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EXHIBIT 10-RR
INTELLICORP, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES B PREFERRED STOCK PURCHASE AGREEMENT ("Purchase Agreement")
is made and entered into this 19th day of March, 1997 by and between
INTELLICORP, INC., a Delaware corporation (the "Company"), and the Purchasers
listed in Schedule 1.1 attached hereto (the "Purchasers" and individually, a
"Purchaser").
R E C I T A L S:
A. The Board of Directors of the Company has adopted the Certificate
Designation, Preferences and Rights of the Series B Preferred Stock (the
"Certificate of Designation") in the form attached hereto as Exhibit 1 which
establishes the rights, preferences and privileges of the Company's $0.001 par
value Series B Preferred Stock (the "Series B Preferred Stock").
B. The Company desires to issue 5,000 shares of Series B
Preferred Stock which are the subject of this Purchase Agreement; and
C. The Purchasers desire to acquire 5,000 shares of Series B
Preferred Stock on the terms and conditions set forth herein.
A G R E E M E N T:
NOW, THEREFORE, IT IS AGREED as follows:
1. Issue of Preferred Stock. Subject to the terms and conditions
hereof, the Company has authorized the issue of:
1.1 5,000 shares of Series B Preferred Stock of the Company
(the "Shares") for delivery to the Purchasers in the amounts set forth in
Schedule 1.1 attached hereto against payment to the Company by each Purchaser of
the amount set forth in Schedule 1.1 by wire transfer in same day or next day
funds.
1.2 Up to 2,500,000 shares of Common Stock (which number may
be adjusted as provided in the Certificate of Designation) upon conversion of
the Shares in accordance with the terms of the Certificate of Designation and
approximately 161,616 shares of Common Stock which may be issued as dividends on
the Shares through April 30, 1998 (the "Dividend Shares").
1.3 A convertible subordinated note due March 19, 2004 (the
"Note") which, at the option of the Company, may be exchanged for the Shares at
any time following the effective date of this Purchase Agreement. If issued, the
Note shall have the terms as described in Section 6 of this Purchase Agreement.
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2. Representations and Warranties of the Company. The Company
represents and warrants that:
2.1 It is a corporation duly organized and validly existing in
good standing under the laws of the State of Delaware, and duly qualified to do
business and in good standing as a foreign corporation in the State of
California, with full power and authority, corporate and otherwise, to enter
into and perform this Agreement, to borrow hereunder, and to make, execute and
deliver the various instruments and documents provided for herein.
2.2 The execution, delivery and performance by the Company of
this Purchase Agreement, and the making, execution and delivery by the Company
of the instruments contemplated hereby, have been duly authorized by all
necessary corporate action and will not violate any provision of law, court
order or decree, or of its Certificate of Incorporation or Bylaws, or result in
the breach of or constitute a default under, or result in the creation of any
lien, charge or encumbrance upon any property or assets of the Company pursuant
to any agreement or instrument,to which it is a party, or by which it or its
property may be bound or affected. This Agreement is a valid and binding
obligation of the Company, enforceable in accordance with its terms.
2.3 The Shares, the Dividend Shares, and the shares of Common
Stock initially issuable upon conversion of the Shares and the Note have been
duly authorized and at all times prior to such conversion will have been duly
reserved for issuance upon such conversion and, when issued, will be validly
issued, fully paid and nonassessable.
2.4 The authorized capital of the Company is 20,000,000 shares
of Common Stock, $.001 par value per share and 2,000,000 shares of preferred
stock, $.001 par value, of which approximately 12,823,865 shares of Common Stock
and 580,645 shares of Series A Preferred Stock are issued and outstanding,
respectively. There are no shares of preferred stock reserved for issuance,
except as set forth herein. There are no shares of Common Stock reserved for
issuance for options, warrants or conversion of convertible securities, except
as set forth on Schedule 2.4 hereto.
2.5 Except as set forth on Schedule 2.5 hereto, (a) there are
no material law suits or proceedings pending, or, to the Company's knowledge,
threatened against or affecting the Company and (b) there are no material
proceedings before any governmental commission, bureau or other administrative
agency pending, or, to the Company's knowledge, threatened against the Company.
2.6 Any and all licenses and approvals required by the Company
for the conduct of its business have been obtained from the federal, state or
local authorities concerned, all of which are in good standing, except where the
failure to receive such licenses or approvals would not, individually or in the
aggregate, have a material adverse effect on the financial condition,
operations, business, assets or properties of the Company.
2.7 The minute books of the Company have been properly kept
and reflect all transactions entered into by the Company which require
submission to or action by the stockholders or directors of the Company.
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2.8 No governmental permit, consent, approval or authorization
(other than as required by any applicable state securities law) is required in
connection with (i) the execution and delivery of this Purchase Agreement by the
Company or (ii) the offer, sale, issuance and delivery of the Shares
contemplated hereby by the Company; provided that, all representations made to
the Company by the Purchasers in this Purchase Agreement and in any other
document or instrument delivered in connection herewith are assumed for purposes
of this representation and warranty to be accurate and complete.
2.9 Included in the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1996 are the consolidated balance sheets of the
Company at June 30, 1996 and June 30, 1995, and the consolidated statements of
operations, cash flows and stockholders equity for the year ended June 30, 1996
with the report thereon of Ernst & Young LLP, independent auditors.
2.10 None of the Company's reports and filings with the
Securities and Exchange Commission ("SEC") when filed contained a misstatement
of a material fact or omitted to state a material fact necessary to make the
statements contained therein, in the light of the circumstances in which they
were made or omitted, not misleading.
2.11 The Company's Common Stock is traded on Nasdaq Small Cap
Market, the shares issuable upon conversion of the Shares and the Dividend
Shares shall be listed or approved for listing upon official notice of issuance
by Nasdaq prior to issuance. Except as set forth on Schedule 2.11, to the
knowledge of the Company, there have been no notices of any delisting or
delisting procedures threatened or contemplated by Nasdaq.
3. Representations of Purchaser. This Purchase Agreement is made with
each Purchaser by the Company in reliance upon such Purchaser's representations
to the Company, which by such Purchaser's acceptance hereof, such Purchaser
confirms, that (a) Purchaser is acquiring the Shares for its own account and not
for the beneficial interest of any other person, and not with a view to the
distribution thereof, and that Purchaser will not distribute, sell or otherwise
dispose of the Shares, or the Note, if exchanged for the Shares, or any of the
shares of Common Stock of the Company issuable upon conversion of the Shares or
the Note, except as permitted under the Securities Act of 1933, as amended (the
"Act"), the General Rules and Regulations thereunder, and all applicable State
"Blue Sky" laws; (b) Purchaser's financial circumstances are such as to permit
Purchaser to make this investment without having a present intention or need to
liquidate its investment; (c) Purchaser severally confirms further that it has
been advised that none of the Shares, the Note, if exchanged for the Shares, or
the Common Stock issuable upon the conversion thereof have been registered under
the Act, and that, accordingly, such Shares, shares of Common Stock and the Note
will be what is commonly known as "restricted securities," and are not freely
transferrable by Purchaser except pursuant to an exemption from registration
under the Act, such as Rule 144, the substance of which has been explained to
Purchaser or upon registration of the Common Stock under the Act; (d) Purchaser
is an "accredited investor" as that term is defined in SEC Regulation D, (e)
Purchaser is knowledgeable about the software industry and the Company's
products and has had the opportunity to discuss with Company management the
Company and its products, prospects, results of operation and financial
condition and to have access to any and all information regarding the Company
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that Purchaser deems necessary to its decision to purchase the Shares, and (f)
that the following legends shall be placed on the Certificates evidencing the
Shares (and, on the Note and any shares of Common Stock is issuable upon
conversion of the Shares and the Note):
"THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT IN
A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED, PURSUANT TO SECTION 4(2) OF SAID ACT AND NOT WITH A
VIEW TO OR IN CONNECTION WITH THE DISTRIBUTION THEREOF. NEITHER THESE
SECURITIES NOR THE SECURITIES ISSUED UPON CONVERSION HEREOF MAY BE
OFFERED FOR SALE OR SOLD OR OTHERWISE DISPOSED OF EXCEPT UPON
COMPLIANCE WITH SAID ACT."
4. Transfer by the Purchasers. None of the Shares to be purchased by
the Purchasers, the Note, if issued, the shares of Common Stock issuable upon
conversion thereof or the Dividend Shares, nor any interest therein, shall be
sold, transferred, assigned, or otherwise disposed of, unless the Company shall
previously have received an opinion of counsel knowledgeable in federal
securities law, to the effect that registration under the Act is not required in
connection with such disposition pursuant to the Act, provided, however, that
the Common Stock issuable upon conversion of the Shares may be sold if such sale
is registered under the Act.
5. Registration.
(a) Registration. Within 90 days following the execution of
this Agreement the Company shall prepare and file with the Commission a
registration statement on Form S-3 sufficient to permit the public offering and
sale by the Purchasers of the Common Stock into which the Shares may, from time
to time, be convertible and the Dividend Shares through the facilities of all
appropriate securities exchanges and the over-the-counter market, and will use
its best efforts through its officers, directors, auditors and counsel to cause
such registration statement to become effective as promptly as practicable. Any
registration statement which becomes effective pursuant to the provisions of
this paragraph, shall be kept effective by the Company for so long as any
Purchaser owns any of the Shares, or any shares of Common Stock or Notes of the
Company which it receives upon conversion of the Shares. The Company, at its
sole expense, will also take such actions as shall permit the Shares of Common
Stock to be sold in all states which a Purchaser requests.
(b) Terms of Registrations. The foregoing rights and
duties shall be subject to the following terms and conditions:
(i) The Company shall bear all of the costs of
any registration statement, including all "blue sky" fees and expenses.
(ii) The Company will use its best efforts to
cause such registration statement to become effective under the Act.
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5.2 In connection with any registration pursuant to Section
5.1, the Company will (i) use its best efforts to permit a lawful distribution
by Purchasers in the manner specified by Purchasers; (ii) use its best efforts
to qualify or otherwise "blue sky" the proposed offering by Purchasers in such
states as the Purchasers shall reasonably request; provided, however, that
nothing herein contained shall require the Company to qualify as a foreign
corporation in a jurisdiction in which it is not presently qualified or to
become licensed as a securities broker or dealer in any jurisdiction; (iii)
provide Purchasers with a reasonable number of registration statements and
prospectuses (including amendments and revisions) requested by Purchasers; and
(iv) use its best efforts to have such prospectuses meet the requirements of
Section 10(a) of the Securities Act of 1933, as amended.
5.3 The Company's obligations under this Section 5 are
conditioned upon its being furnished by each Purchaser with descriptions of such
Purchaser's Common Stock to be covered in the requested registration statement,
the proposed method of distribution, and such other relevant information as may
be required.
5.4 In connection with any registration statement pursuant to
this Section 5, Purchasers shall indemnify and hold harmless the Company and
each person (if any) who controls the Company within the meaning of Section 15
of the Act from and against all losses, claims, damages and liabilities to which
the Company or any of them may be subject, actually or allegedly caused by any
untrue or allegedly untrue statement of a material fact contained in any such
registration statement or related prospectus or actually or allegedly caused by
an omission to state therein a material fact actually or allegedly required to
be stated therein or necessary to make the statements therein not misleading,
which statement or omission shall have been made in reliance upon and in
conformity with written information furnished to the Company by Purchasers or on
Purchaser's behalf specifically for use in connection with such registration
statement. Reciprocally, the Company hereby agrees to indemnify and hold
harmless Purchasers, any broker or other person who may be deemed an underwriter
for a Purchaser and each person (if any) who controls a Purchaser or Purchaser's
underwriter within the meaning of Section 14 of the Act, from and against all
losses, claims, damages and liabilities to which such parties or any of them may
be subject, actually or allegedly caused by any untrue or allegedly untrue
statement of a material fact contained in any such registration statement or
related prospectus or actually or allegedly caused by any omission to state
therein a material fact actually or allegedly required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
statement or omission shall have been made in reliance upon and in conformity
with written information furnished to the Company by or on behalf of a Purchaser
specifically for use in connection with such registration statement.
(a) Subject to subsection (b) below, the
foregoing indemnity shall include reimbursements for any reasonable legal or
other expenses incurred by the indemnified party or any director, officer or
controlling person, as defined above, in connection with investigating or
defending any such loss.
(b) Promptly after receipt by an indemnified
party under this Section 5.4 of notice of commencement of any action, the
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 5.4, notify
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the indemnifying party of the commencement thereof; but the omission so to
notify the indemnifying party will not relieve it from any liability to any
indemnified party except to the extent that the failure to so notify such party
adversely affected the indemnifying party. In case any such action is brought
against any indemnified party and it notifies the indemnifying party of the
commencement thereof, the latter will be entitled to participate therein, and to
the extent desired, jointly, with any other indemnifying party similarly
notified, assume the defense and control the settlement thereof, with counsel
satisfactory to such indemnified party. After notice from the indemnifying party
to such indemnified party as to its election so to assume the defense thereof,
the indemnifying party will not be liable to such indemnified party under this
Section 5.4 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof, other than reasonable
cost of investigation.
(c) The Company and Purchasers each have the
right to make a reasonable investigation of the information contained in any
registration statement covered by this Section 5 to confirm its accuracy,
subject, however, to the obligation of the party making such investigation to
keep in confidence any information derived until such time as the information is
filed with the SEC.
5.5 To the extent transfers of the Shares, Common Stock, the
Dividend Shares or the Note are permitted pursuant to Section 4 hereof,
Purchaser may transfer, assign or otherwise dispose of its rights under this
Section 5, as a whole or in part, but no such action by Purchaser shall increase
or otherwise affect the nature or extent of the Company's obligations provided
in this Section.
6. The Note. The Note, if issued by the Company, shall have the same
financial and other terms as the Series B Preferred Stock issued hereunder;
provided, however, that the notes delivered by the Company under the Seven-Year
Senior Convertible Note Purchase Agreement dated April 19, 1996 among the
Company and certain purchasers listed on Exhibit A thereto (the "Senior Notes")
represent senior indebtedness of the Company, and any Note issued hereunder
shall be junior and subordinated to any outstanding Senior Notes.
7. Board Representation.
The Purchasers and any successor will have the right to
designate one nominee, reasonably acceptable to the Board of Directors of the
Corporation, which nominee is not to be unreasonably refused by the Board of
Directors, for election, at its option, as a member of the Board of Directors of
the Company, and the Company will use its best efforts to cause such nominee to
be elected and continued in office as a director of the Company until 75 percent
of the Shares, or the Common Stock received upon conversion of the Shares has
been sold, or 75 percent of the entire principal of the Note, if issued, has
been paid. Following the election of such nominee as a director, such person
shall receive no more or less compensation than is paid to other non-officer
directors of the Company for attendance at meetings of the Board of Directors of
the Company and shall be entitled to receive reimbursement for all reasonable
costs incurred in attending such meetings including, but not limited to, food,
lodging and transportation. The Company agrees to indemnify and hold such
director harmless, to the maximum extent permitted by the Corporation's Restated
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Certificate of Incorporation or state law, against any and all, claims, actions,
awards and judgments arising out of his service as a director and, in the event
the Company maintains a liability insurance policy affording coverage for the
acts of its officers and directors, to include such director as an insured under
such policy. The rights and benefits of such indemnification and the benefits of
such insurance shall, to the extent possible, extend to the Purchaser insofar as
it may be or may be alleged to be responsible for such director.
8. Covenants of the Company. The Company agrees that, while any
Shares or Note issued hereunder remain outstanding in the name of the Purchaser,
it will do the following:
8.1 The Company will not incur any debt from a financial
institution which is senior to the investment represented by the Shares, or the
Note, if issued ("Senior Debt"), which, together with the Senior Notes, exceeds
in the aggregate $5,000,000 without the written consent of Purchaser. In
addition, the Company will not incur any debt which is subordinated to the
Senior Debt, but which is senior to the investment represented by the Shares, or
the Note, if issued, without the written consent of Purchaser.
8.2 The Company will not sell, lease or convey all or
substantially all of its assets or shares of capital stock without the written
consent of Purchaser.
8.3 As soon as is practicable after the end of each month, but
in no event later than 45 days after month end, the Company will provide the
Purchasers with monthly financial results as currently prepared for internal use
by Company management and will provide to the Purchaser's nominee for director
all budgets prepared for and delivered to the Company's Board of Directors. In
connection with the delivery of such financials results and budgets, the
Purchasers acknowledge that such information is material non public information
of the Company and while in possession of such Information each Purchaser agrees
it will not engage in any transactions in violation of the federal securities
laws.
9. Due Diligence Expenses. The Company shall pay the Purchasers
a nonrefundable due diligence expense fee of $7,500.
10. Notices. Any notice or demand required or desired to be given
to or served upon the Company or Purchaser in connection herewith shall be in
writing and deemed to have been sufficiently given or served for all purposes
when delivered in person or when deposited in the United States mails, certified
or registered, postage prepaid, if to the Company, addressed or delivered as
follows:
If to the Company:
IntelliCorp, Inc.
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Attention: President
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If to Purchaser: at the address set forth on Schedule 1.1
attached hereto, or, if any other address shall at any time be designated by the
Company or by Purchaser in writing in conformance with the provisions hereof, to
such other address.
11. Parties in Interest. All the terms and provisions of this
Purchase Agreement shall bind and inure to the benefit of the parties hereto and
their respective successors and assigns.
12. Governing Law. This Purchase Agreement shall be construed in
accordance with and governed by the laws of the State of California.
13. Section and other Headings. Section and other headings herein are
for reference purposes only, and shall not be used in any way to govern, limit,
modify, construe or otherwise affect this Agreement.
14. Counterparts. This Purchase Agreement may be executed with
Purchasers in one or more counterparts, each of which shall be deemed an
original, but all of which together shall be deemed but one and the same
instrument.
15. Amendment. This Purchase Agreement may be amended by written
agreement of the Company and the holders of the 75% of the then outstanding
Shares with respect to the matters referred to herein. Any such amendment,
waiver or consent shall be binding upon the parties hereto.
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IN WITNESS WHEREOF, this Agreement has been executed and delivered on
the date first above written by the duly authorized representative of the
Company.
COMPANY: INTELLICORP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇
President
Address: ▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
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PURCHASER DELAWARE STATE EMPLOYEES'
RETIREMENT FUND
By: Pecks Management Partners Ltd.
Its Investment Advisor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Managing Director
Address: Mercantile Safe Deposit
& Trust Company
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Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
DECLARATION OF TRUST FOR
DEFINED BENEFIT PLANS OF
ZENECA HOLDINGS INC.
By: Pecks Management Partners Ltd.
Its Investment Advisor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Managing Director
Address: State Street Bank & Trust Company
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DECLARATION OF TRUST FOR
DEFINED BENEFIT PLANS OF ICI
AMERICAN HOLDINGS INC.
By: Pecks Management Partners Ltd.
Its Investment Advisor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Managing Director
Address: State Street Bank & Trust Company
One Enterprise Drive
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EXHIBIT 1
CERTIFICATE OF DESIGNATION
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CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES B PREFERRED STOCK
OF
INTELLICORP, INC.
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
INTELLICORP, INC., a corporation (the "Corporation") organized and
existing under the General Corporation Law of the State of Delaware (the
"DGCL"), in accordance with the provisions of Section 103 thereof, HEREBY
CERTIFIES:
That, pursuant to the authority conferred upon the Board of Directors
by the Certificate of Incorporation of the Corporation, the Board of Directors,
on March 14, 1997, adopted the following resolution creating a series of 5,000
shares of Preferred Stock designated as Series B Preferred Stock.
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the provisions
of its Certificate of Incorporation and Section 151 of the DGCL,
a series of Preferred Stick of the Corporation be and it hereby
is created, and that the designation and amount thereof and the
voting powers, preferences and relative, participating, optional
and other special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof are as
follows:
1. Designation and Amount. The shares of such series shall be
designated as "Series B Preferred Stock, par value $.001 per share" (the
"Series B Preferred Stock"), and the number of shares constituting such series
shall be 5,000.
2. Dividend Rights.
2.1 Priority. Subject and junior to the rights of the
Series A Preferred Stock, the holders of the Series B Preferred Stock shall be
entitled to receive, in preference and priority to payment of any dividends on
any other outstanding shares of the Corporation, when and as declared by the
Board of Directors out of any funds legally available therefor, dividends on
each outstanding share of Series B Preferred Stock, payable quarterly on each
July 31, October 31, January 31 and April 30, beginning on July 31, 1997. Such
dividends on the Series B Preferred Stock shall be at a rate of 8% per annum
($80.00 per share annually, as pro rated for each dividend payment period,
including the Initial Dividend Payment period), unless a dividend is paid at a
higher rate (determined on an as-if-converted to Common Stock basis) on any
outstanding shares of the Corporation other than the Series A Preferred Stock,
in which event the dividends on the Series B Preferred Stock shall be paid at
such higher rate (determined on an as-if-converted to Common Stock basis). The
right to such dividends on the Series B Preferred Stock shall be cumulative.
Except for dividends paid on the Series A Preferred Stock, no dividends shall
be paid on any other
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outstanding shares of the Corporation while any dividend on shares of Series B
Preferred Stock are not paid for the current period and for any prior period,
and dividends shall begin to accrue and be cumulative on outstanding shares of
Series B Preferred Stock from the date of issuance of such shares. Accumulated
but unpaid dividends shall not bear interest. Dividends paid on shares of Series
B Preferred Stock in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares of Series B Preferred Stock at the
time outstanding. The Board of Directors may fix a record date for the
determination of holders of Series B Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which record date shall
be no more than 30 days prior to the date fixed for the payment thereof.
Dividends, if paid, or if declared and set apart for payment, must be paid on,
or declared and set apart for payment on, all outstanding shares of Series B
Preferred Stock contemporaneously. Except for dividends paid on the Series A
Preferred Stock, no outstanding shares of the Corporation shall receive any
dividend at a rate which is greater than the rate at which dividends are paid
in respect of the Series B Preferred Stock (based on the number of shares of
Common Stock into which the Series B Preferred Stock is convertible on the
date of dividend). If any dividend is not paid on a dividend payment date, the
holders of the Series B Preferred Stock shall be entitled, at their election,
to have the dividend, when paid, paid in cash or in Common Stock of the
Corporation, valued at 90% of the lowest closing bid price of the Corporation's
Common Stock on the Nasdaq Stock Market for any 20 consecutive trading days
commencing on five trading days preceding the dividend payment date through the
date the dividend is paid, but in no event less than $0.775 bid price per share
of Common Stock, as equitably adjusted to reflect any stock splits, stock
dividends, stock combinations or the like.
2.2 Payment. Dividends shall be paid by forwarding a check, postage
prepaid, to the address of each holder (or, in the case of joint holders, to the
address of any such holder) of Series B Preferred Stock as shown on the books
of the Corporation, or to such other address as such holder specifies for such
purpose by written notice to the Corporation. The forwarding of such check
shall satisfy all obligations of the Corporation with respect to such
dividends, unless such check is not paid. For all dividend payments through
April 30, 1998, the Corporation, at its option, may elect to pay the dividends
in Common Stock of the Corporation, valued at 90% of the average closing bid
price of the Corporation's Common Stock on the Nasdaq Stock Market for the 20
trading days preceding the dividend payment date so long as such Common Stock
is, on the dividend payment date, registered with the United States Securities
and Exchange Commission (the "Commission") for resale by the holder. If the
Corporation elects to pay the first dividend payment in Common Stock, it shall
notify the holders of Series B Preferred Stock on or before July 31, 1997. If
such Common Stock is not registered with the Commission for resale on or before
July 31, 1997, the holders of Series B Preferred Stock shall be entitled to
elect to have such dividend paid in cash or in Common Stock of the
Corporation, valued as set forth in Paragraph 2.1 above.
3. Liquidation Rights. In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or not, the holders of Series B
Preferred Stock shall be entitled to receive, subject and junior to the rights
of the holders of the Series A Preferred Stock and before any amount shall be
paid to holders of Common Stock, an amount per share equal to $1,000.00 (as
adjusted for stock splits, combinations or similar events and
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hereafter referred to as "Original Issue Price") plus all accumulated and unpaid
dividends, if any (the "Liquidation Amount"). If, upon the occurrence of a
liquidation, dissolution or winding up, the assets and surplus funds distributed
among the holders of Series B Preferred Stock shall be insufficient to permit
the payment to such holders of the full preferential amount, then subject to any
prior payment to the holders of the Series A Preferred Stock, such assets and
surplus funds of the Corporation as are legally available for distribution shall
be distributed ratably among the holders of Series B Preferred Stock. If, upon
the occurrence of a liquidation, dissolution or winding up, after the payment
to the holders of Series B Preferred Stock of the preferential amount, assets or
surplus funds remain in the Corporation, the holders of Common Stock shall be
entitled to receive ratably all such remaining assets and surplus funds.
4. Redemption. At any time on 30 days written notice given after
April 30, 2000, at its option, the Corporation will have the right to redeem the
Series B Preferred Stock by paying in cash the Liquidation Amount. The Series B
Preferred Stock may also be redeemed under the circumstances described in
Section 6, "Change in Control" below.
5. Voting Rights. Except as specifically provided below, the Series
B Preferred Stock shall have no voting rights. If the Corporation does not
declare and pay eight quarterly dividend payments, then the holders of Series B
Preferred Stock shall have the right to vote with the holders of Common Stock as
one class on all matters submitted to the shareholders for a vote as follows:
(i) the holders of Series B Preferred Stock shall have one vote for each full
share of Common Stock into which their respective shares of Series B Preferred
Stock are convertible on the record date for the vote; and (ii) the holders of
Common Stock shall have one vote per share of Common Stock.
6. Change in Control. If, prior to conversion or redemption in
full of the Series B Preferred Stock, the Corporation shall consolidate with or
merge with another corporation or engage in a similar transaction and the
stockholders of this Corporation immediately prior to such merger or
consolidation own less than 50% of the outstanding securities of the surviving
corporation, or the Corporation shall sell all or substantially all or its
assets for a consideration (apart from the assumption of obligations) consisting
principally of securities or there occurs a purchase of 50% or more of the
Common Stock of the Corporation by a person or group of related persons pursuant
to a tender offer or otherwise (any such event, a "change in control"), the
holders of the Series B Preferred Stock will thereafter be entitled to receive,
upon the conversion thereof, the securities or property to which a holder of the
number of shares of Common Stock then issuable upon the conversion of such
Series B Preferred Stock would have been entitled upon such change in control,
and, the Corporation shall take such steps in connection with such change in
control, as may be necessary to assure that the Series B Preferred Stock (or new
preferred stock issued by the succeeding company with exactly the same terms as
the Series B Preferred Stock) shall remain in effect and that the provisions of
the Series B Preferred Stock shall thereafter be applicable, as nearly as
reasonably may be, in relation to any securities or property thereafter issuable
upon the conversion of the Series B Preferred Stock. In addition, in the event
of a change in control, the Conversion Price (as defined in Section 7) shall
become the lower of the Conversion Price in effect immediately prior to such
change in control (as adjusted pursuant to the provisions of Section 7.3) or the
price per share paid in the transaction
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resulting in the change in control; provided, that if such change of control
would reduce the Conversion Price to the price per share paid in the change of
control, then the Corporation shall have the right on at least five days notice
prior to the change in control, during which time the Series B Preferred Stock
shall not be convertible, to redeem the Series B Preferred Stock by paying the
Liquidation Amount; provided, further, that if the price per share paid in the
change in control is equal to two times the then Conversion Price, the
Corporation shall have the right, on at least 30 days notice prior to the change
in control, during which period the Series B Preferred Stock shall remain
convertible, to redeem the Series B Preferred Stock by paying the Liquidation
Amount.
7. Conversion to Common Stock. The Series B Preferred Stock shall
be convertible into Common Stock of the Corporation as follows:
7.1 Right to Convert; Initial Conversion Price. Each holder
of the Series B Preferred Stock will have the right at its option, at any time
and from time to time, except as provided in Section 6 in connection with a
change in control which would reduce the Conversion Price to the price per share
paid in the change in control, prior to redemption in full of the Series B
Preferred Stock, to convert any or all of such Series B Preferred Stock
(including any accumulated and unpaid dividends, whether or not declared) into
fully-paid and non-assessable shares of the Corporation's Common Stock $.001 par
value per share, at the conversion price as hereafter provided.
7.2 Mechanics of Conversion.
7.2.1 To convert Series B Preferred Stock, in whole or
in part as provided herein at the holder's election, a holder of Series B
Preferred Stock shall give written notice to the Corporation (by means of first
class U.S. mail or by facsimile addressed to the attention of the President) of
his intention to convert, stating the number of shares of Series B Preferred
Stock and the amount of any accumulated and unpaid dividends that is to be
converted and the name and address of each person in whose name a share or
shares of Common Stock issuable upon such conversion is to be registered, such
conversion to be effective on receipt of the notice of conversion.
7.2.2 As promptly as practical after the giving of
notice to convert as herein provided, and the surrender of the certificates
representing the shares of Series B Preferred Stock converted, the Corporation
shall: (i) pay the holder (to the extent not converted as provided above) the
amount of accrued and unpaid dividends on Series B Preferred Stock to the date
on which such conversion is made, either in cash or by means of shares of Common
Stock as set forth above; and (ii) deliver or cause to be delivered at its
office or agency maintained for that purpose to or upon written order of the
holder of the Series B Preferred Stock certificates representing the number of
fully paid and nonassessable shares of Common Stock of the Corporation into
which the Series B Preferred Stock is converted and, in the event of partial
conversion, certificates representing the unconverted shares of Series B
Preferred Stock, dated as of the date the Series B Preferred Stock is converted
in part, and in all other respects identical to the Series B Preferred Stock
converted.
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7.2.3 The total number of shares of Common Stock into which a
share of Series B Preferred Stock may be converted initially will be determined
by dividing the Original Issue Price of $1,000.00 by the conversion price. The
conversion price shall initially be $2.00 in lawful money of the United States
of America and shall be adjusted as provided in Paragraph 7.4 hereof, and as
provided below (hereinafter called the "Conversion Price"). In the case of
accumulated and unpaid dividends, the total number of shares of Common Stock
into which such accumulated and unpaid dividends may be converted shall be
determined by dividing the dollar amount of the accumulated and unpaid dividends
to be converted by the value of the Common Stock determined in accordance with
Paragraph 2.1 above, with, for this purpose, the date of conversion being the
"date the dividend is paid" referred to in the final sentence of Paragraph 2.1.
7.3 Reserved Shares.
7.3.1 The Corporation covenants and agrees that it has
reserved and shall at all times reserve and keep available out of its authorized
but unissued Common Stock, solely for the purpose of issuing such shares upon
the conversion of the Series B Preferred Stock, the full number of shares of
Common Stock deliverable upon the conversion of all Series B Preferred Stock
outstanding. The Corporation covenants and agrees that the shares of its Common
Stock delivered: (i) upon conversion of the Series B Preferred Stock; (ii) in
payment of dividends; and (iii) on conversion of any accumulated and unpaid
dividends shall, at the time of delivery of the certificates for such shares of
Common Stock, be validly issued and outstanding and fully paid and nonassessable
shares of Common Stock. The Corporation further covenants and agrees that it
will pay when due and payable any and all Federal and state original issue taxes
which may be payable in respect of the issue of the Series B Preferred Stock or
any shares of Common Stock upon the conversion of Series B Preferred Stock. The
Corporation shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the transfer and delivery of Series B
Preferred Stock, all such tax being payable by the holder of such Series B
Preferred Stock at the time of surrender.
7.3.2 Each person in whose name any certificate for shares of
Common Stock is issuable upon the conversion of Series B Preferred Stock or any
accumulated and unpaid dividends shall for all purposes be deemed to have become
the holder of record of the Common Stock represented thereby on the date upon
which notice of conversion was given in accordance with Paragraph 7.2,
notwithstanding that the date of such notice is a date upon which the stock
transfer books of the Corporation are then closed or that certificates
representing such shares of Common Stock shall not then be actually delivered to
the holder of the Series B Preferred Stock.
7.4 Adjustments to Conversion Price.
7.4.1 In case the Corporation shall, at any time or from time
to time after the date of issuance of the Series B Preferred Stock, issue any
additional shares of Common Stock (or any security convertible into shares of
Common Stock or any rights or options to purchase shares of Common Stock) for a
consideration per share less than the Conversion Price in effect immediately
prior to the issuance of such additional shares or
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without consideration, then, and thereafter successively upon each such
issuance, the Conversion Price in effect immediately prior to the issuance of
such additional shares shall forthwith be reduced to a price determined by
dividing:
(a) An amount equal to the sum of: (i) the number of
shares of Common Stock outstanding immediately prior to such issuance multiplied
by the then existing Conversion Price; plus (ii) the consideration, if any,
received by the Corporation upon such issuance, by
(b) The total number of shares of Common Stock
outstanding immediately after the issuance of such additional shares.
7.4.2 The Corporation shall not be required to make any
adjustment of the Conversion Price in accordance with Section 7.4.1 if the
amount of such adjustment shall be less than $.01, but in such case, any
adjustment that would otherwise be required then to be made shall be carried
forward and shall be made at the time of and together with the next subsequent
adjustment of the Conversion Price which, together with all adjustments thereof
so carried forward, shall amount to not less than $.01.
7.4.3 For the purpose of adjustments under Section 7.4.1, the
following provisions shall also be applicable:
(a) In the case of the issuance of additional shares
of Common Stock for cash, the consideration received by the Corporation therefor
shall be deemed to be the cash proceeds received for such shares without
deducting any commissions or other expenses paid or incurred by the Corporation
for any underwriting of, or otherwise in connection with, the issuance of such
shares.
(b) In case of the issuance (otherwise than upon
conversion of Series B Preferred Stock) of additional shares of Common Stock for
a consideration other than cash or a consideration a part of which shall be
other than cash, the amount of the consideration shall be determined in good
faith by the Board of Directors of the Corporation.
(c) In the case of the issuance by the Corporation
after the date of issuance of the Series B Preferred Stock, of any security that
is convertible into shares of Common Stock or any rights or options to purchase
shares of Common Stock: (i) the Corporation shall be deemed to have issued the
maximum number of shares of Common Stock deliverable upon the exercise of such
rights or options or upon conversion of such securities; and (ii) the
consideration therefor shall be deemed to be the sum of (x) the consideration
received by the Corporation for such convertible securities or for such other
rights or options as the case may be, without deducting therefrom any expenses
or commissions incurred or paid by the Corporation for any underwriting or
issuance of such convertible security or right or option, plus (y) the
consideration or adjustment payment to be received by the Corporation in
connection with such conversion, plus (z) the minimum price at which shares of
Common Stock are to be delivered upon the exercise of such rights or options,
or, if no minimum price is specified and such shares are to be delivered at the
option price related to the market value of the subject shares, an option price
bearing the
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same relation to the market value of the subject shares at the time such rights
or options were granted; provided, that as to such options such further
adjustment as shall be necessary on the basis of the actual option price at the
time of exercise shall be made at such time if the actual option price is less
than the aforesaid assumed option price.
(d) For the purpose hereof, any additional shares of
Common Stock issued as a stock dividend shall be deemed to have been issued for
no consideration.
(e) The number of shares of Common Stock at any time
outstanding shall include: (i) all outstanding common stock of the Corporation;
and (ii) the aggregate number of shares deliverable in respect of the
convertible securities, rights and options referred to in this Section 7.4;
provided, that to the extent that any such options, warrants or conversion
privileges are not exercised, such shares shall be deemed to be outstanding only
until the expiration dates of the rights, options or conversion privilege or the
prior cancellation thereof. Notwithstanding the foregoing, there shall not be
taken into account, for the purpose of any computation made pursuant to Section
7.4, whether for the determination of the number of shares of Common Stock
issued or outstanding on or prior to any date, or otherwise: (i) any options,
warrants or rights to purchase shares of Common Stock of the Corporation in
existence on the date of issuance of the Series B Preferred Stock; (ii) options
to purchase up to 750,000 shares of Common Stock if the exercise price thereof
is at least $1.00 per share; (iii) any options granted to directors of the
Corporation pursuant to the automatic grants of the Nonemployee Director Plan,
as currently in effect, where the exercise price has been discounted to reflect
forgiven director fees; or (iv) any shares of Common Stock issued upon the
exercise of any such options, warrants or conversion rights.
7.4.4 If at any time or from time to time the Corporation
shall by subdivision, consolidation or reclassification of shares, or otherwise,
change as a whole, the outstanding shares of Common Stock into a different
number or class of shares, the shares issuable: (i) upon conversion of the
Series B Preferred Stock; (ii) in payment of dividends; and (iii) on conversion
of any accumulated and unpaid dividends, and the Conversion Price per share,
shall be proportionately and correspondingly adjusted.
7.4.5 In case the Corporation shall declare a dividend upon
the Common Stock payable otherwise than out of earnings or earned surplus and
otherwise than in Common Stock, 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 the
Common Stock, or in the case of any other dividend, to the fair value thereof
per share of the Common Stock as determined, in good faith, by the Board of
Directors of the Corporation. For the purposes of the foregoing, a dividend
other than in cash shall be considered payable out of earnings or earned surplus
only to the extent that such earnings or earned surplus are charged an amount
equal to the fair value of such dividend as determined in good faith by the
Board of Directors of the Corporation. Such reductions shall take effect as of
the date as of which the holders of Common Stock of record are entitled to such
dividend.
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7.4.6 Irrespective of any adjustments or changes in the
Conversion Price or the number of shares of Common Stock actually issuable: (i)
on conversion of the Series B Preferred Stock; (ii) in payment of dividends; and
(iii) on conversion of any accumulated and unpaid dividends, the Series B
Preferred Stock shall continue to express the Conversion Price per share and the
number of shares issuable thereunder as expressed in Series B Preferred Stock
when initially issued.
7.4.7 The Corporation shall give notice to the holders of
Series B Preferred Stock of any change in the Conversion Price of the Series B
Preferred Stock and any change in the number of shares of Common Stock issuable
in payment of dividends and on conversion of any accumulated and unpaid
dividends, and the method of calculation thereof. The Corporation shall give the
holder of Series B Preferred Stock advance notice of any cash dividends, rights
offerings and other transactions directly for the benefit of holders of Common
Stock of the Corporation.
8. Exchange. The Series B Preferred Stock shall be exchangeable
into convertible subordinated notes of the Corporation due March 19, 2004 (the
"Notes") as follows:
8.1 Option to Exchange. The Series B Preferred Stock shall
be exchangeable, in whole but not in part, at the option of the Corporation, for
Notes at any time after the original issuance of the shares of Series B
Preferred Stock. The Corporation will mail to each record holder of the Series B
Preferred Stock written notice of its intent to exchange the Series B Preferred
Stock for the Notes no less than 30 nor more than 60 days prior to the date of
the exchange (the "Exchange Date"). The notice shall specify the effective date
of the exchange, the manner for surrender of the Series B Preferred Stock, and
that dividends shall cease to accrue on the Exchange Date.
8.2 Effect on Preferred Stock. If the Corporation has
caused the Series B Preferred Stock to be exchanged for Notes and has complied
with the other provisions of this Section 8, then notwithstanding that any
certificates for shares of Series B Preferred Stock have not been surrendered
for exchange, on the Exchange Date dividends shall cease to accrue on the Series
B Preferred Stock and at the close of business on the Exchange Date the holders
of the Series B Preferred Stock shall cease to be stockholders with respect to
the Series B Preferred Stock and shall have no interest in other claims against
the Corporation by virtue thereof and shall have no voting or other rights with
respect to the Series B Preferred Stock, except the right to receive the Notes
issuable upon such exchange and the right to accumulated and unpaid dividends,
without interest thereon, upon surrender (and endorsement, if required by the
Corporation) of their certificates, and the shares evidenced thereby shall no
longer be deemed outstanding for any purpose.
8.3 Conversion Prior to Exchange. Notwithstanding the
foregoing, if notice has been given pursuant to this Section 8, and any holder
of shares of Series B Preferred Stock shall, prior to the close of business on
the Exchange Date, give written notice to the Corporation pursuant to Section 7
of the conversion of any or all of the shares held by the holder (accompanied by
a certificate or certificates for such shares, duly endorsed or assigned to the
Corporation), then the exchange shall not become effective as to
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the shares to be converted and the conversion shall become effective as provided
in Section 7.
8.4 Delivery. The Notes will be delivered to the persons
entitled thereto upon surrender to the Corporation of the certificates for
shares of Series B Preferred Stock being exchanged therefor.
IN WITNESS WHEREOF, IntelliCorp, Inc. has caused this
Certificate to be signed by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, its President, on this 18th day of
March, 1997.
INTELLICORP, INC.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
President
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