EXHIBIT C
SUBSCRIPTION AGREEMENT
(Share Contribution)
Systems Holding, Inc.
000 Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxx 00000-0000
Ladies and Gentlemen:
1. Recitals. The undersigned hereby acknowledges that
Systems Holding, Inc. (the "Corporation") has been organized
under the laws of the State of Delaware in order to hold,
directly or indirectly, all of the outstanding common shares of
the capital stock of Electronic Retailing Systems International,
Inc., a Delaware corporation: (x) in excess of a majority of the
outstanding shares of which would, subject to the provisions
hereinafter set forth, be contributed to the Corporation
pursuant to subscription agreements substantially in the form of
this Subscription Agreement; and (y) the remainder of which
would be converted to cash pursuant to such terms and subject to
such conditions as shall be contained in the Merger Agreement
(as hereinafter defined) determined by the Board of Directors of
the Corporation, in its sole discretion (the "ERS Transaction").
(i) 2. Subscription. (a) The undersigned hereby
subscribes for ______ shares (the "Securities") of the common
stock, $.0l par value ("Holdco Common Stock"), of the
Corporation, equivalent to the number of shares of the common
stock, $.01 par value (the "ERS Common Stock"), of Electronic
Retailing Systems International, Inc., a Delaware corporation
("ERS"), contributed by the undersigned to the Corporation
pursuant to this Agreement, which shall be issued to the
undersigned contemporaneously with acceptance of this
Subscription Agreement in the manner set forth in Paragraph 7
hereof.
(b) The undersigned shall, in exchange for the
foregoing Securities to which this subscription relates, at the
Contribution Date (as hereinafter defined) assign, transfer and
convey to the Corporation a number of shares of ERS Common Stock
equivalent to the number of Securities acquired hereunder. In
furtherance of its obligations at the Contribution Date, the
undersigned herewith delivers to the Corporation a certificate
or certificates representing the shares of ERS Common Stock to
be contributed to the Corporation as aforesaid, accompanied by a
stock power duly endorsed in blank in such manner as shall be
directed by the Corporation.
(c) Prior to the acceptance of this Subscription
Agreement, the Corporation, in its sole discretion, may elect to
cancel the offering of shares of Holdco Common Stock at any
time, and in such event neither party hereto shall have any
further obligation hereunder, and the Corporation shall return
to the undersigned any certificate or certificates representing
shares of ERS Common Stock delivered as aforesaid. In the event
the Corporation shall not have accepted this subscription on or
prior to July 15, 2001, neither party shall have any further
obligation hereunder.
3. Subscriber Representations and Warranties. To induce
the acceptance of this subscription by the Corporation, the
undersigned hereby represents, warrants, agrees and confirms to
the Corporation that:
(a) The information which the undersigned has
provided to the Corporation is true and correct in all respects
as of the date hereof (or, if there have been any changes in
such information since the date such information was furnished,
the undersigned has advised the Corporation in writing of such
changes).
(b) The address set forth below is the true and
correct residence of the undersigned, the undersigned has
reached the age of majority in such state or jurisdiction, and
the undersigned has no present intention of becoming a resident
of any other state or jurisdiction. (If a corporation, trust or
partnership, the undersigned has its principal place of business
at the address set forth below, and was not organized for the
specific purpose of acquiring the Units subscribed for herein).
(c) The undersigned is a sophisticated investor familiar
with the types of risks inherent in the purchase of the
Securities, and has such business or financial experience that
the undersigned is capable of protecting his own interests in
connection with an investment in the Corporation.
(d) The undersigned has examined, or has had an
opportunity to examine, and make copies of, before the date
hereof, all information concerning the Corporation and ERS and
this offering requested by the undersigned, and all material
documents relating to this offering, and on the basis of such
examination is thoroughly familiar with the business and affairs
of the Corporation and ERS. Without limiting the generality of
the foregoing, the undersigned has received a copy of: (i) the
certificate of incorporation and by-laws of the Corporation, and
the form of Principal Stockholders Agreement relating to the
Corporation proposed to be entered into by Norton Xxxxxxxxx,
Xxxxx X. Failing, Jr. and their respective affiliates, (ii)
ERS' Annual Report on Form 10-K for the year ended December 31,
2000, including therein the consolidated financial statements of
ERS as at such date and for the three years then ended, together
with Amendment No. 1 to said report, and (iii) ERS' Quarterly
Report on Form 10-Q for the quarter ended March 31, 2001. The
undersigned has had an opportunity to ask questions of and
receive answers from the Corporation, or a person or persons
acting on its behalf, concerning the terms and conditions of
this investment, and to obtain any additional information
necessary to verify the accuracy of the information furnished,
and all such questions have been answered to the full
satisfaction of the undersigned.
(e) The undersigned owns, and will contribute to the
Corporation hereunder, a number of shares of ERS Common Stock
equivalent to the number of Securities acquired hereunder. The
shares of ERS Common Stock to be contributed to the Corporation
hereunder (together with any shares to be contributed to the
Corporation by affiliates of the undersigned) constitute all of
the shares of ERS Common Stock beneficially owned by the
undersigned (within the meaning of Rule 13d-3 promulgated by the
Securities and Exchange Commission under the Securities Exchange
Act of 1934). At the Contribution Date, there will be, no
pledges, charges, liens, security interests or other
encumbrances of any nature whatsoever (collectively, "Liens")
with respect to such shares; and, at the Contribution Date, the
Corporation will acquire good and marketable title to such
shares, free and clear of all Liens.
(f) No representations or warranties have been made
to the undersigned by or on behalf of the Corporation, or any of
its agents, employees or affiliates, and in entering into this
transaction the undersigned is relying only on the results of
its own independent investigation, including the information
furnished by the Corporation.
(g) The undersigned does not intend or anticipate that
this investment be a source of income, the undersigned is able
to bear the substantial economic risks of the investment in the
Securities being made by it, and at the present time the
undersigned could afford a complete loss of such investment.
(h) The undersigned is acquiring the Securities for its
own account, for investment purposes only, and not with a view
to the sale or other distribution thereof, in whole or in part.
In order to induce the Corporation to issue and sell the
Securities subscribed for herein to the undersigned, it is
agreed that the Corporation will have no obligation to recognize
the ownership, beneficial or otherwise, of any such Securities
are convertible, by anyone other than the undersigned.
(i) The undersigned understands that:
(i) The Securities are speculative investments and
involve a high degree of risk.
(ii) There are substantial restrictions on the
transferability of the Securities, and each of them; there
will be no public market for the Securities, or any of
them, acquired hereunder, and the undersigned will not be
able to avail itself of the provisions of Rule 144 adopted
by the Securities and Exchange Commission under the
Securities Act of 1933 (the "Securities Act") with respect
to the resale of any such Securities; and, accordingly, it
may not be possible for the undersigned to liquidate its
investment in the Corporation.
(j) The undersigned understands that neither the
Securities, nor any of them, have been registered under the
Securities Act, in reliance on an exemption thereunder for
transactions not involving any public offering, and that neither
the Securities, nor any of them, have been approved or
disapproved by the Securities and Exchange Commission or by any
federal or state agency.
(k) The undersigned will not sell, transfer, pledge or
otherwise dispose of any Securities, or any interest therein,
until either of the following events has occurred: (i) it has
received an opinion in form and substance reasonably acceptable
to the Corporation of counsel reasonably acceptable to the
Corporation that registration thereof under the Securities Act
is not required; or (ii) a registration statement under the
Securities Act covering such securities, or interest therein and
the disposition thereof has become effective under the
Securities Act. Any certificates or other instruments in
evidence of the Securities, or any of them, shall be endorsed
with a legend to the foregoing effect (and referencing the
additional restrictions contained in this Subscription
Agreement), and stop transfer instructions shall be issued with
respect to such Securities, so long as such Securities are,
subject to such restrictions on disposition.
(l) The undersigned is an "accredited investor" as
defined under Regulation D promulgated pursuant to the
Securities Act.
(m) If the undersigned is a corporation or trust (or
other entity not described under Sub-Paragraph (n) immediately
succeeding), the person executing this Subscription Agreement
represents and warrants that it is authorized to so sign, and to
enter into the Irrevocable Proxy (as hereinafter defined), that
the corporation, trust or other such entity is authorized by the
articles (or certificate) of incorporation and by-laws of the
corporation or by the trust agreement, or by the governing
documents of such other entity, as the case may be, to make this
investment and to enter into this Subscription Agreement and the
Irrevocable Proxy; and, in the case of a corporation, the
undersigned will, upon request of the Corporation, furnish to
the Corporation a true and correct copy of the provisions of the
articles (or certificate) of incorporation or by-laws, or both,
authorizing the undersigned to make such investment, as well as
a copy (certified by the secretary or other authorized officer)
of appropriate corporate resolutions authorizing this specific
investment, and in the case of a trust, the undersigned will,
upon request of the Corporation, furnish to the Corporation a
true and correct copy of the provisions of the trust agreement
authorizing the trustee to make such investment, and in the case
of any other such entity, the undersigned will, upon request of
the Corporation, furnish to the Corporation a true and correct
copy of the provisions of such other governing documents
authorizing the undersigned to make such investment.
(n) If the undersigned is a partnership, by signing
below, the partner executing this Subscription Agreement
represents and warrants that each one of the foregoing
representations or agreements or understandings set forth herein
applies to each partner; that it is authorized to so sign and to
enter into this Subscription Agreement and the Irrevocable
Proxy; upon request of the Corporation, the undersigned will
furnish to the Corporation a true and correct copy of the
provisions of the undersigned's partnership agreement
authorizing the executing partner to make such investments; in
the case of any partner that is a trust, a trustee (or co-
trustee) of the trust is authorized by the trust agreement to
make this investment and to enter into this Subscription
Agreement and to enter into the Irrevocable Proxy; and in the
case of any partner that is a corporation, such corporation,
will upon request of the Corporation, furnish to the Corporation
a true and correct copy of the provisions of the articles (or
certificate) of incorporation or by-laws, or both, authorizing
such corporation to make such investment, and a copy (certified
by the secretary or other authorized officer) of appropriate
corporate resolutions authorizing this specific investment; and
in the case of a partner that is organized as an entity not set
forth as aforesaid, the undersigned will, upon request of the
Corporation, furnish to the Corporation a true and correct copy
of the provisions of the governing documents of such entity
authorizing such entity to make such investment.
4. Indemnity. The undersigned understands the meaning and
legal consequences of the representations, warranties and
agreements contained in Paragraph 3 hereof and elsewhere herein,
and the undersigned hereby agrees to indemnify and hold harmless
the Corporation and each officer and director thereof from and
against any and all loss, damage or liability due to or arising
out of a breach of any representation, warranty or agreement of
the undersigned.
5. Acceptance. The undersigned understands that this
subscription is not binding on the Corporation until the
Corporation accepts it, which acceptance is at the sole
discretion of the Corporation, by executing this Subscription
Agreement where indicated.
6. Corporation Representations and Warranties. By its
acceptance of this subscription, the Corporation hereby
represents, warrants, agrees and confirms to the undersigned
that:
(a) The officer executing this Subscription Agreement is
authorized to so sign; the Corporation is authorized by its
certificate of incorporation and by-laws to accept this
Subscription Agreement; and the execution and delivery hereof by
the Corporation and the consummation by the Corporation of the
transactions contemplated hereby have been duly authorized by
all necessary corporate action .
(b) The Corporation is duly organized, validly
existing and in good standing under the laws of its jurisdiction
of incorporation, and has all requisite corporate power and
authority to own and operate its properties and to carry on its
business as now conducted and proposed to be conducted.
(c) The authorized capital stock of the Corporation
consists of 35,000,000 shares of Holdco Common Stock, and
2,000,000 shares of preferred stock, $1.00 par value. As of the
date hereof, there are no subscriptions, warrants or options
to which the Corporation is bound relating to the issuance or
purchase of any shares of Holdco Common Stock, except agreements
substantially in the form of this Subscription Agreement, or in
the form of the Subscription Agreement (Cash Contribution)
executed by the undersigned) (none of which the Corporation
intends to accept except contemporaneously with all other such
subscriptions to be accepted by the Corporation), and
arrangements with the holders of indebtedness of ERS
(substantially in the form disclosed to the undersigned), but
subject to such determinations as may be made by the Board of
Directors of the Corporation acting in the interests of all
stockholders (and all subscribers to Holdco Common Stock), taken
in their entirety (it being acknowledged, without limitation,
that the Merger Agreement may provide for the assumption by the
Corporation of stock options issued by ERS, and that the
Corporation may issue additional shares of Holdco Common Stock,
for cash, in order to provide funds for application under the
Merger Agreement to the conversion of shares of ERS Common Stock
issued upon exercise of options prior to closing under such
agreement). The Securities, upon payment therefor in accordance
with this Subscription Agreement, shall be duly authorized,
validly issued and fully paid and non-assessable.
(d) As of the date hereof, the authorized capital
stock of ERS consists of 35,000,000 shares of ERS Common Stock,
of which approximately 21,345,383 shares are issued and
outstanding, and 2,000,000 shares of preferred stock, $1.00 par
value, of which 40,000 shares are designated Series A-1
Convertible Preferred Stock, 39,985 shares of which are issued
and outstanding. As of the date hereof, there are no
subscriptions, warrants, options, calls, commitments by or
agreements to which the Corporation is bound relating to the
issuance or purchase of any shares of ERS Common Stock, except
for (i) warrants, exercisable with respect to an aggregate of
2,538,258 shares of ERS Common Stock; (ii) options, exercisable
with respect to an aggregate of approximately 2,903,384 shares
of ERS Common Stock issuable pursuant to ERS' 1993 Employee
Stock Option Plan (the "Employee Plan"); and (iii) options,
exercisable with respect to an aggregate of 120,000 shares of
ERS Common Stock issuable pursuant to the ERS' 1993 Director
Stock Option Plan (together with the Employee Plan, the
"Plans"). The Corporation has entered into irrevocably proxies,
substantially in the form of Exhibit A, with the holders of in
excess of 50% of the shares of ERS Common Stock outstanding on
the date hereof.
7. Deliveries. (a) Upon acceptance of this subscription by
the Corporation, the Corporation shall issue and deliver to the
undersigned a certificate or certificates registered in the name
of the undersigned representing the Securities subscribed
hereunder, each such certificate containing the restrictive
legend required under Paragraph 3(k) hereof and appropriately
referencing the restrictions under paragraph 9 hereof and
(through the Contribution Date) complying with the provisions of
Section 156 of the Delaware General Corporation Law regarding
partly paid shares.
(b) Subject to execution and delivery by, inter alia, the
Corporation and ERS of such definitive documentation as shall
evidence agreement to the ERS Transaction, upon five days' prior
written notice delivered to the undersigned by the Corporation
(which shall specify that the conditions to consummate such
transaction have been satisfied or waived, other than conditions
with respect to actions to be taken at closing thereof, or
immediately prior or subsequent thereto), at such time as shall
be specified by the Corporation in such notice (the
"Contribution Date"), all shares of ERS Common Stock applicable
to the subscription hereunder shall contemporaneously be
assigned, transferred and conveyed to the Corporation.
8. Voting Agreement. The undersigned hereby agrees that, in
the event its subscription hereunder is accepted by the
Corporation, it shall take all such action as shall reasonably be
requested by the Corporation to vote its shares of ERS Common
Stock, and all shares of the capital stock of ERS (x) into which
such shares may be reclassified or (y) distributed in respect of
such shares or received in exchange for such shares, and/or
exercise any consensual rights with respect thereto, to approve
any agreement and plan of merger (the "Merger Agreement") entered
into, inter alia, by the Corporation and ERS, providing for the
merger into ERS of a wholly-owned subsidiary of the Corporation as
a result of which, among other matters, the common shares of ERS
not held by the Corporation would be converted into the right to
receive cash from the Corporation, and the consummation of the
transactions contemplated by the Merger Agreement, including,
without limitation, the approval of an amendment to ERS'
certificate of incorporation whereby the outstanding shares of ERS
Common Stock held by the Corporation would be reclassified as
shares of the class B common stock, $.01 par value, of ERS, each
share to have the same voting and dividend rights as one share of
ERS Common Stock; and against any proposal inconsistent with the
foregoing transactions. The undersigned herewith executes and
delivers to the Corporation its irrevocable proxy dated the date
hereof (the "Irrevocable Proxy"), in the form of Exhibit A
attached hereto, with respect to its shares of ERS Common Stock,
in furtherance of its agreement under this Paragraph 8.
9. Transfers of Securities. (a) Except as hereinafter
provided, the undersigned shall not assign, pledge, hypothecate
or encumber, directly or indirectly, all or any Securities,
voluntarily or involuntarily, without the prior written approval
of the Corporation.
(b) Notwithstanding any other provision contained in
this Paragraph 9, upon the death, bankruptcy, insolvency,
liquidation or dissolution of the undersigned, its interest in
the Corporation shall descend to and vest in its legal
representatives or other successors, subject to the terms and
conditions of this Paragraph 9 (and to the obligation of the
undersigned to make the contribution to the Corporation required
on the Contribution Date), who shall agree in writing to be
bound hereby.
(c) (i) The undersigned shall, subject to all other
terms and conditions of this Subscription Agreement, have the
right to sell and assign all or any part of his Securities upon
compliance with the provisions of this Sub-Paragraph (c);
provided, however, that the assignee of such interest shall
agree in writing to be bound by the terms and provisions of this
Paragraph 9 (and it being acknowledged that no such transaction
shall relieve the undersigned from its obligation to make the
contribution to the Corporation required on the Contribution
Date).
(ii) If the undersigned desires to sell and assign
any securities of the Corporation pursuant to a bona fide offer
therefor he shall first offer the same to the Corporation at a
price equal to the dollar value of the consideration offered to
the undersigned pursuant to such bona fide offer by written
notice to the Corporation to that effect setting forth the terms
of such bona fide offer. The Corporation shall have the right
and option to purchase all but not less than all of the
Securities specified in such notice. Such right and option shall
be exercised by the Corporation by giving written notice of
exercise to the undersigned within 30 days after the receipt of
the foregoing notice from the undersigned.
(iii) If the Corporation shall not have exercised
its right and option within the time provided therefor, the
undersigned shall thereafter be free for a period of 60 days to
sell and assign the Securities to which such right and option
related, free of the restriction of clause (ii) immediately
preceding, but only on the terms set forth in such bona fide
offer and to the offeror thereof.
(iv) Notwithstanding any other provision contained
in this Paragraph 9, but subject to the other terms and
conditions of this Subscription Agreement, the undersigned may,
at any time, sell, transfer, or assign all or any part of his
Securities to any person or entity controlling, controlled by or
under common control with the undersigned, or to any member of
the immediate family of the undersigned (extending to parents,
spouse, siblings, children or grandchildren), or to any trust
for the benefit of the undersigned or any member of his
immediate family, without compliance with the provisions of this
Paragraph 9; provided, however, that the assignee of such
interest shall agree to be bound by the terms and provisions of
this Paragraph 9 (and it being acknowledged that no such
transaction shall relieve the undersigned from its obligation to
make the contribution to the Corporation required on the
Contribution Date).
9. Sale of Controlling Interest. In the event that, after
the Contribution Date, any party offers to acquire, directly or
indirectly, a "controlling interest" in the Corporation, the
Corporation shall use its best efforts to ensure that such offer
is not accepted until the offeror shall first, by written
notice, have offered to purchase from the undersigned its entire
interest in the Corporation on the same terms per share and the
same price per share applicable to the "controlling interest"
proposed to be sold. The undersigned shall have the right and
option, in its sole discretion, to sell such interest upon such
terms by giving written notice of such election to the
Corporation and such offeror within 30 days after the receipt of
the applicable offer under this Paragraph 10. For purposes
hereof, a "controlling interest" shall entail the possession,
direct or indirect of the power of cause the direction of the
management and policies of the Corporation, whether through
ownership of voting securities, or otherwise.
10. Restricted Securities. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES
LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS
SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL
RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
11. Miscellaneous. (a) This subscription is not
transferable or assignable by the undersigned.
(b) All notices or other communications to be given or
made hereunder shall be in writing and shall be delivered
personally or mailed, by registered or certified mail, return
receipt requested, postage prepaid, or by overnight mail by a
reputable courier, to the undersigned or to the Corporation, as
the case may be, at the respective addresses set forth herein.
(c) Notwithstanding the place where this Subscription
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 Connecticut.
(d) This Subscription Agreement, and the agreements
referred to herein, constitute the entire agreement between the
parties hereto with respect to the subject matter hereof and may
be amended only by a writing executed by the parties.
(e) Each of the parties shall bear such party's own
expenses in connection with this Subscription Agreement and the
transactions contemplated hereby. The undersigned shall be
responsible for all taxes and governmental fees in connection
with the transfer of its ERS Common Stock hereunder.
(f) The undersigned shall use its best efforts to
take such actions as may be necessary or reasonably requested by
the Corporation to carry out and consummate the transactions
contemplated by this Subscription Agreement. Without limiting
the generality of the foregoing, the undersigned from time to
time, at the request of the Corporation and without further
consideration, shall execute and deliver further instruments of
transfer and assignment and take such further action as the
Corporation may reasonably require more effectively to transfer
and assign to, and vest in, the Corporation the shares of ERS
Common Stock assigned hereunder.
IN WITNESS WHEREOF, the undersigned executes and agrees to
be bound by this Subscription Agreement this 2nd day of July,
2001.
SUBSCRIBER:
A.__ Check if individual If Fiduciary, Corporation or Partnership,
ownership. check if one and indicate capacity of
signature under signature line:
If joint ownership, Check one:
B.__ Joint Tenants with F.__ Trust - attach a copy of trust
Rights of Survivorship agreement
C.__ Tenants in Common G.__ Power of Attorney-attach original
D.__ Community Property H.__ Custodian under Uniform Gifts
to Minors Act
E.__ Tenants by Entirety I.__ Partnership-attach a copy of
Partnership Agreement
J.__ Corporation-attach a copy of
corporate resolution authorizing
signature and purchase
K.__ Other-Please specify below and
supply evidence of authority to
sign and purchase:
or
Social Security Number of Identification Number of
Individual Limited Partner Corporate Limited Partner
Social Security Number
of Individual Joint Partner (if any)
Subscriber Name
First Name - Initial Not Acceptable M.I. Last Name
Joint Subscriber Name (if any)
First Name - Initial Not Acceptable M.I. Last Name
Partnership or Corporate Subscriber Name
Jurisdiction of Incorporation of Corporate Subscriber
Residence Address, or Principal Place of Business if Corporate
Subscriber
(Important: P.O. Box Numbers not acceptable for Residence Address)
Street Number Street Name Apt. No.
Bldg. No. City State Zip Code
Mailing Address (if other than address above)
Street Number Street Name Apt. No.
Bldg. No. City State Zip Code
Home Telephone Office Telephone
Area Code Number Area Code Number
The foregoing subscription is hereby accepted by the
Corporation this 2nd day of July, 2001.
SYSTEMS HOLDING , INC.
By
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