UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
April 18, 2000
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Date of Report
(Date of Earliest Event Reported)
COMPUTERIZED THERMAL IMAGING, INC.
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(Exact name of registrant as specified in its charter)
Nevada 000-23955 87-0458721
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(State or other jurisdiction Commission File No. (IRS Employer ID No.)
of incorporation)
476 HERITAGE PARK BOULEVARD, SUITE 210
LAYTON, UTAH 84041
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(Address of principal executive offices)
(801) 776-4700
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(Registrant's telephone number)
Not Applicable
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(Former Name and Address of Principal Executive Offices)
Item 2. Acquisition of assets.
On April 4, 2000, we signed a Memorandum of Agreement (the "MOA") to acquire
up to 100 percent of the outstanding common stock of Bales Scientific, Inc.
("Bales"), a leading supplier of high-speed, high-resolution thermal imaging
equipment, for a total purchase price of $11.1 million (subject to a working
capital adjustment). The deal was closed on April 18, 2000 wherein we
acquired 100% of Bales including inventory, equipment, order backlog and all
intellectual property and rights. The purchase price was determined through
negotiations between us and the selling shareholders of Bales, although no
appraisal was done. It is anticipated that the acquisition will be accounted
for as a "purchase" under the equity method of accounting.
Bales, founded in 1977, designs, manufactures, and sells high-resolution,
dynamic, digital infrared-imaging workstations and related products for both
medical and industrial applications. Medical applications for Bales products
include imaging of circulatory, neurological and soft tissue abnormalities,
including work in the area of breast cancer. Its recently introduced Photonic
Stimulators are used to increase blood flow and circulation in the treatment
of chronic pain. Industrial applications include non-destructive inspection of
aging aircraft, electronics, composites, metals and other advanced materials
as well as breakthroughs in the area of inspection of turbine blades for large
power generation equipment.
Pursuant to the deal, the total purchase price of $11.1 million comprised a
$500,000 nonrefundable commitment fee, $5.1 million cash, and $5.5 million of
our common stock as determined from the listed bid price on the last business
day prior to closing, or 709,677 shares at a price of $7.75 per share. The
purchase price is subject to a working capital adjustment to be determined
within 30 days of closing. Cashed needed to consummate the deal was provided
by funds derived from our recently concluded private placements.
In connection with the deal, Maurice Bales, previous majority-shareholder of
Bales and noted authority in thermal imaging technology, entered into a
three-year employment contract with us to provide expertise and services to
further develop our thermal imaging technology and integrate Bales' technology
into our products. In addition to his normal compensation, Mr. Bales will be
granted options to acquire 100,000 shares of the Company's common stock during
each year of his employment at a purchase price equal to the listed bid price
of such shares on the business day immediately preceding the granting of such
options. The first 100,000 options were granted upon closing the deal and
each additional 100,000 options will be granted upon each subsequent
anniversary date of his employment. In connection with the Employment
Agreement, we are required to pay Mr. Bales royalties of $250 upon the sales
of some of our products. We believe that this royalty burden will not exceed
4 percent for any specific sale and could be less.
In connection with the acquisition, we also entered into a three-year office
lease agreement with Mr. Bales that provides for monthly lease payments to
him, subject to annual cost-of-living adjustments, of $7,500.
Common stock issued pursuant to the deal is restricted and cannot be resold
without registration under applicable federal and state laws. We intend to
include common stock issued in connection with the deal and common stock
underlying the options granted in our registration statement to be filed prior
to July 1, 2000.
Item 7. Financial Statements and Exhibits
(a) Financial statements of business acquired.
Due to the fact that Bales was closely-held, audited financial statements, as
required by Item 310(c) of Regulation S-B, are not available for presentation
herein. Paragraph (a)(4) of Item 7 of Form 8-K allows for an automatic 60-day
extension of time to provide the required financial statements noted above.
We will undertake to provide the required financial statements prior to July
3, 2000.
(b) Proforma financial information.
As noted under paragraph (a) above, the proforma financial statements required
by Item 310(d) Regulation S-B will be provided at such time as the required
financial statements noted in (a) above become available.
(c) Exhibits. The following exhibits are filed herewith:
2.1 Memorandum of Agreement dated April 4, 2000 between
Computerized Thermal Imaging, Inc., Maurice J. Bales and
Maurice J. Bales and Marianne J. Bales, Trustees.
4.1 Stock Option Agreement between Computerized Thermal Imaging,
Inc. and Maurice J. Bales dated April 17, 2000.
10.1 Acknowledgement of Entitlement to Stock dated April 17, 2000.
10.2 Stock Subscription Agreement between Computerized Thermal
Imaging, Inc. and Maurice J. and Marianne J. Bales as Trustees
of the Maurice J. and Marianne J. Bales Trust dated April 18,
2000.
10.3 Omitted Stock Subscription Agreements.
10.4 Employment and Royalty Agreement between Computerized Thermal
Imaging, Inc. and Maurice J. Bales dated April 17, 2000.
10.5 Building Lease Agreement between Computerized Thermal
Imaging, Inc. and Maurice J. and Marianne J. Bales Trust dated
April 17, 2000.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
COMPUTERIZED THERMAL IMAGING, INC.
Date: 4/27/2000 By: /s/ Kevin L. Packard
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Kevin L. Packard
Chief Financial Officer
EXHIBIT 2.1
MEMORANDUM OF AGREEMENT
This MEMORANDUM OF AGREEMENT ("MOA") is executed as of April 4, 2000
among COMPUTERIZED THERMAL IMAGING, INC., a Nevada corporation ("CTI"), BALES
SCIENTIFIC INC., a California corporation ("BSI"), MAURICE J. BALES ("Bales")
and MAURICE J. BALES and MARIANNE J. BALES as TRUSTEES of the MAURICE J. BALES
and MARIANNE J. BALES TRUST ("the Trust"). CTI, BSI, Bales and the Trust are
referred to collectively hereinafter as "the Parties".
1. BSI designs, manufactures and sells machinery and equipment
utilizing infrared technology and is the owner of various patents, copyrights,
trademarks, service marks, plans, specifications, drawings, compilations of
information and other tangible possessions and intangible rights and/or ideas
pertaining thereto (collectively "BSI's Intellectual Property"). The Trust is
the owner of all right, title and interest in and to 90 percent of the issued
and outstanding shares of BSI's common stock ("the Trust BSI Shares"). Dr.
Jacob Green ("Green") is the owner of all right, title and interest in and to
the remaining 10 percent of the issued and outstanding shares of BSI's common
stock ("the Green BSI Shares"). CTI desires to acquire at least 90 percent of
the issued and outstanding shares of BSI's common stock for a combination of
cash and CTI's Common Stock as defined in Paragraph 4. BSI desires that CTI
purchase the Trust BSI Shares because BSI understands from CTI that said
acquisition will result in a substantial contribution of capital and human
resources to BSI's business and operations, thereby substantially increasing
BSI's research, development, marketing and sales opportunities. The Trust is
willing to sell the Trust BSI Shares to CTI in accordance with the terms and
conditions set forth in this MOA.
2. CTI shall:
i) purchase the Trust BSI Shares for the Trust Total Purchase
Price, which shall consist of: a) $ 4,600,000 cash; plus b) the amount of
CTI's Common Stock defined in Paragraph 4 as "the Trust CTI Shares"; plus or
minus c) 90 percent of the Adjustment Amount as defined in Paragraph 4; or
ii) purchase the Trust BSI Shares for the Trust Total Purchase
Price and, with the consent of Green, purchase the Green BSI Shares for the
Green Total Purchase Price, which shall consist of: a) $ 500,000 cash; plus
b) the amount of CTI's Common Stock defined in Paragraph 4 as "the Green CTI
Shares"; plus or minus c) 10 percent of the Adjustment Amount. The parties
acknowledge that the difference between the purchase price of the Trust BSI
Shares and the Green BSI Shares represents on a conservative estimated basis
the value of the Trust BSI Shares' controlling interest in BSI.
3. Bales shall indemnify and hold CTI harmless from and against any and
all judgments and costs (including attorneys' fees) that CTI may incur in any
judicial proceeding in which it is finally determined that: i) any of BSI's
Intellectual Property owned by BSI prior to the Acquisition Date infringes
upon the patent or other property rights of third parties; or ii) BSI is
liable to third parties with respect to any other claims that arose prior to
the Acquisition Date.
4. For the purpose of this MOA:
i) "Acquisition Date" means a date mutually agreed by the Parties,
but in no event later than April15, 2000. On the Acquisition Date, the Trust
and, if applicable, Green, shall endorse and deliver to CTI the Trust BSI
Shares and, if applicable, the Green BSI Shares, and CTI shall deliver the
Trust Total Purchase Price to the Trust and, if applicable, the Green Total
Purchase Price to Green;
ii) "CTI's Common Stock" means shares of CTI's common stock to be
traded upon any exchange or through any market system in which other shares of
CTI's common stock are or will be regularly traded pursuant to CTI's
submission of a registration statement no later than July 1, 2000 to the
United States Securities and Exchange Commission, which shall provide BALES
and, if applicable Green, with piggy-back registration rights;
iii) "Bid Price" means the bid price on the exchange or market
system in which CTI's Common Stock is listed as of the close of regular New
York Stock Exchange trading hours;
iv) "the Trust CTI Shares" means the number of shares of CTI's
Common Stock with a total market value of $ 4,950,000 as determined by the Bid
Price on the last business day prior to the Acquisition Date;
v) "the Green CTI Shares" means the number of shares of CTI's
Common Stock with a total market value of $ 550,000 as determined by the Bid
Price on the last business day prior to the Acquisition Date; and
vi) "Adjustment Amount" means the amount by which BSI's cash, cash
equivalents and receivables aged 90 days or less as of the day before the
Acquisition Date exceeds (in which case the Adjustment Amount shall be added
to the cash portion of the Total Purchase Price) or is less than (in which
case the Adjustment Amount shall be subtracted from the cash portion of the
Total Purchase Price) the amount of BSI's total outstanding indebtedness
(including all accounts payable) as of the day before the Acquisition Date.
If the purchase and sale of the Trust (and Green) BSI Shares is (are)
judicially enforced, the Adjustment Amount shall be determined as of the day
that judgment is entered.
5. Simultaneously with the execution of this MOA, CTI shall pay to BSI
in immediately available non-refundable good funds the sum of $ 500,000 in
consideration for BSI's agreement, hereby given, that until the earlier of the
Acquisition Date or April 15, 2000 ("the Lockup Period"), BSI shall not
negotiate or discuss with any third party the possible acquisition by a third
party of all or a portion of BSI's stock or assets other than in the ordinary
course of business. By executing this MOA, and for no additional
consideration, the Trust agrees that the Trust shall not, during the Lockup
Period, negotiate or discuss with any third party the possible acquisition of
the Trust BSI Shares.
6. During the Lockup Period, and at no cost to CTI, BSI shall make its
best efforts to obtain from Dr. Constance Haber ("Haber") a release ("the
Haber Release") of all claims that Haber has or hereafter may acquire as of
the effective date of the Haber Release to any right, title or interest in or
to: i) Bales or BSI's Intellectual Property; or ii) compensation for services
rendered or for any other reason.
7. During the Lockup Period, the parties shall: i) negotiate in good
faith for the purpose of reaching agreement on the language of the formal
transactional instruments and documents ("the Acquisition Documents") that the
parties desire to memorialize the acquisition(s) contemplated herein; ii)
cause their counsel to prepare the Acquisition Documents; and iii) fully
execute the same. However, the parties understand and agree that all material
terms and conditions to be included in the Acquisition Documents are as set
forth in this MOA. Accordingly, this MOA constitutes the binding obligation
of the Parties to effect the acquisition(s) contemplated herein in accordance
with the terms and conditions of this MOA even if the Parties are unable to
agree upon the form or substance of the Acquisition Documents.
Notwithstanding the foregoing, CTI shall not be obligated to purchase the
Trust BSI Shares or the Green BSI Shares if: i) BSI is unable to obtain the
Haber Release; or ii) Bales refuses to execute an employment agreement with
CTI whose material terms are as set forth in Paragraph 8.
8. On the Acquisition Date, Bales and CTI shall execute an employment
agreement whereby Bales shall be employed by CTI in the position of Senior
Vice President and Director of Research and Development for a term of three
years with the following compensation and benefits:
i) an annual salary, paid semi-monthly, of $ 200,000 for the first
year with annual increases as determined by CTI's Board of Directors for CTI's
senior executives;
ii) annual options to purchase up to 100,000 shares per option of
CTI's Common Stock at the Bid Price on the last business day prior to the
issuance of the option, with the first option issued on the Acquisition Date
and the second and third options issued on the first and second anniversaries,
respectively, of the employment agreement;
iii) a royalty of $ 500 for each photonic stimulator system or
replacement or derivative thereof manufactured by or on behalf of CTI or any
subsidiary or affiliate of CTI during the term of the employment agreement,
with corresponding audit rights to assure payment;
iv) standard non-competition provisions prohibiting Bales from
competing with CTI during the term of the employment agreement and providing
that all inventions conceived or developed by Bales during said term shall
belong to CTI;
v) a minimum of three weeks paid vacation annually, with any
unused portion accumulating from year to year; and
vi) all other benefits provided by CTI to CTI's senior executives.
9. On the Acquisition Date, CTI shall execute a three year lease of the
real property owned by the Trust and presently occupied by BSI. The rent
shall be at the prevailing market rate for similar properties in Walnut Creek,
California and shall increase on January 1 of each year of the lease term at
the rate of the annual increase in the consumer price index normally used for
commercial real estate leases in the San Francisco Bay Area, with 1999 being
the base year.
10. CTI, on behalf of itself and all of its officers, directors,
employees, agents and representatives, hereby covenants that in the event that
BSI discloses to CTI any of BSI's Intellectual Property during the Lockup
Period, CTI shall not, without BSI's prior written consent, directly or
indirectly: i) use BSI's Intellectual Property for any purpose whatsoever; or
ii) disclose to any third party any of BSI's Intellectual Property. CTI
understands and agrees that a breach of this covenant of non-use and
non-disclosure by any officer, director, employee, agent or representative of
CTI shall constitute a breach by CTI, and CTI shall be liable for all damages
and/or injunctive relief resulting therefrom.
11. Within 10 business days after the Acquisition Date, and upon
presentation of appropriate invoices therefor, CTI shall reimburse Bales for
Bales' costs and professional fees incurred in connection with the
acquisition(s) contemplated herein.
12. This MOA constitutes the entire understanding among the Parties and
supercedes all prior agreements and understandings, whether written or oral,
concerning the subject matter hereof. This MOA may not be amended or
otherwise modified except by a writing executed by all parties hereto.
13. No Party may assign any of its rights hereunder to any other Party.
14. Time is of the essence in the performance of each and every act to
be performed hereunder.
15. This MOA shall be governed by and interpreted and enforced in
accordance with the laws of the State of California.
16. This MOA may be executed in counterparts, each of which shall
constitute an original document, and all of which together shall constitute
one and the same instrument. Photocopy and facsimile signatures shall have
the same force and effect as original signatures.
COMPUTERIZED THERMAL IMAGING, INC.
By: /s/David B. Johnston
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David B. Johnston
President and Chief Executive Officer
BALES SCIENTIFIC INC.
By: /s/Maurice J. Bales
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Maurice J. Bales
President and Technical Director
MAURICE J. BALES and MARIANNE J. BALES TRUST
By: /s/Maurice J. Bales, Trustee
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Maurice J. Bales, Trustee
By: /s/Marianne J. Bales, Trustee
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Marianne J. Bales, Trustee
EXHIBIT 4.1
STOCK OPTION AGREEMENT
THE OPTIONS REPRESENTED BY THIS CERTIFICATE AND THE COMMON STOCK ISSUABLE UPON
THE EXERCISE OF THE OPTIONS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "1933 ACT") OR QUALIFIED FOR SALE UNDER THE
SECURITIES LAWS OF ANY STATE OR JURISDICTION OF THE UNITED STATES. NO
REGULATORY BODY HAS ENDORSED THESE SECURITIES. THIS OPTION CERTIFICATE, THE
OPTIONS IT EVIDENCES, AND THE UNDERLYING COMMON STOCK ISSUED ON EXERCISE OF
THE OPTIONS, MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE 1933 AND APPLICABLE STATE BLUE SKY LAWS ACT OR IN VIOLATION OF SUCH
SECURITIES LAWS.
OPTION TO PURCHASE SHARES OF COMMON STOCK OF
COMPUTERIZED THERMAL IMAGING, INC.
NO. O-CTI-063000-01 100,000 Options
This Option Certificate certifies that Maurice J. Bales (the "Holder") is
the owner of 100,000 Options (subject to adjustment as provided herein), each
of which represents the right to subscribe for and purchase from COMPUTERIZED
THERMAL IMAGING, INC., a Nevada corporation (the "Company"), one share of the
common stock, par value $0.001 per share, of the Company (the common stock,
including any stock into which it may be changed, reclassified or converted,
is herein referred to as the "Common Stock") at the purchase price of $9.0625
per share (the "Exercise Price).
THESE OPTIONS ARE NOT GRANTED IN RESPECT TO ANY QUALIFIED
STOCK PLAN OF THE COMPANY. ACCORDINGLY, SUCH OPTIONS ARE
NONQUALIFIED OPTIONS FOR UNITED STATES TAX PURPOSES. THE
HOLDER HEREOF SHOULD CONTACT A TAX ADVISOR REGARDING THE
TAX TREATMENT OF THESE OPTIONS.
The Options represented by this Option Certificate are subject to the
following provisions, terms and conditions:
1. Vesting of Options.
The Holder shall be entitled to exercise the Options at any time during
the Exercise Period, as defined in Section 2 below.
2. Exercise of Options.
The Options may be exercised by the Holder in whole, or in part, (but not
as to a fractional share of Common Stock), by surrender of this Option
Certificate at the office of the Company located at 476 Heritage Park Blvd.,
Suite 210, Layton, Utah 84041 (or such other office or agency of the Company
as may be designated by notice in writing to the Holder at the address of such
Holder appearing on the books of the Company) with the appropriate form
attached hereto duly completed, at any time within the period beginning on the
date hereof and expiring at 5:00 p.m. Salt Lake City, Utah time, on April 17,
2003 (the "Exercise Period") and by payment to the Company by certified check
or bank draft of the Exercise Price for such shares. The Company agrees that
the shares of Common Stock so purchased shall be and are deemed to be issued
to the Holder as the record owner of such shares of Common Stock as of the
close of business on the date on which the Option Certificate shall have been
surrendered and payment made for such shares of Common Stock. Certificates
representing the shares of Common Stock so purchased, together with any cash
for fractional shares of Common Stock paid pursuant to Section 4(f), shall be
delivered to the Holder promptly, and, unless the Options have expired, a new
Option Certificate representing the number of Options represented by the
surrendered Option Certificate, if any, that shall not have been exercised
also shall be delivered to the Holder within such time.
3. Shares Fully Paid; Reservation of Shares.
All shares of Common Stock that may be issued upon the exercise of the
rights represented by this Option shall, upon issuance, be fully paid and
nonassessable, and free from all taxes (other than taxes based on the income
of the holder of this Option), with respect to the issue thereof. During the
period within which the rights represented by this Option may be exercised,
the Company shall at all times have authorized and reserved for issuance upon
exercise of the purchase right evidenced by this Option, a sufficient number
of shares of its Common Stock to provide for the exercise of the rights
represented by this Option. The Company agrees that its issuance of this
Option shall constitute full authority to its officers who are charged with
the duty of executing stock certificates to execute and issue the necessary
certificates for shares of common Stock issuable upon exercise of this Option.
4. Adjustments.
The Exercise Price and the number of shares of Common Stock issuable upon
exercise of each Option shall be subject to adjustment from time to time as
follows:
(a) Stock Dividends; Stock Splits; Reverse Stock Splits;
Reclassifications. In case the Company shall (i) pay a dividend with respect
to its Common Stock in shares of capital stock, (ii) subdivide its outstanding
shares of Common Stock, (iii) combine its outstanding shares of Common Stock
into a smaller number of shares of any class of Common Stock or (iv) issue any
shares of its capital stock in a reclassification of the Common Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing corporation), other than
elimination of par value, a change in par value, or a change from par value to
no par value (any one of which actions is herein referred to as an "Adjustment
Event"), the number of shares of Common Stock purchasable upon exercise of
each Option immediately prior to the record date for such Adjustment Event
shall be adjusted so that the Holder shall thereafter be entitled to receive
the number of shares of Common Stock or other securities of the Company (such
other securities thereafter enjoying the rights of shares of Common Stock
under this Option Certificate) that such Holder would have owned or have been
entitled to receive after the happening of such Adjustment Event, had such
Option been exercised immediately prior to the happening of such Adjustment
Event or any record date with respect thereto. An adjustment made pursuant to
this Section 4(a) shall become effective immediately after the effective date
of such Adjustment Event retroactive to the record date, if any, for such
Adjustment Event.
(b) Adjustment of Exercise Price. Whenever the number of shares of
Common Stock purchasable upon the exercise of each Option is adjusted pursuant
to Section 4(a), the Exercise Price for each share of Common Stock payable
upon exercise of each Option shall be adjusted by multiplying such Exercise
Price immediately prior to such adjustment by a fraction, the numerator of
which shall be the number of shares of Common Stock purchasable upon the
exercise of each Option immediately prior to such adjustment, and the
denominator of which shall be the number of shares of Common Stock so
purchasable immediately thereafter.
(c) De Minimis Adjustments. No adjustment in the Exercise Price and
number of shares of Common Stock purchasable hereunder shall be required
unless such adjustment would require an increase or decrease of at least $0.15
in the Exercise Price; provided, however, that any adjustments which by reason
of this Section 4(c) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations shall be
made to the nearest full share.
(d) Adjustment Limitations. Except as provided in this section 4, no
adjustment on account of dividends or interest on Common Stock or other
securities purchasable hereunder will be made upon the exercise hereof.
(e) Statement on Option Certificates. The form of this Option
Certificate need not be changed because of any change in the Exercise Price or
in the number or kind of shares purchasable upon the exercise of a Option.
However, the Company may at any time in its sole discretion make any change in
the form of the Option Certificate that it may deem appropriate and that does
not affect the substance thereof and any Option Certificate thereafter issued,
whether in exchange or substitution for any outstanding Option Certificate or
otherwise, may be in the form so changed.
(f) Fractional Interest. The Company shall not be required to issue
fractional shares of Common Stock on the exercise of the Options. The number
of full shares of Common Stock which shall be issuable upon such exercise
shall be computed on the basis of the aggregate number of whole shares of
Common Stock purchasable on the exercise of the Options so presented. If any
fraction of a share of Common Stock would, except for the provisions of this
Section 4(f), be issuable on the exercise of the Options (or specified
proportion thereof), the Company shall pay an amount in cash calculated by it
to be equal to the then fair value of one share of Common Stock, as determined
by the Board of Directors of the Company in good faith, multiplied by such
fraction computed to the nearest whole cent.
5. No Rights of Stockholder.
The Option Holder shall not be entitled to vote or to receive dividends
or shall otherwise be deemed to be the holder of shares of Common Stock for
any purpose, nor shall anything contained herein or in any Option Certificate
be construed to confer upon the Holder, as such, any of the rights of a
stockholder of the Company or any right to vote upon or give or withhold
consent to any action of the Company (whether upon any reorganization,
issuance of securities, reclassification or conversion of Common Stock,
consolidation, merger, sale, lease, conveyance, or otherwise), receive notice
of meetings or other action affecting stockholders (except for notices
expressly provided for herein) or receive dividends or subscription rights,
until the Option Certificate shall have been surrendered for exercise
accompanied by full and proper payment of the Exercise Price as provided
herein and shares of Common Stock hereunder shall have become issuable and
until the Holder shall have been deemed to have become a holder of record of
such shares. The Holder shall not, upon the exercise of Options, be entitled
to any dividends if the record date with respect to payment of such dividends
shall be a date prior to the date such shares of Common Stock became issuable
upon the exercise of such Options.
6. Registration Rights.
(a) Piggyback Registration. If at any time or from time to time, the
Company shall determine to register any of its securities, for its own account
or the account of any of its stockholders, other than a registration relating
solely to employee benefit plans, the Company will include in such
registration, and in any underwriting involved therein, all the shares of
Common Stock issuable upon exercise of this Option.
(b) Period of Effectiveness. The Company shall use its best effort
to maintain the effectiveness of any registration statement pursuant to this
section 6 for a period in excess of the shorter of (i) the period during which
the Option holder shall hold any shares of Common Stock or (ii) three years
after the effective date of Holder's employment with the Company.
(c) Expenses. All fees, disbursements and expenses incurred by the
Company in connection with any registration pursuant to this section 6 shall
be borne by the Company, excluding legal fees and disbursements of counsel for
the Option holder.
7. Closing of Books.
The Company will at no time close its transfer books against the transfer
of any Option or of any shares of Common Stock or other securities issuable
upon the exercise of any Option in any manner which interferes with the timely
exercise of the Options.
8. Options Exchangeable; Loss, Theft.
This Option Certificate is exchangeable, upon the surrender hereof by any
Holder at the office or agency of the Company referred to in Section 2, for
new Option Certificates of like tenor representing in the aggregate the right
to subscribe for and purchase the number of shares of Common Stock which may
be subscribed for and purchased hereunder, each such new Option to represent
the right to subscribe and purchase such number of shares of Common Stock as
shall be designated by said Holder hereof at the time of such surrender. Upon
receipt of evidence satisfactory to the Company of the loss, theft,
destruction or mutilation, or upon surrender or cancellation of this Option
Certificate, the Company will issue to the Holder hereof a new Option
Certificate of like tenor, in lieu of this Option Certificate, representing
the right to subscribe for and purchase the number of shares of Common Stock
which may be subscribed for and purchased hereunder.
9. Mergers, Consolidations.
If the Company shall merge or consolidate with another corporation, the
Holder of this Option shall thereafter have the right, upon exercise hereof
and payment of the Exercise Price, to receive solely the kind and amount of
shares of stock (including, if applicable, Common Stock), other securities,
property or cash or any combination thereof receivable by a holder of the
number of shares of Common Stock, as adjusted from time to time, for which
this Option might have been exercised immediately prior to such merger or
consolidation (assuming, if applicable, that the Holder of such Common Stock
failed to exercise its rights of election, if any, as to the kind or amount of
shares of stock, other securities, property or cash or combination thereof
receivable upon such merger or consolidation).
10. Expenses.
The Holder shall bear the cost of all underwriting discounts, selling
commissions and stock transfer taxes applicable to the Option and the Common
Stock underlying the Options.
11. Representations.
The Company represents and options to the holder of this Option as
follows:
(a) This Option has been duly authorized and executed by the Company
and is a valid and binding obligation of the Company enforceable in accordance
with its terms, subject to the laws of general application relating to
bankruptcy, insolvency, and the relief of debtors and the rules of law or
principles of equity governing specific performance, injunctive relief, and
other equitable remedies; and
(b) The Shares have been duly authorized and reserved by the Company
and, when issued in accordance with the terms hereof, will be validly issued,
fully paid and nonassessable.
12. Compliance with Securities Laws.
The holder of this Option, by acceptance hereof, agrees that this Option
and the Common Stock to be issued upon exercise hereof are being acquired for
investment and that such holder will not offer, sell or otherwise dispose of
this Option or any Common Stock to be issued upon exercise hereof except under
circumstances that will not result in a violation of the 1933 Act or any
applicable state Blue Sky law. This Option and all Common Stock issued upon
exercise of this Option (unless registered under the 1933 Act) shall bear a
legend in substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. THIS SECURITY MAY NOT BE SOLD,
OFFERED FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THESE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED."
13. Disposition of Option and Common Stock.
With respect to any offer, sale or other disposition of this Option or
any shares of Common Stock acquired pursuant to the exercise of this Option
prior to registration of such shares, the holder hereof and each subsequent
holder of this Option agrees to give written notice to the Company prior
thereto, describing briefly the manner thereof, together with a written
opinion of such holder's counsel, if requested by the Company, to the effect
that such offer, sale or other disposition may be effected without
registration or qualification of this Option or such Common Stock under the
1933 Act or any applicable state Blue Sky law then in effect, and indicating
whether or not under any of said laws certificates for this Option or such
Common Stock to be sold or otherwise disposed of require any restrictive
legend as to applicable restrictions on transferability in order to ensure
compliance therewith. Upon receiving such written notice and reasonably
satisfactory opinion, if so requested, the Company shall notify such holder
that such holder can sell or otherwise dispose of this Option or such Common
Stock, all in accordance with the terms of the notice delivered to the
Company. If a determination has been made pursuant to this section 12 that
the opinion of counsel for the holder is not reasonably satisfactory to the
Company, the Company shall so notify the holder promptly after such
determination has been made.
14. Miscellaneous.
(a) Binding on Successors. This Option shall be binding upon any
successors or assigns of the Company. This Option shall constitute a contract
under the laws of the State of Utah and for all purposes shall be construed in
accordance with and governed by the laws of the State of Utah.
(b) Headings. The headings in this Option are for purposes of
convenience and reference only and shall not be deemed to constitute a part
hereof.
(c) Amendments. This Option and any provision hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by
the Company and the registered holder hereof.
Dated as of April 17, 2000
COMPUTERIZED THERMAL IMAGING, INC.
By: /s/ Kevin L. Packard
---------------------------
Name: Kevin L. Packard
Chief Financial Officer
<PAGE>
[FORM OF ELECTION TO PURCHASE]
(To be executed upon exercise of Option)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Option Certificate, to purchase ____________ shares of
Common Stock and herewith tenders in payment for such shares a certified check
or bank draft payable to the order of COMPUTERIZED THERMAL IMAGING, INC. in
the amount of $__________________, all in accordance with the terms hereof.
The undersigned requests that a certificate for such shares be registered in
the name of _____________________________________________ whose address is
_______________________________________________ and that such certificate (or
any payment in lieu thereof) be delivered to__________________________________
whose address is __________________________________________________.
Dated: _________________________ _________________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Option.)
EXHIBIT 10.1
ACKNOWLEDGMENT OF ENTITLEMENT TO STOCK
Pursuant to: i) that certain Memorandum of Agreement ("MOA") executed as
of April 4, 2000, by Computerized Thermal Imaging, Inc., a Nevada corporation
("CTI"), Bales Scientific Inc., a California corporation ("BSI"), Maurice J.
Bales and Maurice J. Bales and Marianne J. Bales as Trustees of the Maurice J.
Bales and Marianne J. Bales Trust; and ii) CTI's acquisition of all of the
outstanding and issued shares of BSI's common stock as contemplated in the
MOA, CTI hereby acknowledges and affirms that the following persons and
entities are entitled to and shall receive the number of shares of CTI's
common stock equal to the values set forth below, valued at the Bid Price (as
defined in the MOA) as of April 17, 2000. Said shares shall be issued to said
persons and entities immediately upon the approval by the United States
Securities and Exchange Commission of the registration statement that CTI
shall file on or about May 1, 2000.
ISSUEE VALUE
------ -----
Maurice J. Bales and Marianne J. Bales $4,700,000
as Trustees for the Maurice J. Bales
and Marianne J. Bales Trust
Constance Haber Stevenson $ 250,000
Southeastern Neuroscience Institute $ 440,000
Profit Sharing Plan for the Benefit
of Jacob Green, M.D.
Jacob Green, M.D. $ 110,000
DATED: April 17, 2000
COMPUTERIZED THERMAL IMAGING, INC.
By: /s/ David B. Johnston
--------------------------
DAVID B. JOHNSTON
President and Chief
Executive Officer
EXHIBIT 10.2
COMMON STOCK SUBSCRIPTION AGREEMENT
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Maurice J. Bales and Marianne J. Bales as Trustees of the
Maurice J. Bales and Marianne J. Bales Trust, (jointly, the "Subscriber"),
Computerized Thermal Imaging, Inc., a Nevada corporation (the "Company") and
Bales Scientific, Inc., a California corporation ("BSI"), have entered into
that certain Memorandum of Agreement (the "MOA") dated April 4, 2000 between
the Company, Subscriber and BSI;
WHEREAS, there are 200 outstanding shares of the common stock of BSI (the
"Target Shares");
WHEREAS, the acquisition of the Target Shares by the Company as
contemplated by the MOA (the "Acquisition") occurred on April 18, 2000 (the
"Acquisition Date");
WHEREAS, consideration paid to the Subscriber in exchange for the 180
Target Shares owned by the Subscriber ("Subscriber's Target Shares") consists
of $4,510,000 cash and so many shares of the Company's common stock (the
"Exchange Shares") the number of which is equal to $4,700,000 divided by the
closing bid price per share of the Exchange Shares as quoted on the OTC
Bulletin Board of the NASD on the business day prior to the Acquisition Date;
WHEREAS, the closing bid price per share of the Exchange Shares as
quoted on the OTC Bulletin Board of the NASD on the business day prior to the
Acquisition Date was US$7.75; and
WHEREAS, it is contemplated by all parties hereto (but not as a
condition precedent to) that the Acquisition qualify as a statutory merger
under Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended.
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1) Subscription to Exchange Shares. The Subscriber hereby subscribes to
606,452 Exchange Shares upon the Subscriber's delivery of this Subscription
Agreement and the Subscriber's tender of Subscriber's Target Shares as
contemplated by the MOA.
2) Allocation of Consideration to Exchange Shares. The Subscriber Target
Shares tendered hereunder represents 51.03 percent of the Subscribers total
common stock ownership of BSI immediately prior to the Acquisition Date. The
remaining 48.97 percent of the Subscriber Target Shares prior to the
Acquisition is tendered in exchange for the cash consideration of $4,510,000
noted above.
3) Exchange Shares not Registered. The Subscriber acknowledges and
understands that the Exchange Shares subscribed herein are not registered
under the Securities Act of 1933, as amended (the "Act"), or any securities
"blue sky" or other similar laws of any state ("State Securities Laws"). The
Company shall have no obligation to issue the Exchange Shares to any person to
whom the issuance of such shares would constitute a violation of the Act or
any State Securities Laws. The Company will cause the Secretary of the
Company to deliver the Exchange Shares subscribed to by the Subscriber to the
Subscriber promptly after the Company has accepted this Subscription Agreement
(the "Closing").
4) Registration Rights.
(a) Piggyback Registration. The Company shall include the Exchange
Shares in the registration of the Company securities that the Company shall
file with the United States Securities and Exchange Commission on or before
July 1, 2000.
(b) Period of Effectiveness. The Company shall use its best effort
to maintain the effectiveness of any registration statement pursuant to this
section 4 for a period in excess of the shorter of (i) the period during which
the Subscriber shall hold any Exchange Shares or (ii) three years after the
Acquisition Date.
(c) Expenses. All fees, disbursements and expenses incurred by the
Company in connection with any registration pursuant to this section 4 shall
be borne by the Company, excluding legal fees and disbursements of counsel for
the Option holder.
5) Representations and Warranties. The Subscriber hereby represents and
warrants to and covenants with the Company, as well as each officer, director
and agent of the Company as follows:
(a) General
(i) The Subscriber has all requisite authority to enter into this
Subscription Agreement and to perform all the obligations required to be
performed by the Subscriber hereunder.
(ii) The Subscriber is the sole party in interest and is not
acquiring the Exchange Shares as an agent or otherwise for any other person
and the Subscriber is a resident of the state set forth opposite its name on
the signature page hereto.
(iii) The Subscriber recognizes that the total amount of value
tendered to purchase the Exchange Shares is immediately placed at the risk of
the business and may be completely lost. The purchase of the Exchange Shares
of the Company as an investment involves extreme risk.
(iv) The Subscriber realizes that the Exchange Shares cannot
readily be sold as the shares of Exchange Shares are restricted securities,
that it may not be possible to sell or dispose of the Exchange Shares and
therefore the Exchange Shares must not be purchased unless the Subscriber has
liquid assets sufficient to assure that such purchase will cause no undue
financial difficulties and the Subscriber can provide for current needs and
personal contingencies.
(v) The Subscriber confirms and represents that it is able (a) to
bear the economic risk of its investment, (b) to hold the securities for an
indefinite period of time, and (c) to afford a complete loss of its
investment. The Subscriber also represents that it has adequate means of
providing for its current needs and personal contingencies, and has no need
for liquidity in this particular investment.
(vi) The Subscriber has not become aware of the offering of
Exchange Shares of the Company by any form of general solicitation or
advertising, including, but not limited to advertisements, articles, notices
or other communications published in any newspaper, magazine or other similar
media or broadcast over television or radio or any seminar or meeting where
those individuals that have attended have been invited by any such or similar
means of general solicitation or advertising.
(b) Information Concerning the Company.
(i) The Subscriber acknowledges that it has received all current
information about the Company including the Company's (A) Form 10-KSB for the
fiscal year ended June 30, 1999, as amended and (B) Forms 10-QSB for the
quarters ended September and December 31, 1999.
(ii) The Subscriber or its representative is familiar with the
business and financial condition, properties, operations and prospects of the
Company, and, at a reasonable time prior to the execution of this Subscription
Agreement, that it and its representative have been afforded the opportunity
to ask questions of and receive satisfactory answers from the Company's
officers and directors, or other persons acting on the Company's behalf,
concerning the business and financial condition, properties, operations and
prospects of the Company and concerning the terms and conditions of the
offering of the Exchange Shares and has asked such questions as it or its
representative desires to ask and all such questions have been answered to the
full satisfaction of the Subscriber.
(iii) The Subscriber understands that, unless the Subscriber
notifies the Company in writing to the contrary before the Closing, all the
representations and warranties contained in this Subscription Agreement will
be deemed to have been reaffirmed and confirmed as of the Closing, taking into
account all information received by the Subscriber.
(iv) The Subscriber understands that the purchase of the Exchange
Shares involves various risks, including, but not limited to, those outlined
in this Subscription Agreement.
(v) The Subscriber acknowledges that no representations or
warranties have been made to the Subscriber by the Company as to the tax
consequences of this investment, or as to profits, losses or cash flow which
may be received or sustained as a result of this investment.
(vi) All documents, records and books pertaining to a proposed
investment in the Exchange Shares which the Subscriber or its representative
has requested have been made available to the Subscriber.
(vii) The Subscriber or its representative has been provided
access to all information requested in evaluating its purchase of the Exchange
Shares.
(viii) 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 Exchange
Shares.
(c) Restrictions on Transfer or Sale of the Exchange Shares
(i) The Subscriber is acquiring the Exchange Shares subscribed
solely for the Subscriber's own beneficial account, for investment purposes,
and not with view to, or for resale in connection with, any distribution of
the Exchange Shares. The Subscriber understands that the offer and the sale
of the Exchange Shares has not been registered under the Act or any State
Securities Laws by reason of specific exemptions under the provisions thereof
which depend in part upon the investment intent of the Subscriber and of the
other representations made by the Subscriber in this Subscription Agreement.
The Subscriber understands that the Company is relying upon the
representations, covenants and agreements contained in this Subscription
Agreement (and any supplemental information) for the purposes of determining
whether this transaction meets the requirements for such exemptions.
(ii) The Subscriber understands that the Exchange Shares are
"restricted securities" under applicable federal securities laws and that the
Act and the rules of the Securities and Exchange Commission (the "Commission")
provide in substance that the Subscriber may dispose of the Exchange Shares
only pursuant to an effective registration statement under the Act or an
exemption therefrom. The certificates evidencing the shares of Common stock
offered hereby will bear a legend that clearly sets forth this restriction.
While the Company has granted certain piggy-back registration rights to the
Subscriber, no assurance can be given as to when or if any registration
statement will become effective. The Subscriber understands that the
Subscriber may not at any time demand the purchase by the Company of the
Subscriber's Exchange Shares.
(iii) The Subscriber agrees: (A) that the Subscriber will not
sell, assign, pledge, give, transfer or otherwise dispose of the Exchange
Shares or any interest therein, or make any offer or attempt to do any of the
foregoing, except pursuant to a registration of the Exchange Shares under the
Act and all applicable State Securities Laws or in a transaction which is
exempt from the registration provisions of the Act and all applicable State
Securities Laws; (B) that the Company and any transfer agent for the Exchange
Shares shall not be required to give effect to any purported transfer of any
of the Exchange Shares except upon compliance with the foregoing restrictions;
and (C) that a restrictive legend will be placed on the certificates
representing the Exchange Shares.
(iv) The Subscriber has not offered or sold any portion of the
subscribed for Exchange Shares and has no present intention of dividing such
Exchange Shares with others or of reselling or otherwise disposing of any
portion of such Exchange Shares either currently or after the passage of a
fixed or determinable period of time or upon the occurrence or nonoccurrence
of any predetermined event or circumstance.
6) Survival and Indemnification. All representations, warranties and
covenants contained in this Agreement and the indemnification contained in
this Paragraph 6 shall survive (i) the acceptance of the Subscription
Agreement by the Company and (ii) the death or disability of the Subscriber.
The Subscriber acknowledges the meaning and legal consequences of the
representations, warranties and covenants in Paragraph 5 hereof and that the
Company has relied upon such representations, warranties and covenants in
determining the Subscriber's qualification and suitability to purchase the
Exchange Shares. The Subscriber hereby agrees to indemnify, defend and hold
harmless the Company, and its officers, directors, employees, agents and
controlling persons, from and against any and all losses, claims, damages,
liabilities, expenses (including attorneys' fees and disbursements), judgment
or amounts paid in settlement of actions arising out of or resulting from the
untruth of any representation herein or the breach of any warranty or covenant
herein. Notwithstanding the foregoing, however, no representation, warranty,
covenant or acknowledgment made herein by the Subscriber shall in any manner
be deemed to constitute a waiver of any rights granted to it under the
Securities or State Securities laws.
7) 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 registered or certified mail, return receipt requested,
postage prepaid, or overnight air courier guaranteeing next day delivery:
(a) if to the Company, to it at the following address:
Computerized Thermal Imaging, Inc.
Attention: Mr. Kevin Packard, Chief Financial Officer
476 Heritage Park Blvd.
Layton, UT 84041
(b) if to the Subscriber, at the address set forth on the last page
hereof or directly to the Subscriber at the address set forth on the signature
page hereto, or at such other address as either party shall have specified by
notice in writing to the other.
All notice and communications shall be deemed to have been duly given: at
the time delivered by hand, if personally delivered; two days after being
deposited in the mail, postage prepaid, if mailed; and the next day after
timely delivery to the courier, if sent by overnight air courier guaranteeing
next day delivery.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
8) No Assignment. This Subscription Agreement is not assignable by the
Subscriber, and may not be modified, waived or terminated except by an
instrument in writing signed by each of the parties hereto.
9) Binding Effect. Except as otherwise provided herein, this Subscription
Agreement shall be binding upon and inure to the benefit of the parties and
their heirs, executors, administrators, successors, legal representatives and
assigns, and the agreements, representations, warranties and acknowledgments
contained herein shall be deemed to be made by and be binding upon such heirs,
executors, administrators, successors, legal representatives and assigns. If
the Subscriber is more than one person, the obligation of the Subscriber shall
be joint and several and the agreements, representations, warranties and
acknowledgments contained herein shall be deemed to be made by and be binding
upon each such person and his heirs, executors, administrators and successors.
10) Entire Agreement. This Subscription Agreement constitutes the entire
agreement of the Subscriber and the Company relating to the matters contained
herein, superseding all prior contracts or agreements, whether oral or
written.
11) Governing Law. This Subscription Agreement shall be governed and
controlled as to the validity, enforcement, interpretations, construction and
effect and in all other aspects by the substantive laws of the State of Utah.
12) Severability. If any provision of this Subscription Agreement or the
application thereof to any Subscriber or circumstance shall be held invalid or
unenforceable to any extent, the remainder of this Subscription Agreement and
the application of such provision to other subscriptions or circumstances
shall not be affected thereby and shall be enforced to the greatest extent
permitted by law.
13) Headings. The headings in this Subscription Agreement are inserted
for convenience and identification only and are not intended to describe,
interpret, define, or limit the scope, extent or intent of this Subscription
Agreement or any provision hereof.
IN WITNESS WHEREOF, the undersigned Subscriber has executed this Subscription
Agreement as of this 18th day of April, 2000.
Maurice J. Bales and Marianne J. Bales as Trustees of
the Maurice J. Bales and Marianne J. Bales Trust
/s/ Maurice J. Bales, Trustee
------------------------------
Maurice J. Bales, Trustee
/s/ Marianne J. Bales, Trustee
------------------------------
Marianne J. Bales, Trustee
______________________________
Street Address
______________________________
City State Zip
ACCEPTED by the Company as of the 18th day of April, 2000
Computerized Thermal Imaging, Inc.
By: /s/ Kevin Packard
--------------------------------------
Kevin Packard, Chief Financial Officer
EXHIBIT 10.3
OMITTED STOCK SUBSCRIPTION AGREEMENTS
The following Stock Subscription Agreements were omitted on the basis
that, except for as noted below, they are, in all material respects similar to
the Stock Subscription Agreement between Computerized Thermal Imaging, Inc.
and Maurice J. and Marianne J. Bales as Trustees of the Maurice J. and
Marianne J. Bales Trust dated April 18, 2000 reflected as Exhibit 10.2 above.
1) The Stock Subscription Agreement between Computerized Thermal Imaging,
Inc. (the "Company") and Southeastern Neuroscience Institute Profit Sharing
Plan for the Benefit of Jacob Green, M.D. ("Southeastern") dated April 18,
2000 which provides for the issuance of 56,774 shares of common stock of the
Company at a bid price of $7.75 per share (total value of $440,000) to
Southeastern upon Southeastern tender of 16 shares of outstanding common
stock of Bales Scientific, Inc.
2) The Stock Subscription Agreement between Computerized Thermal Imaging,
Inc. (the "Company") and Jacob Green, M.D. ("Green") dated April 18, 2000
which provides for the issuance of 14,194 shares of common stock of the
Company at a bid price of $7.75 per share (total value of $110,000) to Green
upon Green's tender of 4 shares of outstanding common stock of Bales
Scientific, Inc.
3) The Stock Subscription Agreement between Computerized Thermal Imaging,
Inc. (the "Company") and Constance Haber Stevenson ("Stevenson") dated April
18, 2000 which provides for the issuance of 32,258 shares of common stock of
the Company at a bid price of $7.75 per share (total value of $250,000) to
Stevenson upon Stevenson's execution of various documents, the release of
certain rights, and assignments made in connection with the Company
acquisition of Bales Scientific, Inc.
EXHIBIT 10.4
EMPLOYMENT AND ROYALTY AGREEMENT
COMPUTERIZED THERMAL IMAGING, INC., a Nevada corporation ("CTI"), hereby
agrees to employ MAURICE J. BALES ("BALES"), and BALES agrees to be employed
by CTI, in consideration of and pursuant to the following terms and
conditions:
1. Position.
CTI shall employ Bales in the position of Senior Vice President
and Director of Research and Development.
2. Outside Business Activities.
During his employment, Bales shall devote his full energies,
interests, abilities and productive time to the performance of his duties
under this Agreement and shall not, without CTI prior written consent, render
any services to others for compensation or engage or participate, actively or
passively, in any other business activities that would materially interfere
with the performance of Bales duties hereunder or compete with CTI business.
3. Term.
Subject to earlier termination as provided in Paragraph 7, Bales
shall be employed for a term of three years commencing April 17, 2000.
4. Place of Employment.
Bales shall perform his duties at CTI offices located in Walnut
Creek, California, but may be required to travel from time to time as mutually
agreed between CTI and Bales.
5. Compensation and Benefits.
a. Salary.
CTI shall pay an annual salary of $200,000 payable
semi-monthly, prorated for each partial year of employment, with annual
increases (but not decreases) as determined by CTI Board of Directors for CTI
senior executives.
b. Options.
Simultaneously with the execution of this Agreement, and
on the first and second anniversaries thereof, CTI shall deliver to Bales
options to purchase up to 100,000 shares per option of CTI common stock at
the bid price as of the last business day prior to the issuance of the option
on the exchange or in the market system in which CTI common stock is listed.
The options shall be in the form and substance of options heretofore granted
by CTI to CTI senior executives.
c. Vacation.
Bales shall be entitled to no less than three weeks paid
vacation for each full year of employment, with any unused portion
accumulating from year to year.
d. Other Benefits.
CTI shall provide Bales with such other benefits,
including, but not limited to, bonuses, medical and dental insurance and
participation in CTI retirement plan (if one exists or subsequently is
adopted), as CTI may provide for CTI employees, subject to such guidelines,
conditions and restrictions as CTI, in CTI sole discretion, may determine.
6. Royalties.
CTI shall pay Bales a royalty of $250 for each photonic
stimulator or photonic stimulator system or replacement or derivative thereof
(collectively hotonic stimulator manufactured by or on behalf of CTI or any
subsidiary, licensee or affiliate of CTI during the term of this Agreement.
Said royalties shall be paid on or before the 15th day of the month following
the end of CTI fiscal quarter in which the photonic stimulator for which the
royalty is due is manufactured. Said payments do not constitute compensation
for employment. No federal or state tax or related deductions shall be made
therefrom, and said payments shall be reported as royalty payments to the
United States Internal Revenue Service on Form 1099. Bales shall have the
right, upon written reasonable notice to CTI, to inspect and/or have a
representative inspect CTI books and records to assure CTI compliance with
its royalty payment obligations as set forth herein.
7. CTI Ownership of Processes, Inventions, Etc.
a. Except as provided in sub-Paragraph 6(c), all software
programs, documentation, source codes, object codes, processes, inventions,
patents, copyrights, trademarks and all other tangible possessions and
intangible rights (collectively nventions which may be conceived or
developed by Bales, either alone or with others, during the term of this
Agreement, whether or not conceived or developed during Bales working hours,
and which materially relate to CTI programs, products, equipment, supplies,
facilities, trade secrets, CTI business or CTI actual or demonstrably
anticipated research or development, or which result in any manner from any
work performed by Bales at CTI request, shall be the sole property of CTI.
For the purpose of this Paragraph, TI business shall be deemed to mean the
research, development, marketing and sale of devices and systems that utilize
infrared thermal or related imaging technology.
b. Bales shall execute all documents, including, but not
limited to, copyright and patent applications and assignments, required by CTI
to establish and/or enforce CTI rights under this Paragraph.
c. THIS PARAGRAPH 7 DOES NOT APPLY TO INVENTIONS WHICH ARE
DEVELOPED ENTIRELY ON BALES OWN TIME WITHOUT USING CTI EQUIPMENT, SUPPLIES,
FACILITIES OR TRADE SECRET INFORMATION AND WHICH: (i) DO NOT RELATE AT THE
TIME OF CONCEPTION OR REDUCTION TO PRACTICE TO CTI BUSINESS OR ACTUAL OR
DEMONSTRABLY ANTICIPATED RESEARCH OR DEVELOPMENT; OR (ii) DO NOT RESULT FROM
ANY WORK PERFORMED BY BALES FOR CTI.
d. The provisions of sub-Paragraph 7(c) are intended to
provide the notice to Bales required under California Labor Code Section 2872.
Bales specifically acknowledges that he has read all of the provisions of
Paragraph 7, including the notice contained in sub-Paragraph 7(c), and that he
has received a copy of this entire Agreement.
8. Termination.
a. CTI may terminate this Agreement at any time without
notice if Bales commits any material act of dishonesty, is convicted of a
crime involving moral turpitude, or, after written notice thereof by CTI,
continues to be negligent in the performance of his duties under this
Agreement in a manner that substantially adversely affects CTI business.
b. CTI may terminate this Agreement at any time if Bales
becomes physically or mentally ill or otherwise incapacitated so that for a
continuous period of six months, Bales has been unable to perform his
obligations under this Agreement in substantially the same manner and with
substantially the same effect as prior to the incapacity. If CTI terminates
Bales employment under this Paragraph 8(b), CTI shall provide Bales with a
one-time disability payment of one-half of Bales then current annual salary.
c. Bales may terminate this Agreement at any time if CTI
breaches any of its obligations under this Agreement. Bales failure or
refusal to terminate this Agreement upon any such breach shall not constitute
a waiver of Bales right to terminate this Agreement upon any subsequent
breach.
9. Unfair Competition Prohibited.
a. Bales understands and acknowledges that during the course
of his employment Bales will be exposed to confidential information and
numerous trade secrets of and concerning CTI whose divulgence to third parties
would substantially adversely affect CTI business and/or reputation. Those
trade secrets and confidential information relate to and include, but are not
limited to, the following:
i. The source and object codes of CTI software;
ii. The source and object codes of third party
software marketed or used by CTI;
iii. CTI marketing techniques;
iv. Customer lists;
v. Contact lists;
vi. Internal accounting and record keeping systems;
vii. Information concerning CTI financial condition;
viii. Management and personnel records;
ix. CTI inventions as defined in Paragraph 7; and
x. Such other technical and nontechnical trade
secrets as may subsequently be developed or
obtained by CTI.
b. Bales expressly agrees that he shall not, without CTI
prior written consent, either during the term of this Agreement or at any time
thereafter, divulge to third parties any of CTI trade secrets or confidential
information. In this regard, the parties specifically acknowledge and agree
that if Bales breaches any of his obligations under this Paragraph 9, CTI may
not have an adequate remedy at law, and a prohibitory injunction restraining
and enjoining Bales from divulging CTI trade secrets and confidential
information to third parties and a mandatory injunction requiring Bales to
inform CTI of the recipients and nature of all trade secrets and confidential
information theretofore divulged by Bales are proper remedies in addition to
all other remedies which CTI may have at law and in equity.
10. Attorneys Fees.
If either party commences an action for the enforcement and/or
interpretation of any of the provisions of this Agreement, the prevailing
party shall be entitled to recover his or its reasonable attorneys fees in
addition to all other remedies.
11. Necessary Acts.
Each party agrees to perform all further acts and execute and
deliver all other documents which may be reasonably necessary to carry out the
provisions of this Agreement.
12. Severability.
If any provision of this Agreement is determined by a court of
competent jurisdiction to be unenforceable, the remaining provisions shall
remain in full force and effect.
13. Entire Agreement.
This Agreement contains the entire agreement between the
parties and supersedes all prior oral and written understandings and
agreements concerning the subject hereof. No amendments may be made except by
a writing signed by both parties.
14. Applicable Law.
This Agreement, and all provisions hereof, shall be interpreted
and enforced in accordance with the laws of the State of California.
Executed at Walnut Creek, California, as of April 17, 2000.
COMPUTERIZED THERMAL IMAGING, INC.,
a Nevada corporation
By: /s/ David P. Johnston
-------------------------------------
David P. Johnston
President and Chief Executive Officer
/s/ Maurice J. Bales
-------------------------------------
MAURICE J. BALES
<PAGE>
EXHIBIT 10.5
BUILDING LEASE AGREEMENT
This BUILDING LEASE AGREEMENT ("Lease")is made and entered into as of this
17th day of April, 2000 by and between THE MAURICE J. BALES and MARIANNE J.
BALES TRUST ("Landlord") and COMPUTERIZED THERMAL IMAGING, INC., a Nevada
corporation ("Tenant").
1. Lease Landlord hereby leases to Tenant, and Tenant hereby
leases from Landlord, the commercial building located at and commonly referred
to as 1620 Tice Valley Boulevard, Walnut Creek, California (the "Building") .
2. Term The term of this Lease shall commence on April 20, 2000
and end on April 19, 2003.
3. Rent The rent shall be $7,500 per month for the first twelve
months, payable in advance on or before the 20th day of each month commencing
April 20, 2000, and shall increase annually as of April 20 of each succeeding
year at a rate equal to the percentage increase, if any, in the Consumer Price
Index published by the United States Department of Labor, Bureau of Labor
Statistics (All Urban Consumers - San Francisco Bay Area), or any comparable
government index then in effect, for the preceding calendar year. Tenant
shall pay Landlord a late charge of $375 if the rent is not paid on or before
the 25th of the month in which the rent is due.
4. Use Tenant shall use the Building for research and development
in the field of infrared transmitting and imaging technology, limited light
manufacturing pertaining thereto, and for no other purpose whatsoever. Under
no circumstances shall Tenant store or use hazardous substances, materials or
wastes at or in the Building, commit waste in or upon the Building or use the
Building in any manner that creates a nuisance, violates any laws, regulations
or ordinances or increases or causes a cancellation of any policies of
insurance carried by Landlord concerning the Building or the contents of the
Building.
5. Services and Utilities Landlord shall provide Tenant with the
services and utilities that Landlord customarily has provided to the Building,
including, but not limited to, water, electricity, HVAC, janitorial services
and exterior and structural repairs. Notwithstanding the foregoing, Landlord
shall have no obligation to make interior, non-structural repairs, or to paint
or carpet the interior walls, ceilings or floors. Tenant shall at all times
maintain the interior of the Building in a state of good repair and in a neat,
clean and serviceable condition to the extent that Landlord is not obligated
to do so hereunder. Landlord shall have the right to enter the Building for
the purposes of showing the Building to prospective purchasers and/or lenders,
responding to emergencies and effecting necessary repairs.
6. Assignment; Sublease Tenant shall not assign this Lease or
sublease the Building without Landlord prior written consent, which consent
shall not be unreasonably withheld.
7. Alterations and Liens Tenant shall not, without Landlord prior
written consent, make alterations, additions or improvements to the Building.
Tenant shall keep the Building and the land upon which the Building is
situated free and clear of any and all mechanics and materialmens liens
resulting from any and all such alterations, additions or improvements.
8. Loss, Damage and Injury Landlord shall not be liable to Tenant
or Tenant agents, employees, guests, invitees, or any person claiming by,
through or under Tenant, for any injury to person, loss or damage to property,
or for loss or damage to business, occasioned by or through the acts or
omissions of Landlord or any other person, or by any cause whatsoever, except
for any injury, loss or damage occasioned by Landlord gross negligence or
willful misconduct. To the extent that such liability has not been caused by
Landlord gross negligence or willful misconduct, and to the extent that such
liability is not indemnified by Landlord or Tenant policies of insurance,
Tenant shall indemnify Landlord from and against any liability arising from
Tenant use and/or occupancy of the Building.
9. Insurance Tenant shall, at Tenant expense, keep in full force
and effect during the term hereof a policy or policies of public liability and
property damage insurance with combined single limits of not less than $1
million. Said policy or policies shall name Landlord as an additional
insured, and shall insure Landlord contingent liability with respect to acts,
or omissions of Tenant. Said policy or policies shall be issued by an
insurance company or companies licensed to do business in the State of
California and shall require no less than thirty days prior written notice to
Landlord before the policy or policies be cancelled or amended. Tenant shall
deliver to Landlord a certificate evidencing such insurance within 10 days
after the execution of this Lease and withing 10 days after all renewals or
replacements of said insurance.
10. Holding Over If Tenant remains in possession of the Building
after the expiration of the term of this Lease, Tenant shall become a Tenant
from month to month upon the terms and conditions of this Lease, so far as
applicable, but at a monthly rental of $10,000, payable in advance. Said
month to month tenancy shall continue until terminated as provided by law.
11. Damage If the Building is damaged by fire or other casualty
covered by insurance, Landlord shall forthwith repair the same, provided such
repairs can be made within ninety working days from the date of such damage.
In such event, this Lease shall remain in full force and effect during the
period when such repairs are made, except that Tenant rent shall be equitably
adjusted during said period unless the damage is attributable to the negligent
or willful conduct of Tenant or Tenant officers, agents, contractors,
employees or invitees. If such repairs are not covered by insurance or cannot
be made within ninety working days from the date of such damage, Landlord
shall have the option to either: (1) repair or restore the Building, in which
case this Lease shall continue in full force and effect, but with the rent
equitably adjusted as provided above; or (2) terminate this Lease by so
notifying Tenant in writing within thirty working days after the date of
damage. The termination shall be effective upon the date specified in the
Landlord notice, which date shall be not less than thirty nor more than sixty
working days after the giving of said notice. Tenant hereby waives any
provisions of law automatically terminating this Lease or otherwise contrary
to the provisions of this paragraph in the event of damage to or destruction
of the premises.
12. Eminent Domain If all or any part of the Building is taken or
appropriated by any public or quasi-public authority under the power of
eminent domain, and such taking will substantially impair Tenant use of the
Building for more than ninety days, either party hereto may, at its option,
terminate this Lease. If Tenant terminates the Lease, Landlord shall be
entitled to, and Tenant upon demand of Landlord shall assign to Landlord, any
and all of Tenant rights in and to any and all income, rent, award, and/or
any interest therein whatsoever that may be awarded or paid in connection with
the taking or appropriation, and Tenant shall have no claim against Landlord
or the condemnor for the value of the unexpired term of this Lease. If a part
of the Building is taken or appropriated by eminent domain and neither party
terminates this Lease, the rent thereafter to be paid shall be equitably
adjusted.
13. Estoppel Certificates At any time and from time to time,
Tenant shall, upon Landlord request, promptly execute, acknowledge and
deliver to Landlord a statement: (1) certifying the date of commencement of
this Lease; (2) acknowledging that this Lease is unmodified and in full force
and effect (or if there have been modifications, that this Lease is in full
force and effect as modified and the date and nature of such modifications)
and the date to which the rent has been paid; and (3) setting forth such other
matters as may reasonably be requested by Landlord. Landlord and Tenant
intend that the statement or statements delivered pursuant to this paragraph
may be relied upon by any mortgagee, beneficiary of any Deed of Trust or by
any purchaser or prospective purchaser of the Building.
14. Waiver of Insurable Losses Landlord and Tenant intend that
the risks of loss, damage and injury arising from the occupancy and/or use of
the Building be allocated as far as possible to the parties respective
insurance policies. Accordingly, Landlord and Tenant each hereby waive any
and all claims, actions, demands and all rights of recovery against each
other, and hereby release each other from all liability therefor, to the
maximum extent permitted by law to the extent that such loss, damage or injury
is compensated by the parties respective insurance policies.
15. No Personal Liability Notwithstanding any other provision of
this Lease, the liability of Landlord with respect to any obligation shall be
limited to the interest of Landlord in the Building, and Tenant shall look
solely to such interest for the recovery of any judgment or award against
Landlord. Neither Landlord, nor any trustee, member, principal, partner,
shareholder, officer, agent, director or beneficiary thereof shall be
personally liable for any judgment or deficiency.
16. Attorneys Fees If either Landlord or Tenant commences an
action to interpret or enforce any provision of this Lease, the prevailing
party shall be entitled to recover its reasonable attorneys fees in addition
to all other remedies.
17. No Party is Drafter Landlord and Tenant each acknowledge that
this Lease has been fully and freely negotiated, and that no provision hereof
shall be interpreted against either party on the ground that such party is the
drafter thereof.
18. Entire Agreement This Lease constitutes the entire agreement
between the parties and supersedes all prior agreements and understandings,
whether written or oral, concerning the subject matter hereof. This Lease may
not be amended or otherwise modified except by a writing executed by both
parties.
19. Successors Subject to the restrictions on Tenant right to
assign this Lease or to sublease as set forth in Paragraph 6, this Lease shall
be binding upon and inure to the benefit of all successors of the parties.
20. Notices All notices required to be given hereunder shall be
in writing and shall be deemed delivered: i) on the date of delivery if
delivered in person or transmitted by fax transmission and receipt thereof has
been acknowledged by the party to be notified or a duly authorized
representative thereof; ii) on the next business day if delivered by a
nationally recognized overnight courier service; or iii) on the third business
day after mailing if mailed by first class mail with postage fully prepaid
thereon to the last known address of the party to be notified.
21. Landlord Remedies and Applicable Law; No Waiver In the event
of a default by Tenant of any of Tenant obligations under this Lease,
Landlord shall have all rights and remedies available to it under the laws of
the State of California. In the event Landlord fails or refuses to exercise
its rights with respect to a default, said failure or refusal shall not
constitute or be deemed a waiver of any of Landlord rights with respect to
any subsequent default.
22. Severability If any provision of this Lease is determined by
a court of competent jurisdiction to be unenforceable, such determination
shall not affect any other provision, and all of such other provisions shall
remain in full force and effect.
23. Applicable Law This Lease and all provisions hereof shall be
interpreted and enforced in accordance with the law of the State of
California.
THE MAURICE J. BALES and MARIANNE J.
BALES TRUST
By: /s/ Maurice J. Bales, Trustee
-----------------------------
Maurice J. Bales, Trustee
By: /s/ Marianne J. Bales, Trustee
-----------------------------
Marianne J. Bales, Trustee
Landlord
COMPUTERIZED THERMAL IMAGING, INC.,
a Nevada corporation
By: /s/ David B. Johnston
----------------------------
David B. Johnston
President and Chief Executive Officer
Tenant
