Exhibit 2(a)
STOCK AND CONVERTIBLE NOTE PURCHASE AGREEMENT
dated as of February 11, 2000
among
NEWCHECK CORPORATION
d/b/a Productivity Solutions, Inc.
and
THE PURCHASERS NAMED HEREIN
TABLE OF CONTENTS Page
I. DEFINITIONS 1
II. THE PURCHASE AND SALE OF SECURITIES 11
2.1. Purchase of Convertible Preferred Stock 11
2.2. Purchase of Note 12
2.3. Closing 12
III. PURCHASERS' REPRESENTATIONS 12
3.1. Investment Intention 12
3.2. Accredited Investor 13
3.3. Existence 13
3.4. Power; Authorization;Enforceable Obligations 13
3.5 Stock Ownership 14
IV. COMPANY'S REPRESENTATIONS AND WARRANTIES 14
4.1. Authorized and Outstanding Shares of Capital
Stock 14
4.2. Authorization and Issuance of Convertible
Preferred Stock and Convertible Notes 15
4.3. Securities Laws 16
4.4. Corporate Existence; Compliance with Law 16
4.5. Subsidiaries 17
4.6. Corporate Power; Authorization; Enforceable
Obligations 17
4.7. Financial Statements 18
4.8. Ownership of Property 18
4.9. Material Contracts; Indebtedness 19
4.10. Environmental Protection 20
4.11. Labor Matters 21
4.12. Other Ventures 22
4.13. Taxes 22
4.14. No Litigation 22
4.15. Brokers 22
4.16. Employment and Labor Agreements 23
4.17. Patents, Trademarks, Copyrights and Licenses 23
4.18. No Material Adverse Effect 23
4.19. ERISA 23
4.20. Registration Under Exchange Act; Registra-
tion Rights 26
4.21. Ordinary Course of Business 26
4.22. Insurance 26
4.23. Accounts Receivable 26
4.24. Minute Books 27
4.25. Year 2000 Compliance 27
4.26. Full Disclosure 27
4.27. Economic Terms 27
V. COVENANTS 27
5.1. Affirmative and Financial Covenants 27
(a) Books and Records 28
(b) Financial and Business Information 28
(c) Tax Compliance 30
(d) Insurance 30
(e) Employee Plans 30
(f) Compliance with Law 31
(g) Maintenance of Existence and Conduct
of Business 31
(h) Access 31
(i) Exchange of Stock Certificates 30
(j) Lost, Stolen, Destroyed or Mutilated
Stock Certificates 31
(k) Confidential Information 32
5.2. Additional Affirmative Covenants 32
5.3. Negative Covenants 32
(a) Permitted Acquisitions or Investments 32
(b) Sales of Assets; Liquidation 33
(c) Agreements 33
(d) Employee Loans 33
(e) Capital Stock 33
(f) Senior Stock 33
(g) Transactions with Affiliates 33
(h) Indebtedness 34
(i) Restricted Payments 34
(j) Mergers and Subsidiaries 34
(k) Management Compensation 34
(l) Amendments to Certificate of
Incorporation and By-Laws 34
5.4. Additional Negative Covenants 35
VI. CONDITIONS PRECEDENT 35
6.1. Conditions Precedent 35
6.2. Additional Conditions 37
VII. SECURITIES LAW MATTERS 37
7.1. Legends 37
VIII. INDEMNIFICATION 37
IX. MISCELLANEOUS 37
9.1. Notices 38
9.2. Binding Effect; Benefits 39
9.3. Complete Agreement 39
9.4. Consents; Further Action 40
9.4. Successors and Assigns; Assignability 41
9.5. Remedies 41
9.6. Section and Other Headings 41
9.7. Severability 41
9.8. Counterparts 41
9.9. Publicity 42
9.10. Non-Solicitation 42
9.11. Governing Law; Jury Waiver 42
9.12. Consent Fees 42
Schedules
Schedule 2.1 - Purchasers
Schedule 2.1(a) - 1999 Securities
Schedule 3.5 - Stock Ownership
Schedule 4.1 - Stock and Warrants
Schedule 4.5 - Subsidiaries
Schedule 4.7 - Financial Statements; Other Obligations
Schedule 4.8 - Ownership and Properties
Schedule 4.9 - Material Contracts and Indebtedness
Schedule 4.10 - Environmental Matters
Schedule 4.12 - Other Ventures
Schedule 4.13 - Taxes
Schedule 4.14 - Litigation
Schedule 4.15 - Brokers
Schedule 4.16 - Employment Contracts
Schedule 4.17 - Patents, Trademarks, Etc.
Schedule 4.18 - Material Adverse Effect
Schedule 4.19 - ERISA
Schedule 4.20 - Registration Rights
Schedule 4.22 - Insurance
Schedule 9.1 - Purchasers' Addresses
Exhibits
Exhibit A-1 Form of ERS Convertible Note
Exhibit A-2 Form of AG Convertible Note
Exhibit B Form of Senior Preferred Certificate of
Designation
Exhibit C Form of Amended and Restated Certificate of
Incorporation
Exhibit D Form of Management Agreement
Exhibit E Form of Registration Rights Agreement
Exhibit F Form of Securityholders Agreement
Exhibit G Form of Amended Series B Terms, Preferences,
Rights and Limitations
Exhibit H Form of Opinion of Company Counsel
STOCK AND CONVERTIBLE NOTE PURCHASE AGREEMENT
STOCK AND CONVERTIBLE NOTE PURCHASE AGREEMENT dated as of
February 11, 2000 among NewCheck Corporation d/b/a/ Productivity
Solutions, Inc., a Delaware corporation having an office at 0000
Xxxxxxxxxx Xxx, Xxxxx 00, Xxxxxxxxxxxx, Xxxxxxx 00000
(hereinafter referred to as the "Company"), Electronic Retailing
Systems International, Inc., a Delaware corporation having an
office at 000 Xxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxxx 00000
(hereinafter referred to as "ERS"), and the other purchasers
named on the signature pages hereto (together with ERS
hereinafter referred to herein as the "Purchasers" and each
individually, as a "Purchaser").
W I T N E S S E T H :
WHEREAS, the Company has agreed to issue and sell to ERS,
and ERS has agreed to acquire from the Company, upon the terms
and conditions hereinafter provided, $4,550,000, in original
principal amount of the Company's 8% Convertible Note in the
form of Exhibit A-1 annexed hereto (hereinafter referred to as
the "ERS Convertible Note"); the Company has agreed to issue and
sell to AG Checkout LLC (hereinafter referred to as "AG"), and
AG has agreed to acquire from the Company, upon the terms and
conditions hereinafter provided, $700,000 in original principal
amount of the Company's 8% Convertible Note in the form of
Exhibit A-1 annexed hereto (hereinafter referred to as the "AG
Convertible Note"); and the Company has agreed to issue and sell
to the Purchasers, and the Purchasers have agreed to purchase
from the Company, upon the terms and conditions hereinafter
provided, an aggregate of 1,072,659 shares of the Company's
Series C Convertible Preferred Stock, $.0001 par value, the
terms, preferences and limitations of which are set forth in
Exhibit B annexed hereto (hereinafter referred to as the "Senior
Preferred Stock"); and
WHEREAS, the Purchasers include: (i) the holders of a
majority of the record and beneficial holders of the outstanding
shares of the Company's Series A Convertible Preferred Stock,
$.0001 par value (hereinafter referred to as "Series A Preferred
Stock"); and (ii) the Required Holders (as set forth in the 1998
Purchase Agreement [as hereinafter defined]);
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, it is agreed as follows:
SECTION I
DEFINITIONS
Unless otherwise defined herein, the following terms shall
have the respective meanings set forth below (such meanings
being equally applicable to both the singular and plural form of
the terms defined):
(i) "Affiliate" shall mean, with respect to any Person,
(i) each Person that, directly or indirectly, owns or controls,
whether beneficially, or as a trustee, guardian or other
fiduciary, 5% or more of the Voting Securities of such Person,
(ii) each Person that controls, is controlled by or is under
common control with such Person or any Affiliate of such Person,
(iii) each of such Person's officers, directors, joint venturers
and partners, (iv) any trust or beneficiary of a trust of which
such Person is the sole trustee or (v) any lineal descendants,
ancestors, spouse or former spouses (as part of a marital
dissolution) of such Person (or any trust for the benefit of
such Person). For the purpose of this definition, "control" of
a Person shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of its management or
policies, whether through the ownership of Voting Securities, by
contract or otherwise.
(ii) "AG Convertible Note" shall have the meaning set forth
in the recitals hereto.
(iii) "Amended and Restated Certificate of
Incorporation" shall mean the Fifth Amended and Restated
Certificate of Incorporation of the Company, as may from time to
time be amended, in the form of Exhibit C annexed hereto.
(iv) "Balance Sheet" shall have the meaning set forth in
Section 4.7(a) hereof.
(v) "Board of Directors" shall have the meaning set forth
in Section 5.3(a) hereof.
(vi) "Business Day" shall mean any day that is not a
Saturday, a Sunday or a day on which banks are required or
permitted to be closed in the State of New York.
(vii) "Capital Expenditures" shall include software
development costs and all payments for any fixed assets or
improvements or for replacements, substitutions or additions
thereto, that have a useful life of more than one year and which
are required to be capitalized under GAAP.
(viii) "Capital Lease" shall mean, with respect to any
Person, any lease of any property (whether real, personal or
mixed) by such Person as lessee that, in accordance with GAAP,
either would be required to be classified and accounted for as a
capital lease on a balance sheet of such Person or otherwise be
disclosed as a capital lease in a note to such balance sheet,
other than, in the case of the Company or a Subsidiary of the
Company, any such lease under which the Company or such
Subsidiary is the lessor and any lease pursuant to a bona-fide
financing arrangement for equipment where the Company is the
lessee.
(ix) "Capital Lease Obligation" shall mean, with respect to
any Capital Lease, the amount of the obligation of the lessee
thereunder that, in accordance with GAAP, would appear on a
balance sheet of such lessee in respect of such Capital Lease or
otherwise be disclosed in a note to such balance sheet.
(x) "Charges" shall mean all federal, state, county, city,
municipal, local, foreign or other governmental (including,
without limitation, PBGC) taxes at the time due and payable,
levies, assessments, charges, Liens, claims or encumbrances upon
or relating to (i) the Company's or any of its Subsidiaries'
employees, payroll, income or gross receipts, (ii) the Company's
or any of its Subsidiaries' ownership or use of any of its
assets, or (iii) any other aspect of the Company's or any of the
Subsidiaries' business.
(xi) "Closing" shall have the meaning set forth in Section
2.3 hereof.
(xii) "Closing Date" shall have the meaning set forth
in Section 2.3 hereof.
(xiii) "COBRA" shall have the meaning set forth in
Section 4.19(m) hereof.
(xiv) "Common Stock" shall mean the common stock,
$.0001 par value, of the Company.
(xv) "Compensation" shall mean, with respect to any Person,
all payments and accruals commonly considered to be
compensation, including, without limitation, all wages, salary,
deferred payment arrangements, bonus payments and accruals,
profit sharing arrangements, payments in respect of stock option
or phantom stock option or similar arrangements, stock
appreciation rights or similar rights, incentive payments,
pension or employment benefit contributions or similar payments,
made to or accrued for the account of such Person or otherwise
for the direct or indirect benefit of such Person.
(xvi) "Convertible Notes" shall mean the ERS
Convertible Note and the AG Convertible Note (which,
individually, shall be referred to herein as a "Convertible
Note").
(xvii) "Convertible Preferred Stock" shall mean the
Senior Preferred Stock and the Series B Preferred Stock.
(xviii) "Environmental Laws" shall mean all federal,
state and local laws, statutes, ordinances and regulations, now
or hereafter in effect, and in each case as amended or
(xix) supplemented from time to time, and any judicial or
administrative interpretation thereof, including, without
limitation, any applicable judicial or administrative order,
consent decree or judgment, relative to the applicable Real
Estate, relating to the regulation and protection of human
health, safety, the environment and natural resources
(including, without limitation, ambient air, surface water,
groundwater, wetlands, land surface or subsurface strata,
wildlife, aquatic species and vegetation). Environmental Laws
include but are not limited to the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended
(42 U.S.C. Section 9601 et seq.) ("CERCLA"); the Hazardous
Material Transportation Act, as amended (49 U.S.C. Section 1801
et seq.); the Federal Insecticide, Fungicide, and Rodenticide
Act, as amended (7 U.S.C. Section 136 et seq.); the Resource
Conservation and Recovery Act, as amended (42 U.S.C.
Section 6901 et seq.) ("RCRA"); the Toxic Substance Control Act,
as amended (15 U.S.C. Section 2601 et seq.); the Clean Air Act,
as amended (42 U.S.C. Section 740 et seq.); the Federal
Water Pollution Control Act, as amended (33 U.S.C. Section 1251
et seq.); the Occupational Safety and Health Act, as amended (29
U.S.C. Section 651 et seq.) ("OSHA"); and the Safe Drinking
Water Act, as amended (42 U.S.C. Section 300f et seq.), and any
and all regulations promulgated thereunder, and all analogous
state and local counterparts or equivalents and any transfer of
ownership notification or approval statutes.
(xix) "Environmental Liabilities and Costs" shall mean
all liabilities, obligations, responsibilities, remedial
actions, losses, damages, punitive damages, consequential
damages, treble damages, costs and expenses (including, without
limitation, all fees, disbursements and expenses of counsel,
experts and consultants and costs of investigation and
feasibility studies), fines, penalties, sanctions and interest
incurred as a result of any claim, suit, action or demand by any
Person or entity, whether based in contract, tort, implied or
express warranty, strict liability, criminal or civil statute or
common law (including, without limitation, any thereof arising
under any Environmental Law, permit, order or agreement with any
Governmental Authority) and which relate to any health or safety
condition regulated under any Environmental Law or in connection
with any other environmental matter or Spill or the presence of
a hazardous substance or threatened Spill of any Hazardous
Substance.
(xx) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974 (or any successor legislation thereto), as
amended from time to time and any regulations promulgated
thereunder.
(xxi)"ERISA Affiliate" shall mean, with respect to the
Company, any trade or business (whether or not incorporated)
under common control with the Company and which, together with
the Company, are treated as a single employer within the meaning
of Sections 414(b), (c), (m) or (o) of the IRC, excluding the
Purchasers and each other Person which would not be an ERISA
Affiliate if the Purchasers did not own any issued and
outstanding shares of Stock of the Company.
(xxii) "ERS Convertible Note" shall have the meaning set
forth in the recitals hereto.
(xxiii) "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended, and all rules and regulations
promulgated thereunder.
(xxiv) "Facility" shall have the meaning set forth under
Section 4.10.
(xxv) "Financials" shall mean the financial statements
referred to in Section 4.7(a) hereof.
(xxvi) "Fiscal Year" shall mean the twelve month period
ending December 31. Subsequent changes of the fiscal year of
the Company shall not change the term "Fiscal Year," unless the
Required Holders shall consent in writing to such changes.
(xxvii) "GAAP" shall mean generally accepted accounting
principles in the United States of America as in effect from
time to time.
(xxviii) "Governmental Authority" shall mean any nation or
government, any state or other political subdivision thereof,
and any agency, department or other entity exercising executive,
legislative, judicial, regulatory or administrative functions of
or pertaining to government.
(xxix) "Guaranteed Indebtedness" shall mean, as to any
Person, any obligation of such Person guaranteeing any
Indebtedness, (hereinafter referred to as "primary obligations")
of any other Person (hereinafter referred to as the "primary
obligor") in any manner including, without limitation, any
obligation or arrangement of such Person (a) to purchase or
repurchase any such primary obligation, (b) to advance or supply
funds (i) for the purchase or payment of any such primary
obligation or (ii) to maintain working capital or equity capital
of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet condition of the primary obligor,
(c) to purchase property, securities or services primarily for
the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such
primary obligation, or (d) to indemnify the owner of such
primary obligation against loss in respect thereof.
(xxx) "Hazardous Substance" shall have the meaning set
forth under Section 4.10.
(xxxi) "Indebtedness" of any Person shall mean (i) all
indebtedness of such Person for borrowed money, (ii) all
obligations evidenced by notes, bonds, debentures or similar
instruments, (iii) all Capital Lease Obligations, (iv) all
Guaranteed Indebtedness, (v) all Indebtedness referred to in
clause (i), (ii), (iii) or (iv) above secured by (or for which
the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in
property (including, without limitation, accounts and contract
rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness
and (vi) all liabilities under Title IV of ERISA.
(xxxii) "IRC" shall mean the Internal Revenue Code of 1986,
as amended, and any successor thereto.
(xxxiii) "IRS" shall mean the Internal Revenue Service, or
any successor thereto.
(xxxiv) "Lien" shall mean any mortgage or deed of trust,
pledge, hypothecation, assignment, deposit arrangement, lien,
charge, claim, security interest, easement or encumbrance, or
preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without
limitation, any title retention agreement, any financing lease
having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any
financing statement perfecting a security interest as to assets
owned by the relevant Person under the Uniform Commercial Code
or comparable law of any jurisdiction).
(xxxv) "LRM" shall mean the labor resource management
product line of the Company.
(xxxvi) "Major Holders" shall have the meaning set forth
in Section 5.1(b).
(xxxvii) "Management Agreement" shall mean that certain
management agreement, dated as of the Closing Date hereof,
between the Company and ERS in the form of Exhibit D annexed
hereto, as may be amended, supplemented or otherwise modified
from time to time in accordance with the terms thereof.
(xxxviii) "Manager" shall have the meaning set forth in
Section 5.3(a) hereof.
(xxxix) "Material Adverse Effect" shall mean material
adverse effect on the business, assets, operations, prospects or
financial condition of the Company and its Subsidiaries, if any,
taken as a whole.
(xl) "Material Contracts" means (i) all of the Company's
and its Subsidiaries' contracts, agreements, leases or other
instruments (written or oral) to which the Company or any of its
Subsidiaries is a party or by which the Company, its
Subsidiaries or its assets or properties are or may be bound,
which involve payments by or to the Company or its Subsidiaries
of more than $100,000 or which extend for a term of more than a
year from the date hereof, (ii) all of the Company's and its
Subsidiaries' loan agreements, bank lines of credit agreements,
indentures, mortgages, deeds of trust, pledge and security
agreements, factoring agreements, leases, conditional sales
contracts, letters of credit or other debt instruments, (iii)
all material operating or Capital Leases for equipment to which
the Company or any of its Subsidiaries is a party, (iv) all non-
competition and similar agreements to which the Company is a
party, (v) all contracts for the employment of any officer or
employee, (vi) all consulting agreements, (vii) any guarantees
by the Company or any of its Subsidiaries, (viii) all
distributor and sales agency agreements and (ix) all other
material contracts not made in the ordinary course of business.
(xli) "Multiemployer Plan" shall mean a "multiemployer plan"
as defined in Section 4001(a)(3) of ERISA, and to which the
Company, any of its Subsidiaries or any ERISA Affiliate is
making, is obligated to make, has made or been obligated to
make, contributions on behalf of participants who are or were
employed by any of them.
(xlii) "1994 Rights Agreement" shall mean the Rights
Agreement dated as of June 30, 1994 entered into by the Company
and the holders of the Series A Preferred Stock.
(xliii) "1998 Purchase Agreement" shall mean the Purchase
Agreement dated May 13, 1998 entered into by the Company and the
holders of the Series B Preferred Stock.
(xliv) "1998 Registration Rights Agreement" shall mean
the agreement dated May 13, 1998 entered into by the Company and
the holders of the Series B Preferred Stock.
(xlv) "1999 Notes" shall mean all right, title and
interest in and to the notes issued by the Company to the
Purchasers identified on Schedule 2.1(a) pursuant to the
commitment dated September 29, 1999 among the Company and such
Purchasers, in the principal amounts as are set forth on
Schedule 2.1(a) opposite each such Purchaser's name, which have
an aggregate outstanding principal amount of $3,262,917 plus
interest accrued and unpaid thereon.
(xlvi) "1999 Securities" shall mean the 1999 Notes and the
1999 Warrants.
(xlvii) "1999 Warrants" shall mean all right, title and
interest in and to the Company's warrants issued by the Company
to the Purchasers identified on Schedule 2.1(a) pursuant to the
commitment dated September 29, 1999 among the Company and such
Purchasers, in such number as are set forth on Schedule 2.1(a)
opposite each such Purchaser's name, covering an aggregate of
38,387,259 shares of Common Stock.
(xlviii) "Original Securityholder Agreement" shall mean
the Stockholders Agreement dated May 13, 1998 entered into by
the Company and the holders of the Series B Preferred Stock.
(xlix) "Participation Event" shall have the meaning set
forth in the Senior Preferred Certificate of Designation.
(l) "Patents" shall have the meaning set forth under
Section 4.17.
(li) "PBGC" shall mean the Pension Benefit Guaranty
Corporation or any successor thereto.
(lii) "Pension Plan" shall have the meaning set forth
in Section 4.19(a) hereof.
(liii) "Permitted Indebtedness" means, with respect to the
Company, (i) taxes or assessments or other governmental Charges
or levies, either not yet due and payable or to the extent that
nonpayment thereof is permitted by the terms of this Agreement;
(ii) obligations under workmen's compensation, unemployment
insurance, social security or public liability laws or similar
legislation; (iii) bids, tenders, contracts (other than
contracts for the payment of money) or leases to which the
Company or any of its Subsidiaries is a party as lessee made in
the ordinary course of business; (iv) public or statutory
obligations of the Company or any of its Subsidiaries; (v) all
deferred taxes and (vi) all unfunded pension fund and other
employee benefit plan obligations and liabilities but only to
the extent permitted to remain unfunded under applicable law.
(liv) "Person" shall mean any individual, sole
proprietorship, partnership, limited liability company, joint
venture, trust, unincorporated organization, association,
corporation, institution, public benefit corporation, entity or
government (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality,
division, agency, body or department thereof).
(lv) "Plan" shall have the meaning set forth in Section
4.19(a) hereof.
(lvi) "Qualified Public Offering" has the meaning assigned
to it in the Senior Preferred Certificate of Designation.
(lvii) "Registration Rights Agreement" shall mean the
Amended and Restated Registration Rights Agreement among the
Company, the Purchasers and the other parties signatory thereto,
in the form of Exhibit E annexed hereto, as such agreement may
be amended, supplemented or otherwise modified from time to time
in accordance with the terms thereof.
(lviii) "Required Holders" shall mean: (i) Persons who, in
the aggregate, hold Convertible Preferred Stock (or a
Convertible Note), or Common Stock into which the Convertible
Preferred Stock (including Convertible Preferred Stock issuable
or issued upon conversion of the Convertible Notes) has been
converted representing at least 66.67% of the total number of
shares of Common Stock into which the Convertible Preferred
Stock that has been issued is convertible (determined prior to a
Participation Event) or has been converted, including in such
calculation shares issuable or issued upon conversion of the
Convertible Notes and excluding in such calculation shares
issuable upon conversion of Convertible Preferred Stock acquired
by the Company; and (ii) the holder of the ERS Convertible Note.
(lix) "Restricted Payment" shall mean (i) the declaration
of any dividend or the incurrence of any liability to make any
other payment or distribution of cash or other property or
assets in respect of the Company's Stock or (ii) any payment on
account of the purchase, redemption or other retirement of the
Company's Stock or any other payment or distribution made in
respect of any Stock of the Company, either directly or
indirectly.
(lx) "Retiree Welfare Plan" shall refer to any Welfare Plan
providing for continuing coverage or benefits for any
participant or any beneficiary of a participant after such
participant's termination of employment, other than continuation
coverage provided pursuant to Section 4980B of the IRC and at
the sole expense of the participant or the beneficiary of the
participant.
(lxi) "SEC" shall mean the U.S. Securities and Exchange
Commission, or any successor thereto.
(lxii) "Securities Act" shall mean the Securities Act of
1933, as amended, and all rules and regulations promulgated
thereunder.
(lxiii) "Securityholders Agreement" shall mean the Amended
and Restated Securityholders Agreement among the Company, the
Purchasers and the other parties signatory thereto, in the form
of Exhibit F annexed hereto, as such agreement may be amended,
supplemented or otherwise modified from time to time.
(lxiv) "Senior Preferred Certificate of Designation" shall
mean the Certificate of Designation of the Senior Preferred
Stock in the form of Exhibit B annexed hereto.
(lxv) "Senior Preferred Stock" shall have the meaning set
forth in the recitals hereto.
(lxvi) "Series A Preferred Stock" shall have the meaning
set forth in the recitals hereto.
(lxvii) "Series B Terms, Preferences, Rights and
Limitations" shall mean the Amended Terms, Preferences, Rights
and Limitations of the Series B Preferred Stock in the form of
Exhibit G annexed hereto.
(lxviii) "Series B1 Preferred Stock" shall mean the
Company's Series B1 Convertible Preferred Stock, $.0001 par
value.
(lxix) "Series B2 Preferred Stock" shall mean the Company's
Series B2 Convertible Preferred Stock, $.0001 par value.
(lxx) "Series B Preferred Stock" shall mean the Series B1
Preferred Stock and the Series B2 Preferred Stock.
(lxxi) "Spill" shall have the meaning set forth in Section
4.10.
(lxxii) "Stock" shall mean all shares, options, warrants,
general or limited partnership interests, limited liability
company membership interests, participations or other
equivalents (regardless of how designated) of or in a
corporation, partnership, limited liability company or
equivalent entity whether voting or nonvoting, including,
without limitation, common stock, preferred stock, or any other
"equity security" (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the SEC under the
Exchange Act).
(lxxiii) "Subsidiary" shall mean, with respect to any
Person, (a) any corporation of which an aggregate of more than
50% of the outstanding Voting Securities is at the time,
directly or indirectly, owned legally or beneficially by such
Person and/or one or more Subsidiaries of such Person, and
(b) any partnership or other entity in which such Person and/or
one or more Subsidiaries of such Person shall have an interest
(whether in the form of voting or participation in profits or
capital contribution) of more than 50%.
(lxxiv) "System" shall have the meaning set forth in
Section 4.25 hereof.
(lxxv) "Taxes" shall mean any and all taxes, charges, fees,
levies, duties, liabilities, impositions or other assessments,
including, without limitation, income, gross receipts, profits,
excise, real or personal property, environmental, recapture,
sales, use, value-added, withholding, social security,
retirement, employment, unemployment, occupation, service,
license, net worth, payroll, franchise, gains, stamp, transfer
and recording taxes, fees and charges, imposed by the IRS or any
other taxing authority (whether domestic or foreign including,
without limitation, any state, county, local or foreign
government or any subdivision or taxing agency thereof
(including a United States possession)), whether computed on
separate, consolidated, unitary, combined or any other basis;
and such term shall include any interest whether paid or
received, fines, penalties or additional amounts attributable to
or imposed upon, or with respect to, any such taxes, charges,
fees, levies or other assessments. For purposes of this
Agreement, "Taxes" also includes any obligations under any
agreements or arrangements with any other Person with respect to
Taxes of such other Person (including pursuant to Treas. Reg.
Section 1.1502-6 or comparable provisions of state, local or
foreign tax law) and including any liability for Taxes of any
predecessor entity. "Tax Return" shall mean any report, return,
document, declaration or other information of filing required to
be supplied to any taxing authority or jurisdiction (foreign or
domestic) with respect to Taxes, including, without limitation,
information returns, any documents with respect to or
accompanying payments of estimated Taxes, or with respect to or
accompanying requests for the extension of time in which to file
any such report, return, document, declaration or other
information.
(lxxvi) "Transaction Documents" shall mean this Agreement,
the Convertible Notes, the Senior Preferred Certificate of
Designation, the Series B Terms, Preferences, Rights and
Limitations, the Amended and Restated Certificate of
Incorporation, the Management Agreement, each warrant
certificate to be delivered pursuant to the Management
Agreement, the Securityholders Agreement and the Registration
Rights Agreement.
(lxxvii) "Voting Securities" shall mean all classes of
capital stock or other interests in equity (excluding debt
securities convertible into equity) of the subject referenced
then outstanding and normally entitled to vote in the election
of directors, managers or trustees thereof.
(lxxviii) "Welfare Plan" shall mean any welfare plan, as
defined in Section 3(1) of ERISA, which is maintained or
contributed to by the Company, any of its Subsidiaries or any
ERISA Affiliate.
References to this "Agreement" shall mean this
Purchase Agreement, including all amendments, modifications and
supplements and any exhibits or schedules to any of the
foregoing, and shall refer to the Agreement as the same may be
in effect at the time such reference becomes operative.
Any accounting term used in this Agreement shall have,
unless otherwise specifically provided herein, the meaning
customarily given such term in accordance with GAAP, and all
financial computations hereunder shall be computed, unless
otherwise specifically provided herein, in accordance with GAAP
consistently applied. That certain terms or computations are
explicitly modified by the phrase "in accordance with GAAP"
shall in no way be construed to limit the foregoing. The words
"herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole, including the
Exhibits and Schedules hereto, as the same may from time to time
be amended, modified or supplemented, and not to any particular
section, subsection or clause contained in this Agreement.
Wherever from the context it appears appropriate, each term
stated in either the singular or plural shall include the
singular and the plural, and pronouns stated in the masculine,
feminine or neuter gender shall include the masculine, the
feminine and the neuter.
SECTION II
THE PURCHASE AND SALE OF SECURITIES
2.1 Purchase of Convertible Preferred Stock. (a) Subject
to the terms and conditions set forth in this Agreement, each
Purchaser, severally and not jointly, agrees to subscribe for
and purchase from the Company, and the Company agrees to issue
and sell to each Purchaser, on the Closing Date, that number of
shares of Senior Preferred Stock set forth opposite such
Purchaser's name on Schedule 2.1 hereto.
(b) The aggregate consideration for the aggregate
number of shares of Senior Preferred Stock subscribed for by all
Purchasers is $4,696,236, in cash (subject to the matters set
forth under Section 4.27), plus, in the case of those certain
Purchasers holding 1999 Securities as set forth on Schedule
2.1(a), the permanent waiver and elimination of any and all
obligations of the Company under all 1999 Securities and the
cancellation thereof (to which such Purchasers hereby agree,
effective at Closing); the specific amount of such aggregate
consideration attributable to each Purchaser to be as set forth
opposite such Purchaser's name on Schedule 2.1 (to which shall
be applied the principal amount of such Purchaser's 1999 Notes
as set forth opposite such Purchaser's name on Schedule 2.1(a)
hereto).
2.2 Purchase of Convertible Notes. Subject to the terms
and conditions set forth in this Agreement, on the Closing Date:
(a) ERS agrees to purchase the ERS Convertible Note from the
Company, and the Company agrees to issue the ERS Convertible
Note to ERS; and (b) AG agrees to purchase the AG Convertible
Note from the Company, and the Company agrees to issue the AG
Convertible Note to AG. The aggregate consideration for the ERS
Convertible Note from ERS is $4,550,000, in cash and the
aggregate consideration for the AG Convertible Note from AG is
$700,000, in cash.
2.3 Closing. (a) The closing of the purchase and sale of
the Senior Preferred Stock and the Convertible Notes (herein
referred to as the "Closing") shall take place within five
Business Days after the satisfaction or waiver of the conditions
set forth in Article VI hereof (other than conditions to be
satisfied by execution and delivery of documents and
certificates required to be dated the Closing Date); or such
date and time as shall be mutually agreed to by the parties
hereto (herein referred to as the "Closing Date") at the offices
of Krugman & Kailes LLP, Park 00 Xxxx - Xxxxx Xxx, Xxxxxx Xxxxx,
Xxx Xxxxxx 00000, or such other place as shall be mutually
agreed to by the parties hereto.
(b) On the Closing Date, the Company shall transmit
for delivery to each Purchaser certificates representing the
Senior Preferred Stock to be purchased by such Purchaser,
registered in such names and in such denominations as such
Purchaser requests, against delivery by such Purchaser of the
consideration therefor by wire transfer of funds on the Closing
Date to the account of the Company (or in the case of any
Purchaser holding 1999 Securities, by delivery to the Company of
such 1999 Securities for cancellation; or as otherwise
contemplated under Section 4.27). On the Closing Date: (i) the
Company will execute and deliver the ERS Convertible Note to
ERS, dated the Closing Date, against delivery by ERS of the
consideration therefor by wire transfer of funds on the Closing
Date to the account of the Company; and (ii) the Company will
execute and deliver the AG Convertible Note to AG, dated the
Closing Date, against delivery by AG of the consideration
therefor by wire transfer of funds on the Closing Date to the
account of the Company. Any and all 1999 Securities not
delivered to the Company on the Closing Date as aforesaid shall
be deemed cancelled by the Company, and all obligations of the
Company thereunder deemed permanently waived, and the records of
the Company modified accordingly.
SECTION III
PURCHASERS' REPRESENTATIONS
Each Purchaser, severally and not jointly, makes the
following representations and warranties, as to itself only, to
the Company, each and all of which shall survive the execution
and delivery of this Agreement and the Closing hereunder:
3.1. Investment Intention. Such Purchaser is purchasing
its Senior Preferred Stock or Convertible Note for its own
account, for investment purposes and not with a view to the
distribution thereof in violation of the Securities Act. Such
Purchaser will not, directly or indirectly, offer, transfer,
sell, assign, pledge, hypothecate or otherwise dispose of any of
the Senior Preferred Stock or Convertible Notes (or solicit any
offers to buy, purchase, or otherwise acquire any of the Senior
Preferred Stock or Convertible Notes), except in compliance with
the Securities Act.
3.2. Accredited Investor. Such Purchaser is an "accredited
investor" (as that term is defined in Rule 501 of Regulation D
under the Securities Act) and by reason of its business and
financial experience, it has such knowledge, sophistication and
experience in business and financial matters as to be capable of
evaluating the merits and risks of the prospective investment,
is able to bear the economic risk of such investment and is able
to afford a complete loss of such investment. Such Purchaser
has read and is familiar with the Transaction Documents. All
documents, records, and other information pertaining to the
Company that such Purchaser has requested have been made
available or delivered to such Purchaser or the Person or
Persons acting on such Purchaser's behalf. Such Purchaser has
had an adequate opportunity to ask questions of and receive
answers from the Company and its officers concerning the terms
and conditions of this investment, to inspect and copy all
material documents relating to the Company including, but not
being limited to, the Company's Amended and Restated Certificate
of Incorporation, as amended, and Bylaws, respectively, and to
obtain any additional information that is necessary to verify
the accuracy of the information such Purchaser has received.
3.3. Existence. Such Purchaser is a natural person or
corporation, partnership, limited liability company, or other
legal entity, as applicable, duly organized, validly existing
and in good standing under the laws of its jurisdiction of
formation.
3.4. Power; Authorization; Enforceable Obligations. The
execution, delivery and performance by such Purchaser of this
Agreement and the other Transaction Documents to be executed by
it: (i) are within such Purchaser's power (corporate or
otherwise); (ii) have been duly authorized by all necessary
action (corporate or otherwise); (iii) where applicable, are not
in contravention of any provision of such Purchaser's
certificate of incorporation, by-laws or other organizational
documents; and (iv) does not violate any law or regulation, or
any order or decree of any court or governmental instrumentality
binding on such Purchaser. This Agreement and the other
Transaction Documents to which such Purchaser is a party have
each been duly executed and delivered by such Purchaser and
constitute the legal, valid and binding obligations of such
Purchaser, enforceable against it in accordance with their
respective terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar
laws affecting creditors' rights and remedies generally, and
subject, as to enforceability, to general principles of equity,
including principles of commercial reasonableness, good faith
and fair dealing (regardless of whether enforcement is sought in
a proceeding at law or in equity).
3.5. Stock Ownership. Such Purchaser owns, beneficially and
of record, the Stock of the Company set forth opposite the name
of such Purchaser in Schedule 3.5, free and clear of any Lien
(other than the Original Securityholders Agreement or any
Transaction Document or as otherwise identified in writing to
the Company). Such Purchaser does not have any Affiliate that
owns, beneficially or of record, any Stock of the Company
(except for those Affiliates expressly designated as such on
said schedule).
SECTION IV
COMPANY'S REPRESENTATIONS AND WARRANTIES
The Company makes the following representations and
warranties to each Purchaser, each and all of which shall
survive the execution and delivery of this Agreement and the
Closing hereunder:
4.1. Authorized and Outstanding Shares of Capital Stock.
(a) After giving effect to the Closing, the authorized capital
stock of the Company shall consist of 100,000,000 shares of
Common Stock, of which 30,769 shares will be issued and
outstanding, 200,000 shares of Series A Preferred Stock, of which
12,138 shares will be issued and outstanding, 300,000 shares of
Series B1 Preferred Stock, of which 113,838 shares will be issued
and outstanding, 500,000 shares of Series B2 Preferred Stock, of
which 205,842 shares will be issued and outstanding, and
3,500,000 shares of Senior Preferred Stock, of which 1,072,659
shares will be issued and outstanding. All of such issued and
outstanding shares are validly issued, fully paid and
non-assessable. Schedule 4.1 hereto contains a complete and
correct list of all stockholders of the Company and the number of
shares owned by each. Except as set forth on Schedule 4.1,
(i) there is no existing option, warrant, call, commitment or
other agreement to which the Company is a party requiring, and
there are no convertible securities of the Company outstanding
which upon conversion would require, the issuance of any
additional shares of Stock of the Company or other securities
convertible into shares of equity securities of the Company, and
(ii) there are no agreements to which the Company is a party or,
to the knowledge of the Company, to which any stockholder or
warrant holder of the Company is a party, with respect to the
voting or transfer of the Stock of the Company or with respect to
any other aspect of the Company's affairs, other than the
Transaction Documents, the 1994 Rights Agreement or the Original
Securityholders Agreement. Except as set forth on Schedule 4.1,
there are no stockholders' preemptive rights or rights of first
refusal or other similar rights with respect to the issuance of
Stock by the Company, other than pursuant to the 1994 Rights
Agreement, the Original Securityholders Agreement or the
Transaction Documents. True and correct copies of the
certificate of incorporation and by-laws of the Company have been
delivered to the Purchasers.
(b) After giving effect to the consummation of the
transactions to be consummated hereunder, no event shall have
occurred prior to the date hereof (other than the reverse stock
split of the Common Stock effected pursuant to the Amended and
Restated Certificate of Incorporation) which, subsequent to the
date hereof, will cause any adjustment in any conversion or
exercise price or ratio with respect to any Stock of the Company
pursuant to any anti-dilution provisions thereunder nor, as a
result of any such event, will the number of shares of Stock
issuable upon such conversion or such exercise, as the case may
be, be subject to adjustment. No such conversion or exercise
price or ratio shall be subject to adjustment as a consequence of
the transactions contemplated by the Transaction Documents, nor,
as a consequence of such consummation, shall the numbers of
shares of Stock issuable upon such conversion or such exercise,
as the case may be, be subject to adjustment.
4.2. Authorization and Issuance of Senior Preferred Stock
and Convertible Notes. The issuance of the Senior Preferred
Stock (including, without limitation, the Senior Preferred Stock
issuable upon conversion of the Convertible Notes), and the
Convertible Notes, have been duly authorized by all necessary
corporate action on the part of the Company and, upon delivery
to the Purchasers of certificates for the Senior Preferred Stock
against payment in accordance with the terms hereof, the Senior
Preferred Stock shall be validly issued and fully paid and
non-assessable, free and clear of all pledges, liens,
encumbrances and preemptive rights, except as provided in the
Transaction Documents. The issuance of shares of Common Stock
upon conversion of the Senior Preferred Stock (including,
without limitation, the Senior Preferred Stock issuable upon
conversion of the Convertible Notes) has been duly authorized by
all necessary corporate action on the part of the Company and,
when issued upon conversion of the Senior Preferred Stock
(including, without limitation, the Senior Preferred Stock
issuable upon conversion of the Convertible Notes), such Common
Stock shall be validly issued and fully paid and non-assessable.
The Company has duly reserved a sufficient number of shares of
Common Stock for issuance pursuant to the terms of the Senior
Preferred Stock, and a sufficient number of shares of Senior
Preferred Stock for issuance pursuant to the terms of the
Convertible Notes.
4.3. Securities Laws. In reliance on the investment
representations contained in Section 3.1 and Section 3.2, the
offer, issuance, sale and delivery of the Senior Preferred Stock
and the Convertible Notes, as provided in this Agreement, and of
the Senior Preferred Stock, as provided in the Convertible
Notes, and of the Common Stock, as provided in the Senior
Preferred Certificate of Designation, are exempt from the
registration requirements of the Securities Act and all
applicable state securities laws. Neither the Company nor any
Person authorized to act on its behalf has taken or will take
any action (including, without limitation, any offering of any
securities of the Company under circumstances which would
require the integration of such offering with the offering of
the Senior Preferred Stock (including, without limitation, the
Senior Preferred Stock issuable upon conversion of the
Convertible Notes) and the Convertible Notes, and the issuance
of Common Stock under the Senior Preferred Certificate of
Designation under the Securities Act and the rules and
regulations of the SEC thereunder) which might subject the
offering, issuance or sale of the Senior Preferred Stock
(including, without limitation, the Senior Preferred Stock
issuable upon conversion of the Convertible Notes) and the
Convertible Notes to the registration requirements of Section 5
of the Securities Act.
4.4. Corporate Existence; Compliance with Law. (a) The
Company and each of its Subsidiaries, if any: (i) is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware (in the case of
the Company) and as set forth on Schedule 4.5 (in the case of
its Subsidiaries); (ii) is duly qualified as a foreign
corporation and in good standing under the laws of each
jurisdiction where its ownership or lease of property or the
conduct of its business requires such qualification (except for
jurisdictions in which such failure to so qualify or to be in
good standing would not have a Material Adverse Effect);
(iii) has the requisite corporate power and authority and the
legal right to own, pledge, mortgage or otherwise encumber and
operate its properties, to lease the property it operates under
lease, and to conduct its business as now being conducted;
(iv) has, or has timely applied for, all material franchises,
licenses, permits, consents or approvals from or by, and has
made all material filings with, and has given all material
notices to, all Governmental Authorities having jurisdiction, to
the extent required for the ownership, operation and conduct of
the Company's business as now being conducted and all such
franchises, licenses, permits, consents and governmental and
other approvals are in full force and effect, there has been no
default or breach thereunder, and there is no pending or
threatened proceeding under which any may be revoked, terminated
or suspended; (v) is in compliance with its certificate or
articles of incorporation and by-laws; and (vi) is in compliance
with all applicable provisions of law, except for such
non-compliance which would not have a Material Adverse Effect.
(b) The Company is not, and is not directly or indirectly
controlled by or acting on behalf of any party which is, an
"investment company" within the meaning of the Investment Company
Act of 1940, as amended.
4.5. Subsidiaries. There currently exist no Subsidiaries
of the Company.
4.6. Corporate Power; Authorization; Enforceable
Obligations. The execution, delivery and performance by the
Company of this Agreement, the other Transaction Documents to
which it is a party and all instruments and documents to be
delivered by the Company, the issuance and sale of the Senior
Preferred Stock and the Convertible Notes and the consummation
of the other transactions contemplated by any of the foregoing:
(i) are within the Company's corporate power and authority;
(ii) have been duly authorized by all necessary or proper
corporate action; (iii) are not, except as to certain provisions
for which waivers have been granted by shareholders entitled to
the benefits thereof, in contravention of any provision of the
Company's certificate of incorporation or by-laws; (iv) will not
violate any law or regulation, or any order or decree of any
court or governmental instrumentality; (v) will not conflict
with or result in the breach or termination of, constitute a
default under or accelerate any performance required by, any
indenture, mortgage, deed of trust, lease, agreement or other
instrument to which the Company or any of its Subsidiaries is a
party or by which the Company, any of its Subsidiaries or any of
their property is bound; (vi) will not result in the creation or
imposition of any Lien upon any of the property of the Company
or any of its Subsidiaries; and (vii) do not require the consent
or approval of, or any filing with, any Governmental Authority
or any other Person (except (A) for the filing of the Amended
and Restated Certificate of Incorporation, the Senior Preferred
Certificate of Designation (together with the Amended and
Restated Certificate of Incorporation), and the Series B
Preferred Terms, Preferences, Rights and Limitations, (B) for
those filings required by the Registration Rights Agreement, (C)
for filings of any notice subsequent to the Closing that may be
required under federal or state securities laws, (D) for the
execution and delivery of the Registration Rights Agreement and
the Securityholders Agreement as contemplated hereby, and (E) to
the extent previously obtained or made). Without limiting the
generality of the foregoing, none of the transactions
contemplated in this Agreement (including, without limitation,
the use of the proceeds from the sale of the Convertible Notes)
violates, shall violate or will result in a violation of Section
7 of the Exchange Act, or any regulations issued pursuant
thereto, including, without limitation, Regulations T, U and X
of the Board of Governors of the Federal Reserve System. Neither
the Company nor any Subsidiary owns, or with the proceeds of the
sale of the Convertible Notes intends to own, carry or purchase,
or refinance borrowings that were used to own, carry or
purchase, any "margin security" or "margin stock" within the
meaning of said Regulations T, U and X. At or prior to the
Closing Date, each of this Agreement and the other Transaction
Documents to which it is a party shall have been duly executed
and delivered by the Company and each shall then constitute a
legal, valid and binding obligation of the Company, enforceable
against it in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to
general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of
whether enforcement is sought in a proceeding at law or in
equity), and the Amended and Restated Certificate of
Incorporation, the Series B Terms, Preferences, Rights and
Limitations (together with the Amended and Restated Certificate
of Incorporation) and the Senior Preferred Certificate of
Designation shall have been duly filed with the Secretary of
State of the State of Delaware.
4.7. Financial Statements. (a) The audited
consolidated balance sheet of the Company as at December 31,
1998, and the related consolidated statements of income,
retained earnings and cash flows for the year then ended, with
the opinion thereon of PriceWaterhouseCoopers LLP, and the
unaudited consolidated balance sheet of the Company as at
September 30, 1999 (herein referred to as the "Balance Sheet")
and the related unaudited consolidated statements of income,
retained earnings and cash flows for the nine months then ended,
accompanied by the certification of the chief financial officer
of the Company, copies of which have previously been delivered
to the Purchasers, are true and correct in all material respects
and have been, except as noted therein, prepared in conformity
with GAAP consistently applied throughout the periods involved
and present fairly in all material respects the financial
position of the Company as at the dates thereof, and the results
of its operations and cash flows for the periods then ended.
(b) The Balance Sheet fully and fairly presents all
liabilities of the Company and the Subsidiaries of the types
normally reflected in balance sheets as and at the dates
thereof. Except as set forth on Schedule 4.7, neither the
Company nor any of its Subsidiaries has any material
obligations, accrued, absolute, contingent or otherwise, whether
due or to become due and whether the amount thereof is readily
ascertainable or not, including, without limitation, liabilities
for Charges, long-term leases or unusual forward or long-term
commitments which are not reflected in the Balance Sheet.
(c) Except as set forth on Schedule 4.7, no dividends
or other distributions have been declared, set aside, paid or
made, directly or indirectly, upon any shares of capital Stock
of the Company, nor have any shares of capital Stock of the
Company been redeemed, retired, purchased or otherwise acquired
for value by the Company since December 31, 1998.
(d) Except as set forth in Schedule 4.7 neither the
Company nor any Subsidiary has: (i) incurred any liability or
obligation under agreements or otherwise, except current
liabilities entered into or incurred in the ordinary course of
business consistent with past practice; issued any equity
securities or rights with respect to equity securities; issued
any notes or other corporate debt securities or paid or
discharged any outstanding Indebtedness, except in the ordinary
course of business consistent with past practice; or mortgaged,
pledged or subjected to any Lien any of their respective assets
or properties; (ii) entered into any transaction other than in
the ordinary course of business consistent with past practice,
except in connection with the execution and performance of this
Agreement and the transactions contemplated hereby; or (iii)
suffered any damage, destruction, or loss to any of its assets
or properties (whether or not covered by insurance), in each
case, except as specifically set forth in the Financials.
4.8. Ownership of Property. (a) The Company and each of
its Subsidiaries has good, valid, and marketable title to all of
their respective assets and properties, in each case (except as
set forth under item 5 of Schedule 4.8) free and clear of all
Liens; and, without limiting the foregoing, has good, valid and
marketable title to all of their respective assets and
properties shown on the Balance Sheet, in each case free and
clear of all Liens, except for such assets and properties
disposed of in the ordinary course of business since the date of
the Balance Sheet. The Company and the Subsidiaries lease or own
all properties and assets necessary in any material respect for
the operation of the business of the Company and the
Subsidiaries as currently conducted.
(b) Neither the Company nor any of its Subsidiaries owns
any real estate. Each of the Company and its Subsidiaries has
valid and marketable leasehold interests in the leases described
in Schedule 4.8 hereto.
(c) All real property leased by the Company and its
Subsidiaries is set forth on Schedule 4.8. Each of such leases
is valid and enforceable in accordance with its terms against
the Company (subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar
laws affecting creditors' rights and remedies generally, and
subject, as to enforceability, to general principles of equity,
including principles of commercial reasonableness, good faith
and fair dealing (regardless of whether enforcement is sought in
a proceeding at law or in equity)) and is in full force and
effect. The Company has delivered to the Purchasers true and
complete copies of each of such leases set forth on Schedule 4.8
and all documents known to the Company affecting the rights or
obligations of the Company or any of its Subsidiaries,
including, without limitation, any non-disturbance and
recognition agreements, subordination agreements, attornment
agreements and agreements regarding the term or rental of any of
the real property leases. Except as set forth on Schedule 4.8,
none of the Company, any of its Subsidiaries nor, to its
knowledge, any other party to any such lease is in default in
any material respect of its obligations thereunder or has
delivered or received any notice of default under any such
lease, nor to the knowledge of the Company has any event
occurred which, with the giving of notice, the passage of time
or both, would constitute a default under any such lease.
(d) Except as disclosed on Schedule 4.8, neither the
Company nor any of its Subsidiaries is obligated under or a
party to, any option, right of first refusal or any other
contractual right to purchase, acquire, sell, assign or dispose
of any real property owned or leased by the Company or such
Subsidiary.
4.9. Material Contracts; Indebtedness. Schedule 4.9
contains a true, correct and complete list of all Material
Contracts. Each Material Contract is a valid and binding
agreement of the Company or its Subsidiaries (as the case may
be) enforceable against the Company or such Subsidiary in
accordance with its terms (subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium
and similar laws affecting creditors' rights and remedies
generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of
whether enforcement is sought in a proceeding at law or in
equity)), and neither the Company nor any of its Subsidiaries
has any knowledge that any Material Contract is not a valid and
binding agreement against the other parties thereto. The
Company and each of its Subsidiaries has fulfilled in all
material respects all obligations required pursuant to the
Material Contracts to have been performed by the Company or such
Subsidiary on its part. Neither the Company nor any of its
Subsidiaries is in default or breach in any material respect,
nor to the Company's or such Subsidiary's knowledge is any third
party in default or breach, under or with respect to any
Material Contract and no event has occurred, or, is alleged to
have occurred, which constitutes or with lapse of time or giving
of notice or both, would constitute a default or a basis for a
claim of force majeure or other claim of excusable delay or non-
performance under any Material Contract. Except as set forth on
Schedule 4.9, neither the Company nor any of its Subsidiaries
has any Indebtedness except Permitted Indebtedness.
4.10. Environmental Protection. (a) Except as set
forth on Schedule 4.10, to the Company's and its Subsidiaries'
knowledge, all real property owned, leased or otherwise operated
by the Company and its Subsidiaries (each, herein referred to as
a "Facility") is free of contamination from any substance, waste
or material (i) currently identified to be toxic or hazardous
pursuant to, or which may result in liability under, any
Environmental Law or (ii) within the definition of a substance
which is toxic or hazardous under any Environmental Law,
including, without limitation, any asbestos, pcb, radioactive
substance, methane, volatile hydrocarbons, industrial solvents,
oil or petroleum or chemical liquids or solids, liquid or
gaseous products, or any other material or substance which has
in the past or could at any time in the future cause or
constitute a health, safety, or environmental hazard to any
Person or property or result in any Environmental Liabilities
and Costs (herein referred to as a "Hazardous Substance") of
more than $25,000 or which, in either case, could have a
Material Adverse Effect. Except as set forth on Schedule 4.10,
neither the Company nor any of its Subsidiaries has caused or to
the Company's knowledge suffered to occur any release, spill,
migration, leakage, discharge, spillage, uncontrolled loss,
seepage, or filtration of Hazard Substances at or from the
Facility (herein referred to as a "Spill") which could result in
Environmental Liabilities and Costs in excess of $25,000.
(b) The Company and each Subsidiary has generated,
treated, stored and disposed of any Hazardous Substances in full
compliance with applicable Environmental Laws, except for such
non-compliances which would not have a Material Adverse Effect.
(c) The Company and each Subsidiary has obtained, or has
applied for, and is in full compliance with and in good standing
under all permits required under Environmental Laws (except for
such failures which would not have a Material Adverse Effect)
and neither the Company nor any of its Subsidiaries has any
knowledge of any proceedings to substantially modify or to
revoke any such permit.
(d) Except as set forth on Schedule 4.10, there are no
investigations, proceedings or litigation pending or, to the
Company's or its Subsidiaries' knowledge, threatened affecting
or against the Company, any of its Subsidiaries or the
Facilities relating to Environmental Laws or Hazardous
Substances.
(e) Since January 1, 1998, except for communications in
connection with the matters listed on Schedule 4.10, neither the
Company nor any of its Subsidiaries has received any
communication or notice (including, without limitation, requests
for information) indicating the potential of Environmental
Liabilities and Costs against the Company or its Subsidiaries.
4.11. Labor Matters. (a) There are no strikes or
other labor disputes against the Company or any of its
Subsidiaries pending or, to the Company's or its Subsidiaries'
knowledge, threatened. Hours worked by and payment made to
employees of the Company and its Subsidiaries have not been in
violation of the Fair Labor Standards Act or any other
applicable law dealing with such matters. All payments due from
the Company and each of its Subsidiaries on account of employee
health and welfare insurance have been paid or accrued as a
liability on the books of the Company or such Subsidiary. There
is no organizing activity involving the Company or any of its
Subsidiaries pending or, to the Company's or its Subsidiaries'
knowledge, threatened by any labor union or group of employees.
There are no representation proceedings pending or, to the
Company's or its Subsidiaries' knowledge, threatened with the
National Labor Relations Board, and no labor organization or
group of employees of the Company or its Subsidiaries has made a
pending demand for recognition. Except as set forth on Schedule
4.14, there are no complaints or charges against the Company or
any of its Subsidiaries pending or, to the Company's or its
Subsidiaries' knowledge, threatened to be filed with any
federal, state, local or foreign court, governmental agency or
arbitrator based on, arising out of, in connection with, or
otherwise relating to the employment or termination of
employment by the Company or any of its Subsidiaries of any
individual.
(b) Neither the Company nor any of its Subsidiaries is, or
during the five years preceding the date hereof was, a party to
any labor or collective bargaining agreement and there are no
labor or collective bargaining agreements which pertain to
employees of the Company or its Subsidiaries.
4.12. Other Ventures. Except as set forth on Schedule
4.12, neither the Company nor any of its Subsidiaries is engaged
in any joint venture or partnership with any other Person.
4.13. Taxes. Except as set forth on Schedule 4.13, all
federal, state, local and foreign tax returns, reports and
statements required to be filed by the Company and its
Subsidiaries have been timely filed with the appropriate
Governmental Authority and all such returns, reports and
statements are true, correct and complete in all material
respects. All Taxes due and payable for the periods covered by
such returns, reports and statements have been paid prior to the
date on which any fine, penalty, interest or late charge may be
added thereto for nonpayment thereof, or any such fine, penalty,
interest, late charge or loss has been paid. Proper and
accurate amounts have been withheld by the Company and its
Subsidiaries from its employees for all periods in material
compliance with the tax, social security and unemployment
withholding provisions of applicable federal, state, local and
foreign law and such withholdings have been timely paid to the
respective governmental agencies. Neither the Company nor any
of its Subsidiaries has executed or filed with the IRS or any
other Governmental Authority any agreement or other document
extending, or having the effect of extending, the period for
assessment or collection of any Taxes. No tax audits or other
administrative or judicial proceedings are pending or to the
Company's knowledge threatened with regard to any Taxes for
which the Company or any Subsidiary may be liable and no written
assessment of Taxes is proposed against the Company or any
Subsidiary. Neither the Company nor any of its Subsidiaries has
filed a consent pursuant to IRC Section 341(f) or agreed to have
IRC Section 341(f)(2) apply to any dispositions of subsection
(f) assets (as such term is defined in IRC Section 341(f)(4)).
None of the property owned by the Company or any of its
Subsidiaries is property which such company is required to treat
as being owned by any other Person pursuant to the provisions of
Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended, and in effect immediately prior to the enactment of the
Tax Reform Act of 1986 or is "tax-exempt use property" within
the meaning of IRC Section 168(h). Neither the Company nor any
of its Subsidiaries has agreed or has been requested to make any
adjustment under IRC Section 481(a) by reason of a change in
accounting method or otherwise. Neither the Company nor any of
its Subsidiaries has any obligation under any written tax
sharing agreement.
4.14. No Litigation. Except as disclosed on Schedule
4.14, no action, suit, claim or proceeding is now pending or, to
the knowledge of the Company or its Subsidiaries, threatened
against the Company or any of its Subsidiaries, at law, in
equity or otherwise, before any court, board, commission, agency
or instrumentality domestic or foreign, or of any agency or
subdivision thereof, or before any arbitrator or panel of
arbitrators.
4.15. Brokers. Except as set forth on Schedule 4.15,
no broker or finder acting on behalf of the Company or any of
its Subsidiaries brought about the consummation of the
transactions contemplated pursuant to this Agreement and, except
pursuant to the provisions of the Management Agreement, neither
the Company nor any of its Subsidiaries has any obligation to
any Person in respect of any finder's or brokerage fees (or any
similar obligation) in connection with the transactions
contemplated by this Agreement. The Company is solely
responsible for the payment of all finder's or brokerage fees to
the entities set forth on Schedule 4.15.
4.16. Employment and Labor Agreements. Except for the
Management Agreement or as set forth on Schedule 4.16, there are
no employment, consulting or management agreements covering
management of the Company or any of its Subsidiaries.
4.17. Patents, Trademarks, Copyrights and Licenses.
The Company and each of its Subsidiaries owns all licenses,
patents, patent applications, copyrights, service marks,
trademarks and registrations and applications for registration
thereof, and trade names necessary to continue to conduct its
business as heretofore conducted by it and now being conducted
by it, each of which is listed, together with Patent and
Trademark Office or Copyright Office application or registration
numbers, where applicable, on Schedule 4.17 hereto. To the
Company's knowledge, the Company and each of its Subsidiaries
conducts its businesses without infringement or claim of
infringement of any license, patent, copyright, service xxxx,
trademark, trade name, trade secret or other intellectual
property right of others, except as set forth on Schedule 4.17
hereto. To the Company's knowledge, there is no infringement by
others of any license, patent, copyright, service xxxx,
trademark, trade name, trade secret or other intellectual
property right of the Company or any of its Subsidiaries, except
as set forth on Schedule 4.17 hereto. All patents listed on
Schedule 4.17 (herein referred to as the "Patents") are
currently in compliance with formal legal requirements
(including payment of filing, examination and maintenance fees
and proofs of working or use (to the extent required)). No
charge, complaint, action, suit, proceeding, hearing,
investigation, claim or demand is pending or, to the knowledge
of the Company, is threatened, which challenges the legality,
validity, enforceability, use or ownership of any Patent. No
Patent has been or is now involved in any interference, reissue,
reexamination or opposition proceeding. To the Company's
knowledge, there is no potentially interfering patent or patent
application of any third party.
4.18. No Material Adverse Effect. Except as set forth
on Schedule 4.18 or on Schedules 4.14 or 4.17 to this Agreement,
and without reference to the liquidity or capital resources of
the Company or its Subsidiaries, no event has occurred since
December 31, 1998 which has had or could be reasonably expected
to have a Material Adverse Effect, exclusive of events not
materially worse than, or reflecting a materially different
trend in, prior comparable events or effects.
4.19. ERISA. (a) Schedule 4.19 sets forth: (i) all
"employee benefit plans", as defined in Section 3(3) of ERISA,
and any other employee benefit arrangements or payroll
practices, including, without limitation, severance pay, sick
leave, vacation pay, salary continuation for disability,
consulting or other Compensation agreements, retirement,
deferred compensation, bonus, stock purchase, hospitalization,
medical insurance, life insurance and scholarship programs
(herein referred to as the "Plans") maintained by the Company
and any of its Subsidiaries or to which the Company or any of
its Subsidiaries contributed or is obligated to contribute
thereunder, and (ii) all "employee pension plans", as defined in
Section 3(2) of ERISA (the "Pension Plans"), maintained by the
Company, any of its Subsidiaries or any of its ERISA Affiliates
to which the Company, any of its Subsidiaries or any of its
ERISA Affiliates contributed or is obligated to contribute
thereunder.
(b) The Purchasers will not have (i) any obligation to
make any contribution to any Multiemployer Plan or (ii) any
withdrawal liability from any such Multiemployer Plan under
Section 4201 of ERISA which it would not have had if it had not
purchased the Senior Preferred Stock or the Convertible Notes
from the Company at the Closing in accordance with the terms of
this Agreement.
(c) The Pension Plans intended to be qualified under
Section 401 of the IRC are so qualified and the trusts
maintained pursuant thereto are exempt from federal income
taxation under Section 501 of the IRC, and nothing has occurred
with respect to the operation of the Pension Plans which could
cause the loss of such qualification or exemption or the
imposition of any liability, penalty, or tax under ERISA or the
IRC, except where such loss or liability, penalty, or tax could
not be reasonably expected to exceed $100,000.
(d) All contributions required by law or pursuant to the
terms of the Plans (without regard to any waivers granted under
Section 412 of the IRC) to any funds or trusts established
thereunder or in connection therewith have been made by the due
date thereof (including any valid extension) and no accumulated
funding deficiencies exist in any of the Pension Plans.
(e) There is no "amount of unfunded benefit liabilities"
as defined in Section 4001(a)(18) of ERISA in any of the
respective Pension Plans.
(f) There has been no "reportable event" as that term is
defined in Section 4043 of ERISA and the regulations thereunder
with respect to the Pension Plans which would require the giving
of notice, or any event requiring disclosure under Sections
4041(c)(3)(C), 4063(a) or 4068(f) of ERISA.
(g) There is no material violation of ERISA with respect
to the filing of applicable reports, documents, and notices
regarding the Plans with the Secretary of Labor and the
Secretary of the Treasury or the furnishing of such documents to
the participants or beneficiaries of the Plans.
(h) True, correct and complete copies of the following
documents, with respect to each of the Plans, have been made
available or delivered to The Purchasers by the Company: (A) any
plans and related trust documents, and amendments thereto,
(B) the most recent Forms 5500 (including any schedules thereto)
and the most recent actuarial valuation report, if any, (C) the
last IRS determination letter, (D) summary plan descriptions,
(E) written communications to employees relating to the Plans
and (F) written descriptions of all non-written agreements
relating to the Plans.
(i) There are no pending actions, claims or lawsuits which
have been asserted or instituted against the Plans, the assets
of any of the trusts under such Plans or the Plan sponsor or the
Plan administrator, or against any fiduciary of the Plans with
respect to the operation of such Plans (other than routine
benefit claims), nor does the Company or any of its Subsidiaries
have knowledge of facts which could form the basis for any such
claim or lawsuit.
(j) All amendments and actions required to bring the Plans
into conformity in all material respects with all of the
applicable provisions of ERISA and other applicable laws have
been made or taken except to the extent that such amendments or
actions are not required by law to be made or taken until a date
after the Closing Date.
(k) Except with respect to the filing of Forms 5500 with
respect to the Company's cafeteria plan for the 1995 and 1996
plan years, the Plans have been maintained, in all material
respects, in accordance with their terms and with all provisions
of ERISA (including rules and regulations thereunder) and other
applicable Federal and state law, and neither the Company nor
any of its Subsidiaries or "party in interest" or "disqualified
person" with respect to the Plans has engaged in a non-exempt
"prohibited transaction" within the meaning of Section 4975 of
the IRC or Section 406 of ERISA.
(l) None of the Company, any of its Subsidiaries or any
ERISA Affiliate has terminated any Pension Plan, or incurred any
outstanding liability under Section 4062 of ERISA to the PBGC,
or to a trustee appointed under Section 4042 of ERISA.
(m) None of the Company, any of its Subsidiaries or any
ERISA Affiliate maintains retired life and retired health
insurance plans which are Welfare Plans and which provide for
continuing benefits or coverage for any participant or any
beneficiary of a participant except as may be required under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended (herein referred to as "COBRA") and at the expense of
the participant or the participant's beneficiary. The Company,
all of its Subsidiaries and all ERISA Affiliates which maintains
a Welfare Plan has complied in all material respects with the
notice and continuation requirements of COBRA and the
regulations thereunder.
(n) None of the Company, any of its Subsidiaries or any
ERISA Affiliate has contributed or been obligated to contribute
to a Multiemployer Plan as of the Closing.
(o) None of the Company, any of its Subsidiaries or any
ERISA Affiliate has withdrawn in a complete or partial
withdrawal from any Multiemployer Plan prior to the Closing
Date, nor has any of them incurred any liability due to the
termination or reorganization of a Multiemployer Plan.
(p) None of the Company, any of its Subsidiaries, any
ERISA Affiliate or any organization to which the Company is a
successor or parent corporation, within the meaning of Section
4069(b) of ERISA, has engaged in any transaction, within the
meaning of Section 4069 of ERISA.
4.20. Registration Under Exchange Act; Registration
Rights. Neither the Company nor any of its Subsidiaries has
registered any class of its securities pursuant to Section 12 of
the Exchange Act and no such registration is required by the
Exchange Act. Except as set forth in Schedule 4.20 hereto and
as provided in the Registration Rights Agreement, neither the
Company nor any of its Subsidiaries is under any obligation to
register, under the Securities Act, any of its presently
outstanding securities or any securities which may hereafter be
issued.
4.21. Ordinary Course of Business. Except as set forth
on Schedule 4.7 or in response to the events described therein,
since December 31, 1998, the Company and each of its
Subsidiaries has conducted its operations only in the ordinary
course of business consistent with past practice.
4.22. Insurance. The Company and the Subsidiaries
maintain insurance policies covering all of their respective
assets and properties, and in each case the various occurrences
which may arise in connection with the operation of the business
of the Company and the Subsidiaries. Schedule 4.22 hereto
contains a complete and correct list of all policies of
insurance of any kind or nature covering the Company and its
Subsidiaries, including, without limitation, policies of life,
fire, theft, employee fidelity and other casualty and liability
insurance, indicating the type of coverage, name of insured, the
insurer, the premium, the expiration date of each policy and the
amount of coverage, and such policies are in full force and
effect. Complete and correct copies of each such policy have
been furnished or made available to The Purchasers. Such
policies are in full force and effect, all premiums due thereon
have been paid, and the Company and the Subsidiaries,
respectively, have complied with the provisions of such
policies. Such insurance is of comparable amounts and coverage
as that which companies engaged in similar businesses would
maintain in accordance with good business practice
4.23. Accounts Receivable. To the Company's knowledge,
all accounts receivable of the Company and its Subsidiaries as
shown on the Balance Sheet are collectible in the ordinary
course of business by the Company or such Subsidiary, net of the
reserves for bad debts shown on the Balance Sheet.
4.24. Minute Books. The minute books of the Company,
as previously made available to the Purchasers accurately
reflect all formal corporate action of the stockholders and
Board of Directors of the Company.
4.25. Year 2000 Compliance. Each system, including
systems sold by the Company to third parties, comprised of
software, hardware, databases or embedded control systems
(microprocessor controlled or controlled by any robotic or other
device) (herein referred to, collectively, as a "System") that
constitutes any material part of, or is used in connection with
the use, operation or enjoyment of, any material tangible or
intangible asset or real property of the Company or any of its
Subsidiaries have not been materially adversely affected by the
advent of the year 2000, the advent of the twenty-first century
or the transition from the twentieth century through the year
2000 and into the twenty-first century. The Company has no
reason to believe that it or any of its Subsidiaries may incur
material expenses arising from or relating to the failure of any
of their Systems as a result of the advent of the year 2000, the
advent of the twenty-first century or the transition from the
twentieth century through the year 2000 and into the twenty-
first century. Each System of the Company and its Subsidiaries
is able to accurately process date data, including, but not
limited to, calculating, comparing and sequencing from, into and
between the twentieth century (through year 1999), the year 2000
and the twenty-first century, including leap year calculations.
4.26. Full Disclosure. No information contained in
this Agreement, any other Transaction Document, the Financials
or any written statement furnished by or on behalf of the
Company pursuant to the terms of this Agreement contains any
untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or
therein not misleading in light of the circumstances under which
made.
4.27. Economic Terms. Except as otherwise disclosed in
the Transaction Documents, each Purchaser is acquiring the
Senior Preferred Stock hereunder on the same economic terms; it
being acknowledged that: (i) Xxxxx Xxxxx is acquiring his Senior
Preferred Stock hereunder as described in the proviso set forth
under Section 6.1 hereof and (ii) Xxxxxxxx Partners Inc. is
acquiring its Senior Preferred Stock hereunder in exchange for
services rendered to the Company.
SECTION V
COVENANTS
5.1. Affirmative and Financial Covenants. The Company
covenants and agrees that from and after the Closing (except as
otherwise provided herein, or unless the Required Holders have
given their prior written consent) so long as shares of
Convertible Preferred Stock or the Convertible Notes are
outstanding and represent 10% or more of the shares of Common
Stock into which the Convertible Preferred Stock outstanding at
Closing is convertible (determined prior to a Participation
Event), including in such calculation shares issuable upon
conversion of the Convertible Notes:
(a) Books and Records. The Company shall, and shall cause
its Subsidiaries to, keep adequate records and books of account
with respect to their business activities, in which proper
entries, reflecting all of their financial transactions, are
made in accordance with GAAP.
(b) Financial and Business Information.
(i) Monthly Information. Commencing with the month
ending February 29, 2000, the Company will deliver to each
Person that, together with their Affiliates, hold at least
100,000 shares (appropriately adjusted for stock splits,
combinations, recapitalizations and similar transactions)
of Convertible Preferred Stock (for such purpose, treating
as outstanding all shares of Senior Preferred Stock
issuable upon conversion of the Convertible Note), and to
the holder of the ERS Convertible Note (herein referred to
as "Major Holders") as soon as practicable after the end of
each month: (A) an unaudited consolidated balance sheet of
the Company and its Subsidiaries, if any, at the end of
such month; (B) unaudited consolidated statements of
income, retained earnings and cash flows of the Company and
its Subsidiaries, if any, for such month and for the
portion of such year ending with such month; (C) a backlog
report indicating customer names, unit volume, unit pricing
and expected delivery dates for firm orders.
(ii) Quarterly Information. The Company will deliver
to each Major Holder, and to the holder of the ERS
Convertible Note, as soon as practicable after the end of
each of the first three quarterly fiscal periods in each
Fiscal Year of the Company, (A) an unaudited consolidated
balance sheet of the Company and its Subsidiaries, if any,
as at the end of such quarter, and (B) unaudited
consolidated statements of income, retained earnings and
cash flows of the Company and its Subsidiaries, if any, for
such quarter and (in the case of the second and third
quarters) for the portion of the Fiscal Year ending with
such quarter, setting forth in comparative form in each
case the projected consolidated figures for such period and
the actual consolidated figures for the comparable period
of the prior Fiscal Year. Such statements shall be
(1) prepared in accordance with GAAP consistently applied,
(2) in reasonable detail and (3) certified by the principal
financial or accounting officer of the Company.
(iii) Annual Information. The Company will
deliver to each Major Holder, and the holder of the ERS
Convertible Note, as soon as practicable after the end of
each Fiscal Year of the Company, (A) an audited
consolidated balance sheet of the Company and its
Subsidiaries, if any, as at the end of such year, and
(B) audited consolidated statements of income, retained
earnings and cash flows of the Company and its
Subsidiaries, if any, for such year; setting forth in each
case in comparative form the figures for the previous year.
Such statements shall be (1) prepared in accordance with
GAAP consistently applied, (2) in reasonable detail and
(3) certified by PriceWaterhouseCoopers LLP or such other
firm of independent certified public accountants of
recognized national standing selected by the Company and
reasonably acceptable to the Required Holders.
(iv) Filings. The Company will deliver to each Major
Holder, and to the holder of the ERS Convertible Note,
promptly upon their becoming available, one copy of each
report, notice or proxy statement sent by the Company to
its stockholders generally, and of each regular or periodic
report (pursuant to the Exchange Act) and any registration
statement, prospectus or other writing (other than
transmittal letters) (including, without limitation, by
electronic means) pursuant to the Securities Act filed by
the Company with (i) the SEC or (ii) any securities
exchange on which shares of Common Stock of the Company are
listed.
(v) Projections. The Company will deliver to each
Major Holder and the holder of the ERS Convertible Note as
soon as practicable prior to the beginning of each Fiscal
Year:
(A) projected consolidated balance sheets of the
Company and its Subsidiaries, if any, for
such Fiscal Year, on a monthly basis;
(B) projected consolidated cash flow statements
of the Company and its Subsidiaries, if any,
including summary details of cash
disbursements (including for Capital
Expenditures), for such Fiscal Year, on a
monthly basis; and
(C) projected consolidated income statements of
the Company and its Subsidiaries, if any,
for such Fiscal Year, on a monthly basis.
(vii) Board Materials. The Company will deliver
to each Major Holder and the holder of the ERS Convertible
Note as soon as practicable after each regular meeting of
the Board of Directors copies of any written materials and
distributed to the Board of Directors at such meetings.
(c) Tax Compliance. The Company shall pay all transfer,
excise or similar taxes (not including income or franchise
taxes) in connection with the issuance, sale, delivery or
transfer by the Company to the Purchasers of the Convertible
Notes, the Senior Preferred Stock, and the securities issuable
upon conversion thereof, and shall indemnify and save each
Purchaser and the holder of the Convertible Notes harmless
without limitation as to time against any and all liabilities
with respect to such taxes. The Company shall not be responsible
for any taxes in connection with the transfer of the Senior
Preferred Stock, the Convertible Notes or such securities by the
holder thereof. The obligations of the Company under this
Section 5.1(c) shall survive the payment, prepayment or
redemption of the Senior Preferred Stock or the Convertible
Notes and the termination of this Agreement.
(d) Insurance. The Company shall and shall cause each
Subsidiary of the Company to maintain insurance covering,
without limitation, fire, theft, burglary, public liability,
property damage, product liability, workers' compensation,
directors' and officers' insurance and insurance on all property
and assets material to the operation of the business, all in
amounts customary for the industry. The Company shall, and
shall cause each of its Subsidiaries to, pay all insurance
premiums payable by them on a timely basis.
(e) Employee Plans. (i) With respect to other than a
Multiemployer Plan, for each Plan and Pension Plan intended to
be qualified under Section 401(a) of the IRC hereafter adopted
or maintained by the Company, any of its Subsidiaries or any
ERISA Affiliate, the Company shall (A) seek, or cause its
Subsidiaries or ERISA Affiliates to seek, and receive
determination letters from the IRS to the effect that such Plan
or Pension Plan is qualified within the meaning of Section
401(a) of the IRC; and (B) from and after the adoption of any
such Plan or Pension Plan, cause such plan to be qualified
within the meaning of Section 401(a) of the IRC and to be
administered in all material respects in accordance with the
requirements of ERISA and Section 401(a) of the IRC.
(ii) With respect to each Welfare Plan hereafter
adopted or maintained by the Company, any of its Subsidiaries or
any ERISA Affiliate, to the extent applicable, the Company shall
comply, or cause its Subsidiaries or ERISA Affiliates to comply,
in all material respects with the notice and continuation
coverage requirements of Section 4980B of the IRC and the
regulations thereunder.
(iii) The Company shall not, directly or
indirectly, and shall not permit its Subsidiaries or any ERISA
Affiliate to directly or indirectly by reason of an amendment or
amendments to, or the adoption of, one or more Pension Plans,
permit the present value of all benefit liabilities, as defined
in Title IV of ERISA, to exceed the fair market value of assets
allocable to such benefits, or to increase to the extent
security must be provided to any Pension Plan under Section
401(a)(29) of the IRC in a manner which would have a Material
Adverse Effect. The Company shall not directly or indirectly,
and shall not permit its Subsidiaries or any ERISA Affiliate to
(a) satisfy any liability under any Pension Plan by purchasing
annuities from an insurance company or (b) invest the assets of
any Pension Plan with an insurance company, unless, in each
case, such insurance company is rated AA or better by Standard &
Poor's Corporation and the equivalent by each other nationally
recognized rating agency at the time of the investment.
(f) Compliance with Law. The Company shall, and shall
cause each of its Subsidiaries to, comply with all laws,
including Environmental Laws, applicable to it, except where the
failure to comply would not be reasonably likely to result in a
Material Adverse Effect.
(g) Maintenance of Existence and Conduct of Business. The
Company shall, and shall cause each of its Subsidiaries to:
(i) do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence, and its
rights and franchises (except for Subsidiaries liquidated,
dissolved, merged or consolidated pursuant to action approved by
the Company's Board of Directors); (ii) at all times maintain,
preserve and protect all of its patents, trademarks and trade
names, and preserve all the remainder of its material assets, in
use or useful in the conduct of its business and keep the same
in good repair, working order and condition (taking into
consideration ordinary wear and tear) and from time to time
make, or cause to be made, all needful and proper repairs,
renewals and replacements, betterments and improvements thereto
consistent with industry practices, in each case except as would
not have a Material Adverse Effect; and (iii) continue to
conduct only the business that the Company is engaged in on the
date hereof or businesses related, ancillary or complementary
thereto, or using any technology or other asset developed by the
Company or any Subsidiary.
(h) Access. The Company shall permit representatives of
Major Holders to visit and inspect any of the properties of the
Company and its Subsidiaries, to examine the corporate books and
make copies or extracts therefrom and to discuss the affairs,
finances and accounts of the Company and its Subsidiaries with
the principal officers of the Company, all at such reasonable
times, upon reasonable notice and as often as any such Major
Holder may reasonably request, subject, where applicable to the
provisions of Section 5.1(k) hereof.
(i) Exchange of Stock Certificates. The Company will, at
its expense, promptly upon surrender of any certificates
representing shares of Convertible Preferred Stock at the office
of the Company referred to in, or designated pursuant to,
Section 9.1 hereof, execute and deliver to any holder so
surrendering such certificates a new certificate or certificates
in denominations specified by such holder for an aggregate
number of shares of Convertible Preferred Stock equal to the
number of shares of such stock represented by the certificates
surrendered.
(j) Lost, Stolen, Destroyed or Mutilated Stock
Certificates or Note. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or
mutilation of any certificate for shares of Convertible
Preferred Stock and, in the case of loss, theft or destruction,
upon delivery of an indemnity reasonably satisfactory to the
Company (which may be an undertaking by a holder to so indemnify
the Company), or, in the case of mutilation, upon surrender and
cancellation thereof, the Company will issue a new certificate
of like tenor for a number of shares of Convertible Preferred
Stock equal to the number of shares of such stock represented by
the certificate lost, stolen, destroyed or mutilated.
(k) Confidential Information. All financial and business
information specifically designated by the Company as
"confidential" shall be treated as such and shall not be
disclosed to any Person without the prior written consent of the
Company or pursuant to any other agreement with the Company,
except as may be required by law and to potential transferees of
the Company's Stock, provided that such potential transferees
shall agree to be bound by this confidentiality provision, and
provided that each of ERS and GE Capital Equity Investments Inc.
shall be permitted to make any and all disclosures which it or
its counsel deems necessary or appropriate under applicable
federal or state securities laws.
5.2 Additional Affirmative Covenants. The Company
covenants and agrees that from and after the Closing (unless ERS
shall have given its prior written consent) so long as ERS or
any Affiliate thereof holds the ERS Convertible Note, or any
Stock of the Company, the Company will promptly provide to ERS
all information, data, financial statements (audited or
otherwise) and consents requested by ERS to permit timely
compliance by ERS with any and all federal securities laws,
including, without limitation, the rules and regulations of the
SEC, as a result of its interest in the Company.
5.3. Negative Covenants. The Company covenants and
agrees that from and after the Closing (except as otherwise
provided herein, or unless the Required Holders have given their
prior written consent) so long as Convertible Preferred Stock or
the Convertible Notes are outstanding and represent 10% or more
of the shares of Common Stock into which the Convertible
Preferred Stock outstanding at Closing is convertible
(determined prior to a Participation Event), including in such
calculation shares issuable upon conversion of the Convertible
Notes:
(a) Permitted Acquisitions or Investments. The
Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly in any transaction or related series
of transactions, acquire or invest in, whether for cash, debt,
Stock, or other property or assets or by guaranty of any
obligation, any assets or business of any other Person other
than (i) acquisitions of or investments in assets in the
ordinary course of business of the Company or any Subsidiary;
(ii) acquisitions by the Company or Subsidiaries of the Company
from the Company or any such Subsidiary (or any Person that
would become a Subsidiary as a result thereof) or investments
therein; or (iii) acquisitions and investments by the Company or
any Subsidiary that are considered by the Board of Directors of
the Company (herein referred to as the "Board of Directors") or
by the manager (herein referred to as the "Manager") pursuant to
the Management Agreement to be strategic in nature.
(b) Sales of Assets; Liquidation. The Company shall
not, and shall not permit any Subsidiary of the Company to:
(i) sell, transfer, convey or otherwise dispose of any assets or
properties which in any single transaction or series of related
transactions is in an aggregate amount exceeding $100,000,
unless approved by the Board of Directors, or by the Manager
with notice thereof to the Board of Directors, or
(ii) liquidate, dissolve or wind up the Company, or any of its
Subsidiaries, except for transfers to the Company or another
Subsidiary, whether voluntary or involuntary; provided, however,
that the foregoing shall not prohibit (i) the sale of inventory
in the ordinary course of business, (ii) the sale of surplus or
obsolete equipment and fixtures, (iii) the sale of LRM,
(iv) transfers resulting from any casualty or condemnation of
assets or properties.
(c) Agreements. The Company shall not and shall not
permit any Subsidiary of the Company to take or omit to take any
action, which act or omission would constitute a default or an
event of default under any agreement, document or instrument to
which it is a party: (A) involving the failure to make any
payment (whether of principal, interest or otherwise) due
(whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) in respect of any
Indebtedness of the type described in clauses (i), (ii) or (iii)
of the definition of "Indebtedness" of the Company, which
Indebtedness is in an aggregate amount exceeding $100,000,
unless such default or event of default would not have a
Material Adverse Effect, or (B) causing (or permitting any
holder of such Indebtedness or a trustee to cause) such
Indebtedness or a portion thereof in an aggregate amount
exceeding $100,000, to become due prior to its stated maturity
or prior to its regularly scheduled dates of payment, unless
such acceleration would not have a Material Adverse Effect.
(d) Employee Loans. The Company shall not and shall
not permit any Subsidiary of the Company to make or accrue any
loans or other advances of money to any employee of the Company
or such Subsidiary, other than in the ordinary course of
business in an aggregate amount outstanding not to exceed
$50,000 at any one time, unless approved by the Board of
Directors or by the Manager (except for employees who are or
were also employees of the Manager as to whom approval by a
majority of the directors not constituting employees, officers,
directors or principal stockholders of the Manager shall be
required).
(e) Capital Stock. The Company shall not issue any
additional shares of Convertible Preferred Stock other than as
dividends thereon, or pursuant to conversion of the Convertible
Notes.
(f) Senior Stock. The Company shall not authorize or
issue any Stock senior to or pari passu with the Convertible
Preferred Stock or convertible into or exchangeable for such
senior or pari passu Stock.
(g) Transactions with Affiliates. The Company shall
not and shall not permit any Subsidiary of the Company to enter
into or be a party to any transaction with any Affiliate of the
Company or such Subsidiary, or with any Director or Affiliate of
any Director, except (i) transactions expressly contemplated or
permitted hereby, (ii) transactions in the ordinary course of
and pursuant to the reasonable requirements of the Company's or
such Subsidiary's business and upon fair and reasonable terms
that are fully disclosed to the Board of Directors and are no
less favorable to the Company or such Subsidiary than would be
obtained in a comparable arm's-length transaction with a Person
not an Affiliate of the Company or such Subsidiary,
(iii) transactions between the Company and its Subsidiaries or
between such Subsidiaries (iv) payment of Compensation to
employees and fees to Directors who are not employees of a Major
Holder or Affiliates of a Major Holder and (v) in connection
with the Management Agreement.
(h) Indebtedness. The Company shall not and shall
not permit any Subsidiary of the Company to incur or suffer to
exist any Indebtedness except: (i) Indebtedness existing on the
date hereof and listed on Schedule 4.9; (ii) the Convertible
Notes and all obligations thereunder; (iii) Permitted
Indebtedness; (iv) other Indebtedness pursuant to a working
capital line of credit approved by the Board of Directors and
the Manager; or (v) Indebtedness owing by the Company to any of
its Subsidiaries or by any of the Company's Subsidiaries to any
other Subsidiary or the Company.
(i) Restricted Payments. The Company shall not and
shall not permit any Subsidiary of the Company to make any
Restricted Payments nor shall the Company permit any Subsidiary
to make such payments with respect to the Company's Stock;
provided, however, that the Company may (a) declare and pay
in-kind dividends on the Convertible Preferred Stock, (b) redeem
the Convertible Preferred Stock in accordance with their
respective terms and (c) fulfill all obligations under the
Convertible Notes in accordance with their respective terms.
(j) Mergers and Subsidiaries. Neither the Company
nor any Subsidiaries of the Company shall directly or
indirectly, by operation of law or otherwise, merge with,
consolidate with, or otherwise combine with any Person, other
than (i) mergers of Subsidiaries of the Company into the
Company or any other Subsidiaries and (ii) mergers in connection
with any transaction permitted by Section 5.3(a) hereof.
(k) Management Compensation. Without the approval of
the Company's Board of Directors and the Manager, and without
limiting any provision of the Management Agreement, the Company
shall not and shall not permit any Subsidiary of the Company to,
increase the salary and bonus it pays to any employee of the
Company or its Subsidiaries if such employee's total annual
Compensation exceeds $150,000.
(l) Amendments to Certificate of Incorporation and
By-Laws. The Company shall not authorize, adopt or approve an
amendment to the certificate of incorporation of the Company or
the By-Laws of the Company in any manner adverse to the holders
of the Convertible Preferred Stock or the Convertible Notes.
5.4. Additional Negative Covenants. (a)The Company hereby
agrees that from and after the Closing (unless the holders of
66.67% of the outstanding shares of Series B Preferred Stock
shall have given their prior written consent), so long as at
least 10% of the shares of Series B Preferred Stock are
outstanding, the Company shall make all payments of principal of
and interest on the Convertible Notes in the form of shares of
Senior Preferred Stock (and not in cash).
(b) The Company covenants and agrees that, from and after
the Closing and until a Participation Event shall have occurred,
so long as Convertible Preferred Stock or the Convertible Notes
are outstanding and represent 10% or more of the shares of
Common Stock into which the Convertible Preferred Stock
outstanding at Closing is convertible (determined prior to a
Participation Event), including in such calculation shares
issuable upon conversion of the Convertible Notes, the Company
will not agree to any amendment to the Management Agreement not
customary for agreements of this type unless the Required
Holders shall have given their prior written consent (which
shall not be unreasonably withheld or delayed).
SECTION VI
CONDITIONS PRECEDENT
6.1. Conditions Precedent. The obligation of each
Purchaser to purchase the Senior Preferred Stock pursuant to
Section 2.1 hereof, and of ERS and AG to purchase the
Convertible Notes, respectively, pursuant to Section 2.2 hereof,
is subject to the condition that such Purchaser and ERS shall
have received, on the Closing Date, the following, each dated
the Closing Date unless otherwise indicated, in form and
substance reasonably satisfactory to the Purchasers who would
constitute the Required Holders upon consummation of the
Closing:
(a) The favorable opinion of Powell, Goldstein, Xxxxxx &
Xxxxxx LLP, counsel to the Company, substantially in the form
attached hereto as Exhibit H, it being understood that to the
extent that such opinion of counsel to the Company shall rely
upon any other opinion of counsel, each such other opinion shall
be in form and substance reasonably satisfactory to the
Purchasers who would constitute the Required Holders upon
consummation of the Company and shall provide that the
Purchasers and the holders of the Convertible Notes may rely
thereon.
(b) Resolutions of the Board of Directors, certified by
the Secretary or Assistant Secretary of the Company, as of the
Closing Date, to be duly adopted and in full force and effect on
such date, authorizing (i) the consummation of each of the
transactions contemplated by this Agreement and (ii) specific
officers to execute and deliver this Agreement and each other
Transaction Document to which it is a party.
(c) Governmental certificates, dated the most recent
practicable date prior to the Closing Date, with telegram
updates where available, showing that the Company is organized
and in good standing in the jurisdiction of its organization and
is qualified as a foreign corporation and in good standing in
all other jurisdictions in which it is qualified to transact
business.
(d) True and correct copies, certified by the Secretary or
Assistant Secretary of the Company, of the document evidencing
the terms of the Senior Preferred Stock, which shall contain the
terms set forth in Exhibit B attached hereto, as filed with the
Secretary of State of the State of Delaware.
(e) True and correct copies, certified by the Secretary or
Assistant Secretary of the Company, of the document evidencing
the terms of the Series B Preferred Stock, as amended, which
shall contain the terms set forth hereto, as filed with the
Secretary of State of the State of Delaware (together with the
Amended and Restated Certificate of Incorporation).
(f) A copy of the Company's Amended and Restated
Certificate of Incorporation, which shall contain the terms set
forth in Exhibit C attached hereto, as filed with the Secretary
of State of the State of Delaware, and copies of the Company's
by-laws, certified by the Secretary or Assistant Secretary of
the Company as true and correct as of the Closing Date.
(g) The Registration Rights Agreement, the Securityholders
Agreement and the Management Agreement (together with each
warrant certificate to be delivered to ERS pursuant to the
Management Agreement) duly executed by the parties thereto.
(h) Certificates of the Secretary or an Assistant
Secretary of the Company, dated the Closing Date, as to the
incumbency and signatures of the officers of the Company
executing this Agreement, the Senior Preferred Stock, each other
Transaction Document to which it is a party and any other
certificate or other document to be delivered pursuant hereto or
thereto, together with evidence of the incumbency of such
Secretary or Assistant Secretary.
(i) Certificate of the President or a Vice President of
the Company, dated the Closing Date, stating that all of the
representations and warranties of the Company contained herein
or in the other Transaction Documents are true and correct in
all material respects on and as of the Closing Date as if made
on such date and that to his knowledge, after due inquiry, no
breach of any covenant contained in Article V has occurred or
would result from the Closing hereunder.
(j) All third party or other consents or waivers required
to consummate the transactions contemplated by this Agreement
and the other Transaction Documents.
(k) All Purchasers shall contemporaneously have acquired
their Senior Preferred Stock and Convertible Notes hereunder;
provided, however, that, notwithstanding paragraph (k) of this
Section 6.1 or any other provision contained in this Agreement
or the other Transaction Documents: (i) none of the shares of
Senior Preferred Stock allocated to Xxxxx Xxxxx under this
Agreement shall be issued and delivered to him until his
execution and delivery of this Agreement and the other
Transaction Documents contemplated to be executed and delivered
by him, it being acknowledged and agreed that the Company
(acting upon authorization of its Board of Directors) may, at
one or more instances deemed appropriate by the Company, issue
and deliver to him up to the number of shares allocated to him
hereunder in connection with his execution and delivery as
aforesaid and/or in respect of settlement of the matters set
forth under item 1 of Schedule 4.14 in form and substance
satisfactory to the Company (as determined by its Board of
Directors); (ii) 3,369 shares of the aggregate of 13,477 shares
of Senior Preferred Stock allocated to Xxxxxxxx Partners Inc.
under this Agreement shall not be issued or delivered to them
until performance of additional services in such manner as shall
be satisfactory to the Company; and (iii) this Agreement and the
other Transaction Documents shall be binding upon all parties
hereto notwithstanding the absence of any execution and delivery
of this Agreement or any other Transaction Document by Xx. Xxxxx
or of any issuance and delivery of shares as aforesaid. Any
representation or warranty of the Company hereunder or under any
other Transaction Document shall be deemed modified to reflect
the foregoing.
6.2 Additional Conditions. The obligation of ERS to
purchase the Senior Preferred Stock pursuant to Section 2.1
hereof and the ERS Convertible Note pursuant to Section 2.2
hereof is subject to the additional condition precedent that it
receive, prior to Closing, any and all information, data,
financial statements (audited or otherwise) and consents
requested by ERS to permit compliance by ERS with any and all
federal securities laws, including, without limitation, the
rules and regulations of the SEC, as a result of the
consummation at Closing of the transactions contemplated
hereunder.
SECTION VII
SECURITIES LAW MATTERS
7.1. Legends. Each certificate representing the
Senior Preferred Stock shall bear a legend substantially in the
following form:
"THE SERIES C CONVERTIBLE PREFERRED STOCK
REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED
BY THE HOLDER FOR ITS OWN ACCOUNT, FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO THE DISTRIBUTION
OF SUCH CONVERTIBLE PREFERRED STOCK. THE SHARES
OF SERIES C CONVERTIBLE PREFERRED STOCK HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
(THE "ACT") AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN
EXEMPTION THEREFROM."
SECTION VIII
INDEMNIFICATION
The Company agrees to indemnify and hold harmless each
Purchaser, each holder of the Convertible Notes and its
Affiliates and their respective officers, directors and
employees from and against any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs,
attorneys' fees, expenses and disbursements of any kind which
may be imposed upon, incurred by or asserted against such
Purchaser, each holder of such Convertible Notes or such other
indemnified Persons in any manner relating to or arising out of
any untrue representation, breach of warranty or failure to
perform any covenants or agreement by the Company contained
herein or in any certificate or document delivered pursuant
hereto or arising out of any Environmental Law applicable to the
Company or its Subsidiaries or otherwise relating to or arising
out of the transactions contemplated hereby, other than losses
relating strictly to market risk.
SECTION IX
MISCELLANEOUS
9.1. Notices. Whenever it is provided herein that any
notice, demand, request, consent, approval, declaration or other
communication shall or may be given to or served upon any of the
parties by another, or whenever any of the parties desires to
give or serve upon another any such communication with respect
to this Agreement, each such notice, demand, request, consent,
approval, declaration or other communication shall be in writing
and either shall be delivered in person with receipt
acknowledged or by registered or certified mail, return receipt
requested, postage prepaid, or by telecopy and confirmed by
telecopy answerback addressed as follows:
If to the Company:
NewCheck Corporation
0000 Xxxxxxxxxx Xxx, Xxxxx 00
Xxxxxxxxxxxx, Xxxxxxx 00000
Attn: Chief Executive Officer
Telecopy Number: (000) 000-0000
with a courtesy copy to:
Powell, Goldstein, Xxxxxx & Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxx X. Xxxxx, Esq.
Telecopy Number: (000) 000-0000
If to ERS:
Electronic Retailing Systems International, Inc.
000 Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Attn: Xxxxx X. Failing, Jr.
Telecopy Number: (203) 849-261
with courtesy copies to:
Krugman & Kailes LLP
Park 00 Xxxx - Xxxxx Xxx
Xxxxxx Xxxxx, Xxx Xxxxxx 00000
Attn: Xxxxxx Xxxxxx, Esq.
Telecopy Number: (000) 000-0000
If to any other Purchaser, to such Purchaser's address as
set forth on Schedule 9.1 hereto, or at such other address as
may be substituted by notice given as herein provided. The
giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice,
demand, request, consent, approval, declaration or other
communication hereunder shall be deemed to have been duly given
or served on the date on which personally delivered, with
receipt acknowledged, telecopied and confirmed by telecopy
answerback, or three (3) Business Days after the same shall have
been deposited with the United States mail.
9.2. Binding Effect; Benefits. Except as otherwise
provided herein, 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 give 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 the
holders of the Series B Preferred Stock (whether or not
constituting Purchasers) shall be entitled to the benefits of
Sections 5.1, 5.3 and 5.4 hereof as if parties hereto.
9.3. Complete Agreement. (a) This Agreement
constitutes the complete understanding of the parties with
respect to its subject matter and supersedes any other agreement
or understanding relating thereto, including, without
limitation, any commitment letter or memorandum of terms with
respect to the transactions contemplated hereby. Without
limiting the generality of the foregoing: (x) this Agreement
amends, restates and supersedes all provisions of the 1998
Purchase Agreement contained under Sections IV and V, which
shall have no continuing effect subsequent to Closing; and (y)
any and all commitments delivered to the Company in connection
with the 1999 Securities shall be terminated and of no further
effect subsequent to Closing.
(b) No amendment or waiver of any provision of this
Agreement nor consent to any departure by the Company therefrom,
shall in any event be effective unless the same shall be in
writing and signed by the Company and the Required Holders
(provided, however, that any amendment or waiver of any
provision of Section 5.3(e) and any consent to any departure by
the Company therefrom shall further not be effective unless in
writing and signed by each Person who [together with its
Affiliates] holds at least 7% of the total number of shares of
Common Stock into which the Convertible Preferred Stock that has
been issued is convertible [determined prior to a Participation
Event] or has been converted, including in such calculation
shares issuable or issued upon conversion of the Convertible
Notes and excluding in such calculation shares issuable upon
conversion of Convertible Preferred Stock acquired by the
Company), and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for
which given. 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 taking such action, of compliance with any
representations, warranties, covenants or agreements contained
herein. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as
a waiver of any preceding or succeeding breach and no failure by
either party to exercise any right or privilege hereunder shall
be deemed a waiver of such party's rights or privileges
hereunder or shall be deemed a waiver of such party's rights to
exercise the same at any subsequent time or times hereunder. In
connection with the foregoing, each Purchaser hereby agrees that
it shall promptly notify the Company in the event any Affiliate
of such Purchaser holds, beneficially or of record, any Stock of
the Company.
9.4 Consents; Further Action. Each Purchaser and the
Company hereby expressly consents to the consummation of the
transactions contemplated by this Agreement and the other
Transaction Documents notwithstanding any provision to the
contrary contained in the 1994 Rights Agreement, the 1998
Purchase Agreement, the Original Securityholders Agreement, the
1998 Registration Rights Agreement or any other agreement,
instrument or document, and agrees that such transactions shall
not constitute a breach or default or event of default
thereunder, nor activate or give rise to any rights thereunder
(including, without limitation, any rights-of-first offer, any
tag-along rights or any redemption rights). Without limiting the
generality of the foregoing, the parties expressly agree that:
(i) any adjustment to the terms of the Series B Preferred Stock,
and any rights with respect thereto, not heretofore effectuated
and not set forth in the Series B Terms, Preferences, Rights and
Limitations are hereby permanently waived and extinguished and
(ii) any adjustments to the terms of the Series A Preferred
Stock or the Series B Preferred Stock arising from or related to
the issuance of any Stock of the Company, or the Convertible
Notes, pursuant to the Transaction Documents, and the conversion
or exercise of any such securities (or any other securities
issued or issuable upon conversion or exercise thereof), and any
and all rights to acquire securities under the Original
Securityholders Agreement, the Securityholders Agreement or
otherwise, are hereby permanently waived. Each Purchaser shall
take such further action, and execute such additional consents,
documents and instruments, reasonably requested by the Company
or the Manager in order to effectuate the provisions of this
Agreement and the other Transaction Documents and the
transactions contemplated hereby and thereby.
9.5. Successors and Assigns; Assignability. Neither
this Agreement nor any right, remedy, obligation or liability
arising hereunder or by reason hereof shall be assignable by the
Company without the prior written consent of the Required
Holders. Any right, remedy, obligation or liability arising
hereunder or by reason hereof shall be assignable by the
Purchasers or ERS or AG without the prior written consent of the
Company, except the obligation of the Purchasers to purchase the
Senior Preferred Stock, of ERS to purchase the ERS Convertible
Note and of AG to purchase the AG Convertible Note, at Closing.
All covenants contained herein shall bind and inure to the
benefit of the parties hereto and their respective successors
and assigns.
9.6. Remedies. Each Purchaser, in addition to being
entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of
its rights under this Agreement. The Company agrees that
monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this
Agreement and hereby agrees to waive the defense in any action
for specific performance that a remedy at law would be adequate.
In any action or proceeding brought to enforce any provision of
this Agreement or where any provision hereof is validly asserted
as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees in addition to any other available
remedy.
9.7. 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.
9.8. Severability. In the event that any one or more
of the provisions contained in this Agreement shall be
determined to be invalid, illegal or unenforceable in any
respect for any reason, the validity, legality and
enforceability of any such provision or provisions in every
other respect and the remaining provisions of this Agreement
shall not be in any way impaired.
9.9. Counterparts. This Agreement may be executed in
any 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.
9.10. Publicity. None of the Purchasers, ERS nor the
Company shall issue any press release or make any public
disclosure regarding the transactions contemplated hereby unless
such press release or public disclosure is approved by those
parties mentioned in such press release or public disclosure in
advance; it being agreed that any such approval on behalf of the
Company may be provided by the Manager. Notwithstanding the
foregoing, each of the parties hereto may, in documents required
to be filed by it with the SEC or other regulatory bodies, make
such statements with respect to the transactions contemplated
hereby as each may be advised by counsel is legally necessary or
advisable, and may make such disclosure as it is advised by its
counsel is required by law.
9.11 Non-Solicitation. Until the consummation of the
Closing, neither the Company nor any of the Purchasers will,
directly or indirectly, initiate, solicit or encourage
discussions, inquiries or proposals, or participate in any
negotiation or discussion, for the purpose or with the intention
of leading to any proposal inconsistent with the consummation of
the transactions contemplated hereunder, or any sale of all or
substantially all of the assets or Stock of the Company, or any
consolidation, merger or other business combination involving
the Company.
9.12. Governing Law; Jury Waiver. This Agreement shall be
governed by, construed and enforced in accordance with, the laws
of the State of New York without regard to the principles
thereof relating to conflict of laws. Each of the parties
hereby submits to personal jurisdiction and waives any objection
as to venue in the County of New York, State of New York. The
parties hereto waive all right to trial by jury in any action or
proceeding to enforce or defend any rights under this Agreement.
9.13. Consent Fees. Any fees or other consideration given
to any Purchaser or to the holder of any Convertible Note to
obtain his or its consent or waiver under or with respect to
this Agreement shall be given pro rata to the consenting parties
(based on the number of shares Common Stock into which their
Convertible Preferred Stock outstanding is convertible
(determined prior to a Participation Event, including in such
calculation shares issuable upon conversion of the Convertible
Notes (if the holder so consents).
IN WITNESS WHEREOF, the Company and each Purchaser has
executed this Agreement as of the day and year first above
written.
NEWCHECK CORPORATION
By: s/Xxxxxx X. Xxxxxx, Xx.
----------------------------------
Name: Xxxxxx X. Xxxxxx, Xx.
Title: President and Chief Executive
Officer
PURCHASERS:
ELECTRONIC RETAILING SYSTEMS INTERNATIONAL
INC.
By: s/Xxxxx X. Failing, Jr.
------------------------------------
Name: Xxxxx X. Failing, Jr.
Title: Vice Chairman and Chief
Executive Officer
GE CAPITAL EQUITY INVESTMENTS, INC.
By: s/Xxxxx X. Xxxxx
-------------------------------------
Name: Xxxxx X. Xxxxx
Title: Senior Vice President
CANAAN CAPITAL LIMITED PARTNERSHIP
By: Canaan Capital Management L.P., Its
General Partner
By: Canaan Capital Partners L.P., Its
General Partner
By: s/Xxxxx Xxxx
------------------------------------
General Partner
CANAAN CAPITAL OFFSHORE LIMITED
PARTNERSHIP C.V.
By: Canaan Capital Management, L.P., Its
General Partner
By: Canaan Capital Partners L.P., Its
General Partner
By: s/Xxxxx Xxxx
------------------------------------
General Partner
PEC ISRAEL ECONOMIC CORPORATION
By: s/Xxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
DISCOUNT INVESTMENT CORPORATION, LTD.
By: s/Dr. Yoram Turbowicz
s/Xxxxxx Xxxxx
------------------------------------
Name: Xx. Xxxxxx Turbowicz
Title: Chief Executive Officer
Name: Xxxxxx Xxxxx
Title: Assistant to President
s/Xxxxx X. Failing
----------------------------------------
XXXXX X. FAILING
s/Xxxxx Xxxxxxxx
----------------------------------------
XXXXX XXXXXXXX
s/Xxxxxxx X. Xxxxxxx
----------------------------------------
XXXXXXX X. XXXXXXX
s/Xxxxxxx Xxxxxxxxxx
----------------------------------------
XXXXXXX XXXXXXXXXX
s/Xxxxx Xxxxx
----------------------------------------
XXXXX XXXXX
s/Xxxxxx XxXxxx
----------------------------------------
XXXXXX XXXXXX
s/Xxxxxxx Xxx
----------------------------------------
XXXXXXX XXX
s/Xxxx Xxxxxxxxx
----------------------------------------
XXXX XXXXXXXXX
s/Xxxxx Xxxxxxx
----------------------------------------
XXXXX XXXXXXX
XXXXX STREET ASSOCIATES, LLC
By: s/Xxxxx Xxxx
----------------------------------
Name: Xxxxx Xxxx
title: Member/Manager
AG CHECKOUT LLC
By: s/Xxxxxx Brain
-----------------------------------
Name: Xxxxxx Brain
Title: Vice President
XXXXXXXX PARTNERS, LLC
By s/Xxxxx X. Xxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
s/Xxxxxx X. Xxxxxxx
---------------------------------------
XXXXXX X. XXXXXXX
XXXXX CORPORATION
By: s/Xxxxxxx Xxxxxxxx
-----------------------------------
Name: Xxxxxxx Xxxxxxxx
Title: President
TRUST UNDER PARAGRAPH II OF ARTICLE
FIRST OF THE FAILING TRUST U/A/D 7/31/90
F/B/O XXXXX X. FAILING, III
By: s/Xxxxx X. Failing
------------------------------------
XXXXX X. FAILING
TRUST UNDER PARAGRAPH II OF ARTICLE
FIRST OF THE FAILING TRUST U/A/D 7/31/90
F/B/O LINDSAY FAILING
By: s/Xxxxx X. Failing
------------------------------------
XXXXX X. FAILING
BNY CAPITAL MARKETS, INC.
By: s/Xxxxxx Xxxxxxxx
-----------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Managing Director
EXHIBIT A-1
NEITHER THIS NOTE, NOR THE SHARES ISSUABLE UPON CONVERSION
OF THIS NOTE, HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED
IN VIOLATION OF SUCH ACT
NEWCHECK CORPORATION
d/b/a Productivity Solutions, Inc.
8% CONVERTIBLE NOTE
$4,550,000 February 11, 2000
SECTION 1. General. NEWCHECK CORPORATION d/b/a Productivity
Solutions, Inc., a Delaware corporation (hereinafter referred to
as the "Company"), with offices at 0000 Xxxxxxxxxx Xxx, Xxxxx 00,
Xxxxxxxxxxxx, Xxxxxxx 00000, for value received, hereby promises
to pay to ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC., a
Delaware corporation (hereinafter referred to as "ERS"), with
offices at 000 Xxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxxx 00000, or
order, the principal amount of $4,550,000 (Four Million Five
Hundred Fifty Thousand Dollars), the entire principal balance of
which shall be due and payable on the fifth anniversary of the
date hereof (hereinafter referred to as the "Maturity Date"), in
such coin or currency of the United States of America as at the
time of payment shall be legal tender therein for the payment of
public and private debts or, at the election of the Company, in
the manner hereinafter set forth; and, to pay interest on the
unpaid balance of the principal amount hereof from the date
hereof at the rate of 8% per annum, compounded semi-annually on
each July 1 and January 1 prior to the Maturity Date, in like
coin or currency or, at the election of the Company, in the
manner hereinafter set forth, on the Maturity Date; and to pay
interest at such rate, in like coin or currency or, at the
election of the Company, in such manner, on any overdue principal
and (to the extent permitted by law) on any overdue interest,
from the due date hereof until the obligation of the Company with
respect to the payment thereof shall be discharged; all payments
of principal of this Note and all payments of the interest on
this Note to be made at 000 Xxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxxx
00000, or such other location as shall be specified in writing by
the holder of this Note to the Company.
All payments of principal of this Note and all payments of
interest on this Note may, at the election of the Company, in
lieu of payment in coin or currency of the United States of
America as aforesaid, be made in validly authorized and issued,
fully-paid and non-assessable shares of Senior Preferred Stock
(as hereinafter defined), registered in the name of the payee,
free and clear of any and all liens, charges or other
encumbrances of any nature whatsoever, with an aggregate
liquidation preference equal in amount to the payment to be made.
SECTION 2. Definitions. As used herein, the following terms
shall have the following respective meanings:
The Term "AG Note" shall mean the 8% Convertible Note in the
original principal amount of $700,000 issued as of the date
hereof by the Company to AG Checkout LLC.
The term "Certificate of Designation" shall mean the
Certificate of Designation of the Senior Preferred Stock, as
filed with the Secretary of State of Delaware and as may be
amended from time to time.
The term "Company" shall mean NewCheck Corporation d/b/a
Productivity Solutions, Inc., a Delaware corporation, the maker
of this Note, and shall also mean any successor corporation.
The term "Conversion Price" shall mean the applicable price
per share of Senior Preferred Stock set forth in Section 7.6
hereof, or, in case any adjustment of such price has taken place
pursuant to the further provisions of Section 7, then the price
as last adjusted and in effect for purposes of Section 7.
The term "Convertible Securities" shall have the meaning set
forth in Section 6.2 hereof.
The term "ERS" shall have the meaning set forth in Section 1
hereof.
The term "Events of Default" shall have the meaning set
forth in Section 5.1 hereof.
The term "Issuance Date" shall mean the date of this Note.
The term "majority-in-interest", when used with reference to
the principal amount of the Notes, shall mean in excess of 50% of
the aggregate outstanding principal amount of the Notes.
The term "Maturity Date" shall have the meaning set forth in
Section 1 hereof.
The term "Mandatory Conversion" shall have the meaning set
forth in Section 7.3 hereof.
The term "Note" shall mean this Note and any Note executed
and delivered by the Company in exchange or replacement for this
Note pursuant to Section 8 hereof.
The term "Notes" shall mean this Note and the AG Note.
The term "Options" shall have the meaning set forth in
Section 6.2 hereof.
The term "Person" shall mean an individual, a corporation, a
partnership, a trust, an unincorporated organization and a
government or any department, agency or political subdivision
thereof.
The term "Purchase Agreement" shall mean the Stock and
Convertible Note Purchase Agreement dated as of the Issuance Date
among the Company, ERS and the other parties signatory thereto.
The term "Registration Rights Agreement" shall mean the
Amended and Restated Registration Rights Agreement dated the
Issuance Date among the Company, ERS and the other parties
signatory thereto.
The term "Securityholders Agreement" shall mean the Amended
and Restated Securityholders Agreement dated the Issuance Date
among the Company, ERS and the other parties signatories thereto.
The term "Senior Preferred Stock" shall mean the Series C
Convertible Preferred Stock, $.0001 par value, of the Company.
The term "Subsidiary" shall mean: (x) any present or future
corporation at least a majority of the outstanding voting
securities of which shall at the time be owned through
Subsidiaries, by the Company, or which is otherwise controlled by
the Company and (y) any partnership, association, joint venture
or other entity in which the Company, directly or indirectly, or
through Subsidiaries, has a 50% or more equity interest at the
time or which is otherwise controlled by the Company. For
purposes hereof, outstanding voting securities shall be deemed to
be all classes of capital stock or other interests in equity
(excluding debt securities convertible into equity) then
outstanding and normally entitled to vote in the election of
directors, managers or trustees.
SECTION 3. Optional Prepayment.
3.1 Except as agreed to in writing by the holders of a
majority-in-interest of the principal amount of the Notes to any
such payment, the Company shall not prepay all or any portion of
the principal of or any interest on this Note prior to the
Maturity Date.
3.2 Provided the holders of a majority-in-interest of the
principal amount of the Notes shall have evidenced their
agreement to such payment as aforesaid, the Company may prepay
the whole, or any part, of the unpaid principal amount of this
Note, without premium or penalty, upon the terms hereinafter set
forth, and provided that interest on the principal prepayment
shall be paid concurrently therewith. Notices of intended
prepayment shall be given by the Company by mail and shall be
mailed to the holder of this Note not less than 30 days from the
date fixed for prepayment. The giving of such notice by the
Company shall not in any way affect the rights of the holder of
this Note under Section 7 hereof. In case this Note is intended
to be prepaid in part only, such notice shall specify the
principal amount hereof to be prepaid; and, in such case, the
principal amount of this Note shall be prepaid in an amount
proportionate to the principal amount of all Notes so prepaid.
Upon giving of notice of prepayment as aforesaid, and subject to
agreement thereto by the holder of this Note, this Note or
portion thereof so specified for prepayment shall on the
prepayment date specified in such notice become due and payable,
and from and after the prepayment date so specified (unless the
Company shall default in making such prepayment) interest on the
principal of this Note or portion hereof so specified for
prepayment shall cease to accrue, and the principal of this Note
or portion thereof so specified for prepayment shall be paid by
the Company at the prepayment price aforesaid.
SECTION 4. Consolidation Merger or Disposition of Assets.
Without limiting any other covenant contained in the Purchase
Agreement, the Company shall not consolidate with, merge into, or
sell or otherwise dispose of all or substantially all its
properties as an entirety to, any person unless:
(a) the successor formed by or resulting from such
consolidation or merger or to which such sale or other
disposition shall have been made shall be a corporation
organized under the laws of the United States of America or any
State, district or territory thereof;
(b) such successor corporation shall expressly assume
the due and punctual payment of the principal of and interest on
this Note according to its tenor, and the due and punctual
performance and observance of all the covenants, agreements and
conditions of this Note to be performed or observed by the
Company to the same extent as if such successor corporation had
been the original maker of this Note (and such assumption shall,
upon the request of the holder of this Note, be evidenced by the
endorsing of an appropriate legend upon this Note, and any Note
executed pursuant to Section 8 hereof after such assumption
shall, unless executed in the name of such corporation, have a
similar legend endorsed thereon);
(c) immediately after such consolidation, merger,
sale or other disposition, such successor corporation shall not
be in default in the performance of any of the covenants,
agreements or conditions contained in this Note and no condition,
act or event (with the giving of notice, passage of time, or
otherwise) would result in such default; and
(d) immediately after such consolidation, merger,
sale or other disposition, such successor corporation shall have
a consolidated stockholders' equity, determined in accordance
with generally accepted accounting principles, which is no less
than the Company's stockholders' equity, as so determined,
immediately prior to such transaction.
SECTION 5. Events of Default and Remedies.
5.1 Unless waived by the holders of a majority-in-interest
of the principal amount of the Notes, the entire unpaid principal
amount of this Note, together with all accrued interest hereon,
at the option of the holder hereof exercised by notice to the
Company, shall forthwith become and be due and payable if any one
or more of the following events (herein called "Events of
Default") shall have occurred (for any reason whatsoever and
whether such happening shall be voluntary or involuntary or come
about or be effected by operation of law or pursuant to or in
compliance with any judgment, decree or order of any court or any
order, rule or regulation of any administrative or governmental
body) and be continuing at the time of such notice, that is to
say:
(a) if default shall be made in the due and punctual
payment of the principal of this Note when and as the same shall
become due and payable, whether at maturity, by acceleration or
otherwise;
(b) if default shall be made in the due and punctual
payment of any interest on this Note when and as such interest
shall become due and payable;
(c) if default shall be made in the performance or
observance of any of the other covenants, agreements or
conditions of the Company or any Subsidiary contained in this
Note or in the Purchase Agreement or any other agreement to which
the Company and the holder of this Note are party, and such
default shall have continued for a period of 30 days after notice
thereof to the Company;
(d) if any representation or warranty made by the
Company under the Purchase Agreement or in any document or
certificate furnished by the Company pursuant thereto shall prove
to be inaccurate in any material respect when made;
(e) if this Note, the Purchase Agreement or any other
agreement to which the Company and the holder of this Note are
party shall cease to be enforceable in accordance with its terms
against the Company, or the Company shall so state in writing;
(f) if the Company or any Subsidiary shall default
beyond any period of grace provided with respect thereto in the
payment of principal of, premium, if any, or interest on any
obligation in respect of borrowed money when due, whether by
acceleration or otherwise; or if the Company or any Subsidiary
shall default beyond any grace period herein provided in the
performance or observance of any other agreement, term or
condition contained in such obligation or in any agreement under
which any such obligation is created, if the effect of any such
default is to cause or permit the holder or holders of such
obligations (or a trustee on behalf of such holder or holders) to
cause such obligation to become due prior to the date of its
stated maturity, unless such holder or holders or trustee shall
have waived such default after its occurrence or unless such
holder or holders or trustee shall have failed to give any notice
required to create an event of default thereunder;
(g) if final judgment for the payment of money in
excess of $100,000 shall be rendered by a court of record against
the Company or any Subsidiary and the Company or such Subsidiary
shall not discharge the same or provide for its discharge in
accordance with its terms, or shall not procure a stay of
execution thereon within 30 days from the date of entry thereof
and, within the period during which execution of such judgment
shall have been stayed, appeal therefrom, and cause the execution
thereof to be stayed during such appeal;
(h) if the Company or any Subsidiary shall:
(i) admit in writing its inability to pay its
debts generally as they become due;
(ii) file a petition in bankruptcy or a petition
to take advantage of any insolvency act;
(iii) make an assignment for the benefit of
creditors;
(iv) consent to the appointment of a receiver of
itself or of the whole or any substantial part of its
property;
(v) on a petition in bankruptcy filed against
it, be adjudicated a bankrupt; or
(vi) file a petition or answer seeking
reorganization or arrangement under the Federal
bankruptcy laws or any other applicable law or statute
of the United States of America or any State, district
or territory thereof;
(i) if a court of competent jurisdiction shall enter,
except at the direct or indirect request of the holder of this
Note, an order, judgment, or decree appointing, without the
consent of the Company or any Subsidiary, a receiver of the
Company or any Subsidiary or of the whole or any substantial part
of its property, or approving a petition filed against it seeking
reorganization or arrangement of the Company or any Subsidiary
under the Federal bankruptcy laws or any other applicable law or
statute of the United States of America or any State, district or
territory thereof, and such order, judgment or decree shall not
be vacated or set aside or stayed within 60 days from the date of
entry thereof; or
(j) if, under the provisions of any other law for the
relief or aid of debtors, any court of competent jurisdiction
shall assume custody or control of the Company or any Subsidiary
or of the whole or any substantial part of its property and such
custody or control shall not be terminated or stayed within 60
days from the date of assumption of such custody or control.
5.2. In the case any one or more of the Events of Default
specified in Section 5.1 hereof shall have occurred and be
continuing, unless waived by the holders of a majority-in-
interest of the principal amount of the Notes, the holder of this
Note may proceed to protect and enforce its rights either by suit
in equity and/or by action at law, whether for the specific
performance of any covenant or agreement contained in this Note,
or, unless so waived, the holder of this Note may proceed to
enforce the payment of all sums due upon this Note or to enforce
any other legal or equitable right of the holder of this Note. In
the event an Event of Default shall have occurred, unless so
waived, and the holder of this Note shall employ attorneys, or
incur other costs and expenses for the collection of payments due
or to become due, or for the enforcement or performance or
observance of any obligation or agreement of the Company under
this Note, the Company agrees that it will pay to the holder, on
demand, the reasonable fees of such attorney together with all
other costs and expenses incurred by the holder.
5.3 No remedy herein conferred upon the holder is intended
to be exclusive of any other remedy and each and every such
remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law
or in equity or by statute or otherwise.
5.4 No course of dealing between the Company and the
holder or any delay on the part of the holder hereof in exer-
cising any rights hereunder shall operate as a waiver of any
rights of the holder hereof.
SECTION 6. Protective Covenants.
6.1 Without the prior written consent of the holders of a
majority-in-interest of the principal amount of the Notes, the
Company shall not: authorize, adopt or approve an amendment to
the Certificate of Incorporation of the Company which would alter
or change in any manner the terms, powers, preferences or special
rights of the Senior Preferred Stock, or grant any waivers of
such preferences or rights, including any such modification or
amendment that may (A) change the redemption date of the Senior
Preferred Stock, (B) raise the conversion price of the Senior
Preferred Stock or reduce the liquidation preference or
redemption price or the dividend rights of the Senior Preferred
Stock, (C) adversely affect any of the conversion features of the
Senior Preferred Stock, or (D) reduce the percentage of
outstanding Senior Preferred Stock necessary to modify or amend
the terms thereof or to grant waivers thereof; or (without
limiting any rights of any party to require the Company to effect
a registration under the Registration Rights Agreement) cause or
permit to occur any Participation Event (as defined in the
Certificate of Designation), if within the control of the Company
and except for any Liquidity Event (as defined in the Certificate
of Designation) in the ordinary course of business.
6.2 Without the prior written consent of a majority-in-
interest of the principal amount of the Notes, the Company shall
not: (A) declare a dividend or effect any other distribution on
the Senior Preferred Stock except as required by the Purchase
Agreement or the Certificate of Designation; (B) subdivide the
outstanding shares of Senior Preferred Stock into a greater
number of shares of Senior Preferred Stock or combine the
outstanding shares of Senior Preferred Stock into a smaller
number of shares of Senior Preferred Stock; or (C) issue or sell
any shares of Senior Preferred Stock for a consideration per
share less than the Conversion Price in effect immediately prior
to the time of such issue or sale, or without consideration. For
purposes of this Section 6.2, the following additional paragraphs
shall apply:
(i) Issuance of Rights or Options. In case at any
time the Company shall in any manner grant (whether directly
or by assumption in a merger or otherwise) any rights to
subscribe for or to purchase, or any options for the
purchase of, Senior Preferred Stock or any stock or
securities convertible into or exchangeable for Senior
Preferred Stock (such rights or options being herein called
"Options" and such convertible or exchangeable stock or
securities being herein called "Convertible Securities")
whether or not such Options or the right to convert or
exchange any such Convertible Securities are immediately
exercisable, and the price per share for which Senior
Preferred Stock is issuable upon the exercise of such
Options or upon the conversion or exchange of such
Convertible Securities (determined by dividing (I) the total
amount, if any, received or receivable by the Company as
consideration for the granting of such Options, plus the
aggregate amount of additional consideration payable to the
Company upon the exercise of all such Options, plus, in the
case of such options which relate to Convertible Securities,
the aggregate amount of additional consideration, if any,
payable upon the issue or sale of such Convertible
Securities and upon the conversion or exchange thereof, by
(ii) the total maximum number of shares of Senior Preferred
Stock issuable upon the exercise of such Options or upon the
conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options) shall be less
than the Conversion Price in effect immediately prior to the
time of the granting of such Options, then the total maximum
number of shares of Senior Preferred Stock issuable upon the
exercise of such Options or upon conversion or exchange of
the total maximum amount of such Convertible Securities
issuable upon the exercise of such Options shall be deemed
to have been issued for such price per share as of the date
of granting of such Options.
(ii) Issuance of Convertible Securities. In case the
Company shall in any manner issue (whether directly or by
assumption in a merger or otherwise) or sell any Convertible
Securities, whether or not the rights to exchange or convert
any such Convertible Securities are immediately exercisable,
and the price per share for which Senior Preferred Stock is
issuable upon such conversion or exchange (determined by
dividing (i) the total amount received or receivable by the
Company as consideration for the issue or sale of such
Convertible Securities, plus the aggregate amount of
additional consideration, if any, payable to the Company
upon the conversion or exchange thereof, by (ii) the total
maximum number of shares of Senior Preferred Stock issuable
upon the conversion or exchange of all such Convertible
Securities) shall be less than the Conversion Price in
effect immediately prior to the time of such issue or sale,
then the total maximum number of shares of Senior Preferred
Stock issuable upon conversion or exchange of all such
Convertible Securities shall be deemed to have been issued
for such price per share on the date of the issue or sale of
such Convertible Securities.
(iii) Consideration for Stock. In case any shares of
Senior Preferred Stock, Options or Convertible Securities
shall be issued or sold for cash, the consideration received
therefor shall be deemed to be the amount received by the
Company therefor, without deduction therefrom of any
expenses incurred or any underwriting commissions or
concessions paid or allowed by the Company in connection
therewith. In case any shares of Senior Preferred Stock,
Options or Convertible Securities shall be issued or sold
for a consideration other than cash, the amount of the
consideration other than cash received by the Company shall
be deemed to be the fair value for such consideration as
determined in good faith by the Board of Directors of the
Company, without deduction of any expenses incurred or any
underwriting commissions or concessions paid or allowed by
the Company in connection therewith. In case any Options
shall be issued in connection with the issue and sale of
other securities of the Company, together comprising one
integral transaction in which no specific consideration is
allocated to such Options by the parties thereto, such
Options shall be deemed to have been issued without
consideration.
SECTION 7. Conversion of Note.
7.1 Right to Convert. Subject to and upon compliance with
the provisions hereof, the holder of this Note shall have the
right, at such holder's option, at any time or from time to time
on or after the second anniversary of the Issuance Date, to
convert all or any part of the unpaid principal amount hereof,
plus all interest accrued to the date of such conversion, into
shares of Senior Preferred Stock, at the applicable Conversion
Price.
7.2 Exercise of Conversion Privilege. In order to
exercise the conversion privilege, the holder of this Note shall
surrender it to the Company at the principal executive offices of
the Company at 0000 Xxxxxxxxxx Xxx, Xxxxx 00, Xxxxxxxxxxxx,
Xxxxxxx 00000 accompanied by written notice to the Company that
the holder elects to convert this Note, or, if less than the
entire unpaid principal amount hereof is to be converted, the
portion hereof to be converted, and, if requested by the Company,
by a duly executed instrument of transfer. Such notice (and any
notice by the holder of this Note accompanying surrender of this
Note in the event of a Mandatory Conversion) shall also state the
name or names (with address or addresses) in which the
certificate or certificates for shares of Senior Preferred Stock
which shall be issuable on such conversion shall be issued. As
soon as practicable after the receipt of such notice and the
surrender of this Note, the Company shall issue and shall deliver
at said offices to the holder of this Note, or on his written
order, a certificate or certificates for the number of full
shares of Senior Preferred Stock issuable upon the conversion of
this Note (or portion hereof) and provision shall be made for any
fraction of a share as provided in Section 7.5 hereof. Such
conversion (other than a Mandatory Conversion) shall be deemed to
have been effected immediately prior to the close of business on
the date on which such notice shall have been received by the
Company and this Note shall have been surrendered as aforesaid.
Conversion shall be at the Conversion Price in effect at the time
of conversion, and at such time the rights of the holder of this
Note as such holder shall cease and the person or persons in
whose name or names any certificate or certificates for shares of
Senior Preferred Stock shall be issuable upon such conversion
shall be deemed to have become the holder or holders of record of
the shares of Senior Preferred Stock represented thereby. Upon
conversion of only a part of the unpaid principal amount of this
Note, the Company shall execute and deliver to or on the order of
the holder thereof at said offices, at the expense of the
Company, a new Note in principal amount equal to the unconverted
portion of such unpaid principal amount, which new Note shall be
dated and bear interest from the date to which interest shall
have been paid on such unconverted portion.
7.3 Mandatory Conversion. Immediately prior to any event
which, pursuant to the Certificate of Designation, would cause
the mandatory conversion of all outstanding shares of Senior
Preferred Stock into shares of the common stock, $.0001 par
value, of the Company, the entire unpaid principal amount hereof,
plus all interest accrued to the date of such conversion, shall
automatically and without any further act by the holder of this
Note convert into shares of Senior Preferred Stock, at the then
applicable Conversion Price (herein referred to as a "Mandatory
Conversion").
7.4 Right to Interest. Notwithstanding any provision to
the contrary contained in this Note, the holder of this Note
shall have the right, exercisable by written notice delivered to
the Company, to require that any interest payable under this Note
be paid by delivery of shares of Senior Preferred Stock in the
manner set forth under Section 1 hereof.
7.5 Adjustment for Fractional Shares. No fractional
shares of Senior Preferred Stock or scrip shall be issued upon
conversions of this Note. Instead of any fractional shares of
Senior Preferred Stock which would otherwise be issuable upon
conversion of this Note (or portion hereof) the Company shall pay
a cash adjustment in respect of such fractional share of Senior
Preferred Stock in an amount equal to the same fraction of the
then current fair value of a share of Senior Preferred Stock, as
determined in good faith by the Board of Directors of the
Company.
7.6 Conversion Price. The Conversion Price per share of
Senior Preferred Stock shall be $7.42.
7.7 Consolidation, Merger, Sale of Assets, Reorganization
or Reclassification. If any consolidation or merger of the
Company with another corporation after the Issuance Date, or the
sale of all or substantially all of its assets to another
corporation shall be effected, or in case of any capital
reorganization or reclassification of the capital stock of the
Company, then, as a condition of such consolidation, merger or
sale, reorganization or reclassification, lawful and adequate
provision shall be made whereby the holder of this Note shall
thereafter have the right to purchase and receive upon the basis
and upon the terms and conditions specified herein and in lieu of
the shares of Senior Preferred Stock immediately theretofore
purchasable and receivable upon the conversion of this Note, such
shares of stock, securities or assets as may be issuable or
payable with respect to or in exchange for a number of
outstanding shares of Senior Preferred Stock of the Company equal
to the number of shares of Senior Preferred Stock immediately
theretofore purchasable and receivable by such holder had such
consolidation, merger, sale, reorganization, or reclassification
not taken place, and in any such case appropriate provision shall
be made with respect to the rights and interest of such holder to
the end that the provisions hereof (including without limitation
provisions for adjustment of the Conversion Price) shall
thereafter be applicable, as nearly as may be, in relation of any
shares of stock, securities or assets thereafter deliverable upon
the exercise of such conversion rights.
7.8 Notice of Certain Actions. Without limiting any
provision of the Purchase Agreement or contained herein, in case
at any time:
(i) the Company shall offer for subscription pro rata
to the holders of its shares of Senior Preferred Stock any
additional shares of stock of any class or other rights;
(ii) there shall be any capital reorganization or
reclassification of the capital stock of the Company, or
consolidation or merger of the Company with, or sale of all or
substantially all its assets to, another corporation; or
(iii)there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in any one or more of said cases, the Company shall give
written notice to the holder hereof, of the date on which (A) the
books of the Company shall close or a record shall be taken for
such transaction or (B) such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or
winding-up shall take place, as the case may be. Such notice
shall also specify the date as of which the holders of shares of
Senior Preferred Stock of record shall participate in such
transaction or shall be entitled to exchange their shares of
Senior Preferred Stock for securities or other property
deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such written notice shall be
given at least 30 days prior to the action in question and not
less than 30 days prior to the record date or the date on which
the Company's transfer books are closed in respect thereto.
7.9 Reservation of Shares. The Company shall at all times
reserve and keep available out of its authorized shares of Senior
Preferred Stock, solely for the purpose of issue upon the
conversion of this Note as herein provided, such number of shares
of Senior Preferred Stock as shall then be issuable upon the
conversion of this Note.
7.10 Taxes. The issuance of certificates of shares of
Senior Preferred Stock upon the conversions of this Note shall be
made without charge to the holder of this Note for any issuance
tax in respect thereto; provided, however, that the Company shall
not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of this Note.
7.11 Closing of Books. The Company will at no time close
its transfer books against the transfer of any shares of Senior
Preferred Stock issued or issuable upon the conversion of this
Note in any manner which interferes with the timely conversion of
this Note.
SECTION 8. Exchange or Replacement of Note.
8.1 The holder of this Note, at its option, may in person
or by duly authorized attorney surrender this Note for exchange,
at the principal executive offices of the Company, and at the
expense of the Company receive in exchange therefor a new Note in
the same aggregate principal amount as the aggregate unpaid
principal amount of the Note so surrendered, bearing interest at
the same annual rate as the Note so surrendered and otherwise in
substantially the form of the Note so surrendered, each such new
Note to be dated as of the date to which interest has been paid
on the note so surrendered and to be in such principal amount and
payable to the holder of this Note. Five days' prior written
notice to the holder's intention to make such exchange shall be
given to the Company.
8.2 Upon receipt by the Company of evidence satisfactory to
it of the loss, theft, destruction or mutilation of this Note,
and (in case of loss, theft or destruction) of indemnity
reasonably satisfactory to it, and upon surrender and cancel-
lation of this Note, if mutilated, the Company, upon reimburse-
ment to it of all reasonable expenses incidental thereto, will
make and deliver a new Note, of like tenor, in lieu of this Note.
Any Note made and delivered in accordance with the provisions of
this Section 8 shall be dated as of the date to which interest
has been paid on this Note.
SECTION 9. Notices. All notices, requests or instructions
hereunder shall be in writing and delivered personally or sent by
registered or certified mail, postage prepaid or by overnight
express mail by a nationally recognized overnight mail carrier as
follows:
(1) if to the Company:
0000 Xxxxxxxxxx Xxx
Xxxxx 00
Xxxxxxxxxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
Telecopy Number: (000) 000-0000
with a copy to:
Xxxxx X. Xxxxx, Esq.
Powell, Goldstein, Xxxxxx & Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Telecopy Number: (000) 000-0000
(2) if to the holder of this Note:
000 Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxx
Telecopy Number: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxx, Esq.
Krugman & Kailes LLP
Park 00 Xxxx - Xxxxx Xxx
Xxxxxx Xxxxx, Xxx Xxxxxx 00000
Telecopy Number: (000) 000-0000
Any notice so addressed and mailed, shall be deemed to be given
when so mailed. Any notice so addressed and otherwise delivered
shall be deemed to be given when actually received by the
addressee. Any of the above addresses may be changed at any time
by notice given as provided above; provided, however, that any
such notice of change of address shall be effective only upon
receipt.
SECTION 10. Captions. Captions and section titles
contained herein are inserted as a matter of convenience and for
reference only and are not intended to define, limit, extend or
describe the scope of this Note or the intent of any provision
hereof.
SECTION 11. Severability. In the event that one or more
of the provisions of this Note shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any
other provisions of this Note, but this Note shall be construed
as if such invalid, illegal or unenforceable provision had never
been contained herein.
SECTION 12. Holders. The Company may deem and treat the
holder of this Note as the absolute owner of this Note for the
purpose of receiving payment hereon or on account hereof and for
all other purposes, and the Company shall not be affected by any
notice to the contrary.
SECTION 13. Governing Law. This Note shall be governed
by and construed in accordance with the laws of the State of New
York applicable to agreements made and to be performed entirely
within such state.
SECTION 14. Related Agreements. This Note is issued
pursuant to the Purchase Agreement and is entitled to the
benefits thereof and subject to the obligations thereunder, and
to those set forth in the Registration Rights Agreement and the
Securityholders Agreement. Copies of such agreements may be
obtained by any holder of this Note at the principal executive
offices of the Company.
IN WITNESS WHEREOF, the undersigned has executed this Note
as of the date first-above written.
ATTEST: NEWCHECK CORPORATION
d/b/a Productivity Solutions,
Inc.
By
-------------------- -----------------------------
Secretary President and Chief Executive
Officer
EXHIBIT A-2
NEITHER THIS NOTE, NOR THE SHARES ISSUABLE UPON CONVERSION
OF THIS NOTE, HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED
IN VIOLATION OF SUCH ACT
NEWCHECK CORPORATION
d/b/a Productivity Solutions, Inc.
8% CONVERTIBLE NOTE
$700,000 February 11, 2000
SECTION 1. General. NEWCHECK CORPORATION d/b/a Productivity
Solutions, Inc., a Delaware corporation (hereinafter referred to
as the "Company"), with offices at 0000 Xxxxxxxxxx Xxx, Xxxxx 00,
Xxxxxxxxxxxx, Xxxxxxx 00000, for value received, hereby promises
to pay to AG Checkout LLC, a Delaware limited liability company
(hereinafter referred to as "AG"), with offices at c/o Xxxxxx,
Xxxxxx & Co., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or
order, the principal amount of $700,000 (Seven Hundred Thousand
Dollars), the entire principal balance of which shall be due and
payable on the fifth anniversary of the date hereof (hereinafter
referred to as the "Maturity Date"), in such coin or currency of
the United States of America as at the time of payment shall be
legal tender therein for the payment of public and private debts
or, at the election of the Company, in the manner hereinafter set
forth; and, to pay interest on the unpaid balance of the
principal amount hereof from the date hereof at the rate of 8%
per annum, compounded semi-annually on each July 1 and January 1
prior to the Maturity Date, in like coin or currency or, at the
election of the Company, in the manner hereinafter set forth, on
the Maturity Date; and to pay interest at such rate, in like coin
or currency or, at the election of the Company, in such manner,
on any overdue principal and (to the extent permitted by law) on
any overdue interest, from the due date hereof until the
obligation of the Company with respect to the payment thereof
shall be discharged; all payments of principal of this Note and
all payments of the interest on this Note to be made at c/o
Xxxxxx, Xxxxxx & Co., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
or such other location as shall be specified in writing by the
holder of this Note to the Company.
All payments of principal of this Note and all payments of
interest on this Note may, at the election of the Company, in
lieu of payment in coin or currency of the United States of
America as aforesaid, be made in validly authorized and issued,
fully-paid and non-assessable shares of Senior Preferred Stock
(as hereinafter defined), registered in the name of the payee,
free and clear of any and all liens, charges or other
encumbrances of any nature whatsoever, with an aggregate
liquidation preference equal in amount to the payment to be made.
SECTION 2. Definitions. As used herein, the following terms
shall have the following respective meanings:
The term "AG" shall have the meaning set forth in Section 1
hereof.
The term "Certificate of Designation" shall mean the
Certificate of Designation of the Senior Preferred Stock, as
filed with the Secretary of State of Delaware and as may be
amended from time to time.
The term "Company" shall mean NewCheck Corporation d/b/a
Productivity Solutions, Inc., a Delaware corporation, the maker
of this Note, and shall also mean any successor corporation.
The term "Conversion Price" shall mean the applicable price
per share of Senior Preferred Stock set forth in Section 7.6
hereof, or, in case any adjustment of such price has taken place
pursuant to the further provisions of Section 7, then the price
as last adjusted and in effect for purposes of Section 7.
The term "Convertible Securities" shall have the meaning set
forth in Section 6.1 hereof.
The term "ERS Note" shall mean the 8% Convertible Note in
the original principal amount of $4,550,000 issued as of the date
hereof by the Company to Electronic Retailing Systems
International, Inc.
The term "Events of Default" shall have the meaning set
forth in Section 5.1 hereof.
The term "Issuance Date" shall mean the date of this Note.
The term "majority-in-interest", when used with reference to
the principal amount of the Notes, shall mean in excess of 50% of
the aggregate outstanding principal amount of the Notes.
The term "Maturity Date" shall have the meaning set forth in
Section 1 hereof.
The term "Mandatory Conversion" shall have the meaning set
forth in Section 7.3 hereof.
The term "Note" shall mean this Note and any Note executed
and delivered by the Company in exchange or replacement for this
Note pursuant to Section 8 hereof.
The term "Notes" shall mean this Note and the ERS Note.
The term "Options" shall have the meaning set forth in
Section 6.1 hereof.
The term "Person" shall mean an individual, a corporation, a
partnership, a trust, an unincorporated organization and a
government or any department, agency or political subdivision
thereof.
The term "Purchase Agreement" shall mean the Stock and
Convertible Note Purchase Agreement dated as of the Issuance Date
among the Company, AG and the other parties signatory thereto.
The term "Registration Rights Agreement" shall mean the
Amended and Restated Registration Rights Agreement dated the
Issuance Date among the Company, AG and the other parties
signatory thereto.
The term "Securityholders Agreement" shall mean the Amended
and Restated Securityholders Agreement dated the Issuance Date
among the Company, AG and the other parties signatories thereto.
The term "Senior Preferred Stock" shall mean the Series C
Convertible Preferred Stock, $.0001 par value, of the Company.
The term "Subsidiary" shall mean: (x) any present or future
corporation at least a majority of the outstanding voting
securities of which shall at the time be owned through
Subsidiaries, by the Company, or which is otherwise controlled by
the Company and (y) any partnership, association, joint venture
or other entity in which the Company, directly or indirectly, or
through Subsidiaries, has a 50% or more equity interest at the
time or which is otherwise controlled by the Company. For
purposes hereof, outstanding voting securities shall be deemed to
be all classes of capital stock or other interests in equity
(excluding debt securities convertible into equity) then
outstanding and normally entitled to vote in the election of
directors, managers or trustees.
SECTION 3. Optional Prepayment.
3.1 Except as agreed to in writing by the holders of a
majority-in-interest of the principal amount of the Notes prior
to any such payment, the Company shall not prepay all or any
portion of the principal of or any interest on this Note prior to
the Maturity Date.
3.2 Provided the holders of this Note shall have evidenced
their agreement to such payment as aforesaid, the Company may
prepay the whole, or any part, of the unpaid principal amount of
this Note, without premium or penalty, upon the terms
hereinafter set forth, and provided that interest on the
principal prepayment shall be paid concurrently therewith.
Notices of intended prepayment shall be given by the Company by
mail and shall be mailed to the holder of this Note not less
than 30 days from the date fixed for prepayment. The giving of
such notice by the Company shall not in any way affect the
rights of the holder of this Note under Section 7 hereof. In
case this Note is intended to be prepaid in part only, such
notice shall specify the principal amount hereof to be prepaid;
and, in such case, the principal amount of this Note shall be
prepaid in an amount proportionate to the principal amount of
all Notes so prepaid. Upon giving of notice of prepayment as
aforesaid, and subject to agreement thereto by the holder of
this Note, this Note or portion thereof so specified for
prepayment shall on the prepayment date specified in such notice
become due and payable, and from and after the prepayment date
so specified (unless the Company shall default in making such
prepayment) interest on the principal of this Note or portion
hereof so specified for prepayment shall cease to accrue, and
the principal of this Note or portion thereof so specified for
prepayment shall be paid by the Company at the prepayment price
aforesaid.
SECTION 4. Consolidation Merger or Disposition of Assets.
Without limiting any other covenant contained in the Purchase
Agreement, the Company shall not consolidate with, merge into, or
sell or otherwise dispose of all or substantially all its
properties as an entirety to, any person unless:
(a) the successor formed by or resulting from such
consolidation or merger or to which such sale or other
disposition shall have been made shall be a corporation
organized under the laws of the United States of America or any
State, district or territory thereof;
(b) such successor corporation shall expressly assume
the due and punctual payment of the principal of and interest on
this Note according to its tenor, and the due and punctual
performance and observance of all the covenants, agreements and
conditions of this Note to be performed or observed by the
Company to the same extent as if such successor corporation had
been the original maker of this Note (and such assumption shall,
upon the request of the holder of this Note, be evidenced by the
endorsing of an appropriate legend upon this Note, and any Note
executed pursuant to Section 8 hereof after such assumption
shall, unless executed in the name of such corporation, have a
similar legend endorsed thereon);
(c) immediately after such consolidation, merger,
sale or other disposition, such successor corporation shall not
be in default in the performance of any of the covenants,
agreements or conditions contained in this Note and no condition,
act or event (with the giving of notice, passage of time, or
otherwise) would result in such default; and
(d) immediately after such consolidation, merger,
sale or other disposition, such successor corporation shall have
a consolidated stockholders' equity, determined in accordance
with generally accepted accounting principles, which is no less
than the Company's stockholders' equity, as so determined,
immediately prior to such transaction.
SECTION 5. Events of Default and Remedies.
5.1 Unless waived by the holders of a majority-in-interest
of the principal amount of the Notes, the entire unpaid principal
amount of this Note, together with all accrued interest hereon,
at the option of the holder hereof exercised by notice to the
Company, shall forthwith become and be due and payable if any one
or more of the following events (herein called "Events of
Default") shall have occurred (for any reason whatsoever and
whether such happening shall be voluntary or involuntary or come
about or be effected by operation of law or pursuant to or in
compliance with any judgment, decree or order of any court or any
order, rule or regulation of any administrative or governmental
body) and be continuing at the time of such notice, that is to
say:
(a) if default shall be made in the due and punctual
payment of the principal of this Note when and as the same shall
become due and payable, whether at maturity, by acceleration or
otherwise;
(b) if default shall be made in the due and punctual
payment of any interest on this Note when and as such interest
shall become due and payable;
(c) if default shall be made in the performance or
observance of any of the other covenants, agreements or
conditions of the Company or any Subsidiary contained in this
Note or in the Purchase Agreement or any other agreement to which
the Company and the holder of this Note are party, and such
default shall have continued for a period of 30 days after notice
thereof to the Company;
(d) if any representation or warranty made by the
Company under the Purchase Agreement or in any document or
certificate furnished by the Company pursuant thereto shall prove
to be inaccurate in any material respect when made;
(e) if this Note, the Purchase Agreement or any other
agreement to which the Company and the holder of this Note are
party shall cease to be enforceable in accordance with its terms
against the Company, or the Company shall so state in writing;
(f) if the Company or any Subsidiary shall default
beyond any period of grace provided with respect thereto in the
payment of principal of, premium, if any, or interest on any
obligation in respect of borrowed money when due, whether by
acceleration or otherwise; or if the Company or any Subsidiary
shall default beyond any grace period herein provided in the
performance or observance of any other agreement, term or
condition contained in such obligation or in any agreement under
which any such obligation is created, if the effect of any such
default is to cause or permit the holder or holders of such
obligations (or a trustee on behalf of such holder or holders) to
cause such obligation to become due prior to the date of its
stated maturity, unless such holder or holders or trustee shall
have waived such default after its occurrence or unless such
holder or holders or trustee shall have failed to give any notice
required to create an event of default thereunder;
(g) if final judgment for the payment of money in
excess of $100,000 shall be rendered by a court of record against
the Company or any Subsidiary and the Company or such Subsidiary
shall not discharge the same or provide for its discharge in
accordance with its terms, or shall not procure a stay of
execution thereon within 30 days from the date of entry thereof
and, within the period during which execution of such judgment
shall have been stayed, appeal therefrom, and cause the execution
thereof to be stayed during such appeal;
(h) if the Company or any Subsidiary shall:
(i) admit in writing its inability to pay its
debts generally as they become due;
(ii) file a petition in bankruptcy or a petition
to take advantage of any insolvency act;
(iii) make an assignment for the benefit of
creditors;
(iv) consent to the appointment of a receiver of
itself or of the whole or any substantial part of its
property;
(v) on a petition in bankruptcy filed against
it, be adjudicated a bankrupt; or
(vi) file a petition or answer seeking
reorganization or arrangement under the Federal
bankruptcy laws or any other applicable law or statute
of the United States of America or any State, district
or territory thereof;
(i) if a court of competent jurisdiction shall enter,
except at the direct or indirect request of the holder of
this Note, an order, judgment, or decree appointing, without
the consent of the Company or any Subsidiary, a receiver of
the Company or any Subsidiary or of the whole or any substantial
part of its property, or approving a petition filed against it
seeking reorganization or arrangement of the Company or any
Subsidiary under the Federal bankruptcy laws or any other
applicable law or statute of the United States of America or any
State, district or territory thereof, and such order, judgment or
decree shall not be vacated or set aside or stayed within 60 days
from the date of entry thereof; or
(j) if, under the provisions of any other law for the
relief or aid of debtors, any court of competent jurisdiction
shall assume custody or control of the Company or any Subsidiary
or of the whole or any substantial part of its property and such
custody or control shall not be terminated or stayed within 60
days from the date of assumption of such custody or control.
5.2. In the case any one or more of the Events of Default
specified in Section 5.1 hereof shall have occurred and be
continuing, unless waived by the holders of a majority-in-
interest of the principal amount of the Notes, the holder of this
Note may proceed to protect and enforce its rights either by suit
in equity and/or by action at law, whether for the specific
performance of any covenant or agreement contained in this Note,
or, unless so waived, the holder of this Note may proceed to
enforce the payment of all sums due upon this Note or to enforce
any other legal or equitable right of the holder of this Note. In
the event an Event of Default shall have occurred, unless so
waived, and the holder of this Note shall employ attorneys, or
incur other costs and expenses for the collection of payments due
or to become due, or for the enforcement or performance or
observance of any obligation or agreement of the Company under
this Note, the Company agrees that it will pay to the holder, on
demand, the reasonable fees of such attorney together with all
other costs and expenses incurred by the holder.
5.3 No remedy herein conferred upon the holder is intended
to be exclusive of any other remedy and each and every such
remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law
or in equity or by statute or otherwise.
5.5 No course of dealing between the Company and the
holder or any delay on the part of the holder hereof in exer-
cising any rights hereunder shall operate as a waiver of any
rights of the holder hereof.
SECTION 6. Protective Covenants.
6.1 Without the prior written consent of the holders of a
majority-in-interest of the principal amount of the Notes, the
Company shall not: authorize, adopt or approve an amendment to
the Certificate of Incorporation of the Company which would alter
or change in any manner the terms, powers, preferences or special
rights of the Senior Preferred Stock, or grant any waivers of
such preferences or rights, including any such modification or
amendment that may (A) change the redemption date of the Senior
Preferred Stock, (B) raise the conversion price of the Senior
Preferred Stock or reduce the liquidation preference or
redemption price or the dividend rights of the Senior Preferred
Stock, (C) adversely affect any of the conversion features of the
Senior Preferred Stock, or (D) reduce the percentage of
outstanding Senior Preferred Stock necessary to modify or amend
the terms thereof or to grant waivers thereof; or (without
limiting any rights of any party to require the Company to effect
a registration under the Registration Rights Agreement) cause or
permit to occur any Participation Event (as defined in the
Certificate of Designation), if within the control of the Company
and except for any Liquidity Event (as defined in the Certificate
of Designation) in the ordinary course of business.
6.2 Without the prior written consent of the holders of a
majority-in-interest of the principal amount of the Notes, the
Company shall not: (A) declare a dividend or effect any other
distribution on the Senior Preferred Stock except as required by
the Purchase Agreement or the Certificate of Designation; (B)
subdivide the outstanding shares of Senior Preferred Stock into
a greater number of shares of Senior Preferred Stock or combine
the outstanding shares of Senior Preferred Stock into a smaller
number of shares of Senior Preferred Stock; or (C) issue or sell
any shares of Senior Preferred Stock for a consideration per
share less than the Conversion Price in effect immediately prior
to the time of such issue or sale, or without consideration.
For purposes of this Section 6.2, the following additional
paragraphs shall apply:
(i) Issuance of Rights or Options. In case at any
time the Company shall in any manner grant (whether directly or
by assumption in a merger or otherwise) any rights to subscribe
for or to purchase, or any options for the purchase of, Senior
Preferred Stock or any stock or securities convertible into or
exchangeable for Senior Preferred Stock (such rights or options
being herein called "Options" and such convertible or
exchangeable stock or securities being herein called
"Convertible Securities") whether or not such Options or the
right to convert or exchange any such Convertible Securities
are immediately exercisable, and the price per share for
which Senior Preferred Stock is issuable upon the exercise
of such Options or upon the conversion or exchange of such
Convertible Securities (determined by dividing (I) the total
amount, if any, received or receivable by the Company as
consideration for the granting of such Options, plus the
aggregate amount of additional consideration payable to the
Company upon the exercise of all such Options, plus, in the
case of such options which relate to Convertible Securities,
the aggregate amount of additional consideration, if any,
payable upon the issue or sale of such Convertible
Securities and upon the conversion or exchange thereof, by
(ii) the total maximum number of shares of Senior Preferred
Stock issuable upon the exercise of such Options or upon the
conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options) shall be less
than the Conversion Price in effect immediately prior to the
time of the granting of such Options, then the total maximum
number of shares of Senior Preferred Stock issuable upon the
exercise of such Options or upon conversion or exchange of
the total maximum amount of such Convertible securities
issuable upon the exercise of such Options shall be deemed
to have been issued for such price per share as of the date
of granting of such Options.
(ii) Issuance of Convertible Securities. In case the
Company shall in any manner issue (whether directly or by
assumption in a merger or otherwise) or sell any Convertible
Securities, whether or not the rights to exchange or convert
any such Convertible Securities are immediately exercisable,
and the price per share for which Senior Preferred Stock is
issuable upon such conversion or exchange (determined by
dividing (i) the total amount received or receivable by the
Company as consideration for the issue or sale of such
Convertible Securities, plus the aggregate amount of
additional consideration, if any, payable to the Company
upon the conversion or exchange thereof, by (ii) the total
maximum number of shares of Senior Preferred Stock issuable
upon the conversion or exchange of all such Convertible
Securities) shall be less than the Conversion Price in
effect immediately prior to the time of such issue or sale,
then the total maximum number of shares of Senior Preferred
Stock issuable upon conversion or exchange of all such
Convertible Securities shall be deemed to have been issued
for such price per share on the date of the issue or sale of
such Convertible Securities.
(iii) Consideration for Stock. In case any shares of
Senior Preferred Stock, Options or Convertible Securities
shall be issued or sold for cash, the consideration received
therefor shall be deemed to be the amount received by the
Company therefor, without deduction therefrom of any
expenses incurred or any underwriting commissions or
concessions paid or allowed by the Company in connection
therewith. In case any shares of Senior Preferred Stock,
Options or Convertible Securities shall be issued or sold
for a consideration other than cash, the amount of the
consideration other than cash received by the Company shall
be deemed to be the fair value for such consideration as
determined in good faith by the Board of Directors of the
Company, without deduction of any expenses incurred or any
underwriting commissions or concessions paid or allowed by
the Company in connection therewith. In case any Options
shall be issued in connection with the issue and sale of
other securities of the Company, together comprising one
integral transaction in which no specific consideration is
allocated to such Options by the parties thereto, such
Options shall be deemed to have been issued without
consideration.
SECTION 7. Conversion of Note.
7.1 Right to Convert. Subject to and upon compliance with
the provisions hereof, the holder of this Note shall have the
right, at such holder's option, at any time or from time to time,
on or after the second anniversary of the Issuance Date, to
convert all or any part of the unpaid principal amount hereof,
plus all interest accrued to the date of such conversion, into
Shares of Senior Preferred Stock, at the applicable Conversion
Price.
7.2 Exercise of Conversion Privilege. In order to
exercise the conversion privilege, the holder of this Note shall
surrender it to the Company at the principal executive offices of
the Company at 0000 Xxxxxxxxxx Xxx, Xxxxx 00, Xxxxxxxxxxxx,
Xxxxxxx 00000 accompanied by written notice to the Company that
the holder elects to convert this Note, or, if less than the
entire unpaid principal amount hereof is to be converted, the
portion hereof to be converted, and, if requested by the Company,
by a duly executed instrument of transfer. Such notice (and any
notice by the holder of this Note accompanying surrender of this
Note in the event of a Mandatory Conversion) shall also state the
name or names (with address or addresses) in which the
certificate or certificates for shares of Senior Preferred Stock
which shall be issuable on such conversion shall be issued. As
soon as practicable after the receipt of such notice and the
surrender of this Note, the Company shall issue and shall deliver
at said offices to the holder of this Note, or on his written
order, a certificate or certificates for the number of full
shares of Senior Preferred Stock issuable upon the conversion of
this Note (or portion hereof) and provision shall be made for any
fraction of a share as provided in Section 7.5 hereof. Such
conversion (other than a Mandatory Conversion) shall be deemed to
have been effected immediately prior to the close of business on
the date on which such notice shall have been received by the
Company and this Note shall have been surrendered as aforesaid.
Conversion shall be at the Conversion Price in effect at the time
of conversion, and at such time the rights of the holder of this
Note as such holder shall cease and the person or persons in
whose name or names any certificate or certificates for shares of
Senior Preferred Stock shall be issuable upon such conversion
shall be deemed to have become the holder or holders of record of
the shares of Senior Preferred Stock represented thereby. Upon
conversion of only a part of the unpaid principal amount of this
Note, the Company shall execute and deliver to or on the order of
the holder thereof at said offices, at the expense of the
Company, a new Note in principal amount equal to the unconverted
portion of such unpaid principal amount, which new Note shall be
dated and bear interest from the date to which interest shall
have been paid on such unconverted portion.
7.3 Mandatory Conversion. Immediately prior to any event
which, pursuant to the Certificate of Designation, would cause
the mandatory conversion of all outstanding shares of Senior
Preferred Stock into shares of the common stock, $.0001 par
value, of the Company, the entire unpaid principal amount hereof,
plus all interest accrued to the date of such conversion, shall
automatically and without any further act by the holder of this
Note convert into shares of Senior Preferred Stock, at the then
applicable Conversion Price. In addition, contemporaneously with
the conversion of the ERS Note, in whole or in part, or of any
right to convert interest under the ERS Note, into shares of
Senior Preferred Stock, then the principal of or interest on this
Note (or right to receive interest on this Note), as the case may
be, shall automatically and without further act by the holder of
this Note convert into shares of Senior Preferred Stock, at the
then applicable Conversion Price, in the same proportion as
conversion of the principal of, or interest on the ERS Note (or
right to receive interest on the ERS Note), respectively. Any
conversion of this Note pursuant to this Section 7.3 is herein
referred to as a "Mandatory Conversion."
7.4 Right to Interest. Notwithstanding any provision to
the contrary contained in this Note, the holder of this Note
shall have the right, exercisable by written notice delivered to
the Company, to require that any interest payable under this Note
be paid by delivery of shares of Senior Preferred Stock in the
manner set forth under Section 1 hereof.
7.5 Adjustment for Fractional Shares. No fractional
shares of Senior Preferred Stock or scrip shall be issued upon
conversions of this Note. Instead of any fractional shares of
Senior Preferred Stock which would otherwise be issuable upon
conversion of this Note (or portion hereof) the Company shall pay
a cash adjustment in respect of such fractional share of Senior
Preferred Stock in an amount equal to the same fraction of the
then current fair value of a share of Senior Preferred Stock, as
determined in good faith by the Board of Directors of the
Company.
7.6 Conversion Price. The Conversion Price per share of
Senior Preferred Stock shall be $7.42.
7.7 Consolidation, Merger, Sale of Assets, Reorganization
or Reclassification. If any consolidation or merger of the
Company with another corporation after the Issuance Date, or the
sale of all or substantially all of its assets to another
corporation shall be effected, or in case of any capital
reorganization or reclassification of the capital stock of the
Company, then, as a condition of such consolidation, merger or
sale, reorganization or reclassification, lawful and adequate
provision shall be made whereby the holder of this Note shall
thereafter have the right to purchase and receive upon the basis
and upon the terms and conditions specified herein and in lieu of
the shares of Senior Preferred Stock immediately theretofore
purchasable and receivable upon the conversion of this Note, such
shares of stock, securities or assets as may be issuable or
payable with respect to or in exchange for a number of
outstanding shares of Senior Preferred Stock of the Company equal
to the number of shares of Senior Preferred Stock immediately
theretofore purchasable and receivable by such holder had such
consolidation, merger, sale, reorganization, or reclassification
not taken place, and in any such case appropriate provision shall
be made with respect to the rights and interest of such holder to
the end that the provisions hereof (including without limitation
provisions for adjustment of the Conversion Price) shall
thereafter be applicable, as nearly as may be, in relation of any
shares of stock, securities or assets thereafter deliverable upon
the exercise of such conversion rights.
7.8 Notice of Certain Actions. Without limiting any
provision of the Purchase Agreement or contained herein, in case
at any time:
(i) the Company shall offer for subscription pro rata
to the holders of its shares of Senior Preferred Stock any
additional shares of stock of any class or other rights;
(ii) there shall be any capital reorganization or
reclassification of the capital stock of the Company, or
consolidation or merger of the Company with, or sale of all or
substantially all its assets to, another corporation; or
(iii) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in any one or more of said cases, the Company shall give
written notice to the holder hereof, of the date on which (A) the
books of the Company shall close or a record shall be taken for
such transaction or (B) such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or
winding-up shall take place, as the case may be. Such notice
shall also specify the date as of which the holders of shares of
Senior Preferred Stock of record shall participate in such
transaction or shall be entitled to exchange their shares of
Senior Preferred Stock for securities or other property
deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such written notice shall be
given at least 30 days prior to the action in question and not
less than 30 days prior to the record date or the date on which
the Company's transfer books are closed in respect thereto.
7.9 Reservation of Shares. The Company shall at all times
reserve and keep available out of its authorized shares of Senior
Preferred Stock, solely for the purpose of issue upon the
conversion of this Note as herein provided, such number of shares
of Senior Preferred Stock as shall then be issuable upon the
conversion of this Note.
7.10 Taxes. The issuance of certificates of shares of
Senior Preferred Stock upon the conversions of this Note shall be
made without charge to the holder of this Note for any issuance
tax in respect thereto; provided, however, that the Company shall
not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of this Note.
7.11 Closing of Books. The Company will at no time close
its transfer books against the transfer of any shares of Senior
Preferred Stock issued or issuable upon the conversion of this
Note in any manner which interferes with the timely conversion of
this Note.
SECTION 8. Exchange or Replacement of Note.
8.1 The holder of this Note, at its option, may in person
or by duly authorized attorney surrender this Note for exchange,
at the principal executive offices of the Company, and at the
expense of the Company receive in exchange therefor a new Note in
the same aggregate principal amount as the aggregate unpaid
principal amount of the Note so surrendered, bearing interest at
the same annual rate as the Note so surrendered and otherwise in
substantially the form of the Note so surrendered, each such new
Note to be dated as of the date to which interest has been paid
on the note so surrendered and to be in such principal amount and
payable to the holder of this Note. Five days' prior written
notice to the holder's intention to make such exchange shall be
given to the Company.
8.2 Upon receipt by the Company of evidence satisfactory to
it of the loss, theft, destruction or mutilation of this Note,
and (in case of loss, theft or destruction) of indemnity
reasonably satisfactory to it, and upon surrender and cancel-
lation of this Note, if mutilated, the Company, upon reimburse-
ment to it of all reasonable expenses incidental thereto, will
make and deliver a new Note, of like tenor, in lieu of this Note.
Any Note made and delivered in accordance with the provisions of
this Section 8 shall be dated as of the date to which interest
has been paid on this Note.
SECTION 9. Notices. All notices, requests or instructions
hereunder shall be in writing and delivered personally or sent by
registered or certified mail, postage prepaid or by overnight
express mail by a nationally recognized overnight mail carrier as
follows:
(1) if to the Company:
0000 Xxxxxxxxxx Xxx
Xxxxx 00
Xxxxxxxxxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
Telecopy Number: (000) 000-0000
with a copy to:
Xxxxx X. Xxxxx, Esq.
Powell, Goldstein, Xxxxxx & Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Telecopy Number: (000) 000-0000
(2) if to the holder of this Note:
c/o Xxxxxx, Xxxxxx & Co.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Brain
Telecopy Number: (000) 000-0000
Any notice so addressed and mailed, shall be deemed to be given
when so mailed. Any notice so addressed and otherwise delivered
shall be deemed to be given when actually received by the
addressee. Any of the above addresses may be changed at any time
by notice given as provided above; provided, however, that any
such notice of change of address shall be effective only upon
receipt.
SECTION 10. Captions. Captions and section titles
contained herein are inserted as a matter of convenience and for
reference only and are not intended to define, limit, extend or
describe the scope of this Note or the intent of any provision
hereof.
SECTION 11. Severability. In the event that one or more
of the provisions of this Note shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any
other provisions of this Note, but this Note shall be construed
as if such invalid, illegal or unenforceable provision had never
been contained herein.
SECTION 12. Holders. The Company may deem and treat the
holder of this Note as the absolute owner of this Note for the
purpose of receiving payment hereon or on account hereof and for
all other purposes, and the Company shall not be affected by any
notice to the contrary.
SECTION 13. Governing Law. This Note shall be governed
by and construed in accordance with the laws of the State of New
York applicable to agreements made and to be performed entirely
within such state.
SECTION 14. Related Agreements. This Note is issued
pursuant to the Purchase Agreement and is entitled to the
benefits thereof and subject to the obligations thereunder, and
to those set forth in the Registration Rights Agreement and the
Securityholders Agreement. Copies of such agreements may be
obtained by any holder of this Note at the principal executive
offices of the Company.
IN WITNESS WHEREOF, the undersigned has executed this Note
as of the date first-above written.
ATTEST: NEWCHECK CORPORATION
d/b/a Productivity Solutions,
Inc.
By
--------------------- ---------------------------
Secretary President and Chief Executive
Officer
EXHIBIT B
NEWCHECK CORPORATION
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS OF PREFERRED STOCK
AND QUALIFICATIONS, LIMITATIONS AND
RESTRICTIONS THEREOF
Pursuant to Section 151(g) of the
General Corporation Law of
Delaware
NEWCHECK CORPORATION (hereinafter referred to as the "Company"),
a corporation organized and existing under the laws of the State
of Delaware, hereby certifies that pursuant to the provisions of
Section 141(f) of the General Corporation Law of Delaware, its
Board of Directors, by unanimous written consent, dated February
11, 2000 adopted the following resolution, which resolution
remains in full force and effect as of the date hereof:
WHEREAS, the Board of Directors of the Company is authorized,
within the limitations and restrictions stated in the
Certificate of Incorporation, to fix by resolution or
resolutions the designation of preferred stock and the powers,
preferences and relative participating, optional or other
special rights and qualifications, limitations or restrictions
thereof, including, without limiting the generality of the
foregoing, such provisions as may be desired concerning voting,
redemption, dividends, dissolution or the distribution of
assets, conversion or exchange, and such other subjects or
matters as may be fixed by resolution or resolutions of the
Board of Directors under the General Corporation Law of
Delaware; and
WHEREAS, it is the desire of the Board of Directors of
the Company, pursuant to its authority as aforesaid, to
authorize and fix the terms of the preferred stock to be
designated the Series C Convertible Preferred Stock of the
Company and the number of shares constituting such preferred
stock;
NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized
the Series C Preferred Stock on the terms and provisions herein
set forth:
TERMS, PREFERENCES, RIGHTS AND LIMITATIONS
of
SERIES C PREFERRED STOCK
of
NEWCHECK CORPORATION
The relative rights, preferences, powers, qualifications,
limitations and restrictions granted to or imposed upon the
Series C Preferred Stock or the holders thereof are as follows:
1. Definitions. For purposes of this Designation, the
following definitions shall apply:
"AG Convertible Note" means the Company's 8% Convertible
Note dated as of even date herewith issued to AG Checkout LLC
due February 11, 2005 in the aggregate principal amount of
$700,000, convertible into Senior Preferred Stock of the
Company.
"Appraised Value" shall mean, on any date herein specified,
the fair market value of a share of Series C Preferred Stock
(calculated as if a Participation Event had then occurred
entailing a sale of all or substantially all of the assets of
the company to a Person not an Affiliate of the Company, or a
merger or consolidation of the Company or a sale of its shares
whereby the entire equity in the Company is acquired by a Person
not an Affiliate of the Company), determined by an investment
banking firm selected by the Company and approved by the
Required Holders (not to be unreasonably withheld or delayed),
the costs of which shall be borne by the Company.
"Board" shall mean the Board of Directors of the Company.
"Business Day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in the State of
New York are authorized or obligated by law or executive order
to close.
"Common Stock" shall mean the Common Stock, $.0001 par
value per share, of the Company.
"Company" shall mean NewCheck Corporation d/b/a
Productivity Solutions, Inc., a Delaware corporation.
"Conversion Price" shall mean the amount computed by dividing
the Liquidation Preference by the number of shares of Common
Stock into which one share of Series C Preferred Stock is
convertible at the Conversion Ratio.
"Conversion Ratio" has the meaning set forth in Section 7
of this Certificate of Designation.
"Convertible Notes" means the AG Convertible Note and the
ERS Convertible Note.
"Convertible Securities" has the meaning set forth in
Section 7 of this Certificate of Designation.
"Current Market Price", on any date, shall mean the
average, for 30 consecutive Business Days commencing 45 days
before such date, of the last sale prices of the Common Stock on
each such day on the principal stock exchange or the Nasdaq
National Market on which the Common Stock is then listed or
admitted to trading, and if no sale takes place on any such day
on any such exchange or market, the average of the last reported
closing bid and asked prices on such date as officially quoted
on any such exchange or market; and if the Common Stock is not
then listed or admitted to trading on any stock exchange or such
market, the average of the last reported closing bid and asked
prices on such day in the over-the-counter market, as furnished
by Nasdaq or the National Quotation Bureau, Inc.; and if neither
such corporation at the time is engaged in the business of
reporting such prices, as furnished by any similar firm then
engaged in such business, or if there is no such firm, as
furnished by any member of the National Association of
Securities Dealers selected by the Company and approved by the
Required Holders (not to be unreasonably withheld or delayed);
provided, however, that if the Common Stock is not traded in
such manner that the foregoing data is available for the period
required hereunder, the Current Market Price shall mean the fair
market value as shall be determined in good faith by the Board
of the Company or, if such determination cannot be made, by an
investment banking firm selected by the Company and approved by
the Required Holders (not to be unreasonably withheld or
delayed), the costs of which shall be borne by the Company.
"Dividend Rate" shall mean 8% per annum, calculated on a
360 day per year basis, based on the actual number of days
elapsed.
"ERS Convertible Note" means the Company's 8% Convertible
Note dated of even date herewith due February 11, 2005 issued to
Electronic Retailing Systems International, Inc. in the
aggregate principal amount of $4,550,000, convertible into
Senior Preferred Stock of the Company.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any similar Federal statute, and the rules
and regulations of the Securities and Exchange Commission
thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Exchange Act
of 1934, as amended, shall include reference to the comparable
section, if any, of any such similar Federal statute.
"Fair Market Value" shall mean the amount which a willing
buyer would pay a willing seller in an arm's-length transaction,
with neither being under any compulsion to buy or sell.
"Fully Diluted Outstanding" shall mean, at any date, all
shares of Common Stock outstanding at such date, and all shares
of Common Stock issuable upon the exchange or conversion of all
Convertible Securities outstanding on such date and exchangeable
for or convertible into Common Stock (and of all such
Convertible Securities issuable upon exercise of Options), and
upon the exercise of all Options to acquire Common Stock
outstanding on such date.
"Liquidation Preference" shall mean $ 7.42 per share.
"Liquidity Event" shall mean availability to the Company of cash
and cash equivalents in excess of $20 million, excluding
therefrom any and all working capital or reserves or other
amounts necessary or appropriate for the proper operation of the
Company's business (as reasonably determined by the Board of
Directors) and amounts restricted as a result of any obligation
undertaken by the Company in furtherance of the Company's
business and approved by its Board acting reasonably (such
exclusions not to extend to amounts required for distributions
or payments on or in exchange for shares, whether in redemption
thereof, upon a Participation Event or otherwise).
"Management Agreement" shall mean the Management Agreement
dated February 11, 2000 between the Company and Electronic
Retailing Systems International, Inc., as may from time to time
be amended, and any replacements thereof.
"Mandatory Conversion" has the meaning set forth in Section
7 of this Certificate of Designation.
"New Securities" has the meaning set forth in the
Securityholders Agreement.
"Optional Conversion" has the meaning set forth in Section
7 of this Certificate of Designation.
"Options" has the meaning set forth in Section 7 of this
Certificate of Designation.
"Original Issue Date" shall mean the date of the original
issuance of shares of Series C Preferred Stock.
"Participation Event" shall mean (i) a sale of all or
substantially all of the assets of the Company, or (ii) a merger
or consolidation of the Company with or into any other
corporation (other than a merger or consolidation in which
shares of the Company's Voting Securities outstanding
immediately before such merger or consolidation are exchanged or
converted into or constitute shares which represent more than
50% of the surviving entity's Voting Securities after such
consolidation or merger), or (iii) a transaction or a series of
transactions in which a Person or a group of Persons (as defined
in Rule 13d-5(b)(I) of the Exchange Act) acquires beneficial
ownership (as determined in accordance with Rule 13d-3 of the
Exchange Act) of more than 50% of the Voting Securities of the
Company, or (iv) a Qualified Public Offering, or (v) a Liquidity
Event, or (vi) a liquidation, dissolution of winding-up the
Company. A Participation Event shall not extend to any
reorganization, merger or consolidation involving (1) only a
change in the state of incorporation of the Company, (2) a
merger of the Company with or into a wholly-owned subsidiary of
the Company that is incorporated in the United States of
America, or (3) an acquisition by merger, reorganization or
consolidation, in which the Company is substantively the
surviving corporation and operates as a going concern and is not
the target in any such acquisition, of another corporation
incorporated in the United States of America that is engaged in
a business similar or related to the business of the Company and
which does not involve a recapitalization of the Series C
Preferred Stock.
"Person" shall mean any individual, firm, corporation or
other entity, and shall include any successor (by merger or
otherwise) of such entity.
"Qualified Public Offering" means a sale of Company's
Common Stock pursuant to an underwritten public offering of the
Company's Common Stock on Form S-1 (or any equivalent general
registration form) under the Securities Act of 1933, as amended,
where the pre-closing valuation of the Company (based on the
percentage of the Company sold in such transaction and the price
therefor) is at least $120 million and generating for the
Company aggregate gross proceeds of at least $20 million.
"Redemption Date" shall mean the date on which any shares
of Series C Preferred Stock are redeemed by the Company.
"Redemption Notice" has the meaning set forth in Section
6(a) of this Certification of Designation.
"Redemption Price" has the meaning set forth in Section
6(a) of this Certificate of Designation.
"Required Holders" shall mean Persons who, in the
aggregate, hold Series C Preferred Stock (or any Convertible
Note) representing at least 66.67% of the outstanding Series C
Preferred Stock, including in such calculation shares issuable
upon conversion of the Convertible Notes.
"Securityholders Agreement" shall mean the Amended and
Restated Securityholders Agreement dated February 11, 2000
entered into, inter alia, by the Company and the Required
Holders, as may from time to time be amended.
"Series A Preferred Stock" shall mean Company's Series A
Preferred Stock, $.0001 par value per share.
"Series B Terms, Preferences, Rights and Limitations" shall
mean the Amended Terms, Preferences, Rights and Limitations of
the Series B Preferred Stock, as filed with the Secretary of
State of Delaware (together with the Company's Fifth Amended and
Restated Certificate of Incorporation).
"Series B Preferred Stock" shall refer to shares of Series
B1 Preferred Stock and Series B2 Preferred Stock.
"Series B1 Preferred Stock" shall mean Company's Series B1
Convertible Preferred Stock, $.0001 par value per share.
"Series B2 Preferred Stock" shall mean Company's Series B2
Convertible Preferred Stock, $.0001 par value per share.
"Series C Preferred Stock" shall mean Company's Series C
Convertible Preferred Stock, $.0001 par value per share.
"Super Required Holders" shall mean Persons who, in the
aggregate, hold Series C Preferred Stock (or any Convertible
Note) representing at least 75% of the outstanding Series C
Preferred Stock, including in such calculation shares issuable
upon conversion of the Convertible Notes.
"Voting Securities" shall mean all classes of capital or
other interests in equity (excluding debt securities convertible
into equity) of the subject referenced then outstanding and
normally entitled to vote in the election of directors,
managers, or trustees thereof.
2. Designation: Number of Shares. The designation of the
preferred stock authorized by this resolution shall be Series C
Preferred Stock and the number of shares of Series C Preferred
Stock authorized hereby shall be 3,500,000.
3. Dividends.
(a) So long as any shares of Series C Preferred Stock
shall be outstanding, the holders of such Series C Preferred
Stock shall be entitled to receive, if legally payable by the
Board of the Company, preferential dividends, payable-in-kind in
additional shares of Series C Preferred Stock of the same
series, based upon the Liquidation Preference thereof, at the
Dividend Rate on the Liquidation Preference hereunder, payable
semi-annually on the first Business Day of July and January of
each year, commencing July 1, 2000. If the Board of the Company
cannot legally declare or pay such dividends, then such
dividends shall be cumulative and compound semi-annually, shall
begin to accrue and compound from the Original Issue Date,
whether or not there shall be net profits or net assets of the
Company legally available for the payment of those dividends,
and shall be paid-in-kind as soon as such dividends are legally
payable.
(b) So long as any shares of Series C Preferred Stock
shall be outstanding, then, without the affirmative vote of the
Required Holders, (i) no dividend whatsoever shall be paid or
declared, and no distribution shall be made, on account of any
Common Stock or Series A Preferred Stock or (except as required
by the Series B Terms, Preferences, Rights and Limitations as in
effect on the date hereof) the Series B Preferred Stock and
(ii) no shares of Common Stock or Series A Preferred Stock or
(except as required by the Series B Terms, Preferences, Rights
and Limitations as in effect on the date hereof) the Series B
Preferred Stock shall be repurchased, redeemed or acquired by
the Company, and (except as aforesaid) no funds shall be paid
into or set aside or made available for a sinking fund for the
purchase, redemption or acquisition thereof.
4. Liquidation Rights of Series C Preferred Stock.
(a) In the event of any liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, the
holders of Series C Preferred Stock then outstanding shall be
entitled to be paid out of the assets of the Company available
for distribution to its stockholders, whether such assets are
capital, surplus or earnings, after payment or declaration and
setting apart for payment of amounts due thereon shall be made
in respect of any shares of any other class or series of the
Company's Preferred Stock ranking senior to the Series C
Preferred Stock and before any payment or declaration and
setting apart for payment of any amount shall be made in respect
of any shares of Common Stock or any share of any other class or
series of the Company's preferred stock ranking junior to the
Series C Preferred Stock (including, but not limited to, the
Company's Series A Preferred Stock and its Series B Preferred
Stock) with respect to the payment of dividends or distribution
of assets on liquidation, dissolution or winding up of the
Company, an amount equal to the Liquidation Preference plus all
declared or accrued and unpaid dividends (whether or not then
legally payable) in respect of any liquidation, dissolution or
winding up consummated.
(b) If upon any liquidation, dissolution or winding up of
the Company, whether voluntary or involuntary, and after payment
or declaration and setting apart for payment of amounts due
thereon shall be made in respect of any shares of any other
class or series of the Company's preferred stock ranking senior
to the Series C Preferred Stock, the assets to be distributed
among the holders of Series C Preferred Stock shall be
insufficient to permit the payment to such stockholders of the
full preferential amounts aforesaid, then the entire assets of
the Company remaining to be distributed after payment or
declaration and setting apart for payment of amounts due in
respect of any shares of any other class or series of the
Company's preferred stock ranking senior to the Series C
Preferred Stock) shall be distributed ratably among the holders
of Series C Preferred Stock, based on the full preferential
amounts for the number of shares of Common Stock (determined on
an as-if converted basis) held by each holder.
(c) For purposes of this Section 4, each Participation
Event shall be deemed a liquidation, dissolution, or winding-up
of the Company.
(d) After payment to the holders of Series C Preferred
Stock of the amounts set forth in Sections 4(a) and (b) hereof,
if a Participation Event other than a Qualified Public Offering
or a Liquidity Event shall have occurred the remaining assets of
the Company legally available for distribution, if any, shall be
distributed to the holders of any Company stock entitled to a
preference over the Common Stock and, thereafter, ratably to the
holders of Common Stock together with the Series C Preferred
Stock and the Series B Preferred Stock, and of any other
participating security issued by the Company (who shall
participate with the Common Stock on an as-if converted basis
[including treating any then declared or accrued and unpaid
dividends, whether or not then legally payable as if then paid
in kind], subject to the provisions of the Series B Terms,
Preferences, Rights and Limitations in respect of allocations
between the Series B1 Preferred Stock and the Series B2
Preferred Stock).
5. Voting Rights. In addition to any voting rights
provided by law, the holders of shares of Series C Preferred
Stock shall have the following voting rights:
(a) So long as any of the Series C Preferred Stock is
outstanding, each share of Series C Preferred Stock shall
entitle the holder thereof to vote on all matters voted on by
the holders of Common Stock, voting together as a single class
with other shares entitled to vote at all meetings of the
stockholders of the Company. With respect to any such vote,
each share of Series C Preferred Stock shall entitle the holder
thereof to cast the number of votes equal to the number of votes
which could be cast in such vote by a holder of the number of
shares of Common Stock of the Company into which such share of
Series C Preferred Stock is convertible on the record date for
such vote.
(b) The affirmative vote of the Required Holders, voting
together as a class, in person or by proxy, at a special or
annual meeting of stockholders called for the purpose, or
pursuant to a written consent of stockholders shall be necessary
to authorize, adopt or approve an amendment to the Certificate
of Incorporation of the Company which would alter or change in
any manner the terms, powers, preferences or special rights of
the shares of Series C Preferred Stock, or grant any waivers of
such preferences or rights, provided, that, no such modification
or amendment may, without the consent of the Super Required
Holders, (A) change the redemption date of the Series C
Preferred Stock; (B) raise the Conversion Price or reduce the
Liquidation Preference or Redemption Price or dividend rights of
the Series C Preferred Stock; (C) adversely affect any of the
conversion features of the Series C Preferred Stock set forth in
Section 7 hereof; or (D) reduce the percentage of outstanding
Series C Preferred Stock necessary to modify or amend the terms
thereof or to grant waivers thereof.
(c)(i) The foregoing rights of holders of shares of
Series C Preferred Stock to take any actions as provided in this
Section 5 may be exercised at any annual meeting of stockholders
or at a special meeting of stockholders held for such purpose as
hereinafter provided or at any adjournment thereof or pursuant
to any written consent of stockholders.
(ii) If (A) the annual meeting of stockholders of the
Company is not, for any reason, held within the time fixed in
the by-laws of the Company, or (B) vacancies shall exist in the
offices of directors elected by the holders of Series C
Preferred Stock pursuant to the Securityholders Agreement or the
composition of the Board shall otherwise not conform to the
requirements of the Securityholders Agreement, a proper officer
of the Company, upon the written request of the holders of
record of at least ten percent (10%) of the shares of Series C
Preferred Stock then outstanding (or of the ERS Convertible
Note), addressed to the Secretary of the Company, shall call a
special meeting in lieu of the annual meeting of stockholders or
a special meeting of the holders of Series C Preferred Stock and
the Convertible Notes, for the purpose of electing or, if
necessary, removing directors elected by the holders of Series C
Preferred Stock. Any such meeting shall be held at the earliest
practicable date at the place for the holding of the annual
meetings of stockholders. If such meeting shall not be called
by the proper officer of the Company within twenty (20) days
after personal service of said written request upon the
Secretary of the Company, or within twenty (20) days after
mailing the same within the United States by certified mail,
addressed to the Secretary of the Company at its principal
executive offices, then the holders of record of at least ten
percent (10%) of the outstanding shares of Series C Preferred
Stock (or of the ERS Convertible Note) may designate in writing
one of their number to call such meeting at the expense of the
Company, and such meeting may be called by the Person so
designated upon the notice required for the annual meetings of
stockholders of the Company and shall be held at the place for
holding the annual meetings of stockholders. Any holder of
Series C Preferred Stock (or of the ERS Convertible Note) so
designated shall have access to the lists of stockholders to be
called pursuant to the provisions hereof.
6. Redemption of Series C Preferred Stock.
(a)(i) Mandatory Redemption. (A)(i) Provided that the
Required Holders shall have delivered written notice to the
Company at least 90 days prior to such date of their request
that the Company redeem such shares, on April 30, 2003 the
Company shall redeem, and the holders of the outstanding Series
C Preferred Stock shall sell to the Company, at the applicable
redemption price per share (herein referred to as the
"Redemption Price") equal to the greater of (x) the sum of the
Liquidation Preference per share plus an amount equal to all
accrued and unpaid dividends per share, or (y) the Appraised
Value, one-third of the outstanding Series C Preferred Stock.
(ii) Provided that the Required Holders shall have
delivered written notice to the Company at least 90 days prior
to such date of their request that the Company redeem such
shares, on April 30, 2004 the Company shall redeem, and the
holders of the outstanding Series C Preferred Stock shall sell
to the Company, at the applicable Redemption Price, one-half of
the outstanding Series C Preferred Stock.
(iii) Provided that the Required Holders shall have
delivered written notice to the Company at least 90 days prior
to such date of their request that the Company redeem such
shares, on April 30, 2005 the Company shall redeem, and the
holders of the outstanding Series C Preferred Stock shall sell
to the Company, at the applicable Redemption Price, all
outstanding Series C Preferred Stock.
(iv) Each redemption pursuant to this Section 6 shall
be made pro rata among all holders of Series C Preferred Stock.
(v)
(B) At least 20 days and not more than sixty
days prior to the date fixed for the mandatory redemption of the
Series C Preferred Stock, written notice (herein referred to as
the "Redemption Notice") shall be mailed, postage prepaid, to
each holder of record of the Series C Preferred Stock at its
post office address last shown on the records of the Company.
The Redemption Notice shall state:
(1) the number of shares of Series C
Preferred Stock held by the holder that the Company intends to
redeem;
(2) the date fixed for redemption and the
Redemption Price; and
(3) that the holder is to surrender to the
Company, in the manner and at the place designated, its
certificate or certificates representing the shares of Series C
Preferred Stock to be redeemed.
(ii) Delivery of Certificates and Redemption Price. On or
before the Redemption Date, each holder of Series C Preferred
Stock shall surrender the certificate or certificates
representing such shares of Series C Preferred Stock to the
Company, in the manner and at the place designated in the
Redemption Notice, and thereupon the Redemption Price for such
shares shall be payable in cash on the Redemption Date to the
Person whose name appears on such certificate or certificates as
the owner thereof, and each surrendered certificate shall be
cancelled and retired. In the event that less than all of the
shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.
(b) Unless the Company defaults in the payment in full of
the Redemption Price, dividends on the Series C Preferred Stock
called for redemption shall cease to accumulate on the
Redemption Date, and the holders of such shares redeemed shall
cease to have any further rights with respect thereto on the
Redemption Date, other than to receive the Redemption Price
without interest.
(c) If, at the time of any redemption pursuant to this
Section 6, the funds of the Company legally available for
redemption of Series C Preferred Stock are insufficient to
redeem the number of shares required to be redeemed, those funds
which are legally available shall be used to redeem the maximum
possible number of such shares, pro rata based upon the number
of shares to be redeemed. At any time thereafter when
additional funds of the Company become legally available for the
redemption of Series C Preferred Stock, such funds shall
immediately be used to redeem the balance of the shares of
Series C Preferred Stock which the Company has become obligated
to redeem pursuant to this subparagraph, but which it has not
redeemed.
(d) The Company may not otherwise redeem or repurchase the
Series C Preferred Stock.
7. Conversion. (a) Subject to the provisions for
adjustment hereinafter set forth, (i) each share of Series C
Preferred Stock shall be convertible at any time and from time
to time, at the option of the holder thereof (such conversion,
herein referred to as an "Optional Conversion") and (ii) all
shares of Series C Preferred Stock shall be converted upon the
occurrence of a Qualified Public Offering or a Liquidity Event
or the written election of both the Required Holders and the
holder of the ERS Convertible Note (such conversion, herein
referred to as a "Mandatory Conversion"), in each case into
fully paid and nonassessable shares of Common Stock. The number
of shares of Common Stock deliverable upon conversion of a share
of Series C Preferred Stock, adjusted as hereinafter provided,
is referred to herein as the "Conversion Ratio." After giving
effect to the reverse stock split of the Common Stock on the
date hereof, the Conversion Ratio shall hereinafter be 3 in
respect of the Series C Preferred Stock, subject to adjustment
from time to time after the date hereof pursuant to paragraph
(f) of this Section 7. No fractional shares shall be issued
upon the conversion of any shares of Series C Preferred Stock.
All shares of Common Stock (including fractions thereof)
issuable upon conversion of more than one share of Series C
Preferred Stock by a holder thereof shall be aggregated for
purposes of determining whether conversion would result in the
issuance of any fractional share. If, after the aforementioned
aggregation, the conversion would result in the issuance of a
fraction of a share of Common Stock, the Company shall, in lieu
of issuing any fractional share, pay the holder otherwise
entitled to such fraction a sum in cash equal to the same
fraction applied to the Current Market Price of a share of
Common Stock on the date of conversion.
(b)(i) An Optional Conversion of the Series C Preferred
Stock may be effected by any such holder upon the surrender to
the Company at the principal office of the Company of the
certificate for such Series C Preferred Stock to be converted
accompanied by a written notice stating that such holder elects
to convert all or a specified number of such shares (which may
be fractional shares) in accordance with the provisions of this
Section 7 and specifying the name or names in which such holder
wishes the certificate or certificates for shares of Common
Stock to be issued. A Mandatory Conversion of the Series C
Preferred Stock shall be immediately effective and shall be
deemed to be made as of the date of the consummation of a
Liquidity Event or Qualified Public Offering (the existence of
which the Company shall promptly notify the holders of Series C
Preferred Stock), or the written election of both the Required
Holders and the holder of the ERS Convertible Note. Any holder
may surrender to the Company the certificate for such Series C
Preferred Stock converted pursuant to a Mandatory Conversion
accompanied by a written notice specifying the name or names in
which such holder wishes the certificate or certificates for
shares of Common Stock to be issued. Until such time as the
holder surrenders its certificate pursuant to a Mandatory
Conversion, the certificates representing the Series C Preferred
Stock shall represent the number of shares of Common Stock
issuable upon conversion of such certificate. Upon any
conversion of any shares of Series C Preferred Stock, all
accrued and unpaid dividends owing (whether or not then legally
payable) in respect of such shares shall be treated as if such
dividends were declared and paid-in-kind pursuant to Section
3(a) hereof and converted.
(ii) In case the written notice specifying the name or
names in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued shall
specify a name or names other than that of such holder, such
notice shall be accompanied by payment of all transfer taxes
payable upon the issuance of shares of Common Stock in such name
or names. Other than such taxes, the Company will pay any and
all issue and other taxes (other than taxes based on income)
that may be payable in respect of any issue or delivery of
shares of Common Stock on conversion of Series C Preferred Stock
pursuant hereto. As promptly as practicable, and in any event
within five Business Days after the surrender of such
certificate or certificates and the receipt of such notice
relating thereto and, if applicable, payment of all transfer
taxes (or the demonstration to the satisfaction of the Company
that such taxes have been paid), the Company shall deliver or
cause to be delivered (i) certificates representing the number
of validly issued, fully paid and nonassessable full shares of
Common Stock to which the holder of shares of Series C Preferred
Stock being converted shall be entitled and (ii) if less than
the full number of shares of Series C Preferred Stock evidenced
by the surrendered certificate or certificates is being
converted, a new certificate or certificates, of like tenor, for
the number of shares evidenced by such surrendered certificate
or certificates less the number of shares being converted.
(iii) In the case of an Optional Conversion, such conversion
shall be deemed to have been made at the close of business on
the date of giving the written notice referred to in the first
sentence of (b)(i) above and of such surrender of the
certificate or certificates representing the shares of Series C
Preferred Stock to be converted so that the rights of the holder
thereof as to the shares being converted shall cease except for
the right to receive shares of Common Stock in accordance
herewith, and the Person entitled to receive the shares of
Common Stock shall be treated for all purposes as having become
the record holder of such shares of Common Stock at such time.
(c) In case any shares of Series C Preferred Stock are to
be redeemed pursuant to Section 6, all rights of conversion
shall cease and terminate as to the shares of Series C Preferred
Stock to be redeemed at the close of business on the Business
Day next preceding the date fixed for redemption unless the
Company shall default in the payment of the Redemption Price.
(d) The Conversion Ratio shall be subject to adjustment
from time to time in certain instances as hereinafter provided.
(e) The Company shall at all times reserve, and keep
available for issuance upon the conversion of the Series C
Preferred Stock, such number of its authorized but unissued
shares of Common Stock as will from time to time be sufficient
to permit the conversion of all outstanding shares of Series C
Preferred Stock, and shall take all action required to increase
the authorized number of shares of Common Stock if necessary to
permit the conversion of all outstanding shares of Series C
Preferred Stock.
(f) The Conversion Ratio will be subject to adjustment
from time to time as follows:
(i) In case the Company shall at any time or from
time to time after the date hereof (A) pay a dividend, or
make a distribution, on the outstanding shares of Common
Stock in shares of Common Stock, (B) subdivide the
outstanding shares of Common Stock, or (C) combine the
outstanding shares of Common Stock into a smaller number of
shares, then, and in each such case, the Conversion Ratio
in effect immediately prior to such event or the record
date therefor, whichever is earlier, shall be adjusted so
that the holder of any shares of Series C Preferred Stock
thereafter surrendered for conversion shall be entitled to
receive the number of shares of Common Stock or other
securities of the Company which such holder would have
owned or have been entitled to receive after the happening
of any of the events described above, had such shares of
Series C Preferred Stock been surrendered for conversion
immediately prior to the happening of such event or the
record date therefor, whichever is earlier. An adjustment
made pursuant to this clause (i) shall become effective (x)
in the case of any such dividend or distribution,
immediately after the close of business on the record date
for the determination of holders of shares of Common Stock
entitled to receive such dividend or distribution, or (y)
in the case of such subdivision or combination, at the
close of business on the day upon which such corporate
action becomes effective.
(ii) In case the Company shall declare a dividend upon
the shares of Common Stock payable otherwise than out of
earned surplus or otherwise than in shares of Common Stock
or convertible securities of the Company, the Conversion
Price in effect immediately prior to the declaration of such
dividend shall be reduced by an amount equal, in the case of
a dividend in cash, to the amount thereof payable per share
of Common Stock or, in the case of any other dividend, to
the fair value thereof per share of Common Stock as
determined in good faith by the Board of the Company. For
the purposes of the foregoing, a dividend other than in cash
shall be considered payable out of earned surplus only to
the extent that such earned surplus is charged an amount
equal to the fair value of such dividend as determined in
good faith by the Board of the Company. Such reductions
shall take effect as of the date on which a record is taken
for the purpose of such dividend, or, if a record is not
taken, the date as of which the holders of shares of Common
Stock of record entitled to such dividend are to be
determined.
(iii) In case the Company shall, after the date
hereof, issue shares of Common Stock constituting New
Securities (other than issuances covered by clauses (i) and
(ii) above), at a price per share less than the greater of
(x) the Conversion Price as of the date of issuance of such
shares, and (y) the Current Market Price as of the date of
issuance of such shares, then, and in each such case, the
Conversion Price shall be reduced (but not increased) to
the price (calculated to the nearest cent) equal to the
quotient obtained by dividing (i) the amount equal to the
sum of (a) the number of Fully-Diluted Outstanding shares
immediately prior to such issue or sale multiplied by the
then existing Conversion Price, and (b) the consideration,
if any, received by the Company upon such issue or sale by
(ii) the total number of Fully-Diluted Outstanding shares
immediately after such issue or sale. Upon such adjustment
to the Conversion Price, the Conversion Ratio shall be
adjusted to the number obtained by dividing the Liquidation
Preference by the adjusted Conversion Price. For purposes of
this paragraph (iii) the following additional paragraphs
shall apply:
(A) In case at any time the Company
shall in any manner grant (whether directly or by
assumption in a merger or otherwise) any rights to
subscribe for or to purchase, or any options for the
purchase of, Common Stock or any stock or securities
convertible into or exchangeable for Common Stock
(such rights or options being herein called "Options"
and such convertible or exchangeable stock or
securities being herein called "Convertible
Securities") whether or not such Options or the right
to convert or exchange any such Convertible Securities
are immediately exercisable, and the price per share
for which Common Stock is issuable upon the exercise
of such Options or upon the conversion or exchange of
such Convertible Securities (determined by dividing
(i) the total amount, if any, received or receivable
by the Company as consideration for the granting of
such Options, plus the aggregate amount of additional
consideration payable to the Company upon the exercise
of all such Options, plus, in the case of such Options
which relate to Convertible Securities, the aggregate
amount of additional consideration, if any, payable
upon the issue or sale of such Convertible Securities
and upon the conversion or exchange thereof, by (ii)
the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the
conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options)
shall be less than the greater of (x) the Conversion
Price or (y) the Current Market Price, in each case in
effect immediately prior to the time of the granting
of such Options, then the total maximum number of
shares of Common Stock issuable upon the exercise of
such Options or upon conversion or exchange of the
total maximum amount of such Convertible Securities
issuable upon the exercise of such Options shall be
deemed to have been issued for such price per share as
of the date of granting of such Options and thereafter
shall be deemed to be outstanding. Except as otherwise
provided in Paragraph (iii)(C) of this Paragraph (f),
no adjustment of the Conversion Price shall be made
upon the actual issue of such Common Stock or of such
Convertible Securities upon exercise of such Options
or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.
(B) In case the Company shall in any
manner issue (whether directly or by assumption in a
merger or otherwise) or sell any Convertible
Securities, whether or not the rights to exchange or
convert any such Convertible Securities are
immediately exercisable, and the price per share for
which Common Stock is issuable upon such conversion or
exchange (determined by dividing (i) the total amount
received or receivable by the Company as consideration
for the issue or sale of such Convertible Securities,
plus the aggregate amount of additional consideration,
if any, payable to the Company upon the conversion or
exchange thereof, by (ii) the total maximum number of
shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities) shall be
less than the greater of (x) the Conversion Price or
(y) the Current Market Price, in each case in effect
immediately prior to the time of such issue or sale,
then the total maximum number of shares of Common
Stock issuable upon conversion or exchange of all such
Convertible Securities shall be deemed to have been
issued for such price per share on the date of the
issue or sale of such Convertible Securities and
thereafter shall be deemed to be outstanding, provided
that (i) except as otherwise provided in Paragraph
(iii)(C) of this Paragraph (f), no adjustment of the
Conversion Price shall be made upon the actual issue
of such Common Stock upon conversion or exchange of
such Convertible Securities, and (ii) if any such
issue or sale of such Convertible Securities is made
upon exercises of any Options to purchase any such
Convertible Securities for which adjustments of the
Conversion Price have been or are to be made pursuant
to other provisions of this Paragraph (iii)(B), no
further adjustment of the Conversion Price shall be
made by reason of such issue or sale.
(C) Upon the happening of any of the
following events, namely, if the purchase price
provided for in any Option referred to in Paragraph
(iii)(A) of this Paragraph (f), the additional
consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in
Paragraphs (iii)(A) or (B) of this Paragraph (f), or
the rate at which any Convertible Securities referred
to in Paragraph (iii)(A) or (B) of this Paragraph (f)
are convertible into or exchangeable for Common Stock
shall change at any time (other than under or by
reason of provisions designed to protect against
dilution), the Conversion Price in effect at the time
of such event shall forthwith be readjusted to the
Conversion Price which would have been in effect at
such time had such Options or Convertible Securities
still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as
the case may be, at the time initially granted, issued
or sold; and on the expiration of any such Option or
the termination of any such right to convert or
exchange such Convertible Securities, the Conversion
Price then in effect hereunder shall forthwith be
increased to the Conversion Price which would have
been in effect at the time of such expiration or
termination had such Option or Convertible Securities,
to the extent outstanding immediately prior to such
expiration or termination, never been issued, and the
Common Stock issuable thereunder shall no longer be
deemed to be outstanding. If the purchase price
provided for in any such Option referred to in
Paragraph (iii)(A) of this Paragraph (f) or the rate
at which any Convertible Securities referred to in
Paragraphs (iii)(A) or (B) of this Paragraph (f) are
convertible into or exchangeable for Common Stock
shall be reduced at any time under or by reason of
provisions with respect thereto designed to protect
against dilution, then, in case of the delivery of
Common Stock upon the exercise of any such Option or
upon conversion or exchange of any such Convertible
Securities, the Conversion Price then in effect
hereunder shall forthwith be adjusted to such
respective amount as would have been obtained had such
Option or Convertible Securities never been issued as
to such Common Stock and had adjustments been made
upon the issuance of the shares of Common Stock
delivered as aforesaid, but only if as a result of
such adjustment the Conversion Price then in effect
hereunder is thereby reduced.
(D) In case any shares of Common
Stock, Options or Convertible Securities shall be
issued or sold for cash, the consideration received
therefor shall be deemed to be the amount received by
the Company therefor, without deduction therefrom of
any expenses incurred or any underwriting commissions
or concessions paid or allowed by the Company in
connection therewith. In case any shares of Common
Stock, Options or Convertible Securities shall be
issued or sold for a consideration other than cash,
the amount of the consideration other than cash
received by the Company shall be deemed to be the fair
value of such consideration as determined in good
faith by the Board of the Company, without deduction
of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the
Company in connection therewith. In case any Options
shall be issued in connection with the issue and sale
of other securities of the Company, together
comprising one integral transaction in which no
specific consideration is allocated to such Options by
the parties thereto, such Options shall be deemed to
have been issued without consideration.
(E) In case the Company shall take a
record of the holders of its Common Stock for the
purpose of entitling them (i) to receive a dividend or
other distribution payable in Common Stock, Options or
Convertible Securities, or (ii) to subscribe for or
purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to
be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon
the declaration of such dividend or the making of such
other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(iv) If any consolidation or merger of the
Company with or into another corporation, or the sale
of all or substantially all its assets to another
corporation shall be effected, or in case of any
capital reorganization or reclassification of the
capital stock of the Company, and such transaction
does not constitute a Participation Event, then, as a
condition of such consolidation, merger or sale,
reorganization or reclassification, lawful and
adequate provision shall be made whereby the holder of
Series C Preferred Stock shall thereafter have the
right to receive upon the basis and upon the terms and
condition specified herein and in lieu of the shares
of Common Stock immediately theretofore receivable
upon the conversion of Series C Preferred Stock, such
shares of stock, securities or assets as may be issued
or payable with respect to or in exchange for a number
of outstanding shares of Common Stock equal to the
number of shares of Common Stock immediately
theretofore so receivable by such holder had such
consolidation, merger, sale, reorganization or
reclassification not taken place, and in any such case
appropriate provision shall be made with respect to
the rights and interests of such holder to the end
that the provisions hereof (including without
limitation provisions for adjustment of the Conversion
Price) shall thereafter be applicable, as nearly as
may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise of
such conversion rights.
(v) For purposes of this paragraph (f), the
number of shares of Common Stock at any time
outstanding shall not include any shares of Common
Stock then owned or held by or for the account of the
Company or any of its Subsidiaries.
(vi) If the Company shall take a record of
the holders of its Common Stock for the purpose of
entitling them to receive a dividend or other
distribution, and shall thereafter and before the
distribution to stockholders thereof legally abandon
its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the
number of shares of Common Stock issuable upon
exercise of the right of conversion granted by this
paragraph (f) or in the Conversion Ratio then in
effect shall be required by reason of the taking of
such record.
(vii) Anything in this paragraph (f) to the
contrary notwithstanding, the Company shall not be
required to give effect to any adjustment in the
Conversion Ratio unless and until the net effect of
one or more adjustments (each of which shall be
carried forward), determined as above provided, shall
have resulted in a change of the Conversion Ratio by
at least one-tenth of one share of Common Stock, and
when the cumulative net effect of more than one
adjustment so determined shall be to change the
Conversion Ratio by at least one-tenth of one share of
Common Stock, such change in Conversion Ratio shall
thereupon be given effect.
8. Reports as to Adjustments. Upon any adjustment of the
Conversion Ratio then in effect and any increase or decrease in
the number of shares of Common Stock issuable upon the operation
of the conversion set forth in Section 7, then, and in each such
case, the Company shall promptly deliver to each holder of the
Series C Preferred Stock, a certificate signed by the President
or a Vice President and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of the
Company setting forth in reasonable detail the event requiring
the adjustment and the method by which such adjustment was
calculated and specifying the Conversion Ratio then in effect
following such adjustment and the increased or decreased number
of shares issuable upon the conversion granted by Section 7, and
shall set forth in reasonable detail the method of calculation
of each and a brief statement of the facts requiring such
adjustment. Where appropriate, such notice to holders of the
Series C Preferred Stock may be given in advance and included as
part of the notice required under the provisions of Section 11.
9. Certain Covenants. Any registered holder of Series C
Preferred Stock may proceed to protect and enforce its rights
and the rights of such holders by any available remedy by
proceeding at law or in equity to protect and enforce any such
rights, whether for the specific enforcement of any provision in
this Certificate of Designation or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
10. No Reissuance of Series C Preferred Stock. No Series
C Preferred Stock acquired by the Company by reason of
redemption, purchase, or otherwise shall be reissued, and all
such shares shall be cancelled, retired and eliminated from the
shares which the Company shall be authorized to issue.
11. Notices. All notices to the Company permitted
hereunder shall be personally delivered or sent by first class
mail, postage prepaid, addressed to its principal office located
at 0000 Xxxxxxxxxx Xxx, Xxxxx 00, Xxxxxxxxxxxx, XX 00000, or to
such other address at which its principal office is located and
as to which notice thereof is similarly given to the holders of
the Series C Preferred Stock at their addresses appearing on the
books of the Company.
IN WITNESS WHEREOF, NewCheck Corporation caused this
Certificate to be signed by Xxxxxx X. Xxxxxx, Xx., its Chief
Executive Officer on this 11th day of February, 2000.
---------------------------------
Xxxxxx X. Xxxxxx, Xx.
Chief Executive Officer
EXHIBIT C
FIFTH RESTATED
CERTIFICATE OF INCORPORATION
OF
NEWCHECK CORPORATION
The undersigned, Xxxxxx X. Xxxxxx, Xx. hereby certifies that:
A. He is the duly elected and acting Chief Executive
Officer of NewCheck Corporation, a Delaware corporation (the
"Company").
B. The original Certificate of Incorporation of the Company
was filed with the Secretary of State on May 26, 1994.
C. The Restated Certificate of Incorporation was filed with
the Secretary of State on June 28, 1994.
D. The Second Restated Certificate of Incorporation was
filed with the Secretary of State on July 28, 1997.
E. The Third Restated Certificate of Incorporation was
filed with the Secretary of State on May 5, 1998.
F. The Fourth Restated Certificate of Incorporation was
filed with the Secretary of State on May 12, 1998.
G. The Fourth Restated Certificate of Incorporation is
hereby amended and restated to read in full as follows:
The name of this corporation is NewCheck Corporation
(hereinafter sometimes referred to as the "Company").
The address of the registered office of the Company in the State
of Delaware is 1013 Centre Road, Wilmington, County of Xxx
Xxxxxx, Xxxxxxxx 00000. The name of the registered agent at
that address is Corporation Service Company.
The purpose of the Company is to engage in any lawful act or
activity for which a corporation may be organized under the
General Corporation Law of Delaware.
The Company is authorized to issue two classes of shares to be
designated respectively "Preferred" and "Common." The total
number of shares of Preferred Stock authorized is 12,500,000,
par value $0.0001 per share, and the total number of shares of
Common Stock authorized is 100,000,000, par value of $0.0001 per
share. Upon the filing and effectiveness of this Fifth Restated
Certificate of Incorporation in the office of the Secretary of
State of Delaware, each outstanding share of Common Stock of a
par value of $0.0001 is combined and converted into 1/325 share
of Common Stock of a par value of $0.0001.
Upon the filing and effectiveness of this Fifth Restated
Certificate of Incorporation in the office of the Secretary of
State of Delaware, each outstanding share of Series A Preferred
Stock of a par value of $0.0001 is combined and converted into
1/325 share of Series A Preferred Stock of a par value of
$0.0001.
The Board of Directors of the Company (the "Board") is
authorized, subject to limitations prescribed by law and herein
and in any Certificate of Designation filed pursuant hereto, to
provide for the issuance of shares of Preferred Stock in series,
and by filing a certificate pursuant to the applicable law of
the State of Delaware, to establish from time to time the number
of shares to be included in each such series, and to fix the
designation, powers, preferences and rights of the shares of
each such series and the qualifications, limitations or
restrictions thereof.
The authority of the Board with respect to each series shall
include, but not be limited to, determination of the following:
(a) The number of shares constituting that series and
the distinctive designation of that series;
(b) The dividend rate on the shares of that series,
whether dividends shall be cumulative, and, if so, from which
date or dates, and the relative rights of priority, if any, of
payment of dividends on shares of that series;
(c) Whether that series shall have voting rights, in
addition to the voting rights provided by law, and, if so, the
terms of such voting rights;
(d) Whether that series shall have conversion
privileges, and, if so, the terms and conditions of such
conversion, including provision for adjustment of the conversion
rate in such events as the Board shall determine;
(e) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such
redemption, including the date or date upon or after which they
shall be redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions and
at a different redemption dates;
(f) Whether that series shall have a sinking fund for
the redemption or purchase of shares of that series, and, if so,
the terms and amount of such sinking fund;
(g) The rights of the shares of that series in the
event of voluntary or involuntary liquidation, dissolution or
winding up of the Company, and the relative rights of priority,
if any, of payment of shares of that series; and
(h) Any other relative rights, preferences and
limitations of that series.
Designation of Series A Preferred Stock and Series B Preferred
Stock.
The first series of Preferred Stock shall be designated Series A
Preferred Stock and shall be comprised of 200,000 shares. The
rights, preferences, privileges and restrictions granted to or
imposed upon the Series A Preferred Stock are as set forth
below. The next series of Preferred Stock shall be designated:
(i) Series B1 Preferred Stock, and shall be comprised of 200,000
shares and (ii) Series B2 Preferred Stock and shall be comprised
of 500,000 shares. The rights, preferences, privileges and
restrictions granted to or imposed upon the Series B1 Preferred
Stock and the Series B2 Preferred Stock are as set forth in
Annex 1 hereto, the provisions of which are by this reference
incorporated into this Article FIFTH and modify, amend and
supersede in their entirety the rights, preferences, privileges
and restrictions set forth in that certain Certificate of
Designation, Preference and Relative, Participating, Optional
and Other Special Rights of Preferred Stock and Qualifications,
Limitations and Restrictions dated and filed with the Secretary
of State of Delaware on May 13, 1998. The issuance of shares of
Preferred Stock from and after the date of this Fifth Restated
Certificate of Incorporation shall be by the filing of a
certificate pursuant to the applicable law of the State of
Delaware as authorized by the Board as provided herein.
Dividend Rights of Series A Preferred Stock. Subject to the
dividend provisions fixed by the Board for any series of
Preferred Stock designated by the Board in the future, the
holders of Series A Preferred Stock shall be entitled to receive
dividends, out of any assets at the time legally available
therefor, when and as declared by the Board, at the rate of
$32.50 per annum. The right to dividends on the Series A
Preferred Stock shall not be cumulative, and no right shall
accrue to the holders of the Series A Preferred Stock by reason
of the fact that dividends on such shares are not declared or
paid on the Series A Preferred Stock. No cash dividends shall
be paid on any Common Stock unless at the same time a dividend
is paid with respect to all outstanding shares of Series A
Preferred Stock in an amount for each such share of Series A
Preferred Stock equal to the aggregate amount of such dividends
payable on that number of shares of Common Stock into which each
such share of Series A Preferred Stock could then be converted.
Preference on Liquidation. Subject to the liquidation
preferences of any series of Preferred Stock other than the
Series A Preferred Stock, including, without limitation, any
liquidation preference prior to any liquidation preference set
forth in this Section 2, in the event of any liquidation,
dissolution or winding up of the Company, distributions to
holders of Series A Preferred Stock and holders of Common Stock
shall be made in the following manner:
Amount, Priority, Etc.
The holders of Series A Preferred Stock shall be entitled to
receive, prior and in preference to any distribution of any of
the assets of the Company to the holders of the Common Stock by
reason of their ownership of such stock, the amount of (i)
$325.00 per share for each share of Series A Preferred Stock
then held by them, adjusted for any stock split, stock
combination, stock distribution or stock dividend with respect
to such shares, plus all dividends declared but unpaid pursuant
to Section 1 hereof with respect to each share of Series A
Preferred Stock. If the assets and funds available for
distribution among the holders of Series A Preferred Stock and
among the holders of any series of Preferred Stock ranking on a
parity with the Series A Preferred Stock with respect to this
subsection (a)(1) of Section 2 as to the distribution of assets
and funds upon such dissolution, liquidation or winding up shall
be insufficient to permit the payment to such holders of their
full liquidation payments, then the entire assets and funds of
the Company legally available for such distribution shall be
distributed ratably among such holders in proportion to their
aggregate preferential amounts.
After payment in full to the holders of Series A Preferred Stock
of all amounts exclusively payable on or with respect to said
shares pursuant to subsection (a)(1) of this Section 2, the
holders of the Common Stock and any holders of the Company's
Preferred Stock who are entitled to participate with the Common
Stock on an as-converted basis in any remaining assets of the
Company legally available for distribution, if any
(collectively, the "Participants") shall be entitled to receive
the entire remaining assets and funds of the Company legally
available for such distribution, with such amounts to be
distributed ratably among such Participants in proportion to
their actual and as-converted holdings of shares of Common
Stock.
For purposes of this Section 2, a merger or consolidation of the
Company with or into any other corporation or corporations, or
the merger of any other corporation or corporations into the
Company, in which the stockholders of the Company shall own less
than a majority of the voting securities of the surviving
corporation, or a sale, transfer or lease (but not including a
transfer by pledge or mortgage to a bona fide lender) of all or
substantially all of the assets of the Company, shall be treated
as a liquidation, dissolution or winding up of the Company.
In the event the Company shall propose to take any action of the
types described in subparagraphs (a) and (b) of this Section 2,
the Company shall, within ten (10) days after the date the Board
approves such action, or twenty (20) days prior to any
stockholders' meeting called to approve such action, whichever
is earlier, give each holder of shares of Series A Preferred
Stock initial written notice of the proposed action. Such
initial written notice shall describe the material terms and
conditions of such proposed action, including a description of
the stock, cash and property to be received by the holders of
shares of Series A Preferred Stock upon consummation of the
proposed action and the date of delivery thereof. If any
material change in the facts set forth in the initial notice
shall occur, the Company shall promptly give written notice to
each holder of shares of Series A Preferred Stock of such
material change.
The Company shall not consummate any proposed action of the
types described in subparagraphs (a) and (b) of this Section 2
before the expiration of thirty (30) days after the mailing of
the initial notice or twenty (20) days after the mailing of any
subsequent written notice, whichever is later; provided that any
such 30-day or 20-day period may be shortened upon the written
consent of the holders of a majority of the outstanding shares
of Series A Preferred Stock.
In the event the Company shall propose to take any action of the
types described in subparagraphs (a) and (b) of this Section 2
which will involve the distribution of assets other than cash,
the Board shall make a good faith appraisal of the value of the
assets to be distributed to the holders of shares of Series A
Preferred Stock. The Company shall give prompt written notice
to each holder of shares of Series A Preferred Stock of such
valuation. All notices pursuant to this Section 2 hereof shall
be deemed given upon personal delivery or five (5) days after
deposit in a United States Post Office by registered or
certified mail.
Voting. Except as otherwise required by law, and except as
otherwise provided in Section 5 below, the shares of Series A
Preferred Stock shall be voted together with the Common Stock at
any annual or special meeting of the stockholders of the
Company, or may act by written consent in the same manner as the
Common Stock, and shall have the voting rights and powers equal
to the voting rights of the Common Stock, upon the following
basis: each holder of shares of Series A Preferred Stock shall
be entitled to such number of votes for the shares of Series A
Preferred Stock held by it on the record date for such meeting
or action to be taken by written consent, as shall be equal to
the nearest whole number of shares of the Common Stock into
which such holder's shares of Series A Preferred Stock are
convertible immediately after the close of business on the
record date for such meeting or action to be taken by written
consent, as the case may be.
Conversion Rights. The holders of Series A Preferred Stock
shall have conversion rights as follows:
Each share of Series A Preferred Stock shall be convertible, at
the option of the holder thereof, at any time at the principal
office of the Company or any transfer agent for such shares,
into fully paid and nonassessable shares of Common Stock of the
Company.
The number of shares of Common Stock into which each share of
Series A Preferred Stock may be converted shall be determined by
dividing $1.00 by the conversion price (the "Series A Conversion
Price") determined as hereinafter provided in effect at the time
of the conversion. The Series A Conversion Price per share at
which shares of Common Stock shall be initially issuable upon
conversion of any shares of Series A Preferred Stock shall be
$0.25, subject to adjustment as provided herein.
Each share of Series A Preferred Stock shall be converted into
Common Stock automatically in the manner provided herein upon
the holders of a majority of the outstanding shares of the
Series A Preferred Stock consenting in writing. Each share of
Series A Preferred Stock shall be converted into Common Stock
automatically in the manner provided herein upon the closing of
the sale of securities of the Company pursuant to an
underwritten public offering of the Company's Common Stock on
Form S-1 (or any equivalent general registration form) under the
Securities Act of 1933, as amended, where the pre-closing
valuation of the Company (based on the percentage of the Company
sold in such transaction and the price therefor) is at least
$120 million and generating for the Company gross proceeds of at
least $20 million) ("Qualified Public Offering") or (y) the
availability to the Company of cash and cash equivalents in an
amount in excess of $20 million, excluding therefrom any
reserves or other amounts necessary or appropriate for the
proper operation of the Company's business (as determined by the
Company's Board of Directors) and amounts restricted as a result
of any obligations undertaken by the Company in furtherance of
the Company's business and approved by its Board of Directors
acting reasonably (such exclusions not to extend to amounts
required for distributions or payments on or in exchange for
shares, whether in redemption thereof or otherwise).
Automatic Conversion of Certain Series A Preferred Stock Into
Common Stock in Connection with Dilutive Issuances.
The Company may from time to time on or after the date of this
Fifth Restated Certificate of Incorporation propose equity
financings involving the offer and sale of newly issued Equity
Securities (as defined in subsection (c)(5) of this Section 4
below) for a consideration per share of Common Stock issued or
issuable upon exchange, exercise or conversion of such Equity
Securities of less than $1.00, as adjusted for stock dividends,
stock splits, recapitalizations and the like regarding the
Common Stock.
In the event of any such Dilutive Financing, the shares of
Series A Preferred Stock of any holder of record of any such
shares (the "Diluted Holder") shall be subject to conversion to
Common Stock pursuant to Section 4(c)(3) below if the Diluted
Holder does not purchase its full pro rata share (as defined
below) of the Equity Securities offered by the Company (after
any rights of first refusal held by persons other than Diluted
Holders have been satisfied or waived) to all Diluted Holders as
part of such Dilutive Financing (the "Diluted Holders'
Securities"). Each Diluted Holder's pro rata share of the
offered Diluted Holders' Securities will be that fraction of the
Diluted Holders' Securities which is calculated by dividing (x)
the number of shares of Common Stock issued or issuable upon
conversion of all share of the Series A Preferred Stock held by
such Diluted Holder as of the date of delivery of the Company's
written notification referred to in subsection (2) below (the
"Purchase Notice Date") by (y) the total number of shares of
Common Stock issued and outstanding or issuable upon conversion
of all Equity Securities of the Company as of the Purchase
Notice Date; provided, that, if any Diluted Holder purchases in
a Dilutive Financing a number of Equity Securities which is
greater than the number which represents its pro rata share of
the Diluted Holders' Securities (through a right of first
refusal or otherwise) ("Participating Holder"), then, with
respect to such Dilutive Financing, the shares of the Series A
Preferred Stock of such Participating Holder will not be subject
to conversion under this Section 4(c), the aggregate number of
Diluted Holders' Securities will be deemed reduced by the number
of Equity Securities purchased by such Participating Holder, and
the shares of the Series A Preferred Stock held by such
Participating Holder and all other Participants as of the
Purchase Notice Date will not be considered outstanding for the
purposes of determining the pro rata shares of Diluted Holders
other than Participants.
In the event the Company proposes a Dilutive Financing involving
the offer of Diluted Holders' Securities, the Company shall
deliver to each of the Diluted Holders written notice (the
"Purchase Notice") of its intention to sell and issue Equity
Securities at least thirty (30) days in advance of the first
closing scheduled by the Company for such Dilutive Financing,
setting forth the general terms under which it proposes to make
such sale, including the number of Diluted Holders' Securities
offered, each Diluted Holder's pro rata share of the Diluted
Holders' Securities and the scheduled date for each closing of
the Dilutive Financing; provided that the 30-day notice period
relating to any particular Dilutive Financing may be shortened
to a period of ten (10) days upon the written consent of a
holders of a majority of the outstanding shares of the Series A
Preferred Stock. To confirm its intention to participate and
purchase its full pro rata share in such Dilutive Financing, a
Diluted Holder must notify the Company in writing within fifteen
(15) days of the Purchase Notice Date; provided that the 15-day
response period relating to any particular Dilutive Financing
may be shortened to a period of five (5) days upon the written
consent of the holders of a majority of the outstanding shares
of the Series A Preferred Stock.
If the aggregate number of Diluted Holders' Securities purchased
by a Diluted Holder at the closing scheduled by the Company with
respect to a Dilutive Financing (the "Closing") is less than the
number of Diluted Holders' Securities which represents such
Diluted Holder's full pro rata share of such Dilutive Financing,
then all of the shares of the Series A Preferred Stock owned by
such Diluted Holder as of the Purchase Notice Date ("Converting
Shares") will be deemed converted automatically into Common
Stock on the date of, but immediately prior to, the Closing.
The Company shall deliver to each Diluted Holder whose shares of
the Series A Preferred Stock are converted into shares of Common
Stock pursuant to this Section 4(c), a written notice of such
conversion within twenty (20) days after the date of the
Closing. Notwithstanding the above, any Diluted Holders may
elect to convert their shares of Series A Preferred Stock into
Common Stock by providing the Company written notice thereof
pursuant to Section 4(a) above on or before the Closing.
On and after the date of the Closing, notwithstanding that any
certificates for the Series A Preferred Stock being converted
into Common Stock shall not have been surrendered for
conversion, the shares of such Series A Preferred Stock
evidenced thereby shall be deemed to be no longer outstanding,
and all rights with respect thereto shall forthwith cease and
terminate, except only the rights of the Diluted Holder (x) to
receive the shares of Common Stock to which it shall be entitled
upon conversion thereof, and (y) with respect to dividends
declared but unpaid on such Series A Preferred Stock prior to
such date. In the event that any Diluted Holder presents such
Diluted Holder's certificate therefor for surrender to the
Company or its transfer agent upon such conversion into Common
Stock, a certificate for the number of shares of Common Stock
into which the shares of Preferred Stock surrendered were
convertible on such conversion date, along with a balance stock
certificate(s) for the shares which are not to be converted
hereby or pursuant to Section 4(a), promptly will be issued and
delivered to such Diluted Holder.
For purposes of this Section 4(c), the term "Equity Securities"
shall mean any securities having voting rights in the election
of the Board not contingent upon default, or any securities
evidencing an ownership interest in the Company, or any
securities convertible into or exercisable for any shares of the
foregoing, or any agreement or commitment to issue any of the
foregoing.
This Section 4(c) shall be of no further effect and deemed null
and void with respect to any Dilutive Financing which occurs
after the date of the closing of the Qualified Public Offering,
as defined in Section 4(b) above.
For purposes of this Section 4(c), the following provisions
shall be applicable for purposes of determining whether there
has been a Dilutive Financing:
For purposes of determining the amount of consideration received
by the Company, the consideration received by the Company shall
not be reduced by the amount of any commissions or expenses paid
or incurred by the Company.
In case of the issuance of Equity Securities for a consideration
other than cash or a consideration partly other than cash, the
amount of the consideration other than cash received by the
Company for such shares shall be deemed to be the value of such
consideration as reasonably determined by the Board.
In case of the issuance by the Company in any manner of any
Equity Securities which represent rights to subscribe for or to
purchase shares of Common Stock or shares convertible into or
exchangeable for Common Stock, the Dilutive Price shall equal
the price calculated by dividing (x) the maximum number of
shares of Common Stock issuable to the holders of such rights,
options or shares upon the exercise, conversion or exchange of
such rights, options or shares (or, if applicable, the
conversion or exchange of the securities issuable upon such
exercise, conversion or exchange) as of the date of the issuance
of such rights, options or shares, as the case may be, into (y)
the minimum aggregate consideration named in such rights or
options or in the agreement relating to such shares, as the case
may be, for the Equity Securities covered thereby, plus the
consideration, if any, received by the Company for such rights,
options or shares (and, if applicable, upon exercise, conversion
or exchange of the securities issuable pursuant to such rights,
options or shares), as of the date of the issuance of such
rights, options or shares, as the case may be.
In case of the issuance or issuances by the Company in any
manner of any obligations that shall be convertible into or
exchangeable for Common Stock, or shares convertible into or
exchangeable for Common Stock, the Dilutive Price shall equal
the price calculated by dividing (x) the maximum number of
shares of Common Stock issuable upon the conversion or exchange
of such obligations (or, if applicable, the conversion or
exchange of the securities issuable upon such conversion or
exchange) as of the date such obligations are issued into (y)
the total of (aa) the amount of consideration received by the
Company upon the issuance of such obligations plus (bb) the
additional minimum aggregate consideration, if any, other than
the amount of consideration received by the Company for such
obligations, receivable by the Company upon such conversion or
exchange (and, if applicable, the conversion or exchange of the
securities issuable upon such conversion or exchange), except in
adjustment of dividends.
The amount of the consideration received by the Company upon the
issuance of any rights, options, or shares referred to in
Section 4(c)(7)(iii) hereof or upon the issuance of any
obligations or shares which are convertible or exchangeable as
described in Section 4(c)(7)(iii) or (iv) hereof, and the amount
of the consideration, if any, other than such obligations or
shares so convertible or exchangeable, receivable by the Company
upon the exercise, conversion or exchange thereof shall be
determined in the same manner provided in Sections 4(c)(7)(i)
and (ii) hereof with respect to the consideration received by
the Company in case of the issuance of Equity Securities.
For the purposes of this Section 4(c), the issuances of Equity
Securities described below in Section 4(g)(1)(i)-(v) shall not
be deemed to be Dilutive Financings.
With the written consent of the record holders of a majority of
the outstanding shares of a Series A Preferred Stock and the
Company, the provisions of this Section 4(c) may be waived.
Upon the effectuation of any such waiver, the Company shall
promptly give written notice thereof to the record holders of
shares of Series A Preferred Stock who have not previously not
consented thereto in writing.
The holder of any shares of Series A Preferred Stock may
exercise the conversion right specified in Section 4(a) by
surrendering to the Company or any transfer agent of the Company
the certificate or certificates for the shares to be converted,
accompanied by written notice specifying the number of shares to
be converted. Upon the occurrence of any event specified in
Section 4(b) or 4(c), the outstanding shares of Series A
Preferred Stock shall be converted automatically without any
further action by the holders of such shares and whether or not
the certificates representing such shares are surrendered to the
Company or its transfer agent; provided that the Company shall
not be obligated to issue to any holder certificates evidencing
the shares of Common Stock issuable upon such conversion unless
certificates evidencing such shares of Series A Preferred Stock
are delivered either to the Company or any transfer agent of the
Company. Conversion shall be deemed to have been effected on
the date when delivery of notice of an election to convert and
of certificates for shares being converted is made or on the
date of the occurrence of any event specified in Section 4(b) or
4(c), as the case may be, and such date is referred to herein as
the "Conversion Date." As promptly as practicable thereafter
(and after surrender of the certificate or certificates
representing shares of Series A Preferred Stock to the Company
or any transfer agent of the Company in the case of conversions
pursuant to Section 4(b) or 4(c) the Company shall issue and
deliver to such holder a certificate or certificates for the
number of full shares of Common Stock to which such holder is
entitled. No fractional shares of Common Stock shall be issued
by the Company and all such fractional shares shall be
disregarded. In lieu thereof, the Company shall pay in cash the
fair market value of any such fractional share as determined by
the Board. The person in whose name the certificate or
certificates for Common Stock are to be issued shall be deemed
to have become a holder of record of such Common Stock on the
applicable Conversion Date. Upon conversion of only a portion
of the number of shares covered by a certificate representing
shares of Series A Preferred Stock surrendered for conversion
(in the case of conversion pursuant to Section 4(a)), the
Company shall issue and deliver to or upon the written order of
the holder of the certificate so surrendered for conversion, at
the expense of the Company, a new certificate covering the
number of shares of Series A Preferred Stock representing the
unconverted portion of the certificate so surrendered.
In case the Company shall at any time (i) subdivide the
outstanding Common Stock, or (ii) issue a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock
issuable upon conversion of the Series A Preferred Stock
immediately prior to such subdivision or the issuance of such
stock dividend shall be proportionately increased by the same
ratio as the subdivision or dividend (with appropriate
adjustments in the Conversion Price of the Series A Preferred
Stock). In case the Company shall at any time combine its
outstanding Common Stock, the number of shares of Common Stock
issuable upon conversion of the Series A Preferred Stock
immediately prior to such combination shall be proportionately
decreased by the same ratio as the combination (with appropriate
adjustments in the Conversion Price of the Series A Preferred
Stock). All such adjustments described herein shall be
effective at the close of business on the date of such
subdivision, stock dividend or combination, as the case may be.
If the Company shall issue or sell any shares of Common Stock,
or any obligation, any share of stock or other security of the
Company convertible into or exchangeable or exercisable for
Common Stock ("Common Stock Equivalents") at a consideration per
share less than the Series A Conversion Price for the Series A
Preferred Stock in effect immediately prior to the time of such
issue or sale, then forthwith upon such issue or sale, the
Series A Conversion Price for the Series A Preferred Stock shall
be adjusted to a price (calculated to the nearest cent)
determined by dividing:
an amount equal to the sum of (x) the number of shares of Common
Stock outstanding immediately prior to such issue or sale
multiplied by the then existing Series A Conversion Price for
the Series A Preferred Stock, (y) the number of shares of Common
Stock issuable upon conversion, exchange or exercise of any
Common Stock Equivalents outstanding immediately prior to such
issue or sale multiplied by the then existing Series A
Conversion Price for the Series A Preferred Stock, and (z) an
amount equal to the aggregate "consideration actually received"
by the Company upon such issue or sale by
the sum of the number of shares of Common Stock outstanding
immediately after such issue or sale and the number of shares of
Common Stock issuable upon conversion, exchange or exercise of
any Common Stock Equivalents outstanding immediately after such
issue or sale.
For purposes hereof the following provisions shall be
applicable:
The foregoing notwithstanding, no adjustment of the Conversion
Price for the Series A Preferred Stock shall be made as a result
of the issuance after the effective date of this Fifth Restated
Certificate of Incorporation of:
shares of Common Stock (or any options or rights to purchase
such shares of Common Stock) issued or issuable to officers,
directors, employees or consultants of the Company pursuant to
stock grants, stock purchase plans, stock option plans or other
stock incentive programs, agreements or arrangements approved by
the Board;
shares issued pursuant to transactions described in subsection
(e) of this Section 4;
shares of Common Stock or Preferred shares issuable upon
exercise, conversion or exchange of Common Stock Equivalents
according to their terms which have previously been incorporated
into computations hereunder on the date when such Common Stock
Equivalents were issued;
shares of Common Stock issued upon conversion of Series A
Preferred Stock;
shares of Common Stock or Preferred shares issuable upon
exercise, conversion or exchange of warrants to purchase Common
Stock or Preferred shares issued in connection with bank lines,
equipment financing or distributor or reseller incentives,
together with such warrants, or warrants as compensation to
consultants in connection with a financing transaction involving
the Company; and
shares of Common Stock or Preferred Shares as dividends with
respect to any Preferred Stock senior in priority to or on
parity with the Series A Preferred Stock.
In the case of an issue or sale for cash of shares of Common
Stock, the "consideration actually received" by the Company
therefor shall be deemed to be the amount of cash received,
before deducting therefrom any commissions or expenses paid by
the Company.
In case of the issuance (other than upon conversion or exchange
or exercise of obligations or shares of stock of the Company) of
additional shares of Common Stock for a consideration other than
cash or a consideration partly other than cash, the amount of
the consideration other than cash received by the Company for
such shares shall be deemed to be the value of such
consideration as reasonably determined by the Board.
In case of the issuance by the Company in any manner of any
Common Stock Equivalents, all shares of Common Stock or stock
convertible into Common Stock to which the holders of such
Common Stock Equivalents shall be entitled to obtain pursuant to
such Common Stock Equivalents, shall be deemed "outstanding" as
of the date of the issuance of such Common Stock Equivalents,
and the minimum aggregate consideration named in such Common
Stock Equivalents for the shares of Common Stock or stock
convertible into Common Stock covered thereby, plus the
consideration, if any, received by the Company for such Common
Stock Equivalents, shall be deemed to be the "consideration
actually received" by the Company (as of the date of the
issuance of such Common Stock Equivalents) for the issuance of
such shares.
The amount of the "consideration actually received" by the
Company upon the issuance of any Common Stock Equivalents above,
and the amount of the consideration, if any, receivable by the
Company upon the exercise, conversion or exchange thereof shall
be determined in the same manner provided in subsections (2) and
(3) above with respect to the consideration received by the
Company in case of the issuance of additional shares of Common
Stock; provided, however, that if such Common Stock Equivalents
are issued in payment or satisfaction of any dividend upon any
stock of the Company other than Common Stock, the amount of the
"consideration actually received" by the Company upon the
original issuance of such Common Stock Equivalents shall be
deemed to be the value of such obligations or shares of stock,
as of the date of the adoption of the resolution declaring such
dividend, as determined by the Board at or as of that date. On
the expiration or termination of any Common Stock Equivalents,
or any change in the number of shares of Common Stock
deliverable upon exercise, conversion or exchange of such Common
Stock Equivalents, the Conversion Price for the Preferred Stock
then in effect shall forthwith be readjusted to such Conversion
Price for the Preferred Stock as would have been obtained had
the adjustments made upon the issuance of such Common Stock
Equivalents been made upon the basis of the delivery of only the
number of shares of Common Stock actually delivered or to be
delivered upon the exercise, conversion or exchange of such
Common Stock Equivalents.
In the event the Company shall declare a distribution payable in
securities of other persons, evidences of indebtedness issued by
the Company or other persons or options or rights not referred
to in this Section 4(g), then, in each such case, the holders of
Series A Preferred Stock shall be entitled to the distributions
provided for in Section 1 above, and no adjustment to the Series
A Conversion Price provided for in this Section 4 shall be
applicable.
In case of any merger (other than a merger in which the Company
is not the continuing or surviving entity) or any
reclassification of the Common Stock of the Company, each share
of Series A Preferred Stock shall thereafter be convertible
into that number of shares of stock or other securities or
property to which a holder of the number of shares of Common
Stock issuable upon conversion of a share of Series A Preferred
Stock immediately prior to such merger or reclassification would
have been entitled upon such merger or reclassification. In any
such case, appropriate adjustment (as determined by the Board)
shall be made in the application of the provisions herein set
forth with respect to the rights and interests thereafter of the
holders of Series A Preferred Stock, such that the provisions
set forth herein shall thereafter be applicable, as nearly as
reasonably may be, in relation to any share of stock or other
property thereafter issuable upon conversion.
The Company shall at all times reserve and keep available, out
of its authorized but unissued Common Stock, solely for the
purpose of effecting the conversion of Series A Preferred Stock,
the full number of shares of Common Stock deliverable upon the
conversion of all Series A Preferred Stock from time to time
outstanding. The Company shall from time to time (subject to
obtaining necessary director and stockholder authorizations), in
accordance with the laws of the State of Delaware, increase the
authorized amount of its Common Stock if at any time the
authorized number of shares of Common Stock remaining unissued
shall not be sufficient to permit the conversion of all of the
shares of Series A Preferred Stock at the time outstanding.
Upon any conversion of Series A Preferred Stock pursuant to this
Section 4, the shares of Series A Preferred Stock which are
converted shall not be reissued. Upon conversion of all of the
then outstanding shares of Series A Preferred Stock pursuant to
this Section 4 and upon the taking of any action required by
law, all shares of Series A Preferred Stock shall not be deemed
outstanding for any purpose whatsoever and all such shares shall
revert to the status of authorized and unissued shares of
Preferred shares.
Upon the occurrence of each adjustment or readjustment of the
Series Conversion Price pursuant to this Section 4, the Company
at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Preferred Stock a certificate setting
forth such adjustment or readjustment showing in detail the
facts upon which such adjustment for readjustment is based. The
Company shall, upon the reasonable written request at any time
of any holder of Series A Preferred Stock, furnish or cause to
be furnished to such holder a like certificate setting forth (i)
such adjustments and readjustments, and (ii) the number of
shares of Common Stock and the amount, if any, of other property
which at the time would be received upon the conversion of
Series A Preferred Stock.
Any notices required by the provisions of this Section 4 to be
given to the holders of shares of Series A Preferred Stock shall
be deemed given five (5) days after deposited in the United
States mail, first class, postage prepaid and addressed to each
holder of record at its address appearing on the books of the
Company.
The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or
performed hereunder by the Company, but will at all times in
good faith assist in the carrying out of all the provisions of
this Section 4 and in the taking of all such action as may be
necessary or appropriate in order to protect the conversion
rights of the holders of the Series A Preferred Stock against
impairment.
1999 Stock and Convertible Note Purchase Agreement; Reverse
Stock Splits.
(a) Notwithstanding any provision to the contrary
contained herein, no adjustment shall be made to the terms of
the Series A Preferred Stock arising from or related to the
issuance of any securities of the Company pursuant to the Stock
and Convertible Note Purchase Agreement dated February 11, 2000
entered into by the Company, and the additional agreements
contemplated thereunder (including, without limitation (as
defined thereunder), the Convertible Notes, the Management
Agreement and the Warrants contemplated by the Management
Agreement), and the conversion or exercise of any such
securities (or any securities issued or issuable upon conversion
or exercise thereof), nor shall any holder of Series A Preferred
Stock have any rights to acquire any such securities as a result
of the provisions hereof.
(b) No adjustments shall be made to the terms of the
Series A Preferred Stock arising from or related to the
consummation of: (i) the reverse stock split of the Common Stock
provided for under Article FOURTH hereinabove set forth or (ii)
the reverse stock split of the Series A Preferred Stock provided
for under the first paragraph of this Article FIFTH hereinabove
contained.
Protective Provisions. So long as any shares of Series A
Preferred Stock are outstanding, the Company shall not, without
first obtaining the approval (by vote or written consent, as
provided by law) of the holders of at least a majority of the
then outstanding shares of Series A Preferred Stock, voting as a
single class, amend any of the terms or provisions of this
Designation of Series A Preferred Stock.
The business and affairs of the Company shall be managed by or
under the direction of the Board. In addition to the powers and
authority expressly conferred upon them by Statute or by this
Certificate of Incorporation or the Bylaws of the Company, the
directors are hereby empowered to exercise all such powers and
do all such acts and things as may be exercised or done by the
Company. Election of directors need not be by written ballot
unless the Bylaws so provide.
The Board is authorized to make, adopt, amend, alter or repeal
the Bylaws of the Company. The stockholders shall also have
power to make, adopt, amend, alter or repeal the Bylaws of the
Company.
The Company eliminates the personal liability of each member of
its Board to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided
that the foregoing shall not eliminate the liability of a
director (1) for any breach of such director's duty of loyalty
to the Company or its stockholders. (2) for acts or omissions
not in good faith or which involve intentional misconduct or a
knowing violation of law, (3) under Section 174 of Title 8 of
the Delaware Code, or (4) for any transaction from which such
director derived an improper personal benefit. If the Delaware
General Corporation Law is amended in the future to authorize
corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the
Company shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended
from time to time.
Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is otherwise
involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she is or was a
director, officer or employee of the Company or is or was
serving at the request of the Company as a director, officer,
employee, partner or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including
service with respect to employee benefit plans (hereinafter an
"Indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity while serving as a director,
officer, employee, partner or agent, shall be indemnified and
held harmless by the Company to the fullest extent authorized by
the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Company to
provide broader indemnification rights than such law permitted
the Company to provide prior to such amendment), against all
expense, liability and loss (including attorneys' fees,
judgments, fines, taxes or penalties and amount paid in
settlement) reasonably incurred or suffered by such Indemnitee
in connection therewith and such indemnification shall continue
as to an Indemnitee who has ceased to be a director, officer,
employee, partner or agent and shall inure to the benefit of the
Indemnitee's heirs, executors and administrators; provided,
however, that except as provided in Section 2 hereof with
respect to proceedings to enforce rights to indemnification, the
Company shall indemnify any such Indemnitee in connection with a
proceeding (or part thereof) initiated by such Indemnitee only
if such proceeding (or part thereof) was authorized by the
Board. The right to indemnification conferred in this Section
shall be a contract right and shall include the right to be paid
by the Company the expenses incurred in defending any such
proceeding in advance of its final disposition (hereinafter an
"advancement of expenses"); provided, however, that, if the
Delaware General Corporation Law so requires, an advancement of
expenses incurred by an Indemnitee in his or her capacity as a
director or officer (and not in any other capacity in which
service was or is rendered by such Indemnitee, including,
without limitation, service to an employee benefit plan) shall
be made only upon delivery to the Company of an undertaking, by
or on behalf of such Indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal that
such Indemnitee is not entitled to be indemnified for such
expenses under this Section or otherwise (hereinafter an
"undertaking").
Right of Indemnitee to Bring Suit. If a claim under paragraph
(1) of this Section is not paid in full by the Company within
sixty (60) days after a written claim has been received by the
Company, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be twenty
(20) days, the Indemnitee may at any time thereafter bring suit
against the Company to recover the unpaid amount of the claim.
If successful in whole or in part in any such suit or in a suit
brought by the Company to recover an advancement of expenses
pursuant to the terms of an undertaking the Indemnitee shall be
entitled to be paid also the expense of prosecuting or defending
such suit. In (a) any suit brought by the Indemnitee to enforce
a right to indemnification hereunder (but not in a suit brought
by the Indemnitee to enforce a right to an advancement of
expenses), it shall be a defense that, and (b) any suit by the
Company to recover an advancement of expenses pursuant to the
terms of an undertaking the Company shall be entitled to recover
such expenses upon a final adjudication that, the Indemnitee has
not met the applicable standard of conduct set forth in the
Delaware General Corporation Law. Neither the failure of the
Company (including its Board, independent legal counsel or its
stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the Indemnitee
is proper in the circumstances because the Indemnitee has met
the applicable standard of conduct set forth in the Delaware
General Corporation Law, nor an actual determination by the
Company (including its Board, independent legal counsel or its
stockholders) that the Indemnitee has not met such applicable
standard of conduct, shall create a presumption that the
Indemnitee has not met the applicable standard of conduct, or in
the case of such a suit brought by the Indemnitee, be a defense
to such suit. In any suit brought by the Indemnitee to enforce
a right hereunder, or by the Company to recover an advancement
of expenses pursuant to the terms of an undertaking, the burden
of proving that the Indemnitee is not entitled to be indemnified
or to such advancement of expenses under this Section 2 or
otherwise shall be on the Company.
Non-Exclusivity of Rights. The rights to indemnification and to
the advancement of expenses conferred in this Section shall not
be exclusive of any other right which any person may have or
hereafter acquire under this Certificate of Incorporation or any
statute, By-Law, contract or agreement, vote of stockholders or
disinterested directors or otherwise.
Insurance. The Company may maintain insurance, at its expense,
to protect itself and any director, officer, employee or agent
of the Company or another corporation, partnership, joint
venture, trust or other enterprise against any expense,
liability or loss, whether or not the Company would have the
power to indemnify such person against such expense, liability
or loss under the Delaware General Corporation Law.
Indemnification of Agents of the Company. The Company may, to
the extent authorized from time to time by the Board, grant
rights to indemnification and to the advancement of expenses, to
any agent of the Company to the fullest extent of the provisions
of this Section with respect to the indemnification and
advancement of expenses of directors, officers and employees of
the Company.
Continuation of Rights. Any repeal or modification of the
foregoing provisions of this Article EIGHTH by the stockholders
of the Company shall not adversely affect any right or
protection of a director of the Company existing at the time of
such repeal or modification.
The Company shall not be governed by the provisions of Section
203 of the Delaware General Corporation Law.
H. The foregoing Fifth Restated Certificate of
Incorporation has been approved by the Board.
I. The Board, by unanimous written consent, declared the
foregoing Fifth Restated Certificate of Incorporation to be
advisable, and called for a vote of the Company's stockholders
to approve such Fifth Restated Certificate of Incorporation.
J. The stockholders of the Company holding the necessary
number of shares as required by statute to approve and adopt the
Fifth Restated Certificate of Incorporation in accordance with
Section 228 of the Delaware General Corporation Law, by written
consent, adopted and approved such Fifth Restated Certificate of
Incorporation.
K. The foregoing Fifth Restated Certificate of
Incorporation has been duly adopted in accordance with Sections
242 and 245 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, the Company has caused this Certificate to
be duly executed by Xxxxxx X. Xxxxxx, Xx., its Chief Executive
Officer on February 11, 2000.
------------------------------
Xxxxxx X. Xxxxxx, Xx., Chief
Executive Officer
Annex 1
AMENDED TERMS, PREFERENCES, RIGHTS AND LIMITATIONS
of
SERIES B PREFERRED STOCK
of
NEWCHECK CORPORATION
The relative rights, preferences, powers, qualifications,
limitations and restrictions granted to or imposed upon the
Series B Preferred Stock or the holders thereof, which modify,
amend and supersede in their entirety the Series B Original
Certificate of Designation (as hereinafter defined) and the
relative rights, preferences, powers, qualifications,
limitations and restrictions granted or imposed therein, are as
follows:
1. Definitions. For purposes of this Amended Designation,
the following definitions shall apply:
"Board" shall mean the Board of Directors of the Company.
"Business Day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in the State of
New York are authorized or obligated by law or executive order
to close.
"Common Stock" shall mean the Common Stock, $.0001 par value
per share, of the Company.
"Company" shall mean NewCheck Corporation d/b/a Productivity
Solutions, Inc. , a Delaware corporation.
"Conversion Price" shall mean the amount computed by dividing
the Liquidation Preference by the number of shares of Common
Stock into which one share of Series B1 Preferred Stock or
Series B2 Preferred Stock, as the case may be, is convertible at
its Conversion Ratio.
"Conversion Ratio" has the meaning set forth in Section 7 of
this these Amended Terms, Preferences, Rights and Limitations.
"Convertible Securities" has the meaning set forth in Section 7
of this these Amended Terms, Preferences, Rights and
Limitations.
"Current Market Price" on any date, shall mean the average, for
30 consecutive Business Days commencing 45 days before such
date, of the last sale prices of the Common Stock on each such
day on the principal stock exchange or the Nasdaq National
Market on which the Common Stock is then listed or admitted to
trading; and if no sale takes place on any such day on any such
exchange or market, the average of the last reported closing bid
and asked prices on such date as officially quoted on any such
exchange or market; and if the Common Stock is not then listed
or admitted to trading on any stock exchange or such market, the
average of the last reported closing bid and asked prices on
such day in the over-the-counter market, as furnished by Nasdaq
or the National Quotation Bureau, Inc.; and if neither such
corporation at the time is engaged in the business of reporting
such prices, as furnished by any similar firm then engaged in
such business, or if there is no such firm, as furnished by any
member of the National Association of Securities Dealers
selected by the Company and approved by the Required Holders
(not to be unreasonably withheld or delayed); provided, however,
that if the Common Stock is not traded in such manner that the
foregoing data is available for the period required hereunder,
the Current Market Price shall mean the fair market value as
shall be determined in good faith by the Board of the Company
or, if such determination cannot be made, by an investment
banking firm selected by the Company and approved by the
Required Holders (not to be unreasonably withheld or delayed),
the costs of which shall be borne by the Company.
"Dividend Rate" shall mean 8% per annum, calculated on a 360
day per year basis, based on the actual number of days elapsed.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar Federal statute, and the rules and
regulations of the Securities and Exchange Commission
thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Exchange Act
of 1934, as amended, shall include reference to the comparable
section, if any, of any such similar Federal statute.
"Fully Diluted Outstanding" shall mean, at any date, all shares
of Common Stock outstanding at such date and all shares of
Common Stock issuable upon the exchange or conversion of all
Convertible Securities outstanding on such date and exchangeable
for or convertible into Common Stock (and of all such
Convertible Securities issuable upon exercise of Options), and
upon the exercise of all Options to acquire Common Stock
outstanding on such date
"Liquidation Preference" shall mean, in the case of the Series
B-1 Preferred Stock, the sum of $10 per share and, , in the case
of the Series B-2 Preferred Stock, the sum of $90 per share.
"Liquidity Event" shall mean availability to the Company of cash
and cash equivalents in excess of $50 million, excluding
therefrom any and all working capital or reserves or other
amounts necessary or appropriate for the proper operation of the
Company's business (as reasonably determined by the Board) and
amounts restricted as a result of any obligation undertaken by
the Company in furtherance of the Company's business and
approved by its Board acting reasonably (such exclusions not to
extend to amounts required for distributions or payments on or
in exchange for shares, whether in redemption thereof, upon a
Participation Event or otherwise); and, provided, however, that,
in the event no shares of Senior Preferred Stock shall remain
outstanding (other than as a result of the same Liquidity
Event), the foregoing reference to "$50 million" shall be
amended to be "$35 million".
"Management Agreement" shall mean the Management Agreement dated
February 11, 2000 between the Company and Electronic Retailing
Systems International, Inc., as may from time to time be
amended, and any replacements thereof.
"Mandatory Conversion" has the meaning set forth in Section 7 of
this these Amended Terms, Preferences, Rights and Limitations.
"New Securities" has the meaning set forth in the
Securityholders Agreement.
"Optional Conversion" has the meaning set forth in Section 7 of
these Amended Terms, Preferences, Rights and Limitations.
"Options" has the meaning set forth in Section 7 of these
Amended Terms, Preferences, Rights and Limitations.
"Original Issue Date" shall mean the date of the original
issuance of shares of Series B Preferred Stock.
"Participation Event" shall mean (i) a sale of all or
substantially all of the assets of the Company, or (ii) a merger
or consolidation of the Company with or into any other
corporation (other than a merger or consolidation in which
shares of the Company's Voting Securities outstanding
immediately before such merger or consolidation are exchanged or
converted into or constitute shares which represent more than
50% of the surviving entity's Voting Securities after such
consolidation or merger), or (iii) a transaction or a series of
transactions in which a Person or a group of Persons (as defined
in Rule 13d-5(b)(I) of the Exchange Act) acquires beneficial
ownership (as determined in accordance with Rule 13d-3 of the
Exchange Act) of more than 50% of the Voting Securities of the
Company, or (iv) a Liquidity Event, or (v) a liquidation,
dissolution of winding-up the Company. A Participation Event
shall not extend to any reorganization, merger or consolidation
involving (1) only a change in the state of incorporation of the
Company, (2) a merger of the Company with or into a wholly-owned
subsidiary of the Company that is incorporated in the United
States of America, or (3) an acquisition by merger,
reorganization or consolidation, in which the company is
substantively the surviving corporation and operates as a going
concern and is not the target in any such acquisition, of
another corporation incorporated in the United States of America
that is engaged in a business similar or related to the business
of the Company and which does not involve a recapitalization of
the Series B Preferred Stock.
"Person" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise)
of such entity.
"Redemption Date" shall mean the date on which any shares of
Series B Preferred Stock are redeemed by the Company.
"Redemption Notice" has the meaning set forth in Section 6(a) of
these Amended Terms, Preferences, Rights and Limitations.
"Redemption Price" has the meaning set forth in Section 6(a) of
these Amended Terms, Preferences, Rights and Limitations.
"Required Holders" shall mean Persons who, in the aggregate,
hold at least 66.67% of the outstanding Series B Preferred
Stock.
"Securityholders Agreement" shall mean the Amended and Restated
Securityholders Agreement dated February 11, 2000 entered into,
inter alia, by the Company and the Required Holders, as may from
time to time be amended.
"Senior Preferred Conversion Price" shall mean the Conversion
Price, as such term is defined in the Senior Preferred Stock
Certificate of Designation, as in effect from time to time.
"Senior Preferred Stock" shall mean Company's Series C
Convertible Preferred Stock, $.0001 par value per share.
"Series A Preferred Stock" shall mean Company's Series A
Preferred Stock, $.0001 par value per share.
"Series B Original Certificate of Designation" shall mean that
certain Certificate of Designation, Preferences and Relative,
Participating, Optional and Other Special Rights of Preferred
Stock and Qualifications, Limitations and Restrictions dated and
filed by the Company with the Secretary of State of Delaware on
May 13, 1998 with respect to the Series B Preferred Stock.
"Series B Preferred Stock" shall refer to shares of Series B1
Preferred Stock and Series B2 Preferred Stock.
"Series B1 Preferred Stock" shall mean Company's Series B1
Convertible Preferred Stock, $.0001 par value per share.
"Series B2 Preferred Stock" shall mean Company's Series B2
Convertible Preferred Stock, $.0001 par value per share.
"Voting Securities" shall mean all classes of capital or other
interests in equity (excluding debt securities convertible into
equity) of the subject referenced then outstanding and normally
entitled to vote in the election of directors, managers, or
trustees thereof.
2. Designation: Number of Shares. The designation of the
preferred stock authorized by this resolution shall be Series B1
Preferred Stock or Series B2 Preferred Stock, as applicable, the
number of shares of Series B1 Preferred Stock authorized hereby
shall be 200,000 shares, and the number of shares of Series B2
Preferred Stock authorized hereby shall be 500,000 shares.
3. Dividends.
(a) So long as any shares of Series B Preferred Stock shall be
outstanding, the holders of such Series B Preferred Stock shall
be entitled to receive, if legally payable by the Board of the
Company, preferential dividends, payable-in-kind in additional
shares of Series B Preferred Stock of the same series, based
upon the Liquidation Preference thereof, at the Dividend Rate on
the Liquidation Preference hereunder, payable semi-annually on
the first Business Day of July and January of each year,
commencing July 1, 1998. If the Board of the Company cannot
legally declare or pay such dividends, then such dividends shall
be cumulative and compound semi-annually, shall begin to accrue
and compound from the Original Issue Date, whether or not there
shall be net profits or net assets of the Company legally
available for the payment of those dividends, and shall be paid-
in-kind as soon as such dividends are legally payable. Any such
dividend payable for the period from the Original Issue Date to
the date hereof shall be payable based on the Liquidation
Preference previously set forth in the Series B Preferred
Original Certificate of Designation, and any such dividend
payable for the period after the date hereof shall be payable
based on the Liquidation Preference set forth herein. Dividends
may not be paid in cash.
(b) So long as any shares of Series B Preferred Stock shall be
outstanding, then, without the affirmative vote of the Required
Holders, (i) no dividend whatsoever shall be paid or declared,
and no distribution shall be made, on account of any Common
Stock or Series A Preferred Stock and (ii) no shares of Common
Stock or Series A Preferred Stock shall be repurchased, redeemed
or acquired by the Company, and no funds shall be paid into or
set aside or made available for a sinking fund for the purchase,
redemption or acquisition thereof.
4. Liquidation Rights of Series B Preferred Stock.
(a) In the event of any liquidation, dissolution or winding up
of the Company, whether voluntary or involuntary, the holders of
Series B Preferred Stock then outstanding shall be entitled to
be paid out of the assets of the Company available for
distribution to its stockholders, whether such assets are
capital, surplus or earnings, after payment or declaration and
setting apart for payment of amounts due thereon shall be made
in respect of any shares of any other class or series of the
Company's Preferred Stock ranking senior to the Series B
Preferred Stock (including, but not limited to, the Company's
Senior Preferred Stock) and before any payment or declaration
and setting apart for payment of any amount shall be made in
respect of any shares of Common Stock or any share of any other
class or series of the Company's preferred stock ranking junior
to the Series B Preferred Stock (including, but not limited to,
the Company's Series A Preferred Stock) with respect to the
payment of dividends or distribution of assets on liquidation,
dissolution or winding up of the Company, an amount equal to the
Liquidation Preference plus all declared or accrued and unpaid
dividends (whether or not then legally payable) in respect of
any liquidation, dissolution or winding up consummated.
(b) If upon any liquidation, dissolution or winding
up of the Company, whether voluntary or involuntary, and after
payment or declaration and setting apart for payment of amounts
due thereon shall be made in respect of any shares of any other
class or series of the Company's preferred stock ranking senior
to the Series B Preferred Stock (including, but not limited to,
the Company's Senior Preferred Stock), the assets to be
distributed among the holders of Series B Preferred Stock shall
be insufficient to permit the payment to such stockholders of
the full preferential amounts aforesaid, then the entire assets
of the Company remaining to be distributed after payment or
declaration and setting apart for payment of amounts due in
respect of any shares of any other class or series of the
Company's preferred stock ranking senior to the Series B
Preferred Stock) (including, but not limited to, the Company's
Senior Preferred Stock) shall be distributed ratably among the
holders of Series B Preferred Stock, based on the full
preferential amounts for the number of shares of Common Stock
(determined on an as-if converted basis) held by each holder.
(c) For purposes of this Section 4, each Participation Event
shall be deemed a liquidation, dissolution, or winding-up of the
Company.
(d) After payment to the holders of Series B Preferred Stock of
the amounts set forth in Sections 4(a) and (b) hereof, if a
Participation Event other than a Liquidity Event shall have
occurred, the remaining assets of the Company legally available
for distribution, if any, shall be distributed to the holders of
any Company stock entitled to a preference over the Common Stock
and, thereafter, ratably to the holders of Common Stock and
together with the Series B Preferred Stock and the Senior
Preferred Stock, and of any other participating security issued
by the Company (who shall participate with the Common Stock on
an as-if converted basis [including treating any then declared
or accrued and unpaid dividends, whether or not then legally
payable as if then paid in kind], except that, in performing
such calculation, ten percent of the shares of Common Stock
otherwise allocable to each holder of Series B2 Preferred Stock
shall be deducted therefrom and allocated to the holders of
Series B1 Preferred Stock [pro rata on the basis of their
respective shares of Series B1 Preferred Stock]).
5. Voting Rights. In addition to any voting rights provided by
law, the holders of shares of Series B Preferred Stock shall
have the following voting rights:
(a) So long as any of the Series B Preferred Stock is
outstanding, each share of Series B Preferred Stock shall
entitle the holder thereof to vote on all matters voted on by
the holders of Common Stock, voting together as a single class
with other shares entitled to vote at all meetings of the
stockholders of the Company. With respect to any such vote,
each share of Series B Preferred Stock shall entitle the holder
thereof to cast the number of votes equal to the number of votes
which could be cast in such vote by a holder of the number of
shares of Common Stock of the Company into which such share of
Series B Preferred Stock is convertible on the record date for
such vote.
(b) The affirmative vote of the Required Holders, voting
together as a class, in person or by proxy, at a special or
annual meeting of stockholders called for the purpose, or
pursuant to a written consent of stockholders shall be
necessary to authorize, adopt or approve an amendment to the
Certificate of Incorporation of the Company which would alter or
change in any manner the terms, powers, preferences or special
rights of the shares of Series B Preferred Stock, or grant any
waivers of such preferences or rights, including any such
modification or amendment that may, (A) change the redemption
date of the Series B Preferred Stock; (B) raise the Conversion
Price or reduce the Liquidation Preference or Redemption Price
or dividend rights of the Series B Preferred Stock;
(C) adversely affect any of the conversion features of the
Series B Preferred Stock set forth in Section 7 hereof; or
(D) reduce the percentage of outstanding Series B Preferred
Stock necessary to modify or amend the terms thereof or to grant
waivers thereof.
(c)(i) The foregoing rights of holders of shares of
Series B Preferred Stock to take any actions as provided in this
Section 5 may be exercised at any annual meeting of stockholders
or at a special meeting of stockholders held for such purpose as
hereinafter provided or at any adjournment thereof or pursuant
to any written consent of stockholders.
(ii) If (A) the annual meeting of stockholders of the
Company is not, for any reason, held within the time fixed in
the by-laws of the Company, or (B) vacancies shall exist in the
offices of directors elected by the holders of Series B
Preferred Stock pursuant to the Securityholders Agreement, or
the composition of the Board shall otherwise not conform to the
requirements of the Securityholders Agreement, a proper officer
of the Company, upon the written request of the holders of
record of at least ten percent (10%) of the shares of Series B
Preferred Stock then outstanding, addressed to the Secretary of
the Company, shall call a special meeting in lieu of the annual
meeting of stockholders or a special meeting of the holders of
Series B Preferred Stock, for the purpose of electing or, if
necessary, removing directors elected by the holders of Series B
Preferred Stock. Any such meeting shall be held at the earliest
practicable date at the place for the holding of the annual
meetings of stockholders. If such meeting shall not be called
by the proper officer of the Company within twenty (20) days
after personal service of said written request upon the
Secretary of the Company, or within twenty (20) days after
mailing the same within the United States by certified mail,
addressed to the Secretary of the Company at its principal
executive offices, then the holders of record of at least ten
percent (10%) of the outstanding shares of Series B Preferred
Stock may designate in writing one of their number to call such
meeting at the expense of the Company, and such meeting may be
called by the Person so designated upon the notice required for
the annual meetings of stockholders of the Company and shall be
held at the place for holding the annual meetings of
stockholders. Any holder of Series B Preferred Stock so
designated shall have access to the lists of stockholders to be
called pursuant to the provisions hereof.
6. Redemption of Series B Preferred Stock.
(a)(i) Mandatory Redemption. (A) The Company shall redeem,
and the holders of the outstanding Series B Preferred Stock
shall sell to the Company, at the redemption price per share
equal to the sum of the Liquidation Preference per share plus an
amount equal to all accrued and unpaid dividends per share
(herein referred to as the "Redemption Price"), all of the
outstanding Series B Preferred Stock on the seventh anniversary
of the Original Issue Date.
(B) At least twenty (20) Business Days and not
more than sixty (60) Business Days prior to the date fixed for
the mandatory redemption of the Series B Preferred Stock,
written notice (herein referred to as the "Redemption Notice")
shall be mailed, postage prepaid, to each holder of record of
the Series B Preferred Stock at its post office address last
shown on the records of the Company. The Redemption Notice
shall state:
(1) the number of shares of Series B
Preferred Stock held by the holder that the Company intends to
redeem;
(2) the date fixed for redemption and the
Redemption Price; and
(3) that the holder is to surrender to the
Company, in the manner and at the place designated, its
certificate or certificates representing the shares of Series B
Preferred Stock to be redeemed.
(ii) Delivery of Certificates and Redemption Price. On or
before the Redemption Date, each holder of Series B Preferred
Stock shall surrender the certificate or certificates
representing such shares of Series B Preferred Stock to the
Company, in the manner and at the place designated in the
Redemption Notice, and thereupon the Redemption Price for such
shares shall be payable in cash on the Redemption Date to the
Person whose name appears on such certificate or certificates as
the owner thereof, and each surrendered certificate shall be
cancelled and retired. In the event that less than all of the
shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.
(b) Unless the Company defaults in the payment in full of the
Redemption Price, dividends on the Series B Preferred Stock
called for redemption shall cease to accumulate on the
Redemption Date, and the holders of such shares redeemed shall
cease to have any further rights with respect thereto on the
Redemption Date, other than to receive the Redemption Price
without interest.
(c) If, at the time of any redemption pursuant to this Section
6, the funds of the Company legally available for redemption of
Series B Preferred Stock are insufficient to redeem the number
of shares required to be redeemed, those funds which are legally
available shall be used to redeem the maximum possible number of
such shares, pro rata based upon the number of shares to be
redeemed. At any time thereafter when additional funds of the
Company become legally available for the redemption of Series B
Preferred Stock, such funds shall immediately be used to redeem
the balance of the shares of Series B Preferred Stock which the
Company has become obligated to redeem pursuant to this
subparagraph, but which it has not redeemed.
(d) The Company may not otherwise redeem or repurchase the
Series B Preferred Stock.
7. Conversion. (a) Subject to the provisions for adjustment
hereinafter set forth, (i) each share of Series B Preferred
Stock shall be convertible at any time and from time to time, at
the option of the holder thereof (such conversion, herein
referred to as an "Optional Conversion") and (ii) all shares of
Series B Preferred Stock shall be converted upon the occurrence
of a Liquidity Event or the written election of the Required
Holders (such conversion, herein referred to as a "Mandatory
Conversion"), in each case into fully paid and nonassessable
shares of Common Stock. The number of shares of Common Stock
deliverable upon conversion of a share of Series B Preferred
Stock, adjusted as hereinafter provided, is referred to herein
as the "Conversion Ratio." After giving effect to the reverse
stock split of the Common Stock on the date hereof, the
Conversion Ratio shall initially hereinafter be 1.1611 in
respect of the Series B1 Preferred Stock and 3.6199 in respect
of the Series B2 Preferred Stock, subject to adjustment from
time to time after the date hereof pursuant to paragraph (f) of
this Section 7. No fractional shares shall be issued upon the
conversion of any shares of Series B Preferred Stock. All shares
of Common Stock (including fractions thereof) issuable upon
conversion of more than one share of Series B Preferred Stock by
a holder thereof shall be aggregated for purposes of determining
whether conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the
conversion would result in the issuance of a fraction of a share
of Common Stock, the Company shall, in lieu of issuing any
fractional share, pay the holder otherwise entitled to such
fraction a sum in cash equal to the same fraction applied to the
Current Market Price of a share of Common Stock on the date of
conversion (as determined in good faith by the Board).
(b)(i) An Optional Conversion of the Series B Preferred Stock
may be effected by any such holder upon the surrender to the
Company at the principal office of the Company of the
certificate for such Series B Preferred Stock to be converted
accompanied by a written notice stating that such holder elects
to convert all or a specified number of such shares (which may
be fractional shares) in accordance with the provisions of this
Section 7 and specifying the name or names in which such holder
wishes the certificate or certificates for shares of Common
Stock to be issued. A Mandatory Conversion of the Series B
Preferred Stock shall be immediately effective and shall be
deemed to be made as of the date of the consummation of a
Liquidity Event (the existence of which the Company shall
promptly notify the holders of Series B Preferred Stock), or the
written election of the Required Holders. Any holder may
surrender to the Company the certificate for such Series B
Preferred Stock converted pursuant to a Mandatory Conversion
accompanied by a written notice specifying the name or names in
which such holder wishes the certificate or certificates for
shares of Common Stock to be issued. Until such time as the
holder surrenders its certificate pursuant to a Mandatory
Conversion, the certificates representing the Series B Preferred
Stock shall represent the number of shares of Common Stock
issuable upon conversion of such certificate. Upon any
conversion of any shares of Series B Preferred Stock, all
accrued and unpaid dividends (whether or not then legally
payable) owing in respect of such shares shall be treated as if
such dividends were declared and paid-in-kind pursuant to
Section 3(a) hereof and converted.
(ii) In case the written notice specifying the name or
names in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued shall
specify a name or names other than that of such holder, such
notice shall be accompanied by payment of all transfer taxes
payable upon the issuance of shares of Common Stock in such name
or names. Other than such taxes, the Company will pay any and
all issue and other taxes (other than taxes based on income)
that may be payable in respect of any issue or delivery of
shares of Common Stock on conversion of Series B Preferred Stock
pursuant hereto. As promptly as practicable, and in any event
within five Business Days after the surrender of such
certificate or certificates and the receipt of such notice
relating thereto and, if applicable, payment of all transfer
taxes (or the demonstration to the satisfaction of the Company
that such taxes have been paid), the Company shall deliver or
cause to be delivered (i) certificates representing the number
of validly issued, fully paid and nonassessable full shares of
Common Stock to which the holder of shares of Series B Preferred
Stock being converted shall be entitled and (ii) if less than
the full number of shares of Series B Preferred Stock evidenced
by the surrendered certificate or certificates is being
converted, a new certificate or certificates, of like tenor, for
the number of shares evidenced by such surrendered certificate
or certificates less the number of shares being converted.
(iii) In the case of an Optional Conversion, such conversion
shall be deemed to have been made at the close of business on
the date of giving the written notice referred to in the first
sentence of (b)(i) above and of such surrender of the
certificate or certificates representing the shares of Series B
Preferred Stock to be converted so that the rights of the holder
thereof as to the shares being converted shall cease except for
the right to receive shares of Common Stock in accordance
herewith, and the Person entitled to receive the shares of
Common Stock shall be treated for all purposes as having become
the record holder of such shares of Common Stock at such time.
(c) In case any shares of Series B Preferred Stock are to be
redeemed pursuant to Section 6, all rights of conversion shall
cease and terminate as to the shares of Series B Preferred Stock
to be redeemed at the close of business on the Business Day next
preceding the date fixed for redemption unless the Company shall
default in the payment of the Redemption Price.
(d) The Conversion Ratio shall be subject to adjustment from
time to time in certain instances as hereinafter provided.
(e) The Company shall at all times reserve, and keep available
for issuance upon the conversion of the Series B Preferred
Stock, such number of its authorized but unissued shares of
Common Stock as will from time to time be sufficient to permit
the conversion of all outstanding shares of Series B Preferred
Stock, and shall take all action required to increase the
authorized number of shares of Common Stock if necessary to
permit the conversion of all outstanding shares of Series B
Preferred Stock.
(f) The Conversion Ratio will be subject to adjustment from
time to time as follows:
(i) In case the Company shall at any time or
from time to time after the date hereof (A) pay a
dividend, or make a distribution, on the outstanding
shares of Common Stock in shares of Common Stock,
(B) subdivide the outstanding shares of Common Stock,
or (C) combine the outstanding shares of Common Stock
into a smaller number of shares, then, and in each
such case, the Conversion Ratio in effect immediately
prior to such event or the record date therefor,
whichever is earlier, shall be adjusted so that the
holder of any shares of Series B Preferred Stock
thereafter surrendered for conversion shall be
entitled to receive the number of shares of Common
Stock or other securities of the Company which such
holder would have owned or have been entitled to
receive after the happening of any of the events
described above, had such shares of Series B Preferred
Stock been surrendered for conversion immediately
prior to the happening of such event or the record
date therefor, whichever is earlier. An adjustment
made pursuant to this clause (i) shall become
effective (x) in the case of any such dividend or
distribution, immediately after the close of business
on the record date for the determination of holders of
shares of Common Stock entitled to receive such
dividend or distribution, or (y) in the case of such
subdivision or combination, at the close of business
on the day upon which such corporate action becomes
effective.
(ii) In case the Company shall declare a dividend upon the
shares of Common Stock payable otherwise than out of earned
surplus or otherwise than in shares of Common Stock or
convertible securities of the Company, the Conversion Price in
effect immediately prior to the declaration of such dividend
shall be reduced by an amount equal, in the case of a dividend in
cash, to the amount thereof payable per share of Common Stock or,
in the case of any other dividend, to the fair value thereof per
share of Common Stock as determined in good faith by the Board of
the Company. For the purposes of the foregoing, a dividend other
than in cash shall be considered payable out of earned surplus
only to the extent that such earned surplus is charged an amount
equal to the fair value of such dividend as determined in good
faith by the Board of the Company. Such reductions shall take
effect as of the date on which a record is taken for the purpose
of such dividend, or, if a record is not taken, the date as of
which the holders of shares of Common Stock of record entitled to
such dividend are to be determined.
(iii) In case the Company shall, after the
date hereof, issue shares of Common Stock constituting
New Securities (other than issuances covered by
clauses (i) and (ii) above), at a price per share
less than the greater of (x) the Senior Preferred
Conversion Price as of the date of issuance of such
shares, and (y) the Current Market Price as of the
date of issuance of such shares: then, and in each
such case, the Conversion Price shall be reduced (but
not increased) to the price (calculated to the nearest
cent) equal to the quotient obtained by dividing (i)
the amount equal to the sum of (a) the number of
Fully-Diluted Outstanding shares immediately prior to
such issue or sale multiplied by the then existing
Conversion Price, and (b) the consideration, if any,
received by the Company upon such issue or sale by
(ii) the total number of Fully-Diluted Outstanding
shares immediately after such issue or sale. Upon such
adjustment to the Conversion Price, the Conversion
Ratio shall be adjusted to the number obtained by
dividing the Liquidation Preference by the adjusted
Conversion Price. For purposes of this paragraph (iii)
the following additional paragraphs shall apply:
(A) In case at any time the Company
shall in any manner grant (whether directly or by
assumption in a merger or otherwise) any rights to
subscribe for or to purchase, or any options for the
purchase of, Common Stock or any stock or securities
convertible into or exchangeable for Common Stock
(such rights or options being herein called "Options"
and such convertible or exchangeable stock or
securities being herein called "Convertible
Securities") whether or not such Options or the right
to convert or exchange any such Convertible Securities
are immediately exercisable, and the price per share
for which Common Stock is issuable upon the exercise
of such Options or upon the conversion or exchange of
such Convertible Securities (determined by dividing
(i) the total amount, if any, received or receivable
by the Company as consideration for the granting of
such Options, plus the aggregate amount of additional
consideration payable to the Company upon the exercise
of all such Options, plus, in the case of such Options
which relate to Convertible Securities, the aggregate
amount of additional consideration, if any, payable
upon the issue or sale of such Convertible Securities
and upon the conversion or exchange thereof, by (ii)
the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the
conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options)
shall be less than the greater of (x) the Senior
Preferred Conversion Price or (y) the Current Market
Price, in each case in effect immediately prior to the
time of the granting of such Options, then the total
maximum number of shares of Common Stock issuable upon
the exercise of such Options or upon conversion or
exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of
such Options shall be deemed to have been issued for
such price per share as of the date of granting of
such Options and thereafter shall be deemed to be
outstanding. Except as otherwise provided in Paragraph
(iii)(C) of this Paragraph (f), no adjustment of the
Conversion Price shall be made upon the actual issue
of such Common Stock or of such Convertible Securities
upon exercise of such Options or upon the actual issue
of such Common Stock upon conversion or exchange of
such Convertible Securities.
(B) In case the Company shall in any
manner issue (whether directly or by assumption in a
merger or otherwise) or sell any Convertible
Securities, whether or not the rights to exchange or
convert any such Convertible Securities are
immediately exercisable, and the price per share for
which Common Stock is issuable upon such conversion or
exchange (determined by dividing (i) the total amount
received or receivable by the Company as consideration
for the issue or sale of such Convertible Securities,
plus the aggregate amount of additional consideration,
if any, payable to the Company upon the conversion or
exchange thereof, by (ii) the total maximum number of
shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities) shall be
less than the greater of (x) the Senior Preferred
Conversion Price or (y) the Current Market Price, in
each case in effect immediately prior to the time of
such issue or sale, then the total maximum number of
shares of Common Stock issuable upon conversion or
exchange of all such Convertible Securities shall be
deemed to have been issued for such price per share on
the date of the issue or sale of such Convertible
Securities and thereafter shall be deemed to be
outstanding, provided that (i) except as otherwise
provided in Paragraph (iii)(C) of this Paragraph (f),
no adjustment of the Conversion Price shall be made
upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities,
and (ii) if any such issue or sale of such Convertible
Securities is made upon exercises of any Options to
purchase any such Convertible Securities for which
adjustments of the Conversion Price have been or are
to be made pursuant to other provisions of this
Paragraph (iii)(B), no further adjustment of the
Conversion Price shall be made by reason of such issue
or sale.
(C) Upon the happening of any of the
following events, namely, if the purchase price
provided for in any Option referred to in Paragraph
(iii)(A) of this Paragraph (f), the additional
consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in
Paragraphs (iii)(A) or (B) of this Paragraph (f), or
the rate at which any Convertible Securities referred
to in Paragraph (iii)(A) or (B) of this Paragraph (f)
are convertible into or exchangeable for Common Stock
shall change at any time (other than under or by
reason of provisions designed to protect against
dilution), the Conversion Price in effect at the time
of such event shall forthwith be readjusted to the
Conversion Price which would have been in effect at
such time had such Options or Convertible Securities
still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as
the case may be, at the time initially granted, issued
or sold; and on the expiration of any such Option or
the termination of any such right to convert or
exchange such Convertible Securities, the Conversion
Price then in effect hereunder shall forthwith be
increased to the Conversion Price which would have
been in effect at the time of such expiration or
termination had such Option or Convertible Securities,
to the extent outstanding immediately prior to such
expiration or termination, never been issued, and the
Common Stock issuable thereunder shall no longer be
deemed to be outstanding. If the purchase price
provided for in any such Option referred to in
Paragraph (iii)(A) of this Paragraph (f) or the rate
at which any Convertible Securities referred to in
Paragraphs (iii)(A) or (B) of this Paragraph (f) are
convertible into or exchangeable for Common Stock
shall be reduced at any time under or by reason of
provisions with respect thereto designed to protect
against dilution, then, in case of the delivery of
Common Stock upon the exercise of any such Option or
upon conversion or exchange of any such Convertible
Securities, the Conversion Price then in effect
hereunder shall forthwith be adjusted to such
respective amount as would have been obtained had such
Option or Convertible Securities never been issued as
to such Common Stock and had adjustments been made
upon the issuance of the shares of Common Stock
delivered as aforesaid, but only if as a result of
such adjustment the Conversion Price then in effect
hereunder is thereby reduced.
(D) In case any shares of Common
Stock, Options or Convertible Securities shall be
issued or sold for cash, the consideration received
therefor shall be deemed to be the amount received by
the Company therefor, without deduction therefrom of
any expenses incurred or any underwriting commissions
or concessions paid or allowed by the Company in
connection therewith. In case any shares of Common
Stock, Options or Convertible Securities shall be
issued or sold for a consideration other than cash,
the amount of the consideration other than cash
received by the Company shall be deemed to be the fair
value of such consideration as determined in good
faith by the Board of the Company, without deduction
of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the
Company in connection therewith. In case any Options
shall be issued in connection with the issue and sale
of other securities of the Company, together
comprising one integral transaction in which no
specific consideration is allocated to such Options by
the parties thereto, such Options shall be deemed to
have been issued without consideration.
(E) In case the Company shall take a
record of the holders of its Common Stock for the
purpose of entitling them (i) to receive a dividend or
other distribution payable in Common Stock, Options or
Convertible Securities, or (ii) to subscribe for or
purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to
be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon
the declaration of such dividend or the making of such
other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(iv) If any consolidation or merger of the
Company with or into another corporation, or the sale
of all or substantially all its assets to another
corporation shall be effected, or in case of any
capital reorganization or reclassification of the
capital stock of the Company, and such transaction
does not constitute a Participation Event, then, as a
condition of such consolidation, merger or sale,
reorganization or reclassification, lawful and
adequate provision shall be made whereby the holder of
Series B Preferred Stock shall thereafter have the
right to receive upon the basis and upon the terms and
condition specified herein and in lieu of the shares
of Common Stock immediately theretofore receivable
upon the conversion of Series B Preferred Stock, such
shares of stock, securities or assets as may be issued
or payable with respect to or in exchange for a number
of outstanding shares of Common Stock equal to the
number of shares of Common Stock immediately
theretofore so receivable by such holder had such
consolidation, merger, sale, reorganization or
reclassification not taken place, and in any such case
appropriate provision shall be made with respect to
the rights and interests of such holder to the end
that the provisions hereof (including without
limitation provisions for adjustment of the Conversion
Price) shall thereafter be applicable, as nearly as
may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise of
such conversion rights.
(v) For purposes of this paragraph (f), the
number of shares of Common Stock at any time
outstanding shall not include any shares of Common
Stock then owned or held by or for the account of the
Company or any of its Subsidiaries.
(vi) If the Company shall take a record of
the holders of its Common Stock for the purpose of
entitling them to receive a dividend or other
distribution, and shall thereafter and before the
distribution to stockholders thereof legally abandon
its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the
number of shares of Common Stock issuable upon
exercise of the right of conversion granted by this
paragraph (f) or in the Conversion Ratio then in
effect shall be required by reason of the taking of
such record.
(vii) Anything in this paragraph (f) to the
contrary notwithstanding, the Company shall not be
required to give effect to any adjustment in the
Conversion Ratio unless and until the net effect of
one or more adjustments (each of which shall be
carried forward), determined as above provided, shall
have resulted in a change of the Conversion Ratio by
at least one-tenth of one share of Common Stock, and
when the cumulative net effect of more than one
adjustment so determined shall be to change the
Conversion Ratio by at least one-tenth of one share of
Common Stock, such change in Conversion Ratio shall
thereupon be given effect.
8. Reports as to Adjustments. Upon any adjustment of the
Conversion Ratio then in effect and any increase or decrease in
the number of shares of Common Stock issuable upon the operation
of the conversion set forth in Section 7, then, and in each such
case, the Company shall promptly deliver to each holder of the
Series B Preferred Stock, a certificate signed by the President
or a Vice President and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of the
Company setting forth in reasonable detail the event requiring
the adjustment and the method by which such adjustment was
calculated and specifying the Conversion Ratio then in effect
following such adjustment and the increased or decreased number
of shares issuable upon the conversion granted by Section 7, and
shall set forth in reasonable detail the method of calculation
of each and a brief statement of the facts requiring such
adjustment. Where appropriate, such notice to holders of the
Series B Preferred Stock may be given in advance and included as
part of the notice required under the provisions of Section 11.
9. Certain Covenants. Any registered holder of Series B
Preferred Stock may proceed to protect and enforce its rights
and the rights of such holders by any available remedy by
proceeding at law or in equity to protect and enforce any such
rights, whether for the specific enforcement of any provision in
this Amended Certificate of Designation or in aid of the
exercise of any power granted herein, or to enforce any other
proper remedy.
10. No Reissuance of Series B Preferred Stock. No Series B
Preferred Stock acquired by the Company by reason of redemption,
purchase, or otherwise shall be reissued, and all such shares
shall be cancelled, retired and eliminated from the shares which
the Company shall be authorized to issue.
11. Notices. All notices to the Company permitted hereunder
shall be personally delivered or sent by first class mail,
postage prepaid, addressed to its principal office located at
0000 Xxxxxxxxxx Xxx, Xxxxx 00, Xxxxxxxxxxxx, XX 00000, or to
such other address at which its principal office is located and
as to which notice thereof is similarly given to the holders of
the Series B Preferred Stock at their addresses appearing on the
books of the Company.
EXHIBIT D
MANAGEMENT AGREEMENT
dated as of
February 11, 2000
NewCheck Corporation
d/b/a Productivity Solutions, Inc.
TABLE OF CONTENTS Page
ARTICLE I APPOINTMENT OF MANAGER 1
1.1 Appointment of Manager 1
1.2 Duties of Manager 2
1.3 Standard of Care 3
ARTICLE II REPORTS TO BOARD OF DIRECTORS;
BUSINESS PLAN 3
2.1 Board Oversight 3
2.2 Business Plan 3
ARTICLE III TERM 4
3.1 Term of Agreement 4
3.2 Early Termination 4
ARTICLE IV COMPENSATION 5
4.1 Warrants 5
4.2 Reimbursement of Expenses 5
ARTICLE V REPRESENTATIONS AND WARRANTIES OF
THE COMPANY 6
5.1 Incorporation 6
5.2 Authorization 6
5.3 Conflicts 6
5.4 Warrant Shares 7
5.5 Securities Laws 7
5.6 Purchase Agreement. 7
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF
THE MANAGER 7
6.1 Incorporation 7
6.2 Authorization 7
6.3 Conflicts 7
6.4 Investment Intention 8
ARTICLE VII COVENANTS OF COMPANY 8
7.1 Affirmative Covenants of Company 8
7.2 Negative Covenants of the Company 8
ARTICLE VIII CONFIDENTIALITY 9
8.1 Confidential Material 9
8.2 Obligation of Nondisclosure 9
8.3 Permitted Disclosures 9
8.4 Injunctive Relief 10
ARTICLE IX CONFLICTS OF INTEREST 10
9.1 Conflict of Interest 10
ARTICLEX INDEMNIFICATION 11
10.1 Basis of Indemnity 11
10.2 Payment 11
10.3 Limitation of Liability 11
ARTICLE XI MISCELLANEOUS 11
11.1 Force Majeure 11
11.2 Relationship of Parties 12
11.3 Notices 12
11.4 Entire Agreement 13
11.5 Amendments 13
11.6 Further Actions 13
11.7 Assignment 13
11.8 Expenses 13
11.9 Governing Law 13
11.10 Headings 13
11.11 Counterparts 13
Exhibit A - Form of Initial Warrant Certificate
Exhibit B - Form of Additional Warrant Certificate
Exhibit C - Form of Amended and Restated Registration Rights
Agreement
-ii-
MANAGEMENT AGREEMENT
THIS AGREEMENT made as of this 11th day of February, 2000,
between ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC., a
corporation organized and validly existing under the laws of the
State of Delaware (hereinafter referred to as the "Manager"),
and NEWCHECK CORPORATION d/b/a Productivity Solutions, Inc., a
corporation organized and validly existing under the laws of the
State of Delaware (hereinafter referred to as the "Company").
W I T N E S S E T H:
WHEREAS, the Company, is engaged in the development and
commercialization of automated self-checkout systems and related
labor resource management systems for use in supermarkets and
other retailers (together with any related, ancillary or
complementary business and any business utilizing any
technology, know-how, patents, processes or other intellectual
property now or hereinafter developed by the Company,
hereinafter referred to as the "Business");
WHEREAS, the Manager and the Company, inter alia, are
parties to a Stock and Convertible Note Purchase Agreement dated
as of February 11, 2000 (hereinafter referred to as the "Stock
and Note Purchase Agreement") with respect to, among other
things, the purchase by the Manager and the other investors
named therein of certain securities of the Company;
WHEREAS, in accordance with the terms and provisions of the
Stock and Note Purchase Agreement, it is a condition to the
consummation of the placement thereunder that the parties hereto
execute and deliver this Management Agreement; and
WHEREAS, the parties have determined that it is in their
respective best interests to enter into the transactions set
forth herein in order for the Company to retain the Manager to
provide such management services as set forth hereinafter, so as
to assist in the supervision and management of the Business, and
to satisfy the foregoing condition to closing under the Stock and
Note Purchase Agreement;
NOW, THEREFORE, in consideration of the premises and mutual
covenants and agreements herein contained, the parties hereto
hereby agree as follows:
ARTICLE I
APPOINTMENT OF MANAGER
1.1 Appointment of Manager. Subject to the terms and
conditions of this Agreement, the Company hereby appoints the
Manager as its agent, on behalf of the Company, to operate,
supervise and manage the Business and the Company, and the
Manager hereby accepts such appointment. The Company and the
Manager hereby agree that, during the term set forth in Article
II hereof: (i) the Manager shall, within the parameters of each
Business Plan (as hereinafter defined) and the related provisions
of this Agreement, have the power and authority to take all such
action as it shall deem necessary, and in the best interests of
the Company, for the protection, operation, supervision, and
management of the Business and the Company, and (ii) the Company
shall not appoint, engage or employ any party other than the
Manager to perform any of the Manager's duties hereunder, except
as approved in advance in writing by the Manager.
1.2 Duties of Manager. Without in any way limiting the
scope of the appointment of the Manager in accordance with
Section 1.1 hereof, the Manager shall, subject to Section 1.3
hereof and within the parameters of each Business Plan and the
related provisions of this Agreement, perform the following
duties for the Company;
(a) maintain the character of the Business as now
established; provided however, that the Manager shall also be
empowered during the term hereof to take such action as is
necessary or appropriate to expand or to consolidate the products
and services provided by the Company as part of the Business, as
presently or hereinafter constituted, consistent with the general
nature and scope of the Business, and to introduce such
additional products and services as the Manager shall deem
appropriate fully to utilize and to develop the resources of the
Company;
(b) operate and supervise the Business in the usual,
regular and ordinary manner utilized by the Manager in the
operation of its business and in accordance with good business
practices;
(c) preserve the present business relationships of the
Company, provide management and supervisory services to the
Company at least comparable to those supplied by the Company's
present officers and employees and procure for the Company all
additional management, administrative, supervisory and other
personnel required by the Business;
(d) develop and recommend to the Board of Directors of the
Company business plans, research and development programs and/or
marketing programs in respect of the Business, and arrange for
the active promotion, operation and sale of the products and
services of the Company;
(e) propose, accept, and cause the Company to perform
contracts, on behalf and at the expense of the Company, modify
existing contracts, provide for the development and manufacture
of products and the furnishing of services ordered from the
Company and arrange for the procurement of equipment, tools,
materials and supplies necessary for the operation of the
Business;
(f) establish overall cost accounting systems in respect
of the conduct of the Business, maintain or cause the Company to
maintain records and books of account in accordance with good
business practices, and furnish to the Company and its
representatives such information concerning the Business and its
scope and direction as the Company shall from time to time
reasonably request;
(g) develop and recommend to the Board of Directors of the
Company financing plans for the Company and the Business; engage
and dismiss financial advisors, investment bankers and other
consultants in the name and on behalf of the Company; make
recommendations to the Board of Directors regarding the issuance
of securities generally by the Company; and determine grants of
options with respect to the common stock, $.0001 par value
(hereinafter referred to as "Common Stock"), of the Company to
management, employees and consultants of the Company (including,
without limitation, those furnished by the Manager) from the
authorization of the Board of Directors of the Company as at the
date hereof and as hereinafter augmented thereby;
(h) subject to the terms of the Stock and Note Purchase
Agreement and the other documents referred to therein, determine
on behalf of the Company if the Company shall cause or permit a
Participation Event (as defined in the Stock and Note Purchase
Agreement) to occur;
(i) cause the Company to prosecute claims, suits,
proceedings, and actions against third parties, and defend
claims, suits, proceedings and actions against the Company; and
(j) take all such other actions as the Manager deems
necessary or desirable in order to discharge the Manager's duties
hereunder, and exercise all rights of management as allowed by
law or generally accepted business practice.
1.3 Standard of Care. At all times during the performance
of its duties under this Agreement, the Manager shall, and shall
cause each Affiliate of the Manager or other person employed or
retained by the Manager and involved in providing the services
under this Agreement to, act in a manner that is in good faith
and in the best interests of or not opposed to the best interests
of the Company and of its shareholders, taken as a whole.
ARTICLE II
REPORTS TO BOARD OF DIRECTORS; BUSINESS PLAN
2.1 Board Oversight. The Manager shall confer on a regular
basis with the Board of Directors of the Company or a designated
committee thereof, at regularly scheduled meetings or upon the
demand of the Board (in all events at least twice per year), to
report matters of materiality and to report the general status of
ongoing operations. In addition, the Manager shall, at the
request of the Board of Directors upon reasonable prior notice,
attend, or cause its representatives to attend, any and all
meetings held of the Board, and shall respond to all reasonable
inquiries of the directors raised with respect to the Business or
the Company.
2.2 Business Plan. At least 30 days prior to the
commencement of each fiscal year of the Company during the term
of this Agreement (except that, in respect of the first such
fiscal year, such date shall fall within 90 days after the date
of this Agreement), the Manager shall prepare and submit to the
Board of Directors of the Company, for review and approval,
operating and capital budgets, setting forth projections of cash
receipts for such year on a quarterly basis, together with a
summary of operating and capital expenditures projected by the
Manager on a quarterly basis, in connection with the operation of
the Business, such budgets to constitute the business plan for
the Company for such year (each herein referred to as a "Business
Plan"). The Manager shall not incur any expenses in the name or
on behalf of the Company other than those projected in a Business
Plan recommended pursuant to this Section 2.2 and approved by the
Board of Directors of the Company, except for expenses that do
not vary by more than five percent from the aggregate of similar
expenses under major line items in the budget contained in any
such Business Plan (and except that, in the event the Board of
Directors shall fail to approve a Business Plan for any period,
the Manager shall operate hereunder consistent with past practice
of the Company and subject to Section 1.3 hereof). From time to
time, the Manager may recommend to the Board of Directors of the
Company, for review and approval, one or more supplements to or
revisions of a Business Plan approved as aforesaid (it being
acknowledged that, without limiting the provisions of this
Section 2.2 hereinabove set forth, the Manager shall not incur
any expenses in the name or on behalf of the Company contained in
any such supplement until it is reviewed and approved by the
Board of Directors of the Company). Each such supplement, once
reviewed and approved as aforesaid, shall constitute part of the
Business Plan to which it pertains.
ARTICLE III
TERM
3.1 Term of Agreement. Subject to Section 3.2 hereof, the
appointment of the Manager pursuant to Article I hereof shall
extend through the fifth anniversary of the date hereof;
provided, however, that, so long as the Manager or its Affiliates
owns or has rights to acquire at least 7% of the outstanding
equity of the Company, the Manager shall have the option to
extend such term for up to an additional five years upon giving
the Company written notice of such extension at least 90 days
prior to the expiration of the fifth anniversary of the date
hereof.
3.2 Early Termination.
(a) Notwithstanding the foregoing provisions of Section
3.1 hereof, this Agreement shall forthwith terminate, at the
option of the Manager, in the event that the Company shall:
(i) admit in writing its inability to pay its debts
generally as they become due;
(ii) file a petition in bankruptcy or a petition to
take advantage of any insolvency act;
(iii) make an assignment for the benefit of creditors;
(iv) consent to the appointment of a receiver of
itself or of the whole or any substantial part of its
property;
(v) on a petition in bankruptcy filed against it, be
adjudicated bankrupt; or
(vi) file a petition or answer seeking reorganization
or arrangement under the Federal bankruptcy laws or any
other applicable law or statute of the United States of
America or any state, district or territory thereof.
(b) Notwithstanding the foregoing provisions of Section
3.1 hereof, this Agreement shall further be terminable by either
party upon 180 days' prior written notice to the other party
following any material breach of this Agreement by the other
party (provided that such breach shall remain uncured at the end
of such period or, if such breach is not reasonably susceptible
to cure during such period, provided that the breaching party
shall not have diligently taken steps to cure such breach at the
end of such period).
ARTICLE IV
COMPENSATION
4.1 Warrants.
(a) In consideration of the performance by the Manager of
its duties as set forth in Article I hereof, the Company herewith
issues to the Manager warrants (hereinafter referred to as the
"Initial Warrants") to purchase shares of Common Stock, as
evidenced by the warrant certificate (hereinafter referred to as
the "Initial Warrant Certificate") in the form of Exhibit A
annexed hereto.
(b) In further consideration of the performance by the
Manager of its duties as set forth in Article I, the Company
herewith issues to the Manager additional warrants (together with
the Initial Warrants, hereinafter referred to as the "Warrants")
to purchase shares (together with the shares of Common Stock
issuable upon exercise of the Initial Warrants, hereinafter
referred to as the "Warrant Shares") of Common Stock, as
evidenced by the warrant certificate (together with the Initial
Warrant Certificate, hereinafter referred to as the "Warrant
Certificate") in the form of Exhibit B annexed hereto.
(c) In connection with issuance of the Warrants, the
Company herewith executes and delivers to the Manager the
Amended and Restated Registration Rights Agreement in the form
of Exhibit C annexed hereto, extending thereby to the Manager
the registration rights specified therein with respect to the
Warrant Shares.
4.2 Reimbursement of Expenses. In the event that the
Manager or any Affiliate thereof shall incur any expenses for its
own account in connection with its performance hereunder, whether
in connection with services or materials devoted hereunder or
otherwise, or in connection with any other activities relative to
the Company (whether prior to or after the date hereof), the
Company shall from time to time be obligated to reimburse the
Manager for such expenses, to the extent reasonably incurred, in
cash, within fifteen days after the rendering by the Manager of a
statement therefor. Such expenses shall extend, without
limitation, to expenses reasonably incurred directly or
indirectly in connection with performance hereunder or in
connection with any such other activities relative to the
Company, and to a portion of the Manager's (or its Affiliates')
general and administrative expenses reasonably allocated by the
Manager to performance hereunder, including, without limitation,
a reasonable allocation of compensation and benefits to employees
of the Manager and its Affiliates. The Company's obligation as
aforesaid shall extend to investment banking fees in the amount
of $150,000 plus reasonable expenses incurred to BNY Capital
Markets under the engagement letter dated January 21, 2000, and
reasonable legal fees and expenses incurred by the Manager in
connection with the negotiation, execution and delivery of the
Stock and Note Purchase Agreement and the additional agreements
contemplated thereby (including, without limitation, this
Agreement), it being understood and agreed that any and all
securities deliverable by the Manager in such connection shall be
valued by the Manager in its reasonable discretion. For purposes
of this Agreement, the term "Affiliate" shall mean any person or
entity controlled by, controlling or under common control with
the Manager. Notwithstanding the foregoing or any other provision
contained in this Agreement, the parties understand and agree
that the Manager shall not be required to advance any amounts to
the Company, or to guarantee or in any manner secure any
obligations of the Company or in any manner become obligated for
any of the liabilities of the Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents, warrants and covenants that:
5.1 Incorporation. The Company is duly organized, validly
existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to own or
hold under lease the assets and properties which it owns or holds
under lease and to perform all its obligations under the
agreements to which it is a party, including, without limitation,
this Agreement and the Warrant Certificates. The Company is in
good standing in each other jurisdiction in which the failure to
be so qualified would have a material adverse effect on its
assets or properties or to the conduct of the Business.
5.2 Authorization. The execution and delivery of this
Agreement and the Warrant Certificates by the Company, the
performance by the Company of its covenants and agreements
hereunder and thereunder and the consummation by the Company of
the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action. Without limiting
the generality of the foregoing, the Board of Directors has
authorized the Manager to determine, without further action by
the Board of Directors, grants (and the terms thereof) of options
with respect to Common Stock to management, employees and
consultants of the Company (including, without limitation, those
furnished by the Manager), covering up to an aggregate of
1,550,000 shares of Common Stock (which the Company has duly
reserved for issuance upon exercise of such options); and such
options, and the Common Stock issuable upon exercise thereof,
will be duly authorized, validly-issued, fully-paid and non-
assessable, issuable without violation of the preemptive rights
of any party. This Agreement and the Warrant Certificates
constitute the valid and legally binding obligation of the
Company enforceable against the Company in accordance with their
respective terms, except as may be limited by bankruptcy,
insolvency or other laws affecting generally the enforceability
of creditors' rights and by limitations on the availability of
equitable remedies.
5.3 Conflicts. Neither the execution and delivery of this
Agreement and the Warrant Certificates by the Company, nor the
consummation of the transactions contemplated herein and therein
to be consummated by the Company, will violate any provision of
the certificate of incorporation or by-laws of the Company, or
any law, rule, regulation, writ, judgment, injunction, decree,
determination, award or other order of any court, government, or
governmental agency or instrumentality, domestic or foreign,
applicable to the Company, or conflict with or result in any
breach of any of the terms of or the creation or imposition of
any mortgage, deed of trust, pledge, lien, security interest or
other charge or encumbrance of any nature pursuant to the terms
of any contract or agreement to which the Company is a party or
by which the Company or any of their respective properties or
assets is bound.
5.4 Warrant Shares. The Company has duly reserved for
issuance a number of shares of Common Stock adequate to comply
with its obligations to issue the Warrant Shares. The Warrants
have been and, upon exercise of the Warrants the Warrant Shares
will be, duly authorized, validly issued and fully-paid and non-
assessable, issued without violation of the preemptive rights of
any party. The Warrants are and, upon exercise of the Warrants
the Warrant Shares will be, free and clear of any and all
pledges, charges, liens, mortgages, deeds of trust and any other
encumbrances of any nature whatsoever created by the Company.
5.5 Securities Laws. In reliance on the investment
representations contained in Section 6.4, the issuance and
delivery of the Warrants and the Warrant Shares, as provided in
this Agreement and the Warrant Certificates, are exempt from the
registration requirements of the Securities Act of 1933
(hereinafter referred to as the "Securities Act") and all
applicable state securities laws. Neither the Company nor any
person or entity authorized to act on its behalf has taken or
will take any action (including, without limitation, any offering
of any securities of the Company under circumstance which would
require the integration of such offering with the offering of the
Warrants or the Warrant Shares under the Securities Act and the
rules and regulations of the Securities and Exchange Commission
thereunder) which might subject the offering, issuance or sale of
the Warrants or the Warrant Shares to the registration
requirements of Section 5 of the Securities Act.
5.6 Purchase Agreement. Each and every representation and
warranty of the Company set forth in the Purchase Agreement is
hereby incorporated by reference into this Agreement as if set
forth herein.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE MANAGER
The Manager hereby represents, warrants and covenants that:
6.1 Incorporation. The Manager is a corporation duly
incorporated, validly existing and in good standing under the
laws of the State of Delaware and has the full corporate power
and authority to enter into this Agreement and to perform its
agreements and covenants to be performed hereunder. The Manager
is in good standing in each other jurisdiction wherein the
failure so to qualify would have a material adverse effect on its
ability to consummate the transactions contemplated hereunder.
6.2 Authorization. The execution and delivery of this
Agreement by the Manager and the performance by the Manager of
its covenants and agreements hereunder have been duly authorized
by all necessary corporate action and, when executed and
delivered by the Manager, this Agreement shall constitute the
valid and legally binding agreement of the Manager enforceable
against the Manager in accordance with its terms, except as may
be limited by bankruptcy, insolvency, or other laws affecting the
enforceability of creditors' rights and by limitations on the
availability of equitable remedies.
6.3 Conflicts. Neither the execution and delivery of this
Agreement by the Manager nor the consummation of the transactions
contemplated herein to be consummated by the Manager, will
violate any provision of the certificate of incorporation or by-
laws of the Manager or any law, rule, regulation, writ, judgment,
injunction, decree, determination, award or other order of any
court, government or governmental agency or instrumentality,
domestic or foreign, applicable to the Manager or conflict with
or result in any breach of any mortgage, deed of trust, pledge,
lien, security interest or other charge or encumbrance of any
nature pursuant to the terms of any contract or agreement to
which the Manager is a party or by which the Manager or any of
the assets of the Manager are bound.
6.4 Investment Intention. The Manager is acquiring the
Warrants for investment purposes and not with a view to the
distribution thereof in violation of the Securities Act. The
Manager will not, directly or indirectly, offer, transfer, sell,
assign, pledge, hypothecate or otherwise dispose of any of the
Warrants (or solicit any offers to buy, purchase, or otherwise
acquire any of the Warrants), except in compliance with the
Securities Act.
ARTICLE VII
COVENANTS OF COMPANY
7.1 Affirmative Covenants of Company. During the term of
this Agreement, the Company shall:
(a) pay to the Manager all amounts due pursuant to the
terms hereof, without setoff or counterclaim for any reason
whatsoever;
(b) notify the Manager promptly in writing of any default
under any instrument or agreement to which the Company is a
party and any litigation, arbitration, or other governmental
proceeding, or threatened litigation, arbitration, or other
governmental proceeding, involving the Company;
(c) provide the Manager with drawing rights on such
accounts maintained with financial institutions by the Company as
are or shall be necessary, or in the interests of the Company, to
operate the Business;
(d) furnish to the Manager such financial, legal and other
information in its possession or available to it with respect to
the Company as shall from time to time be requested by the
Manager;
(e) use its best efforts in all respects to cooperate with
the Manager in its performance under this Agreement.
7.2 Negative Covenants of the Company. During the term of
this Agreement, the Company shall not, without the concurrence of
the Manager (acting pursuant to Section 1.3 hereof):
(a) (i) issue, grant, sell or encumber any shares of its
capital stock, (ii) other than pursuant to commitments existing
on the date hereof and as contemplated by Section 1.2(g) hereof,
issue, grant, sell or encumber any security, option, warrant,
put, call subscription or other right of any kind, fixed or
contingent, that directly or indirectly calls for the
acquisition, issuance, sale, pledge or other disposition of any
shares of capital stock or other equity interests of the Company,
(iii) enter into any agreement, commitment or understanding
calling for any transaction referred to in clause (i) or (ii) of
this Paragraph (a), or (iv), make any other changes in its equity
capital structure;
(b) split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other
distribution (whether in cash, stock, securities, indebtedness,
rights or property or any combination thereof) in respect of any
shares of its capital stock or other equity interests, or redeem
or otherwise acquire any shares of the capital stock or other
equity interests;
(c) without limiting any rights of any party to require
the Company to effect a registration under the Amended and
Restated Registration Rights Agreement hereinabove referenced,
cause or permit any Participation Event (if within the control of
the Company and except for any Liquidity Event [as defined in the
Senior Preferred Certificate of Designation referenced in the
Stock and Note Purchase Agreement] in the ordinary course of
business) to occur;
(d) make or permit any change in its certificate of
incorporation or by-laws; or
(e) acquire, directly or indirectly, any interest in any
corporation, association, partnership or other controlling
entity, unless provision satisfactory to the Manager shall be
made whereby such entity shall be covered by this Agreement in
all relevant respects as if the Company hereunder.
ARTICLE VIII
CONFIDENTIALITY
8.1 Confidential Material. For purposes of this Article
VIII, the term "Confidential Material" shall be defined to mean
all proprietary or confidential information furnished to the
Manager, or any of its directors, officers, employees or agents
(each hereinafter referred to as a "Receiving Party") by the
Company, or any of its directors, officers, employees or agents
(each hereinafter referred to as a "Disclosing Party").
Notwithstanding the foregoing, the term "Confidential Material
shall not include information which (i) is known to the Receiving
Party, prior to the date hereof, (ii) becomes generally available
to the trade or the public other than as a result of a disclosure
by the Disclosing Party, (ii) was available to the Receiving
Party on a non-confidential basis prior to its disclosure to the
Receiving Party by the Disclosing Party, or (iv) becomes
available to the Receiving Party on a non-confidential basis from
a source other than the Disclosing Party, provided that such
source is not bound by a confidentiality agreement with the
Disclosing Party.
8.2 Obligation of Nondisclosure. In connection with and as
a condition to the Disclosing Party furnishing Confidential
Material to the Receiving Party, the Manager hereby agrees that,
during the term of this Agreement and for a period of three years
thereafter, the Receiving Party shall treat all Confidential
Material confidentially, and not disclose it except in accordance
herewith. Notwithstanding the foregoing or any other provision
contained herein, unless otherwise agreed to by the parties
hereto, the Receiving Party may not in any manner use any
Confidential Material for any purpose other than in connection
with conduct of the Business.
8.3 Permitted Disclosures. In the event that the Receiving
Party is required (by oral questions, interrogatories, requests
for information or documents, subpoena, civil investigative
demand or similar process) to disclose any Confidential Material,
the Receiving Party shall provide the Disclosing Party with
prompt notice thereof so that the Disclosing Party may seek an
appropriate protective order and/or waive compliance by the
Receiving Party with the provisions hereof; provided, however,
that, if in the absence of a protective order or the receipt of a
waiver hereunder, the Receiving Party is, in the opinion of its
counsel, compelled to disclose Confidential Material not
otherwise disclosable hereunder to any legislative, judicial or
regulatory body, agency or authority, or else be exposed to the
liability for contempt, fine or penalty, or to other censure,
such Confidential Material may be so disclosed. In addition, the
Manager shall be permitted to make any and all disclosures which
the Manager or its counsel deems necessary or appropriate under
federal and state securities laws and regulations with respect to
the performance of services hereunder or otherwise related to the
obligations of the Manager under such laws or regulations.
8.4 Injunctive Relief. In view of the irreparable harm and
damage which would be incurred by the Company in the event of any
violation of any of the provisions of this Article VIII, the
Manager hereby consents and agrees that, if any Receiving Party
violates any such provision, the Company shall be entitled to an
injunction or similar equitable relief to be issued by any court
of competent jurisdiction restraining the breaching party from
committing or continuing any such violation.
ARTICLE IX
9.1 Conflict of Interest. The Company and the Manager each
understand that in fulfilling its obligations hereunder, the
Manager may encounter facts and circumstances giving rise to a
conflict between the interests of the Manager and the interests
of the Company. Notwithstanding the foregoing (but subject to
the proviso hereinafter contained), the parties understand and
agree that the Manager may engage, directly or indirectly, in
any other business venture or ventures of any nature and
description, independently or with others, and whether or not
related to the Business; provided, however, that the Manager
shall not, during the term of this Agreement, without prior
approval of the Board of Directors of the Company acting by a
majority of the members thereof not constituting employees,
officers, directors or principal stockholders of the Manager,
engage in the commercialization of any automated self-checkout
system for use in supermarkets and other retailers competitive
with any such system of the Company. Without limiting the
generality of the foregoing, the parties acknowledge and agree
that, in the event the parties enter into any additional
transactions not contemplated by the provisions of this
Agreement, such transactions shall be on arms-length terms, no
less favorable to the Company in any material respect than the
terms that could be obtained from unaffiliated parties, if any,
in the same area entering into comparable transactions with the
Company.
ARTICLE X
INDEMNIFICATION
10.1 Basis of Indemnity. The Company hereby agrees to
indemnify and hold harmless, the Manager, its directors,
officers, employees, agents and their respective legal
representatives, successors and assigns (each hereinafter
referred to as an "Indemnified Party"), from and against any and
all direct or consequential damages, costs, expenses, losses,
claims, demands, liabilities and/or obligations, including,
without limitation, reasonable counsel's fees (hereinafter
referred to as "Damages"): (i) resulting from any breach of any
warranty, representation, agreement or covenant of the Company
set forth or incorporated by reference in this Agreement, or the
discharge by the Manager of its obligations under this Agreement
(except insofar as arising from the gross negligence or willful
breach of this Agreement by the Manager or its employees or
agents); or (ii) in any way related to the Company, and/or the
obligations, liabilities or properties thereof or the Business,
whether incurred or resulting from any state of facts heretofore
or hereinafter arising (except insofar as any such Damages shall
have arisen as a result of the gross negligence or willful
misconduct of the Manager, its employees or agents in the
performance of the Manager's duties hereunder).
10.2 Payment. In the event that an Indemnified Party shall
incur any Damages in respect of which indemnity may be sought
pursuant to this Agreement, the Company shall be given written
notice thereof promptly by such Indemnified Party, which notice
shall, to the extent reasonably available to such Indemnified
Party, specify the amount and nature of such Damages and include
the request by the Indemnified Party of the Company for
indemnification therefor. The Company shall promptly pay to such
Indemnified Party the amount of the Damages so specified.
10.3 Limitation of Liability. Without limiting the
provisions of Section 10.1 hereof, in any event the liability of
the Manager and its Affiliates with respect to this Agreement or
anything done in connection herewith, including but not limited
to the performance or breach hereof, or from the sale, delivery,
provision or use of any service or product provided under or
covered by this Agreement, whether in contract, tort (including
negligence or strict liability) or otherwise, shall not exceed
the amounts previously paid to the Manager and its Affiliates by
the Company under this Agreement (including the then current fair
market value of the Warrants, and of any shares theretofore
issued upon exercise of the Warrants, held by the Manager, plus
the proceeds of any shares theretofore so issued and disposed of
by the Manager), except as a result of the Manager's gross
negligence or willful misconduct; and the Company hereby releases
the Manager and its Affiliates from any act done or omitted to be
done by the Manager except to the extent aforesaid.
ARTICLE XI
MISCELLANEOUS
11.1 Force Majeure. The Company and the Manager agree that
neither shall be deemed to be in default of any of their
respective obligations hereunder to the extent only that
performance of any such obligation shall have been prevented by
an act of God, fire, riot, war or government, but only to the
extent of the duration of the act or acts comprising the basis
for the operation of this Section 11.1.
11.2 Relationship of Parties. The relationship between the
Parties, created by this Agreement shall for all purposes be that
of independent contractors and neither shall be deemed or
construed as an agent of the other for any purpose; it being
specifically the intent of the parties to avoid forming any
partnership or joint venture and it being understood and agreed
that each party shall exercise full power and authority, subject
only to the respective rights and obligations of the parties set
forth herein, in the performance of any or all of their
respective obligations hereunder.
11.3 Notices. All notices, requests, or instructions
hereunder shall be in writing and delivered personally, or sent
by registered, certified, or express mail, postage prepaid,
return receipt requested, or by a reputable overnight courier
service, as follows:
(1) if to the Manager:
000 Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Attention: President
with a copy to:
Xxxxxx Xxxxxx, Esq.
Krugman & Kailes LLP
Park 80 West-Plaza Two
Xxxxxx Xxxxx, Xxx Xxxxxx 00000
(2) if to the Company:
0000 Xxxxxxxxxx Xxx
Xxxxx 00
Xxxxxxxxxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
with a copy to:
Xxxxx X. Xxxxx, Esq.
Powell, Goldstein, Frazer, Murphy LLP
000 Xxxxxxxxx Xx. X.X.
00xx Xxxxx
Xxxxxxx, Xxxxxxx 00000
or to such other address as a party may designate by written
notice to the other parties. If delivered personally, the date on
which such notice, request, instruction or document is deemed
given shall be the date on which such delivery is made, or if
delivered by mail, three days after the date on which deposited
in the mail or if delivered by a reputable overnight courier
service, the day after the date on which deposited with or turned
over to said courier service. Each notice, request, instruction
or document shall bear the date on which it is delivered.
11.4 Entire Agreement. This Agreement and the documents
referred to herein contain the entire agreement between the
parties hereto with respect to the transactions contemplated
herein.
11.5 Amendments. No modifications or amendments hereof
shall be effective unless in writing and signed by the party
against which it is sought to be enforced.
11.6 Further Actions. Each of the parties hereto shall take
such additional actions as may be necessary or reasonably
requested by the other party hereto to carry out and consummate
the transactions contemplated in this Agreement.
11.7 Assignment. This Agreement may not be assigned or
transferred by either party without the prior written consent of
the other party having first been obtained. Any attempted
assignment or transfer in breach of the provisions of this
Section 11.7 shall be void and of no further effect and shall
constitute a material breach of this Agreement.
11.8 Expenses. Except as otherwise set forth herein, each
of the parties shall bear its expenses in connection with this
Agreement and the transactions contemplated herein.
11.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Connecticut
applicable in the case of agreements made and to be entirely
performed within such State.
11.10 Headings. The headings appearing herein are for the
convenience of the parties only and shall not be construed to
affect the meaning of the provisions of this Agreement.
11.11 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all
of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties hereto as of the date first above written.
ATTEST: ELECTRONIC RETAILING SYSTEMS
INTERNATIONAL, INC.
By
-------------------- ---------------------------
Assistant Secretary Vice Chairman and
Chief Executive Officer
ATTEST: NEWCHECK CORPORATION d/b/a
Productivity Solutions, Inc.
By
-------------------- ---------------------------
Secretary President and Chief Executive
Officer
EXHIBIT E
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT dated as
of February 11, 2000 among NewCheck Corporation, d/b/a
Productivity Solutions, Inc., a corporation duly organized and
validly existing under the laws of the State of Delaware
(hereinafter referred to as the "Company"), Electronic Retailing
Systems International, Inc., a corporation duly organized and
validly existing under the laws of the State of Delaware
(hereinafter referred to as "ERS"), the other purchasers of the
Company's Series C Convertible Preferred Stock, $0.0001 par value
(hereinafter referred to as the "Senior Preferred Stock"),
identified on Schedule 1 annexed hereto (hereinafter, together
with ERS, referred to as the "Purchasers", and each individually,
as a "Purchaser"), and the other Holders (as hereinafter
defined).
W I T N E S S E T H :
WHEREAS, the Company and the holders of the Series A
Convertible Preferred Stock $.0001 par value (hereinafter
referred to as the "Series A Preferred Stock"), of the Company
are parties to a Rights Agreement dated as of June 30, 1994
(Section 1 of which is hereinafter referred to as the "1994
Agreement"), with respect to the registration by the Company of
the shares of its common stock, $.0001 par value (as the same may
be constituted from time to time, hereinafter referred to as the
"Common Stock"), issuable upon conversion of the Series A
Preferred Stock, and of the other Registrable Securities
identified therein; and
WHEREAS, the Company and the holders of the Series B1
Convertible Preferred Stock, $.0001 par value (hereinafter
referred to as the "Series B1 Preferred Stock"), of the Company
and the holders of the Series B2 Convertible Preferred Stock,
$.0001 par value (hereinafter referred to as the "Series B2
Preferred Stock"), of the Company are parties to a Registration
Rights Agreement dated May 13, 1998 (hereinafter referred to as
the "1998 Agreement"), with respect to registration by the
Company of the shares of Common Stock issuable upon conversion of
the Series B1 Preferred Stock and the Series B2 Preferred Stock,
and of the other Registrable Securities identified therein; and
WHEREAS, the Company and the Purchasers are parties to a
Stock and Convertible Note Purchase Agreement dated as of even
date herewith (hereinafter referred to as the "Stock and Note
Purchase Agreement"), providing for, among other matters, the
issuance and delivery by the Company: (i) to the Purchasers of
shares of the Senior Preferred Stock, such shares convertible
into shares of the Common Stock, (ii) to ERS of the Company's 8%
Convertible Note dated as of even date herewith (hereinafter
referred to as the "ERS Convertible Note"), and (iii) to AG
Checkout LLC of the Company's 8% Convertible Note dated as of
even date herewith (hereinafter referred to as the "AG
Convertible Note" and together with the ERS Convertible Note,
referred to herein as the "Convertible Notes"), such Convertible
Notes convertible into shares of Senior Preferred Stock; and
WHEREAS, the Company and ERS are parties to a Management
Agreement dated as of even date herewith (hereinafter referred to
as the "Management Agreement"), providing for, among other
matters, the issuance and delivery by the Company to ERS of
warrants (hereinafter referred to as the "Warrants") exercisable
with respect to shares of the Common Stock evidenced by the terms
and conditions of two Warrant Certificates, each dated as of even
date herewith, delivered by the Company to ERS;
WHEREAS, it is a condition to the acquisition and acceptance
by the Purchasers of the Senior Preferred Stock and the
Convertible Notes, and to the execution and delivery of the
Management Agreement by ERS, that the 1994 Agreement and the 1998
Agreement be amended and restated as set forth herein and that
the Company execute and deliver this Agreement to the Purchasers;
and
WHEREAS, the holders of the Series A Preferred Stock party
hereto constitute a majority of the record and beneficial holders
of the Registrable Securities (as set forth in the 1994
Agreement) and the holders of the Series B1 Preferred Stock and
Series B2 Preferred Stock party hereto constitute the Majority
Holders (as set forth in the 1998 Agreement);
NOW, THEREFORE, in consideration of the agreements, premises
and the mutual covenants contained herein the parties, intended
to be legally bound, hereto hereby agree as follows:
1. Definitions. Unless otherwise defined herein, the
following terms shall have the respective meanings set forth
below (such meanings being equally applicable to both the
singular and plural form of the terms defined):
"Agreement" shall mean this Amended and Restated
Registration Rights Agreement, including all amendments,
modifications and supplements and any exhibits or schedules to
any of the foregoing, and shall refer to the Agreement as the
same may be in effect at the time such reference becomes
operative.
"Amended and Restated Securityholders Agreement" shall mean
the Amended and Restated Securityholders Agreement dated as of
even date herewith among the Company, the Purchasers and the
holders of the Series B1 Preferred Stock and the holders of the
Series B2 Preferred Stock, which in all respects amends and
restates the Stockholders Agreement dated as of May 13, 1998
among the Company and such holders.
"Business Day" shall mean any day that is not a Saturday, a
Sunday or a day on which banks are required or permitted to be
closed in the State of New York.
"Commission" shall mean the Securities and Exchange
Commission or any other federal agency then administering the
Securities Act and other federal securities laws.
"Conversion Shares" shall mean shares of Common Stock issued
upon conversion of shares of Series A Preferred Stock, Series B1
Preferred Stock, Series B2 Preferred Stock or Senior Preferred
Stock (including, without limitation, Senior Preferred Stock
issuable upon conversion of the Convertible Notes), and upon
exercise of the Warrants.
"Demand Holders" shall mean Holders holding at the time
shares of Senior Preferred Stock, and the Convertible Notes,
representing at least 60% of the sum of (x) all then outstanding
Conversion Shares issued upon conversion of Senior Preferred
Stock (including, without limitation, Senior Preferred Stock
issuable upon conversion of the Convertible Notes), (y) all
shares of Common Stock issuable to the holders of then
outstanding Senior Preferred Stock, and (z) all shares of Common
Stock issuable to the holders of Senior Preferred Stock issuable
upon conversion of the Convertible Notes; except that the
foregoing reference to "60%" shall be reduced to "30%" subsequent
to a Qualified Public Offering or, if earlier, 18 months from and
after the date hereof with respect to a Qualified Public
Offering.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time, or any similar federal
statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
"Holder" shall mean the holder of Conversion Shares, or
shares of Series A Preferred Stock, Series B1 Preferred Stock,
Series B2 Preferred Stock or Senior Preferred Stock (including,
without limitation, Senior Preferred Stock issued upon conversion
of the Convertible Notes), or of the Convertible Notes or the
Warrants.
"NASD" shall mean the National Association of Securities
Dealers, Inc., or any successor corporation thereto.
"Person" shall mean an individual, partnership, corporation,
trust or unincorporated organization, or a government or agency
or political subdivision thereof.
"Qualified Public Offering" shall have the meaning ascribed
to such term in the Senior Preferred Certificate of Designation.
"Registrable Securities" shall mean the shares of Common
Stock from time to time issued or issuable to the holders of the
Series A Preferred Stock, Series B1 Preferred Stock, Series B2
Preferred Stock, and Senior Preferred Stock (including, without
limitation, shares of Senior Preferred Stock issuable upon
conversion of the Convertible Notes), upon the conversion
thereof, or to the holders of the Warrants upon exercise thereof,
or hereinafter acquired by such holders or which they hereinafter
obtain the right to acquire pursuant to the terms of the Amended
and Restated Securityholders Agreement or otherwise; provided,
however, that a security ceases to be a Registrable Security when
it is no longer a Restricted Security.
"Registration Statement" shall mean any registration
statement of the Company which covers Registrable Securities
pursuant to the provisions of this Agreement, including the
prospectus, amendments (including post-effective amendments) and
supplements to such Registration Statement, all exhibits and all
material incorporated by reference in such Registration
Statement.
"Required Holders" shall mean Holders holding at the time
shares of Series B1 Preferred Stock, Series B2 Preferred Stock,
or Senior Preferred Stock, or the Convertible Notes, or
Conversion Shares into which the Series B1 Preferred Stock,
Series B2 Preferred Stock, or Senior Preferred Stock (including,
without limitation, Senior Preferred Stock issuable or issued
upon conversion of the Convertible Notes) has been converted,
representing at least 66.67% of the sum of (x) all then
outstanding Conversion Shares issued upon conversion of the
Series B1 Preferred Stock, Series B2 Preferred Stock or Senior
Preferred Stock (including, without limitation, Senior Preferred
Stock issuable upon conversion of the Convertible Notes), (y) all
shares of Common Stock issuable to the holders of then
outstanding Series B1 Preferred Stock, Series B2 Preferred Stock
or Senior Preferred Stock, and (z) all shares of Common Stock
issuable to the holders of Senior Preferred Stock issuable upon
conversion of the Convertible Notes.
"Restricted Security" shall mean any security unless or
until: (i) it has been effectively registered under the
Securities Act and disposed of in accordance with the
Registration Statement covering it; (ii) it is distributed to the
public pursuant to Rule 144 (or any similar provisions then in
force) under the Securities Act; or (iii) it has otherwise been
transferred and a new certificate or other evidence of ownership
for it not bearing a restrictive legend pursuant to the
Securities Act and not subject to any stop transfer order has
been delivered by or on behalf of the Company and no other
restriction on transfer exists.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall
be in effect from time to time.
"Senior Preferred Certificate of Designation" shall mean the
Certificate of Designation of the Senior Preferred Stock filed
with the Secretary of State of Delaware, as may from time to time
be amended.
"underwritten offering" shall mean a registration in which
securities of the Company are sold pursuant to a firm commitment
underwriting to an underwriter at a fixed price for reoffering or
pursuant to agency or best efforts arrangements with an
underwriter.
2. Prior Agreements. This Agreement hereby amends and
restates the terms and provisions of each of the 1994 Agreement
and the 1998 Agreement, which are superseded in their entirety by
the provisions hereof.
3. Required Registration. Subject to the provisions of
Section 9 hereof, if the Demand Holders make a written request
for a registration with the Commission under and in accordance
with the provisions of the Securities Act of all or part of their
Registrable Securities (hereinafter referred to as a "Demand
Registration"), the Company shall promptly notify all Holders of
Registrable Securities in writing of the receipt of such request
and each such Holder, may elect (by written notice sent to the
Company within 10 Business Days from the date of such Holder's
receipt of the aforementioned Company's notice) to have
Registrable Securities included in such registration thereof
pursuant to this Section 3. Thereupon the Company shall, as
expeditiously as is possible, use its best efforts to effect the
registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by
such Holders for sale, all to the extent required to permit the
disposition (in accordance with the intended method or methods
thereof, as aforesaid) of the Registrable Securities so
registered. All requests made pursuant to this Paragraph shall
specify the number of Registrable Securities to be registered and
shall also specify the intended methods of disposition thereof;
provided, however, that if the Demand Holders of a majority of
the Registrable Securities held by the Required Holders
requesting such registration request an underwritten offering,
the method of disposition shall be such an underwritten offering.
4. Incidental Registration. If the Company at any time
proposes to file on its behalf and/or on behalf of any of its
security holders (the "demanding security holders"), a
Registration Statement under the Securities Act on any form
(other than a Demand Registration and other than on a
Registration Statement on Form S-4 or S-8 or any successor form
for securities to be offered in a transaction of the type
referred to in Rule 145 under the Securities Act or to employees
of the Company pursuant to any employee benefit plan,
respectively) for the general registration of securities, it
will give written notice thereof to all Holders, at least 30
days before the initial filing with the Commission of such
Registration Statement, which notice shall set forth the
intended method of disposition of the securities proposed to be
registered by the Company. The notice shall offer to include in
such filing the aggregate number of shares of Registrable
Securities as such holders thereof may request.
Each Holder desiring to have Registrable Securities
registered under this Section 4 shall advise the Company in
writing within 10 Business Days after the date of receipt of
such offer from the Company, setting forth the amount of such
Registrable Securities for which registration is requested. The
Company shall thereupon include in such filing the number of
shares of Registrable Securities for which registration is so
requested, subject to the next sentence, and shall use its best
efforts to effect registration under the Securities Act of such
shares. If the managing underwriter of a proposed underwritten
offering shall advise the Company in writing that, in its
opinion, the distribution of the Registrable Securities
requested to be included in the registration concurrently with
the securities being registered by the Company or such demanding
security holder would materially and adversely affect the
distribution of such securities by the Company or such demanding
security holder, then all selling security holders (including
the demanding security holder) shall reduce the amount of
securities each intended to distribute through such offering on
a pro rata basis. Except as otherwise provided in Section 7
hereof, all expenses of such registration shall be borne by the
Company.
This Section 4 shall not apply to a Qualified Public
Offering unless the Demand Holders request to register their
Registrable Securities, then all Holders shall be entitled to
register their Registrable Securities pursuant to this Section
4, subject to the penultimate sentence of the above paragraph
immediately preceding this paragraph. If a registration under
this Section 4 is an underwritten offering, all holders whose
Securities are included therein shall be obligated to sell their
securities on the same terms and conditions as apply to the
securities being issued and sold generally in such underwriting.
5. Holdback Agreements.
A. Restrictions on Public Sale by Holder of Registrable
Securities. Each Holder agrees, if requested by the managing
underwriters, not to effect any public sale or distribution of
securities of the Company of the same class as the securities
included in any Registration Statement with respect to the
Company's initial underwritten public offering of securities,
including a sale pursuant to Rule 144 under the Securities Act
(except as part of such underwritten offering), during the
ten-day period prior to, and, during the 120-day period beginning
on, the closing date of such underwritten offering made pursuant
to such Registration Statement, to the extent timely notified in
writing by the Company or the managing underwriters. The
foregoing provisions shall not apply to any Holder if such Holder
is prevented by applicable statute or regulation from entering
any such agreement; provided, however, that any such Holder shall
undertake, in its request to participate in any such underwritten
offering, not to effect any public sale or distribution of the
applicable class of Registrable Securities commencing on the date
of sale of such applicable class of Registrable Securities unless
it has provided 45 days' prior written notice of such sale or
distribution to the underwriter or underwriters.
B. Restrictions on Public Sale by the Company and Others.
The Company agrees:
(i) not to effect any public or private sale or
distribution of its equity securities, or any securities
convertible into or exchangeable or exercisable for such
equity securities, including a sale pursuant to Regulation D
under the Securities Act, during the ten-day period prior
to, and during the 120-day period beginning on, the closing
date of the initial underwritten offering of the Company's
securities, without the consent of the managing underwriters
of such underwritten offering, to the extent timely notified
in writing by a holder of Registrable Securities or the
managing underwriters (except as part of such underwritten
offering or pursuant to registrations on Form S-4 or S-8 or
any successor form to such Forms); and
(ii) to cause each officer and director of the Company
who is a holder of its equity securities, or any securities
convertible into or exchangeable or exercisable for such
equity securities to agree not to effect any public sale or
distribution of any such securities during such period,
including a sale pursuant to Rule 144 under the Securities
Act (except as part of such underwritten offering, if
permitted, or with the consent of the managing underwriter
of such underwritten offering).
6. Registration Procedures. If the Company is required
by the provisions of Sections 3 or 4 hereof to use its best
efforts to effect the registration of any of its securities
under the Securities Act, the Company will, as expeditiously as
possible:
(a) prepare and file with the Commission a Registration
Statement with respect to such securities on a form for which the
Company then qualifies and which form shall be available for the
sale of the Registrable Securities in accordance with the
intended method or methods of distribution thereof, and use its
best efforts to cause such Registration Statement to become and
remain effective for a period of time required for the
disposition of such securities by the holders thereof, but not to
exceed 180 days; provided, however, that before filing a
Registration Statement or prospectus or any amendments or
supplements thereto, including documents incorporated by
reference after the initial filing of the Registration Statement,
the Company shall furnish to the holders of the Registrable
Securities covered by such Registration Statement and the
underwriters, if any, copies of all such documents proposed to be
filed, which documents will be subject to the review of such
holders and underwriters;
(b) prepare and file with the Commission such amendments
and supplements to such Registration Statement and the prospectus
used in connection therewith as may be necessary to keep such
Registration Statement effective and to comply with the
provisions of the Securities Act with respect to the sale or
other disposition of all securities covered by such Registration
Statement until the earlier of such time as all of such
securities have been disposed of in a public offering or the
expiration of 180 days;
(c) furnish to such selling security holders such number
of copies of a summary prospectus or other prospectus, including
a preliminary prospectus, in conformity with the requirements of
the Securities Act, and such other documents, as such selling
security holders may reasonably request;
(d) use its best efforts to register or qualify the
securities covered by such Registration Statement under such
other securities or blue sky laws of such jurisdictions within
the United States and Puerto Rico as each holder of such
securities shall request (provided, however, that the Company
shall not be obligated to qualify as a foreign corporation to do
business under the laws of any jurisdiction in which it is not
then qualified or to file any general consent to service or
process), and do such other reasonable acts and things as may be
required of it to enable such holder to consummate the
disposition in such jurisdiction of the securities covered by
such Registration Statement;
(e) at the request of any Holder requesting registration
of Registrable Securities pursuant to Section 3, on the date
that such shares of Registrable Securities are delivered to the
underwriters for sale pursuant to such registration or, if such
Registrable Securities are not being sold through underwriters,
on the date that the Registration Statement with respect to such
shares of Registrable Securities becomes effective, (1) make
such representations and warranties to the holders of such
Registrable Securities and the underwriters, if any, in such
form, substance and scope as are customarily made by issuers to
underwriters in primary underwritten offerings and covering
matters; (2) furnish an opinion, dated such date, of the
independent counsel representing the Company for the purposes of
such registration, addressed to the underwriters, if any, and if
such Registrable Securities are not being sold through
underwriters, then to the Holders thereof making such request,
in customary form and covering matters of the type customarily
covered in such legal opinions; (3) furnish a comfort letter
dated such date, from the independent certified public
accountants of the Company, addressed to the underwriters, if
any, and if such Registrable Securities are not being sold
through underwriters, then to the Holders thereof making such
request and, if such accountants refuse to deliver such letter
to such Holders, then to the Company, in a customary form and
covering matters of the type customarily covered by such comfort
letters and as the underwriters or such Holders shall reasonably
request; (4) if an underwriting agreement is entered into, cause
the same to set forth in full the indemnification and
contribution provisions and procedures of Section 8 hereof, or
language at least as favorable to the Holders, with respect to
all parties to be indemnified pursuant to said Section; and (5)
deliver such documents and certificates as may be reasonably
requested by the Holders of a majority of the Registrable
Securities being sold and the managing underwriters, if any, to
evidence compliance with clause (1) of this Paragraph (e) and
with any customary conditions contained in the underwriting
agreement or other agreement entered into by the Company. Such
opinion of counsel shall additionally cover such other legal
matters with respect to the registration in respect of which
such opinion is being given as such Holders of a majority of the
Registrable Securities being sold may reasonably request. Such
letter from independent certified public accountants shall
additionally cover such other financial matters (including
information as to the period ending not more than five Business
Days prior to the date of such letter) with respect to the
registration in respect of which such letter is being given as
the Holders of a majority of the Registrable Securities being so
registered may reasonably request;
(f) enter into customary agreements (including an
underwriting agreement in customary form) and take such other
actions as are reasonably required in order to expedite or
facilitate the disposition of such Registrable Securities; and
(g) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make
available to its security holders, as soon as reasonably
practicable, but not later than 18 months after the effective
date of the Registration Statement, an earnings statement
covering the period of at least 12 months beginning with the
first full month after the effective date of such Registration
Statement, which earnings statements shall satisfy the provisions
of Section 11(a) of the Securities Act.
It shall be a condition precedent to the obligation of the
Company to take any action pursuant to this Agreement in respect
of the securities which are to be registered at the request of
any holder of Registrable Securities that such holder shall
furnish to the Company such information regarding the securities
held by such holder and the intended method of disposition
thereof as the Company shall reasonably request and as shall be
required in connection with the action taken by the Company.
7. Expenses. All expenses (hereinafter referred to as
"Registration Expenses") incurred in complying with this
Agreement, including without limitation, all registration and
filing fees (including all expenses incident to filing with the
NASD), printing, messenger, telephone and delivery expenses,
securities acts liability insurance if the Company so desires or
if, the underwriters or selling holders of Registrable
Securities so require, fees and disbursements of underwriters,
except as set forth in subparagraph (b) of this Section, fees
and disbursements of counsel for the Company, the reasonable
fees and expenses of one counsel for the selling security
holders (selected by those holding a majority of the Registrable
Securities being registered), expenses of any special audits
incident to or required by any such registration and expenses of
complying with the securities or blue sky laws of any
jurisdiction pursuant to Section 6(d) shall be paid by the
Company, except that:
(a) all such expenses in connection with any amendment or
supplement to the Registration Statement or prospectus filed
more than 180 days after the effective date of such Registration
Statement because any holder of Registrable Securities has not
effected the disposition of the securities requested to be
registered shall be paid by such Holder of Registrable
Securities; and
(b) the Company shall not be liable for any fees,
discounts or commissions to any underwriter or any fees or
disbursements of counsel for any underwriter in respect of the
securities sold by such Holder of Registrable Securities.
8. Indemnification and Contribution.
(a) In the event of any registration of any Registrable
Securities under the Securities Act pursuant to this Agreement,
the Company shall indemnify and hold harmless the Holder of such
Registrable Securities, such Holder's directors and officers,
and each other Person (including each underwriter) who
participated in the offering of such Registrable Securities and
each other Person, if any, who controls such Holder or such
participating Person within the meaning of the Securities Act,
against any losses, claims, damages or liabilities, joint or
several, to which such holder or any such director or officer or
participating Person or controlling Person may become subject
under the Securities Act or any other statute or at common law,
insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon (i)
any alleged untrue statement of any material fact contained, on
the effective date thereof, in any Registration Statement under
which such securities were registered under the Securities Act,
any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, or (ii) any
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, and shall reimburse such Holder or such director,
officer or participating Person or controlling Person for any
reasonable legal or any other expenses reasonably incurred by
such holder or such director, officer or participating Person or
controlling Person in connection with investigating or defending
any such loss, claim, damage, liability or action; provided,
however, that the Company shall not be liable in any such case
to the extent that any such loss, claim, damage or liability
arises out of or is based upon any actual or alleged untrue
statement or actual or alleged omission made in such
Registration Statement, preliminary prospectus, prospectus or
amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by such Holder
specifically for use therein or (in the case of any registration
pursuant to Section 3) so furnished for such purposes by any
underwriter. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of
such Holder or such director, officer or participating Person or
controlling Person, and shall survive the transfer of such
securities by such Holder.
(b) Each Holder, by acceptance hereof, agrees to indemnify
and hold harmless the Company, its directors and officers and
each other Person, if any, who controls the Company within the
meaning of the Securities Act against any losses, claims,
damages or liabilities, joint or several, to which the Company
or any such director or officer or any such Person may become
subject under the Securities Act or any other statute or at
common law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are
based upon information in writing provided to the Company by
such Holder specifically for use in the following documents and
contained, on the effective date thereof, in any Registration
Statement under which securities were registered under the
Securities Act at the request of such Holder, any preliminary
prospectus or final prospectus contained therein, or any
amendment or supplement thereto. Notwithstanding the provisions
of this paragraph (b) or paragraph (c) below, no Holder of
Registrable Securities shall be required to indemnify any Person
pursuant to this Section 8 or to contribute pursuant to
paragraph (c) below in an amount in excess of the amount of the
aggregate net proceeds received by such Holder in connection
with any such registration under the Securities Act.
(b) If the indemnification provided for in this Section 8
from the indemnifying party is unavailable to an indemnified
party hereunder in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and
indemnified parties in connection with the actions which
resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to,
among other things, whether any action in question, including
any untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact, has been
made by, or relates to information supplied by, such
indemnifying party or indemnified parties, and the parties'
relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be
deemed to include any reasonable legal or other fees or expenses
reasonably incurred by such party in connection with any
investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 8(c) were
determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable
considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
9. Certain Limitations on Registration Rights.
Notwithstanding the other provisions of
this Agreement:
(a) The provisions of Section 3 hereof shall not extend to
more than two Demand Registrations; provided, however, that if
the Company shall be eligible to file a Registration Statement on
Form S-3 (or other comparable short form) the number of Demand
Registrations shall extend to four registrations if on Form S-3
(or such other form), though in no event shall the Company be
required to file more than one registration on Form S-3 in any
calendar year.
(c) The Company shall not be obligated to register the
Registrable Securities of any Holder if, in the opinion of
counsel to the Company reasonably satisfactory to the Holder and
its counsel (or, if the Holder has engaged an investment banking
firm, to such investment banking firm and its counsel), the sale
or other disposition of such Holder's Registrable Securities, in
the manner proposed by such Holder (or by such investment
banking firm), may be effected without registering such
Registrable Securities under the Securities Act.
(c) The Company shall not be obligated to register the
Registrable Securities of any Holder pursuant to Section 3 if
the Company has had a Registration Statement, under which such
Holder had a right to have its Registrable Securities included
pursuant to Section 3 or 4, declared effective within 180 days
prior to the date of the request pursuant to Section 3.
(d) The Company shall have the right to delay the filing
or effectiveness of a Registration Statement required pursuant
to Section 3 hereof during one or more periods aggregating not
more than 90 days in any twelve-month period in the event that
(i) the Company would, in accordance with the advice of its
counsel, be required to disclose in the prospectus information
not otherwise then required by law to be publicly disclosed and
(ii) in the judgment of the Company's Board of Directors, there
is a reasonable likelihood that such disclosure, or any other
action to be taken in connection with the prospectus, would
materially and adversely affect any existing or prospective
material business situation, transaction or negotiation or
otherwise materially and adversely affect the Company.
10. Selection of Managing Underwriters. The managing
underwriter or underwriters for any underwritten offering of
Registrable Securities to be registered pursuant to Section 3
shall be selected by the Holders of a majority of the shares
held being so registered and shall be reasonably acceptable to
the Company.
11. Rule 144. The Company covenants that it shall file the
reports required to be filed by it under the Securities Act and
the Exchange Act and the rules and regulations adopted by the
Commission thereunder, and it shall take such further action as
any holder of Registrable Securities may reasonably request, all
to the extent required from time to time to enable such holder to
sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided
by (i) Rule 144 under the Securities Act, as such rule may be
amended from time to time, or (ii) any similar rule or regulation
hereafter adopted by the Commission. Upon the request of any
holder of Registrable Securities, the Company shall deliver to
such holder a written statement as to whether it has complied
with such information and requirements.
12. Miscellaneous.
(a) No Inconsistent Agreements. The Company will not
hereafter enter into any agreement with respect to its
securities which is inconsistent with the rights granted to the
Holders in this Agreement. Except with respect to the 1994
Agreement and the 1998 Agreement, the Company has not previously
entered into any agreement with respect to any of its securities
granting any registration rights to any Person.
(b) Remedies. Each Holder, in addition to being entitled
to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights
under this Agreement. The Company agrees that monetary damages
would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Agreement and
hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate. In any
action or proceeding brought to enforce any provision of this
Agreement or where any provision hereof is validly asserted as a
defense, the successful party shall be entitled to recover
reasonable attorneys' fees in addition to any other available
remedy.
(c) Amendments and Waivers. Except as otherwise provided
herein, the provisions of this Agreement may not be amended,
modified or supplemented, and waivers or consents to departure
from the provisions hereof may not be given unless the Company
has obtained the written consent of the Required Holders. Any
amendment, modification, supplement or waiver agreed to by the
Required Holders shall be binding upon all Holders.
(d) Notice Generally. Any notice, demand, request,
consent, approval, declaration, delivery or other communication
hereunder to be made pursuant to the provisions of this
Agreement shall be sufficiently given or made if in writing and
either delivered in person with receipt acknowledged or sent by
registered or certified mail, return receipt requested, postage
prepaid, by overnight express mail by a nationally recognized
carrier, or by telecopy and confirmed by telecopy answerback,
addressed as follows:
(i) If to any Holder, at its last known address
appearing on the books of the Company maintained
for such purposes.
(ii) If to the Company, at
NewCheck Corporation
0000 Xxxxxxxxxx Xxx, Xxxxx 00
Xxxxxxxxxxxx, Xxxxxxx 00000
Attn: Chief Executive Officer
Telecopy Number: (000) 000-0000
or at such other address as may be substituted by notice given
as herein provided. The giving of any notice required hereunder
may be waived in writing by the party entitled to receive such
notice. Every notice, demand, request, consent, approval,
declaration, delivery or other communication hereunder shall be
deemed to have been duly given or served on the date on which
personally delivered, with receipt acknowledged, telecopied and
confirmed by telecopy answerback, the next day if delivered by
overnight express carrier or three Business Days after the same
shall have been deposited in the United States mail.
(e) Benefit and Binding Effect. All of the terms and
provisions of this Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective
successors and assigns, including any permitted transferee of
their Registrable Securities (other than as part of a registered
offering under the Securities Act). References herein to any
Holder shall include Holder and any of its successors and
assigns.
(f) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
(g) Governing Law; Jurisdiction. This Agreement shall be
governed by, construed and enforced in accordance with the laws
of the State of New York without giving effect to the conflict
of laws provisions thereof. Each of the parties hereby submits
to personal jurisdiction and waives any objections as to venue
in the County of New York, State of New York. The parties hereto
waive all right to trial by jury in any action or proceeding to
enforce or defend any rights hereunder.
(h) Severability. Wherever possible, each provision of
this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision
of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating
the remainder of such provision or the remaining provisions of
this Agreement.
(i) Entire Agreement. This Agreement represents the
complete agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein. This
Agreement supersedes all prior agreements and understandings
between the parties with respect to the subject matter hereof
including, without limitation, the 1994 Agreement and the 1998
Agreement.
(j) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute but one and the same
instrument. This Agreement shall be binding upon the parties
hereto notwithstanding the absence of any execution and delivery
hereof by Xxxxx Xxxxx, who may subsequently be joined as a party
by execution and delivery hereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
NEWCHECK CORPORATION
By:
------------------------
Xxxxxx X. Xxxxxx, Xx.
Chief Executive Officer
ELECTRONIC RETAILING SYSTEMS
INTERNATIONAL, INC.
By:
------------------------
Name: Xxxxx X. Failing, Jr.
Title: Vice Chairman and
Chief Executive Officer
CANAAN CAPITAL OFFSHORE LIMITED
PARTNERSHIP, C.V., a limited
partnership formed under the laws
of the Netherlands Antilles
By: Canaan Capital Management
L.P., General Partner
By: Canaan Capital Partners L.P.,
General Partner
By:
------------------------
General Partner
CANAAN CAPITAL LIMITED
PARTNERSHIP, a Delaware limited
partnership
By: Canaan Capital Management
L.P., General Partner
By: Canaan Capital Partners L.P.,
General Partner
By:
-------------------------
General Partner
GE CAPITAL EQUITY INVESTMENTS,
INC.
By:
----------------------------
Name: Xxxxx X. Xxxxx
Title: Senior Vice President
PEC ISRAEL ECONOMIC CORPORATION
By:
----------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
DISCOUNT INVESTMENT CORPORATION,
LTD.
By:
---------------------------
Name: Dr. Yoram Turbowicz
Title: Chief Executive
Officer
Name: Xxxxxx Xxxxx
Title: Assistant to
President
FIRST COMMERCE CAPITAL, INC.,
d/b/a BANC ONE CAPITAL
By:
---------------------------
Name: Xxxx X. Xxxx
Title: Authorized Signatory
XXXXXXX NATIONAL LIFE INSURANCE
CO.,
by PPM AMERICA, INC. Attorney in
Fact
By:
---------------------------
Name: Xxxxxxx Xxxxxxxx
Title: Vice President
-------------------------------
XXXXX X. FAILING
TRUST UNDER PARAGRAPH II OF ARTICLE
FIRST OF THE FAILING TRUST U/A/D
7/31/90 F/B/O XXXXX X. FAILING, III
By:
-------------------------------
XXXXX X. FAILING
TRUST UNDER PARAGRAPH II OF ARTICLE
FIRST OF THE FAILING TRUST U/A/D
7/31/90 F/B/O LINDSAY FAILING
By:
------------------------------
XXXXX X. FAILING
----------------------------------
XXXXX XXXXXXXX
----------------------------------
XXXXXXX X. XXXXXXX
----------------------------------
XXXXXXX XXXXXXXXXX, ON BEHALF OF
XXXXXX X.X. XXXXXXX & J. XXXXXXXXXXX
XXXXX TTEE CREDIT RESEARCH AND
TRADING LLC PFT SHR U/A DTD 1/1/96
FBO XXXXXXX XXXXXXXXXX
----------------------------------
XXXXX XXXXX
----------------------------------
XXXXX X. FAILING
----------------------------------
XXXXXX XXXXXX
----------------------------------
XXXXXXX XXX
----------------------------------
XXXX XXXXXXXXX
----------------------------------
XXXXX XXXXXXX
XXXXX STREET ASSOCIATES, LLC
By:
------------------------------
Name: Xxxxx Xxxx
Title: Member/Manager
AG CHECKOUT LLC
By:
------------------------------
Name: Xxxxxx Brain
Title: Vice President
XXXXXXXX PARTNERS, LLC
By
------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
----------------------------------
XXXXXX X. XXXXXXX
XXXXX CORPORATION
By
------------------------------
Name: Xxxxxxx Xxxxxxxx
Title: President
BNY CAPITAL MARKETS, INC.
By
------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Managing Director
---------------------------------
XXXXXXX XXXXXXXXXX
EXHIBIT F
AMENDED AND RESTATED SECURITYHOLDERS AGREEMENT
AMENDED AND RESTATED SECURITYHOLDERS AGREEMENT dated as of
February 11, 2000 among NewCheck Corporation, d/b/a Productivity
Solutions, Inc., a corporation duly organized, validly existing
under the laws of the State of Delaware (hereinafter referred to
as the "Company"), and those holders of the Company's securities
set forth on Annex I hereto (hereinafter referred to,
individually, as a "Holder" and collectively, as the "Holders").
W I T N E S S E T H :
WHEREAS, the Company and the holders of its Series B1
Convertible Preferred Stock, $.0001 par value (hereinafter
referred to as the "Series B1 Preferred Stock"), and the holders
of its Series B2 Convertible Preferred Stock, $.0001 par value
(hereinafter referred to as the "Series B2 Preferred Stock" and,
together with the Series B1 Preferred Stock, hereinafter
referred to as the "Series B Preferred Stock"), both series
convertible into shares of the Company's common stock, $.0001
par value (hereinafter referred to as the "Common Stock"), are
parties to a Stockholder's Agreement dated as of May 13, 1998
(hereinafter referred to as the "Original Securityholders
Agreement"), pursuant to which such holders mutually agreed to
certain matters respecting the Company, including, without
limitation, certain covenants pertaining to Board
representation, voting of their respective shares and other
matters;
WHEREAS, the Company and the purchasers (hereinafter
referred to as the "Purchasers") of the Company's Series C
Convertible Preferred Stock, $.0001 par value (hereinafter
referred to as the "Senior Preferred Stock"), and its 8%
Convertible Notes dated as of even date herewith (hereinafter
referred to as the "Convertible Notes"), are parties to a Stock
and Convertible Note Purchase Agreement dated as of even date
herewith (hereinafter referred to as the "Stock and Note
Purchase Agreement"), providing for, among other matters, the
issuance and delivery by the Company: (i) to the Purchasers of
shares of the Senior Preferred Stock, such shares convertible
into shares of Common Stock; (ii) to Electronic Retailing
Systems International, Inc. (hereinafter referred to as "ERS")
of its Convertible Note (hereinafter referred to as the "ERS
Convertible Note"), convertible into shares of Senior Preferred
Stock and (iii) to AG Checkout LLC (hereinafter referred to as
"AG") of its Convertible Note, convertible into shares of Senior
Preferred Stock;
WHEREAS, it is a condition to the acquisition and
acceptance by the Purchasers of the Senior Preferred Stock and
the Convertible Notes that the Original Securityholders
Agreement be amended and restated as set forth herein, and that
the parties execute and deliver this Agreement;
WHEREAS, each of the parties hereto (other than the
Company) is on the date hereof a holder of a Convertible Note,
or the number of shares of Series B Preferred Stock or Senior
Preferred Stock (hereinafter referred to, collectively, as
"Convertible Preferred Stock"; the Convertible Preferred Stock
(including, without limitation, all shares of Senior Preferred
Stock into which the Convertible Notes are convertible), and all
shares of Common Stock into which the shares of Convertible
Preferred Stock are convertible, together with all shares of the
Company's Series A Convertible Preferred Stock, $.0001 par value
[hereinafter referred to as the "Series A Preferred Stock"], and
the Common Stock into which such shares are convertible, being
hereinafter referred to, collectively, as the "Stock") as is set
forth on Annex I hereto;
WHEREAS, the holders of the Series B Preferred Stock party
hereto constitute, on the date hereof, the Super-Required
Holders (as set forth in the Original Securityholders
Agreement); and
NOW, THEREFORE, in consideration of the agreements,
premises and mutual covenants contained herein, the parties
hereto, intending to be legally bound, hereby agree as follows:
1. Original Securityholders Agreement. This Agreement
hereby amends and restates the terms and provisions of
the Original Securityholders Agreement, which are
superseded in their entirety by the provisions hereof.
2. Right of First Offer for New Securities.
(a) The Company hereby grants to each of the Holders
a right of first offer to purchase shares of any New Securities
(as defined below) which the Company may, from time to time,
propose to sell and issue prior to the Initial Public Offering
(as defined below). Such right of first offer shall allow each
Holder to purchase its "Proportionate Share" or "Residual
Proportionate Share" (as such terms are defined below) of the
New Securities proposed to be issued. In the event any Holder
does not purchase any or all of its First Offeree Proportionate
Share or First Offeree Residual Proportionate Share, or Second
Offeree Proportionate Share or Second Offeree Residual
Proportionate Share (as such terms are defined below) of New
Securities, the other Holders shall have the right to purchase
such unpurchased New Securities, as described below. The right
of first offer granted under this Section 2 shall terminate as
to any Final Balance (as defined below) of New Securities to be
issued if and to the extent unexercised as to such Final Balance
within 25 Business Days after receipt of the notice described in
Section 2(c) hereof. Holders may reallocate their right of first
offer, to the extent arising from ownership of any series of
securities (or securities convertible into such series), to
other Holders of the same series of securities (or securities
convertible into such series).
(b) Unless otherwise defined herein, the following terms
shall have the respective meanings set forth below (such
meanings being equally applicable to both the singular and
plural form of the terms defined):
(i) "Initial Public Offering" shall mean the first
sale of securities by the Company pursuant to an effective
registration statement filed by the Company under the
Securities Act of 1933 (hereinafter referred to as the
"Securities Act");
(ii) "New Securities" shall mean any authorized but
unissued shares, and any treasury shares, of capital stock
of the Company and all rights, options or warrants to
purchase capital stock, and securities of any type
whatsoever that are, or may become, convertible into
capital stock; provided, however, that the term "New
Securities" does not include (i) securities issued
pursuant to the acquisition of another corporation by the
Company by merger, purchase of all or substantially all of
the assets or other reorganization whereby the Company
shall become the owner of more than 50% of the voting
power of such corporation; (ii) shares of Common Stock or
Convertible Preferred Stock issued in connection with any
stock split or stock dividend of the Company; (iii) shares
of Common Stock issued pursuant to any public offering and
sale of equity securities of the Company pursuant to an
effective registration statement under the Securities Act;
(iv) shares of Common Stock issued pursuant to the
conversion of any series of convertible preferred stock of
the Company, including the Series A Preferred Stock,
Series B Preferred Stock or Senior Convertible Preferred
Stock; (v) up to 1,550,000 shares of Common Stock (or any
options, warrants or rights to purchase such shares of
Common Stock) issued or issuable to officers, directors,
employees or consultants of the Company pursuant to stock
grants, stock purchase plans, stock option plans or other
stock incentive programs, agreements or arrangements
approved by the Board (such number appropriately adjusted
to reflect any stock splits, dividends, combinations,
reclassifications or recapitalizations), and (vi) shares
of Common Stock issued or issuable upon conversion or
exercise of or as dividends with respect to options,
rights, warrants or other convertible securities of the
Company outstanding as of the date hereof (and giving
effect to the transactions contemplated by the Stock and
Note Purchase Agreement and the additional agreements
contemplated thereunder).
(iii) "Proportionate Shares" shall mean the First
Offeree Proportionate Share or the Second Offeree
Proportionate Share.
(iv) "First Offeree Proportionate Share" shall be
equal to a fraction, the numerator of which shall equal
the total number of shares of Common Stock (determined on
an as-converted basis [prior to a Participation Event, as
defined in the Amended Terms, Preferences, Rights and
Limitations of the Series B Preferred Stock, as filed with
the Secretary of State of Delaware together with the
Company's Fifth Restated Certificate of Incorporation and
from time to time amended] and only including the Senior
Preferred Stock [including the Senior Preferred Stock
issuable upon conversion of the Convertible Notes] and
Common Stock issuable upon conversion thereof) then owned
by or issuable to such Holder (if a holder of the Senior
Preferred Stock or of the Convertible Notes) and the
denominator of which shall equal the total number of
shares of Common Stock (determined on an as-converted
basis prior to a Participation Event and only including
the Senior Preferred Stock [including the Senior Preferred
Stock issuable upon conversation of the Convertible Notes]
and Common Stock issuable upon conversion thereof) owned
by or issuable to all Holders who are holders of the
Senior Preferred Stock or of the Convertible Notes.
(v) "Second Offeree Proportionate Share" shall be
equal to a fraction, the numerator of which shall equal
the total number of shares of Common Stock (determined on
an as-converted basis prior to a Participation Event and
only including the Series B Preferred Stock and Common
Stock issuable upon conversion thereof) then owned by a
Holder who is a holder of the Series B Preferred Stock and
the denominator of which shall equal the total number of
shares of Common Stock (determined on an as-converted
basis prior to a Participation Event and only including
the Series B Convertible Preferred Stock and Common Stock
issuable upon conversion thereof) owned by all Holders who
are holders of the Series B Convertible Preferred Stock.
(c) If, prior to the Initial Public Offering, the Company
proposes to issue New Securities, it shall give each Holder
written notice thereof, describing the New Securities, the
number thereof to be issued, the purchase price therefor (which
shall be payable solely in cash) and the terms upon which the
Company proposes to issue the same. Each Holder of Senior
Preferred Stock or of a Convertible Note (hereinafter referred
to as a "First Offeree") shall have seven Business Days from
the date such notice is given to determine whether to purchase
all or any portion of such First Offeree's Proportionate Share
of such New Securities for the purchase price and upon the terms
specified in the notice by giving written notice to the Company
and stating therein the number of New Securities to be
purchased.
(d) If, prior to the Initial Public Offering, all First
Offerees have not elected within such seven Business Day period
to purchase all of the New Securities proposed to be issued, the
Company shall provide each Participating First Offeree (as
defined below) within three Business Days after such period ends
with a schedule setting forth the following information:
(i) the amount of New Securities elected to be purchased,
(ii) the purchasers thereof (hereinafter referred to,
individually as a "Participating First Offeree" and,
collectively as the "Participating First Offerees") and the
specific amount of New Securities elected to be purchased by
each such Participating First Offeree, and (iii) the amount of
New Securities not elected to be purchased. Each Participating
First Offeree shall thereafter have an additional five Business
Days after such three-Business Day period has elapsed to
determine whether to purchase all or any portion of such
Participating First Offeree's "First Offeree Residual
Proportionate Share" (as such term is defined below) of such
remaining New Securities for the purchase price and upon the
terms specified in the notice by giving written notice to the
Company and stating therein the number of New Securities to be
purchased. "First Offeree Residual Proportionate Share" shall be
equal to a fraction, the numerator of which shall equal the
total number of shares of Common Stock (as determined in the
definition of First Offeree Proportionate Share) then owned by
or issuable to such Participating First Offeree and the
denominator of which shall equal the total number of shares of
such shares of Common Stock owned by or issuable to all
Participating First Offerees (as so determined).
(e) If, prior to the Initial Public Offering, the First
Offerees and/or the Participating First Offerees have not
collectively elected to purchase all of the New Securities
proposed to be issued (within the time period for notifying the
Company set forth in subparagraphs (c) and (d) above), then the
Company shall provide each Second Offeree (as defined below)
within three Business Days after such period ends with a
schedule setting forth the following information: (i) the
amount of New Securities elected to be purchased by all
Participating First Offerees, and (ii) the amount of New
Securities not elected to be purchased (hereinafter referred to
as the "Unpurchased Balance"). Each Holder of Series B Preferred
Stock (hereinafter referred to as a "Second Offeree") shall
thereafter have an additional five Business Days after such
three-Business Day period has elapsed to determine whether to
purchase all or any portion of such Second Offeree's
Proportionate Share of such Unpurchased Balance for the purchase
price and upon the terms specified in the notice by giving
written notice to the Company and stating therein the number of
New Securities to be purchased from the Unpurchased Balance.
(f) If, prior to the Initial Public Offering, the Second
Offerees have not elected within such five-Business Day period
to purchase all of the Unpurchased Balance, then the Company
shall provide each Participating Second Offeree (as defined
below) within three Business Days after such period ends with a
schedule setting forth the following information: (i) the
amount of the Unpurchased Balance elected to be purchased by
Second Offerees, (ii) the purchasers thereof (hereinafter
referred to, individually a as "Participating Second Offeree"
and, collectively as the "Participating Second Offerees") and
the specific amount of the Unpurchased Balance elected to be
purchased by each such Participating Second Offeree, and
(iii) the amount of the Unpurchased Balance not elected to be
purchased (hereinafter referred to as the "Final Balance").
Each Participating Second Offeree shall thereafter have an
additional four Business Days after such three-Business Day
period has elapsed to determine whether to purchase all or any
portion of such Participating Second Offeree's "Second Offeree's
Residual Proportionate Share" (as such term is
defined below) of such Final Balance for the purchase price and
upon the terms specified in the notice by giving written notice
to the Company and stating therein the number of New Securities
from the Final Balance to be purchased. "Second Offeree Residual
Proportionate Share" shall be equal to a fraction, the numerator
of which shall equal the total number of shares of Common Stock
(as determined in the definition of Second Offeree Proportionate
Share) then owned by such Participating Second Offeree and the
denominator of which shall equal the total number of shares of
such shares of Common Stock owned by all Participating Second
Offerees (as so determined).
(g) If Holders have not elected to purchase all of the New
Securities proposed to be issued (within the time period for
notifying the Company set forth above), then the Company shall
have 120 calendar days in which to complete the proposed
issuance of the Final Balance not purchased by Holders at a
price not less than that contained in the notice previously
given to Holders and on terms and conditions not more favorable
to the third party than those contained in such notice. If, at
the end of such 120-calendar day period, the Company has not
completed such issuance of the Final Balance of New Securities,
the Company shall no longer be permitted to issue such Final
Balance of New Securities pursuant to this Section 1 without
again fully complying with all of the provisions of this Section
2.
2. Supplemental Right of First Offer.
(a) The Company hereby grants to ERS, for as long as it
shall hold the ERS Convertible Note or any shares of Senior
Preferred Stock, a right of first offer to purchase shares of
any Voting Securities (as defined below) not subject to the
rights of ERS under Section 2, which the Company may, from time
to time, propose to sell and issue, if the effect of such
issuance and sale would otherwise result in ownership by ERS of
less than ten percent of the outstanding Voting Securities. Such
right of first offer shall allow ERS to purchase a share of the
Voting Securities proposed to be issued so as to result in
ownership by ERS of not less than ten percent of the outstanding
Voting Securities. The right of first offer granted under this
Section 3 shall terminate as to such Voting Securities to be
issued if and to the extent unexercised as to such Voting
Securities within 25 Business Days after receipt of the notice
described in Section 3(c) hereof.
(b) For purposes of this Agreement, the term "Voting
Securities" shall mean all classes of capital
stock or other interests in equity (excluding
debt securities convertible into equity) of the
subject referenced then outstanding and normally
entitled to vote in the election of directors,
managers or trustees thereof.
(c) If the Company proposed to issue Voting
Securities not subject to the rights of ERS under
Section 2, it shall give ERS written notice
thereof, describing the Voting Securities, the
number thereof to be issued, the purchase price
therefor and the terms upon which the Company
proposes to issue the same, and the aggregate
Voting Securities that will be outstanding after
giving effect to such transaction. ERS shall have
seven business days from the date such notice is
given to determine whether to purchase such
portion of such Voting Securities so as to result
in ownership by ERS of not less than ten percent
of the outstanding Voting Securities, upon the
terms specified in the notice (appropriately
allocated to such portion), by giving written
notice to the Company and stating therein the
number of Voting Securities to be purchased;
provided, however, that, in the event that the
purchase price specified in the Company's notice
shall be payable other than in cash, ERS shall
have the right to exercise its right under this
Section 3 in exchange for cash equal to the
reasonable fair market value of the purchase
price otherwise payable for the Voting Securities
to be acquired thereby. Such amount shall be
determined by the Company and ERS in good faith,
except that if such parties are unable to
determine such amount within five business days
of the Company's notice under this Section 3(c),
such amount shall be determined by an independent
appraiser qualified in such matters and
reasonably acceptable to both the Company and ERS
(and the period under this Section 3 during which
ERS may exercise its right shall be extended to
seven business days subsequent to such
determination). The Company shall furnish ERS and
such appraiser with all information reasonably
related to the calculation of such amount.
4. Right of First Offer for Sales of Convertible
Preferred Stock and Series A Preferred Stock.
(a) Each Holder hereby grants to the Company first and
then to each of the other Holders a right of first offer to
purchase shares of any Convertible Preferred Stock or Series A
Preferred Stock (and Common Stock received upon conversion
thereof) which such Holder (hereinafter referred to as the
"Selling Holder") may, from time to time, propose to sell prior
to the Initial Public Offering. Such right of first offer
shall allow the Company, and to the extent not purchased by the
Company, then each other Holder (each, hereinafter referred to
as an "Offeree") to purchase its "Convertible Securities
Proportionate Share" (as such term is defined below) of each
class of the Stock proposed to be sold prior to the Initial
Public Offering. In the event any Offeree does not purchase any
or all of its Convertible Securities Proportionate Share of such
Stock proposed to be sold prior to the Initial Public Offering,
the other Offerees shall have the right to purchase such
unpurchased Stock, as described below. The right of first offer
granted hereunder shall terminate if unexercised within 25
Business Days after receipt of the notice described in Section
4(c)hereof. Offerees may reallocate their right of first offer
among themselves. This right of first offer shall not apply,
however, to (i) sales or other dispositions by Holders pursuant
to their tag-along rights in Section 5 hereof, or (ii) sales or
other dispositions by Holders to their respective Affiliates (as
hereinafter defined), who agree to acquire such shares subject
to the provisions of this Agreement. For purposes of this
Section 4, any proposal to sell any Convertible Note (or portion
thereof) shall be deemed a proposal to sell the shares of Senior
Preferred Stock into which such Convertible Note (or portion
thereof) is convertible, and shall be subject to the provisions
of this Section 4 (and, notwithstanding any provision to the
contrary contained in any Convertible Note, contemporaneously
with closing of the purchase of any such shares pursuant to the
exercise of any rights under this Section 4, such Convertible
Note [or portion thereof, as the case may be] shall
automatically and without further act by the holder thereof
convert into such shares at the then applicable conversion
price); and the parties further acknowledge and agree that each
subsequent holder of a Convertible Note acquired prior to the
Initial Public Offering shall agree to be subject to the
provisions of this Agreement.
(b)(i) "Convertible Securities Proportionate Share"
shall, in the case of any Holder Offeree, be equal to a
fraction, the numerator of which shall equal the total number of
shares of Common Stock (determined on an as-converted basis
prior to a Participation Event and only including the Series B
Preferred Stock, the Senior Preferred Stock [including the
Senior Preferred Stock issuable upon conversion of the
Convertible Notes] and Common Stock issuable upon conversion
thereof) then owned by or issuable to such Offeree and the
denominator of which shall equal the total number of such shares
of Common Stock owned by or issuable to all Offerees,
and in the case of the Company, be equal to the total amount of
the Company Stock proposed to be sold by the Selling Holder.
(ii) "Affiliates" shall mean (I) each person or entity
that, directly or indirectly, owns or controls, whether
beneficially, or as a trustee, guardian or other fiduciary, 5%
or more of the Voting Securities of the subject referenced, (II)
each person or entity that controls, is controlled by or is
under common control with the subject referenced or any
Affiliate of the subject referenced, (III) each of the officers,
directors, joint venturers and partners of the subject
referenced, (IV) any trust or beneficiary of a trust of which
the subject referenced is the sole trustee or (V) any lineal
descendants, ancestors, spouse or former spouses (as part of a
marital dissolution) of the subject referenced (or any trust for
the benefit thereof). For the purpose of this definition,
"control" shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management or
policies, whether through the ownership of Voting Securities, by
contract or otherwise, of the subject referenced.
(c) If a Selling Holder proposes to sell any shares of
Convertible Preferred Stock or Series A Preferred Stock (or
Common Stock received upon conversion thereof) to which the
right of first offer under this Section 4 applies, it shall give
the Company and each Offeree written notice thereof, describing
the number of shares thereof to be sold, the purchase price
therefor (which shall be payable solely in cash) and the terms
upon which such Selling Holder proposes to sell the same. The
Company shall have ten Business Days from the date such notice
is given to determine whether to purchase all or any portion of
such Stock for the purchase price and upon the terms specified
in the notice by giving written notice to Selling Holder and to
each Offeree and stating therein the number of shares of Stock
to be purchased. To the extent the Company has not determined
to purchase all of the Stock proposed to be sold, each Offeree
shall then have an additional ten Business Days from the date
such notice is given to determine whether to purchase all or any
portion of such Offeree's Convertible Securities Proportionate
Share of such Stock not purchased by the Company for the
purchase price and upon the terms specified in the notice by
giving written notice to the Selling Holder and stating therein
the number of shares of Stock to be purchased.
(d) If the Offerees and the Company have not elected
within such aggregate 20-Business Day period to purchase all of
the shares of Stock proposed to be sold, the Selling Holder
shall provide each Participating Offeree (as defined below)
within five Business Days after such period ends with a schedule
setting forth the following information: (i) the number of
shares of Stock elected to be purchased, (ii) the purchasers
thereof (hereinafter referred to as the "Participating
Offerees") and the specific number of shares elected to be
purchased by each such Participating Offeree, and (iii) the
number of shares not elected to be purchased. Each
Participating Offeree shall thereafter have an additional ten
Business Days after such five-Business Day period has elapsed to
determine whether to purchase all or any portion of such
Participating Offeree's "Residual Convertible Securities
Proportionate Share" (as such term is defined below) of such
remaining shares for the purchase price and upon the terms
specified in the notice by giving written notice to the Selling
Holder and stating therein the number of shares to be purchased.
"Residual Convertible Securities Proportionate Share" shall be
equal to a fraction, the numerator of which shall equal the
total number of shares of Common Stock (as determined in the
definition of Convertible Securities Proportionate Share) then
owned by or issuable to such Participating Offeree and the
denominator of which shall equal the total number of such shares
of Common Stock owned by or issuable to all Participating
Offerees (as so determined).
(e) If the Offerees and the Company (considered together)
have not elected to purchase all of the shares proposed to be
sold by the Selling Holder (within the time period for notifying
the Selling Holder set forth above), then neither the Company
nor any Offeree shall have any right to purchase any of such
shares and the Selling Holder shall have 120 calendar days in
which to sell all (but not less than all) of the shares
originally proposed to be sold at a price not less than that
contained in the notice previously given to the Offerees and the
Company, and on terms and conditions not more favorable to the
third party than those contained in such notice. If, at the end
of such 120-calendar day period, the Selling Holder has not
completed such sale of Convertible Preferred Stock, the Selling
Holder shall no longer be permitted to sell Convertible
Preferred Stock pursuant to this Section 4 without again fully
complying with all of the provisions of this Section 4
5. Tag-Along Right With Respect to Sales of Canaan Stock.
(a) In addition to the requirements of Section 4 hereof,
Canaan Capital Limited Partnership and Canaan Capital Offshore
Limited Partnership, C.V. (herein collectively referred to as
"Canaan") shall not directly or indirectly sell, transfer or
otherwise dispose of any equity securities of the Company
(including, but not limited to, Common Stock, Series A Preferred
Stock or Convertible Preferred Stock, (hereinafter referred to,
collectively, as "Canaan Stock"), in a single transaction or
related series of transactions, to any third party (other than
(i) distributions of Canaan Stock to Canaan's partners generally
either upon a liquidation or termination of the applicable
Canaan entity or after a Qualified IPO (for purposes of this
Agreement, as defined in the Certificate of Designation of the
Senior Preferred Stock, as filed with the Secretary of State of
Delaware and from time to time amended) and (ii) sales of
Canaan Stock in a public market transaction after an Initial
Public Offering) unless the terms and conditions of such sale,
transfer or other disposition (hereinafter referred to as the
"Third Party Disposition") to such third party shall contain an
offer to each Holder, to include in such Third Party Disposition
such number of shares of Common Stock or Convertible Preferred
Stock as is determined in accordance with Section 5(b) below.
At least 45 days prior to effecting any Third Party Disposition,
Canaan shall promptly cause the terms and conditions of the
Third Party Disposition to be reduced to a reasonably detailed
writing (which writing shall identify the third party purchaser
and shall include the offer to Holders to purchase or otherwise
acquire their Common Stock or Convertible Preferred Stock, as
the case may be, according to the terms and subject to the
conditions of this Section 5), and shall deliver, or cause the
third party to deliver, written notice (hereinafter referred to
as the "Notice") of the terms of such Third Party Disposition to
each Holder. The Notice shall be accompanied by a true and
correct copy of the agreement, if any, embodying the terms and
conditions of the proposed Third Party Disposition or such
written summary thereof if there is no agreement. At any time
after receipt of the Notice (but in no event later than ten
Business Days after receipt), any Holder may accept the offer
included in the Notice for up to such number of its shares of
Common Stock or Convertible Preferred Stock (including
Convertible Preferred Stock issuable upon conversion of the
Convertible Notes), as the case may be, as determined in
accordance with the provisions of Section 5(b) below, by
furnishing irrevocable written notice of such acceptance to
Canaan and to the third party.
(b) In the event that any Holder elects to accept the
offer included in the Notice described in Section 5(a) above,
such Holder (hereinafter referred to as the "Included Holder")
shall have the right to sell, transfer or otherwise dispose of
such number of its shares of Common Stock and/or Convertible
Preferred Stock (including Convertible Preferred Stock issuable
upon conversion of the Convertible Notes) pursuant to, and upon
consummation of, the Third Party Disposition which is equal to
the product of (X) the total number of shares of Common Stock
owned by the Included Holder (assuming for the purpose of this
calculation, the conversion of all shares of Convertible
Preferred Stock and including Convertible Preferred Stock
issuable upon conversion of the Convertible Notes) and (Y) a
fraction, the numerator of which shall equal the total number of
shares of Canaan Stock (calculated on an as converted basis) to
be sold to the third party, and the denominator of which shall
equal the total number of shares of Canaan Stock (calculated on
an as converted basis) then owned by Canaan (assuming for the
purposes of this calculation, the conversion of all shares of
Convertible Preferred Stock). If the third party purchaser is
not willing to purchase such additional shares, the number of
shares to be sold by Canaan and the Included Holders shall be
proportionately reduced based upon the number of shares then
owned.
(d) The purchase of Stock pursuant to this Section 5 shall
be made on the same terms (including, without limitation, the
per share consideration and method of payment, and the date of
sale, transfer or other disposition), and subject to the same
conditions, if any, as are provided to Canaan and stated in the
Notice. Notwithstanding anything herein to the contrary, the
rights set forth in this Section 5 shall only apply to shares of
Holders' Convertible Preferred Stock in the event that the
Canaan Stock to be sold in the Third Party Disposition is
Convertible Preferred Stock, but shall not apply to Holders'
Common Stock and Convertible Preferred Stock (including
Convertible Preferred Stock issuable upon conversion of the
Convertible Notes) in the event that the Canaan Stock to be sold
in the Third Party Disposition is Common Stock.
(e) Upon the consummation of the disposition of Stock to
the third party pursuant to the Third Party Disposition, Canaan
shall (i) cause the third party to remit directly to each
Included Holder the sales price of its Stock disposed of
pursuant thereto, and (ii) furnish such other evidence of the
completion and time of completion of such disposition and the
terms thereof as may reasonably be requested by such Included
Holder. Each Included Holder will bear its pro rata share
(based upon the number of shares of each class sold and the
aggregate consideration of each class) of the brokerage and
similar costs of any sale of Stock pursuant to this Section 5.
Costs incurred by the Included Holder on its own behalf will not
be considered costs of the transaction hereunder.
(f) If a Holder has not delivered to Canaan and to the
third party written notice of its acceptance of the offer
contained in the Notice within 10 Business Days after the
receipt of such Notice, it shall be deemed to have waived any
and all rights pursuant to this Section 5 with respect to the
disposition of its Stock described in the Notice, and Canaan
shall have 45 days (calculated from the first day next
succeeding the expiration of the 45 day acceptance period
described above), in which to dispose of the aggregate amount of
Canaan Stock described in the Notice to the third party
identified in the Notice, on terms not more favorable to Canaan
than those which were set forth in the Notice, provided that the
foregoing shall not limit the obligations of Canaan pursuant to
Section 4 above. If a Holder has delivered irrevocable written
notice of acceptance as described in the preceding sentence and,
if after 30 days following receipt of the Notice, Canaan and the
third party shall not have completed the disposition of Canaan
Stock to be sold in connection therewith in accordance with the
terms of the Third Party Disposition, all the restrictions on
the disposition of Canaan Stock contained in this Section 5
shall again be in force and effect.
6. Closing Conditions.
(a) Any third party purchaser of Convertible Preferred
Stock (or Common Stock received upon conversion thereof) shall
agree in writing to be bound by all of the provisions and
conditions of this Agreement as are applicable to Holders as
though the third party purchaser had been an original signatory
hereto (except insofar as such shares are acquired subsequent to
an Initial Public Offering and the provisions hereof no longer
apply to the holder of such shares).
(b) Unless otherwise agreed to by the parties, the
consummation of any disposition of Stock (hereinafter referred
to as the "Closing") pursuant to this Agreement shall take place
at the executive offices of the Company, within 20 Business Days
after the date of the applicable notice of intention to buy. At
the Closing, the purchaser(s) shall deliver a certified or bank
cashier's check or shall transfer funds by wire transfer in the
appropriate amount of any cash purchase price to the Company or
such Selling Holder, as the case may be, against the
simultaneous delivery of certificates representing the Stock
being purchased, duly endorsed and in proper form for transfer,
with any required stock transfer tax stamps affixed thereto,
free and clear of all liens, claims and encumbrances, except as
provided by this Agreement.
(c) The obligation of the parties hereto to consummate the
closing of any of the sales of Stock shall be subject to
purchaser(s) in each such transaction having received (A) all
material consents, permits, licenses, orders or other approvals
necessary for the purchase thereof, (B) the expiration or
termination of any applicable waiting periods under the Xxxx-
Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended
(hereinafter referred to as the "HSR Act"), and (C) no
preliminary or permanent injunction or other order by any court
of competent jurisdiction prohibiting or otherwise restraining
the consummation of any such transaction shall be in effect.
(d) Notwithstanding anything to the contrary contained
herein, if (A) any waiting period under the HSR Act applicable
to the consummation of any such transaction pursuant to this
Section 6 shall not have expired or been terminated, (B) any
preliminary or permanent injunction or other order by any court
of competent jurisdiction prohibiting or otherwise restraining
the consummation of any such transaction shall be in effect or
(C) any material approvals have not been obtained, in any case,
as of the date specified in this Section 4 for the consummation
of such transaction, such date shall be deemed to be five
Business Days following the later to occur of (x) the expiration
or termination of the waiting period, (y) the expiration or
termination of such order or injunction and (z) the receipt of
such material approvals; provided, however, that the closing for
such transaction shall not be delayed more than 60 days after
the date specified in this Section 6.
7. Board of Directors.
(a) The Holders hereby agree that at all times after
the date hereof the Board of Directors of the Company shall
consist of seven directors elected or appointed as follows,
subject to the designation rights of GE Capital Equity
Investments, Inc. (hereinafter referred to as "GE Capital") and
of ERS and of AG as more particularly set forth below: (i)
three (3) directors shall be elected or appointed by the holders
of shares of Senior Preferred Stock, voting separately as a
single class on an as-converted basis, (ii) one (1) director
shall be elected by the holders of shares of Series B2 Preferred
Stock, voting separately as a single class, and (iii) three (3)
directors, with relevant industry experience, shall be elected
at large by the holders of shares of all voting Stock of the
Company. Notwithstanding the foregoing provisions of this
Section 7(a) above: (i) the director to be elected or appointed
by the holders of shares of Series B2 Preferred Stock shall be
designated by GE Capital so long as GE Capital, together with
its Affiliates, continues to own at least seven percent (7%) of
the sum of the Company's outstanding Voting Securities and those
issuable upon conversion of the Convertible Notes, (ii) at least
one (1) of the directors to be elected or appointed by the
holders of shares of Senior Preferred Stock shall be designated
by ERS so long as ERS, together with its Affiliates, continues
to own at least seven percent (7%) of the sum of the Company's
outstanding Voting Securities and those issuable upon conversion
of the Convertible Notes and (iii) for so long as AG continues
to own at least five percent (5%) of the sum of the Company's
outstanding Voting Securities and those issuable upon conversion
of the Convertible Notes, AG shall have the right at its option
(x) to appoint one additional director, in which case, after
written notice thereof to the Board of Directors, the Board of
Directors shall be expanded to consist of eight directors
(consisting of seven directors appointed as aforesaid and one
director appointed by AG) or (y) to designate an authorized
representative of AG (without voting rights) to attend as
observer each meeting of the Board of Directors, with notice of
such meetings to be given to AG in the form and manner given to
the directors. In addition, for as long as PEC Israel Economic
Corporation (hereinafter referred to as "PEC") and Discount
Investment Corporation (hereinafter referred to as "Discount")
together continue to own at least five percent (5%) of the sum
of the Company's outstanding Voting Securities and those
issuable upon conversion of the Convertible Notes, Discount
shall have the right to designate an authorized representative
of PEC and Discount (without voting rights) to attend as
observer each meeting of the Board of Directors, with notice of
such meetings to be given to PEC and Discount in the form and
manner given to directors. Notwithstanding the foregoing, the
parties acknowledge that the requirements of clause (iii)(y) of
the second preceding sentence, and of the immediately preceding
sentence, shall not affect the validity of any meeting of the
Board of Directors or any action taken thereat, nor prevent the
Board of Directors from acting by
consent; it being further agreed that each such observer shall
be entitled to receive copies of any written materials
distributed to the Board of Directors at any meeting and shall
enter into such reasonable confidentiality arrangements as shall
be prescribed by the Board of Directors. Promptly on or after
the date hereof, and from time to time as necessary, the Holders
shall take all actions necessary to elect, or to approve and
appoint members of the Board of Directors of the Company in
accordance with the foregoing. The Holders hereby further agree
not to amend any provision of the Amended Terms, Preferences,
Rights and Limitations of the Series B Preferred Stock or the
Certificate of Designation of the Senior Preferred Stock or the
Company's Certificate of Incorporation which pertains to the
composition of the Company's Board of Directors in any manner
inconsistent with the provisions of the immediately preceding
sentence without the prior written consent of GE Capital (so
long as it is entitled to designate any directors, and insofar
as such provisions pertain to GE Capital) and ERS (so long as it
is entitled to designate any directors, and such provisions
pertain to ERS) and AG (so long as it is entitled to designate
any directors, and insofar as such provisions pertain to AG) and
PEC and Discount (so long as Discount is entitled to designate
any observers, and insofar as such provisions pertain to them).
The foregoing Board arrangements will terminate upon the closing
of a Qualified IPO of the Company.
(b) In the event that a vacancy is created on the Board of
Directors at any time by the death, disability, retirement,
resignation or removal of any member of the Board of Directors,
or for any other reason there shall exist or occur any vacancy
on the Board, each Holder hereby agrees to cause the election or
appointment as director to fill such vacancy of the individual
designated by the Holders that had designated (pursuant to
Section 7(a) hereof) the director whose death, disability,
retirement, resignation or removal resulted in such vacancy on
the Board (in the manner set forth in Section 7(a) hereof).
(c) Each Holder hereby agrees to take all actions
necessary to call, or cause the Company and the appropriate
officers and directors of the Company to call, an annual meeting
(and when circumstances so require, a special meeting) of
Holders of the Company and to vote all shares of Stock owned or
held of record by such Holder at any such meeting and at any
other annual or special meeting of stockholders in favor of, or
take all actions by written consent in lieu of any such meeting
as may be necessary to cause, the election as members of the
Board of Directors of those individuals so designated in
accordance with, and to otherwise effect the intent of, this
Section 7.
8. Holders' Representations and Warranties. Except with
respect to that certain Rights Agreement dated June 30, 1994,
and that certain Co-Sale Agreement dated August 14, 1997, to
which Canaan is a party, each Holder represents and warrants to
each of the other Holders that there are no agreements to which
such Holder is a party that will survive the execution and
delivery of this Agreement with respect to the voting or
transfer of the capital stock of the Company or with respect to
any other aspect of the Company's affairs, other than this
Agreement, the Voting Rights Agreement, dated December 10, 1980,
as amended, between PEC Israel and Discount Investment
Corporation, Ltd., and the Stock and Note Purchase Agreement and
the agreements and documents contemplated thereby.
9. Legend. The Holders agree that each certificate
representing the Stock and the Canaan Stock now or hereafter
held by a Holder shall be endorsed with a legend in
substantially the following form:
"The shares represented by this certificate are
subject to a certain Amended and Restated
Securityholders Agreement dated as of February 11,
2000 which provides, among other things, for certain
restrictions on the transfer of such shares. A copy
of such Agreement is on file at the principal offices
of NewCheck Corporation and will be furnished upon
request to any holder of the shares represented by
this certificate."
10. Equitable Relief. It is hereby acknowledged that
irreparable harm would occur in the event that any of the
provisions of this Agreement were not performed fully by the
parties hereto in accordance with the terms specified herein,
and that monetary damages are an inadequate remedy for breach of
this Agreement because of the difficulty of ascertaining and
quantifying the amount of damage that will be suffered by the
parties relying hereon in the event that the undertakings and
provisions contained in this Agreement were breached or
violated. Accordingly, each party hereto hereby agrees that
each other party hereto shall be entitled to an injunction or
injunctions to restrain, enjoin and prevent breaches of the
undertakings and provisions hereof and to enforce specifically
the undertakings and provisions hereof in any court of the
United States or any state having jurisdiction over the matter;
it being understood that such remedies shall be in addition to,
and not in lieu of, any other rights and remedies available at
law or in equity.
11. Miscellaneous.
(a) Notices. Any and all notices, designations,
consents, offers, acceptances, or any other communication
provided for herein shall be made in writing by personal-
delivery, first-class mail (registered or certified, with return
receipt requested), telecopier (with "answer back"
confirmation), or overnight air courier guaranteeing next day
delivery in the case of the Company, at its address set forth at
the beginning of this Agreement (Attn: Chief Executive Officer;
telecopy No.: (000) 000-0000, and in the case of any Holder, to
the address of such party appearing under its or his name on
Annex I hereto (or to such other address as may be designated in
writing by any such party in accordance with this Section
11(a)). Such notices or communications shall be effective and
deemed given upon delivery to said address.
(b) Complete Agreement; Amendment. This Agreement
constitutes the complete understanding of the parties with
respect to its subject matter and supersedes any other agreement
or understanding relating thereto, including, without
limitation, the Original Securityholder's Agreement. No
amendment, change or modification of this Agreement shall be
valid, binding or enforceable, unless the same shall be in
writing and signed by (i) Persons who, in the aggregate, hold
Convertible Preferred Stock (or a Convertible Note), or Common
Stock into which the Convertible Preferred Stock(including
Convertible Preferred Stock issuable or issued upon conversion
of the Convertible Notes) has been converted, representing at
least 66.67% of the total number of shares of Common Stock into
which the Convertible Preferred Stock that has been issued is
convertible (determined prior to a Participation Event) or has
been converted, including in such calculation shares issuable or
issued upon conversion of the Convertible Notes and excluding in
such calculation shares issuable upon conversion of Convertible
Preferred Stock acquired by the Company, and (ii) solely with
respect to any amendment, change or modification of Section 2
hereof, each Person who (together with its Affiliates) holds at
least 5% of the total number of shares of Common Stock into
which the Convertible Preferred Stock outstanding is convertible
(determined prior to a Participation Event and including in such
calculation shares issuable upon conversion of the Convertible
Notes) and (iii) solely with respect to any amendment, change or
modification of Section 7 hereof affecting the rights of GE
Capital, ERS, AG, PEC or Discount to designate a director (or
nominate an observer, as the case may be), GE Capital, ERS, AG,
PEC and Discount, respectively, and (iv) the holder of the ERS
Convertible Note, on behalf of the Holders, and the Company to
the extent their rights and obligations under this Agreement
would be affected thereby. Any amendment, change or modification
of this Agreement agreed to aforesaid shall be binding upon all
Holders
(c) Termination. This Agreement may be terminated at any
time by an instrument in writing signed by the Holders described
under clauses (i), (ii), (iii) and (iv) of Paragraph (b)
immediately preceding (without limiting any such Holders right
to consent thereof or to withhold consent by reference to its
rights under any Section of this Agreement) and, if sooner, upon
the consummation of a Qualified IPO, except that the provisions
of Section 5 hereof shall remain in effect for a period of seven
years after the date hereof.
(d) Waiver. No failure or delay on the part of the
Holders or the Company or any of them in exercising any right,
power or privilege hereunder, and no course of dealing between
the Holders or the Company, shall operate as a waiver thereof
nor shall any single or partial exercise of any right, power or
privilege hereunder preclude the simultaneous or later exercise
of any other right, power or privilege. The rights and remedies
herein expressly provided are cumulative and not exclusive of
any rights and remedies which the Holders or the Company would
otherwise have.
(e) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute but one and the same
instrument. This Agreement shall be binding upon the parties
hereto notwithstanding the absence of any execution and delivery
hereof by Xxxxx Xxxxx, who may subsequently be joined as a party
by execution and delivery hereof.
(f) Governing Law; Waivers. This Agreement shall be
governed by, construed and enforced in accordance with the laws
of the State of New York without giving effect to the conflict
of laws provisions thereof. Each of the parties hereby submits
to personal jurisdiction and waives any objection as to venue in
the County of New York, State of New York. The parties hereto
waive all right to trial by jury in any action or proceeding to
enforce or defend any rights hereunder.
(g) Benefit and Binding Effect. All of the terms and
provisions of this Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective
successors and assigns, including any permitted transferee of
their Stock (other than as part of a registered offering under
the Securities Act). References herein to any Holder shall
include Holder and any of its successors and assigns.
(h) Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision
of this Agreement is held to be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating
the remainder of this Agreement.
(i) After-Acquired Shares. All of the provisions of this
Agreement shall apply to all of the shares of Stock and Canaan
Stock of the Company now owned or which may be issued to or
acquired by a Holder in consequence of any additional issuance
(including, without limitation, by exercise of an option or any
warrant), purchase, exchange, conversion or reclassification of
stock, corporate reorganization, or any other form of
recapitalization, consolidation, merger, stock split or stock
dividend, or which are acquired by a Holder in any other manner,
which shall constitute Stock and Canaan Stock, as the case may
be, for purposes of this Agreement.
(j) Approvals and Consents. The Holders hereby agree,
for themselves, their successors, heirs and legal
representatives, to vote at stockholders' and directors'
meetings of the Company, to prepare, execute and deliver or
cause to be prepared, executed and delivered such further
instruments and documents, to take such other actions and to
adopt such by-laws and provisions of the certificate of
incorporation as may be reasonably required to more effectively
carry out the intent and purposes of this Agreement and the
transactions contemplated hereby. They further agree to cause
the Company to do the same.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
NEWCHECK CORPORATION
By:
---------------------------
Xxxxxx X. Xxxxxx, Xx.
Chief Executive Officer
ELECTRONIC RETAILING SYSTEMS
INTERNATIONAL, INC.
By:
------------------------
Name: Xxxxx X. Failing, Jr.
Title: Vice Chairman and Chief
Executive Officer
CANAAN CAPITAL OFFSHORE LIMITED
PARTNERSHIP, C.V., a limited
partnership formed under the laws
of the Netherlands Antilles
By: Canaan Capital Management
L.P., General Partner
By: Canaan Capital Partners L.P.,
General Partner
By:
--------------------------
General Partner
CANAAN CAPITAL LIMITED
PARTNERSHIP, a Delaware limited
partnership
By: Canaan Capital Management
L.P., General Partner
By: Canaan Capital Partners L.P.,
General Partner
By:
--------------------------
General Partner
GE CAPITAL EQUITY INVESTMENTS,
INC.
By:
------------------------
Name: Xxxxx X. Xxxxx
Title: Senior Vice President
PEC ISRAEL ECONOMIC CORPORATION
By:
---------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
DISCOUNT INVESTMENT CORPORATION,
LTD.
By:
----------------------------
Name: Dr. Yoram Turbowicz
Title: Chief Executive
Officer
Name: Xxxxxx Xxxxx
Title: Assistant to
President
FIRST COMMERCE CAPITAL, INC.,
D/b/a BANC ONE CAPITAL
By:
--------------------------
Name: Xxxx X. Xxxx
Title: Authorized Signatory
XXXXXXX NATIONAL LIFE INSURANCE
CO.,
by PPM AMERICA, INC. Attorney in
Fact
By:
---------------------------
Name: Xxxxxxx Xxxxxxxx
Title: Vice President
--------------------------------
XXXXX X. FAILING
TRUST UNDER PARAGRAPH II OF ARTICLE
FIRST OF THE FAILING TRUST U/A/D
7/31/90 F/B/O XXXXX X. FAILING, III
By:
--------------------------------
XXXXX X. FAILING
TRUST UNDER PARAGRAPH II OF ARTICLE
FIRST OF THE FAILING TRUST U/A/D
7/31/90 F/B/O LINDSAY FAILING
By:
--------------------------------
XXXXX X. FAILING
-----------------------------------
XXXXX XXXXXXXX
------------------------------------
XXXXXXX X. XXXXXXX
------------------------------------
XXXXXXX XXXXXXXXXX, ON BEHALF OF
XXXXXX X.X. XXXXXXX & J. XXXXXXXXXXX
XXXXX TTEE CREDIT RESEARCH AND
TRADING LLC PFT SHR U/A DTD 1/1/96
FBO XXXXXXX XXXXXXXXXX
-----------------------------------
XXXXX XXXXX
-----------------------------------
XXXXXX XXXXXX
-----------------------------------
XXXXXXX XXX
-----------------------------------
XXXX XXXXXXXXX
-----------------------------------
XXXXX XXXXXXX
XXXXX STREET ASSOCIATES, LLC
By:
--------------------------------
Name: Xxxxx Xxxx
Title: Member/Manager
AG CHECKOUT LLC
By:
--------------------------------
Name: Xxxxxx Brain
Title: Vice President
XXXXXXXX PARTNERS, LLC
By
---------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
-----------------------------------
XXXXXX X. XXXXXXX
XXXXX CORPORATION
By
------------------------------
Name: Xxxxxxx Xxxxxxxx
Title: President
BNY CAPITAL MARKETS, INC.
By
------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Managing Director
--------------------------------
XXXXXXX XXXXXXXXXX
EXHIBIT G
AMENDED TERMS, PREFERENCES, RIGHTS AND LIMITATIONS
of
SERIES B PREFERRED STOCK
of
NEWCHECK CORPORATION
The relative rights, preferences, powers, qualifications,
limitations and restrictions granted to or imposed upon the
Series B Preferred Stock or the holders thereof, which modify,
amend and supersede in their entirety the Series B Original
Certificate of Designation (as hereinafter defined) and the
relative rights, preferences, powers, qualifications,
limitations and restrictions granted or imposed therein, are as
follows:
1. Definitions. For purposes of this Amended Designation, the
following definitions shall apply:
"Board" shall mean the Board of Directors of the Company.
"Business Day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in the State of
New York are authorized or obligated by law or executive order
to close.
"Common Stock" shall mean the Common Stock, $.0001 par
value per share, of the Company.
"Company" shall mean NewCheck Corporation d/b/a
Productivity Solutions, Inc. , a Delaware corporation.
"Conversion Price" shall mean the amount computed by
dividing the Liquidation Preference by the number of shares of
Common Stock into which one share of Series B1 Preferred Stock
or Series B2 Preferred Stock, as the case may be, is convertible
at its Conversion Ratio.
"Conversion Ratio" has the meaning set forth in Section 7
of this these Amended Terms, Preferences, Rights and
Limitations.
"Convertible Securities" has the meaning set forth in
Section 7 of this these Amended Terms, Preferences, Rights and
Limitations.
"Current Market Price" on any date, shall mean the average,
for 30 consecutive Business Days commencing 45 days before such
date, of the last sale prices of the Common Stock on each such
day on the principal stock exchange or the Nasdaq National
Market on which the Common Stock is then listed or admitted to
trading; and if no sale takes place on any such day on any such
exchange or market, the average of the last reported closing bid
and asked prices on such date as officially quoted on any such
exchange or market; and if the Common Stock is not then listed
or admitted to trading on any stock exchange or such market, the
average of the last reported closing bid and asked prices on
such day in the over-the-counter market, as furnished by Nasdaq
or the National Quotation Bureau, Inc.; and if neither such
corporation at the time is engaged in the business of reporting
such prices, as furnished by any similar firm then engaged in
such business, or if there is no such firm, as furnished by any
member of the National Association of Securities Dealers
selected by the Company and approved by the Required Holders
(not to be unreasonably withheld or delayed); provided, however,
that if the Common Stock is not traded in such manner that the
foregoing data is available for the period required hereunder,
the Current Market Price shall mean the fair market value as
shall be determined in good faith by the Board of the Company
or, if such determination cannot be made, by an investment
banking firm selected by the Company and approved by the
Required Holders (not to be unreasonably withheld or delayed),
the costs of which shall be borne by the Company.
"Dividend Rate" shall mean 8% per annum, calculated on a
360 day per year basis, based on the actual number of days
elapsed.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any similar Federal statute, and the rules
and regulations of the Securities and Exchange Commission
thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Exchange Act
of 1934, as amended, shall include reference to the comparable
section, if any, of any such similar Federal statute.
"Fully Diluted Outstanding" shall mean, at any date, all
shares of Common Stock outstanding at such date and all shares
of Common Stock issuable upon the exchange or conversion of all
Convertible Securities outstanding on such date and exchangeable
for or convertible into Common Stock (and of all such
Convertible Securities issuable upon exercise of Options), and
upon the exercise of all Options to acquire Common Stock
outstanding on such date
"Liquidation Preference" shall mean, in the case of the
Series B-1 Preferred Stock, the sum of $10 per share and, , in
the case of the Series B-2 Preferred Stock, the sum of $90 per
share.
"Liquidity Event" shall mean availability to the Company of
cash and cash equivalents in excess of $50 million, excluding
therefrom any and all working capital or reserves or other
amounts necessary or appropriate for the proper operation of the
Company's business (as reasonably determined by the Board) and
amounts restricted as a result of any obligation undertaken by
the Company in furtherance of the Company's business and
approved by its Board acting reasonably (such exclusions not to
extend to amounts required for distributions or payments on or
in exchange for shares, whether in redemption thereof, upon a
Participation Event or otherwise); and, provided, however, that,
in the event no shares of Senior Preferred Stock shall remain
outstanding (other than as a result of the same Liquidity
Event), the foregoing reference to "$50 million" shall be
amended to be "$35 million".
"Management Agreement" shall mean the Management Agreement
dated February 11, 2000 between the Company and Electronic
Retailing Systems International, Inc., as may from time to time
be amended, and any replacements thereof.
"Mandatory Conversion" has the meaning set forth in Section
7 of this these Amended Terms, Preferences, Rights and
Limitations.
"New Securities" has the meaning set forth in the
Securityholders Agreement.
"Optional Conversion" has the meaning set forth in Section
7 of these Amended Terms, Preferences, Rights and Limitations.
"Options" has the meaning set forth in Section 7 of these
Amended Terms, Preferences, Rights and Limitations.
"Original Issue Date" shall mean the date of the original
issuance of shares of Series B Preferred Stock.
"Participation Event" shall mean (i) a sale of all or
substantially all of the assets of the Company, or (ii) a merger
or consolidation of the Company with or into any other
corporation (other than a merger or consolidation in which
shares of the Company's Voting Securities outstanding
immediately before such merger or consolidation are exchanged or
converted into or constitute shares which represent more than
50% of the surviving entity's Voting Securities after such
consolidation or merger), or (iii) a transaction or a series of
transactions in which a Person or a group of Persons (as defined
in Rule 13d-5(b)(I) of the Exchange Act) acquires beneficial
ownership (as determined in accordance with Rule 13d-3 of the
Exchange Act) of more than 50% of the Voting Securities of the
Company, or (iv) a Liquidity Event, or (v) a liquidation,
dissolution of winding-up the Company. A Participation Event
shall not extend to any reorganization, merger or consolidation
involving (1) only a change in the state of incorporation of the
Company, (2) a merger of the Company with or into a wholly-owned
subsidiary of the Company that is incorporated in the United
States of America, or (3) an acquisition by merger,
reorganization or consolidation, in which the company is
substantively the surviving corporation and operates as a going
concern and is not the target in any such acquisition, of
another corporation incorporated in the United States of America
that is engaged in a business similar or related to the business
of the Company and which does not involve a recapitalization of
the Series B Preferred Stock.
"Person" shall mean any individual, firm, corporation or
other entity, and shall include any successor (by merger or
otherwise) of such entity.
"Redemption Date" shall mean the date on which any shares
of Series B Preferred Stock are redeemed by the Company.
"Redemption Notice" has the meaning set forth in Section
6(a) of these Amended Terms, Preferences, Rights and
Limitations.
"Redemption Price" has the meaning set forth in Section
6(a) of these Amended Terms, Preferences, Rights and
Limitations.
"Required Holders" shall mean Persons who, in the
aggregate, hold at least 66.67% of the outstanding Series B
Preferred Stock.
"Securityholders Agreement" shall mean the Amended and
Restated Securityholders Agreement dated February 11, 2000
entered into, inter alia, by the Company and the Required
Holders, as may from time to time be amended.
"Senior Preferred Conversion Price" shall mean the
Conversion Price, as such term is defined in the Senior
Preferred Stock Certificate of Designation, as in effect from
time to time. "Senior Preferred Stock" shall mean Company's
Series C Convertible Preferred Stock, $.0001 par value per
share.
"Series A Preferred Stock" shall mean Company's Series A
Preferred Stock, $.0001 par value per share.
"Series B Original Certificate of Designation" shall mean
that certain Certificate of Designation, Preferences and
Relative, Participating, Optional and Other Special Rights of
Preferred Stock and Qualifications, Limitations and Restrictions
dated and filed by the Company with the Secretary of State of
Delaware on May 13, 1998 with respect to the Series B Preferred
Stock.
"Series B Preferred Stock" shall refer to shares of Series
B1 Preferred Stock and Series B2 Preferred Stock.
"Series B1 Preferred Stock" shall mean Company's Series B1
Convertible Preferred Stock, $.0001 par value per share.
"Series B2 Preferred Stock" shall mean Company's Series B2
Convertible Preferred Stock, $.0001 par value per share.
"Voting Securities" shall mean all classes of capital or
other interests in equity (excluding debt securities convertible
into equity) of the subject referenced then outstanding and
normally entitled to vote in the election of directors,
managers, or trustees thereof.
2. Designation: Number of Shares. The designation of the
preferred stock authorized by this resolution shall be Series B1
Preferred Stock or Series B2 Preferred Stock, as applicable, the
number of shares of Series B1 Preferred Stock authorized hereby
shall be 200,000 shares, and the number of shares of Series B2
Preferred Stock authorized hereby shall be 500,000 shares.
3. Dividends.
(a) So long as any shares of Series B Preferred Stock
shall be outstanding, the holders of such Series B Preferred
Stock shall be entitled to receive, if legally payable by the
Board of the Company, preferential dividends, payable-in-kind in
additional shares of Series B Preferred Stock of the same
series, based upon the Liquidation Preference thereof, at the
Dividend Rate on the Liquidation Preference hereunder, payable
semi-annually on the first Business Day of July and January of
each year, commencing July 1, 1998. If the Board of the Company
cannot legally declare or pay such dividends, then such
dividends shall be cumulative and compound semi-annually, shall
begin to accrue and compound from the Original Issue Date,
whether or not there shall be net profits or net assets of the
Company legally available for the payment of those dividends,
and shall be paid-in-kind as soon as such dividends are legally
payable. Any such dividend payable for the period from the
Original Issue Date to the date hereof shall be payable based on
the Liquidation Preference previously set forth in the Series B
Preferred Original Certificate of Designation, and any such
dividend payable for the period after the date hereof shall be
payable based on the Liquidation Preference set forth herein.
Dividends may not be paid in cash.
(b) So long as any shares of Series B Preferred Stock
shall be outstanding, then, without the affirmative vote of the
Required Holders, (i) no dividend whatsoever shall be paid or
declared, and no distribution shall be made, on account of any
Common Stock or Series A Preferred Stock and (ii) no shares of
Common Stock or Series A Preferred Stock shall be repurchased,
redeemed or acquired by the Company, and no funds shall be paid
into or set aside or made available for a sinking fund for the
purchase, redemption or acquisition thereof.
4. Liquidation Rights of Series B Preferred Stock.
(a) In the event of any liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, the
holders of Series B Preferred Stock then outstanding shall be
entitled to be paid out of the assets of the Company available
for distribution to its stockholders, whether such assets are
capital, surplus or earnings, after payment or declaration and
setting apart for payment of amounts due thereon shall be made
in respect of any shares of any other class or series of the
Company's Preferred Stock ranking senior to the Series B
Preferred Stock (including, but not limited to, the Company's
Senior Preferred Stock) and before any payment or declaration
and setting apart for payment of any amount shall be made in
respect of any shares of Common Stock or any share of any other
class or series of the Company's preferred stock ranking junior
to the Series B Preferred Stock (including, but not limited to,
the Company's Series A Preferred Stock) with respect to the
payment of dividends or distribution of assets on liquidation,
dissolution or winding up of the Company, an amount equal to the
Liquidation Preference plus all declared or accrued and unpaid
dividends (whether or not then legally payable) in respect of
any liquidation, dissolution or winding up consummated.
(b) If upon any liquidation, dissolution or winding up of
the Company, whether voluntary or involuntary, and after payment
or declaration and setting apart for payment of amounts due
thereon shall be made in respect of any shares of any other
class or series of the Company's preferred stock ranking senior
to the Series B Preferred Stock (including, but not limited to,
the Company's Senior Preferred Stock), the assets to be
distributed among the holders of Series B Preferred Stock shall
be insufficient to permit the payment to such stockholders of
the full preferential amounts aforesaid, then the entire assets
of the Company remaining to be distributed after payment or
declaration and setting apart for payment of amounts due in
respect of any shares of any other class or series of the
Company's preferred stock ranking senior to the Series B
Preferred Stock) (including, but not limited to, the Company's
Senior Preferred Stock) shall be distributed ratably among the
holders of Series B Preferred Stock, based on the full
preferential amounts for the number of shares of Common Stock
(determined on an as-if converted basis) held by each holder.
(c) For purposes of this Section 4, each Participation
Event shall be deemed a liquidation, dissolution, or winding-up
of the Company.
(d) After payment to the holders of Series B Preferred
Stock of the amounts set forth in Sections 4(a) and (b) hereof,
if a Participation Event other than a Liquidity Event shall have
occurred, the remaining assets of the Company legally available
for distribution, if any, shall be distributed to the holders of
any Company stock entitled to a preference over the Common Stock
and, thereafter, ratably to the holders of Common Stock and
together with the Series B Preferred Stock and the Senior
Preferred Stock, and of any other participating security issued
by the Company (who shall participate with the Common Stock on
an as-if converted basis [including treating any then declared
or accrued and unpaid dividends, whether or not then legally
payable as if then paid in kind], except that, in performing
such calculation, ten percent of the shares of Common Stock
otherwise allocable to each holder of Series B2 Preferred Stock
shall be deducted therefrom and allocated to the holders of
Series B1 Preferred Stock [pro rata on the basis of their
respective shares of Series B1 Preferred Stock]).
5. Voting Rights. In addition to any voting rights provided by
law, the holders of shares of Series B Preferred Stock shall
have the following voting rights:
(a) So long as any of the Series B Preferred Stock is
outstanding, each share of Series B Preferred Stock shall
entitle the holder thereof to vote on all matters voted on by
the holders of Common Stock, voting together as a single class
with other shares entitled to vote at all meetings of the
stockholders of the Company. With respect to any such vote,
each share of Series B Preferred Stock shall entitle the holder
thereof to cast the number of votes equal to the number of votes
which could be cast in such vote by a holder of the number of
shares of Common Stock of the Company into which such share of
Series B Preferred Stock is convertible on the record date for
such vote.
(b) The affirmative vote of the Required Holders, voting
together as a class, in person or by proxy, at a special or
annual meeting of stockholders called for the purpose, or
pursuant to a written consent of stockholders shall be necessary
to authorize, adopt or approve an amendment to the Certificate
of Incorporation of the Company which would alter or change in
any manner the terms, powers, preferences or special rights of
the shares of Series B Preferred Stock, or grant any waivers of
such preferences or rights, including any such modification or
amendment that may, (A) change the redemption date of the
Series B Preferred Stock; (B) raise the Conversion Price or
reduce the Liquidation Preference or Redemption Price or
dividend rights of the Series B Preferred Stock; (C) adversely
affect any of the conversion features of the Series B Preferred
Stock set forth in Section 7 hereof; or (D) reduce the
percentage of outstanding Series B Preferred Stock necessary to
modify or amend the terms thereof or to grant waivers thereof.
(c)(i) The foregoing rights of holders of shares of
Series B Preferred Stock to take any actions as provided in this
Section 5 may be exercised at any annual meeting of stockholders
or at a special meeting of stockholders held for such purpose as
hereinafter provided or at any adjournment thereof or pursuant
to any written consent of stockholders.
(ii) If (A) the annual meeting of stockholders of the
Company is not, for any reason, held within the time fixed in
the by-laws of the Company, or (B) vacancies shall exist in the
offices of directors elected by the holders of Series B
Preferred Stock pursuant to the Securityholders Agreement, or
the composition of the Board shall otherwise not conform to the
requirements of the Securityholders Agreement, a proper officer
of the Company, upon the written request of the holders of
record of at least ten percent (10%) of the shares of Series B
Preferred Stock then outstanding, addressed to the Secretary of
the Company, shall call a special meeting in lieu of the annual
meeting of stockholders or a special meeting of the holders of
Series B Preferred Stock, for the purpose of electing or, if
necessary, removing directors elected by the holders of Series B
Preferred Stock. Any such meeting shall be held at the earliest
practicable date at the place for the holding of the annual
meetings of stockholders. If such meeting shall not be called
by the proper officer of the Company within twenty (20) days
after personal service of said written request upon the
Secretary of the Company, or within twenty (20) days after
mailing the same within the United States by certified mail,
addressed to the Secretary of the Company at its principal
executive offices, then the holders of record of at least ten
percent (10%) of the outstanding shares of Series B Preferred
Stock may designate in writing one of their number to call such
meeting at the expense of the Company, and such meeting may be
called by the Person so designated upon the notice required for
the annual meetings of stockholders of the Company and shall be
held at the place for holding the annual meetings of
stockholders. Any holder of Series B Preferred Stock so
designated shall have access to the lists of stockholders to be
called pursuant to the provisions hereof.
6. Redemption of Series B Preferred Stock.
(a)(i) Mandatory Redemption. (A) The Company shall redeem,
and the holders of the outstanding Series B Preferred Stock
shall sell to the Company, at the redemption price per share
equal to the sum of the Liquidation Preference per share plus an
amount equal to all accrued and unpaid dividends per share
(herein referred to as the "Redemption Price"), all of the
outstanding Series B Preferred Stock on the seventh anniversary
of the Original Issue Date.
(B) At least twenty (20) Business Days and not
more than sixty (60) Business Days prior to the date fixed for
the mandatory redemption of the Series B Preferred Stock,
written notice (herein referred to as the "Redemption Notice")
shall be mailed, postage prepaid, to each holder of record of
the Series B Preferred Stock at its post office address last
shown on the records of the Company. The Redemption Notice
shall state:
(1) the number of shares of Series B
Preferred Stock held by the holder that the Company intends to
redeem;
(2) the date fixed for redemption and the
Redemption Price; and
(3) that the holder is to surrender to the
Company, in the manner and at the place designated, its
certificate or certificates representing the shares of Series B
Preferred Stock to be redeemed.
(ii) Delivery of Certificates and Redemption Price. On or
before the Redemption Date, each holder of Series B Preferred
Stock shall surrender the certificate or certificates
representing such shares of Series B Preferred Stock to the
Company, in the manner and at the place designated in the
Redemption Notice, and thereupon the Redemption Price for such
shares shall be payable in cash on the Redemption Date to the
Person whose name appears on such certificate or certificates as
the owner thereof, and each surrendered certificate shall be
cancelled and retired. In the event that less than all of the
shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.
(b) Unless the Company defaults in the payment in full of the
Redemption Price, dividends on the Series B Preferred Stock
called for redemption shall cease to accumulate on the
Redemption Date, and the holders of such shares redeemed shall
cease to have any further rights with respect thereto on the
Redemption Date, other than to receive the Redemption Price
without interest.
(c) If, at the time of any redemption pursuant to this
Section 6, the funds of the Company legally available for
redemption of Series B Preferred Stock are insufficient to
redeem the number of shares required to be redeemed, those funds
which are legally available shall be used to redeem the maximum
possible number of such shares, pro rata based upon the number
of shares to be redeemed. At any time thereafter when
additional funds of the Company become legally available for the
redemption of Series B Preferred Stock, such funds shall
immediately be used to redeem the balance of the shares of
Series B Preferred Stock which the Company has become obligated
to redeem pursuant to this subparagraph, but which it has not
redeemed.
(d) The Company may not otherwise redeem or repurchase the
Series B Preferred Stock.
7. Conversion. (a) Subject to the provisions for
adjustment hereinafter set forth, (i) each share of Series B
Preferred Stock shall be convertible at any time and from time
to time, at the option of the holder thereof (such conversion,
herein referred to as an "Optional Conversion") and (ii) all
shares of Series B Preferred Stock shall be converted upon the
occurrence of a Liquidity Event or the written election of the
Required Holders (such conversion, herein referred to as a
"Mandatory Conversion"), in each case into fully paid and
nonassessable shares of Common Stock. The number of shares of
Common Stock deliverable upon conversion of a share of Series B
Preferred Stock, adjusted as hereinafter provided, is referred
to herein as the "Conversion Ratio." After giving effect to the
reverse stock split of the Common Stock on the date hereof, the
Conversion Ratio shall initially hereinafter be 1.1611 in
respect of the Series B1 Preferred Stock and 3.6199 in respect
of the Series B2 Preferred Stock, subject to adjustment from
time to time after the date hereof pursuant to paragraph (f) of
this Section 7. No fractional shares shall be issued upon the
conversion of any shares of Series B Preferred Stock. All shares
of Common Stock (including fractions thereof) issuable upon
conversion of more than one share of Series B Preferred Stock by
a holder thereof shall be aggregated for purposes of determining
whether conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the
conversion would result in the issuance of a fraction of a share
of Common Stock, the Company shall, in lieu of issuing any
fractional share, pay the holder otherwise entitled to such
fraction a sum in cash equal to the same fraction applied to the
Current Market Price of a share of Common Stock on the date of
conversion (as determined in good faith by the Board).
(b)(i) An Optional Conversion of the Series B Preferred
Stock may be effected by any such holder upon the surrender to
the Company at the principal office of the Company of the
certificate for such Series B Preferred Stock to be converted
accompanied by a written notice stating that such holder elects
to convert all or a specified number of such shares (which may
be fractional shares) in accordance with the provisions of this
Section 7 and specifying the name or names in which such holder
wishes the certificate or certificates for shares of Common
Stock to be issued. A Mandatory Conversion of the Series B
Preferred Stock shall be immediately effective and shall be
deemed to be made as of the date of the consummation of a
Liquidity Event (the existence of which the Company shall
promptly notify the holders of Series B Preferred Stock), or the
written election of the Required Holders. Any holder may
surrender to the Company the certificate for such Series B
Preferred Stock converted pursuant to a Mandatory Conversion
accompanied by a written notice specifying the name or names in
which such holder wishes the certificate or certificates for
shares of Common Stock to be issued. Until such time as the
holder surrenders its certificate pursuant to a Mandatory
Conversion, the certificates representing the Series B Preferred
Stock shall represent the number of shares of Common Stock
issuable upon conversion of such certificate. Upon any
conversion of any shares of Series B Preferred Stock, all
accrued and unpaid dividends (whether or not then legally
payable) owing in respect of such shares shall be treated as if
such dividends were declared and paid-in-kind pursuant to
Section 3(a) hereof and converted.
(ii) In case the written notice specifying the name or
names in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued shall
specify a name or names other than that of such holder, such
notice shall be accompanied by payment of all transfer taxes
payable upon the issuance of shares of Common Stock in such name
or names. Other than such taxes, the Company will pay any and
all issue and other taxes (other than taxes based on income)
that may be payable in respect of any issue or delivery of
shares of Common Stock on conversion of Series B Preferred Stock
pursuant hereto. As promptly as practicable, and in any event
within five Business Days after the surrender of such
certificate or certificates and the receipt of such notice
relating thereto and, if applicable, payment of all transfer
taxes (or the demonstration to the satisfaction of the Company
that such taxes have been paid), the Company shall deliver or
cause to be delivered (i) certificates representing the number
of validly issued, fully paid and nonassessable full shares of
Common Stock to which the holder of shares of Series B Preferred
Stock being converted shall be entitled and (ii) if less than
the full number of shares of Series B Preferred Stock evidenced
by the surrendered certificate or certificates is being
converted, a new certificate or certificates, of like tenor, for
the number of shares evidenced by such surrendered certificate
or certificates less the number of shares being converted.
(iii) In the case of an Optional Conversion, such conversion
shall be deemed to have been made at the close of business on
the date of giving the written notice referred to in the first
sentence of (b)(i) above and of such surrender of the
certificate or certificates representing the shares of Series B
Preferred Stock to be converted so that the rights of the holder
thereof as to the shares being converted shall cease except for
the right to receive shares of Common Stock in accordance
herewith, and the Person entitled to receive the shares of
Common Stock shall be treated for all purposes as having become
the record holder of such shares of Common Stock at such time.
(c) In case any shares of Series B Preferred Stock are to
be redeemed pursuant to Section 6, all rights of conversion
shall cease and terminate as to the shares of Series B Preferred
Stock to be redeemed at the close of business on the Business
Day next preceding the date fixed for redemption unless the
Company shall default in the payment of the Redemption Price.
(d) The Conversion Ratio shall be subject to adjustment
from time to time in certain instances as hereinafter provided.
(e) The Company shall at all times reserve, and keep
available for issuance upon the conversion of the Series B
Preferred Stock, such number of its authorized but unissued
shares of Common Stock as will from time to time be sufficient
to permit the conversion of all outstanding shares of Series B
Preferred Stock, and shall take all action required to increase
the authorized number of shares of Common Stock if necessary to
permit the conversion of all outstanding shares of Series B
Preferred Stock.
(f) The Conversion Ratio will be subject to adjustment
from time to time as follows:
(i) In case the Company shall at any time or
from time to time after the date hereof (A) pay a
dividend, or make a distribution, on the outstanding
shares of Common Stock in shares of Common Stock,
(B) subdivide the outstanding shares of Common Stock,
or (C) combine the outstanding shares of Common Stock
into a smaller number of shares, then, and in each
such case, the Conversion Ratio in effect immediately
prior to such event or the record date therefor,
whichever is earlier, shall be adjusted so that the
holder of any shares of Series B Preferred Stock
thereafter surrendered for conversion shall be
entitled to receive the number of shares of Common
Stock or other securities of the Company which such
holder would have owned or have been entitled to
receive after the happening of any of the events
described above, had such shares of Series B Preferred
Stock been surrendered for conversion immediately
prior to the happening of such event or the record date
therefor, whichever is earlier. An adjustment made pursuant to
this clause (i) shall become effective (x) in the case of any
such dividend or distribution, immediately after the close of
business on the record date for the determination of holders of
shares of Common Stock entitled to receive such dividend or
distribution, or (y) in the case of such subdivision or
combination, at the close of business on the day upon which such
corporate action becomes effective.
(iii) In case the Company shall declare a dividend upon the
shares of Common Stock payable otherwise than out of earned
surplus or otherwise than in shares of Common Stock or
convertible securities of the Company, the Conversion Price in
effect immediately prior to the declaration of such dividend
shall be reduced by an amount equal, in the case of a dividend in
cash, to the amount thereof payable per share of Common Stock or,
in the case of any other dividend, to the fair value thereof per
share of Common Stock as determined in good faith by the Board of
the Company. For the purposes of the foregoing, a dividend other
than in cash shall be considered payable out of earned surplus
only to the extent that such earned surplus is charged an amount
equal to the fair value of such dividend as determined in good
faith by the Board of the Company. Such reductions shall take
effect as of the date on which a record is taken for the purpose
of such dividend, or, if a record is not taken, the date as of
which the holders of shares of Common Stock of record entitled to
such dividend are to be determined.
(iv) In case the Company shall, after the date hereof,
issue shares of Common Stock constituting New Securities (other
than issuances covered by clauses (i) and (ii) above), at a
price per share less than the greater of (x) the Senior
Preferred Conversion Price as of the date of issuance of such
shares, and (y) the Current Market Price as of the date of
issuance of such shares: then, and in each such case, the
Conversion Price shall be reduced (but not increased) to the
price (calculated to the nearest cent) equal to the quotient
obtained by dividing (i) the amount equal to the sum of (a) the
number of Fully-Diluted Outstanding shares immediately prior to
such issue or sale multiplied by the then existing Conversion
Price, and (b) the consideration, if any, received by the Company
upon such issue or sale by (ii) the total number of Fully-Diluted
Outstanding shares immediately after such issue or sale. Upon
such adjustment to the Conversion Price, the Conversion Ratio
shall be adjusted to the number obtained by dividing the
Liquidation Preference by the adjusted Conversion Price. For
purposes of this paragraph (iii) the following additional
paragraphs shall apply:
(A) In case at any time the Company
shall in any manner grant (whether directly or by
assumption in a merger or otherwise) any rights to
subscribe for or to purchase, or any options for the
purchase of, Common Stock or any stock or securities
convertible into or exchangeable for Common Stock
(such rights or options being herein called "Options"
and such convertible or exchangeable stock or
securities being herein called "Convertible
Securities") whether or not such Options or the right
to convert or exchange any such Convertible Securities
are immediately exercisable, and the price per share
for which Common Stock is issuable upon the exercise
of such Options or upon the conversion or exchange of
such Convertible Securities (determined by dividing
(i) the total amount, if any, received or receivable
by the Company as consideration for the granting of
such Options, plus the aggregate amount of additional
consideration payable to the Company upon the exercise
of all such Options, plus, in the case of such Options
which relate to Convertible Securities, the aggregate
amount of additional consideration, if any, payable
upon the issue or sale of such Convertible Securities
and upon the conversion or exchange thereof, by (ii)
the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the
conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options)
shall be less than the greater of (x) the Senior
Preferred Conversion Price or (y) the Current Market
Price, in each case in effect immediately prior to the
time of the granting of such Options, then the total
maximum number of shares of Common Stock issuable upon
the exercise of such Options or upon conversion or
exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of
such Options shall be deemed to have been issued for
such price per share as of the date of granting of
such Options and thereafter shall be deemed to be
outstanding. Except as otherwise provided in Paragraph
(iii)(C) of this Paragraph (f), no adjustment of the
Conversion Price shall be made upon the actual issue
of such Common Stock or of such Convertible Securities
upon exercise of such Options or upon the actual issue
of such Common Stock upon conversion or exchange of
such Convertible Securities.
(B) In case the Company shall in any
manner issue (whether directly or by assumption in a
merger or otherwise) or sell any Convertible
Securities, whether or not the rights to exchange or
convert any such Convertible Securities are
immediately exercisable, and the price per share for
which Common Stock is issuable upon such conversion or
exchange (determined by dividing (i) the total amount
received or receivable by the Company as consideration
for the issue or sale of such Convertible Securities,
plus the aggregate amount of additional consideration,
if any, payable to the Company upon the conversion or
exchange thereof, by (ii) the total maximum number of
shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities) shall be
less than the greater of (x) the Senior Preferred
Conversion Price or (y) the Current Market Price, in
each case in effect immediately prior to the time of
such issue or sale, then the total maximum number of
shares of Common Stock issuable upon conversion or
exchange of all such Convertible Securities shall be
deemed to have been issued for such price per share on
the date of the issue or sale of such Convertible
Securities and thereafter shall be deemed to be
outstanding, provided that (i) except as otherwise
provided in Paragraph (iii)(C) of this Paragraph (f),
no adjustment of the Conversion Price shall be made
upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities,
and (ii) if any such issue or sale of such Convertible
Securities is made upon exercises of any Options to
purchase any such Convertible Securities for which
adjustments of the Conversion Price have been or are
to be made pursuant to other provisions of this
Paragraph (iii)(B), no further adjustment of the
Conversion Price shall be made by reason of such issue
or sale.
(C) Upon the happening of any of the
following events, namely, if the purchase price
provided for in any Option referred to in Paragraph
(iii)(A) of this Paragraph (f), the additional
consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in
Paragraphs (iii)(A) or (B) of this Paragraph (f), or
the rate at which any Convertible Securities referred
to in Paragraph (iii)(A) or (B) of this Paragraph (f)
are convertible into or exchangeable for Common Stock
shall change at any time (other than under or by
reason of provisions designed to protect against
dilution), the Conversion Price in effect at the time
of such event shall forthwith be readjusted to the
Conversion Price which would have been in effect at
such time had such Options or Convertible Securities
still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as
the case may be, at the time initially granted, issued
or sold; and on the expiration of any such Option or
the termination of any such right to convert or
exchange such Convertible Securities, the Conversion
Price then in effect hereunder shall forthwith be
increased to the Conversion Price which would have
been in effect at the time of such expiration or
termination had such Option or Convertible Securities,
to the extent outstanding immediately prior to such
expiration or termination, never been issued, and the
Common Stock issuable thereunder shall no longer be
deemed to be outstanding. If the purchase price
provided for in any such Option referred to in
Paragraph (iii)(A) of this Paragraph (f) or the rate
at which any Convertible Securities referred to in
Paragraphs (iii)(A) or (B) of this Paragraph (f) are
convertible into or exchangeable for Common Stock
shall be reduced at any time under or by reason of
provisions with respect thereto designed to protect
against dilution, then, in case of the delivery of
Common Stock upon the exercise of any such Option or
upon conversion or exchange of any such Convertible
Securities, the Conversion Price then in effect
hereunder shall forthwith be adjusted to such
respective amount as would have been obtained had such
Option or Convertible Securities never been issued as
to such Common Stock and had adjustments been made
upon the issuance of the shares of Common Stock
delivered as aforesaid, but only if as a result of
such adjustment the Conversion Price then in effect
hereunder is thereby reduced.
(D) In case any shares of Common
Stock, Options or Convertible Securities shall be
issued or sold for cash, the consideration received
therefor shall be deemed to be the amount received by
the Company therefor, without deduction therefrom of
any expenses incurred or any underwriting commissions
or concessions paid or allowed by the Company in
connection therewith. In case any shares of Common
Stock, Options or Convertible Securities shall be
issued or sold for a consideration other than cash,
the amount of the consideration other than cash
received by the Company shall be deemed to be the fair
value of such consideration as determined in good
faith by the Board of the Company, without deduction
of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the
Company in connection therewith. In case any Options
shall be issued in connection with the issue and sale
of other securities of the Company, together
comprising one integral transaction in which no
specific consideration is allocated to such Options by
the parties thereto, such Options shall be deemed to
have been issued without consideration.
(E) In case the Company shall take a
record of the holders of its Common Stock for the
purpose of entitling them (i) to receive a dividend or
other distribution payable in Common Stock, Options or
Convertible Securities, or (ii) to subscribe for or
purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to
be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon
the declaration of such dividend or the making of such
other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(iv) If any consolidation or merger of the
Company with or into another corporation, or the sale
of all or substantially all its assets to another
corporation shall be effected, or in case of any
capital reorganization or reclassification of the
capital stock of the Company, and such transaction
does not constitute a Participation Event, then, as a
condition of such consolidation, merger or sale,
reorganization or reclassification, lawful and
adequate provision shall be made whereby the holder of
Series B Preferred Stock shall thereafter have the
right to receive upon the basis and upon the terms and
condition specified herein and in lieu of the shares
of Common Stock immediately theretofore receivable
upon the conversion of Series B Preferred Stock, such
shares of stock, securities or assets as may be issued
or payable with respect to or in exchange for a number
of outstanding shares of Common Stock equal to the
number of shares of Common Stock immediately theretofore so
receivable by such holder had such consolidation, merger, sale,
reorganization or reclassification not taken place, and in any
such case appropriate provision shall be made with respect to
the rights and interests of such holder to the end that the
provisions hereof (including without limitation provisions for
adjustment of the Conversion Price) shall thereafter be
applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the
exercise of such conversion rights.
(v) For purposes of this paragraph (f), the
number of shares of Common Stock at any time
outstanding shall not include any shares of Common
Stock then owned or held by or for the account of the
Company or any of its Subsidiaries.
(vi) If the Company shall take a record of
the holders of its Common Stock for the purpose of
entitling them to receive a dividend or other
distribution, and shall thereafter and before the
distribution to stockholders thereof legally abandon
its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the
number of shares of Common Stock issuable upon
exercise of the right of conversion granted by this
paragraph (f) or in the Conversion Ratio then in
effect shall be required by reason of the taking of
such record.
(vii) Anything in this paragraph (f) to the
contrary notwithstanding, the Company shall not be
required to give effect to any adjustment in the
Conversion Ratio unless and until the net effect of
one or more adjustments (each of which shall be
carried forward), determined as above provided, shall
have resulted in a change of the Conversion Ratio by
at least one-tenth of one share of Common Stock, and
when the cumulative net effect of more than one
adjustment so determined shall be to change the
Conversion Ratio by at least one-tenth of one share of
Common Stock, such change in Conversion Ratio shall
thereupon be given effect.
8. Reports as to Adjustments. Upon any adjustment of the
Conversion Ratio then in effect and any increase or decrease in
the number of shares of Common Stock issuable upon the operation
of the conversion set forth in Section 7, then, and in each such
case, the Company shall promptly deliver to each holder of the
Series B Preferred Stock, a certificate signed by the President
or a Vice President and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of the
Company setting forth in reasonable detail the event requiring
the adjustment and the method by which such adjustment was
calculated and specifying the Conversion Ratio then in effect
following such adjustment and the increased or decreased number
of shares issuable upon the conversion granted by Section 7, and
shall set forth in reasonable detail the method of calculation
of each and a brief statement of the facts requiring such
adjustment. Where appropriate, such notice to holders of the
Series B Preferred Stock may be given in advance and included as
part of the notice required under the provisions of Section 11.
9. Certain Covenants. Any registered holder of Series B
Preferred Stock may proceed to protect and enforce its rights
and the rights of such holders by any available remedy by
proceeding at law or in equity to protect and enforce any such
rights, whether for the specific enforcement of any provision in
this Amended Certificate of Designation or in aid of the
exercise of any power granted herein, or to enforce any other
proper remedy.
10. No Reissuance of Series B Preferred Stock. No Series
B Preferred Stock acquired by the Company by reason of
redemption, purchase, or otherwise shall be reissued, and all
such shares shall be cancelled, retired and eliminated from the
shares which the Company shall be authorized to issue.
11. Notices. All notices to the Company permitted
hereunder shall be personally delivered or sent by first class
mail, postage prepaid, addressed to its principal office located
at 0000 Xxxxxxxxxx Xxx, Xxxxx 00, Xxxxxxxxxxxx, XX 00000, or to
such other address at which its principal office is located and
as to which notice thereof is similarly given to the holders of
the Series B Preferred Stock at their addresses appearing on the
books of the Company.
February 11, 2000
The Purchasers Listed on Schedule 2.1 to the Purchase Agreement
(as defined below)
Ladies and Gentlemen:
We have represented NewCheck Corporation, a Delaware corporation
(the "Company"), in connection with that certain Stock and Note
Purchase Agreement, dated as of February 11, 2000 (the "Purchase
Agreement"), by and among the Company and the Purchasers listed
on Schedule 2.1 to the Purchase Agreement (the "Purchasers").
We have also represented the Company in connection with the
Transaction Documents. This opinion is delivered pursuant to
Section 6.1(a) of the Purchase Agreement. Except as otherwise
indicated, capitalized terms used herein are defined as set
forth in the Purchase Agreement.
In connection with this opinion, we have assumed the accuracy
and completeness of all documents and records that we have
reviewed, the genuineness of all signatures other than those of
the Company, the authenticity of the documents submitted to us
as originals and the conformity to authentic original documents
of all documents submitted to us as certified, conformed or
reproduced copies. We have further assumed, without
investigation, that:
A. All natural persons involved in the transactions
contemplated by the Transaction Documents (the "Transactions")
have sufficient power and legal capacity to enter into and
perform their respective obligations thereunder and to carry out
their roles in the Transactions.
B. Each entity which is a party to the Transactions, other
than the Company, has been duly organized and is validly
existing and in good standing under its jurisdiction of
organization, with the corporate or other organizational power
to perform its obligations under the Transaction Documents, that
each of such entities has all requisite power and authority to
enter into and perform under the Transaction Documents, and that
each party to the Transactions other than the Company
(collectively, the "Other Parties") has duly authorized,
executed and delivered each document to which they are a party.
C. All representations of each Other Party set forth in the
Transaction Documents are true and correct and each Other Party
has satisfied all legal requirements that are applicable to it
to the extent necessary to make the Transaction Documents to
which it is a party to be enforceable against it in accordance
with their respective terms.
D. The conduct of the parties to the Transactions complies
with any applicable requirement of good faith, fair dealing and
conscionability.
E. The Company holds the requisite title (both legal and
beneficial) and rights to any property involved in the
Transactions.
F. There has not been any mutual mistake of fact or
misunderstanding, fraud, duress or undue influence.
G. All statutes, judicial and administrative decisions, and
rules and regulations of governmental agencies, applicable to
this opinion are generally available to lawyers practicing in
the State of Georgia and are in a format that makes legal
research reasonably feasible.
In connection with this opinion, we have examined such corporate
records and other documents and have made such examinations of
law as we have deemed necessary. In rendering this opinion, as
to questions of fact material to this opinion, we have relied to
the extent we have deemed such reliance appropriate, without
investigation, on certificates and other communications from
public officials and certificates from officers of the Company,
and on the representations and warranties of the Company and the
Other Parties set forth in the Transaction Documents and the
schedules and certificates delivered pursuant thereto.
Wherever we indicate that our opinion with respect to the
existence or absence of facts is based on our knowledge, our
opinion is based solely on the current actual knowledge of
factual matters that the attorneys in this firm who are
representing the Company in connection with the Transactions
recognize as being relevant to the opinions or confirmations
being rendered, and we have conducted no independent
investigation of factual matters in connection with this
opinion.
The opinions set forth below are subject to the following
limitations and qualifications:
(1) the effects of bankruptcy, insolvency, reorganization,
receivership, moratorium and other similar laws
affecting the rights and remedies of creditors
generally;
(2) the effects of general principles of equity or of
public policy, whether applied by a court of law or
equity, with respect to the performance and
enforcement of the Transaction Documents;
(3) the effect and possible unenforceability of
contractual provisions providing for choice of
governing laws;
(4) we express no opinion as to the effect of any federal
(except to the extent provided herein) or state
securities laws or blue sky laws;
(5) we express no opinion as to the enforceability of any
non-competition, non-solicitation or confidentiality
covenant in any of the Transaction Documents;
(6) we express no opinion as to the legality or
enforceability of any provisions in the Management
Agreement purporting to assign or delegate to any
third party matters within the scope of the duties of
the Board of Directors under Delaware Law;
(7) we express no opinion as to patent, copyright,
trademark and other intellectual property law;
(8) we express no opinion as to the possible
unenforceability of provisions providing for the
modification of an agreement without the consent of
all of the parties to such agreement;
(9) we express no opinion as to the possible
unenforceability of provisions providing for the
waiver of any party's rights to a trial by jury;
(10) we express no opinion as to fraudulent conveyance laws
or taxation laws; and
(11) we express no opinion as to the possible
unenforceability of provisions providing for
indemnification and contribution for liabilities
arising under federal or state securities laws.
Based upon and subject to the foregoing, and to the further
qualifications and limitations set forth below, it is our opinion
that:
1. The Company is duly organized as a corporation and is
validly existing and in good standing under the laws
of the State of Delaware. Based upon the certificates
of the Secretaries of State of the States of Florida
and Illinois (copies of which are attached hereto as
Exhibit A) the Company is duly qualified as a foreign
corporation existing and in good standing under the
laws of the States of Florida and Illinois.
2. The Company has all requisite corporate power and
authority to (a) execute and deliver the Transaction
Documents and to perform its obligations thereunder,
(b) issue and sell the Senior Convertible Preferred
Stock and the Convertible Notes, and (c) conduct its
business as presently conducted.
3. The execution, delivery and performance by the Company
of the Transaction Documents have been duly authorized
by all requisite corporate action and the Company has
duly executed and delivered each of the Transaction
Documents.
4. Assuming that, contrary to their terms, the
Transaction Documents are governed by the laws of the
State of Georgia, the Transaction Documents are
enforceable against the Company in accordance with
their terms.
5. Except as set forth in the Purchase Agreement or the
schedules thereto, and subject to the execution and
delivery by the Company of the Transaction Documents,
the performance by the Company of its obligations
thereunder, and the consummation of the Transactions
(i) do not and will not conflict with or violate any
provisions of the Certificate of Incorporation or
Bylaws of the Company, and (ii) do not and will not
(a) conflict with or result in a breach of the terms,
conditions or provisions of, (b) constitute a default
under, (c) result in the creation of any encumbrance
upon the capital stock or assets of the Company
pursuant to, (d) give any third party the right to
modify, terminate or accelerate any obligation under,
or (e) result in a violation of, any law, statute,
rule or regulation or any agreement or instrument or
any order, judgment or decree known to us to which the
Company is subject or by which any of its assets are
bound.
6. Other than the filings identified in the Registration
Rights Agreement, no consent, approval, order or
authorization of, or registration, declaration or
filing with, any federal, State of Delaware or State
of Georgia governmental authority is required for the
execution and delivery by the Company of the
Transaction Documents and for the consummation by the
Company of the Transactions.
7. The Amended and Restated Certificate of Incorporation,
the Series B Terms, Preferences, Rights and
Limitations and the Senior Preferred Certificate of
Designation (the "Certificates") have each been duly
and validly authorized, executed and, based solely
upon our receipt of telecopies from the filing agent
of the Certificates endorsed as filed by the Secretary
of State of the State of Delaware, filed with the
Secretary of State of the State of Delaware. The
Certificates do not violate or conflict with the
provisions of the General Corporation Law of the State
of Delaware.
8. Based on (i) the representations of officers of the
Company, (ii) the declarations of the Board of
Directors of the Company in its minutes of even date
herewith with respect to the issued and outstanding
Series B Preferred Stock, and (iii) to our knowledge,
the, issued and outstanding capital stock of the
Company, including the Senior Convertible Preferred
Stock, is set forth on Schedule 4.1 to the Purchase
Agreement. After giving effect to the filing of the
Certificates, (x) the authorized capital stock of the
Company, including the Senior Convertible Preferred
Stock, is set forth in Section 4.1 to the Purchase
Agreement, and (y) each outstanding share of Stock,
including the Senior Convertible Preferred Stock, is
duly authorized and validly issued and is fully paid
and non-assessable. To our knowledge, except as set
forth in the Purchase Agreement, the schedules to the
Purchase Agreement or the Amended and Restated
SecurityHolder's Agreement, (i) there is no existing
option, warrant, call, commitment or other agreement
to which the Company is a party requiring, and there
are no convertible securities of the Company
outstanding which upon conversion would require, the
issuance of any additional shares of Stock of the
Company or other securities convertible into shares of
equity securities of the Company, (ii) there are no
agreements among or with any of the stockholders of
the Company with respect to the voting or transfer of
the Stock of the Company or with respect to any other
aspect of the Company's affairs, and (iii) there are
no stockholders' preemptive rights or rights of first
refusal or other similar rights with respect to the
issuance of Stock by the Company.
9. The Company has duly reserved (a) 5,300,000 shares of
Common Stock for issuance upon conversion of the
Senior Convertible Preferred Stock and (b) 2,400,000
shares of Common Stock for issuance upon conversion of
the Warrants and (c) 710,000 shares of Senior
Preferred Stock for issuance upon conversion of the
Convertible Notes (collectively, the "Conversion
Shares"). When issued upon conversion of the Senior
Convertible Preferred Stock, the Warrants or the
Convertible Notes in compliance with the terms and
conditions of the Senior Preferred Certificate of
Designation, the Conversion Shares will be validly
issued, fully paid and non-assessable.
10. Based in part upon the representations of the
Purchasers contained in the Purchase Agreement, the
offer and sale of the Senior Convertible Preferred
Stock and the Convertible Notes to the Purchasers is
exempt from the registration requirements of the
Securities Act of 1933, as amended to date.
We hereby confirm to you that, to our knowledge, except as
set forth in the schedules to the Purchase Agreement, there are
no actions, suits, proceedings, orders, investigations or claims
pending or threatened against the Company, at law or in equity,
or before or by any court, governmental department, commission,
board, bureau, agency, arbitrator or other instrumentality.
Our opinions expressed above are limited to the laws of the
State of Georgia, the corporate laws of the State of Delaware,
and, subject to the limitations set forth therein, the federal
laws of the United States of America, and we do not express any
opinion herein concerning any other law. In addition, we
express no opinion herein concerning any statues, ordinances,
administrative decisions, rules or regulations of any county,
town, municipality or special political subdivision (whether
created or enabled through legislative action at the federal,
state or regional level). This opinion is given as of the date
hereof and we assume no obligation to advise you of changes that
may hereafter be brought to our attention. This opinion is
solely for the information of the Purchasers, and is not to be
quoted in whole or in part or otherwise referred to, nor is it
to be filed with any governmental agency or any other person
without our prior written consent. This opinion is rendered
solely for the benefit of the Purchasers and solely for the
purposes of the Transactions and should not be relied upon for
any other purpose.
Very truly yours,
POWELL, GOLDSTEIN, XXXXXX & XXXXXX LLP
