PREFERRED STOCK PURCHASE AGREEMENT
This agreement is made this 15th day of July,
1997 by and between ARI Network Services, Inc. (the
"Company") and WITECH Corporation ("WITECH").
1. Preferred Stock Purchase. WITECH agrees to
purchase 20,000 Series A preferred shares of the
Company for $2.0 million. The preferred shares so
purchased are referred to herein as the "Shares." The
Shares shall have the relative rights, preferences and
limitations set forth in the form of Articles of
Amendment attached hereto as Exhibit A (the "Articles
of Amendment"). The Company agrees to file the
Articles of Amendment with the Wisconsin Department of
Financial Institutions prior to the time of closing
specified herein.
2. Acknowledgments. WITECH acknowledges that the
Shares have not been registered under the Securities
Act of 1933, as amended, and represents and warrants to
and agrees with the Company as follows:
(a) It is acquiring the Shares for its own account and
not with a view to the distribution thereof.
(b) It will not offer, sell, pledge or otherwise
dispose of the Shares except pursuant to an effective
registration statement or an exemption from
registration under the Securities Act and applicable
securities laws.
(c) The certificates for the Shares may bear a legend
relating to the restrictions on transfer imposed by
applicable law.
(d) It has made its own independent examination,
investigation, analysis and evaluation of the Company,
including WITECH's own estimate of the value of the
Company's business, and has undertaken such due
diligence (including a review of the assets,
liabilities, books, records and contracts of the
Company) as WITECH deems adequate.
(e) WITECH has received, through its representative on
the Board of Directors of the Company, (i) projections,
estimates or budgets of future revenues, expenses,
expenditures or results of operations and (ii) other
information and documents (financial and otherwise)
with respect to the Company. WITECH acknowledges that
the Company shall not be responsible for the accuracy
or completeness of such information and the Company
shall not be considered as having made any
representation or warranty to WITECH with respect
thereto or with respect to any other information,
except if and to the extent specifically set forth
herein.
3. Loan Reduction. The Company shall apply all of
the purchase price of the Shares toward payment of
principal, interest and other amounts payable by the
Company under that certain loan agreement (the "Loan
Agreement") dated October 4, 1993, as amended, by and
between the parties hereto.
4. Additional Indebtedness. So long as any of the
Shares are owed by WITECH, neither the Company nor any
of its subsidiaries shall, without WITECH's consent, incur
guaranty any indebtedness for borrowed money, (including
capitalized lease obligations) other than indebtedness for
borrowed money owed to WITECH or any affiliate or successor
thereof; provided, however, this covenant shall not restrict
(a) liabilities for accounts payable and expense accruals
incurred or assumed in the ordinary course of business,
and (b) indebtedness in an aggregate outstanding principal
amount of $250,000 (including capitalized lease obligation
amounts in accordance with generally accepted accounting
principles) representing the deferred purchase price or
lease of assets.
5. Closing. The purchase and sale of the Shares and
the payment under the Loan Agreement shall occur on
July 31, 1997, provided (a) the Board of Directors of
the Company shall have approved this Agreement and the
establishment of the Shares, and (b) the Company shall
have received assurances, satisfactory to it, that the
sale of Shares as contemplated hereby would not require
shareholder approval, and would not constitute a
corporate governance violation, under the rules of the
National Association of Securities Dealers, Inc.
applicable to the Company. If such conditions are not
satisfied by July 31, 1997, this Agreement shall
terminate without liability to either party.
6. Miscellaneous. This Agreement contains the entire
agreement between the parties hereto with respect to
the transactions contemplated hereby and supersedes all
prior arrangements or understandings with respect
thereto. This Agreement shall be governed by the laws
of the State of Wisconsin.
IN WITNESS WHEREOF, the undersigned have executed
this Agreement as of the date first above written.
ARI NETWORK SERVICES, INC.
By:/s/ Xxxxx Xxxxxxx
-------------------------
Xxxxx Xxxxxxx,President and
Chief Executive Officer
WITECH CORPORATION
By:/s/ Xxxxxxx Xxxxxxxxxx
-------------------------
Xxxxxxx Xxxxxxxxxx, President
EXHIBIT A
ARTICLES OF AMENDMENT
OF
ARI NETWORK SERVICES, INC.
Pursuant to Section 180.0602 of the Wisconsin Business
Corporation Law,
ARI Network Services, Inc., a corporation
organized and existing under the Wisconsin Business
Corporation Law (the "Company"), DOES HEREBY CERTIFY:
That (a) pursuant to the authority conferred upon
the Board of Directors by the Articles of Incorporation
of the Company, the Board of Directors on
_____________________, 1997 adopted the resolution set
forth below creating a series of Preferred Stock, par
value $.001 per share, designated as Series A Preferred
Stock, (b) shareholder action approving the creation of
the Series A Preferred Stock was not required, and (c)
no shares of Series A Preferred Stock have been issued:
NOW, THEREFORE, BE IT RESOLVED, that pursuant to
the authority vested in the Board of Directors of this
Company in accordance with the provisions of its
Articles of Incorporation, a series of Preferred Stock,
par value $.001 per share, of the Company be and it
hereby is created, and that the designation and amount
and relative rights, limitations and preferences
thereof are as follows:
Section 1. Designation and Amount. The shares of
such series shall be designated as "Series A Preferred
Stock" (the "Series A Preferred Stock"); the number of
shares constituting such series shall be Forty Thousand
(40,000). Such number of shares may be increased or
decreased by resolution of the Board of Directors;
provided, that no decrease shall reduce the number of
shares of Series A Preferred Stock to a number less
than the number of shares then outstanding plus the
number of shares reserved for issuance upon the
exercise of outstanding options, rights or warrants or
upon the conversion of any outstanding securities
issued by the Company into Series A Preferred Stock.
Section 2. Voting Rights. The holders of the
Series A Preferred Stock shall not, except as required
by law, have any right or power to vote on any question
or in any proceeding or to be represented at, or to
receive notice of, any meeting of the Company's
stockholders. On any matters in which the holders of
shares of the Series A Preferred Stock shall be so
entitled to vote under applicable law, they shall be
entitled to one (1) vote for each share held.
Section 3. Dividends.
(a) Each holder of a share of Series A Preferred
Stock shall be entitled to receive, when, as and if
declared by the Company's Board of Directors, out of
the funds of the Company legally available therefor,
cumulative dividends during each Quarterly Dividend
Period (as hereinafter defined) that such share of
Series A Preferred Stock is outstanding at a per annum
dividend rate equal to the product of (i) One Hundred
Dollars and (ii) two percent (2%) per annum above the
fluctuating per annum rate of interest published from
time to time in the Midwest Edition of The Wall Street
Journal under the "Money Rates" caption as the "Prime
Rate" (and if more than one such "Prime Rate" shall be
so published on any date, the highest of such rates for
such date), which rate shall change effective as of the
date of any published change in such published "Prime
Rate," but not less than a rate per annum equal to Ten
Dollars ($10.00) per share nor more than Fourteen
Dollars ($14.00) per share; provided, however, that
dividends for any period during which any shares of
Series A Preferred Stock shall be outstanding for less
than a full Quarterly Dividend Period (as defined
below) shall be paid pro rata based on the actual
number of days in such Quarterly Dividend Period. As
used herein, "Quarterly Dividend Period" means the
period from November 1 through the next January 31,
from February 1 through the next April 30, from May 1
through the next July 31 or from August 1 through the
next October 31; provided that the first Quarterly
Dividend Period shall be the period commencing on the
date of initial issuance of shares of the Series A
Preferred Stock (other than Additional Shares (as
defined below)) and ending on October 31, 1997.
(b) Except as provided below, each such dividend
shall be paid in cash on the first day of February,
May, August and November in each year (each a
"Quarterly Dividend Payment Date") commencing on
November 1, 1997, to the holders of record of shares of
Series A Preferred Stock as they appear on the stock
register of the Company on such record date as shall be
fixed by the Board of Directors of the Company or a
duly authorized committee thereof, which date shall be
at least ten (10) but no more than thirty (30) days
preceding the Quarterly Dividend Payment Date
immediately following the relevant Quarterly Dividend
Period. Notwithstanding anything to the contrary
herein, prior to August 1, 2002, all (but not less than
all) dividends payable on any particular Quarterly
Dividend Payment Date may be paid, at the option of the
Company, in lieu of cash, in additional shares of
Series A Preferred Stock ("Additional Shares") with a
Liquidation Preference (as defined below) equal to the
amount of such dividend. Such Quarterly Dividend
Payment Date shall be the original issuance date of
such Additional Shares for purposes of the accrual of
dividends. Prior to each issuance of any Additional
Shares as a dividend on any of the Series A Preferred
Stock, the Company will prepare and mail to each holder
of shares of the Series A Preferred Stock a certificate
setting forth the computation of the number of
Additional Shares issuable in payment of such dividend
to each holder of record of the Series A Preferred
Stock. A dividend payment in Additional Shares shall
not be considered paid if the Company, on the
applicable Quarterly Dividend Payment Date, has not
caused share certificates representing the Additional
Shares issuable in payment of such dividend to be
delivered to the holders of the Series A Preferred
Stock.
(c) The amount of any dividends "accrued" on any
share of the Series A Preferred Stock at any Quarterly
Dividend Payment Date shall be deemed to be the amount
of any unpaid dividends accumulated thereon to and
including such Quarterly Dividend Payment Date, whether
or not earned or declared. Dividends in arrears shall
bear dividends as if such dividends in arrears had been
declared and paid in Additional Shares as set forth
herein. Dividends on account of arrears for any past
Quarterly Dividend Periods may be declared and paid at
any time, without reference to any regular Quarterly
Dividend Payment Date, to holders of record on such
date, not exceeding 45 days preceding the payment date
thereof, as may be fixed by the Board of Directors of
the Company or a duly authorized committee thereof.
(d) So long as any shares of the Series A
Preferred Stock shall remain outstanding, no dividends
shall be paid or declared, or other distributions made
(upon dissolution or otherwise), whether in cash or
property or in obligations or shares of the Company, on
any shares of the Common Stock or stock of any other
series of Preferred Stock of the Company over which the
Series A Preferred Stock has a priority in the
distribution of assets in the event of any liquidation,
dissolution or winding up of the affairs of the Company
("Junior Preferred Stock") (other than dividends
payable solely in shares of Common Stock or Junior
Preferred Stock), nor shall any shares of the Common
Stock or Junior Preferred Stock be purchased, redeemed,
retired or otherwise acquired by the Company or any
corporation or other entity controlled by the Company
for any consideration of any kind (or any payment made
to or available for a sinking fund for the redemption
of any such securities), and neither the Company nor
any corporation or other entity controlled by the
Company shall incur any obligation for any of the
foregoing.
Section 4. Redemption.
(a) The Company may, at the election of its Board
of Directors, redeem outstanding shares of the Series A
Preferred Stock, in whole at any time or in part from
time to time, at the redemption price of One Hundred
Dollars ($100.00) per share, plus, in each case,
accrued and unpaid dividends through the day
immediately preceding the date fixed for the redemption
of shares of the Series A Preferred Stock (the
"Redemption Date"), but without premium.
(b) At least ten (10) days but not more than
sixty (60) days prior to the Redemption Date, written
notice of such redemption shall be mailed to each
holder of record of shares of the Series A Preferred
Stock to be redeemed, in a postage prepaid envelope
sent by first class mail and addressed to such holder
at its post office address as shown on the records of
the Company; provided, however, that no failure to mail
such notice nor any defect therein or in the mailing
thereof shall affect the validity of the proceeding for
the redemption of the shares of the Series A Preferred
Stock to be redeemed.
Each such notice shall state:
(1) the Redemption Date;
(2) the number of shares of the Series A
Preferred Stock to be redeemed and, if less than
all the shares held by such holder are to be
redeemed from such holder, the number of shares to
be redeemed from such holder and the method of
calculating such number;
(3) the cash redemption price (including the
amount of accrued dividends being paid);
(4) the place or places where certificates
for such shares are to be surrendered for payment
of the redemption price; and
(5) that dividends on the shares to be
redeemed shall cease to accrue on such Redemption
Date.
On or after the Redemption Date, each holder of shares
of the Series A Preferred Stock to be redeemed shall
present and surrender its certificate or certificates
for such shares (duly endorsed for transfer or
accompanied by appropriate stock powers) to the Company
at the place designated in such notice and thereupon
the redemption price of such shares shall be paid to or
on the order of the person whose name appears on such
certificate or certificates as the owner thereof. In
case fewer than all the shares represented by such
certificate are redeemed, a new certificate shall be
issued representing the shares that are not redeemed.
From and after the Redemption Date (unless the Company
shall default in payment of the redemption price), all
dividends on the shares of the Series A Preferred Stock
designated for redemption in such notice shall cease to
accrue and all rights of the holders thereof as
stockholders of the Company, except the right to
receive the redemption price thereof (including all
accrued and unpaid dividends up to the Redemption
Date), without interest, upon the surrender of
certificates representing the same, shall cease and
terminate and such shares shall not thereafter be
transferred (except with the consent of the Company) on
the books of the Company and such shares shall not be
deemed to be outstanding for any purpose whatsoever.
(c) If fewer than all of the shares of the Series
A Preferred Stock are to be redeemed, the Board of
Directors of the Company shall select the shares of the
Series A Preferred Stock to be redeemed pro rata (or as
nearly pro rata as practicable); provided, however,
that no fractional shares of the Series A Preferred
Stock shall be redeemed.
Section 5. Liquidation, Dissolution and Winding
Up. In the event of any liquidation, dissolution, or
winding up of the affairs of the Company, whether
voluntary or otherwise, after payment or provision for
payment of the debts and other liabilities of the
Company, the holders of shares of the Series A
Preferred Stock shall be entitled to receive, out of
the remaining net assets of the Company, the amount of
One Hundred Dollars ($100.00) in cash for each share of
the Series A Preferred Stock (the "Liquidation
Preference"), plus an amount equal to all accrued and
unpaid dividends on each such share to the date fixed
for distribution, before any distribution shall be made
to the holders of the Common Stock or any Junior
Preferred Stock. After such payment to the holders of
the Series A Preferred Stock, the holders of the Series
A Preferred Stock shall not be entitled to any
distribution in the event of liquidation, dissolution
or winding up of the affairs of the Company.
Section 6. Additional Issuances of Preferred
Stock. So long as any shares of Series A Preferred
Stock are outstanding, the Company shall not issue any
additional Preferred Stock, other than Junior Preferred
Stock (as defined in Section 3(d) hereof) or additional
shares of Series A Preferred Stock as provided in
Section 3(b) hereof.
* * *
Executed this ____ day of July, 1997.
ARI NETWORK SERVICES, INC.
[Corporate Seal]
Xxxxx X. Xxxxxxx,
President and
Chief Executive Officer
This instrument was drafted by
Xxxxx X. Xxxxxxxxx
Xxxxxxx & Xxxx, S.C.
000 X. Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
