REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of March 15,
1996 by and among Network Imaging Corporation, a Delaware corporation with
headquarters located at 000 Xxxxxxx Xxxx Xxxxx, Xxxxxxx, XX 00000 (the
"Company"), and the undersigned (collectively, the "Buyer").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among
the parties of even date herewith (the "Securities Purchase Agreement"), the
Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, (i) to issue and sell to the Buyer shares (the
"Common Shares") of the Company's common stock (the "Common Stock"), and (ii) to
issue to the Buyer warrants (the "Warrants") for the purchase of shares of
Common Stock (as exercised, the "Warrant Shares"); and
B. To induce the Buyer to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws;
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 are hereby acknowledged, the Company and the
Buyer hereby agree as follows:
1. DEFINITIONS
a. As used in this Agreement, the following terms shall have
the following meanings:
(i) "Investor" means the Buyer and any transferee
or assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.
(ii) "register," "registered," and "registration"
refer to a registration effected by preparing and filing a Registration
Statement or Statements in compliance with the 1933 Act and pursuant to Rule 415
under the 1933 Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(iii) "Registrable Securities" means the Common
Shares, the Warrant Shares, and the
Damage Shares (as defined below).
(iv) "Registration Statement" means a registration
statement of the Company under the 0000 Xxx.
b. Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare, and, on
or prior to April 3, 1996, file with the SEC a Registration Statement on Form
S-3 covering the resale of the Registrable Securities, which Registration
Statement shall state that, in accordance with Rule 416 promulgated under the
1933 Act, such Registration Statement also covers such indeterminate number of
additional shares of Common Stock as may become issuable upon exercise of the
Warrants to prevent dilution resulting from stock splits, stock dividends or
similar transactions. The Registration Statement (and each amendment or
supplement thereto, and each request for acceleration of effectiveness thereof)
shall be provided to and approved by the Buyer and its counsel prior to its
filing or other submission.
b. Underwritten Offering. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) hereof involves an underwritten
offering, the Investors who hold a majority in interest of the Registrable
Securities subject to such underwritten offering shall have the right to select
one legal counsel and an investment banker or bankers and manager or managers to
administer the offering, which investment banker or bankers or manager or
managers shall be reasonably satisfactory to the Company.
c. Payments by the Company. If the Registration Statement
covering the Registrable Securities required to be filed by the Company pursuant
to Section 2(a) hereof is not declared effective by the SEC by June 17, 1996 or
if, after the Registration Statement has been declared effective by the SEC,
sales cannot be made pursuant to the Registration Statement (by reason of stop
order, the Company's failure to update the Registration Statement or otherwise),
or if the Common Stock is not listed or included for quotation on the National
Association of Securities Dealers Automated Quotation (the "NASDAQ"), National
Market System (the "NASDAQ-NMS"), the New York Stock Exchange (the "NYSE"), or
the American Stock Exchange (the "AMEX"), then the Company will make payments to
the Investors in such amounts and at such times as shall be determined pursuant
to this Section 2(c) as partial relief for the damages to the Investors by
reason of any such delay in or reduction of their ability to sell the
Registrable Securities (which remedy shall not be exclusive of any other
remedies available at law or in equity). The Company shall pay to each holder of
Registrable Securities an amount equal to the Average Market Price (as defined
below) of the Common Stock during the five (5) consecutive trading days ending
one (1) trading day prior to the Closing Date (the "Closing Date Average Market
Price") multiplied by (the "Multiple Amount") three-hundredths (.03) times the
sum of: (i) the number of months (prorated for partial months) after June 17,
1996 and prior to the date the Registration Statement is declared effective by
the SEC; (ii) the number of months (prorated for partial months) that sales
cannot be made pursuant to the Registration Statement after the Registration
Statement has been declared effective; and (iii) the number of months (prorated
for partial months) that the Common Stock is not listed or included for
quotation on the NASDAQ-NMS, NYSE or AMEX after the Registration Statement has
been declared effective; provided, however, that the Multiple Amount shall not
at any time exceed twenty five hundredths (.25). (For example, if the
Registration Statement becomes effective one and one-half (1 1/2) months after
June 17, 1996, the Company would pay $45,000 for each $1,000,000 of Closing Date
Average Market Price until any subsequent adjustment; if thereafter, sales could
not be made pursuant to the Registration Statement for a period of two (2)
months, the Company would pay an additional $60,000 for each $1,000,000 of
Closing Date Average Market Price). Such amounts may be paid at the Company's
option in cash or Common Stock (the "Damage Shares") valued based on the Average
Market Price for the period (a "Damage Pricing Period") of five (5) consecutive
trading days ending on the trading day prior to the date that the Registration
Statement is declared effective or that sales can be resumed under the
Registration Statement, as applicable; provided, however, any amounts due as to
any Damage Pricing Period during which the Registration Securities are not
listed or included for quotation on the NASDAQ-NMS, NYSE or AMEX shall be paid
in cash only; provided, further, however, that in no event shall Damage Shares
be paid hereunder if, after giving effect to such payment, the number of shares
of Common Stock beneficially owned by such holder and all other holders whose
holdings would be aggregated with such holder for purposes of calculating
beneficial ownership in accordance with Sections 13(d) and 16 of the Securities
Exchange Act of 1934, as amended, and the regulations thereunder ("Sections
13(d) and 16"), including, without limitation, any person serving as an adviser
to any holder (collectively, the "Related Persons"), would exceed four and
ninety five-hundredths percent (4.95%) of outstanding shares of Common Stock
(calculated in accordance with Sections 13(d) and 16); cash shall be paid for
any Damage Shares which cannot be issued pursuant to this proviso. Payments of
cash or issuances of Damage Shares pursuant hereto shall be made within five (5)
days after the end of each period that gives rise to such obligation, provided
that, if any such period extends for more than thirty (30) days, interim
payments shall be made for each such thirty (30) day period with the interim
payment (if paid in Damage Shares) based on the last five (5) trading days of
such thirty (30) day period. "Average Market Price" of any security for any
period shall be computed as the arithmetic average of the closing bid prices for
such security for each trading day in such period on the NASDAQ-NMS, or, if the
NASDAQ-NMS is not the principal trading market for such security, on the
principal trading market for such security, or, if market value cannot be
calculated for such period on any of the foregoing bases, the Average Market
Price shall be the average fair market value during such period as reasonably
determined in good faith by the Board of Directors of the Company.
d. Piggy-Back Registrations. If at any time prior to the
effective date of the Registration Statement required to be filed by the Company
pursuant to Section 2(a) hereof, the Company shall file with the SEC a
Registration Statement relating to an offering or its own account or the account
of others under the 1933 Act of any of its equity securities (other than on Form
S-4 or Form S-8 of their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans) the Company shall send to each Investor who is entitled to
registration rights under this Section 2(d) written notice of such determination
and, if within twenty (20) days after receipt of such notice, such Investor
shall so request in writing, the Company shall include in such Registration
Statement all or any part of the Registrable Securities such Investor requests
to be registered, except that if, in connection with any underwritten public
offering for the account of the Company the managing underwriter(s) thereof
shall impose a limitation on the number of shares of Common Stock which may be
included in the Registration Statement because, in such underwriter(s)'
judgment, marketing or other factors dictate such limitation is necessary to
facilitate public distribution, then the Company shall be obligated to include
in such Registration Statement only such limited portion of the Registrable
Securities with respect to which such Investor has requested inclusion
hereunder; provided that no portion of the equity securities which the Company
is offering for its own account shall be excluded; provided further that the
Company shall be entitled to exclude Registrable Securities to the extent
necessary to avoid breaching obligations existing prior to the date hereof to
other stockholders of the Company. Any exclusion of Registrable Securities shall
be made pro rata among the Investors seeking to include Registrable Securities,
in proportion to the number of Registrable Securities sought to be included by
such Investors; provided, however, that the Company shall not exclude any
Registrable Securities unless the Company has first excluded all outstanding
securities, the holders of which are not entitled to inclusion of such
securities in such Registration Statement or are not entitled to pro rata
inclusion with the Registrable Securities; and provided further, however, that,
after giving effect to the immediately preceding proviso, any exclusion of
Registrable Securities shall be made pro rata with holders of other securities
having the right to include such securities in the Registration Statement other
than holders of securities entitled to inclusion of their in such Registration
Statement by reason of demand registration rights. No right to registration of
Registrable Securities under this Section 2(d) shall be construed to limit any
registration required under Section 2(a) hereof. The obligations of the Company
under this Section 2(d) may be waived by Investors holding a majority in
interest of the Registrable Securities. If an offering in connection with which
an Investor is entitled to registration under this Section 2(d) is an
underwritten offering, then each Investor whose Registrable Securities are
included in such Registration Statement shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in an underwritten offering
using the same underwriter or underwriters and, subject to the provisions of
this Agreement, on the same terms and conditions as other shares of Common Stock
included in such underwritten offering.
e. Eligibility for Form S-3. The Company represents and
warrants that it meets the requirement for the use of Form S-3 for registration
of the sale by the Buyer and any other Investor of the Registrable Securities
and the Company shall file all reports required to be filed by the Company with
the SEC in a timely manner so as to maintain such eligibility for the use of
Form S-3. In the event that Form S-3 is not available for the sale by the
Investors of the Registrable Securities, the Company shall register the sale on
another appropriate form.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare promptly, and file with the SEC
not later than April 3, 1996, a Registration Statement with respect to the
number of Registrable Securities provided in Section 2(a), and thereafter to use
its best efforts to cause each Registration Statement relating to Registrable
Securities to become effective as soon as possible after such filing, and keep
the Registration Statement effective pursuant to Rule 415 at all times until
such date as the earlier of (i) at least three (3) years after the date of the
expiration of all of the Warrants, or (ii) the date on which (a) all of the
Warrants have been exercised or expired and (b) no Registrable Securities are
held by any Investor (the "Registration Period"), which Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material fact or omit to
state 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.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep the Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the disposition of
all Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement.
c. The Company shall furnish to each investor whose
Registrable Securities are included in the Registration Statement and its legal
counsel (i) promptly after the same is prepared and publicly distributed, filed
with the SEC, or received by the Company, one copy of the Registration Statement
and any amendment thereto each preliminary prospectus and prospectus and each
amendment or supplement thereto, and, in the case of the Registration Statement
referred to in Section 2(a), search letter written by or on behalf of the
Company to the ss. or the staff of the SEC, and each item of correspondence from
the SEC or the staff of the SEC, in each case relating to such Registration
Statement (other than any portion of any thereof which contains information for
which the Company has sought confidential treatment), and (ii) such number of
copies of a prospectus, including a preliminary prospectus, and all amendments
and supplements thereto and such other documents as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor.
d. The Company shall use reasonable efforts to (i) register
and qualify the Registrable Securities covered by the Registration Statement
under such other securities or "blue sky" laws of such jurisdictions in the
United States as the Investors who hold a majority in interest of the
Registrable Securities being offered reasonably request, (ii) prepare and file
in those jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (a) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (b) subject itself
to general taxation in any such jurisdiction, (c) file a general consent to
service of process in any such jurisdiction, (d) provide any undertakings that
cause more than nominal expense or burden to the Company, or (e) make any change
in its charter or bylaws, which in each case the Board of Directors of the
Company determines to be contrary to the best interests of the Company and its
stockholders.
e. In the event Investors who hold a majority in interest of
the Registrable Securities being offered in the offering select underwriters for
the offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnifications and contribution obligations, with the
underwriters of such offering.
f. As promptly as practicable after becoming aware of such
event, the Company shall notify each Investor of the happening of any event, of
which the Company has knowledge, as a result of which the prospectus included in
the Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a 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, and use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, and deliver such number of copies of such
supplement or amendment to each Investor as such Investor may reasonably
request.
g. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order at the earliest possible moment and to notify each
Investor who holds Registrable Securities being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance of such order
and the resolution thereof.
h. The Company shall permit a single firm of counsel,
designated as selling stockholders' counsel by the Investors who hold a majority
in interest of the Registrable Securities being sold, to review the Registration
Statement and all amendments and supplements thereto a reasonable period of time
prior to their filing with the SEC, and not file any document in a form to which
such counsel reasonably objects.
i. The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the 0000 Xxx) covering a twelve-month
period beginning not later than the first day of the Company's fiscal quarter
next following the effective date of the Registration Statement.
j. At the request of the Investors who hold a majority in
interest of the Registrable Securities being sold, the Company shall furnish, on
the date that Registrable Securities are delivered to an underwriter, if any,
for sale in connection with the Registration Statement (i) if required by an
underwriter, a letter, dated such date, from the Company's independent certified
public accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters, and (ii) an opinion, dated as of such date, from
counsel representing the Company for purposes of such Registration Statement, in
form, scope and substance as is customarily given in an underwritten public
offering, addressed to the underwriters and the Investors.
k. the Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to the
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Buyer, (iv) one firm of attorneys and one firm
of accountants or other agents retained by all other Investors, and (v) one firm
of attorneys retained by all such underwriters (collectively, the "Inspectors")
all pertinent financial and other records, and pertinent corporate documents and
properties of the Company (collectively, the "Records"), as shall be reasonably
deemed necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; provided, however, that each Inspector shall
hold in confidence and shall not make any disclosure (except to an Investor) of
any Record or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(a) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (b) the release of such
Records is ordered pursuant to a subpoena or other order from a court or
government body of competent jurisdiction, or (c) the information in such
Records has been made generally available to the public other than by disclosure
in violation of this or any other agreement. The Company shall not be required
to disclose any confidential information in such Records to any Inspector until
and unless such Inspector shall have entered into confidentiality agreements (in
form and substance satisfactory to the Company) with the Company with respect
thereto, substantially in the form of this Section 3(k). Each Investor agrees
that it shall, upon learning that disclosure of such Records is sought in or by
a court or governmental body of competent jurisdiction or through other means,
give prompt notice to the Company and allow the Company, as its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential.
l. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company hereof
unless (i) disclosure of such information is necessary to comply with federal or
state securities laws, (ii) the disclosure of such information is necessary to
avoid or correct a misstatement or omission in any Registration Statement, (iii)
the release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor, and
allow the Investor, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protection order for, such information.
m. The Company shall use its best efforts to cause all the
Registrable Securities covered by the Registration Statement to be listed on
NYSE or AMEX or included for quotation on NASDAQ-NMS.
n. The Company shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities and CUSIP numbers
therefor not later than the effective date of the Registration Statement.
o. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be offered pursuant to the
Registration Statement and enable such certificates to be in such denomination
or amounts, as the case may be, as the managing underwriter or underwriters, if
any, or the Investors may reasonably request and registered in such names as the
managing underwriter or underwriters, if any, or the Investors may request. No
later than the effective date of any Registration Statement registering the
resale of Registrable Securities, the Company shall deliver to its transfer
agent instructions, accompanied by any reasonably required opinion of counsel,
that (i) permit sales of legended securities in a timely fashion that complies
with then mandated securities settlement procedures for regular way market
transactions; and (ii) upon the exercise of Warrants and the contemporaneous
resale, pursuant to a Registration Statement, of the applicable Warrant Shares,
permit the issuance of stock certificates without restrictive legends to the
transferees of such Warrant Shares.
p. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to the Registration Statement.
4. OBLIGATIONS OF THE INVESTOR.
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
a. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least five (5)
days prior to the first anticipated filing date of the Registration Statement,
the Company shall notify each Investor of the information the Company requires
from each such Investor if such Investor elects to have any of such Investor's
Registrable Securities included in the Registration Statement.
b. Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
c. In the event Investors holding a majority in interest of
the Registrable Securities being registered determine to engage the services of
an underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
d. Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(f)
or 3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
e. No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting arrangements
approved by the Investors entitled hereunder to approve such arrangements, (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements, and (iii) agrees to pay its pro rata share of
all underwriting discounts and commissions.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, the
fees and disbursements of counsel for the Company, and the fees and
disbursements of one (1) firm of counsel for the Investors, shall be borne by
the Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify,
hold harmless and defend (i) each Investor who holds such Registrable
Securities, (ii) the directors, officers and each person who controls any
Investor within the meaning of the 1933 Act or the Securities Exchange Act of
1934, as amended (the "1934 Act"), if any, and (iii) any underwriter (as defined
in the 0000 Xxx) for the Investors; and the directors, officers and each person
who controls any such underwriter within the meaning of the 1933 Act or the 1934
Act, if any, (each, an "Indemnified Person") to which any of them may become
subject insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading, (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final prospectus (as amended
or supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, or any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities pursuant to a Registration Statement (matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations"). Subject
to the restrictions set forth in Section 6(d) with respect to the number of
legal counsel, the Company shall reimburse the Investors and each such
underwriter or controlling person, promptly as such expenses are incurred and
are due and payable, for any reasonable legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any such Claim,
subject to the provisions of Section 6(d). Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a): (i) shall not apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by any Indemnified Person or underwriter for
such Indemnified Person expressly for use in connection with the preparation of
the Registration Statement or any such amendment thereof or supplement thereto,
if such prospectus was timely made available by the Company pursuant to Section
3(c) hereof; (ii) with respect to any preliminary prospectus, shall not inure to
the benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to Section 3(c) hereof; (iii)
shall not be available to the extent such Claim is based on a failure of the
Investor to deliver or to cause to be delivered the prospectus made available by
the Company; and (iv) shall not apply to amounts paid in settlement of any Claim
if such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to indemnify, hold harmless
and defend, to the same extent and in the same manner set forth in Section 6(a),
the Company, each of its directors, each of its officers who signs the
Registration Statement, each person, if any, who controls the Company within the
meaning of the 1933 Act or the 1934 Act, any underwriter and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the 1933 Act or the 1934 Act (collectively and
together with an indemnified Person, an "Indemnified Party"), against any Claim
to which any of them may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation,
in each case to the extent (and only to the extent) that such violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement or to the extent such Claim is based upon any violation or alleged
violation by the Investor of the 1933 Act, the 1934 Act, or any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder; and such Investor will reimburse any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such Claim; provided, however, that the indemnity agreement
contained in this Section s6(b) shall not apply to amounts paid in settlement of
any Claim if such settlement is effected without the prior written consent of
such Investor, which consent shall not be unreasonably withheld; provided,
further, however, that the Investor shall be liable under this Section 6(b) for
only that amount of a Claim as does not exceed the net proceeds to such Investor
as a result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(b) with respect to any
preliminary prospectus shall not inure to the benefit of any Indemnified Party
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing by such
persons expressly for inclusion in the Registration Statement.
d. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any government action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to made against any indemnifying
party under this Section 6, deliver to the indemnifying party a written notice
of the commencement thereof, and the indemnifying party shall have the right to
participate in, and to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The Company shall pay for only one separate legal counsel for the
Investors, and such legal counsel shall be selected by the Investors holding a
majority in interest of the Registrable Securities included in the Registration
Statement to which the Claim relates. The failure to deliver written notice to
the indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action. The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due and
payable.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of such fraudulent misrepresentation, and (iii) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation of
the SEC that may at any time permit the investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to:
a. make and keep public information available, as those terms
are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1934 Act so long as the Company
remains subject to such requirements (it being understood that nothing herein
shall limit the Company's obligations under Section 4(c) of the Securities
Purchase Agreement) and the filing of such reports and other documents is
required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144 and the
1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested to permit the investors to
sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS
The rights to have the Company register Registrable Securities pursuant
to this Agreement shall be automatically assignable by the Investors to any
transferee of all or any portion of Registrable Securities if: (i) the Investor
agrees in writing with the transferee or assignee or assign such rights, and a
copy of such agreement is furnished to the Company within a reasonable time
after such assignment, (ii) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (a) the name and
address of such transferee or assignee, and (b) the securities with respect to
which such registration rights are being transferred or assigned, (iii)
immediately following such transfer or assignment the further disposition of
such securities laws, (iv) at or before the time the Company receives the
written notice contemplated by clause (ii) of this sentence the transferee or
assignee agrees in writing with the Company to be bound by all of the provisions
contained herein and by all the provisions of the Securities Purchase Agreement
that deal with the transfer or resale of the Registrable Securities, (v) such
transfer shall have been made in accordance with the applicable requirements of
the Securities Purchase Agreement, and (vi) such transferee shall be an
"accredited investor" as that term defined in Rule 501 of Regulation D
promulgated under the 1933 Act.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with written consent of the Company and
Investors who hold a majority in interest of the Registrable Securities. Any
amendment or waiver effected in accordance with Section 10 shall be binding upon
each Investor and the Company.
11. MISCELLANEOUS
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Notices required or permitted to be given thereunder shall
be in writing and shall be deemed to be sufficiently given when personally
delivered (by hand, by courier, by telephone line facsimile transmission or
other means) or sent by certified mail, return receipt requested, properly
addressed and with proper postage pre-paid,
if to the Company:
Network Imaging Corporation
000 Xxxxxxx Xxxx Xxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Bernardie
with copy to:
Xxxxx & Xxxxxx, L.L.P.
0000 Xxxxxx Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 2007
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxx X. Xxxxxx, Esq.
if to the Buyer, at the addresses listed on the signature page
with copy to:
Genesee Advisers
00000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxx X. Xxxx
and:
Klehr, Harrison, Xxxxxx, Xxxxxxxxx & Xxxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
and if to any other Investor, at such address as such Investor shall have
provided in writing to the Company, or at such other address as each party
furnishes by notice given in accordance with this Section 11(b), and shall be
effective, when personally delivered, upon receipt and, when so sent by
certified mail, four days after deposit with the United States Postal Service.
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. This Agreement shall be enforced, governed by and construed
in accordance with the laws of the Commonwealth of Virginia applicable to
agreements made and to be performed entirely within such State. In the event
that any provision of this Agreement is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof which
may prove invalid or unenforceable under any law shall not affect the validity
of enforceability of any other provision hereof.
e. This Agreement and the Securities Purchase Agreement
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement and the Securities Purchase Agreement supersede all
prior agreements and understandings among t he parties hereto with respect to
the subject matter hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, one executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
IN WITNESS WHEREOF, the parties have caused to be duly executed under
seal as of day and year first above written.
NETWORK IMAGING CORPORATION
By: ______________________________
Name: ____________________________
Its: ______________________________
GFL PERFORMANCE FUND LTD.
By: ______________________________
Name: ____________________________
Its: ______________________________
Address: Genesee Fund Limited
CITCO Building
Wickhams Cay
P.O. Box 662
Road Town, Tortola
British Virgin Islands
Administrator
Curacao International Trust Co. N.V.
Xxxx Xxxxxxxxx 0
X.X. Xxx 000
Xxxxxxx, Xxxxxxxxxx Autilles
