<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
INTERLEAF, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
INTERLEAF, INC.
62 FOURTH AVENUE
WALTHAM, MASSACHUSETTS 02154
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
TELEPHONE NO.: (617) 290-0710
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD DECEMBER 17, 1997
You are hereby notified that a Special Meeting of Shareholders (the "Special
Meeting") of Interleaf, Inc. (the "Company") will be held at the offices of
Interleaf, Inc., 62 Fourth Avenue, Waltham, Massachusetts, on Wednesday,
December 17, 1997 at 8:30 a.m., local time, to consider and act upon the
following matters:
1. To approve and reserve for issuance the shares of Common Stock
issuable (i) upon the conversion of shares of the Company's 6% Convertible
Preferred Stock issued in a September 1997 private placement, (ii) as
dividends on the 6% Convertible Preferred Stock and (iii) in respect of
related placement agent warrants, pursuant to the terms of the 6%
Convertible Preferred Stock Investment Agreement dated as of September 30,
1997, a copy of which is attached as EXHIBIT 1.
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on November 17, 1997 will be
entitled to vote at the Special Meeting or any adjournment thereof. The stock
transfer books of the Company will remain open.
By Order of the Board of Directors,
Craig Newfield, CLERK
Waltham, Massachusetts
November 21, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING, PLEASE
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE
ENCLOSED ENVELOPE IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES. NO
POSTAGE NEED BE AFFIXED IF THE PROXY IS MAILED IN THE UNITED STATES.
<PAGE>
INTERLEAF, INC.
62 FOURTH AVENUE
WALTHAM, MASSACHUSETTS 02154
SOLICITATION AND VOTING OF PROXIES
DECEMBER 17, 1997
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Interleaf, Inc. (the "Company") for use at
the Special Meeting of Shareholders to be held at the offices of the Company on
Wednesday, December 17, 1997 at 8:30 a.m. and at any adjournment of that meeting
(the "Special Meeting"). All proxies will be voted in accordance with the
shareholders' instructions, and if no choice is specified, the proxies will be
voted in favor of the matters set forth in the accompanying Notice of Special
Meeting. Any proxy may be revoked by a shareholder at any time before its
exercise by delivery of written revocation or a subsequently dated proxy to the
Clerk of the Company, or by voting in person at the Special Meeting. It is
expected that this proxy statement and accompanying proxy card will first be
mailed to shareholders on or about November 21, 1997.
RECORD DATE AND VOTING SECURITIES
The Board of Directors has fixed November 17, 1997 as the record date for
determining shareholders who are entitled to vote at the Special Meeting. At the
close of business on November 17, 1997 there were outstanding and entitled to
vote 17,846,259 shares of common stock of the Company, $.01 par value per share
("Common Stock"), 861,911 shares of the Company's Senior Series B Convertible
Preferred Stock, $.10 par value per share ("Series B Preferred Stock") and
1,013,928 shares of the Company's Series C Convertible Preferred Stock, $0.10
par value per share ("Series C Preferred Stock"). Series B Preferred Stock and
Series C Preferred Stock are jointly referred to herein as the "Preferred
Stock." At the Special Meeting each share of the Common Stock is entitled to one
vote; each share of the Series B Preferred Stock is entitled to 1.34375 votes,
and each share of the Series C Preferred Stock is entitled to 2 votes. Therefore
the total number of votes eligible to be cast at the Special Meeting is
21,032,308.
The Company's By-laws provide that a quorum consists of the representation
in person or by proxy at a meeting of shareholders entitled to vote a majority
of the votes that are entitled to be cast at the meeting. Abstentions and broker
non-votes will be counted for the purpose of determining the presence or absence
of a quorum. "Broker non-votes" are shares held by brokers or nominees which are
present in person or represented by proxy, but which are not voted on a
particular matter because instructions have not been received from the
beneficial owner. The effect of abstentions and broker non-votes on proposals to
be brought before the Special Meeting is discussed below.
The affirmative vote of shares holding a majority of the votes of Common
Stock and Preferred Stock represented, entitled to vote and voting at the
Special Meeting is required to approve Proposal 1 in the accompanying Notice of
Special Meeting ("Proposal 1") concerning the issuance of Common Stock pursuant
to the private placement completed by the Company as of September 30, 1997 (the
"1997 Private Placement") and to approve any other business which may properly
be brought before the Special Meeting or any adjournment thereof. Pursuant to an
agreement with The Nasdaq Stock Market, Inc. ("Nasdaq"),
1
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and under the terms of the 6% Convertible Preferred Stock Investment Agreement,
the 6% Convertible Preferred Stock issued in the 1997 Private Placement is not
entitled to vote on Proposal 1.
Shares of Common Stock and Preferred Stock represented in person or by proxy
at the Special Meeting (including shares which abstain from or do not vote with
respect to one or more of the matters presented at the Special Meeting) will be
tabulated by the Clerk. Abstentions will be treated as shares that are present
for purposes of determining the number of shares present and entitled to vote
with respect to any particular matter, but which are not voted with respect to
such matter. If a broker holding stock in "street name" does not have
discretionary authority as to certain shares to vote on a particular matter,
those shares will be considered as not voting with respect to such matter.
The Board of Directors and management of the Company deem Proposal 1
described herein to be in the best interest of the Company and its shareholders
and recommend that the shareholders approve such proposal. All directors and
executive officers of the Company named in the table below intend to vote their
shares of Common Stock in favor of such proposal.
PRINCIPAL AND MANAGEMENT SHAREHOLDERS
The following table sets forth certain information as of November 12, 1997
with respect to all of the Company's voting shares owned or deemed beneficially
owned as determined under the rules of the Securities and Exchange Commission,
directly or indirectly, by each shareholder known to the Company to own
beneficially more than 5% of the outstanding shares of a class of voting
securities of the Company, by each director, by each of the executive officers
as required under Item 402(a)(3) of Regulation S-K under the Securities Act of
1933, as amended (the "Securities Act"), and by all current directors and
executive officers of the Company and its subsidiaries as a group. In accordance
with Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), a person is deemed to be the beneficial owner, for purposes of
this table, of any shares of the Company if he or she has or shares voting power
or investment power with respect to such security or has the right to acquire
beneficial ownership at any time within 60 days of November 17, 1997. As used
herein "voting power" is the power to vote or direct the voting of shares and
"investment power" is the power to dispose of or direct the disposition of
shares. Except as indicated in the notes following the table below, each person
named has sole voting and investment power with respect to the shares listed as
being beneficially owned by such person.
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COMMON STOCK
<TABLE>
<CAPTION>
% OF TOTAL
VOTING
NO. OF SHARES CAPITAL
DIRECTORS, OFFICERS AND 5% BENEFICIALLY % OF CLASS STOCK
SHAREHOLDERS OWNED OUTSTANDING OUTSTANDING(1)
- -------------------------------------------------- ------------- ----------- -------------
<S> <C> <C> <C>
U. S. Trust Company of New York
114 West 47th Street
New York, NY 10036-1532........................... 1,667,100(2) 9.34% 7.93%
Frederick B. Bamber............................... 45,700(3) * *
David A. Boucher.................................. 241,844(4) 1.35% 1.15%
George D. Potter, Jr.............................. 125,662(5) * *
Rory J. Cowan..................................... 65,000(6) * *
Marcia J. Hooper.................................. -- (7) * *
Jaime W. Ellertson................................ 14,100 * *
Mark H. Cieplik(8)................................ -- * *
Stephen J. Hill(9)................................ -- * *
Michael L. Shanker(10)............................ -- * *
Ed Koepfler(11)................................... 300,000 1.68% 1.43
G. Gordon M. Large(12)............................ -- * *
Stanley C. Douglas(13)............................ -- * *
<CAPTION>
ALL CURRENT DIRECTORS AND EXECUTIVE
OFFICERS AS A GROUP
- --------------------------------------------------
<S> <C> <C> <C>
All current directors and executive officers as a
group (10 persons)................................ 542,306 (14)] 3.01% 2.56%
</TABLE>
SERIES B PREFERRED STOCK
<TABLE>
<CAPTION>
NO. OF % OF TOTAL
SHARES VOTING CAPITAL
DIRECTORS, OFFICERS AND 5% BENEFICIALLY % OF CLASS STOCK
SHAREHOLDERS OWNED OUTSTANDING OUTSTANDING(1)
- ---------------------------------------------------------------------- ------------ --------------- ---------------
<S> <C> <C> <C>
Advent International Corporation
101 Federal Street
Boston, MA 02110...................................................... 861,911(15) 100% 5.51%
</TABLE>
SERIES C PREFERRED STOCK
<TABLE>
<CAPTION>
NO. OF % OF TOTAL
SHARES VOTING CAPITAL
DIRECTORS, OFFICERS AND 5% BENEFICIALLY % OF CLASS STOCK
SHAREHOLDERS OWNED OUTSTANDING OUTSTANDING(1)
- ---------------------------------------------------------------------- ------------ --------------- -----------------
<S> <C> <C> <C>
Auer & Co.(16)
P.O. Box 1107
Church Street Station
New York, NY 10008-1107............................................... 1,013,928 100% 9.64%(16)
</TABLE>
3
<PAGE>
6% CONVERTIBLE PREFERRED STOCK
<TABLE>
<CAPTION>
% OF TOTAL
NO. OF SHARES VOTING CAPITAL
DIRECTORS, OFFICERS AND 5% BENEFICIALLY % OF CLASS STOCK
SHAREHOLDERS OWNED OUTSTANDING OUTSTANDING(17)
- -------------------------------------------------------------------- --------------- ------------- -------------------
<S> <C> <C> <C>
SIL Nominees Ltd.................................................... 1,500 19.67% --
Leonardo, L.P....................................................... 950(18) 12.46% --
Olympus Securities, Ltd............................................. 550(19) 7.21% --
The Tail Wind Fund Ltd.............................................. 500 6.56% --
Deere Park Capital Mgmt., Inc....................................... 500 6.56% --
Lakeshore International Ltd......................................... 500 6.56% --
Bruce Newberg....................................................... 500(20) 6.56% --
Nelson Partners..................................................... 450(21) 5.90% --
Ramius Fund, Ltd.................................................... 400(22) 5.25% --
Cappello Capital Corp............................................... 863(23) 14.46% --
</TABLE>
- ------------------------
* Less than 1%.
-- Indicates zero.
(1) Determined by using a conversion ratio of 1.34375 for the Series B
Preferred Stock, and a conversion ratio of 2 for the Series C Preferred
Stock.
(2) U.S. Trust has shared voting power over this amount. The Company has relied
on information contained in Form 13G filed by U.S. Trust on February 20,
1997 in providing this information.
(3) Includes 38,000 shares of Common Stock issuable upon exercise of certain
options, which options are currently exercisable or become exercisable
within the 60-day period after November 17, 1997.
(4) Includes 10,000 shares of Common Stock issuable upon exercise of certain
options, which options are currently exercisable or become exercisable
within the 60-day period after November 17, 1997.
(5) Includes 20,000 shares of Common Stock issuable upon exercise of certain
options, which options are currently exercisable or become exercisable
within the 60-day period after November 17, 1997.
(6) Represents 55,000 shares of Common Stock issuable upon exercise of certain
options, which options are currently exercisable or become exercisable
within the 60-day period after November 17, 1997.
(7) Does not include 861,911 shares of Series B Preferred Stock beneficially
owned by Advent International Corporation, a corporation in which Ms.
Hooper serves as Vice President.
(8) Mr. Cieplik resigned from all positions with the Company, effective June
10, 1997.
(9) Mr. Hill resigned from all positions with the Company, effective May 17,
1997.
(10) Mr. Shanker resigned from all positions with the Company, effective May 17,
1997.
(11) Mr. Koepfler resigned as an executive officer with the Company, effective
November 15, 1996, and as a director, effective April 2, 1997.
(12) Mr. Large resigned from all positions with the Company, effective November
12, 1996.
(13) Mr. Douglas resigned from all positions with the Company, effective
November 15, 1996.
4
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(14) Includes an aggregate of 173,000 shares of Common Stock issuable upon
exercise of options held by four directors and one officer, which options
are currently exercisable or become exercisable within the 60-day period
after November 17, 1997. Does not include any of the Series B Preferred
Stock beneficially owned by Advent International Corporation, of which Ms.
Marcia Hooper (a Director of the Company) serves as Vice President.
(15) Represents 861,911 shares of Series B Preferred Stock held by various
limited partnerships of which Advent International Corporation is either
the general partner or a general partner in limited partnerships which are
the general partners in such various limited partnerships.
(16) Auer & Co. has no voting power over these shares. Each share of Series C
Preferred Stock may be converted into four shares of Common Stock at any
time. Upon conversion into Common Stock, each such shareholder shall be
entitled to one vote for each share of Common Stock.
(17) Under the terms of the several 6% Convertible Preferred Stock Investment
Agreements, the 6% Convertible Preferred Stock has no voting power, except
(i) as to whether a consolidation or merger of the Company or a sale of all
or substantially all of its assets will constitute a liquidation or
winding-up of the Company for purposes of determining if such stock is
entitled to its liquidation preference, or (ii) as provided by law. The 6%
Convertible Preferred Stock has no right to vote on Proposal 1. The number
of shares of Common Stock issuable upon conversion of the 6% Convertible
Preferred Stock (including conversion of the 6% Convertible Preferred Stock
issuable upon exercise of the related placement agent warrants) is not
presently determinable. See PROPOSAL 1--APPROVAL OF 1997 PRIVATE
PLACEMENT--SUMMARY OF TRANSACTION TERMS for a description of the terms upon
which 6% Convertible Preferred Stock is convertible into shares of Common
Stock.
(18) Mr. Michael L. Gordon serves as an officer in an entity which is an
investment advisor to Leonardo, L.P., which holds of record 950 shares, as
indicated above. This amount does not include 300 shares held of record by
Raphael, L.P., 400 shares held of record by Ramius Fund, Ltd., 200 shares
held of record by Hick Investments, Ltd., 75 shares held of record by
G.A.M. Arbitrage Investments, Inc., and 75 shares held of record by A.G.
Superfund International Partners, L.P., all of which have investment
advisors in which Mr. Gordon also serves as an officer.
(19) Ms. Anne Dupuy serves as a director of Olympus Securities, Ltd., which
holds of record 550 shares, as indicated above. This amount does not
include 450 shares held of record by Nelson Partners, an entity in which
Ms. Dupuy also serves as an officer.
(20) Mr. Newberg serves as trustee of the Bruce Newberg Trust (the "Trust"),
which holds 500 shares of 6% Convertible Preferred Stock. Mr. Newberg has
sole voting and investment power with respect to the 500 shares of 6%
Convertible Preferred Stock held by the Trust.
(21) Ms. Ann Dupuy serves as an officer of Nelson Partners, which holds of
record 450 shares, as indicated above. This amount does not include 550
shares held of record by Olympus Securities, Ltd., an entity of which Ms.
Dupuy also serves as a director.
(22) Mr. Michael L. Gordon serves as an officer of an entity which is investment
advisor to Ramius Fund, Ltd., which holds of record 400 shares, as
indicated above. This amount does not include 950 shares held of record by
Leonardo, L.P., 375 shares held of record by G.A.M. Arbitrage Investments,
Inc., 300 shares held of record by Raphael, L.P., 200 shares held of record
by Hick Investments, Ltd., and 75 shares held of record by A.G. Superfund
International Partners, L.P., all of which have investment advisors in
which Mr. Gordon also serves as an officer.
5
<PAGE>
(23) Includes warrants to purchase 763 shares of 6% Convertible Preferred Stock
issued to Cappello Capital Corp., the placement agent. These warrants are
exercisable immediately, and have been assigned to principals of the
placement agent and their family members. Also includes 50 shares held of
record by Linda Cappello and 50 shares held of record by Gerald Cappello,
officers in Cappello Capital Corp. Does not include 200 shares held of
record by Laredo Capital Partners in which Lawrence K. Fleishman, an
officer of Cappello Capital Corp., is a partner, and 100 shares held of
record by NY-DBL Diamond Group, in which Mr. Fleishman also serves as
partner.
PROPOSAL 1--APPROVAL OF 1997 PRIVATE PLACEMENT
INTRODUCTION
In August, 1997 the Company received notification from Nasdaq that due to
the Company's insufficient net tangible assets, the Company would be delisted
from the Nasdaq National Market (the "National Market") unless it raised the
necessary additional capital. Nasdaq rules require that the Company have net
tangible assets in excess of $4 million. In August, 1997 the Company had a
deficit of approximately $252,000. To raise sufficient funds to increase the
Company's net tangible assets, and in turn maintain the Company's listing on the
National Market, the Board of Directors completed the 1997 Private Placement of
6% Convertible Preferred Stock.
GENERAL
As of September 30, 1997, the Company completed the 1997 Private Placement
pursuant to which it received aggregate net proceeds of approximately $6.8
million (after cash fees to the placement agent and estimated transaction
expenses of approximately $.8 million) from the issuance of shares of the
Company's 6% Convertible Preferred Stock and related placement agent warrants.
The securities issuances related to the 1997 Private Placement (including shares
of Common Stock issuable upon the conversion of shares of 6% Convertible
Preferred Stock, as dividends thereon and upon exercise of the placement agent
warrants) are referred to as the "1997 Private Placement Issuances." All of the
securities sold in the 1997 Private Placement Issuances were sold in private
placements solely to accredited investors under the Securities Act.
6
<PAGE>
Under the 6% Convertible Preferred Stock Investment Agreement, if Proposal 1
is not approved by the shareholders, the Company must redeem, at a redemption
price equal to 110% of the liquidation preference of the 6% Convertible
Preferred Stock, the smallest number of shares which is sufficient in the
Company's reasonable judgment such that following such redemption conversion of
the remaining shares of 6% Convertible Preferred Stock would not constitute a
breach of the Company's obligations under applicable Nasdaq rules. Those rules
require the Company to seek shareholder approval for any issuance of Common
Stock equal to 20% or more of the voting power outstanding before the issuance
for less than the greater of the book or market value of the stock. If any such
redemption causes the Company to fail to meet National Market listing
requirements, including the requirement that the Company have tangible net
assets in excess of $4 million, the Company would be subject to delisting. If
delisted from the National Market, the Company would attempt to become listed on
another stock exchange where it is able to meet the listing requirements of such
other exchange or to arrange for the Common Stock to be traded on the Nasdaq
electronic bulletin board.
The exact number of shares of Common Stock issuable as a result of the 1997
Private Placement Issuances cannot currently be determined because each
component (i.e., the 6% Convertible Preferred Stock and the related placement
agent warrants) is subject to adjustment mechanisms which cause the number of
shares of Common Stock issuable to be dependent on future events, principally
consisting of the future trading prices of the Common Stock, the conversion
decisions of holders of the 6% Convertible Preferred Stock and related placement
agent warrants, and whether the Company opts to pay dividends in cash or in
additional 6% Convertible Preferred Stock. The number of shares of Common Stock
issuable as a result of the 1997 Private Placement Issuances will, generally,
vary inversely with the market price of the Common Stock. Depending on the
market price of the Common Stock and the timing of conversion of 6% Convertible
Preferred Stock and related placement agent warrants, the conversion of 6%
Convertible Preferred Stock and related placement agent warrants could require
the issuance of more than 20% of the Company's Common Stock.
The Company intends to use the proceeds raised in the 1997 Private Placement
primarily to maintain net worth requirements for continued listing on the
National Market. However, a portion of the proceeds may be used, in the
discretion of the Board of Directors, to prevent dilution to the Common
Shareholders as a result of the conversion of 6% Convertible Preferred Stock or
the payment of dividends on the 6% Convertible Preferred Stock in the form of
additional shares of 6% Convertible Preferred Stock or for ongoing working
capital. The Company has also agreed to reserve $1 million from the proceeds for
a period of 18 months in order to fund its exercise of the Green Floor as
described below.
SUMMARY OF TRANSACTION TERMS
Set forth below is a summary of the material terms of the 1997 Private
Placement Issuances, which summary is qualified by reference to the full text of
the underlying documents which are attached as exhibits to this proxy statement.
6% CONVERTIBLE PREFERRED STOCK PLACEMENT. Pursuant to the terms of the
several 6% Convertible Preferred Stock Investment Agreements, each dated as of
September 30, 1997 (collectively, the "6% Convertible Preferred Stock Investment
Agreements"), the Company issued and sold in a private placement to certain
accredited investors for $1,000 per share an aggregate of 7,625 restricted
shares of a newly-established series of preferred stock, designated as 6%
Convertible Preferred Stock, resulting in gross proceeds to the Company of
approximately $7.6 million in the aggregate.
Each share of 6% Convertible Preferred Stock is entitled to receive
dividends, payable annually on September 30 of each year, when and as declared
by the Company's Board of Directors, at the rate of 6%
7
<PAGE>
per annum in preference to any payment made on any shares of Common Stock or any
other class or series of capital stock of the Company other than the Series C
Preferred Stock, which has rights to dividends PARI PASSU with the 6%
Convertible Preferred Stock. Such dividends accrue from day to day whether or
not earned or declared. Any dividend payable after the date of issuance of the
6% Convertible Preferred Stock may be paid (i) in additional shares of 6%
Convertible Preferred Stock valued at $1,000 per share, or (ii) upon proper
notice, in cash. Each share of 6% Convertible Preferred Stock is also entitled
to a liquidation preference of $1,000 per share, plus any accrued but unpaid
dividends and any amounts owing as a result of a failure by the Company to file
an effective registration statement within the prescribed period (see discussion
below), in preference to any other class or series of capital stock of the
Company. Except to determine whether such stock is entitled to its liquidation
preference under certain circumstances, and as provided by applicable law,
holders of shares of 6% Convertible Preferred Stock have no voting rights.
Commencing December 29, 1997, at least 10% and up to 25% (depending upon the
price at which the Common Stock is trading) of the number of shares of 6%
Convertible Preferred Stock held of record by each holder on such day will
become convertible into shares of Common Stock, and thereafter on the same day
in successive months additional shares of 6% Convertible Preferred Stock will
become convertible (with the additional amount varying from 10% to 25% of the
number of shares of 6% Convertible Preferred Stock held of record by such holder
on such day depending upon the price at which the Common Stock is trading),
except that in any month in which the highest of daily low trading prices of the
Common Stock is $2.50 or less, not more than 10% of each holder's shares of 6%
Convertible Preferred Stock held of record on such day will be convertible. On
September 30, 2002, all outstanding shares of 6% Convertible Preferred Stock
will automatically be converted into Common Stock.
The number of shares of Common Stock issuable upon conversion of shares of
6% Convertible Preferred Stock will equal the liquidation preference of the
shares being converted divided by the then-effective conversion price applicable
to the Common Stock (the "Conversion Price"). The Conversion Price as of any
date during the seven-month period following the date of issuance is $5.50. The
Conversion Price as of any date after the seven-month period following the date
of issuance and before the first day of the sixteenth month after the date of
issuance will be the lowest trading price of the Common Stock during the 22
consecutive trading days immediately preceding the date of conversion reduced by
the Applicable Percentage described below, except that the Conversion Price will
not be less than $1.50 prior to the first day of the thirteenth month after the
date of issuance. The "Applicable Percentage" is dependent upon the time elapsed
after the date of issuance to the date of measurement, being 9.8% starting on
the first day of the eighth month and increasing in the subsequent four months
to 11.1%, 12.4%, 13.7% and 15%, respectively. At any date after the first day of
the sixteenth month after the date of issuance, the Conversion Price will be the
lesser of (i) 85% of the average low daily trading price of the Common Stock for
all the trading days during the 12th through 15th month (but in no event less
than $2.8126), or (ii) 85% of the average low daily trading price of the Common
Stock during the 22 consecutive trading days immediately preceding the date of
conversion (the "Conversion Cap"). The Conversion Price is at all times also
subject to customary anti-dilution adjustment for events such as stock splits,
stock dividends, reorganizations and certain mergers affecting the Common Stock.
All of the then outstanding shares of 6% Convertible Preferred Stock will
automatically be converted into shares of Common Stock at the then applicable
Conversion Price on the fifth anniversary of the date of original issuance. No
holder of 6% Convertible Preferred Stock will be entitled to convert any share
of 6% Convertible Preferred Stock into shares of Common Stock if, following such
conversion, the holder and its affiliates (within the meaning of the Exchange
Act) will be the beneficial owners (as defined in Rule 13d-3 under the Exchange
Act) of 10% or more of the outstanding shares of Common Stock.
8
<PAGE>
In addition, following conversion of the 6% Convertible Preferred Stock into
shares of Common Stock, the holders of such shares of Common Stock have agreed
to be limited on resales of such shares on any trading day to the greatest of:
(i) 10% of the average daily trading volume of the Common Stock for the five
trading days preceding any such sale; (ii) 12,000 shares; or (iii) 10% of the
trading volume of the Common Stock on the date of any such sale. Further, the
Company has the right, upon proper notice, if the Conversion Price falls below
$3.00 (or such other price as is set by the Company upon proper notice), and
subject to certain other conditions, to honor any conversion request by a cash
payment in lieu of the issuance of Common Stock in an amount equal to the
proceeds which would otherwise have been received by the holder if conversion
were in fact made into Common Stock and such Common Stock were sold at the high
trade price on the trading day immediately preceding the date that the
conversion notice is received (the "Green Floor").
The Company is not obligated to issue, in the aggregate, more than 3,150,000
shares of Common Stock if issuance of a larger number of shares would constitute
a breach of the Rules or Designation Criteria of the Nasdaq Stock Market (the
"Nasdaq Rules"), including the shareholder approval rules described above. If
shareholder approval is not received prior to December 31, 1997, the Company
will be obligated to redeem on or before January 15, 1998, at a premium price, a
sufficient number of shares of 6% Convertible Preferred Stock which, in its
reasonable judgment, will permit conversion of the remaining shares of 6%
Convertible Preferred Stock without breaching the Nasdaq Rules. Any delay in
payment will cause such redemption amount to accrue interest at the rate of 0.1%
per day until paid. Subject to this requirement to effect a special redemption
of the 6% Convertible Preferred Stock, if the issuance of Common Stock upon
conversion of any shares of 6% Convertible Preferred Stock would constitute a
breach of the Nasdaq Rules, then the Company has agreed to exercise the Green
Floor with respect to such issuance. Pursuant to its agreement with Nasdaq, the
Company will reserve $1 million from the 1997 Private Placement proceeds for a
period of 18 months to be used solely for the purpose of funding the exercise of
the Green Floor, but there is no other restriction on the Company's use of such
proceeds. There is no assurance that the proceeds of the 1997 Private Placement
Issuances will be available to fund any required cash redemption of 6%
Convertible Preferred Stock or exercise of the Green Floor or that the $1
million reserved by the Company will be sufficient to fund the exercise of the
Green Floor.
The Company has agreed to register the shares of Common Stock issuable upon
conversion of the 6% Convertible Preferred Stock, including shares payable as
dividends thereon, and shares issuable upon exercise of the related placement
agent warrants, for resale under the Securities Act no later than December 29,
1997. Any delay in having the related registration statement declared effective
by the Commission beyond the applicable period, or any unavailability to the
holders of the 6% Convertible Preferred Stock of a current prospectus after such
period, will require the Company to pay to the holders, in cash, 3% of the total
purchase price of the 6% Convertible Preferred Stock, or $228,750 in the
aggregate, for each 30-day period of the delay (pro rated for any shorter
period).
PLACEMENT AGENT COMPENSATION. The placement agent for the 1997 Private
Placement Issuances was Cappello Capital Corp. In consideration for placing such
securities, the placement agent received aggregate cash compensation of 8.7% of
the gross proceeds received by the Company, or $663,375. Further, the Company
also agreed to issue to the placement agent 6% Convertible Preferred Stock
warrants to acquire an aggregate of 763 shares of 6% Convertible Preferred Stock
for an exercise price of $1,000 per share (subject to the same anti-dilution
protections as are applicable to the 6% Convertible Preferred Stock). Such
warrants are exercisable for a period of five years for shares of 6% Convertible
Preferred Stock. The Company is obligated to register the shares of Common Stock
issuable upon exercise and conversion of the placement agent warrants for resale
under the Securities Act. The placement agent will retain its compensation
whether or not the required shareholder approval is obtained for Proposal 1.
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<PAGE>
EFFECT ON OUTSTANDING COMMON STOCK AND PREFERRED STOCK
The issuance of Common Stock upon the conversion of the 6% Convertible
Preferred Stock will have no effect on the rights or privileges of existing
holders of Common Stock or Preferred Stock except that the economic interests
and voting rights of each shareholder will be diluted as a result of such
issuance. Further, prior to conversion, holders of the 6% Convertible Preferred
Stock will be entitled to receive dividends and distributions upon a liquidation
of the Company in preference to claims of holders of the Common Stock and Series
B Preferred Stock and PARI PASSU with claims of holders of the Series C
Preferred Stock.
As noted above, the exact number of shares of Common Stock issuable upon
conversion of the 6% Convertible Preferred Stock cannot currently be determined
but such issuances will vary inversely with the market price of the Common
Stock, and such shares will be issued at a discount which increases to 15% if 6%
Convertible Preferred Stock is held through the last day of the 12th month after
issuance. The current holders of Common Stock and Preferred Stock will be
diluted by issuances of Common Stock upon conversion of the 6% Convertible
Preferred Stock to an extent that depends on the future market price of the
Common Stock, the timing of conversions of 6% Convertible Preferred Stock and
exercise of the related placement agent warrants, and whether the Company opts
to pay dividends in cash or in additional shares of 6% Convertible Preferred
Stock. The potential effects of any such dilution on the existing shareholders
of the Company include (i) the possible right of the holders of 6% Convertible
Preferred Stock to control the Company and elect its Board of Directors and (ii)
the significant diminution of the current shareholders' economic and voting
interests in the Company.
OTHER MATTERS
Management does not know of any other matters which may come before the
Special Meeting. However, if any other matters are properly presented to the
meeting, it is the intention of the persons named in the accompanying proxy to
vote, or otherwise act, in accordance with their judgment on such matters.
This solicitation has been made by the Company. All costs of solicitation of
proxies will be borne by the Company. In addition to solicitations by mail, the
Company's directors, officers and other employees, without additional
remuneration, may solicit proxies by telephone, telegraph and personal
interviews. Brokers, custodians and fiduciaries will be requested to forward
proxy soliciting material to the owners of stock held in their names, and the
Company will reimburse them for their out-of-pocket expenses in this regard. The
Company has retained Corporate Invester Communications, Inc. of 111 Commerce
Road, Carlstadt NJ 07072-2856 to assist in the solicitation of proxies for an
estimated cost of $2,000 plus reasonable out-of-pocket expenses.
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SHAREHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
Any shareholder desiring to present a proposal for consideration at the
Company's 1998 annual meeting of shareholders and included in the Company's
proxy statement, must submit the proposal to the Company so that it is received
at the executive offices of the Company not later than March 21, 1998. Any
shareholder desiring to submit a proposal should consult applicable regulations
of the Securities and Exchange Commission.
By Order of the Board of Directors,
Craig Newfield, CLERK
November 21, 1997
THE BOARD OF DIRECTORS HOPES THAT SHAREHOLDERS WILL ATTEND THE SPECIAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE. YOUR PROMPT
RESPONSE WILL GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND WILL BE
APPRECIATED. SHAREHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR SHARES
PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
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INTERLEAF, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) Jaime W. Ellertson and Craig Newfield,
or either or them, as Proxies, each with the power to appoint his substitute,
and hereby authorizes them to represent and to vote, as designated below, all
the shares of capital stock of Interleaf, Inc. held of record by the
undersigned on November 17, 1997, at the Special Meeting of Shareholders to
be held on December 17, 1997, or any adjournment thereof.
The proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is given, this proxy
will be voted FOR all proposals. Attendance of the undersigned at the
meeting or at any adjournment thereof will not be deemed to revoke this proxy
unless the undersigned shall revoke this proxy in writing.
===============================================================================
PLEASE VOTE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.
- -------------------------------------------------------------------------------
Please sign this proxy exactly as your name appears on the books of
Interleaf, Inc. Joint owners should each sign personally. Trustees and
other fiduciaries should indicate the capacity in which they sign, and where
more than one name appears, a majority must sign. If a corporation, this
signature should be that of an authorized officer who should state his or her
title.
===============================================================================
/x/ PLEASE MARK VOTES AS IN THIS EXAMPLE
1) To approve the 1997 Private Placement and the 1997 Private Placement
Issuances, as described in the Company's Proxy Statement dated
November 21, 1997.
/ / For / / Against / / Abstain
2) In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
Please be sure to sign and date this Proxy. Date
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Shareholder sign here Co-owner sign here
<PAGE>
EXHIBIT 1
PREFERRED STOCK INVESTMENT AGREEMENT
AGREEMENT dated as of September 30, 1997 between Interleaf, Inc. (the "Company")
and the investor whose name is set forth at the foot of this Agreement (the
"Investor").
The parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF PREFERRED STOCK
SECTION I.1 PURCHASE AND SALE OF PREFERRED STOCK. Upon the following terms
and conditions, the Company shall issue and sell to the Investor shares of the
Company's 6% Convertible Preferred Stock (the "Shares") having the rights,
designations and preferences set forth in Schedule I hereto, and the Investor
shall purchase from the Company the number of Shares designated on the signature
page hereof.
SECTION I.2 PURCHASE PRICE. The purchase price for the Shares (the
"Purchase Price") shall be $1,000 per share.
SECTION I.3 THE CLOSING.
(a) The closing of the purchase and sale of the Shares (the "Closing"),
shall take place at the offices of the Company, at 10:00 a.m., local time on
the later of the following: (i) the date on which the last to be fulfilled
or waived of the conditions set forth in Article IV hereof and applicable to
the Closing shall be fulfilled or waived in accordance herewith, or (ii)
such other time and place and/or on such other date as the Investor and the
Company may agree but in no event later than September 30, 1997. The date on
which the Closing occurs is referred to herein as the "Closing Date."
(b) On the Closing Date, the Company shall deliver to the Investor
certificates representing the number of Shares being purchased by the
Investor, registered in the name of the Investor, or deposit such Shares
into accounts designated by the Investor, and the Investor shall deliver to
the Company the Purchase Price for such Shares by cashier's check or wire
transfer in immediately available funds to such account as shall be
designated in writing by the Company. The Investor shall also deliver, as a
condition to the Closing, a Purchaser's Questionnaire in the form supplied
by the Company. In addition, each party shall deliver all documents,
instruments and writings required to be delivered by such party pursuant to
this Agreement at or prior to the Closing.
SECTION I.4 COVENANT TO REGISTER.
(a) For purposes of this Section, the following definitions shall apply:
(i) The terms "register," "registered," and "registration" refer to a
registration under the Securities Act of 1933, as amended (the "Act"),
effected by preparing and filing a registration statement in compliance
with the Act, and the declaration or ordering of effectiveness of such
registration statement, document or amendment thereto.
(ii) The term "Registrable Securities" does not include the Shares
but means (A) the shares of common stock issued or issuable upon
conversion of the Shares, or (B) any securities of the Company or
securities of any successor corporation issued pursuant to the provisions
of Schedule I hereto or issuable upon the conversion or exercise of any
warrant, right or other security that is issued as a dividend or other
distribution with respect to, or in exchange for or in replacement of the
Shares, which in either case (i) have not been resold pursuant to an
effective registration statement or pursuant to Rule 144 under the Act or
(ii) may not be resold pursuant to Rule 144(k) under the Act. For
purposes of this Agreement, securities will be considered ineligible for
resale pursuant to Rule 144(k) under the Act unless the Company's
transfer agent has accepted an instruction from the Company specifying
that such securities are eligible for sale pursuant to Rule 144(k).
(iii) The term "holder of Registrable Securities" includes any person
who holds Shares which are convertible into Registrable Securities.
<PAGE>
(b) (i) The Company shall, as expeditiously as possible following the
Closing, file a registration statement on Form S-3, or if Form S-3 is not
then available, another appropriate form, covering the resale of all the
Registrable Securities under Rule 415. The number of shares of Common Stock
initially included in such registration statement shall be not less than
150% of the number which would be issuable upon conversion of the Shares if
all thereof were to be converted at a conversion price equal to the average
closing price of the Common Stock during the five trading days prior to the
effective date of the registration statement. The Company shall use its best
efforts to cause such registration statement to become effective by the 90th
calendar day after the Closing Date (the "Initial Registration"). In the
event such registration statement is not so declared effective or if at any
time thereafter it does not include at least 120% of the number of
Registrable Securities which would then be issuable upon conversion of the
6% Preferred (or any successor security) at the conversion price then in
effect, any holder of Registrable Securities shall have the right to require
by notice in writing that the Company register all or any part of the
Registrable Securities held by such holder (a "Demand Registration") and the
Company shall thereupon effect such registration in accordance herewith
(which may include adding such shares to an existing shelf registration).
The parties agree that if the holder of Registrable Securities demands
registration of less than all of the Registrable Securities, the Company, at
its option, may nevertheless file a registration statement covering all of
the Registrable Securities. If such registration statement is declared
effective with respect to all Registrable Securities, then so long as the
Company is in compliance with its obligations under Subsection (d)(i)
through (v) hereof, the demand registration rights granted pursuant to this
Subsection (b) (i) shall not be applicable. If such registration statement
is not declared effective with respect to all Registrable Securities, or if
the Company is not in compliance with said obligations, the demand
registration rights described herein shall remain in effect. The Company
shall provide holders of Registrable Securities reasonable opportunity to
review any such registration statement or amendment or supplement thereto
prior to the filing thereof. Nothing herein shall require the Company to
postpone filing the registration statement. If the Registrable Securities
are registered initially on a form other than Form S-3, and thereafter the
Company becomes eligible to use Form S-3, the Company will then take all
action permitted by Rule 401(e) under the Act to utilize the requirements of
Form S-3 thereafter.
(ii) The Company shall not be obligated to effect Demand Registration
under Subsection (b)(i) if all of the Registrable Securities held by the
holder of Registrable Securities which are demanded to be covered by the
Demand Registration are, at the time of such demand, included in an
effective registration statement and the Company is in compliance with
its obligations under Subsection (d) (i) through (v) hereof.
(iii) The Company may suspend the effectiveness of any such
registration effected pursuant to this Subsection (b) in the event, and
for such period of time as, such a suspension is required by the rules
and regulations of the Securities and Exchange Commission ("SEC"), and
may suspend use of the prospectus included in the Registration Statement
if such prospectus ceases to meet the requirements of Section 10 of the
Act. The Company will immediately advise the holders of the registered
securities of any such suspension, and will use its best efforts to cause
such suspension to terminate at the earliest possible date. The Investor
agrees that following receipt of any such notice, and until such
suspension is terminated, the Investor will not make use of the suspended
prospectus and will make no sales requiring delivery of such prospectus.
(iv) If the registration statement covering the required number of
Registrable Securities is not effective by the 90th calendar day after
the Closing Date, then the Company shall pay the Investor in cash an
amount equal to 3% of the total Purchase Price of the Shares purchased by
the Investor for each 30 day period thereafter until such registration
statement is effective (pro-
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<PAGE>
rata as to a period of less than 30 days). An amount equal to 3% of the
total Purchase Price of Shares and any Registrable Securities then held
by Investor shall also be paid to the Investor in cash with respect to
any period in excess of 30 days that the effectiveness of the
Registration Statement or use of the prospectus is suspended as set forth
in Section 1.4 (b)(iii) or the prospectus is otherwise unavailable for
use by sellers of Registrable Securities. Any payment hereunder shall be
made not later than ten days after the end of the 30-day period with
respect to which such payment is due. The "Purchase Price" of Registrable
Securities shall be, in the case of Registrable Securities derived from
conversion or substitution of Shares, the Purchase Price of such Shares.
This subsection is in addition to the provisions of Section 7.2(a)
hereof.
(c) If the Company proposes to register (including for this purpose a
registration effected by the Company for shareholders other than the
Investor) any of its stock or other securities under the Act in connection
with a public offering of such securities (other than a registration on Form
S-4, Form S-8 or other limited purpose form) and all Registrable Securities
have not theretofore been included in a registration statement under
Subsection (b) which remains effective, the Company shall, at such time,
promptly give all holders of Registrable Securities written notice of such
registration. Upon the written request of any holder of Registrable
Securities given within twenty (20) days after receipt of such notice by the
holder of Registrable Securities, the Company shall use its best efforts to
cause to be registered under the Act all Registrable Securities that such
holder of Registrable Securities requests to be registered. However, the
Company shall have no obligation under this Subsection (c) to the extent
that, with respect to a public offering registration, the managing
underwriter of such public offering reasonably notifies such holder(s) in
writing of its determination that the Registrable Securities or a portion
thereof should be excluded therefrom. The rights of the Investor and the
obligations of the Company under this subsection are subject to any prior
registration rights of other shareholders of the Company which are disclosed
in Exhibit A hereto.
(d) Whenever required under this Section to effect the registration of
any Registrable Securities, including, without limitation, the Initial
Registration, the Company shall, as expeditiously as reasonably possible:
(i) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause
such registration to become effective as provided in Section 1.4(b)(i),
and keep such registration statement effective for so long as any holder
of Registrable Securities desires to dispose of the securities covered by
such registration statement, or, if earlier, until such Registrable
Securities may be sold under Rule 144(k) (provided that the Company's
transfer agent has accepted an instruction from the Company to such
effect).
(ii) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with
such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities
covered by such registration statement and notify the holders of the
filing and effectiveness of such registration statement and any
amendments or supplements.
(iii) Furnish to each holder of Registrable Securities such numbers
of copies of a current prospectus conforming with the requirements of the
Act, copies of the registration statement, any amendment or supplement
thereto and any documents incorporated by reference therein and such
other documents as such holder of Registrable Securities may reasonably
require in order to facilitate the disposition of Registrable Securities
owned by such holder of Registrable Securities.
(iv) Use its best efforts to register and qualify the securities
covered by such registration statement under such securities or "Blue
Sky" laws of such jurisdictions as shall be reasonably requested by a
holder of Registrable Securities and keep such registration or
qualification effective as long as required to permit sale of Registrable
Securities thereunder, provided that the
3
<PAGE>
Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service
of process in any such states or jurisdictions.
(v) Notify each holder of Registrable Securities immediately of the
happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue
statement of material fact or omits to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, and use its best
efforts to promptly update and/or correct such prospectus.
(vi) Furnish to each holder of Registrable Securities included
therein (1) an opinion of counsel to the Company covering compliance of
the registration statement, as to form, with the requirements of the Act
and the rules thereunder, and covering the matters covered in the opinion
filed as an exhibit to the registration statement, and (2) a "cold
comfort" letter or letters of the Company's independent public
accountants in the form and of the substance customarily supplied to
underwriters in connection with a public offering.
(vii) Use its best efforts to list the Registrable Securities covered
by such registration statement with any national market or securities
exchange on which the Common Stock is then listed.
(viii) Make available for inspection by the holder of Registrable
Securities, upon request, all SEC Documents (as defined below) filed
subsequent to the Closing and require the Company's representatives to
supply all information reasonably requested by any holder of Registrable
Securities in connection with such registration statement. Nothing herein
shall require the Company to postpone filing the registration statement
or to delay the effectiveness thereof.
(e) Each holder of Registrable Securities will furnish to the Company in
connection with any registration under this Section such information
regarding itself, the Registrable Securities and other securities of the
Company held by it, and the intended method of disposition of such
securities as shall be reasonably required to effect the registration of the
Registrable Securities held by such holder of Registrable Securities. The
Investor shall provide such data at or prior to the Closing. The intended
method of disposition (Plan of Distribution) of such securities as so
provided by Investor shall be included without alteration in the
Registration Statement covering the Registrable Securities and shall not be
changed without written consent of the Investor.
(f) (i) The Company shall indemnify, defend and hold harmless each
holder of Registrable Securities which are included in a registration
statement pursuant to the provisions of Subsections (b) or (c) (each, a
"Selling Shareholder") and each of its officers, directors, employees,
agents, partners or controlling persons (within the meaning of the Act)
(each, an "indemnified party") from and against, and shall reimburse such
indemnified party with respect to, any and all claims, suits, demands,
causes of action, losses, damages, liabilities, costs or expenses
("Liabilities") to which such indemnified party may become subject under the
Act or otherwise, arising from or relating to (A) any untrue statement or
alleged untrue statement of any material fact contained in such registration
statement, any prospectus contained therein or any amendment or supplement
thereto, or (B) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not
misleading; provided, however, that the Company shall not be liable in any
such case to the extent that any such Liability arises out of or is based
upon an untrue statement or omission so made in reliance upon information
furnished by such indemnified party in writing specifically for use in the
registration statement; provided further, that the Company shall not be
liable in any such case to the extent that any such Liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in any preliminary prospectus if (i) a Selling
Shareholder under an
4
<PAGE>
obligation to send or deliver a copy of the prospectus with or prior to the
delivery of written confirmation of the sale of Registrable Securities to
the person asserting such Liability who purchased such Registrable
Securities which are the subject thereof from such Selling Shareholder
failed to do so and (ii) the prospectus would have corrected such untrue
statement or omission; and provided further, that the Company shall not be
liable in any such case to the extent that any Liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission in the prospectus, if such untrue statement or alleged
untrue statement, omission or alleged omission is corrected in an amendment
or supplement to the prospectus and if, having previously been furnished by
or on behalf of the Company with copies of the prospectuses so amended or
supplemented and having been obligated to deliver such prospectuses, the
Selling Shareholder thereafter failed to deliver such prospectus as so
amended or supplemented, prior to or concurrently with the sale of
Registrable Securities to the person asserting such Liability who purchased
such Registrable Securities which are the subject thereof from such Selling
Shareholder.
(ii) In the event of any registration under the Act of Registrable
Securities pursuant to Subsections (b) or (c), each holder of such
Registrable Securities hereby severally agrees to indemnify, defend and
hold harmless the Company, and its officers, directors, employees,
agents, partners, or controlling persons (within the meaning of the Act)
(each, an "indemnified party") from and against, and shall reimburse such
indemnified party with respect to, any and all Liabilities to which such
indemnified party may become subject under the Act or otherwise, arising
from or relating to (A) any untrue statement or alleged untrue statement
of any material fact contained in such registration statement, any
prospectus contained therein or any amendment or supplement thereto, or
(B) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not
misleading; provided, that such holders will be liable in any such case
to the extent, and only to the extent, that any such Liability arises out
of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement,
prospectus or amendment or supplement thereto in reliance upon written
information furnished in an instrument duly executed by such holder
specifically for use in the registration statement.
(iii) Promptly after receipt by any indemnified party of notice of
the commencement of any action, such indemnified party shall, if a claim
in respect thereof is to be made against another party (the "indemnifying
party") hereunder, notify such party in writing thereof, but the omission
so to notify shall not relieve the indemnifying party from any Liability
which it may have to the indemnified party other than under this section
and shall only relieve it from any Liability which it may have to the
indemnified party under this section if and to the extent it is actually
prejudiced by such omission. In case any such action shall be brought
against any indemnified party and such indemnified party shall notify the
indemnifying party of the commencement thereof, the indemnifying party
shall be entitled to participate in and, to the extent it shall wish, to
assume and undertake the defense thereof with counsel reasonably
satisfactory to such indemnified party, and, after notice from the
indemnifying party to the indemnified party of its election so to assume
and undertake the defense thereof, the indemnifying party shall not be
liable to the indemnified party under this section for any legal expenses
subsequently incurred by the indemnified party in connection with the
defense thereof other than reasonable costs of investigation and of
liaison with counsel so selected, provided, however, that if the
defendants in any such action include both the indemnifying party and
such indemnified party and the indemnified party shall have reasonably
concluded, based upon an opinion of counsel, that there may be reasonable
defenses available to it which are different from or additional to those
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<PAGE>
available to the indemnifying party or if the interests of the
indemnified party reasonably may be deemed to conflict with the interests
of the indemnifying party, the indemnified party shall have the right to
select a separate counsel and to assume such legal defenses and otherwise
to participate in the defense of such action, with (subject to the
following sentence) the reasonable expenses and fees of such separate
counsel and other reasonable expenses related to such participation to be
reimbursed by the indemnifying party as incurred. If the Company is the
indemnifying party it shall pay the reasonable expenses and fees of only
one separate counsel whose selection is approved by the largest group of
similarly situated indemnified parties as measured by the aggregate face
value of such Registrable Securities owned by such group. Any indemnified
party who chooses not to be represented by the foregoing separate counsel
shall be entitled, at its own expense, to be represented by counsel of
its own selection.
(g) (i) With respect to the inclusion of Registrable Securities in a
registration statement pursuant to Subsections (b) or (c), all fees, costs
and expenses of and incidental to such registration, inclusion and public
offering shall be borne by the Company; provided, however, that any Selling
Shareholders participating in such registration shall bear their own share
of the underwriting discounts and commissions, and transfer taxes if any,
incurred by them in connection with such registration.
(ii) The fees, costs and expenses of registration to be borne by the
Company as provided in this Subsection (g) shall include, without
limitation, all registration, filing and NASD fees, printing expenses,
fees and disbursements of counsel and accountants for the Company, and
all legal fees and disbursements and other expenses of complying with
state securities or Blue Sky laws of any jurisdiction or jurisdictions in
which securities to be offered are to be registered and qualified.
Subject to appropriate agreements as to confidentiality, and upon
reasonable advance notice from the holder or its counsel, the Company
shall make available to counsel for the holders of Registrable Securities
upon reasonable request its documents and personnel for due diligence
purposes, and shall pay the reasonable fees and disbursements of one law
firm (but not more than one) acting as counsel for a majority of such
holders. Except as otherwise provided herein, fees and disbursements of
counsel and accountants for the Selling Shareholders shall be borne by
the respective Selling Shareholders. Nothing herein shall require the
Company to postpone filing the registration statement or delay its
effectiveness.
(h) The rights to cause the Company to register all or any portion of
Registrable Securities pursuant to this Section may be assigned by Investor
to a transferee or assignee of all, or a portion equal to 20% or more, in
the aggregate, of its Shares or the Registrable Securities derived from such
Shares. Any transferee asserting registration rights hereunder shall agree
to be bound by the applicable provisions of this Agreement.
(i) From and after the date of this Agreement, the Company shall not
grant additional "piggy-back" registration rights to the holders of any
securities of the Company to include any of their securities in any
registration statement filed by the Company pursuant to Subsection (b)
unless such inclusion will not reduce the amount of the Registrable
Securities included therein.
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<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION II.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby makes the following representations and warranties to the Investor:
(a) Organization and Qualification. The Company is a corporation duly
incorporated and existing in good standing under the laws of Massachusetts
and has the requisite corporate power to own its properties and to carry on
its business as now being conducted. The Company does not have any material
subsidiaries except as listed in Exhibit A hereto or in the SEC Documents
(as hereinafter defined). The Company and each such subsidiary, if any, is
duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary other than those
in which the failure so to qualify would not have a Material Adverse Effect.
"Material Adverse Effect" means any material adverse effect on the business,
operations, properties, prospects, or financial condition of the Company and
its subsidiaries taken as a whole.
(b) Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform this Agreement and
to issue the Shares in accordance with the terms hereof, (ii) the execution
and delivery of this Agreement by the Company and the consummation by it of
the transactions contemplated hereby have been duly authorized by all
necessary corporate action, and no further consent or authorization of the
Company or its Board of Directors or stockholders is required except as
contemplated by this Agreement or Schedule I hereto (including stockholder
approval), (iii) this Agreement has been duly executed and delivered by the
Company, and (iv) this Agreement constitutes a valid and binding obligation
of the Company enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally the enforcement of, creditors' rights and
remedies or by other equitable principles of general application. The
Company's chief executive officer and chief financial officer and directors
have studied and fully understand the nature of the securities being sold
hereunder, and recognize that they have a potential dilutive effect.
(c) Capitalization. The authorized capital stock of the Company consists
of 50,000,000 shares of Common Stock and 5,000,000 shares of preferred
stock; there are 17,840,259 shares of Common Stock and 1,010,002 shares of
Class C preferred stock issued and outstanding; and, upon issuance of the
Shares in accordance with the terms hereof and pursuant to similar
agreements of like tenor, there will be 17,840,259 shares of Common Stock,
approximately 1,010,002 shares of Class C preferred stock, and 7,625 shares
of 6% Convertible Preferred Stock issued and outstanding. All of the
outstanding shares of the Company's Common Stock have been validly issued
and are fully paid and nonassessable. Except as set forth in Exhibit A
hereto and as described in the SEC Documents, no shares of Common Stock are
entitled to preemptive rights or registration rights and there are no
outstanding options, convertible securities, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into, any shares of capital stock of the
Company, or contracts, commitments, understandings, or arrangements by which
the Company is or may become bound to issue additional shares of capital
stock of the Company or options, warrants, scrip, rights to subscribe to, or
commitments to purchase or acquire, any shares, or securities or rights
convertible into shares, of capital stock of the Company. The Company has
furnished or made available to the Investor true and correct copies of the
Company's charter documents as in effect on the date hereof (the "Charter"),
and the Company's By-Laws, as in effect on the date hereof (the "By-Laws").
7
<PAGE>
(d) Issuance of Shares. The issuance of the Shares has been duly
authorized and, when paid for or issued in accordance with the terms hereof,
the Shares shall be validly issued, fully paid and non-assessable and
entitled to the rights and preferences set forth in Schedule I hereto. The
Common Stock issuable upon conversion of the Shares will be duly authorized
and reserved for issuance and, upon conversion in accordance with the
Certificate of Designation to be filed by the Company to establish the
rights and preferences of the Shares, will be validly issued, fully paid and
non-assessable and not subject to any preemptive rights or adverse claims,
and the holders shall be entitled to all rights and preferences accorded to
a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby do not and will not (i) result in a
violation of the Company's Charter or By-Laws or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its subsidiaries is a party, or
result in a violation of any federal, state, local or foreign law, rule,
regulation, order, judgment or decree (including Federal and state
securities laws and regulations) applicable to the Company or any of its
subsidiaries or by which any property or asset of the Company or any of its
subsidiaries is bound or affected (except as contemplated by Section 10 of
Schedule I hereto and except for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect); provided
that, for purposes of such representation as to Federal, state, local or
foreign law, rule or regulation, no representation is made herein with
respect to any of the same applicable solely to the Investor and not to the
Company. The business of the Company is not being conducted in violation of
any law, ordinance or regulations of any governmental entity, except for
violations which either singly or in the aggregate do not and will not have
a Material Adverse Effect. The Company is not required under Federal, state
or local law, rule or regulation in the United States to obtain any consent,
authorization or order of, or make any filing (other than the filing of a
Certificate setting forth the terms of the Shares with the Massachusetts
Secretary of State) or registration with, any court or governmental agency
in order for it to execute, deliver or perform any of its obligations under
this Agreement or issue and sell the Shares in accordance with the terms
hereof (other than any SEC, NASD or state securities filings which may be
required to be made by the Company and any registration statement which may
be filed pursuant hereto); provided that, for purposes of the representation
made in this sentence, the Company is assuming and relying upon the accuracy
of the relevant representations and agreements of the Investor herein.
Purchase of the Shares by the Investor and conversion of the Shares pursuant
to the provisions hereof and of Schedule I hereto, if and so long as Section
3.5 hereof is complied with, will not cause any person to become an
"acquiring person" or otherwise create any remedy against the Investor under
the Shareholder Rights Plan of the Company.
(f) SEC Documents, Financial Statements. The Common Stock of the Company
is registered pursuant to Section 12(g) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") and the Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it
with the SEC pursuant to the reporting requirements of the Exchange Act,
including material filed pursuant to Section 13(a) or 15(d), in addition to
one or more registration statements and amendments thereto heretofore filed
by the Company with the SEC (all of the foregoing including filings
incorporated by reference therein being referred to herein as the "SEC
Documents"). The Company has delivered or made available to the Investor
true and complete copies of the quarterly and annual (including, without
limitation, proxy information and solicitation materials) SEC Documents
filed with the SEC since December 31, 1995. The Company has not provided to
the
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<PAGE>
Investor any information which, according to applicable law, rule or
regulation, should have been disclosed publicly by the Company but which has
not been so disclosed, other than with respect to the transactions
contemplated by this Agreement. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC promulgated thereunder
except as set forth on Exhibit A and other federal, state and local laws,
rules and regulations applicable to such SEC Documents, and none of the SEC
Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading. The financial statements of the Company included
in the SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations
of the SEC or other applicable rules and regulations with respect thereto.
Such financial statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed
or summary statements) and fairly present in all material respects the
financial position of the Company as of the dates thereof and the results of
operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments).
(g) No Material Adverse Change. Since the date through which the most
recent quarterly report of the Company on Form 10-Q has been prepared and
filed with the SEC, a copy of which is included in the SEC Documents, no
event which would have a Material Adverse Effect has occurred or exists with
respect to the Company or its subsidiaries otherwise than in the ordinary
course of business, except as otherwise disclosed or reflected in other SEC
Documents prepared through or as of a date subsequent thereto, and the
Company has not received any communication from the SEC or the NASD
regarding any possible de-listing of the Company's Common Stock except as
disclosed in the Company's report on Form 10-Q for June 30, 1997 and
subsequent related communications from the NASD.
(h) No Undisclosed Events or Circumstances. No event or circumstance has
occurred or exists with respect to the Company or its subsidiaries or their
respective businesses, properties, prospects, operations or financial
condition, which, under applicable law, rule or regulation, requires public
disclosure or announcement by the Company but which has not been so publicly
announced or disclosed.
(i) No General Solicitation. Neither the Company, nor any of its
affiliates, or, to its knowledge, any person acting on its or their behalf
(including Cappello Capital Corp. (the "Placement Agent")), has engaged in
any form of general solicitation or general advertising (within the meaning
of Regulation D under the Act) in connection with the offer or sale of the
Shares.
(j) No Integrated Offering. Earlier offers or discussions regarding
possible sales of securities by the Company have not been such as to require
registration of the Shares under the Act.
(k) Approval Commitments. The Company has received binding assurance
from its chief executive officer, chief financial officer and its directors
and the only stockholder known to the Company that owns more than 5% of the
outstanding stock of the Company, to the effect that such persons will vote
all their shares in favor of such approval of the transactions contemplated
hereby as may be necessary to comply with any rule or regulation of the NASD
or any other regulatory agency.
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<PAGE>
(l) Lender Approvals. The Company has received all consents or approvals
from holders of its debt securities that are necessary to allow the Company
to redeem a portion of the Shares if so required pursuant to Schedule I
hereto.
SECTION II.2 REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. The Investor
hereby makes the following representations and warranties to the Company:
(a) Authorization, Enforcement. (i) Such Investor has the requisite
power and authority to enter into and perform this Agreement and to purchase
the Shares being sold hereunder, (ii) the execution and delivery of this
Agreement by the Investor and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate or
partnership action, and (iii) this Agreement constitutes a valid and binding
obligation of the Investor enforceable against the Investor in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar
laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
(b) No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by the Investor of the transactions
contemplated hereby do not and will not (i) result in a violation of the
Investor's charter documents or By-Laws or (ii) conflict with any agreement,
indenture or instrument to which Investor is a party, or (iii) result in a
violation of any law, rule, or regulation, or any order, judgment or decree
of any court or governmental agency applicable to Investor. The business of
the Investor is not being conducted in violation of any law or regulation of
any governmental entity, except for possible violations which either singly
or in the aggregate do not and will not have a material adverse effect on
the Investor. The Investor is not required to obtain any consent or
authorization of any governmental agency in order for it to perform its
obligations under this Agreement. The data to be provided by the Investor in
connection with registering the Registrable Securities under the Act will be
true and correct in all material respects.
(c) Investment Representation. The Investor is purchasing the Shares for
its own account for investment and not with a view to distribution otherwise
than in compliance with the Act. Investor has no present intention to sell
the Shares and Investor has no present arrangement (whether or not legally
binding) to sell the Shares to or through any person or entity; provided,
however, that by making the representations herein, the Investor does not
agree to hold the Shares for any minimum or other specific term and reserves
the right to dispose of the Shares at any time in accordance with Federal
and state securities laws applicable to such disposition.
(d) Accredited Investor. The Investor is an accredited investor as
defined in Rule 501 promulgated under the Act. The Investor has such
knowledge and experience in financial and business matters in general, and
investments in particular, so that the Investor is able to evaluate the
merits and risks of an investment in the Shares and to protect its own
interests in connection with such investment. In addition (but without
limiting the effect of the Company's representations and warranties
contained herein), the Investor has received such information as it
considers necessary or appropriate for deciding whether to purchase the
Shares pursuant hereto. The Investor acknowledges that no representation or
warranty is made by the Placement Agent or any persons representing the
Placement Agent with respect to the Company or sale of the Shares.
(e) Rule 144. The Investor understands that there is no public trading
market for the Shares, that none is expected to develop, and that the Shares
must be held indefinitely unless such Shares or securities into which the
Shares are converted are registered under the Act or an exemption from
registration is available. The Investor has been advised or is aware of the
provisions of Rule 144 promulgated under the Act.
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ARTICLE III
COVENANTS
SECTION III.1 SECURITIES COMPLIANCE.
(a) The Company shall notify the SEC and NASD, in accordance with their
requirements, of the transactions contemplated by this Agreement, and shall
take all other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Shares and Common Stock issuable upon conversion thereof to
the Investor or subsequent holder.
(b) The Investor understands that the Shares are being offered and sold
in reliance on a transactional exemption from the registration requirements
of Federal and state securities laws and that the Company is relying upon
the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Investor set forth herein in order
to determine the applicability of such exemptions and the suitability of the
Investor to acquire the Shares.
SECTION III.2 REGISTRATION AND LISTING. Until one (1) year after all Shares
have been converted into Common Stock, the Company will cause its Common Stock
(or other securities into which the Shares are convertible) to continue to be
registered under Sections 12(b) or 12(g) of the Exchange Act, will comply in all
respects with its reporting and filing obligations under said act, will comply
with all requirements related to any registration statement filed pursuant to
this Agreement and will not take any action or file any document (whether or not
permitted by the Act or the Exchange Act or the rules thereunder) to terminate
or suspend such registration or to terminate or suspend its reporting and filing
obligations under said Acts, except as permitted herein. Until one (1) year
after all Shares have been converted into Common Stock the Company will use its
best efforts to continue the listing or trading of its Common Stock (or other
securities into which the Shares are convertible) on the Nasdaq National Market
or the Nasdaq Small Cap Market or a national securities exchange and will comply
in all respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the NASD and Nasdaq.
SECTION III.3 STOCKHOLDER APPROVAL. The Company will use its best efforts
to promptly notice and hold a stockholders meeting as soon as reasonably
practicable to obtain any stockholder approvals required by the Company
(including those required by all applicable agreements between the Company and
the NASD or Nasdaq) to allow for issuance of Common Stock upon conversion of the
Shares.
SECTION III.4 SALE RESTRICTIONS. Following conversion of the Shares into
Common Stock of the Company, Investor will not on any trading day offer or sell
publicly on NASDAQ or on the principal exchange on which the Common Stock is
traded, or any other securities market or securities exchange, on a net basis,
more than the following number of such shares of Common Stock: the greatest of
(i) 10% of the average daily trading volume of the Common Stock for the five
trading days immediately preceding such sale as reported by NASDAQ or by such
principal exchange, (ii) 12,000 shares, or (iii) 10% of the trading volume for
the Common Stock on such day, as reported by NASDAQ or by such principal
exchange. This provision shall survive the final conversion date of the Shares.
SECTION III.5 CONVERSION RIGHTS. Investor shall not be entitled to convert
any Share into Common Stock of the Company if following conversion of such Share
the Investor and its affiliates (within the meaning of the Exchange Act) shall
be the beneficial owners (as defined in Rule 13d-3 under the Exchange Act) of
10% or more of the Common Stock of the Company, or if a lesser percentage is set
forth after the name of the Investor on the signature page hereof, such lesser
percentage. The provisions of this Section cannot be amended.
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SECTION III.6 HEDGING RESTRICTIONS. Investor agrees not to engage in any
short sales, swaps, purchasing of puts, or other hedging activities that involve
the direct or indirect use of the Common Stock or any derivative securities
based on Common Stock to hedge its investment in the Shares. This Section shall
not apply to transactions in which Investor has no beneficial interest made on
behalf of third-party clients who are not holders of Shares.
SECTION III.7 NOTICE OF CONVERSION CAP. No later than 10 days after the end
of the 15th full calendar month after the Closing Date the Company will deliver
notice to the Investor specifying the amount of the then applicable Conversion
Cap (as defined in Schedule I hereto) and the calculation thereof.
ARTICLE IV
CONDITIONS
SECTION IV.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO SELL
THE SHARES. The obligation hereunder of the Company to issue and/or sell the
Shares to the Investor is subject to the satisfaction, at or before the Closing,
of each of the conditions set forth below. These conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion.
(a) Accuracy of the Investor's Representations and Warranties. The
representations and warranties of the Investor shall be true and correct in
all material respects when made and as of the Closing Date.
(b) Performance by the Investor. The Investor shall have performed all
agreements and satisfied all conditions required to be performed or
satisfied by the Investor at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated
or endorsed by any court or governmental authority of competent jurisdiction
which prohibits the consummation of any of the transactions contemplated by
this Agreement.
SECTION IV.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE INVESTOR TO
PURCHASE THE SHARES. The obligation hereunder of the Investor to acquire and
pay for the Shares is subject to the satisfaction, at or before the Closing, of
each of the conditions set forth below. These conditions are for the Investor's
sole benefit and may be waived by the Investor at any time in its sole
discretion.
(a) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that
speak as of a particular date).
(b) Performance by the Company. The Company shall have performed all
agreements and satisfied all conditions required to be performed or
satisfied by the Company at or prior to the Closing.
(c) Nasdaq. The Company's Common Stock shall be listed and trade on the
Nasdaq National Market on the Closing Date.
(d) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated
or endorsed by any court or governmental authority of competent jurisdiction
which prohibits the consummation of any of the transactions contemplated by
this Agreement.
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(e) Opinion of Counsel, Etc. At the Closing the Investor shall have
received an opinion of counsel to the Company (who may be in-house counsel)
in the form attached hereto, and such other certificates and documents as
the Investor or its counsel shall reasonably require incident to the
Closing.
ARTICLE V
LEGEND ON STOCK
Each certificate representing the Shares and, if appropriate, securities
issued upon conversion thereof, shall be stamped or otherwise imprinted with a
legend substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR
SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID
ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN APPLICABLE EXEMPTION
FROM SUCH REGISTRATION REQUIREMENTS.
The Company agrees to reissue certificates representing the Shares or, if
applicable, the securities issued upon conversion thereof without the legend set
forth above at such time as (i) in the opinion of counsel to the holder, the
holder thereof is permitted to dispose of such Shares (or securities issued upon
conversion thereof) pursuant to Rule 144 under the Act, (ii) the securities are
sold to a purchaser or purchasers who (in the opinion of counsel to such
purchasers, in form and substance reasonably satisfactory to the Company and its
counsel) are able to dispose of such shares publicly without registration under
the Act, or (iii) such securities are included in an effective registration
statement under the Act.
ARTICLE VI
TERMINATION
SECTION VI.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be
terminated at any time prior to the Closing by the mutual written consent of the
Company and the Investor.
SECTION VI.2 OTHER TERMINATION. This Agreement may be terminated by action
of the Board of Directors or other governing body of the Investor or the Company
at any time if the Closing shall not have been consummated by the fifth business
day following the date of this Agreement and in no event later than September
30, 1997.
SECTION VI.3 AUTOMATIC TERMINATION. This Agreement shall automatically
terminate without any further action of either party hereto if the Closing shall
not have occurred by the tenth business day following the date of this
Agreement.
ARTICLE VII
MISCELLANEOUS
SECTION VII.1 FEES AND EXPENSES. Except as otherwise set forth in Section
1.4 hereof, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company will compensate the Placement Agent
and will indemnify it against certain liabilities. The Placement Agent's
compensation includes a cash payment in an amount equal to 8.7% of the Purchase
Price of Shares sold by the Company, and the issuance of warrants to the
Placement Agent to purchase that number of Shares equal to 10% of the number of
Shares sold. The Company shall
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pay all stamp and other taxes and duties levied in connection with the issuance
of the Shares pursuant hereto.
SECTION VII.2 SPECIFIC ENFORCEMENT, CONSENT TO JURISDICTION.
(a) The Company and the Investor acknowledge and 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 or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof,
this being in addition to any other remedy to which either of them may be
entitled by law or equity.
(b) Each of the Company and the Investor (i) hereby irrevocably submits
to the jurisdiction of the United States District Court and other courts of
the United States sitting in New York for the purposes of any suit, action
or proceeding arising out of or relating to this Agreement and (ii) hereby
waives, and agrees not to assert in any such suit, action or proceeding, any
claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or
that the venue of the suit, action or proceeding is improper. Each of the
Company and the Investor consents to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address
in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing in this paragraph shall affect or limit any right to serve
process in any other manner permitted by law.
SECTION VII.3 ENTIRE AGREEMENT: AMENDMENT. This Agreement contains the
entire understanding of the parties with respect to the matters covered hereby
and, except as specifically set forth herein, neither the Company nor the
Investor makes any representation, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived or amended
other than by a written instrument signed by the party against whom enforcement
of any such amendment or waiver is sought.
SECTION VII.4 NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be effective (a)
upon hand delivery or delivery by telex (with correct answer back received),
telecopy or facsimile at the address or number designated below (if delivered on
a business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice is to be
received) or (b) on the second business day following the date of mailing by
express courier
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service, fully prepaid, addressed to such address, or upon actual receipt of
such mailing, whichever shall first occur. The addresses for such communications
shall be:
<TABLE>
<S> <C>
Jaime W. Ellertson, President
Interleaf, Inc.
62 Fourth Avenue
Waltham, MA 02154
to the Company: Fax: (617) 290-4977
Anil Khosla, Esq.
Peabody & Arnold
50 Rowes Wharf
Boston, MA 02110-21253342
with a copy to: Fax: (617) 951-2125
At the address set forth at the foot of this
Agreement, with copies to Investor's counsel as
to the set forth at the foot of this Agreement or as
Investor: specified in writing by Investor
Gerard K. Cappello
Cappello Capital Corp.
1299 Ocean Avenue, Suite 306
Santa Monica, California 90401
with a copy to: Fax: (310) 393-4838
</TABLE>
Any party hereto may from time to time change its address for notices by giving
at least 10 days' written notice of such changed address to the other party
hereto.
SECTION VII.5 WAIVERS. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
SECTION VII.6 HEADINGS. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
SECTION VII.7 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
this Agreement shall be binding upon and inure to the benefit of the parties and
their successors and assigns. The parties hereto may amend this Agreement
without notice to or the consent of any third party.
SECTION VII.8 NO THIRD PARTY BENEFICIARIES. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
SECTION VII.9 GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of New York without
regard to such state's principles of conflict of laws.
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SECTION VII.10 SURVIVAL. The representations and warranties of the Company
and the Investor contained in Article II and the agreements and covenants set
forth in Articles I, III, V and VII shall survive the Closing for five years.
SECTION VII.11 EXECUTION. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event any signature is delivered by facsimile
transmission, the party using such means of delivery shall cause the manually
executed signature page(s) to be physically delivered to the other party within
five days of the execution hereof.
SECTION VII.12 PUBLICITY. The Company agrees that it will not disclose, and
will not include in any public announcement, the name of the Investor without
its consent, unless and until such disclosure is required by law or applicable
regulation, and then only to the extent of such requirement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the date hereof.
<TABLE>
<S> <C> <C>
INTERLEAF, INC.
By:
-----------------------------------------
Name:
Its: PRESIDENT
Number of Shares
THE INVESTOR
By:
- -------------- -----------------------------------------
Dollar Amount at Name:
$1,000 per share Its:
$ -------------- Investor's address:
Percentage limitation, if desired
Name and address of Investor's counsel:
</TABLE>
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SCHEDULE I
RESOLUTION ESTABLISHING PREFERENCES
OF
6% CONVERTIBLE PREFERRED STOCK
RESOLVED that there shall be a series of shares of the Preferred Stock of
the Corporation designated "6% Convertible Preferred Stock"; that the number of
authorized shares of such series shall be 11,000 and that the rights and
preferences of such series (the "6% Preferred") and the limitations or
restrictions thereon, shall be as follows:
1. DIVIDENDS.
(a) The holders of the 6% Preferred shall be entitled to receive out of
any assets legally available therefor cumulative dividends at the rate of
$60.00 per share per annum, payable annually on September 30 of each year,
when and as declared by the Board of Directors, in preference and priority
to any payment of any dividend on the Common Stock or any other class or
series of stock of the Corporation ranking junior to the 6% Preferred and
ranking PARI PASSU with the Class C Preferred Stock of the Corporation. Such
dividends shall accrue on any given share from the day of original issuance
of such share and shall accrue from day to day whether or not earned or
declared. If at any time dividends on the outstanding 6% Preferred at the
rate set forth above shall not have been paid or declared and set apart for
payment with respect to all preceding periods, the amount of the deficiency
shall be fully paid or declared and set apart for payment, but without
interest, before any distribution, whether by way of dividend or otherwise,
shall be declared or paid upon or set apart for the shares of any other
class or series of stock of the Corporation except a class or series which
is entitled to priority over the 6% Preferred.
(b) Dividends shall be paid in shares of 6% Preferred valued at $1,000
per share. Dividends not theretofore paid shall be paid upon conversion of
any share of the 6% Preferred and shall be simultaneously converted into
Common Stock together with the share on which such dividends have accrued.
(c) At its option, the Corporation may elect to pay accumulated
dividends in cash. The Corporation must give notice of such election in the
manner provided in Section 5 hereof at least ten (10) calendar days prior to
both the date of payment and the date Notice of Conversion is given by a
holder. The Corporation may choose the cash election any number of times and
each such election may be effective for any length of time established by
the Corporation and stated in its notice of the election.
2. LIQUIDATION PREFERENCE.
(a) The liquidation rights of the 6% Preferred shall rank pari passu
with the Class C Preferred Stock of the Corporation. In the event of any
liquidation, dissolution or winding up of the Corporation, either voluntary
or involuntary, the holders of the 6% Preferred shall be entitled to
receive, prior and in preference to any distribution of any assets of the
Corporation to the holders of the Common Stock or any other class or series
of shares except any class or series which is entitled to priority over the
6% Preferred and except for ratable distribution to the Class C Preferred
Stock, the amount of $1,000 per share plus any accrued but unpaid dividends
plus any amounts accrued but unpaid under Section 1.4(b)(iv) of the
Preferred Stock Investment Agreement under which shares of the 6% Preferred
were originally issued (the "Liquidation Preference").
1
<PAGE>
(b) Subject to the last sentence of this Section, a consolidation or
merger of the Corporation with or into any other corporation or
corporations, or a sale of all or substantially all of the assets of the
Corporation, shall, at the option of the holders of the 6% Preferred, be
deemed a liquidation, dissolution or winding up within the meaning of this
Section 2 if the shares of stock of the Corporation (along with all
derivative securities) outstanding immediately prior to such transaction
represent immediately after such transaction less than a majority of the
voting power of the surviving corporation (or of the acquirer of the
Corporation's assets in the case of a sale of assets). Such option may be
exercised by the vote or written consent of holders of a majority of the 6%
Preferred at any time within thirty calendar days after written notice of
the essential terms of such transaction shall have been given to the holders
of the 6% Preferred as provided in Section 5 hereof. Such notice shall be
given by the Corporation immediately following determination of such
essential terms. If such option is exercised, the holders of the 6%
Preferred shall be entitled to receive, in cash, immediately upon the
occurrence of such transaction, an amount per share equal to the Liquidation
Preference divided by the difference between 100% and the Applicable
Percentage determined pursuant to Section 4 hereof. This Section shall not
apply to a business combination in which the Common Stock of the Corporation
is converted solely into or exchanged solely for voting common stock of the
corporation surviving such business combination, if (i) such common stock of
the surviving corporation is listed and traded on the NASDAQ National
Market, the American Stock Exchange or the New York Stock Exchange, and (ii)
the Board of Directors of the Corporation determines in good faith that the
conversion rights and other rights and preferences of the 6% Preferred are
preserved and not rendered of less value by the terms of such business
combination.
3. MANDATORY CONVERSION.
On the fifth anniversary of the date of issuance, all then outstanding
shares of 6% Preferred shall be automatically converted into Common Stock at the
Conversion Price on such anniversary date and otherwise pursuant to the
applicable provisions set forth in Section 4 hereof.
4. CONVERSION. The holders of the 6% Preferred shall have optional
conversion rights as follows:
(a) Accrual of Conversion Rights. The Conversion Period shall commence
90 days after the date of issuance, and shall continue thereafter for the
life of the issue. Each holder of record of 6% Preferred shares on the date
of commencement of the Conversion Period (an "Original Holder") shall be
entitled to convert in any calendar month the following percentage of the 6%
Preferred shares held by such holder on the date of commencement of the
Conversion Period (the "Conversion Restriction"). The percentage for each
calendar month will be determined based on the highest of the daily low
trading prices of the Common Stock during such month, as follows:
<TABLE>
<CAPTION>
HIGHEST OF DAILY LOW
TRADING PERCENTAGE BECOMING
PRICES DURING MONTH CONVERTIBLE FOR SUCH MONTH
- ------------------------- ---------------------------
<S> <C>
$2.50 or less 10.0%
$2.51 to $3.50 10.0%
$3.51 to $4.00 12.5%
$4.01 to $5.50 15.0%
$5.51 to $6.00 17.5%
$6.01 to $7.50 20.0%
$7.51 to $8.50 22.5%
$8.51 or more 25.0%
</TABLE>
2
<PAGE>
The number of shares which may be converted in any calendar month shall include
on a cumulative basis the number of shares which might have been but were not
converted during earlier calendar months, except that in any month in which the
highest of the daily low trading prices is $2.50 or less, the amount converted
shall not exceed 10%. In the case of transfers of shares by an Original Holder
the Corporation shall make such notations on its stock ownership records and on
the certificates for shares issued upon transfer so as to reflect the portion
(if any) of the transferred shares which have become convertible pursuant to
this provision, or the Corporation may at its election issue certificates
representing the 6% Preferred shares in such form, or with such annotations, as
to reflect the time or times at which the shares represented by such
certificates will become convertible.
(b) Removal of Limitations. The limitations set forth in Section 4(a)
hereof, with respect to the percentage of 6% Preferred shares which may be
converted during certain time periods, shall terminate and all the 6%
Preferred shares shall thereafter be fully convertible if any of the
following events or conditions shall occur or exist: (i) an event described
in Section 2(b) (subject to the exclusion in the last sentence of such
Section) shall occur, whether or not the holders of 6% Preferred deem such
event to be a liquidation; (ii) proceedings for relief under any bankruptcy
or similar law for the relief of debtors are instituted by or against the
Corporation or any of its significant subsidiaries and, if instituted
against the Corporation or such subsidiary, are consented to or not
dismissed within 30 days; (iii) the independent auditors of the Corporation
shall fail or be unwilling to express within 90 days after the end of the
Corporation's fiscal year a customary opinion on the financial statements of
the Corporation, or shall express such opinion subject to a "going concern"
qualification; (iv) the Common Stock of the Corporation shall cease to be
listed on either the NASDAQ Small-Cap Market, the NASDAQ National Market, or
a national securities exchange; or (v) there shall be a material breach by
the Corporation of any of its obligations hereunder or under the Preferred
Stock Investment Agreements pursuant to which the 6% Preferred was
originally issued which has a material adverse effect on the holders of 6%
Preferred.
(c) Right to Convert. At and after the time it has become convertible,
each share of 6% Preferred shall be convertible, at the option of the holder
thereof, into such number of fully paid and nonassessable shares of Common
Stock as is determined by dividing (i) the liquidation preference of the 6%
Preferred share determined pursuant to Section 2(a) hereof on the date the
notice of conversion is given, by (ii) the Conversion Price determined as
hereinafter provided in effect on said date, provided however, that a share
of 6% Preferred shall not be converted into Common Stock if following such
conversion the holder thereof together with affiliates of such holder would
be the beneficial owners (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of 10% or more of the Common Stock of the Corporation.
(d) Mechanics of Conversion. To convert shares of 6% Preferred into
shares of Common Stock, the holder shall give written notice to the
Corporation (which notice may be given by facsimile transmission) that such
holder elects to convert the same and shall state therein the number of
shares to be converted and the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued.
Promptly thereafter the holder shall surrender the certificate or
certificates representing the shares to be converted, duly endorsed, at the
office of the Corporation or of any transfer agent for such shares, or at
such other place designated by the Corporation. The Corporation shall,
immediately upon receipt of such notice, issue and deliver to or upon the
order of such holder, against delivery of the certificates representing the
shares which have been converted, a certificate or certificates for the
number of shares of Common Stock to which such holder shall be entitled, and
a certificate representing the shares of 6% Preferred not so converted, if
any. The Corporation shall effect such issuance immediately and shall
transmit the certificates by messenger or
3
<PAGE>
overnight delivery service to reach the address designated by such holder
within three trading days after the receipt of such notice. Notice of
conversion may be given by a holder at any time of day up to 5:00 pm Los
Angeles time, and such conversion shall be deemed to have been made
immediately prior to the close of business on the date such notice of
conversion is given (the "Conversion Date"). The person or persons entitled
to receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock at the close of business on the Conversion Date.
(e) Determination of Conversion Price.
(i) On any Conversion Date prior to the first day of the thirteenth
calendar month after the Closing, the Conversion Price shall not be less
than $1.50, and until the end of the seventh month following the Closing
the Conversion Price shall be $5.50. Subject to the foregoing sentence
and to the provisions of subsection (e)(iii) and subsection (f) of this
Section, on any Conversion Date, the Conversion Price shall be the
average of the three (3) lowest daily trading prices of the Common Stock
for the 22 consecutive trading days ending with the trading day prior to
the Conversion Date, reduced by the Applicable Percentage (as defined
below) in effect on the Conversion Date.
(ii) The Applicable Percentage shall be as follows:
<TABLE>
<C> <S>
9.8% starting on the first day of the eighth (8th) calendar month after
Closing.
11.1% starting on the first day of the ninth (9th) calendar month after
Closing.
12.4% starting on the first day of the tenth (10th) calendar month after
Closing.
13.7% starting on the first day of the eleventh (11th) calendar month
after Closing.
15.0% starting on the first day of the twelfth (12th) calendar month
after Closing and thereafter.
</TABLE>
(iii) From and after the first day of the sixteenth (16th) calendar
month after Closing, the Maximum Conversion Price ("Conversion Cap")
shall be 85% of the average low daily trading price of the Common Stock
during the period beginning on the first day of the twelfth (12th)
calendar month following Closing and ending on the last day of the
fifteenth (15th) calendar month following Closing. Notwithstanding the
prior sentence, in no event shall the Conversion Cap be less than the
greater of: i) two dollars and fifty cents ($2.50), or ii) the average
daily closing price of the Common Stock for the five (5) trading days
immediately prior to the Closing.
(iv) The terms "low trading price" and "last sale price" of the
Common Stock on any day shall mean, respectively, (A) the lowest reported
sale price and the last reported sale price of the Common Stock on the
principal stock exchange on which the Common Stock is listed, or (B) if
the Common Stock is not listed on a stock exchange, the lowest reported
sale price and the last reported sale price of the Common Stock on the
principal automated securities price quotation system on which sale
prices of the Common Stock are reported, or (C) if the Common Stock is
not listed on a stock exchange and sale prices of the Common Stock are
not reported on an automated quotation system, the lowest bid price and
the last bid price for the Common Stock as reported by National Quotation
Bureau Incorporated. If none of the foregoing provisions are applicable,
the "low trading price" and "last sale price" of the Common Stock on a
day will be the fair market value of the Common Stock on that day as
determined by a member firm of the New York Stock Exchange, Inc.,
selected by the Board of Directors of the Corporation. The term "trading
day" means (x) if the Common Stock is listed on at least one stock
exchange, a day on
4
<PAGE>
which there is trading on the principal stock exchange on which the
Common Stock is listed, (y) if the Common Stock is not listed on a stock
exchange but sale prices of the Common Stock are reported on an automated
quotation system, a day on which trading is reported on the principal
automated quotation system on which sales of the Common Stock are
reported, or (z) if the foregoing provisions are inapplicable, a day on
which quotations are reported by National Quotation Bureau Incorporated.
The "closing price" of the Common Stock on any day means the "last sale
price" as defined above.
(v) In the event that during any period of consecutive trading days
provided for above, the Corporation shall declare or pay any dividend on
the Common Stock payable in Common Stock or in rights to acquire Common
Stock, or shall effect a stock split or reverse stock split, or a
combination, consolidation or reclassification of the Common Stock, then
the Conversion Price and (if such event occurs during or after the 12th
month after the date of issuance) the Conversion Cap shall be
proportionately decreased or increased, as appropriate, to give effect to
such event, and like adjustment shall be made in any price per share
specified in dollars herein.
(f) Green Floor. If at any time the Conversion Price falls below three
dollars ($3.00) per share (the "Green Floor Price"), the Corporation may at
its option, exercised by written notice ("Cash Conversion Notice") given to
the holders of the 6% Preferred five days prior to the effective date
specified in such Notice (the "Effective Date") honor any conversion request
otherwise properly made, if at a Conversion Price lower than the Green Floor
Price, by a cash payment in lieu of the issuance of Common Stock in an
amount equal to the proceeds which would otherwise have been received by the
holder if conversion were in fact made into Common Stock and such Common
Stock were sold at the high trade price on the trading day immediately
preceding the date that the conversion notice is received (the "Cash
Conversion Amount"). The Cash Conversion Notice may specify an expiration
date of such Notice, or may specify a limitation on the aggregate number of
dollars which the Corporation will pay in Cash Conversion Amounts. When such
dollar limitation is reached the Corporation shall give immediate notice to
the holders of 6% Preferred that the Cash Conversion Notice is no longer in
effect. The Corporation may at any time reset the Green Floor Price to any
price determined by the Corporation by giving 30 days prior notice to the
holders of the 6% Preferred. If notice of conversion shall be given by a
holder of 6% Preferred shares on a date that a Cash Conversion Notice is in
effect, the Corporation shall within 48 hours following surrender of the
share certificate as provided in Section 4(d) hereof make payment of the
Cash Conversion Amount to such holder by wire transfer of immediately
available funds in U.S. dollars pursuant to such wire transfer instructions
as may have been given by such holder, or otherwise by mailing by certified
mail a bank cashiers' or certified check for the Cash Conversion Amount to
the record address of such holder. A Cash Conversion Notice shall cease to
be effective if the Corporation fails to make payment of the Cash Conversion
Amount to any holder entitled thereto in the manner and within the time
specified in the foregoing sentence, time being of the essence. If a Cash
Conversion Notice ceases to be effective pursuant to the foregoing sentence,
it shall not thereafter be effective as to any holder and no Cash Conversion
Notice may thereafter be given by the Corporation. The number of shares that
a holder is entitled to convert, determined pursuant to subsections (a) and
(b) of this Section 4, shall not be affected by the giving or effectiveness
of a Cash Conversion Notice. Any Cash Conversion Notice shall be given as
provided in Section 5 hereof.
(g) Distributions. In the event the Corporation shall at any time or
from time to time 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 or any of its
subsidiaries or other property, other than cash dividends from earnings or
dividends of additional shares of Common
5
<PAGE>
Stock, then in each such event provision shall be made so that the holders
of 6% Preferred shall receive, upon the conversion thereof, the securities
or other property which they would have received had they been the owners on
the date of such event of the number of shares of Common Stock issuable to
them upon conversion.
(h) Certificates as to Adjustments. Upon the occurrence of any
adjustment or readjustment of the Conversion Price or the Conversion Cap
pursuant to Section 4(e)(v) or Section 4(m) hereof, or any adjustment of the
cash per-share prices specified herein, the Corporation at its expense shall
promptly compute such adjustment or readjustment in accordance with the
terms hereof and prepare and furnish to each holder of 6% Preferred 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 6%
Preferred, furnish or cause to be furnished to such holder a like
certificate prepared by the Corporation setting forth (i) such
adjustments and readjustments, and (ii) the number of other securities and
the amount, if any, of other property which at the time would be received
upon the conversion of 6% Preferred with respect to each share of Common
Stock received upon such conversion. If any holder disputes the computation
of such adjustment the Corporation shall cause independent public
accountants selected by the Corporation to verify and, if necessary, correct
such computation.
(i) Notice of Record Date. In the event of any taking by the Corporation
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend
(other than a cash dividend) or other distribution, any security or right
convertible into or entitling the holder thereof to receive additional
shares of Common Stock, or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities or
property, or to receive any other right, the Corporation shall give notice
to each holder of 6% Preferred at least 10 days prior to such date
specifying the date on which any such record is to be taken for the purpose
of such dividend, distribution, security or right and the amount and
character of such dividend, distribution, security or right.
(j) Issue Taxes. The Corporation shall pay any and all issue and other
taxes, excluding any income, franchise or similar taxes, that may be payable
in respect of any issue or delivery of shares of Common Stock on conversion
of shares of 6% Preferred pursuant hereto; provided, however, that the
Corporation shall not be obligated to pay any transfer taxes resulting from
any transfer requested by any holder in connection with any such conversion.
(k) Reservation of Stock Issuable Upon Conversion. The Corporation shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion
of the shares of the 6% Preferred, such number of its shares of Common Stock
as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the 6% Preferred, and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of the 6% Preferred,
the Corporation will take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such
purpose, including, without limitation, engaging in best efforts to obtain
the requisite shareholder approval as promptly as practicable.
(l) Fractional Shares. No fractional shares shall be issued upon the
conversion of any share or shares of 6% Preferred. All shares of Common
Stock (including fractions thereof) issuable upon conversion of more than
one share of 6% Preferred by a holder thereof shall be aggregated for
purposes of determining whether the conversion would result in the issuance
of any fractional share.
6
<PAGE>
If, after the aforementioned aggregation, the conversion would result in the
issuance of a fraction of a share of Common Stock, the Corporation shall, in
lieu of issuing any fractional share, pay the holder otherwise entitled to
such fraction a sum in cash equal to the fair market value of such fraction
on the date of conversion (as determined in good faith by the Board of
Directors of the Corporation).
(m) Reorganization or Merger. In case of any reorganization or any
reclassification of the capital stock of the Corporation or any
consolidation or merger of the Corporation with or into any other
corporation or corporations or a sale of all or substantially all of the
assets of the Corporation to any other person, and the holders of 6%
Preferred do not elect to treat such transaction as a liquidation,
dissolution or winding up as provided in Section 2, then, as part of such
reorganization, consolidation, merger or sale, provision shall be made so
that each share of 6% Preferred shall thereafter be convertible into the
number of shares of stock or other securities or property (including cash)
to which a holder of the number of shares of Common Stock deliverable upon
conversion of such share of 6% Preferred would have been entitled upon the
record date of (or date of, if no record date is fixed) such event and, in
any case, appropriate adjustment (as determined by the Board of Directors)
shall be made in the application of the provisions herein set forth with
respect to the rights and interests thereafter of the holders of the 6%
Preferred, to the end that the provisions set forth herein shall thereafter
be applicable, as nearly as equivalent as is practicable, in relation to any
shares of stock or the securities or property (including cash) thereafter
deliverable upon the conversion of the shares of 6% Preferred. The
Corporation shall have no obligation to obtain the prior consent of the
holders of 6% Preferred, individually or as a class, except as expressly
provided herein or as provided by applicable law.
5. NOTICES. Any notice to be given to the holders of the 6% Preferred shall
be (i) mailed by first class mail postage prepaid to each holder of 6% Preferred
at the address shown on the records of the Corporation for such holder, (ii)
transmitted by telecopy or facsimile transmission to any holder which has
supplied a telecopy or facsimile address to the Corporation, and (iii) unless
receipted for by telecopy or facsimile on the date such notice is given, shall
be transmitted by an overnight delivery service or courier service for delivery
at the address shown on the records of the Corporation for such holder on the
first business day following the date such notice is given, or if delivery in
one business day to such address cannot be effected by such delivery service,
then on the earliest day on which such delivery can be made.
6. OTHER PROVISIONS. For all purposes of this Resolution, the term "date of
issuance" or "closing" shall mean the day on which shares of the 6% Preferred
are first issued by the Corporation, and the terms "trading price", "low trading
price", "closing price", "last trade price", and "trading days" shall have the
meanings given them in Section 4(e) hereof. Any provision herein which conflicts
with or violates any applicable usury law shall be deemed modified to the extent
necessary to avoid such conflict or violation.
7. RESTRICTIONS AND LIMITATIONS. The Corporation shall not undertake the
following actions without the consent of the holders of a majority of the 6%
Preferred: (i) modify its Certificate of Incorporation or Bylaws so as to amend
or change any of the rights, preferences, or privileges of the 6% Preferred,
(ii) authorize or issue any other equity security senior to the 6% Preferred, or
(iii) purchase or otherwise acquire for value any Common Stock or other equity
security of the Corporation either junior or senior to or on a parity with the
6% Preferred while there exists any arrearage in the payment of cumulative
dividends hereunder.
8. VOTING RIGHTS. Except as provided herein or as provided for by law, the
6% Preferred shall have no voting rights.
7
<PAGE>
9. ATTORNEYS' FEES. Any holder of 6% Preferred shall be entitled to recover
from the Corporation the reasonable attorneys' fees and expenses incurred by
such holder in connection with enforcement by such holder of any obligation of
the Corporation hereunder, if such holder is the prevailing party in an action
or proceeding to compel such enforcement.
10. LIMITATION ON NUMBER OF CONVERSION SHARES. The Corporation shall not be
obligated to issue, in the aggregate, more than 3,150,000 shares of Common Stock
as presently constituted (the "Nasdaq Cap") upon conversion of the 6% Preferred,
if issuance of a larger number of shares would constitute a breach of the Rules
or Designation Criteria of the NASDAQ Stock Market (the "NASDAQ Rules"). Subject
to the obligation to effect certain redemptions pursuant to the last three
sentences of this Section, if further issuances of shares of Common Stock upon
conversion of the 6% Preferred would constitute a breach of the NASDAQ Rules
(i.e., all of the shares permitted to be issued under the Nasdaq Cap shall have
been so issued), then so long thereafter as such limitation shall continue to be
applicable and any shares of 6% Preferred are submitted for conversion such
shares shall receive in cash an amount equal to the Cash Conversion Amount
determined as provided in Section 4(f) hereof, in lieu of the Common Stock which
such shares would otherwise be entitled to receive upon conversion. Payment of
the Cash Conversion Amount shall be made no later than as specified in Section
4(f) and shall bear daily interest thereafter at the rate of one-tenth of one
percent per day until paid. The NASDAQ Cap shall be proportionately and
equitably adjusted in the event of stock splits, stock dividends, reverse stock
splits, reclassifications or other such events, in such manner as the Board of
Directors of the Corporation shall reasonably determine. If (A) the Corporation
is unable to obtain the requisite shareholder approval concerning the issuance
of shares of Common Stock upon conversion of the 6% Preferred to satisfy the
NASDAQ Rules prior to December 31, 1997, then (B) the Corporation shall
immediately redeem, at a "Special Redemption Price" equal to 110% of the
liquidation preference of such shares, the smallest number of Shares which is
sufficient, in the Corporation's reasonable judgment, such that following such
redemption, conversion of the remaining shares of 6% Preferred would not
constitute a breach of the Corporation's obligations under the NASDAQ Rules. Any
redemption effected pursuant to the preceding sentence shall require 15 days'
notice and the Redemption Date shall be not more than 15 days after the date
specified in Clause A of the preceding sentence. Such redemption shall be made
pro-rata. If there shall be a default in payment of the Special Redemption
Price, the amount so payable shall bear daily interest from and after the
Redemption Date at the rate of one-tenth of one percent per day until paid.
8
<PAGE>
STOCK PURCHASE WARRANT
WARRANT TO PURCHASE SHARES
OF
6% CONVERTIBLE PREFERRED STOCK
NO. PW-1 EXPIRES AT 5:00 P.M., PACIFIC TIME, ON SEPTEMBER 30, 2002
INTERLEAF, INC.
This certifies that , the registered holder hereof or assigns (the
"Warrantholder") is entitled to purchase from Interleaf, Inc., a Massachusetts
corporation (the "Company"), at any time before the expiration time and date
shown above (the "Expiration Time") at the purchase price per share of $1,000
(the "Warrant Price"), the number of shares shown above of the 6% Convertible
Preferred Stock ("6% Preferred Stock") of the Company. The number and class of
shares purchasable upon exercise of this Warrant and the Warrant Price per share
shall be subject to adjustment from time to time as set forth below.
SECTION 1. TRANSFERABILITY AND FORM OF WARRANT.
1.1 REGISTRATION. This Warrant shall be numbered and shall be registered on
the books of the Company.
1.2 TRANSFER. This Warrant shall be transferable on the books of the
Company only upon delivery thereof duly endorsed by the Warrantholder or duly
authorized attorney or representative, accompanied by proper evidence of
succession, assignment or authority to transfer. Upon any registration of
transfer, the Company shall execute and deliver a new Warrant to the person
entitled thereto. This Warrant may be divided or combined, upon request to the
Company by the Warrantholder, into a certificate or certificates representing
the right to purchase the same aggregate number of shares. Unless the context
indicates otherwise, the term "Warrantholder" shall include any transferee or
transferees of a Warrant and the term "Warrant" shall include any and all
warrants issued upon division, exchange, substitution or transfer of this
Warrant. Notwithstanding the foregoing, the Warrantholder shall not transfer the
Warrant or the securities underlying the Warrants in a private transaction
without advance permission from the Company, except for transfers to partners or
immediate family members.
1.3 FORM OF WARRANT. The Warrant shall be executed on behalf of the Company
by its President, Vice President or other authorized officer, and shall be dated
as of the date of signature thereof by the Company either upon initial issuance
or upon division, exchange, substitution or transfer. A Warrant bearing the
signature of an individual who was at any time the proper officer of the Company
shall bind the Company, notwithstanding that such individual shall have ceased
to hold such office prior to the delivery of such Warrant. The form of election
to exercise this Warrant and the form of assignment of this Warrant shall be
substantially as attached hereto.
SECTION 2. PAYMENT OF TAXES.
The Company will pay all documentary stamp taxes, if any, attributable to
the initial issuance of shares to the Warrantholder; provided, however, that the
Company shall not be required to pay any tax or taxes which may be payable in
respect of any secondary transfer of the Warrant or the shares.
<PAGE>
SECTION 3. MUTILATED OR MISSING WARRANTS.
In case this Warrant shall be mutilated, lost, stolen or destroyed, the
Company shall, at the request of the Warrantholder, issue and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant, or
in lieu of and in substitution for the lost, stolen or destroyed Warrant, a new
Warrant of like tenor, but only upon receipt of evidence satisfactory to the
Company of such loss, theft or destruction of such Warrant. The applicant shall
also comply with such other reasonable regulations and pay such other reasonable
administrative charges as the Company may prescribe.
SECTION 4. RESERVATION OF SHARES.
There has been reserved, and the Company shall at all times keep reserved so
long as this Warrant remains outstanding, out of its authorized shares of
capital stock, such number and class of shares as shall be subject to purchase
under this Warrant. Such reserved shares shall be used solely for issuances upon
exercise of this Warrant. Shares of any class issued upon exercise of this
Warrant shall have all the rights and privileges of other shares of the same
class, whenever issued, subject to the adjustment provisions set forth below.
SECTION 5. EXERCISE OF WARRANT.
5.1 EXERCISE BY CASH PAYMENT. The Holder of this Warrant shall have the
right at any time and from time to time to exercise this Warrant in full or in
part by surrender of this Warrant to the Company accompanied by payment to the
Company in cash or by certified or cashier's check or by wire transfer of funds
of the aggregate Warrant Price for the number of shares in respect of which this
Warrant is then exercised.
5.2 CASHLESS EXERCISE. This Warrant may be exercised in full or in part by
surrender of this Warrant to the Company accompanied by written notice
substantially in the form attached hereto of the holder's election to effect
cashless exercise ("Cashless Exercise"). Upon Cashless Exercise, the holder
shall be entitled to receive, in respect of each share for which this Warrant is
then exercised, that number of shares of 6% Preferred Stock (or such other class
of shares as may then be issuable upon exercise hereof) which, valued at Current
Value, have a value equal to the Current Value of each share as to which this
Warrant is then being exercised less the Warrant Price payable for such share.
Current Value of a share as to which this Warrant is being exercised shall be
the total Current Market Value of the number of shares of Common Stock of the
Company issuable upon conversion of such share at the Conversion Price in effect
on the date of such Cashless Exercise. Current Market Value of the Common Stock
shall be as defined in Section 7.
5.3 DELIVERY OF CERTIFICATES. Upon exercise of this Warrant the Company
shall issue and cause to be delivered with all reasonable dispatch to or upon
the written order of the Warrantholder and in such name or names as the
Warrantholder may designate, a certificate or certificates for the number of
full shares issuable upon such exercise together with cash, as provided in
Section 7 hereof, in respect of any fractional shares. The Company shall effect
such issuance immediately and shall transmit the certificates by messenger or
overnight delivery service to reach the address designated by the Warrantholder
within two business days after receipt of the Warrant Price or, in the case of a
cashless exercise, after receipt of the Warrant. Such certificate or
certificates shall be deemed to have been issued and any person so designated to
be named therein shall be deemed to have become a holder of record of such
shares as of the date of surrender of the Warrant and payment of the Warrant
Price, as aforesaid, notwithstanding that the certificates representing such
shares shall not actually have been delivered or that the stock transfer books
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of the Company shall then be closed. In the event of partial exercise a new
Warrant evidencing the remaining portion of this Warrant will be issued by the
Company.
5.4 SIMULTANEOUS CONVERSION. Subject to the applicable conversion
restrictions and other terms of the 6% Preferred Stock, the Warrantholder may
elect to convert the convertible securities issuable upon exercise of this
Warrant simultaneously with the exercise of this Warrant and may give written
notice of such election substantially in the form attached hereto. Upon such
election the Company need not issue certificates representing the convertible
securities issuable upon exercise of this Warrant, but shall issue and deliver
as provided in the foregoing Section certificates representing the securities to
which the holder is entitled upon such conversion.
SECTION 6. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES.
6.1 ADJUSTMENTS. The number and kind of securities purchasable upon the
exercise of the Warrants and the Warrant Price shall be subject to adjustment
from time to time upon the happening of certain events, as follows:
(a) If the shares purchasable upon exercise of the Warrants are
subdivided, combined or reclassified, or if other shares of the kind so
purchasable are issued in respect thereof as a dividend thereon (excluding
dividends required by the charter provisions governing such shares), the
number and class of shares purchasable upon exercise of the Warrants
immediately prior thereto shall be adjusted so that the Warrantholder shall
be entitled to receive the kind and number of shares or other securities of
the Company which it would have owned or would have been entitled to receive
after the happening of any of the events described above, had the Warrants
been exercised immediately prior to the happening of such event or any
record date with respect thereto. Any adjustment made pursuant to this
paragraph (a) shall become effective immediately after the effective date of
such event retroactive to the record date, if any, for such event.
(b) If the shares purchasable upon exercise of the Warrants become
entitled to receive a distribution of evidences of indebtedness or assets
(excluding dividends required by the charter provisions governing such
shares) or rights, options, warrants or convertible securities containing
the right to subscribe for or purchase securities or assets of the Company,
then, in each case, the number of shares thereafter purchasable upon the
exercise of the Warrants shall be determined by multiplying the number of
shares theretofore purchasable upon exercise of the Warrants by a fraction,
of which the numerator shall be the then Current Value on the date of such
distribution, and of which the denominator shall be such Current Value on
such date minus the then fair value of the portion of the assets or evidence
of indebtedness so distributed or of such subscription rights, options or
warrants applicable to one share. Such adjustment shall be made whenever any
such distribution is made and shall become effective on the date of
distribution retroactive to the record date for the determination of
shareholders entitled to receive such distribution. Current Value shall have
the meaning set forth in Section 5.2.
(c) No adjustment in the number of shares purchasable hereunder shall be
required unless such adjustment would require an increase or decrease of at
least one percent (1%) in the number of shares then purchasable upon the
exercise of a Warrant; provided, however, that any adjustments which by
reason of this paragraph (c) are not required to be made immediately shall
be carried forward and taken into account in any subsequent adjustment.
(d) Whenever the number or class of shares purchasable upon the exercise
of a Warrant is adjusted as herein provided, a corresponding adjustment in
the Warrant Price shall be made so that
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the aggregate Warrant Price payable upon full exercise of this Warrant shall
remain the same. If such adjustment results in more than one class of
security being purchasable upon exercise of this Warrant, the adjusted
Warrant Price shall be allocated to such securities on the basis of their
respective fair market values.
(e) Whenever the number or class of shares purchasable upon the exercise
of a Warrant or the Warrant Price is adjusted as herein provided, the
Company shall cause to be promptly mailed to the Warrantholder by first
class mail, postage prepaid, notice of such adjustment or adjustments
setting forth the number and class of shares purchasable upon the exercise
of a Warrant and the Warrant Price after such adjustment, together with a
brief statement of the facts requiring such adjustment and the computation
by which such adjustment was made. If any holder disputes the computation of
such adjustment the Corporation shall cause independent public accountants
selected by the Corporation to verify and, if necessary, correct such
computation.
(f) The term "Common Stock" shall mean (i) the class of stock designated
as the Common Stock of the Company at the issue date of this Warrant or (ii)
any other class of stock resulting from successive changes or
reclassifications of such Common Stock, and the term "6% Preferred Stock"
shall mean (x) the class or series of stock which is initially purchasable
upon exercise hereof, or (y) any other class or series of stock resulting
from successive reclassifications or changes of such 6% Preferred Stock. In
the event that at any time, as a result of an adjustment made pursuant to
this Section, the Warrantholder shall become entitled to purchase any
securities of the Company other than shares of 6% Preferred Stock,
thereafter the number of such other securities so purchasable upon exercise
of the Warrant and the Warrant Price of such securities shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent
as practicable to the provisions with respect to the shares contained in
this Section.
6.2 NO ADJUSTMENT FOR DIVIDENDS. Except as provided in Subsection 6.1, no
adjustment in respect of any dividends shall be made during the term of the
Warrant or upon the exercise of the Warrant.
6.3 PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION, CONSOLIDATION,
ETC. In case of any reclassification of the securities of the Company or any
consolidation of the Company with or merger of the Company into another
corporation or in case of any sale or conveyance to another corporation of the
property, assets or business of the Company as an entirety or substantially as
an entirety, the Company or such successor or purchasing corporation, as the
case may be, shall provide by agreement that the Warrantholder shall have the
right thereafter upon payment of the Warrant Price in effect immediately prior
to such action to purchase upon exercise of the Warrant the kind and amount of
shares and other securities and property which he would have owned or have been
entitled to receive after the happening of such reclassification, consolidation,
merger, sale or conveyance had the Warrant been exercised immediately prior to
such action. Such agreement shall provide for adjustments, which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section. The provisions of this subsection shall similarly apply to successive
reclassifications, consolidations, mergers, sales or conveyances.
6.4 STATEMENT ON WARRANT CERTIFICATES. Irrespective of any adjustments in
the Warrant Price or the number of securities purchasable upon the exercise of
the Warrant, the Warrant certificate or certificates theretofore or thereafter
issued may continue to express the same price and number of securities as are
stated in the similar Warrant certificates initially issued.
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SECTION 7. FRACTIONAL INTERESTS; CURRENT MARKET PRICE; CLOSING BID PRICE.
The Company shall not be required to issue fractional shares on the exercise
of the Warrant. If any fraction of a share would, except for the provisions of
this Section, be issuable on the exercise of the Warrant (or specified portion
thereof), the Company shall pay an amount in cash equal to the then Current
Value (as defined in Section 5.2) multiplied by such fraction. The term "Current
Market Price" of the Common Stock shall mean (i) if the Common Stock is traded
in the over-the-counter market or on the National Association of Securities
Dealers, Inc. Automated Quotations System ("NASDAQ"), the average per share
closing bid prices of the Common Stock on the 20 consecutive trading days
immediately preceding the date in question, as reported by NASDAQ or an
equivalent generally accepted reporting service, or (ii) if the Common Stock is
traded on a national securities exchange, the average for the 20 consecutive
trading days immediately preceding the date in question of the daily per share
closing bid prices of the Common Stock on the principal stock exchange on which
it is listed, or (iii) if the Common Stock is not so listed or traded, the fair
market value of the Common Stock as determined in good faith by the board of
directors of the Company. The term "closing bid price" shall mean the last bid
price on the day in question as reported by NASDAQ or an equivalent generally
accepted reporting service or (as the case may be) as reported by the principal
stock exchange on which the Common Stock is listed, or if not so reported, as
reasonably determined in good faith by the Board of Directors of the Company.
SECTION 8. NO RIGHTS AS SHAREHOLDER; NOTICES TO WARRANTHOLDER.
Nothing contained herein shall be construed as conferring upon the
Warrantholder any rights whatsoever as a shareholder of the Company, including
the right to vote, to receive dividends, to consent or to receive notices as a
shareholder in respect of any meeting of shareholders for the election of
directors of the Company or any other matter. If, however, at any time prior to
the expiration of the Warrant and prior to its exercise, any of the following
events shall occur:
(a) any action which would require an adjustment pursuant to Sections
6.1 or 6.3; or
(b) a dissolution, liquidation or winding up of the Company (other than
in connection with a consolidation, merger or sale of its property, assets
and business, as an entirety) shall be proposed;
then in any one or more of said events, the Company shall give notice in writing
of such event to the Warrantholder at least 10 business days prior to the date
fixed as a record date or the date of closing the transfer books or other
applicable date with respect thereto. Such notice shall specify such record date
or the date of closing the transfer books, as the case may be.
Any notice to the Warrantholder shall be given at the address of the
Warrantholder appearing on the books of the Company, and if the Warrantholder
has specified a telecopier address, by facsimile transmission to such address.
SECTION 9. REGISTRATION AND INDEMNIFICATION.
The holder of this Warrant and the holder of shares of 6% Preferred Stock
issued upon exercise of this Warrant shall have the same rights and obligations
with respect to registration under the Securities Act of 1933, and with respect
to indemnification in connection with any such registration, as if such holder
were one of the Investors under the Preferred Stock Investment Agreements
entered into between the Company and the original purchasers of the 6% Preferred
Stock of the Company, excluding, however, the provisions of the first sentence
of Section 1.4(b)(iv) of said Agreements. Such rights and obligations shall
continue until one year after the expiration or earlier exercise of this
Warrant.
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SECTION 10. EXPIRATION OF WARRANT.
10.1 If not theretofore exercised, this Warrant shall terminate at 5:00
p.m. Pacific time on the date shown in the caption hereof.
SECTION 11. SUCCESSORS.
All the covenants and provisions of this Agreement by or for the benefit of
the Company or the Warrantholder shall bind and inure to the benefit of their
respective successors and assigns hereunder.
SECTION 12. MERGER OR CONSOLIDATION OF THE COMPANY.
The Company will not merge or consolidate with or into any other corporation
or sell all or substantially all of its property to another corporation, unless
the provisions of Section 6.3 are complied with.
SECTION 13. APPLICABLE LAW.
This Agreement shall be deemed to be a contract made under the laws of the
State of New York and for all purposes shall be construed in accordance with the
laws of said State.
SECTION 14. SPECIAL LIMITATIONS.
The holder agrees that until September 30, 1998 it will not exercise any
Warrants without the Company's approval in any month during which, or following
a month in which, the trading price of the Common Stock is at any time below
$3.00 per share. Further, the holder agrees that it will consult with the
Company prior to exercising any Warrants, but the Company's approval is not
required except as expressly provided herein.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by a
duly authorized officer of the Company.
Interleaf, Inc.
By: __________________________________
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PURCHASE FORM
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant in respect of of the shares provided for
therein, and requests that certificates be issued in the name of:
- --------------------------------------------------------------------------------
(Please Print Name, Address and Taxpayer Identification Number)
- --------------------------------------------------------------------------------
and, if said number of shares shall not be all the shares purchasable hereunder,
that a new Warrant certificate for the balance of the shares purchasable under
the within Warrant be registered in the name of the undersigned Warrantholder or
his Assignee as below indicated and delivered to the address stated below.
The undersigned:
/ / elects to pay the full Warrant Price in cash or by certified or cashier's
check or wire funds transfer
/ / elects "cashless exercise" pursuant to Section 5.2 of the Warrant
"Current Value" for purposes of Cashless Exercise is: $
Number of shares issuable on Cashless Exercise is: shares
/ / elects simultaneous conversion pursuant to Section 5.4 of the Warrant
Dated: ______________________________________________
Signature of Warrantholder
The above signature must correspond with the name appearing upon the face of
this Warrant in every particular, without alteration or enlargement or any
change whatever.
Name of Assignee, if any: _________________________________________
(Please Print)
- --------------------------------------------------------------------------------
(Please print Name, Address and Taxpayer
Identification Number)
- --------------------------------------------------------------------------------
Signature Guaranteed: Signature guarantee is required if certificates are to be
registered in the name of any person other than the name
written upon the face of the Warrant. Signature must be
guaranteed by a commercial bank or trust company or a
member firm of the New York Stock Exchange.
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ASSIGNMENT
(To be signed only upon assignment of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
- --------------------------------------------------------------------------------
(Name and Address of Assignee Must Be Printed or Typewritten)
- --------------------------------------------------------------------------------
(Relationship to Registered Holder)
- --------------------------------------------------------------------------------
(Taxpayer Identification Number of Assignee)
the within Warrant, hereby irrevocably constituting and appointing
Attorney to transfer said Warrant on the books of the Company, with full power
of substitution in the premises.
Dated: , 19 ___________________________________
Signature of Registered Holder
Signature Guaranteed: The above signature must correspond with the name
appearing upon the face of this Warrant in every
particular, without alteration or enlargement or any
change whatever, and must be guaranteed by a commercial
bank or trust company or a member firm of the New York
Stock Exchange.
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