<PAGE>
FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
-------------------------------
Date of Report April 12, 1996
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CHANCELLOR CORPORATION
----------------------
(Exact Name of Registrant as specified in its charter)
Massachusetts 0-11663 04-2626079
- --------------------------------------------------------------------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
745 Atlantic Avenue, Boston, Massachusetts 02111
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 728-8500
-----------------------------
N/A
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(Former name or former address, if changed since last report)
<PAGE>
Item 1. Changes in Control of Registrant.
- ------ --------------------------------
On April 12, 1996, the Registrant, Vestex Corporation and Vestex Capital
Corporation entered into Amendment No. 4 (the "Amendment") to a Recapitalization
and Stock Purchase Agreement dated as of September 20, 1994. Effective April
12, 1996, pursuant to the Amendment, the Registrant issued and sold to Vestex
Capital Corporation 5,000,000 shares of its Series AA Convertible Preferred
Stock for $1,350,000 in cash, less reimbursement of $312,500 of due diligence
and other transactional costs to Vestex Capital Corporation by the Registrant
(the "Preferred Stock Placement"). On April 12, 1996, the Registrant also
announced that it had commenced a private offering of up to 4,000,000 shares of
its Common Stock (the "Common Stock Offering") to a select group of investors.
The beneficial ownership table which appears at the end of this Item 1 sets
forth the voting power at April 12, 1996, after giving effect to the stock
purchase described above, of all persons known to the Registrant to own
beneficially 5% or more of the Registrant's outstanding stock and of all members
of the Registrant's management.
Effects of the Preferred Stock Placement and the Common Stock Offering on the
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Company's Governance.
- --------------------
On July 25, 1995, the Registrant, Vestex Corporation, Stephen G. Morison
(the Registrant's President and Chief Executive Officer) and certain of the
Registrant's employees entered into an Interim Voting Agreement (the "Interim
Voting Agreement"). Pursuant to the Interim Voting Agreement, the employees
agreed for so long as Mr. Morison was an officer or director of the Registrant
and until the closing of a preferred stock placement, (a) to vote for the
election of four directors, three of whom would be continuing directors
(initially, Bruce M. Dayton, Thomas W. Killilea and Mr. Morison) or their
designees (hereinafter, "Continuing Directors") and one of whom would be
designated by Vestex Corporation (initially, Brian M. Adley) and (b) in regard
to other matters, to vote as directed by Mr. Morison. Vestex Corporation agreed
that, in the event that it defaulted in its obligation to purchase preferred
stock of the Company pursuant to the terms of the Recapitalization Agreement, as
then in effect, Mr. Morison would assume voting control over the Common Stock
owned by Vestex Corporation. In September 1995, Vestex Corporation so defaulted
and Mr. Morison assumed such voting control. Because a majority of the
Registrant's outstanding shares has been subject to the Interim Voting
Agreement, all directors have been subject to election in accordance with the
terms of such Agreement for so long as it has been in effect.
Following its purchase of preferred stock through the Preferred Stock
Placement, Vestex Capital Corporation holds sufficient capital stock of the
Registrant to be able to cast between 46.7% and 65.1% of all votes that may be
cast by all stockholders, depending on whether all or any or none of the
4,000,000 shares of Common Stock
Page 2 of 11 Pages
<PAGE>
being offered pursuant to the Common Stock Offering are eventually issued. This
voting power would ordinarily be sufficient, as a practical matter, to elect the
entire Board of Directors and to approve all matters requiring stockholder
approval. Currently, and for a period of five years following the Preferred
Stock Placement, however, another voting agreement (the "Long-Term Voting
Agreement") will be in effect, providing for the election of a Board of seven
Directors, two of whom will be nominated by Vestex Capital Corporation and five
of whom will be Continuing Directors subject to election by the stockholders
other than Vestex ("Minority Stockholders"). The Long-Term Voting Agreement
also requires that, for a period of two years following the closing of the
Preferred Stock Placement, certain issuances of stock, mergers, charter and by-
law amendments and other transactions, in which Vestex Capital Corporation has
an interest which conflicts with or is distinct from that of the Registrant,
will be subject to approval by the Continuing Directors or the Minority
Stockholders ("Minority Approval").
The Long-Term Voting Agreement also provides that Richard D. Rizzo, a new
Minority Director (or a successor jointly appointed by Vestex Capital
Corporation and the Registrant, or, failing such appointment, a successor
selected by the Board of Directors of the Registrant) will be authorized to
vote, in accordance with all applicable requirements of the Long-Term Voting
Agreement and otherwise at his discretion, that number of shares owned by Vestex
Capital Corporation which from time to time exceed 39.6% of all shares of
capital stock of the Registrant then outstanding.
The Interim Voting Agreement has been superseded in its entirety by the
Long-Term Voting Agreement.
Continuing Directors. Stephen G. Morison, Bruce M. Dayton, Thomas W.
--------------------
Killilea and Richard D. Rizzo will be the four initial Continuing Directors.
Mr. Morison will be subject to re-election in 1996 and 1998, Mr. Rizzo in 1997
and 2000 and Messrs. Dayton and Killilea in 1996 and 1999. The Long-Term Voting
Agreement provides that, at all elections of directors prior to the Annual
Meeting of Stockholders to be held in the year 2001, the Registrant will
nominate each of the initial Continuing Directors for re-election or, if any
such Continuing Director does not choose to stand for re-election, a nominee
designated by a majority of the Continuing Directors then in office. Vestex
Capital Corporation has agreed to vote all of its outstanding stock in favor of
such nominees if they are unopposed. If any such nominee is opposed, Vestex
Capital Corporation will vote all of its outstanding stock in favor of the
candidate who receives a plurality of the votes cast by the Minority
Stockholders. Vacancies which occur among the Continuing Directors will be
filled as designated by the remaining Continuing Directors.
Minority Approval. For a period of two years following
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Page 3 of 11 Pages
<PAGE>
consummation of the Preferred Stock Placement, the following types of
transactions will be subject to approval by either a majority of the Continuing
Directors then in office or the holders of a majority of the shares of common
stock held by Minority Stockholders: (i) any issuance or transfer by the
Registrant of any stock or other securities of the Registrant to Vestex Capital
Corporation (other than the issuance of common stock pursuant to the conversion
of Series AA Convertible Preferred Stock), (ii) any merger, consolidation or
sale of assets involving the Registrant and Vestex Capital Corporation, (iii)
any action taken by the Registrant which results in a going private transaction
subject to Rule 13e-3 under the Securities Exchange Act of 1934, or (iv) the
payment to Vestex Capital Corporation of any fee or other similar type of
benefit (other than as contemplated in the Recapitalization Agreement, as
amended by the Amendment and a related consulting agreement). Vestex Capital
Corporation has agreed not to attempt to commence or effect any of such
transactions without first obtaining the necessary approval. The foregoing does
not apply to any transaction in which Vestex Capital Corporation does not have a
conflict of interest, such as the issuance of securities to an unrelated
purchaser (notwithstanding that Vestex Capital Corporation would be entitled to
receive a fee in connection with such transaction).
The foregoing summary is qualified by reference to the Long-Term Voting
Agreement, a copy of which is set forth as Exhibit 3 hereto.
BENEFICIAL OWNERSHIP TABLE
--------------------------
The following table sets forth the number of shares of Common Stock
beneficially owned by the persons or entities known by the Registrant's
management to be the beneficial owners of more than 5% of the outstanding
shares, the number of shares beneficially owned by each director and each
executive officer, and the number of shares beneficially owned by all directors
and officers as a group, as "beneficial ownership" has been defined under rules
promulgated by the Securities and Exchange Commission, at April 12, 1996 after
giving effect to the issuance and sale of 5,000,000 shares of Series AA
Convertible Preferred Stock and 400,000 shares of Common Stock. Appropriate
additional columns have been added to reflect the pro forma effects of the
issuance and sale of an additional 4,000,000 shares of Common Stock, as if such
sales of Common Stock (which may occur in connection with the Common Stock
Offering at any time prior to May 15, 1996) had occurred on such date.
Page 4 of 11 Pages
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<TABLE>
<CAPTION>
Voting Power(1)
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Common Stock Percentage of
Name and Address of Beneficially Shares Outstanding Percentage
-------------------------- ----------------------
Beneficial Owner Owned Actual Pro Forma(2) Shares Actual Pro Forma(2)
- ---------------- ----- ------ ------------ ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C>
Vestex Capital
Corporation (3) 6,000,000 (4) 65.1% 46.7% 6,600,000(4)(5)(6) 62.6% 46.7%
Brian M. Adley (3) 6,637,500 (4)(7)(8) 65.2% 47.0% 6,600,000(4)(5)(6)(7) 62.6% 46.7%
Stephen G. Morison (9) 984,812 (8)(10) 9.3% 6.8% 546,812(5) 5.2%(10) 3.9%
Bruce M. Dayton (9) 46,321 (8) * * 38,821(5) * *
Thomas W. Killilea (12) 175,375 (8) 1.7% 1.2% 125,375(5) 1.2% *
Michael DeSantis, Jr.(9) 361,595 (8) 3.5% 2.5% 186,595 1.7% 1.3%
William J. Guthlein (9) 70,325 * * 70,325 * *
Gregory S. Harper (9) 219,867 (8) 2.1% 1.5% 109,867 1.0% *
David W. Parr (9) 119,750 1.2% * 119,750 1.1% *
Richard D. Rizzo (9) 27,000 (8)(11) * * 0(5)(11) * *
Directors and Executive
Officers as a group
(9 persons) 8,641,733 (4)(7)(8) 75.9% 57.7% 7,797,545(4)(7)(8) 77.0% 55.2%
</TABLE>
____________________
* Less than one percent (1.0%)
THE NOTES TO THIS TABLE APPEAR ON PAGE 6.
Page 5 of 11 Pages
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Notes to Beneficial Ownership Table
-----------------------------------
(1) Number of votes which each person is entitled to cast expressed as a number
and as a percentage of all votes which all stockholders are (or, in the
case of the pro forma column, would be) entitled to cast; assumes no
exercise of stock options.
(2) Pro forma as if the additional 4,000,000 shares of Common Stock being
offered in the Common Stock Offering had been issued and outstanding at
April 12, 1996; assumes no exercise of stock options.
(3) This stockholder's address is 12 Waltham Street, Lexington, MA 02173.
(4) Assumes conversion of 5,000,000 shares of Series AA Convertible Preferred
Stock into a like number of shares of Common Stock.
(5) All shares owned by this stockholder must be voted for the election of
directors as required by the provisions of the Long-Term Voting Agreement.
(6) Between 1,001,989 of these shares (if an additional 4,000,000 shares are
sold by the Company in the Common Stock Offering) and 2,585,989 of these
shares (if no additional shares are sold by the Company in the Common Stock
Offering) will be voted, as to all matters other than the election of
directors, as specified by Richard D. Rizzo or his successor pursuant to
the provisions of the Voting Agreement.
(7) Includes all shares owned by Vestex Capital Corporation reported above. Mr.
Adley has sole or shared voting power as to all such shares.
(8) Includes 37,500, 435,500, 7,500, 50,000, 175,000, 110,000 and 27,000 shares
which Messrs. Adley, Morison, Dayton, Killilea, DeSantis, Harper and Rizzo
are entitled to acquire, respectively, through the exercise of outstanding
stock options within the next 60 days.
(9) Each of these persons maintains a business address c/o the Registrant.
(10) Does not include 647,739 shares owned by certain other employees as to
which Mr. Morison formerly had voting power or 1,600,000 shares as to which
Mr. Morison formerly had voting power due to a default in Vestex
Corporation's obligation to purchase 5,000,000 shares of Series A
Convertible Preferred Stock in the fall of 1995.
Page 6 of 11 Pages
<PAGE>
(11) Excludes up to 2,585,989 shares owned by Vestex Capital Corporation as to
which this person will have voting power with respect to all matters other
than the election of directors pursuant to the Long-Term Voting Agreement.
(12) This person maintain a business address at Oppenheimer & Co., Inc., One
Federal Street, Boston, MA 02110.
The foregoing table assumes between 10,136,391 and 14,136,391 shares of
Common Stock to be outstanding, on the assumptions set forth above, depending on
whether all or any or none of the 4,000,000 additional shares being offered in
the Common Stock Offering are sold.
Terms of the Preferred Stock
- ----------------------------
Subject to the powers, preferences, rights, qualifications, limitations and
restrictions of any other class or series of preferred stock that may be issued,
the holder of each of the 5 million shares of Series AA Convertible Preferred
Stock ("Series AA Preferred") is entitled to the following preferences and
rights:
Dividends; Special Payment Upon Conversion: The Series AA Preferred
------------------------------------------
will be entitled to receive dividends (if any) paid from time to time on
the Common Stock, on a pari passu basis. If, within five years after the
issuance of the Series AA Preferred, the Registrant issues additional
equity securities (other than upon the exercise of certain warrants or
options) or debt convertible into equity securities of the Registrant for
cash consideration in excess of $7,500,000 ("Additional Equity
Investment"), then there shall be paid to the holders of any Series AA
Preferred which is thereafter converted an amount per share at a rate of
(i) $.035 per annum, if the Additional Equity Investment is consummated and
the shares are converted within one year after their issuance; (ii) $.03
per annum, if the Additional Equity Investment is consummated and the
shares are converted within two years after their issuance; (iii) $.025 per
annum, if the Additional Equity Investment is consummated and the shares
are converted within three years after their issuance; (iv) $.02 per annum,
if the Additional Equity Investment is consummated and the shares are
converted within four years after their issuance; or (v) $.015 per annum,
if the Additional Equity Investment is consummated and the shares are
converted within five years after the issuance. After April 11, 1998, such
dividends may, at the Company's election, be paid in the form of shares of
Common Stock of the Registrant, valued for this purpose at one-half their
then prevailing trading price determined under a formula.
Page 7 of 11 Pages
<PAGE>
Liquidation Preference: a payment of $.50 per share plus any
----------------------
accumulated and unpaid dividends thereon, and no more, upon any voluntary or
involuntary liquidation, dissolution or winding up of the Registrant, payable
out of funds legally available for the purpose, after payment of debts and
expenses and subject to the rights of any senior class or series (as defined) of
preferred stock, but in preference to the payment of any amounts to the holders
of junior stock (as defined) including Common Stock.
In any event of any consolidation or merger of the Registrant with or
into another entity, any sale or transfer to another entity of all or
substantially all of its assets or the voluntary or involuntary dissolution
and winding up of the Registrant, the holder of each share of Series AA
Preferred then outstanding will have the right to elect to receive its
liquidation preference or to convert each such share into the kind and
amount of securities and property receivable upon or deemed to be held
following such consolidation, merger, sale, transfer or dissolution by a
holder of the number of shares of Common Stock into which such Series AA
Preferred shares might have been converted immediately prior to such
consolidation, merger, sale, transfer or dissolution.
Conversion Rights: each share of Series AA Preferred will be
-----------------
convertible at any time into shares of Common Stock at an initial
conversion rate of one share of Common Stock per share of Series AA
Preferred (equivalent to a conversion price of $.50 per share). The
conversion rate is subject to adjustment in certain events, including stock
dividends, stock splits, reverse stock splits, subdivisions, combinations
and reclassifications of Common Stock, but is not subject to adjustment
upon the issuance of Common Stock or options, rights or warrants to
purchase Common Stock at a price lower than the conversion price as in
effect from time to time. Fractional Common Shares will not be issued upon
conversion but, in lieu thereof, the Registrant will pay a cash adjustment
based on the conversion price of the Common Stock.
Retirement: at any time after April 11, 1999, the Registrant may
----------
elect to cause all outstanding shares of Series AA Preferred to be retired
by paying any amounts that would be due upon conversion and converting such
shares into Common Stock at the then effective conversion rate.
Voting Rights: as may votes per share of Series AA Preferred as the
-------------
number of shares of Common Stock into which each such share of Series AA
Preferred is convertible (initially, one vote per share), with the Common
Stock and all outstanding preferred stock voting together as a single class
on all matters except as otherwise expressly provided in the Registrant's
Articles of Organization or prescribed by law.
Page 8 of 11 Pages
<PAGE>
Without the favorable vote or consent of the holders of a majority of the
issued and outstanding Series AA Preferred, voting as a class, the Registrant is
not authorized to amend, alter or repeal any of the preferences or rights of the
Series AA Preferred so as to materially adversely affect such preferences and
rights, increase the authorized number of shares of preferred stock, create any
new class of shares having preference over or ranking on a parity with the
Series AA Preferred, cause any purchase of stock other than from employees,
cause a dividend to be paid on the Common Stock, effect a merger to which the
Company is a party or a sale of the Registrant's assets, or amend the Company's
Articles of Organization or By-Laws.
Registration Rights. The holders of at least 1,000,000 shares
-------------------
(subject to anti-dilution provisions, and including any Common Stock which
is issued upon conversion of Series AA Preferred) of Series AA Preferred,
will have the right on one occasion (and on two additional occasions during
any twelve-month period in which the Registrant does not qualify to
register shares in a public offering on Form S-3) to require the Registrant
to use its best efforts to cause the shares, and those of other Series A
Preferred stockholders wishing to participate on a pro rata basis, to be
registered for sale to the public through an underwriting firm which is
approved by the Registrant. Less than 20% of the outstanding Series AA
Preferred can be registered provided the anticipated aggregate offering
price to the public would exceed $2,000,000. The maximum number of shares
to be so registered will be subject to limitation, at the underwriter's
discretion, on a pro rata basis among the selling stockholders, in order to
accommodate public demand for such shares or for newly issued shares of the
Registrant if the Board of Directors should elect to have the Registrant
include newly issued shares in such offering. Underwriters' discounts,
commissions and related costs will be borne by the Registrant and the
participating stockholders in proportion to the respective numbers of
shares sold by each. Legal, accounting and other expenses of such offering
will be borne entirely by the Registrant.
In addition, the holders of Series AA Preferred will have (a) certain
"piggy-back" registration rights, subject to limitation at underwriters'
discretion to an amount which is not less than 10% of the shares requested,
if the Registrant registers any shares in a public offering (other than in
connection with a business combination or employee incentive plan) and (b)
an unlimited number of demand registrations on Form S-3 or any successor
Form at any time that the Registrant qualifies for the use of such Form,
subject to certain exceptions. Legal, accounting and other offering
expenses will be borne as described above.
Page 9 of 11 Pages
<PAGE>
The Registrant does not at present have any undesignated series preferred
stock, but will consider soliciting stockholder approval to amending 5 million
shares of Series A Convertible Preferred Stock, none of which is outstanding, so
that it becomes undesignated series preferred stock.
Item 5. Other Events.
- ------ ------------
On April 16, 1996, the Registrant issued a press release announcing the
closing of the Preferred Stock Placement described hereinabove. The press
release also announ ced the commencement of the Common Stock Offering described
hereinabove and the Registrant's financial results for the twelve months and
three months ended December 31, 1995.
Reference is made to the press release, which is filed as an exhibit to
this Form 8-K.
Item 7. Financial Statements, Pro Forma Financial
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Information and Exhibits.
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(c) Exhibits
1. Amendment No. 4 to Recapitalization and Stock Purchase Agreement
dated as of April 12, 1996 among the Registrant, Vestex
Corporation and Vestex Capital Corporation.
2. Registration Rights Agreement dated as of April 12, 1996 between
the Registrant and Vestex Corporation.
3. Voting Agreement among the Registrant, Vestex Corporation, Vestex
Capital Corporation, Steven G. Morison, Bruce M. Dayton, Thomas
W. Killilea, Brian M. Adley, and Richard D. Rizzo.
4. Certificate of Designation of a Class or Series of Preferred
Stock, in substance as filed with the Secretary of State of the
Commonwealth of Massachusetts.
5. Press release dated April 16, 1996.
Page 10 of 11 Pages
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CHANCELLOR CORPORATION
By: /s/ William J. Guthlein
-----------------------------
William J. Guthlein
Vice President, Treasurer
and Chief Financial
Officer
Page 11 of 11 Pages
<PAGE>
Exhibit 1
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AMENDMENT NO. 4 TO
RECAPITALIZATION AND STOCK PURCHASE AGREEMENT
THIS AMENDMENT NO. 4 TO RECAPITALIZATION AND STOCK PURCHASE AGREEMENT (this
"Amendment"), dated as of this 11th day of April, 1996, by and between
CHANCELLOR CORPORATION, a Massachusetts corporation (the "Company"), VESTEX
CORPORATION, a Massachusetts corporation (the "Purchaser"), and VESTEX CAPITAL
CORPORATION, a Massachusetts corporation (the "Assignee" and, together with the
Purchaser, "Vestex"), amends, modifies and supplements that certain
Recapitalization and Stock Purchase Agreement dated as of September 20, 1994
among the Company, the Purchaser and Bruncor Inc., a New Brunswick corporation
("Bruncor") (as amended by Amendment No. 1 to Recapitalization and Stock
Purchase Agreement dated as of November 18, 1994, that certain letter agreement
dated as of February 28, 1995 ("Amendment No. 2"), and Amendment No. 3 to
Recapitalization and Stock Purchase Agreement dated as of July 14, 1995, each
among the Company, the Purchaser and Bruncor, the "Agreement") as the Agreement
relates to the Company and the Purchaser, but not as it relates to Bruncor.
Capitalized terms used in this Amendment and not otherwise defined herein shall
have the meanings ascribed to them in the Agreement.
WHEREAS, the parties hereto wish to amend, modify and supplement the
Agreement upon the terms and conditions set forth hereinbelow;
<PAGE>
- 2 -
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Preferred Stock; Purchase Price; Expenses; Closing Date. The
-------------------------------------------------------
Assignee hereby agrees to pay to the Company, by bank check or wire transfer,
and in addition to amounts previously paid by the Purchaser to the Company
pursuant to the Agreement, $1,350,000.00 (the "Purchase Price"). Upon receipt
of the Purchase Price, the Company shall issue and deliver to the Assignee
5,000,000 shares of Series AA Convertible Preferred Stock (the "Preferred
Stock") having the terms and conditions set forth on Exhibit A hereto.
---------
Immediately upon receipt of the Purchase Price, the Company shall reimburse to
the Purchaser, by wire transfer, its costs and expenses in connection with due
diligence, negotiation and closing the transactions contemplated hereby
stipulated to be in the amount of $312,500.00. The payment by the Assignee to
the Company of the Purchase Price, the reimbursement by the Company to the
Purchaser of its costs and expenses, and the issuance by the Company to the
Assignee of the Preferred Stock, shall take place at a closing (the "Preferred
Stock Closing") to be held on the date of this Amendment (the "Closing Date"),
or such later date
<PAGE>
- 3 -
to which the parties may agree (the "Delayed Closing Date"), but in no event
later than May 14, 1996 (the "Final Closing Date"), in any case, at 10:00 a.m.
at the offices of the Company. If the Preferred Stock Closing does not occur on
or before the Final Closing Date, the Agreement, as amended hereby, shall be
null and void.
2. Common Stock Offering; Modification of Preferred Stock Closing.
--------------------------------------------------------------
Vestex acknowledges that the Company is currently conducting an offering of up
to 9,000,000 shares of its Common Stock (the "Common Stock Offering").
Notwithstanding anything contained herein to the contrary, the number of shares
of Preferred Stock to be issued to the Assignee shall be reduced from 5,000,000
by that number of shares of Common Stock (if any) in excess of 4,000,000 for
which subscriptions have been received by the Company on or before the Preferred
Stock Closing, and the Purchase Price shall be reduced by $.27 per share for
each share of Preferred Stock (if any) less than 5,000,000 issued to the
Assignee at the Preferred Stock Closing. Upon the Preferred Stock Closing, the
Common Stock Offering shall be terminated if subscriptions for 4,000,000 or more
shares of Common Stock have then been subscribed for, or if fewer than 4,000,000
shares of Common Stock have then been subscribed for, the Common Stock
<PAGE>
- 4 -
Offering shall be reduced to a maximum of 4,000,000 shares of Common Stock.
3. Other Closing Matters. At the Preferred Stock Closing, the
---------------------
Company, the Assignee and/or the Purchaser (as the case may be) shall execute
and deliver (a) a Registration Rights Agreement in the form attached hereto as
Exhibit B, (b) a Voting Agreement in the form attached hereto as Exhibit C, (c)
- --------- ---------
Releases in the forms attached hereto as Exhibit D, and (d) an Amendment to
---------
Consulting Agreement in the form attached hereto as Exhibit E.
---------
4. Further Amendments to Agreement. The Agreement is hereby further
-------------------------------
amended by eliminating the Escrow Agreement and any references thereto, it being
agreed that the Purchase Price shall be immediately available to the Company for
working capital purposes. The date by which the Company's current severance
policies shall be terminated pursuant to Article V(n)(iv) of the Agreement is
hereby amended to be the anniversary of the Preferred Stock Closing.
5. Revised Schedules. The Schedules to the Agreement are hereby
-----------------
revised and restated in the forms attached hereto.
<PAGE>
- 5 -
6. Affirmation of Agreement. Except as modified, amended and supplemented
------------------------
hereby, the Agreement is hereby affirmed, ratified and approved as the legal,
valid and binding agreement of the parties thereto, enforceable in accordance
with its terms.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered by their duly authorized officers as of the date and year
first above written.
CHANCELLOR CORPORATION VESTEX CORPORATION
By: /s/ Stephen G. Morison By: /s/ Brian M. Adley
--------------------------- ---------------------------
Title: CEO Title: CEO
------------------------- ------------------------
VESTEX CAPITAL CORPORATION
By: /s/ Brian M. Adley
---------------------------
Title: CEO
------------------------
[SCHEDULES AND EXHIBITS OMITTED]
<PAGE>
EXHIBIT 2
---------
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Agreement dated as of April 11, 1996 is entered into by and among
Chancellor Corporation, a Massachusetts corporation (the "Company"), Vestex
Corporation, a Masachusetts corporation ("Vestex"), and Vestex Capital
Corporation, a Massachusetts corporation ("Capital") and, together with Vestex,
the ("Purchaser").
WHEREAS, the Company, the Purchaser and Bruncor, Inc. have entered into a
Recapitalization and Stock Purchase Agreement dated as of September 20, 1994 (as
subsequently amended, the "Purchase Agreement"); and
WHEREAS, the Company and the Purchaser desire to provide for certain
arrangements with respect to the registration of shares of capital stock of the
Company under the Securities Act of 1933;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
-------------------
shall have the following respective meanings:
"Commission" means the Securities and Exchange Commission, or any
----------
other Federal agency at the time administering the Securities Act.
"Common Stock" means the common stock, $.01 par value per share, of
------------
the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
or any similar Federal statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be in effect.
"Registration Statement" means a registration statement filed by the
----------------------
Company with the Commission for a public offering and sale of Common Stock
(other than a registration statement on Form S-8 or Form S-4, or their
successors, or any other form for a similar limited purpose, or any registration
statement covering only securities proposed to be issued in exchange for
securities or assets of another corporation).
"Registration Expenses" means the expenses described in Section 5.
---------------------
"Registrable Shares" means (i) the Common Shares and the Preferred
------------------
Shares, as those terms are defined in the Purchase Agreement, (ii) the shares of
Common Stock issued or issuable upon
<PAGE>
conversion of the Preferred Shares and (iii) any other shares of Common Stock
issued in respect of such shares (because of stock splits, stock dividends,
reclassifications, recapitalizations, or similar events); provided, however,
-------- -------
that shares of Common Stock which are Registrable Shares shall cease to be
Registrable Shares (i) upon any sale pursuant to a Registration Statement or
Rule 144 under the Securities Act or (ii) upon any sale in any manner to a
person or entity which, by virtue of Section 14 of this Agreement, is not
entitled to the rights provided by this Agreement. Wherever reference is made in
this Agreement to a request or consent of holders of a certain percentage of
Registrable Shares, the determination of such percentage shall include shares of
Common Stock issuable upon conversion of the Preferred Shares even if such
conversion has not yet been effected.
"Securities Act" means the Securities Act of 1933, as amended, or any
--------------
similar Federal statute, and the rules and regulations of the Commission issued
under such Act, as they each may, from time to time, be in effect.
"Shares" shall have the meanings assigned in the preamble of the
------
Purchase Agreement to the terms "Preferred Shares" and "Common Shares."
"Stockholders" means the Purchaser and any persons or entities to whom
------------
the rights granted under this Agreement are transferred by the Purchaser, its
successors or assigns pursuant to Section 14 hereof.
2. Required Registrations.
----------------------
(a) At any time after April 11, 1996, a Stockholder or Stockholders
holding in the aggregate at least 20% of the Registrable Shares may request, in
writing, that the Company effect the registration on Form S-1 or Form S-2 (or
any successor form) of Registrable Shares owned by such Stockholder or
Stockholders that either (i) constitute at least 20% of the Registrable Shares
or (ii) have an aggregate offering price of at least $2,000,000 (based on the
then current market price or fair value). If the holders initiating the
registration intend to distribute the Registrable Shares by means of an
underwriting, they shall so advise the Company in their request. In the event
such registration is underwritten, the right of other Stockholders to
participate shall be conditioned on such Stockholders' participation in such
underwriting. Upon receipt of any such request, the Company shall promptly give
written notice of such proposed registration to all Stockholders. Such
Stockholders shall have the right, by giving written notice to the Company
within 30 days after the Company provides its notice, to elect to have included
in such registration such of their Registrable Shares as such Stockholders may
request in such notice of election; provided that if the underwriter (if any)
managing the
-2-
<PAGE>
offering determines that, because of marketing factors, all of the Registrable
Shares requested to be registered by all Stockholders may not be included in the
offering, then all Stockholders who have requested registration shall
participate in the registration pro rata based upon the number of Registrable
Shares which they have requested to be so registered. Thereupon, the Company
shall, as expeditiously as possible, use its best efforts to effect the
registration on Form S-1 or Form S-2 (or any successor form) of all Registrable
Shares which the Company has been requested to so register (provided, that the
Company may in its discretion delay the filing of any registration statement for
a period of up to 90 days from the date of the giving of written notice of such
delay).
(b) At any time that the Company is eligible to file a Registration
Statement on Form S-3 with respect to offerings by its stockholders (or any
successor form relating to secondary offerings), a Stockholder or Stockholders
holding in the aggregate at least 25% of the Registrable Shares may request the
Company, in writing, to effect the registration on Form S-3 (or such successor
form), of Registrable Shares owned by such Stockholder or Stockholders. Upon
receipt of any such request, the Company shall promptly give written notice of
such proposed registration to all Stockholders. Such Stockholders shall have the
right, by giving written notice to the Company within 30 days after the Company
provides its notice, to elect to have included in such registration such of
their Registrable Shares as such Stockholders may request in such notice of
election; provided that if the underwriter (if any) managing the offering
determines that, because of marketing factors, all of the Registrable Shares
requested to be registered by all Stockholders may not be included in the
offering, then all Stockholders who have requested registration shall
participate in the registration pro rata based upon the number of Registrable
Shares which they have requested to be so registered. Thereupon, the Company
shall, as expeditiously as possible, use its best efforts to effect the
registration on Form S-3 (or such successor form) of all Registrable Shares
which the Company has been requested to so register.
(c) The Company shall not be required to effect more than one
registration pursuant to paragraph (a) above, except that it shall be required
to effect up to two additional registrations pursuant to paragraph (a) above
during any twelve-month period if, at the time of such registration, the Company
is not eligible to use Form S-3. In addition, the Company shall not be required
to effect any registration (other than on Form S-3 or any successor form
relating to secondary offerings) within six months after the effective date of
any other Registration Statement of the Company.
(d) If at the time of any request to register Registrable Shares
pursuant to this Section 2, the Company is engaged or has fixed plans to engage
within 30 days of the time of the request in a registered public offering as to
which the
-3-
<PAGE>
Stockholders may include Registrable Shares pursuant to Section 3 or is engaged
in any other activity which, in the good faith determination of the Company's
Board of Directors, would be adversely affected by the requested registration to
the material detriment of the Company, then the Company may at its option direct
that such request be delayed for a period not in excess of six months from the
effective date of such offering or the date of commencement of such other
material activity, as the case may be, such right to delay a request to be
exercised by the Company not more than once in any two-year period.
3. Incidental Registration.
-----------------------
(a) Whenever the Company proposes to file a Registration Statement
(other than pursuant to Section 2) at any time and from time to time, it will,
prior to such filing, give written notice to all Stockholders of its intention
to do so and, upon the written request of a Stockholder or Stockholders given
within 20 days after the Company provides such notice (which request shall state
the intended method of disposition of such Registrable Shares), the Company
shall use its best efforts to cause all Registrable Shares which the Company has
been requested by such Stockholder or Stockholders to register to be registered
under the Securities Act to the extent necessary to permit their sale or other
disposition in accordance with the intended methods of distribution specified in
the request of such Stockholder or Stockholders; provided that the Company shall
have the right to postpone or withdraw any registration effected pursuant to
this Section 3 without obligation to any Stockholder.
(b) In connection with any registration under this Section 3
involving an underwriting, the Company shall not be required to include any
Registrable Shares in such registration unless the holders thereof accept the
terms of the underwriting as agreed upon between the Company and the
underwriters selected by it (provided that such terms must be consistent with
this Agreement). If in the opinion of the managing underwriter it is appropriate
because of marketing factors to limit the number of Registrable Shares to be
included in the offering, then the Company shall be required to include in the
registration only that number of Registrable Shares, if any, which the managing
underwriter believes should be included therein; provided that (i) in no event
shall the number of Registrable Shares included in the offering be reduced below
10% of the total number of Registerable Shares of Common Stock requested to be
included in the offering, and (ii) no persons or entities other than the
Company, the Stockholders and persons or entities holding registration rights
granted in accordance with Section 10 hereof shall be permitted to include
securities in the offering. If the number of Registrable Shares to be included
in the offering in accordance with the foregoing is less than the total number
of shares which the holders of Registrable Shares have requested to
-4-
<PAGE>
be included, then the holders of Registrable Shares who have requested
registration and other holders of securities entitled to include them in such
registration shall participate in the registration pro rata based upon their
total ownership of shares of Common Stock (giving effect to the conversion into
Common Stock of all securities convertible thereinto). If any holder would thus
be entitled to include more securities than such holder requested to be
registered, the excess shall be allocated among other requesting holders pro
rata in the manner described in the preceding sentence.
4. Registration Procedures. If and whenever the Company is required by
-----------------------
the provisions of this Agreement to use its best efforts to effect the
registration of any of the Registrable Shares under the Securities Act, the
Company shall:
(a) file with the Commission a Registration Statement with respect to
such Registrable Shares and use its best efforts to cause that Registration
Statement to become and remain effective;
(b) as expeditiously as possible prepare and file with the Commission
any amendments and supplements to the Registration Statement and the prospectus
included in the Registration Statement as may be necessary to keep the
Registration Statement effective, in the case of a firm commitment underwritten
public offering, until each underwriter has completed the distribution of all
securities purchased by it and, in the case of any other offering, until the
earlier of the sale of all Registrable Shares covered thereby or 120 days after
the effective date thereof;
(c) as expeditiously as possible furnish to each selling Stockholder
such reasonable numbers of copies of the prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as the selling Stockholder may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Shares owned
by the selling Stockholder; and
(d) as expeditiously as possible use its best efforts to register or
qualify the Registrable Shares covered by the Registration Statement under the
securities or Blue Sky laws of such states as the selling Stockholders shall
reasonably request, and do any and all other acts and things that may be
necessary or desirable to enable the selling Stockholders to consummate the
public sale or other disposition in such states of the Registrable Shares owned
by the selling Stockholder; provided, however, that the Company shall not be
-------- -------
required in connection with this paragraph (d) to qualify as a foreign
corporation or execute a general consent to service of process in any
jurisdiction.
-5-
<PAGE>
If the Company has delivered preliminary or final prospectuses to the
selling Stockholders and after having done so the prospectus is amended to
comply with the requirements of the Securities Act, the Company shall promptly
notify the selling Stockholders and, if requested, the selling Stockholders
shall immediately cease making offers of Registrable Shares and return all
prospectuses to the Company. The Company shall promptly provide the selling
Stockholders with revised prospectuses and, following receipt of the revised
prospectuses, the selling Stockholders shall be free to resume making offers of
the Registrable Shares.
5. Allocation of Expenses. The Company will pay all Registration
----------------------
Expenses of all registrations under this Agreement; provided, however, that if a
-------- -------
registration under Section 2 is withdrawn at the request of the Stockholders
requesting such registration (other than as a result of information concerning
the business or financial condition of the Company which is made known to the
Stockholders after the date on which such registration was requested) and if the
requesting Stockholders elect not to have such registration counted as a
registration requested under Section 2, the requesting Stockholders shall pay
the Registration Expenses of such registration pro rata in accordance with the
number of their Registrable Shares included in such registration. For purposes
of this Section 5, the term "Registration Expenses" shall mean all expenses
incurred by the Company in complying with this Agreement, including, without
limitation, all registration and filing fees, exchange listing fees, printing
expenses, fees and expenses of counsel for the Company and the fees and expenses
of one counsel selected by the selling Stockholders to represent the selling
Stockholders, state Blue Sky fees and expenses, and the expense of any special
audits incident to or required by any such registration, but excluding
underwriting discounts, selling commissions and the fees and expenses of selling
Stockholders' own counsel (other than the counsel selected to represent all
selling Stockholders).
6. Indemnification and Contribution.
--------------------------------
(a) In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, the Company will indemnify
and hold harmless the seller of such Registrable Shares, each underwriter of
such Registrable Shares, and each other person, if any, who controls such seller
or underwriter within the meaning of the Securities Act or the Exchange Act
against any losses, claims, damages or liabilities, joint or several, to which
such seller, underwriter or controlling person may become subject under the
Securities Act, the Exchange Act, state securities or Blue Sky laws or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any
-6-
<PAGE>
Registration Statement under which such Registrable Shares were registered under
the Securities Act, any preliminary prospectus or final prospectus contained in
the Registration Statement, or any amendment or supplement to such Registration
Statement, or arise out of or are based upon the omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; and the Company will reimburse such seller,
underwriter and each such controlling person for any legal or any other expenses
reasonably incurred by such seller, underwriter or controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will 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 untrue statement or omission made in such
Registration Statement, preliminary prospectus or final prospectus, or any such
amendment or supplement, in reliance upon and in conformity with information
furnished to the Company, in writing, by or on behalf of such seller,
underwriter or controlling person specifically for use in the preparation
thereof.
(b) In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, each seller of Registrable
Shares, severally and not jointly, will indemnify and hold harmless the Company,
each of its directors and officers and each underwriter (if any) and each
person, if any, who controls the Company or any such underwriter within the
meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages or liabilities, joint or several, to which the Company, such directors
and officers, underwriter or controlling person may become subject under the
Securities Act, Exchange Act, state securities or Blue Sky laws or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement under which
such Registrable Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to the Registration Statement, or
arise out of or are based upon any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, if the statement or omission was made in reliance upon
and in conformity with information relating to such seller furnished in writing
to the Company by or on behalf of such seller specifically for use in connection
with the preparation of such Registration Statement, prospectus, amendment or
supplement; provided, however, that the obligations of such Stockholders
-------- -------
hereunder shall be limited to an amount equal to the proceeds to each
Stockholder of Registrable Shares sold in connection with such registration.
-7-
<PAGE>
(c) Each party entitled to indemnification under this Section 6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided, that counsel for the Indemnifying
--------
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld); and, provided, further, that the failure of any Indemnified Party to
-------- -------
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 6. The Indemnified Party may participate in such
defense at such party's expense; provided, however, that the Indemnifying Party
-------- -------
shall pay such expense if representation of such Indemnified Party by the
counsel retained by the Indemnifying Party would be inappropriate due to actual
or potential differing interests between the Indemnified Party and any other
party represented by such counsel in such proceeding. No Indemnifying Party, in
the defense of any such claim or litigation shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect of such claim or litigation, and no Indemnified Party shall
consent to entry of any judgment or settle such claim or litigation without the
prior written consent of the Indemnifying Party.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Registrable Shares exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 6 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 6 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any such selling Stockholder or any such controlling
person in circumstances for which indemnification is provided under this Section
6; then, in each such case, the Company and such Stockholder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportions so that such holder
is responsible for the portion represented by the percentage that the public
offering price of its Registrable Shares offered by the Registration Statement
bears to the public offering price of all securities offered by such
Registration Statement, and the Company is responsible for the remaining
portion; provided, however, that, in any such case,
-------- -------
-8-
<PAGE>
(A) no such holder will be required to contribute any amount in excess of the
proceeds to it of all Registrable Shares sold by it pursuant to such
Registration Statement, and (B) no person or entity guilty of fraudulent
misrepresentation, within the meaning of Section 11(f) of the Securities Act,
shall be entitled to contribution from any person or entity who is not guilty of
such fraudulent misrepresentation.
7. Indemnification with Respect to Underwritten Offering. In the event
-----------------------------------------------------
that Registrable Shares are sold pursuant to a Registration Statement in an
underwritten offering pursuant to Section 2, the Company agrees to enter into an
underwriting agreement containing customary representations and warranties with
respect to the business and operations of an issuer of the securities being
registered and customary covenants and agreements to be performed by such
issuer, including without limitation customary provisions with respect to
indemnification by the Company of the underwriters of such offering.
8. Information by Holder. Each Stockholder including Registrable Shares
---------------------
in any registration shall furnish to the Company such information regarding such
Stockholder and the distribution proposed by such Stockholder as the Company may
reasonably request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Agreement.
9. "Stand-Off" Agreement. Each Stockholder, if requested by the Company
---------------------
and the managing underwriter of an offering by the Company of Common Stock or
other securities of the Company pursuant to a Registration Statement, shall
agree not to sell publicly or otherwise transfer or dispose of any Registrable
Shares or other securities of the Company held by such Stockholder for a
specified period of time (not to exceed 90 days) following the effective date of
such Registration Statement.
10. Limitations on Subsequent Registration Rights. The Company shall not,
---------------------------------------------
without the prior written consent of Stockholders holding at least a majority of
the Registrable Shares, enter into any agreement (other than this Agreement)
with any holder or prospective holder of any securities of the Company which
would allow such holder or prospective holder (a) to include securities of the
Company in any Registration Statement, unless under the terms of such agreement,
such holder or prospective holder may include such securities in any such
registration only on terms substantially similar to the terms on which holders
of Registrable Shares may include shares in such registration, or (b) except in
the case of Bruncor Inc. as the holder of warrants to purchase 250,000 shares of
Common Stock and certain lenders to the Company as holders of warrants to
purchase a total of 449,439 shares of Common Stock to make a demand registration
which could
-9-
<PAGE>
result in such registration statement being declared effective prior to December
31, 2004.
11. Rule 144 Requirements. After the earliest of (i) the closing of the
---------------------
sale of securities of the Company pursuant to a Registration Statement, (ii) the
registration by the Company of a class of securities under Section 12 of the
Exchange Act, or (iii) the issuance by the Company of an offering circular
pursuant to Regulation A under the Securities Act, the Company agrees to:
(a) comply with the requirements of Rule 144(c) under the Securities
Act with respect to current public information about the Company;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements); and
(c) furnish to any holder of Registrable Shares upon request (i) a
written statement by the Company as to its compliance with the requirements of
said Rule 144(c), and the reporting requirements of the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements), (ii) a copy of the most recent annual or quarterly report of the
Company, and (iii) such other reports and documents of the Company as such
holder may reasonably request to avail itself of any similar rule or regulation
of the Commission allowing it to sell any such securities without registration.
12. Mergers, Etc. The Company shall not, directly or indirectly, enter
------------
into any merger, consolidation or reorganization in which the Company shall not
be the surviving corporation unless the proposed surviving corporation shall,
prior to such merger, consolidation or reorganization, agree in writing to
assume the obligations of the Company under this Agreement, and for that purpose
references hereunder to "Registrable Shares" shall be deemed to be references to
the securities which the Stockholders would be entitled to receive in exchange
for Registrable Shares under any such merger, consolidation or reorganization;
provided, however, that the provisions of this Section 12 shall not apply in the
- -------- -------
event of any merger, consolidation or reorganization in which the Company is not
the surviving corporation if all Stockholders are entitled to receive in
exchange for their Registrable Shares consideration consisting solely of (i)
cash, (ii) securities of the acquiring corporation which may be immediately sold
to the public without registration under the Securities Act, or (iii) securities
of the acquiring corporation which the acquiring corporation has agreed to
register within 90 days of completion of the transaction for resale to the
public pursuant to the Securities Act.
-10-
<PAGE>
13. Termination. All of the Company's obligations to register Registrable
-----------
Shares under this Agreement shall terminate on the tenth anniversary of this
Agreement.
14. Transfers of Rights. This Agreement, and the rights and obligations
-------------------
of each Purchaser hereunder, may be assigned by such Purchaser to any person or
entity to which Shares are transferred by such Purchaser, and such a permitted
transferee shall be deemed a "Purchaser" for purposes of this Agreement;
provided that the transferee provides written notice of such assignment to the
Company.
15. General.
-------
(a) Notices. All notices, requests, consents,
-------
communications under this Agreement shall be in writing and shall be delivered
by hand or mailed by first class certified or registered mail, return receipt
requested, postage prepaid:
If to the Company, at 745 Atlantic Avenue, Boston, Massachusetts 02110,
Attention: President, or at such other address or addresses as may have been
furnished in writing by the Company to the Purchaser, with a copy to Edward
Young, Esq., Hale and Dorr, 60 State Street, Boston, Massachusetts 02109; or
If to a Stockholder, c/o Vestex Corporation at 12 Waltham Street,
Lexington, Massachusetts 02173, or at such other address or addresses as may
have been furnished to the Company in writing by such Stockholder, with a copy
to Richard Arrighi, Esq., Hinckley, Allen & Snyder, One Financial Center,
Boston, Massachusetts 02111.
Notices provided in accordance with this Section 15(a) shall be deemed
delivered upon personal delivery or two business days after deposit in the mail.
(b) Entire Agreement. This Agreement embodies the entire agreement
----------------
and understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter.
(c) Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and the holders of at
least a majority of the Registrable Shares; provided, that this Agreement may be
--------
amended with the consent of the holders of less than all Registrable Shares only
in a manner which affects all Registrable Shares in the same fashion. No waivers
of or exceptions to any term, condition or provision of this Agreement, in any
one or more instances, shall be deemed to be, or construed as, a further or
continuing waiver of any such term, condition or provision.
-11-
<PAGE>
(d) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
shall be one and the same document.
(e) Severability. The invalidity or unenforceability of any
------------
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
(f) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the Commonwealth of Massachusetts.
Executed as of the date first written above.
COMPANY:
CHANCELLOR CORPORATION
By:/s/ Stephen G. Morison
--------------------------------
Title: CEO
-----------------------------
PURCHASER:
VESTEX CORPORATION
By:/s/ Brian M. Adley
--------------------------------
Title: CEO
-----------------------------
VESTEX CAPITAL CORPORATION
By:/s/ Brian M. Adley
--------------------------------
Title: CEO
----------------------------
-12-
<PAGE>
EXHIBIT 3
---------
VOTING AGREEMENT
VOTING AGREEMENT, dated as of April 11, 1996 (the "Agreement"), is
made by and among Chancellor Corporation, a Massachusetts corporation (the
"Company"), Vestex Corporation and Vestex Capital Corporation, each a
Massachusetts corporation (collectively, "Vestex"), each of those persons who
are directors of the Company and who have entered into this Agreement
(individually referred to as a "Director" and collectively referred to as the
"Directors") and each of those persons who are employees of the Company and who
have entered into this Agreement (individually referred to as an "Employee" and
collectively referred to as the "Employees").
W I T N E S S E T H:
-------------------
WHEREAS, the Company, Bruncor Inc., a New Brunswick corporation and an
affiliate of the Company ("Bruncor"), and Vestex have entered into a
Recapitalization and Stock Purchase Agreement dated as of September 20, 1994, as
successively amended by four amendments (the "Recapitalization Agreement"),
providing for, among other things, the purchase by Vestex of 1,600,000 shares of
the Company's Common Stock (the "Common Shares") from Bruncor and the subsequent
purchase by Vestex of 5,000,000 shares of the Company's Series AA Convertible
Preferred Stock (the "Preferred Shares") from the Company (such transactions
referred to as the "Purchases");
WHEREAS, it is the intention of the parties that, following the
consummation of both the Purchases, the Board of Directors of
<PAGE>
the Company will consist of up to seven members, up to two of whom will be
nominees of Vestex; and
WHEREAS, it is the intention of the parties that upon consummation of
the Purchases the business of the Company and its subsidiaries will continue to
be conducted in the ordinary and usual course of its business with such changes
as are determined by the Board of Directors of the Company; and
WHEREAS, it is the intention of Vestex to preserve the goodwill of the
Company and to allow the Company to maintain and expand the valuable business
relationships established by it; and
WHEREAS, the Company intends, subject to the continuing review of the
Company's Board of Directors, to continue the Company's efforts to expand its
business, and to permit the Company to operate its business under its current
management and from its existing location and under its current corporate name;
and
WHEREAS, the parties understand the importance and desirability of
maintaining an active public trading market for the Company's common stock; and
WHEREAS, Vestex has no present intention of taking any action which
would cause (a) the Company's common stock to cease to be quoted in the over-
the-counter market by member firms of the National Association of Securities
Dealers Inc. or (b) the Company to no longer be subject to Sections 12 or 13 of
the Securities Exchange Act of 1934, as amended; and
-2-
<PAGE>
WHEREAS, the parties intend that certain types of corporate
transactions proposed to occur within two years following the consummation of
the Purchases will require the approval of either (i) the holders of a majority
of the outstanding shares of the Company's common stock not held by Vestex or
its affiliates or (ii) a majority of those directors then in office who are not
affiliates of Vestex and who either were directors of the Company prior to the
Purchases or subsequently were elected as successor directors (A) with a
plurality of the votes cast by the holders of the outstanding shares of the
Company's common stock not held by Vestex or its affiliates or (B) by
designation of a majority of the Continuing Directors then in office
("Continuing Directors"); and
WHEREAS, the parties hereto wish to agree on certain other matters
relating to the voting of certain shares of the Company's common stock and
preferred stock held by Vestex and to the operation of the business of the
Company following the consummation of the Purchases;
NOW, THEREFORE in consideration of the mutual covenants and agreements
set forth herein, the parties hereto hereby agree as follows:
ARTICLE I
---------
1.1. Voting of Shares.
----------------
(a) In any and all elections of directors of the Company
(whether at a meeting or by written consent in lieu of a
-3-
<PAGE>
meeting) prior to the Company's 2001 Annual Meeting of Stockholders, Vestex, the
Directors and the Employees shall vote or cause to be voted ("Vote") any and all
Shares (as defined in Section 1.2 below) owned by it or its affiliates, or over
which it or its affiliates have voting control, and otherwise use their
respective best efforts, so as to fix the number of directors of the Company at
seven and to elect directors as provided herein. Upon consummation of Vestex's
purchase of the Preferred Shares, the Board shall consist of up to two members
designated by Vestex (one of whom shall be subject to ratification by a majority
of the directors theretofore in office ("Ratification")) and five members who
shall be Continuing Directors (one of whom shall be subject to Ratification).
The directors initially designated by Vestex are Brian M. Adley and another
person yet to be designated (the "New Vestex Nominee"), and the directors
initially designated by the Continuing Directors are Bruce M. Dayton, Thomas W.
Killilea, Richard D. Rizzo, Stephen G. Morison and another person yet to be
designated (the "New Non-Vestex Nominee"). The designation of the New Vestex
Nominee and the New Non-Vestex Nominee and the designation of their respective
successors shall require Ratification. Messrs. Dayton and Killilea and the New
Vestex Nominee shall be subject to re-election at the Company's 1996 Annual
Meeting of Stockholders (and, if re-elected in 1996) at the 1999 Annual Meeting
of Stockholders, Messrs. Adley and Rizzo shall be subject to re-election at the
Company's 1997 Annual Meeting of Stockholders (and, if re-elected in 1997) at
the 2000 Annual
-4-
<PAGE>
Meeting of Stockholders, and Mr. Morison (who would have been subject to re-
election at the 1995 Annual Meeting of Stockholders, had such a meeting been
held) and the New Non-Vestex Nominee shall be subject to re-election at the
Company's 1996 Annual Meeting of Stockholders (and, if re-elected in 1996) at
the 1998 Annual Meeting of Stockholders. All Shares subject to this Agreement
shall be voted (i) at the 1996 Annual Meeting for the re-election of Messrs.
Dayton, Killilea and Morison and, if they have by then been nominated and
received Ratification, the New Vestex Nominee and the New Non-Vestex Nominee,
for the respective terms specified above, (ii) at the 1997 and 2000 Annual
Meetings for the re-election of Messrs. Adley (or other nominee of Vestex) and
Rizzo, (iii) at the 1998 Annual Meeting for the re-election of Mr. Morison and
for the election of one other nominee designed by a majority of the directors
then in office (who may, but need not, be the New Non-Vestex Nominee, (or up to
two Continuing Directors in substitution for them), and (iv) at the 1999 Annual
Meeting for the re-election of Messrs. Dayton and Killilea (or up to two other
Continuing Directors in substitution for them) and for one other nominee
designated by a majority of the directors then in office (who may, but need not,
be the New Vestex Nominee. At any re-election of a Continuing Director, the
parties shall cast all of their votes in favor of such Continuing Director if he
chooses to stand for re-election and is unopposed; in favor of the designee of a
majority of the Continuing Directors then in office if such Continuing Director
chooses not to stand for re-election and such
-5-
<PAGE>
designee is unopposed; or, in the case of a contested election, in favor of the
candidate who receives a plurality of the votes cast by the holders of the
outstanding shares of the Company's common stock not held by Vestex or its
affiliates.
(b) The Company shall provide the Continuing Directors and Vestex
with 30 days' prior written notice of any intended mailing of a notice to
stockholders for a meeting at which directors are to be elected (except that
only 10 days' prior notice shall be required prior to the 1996 Annual Meeting).
Vestex, the Continuing Directors and the Board of Directors shall give written
notice to all other parties to this Agreement, no later than 20 days prior to
such mailing (3 days in the case of the 1996 Annual Meeting), of the persons
designated by Vestex, by the Continuing Directors and by the entire Board,
respectively, as nominees for election as directors. The Company agrees to
nominate as directors the individuals designated, or to be designated, pursuant
to Section 1(a). If Vestex or the Continuing Directors shall fail to give notice
to the Company as provided above, it shall be deemed that the designees of
Vestex or the Continuing Directors, as the case may be, then serving as
directors shall be their designees for reelection.
(c) Vestex shall not vote to remove any director designated by the
Continuing Directors or by the entire Board, and the Continuing Directors shall
not vote to remove any director designated by Vestex or by the entire Board,
except upon (i) the written instruction of the party or parties who designated
such
-6-
<PAGE>
director or (ii) demonstration by clear and convincing evidence of bad faith or
willful misconduct that has caused the Company substantial injury. In the event
of any such removal, the vacancy shall be filled by a designee of Vestex, if the
director whose removal occasioned the vacancy was a designee of Vestex, by a
designee of the remaining Continuing Directors, if the director whose removal
occasioned the vacancy was a Continuing Director, or by a designee of the entire
Board, if the director whose removal occasioned the vacancy was a designee of
the entire Board.
1.2. Shares. "Shares" shall mean and include any and all Preferred
------
Shares, Common Shares and other shares of capital stock of the Company, by
whatever name called, which carry voting rights (including voting rights which
arise by reason of default) and shall include any shares now owned or
subsequently acquired by any party, however acquired, including without
limitation stock splits and stock dividends.
1.3. Termination. This Agreement shall terminate in its entirety on
-----------
the fifth anniversary of the date of this Agreement or on the day immediately
prior to the date of the Company's 2001 Annual Meeting of Stockholders,
whichever occurs first.
1.4. No Revocation. The voting agreements contained herein are
-------------
coupled with an interest and may not be revoked, except by written consent of
the Continuing Directors and Vestex. Each of the Continuing Directors and
Vestex agrees not to take any action to amend any provisions of the Articles of
Organization or the By-Laws of the Company relating to the election, removal or
-7-
<PAGE>
indemnification of directors, or any other matter pertaining to the subject
matter of this Agreement, as in effect upon consummation of the Purchases as
contemplated by the Recapitalization Agreement, without the prior written
consent of the Continuing Directors and Vestex.
1.5. Indemnification. In the event that any director elected
---------------
pursuant to Section 1 of this Agreement shall be made or threatened to be made a
part to any action, suit or proceeding with respect to which he may be entitled
to indemnification by the Company pursuant to its Articles of Organization or
By-Laws, or otherwise, he shall be entitled to be represented in such action,
suit or proceeding by counsel of his choice and the reasonable expenses of such
representation shall be reimbursed by the Company to the extent provided in or
authorized by said Articles of Organization or By-Laws. The Company agrees that
it shall comply with the provisions of Sections 7.04, 7.07 and 7.10 of the
Recapitalization Agreement in regard to indemnification and directors' and
officers' liability insurance.
In consideration of entering into this Agreement, each party hereto
acknowledges and agrees that, to the maximum extent permitted by applicable law,
neither Mr. Rizzo, as the person entitled to direct the voting of the Shares to
be Voted under Section 2.1, nor, should the entire Board succeed to the right to
vote such Shares, any director, have any liability for monetary damages to
Vestex or any other party based upon his acts or omissions or alleged acts or
omissions in connection with the
-8-
<PAGE>
voting of such Shares; and each such party, including without limitation Vestex,
hereby irrevocably waives any right, claim or cause of action for money damages
based upon the same.
1.6. Restrictive Legend. All certificates representing Shares owned
------------------
or hereafter acquired by Vestex or any transferee of Vestex bound by this
Agreement shall have affixed thereto a legend substantially in the following
form:
"The shares of stock represented by this certificate are subject
to certain voting agreements as set forth in a Voting Agreement
by and among the registered owner of this certificate, the
Company and certain other stockholders of the Company, a copy of
which is available for inspection at the offices of the Clerk of
the Company."
1.7. Transfers of Rights. Any transferee to whom Shares are
-------------------
transferred by Vestex, whether voluntarily or by operation of law, shall be
bound by the voting obligations imposed upon the transferor under this
Agreement, and, subject to the provisions of Section 3.1 below, shall be
entitled to the rights granted to the transferor under this Agreement, to the
same extent as if such transferee were Vestex hereunder.
ARTICLE II
----------
2.1. Voting of Certain Shares Owned by Vestex. Commencing on the
----------------------------------------
date of this Agreement, the number of Preferred Shares specified herein (the
"Shares to be Voted") shall be Voted as specified by Richard D. Rizzo (or, in
the event Mr. Rizzo ceases to be a director of the Company or declines to Vote
the Shares to
-9-
<PAGE>
be Voted, as specified by a successor jointly appointed by Vestex and the Board
of Directors or, in the absence of such an appointment, as specified by a
majority of the entire Board of Directors). The number of Shares to be Voted
shall be equal to the amount by which (a) all Shares owned of record or
beneficially by Vestex and its affiliates shall exceed (b) 39.6% of the total
number of shares of common stock and preferred stock of the Company then
outstanding, without deeming shares underlying unexercised stock options or
warrants to be outstanding. The Shares to be Voted shall be Voted for the
election of directors in the manner provided in Section 1 and in respect of all
other matters which may be presented for action by the Company's stockholders,
whether at an Annual or Special Meeting or by written action, as designated by
Mr. Rizzo (or by a successor or by a majority of the entire Board of Directors,
as the case may be). The provisions of this Section 2.1 shall continue in effect
for 18 months following the date of this Agreement, provided that they shall
terminate if at any time during such 18-month period the number of shares
referred to in clause (b) above exceeds the number of shares referred to in
clause (a) above, so that there are no longer any Shares to be Voted. The number
of Shares to be Voted shall increase or decrease automatically to the extent
that changes in the number of shares referred to in clause (a) or (b) above
shall occur from time to time.
2.2 Special Approval. Prior to April 11, 1998, any of the following
----------------
transactions:
-10-
<PAGE>
(a) any issuance or transfer by the Company of capital stock or other
securities of the Company to an interested stockholder, considering Vestex or
any of its affiliates or associates (as defined in Mass. Gen. Laws c.110F, (S)3)
as being interested stockholders for the purposes hereof, other than the
issuance of common stock pursuant to the conversion of Preferred Shares; or
(b) any merger, consolidation or sale of assets described in Mass.
Gen. Laws c.110F, (S)3(c)(2), involving the Company and any interested
stockholder, considering Vestex and each of its respective affiliates and
associates as being an interested stockholder for the purposes hereof; or
(c) any action taken by the Company which results in a going private
transaction subject to Rule 13e-3 under the Securities Exchange Act of 1934; or
(d) the payment to any interested stockholder of any fee or other
benefit described in Mass. Gen. Laws c.110F, (S)3(c)(5), considering Vestex and
each of its affiliates and associates as being an interested stockholder for
purposes hereof, other than fees contemplated by the Recapitalization Agreement
and the exhibits thereto; shall require the approval of either (i) a majority of
the Continuing Directors then in office or (ii) the holders of a majority of the
outstanding shares of the Company's Common Stock not held by Vestex or its
respective affiliates; and the Company or Vestex shall not attempt to commence
or effect any of such transactions without obtaining such approval. The
-11-
<PAGE>
foregoing provisions do not apply to any transaction (such as the issuance of
shares of capital stock to non-affiliates of Vestex or mergers with non-
affiliates of Vestex) in which Vestex and its affiliates are not in a conflict
of interest position.
ARTICLE III
-----------
3.1. Assignment. The rights of Vestex hereunder may from time to
----------
time be assigned as a whole, but only if assigned together with any rights of
Vestex under the Recapitalization Agreement, to any direct or indirect wholly-
owned subsidiary of Vestex; provided, however, that any such assignment shall
-------- -------
not relieve Vestex of its obligations hereunder. Vestex may also assign a
portion of its rights hereunder to any purchaser of Shares which undertakes in
writing to be bound by the obligations of Vestex hereunder, in which case all
decisions to be made by Vestex and such other purchaser shall be made by the
holders of a majority of the Shares outstanding from time to time.
Notwithstanding any provision of this Agreement to the contrary,
Vestex may, in its discretion, sell Shares, free and clear of the obligations
imposed under this Agreement and without any benefit of the rights conferred
under this Agreement: (a) in a public offering or in the public securities
markets; or (b) in a private transaction to one or more purchasers which are not
"affiliates" or "associates" (as defined in Mass. Gen. Laws c. 110F (S)3) of
Vestex in an amount not exceeding 1,000,000 Shares to any one purchaser or
"group" of purchasers (within the meaning
-12-
<PAGE>
of Rule 13d-1 under the Securities Exchange Act of 1934, as amended); provided,
--------
however, that Shares sold by Vestex in any transaction which is primarily
- -------
intended as a device or artifice to avoid the obligations imposed by this
Agreement, shall remain subject to such obligations and the benefits conferred
by this Agreement. Other than as permitted by this Section 3.1, this Agreement
shall not be assignable by any party hereto without the prior written consent of
the other parties.
3.2. Notices. All notices and other communications hereunder shall
-------
be in writing and shall be deemed to have been duly given (and shall be deemed
to have been duly received if so given) if personally delivered or sent by
telegram, cable, or telex, or by registered or certified mail, postage prepaid,
addressed to the respective parties as follows:
If to any Continuing Director, to him at the address listed below, with a copy
to the Company and to Hale and Dorr, 60 State Street, Boston, Massachusetts
02109, Attention: Edward Young, Esq.
Brian M. Adley
c/o Vestex Corporation
12 Waltham Street
Lexington, Massachusetts 02173
Bruce M. Dayton
10 Dover Lane
Lexington, Massachusetts 02173
Thomas W. Killilea
14 Union Wharf
Boston, Massachusetts 02109
Stephen G. Morison
Gingerbread Hill
Marblehead, Massachusetts 01945
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<PAGE>
Richard D. Rizzo
12 Algonquin Avenue
Andover, Massachusetts 01810
If to the Company:
Chancellor Corporation
745 Atlantic Avenue
Boston, Massachusetts 02021
Attention: President
With copies to Hale and Dorr, as provided above.
If to Vestex:
Vestex Corporation
12 Waltham Street
Lexington, Massachusetts 02173
With copies to:
Hinckley, Allen & Snyder
One Financial Center
Boston, Massachusetts 02111
Attention: Richard C. Arrighi, Esq.
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt.
3.3. Amendment; Modification. This Agreement may only be amended or
-----------------------
modified by an instrument in writing signed by Vestex and the Continuing
Directors then in office.
3.4. No Waiver of Rights. No failure or delay on the part of either
-------------------
party in the exercise of any power, right or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercises thereof or of any other
right, power or privilege. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
-14-
<PAGE>
3.5. Counterparts. This Agreement may be executed in any number of
------------
counterparts, and by separate parties on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.
3.6. Agreement Binding on Successors and Assigns. Subject to the
-------------------------------------------
provisions of Section 3.1 hereof, this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns. Upon election, any additional persons besides the Directors who serve
as Continuing Directors shall be added as parties to this Agreement. Each
Director or other Continuing Director who ceases to serve as a director in
accordance with the terms of this Agreement shall thereupon automatically cease
to be a party to this Agreement.
3.7. Specific Performance. The parties hereto agree that irreparable
--------------------
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state thereof having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
3.8. Benefit of Recapitalization Agreement. Vestex agrees that each
-------------------------------------
Continuing Director shall have the benefit of the terms and conditions of the
Recapitalization Agreement that relate to
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<PAGE>
the future conduct of the business of the Company and the agreement of Vestex to
use their best efforts to locate and obtain capital for the Company as though
such terms and conditions were set forth herein as running from Vestex to each
of the Continuing Directors. Each Continuing Director shall have the right to
enforce such terms and conditions on his own behalf or on behalf of the Company
against Vestex.
3.9. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the Commonwealth of Massachusetts.
3.10. Entire Agreement, Assignability, Etc. This Agreement, together
------------------------------------
with the Recapitalization Agreement, including all exhibits and schedules
thereto, (i) constitutes the entire agreement, and supersedes all other prior
agreements and understandings, both written and oral, among the parties, or any
of them, with respect to the subject matter hereof (including, without
limitation, insofar as it relates to agreements among the parties hereto as
distinct from agreements between such parties and other persons not parties
hereto, the Interim Voting Agreement dated as of July 25, 1995), (ii) is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder, and (iii) shall not be assignable by operation of law or
otherwise.
IN WITNESS WHEREOF, the parties hereto have duly executed or caused
this Agreement to be duly executed under seal on the day and year first above
written.
/s/ Brian M. Adley
-------------------------------
Brian M. Adley
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<PAGE>
/s/ Bruce M. Dayton
-------------------------------
Bruce M. Dayton
/s/ Thomas W. Killilea
-------------------------------
Thomas W. Killilea
/s/ Stephen G. Morison
-------------------------------
Stephen G. Morison
/s/ Richard D. Rizzo
-------------------------------
Richard D. Rizzo
CHANCELLOR CORPORATION
By:/s/ Stephen G. Morison
----------------------------
President
VESTEX CAPITAL CORPORATION VESTEX CORPORATION
By: /s/ Brian M. Adley By: /s/ Brian M. Adley
-------------------- -------------------------
Title: President President
The following persons have become additional parties to the foregoing
Agreement as of the respective dates set forth below:
____________________________
date
____________________________
date
_______________________________
[New Vestex Nominee]
_______________________________
[New Non-Vestex Nominee]
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<PAGE>
EXHIBIT 4
---------
CHANCELLOR CORPORATION
Clerk's Certificate
-------------------
The undersigned hereby certifies that he is the duly elected Clerk of
Chancellor Corporation (hereinafter called the "Corporation"), organized and
existing under and by virtue of the Massachusetts Business Corporation Law, and
does hereby further certify as follows:
At a meeting of the Board of Directors of the Corporation held on March 21,
1996, the following resolution was duly adopted, pursuant to Chapter 156B,
Section 71 of the Massachusetts General Laws:
SERIES AA CONVERTIBLE PREFERRED STOCK.
- -------------------------------------
Five million (5,000,000) shares of the authorized and unissued Preferred
Stock of the Corporation are hereby designated "Series AA Convertible Preferred
Stock" (the "Series AA Preferred Stock") with the following rights, preferences,
powers, privileges and restrictions, qualifications and limitations.
1. Dividends.
---------
(a) The holders of shares of Series AA Preferred Stock shall be
entitled to receive cash dividends only to the same extent and in the same
amounts as dividends are declared and paid with respect to common stock as if
the Preferred Stock had been converted to Common Stock in accordance with
Section 4 hereof on the date such dividends are declared.
2. Liquidation, Dissolution or Winding Up; Certain Mergers,
-------------------------------------------------------
Consolidations and Asset Sales.
------------------------------
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series AA
Preferred Stock then outstanding shall be entitled to be paid out of the assets
of the Corporation available for distribution to its stockholders, after and
subject to the payment in full of all amounts required to be distributed to the
holders of any other class or series of stock of the Corporation ranking on
liquidation prior and in preference to the Series AA Preferred Stock
(collectively referred to as "Senior Preferred Stock"), but before any payment
shall be made to the holders of Common Stock or any other class or series of
stock ranking on liquidation junior to the Series AA Preferred Stock (such
Common Stock and other stock being collectively referred to as "Junior Stock")
by reason of their ownership thereof, an amount
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<PAGE>
equal to the greater of (i) $.50 per share (subject to amount appropriate
adjustment in the event of any stock dividend, stock split, combination or other
similar recapitalization affecting such shares), plus any dividends declared or
accrued but unpaid thereon, or (ii) such amount per share as would have been
payable had each such share been converted into Common Stock pursuant to Section
4 immediately prior to such liquidation, dissolution or winding up. If upon any
such liquidation, dissolution or winding up of the Corporation the remaining
assets of the Corporation available for distribution to its stockholders shall
be insufficient to pay the holders of shares of Series AA Preferred Stock the
full amount to which they shall be entitled, the holders of shares of Series AA
Preferred Stock and any class or series of stock ranking on liquidation on a
parity with the Series AA Preferred Stock shall share ratably in any
distribution of the remaining assets and funds of the Corporation in proportion
to the respective amounts which would otherwise be payable in respect of the
shares held by them upon such distribution if all amounts payable on or with
respect to such shares were paid in full.
(b) After the payment of all preferential amounts required to be paid
to the holders of Senior Preferred Stock, Series AA Preferred Stock and any
other class or series of stock of the Corporation ranking on liquidation on a
parity with the Series AA Preferred Stock, upon the dissolution, liquidation or
winding up of the Corporation, the holders of shares of Junior Stock then
outstanding shall be entitled to receive the remaining assets and funds of the
Corporation available for distribution to its stockholders.
(c) In the event of any merger or consolidation of the Corporation
into or with another corporation (except one in which the holders of capital
stock of the Corporation immediately prior to such merger or consolidation
continue to hold at least 80% by voting power of the capital stock of the
surviving corporation), or the sale of all or substantially all the assets of
the Corporation, if the holders of at least a majority of the then outstanding
shares of Series AA Preferred Stock so elect by giving written notice thereof to
the Corporation at least three days before the effective date of such event,
then such merger, consolidation or asset sale shall be deemed to be a
liquidation of the Corporation, and all consideration payable to the
stockholders of the Corporation (in the case of a merger or consolidation), or
all consideration payable to the Corporation, together with all other available
assets of the Corporation (in the case of an asset sale), shall be distributed
to the holders of capital stock of the Corporation in accordance with
Subsections 2(a) and 2(b) above. The Corporation shall promptly provide to the
holders of shares of Series AA Preferred Stock such information concerning the
- 2 -
<PAGE>
terms of such merger, consolidation or asset sale and the value of the assets of
the Corporation as may reasonably be requested by the holders of Series AA
Preferred Stock in order to assist them in determining whether to make such an
election. If the holders of the Series AA Preferred Stock make such an
election, the Corporation shall use its best efforts to amend the agreement or
plan of merger or consolidation to adjust the rate at which the shares of
capital stock of the Corporation are converted into or exchanged for cash, new
securities or other property to give effect to such election. The amount deemed
distributed to the holders of Series AA Preferred Stock upon any such merger or
consolidation shall be the cash or the value of the property, rights or
securities distributed to such holders by the acquiring person, firm or other
entity. The value of such property, rights or other securities shall be
determined in good faith by the Board of Directors of the Corporation. If no
notice of the election permitted by this Subsection (c) is given, the provisions
of Subsection 4(h) shall apply.
(d) The Corporation may not liquidate, dissolve or wind up if the
assets of the Corporation then available for distribu tion to its stockholders
shall be insufficient to pay the holders of shares of Series AA Preferred Stock
the full amount to which they shall be entitled upon such liquidation,
dissolution or winding up under this Section 2, without the prior written
approval of the holders of a majority of the then outstanding shares of Series
AA Preferred Stock.
3. Voting.
------
(a) Each holder of outstanding shares of Series AA Preferred Stock
shall be entitled to the number of votes equal to the number of whole shares of
Common Stock into which the shares of Series AA Preferred Stock held by such
holder are then convertible (as adjusted from time to time pursuant to Section 4
hereof), at each meeting of stockholders of the Corporation (and written actions
of stockholders in lieu of meetings) with respect to any and all matters
presented to the stockholders of the Corporation for their action or
consideration. Except as provided by law, by the provisions of Subsection 3(b),
3(c), 3(d) or 3(e) below or by the provisions establishing any other series of
Series Preferred Stock, holders of Series AA Preferred Stock and of any other
outstanding series of Series Preferred Stock shall vote together with the
holders of Common Stock as a single class.
(b) Prior to April 11, 1998, any of the following transactions:
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<PAGE>
(i) any issuance or transfer by the Corporation of capital stock
or other securities of the Corporation to an interested stockholder, considering
Vestex Corporation or any of their respective affiliates or associates (as
defined in Mass. Gen. Laws c.110F, (S)3) as being interested stockholders for
the purposes hereof, other than the issuance of common stock pursuant to the
conversion of preferred stock; or
(ii) any merger, consolidation or sale of assets described in
Mass. Gen. Laws c.110F, (S)3(c)(2), involving the Corporation and any interested
stockholder, considering Vestex, the Purchaser, and each of their respective
affiliates and associates as being an interested stockholder for the purposes
hereof; or
(iii) any action taken by the Corporation which results in a going
private transaction subject to Rule 13e-3 under the Securities Exchange Act of
1934; or
(iv) the payment to any interested stockholder of any fee or
other benefit described in Mass. Gen. laws c.110F, (S)3(c)(5), considering the
above-named parties and each of their respective affiliates and associates as
being an interested stockholder for purposes hereof;
shall require the approval of the holders of a majority of the outstanding
shares of the Corporation's Common Stock not held by the above-named or their
respective affiliates, unless approved in writing by a majority of the
Continuing Directors then in office.
For this purpose, the term "Continuing Directors" shall mean those
directors of the Corporation who either were directors of the Corporation prior
to April 11, 1996 or were subsequently nominated for election as successor
directors by a majority of such persons or their designated successors.
4. Optional Conversion. The holders of the Series AA Preferred Stock
-------------------
shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series AA Preferred Stock shall
----------------
be convertible, at the option of the holder thereof, at any time and from time
to time, and without the payment of additional consideration by the holder
thereof, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing $.50 by the Conversion Price (as defined below) in
effect at the time of conversion. The "Conversion Price" shall initially be
$.50. Such initial
- 4 -
<PAGE>
Conversion Price, and the rate at which shares of Series AA Preferred Stock may
be converted into shares of Common Stock, shall be subject to adjustment as
provided below.
In the event of a liquidation of the Corporation, the Conversion Rights
shall terminate at the close of business on the first full day preceding the
date fixed for the payment of any amounts distributable on liquidation to the
holders of Series AA Preferred Stock.
(b) Fractional Shares. No fractional shares of Common Stock shall be
-----------------
issued upon conversion of the Series AA Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Conversion Price.
(c) Mechanics of Conversion.
-----------------------
(i) In order for a holder of Series AA Preferred Stock to
convert shares of Series AA Preferred Stock into shares of Common Stock, such
holder shall surrender the certificate or certificates for such shares of Series
AA Preferred Stock, at the office of the transfer agent for the Series AA
Preferred Stock (or at the principal office of the Corporation if the
Corporation serves as its own transfer agent), together with written notice that
such holder elects to convert all or any number of the shares of the Series AA
Preferred Stock represented by such certificate or certificates. Such notice
shall state such holder's name or the names of the nominees in which such holder
wishes the certificate or certificates for shares of Common Stock to be issued.
If required by the Corporation, certificates surrendered for conversion shall be
endorsed or accompanied by a written instrument or instruments of transfer, in
form satisfactory to the Corporation, duly executed by the registered holder or
his or its attorney duly authorized in writing. The date of receipt of such
certificates and notice by the transfer agent (or by the Corporation if the
Corporation serves as its own transfer agent) shall be the conversion date
("Conversion Date"). The Corporation shall, as soon as practicable after the
Conversion Date, issue and deliver at such office to such holder of Series AA
Preferred Stock, or to his or its nominees, a certificate or certificates for
the number of shares of Common Stock to which such holder shall be entitled,
together with cash in lieu of any fraction of a share.
(ii) The Corporation shall at all times when the Series AA
Preferred Stock shall be outstanding, reserve and keep available out of its
authorized but unissued stock, for the purpose of effecting the conversion of
the Series AA Preferred Stock, such number of its duly authorized shares of
Common Stock
- 5 -
<PAGE>
as shall from time to time be sufficient to effect the conversion of all
outstanding Series AA Preferred Stock. Before taking any action which would
cause an adjustment reducing the Conversion Price below the then par value of
the shares of Common Stock issuable upon conversion of the Series AA Preferred
Stock, the Corporation will take any corporate action which may, in the opinion
of its counsel, be necessary in order that the Corporation may validly and
legally issue fully paid and nonassessable shares of Common Stock at such
adjusted Conversion Price.
(iii) Upon any such conversion, no adjustment to the Conversion
Price shall be made for any declared or accrued but unpaid dividends on the
Series AA Preferred Stock surrendered for conversion or on the Common Stock
delivered upon conversion.
(iv) All shares of Series AA Preferred Stock which shall have
been surrendered for conversion as herein provided shall no longer be deemed to
be outstanding and all rights with respect to such shares, including the rights,
if any, to receive notices and to vote, shall immediately cease and terminate on
the Conversion Date, except only the right of the holders thereof to receive
shares of Common Stock in exchange therefor and payment of any dividends
declared or accrued but unpaid thereon. Any shares of Series AA Preferred Stock
so converted shall be retired and cancelled and shall not be reissued, and the
Corporation (without the need for stockholder action) may from time to time take
such appropriate action as may be necessary to reduce the authorized Series AA
Preferred Stock accordingly.
(v) The Corporation shall pay any and all issue and other taxes
that may be payable in respect of any issuance or delivery of shares of Common
Stock upon conversion of shares of Series AA Preferred Stock pursuant to this
Section 4. The Corporation shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the issuance and delivery
of shares of Common Stock in a name other than that in which the shares of
Series AA Preferred Stock so converted were registered, and no such issuance or
delivery shall be made unless and until the person or entity requesting such
issuance has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that such tax has been
paid.
(d) Adjustment for Stock Splits and Combinations. If the Corporation
--------------------------------------------
shall at any time or from time to time after the date on which a share of Series
AA Preferred Stock was first issued (the "Original Issue Date") effect a
subdivision of the outstanding Common Stock, the Conversion Price then in effect
immediately before that subdivision shall be proportionately decreased. If the
Corporation shall at any time or from time to
- 6 -
<PAGE>
time after the Original Issue Date effect a subdivision of the Series AA
Preferred Stock, the Conversion Price then in effect immediately before that
subdivision shall be proportionately increased. If the Corporation shall at any
time or from time to time after the Original Issue Date combine the outstanding
shares of Common Stock, the Conversion Price then in effect immediately before
the combination shall be proportionately increased. If the Corporation shall at
any time or from time to time after the Original Issue Date combine the
outstanding shares of Series AA Preferred Stock, the Conversion Price then in
effect immediately before the combination shall be proportionately decreased.
Any adjustment under this paragraph shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(e) Adjustment for Certain Dividends and Distributions. In the event
--------------------------------------------------
the Corporation at any time, or from time to time after the Original Issue Date
shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the Conversion
Price for the Series AA Preferred Stock then in effect shall be decreased as of
the time of such issuance or, in the event such a record date shall have been
fixed, as of the close of business on such record date, by multiplying the
Conversion Price for the Series AA Preferred Stock then in effect by a fraction:
(1) the numerator of which shall be the total number of shares
of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date, and
(2) the denominator of which shall be the total number of shares
of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend
or distribution;
provided, however, if such record date shall have been fixed and such dividend
is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Conversion Price for the Series AA Preferred Stock shall be
recomputed accordingly as of the close of business on such record date and
thereafter the Conversion Price for the Series AA Preferred Stock shall be
adjusted pursuant to this paragraph as of the time of actual payment of such
dividends or distributions; and provided further, however, that no such
adjustment shall be made if the holders of Series AA Preferred Stock
simultaneously receive a dividend or
- 7 -
<PAGE>
other distribution of shares of Common Stock in a number equal to the number of
shares of Common Stock as they would have received if all outstanding shares of
Series AA Preferred Stock had been converted into Common Stock on the date of
such event.
(f) Adjustments for Other Dividends and Distributions. In the event
-------------------------------------------------
the Corporation at any time or from time to time after the Original Issue Date
for the Series AA Preferred Stock shall make or issue, or fix a record date for
the determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in securities of the Corporation other than shares of
Common Stock, then and in each such event provision shall be made so that the
holders of the Series AA Preferred Stock shall receive upon conversion thereof
in addition to the number of shares of Common Stock receivable thereupon, the
amount of securities of the Corporation that they would have received had the
Series AA Preferred Stock been converted into Common Stock on the date of such
event and had they thereafter, during the period from the date of such event to
and including the conversion date, retained such securities receivable by them
as aforesaid during such period, giving application to all adjustments called
for during such period under this paragraph with respect to the rights of the
holders of the Series AA Preferred Stock; and provided further, however, that no
such adjustment shall be made if the holders of Series AA Preferred Stock
simultaneously receive a dividend or other distribution of such securities in an
amount equal to the amount of such securities as they would have received if all
outstanding shares of Series AA Preferred Stock had been converted into Common
Stock on the date of such event.
(g) Adjustment for Reclassification, Exchange, or Substitution. If
----------------------------------------------------------
the Common Stock issuable upon the conversion of the Series AA Preferred Stock
shall be changed into the same or a different number of shares of any class or
classes of stock, whether by capital reorganization, reclassification, or
otherwise (other than a subdivision or combination of shares or stock dividend
provided for above, or a reorganization, merger, consolidation, or sale of
assets provided for below), then and in each such event the holder of each such
share of Series AA Preferred Stock shall have the right thereafter to convert
such share into the kind and amount of shares of stock and other securities and
property receivable upon such reorganization, reclassification, or other change,
by holders of the number of shares of Common Stock into which such shares of
Series AA Preferred Stock might have been converted immediately prior to such
reorganization, reclassification, or change, all subject to further adjustment
as provided herein.
(h) Adjustment for Merger or Reorganization, etc. In case of any
--------------------------------------------
consolidation or merger of the Corporation with or
- 8 -
<PAGE>
into another corporation or the sale of all or substantially all of the assets
of the Corporation to another corporation (other than a consolidation, merger or
sale which is covered by Subsection 2(c)), each share of Series AA Preferred
Stock shall thereafter be convertible (or shall be converted into a security
which shall be convertible) into the kind and amount of shares of stock or other
securities or property to which a holder of the number of shares of Common Stock
of the Corporation deliverable upon conversion of such Series AA Preferred Stock
would have been entitled upon such consolidation, merger or sale; and, in such
case, appropriate adjustment (as determined in good faith by the Board of
Directors) shall be made in the application of the provisions in this Section 4
set forth with respect to the rights and interest thereafter of the holders of
the Series AA Preferred Stock, to the end that the provisions set forth in this
Section 4 (including provisions with respect to changes in and other adjustments
of the Conversion Price) shall thereafter be applicable, as nearly as reasonably
may be, in relation to any shares of stock or other property thereafter
deliverable upon the conversion of the Series AA Preferred Stock.
(i) No Impairment. The Corporation will not, by amendment of its
-------------
Articles of Organization 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 Corporation, 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 AA Preferred Stock against impairment.
(j) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Price pursuant to this Section 4,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Series AA Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Series AA Preferred Stock, furnish or cause to be
furnished to such holder a similar certificate setting forth (i) such
adjustments and readjustments, (ii) the Conversion Price then in effect, and
(iii) the number of shares of Common Stock and the amount, if any, of other
property which then would be received upon the conversion of Series AA Preferred
Stock.
(k) Notice of Record Date. In the event:
---------------------
- 9 -
<PAGE>
(i) that the Corporation declares a dividend (or any other
distribution) on its Common Stock payable in Common Stock or
other securities of the Corporation;
(ii) that the Corporation subdivides or combines its outstanding
shares of Common Stock;
(iii) of any reclassification of the Common Stock of the
Corporation (other than a subdivision or combination of its
outstanding shares of Common Stock or a stock dividend or
stock distribution thereon), or of any consolidation or
merger of the Corporation into or with another corporation,
or of the sale of all or substantially all of the assets of
the Corporation; or
(iv) of the involuntary or voluntary dissolution, liquidation or
winding up of the Corporation;
then the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Series AA Preferred Stock, and shall cause
to be mailed to the holders of the Series AA Preferred Stock at their last
addresses as shown on the records of the Corporation or such transfer agent, at
least ten days prior to the date specified in (A) below or twenty days before
the date specified in (B) below, a notice stating
(A) the record date of such dividend, distribution, subdivision or
combination, or, if a record is not to be taken, the date as of
which the holders of Common Stock of record to be entitled to
such dividend, distribution, subdivision or combination are to be
determined, or
(B) the date on which such reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property
deliverable upon such reclassification, consolidation, merger,
sale, dissolution or winding up.
(l) Special Payment Upon Conversion. Upon the conversion of any
-------------------------------
shares of Series AA Preferred Stock within five years after their Original Issue
Date, an amount of cash (or shares of Common Stock of the Corporation, in the
circumstances contemplated herein) shall be paid at the following rates to the
- 10 -
<PAGE>
holder of such shares if (but only if) the Corporation has, prior to such
conversion, issued additional equity securities of the Corporation (other than
upon the exercise of warrants outstanding on the Original Issue Date or options
then or thereafter granted to employees of the Corporation) or debt securities
convertible into equity securities of the Corporation and, in connection with
the issuance of such additional equity securities or convertible debt, the
Corporation has received aggregate cash consideration in excess of $7,500,000
(the final such issuance which causes such aggregate cash consideration to
exceed $7,500,000 being hereinafter referred to as the "Additional Equity
Investment"):
<TABLE>
<CAPTION>
If the Additional Equity Amount per share
Investment occurs and the (as a rate per
conversion takes place within annum from Original
the following period after the Issue Date through
date of original issuance: date of conversion)
------------------------------ -------------------
<S> <C>
within one year $.035
within two years but not
within one year .03
within three years but not
within two years .025
within four years but not
within three years .02
within five years but not
within four years .015
</TABLE>
If the Corporation shall have received an Additional Equity
Investment, then, at any time after April 11, 1998, the foregoing amounts may,
at the Corporation's election, be paid to the holder of Series AA Preferred
Stock by delivery of a number of shares of Common Stock equal to the quotient
obtained by dividing (x) the aggregate amount due by (y) 50% of the value per
share of the Common Stock. For purposes of this paragraph, the value of each
share of Common Stock shall be deemed to be the average of the last reported
sales price for Common Stock admitted to trading on a national securities
exchange or quoted on the Nasdaq National Market, or the average of the closing
bid and market prices for such stock quoted on the Nasdaq Small Cap Market, the
Electronic Bulletin Board or other quotations publication medium during the
forty (40) trading days immediately prior to the date of such payment so paid
may be either authorized or unissued shares or treasury shares.
5. Mandatory Retirement.
--------------------
(a) At any time after April 11, 1999, the Corporation shall be
authorized, at its sole discretion to cause all
- 11 -
<PAGE>
outstanding shares of Series AA Preferred Stock to automatically be retired by
(i) paying each holder of such shares any amounts owing under Section 4(l) above
and (ii) converting such shares of Series AA Preferred Stock into shares of
Common Stock, at the then effective conversion rate. The number of authorized
shares of Preferred Stock shall be automatically reduced by the number of shares
of Preferred Stock that had been designated as Series AA Preferred Stock, and
all provisions included under the caption "Series AA Convertible Preferred
Stock", and all references to the Series AA Preferred Stock, shall be deleted
and shall be of no further force or effect.
(b) All holders of record of shares of Series AA Preferred Stock
shall be given written notice of effective date of such retirement (the
"Mandatory Date") and the place designated for mandatory retirement of all such
shares of Series AA Preferred Stock pursuant to this Section 5. Such notice need
not be given in advance of the occurrence of the Mandatory Conversion Date. Such
notice shall be sent by first class or registered mail, postage prepaid, to each
record holder of Series AA Preferred Stock at such holder's address last shown
on the records of the transfer agent for the Series AA Preferred Stock (or the
records of the Corporation, if it serves as its own transfer agent). Upon
receipt of such notice, each holder of shares of Series AA Preferred Stock shall
surrender his or its certificate or certificates for all such shares to the
Corporation at the place designated in such notice, and shall thereafter receive
certificates for the number of shares of Common Stock to which such holder is
entitled pursuant to this Section 5. On the Mandatory Conversion Date, all
rights with respect to the Series AA Preferred Stock so converted, including the
rights, if any, to receive notices and vote (other than as a holder of Common
Stock) will terminate, except only the rights of the holders thereof, upon
surrender of their certificate or certificates therefor, to receive certificates
for the number of shares of Common Stock into which such Series AA Preferred
Stock has been converted. If so required by the Corporation, certificates
surrendered for conversion shall be endorsed or accompanied by written
instrument or instruments of transfer, in form satisfactory to the Corporation,
duly executed by the registered holder or by his or its attorney duly authorized
in writing. As soon as practicable after the Mandatory Conversion Date and the
surrender of the certificate or certificates for Series AA Preferred Stock, the
Corporation shall cause to be issued and delivered to such holder, or on his or
its written order, a certificate or certificates for the number of full shares
of Common Stock issuable on such retirement and conversion in accordance with
the provisions hereof and cash as provided in Subsection 4(b) in respect of any
fraction of a share of Common Stock otherwise issuable upon such conversion.
- 12 -
<PAGE>
(c) All certificates evidencing shares of Series AA Preferred Stock
which are required to be surrendered for conversion in accordance with the
provisions hereof shall, from and after the Mandatory Conversion Date, be deemed
to have been retired and cancelled and the shares of Series AA Preferred Stock
represented thereby converted into Common Stock for all purposes,
notwithstanding the failure of the holder or holders thereof to surrender such
certificates on or prior to such date. The Corporation may thereafter take such
appropriate action (without the need for stockholder action) as may be necessary
to reduce the authorized Series AA Preferred Stock accordingly.
IN WITNESS WHEREOF, the undersigned has signed this Certificate this 12th
day of April, 1996.
/s/ David W. Parr
--------------------------------
David W. Parr, Clerk
- 13 -
<PAGE>
EXHIBIT 5
---------
CHANCELLOR 745 ATLANTIC AVENUE, BOSTON, MA
NEWS RELEASE 02111
(617) 728-8500
FOR IMMEDIATE RELEASE
CONTACT:
Stephen G. Morison William J. Guthlein
President and Chief Vice President, Treasurer
Executive Officer and Chief Financial Officer
(617)728-8500 (617)728-8500
CHANCELLOR ANNOUNCES $1.35 MILLION PREFERRED STOCK PURCHASE, PRIVATE COMMON
---------------------------------------------------------------------------
STOCK OFFERING, AND FOURTH QUARTER AND FISCAL 1995 RESULTS
----------------------------------------------------------
BOSTON, Massachusetts, April 16, 1996, Chancellor Corporation, a Boston-
based equipment lessor, announced today that it has issued shares of a newly
authorized Series AA Convertible Preferred Stock to Vestex Capital Corporation
("Vestex") in exchange for the infusion of $1.35 million of new capital into the
Company, less reimbursement of $312,500 of due diligence and other transactional
costs. Following the capital infusion, Vestex owns approximately 63% of
Chancellor's outstanding stock subject to a voting agreement which, among other
things, limits Vestex's voting control to approximately 40% of Chancellor's
outstanding stock for a period of up to 18 months.
Vestex has stated that its goal is to raise additional equity capital and
replace certain of the Company's borrowing facilities with new borrowing
facilities. The new capital and financing will enable the Company to improve
its operations, to pursue opportunities to develop its remarketing capabilities,
and to improve the terms under which it acquires and manages lease transactions.
Chancellor Corporation also announced today that it had commenced a private
offering of up to 4,000,000 shares of its Common Stock to a select group of
investors.
Chancellor Corporation further announced today that it has reported a net
loss of $1.2 million or $.22 per share for the year ended December 31, 1995. For
its fiscal year ended December 31, 1994, the Company had reported a net loss of
$3.3 million or $.52 per share. For the quarter ended December 31, 1995, the
Company reported a net profit of $154,000 or $.03 per share, representing the
Company's second consecutive quarterly profit.
Stephen G. Morison, the Company's President and Chief Executive Officer,
commented on these developments. He said "The recapitalization of the Company,
together with its second consecutive quarterly profit and recently announced
normalization of its lending relationships, represent essential steps in our
long-standing efforts to restore Chancellor's financial viability as a leading
independent transportation leasing and management company. The current capital
infusion, together with the potential for additional equity capital through the
Common Stock offering and
<PAGE>
[LETTERHEAD OF CHANCELLOR APPEARS HERE]
CHANCELLOR CORPORATION
NEWS RELEASE (Continued)
April 16, 1996
Vestex's future efforts, will enable the Company to pursue opportunities to
develop its operations, particularly in regard to its remarketing capabilities,
and to resume the growth of its lease origination activity."
Founded in 1977, Chancellor Corporation has in recent years concentrated on
the leasing of transportation equipment. It is also involved in the leasing of
aircraft, communications, materials handling and other equipment. Chancellor
Corporation's common stock is listed on the OTC Electronic Bulletin Board
(symbol "CHCR").
<TABLE>
<CAPTION>
CONSOLIDATED SUMMARY OF OPERATIONS
----------------------------------
(In Thousands Except Per Share Amounts)
YEAR ENDED 3 MONTHS ENDED
------------------ -------------------
12/31/95 12/31/94 12/31/95 2/31/94
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Revenues $ 8,491 $10,587 $ 2,102 $ 2,579
Net Profit (Loss) ($ 1,221) ($ 3,343) $ 154 ($ 447)
Net Profit (Loss)
Per Share ($ .22) ($ .52) $ .03 ($ .07)
Average Shares
Outstanding 5,634 6,373 5,136 6,382
</TABLE>
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