SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of December
29, 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 Xxxx Xxxxxxx (
the "Purchaser").
WHEREAS:
A. The Company and the 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. The Purchaser and the Company executed a line of credit in the
amount of $5,000,000 on December 31, 1996 (the "Line of Credit");
C. The Company has requested that the Purchaser convert $4,000,000 of
the Line of Credit into equity, and the remaining $1,000,000 shall continue to
exist in accordance with all of the terms and conditions of the Line of Credit
Agreement dated December 31, 1996 with the exception that it shall be payable
with respect to that amount with an interest rate of 8 1/2% per annum due April
1, 1999;
D. The Company has requested that the Purchaser convert the Line of
Credit into, upon the terms and conditions stated in this Agreement, 4,000
shares of the Company's Series M Convertible Preferred Stock, par value $.0001
per share (the "Series M Stock"), convertible into its common stock, par value
$.0001 per share, of the Company (the "Common Stock"). The effective yield under
the Series M Stock will be 8 1/2% per annum, payable in kind at the option of
the Company. 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". The Preferred Shares and the
Conversion Shares are collectively referred to herein as the "Securities."
NOW, THEREFORE, the Company and the Purchaser hereby agree as follows:
1. PURCHASE AND SALE OF UNITS.
a. Purchase of Units. Upon execution of this Agreement, the Purchaser
shall be deemed to have purchased from the Company, with no fee or payment due
to the Company, 4,000 shares of the Series M Stock. Upon the execution of this
Agreement, the Line of Credit shall be reduced to $1,000,000 current and
outstanding, plus interest.
2. PURCHASER'S REPRESENTATIONS AND WARRANTIES
The Purchaser 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. Purchaser agrees that any and all disposal(s) of the Securities
shall be in accordance with or pursuant to a registration statement or an
exemption under the Securities Act.
b. 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.
c. Transfer or Resale. Purchaser understands that 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"); 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 except as
otherwise set forth herein.
d. Legends. Purchaser understands that the Series M Stock and, until
such time as the Conversion Shares have been registered under the Securities Act
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
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.
b. Enforcement. This Agreement has been duly and validly executed and
delivered on behalf of Purchaser and is a valid and binding agreement of
Purchaser enforceable in accordance with their terms.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Purchaser that:
a. Organization and Qualification. The Company 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 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.
b. Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and perform this Agreement.
c. Expenses. Except as otherwise provided in this 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 to be executed in connection herewith except the
Company agrees that it shall be responsible for payment of reasonable legal fees
to Purchaser's counsel.
d. Financial Information. The Company agrees to send the following
reports to the Purchaser until such Purchaser transfers, assigns or sells all of
its Securities contemporaneous with 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 all other relevant information on
request from Purchaser.
e. 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
Series M Stock and issuance of the Conversion Shares in connection therewith and
as otherwise required by the Certificate of Designation.
f. Corporate Existence. So long as a Purchaser beneficially owns any of
the Series M Stock, 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 the Series M Stock as of the date of such transaction.
g. Compliance with Certificate of Designation. The Company shall comply
with all of the provisions contained in the Certificate of Designation.
4. TRANSFER AGENT INSTRUCTIONS.
a. The Company shall instruct its transfer agent to issue certificates,
registered in the name of the Purchaser or its nominee, for the Conversion
Shares in such amounts as specified from time to time by such Purchaser to the
Company upon conversion of the Series M Stock. 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 4, 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 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. Nothing in this Section shall affect in any way the
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 the 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 the 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
promptly instruct its transfer agent to issue one or more certificates in such
name and in such denominations as specified by the Purchaser.
5. REGISTRATION RIGHTS.
The Company agrees that at any time it registers shares of common stock
for any other party, it shall promptly notify Purchaser of such pending
registration and shall undertake, upon the request of the Purchaser, to register
the Conversion Shares. Purchaser shall notify the Company that it seeks to have
the Conversion Shares registered within ten days of the Company's notification
of a filing to the Purchaser. Notwithstanding the foregoing, the Company shall
undertake to file a registration statement to register the Conversion Shares no
later than August 1, 1998 and the Company shall keep such registration current
and effective thereafter. In the event that the Company does not register the
Conversion Shares by August 1, 1998, the Purchaser shall have a demand
registration right at the Company's expense.
6. LIQUIDATION PREFERENCE.
The Series M Stock shall hold liquidation preference over the Common
Stock and the Series K and L Convertible Preferred Stocks of the Company. The
Series M Stock shall rank junior to the Series A Convertible Preferred Stock
until such time as the Company has effected the conversion of the Series A
Convertible Preferred Stock.
7. EXISTING WARRANTS.
All warrants to purchase shares of the Company's common stock that are
currently held by the Purchaser and Liberty Travel shall be repriced to $1.50,
and such warrants shall expire on December 31, 2002. Such modifications to the
warrants shall become effective the first business day immediately following
execution of this Agreement. The Company agrees that all of the Company's
publicly held warrants shall be repriced to $1.50 effective on the first
business day immediately following execution of this Agreement. All other terms
and conditions of the warrants shall remain unchanged.
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 New Jersey applicable to
contracts made and to be performed in the State of New Jersey. The Company and
the Purchaser irrevocably consent to the exclusive jurisdiction of the United
States federal courts located in Essex County in the State of New Jersey 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.
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.
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.
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: General Counsel's Office
If to the Purchaser, to such address set forth under such Purchaser's
name on the execution page hereto executed by the Purchaser, with an additional
copy to Purchaser's counsel.
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.
h. Survival. The Company agrees to indemnify and hold harmless the
Purchaser 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.
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:
Xxxx Xxxxxxx
ADDRESS: 00 Xxxxxx Xxxxxx, Xxxxxx Xxx Xxxxxx 00000
