December 17, 1999
Mr. Itzhak Goldenberg
Noga Electrotechnica Limited
Re: Magna-Lab, Inc.
Ladies and Gentlemen,
On behalf of our client, Magna-Lab, Inc., this letter sets forth our
understanding of the terms under which Noga Electrotechnica Limited and or its
affiliated entities (collectively, "Noga") will commit to invest $3,000,000 in
Magna-Lab.
1. Upon execution of this letter, Noga will make a nonrefundable payment
to Magna-Lab of $250,000. This will entitle Noga to receive, for no
additional consideration, $250,000 worth of Magna-Lab class A common
stock ("common stock") at $.22 per share if and only if all further
payments required to be made by Noga under this letter are timely made.
2. Within 30 days of the date of execution of this letter, Noga will
purchase $250,000 worth of common stock of Magna-Lab at $.22 per share.
3. Within 60 days of the date of execution of this letter, Noga will
purchase an additional $250,000 worth of common stock of Magna-Lab at
$.22 per share.
4. By May 30, 2000, Noga will purchase an additional $2,250,000 worth of
common stock of Magna-Lab at $.22 per share (it being understood that
Noga has the right to make partial payments prior to May 30, 2000 for a
pro rata number of shares); provided, however, that if, for any 5
consecutive trading days or any 10 trading days in a 30 trading day
period, the bid price of Magna-Lab's common stock closes at $2.00 or
more per share at any time after the date of this letter and prior to
May 30, 2000, Magna-Lab shall thereafter have the right to demand, by
delivery of written notice to Noga, that Noga pay such $2,250,000
amount immediately. Within 15 days of delivery of such notice, Noga
shall pay to Magna-Lab such amount.
5. Noga shall have an option, exercisable at any time prior to May 30,
2000, to purchase such additional number of shares of Magna-Lab common
stock at $.22 per share as is necessary for Magna-Lab to meet Nasdaq
SmallCap Market minimum listing requirements.
6. Upon payment of the initial $250,000 and for a period of two years
after the date of this letter, Noga shall have the right to nominate a
number of directors to Magna-Lab's board of directors such that the
total number of non Noga-nominated directors on the Board exceeds the
number of Noga-nominated directors by one. Noga designates Jerry
Feldman as its initial nominee.
7. Noga understands that Magna-Lab is currently seeking to raise up to
$2,000,000 in a private placement not involving Noga. In the event
Magna-Lab is required to pay to third parties an investment banking,
placement agent or similar fee or commission, whether in the form of
stock or cash (other than salary), for monies raised in that offering,
Magna-Lab agrees to pay to Noga, for no additional consideration, an
amount equal to the amount of such fee or commission; provided,
however, that the total amount of stock or options, if any, payable to
Noga and such third parties shall not exceed 7,000,000 shares.
Notwithstanding the foregoing, if less than the full $2,000,000 is
raised in the private placement not involving Noga, the number of
shares of stock or options payable to Noga and such third parties shall
be proportionate to the amount of funds raised. For example, if Noga
provides the full $3,000,000 it has committed under this letter and
such third parties raise only $1,000,000 in such financing, then Noga
shall be entitled to 75% of the total stock and option compensation an
such third parties shall be entitled to the remaining 25%.
8. Upon payment of the initial $250,000 hereunder, Magna-Lab agrees that
any single payment or withdrawal from the company's bank account(s) of
$2,000 or more shall require the signature of Jerry Feldman or such
other individual designated by Noga and acceptable to Magna-Lab.
9. During the period ending two years from the date of this letter,
Magna-Lab agrees to (i) hold Board meetings at least once a month or
such other interval as is reasonably acceptable to the Noga-designated
directors, and (ii) provide to the Board members an annual budget and
monthly updates as well as a monthly business report.
10. Set forth on Schedule A attached hereto is a summary of Magna-Lab's
outstanding stock, on an actual and fully diluted basis.
11. It is contemplated that a stockholder agreement between Noga and
certain principal stockholders of Magna-Lab will be entered into with
respect to certain voting and other matters.
12. Noga will provide appropriate investor representations necessary to
establish compliance with US Securities laws with respect to this
investment.
13. All rights of Noga and all agreements of Magna-Lab under this letter
shall terminate and be of no further force or effect in the event that
Noga fails to timely pay any amount required to be paid by it
hereunder.
This letter agreement shall be governed by and construed in accordance with the
laws of the State of New York (without giving effect to its rules as to
conflicts of law). This letter agreement contains the entire agreement between
the parties relating to the subject matter hereof and supersedes all oral
statements and prior writings with respect thereto. This letter agreement may
not be amended or modified except by a writing executed by each of the parties
hereto. This letter agreement may not be assigned by Noga without Magna-Lab's
prior written consent. This letter agreement may be executed in counterparts,
each of which will be deemed an original, but all of which taken together will
constitute one and the same instrument.
If the foregoing is acceptable to you, please sign in the space provided below
and return a copy of this letter by fax and mail to indicate your commitment. We
will then submit the proposal to Magna-Lab's board of directors for its
approval. This letter will not be binding on either party unless and until
signed by both parties and approved by each party's board of directors or
comparable governing body.
Sincerely,
GRAHAM & JAMES LLP
By: /s/Irwin M. Rosenthal
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Irwin M. Rosenthal
AGREED: NOGA ELECTROTECHNICA LIMITED
By: /s/Itzak Goldenberg
-------------------
Print Name: Itzak Goldenberg
Print Title: Managing Director
AGREED: MAGNA LAB, INC.
By: /s/Irwin M. Rosenthal
---------------------
Print Name: Irwin M. Rosenthal
Print Title: Director
