EXHIBIT 10.12
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement") dated as of April 14,
1997, by and among ImageMatrix Corporation, a Colorado corporation (the
"Company"), and the entities and individuals listed on Schedule 1 hereto (the
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"Purchasers").
WHEREAS, the Company is in need of working capital; and
WHEREAS, pursuant to this Agreement, the Purchasers wish to provide
such capital by purchasing convertible preferred stock (the "Series A Preferred
Stock") to be issued by the Company in Units, each consisting of 30,000 shares
of Series A Preferred Stock (a "Unit"); and
WHEREAS, the Company will sell 110 Units, consisting of an aggregate of
3,300,000 shares of Series A Preferred Stock for gross proceeds of $3,300,000;
and
WHEREAS, because all of the Purchasers are "accredited investors" as
defined by Rule 501(a) of Regulation D under the Securities Act of 1933, as
amended (the"Act"), the transaction will be exempt from registration under the
Act;
NOW, THEREFORE, in consideration of the aforesaid and the mutual
promises hereinafter made, the parties hereto agree as follows:
1. PURCHASE OF SECURITIES.
1.01 Sale of Units.
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a. Subject to the terms and conditions hereof, on the Closing
Date (as hereinafter defined) the Company agrees to issue and sell, and each
Purchaser set forth on Schedule 1 to this Agreement agrees severally but not
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jointly to purchase, the number of Units set forth opposite such Purchaser's
name on Schedule 1 in column 2, for the aggregate purchase price set forth on
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Schedule 1 in column 3.
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b. If the Registration Statement referred to in Section 6 below
is not declared effective by the Securities and Exchange Commission by the first
anniversary date of the Closing Date hereof, any shares of Series A Preferred
Stock, or portions thereof, which have not then been converted by any Purchaser,
shall be redeemed by the Company at the option of such Purchaser as provided in
the Certificate of Amendment attached hereto as Exhibit A (the "Non-approval
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Redemption Amount").
1.02 Closing Date; Delivery. The closing of the issuance and sale of
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the 110 Units hereunder will be held at the offices of Chrisman, Bynum &
Johnson, P.C. on April 14, 1997, or at such other time and place as to which
the Company and the Purchasers may agree (the "Closing Date"). On the Closing
Date, the Purchasers severally but not jointly will deliver by wire transfer in
immediately available funds the purchase price and the Company will issue and
deliver certificates for the Series A Preferred Stock to the Purchasers as set
forth in Schedule 1.
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1.03 Payment of Commission. The Company has agreed, pursuant to a
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letter agreement dated April 1, 1997, as amended on April 7, 1997, to pay to
Neidiger, Tucker, Bruner, Inc. ("NTB") a commission for the sale of all Units
sold hereunder in the amount of six percent (6%) of the gross proceeds received
by the Company and to grant 50,000 Class A Warrants to purchase the Company's no
par value common stock ("Common Stock") to NTB. The Company has also agreed to
pay a four percent (4%) finder's fee to Mueller Trading Company on the gross
proceeds and to grant 1,000,000 Class A Warrants and 500,000 Class B Warrants to
purchase the Company's Common Stock to Mueller Trading Company. The terms and
provisions of the Class A and Class B Warrants shall be as set forth on Exhibits
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B and C, respectively. Warrants may be exercised by the registered holders
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thereof for a period of three years from the Closing Date. Class A Warrants
shall be exercisable at a price of $2.25 per share. Class B Warrants shall be
exercisable at a price of $3.00 per share. Warrants may not be redeemed by the
Company. Holders of Warrants have registration rights with respect to the Common
Stock issuable upon exercise of the Warrants as set forth in Section 6.01.
Notwithstanding the failure of any Warrant to recite any of the terms of this
Agreement applicable to such Warrants, all of such terms shall be binding upon
and inure to the benefit of all Holders of Warrants. The Company has not agreed
to pay, or to cause the other to pay, any commissions, finders fee or
compensation on account of the Transaction other than as recited herein.
1.04 Description of Series A Preferred Stock The relative rights,
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preferences, restrictions and other provisions relating to the Preferred Stock
shall be as set forth in the Certificate of Amendment attached hereto as Exhibit
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A. Notwithstanding the failure of any certificate for the Series A Preferred
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Stock to recite any of the terms of this Agreement applicable to such shares,
all of such terms shall be binding upon and inure to the benefit of all holders
of the Series A Preferred Stock.
1.05 Antidilution Provisions. The Series A Preferred Stock and the
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Warrants are subject to customary antidilution provisions as set forth in such
instruments.
2. REPRESENTATIONS AND WARRANTIES OF PURCHASERS. Each Purchaser
hereby represents and warrants as to himself, herself or itself as follows:
2.01 Purchaser is acquiring the Units for investment only and not with
a view to or for resale or distribution of any part thereof, and with no present
intention of selling,
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granting participation in, or otherwise distributing the same except pursuant to
the registration rights granted by Section 6 hereof.
2.02 Purchaser is an "accredited investor" as defined in Rule 501(a)
of Regulation D under the Securities Act of 1933, as amended (the "Act") and has
executed an Accredited Investor Statement in the form attached hereto as Exhibit
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D. Purchaser has such knowledge and experience in business and financial matters
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as to be capable of evaluating the risks and merits of an investment in the
Series A Preferred Stock and Warrants and has sufficient financial resources to
bear the economic risks thereof (including possible complete loss of such
investment) for an indefinite period of time. Purchaser has full and free
access to the Company's books, financial statements, records, contracts,
documents and other information concerning the Company and has been afforded an
opportunity to ask questions of the Company's officers, employees, agents,
accountants and representatives concerning the Company's business, operations,
financial condition, assets, liabilities and other relevant matters, and has
been given all such information as has been requested, in order to evaluate the
merits and risks of the investment in the Units. Upon request, Purchaser will
provide the Company with access to Purchaser's tax, financial and other records
as are reasonably necessary under the circumstances to confirm that Purchaser is
an accredited investor within the meaning of Rule 501(a) of Regulation D under
the Act.
2.03 Each purchaser understands that:
a. The Series A Preferred Stock and the Warrants included in
the Units are "restricted securities" within the meaning of Rule 144 under the
Act.
b. The Series A Preferred Stock and the Warrants are not
being registered with the Securities and Exchange Commission and therefore must
be held until they are subsequently registered under the Act and any applicable
state or foreign securities laws (pursuant to Section 6 hereof or otherwise)
unless an exemption from registration is available; provided, however, that
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Purchasers have the registration rights set forth in Section 6 for the shares of
Common Stock issuable upon conversion of the Series A Preferred Stock and
exercise of the Warrants.
c. The exemption from registration under Rule 144 will not be
available for one year from the date of acquisition of the Series A Preferred
Stock and Warrants, and even then may not be available unless (A) a public
trading market still exists for the Common Stock at that time, (B) adequate
information concerning the Company is then publicly available, and (C) the sale
complies with the other terms and conditions of Rule 144.
2.04 Each Purchaser acknowledges and agrees that it shall have, no
right to convert any Series A Preferred Stock or exercise any Warrants to
purchase the Common Stock of the Company so long as and to the extent that at
the time of such conversion or exercise, such
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conversion or exercise would cause the Purchaser then to be the "beneficial
owner" of five percent (5%) or more of the Company's then outstanding common
stock. For the purpose hereof, the term "beneficial owner" shall have the
meaning ascribed to it in Section 13(d) of the Securities Exchange Act of 1934.
The opinion of legal counsel to each Purchaser, in form and substance
satisfactory to the Company and the Company's counsel, shall prevail in all
matters relating to the amount of such Purchaser's beneficial ownership.
2.05 [THIS SECTION INTENTIONALLY OMITTED]
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
3.01 Organization and Good Standing. The Company is a corporation,
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duly organized, validly existing, and in good standing under the laws of the
State of Colorado and has all requisite corporate power and authority to own and
lease its properties and conduct its business as it is now being conducted. The
Company is not required to be qualified to do business as a foreign corporation
in any jurisdiction in which it is not qualified and where a failure to be
qualified would have a material adverse effect on the Company.
3.02 Capitalization Structure.
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a. As of the date of this Agreement, the Company's authorized
capital stock consists of 5,000,000 shares of undesignated Preferred Stock and
20,000,000 shares of Common Stock, no par value, of which no shares of Preferred
Stock and 4,922,834 shares of Common Stock are issued and outstanding. The
rights, preferences and privileges of the capital stock are as set forth in the
Articles of Incorporation and Bylaws of the Company. As of the date of this
Agreement, all issued and outstanding shares of Common Stock are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights and there is no outstanding subscription, option, warrant, call, right,
agreement, commitment, understanding, or arrangement relating to the issuance,
sale, delivery, transfer or redemption of the Company's capital stock
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other than, in the case of Common Stock, in each case as of April 4, 1997, the
shares, options and warrants listed in Exhibit E, attached hereto.
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b. The Company has reserved 3,300,000 shares of Series A
Preferred Stock and 5,000,000 shares of authorized but unissued Common Stock for
the issuance of the Series A Preferred Stock, the conversion of Series A
Preferred Stock and the exercise of Warrants hereunder. All of the shares of
the Company's Common Stock issuable upon conversion of the Series A Preferred
Stock and exercise of the Warrants have been duly authorized by all necessary
corporate action and will be when issued in accordance with the terms of the
Series A Preferred Stock and Warrants, validly issued, fully paid and
nonassessable and free of preemptive rights, other than those restrictions
imposed by the Company's Articles of Incorporation and Bylaws.
3.03 Authority; No Conflict; Required Filings.
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a. The Company has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated by
this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company. This Agreement
has been duly executed and delivered by the Company and constitutes the valid
and binding obligation of the Company, enforceable in accordance with its terms.
b. The execution and delivery of this Agreement by the Company
and the consummation of the transactions contemplated by this Agreement will not
(i) conflict with or result in any violation or breach of any provision of the
Articles of Incorporation or Bylaws of the Company; (ii) result in any violation
or breach of, or constitute a default or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any benefit under any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
lease contract or other agreement, instrument or obligation to which the Company
is a party or by which it or any of its properties or assets may be bound; or
(iii) conflict with or violate any permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Company or any of its properties or assets, except in the case of (ii)
and (iii) for any such violation, breaches, defaults, termination, cancellation,
accelerations, or conflicts which would not, in the aggregate, have or result in
a material adverse effect on the Company or impair the ability of the Company to
consummate the transactions contemplated by this Agreement.
c. No consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental entity, is required
by or with respect to the Company in connection with the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby.
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3.04 SEC Filings; Financial Statements.
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a. The Company has timely filed and made available to
Purchasers all forms, reports and documents required to be filed by the Company
with the Commission since June 4, 1996 (collectively, the "ImageMatrix SEC
Reports"). The ImageMatrix SEC Reports (i) at the time filed, complied in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act, as the case may be, and (ii) did not at the time they were filed
(or if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing) contain any untrue statement of a material fact
or omit to state a material fact required to be stated in such ImageMatrix SEC
Reports or necessary in order to make the statements in such ImageMatrix SEC
Reports, in the light of the circumstances under which they were made, not
misleading.
b. Each of the financial statements (including, in each case,
any related notes) contained in the ImageMatrix SEC Reports, including any
ImageMatrix SEC Reports filed after the date of this Agreement until the Closing
Date, complied or will comply, as of their respective dates, in all material
respects, with all applicable accounting requirements and the published rules
and regulations of the Commission with respect thereto, was or will be prepared
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods involved and fairly presented or will
present the consolidated financial position of the Company as at the respective
dates and the results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which were not or are not
expected to be material in amount.
3.05 Litigation. Except as described in the ImageMatrix SEC Reports,
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there is no action, suit or proceeding, claim, arbitration or investigation
pending or, to the best of the Company's knowledge, threatened against the
Company which would, in the aggregate, have a material adverse effect on the
Company or impair the ability of the Company to consummate the transactions
contemplated by this Agreement.
3.06 Brokers and Finders. No broker, trader or investment banker is
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entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated hereby based upon arrangements made by or on
behalf of the Company except for the commissions described in Section 1.03.
4. [THIS SECTION INTENTIONALLY OMITTED]
5. COVENANTS OF THE COMPANY.
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5.01 The Company covenants and agrees that, so long as any Series A
Preferred Stock or Warrants shall be outstanding:
a. Maintenance of office. The Company will maintain an office
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or agency in such place in the United States of America as the Company may
designate in writing to the registered holders of Series A Preferred Stock and
Warrants, where the Series A Preferred Stock and Warrants may be presented for
registration or transfer and for exchange as their terms may provide, where
notices and demands to or upon the Company in respect of its Series A Preferred
Stock and Warrants may be served.
b. Corporate Existence. The Company will do or cause to be
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done all things necessary and lawful to preserve and keep in full force and
effect its corporate existence, rights and franchises.
c. Maintenance of Property. The Company will at all times
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maintain and keep, or cause to be maintained and kept, in good repair, working
order and condition all significant properties of the Company used in the
conduct of the business of the Company.
d. Notice of Default. If any one or more events which
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constitute a default under either the Series A Preferred Stock or Warrants, in
accordance with their terms, or if the holder of any Series A Preferred Stock or
Warrants shall take any other action permitted upon the occurrence of any such
default, the Company shall, immediately after it becomes aware that any such
event has occurred or that such demand has been made or that any such action has
been taken, give notice to all holders of the Series A Preferred Stock and
Warrants, specifying the nature of such event or of such demand or action, as
the case may be.
5.02 Additional Regulation D or Regulation S Offerings. The Company
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agrees that it shall not, without the approval of all of the holders of Series A
Preferred Stock and Warrants issued hereunder, (a) make an unregistered offering
of shares of its Common Stock or of securities convertible into such Common
Stock pursuant to Regulation D under the Act or otherwise, pursuant to which
registration rights are granted to the purchasers in such an offering, or (b)
make an offering of securities pursuant to Regulation S under the Act, in either
case until 270 days after the Closing Date.
5.03 Notice of Conversion of Series A Preferred Stock or Exercise of
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Warrants; Payment for Late Delivery of Shares or Late Redemptions.
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a. If the Holder of a share of Series A Preferred Stock or a
Warrant delivers to the principal office of the Company to the attention of
Blair McNea, Secretary and Gerald E. Henderson, President (a) a copy of the
Conversion Notice or Notice of Exercise, respectively, by telecopy (telecopy
number 303/399-1554) and (b) within two business days thereafter, the Series A
Preferred Stock Certificate and original Conversion Notice or the Warrant
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Price and the original Notice of Exercise, and; (c) the Company fails to deliver
to the Holder the Certificate representing the shares of Common Stock due upon
such conversion or exercise within five (5) business days (the "Five-Day
Period") after receiving the original Conversion Notice and Series A Preferred
Stock or the Original Notice of Exercise and the Warrant Price, then the Company
will pay the Holder the amount described in Section 5.03 d. below, which amount
shall begin to accrue on the first day after the expiration of the Five-Day
Period; provided, however, that if the Company has given notice of redemption of
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the Series A Preferred Stock, as defined in the Series A Preferred Stock
Certificate of Amendment, the Company shall not be obligated to pay the amount
for late delivery described in this Section.
b. [Intentionally omitted.]
c. If payment by the Company of any 125% Redemption Amount or
the Non-approval Redemption Amount as defined in the Series A Preferred Stock
Certificate of Amendment is not made within the period provided for such
payment, the Company shall pay to the Holder the late payment set forth in
Section 5.03 d. below which amount shall begin to accrue on the first day after
the expiration of such period.
d. The late payment shall be $1,000 per day for each $100,000
in Series A Preferred Stock converted or redeemed or each 10,000 Warrants
exercised (proportionately adjusted for greater or lesser amounts) for the first
of five (5) days and $500 per day thereafter continuing until the stock
certificate is delivered to Holder.
e. The late payment provided by this Section 5.03 shall be in
addition to, and not lieu of, the rights or remedies of the Purchasers or the
Holders under the Series A Preferred Stock, the Warrants or this Agreement or
which are otherwise available under law.
6. REGISTRATION RIGHTS.
6.01 a. Registration. The Company represents that it will become
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eligible for use of Form S-3 on June 5, 1997, and shall file within sixty (60)
days after the Closing Date a registration statement or such form covering all
of the Registrable Securities with the Commission and shall use its best efforts
to have such registration statement declared effective by the Commission (a
"Registration") within ninety (90) days after receipt of the filing with the
Commission. "Registrable Securities", for purposes of this Agreement, means the
shares of Common Stock underlying the Series A Preferred Stock and the Class A
and Class B Warrants. The Registration shall be for 5,000,000 shares of Common
Stock, and the Company further, will register on such form such additional
shares of Common Stock as may be necessary to register all of the Common Stock
into which the Series A Preferred Stock is converted and underlying the Class A
and Class B Warrants.
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b. Selection of Underwriter(s). The Purchaser(s) shall have
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sole discretion to select the underwriter(s), if any, to manage the sale of
Registrable Securities pursuant to such Registration under this Section 6.01.
c. Effective Registration Statement. A Registration requested
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pursuant to this Section 6.01 will be deemed to have been effected as soon as it
has become effective; provided, however, that if the offering of Registrable
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Securities pursuant to such registration is interfered with by any stop order,
injunction or other order or requirement of the Commission or other governmental
agency or court within 135 days after it has become effective, such Registration
will be deemed not to have been effected. If any such stop order or injunction
is rescinded, the effective periods required by this Agreement shall continue
upon such rescission and be extended by the number of days by which such stop
order reduced the effective period.
6.02 Registration Procedures. It shall be a condition precedent to
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the obligations of the Company and any underwriter(s) to take any action
pursuant to this Section 6 that the Selling Holders in any Registration shall
furnish to the Company such information regarding them, the Registrable
Securities held by them, the intended method of disposition of such Registrable
Securities, and such agreements regarding indemnification, disposition of such
securities and the other matters referred to in this Section 6 as the Company
shall reasonably request. With respect to any Registration pursuant to this
Section 6, the Company shall, as expeditiously as practicable:
a. Prepare a Form S-3 registration statement (or the Company if
is not eligible to use a Form S-3, then another appropriate form prescribed by
the Commission) and file it with the Commission within sixty (60) days after the
Closing Date and any necessary amendments thereto covering the Registrable
Securities of the Selling Holders and use its best efforts to cause such
registration statement to become effective within ninety (90) days after filing
with the Commission;
b. Prepare and file with the Commission such amendments and
post effective amendments to such registration statement and any documents
required to be incorporated by reference therein as may be necessary to keep the
registration statement effective for a period of three (3) years (or such
shorter period which will terminate when there are no longer any Warrants
outstanding hereunder or when all Registrable Securities covered by such
registration statement have been sold or withdrawn, but not prior to the
expiration of the time period referred to in Section 4(3) of the Act and Rule
174 thereunder, if applicable) cause the prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Act (or any successor rule);
c. Furnish to such Selling Holder, without charge, at least one
conformed copy of the registration statement and any post-effective amendments
thereto, upon request, and a reasonable number of copies of the final prospectus
and any preliminary
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prospectuses and any amendments or supplements thereto, and any exhibit or
documents incorporated therein by reference;
d. Immediately notify such Selling Holder, at any time when a
prospectus relating thereto is required to be delivered under the Act, when the
Company becomes aware of any event which causes the prospectus to contain any
untrue statement of material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were
made not misleading and, as promptly as practicable thereafter, prepare and file
and attach a supplement or amendment to such prospectus correcting same;
e. Use its best efforts to cause all securities included in
such registration statement to be listed, by the date of the first sale of
securities pursuant to such registration statement, on the Nasdaq SmallCap
System;
f. Make generally available to Selling Holders an earnings
statement satisfying the provisions of Section 11(a) of the Act no later than 90
days after the end of the Company's fiscal year next ending after the effective
date of the registration statement;
g. Make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the registration statement at the earliest
possible moment;
h. As promptly as practicable after filing with the Commission
of any subsequently filed document which is incorporated by reference into a
registration statement (such as a Form 10-QSB), deliver a reasonable number of
copies of such document to such Selling Holder;
i. Prior to the date on which the registration statement is
declared effective, use its best efforts to register or qualify the securities
covered by the registration statement for offer and sale under the securities or
blue sky laws of each state of the United States as such Selling Holder or
underwriter(s), may reasonably request and to keep each such registration or
qualification effective, including through new filings, or amendments or
renewals, during the period such registration statement is required to be kept
effective and to do any and all other acts or things necessary or advisable to
enable the disposition in all such jurisdictions of the Registrable Securities
covered by the applicable registration statement;
j. Enter into such customary agreements (including an
underwriting agreement in customary form) and take such other actions
customarily taken by registrants as sellers of a majority of such Registrable
Securities or the underwriter(s), if any, reasonably request in order to
expedite or facilitate the disposition of such Registrable Securities;
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k. Obtain a "cold comfort" letter or letters from the Company's
independent public accountants in customary form as may reasonably be requested;
l. Make available for inspection by any Selling Holder holding
Registrable Securities covered by such registration statement, by any
underwriter participating in any disposition to be effected pursuant to such
registration statement and by any attorney, accountant or other agent retained
by any such Selling Holder or any such underwriter, all pertinent financial and
other records, pertinent corporate documents and properties of the Company, and
supply all information reasonably requested by any such Selling Holder,
underwriter, attorney, accountant or agent in connection with such registration
statement;
m. Cooperate with such Selling Holder and the underwriter(s),
if any, to facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legends) representing the Shares to be sold under the
registration statement, enable such securities to be in such denominations and
registered in such names as the Selling Holder or the underwriter(s), if any,
may request; and
n. Use its best efforts to cause the Shares covered by the
registration statement to be registered with or approved by such other
governmental agencies or authorities within the United States, including,
without limitation, the National Association of Securities Dealers, Inc., as may
be necessary to enable the seller or sellers thereof or the underwriter(s), if
any, to consummate the disposition of such Registrable Securities.
The Selling Holders, upon receipt of any notice from the Company of
any event of the kind described in paragraph (d) of this Section 6.02, will
forthwith discontinue disposition of the Shares until the Selling Holders'
receipt of the copies of the supplemented or amended prospectus contemplated by
paragraph (d) of this Section 6.02 or until they are advised in writing (the
"Advice") by the Company that the use of the prospectus may be resumed, and have
received copies of any additional or supplemental filings which are incorporated
by reference in the prospectus. In the event the Company shall give any such
notice, the time periods mentioned in paragraph (b) of this Section 6.02 shall
be extended by the number of days during the period from and including any date
of the giving of such notice to and including the date when each seller of
securities covered by such registration statement shall have received the copies
of the supplemented or amended prospectus contemplated by paragraph (d) of this
Section 6.02 hereof or the Advice.
6.03 Blackout Periods.
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a. At any time when a registration statement effected pursuant
to Section 6.01 relating to Registrable Securities is effective, upon written
notice from the Company to the Selling Holders that either:
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(i) the Company has determined to engage in a publicly
registered offering of its Common Stock and has been advised in writing (with a
copy to the Selling Holders) by a nationally recognized independent investment
banking firm selected by the Company that, in such firm's opinion, the Selling
Holders' sale of Registrable Securities pursuant to the registration statement
would adversely affect such immediately planned Company offering (a "Transaction
Blackout"), provided, however, there may not be more than one Transaction
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Blackout in any 365 day period; or
(ii) the Company determines in the good faith judgment of
legal counsel to the Company that the cessation of the Selling Holders' sale of
Registrable Securities pursuant to the registration statement is mandated by law
(an "Information Blackout"), then Selling Holders shall suspend sales of
Registrable Securities pursuant to such registration statement until the earlier
of:
(A) in the case of a Transaction Blackout, the earliest
of (i) thirty (30) days after the beginning of such Transaction Blackout, (ii)
the termination of any "blackout" period required by the underwriters to be
applicable to the Selling Holders, if any, in connection with such Company
offering, (iii) promptly after abandonment of such Company offering, or, in the
case of an Information Blackout, the earlier of (iv) the date upon which the
cessation of such sales would, in the opinion of the Company's legal counsel, no
longer be mandated by law, or (v) thirty (30) days after the beginning of such
Information Blackout; or
(B) such time as the Company notifies the Selling
Holders that sales pursuant to such registration statement may be resumed (the
number of days from such suspension of sales of the Selling Holders until the
day when such sales may be resumed hereunder is hereinafter called a "Sales
Blackout Period"); provided, that the Company may not impose a Sales Blackout
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Period during the 120 day period immediately following the date on which a
registration statement effected pursuant to Section 6.01 first became effective.
b. If there is a Transaction Blackout or an Information
Blackout, the time periods set forth in Section 6.02(b) shall be extended for a
number of days equal to the number of days in the Sales Blackout Period.
6.04 Registration Expenses. In the case of any Registration, the
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Company shall bear all of the costs and expenses of such Registration
(including, without limitation, the expenses of preparing any registration
statement, Commission and state "blue sky" filing, registration and
qualification fees, the cost of providing any legal opinion or "cold comfort"
letters reasonably requested by the Selling Holders and printing costs);
provided, however, that the Company shall not be responsible for legal fees or
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expense of counsel for any of the Selling Holders, or for any
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underwriter's discounts or commissions that are attributable to the Registrable
Securities of a Selling Holder.
6.05 Indemnification and Contribution.
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a. Indemnification by the Company. The Company agrees to
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indemnify and hold harmless each Selling Holder, its officers, directors and
agents and each person who controls (within the meaning of the Act, and the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) such Selling
Holder, including, without limitation, any general partner or manager of any
thereof, against all losses, claims, damages, liabilities and expenses arising
out of or based upon any untrue or alleged untrue statement of a material fact
contained in any registration statement, prospectus or preliminary prospectus in
which such Selling Holder is participating or in any document incorporated by
reference therein or any omission or alleged omission to state therein a
material fact necessary to make the statement therein (in the case of the
prospectus or any preliminary prospectus, in light of the circumstances under
which they were made) not misleading, except insofar as the same are caused by,
based upon or contained in any information with respect to such Selling Holder
furnished in writing to the Company by such Selling Holder expressly for use
therein; provided, however, that the foregoing indemnity agreement with respect
--------
to any preliminary prospectus shall not inure to the benefit of any Selling
Holder from whom the person asserting such loss, claim, damage or liability
purchased the securities if it is determined that it was the responsibility of
such Selling Holder to provide such person with a current copy of the prospectus
and such current copy of the prospectus would have cured such loss, claim,
damage or liability. The Company will also indemnify underwriters (as such term
is defined in the Act), their officers and directors and each person who
controls such persons (within the meaning of the Act) to the same extent as
provided above with respect to the indemnification of the Selling Holders.
b. Indemnification by the Selling Holders. In connection with
---------------------------------------
any Registration in which a Selling Holder is participating, such Selling Holder
will furnish to the Company in writing such information and affidavits with
respect to such Selling Holder as the Company reasonably requests for use in
connection with any registration statement or prospectus and agrees to indemnify
and hold harmless the Company, its directors, officers and agents and each
person who controls (within the meaning of the Act and the Exchange Act) the
Company against any losses, claims, damages, liabilities and expenses arising
out of or based upon any untrue statement of a material fact or any omission to
state a material fact necessary to make the statements in the registration
statement or prospectus or preliminary prospectus (in the case of the prospectus
or preliminary prospectus, in light of the circumstances under which they were
made) not misleading, to the extent, but only to the extent, that such untrue
statement or omission is contained in any information or affidavit such Selling
Holder furnished to the Company by such Selling Holder expressly for use therein
provided, however, that the amount recoverable by the Company from any Selling
- --------
Holder under this indemnification provision shall not exceed the amount of net
proceeds received by the Selling Holder from the sale of Registrable Securities
13
hereunder; and provided, further, that the indemnity agreement contained in this
--------
Section 6.05 shall not apply to amounts paid in settlement of any loss, claim,
damage, liability or action arising pursuant to late registration under Section
6 if such settlement is effected without the consent of the Selling Holder
(which consent shall not be unreasonably withheld). Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
the Company or any of the prospective sellers, or any of their respective
affiliates, directors, officers or controlling persons and shall survive the
transfer of such securities by such seller.
c. Conduct of Indemnification Proceedings. Any person entitled
--------------------------------------
to indemnification hereunder will (i) give prompt written notice to the
indemnifying party of any claim with respect to which it seeks indemnification
and (ii) unless in such indemnified party's reasonable judgment a conflict of
interest may exist between such indemnified and indemnifying party, permit the
indemnifying party to assume the defense of such claim, jointly with any other
indemnifying party similarly notified to the extent it may elect, with counsel
reasonably satisfactory to the indemnified party. The failure to so notify the
indemnifying party shall relieve the indemnifying party from any liability
hereunder with respect to the action to the extent that such failure materially
prejudices the indemnifying party; provided, however, that any such failure
--------
shall not relieve the indemnifying party from any other liability which it may
have to any other party. Whether or not such defense is assumed by the
indemnifying party, the indemnifying party will not be subject to any liability
for any settlement made without its consent (but such consent will not be
unreasonably withheld). No indemnifying party will consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect of such claim obligation. An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such, claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the reasonable fees and expenses of
such additional counsel or counsels.
d. Contribution. If for any reason the indemnification
------------
provided for in the preceding paragraphs (a) and (b) of this Section 6.05 is
unavailable to an indemnified party as contemplated by the preceding paragraphs
(a) and (b) of this Section 6.05 for any reason, then the indemnifying party
shall contribute to the amount paid or payable by the indemnified party as a
result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect not only the relative benefits received by the
indemnified party and the indemnifying party, but also the relative fault of the
indemnified party and the indemnifying party, as well as any other relevant
equitable considerations. Notwithstanding the foregoing, if the indemnifying
party is a Selling Holder, any contribution pursuant to this Section 6.05(d)
shall be several and not joint, and shall be limited to the amount of net
proceeds received by such Selling Holder from the sale of Registrable Securities
hereunder.
14
e. Other Indemnification. Indemnification similar to that
---------------------
specified in the preceding subdivisions of this Section 6.05 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any federal or state law or regulation or governmental
authority other than the Act.
6.06 Exchange Act Reports. The Company agrees that at all times after
--------------------
it has filed a registration statement pursuant to the requirements of the Act
relating to any class of equity securities of the Company, it will use its best
efforts to file in a timely manner all reports required to be filed by it
pursuant to the Exchange Act to the extent the Company is required to file such
reports. Upon request of a Selling Holder, the Company will furnish the
requesting Selling Holder with such information as may be necessary to enable
such Selling Holder to effect sales pursuant to Rule 144A. Notwithstanding the
foregoing, the Company may register any class of its equity securities under
Section 12 of the Exchange Act or suspend its duty to file reports with respect
to any class of its securities pursuant to Section 15(d) of the Exchange Act if
it is then permitted to do so pursuant to the Exchange Act and rules and
regulations thereunder.
6.07 Participation in Registrations. No Selling Holder may
------------------------------
participate in any Registration hereunder unless such Selling Holder (a) agrees
to sell the Selling Holder's securities on the basis provided in any
underwriting arrangements approved by the persons entitled hereunder to approve
such arrangements, and (b) completes and executes all questionnaires, powers of
attorney, underwriting agreements and other documents customarily required under
the terms of such underwriting arrangements.
6.08 Remedies. In addition to all other remedies which shall be
--------
available under law or under any other provisions of this Agreement, each
Selling Holder shall have the right and remedy to have the provisions of this
Section specifically enforced by any court having jurisdiction in the event that
the Company breaches such provisions, and the Company shall reimburse such
Selling Holder for the reasonable costs of the expenses for counsel for such
Purchaser incurred in connection with such proceeding.
7. MISCELLANEOUS
-------------
7.01 Notices. All notices, requests and other communications to any
--------
party hereunder shall be in writing (including facsimile or similar writing) and
shall be given to such party at its address or facsimile number set forth on the
signature pages hereof or such other address or facsimile number as such party
may hereafter specify in writing to the Secretary of the Company for the purpose
by notice to the party sending such communication. Each such notice, request or
other communication shall be effective (i) if given by facsimile, when such
message is transmitted to the number set forth on such signature pages or such
other number as a party may specify in writing to the Secretary of the Company
or (ii) if given by any other means, the earlier of (x) when delivered by hand
to the address set forth on such signature pages or such other
15
address as a party may specify in writing to the Secretary of the Company or (y)
five business days after the mailing of such notice by certified mail. If more
than one Purchaser specified the same address for such notices, then a single
notice to such address shall be deemed to be notice to all Purchasers at that
address.
7.02 Binding Effect; Benefit. This Agreement shall be binding upon
------------------------
and inure to the benefit of the parties to this Agreement and their respective
successors and permitted assigns, nothing in this Agreement, express or implied,
is intended or shall be construed to any person other than the parties to this
Agreement or their respective successors or assigns any legal or equitable
right, remedy or claim under or in respect of any agreement or any provision
contained herein provided, however, that nothing herein shall be construed to
--------
preclude the assignment by Purchasers hereunder in connection with their resale
of Warrants Series A Preferred Stock purchased hereunder, of the rights
attendant thereto, including but not limited to the registration rights for
Registrable Securities, subject only to compliance with applicable securities
laws. This Agreement constitutes the entire agreement and understanding, and
supersedes and terminates all prior agreements and understandings, both oral and
written, between the parties hereto relating to the subject matter hereof.
7.03 Waiver. Any party hereto may, without binding any other party,
------
by written notice to another party (a) extend the time for the performance of
any of the obligations or other actions of such other party under this
Agreement; (b) waive compliance with any of the conditions or covenants of such
other party contained in this Agreement; and (c) waive or modify performance of
any of the obligations of such other party under this Agreement. Except as
provided in the preceding sentence, no action taken pursuant to this Agreement,
including, without limitation, any investigation by or on behalf of any party,
shall be deemed to constitute a waiver by the party bringing such action of
compliance with any representations, warranties, covenants or agreements
contained herein. Neither the waiver by any party hereto of a breach of any
provision hereof or any preceding or succeeding breach nor the failure by any
party to exercise any right or privilege hereunder shall be deemed a waiver of
such party's rights or privileges hereunder nor shall it be deemed a waiver of
such party's rights to exercise the same at any subsequent time or times
hereunder.
7.04 Amendment. This Agreement may be amended, modified or
---------
supplemented only by a written instrument executed by all of the parties hereto
(including transferees of Purchasers).
7.05 Assignability Neither this Agreement nor any right, remedy,
-------------
obligation or liability arising hereunder or by reason hereof shall be
assignable by either the Company or any Purchaser except as otherwise
contemplated hereunder and except that the right of Purchasers may be assigned
as provided herein.
16
7.06 Arbitration. Except as provided below, any and all disputes
-----------
arising under or related to this Agreement which cannot be resolved through
negotiations between the parties shall be submitted to binding arbitration. If
the parties fail to reach a settlement of their dispute within fifteen (15) days
after the earliest date upon which one of the parties notified the other(s) of
its desire to attempt to resolve the dispute, then the dispute shall be promptly
submitted to arbitration by a single arbitrator through the Judicial Arbiter
Group, any successor of the Judicial Arbiter Group, or any similar arbitration
provider who can provide a former judge to conduct such arbitration if JAG is no
longer in existence ("JAG"). The arbiter shall be selected by JAG on the basis,
if possible, of his or her expertise in the subject matter(s) of the dispute.
The decision of the arbitrator shall be final, nonappealable and binding upon
the parties, and it may be entered in any court of competent jurisdiction. The
arbitration shall take place in Chicago, Illinois. The arbitrator shall be
bound by the laws of the State of Colorado applicable to the issues involved in
the arbitration and all Colorado rules relating to the admissibility of
evidence, including, without limitation, all relevant privileges and the
attorney work product doctrine. All discovery shall be completed in accordance
with the time limitations prescribed in the Colorado rules of civil procedure,
unless otherwise agreed by the parties or ordered by the arbitrator on the basis
of strict necessity adequately demonstrated by the party requesting an extension
of time. The arbitrator shall have the power to grant equitable relief where
applicable under Colorado law, and shall be entitled to make an award of
punitive damages when applicable under Colorado law. The arbitrator shall issue
a written opinion setting forth his or her decision and the reasons therefor
within thirty (30) days after the arbitration proceeding is concluded. The
obligation of the parties to submit any dispute arising under or related to this
Agreement to arbitration as provided in this Section shall survive the
expiration or earlier termination of this Agreement. Notwithstanding the
foregoing, either party may seek and obtain an injunction or other appropriate
relief from a court to preserve or protect trademarks, tradenames, copyrights,
patents, trade secrets or other intellectual property or proprietary information
or to preserve the status quo with respect to any matter pending conclusion of
the arbitration proceeding, but no such application to a court shall in any way
be permitted to stay or otherwise impede the progress of the arbitration
proceeding.
In the event of any arbitration or litigation being filed or instituted between
the parties concerning this Agreement, the prevailing party will be entitled to
receive from the other party or parties its attorneys' fees, witness fees, costs
and expenses, court costs and other reasonable expenses, whether or not such
controversy, claim or action is prosecuted to judgment or other form of relief.
7.07 Pronouns. Whenever the context may require any pronoun used
--------
herein shall include the corresponding masculine, feminine or neuter forms.
7.08 Section and Other Headings, The section and other headings
--------------------------
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
17
7.09 Counterparts. This Agreement may be executed in any number of
------------
counterparts or separate number of counterparts, each of which shall be deemed
to be an original and all of which together shall be deemed to be one and the
same instrument.
7.10 No Joint and Several Liability Among Purchasers. The
-----------------------------------------------
obligations, representations and warranties of the Purchasers hereunder are made
by each Purchaser as to himself, herself or itself only. There shall be no
joint and several liability among the Purchasers.
18
IN WITNESS WHEREOF, the Company and each Purchaser has executed this
Agreement as of the day and year first above written.
ATTEST: IMAGEMATRIX CORPORATION.
_______________________________________ By:______________________________
Blair McNea, Vice President Gerald E. Henderson, President
Business Development, Secretary/Treasurer
Notices: 400 S. Colorado Boulevard,
Suite 500
Denver, CO 80303
Facsimile: (303) 399-1554
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PURCHASERS:
______________________________________________
By:___________________________________________
___________________________________________
Notices:______________________________________
______________________________________
______________________________________
______________________________________________
By:___________________________________________
___________________________________________
Notices:______________________________________
______________________________________
______________________________________
______________________________________________
By:___________________________________________
___________________________________________
Notices:______________________________________
______________________________________
______________________________________
______________________________________________
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By:___________________________________________
___________________________________________
Notices:______________________________________
______________________________________
______________________________________
21
LIST OF SCHEDULES AND EXHIBITS
Schedule 1 Purchasers
Exhibit A Certificate of Amendment
Exhibit B Form of Class A Warrant
Exhibit C Form of Class B Warrant
Exhibit D Form of Accredited Investor Statement
Exhibit E Shares, Options and Warrants
22