CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
By and Among
NETWORK IMAGING CORPORATION
and
SOUTHBROOK INTERNATIONAL INVESTMENTS, LTD.
______________________________
Dated as of September 30, 1996
______________________________
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TABLE OF CONTENTS
Page
ARTICLE I CERTAIN DEFINITIONS 1
Section 1.1. Certain Definitions. 1
ARTICLE II PURCHASE OF SHARES 3
Section 2.1. Purchase of Shares; Closing 3
ARTICLE III REPRESENTATIONS AND WARRANTIES 4
Section 3.1. Representations and Warranties of the Company
4
Section 3.2. Representations and Warranties of the
Purchaser 8
ARTICLE IV OTHER AGREEMENTS OF THE PARTIES 10
Section 4.1. Transfer Restrictions 10
Section 4.2. Stop Transfer Instruction 11
Section 4.3. Furnishing of Information 11
Section 4.4. Notice of Certain Events 11
Section 4.5. Copies and Use of Disclosure Materials 12
Section 4.6. Modification to Disclosure Materials 12
Section 4.7. Blue Sky Laws 12
Section 4.8. Integration 12
Section 4.9. Furnishing of Rule 144A Materials 13
Section 4.10. Solicitation Materials 13
Section 4.11. Subsequent Financial Statements 13
Section 4.12. Right of First Refusal 13
Section 4.13. Purchaser Ownership of Common Stock 14
Section 4.14. Availability of Common Stock . . . . . . . . . . . 15
Section 4.15. Listing of Underlying Shares 15
Section 4.16. Conversion Procedures 15
Section 4.17. Purchaser's Rights if Trading in Common
Stock is Suspended . . . . . . . . . . . . . . 15
Section 4.18. No Violation of Applicable Law . . . . . . . . 15
Section 4.19. Repurchase or Redemption Restrictions . . . . . 16
ARTICLE V CONDITIONS PRECEDENT TO CLOSING 16
Section 5.1. Conditions Precedent to Obligations of the
Purchaser. 16
Section 5.2. Conditions Precedent to Obligations of the
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Company 18
ARTICLE VI TERMINATION 18
Section 6.1. Termination by Mutual Consent 18
Section 6.2. Termination by the Company or the Purchaser
18
Section 6.3. Termination by the Company 19
Section 6.4. Termination by the Purchaser 19
ARTICLE VII MISCELLANEOUS 20
Section 7.1. Fees and Expenses 20
Section 7.2. Entire Agreement; Amendments 20
Section 7.3. Notices 21
Section 7.4. Amendments; Waivers 22
Section 7.5. Headings 22
Section 7.6. Successors and Assigns 22
Section 7.7. No Third Party Beneficiaries 22
Section 7.8. Governing Law 22
Section 7.9. Survival 22
Section 7.10. Counterpart Signatures 22
Section 7.11. Publicity 23
Section 7.12. Severability 23
Section 7.13. Remedies 23
Exhibit A Certificate of Designation
Exhibit B Registration Rights Agreement
Exhibit C Form of Opinion of Xxxxx & Xxxxxx, L.L.P., counsel for
the Company
Exhibit D Conversion Procedures
Schedule 3.1(a) Subsidiaries
Schedule 3.1(c) Capitalization
Schedule 3.1(f) Required Consents and Approvals
Schedule 3.1(g) Litigation
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CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT, dated as of
September 30, 1996 (this "Agreement"), by and among Network Imaging
Corporation, a Delaware corporation (the "Company"), and Southbrook
International Investments, Ltd., a corporation organized and existing under
the laws of British Virgin Islands (the "Purchaser").
WHEREAS, the Company desires to issue and sell to the Purchaser
and the Purchaser desires to acquire shares of the Company's Series J
Convertible Preferred Stock, par value $.0001 per share (the "Preferred
Stock").
IN CONSIDERATION of the mutual covenants and agreements set
forth herein and for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties agree as follows:
ICERTAIN DEFINITIONS
1. Certain Definitions. As used in this Agreement, and unless
the context requires a different meaning, the following terms have the
meanings indicated:
"Affiliate" means, with respect to any Person, any Person that,
directly or indirectly, controls, is controlled by or is under common
control with such Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with") shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies
of such Person, whether through the ownership of voting securities or by
contract or otherwise.
"Business Day" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions
in the state of New York are authorized or required by law or other
government actions to close.
"Closing" shall have the meaning set forth in Section 2.1(b).
"Closing Date" shall have the meaning set forth in Section
2.1(b).
"Certificate of Designation" shall have the meaning set forth
in Section 2.1(a).
"Code" means the Internal Revenue Code of 1986, as amended, and
the rules and regulations thereunder as in effect on the date hereof.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, par value
008258-00007/391115.4
$.0001 per share.
"Disclosure Materials" means, collectively, the SEC Documents,
the disclosure package delivered to the Purchaser in connection with the
offering by the Company of the Shares and the Schedules to this Agreement
furnished by or on behalf of the Company pursuant to Section 3.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, encumbrance, charge or security interest of any kind in or on such
asset or the revenues or income thereon or therefrom.
"Material Adverse Effect" shall have the meaning set forth in
Section 3.1(a).
"Per Share Consideration" shall have the meaning set forth in
Section 2.1(a).
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
political subdivision thereof) or other entity of any kind.
"Preferred Stock" shall have the meaning set forth in the
recitals hereto.
"Purchase Price" shall have the meaning set forth in Section
2.1(a).
"Registration Rights Agreement" means the registration rights
agreement, substantially in the form of Exhibit B, as the same may be
amended, supplemented or otherwise modified in accordance with its terms.
"Required Approvals" shall have the meaning set forth in
Section 3.1(f).
"SEC Documents" shall have the meaning set forth in Section
3.1(l).
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means the shares of Preferred Stock purchased by the
Purchaser pursuant to this Agreement.
"Subsidiaries" shall have the meaning set forth in Section
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3.1(a).
"Underlying Shares" means the shares of Common Stock into which
the Shares are convertible in accordance with the terms hereof and the
Certificate of Designation.
IPURCHASE OF SHARES
1. Purchase of Shares; Closing.
(a) Subject to the terms and conditions herein set forth, the
Company shall issue and sell to the Purchaser, and the Purchaser shall
purchase from the Company on the Closing Date 500 Shares, which shall have
the respective rights, preferences and privileges set forth in Exhibit A
(the "Certificate of Designation"), at a price per Share of US$10,000 (the
"Per Share Consideration"). The "Purchase Price" shall equal $5,000,000.
(a) The closing of the purchase and sale of the Shares (the
"Closing") shall take place at the offices of Xxxxxxxx Xxxxxxxxx Xxxxxx
Xxxxxxxx & Xxxxxx LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx
00000, immediately following the execution hereof, or at such other time
and/or place as the Purchaser and the Company may agree, provided, however,
in no case shall the Closing take place later than the fifth day after the
last of the conditions listed in Article V is satisfied or waived by the
appropriate party. The date of the Closing is hereinafter referred to as
the "Closing Date".
(a) At the Closing, (i) the Company shall deliver to the
Purchaser (A) one or more stock certificates representing the Shares
purchased hereunder, registered in the name of the Purchaser and (B) all
documents, instruments and writings required to have been delivered at or
prior to Closing by the Company pursuant to this Agreement, (ii) the
Purchaser shall deliver to the Company (A) the Purchase Price in United
States dollars in immediately available funds by wire transfer to an
account designated in writing by the Company prior to the Closing and (B)
all documents, instruments and writings required to have been delivered at
or prior to Closing by the Purchaser pursuant to this Agreement.
IREPRESENTATIONS AND WARRANTIES
1. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Purchaser as follows:
(a) Organization and Qualification. The Company is a
corporation, duly incorporated, validly existing and in good standing under
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the laws of the jurisdiction of its incorporation, with the requisite
corporate power and authority to own and use its properties and assets and
to carry on its business as currently conducted. The Company has no
subsidiaries other than as set forth in the SEC Documents or in Schedule
3.1(a) (collectively, the "Subsidiaries"). Each of the Subsidiaries is a
corporation, duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, with the full corporate
power and authority to own and use its properties and assets and to carry
on its business as currently conducted. Each of the Company and the
Subsidiaries is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing,
as the case may be, could not reasonably be expected to have, individually
or in the aggregate, a material adverse effect on the results of
operations, assets, prospects, or financial condition of the Company and
the Subsidiaries, taken as a whole (a "Material Adverse Effect").
(a) Authorization; Enforcement. The Company has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated hereby and by the Registration Rights Agreement
and otherwise to carry out its obligations hereunder and thereunder. The
execution and delivery of this Agreement and the Registration Rights
Agreement by the Company and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
action on the part of the Company. Each of this Agreement and the
Registration Rights Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or
by other equitable principles of general application.
(a) Capitalization. The authorized, issued and outstanding
capital stock of the Company and each of the Subsidiaries is set forth in
Schedule 3.1(c). No shares of Common Stock are entitled to preemptive or
similar rights. Except as specifically disclosed in Schedule 3.1(c), there
are no outstanding options, warrants, script rights to subscribe to, calls
or commitments of any character whatsoever relating to, or, except as a
result of the purchase and sale of the Shares hereunder and other than
shares of the Company's Series I Convertible Preferred Stock issued to the
Purchaser, securities, rights or obligations convertible into or
exchangeable for, or giving any person any right to subscribe for or
acquire any shares of Common Stock, or contracts, commitments,
understandings, or arrangements by which the Company or any Subsidiary is
or may become bound to issue additional shares of Common Stock, or
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securities or rights convertible or exchangeable into shares of Common
Stock. Neither the Company nor any Subsidiary is in violation of any of
the provisions of its respective certificate of incorporation, bylaws or
other charter documents.
(a) Issuance of Shares. The Shares are duly authorized and,
when paid for in accordance with the terms hereof, shall be validly
issued, fully paid and nonassessable. The Company has and at all times
while the Shares are outstanding will maintain an adequate reserve of
shares of Common Stock to enable it to perform its obligations under this
Agreement and the Certificate of Designation. When issued in accordance
with the terms hereof, the Underlying Shares will be duly authorized,
validly issued, fully paid and nonassessable.
(a) No Conflicts. The execution, delivery and performance of
this Agreement and the Registration Rights Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby and
thereby do not and will not (i) conflict with or violate any provision of
its certificate of incorporation or bylaws or (ii) subject to obtaining the
consents referred to in Section 3.1(f), conflict with, or constitute a
default (or an event which with notice or lapse of time or both would
become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company is a party, or (iii) to the knowledge of
the Company result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or govern-
mental authority to which the Company is subject (including Federal and
state securities laws and regulations), or by which any property or asset
of the Company is bound or affected, except in the case of each of clauses
(ii) and (iii), such conflicts, defaults, terminations, amendments, accel-
erations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect. The business of the Company is
not being conducted in violation of any law, ordinance or regulation of any
governmental authority, except for violations which, individually or in the
aggregate, do not have a Material Adverse Effect.
(a) Consents and Approvals. Except as specifically set forth
in Schedule 3.1(f), neither the Company nor any Subsidiary is required to
obtain any consent, waiver, authorization, or order of, or make any filing
or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of this Agreement and the
Registration Rights Agreement, other than the filing of the registration
statement covering the Underlying Shares with the Commission and the making
of the applicable blue-sky filings under state securities laws, each as
contemplated by the Registration Rights Agreement and other than, in all
cases, where the failure to obtain such consent, waiver, authorization or
008258-00007/391115.4
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order, or to give or make such notice or filing, would not materially
impair or delay the ability of the Company to effect the Closing and
deliver to the Purchaser the Shares free and clear of all Liens
(collectively, the "Required Approvals").
(a) Litigation; Proceedings. Except as specifically dis-
closed in the Disclosure Materials or in Schedule 3.1(g), there is no
action, suit, notice of violation, proceeding or investigation pending or,
to the best knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries or any of their respective properties
before or by any court, governmental or administrative agency or regulatory
authority (Federal, State, county, local or foreign) which (i) relates to
or challenges the legality, validity or enforceability of this Agreement,
the Registration Rights Agreement or the Shares (ii) could, individually or
in the aggregate, have a Material Adverse Effect or (iii) could, indi-
vidually or in the aggregate, materially impair the ability of the Company
to perform fully on a timely basis its obligations under this Agreement or
the Registration Rights Agreement.
(a) No Default or Violation. Neither the Company nor any
Subsidiary (i) is in default under or in violation of any indenture, loan
or credit agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound, except such
conflicts or defaults as do not have a Material Adverse Effect, (ii) is in
violation of any order of any court, arbitrator or governmental body,
except for such violations as do not have a Material Adverse Effect, or
(iii) is in violation of any statute, rule or regulation of any
governmental authority which could (individually or in the aggregate) (x)
adversely affect the legality, validity or enforceability of this Agreement
or the Registration Rights Agreement, (y) have a Material Adverse Effect or
(z) adversely impair the Company's ability or obligation to perform fully
on a timely basis its obligations under this Agreement or the Registration
Rights Agreement.
(a) Certain Fees. No fees or commission will be payable by
the Company to any broker, finder, investment banker or bank with respect
to the consummation of the transactions contemplated hereby.
(a) Disclosure Materials. The Disclosure Materials do not
contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading.
(a) Private Offering. Neither the Company nor any Person
acting on its behalf has taken or will take any action (including, without
limitation, any offering of any securities of the Company under
circumstances which would require the integration of such offering with the
008258-00007/391115.4
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offering of the Shares under the Securities Act) which might subject the
offering, issuance or sale of the Shares to the registration requirements
of Section 5 of the Securities Act.
(a) SEC Documents. The Company has filed all reports
required to be filed by it under the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the two years preceding the date hereof
(or such shorter period as the Company was required by law to file such
material) (the foregoing materials being collectively referred to herein as
the "SEC Documents") on a timely basis, or has received a valid extension
of such time of filing. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Securities
Act and the Exchange Act and the rules and regulations of the Commission
promulgated thereunder, and none of the SEC Documents, when filed,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in
the SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations
of the Commission with respect thereto. Such financial statements have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved, except as may be
otherwise indicated in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the
Company as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal year-end audit adjustments. Since the date of the
financial statements included in the Company's last filed Quarterly Report
on Form 10-Q, there has been no event, occurrence or development that has
had a Material Adverse Effect which is not specifically disclosed in any of
the Disclosure Materials.
(a) Exclusivity. The Company shall not issue and sell the
Series J Convertible Preferred Stock to any other Person than to the
Purchaser.
1. Representations and Warranties of the Purchaser. The
Purchaser hereby represents and warrants to the Company as follows:
(a) Organization; Authority. The Purchaser is a corporation
duly and validly existing and in good standing under the laws of the
jurisdiction of its incorporation. The Purchaser has the requisite power
and authority to enter into and to consummate the transactions contemplated
hereby and by the Registration Rights Agreement and otherwise to carry out
its obligations hereunder and thereunder. The purchase of the Shares by
the Purchaser hereunder has been duly authorized by all necessary action on
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the part of the Purchaser. Each of this Agreement and the Registration
Rights Agreement has been duly executed and delivered by the Purchaser or
on its behalf and constitutes the valid and legally binding obligation of
the Purchaser, enforceable against the Purchaser in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights generally and to general
principles of equity.
(a) Investment Intent. The Purchaser is acquiring the Shares
and the Underlying Shares for its own account (and/or on behalf of managed
accounts who are purchasing solely for their own accounts for investment)
for investment purposes only and not with a view to or for distributing or
reselling such Shares or Underlying Shares or any part thereof or interest
therein, without prejudice, however, to the Purchaser's right, subject to
the provisions of this Agreement and the Registration Rights Agreement, at
all times to sell or otherwise dispose of all or any part of such Shares or
Underlying Shares under an effective registration statement under the
Securities Act and in compliance with applicable State securities laws or
under an exemption from such registration.
(a) Purchaser Status. At the time the Purchaser (and any
account for which it is purchasing) was offered the Shares, it (and any
account for which it is purchasing) was, and at the date hereof, it (and
any account for which it is purchasing) is, and at the Closing Date, it
(and any account for which it is purchasing) will be, an "accredited
investor" as defined in Rule 501(a) under the Securities Act.
(a) Experience of Purchaser. The Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the
Shares, and has so evaluated the merits and risks of such investment.
(a) Ability of Purchaser to Bear Risk of Investment. The
Purchaser is able to bear the economic risk of an investment in the Shares
and, at the present time, is able to afford a complete loss of such
investment.
(a) Prohibited Transactions. The Shares to be purchased by
the Purchaser are not being acquired, directly or indirectly, with the
assets of any "employee benefit plan", within the meaning of Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended.
(a) Access to Information. The Purchaser acknowledges
receipt of the Disclosure Materials and further acknowledges that it has
been afforded (i) the opportunity to ask such questions as it has deemed
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necessary of, and to receive answers from, representatives of the Company
concerning the terms and conditions of the offering of the Shares and the
merits and risks of investing in the Shares; (ii) access to information
about the Company and the Company's financial condition, results of
operations, business, properties, management and prospects sufficient to
enable it to evaluate its investment in the Common Stock; and (iii) the
opportunity to obtain such additional information which the Company
possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the
Shares and to verify the accuracy and completeness of the information
contained in the Disclosure Materials.
(a) Reliance. The Purchaser understands and acknowledges
that (i) the Shares are being offered and sold, and the Underlying Shares
are being offered to it without registration under the Securities Act in a
private placement that is exempt from the registration provisions of the
Securities Act and (ii) the availability of such exemption depends in part
on, and that the Company will rely upon the accuracy and truthfulness of,
the foregoing representations and the Purchaser hereby consents to such
reliance.
The Company acknowledges and agrees that the Purchaser makes no
representation or warranty with respect to the transactions contemplated
hereby other than those specifically set forth in Article III herein.
IOTHER AGREEMENTS OF THE PARTIES
1. Transfer Restrictions. If the Purchaser should decide to
dispose of any of the Shares to be purchased by it hereunder (and upon
conversion thereof, any Underlying Shares), the Purchaser understands and
agrees that it may do so only (i) pursuant to an effective registration
statement under the Securities Act, (ii) to the Company or (iii) pursuant
to an available exemption from registration under the Securities Act. In
connection with any transfer of any Shares other than pursuant to an
effective registration statement or to the Company, the Company may require
that the transferor of such Shares provide to the Company an opinion of
counsel experienced in the area of United States securities laws selected
by the transferor, the form and substance of which opinion shall be,
reasonably satisfactory to the Company, to the effect that such transfer
does not require registration of such Shares under the Securities Act or
any State securities laws.
The Purchaser agrees to the imprinting, so long as appropriate,
of the following legend on certificates representing the Shares:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
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SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER REGULATION D
PROMULGATED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, THEY MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF,
U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACCEPTANCE HEREOF, THE HOLDER OF THESE SECURITIES AGREES THAT IT WILL
NOT RESELL, PLEDGE OR OTHERWISE TRANSFER THESE SECURITIES OR THE
SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE, EXCEPT (A)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT, (B) TO NETWORK IMAGING CORPORATION (THE "COMPANY") OR (C)
PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT. IF THE PROPOSED TRANSFER IS TO BE MADE OTHER THAN
PURSUANT TO CLAUSE (A) OR (B) ABOVE, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE COMPANY AND THE TRANSFER AGENT SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THEY MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN,
THE TERMS "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN
TO THEM BY RULE 902 PROMULGATED UNDER THE SECURITIES ACT.
The legend set forth above may be removed if and when the
Shares represented by such certificate or the Underlying Shares, as the
case may be, are disposed of pursuant to an effective registration
statement under the Securities Act or in the opinion of counsel to the
Company experienced in the area of United States securities laws such
legend is no longer required under applicable requirements of the
Securities Act. The stock certificates representing the Shares and the
Underlying Shares shall also bear any other legends required by applicable
Federal or state securities laws, which legends may be removed when, in the
opinion of counsel to the Company experienced in the applicable securities
laws, such legends are no longer required under the applicable requirements
of such securities laws. The Company agrees that it will provide the
Purchaser, upon request, with a substitute stock certificate or
certificates, free from such legend at such time as such legend is no
longer applicable. The Purchaser agrees that, in connection with any
transfer of Shares or Underlying Shares by it pursuant to an effective reg-
istration statement under the Securities Act, it will comply with all
prospectus delivery requirements of the Securities Act. The Company makes
no representation, warranty or agreement as to the availability of any
exemption from registration under the Securities Act with respect to any
resale of Shares or Underlying Shares.
1. Stop Transfer Instruction. The Purchaser agrees that the
Company shall be entitled to make a notation on its records and give
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instructions to any transfer agent of the Company in order to implement the
restrictions on transfer set forth in this Agreement.
1. Furnishing of Information. As long as the Purchaser owns
Shares or Underlying Shares, the Company will promptly furnish to it all
reports filed by the Company pursuant to Section 13(a) or 15(d) of the
Exchange Act (or if the Company is not at the time required to file reports
pursuant to such sections, annual and quarterly reports comparable to those
required by Section 13(a) or 15(d) of the Exchange Act).
1. Notice of Certain Events. The Company shall (i) advise the
Purchaser promptly after obtaining knowledge thereof, and, if requested by
the Purchaser, confirm such advice in writing, of (A) the issuance by any
state securities commission of any stop order suspending the qualification
or exemption from qualification of the Shares or the Common Stock for
offering or sale in any jurisdiction, or the initiation of any proceeding
for such purpose by any state securities commission or other regulatory
authority, or (B) any event that makes any statement of a material fact
made in the Disclosure Materials untrue or that requires the making of any
additions to or changes in the Disclosure Materials in order to make the
statements therein, in the light of the circumstances under which they are
made, not misleading, (ii) use its best efforts to prevent the issuance of
any stop order or order suspending the qualification or exemption from
qualification of the Shares or the Common Stock under any state securities
or Blue Sky laws, and (iii) if at any time any state securities commission
or other regulatory authority shall issue an order suspending the
qualification or exemption from qualification of the Shares or the Common
Stock under any such laws, use its best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time.
1. Copies and Use of Disclosure Materials. The Company shall
furnish the Purchaser, without charge, as many copies of the Disclosure
Materials, and any amendments or supplements thereto, as the Purchaser may
reasonably request. The Company consents to the use of the Disclosure
Materials, and any amendments and supplements thereto, by the Purchaser in
connection with resales of the Shares or the Underlying Shares other than
pursuant to an effective registration statement.
1. Modification to Disclosure Materials. If any event shall
occur as a result of which, in the reasonable judgment of the Company or
the Purchaser, it becomes necessary or advisable to amend or supplement the
Disclosure Materials in order to make the statements therein, in the light
of the circumstances at the time the Disclosure Materials were delivered to
the Purchaser, not misleading, or if it is necessary to amend or supplement
the Disclosure Materials to comply with applicable law, the Company shall
promptly prepare an appropriate amendment or supplement to the Disclosure
Materials (in form and substance reasonably satisfactory to the Purchaser)
008258-00007/391115.4
-11-
so that (i) as so amended or supplemented the Disclosure Materials will not
include an untrue statement of material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances existing at the time it is delivered to Purchaser, not
misleading and (ii) the Disclosure Materials will comply with applicable
law.
1. Blue Sky Laws. The Company shall cooperate with the
Purchaser in connection with the qualification of the Shares and the
Underlying Shares under the securities or Blue Sky laws of such
jurisdictions as the Purchaser may request and to continue such
qualification at all times through the third anniversary of the Closing
Date; provided, however, that neither the Company nor its Subsidiaries
shall be required in connection therewith to qualify as a foreign
corporation where they are not now so qualified.
1. Integration. The Company shall not and shall use its best
efforts to ensure that no Affiliate shall sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined
in Section 2 of the Securities Act) that would be integrated with the offer
or sale of the Shares or the Underlying Shares in a manner that would
require the registration under the Securities Act of the sale of the Shares
or Underlying Shares to the Purchaser.
1. Furnishing of Rule 144A Materials. The Company shall, for
so long as any of the Shares or Underlying Shares remain outstanding and
during any period in which it is not subject to Section 13 or 15(d) of the
Exchange Act, make available to any registered holder of Shares or
Underlying Shares in connection with any sale thereof and any prospective
purchaser of such Shares or Underlying Shares from such Person, the
following information in accordance with Rule 144A(d)(4) under the
Securities Act: a brief statement of the nature of the business of the
Company and the products and services it offers and the Company's most
recent audited balance sheet and profit and loss and retained earnings
statements, and similar audited financial statements for such part of the
two preceding fiscal years as the Company has been in operation.
1. Solicitation Materials. The Company shall not (i)
distribute any offering materials in connection with the offering and sale
of the Shares or Underlying Shares other than the Disclosure Materials and
any amendments and supplements thereto prepared in compliance herewith or
(ii) solicit any offer to buy or sell the Shares or Underlying Shares by
means of any form of general solicitation or advertising.
1. Subsequent Financial Statements. The Company shall furnish
to the Purchaser, promptly after they are filed with the Commission, a copy
of all financial statements for any period subsequent to the period covered
008258-00007/391115.4
-12-
by the financial statements included in the Disclosure Materials.
1. Right of First Refusal. (a) The Company shall not
directly or indirectly, without the prior consent of the Purchaser, offer,
sell, grant any option to purchase, or otherwise dispose (or announce any
offer, sale, grant or any option to purchase or other disposition) of any
of its or its Affiliates equity or equity-equivalent securities (a
"Subsequent Sale") for a period of 90 days after Closing Date, except (i)
the granting of options to employees, officers and directors under, and the
issuance of shares upon exercise of options granted under, any stock option
plan heretofore or hereinafter adopted by the Company; (ii) shares issued
upon exercise of any currently outstanding warrants and upon conversion of
any currently outstanding convertible preferred stock disclosed in Schedule
3.1 and (iii) shares of Common Stock issued upon conversion of Shares in
accordance herewith, unless (A) the Company provides the Purchaser a
written notice (the "Subsequent Financing Notice") of its intention to
effect such Subsequent Financing, which Subsequent Financing Notice shall
describe in reasonable detail the proposed terms of such Subsequent
Financing and the amount of proceeds intended to be raised thereunder and
(B) the Purchaser shall not have notified the Company within forty-eight
(48) hours of its receipt of the Subsequent Financing Notice of its
willingness to enter into good faith negotiations to provide (or to cause
its sole designee to provide) financing to the Company on substantially the
terms set forth in the Subsequent Financing Notice. If the Purchaser shall
fail to notify the Company of its intention to enter into such negotiations
within such forty-eight (48) hour period, the Company may effect the
Subsequent Financing substantially upon the terms set forth in the
Subsequent Financing Notice; provided, that the Company shall provide the
Purchaser with a second Subsequent Financing Notice, and the Purchaser
shall again have the right of first refusal set forth above in this
paragraph (a), if the Subsequent Financing subject to the initial
Subsequent Financing Notice shall not have been consummated for any reason
on the terms set forth in such Subsequent Financing Notice within 30 days
after the date of the initial Subsequent Financing Notice.
(a) From the date hereof through the Closing Date, the
Company shall not and shall cause the Subsidiaries not to, without the
consent of the Purchaser, (i) amend its Certificate of Incorporation,
bylaws or other charter documents so as to adversely affect any rights of
the Purchaser; (ii) split, combine or reclassify its outstanding capital
stock; (iii) declare, authorize, set aside or pay any dividend or other
distribution with respect to the Common Stock; (iv) redeem, repurchase or
offer to repurchase or otherwise acquire shares of its Common Stock; or (v)
enter into any agreement with respect to any of the foregoing.
1. Purchaser Ownership of Common Stock. The Purchaser may not
use its ability to convert Shares hereunder or under the terms of the
008258-00007/391115.4
-13-
Certificate of Designation to the extent that such conversion would result
in the Purchaser owning more than 4.9% of the outstanding shares of the
Common Stock; provided, however, that this Section 4.13 shall not affect
the Company's right under Section 5 of the Certificate of Designation to
force the Purchaser to convert Shares under the circumstances set forth in
such section. The Company shall, promptly upon its receipt of a Holder
Conversion Notice tendered by the Purchaser (or its designee) under the
Certificate of Designation, notify the Purchaser of the number of shares of
Common Stock outstanding on such date and the number of Underlying Shares
which would be issuable to the Purchaser (or its designee, as the case may
be) if the conversion requested in such Conversion Notice were effected in
full, whereupon, notwithstanding anything to the contrary set forth in the
Certificate of Designation, the Purchaser may revoke such conversion or
exercise to the extent that it determines that such conversion or exercise
would result in the Purchaser owning in excess of 4.9% of such outstanding
shares of Common Stock.
1. Availability of Common Stock. The Company undertakes to
use its best efforts to promptly obtain stockholder approval to increase
the number of shares of Common Stock which it is authorized to issue to at
least 60,000,000 shares, at such time as the Company would be, if a notice
of conversion were to be delivered on such date, precluded from converting
the full number of Shares that remain unconverted at such date due to the
unavailability of authorized but unissued or re-acquired Common Stock.
1. Listing of Underlying Shares. The Company shall take all
steps necessary to cause the Underlying Shares to be approved for listing
in The NASDAQ National Market (or other national securities exchange or
market on which the Common Stock is listed) no later than the first day
after which shares may be converted hereunder by the Purchaser, and shall
provide to the Purchaser evidence of such listing.
1. Conversion Procedures. Exhibit D attached hereto sets
forth the procedures with respect to the conversion of the Shares, in-
cluding the forms of conversion notice to be provided upon conversion,
instructions as to the procedures for conversion, the form of legal
opinion, if necessary, that shall be rendered to the Company's transfer
agent and such other information and instructions as may be reasonably
necessary to enable the Purchaser to exercise its right of conversion
smoothly and expeditiously.
1. Purchaser's Rights if Trading in Common Stock is Suspended.
In the event that at any time within the two-year period after the Closing
Date trading in the shares of the Common Stock is suspended on the
principal market or exchange for such shares, at Purchaser's option
exercisable by written notice to the Company, the Company shall repurchase
all Shares and all Underlying Shares then held by such Purchaser, at an
008258-00007/391115.4
-14-
aggregate purchase price equal to (A) the product of the Per Share Market
Value (as defined in Certificate of Designation) as of the five (5) Trading
Days immediately preceding the day of such notice multiplied by the number
of shares of Common Stock into which the Shares to be purchased are then
convertible (or in the case of Underlying Shares, the number of Underlying
Shares to be purchased), plus (B) interest on such amount accruing from the
15th day to the 30th day after such notice at the rate of 5% per annum,
from the 31st day to the 60th day at 8% per annum, from the 60th day to the
90th day at the rate of 12% per annum and from the 90th day until paid at
the rate of 24% per annum.
1. No Violation of Applicable Law. Notwithstanding any
provision of this Agreement to the contrary, if any repurchase or
redemption of shares otherwise required under this Agreement or the
Registration Rights Agreement would be prohibited by the relevant
provisions of the Delaware General Corporation Law, such repurchase or
redemption shall be effected as soon as it is permitted under such law;
provided, however, that, interest payable by the Company with respect to
any such redemption or repurchase shall continue to accrue in accordance
with Section 4.16 during any such period.
1. Repurchase or Redemption Restrictions. Notwithstanding any
provision of this Agreement to the contrary, if any repurchase or
redemption of shares otherwise required under this Agreement would be
prohibited in the absence of consent from any lender of the Company or the
Subsidiaries, or by the holders of any class of securities of the Company,
the Company shall use its best efforts to obtain such consent as promptly
as practicable after the repurchase or redemption is required. Interest
payable by the Company with respect to any such redemption or repurchase
shall continue to accrue in accordance with Section 4.16 until such consent
is obtained. Nothing contained in this Section 4.18 shall be construed as
a waiver by the Purchaser of any rights it may have by virtue of any breach
of any representation or warranty of the Company herein as to the absence
of any requirement to obtain any such consent.
ICONDITIONS PRECEDENT TO CLOSING
1. Conditions Precedent to Obligations of the Purchaser. The
obligation of the Purchaser to purchase the Shares is subject to the
satisfaction or waiver by the Purchaser, at or prior to the Closing, of
each of the following conditions:
(a) Legal Opinion. The Purchaser shall have received the
legal opinion, addressed to it and dated the Closing Date, of Xxxxx &
Xxxxxx L.L.P., counsel for the Company, substantially in the form of
Exhibit C;
008258-00007/391115.4
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(a) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company contained herein and in
the Registration Rights Agreement shall be true and correct in all material
respects as of the date when made and as of the Closing Date as though made
at that time (except that representations and warranties that are made as
of a specific date need be true in all material respects only as of such
date);
(a) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement and the
Registration Rights Agreement to be performed, satisfied or complied with
by the Company at or prior to the Closing;
(a) No Material Adverse Effect. Since the date of the
financial statements included in the Company's last filed Quarterly Report
on Form 10-Q, no event which had a Material Adverse Effect shall have
occurred which is not disclosed in the Disclosure Materials;
(a) No Prohibitions. The purchase of and payment for the
Shares (and upon conversion thereof, the Underlying Shares) hereunder (i)
shall not be prohibited or enjoined (temporarily or permanently) by any
applicable law or governmental regulation and (ii) shall not subject the
Purchaser to any penalty, or in its reasonable judgment, other onerous
condition under or pursuant to any applicable law or governmental
regulation that would materially reduce the benefits to the Purchaser of
the purchase of the Shares or the Underlying Shares (provided, however,
that such regulation, law or onerous condition was not in effect in such
form at the date of this Agreement);
(a) Company Certificates. The Purchaser shall have received
a certificate, dated the Closing Date, signed by the Secretary or an
Assistant Secretary of the Company and certifying (i) that the Company's
Certificate of Incorporation and By-Laws attached to the Certificate dated
June 28, 1996, delivered to Newsun Limited in connection with the closing
of the Series I Convertible Preferred Stock (the "Series I Closing") have
not been amended or otherwise been modified in any respect, except for the
filing of the Series I Preferred Stock Certificate of Designation filed in
connection with the Series I Closing, and that attached thereto is true and
complete resolutions duly adopted by the Board of Directors of the Company
authorizing the execution and delivery of this Agreement and the
Registration Rights Agreement and the issuance and sale of the Shares and
the Underlying Shares and (ii) the incumbency of officers executing this
Agreement and the Registration Rights Agreement;
(a) Registration Rights Agreement. The Company shall have
008258-00007/391115.4
-16-
executed the Registration Rights Agreement;
(a) No Suspensions of Trading in Common Stock. Trading in
the Common Stock shall not have been suspended by the Commission or the
NASDAQ National Market or other national securities exchange or market on
which the Common Stock is listed or quoted (except for any suspension of
trading of limited duration solely to permit dissemination of material
information regarding the Company);
(a) Required Approvals. All Required Approvals shall have
been obtained; and
(a) Delivery of Stock Certificates. The Company shall have
delivered to the Purchaser the stock certificate(s) representing the
Shares, registered in the name of the Purchaser, each in form satisfactory
to the Purchaser.
1. Conditions Precedent to Obligations of the Company. The
obligation of the Company to issue and sell the Shares hereunder is subject
to the satisfaction or waiver by the Company, at or to the Closing, of each
of the following conditions:
(a) Accuracy of the Purchaser's Representations and
Warranties. The representations and warranties of the Purchaser shall be
true and correct in all material respects as of the date when made and as
of the Closing Date as though made at that time (except that
representations and warranties that are made as of a specific date need be
true in all material respects only as of such date);
(a) Performance by the Purchaser. The Purchaser shall have
performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement and the
Registration Rights Agreement to be performed, satisfied or complied with
by it at or prior to the Closing; and
(a) No Prohibitions. The sale of the Shares (and upon
conversion thereof, the Underlying Shares) hereunder (i) shall not be
prohibited or enjoined (temporarily or permanently) by any applicable law
or governmental regulation and (ii) shall not subject the Company to any
penalty, or in its reasonable judgment, any other onerous condition under
or pursuant to any applicable law or governmental regulation that would
materially reduce the benefits to the Company of the sale of Shares or the
Underlying Shares to the Purchaser (provided, however, that such
regulation, law or onerous condition was not in effect in such form at the
date of this Agreement).
008258-00007/391115.4
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ITERMINATION
1. Termination by Mutual Consent. This Agreement may be
terminated at any time prior to Closing by the mutual consent of the
Company and the Purchaser.
1. Termination by the Company or the Purchaser. This
Agreement may be terminated prior to Closing by either the Company or the
Purchaser, by giving written notice of such termination to the other party,
if:
(a) the Closing shall not have occurred by October 1,
1996; provided that the terminating party is not then in material
breach of its obligations under this Agreement in any manner that
shall have caused the failure referred to in this paragraph (a);
(b) there shall be in effect any statute, rule, law or
regulation that prohibits the consummation of the Closing or if the
consummation of the Closing would violate any non-appealable final
judgment, order, decree, ruling or injunction of any court of or
governmental authority having competent jurisdiction; or
(c) there shall have been an amendment to Regulation D
or an interpretive release promulgated or issued thereunder, which,
in the reasonable judgment of the terminating party, would materially
adversely affect the transactions contemplated hereby and by the
Registration Rights Agreement.
1. Termination by the Company. This Agreement may be
terminated prior to Closing by the Company, by giving written notice of
such termination to the Purchaser, if the Purchaser has materially breached
any representation, warranty, covenant or agreement contained in this
Agreement or the Registration Rights Agreement and such breach is not cured
within five business days following receipt by the Purchaser of notice of
such breach.
1. Termination by the Purchaser. This Agreement may be
terminated prior to Closing by the Purchaser, by giving written notice of
such termination to the Company, if:
(a) the Company has breached any representation,
warranty, covenant or agreement contained in this Agreement or the
Registration Rights Agreement and such breach is not cured within
five business days following receipt by the Company of notice of such
breach;
(b) there has occurred an event since the date of the
008258-00007/391115.4
-18-
financial statements included in the Company's last filed Quarterly
Report on Form 10-Q which could reasonably be expected to have a
Material Adverse Effect and which is not disclosed in the Disclosure
Materials; or
(c) trading in the Common Stock has been suspended by
the Commission or the NASDAQ National Market or other national
securities exchange or market on which the Common Stock is listed or
quoted (except for any suspension of trading of limited duration
solely to permit dissemination of material information regarding the
Company); or
(d) the effectiveness of the Registration Statement
relating to the Series I Preferred Stock has been suspended for any
reason.
008258-00007/391115.4
-19-
IMISCELLANEOUS
1. Fees and Expenses. Each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any,
and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The
Company shall pay all stamp and other taxes and duties levied in connection
with the issuance of the Shares (and upon conversion thereof, the
Underlying Shares) pursuant hereto. The Purchaser shall be responsible for
its own tax liability that may arise as a result of the investment
hereunder or the transactions contemplated by this Agreement. Whether or
not the transactions contemplated by this Agreement are consummated or this
Agreement is terminated, the Company shall pay (i) all costs, expenses,
fees and all taxes incident to and in connection with: (A) the preparation,
printing and distribution of the Disclosure Materials and all amendments
and supplements thereto (including, without limitation, financial
statements and exhibits), and all preliminary and final Blue Sky memoranda
and all other agreements, memoranda, correspondence and other documents
prepared and delivered in connection herewith (B) the issuance and delivery
of the Shares and, upon conversion thereof, the Underlying Shares, (C) the
qualification of the Shares and, upon conversion thereof, the Underlying
Shares for offer and sale under the securities or Blue Sky laws of the
several states (including, without limitation, the fees and disbursements
of the Purchasers' counsel relating to such registration or qualification),
(D) furnishing such copies of the Disclosure Materials and all amendments
and supplements thereto, as may reasonably be requested for use in
connection with resales of the Shares and, upon conversion thereof, the
Underlying Shares, and (E) the preparation of certificates for the Shares
and, upon conversion thereof, the Underlying Shares (including, without
limitation, printing and engraving thereof), (ii) all fees and expenses of
the counsel and accountants of the Company and (iii) all expenses and
listing fees in connection with the application for quotation of the
Underlying Shares in the NASDAQ National Market.
1. Entire Agreement; Amendments. This Agreement, together
with the Exhibits, Annexes and Schedules hereto, and the Registration
Rights Agreement contain the entire understanding of the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters.
1. Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed to
have been received (a) upon hand delivery (receipt acknowledged) or
delivery by telex (with correct answer back received), telecopy or
facsimile (with transmission confirmation report) at the address or number
designated below (if delivered on a Business Day during normal business
hours where such notice is to be received), or the first Business Day
008258-00007/391115.4
-20-
following such delivery (if delivered other than on a Business Day during
normal business hours where such notice is to be received) or (b) on the
second Business Day following the date of mailing by express courier
service, fully prepaid, addressed to such address, or upon actual receipt
of such mailing, whichever shall first occur. The addresses for such
communications shall be:
If to the Company: Network Imaging Corporation
000 Xxxxxxx Xxxx Xxxxx
Xxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx X. Xxxxxxx
With copies to: Xxxxx & Xxxxxx L.L.P.
0000 Xxxxxx Xxxxxxxxx Xxxxxx, X.X.
Xxxxx 000 Xxxx
Xxxxxxxxxx, X.X. 00000
Facsimile No.: (000) 000-0000
Attn: Xxxx X. Xxxxxx
If to the Purchaser: Southbrook International
Investments, Ltd.
c/o Trippoak Advisors, Inc.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx X. Xxxxxx
With copies to: Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx &
Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxxxx and
Xxxx X. Xxxxx
or such other address as may be designated in writing hereafter, in the
same manner, by such person.
1. Amendments; Waivers. No provision of this Agreement may
be waived or amended except in a written instrument signed, in the case of
an amendment, by both the Company and the Purchaser, or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought.
No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in
the future or a waiver of any other provision, condition or requirement
hereof, nor shall any delay or omission of either party to exercise any
008258-00007/391115.4
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right hereunder in any manner impair the exercise of any such right
accruing to it thereafter.
1. Headings. The headings herein are for convenience only,
do not constitute a part of this Agreement and shall not be deemed to limit
or affect any of the provisions hereof.
1. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and
permitted assigns. Neither the Company nor the Purchaser may assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the other, except that the Purchaser may assign its rights
hereunder and under the Registration Rights Agreement to an Affiliate
thereof, provided, that such assignee demonstrates to the reasonable
satisfaction of the Company its satisfaction of the representations and
warranties set forth in Section 3.2 herein. The assignment by a party of
this Agreement or any rights hereunder shall not affect the obligations of
such party under this Agreement.
1. No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted
successors and assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
1. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
New York without regard to the principles of conflicts of law thereof.
1. Survival. The representations and warranties of the
Company and the Purchaser contained in Article III and the agreements and
covenants of the parties contained in Article IV and this Article VII shall
survive the Closing (or any earlier termination of this Agreement) and any
conversion of Shares hereunder.
1. Counterpart Signatures. This Agreement may be executed in
two or more counterparts, all of which when taken together shall be
considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other
party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of
the party executing (or on whose behalf such signature is executed) the
same with the same force and effect as if such facsimile signature page
were an original thereof.
1. Publicity. The Company and the Purchaser shall consult
with each other in issuing any press releases or otherwise making public
008258-00007/391115.4
-22-
statements with respect to the transactions contemplated hereby and neither
party shall issue any such press release or otherwise make any such public
statement without the prior written consent of the other, which consent
shall not be unreasonably withheld or delayed.
1. Severability. In case any one or more of the provisions
of this Agreement shall be invalid or unenforceable in any respect, the
validity and enforceability of the remaining terms and provisions of this
Agreement shall not in any way be affecting or impaired thereby and the
parties will attempt to agree upon a valid and enforceable provision which
shall be a reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Agreement.
1. Remedies. In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages,
the Purchaser will be entitled to specific performance of the obligations
of the Company under this Agreement and the Company will be entitled to
specific performance of the obligations of the Purchaser hereunder with
respect to the subsequent transfer of Shares and the Underlying Shares.
Each of the Company and the Purchaser agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of any breach
of its obligations described in the foregoing sentence and hereby agrees to
waive in any action for specific performance of any such obligation the
defense that a remedy at law would be adequate.
008258-00007/391115.4
-23-
008258-00007/391115.4
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first indicated above.
Company:
NETWORK IMAGING CORPORATION
By:
Name:
Title:
Purchaser:
SOUTHBROOK INTERNATIONAL
INVESTMENTS, LTD.
By:
Name:
Title:
08258-00007/391114.4
-2-
Exhibit A
CERTIFICATE OF DESIGNATION OF
SERIES J CONVERTIBLE PREFERRED STOCK OF
NETWORK IMAGING CORPORATION
The undersigned, Xxxxx X. Xxxx and Xxxxxx X. Xxxxxxxx, hereby
certify that:
1 They are the duly elected and acting President and
Secretary, respectively, of Network Imaging Corporation, a Delaware
corporation (the "Company").
1 The Certificate of Incorporation of the Company
authorizes 20,000,000 shares of preferred stock, par value $.0001 per
share, of which the following have been authorized and are issued and
outstanding: Series A Cumulative Convertible Preferred Stock, 1,750,000
authorized and 1,605,025 outstanding; Series E Convertible Preferred Stock,
2 authorized and 2 outstanding; Series F-1, F-2, F-3 or F-4 Convertible
Preferred Stock, 1,792,186 authorized and 1,792,186 of Series F-1
Convertible Preferred Stock outstanding; Series H Convertible Preferred
Stock, 270 authorized and 270 outstanding; Series I Convertible Preferred
Stock, 275 authorized and 275 outstanding.
1 The following is a true and correct copy of resolutions
duly adopted by the Board of Directors at a meeting duly held September 25,
1996, which constituted all requisite action on the part of the Company for
adoption of such resolutions.
RESOLUTIONS
WHEREAS, the Board of Directors of the Company (the "Board of
Directors") is authorized to provide for the issuance of the shares of
Preferred Stock in series, and by filing a certificate pursuant to the
applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in each such series, and to fix the
designations, powers, preferences and rights of the shares of each such
series and the qualifications, limitations or restrictions thereof;
WHEREAS, the Board of Directors desires, pursuant to its
authority as aforesaid, to designate a new series of preferred stock, set
the number of shares constituting such series and fix the rights,
08258-00007/391114.4
-3-
preferences, privileges and restrictions of such series.
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors
hereby designates a new series of preferred stock and the number of shares
constituting such series and fixes the rights, preferences, privileges and
restrictions relating to such series as follows:
1 Designation, Amount and Par Value. The series of Preferred
Stock shall be designated as the Series J Convertible Preferred Stock (the
"Preferred Stock"), and the number of shares so designated shall be 500.
The par value of each share of Preferred Stock shall be $.0001. Each share
of Preferred Stock shall have a stated value of $10,000 per share (the
"Stated Value").
1 Dividends.
1 Holders of Preferred Stock shall be entitled to receive,
when and as declared by the Board of Directors out of funds legally
available therefor, and the Company shall pay, cumulative dividends at the
rate per share (as a percentage of the Stated Value per share) equal to 6%
per annum, payable, in cash or shares of Common Stock, in arrears on the
Conversion Date (as hereinafter defined). Dividends on the Preferred Stock
shall accrue daily commencing the Original Issue Date (as defined in
Section 6) and shall be deemed to accrue on such date whether or not earned
or declared and whether or not there are profits, surplus or other funds of
the Company legally available for the payment of dividends. The party that
holds the Preferred Stock on an applicable record date for any dividend
payment will be entitled to receive such dividend payment and any other
accrued and unpaid dividends which accrued prior to such dividend payment
date, without regard to any sale or disposition of such Preferred Stock
subsequent to the applicable record date but prior to the applicable
dividend payment date. Except as otherwise provided herein, if at any time
the Company pays less than the total amount of dividends then accrued to
any class of Preferred Stock, such payment shall be distributed ratably
among the holders of such class based upon the number of shares held by
each holder.
1 So long as any Preferred Stock shall remain outstanding,
neither the Company nor any subsidiary thereof shall redeem, purchase or
otherwise acquire directly or indirectly any Junior Securities (as defined
in Section 6), nor shall the Company directly or indirectly pay or declare
any dividend or make any distribution (other than a dividend or
distribution described in Section 5) upon, nor shall any distribution be
made in respect of, any Junior Securities, nor shall any monies be set
aside for or applied to the purchase or redemption (through a sinking fund
or otherwise) of any Junior Securities unless all dividends on the
Preferred Stock for all past dividend periods shall have been paid.
08258-00007/391114.4
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1 Voting Rights. Except as otherwise provided herein and as
otherwise provided by law, the Preferred Stock shall have no voting rights.
However, so long as any shares of Preferred Stock are outstanding, the
Company shall not, without the affirmative vote of the holders of a
majority of the shares of the Preferred Stock then outstanding, (i) alter
or change adversely the powers, preferences or rights given to the
Preferred Stock or (ii) authorize or create any class of stock ranking as
to dividends or distribution of assets upon a Liquidation (as defined
below) senior to, prior to or pari passu with the Preferred Stock.
1 Liquidation. Upon any liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary (a
"Liquidation"), the holders of shares of Preferred Stock shall be entitled
to receive out of the assets of the Company, whether such assets are
capital or surplus, for each share of Preferred Stock an amount equal to
the Stated Value, plus an amount equal to accrued but unpaid dividends per
share, whether declared or not, but without interest, before any
distribution or payment shall be made to the holders of any Junior
Securities, and if the assets of the Company shall be insufficient to pay
in full such amounts, then the entire assets to be distributed shall be
distributed among the holders of Preferred Stock ratably in accordance with
the respective amounts that would be payable on such shares if all amounts
payable thereon were paid in full. A sale, conveyance or disposition of
all or substantially all of the assets of the Company or the effectuation
by the Company of a transaction or series of related transactions in which
more than 50% of the voting power of the Company is disposed of shall be
deemed a Liquidation; provided that, a consolidation or merger of the
Company with or into any other Company or Companies shall not be treated as
a Liquidation, but instead shall be subject to the provisions of Section 5.
The Company shall mail written notice of any such liquidation, not less
than 60 days prior to the payment date stated therein, to each record
holder of Preferred Stock.
1 Conversion.
1 Each share of Preferred Stock shall be convertible into
shares of Common Stock at the Conversion Ratio (as defined in Section 6) at
the option of the holder in whole or in part at any time after the
expiration of the earlier to occur of (i) 60 days after the Original Issue
Date and (ii) the date that the Securities and Exchange Commission (the
"Commission") declares effective under the Securities Act of 1933, as
amended (the "Securities Act") the registration statement contemplated by
the Registration Rights Agreement, dated the Original Issue Date (the
"Registration Rights Agreement"), by and between the Company and the
original holder of Preferred Stock relating to the Preferred Stock and the
shares of Common Stock into which the Preferred Stock is convertible in
accordance with the terms hereof. Any conversion under this Section 5(a)
08258-00007/391114.4
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shall be of a minimum amount of at least ten (10) shares of Preferred
Stock. The holder shall effect conversions by surrendering the certificate
or certificates representing the shares of Preferred Stock to be converted
to the Company, together with the form of conversion notice attached hereto
as Exhibit A (the "Holder Conversion Notice") in the manner set forth in
Section 5(j). Each Holder Conversion Notice shall specify the number of
shares of Preferred Stock to be converted and the date on which such
conversion is to be effected, which date may not be prior to the date the
holder delivers such Notice by facsimile (the "Holder Conversion Date").
Subject to Section 5(c) and, as to the original holder (or its sole
designee), subject to Section 4.13 of the Purchase Agreement (as defined in
Section 6), each Holder Conversion Notice, once given, shall be
irrevocable. If the holder is converting less than all shares of Preferred
Stock represented by the certificate or certificates tendered by the holder
with the Holder Conversion Notice, the Company shall promptly deliver to
the holder a certificate for such number of shares as have not been
converted.
1 Provided that ten (10) Trading Days (as defined in
Section 6) shall have elapsed from the date the Commission declared the
registration statement contemplated by the Registration Rights Agreement
effective under the Securities Act, each share of the Preferred Stock shall
be convertible into shares of Common Stock at the Conversion Ratio at the
option of the Company in whole or in part at any time on or after the
expiration of one (1) year after the Original Issue Date; provided,
however, that the Company is not permitted to deliver a Company Conversion
Notice (as defined below) within ten (10) days of issuing any press release
or other public statement relating to such conversion. The Company shall
effect such conversion by delivering to the holders of such shares of
Preferred Stock to be converted a written notice in the form attached
hereto as Exhibit B (the "Company Conversion Notice"), which Company
Conversion Notice, once given, shall be irrevocable. Each Company
Conversion Notice shall specify the number of shares of Preferred Stock to
be converted and the date on which such conversion is to be effected, which
date will be at least one (1) Trading Day after the date the Company
delivers such Notice by facsimile to the holder (the "Company Conversion
Date"). The Company shall give such Company Conversion Notice in
accordance with Section 5(j) below at least one (1) Trading Day before the
Company Conversion Date. Any such conversion shall be effected on a pro
rata basis among the holders of Preferred Stock. Upon the conversion of
shares of Preferred Stock pursuant to a Company Conversion Notice, the
holders of the Preferred Stock shall surrender the certificates
representing such shares at the office of the Company or of any transfer
agent for the Preferred Stock or Common Stock. If the Company is
converting less than all shares of the Preferred Stock, the Company shall,
upon conversion of such shares subject to such Company Conversion Notice
and receipt of the certificate or certificates representing such shares of
08258-00007/391114.4
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Preferred Stock deliver to the holder or holders a certificate for such
number of shares of Preferred Stock as have not been converted. Each of a
Holder Conversion Notice and a Company Conversion Notice is sometimes
referred to herein as a "Conversion Notice," and each of a "Holder
Conversion Date" and a "Company Conversion Date" is sometimes referred to
herein as a "Conversion Date."
1 (i) If the average of the Per Share Market Value (as
defined in Section 6) for the five (5) Trading Days immediately preceding
the date that the Company receives any Holder Conversion Notice is less
than $3 1/8, then the Company shall have the right, exercisable by notice
to the tendering holder by the close of business on the Business Day
following the Company's receipt of such Conversion Notice, to redeem the
Preferred Stock tendered for conversion pursuant to such Holder Conversion
Notice at a price equal to the product of (i) the average of the Per Share
Market Value for the five (5) Trading Days immediately preceding the
Conversion Date, (ii) the number of shares of Preferred Stock which would
then be converted but for this section, and (iii) the Conversion Ratio,
which redemption price will be paid by the Company within ten (10) Business
Days of its receipt of such Holder Conversion Notice. If the Company fails
for any reason to pay such redemption price within such period, the Company
shall effect the conversion of Preferred Shares subject to such Holder
Conversion Notice at the lesser of the Conversion Price measured on the
Conversion Date indicated in the Holder Conversion Notice and the
Conversion Price measured at the end of such ten (10) Business Day period.
The holder shall have the right, exercisable at any time when the Per Share
Market Value is such that the Company would have the right of redemption
contemplated in this section were it to receive a Holder Conversion Notice,
to deliver to the Company (by facsimile) a letter inquiring whether the
Company would exercise such redemption right if it received a Holder
Conversion Notice within five (5) calendar days of its receipt of such
letter, which such inquiry letter shall set forth the number of shares that
would be subject to such Holder Conversion Notice. The Company shall
respond to the inquiry letter (by facsimile) by the close of business on
the Business Day after which it is received, which response shall be
binding upon it with respect to the Conversion Notice that is subject to
such inquiry letter. The Company shall be deemed to have waived its
redemption right if it fails for any reason to respond by facsimile to the
holder delivering such inquiry letter by the close of business on the
Business Day after its receipt of the inquiry letter.
(ii) Not later than three (3) Trading Days after the
Conversion Date, the Company will deliver to the holder (i) a certificate
or certificates which shall be free of restrictive legends and trading
restrictions (other than those then required by law and as set forth in the
Purchase Agreement, representing the number of shares of Common Stock being
acquired upon the conversion of shares of Preferred Stock and (ii) one or
08258-00007/391114.4
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more certificates representing the number of shares of Preferred Stock not
converted; provided, however, that the Company shall not be obligated to
issue certificates evidencing the shares of Common Stock issuable upon
conversion of any shares of Preferred Stock until certificates evidencing
such shares of Preferred Stock are either delivered for conversion to the
Company or any transfer agent for the Preferred Stock or Common Stock, or
the holder notifies the Company that such certificates have been lost,
stolen or destroyed and provides a bond (or other adequate security
reasonably acceptable to the Company) satisfactory to the Company to
indemnify the Company from any loss incurred by it in connection therewith.
The Company shall, upon request of the holder, use its best efforts to
deliver any certificate or certificates required to be delivered by the
Company under this Section 5(c) electronically through the Depository Trust
Corporation or another established clearing corporation performing similar
functions. In the case of a conversion pursuant to a Holder Conversion
Notice, if such certificate or certificates are not delivered by the date
required under this Section 5(c), the holder shall be entitled by written
notice to the Company at any time on or before such holder's receipt of
such certificate or certificates thereafter, to rescind such conversion, in
which event the Company shall immediately return the certificates
representing the shares of Preferred Stock tendered for conversion.
1 (i) The conversion price for each share of Preferred
Stock (the "Conversion Price") in effect on any Conversion Date shall be
the lesser of (a) $3 1/8 and (b) 81% of the average Per Share Market Value
for the five (5) Trading Days immediately preceding the Conversion Date;
provided, however, (x) if the registration statement to be filed by the
Company in accordance with the Registration Rights Agreement is not filed
with the Commission on or prior to the Filing Date (as defined in the
Registration Rights Agreement), (y) such registration statement so filed is
not declared effective by the Commission on or prior to the Effectiveness
Date (as defined in the Registration Rights Agreement) or (z) such
registration statement so filed is declared effective but thereafter ceases
to be effective at any time during the Effectiveness Period (as defined in
the Registration Rights Agreement) without being succeeded within 30 days
by a subsequent registration statement filed with and declared effective by
the Commission (any such failure being hereinafter referred to as an
"Event", and for purposes of clauses (x) and (y) the date on which such
Event occurs, or for purposes of clause (z) the date on which such 30-day
limit is exceeded, being hereinafter referred to as an "Event Date"),
clause (b) above shall be decreased by 2% monthly (i.e., 79% at the end of
the first such month and 77% at the end of the second such month).
Commencing on the third month after an Event Date, the two (2%) percent
monthly penalty shall be paid to the holder in cash.
(ii) If the Company, at any time while any shares of
Preferred Stock are outstanding, (a) shall pay a stock dividend or
08258-00007/391114.4
-8-
otherwise make a distribution or distributions on shares of its Junior
Securities payable in shares of its capital stock (whether payable in
shares of its Common Stock or of capital stock of any class), (b) subdivide
outstanding shares of Common Stock into a larger number of shares, (c)
combine outstanding shares of Common Stock into a smaller number of shares,
or (d) issue by reclassification of shares of Common Stock any shares of
capital stock of the Company, the Conversion Price designated in Section
5(d)(i) shall be multiplied by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding before such event and of
which the denominator shall be the number of shares of Common Stock
outstanding after such event. Any adjustment made pursuant to this Section
5(d)(ii) shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective
date in the case of a subdivision, combination or re-classification.
(iii) If the Company, at any time while any shares of
Preferred Stock are outstanding, shall issue rights or warrants to all
holders of Common Stock entitling them to subscribe for or purchase shares
of Common Stock at a price per share less than the Per Share Market Value
of Common Stock at the record date mentioned below, the Conversion Price
designated in Section 5(d)(i) shall be multiplied by a fraction, of which
the denominator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding on the date of issuance of such rights
or warrants plus the number of additional shares of Common Stock offered
for subscription or purchase, and of which the numerator shall be the
number of shares of Common Stock (excluding treasury shares, if any)
outstanding on the date of issuance of such rights or warrants plus the
number of shares which the aggregate offering price of the total number of
shares so offered would purchase at such Per Share Market Value. Such
adjustment shall be made whenever such rights or warrants are issued, and
shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights or warrants.
However, upon the expiration of any right or warrant to purchase Common
Stock the issuance of which resulted in an adjustment in the Conversion
Price designated in Section 5(d)(i) pursuant to this Section 5(d)(iii), if
any such right or warrant shall expire and shall not have been exercised,
the Conversion Price designated in Section 5(d)(i) shall immediately upon
such expiration be recomputed and effective immediately upon such
expiration be increased to the price which it would have been (but
reflecting any other adjustments in the Conversion Price made pursuant to
the provisions of this Section 5 after the issuance of such rights or
warrants) had the adjustment of the Conversion Price made upon the issuance
of such rights or warrants been made on the basis of offering for
subscription or purchase only that number of shares of Common Stock
actually purchased upon the exercise of such rights or warrants actually
exercised.
08258-00007/391114.4
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(iv) If the Company, at any time while shares of
Preferred Stock are outstanding, shall distribute to all holders of Common
Stock (and not to holders of Preferred Stock) evidences of its indebtedness
or assets or rights or warrants to subscribe for or purchase any security
(excluding those referred to in Section 5(d)(iii) above) then in each such
case the Conversion Price at which each share of Preferred Stock shall
thereafter be convertible shall be determined by multiplying the Conversion
Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the Per Share Market Value of
Common Stock determined as of the record date mentioned above, and of which
the numerator shall be such Per Share Market Value of the Common Stock on
such record date less the then fair market value at such record date of the
portion of such assets or evidence of indebtedness so distributed
applicable to one (1) outstanding share of Common Stock as determined by
the Board of Directors in good faith; provided, however, that in the event
of a distribution exceeding ten percent (10%) of the net assets of the
Company, such fair market value shall be determined by a nationally
recognized or major regional investment banking firm or firm of independent
certified public accountants of recognized standing (which may be the firm
that regularly examines the financial statements of the Company) (an
"Appraiser") selected in good faith by the holders of a majority in
interest of the shares of Preferred Stock; and provided, further that the
Company, after receipt of the determination by such Appraiser shall have
the right to select an additional Appraiser, in which case the fair market
value shall be equal to the average of the determinations by each such
Appraiser. In either case the adjustments shall be described in a
statement provided to all holders of Preferred Stock of the portion of
assets or evidences of indebtedness so distributed or such subscription
rights applicable to one (1) share of Common Stock. Such adjustment shall
be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
(v) All calculations under this Section 5 shall be made
to the nearest cent or the nearest 1/100th of a share, as the case may be.
(vi) Whenever the Conversion Price is
adjusted pursuant to Section 5(d)(ii),(iii), (iv) or (v), the Company shall
promptly mail to each holder of Preferred Stock, a notice setting forth the
Conversion Price after such adjustment and setting forth a brief statement
of the facts requiring such adjustment.
(vii) In case of any reclassification
of the Common Stock, any consolidation or merger of the Company with or
into another Person, the sale or transfer of all or substantially all of
the assets of the Company or any compulsory share exchange pursuant to
which the Common Stock is converted into other securities, cash or
08258-00007/391114.4
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property, the holders of the Preferred Stock then outstanding shall have
the right thereafter to convert such shares only into the shares of stock
and other securities and property receivable upon or deemed to be held by
holders of Common Stock following such reclassification, consolidation,
merger, sale, transfer or share exchange, and the holders of the Preferred
Stock shall be entitled upon such event to receive such amount of
securities or property as the shares of the Common Stock of the Company
into which such shares of Preferred Stock could have been converted
immediately prior to such reclassification, consolidation, merger, sale,
transfer or share exchange would have been entitled. The terms of any such
consolidation, merger, sale, transfer or share exchange shall include such
terms so as to continue to give to the holder of Preferred Stock the right
to receive the securities or property set forth in this Section 5(d)(vii)
upon any conversion following such consolidation, merger, sale, transfer or
share exchange. This provision shall similarly apply to successive
reclassifications, consolidations, mergers, sales, transfers or share
exchanges.
(viii) If:
a. the Company shall declare a dividend (or any
other distribution) on its Common Stock; or
b. the Company shall declare a special
nonrecurring cash dividend on or a redemption
of its Common Stock; or
c. the Company shall authorize the granting to
all holders of the Common Stock rights or
warrants to subscribe for or purchase any
shares of capital stock of any class or of any
rights; or
d. the approval of any stockholders of the
Company shall be required in connection with
any reclassification of the Common Stock of
the Company (other than a subdivision or
combination of the outstanding shares of
Common Stock), any consolidation or merger to
which the Company is a party, any sale or
transfer of all or substantially all of the
assets of the Company, or any compulsory share
exchange whereby the Common Stock is converted
into other securities, cash or property; or
e. the Company shall authorize the voluntary or
involuntary dissolution, liquidation or
08258-00007/391114.4
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winding-up of the affairs of the Company;
then the Company shall cause to be filed at each office or agency
maintained for the purpose of conversion of Preferred Stock, and shall
cause to be mailed to the holders of Preferred Stock at their last
addresses as they shall appear upon the stock books of the Company, at
least 30 calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is
to be taken for the purpose of such dividend, distribution, redemption,
rights or warrants, or if a record is not to be taken, the date as of which
the holders of Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined, or (y)
the date on which such reclassification, consolidation, merger, sale,
transfer, share exchange, dissolution, liquidation or winding-up is
expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their
shares of Common Stock for securities or other property deliverable upon
such reclassification, consolidation, merger, sale, transfer, share
exchange, dissolution, liquidation or winding-up; provided, however, that
the failure to mail such notice or any defect therein or in the mailing
thereof shall not affect the validity of the corporate action required to
be specified in such notice.
1 If at any time conditions shall arise by reason of action
taken by the Company which in the opinion of the Board of Directors are not
adequately covered by the other provisions hereof and which might
materially and adversely affect the rights of the holders of Preferred
Stock (different than or distinguished from the effect generally on rights
of holders of any class of the Company's capital stock) or if at any time
any such conditions are expected to arise by reason of any action
contemplated by the Company, the Company shall mail a written notice
briefly describing the action contemplated and the material adverse effects
of such action on the rights of the holders of Preferred Stock at least 30
calendar days prior to the effective date of such action, and an Appraiser
selected by the holders of majority in interest of the Preferred Stock
shall give its opinion as to the adjustment, if any (not inconsistent with
the standards established in this Section 5), of the Conversion Price
(including, if necessary, any adjustment as to the securities into which
shares of Preferred Stock may thereafter be convertible) and any
distribution which is or would be required to preserve without diluting the
rights of the holders of shares of Preferred Stock; provided, however, that
the Company, after receipt of the determination by such Appraiser, shall
have the right to select an additional Appraiser, in which case the
adjustment shall be equal to the average of the adjustments recommended by
each such Appraiser. The Board of Directors shall make the adjustment
recommended forthwith upon the receipt of such opinion or opinions or the
taking of any such action contemplated, as the case may be; provided,
08258-00007/391114.4
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however, that no such adjustment of the Conversion Price shall be made
which in the opinion of the Appraiser(s) giving the aforesaid opinion or
opinions would result in an increase of the Conversion Price to more than
the Conversion Price then in effect.
1 The Company covenants that it will at all times reserve
and keep available out of its authorized and unissued Common Stock solely
for the purpose of issuance upon conversion of Preferred Stock as herein
provided, free from preemptive rights or any other actual contingent
purchase rights of Persons other than the holders of Preferred Stock, such
number of shares of Common Stock as shall be issuable (taking into account
the adjustments and restrictions of Sections 5(b) and Section 5(d) hereof)
upon the conversion of all outstanding shares of Preferred Stock. The
Company covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly and validly authorized, issued and fully paid
and nonassessable.
1 Upon a conversion hereunder, the Company shall not be
required to issue stock certificates representing fractions of shares of
Common Stock, but may if otherwise permitted, make a cash payment in
respect of any final fraction of a share based on the Per Share Market
Value at such time. If the Company elects not, or is unable, to make such
a cash payment, the holder of a share of Preferred Stock shall be entitled
to receive, in lieu of the final fraction of a share, one whole share of
Common Stock.
1 The issuance of certificates for shares of Common Stock
on conversion of Preferred Stock shall be made without charge to the
holders thereof for any documentary stamp or similar taxes that may be
payable in respect of the issue or delivery of such certificate, provided
that the Company shall not be required to pay any tax that may be payable
in respect of any transfer involved in the issuance and delivery of any
such certificate upon conversion in a name other than that of the holder of
such shares of Preferred Stock so converted and the Company shall not be
required to issue or deliver such certificates unless or until the Person
or Persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
1 Shares of Preferred Stock converted into Common Stock
shall be canceled and shall have the status of authorized but unissued
shares of preferred stock.
1 Each Holder Conversion Notice shall be given by facsimile
and by mail, postage prepaid, addressed to the attention of the Chief
Financial Officer of the Company at the facsimile telephone number and
address of the principal place of business of the Company. Each Company
08258-00007/391114.4
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Conversion Notice shall be given by facsimile and by mail, postage prepaid,
addressed to each holder of Preferred Stock at the facsimile telephone
number and address of such holder appearing on the stock books of the
Company or provided to the Company by such holder for the purpose of such
Company Conversion Notice, or if no such facsimile telephone number or
address appears or is so provided, at the principal place of business of
the holder. Any such notice shall be deemed given and effective upon the
earliest to occur of (i)(a) if such Conversion Notice is delivered via
facsimile at the facsimile telephone number specified in this Section 5(j)
prior to 7:30 p.m. (Eastern Standard Time) on any date, such date (or, in
the case of a Company Conversion Notice, the next Trading Day) or such
later date as is specified in the Conversion Notice, and (b) if such
Conversion Notice is delivered via facsimile at the facsimile telephone
number specified in this Section 5(j) after 7:30 p.m. (Eastern Standard
Time) on any date, the next date (or, in the case of a Company Conversion
Notice, the next Trading Day after such next day) or such later date as is
specified in the Conversion Notice, (ii) five days after deposit in the
United States mails or (iii) upon actual receipt by the party to whom such
notice is required to be given.
1 Definitions. For the purposes hereof, the following terms
shall have the following meanings:
"Business Day" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions
in the state of New York are authorized or required by law or other
government actions to close.
"Common Stock" means shares now or hereafter authorized of the
class of Common Stock, par value $.0001, of the Company and stock of any
other class into which such shares may hereafter have been reclassified or
changed.
"Conversion Ratio" means, at any time, a fraction, of which the
numerator is Stated Value plus accrued but unpaid dividends, and of which
the denominator is the Conversion Price at such time.
"Junior Securities" means the Common Stock and all other equity
securities of the Company, except the Company's Series A Cumulative
Convertible Preferred Stock, Series E Convertible Preferred Stock, Series
F-1, F-2, F-3 and F-4 Convertible Preferred Stock, Series H Convertible
Preferred Stock and Series I Convertible Preferred Stock.
"Original Issue Date" shall mean the date of the first issuance
of any shares of the Preferred Stock regardless of the number of transfers
of any particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.
08258-00007/391114.4
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"Per Share Market Value" means on any particular date (a) the
closing bid price per share of the Common Stock on such date on The NASDAQ
National Market or other national securities exchange on which the Common
Stock has been listed or if there is no such price on such date, then the
closing bid price on such national securities exchange or market on the
date nearest preceding such date, or (b) if the Common Stock is not listed
on The NASDAQ National Market or any national securities exchange or
market, the closing bid price for a share of Common Stock on the
over-the-counter market, as reported by the NASDAQ Stock Market at the
close of business on such date, or (c) if the Common Stock is not quoted on
the NASDAQ Stock Market, the closing bid price for a share of Common Stock
on the over-the-counter market as reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions
of reporting prices), or (d) if the Common Stock is no longer reported by
the National Quotation Bureau Incorporated (or similar organization or
agency succeeding to its functions of reporting prices), then the average
of the "Pink Sheet" quotes for the relevant conversion period as determined
by the holder, or (e) if the Common Stock is no longer publicly traded, the
fair market value of a share of Common Stock as determined by an Appraiser
(as defined in Section 5(d)(iv) above) selected in good faith by the
holders of a majority in interest of the shares of the Preferred Stock;
provided, however, that the Company, after receipt of the determination by
such Appraiser, shall have the right to select an additional Appraiser, in
which case, the fair market value shall be equal to the average of the
determinations by each such Appraiser.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
"Purchase Agreement" means the Convertible Preferred Stock
Purchase Agreement, dated as of the Original Issue Date, between the
Company and the original holder of the Preferred Stock.
"Trading Day" means (a) a day on which the Common Stock is
traded on The NASDAQ National Market or principal national securities
exchange or market on which the Common Stock has been listed, or (b) if the
Common Stock is not listed on The NASDAQ National Market or any stock
exchange or market, a day on which the Common Stock is traded on the
over-the-counter market, as reported by the NASDAQ Stock Market, or (c) if
the Common Stock is not quoted on the NASDAQ Stock Market, a day on which
the Common Stock is quoted in the over-the-counter market as reported by
the National Quotation Bureau Incorporated (or any similar organization or
agency succeeding its functions of reporting prices).
RESOLVED FURTHER, that the President and Secretary of the
Company be, and they hereby are, authorized and directed to prepare,
08258-00007/391114.4
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execute, verify, and file in Delaware, a Certificate of Designation in
accordance with these resolutions and as required by law.
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08258-00007/391114.4
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IN WITNESS WHEREOF, Network Imaging Corporation has caused its
corporate seal to be hereunto affixed and this certificate to be signed by
Xxxxx X. Xxxx, its President, and attested by Xxxxxx X. Xxxxxxxx, its
Secretary, this __th day of September, 1996.
NETWORK IMAGING CORPORATION
By:________________________________
Xxxxx X. Xxxx
President
Attest:
By:___________________________
Xxxxxx X. Xxxxxxxx
Secretary
08258-00007/391114.4
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EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)
The undersigned hereby irrevocably elects to convert the number of shares
of Series J Convertible Preferred Stock indicated below, into shares of
Common Stock, par value U.S.$.0001 per share (the Common Stock ), of
Network Imaging Corporation (the Company ) according to the conditions
hereof, as of the date written below. If shares are to be issued in the
name of a person other than undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering herewith such
certificates and opinions as reasonably requested by the Company in
accordance therewith. No fee will be charged to the Holder for any
conversion, except for such transfer taxes, if any.
Conversion calculations:
Date to Effect Conversion
Number of shares of Preferred
Stock to be Converted
Applicable Conversion Price
Signature
Name:
Address:
The Company undertakes to promptly upon its receipt of this conversion
notice (and, in any case prior to the time it effects the conversion
requested hereby), notify the converting holder by facsimile of the number
of shares of Common Stock outstanding on such date and the number of shares
of Common Stock which would be issuable to the holder if the conversion
requested in this conversion notice were effected in full, whereupon, the
holder may, within one day of the notice from the Company, revoke the
conversion requested hereby to the extent that it determines that such
conversion would result in it owning in excess of 4.9% of the outstanding
008258-00007/391113.2
shares of Common Stock on such date, and the Company shall issue to the
holder one or more certificates representing shares of Preferred Stock
which have not been converted as a result of this provision. If the holder
waives the applicability of this limitation by notice to the Company
delivered upon its receipt of the Company's notice regarding the number of
outstanding shares of Common Stock or if the Purchaser fails to respond to
the Company's notice within one day thereafter, the Company shall effect in
full the conversion requested in this notice.
008258-00007/391113.2
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EXHIBIT B
NETWORK IMAGING CORPORATION
NOTICE OF CONVERSION AT
THE ELECTION OF THE COMPANY
The undersigned in the name and on behalf of Network Imaging Corporation
(the "Company") hereby notifies the addressee hereof that the Company
hereby elects to exercise its right to convert
[ ] shares of its Series J Convertible Preferred Stock held by
the Holder into shares of Common Stock, par value U.S.$.0001 per share (the
Common Stock ) of the Company according to the terms hereof, as of the
date written below. No fee will be charged to the Holder for any
conversion hereunder, except for such transfer taxes, if any which may be
incurred by the Company if shares are to be issued in the name of a person
other than the person to whom this notice is addressed.
Conversion calculations:
Date to Effect Conversion
Number of Shares of Preferred
Stock to be Converted
Applicable Conversion Price
Number of Shares of Common Stock
outstanding at close of trading
on Conversion Date
Signature
Name:
Address:
008258-00007/391113.2
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Exhibit B
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made
and entered into as of September 30, 1996, by and among Network Imaging
Corporation, a Delaware corporation (the "Company"), and Southbrook
International Investments, Ltd., a British Virgin Islands corporation (the
"Purchaser").
This Agreement is made pursuant to the Convertible Preferred
Stock Purchase Agreement, dated as of September 30, 1996 by and among the
Company and the Purchaser (the "Purchase Agreement"). The execution of
this Agreement is a condition to the closing of the transactions
contemplated by the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein shall
have the meanings given such terms in the Purchase Agreement. As used in
this Agreement, the following terms shall have the following meanings:
"Advice" shall have meaning set forth in Section 4(o).
"Affiliate" means, with respect to any Person, any other Person
that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "control,"
when used with respect to any Person, means the possession, direct or
indirect, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise; and the terms of "affiliated,"
"controlling" and "controlled" have meanings correlative to the foregoing.
"Blackout" shall have the meaning set forth in Section 3(b).
"Business Day" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions
in the state of New York generally are authorized or required by law or
other government actions to close.
"Closing Date" shall have the meaning set forth in the Purchase
008258-00007/391113.2
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Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, par value
$.0001 per share.
"Effectiveness Date" means the 90th day following the Closing
Date.
"Effectiveness Period" shall have the meaning set forth in
Section 2(a).
"Event" shall have the meaning set forth in Section 5.
"Event Date" shall have the meaning set forth in Section 5.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Filing Date" means the earlier of (i) 45th day following the
Closing Date or (ii) the second Business Day after the Company files its
Quarterly Report on Form 10-Q with the Commission.
"Holder" or "Holders" means the holder or holders, as the case
may be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section
7(c).
"Indemnifying Party" shall have the meaning set forth in
Section 7(c).
"Losses" shall have the meaning set forth in Section 7(a).
"New York Courts" shall have the meaning set forth in Section
9(i).
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
political subdivision thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
008258-00007/391113.2
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Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated
under the Securities Act), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of the
Registrable Securities covered by the Registration Statement, and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
"Registrable Securities" means the shares of Series J Preferred
Stock purchased by the Purchaser pursuant to the Purchase Agreement and the
shares of Common Stock into which such shares of Series J Preferred Stock
are convertible pursuant to the Purchase Agreement.
"Registration Statement" means the registration statement,
contemplated by Section 2(a), including the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre-
and post-effective amendments, all exhibits thereto, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
"Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to
time, or any similar rule or regulation hereafter adopted by the Commission
having substantially the same effect as such Rule.
"Rule 144A" means Rule 144A promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to
time, or any similar rule or regulation hereafter adopted by the Commission
having substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to
time, or any similar rule or regulation hereafter adopted by the Commission
having substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to
time, or any similar rule or regulation hereafter adopted by the Commission
having substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means any special counsel to the Holders, for
which the Holders will be reimbursed by the Company pursuant to Section 5.
"Underwritten registration or underwritten offering" means a
008258-00007/391113.2
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registration in connection with which securities of the Company are sold to
an underwriter for reoffering to the public pursuant to an effective
registration statement.
1. Shelf Registration
(a) On or prior to the Filing Date, the Company shall prepare
and file with the Commission a "shelf" Registration Statement covering all
Registrable Securities (which Registrable Securities shall include the (i)
double the number of shares of Common Stock which all shares of Series J
Preferred Stock are converted into pursuant to the Purchase Agreement on
the Closing Date or (ii) such other number of shares agreed to by the
parties to the Purchase Agreement) for an offering to be made on a
continuous basis pursuant to Rule 415. The Registration Statement shall be
on Form S-3 or another appropriate form permitting registration of
Registrable Securities for resale by the Holders in the manner or manners
designated by them (including, without limitation, public or private sales
and one or more underwritten offerings). The Company shall (x) not permit
any securities other than the Registrable Securities to be included in the
Registration Statement and (y) use its best efforts to cause the
Registration Statement to be declared effective under the Securities Act as
promptly as practicable after the filing thereof, but in any event prior to
the Effectiveness Date, and to keep such Registration Statement
continuously effective under the Securities Act until the date which is
three years after the Closing Date or such earlier date when all
Registrable Securities covered by such Registration Statement have been
sold or may be sold pursuant to Rule 144(A) as determined by the counsel to
the Company pursuant to a written opinion letter, addressed to the Holders,
to such effect (the "Effectiveness Period"); provided, however, that the
Company shall not be deemed to have used its best efforts to keep the
Registration Statement effective during the Effectiveness Period if it
voluntarily takes any action that would result in the Holders not being
able to sell the Registrable Securities covered by such Registration
Statement during the Effectiveness Period, unless such action is required
under applicable law or the Company has filed a post-effective amendment to
the Registration Statement and the Commission has not declared it effective
or except as otherwise permitted by Section 3(a).
(a) If the Holders of a majority of the Registrable
Securities so elect, an offering of Registrable Securities pursuant to the
Registration Statement may be effected in the form of an underwritten
offering. In such event, and if the managing underwriters advise the
Company and such Holders in writing that in their opinion the amount of
Registrable Securities proposed to be sold in such offering exceeds the
amount of Registrable Securities which can be sold in such offering, there
shall be included in such underwritten offering the amount of such
Registrable Securities which in the opinion of such managing underwriters
can be sold, and such amount shall be allocated pro rata among the Holders
008258-00007/391113.2
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proposing to sell Registrable Securities in such underwritten offering.
(a) If any of the Registrable Securities are to be sold in an
underwritten offering, the investment banker or investment bankers and
manager or managers that will administer the offering will be selected by
the Holders of a majority of the Registrable Securities included in such
offering. No Holder may participate in any underwritten offering hereunder
unless such Person (i) agrees to sell its Registrable Securities on the
basis provided in any underwriting agreements approved by the Persons
entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such
arrangements.
1. Hold-Back Agreements
(a) Restrictions on Public Sale by the Holders. Subject to
paragraph (b) of this Section 3, the Purchaser hereby understands and
agrees that the registration rights of the Purchaser pursuant to this
Agreement and its ability to offer and sell Registrable Securities pursuant
to the Registration Statement are limited by the provisions of the
immediately following sentence. If the Company determines in its good
faith judgment that the filing of the Registration Statement in accordance
with Section 2 or the use of any Prospectus would require the disclosure of
material information which the Company has a bona fide business purpose for
preserving as confidential or the disclosure of which would impede the
Company's ability to consummate a significant transaction, upon written
notice of such determination by the Company, the rights of the Purchaser to
offer, sell or distribute any Registrable Securities pursuant to the
Registration Statement or to require the Company to take action with
respect to the registration or sale of any Registrable Securities pursuant
to the Registration Statement (including any action contemplated by Section
4) will for up to 60 days in any 12-month period be suspended until the
date upon which the Company notifies the Holders in writing that suspension
of such rights for the grounds set forth in this Section 3(a) is no longer
necessary; provided that there may be no such further suspension after the
initial twelve-month period in which such suspension has occurred.
(a) Limitation on Blackouts. Notwithstanding anything
contained herein to the contrary, the aggregate number of days (whether or
not consecutive) during which the Company may delay the effectiveness of
the Registration Statement or prevent offerings, sales or distributions by
the Purchaser pursuant to paragraph (a) above or the last paragraph of
Section 4 (collectively, a "Blackout") shall in no event exceed 90 days
during any 12-month period and no Blackout may continue in consecutive 12
month periods.
008258-00007/391113.2
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1. Registration Procedures
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Prepare and file with the Commission within the time
period set forth in Section 2 a Registration Statement on Form S-3 in
accordance with the method or methods of distribution thereof as specified
by the Holders, and cause the Registration Statement to become effective
and remain effective as provided herein; provided, however, that not less
than five (5) Business Days prior to the filing of the Registration
Statement or any related Prospectus or any amendment or supplement thereto
(including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall (i) furnish to the
Holders, their Special Counsel and any managing underwriters, copies of all
such documents proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference) will be subject to
the review of such Holders, their Special Counsel and such managing under-
writers, and (ii) cause its officers and directors, counsel and independent
certified public accountants to respond to such inquiries as shall be
necessary, in the opinion of respective counsel to such Holders and such
underwriters, to conduct a reasonable investigation within the meaning of
the Securities Act. The Company shall not file the Registration Statement
or any such Prospectus or any amendments or supplements thereto to which
the Holders of a majority of the Registrable Securities, their Special
Counsel, or any managing underwriters, shall reasonably object on a timely
basis.
(a) (i) Prepare and file with the Commission such
amendments, including post-effective amendments, to the Registration State-
ment as may be necessary to keep the Registration Statement continuously
effective for the applicable time period; (ii) cause the related Prospectus
to be amended or supplemented by any required Prospectus supplement, and as
so supplemented or amended to be filed pursuant to Rule 424 (or any similar
provisions then in force) promulgated under the Securities Act; (iii)
respond as promptly as practicable to any comments received from the
Commission with respect to the Registration Statement or any amendment
thereto; and (iv) comply with the provisions of the Securities Act and the
Exchange Act with respect to the disposition of all Registrable Securities
covered by the Registration Statement during the applicable period in
accordance with the intended methods of disposition by the Holders thereof
set forth in the Registration Statement as so amended or in such Prospectus
as so supplemented.
(a) Notify the Holders of Registrable Securities to be sold,
their Special Counsel and any managing underwriters immediately (and, in
the case of (i)(A) below, not less than five (5) days prior to such filing)
and (if requested by any such Person) confirm such notice in writing no
008258-00007/391113.2
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later than one (1) Business Day following the day (i)(A) when a Prospectus
or any Prospectus supplement or post-effective amendment to the Regis-
tration Statement is proposed to be filed and, (B) with respect to the
Registration Statement or any post-effective amendment, when the same has
become effective; (ii) of any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to
the Registration Statement or Prospectus or for additional information;
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement covering any or all of the
Registrable Securities or the initiation of any Proceedings for that pur-
pose; (iv) if at any time any of the representations and warranties of the
Company contained in any agreement (including any underwriting agreement)
contemplated hereby ceases to be true and correct in all material respects;
(v) of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction, or the initiation
or threatening of any Proceeding for such purpose; and (vi) of the
occurrence of any event that makes any statement made in the Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the
Prospectus, as the case may be, it will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(a) Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness
of the Registration Statement or (ii) any suspension of the qualification
(or exemption from qualification) of any of the Registrable Securities for
sale in any jurisdiction, at the earliest practicable moment.
(a) If requested by any managing underwriter or the Holders
of a majority of the Registrable Securities to be sold in connection with
an underwritten offering, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment to the Registration Statement such
information as such managing underwriters and such Holders reasonably agree
should be included therein and (ii) make all required filings of such
Prospectus supplement or such post-effective amendment as soon as
practicable after the Company has received notification of the matters to
be incorporated in such Prospectus supplement or post-effective amendment;
provided, however, that the Company shall not be required to take any
action pursuant to this Section 4(e) that would, in the opinion of counsel
for the Company, violate applicable law.
(a) Furnish to each Holder, their Special Counsel and any
managing underwriters, without charge, at least one executed copy of each
008258-00007/391113.2
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Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent requested
by such Person (including those previously furnished or incorporated by
reference) promptly after the filing of such documents with the Commission.
(a) Promptly deliver to each Holder, their Special Counsel,
and any underwriters, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request; and the Company
hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders and any underwriters in
connection with the offering and sale of the Registrable Securities covered
by such Prospectus and any amendment or supplement thereto.
(a) Prior to any public offering of Registrable Securities,
use its best efforts to register or qualify or cooperate with the selling
Holders, any underwriters and their respective counsel in connection with
the registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States
as any Holder or underwriter requests in writing, to keep each such reg-
istration or qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things necessary
or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by a Registration Statement; provided,
however, that the Company shall not be required to qualify generally to do
business in any jurisdiction where it is not then so qualified or to take
any action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.
(a) Cooperate with the Holders and any managing underwriters
to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold, which certificates shall be
free of all restrictive legends, and to enable such Registrable Securities
to be in such denominations and registered in such names as any such
managing underwriters or Holders may request at least two Business Days
prior to any sale of Registrable Securities.
(a) Upon the occurrence of any event contemplated by Section
4(c)(vi), as promptly as practicable, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, and file any other required
document so that, as thereafter delivered, neither the Registration
Statement nor such Prospectus will contain an untrue statement of a
material fact or omit to state a material fact required to be stated
008258-00007/391113.2
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therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(a) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on each securities
exchange or market, if any, on which similar securities issued by the
Company are then listed.
(a) Enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in underwritten
offerings) and take all such other actions in connection therewith
(including those reasonably requested by any managing underwriters and the
Holders of a majority of the Registrable Securities being sold) in order to
expedite or facilitate the disposition of such Registrable Securities, and
whether or not an underwriting agreement is entered into, (i) make such
representations and warranties to such Holders and such underwriters as are
customarily made by issuers to underwriters in underwritten public
offerings, and confirm the same if and when requested; (ii) obtain and
deliver copies thereof to each Holder and the managing underwriters, if
any, of opinions of counsel to the Company and updates thereof addressed to
each selling Holder and each such underwriter, in form, scope and substance
reasonably satisfactory to any such managing underwriters and Special
Counsel to the selling Holders covering the matters customarily covered in
opinions requested in underwritten offerings and such other matters as may
be reasonably requested by such Special Counsel and underwriters; (iii)
immediately prior to the effectiveness of the Registration Statement, and,
in the case of an underwritten offering, at the time of delivery of any
Registrable Securities sold pursuant thereto, obtain and deliver copies to
the Holders and the managing underwriters, if any, of "cold comfort"
letters and updates thereof from the independent certified public
accountants of the Company (and, if necessary, any other independent
certified public accountants of any subsidiary of the Company or of any
business acquired by the Company for which financial statements and
financial data is, or is required to be, included in the Registration
Statement), addressed to each selling Holder and each of the underwriters,
if any, in form and substance as are customary in connection with
underwritten offerings; (iv) if an underwriting agreement is entered into,
the same shall contain indemnification provisions and procedures no less
favorable to the selling Holders and the underwriters, if any, than those
set forth in Section 7 (or such other provisions and procedures acceptable
to the managing underwriters, if any, and holders of a majority of
Registrable Securities participating in such underwritten offering; and (v)
deliver such documents and certificates as may be reasonably requested by
the Holders of a majority of the Registrable Securities being sold, their
Special Counsel and any managing underwriters to evidence the continued
validity of the representations and warranties made pursuant to clause
4(l)(i) above and to evidence compliance with any customary conditions
contained in the underwriting agreement or other agreement entered into by
008258-00007/391113.2
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the Company.
(a) Make available for inspection by the selling Holders, any
representative of such Holders, any underwriter participating in any
disposition of Registrable Securities, and any attorney or accountant
retained by such selling Holders or underwriters, at the offices where
normally kept, during reasonable business hours, all financial and other
records, pertinent corporate documents and properties of the Company and
its subsidiaries, and cause the officers, directors, agents and employees
of the Company and its subsidiaries to supply all information in each case
requested by any such Holder, representative, underwriter, attorney or
accountant in connection with the Registration Statement; provided,
however, that any information that is determined in good faith by the
Company in writing to be of a confidential nature at the time of delivery
of such information shall be kept confidential by such Persons, unless (i)
disclosure of such information is required by court or administrative order
or is necessary to respond to inquiries of regulatory authorities; (ii)
disclosure of such information, in the opinion of counsel to such Person,
is required by law; (iii) such information becomes generally available to
the public other than as a result of a disclosure or failure to safeguard
by such Person; or (iv) such information becomes available to such Person
from a source other than the Company and such source is not bound by a
confidentiality agreement.
(a) Comply with all applicable rules and regulations of the
Commission and make generally available to its securityholders earning
statements satisfying the provisions of Section 11(a) of the Securities Act
and Rule 158 not later than 45 days after the end of any 12-month period
(or 90 days after the end of any 12-month period if such period is a fiscal
year) (i) commencing at the end of any fiscal quarter in which Registrable
Securities are sold to underwriters in a firm commitment or best efforts
underwritten offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the
Company after the effective date of the Registration Statement, which
statement shall cover said 12-month period, or end shorter periods as is
consistent with the requirements of Rule 158.
(a) Provide a CUSIP number for all Registrable Securities,
not later than the effective date of the Registration Statement.
The Company may require each selling Holder to furnish to the
Company such information regarding the distribution of such Registrable
Securities as is required by law to be disclosed in the Registration
Statement and the Company may exclude from such registration the
Registrable Securities of any such Holder who unreasonably fails to furnish
such information within a reasonable time after receiving such request.
If the Registration Statement refers to any Holder by name or
008258-00007/391113.2
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otherwise as the holder of any securities of the Company, then such Holder
shall have the right to require (i) the inclusion therein of language, in
form and substance reasonably satisfactory to such Holder, to the effect
that the ownership by such Holder of such securities is not to be construed
as a recommendation by such Holder of the investment quality of the
Company's securities covered thereby and that such ownership does not imply
that such Holder will assist in meeting any future financial requirements
of the Company, or (ii) if such reference to such Holder by name or
otherwise is not required by the Securities Act or any similar Federal
statute then in force, the deletion of the reference to such Holder in any
amendment or supplement to the Registration Statement filed or prepared
subsequent to the time that such reference ceases to be required.
Each Purchaser covenants and agrees that (i) it will not offer
or sell any Registrable Securities under the Registration Statement until
it has received copies of the Prospectus as then amended or supplemented as
contemplated in Section 4(g) and notice from the Company that such
Registration Statement and any post-effective amendments thereto have
become effective as contemplated by Section 4(c) and (ii) the Purchaser and
its officers, directors or Affiliates, if any, will comply with the
prospectus delivery requirements of the Securities Act as applicable to
them in connection with sales of Registrable Securities pursuant to the
Registration Statement.
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the
occurrence of any event of the kind described in Section 4(c)(ii),
4(c)(iii), 4(c)(iv), 4(c)(v) or 4(c)(vi), such Holder will forthwith
discontinue disposition of such Registrable Securities until such Holder's
receipt of the copies of the supplemented Prospectus and/or amended
Registration Statement contemplated by Section 4(j), or until it is advised
in writing (the "Advice") by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement.
1. Liquidated Damages. The Company acknowledges and agrees
that the Holders will suffer damages, and that it would not be feasible to
ascertain the extent of such damages with precision, if the Company fails
to fulfill its obligations hereunder and (a) a Registration Statement is
not filed with the Commission on or prior to the Filing Date, (b) a
Registration Statement is not declared effective by the Commission on or
prior to the Effectiveness Date or (c) a Registration Statement is filed
and declared effective but thereafter ceases to be effective at any time
during the Effectiveness Period without being succeeded within 30 days by a
subsequent Registration Statement filed with and declared effective by the
Commission (any such failure being hereinafter referred to as an "Event",
and for purposes of clauses (a) and (b) the date on which such Event
008258-00007/391113.2
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occurs, or for purposes of clause (c) the date on which such 30-day limit
is exceeded, being hereinafter referred to as an "Event Date").
Upon the occurrence of an Event, the Company agrees to increase
the discount applicable to a conversion of Series J Preferred Stock in
accordance with Section 5(d)(i) of the Certificate of Designation by two
percent (2%) per month for each of the first two months after each Event
Date. Commencing on the third month after an Event Date, the two percent
(2%) monthly penalty shall be paid to the Holder in cash. Such increase in
discount and/or payment in cash, as the case may be, shall be paid as
liquidated damages, and not as a penalty, to each Holder; provided, that
such liquidated damages will, in each case, cease to accrue (subject to the
occurrence of another Event) on the date in which the applicable
Registration Statement is no longer subject to an order suspending the
effectiveness thereof or Proceedings relating thereto or a subsequent Shelf
Registration is declared effective.
The Company shall notify each Holder within five days of each
Event and Event Date. The Company shall pay the liquidated damage due on
the Registrable Securities to each Holder of record as at the Event Date on
the first Business Day of each month in which such liquidated damages shall
accrue by check delivered to the address for notice of such Holder set
forth herein.
008258-00007/391113.2
-15-
1. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not the Registration Statement is filed or becomes effective and
whether or not any Registrable Securities are sold pursuant to the
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing
fees (including, without limitation, fees and expenses (A) with respect to
filings required to be made with the National Association of Securities
Dealers, Inc. and (B) in compliance with state securities or Blue Sky laws
(including, without limitation, fees and disbursements of counsel for the
underwriters or Holders in connection with Blue Sky qualifications of the
Registrable Securities and determination of the eligibility of the Regis-
trable Securities for investment under the laws of such jurisdictions as
the managing underwriters, if any, or Holders of a majority of Registrable
Securities may designate)), (ii) printing expenses (including, without
limitation, expenses of printing certificates for Registrable Securities
and of printing prospectuses if the printing of prospectuses is requested
by the managing underwriters, if any, or by the holders of a majority of
the Registrable Securities included in the Registration Statement), (iii)
messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company and Special Counsel for the Holders (subject to the
provisions of Section 6(b)), (v) fees and disbursements of all independent
certified public accountants referred to in Section 4(1)(iii) (including,
without limitation, the expenses of any special audit and "cold comfort"
letters required by or incident to such performance), (vi) Securities Act
liability insurance, if the Company so desires such insurance, and (vii)
fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this
Agreement. In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, the fees and expenses
incurred in connection with the listing of the Registrable Securities on
any securities exchange on which similar securities issued by the Company
are then listed.
(a) In connection with the Registration Statement, the
Company shall reimburse the Holders for the reasonable fees and
disbursements of one firm of attorneys chosen by the Holders of a majority
of the Registrable Securities.
008258-00007/391113.2
-16-
1. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding termination of this Agreement and without limitation as to
time, indemnify and hold harmless each Holder, the officers, directors,
agents, brokers, investment advisors and employees of each of them, each
Person who controls any such Holder (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the
fullest extent permitted by applicable law, from and against any and all
losses, claims, damages, liabilities, costs (including, without limitation,
costs of preparation and attorneys' fees) and expenses (collectively,
"Losses"), as incurred, arising out of or relating to any untrue or alleged
untrue statement of a material fact contained in the Registration
Statement, any Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to
be stated therein or necessary to make the statements therein (in the case
of any Prospectus or form of prospectus or supplement thereto, in light of
the circumstances under which they were made) not misleading, except to the
extent, but only to the extent, that such untrue statements or omissions
are based solely upon information regarding such Holder furnished in writ-
ing to the Company by or on behalf of such Holder expressly for use
therein, which information was reasonably relied on by the Company for use
therein or to the extent that such information relates to such Holder or
such Holder's proposed method of distribution of Registrable Securities and
was reviewed and expressly approved in writing by such Holder expressly for
use in the Registration Statement, such Prospectus or such form of
Prospectus or in any amendment or supplement thereto. The Company shall
notify the Holders promptly of the institution, threat or assertion of any
Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.
(a) Indemnification by Holders. In connection with the
Registration Statement, each Holder shall furnish to the Company in writing
such information as the Company reasonably requests for use in connection
with the Registration Statement or any Prospectus and agrees, jointly and
not severally, to indemnify and hold harmless the Company, their directors,
officers, agents and employees, each Person who controls the Company
(within the meaning of Section 15 of the Securities Act and Section 20 of
the Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law,
from and against all Losses (as determined by a court of competent
jurisdiction in a final judgment not subject to appeal or review) arising
solely out of or based solely upon any untrue statement of a material fact
contained in the Registration Statement, any Prospectus, or any form of
prospectus, or arising solely out of or based solely upon any omission of a
material fact required to be stated therein or necessary to make the
008258-00007/391113.2
-17-
statements therein not misleading to the extent, but only to the extent,
that such untrue statement or omission is contained in any information so
furnished in writing by such Holder to the Company specifically for
inclusion in the Registration Statement or such Prospectus and that such
information was reasonably relied upon by the Company for use in the
Registration Statement, such Prospectus or such form of prospectus or to
the extent that such information relates to such Holder or such Holder's
proposed method of distribution of Registrable Securities and was reviewed
and expressly approved in writing by such Holder expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus. In no
event shall the liability of any selling Holder hereunder be greater in
amount than the dollar amount of the proceeds received by such Holder upon
the sale of the Registrable Securities giving rise to such indemnification
obligation.
(a) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity
hereunder (an "Indemnified Party"), such Indemnified Party promptly shall
notify the Person from whom indemnity is sought (the "Indemnifying Party")
in writing, and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any
Indemnified Party to give such notice shall not relieve the Indemnifying
Party of its obligations or liabilities pursuant to this Agreement, except
(and only) to the extent that it shall be finally determined by a court of
competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed
to pay such fees and expenses; or (2) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ
counsel reasonably satisfactory to such Indemnified Party in any such
Proceeding; or (3) the named parties to any such Proceeding (including any
impleaded parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall have been advised by counsel that a
conflict of interest is likely to exist if the same counsel were to
represent such Indemnified Party and the Indemnifying Party (in which case,
if such Indemnified Party notifies the Indemnifying Party in writing that
it elects to employ separate counsel at the expense of the Indemnifying
Party, the Indemnifying Party shall not have the right to assume the
defense thereof and such counsel shall be at the expense of the
Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent,
008258-00007/391113.2
-18-
which consent shall not be unreasonably withheld. No Indemnifying Party
shall, without the prior written consent of the Indemnified Party, effect
any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on
claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within 10 Business Days of written notice thereof to the Indem-
nifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided,
that the Indemnifying Party may require such Indemnified Party to undertake
to reimburse all such fees and expenses to the extent it is finally
judicially determined that such Indemnified Party is not entitled to
indemnification hereunder).
(a) Contribution. If a claim for indemnification under
Section 7(a) or 7(b) is unavailable to an Indemnified Party or is
insufficient to hold such Indemnified Party harmless for any Losses in
respect of which this Section would apply by its terms (other than by
reason of exceptions provided in this Section), then each Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to
the amount paid or payable by such Indemnified Party as a result of such
Losses, in such proportion as is appropriate to reflect the relative fault
of the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well as
any other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference
to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or
alleged omission of a material fact, has been taken or made by, or relates
to information supplied by, such Indemnifying Party or Indemnified Party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action, statement or omission. The
amount paid or payable by a party as a result of any Losses shall be deemed
to include, subject to the limitations set forth in Section 7(c), any
attorneys' or other fees or expenses incurred by such party in connection
with any Proceeding to the extent such party would have been indemnified
for such fees or expenses if the indemnification provided for in this
Section was available to such party.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by
pro rata allocation or by any other method of allocation that does not take
into account the equitable considerations referred to in the immediately
008258-00007/391113.2
-19-
preceding paragraph. Notwithstanding the provisions of this Section 7(d),
the Purchaser shall not be required to contribute, in the aggregate, any
amount in excess of the amount by which the proceeds actually received by
the Purchaser from the sale of the Registrable Securities subject to the
Proceeding exceeds the amount of any damages that the Purchaser has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any Person who was not guilty
of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may
have to the Indemnified Parties.
1. Rule 144
The Company shall file the reports required to be filed by it
under the Securities Act and the Exchange Act in a timely manner and, if at
any time the Company is not required to file such reports, they will, upon
the request of any Holder, make publicly available other information so
long as necessary to permit sales of its securities pursuant to Rule 144.
The Company further covenants that it will take such further action as any
Holder may reasonably request, all to the extent required from time to time
to enable such Holder to sell Registrable Securities without registration
under the Securities Act within the limitation of the exemptions provided
by Rule 144. Upon the request of any Holder, the Company shall deliver to
such Holder a written certification of a duly authorized officer as to
whether it has complied with such requirements.
1. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by
a Holder, of any of their obligations under this Agreement, each Holder or
the Company, as the case may be, in addition to being entitled to exercise
all rights granted by law and under this Agreement, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company and each Holder agree that monetary damages would
not provide adequate compensation for any losses incurred by reason of a
breach by it of any of the provisions of this Agreement and hereby further
agrees that, in the event of any action for specific performance in respect
of such breach, it shall waive the defense that a remedy at law would be
adequate.
(a) No Inconsistent Agreements. Except as specifically set
forth in Schedule 3.1 to the Purchase Agreement, none of the Company nor
any of its subsidiaries has, as of the date hereof, nor shall the Company
or any of its subsidiaries, on or after the date of this Agreement, enter
008258-00007/391113.2
-20-
into any agreement with respect to its securities that is inconsistent with
the rights granted to the Holders in this Agreement or otherwise conflicts
with the provisions hereof. Except as set specifically forth in Schedule
3.1 to the Purchase Agreement, none of the Company nor any of its
subsidiaries has previously entered into any agreement granting any
registration rights with respect to any of its securities to any Person.
Without limiting the generality of the foregoing, without the written
consent of the Holders of a majority of the then outstanding Registrable
Securities, the Company shall not grant to any Person the right to request
the Company to register any securities of the Company under the Securities
Act unless the rights so granted are subject in all respects to the prior
rights in full of the Holders set forth herein, and are not otherwise in
conflict or inconsistent with the provisions of this Agreement.
(a) No Piggyback on Registrations. Except as specifically
set forth in Schedule 3.1 to the Purchase Agreement, none of the Company
nor any of its securityholders (other than the Holders in such capacity
pursuant hereto) may include securities of the Company in the Registration
Statement other than the Common Stock to be issued under the Purchase
Agreement, and the Company shall not enter into any agreement providing any
such right to any of its securityholders.
(a) Entire Agreement; Amendments. This Agreement, together
with the Exhibits, Annexes and Schedules hereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with
respect to such matters.
(a) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the same shall be in writing and
signed by the Company and the Holders of at least a majority of the then
outstanding Registrable Securities; provided, however, that, for the pur-
poses of this sentence, Registrable Securities that are owned, directly or
indirectly, by the Company, or an Affiliate of the Company are not deemed
outstanding. Notwithstanding the foregoing, a waiver or consent to depart
from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders and that does not directly or
indirectly affect the rights of other Holders may be given by Holders of at
least a majority of the Registrable Securities to which such waiver or
consent relates; provided, however, that the provisions of this sentence
may not be amended, modified, or supplemented except in accordance with the
provisions of the immediately preceding sentence.
(a) Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed to
have been received (a) upon hand delivery (receipt acknowledged) or
008258-00007/391113.2
-21-
delivery by telex (with correct answer back received), telecopy or
facsimile (with transmission confirmation report) at the address or number
designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during
normal business hours where such notice is to be received) or (b) on the
second business day following the date of mailing by express courier
service, fully prepaid, addressed to such address, or upon actual receipt
of such mailing, whichever shall first occur. The addresses for such
communications shall be:
If to the Company: Network Imaging Corporation
000 Xxxxxxx Xxxx Xxxxx
Xxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Chief Executive Officer
With copies to: Xxxxx & Xxxxxx L.L.P.
0000 Xxxxxx Xxxxxxxxx Xxxxxx,
X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Facsimile No.: (000) 000-0000
Attn: Xxxx X. Xxxxxx
If to the Purchaser: Southbrook International
Investments, Ltd.
c/o Trippoak Advisors, Inc.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx X. Xxxxxx
With copies to: Xxxxxxxx Xxxxxxxxx Xxxxxx
Aronsohn & Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxxx and
Xxxx X.
Xxxxx
Facsimile No.: (000) 000-0000
If to any other Person who is then the registered Holder:
To the address of such Holder as
it appears in the stock transfer
books of the Company
008258-00007/391113.2
-22-
or such other address as may be designated in writing hereafter, in the
same manner, by such Person.
(a) Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and permitted assigns of
each of the parties and shall inure to the benefit of each Holder. The
Company may not assign its rights or obligations hereunder without the
prior written consent of each Holder.
(a) Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to
be an original and, all of which taken together shall constitute one and
the same Agreement. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile
signature were the original thereof.
(a) Governing Law; Submission to Jurisdiction; Waiver of Jury
Trial. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without regard to principles of
conflicts of law. The Company hereby irrevocably submits to the
jurisdiction of any New York state court sitting in the Borough of
Manhattan in the City of New York or any federal court sitting in the Bor-
ough of Manhattan in the City of New York (collectively, the "New York
Courts") in respect of any Proceeding arising out of or relating to this
Agreement, and irrevocably accepts for itself and in respect of its
property, generally and unconditionally, jurisdiction of the New York
Courts. The Company irrevocably waives to the fullest extent it may
effectively do so under applicable law any objection that it may now or
hereafter have to the laying of the venue of any such Proceeding brought in
any New York Court and any claim that any such Proceeding brought in any
New York Court has been brought in an inconvenient forum. Nothing herein
shall affect the right of any Holder to serve process in any manner
permitted by law or to commence legal proceedings or otherwise proceed
against the company in any other jurisdiction.
(a) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(a) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction
to be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or
invalidated, and the parties hereto shall use their reasonable efforts to
find and employ an alternative means to achieve the same or substantially
the same result as that contemplated by such term, provision, covenant or
008258-00007/391113.2
-23-
restriction. It is hereby stipulated and declared to be the intention of
the parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(a) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(a) Shares held by The Company and its Affiliates. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the
Company or its Affiliates (other than the Purchaser or transferees or
successors or assigns thereof if such Persons are deemed to be Affiliates
solely by reason of their holdings of such Registrable Securities) shall
not be counted in determining whether such consent or approval was given by
the Holders of such required percentage.
008258-00007/391113.2
-24-
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
NETWORK IMAGING CORPORATION
By:
Name:
Title:
SOUTHBROOK INTERNATIONAL
INVESTMENTS, LTD.
By:
Name:
Title:
008258-00007/391113.2
-1-
EXHIBIT C
Xxxxx & Xxxxxx L.L.P.
Suite 405-West
0000 Xxxxxx Xxxxxxxxx Xx., X.X.
Xxxxxxxxxx, XX 00000
(000) 000-0000
September 30, 1996
Southbrook International Investment, Limited
c/o Trippoak Advisor, Inc.
000 Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Re: Network Imaging Corporation
Gentlemen:
We have acted as counsel to Network Imaging Corporation, a
Delaware corporation (the "Company"), in connection with the execution and
delivery of the Convertible Preferred Stock Purchase Agreement, dated as of
September 30, 1996 (the "Purchase Agreement"), by and between the Company
and Southbrook International Investment, Limited (the "Purchaser"),
pursuant to which the Company is issuing to the Purchaser shares of its
Series J Convertible Preferred Stock, par value $.0001 per share (the
"Shares"). Terms used and not otherwise defined herein shall have the
respective meanings set forth in the Purchase Agreement.
This opinion is delivered to you pursuant to Section 5.1(a) of
the Purchase Agreement.
In connection with this opinion, we have examined:
(a) An executed copy of the Purchase Agreement;
(b) The Certificate of Designation of Series J Convertible
Preferred Stock of the Company, as filed with the
Secretary of the State of Delaware on September 30, 1996
(the "Certificate of Designation");
(c) The Certificate of Incorporation and By-laws of the
Company, each as amended to date hereof;
(d) An executed copy of the Registration Rights Agreement,
dated as of September 30, 1996 (the "Registration Rights
008258-00007/391113.2
-2-
Agreement"), between the Company and the Purchaser;
(e) Records of proceedings and actions of the Board of
Directors of the Company relating to the transactions
contemplated by the Purchase Agreement and the
Registration Rights Agreement;
(f) Officer's Certificate for the Company, dated September
30, 1996 (the "Officer's Certificate"); and
(g) The Certificate of Incorporation and By-laws of
Symmetrical Technologies, Incorporated (the "Domestic
Subsidiary"), each as amended to date hereof.
We have also investigated such questions of law, including,
without limitation, Regulation D ("Regulation D") promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), and examined
such additional corporate records of the Company and such other documents
and public records as we have deemed necessary or appropriate to render the
opinions contained herein.
We have assumed the genuineness of all signatures (except those
of officers of the Company), the authenticity of all documents submitted to
us as originals and the conformity to original documents of documents
submitted to us as certified, conformed or photo copies. We have also
assumed, without verification, the legal capacity of each individual who
has executed documents or instruments in connection with the transaction
contemplated hereby. With respect to certain factual matters, we have
relied, without independent investigation on the facts stated in the
representations and warranties contained in the Purchase Agreement and the
Schedules thereto, the SEC Documents, the Registration Rights Agreement and
the Officers' Certificate (other than in each case facts constituting
conclusions of law).
We have also assumed, without verification (i) that the parties
to the Purchase Agreement and the other agreements, instruments and
documents executed in connection therewith, other than the Company, have
the power (including, without limitation, corporate power where applicable)
and authority to enter into and perform the Purchase Agreement and such
other agreements, instruments and documents, (ii) the due authorization,
execution and delivery by such other parties of the Purchase Agreement and
such other agreements, instruments and documents, and (iii) that the
Purchase Agreement and such other agreements, instruments and documents
constitute legal, valid and binding obligations of each such other party,
enforceable against such other party in accordance with their respective
terms.
Based upon and subject to the foregoing, we are of the opinion
that:
1. Each of the Company and the Domestic Subsidiary is a
corporation, duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, with the requisite
corporate power and authority to own and use its properties and assets and
to carry on its business as currently conducted.
2. The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by
the Purchase Agreement and the Registration Rights Agreement and otherwise
to carry out its obligations under such agreements. The execution and
delivery of the Purchase Agreement and the Registration Rights Agreement by
the Company and the consummation by it of the transactions contemplated
thereby have been duly authorized by all necessary action on the part of
the Company. Each of the Purchase Agreement and the Registration Rights
Agreement has been duly executed and delivered by the Company and
constitutes the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or
by other equitable principles of general application and except as rights
to indemnity or contribution may be limited by applicable law.
3. No shares of common stock, par value $.0001 per share (the
"Common Stock"), of the Company are entitled to preemptive or similar
rights. Except as specifically disclosed in Schedules 3.1 to the Purchase
Agreement, to our knowledge, there are no outstanding options, warrants,
scrip rights to subscribe to, calls or commitments of any character
whatsoever relating to, or, except as a result of the purchase and sale of
the Shares under the Purchase Agreement, securities, rights or obligations
convertible into or exchangeable for, or giving any person any right to
subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common
Stock, or securities or rights convertible or exchangeable into shares of
Common Stock.
4. The Shares are duly authorized and, when paid for in
accordance with the terms of the Purchase Agreement, shall have been
validly issued, fully paid and nonassessable.
5. The shares of Common Stock into which the Shares are
convertible (the "Underlying Shares") have been duly authorized and
reserved for issuance by the Company and, when issued by the Company in
accordance with the terms of the Purchase Agreement and the Certificate of
Designation, will be validly issued, fully paid and nonassessable.
6. Assuming the accuracy of the representations and warranties
of the Company set forth in Section 3.1(k) of the Purchase Agreement and of
the Purchasers set forth in Section 3.2 of the Purchase Agreement, the
offer, issuance and sale of the Shares or the Underlying Shares to the
Purchaser pursuant to the Purchase Agreement are exempt from the
registration requirements of the Securities Act by reason of Regulation D
008258-00007/391115.4
-4-
promulgated thereunder.
7. The execution, delivery and performance of the Purchase
Agreement and the Registration Rights Agreement by the Company and the
consummation by the Company of the transactions contemplated by such
agreements do not and will not (i) conflict with or violate any provision
of its certificate of incorporation or bylaws, (ii) to our knowledge,
conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company is a party, or
(iii) to our knowledge, result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company is subject (excluding Federal
and state securities laws and regulations as to which we express no opinion
except as set forth in 6 above), or by which any property or asset of the
Company is bound or affected, except in the case of each of clauses (ii)
and (iii), such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or
in the aggregate, have a Material Adverse Effect. To our knowledge, the
business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental authority, except for
violations which, individually or in the aggregate, do not have a Material
Adverse Effect..
8. Other than the Required Approvals, to our knowledge, the
Company is not required to obtain any consent, waiver, authorization or
order of, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other person in
connection with the execution, delivery and performance by the Company of
the Purchase Agreement and the Registration Rights Agreement, where the
failure to obtain such consent, waiver authorization or order, or to give
or make such notice or filing, would materially impair or delay the ability
of the Company to effect the closing and deliver to the Purchaser the
shares free and clear of all liens, except that we express no opinion on
Federal and state securities laws and regulations except as set forth in 6
above.
9. To our knowledge, the Company has filed all reports
required to be filed by it under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including pursuant to Section 13(a) or 15(d)
thereof, for the two years preceding the date hereof (or such shorter
period as the Company was required by law to file such material) on a
timely basis, or has received a valid extension of such time of filing.
We do not undertake to advise you or anyone else of any changes
in the opinions expressed herein resulting from changes in law, changes in
008258-00007/391115.4
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facts or any other matters that hereafter might occur or be brought to our
attention that did not exist on the date hereof and of which we had no
knowledge.
We express no opinion as to the law of any jurisdiction other
than the federal law of the United States, the laws of the District of
Columbia and, to the extent relevant to the opinions expressed herein, the
General Corporation Law of the State of Delaware (the "DGCL"). To the
extent the laws of any state other than the DGCL govern any of the opinions
expressed herein, we have assumed that the laws of such state are the same
as the laws of the District of Columbia.
Very truly yours,
/s/ Xxxxx & Xxxxxx L.L.P.
Xxxxx & Xxxxxx L.L.P.
008258-00007/391115.4
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Exhibit D
Conversion Procedures
Conversion shall be effectuated by surrendering the Preferred Stock
to be converted by overnight courier to the Company with a Notice of
Conversion, a copy of which is attached hereto (with an advance copy of
such conversion notice to the Company and its counsel by facsimile at (703)
904-3292 and (000) 000-0000, respectively), executed by the holder
evidencing such holder's intention to convert the number of shares of
Preferred Stock subject to such notice, and accompanied, in the event the
holder desires to register the shares of Common Stock in a name other than
that of holder, by proper assignment hereof. The Company shall cause its
transfer agent (the "Transfer Agent") to deliver the shares of Common Stock
subject to such notice (free of restrictive legend except as provided in
the Convertible Preferred Stock Purchase Agreement between the Company and
the original holder of the Preferred Stock) to the holder within three
business days from date of receipt of the conversion notice and the
original of the Preferred Stock certificate (or a lost certificate
affidavit and bond in form reasonably satisfactory to the Company if the
original certificate has been lost, mutilated or destroyed). If the holder
is converting less than all shares of Preferred Stock represented by the
certificate or certificates tendered by the holder with the above mentioned
conversion notice, the Company shall promptly deliver to the holder a
certificate for such number of shares of Preferred Stock as have not been
converted.
008258-00007/391115.4
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NETWORK IMAGING CORPORATION - NOTICE OF CONVERSION
The undersigned Registered Holder hereby elects to convert the number of
shares of Series J Convertible Preferred Stock set forth below into shares
of common stock ("Common Stock") of Network Imaging Corporation (the
"Company") according to the conditions of the Certificate of Designation of
Series J Convertible Preferred Stock. The election of the holder hereunder
shall be irrevocable, except to the extent that the conversion requested
pursuant to this notice would result in the Purchaser owning in excess of
4.9% of the outstanding shares of the Company's Common Stock(the
"Outstanding Shares"), as determined on the Conversion Date (the
"Conversion Cap"). If the holder submitting this notice is the Purchaser
or a nominee of the Purchaser, the Company will promptly (and, in any case
prior to the time it effects such conversion) notify the holder by
facsimile of the number of Outstanding Shares. If the holder promptly
provides the Company by facsimile with a notice stating that the conversion
would result in the Purchaser exceeding the Conversion Cap and setting
forth the maximum number of shares of Common Stock that may be issued
without the Purchaser exceeding the Conversion Cap, the Company shall
effect the conversion of only such number of shares of Preferred Stock
tendered pursuant hereto as would not result in the ownership by the
Purchaser of in excess of 4.9% of such Common Stock, and shall issue to the
Purchaser one or more certificates representing shares of Preferred Stock
which have not been converted as a result of the Conversion Cap. The
Purchaser may waive the applicability of the Conversion Cap by notice to
the Company delivered upon its receipt of the Company's notice of the
number of Outstanding Shares. If shares are to be issued in the name of a
person other than the undersigned, the undersigned will pay all transfer
taxes payable with respect thereto and is delivering herewith such
certificates and opinions as have been reasonably requested by the Company.
No fee will be charged to the Holder for any conversion, except for
transfer taxes, if any.
Applicable Conversion Price $
($3.125 or, if lower, 81% of Day 1
the average closing bid price Day 2
for the Common Stock for the Day 3
five trading days preceding Day 4
the date for conversion Day 5
specified in this Notice) Average X 81%=
008258-00007/391115.4
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Preferred Stock to Be Converted
Certificate No. of Shares Conversion Value No. of
Shares
__No.___ Preferred Stock Preferred Stock*
Common Stock *
Totals
* Conversion Value = $10,000. No. of Shares Common Stock =
Conversion Value/Applicable Conversion Price.
Execution
Date of this Notice Name of Registered
Holder
________
Date to Effect Conversion
Contact Name: ______________________ ___________________
Authorized Signature
Telephone: ______________________
Facsimile: _______________________ _____________________
_________________________________
Address
NOTE: No shares of Common Stock will be issued until the original Preferred
Stock Certificate(s) to be converted and the Notice of Conversion are
received by the Company or its authorized agent. The original
Preferred Stock Certificate(s) to be converted and the Notice
of Conversion must be received by the Company or its authorized
agent by the fifth business day following the Date of Conversion, or
such Notice of Conversion shall become null and void. The Date to
Effect Conversion must be on or after the Date of this Notice.
This Notice must be sent by facsimile and by overnight courier to
Xxxx X. Xxxxxx, Xxxxx & Xxxxxx L.L.P., Suite 405 West, 0000 Xxxxxx
Xxxxxxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000 (Fax No. 000-000-0000)
008258-00007/391115.4
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and by facsimile to Xxxxx X. Xxxxxxx, Network Imaging Corporation, 000
Xxxxxxx Xxxx Xxxxx, Xxxxxxx, XX
00000-0000 (Fax No. 000-000-0000).
008258-00007/391115.4
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Form of Transfer Agent Letter
_____________
, 1996
American Stock Transfer & Trust Company
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxx
Xxxxx Xxxxx
Re: Network Imaging Corporation
Ladies & Gentlemen:
Network Imaging Corporation (the "Company") has issued 500 shares of
Series J Convertible Preferred Stock (the "Preferred Stock") which are
convertible into shares of the Company's common stock, par value $.0001 per
share (the "Common Stock"), pursuant to the terms set forth in the
Certificate of Designation for the Preferred Stock, a copy of which is
attached. The shares of Preferred Stock were issued in September 1996 in
reliance on Regulation D under the Securities Act of 1933. The Company has
received a notice to convert shares of Preferred Stock which the Company
has determined requires the issuance of shares (the "Shares") of
Common Stock.
The Shares are being issued pursuant to resolutions adopted by the
Board of Directors of the Company dated September 25, 1996, a copy of which
is attached. In our opinion, the shares have been duly authorized and,
upon issuance as provided for in the Certificate of Designation, will be
validly issued, fully paid and non-assessable.
You are hereby authorized and directed, as registrar and transfer
agent of the Common Stock, to issue certificates for shares of Common
Stock registered as follows:
008258-00007/391115.4
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The following legend should be placed on the Certificate:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
REGULATION D PROMULGATED UNDER THE U.S. SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, THEY MAY
NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR
THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN
THE FOLLOWING SENTENCE. BY ITS ACCEPTANCE HEREOF, THE HOLDER
OF THESE SECURITIES AGREES THAT IT WILL NOT RESELL, PLEDGE OR
OTHERWISE TRANSFER THESE SECURITIES, EXCEPT (A) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (B)
TO NETWORK IMAGING CORPORATION (THE "COMPANY") OR (C) PURSUANT
TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT. IF THE PROPOSED TRANSFER IS TO BE MADE OTHER
THAN PURSUANT TO CLAUSE (A) OR (B) ABOVE, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO THE COMPANY AND THE TRANSFER
AGENT SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION
AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS
BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. AS USED HEREIN, THE TERMS "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 PROMULGATED
UNDER THE SECURITIES ACT.
Please fax a copy of the front and back of the certificate to my
attention and hold the certificate for our authorization to deliver the
certificate pursuant to instructions that will be subsequently furnished to
you.
Thank you for your assistance in this matter.
Very truly yours,
008258-00007/391115.4
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