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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 27, 1997
E-Z SERVE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 1-10717 75-2168773
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
2550 NORTH LOOP WEST, SUITE 600
HOUSTON, TEXAS 77092
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 684-4300
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ITEM 5. OTHER EVENTS.
SECURITIES PURCHASE AGREEMENT
On January 27, 1997, E-Z Serve Corporation ("Company"), entered into
a Securities Purchase Agreement ("Purchase Agreement") with Phemus Corporation
("Phemus"), one of the Company's major stockholders. Pursuant to the Purchase
Agreement, the Company issued and sold to Phemus (i) 140,000 shares of its
Series H Preferred Stock, $0.01 par value ("Series H Preferred Stock"), (ii)
warrants ("Warrants") for the purchase of an aggregate of 960,000 shares of the
Company's common stock, $.01 par value ("Common Stock"), at a per share
exercise price of $0.01 and exercisable at any time prior to January 27, 2009,
and (iii) additional warrants issuable on each anniversary date of the Purchase
Agreement for each share of Series H Preferred Stock then outstanding
("Additional Warrants"). On January 31, 1997, Phemus sold 33,600 shares of the
Series H Preferred Stock and warrants to purchase 230,400 shares of Common
Stock for an aggregate of $2,144,724 to Intercontinental Mining & Resources
Incorporated ("IMR"), another major stockholder of the Company.
Net proceeds of $8,359,000 from the sale of the Series H Preferred
Stock and the Warrants were used by the Company to redeem all of the outstanding
75,656 shares of the Company's $6.00 Convertible Preferred Stock, Series C
("Series C Preferred Stock") and net proceeds of $5,081,000 were used for
general corporate purposes, including paying down a portion of amounts
outstanding under the Amended and Restated Credit and Guaranty Agreement
("Credit Agreement") dated as of October 7, 1995, as amended, among the Company,
its subsidiary, E-Z Serve Convenience Stores, Inc., and the Company's senior
bank lenders.
SERIES H PREFERRED STOCK
To effectuate the foregoing, the Company filed a Certificate of
Designation, Preferences and Rights of Series H Preferred Stock with the
Secretary of the State of Delaware ("Certificate of Designation") on January
24, 1997. The number of authorized shares initially constituting the Series H
Preferred Stock is 750,000, which number may be decreased (but not increased)
by the Board of Directors without a vote of the stockholders; provided that
such number of shares may not be decreased below the number of then outstanding
shares of Series H Preferred Stock.
The dividends on each share of Series H Preferred Stock shall accrue
on a daily basis at the rate of 13% per annum of the liquidation value, set at
$100 per Share ("Liquidation Value"). Dividends are payable semi-annually and
accrue whether or not they have been declared and whether or not there are
profits, surplus, or other funds of the Company available for payment. All
accrued and unpaid dividends shall be fully paid or declared with funds
irrevocably set apart for payment before any dividends (or other payments) may
be made with respect to any other capital stock or other equity securities of
the Company (collectively referred to as "Junior Securities"). Dividends shall
be paid solely by the issuance of additional shares of Series H Preferred Stock
(fractional shares shall be paid in cash).
Upon liquidation or dissolution of the Company, each holder of Series
H Preferred Stock shall be entitled to be paid an amount equal to the aggregate
Liquidation Value of such shares, plus all accrued and unpaid dividends, before
any distribution or payment is made upon any other Junior Securities.
The Company is required to redeem each outstanding share of Series H
Preferred Stock upon the earlier of (i) the third anniversary date of the
Purchase Agreement, (ii) the occurrence of a change in ownership whereby any
new investor owns more than 50% of the Common Stock, or (iii) the occurrence of
certain other fundamental changes in the Company. The Company may, at its
option, at any time redeem any
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or all of the outstanding Series H Preferred Stock. In either case, the Company
shall pay a redemption price per share of Series H Preferred Stock equal to the
Liquidation Value plus all accrued and unpaid dividends. The Series H Preferred
Stock, however, cannot be redeemed unless permitted by the Credit Agreement
The Series H Preferred Stock has no voting rights other than granted
by statute. However, the Company is prohibited from taking certain corporate
actions without the written consent of the holders of a majority of the Series
H Preferred Stock, including amendments and modifications to the Company's
Certificate of Incorporation, the sale of additional shares of Series H
Preferred Stock, the payment of dividends, the redemption of any shares of
capital stock of the Company and certain other actions. Upon the Company's
failure to comply with the terms of the Certificate of Designation, the holders
of the Series H Preferred Stock have certain remedies including (i) an automatic
increase in the dividend rate to 23%, (ii) the right to demand a redemption of
all outstanding shares of Series H Preferred Stock, subject to the Credit
Agreement, (iii) and the right to appoint one director to the Company's Board of
Directors who will have a majority of the votes of the Board of Directors.
AMENDMENTS TO CERTAIN AGREEMENTS
In connection with the issuance of the Series H Preferred Stock, the
Amended and Restated Stockholders Agreement by and among the Company, certain
stockholders and employees of the Company, entered into as of June 1, 1994, was
amended to permit the issuance of the Series H Preferred Stock, the redemption
of the Series C Preferred Stock and the provisions relating to the additional
director described above. Similarly, the Registration Rights Agreement dated as
of March 25, 1992, as amended, by and among the Company and certain
stockholders of the Company was amended to include the Common Stock issuable
upon the exercise of the Warrants and the Additional Warrants.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
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<S> <C>
4.1 Certificate of Designation, Preferences and Rights of Series H Preferred Stock of E-Z
Serve Corporation filed January 24, 1997.
4.2 Certificate of Elimination for $6.00 Convertible Preferred Stock, Series C of E-Z
Serve Corporation filed January 27, 1997.
4.3 Amendment No. 1 to Stockholders Agreement, dated January 27, 1997, by and
among E-Z Serve Corporation, Phemus Corporation, Intercontinental Mining &
Resources Incorporated, DLJ Capital Corporation and Tenacqco Bridge Partnership.
4.4 Third Amendment to Registration Rights Agreement, dated January 27,1997, by and
among E-Z Serve Corporation, Phemus Corporation and Intercontinental Mining &
Resources Incorporated.
4.5 Form of Common Stock Purchase Warrant of E-Z Serve Corporation issued pursuant
to the Securities Purchase Agreement, dated January 27, 1997, between E-Z Serve
Corporation and Phemus Corporation.
99.1 Securities Purchase Agreement, dated January 27, 1997, between E-Z Serve
Corporation and Phemus Corporation.
</TABLE>
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
E-Z SERVE CORPORATION
By: /s/ John T. Miller
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John T. Miller
Senior Vice President
Dated: February 10, 1997
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
4.1 Certificate of Designation, Preferences and Rights of Series H
Preferred Stock of E-Z Serve Corporation filed January 24,
1997.
4.2 Certificate of Elimination for $6.00 Convertible Preferred
Stock, Series C of E-Z Serve Corporation filed January 27,
1997.
4.3 Amendment No. 1 to Stockholders Agreement, dated
January 27, 1997, by and among E-Z Serve Corporation, Phemus
Corporation, Intercontinental Mining & Resources
Incorporated, DLJ Capital Corporation and Tenacqco Bridge
Partnership.
4.4 Third Amendment to Registration Rights Agreement, dated
January 27, 1997, by and among E-Z Serve Corporation,
Phemus Corporation and Intercontinental Mining & Resources
Incorporated.
4.5 Form of Common Stock Purchase Warrant of E-Z Serve
Corporation issued pursuant to the Securities Purchase
Agreement, dated January 27, 1997, between E-Z Serve
Corporation and Phemus Corporation.
99.1 Securities Purchase Agreement, dated January 27, 1997,
between E-Z Serve Corporation and Phemus Corporation.
</TABLE>
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E-Z SERVE CORPORATION
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF
SERIES H PREFERRED STOCK
Pursuant to Section 151(g) of the General Corporation Law of the State of
Delaware
I, Neil H. McLaurin, President and Chief Executive Officer of E-Z
Serve Corporation, a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), in accordance
with the provisions of Section 151(g) thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors
by the Amended and Restated Certificate of Incorporation of the Corporation, as
amended, the Board of Directors of the Corporation on January 23, 1997 adopted
the following resolution creating 750,000 shares of preferred stock designated
as Series H Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of its Amended
and Restated Certificate of Incorporation, a series of preferred stock of the
Corporation be, and it hereby is, created, and that the designation and amount
thereof and the voting powers, preferences and relative, participating,
optional and other special rights of shares of such series and the
qualifications, limitations or restrictions thereof are as follows:
Section 1. Designation and Number. The shares of such class shall
be designated "Series H Preferred Stock." The number of shares initially
constituting the Series H Preferred Stock shall be 750,000 which number may be
decreased (but not increased) by the Board of Directors without a vote of
stockholders; provided that such number may not be decreased below the number
of then outstanding shares of Series H Preferred Stock.
Section 2. Dividends.
2A. General Obligation. To the extent permitted by law, the
Corporation shall pay preferential dividends to the holders of the Series H
Preferred Stock as provided in this Section 2. Dividends on each share of the
Series H Preferred Stock (a "Share") shall accrue on a daily basis at the rate
of 13% per annum of the Liquidation Value thereof. Such dividends shall accrue
whether or not they have been declared and whether or not there are profits,
surplus or other funds of the Corporation legally available for the payment of
dividends, and such dividends shall be cumulative such that all accrued and
unpaid dividends shall be fully paid or declared with funds irrevocably set
apart for payment before any dividends, distributions, redemptions or other
payments may be made
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with respect to any Junior Securities. The date on which the Corporation
initially issues any Share (which in the case of shares issued as dividends in
kind, shall be their Dividend Reference Date (as defined below)) shall be
deemed to be its "date of issuance" regardless of the number of times transfer
of such Share is made on the stock records maintained by or for the Corporation
and regardless of the number of certificates which may be issued to evidence
such Share.
The Corporation shall pay such dividends solely by issuing additional
shares of Series H Preferred Stock. No fractional interest in shares of Series
H Preferred Stock shall be issued as a dividend payment. Each holder of Series
H Preferred Stock who otherwise would have been entitled to a fractional share
of Series H Preferred Stock as a dividend payment on the aggregate number of
shares of Series H Preferred Stock for which such holder is entitled to receive
dividends will receive, in lieu of such fractional share, a cash amount
determined by multiplying such fraction of a share by $100.
2B. Dividend Payment Dates. The dates at which dividends on the
Series H Preferred Stock shall be payable are January 20 and July 20 of each
year (each a "Dividend Reference Date"), beginning on July 20, 1997.
2C. Distribution of Partial Dividend Payments. Except as
otherwise provided herein, if at any time the Corporation pays less than the
total amount of dividends then accrued with respect to the Series H Preferred
Stock, such payment shall be distributed pro rata among the holders thereof
based upon the aggregate accrued but unpaid dividends on the Shares held by
each such holder.
Section 3. Liquidation.
3A. Liquidation Payments. Upon any liquidation, dissolution or
winding up of the Corporation (whether voluntary or involuntary), each holder
of Series H Preferred Stock shall be entitled to be paid, before any
distribution or payment is made upon any Junior Securities, an amount equal to
the aggregate Liquidation Value of all Shares held by such holder (plus all
accrued and unpaid dividends thereon), and the holders of Series H Preferred
Stock shall not be entitled to any further payment. If upon any such
liquidation, dissolution or winding up of the Corporation, the Corporation's
assets to be distributed among the holders of the Series H Preferred Stock are
insufficient to permit payment to such holders of the aggregate amount which
they are entitled to be paid under this Section 3, then the entire assets
available to be distributed to the holders of the Series H Preferred Stock
shall be distributed pro rata among such holders based upon the aggregate
Liquidation Value (plus all accrued and unpaid dividends) of the Series H
Preferred Stock held by each such holder. Prior to the liquidation,
dissolution or winding up of the Corporation, the Corporation shall declare for
payment all accrued and unpaid dividends with respect to the Series H Preferred
Stock. Not less than 60 days prior to the payment date stated therein, the
Corporation
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shall mail written notice of any such liquidation, dissolution or winding up to
each record holder of Series H Preferred Stock, setting forth in reasonable
detail the amount of proceeds to be paid with respect to each Share, each share
of Common Stock and each other equity security of the Corporation in connection
with such liquidation, dissolution or winding up.
3B. Distribution Other Than Cash. Whenever the distribution
provided for in this Section 3 shall be payable in property other than cash,
the value of such distribution shall be the fair market value of such property
as determined in good faith by the Board of Directors; provided, however, that
if the holders of a majority of the then outstanding shares of Series H
Preferred Stock (the "Contesting Holders") notify the Board of Directors within
ten business days after receiving written notification of such determination of
fair market value that they disagree with such determination, then the Board of
Directors and the Contesting Holders shall have 30 days to agree upon a fair
market value of the relevant property. If, by the end of such 30-day period,
they are unable to agree on a fair market value, the fair market value shall be
determined by an appraisal, the cost of which shall be shared equally by the
Corporation, on one hand, and the Contesting Holders, on the other hand. All
appraisals shall be undertaken by two appraisers, one selected by the
Corporation and one selected by the Contesting Holders, which selections must
be made within 10 days after the expiration of the 30-day period described
above. If one selecting party fails to timely select its appraiser, the other
selecting party shall select both appraisers. The fair market value shall be
the fair market value arrived at by those appraisers within 60 days following
the appointment of the last appraiser to be appointed. In the event that the
two appraisers cannot agree on such fair market value within such a period of
time, (a) if the appraisers' valuations are within 10% of each other, the fair
market value shall be the average of the two valuations, and (b) if the
differences in the valuations are greater, the appraisers shall elect a third
appraiser who will calculate fair market value independently, and, except as
provided in the next sentence, the fair market value of the property shall in
each case be the average of the two fair market values arrived at by the
appraisers who are closest in amount. If one appraiser's valuation is the
average of the other two valuations, the average valuation shall be the fair
market value. In the event that the two original appraisers cannot agree upon
a third appraiser within 30 days following the end of the 60-day period
referred to above, the third appraiser shall be appointed by the American
Arbitration Association.
Section 4. Priority of Series H Preferred Stock on Dividends and
Redemptions.
So long as any Series H Preferred Stock remains outstanding, except as
permitted under the Corporation's existing stock option plans, without the
prior written consent of the holders of a majority of the outstanding shares of
Series H Preferred Stock, the Corporation shall not, nor shall it permit any
Subsidiary to, redeem, purchase or otherwise acquire directly or indirectly any
Junior Securities, nor shall the Corporation directly or indirectly pay or
declare any dividend or make any
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distribution (including, without limitation, in connection with a purchase,
redemption, or retirement) upon any Junior Securities, other than in additional
shares of Junior Securities.
Section 5. Redemptions.
5A. Mandatory and Optional Redemption. The Corporation shall
redeem each share of Series H Preferred Stock then outstanding (the "Mandatory
Redemption") upon the earlier of (a) the third anniversary of the date of the
Securities Purchase Agreement (the "Investment Date"), (b) the occurrence of a
Change in Ownership, and (c) the occurrence of a Fundamental Change. If the
Mandatory Redemption is prohibited by the Credit Agreement, the Corporation
shall make such Mandatory Redemption as soon as it is permitted to do so under
the Credit Agreement.
In addition, the Corporation may, at its option, at any time and from
time to time, redeem all or any portion of the Shares of Series H Preferred
Stock then outstanding (the "Optional Redemption"). Upon either a Mandatory
Redemption or an Optional Redemption, the Corporation shall pay a price per
Share equal to the Liquidation Value thereof (plus all accrued and unpaid
dividends thereon, whether or not declared). No Optional Redemption may be
made for fewer than 1,000 Shares (or such lesser number of Shares then
outstanding).
5B. Redemption Payments. For each Share which is to be redeemed
hereunder, the Corporation shall be obligated on the Redemption Date to pay to
the holder thereof (upon surrender by such holder at the Corporation's
principal office of the certificate representing such Share) an amount in
immediately available funds equal to the redemption price described in Section
5A. If the funds of the Corporation legally available for redemption of Shares
on any Redemption Date are insufficient to redeem the total number of Shares to
be redeemed on such date, those funds which are legally available shall be used
to redeem the maximum possible number of Shares pro rata among the holders of
the Shares to be redeemed based upon the aggregate redemption price pursuant to
Section 5A of such Shares held by each such holder. At any time thereafter
when additional funds of the Corporation are legally available for the
redemption of Shares, such funds shall immediately be used to redeem the
balance of the Shares which the Corporation has become obligated to redeem on
any Redemption Date but which it has not redeemed.
5C. Notice of Redemption. Except as otherwise provided herein,
the Corporation shall mail written notice of each redemption of any Series H
Preferred Stock to each record holder thereof not more than 60 nor less than 30
days prior to the date on which such redemption is to be made. In case fewer
than the total number of Shares represented by any certificate are redeemed, a
new certificate representing the number of unredeemed Shares shall be issued to
the holder thereof without cost to such holder within five business days after
surrender of the certificate representing the redeemed Shares.
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5D. Determination of the Number of Each Holder's Shares to be
Redeemed. The number of Shares of Series H Preferred Stock to be redeemed from
each holder thereof in any Optional Redemption hereunder shall be the number of
Shares determined by multiplying the total number of Shares to be redeemed by a
fraction, the numerator of which shall be the total number of Shares then held
by such holder and the denominator of which shall be the total number of Shares
then outstanding.
5E. Dividends After Redemption Date. No Shares shall be entitled
to any dividends accruing after the date on which the redemption price of such
Share pursuant to Section 5A is paid to the holder of such Share. On such
date, all rights of the holder of such Share shall cease, and such Share shall
no longer be deemed to be issued and outstanding.
5F. Redeemed or Otherwise Acquired Shares. Any Shares which are
redeemed or otherwise acquired by the Corporation shall be canceled and retired
to authorized but unissued shares and shall not be reissued, sold or
transferred.
5G. Other Redemptions or Acquisitions. The Corporation shall not,
nor shall it permit any Subsidiary to, redeem or otherwise acquire any Shares
of Series H Preferred Stock, except as expressly authorized herein or as
contemplated by the terms of the Securities Purchase Agreement.
5H. Payment of Accrued Dividends. The Corporation may not redeem
any Series H Preferred Stock, unless all dividends accrued on the outstanding
Series H Preferred Stock through the immediately preceding Dividend Reference
Date have been declared and paid in full.
Section 6. Voting and Other Rights.
6A. Voting. Except as otherwise provided herein and as otherwise
required by applicable law, the Series H Preferred Stock shall have no voting
rights; provided, however, that each holder of Series H Preferred Stock shall
be entitled to notice of all stockholders meetings at the same time and in the
same manner as notice is given to all stockholders entitled to vote at such
meetings. The number of shares of Series H Preferred Stock entitled to vote on
any matter shall be determined as of the record date for the determination of
shareholders entitled to vote on such matter or, if no such record date is
established, at the date such vote is taken or any written consent of
shareholders is solicited. Except as otherwise expressly provided for herein
or as required by law, the holders of Series H Preferred Stock shall vote
together as a single class on all matters.
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6B. Other Rights. In addition to any rights provided by law,
without the written consent of the holders of a majority of shares of Series H
Preferred Stock then outstanding, the Corporation shall not:
(i) effect any amendment to, or modification of, the
Corporation's Certificate of Incorporation (including Certificates of
Designation thereunder) or Bylaws, which amendment or modification adversely
affects the rights and preferences of the Series H Preferred Stock;
(ii) authorize, issue or sell, or obligate itself to
authorize, issue or sell, (a) any additional shares of Series H Preferred Stock
(other than pursuant to Section 2A), or (b) any equity securities that are
senior to or pari passu with the Series H Preferred Stock with respect to
dividends, liquidation preferences or redemption rights;
(iii) issue or sell, or authorize itself to issue or sell
any Common Stock or options to acquire Common Stock (other than the Additional
Warrants contemplated by Section 8.1 of the Securities Purchase Agreement) if
there is insufficient authorized Common Stock to permit the exercise or
conversion (as applicable) of all Additional Warrants issued or issuable
pursuant to Section 8.1 of the Securities Purchase Agreement.
(iv) reclassify any shares of Series H Preferred Stock or
any Junior Securities;
(v) declare or pay any dividends, return any capital to
its stockholders as such, or make any distribution of assets to its
stockholders as such, other than (a) with respect to the Series H Preferred
Stock as provided herein, and (b) with respect to the $6.00 Convertible
Preferred Stock, Series C ("Series C Preferred Stock") as provided in Section
6B(vi);
(vi) redeem or repurchase or otherwise acquire for value
any shares of its capital stock (or rights, options or warrants to purchase
such shares) or other equity interests, except for (a) the redemption by the
Corporation of the Series H Preferred Stock pursuant to Section 5 hereof, (b)
the redemption of the Series C Preferred Stock of the Corporation as provided
in Section 3.3 of the Securities Purchase Agreement, and (c) as permitted
under the Corporation's existing stock option plans.
(vii) effect, or obligate itself to effect, (a) any merger
or consolidation with or into any other Person (as defined below) or (b) the
sale, assignment, lease or other disposition of, whether in one transaction or
a series of transactions, all or substantially all of its assets or (c) the
liquidation, dissolution or winding up of the Corporation;
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(viii) permit any Subsidiary to merge or consolidate with or
into any other Person (other than (a) the Corporation or (b) a Wholly-Owned
Subsidiary (as defined below)) or sell, assign, lease or otherwise dispose of,
or voluntarily part with the control of, whether in one transaction or a series
of transactions (other than to the Corporation or a Wholly-Owned Subsidiary),
all or substantially all of its assets;
(ix) permit any Subsidiary to redeem or repurchase or
otherwise acquire for value any shares of the Corporation's capital stock (or
rights, options or warrants to purchase such shares) or other equity interests;
(x) sell or otherwise dispose of any shares of capital
stock or other equity interests of any Subsidiary, except to a Wholly-Owned
Subsidiary (other than specific transactions approved by the Corporation's
Board of Directors as of the date hereof);
(xi) permit any Subsidiary to sell or otherwise dispose of
any shares of capital stock or other equity interests of the Corporation or any
other Subsidiary, except to the Corporation or a Wholly-Owned Subsidiary;
(xii) principally participate in any businesses other than
the businesses in which the Company is principally engaged on the date hereof;
(xiii) permit any Subsidiary to principally participate in
any businesses other than the businesses in which such Subsidiary is
principally engaged on the date hereof;
(xiv) make any acquisition with a purchase price of more
than $200,000 of any assets or securities or other equity interests of any
other Person;
(xv) permit any Subsidiary to make any acquisition with a
purchase price of more than $200,000 of any assets or securities or other
equity interests of any other Person;
(xvi) create any Subsidiary other than a Wholly-Owned
Subsidiary;
(xvii) incur, directly or indirectly through any of its
Subsidiaries, any additional indebtedness (including, without limitation,
guarantees of indebtedness and pledges of assets in support of indebtedness) in
excess of the threshold specified in Section 7.2.2(i) of the Credit Agreement,
other than accounts payable to suppliers incurred in the ordinary course of
business and borrowings under the revolving credit facility of the Credit
Agreement.
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Section 7. Events of Noncompliance.
7A. Definition. An Event of Noncompliance shall have occurred if:
(i) the Corporation fails to pay a dividend when required
to do so hereunder;
(ii) the Corporation fails to make any redemption payment
with respect to the Series H Preferred Stock which it is required to make
hereunder, whether or not such payment is legally permissible or is prohibited
by any agreement to which the Corporation is subject;
(iii) the Corporation breaches or otherwise fails to
perform or observe any other material covenant, term, or agreement set forth
herein or in the Securities Purchase Agreement (including without limitation
Section 8.1 thereof);
(iv) any representation or warranty contained in the
Securities Purchase Agreement or any information contained in writing required
to be furnished by the Corporation or any Subsidiary to any holder of Series H
Preferred Stock, is false or misleading in any material respect on the date
made or furnished;
(v) the Corporation or any Subsidiary makes an assignment
for the benefit of creditors or admits in writing its inability to pay its
debts generally as they become due; or an order, judgment or decree is entered
adjudicating the Corporation or any Subsidiary is entered under the Federal
Bankruptcy Code; or the Corporation or any Subsidiary petitions or applies to
any tribunal for the appointment of a custodian, trustee, receiver or
liquidator of the Corporation or any Subsidiary or of any substantial part of
the assets of the Corporation or any Subsidiary, or commences any proceeding
(other than a proceeding for the voluntary liquidation and dissolution of a
Subsidiary) relating to the corporation or any Subsidiary under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction; or any such petition or application is
field, or any such proceeding is commenced, against the Corporation or any
Subsidiary and either (a) the Corporation or any such Subsidiary by any act
indicates its approval thereof, consent thereto or acquiescence therein or (b)
such petition, application or proceeding is not dismissed within 60 days;
(vi) a judgment in excess of $500,000 is rendered against
the Corporation or any Subsidiary and, within 60 days after entry thereof, such
judgment is not discharged or execution thereof stayed pending appeal, or
within 60 days after the expiration of any such stay, such judgment is not
discharged; or
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(vii) the Corporation or any Subsidiary defaults in the
performance of any obligation or agreement if the effect of such default is to
cause an amount exceeding $500,000 to become due prior to its stated maturity
or to permit the holder or holders of any obligation to cause an amount
exceeding $500,000 to become due prior to its stated maturity.
7B. Consequences of Events of Noncompliance.
(i) If an Event of Noncompliance has occurred and is
continuing, the dividend rate on the Series H Preferred Stock shall increase
immediately by an increment of 10 percentage point(s). Any increase of the
dividend rate resulting from the operation of this subparagraph shall terminate
as of the close of business on the date on which no Event of Noncompliance
exists, subject to subsequent increases pursuant to this paragraph.
(ii) If an Event of Noncompliance, other than an Event of
Noncompliance of the type described in subparagraph 7A(v), has occurred and is
continuing, the holder or holders of a majority of the Series H Preferred Stock
then outstanding may demand (by written notice delivered to the Corporation)
immediate redemption of all or any portion of the Series H Preferred Stock
owned by such holder or holders at a price per Share equal to the Liquidation
Value thereof (plus all accrued and unpaid dividends thereon). The Corporation
shall give prompt written notice of such election to the other holders of
Series H Preferred Stock (but in any event within five days after receipt of
the initial demand for redemption), and each such other holder may demand
immediate redemption of all or any portion of such holder's Series H Preferred
Stock by giving written notice thereof to the Corporation within seven days
after receipt of the Corporation's notice. Subject to the Credit Agreement,
the Corporation shall redeem all Series H Preferred Stock as to which rights
under this paragraph have been exercised within 15 days after receipt of the
initial demand for redemption.
(iii) If an Event of Noncompliance of the type described in
subparagraph 7A(v) has occurred, all of the Series H Preferred Stock then
outstanding shall be subject to immediate redemption by the Corporation
(without any action on the part of the holder of the Series H Preferred Stock)
at a price per Share equal to the Liquidation Value thereof (plus all accrued
and unpaid dividends thereon). The Corporation shall immediately redeem all
Series H Preferred Stock upon the occurrence of such Event of Noncompliance.
(iv) If any Event of Noncompliance has occurred and is
continuing, the number of directors constituting the Corporation's Board of
Directors shall, at the request of the holder of a majority of the Series H
Preferred stock then outstanding, be increased by one member, and the holders
of Series H Preferred Stock shall have the special right, voting separately as
a single class (with each Share being entitled to one vote) and to the
exclusion of all other classes of the
-9-
<PAGE> 10
Corporation's stock, to elect an individual to fill such newly created
directorship, to fill any vacancy of such directorship and to remove any
individual elected to such directorship. The newly created directorship shall
constitute a separate class of directors, and the director elected by the
holders of the Series H Preferred Stock shall be entitled to cast a number of
votes on each matter considered by the Board of Directors (including for
purposes of determining the existence of a quorum) equal to the sum of the
number of votes entitled to be cast by all of the other directors plus one.
The special right of the holder of Series H Preferred Stock to elect members of
the Board of Directors may be exercised at the special meeting called pursuant
to this subparagraph (iv), at any annual or other special meeting of
stockholders and, to the extent and in the manner permitted by applicable law,
pursuant to a written consent in lieu of a stockholders meeting. Such special
right shall continue until such time as there is no longer any Event of
Noncompliance in existence, at which time such special right shall terminate
subject to revesting upon the occurrence and continuation of any Event of
Noncompliance which gives rise to such special right hereunder.
At any times when such special right has vested in the holders of
Series H Preferred Stock, a proper officer of the Corporation shall, upon the
written request of the holder of at least a majority of the Series H Preferred
Stock then outstanding, addressed to the secretary of the Corporation, call a
special meeting of the holders of Series H Preferred Stock for the purpose of
electing a director pursuant to this subparagraph. Such meeting shall be held
at the earliest legally permissible date at the principal office of the
Corporation, or at such other place designated by the holders of at least a
majority of the Series H Preferred Stock then outstanding. If such meeting has
not been called by a proper officer of the Corporation within 24 hours after
personal service of such written request upon the secretary of the Corporation
or within 48 hours after mailing the same to the secretary of the Corporation
at its principal office, then the holders of at least a majority of the Series
H Preferred Stock then outstanding may designate in writing one of their number
to call such meeting at the expense of the Corporation, and such meeting may be
called by such Person so designated upon the notice required for annual
meetings of stockholders and shall be held at the Corporation's principal
office, or at such other place designated by the holders of at least a majority
of the Series H Preferred Stock then outstanding. Any holder of Series H
Preferred Stock so designated shall be given access to the stock record books
of the Corporation for the purpose of causing a meeting of stockholders to be
called pursuant to this subparagraph.
At any meeting or at any adjournment thereof at which the holders of
Series H Preferred Stock have the special right to elect directors, the
presence, in person or by proxy, of the holders of a majority of the Series H
Preferred Stock then outstanding shall be required to constitute a quorum for
the election or removal of any director by the holders of the Series H
Preferred Stock exercising such special right. The vote of a majority of such
quorum shall be required to elect or remove any such director.
-10-
<PAGE> 11
Any director so elected by the holders of Series H Preferred Stock
shall continue to serve as a director until the expiration of the lesser of (a)
a period of six months following the date on which there is no longer any Event
of Noncompliance in existence or (b) the remaining period of the full term for
which such director has been elected. After the expiration of such six-month
period or when the full term for which such director has been elected ceases
(provided that the special right to elect directors has terminated), as the
case may be, the number of directors constituting the board of directors of the
Corporation shall decrease to such number as constituted the whole board of
directors of the Corporation immediately prior to the occurrence of the Event
or Events of Noncompliance giving rise to the special right to elect directors.
(v) If any Event of Noncompliance exists, each holder of
Series H Preferred Stock shall also have any other rights which such holder is
entitled to under any contract or agreement at any time and any other rights
which such holder may have pursuant to applicable law.
7C. Registration of Transfer.
The Corporation shall keep at its principal office a register for the
registration of Series H Preferred Stock. Upon the surrender of any
certificate representing Series H Preferred Stock at such place, the
Corporation shall, at the request of the record holder of such certificate,
execute and deliver (at the Corporation's expense) a new certificate or
certificate in exchange therefor representing in the aggregate the number of
Shares represented by the surrendered certificate. Each such new certificate
shall be registered in such name and shall represent such number of Shares as
is requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate, and dividends
shall accrue on the Series H Preferred Stock represented by such new
certificate form the date to which dividends have been fully paid on such
Series H Preferred Stock represented by the surrendered certificate.
Section 8. Replacement
Upon receipt of evidence reasonably satisfactory to the Corporation
(an affidavit of the registered holder shall be satisfactory) of the ownership
and the loss, theft, destruction or mutilation of any certificate evidencing
Shares of Series H Preferred Stock, and in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other
institutional investor its own agreement shall be satisfactory), or, in the
case of any such mutilation upon surrender of such certificate, the Corporation
shall (at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of Shares of such class
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate, and
-11-
<PAGE> 12
dividends shall accrue on the Series H Preferred Stock represented by such new
certificate from the date to which dividends have been fully paid on such lost,
stolen, destroyed or mutilated certificate.
Section 9. Definitions.
"Change in Ownership" means any sale, transfer or issuance or series
of sales, transfers and/or issuances of Common Stock by the Corporation or any
holders thereof which results in any Person or group of Persons (as the term
"group" is used under the Securities Exchange Act of 1934), other than the
holders of Common Stock as of the date of the Stockholders Agreement, owning
more than 50% of the Common Stock outstanding at the time of such sale,
transfer or issuance of series of sales, transfers and/or issuances.
"Common Stock" means, collectively, the Corporation's common stock,
par value $0.01 per share, and any capital stock of any class of the
Corporation hereafter authorized which is not limited to a fixed sum or
percentage of par or stated value in respect to the rights of the holders
thereof to participate in dividends or in the distribution of assets upon any
liquidation, dissolution or winding up of the Corporation.
"Credit Agreement" means the Amended and Restated Credit and Guaranty
Agreement dated as of October 2, 1995 among E-Z Serve Convenience Stores, Inc.,
E-Z Serve Corporation, and Societe Generale, as Agent for certain lenders.
"Fundamental Change" means either (a) any sale or transfer of more
than 50% of the assets of the Corporation and its Subsidiaries on a
consolidated basis (measured either by book value in accordance with generally
accepted accounting principles consistently applied or by fair market value
determined in the reasonable good faith judgment of the Corporation's Board of
Directors) in any transaction or series of transactions (other than sales in
the ordinary course of business), (b) any merger or consolidation to which the
Corporation is a party, except for a merger in which the Corporation is the
surviving corporation, the terms of the Series H Preferred Stock are not
changed and the Series H Preferred Stock is not exchanged for cash, securities
or other property, and after giving effect to such merger, the holders of the
Corporation's outstanding capital stock possessing a majority of the voting
power (under ordinary circumstances) to elect a majority of the Corporation's
Board of Directors immediately prior to the merger shall continue to own the
Corporation's outstanding capital stock possessing the voting power (under
ordinary circumstances) to elect a majority of the Corporation's Board of
Directors or (c) any repayment of all outstanding borrowings under the Credit
Agreement.
"Junior Securities" means any capital stock or other equity securities
of the Corporation, except for the Series C Preferred Stock of the Corporation.
-12-
<PAGE> 13
"Liquidation Value" of any Share as of any particular date shall be
equal to $100.
"Person" means an individual, a partnership, a corporation, a limited
liability company, a limited liability, an association, a joint stock company,
a trust, a joint venture, an unincorporated organization and a governmental
entity or any department, agency or political subdivision thereof.
"Public Offering" means any offering by the Corporation of its capital
stock or equity securities to the public pursuant to an effective registration
statement under the Securities Act of 1933, as then in effect, or any
comparable statement under any similar federal statute then in force.
"Redemption Date" as to any Share means the date specified in the
notice of any redemption at the Corporation's option or at the holder's option;
provided that no such date shall be a Redemption Date unless the redemption
price provided in Section 5A of such Share is actually paid in full on such
date, and if not so paid in full, the Redemption Date shall be the date on
which such amount is fully paid.
"Securities Purchase Agreement" means the Securities Purchase
Agreement dated January 24, 1997 between the Corporation and Phemus
Corporation.
"Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a
majority of the partnership or other similar ownership interest thereof is at
the time owned or controlled, directly or indirectly, by any Person or one or
more Subsidiaries of that person or a combination thereof. For purposes
hereof, a Person or Persons shall be deemed to have a majority ownership
interest in a limited liability company, partnership, association or other
business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control the managing general partner of such
limited liability company, partnership, association or other business entity.
"Wholly-Owned Subsidiary" means any Subsidiary of which all of the
outstanding capital stock (or other shares of beneficial interest) is owned by
the Corporation, directly or indirectly through one or more Wholly-Owned
Subsidiaries.
-13-
<PAGE> 14
Section 10. Amendment and Waiver.
No amendment, modification or waiver shall be binding or effective
with respect to any provision hereof without the prior written consent of the
holders of a majority of the Series H Preferred Stock outstanding at the time
such action is taken; provided that no such action shall change (a) the rate at
which or the manner in which dividends on the Series H Preferred Stock accrue
or the times at which such dividends become payable or the amount payable on
redemption of the Series H Preferred Stock or the times at which redemption of
Series H Preferred Stock is to occur or (b) the percentage required to approve
any change described in clause (a) above, without the prior written consent of
the holders of at least 80% of the Series H Preferred Stock then outstanding;
and provided further that no change in the terms hereof may be accomplished by
merger or consolidation of the Corporation with another corporation or entity
unless the Corporation has obtained the prior written consent of the holders of
the applicable percentage of the Series H Preferred Stock then outstanding.
Section 11. Notices.
Except as otherwise expressly provided hereunder, all notices referred
to herein shall be in writing and shall be delivered by registered or certified
mail, return receipt requested and postage prepaid, or by reputable overnight
courier service, charges prepared, and shall be deemed to have been given when
so mailed or sent (i) to the Corporation, at its principal executive offices
and (ii) to any stockholder, at such holder's address as it appears in the
stock records of the Corporation (unless otherwise indicated by any such
holder).
Section 12. Adjustment.
All numbers and amounts set forth herein which refer to share prices
or amounts shall be appropriately adjusted to reflect stock splits, stock
dividends, combinations of shares and other recapitalizations affecting the
Series H Preferred Stock.
-14-
<PAGE> 15
IN WITNESS WHEREOF, I have executed and subscribed the Certificate of
Designation and do affirm the foregoing as true under the penalties of perjury
this 23rd day of January 1997.
/s/ Neil H. McLaurin
-------------------------------------
Neil H. McLaurin
President and Chief Executive Officer
-15-
<PAGE> 1
CERTIFICATE OF ELIMINATION
FOR SERIES C PREFERRED STOCK
OF E-Z SERVE CORPORATION
E-Z Serve Corporation, a Delaware corporation (the "Company"), hereby
certifies that:
FIRST: At a meeting of the Board of Directors of the Company, a
resolution was duly adopted concerning the elimination of the Company's $6.00
Convertible Preferred Stock, Series C ("Series C Preferred Stock"). The
resolution is as follows:
WHEREAS, upon the redemption of the Series C Preferred Stock,
there shall be no shares of Series C Preferred Stock outstanding, no
shares of Series C Preferred Stock will be issued, and pursuant to the
terms of the Certificate of Designation, Preferences and Rights of the
$6.00 Convertible Preferred Stock, Series C ("Series C Certificate")
all shares of Series C Preferred Stock will have the status of
authorized but unissued shares of the Company's preferred stock,
unclassified as to series;
NOW, THEREFORE, IT IS RESOLVED, that the Board of Directors
directs the President or any Vice President of the Company to file a
Certificate of Elimination with the Secretary of State of Delaware
after the redemption of all of the shares of the Series C Preferred
Stock to eliminate from the Company's Amended and Restated Certificate
of Incorporation, as amended, all matters set forth in the Series C
Certificate.
SECOND: Pursuant to the provisions of Section 151(g) of the Delaware
General Corporation Law, upon the effective date of the filing of this
certificate, the elimination of all matters set forth in the Series C
Certificate from the Company's Amended and Restated Certificate of
Incorporation, as amended, shall be effected.
IN WITNESS WHEREOF, the Company has caused this certificate to be
signed by Neil H. McLaurin, its President, on January 27, 1997
E-Z SERVE CORPORATION
By: /s/ Neil H. McLaurin
-----------------------------------
Neil H. McLaurin
President
<PAGE> 1
AMENDMENT NO. 1 TO STOCKHOLDERS AGREEMENT
This Amendment No. 1 to Stockholders Rights Agreement ("Amendment") is
made as of January 27, 1997, by and among E-Z Serve Corporation, a Delaware
Corporation (the "Company"), Phemus Corporation, a Massachusetts corporation
("Phemus"), Intercontinental Mining & Resources Incorporated, a British Virgin
Islands corporation ("IMR"), Quadrant Capital Corp., a Delaware corporation,
formerly named Intercontinental Mining & Resources Limited ("QCC"), DLJ Capital
Corporation, a Delaware corporation ("DLJ"), and Tenacqco Bridge Partnership, a
New York partnership ("Tenacqco"). Phemus, IMR, QCC, DLJ and Tenacqco are
referred to herein together as the "Holders."
WHEREAS, the Company, the Holders and certain employees of the Company
entered into that certain Amended and Restated Stockholders Agreement dated as
of June 1, 1994 (the "Agreement"); and
WHEREAS, as of the date hereof, the Company has issued warrants to
purchase common stock of the Company to Phemus in conjunction with the issuance
by the Company of shares of its Series H Preferred Stock, par value $0.01 per
share ("Series H Preferred Stock"); and
WHEREAS, simultaneously with the issuance of the Series H Preferred
Stock, the Company shall use a portion of the proceeds from such issuance to
redeem all of the outstanding shares of the Company's $6.00 Convertible
Preferred Stock, Series C ("Series C Preferred Stock"); and
WHEREAS, the parties desire to amend the Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
1. As required by Section 3.2 of the Agreement, the parties
hereto consent to the issuance of the Series H Preferred Stock
to Phemus and the redemption of all of the outstanding shares
of the Series C Preferred Stock.
<PAGE> 2
2. Section 3.1(a) of the Agreement is hereby amended in its
entirety to be as follows:
(a) The Board of Directors shall be composed of seven members,
except to the extent required to be increased pursuant to the terms of
the Certificate of Designation of the Series H Preferred Stock.
3. A new Section 3.1(d) is hereby added to the Agreement as
follows:
(d) Each Holder agrees that it will vote all of its shares of
Common Stock and Options, at any regular or special meeting of the
stockholders of the Issuer called for the purpose of filling positions
of the Directors or to increase the number of authorized shares of
Common Stock, or in any written consent executed in lieu of such a
meeting of stockholders, and shall take all actions necessary, to
ensure the election of a director nominated by the holders of the
Series H Preferred Stock pursuant to the terms of the Certificate of
Designation of Series H Preferred Stock or to increase the number of
authorized shares of Common Stock, if necessary, to ensure the ability
of Phemus to exercise in full any warrants issued or issuable pursuant
to the Securities Purchase Agreement dated January 27, 1997, between
Phemus and the Company, as applicable. If the holders of Series H
Preferred Stock are entitled to a special directorship pursuant to
Section 7B(iv) of the Certificate of Designation for the Series H
Preferred Stock, Section 3.2(a) of this Agreement shall no longer be
applicable during the period in which the holders of Series H
Preferred Stock are so entitled. During such period, if the Issuer
proposed to take any action, but such action is not approved by the
requisite percentage (under applicable law) of the Issuer's
outstanding shares of Common Stock, if such approval is required by
applicable law, then: (i) Phemus shall have the right to invoke as a
Triggering Holder the Buy-Sell described in Section 3.2(b) and (c) of
this Agreement in accordance with such provisions, and (ii) the other
Holders shall respond in accordance with Section 3.2(c) of this
Agreement to the Trigger Price set by Phemus.
4. Section 4.2(a) of the Agreement is hereby amended in its
entirety to be as follows:
(a) Any term of this Agreement may be amended or waived only
with the written consent of each of the Holders; provided, however,
that the Company, without the consent of the Holders, may amend
Schedule 1 to this Agreement to reflect changes to the number of
fully-diluted shares of Common Stock held by the Holders. The Company
shall promptly distribute to the Holders any amended Schedule 1.
-2-
<PAGE> 3
5. Schedule 1 to the Agreement is amended in its entirety to be
as set forth in Schedule 1 attached hereto.
Except as expressly amended herein, the Agreement shall remain in full force
and effect.
[The rest of this page has been intentionally left blank.]
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed as of the date first above written.
E-Z SERVE CORPORATION
By: /s/ John T. Miller
------------------------------------------
Name: John T. Miller
Title: Senior Vice President
PHEMUS CORPORATION
By: /s/ Michael R. Eisenson
------------------------------------------
Name: Michael R. Eisenson
--------------------------------
By: /s/ Michael Thonis
------------------------------------------
Name: Michael Thonis
--------------------------------
QUADRANT CAPITAL CORP.
By:
------------------------------------------
Name:
--------------------------------
Title:
-------------------------------
INTERCONTINENTAL MINING & RESOURCES
INCORPORATED
By: /s/ Thomas A. Huser
------------------------------------------
Name: Thomas A. Huser
--------------------------------
Title: Attorney in Fact
-------------------------------
-4-
<PAGE> 5
DLJ CAPITAL CORPORATION
By: /s/ Paul Thompson III
-------------------------------------------
Name: Paul Thompson III
---------------------------------
Title: Vice President
--------------------------------
TENACQCO BRIDGE PARTNERSHIP
By DLJ Capital Corporation, its General Partner
By: /s/ Paul Thompson III
-------------------------------------------
Name: Paul Thompson III
---------------------------------
Title: Vice President
--------------------------------
-5-
<PAGE> 6
SCHEDULE 1
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Holder Number of Shares of Common Stock
------ on a Fully Diluted Basis
------------------------
- --------------------------------------------------------------------------------
<S> <C>
DLJ Capital / Tenacqco 29,715,364
- --------------------------------------------------------------------------------
Phemus 17,660,457
- --------------------------------------------------------------------------------
IMR / Quadrant 14,802,325
- --------------------------------------------------------------------------------
</TABLE>
-6-
<PAGE> 1
THIRD AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
This Third Amendment to Registration Rights Agreement ("Amendment") is
made as of January 27, 1997, by and among E-Z Serve Corporation, a Delaware
Corporation (the "Company"), Phemus Corporation, a Massachusetts corporation
("Phemus"), Intercontinental Mining & Resources Incorporated, a British Virgin
Islands corporation ("IMR"), and Quadrant Capital Corp., a Delaware
corporation, formerly named Intercontinental Mining & Resources Limited
("QCC"). Phemus, IMR and QCC are referred to herein together as the
"Investors."
WHEREAS, the Company and the Investors entered into that certain
Registration Rights Agreement dated as of March 25, 1992, as amended on July
31, 1992 and April 21, 1993 (the "Agreement"); and
WHEREAS, the Investors (i) hold an aggregate of at least sixty-six and
two-thirds percent (66 2/3%) of the aggregate of the Registrable Securities (as
defined in the Agreement) outstanding as of the date hereof, and (ii) pursuant
to Section 2.4 of the Agreement, may consent to an amendment of the Agreement;
and
WHEREAS, as of the date hereof, the Company has issued warrants to
purchase Common Stock of the Company to Phemus in conjunction with the issuance
by the Company of shares of its Series H Preferred Stock, par value $0.01 per
share; and
WHEREAS, the parties desire to amend the Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
1. Section 1.1(b) of the Agreement is hereby amended in its
entirety to be as follows:
(b) The term "Registrable Securities" means (1) the Common
Stock issued or issuable upon the conversion of the Shares, (2) the
Common Stock issued or issuable upon the conversion of the Series D
Preferred which is issued or issuable upon the exercise of the D
Warrants, (3) the Common Stock issued or issuable pursuant to the D
Warrants, (4) the Common Stock issued or issuable upon the conversion
of the shares of the Company's Series F Convertible Preferred Stock
issued to Phemus Corporation and Intercontinental Mining & Resources
Incorporated on April 20, 1993, (5) the Common Stock issued or
issuable upon the exercise of the
<PAGE> 2
warrants issued to Phemus Corporation and Intercontinental Mining &
Resources Incorporated on April 20, 1993, (6) the Common Stock issued
upon the exercise of warrants issued or issuable under the Securities
Purchase Agreement dated January 27, 1997, between the Company and
Phemus Corporation, and (7) any Common Stock of the Company issued (or
issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, such
securities described in (1), (2), (3), (4), (5) or (6) of this
paragraph; provided, however, that any shares previously sold to the
public pursuant to a registered public offering or pursuant to an
exemption from the registration requirements of the 1933 Act shall
cease to be Registrable Securities;
Except as expressly amended herein, the Agreement shall remain in full force
and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed as of the date first above written.
E-Z SERVE CORPORATION
By: /s/ John T. Miller
----------------------------------------
Name: John T. Miller
Title: Senior Vice President
PHEMUS CORPORATION
By: /s/ Michael R. Eisenson
----------------------------------------
Name: Michael R. Eisenson
------------------------------
By: /s/ Michael Thonis
----------------------------------------
Name: Michael Thonis
------------------------------
QUADRANT CAPITAL CORP.
By:
----------------------------------------
Name:
------------------------------
Title:
-----------------------------
-2-
<PAGE> 3
INTERCONTINENTAL MINING & RESOURCES
INCORPORATED
By: /s/ Thomas A. Huser
----------------------------------------
Name: Thomas A. Huser
------------------------------
Title: Attorney in Fact
-----------------------------
-3-
<PAGE> 1
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE SUCH A REGISTRATION IS
IN EFFECT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SAID ACT.
E-Z SERVE CORPORATION
COMMON STOCK PURCHASE WARRANT
Houston, Texas
__________, 19__
E-Z Serve Corporation, a Delaware corporation (the "Company"), for
value received, hereby certifies that __________________, or registered
assigns, is entitled to purchase from the Company _______ duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock, par value
$0.01 per share (the "Common Stock"), of the Company at the purchase price per
share of $____ (the "Initial Warrant Price"), at any time or from time to time
prior to 5:00 P.M., Houston, Texas time, on January 27, 2009 (the "Expiration
Date"), all subject to the terms, conditions and adjustments set forth below in
this Warrant.
This Warrant is one of the warrants to purchase Common Stock (the
"Warrants", such term to include any such warrants issued in substitution
therefor) originally issued in connection with the execution and delivery of
the Securities Purchase Agreement dated as of January 27, 1997 (as from time to
time in effect, the "Securities Purchase Agreement") among the Company and
Phemus Corporation (the "Purchaser"). The Warrants originally so issued
evidence rights to purchase an aggregate of _______ shares of Common Stock,
subject to adjustment as provided herein. Certain capitalized terms used in
this Warrant are defined in Section 13 hereof.
1. EXERCISE OR CONVERSION OF WARRANT.
1.1. Manner of Exercise or Conversion; Payment.
1.1.1. Exercise. This Warrant may be exercised by the
holder hereof, in whole or in part, during normal business hours on
any Business Day on or prior to the Expiration Date, by surrender of
this Warrant to the Company at its office maintained pursuant to
Section 12.2(a) hereof, accompanied by a subscription in substantially
the form attached to
<PAGE> 2
this Warrant (or a reasonable facsimile thereof) duly executed by such
holder and accompanied by payment, in cash or by check payable to the
order of the Company (or by any combination of such methods), in the
amount obtained by multiplying (a) the number of shares of Common
Stock (without giving effect to any adjustment thereof) designated in
such subscription by (b) the Initial Warrant Price, and such holder
shall thereupon be entitled to receive the number of duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock
(or Other Securities) determined as provided in Sections 2 through 4
hereof.
1.1.2. Conversion. This Warrant may be converted by the
holder hereof, in whole or in part, into shares of Common Stock,
during normal business hours on any Business Day on or prior to the
Expiration Date, by surrender of this Warrant to the Company at its
office maintained pursuant to Section 12.2(a) hereof, accompanied by a
conversion notice in substantially the form attached to this Warrant
(or a reasonable facsimile thereof) duly executed by such holder, and
such holder shall thereupon be entitled to receive a number of duly
authorized, validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) equal to the quotient of:
(i) the excess of:
(a) an amount equal to (x) the number of shares
of Common Stock (or Other Securities)
determined as provided in Sections 2
through 4 hereof which such holder would be
entitled to receive upon exercise of this
Warrant for the number of shares of Common
Stock designated in such conversion notice
multiplied by (y) the Current Market Price
of each such share of Common Stock (or such
Other Securities) so receivable upon such
exercise
over
(b) an amount equal to (x) the number of shares
of Common Stock (without giving effect to
any adjustment thereof) designated in such
conversion notice multiplied by (y) the
Initial Warrant Price
divided by
(ii) such Current Market Price of each such share of
Common Stock (or Other Securities).
-2-
<PAGE> 3
For all purposes of this Warrant (other than this Section 1.1), any
reference herein to the exercise of this Warrant shall be deemed to
include a reference to the conversion of this Warrant into Common
Stock (or other Securities) in accordance with the terms of this
Section 1.1.2.
1.2. When Exercise Effective. Each exercise of this Warrant
shall be deemed to have been effected immediately prior to the close of
business on the Business Day on which this Warrant shall have been surrendered
to the Company as provided in Section 1.1 hereof, and at such time the Person
or Persons in whose name or names any certificate or certificates for shares of
Common Stock (or Other Securities) shall be issuable upon such exercise as
provided in Section 1.3 hereof shall be deemed to have become the holder or
holders of record thereof.
1.3. Delivery of Stock Certificates, etc. As soon as practicable
after each exercise of this Warrant, in whole or in part, and in any event
within five Business Days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the
name of and delivered to the holder hereof or, subject to Section 9 hereof, as
such holder (upon payment by such holder of any applicable transfer taxes) may
direct:
(a) a certificate or certificates for the number of duly
authorized, validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such holder shall be
entitled upon such exercise plus, in lieu of any fractional share to
which such holder would otherwise be entitled, cash in an amount equal
to the same fraction of the Market Price per share on the Business Day
next preceding the date of such exercise; and
(b) in case such exercise is in part only, a new Warrant or
Warrants of like tenor, dated the date hereof and calling in the
aggregate on the face or faces thereof for the number of shares of
Common Stock equal to the number of such shares (without giving effect
to any adjustment thereof) called for on the face of this Warrant
minus the number of such shares designated by the holder upon such
exercise as provided in Section 1.1 hereof.
1.4. Company to Reaffirm Obligations. The Company will, at the
time of each exercise of this Warrant, upon the request of the holder hereof,
acknowledge in writing its continuing obligation to afford to such holder all
rights (including without limitation any rights to registration, pursuant to
the Registration Agreement referred to in Section 8 hereof, of the shares of
Common Stock or Other Securities issued upon such exercise) to which such
holder shall continue to be entitled after such exercise in accordance with the
terms of this Warrant; provided, however, that if the holder of this Warrant
shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford such rights to such holder.
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2. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE.
2.1. General; Number of Shares; Warrant Price. The number of
shares of Common Stock which the holder of this Warrant shall be entitled to
receive upon each exercise hereof shall be determined by multiplying the number
of shares of Common Stock which would otherwise (but for the provisions of this
Section 2) be issuable upon such exercise, as designated by the holder hereof
pursuant to Section 1.1 hereof, by the fraction of which (a) the numerator is
the Initial Warrant Price and (b) the denominator is the Warrant Price in
effect on the date of such exercise. The "Warrant Price" shall initially be
the Initial Warrant Price, shall be adjusted and readjusted from time to time
as provided in this Section 2 and, as so adjusted or readjusted, shall remain
in effect until a further adjustment or readjustment thereof is required by
this Section 2.
2.2. Adjustment of Warrant Price.
2.2.1. Issuance of Additional Shares of Common Stock. In
case the Company at any time or from time to time after the date
hereof shall issue or sell Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be issued
pursuant to Section 2.3 or 2.4 hereof) without consideration or for a
consideration per share less than the greater of the Current Market
Price or the Warrant Price in effect immediately prior to such issue
or sale, then, and in each such case, subject to Section 2.7 hereof,
such Warrant Price shall be reduced, concurrently with such issue or
sale, to a price (calculated to the nearest 0.0001 of a cent)
determined by multiplying such Warrant Price by a fraction:
(a) the numerator of which shall be the per share
consideration received by the Company for the Additional
Shares of Common Stock so issued or sold; and
(b) the denominator of which shall be the greater of
such Current Market Price and such Warrant Price.
2.2.2. Dividends and Distributions. In case the Company
at any time or from time to time after the date hereof shall declare,
order, pay or make a dividend or other distribution (including without
limitation any distribution of cash, other or additional stock or
other securities or property or Options, by way of dividend or
spin-off, reclassification, recapitalization or similar corporate
rearrangement or otherwise) on the Common Stock, other than a dividend
payable in Additional Shares of Common Stock, then, and in each such
case, subject to Section 2.7 hereof, the Warrant Price in effect
immediately prior to the close of business on the record date fixed
for the determination of holders of any class of securities entitled
to receive such dividend or distribution shall be reduced, effective
as of the close of
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<PAGE> 5
business on such record date, to a price (calculated to the nearest
.001 of a cent) determined by multiplying such Warrant Price by a
fraction:
(x) the numerator of which shall be the Current
Market Price in effect on such record date or, if the Common
Stock trades on an ex-dividend basis, on the date prior to the
commencement of ex-dividend trading, less the amount of such
dividend or distribution (as determined in good faith by the
Board of Directors of the Company) applicable to one share of
Common Stock; and
(y) the denominator of which shall be such Current
Market Price.
2.3. Treatment of Options and Convertible Securities. In case the
Company at any time or from time to time after the date hereof shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities entitled to receive, any Options or
Convertible Securities, then, and in each such case, the maximum number of
Additional Shares of Common Stock (as set forth in the instrument relating
thereto, without regard to any provisions contained therein for a subsequent
adjustment of such number the purpose of which is to protect against dilution)
at any time issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue, sale, grant or assumption or, in case such
a record date shall have been fixed, as of the close of business on such record
date (or, if the Common Stock trades on an ex-dividend basis, on the date prior
to the commencement of ex-dividend trading); provided, however, that such
Additional Shares of Common Stock shall not be deemed to have been issued
unless the consideration per share (determined pursuant to Section 2.5 hereof)
of such shares would be less than the greater of the Current Market Price or
the Warrant Price in effect on the date of and immediately prior to such issue,
sale, grant or assumption or immediately prior to the close of business on such
record date (or, if the Common Stock trades on an ex-dividend basis, on the
date prior to the commencement of ex- dividend trading), as the case may be;
and provided, further, that in any such case in which Additional Shares of
Common Stock are deemed to be issued:
(a) no further adjustment of the Warrant Price shall be made
upon the exercise of such Options or the conversion or exchange of
such Convertible Securities and the consequent issue or sale of
Convertible Securities or shares of Common Stock;
(b) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase in
the consideration payable to the Company, or decrease in the number of
Additional Shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof (by change of rate or otherwise), the
Warrant Price computed
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upon the original issue, sale, grant or assumption thereof (or upon
the occurrence of the record date, or date prior to the commencement
of ex-dividend trading, as the case may be, with respect thereto), and
any subsequent adjustments based thereon, shall, upon any such
increase or decrease becoming effective, be recomputed to reflect such
increase or decrease insofar as it affects such Options, or the rights
of conversion or exchange under such Convertible Securities, which are
outstanding at such time;
(c) upon the expiration (or purchase by the Company and
cancellation or retirement) of any such Options which shall not have
been exercised, or the expiration of any rights of conversion or
exchange under any such Convertible Securities which (or purchase by
the Company and cancellation or retirement of any such Convertible
Securities the rights of conversion or exchange under which) shall not
have been exercised, the Warrant Price computed upon the original
issue, sale, grant or assumption thereof (or upon the occurrence of
the record date, or date prior to the commencement of ex-dividend
trading, as the case may be, with respect thereto), and any subsequent
adjustments based thereon, shall, upon (and effective as of) such
expiration (or such cancellation or retirement, as the case may be),
be recomputed as if:
(i) in the case of Options or Convertible
Securities, the only Additional Shares of Common Stock issued
or sold were the Additional Shares of Common Stock, if any,
actually issued or sold upon the exercise of such Options or
the conversion or exchange of such Convertible Securities and
the consideration received therefor was the consideration
actually received by the Company for the issue, sale, grant or
assumption of all such Options, whether or not exercised, plus
the consideration actually received by the Company upon such
exercise, or for the issue or sale of all such Convertible
Securities which were actually converted or exchanged, plus
the additional consideration, if any, actually received by the
Company upon such conversion or exchange, and
(ii) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually
issued or sold upon the exercise of such Options were issued
at the time of the issue, sale, grant or assumption of such
Options, and the consideration received by the Company for the
Additional Shares of Common Stock deemed to have then been
issued was the consideration actually received by the Company
for the issue, sale, grant or assumption of all such Options,
whether or not exercised, plus the consideration deemed to
have been received by the Company (pursuant to Section 2.5
hereof) upon the issue or sale of such Convertible Securities
with respect to which such Options were actually exercised;
and
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<PAGE> 7
(d) no readjustment pursuant to clause (b) or (c)
above (either individually or cumulatively together with all
prior readjustments as made in respect of such Options or
Convertible Securities) shall have the effect of increasing
the Warrant Price by a proportion (relative to the Warrant
Price in effect immediately prior to such readjustment) in
excess of the inverse of the aggregate proportional adjustment
thereof made in respect of the issue, sale, grant or
assumption of such Options or Convertible Securities.
If the consideration provided for in any Option or the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Security shall be reduced, or the rate at which any Option is
exercisable or any Convertible Security is convertible into or exchangeable for
shares of Common Stock shall be increased, at any time under or by reason of
provisions with respect thereto designed to protect against dilution, then,
effective concurrently with each such change, the Warrant Price then in effect
shall first be adjusted to eliminate the effects (if any) of the issuance (or
deemed issuance) of such Option or Convertible Security on the Warrant Price
and then readjusted as if such Option or Convertible Security had been issued
on the date of such change with the terms in effect after such change, but only
if as a result of such adjustment the Warrant Price then in effect hereunder is
thereby reduced.
2.4. Treatment of Stock Dividends, Stock Splits, etc. In case the
Company at any time or from time to time after the date hereof shall declare or
pay any dividend on the Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case, Additional Shares of
Common Stock shall be deemed to have been issued (a) in the case of any such
dividend, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend, or (b) in the case of any such subdivision, at the close of business
on the day immediately prior to the day upon which such corporate action
becomes effective.
2.5. Computation of Consideration. For the purposes of this
Section 2:
(a) the consideration for the issue or sale of any Additional
Shares of Common Stock shall, irrespective of the accounting treatment
of such consideration:
(i) insofar as it consists of cash, be computed at
the amount of cash actually received by the Company net of any
expenses paid or incurred by the Company or any commissions or
compensations paid or concessions or discounts allowed to
underwriters, dealers or others performing similar services in
connection with such issue or sale;
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<PAGE> 8
(ii) insofar as it consists of property (including
securities) other than cash actually received by the Company,
be computed at the fair value thereof at the time of such
issue or sale, as determined in good faith by the Board of
Directors of the Company;
(iii) insofar as it consists neither of cash nor of
other property, be computed as having no value; and
(iv) in case Additional Shares of Common Stock are
issued or sold together with other stock or securities or
other assets of the Company for a consideration which covers
both, be the portion of such consideration so received,
computed as provided in clauses (i), (ii) and (iii) above,
allocable to such Additional Shares of Common Stock, all as
determined in good faith by the Board of Directors of the
Company;
(b) Additional Shares of Common Stock deemed to have been
issued pursuant to Section 2.3 hereof shall be deemed to have been
issued for a consideration per share determined by dividing:
(i) the total amount of cash and other property, if
any, received and receivable by the Company as direct
consideration for the issue, sale, grant or assumption of the
Options or Convertible Securities in question, plus the
minimum aggregate amount of additional consideration (as set
forth in the instruments relating thereto, without regard to
any provision contained therein for a subsequent adjustment of
such consideration the purpose of which is to protect against
dilution) payable to the Company upon the exercise in full of
such Options or the conversion or exchange of such Convertible
Securities or, in the case of Options for Convertible
Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible
Securities, in each case computing such consideration as
provided in the foregoing clause (a),
by
(ii) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment
of such number the purpose of which is to protect against
dilution) issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities; and
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<PAGE> 9
(c) Additional Shares of Common Stock deemed to have been
issued pursuant to Section 2.4 hereof shall be deemed to have been
issued for no consideration.
2.6. Adjustments for Combinations, etc. In case the outstanding
shares of Common Stock shall be combined or consolidated, by reclassification
or otherwise, into a lesser number of shares of Common Stock, the Warrant Price
in effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
2.7. Minimum Adjustment of Warrant Price. If the amount of any
adjustment of the Warrant Price required pursuant to this Section 2 would be
less than one-tenth (1/10) of one percent (1%) of the Warrant Price in effect
at the time such adjustment is otherwise so required to be made, such amount
shall be carried forward and adjustment with respect thereto made at the time
of and together with any subsequent adjustment which, together with such amount
and any other amount or amounts so carried forward, shall aggregate at least
one tenth (1/10) of one percent (1%) of such Warrant Price.
2.8. Shares Deemed Outstanding. For all purposes of the
computations to be made pursuant to this Section 2, (i) there shall be deemed
to be outstanding all shares of Common Stock issuable pursuant to the exercise
of Options and conversion of Convertible Securities outstanding on January 27,
1997 excluding the $6.00 Convertible Preferred Stock, Series C and including
without limitation the Warrants, (ii) immediately after any Additional Shares
of Common Stock are deemed to have been issued pursuant to Section 2.3 or 2.4
hereof, such Additional Shares shall be deemed to be outstanding, (iii)
treasury shares shall not be deemed to be outstanding and (iv) no adjustment
shall be made in the Warrant Price upon the issuance of shares of Common Stock
pursuant to Options and Convertible Securities so deemed to be outstanding, but
this Section 2.8 shall not prevent other adjustments in the Warrant Price
arising by virtue of such outstanding Options or Convertible Securities
pursuant to the provisions of Section 2.3 hereof; provided, however, that, for
purposes of calculating adjustments to the Warrant Price, there shall be deemed
to be outstanding immediately after giving effect to any issuance of shares of
Common Stock, Options or Convertible Securities all shares of Common Stock
issuable upon the exercise of Options and conversion of Convertible Securities
then outstanding (including without limitation the Warrants) after giving
effect to antidilution provisions contained in all such outstanding Options and
Convertible Securities which cause an adjustment in the number of shares of
Common Stock so issuable, either by virtue of such issuance of shares of Common
Stock, Options or Convertible Securities or by virtue of the operation of such
antidilution provisions.
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3. CONSOLIDATION, MERGER, ETC.
3.1. Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, etc. In case the Company after the date hereof (a) shall
consolidate with or merge into any other Person and shall not be the continuing
or surviving corporation of such consolidation or merger, or (b) shall permit
any other Person to consolidate with or merge into the Company and the Company
shall be the continuing or surviving Person but, in connection with such
consolidation or merger, the Common Stock or Other Securities shall be changed
into or exchanged for stock or other securities of any other Person or cash or
any other property, or (c) shall transfer all or substantially all of its
properties or assets to any other Person, or (d) shall effect a capital
reorganization or reclassification of the Common Stock or Other Securities
(other than a capital reorganization or reclassification to the extent that
such capital reorganization or reclassification results in the issue of
Additional Shares of Common Stock for which adjustment in the Warrant Price is
provided in Section 2.2.1 or 2.2.2 hereof), then, and in the case of each such
transaction, proper provision shall be made so that, upon the basis and the
terms and in the manner provided in this Warrant, the holder of this Warrant,
upon the exercise hereof at any time after the consummation of such
transaction, shall be entitled to receive (at the aggregate Warrant Price in
effect at the time of such consummation for all Common Stock or Other
Securities issuable upon such exercise immediately prior to such consummation),
in lieu of the Common Stock or Other Securities issuable upon such exercise
prior to such consummation, the greatest amount of securities, cash or other
property to which such holder would actually have been entitled as a
shareholder upon such consummation if such holder had exercised the rights
represented by this Warrant immediately prior thereto, subject to adjustments
(subsequent to such consummation) as nearly equivalent as possible to the
adjustments provided for in Sections 2, 3 and 4 hereof; provided, however, that
if a purchase, tender or exchange offer shall have been made to and accepted by
the holders of more than 50% of the outstanding shares of Common Stock, and if
the holder of such Warrants so designates in a notice given to the Company on
or before the date immediately preceding the date of the consummation of such
transaction, the holder of such Warrants shall be entitled to receive the
greatest amount of securities, cash or other property to which such holder
would actually have been entitled as a shareholder if the holder of such
Warrants had exercised such Warrants prior to the expiration of such purchase,
tender or exchange offer and accepted such offer, subject to adjustments (from
and after the consummation of such purchase, tender or exchange offer) as
nearly equivalent as possible to the adjustments provided for in Sections 2, 3
and 4 hereof.
3.2. Assumption of Obligations. Notwithstanding anything contained
in the Warrants or in the Securities Purchase Agreement to the contrary, the
Company will not effect any of the transactions described in clauses (a)
through (d) of Section 3.1 hereof unless, prior to the consummation thereof,
each person (other than the Company) which may be required to deliver any
stock, securities, cash or property upon the exercise of this Warrant as
provided herein shall assume,
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<PAGE> 11
by written instrument delivered to, and reasonably satisfactory to, the holder
of this Warrant, (a) the obligations of the Company under this Warrant (and if
the Company shall survive the consummation of such transaction, such assumption
shall be in addition to, and shall not release the Company from, any continuing
obligations of the Company under this Warrant), (b) the obligations of the
Company under the Registration Agreement and (c) the obligation to deliver to
such holder such shares of stock, securities, cash or property as, in
accordance with the foregoing provisions of this Section 3, such holder may be
entitled to receive, and such Person shall have similarly delivered to such
holder an opinion of counsel for such Person, which counsel shall be reasonably
satisfactory to such holder, stating that this Warrant shall thereafter
continue in full force and effect and the terms hereof (including without
limitation all of the provisions of this Section 3) shall be applicable to the
stock, securities, cash or property which such Person may be required to
deliver upon any exercise of this Warrant or the exercise of any rights
pursuant hereto. Nothing in this Section 3 shall be deemed to authorize the
Company to enter into any transaction not otherwise permitted by the Securities
Purchase Agreement.
4. OTHER DILUTIVE EVENTS. In case any event shall occur as to which the
provisions of Section 2 or 3 hereof are not strictly applicable but the failure
to make any adjustment would not, in the opinion of the holder of this Warrant,
fairly protect the purchase rights represented by this Warrant in accordance
with the essential intent and principles of such Sections, then, in each such
case, at the request of such holder, the Company shall appoint a firm of
independent investment bankers of recognized national standing (which shall be
completely independent of the Company and shall be satisfactory to the holder
of this Warrant), which shall give their opinion upon the adjustment, if any,
on a basis consistent with the essential intent and principles established in
Sections 2 and 3 hereof, necessary to preserve, without dilution, the purchase
rights represented by this Warrant. Upon receipt of such opinion, the Company
will promptly mail a copy thereof to the holder of this Warrant and shall make
the adjustments described therein.
5. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its
certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights
of the holder of this Warrant against dilution or other impairment. Without
limiting the generality of the foregoing, the Company (a) will not permit the
par value of any shares of stock receivable upon the exercise of this Warrant
to exceed the amount payable therefor upon such exercise, (b) will take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of stock on the
exercise of the Warrants from time to time outstanding, (c) will not take any
action which results in any adjustment of the Warrant Price if the total number
of shares of Common Stock (or Other
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Securities) issuable after the action upon the exercise of all of the Warrants
would exceed the total number of shares of Common Stock (or Other Securities)
then authorized by the Company's certificate of incorporation and available for
the purpose of issue upon such exercise, and (d) will not issue any capital
stock of any class which is preferred as to dividends or as to the distribution
of assets upon voluntary or involuntary dissolution, liquidation or winding-up,
unless the rights of the holders thereof shall be limited to a fixed sum or
percentage of par value or a sum determined by reference to a formula based on
a published index of interest rates, an interest rate publicly announced by a
financial institution or a similar indicator of interest rates in respect of
participation in dividends and to a fixed sum or percentage of par value in any
such distribution of assets.
6. ACCOUNTANTS' REPORT AS TO ADJUSTMENTS. In each case of any adjustment
or readjustment in the shares of Common Stock (or Other Securities) issuable
upon the exercise of this Warrant, the Company at its expense will promptly
compute such adjustment or readjustment in accordance with the terms of this
Warrant and cause independent certified public accountants of recognized
national standing (which may be the regular auditors of the Company) selected
by the Company to verify such computation (other than any computation of the
fair value of property as determined in good faith by the Board of Directors of
the Company) and prepare a report setting forth such adjustment or readjustment
and showing in reasonable detail the method of calculation thereof and the
facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or to be received by the Company
for any Additional Shares of Common Stock issued or sold or deemed to have been
issued, (b) the number of shares of Common Stock outstanding or deemed to be
outstanding, and (c) the Warrant Price in effect immediately prior to such
issue or sale and as adjusted and readjusted (if required by Section 2 hereof)
on account thereof. The Company will forthwith mail a copy of each such report
to each holder of a Warrant and will, upon the written request at any time of
any holder of a Warrant, furnish to such holder a like report setting forth the
Warrant Price at the time in effect and showing in reasonable detail how it was
calculated. The Company will also keep copies of all such reports at its
office maintained pursuant to Section 12.2(a) hereof and will cause the same to
be available for inspection at such office during normal business hours by any
holder of a Warrant or any prospective purchaser of a Warrant designated by the
holder thereof.
7. NOTICES OF CORPORATE ACTION. In the event of
(a) any taking by the Company 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 or other
distribution, 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, or
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(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any consolidation or merger involving the Company and any
other Person or any transfer of all or substantially all the assets of
the Company to any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
(d) any issuance of any Common Stock, Convertible Security or
Option by the Company,
the Company will mail to each holder of a Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose
of such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place, the time, if
any such time is to be fixed, as of which the holders of record of Common Stock
(or Other Securities) shall be entitled to exchange their shares of Common
Stock (or Other Securities) for the securities or other property deliverable
upon such reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, liquidation or winding-up and a description in
reasonable detail of the transaction and (iii) the date of such issuance,
together with a description of the security so issued and the consideration
received by the Company therefor. Such notice shall be mailed at least 5 days
prior to the date therein specified.
8. REGISTRATION OF WARRANTS AND COMMON STOCK. If any shares of Common
Stock required to be reserved for purposes of exercise of this Warrant require
registration with or approval of any governmental authority under any federal
or state law (other than the Securities Act) before such shares may be issued
upon exercise, the Company will, at its expense and as expeditiously as
possible, use its best efforts to cause such shares to be duly registered or
approved, as the case may be. This Warrant and the shares of Common Stock (and
Other Securities) issuable upon exercise of this Warrant shall constitute
Registrable Securities (as such term is defined in the Registration Agreement).
Each holder of this Warrant shall be entitled to all of the benefits afforded
to a holder of any such Registrable Securities under the Registration Agreement
and such holder, by its acceptance of this Warrant, agrees to be bound by and
to comply with the terms and conditions of the Registration Agreement
applicable to such holder as a holder of such Registrable Securities. At any
such time as or Common Stock is listed on any national securities exchange, the
Company will, at its expense, obtain promptly and maintain the approval for
listing on each such exchange, upon official notice of issuance, the shares of
Common Stock issuable upon exercise of the then outstanding Warrants and
maintain the listing of such shares after their issuance; and the Company
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<PAGE> 14
will also list on such national securities exchange, will register under the
Exchange Act and will maintain such listing of, any Other Securities that at
any time are issuable upon exercise of the Warrants, if and at the time that
any securities of the same class shall be listed on such national securities
exchange by the Company.
9. RESTRICTIONS ON TRANSFER.
9.1. Restrictive Legends. Except as otherwise permitted by this
Section 9, each certificate for Common Stock (or Other Securities) issued upon
the exercise of any Warrant, each certificate issued upon the direct or
indirect transfer of any such Common Stock (or Other Securities), all Warrants
originally issued pursuant to the Securities Purchase Agreement and each
Warrant issued upon direct or indirect transfer or in substitution for any
Warrant pursuant to Section 12 hereof shall be transferable only upon
satisfaction of the conditions specified in the Stockholders Agreement, Section
11 of the Securities Purchase Agreement and in this Section 9 and shall be
stamped or otherwise imprinted with legends in substantially the form required
by Section 11 of the Securities Purchase Agreement.
9.2. Notice of Proposed Transfer; Opinion of Counsel. Prior to any
transfer of any Restricted Securities which are not registered under an
effective registration statement under the Securities Act, the holder thereof
will give written notice to the Company of such holder's intention to effect
such transfer and to comply in all other respects with this Section 9.2. Each
such notice (a) shall describe the manner and circumstances of the proposed
transfer, and (b) shall designate counsel for the holder giving such notice
(who may be house counsel for such holder). The holder giving such notice will
submit a copy thereof to the counsel designated in such notice. The following
provisions shall then apply:
(i) If in the opinion of such counsel (reasonably acceptable
to the Company) the proposed transfer may be effected without
registration of such Restricted Securities under the Securities Act,
such holder shall thereupon be entitled to transfer such Restricted
Securities in accordance with the terms of the notice delivered by
such holder to the Company. Each certificate representing such
Restricted Securities issued upon or in connection with such transfer
shall bear the restrictive legends required by Section 9.1 hereof,
unless the related restrictions on transfer provided for in the
Securities Agreement shall have ceased and terminated as to such
Restricted Securities pursuant to Section 9.3 hereof.
(ii) If in the opinion of such counsel (reasonably acceptable
to the Company) the proposed transfer may not legally be effected
without registration of such Restricted Securities under the
Securities Act (such opinion to state the basis of the legal
conclusions
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reached therein), thereafter such holder shall not be entitled to
transfer such Restricted Securities until either (x) receipt by the
Company of a further notice from such holder pursuant to the foregoing
provisions of this Section 9.2 and fulfillment of the provisions of
clause (i) above or (y) such Restricted Securities have been
effectively registered under the Securities Act.
Notwithstanding any other provision of this Section 9 or of the
Securities Purchase Agreement, no opinion of counsel shall be necessary for a
transfer of Restricted Securities by the holder thereof to a subsidiary,
shareholder, partner or other affiliate of such holder, if the transferee
agrees in writing to be subject to the terms hereof to the same extent as if
such transferee were the original Purchaser hereof.
9.3. Termination of Restrictions. The restrictions imposed by this
Section 9 upon the transferability of Restricted Securities shall cease and
terminate as to any particular Restricted Securities (a) when such Restricted
Securities shall have been effectively registered under the Securities Act, or
(b) when, in the opinion of counsel (reasonably acceptable to the Company) for
the holder thereof, such restrictions are no longer required in order to insure
compliance with the Securities Act or Section 11 of the Securities Purchase
Agreement. Whenever such restrictions shall cease and terminate as to any
Restricted Securities, the holder thereof shall be entitled to receive from the
Company, without expense (other than applicable transfer taxes, if any), new
securities of like tenor not bearing the applicable legends required by Section
9.1 hereof.
10. AVAILABILITY OF INFORMATION. If the Company shall have filed a
registration statement pursuant to the requirements of Section 12 of the
Exchange Act or a registration statement pursuant to the requirements of the
Securities Act, the Company will comply with the reporting requirements of
Sections 13 and 15(d) of the Exchange Act and will comply with all other public
information reporting requirements of the Commission (including Rule 144
promulgated by the Commission under the Securities Act) from time to time in
effect and relating to the availability of an exemption from the Securities Act
for the sale of any Restricted Securities. The Company will also cooperate
with each holder of any Restricted Securities in supplying such information as
may be necessary for such holder to complete and file any information reporting
forms presently or hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale of any
Restricted Securities. The Company will furnish to each holder of any
Warrants, promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available
generally by the Company to its stockholders, and copies of all regular and
periodic reports and all registration statements and prospectuses filed by the
Company with any securities exchange or with the Commission.
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<PAGE> 16
11. RESERVATION OF STOCK, ETC. The Company will at all times reserve and
keep available, solely for issuance and delivery upon exercise of the Warrants,
the number of shares of Common Stock of each class (or Other Securities) from
time to time issuable upon exercise of all Warrants at the time outstanding.
All shares of Common Stock (or Other Securities) issuable upon exercise of any
Warrants shall be duly authorized and, when issued upon such exercise, shall be
validly issued and, in the case of shares, fully paid and nonassessable with no
liability on the part of the holders thereof.
12. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS.
12.1. Ownership of Warrants. The Company may treat the person in
whose name any Warrant is registered on the register kept at the office of the
Company maintained pursuant to Section 12.2(a) hereof as the owner and holder
thereof for all purposes, notwithstanding any notice to the contrary, except
that, if and when any Warrant is properly assigned in blank, the Company may
(but shall not be obligated to) treat the bearer thereof as the owner of such
Warrant for all purposes, notwithstanding any notice to the contrary. Subject
to Section 9 hereof, a Warrant, if properly assigned, may be exercised by a new
holder without a new Warrant first having been issued.
12.2. Office; Transfer and Exchange of Warrants.
(a) The Company will maintain an office (which may be an
agency maintained at a bank) in Houston, Texas where notices,
presentations and demands in respect of this Warrant may be made upon
it. Such office shall be maintained at 2550 North Loop West, Suite
600, Houston Texas 77092 until such time as the Company shall notify
the holders of the Warrants of any change of location of such office
within Houston, Texas.
(b) The Company shall cause to be kept at its office
maintained pursuant to Section 12.2(a) hereof a register for the
registration and transfer of the Warrants. The names and addresses of
holders of Warrants, the transfers thereof and the names and addresses
of transferees of Warrants shall be registered in such register. The
Person in whose name any Warrant shall be so registered shall be
deemed and treated as the owner and holder thereof for all purposes of
this Warrant, and the Company shall not be affected by any notice or
knowledge to the contrary.
(c) Upon the surrender of any Warrant, properly endorsed, for
registration of transfer or for exchange at the office of the Company
maintained pursuant to Section 12.2(a) hereof, the Company at its
expense will (subject to compliance with Section 9 hereof, if
applicable) execute and deliver to or upon the order of the holder
thereof a new Warrant or Warrants of like tenor, in the name of such
holder or as such holder (upon payment by such holder of any
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<PAGE> 17
applicable transfer taxes) may direct, calling in the aggregate on the
face or faces thereof for the number of shares of Common Stock called
for on the face or faces of the Warrant or Warrants so surrendered.
12.3. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
any Warrant and, in the case of any such loss, theft or destruction of any
Warrant held by a Person other than a Purchaser or any institutional investor,
upon delivery of indemnity reasonably satisfactory to the Company in form and
amount or, in the case of any such mutilation, upon surrender of such Warrant
for cancellation at the office of the Company maintained pursuant to Section
12.2(a) hereof, the Company at its expense will execute and deliver, in lieu
thereof, a new Warrant of like tenor and dated the date hereof.
13. DEFINITIONS. As used herein, unless the context otherwise requires,
the following terms have the following respective meanings:
Additional Shares of Common Stock: All shares (including treasury
shares) of Common Stock issued or sold (or, pursuant to Section 2.3 or 2.4
hereof, deemed to be issued) by the Company after the date hereof, whether or
not subsequently reacquired or retired by the Company, other than the shares of
Common Stock issued upon the exercise of Warrants.
Business Day: Any day other than a Saturday or a Sunday or a day on
which commercial banking institutions in Boston, Massachusetts, New York, New
York or Houston, Texas are authorized by law to be closed. Any reference to
"days" (unless Business Days are specified) shall mean calendar days.
Commission: The Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
Common Stock: As defined in the introduction to this Warrant, such
term to include any stock into which such Common Stock shall have been changed
or any stock resulting from any reclassification of such Common Stock, and all
other stock of any class or classes (however designated) of the Company the
holders of which have the right, without limitation as to amount, either to all
or to a share of the balance of current dividends and liquidating dividends
after the payment of dividends and distributions on any shares entitled to
preference.
Company: As defined in the introduction to this Warrant, such term to
include any corporation which shall succeed to or assume the obligations of the
Company hereunder in compliance with Section 3 hereof.
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<PAGE> 18
Convertible Securities: Any evidences of indebtedness, shares of
stock (other than Common Stock) or other securities directly or indirectly
convertible into or exchangeable for Additional Shares of Common Stock.
Securities Purchase Agreement: As defined in the introduction to this
Warrant.
Current Market Price: On any date specified herein, the average daily
Market Price during the period of the most recent 20 days, ending on such date,
on which the national securities exchanges were open for trading, except that
if no class of the Common Stock is then listed or admitted to trading on any
national securities exchange or quoted in the over-the-counter market, the
Current Market Price shall be the Market Price on such date.
Exchange Act: The Securities Exchange Act of 1934, or any similar
federal statute, and the rules and regulations of the Commission thereunder,
all as the same shall be in effect at the time.
Expiration Date: As defined in the introduction to this Warrant.
Market Price: On any date specified herein, the amount per share of
Common Stock equal to (a) the last sale price of Common Stock, regular way, on
such date or, if no such sale takes place on such date, the average of the
closing bid and asked prices thereof on such date, in each case as officially
reported on the principal national securities exchange on which Common Stock is
then listed or admitted to trading, or (b) if Common Stock is not then listed
or admitted to trading on any national securities exchange but is designated as
a national market system security by the NASD, the last trading price of Common
Stock on such date, or (c) if there shall have been no trading on such date or
if Common Stock is not so designated, the average of the closing bid and asked
prices of Common Stock on such date as shown by the NASD automated quotation
system, or (d) if Common Stock is not then listed or admitted to trading on any
national exchange or quoted in the over-the-counter market, the fair value
thereof determined in good faith by the Board of Directors of the Company as of
a date which is within 15 days of the date as of which the determination is to
be made.
NASD: The National Association of Securities Dealers, Inc.
Options: Rights, options or warrants to subscribe for, purchase or
otherwise acquire either Additional Shares of Common Stock or Convertible
Securities.
Other Securities: Any stock (other than Common Stock) and other
securities of the Company or any other person (corporate or otherwise) which
the holders of the Warrants at any time shall be entitled to receive, or shall
have received, upon the exercise of the Warrants, in lieu of or in addition
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<PAGE> 19
to Common Stock, or which at any time shall be issuable or shall have been
issued in exchange for or in replacement of Common Stock or Other Securities
pursuant to Section 3 hereof or otherwise.
Person: A corporation, an association, a partnership, an
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
Purchaser: As defined in the introduction to this Warrant.
Registration Agreement: The Registration Rights Agreement dated as of
March 25, 1992 and as last amended on January 27, 1997, in the form of Exhibit
6.9 to the Securities Purchase Agreement, as from time to time in effect.
Restricted Securities: All of the following: (a) any Warrants
bearing the applicable legend or legends referred to in Section 9.1 hereof, (b)
any shares of Common Stock (or Other Securities) which have been issued upon
the exercise of Warrants and which are evidenced by a certificate or
certificates bearing the applicable legend or legends referred to in such
Section, (c) unless the context otherwise requires, any shares of Common Stock
(or Other Securities) which are at the time issuable upon the exercise of
Warrants and which, when so issued, will be evidenced by a certificate or
certificates bearing the applicable legend or legends referred to in such
Section.
Securities Act: The Securities Act of 1933, or any similar federal
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.
Stockholders Agreement: The Amended and Restated Stockholders
Agreement dated as of June 1, 1996 and as last amended on January 27, 1997, in
the form of Exhibit 6.10 to the Securities Purchase Agreement, as from time to
time in effect.
Warrant Price: As defined in Section 2.1 hereof.
Warrants: As defined in the introduction to this Warrant.
14. REMEDIES. The Company stipulates that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
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<PAGE> 20
15. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in this
Warrant shall be construed as conferring upon the holder hereof any rights as a
stockholder of the Company or as imposing any obligation on such holder to
purchase any securities or as imposing any liabilities on such holder as a
stockholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.
16. NOTICES. Any notice or other communication in connection with this
Warrant shall be deemed to be delivered if in writing (or in the form of a
telex or telecopy) addressed as hereinafter provided and if either (x) actually
delivered at said address (evidenced in the case of a telex by receipt of the
correct answerback) or (y) in the case of a letter, three Business Days shall
have elapsed after the same shall have been deposited in the United States
mails, postage prepaid and registered or certified: (a) if to any holder of
any Warrant, at the registered address of such holder as set forth in the
register kept at the office of the Company maintained pursuant to Section
12.2(a) hereof; or (b) if to the Company, to the attention of its President at
its office maintained pursuant to Section 12.2(a) hereof; provided, however,
that the exercise of any Warrant shall be effective in the manner provided in
Section 1 hereof.
17. MISCELLANEOUS. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or
termination is sought. This Warrant shall be construed and enforced in
accordance with and governed by the laws of The Commonwealth of Massachusetts.
The section headings in this Warrant are for purposes of convenience only and
shall not constitute a part hereof.
E-Z SERVE CORPORATION
By: /s/ Neil H. McLaurin
-------------------------
Title: Chairman,
President & Chief
Executive Officer
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<PAGE> 21
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To E-Z SERVE CORPORATION
The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases thereunder, __________(1)
shares of the Common Stock and herewith makes payment of $ therefor, and
requests that the certificates for such shares be issued in the name of, and
delivered to , whose address is .
Dated:
---------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
---------------------------------
(Street Address)
---------------------------------
(City) (State) (Zip Code)
- ------------------------------
(1)Insert here the number of shares called for on the face of this Warrant
(or, in the case of a partial exercise, the portion thereof as to which this
Warrant is being exercised), in either case without making any adjustment for
Additional Shares of Common Stock or any other stock or other securities or
property or cash which, pursuant to the adjustment provisions of this Warrant,
may be delivered upon exercise. In the case of a partial exercise, a new
Warrant or Warrants will be issued and delivered, representing the unexercised
portion of the Warrant, to the holder surrendering the Warrant.
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FORM OF CONVERSION NOTICE
[To be executed only upon conversion of Warrant]
To E-Z SERVE CORPORATION
The undersigned registered holder of the within Warrant hereby
irrevocably converts such Warrant with respect to __________(1) shares of the
Common Stock which such holder would be entitled to receive upon the exercise
hereof, and requests that the certificates for such shares be issued in the
name of, and delivered to , whose address is .
Dated: ---------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
---------------------------------
(Street Address)
---------------------------------
(City) (State) (Zip Code)
- ------------------------------
(1)Insert here the number of shares called for on the face of this Warrant
(or, in the case of a partial conversion, the portion thereof as to which this
Warrant is being converted), in either case without making any adjustment for
Additional Shares of Common Stock or any other stock or other securities or
property or cash which, pursuant to the adjustment provisions of this Warrant,
may be delivered upon exercise. In the case of a partial conversion, a new
Warrant or Warrants will be issued and delivered, representing the unconverted
portion of the Warrant, to the holder surrendering the Warrant.
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FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within
Warrant hereby sells, assigns and transfers unto the right
represented by such Warrant to purchase _________(1) shares of Common Stock of
E-Z SERVE CORPORATION to which such Warrant relates, and appoints
Attorney to make such transfer on the books of E-Z SERVE CORPORATION maintained
for such purpose, with full power of substitution in the premises.
Dated: ---------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
---------------------------------
(Street Address)
---------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
- ------------------------------
- ------------------------------
(1)Insert here the number of shares called for on the face of this Warrant
(or, in the case of a partial exercise, the portion thereof as to which this
Warrant is being exercised), in either case without making any adjustment for
Additional Shares of Common Stock or any other stock or other securities or
property or cash which, pursuant to the adjustment provisions of this Warrant,
may be delivered upon exercise. In the case of a partial exercise, a new
Warrant or Warrants will be issued and delivered, representing the unexercised
portion of the Warrant, to the holder surrendering the Warrant.
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================================================================================
-----------------------------
SECURITIES PURCHASE AGREEMENT
-----------------------------
between
E-Z SERVE CORPORATION
and
PHEMUS CORPORATION
Dated
As of January 27, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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1. TRANSACTIONS AND DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1. Series H Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2. Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.4. Investor Securities Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. SALE AND PURCHASE OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.1. Agreement to Sell and Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.3. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.4. Specifically Prohibited Applications of Proceeds . . . . . . . . . . . . . . . . . . . . . . 3
4. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.1. Organization, Standing, Subsidiaries, etc . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.2. Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.3. Reservation of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.4. No Legal Obstacle to Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.5. Foreign Trade Regulations; Government Regulations . . . . . . . . . . . . . . . . . . . . . . 4
4.6. Availability for Resale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.7. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5. INVESTMENT REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.1. Accredited Investor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.2. Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.3. Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.4. Authorization, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6. CONDITIONS TO PURCHASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.1. Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.2. Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.3. Representations and Warranties; Officers' Certificate . . . . . . . . . . . . . . . . . . . . 6
6.4. Commitment Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.5. Payment of Transaction Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
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<TABLE>
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6.6. Proper Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.7. Legality; Governmental Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.8. Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.9. Amendment to Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.10. Amendment to Stockholders Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.11. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7. COVENANTS APPLICABLE WHILE ANY INVESTOR SECURITIES ARE OUTSTANDING . . . . . . . . . . . . . . . . . . . . . . 7
7.2. Resale under Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.3. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8. COVENANTS APPLICABLE WHILE ANY SHARES OF SERIES H PREFERRED STOCK CONSTITUTING INVESTOR SECURITIES ARE
OUTSTANDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.1. Issuance of Additional Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.2. Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8.3. Resale Under Rule 144A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9. COVENANTS APPLICABLE WHILE ANY WARRANTS OR ADDITIONAL WARRANTS CONSTITUTING INVESTOR SECURITIES ARE
OUTSTANDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9.1. Reservation of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
10. PAYMENT ON INVESTOR SECURITIES; TRANSFER; REPLACEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
10.1. Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
10.2. Transfer and Exchange of Senior Preferred . . . . . . . . . . . . . . . . . . . . . . . . . 9
10.3. Transfer, Exchange, Exercise and Conversion of Warrants . . . . . . . . . . . . . . . . . . 10
10.4. Replacement of Lost Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
11. RESTRICTIONS ON TRANSFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
11.1. Restrictive Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
11.2. Notice of Proposed Transfer; Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . 11
11.3. Termination of Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
12. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
12.1. Terms Defined Elsewhere . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
12.2. Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
12.3. Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
12.4. Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
12.5. By-laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
12.6. Charter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
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<TABLE>
<S> <C> <C>
12.7. Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
12.8. Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
12.9. Contractual Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
12.10. Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
12.11. Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
12.12. Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
12.13. Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
12.14. Foreign Trade Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
12.15. Governmental Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
12.16. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
12.17. Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
12.18. Legal Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
12.19. Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
12.20. Major Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
12.21. Material Adverse Change; Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . 15
12.22. Members of the Immediate Family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
12.23. Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
12.24. Public Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
12.25. Related Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
12.26. Required Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
12.27. Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
12.29. Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
12.30. Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
12.31. Subject Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
12.32. Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
13. EXPENSES, INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
13.1. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
13.2. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
14. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
15. SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
16. AMENDMENTS AND WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
17. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
18. SERVICE OF PROCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C> <C>
19. APPLICABLE REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
20. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
-iv-
<PAGE> 6
SCHEDULES AND EXHIBITS
Schedule I Home Office Payments
Exhibit 2.1 Charter of Company
Exhibit 2.2 Warrant
Exhibit 6.9 Amendment No. 3 to Registration Rights Agreement
Exhibit 6.10 Amendment No. 1 to Amended and Restated Stockholders
Agreement
-v-
<PAGE> 7
E-Z SERVE CORPORATION
2550 NORTH LOOP WEST
HOUSTON, TEXAS 77092
TELEPHONE NUMBER: (713) 684-4300
As of January 27, 1997
PHEMUS CORPORATION
c/o Harvard Management Company
600 Atlantic Avenue
Boston, Massachusetts 02210
Ladies and Gentlemen:
In connection with the purchase and sale of securities provided for
herein, the undersigned E-Z Serve Corporation, a corporation duly incorporated
and validly existing under the laws of the State of Delaware (the "Company"),
hereby agrees with you as follows:
1. TRANSACTIONS AND DEFINITIONS. Subject to all of the terms and
conditions of this Agreement and in reliance on the representations and
warranties set forth or incorporated by reference herein, the Company proposes
to issue and sell to you the Investor Securities described herein, and to apply
the proceeds therefrom solely as specified in Section 3.3 hereof. Certain
terms are used in this Agreement as specifically defined herein. These
definitions are set forth or referred to in Section 12 hereof.
2. THE SECURITIES.
2.1. Series H Preferred Stock. The Company has authorized the
issuance and sale to you of 140,000 shares of its Series H Preferred Stock,
$0.01 par value (the "Series H Preferred Stock") with the terms specified in
the Company's Charter (the "Certificate") attached hereto as Exhibit 2.1. You
consent to the issuance of Series H Preferred Stock in your capacity as a
holder of the $6.00 Convertible Preferred Stock, Series C (the "Series C
Preferred Stock") of the Company.
2.2. Warrants. The Company has authorized the issuance and sale to
you of warrants, each in substantially the form of Exhibit 2.2 hereto, for the
purchase of an aggregate of 960,000
-1-
<PAGE> 8
shares of the Company's common stock, par value $0.01 per share ("Common
Stock"), at a per share exercise price of $0.01 (each such warrant, together
with any warrant or warrants issued in exchange therefor, being referred to
herein as a "Warrant" and collectively as the "Warrants"). In addition, the
Company shall issue you additional warrants (the "Additional Warrants")
pursuant to and in accordance with Section 8.1 hereof.
2.3. Aggregate Purchase Price. The aggregate purchase price for
the Series H Preferred Stock and the Warrants shall be 13,440,000.
2.4. Investor Securities Defined. The Series H Preferred Stock and
the Warrants being issued to you hereunder, together with (i) any securities
issued with respect thereto (whether as a stock dividend or otherwise), upon
exercise, conversion or transfer thereof or in exchange therefor, including
without limitation the Additional Warrants and the Common Stock issued or
issuable upon exercise or conversion of the Warrants and the Additional
Warrants (the "Warrant Shares") and (ii) any securities issued with respect to,
upon exercise, conversion or transfer of or in exchange for the securities
described in the immediately preceding clause (i) or this clause (ii), are
collectively referred to herein as "Investor Securities"; provided, however,
that any such securities sold in a Public Sale shall cease to be Investor
Securities for all purposes hereof.
3. SALE AND PURCHASE OF SECURITIES.
3.1. Agreement to Sell and Purchase. Based on your representations
and warranties contained in Section 4 hereof, the Company hereby agrees to
issue and sell to you, and, subject to all of the terms and conditions hereof
and in reliance on the representations and warranties of the Company set forth
or otherwise referred to herein, you hereby agree to purchase from the Company,
at the Closing, the Series H Preferred Stock and the Warrants, at the purchase
price specified in Section 2.3.
3.2. Closing. The closing of the purchase and sale of the Investor
Securities (the "Closing") shall take place at 10:00 a.m., Boston time, at the
offices of Ropes & Gray, on or before January 27, 1997 or at such other place
as the Company and you may agree upon (the date on which the Closing occurs
being herein referred to as the "Closing Date"). At the Closing, the Company
will, unless otherwise requested, deliver to you a single certificate for the
Series H Preferred Stock evidencing the aggregate number of shares of Series H
Preferred Stock being issued to you by the Company hereunder, and a single
warrant evidencing the aggregate number of Warrants being issued to you by the
Company hereunder, each registered in your name, against payment of the
purchase price therefor by wire transfer of immediately available funds to a
single account of the Company specified by notice from the Company to you not
less than two Business Days prior to the Closing Date.
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<PAGE> 9
3.3. Use of Proceeds. The Company covenants that it will apply the
proceeds of the Investor Securities to be issued and sold by it to you at the
Closing (a) to the payment of $3,550,000 principal due under a term loan from
certain senior lenders, (b) to the redemption of all of its outstanding shares
of Series C Preferred Stock for $100 per share, plus all accrued and unpaid
dividends thereon, and (c) any remaining proceeds shall be used for general
corporate purposes.
3.4. Specifically Prohibited Applications of Proceeds. In no event
shall the Company, directly or indirectly, apply any part of the proceeds from
the issuance and sale hereunder of the Investor Securities to any transaction
prohibited by the Foreign Trade Regulations.
4. REPRESENTATIONS AND WARRANTIES. In order to induce you to enter into
this Agreement and to purchase the Investor Securities to be purchased by you
hereunder, the Company hereby represents and warrants as follows with respect
to the Company and its Subsidiaries:
4.1. Organization, Standing, Subsidiaries, etc.
4.1.1. The Company. The Company is a duly
incorporated and validly existing corporation under the laws
of the State of Delaware, with all necessary power and
authority, corporate and otherwise, to execute, deliver and
perform this Agreement and each other Related Agreement to
which it is or will be a party, to issue, sell and perform the
Investor Securities, and to carry on the business now
conducted or currently proposed to be conducted by it. The
Company has taken all action, corporate and otherwise,
necessary to authorize this Agreement, the other Related
Agreements to which it is or will be a party and the issuance
of the Investor Securities and to make each such document the
legal, valid, binding and enforceable obligation it purports
to be, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally or by general
principles of equity. This Agreement, each other Related
Agreement to which the Company is or will be a party and the
Investor Securities have been (or, as applicable, will have
been at or prior to the Closing, to the extent deliverable at
Closing) duly executed and delivered by the Company.
4.1.2. Charter. Attached hereto as Exhibit 2.1 is
a correct and complete copy of the Charter of the Company
(including the Certificate of Designation for the Series H
Preferred Stock (the "Certificate")) as in effect at the
execution hereof and as it will be in effect at the Closing.
4.1.3. Qualification. The Company is duly
qualified to do business as a foreign corporation and is in
good standing as such in each jurisdiction in which it is
required to be
-3-
<PAGE> 10
so qualified and is duly authorized, qualified and licensed
under all laws, regulations, ordinances or orders of public
authorities, or otherwise, to carry on its business in the
places and in the manner presently conducted and proposed to
be conducted, except for such failures to be so qualified or
authorized, qualified and licensed that have not had and are
not reasonably expected to have a Material Adverse Effect.
4.2. Capitalization.
4.2.1. Capital Stock of the Company. The
authorized capital stock of the Company immediately after the
Closing will consist of 100,000,000 shares of Common Stock,
and 3,000,000 shares of preferred stock, with 200,000 shares
designated as Series C Preferred Stock, and 750,000 shares
designated as Series H Preferred Stock. Immediately after the
Closing and the application of the proceeds therefrom, the
Company will have outstanding 69,119,532 shares of Common
Stock and 140,000 shares of Series H Preferred Stock, all of
which have been validly issued and are fully paid and non-
assessable. Immediately after the Closing and the application
of the proceeds therefrom, no shares of Series C Preferred
Stock will be outstanding. When issued and paid for as
provided for in this Agreement, the Investor Securities will
be subject to no Lien, except restrictions on transfer imposed
by this Agreement and applicable securities laws and Liens, if
any, created by you.
4.3. Reservation of Common Stock. The shares of Common Stock
issuable upon exercise or conversion of the Warrants have been duly authorized
and reserved for issuance by all necessary corporate action on the part of the
Company, and such shares, when issued upon such exercise or conversion (as
applicable), will be duly and validly issued, fully paid and nonassessable.
4.4. No Legal Obstacle to Agreement. Neither the execution and
delivery of this Agreement or any other Related Agreement, nor the consummation
of any transaction referred to herein or therein or contemplated hereby or
thereby, nor the fulfillment of the terms hereof or thereof or of any agreement
or instrument referred to in this Agreement or any other Related Agreement, has
constituted or resulted in or will constitute or result in (i) a breach of the
provisions of any Contractual Obligation to which any the Company is party or
by which it is bound or of its Charter or By-laws, or (ii) assuming the
accuracy of your representations and warranties in Section 5 hereof, a
violation of any Legal Requirement applicable to any Subject Entity, or (iii)
the creation under any Contractual Obligation of any Lien (other than liens
required by the Credit Agreement) upon any of the assets of the Company. No
approval, authorization or other action by any Governmental Authority or any
other Person is required to be obtained by the Company in connection with the
execution, delivery and performance of this Agreement or any other Related
Agreement or the Investor Securities or the transactions contemplated hereby or
thereby, except for such approvals as
-4-
<PAGE> 11
will have been obtained and shall be in full force and effect as of the Closing
Date, and copies of which shall have been furnished to you at or prior to the
Closing.
4.5. Foreign Trade Regulations; Government Regulations.
4.5.1. Foreign Trade Regulations. Neither the
execution and delivery of this Agreement or any other Related
Agreement, nor the issuance and sale of the Investor
Securities by the Company hereunder and the application of the
proceeds thereof, has constituted or resulted in or will
constitute or result in the violation of any Foreign Trade
Regulation.
4.5.2. Governmental Regulation. Neither the
Company nor any corporation controlling the Company or under
common control with the Company is subject to regulation under
the Public Utility Holding Company Act of 1935, the Investment
Company Act of 1940, the Interstate Commerce Act or the
Federal Power Act, or is subject to any Legal Requirement
(other than Legal Requirements applicable to borrowers or
issuers of securities generally) which regulates the incurring
of Indebtedness by the Company, or any of its Subsidiaries,
for money borrowed or the issuing by any of them of any equity
security. No approval or authorization of any governmental
authority is required to permit the execution, delivery or
performance by the Company of this Agreement or the
consummation of any of the transactions contemplated hereby.
4.6. Availability for Resale. The Series H Preferred Stock is
eligible for resale pursuant to the provisions of Rule 144A.
4.7. Disclosure. Neither this Agreement nor any agreement,
certificate, statement or document furnished by or on behalf of the Company in
connection herewith, contains any untrue statement of material fact or omits to
state a material fact necessary in order to make the statements contained
herein in light of the circumstances in which made not misleading. There is no
fact known to the Company which has had, or in the future is reasonably likely
to have (so far as the Company can now foresee), a Material Adverse Effect.
5. INVESTMENT REPRESENTATIONS. You hereby represent and warrant to the
Company with respect to the purchase by you of the Investor Securities as
follows; provided, however, that nothing contained in this Section 5 shall
prevent you from transferring such Investor Securities in compliance with the
provisions of Section 11 hereof; and provided, further, that the disposition of
your property shall at all times be and remain in your control.
-5-
<PAGE> 12
5.1. Accredited Investor. You are an "accredited investor" as such
term is defined in Rule 501(a) of Regulation D of the Securities Act.
5.2. Experience. You have substantial experience in evaluating and
investing in private placement transactions of securities in companies similar
to the Company so you are capable of evaluating the merits and risks of your
investment in the Company and have the capacity to protect your own interests
in making your investment in the Company. You have had access to and an
opportunity to inspect all relevant information relating to the Company,
including financial statements of the Company, sufficient to enable you to
evaluate the merits and risks of the purchase of the Investor Securities
hereunder. You also have had the opportunity to ask questions of officers of
the Company and have received satisfactory answers respecting, and have
obtained such additional information as you have desired regarding, the
business, financial condition and affairs of the Company.
5.3. Investment. You are acquiring the Investor Securities for
investment and not with the view to, or for resale in connection with, any
distribution thereof. You understand that the Investor Securities to be
purchased have not been, and will not be registered under the Securities Act by
reason of a specific exemption from the registration provisions of the
Securities Act, the availability of which depends upon, among other things, the
bona fide nature of your investment intent and the accuracy of your
representations as expressed herein.
5.4. Authorization, etc. You are a duly incorporated and validly
existing corporation under the laws of The Commonwealth of Massachusetts, with
all necessary power and authority, corporate and otherwise, to execute, deliver
and perform this Agreement and each other Related Agreement to which you are or
will be a party, and to carry on the business now conducted or currently
proposed to be conducted by you. You have the necessary power and authority to
enter into this Agreement and the Related Agreements, to perform your
obligations hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by you of this
Agreement and the Related Agreements and the performance by you of your
obligations hereunder and thereunder have been duly authorized by all requisite
corporate action, and this Agreement and the Related Agreements constitute your
legal, valid and binding obligations, enforceable in accordance with its and
their terms, subject to (a) applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors rights generally and (b) to
general principles of equity. This Agreement and each other Related Agreement
to which you are or will be a party have been (or, as applicable, will have
been at or prior to the Closing) duly executed and delivered by you.
6. CONDITIONS TO PURCHASE. Your obligation to purchase any of the
Investor Securities pursuant to this Agreement is subject to compliance by the
Company with its agreements herein
-6-
<PAGE> 13
contained, and to the satisfaction, simultaneously with or prior to the
Closing, of the following conditions, which may be waived by you in the
exercise of your sole discretion:
6.1. Credit Agreement. Certain of the lenders under the Credit
Agreement shall have entered into a letter agreement with you.
6.2. Legal Opinions. You shall have received from Bracewell &
Patterson, L.L.P., counsel to the Company, its opinions in form and substance
reasonably satisfactory to you.
6.3. Representations and Warranties. The representations and
warranties contained in Section 4 hereof shall be true and correct on and as of
the Closing with the same force and effect as though made on and as of the
Closing; between September 30, 1996 and the Closing there shall have been no
Material Adverse Effect as the result of any fire, flood, explosion, accident,
drought, strike, lockout, riot, sabotage, confiscation, condemnation or
purchase of any property by governmental authority, activities of armed forces
or acts of God or the public enemy, legislative or regulatory order or change,
judicial decision or any other event or development whether or not related to
those enumerated above.
6.4. General. All instruments and legal and corporate proceedings
in connection with the transactions contemplated by this Agreement shall be
reasonably satisfactory in form and substance to you, and you shall have
received copies of all documents, including without limitation records of
corporate proceedings and opinions of counsel, which you may have reasonably
requested in connection therewith, such documents where appropriate to be
certified by proper corporate or governmental authorities.
6.5. Payment of Transaction Costs. At the time of the Closing, the
Company shall have paid all reasonable fees, expenses, and disbursements
incurred by you at or prior to the time of the Closing in connection with the
transactions contemplated by this Agreement and of the Related Agreements,
including, without limitation, the reasonable fees, expenses, and disbursements
of your counsel.
6.6. Proper Proceedings. All proper corporate proceedings shall
have been taken by the Company to authorize this Agreement and the transactions
contemplated hereby.
6.7. Legality; Governmental Authorization. Neither the purchase of
the Investor Securities nor the consummation of any of the transactions
contemplated hereunder shall be prohibited by any Legal Requirement, or shall
subject you to any penalty, special tax, or other onerous condition. All
necessary consents, approvals, licenses, permits, orders and authorizations of,
and registrations, declarations and filings with, any governmental or
administrative agency or any
-7-
<PAGE> 14
other Person with respect to any of the transactions contemplated by this
Agreement or the other Related Agreements shall have been duly obtained or made
and shall be in full force and effect.
6.8. Due Diligence. You shall have completed your due diligence
with respect to the Company to your complete satisfaction.
6.9. Amendment to Registration Rights Agreement. Amendment No. 3
(the "Registration Rights Amendment") to the Registration Rights Agreement
dated March 25, 1992 shall have been duly authorized, executed and delivered
and shall be in full force and effect in substantially the form of Exhibit 6.9
hereto with no term or condition thereof having been amended, modified or
waived without your prior written consent.
6.10. Amendment to Stockholders Agreement. Amendment No. 1 (the
"Stockholders Agreement Amendment") to the Amended and Restated Stockholders
Agreement dated June 1, 1994 shall have been duly authorized, executed and
delivered and shall be in full force and effect in substantially the form of
Exhibit 6.10 hereto with no term or condition thereof having been amended,
modified or waived without your prior written consent.
The Company's obligation to sell the Investor Securities pursuant to
this Agreement is subject to compliance by you with your agreements herein
contained, and to the continued accuracy in all material respects on the Closing
Date as though made on and as of the Closing Date, your representations
contained in this Agreement.
7. COVENANTS APPLICABLE WHILE ANY INVESTOR SECURITIES ARE OUTSTANDING.
The Company covenants that so long as any of the Investor Securities remains
outstanding it will comply with the following provisions:
7.1. Notice of Defaults. Promptly upon any senior officer of the
Company obtaining knowledge of any covenant hereunder having been breached or
of any Event of Noncompliance under the Certificate, the Company will furnish
to each Major Holder a notice specifying the nature and period of existence
thereof and what action the Company has taken, is taking or proposes to take
with respect thereto.
7.2. Resale under Rule 144. For so long as the Common Stock is
registered under the Securities Act, the Company, for as long as necessary for
you to comply with Rule 144 under the Securities Act in order to sell Common
Stock to the public without registration thereunder, will make available to you
the benefit of certain rules and regulations of the Commission which may permit
you to sell Common Stock to the public without registration under the
Securities Act by (1) making and keeping "current public information"
"available" (as both such terms are defined in Rule
-8-
<PAGE> 15
144 at all times, (2) timely filing with the Commission, in accordance with all
rules and regulations applicable thereto, all reports and other documents (x)
required of the Company for Rule 144, as it may be amended from time to time
(or any rule, regulation or statute replacing Rule 144), to be available and
(y) required to be filed under Section 15(d) of the Exchange Act,
notwithstanding that the Company's duty to file such reports or documents may
be suspended or otherwise terminated under the express terms of such provision,
and (3) upon request by you, furnishing you a written statement by the Company
that it has complied with the reporting requirements of the Exchange Act and
Rule 144, together with a copy of the most recent annual or quarterly report of
the Company and such reports and documents filed by the Company with the
Commission as may reasonably be requested by you in order that you may avail
yourself of any rule or regulation of the Commission allowing sales of Common
Stock without registration under the Securities Act.
7.3. Use of Proceeds. Contemporaneously with or immediately after
the Closing, the Company shall use the proceeds of the sale of Investor
Securities for the purposes described in Section 3.3(a) and (b), and shall file
a Certificate of Elimination with respect to the Series C Preferred Stock.
8. COVENANTS APPLICABLE WHILE ANY SHARES OF SERIES H PREFERRED STOCK
CONSTITUTING INVESTOR SECURITIES ARE OUTSTANDING.
8.1. Issuance of Additional Warrants. On each anniversary of the
Closing Date on which shares of Series H Preferred Stock are outstanding, the
Company shall issue within ten Business Days of such anniversary date without
consideration to each holder of each share of Series H Preferred Stock
outstanding on such anniversary date (including without limitation shares of
Series H Preferred Stock issued as dividends in kind) an Additional Warrant
substantially in the form of Exhibit 2.2 hereto to purchase the number of
shares of Common Stock indicated in the table below:
<TABLE>
<CAPTION>
Anniversary Shares of Common Stock
----------- ----------------------
<S> <C>
1st 16
2nd 24
3rd and thereafter 32
</TABLE>
The shares of Common Stock in the table above shall be adjusted in accordance
with the rules contained in Section 2 of Exhibit 2.2 attached hereto.
The Company shall mail (by registered mail) the Additional Warrants to
each registered holder of Series H Preferred Stock at its address as listed in
the register maintained by the Company with respect to the Series H Preferred
Stock.
-9-
<PAGE> 16
8.2. Distributions. Neither the Company nor any of its
Subsidiaries shall make any Distribution with respect to the Common Stock.
8.3. Resale Under Rule 144A. The Company, at all times during
which it is neither subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, nor exempt from reporting pursuant to Rule 12g3-2(b)
under the Exchange Act, will provide in written form, upon the written request
of any holder of Investor Securities, or a prospective purchaser of securities
of the Company from such holder, all information required by Rule 144A(d)(4)(i)
of the General Regulations promulgated by the Commission under the Securities
Act ("144A Information"). With respect to the holder of Investor Securities,
the obligations of the Company under this Section 8.3 shall at all times be
contingent upon such holder's obtaining from a prospective purchaser an
agreement to take all reasonable precautions to safeguard the 144A Information
from disclosure to anyone other than employees, advisors or agents of the
prospective purchaser who required access to the 144A Information for the sole
purpose of evaluating its purchase of the Securities.
8.4. Financial Reporting. The Company shall provide each Major
Holder of Series H Preferred Stock with the same financial information as it
provides to its lenders under Section 7.1.1 of the Credit Agreement.
9. COVENANTS APPLICABLE WHILE ANY WARRANTS OR ADDITIONAL WARRANTS
CONSTITUTING INVESTOR SECURITIES ARE OUTSTANDING.
9.1. Reservation of Common Stock. Upon each issuance of Additional
Warrants, the Company will use its best efforts to cause its Charter to be
amended if necessary to ensure that there is sufficient authorized Common Stock
to permit the exercise or conversion (as applicable) of such Additional
Warrants. The Company will not issue additional shares of Common Stock or
options exercisable or convertible into Common Stock (other than Additional
Warrants) if there is insufficient authorized Common Stock to permit the
exercise or conversion ( as applicable) of such Additional Warrants.
10. PAYMENT ON INVESTOR SECURITIES; TRANSFER; REPLACEMENT.
10.1. Payment. All payments made in respect of the Investor
Securities held by you shall be made in federal or other immediately available
funds in lawful money of the United States for credit, not later than 2:00
p.m., Eastern Standard Time, to you at your account set forth on Schedule I
hereto accompanied by sufficient information to identify the source and
application thereof or by such other method or at such other address as a
holder of Investor Securities shall have from time to time given timely notice
of to the Company.
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<PAGE> 17
10.2. Transfer and Exchange of Series H Preferred Stock. The
Company shall keep at its principal office a register in which shall be entered
the names and addresses of the registered holders of shares of Series H
Preferred Stock issued by it and particulars of the respective shares of Series
H Preferred Stock held by them and of all transfers of such shares. Upon
surrender at such office of any certificate representing shares of Series H
Preferred Stock for registration of exchange or (subject to compliance with the
applicable provisions of Section 11), transfer, the Company shall issue, at its
expense, one or more new certificates, in such denomination or denominations as
may be requested, for shares of such Series H Preferred Stock and registered as
such holder may request. Any certificate representing shares of Series H
Preferred Stock surrendered for registration of transfer shall be duly
endorsed, or accompanied by a written instrument of transfer duly executed by
the holder of such certificate or his attorney duly authorized in writing.
10.3. Transfer, Exchange, Exercise and Conversion of Warrants. The
Company shall keep at its principal office a register in which shall be entered
the names and addresses of the holders of the Warrants and particulars of the
Warrants held by them and of all transfers, exchanges, conversions and
redemptions of Warrants. Upon surrender at such office or such other place as
shall be duly specified by the Company of any Warrant for redemption,
conversion, exercise, exchange or (subject to compliance with the applicable
provisions of this Agreement, including without limitation the conditions set
forth in Section 11 hereof) transfer, the Company shall issue at its expense
one or more new Warrants in such denomination or denominations as may be
requested, and registered as such holder may request. Any Warrant surrendered
for registration of transfer shall be duly endorsed, or accompanied by a
written instrument of transfer duly executed by the holder of such certificate
or his attorney duly authorized in writing. The Company will pay shipping and
insurance charges, from and to each holder's principal office, upon any
transfer, exchange, conversion or redemption provided for in this Section 10.3.
10.4. Replacement of Lost Securities. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a security and, in the case of any such loss, theft or
destruction, upon delivery of an indemnity bond in such reasonable amount as
the Company may determine (or, in the case of a security held by you or another
institutional holder or by the nominee of you or such other institutional
holder, of an unsecured indemnity agreement from you or such other holder
reasonably satisfactory to the Company) or, in the case of any such mutilation,
upon the surrender of the security for cancellation to the Company at its
principal office, the Company at its expense will execute and deliver or will
cause to be executed and delivered in lieu thereof a new security of like
tenor. Any security in lieu of which any such new security has been so
executed and delivered or caused to be executed and delivered by the Company
shall not be deemed to be an outstanding security for any purpose.
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<PAGE> 18
11. RESTRICTIONS ON TRANSFER. The Investor Securities shall be
transferable only upon satisfaction of the applicable conditions specified in
this Section 11
11.1. Restrictive Legend. Except as otherwise permitted by Section
11.3 hereof, each Warrant shall bear a legend in substantially the form of the
legend set forth at the beginning of Exhibit 2.2 hereto, and each certificate
representing Warrant Shares or shares of Series H Preferred Stock shall bear a
legend in substantially the following form:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or under the securities
laws of any state, and may not be sold, or otherwise transferred, in
the absence of such registration or an exemption therefrom under such
Act and under any such applicable state laws. Furthermore, such
shares may be sold or otherwise transferred only in compliance with
the conditions specified in the Securities Purchase Agreement dated as
of January 27, 1997 among the issuer hereof and the other parties
thereto. Complete and correct copies of such Agreement (including the
Exhibits thereto) are available for inspection at the principal office
of the issuer hereof and will be furnished without charge to the
holder of such shares upon written request."
11.2. Notice of Proposed Transfer; Opinions of Counsel. Prior to
any transfer of any Investor Securities other than pursuant to an effective
registration statement under the Securities Act, the holder thereof will give
not less than three Business Days' prior written notice to the Company of such
holder's intention to effect such transfer, describing in reasonable detail the
manner of the proposed transfer. No holder of Investor Securities shall
transfer any Investor Securities other than pursuant to an effective
registration statement under the Securities Act until (i) such holder delivers
to the Company an opinion of Ropes & Gray or other counsel reasonably
acceptable to the Company addressed to the Company to the effect that the
proposed transfer may be effected without registration of such Investor
Securities under the Securities Act or applicable state securities laws, and
(ii) the transferee agrees in writing to be bound by all of the terms of this
Agreement and the Investor Securities to be transferred, and thereupon such
holder shall be entitled, within 30 days thereafter, to transfer such Investor
Securities in accordance with the terms of this Agreement and the notice
delivered by such holder to the Company.
11.3. Termination of Restrictions. The restrictions imposed by this
Section 11 upon the transferability of Investor Securities shall cease and
terminate as to any particular Investor Securities and any securities issued in
exchange therefor or upon transfer thereof (i) when, (in the case of Sections
11.1 and 11.2 hereof) in the written opinion (addressed to the Company) of
Ropes & Gray or other counsel reasonably acceptable to the Company, such
restrictions are no longer required in order to assure compliance with the
Securities Act, or (ii) when such Investor Securities are being or have been
sold pursuant to a Public Sale. Whenever any of such
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<PAGE> 19
restrictions shall cease and terminate as to any Investor Securities, the
holder thereof shall be entitled to receive, without expense, from the Company,
new certificates not bearing that part of the legend specified in Section 11.1
hereof that is no longer applicable.
12. DEFINITIONS. For purposes of this Agreement:
12.1. Terms Defined Elsewhere. The following terms defined
elsewhere in this Agreement in the Sections set forth below shall have the
respective meanings therein defined:
<TABLE>
<CAPTION>
Term Definition
<S> <C>
"Additional Warrants" Section 2.2
"Certificate" Section 4.1.2
"Closing" Section 3.2
"Closing Date" Section 3.2
"Common Stock" Section 2.2
"Company" Preamble
"Investor Securities" Section 2.4
"Registration Rights Amendment" Section 6.9
"Series C Preferred Stock" Section 2.1
"Series F Preferred Stock" Section 4.2
"Series G Preferred Stock" Section 4.2
"Series H Preferred Stock" Section 2.1
"Stockholders Agreement Amendment" Section 6.10
"Warrants" Section 2.2
"Warrant Shares" Section 2.4
"144A Information" Section 8.3
</TABLE>
Certain other terms are defined in the Exhibits hereto and are used therein
with the meanings so defined.
12.2. Action. The term "Action" shall mean any claim, action, cause
of action or suit (in contract or tort or otherwise), arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
12.3. Business Day. The term "Business Day" shall mean any day on
which banking institutions in Boston, Massachusetts and New York, New York are
customarily open for the purpose of transacting business.
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<PAGE> 20
12.4. By-laws. The term "By-laws" shall include all written rules,
regulations, procedures and by-laws and all other documents relating to the
management, governance or internal regulation of a Person other than an
individual, or interpretive of the Charter of such Person, each as from time to
time amended or modified.
12.5. Charter. The term "Charter" shall include the articles or
certificate of incorporation (including any certificate of designation),
statute, constitution, joint venture or partnership agreement or articles or
other charter of any Person other than an individual, each as from time to time
amended or modified.
12.6. Commission. The term "Commission" shall mean the Securities
and Exchange Commission or any other federal agency at the time administering
the Securities Act, the Exchange Act or both.
12.7. Consolidated. The term "consolidated" shall mean, when used
with reference to any term, that term as applied to the accounts of the Company
(or other indicated Person) and each of its Subsidiaries, consolidated in
accordance with generally accepted accounting principles after eliminating all
inter-company items and with appropriate deductions for minority interests in
Subsidiaries.
12.8. Credit Agreement. The term "Credit Agreement" shall mean the
Amended and Restated Credit and Guaranty Agreement dated as of October 2, 1995
among E-Z Serve Convenience Stores, Inc., E-Z Serve Corporation, and Societe
Generale, as Agent for certain lenders.
12.9. Distribution. The term "Distribution" shall mean (i) the
declaration or payment of any dividend or other distribution on or in respect
of any Equity Security of any Subject Entity, other than dividends payable on
Common Stock solely in shares of Common Stock and (ii) the purchase, redemption
or other retirement of any Equity Security of any Subject Entity, whether
directly or indirectly through a Subsidiary or otherwise.
12.10. Exchange Act. The term "Exchange Act" shall mean the
Securities Exchange Act of 1934, or any successor federal statute, and the
rules and regulations of the Commission thereunder, all as the same shall be in
effect from time to time.
12.11. Equity Securities. The term "Equity Securities" shall mean,
with respect to any Person which is not a natural person, all shares of capital
stock or other equity or beneficial interests issued by or created in or by
such Person, all stock appreciation or similar rights or grants of, or other
Contractual Obligation for, any right to share in the equity, income, revenues
or cash flow of such Person, and all securities or other rights, warrants or
other Contractual
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<PAGE> 21
Obligations to acquire any of the foregoing, whether by conversion, exchange,
exercise, preemptive right or otherwise.
12.12. Foreign Trade Regulations. The term "Foreign Trade
Regulations" means (a) any act that prohibits or restricts, or empowers the
President or any executive agency of the United States of America to prohibit
or restrict, exports to or financial transactions with any foreign country or
foreign national, (b) the regulations with respect to certain prohibited
foreign trade transactions set forth at 15 C.F.R. Parts 730 et seq., 22 C.F.R.
Parts 120-130 and 31 C.F.R. Parts 500 et seq. and (c) any order, regulation,
ruling, interpretation, direction, instruction or notice relating to any of the
foregoing, all as from time to time in effect.
12.13. Governmental Authority. The term "Governmental Authority"
shall mean any U.S. federal, state or local or any foreign government,
governmental authority, regulatory or administrative agency, governmental
commission, court or tribunal (or any department, bureau or division thereof)
or any arbitral body.
12.14. Indebtedness. The term "Indebtedness" shall have the same
meaning as under the Credit Agreement.
12.15. Legal Requirement. The term "Legal Requirement" shall mean
any federal, state, local or foreign law, statute, standard, ordinance, code,
order, rule, regulation, resolution, promulgation, or any order, judgment or
decree of any court, arbitrator, tribunal or governmental authority, or any
license, franchise, permit or similar right granted under any of the foregoing,
or any similar provision having the force and effect of law.
12.16. Lien. The term "Lien" shall mean (a) any mortgage, pledge,
lien, charge, security interest or other similar encumbrance or restriction of
any kind upon any property or assets of any character, or upon the income or
profits therefrom or upon the transfer thereof; (b) any acquisition of or
agreement to have an option to acquire any property or assets upon conditional
sale or other title retention agreement, device or arrangement (including a
capitalized lease); or (c) any sale, assignment, pledge or other transfer for
security of any accounts, general intangibles or chattel paper, with or without
recourse.
12.17. Major Holder. The term "Major Holder" with respect to any
class of Investor Securities shall mean (i) you, so long as you hold that class
of Investor Securities, or (ii) any holder of 25% or more of the securities
constituting Investor Securities of that class of Investor Securities then
outstanding
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<PAGE> 22
12.18. Material Adverse Change; Material Adverse Effect. The terms
"Material Adverse Change" and "Material Adverse Effect" shall mean,
respectively, any adverse change in or effect on the business, operations,
assets, prospects or condition, financial or otherwise, of any Subject Entity
which, when considered either singly or together with all other adverse changes
and effects with respect to which either such phrase is used in this Agreement,
is material to the Subject Entities considered as one enterprise.
12.19. Person. The term "Person" shall mean an individual,
partnership, limited liability company, corporation, association, trust, joint
venture or unincorporated organization, and any government, governmental
department or agency or political subdivision thereof.
12.20. Public Sale. The term "Public Sale" shall mean a distribution
pursuant to a registration statement under the Securities Act.
12.21. Related Agreements. The term "Related Agreements" shall mean
the Registration Rights Amendment and the Stockholders Agreement Amendment.
12.22. Required Holders. The term "Required Holders" shall mean,
with respect to any class or type of Investor Securities, the holder or holders
at the relevant time (excluding the Subject Entities) of more than 50% of the
number of outstanding shares, as the case may be, of the specified class or
type of Investor Securities.
12.23. Rule 144. The term "Rule 144" shall mean Rule 144 of the
Commission's rules and regulations promulgated under the Securities Act, and
any successor rule or regulation thereto, and in the case of any referenced
section of such Rule, any successor section thereto, collectively and as from
time to time amended and in effect.
12.24. Rule 144A. The term "Rule 144A" shall mean Rule 144A of the
Commission's rules and regulations promulgated under the Securities Act, and
any successor rule or regulation thereto, and in the case of any referenced
section of such Rule, any successor section thereto, collectively and as from
time to time amended and in effect.
12.25. Securities Act. The term "Securities Act" shall mean the
Securities Act of 1933, as amended, or any successor federal statute, and the
rules and regulations of the Commission thereunder, all as the same shall be in
effect from time to time.
12.26. Stockholder. The term "Stockholder" shall mean each Person
who holds any Equity Security of the Company.
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<PAGE> 23
12.27. Subject Entity. The term "Subject Entity" shall mean the
Company and each of its Subsidiaries.
12.28. Subsidiary. The term "Subsidiary" shall mean any Person of
which the Company or any other specified Person now or hereafter shall at the
time own directly or indirectly through a Subsidiary at least a majority of the
outstanding capital stock (or other shares of beneficial interest) entitled to
vote generally.
13. EXPENSES, INDEMNITY.
13.1. Expenses. Whether or not the transactions contemplated by
this Agreement shall be consummated, the Company hereby agrees to pay on demand
all reasonable out-of-pocket expenses incurred by you in connection with such
transactions and operations hereunder (other than expenses incurred in the
normal course of investment monitoring) and in connection with any amendments
or waivers (whether or not the same become effective) hereof and of the other
Related Agreements and all expenses incurred by any of you or any holder of any
Investor Securities issued hereunder in connection with the enforcement in good
faith of any rights hereunder, under any other Related Agreement or under the
Charter of the Company, including without limitation: (a) the reasonable cost
and expenses of preparing and duplicating this Agreement; (b) the reasonable
cost of delivering to your principal office, insured to your reasonable
satisfaction, the Investor Securities sold to you hereunder and any Investor
Securities delivered to you in exchange therefor or upon any conversion or
substitution thereof, in any such case insured to your satisfaction; (c) the
reasonable fees, expenses and disbursements of Ropes & Gray in connection with
the transactions contemplated by this Agreement; (d) all taxes (other than
taxes determined with respect to income and transfer taxes that may be payable
upon a transfer), including any recording fees and filing fees and documentary
stamp and similar taxes at any time payable in respect of this Agreement, any
other Related Agreement, or the issuance of any of the Investor Securities;
provided, however, that you and each holder of Investor Securities shall bear
the fees and disbursements of counsel for such of you or such holder in
connection with all opinions rendered by such counsel pursuant to Section 11
hereof.
13.2. Indemnity.
13.2.1. The Company hereby further agrees to indemnify,
exonerate and hold you and each of your stockholders, officers,
directors, employees and agents free and harmless from and against any
and all Actions, losses, liabilities and damages, and any
investigation or proceeding instituted by any Governmental Authority
or any other Person, and reasonable expenses in connection therewith,
including without limitation reasonable attorneys' fees and
disbursements, incurred in any capacity by the indemnitee or any of
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<PAGE> 24
them as a result of, or arising out of, or relating to any transaction
financed or to be financed in whole or in part directly or indirectly
with proceeds from the sale by the Company of any of the Investor
Securities, except for any of such indemnified liabilities arising on
account of any indemnitee's gross negligence, willful misconduct or
bad faith.
13.2.2. Each of the Company and you hereby agree to
indemnify each other against and hold each other harmless from any
claim, demand or liability for any broker's, finder's or placement
fees or lender's incentive fees alleged to have been incurred by the
Company or you, as the case may be, in connection with the
transactions contemplated by this Agreement, including without
limitation reasonable legal fees arising in connection with any such
claim, demand or liability; provided, however, that the Company shall
bear the fees and expenses referred to in Section 13.1.
13.3. The obligations of the Company to you under this Section 13
shall survive the redemption, repurchase or transfer of any or all of the
Investor Securities.
14. NOTICES. Any notice or other communication in connection with this
Agreement or the Investor Securities shall be deemed to be delivered if in
writing (or in the form of a telex or telecopy to be given only during the
recipient's normal business hours unless arrangements have otherwise been made
to receive such notice by telex or telecopy outside of normal business hours)
addressed as provided below and if either (a) actually delivered at said
address or (b) in the case of a letter, seven business days shall have elapsed
after the same shall have been deposited in the United States mails, postage
prepaid and registered or certified:
If to the Company, to it at the address set forth on page 1, with a
courtesy copy (not necessary to constitute notice hereunder) to Bracewell &
Patterson, L.L.P., South Tower, Pennzoil Place, 711 Louisiana Street, Suite
2900, Houston, Texas 77002 (Attention: John L. Keffer), or at such other
address as such Person shall have specified by notice actually received by you.
If to you, to your address set forth on page 1 hereof, or at such
other address as you shall have specified by notice actually received by the
Company, with a copy (not necessary to constitute notice hereunder) to Ropes &
Gray, One International Place, Boston, Massachusetts 02110-2624, Attention:
Larry J. Rowe, Esq.
If to any other holder of record of any Investor Security, to it at
its address set forth in the relevant registers of the Company.
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<PAGE> 25
15. SURVIVAL. All covenants, agreements, representations and warranties
made herein or in any other document referred to herein or delivered to you
pursuant hereto or in connection herewith shall be deemed to have been material
and relied on by you, notwithstanding any investigation made by you or on your
behalf, and shall survive the execution and delivery to you of this Agreement
and of the Investor Securities.
16. AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively) only with
the written consent of the Company and Required Holders. Any amendment or
waiver effected in accordance with this Section 16 shall be binding upon each
holder of any Investor Securities and the Company.
17. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW
WHICH CANNOT BE WAIVED, THE COMPANY AND YOU HEREBY WAIVE, AND COVENANT THAT
EACH OF THEM WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE),
ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND,
ACTION, OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR ANY
OTHER RELATED AGREEMENT OR THE SUBJECT MATTER HEREOF OR THEREOF OR ANY
OBLIGATION HEREUNDER OR THEREUNDER OR IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE HOLDERS OF INVESTOR SECURITIES OR THE COMPANY
OR ANY OF THEM IN CONNECTION WITH ANY OF THE ABOVE, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE. EACH PARTY HERETO ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE
OTHER THAT THE PROVISIONS OF THIS SECTION 17 CONSTITUTE A MATERIAL INDUCEMENT
UPON WHICH IT HAS RELIED, IS RELYING AND WILL RELY IN ENTERING INTO THIS
AGREEMENT, AND SUCH OF THE RELATED AGREEMENTS TO WHICH IT IS A PARTY. You or
the Company may file an original counterpart or a copy of this Section 17 with
any court as written evidence of the consent of the other party to the waiver
of its right to trial by jury.
18. SERVICE OF PROCESS. The Company, by its execution hereof, (a) hereby
irrevocably submits to the non-exclusive jurisdiction of the state courts of
the Commonwealth of Massachusetts and to the non-exclusive jurisdiction of the
United States District Court for the District of Massachusetts for the purpose
of any suit, action or other proceeding arising out of or based upon this
Agreement or any other Related Agreement or the subject matter hereof or
thereof brought by you or any of your successors or assigns, and (b) hereby
waives to the extent not prohibited by law, and agrees not to assert, by way of
motion, as a defense or otherwise, in any
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<PAGE> 26
such proceeding, any claim that it is not subject personally to the
jurisdiction of the above-named courts, that its property is exempt or immune
from attachment or execution, that any such proceeding brought in one of the
above-named courts is improper or that this Agreement or the subject matter
hereof or thereof, may not be enforced in or by such court. The Company hereby
consents to service of process in any such proceeding in any manner permitted
by Massachusetts law and agrees that service of process by registered or
certified mail, return receipt requested, at its address referred to in or
specified pursuant to Section 14 hereof, is reasonably calculated to give
actual notice.
19. APPLICABLE REMEDIES. The Company hereby agrees that the holders of
the Investor Securities have no adequate remedy at law, for monetary
compensation or otherwise, for the damages that would be suffered if the
Company were to fail to comply with its obligations hereunder, and that the
Company therefore agrees that the holders of the Investor Securities shall be
entitled to obtain specific performance of the obligations of the Company
herein and therein contained.
20. MISCELLANEOUS. This Agreement, the other Related Agreements, and the
Charter of the Company set forth the entire understanding of the parties hereto
with respect to the transactions contemplated hereby and supersede any prior
written or oral understandings with respect thereto. The invalidity or
unenforceability of any term or provision hereof shall not affect the validity
or enforceability of any other term or provision hereof. The headings in this
Agreement are for convenience of reference only and shall not alter or
otherwise affect the meaning hereof. This Agreement is intended to take effect
as a sealed instrument and may be executed in any number of counterparts which
together shall constitute one instrument and shall be governed by and construed
in accordance with the domestic substantive laws of The Commonwealth of
Massachusetts without giving effect to any choice or conflict of law provision
or rule that would cause the application of the domestic substantive laws of
any other jurisdiction. This Agreement shall bind and inure to the benefit of
the parties hereto and their respective successors and assigns.
Whether or not any express assignment has been made in this Agreement,
provisions of this Agreement that are for your benefit as the holder of any
Investor Securities are also for the benefit of, and enforceable by, all
subsequent holders of Investor Securities, except as otherwise expressly
provided herein.
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<PAGE> 27
If the foregoing corresponds with your understanding of our agreement,
kindly sign this letter and the accompanying copies thereof in the appropriate
space below and return one counterpart of the same to the Company whereupon this
letter shall become and be a binding agreement between you and the Company.
Very truly yours,
SEAL E-Z SERVE CORPORATION
Attest: /s/ John T. Miller By: /s/ Neil H. McLaurin
Title: Senior Vice President, Finance -----------------------------
& Chief Financial Officer Title: Chairman, President
& Chief Executive
Officer
Accepted and Agreed to:
PHEMUS CORPORATION
By: /s/ Michael R. Eisenson
---------------------------
Title: Authorized Signatory
By: /s/ Michael Thonis
---------------------------
Title: Authorized Signatory
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<PAGE> 28
SCHEDULE I
Home Office Payments
Federal Reserve Wire Transfer Instructions
Bank: State Street Bank & Trust Company
Boston, MA 02110
ABA Routing No.: 011-000-028
Attn: Harvard College/Private Capital Group
Credit DDA: 3082-068-2
Prior Advisement to: Tami E. Nason at 617-720-4833
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