EXHIBIT 10.29
EFFECTIVE MANAGEMENT SYSTEMS, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
SERIES B PREFERRED STOCK PURCHASE AGREEMENT ("Agreement") made
as of this ____ day of ________, 1998 between EFFECTIVE MANAGEMENT SYSTEMS,
INC., a Wisconsin corporation, with its principal offices at 12000 West Park
Place, Milwaukee, WI 53224 (the "Company") and the undersigned (the
"Subscriber").
W I T N E S S E T H :
WHEREAS, the Company desires to issue shares of its Series B 8
% Convertible Redeemable Preferred Stock (the "Series B Preferred Stock") at
$1,000 per share with a minimum aggregate purchase price of $700,000 in gross
cash proceeds and, in one or more tranches, a maximum aggregate purchase price
of $2,750,000; and
WHEREAS, each share of Series B Preferred Stock is convertible
into shares of the Company's Common Stock, $.01 par value (the "Common Stock")
per share, at the price per share, subject to adjustment (the "Conversion
Price") as set forth in the Company's Confidential Private Placement Memorandum
dated October 22, 1998, together with all exhibits thereto, as same may
thereafter be supplemented and/or amended (collectively, the "Memorandum"); and
WHEREAS, on August 28, 1998, the Company sold 1,005 shares of
Series A 8% Convertible Redeemable Preferred Stock (the "Series A Preferred
Stock") for an aggregate gross sales price of $1,005,000; and
WHEREAS, pursuant to the Memorandum, the holders of the Series
A Preferred Stock may purchase the Series B Preferred Stock by tendering their
shares of Series A Preferred Stock to the Company, with each share of Series A
Preferred Stock being valued at $1,000 per share (the "Exchange Offer"); and
WHEREAS, the Series B Preferred Stock is being issued and the
Exchange Offer is occurring pursuant to an exemption from the registration
requirements of the Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, Subscriber desires to acquire shares of Series B
Preferred Stock having an aggregate purchase price set forth on the signature
page hereof (the "Purchase Price").
NOW, THEREFORE, for and in consideration of the premises and
the mutual covenants hereinafter set forth, the parties hereto do hereby agree
as follows:
1. SUBSCRIPTION FOR SECURITIES AND REPRESENTATIONS AND COVENANTS BY
SUBSCRIBER.
1.1 Subject to the terms and conditions hereinafter set forth, the
Subscriber hereby subscribes for and agrees to purchase from the Company for
$1,000 per share, shares of Series B Preferred Stock aggregating the Purchase
Price and the Company agrees to sell such Series B Preferred Stock to the
Subscriber for the Purchase Price, subject to the Company's right to sell to the
Subscriber such lesser amount of Series B Preferred Stock as it may, in its sole
discretion, deem necessary or desirable. The Purchase Price is payable by wire
transfer or by check, subject to collection, as set forth in the "INSTRUCTIONS
TO SUBSCRIBERS" contained in the Subscription Documents Booklet of which this
Agreement is a part. Subscribers that are holders of Series A Preferred Stock
shall, rather than submitting a check or wire transfer to the Escrow Agent,
shall tender to the Company by delivery to the Placement Agent their original
certificate (duly endorsed for transfer) for the Series A Preferred Stock.
1.2 The Subscriber recognizes that the purchase of the Series B
Preferred Stock involves a high degree of risk in that (i) no public market
exists for the Series B Preferred Stock; (ii) the shares of Common Stock
issuable upon conversion of the Series B Preferred Stock (the "Conversion
Shares") have not been registered under the 1933 Act, and the Company has no
obligation to register the Conversion Shares, except as set forth in Section 3
below; (iii) an investment in the Series B Preferred Stock is highly speculative
and only investors who can afford the loss of their entire investment should
consider investing in the Company and the Series B Preferred Stock; (iv) the
Subscriber may not be able to liquidate the Subscriber's investment; and (v) the
Subscriber could sustain the loss of Subscriber's entire investment. Such risks
are more fully set forth in the Memorandum.
1.3 The private placement of the Series B Preferred Stock by the
Company (the "Offering") and the Exchange Offer pursuant to the Memorandum shall
continue for a period commencing on the date of the Memorandum and ending on the
date set forth in the Memorandum.
1.4 The Subscriber represents as follows:
(a) The Subscriber represents that the Subscriber is an
Accredited Investor (as defined in Rule 501 of Regulation D promulgated under
the 1933 Act) as indicated by the Subscriber's responses to the Confidential
Investor Questionnaire, a copy of which is included in the Subscription
Documents Booklet, and that the Subscriber is able to bear the economic risk of
an investment in the Series B Preferred Stock.
(b) The Subscriber acknowledges that the Subscriber has
significant prior investment experience, including investment in non-listed and
non-registered securities. The Subscriber recognizes the highly speculative
nature of this investment. The Subscriber acknowledges that the Subscriber has
carefully read the Memorandum, including but not
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limited to, the Company's Form 10-K for the fiscal year ended November 30, 1997,
the Company's Form 10-Qs for the fiscal quarters ended February 28, May 31, and
August 31, 1998, and the terms and conditions of the Series B Preferred Stock
and fully understands the contents thereof.
(c) The Subscriber hereby acknowledges that this Offering, the
Series B Preferred Stock and the Memorandum have not been reviewed by the United
States Securities and Exchange Commission ("SEC") or by any state securities
regulator because it is intended to be a nonpublic offering pursuant to Sections
3(a), 4(2) and 4(6) of the 1933 Act and Rule 506 of Regulation D promulgated
thereunder. The Subscriber represents that the Series B Preferred Stock is being
purchased for the Subscriber's own account, for investment purposes only and not
for distribution or resale to others. The Subscriber agrees that the Subscriber
will not sell or otherwise transfer the Series B Preferred Stock or Conversion
Shares unless they are registered under the 1933 Act or unless an exemption from
such registration is available.
(d) The Subscriber understands that the Series B Preferred Stock
has not been registered under the 1933 Act by reason of a claimed exemption
under the provisions of the 1933 Act which depends, in part, upon the
Subscriber's investment intention. In this connection, the Subscriber
understands that it is the position of the SEC that the statutory basis for such
exemption would not be present if the Subscriber's representation merely meant
that the Subscriber's present intention was to hold the Series B Preferred Stock
(and/or the Conversion Shares) for a short period, such as the capital gains
period of tax statutes, for a deferred sale, for a market rise, assuming that a
market develops, or for any other fixed period. The Subscriber realizes that, in
the view of the SEC, a purchase now with an intent to resell after a
pre-determined amount of time would represent a purchase with an intent
inconsistent with the Subscriber's representation to the Company, and the SEC
might regard such a sale or disposition as a deferred sale to which such
exemptions are not available.
(e) The Subscriber understands that Rule 144 (the "Rule")
promulgated by the SEC under the 1933 Act requires, among other conditions, a
one year holding period prior to the resale (in limited amounts) of securities
acquired in a non-public offering without having to satisfy the registration
requirements under the 1933 Act. The Subscriber understands that the Company
makes no representation or warranty regarding its fulfillment in the future of
any reporting requirements under the Securities Exchange Act of 1934, as
amended, or its dissemination to the public of any current financial or other
information concerning the Company, as is required by the Rule as one of the
conditions of its availability. The Subscriber understands and hereby
acknowledges that the Company is the only entity that can register the
Conversion Shares under the 1933 Act and that the Company is under no obligation
to register the Series B Preferred Stock or Conversion Shares under the 1933
Act, with the exception of certain registration rights set forth in Section 3
below. The Subscriber acknowledges that the Company may, if it desires, permit
the transfer of the Series B Preferred Stock or the Conversion Shares out of the
Subscriber's name only when the Subscriber's request for transfer is accompanied
by an opinion of counsel reasonably satisfactory to the Company that neither the
sale nor the proposed transfer results in a violation of
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the 1933 Act or any applicable state "blue sky" laws and subject to the
provisions of Section 1.4(f) hereof.
(f) The Subscriber consents to the placement of a legend on any
certificate or other document evidencing the Series B Preferred Stock and the
Conversion Shares stating that they have not been registered under the 1933 Act
and under applicable state securities laws and setting forth or referring to the
restrictions on transferability and sale thereof.
(g) The Subscriber understands that the Company will review this
Agreement and the Confidential Investor Questionnaire; and it is further agreed
that the Company reserves the unrestricted right to reject or limit any
subscription and to close the Offering at any time.
(h) The Subscriber hereby represents that the address of
Subscriber furnished by the Subscriber at the end of this Agreement is the
Subscriber's principal residence, if the Subscriber is an individual, or its
principal business address, if the Subscriber is a corporation or other entity.
(i) The Subscriber has had a reasonable opportunity to ask
questions of and receive answers from the Company concerning the Company and the
Offering, and all such questions, if any, have been answered to the full
satisfaction of the Subscriber; and the Company shall provide Subscriber with
the opportunity to ask additional questions of and receive answers (all of which
information shall be limited to information in the public realm) from the
Company concerning the Company during the period which the Subscriber owns the
Series B Preferred Stock.
(j) The Subscriber has such knowledge and expertise in financial
and business matters that the Subscriber is capable of evaluating the merits and
risks involved in an investment in the Series B Preferred Stock.
(k) The Subscriber has full power and authority to execute and
deliver this Agreement and to perform the obligations of the undersigned
hereunder; and this Agreement is a legally binding obligation of the undersigned
enforceable in accordance with its terms.
(l) Except as set forth in this Agreement, the Series B
Preferred Stock, the Memorandum and the public documents of the Company (e.g.,
the fiscal 1997 Form 10-K, the Form 10-Qs for the first three quarters of fiscal
1998, the fiscal 1997 Annual Report and the 1998 Proxy Statement; collectively,
the "Public Documents"), no representations or warranties have been made to the
Subscriber by the Company, the Placement Agent (as defined in the Memorandum) or
any of their respective agents, employees or affiliates, and in entering into
this transaction, the Subscriber is not relying on any information, other than
that contained in the Series B Preferred Stock, the Memorandum, the Public
Documents and the results of an independent investigation by the Subscriber.
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(m) The Subscriber agrees that he, she or it will not sell or
otherwise transfer the Series B Preferred Stock or Conversion Shares unless they
are registered under the 1933 Act and applicable state "blue sky" laws or unless
an exemption from such registration is available. The Subscriber represents that
(i) the Subscriber has adequate means of providing for the Subscriber's current
needs and possible personal contingencies, (ii) the Subscriber has no need for
liquidity in this investment, (iii) the Subscriber is able to bear the
substantial economic risk of an investment in the Series B Preferred Stock for
an indefinite period, and (iv) at the present time the Subscriber could afford a
complete loss of such investment.
(n) It is understood that all documents, records and books
pertaining to this investment have been made available for the inspection by the
Subscriber's attorney and/or accountant and the Subscriber.
1.5 If the Subscriber is participating in the Exchange Offer, the
Subscriber represents and warrants to the Company that the Subscriber owns the
Series A Preferred Stock subject to the Exchange Offer, that the Series A
Preferred Stock subject to the Exchange Offer is free and clear of all liens,
claims and encumbrances and that the Subscriber has the right, power and
authority to enter into the Exchange Offer.
1.6 The Subscriber agrees not to sell the Company's Common Stock
short from the Initial Closing Date (as defined in the Memorandum) through and
including January 31, 1999.
1.7 The Subscriber, in the event of Forced Conversion, as defined in
Paragraph (6) of Section A of Article 4 of the Company's Restated Articles of
Incorporation (the "Restated Articles"), hereby constitutes and appoints the
President and Secretary of the Company, with power of substitution, attorney and
proxy for and in the name and place of the Subscriber, to appear and vote with
the same effect as the Subscriber, as a holder of the Company's Series B
Preferred Stock for approval of the Sale Event (as defined in the Restated
Articles), such proxy to be irrevocable (since it is coupled with an interest)
for the 150-day period provided for in the Restated Articles, all shares of the
Series B the Subscriber is entitled to vote.
2. TERMS OF SUBSCRIPTION.
The Offering of the Series B Preferred Stock is being made on a
"best efforts" basis as more particularly set forth in the Memorandum.
3. REGISTRATION RIGHTS.
(a) As soon as possible after the Final Closing Date (as defined
in the Memorandum), but in no event later than forty-five (45) days after the
Final Closing Date (regardless of whether the maximum number of shares of Series
B Preferred Stock shall have been sold), the Company shall, at its sole cost and
expense, file a registration statement on the appropriate form under the 1933
Act with the SEC covering all of the Conversion Shares and such additional
shares of Common Stock that may be issued as a result of any adjustment to the
Conversion Price as set forth in the Memorandum and as set forth below
(collectively, the "Registrable Securities") for all
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holders of the Series B Preferred Stock and Registrable Securities
(collectively, the "Registered Holders"), time being of the essence. Such
registration statement may also include securities issuable upon conversion of
the Series A Preferred Stock. The Company will use its best efforts to have such
registration statement declared effective as soon as possible after filing, and
shall keep such registration statement current and effective for at least three
(3) years from the effective date thereof or until such earlier date as all of
the Registrable Securities registered pursuant to such registration statement
shall have been sold. Notwithstanding anything to the contrary contained herein,
if such registration statement shall not be filed with the SEC within forty-five
(45) days after the Final Closing Date or if the registration statement shall
not be declared effective within one hundred eighty (180) days after the Final
Closing Date (regardless of whether the maximum number of shares of Series B
Preferred Stock shall have been sold), then the Conversion Price shall be
reduced (and concomitantly the number of shares of Common Stock issuable upon
the conversion of the Series B Preferred Stock shall increase) by the percentage
resulting from multiplying three (3%) percent by the number of thirty (30) day
periods, or any part thereof, beyond said forty-five (45) or one hundred eighty
(180) day period, as applicable, until the initial registration statement
described herein covering the Registrable Securities is filed or declared
effective, as applicable. The maximum reduction pursuant to this provision shall
be eighteen (18%) percent.
(b) In the event the Company effects any registration under the
1933 Act of any Registrable Securities pursuant to Section 3(a) above or 3(g)
below, the Company shall indemnify, to the extent permitted by law, and hold
harmless any person or entity whose Registrable Securities are included in such
registration statement (each, a "Seller"), any underwriter, any officer,
director, affiliate, shareholder, employee or agent of any Seller or
underwriter, and each other person, if any, who controls any Seller or
underwriter within the meaning of Section 15 of the 1933 Act, against any
losses, claims, damages, liabilities, judgment, fines, penalties, costs and
expenses, joint or several, or actions in respect thereof (collectively, the
"Claims"), to which each such indemnified party becomes subject, under the 1933
Act or otherwise, insofar as such Claims arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the registration statement or prospectus or any amendment or supplement thereto
or any document filed under a state securities or blue sky law (collectively,
the "Registration Documents") or insofar as such Claims arise out of or are
based upon the omission or alleged omission to state in any Registration
Document a material fact required to be stated therein or necessary to make the
statements made therein not misleading, and will reimburse any such indemnified
party for any legal or other expenses reasonably incurred by such indemnified
party in investigating or defending any such Claim; provided that the Company
shall not be liable in any such case to a particular indemnified party to the
extent such Claim is based upon an untrue statement or alleged untrue statement
of a material fact or omission or alleged omission of a material fact made in
any Registration Document in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such indemnified party
specifically for use in the preparation of such Registration Document.
(c) In connection with any registration statement in which any
Seller is participating, each Seller, severally and not jointly, shall
indemnify, to the extent permitted by law, and hold harmless the Company, each
of its directors, each of its officers who have signed the registration
statement, each other person, if any, who controls the Company within the
meaning of
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Section 15 of the 1933 Act, each other Seller and each underwriter, any officer,
director, affiliate, shareholder, employee or agent of any such other Seller or
underwriter and each other person, if any, who controls such other Seller or
underwriter within the meaning of Section 15 of the 1933 Act against any Claims
to which each such indemnified party may become subject under the 1933 Act or
otherwise, insofar as such Claims (or actions in respect thereof) are based upon
any untrue statement or alleged untrue statement of any material fact contained
in any Registration Document, or insofar as any Claims are based upon the
omission or alleged omission to state in any Registration Document a material
fact required to be stated therein or necessary to make the statements made
therein not misleading, and will reimburse any such indemnified party for any
legal or other expenses reasonably incurred by such indemnified party in
investigating or defending any such Claim; provided, however, that such
indemnification or reimbursement shall be payable only if, and to the extent
that, any such Claim arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any
Registration Document in reliance upon and in conformity with written
information furnished to the Company by the Seller specifically for use in the
preparation thereof.
(d) Any person entitled to indemnification under Section 3(b) or
3(c) above shall notify promptly the indemnifying party in writing of the
commencement of any Claim if a claim for indemnification in respect thereof is
to be made against an indemnifying party under this Section 3(d), but the
omission of such notice shall not relieve the indemnifying party from any
liability which it may have to any indemnified party otherwise than under
Section 3(b) or 3(c) above, except to the extent that such failure shall
materially adversely affect any indemnifying party or its rights hereunder. In
case any action is brought against the indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in, and, to the extent that it chooses, to assume the
defense thereof with counsel reasonably satisfactory to the indemnified party;
and, after notice from the indemnifying party to the indemnified party that it
so chooses, the indemnifying party shall not be liable for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof; provided, however, that (i) if the indemnifying party fails to
take reasonable steps necessary to defend diligently the Claim within twenty
(20) days after receiving notice from the indemnified party that the indemnified
party believes it has failed to do so; (ii) if the indemnified party who is a
defendant in any action or proceeding which is also brought against the
indemnifying party reasonably shall have concluded that there are legal defenses
available to the indemnified party which are not available to the indemnifying
party; or (iii) if representation of both parties by the same counsel is
otherwise inappropriate under applicable standards of professional conduct, the
indemnified party shall have the right to assume or continue its own defense as
set forth above (but with no more than one firm of counsel for all indemnified
parties, except to the extent any indemnified party or parties reasonably shall
have concluded that there are legal defenses available to such party or parties
which are not available to the other indemnified parties or to the extent
representation of all indemnified parties by the same counsel is otherwise
inappropriate under applicable standards of professional conduct) and the
indemnifying party shall be liable for any reasonable expenses therefor;
provided, that no indemnifying party shall be subject to any liability for any
settlement of a Claim made without its consent (which may not be unreasonably
withheld, delayed or conditioned). If the indemnifying party assumes the defense
of any Claim hereunder,
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such indemnifying party shall not enter into any settlement without the consent
of the indemnified party if such settlement attributes liability to the
indemnified party.
(e) If for any reason the indemnity provided in Section 3(b) or
3(c) above is unavailable, or is insufficient to hold harmless, an indemnified
party, then the indemnifying party shall contribute to the amount paid or
payable by the indemnified party as a result of any Claim in such proportion as
is appropriate to reflect the relative benefits received by the indemnifying
party on the one hand and the indemnified party on the other from the
transactions contemplated by this Agreement. If, however, the allocation
provided in the immediately preceding sentence is not permitted by applicable
law, then each indemnifying party shall contribute to the amount paid or payable
by such indemnified party in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of the indemnifying
party and the indemnified party as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The amount paid or payable in
respect of any Claim shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such Claim. Notwithstanding the foregoing, no underwriter or
controlling person thereof, if any, shall be required to contribute, in respect
of such underwriter's participation as an underwriter in the offering, any
amount in excess of the amount by which the total price at which the Registrable
Securities underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligation of any underwriters to contribute pursuant to
this paragraph (e) shall be several in proportion to their respective
underwriting commitments and not joint.
(f) The provisions of Section 3(b) through 3(e) of this
Agreement shall be in addition to any other rights to indemnification or
contribution which any indemnified party may have pursuant to law or contract
and shall remain operative and in full force and effect regardless of any
investigation made or omitted by or on behalf of any indemnified party and shall
survive the transfer of the Registrable Securities by any such party.
(g) The Registered Holders shall have certain "piggy-back"
registration rights with respect to the Registrable Securities as hereinafter
provided:
A. If at any time after the date of the Final Closing Date
and prior to the date that the Registrable Securities are registered under the
1933 Act pursuant to Section 3(a) above, the Company shall file with the SEC a
registration statement under the 1933 Act (other than a registration statement
on Form S-4 or Form S-8, or any successor thereto, or filed in connection with
an exchange offer or an offering of securities solely to the Company's existing
shareholders or with respect to securities issuable upon conversion of the
Series A Preferred Stock)
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registering any shares of Common Stock, the Company shall give written notice to
each Registered Holder thereof prior to such filing.
B. Within fifteen (15) days after such notice from the
Company, each Registered Holder shall give written notice to the Company whether
or not the Registered Holder desires to have all of the Registered Holder's
Registrable Securities included in the registration statement. If a Registered
Holder fails to give such notice within such period, such Registered Holder
shall not have the right to have such Registered Holder's Registrable Securities
registered pursuant to such registration statement. If a Registered Holder gives
such notice, then the Company shall include such Registered Holder's Registrable
Securities in the registration statement, at the Company's sole cost and
expense, subject to the remaining terms of this Section 3(g); provided, however,
that each Registered Holder shall pay all underwriting discounts, commissions
and transfer taxes as well as his, her or its own counsel fees, if any, relating
to the sale of such Registered Holder's Registrable Securities.
C. If the registration statement relates to an underwritten
offering, and the underwriter shall determine in writing that the total number
of shares of Common Stock to be included in the offering, including the
Registrable Securities, shall exceed the amount which the underwriter in its
sole discretion deems to be appropriate for the offering, the number of shares
of the Registrable Securities shall be reduced pro rata (based on the number of
Registrable Securities requested to be included). The Registered Holders
participating in the offering shall enter into such agreements as may be
reasonably required by the underwriters.
D. The Registered Holders shall have two (2) opportunities
to have the Registrable Securities registered under this Section 3(g); provided
however that their Registrable Securities are not sooner registered under the
1933 Act pursuant to Section 3(a) above.
E. The Registered Holder shall furnish in writing to the
Company such information as the Company shall reasonably require in connection
with a registration statement.
F. The Company may, at any time and in its sole discretion,
decide not to proceed with the filing of a registration statement which may have
give rise to "piggy back" rights under this Section 3(g) or may at any time
terminate or suspend such registration, in which event each Registered Holder's
rights under this Section 3(g) as to the number of opportunities to "piggy-back"
shall be reset.
T (h) If and whenever the Company is required by the provisions
of this Section 3(a) to use its best efforts to register any Registrable
Securities under the 1933 Act, the Company shall, as expeditiously as possible
under the circumstances and subject to the terms of this Section 3:
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A. Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective as soon as possible after filing
and remain effective.
B. Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement current and
effective and to comply with the provisions of the 1933 Act, and any regulations
promulgated thereunder, with respect to the sale or disposition of all
Registrable Securities covered by the registration statement required to effect
the distribution of the securities, but in no event shall the Company be
required to do so for a period of more than three (3) years following the
effective date of the registration statement.
C. Furnish to the Sellers participating in the offering,
copies (in reasonable quantities) of summary, preliminary, final, amended or
supplemented prospectuses, in conformity with the requirements of the 1933 Act
and any regulations promulgated thereunder, and other documents as reasonably
may be required in order to facilitate the disposition of the securities, but
only while the Company is required under the provisions hereof to keep the
registration statement current.
D. Use its best efforts to register or qualify the
Registrable Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions of the United States as the
Sellers participating in the offering shall reasonably request, and do any and
all other acts and things which may be reasonably necessary to enable each
participating Seller to consummate the disposition of the Registrable Securities
in such jurisdictions.
E. Notify each Seller selling Registrable Securities, at any
time when a prospectus relating to any such Registrable Securities covered by
such registration statement is required to be delivered under the 1933 Act, of
the Company's becoming aware that the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing, and promptly prepare and furnish to each such Seller selling
Registrable Securities a reasonable number of copies of a prospectus
supplemented or amended so that, as thereafter delivered to the purchasers of
such Registrable Securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing.
F. As soon as practicable after the effective date of the
registration statement, and in any event within eighteen (18) months thereafter,
make generally available to Sellers participating in the offering an earnings
statement (which need not be audited) covering a period of at least twelve (12)
consecutive months beginning after the effective date of the registration
statement which earnings statement shall satisfy the provisions of Section 11(a)
of the 1933 Act, including, at the Company's option, Rule 158 thereunder. To the
extent that the Company files such information with the SEC in satisfaction of
the foregoing, the Company need not deliver the above referenced earnings
statement to Seller.
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G. Upon request, deliver promptly to counsel of each Seller
participating in the offering copies of all correspondence between the SEC and
the Company, its counsel or auditors and all memoranda relating to discussions
with the SEC or its staff with respect to the registration statement and permit
each such Seller to do such investigation at such Seller's sole cost and
expense, upon reasonable advance notice, with respect to information contained
in or omitted from the registration statement as it deems reasonably necessary.
Each Seller agrees that it will use its best efforts not to interfere
unreasonably with the Company's business when conducting any such investigation
and each Seller shall keep any such information received pursuant to this
Section confidential.
H. Provide a transfer agent located in the United States for
all such Registrable Securities covered by such registration statement not later
than the effective date of such registration statement.
I. List the Registrable Securities covered by such
registration statement on such exchanges and/or on the NASDAQ as the Common
Stock is then currently listed upon.
J. Pay all Registration Expenses incurred in connection with
a registration of Registrable Securities, whether or not such registration
statement shall become effective; provided that each Seller shall pay all
underwriting discounts, commissions and transfer taxes, and their own counsel
fees, if any, relating to the sale or disposition of such Seller's Registrable
Securities pursuant to a registration statement. As used herein, "Registration
Expenses" means any and all reasonable and customary expenses incident to
performance of or compliance with the registration rights set forth herein,
including, without limitation, (i) all SEC and stock exchange or National
Association of Securities Dealers, Inc. registration and filing fees, (ii) all
fees and expenses of complying with state securities or blue sky laws (including
reasonable fees and disbursements of counsel for the underwriters in connection
with blue sky qualifications of the Registrable Securities but no other expenses
of the underwriters or their counsel), (iii) all printing, messenger and
delivery expenses, and (iv) the reasonable fees and disbursements of counsel for
the Company and the Company's independent public accountants.
(i) The Company acknowledges that there is no adequate remedy at
law for failure by it to comply with the provisions of this Section 3 and that
such failure would not be adequately compensable in damages, and therefore
agrees that its agreements contained in this Section 3 may be specifically
enforced. In the event that the Company shall fail to file such registration
statement when required pursuant to Section 3(a) above or to keep any
registration statement effective as provided in this Section 3 or otherwise
fails to comply with its obligations and agreements in this Section 3, then, in
addition to any other rights or remedies the Registered Holders may have at law
or in equity, including without limitation, the right of rescission, the Issuer
shall indemnify and hold harmless the Registered Holders from and against any
and all manner or loss which they may incur as a result of such failure. In
addition, the Issuer shall also reimburse the Registered Holders for any and all
reasonable legal fees and expenses incurred by them in
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successfully enforcing their rights pursuant to this Section 3, regardless of
whether any litigation was commenced.
4. MISCELLANEOUS.
4.1 All notices, consents and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given (a)
when delivered by hand, (b) one business day after the business day of
transmission if sent by telecopier (with receipt confirmed), provided that a
copy is mailed by certified mail, return receipt requested, or (c) one business
day after the business day of deposit with the carrier, if sent for next
business day delivery by Express Mail, Federal Express or other recognized
express delivery service (receipt requested), in each case addressed to the
Company at the address indicated on the first page of this Agreement marked
"Attention: Jeffrey Fossum, Chief Financial Officer", and to the Subscriber at
the Subscriber's address indicated on the last page of this Agreement (or to
such other addresses, the telecopier numbers as a party may designate as to
itself by notice to the other parties).
4.2 This Agreement shall not be changed, modified or amended
except by a writing signed by the parties to be charged, and this Agreement may
not be discharged except by performance in accordance with its terms or by a
writing signed by the party to be charged.
4.3 This Agreement shall be binding upon and inure to the
benefit of the parties hereto and to their respective heirs, legal
representatives, successors and assigns. This Agreement sets forth the entire
agreement and understanding between the parties as to the subject matter thereof
and merges and supersedes all prior discussions, agreements and understandings
of any and every nature among them.
4.4 Notwithstanding the place where this Agreement may be
executed by any of the parties hereto, the parties expressly agree that all the
terms and provisions hereof shall be construed in accordance with and governed
by the laws of the State of New York. The parties hereby agree that any dispute
which may arise between them arising out of or in connection with this Agreement
shall be adjudicated before a court located in New York and they hereby submit
to the exclusive jurisdiction of the courts of the State of New York and of the
federal courts in New York with respect to any action or legal proceeding
commenced by any party, and irrevocably waive any objection they now or
hereafter may have respecting the venue of any such action or proceeding brought
in such a court or respecting the fact that such court is an inconvenient forum,
relating to or arising out of this Agreement or any acts or omissions relating
to the sale of the securities hereunder, and consent to the service of process
in any such action or legal proceeding by means of registered or certified mail,
return receipt requested, in case of the address set forth below or such other
address as the undersigned shall furnish in writing to the other.
4.5 This Agreement may be executed in counterparts. Upon the
execution and delivery of this Agreement by the Subscriber, this Agreement shall
become a binding obligation of the Subscriber with respect to the purchase of
the Series B Preferred Stock as herein provided; subject, however, to the right
hereby reserved to the Company to enter into the same agreements with other
subscribers and to add and/or to delete other persons as subscribers.
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4.6 The holding of any provision of this Agreement to be invalid
or unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect.
4.7 It is agreed that a waiver by either party of a breach of
any provision of this Agreement shall not operate, or be construed, as a waiver
of any subsequent breach by that same party.
4.8 The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first written above.
TO BE COMPLETED BY SUBSCRIBER
-------------------------------------
Print Name
Signature for Individual Subscriber Signature of Subscriber Other than
Individual
_____________________________ By:__________________________________
Signature Name:
Title:
-------------------------------------
Address
-------------------------------------
City State Zip Code
-------------------------------------
Aggregate Purchase Price for Series B
Preferred Stock
-------------------------------------
Social Security or Employer Identification
Number
Aggregate Purchase Price being paid as follows:
(please check applicable box)
__Cash __ Tender of shares of
Series A Preferred Stock
SUBSCRIPTION ACCEPTED:
EFFECTIVE MANAGEMENT SYSTEMS, INC.
By:_______________________________________
Name:
Title:
Date:_____________________________________
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