SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of July 28,
1997, by and among Network Imaging Corporation, a corporation organized under
the laws of the State of Delaware (the "Company"), with headquarters located at
000 Xxxxxxx Xxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000 and each of the purchasers (the
"Purchasers") set forth on the execution pages hereof (the "Execution Pages").
WHEREAS:
A. The Company and each Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("Regulation D"), as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "Securities Act");
B. Each Purchaser desires to purchase, upon the terms and conditions
stated in this Agreement, units (the "Units") consisting of (i) one (1) share of
the Company's Series K Convertible Preferred Stock, par value $.0001 per share
(the "Preferred Shares"), convertible into its common stock, par value $.0001
per share, of the Company (the "Common Stock") and (ii) warrants (the
"Warrants"), in the form attached hereto as Exhibit B, to acquire seventy-five
(75) shares of Common Stock. The rights, preferences and privileges of the
Preferred Shares, including the terms upon which such Preferred Shares are
convertible into shares of Common Stock are set forth in the form of Certificate
of Designations, Preferences and Rights attached hereto as Exhibit A (the
"Certificate of Designation"). The shares of Common Stock issuable upon
conversion of the Preferred Shares or otherwise pursuant to the Certificate of
Designation are referred to herein as the "Conversion Shares" and the shares of
Common Stock issuable upon exercise of or otherwise pursuant to the Warrants are
referred to as the "Warrant Shares". The Units, the Preferred Shares, the
Conversion Shares and the Warrant Shares are collectively referred to herein as
the "Securities."
C. Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
in the form attached hereto as Exhibit C (the "Registration Rights Agreement"),
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act and the rules and regulations promulgated thereunder,
and applicable state securities laws;
NOW, THEREFORE, the Company and the Purchasers hereby agree as follows:
1. PURCHASE AND SALE OF UNITS.
a. Purchase of Units. The issuance, sale and purchase of the Units
shall take place in three (3) separate closings, the first of which is
hereinafter referred to as the "First Closing," the second of which is
hereinafter referred to as the "Second Closing" and the third of which is
hereinafter referred to as the "Third Closing." The purchase price (the
"Purchase Price") per Unit shall be equal to One Thousand Dollars ($1,000.00).
Each Purchaser's obligation to purchase Units hereunder is distinct and separate
from each other Purchaser's obligation to purchase Units and no Purchaser shall
be required to purchase hereunder more than the number of Units set forth on
such Purchaser's Execution Page hereto notwithstanding any failure by any other
Purchaser to purchase Units hereunder.
(i) On the date of the First Closing, subject to the
satisfaction (or waiver) of the conditions set forth in Section 6 and Section 7
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below, the Company shall issue and sell to each Purchaser and each Purchaser
severally agrees to purchase from the Company, such number of Units as is set
forth on such Purchaser's Execution Page as being purchasable by such Purchaser
at the First Closing.
(ii) On the date of the Second Closing, subject to the
satisfaction (or waiver) of the conditions set forth in Section 6 and Section 7
below, the Company shall issue and sell to each Purchaser and each Purchaser
severally agrees to purchase from the Company (a) such number of Units as is set
forth on such Purchaser's Execution Page as being purchasable by such Purchaser
at the Second Closing plus (b) such number of additional Units (not to exceed
545 Units in the case of Zanett Lombardier, Ltd. ("Lombardier") and 455 Units in
the case of Capital Ventures International ("CVI")) as such Purchaser may
hereafter designate in a written notice delivered to the Company no later than
the second business day immediately preceding the day of the Second Closing. If
a Purchaser shall fail to designate that it will purchase Units at the Second
Closing pursuant to clause (b) of the preceding sentence, such Purchaser shall
not be obligated to purchase any additional Units pursuant to clause (b) of the
preceding sentence.
(iii) On the date of the Third Closing, subject to the
satisfaction (or waiver) of the conditions set forth in Section 6 and Section 7
below, the Company shall issue and sell to each Purchaser and each Purchaser
severally agrees to purchase from the Company such number of Units (not to
exceed 2,018 Units in the case of Lombardier and 1,682 Units in the case of CVI)
as such Purchaser may hereafter designate in a written notice delivered to the
Company no later than the second business day following the later of (x)
delivery by the Company to each Purchaser of evidence reasonably satisfactory to
the Purchasers that the conditions to the Third Closing set forth in Section 7
below have been satisfied and (y) March 1, 1997. If a Purchaser shall fail to
designate that it will purchase any Units at the Third Closing, the Purchaser
shall not be obligated to purchase any Units at such closing.
(iv) Notwithstanding anything contained in subsection (ii)
above, if on or before November 15, 1997 (a) the Company delivers evidence
reasonably satisfactory to Lombardier that the Company has met its cash flow
projections delivered to The Zanett Securities Corporation by the Company prior
to the date hereof in connection with the transactions contemplated hereby and
(b) the NASDAQ National Market notifies the Company that the Company's Common
Stock shall be removed from quotation on the NASDAQ National Market due to a
failure to have sufficient net assets and the purchase of 700 Units by
Lombardier hereunder will prevent such removal, the Company may require
Lombardier to purchase 700 Units at a closing to be held prior to the Second
Closing. Lombardier's obligation to purchase Units at such closing shall be
subject to the Company's satisfaction of the conditions contained in Section
7(b) hereof on or prior to the Closing. Any Units purchased by Lombardier
hereunder shall reduce the number of Units Lombardier is obligated to puchase,
and the Company is obligated to sell, under Section 1(a)(ii)(a) at the Second
Closing.
b. Form of Payment. At each closing hereunder, each Purchaser shall pay
the aggregate Purchase Price for the Units being purchased by such Purchaser at
such closing hereunder by wire transfer to the Company, in accordance with the
Company's written wiring instructions, against delivery of duly executed
certificates representing the Preferred Shares and Warrants being purchased by
such Purchaser at such closing hereunder and the Company shall deliver such
certificates against delivery of such aggregate Purchase Price.
c. Closing Date. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Units pursuant to this Agreement shall be (i) in
the case of the First Closing, 12:00 noon Eastern Daylight Savings Time on July
28, 1997; (ii) in the case of the Second Closing, 12:00 noon Eastern Time on the
fifth (5th) trading day following notification of satisfaction (or waiver) of
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the conditions to such closing set forth in Section 7(b) hereof and (iii) in the
case of the Third Closing, 12:00 noon Eastern Time on the fifth (5th) trading
day following the later of (x) receipt by the Company of the last notice from a
Purchaser under Section 1(a)(iii) and (y)notification of satisfaction (or
waiver) of the conditions to such closing set forth in Section 7(b) hereof
(subject, in the case of each of the First Closing, the Second Closing and the
Third Closing, to a two (2) business day grace period at either party's option,
but in any event not later than July 31, 1997 in the case of the First Closing,
not later than November 30, 1997 in the case of the Second Closing and not later
than March 1, 1998 in the case of the Third Closing), or in the case of each of
the First Closing, the Second Closing and the Third Closing such other time as
may be mutually agreed upon by the Company and the Purchasers purchasing Units
in such closing. The closings shall occur at the offices of Klehr, Harrison,
Xxxxxx, Xxxxxxxxx & Xxxxxx, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx
00000.
2. PURCHASERS' REPRESENTATIONS AND WARRANTIES
Each Purchaser severally represents and warrants to the Company that:
a. Investment Purpose. Purchaser is purchasing the Units for
Purchaser's own account for investment only and not with a present view towards
the public sale or distribution thereof, except pursuant to sales that are
exempt from the registration requirements of the Securities Act and/or sales
registered under the Securities Act. Purchaser understands that Purchaser must
bear the economic risk of this investment indefinitely, unless the Securities
are registered pursuant to the Securities Act and any applicable state
securities or blue sky laws or an exemption from such registration is available,
and that the Company has no present intention of registering any such Securities
other than as contemplated by the Registration Rights Agreement. Notwithstanding
anything in this Section 2(a) to the contrary, by making the representations
herein, the Purchaser does not agree to hold the Securities for any minimum or
other specific term and reserves the right to dispose of the Securities at any
time, however, Purchaser agrees that any and all such disposal(s) shall be in
accordance with or pursuant to a registration statement or an exemption under
the Securities Act.
b. Accredited Investor Status. Purchaser is an "Accredited Investor"
as that term is defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. Purchaser understands that the Units are
being offered and sold to Purchaser in reliance upon specific exemptions from
the registration requirements of United States federal and state securities laws
and that the Company is relying upon the truth and accuracy of, and Purchaser's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of Purchaser to acquire the
Units.
d. Information. Purchaser and its counsel, if any, have been furnished
all materials relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Units which have been
specifically requested by Purchaser or its counsel. Purchaser and its counsel,
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if any, have been afforded the opportunity to ask questions of the Company and
have received what Purchaser believes to be satisfactory answers to any such
inquiries. Neither such inquiries nor any other due diligence investigation
conducted by Purchaser or its counsel or any of its representatives shall
modify, amend or affect Purchaser's right to rely on the Company's
representations and warranties contained in Section 3 below. Purchaser
understands that Purchaser's investment in the Securities involves a high degree
of risk.
e. Governmental Review. Purchaser understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities.
f. Transfer or Resale. Purchaser understands that (i) except as
provided in the Registration Rights Agreement, the Securities have not been and
are not being registered under the Securities Act or any state securities laws,
and may not be transferred unless (a) subsequently registered thereunder, or (b)
Purchaser shall have delivered to the Company an opinion of counsel (which
opinion shall be in form, substance and scope customary for opinions of counsel
in comparable transactions) to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration or (c) sold pursuant to Rule 144 promulgated under the Securities
Act (or a successor rule) ("Rule 144"); (ii) any sale of such Securities made in
reliance on Rule 144 may be made only in accordance with the terms of said Rule
and further, if said Rule is not applicable, any resale of such Securities under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the Securities
Act) may require compliance with some other exemption under the Securities Act
or the rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to register such Securities
under the Securities Act or any state securities laws or to comply with the
terms and conditions of any exemption thereunder (in each case, other than
pursuant to the Registration Rights Agreement).
g. Legends. Purchaser understands that the Preferred Shares and
Warrants and, until such time as the Conversion Shares and Warrant Shares have
been registered under the Securities Act as contemplated by the Registration
Rights Agreement or otherwise may be sold by Purchaser pursuant to Rule 144, the
certificates for the Securities may bear a restrictive legend in substantially
the following form:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The securities have been
acquired for investment and may not be sold, transferred or assigned in
the absence of an effective registration statement for the securities
under said Act, or an opinion of counsel, in form, substance and scope
customary for opinions of counsel in comparable transactions, that
registration is not required under said Act or unless sold pursuant to
Rule 144 under said Act.
The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by state securities laws, (a) the sale of
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such Security is registered under the Securities Act, or (b) such holder
provides the Company with an opinion of counsel, in form, substance and scope
customary for opinions of counsel in comparable transactions, to the effect that
a public sale or transfer of such Security may be made without registration
under the Securities Act or (c) such holder provides the Company with reasonable
assurances that such Security can be sold pursuant to Rule 144. Purchaser agrees
to sell all Securities, including those represented by a certificate(s) from
which the legend has been removed, pursuant to an effective registration
statement or in compliance with an exemption from the registration requirements
of the Securities Act. In the event the above legend is removed from any
Security and thereafter the effectiveness of a registration statement covering
such Security is suspended or the Company determines that a supplement or
amendment thereto is required by applicable securities laws, then upon
reasonable advance notice to Purchaser the Company may require that the above
legend be placed on any such Security that cannot then be sold pursuant to an
effective registration statement or Rule 144 and Purchaser shall cooperate in
the prompt replacement of such legend. Such legend shall be removed when such
Security may be sold pursuant to an effective registration statement or Rule
144.
h. Authorization; Enforcement. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of Purchaser and are valid and binding agreements of Purchaser
enforceable in accordance with their terms.
i. Residency. Purchaser is a resident of the jurisdiction set forth
under such Purchaser's name on the Execution Page hereto executed by such
Purchaser.
j. Acknowledgments Regarding Placement Agent. Purchaser acknowledges
that The Zanett Securities Corporation is acting as placement agent (the
"Placement Agent") for the Securities being offered hereby and will be
compensated by the Company for acting in such capacity. Purchaser further
acknowledges that the Placement Agent has acted solely as placement agent in
connection with the offering of the Securities by the Company, that the
information and data provided to Purchaser and referred to in subsection (d)
above or otherwise in connection with the transactions contemplated hereby have
not been subjected to independent verification by the Placement Agent, and that
the Placement Agent makes no representation or warranty with respect to the
accuracy or completeness of such information, data or other related disclosure
material. Purchaser further acknowledges that in making its decision to enter
into this Agreement and purchase the Securities it has relied on its own
examination of the Company and the terms of, and consequences, of holding, the
Securities. Purchaser further acknowledges that the provisions of this Section
2(j) are for the benefit of, and may be enforced by, the Placement Agent.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Purchaser that:
a. Organization and Qualification. The Company and each of its
subsidiaries is a corporation duly organized and existing in good standing under
the laws of the jurisdiction in which it is incorporated, and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. The Company and each of its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted by it makes such qualification
necessary and where the failure so to qualify would have a Material Adverse
Effect. "Material Adverse Effect" means any material adverse effect on (i) the
Securities; (ii) the ability of the Company to perform its obligations
hereunder, the Certificate of Designation, the Warrants or the Registration
Rights Agreement or (iii) the business, operations, properties, prospects or
financial condition of the Company and its subsidiaries, taken as a whole.
b. Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform this Agreement, the
Warrants and the Registration Rights Agreement, to issue and sell the Units,
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Preferred Shares and Warrants in accordance with the terms hereof, and to issue
the Conversion Shares upon conversion of the Preferred Shares and the Warrant
Shares upon exercise of the Warrants in accordance with the terms of the
Certificate of Designation and the Warrants; (ii) the execution, delivery and
performance of this Agreement, the Warrants and the Registration Rights
Agreement by the Company and the consummation by it of the transactions
contemplated hereby and thereby (including without limitation the issuance of
the Preferred Shares and the issuance and reservation for issuance of the
Conversion Shares and Warrant Shares) have been duly authorized by the Company's
Board of Directors and, no further consent or authorization of the Company, its
Board or Directors, or its stockholders is required (under Rule 4460(i)
promulgated by the National Association of Securities Dealers or otherwise);
(iii) this Agreement has been duly executed and delivered by the Company; and
(iv) this Agreement constitutes, and, upon execution and delivery by the Company
of the Registration Rights Agreement and Warrants, such agreements will
constitute, valid and binding obligations of the Company enforceable against the
Company in accordance with their terms.
c. Capitalization. The capitalization of the Company as of the date
hereof, including the authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for issuance pursuant to
the Company's stock option plans, the number of shares issuable and reserved for
issuance pursuant to securities (other than the Preferred Shares and Warrants)
exercisable for, or convertible into or exchangeable for any shares of Common
Stock and the number of shares to be reserved for issuance upon conversion of
the Preferred Shares and exercise of the Warrants is set forth on Schedule 3(c).
All of such outstanding shares of capital stock have been, or upon issuance will
be, validly issued, fully paid and nonassessable. No shares of capital stock of
the Company (including the Preferred Shares, the Conversion Shares and the
Warrant Shares) are subject to preemptive rights or any other similar rights of
the stockholders of the Company or any liens or encumbrances. Except for the
Securities and as set forth on Schedule 3(c), as of the date of this Agreement,
(i) there are no outstanding options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into or exercisable or exchangeable for, any shares of
capital stock of the Company or any of its subsidiaries, or arrangements by
which the Company or any of its subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its subsidiaries,
and (ii) there are no agreements or arrangements under which the Company or any
of its subsidiaries is obligated to register the sale of any of its or their
securities under the Securities Act (except the Registration Rights Agreement).
Except as set forth on Schedule 3(c), there are no securities or instruments
containing antidilution or similar provisions that will be triggered by the
issuance of the Securities in accordance with the terms of this Agreement, the
Certificate of Designation or the Warrants. The Company has furnished to each
Purchaser true and correct copies of the Company's Certificate of Incorporation
as in effect on the date hereof ("Certificate of Incorporation"), the Company's
By-laws as in effect on the date hereof (the "By-laws"), and all other
instruments and agreements governing securities convertible into or exercisable
or exchangeable for Common Stock of the Company. The Certificate of Designation,
in the form attached hereto, has been duly filed with the Secretary of State of
the State of Delaware and, upon the issuance of the Preferred Shares in
accordance with the terms hereof, each Purchaser shall be entitled to the rights
set forth therein. The Company shall provide each Purchaser with a written
update of this representation signed by the Company's Chief Executive Officer on
behalf of the Company as of the date of each closing hereunder. The only changes
to such schedule after the date hereof shall be the result of issuances of
capital stock not in violation of any of the provisions of this Agreement
(including the schedules hereto).
d. Issuance of Shares. The Preferred Shares are duly authorized and,
upon issuance in accordance with the terms of this Agreement, will be validly
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issued, fully paid and non-assessable, and free from all taxes, liens, claims
and encumbrances and will not be subject to preemptive rights or other similar
rights of stockholders of the Company and will not impose personal liability on
the holders thereof. The Conversion Shares and Warrant Shares are duly
authorized and reserved for issuance, and, upon conversion of the Preferred
Shares and exercise of the Warrants in accordance with the terms thereof, will
be validly issued, fully paid and non-assessable, and free from all taxes,
liens, claims and encumbrances and will not be subject to preemptive rights or
other similar rights of stockholders of the Company and will not impose personal
liability upon the holder thereof.
e. No Conflicts. The execution, delivery and performance of this
Agreement, the Warrants and the Registration Rights Agreement by the Company,
the performance by the Company of its obligations under the Certificate of
Designation, and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the issuance and
reservation for issuance, as applicable, of the Preferred Shares, Warrants,
Conversion Shares and Warrant Shares) will not (i) result in a violation of the
Certificate of Incorporation or By-laws or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party, or result in a violation of
any law, rule, regulation, order, judgment or decree (including U.S. federal and
state securities laws and regulations) applicable to the Company or any of its
subsidiaries or by which any property or asset of the Company or any of its
subsidiaries is bound or affected (except, with respect to clause (ii), for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect). Except as set forth on Schedule 3(e), neither the Company nor
any of its subsidiaries is in violation of its Certificate of Incorporation,
By-laws or other organizational documents and neither the Company nor any of its
subsidiaries is in default (and no event has occurred which, with notice or
lapse of time or both, would put the Company or any of its subsidiaries in
default) under, nor has there occurred any event giving others (with notice or
lapse of time or both) any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, except for possible defaults or rights as
would not, individually or in the aggregate, have a Material Adverse Effect. The
businesses of the Company and its subsidiaries are not being conducted, and
shall not be conducted so long as a Purchaser owns any of the Securities, in
violation of any law, ordinance or regulation of any governmental entity, except
for possible violations the sanctions for which either singly or in the
aggregate would not have a Material Adverse Effect. Except as specifically
contemplated by this Agreement and the Registration Rights Agreement, the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency or any
regulatory or self regulatory agency in order for it to execute, deliver or
perform any of its obligations under this Agreement, the Warrants or the
Registration Rights Agreement or to perform its obligations under the
Certificate of Designation, in each case in accordance with the terms hereof or
thereof. Except as set forth on Schedule 3(e), the Company is not in violation
of the listing requirements of the NASDAQ National Market ("NASDAQ") and does
not reasonably anticipate that the Common Stock will be delisted by NASDAQ for
the foreseeable future.
f. SEC Documents, Financial Statements. Since December 31, 1993, the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (all of the foregoing, filed prior to the date hereof and after December
31, 1993, and all exhibits included therein and financial statements and
schedules thereto and documents (other than exhibits) incorporated by reference
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therein, being hereinafter referred to herein as the "SEC Documents"). The
Company has delivered to each Purchaser true and complete copies of the SEC
Documents, except for such exhibits, schedules and incorporated documents. As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, 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. As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
U.S. generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements) and fairly present in all material respects the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). Except as set forth in the financial
statements of the Company included in the SEC Documents filed prior to the date
hereof, the Company has no liabilities, contingent or otherwise, other than (i)
liabilities incurred in the ordinary course of business subsequent to the date
of such financial statements and (ii) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
generally accepted accounting principles to be reflected in such financial
statements, which liabilities and obligations referred to in clauses (i) and
(ii) individually or in the aggregate, are not material to the financial
condition or operating results of the Company. Without limiting the accuracy of
the representations contained in this Section 3(f), the Purchasers acknowledge
that the Company has disclosed to the Purchasers the items set forth on Schedule
3(f).
g. Absence of Certain Changes. Since December 31, 1996, there has been
no material adverse change and no material adverse development in the business,
properties, operations, prospects, financial condition or results of operations
of the Company except as disclosed in Schedule 3(g) or in the SEC Documents
filed prior to the date hereof.
h. Absence of Litigation. Except as disclosed in the SEC Documents
filed prior to the date hereof, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the Company
or any of its subsidiaries, threatened against or affecting the Company, any of
its subsidiaries, or any of their respective directors or officers in their
capacities as such.
i. Intellectual Property. Except as set forth on Schedule 3(i), each of
the Company and its subsidiaries owns or is licensed to use all patents, patent
applications, trademarks, trademark applications, trade names, service marks,
copyrights, copyright applications, licenses, permits, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) and other similar rights and proprietary
knowledge (collectively, "Intangibles") necessary for the conduct of its
business as now being conducted and as described in the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996. To the best knowledge
of the Company, neither the Company nor any subsidiary of the Company infringes
or is in conflict with any right of any other person with respect to any
Intangibles which, individually or in the aggregate, if the subject of an
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unfavorable decision, ruling or finding, would have a Material Adverse Effect.
Neither the Company nor any of its subsidiaries has received written notice of
any pending conflict with or infringement upon such third party Intangibles.
Neither the Company nor any of its subsidiaries has entered into any consent,
indemnification, forbearance to xxx or settlement agreements with respect to the
validity of the Company's or its subsidiaries' ownership or right to use its
Intangibles and, to the best knowledge of the Company, there is no reasonable
basis for any such claim to be successful. Except as set forth on Schedule 3(i),
the Intangibles are valid and enforceable and no registration relating thereto
has lapsed, expired or been abandoned or cancelled or is the subject of
cancellation or other adversarial proceedings, and all applications therefor are
pending and are in good standing. The Company and its subsidiaries have
complied, in all material respects, with its respective contractual obligations
relating to the protection of the Intangibles used pursuant to licenses. To the
best knowledge of the Company, no person is infringing on or violating the
Intangibles owned or used by the Company or its subsidiaries.
j. Foreign Corrupt Practices. Neither the Company, nor any of its
subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any subsidiary has, in the course of his actions
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977;
or made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.
k. Disclosure. All information relating to or concerning the Company
set forth in this Agreement or provided to the Purchasers pursuant to Section
2(d) hereof and otherwise in connection with the transactions contemplated
hereby is true and correct in all material respects and the Company has not
omitted to state any material fact necessary in order to make the statements
made herein or therein, in light of the circumstances under which they were
made, not misleading. No event or circumstance has occurred or exists with
respect to Company or its subsidiaries or their respective businesses,
properties, prospects, operations or financial conditions, which has not been
publicly disclosed but, under applicable law, rule or regulation, would be
required to be disclosed by the Company in a registration statement filed on the
date hereof by the Company under the Securities Act with respect to the primary
issuance of the Company's securities.
l. Acknowledgment Regarding Purchasers' Purchase of the Units. The
Company acknowledges and agrees that none of the Purchasers or the Placement
Agent are acting as a financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to this Agreement or the transactions
contemplated hereby, and any advice given by any Purchaser or the Placement
Agent, or any of their representatives or agents, in connection with this
Agreement and the transactions contemplated hereby is merely incidental to each
Purchaser's purchase of Units or such Placement's Agent role as a placement
agent and has not been relied upon the Company in any way. The Company further
represents to each Purchaser that the Company's decision to enter into this
Agreement has been based solely on an independent evaluation by the Company and
its representatives.
m. [Intentionally Omitted]
n. No General Solicitation. Neither the Company nor any distributor
participating on the Company's behalf in the transactions contemplated hereby
(if any) nor any person acting for the Company, or any such distributor, has
conducted any "general solicitation," as such term is defined in Regulation D,
with respect to any of the Securities being offered hereby.
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o. No Integrated Offering. Except as set forth on Schedule 3(o),
neither the Company, nor any of its affiliates, nor any person acting on its or
their behalf, has directly or indirectly made any offers or sales of any
security or solicited any offerers to buy any security under circumstances that
would require registration of the Securities being offered hereby under the
Securities Act or cause this offering of Securities to be integrated with any
prior offering of the Company for purposes of the Securities Act or any
applicable stockholder approval provisions.
p. No Brokers. The Company has taken no action which would give rise to
any claim by any person for brokerage commissions, finder's fees or similar
payments by any Purchaser relating to this Agreement or the transactions
contemplated hereby, except for dealings with the Placement Agent whose
commissions and fees will be paid for by the Company.
q. Acknowledgment of Dilution. The number of Conversion Shares issuable
upon conversion of the Preferred Shares may increase in certain circumstances,
including the circumstance wherein the trading price of the Common Stock
declines. The Company acknowledges that its obligation to issue Conversion
Shares upon conversion of the Preferred Shares in accordance with the
Certificate of Designation is absolute and unconditional, regardless of the
dilution that such issuance may have on the ownership interests of other
stockholders. Taking the foregoing into account, the Company's Board of
Directors has determined that the issuance of the Units hereunder and the
consummation of the other transactions contemplated hereby are in the best
interests of the Company and its stockholders.
r. Title. The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in Schedule 3(r) or such as do not
materially affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the Company and
its subsidiaries. Any real property and facilities held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
materially interfere with the use made and proposed to be made of such property
and buildings by the Company and its subsidiaries.
s. Tax Status. Except as set forth on Schedule 3(s), the Company and
each of its subsidiaries has made or filed all federal and state income and all
other tax returns, reports and declarations required by any jurisdiction to
which it is subject (unless and only to the extent that the Company and each of
its subsidiaries has set aside on its books provisions reasonably adequate for
the payment of all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim.
4. COVENANTS.
a. Best Efforts. The parties shall use their best efforts timely to
satisfy each of the conditions described in Section 6 and 7 of this Agreement.
b. Form D: Blue Sky Laws. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to each Purchaser promptly after such filing. The Company shall, on or
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before the date of the First Closing take such action as the Company shall
reasonably determine is necessary to qualify the Securities for sale to the
Purchasers pursuant to this Agreement under applicable securities or "blue sky"
laws of the states of the United States or obtain exemption therefrom, and shall
provide evidence of any such action so taken to the Purchasers on or prior to
the date of the First Closing.
c. Reporting Status. So long as any Purchaser beneficially owns any of
the Securities, the Company shall timely file all reports required to be filed
with the SEC pursuant to the Exchange Act, and the Company shall not terminate
its status as an issuer required to file reports under the Exchange Act even if
the Exchange Act or the rules and regulations thereunder would permit such
termination.
d. Use of Proceeds. The Company shall use the proceeds from the sale of
the Units as set forth in Schedule 4(d). None of the proceeds from the sale of
the Units shall be used to redeem or otherwise acquire, or to pay any dividend
or make any distribution with respect to, any of the Company's capital stock
(including, without limitation, to satisfy any obligation which the Company may
have in connection with the transactions contemplated by that certain Purchase
Agreement dated December 31, 1997 by and between the Company and CDR
Enterprises).
e. Right of First Offer. The Company agrees that during the period
beginning on the date hereof and ending two hundred and seventy (270) days
following the date of the last closing which occurs hereunder (the "Lock-Up
Period"), the Company will not, without the prior written consent of Purchasers
holding two-thirds of the Preferred Shares then outstanding, contract with any
party to obtain additional equity financing (including debt financing with an
equity component) in any form (a "Future Offering") unless the Company shall
have first delivered to each Purchaser at least five (5) business days prior to
the closing of such Future Offering, written notice describing the proposed
Future Offering, including the terms and conditions thereof, and providing each
Purchaser and its affiliates, an option during the five (5) business day period
following delivery of such notice to purchase the lower of (x) the aggregate
purchase price of all Units purchased by such Purchaser hereunder and (y) such
Purchaser's pro rata portion (based on the aggregate purchase price of all Units
purchased by such Purchaser hereunder compared to the aggregate purchase price
of all Units purchased hereunder) of the securities being offered in the Future
Offering on the same terms as contemplated by such Future Offering, (the
limitation referred to in this sentence is referred to as the "Capital Raising
Limitation"). The Capital Raising Limitation shall not apply to any transaction
involving issuances of securities as consideration for a merger, consolidation
or acquisition of assets, or in connection with any strategic partnership or
joint venture (the primary purpose of which is not to raise equity capital), or
as consideration for the acquisition of a business, product or license by the
Company or exercise of options by employees or directors. The Capital Raising
Limitation also shall not apply to (i) the issuance of securities pursuant to an
underwritten public offering, (ii) the issuance of securities to holders of the
Company's Series A Cumulative Convertible Preferred Stock in connection with the
restructuring of such capital stock, (iii) the issuance of securities upon
exercise or conversion of the Company's options, warrants or other convertible
securities outstanding as of the date hereof or (iv) the grant of additional
options or warrants, or the issuance of additional securities, under any Company
stock option or restricted stock plan for the benefit of the Company's employees
or directors. Notwithstanding the foregoing, no Purchaser shall have any rights
under this Section 7(e) at any time that it no longer holds any Preferred
Shares.
f. Expenses. Except as otherwise provided in Section 5 of the
Registration Rights Agreement, each party hereto shall be responsible for its
own expenses incurred in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement and the other agreements
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to be executed in connection herewith.
g. Financial Information. The Company agrees to send the following
reports to each Purchaser until such Purchaser transfers, assigns or sells all
of its Securities: (i) within ten (10) days after the filing with the SEC, a
copy of its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, its
proxy statements and any Current Reports on Form 8-K; and (ii) within one (1)
day after release, copies of all press releases issued by the Company or any of
its subsidiaries.
h. Reservation of Shares. The Company shall at all times have
authorized and reserved for the purpose of issuance a sufficient number of
shares of Common Stock to provide for the full conversion of the outstanding
Preferred Shares and issuance of the Conversion Shares in connection therewith
and the full exercise of the Warrants and the issuance of the Warrant Shares in
connection therewith and as otherwise required by the Certificate of Designation
and the Warrants. Moreover, upon approval by its stockholders of the proposals
contemplated by Section 4(n), the Company shall increase the number of shares
reserved for issuance upon conversion and exercise of the outstanding Preferred
Shares and Warrants to an amount equal to 200% of the number of Conversion
Shares issuable upon the full conversion of the then outstanding Preferred
Shares plus 100% of the Warrant Shares issuable upon the full exercise of the
then outstanding Warrants (based on the conversion and exercises prices thereof
then in effect). The Company shall not reduce the number of shares reserved for
issuance upon conversion of the Preferred Shares and the full exercise of the
Warrants without the consent of Purchasers holding a majority of the Preferred
Shares then held by all Purchasers.
i. Listing. The Company shall promptly secure the listing of the
Conversion Shares and Warrant Shares upon each national securities exchange or
automated quotation system, if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance) and shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all
Conversion Shares from time to time issuable upon conversion of the Preferred
Shares and Warrant Shares from time to time issuable upon exercise of the
Warrants. The Company will not take any action adverse to the continued, and
will use all commercially reasonable and lawful efforts to continue the listing
and trading of its Common Stock on the NASDAQ, the NASDAQ Small Cap Market
("SmallCap"), the New York Stock Exchange ("NYSE") or the American Stock
Exchange ("AMEX") and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the National
Association of Securities Dealers ("NASD") and such exchanges, as applicable.
The Company shall promptly provide to each holder of Preferred Shares copies of
any notices it receives regarding the continued eligibility of the Common Stock
for trading in the over-the-counter market or, if applicable, any securities
exchange (including the NASDAQ) on which securities of the same class or series
issued by the Company are then listed or quoted, if any.
j. Corporate Existence. So long as a Purchaser beneficially owns any
Preferred Shares or Warrants, the Company shall maintain its corporate
existence, and in the event of a merger, consolidation or sale of all or
substantially all of the Company's assets, the Corporation shall ensure that the
surviving or successor entity in such transaction assumes the Company's
obligations hereunder and under the agreements and instruments entered into in
connection herewith regardless of whether or not the Company would have had a
sufficient number of shares of Common Stock authorized and available for
issuance in order to effect the conversion of all Preferred Shares and exercise
in full of all Warrants outstanding as of the date of such transaction.
k. No Integrated Offerings. The Company shall not make any offers or
sales of any security (other than the Securities) under circumstances that would
require registration of the Securities being offered or sold hereunder under the
Securities Act or cause this offering of Securities to be integrated with any
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other offering of securities by the Company for purposes of NASDAQ Rule 4460(i).
l. Transfer Agent Instructions. No later than the tenth business day
following the date of the First Closing the Company shall have delivered
evidence reasonably satisfactory to the Purchasers that the Company's transfer
agent has agreed to act in accordance with irrevocable instructions in the form
attached hereto as Exhibit E.
m. Compliance with Certificate of Designation. The Company shall
comply with all of the provisions contained in the Certificate of Designation.
n. Stockholder Approval. The Company shall hold a special meeting of
its stockholders no later than December 31, 1997 and use its best efforts to
obtain at such meeting (i) such approvals of the Company's stockholders as may
be required to issue all of the shares of Common Stock issuable upon conversion
of, or otherwise with respect to, the Preferred Shares and the shares of Common
Stock issuable upon exercise of, or otherwise with respect to, the Warrants
without violating NASD Rule 4460(i) (or any successor rule thereto which may
then be in effect) and (ii) an increase in its authorized shares of Common Stock
so that it can reserve 200% of the number of Conversion Shares issuable upon the
full conversion of the Preferred Shares then outstanding and issuable hereunder
plus 100% of the Warrant Shares issuable upon the full exercise of the Warrants
then outstanding and issuable hereunder (based on the conversion and exercises
prices thereof then in effect). The Company shall comply with the filing and
disclosure requirements of Section 14 promulgated under the Exchange Act in
connection with the solicitation, acquisition and disclosure of such stockholder
approval. The Company represents and warrants that its Board of Directors has
unanimously recommended that the Company's stockholders approve the proposals
contemplated by this Section 4(n) and shall so indicate such recommendation in
the proxy statement used to solicit such stockholder approval.
5. TRANSFER AGENT INSTRUCTIONS.
a. The Company shall instruct its transfer agent to issue certificates,
registered in the name of each Purchaser or its nominee, for the Conversion
Shares and Warrant Shares in such amounts as specified from time to time by such
Purchaser to the Company upon conversion of the Preferred Shares or exercise of
the Warrants. To the extent and during the periods provided in Section 2(f) and
2(g) of this Agreement, all such certificates shall bear the restrictive legend
specified in Section 2(g) of this Agreement.
b. The Company warrants that no instruction other than such
instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(f) hereof in the case of all of the Securities prior to
registration of the Conversion Shares and Warrant Shares under the Securities
Act, will be given by the Company to its transfer agent and that the Securities
shall otherwise be freely transferable on the books and records of the Company
as and to the extent provided in this Agreement and the Registration Rights
Agreement. Nothing in this Section shall affect in any way each Purchaser's
obligations and agreement set forth in Section 2(g) hereof to resell the
Securities pursuant to an effective registration statement or in compliance with
an exemption from the registration requirements of applicable securities law.
c. If a Purchaser provides the Company with an opinion of counsel,
which opinion of counsel shall be in form, substance and scope customary for
opinions of counsel in comparable transactions, to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from registration, or a Purchaser provides the Company with reasonable
assurances that such Securities may be sold pursuant to Rule 144, the Company
shall permit the transfer, and, in the case of the Conversion Shares and Warrant
Shares promptly instruct its transfer agent to issue one or more certificates in
such name and in such denominations as specified by a Purchaser.
d. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to a Purchaser by vitiating the intent and
purpose of the transaction contemplated hereby. Accordingly, the Company
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acknowledges that the remedy at law for a breach of its obligations under this
Section 5 will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Section 5, that a Purchaser
shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Units to
a Purchaser at a closing hereunder is subject to the satisfaction, at or before
the applicable closing, of each of the following conditions thereto, provided
that these conditions are for the Company's sole benefit and may be waived by
the Company at any time in its sole discretion. The obligation of the Company to
issue and sell the Units to any Purchaser hereunder is distinct and separate
from its obligation to issue and sell Units to any other Purchaser hereunder and
any failure by one or more Purchasers to fulfill the conditions set forth herein
or to consummate the purchase of Units hereunder will not relieve the Company of
its obligations with respect to any other Purchaser.
a. With respect to the First Closing:
(i) The applicable Purchaser shall have executed the signature
page to this Agreement and the Registration Rights Agreement, and delivered the
same to the Company.
(ii) The applicable Purchaser shall have delivered the
Purchase Price for the Units purchased at the First Closing in accordance with
Section 1(b) above.
(iii) The representations and warranties of the applicable
Purchaser shall be true and correct as of the date when made and as of the date
and time of such closing as though made at that time (except for representations
and warranties that speak as of a specific date, which representations and
warranties shall be true and correct as of such date), and the applicable
Purchaser shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the applicable Purchaser at or prior to
the date of the First Closing.
(iv) No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.
b. With respect to the Second and Third Closing:
(i) The applicable Purchaser shall have executed the signature
page to this Agreement and the Registration Rights Agreement, and delivered the
same to the Company.
(ii) The applicable Purchaser shall have paid the Purchase
Price for the Units purchased at such closing in accordance with Section 1(b)
above.
(iii) The representations and warranties of the applicable
Purchaser shall be true and correct as of the date when made and as of the date
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and time of such closing as though made at that time (except for representations
and warranties that speak as of a specific date, which representations and
warranties shall be true and correct as of such date), and the applicable
Purchaser shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the applicable Purchaser at or prior to
the date of such closing.
(iv) No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.
7. CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE.
The obligation of each Purchaser hereunder to purchase the Units to be
purchased by it at the closings is subject to the satisfaction, at or before the
applicable closing date, of each of the following conditions, provided that
these conditions are for such Purchaser's sole benefit and may be waived by such
Purchaser at any time in the Purchaser's sole discretion:
a. With respect to the First Closing:
(i) The Company shall have executed the signature page to this
Agreement and the Registration Rights Agreement, and delivered the same to such
Purchaser.
(ii) The Certificate of Designation shall have been accepted
for filing with the Secretary of State of the State of Delaware and a copy
thereof certified by the Secretary of State of Delaware shall have been
delivered to such Purchaser.
(iii) The Company shall have delivered to such Purchaser duly
executed certificates and Warrant agreements (each in such denominations as such
Purchaser shall request) representing the Preferred Shares and Warrants being so
purchased by such Purchaser at the First Closing in accordance with Section 1(b)
above.
(iv) The Common Stock shall be authorized for quotation on
NASDAQ and trading in the Common Stock (or NASDAQ generally) shall not have been
suspended by the SEC or NASDAQ.
(v) The representations and warranties of the Company shall be
true and correct as of the date when made and as of the date of the First
Closing as though made at that time (except for representations and warranties
that speak as of a specific date, which representations and warranties shall be
true and correct as of such date) and the Company shall have performed,
satisfied and complied in all material respects with the covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the date of the First Closing. Such Purchaser
shall have received a certificate, executed by the Chief Executive Officer of
the Company, dated as of the date of the First Closing to the foregoing effect
and as to such other matters as may be reasonably requested by such Purchaser.
(vi) No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.
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(vii) Such Purchaser shall have received an opinion of the
Company's counsel, dated as of the date of the First Closing, in form, scope and
substance reasonably satisfactory to the Purchaser and in substantially the form
of Exhibit D attached hereto.
(viii) The aggregate number of Units being purchased hereunder
by all Purchasers at the First Closing hereunder shall be at least 3,000.
b. With respect to the Second Closing, the Third Closing and any
closing under Section 1(a)(iv):
(i) The Company shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to such Purchaser.
(ii) The Company shall have delivered to such Purchaser duly
executed certificates and Warrant agreements (each in such denominations as such
Purchaser shall request) representing the Preferred Shares and Warrants being so
purchased by such Purchaser at such closing in accordance with Section 1(b)
above.
(iii) The Common Stock shall be authorized for quotation on
NASDAQ and trading in the Common Stock (or NASDAQ generally) shall not have been
suspended by the SEC or NASDAQ.
(iv) The representations and warranties of the Company shall
be true and correct as of the date when made and as of the date of such closing
as though made at that time (except for representations and warranties that
speak as of a specific date, which representations and warranties shall be true
and correct as of such date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the date of such closing. Such Purchaser shall have
received a certificate, executed by the Chief Executive Officer of the Company,
dated as of the date of such closing, to the foregoing effect and as to such
other matters as may be reasonably requested by such Purchaser.
(v) No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.
(vi) Such Purchaser shall have received an opinion of the
Company's counsel, dated as of the date of such closing, in form, scope and
substance reasonably satisfactory to such Purchaser and in substantially the
form of Exhibit D attached hereto.
(vii) No material adverse change or development in the
business, operations, properties, or financial condition, or results of
operations of the Company shall have occurred since the First Closing except for
such changes or developments set forth on Schedule 7(b)(vii).
c. With respect to the Second Closing, each of the following conditions
must also be satisfied:
(i) The Company's quarterly report on Form 10-Q for the fiscal
quarter ended September 30, 1997 shall have been timely filed with the SEC at
least two (2) business days prior to the date of the Second Closing.
(ii) The first Registration Statement required to be filed by
the Company pursuant to Section 2(a) of the Registration Rights Agreement shall
have been declared effective by the SEC and shall be effective and available for
use by such Purchaser as of the date of the Second Closing.
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(iii) The Additional Second Closing Conditions set forth on
Exhibit F shall have been satisfied.
(iv) The date of the Second Closing shall not be later than
November 30, 1997.
(v) The stockholder approvals contemplated by Section 4(n)
shall have been obtained.
d. With respect to the Third Closing, each of the following conditions
must also be satisfied:
(i) The Additional Third Closing Conditions set forth on
Exhibit F shall have been satisfied.
(ii) The Second Closing shall have occurred.
(iii) All Registration Statements required to be filed by the
Company pursuant to Section 2(a) of the Registration Rights Agreement prior to
the Third Closing shall have been declared effective by the SEC and shall be
effective and available for use by such Purchaser as of the date of the Third
Closing.
(iv) The Company has announced to the general public its
earnings for the 1997 fiscal year.
(v) The date of the Third Closing shall not be later than
March 15, 1997.
(vi) The stockholder approvals contemplated by Section 4(n)
shall have been obtained.
8. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware. The Company and the
Purchasers irrevocably consent to the exclusive jurisdiction of the United
States federal courts located in Kent County in the State of Delaware in any
suit or proceeding based on or arising under this Agreement and irrevocably
agrees that all claims in respect of such suit or proceeding may be determined
in such courts. The Company irrevocably waived the defense of an inconvenient
forum to the maintenance of such suit or proceeding. Service of process on the
Company mailed by first class mail shall be deemed in every respect effective
service of process upon the Company in any such suit or proceeding. Nothing
herein shall affect the right of any Purchaser to serve process in any other
manner permitted by law. The Company agrees that a final non-appealable judgment
in any such suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on such judgment or in any other lawful manner.
b. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. This Agreement, once executed by a party, may be
delivered to the other parties hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
In the event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause the manually executed Executive Page(s)
to be physically delivered to the other party within five (5) days of the
execution hereof.
c. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
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d. Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement or
the validity or enforceability of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor the Purchasers make any
representation, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement may be waived other than by an instrument in
writing signed by the party to be charged with enforcement and no provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company and the Purchasers.
f. Notices. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier or confirmed telecopy, in each case addressed to a party. The addresses
for such communications shall be:
If to the Company:
Network Imaging Corporation
000 Xxxxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: President
with a copy to:
General Counsel's Office
Network Imaging Corporation
000 Xxxxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
If to any Purchaser, to such address set forth under such Purchaser's
name on the Execution Page hereto executed by such Purchaser.
Each party shall provide notice to the other parties of any change in
address.
g. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Neither
the Company nor any Purchaser shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, any Purchaser may assign its rights hereunder to
any of its "affiliates," as that term is defined under the Exchange Act, without
the consent of the Company; provided, such assignee is an "accredited investor"
as such term is defined in Rule 501(a) of Regulation D and such assignment will
not impose any significant obligations on the Company under the blue sky laws of
any jurisdiction. This provision shall not limit a Purchaser's right to transfer
the Securities pursuant to the terms of the Certificate of Designation, the
Warrants and this Agreement or to assign such Purchaser's rights hereunder to
any such transferee.
h. 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, except for the provisions of Section 2(j) and 3(l) which
are for the benefit of, and may be enforced by, the Placement Agent.
-18-
i. Survival. The representations and warranties of the Company and the
agreements and covenants set forth in Sections 3, 4, 5 and 8 shall survive the
closings hereunder notwithstanding any due diligence investigation conducted by
or on behalf of any Purchasers. Moreover, none of the representations and
warranties made by the Company herein shall act as a waiver of any rights or
remedies a Purchaser may have under applicable federal or state securities laws.
Notwithstanding the foregoing, any disclosure made by the Company to the
Purchasers in this Agreement (including, without limitation, in Section 3 hereof
or in the Schedules attached hereto) shall constitute disclosure to the
Purchasers for purposes of any applicable federal or state securities laws. The
Company agrees to indemnify and hold harmless each Purchaser and each of such
Purchaser's officers, directors, employees, partners, members, agents and
affiliates for loss or damage arising as a result of or related to any breach or
alleged breach by the Company of any of its representations or covenants set
forth herein, including advancement of expenses as they are incurred.
j. Publicity. The Company and each Purchaser shall have the right to
approve before issuance any press releases, SEC, NASDAQ or NASD filings, or any
other public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of the Purchasers, to make any press release or SEC, NASDAQ or NASD
filings with respect to such transactions as is required by applicable law and
regulations (although the Purchasers shall be consulted by the Company in
connection with any such press release prior to its release and shall be
provided with a copy thereof).
k. Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the First Closing shall not have
occurred on or before July 31, 1997, unless the parties agree otherwise, this
Agreement shall terminate at the close of business on such date. Notwithstanding
any termination of this Agreement, any party not in breach of this Agreement
shall preserve all rights and remedies it may have against another party hereto
for a breach of this Agreement prior to the termination hereof.
m. Joint Participation in Drafting. Each party to this Agreement has
participated in the negotiation and drafting of this Agreement. As such, the
language used herein shall be deemed to be the language chosen by the parties
hereto to express their mutual intent, and no rule of strict construction will
be applied against any party to this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned Purchaser and the Company have
caused this Agreement to be duly executed as of the date first above written.
NETWORK IMAGING CORPORATION
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
PURCHASER:
CAPITAL VENTURES INTERNATIONAL
By: Susquehanna Securities Trading GmbH for the account
of Capital Ventures International
By: ----------------------------------
Xxxxxx Xxxxxxxx, Managing Director
RESIDENCE: Cayman Islands
ADDRESS:
Susquehanna Securities Trading GmbH with a copy to:
Oberlindau 7 Susquehanna Financial Group
60323 Frankfurt am Main 000 Xxxx Xxxx Xxxxxx
Attn: Xxxxxx Xxxxxxxx Xxxxx 000
Xxxx Xxxxxx, XX 00000-0000
Attn: Xxxxxx Xxxxxxxx
AGGREGATE SUBSCRIPTION AMOUNT
Number of Units* to be Purchased at First Closing: 1,500
----------
Purchase Price ($1,000 per Unit): $1,500,000
----------
Number of Units* to be Purchased at Second Closing: 1,364
----------
Purchase Price ($1,000 per Unit): $1,364,000
----------
------------------------
* Each Unit consists of one (1) Preferred Share and a Warrant to purchase
seventy-five (75) shares of Common Stock.
IN WITNESS WHEREOF, the undersigned Purchaser and the Company
have caused this Agreement to be duly executed as of the date first above
written.
NETWORK IMAGING CORPORATION
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
PURCHASER:
ZANETT LOMBARDIER, LTD.
By: ----------------------------
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
RESIDENCE: Cayman Islands
ADDRESS:
Zanett Lombardier, Ltd.
c/o The Zanett Securities Corporation
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telecopy: (000) 000-0000
Attn: Xxxxxxx Xxxxxxxx
AGGREGATE SUBSCRIPTION AMOUNT
Number of Units* to be Purchased at First Closing: 1,800
----------
Purchase Price ($1,000 per Unit): $1,800,000
----------
Number of Units* to be Purchased at Second Closing: 1,636
----------
Purchase Price ($1,000 per Unit): $1,636,000
----------
------------------------
* Each Unit consists of one (1) Preferred Share and a Warrant to purchase
seventy-five (75) shares of Common Stock.
