfied with the results thereof, and been given
access, if requested, to all documents with respect to the Company or
this transaction, as well as to such other information that Consultant
has requested to evaluate an investment in the Options and Option
Shares. Consultant has made its own determination of the value of the
Options and has not received or relied upon any statements,
representations, or warranties of the Company or its agents or
representatives.
8. NO RIGHTS AS SHAREHOLDER. Consultant shall have no rights as a shareholder
of the Company with respect to the Option Shares until the date of issuance
of a certificate for such Option Shares; no adjustment for distributions,
or otherwise, shall be made if the record date therefor is prior to the
date of issuance of such certificate.
9. CHANGES IN THE COMPANY'S STRUCTURE.
(a) CHANGES IN STRUCTURE. The existence of the Options shall not affect
in any way the right or power of the Company, directors, or its
shareholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's
capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, or any other security
or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business or any other
corporate act or proceeding, whether of a similar character or
otherwise.
(b) CHANGES IN NUMBER OF SHARES. If, while the Options are outstanding,
the Company shall effect a subdivision or consolidation of Shares or
other capital readjustment, the payment of a Share dividend, or other
increase or reduction of the number of Shares outstanding, without
receiving compensation therefor in money, services, or property, then
(i) in the event of such an increase in the number of Shares
outstanding, the number of Option Shares then subject to the Options
shall be proportionately increased, and the Exercise Prices shall be
proportionately reduced and (ii) in the event of such a reduction in
the number of Shares outstanding, the number of Option Shares then
subject to the Options shall be proportionately reduced, and the
Exercise Prices shall be proportionately increased.
(c) CHANGES IN CORPORATE STRUCTURE. After a merger of one or more
corporations into the Company or after a consolidation of the Company
and one or more corporations in which the Company shall be the
surviving corporation, Consultant shall, at no additional cost, be
entitled upon exercise of the Options to receive (subject to any
required action by shareholders) in lieu of the number of Option
Shares as to which the Options shall then be so exercisable, the
number and class of shares or other securities to which Consultant
would have been entitled pursuant to the terms of the agreement of
merger or consolidation if, immediately prior to such merger or
consolidation, Consultant had been the holder of record of a number of
Shares equal to the number of Option Shares as to which the Options
shall be so exercised. In the event the Company agrees to be merged
with or consolidated
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into one or more corporations or other entities in which the
Company shall not be the surviving entity then, the Company shall,
prior to such merger or consolidation, obtain the full and
unconditional agreement of such surviving entity to assume all of
the obligations of the Company under this Agreement.
(d) ISSUANCE OF SHARES. Except as hereinbefore expressly provided, the
issuance by the Company of shares of any class, or securities
convertible into shares of any class, for cash or property, or for
labor or services, either upon direct sale or upon the exercise of
rights or warrants to subscribe therefor, or upon conversion of shares
or obligations of the Company convertible into such shares or other
securities, shall not affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of the Shares then
subject to the Options.
10. EXPENSES. All expenses, including travel and lodging, incurred by the
Consultant in the performance of Services shall be the sole responsibility
of the Consultant, unless otherwise agreed in writing. During the
continuance of this Agreement, Consultant shall certify as regular and
guarantee Consultant's situation towards all relevant tax authorities,
social administrations and professional organizations, if applicable, as
being in conformity with Consultant's status as an independent contractor.
11. CONFIDENTIAL INFORMATION. During the term of consultation with CTI, the
Consultant will have access to and become acquainted with sensitive and
confidential information regarding CTI and its business. Consultant
acknowledges that the confidential information has been developed or
acquired by CTI through the expenditure of substantial time, effort and
money and serves to provide CTI with an advantage over it competitors.
Consultant hereby agrees that such confidential information may not be
disclosed to third parties unless otherwise agreed to in writing by CTI.
The Consultant further agrees not to use any information made available to
or coming into its possession or knowledge in a manner that is adverse to
the business of CTI. This provision shall survive the termination of this
Agreement.
12. LIMITATION OF LIABILITY. CTI hereby agrees to indemnify, defend and hold
harmless Consultant for any and all claims, causes of action, penalties,
fines, settlements, and judgements against Consultant which arise out of or
relate to the Consultant's performance of Services, with the exception of
any gross negligence or willful misconduct of Consultant.
13. DURATION. This Agreement shall remain in effect for a period of one (1)
year commencing on the Effective Date, unless it appears from the context
of a provision that it is intended to survive the termination of this
Agreement. CTI may terminate this Agreement for "cause" by providing five
(5) days written notice to the other party.
14. ARBITRATION. Any controversy or claim arising out of or relating to this
Agreement, or the breach, termination, or validity thereof, shall be
settled by final and binding arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association ("AAA Rules") in
effect as of the effective date of this Agreement. The American Arbitration
Association ("AAA") shall be responsible for (i) appointing a sole
arbitrator, and (ii) administering the case in accordance with the AAA
Rules. This Agreement and all other documents executed pursuant hereto
shall be governed by and construed in accordance with the substantive laws
of the State of Washington, without regard to any conflicts of laws
principles thereof. The situs of the arbitration shall be Seattle,
Washington. Any order or judgement rendered by the arbitrator may be
entered by any court having jurisdiction.
15. ASSIGNMENT. This Agreement shall inure to the benefit of and be binding
upon the parties, their respective successors and permitted assigns. This
Agreement may not be assigned by any party without the prior written
consent of the other parties.
16. HEADINGS. Headings used in this Agreement are used for convenience only and
do not constitute substantive matters to be considered in construing the
terms of this Agreement.
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17. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter thereof and
supersedes all documents, verbal consents, or understandings made before
the conclusion of this Agreement. The terms of this Agreement may be
amended or modified only by written agreement signed by all of the parties
hereto. All changes, supplements or amendments to this Agreement will be
valid only when agreed upon by the parties and made in writing.
18. NOTICES. Any notices or consents required or permitted by this Agreement
shall be in writing and shall be deemed to have been sufficiently given if
delivered in person, or if sent by certified mail, return receipt
requested, or telexed or telefaxed to the party entitled thereto with
confirmation of transmission, addressed as set forth on the signature pages
hereto, unless such address is changed by written notice hereunder. If so
mailed the same shall not be deemed effective until three (3) business days
after posting.
19. WAIVERS. No waiver of any term or condition of this Agreement shall be
valid except by an instrument in writing expressly waiving such term or
condition signed by the waiving party. A waiver by any party of any term
or condition of this Agreement in any one instance shall not be deemed or
construed as a waiver of such term or condition for any similar instance in
the future or of any subsequent breach hereof. All rights, remedies,
undertakings, obligations and agreements contained in this Agreement shall
be cumulative and none of them shall be a limitation of any other remedy,
right undertaking, obligation or agreement of either party.
20. SEVERABILITY. Should any part or provision of the Agreement be judicially
held to be unenforceable or in conflict with the law of any jurisdiction,
the validity of the remaining parts or provisions shall not be affected by
such holding and shall remain in full force and effect.
21. GENERAL ASSURANCES. The parties agree to execute, acknowledge, and deliver
all such further instruments, and do all such other acts, as may be
necessary or appropriate in order to carry out the intent and purposes of
this Agreement.
22. DUPLICATE ORIGINALS. This Agreement may be executed in one or more
counterparts, each of which shall be treated and deemed an original, but
all of which together shall constitute one and the same document.
23. CONSTRUCTION OF AGREEMENT. The parties hereto acknowledge and agree that
neither this Agreement nor any of the other documents executed in
connection herewith shall be construed more favorably in favor of one than
the other based upon which party drafted the sane, it being acknowledged
that all parties hereto contributed substantially to the negotiation and
preparation of this Agreement and the documents executed in connection
herewith.
24. NO THIRD PARTY BENEFICIARIES. Except as otherwise expressly forth in this
Agreement, no person or entity not a party to this Agreement shall have
rights under this Agreement as a third party beneficiary or otherwise.
25. RELATIONSHIP OF PARTIES. Consultant is providing services on an
independent contractor basis. Notwithstanding anything to the contrary
herein, this agreement shall not in any manner be construed to create a
joint venture, partnership, agency or other similar form of relationship,
and neither party shall have the right or authority to: (i) commit the
other party to any obligation or transaction not expressly authorized by
such other party, or (ii) act or purport to act as agent or representative
of the other, except as expressly authorized in writing by such other
party.
[THIS SPACE INTENTIONALLY BLANK]
[SIGNATURES NEXT PAGE]
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CTI:
COMPUTERIZED THERMAL IMAGING, INC.
ADDRESS:
141 North State Street, Suite 161
Lake Oswego, Oregon 97034
(503) 650-0119 By: /s/ David B. Johnston
--------------------------------------
David B. Johnston,
Chief Executive Officer
Dated: July 21, 1997
CONSULTANT:
LIBERTY CAPITAL GROUP, INC.
ADDRESS:
814 Lakeway Drive, Suite 262
Bellingham, WA 98226
(360) 676-6580 Telecopier By: /s/ Jay Allen Greig
--------------------------------------
Jay Allen Greig
Title:
-------------------------------
Dated: July 20, 1997
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EXHIBIT 10(dd)
STOCK TRANSFER AGREEMENT
This STOCK TRANSFER AGREEMENT (the "Agreement") is entered into
effective this 28th day of January, 1997 by and between COMPUTERIZED THERMAL
IMAGING, INC., a Nevada corporation ("CTI") and THERMAL MEDICAL IMAGING,
INC., a Nevada corporation ("TMI"). CTI and TMI are sometimes hereafter
referred to singularly as a "Party" and collectively as the "Parties."
W I T N E S S E T H:
WHEREAS, CTI currently owns approximately 19.8% of the outstanding stock
of TMI in consideration of capital contributions at formation to TMI and will
be assigned, upon the execution hereof, additional shares and options granted
to General Secord and David Johnston as directors of TMI;
WHEREAS, the remaining shares are held by TMI employees or directors,
who agreed to serve as employees or directors of TMI in exchange for such
shares contemplating an AmCap private offering and subsequent public offering
which did not succeed; and
WHEREAS, TMI has borrowed demand loans, as further stated on EXHIBIT A,
from CTI for working capital, and TMI requires additional capital to continue
the development of its technology for marketing in North America; and
WHEREAS, CTI is willing to contribute the additional working capital, as
necessary, to TMI to complete certain phases of its remaining initial
business plan activities, all on the condition that CTI be entitled to obtain
in exchange therefor a controlling eighty percent (80%) interest in the
common stock of TMI;
NOW, THEREFORE, in consideration of the premises and in consideration of
the mutual covenants and agreements contained herein and other good and
valuable consideration, the receipt, sufficiency and adequacy of which is
hereby acknowledged, CTI and TMI do hereby covenant and agree as follows:
1. TERMS. TMI hereby agrees to convey to CTI 25,500,000 shares of the
common stock of TMI, which will convey to CTI controlling ownership of more
than 80% of the outstanding common stock of TMI fully diluted, in
consideration for which CTI agrees to cancel TMI's outstanding indebtedness
and to contribute from time to time certain funds needed to accomplish the
objectives of the TMI business plan to present its technology to the FDA and
receive a Pre Market Approval ("PMA"). No additional shares will be issued
to CTI for subsequent contributions made for the purpose of enabling TMI to
achieve its objective of completing clinical trials and obtaining a PMA from
the FDA. The parties acknowledge that CTI and TMI will cooperate to enable
TMI to conduct clinical trials and proceed to further develop its technology
and business plan.
2. TMI OPERATIONS. The Board of Directors of TMI shall continue to
have the authority for managing and operating the business of TMI and to
determine the appropriate application of resources which are made available
to it by CTI, or which are owned or developed or by TMI. TMI shall have the
right to arrange for supplemental working capital debt financing from third
party sources for the development of its business if CTI chooses not to
contribute for particular expenses or disagrees with the need for any
financing desired by the TMI Board of Directors. In such case(s), however,
TMI shall notify CTI of its intention to obtain such third party debt
financing, after which CTI shall have for a period of fifteen (15) days the
exclusive right to advance such funds or arrange alternative debt financing
on the same terms.
3. TRANSFER OF SHARES. Within ten (10) days after execution hereof,
TMI shall issue a share certificate representing the number of shares
purchased by CTI set forth in paragraph 1, duly executed by authorized
officers of TMI. All such shares when issued shall be fully paid and
non-assessable shares of TMI.
4. DILUTION. TMI represents that there are 96 million shares of common
stock authorized, and there are 6,453,000 common shares outstanding. There are
outstanding options for issuance of up to an additional 880,000
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shares. TMI agrees that at all times while CTI owns at least 80% of the
outstanding shares of TMI, TMI will not issue any additional shares of stock
of TMI to any other party, whether in a private or public offering or
otherwise, without the express prior written consent of CTI, which shall not
be unreasonably withheld if required according to paragraphs 5 or 10.
5. OBJECTIVE TO ACHIEVE FDA APPROVAL. The objective of TMI's business
plan is to achieve a PMA from the FDA for TMI's use of its technology for the
detection of breast cancer. It is the intention, although not the
obligation, of CTI that all of the funds it deems reasonably necessary to
achieve TMI's business plan to receive FDA approval shall be contributed to
TMI by CTI. If CTI is unable or unwilling to contribute the funds reasonably
required as needed (at least a quarter in advance) to achieve the PMA, then
TMI may negotiate to obtain such additional funds from third parties on terms
its Board of Directors deem advisable. If equity financing is arranged, TMI
shall notify CTI of the terms of such proposal, which may include amounts
greater than needed for the quarter, and CTI shall have the right to first
refusal to reasonably match such offer or proposal within 20 days, or TMI may
proceed to accept such offer after the 20 days and issues shares or equity
accordingly. In such case where equity financing is required from a third
party to operate TMI in such a manner to enable TMI to achieve the PMA from
the FDA, (provided TMI has expended all of its available funds only for
operations and development required to produce its technology and to achieve
the PMA) only CTI's interest shall be diluted and the Board of Directors may
issue shares, or CTI shall surrender such shares, as required to prevent the
other shareholders from further dilution.
6. PRIOR LOANS CANCELLED. At present, demand loans from CTI to TMI in
the outstanding principal amount of about $700,000 (the "Loan") are
outstanding. Those loans were made to enable TMI to proceed toward clinical
trials. CTI hereby contributes the existing balance of the Loan to TMI as a
contribution to capital.
7. ORIGINAL LICENSE AGREEMENT. TMI and CTI entered into a License
Agreement (the "Original License Agreement") under which CTI licensed certain
thermal imaging technologies to TMI. TMI agreed to purchase thermal imaging
units from CTI on terms and conditions set forth therein, and to pay an
initial license fee of $2,500,000.00 (the "Initial License Fee"). In lieu of
payment of the Initial License Fee, TMI executed in August 1996 in a
Promissory Note (the "License Fee Note") in the original principal amount of
$2,500,000.00 payable to CTI in one year. CTI hereby contributes such
indebtedness evidenced by the License Fee Note to TMI as a contribution to
capital and will cancel the License Fee Note. This cancellation of
indebtedness constitutes additional consideration for the execution of this
Agreement.
8. NEW LICENSE AGREEMENT. Due to changed circumstances, the Parties
hereby agree to enter into a novation of the Original License Agreement by
entering a new license agreement for the purpose of redefining the Parties
rights and obligations (the "New License Agreement"). The New License
Agreement shall achieve the essential purposes of the Original License
Agreement, which are to obligate CTI to license all of its rights, title, and
interest in its CTI technology and trade secrets with respect to the
operation of its Computerized Thermal Imaging units and quantative thermal
assessment laboratory and protocol concepts solely and exclusively for use
for detection of breast cancer in North America. The New License Agreement
will provide, among other things:
(a) There will be no Initial License Fee charged to TMI but TMI shall
compensate CTI on a reasonable basis for its license;
(b) The thermal imaging units will not be priced or sold to TMI on a
per unit basis, but instead CTI shall be compensated on some
other mutually agreeable or reasonable formula, such as a
per/unit or software royalty or percentage of Hospital Use
Agreement revenue stream;
(c) CTI will reserve to TMI all manufacturing rights for production
of the thermal imaging hardware units and of the software
developed for breast cancer related applications;
(d) CTI may not compete with the public with TMI in North America,
and TMI cannot use technology licensed to TMI by CTI to compete
outside of North America without CTI's consent.
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<PAGE>
(e) There shall be cross licenses of all technology for use not in
competition. All technology developed by TMI shall be licensed
to CTI for use worldwide not in competition with TMI in North
America; CTI shall be obligated to license to TMI all technology
which it may subsequently develop which may benefit TMI for use
in breast cancer imaging in North America, including data base
development technology.
(f) CTI shall have only reasonable operational control to protect its
rights under this Agreement, but TMI shall otherwise have the
right to determine its marketing strategies. Any changes to
Hospital Use Agreements to be employed by TMI must be made only
with the consent of CTI, which consent shall not be unreasonably
withheld, to enable CTI to protect its products for other medical
uses and to prevent unauthorized competition or pricing practices
that reasonably would impair the long term value of CTI's
products.
(g) All TMI units and software licensed from CTI placed or sold shall
be with the express restriction that such units may not be used
except for breast cancer detection in North America;
(h) CTI shall indemnify, defend, and hold harmless TMI from any
litigation or claims which might be initiated by contractors with
CTI and there shall be a mutual covenant from TMI;
(i) Either TMI or CTI may patent in its name the technology that it
develops, or if the developer chooses not to prosecute the
patent, the other Party may prosecute the patent in its name,
which technology shall be subject to the cross license; and
(j) An arbitration clause shall resolve any disputes, including the
setting of any royalty or revenue sharing percentages as shall be
deemed reasonable as may be required for subsequent adjustments.
9. EQUIPMENT FINANCING FOR TMI. The contributions to be made by CTI
do not include any equipment financing. The equipment financing requirements
of TMI are separate. CTI may or may not arrange or guarantee equipment
financing on behalf of TMI, but the terms of such guaranty or consideration
are separate and distinct from the consideration set forth under this
Agreement. If TMI arranges third party financing to achieve equipment
financing or working capital financing to achieve its business plan of
receiving FDA approval, TMI must give at least twenty (20) days notice to CTI
to allow CTI the exclusive right to arrange substitute financing on the same
or better terms. Nevertheless, CTI may arrange third party financing to
achieve a material portion of the anticipated funds.
10. FURTHER DILUTION. The Parties acknowledge that three employees of
TMI currently have agreements limiting dilution of their shares in TMI until
after this issuance of shares to CTI. Therefore, CTI acknowledges that Ken
Dodd, Simona Gallagher, and Bill Black will be issued additional shares
subsequent to the transfer of the shares required by paragraph 1 of this
Agreement, to comply with such employment terms. TMI shall issue 1,820,000
shares to Mr. Dodd and 500,000 each to the other two employees. In addition,
some additional shares or options or warrants may be issued, as deemed
advisable by the TMI Board of Directors to compensate employees or to induce
appropriate vendors or health care experts to render necessary services to
TMI to complete the testing needed to receive a PMA from the FDA. TMI may
issue such shares only according to paragraph 4 and to the extent CTI's fully
diluted shares equal at least 80% of the outstanding stock. The Parties
acknowledge that CTI shall still own, after full dilution, at least 80% of
the outstanding common stock of TMI, taking into account all outstanding
stock warrants and stock options, as if exercised and other forms of equity
issued or to be issued prior to receipt of the PMA from the FDA, provided
there are no additional shares issued to third parties pursuant to paragraph
5.
11. NOTICES. All notices, requests or other communications required or
permitted to be delivered hereunder shall be in writing, delivered
personally, by registered mail or via confirmed facsimile or similar means of
transmission, as follows:
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(a) If to CTI:
David B. Johnston, President
Computerized Thermal Imaging, Inc.
141 North State Street, Suite 161
Lake Oswego, Oregon 97034
WITH A COPY TO:
Mr. Donald R. Looper
Looper, Reed, Mark & McGraw
Nine Greenway Plaza, Suite 1717
Houston, Texas 77046
(b) If to TMI:
Mr. Kenneth M. Dodd
Thermal Medical Imaging, Inc.
30150 Telegraph Road, Suite 177
Bingham Farms, MI 48025
WITH A COPY TO:
Ms. Alexine Jackson
_____________________________________
_____________________________________
_____________________________________
Any notice shall be effective upon receipt at the address stated above. Any
party hereto may from time to time designate by notice, as herein provided,
any other address to which such notice, request or other communication
addressed to it shall be sent.
12. ASSIGNMENT; SUCCESSORS. The rights and obligations of the parties
hereunder and under the documents executed in connection herewith are
assignable and transferable in whole but not in part without the prior
written consent of the other parties. Subject to the foregoing, this
Agreement shall be binding upon, and shall inure to the benefit of, the
respective parties hereto and their respective heirs, executors,
administrators, successors and permitted assigns. Except the parties hereto
and their respective permitted assigns and transferees, no other parties
shall benefit from or be entitled to enforce any provisions of this Agreement
or other rights and obligations arising in connection with this Agreement and
the documents executed in connection herewith.
13. CHOICE OF LAWS; JURISDICTION; VENUE. This Agreement shall be
construed in accordance with and governed by the laws of the State of Texas,
without regard to conflicts of laws principles thereof, which substantive
laws shall govern any dispute or claim arising under or related to this
Agreement.
14. ARBITRATION. THE PARTIES KNOWINGLY, VOLUNTARILY AND IRREVOCABLY
AGREE THAT ANY DISPUTES OR CONFLICTS IN ANY WAY ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE PERFORMANCE OR BREACH OF ANY OF THE MATTERS DESCRIBED
HEREIN SHALL BE RESOLVED BY BINDING ARBITRATION AT THE WRITTEN ELECTION OF
EITHER PARTY HERETO. THE PARTIES IRREVOCABLY AGREE TO BE BOUND BY ALL
FINDINGS OF FACT AND CONCLUSIONS OF LAW OF THE ARBITRATOR SELECTED. THE
ELECTION OF A PARTY UNDER THIS PARAGRAPH SHALL BE BY DELIVERY OF WRITTEN
NOTICE TO THE OPPOSING PARTY; PROVIDED THAT IF A LEGAL PROCEEDING RELATING TO
THE SUBJECT DISPUTE HAS PREVIOUSLY BEEN FILED IN ANY COURT OF COMPETENT
JURISDICTION, THEN SUCH NOTICE OF ELECTION UNDER THIS PARAGRAPH SHALL BE
DELIVERED WITHIN SIXTY (60) DAYS OF THE DATE THE ELECTING PARTY RECEIVES
SERVICE OF PROCESS IN SUCH LEGAL PROCEEDING. ANY ARBITRATION SHALL PROCEED
IN ACCORDANCE WITH THE RULES OF THE JUDICIAL ARBITRATION AND MEDIATION
SERVICES ("JAMS/ENDISPUTE"), WHICH SHALL BE THE ADMINISTRATIVE AND APPOINTING
BODY. JAMS/ENDISPUTE SHALL APPOINT A SOLE ARBITRATOR TO RESOLVE ANY DISPUTE,
INCLUDING (1) THE DETERMINATION OF A REASONABLE ROYALTY PERCENTAGE OR FEE
THAT MAY BE IN DISPUTE FOR CONTINUED PERFORMANCE UNDER THE NEW LICENSE
AGREEMENT WHICH MAY CALL FOR REASONABLE ADJUSTMENTS OR FEES BETWEEN THE
PARTIES, AND (2) THE ACTUAL TERMS FOR THE NEW LICENSE AGREEMENT IF THE
PARTIES RESTRUCTURING THE
4
<PAGE>
ORIGINAL LICENSE AGREEMENT ARE UNABLE TO REACH A MUTUAL AGREEMENT ON ALL
TERMS. THE ARBITRATION SHALL PROCEED IN ACCORDANCE WITH THE RULES OF THE
AMERICAN ARBITRATION ASSOCIATION.
15. HEADINGS. Headings used in this Agreement are used for convenience
only and do not constitute substantive matters to be considered in construing
the terms of this Agreement.
16. SEVERABILITY. In case any one or more of the provisions of this
Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, any other provisions in this Agreement shall be
construed as if such invalid, illegal or unenforceable provisions had never
been contained herein. Such invalid, illegal or unenforceable provisions
shall be given effect to the maximum extent then permitted by law.
17. ENTIRE AGREEMENT. This Agreement, together with any exhibits,
attachments or documents executed in connection herewith, supersedes any and
all prior or contemporaneous understandings, statements, representations,
warranties and agreements, whether written or oral, between the Parties
hereto respecting the subject matter hereof.
18. COUNTERPARTS. This Agreement may be executed simultaneously in one
or more counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument. A facsimile
signature shall be effective in all respects.
19. AMENDMENTS. This Agreement may not be altered, modified or amended
except pursuant to a written instrument executed by all Parties hereto.
20. FURTHER ASSURANCES. Each of the Parties hereto shall, at any time
and from time to time after the date hereof, upon request by legal counsel to
CTI or TMI and without further consideration, execute and deliver such
instruments of transfer or other documents and take such further action as
may be reasonably required in order to effectuate and consummate the
transactions contemplated hereby. TMI hereby represents that the execution
of this Agreement has been properly authorized to bind TMI.
21. THIRD PARTY BENEFICIARIES. Only as expressly set forth in this
Agreement, a person or entity not a party to this Agreement shall have rights
under this Agreement as a third party beneficiary or otherwise.
IN WITNESS WHEREOF, the parties hereby have duly executed this Agreement
effective as of the day and year above first written.
CTI:
By: /s/ Richard. Secord
---------------------------
Name: Richard V. Secord
-------------------------
Title: President
------------------------
TMI:
By: /s/ Kenneth M. Dodd
--------------------------
Name: Kenneth M. Dodd
------------------------
Title: President
-----------------------
EXHIBITS:
A - Demand Loans
5
<PAGE>
EXHIBIT "A" TO
STOCK TRANSFER AGREEMENT
Each loan made by CTI to cover operating costs of TMI were made on terms
that they would be repaid upon demand and that they would not bear interest,
subject to a subsequent review depending upon the time over which the loans must
remain outstanding before TMI is able to obtain capitalization.
After the initial capitalization contribution from CTI at $211,636, CTI has
made loans to TMI of the following amounts:
<TABLE>
<CAPTION>
Item Date Loan Purpose
<S> <C> <C> <C>
1. October 29, 1996 $ 47,000.00 Wire transfer from CTI to satisfy
payroll obligations of TMI pending
capitalization.
2. November 11, 1996 $105,700.00 Wire transfer from CTI to cover
accrued TRW expenses and other TMI
operating expenses.
3. August 26, 1996 $157,000.00 TMI employees and expenses
based by check.
4. January 1997 $ 36,000.00 Transfer for compensation to TMI
----------- employees.
Total Loans Reflected by
Promissory Notes: $345,700.00
-----------
-----------
Other amounts spent by CTI for the benefit of TMI
but not reflected by promissory notes.
5. March 1996 $217,000.00 Infrared camera system delivered to
TMI for use and study at HUH.
6. June 1996 $ 95,000.00 Delivery of 1 additional systems to TMI
for clinical study and software
development and integration.
7. June 1996 $ 24,877.00 CTI Technical Support Equipment
8. May 1996 $ 40,000.00 Paid to AmCap for preparation of TMI
Securities Offering under contract
payable by TMI.
9. May 1996 $ 10,000.00 Legal fees to Counsel for AmCap pursuant
----------- to contract required payment by TMI.
TOTAL $732,577.00
-----------
-----------
</TABLE>
<PAGE>
EXHIBIT 10(ee)
AMENDMENT TO
EMPLOYEE STOCK OPTION AGREEMENT
This Amendment to the Employee Stock Option Agreement (the "Amendment")
is entered into on this 26th day of January, 1998, and effective as of the
30th day of April, 1997, by and between Computerized Thermal Imaging, Inc., a
Nevada corporation (the "Company"), and David Packer ("Employee").
W I T N E S S E T H:
WHEREAS, the Company and Employee entered into an Employment Agreement
dated April 30, 1997 wherein Employee was hired to serve as President of the
Company under the terms and conditions of such agreement; and
WHEREAS, the Company and Employee are parties to that Employee Stock Option
Agreement dated April 30, 1997 (the "Stock Option Agreement") which was executed
in conjunction with the Employment Agreement and provides for the granting of an
Option to purchase 500,000 shares of common stock of the Company as additional
incentive compensation to Employee; and
WHEREAS, the Stock Option Agreement incorporates by reference the terms of
that certain "1995 Stock Option Plan" (the "1995 Plan") which was adopted by the
Board of Directors, but subject to the further approval of the stockholders of
the Company prior to June 1, 1996; and
WHEREAS, the 1995 Plan was not submitted to the stockholders for approval
prior to June 1, 1996 and was formally terminated on September 18, 1997 by the
Board of Directors; and
WHEREAS, the parties desire to reaffirm the granting of the Option and to
independently ratify and incorporate, to the extent applicable, the terms of the
1995 Plan as part of the Stock Option Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and consideration
herein provided, the sufficiency of which is hereby acknowledged, the parties
agree to amend the terms of the Stock Option Agreement as follows:
1. SCOPE. The Company and Employee hereby agree to amend the terms of
the Stock Option Agreement in accordance with the terms of this Amendment. This
Amendment shall be read together with the Stock Option Agreement as one
agreement and the parties hereby reaffirm the provisions of the Stock Option
Agreement to the extent that the terms of this Amendment do not supersede or
conflict with the terms of the Stock Option Agreement. All terms not defined in
this Amendment shall have the meanings given to them in the Stock Option
Agreement.
2. RATIFICATION AND INCORPORATION. In consideration of the fact that the
1995 Plan was not formally ratified by the stockholders of the Company prior to
the expiration of twelve (12) months from the date of its adoption by the Board
of Directors and, as such, never became effective as a plan qualifying for
incentive stock option treatment under section 422 of the Internal Revenue
Code, the parties deem it prudent to acknowledge, confirm, ratify and
incorporate, for all purposes, the terms and conditions of 1995 Plan as
contractual provisions forming an integral part of the Stock Option Agreement.
Any provisions of the 1995 Plan, including Section 2, which reference
stockholder ratification of the 1995 Plan within twelve (12) months from June 1,
1995 as a condition precedent to the effectiveness of the 1995 Plan are limited
in scope and effect to the issue of determining whether the Options granted
thereunder will qualify for incentive stock option treatment accorded under
section 422 of the Internal Revenue Code, and shall have no effect whatsoever on
the validity of the terms of the 1995 Plan or the Options granted pursuant or in
reference to the 1995 Plan. The terms of the 1995 Plan shall be incorporated,
on a basis independent from the deemed validity, invalidity, or expiration of
the 1995 Plan, as original contract terms of the Stock Option Agreement,
effective as of the effective date of the Stock Option Agreement.
1
<PAGE>
3. MULTIPLE COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be treated and deemed an original, but all of
which together shall constitute one and the same document. Facsimile signatures
shall be effective in all respects.
WHEREAS, the undersigned parties hereby agree to the terms and conditions
provided for in this Amendment, and have executed this Amendment as of the first
date written above.
COMPANY:
COMPUTERIZED THERMAL IMAGING, INC.
By: /s/ David B. Johnston
------------------------
Name: David B. Johnston
------------------------
Title: Chief Executive Officer
------------------------
EMPLOYEE:
/s/ David Packer
------------------------
David Packer
2
<PAGE>
EXHIBIT 10(ff)
AMENDMENT TO
EMPLOYEE STOCK OPTION AGREEMENT
This Amendment to the Employee Stock Option Agreement (the "Amendment") is
entered into on this 22 day of January, 1998, and effective as of the 11th day
of October, 1995, by and between Computerized Thermal Imaging, Inc., a Nevada
corporation (the "Company"), and Kenneth M. Dodd ("Employee").
W I T N E S S E T H:
WHEREAS, the Company and Employee entered into an Employment Agreement
dated October 11, 1995 wherein Employee was hired to serve as an executive of
the Company and/or its affiliate under the terms and conditions of such
agreement; and
WHEREAS, the Company and Employee are parties to that Employee Stock Option
Agreement dated October 11, 1995 (the "Stock Option Agreement") which was
executed in conjunction with the Employment Agreement and provides for the
granting of an Option to purchase 500,000 shares of common stock of the Company
as additional incentive compensation to Employee; and
WHEREAS, the Stock Option Agreement incorporates by reference the terms of
that certain "1995 Stock Option Plan" (the "1995 Plan") which was adopted by the
Board of Directors, but subject to the further approval of the stockholders of
the Company prior to June 1, 1996; and
WHEREAS, the 1995 Plan was not submitted to the stockholders for approval
prior to June 1, 1996 and was formally terminated on September 18, 1997 by the
Board of Directors; and
WHEREAS, the parties desire to reaffirm the granting of the Option and to
independently ratify and incorporate, to the extent applicable, the terms of the
1995 Plan as part of the Stock Option Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and consideration
herein provided, the sufficiency of which is hereby acknowledged, the parties
agree to amend the terms of the Stock Option Agreement as follows:
1. SCOPE. The Company and Employee hereby agree to amend the terms of
the Stock Option Agreement in accordance with the terms of this Amendment. This
Amendment shall be read together with the Stock Option Agreement as one
agreement and the parties hereby reaffirm the provisions of the Stock Option
Agreement to the extent that the terms of this Amendment do not supersede or
conflict with the terms of the Stock Option Agreement. All terms not defined in
this Amendment shall have the meanings given to them in the Stock Option
Agreement.
2. RATIFICATION AND INCORPORATION. In consideration of the fact that the
1995 Plan was not formally ratified by the stockholders of the Company prior to
the expiration of twelve (12) months from the date of its adoption by the Board
of Directors and, as such, never became effective as a plan qualifying for
incentive stock option treatment under section 422 of the Internal Revenue
Code, the parties deem it prudent to acknowledge, confirm, ratify and
incorporate, for all purposes, the terms and conditions of 1995 Plan as
contractual provisions forming an integral part of the Stock Option Agreement.
Any provisions of the 1995 Plan, including Section 2, which reference
stockholder ratification of the 1995 Plan within twelve (12) months from June 1,
1995 as a condition precedent to the effectiveness of the 1995 Plan are limited
in scope and effect to the issue of determining whether the Options granted
thereunder will qualify for incentive stock option treatment accorded under
section 422 of the Internal Revenue Code, and shall have no effect whatsoever on
the validity of the terms of the 1995 Plan or the Options granted pursuant or in
reference to the 1995 Plan. The terms of the 1995 Plan shall be incorporated,
on a basis independent from the deemed validity, invalidity, or expiration of
the 1995 Plan, as original contract terms of the Stock Option Agreement,
effective as of the effective date of the Stock Option Agreement.
1
<PAGE>
3. MULTIPLE COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be treated and deemed an original, but all of
which together shall constitute one and the same document. Facsimile signatures
shall be effective in all respects.
WHEREAS, the undersigned parties hereby agree to the terms and conditions
provided for in this Amendment, and have executed this Amendment as of the first
date written above.
COMPANY:
COMPUTERIZED THERMAL IMAGING, INC.
By: /s/ David B. Johnston
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
EMPLOYEE:
/s/ Kenneth M. Dodd
-------------------------------
Kenneth M. Dodd
2
<PAGE>
EXHIBIT 10(gg)
AMENDMENT TO
EMPLOYEE STOCK OPTION AGREEMENT
This Amendment to the Employee Stock Option Agreement (the "Amendment")
is entered into on this 26th day of January, 1998, and effective as of
the 12th day of June, 1995, by and between Computerized Thermal Imaging,
Inc., a Nevada corporation (the "Company"), and Richard V. Secord
("Employee").
W I T N E S S E T H:
WHEREAS, the Company and Employee entered into an Employment Agreement
dated June 12, 1995 wherein Employee was hired to serve as an executive of
the Company under the terms and conditions of such agreement; and
WHEREAS, the Company and Employee are parties to that Employee Stock
Option Agreement effective June 12, 1995 (the "Stock Option Agreement") which
was originally executed in conjunction with the Employment Agreement and
provides for the granting of an Option to purchase 2,000,000 shares of common
stock of the Company as additional incentive compensation to Employee; and
WHEREAS, the Stock Option Agreement incorporates by reference the terms
of that certain "1995 Stock Option Plan" (the "1995 Plan") which was adopted
by the Board of Directors, but subject to the further approval of the
stockholders of the Company prior to June 1, 1996; and
WHEREAS, the 1995 Plan was not submitted to the stockholders for
approval prior to June 1, 1996 and was formally terminated on September 18,
1997 by the Board of Directors; and
WHEREAS, the parties desire to reaffirm the granting of the Option and
to independently ratify and incorporate, to the extent applicable, the terms
of the 1995 Plan as part of the Stock Option Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
consideration herein provided, the sufficiency of which is hereby
acknowledged, the parties agree to amend the terms of the Stock Option
Agreement as follows:
1. SCOPE. The Company and Employee hereby agree to amend the terms of
the Stock Option Agreement in accordance with the terms of this Amendment.
This Amendment shall be read together with the Stock Option Agreement as one
agreement and the parties hereby reaffirm the provisions of the Stock Option
Agreement to the extent that the terms of this Amendment do not supersede or
conflict with the terms of the Stock Option Agreement. All terms not defined
in this Amendment shall have the meanings given to them in the Stock Option
Agreement.
2. RATIFICATION AND INCORPORATION. In consideration of the fact that
the 1995 Plan was not formally ratified by the stockholders of the Company
prior to the expiration of twelve (12) months from the date of its adoption
by the Board of Directors and, as such, never became effective as a plan
qualifying for incentive stock option treatment under section 422 of the
Internal Revenue Code, the parties deem it prudent to acknowledge, confirm,
ratify and incorporate, for all purposes, the terms and conditions of 1995
Plan as contractual provisions forming an integral part of the Stock Option
Agreement. Any provisions of the 1995 Plan, including Section 2, which
reference stockholder ratification of the 1995 Plan within twelve (12) months
from June 1, 1995 as a condition precedent to the effectiveness of the 1995
Plan are limited in scope and effect to the issue of determining whether the
Options granted thereunder will qualify for incentive stock option treatment
accorded under section 422 of the Internal Revenue Code, and shall have no
effect whatsoever on the validity of the terms of the 1995 Plan or the
Options granted pursuant or in reference to the 1995 Plan. The terms of the
1995 Plan shall be incorporated, on a basis independent from the deemed
validity, invalidity, or expiration of the 1995 Plan, as original contract
terms of the Stock Option Agreement, effective as of the effective date of
the Stock Option Agreement.
1
<PAGE>
3. MULTIPLE COUNTERPARTS. This Amendment may be executed in one or
more counterparts, each of which shall be treated and deemed an original, but
all of which together shall constitute one and the same document. Facsimile
signatures shall be effective in all respects.
WHEREAS, the undersigned parties hereby agree to the terms and
conditions provided for in this Amendment, and have executed this Amendment
as of the first date written above.
COMPANY:
COMPUTERIZED THERMAL IMAGING, INC.
By: /s/ David B. Johnston
--------------------------------
Name: David B. Johnston
-----------------------------
Title: Chief Executive Officer
----------------------------
EMPLOYEE:
/s/ Richard V. Secord
----------------------------------
Richard V. Secord
2
<PAGE>
EXHIBIT 10(hh)
COMPUTERIZED THERMAL IMAGING, INC.
CONSULTANT STOCK OPTION AGREEMENT
THIS CONSULTANT STOCK OPTION AGREEMENT (this "Agreement") is entered
into on this 5th day of November, 1997, and effective January 1, 1997 (the
"Date of Grant") by and between COMPUTERIZED THERMAL IMAGING, INC., a Nevada
corporation (the "Company"), and WILLARD HARPSTER ("Consultant").
W I T N E S S E T H:
WHEREAS, the Company and Consultant entered into that certain Consulting
Agreement (the "Consulting Agreement") effective January 1, 1997 regarding
the performance by Consultant of consulting services to the Company; and
WHEREAS, the Consulting Agreement provides for the issuance of stock
options to Consultant in consideration for such services; and
WHEREAS, the stock options granted pursuant to this Agreement shall not
be subject to the terms and conditions of the Company's 1997 Stock Option and
Restricted Stock Plan (the "PLAN");
NOW, THEREFORE, for and in consideration of the mutual covenants
contained herein and for other good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions set forth
herein, the Company hereby grants to Consultant options (the "Options") to
purchase all or any portion of 275,000 shares of common stock of the Company
(the "Shares") at a purchase price equal to $0.75 per Share (the "Exercise
Price"), which represents the approximate fair market value of the Shares on
the Date of Grant.
2. AMOUNT AND DATES EXERCISABLE.
(a) The Options may be exercised in whole or in part by Consultant
based on the following schedule: (i) fifty percent (50%) of the Options shall
become exercisable on the Date of Grant; and (ii) the remaining fifty percent
(50%) shall become exercisable on December 31, 1997.
(b) In the event Consultant terminates the Consulting Agreement or
the Company terminates the Consulting Agreement for "cause" (defined as the
breach of any covenant in the Consulting Agreement by Consultant and/or
Consultant's negligence or failure to perform services in accordance with
reasonable industry standards) then (i) any Options that are exercisable as
of the date of such termination shall be deemed earned by Consultant,
surviving termination, but in all cases must be exercised on or before the
expiration of ninety (90) days following the termination date, and (ii) any
Options that are not yet exercisable as of the date of such termination of
employment will terminate automatically without notice and be of no further
force or effect.
(c) In the event the Company terminates the Consulting Agreement
without cause then any portion of the Options which the Consultant has the
right to exercise as of the date of such termination of employment must be
exercised on or before ninety (90) days after the date of termination. All
Options not exercisable as of the date of termination of employment and all
Options earned by Consultant, if any, not exercised on or before the
expiration of the ninety (90) day period will terminate automatically without
notice and be of no further force or effect.
(d) Notwithstanding anything in this Agreement to the contrary,
the Options will terminate automatically without notice and be of no further
force or effect to the extent the Options are not yet exercised within five
(5) years after the Date of Grant.
1
<PAGE>
3. EXERCISE OF OPTIONS. The Options may be exercised on one or more
occasions, but can only be exercised for whole Shares. The Options shall be
exercised by Consultant by delivering to the Company (i) written notification
that any or all of the Options are exercisable, including evidence reasonably
satisfactory to the Company to that effect, (ii) the cash required to pay in
full an amount equal to the total Exercise Price for the number of Shares so
exercised. Consultant shall execute such documents and instruments as
requested by counsel of the Company to satisfy securities laws or evidence
the issuance and receipt and performance for the Option Shares, including
acknowledgment of all investor representations deemed necessary by Company
counsel. Upon receipt of all necessary documentation and payment, the
Company shall deliver to Consultant certificate(s) for said Shares
(collectively, the "Option Shares").
4. TRANSFERABILITY OF OPTIONS. Except as herein set forth, the
Options shall not be transferable by Consultant and shall be exercisable only
by Consultant.
5. REQUIREMENTS OF LAW.
(a) COMPLIANCE WITH LAWS. Notwithstanding anything in this
Agreement to the contrary, the Company shall not be required to sell or issue
any Option Shares under this Agreement if the issuance of such Option Shares
shall constitute a violation by Consultant or the Company of any provisions
of any law or regulation of any governmental authority or the by-laws of the
Company. The Company shall not be obligated to take any affirmative action
other than that which is specifically set forth in this Section 5 in order to
cause the exercise of the Options or the issuance of Option Shares pursuant
hereto to comply with any law or regulation of any governmental authority.
(b) FEDERAL AND STATE SECURITIES LAWS. Upon exercise of the
Options, unless a registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), is in effect with respect to the Option
Shares covered hereby, the Company shall not be required to issue such Option
Shares unless the Company has received evidence reasonably satisfactory to it
that such issuance is exempt from registration under the Securities Act and
all applicable state securities laws. The Company shall be obligated to
register the Option Shares, if permitted by applicable state securities laws.
Unless registered or exempt from restriction, the certificate(s) issued
representing the Option Shares shall bear a legend in substantially the
following form:
The Shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or under the securities
laws of any state and may not be sold or transferred except upon such
registration or upon receipt by the Company of an opinion of counsel
reasonably satisfactory to the Company that registration is not
required for such sale or transfer.
(c) REGISTRATION RIGHTS. All Shares in the Company which the
Employee obtains from the exercise of Options will be subject to the
following "piggy-back" registration rights:
If the Company at any time proposes to file, or does file, any registration
statement under the Securities Act, as amended, covering the class of
Shares which Employee holds, whether that registration is for securities to
be issued by the Company or then held by another party, Employee will have
the right to have any part or all of the Shares then held to be registered
under such proposed registration statement. If Employee wishes to exercise
such right, Employee shall notify the Company in writing of such desire
within thirty (30) days after the date Employee receives notice of the
proposed registration from the Company. Upon receipt of Employee's timely
request for registration under this Section 4, the Company will add the
Shares Employee requested be registered to the proposed registration
statement; provided, that if after Employee makes a request for
registration and the Company decides not to register or delay such
registration, for any reason, the Company will give Employee written notice
of its decision. However, no such determination will prejudice Employee's
rights to other and further registrations to be made by the Company from
time to time. The Company will bear all costs and expenses of each and all
such registrations incurred in connection with the exercise of rights
granted under this Section 4.
(d) INVESTMENT INTENT. Consultant hereby represents and warrants
that the Options and Option Shares are being acquired solely for the account
of Consultant for investment purposes only and not with a view to or for the
resale, distribution, subdivision, or fractionalization thereof; Consultant
has no contract, understanding,
2
<PAGE>
undertaking, agreement, or arrangement with any person to sell, transfer or
pledge to any person the Options or Option Shares or any part thereof;
Consultant has no present plans to enter into any such contract, undertaking,
agreement or arrangement; Consultant understands the legal consequences of
the foregoing representations and warranties to mean that Consultant must
bear the economic risk of the investment in the Option Shares for an
indefinite period of time; Consultant has such knowledge and experience in
financial and business matters that Consultant is capable of evaluating the
merits and risks of acquiring the Option Shares; and Consultant acknowledges
that the acquisition of the Option Shares involves a HIGH degree of risk that
may result in the loss of the total amount of Consultant's investment in the
Options and Option Shares.
(e) DUE DILIGENCE. Consultant acknowledges that it has for a
reasonable amount of time had an opportunity to ask questions and receive
answers concerning the terms and conditions of the issuance of the Options
and Option Shares and the actual and proposed business and affairs of the
Company, and is satisfied with the results thereof, and been given access, if
requested, to all documents with respect to the Company or this transaction,
as well as to such other information that Consultant has requested to
evaluate an investment in the Options and Option Shares.
6. NO RIGHTS AS SHAREHOLDER. Consultant shall have no rights as a
shareholder of the Company with respect to the Option Shares until the date
of issuance of a certificate for such Option Shares; no adjustment for
distributions, or otherwise, shall be made if the record date therefor is
prior to the date of issuance of such certificate.
7. CHANGES IN THE COMPANY'S STRUCTURE.
(a) CHANGES IN STRUCTURE. The existence of the Options shall not
affect in any way the right or power of the Company, directors, or its
shareholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issue of
bonds, debentures, or any other security or the dissolution or liquidation of
the Company, or any sale or transfer of all or any part of its assets or
business or any other corporate act or proceeding, whether of a similar
character or otherwise.
(b) CHANGES IN NUMBER OF SHARES. If, while the Options are
outstanding, the Company shall effect a subdivision or consolidation of
Shares or other capital readjustment, the payment of a Share dividend, or
other increase or reduction of the number of Shares outstanding, without
receiving compensation therefor in money, services, or property, then (i) in
the event of such an increase in the number of Shares outstanding, the number
of Option Shares then subject to the Options shall be proportionately
increased, and the Exercise Prices shall be proportionately reduced and (ii)
in the event of such a reduction in the number of Shares outstanding, the
number of Option Shares then subject to the Options shall be proportionately
reduced, and the Exercise Prices shall be proportionately increased.
(c) CHANGES IN CORPORATE STRUCTURE. After a merger of one or more
corporations into the Company or after a consolidation of the Company and one
or more corporations in which the Company shall be the surviving corporation,
Consultant shall, at no additional cost, be entitled upon exercise of the
Options to receive (subject to any required action by shareholders) in lieu
of the number of Option Shares as to which the Options shall then be so
exercisable, the number and class of shares or other securities to which
Consultant would have been entitled pursuant to the terms of the agreement of
merger or consolidation if, immediately prior to such merger or
consolidation, Consultant had been the holder of record of a number of Shares
equal to the number of Option Shares as to which the Options shall be so
exercised. In the event the Company agrees to be merged with or consolidated
into one or more corporations or other entities in which the Company shall
not be the surviving entity then, the Company shall, prior to such merger or
consolidation, obtain the full and unconditional agreement of such surviving
entity to assume all of the obligations of the Company under this Agreement.
(d) ISSUANCE OF SHARES. Except as hereinbefore expressly
provided, the issuance by the Company of shares of any class, or securities
convertible into shares of any class, for cash or property, or for labor or
services, either upon direct sale or upon the exercise of rights or warrants
to subscribe therefor, or upon conversion of shares or obligations of the
Company convertible into such shares or other securities, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the number
or price of the Shares then subject to the Options.
3
<PAGE>
8. EXPENSES. Each party shall pay its own expenses, including legal
expenses and attorneys' fees, which have been or may be incurred in
connection with the preparation, administration, amendment, or modification
of this Agreement and the other documents and instruments executed in
connection herewith.
9. NOTICES. Any notices or consents required or permitted by this
Agreement shall be in writing and shall be deemed to have been sufficiently
given if delivered in person, or if sent by certified mail, return receipt
requested, or telexed or telefaxed to the party entitled thereto with
confirmation of transmission, addressed as set forth on the signature pages
hereto, unless such address is changed by written notice hereunder. If so
mailed the same shall not be deemed effective until three (3) business days
after posting.
10. AMENDMENTS. No amendment, modification or waiver of this Agreement
or any other agreements or documents executed pursuant hereto shall be
effective unless the same is in writing and signed by the person against whom
such amendment is sought to be enforced.
11. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas, without regard to any
conflicts of laws principles thereof.
12. ALTERNATIVE DISPUTE RESOLUTION. ANY CONTROVERSY OR CLAIM ARISING
OUT OF OR RELATING TO THIS AGREEMENT, OR THE BREACH, TERMINATION, OR VALIDITY
THEREOF, SHALL BE SETTLED BY FINAL AND BINDING ARBITRATION IN ACCORDANCE WITH
THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION
("AAA RULES") IN EFFECT AS OF THE EFFECTIVE DATE OF THIS AGREEMENT. THE
AMERICAN ARBITRATION ASSOCIATION ("AAA") SHALL BE RESPONSIBLE FOR (i)
APPOINTING A SOLE ARBITRATOR, AND (ii) ADMINISTERING THE CASE IN ACCORDANCE
WITH THE AAA RULES. THE SITUS OF THE ARBITRATION SHALL BE HOUSTON, TEXAS.
UPON THE APPLICATION OF EITHER PARTY TO THIS AGREEMENT, AND WHETHER OR NOT AN
ARBITRATION PROCEEDING HAS YET BEEN INITIATED, ALL COURTS HAVING JURISDICTION
HEREBY ARE AUTHORIZED TO: (a) ISSUE AND ENFORCE IN ANY LAWFUL MANNER, SUCH
TEMPORARY RESTRAINING ORDERS, PRELIMINARY INJUNCTIONS AND OTHER INTERIM
MEASURES OF RELIEF AS MAY BE NECESSARY TO PREVENT HARM TO A PARTIES INTEREST
OR AS OTHERWISE MAY BE APPROPRIATE PENDING THE CONCLUSION OF ARBITRATION
PROCEEDINGS PURSUANT TO THIS AGREEMENT; AND (b) ENTER AND ENFORCE IN ANY
LAWFUL MANNER SUCH JUDGMENTS FOR PERMANENT EQUITABLE RELIEF AS MAY BE
NECESSARY TO PREVENT HARM TO A PARTIES INTEREST OR AS OTHERWISE MAY BE
APPROPRIATE FOLLOWING THE ISSUANCE OF ARBITRAL AWARDS PURSUANT TO THIS
AGREEMENT. TO THE MAXIMUM EXTENT PERMITTED BY LAW, EACH PARTY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHT TO CONSEQUENTIAL, EXEMPLARY,
OR PUNITIVE DAMAGES REGARDLESS OF THE FORUM FOR THE PROCEEDINGS. ANY ORDER
OR JUDGEMENT RENDERED BY THE ARBITRATOR MAY BE ENTERED AND ENFORCED BY ANY
COURT HAVING COMPETENT JURISDICTION.
13. SUBMISSION TO JURISDICTION. Each party hereby irrevocably submits
to the personal jurisdiction of the United States District Court for Harris
County, Texas, as well as of the District Courts of the State of Texas in
Harris County, Texas over any suit, action or proceeding arising out of or
relating to this Agreement. Each party hereby irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such mediation, arbitration, suit,
action or proceeding brought in any such county and any claim that any such
mediation, arbitration, suit, action or proceeding brought in such county has
been brought in an inconvenient forum.
14. WAIVERS. The observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively
or prospectively) by the party entitled to enforce such term, but such waiver
shall be effective only if in a writing signed by the party or parties
against which such waiver is to be asserted. No delay or omission on the
part of any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver on the part of any party of
any right, power or privilege hereunder operate as a waiver of any other
right, power or privilege hereunder nor shall any single or partial exercise
of any right, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder. All remedies, either under this Agreement or by law or otherwise
afforded to any party, shall be cumulative and not alternative.
15. SEVERABILITY. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be
declared judicially to be invalid, unenforceable or void, such decision will
not have the effect
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of invalidating or voiding the remainder of this Agreement or affect the
application of such provision to other persons or circumstances, and the
parties agree that the part or parts of this Agreement so held to be invalid,
unenforceable or void will be deemed to have been stricken herefrom and the
remainder of this Agreement will have the same force and effect as if such
part or parts had never been included herein. Any such finding of invalidity
or unenforceability shall not prevent the enforcement of such provision in
any other jurisdiction to the maximum extent permitted by applicable law.
16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same instrument.
[THIS SPACE INTENTIONALLY BLANK]
[SIGNATURES NEXT PAGE]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
COMPANY:
COMPUTERIZED THERMAL IMAGING, INC.
ADDRESS:
141 North State Street
Suite 161
Lake Oswego, Oregon 97034
(503) 650-0119 By: /s/ David B. Johnston
-----------------------------------
David B. Johnston, Chief Executive
Officer
CONSULTANT:
ADDRESS:
- --------------------
- --------------------
(___) ___-______ Telecopier By: /s/ Willard Harpster
----------------------------
Willard Harpster
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EXHIBIT 10(ii)
COMPUTERIZED THERMAL IMAGING, INC.
CONSULTANT STOCK OPTION AGREEMENT
THIS CONSULTANT STOCK OPTION AGREEMENT (this "Agreement") is entered
into on this 18th day November, 1997, and effective January 1, 1997 (the
"Date of Grant") by and between COMPUTERIZED THERMAL IMAGING, INC., a Nevada
corporation (the "Company"), and DARON DILLIA d/b/a MANHATTAN FINANCIAL
GROUP, ("Consultant").
W I T N E S S E T H:
WHEREAS, the Company and Consultant entered into that certain Consulting
Agreement (the "Consulting Agreement") effective January 1, 1997 regarding
the performance by Consultant of consulting services to the Company; and
WHEREAS, the Consulting Agreement provides for the issuance of stock
options to Consultant in consideration for such services; and
WHEREAS, the stock options granted pursuant to this Agreement shall not
be subject to the terms and conditions of the Company's 1997 Stock Option and
Restricted Stock Plan (the "PLAN");
NOW, THEREFORE, for and in consideration of the mutual covenants
contained herein and for other good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions set forth
herein, the Company hereby grants to Consultant options (the "Options") to
purchase all or any portion of 2,000,000 shares of common stock of the
Company (the "Shares") at a purchase price equal to $0.60 per Share (the
"Exercise Price"), which represents the approximate fair market value of the
Shares on the Date of Grant.
2. AMOUNT AND DATES EXERCISABLE.
(a) The Options may be exercised in whole or in part by Consultant
based on the following schedule: (i) fifty percent (50%) of the Options shall
become exercisable on the Date of Grant; and (ii) the remaining fifty percent
(50%) shall become exercisable on December 31, 1997.
(b) In the event Consultant terminates the Consulting Agreement or
the Company terminates the Consulting Agreement then (i) any Options that are
exercisable as of the date of such termination shall be deemed earned by
Consultant, surviving termination, but in all cases must be exercised on or
before the expiration of three (3) years following the termination date, and
(ii) any Options that are not yet exercisable as of the date of such
termination will terminate automatically without notice and be of no further
force or effect.
(c) Notwithstanding anything in this Agreement to the contrary,
the Options will terminate automatically without notice and be of no further
force or effect to the extent the Options are not yet exercised within five
(5) years after the Date of Grant.
3. EXERCISE OF OPTIONS. The Options may be exercised on one or more
occasions, but can only be exercised for whole Shares. The Options shall be
exercised by Consultant by delivering to the Company (i) written notification
that any or all of the Options are exercisable, including evidence reasonably
satisfactory to the Company to that effect, (ii) the cash required to pay in
full an amount equal to the total Exercise Price for the number of Shares so
exercised. Consultant shall execute such documents and instruments as
requested by counsel of the Company to satisfy securities laws or evidence
the issuance and receipt and performance for the Option Shares, including
acknowledgment of all investor representations deemed necessary by Company
counsel. Upon receipt of all necessary
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documentation and payment, the Company shall deliver to Consultant
certificate(s) for said Shares (collectively, the "Option Shares").
4. TRANSFERABILITY OF OPTIONS. Except as herein set forth, the
Options shall not be transferable by Consultant and shall be exercisable only
by Consultant.
5. REQUIREMENTS OF LAW.
(a) COMPLIANCE WITH LAWS. Notwithstanding anything in this
Agreement to the contrary, the Company shall not be required to sell or issue
any Option Shares under this Agreement if the issuance of such Option Shares
shall constitute a violation by Consultant or the Company of any provisions
of any law or regulation of any governmental authority or the by-laws of the
Company. The Company shall not be obligated to take any affirmative action
other than that which is specifically set forth in this Section 5 in order to
cause the exercise of the Options or the issuance of Option Shares pursuant
hereto to comply with any law or regulation of any governmental authority.
(b) FEDERAL AND STATE SECURITIES LAWS. Upon exercise of the
Options, unless a registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), is in effect with respect to the Option
Shares covered hereby, the Company shall not be required to issue such Option
Shares unless the Company has received evidence reasonably satisfactory to it
that such issuance is exempt from registration under the Securities Act and
all applicable state securities laws. The Company shall be obligated to
register the Option Shares, if permitted by applicable state securities laws.
Unless registered or exempt from restriction, the certificate(s) issued
representing the Option Shares shall bear a legend in substantially the
following form:
The Shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or under the securities
laws of any state and may not be sold or transferred except upon such
registration or upon receipt by the Company of an opinion of counsel
reasonably satisfactory to the Company that registration is not required
for such sale or transfer.
(c) REGISTRATION RIGHTS. All Shares in the Company which the
Consultant obtains from the exercise of Options will be subject to the
following "piggy-back" registration rights:
If the Company at any time proposes to file, or does file, any registration
statement under the Securities Act, as amended, covering the class of
Shares which Consultant holds, whether that registration is for securities
to be issued by the Company or then held by another party, Consultant will
have the right to have any part or all of the Shares then held to be
registered under such proposed registration statement. If Consultant
wishes to exercise such right, Consultant shall notify the Company in
writing of such desire within thirty (30) days after the date Consultant
receives notice of the proposed registration from the Company. Upon
receipt of Consultant's timely request for registration under this Section
4, the Company will add the Shares Consultant requested be registered to
the proposed registration statement; provided, that if after Consultant
makes a request for registration and the Company decides not to register or
delay such registration, for any reason, the Company will give Consultant
written notice of its decision. However, no such determination will
prejudice Consultant's rights to other and further registrations to be made
by the Company from time to time. The Company will bear all costs and
expenses of each and all such registrations incurred in connection with the
exercise of rights granted under this Section 4.
(d) INVESTMENT INTENT. Consultant hereby represents and warrants
that the Options and Option Shares are being acquired solely for the account
of Consultant for investment purposes only and not with a view to or for the
resale, distribution, subdivision, or fractionalization thereof; Consultant
has no contract, understanding, undertaking, agreement, or arrangement with
any person to sell, transfer or pledge to any person the Options or Option
Shares or any part thereof; Consultant has no present plans to enter into any
such contract, undertaking, agreement or arrangement; Consultant understands
the legal consequences of the foregoing representations and warranties to
mean that Consultant must bear the economic risk of the investment in the
Option Shares for an indefinite period of time; Consultant has such knowledge
and experience in financial and business matters that Consultant is capable
of evaluating the merits and risks of acquiring the Option Shares; and
Consultant acknowledges that the acquisition of
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the Option Shares involves a HIGH degree of risk that may result in the loss
of the total amount of Consultant's investment in the Options and Option
Shares.
(e) DUE DILIGENCE. Consultant acknowledges that it has for a
reasonable amount of time had an opportunity to ask questions and receive
answers concerning the terms and conditions of the issuance of the Options
and Option Shares and the actual and proposed business and affairs of the
Company, and is satisfied with the results thereof, and been given access, if
requested, to all documents with respect to the Company or this transaction,
as well as to such other information that Consultant has requested to
evaluate an investment in the Options and Option Shares.
6. NO RIGHTS AS SHAREHOLDER. Consultant shall have no rights as a
shareholder of the Company with respect to the Option Shares until the date
of issuance of a certificate for such Option Shares; no adjustment for
distributions, or otherwise, shall be made if the record date therefor is
prior to the date of issuance of such certificate.
7. CHANGES IN THE COMPANY'S STRUCTURE.
(a) CHANGES IN STRUCTURE. The existence of the Options shall not
affect in any way the right or power of the Company, directors, or its
shareholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issue of
bonds, debentures, or any other security or the dissolution or liquidation of
the Company, or any sale or transfer of all or any part of its assets or
business or any other corporate act or proceeding, whether of a similar
character or otherwise.
(b) CHANGES IN NUMBER OF SHARES. If, while the Options are
outstanding, the Company shall effect a subdivision or consolidation of
Shares or other capital readjustment, the payment of a Share dividend, or
other increase or reduction of the number of Shares outstanding, without
receiving compensation therefor in money, services, or property, then (i) in
the event of such an increase in the number of Shares outstanding, the number
of Option Shares then subject to the Options shall be proportionately
increased, and the Exercise Prices shall be proportionately reduced and (ii)
in the event of such a reduction in the number of Shares outstanding, the
number of Option Shares then subject to the Options shall be proportionately
reduced, and the Exercise Prices shall be proportionately increased.
(c) CHANGES IN CORPORATE STRUCTURE. After a merger of one or more
corporations into the Company or after a consolidation of the Company and one
or more corporations in which the Company shall be the surviving corporation,
Consultant shall, at no additional cost, be entitled upon exercise of the
Options to receive (subject to any required action by shareholders) in lieu
of the number of Option Shares as to which the Options shall then be so
exercisable, the number and class of shares or other securities to which
Consultant would have been entitled pursuant to the terms of the agreement of
merger or consolidation if, immediately prior to such merger or
consolidation, Consultant had been the holder of record of a number of Shares
equal to the number of Option Shares as to which the Options shall be so
exercised. In the event the Company agrees to be merged with or consolidated
into one or more corporations or other entities in which the Company shall
not be the surviving entity then, the Company shall, prior to such merger or
consolidation, obtain the full and unconditional agreement of such surviving
entity to assume all of the obligations of the Company under this Agreement.
(d) ISSUANCE OF SHARES. Except as hereinbefore expressly
provided, the issuance by the Company of shares of any class, or securities
convertible into shares of any class, for cash or property, or for labor or
services, either upon direct sale or upon the exercise of rights or warrants
to subscribe therefor, or upon conversion of shares or obligations of the
Company convertible into such shares or other securities, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the number
or price of the Shares then subject to the Options.
8. EXPENSES. Each party shall pay its own expenses, including legal
expenses and attorneys' fees, which have been or may be incurred in
connection with the preparation, administration, amendment, or modification
of this Agreement and the other documents and instruments executed in
connection herewith.
9. NOTICES. Any notices or consents required or permitted by this
Agreement shall be in writing and shall be deemed to have been sufficiently
given if delivered in person, or if sent by certified mail, return receipt
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requested, or telexed or telefaxed to the party entitled thereto with
confirmation of transmission, addressed as set forth on the signature pages
hereto, unless such address is changed by written notice hereunder. If so
mailed the same shall not be deemed effective until three (3) business days
after posting.
10. AMENDMENTS. No amendment, modification or waiver of this Agreement
or any other agreements or documents executed pursuant hereto shall be
effective unless the same is in writing and signed by the person against whom
such amendment is sought to be enforced.
11. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas, without regard to any
conflicts of laws principles thereof.
12. ALTERNATIVE DISPUTE RESOLUTION. ANY CONTROVERSY OR CLAIM ARISING
OUT OF OR RELATING TO THIS AGREEMENT, OR THE BREACH, TERMINATION, OR VALIDITY
THEREOF, SHALL BE SETTLED BY FINAL AND BINDING ARBITRATION IN ACCORDANCE WITH
THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION
("AAA RULES") IN EFFECT AS OF THE EFFECTIVE DATE OF THIS AGREEMENT. THE
AMERICAN ARBITRATION ASSOCIATION ("AAA") SHALL BE RESPONSIBLE FOR (i)
APPOINTING A SOLE ARBITRATOR, AND (ii) ADMINISTERING THE CASE IN ACCORDANCE
WITH THE AAA RULES. THE SITUS OF THE ARBITRATION SHALL BE HOUSTON, TEXAS.
UPON THE APPLICATION OF EITHER PARTY TO THIS AGREEMENT, AND WHETHER OR NOT AN
ARBITRATION PROCEEDING HAS YET BEEN INITIATED, ALL COURTS HAVING JURISDICTION
HEREBY ARE AUTHORIZED TO: (a) ISSUE AND ENFORCE IN ANY LAWFUL MANNER, SUCH
TEMPORARY RESTRAINING ORDERS, PRELIMINARY INJUNCTIONS AND OTHER INTERIM
MEASURES OF RELIEF AS MAY BE NECESSARY TO PREVENT HARM TO A PARTIES INTEREST
OR AS OTHERWISE MAY BE APPROPRIATE PENDING THE CONCLUSION OF ARBITRATION
PROCEEDINGS PURSUANT TO THIS AGREEMENT; AND (b) ENTER AND ENFORCE IN ANY
LAWFUL MANNER SUCH JUDGMENTS FOR PERMANENT EQUITABLE RELIEF AS MAY BE
NECESSARY TO PREVENT HARM TO A PARTIES INTEREST OR AS OTHERWISE MAY BE
APPROPRIATE FOLLOWING THE ISSUANCE OF ARBITRAL AWARDS PURSUANT TO THIS
AGREEMENT. TO THE MAXIMUM EXTENT PERMITTED BY LAW, EACH PARTY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHT TO CONSEQUENTIAL, EXEMPLARY,
OR PUNITIVE DAMAGES REGARDLESS OF THE FORUM FOR THE PROCEEDINGS. ANY ORDER
OR JUDGEMENT RENDERED BY THE ARBITRATOR MAY BE ENTERED AND ENFORCED BY ANY
COURT HAVING COMPETENT JURISDICTION.
13. SUBMISSION TO JURISDICTION. Each party hereby irrevocably submits
to the personal jurisdiction of the United States District Court for Harris
County, Texas, as well as of the District Courts of the State of Texas in
Harris County, Texas over any suit, action or proceeding arising out of or
relating to this Agreement. Each party hereby irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such mediation, arbitration, suit,
action or proceeding brought in any such county and any claim that any such
mediation, arbitration, suit, action or proceeding brought in such county has
been brought in an inconvenient forum.
14. WAIVERS. The observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively
or prospectively) by the party entitled to enforce such term, but such waiver
shall be effective only if in a writing signed by the party or parties
against which such waiver is to be asserted. No delay or omission on the
part of any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver on the part of any party of
any right, power or privilege hereunder operate as a waiver of any other
right, power or privilege hereunder nor shall any single or partial exercise
of any right, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder. All remedies, either under this Agreement or by law or otherwise
afforded to any party, shall be cumulative and not alternative.
15. SEVERABILITY. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be
declared judicially to be invalid, unenforceable or void, such decision will
not have the effect of invalidating or voiding the remainder of this
Agreement or affect the application of such provision to other persons or
circumstances, and the parties agree that the part or parts of this Agreement
so held to be invalid, unenforceable or void will be deemed to have been
stricken herefrom and the remainder of this Agreement will have the same
force and effect as if such part or parts had never been included herein.
Any such finding of invalidity or unenforceability shall not prevent the
enforcement of such provision in any other jurisdiction to the maximum extent
permitted by applicable law.
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16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same instrument.
[THIS SPACE INTENTIONALLY BLANK]
[SIGNATURES NEXT PAGE]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
COMPANY:
COMPUTERIZED THERMAL IMAGING, INC.
ADDRESS:
141 North State Street
Suite 161
Lake Oswego, Oregon 97034
(503) 650-0119 By: /s/ David B. Johnston
---------------------------------------
David B. Johnston, Chief
Executive Officer
CONSULTANT:
MANHATTAN FINANCIAL GROUP
ADDRESS:
1147 Manhattan Avenue, #134
Manhattan Beach, CA 90266
By: /s/ Daron Dillia
---------------------------------------
Daron Dillia
Title:
---------------------------------
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EXHIBIT 10(jj)
COMPUTERIZED THERMAL IMAGING, INC.
RESTRICTED STOCK PURCHASE AGREEMENT
THIS RESTRICTED STOCK PURCHASE AGREEMENT (this "Agreement") is entered into
on the 9th day of July 1997 (the "Effective Date"), by and between Computerized
Thermal Imaging, Inc., a Nevada corporation ("CTI") and Manhattan Financial
Group ("MFG").
W I T N E S S E T H:
WHEREAS, CTI needs $150,000 in capital funds to satisfy a public relations
firm contract;
WHEREAS, MFG, an independent contractor financial consulting firm
representing CTI, desires to purchase shares of common stock in CTI for
investment purposes;
WHEREAS, CTI agrees to sell to MFG the requested number of shares based on
the representations and provisions set forth in this Agreement;
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein and for other good and valuable consideration, the receipt, adequacy and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. SALE OF RESTRICTED STOCK. CTI hereby agrees to sell to MFG, and MFG
agrees to purchase, 500,000 shares of common stock in CTI, subject to the terms
and restrictions set forth in this Agreement (the "Restricted Stock"). The
Restricted Stock shall be issued in consideration for the contribution of
$150,000 to CTI (the "Consideration") to be deposited into an account designated
by CTI. The Consideration shall be paid by MFG in monthly installments to, or
for the benefit of, CTI, as it may direct. Installment payments totaling
$150,000 shall become due and payable according to the Administration Agreement,
which requires the Administrator to deposit monthly the sum of the approved
expenses for the month, which in the end of one year shall not be less than
$150,000.00.
2. RESTRICTIONS AND CONDITIONS.
(a) CONTINUED PERFORMANCE. Any failure by MFG to provide all or part
of the Consideration an independent covenant, shall constitute a material breach
of this Agreement. In the event of default by MFG of this Agreement, MFG shall
be entitled the five (5) days written notice to cure by depositing the full
amount of the installment in default; if MFG does not cure the default, CTI
shall be entitled to elect alternative remedies of either (a) claiming
liquidated damages equal to three times the amount in default that was not cured
within five (5) days after notice, or (b) demanding recision and cancellation of
a pro-rata number of the Restricted Stock. If CTI elects to cancel shares as a
remedy by written notice, MFG hereby consents to the immediate cancellation of
the appropriate shares of Restricted Stock and agrees to return all certificates
representing the Restricted Stock issued, for CTI to authorized reissuance of
certificates representing the remaining shares.
(b) PRICE OF STOCK AND REPURCHASE OPTION. The parties hereby agree
that the Restricted Stock shall be sold to MFG at a price of $0.30 per share.
The Restricted Stock shall be subject to a repurchase option exercisable by CTI
at its sole discretion for a duration of one hundred twenty (120) days from the
Effective Date (the "Repurchase Option"). Such Repurchase Option shall entitle
CTI to repurchase any portion of 250,000 shares of Restricted Stock at ten cents
($0.10 per share) if this sale is advised by CTI's legal counsel to constitute a
breach of any other agreement or regulation, and may be exercisable by providing
MFG with written notice thereof.
3. NON-TRANSFERABILITY OF RESTRICTED STOCK. The Restricted Stock may not
be sold, assigned, transferred, redeemed, pledged or otherwise encumbered during
the period in which the terms, conditions and restrictions of this Agreement
apply. Any attempted sale, pledge, assignment, or other transfer of the
Restricted Stock, without consent of CTI's counsel, shall be null and void
without force or effect.
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4. CERTIFICATES. CTI shall issue instructions to its transfer agent to
issue a stock certificate to MFG for the Restricted Stock within ten (10) days
after the initial payment of $50,000 provided for in Section 1.
5. REQUIREMENTS OF LAW.
(a) COMPLIANCE WITH LAWS. CTI shall not be required to sell or issue
any shares under this Agreement if the issuance of such shares shall constitute
a violation by MFG or CTI of any provisions of any law or regulation of any
governmental authority or the Bylaws of CTI. CTI shall not be obligated to take
any affirmative action other than that which is specifically set forth in this
Paragraph 5 in order to cause the issuance of Restricted Stock pursuant hereto
to comply with any law or regulation of any governmental authority.
(b) FEDERAL AND STATE SECURITIES LAWS. MFG understands that the
Restricted Stock when issued will be restricted securities under the Securities
Act of 1933, as amended (the "SECURITIES ACT"), and that no sale, distribution,
transfer or other disposition of the Restricted Stock can be made by MFG unless
the Restricted Stock has been registered under the Securities Act and applicable
securities laws of any other relevant jurisdiction, or exemptions from such
registrations are available with respect to the proposed sale, distribution,
transfer or other distribution. CTI may, but shall in no event be obligated to,
register any securities covered hereby pursuant to the Securities Act or any
applicable state securities laws. The certificate(s) issued representing the
Restricted Stock may bear a legend in substantially the following form:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or under the securities
laws of any state and may not be sold or transferred except upon such
registration or upon receipt by CTI of an opinion of counsel
reasonably satisfactory to CTI that registration is not required for
such sale or transfer."
(c) INVESTMENT INTENT. MFG hereby represents and warrants that the
Restricted Stock is being acquired solely for the account of MFG for investment
purposes only and not with a view to or for the resale, distribution,
subdivision, or fractionalization thereof; MFG has no contract, understanding,
undertaking, agreement, or arrangement with any person to sell, transfer, or
pledge to any person the Restricted Stock or any part thereof; MFG has no
present plans to enter into any such contract, undertaking, agreement or
arrangement; MFG understands the legal consequences of the foregoing
representations and warranties to mean that MFG must bear the economic risk of
the investment in the Restricted Stock for an indefinite period of time; MFG has
such knowledge and experience in financial and business matters that MFG is
capable of evaluating the merits and risks of acquiring the Restricted Stock;
and MFG acknowledges that the acquisition of the Restricted Stock involves a
HIGH degree of risk that may result in the loss of the total amount of MFG's
investment in the Restricted Stock.
(d) DUE DILIGENCE. MFG acknowledges that it has for a reasonable
amount of time had an opportunity to ask questions and receive answers
concerning the terms and conditions of the issuance of the Restricted Stock and
the actual and proposed business and affairs of CTI, and is satisfied with the
results thereof, and been given access, if requested, to all documents with
respect to CTI or this transaction, as well as to such other information that
MFG has requested to evaluate an investment in the Restricted Stock. MFG has
made its own determination of the value of the Restricted Stock and has not
received or relied upon any statements, representations, or warranties of CTI or
its agents or representatives.
6. CHANGES IN CTI'S STRUCTURE.
(a) CHANGES IN STRUCTURE. The existence of the right to receive the
Restricted Stock shall not affect in any way the right or power of CTI or its
officers, directors, or stockholders to make or authorize any or all
adjustments, recapitalizations, reorganizations or other changes in CTI's
capital structure or its business, or any merger or consolidation of CTI, or any
issue of bonds, debentures, or any other security or the dissolution or
liquidation of CTI, or any sale or transfer of all or any part of its assets or
business or any other corporate act or proceeding, whether of a similar
character or otherwise.
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(b) ISSUANCE OF SHARES. Except as hereinbefore expressly provided,
the issuance by CTI of shares of any class, or securities convertible into
shares of any class, for cash or property, or for labor or services, either upon
direct sale or upon the exercise of rights or warrants to subscribe therefor, or
upon conversion of shares or obligations of CTI convertible into such shares or
other securities, shall not affect, and no adjustment by reason thereof shall be
made with respect to, the number of the shares of Restricted Stock to be issued
pursuant to this Agreement.
7. EXPENSES. Each party shall pay its own expenses, including legal
expenses and attorneys' fees, which have been or may be incurred in connection
with the preparation, amendment, or modification of this Agreement and any other
documents and instruments executed in connection herewith. MFG has been advised
to seek its own legal counsel and chose not to do so; MFG acknowledges that
CTI's legal counsel represents solely CTI in the preparation of this Agreement.
8. NOTICES. Any notices or consents required or permitted by this
Agreement shall be in writing and shall be deemed to have been sufficiently
given if delivered in person, or if sent by certified mail, return receipt
requested, or telexed or telefaxed to the party entitled thereto with
confirmation of transmission, addressed as set forth on the signature pages
hereto, unless such address is changed by written notice hereunder. If so
mailed the same shall not be deemed effective until three (3) business days
after posting.
9. AMENDMENTS. No amendment, modification or waiver of this Agreement or
any other agreements or documents executed pursuant hereto shall be effective
unless the same is in writing and signed by the person against whom such
amendment is sought to be enforced.
10. BINDING EFFECTS. This Agreement shall be binding upon and inure to
the benefit of each of the parties hereto and its successors, permitted assigns
and legal representatives.
11. GOVERNING LAW. This Agreement and all other documents executed
pursuant hereto shall be governed by and construed in accordance with the laws
of the State of Texas, without regard to any conflicts of laws principles
thereof.
12. ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement, or the breach, termination, or validity thereof, shall be
settled by final and binding arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association ("AAA Rules") in
effect as of the effective date of this Agreement. The American Arbitration
Association ("AAA") shall be responsible for (i) appointing a sole arbitrator,
and (ii) administering the case in accordance with the AAA Rules. The situs of
the arbitration shall be either Shonomish County, Oregon or Harris County,
Texas. Upon the application of either party to this Agreement, and whether or
not an arbitration proceeding has yet been initiated, all courts having
jurisdiction hereby are authorized to: (a) issue and enforce in any lawful
manner, such temporary restraining orders, preliminary injunctions and other
interim measures of relief as may be necessary to prevent harm to a parties
interest or as otherwise may be appropriate pending the conclusion of
arbitration proceedings pursuant to this Agreement; and (b) enter and enforce in
any lawful manner such judgments for permanent equitable relief as may be
necessary to prevent harm to a parties interest or as otherwise may be
appropriate following the issuance of arbitral awards pursuant to this
Agreement.
The arbitrator shall decide the case according to and based on the
substantive laws of the state of Texas. Any order or judgement rendered by the
arbitrator may be entered by any court having jurisdiction.
13. GENERAL ASSURANCES. The parties agree to execute, acknowledge, and
deliver all such further instruments, and do all such other acts, as may be
necessary or appropriate in order to carry out the intent and purposes of this
Agreement.
14. SEVERABILITY. If any provision of this Agreement, or the application
of such provision to any person or circumstance, shall be declared judicially to
be invalid, unenforceable or void, such decision will not have the effect of
invalidating or voiding the remainder of this Agreement or affect the
application of such provision to other persons or circumstances, and the parties
agree that the part or parts of this Agreement so held to be invalid,
unenforceable or void will be deemed to have been stricken herefrom and the
remainder of this Agreement will have the same force and effect as if such part
or parts had never been included herein. Any such finding of invalidity or
unenforceability shall
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not prevent the enforcement of such provision in any other jurisdiction to
the maximum extent permitted by applicable law.
15. THIRD PARTY BENEFICIARIES. This Agreement does create rights
enforceable by Liberty Capital Group, Inc., an entity not a party to this
Agreement.
16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
COMPUTERIZED THERMAL IMAGING, INC.,
A NEVADA CORPORATION
ADDRESS:
141 North State Street, Suite 161
Lake Oswego, Oregon 97034
Telefax: (503) 650-0119
By: /s/ David B. Johnston
---------------------------------
David B. Johnston,
Chief Executive Officer
MANHATTAN FINANCIAL GROUP
ADDRESS:
By: /s/ Daron C. Dillia
---------------------------------
Daron C. Dillia
Title: Sole Owner
--------------------------
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EXHIBIT 10(kk)
COMPUTERIZED THERMAL IMAGING, INC.
1995 STOCK OPTION PLAN
1. PURPOSES
The purposes of the Computerized Thermal Imaging, Inc. 1995 Stock Option
Plan (the "Plan") are to aid Computerized Thermal Imaging, Inc. (the "Company")
and its Subsidiaries, in attracting and retaining employees of outstanding
competence and to enable selected key employees of the Company and any
Subsidiary to acquire or increase ownership interests in the Company on a basis
that will encourage them to perform at increasing levels of effectiveness and
use their best efforts to promote the growth and profitability of the Company or
any Subsidiary. Consistent with these objectives, the Plan authorizes the
granting to selected key employees of options to acquire shares of Company stock
pursuant to the terms and conditions hereinafter set forth. As used herein, the
term "Subsidiary" means any domestic or foreign corporation, at least 50% of the
outstanding voting stock or voting power of which is beneficially owned,
directly or indirectly, by the Company.
2. EFFECTIVE DATE
The Plan, upon approval of the shareholders of the Company, on or before
the expiration of 12 months from June 1, 1995, shall be effective as of June 1,
1995.
3. ADMINISTRATION
(a) The Plan shall be administered by the Board of Directors of the
Company (the "Board of Directors") or a Committee of the Board of Directors
designated by the Board of Directors (the "Committee"); provided the Committee
shall consist of at least three members and each member shall not have been
eligible, during the one-year period prior to the later of the effective date of
the Plan or such member's appointment to the Committee, to receive an option
under this Plan or to receive stock or an option to purchase stock of the
Company or a Subsidiary under any other plan maintained by the Company or a
Subsidiary. Any member of the Committee who does not satisfy the foregoing
requirement shall not serve in his or her capacity as a Committee member for
purposes of administration of the Plan, until one year has elapsed from the date
he or she was last eligible to receive such stock or such an option under the
Plan or such other plan. If, at any time, there are less than three members of
the Committee eligible to serve in such capacity for purposes of administration
of the Plan as a result of the preceding sentence or otherwise, the Board of
Directors shall appoint one or more members of the Board of Directors, who shall
qualify hereunder, to serve as members of the Committee solely for purposes of
administration of the Plan. All Committee members shall serve, and may be
removed, at the pleasure of the Board of Directors.
(b) For purposes of administration of the Plan, if the Plan shall be
administered by the Committee, a majority of the members of the Committee (but
not less than two) eligible to serve as such shall constitute a quorum, and any
action taken by a majority of such members of the Committee present at any
meeting at which a quorum is present, or acts approved in writing by a majority
of such members of the Committee, shall be the acts of the Committee.
(c) Subject to the express provisions of the Plan, the Board of Directors
(or the Committee) shall have full and final authority to decide when options to
acquire Company stock ("Options") will be granted under the Plan, to select the
key employees to whom the Options will be granted, and to determine the number
of Shares (as defined in Section 5 hereof) to be covered by each Option, the
price at which such Shares may be purchased and other terms and conditions of
such purchase. In making these determinations, the Board of Directors (or the
Committee) shall solicit the recommendations of the Chief Executive Officer of
the Company and may take into account the key employee's present and potential
contributions to the Company's or a Subsidiary's success and any other factors
which the Board of Directors (or the Committee) may deem relevant. Subject again
to the express provisions of the Plan, the Board of Directors (or the Committee)
shall also have full authority to interpret the Plan and any stock option
agreements evidencing Options granted hereunder, to issue rules for
administering the Plan, to change, alter, amend or rescind such rules, and to
make all other determinations necessary or appropriate for the administration of
the Plan.
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All determinations, interpretations and constructions made by the Board of
Directors (or the Committee) pursuant to this Section 3 shall be final and
conclusive. If the Plan is administered by the Committee, to the extent that
authority for making such determinations is expressly reserved under the Plan
to the Board of Directors, or has not been expressly delegated by the Board
of Directors or the Committee, the determination of the Board of Directors
shall be final and conclusive. No member of the Board of Directors or the
Committee shall be liable for any action, determination or omission taken or
made in good faith with respect to the Plan or any Option granted hereunder.
4. ELIGIBILITY
Grants of Options under the Plan shall be confined to key employees of the
Company or a Subsidiary (including officers and directors who are also employees
of the Company or a Subsidiary) who devote substantially their full time to the
Company or Subsidiary and who can make a meaningful contribution to the
Company's or Subsidiary's success; provided, however, that no Option shall be
granted to any member of the Committee.
5. OPTION SHARES
(a) Stock with respect to which Options are granted under the Plan shall
be shares of Common Stock, $0.001 par value per share, of the Company ("Shares")
and except as otherwise required or permitted by Section (b) of this Section 5,
the aggregate number of Shares with respect to which Options may be granted
under the Plan shall not exceed Three Million (3,000,000) Shares. If an Option
expires, terminates, or is otherwise surrendered, in whole or in part, the
Shares allocable to the unexercised portion of such Option shall again become
available for grants of Options under the Plan. As determined from time to time
by the Board of Directors, the Shares available under the Plan for grants of
Options may consist either in whole or in part of authorized but unissued Shares
or Shares which have been reacquired by the Company or a Subsidiary following
original issuance.
(b) The aggregate number of Shares purchasable under Options pursuant to
the provisions of the Plan and the number of Shares and the Option price for
Shares covered by each outstanding Option shall be proportionately adjusted for
any increase or decrease in the number of issued Shares resulting from a
subdivision or consolidation of the issued Shares and may, in the absolute
discretion of the Committee, be similarly adjusted for any other capital
adjustment (including a reclassification of shares or recapitalization or
reorganization of the Company), stock split, the payment of a stock dividend or
the distribution to holders of the Shares of rights, warrants, assets or
evidences of indebtedness.
6. TERMS AND CONDITIONS OF OPTIONS
The Board of Directors (or the Committee) shall have full and complete
authority, in its discretion, but subject to the express provisions of the 1995
Plan, to grant from time to time options under the 1995 Plan which constitute
Incentive Stock Options, and to grant options under the Plan which do not
constitute Incentive Stock Options (such options being hereinafter referred to
as "Non-Qualified Options").
Each Option granted pursuant to the Plan shall be evidenced by a stock
option agreement between the Company and the key employee to whom the Option is
granted (the "Optionee") in such form or forms as the Board of Directors (or the
Committee) from time to time shall prescribe, which agreements need not be
identical to each other but shall comply with and are subject to the following
terms and conditions:
(a) OPTION PRICE. The price at which each Share may be purchased pursuant
to an Option granted under the Plan shall be not less than 100% of the fair
market value for each such Share (i) on the date the Board of Directors (or the
Committee) approves granting of such Option (the "Date of Grant"), or (ii) on a
future date if such is fixed on the Date of Grant by the Board of Directors (or
the Committee), and in no event shall such price be less than the par value of
such Shares. The "fair market value" of the Shares on any date shall be the
mean between the closing bid and asked prices of the Shares on such date (on the
principal market in which the Shares are traded), or if the Shares were not
traded on such date, the mean between the high and the low prices of the Shares
on the next preceding trading day during which the Shares were traded. Anything
contained in this paragraph (a) of Section 6 to the contrary notwithstanding, in
the event that the number of Shares subject to any Option is adjusted pursuant
to Section 5(b)
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hereof, a corresponding adjustment shall be made in the price at which the
Shares subject to such Option may thereafter be purchased.
(b) DURATION OF OPTIONS. Each Option granted under the Plan shall expire
and all rights to purchase Shares pursuant thereto shall cease no later than the
tenth anniversary of the Date of Grant of the Option (the "Expiration Date").
(c) VESTING OF OPTIONS. Each Option granted hereunder may only be
exercised to the extent that the Optionee is vested in such Option. An Optionee
shall vest separately in each Option granted hereunder in accordance with the
terms of each such option or a schedule determined by the Board of Directors (or
the Committee) in its sole discretion, which may be appended to the stock option
agreement. Except as otherwise so provided by the Board of Directors (or the
Committee) in an option or schedule thereto, all Options issued under this Plan
shall vest in accordance with the following schedule:
<TABLE>
<CAPTION>
NUMBER OF YEARS THE OPTIONEE EXTENT TO
HAS REMAINED IN THE EMPLOY WHICH THE
OF THE COMPANY OR A SUBSIDIARY OPTION IS
FOLLOWING THE GRANT OF THE OPTION VESTED
--------------------------------- ---------
<S> <C>
Under one . . . . . . . . . . . . . . . . . . . . . . . 0%
At least one but less than two. . . . . . . . . . . . . 20%
At least two but less than three. . . . . . . . . . . . 40%
At least three but less than four . . . . . . . . . . . 60%
At least four but less than five. . . . . . . . . . . . 80%
Five or more. . . . . . . . . . . . . . . . . . . . . . 100%
</TABLE>
Anything contained in this Paragraph (c) of Section 6 to the contrary
notwithstanding, an Optionee shall become fully (100%) vested in each of his or
her Options upon his or her termination of employment with the Company or a
Subsidiary for reasons of death, Disability, or Retirement (as defined in
Paragraph (g) (iv) of this Section 6); upon his or her termination of employment
by the Company or a Subsidiary for a reason other than discharge for cause
within one year of the merger of the Company into, consolidation of the Company
with, or sale or transfer of all or substantially all the Company's assets to,
another corporation or the acquisition of effective voting control of the
Company by any individual or company or by any individuals or companies acting
in concert (a good faith determination by the Board of Directors that such
control has been acquired shall be final and conclusive); if the Board of
Directors (or the Committee) determines, in its sole discretion, that
acceleration of the Option vesting schedule would be desirable for the Company;
or if such Options vest pursuant to Paragraph (d) of this Section 6.
(d) MERGER, CONSOLIDATION, ETC. In the event that the Company shall,
pursuant to action by its Board of Directors, at any time propose to merge into,
consolidate with, or sell or otherwise transfer all or substantially all of its
assets to another corporation and provision is not made pursuant to the terms of
such transaction for the assumption by the surviving, resulting or acquiring
corporation of outstanding Options under the Plan, or for the substitution of
new options therefor, the Board of Directors (or the Committee) shall cause
written notice of the proposed transaction to be given to each Optionee not less
than forty (40) days prior to the anticipated effective date of the proposed
transaction, and his or her Option shall become fully (100%) vested and, prior
to a date specified in such notice, which shall be not more than ten (10) days
prior to the anticipated effective date of the proposed transaction, each
Optionee shall have the right to exercise his or her Option to purchase any or
all Shares then subject to such Option, including those, if any, which by reason
of other provisions of the Plan have not then become available for purchase.
Each Optionee, by so notifying the Company in writing, may, in exercising his or
her Option, condition such exercise upon, and provide that such exercise shall
become effective at the time of, but immediately prior to, the consummation of
the transaction, in which event such Optionee need not make payment for the
Shares to be purchased upon exercise of such Option until five (5) days after
written notice by the Company to such Optionee that the transaction has been
consummated. If the transaction is consummated, each Option, to the extent not
previously exercised prior to the date specified in the foregoing notice, shall
terminate on the effective date of such consummation. If the transaction is
abandoned, (i) any Shares not purchased upon exercise of such Option shall
continue to be available for purchase in accordance with the other provisions of
the Plan and (ii) to the extent that any Option not exercised prior to such
abandonment shall have vested solely by operation of this Paragraph (d), such
vesting shall be teemed annulled, and
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the vesting schedule set forth in Paragraph (c) of this Section 6 shall be
reinstituted, as of the date of such abandonment.
(e) EXERCISE OF OPTIONS. A person entitled to exercise an Option may
exercise it to the extent vested, in whole at any time or in part from time to
time, by delivering to the Secretary of the Company written notice specifying
the number of Shares with respect to which the Option is being exercised,
together with payment in full of the purchase price of such Shares plus any
federal, state or local income taxes for which the Company has a withholding
obligation in connection with such exercise. Such payment shall be made in cash
or by certified check or bank draft to the order of the Company; provided,
however, that the Board of Directors (or the Committee) may, in its sole
discretion, authorize such payment, in whole or in part, in any other form,
including payment by personal check or by the exchange of Common Stock of the
Company previously acquired by the person entitled to exercise the Option and
having a "fair market value" on the date of exercise equal to the price for
which the Shares may be purchased pursuant to the Option.
(f) NONTRANSFERABILITY. Options shall not be transferable other than by
will or the laws of descent and distribution and no Option may be exercised by
anyone other than the Optionee, except that, should the Optionee die the Option
may be exercised by his estate, legal representative or beneficiary, as the case
may be, subject to all other terms and conditions contained in the Plan.
(g) TERMINATION OF EMPLOYMENT. Unless otherwise determined by the Board
of Directors (or the Committee), the following rules shall apply in the event of
an Optionee's termination of employment with the Company or a Subsidiary:
(i) In the event of an Optionee's termination of employment with the
Company or a Subsidiary either (1) for Cause, whether as defined
in an employment agreement or other written document between the
Company and an Optionee, or (2) voluntarily on the part of the
Optionee and without the written consent of the Company, his or
her Option shall immediately terminate.
(ii) In the event of an Optionee's termination of employment with the
Company or a Subsidiary under circumstances other than those
specified in Paragraph (g)(i) hereof and for reasons other than
death, Disability or Retirement (as defined in Paragraph (g)(iv)
hereof), such Option shall terminate on the date which is ninety
(90) days from the date of such termination of employment or on
its Expiration Date, whichever shall first occur.
(iii) In the event of the death of an Optionee and either while he
or she is employed by the Company or a Subsidiary or, if
Paragraph (g)(ii) or (g)(iv) hereof is applicable, during a
period of time following his or her termination of
employment, such Option shall terminate on the first
anniversary of the Optionee's death or on its Expiration
Date, whichever shall first occur.
(iv) In the event of the Optionee's termination of employment with the
Company or a Subsidiary, for reasons of the inability, due to
mental or physical infirmity, of the Optionee to discharge the
regular responsibilities and duties of his or her employment with
the Company or a Subsidiary, as the case may be ("Disability"),
or for reasons of termination of employment other than discharge
for cause pursuant to the terms of any Retirement Plan maintained
by the Company or any subsidiary in which Optionee participates
(which termination shall constitute "Retirement"), such Option
shall terminate on the date which is one year after the date of
such termination of employment or on its Expiration Date,
whichever shall first occur.
(v) Anything contained in this Paragraph (g) of Section 6 to the
contrary notwithstanding, an Option may only be exercised
following the Optionee's termination of employment with the
Company or a Subsidiary for reasons other than death, Disability
or Retirement if, and to
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the extent that, such Option was exercisable immediately prior
to such termination of employment.
(vi) An Optionee's transfer of employment between the Company and a
Subsidiary or between Subsidiaries shall not constitute a
termination of employment and the Board of Directors (or the
Committee) shall determine in each case whether an authorized
leave of absence for military service or otherwise shall
constitute a termination of employment.
(h) NO RIGHTS AS STOCKHOLDER OR TO CONTINUED EMPLOYMENT. No Optionee
shall have any rights as a Stockholder of the Company with respect to any Shares
prior to the date of issuance to him or her of the certificate or certificates
for such Shares and neither the Plan nor any Option granted under the Plan shall
confer upon an Optionee any right to continuance of employment by the Company or
any Subsidiary or interfere in any way with the right of the Company or
Subsidiary to terminate the employment of such Optionee.
(i) SPECIAL PROVISIONS WITH RESPECT TO INCENTIVE STOCK OPTIONS.
(i) No option will be granted to any employee who immediately before
the option is granted owns more than ten percent (10%) of the
combined voting power of the Company or any subsidiary or
Affiliate, unless the option price is at least 110% of the fair
market value of the stock subject to the option and such option
by its terms is not exercisable after the expiration of five (5)
years after the date such option is granted.
(ii) To the extent the aggregate fair market value of stock (as of the
Date of Grant of each Option) covered by Incentive Stock Options
which are exercisable for the first time by an Optionee during
any calendar year exceeds $100,000, such excess shall be treated
as Non-Qualified Options during such period. Such deemed
Non-Qualified Options shall be taken into account in the order in
which such Options were granted.
7. ISSUANCE OF SHARES; RESTRICTIONS
(a) Subject to the conditions and restrictions provided in this Section 7,
the Company shall, within a reasonable time after an Option has been duly
exercised in whole or in part, deliver to the person who exercised the Option a
certificate, registered in the name of such person, for the number of Shares
with respect to which the Option has been exercised. The Company may legend any
stock certificate issued hereunder to reflect any restrictions provided for in
this Section 7.
(b) Unless the Shares subject to Options granted under the Plan have been
registered under the Securities Act of 1933, as amended (the "Act") and, in the
case of any Optionee who may be deemed an "affiliate" of the Company as defined
in Rule 405 under the Act, such shares have been registered under the Act for
resale by such Optionee, or the Company has determined that an exemption from
registration is available, the Company may require prior to and as a condition
of the issuance of any Shares that the person exercising an Option hereunder
furnish the Company with a written representation in a form prescribed by the
Committee to the effect that such person is acquiring said Shares solely with a
view to investment for his or her own account and not with a view to the resale
or distribution of all or any part thereof, and that such person will not
dispose of any of such Shares otherwise than in accordance with the provisions
of Rule 144 under the Act unless and until either the Shares are registered
under the Act or the Company is satisfied that an exemption for such
registration is available.
(c) Anything contained herein to the contrary notwithstanding, the Company
shall not be obligated to sell or issue any Shares under the Plan unless and
until the Company is satisfied that such sale or issuance complies with (i) all
applicable requirements of the governing body of the principal market in which
such Shares are traded, (ii) all applicable provisions of the Securities Act of
1933, as amended, and (iii) all other laws or regulations by which the Company
is bound or to which the Company is subject.
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<PAGE>
8. SUBSTITUTE OPTIONS
Anything contained herein to the contrary notwithstanding, Options may, at
the discretion of the Committee, be granted under the Plan in substitution for
options to purchase shares of capital stock of another corporation which is
merged into, consolidated with, or all or a substantial portion of the property
or stock of which is acquired by, the Company or a Subsidiary. The terms,
provisions and benefits to Optionees of such substitute Options shall in all
respects be identical to the terms, provisions and benefits to optionees of the
options of the other corporation on the date of substitution, except that such
substitute Options shall provide for the purchase of Shares of the Company
instead of shares of such other corporation.
9. TERMS OF THE PLAN
Unless the Plan has been sooner terminated pursuant to Section 10 hereof,
the Plan shall terminate on, and no Options shall be granted after, the tenth
anniversary of the Effective Date. The provisions of the Plan, however, shall
continue thereafter to govern all Options theretofore granted, until the
exercise, expiration or cancellation of such Options.
10. AMENDMENT AND TERMINATION OF PLAN
The Board of Directors at any time may terminate the Plan or amend it from
time to time in such respects as it deems desirable; provided that, without the
further approval of the Shareholders of the Company in the manner required under
Section 2 hereof, no amendment shall (i) increase the maximum aggregate number
of Shares with respect to which Options may be granted under the Plan, (ii)
change the option price provided for in Section 6(a) hereof, or (iii) change the
eligibility provisions of Section 4 hereof; and provided further that, subject
to the provisions of Section 7 hereof, no termination of or amendment to the
Plan shall adversely affect the rights of an Optionee or other person holding an
Option theretofore granted hereunder without the consent of such Optionee or
other person, as the case may be.
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EXHIBIT 10(ll)
COMPUTERIZED THERMAL IMAGING, INC.
1997 STOCK OPTION AND RESTRICTED STOCK PLAN
SECTION 1
PURPOSE
This Plan is established (i) to offer selected Employees of the Company or
its Subsidiaries an equity ownership interest in the financial success of the
Company, (ii) to provide the Company with an opportunity to attract and retain
the best available personnel for positions of substantial responsibility, and
(iii) to encourage equity participation in the Company by eligible Participants.
This Plan provides for the grant by the Company of (i) Options to purchase
Shares, and (ii) shares of Restricted Stock. Options granted under this Plan
may include nonstatutory options as well as incentive stock options intended to
qualify under section 422 of the Code.
SECTION 2
DEFINITIONS
"ADMINISTRATOR" shall mean either the Committee or the Board of Directors
chosen to administer the Plan in accordance with the terms and conditions of the
Plan.
"AFFILIATE" shall mean any Subsidiary, parent corporation, joint venture or
other business enterprise which controls or is controlled by, or is under common
control with, the Company.
"BOARD OF DIRECTORS" shall mean the board of directors of the Company, as
duly elected from time to time.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and as
interpreted by the regulations thereunder.
"COMMITTEE" shall mean the Compensation Committee of the Company, or such
other Committee as may be appointed by the Board of Directors from time to time.
"COMPANY" shall mean Computerized Thermal Imaging, Inc., a Nevada
corporation.
"DATE OF GRANT" shall mean the date on which the Administrator resolves to
grant an Option to an Optionee or grant Restricted Stock to a Participant, as
the case may be.
"EMPLOYEE" shall include every individual performing Services to the
Company or its Subsidiaries if the relationship between such individual and the
Company or its Subsidiaries is the legal relationship of employer and employee.
Neither service as a member of the Board of Directors nor payment of a
director's fee shall in itself constitute "Services" for purposes of this
definition.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended,
and as interpreted by the rules and regulations promulgated thereunder.
"EXERCISE PRICE" shall mean the amount for which one Share may be purchased
upon exercise of an Option, as specified by the Administrator in the applicable
Stock Option Agreement, but in no event less than the par value per Share.
"FAIR MARKET VALUE" shall be the mean between the closing bid and asked
prices of the Shares on the date in question (on the principal market in which
the Shares are traded), or if the Shares were not traded on such date, the mean
between closing bid and asked prices of the Shares on the next preceding trading
day during which the Shares were traded.
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"ISO" shall mean a stock option which is granted to an individual and which
meets the requirements of section 422(b) of the Code, pursuant to which the
Optionee has no tax consequences resulting from the grant or, subject to certain
holding period requirements, exercise of the option and the employer is not
entitled to a business expense deduction with respect thereto.
"NON-EMPLOYEE DIRECTOR" shall mean any person who at the time of grant is a
member of the Board of Directors but is not an Employee of the Company or any
Affiliate; does not receive compensation, directly or indirectly, from the
Company or any Affiliate for services rendered as a consultant or in any
capacity other than Director, except for an amount that does not exceed the
dollar amount to which disclosure would be required under 17 C.F.R Section
229.404(a); does not possess an interest in any other transaction for which
disclosure would be required under 17 C.F.R. Section 229.404(a); and is not
engaged in a business relationship to which disclosure would be required under
17 C.F.R. Section 229.404(b).
"NONSTATUTORY OPTION" shall mean any Option granted by the Administrator
that does not meet the requirements of sections 421 through 424 of the Code, as
amended.
"OPTION" shall mean either an ISO or Nonstatutory Option, as the context
requires.
"OPTIONEE" shall mean a Participant who holds an Option.
"PARTICIPANTS" shall mean those individuals described in Section 1 of this
Plan selected by the Administrator who are eligible under Section 4 of this Plan
for grants of either Options or Restricted Stock under this Plan.
"PERMANENT AND TOTAL DISABILITY" shall mean that an individual is unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than twelve (12) months. An individual shall not be considered to
suffer from Permanent and Total Disability unless such individual furnishes
proof of the existence thereof in such form and manner, and at such times, as
the Administrator may reasonably require. The scope of this definition shall
automatically be reduced or expanded to the extent that section 22(e)(3) of the
Code is amended to reduce or expand the scope of the definition of Permanent and
Total Disability thereunder.
"PLAN" shall mean this 1997 Stock Option and Restricted Stock Plan, as
amended from time to time.
"PLAN AWARD" shall mean the grant of either an Option or Restricted Stock,
as the context requires.
"RESTRICTED STOCK" shall have that meaning set forth in Section 7(a) of
this Plan.
"RESTRICTED STOCK ACCOUNT" shall have that meaning set forth in Section
7(a)(ii) of this Plan.
"RESTRICTED STOCK CRITERIA" shall have that meaning set forth in Section
7(a)(iv) of this Plan.
"RESTRICTION PERIOD" shall have that meaning set forth in Section 7(a)(iii)
of this Plan.
"SERVICES" shall mean services rendered to the Company or any of its
Subsidiaries as an Employee, as the context requires.
"SHARE" shall mean one share of Stock, as adjusted in accordance with
Section 9 of this Plan (if applicable).
"STOCK" shall mean the common stock of the Company, par value $.001 per
share.
"STOCK OPTION AGREEMENT" shall mean the agreement executed between the
Company and an Optionee that contains the terms, conditions, and restrictions
pertaining to the granting of an Option. Any inconsistencies between this Plan
and any Stock Option Agreement shall be controlled by this Plan.
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<PAGE>
"SUBSIDIARY" shall mean any corporation as to which more than fifty (50%)
percent of the outstanding voting stock or shares shall now or hereafter be
owned or controlled directly by a person, any Subsidiary of such person, or any
Subsidiary of such Subsidiary.
"TEN-PERCENT STOCKHOLDER" shall mean a person that owns more than ten
percent (10%) of the total combined voting power of all classes of outstanding
stock of the Company or any Subsidiary, taking into account the attribution
rules set forth in section 424 of the Code, as amended. For purposes of this
definition of "Ten Percent Stockholder" the term "outstanding stock" shall
include all stock actually issued and outstanding immediately after the grant of
an Option to an Optionee. "Outstanding stock" shall not include reacquired
shares or shares authorized for issuance under outstanding Options held by the
Optionee or by any other person.
"VEST DATE" shall have that meaning set forth in Section 7(a)(v) of this
Plan.
SECTION 3
ADMINISTRATION
(a) GENERAL ADMINISTRATION. This Plan shall be administered by the Board
of Directors or by a Committee composed solely of two (2) or more Non-employee
Directors. In the case a Committee is chosen to administer the Plan, the
members of the Committee shall be appointed by the Board of Directors for such
terms as the Board of Directors may determine. The Board of Directors may from
time to time remove members from, or add members to, the Committee. Vacancies
on the Committee, however caused, shall be filled by the Board of Directors.
(b) COMMITTEE PROCEDURES. The Board of Directors shall designate one of
the members of the Committee as chairman. The Committee may hold meetings at
such times, places, and in such manner as it shall determine. The acts of a
majority of the Committee members present at meetings at which a quorum exists,
or acts reduced to or approved in writing by a majority of all Committee
members, shall be valid acts of the Committee. A majority of the Committee
shall constitute a quorum.
(c) AUTHORITY OF ADMINISTRATOR. This Plan shall be administered by, or
under the direction of, the Board of Directors or the Committee (either of which
may hereinafter be referred to as the "Administrator"). The Administrator shall
administer this Plan so as to comply at all times with the Exchange Act,
including Rule 16b-3 (or any successor rule), and, subject to the Code, shall
otherwise have absolute and final authority to interpret this Plan and to make
all determinations specified in or permitted by this Plan or deemed necessary or
desirable for its administration or for the conduct of the Administrator's
business including, without limitation, the authority to take the following
actions:
(i) To interpret this Plan and to apply its provisions;
(ii) To adopt, amend or rescind rules, procedures and forms relating
to this Plan;
(iii) To authorize any person to execute, on behalf of the
Company, any instrument required to carry out the purposes
of this Plan;
(iv) To determine when Plan Awards are to be granted under this Plan;
(v) To select the Optionees and Participants;
(vi) To determine the number of Shares to be made subject to each Plan
Award;
(vii) To prescribe the terms, conditions and restrictions of each
Plan Award, including without limitation the Exercise Price, vesting conditions,
and the determination whether an Option is to be classified as an ISO or a
Nonstatutory Option;
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<PAGE>
(viii) To amend any outstanding Stock Option Agreement or the
terms, conditions and restrictions of a grant of Restricted Stock, subject to
applicable legal restrictions and the consent of the Optionee or Participant, as
the case may be, who entered into such agreement;
(ix) To establish procedures so that an Optionee may obtain a loan
through a registered broker-dealer under the rules and regulations of the
Federal Reserve Board, for the purpose of exercising an Option;
(x) To establish procedures for an Optionee (1) to have withheld from
the total number of Shares to be acquired upon the exercise of an Option that
number of Shares having a Fair Market Value, which, together with such cash as
shall be paid in respect of fractional shares, shall equal the Exercise Price,
and (2) to exercise a portion of an Option by delivering that number of Shares
already owned by an Optionee having a Fair Market Value which shall equal the
partial Exercise Price and to deliver the Shares thus acquired by such Optionee
in payment of Shares to be received pursuant to the exercise of additional
portions of the Option, the effect of which shall be that an Optionee can in
sequence utilize such newly acquired shares in payment of the Exercise Price of
the entire Option, together with such cash as shall be paid in respect of
fractional shares;
(xi) To establish procedures whereby a number of Shares may be
withheld from the total number of Shares to be issued upon exercise of an
Option, to meet the obligation of withholding for federal and state income and
other taxes, if any, incurred by the Optionee upon such exercise; and
(xii) To take any other actions deemed necessary or advisable for
the administration of this Plan.
All interpretations and determinations of the Administrator made with
respect to the granting of Plan Awards shall be final, conclusive, and binding
on all interested parties. The Administrator may make grants of Plan Awards on
an individual or group basis. No member of the Administrator shall be liable
for any action that is taken or is omitted to be taken if such action or
omission is taken in good faith with respect to this Plan or grant of any Plan
Award.
(d) HOLDING PERIOD. The Administrator may in its sole discretion require
as a condition to the granting of any Plan Award, that a Participant agree not
to sell or otherwise dispose of a Plan Award, any Shares acquired pursuant to a
Plan Award, or any other "derivative security" (as defined by Rule 16a-1(c)
under the Exchange Act) for a period of time determined by the Administrator
including, without limitation, a period of six (6) months following the (i) the
date of the issuance of Shares pursuant to a Plan Award, or (ii) the date when
the Exercise Price of an Option is fixed if such Exercise Price is not fixed on
the Date of Grant.
SECTION 4
ELIGIBILITY
(a) GENERAL RULE. Subject to the limitations set forth in subsection (b)
below, Participants shall be eligible to participate in this Plan; PROVIDED,
HOWEVER, that no Non-employee Directors shall be eligible for any Plan Awards
under this Plan.
(b) NON-EMPLOYEE INELIGIBLE FOR ISOS. In no event shall an ISO be granted
to any individual who is not an Employee on the Date of Grant.
SECTION 5
SHARES SUBJECT TO PLAN
(a) BASIC LIMITATION. Shares offered under this Plan shall be comprised
of authorized but unissued Shares or Shares that have been reacquired by the
Company. The aggregate number of Shares that are available for issuance under
this Plan shall not exceed five million two hundred and fifty thousand
(5,250,000) Shares, however, this aggregate number shall be reduced as necessary
to compensate for any shares of Stock (i) subject to valid and outstanding stock
options granted pursuant or in reference to the Company's 1995 Stock Option Plan
("1995 Plan")
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or (ii) issued pursuant to the 1995 Plan, so that the aggregate number of
shares of Stock subject to outstanding options, restricted grants or issued
under both plans shall not exceed five million two hundred fifty thousand
(5,250,000) shares of Stock. The aggregate number of Shares available under
the Plan is subject to adjustment pursuant to Section 9 of this Plan. The
Administrator shall not issue more Shares than are available for issuance
under this Plan. The number of Shares that are subject to unexercised
Options at any time under this Plan shall not exceed the number of Shares
that remain available for issuance under this Plan. The Company, during the
term of this Plan, shall at all times reserve and keep available sufficient
Shares to satisfy the requirements of this Plan.
(b) ADDITIONAL SHARES. In the event any outstanding Option for any reason
expires, is canceled or otherwise terminates, the Shares allocable to the
unexercised portion of such Option shall again be available for issuance under
this Plan. In the event that Shares issued under this Plan revert to the
Company prior to the Vest Date under a grant of Restricted Stock, such Shares
shall again be available for issuance under this Plan.
SECTION 6
TERMS AND CONDITIONS OF OPTIONS
(a) TERM OF OPTION. The term of each Option shall be ten (10) years from
the Date of Grant or such shorter term as may be determined by the
Administrator; PROVIDED, HOWEVER, in the case of an ISO granted to a Ten-Percent
Stockholder, the term of such ISO shall be five (5) years from the Date of Grant
or such shorter time as may be determined by the Administrator.
(b) VESTING OF OPTIONS. Each Option granted hereunder may only be
exercised to the extent that the Optionee is vested in such Option. Except as
otherwise provided, all Options issued under this Plan shall vest in accordance
with the following schedule:
<TABLE>
<CAPTION>
NUMBER OF YEARS THE OPTIONEE EXTENT TO
HAS REMAINED IN THE EMPLOY WHICH THE
OF THE COMPANY OR A SUBSIDIARY OPTION IS
FOLLOWING THE GRANT OF THE OPTION VESTED
--------------------------------- -----------
<S> <C>
Under one . . . . . . . . . . . . . . . . . . . . . . . . . . 0%
At least one but less than two. . . . . . . . . . . . . . . . 20%
At least two but less than three. . . . . . . . . . . . . . . 40%
At least three but less than four . . . . . . . . . . . . . . 60%
At least four but less than five. . . . . . . . . . . . . . . 80%
Five or more. . . . . . . . . . . . . . . . . . . . . . . . . 100%
</TABLE>
Notwithstanding the foregoing, the Administrator shall have the
discretionary power to establish the vesting periods for any Option granted
hereunder, except that in no case may the Administrator permit more than
twenty-five percent (25%) of any Option to vest before the first anniversary
of the earlier of the Date of Grant or the date on which the Optionee began
providing Services to the Company. Services provided by the Employee prior
to the date that the Plan becomes effective shall be taken into account for
the purpose of calculating vesting periods.
(c) EXERCISE PRICE AND METHOD OF PAYMENT.
(i) EXERCISE PRICE. The Exercise Price shall be such price as is
determined by the Administrator in its sole discretion and set forth in the
Stock Option Agreement; PROVIDED, HOWEVER, the Exercise Price shall not be less
than 100% of the Fair Market Value of the Shares subject to such option on the
Date of Grant (or 110% in the case of an Option granted to a Participant who is
a Ten-Percent Stockholder on the Date of Grant).
(ii) PAYMENT OF SHARES. Payment for the Shares upon exercise of an
Option shall be made in cash, by certified check, or if authorized by the
Administrator, by delivery and transfer of other Shares having a Fair Market
Value on the date of delivery equal to the aggregate exercise price of the
Shares as to which said Option is being exercised, or by any combination of such
methods of payment or by any other method of payment as may be permitted under
applicable law and authorized by the Administrator.
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<PAGE>
(d) EXERCISE OF OPTION.
(i) PROCEDURE FOR EXERCISE; RIGHTS OF STOCKHOLDER. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as shall be determined by the Administrator in accordance with the terms of this
Plan, including, without limitation, performance criteria with respect to the
Company and/or the Optionee.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company, in accordance with the terms of the
Stock Option Agreement, by the Optionee entitled to exercise the Option and full
payment for the Shares and any withholding and other applicable taxes with
respect to the exercised Option has been received by the Company. Full payment
may, as authorized by the Administrator, consist of any form of consideration
and method of payment allowable under Section 6(c)(ii) of this Plan. Upon the
receipt of notice of exercise and full payment for the Shares and taxes, the
Shares shall be deemed to have been issued and the Optionee shall be entitled to
receive such Shares and shall be a stockholder with respect to such Shares, and
the Shares shall be considered fully paid and nonassessable. No adjustment will
be made for a dividend or other right for which the record date is prior to the
date on which the stock certificate is issued, except as provided in Section 9
of this Plan.
Each exercise of an Option shall reduce, by an equal number, the total
number of Shares that may thereafter be purchased under such Option.
(ii) TERMINATION OF STATUS AS AN EMPLOYEE. Except as provided in
Subsections 6(d)(iii) and 6(d)(iv) below and unless provided otherwise in the
Stock Option Agreement, an Optionee holding an Option who ceases to be an
Employee of the Company may, but only until the earlier of the date (i) the
Option held by the Optionee expires, or (ii) (y) in the case of an ISO, ninety
(90) days, and (z) in the case of a Nonstatutory Option, six (6) months, after
the date such Optionee ceases to be an Employee (or such shorter period as may
be provided in the Stock Option Agreement), exercise the Option to the extent
that the Optionee was entitled to exercise it on such date, unless the
Administrator terminates or further extends such period in its sole discretion.
To the extent that the Optionee was not entitled to exercise an Option on such
date, or if the Optionee does not exercise it within the time specified herein,
such Option shall terminate. The Administrator shall have the authority (i) to
determine the date an Optionee ceases to be an Employee and (ii) to shorten or
terminate the exercise periods provided above in the event the Optionee resigns
and/or ceases for "cause" to be an Employee.
(iii) PERMANENT AND TOTAL DISABILITY. Notwithstanding the
provisions of Section 6(d)(ii) above, in the event an Optionee is unable to
continue to perform Services for the Company or any of its Subsidiaries as a
result of such Optionee's Permanent and Total Disability, (and, for ISOs, at the
time such Permanent and Total Disability begins, the Optionee was an Employee
and had been an Employee since the Date of Grant), such Optionee may exercise an
Option in whole or in part to the extent that the Optionee was entitled to
exercise it on such date, but only until the earlier of the date (i) the Option
held by the Optionee expires, or (ii) twelve (12) months from the date of
termination of Services due to such Permanent and Total Disability. To the
extent the Optionee is not entitled to exercise an Option on such date or if the
Optionee does not exercise it within the time specified herein, such Option
shall terminate, unless the Administrator further extends such period in its
sole discretion.
(iv) DEATH OF AN OPTIONEE. Upon the death of an Optionee, any Option
held by an Optionee shall terminate and be of no further effect; PROVIDED,
HOWEVER, notwithstanding the provisions of Section 6(d)(ii) above, in the event
an Optionee's death occurs during the term of an Option held by such Optionee
and, at the time of death, the Optionee was an Employee (and, for ISOs, at the
time of death, the Optionee was an Employee and had been an Employee since the
Date of Grant), the Option may be exercised in whole or in part to the extent
that the Optionee was entitled to exercise it on such date, but only until the
earlier of the date (i) the Option held by the Optionee expires, or (ii) twelve
(12) months from the date of the Optionee's death, by the Optionee's estate or
by a person who acquired the right to exercise the Option by bequest or
inheritance. To the extent the Option is not entitled to be exercised on such
date or if the Option is not exercised within the time specified herein, such
Option shall terminate, unless the Administrator further extends such period in
its sole discretion.
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<PAGE>
(e) NON-TRANSFERABILITY OF OPTIONS. No Option granted under this Plan may
be sold, pledged, assigned, hypothecated, transferred or disposed of in any
manner other than by will or by the laws of descent and distribution or pursuant
to a qualified domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act, or the rules thereunder, and no Option
granted under this Plan is assignable by operation of law or subject to
execution, attachment or similar process. Any Option granted under this Plan
can only be exercised during the Optionee's lifetime by such Optionee unless
exercised pursuant to Section 6(d)(iv). Any attempted sale, pledge, assignment,
hypothecation or other transfer of the Option contrary to the provisions hereof
and the levy of any execution, attachment or similar process upon the Option
shall be null and void and without force or effect. No transfer of the Option
by will or by the laws of descent and distribution shall be effective to bind
the Company unless the Company shall have been furnished written notice thereof
and an authenticated copy of the will and/or such other evidence as the
Administrator may deem necessary to establish the validity of the transfer and
the acceptance by the transferee or transferees of the terms and conditions of
the Option. The terms of any Option transferred by will or by the laws of
descent and distribution shall be binding upon the executors, administrators,
heirs and successors of Optionee.
(f) TIME OF GRANTING OPTIONS. Any Option granted hereunder shall be
deemed to be granted on the Date of Grant. Written notice of the
Administrator's determination to grant an Option to an Employee, evidenced by a
Stock Option Agreement, dated effective as of the Date of Grant, shall be given
to such Employee within a reasonable time after the Date of Grant.
(g) MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Within the limitations
of this Plan, the Administrator may modify, extend or renew outstanding Options
or may accept the cancellation of outstanding Options under this Plan or the
1995 Plan (to the extent not previously exercised) for the granting of new
Options in substitution therefor. The foregoing notwithstanding, no
modification of an Option shall, without the consent of the Optionee, alter or
impair the Optionee's rights or obligations under such Option.
(h) RESTRICTIONS ON TRANSFER OF SHARES. Any Shares issued upon exercise
of an Option shall be subject to such rights of repurchase and other transfer
restrictions as the Administrator may determine in its sole discretion. Such
restrictions shall be set forth in the applicable Stock Option Agreement.
(i) SPECIAL LIMITATION ON ISOS. To the extent that the aggregate Fair
Market Value (determined on the Date of Grant) of the Shares with respect to
which ISOs are exercisable for the first time by an individual during any
calendar year under this Plan, and under all other plans maintained by the
Company, exceeds $100,000, such Options shall be treated as Nonstatutory
Options.
(j) LEAVES OF ABSENCE. Leaves of absence approved by the Administrator
which conform to the policies of the Company shall not be considered termination
of employment if the employer-employee relationship as defined under the Code or
the regulations promulgated thereunder otherwise exists.
SECTION 7
RESTRICTED STOCK
(a) AUTHORITY TO GRANT RESTRICTED STOCK. The Administrator shall have the
authority to grant Shares to Participants that are subject to certain terms,
conditions, and restrictions (the "RESTRICTED STOCK"). The Restricted Stock may
be granted by the Administrator either separately or in combination with
Options. The terms, conditions and restrictions of the Restricted Stock shall
be determined from time to time by the Administrator without limitation, except
as otherwise provided in this Plan; PROVIDED, HOWEVER, that each grant of
Restricted Stock to an Employee shall require the Employee to remain an Employee
of the Company or any of its Subsidiaries for at least six (6) months from the
Date of Grant. The granting, vesting, and issuing of the Restricted Stock shall
also be subject to the following provisions:
(i) NATURE OF GRANT. Restricted Stock shall be granted to
Participants for Services rendered and at no additional cost to Participant;
PROVIDED, HOWEVER, that the value of the Services performed must, in the opinion
of the Administrator, equal or exceed the par value of the Restricted Stock to
be granted to the Participant.
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<PAGE>
(ii) RESTRICTED STOCK ACCOUNT. The Company shall establish a
restricted stock account (the "RESTRICTED STOCK ACCOUNT") for each Participant
to whom Restricted Stock is granted, and such Restricted Stock shall be credited
to such account. No certificates will be issued to the Participant with respect
to the Restricted Stock until the Vest Date as provided herein. Every credit of
Restricted Stock under this Plan to a Restricted Stock Account shall be
considered "contingent" and unfunded until the Vest Date. Such contingent
credits shall be considered bookkeeping entries only, notwithstanding the
"crediting" of "dividends" as provided herein. Such accounts shall be subject
to the general claims of the Company's creditors. The Participant's rights to
the Restricted Stock Account shall be no greater than that of a general creditor
of the Company. Nothing contained herein shall be construed as creating a trust
or fiduciary relationship between the Participants and the Company, the Board of
Directors or the Committee.
(iii) RESTRICTIONS. The terms, conditions, and restrictions of
the Restricted Stock shall be determined by the Administrator on the Date of
Grant. The Restricted Stock may not be sold, assigned, transferred, redeemed,
pledged or otherwise encumbered during the period in which the terms, conditions
and restrictions apply (the "RESTRICTION PERIOD"). More than one grant of
Restricted Stock may be outstanding at any one time, and the Restriction Periods
may be of different lengths. Receipt of the Restricted Stock is conditioned
upon satisfactory compliance with the terms, conditions and restrictions of this
Plan and those imposed by the Administrator.
(iv) RESTRICTED STOCK CRITERIA. At the time of each grant of
Restricted Stock, the Administrator in its sole discretion may establish certain
criteria to determine the times at which restrictions placed on Restricted Stock
shall lapse (i.e., the termination of the Restriction Period), which criteria
may include without limitation performance measures and targets and/or holding
period requirements (the "RESTRICTED STOCK CRITERIA"). The Administrator may
establish a corresponding relationship between the Restricted Stock Criteria and
(i) the number of Shares of Restricted Stock that may be earned, and (ii) the
extent to which the terms, conditions and restrictions on the Restricted Stock
shall lapse. Restricted Stock Criteria may vary among grants of Restricted
Stock; PROVIDED, HOWEVER, that once the Restricted Stock Criteria are
established for a grant of Restricted Stock, the Restricted Stock Criteria shall
not be modified with respect to that grant.
(v) VESTING. On the date the Restriction Period terminates, the
Restricted Stock shall vest in the Participant (the "VEST DATE"), who may then
require the Company to issue certificates evidencing the Restricted Stock
credited to the Restricted Stock Account of such Participant.
(vi) DIVIDENDS. The Administrator may provide from time to time that
amounts equivalent to dividends shall be payable with respect to the Restricted
Stock held in the Restricted Stock Account of a Participant. Such amounts shall
be credited to the Restricted Stock Account and shall be payable to the
Participant on the Vest Date.
(vii) TERMINATION OF SERVICES. If a Participant (x) with the
consent of the Administrator, ceases to be an Employee of, or otherwise ceases
to provide Services to, the Company or any of its Subsidiaries, or (y) dies or
suffers from Permanent and Total Disability, the vesting or forfeiture
(including without limitation the terms, conditions and restrictions) of any
grant under this Section 7 shall be determined by the Administrator in its sole
discretion, subject to any limitations or terms of this Plan. If the
Participant ceases to be an Employee of, or otherwise ceases to provide Services
to, the Company or any of its Subsidiaries for any other reason, all grants of
Restricted Stock under this Plan shall be forfeited (subject to the terms of
this Plan).
(b) DEFERRAL OF PAYMENTS. The Administrator may establish procedures by
which a Participant may elect to defer the transfer of Restricted Stock to the
Participant. The Administrator shall determine the terms and conditions of such
deferral in its sole discretion.
(c) PAYMENT OF TAXES. Notwithstanding the provisions of Section 7(a)(v)
above, the Company will not be required to issue any Restricted Stock unless and
until the Participant shall pay to the Company an amount equal to any
withholding and other applicable taxes related to the issuance of the Restricted
Stock. Such payment shall be made in cash, by certified check, or if authorized
by the Administrator, by delivery of other Shares having a Fair Market Value on
the date of delivery equal to such payment or by any combination of such methods
of payment or by any other method of payment as may be permitted under
applicable law and authorized by the Administrator.
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SECTION 8
ISSUANCE OF SHARES
As a condition to the transfer of any Shares issued under this Plan, the
Company may require an opinion of counsel, satisfactory to the Company, to the
effect that such transfer will not be in violation of the Securities Act of
1933, as amended (the "SECURITIES ACT"), or any other applicable securities
laws, rules or regulations, or that such transfer has been registered under
federal and all applicable state securities laws. The Company may refrain from
delivering or transferring Shares issued under this Plan until the Administrator
has determined that the Participant has tendered to the Company any and all
applicable federal, state or local tax owed by the Participant as the result of
the receipt of a Plan Award, the exercise of an Option or the disposition of any
Shares issued under this Plan, in the event that the Company reasonably
determines that it might have a legal liability to satisfy such tax. The
Company shall not be liable to any person or entity for damages due to any delay
in the delivery or issuance of any stock certificate evidencing any Shares for
any reason whatsoever.
SECTION 9
CAPITALIZATION ADJUSTMENTS; MERGER
(a) ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Subject to any required
action by the stockholders of the Company, the number of Shares covered by each
outstanding Option, the aggregate number of Shares that have been authorized for
issuance under this Plan, and the number of Shares of Restricted Stock credited
to any Restricted Stock Account of a Participant (as well as the Exercise Price
covered by any outstanding Option), shall be proportionately adjusted for any
increase or decrease in the number of issued Shares resulting from a stock
split, payment of a stock dividend with respect to the Stock or any other
increase or decrease in the number of issued Shares effected without receipt of
consideration by the Company. Such adjustment shall be made by the
Administrator in its sole discretion, which adjustment shall be final, binding,
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of Shares subject to
an Option.
(b) DISSOLUTION, LIQUIDATION, SALE OF ASSETS OR MERGER. In the event of
the proposed dissolution or liquidation of the Company, or a proposed sale of
all or substantially all of the assets of the Company, or the proposed merger of
the Company with or into another corporation where the Company is not the
surviving entity, any Options and grants of Restricted Stock shall terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided in the Stock Option Agreement or by the Administrator. The
Administrator may, in the exercise of its sole discretion, in such instances
declare that any Option shall terminate as of a date fixed by the Administrator
and give each Optionee the right to exercise the Optionee's Option as to all or
any part of the Shares covered by such Option, including Shares as to which the
Option would not otherwise be exercisable. Notwithstanding the provisions of
Section 6(b) to the contrary, the Administrator may, in the exercise of its sole
discretion, provide in any Stock Option Agreement or under any grant of
Restricted Stock that the applicable Plan Award shall become immediately vested
in the event of a change in control of the Company or other extraordinary events
as defined by the Administrator.
SECTION 10
NO EMPLOYMENT RIGHTS
No provision of this Plan, under any Stock Option Agreement or under any
grant of Restricted Stock shall be construed to give any Participant any right
to remain an Employee of, or provide Services to, the Company or any of its
Subsidiaries or to affect the right of the Company to terminate any
Participant's service at any time, with or without cause.
SECTION 11
STOCKHOLDER APPROVAL
With respect to any amendment to this Plan adopted by the Administrator
that is required to be approved by the Company's stockholders pursuant to the
terms of Section 12 of this Plan, such approval shall be obtained within
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twelve (12) months after the date such amendment is adopted by the
Administrator; PROVIDED, that such amendment shall not become effective until
such approval has been obtained.
SECTION 12
TERM OF PLAN; EFFECT OF AMENDMENT OR TERMINATION
(a) TERM OF PLAN. This Plan shall become effective upon its adoption by
the Board of Directors subject to the condition subsequent that this Plan is
approved by the stockholders of the Company. The Administrator may grant Plan
Awards under the Plan prior to the time of stockholder approval, but if for any
reason the stockholders of the Company do not approve the Plan within twelve
(12) months after the date the Plan is adopted by the Board of Directors, all
Plan Awards granted under the Plan will be terminated and shall have no force or
effect, and no Plan Award may be exercised in whole or in part prior to such
stockholder approval. This Plan shall continue in effect for a term of ten (10)
years unless sooner terminated under this Section 12.
(b) AMENDMENT AND TERMINATION. The Administrator in its sole discretion
may terminate this Plan at any time. The Administrator may amend this Plan at
any time in such respects as the Administrator may deem advisable; PROVIDED,
that the following amendments shall require approval of the holders of a
majority of the outstanding Shares entitled to vote:
(i) Any change in the aggregate number of Shares that may be issued
under this Plan, other than in connection with an adjustment under Section 9 of
this Plan;
(ii) Any change in the designation of the Participants eligible to be
granted Plan Awards; or
(iii) Any change in this Plan that would materially increase the
benefits accruing to Participants under this Plan.
(c) EFFECT OF TERMINATION. In the event this Plan is terminated, no
Shares shall be issued under this Plan nor shall any Shares of Restricted Stock
be credited to a Restricted Stock Account, except upon exercise of an Option
granted prior to such termination or issuance of Shares of Restricted Stock
previously credited to a Restricted Stock Account. The termination of this
Plan, or any amendment thereof, shall not affect any Shares previously issued to
a Participant, any Option previously granted under this Plan or any Restricted
Stock previously credited to a Restricted Stock Account.
[SPACE INTENTIONALLY LEFT BLANK]
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SECTION 13
GOVERNING LAW
THIS PLAN AND ANY AND ALL STOCK OPTION AGREEMENTS AND AGREEMENTS RELATING
TO THE GRANT OF RESTRICTED STOCK EXECUTED IN CONNECTION WITH THIS PLAN SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS,
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
Adopted by the Board of
Directors of the Company:
/s/ Richard V. Secord
---------------------
November 12, 1997 Richard V. Secord
Secretary
Adopted by the stockholders
of the Company:
February 4, 1998 /s/ Richard V. Secord
---------------------
Richard V. Secord
Secretary
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EXHIBIT 10(mm)
OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT
THIS OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT dated as of ___________,
1997 (the "Agreement"), is executed in reliance upon the exemption from
registration afforded by Regulation S ("Regulation S") as promulgated by the
Securities and Exchange Commission ("SEC"), under the Securities Act of 1933,
as amended. Capitalized terms used herein and not defined shall have the
meanings given to them in Regulation S.
This Agreement has been executed by the undersigned "Buyer" in
connection with the private placement of 12% Series A Senior Subordinated
Convertible Redeemable Debentures of Computerized Thermal Imaging, Inc., a
corporation organized under the laws of Nevada, with its principal executive
offices located at 6105 Macadam, Portland, OR 97201 (hereinafter referred to
as "Seller"). Buyer hereby represents and warrants to, and agrees with Seller:
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND THE
RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "1933 ACT"), AND MAY
NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES (AS DEFINED IN
REGULATION S OF THE 1933 ACT) OR TO, OR FOR THE ACCOUNT OR BENEFIT OF,
U.S. PERSONS (AS DEFINED IN REGULATION S OF THE 1933 ACT) EXCEPT
PURSUANT TO REGISTRATION UNDER OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE 1933 ACT.
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
(a) SUBSCRIPTION. The undersigned Buyer hereby subscribes for
and agrees to purchase a portion of the Seller's 12% Series A Senior
Subordinated Convertible Redeemable Debentures substantially in the form of
the Debentures attached as Exhibit A hereto and having an aggregate original
principal face amount of up to U.S. $1,875,000 (singly, a "Debenture," and
collectively, the "Debentures"), at an aggregate purchase price of 80% of the
face amount of such Debentures as set forth in subsection (b) herein.
(b) PAYMENT. The aggregate Purchase Price for the portion of the
Debentures purchased by the Buyer shall be __________________________ United
States Dollars (U.S. $___________) which represents a discount of 20% of the
face amount of the Debenture purchased by the Buyer (the "Purchase Price"),
which shall be payable pursuant to paragraph C herein by delivering
immediately available funds in United States Dollars by wire transfer to the
designated depository Barry B. Globerman, Esq., as Escrow Agent ("Escrow
Agent") for closing by delivery of securities versus payment.
(c) CLOSING. Subject to the satisfaction of the conditions set
forth in Sections 7 and 8 hereof, payments of the Purchase Price may be made
from time to time in denominations of not less than $10,000 but all payments
hereunder, in any event must be completed on or before April 15, 1997, or
such earlier or later date as is mutually agreed to in writing by Buyer and
Seller.
2. BUYER REPRESENTATIONS AND COVENANTS; ACCESS TO INFORMATION.
OFFSHORE TRANSACTION. In connection with the purchase and sale of
the Debentures, Buyer represents and warrants to, and covenants and agrees
with Seller as follows:
(i) Buyer is not a natural person and is not organized under
the laws of any jurisdiction within the United States, was not formed
by a U.S. Person (as defined in Section 902(o) of Regulation S) for
the purpose of investing in Regulation S securities and is not
otherwise a U.S. Person. Buyer is not, and on the closing date will
not be, an affiliate of Seller;
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(ii) At the time the buy order was originated, Buyer was
outside the United States and is outside of the United States as of
the date of the execution and delivery of this Agreement;
(iii) No offer to purchase the Debentures or the common stock
of Seller issuable upon conversion of the Debentures (collectively,
the "Securities"), was made by Buyer in the United States;
(iv) Buyer is purchasing the Securities for its own account
and Buyer is qualified to purchase the Securities under the laws of
its jurisdiction of residence, and the offer and sale of the
Securities will not violate the securities or other laws of such
jurisdiction;
(v) All offers and sales of any of the Securities by
Buyer prior to the end of the Restricted Period (as hereinafter
defined) shall be made in compliance with any applicable securities
laws of any applicable jurisdiction and in accordance with Rule 903
and 904, as applicable, of Regulation S or pursuant to registration of
securities under the 1933 Act or pursuant to an exemption from
registration. In any case, none of the Securities have been or will
be encumbered, offered, sold or otherwise transferred by Buyer to, or
for the account or benefit of, a U.S. Person or within the United
States until after the end of the one year period commencing on the
later of (x) the date of closing of the offering of the Securities or
(y) the date of the first offer of the Securities to persons other
than distributors (the "Restricted Period"), as calculated pursuant
to Regulation S and certified by Buyer to Seller and thereafter only
pursuant to a Registration Statement or an applicable exemption from
the registration provisions of the 1933 Act;
(vi) The transactions contemplated by this Agreement
(a) have not been and will not be pre-arranged by Buyer with a
purchaser located in the United States or a purchaser which is a
U.S. Person, and (b) are not and will not be part of a plan or scheme
by Buyer, to evade the registration provisions of the 1933 Act;
(vii) Buyer understands that the Securities are not registered
under the 1933 Act and are being offered and sold to it in
reliance on specific exclusions from the registration requirements
of Federal and State securities laws, and that Seller is relying
upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of Buyer set forth
herein in order to determine the applicability of such exclusions
and the suitability of Buyer and any purchaser from Buyer to
acquire the Securities;
(viii) Buyer shall take all reasonable steps to ensure its
compliance with Regulation S and shall promptly send to each purchaser
who acts as a distributor, dealer or a person receiving a selling
concession, fee or other remuneration in respect of any of the
Securities, who purchases prior to the expiration of the Restricted
Period referred to in subparagraph (v) above, a confirmation or other
notice to the purchaser stating that the purchaser is subject to the
same restrictions on offers and sales as Buyer pursuant to
Section 109(c)(2)(iv) of Regulation S;
(ix) Buyer has not conducted or permitted and shall not
conduct or permit on its behalf any "directed selling efforts" as that
term is defined in Rule 902(b) of Regulation S; nor has Buyer
conducted any general solicitation relating to the offer and sale of
any of the Securities in the United States or elsewhere;
(x) Buyer has the full right, power and authority to enter
into this Agreement and to consummate the transaction contemplated
herein. This Agreement has been duly authorized, validly executed and
delivered on behalf of Buyer and is a valid and binding agreement in
accordance with its terms, subject to general principles of equity and
to bankruptcy or other laws affecting the enforcement of creditors'
rights generally;
(xi) The execution and delivery of this Agreement and the
consummation of the purchase of the Securities, and the transactions
contemplated by this Agreement do not and will not conflict with or
result in a breach by Buyer of any of the terms of provisions of, or
constitute a default under, the articles of incorporation or by-laws
(or similar constitutive documents) of Buyer or any
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indenture, mortgage, deed of trust, or other material agreement or
instrument to which Buyer is a party or by which it or any of its
properties or assets are bound, or any existing applicable law,
rule or regulation of the United States or any State thereof or
any applicable decree, judgment or order of any Federal or State
court, Federal or State regulatory body, administrative agency or
other United States governmental body having jurisdiction over
Buyer or any of its properties or assets;
(xii) All invitation, offers and sales of or in respect of,
any of the Securities, by Buyer and any distribution by Buyer of any
documents relating to any offer by it of any of the Securities will be
in compliance with applicable laws and regulations and will be made in
such a manner that no prospectus need be filed and no other filing
need be made by Seller with any regulatory authority or stock exchange
in any country or any political sub-division of any country;
(xiii) Buyer will not make any offer or sale of the Securities
by any means which would not comply with the laws and regulations of
the territory in which such offer or sale takes place or to which such
offer or sale is subject or which would in connection with any such
offer or sale impose upon Seller any obligation to satisfy any public
filing or registration requirement or provide or publish any
information of any kind whatsoever or otherwise undertake or become
obligated to do any act; and
(xiv) Neither the Buyer nor any of its affiliates has
entered, has the intention of entering, or will during the Restricted
Period enter into any put option, short position or other similar
instrument or position with respect to any of the Securities or
securities of the same class as the Securities.
(xv) the Buyer (or others for whom it is contracting
hereunder) has been advised to consult its own legal and tax advisors
with respect to applicable resale restrictions and applicable tax
considerations and it (or others for whom it is contracting hereunder)
is solely responsible (and the Company is not in any way responsible)
for compliance with applicable resale restrictions and applicable tax
legislation.
(xvi) NO GOVERNMENT RECOMMENDATION OR APPROVAL. Buyer
understands that no Federal or State or foreign government agency has
passed on or made any recommendation or endorsement of the Securities.
(xvii) CURRENT PUBLIC INFORMATION. Buyer acknowledges that it
and its advisors, if any, have been furnished with all materials
relating to the business, finances and operations of Seller and all
materials relating to the offer and sale of the Securities which have
been requested by Buyer, all of which contain a legend as required
under Section 10 hereof. Buyer further acknowledges that it and its
advisors, if any, have received complete and satisfactory answers to
such inquiries.
(xviii) BUYER'S SOPHISTICATION. Buyer acknowledges that the
purchase of the Securities involves a high degree of risk, including
the total loss of Buyer's investment. Buyer has such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of purchasing the Securities. Buyer
understands that the Securities are not being registered under the
1933 Act, and therefore Buyer must bear the economic risk of this
investment for an indefinite period of time.
(xix) TAX STATUS. Buyer is not a "10-percent Shareholder"
(as defined in Section 871(h)(3)(B) of the U.S. Internal Revenue Code)
of Seller.
3. SELLER REPRESENTATIONS AND COVENANTS.
(a) REPORTING COMPANY STATUS. Seller is not a "Reporting Issuer"
as defined by Rule 902 of Regulation S. Seller's Common Stock $0.001 par
value per share (the "Common Stock"), is listed and trades on NASD Electronic
Bulletin Board. However, Seller is taking all necessary steps to become a
reporting company in the next 90 days.
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<PAGE>
(b) CURRENT PUBLIC INFORMATION. Seller has furnished Buyer with
copies of such documents as requested by Seller as referred to in
Section 2(xvii) above, and any other publicly available documents requested by
Buyer.
(c) OFFSHORE TRANSACTION. Seller has not offered any of the
Securities to any person in the United States, any identifiable groups of U.S.
citizens abroad, or to any U.S. Person, as such terms are used in Regulation S.
(i) At the time the buy order was originated, Seller and/or
its agents reasonably believe the Buyer was outside of the United
States and was not a U.S. person, based on the representations of
Buyer.
(ii) Seller and/or its agents reasonably believe that the
transaction has not been pre-arranged with a buyer in the United
States, based on the representations of Buyer.
(iii) No offer to buy or sell the Securities was or will be
made by Seller to any person in the United States.
(iv) The sale of the Securities by Seller pursuant to this
Agreement will be made in accordance with the provisions and
requirements of Regulation S provided that the representations and
warranties of Buyer in Section 2 hereof are true and correct.
(v) The transactions contemplated by this Agreement (a) have
not been and will not be pre-arranged by Seller with a purchaser
located in the United States or a purchaser which is a U.S. Person,
and (b) are not and will not be part of a plan or scheme by Seller to
evade the registration provisions of the 1933 Act.
(d) NO DIRECTED SELLING EFFORTS. In regard to this transaction,
Seller has not conducted any "directed selling efforts" as that term is
defined in Rule 902 of Regulation S nor has Seller conducted any general
solicitation relating to the offer and sale of any of the Securities in the
United States or elsewhere.
(e) CONCERNING THE SECURITIES. The issuance, sale and delivery of
the Debentures have been duly authorized by all required corporate action on
the part of Seller, and when issued, sold and delivered in accordance with
the terms hereof and thereof for the consideration expressed herein and
therein, will be duly and validly issued, fully paid and non-assessable. The
Common Stock issuable upon conversion of the Debenture has been duly and
validly reserved for issuance and, upon issuance in accordance with the terms
of the Debentures, shall be duly and validly issued, fully paid, and
non-assessable and will not subject the holders thereof, if such persons are
non-U.S. persons, to personal liability by reason of being such holders.
There are no pre-emptive rights of any shareholder of Seller.
(f) SUBSCRIPTION AGREEMENT. This Agreement has been duly
authorized, validly executed and delivered on behalf of Seller and is a valid
and binding agreement in accordance with its terms, subject to general
principles of equity and to bankruptcy or other laws affecting the
enforcement of creditors' rights generally.
(g) NON-CONTRAVENTION. The execution and delivery of this
Agreement and the consummation of the issuance of the Securities and the
transactions contemplated by this Agreement do not and will not conflict with
or result in a breach by Seller of any of the terms or provisions of, or
constitute a default under, the articles of incorporation or by-laws of
Seller, or any indenture, mortgage, deed of trust, or other material
agreement or instrument to which Seller is a party or by which it or any of
its properties or assets are bound, or any existing applicable law, rule or
regulation of the United States or any State thereof or any applicable
decree, judgment or order of any Federal or State court, Federal or State
regulatory body, administrative agency or other United States governmental
body having jurisdiction over Seller or any of its properties or assets.
(h) APPROVALS. Seller is not aware of any authorization, approval
or consent of any U.S. governmental body which is legally required for the
issuance and sale of the Debentures and the Common Stock
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<PAGE>
issuable upon conversion thereof to persons who are non-U.S. Persons, as
contemplated by this Agreement. Seller is relying entirely upon Buyer and
Distributor with respect to foreign consents and approvals.
4. EXEMPTION; RELIANCE ON REPRESENTATIONS. Buyer understands that the
offer and sale of the Securities are not being registered under the 1933 Act.
Seller and Buyer are relying on the rules governing offers and sales made
outside the United States pursuant to Regulation S.
5. TRANSFER AGENT INSTRUCTIONS.
(a) DEBENTURES. Upon the conversion of the Debentures, the holder
thereof shall submit such Debenture together with a notice of conversion to
the Seller and the Seller shall instruct its transfer agent to issue one or
more Certificates representing that number of shares of Common Stock into
which the Debenture or Debentures are convertible in accordance with the
provisions regarding conversion set forth in Exhibit A hereto. The Seller
shall act as Debenture Registrar and shall maintain an appropriate ledger
containing the necessary information with respect to each Debenture.
(b) COMMON STOCK TO BE ISSUED WITHOUT RESTRICTIVE LEGEND. Upon
the conversion of any Debenture up to the total of the "Conversion Amount"
(as defined in the Debenture) and one year after the issuance of such
Conversion Shares and any "Interest Shares" (as defined in the Debenture) by
a person who is a non-U.S. Person, Seller shall instruct Seller's transfer
agent to issue Stock Certificates up to the total of the "Conversion Amount"
(as defined in the Debenture) and one year after the "Interest Shares" (as
defined in the Debenture) without restrictive legend in the name of Buyer (or
its nominee (being a non-U.S. Person) or such non-U.S. Persons as may be
designated by Buyer prior to the closing) and in such denominations to be
specified at conversion representing the number of shares of Common Stock
issuable upon such conversion, as applicable. Seller warrants that no
instructions other than these instructions and instructions to impose a "stop
transfer" instruction with respect to the certificates until the end of the
respective Restricted Period of the Conversion Shares and Interest Shares, if
any, have been given or will be given to the transfer agent and that the
Common Stock shall otherwise be freely transferable on the books and records
of Seller. Nothing in this Section 5, however, shall affect in any way
Buyer's or such nominee's obligations and agreements to comply with all
applicable securities laws upon resale of the Securities. Furthermore,
nothing shall prohibit the Company in borrowing the non-restricted shares
from shareholders in order to comply with this provision.
6. REGISTRATION. If upon conversion of the Debentures effected by the
Buyer pursuant to the terms of this Agreement or payment of interest pursuant
to the Debenture the Company fails to issue certificates for shares of Common
Stock issuable upon such conversion (the "Underlying Shares") or the Interest
Shares to the Buyer bearing no restrictive legend (after the applicable
Restrictive Period of the Conversion Shares or Interest Shares) for any
reason other than the Company's reasonable good faith belief that the
representations and warranties made by the Buyer in this Agreement or the
Notice of Conversion were untrue when made, or if the restricted period under
Regulation S is extended, then the Company shall be required, at the request
of the Buyer and at the Company's expense, to effect the registration of the
Underlying Shares and/or Interest Shares issuable upon conversion of the
Debentures and payment of interest under the Act and relevant Blue Sky laws
as promptly as is practicable. The Company and the Buyer shall cooperate in
good faith in connection with the furnishing of information required for such
registration and the taking of such other actions as may be legally or
commercially necessary in order to effect such registration. The Company
shall file such a registration statement within 30 days of Buyer's demand
therefor and shall use its best efforts to cause such registration statement
to become effective as soon as practicable thereafter. Such best efforts
shall include, but not be limited to, promptly responding to all comments
received from the staff of the Securities and Exchange Commission, providing
Buyer's counsel with a contemporaneous copy of all written communications
from and to the staff of the Securities and Exchange Commission with respect
to such registration statement and promptly preparing and filing amendments
to such registration statement which are responsive to the comments received
from the staff of the Securities and Exchange Commission. Once declared
effective by the Securities and Exchange Commission, the Company shall cause
such registration statement to remain effective until the earlier of (i) the
sale by the Buyer of all Underlying Shares registered or (ii) 120 days after
the effective date of such registration statement. In the event the Company
undertakes to file a Registration Statement on Form S-3 in connection with
the Common Stock, upon the effectiveness of such Registration, Buyer shall
have the option to sell the Common Stock pursuant thereto. The foregoing
shall not in any way limit Buyer's rights in connection with the Common Stock
pursuant to Regulation S.
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7. DELIVERY INSTRUCTIONS. The Debentures being purchased hereunder
shall be delivered to the Escrow Agent at such time and place as shall be
mutually agreed by Seller and Buyer.
8. CONDITIONS TO SELLER'S OBLIGATION TO SELL. Seller's obligation to
sell the Debentures is conditioned upon:
(a) The receipt and acceptance by Seller of this Agreement as
executed by Buyer.
(b) Delivery into the closing depository of good funds by Buyer as
payment in full of the purchase price of the Debentures.
(c) All of the representations and warranties of the Subscriber
contained in this Agreement shall be true and correct on the Payment Date
with the same force and effect as if made on and as of the Payment Date. The
Subscriber shall have performed or complied with all agreements and satisfied
all conditions on its part to be performed, complied with or satisfied at or
prior to the Payment Date.
(d) No order asserting that the transactions contemplated by this
Agreement are subject to the registration requirements of the Act shall have
been issued, and no proceedings for that purpose shall have been commenced or
shall be pending or, to the knowledge of the Company, be contemplated. No
stop order suspending the sale of the Debentures shall have been issued, and
no proceedings for that purpose shall have been commenced or shall be pending
or, to the knowledge of the Company, be contemplated.
(e) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency that would prevent the issuance of the Debentures. No
injunction, restraining order or order of any nature by a federal or state
court of competent jurisdiction shall have been issued that would prevent the
issuance of the Debentures.
9. CONDITIONS TO BUYER'S OBLIGATION TO PURCHASE. Buyer's obligation
to purchase the Debentures is conditioned upon:
(a) The confirmation of receipt and acceptance by Seller of this
Agreement as evidenced by execution of this Agreement by the duly authorized
officer of Seller.
(b) Delivery of the Debentures to the Escrow Agent.
10. OFFERING MATERIALS. All offering materials and documents used in
connection with offers and sales of the Securities prior to the expiration of
the Restricted Period referred to in Section 2(a)(v) hereof shall include
statements to the effect that the Securities have not been registered under
the 1933 Act or applicable state securities laws, and that neither Buyer, nor
any direct or indirect purchaser of the Securities from Buyer, may directly
or indirectly offer or sell the Securities in the United States or to U.S.
Persons (other than distributors) unless that Securities are registered under
the 1933 Act any applicable state securities laws, or any exemption from the
registration requirements of the 1933 Act or such state securities laws is
available. Such statements shall appear (1) on the cover of any prospectus
or offering circular used in connection with the offer or sale of the
Securities, (2) in the underwriting section of any prospectus or offering
circular used in connection with the offer or sale of the Securities, and
(3) in any advertisement made or issued by Seller, Buyer, any other distributor,
any of their respective affiliates, or any person acting on behalf of any of
the foregoing.
11. NO SHAREHOLDER APPROVAL. Seller hereby agrees that from the
Closing Date until the issuance of Common Stock upon the conversion of the
Debentures, Seller will not take any action which would require Seller to
seek shareholder approval of such issuance unless such shareholder approval
is required by law or regulatory body (including but not limited to the
NASDAQ Stock Market, Inc.) as a result of the issuance of the Securities
hereunder.
12. MISCELLANEOUS.
(a) Except as specifically referenced herein or in the
Distribution Agreement, this Agreement constitutes the entire contract
between the parties, and neither party shall be liable or bound to the other
in any manner
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by any warranties, representations or covenants except as specifically set
forth herein. Any previous agreement among the parties related to the
transactions described herein is superseded hereby. The terms and conditions
of this Agreement shall inure to the benefit of and be binding upon the
respective successors and assigns of the parties hereto. Nothing in this
Agreement, express or implied, is intended to confer upon any party, other
than the parties hereto, and their respective successors and assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
(b) Buyer is an independent contractor, and is not the agent of
Seller. Buyer is not authorized to bind Seller, or to make any
representations or warranties on behalf of Seller.
(c) Seller makes no representations or warranty with respect to
Seller, its finances, assets, business prospects or otherwise. Buyer will
advise each purchaser, if any, and potential purchaser of the Securities, of
the foregoing sentence, and that such purchaser is relying on its own
investigation with respect to all such matters, and that such purchaser will
be given access to any and all documents and Seller personnel as it may
reasonably request for such investigation.
(d) All representations and warranties contained in this Agreement
by Seller and Buyer shall survive the closing of the transactions
contemplated by this Agreement.
(e) This Agreement shall be construed in accordance with the laws
of New York applicable to contracts made and wholly to be performed within
the State of New York and shall be binding upon the successors and assigns of
each party hereto. Buyer hereby waives trial by jury and consents to
exclusive jurisdiction and venue in the State of New York. This Agreement
may be executed in counterparts, and the facsimile transmission of an
executed counterpart to this Agreement shall be effective as an original.
(f) Buyer agrees to indemnify and hold Seller harmless from any
and all claims, damages and liabilities arising from Buyer's breach of its
representations and/or covenants set forth herein.
AMOUNT SUBSCRIBED FOR
$
-----------------
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the date first set forth above.
OFFICIAL SIGNATORY OF SELLER:
Computerized Thermal Imaging, Inc.
By:
-------------------------
Accepted this ____ day of ________, 1997 Title:
----------------------
OFFICIAL SIGNATORY OF BUYER:
----------------------------------
By:
----------------------------------
Title:
--------------------------------
Address of Buyer:
-------------------------------------
-------------------------------------
-------------------------------------
Fax No.:
------------------------------
Tel No.:
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EXHIBIT 10(nn)
DEBENTURE
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY
NOT BE OFFERED OR SOLD IN THE UNITED STATES (AS DEFINED IN REGULATION
S UNDER THE ACT) OR TO, OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS
(AS DEFINED IN REGULATION S UNDER THE ACT) EXCEPT PURSUANT TO
REGISTRATION UNDER THE ACT OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND APPLICABLE STATE SECURITIES LAWS.
No. US $
------ ------
COMPUTERIZED THERMAL IMAGING, INC.
12% SERIES A SENIOR SUBORDINATED CONVERTIBLE REDEEMABLE
DEBENTURE DUE APRIL 30, 1998
THIS DEBENTURE is one of a duly authorized issue of Debentures of
Computerized Thermal Imaging, Inc., a corporation duly organized and existing
under the laws of ________ (the "Company") designated as its 12% Series A
Senior Subordinated Convertible Redeemable Debentures Due April 30, 1998, in
an aggregate principal face amount not exceeding One Million, Eight Hundred
Seventy-Five Thousand Dollars (U.S. $1,875,000) which Debentures are being
purchased at 80% of the face amount of such Debentures.
FOR VALUE RECEIVED, the Company promises to pay to _____________________
______________________ the registered holder hereof and its successors and
assigns (the "Holder"), the principal face sum of __________________________
Dollars (US $___________) on April 30, 1998 (the "Maturity Date"), and to pay
interest on the principal sum outstanding, at the rate of 12% per annum due
and payable quarterly commencing ________________, 1997 pursuant to paragraph
4(b) herein. Accrual of interest shall commence on the date hereof and shall
continue until payment in full of the outstanding principal sum has been made
or duly provided for. The interest so payable will be paid to the person in
whose name this Debenture (or one or more predecessor Debentures) is
registered on the records of the Company regarding registration and
transfers of the Debentures (the "Debenture Register"); provided, however,
that the Company's obligation to a transferee of this Debenture arises only
if such transfer, sale or other disposition is made in accordance with the
terms and conditions of the Offshore Securities Subscription Agreement dated
as of __________________________ between the Company and ____________________
________________________ (the "Subscription Agreement"). The principal of,
and interest (with the exception of the prepaid interest set forth in Section
4(b) herein) on, this Debenture are payable in such coin or currency of the
United States of America as at the time of payment is legal tender for
payment of public and private debts, at the address last appearing on the
Debenture Register of the Company as designated in writing by the Holder
hereof from time to time. The Company will pay the outstanding principal due
upon this Debenture before or on the Maturity Date, less any amounts required
by law to be deducted or withheld, to the Holder of this Debenture no later
than the tenth (10th) day prior to the Maturity Date by check or on the
Maturity Date by wire transfer and addressed to such Holder at the last
address appearing on the Debenture Register. The forwarding of such check or
wire transfer shall constitute a payment of outstanding principal hereunder
and shall satisfy and discharge the liability for principal on this Debenture
to the extent of the sum represented by such check or wire transfer plus any
amounts so deducted. Interest shall be payable in Common Stock (as defined
below) pursuant to paragraph 4(b) herein.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of Ten Thousand
Dollars (US $10,000) and integral multiples thereof. The Debentures are
exchangeable for an equal aggregate principal amount of Debentures of
different authorized denominations, as requested by the Holders surrendering
the same but not less than U.S. $10,000. No service charge will be made for
such registration or transfer or exchange, except that transferee shall pay
any tax or other governmental charges payable in connection therewith.
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2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax or
other applicable laws at the time of such payments.
3. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged in the U.S. only in compliance with the Securities Act of 1933, as
amended (the "Act") and applicable state securities laws. Prior to due
presentment for transfer of this Debenture, the Company and any agent of the
Company may treat the person in whose name this Debenture is duly registered
on the Company's Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or
not this Debenture be overdue, and neither the Company nor any such agent
shall be affected or bound by notice to the contrary. Any holder of this
Debenture, electing to exercise the right of conversion set forth in Section
4(a) hereof, in addition to the requirements set forth in Section 4(a), and
any prospective transferee of this Debenture, is also required to give the
Company (i) written confirmation that it is not a U.S. Person and the
Debenture is not being converted on behalf of a U.S. Person ("Notice of
Conversion") or (ii) an opinion of U.S. counsel to the effect that the
Debenture and shares of common stock issuable upon conversion or transfer
thereof have been registered under the 1933 Act or are exempt from such
registration. In the event a Notice of Conversion or opinion of counsel is
not provided the Holder hereof will not be entitled to exercise the right to
convert or transfer the Debentures.
4. (a) The Holder of this Debenture is entitled, at its option, at
any time commencing 45 days after closing of the Offering hereof to convert
all or any amount over $10,000 of the principal face amount of this Debenture
then outstanding into shares of common stock, $0.001 par value per share, of
the Company (the "Common Stock"), at a conversion price for each share of
Common Stock equal to the lower of (a) 90% of the average closing bid price
of the Common Stock for the five (5) business days immediately preceding the
date of receipt by the Company of notice of conversion ("Conversion Shares")
or (b) 90% of the one closing bid price of the Common Stock day immediately
preceding the date of subscription by the Holder as reported by the National
Association of Securities Dealers Electronic Bulletin Board ("NASDAQ") (the
"Conversion Price"). If the number of resultant Conversion Shares would as a
matter of law or pursuant to regulatory authority require the Company to seek
shareholder approval of such issuance, the Company shall, as soon as
practicable, take the necessary steps to seek such approval. If such
approval is not received within 30 days then Company shall be required to
redeem the Debenture pursuant to paragraph 4(c) herein. Such conversion
shall be effectuated by surrendering the Debentures to be converted (with a
copy, by facsimile or courier, to the Company) to the Company with the form
of conversion notice attached hereto as Exhibit I, executed by the Holder of
this Debenture evidencing such Holder's intention to convert this Debenture
or a specified portion (as above provided) hereof, and accompanied by proper
assignment hereof in blank. Accrued but unpaid interest shall be subject to
conversion. No fractional shares or scrip representing fractions of shares
will be issued on conversion, but the number of shares issuable shall be
rounded to the nearest whole share. The transferee or issues shall execute
such investment representations or other documents as are respectively
required by counsel in order to ascertain the available registration
exemption. The date on which notice of conversion is given shall be deemed
to be the date on which the Holder has delivered this Debenture, with the
assignment and conversion notice duly executed, to the Company or, if
earlier, the date set forth in such notice of conversion if the Debenture is
received by the Company within five (5) business days thereafter. The
transferee or issuee shall execute such investment representations or other
documents as are reasonably required by counsel in order to ascertain the
available registration exemption.
(b) Interest at the rate of 12% per annum shall be payable in
advance, monthly commencing ________ ___, 1997. However, at Closing, the
Company shall prepay the first 3 months interest by issuing in Common Stock
of the Company as follows: Based on the closing bid prices of the Common
Stock for the last 5 consecutive trading days prior to Closing ("Market
Price") the Company shall issue to the Holder shares of Common Stock in an
amount equal to the total monthly interest accrued and due divided by 80% of
the Market Price (the "Interest "Shares"). Common Stock issued pursuant
hereto shall be issued pursuant to Regulation S in accordance with the terms
of the Subscription Agreement. Thereafter, commencing 91 days after Closing
the Company shall pay interest on a monthly basis in cash (or Common Stock,
based on the above formula, at the Company's option).
(c) At any time within 90 days the Company shall have the option
to pay to the Holder 110% of the principal amount of the Debenture, in full,
to the extent conversion has not occurred pursuant to paragraph 4(a) herein,
or pay upon maturity if the Debenture is not converted. The Company shall
give the Holder 5 days written notice and the Holder during such 5 days shall
have the option to convert the Debenture or any part thereof into shares
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of Common Stock at a conversion price equal to 90% of the average of the
closing bid price of the Common Stock for the 5 consecutive trading days
prior to the date of such conversion or accept the cash repayment. Any
shares issued pursuant to the options shall be issued pursuant to Regulation
S or a Registration Statement.
5. No provision of this Debenture shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the principal of,
and interest on, this Debenture at the time, place, and rate, and in the coin
currency, herein prescribed.
6. The Company hereby expressly waives demand and presentment for
payment, notice of nonpayment, protest, notice of protest, notice of
dishonor, notice of acceleration or intent to accelerate, bringing of suit
and diligence in taking any action to collect amounts called for hereunder
and shall be directly and primarily liable for the payment of all sums owing
and to be owing hereon, regardless of and without any notice, diligence, act
or omission as or with respect to the collection of any amount called for
hereunder.
7. The Company agrees to pay all costs and expenses, including
reasonable attorneys' fees, which may be incurred by the Holder in collecting
any amount due under this Debenture.
8. If one or more of the following described "Events of Default" shall
occur and continue for 30 days unless a different time frame is noted below:
(a) The Company shall default in the payment of principal or interest
on this Debenture; or
(b) Any of the representations or warranties made by the Company
herein, in the Subscription Agreement, or in any certificate or
financial or other written statements heretofore or hereafter
furnished by or on behalf of the Company in connection with the
execution and delivery of this Debenture or the Subscription
Agreement shall be false or misleading in any material respect at
the time made; or
(c) The Company shall fail to perform or observe, in any material
respect, any other covenant, term, provision, condition,
agreement or obligation of the Company under this Debenture [and
such failure shall continue uncured for a period of thirty (30)
days after notice from the Holder of such failure]; or
(d) The Company shall (1) become insolvent; (2) admit in writing its
liability to pay its debts generally as they mature; (3) make an
assignment for the benefit of creditors or commence proceedings
for its dissolution; or (4) apply for or consent to the
appointment of a trustee, liquidator or receiver for its or for a
substantial part of its property or business; or
(e) A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business
without its consent and shall not be discharged within thirty
(30) days after such appointment; or
(f) Any governmental agency or any court of competent jurisdiction at
the instance of any governmental agency shall assume custody or
control of the whole or any substantial portion of the properties
or assets of the Company and shall not be dismissed within thirty
(30) days thereafter; or
(g) Any money judgment, writ or warrant of attachment, or similar
process, in excess of One Hundred Thousand ($100,000) Dollars in
the aggregate shall be entered or filed against the Company or
any of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of fifteen (15) days
or in any event later than five (5) days prior to the date of any
proposed sale thereunder; or
(h) Bankruptcy, reorganization, insolvency or liquidation proceedings
or other proceedings for relief under any bankruptcy law or any
law for the relief of debtors shall be instituted by or
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against the Company and, if instituted against the Company, shall
not be dismissed within thirty (30) days after such instruction
of the Company shall by any action or answer approve of, consent
to, or acquiesce in any such proceedings or admit the material
allegations of, or default in answering a petition filed in any
such proceedings; or
(i) The Company shall have its Common Stock delisted from the
over-the-counter market.
(j) Subject to the provisions of Section 5(b) of the Offshore
Securities Subscription Agreement and applicable federal and
state securities laws, the Company shall not deliver the Common
Stock pursuant to paragraph 4 herein without restrictive legend.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which
waiver shall not be deemed to be a waiver of any subsequent default) at the
option of the Holder and in the Holder's sole discretion, the Holder may
consider this Debenture immediately due and payable, without presentment,
demand, protest or (further) notice of any kind (other than notice of
acceleration), all of which are hereby expressly waived, anything herein or
in any note or other instruments contained to the contrary notwithstanding,
and the Holder may immediately, and without expiration of any period of
grace, enforce any and all of the Holder's rights and remedies provided
herein or any other rights or remedies afforded by law.
9. (a) This Debenture represents a secured obligation of the Company
pursuant to paragraph 9 herein. However, no recourse shall be had for the
payment of the principal of, or the interest on, this Debenture, or for any
claim based hereon, or otherwise in respect hereof, against any incorporator,
shareholder, officer or director, as such, past, present or future, of the
Company or any successor corporation, whether by virtue of any constitution,
state or rule of law, or by the enforcement of any assessment or penalty or
otherwise, all such liability being, by the acceptance hereof and as part of
the consideration for the issue hereof, expressly waived and released.
(b) Company shall contemporaneously with the issuance of this
Debenture grant the Holder a lien against the Company's assets having a value
of not less then US. $2,250,000 as detailed on Exhibit B hereto.
10. The Holder of this Debenture, by acceptance hereof, agrees that
this Debenture is being acquired for investment and that such Holder will not
offer, sell or otherwise dispose of this Debenture or the Shares of Common
Stock issuable upon exercise thereof except under circumstances which will
not result in a violation of the Act or any applicable state Blue Sky law or
similar laws relating to the sale of securities.
11. In case any provision of this Debenture is held by a court of
competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if
possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Debenture
will not in any way be affected or impaired thereby.
12. This Debenture and the agreements referred to in this Debenture
constitute the full and entire understanding and agreement between the
Company and the Holder with respect to the subject hereof. Neither this
Debenture nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the Company and the
Holder.
13. This Debenture shall be governed by and construed in accordance
with the laws of New York. Holder hereby waives trial by jury and consents
to exclusive jurisdiction and venue in the State of New York.
14. As set for herein, the Company shall use all reasonable efforts to
issue and deliver, within three business days after the Holder has fulfilled
all conditions and submitted all necessary documents duly executed and in
proper form required for conversion (the "Deadline"), to the Holder or any
part receiving a Debenture by transfer from the Holder (together, a
"Holder"), at the address of the Holder on the books of the Company, a
certificate or certificates for the number of Shares of Common Stock to which
the Holder shall be entitled. The Company understands that a delay in the
issuance of the Shares of Common Stock beyond the Deadline could result in
economic loss to the Holder. As compensation to the Holder for such loss,
the Company agrees to pay liquidated damages to the Holder for late
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issuance of Shares upon conversion in accordance with the following schedule
(where "No. Business Days Late" is defined as the number of business days
beyond seven (7) business days from the date of receipt by the Company of a
Notice of Conversion and the transfer agent of all necessary documentation
duly executed and in proper form required for conversion, including the
original Debenture to be converted, all in accordance with the Debenture,
Subscription Agreement and the requirements of the transfer agent):
LIQUIDATED DAMAGES PER
NO. BUSINESS DAYS LATE $100,000 OF DEBENTURE
1 $ 500
2 $1,000
3 $1,500
4 $2,000
5 $2,500
6 $3,000
7 $3,500
8 $4,000
9 $4,500
10 $5,000
10 $5,000 + $1,000 each
Business Day Late beyond
10 days
The Company shall pay the Holder any liquidated damages incurred under
this Section by check upon the earlier to occur of (i) issuance of the Shares
to the Holder or (ii) each monthly anniversary of the receipt of the Company
of such Holder's Notice of Conversion. Nothing herein shall limit the
Holder's right to pursue actual damages for the Company's failure to issue
and deliver shares of Common Stock to the Subscriber in accordance with the
terms of the Debenture.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated:
-------------------
COMPUTERIZED THERMAL IMAGING, INC.
By:
------------------------------
Title:
---------------------------
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EXHIBIT 1
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $___________ of the
above Debenture No. _____ into Shares of Common Stock of Computerized Thermal
Imaging, Inc. (the "Company") according to the conditions set forth in such
Debenture, as of the date written below.
The undersigned represents that it is not a U.S. Person as defined in
Regulation S promulgated under the Securities Act of 1933, as amended, and is
not converting the Debenture on behalf of any U.S. Person and the
representations contained in the Subscription Agreement are true. If Shares
are to be issued in the name of a person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect thereto.
Date of Conversion*
------------------------------------------------------
Applicable Conversion Price
----------------------------------------------
Signature
----------------------------------------------------------------
[Print Name of Holder and Title of Signer]
Address:
-----------------------------------------------------------------
-----------------------------------------------------------------
- ---------------------------------
Medallion Signature Guaranty
*This original Debenture and Notice of Conversion must be received by the
Company by the fifth business date following the Date of Conversion.
PATH:
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12% SERIES A SENIOR SUBORDINATED
CONVERTABLE REDEEMABLE DEBENTURES
SUBSCRIBER FACE VALUE OF
DEBENTURE
Reg. S Interncontinental
Investments, Ltd. $93,750.00
Banco Cooperativo $87,500.00
Mardi International Corporation $43,750.00
W.Y.Hirsch $187,500.00
Lockwood Resources $187,500.00
Mr. A.M.H.C. Wehmeijer De Asfiliatie B.V. $62,500.00
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EXHIBIT 10 (oo)
GOLDEN HEALTH TELEMEDICINE CONTRACT
This Contract is entered between TriSun Medical Corporation--China, a
corporation formed ("TSM") by the China National Institute of Hospital
Administration for the purpose of obtaining advanced technology in health
care for the citizens of China, and TriSun/CTI Asia, Ltd, a Cyprus
corporation ("TriSun") formed as a strategic alliance partner for initiating
telemedicine capabilities in the PRC.
WHEREAS, the shareholders of TriSun accepted on October 6, 1994 the
joint responsibility for implementing the Golden Health Plan adopted by the
Ministry of Public Health through the National Institute of Hospital
Administration ("NIHA") to employ for the hospitals of China a system
enabling the hospitals to employ telemedicine networks, to intergrade the
hospital management computer systems, and to install thermal imaging
technology in the hospitals for advanced health care in China;
WHEREAS, the Ministry of Public Health adopted the business plan for
TriSun on October 22, 1994, and granted to TriSun the exclusive right to
place thermal imaging and telemedicine technologies in the hospitals in
China; and
WHEREAS, this Contract will achieve the directive of TriSun to place CTI
Systems in the top 500 medical facilities in China, followed by 5,500
additional hospital facilities and 200,000 clinics throughout the People's
Republic of China.
W I T N E S S E T H:
NOW, THEREFORE, in exchange for the premises set forth herein, and in
contemplation of the assistance of third-parties necessary to accomplish the
Golden Health Plan, the parties agree as follows:
1. PURPOSE. TriSun shall install in approximately 6,000 hospitals in
China a "CTI System" to offer advanced health care through thermal imaging
and telemedicine capabilities. The deployment of this program shall begin
with delivery to the top 300 medical facilities throughout China in the order
as listed on Exhibit A. The deliveries of the CTI Systems shall be
coordinated with the development of the NIHA planned telecommunications
superhighway to serve the hospitals and clinics. The installation of the
telecommunications superhighway will enable all hospitals and clinics, not
merely the top 300 facilities, to be networked with the CTI Systems for
telemedicine, thermal imaging analysis, and other imaging modes to deliver
the best health care to the citizens of China in accordance with the Golden
Health Plan. In addition to the identified 6,000 hospitals receiving the CTI
System, TriSun will install in approximately 200,000 outpatient clinics,
small hospitals, and village clinics a CTI Remote System capable of
networking any CTI System to read imaging results, make medical inquiries,
communicate with other hospitals regarding medical procedures, and receive
medical analysis for diagnostic assistance. Performance of the Golden Health
Plan contracts will establish a new health care standard in Asia.
2. CTI SYSTEMS. TriSun shall install in each hospital a Quantitative
Thermal Assessment Lab ("QTA Lab") to provide a controlled environment for
maintaining the latest computerized technology and conduct thermal assessment
of patients. The QTA Lab will contain one computer work station, laser
printer, and all computer equipment necessary for enabling the doctors and
technicians at the hospital to communicate through telemedicine. The
configuration of each QTA Lab will be approximately 16 feet x 20 feet and
will be linked to CTI thermal imaging equipment which will be installed by
TriSun. Two equilibration rooms are configured in the QTA Lab for achieving
thermal stability with patients. The CTI System includes the computerized
thermal imaging equipment. The CTI System will be capable of interconnection
and use with other imaging modalities, such as CAT Scan and X-Ray. The CTI
System will interact with the Health Card Reader/Writer and can access
records from remote locations. The CTI System shall include a scanner to
enable the hospital to convert medical files to the Health Cards. Each
hospital will select and provide space for the installation.
3. CTI REMOTE SYSTEMS. In approximately 200,000 clinics and small
hospitals, TriSun will install CTI Remote Systems which will include one
computer work station, laser printer, a Reader/Writer, and
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telemedicine connectivity. Each CTI Remote System may receive imaging
results for patients examined at hospitals where a CTI System has been
installed with imaging equipment. CTI Remote Systems will enable the local
doctors to access system information for patient's using the Health Cards.
4. CTI SYSTEM ORDERS. TSM shall cause each hospital in accordance
with the Delivery Schedule (Exhibit B) to order CTI Systems. TSM shall also
cause clinics and small hospitals to order the CTI Remote Systems. The
parties also recognize that TSM, from time to time, may change the order of
priorities for delivery among the hospitals and clinics. Likewise, hospital
needs or unforeseen delays may result in a deviation from the Delivery
Schedule. TSM and TriSun will make every effort to maintain the Delivery
Schedule for planning by the hospitals. The parties will comply
substantially with the Delivery Schedule for the first 300 hospitals. Any
hospital or clinic may complete an Order Form for CTI Systems, attached as
Exhibit C, to request an earlier installation.
5. CTI SYSTEM PURCHASE. Each CTI System, installed, shall be
purchased from TriSun for $500,000 (U.S.). Each CTI Remote System will be
purchased for $80,000 (U.S.). No hospital or clinic will be permitted to
purchase computer equipment from another source and connect to the CTI System
for telemedicine. At the time of each order, the respective hospital may
expand the order by requesting additional work stations or other available
accessories or additional imaging equipment or connecting software, which
will cause an adjustment of the purchase price. TriSun shall advise TSM and
the hospital of the cost of any additional requested equipment and obtain
confirmation of the order through the issued letter of credit before
commencing preparation of the order.
6. PRICE ADJUSTMENTS. TriSun shall maintain records for the cost of
each component part of the CTI System, allocating appropriate direct
administrative expenses incurred for maintaining, warranting, and servicing
the component part but excluding project start up costs. If TriSun is able
to reduce in any month after 1995 the cost of any delivered component part of
the CTI System, TriSun shall reduce the price of the CTI System, or the CTI
Remote System, by the amount that the cost of such component part is below
the average cost of delivering such component part during 1995. Cost savings
are anticipated to result from relocating or initiating certain pertinent
manufacturing facilities to China and from purchasing substitute parts from
Asia. Results of such cost savings determined monthly will be reflected in
any subsequent hospital order in the following month. Likewise, the price
may be adjusted with component price increases after 1995 in the same manner.
7. DELIVERY DATES. TriSun shall deliver CTI Systems according to the
Delivery Schedule to the respective hospital and shall install the CTI
Systems fully operational, capable of communicating with other CTI Systems
and regional computer centers. TriSun also shall comply with any other
orders from clinics or small hospitals as provided in any written order from
TSM allowing for at least 5 months to deliver. If a hospital desires to
enhance its orders with additional work stations or accessories, or if a
hospital or clinic not listed on the Delivery Schedules makes an order, the
hospital or TSM should complete the Order Form for CTI System (Exhibit C).
8. METHOD OF PAYMENT. On behalf of TSM or the purchasing hospital,
the Bank of China or Bank of Communications or other financial institution
acceptable to TriSun ("Bank") shall issue, five months prior to the scheduled
delivery date, a letter of credit in favor of TriSun. The documentary letter
of credit will be in the amount of the per unit price of the CTI System, or
the CTI Remote System, due and payable in three installments after the bill
of lading delivery date for the system to a port in China ("Delivery").
Payments to TriSun from the letter of credit shall be due 30% within 5
banking days after Delivery, 20% within 60 calendar days after Delivery and
the remaining 50% on or before 180 calendar days after Delivery.
TriSun shall inform TSM and the Bank of any price adjustments before
issuance of the letter of credit by the Bank. The hospital shall timely
submit a letter of credit application, similar to Exhibit D. The letter of
credit shall be issued and delivered to the bank or assignee designated by
TriSun. The letter of credit may be assigned to the party financing TriSun's
operations by delivery of written notice from TriSun to the Bank. TriSun
shall pay the letter of credit fee, which shall be paid from the proceeds of
the letter of credit upon payment. Delivery of the letter of credit shall
effect the order. According to the Delivery Schedule, the first four CTI
Systems are to be delivered during December 1995. Therefore, Bank shall
deliver four letters of credit, referencing the identified hospitals, to
TriSun within the first five days of July 1995.
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9. ACKNOWLEDGMENT. To evidence the general reasonableness of the Bank
references, TSM shall deliver as Exhibit E an acknowledgement by Bank of the
intended reliance upon the references and use of the documentary letter of
credit facility required under this Contract.
10. FUTURE FINANCING. TriSun and TSM will cooperate after execution of
this Contract to arrange financing, if desired by TSM and the respective
hospitals, for financing the payment for the CTI Systems through installments
over an extended period of time. TSM and TriSun anticipate that financing on
favorable terms may be available, after delivery and payment of some systems,
from sources such as the Economic Development Council in Canada, the World
Bank, the EXIM Bank, or other sources. Each respective hospital purchasing
the CTI System or CTI Remote System is obligated to pay Bank by the payment
due date unless financing is arranged. If financing arrangements are not
obtained by November 1, 1996, TSM has the right to instruct the Bank not to
deliver letters of credit according to the Delivery Schedule and this
Contract for any hospitals that TSM does not deem capable of making payment
timely or that are not connected by telecommunications. The parties
acknowledge that use of CTI Systems over time will result in substantial
medical care cost savings to China as a result of advanced and improved
diagnostic capabilities. The parties contemplate that the health care cost
reductions will assist over time in payment for the CTI Systems and thus will
seek financing to coordinate payment in subsequent years with the realization
of cost reduction benefits.
11. HOSPITAL OBLIGATION . Each purchasing hospital and TSM shall be
liable for payment to the Bank letter of credit issued for that hospital.
The hospital shall have space designated for the QTA Lab when delivered. The
space shall be connected with water, electricity, and outside air. The
hospital shall employ persons to operate the CTI Systems. And shall
coordinate with TriSun to train those employees concurrent with installation.
12. CTI SYSTEM TRAINING. TriSun shall prepare for TSM before September
1995 a brochure to introduce to the hospital administrators the benefits of
utilization of the CTI System. Upon installation of each CTI System, TriSun
shall train at least two technicians and one doctor at each hospital to
operate the CTI Systems. Assuming substantial compliance with the Delivery
Schedule, TriSun shall provide at no cost to the hospitals a training school
in each region to provide regularly scheduled classes for continuing
education to train instructors and operators. TriSun has an obligation to
maintain training programs through the year 2003.
13. INSTALLATION AND WARRANTY. TriSun is obligated to assemble,
deliver, and install the CTI System. TriSun is obligated to pay
manufacturing costs and to pay all costs related to insurance and freight
required to deliver the CTI System to the respective hospital. After
installation, TriSun will test the systems to determine that it is
operational. TriSun shall also be responsible for responding to service
inquiries. TriSun provides a two year warranty on all parts for the CTI
System. The respective hospital shall pay TriSun for any service calls or
operational assistance which is not caused by parts failure. TriSun has an
obligation to repair the CTI Systems at cost (meaning actual labor and parts
replacement cost) for five years, dependant on receipt of prompt payment to
TriSun.
14. CONDITIONS. TriSun will demonstrate that each
installation is operational. TSM and TriSun recognize that the first CTI
System installations will be in hospitals best equipped with
telecommunications technology. The thermal imaging unit will be fully
functional in the hospital with each CTI System. Ultimately, the
telemedicine network contemplated by the Golden Health Plan will require
adequate telecommunications access by the hospital for utilization of the
telemedicine capabilities, of the CTI Systems and CTI Remote Systems. TSM
relies upon JiTong Communications Co. to implement the superhighway.
15. THERMAL IMAGING LICENSE. TriSun delivers a license to each
hospital for use of the thermal imaging equipment and a warranty obligation
from its manufacturer. TriSun shall provide the thermal imaging transparency
and print paper required for analysis of thermal imaging treatment. Each
hospital shall charge its patients for each imaging treatment. TSM shall
cause the hospitals to pay TriSun the Yuan equivalent of $5.00 (U.S.) for
each imaging picture printed. TriSun shall receive no payment for use of the
imaging equipment other than this U.S. $5.00 charge for each print or
transparency. This payment shall be a continuing license fee. TriSun shall
not charge for any prints made during initial training exercises conducted by
TriSun with the hospitals. The hospital shall not be required to pay for the
initial transparencies and print paper provided by TriSun upon installation
of the CTI Systems, but the hospitals shall pay $5.00 per page upon delivery
for all future supplies. TriSun shall not charge for any paper which
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does not produce proper pictures as a result of fault of the equipment. The
hospital shall retain any paper which fails to make a proper print and return
the paper to TriSun for credit. The hospitals may not purchase paper from
any other source for use of the thermal imaging equipment.
16. DUTIES AND TAXES. TSM or the purchasing hospital shall be
responsible for payment of any duties or taxes charged by PRC or any state or
municipality or other country for delivery and installation of the CTI
Systems. If PRC Customs requires payment of duties upon delivery to port, or
if the shipping country imposes a tariff or duty, the respective hospital or
TSM shall pay such duty or TriSun may add the duty to the next letter of
credit to be issued. If the duty or tariff is known before the order, the
payment procedures may be modified to require the Bank to include the amount
of the duties in the letter of credit, which shall be paid by the purchasing
hospital.
17. ARBITRATION. Any dispute between the parties or any hospital or
the Bank pertaining to this Contract shall be resolved by binding arbitration
in accordance with the UNCITRAL Arbitration Rules administered by the
International Centers for Arbitration ("ICA"). ICA shall be the appointing
and administrative authority. The supplemental procedural rules of the ICA
and laws of Cyprus shall apply. In the event of a dispute, any party may
notify ICA. Each party shall select an arbitrator to resolve the dispute.
ICA shall appoint an independent third arbitrator who shall be familiar with
customs in China and who shall be acceptable to both arbitrators.
18. REGIONAL COMPUTER ARCHIVES. TriSun shall provide several regional
storage computer centers to archive the results of CTI Systems examinations.
Each CTI System and CTI Remote System will be able to access and retrieve
information from the computer storage centers. The centralized computer
centers will receive digitized thermal imaging treatment results, not only
for the purpose of storing patient records, but also for the purpose of
building a data base used for patient diagnostic conclusions. The central
computer centers can assimilate actual health conditions with the thermal and
other imaging modalities to construct a system for developing accurate
physiological and anatomical diagnostic assistance to doctors. Each CTI
System will be networked to access this information for improved diagnosis.
TriSun will build the first diagnostic center after the first ten CTI Systems
are purchased. The first regional computer center should serve at least 500
hospitals and regional clinics. The diagnostic capabilities and computer
centers will complete the directive of the Golden Health Plan for placing the
CTI Systems for developing telemedicine and diagnostic capabilities for
improvement of health care in China.
Signed effective this 24th day of April, 1995.
TRISUN MEDICAL CORPORATION--CHINA
By: /s/ Pei DongHong
--------------------------------
Dr. Pei Donghong, President
Legal Representative
TRISUN/CTI ASIA, LTD.
By: /s/ Bin Zhou
--------------------------------
Dr. Bin Zhou (Ben Chou), Chairman
By: /s/ David B. Johnston
--------------------------------
David B. Johnston, President
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EXHIBIT 10(pp)
CONTRACT BETWEEN
TRW SYSTEMS INTEGRATION GROUP and COMPUTERIZED THERMAL IMAGING, INC.
STRATEGIC SYSTEMS DIVISION 141 NORTH STATE STREET
POST OFFICE BOX 1310 LAKE OSWEGO, OR 97034
SAN BERNARDINO, CALIFORNIA 92402-1310
CONTRACT NUMBER: TRW-96-002 TERMS: NET 30 DAYS
COST PLUS FEE CONTRACT
This Contract is entered into October 29, 1996 between TRW Inc., an Ohio
corporation, operating through its Systems Integration Group, Strategic
Systems Division, having an office at San Bernardino, California 92402
(hereinafter also called "TRW" or "Seller") and Computerized Thermal Imaging,
Inc. a Nevada company (also called "CTI" or "Buyer").
WITNESSETH THAT:
In consideration of the mutual promises, covenants, and agreements herein set
forth, the Parties agree that the Seller shall furnish and deliver to the
Buyer all the goods, and perform all the services set forth for the
consideration stated herein. The rights and obligations of the Parties to
this Contract shall be subject to and governed by this Contract and other
documents or Specifications attached hereto or referenced herein. This
Contract supersedes any and all prior agreements of the parties, whether
written or oral, concerning the subject matter hereof.
This Contract shall not be varied in its terms or conditions by any oral
agreement or representation, or otherwise than by an instrument in writing of
even or subsequent date thereto, executed by both Seller and Buyer.
The article titles used herein are for convenience only and shall in no way
be construed as part of this Contract or as an indication of the meaning of
the particular section.
INDEX OF ARTICLES
ARTICLE
NO. ARTICLE TITLE PAGE
- --- ------------- ----
I Definitions and Priority 2
II Limits of Agreement 3
III Scope of Work 3
IV Performance, Delivery Schedule and Termination 3
V Inspection and Acceptance 3
VI Estimated Cost and Fee 4
VII Consideration and Payment 4
VIII Invoices and Remittance 4
IX Payment Terms 5
X Packaging and Delivery 5
XI Warranty 5
XII Limitation of Liability 6
XIII Indemnification 7
XIV Excused Performance 7
XV Insolvency of Buyer 7
XVI Default 7
XVII Assignment 8
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INDEX OF ARTICLES (Continued)
ARTICLE
NO. ARTICLE TITLE PAGE
- --- ------------- ----
XVIII Notices 8
XIX Governing Law - Arbitration 8
XX Taxes 9
XXI Contract Management 9
XXII Notice of Delay 9
XXIII Reports 9
XXIV Intellectual Property Rights & New
Technology & Data Rights 10
XXV Patents Infringement 11
XXVI Changes 11
XXVII Modification and Waiver 12
XXVIII Severability 12
XXIX Counterparts 12
XXX Remedies 12
XXXI Proprietary Information and Non-Disclosure 12
XXXII System Integration Rights 13
XXXIII Buyer Furnished Software and Property 13
ARTICLE I - DEFINITIONS AND PRIORITY
A. The following words and phrases shall have the meanings set forth below:
1. Contract: This Contract between TRW and CTI includes Appendix A
- -Statement of Work, attached hereto and made a part hereof, as may be
modified or supplemented from time to time by agreement by the parties, and
similar schedules, work plans, or documents if approved by both parties from
time to time for performing the projects.
2. Estimated Cost: The amount within which it is agreed that the
Statement of Work is likely to be accomplished.
3. Fee: A compensation method which might be approved by the parties
from time to time for a portion of the Statement of Work by which Seller
would be paid an agreed dollar amount for full satisfaction regardless of the
Cost incurred, or Seller may be reimbursed for any Costs incurred allocable
to the appropriate job and paid as agreed amount in addition to Costs for
full satisfaction, for any specific statement of work for which the parties
agree in advance to be compensated on this basis.
4. Delivery Dates: The dates agreed in the Statement of Work for the
services to be performed at the Site.
5. Services: The services described in the Statement of Work to be
provided by TRW.
6. Site: The facility or other location identified in the Statement
of Work as the destination to which transportation is to be arranged for
deliverable items, and at which services are to be performed.
7. Costs: The actual cost incurred by Seller to perform the work
under this Contract, including the cost of equipment provided and expenses
incurred plus the same burden rates for such costs as TRW charges on
government contracts.
8. Fee: The amount calculated as a percentage of Cost shall be
referred to as the "Fee." The compensation Seller is expected to be paid for
the work under this Contract is Cost reimbursement plus the Fee.
B. In case of any ambiguous inconsistencies between this Contract and the
Statement of Work or similar work orders, the text of this Contract shall
prevail.
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C. This Contract definitizes and applies to work performed pursuant to the
Advanced Authorization to Proceed contained in CTI telefax dated October 10,
1996.
ARTICLE II - LIMITS OF AGREEMENT
The terms and conditions set forth herein constitute the complete and
exclusive statement of all of the terms of the agreement between TRW and CTI
with respect to this Contract, unless different or additional terms and
conditions are hereafter agreed in writing and made a part hereof by Contract
amendment. All prior representations and agreements of the parties are
merged herein and no agent, employee or representative of Seller has the
authority to bind Seller to any other affirmation, representation, promise or
warranty concerning the software or services furnished by Seller, and such
are not enforceable by Buyer unless contained herein. This Contract shall
not be varied, supplemented, qualified, or interpreted by any prior course of
dealing between the parties or by any usage of trade.
ARTICLE III - SCOPE OF WORK
Seller, as an independent Contractor and not as an agent of Buyer,
shall, in conformance with the terms and conditions more particularly set
forth herein, provide the necessary personnel, and services and do all things
necessary or incidental to furnish and deliver to the Buyer all requirements
as set forth in Appendix A-STATEMENT OF WORK, dated October 22, 1996, as
revised or amended from time to time.
ARTICLE IV - PERFORMANCE, DELIVERY SCHEDULE AND TERMINATION
The period of performance shall be from the effective date hereof and
continue for 48 months. The Seller shall provide the services, complete the
installation of the Buyer furnished materials as required by ARTICLE III-
SCOPE OF WORK within the period of performance. Seller shall request
clarifications or instructions from Buyer if the Statement of Work or
instructions from Buyer are not clear or are ambiguous as the project
progresses. Either party may terminate this contract for convenience by
giving thirty (30 days) written notice.
ARTICLE V - INSPECTION AND ACCEPTANCE
A. Final inspection and acceptance of services shall be made at the sites
designated by Buyer. All services covered by this Contract will be subject
to inspection and test by Buyer to the extent practicable at reasonable times
and places prior to acceptance. Any such inspection and test shall be
performed in such manner as to not delay or otherwise interfere with Seller's
performance hereunder.
B. Buyer shall promptly inspect services within 5 days of being notified by
Seller of their being tendered for inspection, and shall, within ten (10)
days after such inspection, give written notice to Seller of any claim that
the goods or services do not conform with the terms of this Contract. If
Buyer fails to inspect services called for above, Buyer will be held to have
accepted the goods or services with all defects that inspection would have
revealed, subject to Seller's obligations under ARTICLE XI, and to have
waived all rights Buyer may have had to revoke acceptance after said ten (10)
day period. Notwithstanding the foregoing, Buyer may notify Seller of a
reasonable delay and toll the inspection period.
C. Depot Operation. To be determined after approval of TRW's Logistics
Support Plan.
ARTICLE VI - ESTIMATED COST AND FEE
[REDACTED DUE TO CONFIDENTIALITY: CONTAINS INDUSTRY
SENSITIVE OR INTELLECTUAL PROPERTY PROVISIONS.]
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ARTICLE VII - CONSIDERATION AND PAYMENT
Seller shall submit invoices monthly identifying work performed, Costs
incurred and the applicable Fee, consisting of the total payable. At the end of
Seller's work required by the Contract, a final invoice containing all unpaid
Cost incurred and uninvoiced Fee, if any, shall be submitted and paid.
ARTICLE VIII - INVOICES AND REMITTANCE
A. Invoices for payments hereunder shall be submitted to the following
address:
Mr. Richard Secord, President
Computerized Thermal Imaging, Inc.
141 North State Street
Lake Oswego, OR 97034
B. Remittance shall be made by check to: (if by U. S. Mail)
TRW Inc.
Accounts Receivable
Lock Box File No. 41818
Los Angeles, CA 90074-1818
C. Remittance shall be made by check to: (if sent by Commercial Express
Carrier)
TRW Inc.
300 North Sepulveda
El Segundo, CA 90245
Attention: Glenn Campbell
(310) 814-7738
ARTICLE IX - PAYMENT TERMS
Payment terms are net thirty (30) days after date of Seller's invoice.
Seller preserves the right at any time to suspend credit or to change credit
terms provided herein, when the financial condition of Buyer reasonably so
warrants. In such case, in addition to any other remedies herein or by law
provided, cash payment or satisfactory security from Buyer may be required by
Seller before shipment, or the due date of payment by Buyer under any
Contract or order with Seller may be accelerated by Seller. Failure to pay
invoices at maturity date makes all subsequent invoices immediately due and
payable, irrespective of terms, and Seller may terminate work and/or withhold
all subsequent deliveries until the full account is settled.
ARTICLE X - PACKAGING AND DELIVERY
Packaging and packing of all items for delivery shall be in accordance
with good commercial practice and adequate to assure safe arrival at
destination. The delivery point of all items to be delivered by Seller
hereunder shall be F. O. B. Origin.
ARTICLE XI - WARRANTY
A. Software
For six (6) months commencing upon the date software installation is
accepted by Buyer at the designated site, TRW warrants that the software
modified or developed by TRW, excluding defects existing at the time of
delivery to TRW in the coding of the software originating from any third
party, shall substantially conform to professional quality, standard industry
practices, the TRW Software Guidelines, and the purpose and requirements set
forth in Appendix A - STATEMENT OF WORK, or other document referencing the
software description. If any of the TRW modified or developed software fails
to comply with the warranty set forth in this paragraph, TRW shall make a
reasonable effort to correct the program errors either (a) without increase
to the Fee or Cost of the Contract or (b) without increase to the Fee but
with reimbursement of Costs, if Buyer's instructions were ambiguous and
unclear and Seller's action was
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reasonable. Any corrected software will be warranted for the remainder of
the original warranty period or thirty (30) days, whichever is longer.
Notwithstanding any other provision of this ARTICLE XI, TRW does not warrant
that software provided hereunder is free of all errors or omissions.
Further, TRW does not warrant that the functions contained in the delivered
software will meet Licensee's requirements or will operate in combinations
other than as specified by TRW, or that the operation of the software will be
uninterrupted or error free or that all program defects can be corrected.
Seller will transfer to Buyer the benefit of any third party warranties to
the extent allowable by the third parties.
B. Services
1. All services performed by TRW will be of professional quality and
conform to standard industry practices and be in accordance with the
Statement of Work, or other document specifying the particular purpose of the
services approved by the parties. Any services which are actually defective
will be re-performed with reasonable promptness, after written notification
is received, and if said notice is made promptly after discovery of such
defect, and in no event later than six (6) months from the date of acceptance
thereof. In such event, to perform any such re-work or transportation caused
thereby, either (a) no additional Fee or duplicated Cost shall be allowed, or
(b) only Costs shall be reimbursed if Buyer's instructions were ambiguous and
Seller reasonably provided the services. If services are to be performed
pursuant to a software warranty, the software warranty standard and
conditions apply. Buyer shall notify Seller in writing of any defect,
furnish relevant information with respect thereto.
2. In instances when re-performance of a defective service is
impractical, and at TRW's sole discretion, an equitable adjustment of the
earned Fee and Costs of the affected item may be offered in lieu of
re-performing the service.
C. ANY OTHER PROVISIONS OF THIS CONTRACT TO THE CONTRARY NOTWITHSTANDING,
THIS WARRANTY, EXCEPT AS TO TITLE, IS IN LIEU OF ALL OTHER WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE, WHETHER ARISING BY LAW, CUSTOM, CONDUCT OR USAGE OF TRADE. IN NO
EVENT SHALL EITHER PARTY BE LIABLE FOR INDIRECT, INCIDENTAL, SPECIAL OR
CONSEQUENTIAL (EXCEPT AS MAY BE ATTRIBUTABLE TO ARTICLES XIII, XXIV, XXV, OR
XXXI), OR PUNITIVE DAMAGES.
D. Deport Warranty - To be determined after approval of TRW's Logistics
Support Plan.
ARTICLE XII - LIMITATION OF LIABILITY
Neither party in any event shall be liable for indirect, incidental,
special or consequential (except as may be attributable to ARTICLES XIII,
XXIV, XXV, OR XXXI) or punitive damages, including such liability for
improper disclosure or misuse by others of any data gathered or processed by
the systems delivered under this Contract. Seller shall not be liable for
incorrect or inappropriate responses or incorrect diagnosis resulting from
the data gathering or processing performed by the systems delivered under
this contract. Seller's liability for damages to Buyer on any claim,
including negligence, for any loss or damage resulting from the performance
or breach thereof, or the design, manufacture, sale, delivery, resale,
installation, technical direction of installation, inspection, repair,
operation or use of any software, data, goods or services covered by or
furnished under this Contract, shall in no case exceed the amount of fee paid
to the Seller under this contract or $1,000,000, whichever is less.
ARTICLE XIII - INDEMNIFICATION
To the extent that Seller's or Buyer's agents, employees or
subcontractors enter upon premises occupied by or under the control of the
other party in the course of the performance of this Contract, the parties
shall take all necessary precautions to prevent the occurrence of any injury
(including death) to any persons, or of any damage to any property arising
out of acts or omissions of such agents, employees or subcontractors, and
except to the extent that any such injury or damage is due solely and
directly to the other party's gross negligence or willful misconduct, shall
indemnify the other party, its officers, employees and agents, against any
loss, claims, damages, liability, expense (including reasonable attorney
fees) and cause of action whatsoever arising out of any act or omission of
the party, its agents, or employees, and both parties shall maintain such
Public Liability, Property Damage and Employee's Liability and Compensation
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Insurance as will protect the other party from any of said risks and from any
claims under any applicable Workmen's Compensation and Occupation Disease
Acts. Furthermore, each party agrees to hold harmless and indemnify the
other from any third-party claim against one party arising from the other
party's negligence or intentional misconduct.
ARTICLE XIV - EXCUSED PERFORMANCE
In addition to any excuse provided by applicable law, Seller shall be
excused from liability for non-delivery, delay in delivery, or delivery of
non conforming goods or services arising from any events beyond its control,
whether or not the events were foreseeable by either party when entering into
the Contract, specifically including, but not limited to, war, riot, strikes,
lockouts, labor disturbances, resignation or death of any of key personnel,
energy or material shortages, fire, flood, earthquake or other natural
catastrophe, Federal, State or Local government requirement or proscription,
breach of contract or other failure of a subcontractor to perform, or
impossibility, including practical impossibility, to perform the services
called for herein or to develop the software without going beyond the state
of the art. Unless expressly provided in writing herein to the contrary,
Seller shall not be deemed to have assumed the risk of any of the above
circumstances. In such event, Seller shall be entitled to compensation on an
equitable basis for any benefit received by Buyer in retaining non conforming
software or utilizing non conforming services.
ARTICLE XV - INSOLVENCY OF BUYER
If Buyer takes any action to make Seller believe Buyer may become
bankrupt or insolvent, ceases business, or to pay bills during the term of
this Contract, Seller may forthwith terminate this Contract upon written
notice thereof to Buyer. Such termination shall not prejudice Seller's
rights to any amounts then due under this Contract or effect any other rights
Seller may have under applicable provisions of controlling law.
ARTICLE XVI - DEFAULT
A. An Event of Default on the part of either party shall exist if:
1. Such party fails to pay the other party any amount required to be
paid hereunder when due and payable;
2. Such party fails to perform any other material obligation required
to be performed by it under any provisions of this Contract, or fails to
initiate corrective action within thirty (30) days after receiving notice
from the other party that such performance has become due.
B. Subject to other provisions hereof which expressly limit the remedies
available hereunder, if an Event of Default, as defined in paragraph A above,
exists on the part of either party, then the other party may continue
performance and seek a resolution of any disputed performance according to
Article XIX, or the other party may terminate this Contract upon giving
written notice of termination and pursue any other remedies available at law
or in equity.
C. Failure by either party to insist upon strict performance of any
provision of this Contract by the other party shall not be deemed to be a
waiver by such party of its rights or remedies, or a waiver by it of any
subsequent default by the other party in the performance of or compliance
with any of the terms of this Contract.
ARTICLE XVII - ASSIGNMENT
A. Neither party shall, without the consent in writing of the other party
assign or transfer this Contract or the benefits or obligations thereof or
any part thereof to any other person other than a subsidiary wholly owned by
the party, provided that this shall not affect any right of TRW to assign,
either absolutely or by way of charge, any moneys due or to become due to it
or which may become payable to it under this Contract.
B. No assignment or transfer of any right or duty hereunder by either party
shall constitute a novation or otherwise release or relieve such party of its
obligations hereunder.
C. The provisions of this Agreement shall be binding upon and inure to the
benefits of Seller and Buyer and their respective successors and assigns. In
the event either party foresees a successor situation developing, the other
party shall
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be notified in writing. This provision shall not be deemed to expand or
otherwise affect the limitation on assignment and transfers set forth above
and no party is intended to or shall have any right or interest under this
Contract, except, as provided herein.
ARTICLE XVIII- NOTICES
Any notices required to be given hereunder shall be given in writing at the
address of each party herein set forth or to such other address as either party
may substitute by written notice to the other.
If to Buyer:
Mr. Richard Secord, President
Computerized Thermal Imaging, Inc.
141 North State Street
Lake Oswego, OR 97034
If to Seller:
TRW Inc.
Post Office Box 1310
San Bernardino, CA 92402-1310
ATTENTION: Richard L. Nickell, SBCA/200
ARTICLE XIX - GOVERNING LAW - ARBITRATION
All questions concerning the validity and operation of this Agreement
and the performance of the obligations imposed upon the parties hereunder
shall be governed by the laws of the State of California, United States of
America.
Any dispute between the parties arising out of or related to
this Contract (or any Statement of Work or other document executed related to
this Contract) shall be resolved by binding arbitration held in Ogden, Utah,
in accordance with the rules and procedures of the American Arbitration
Association ("AAA"). Either party may deliver to the other a written dispute
notice setting forth a description of the issue(s). Appropriate
representatives of both parties will negotiate in good faith within ten (10)
days to resolve the dispute. If the parties are unable to resolve the
dispute within ten days, either party may notify the AAA and the other party
of a statement of claim to initiate arbitration. The purpose of arbitration
is to promptly resolve all disputes, including any cost or fee dispute or
resolution of any equitable adjustments or determination of reasonable
charges which may arise during the course of continued performance, because
the parties have agreed to identify work to be performed as the term of the
contract progresses and that all costs and charges shall be reasonable. The
AAA shall be the appointing and administrative authority applying its
supplemental and procedural rules unless the parties agree on other
procedures. If the parties cannot mutually select an arbitrator reasonably
acceptable to both parties with five (5) days of such notice, AAA shall
identify three independent candidates for selection as the sole arbitrator,
allowing each party an opportunity to strike one. The arbitrator shall
adhere to deadlines for a prompt resolution.
ARTICLE XX - TAXES
Any direct taxes (including stamp, and turnover taxes but excluding
income taxes), duties, fees, charges, or assessments of any nature levied by
any governmental authority in connection with the work of this Contract,
whether levied against Buyer or TRW, shall be for Buyer's account and shall
be paid directly by Buyer to the governmental authority concerned.
ARTICLE XXI - CONTRACT MANAGEMENT
A. Each party's Contract Manager for this Contract shall be designated in
writing. Either party may, by written notice to the other, change such
Contract Manager at any time. At the commencement of this Contract, Richard
Secord is the Contract Manager for CTI, Richard Nickell is the Contract
Manager for TRW.
B. No request, notice, authorization, direction or order received by the
Seller shall be binding upon Seller, or serve as a basis for adjusting the
price, or other provision of the Contract unless issued or confirmed in
writing by the Buyer's
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named Contract Manager. Buyer's Contract Manager shall codify into the
Contract out of scope or over and above activities required by the Buyer's
Program or Technical Representatives. The Seller shall immediately notify,
in writing, the Buyers Contract Manager whenever a change request has been
received from a representative of Buyer other than the Contract Manager which
would affect the terms and conditions, estimated cost, fee, Statement of Work
or Schedules of this Contract.
C. Only TRW's designated Contract Manager or a more senior contracting
individual within the Company is authorized to contractually obligate TRW.
ARTICLE XXII - NOTICE OF DELAY
Whenever any actual or potential event is delaying or threatening to
delay delivery of the equipment or performance of the services under this
Contract, Seller shall give expeditious notice thereof.
ARTICLE XXIII - REPORTS
The Seller shall furnish reports of cost incurred and the progress of
performance monthly. Cost reports shall be submitted within seven (7) days
after the close of TRW's accounting month. Progress reports shall be
submitted as of the end of each calendar month so as to reach Buyer by the
7th day of the following month.
ARTICLE XXIV - INTELLECTUAL PROPERTY RIGHTS AND NEW TECHNOLOGY AND DATA RIGHTS
[REDACTED DUE TO CONFIDENTIALITY: CONTAINS INDUSTRY
SENSITIVE OR INTELLECTUAL PROPERTY PROVISIONS.]
ARTICLE XXV- PATENT INFRINGEMENT
A. TRW shall indemnify Buyer against all actions, claims, demands, costs,
legal fees, charges, and expenses arising from or incurred by reason of any
infringement or alleged infringement of United States letters patent, design,
or copyright, by the use of any Intellectual Property supplied by TRW but
such indemnity shall not cover any use of the products other than for the
purpose indicated by or reasonably to be inferred from this Contract or to
any use which constitute an infringement due to the use of any such products
or software in association or combination with any other products not
supplied by TRW under such combination is designed by services of TRW.
B. In the event of any claim being made or action brought against Buyer
arising out of the matters referred to in this Article, TRW shall be promptly
notified thereof and may at its own expense conduct all negotiations for the
settlement of the same, and any litigation that may arise therefrom. Buyer
shall not, unless and until TRW shall have failed to take over the conduct of
the negotiations or litigation, make any admission which might be prejudicial
thereto. The conduct by TRW of such negotiations or litigation shall be
conditional upon TRW having first given to Buyer such reasonable security as
shall from time to time be required by Buyer to cover the amount ascertained
or agreed or estimated, as the case may be, of any compensation, damages,
expenses, and costs for which Buyer may become liable. Buyer shall, at the
request of TRW, afford all available assistance for the purpose of contesting
any such claim or action, and shall be repaid all reasonable expenses
incurred in so doing.
C. The foregoing indemnity shall not apply to software products thereof
made to the specification or design of Buyer, or to any claim of patent
infringement which is based upon the combination of any part of the products
with other equipment, except equipment acquired from TRW.
D. The foregoing states the entire liability of TRW with respect to
infringement of patents by the products or any part thereof or by operation
thereof.
ARTICLE XXVI - CHANGES
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A. Any changes to this Contract after the effective date hereof which
relate to (i) the deletion of work, (ii) adding additional services, (iii)
changing or modifying work, or (iv) making other changes which do not
materially alter the scope of this Contract shall be made in accordance with
the procedures set forth in this ARTICLE XXVI.
B. Either party hereto may, from time to time, and at any time during the
term hereof request a change, as defined in this Contract. (The party
requesting the change is hereinafter referred to as the "Requesting Party.")
Requests for changes or deletion shall be in writing, and shall be addressed
and delivered to the Notified Party. Such writing shall be identified as a
"Contract Change Request" (CCR), shall carry a sequential number for ease of
tracking, shall set forth in detail the nature of the change requested, and
shall identify the item or service to be changed.
C. When TRW is the Requesting Party, TRW shall submit a proposal for
equitable adjustment to the Contract Estimated Cost, schedule, or other
affected Contract provision. When the Requesting Party is CTI, a proposal
for equitable adjustment to the Contract will be submitted promptly after
receipt of copies of the CCR. The parties shall, as necessary, negotiate the
change and establish any equitable adjustment to the Contract.
D. If the parties decide to implement a change request, a Contract Change
Notice ("CCN") shall be prepared, which shall describe the change, delineate
the Estimated Cost, schedule, and other impacts of the change. Execution of a
CCN by both parties, shall constitute a modification hereof and shall be
binding on both parties hereto. TRW shall not proceed on any change until a
CCN has been issued.
E. Substitutions of products which are purchased items not manufactured by
TRW may be made by TRW without the consent of Buyer if such substitutes are
of like function and quality and of lower delivered cost.
XXVII - MODIFICATION AND WAIVER
No cancellation, modification, amendment, deletion, addition, or other
change in the Contract or any provision hereof, or waiver of any right or
remedy herein provided, shall be effective for any purpose unless
specifically set forth in a writing signed by the party to be bound thereby.
No waiver of any right or remedy in respect of any occurrence or event on one
occasion shall be deemed a waiver of such right or remedy in respect of such
occurrence or event on any other occasion.
XXVIII - SEVERABILITY
Any provision hereof prohibited by or unlawful or unenforceable under
any applicable law of any jurisdiction shall as to such jurisdiction be
ineffective without affecting any other provision of the Contract. To the
full extent, however, that the provisions of such applicable law may be
waived, they are hereby waived, to the end that the Contract be deemed to be
a valid and binding agreement enforceable in accordance with its terms.
XXIX - COUNTERPARTS
This Contract has been executed in several counterparts, each of which shall
be deemed to be an original, and all such counterparts together shall
constitute but one and the same instrument.
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XXX - REMEDIES
Unless otherwise expressly provided herein, the rights and remedies
hereunder are in addition to, and not in limitation of, other rights and
remedies under the Agreement, at law or in equity, and exercise of one right
or remedy shall not be deemed a waiver of any other right or remedy.
XXXI - PROPRIETARY INFORMATION AND NON-DISCLOSURE
A. During the term of this Contract, TRW and CTI, to the extent of each
party's contractual and lawful right to do so, shall exchange such
proprietary technical and other information as is reasonably required for
each to perform its obligations hereunder. The disclosing party without
consent shall be liable for special or consequential damages. TRW and CTI
each agree to keep in confidence and prevent the disclosure to any person(s)
outside their respective organizations or any person(s) within their
organizations not having a need to know, all information received from the
other which is in writing and designated by appropriate stamp or legend to be
of a proprietary nature and to use such information only in connection with
their obligations under this Agreement; provided, however, that neither party
shall be liable for actual special or consequential damages for disclosure or
use of such data if the same is:
1. In the public domain at the time of disclosure, or is subsequently
made available to the general public without restriction by the disclosing
party;
2. Known to the receiving party at the time of disclosure without
restrictions on its use or independently developed by the receiving party,
and there is adequate documentation to demonstrate either condition;
3. Used or disclosed inadvertently despite the exercise of the same
degree of care that each party takes to preserve or safeguard its own
proprietary information;
4. Used or disclosed with the prior written approval of the
non-disclosing party;
5. Disclosed without restriction to the receiving party from a source
other than the disclosing party;
6. Used or disclosed after a period of three (3) years after the date
of receipt.
B. No sheet or page of any written material will be so labeled which is
not, in good faith, believed to contain Proprietary information. A recipient
of information hereunder will have no obligation with respect to any portion
of any written material which is not so labeled, or any information received
orally unless a written summary of such oral communication, specifically
identifying the item s of Proprietary information, is furnished to the
recipient within fifteen (15) days.
C. If any portion of a party's Proprietary information falls within any one
of the above exceptions, the remainder shall continue to be subject to the
foregoing prohibitions and restrictions.
D. To be determined.
XXXII - SYSTEM INTEGRATION RIGHTS
[REDACTED DUE TO CONFIDENTIALITY: CONTAINS INDUSTRY
SENSITIVE OR INTELLECTUAL PROPERTY PROVISIONS.]
XXXIII - BUYER FURNISHED FACILITIES, SOFTWARE AND PROPERTY
A. Title to all facilities, software and property furnished to Seller by
Buyer (or Buyer's customer or Contractor) or paid for by Buyer shall remain
with Buyer (or Buyer's customer). Seller shall not alter or use such
property for any purpose other than that specified by Buyer without the prior
written consent of Buyer. Seller shall keep adequate records, which shall be
made available to Buyer upon request, and shall store protect, preserve,
repair, and maintain such property
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in accordance with sound industrial practice. In the event that Buyer's
property becomes lost or damaged through negligence or willful misconduct by
Seller, its employees, agents, or subcontractors, while in Seller's
possession, Seller agrees to replace (if lost or irreparable) or repair such
property, without increase to the Cost or Fee, at Seller's option. At the
completion of delivery of the goods and services ordered by Buyer in this
Contract for which Buyer's software or property were required, or the
termination of this Contract, Seller shall request disposition instructions
for all such Buyer's software and property, and for all source codes and
tools and documentation required to fully use the New Technologies, or the
remainder thereof. Seller agrees to make such software and property
available to Buyer at Buyer's request, in the manner requested by Buyer.
B. If the aforementioned Buyer-owned facilities, software or property are
increased or decreased, or do not remain available during the performance of
this Contract, or if any change is made in the terms and conditions under
which they are made available to the Seller, an equitable adjustment as may
be appropriate shall be made in the terms of this Contract.
C. CTI agrees to provide TRW with the items identified in the Statement of
Work.
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have executed this Contract to be
effective as of the day and year first above written.
TRW Inc. Computerized Thermal Imaging, Inc.
Systems Integration Group
/s/ Joseph D. Mason /s/ Richard V. Secord
- --------------------------------- ---------------------------------
Joseph D. Mason Richard Secord
Vice President and General Manager President
Strategic Systems Division
Date: 10/25/96 Date:
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APPENDIX A
STATEMENT OF WORK
[REDACTED DUE TO CONFIDENTIALITY: CONTAINS INDUSTRY
SENSITIVE OR INTELLECTUAL PROPERTY PROVISIONS.]
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CONTRACT CHANGE NOTICE
Issued by: CONTRACT NO. TRW-96-002
CHANGE NOTICE NO. 001
Computerized Thermal Imaging, Inc.
515 Pocahontas EFFECTIVE DATE THIS CHANGE:
Ft. Walton, FL 32547 16 December 1996
Issued to:
TRW Inc.
Strategic Systems Division
Post Office Box 1310
San Bernardino, CA 92402
In accordance with ARTICLE XXVI(D) Changes, TRW is hereby authorized under
the terms of this contract to begin the commercialization development and at
least one pilot installation, in accordance with the statement of work
revision 1.0 dated 22 October 1996. The incremental funding of the contract
is increased, and ARTICLE VI(D) is modified as follows:
ARTICLE VI - ESTIMATED COST, AND FEE
D. Authorized funding to this Contract is $4,700,000, which is estimated to
cover the Cost and Fee for all work to be performed from 10 October 1996
(Letter Contract) through 31 December 1997, subject to addition or deletion
of services of any magnitude or other changes according to Article XXVI
Changes. In the event the total funding available is insufficient to
complete all work authorized within the applicable period. Seller shall
notify Buyer in writing and shall not be obligated to perform any unfunded
work until the authorized funding is increased to the amount required to
complete the work. In the event the Contract is fully funded and the
Estimated Cost in insufficient to complete all work required by the Statement
of Work, Seller shall notify Buyer in writing and shall not be obligated to
perform further work until the Estimated Cost and authorized funding are
increased to new values agreed by the parties.
All Terms, Conditions and Provisions of the original Subcontract, as amended,
remain unchanged, except as specifically noted herein.
Computerized Thermal Imaging, Inc.
BY: /s/ Richard V. Secord
--------------------------
R.V. Secord
President & COO
DATE: 1/30/97
--------------------
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EXHIBIT 10(qq)
CLINICAL TRIAL AGREEMENT
This Clinical Trial Agreement ("Agreement") is entered into by and
between THERMAL MEDICAL IMAGING, INC. ("Sponsor") and the Health Research
Association, 1640 Marengo Streeet, 7th Floor, ("Institution"), a California
nonprofit educational institution incorporated under the laws of the State of
California.
RECITALS
WHEREAS, the clinical trial contemplated by this Agreement is of mutual
interest and benefit to Institution and to Sponsor, will further the
instructional, scholarship and study objectives of Institution in a manner
consistent with its status as a nonprofit, tax-exempt, educational
institution, and may derive benefits for both Sponsor and Institution through
the discovery of new knowledge;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree to the following:
DEFINITIONS
"Monitor" shall mean the individual or firm retained by Sponsor to
provide monitoring services for Study utilizing Sponsor's Protocol and Study
Device, initially being QBRI International, Inc.
"Principal Investigator" shall be William R. Dougherty, M.D. who is
acting as a representative for the Institution in activities associated with
this Study.
"Protocol" shall mean the Protocol and Statement of Work as attached
hereto as Exhibit "A".
"Study" shall mean the clinical studies, examinations and collection of
patient data using the Study Device as described in the Protocol, conducted
and collected at the Institution's premises from patients examined by the
Investigator.
"Study Device" shall mean integrated thermal imaging data acquisition
system for breast cancer screening, the interpretive algorithm analysis
process and the clinical evaluation and display device/software which are to
be used or administered during the Study in accordance with the provisions of
the Protocol.
"Institution Intellectual Property" shall mean individually and
collectively all inventions, improvements and discoveries, whether or not
covered by intellectual property protection, which are conceived or made by
one or more employees of Institution in conducting the Study and which are
not Joint Intellectual Property or Sponsor's Intellectual property.
"Joint Intellectual Property" shall mean individually and collectively
all inventions, improvements and discoveries, whether or not covered by
intellectual property protection, which are conceived or made jointly by one
or more employees of Sponsor and Institution.
1. CONTENTS AND ORDER OF PRECEDENCE
This Agreement consists of this Agreement and the following documents which
shall be referred to collectively herein as the "Transaction Documents":
a. Exhibit "A" - Protocol and Statement of Work; and
b. Exhibit "B" - Confidentiality Agreement dated November 7, 1996.
In the event of any conflict between such Exhibits and this Agreement, the
terms of this Agreement shall control.
2. PERFORMANCE OF THE STUDY
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2.1 Institution shall perform the Study substantially in accordance
with the protocal and the terms and conditions of this Agreement. Sponsor and
Institution may at any time amend the Study and this Agreement by mutual
written consent.
2.2 In the event that the Principal Investigator becomes unable or
unwilling to continue the Study and a mutually acceptable substitute is not
available, both the Institution and the Sponsor shall have the option to
terminate this Agreement. The Principle Investigator and any and all other
person involved in the Study (collectively the "Investigator(s)" shall
execute the Confidentiality Agreement substantially in the form attached
hereto or Exhibit "B", (the "Confidentiality Agreement") prior to beginning
any activities associated with the Study.
2.3 Nothing in the Agreement shall be construed to limit the freedom of
Investigators, whether participants in this Agreement or not, from engaging
in similar studies made independently under other grants, contracts or
agreements with parties other than Sponsor, provided said investigations are
not in conflict or violate the terms and conditions of this Agreement and the
Confidentiality Agreement.
2.4 In performing the Study, Institution and Principal Investigator
shall at all times undertake, comply with, and complete the following:
1. The Protocol;
2. This Agreement;
3. Generally accepted standards of good clinical practice;
4. Instructions provided in writing by Sponsor or Monitor;
5. All applicable federal, state and local laws and regulations
applicable to the conduct of the Study and the performance of clinical
investigators generally including but not limited to the Federal Food,
Drug and Cosmetic Act and regulations of the Food and Drug
Administration;
6. Prepare an appropriate patient informed consent document sufficient to
comply with all local, state, and federal statutory and regulatory
requirements and in form acceptable to each of the parties, and
thereafter to obtain such written consent from each patient or
authorized representative prior to initiation of any procedures
required by the Study;
7. Obtain and forward to Sponsor and Monitor evidence of Institutional
Review Board ("IRB") approval of the Study and the informed consent
document prior to beginning the Study;
8. Obtain and forward to Sponsor and Monitor evidence of ongoing review
of the Study and informed consent document by the IRB at least
annually;
9. Obtain and forward to Sponsor and Monitor evidence of IRB approval of
any advertisement used for the Study prior to the publication or other
use of the advertisement;
10. Review the clinical investigators' brochure and all updates as
provided;
11. Maintain Study and related medical records according to local, state
and federal statutory and regulatory requirements;
12. Immediately notify Sponsor and Monitor, according to procedures
specified by Monitor, of any and all serious and/or unexpected adverse
events as defined by the Study and promptly record such events on an
appropriate case report form ("CRF") agreed to by the parties;
13. Promptly notify Sponsor and Monitor of any pregnancy of any subject
enrolled in the study; and
14. Enroll only qualified subjects in the Study as provided in the
Protocol, or as directed by Sponsor and Monitor.
3. MAINTENANCE OF RECORDS AND FORMS
3.1 Institution agrees to fulfill the obligations imposed by Sponsor
for maintenance of records and reports, and those obligations included in
Subpart D of 21 CFR Chapter 1, Responsibilities of Sponsor and Investigators,
a copy of which is provided by Monitor as a part of the site study manual.
3.2 Principal Investigator shall complete and return accurate CRFs to
Sponsor as described in the Study. Principal Investigator also agrees to
ensure the data captured on the CRFs are consistent with the patient medical
records, to complete the case report forms in a timely and coherent, legible
fashion, and to have the CRFs completed in advance of any planned monitoring
visits.
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3.3 Institution shall retain all records from the Study (including
medical records of enrolled patients) for the period of 5 years and will
permit inspection by Sponsor or its authorized representatives of all such
records during normal business hours. During the period of performance and
for a reasonable period thereafter, Sponsor may make copies of and/or extract
nonconfidential information from such records at Sponsor's expense. For
purposes of this paragraph, confidential information shall mean information
which identifies a specific patient.
4. LICENSES AND QUALIFICATIONS
4.1 Principal Investigator shall have and maintain in full force and
effect any and all professional and other licenses, certificates or documents
required to render the services described in this Agreement and agree to
provide a copy of these licenses, certificates or documents to Sponsor and
Monitor upon request. If any such license is suspended or revoked during the
course of the Principal Investigator's participation in the Study,
Institution agrees to notify Sponsor and Monitor promptly in writing.
4.2 Principal Investigator represents and warrants that he has not been
barred from conducting clinical studies by the US Food and Drug
Administration or any other applicable governmental regulatory agency.
Institution agrees to immediately notify Sponsor and Monitor in writing if
the Principal Investigator is barred during the course of the Study.
4.3 Principal Investigator agrees to provide a current curriculum vitae
which is true, complete and accurate up to the start date of this Agreement,
Investigator agrees that Sponsor may supply copies of the curriculum vitae to
Monitor, the FDA and any other government regulatory agency in connection
with the Study.
4.4 Institution represents and certifies that no investigation or study
in which Principal Investigator has been engaged has been terminated for
Principal Investigator's failure to adhere to protocol, guidelines, or
Federal or State regulations.
5. PERIOD OF PERFORMANCE
The estimated period of performance of this Agreement is 9/1/97 through
9/1/98. This Agreement shall become effective upon the date of last signature
hereto and shall continue in effect for the full duration of the period of
performance unless sooner terminated in accordance with the provisions of
Article 2 or 15.
6. REPORTS
Institution shall furnish Sponsor reports, in the form of case report forms
and logs, in such frequency and format as mutually agreed to by the parties,
but in no event less than every 30 days. A final report setting forth the
accomplishments and significant Study findings or lack thereof shall be
prepared by Institution and submitted to Sponsor within ninety (90) days of
the expiration of the Agreement.
7. COSTS, BILLINGS, AND OTHER SUPPORT
7.1 It is agreed and understood by the parties hereto that, subject to
Article 2, total costs to the Sponsor hereunder shall not exceed the amount
of $385,218.75. Payment shall be made by Sponsor according to the schedule
set forth in Exhibit "A".
7.2 Checks shall be made payable to the Health Research Association,
Federal ID No. 95-1683862, and sent to:
Health Research Association
Attn. William Dougherty
1640 Marengo Street, 7th Floor
Los Angeles, CA 90033
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7.3 In the event of termination of this Agreement pursuant to Article 15
hereof, Sponsor shall pay all costs directly attributable to the Study
accrued by Institution as of dare of termination, including noncancellable
obligations, and for all costs associated with patient follow-up as required
by the Protocol of those already enrolled in the Study.
8. PUBLICITY
Neither party shall use the name, trade name, trademark or other designation
of the other party in connection with any products, promotion or advertising
without the prior written permission of the other party.
9. PUBLICATIONS
The Study to be performed under this Agreement is part of a Multi-Center
Collaborative project. The Institution recognizes that the results generated
by this Study may have added scientific significance when combined and
published together with data generated by other centers involved in the
project. Accordingly, Institution expressly acknowledges that the right to
publish the combined results of the collaborative project belongs to the
Sponsor. The Institution shall have the right to publish the results of this
Study but agrees to refrain from publishing until the Collaborative project
is complete, the data analyzed and the combined results submitted for
publication and until the Sponsor has received final Food and Drug
Administration Pre-Market approval or disapproval. Sponsor shall notify, the
Institution within 30 days of notification from the FDA of their decision.
10. CONFIDENTIALITY
10.1 During the term of this Agreement, Sponsor expects to provide
Institution with the Study Device, Protocol, and other information, data, and
materials related thereto (collectively, the "Confidential Property") which
Sponsor considers confidential or proprietary in nature and which shall be
prominently marked or identified in writing as confidential or propriety.
Institution shall receive and hold such Confidential Property in confidence
and agrees to prevent disclosure of said Confidential Property to employees
and agents of Institution, other than those involved in conducting the Study,
and to all third parties, in the manner Institution treats its own similar
information.
10.2 Institution shall not consider information disclosed to it by
Sponsor confidential which: (1) is now common knowledge or subsequently
becomes such through no breach of this Agreement; (2) is rightfully in
Institution's possession prior to Sponsor's disclosure as shown by written
records; (3) is disclosed to Institution by an independent third party that
is not under a separate confidentiality agreement relating thereto; or (4) is
independently developed by or for Institution without benefit of confidential
information received from Sponsor.
11. INTELLECTUAL PROPERTY
11.1 Notwithstanding anything to the contrary in this Agreement, all
right, title, and interest to any intellectual property, including without
limitation inventions, improvements, results, data, and discoveries, that
arise from, relate to or are the direct and specific result of performance of
the Protocol and is directly related to the Study Device, shall belong to the
Sponsor and shall not be considered Institution Intellectual Property.
11.2 All rights and title to any other intellectual property developed
or conceived under this Study (which excludes all other study sites of this
Multi-Center Collaborative project) shall be considered Institution
Intellectual Property, shall belong to Institution and shall be subject to
the terms and conditions of this Agreement.
11.3 Institution will promptly notify Sponsor of any and all Institution
Intellectual Property conceived or made in the performance of work under this
Agreement. Sponsor shall, upon reviewing such notification, determine whether
to request Institution to file, prosecute and maintain any patent application
or application for other intellectual property protection, domestic or
foreign, in Institution's name and whether such property constitutes
Institution
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Intellectual Property. Sponsor shall bear all reasonable costs incurred in
connection with preparation, filing, prosecution and maintenance directed to
Institution Intellectual Property. Institution shall keep Sponsor advised as
to all developments with respect to such applications and Sponsor shall be
given an opportunity to review and comment thereon. If Institution and
Sponsor are unable to agree on whether intellectual property conceived or
made by Institution under 11.2 constitutes Institution Intellectual Property,
Institution may appeal to arbitration under Section 14.
12. JOINT OWNERSHIP INTELLECTUAL PROPERTY
All rights and title to Joint Intellectual Property under the Study shall
belong jointly to Sponsor and Institution and shall be subject to the terms
and conditions of this Agreement. The parties hereto shall promptly notify
each other of any Joint Intellectual Property conceived or made in the
performance of work under this Agreement. The parties shall, upon reviewing
such notification, determine whether to and which party should file,
prosecute and maintain any patent application or application for other
intellectual property protection, domestic or foreign, jointly in Sponsor's
and Institution' names. The parties shall mutually determine the division of
costs incurred in connection with such preparation, filing, prosecution and
maintenance directed to said Joint Intellectual Property. The applying party
shall keep the other party advised as to all developments with respect to
such applications and the non-applying party shall be given an opportunity to
review and comment thereon.
13. GRANT OF RIGHTS
Institution grants Sponsor a time-limited first right to negotiate a
commercial option or worldwide, royalty-bearing license, with the right to
sublicense, to Institution Intellectual Property and to Institution's
interest in Joint Intellectual Property. Such first right must be exercised
within six (6) months after disclosure of Institution Intellectual Property
or disclosure of Joint Intellectual Property in accordance with Articles 11
and 12 above. Institution and Sponsor shall negotiate the terms of any such
license in good faith.
14. ARBITRATION
ANY CONTROVERSY OR CLAIM BETWEEN THE PARTIES ARISING OUT OF OR RELATING TO
THIS AGREEMENT, OR A BREACH THEREOF, WHICH CANNOT BE RESOLVED BY MUTUAL
AGREEMENT SHALL BE SETTLED BY BINDING ARBITRATION CONDUCTED BY A SINGLE
ARBITRATOR IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE
AMERICAN ARBITRATION ASSOCIATION. ANY JUDGMENT UPON THE AWARD RENDERED BY THE
ARBITRATOR MAY BE ENTERED IN ANY COURT HAVING JURISDICTION THEREOF. EACH SUCH
ARBITRATION SHALL BE HELD IN THE COUNTY OF LOS ANGELES, CALIFORNIA.
ALL FEDERAL AND STATE SUBSTANTIVE AND PROCEDURAL LAWS APPLICABLE TO THIS
AGREEMENT RELATING TO ARBITRATION OF CONFLICT SHALL BE FULLY COMPLIED WITH BY
THE PARTIES.
UNLESS THE PARTIES OTHERWISE AGREE, EACH PARTY MAY CONDUCT DISCOVERY PRIOR TO
ANY ARBITRATION HEARING IN ACCORDANCE WITH THE CALIFORNIA RULES OF CIVIL
PROCEDURE AND EVIDENCE. ADDITIONALLY, THERE SHALL BE NO EVIDENCE BY AFFIDAVIT
ALLOWED, AND EACH PARTY SHALL DISCLOSE A LIST OF ALL DOCUMENTARY EVIDENCE TO
BE USED, A LIST OF ALL WITNESSES AND EXPERTS TO BE CALLED BY THE PARTY AT
LEAST TWENTY (20) DAYS PRIOR TO THE ARBITRATION HEARING.
TO THE MAXIMUM EXTENT PERMITTED BY LAW, EACH PARTY KNOWINGLY, VOLUNTARILY,
AND INTENTIONALLY WAIVES ANY RIGHT TO CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE
DAMAGES REGARDLESS OF THE FORUM FOR THE PROCEEDINGS. THE PROVISIONS OF THIS
SECTION SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT FOR ANY REASON
WHATSOEVER.
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15. EXPORT
Sponsor agrees that it will at all times be in compliance with the United
States government export regulations and laws and that any sub-Sponsor
Agreement will require that the sub-Sponsor is in compliance with these
regulations and laws. Sponsor asserts that it is not now doing business with
any country to which the United States government prohibits export of
products under consideration in this Study.
16. TERMINATION
16.1 If a party hereto breaches a material term, covenant or condition
of the Transaction Documents or this Agreement, the non-breaching party may,
terminate this Agreement. Prior to termination, the non-breaching party shall
provide written notice of default, which shall inform the breaching party of
the facts and circumstances upon which such default is based and which shall
provide the breaching party with thirty (30) days in which to cure such
breach or such longer period as the parties may agree or as applicable law
may require. If such breach is not cured within the specified time period,
the non-breaching party may terminate this Agreement by providing written
notice of such termination to the defaulting party.
16.2 This Agreement may be terminated immediately by Sponsor upon written
notice to Institution in the event of any adverse patient reaction. Upon receipt
of a termination notice from Sponsor, the Institution shall stop enrolling and
treating patients under the Study to the extent consistent with generally
accepted standards of good medical practice and patient safety.
16.3 Termination of this Agreement by either party for any reason shall not
effect the rights and obligations of the parties accrued prior to the effective
date of termination.
16.4 Principal Investigator's participation in the Study will automatically
terminate upon receipt of notice that:
1. Any license required to be held by Investigator is suspended or
revoked during the course of the Investigator's participation in the Study; or
2. Investigator has been debarred from conducting clinical studies by the
US Food and Drug Administration.
16.5 In addition to termination under 16.1 and 16.2, Sponsor may
terminate Institution's participation in the Study upon written notice to
Institution in the event that:
1. Sponsor terminates the Study; or
2. Overall study enrollment goals have not been met, even if
Investigator's individual enrollment has not been reached.
16.6 Institution may terminate participation in the Study if it becomes
unwilling or unable to continue to serve, provided Sponsor is provided at
least thirty (30) days advance written notice, in order to give Sponsor an
opportunity to identify and engage a replacement Investigator.
16.7 Upon termination of this Agreement: (i) the Investigator shall stop
enrolling patients into the Study; (ii) shall cease conducting procedures on
patients already enrolled in the Study, except to the extent such procedures
are medically necessary and permissible, and (iii) both Institution and
Investigator shall return to Sponsor any and all Confidential Property which
is in Institution's, Investigator's, or any of their employee's or agent's
possession or control.
17. WARRANTIES
17.1 Institution agrees to perform the Study in accordance with prevailing
professional standards.
17.2 INSTITUTION MAKES NO WARRANTIES FOR ANY PURPOSE WHATSOEVER, EXPRESS
OR IMPLIED, AS TO THE STUDY OR THE RESULTS OF THE STUDY, INCLUDING THE
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MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE STUDY OR THE
RESULTS OF THE STUDY UNDER THIS AGREEMENT. Neither the Principal
Investigator, Sponsor, nor any other person is authorized to give any such
warranty in the name of or on behalf of Institution.
17.3 Sponsor agrees that it will not rely solely upon technical
information provided by Institution or the Principal Investigator in
developing any invention or product, but will independently test, analyze and
evaluate all inventions and products prior to manufacture and distribution of
such inventions and products.
17.4 Neither Institution nor Investigator shall make any warranty or
representations, including but not limited to a warranty or representation of
the efficacy of the Study Device, without the express written permission of
Sponsor and Sponsor will not be liable for any unauthorized warranty or
representation made by Investigator.
18. INSURANCE AND INDEMNIFICATION
18.1 At all times during the conduct of the Study under this Agreement,
Institution agrees to maintain at its sole cost and expense appropriate and
adequate professional and general commercial liability insurance, such
protection being applicable to and covering negligent acts/omissions of
officers, employees and agents while acting within the scope of their
employment by Institution, on an occurrence made basis in single limit
coverage of not less than One Million Dollars ($1,000,000) per claim or
incident and One Million Dollars ($1,000,000) annual aggregate for death,
bodily injury, illness or property damage to support the indemnification
obligations of Institution in Section 18.4 hereof. A Certificate evidencing
each such policy shall be delivered to Sponsor upon request.
18.2 Sponsor agrees to hold harmless, indemnify and defend Los Angeles
County, Institution, it's trustees, officers and agents from demands, claims,
or costs of judgments that may be made or instituted against any of them by
reason of injury or death to any person, or damage to property arising out of
and related to performance of Study, provided however, Sponsor will have no
liability for loss or damage resulting from: (i) failure to adhere to the
protocol or Sponsor's written instructions concerning use of the study device
(ii) Failure to comply with applicable FDA or other government requirements,
or (iii) negligence or willful malfeasance by Institution, it's trustees,
officers, agents or employees, but only to the extent that such demands,
claims or judgments are due to the negligence or will full malfeasance of
Institution, its trustees, officers, agents or employees.
18.3 At all times during this Study, Sponsor agrees to maintain at its
sole cost and expense a policy or program of comprehensive general liability
insurance or self-insurance on an occurrence made basis in single limit
coverage of not less than One Million Dollars ($1,000,000) per incident and
One Million Dollars ($l,000,000) annual aggregate for death, bodily injury,
illness or property damage to support the indemnification obligations assumed
herein. Sponsor shall maintain such comprehensive general liability insurance
during the period that the Study or any modification thereof is being
administered, manufactured, sold, or distributed to humans by the Sponsor and
a reasonable period thereafter which in no event shall be less than two (2)
years. A Certificate evidencing the comprehensive general liability policy
shall be delivered to Institution upon request.
18.4 Institution agrees to hold harmless, indemnify and defend Sponsor
from all liabilities, demands, damages, expenses, and losses arising out of
and related to Institution's or Principal Investigator's gross negligence or
willful misconduct.
19. INDEPENDENT CONTRACTOR
19.1 Institution is an independent contractor and not an agent, joint
venture or partner of Sponsor.
19.2 Investigator is an employee of Institution which is an independent
contractor of Sponsor for all purposes and not an employee, as that term is
understood for purposes of federal and state law. Nothing in this Agreement
shall be deemed to constitute a partnership or joint venture between Sponsor
and Institution, nor shall anything in this Agreement be deemed to constitute
Investigator or Sponsor as the agent of the other. Neither Investigator,
Institution nor Sponsor shall become liable or bound by any representation,
act or omission whatsoever of the other, except to the extent expressly
provided in this Agreement.
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20. GOVERNING LAW
This Agreement shall be governed and construed in accordance with the laws of
the State of California as adjudicated by a court of competent jurisdiction.
21. ATTORNEYS' FEES
In any action on or concerning this Agreement, the prevailing party shall
awarded its reasonable attorneys' fees, costs and necessary disbursements, to
be paid by the nonprevailing party.
22. ASSIGNMENT
Neither party shall assign its rights or duties under this Agreement to
another without the prior written consent of the other party, except to any
party succeeding to substantially all of the business interests of the
assigning party.
23. INSPECTION AND ACCESS
Sponsor's authorized representatives and regulatory authorities may examine
and inspect the Institution's facilities required for performance of the
Study and inspect and copy all data and work products relating to the Study.
Inspections will be conducted during regular business hours upon reasonable
notice and to the extent permitted by law and until the Sponsor has received
final Food and Drug Administration Pre-Market approval or disapproval.
24. RESEARCH MATERIALS
24.1 Institution acknowledges that the Study Device and all other
property and materials being provided to Investigator by Sponsor in
connection with the Study is to be used only for research purposes in
connection with the Study. Institution and Investigator shall have no license
or authority to use any such item in any other context or for any other
purpose.
24.2 Institution also agrees to use the Study Device only in the space
approved by Monitor or Sponsor in accordance with documentation provided by
Monitor or Sponsor. Investigator agrees to maintain adequate records of the
use of the Study Device. In addition, Institution agrees to return Study
Device all other property and materials being provided to Investigator by
Sponsor in connection with the Study upon termination or completion of the
Study.
25. WAIVER AND SEVERABILITY
25.1 No waiver by either party of any breach of any provision hereof
shall constitute a waiver of any other breach of that or of any other
provision hereof.
25.2 In the event a court or governmental agency of competent
jurisdiction holds any provision of this Agreement to be invalid, such
holding shall have no effect on the remaining provisions of this Agreement,
and they shall continue in full force and effect. Upon such holding, the
parties shall, within a reasonable period of time, determine whether the
severed provision(s) detrimentally and materially affect the obligations or
performance of either or both parties. If so affected, the parties shall,
within a reasonable period of time, negotiate in good faith to modify this
Agreement to relieve such effects. If such negotiations do not result in
mutually agreeable modifications to this Agreement, either effected party may
terminate this Agreement upon providing the other party with thirty (30) days
written notice of such termination.
25.3 Sections 3.3, 6, 7.3, 9, 10, 11, 12, 13, 14, 17, 22, 24 and this
25.3 shall survive the termination of this Agreement for any and all reasons
whatsoever.
26. AGREEMENT MODIFICATION
This Agreement may be modified or amended, including extension of the term of
this Agreement, at any time only by the written concurrence of both parties.
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27. NOTICES
Any notices given under this Agreement shall be in writing and delivered to the
following addresses by return receipt mail, postage prepaid, or by overnight
courier service. Such notices shall be effective upon the third business day
following mailing, if by mail, or upon receipt, if by courier.
For Sponsor:
Thermal Medical Imaging, Inc.
1760 South Telegraph Road, Suite 202
Bloomfield Hills, MI 48302
Attention: Bill Black
For Institution:
Health Research Association
Attn: Chief Operating Officer
1640 Marengo Street, 7th Floor
Los Angeles, CA 90033
Copy to: Dr. William R. Dougherty
For Monitor:
QBRI International, Inc.
1300 North 17th Street
Arlington, VA 22209
703.276.0400
703.243.9746(facsimile)
28. THIRD PARTY RIGHTS
This Agreement shall not create any rights, including without limitation
third-party beneficiary rights, in any person or entity not a party to this
Agreement.
29. ENTIRE AGREEMENT
This Agreement constitutes the entire understanding between the parties
hereto and there are no collateral, oral or written Agreements or
understandings. This Agreement supersedes any prior oral or written Agreement
or understanding between the parties.
IN WITNESS WHEREOF, the parties have executed this Agreement in two or more
counterparts, each as an original and all together as one instrument as of
the date of last signature below written.
THERMAL MEDICAL IMAGING, INC. HEALTH RESEARCH ASSOCIATION
By: /s/ William Black, Jr. By: /s/ Julie P. Thompson.
---------------------------- ----------------------------
Name: William Black, Jr. Name: Julie P. Thompson
---------------------------- ----------------------------
Title: Vice President of Operations Title: President and CEO
---------------------------- ----------------------------
Date: 8/12/97 Date: 9-16-97
---------------------------- ----------------------------
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By /s/ William Dougherty
----------------------------
Name: William Dougherty
----------------------------
Title: Principle Investigator
----------------------------
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EXHIBIT A
PAYMENT SCHEDULE
In accordance to the budget detail sheet set forth herein, payments will be
made to:
Health Research Association
Attn. William Dougherty
1640 Marengo Street, 7th Floor
Los Angeles, CA 90033
Invoices for work performed shall be sent to:
Thermal Medical Imaging
Attn. Bill Black
1760 South Telegraph Road, Suite 202
Bloomfield Hills, MI 48302
Payments will commence within thirty (30) days from the receipt of a detailed
invoice following the installation of the first device at either Norris
Cancer Hospital or Los Angeles County General Hospital. Initial payment
shall be in the amount of $48,596.75.
Subsequent payments shall be made monthly following a detailed invoice in the
amount of $30,602.
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EXCHANGE OF CONFIDENTIAL INFORMATION
This Agreement, made and entered by and between Thermal Medical Imaging,
Inc., a Nevada Corporation, with a place of business at 1760 South Telegraph
Road, Suite 202, Bloomfiled Hills, MI 48302 (hereinafter referred to as TMI),
and Heath Research Association, a California, non-profit corporation with a
place of business at 1640 Marengo Street, 7th Floor, Los Angeles, CA 90033
(hereinafter referred to as HRA), all or each of which shall also hereinafter
be referred to as "party" or "parties" respectively, and is effective on the
date of last signature hereto.
RECITALS
For the mutual benefit of both parties, each party wishes to disclose to
and/or to receive from the other certain technical data, information, ideas
and documents to be used in conjunction with the project as described in the
letter dated 31 October 1996 from TMI to Mr. Pablo Valencia and attached
hereto as Attachment 1 (hereinafter "Project"), and which may or may not have
been patented or constitute bases of patentable inventions, but which the
disclosing party nevertheless considers to be Confidential and so indicates
by an appropriate legend, marking, stamp or other positive identification.
Such information, data and ideas shall hereinafter be identified as
"Confidential Information."
AGREEMENTS
Now therefore, the parties do hereby mutually agree that:
1. Confidential Information as defined above includes information or
documents whether or not they qualify as "trade secrets" under applicable
Federal or state law.
2. Each party shall receive and hold such Confidential Information in
confidence and agrees to use its reasonable efforts to prevent unauthorized
disclosure to third parties of said Confidential Information in the same
manner the receiving party uses to protect its own similar information,
provided, however, that neither party shall be liable for use or disclosure
of any Confidential Information if the same:
a. was in the public domain at the time it was disclosed;
b. entered the public domain through no fault of the receiving party
subsequent to the time it was communicated by the disclosing party;
c. was in the receiving party's possession free of any obligation of
confidence at the time it was communicated by the disclosing party;
d. was rightfully communicated to the receiving party by a third party
free of any obligation of confidence subsequent to the time it was
communicated by the disclosing party;
e. was developed by employees or agents of the receiving party without
reference to any information that the disclosing party has communicated to
any third party.
3. If Confidential Information is disclosed, and such information has
importance with respect to intellectual property, such information shall be
reduced to writing promptly by the disclosing party and every page shall be
clearly identified with the legend described above. Such writing shall be
delivered to the receiving party within thirty (30) days after the
disclosure thereto of said Confidential Information.
4. No Confidential Information disclosed pursuant to this Agreement shall be
used, duplicated or disclosed for purposes other than contemplated by the
Project indicated above without the prior written approval of the
disclosing party.
5. No license under any patent or patent application is granted to either
party either directly or indirectly by this Agreement, nor are any rights
of ownership in the Confidential Information granted by this Agreement.
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6. This Agreement shall remain in force for a period of three (3) years. This
Agreement may be terminated by either party with a thirty (30) day prior
written notice to the other party.
7. Confidential Information shall be disclosed only on a need-to-know basis to
personnel of the receiving party.
8. If the Confidential Information is reproduced in whole or part, the
reproduction shall carry a Confidential notice or legend similar to that
which appears on the original.
9. Nothing in this Agreement shall grant to either party the right to make
commitments of any kind, for or on behalf of the other party.
10. This Agreement is not intended to be, nor shall it be considered as, a
"team" arrangement, joint venture, partnership, or other formal business
organization, and unless otherwise agreed, neither party shall have the
right or obligation to share any of the profits or bear any of the risks or
losses of the other party. At all times the parties shall remain
independent contractors with each responsible for its own employees and
representatives. Each party assumes no responsibility to the other for
costs, expenses, risks and liabilities associated with the research,
development, exchange and use of each other's Confidential Information.
11. No rights or obligations other than those expressly recited herein are to
be implied from this Agreement, including any requirement that either party
contract with the other for the procurement of any products, services or
data resulting from this Agreement.
12. Each employee who has had or is granted access to the other party's
Confidential Information shall be informed of the obligation to protect the
Confidential Information of such other party from unauthorized use or
disclosure as herein provided.
13. When this Agreement is terminated as herein provided, or if the
Confidential Information received hereunder is no longer required by the
receiving party, whichever occurs first, then unless otherwise agreed in
writing by the parties, and as directed by the disclosing party, all copies
of the disclosing party's Confidential Information in the possession of the
receiving party shall be returned or destroyed. The receiving party shall
notify the disclosing party in writing when such return or destruction has
been accomplished.
14. This Agreement is deemed to be made under and shall be construed in all
respects in accordance with the Law of the State of California.
15. Each party shall designate personnel for disclosure and receipt of any
Confidential Information hereunder, and all such Confidential Information
shall be addressed to such designated personnel when delivered to the other
party. Such designation of personnel may be amended by letter addressed to
the person who executed this Agreement on behalf of the other party.
The following personnel are initially designated for disclosure and/or
receipt of Confidential Information under this Agreement.
TMI: Health Research Association
William Black Lisa Pratt, COO
Kenneth Dodd ------------------------------
Simona Gallagher ------------------------------
Dr. William Dougherty
16. Neither party shall have any liability for any activity of the other party
in using Confidential Information provided under this Agreement. A
receiving party shall indemnify and hold the disclosing party harmless from
and against any loss, cost or liability arising out of any claims or cause
of action for loss, harm or damage to property or for injury to or death of
persons caused or resulting from any use by a receiving party of
Confidential Information.
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17. This Agreement supersedes all prior understandings and communications
between the parties on the subject matter of this Agreement and shall apply
in lieu of and notwithstanding any specific legend or statement associated
with any information or data exchanged between parties.
Executed for the parties by their respective representatives who are duly
authorized to execute this Agreement.
TMI, Inc. Heath Research Association
/s/ William Black /s/ Julie P. Thompson
- ---------------------- -----------------------
(Signature) (Signature)
William Black Julie P. Thomson
- ---------------------- -----------------------
(Name) (Name)
VP of Operations President and CEO
- ---------------------- -----------------------
(Title) (Title)
8/12/97 9-16-97
- ---------------------- -----------------------
(Date) (Date)
3
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EXHIBIT 10(rr)
CONTRACT BETWEEN
TRW SYSTEMS INTEGRATION GROUP and THERMAL MEDICAL IMAGING, INC.
STRATEGIC SYSTEMS DIVISION 30150 TELEGRAPH RD.
POST OFFICE BOX 1310 BINGHAM FARMS, MICHIGAN
SAN BERNARDINO, CALIFORNIA
CONTRACT NUMBER: TRW-96-001 TERMS: NET 30 DAYS
COST PLUS FEE CONTRACT
This Contract is entered into June 19, 1996 between TRW Inc., an Ohio
corporation, operating through its Systems Integration Group, Strategic
Systems Division, having an office at San Bernardino, California 92402
(hereinafter also called "TRW" or "Seller") and Thermal Medical Imaging, Inc.
a Nevada company (also called "TMI" or "Buyer").
WITNESSETH THAT:
In consideration of the mutual promises, covenants, and agreements herein set
forth, the Parties agree that the Seller shall furnish and deliver to the
Buyer all the goods, and perform all the services set forth for the
consideration stated herein. The rights and obligations of the Parties to
this Contract shall be subject to and governed by this Contract and other
documents or Specifications attached hereto or referenced herein. This
Contract supersedes any and all prior agreements of the parties, whether
written or oral, concerning the subject matter hereof.
This Contract shall not be varied in its terms or conditions by any oral
agreement or representation, or otherwise than by an instrument in writing of
even or subsequent date thereto, executed by both Seller and Buyer.
The article titles used herein are for convenience only and shall in no way be
construed as part of this Contract or as an indication of the meaning of the
particular section.
INDEX OF ARTICLES
ARTICLE
NO. ARTICLE TITLE PAGE
I Definitions and Priority 2
II Limits of Agreement 3
III Scope of Work 3
IV Performance and Delivery Schedule 4
V Inspection and Acceptance 4
VI Estimated Cost and Fixed Fee 4
VII Consideration and Payment 5
VIII Invoices and Remittance 5
IX Payment Terms 5
X Packaging and Delivery 6
XI Warranty 6
XII Limitation of Liability 7
XIII Indemnification 7
XIV Excused Performance 8
XV Insolvency of Buyer 8
XVI Default 8
XVII Assignment 9
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INDEX OF ARTICLES (Continued)
ARTICLE
NO. ARTICLE TITLE PAGE
XVIII Notices 9
XIX Governing Law - Arbitration 10
XX Taxes 10
XXI Contract Management 10
XXII Notice of Delay 11
XXIII Reports 11
XXIV Intellectual Property Rights & New Technology
& Data Rights 11
XXV Patents Infringement 12
XXVI Changes 13
XXVII Modification and Waiver 14
XXVIII Severability 14
XXIX Counterparts 14
XXX Remedies 14
XXXI Proprietary Information and Non-Disclosure 14
XXXII System Integration Rights 15
XXXIII Buyer Furnished Software and Property 16
ARTICLE I - DEFINITIONS AND PRIORITY
A. The following words and phrases shall have the meanings set forth below:
1. Contract: This Contract between TRW and TMI includes Appendix A
- -Statement of Work, attached hereto and made a part hereof, as may be
modified or supplemented from time to time by agreement by the parties, any
TMI Work Priorities ("TWP"), and similar schedules, work plans, or documents
if approved by both parties from time to time for performing the projects.
2. Estimated Cost: The amount within which it is agreed that the
Statement of Work or any TWP is likely to be accomplished.
3. Fixed Fee: A compensation method which might be approved by the
parties from time to time for a portion of the Statement of Work by which
Seller would be paid an agreed dollar amount for full satisfaction regardless
of the Cost incurred, or Seller may be reimbursed for any Costs incurred
allocable to the appropriate job and paid as agreed amount in addition to
Costs for full satisfaction, for any specific statement of work or TWP for
which the parties agree in advance to be compensated on this basis.
4. Delivery Dates: The dates agreed in the Statement of Work for the
services to be performed at the Site.
5. Services: The services described in the Statement of Work or any
TWP to be provided by TRW.
6. Site: The facility or other location identified in the Statement
of Work as the destination to which transportation is to be arranged for
deliverable items, and at which services are to be performed.
7. Costs: The actual cost incurred by Seller to perform the work
under this Contract, including the cost of equipment provided and expenses
incurred plus the same burden rates for such costs as TRW charges on
government contracts.
8. Fee: The amount calculated as a percentage of Cost shall be
referred to as the "Fee." The compensation Seller is expected to be paid for
the work under this Contract is Cost reimbursement plus the Fee,
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although a Fixed Fee may be subsequently agreed for some work to be subsequently
identified according to a statement of work or TWP.
B. In case of any ambiguous inconsistencies between this Contract and the
Statement of Work or subsequent TWP's or similar work orders, the text of
this Contract shall prevail.
C. This Contract definitizes and applies to work performed pursuant to the
Advanced Authorization to Proceed contained in TMI telefax dated March 26,
1996.
ARTICLE II - LIMITS OF AGREEMENT
The terms and conditions set forth herein constitute the complete and
exclusive statement of all of the terms of the agreement between TRW and TMI
with respect to this Contract, unless different or additional terms and
conditions are hereafter agreed in writing and made a part hereof by Contract
amendment. All prior representations and agreements of the parties are
merged herein and no agent, employee or representative of Seller has the
authority to bind Seller to any other affirmation, representation, promise or
warranty concerning the software or services furnished by Seller, and such
are not enforceable by Buyer unless contained herein. This Contract shall
not be varied, supplemented, qualified, or interpreted by any prior course of
dealing between the parties or by any usage of trade.
ARTICLE III - SCOPE OF WORK
Seller, as an independent Contractor and not as an agent of Buyer,
shall, in conformance with the terms and conditions more particularly set
forth herein, provide the necessary personnel, equipment, and materials and
do all things necessary or incidental to furnish and deliver to the Buyer all
requirements set forth in Appendix A - STATEMENT OF WORK, dated 20 May 1996,
as revised or amended from time to time.
ARTICLE IV - PERFORMANCE AND DELIVERY SCHEDULE
The period of performance shall be from the effective date hereof until
approximate 10,000 cases have been collected and analyzed (estimated to be
eight (8) to fourteen (14) months), excluding the clinical implementation
phase referenced in the Statement of Work. The Seller shall provide the
ARTICLE XXIV. (A) materials, perform the services, and complete the data
collection and analyses required by ARTICLE III- SCOPE OF WORK within the
period of performance. Seller shall request clarifications or instructions
from Buyer if the Statement of Work or instructions from Buyer are not clear
or are ambiguous as the project progresses.
ARTICLE V - INSPECTION AND ACCEPTANCE
A. Final inspection and acceptance of services shall be made at the sites
designated by Buyer. All services covered by this Contract will be subject
to inspection and test by Buyer to the extent practicable at reasonable times
and places prior to acceptance. Any such inspection and test shall be
performed in such manner as to not delay or otherwise interfere with Seller's
performance hereunder.
B. Buyer shall promptly inspect and test the software or services within 5
days of being notified by Seller of their being tendered for test or
inspection, and shall, within ten (10) days after such test or inspection,
give written notice to Seller of any claim that the goods or services do not
conform with the terms of this Contract. If Buyer fails to inspect and test
the goods or services called for above, Buyer will be held to have accepted
the goods or services with all defects that inspection and testing would have
revealed, subject to Seller's obligations under ARTICLE XI, and to have
waived all rights Buyer may have had to revoke acceptance after said ten (10)
day period. Notwithstanding the foregoing, Buyer may notify Seller of a
reasonable delay and toll the inspection period.
ARTICLE VI - ESTIMATED COST AND FIXED FEE
[REDACTED DUE TO CONFIDENTIALITY: CONTAINS INDUSTRY
SENSITIVE OR INTELLECTUAL PROPERTY PROVISIONS.]
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ARTICLE VII - CONSIDERATION AND PAYMENT
Seller shall submit invoices monthly identifying work performed, Costs
incurred and the applicable Fee, consisting of the total payable. At the end
of Seller's work required by the Contract, a final invoice containing all
unpaid Cost incurred and uninvoiced Fee, if any, shall be submitted and paid.
ARTICLE VIII - INVOICES AND REMITTANCE
A. Invoices for payments hereunder shall be submitted to the following
address:
Mr. Kenneth Dodd, President
Thermal Medical Imaging, Inc.
30150 Telegraph Road Suite 177
Bingham Farms, MI 48025
B. Remittance shall be made by check to:
TRW Inc.
Accounts Receivable
Lock Box File No. 41818
Los Angeles, CA 90074-1818
ARTICLE IX - PAYMENT TERMS
Payment terms are net thirty (30) days after date of Seller's invoice.
The first invoices, however, will not be submitted before June 30, 1996.
Seller preserves the right at any time to suspend credit or to change credit
terms provided herein, when the financial condition of Buyer reasonably so
warrants. In such case, in addition to any other remedies herein or by law
provided, cash payment or satisfactory security from Buyer may be required by
Seller before shipment, or the due date of payment by Buyer under any
Contract or order with Seller may be accelerated by Seller. Failure to pay
invoices at maturity date makes all subsequent invoices immediately due and
payable, irrespective of terms, and Seller may terminate work and/or withhold
all subsequent deliveries until the full account is settled.
ARTICLE X - PACKAGING AND DELIVERY
Packaging and packing of all items for delivery shall be in accordance
with good commercial practice and adequate to assure safe arrival at
destination. The delivery point of all items to be delivered by Seller
hereunder shall be F. O. B. Origin.
ARTICLE XI - WARRANTY
A. Software
For six (6) months commencing upon the date software installation is
accepted by Buyer at the designated site, TRW warrants that the software
modified or developed by TRW, excluding defects existing at the time of
delivery to TRW in the coding of the software originating from any third
party, shall substantially conform to professional quality, standard industry
practices, the TRW Software Guidelines, and the purpose and requirements set
forth in Appendix A - STATEMENT OF WORK and any implementing TWP or other
document referencing the software description. If any of the TRW modified or
developed software fails to comply with the warranty set forth in this
paragraph, TRW shall make a reasonable effort to correct the program errors
either (a) without increase to the Fixed Fee or Cost of the Contract or (b)
without increase to the Fee but with reimbursement of Costs, if Buyer's
instructions were ambiguous and unclear and Seller's action was reasonable.
Any corrected software will be warranted for the remainder of the original
warranty period or thirty (30) days, whichever is longer. Notwithstanding
any other provision of this ARTICLE XI, TRW does not warrant that software
provided hereunder is free of all errors or omissions. Further, TRW does not
warrant that the functions contained in the delivered software will meet
Licensee's requirements or will
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operate in combinations other than as specified by TRW, or that the operation
of the software will be uninterrupted or error free or that all program
defects can be corrected. Seller will transfer to Buyer the benefit of any
third party warranties to the extent allowable by the third parties.
B. Services
1. All services performed by TRW will be of professional quality and
conform to standard industry practices and be in accordance with the
Statement of Work and any TWP or other document specifying the particular
purpose of the services approved by the parties. Any services which are
actually defective will be re-performed with reasonable promptness, after
written notification is received, and if said notice is made promptly after
discovery of such defect, and in no event later than six (6) months from the
date of acceptance thereof. In such event, to perform any such re-work or
transportation caused thereby, either (a) no additional Fee or duplicated
Cost shall be allowed, or (b) only Costs shall be reimbursed if Buyer's
instructions were ambiguous and Seller reasonably provided the services. If
services are to be performed pursuant to a software warranty, the software
warranty standard and conditions apply. Buyer shall notify Seller in
writing of any defect, furnish relevant information with respect thereto.
2. In instances when re-performance of a defective service is
impractical, and at TRW's sole discretion, an equitable adjustment of the
earned Fee and Costs of the affected item may be offered in lieu of
re-performing the service.
C. ANY OTHER PROVISIONS OF THIS CONTRACT TO THE CONTRARY NOTWITHSTANDING,
THIS WARRANTY, EXCEPT AS TO TITLE, IS IN LIEU OF ALL OTHER WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE, WHETHER ARISING BY LAW, CUSTOM, CONDUCT OR USAGE OF TRADE. IN NO
EVENT SHALL EITHER PARTY BE LIABLE FOR INDIRECT, INCIDENTAL, SPECIAL OR
CONSEQUENTIAL (EXCEPT AS MAY BE ATTRIBUTABLE TO ARTICLES XIII, XXIV, XXV, OR
XXXI), OR PUNITIVE DAMAGES.
ARTICLE XII - LIMITATION OF LIABILITY
Neither party in any event shall be liable for indirect, incidental,
special or consequential (except as may be attributable to ARTICLES XIII,
XXIV, XXV, OR XXXI) or punitive damages, including such liability for
improper disclosure or misuse by others (who are not its agents) of any data
gathered or processed by the systems delivered under this Contract. Any
special or consequential damages permitted under this Contract may not exceed
One Million Dollars. Seller shall not be liable for incorrect or
inappropriate responses or incorrect diagnosis resulting from the data
gathering or processing performed by the systems delivered under this
contract. Seller's liability for damages to Buyer on any claim, including
negligence, for any loss or damage resulting from the performance or breach
thereof, or the design, manufacture, sale, delivery, resale, installation,
technical direction of installation, inspection, repair, operation or use of
any software, data, goods or services covered by or furnished under this
Contract, shall in no case exceed the estimated value cited in ARTICLE VI B.
ARTICLE XIII - INDEMNIFICATION
To the extent that Seller's or Buyer's agents, employees or
subcontractors enter upon premises occupied by or under the control of the
other party in the course of the performance of this Contract, the parties
shall take all necessary precautions to prevent the occurrence of any injury
(including death) to any persons, or of any damage to any property arising
out of acts or omissions of such agents, employees or subcontractors, and
except to the extent that any such injury or damage is due solely and
directly to the other party's gross negligence or willful misconduct, shall
indemnify the other party, its officers, employees and agents, against any
loss, claims, damages, liability, expense (including reasonable attorney
fees) and cause of action whatsoever arising out of any act or omission of
the party, its agents, or employees, and both parties shall maintain such
Public Liability, Property Damage and Employee's Liability and Compensation
Insurance as will protect the other party from any of said risks and from any
claims under any applicable Workmen's Compensation and Occupation Disease
Acts. Furthermore, each party agrees to hold harmless and indemnify the
other from any third-party claim against one party arising from the other
party's negligence or intentional misconduct.
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ARTICLE XIV - EXCUSED PERFORMANCE
In addition to any excuse provided by applicable law, Seller and Buyer
shall be excused from liability for non-delivery, delay in delivery, or
delivery of non conforming goods or services arising from any events beyond
its control, whether or not the events were foreseeable by either party when
entering into the Contract, specifically including, but not limited to, war,
riot, strikes, lockouts, labor disturbances, resignation or death of any of
key personnel, energy or material shortages, fire, flood, earthquake or other
natural catastrophe, Federal, State or Local government requirement or
proscription, breach of contract or other failure of a subcontractor to
perform, or impossibility, including practical impossibility, to perform the
services called for herein or to develop the software without going beyond
the state of the art. Unless expressly provided in writing herein to the
contrary, Seller and Buyer shall not be deemed to have assumed the risk of
any of the above circumstances. In such event, Seller shall be entitled to
compensation on an equitable basis for any benefit received by Buyer in
retaining non conforming software or utilizing non conforming services.
ARTICLE XV - INSOLVENCY OF BUYER
If Buyer takes any action to make Seller believe Buyer may become
bankrupt or insolvent, ceases business, or to pay bills during the term of
this Contract, Seller may forthwith terminate this Contract upon written
notice thereof to Buyer. Such termination shall not prejudice Seller's
rights to any amounts then due under this Contract or effect any other rights
Seller may have under applicable provisions of controlling law.
ARTICLE XVI - DEFAULT
A. An Event of Default on the part of either party shall exist if:
1. Such party fails to pay the other party any amount required to be
paid hereunder when due and payable;
2. Such party fails to perform any other material obligation required
to be performed by it under any provisions of this Contract, or fails to
initiate corrective action within thirty (30) days after receiving notice
from the other party that such performance has become due.
B. Subject to other provisions hereof which expressly limit the remedies
available hereunder, if an Event of Default, as defined in paragraph A above,
exists on the part of either party, then the other party may continue
performance and seek a resolution of any disputed performance according to
Article XIX, or the other party may terminate this Contract upon giving
written notice of termination and pursue any other remedies available at law
or in equity.
C. Failure by either party to insist upon strict performance of any
provision of this Contract by the other party shall not be deemed to be a
waiver by such party of its rights or remedies, or a waiver by it of any
subsequent default by the other party in the performance of or compliance
with any of the terms of this Contract.
ARTICLE XVII - ASSIGNMENT
A. Neither party shall, without the consent in writing of the other party
assign or transfer this Contract or the benefits or obligations thereof or
any part thereof to any other person other than a subsidiary wholly owned by
the party, provided that this shall not affect any right of TRW to assign,
either absolutely or by way of charge, any moneys due or to become due to it
or which may become payable to it under this Contract.
B. No assignment or transfer of any right or duty hereunder by either party
shall constitute a novation or otherwise release or relieve such party of its
obligations hereunder.
C. The provisions of this Agreement shall be binding upon and inure to the
benefits of Seller and Buyer and their respective successors and assigns. In
the event either party foresees a successor situation developing, the other
party shall be notified in writing. This provision shall not be deemed to
expand or otherwise affect the limitation on
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assignment and transfers set forth above and no party is intended to or shall
have any right or interest under this Contract, except, as provided herein.
ARTICLE XVIII- NOTICES
Any notices required to be given hereunder shall be given in writing at the
address of each party herein set forth or to such other address as either party
may substitute by written notice to the other.
If to Buyer:
Mr. Kenneth Dodd, President
Thermal Medical Imaging, Inc.
30150 Telegraph Road, Suite 177
Bingham Farms, MI 48025
If to Seller:
TRW Inc.
Post Office Box 1310
San Bernardino, CA 92402-1310
ATTENTION: R. R. Townley, SBCA
ARTICLE XIX - GOVERNING LAW - ARBITRATION
All questions concerning the validity and operation of this Agreement
and the performance of the obligations imposed upon the parties hereunder
shall be governed by the laws of the State of California, United States of
America.
Any dispute between the parties arising out of or related to this
Contract (or any Statement of Work or TWP or other document executed related
to this Contract) shall be resolved by binding arbitration held in Ogden,
Utah, in accordance with the rules and procedures of the American Arbitration
Association ("AAA"). Either party may deliver to the other a written dispute
notice setting forth a description of the issue(s). Appropriate
representatives of both parties will negotiate in good faith within ten (10)
days to resolve the dispute. If the parties are unable to resolve the
dispute within ten days, either party may notify the AAA and the other party
of a statement of claim to initiate arbitration. The purpose of arbitration
is to promptly resolve all disputes, including any cost or fee dispute or
resolution of any equitable adjustments or determination of reasonable
charges which may arise during the course of continued performance, because
the parties have agreed to identify work to be performed as the term of the
contract progresses and that all costs and charges shall be reasonable. The
AAA shall be the appointing and administrative authority applying its
supplemental and procedural rules unless the parties agree on other
procedures. If the parties cannot mutually select an arbitrator reasonably
acceptable to both parties with five (5) days of such notice, AAA shall
identify three independent candidates for selection as the sole arbitrator,
allowing each party an opportunity to strike one. The arbitrator shall
adhere to deadlines for a prompt resolution.
ARTICLE XX - TAXES
Any direct taxes (including stamp, and turnover taxes but excluding
income taxes), duties, fees, charges, or assessments of any nature levied by
any governmental authority in connection with the work of this Contract,
whether levied against Buyer or TRW, shall be for Buyer's account and shall
be paid directly by Buyer to the governmental authority concerned.
ARTICLE XXI - CONTRACT MANAGEMENT
A. Each party's Contract Manager for this Contract shall be designated in
writing. Either party may, by written notice to the other, change such
Contract Manager at any time. At the commencement of this Contract, Bill
Black is
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the Contract Manager for TMI, R.R. Townley is the Contract Manager for TRW,
and Bob Mantz is the Project Manager for TRW.
B. No request, notice, authorization, direction or order received by the
Seller shall be binding upon Seller, or serve as a basis for adjusting the
price, or other provision of the Contract unless issued or confirmed in
writing by the Buyer's named Contract Manager. Buyer's Contract Manager
shall codify into the Contract out of scope or over and above activities
required by the Buyer's Program or Technical Representatives. The Seller
shall immediately notify, in writing, the Buyers Contract Manager whenever a
change request has been received from a representative of Buyer other than
the Contract Manager which would affect the terms and conditions, estimated
cost, fixed fee, Statement of Work or Schedules of this Contract.
C. Only TRW's designated Contract Manager or a more senior contracting
individual within the Company is authorized to contractually obligate TRW.
TRW's Project Manager may coordinate and agree to TWP's which prioritize work
required by the statement of work.
ARTICLE XXII - NOTICE OF DELAY
Whenever any actual or potential event is delaying or threatening to
delay delivery of the software or performance of the services under this
Contract, Seller shall give expeditious notice thereof.
ARTICLE XXIII - REPORTS
The Seller shall furnish reports of cost incurred and the progress of
performance monthly. Cost reports shall be submitted within seven (7) days
after the close of TRW's accounting month. Progress reports shall be
submitted as of the end of each calendar month so as to reach Buyer by the
7th day of the following month.
ARTICLE XXIV - INTELLECTUAL PROPERTY RIGHTS AND NEW TECHNOLOGY AND DATA RIGHTS
[REDACTED DUE TO CONFIDENTIALITY: CONTAINS INDUSTRY
SENSITIVE OR INTELLECTUAL PROPERTY PROVISIONS.]
ARTICLE XXV- PATENT INFRINGEMENT
A. TRW shall indemnify Buyer against all actions, claims, demands, costs,
legal fees, charges, and expenses arising from or incurred by reason of any
infringement or alleged infringement of United States letters patent, design,
or copyright, by the use of any Intellectual Property supplied by TRW but
such indemnity shall not cover any use of the products other than for the
purpose indicated by or reasonably to be inferred from this Contract or to
any use which constitute an infringement due to the use of any such products
or software in association or combination with any other products not
supplied by TRW under such combination is designed by services of TRW.
B. In the event of any claim being made or action brought against Buyer
arising out of the matters referred to in this Article, TRW shall be promptly
notified thereof and may at its own expense conduct all negotiations for the
settlement of the same, and any litigation that may arise therefrom. Buyer
shall not, unless and until TRW shall have failed to take over the conduct of
the negotiations or litigation, make any admission which might be prejudicial
thereto. The conduct by TRW of such negotiations or litigation shall be
conditional upon TRW having first given to Buyer such reasonable security as
shall from time to time be required by Buyer to cover the amount ascertained
or agreed or estimated, as the case may be, of any compensation, damages,
expenses, and costs for which Buyer may become liable. Buyer shall, at the
request of TRW, afford all available assistance for the purpose of contesting
any such claim or action, and shall be repaid all reasonable expenses
incurred in so doing.
C. The foregoing indemnity shall not apply to software products thereof
made to the specification or design of Buyer, or to any claim of patent
infringement which is based upon the combination of any part of the products
with other equipment, except equipment acquired from TRW.
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D. The foregoing states the entire liability of TRW with respect to
infringement of patents by the products or any part thereof or by operation
thereof.
ARTICLE XXVI - CHANGES
A. Any changes to this Contract after the effective date hereof which
relate to (i) the deletion of work, (ii) adding additional services, (iii)
changing or modifying work, or (iv) making other changes which do not
materially alter the scope of this Contract shall be made in accordance with
the procedures set forth in this ARTICLE XXVI.
B. Either party hereto may, from time to time, and at any time during the
term hereof request a change, as defined in this Contract. (The party
requesting the change is hereinafter referred to as the "Requesting
Party.") Requests for changes or deletion shall be in writing, and shall be
addressed and delivered to the Notified Party. Such writing shall be
identified as a "Contract Change Request" (CCR), shall carry a sequential
number for ease of tracking, shall set forth in detail the nature of the
change requested, and shall identify the item, service, or TWP to be changed.
C. When TRW is the Requesting Party, TRW shall submit a proposal for
equitable adjustment to the Contract Estimated Cost (and Fixed Fee, if any),
schedule, or other affected Contract provision. When the Requesting Party is
TMI, a proposal for equitable adjustment to the Contract will be submitted
promptly after receipt of copies of the CCR. The parties shall, as
necessary, negotiate the change and establish any equitable adjustment to the
Contract.
D. If the parties decide to implement a change request, a Contract Change
Notice ("CCN") shall be prepared, which shall describe the change, delineate
the Estimated Cost, Fixed Fee if any, schedule, and other impacts of the
change. Execution of a CCN by both parties, or a revised TWP, shall
constitute a modification hereof and shall be binding on both parties hereto.
TRW shall not proceed on any change until a CCN or revised TWP has been issued.
E. Substitutions of products which are purchased items not manufactured by
TRW may be made by TRW without the consent of Buyer if such substitutes are
of like function and quality and of lower delivered cost.
XXVII - MODIFICATION AND WAIVER
No cancellation, modification, amendment, deletion, addition, or other
change in the Contract or any provision hereof, or waiver of any right or
remedy herein provided, shall be effective for any purpose unless
specifically set forth in a writing signed by the party to be bound thereby.
No waiver of any right or remedy in respect of any occurrence or event on one
occasion shall be deemed a waiver of such right or remedy in respect of such
occurrence or event on any other occasion.
XXVIII - SEVERABILITY
Any provision hereof prohibited by or unlawful or unenforceable under
any applicable law of any jurisdiction shall as to such jurisdiction be
ineffective without affecting any other provision of the Contract. To the
full extent, however, that the provisions of such applicable law may be
waived, they are hereby waived, to the end that the Contract be deemed to be
a valid and binding agreement enforceable in accordance with its terms.
XXIX - COUNTERPARTS
This Contract has been executed in several counterparts, each of which
shall be deemed to be an original, and all such counterparts together shall
constitute but one and the same instrument.
XXX - REMEDIES
Unless otherwise expressly provided herein, the rights and remedies
hereunder are in addition to, and not in limitation of, other rights and
remedies under the Agreement, at law or in equity, and exercise of one right
or remedy shall not be deemed a waiver of any other right or remedy.
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XXXI - PROPRIETARY INFORMATION AND NON-DISCLOSURE
A. During the term of this Contract, TRW and TMI, to the extent of each
party's contractual and lawful right to do so, shall exchange such
proprietary technical and other information as is reasonably required for
each to perform its obligations hereunder. The disclosing party without
consent shall be liable for special or consequential damages. TRW and TMI
each agree to keep in confidence and prevent the disclosure to any person(s)
outside their respective organizations or any person(s) within their
organizations not having a need to know, all information received from the
other which is in writing and designated by appropriate stamp or legend to be
of a proprietary nature and to use such information only in connection with
their obligations under this Agreement; provided, however, that neither party
shall be liable for actual special or consequential damages for disclosure or
use of such data if the same is:
1. In the public domain at the time of disclosure, or is subsequently
made available to the general public without restriction by the disclosing
party;
2. Known to the receiving party at the time of disclosure without
restrictions on its use or independently developed by the receiving party,
and there is adequate documentation to demonstrate either condition;
3. Used or disclosed inadvertently despite the exercise of the same
degree of care that each party takes to preserve or safeguard its own
proprietary information;
4. Used or disclosed with the prior written approval of the
non-disclosing party;
5. Disclosed without restriction to the receiving party from a source
other than the disclosing party;
6. Used or disclosed after a period of three (3) years after the date
of receipt.
B. No sheet or page of any written material will be so labeled which is
not, in good faith, believed to contain Proprietary information. A recipient
of information hereunder will have no obligation with respect to any portion
of any written material which is not so labeled, or any information received
orally unless a written summary of such oral communication, specifically
identifying the item s of Proprietary information, is furnished to the
recipient within fifteen (15) days.
C. If any portion of a party's Proprietary information falls within any one
of the above exceptions, the remainder shall continue to be subject to the
foregoing prohibitions and restrictions.
D. The entire program and business plan for conducting confirmation studies
at Howard University Hospital, and the results from such work, are
Proprietary Information to TMI. Any public statement of such results or
progress must be approved in advance by TMI. Likewise, the contractual
relationship between TMI or CTI and Bales Scientific, Inc. ("BSI"), and the
methods, inventions, ideas, intellectual property, and technology of BSI
shall be considered as Proprietary information and technology or property of
TMI. The results of thermal imaging cases from BSI or from Bille Marie
Hospital in Montreal, Canada, and the results form use of CTI-TM- thermal
imaging in China are Proprietary Information.
XXXII - SYSTEM INTEGRATION RIGHTS
[REDACTED DUE TO CONFIDENTIALITY: CONTAINS INDUSTRY
SENSITIVE OR INTELLECTUAL PROPERTY PROVISIONS.]
XXXIII - BUYER FURNISHED FACILITIES, SOFTWARE AND PROPERTY
A. Title to all facilities, software and property furnished to Seller by
Buyer (or Buyer's customer or Contractor) or paid for by Buyer shall remain
with Buyer (or Buyer's customer). Seller shall not alter or use such
property for any purpose other than that specified by Buyer without the prior
written consent of Buyer. Seller shall keep adequate records, which shall be
made available to Buyer upon request, and shall store protect, preserve,
repair, and maintain such property in accordance with sound industrial
practice. In the event that Buyer's property becomes lost or damaged
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through negligence or willful misconduct by Seller, its employees, agents, or
subcontractors, while in Seller's possession, Seller agrees to replace (if
lost or irreparable) or repair such property, without increase to the Cost or
Fixed Fee, at Seller's option. At the completion of delivery of the goods and
services ordered by Buyer in this Contract for which Buyer's software or
property were required, or the termination of this Contract, Seller shall
request disposition instructions for all such Buyer's software and property,
and for all source codes and tools and documentation required to fully use
the New Technologies, or the remainder thereof. Seller agrees to make such
software and property available to Buyer at Buyer's request, in the manner
requested by Buyer.
B. If the aforementioned Buyer-owned facilities, software or property are
increased or decreased, or do not remain available during the performance of
this Contract, or if any change is made in the terms and conditions under
which they are made available to the Seller, an equitable adjustment as may
be appropriate shall be made in the terms of this Contract.
C. TMI agrees to provide TRW within 30 days with the items identified in
Appendix B.
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have executed this Contract to be
effective as of the day and year first above written.
TRW Inc. Thermal Medical Imaging, Inc.
Systems Integration Group
/s/ G.R. Sharp /s/ Kenneth M. Dodd
- ------------------------------- -----------------------------
G. R. Sharp Kenneth Dodd
Manager of Contracting and Pricing President
Strategic Systems Division
Date: 6/19/96 Date: 06-21-96
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APPENDIX A
STATEMENT OF WORK
[REDACTED DUE TO CONFIDENTIALITY: CONTAINS INDUSTRY
SENSITIVE OR INTELLECTUAL PROPERTY PROVISIONS.]
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EXHIBIT 10(ss)
CLINICAL TRIAL AGREEMENT
This Clinical Trial Agreement ("Agreement") is entered into by and
between THERMAL MEDICAL IMAGING, INC. ("Sponsor") and the UNIVERSITY OF
SOUTHERN CALIFORNIA ("University"), a California nonprofit educational
institution incorporated under the laws of the State of California.
RECITALS
WHEREAS, the clinical trial contemplated by this Agreement is of mutual
interest and benefit to University and to Sponsor, will further the
instructional, scholarship and Study objectives of University in a manner
consistent with its status as a nonprofit, tax-exempt, educational
institution, and may derive benefits for both Sponsor and University through
the discovery of new knowledge;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree to the following:
DEFINITIONS
"Monitor" shall mean the individual or firm retained by Sponsor to provide
monitoring services for Study utilizing Sponsor's Protocol and Study
Device, initially being QBRI International, Inc.
"Principal Investigator" shall be William R. Dougherty, M.D. who is acting
as a representative for the University in activities associated with this
Study.
* "Protocol" shall mean the Protocol and Statement of Work as attached hereto
as Exhibit "A".
"Study" shall mean the clinical studies, examinations and collection of
patient data using the Study Device as described in the Protocol, conducted
and collected at the University's premises from patients examined by the
Investigator.
"Study Device" shall mean integrated thermal imaging data acquisition
system for breast cancer screening, the interpretive algorithm analysis
process and the clinical evaluation and display device/software which are
to be used or administered during the Study in accordance with the
provisions of the Protocol.
"University Intellectual Property" shall mean individually and collectively
all inventions, improvements and discoveries, whether or not covered by
intellectual property protection, which are conceived or made by one or
more employees of University in conducting the Study and which are not
Joint Intellectual Property or Sponsor's Intellectual property.
"Joint Intellectual Property" shall mean individually and collectively all
inventions, improvements and discoveries, whether or not covered by
intellectual property protection, which are conceived or made jointly by
one or more employees of Sponsor and University.
1. CONTENTS AND ORDER OF PRECEDENCE
This Agreement consists of this Agreement and the following documents which
shall be referred to collectively herein as the "Transaction Documents":
a. Exhibit "A" - Protocol and Statement of Work; and
b. Exhibit "B" - Confidentiality Agreement dated November 7, 1996.
In the event of any conflict between such Exhibits and this Agreement, the terms
of this Agreement shall control.
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2. PERFORMANCE OF THE STUDY
2.1 University shall perform the Study substantially in accordance with
the terms and conditions of this Agreement. Sponsor and University may at any
time amend the Study and this Agreement by mutual written consent.
2.2 In the event that the Principal Investigator becomes unable or
unwilling to continue the Study and a mutually acceptable substitute is not
available, both the University and the Sponsor shall have the option to
terminate this Agreement. The Principle Investigator and any and all other
person involved in the Study (collectively the "Investigator(s)" shall execute
the Confidentiality Agreement substantially in the form attached hereto or
Exhibit "B", (the "Confidentiality Agreement") prior to beginning any activities
associated with the Study.
2.3 Nothing in the Agreement shall be construed to limit the freedom of
Investigators, whether participants in this Agreement or not, from engaging in
similar studies made independently under other grants, contracts or agreements
with parties other than Sponsor, provided said investigations are not in
conflict or violate the terms and conditions of this Agreement and the
Confidentiality Agreement.
2.4 In performing the Study, University and Principal Investigator shall
at all times undertake, comply with, and complete the following:
1. The Protocol;
2. This Agreement;
3. Generally accepted standards of good clinical practice;
4. Instructions provided in writing by Sponsor or Monitor;
5. All applicable federal, state and local laws and regulations
applicable to the conduct of the Study and the performance of clinical
investigators generally including but not limited to the Federal Food,
Drug and Cosmetic Act and regulations of the Food and Drug
Administration;
6. Prepare an appropriate patient informed consent document sufficient to
comply with all local, state, and federal statutory and regulatory
requirements and in form acceptable to each of the parties, and
thereafter to obtain such written consent from each patient or
authorized representative prior to initiation of any procedures
required by the Study;
7. Obtain and forward to Sponsor and Monitor evidence of Institutional
Review Board ("IRB") approval of the Study and the informed consent
document prior to beginning the Study;
8. Obtain and forward to Sponsor and Monitor evidence of ongoing review
of the Study and informed consent document by the IRB at least
annually;
9. Obtain and forward to Sponsor and Monitor evidence of IRB approval of
any advertisement used for the Study prior to the publication or other
use of the advertisement;
10. Review the clinical investigators' brochure and all updates as
provided;
11. Maintain Study and related medical records according to local, state
and federal statutory and regulatory requirements;
12. Immediately notify Sponsor and Monitor, according to procedures
specified by Monitor, of any and all serious and/or unexpected adverse
events as defined by the Study and promptly record such events on an
appropriate case report form ("CRF") agreed to by the parties;
13. Immediately notify Sponsor and Monitor of any pregnancy of any,
subject enrolled in the study; and
14. Enroll only qualified subjects in the Study as provided in the
Protocol, or as directed by Sponsor and Monitor.
3. MAINTENANCE OF RECORDS AND FORMS
3.1 University agrees to fulfill the obligations imposed by Sponsor for
maintenance of records and reports, and those obligations included in Subpart D
of 21 CFR Chapter 1, Responsibilities of Sponsor and Investigators, a copy of
which is provided by Monitor as a part of the site study manual.
3.2 Principal Investigator shall complete and return accurate CRFs to
Sponsor as described in the Study. Principal Investigator also agrees to ensure
the data captured on the CRFs are consistent with the patient medical
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records, to complete the case report forms in a timely and coherent, legiable
fashion, and to have the CRFs completed in advance of any planned monitoring
visits.
3.3 University shall retain all records from the Study (including
medical records of enrolled patients) for the period of time required by
applicable regulations ("Retention Period") and will permit inspection by
Sponsor or its authorized representatives of all such records. During the
period of performance and for a reasonable period thereafter, Sponsor may
make copies of and/or extract nonconfidential information from such records
at Sponsor's expense. For purposes of this paragraph, confidential
information shall mean information which identifies a specific patient.
4. LICENSES AND QUALIFICATIONS
4.1 Principal Investigator shall have and maintain in full force and
effect any and all professional and other licenses, certificates or documents
required to render the services described in this Agreement and agree to
provide a copy of these licenses, certificates or documents to Sponsor and
Monitor upon request. If any such license is suspended or revoked during the
course of the Principal Investigator's participation in the Study, University
agrees to notify Sponsor and Monitor promptly in writing.
4.2 Principal Investigator represents and warrants that he has not been
barred from conducting clinical studies by the US Food and Drug
Administration or any other applicable governmental regulatory agency.
University agrees to immediately notify Sponsor and Monitor in writing if the
Principal Investigator is barred during the course of the Study.
4.3 Principal Investigator agrees to provide a current curriculum vitae
which is true, complete and accurate up to the start date of this Agreement,
Investigator agrees that Sponsor may supply copies of the curriculum vitae to
Monitor, the FDA and any other government regulatory agency in connection
with the Study.
4.4 University represents and certifies that no investigation or study
in which Principal Investigator has been engaged has been terminated for
Principal Investigator's failure to adhere to protocol, guidelines, or
Federal or State regulations.
*5. PERIOD OF PERFORMANCE
The period of performance of this Agreement is (START DATE) through (END
DATE). This Agreement shall become effective upon the date of last signature
hereto and shall continue in effect for the full duration of the period of
performance unless sooner terminated in accordance with the provisions of
Article 2 or 15.
6. REPORTS
University shall furnish Sponsor reports in such frequency and format as
mutually agreed to by the parties, but in no event less than every 30 days. A
final report setting forth the accomplishments and significant Study findings
or lack thereof shall be prepared by University and submitted to Sponsor
within ninety (90) days of the expiration of the Agreement.
7. COSTS, BILLINGS, AND OTHER SUPPORT
* 7.1 It is agreed and understood by the parties hereto that, subject to
Article 2, total costs to the Sponsor hereunder shall not exceed the amount
of $ (AMOUNT). Payment shall be made by Sponsor according to the schedule set
forth in Exhibit "A".
7.2 Checks shall be made payable to the University of Southern
California, Federal ID No. 95-1642394, and sent to:
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University of Southern California
Department of Contracts & Grants
2250 Alcazar St., CSC-219
Los Angeles, CA 90033
Attn: R. Mary Tierney
7.3 In the event of termination of this Agreement pursuant to Article 15
hereof, Sponsor shall pay all costs directly attributable to the Study accrued
by University as of dare of termination, including noncancellable obligations,
and for all costs associated with patient follow-up as required by the Protocol
of those already enrolled in the Study.
8. PUBLICITY
Neither party shall use the name, trade name, trademark or other designation
of the other party in connection with any products, promotion or advertising
without the prior written permission of the other party.
9. PUBLICATIONS
The Study to be performed under this Agreement is part of a Multi-Center
Collaborative project. The University recognizes that the results generated
by this Study may have added scientific significance when combined and
published together with data generated by other centers involved in the
project. Accordingly, University expressly acknowledges that the right to
publish the combined results of the collaborative project belongs to the
Sponsor. The University shall have the right to publish the results of this
Study but agrees to refrain from publishing until the Collaborative project
is complete, the data analyzed and the combined results submitted for
publication and until the Sponsor has received final Food and Drug
Administration Pre-Market approval or disapproval. Sponsor shall notify, the
University within 30 days of notification from the FDA of their decision.
10. CONFIDENTIALITY
10.1 During the term of this Agreement, Sponsor expects to provide
University with the Study Device, Protocol, and other information, data, and
materials related thereto (collectively, the "Confidential Property") which
Sponsor considers confidential or proprietary in nature and which shall be
prominently marked or identified in writing as confidential or propriety.
University shall receive and hold such Confidential Property in confidence
and agrees to prevent disclosure of said Confidential Property to employees
and agents of University, other than those involved in conducting the Study,
and to all third parties, in the manner University treats its own similar
information.
10.2 University shall not consider information disclosed to it by
Sponsor confidential which: (1) is now common knowledge or subsequently
becomes such through no breach of this Agreement; (2) is rightfully in
University's possession prior to Sponsor's disclosure as shown by written
records; (3) is disclosed to University by an independent third party that is
not under a separate confidentiality agreement relating thereto; or (4) is
independently developed by or for University without benefit of confidential
information received from Sponsor.
11. INTELLECTUAL PROPERTY
11.1 Notwithstanding anything to the contrary in this Agreement, all
right, title, and interest to any intellectual property, including without
limitation inventions, improvements, results, data, and discoveries, that
arise from, relate to or are the direct and specific result of performance of
the Protocol and is directly related to the Study Device, shall belong to the
Sponsor and shall not be considered University Intellectual Property.
11.2 All rights and title to any other intellectual property developed
or conceived under this Study (which excludes all other study sites of this
Multi-Center Collaborative project) shall be considered University
Intellectual Property, shall belong to University and shall be subject to the
terms and conditions of this Agreement.
11.3 University will promptly notify Sponsor of any and all University
Intellectual Property conceived or made in the performance of work under this
Agreement. Sponsor shall, upon reviewing such notification, determine
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whether to request University to file, prosecute and maintain any patent
application or application for other intellectual property protection,
domestic or foreign, in University's name and whether such property
constitutes University Intellectual Property. Sponsor shall bear all
reasonable costs incurred in connection with preparation, filing, prosecution
and maintenance directed to University Intellectual Property. University
shall keep Sponsor advised as to all developments with respect to such
applications and Sponsor shall be given an opportunity to review and comment
thereon. If University and Sponsor are unable to agree on whether
intellectual property conceived or made by University under 11.2 constitutes
University Intellectual Property, University may appeal to arbitration under
Section 14.
12. JOINT OWNERSHIP INTELLECTUAL PROPERTY
All rights and title to Joint Intellectual Property under the Study shall
belong jointly to Sponsor and University and shall be subject to the terms
and conditions of this Agreement. The parties hereto shall promptly notify
each other of any Joint Intellectual Property conceived or made in the
performance of work under this Agreement. The parties shall, upon reviewing
such notification, determine whether to and which party should file,
prosecute and maintain any patent application or application for other
intellectual property protection, domestic or foreign, jointly in Sponsor's
and University' names. The parties shall mutually determine the division of
costs incurred in connection with such preparation, filing, prosecution and
maintenance directed to said Joint Intellectual Property. The applying party
shall keep the other party advised as to all developments with respect to
such applications and the non-applying party shall be given an opportunity to
review and comment thereon.
13. GRANT OF RIGHTS
University grants Sponsor a time-limited first right to negotiate a
commercial option or worldwide, royalty-bearing license, with the right to
sublicense, to University Intellectual Property and to University's interest
in Joint Intellectual Property. Such first right must be exercised within six
(6) months after disclosure of University Intellectual Property or disclosure
of Joint Intellectual Property in accordance with Articles 11 and 12 above.
University and Sponsor shall negotiate the terms of any such license in good
faith.
14. ARBITRATION
ANY CONTROVERSY OR CLAIM BETWEEN THE PARTIES ARISING OUT OF OR RELATING TO
THIS AGREEMENT, OR A BREACH THEREOF, WHICH CANNOT BE RESOLVED BY MUTUAL
AGREEMENT SHALL BE SETTLED BY BINDING ARBITRATION CONDUCTED BY A SINGLE
ARBITRATOR IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE
AMERICAN ARBITRATION ASSOCIATION. ANY JUDGMENT UPON THE AWARD RENDERED BY THE
ARBITRATOR MAY BE ENTERED IN ANY COURT HAVING JURISDICTION THEREOF. EACH SUCH
ARBITRATION SHALL BE HELD IN THE COUNTY OF LOS ANGELES, CALIFORNIA.
ALL FEDERAL AND STATE SUBSTANTIVE AND PROCEDURAL LAWS APPLICABLE TO THIS
AGREEMENT RELATING TO ARBITRATION OF CONFLICT SHALL BE FULLY COMPLIED WITH BY
THE PARTIES.
UNLESS THE PARTIES OTHERWISE AGREE, EACH PARTY MAY CONDUCT DISCOVERY PRIOR TO
ANY ARBITRATION HEARING IN ACCORDANCE WITH THE CALIFORNIA RULES OF CIVIL
PROCEDURE AND EVIDENCE. ADDITIONALLY, THERE SHALL BE NO EVIDENCE BY AFFIDAVIT
ALLOWED, AND EACH PARTY SHALL DISCLOSE A LIST OF ALL DOCUMENTARY EVIDENCE TO
BE USED, A LIST OF ALL WITNESSES AND EXPERTS TO BE CALLED BY THE PARTY AT
LEAST TWENTY (20) DAYS PRIOR TO THE ARBITRATION HEARING.
TO THE MAXIMUM EXTENT PERMITTED BY LAW, EACH PARTY KNOWINGLY, VOLUNTARILY,
AND INTENTIONALLY WAIVES ANY RIGHT TO CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE
DAMAGES REGARDLESS OF THE FORUM FOR THE PROCEEDINGS. THE PROVISIONS OF THIS
SECTION SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT FOR ANY REASON
WHATSOEVER.
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15. EXPORT
Sponsor agrees that it will at all times be in compliance with the United
States government export regulations and laws and that any sub-Sponsor
Agreement will require that the sub-Sponsor is in compliance with these
regulations and laws. Sponsor asserts that it is not now doing business with
any country to which the United States government prohibits export of
products under consideration in this Study.
16. TERMINATION
16.1 If a party hereto breaches a material term, covenant or condition
of the Transaction Documents or this Agreement, the non-breaching party may,
terminate this Agreement. Prior to termination, the non-breaching party shall
provide written notice of default, which shall inform the breaching party of
the facts and circumstances upon which such default is based and which shall
provide the breaching party with thirty (30) days in which to cure such
breach or such longer period as the parties may agree or as applicable law
may require. If such breach is not cured within the specified time period,
the non-breaching party may terminate this Agreement by providing written
notice of such termination to the defaulting party.
16.2 This Agreement may be terminated immediately by Sponsor upon
written notice to University in the event of any adverse patient reaction.
Upon receipt of a termination notice from Sponsor, the University shall stop
enrolling and treating patients under the Study to the extent consistent with
generally accepted standards of good medical practice and patient safety.
16.3 Termination of this Agreement by either party for any reason shall
not effect the rights and obligations of the parties accrued prior to the
effective date of termination.
16.4 Principal Investigator's participation in the Study will
automatically terminate upon receipt of notice that:
1. Any license required to be held by Investigator is suspended or
revoked during the course of the Investigator's participation in the
Study; or
2. Investigator has been debarred from conducting clinical studies by the
US Food and Drug Administration.
16.5 In addition to termination under 16.1 and 16.2, Sponsor may
terminate University's participation in the Study upon written notice to
University in the event that:
1. Sponsor terminates the Study; or
2. Overall study enrollment goals have not been met, even if
Investigator's individual enrollment has not been reached.
16.6 University may terminate participation in the Study if it becomes
unwilling or unable to continue to serve, provided Sponsor is provided at
least thirty (30) days advance written notice, in order to give Sponsor an
opportunity to identify and engage a replacement Investigator.
16.7 Upon termination of this Agreement: (i) the Investigator shall stop
enrolling patients into the Study; (ii) shall cease conducting procedures on
patients already enrolled in the Study, except to the extent such procedures
are medically necessary and permissible, and (iii) both University and
Investigator shall return to Sponsor any and all Confidential Property which
is in University's, Investigator's, or any of their employee's or agent's
possession or control.
17. WARRANTIES
17.1 University agrees to perform the Study in accordance with prevailing
professional standards.
17.2 UNIVERSITY MAKES NO WARRANTIES FOR ANY PURPOSE WHATSOEVER, EXPRESS
OR IMPLIED, AS TO THE STUDY OR THE RESULTS OF THE STUDY, INCLUDING THE
6
<PAGE>
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE STUDY OR THE
RESULTS OF THE STUDY UNDER THIS AGREEMENT. Neither the Principal
Investigator, Sponsor, nor any other person is authorized to give any such
warranty in the name of or on behalf of University.
17.3 Sponsor agrees that it will not rely solely upon technical
information provided by University or the Principal Investigator in
developing any invention or product, but will independently test, analyze and
evaluate all inventions and products prior to manufacture and distribution of
such inventions and products.
17.4 Neither University nor Investigator shall make any warranty or
representations, including but not limited to a warranty or representation of
the efficacy of the Study Device, without the express written permission of
Sponsor and Sponsor will not be liable for any unauthorized warranty or
representation made by Investigator.
18. INSURANCE AND INDEMNIFICATION
18.1 At all times during the conduct of the Study under this Agreement,
University agrees to maintain at its sole cost and expense appropriate and
adequate professional and general commercial liability insurance, such
protection being applicable to and covering negligent acts/omissions of
officers, employees and agents while acting within the scope of their
employment by University, on an occurrence made basis in single limit
coverage of not less than One Million Dollars ($1,000,000) per claim or
incident and One Million Dollars ($1,000,000) annual aggregate for death,
bodily injury, illness or property damage to support the indemnification
obligations of University in Section 18.4 hereof. A Certificate evidencing
each such policy shall be delivered to Sponsor upon request.
18.2 Sponsor agrees to hold harmless, indemnify and defend University
from all liabilities, demands, damages, expenses and losses arising out of
and related to the Protocol or the Study Device, including the results of the
Study, except to the extent of University's or Investigator's negligence or
willful misconduct with respect thereto.
18.3 At all times during this Study, Sponsor agrees to maintain at its
sole cost and expense a policy or program of comprehensive general liability
insurance or self-insurance on an occurrence made basis in single limit
coverage of not less than One Million Dollars ($1,000,000) per incident and
One Million Dollars ($l,000,000) annual aggregate for death, bodily injury,
illness or property damage to support the indemnification obligations assumed
herein. Sponsor shall maintain such comprehensive general liability insurance
during the period that the Study or any modification thereof is being
administered, manufactured, sold, or distributed to humans by the Sponsor and
a reasonable period thereafter which in no event shall be less than two (2)
years. A Certificate evidencing the comprehensive general liability policy
shall be delivered to University upon request.
18.4 University agrees to hold harmless, indemnify and defend Sponsor
from all liabilities, demands, damages, expenses, and losses arising out of
and related to University's or Principal Investigator's gross negligence or
willful misconduct.
19. INDEPENDENT CONTRACTOR
19.1 University is an independent contractor and not an agent, joint
venture or partner of Sponsor.
19.2 Investigator is an employee of University which is an independent
contractor of Sponsor for all purposes and not an employee, as that term is
understood for purposes of federal and state law. Nothing in this Agreement
shall be deemed to constitute a partnership or joint venture between Sponsor
and University, nor shall anything in this Agreement be deemed to constitute
Investigator or Sponsor as the agent of the other. Neither Investigator,
University nor Sponsor shall become liable or bound by any representation,
act or omission whatsoever of the other, except to the extent expressly
provided in this Agreement.
20. GOVERNING LAW
This Agreement shall be governed and construed in accordance with the laws of
the State of California as adjudicated by a court of competent jurisdiction.
7
<PAGE>
21. ATTORNEYS' FEES
In any action on or concerning this Agreement, the prevailing party shall
awarded its reasonable attorneys' fees, costs and necessary disbursements, to
be paid by the nonprevailing party.
22. ASSIGNMENT
Neither party shall assign its rights or duties under this Agreement to
another without the prior written consent of the other party, except to any
party succeeding to substantially all of the business interests of the
assigning party.
23. INSPECTION AND ACCESS
Sponsor's authorized representatives and regulatory authorities may examine
and inspect the University's facilities required for performance of the Study
and inspect and copy all data and work products relating to the Study.
Inspections will be conducted during regular business hours upon reasonable
notice and to the extent permitted by law and until the Sponsor has received
final Food and Drug Administration Pre-Market approval or disapproval.
24. RESEARCH MATERIALS
24.1 University acknowledges that the Study Device and all other
property and materials being provided to Investigator by Sponsor in
connection with the Study is to be used only for research purposes in
connection with the Study. University and Investigator shall have no license
or authority to use any such item in any other context or for any other
purpose.
24.2 University also agrees to use the Study Device only in the space
approved by Monitor or Sponsor in accordance with documentation provided by
Monitor or Sponsor. Investigator agrees to maintain adequate records of the
use of the Study Device. In addition, University agrees to return Study
Device all other property and materials being provided to Investigator by
Sponsor in connection with the Study upon termination or completion of the
Study.
25. WAIVER AND SEVERABILITY
25.1 No waiver by either party of any breach of any provision hereof
shall constitute a waiver of any other breach of that or of any other
provision hereof.
25.2 In the event a court or governmental agency of competent
jurisdiction holds any provision of this Agreement to be invalid, such
holding shall have no effect on the remaining provisions of this Agreement,
and they shall continue in full force and effect. Upon such holding, the
parties shall, within a reasonable period of time, determine whether the
severed provision(s) detrimentally and materially affect the obligations or
performance of either or both parties. If so affected, the parties shall,
within a reasonable period of time, negotiate in good faith to modify this
Agreement to relieve such effects. If such negotiations do not result in
mutually agreeable modifications to this Agreement, either effected party may
terminate this Agreement upon providing the other party with thirty (30) days
written notice of such termination.
25.3 Sections 3.3, 6, 7.3, 9, 10, 11, 12, 13, 14, 17, 22, 24 and this
25.3 shall survive the termination of this Agreement for any and all reasons
whatsoever.
26. AGREEMENT MODIFICATION
This Agreement may be modified or amended, including extension of the term of
this Agreement, at any time only by the written concurrence of both parties.
8
<PAGE>
27. NOTICES
Any notices given under this Agreement shall be in writing and delivered to the
following addresses by return receipt mail, postage prepaid, or by overnight
courier service. Such notices shall be effective upon the third business day
following mailing, if by mail, or upon receipt, if by courier.
For Sponsor:
Thermal Medical Imaging, Inc.
30150 Telegraph Rd., Suite 177
Bingham Farms, MI 48025
Attention: Bill Black
For University:
University of Southern California
Department of Contracts and Grants
2250 Alcazar Street, CSC-219
Los Angeles, CA 90033
Attention: R. Mary Tierney
Tel# 213-342-2396
Fax# 213-342-2835
Copy to: Dr. William R. Dougherty
For Monitor:
QBRI International, Inc.
1300 North 17th Street
Arlington, VA 22209
703.276.0400
703.243.9746(facsimile)
28. THIRD PARTY RIGHTS
This Agreement shall not create any rights, including without limitation
third-party beneficiary rights, in any person or entity not a party to this
Agreement.
29. ENTIRE AGREEMENT
This Agreement constitutes the entire understanding between the parties hereto
and there are no collateral, oral or written Agreements or understandings. This
Agreement supersedes any prior oral or written Agreement or understanding
between the parties.
9
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement in two or more
counterparts, each as an original and all together as one instrument as of the
date of last signature below written.
THERMAL MEDICAL IMAGING, INC. UNIVERSITY OF SOUTHERN
CALIFORNIA
By: /s/ William Black, Jr. By: /s/ Lloyd Armstrong, Jr.
------------------------- ---------------------------------
Name: William Black, Jr. Name: Lloyd Armstrong, Jr.
----------------------- -------------------------------
Provost and Senior Vice
Title: Vice President of Operations Title: President - Academic Affairs
------------------------------- ------------------------------
Date: 5 May 97 Date: 30 Apr 97
-------------------------------- -------------------------------
* THIS AGREEMENT IS SIGNED PROVISIONALLY WITH THE UNDERSTANDING THAT PERFORMANCE
IS SUBJECT TO THE MUTUALLY AGREEABLE NEGOTIATION OF THESE TERMS. EVIDENCE OF
THIS NEGOTIATION SHALL BE THE COMPLETION OF THESE TERMS AND THE RESIGNING OF THE
AGREEMENT.
10
<PAGE>
EXHIBIT A
PROTOCOL AND STATEMENT OF WORK
DATED: 1 APRIL 1997
11
<PAGE>
EXHIBIT B
CONFIDENTIALITY AGREEMENT DATED NOVEMBER 7, 1996
12
<PAGE>
EXCHANGE OF CONFIDENTIAL INFORMATION AGREEMENT
This Agreement, made and entered by and between THERMAL MEDICAL IMAGING,
INC., a Nevada corporation, with a place of business at 30150 Telegraph Road,
Suite 177, Bingham Farms, MI 48025 (hereinafter referred to as "TMI"), and
the UNIVERSITY OF SOUTHERN CALIFORNIA, a California, non-profit corporation,
with a place of business at Health Sciences Campus, 2250 Alcazar St.,
CSC-219, Los Angeles, CA 90033 (hereinafter referred to as "USC"), all or
each of which shall also hereinafter be referred to as "party" or "parties"
respectively, and is effective on the date of last signature hereto.
RECITALS
For the mutual benefit of both parties, each party wishes to disclose to
and/or to receive from the other certain technical data, information, ideas
and documents to be used in conjunction with the project as described in the
letter dated 31 October 1996 from TMI to Mr. Pablo Valencia and attached
hereto as Attachment 1 (hereinafter "Project"), and which may or may not have
been patented or constitute bases of patentable inventions, but which the
disclosing party nevertheless considers to be Confidential and so indicates
by an appropriate legend, marking, stamp or other positive identification.
Such information, data and ideas shall hereinafter be identified as
"Confidential Information."
AGREEMENTS
Now therefore, the parties do hereby mutually agree that:
1. Confidential Information as defined above includes information or documents
whether or not they qualify as "trade secrets" under applicable Federal or
state law.
2. Each party shall receive and hold such Confidential Information in
confidence and agrees to use its reasonable efforts to prevent unauthorized
disclosure to third parties of said Confidential Information in the same
manner the receiving party uses to protect its own similar information,
provided, however, that neither party shall be liable for use or disclosure
of any Confidential Information if the same:
a. was in the public domain at the time it was disclosed;
b. entered the public domain through no fault of the receiving party
subsequent to the time it was communicated by the disclosing party;
c. was in the receiving party's possession free of any obligation of
confidence at the time it was communicated by the disclosing party;
d. was rightfully communicated to the receiving party by a third party
free of any obligation of confidence subsequent to the time it was
communicated by the disclosing party;
e. was developed by employees or agents of the receiving party without
reference to any information that the disclosing party has
communicated to any third party.
3. If Confidential Information is disclosed, and such information has
importance with respect to intellectual property, such information shall be
reduced to writing promptly by the disclosing party and every page shall be
clearly identified with the legend described above. Such writing shall be
delivered to the receiving party within thirty (30) days after the
disclosure thereto of said Confidential Information.
4. No Confidential Information disclosed pursuant to this Agreement shall be
used, duplicated or disclosed for purposes other than contemplated by the
Project indicated above without the prior written approval of the
disclosing party.
5. No license under any patent or patent application is granted to either
party either directly or indirectly by this Agreement, nor are any rights
of ownership in the Confidential Information granted by this Agreement.
1
<PAGE>
6. This Agreement shall remain in force for a period of three (3) years. This
Agreement may be terminated by either party with a thirty (30) day prior
written notice to the other party.
7. Confidential Information shall be disclosed only on a need-to-know basis to
personnel of the receiving party.
8. If the Confidential Information is reproduced in whole or part, the
reproduction shall carry a Confidential notice or legend similar to that
which appears on the original.
9. Nothing in this Agreement shall grant to either party the right to make
commitments of any kind, for or on behalf of the other party.
10. This Agreement is not intended to be, nor shall it be considered as, a
"team" arrangement, joint venture, partnership, or other formal business
organization, and unless otherwise agreed, neither party shall have the
right or obligation to share any of the profits or bear any of the risks or
losses of the other party. At all times the parties shall remain
independent contractors with each responsible for its own employees and
representatives. Each party assumes no responsibility to the other for
costs, expenses, risks and liabilities associated with the research,
development, exchange and use of each other's Confidential Information.
11. No rights or obligations other than those expressly recited herein are to
be implied from this Agreement, including any requirement that either party
contract with the other for the procurement of any products, services or
data resulting from this Agreement.
12. Each employee who has had or is granted access to the other party's
Confidential Information shall be informed of the obligation to protect the
Confidential Information of such other party from unauthorized use or
disclosure as herein provided.
13. When this Agreement is terminated as herein provided, or if the
Confidential Information received hereunder is no longer required by the
receiving party, whichever occurs first, then unless otherwise agreed in
writing by the parties, and as directed by the disclosing party, all copies
of the disclosing party's Confidential Information in the possession of the
receiving party shall be returned or destroyed. The receiving party shall
notify the disclosing party in writing when such return or destruction has
been accomplished.
14. This Agreement is deemed to be made under and shall be construed in all
respects in accordance with the Law of the State of California.
15. Each party shall designate personnel for disclosure and receipt of any
Confidential Information hereunder, and all such Confidential Information
shall be addressed to such designated personnel when delivered to the other
party. Such designation of personnel may be amended by letter addressed to
the person who executed this Agreement on behalf of the other party.
The following personnel are initially designated for disclosure and/or
receipt of Confidential Information under this Agreement.
TMI: USC
William M. Black Dr. William R. Dougherty
----------------------------- -----------------------------
Simona Gallagher
Kenneth Dodd Mr. Pablo Valencia
----------------------------- -----------------------------
16. Neither party shall have any liability for any activity of the other party
in using Confidential Information provided under this Agreement. A
receiving party shall indemnify and hold the disclosing party harmless from
and against any loss, cost or liability arising out of any claims or cause
of action for loss, harm or damage to property or for injury to or death of
persons caused or resulting from any use by a receiving party of
Confidential Information.
2
<PAGE>
17. This Agreement supersedes all prior understandings and communications
between the parties on the subject matter of this Agreement and shall apply
in lieu of and notwithstanding any specific legend or statement associated
with any information or data exchanged between parties.
Executed for the parties by their respective representatives who are duly
authorized to execute this Agreement.
TMI, INC. University of Southern California
/s/ William M. Black /s/ Pablo Valencia
- ----------------------------- -----------------------------
(Signature) (Signature)
William M. Black Pablo Valencia
- ----------------------------- -----------------------------
(Name - typed or printed) (Name - typed or printed)
Director of Operations Director Technology Transfer
- ----------------------------- -----------------------------
(Title - typed or printed) (Title - typed or printed)
8 Nov 96 11/7/97
- ----------------------------- -----------------------------
(Date) (Date)
3
<PAGE>
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
The table below presents information necessary for the computation of
loss per share of the Common Stock, on both a primary and fully diluted
basis, for the six months ended December 31, 1997 and 1996 and the years
ended June 30, 1997 and 1996.
<TABLE>
<CAPTION>
Six Months Ended Dec. 31, Year Ended June 30,
--------------------------- --------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net loss applicable to shares of
Common Stock and Common
Stock equivalents -- -- $(2,112,843) $ 2,878,250
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Average number of shares of
Common Stock outstanding 39,004,006 32,906,583 33,803,045 30,898,600
Common Stock equivalents -- -- -- --
----------- ----------- ----------- -----------
Total shares of Common Stock and
Common Stock equivalents 39,004,006 32,906,583 33,803,048 30,873,600
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Primary and fully diluted loss
per share of Common Stock $(0.09) $(0.02) $(0.06) $(0.09)
</TABLE>
Common Stock equivalents are considered anti-dilutive because of the net
losses incurred by the Company.
<PAGE>
EXHIBIT 21
COMPUTERIZED THERMAL IMAGING, INC. SUBSIDIARY
<TABLE>
<CAPTION>
NAME PLACE OF INCORPORATION OWNERSHIP
---- ---------------------- ---------
<S> <C> <C>
Thermal Medical Imaging, Inc. Nevada 80%
</TABLE>
<PAGE>
EXHIBIT 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Prospectus constituting part of
this Registration Statement on Form SB-2 of our reports dated ____, 1998
relating to the audited financial statements of Computerized Thermal Imaging,
Inc. which appear in such Prospectus. We also consent to the reference to us
under the heading "Experts" in such Prospectus.
Ham, Langston & Brezina, LLP
Houston, Texas
February 20, 1998
<PAGE>
EXHIBIT 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Prospectus constituting part of
this Registration Statement on Form SB-2 of our reports relating to the
interim unaudited financial statements of Computerized Thermal Imaging, Inc.
which appear in such Prospectus for the six months ended December 31, 1997
and 1996 and the period from inception (June 10, 1987) to December 31, 1997.
We are aware of the use in this Registration Statement of our report on such
unaudited interim financial information. We also consent to the reference to
us under the heading "Experts" in such Prospectus.
Randy Simpson, CPA P.C.
Sandy, Utah
February 25, 1998
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
WHEREAS, Computerized Thermal Imaging, Inc., a Nevada corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), a
Form SB-2 Registration Statement, a draft of which has been previously
reviewed by the undersigned (the "Registration Statement"), which may include
one or more prospectuses, to the extent required, with such pre-effective or
post-effective amendments thereto as the appropriate officers of the Company
may deem necessary or advisable, together with any and all exhibits and other
documents having relation to the Registration Statement;
NOW, THEREFORE, the undersigned in his capacity as a director or officer
or both, as the case may be, of the Company, does hereby constitute and
appoint David A. Packer as his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, to do any and all acts
and things in his name and on his behalf in his capacity as a director or
officer or both, as the case may be, of the Company, as fully and to all
intents and purposes as the undersigned might or could do in person, and to
execute any and all instruments for the undersigned and in his name in any
and all capacities which such person may deem necessary or advisable to
enable the Company to comply with the Act and any rules, regulations and
requirements of the Commission, in connection with the filing of the
Registration Statement, including specifically, but not limited to, power and
authority to sign for the undersigned, in his capacity as a director or
officer or both, as the case may be, of the Company, the Registration
Statement and any and all other documents (including, without limitation, any
amendments or further post-effective amendments to the Registration Statement
or to such other documents) which such person may deem necessary or advisable
in connection therewith; and the undersigned does hereby ratify and confirm
all that such person shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
as of the 18th day of February, 1998.
/s/ David B. Johnston
----------------------------------
DAVID B. JOHNSTON
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
WHEREAS, Computerized Thermal Imaging, Inc., a Nevada corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), a
Form SB-2 Registration Statement, a draft of which has been previously
reviewed by the undersigned (the "Registration Statement"), which may include
one or more prospectuses, to the extent required, with such pre-effective or
post-effective amendments thereto as the appropriate officers of the Company
may deem necessary or advisable, together with any and all exhibits and other
documents having relation to the Registration Statement;
NOW, THEREFORE, the undersigned in his capacity as a director or officer
or both, as the case may be, of the Company, does hereby constitute and
appoint David A. Packer as his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, to do any and all acts
and things in his name and on his behalf in his capacity as a director or
officer or both, as the case may be, of the Company, as fully and to all
intents and purposes as the undersigned might or could do in person, and to
execute any and all instruments for the undersigned and in his name in any
and all capacities which such person may deem necessary or advisable to
enable the Company to comply with the Act and any rules, regulations and
requirements of the Commission, in connection with the filing of the
Registration Statement, including specifically, but not limited to, power and
authority to sign for the undersigned, in his capacity as a director or
officer or both, as the case may be, of the Company, the Registration
Statement and any and all other documents (including, without limitation, any
amendments or further post-effective amendments to the Registration Statement
or to such other documents) which such person may deem necessary or advisable
in connection therewith; and the undersigned does hereby ratify and confirm
all that such person shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
as of the 18th day of February, 1998.
/s/ Richard V. Secord
----------------------------------
RICHARD V. SECORD
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
WHEREAS, Computerized Thermal Imaging, Inc., a Nevada corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), a
Form SB-2 Registration Statement, a draft of which has been previously
reviewed by the undersigned (the "Registration Statement"), which may include
one or more prospectuses, to the extent required, with such pre-effective or
post-effective amendments thereto as the appropriate officers of the Company
may deem necessary or advisable, together with any and all exhibits and other
documents having relation to the Registration Statement;
NOW, THEREFORE, the undersigned in his capacity as a director or officer
or both, as the case may be, of the Company, does hereby constitute and
appoint David A. Packer as his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, to do any and all acts
and things in his name and on his behalf in his capacity as a director or
officer or both, as the case may be, of the Company, as fully and to all
intents and purposes as the undersigned might or could do in person, and to
execute any and all instruments for the undersigned and in his name in any
and all capacities which such person may deem necessary or advisable to
enable the Company to comply with the Act and any rules, regulations and
requirements of the Commission, in connection with the filing of the
Registration Statement, including specifically, but not limited to, power and
authority to sign for the undersigned, in his capacity as a director or
officer or both, as the case may be, of the Company, the Registration
Statement and any and all other documents (including, without limitation, any
amendments or further post-effective amendments to the Registration Statement
or to such other documents) which such person may deem necessary or advisable
in connection therewith; and the undersigned does hereby ratify and confirm
all that such person shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
as of the 18th day of February, 1998.
/s/ Brent M. Pratley, M.D.
----------------------------------
BRENT M. PRATLEY, M.D.
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
WHEREAS, Computerized Thermal Imaging, Inc., a Nevada corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), a
Form SB-2 Registration Statement, a draft of which has been previously
reviewed by the undersigned (the "Registration Statement"), which may include
one or more prospectuses, to the extent required, with such pre-effective or
post-effective amendments thereto as the appropriate officers of the Company
may deem necessary or advisable, together with any and all exhibits and other
documents having relation to the Registration Statement;
NOW, THEREFORE, the undersigned in his capacity as a director or officer
or both, as the case may be, of the Company, does hereby constitute and
appoint David A. Packer as his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, to do any and all acts
and things in his name and on his behalf in his capacity as a director or
officer or both, as the case may be, of the Company, as fully and to all
intents and purposes as the undersigned might or could do in person, and to
execute any and all instruments for the undersigned and in his name in any
and all capacities which such person may deem necessary or advisable to
enable the Company to comply with the Act and any rules, regulations and
requirements of the Commission, in connection with the filing of the
Registration Statement, including specifically, but not limited to, power and
authority to sign for the undersigned, in his capacity as a director or
officer or both, as the case may be, of the Company, the Registration
Statement and any and all other documents (including, without limitation, any
amendments or further post-effective amendments to the Registration Statement
or to such other documents) which such person may deem necessary or advisable
in connection therewith; and the undersigned does hereby ratify and confirm
all that such person shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
as of the 18th day of February, 1998.
/s/ Milton R. Geilmann
----------------------------------
MILTON R. GEILMANN
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
WHEREAS, Computerized Thermal Imaging, Inc., a Nevada corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), a
Form SB-2 Registration Statement, a draft of which has been previously
reviewed by the undersigned (the "Registration Statement"), which may include
one or more prospectuses, to the extent required, with such pre-effective or
post-effective amendments thereto as the appropriate officers of the Company
may deem necessary or advisable, together with any and all exhibits and other
documents having relation to the Registration Statement;
NOW, THEREFORE, the undersigned in his capacity as a director or officer
or both, as the case may be, of the Company, does hereby constitute and
appoint David A. Packer as his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, to do any and all acts
and things in his name and on his behalf in his capacity as a director or
officer or both, as the case may be, of the Company, as fully and to all
intents and purposes as the undersigned might or could do in person, and to
execute any and all instruments for the undersigned and in his name in any
and all capacities which such person may deem necessary or advisable to
enable the Company to comply with the Act and any rules, regulations and
requirements of the Commission, in connection with the filing of the
Registration Statement, including specifically, but not limited to, power and
authority to sign for the undersigned, in his capacity as a director or
officer or both, as the case may be, of the Company, the Registration
Statement and any and all other documents (including, without limitation, any
amendments or further post-effective amendments to the Registration Statement
or to such other documents) which such person may deem necessary or advisable
in connection therewith; and the undersigned does hereby ratify and confirm
all that such person shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
as of the 18th day of February, 1998.
/s/ Henry C. Aderholt
----------------------------------
HENRY C. ADERHOLT
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<PERIOD-START> JUL-01-1996 JUL-01-1997
<PERIOD-END> JUN-30-1997 DEC-31-1997
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<PP&E> 635,277 645,578
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<INCOME-CONTINUING> (2,112,843) (1,615,916)
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<NET-INCOME> (2,112,843) (1,615,416)
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