-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ISHum8TCq4cTNJfcQtBnYdSCtUzYZ0NJlCWFD4gAXmQGaoSVptzvcKFCyJeoQ5mG +rgxEBuWpeuIgOjQ27xGiA== 0000903893-96-000620.txt : 19960820 0000903893-96-000620.hdr.sgml : 19960820 ACCESSION NUMBER: 0000903893-96-000620 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19960819 SROS: NONE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR CORP CENTRAL INDEX KEY: 0000724051 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 042626079 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-35065 FILM NUMBER: 96617709 BUSINESS ADDRESS: STREET 1: 745 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 6177288500 MAIL ADDRESS: STREET 1: 745 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02111 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: ADLEY BRIAN M ET AL CENTRAL INDEX KEY: 0001021151 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: VESTEX CORP STREET 2: 12 WALTHAM ST CITY: LEXINGTON STATE: MA ZIP: 02173 BUSINESS PHONE: 6178610777 MAIL ADDRESS: STREET 1: VESTEX CORP STREET 2: 12 WALTHAM ST CITY: LEXINGTON STATE: MA ZIP: 02173 SC 13D/A 1 SCHEDULE 13D CUSIP No. 1588 28 10 3 Schedule 13D ---------------------- ------------ Amendment No. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 1) CHANCELLOR CORPORATION (Name of Issuer) Common Stock, $0.01 par value per share (Title of Class of Securities) 1588 28 10 3 (CUSIP Number) Brian M. Adley, Chairman of Vestex Corporation, 12 Waltham Street, Lexington, MA 02173 (617) 861-0777 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) April 12, 1996 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box / /. Check the following box if a fee is being paid with the statement / /. (A fee is not required only if the reporting persons (1) has a previous statement on file reporting beneficial ownership of more than five percent of the class of securities described in Item 1; and (2) has filed no amendment subsequent thereto reporting beneficial ownership of five percent or less of such class.) (See Rule 13d-7) Note: Six copies of this statement, including all exhibits, should be filed with the Commission. See rule 13(d)-1(a) for other parties to whom copies are to be sent. "The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior coverage page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). 1 of 9 1. Name of Reporting Person: Brian M. Adley SS or IRS Identification Number of the Above Person: 2. Check the Appropriate Box if a Member of a Group: (a) / / (b) /X/ 3. SEC Use Only 4. Source of Funds: OO 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e): / / 6. Citizenship or Place of Organization: United States 7. Sole Voting Power: 6,675,000 shares 8. Shared Voting Power: 0 shares 9. Sole Dispositive Power: 6,675,000 shares 10. Shared Dispositive Power: 0 shares 11. Aggregate Amount Beneficially Owned by Each Reporting Person: 6,675,000 shares 12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares / / 13. Percent of Class Represented by Amount in Row (11): 65.6% 14. Type of Reporting Person: IN 2 of 9 1. Name of Reporting Person: Vestex Corporation SS or IRS Identification Number of the Above Person: 04-3244860 2. Check the Appropriate Box if a Member of a Group: (a) / / (b) /X/ 3. SEC Use Only 4. Source of Funds: NA 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e): / / 6. Citizenship or Place of Organization: Massachusetts 7. Sole Voting Power: 0 shares 8. Shared Voting Power: 0 shares 9. Sole Dispositive Power: 0 shares 10. Shared Dispositive Power: 0 shares 11. Aggregate Amount Beneficially Owned by Each Reporting Person: 0 shares 12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares / / 13. Percent of Class Represented by Amount in Row (11): 0% 14. Type of Reporting Person: CO 3 of 9 1. Name of Reporting Person: Vestex Capital Corporation SS or IRS Identification Number of the Above Person: 04-3303651 2. Check the Appropriate Box if a Member of a Group: (a) / / (b) /X/ 3. SEC Use Only 4. Source of Funds: BK 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e): / / 6. Citizenship or Place of Organization: Massachusetts 7. Sole Voting Power: 6,600,000 shares 8. Shared Voting Power: 0 shares 9. Sole Dispositive Power: 6,600,000 shares 10. Shared Dispositive Power: 0 shares 11. Aggregate Amount Beneficially Owned by Each Reporting Person: 6,600,000 shares 12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares / / 13. Percent of Class Represented by Amount in Row (11): 65.1% 14. Type of Reporting Person: CO 4 of 9 The joint statement of Brian M. Adley ("Adley") and Vestex Corporation ("VC") on Schedule 13D dated August 7, 1995, (a copy of which is filed herewith as Exhibit 1 and hereby made a part hereof) which relates to the common stock, par value $.01 per share ("Common Stock"), of Chancellor Corporation (the "Issuer"), whose principal executive offices are located at 745 Atlantic Avenue, Boston, Massachusetts 02111, is hereby joined by Vestex Capital Corporation ("Vestex" and collectively with Adley and VC, hereinafter the "Purchaser") and is hereby amended and supplemented as follows: Item 2. Identity and Background. The following additional information is added to the end of Item 2: (a) Vestex Corporation. (b) 12 Waltham Street, Lexington, MA 02173. (c) Engaged in the investment business. (d) During the last five years, Vestex Corporation has not been convicted in any criminal proceeding. (e) During the last five years Vestex Corporation has not been a party to any civil proceedings the result of which was a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) Vestex Corporation is a corporation formed under the laws of the Commonwealth of Massachusetts and is wholly-owned by Brian M. Adley. (a) Vestex Capital Corporation. (b) 12 Waltham Street, Lexington, MA 02173. (c) Engaged in the investment business. (d) During the last five years, Vestex Capital Corporation has not been convicted in any criminal proceeding. (e) During the last five years Vestex Capital Corporation has not been a party to any civil proceedings the result of which was a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) Vestex Capital Corporation is a corporation formed under the laws of the Commonwealth of Massachusetts and is wholly-owned by Brian M. Adley. Item 3. Source and Amount of Funds or Other Consideration. The following is added as the second paragraph of Item 3: On April 12, 1996, VC transferred 1,600,000 shares of Common Stock (the "Common Stock") to Vestex for no consideration. On April 12, 1996, Vestex acquired directly from the Issuer 5,000,000 shares of Series AA Convertible Preferred Stock (the "Preferred Shares") for which Vestex paid a total of $1,350,000 in cash. In connection with said purchase, Vestex received $312,500 from the Issuer as reimbursement of expenses incurred in the transaction. The purchase price for said Preferred Shares came from working capital, which working capital was provided, in part, by the proceeds of the 5 of 9 loan agreement (the "Loan Agreement") effective March 28, 1996, among Vestex, Adley (as co-borrower) and First Capital, Inc. ("FCI"). This loan is secured, in part, by a pledge of said Preferred Shares to FCI. The Loan Agreement is attached hereto as Exhibit 2 and hereby made a part hereof. The rights and preferences of the Preferred Shares are as set forth in the Certificate of Designation filed as Exhibit 3 hereto and hereby made a part hereof. Item 4. Purpose of Transaction. The following is added as the third, fourth and fifth paragraphs of item 4: The Preferred Shares and the Shares of Common Stock acquired by Vestex on April 12, 1996 were acquired for investment purposes. Effective April 12, 1996,the Shares of Common Stock acquired by Vestex from VC were released from the terms of the "Interim Voting Agreement" dated as of July 25, 1995 filed on August 7, 1995 as Exhibit 2. The Preferred Shares and the Common Stock acquired by Vestex are subject to the "Long-Term Voting Agreement" dated as of April 12, 1996, a copy of which is filed herewith as Exhibit 4 and hereby made a part hereof. As of April 11, 1996, the Issuer, VC, and Vestex entered into the Registration Rights Agreement filed herewith as Exhibit 5 and hereby made a part hereof, pursuant to which Vestex and transferees of the Preferred Shares and shares of Common Stock held by Vestex are entitled to require the Issuer to file a registration statement with the Securities Exchange Commission with respect to such shares. Vestex and Adley, in accordance with the terms of the Long-Term Voting Agreement, presently intend to nominate and elect Mr. Gerald Brauser and Mr. Lawrence LaChance to the Issuer's Board of Directors. Except as described above, the Reporting Person has no plans at present relating to (a) the acquisition by any person of additional securities of the Company or the disposition of securities of the Company, (b) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries, (c) any sale or transfer of a material amount of assets of the Company or any of its subsidiaries, (d) any change in the present board of directors or management of the Company, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board, (e) any material change in the present capitalization or dividend policy of the Company, (f) any other material change in the Company's business or corporate structure, (g) any changes in the Company's charter or bylaws or other actions which may impede the acquisition of control of the Company by any person, (h) causing any class of securities of the Company to be delisted from a national securities exchange or to cease to be authorized to be quoted in an interdealer quotation system of a registered national securities association, (i) any class of equity securities of the Company becoming eligible for termination of registration pursuant to Section 12 (g) (4) of the Exchange Act, or (j) any action similar to any of those enumerated above. Item 5. Interest in Securities of the Issuer. The following is added to the end of part (a) of Item 5: 6 of 9 As a result of the transactions completed on April 12, 1996, as of April 12, 1996 Vestex beneficially owns 6,600,000 shares of Common Stock of the Issuer (65.1%) of the outstanding common stock (assuming the conversion of the 5,000,000 Preferred Shares on a one-for-one basis); Adley beneficially owns 6,675,000 shares of Common Stock of the Issuer (65.6%) of the outstanding common stock (6,600,000 shares indirectly through his control of Vestex and 75,000 directly, assuming the exercise of his stock purchase options relating to 75,000 shares). The following is added to the end of part (b) of Item 5 as paragraphs 2 and 3: As of April 12, 1996, Vestex has the sole power to vote, dispose of, or direct the disposition of 6,600,000 shares of Common Stock (including 5,000,000 Preferred Shares as converted into Common Stock); and Adley has the sole power to vote, dispose of, or direct the disposition of 6,675,000 shares (comprised of 75,000 shares of Common Stock to which Adley holds stock purchase options exercisable within the next sixty (60) days, and 6,600,000 Shares of Common Stock beneficially owned by Vestex). The following is added to the end of part (c) of Item 5: VC and Vestex effected the following transactions in the Issuer's common stock during the past 60 days: On April 12, 1996 Vestex acquired 1,600,000 Shares of Common Stock from VC for no consideration, and 5,000,000 Preferred Shares directly from the Issuer, for a total purchase price of $1,350,000 ($.27 per share). The following is added to the end of part (e) of Item 5: Not applicable as to Adley or Vestex. VC ceased to be a beneficial owner of any shares of the Common Stock on April 12, 1996. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. The following is added to the end of Item 6 as paragraphs 5, 6 and 7: Effective April 12, 1996, the 1,600,000 shares of Common Stock transferred from VC to Vestex were released from the terms and conditions of the Interim Voting Agreement, as the Interim Voting Agreement was superseded in its entirety by another voting agreement (the "Long-Term Voting Agreement") entered that date among the Issuer, Vestex, Stephen G. Morison, Bruce M. Dayton, Thomas W. Killilea, Richard D. Rizzo, and the Issuer's employees. The Long-Term Voting Agreement, which is filed herewith as Exhibit 4 and hereby made a part hereof, provides for the election of a Board of seven Directors, two of whom will be nominated by Vestex and five of whom will be the nominees of the Company's continuing directors other than nominees of Vestex ("Continuing Directors") subject to 7 of 9 election by the stockholders other than Vestex ("Minority Stockholders"). The Long-Term Voting Agreement also requires that, until April 12, 1998, certain issuances of stock, mergers, charter and by-law amendments and other transactions in which Vestex has an interest which conflicts with or is distinct from that of the Issuer, will be subject to approval by the Continuing Directors or the Minority Stockholders ("Minority Approval"). In connection with the closing of the sale of the Preferred Stock, the Issuer, VC, and Vestex entered into the Registration Rights Agreement filed herewith as Exhibit 5 and hereby made a part hereof, pursuant to which Vestex and transferees of the Preferred Shares and shares of Common Stock held by Vestex are entitled to require the Issuer to file a registration statement with the Securities and Exchange Commission with respect to such shares. Effective March 28, 1996, Vestex and Adley, as co-borrowers, entered into a loan agreement (the "Loan Agreement") with First Capital, Inc. ("FCI"), a Virginia corporation, pursuant to which FCI loaned to Vestex $1,800,000 (the "Loan") a portion of which Vestex used to purchase the 5,000,000 Preferred Shares. The Loan is secured, in part, by a pledge to FCI of the 5,000,000 Preferred Shares. The Loan Agreement is attached hereto as Exhibit 2 and incorporated herein by reference. Item 7. Material to be Filed as Exhibits. The following documents are hereby filed as Exhibits to this Amendment No. 1 and hereby incorporated by reference: Exhibit Description 1. Original Schedule 13D filed August 7, 1995 by Adley and VC. 2. Loan Agreement effective March 28, 1996, between Vestex and First Capital, Inc., regarding pledge of 5,000,000 Series AA Convertible Preferred Shares. 3. Certificate of Designation 4. Long-Term Voting Agreement dated as of April 11, 1996, among the Issuer and Vestex. 5. Registration Rights Agreement dated as of April 11, 1996, between Vestex, VC, and the Issuer. 8 of 9 Signatures After reasonable inquiry and to the best of my knowledge and belief, the undersigned each hereby certify that the information set forth in this statement is true, complete and correct. Dated: August 14, 1996 Brian M. Adley ----------------------------- Brian M. Adley VESTEX CAPITAL CORPORATION Dated: August 14, 1996 By: Brian M. Adley ------------------------- Brian M. Adley, Chairman VESTEX CORPORATION Dated: August 14, 1996 By: Brian M. Adley ------------------------- Brian M. Adley, Chairman 9 of 9 EX-99.1 2 ORIGINAL SCHEDULE 13D CUSIP No. 1588 28 10 3 Schedule 13D ---------------------- ------------ Amendment No. 1 Exhibit 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. ____________) CHANCELLOR CORPORATION (Name of Issuer) Common Stock, $0.01 par value per share (Title of Class of Securities) 1588 28 103 (CUSIP Number ) Brian M. Adley, Chairman of Vestex Corporation, 12 Waltham Street, Lexington, MA 02173 (617) 861-0777 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) Vestex Corporation, 12 Waltham Street, Lexington, MA 02173 (617) 861-0777 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) July 25, 1995 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box . Check the following box if a fee is being paid with the statement . (A fee is not required only if the reporting persons (1) has a previous statement on file reporting beneficial ownership of more than five percent of the class of securities described in Item 1; and (2) has filed no amendment subsequent thereto reporting beneficial ownership of five percent or less of such class.) (See Rule 13d-7) Note: Six copies of this statement, including all exhibits, should be filed with the Commission. See rule 13(d)-1(a) for other parties to whom copies are to be sent. "The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior coverage page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). Exhibit 1- Page 1 Item 1. Security and Issuer. (a) The name of the subject company is Chancellor Corporation, a Massachusetts corporation (the "Company"). The address of its principal executive offices is 745 Atlantic Avenue, Boston, Massachusetts 02111. (b) The class of securities to which this statement relates is the Common Stock, $.01 par value per share, of the Company. Item 2. Identity and Background. (a)-(c) The name and address of the person who is filing this statement (the "Reporting Person"), together with his title with the Company (which employment constitutes his principal occupation) are as follows: Name Address Title - ---- ------- ----- Brian M. Adley c/o Vestex Corporation 12 Waltham Street Lexington, MA 02173 (d)-(e) The Reporting Person, during the last five years, has not been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) nor was he a party to a civil proceeding of a judicial or administration body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) The Reporting Person is a U.S. citizen. Item 3. Source and Amount of Funds or Other Consideration. For a total of 1,600,000 shares owned outright by Vestex Corporation, Vestex Corporation paid a total of $475,000 in cash. Such amounts came from corporate funds. If and when Brian M. Adley exercises outstanding stock options, he would expect to use personal funds. Item 4. Purpose of Transaction. Vestex Corporation's transaction was for investment pending making a larger, controlling investment as described herein. With respect to Brian M. Adley's stock options, the company has awarded stock options to Mr. Adley in his capacity as a Director of the Company. Pursuant to its 1994 Directors Stock Option Plan. As heretofore reported by the Company, Vestex Corporation has subscribed to purchase from the Company 5,000,000 shares of Series A Convertible Preferred Stock for $2,500,000 in December 1995, following which purchase Vestex Corporation will hold a majority of the Company's outstanding shares. The voting of such shares, together with those beneficially owned by the Reporting Person, will thereafter be governed ;by a new voting agreement whose terms are summarized in Item 6. Among other things, for a period of approximately five years thereafter Vestex Corporation will be entitled to designate only a majority of the Company's directors and the two incumbent outside directors and Stephen G. Morison (or their designated successors) will be entitled to serve on the Board with certain powers of veto, described in Item 6 below, for the first two years of such period. Prior to the issuance of such preferred stock, the Company's Articles of Organization will be amended to provide that (i) the Company may at any time following the second anniversary of the issuance of such preferred stock, redeem all or any part of the preferred stock, by paying the holder, in cash, all accrued but unpaid dividends thereon and converting the preferred stock to be redeemed into common stock and (ii) special payments upon conversion thereof as set forth in Section C(3)(1) of the Company's Articles of Organization, as amended, may be payable, in the sole discretion of the Minority Directors (as that term is defined in Item 6), at any time following the second Exhibit 1- Page 2 anniversary of the issuance of such stock, in common stock of the Company, at a conversion rate equal to the common stock's fair market value (determined on the basis of average bid and asked prices over a specified period) divided by two. Except as described above, the Reporting Person has no plans at present relating to (a) the acquisition by any person of additional securities of the Company or the disposition of securities of the company, (b) an extraordinary corporation transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries, (c) any sale or transfer of a material amount of assets of the Company or any of its subsidiaries, (d) any change in the present board of directors or management of the Company, including any plans or proposals to change ;the number or term of directors or to fill any existing vacancies on the board, (e) any material change in the present capitalization or dividend policy of the Company, (f) any other material change in the Company's business or corporate structure, (g) any changes in the Company's charter or bylaws or other actions which may impede the acquisition of control of the Company by any person, (h) causing any class of securities of the Company to be delisted from a national securities exchange or to cease to be authorized to be quoted in an interdealer quotation system of a registered national securities association, (i) any class of equity securities of the Company becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Exchange Act, or (j) any action similar to any of those enumerated above. Item 5. Interests in Securities of the Issuer. (a) Vestex Corporation beneficially owns the following numbers of shares: Number Nature of Percentage of Shares Beneficial Ownership Class (1) - --------- -------------------- --------- 1,600,000 Owned outright 31.2% Brian M. Adley beneficially owns the following number of shares: Number Nature of Percentage of Shares Beneficial Ownership Class (1) - --------- -------------------- --------- 37,500 Stock options exercisable .05% within 60 days hereafter 1,600,000 Shares over which the 31.2% Reporting Person has voting power - ------------------- ------------ 1,637,000 31.7% - --------------- (1) the number of shares outstanding is deemed to include shares which the Reporting Person can acquire by exercise of stock options. (b) Vestex corporation has sole power to vote and to dispose of 1,600,000 shares set forth opposite its name. At August 7, 1995, Vestex Corporation has the power to vote a total of 1,600,000 of the Company's outstanding shares (31.2). (c) Vestex Corporation has effected the following transactions in the Company's Common Stock during the past 60 days: Exhibit 1- Page 3 (i) On July 25, 1995, Vestex Corporation acquired 1,600,000 shares. Brian M. Adley has effected the following transactions in the Company's Common Stock during the past 60 days: (i) On July 26, 1995, the Company awarded Brian M. Adley 375,000 shares of stock under its 1994 Directors Stock Award Plan. (ii) On July 25, 1995 Vestex corporation acquired 1,600,000 shares. Brian M. Adley has voting power over such shares. (d) The Reporting Person doe not know of any other person who has the right to receive or the power to direct the receipt of dividends from, or the proceeds of sale of, any shares referred to above. (e) Not applicable. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. In connection with the stock purchase and sale described above, the Company, Stephen G. Morison and the Company's employees have entered into (or, in the case of certain of such employees, will enter into as a condition to receiving shares of Common Stock) an Interim Voting Agreement dated as of July 25, 1995 (the "Interim Voting Agreement"). Pursuant to the Interim Voting Agreement, for so long as Mr. Morison is an officer or director of the Company and until the closing of the preferred stock purchase described in Item 4 above, the employees have agreed (a) to vote the subject Shares for the election of four directors, three of whom shall be continuing directors (currently, Bruce M. Dayton, Thomas W. Killilea and Mr. Morison) or their designees (hereinafter, "Minority Directors") and one of whom shall be designated by Vestex Corporation (initially, Brian M. Adley) and (b) in other matters, to vote the subject shares as directed by mr. Morison. Vestex Corporation has agreed that, in the event that it defaults in its obligation to purchase the Preferred Stock, Mr. Morison will assume voting control over Vestex corporation's common stock. Because a majority of the Company's outstanding shares are subject to the Interim Voting Agreement, all directors will be elected in accordance with the terms of such agreement for so long as it is in effect. Following its purchase of preferred stock, Vestex Corporation will hold sufficient capital stock of the Company to be able to cast 65.1% of all votes that may be cast by all stockholders. This voting power will ordinarily be sufficient to elect the entire Board of Directors and to approve all matters requiring stockholder approval. For a period of five years following the preferred stock purchase, however, another voting agreement (the "Long-Term Voting Agreement") will be in effect, providing for the election of a board of Directors, a majority of whom will be nominated by Vestex Corporation and one less than a majority of whom will be Minority Directors subject to election by the stockholders other than Vestex ("Minority Stockholders"). The Long-Term Voting Agreement will also require that, for a period of two years following the preferred stock closing, certain issuances of stock, mergers, charter and by-law amendments and other transactions, in which Vestex Corporation has an interest which conflicts with or is distinct from that of the Company, will be subject to approval by the Minority Directors or the Minority Stockholders ("Minority Approval"). Minority Directors. Stephen G. Morison, Bruce M. Dayton and Thomas W. Killilea will be the three initial Minority Directors. Mr. Morison will be subject to re-election in 1995 and Messrs. Dayton and Killilea in 1996. The Long-Term Voting Agreement provides that, at all elections of directors prior to the Annual Meeting of Stockholders held in the year 2000, the company will nominate each of the initial Minority Directors for re-election or, if any such Minority Director does not choose to stand for re-election, a nominee designated by a majority of the Minority Directors then in office. Vestex Corporation has agreed to vote all of its outstanding stock in favor of such nominees if they are unopposed. If any such nominee is opposed, Vestex Corporation will vote all of its outstanding stock in favor of the candidate who receives a plurality of the votes cast by the Minority Exhibit 1- Page 4 Stockholders. Vacancies which occur among the Minority Directors will be filled as designated by the remaining Minority Directors. Minority Approval. For a period of two years following the issuance of the Preferred Stock, the following types of transactions will be subject to approval by either a majority of the Minority Directors then in office or the holders of a majority of the shares of Common Stock held by Minority Stockholders: (i) any issuance or transfer by the Company of any stock or other securities of the Company to Vestex corporation (other than the issuance of Common Stock pursuant to the conversion of Series A Preferred Stock), (ii) any merger, consolidation or sale of assets involving the Company and Vestex corporation, (iii) any action taken by the company which results in a going private transaction subject to Rule 13e-3 under the Securities Exchange Act of 1934, or (iv) the payment to Vestex Corporation of any fee or other similar type of benefit (other than as contemplated in the Recapitalization Agreement, as amended by the Amendment). Vestex Corporation has agreed not to attempt to commence or effect any of such transactions without first obtaining the necessary approval. The foregoing does not apply to any transaction in which Vestex corporation does not have a conflict of interest, such as the issuance of securities to an unrelated purchaser (notwithstanding that Vestex corporation would be entitled to receive a fee in connection with such transaction). Item 7. Material to be Filed as Exhibits. The following documents are hereby filed as Exhibits to this statement:
Exhibit Description - ------- ----------- 1. Amendment No. 3 to Recapitalization and Stock Purchase Agreement dated as of July 14, 1995 among the Registrant, Bruncor, Inc. and Vestex Corporation. 2. Interim Voting Agreement dated as of July 25 among the Registrant, Vestex Corporation, Stephen G. Morison and the Company's other Employees. 3. Form of Voting Agreement among the Registrant, Vestex Corporation, Steven G. Morison, Bruce M. Dayton and Thomas W. Killilea.
Signature After reasonable inquiry and to the best of my knowledge and behalf, I certify that the information set forth in this statement is true, complete and correct. Date: August 7, 1995 Brian M. Adley -------------------- Brian M. Adley -------------------- Print Name Exhibit 1- Page 5 Exhibit 2 to Exhibit 1 SCHEDULE 13D AGREEMENT Pursuant to Rule 13d-1(f)(1)(ii) of the Securities and Exchange Commission, the undersigned hereby agree to file a statement on Schedule 13D on behalf of each of them with respect to their interest in the common stock, $.01 par value, of Chancellor Corporation, a Massachusetts corporation. EXECUTED as of this 7th day of August, 1995. Brian M. Adley -------------------- Brian M. Adley Brian M. Adley, Chairman ------------------------ Vestex Corporation Exhibit 1- Page 6 EX-99.2 3 LOAN AGREEMENT CUSIP No. 1588 28 10 3 Schedule 13D ---------------------- ------------ Amendment No. 1 Exhibit 2 Exhibit 2 - --------- LOAN AGREEMENT This Loan Agreement is made this day of , 1996, in the City of Vienna, Fairfax County, Virginia between FIRST CAPITAL, INC., a Virginia corporation, ("FCI") and VESTEX CAPITAL CORP., a Massachusetts corporation, and BRIAN ADLEY, an individual (collectively referred to as "Borrowers"). RECITALS A. The Borrowers have requested the Loan from FCI for the purpose of closing on the acquisition of five million (5,000,000) shares of the preferred stock, of Chancellor Corp., a Delaware corporation. B. FCI has agreed to make, and the Borrowers have agreed to accept, the Loan, subject to the terms, covenants, and conditions set forth in this Agreement. TERMS, COVENANTS, AND CONDITIONS The Borrowers and FCI agree as follows: 1. RECITALS AND DEFINITIONS 1.1 Recitals. The foregoing recitals are true and correct and are incorporated into this Agreement. All defined terms are set forth in the Recitals shall have the meanings as set forth in Section 1.2. 1.2 Definitions. As used in this Agreement the following terms shall have the following meanings: 1.2.1 "Advance" means a disbursement of the Loan pursuant to this Agreement. 1.2.2 "Agreement" means this Loan Agreement. 1.2.3 "Borrowers" means Vestex Capital Corp., a Massachusetts corporation and Brian Adley, an individual. 1.2.4 "Borrowers Counsel" means the law firm of Hinckley, Allen & Snyder. 1.2.5 "FCI" means First Capital, Inc., a Virginia corporation, its successors, and assigns. 1.2.6 "FCI Counsel" means the law firms of Lee C. Summers, PA. and Hazel & Thomas. 1.2.7 "Closing" means the time of the execution and delivery of this Agreement by the Borrowers and FCI. 1.2.8 "Closing Date" means the date of Closing which is March 28, 1996. 1.2.9 "Event of Default" means any event described in Section 7 of this Agreement. 1.2.10 "Governmental Authority" means any (domestic or foreign) federal, state, county, municipal, or other government, governmental department, district commission, board, bureau, court, agency, or any instrumentality of any of them having Jurisdiction and/or authority of or over the Borrowers. Exhibit 2- Page 1 1.2.11 "Governmental Requirement" means any law, statute, code, ordinance, order, rule, regulation, judgment, decree, writ, injunction, franchise, permit, certificate, license, authorization, or other direction or requirement of any Governmental Authority, whether now existing or in the future enacted, adopted, promulgated, entered, or issued, applicable to the Borrowers. 1.2.12 "Loan or Loan Amount" means a loan in the principal amount of $1,800,000.00. 1.2.13 "Loan Documents" means any document or instrument executed, submitted or to be submitted by the Borrowers or others in connection with the Loan. Such documents may include, but shall not be limited to, this Agreement, the Note, financing statements, the Borrower's affidavit(s), certificates or corporate resolutions, and other certificates of the Borrowers, opinions of counsel, security agreements, and financial statements. 1.2.14 "Note" means the Promissory Note of even date with this Agreement from the Borrowers to FCI in the amount of $1,800,000.00 and any other note given to FCI. 1.2.15 "Person" means and shall include, without limitation, any manner of association, Governmental Authority, business trust, company, corporation, estate, joint venture, natural person, partnership, trust or other entity. 1.2.16 "Personal Property" means all of the following property of the Borrowers whether now owned and existing, or in the future acquired or arising. 1.2.16.1 all personal property 1.2.16.2 all accounts, accounts receivables, other receivables, contract rights, chattel paper, instruments and documents; any other obligations or indebtedness owed to the Borrowers from whichever source arising, all rights of the Borrowers to receive any performance or any payments in money or kind; all guaranties of the foregoing and security therefor; all of the right, title, and interest of the Borrowers in and with respect to the goods, services, or other property that gave rise to or that secure any of the foregoing, and all rights of the Borrowers as an unpaid seller of goods and services, including, but not limited to, the rights to stoppage in transit, replevin, reclamation, and resale; 1.2.16.3 all goods, including, but not limited to, all machinery, equipment, furniture, furnishings, building supplies and materials, business machines, tools, aircraft, and motor vehicles of every kind and description, and all warranties and guaranties for any of the foregoing; 1.2.16.4 all inventory, merchandise, raw materials, parts, supplies, work-in-process and finished products intended for sale, of every kind and description, in the custody or possession, actual or constructive, of the Borrower, including such inventory as is temporarily out of the custody or possession of the Borrower, and any returns upon any accounts and other proceeds resulting from the sale or disposition of any of the foregoing including, without limitation, raw materials, work-in- process, and finished goods; 1.2.16.5 all general intangibles, including, without limitation, corporate or other business records and books, trademarks, trade names, goodwill, licenses, governmental approvals, franchises, tax refund claims, and agreements with utility companies, together with any deposits, prepaid fees and charges paid thereon; 1.2.16.6 all judgments, awards of damages and settlements; 1.2.16.7 all proceeds, products, replacements, additions, betterments, extensions, improvements. substitutions, renewals, and accessions of any of the foregoing. Exhibit 2- Page 2 2. THE LOAN AND COLLATERAL 2.1 Description of Loan. Subject to all the terms, representations, warranties, covenants, and conditions of this Agreement, FCI agrees to lend to the Borrowers, and the Borrowers agree to borrow from FCI, an amount not in excess of the Loan Amount to be used to close the acquisition of the preferred stock of Chancellor Corp., costs incident to closing, commitment fees and other related costs. 2.2 Evidence of and Security for the Loan. The Loan shall be evidenced by the Note, which shall be secured by five million (5,000,000) shares of the preferred stock of Chancellor Corp., a life insurance policy with a death benefit of $2,500,000.00 on the life of Brian Adley, a security interest in the Personal Property of the Borrowers and by such other security instruments and documents as may be reasonably required by FCI, including those set forth in this Agreement. 3.1 Representations and Warranties of the Borrowers. The Borrowers represent and warrant to FCI as follows: 3.1.1 Organization and Good Standing. Vestex Capital Corp. is a corporation duly organized, validly existing and in good standing under the laws of the State of Massachusetts. 3.1.2 Power. The Borrowers have the power and capacity to enter into, perform and deliver the Loan Documents executed by them. 3.1.3 Authorization. The execution and delivery of the Loan Documents and the performance by the Borrowers of their obligations under the Loan Documents have been duly authorized by all necessary corporate action. The Loan Documents will, when executed and delivered, constitute the legal, valid, binding, and enforceable obligations of the Borrowers to the extent called for in the Loan Documents. 3.1.4 Adverse Litigation. The Borrowers have disclosed to FCI and FCl's counsel all material adverse litigation (in process, threatened, or pending) against the Borrowers. 3.1.5 Other Financing. The Borrower has not received any other financing for the purchase of the preferred stock of Chancellor Corp. 3.1.6 Claims and Change of Condition. The Borrowers acknowledge that no events have transpired and no claims (including, without limitation, claims in litigation) have been made, and no litigation is in process, threatened or pending, against the Borrowers or Chancellor Corp. which (i) would constitute a material adverse change in the financial condition of the Borrowers or Chancellor Corp. from that financial information provided to FCI and relied upon by FCI in deciding to make the Loan, or (ii) may materially and adversely affect the Borrowers; 3.1.7 Stock Ownership. Simultaneously with the Closing of the Loan, Borrowers shall acquire ownership of Five Million (5,000,000) shares of the preferred capital stock of Chancellor Corp., a Delaware corporation, which shares shall have been duly authorized and issued, shall be non-assessable and shall not be subject to any lien, encumbrance, hypothecation or pledge. Immediately after the Closing, Borrowers shall control more than fifty percent (50%) of the voting stock of Chancellor Corp. 3.1.8 Reliance on Representations. The Borrowers acknowledge that FCI has relied upon the Borrowers' representations, has made no independent Investigation of the truth of such representations, and is not charged with any knowledge contrary to such representations that may be received by an examination of the public records or that may have been received by any ofFicer, director, agent, employee, or shareholder of FCl Exhibit 2- Page 3 3.1.9 Due Diligence. To the extent that any of the representations and warranties in this Agreement are stated as being to the best of the Borrowers' knowledge, those representations and warranties are being made after diligent and reasonable investigation by the Borrowers regarding the subject matter of such representations. 3.2. Representations and Warranties of FCI. FCI represents and warrants to Borrowers as follows: 3.2.1 Organization and Good Standing. FCI is a corporation duly organized, validly existing and in good standing under the laws of the State of Virginia. 3.2.2 Power. FCI has the power and capacity to enter into, perform and deliver the Loan Documents executed by it. 3.2.3 Authorization. The execution and delivery of the Loan Documents and the performance by FCI of its obligation under the Loan Documents have been duly authorized by all necessary corporate action. 4. CONDITIONS PRECEDENT TO CLOSING. As conditions precedent to the Closing, the Borrowers shall satisfy the following: 4.1 The Loan Documents, each inform and substance satisfactory to FCI and FCl's Counsel, shall have been executed and delivered to FCI and, as necessary to perfect FCl's first lien on the Collateral, recorded or filed in the appropriate Public Records. 4.2 FCI shall have received possession of five million (5,000,000) shares of the preferred stock of Chancellor Corp endorsed in blank or shall have received a letter from Hinckley, Allen 8 Snyder, Attorneys at Law, that such shares have been presented to the transfer agent for Chancellor Corp. and will be forwarded to FCI immediately upon issuance by that transfer agent and receipt by Borrowers. 4.3 FCI shall have received certified copies of the Articles of Incorporation and Bylaws of Vestex Capital Corp. and a current Certificate of Good Standing for Vestex Capital Corp. 4.4 FCI shall have received an assignment of a policy on the life of Brian Adley with a death benefit of Two Million Five Hundred Thousand Dollars ($2,500,000.00) with premium paid for one (1) year naming FCI as the beneficiary which beneficiary designation cannot be changed without the consent of FCI. FCI shall accept a binder on such insurance at closing in the amount of $2,800,000.00. The policy in the amount of $2,500,000.00 and the assignment thereof shall be delivered to FCI within sixty (60) days of the Closing Date. Failure to deliver the policy and assignment within this time period shall be a default hereunder and under the Note. 4.5 FCI shall have received such further documents and opinions as FCI may reasonably request. 4.6 The Borrowers shall have satisfied all other conditions precedent to the Advance set forth elsewhere in this Agreement and in any other Loan Document. Any waiver of these conditions precedent shall be in writing, specify the condition and be signed by Larry Schwark as Vice President of FCI. Any waiver shall waive only the specified condition and no other and shall not be deemed or construed to be a subsequent waiver of the same condition or to prohibit FCI from requiring subsequent compliance with such previously waived condition. Neither the Closing of the Loan or the disbursement of proceeds of the Loan for the payment of costs and expenses of the Closing shall be deemed a waiver of any of the foregoing conditions precedent. 5. AFFIRMATIVE COVENANTS. Exhibit 2- Page 4 5.1 Use of Proceeds. The Borrowers shall use the proceeds of the Loan only for the acquisition of the preferred stock of Chancellor Corp., costs of Closing, and other costs related thereto. 5.2 Notices. The Borrowers shall give prompt written notice to FCI of (i) any action or proceeding instituted by or against the Borrowers in any court or by any Governmental Authority, or of any such proceedings threatened against the Borrowers which might result in a judgment or judgments which might have a material adverse effect upon the business, operations, properties, assets, or condition (financial or otherwise) of the Borrowers, and (ii) any other action, event, or condition of any nature known to the Borrowers which constitutes an Event of DEFAULT or a default of the Borrowers under any contract, instrument, or agreement to which it is a party or by which it or any of its properties or assets may be bound or to which nay may be subject, which default might have a material adverse effect upon the business, operations, properties, assets, or condition (financial or otherwise) of the Borrowers. 5.3 Financial Instruments. The Borrowers shall furnish (or case to be furnished) to FCI, the following financial statements of the Borrowers prepared in accordance with generally accepted accounting principles (to the extent such statements are for a corporation and are prepared by an accountant) (all annual financial statements of the Borrower shall be certified by the Chief Financial Officer of the Borrowers): 5.3.1 Within 90 days after the end of each fiscal year of the corporate Borrower, statements of profit and loss and of surplus, for each fiscal year, and balance sheets as of the end of each such year of the Borrowers, in reasonable detail; and 5.3.2 within 30 days after the end of each quarter, financial statements, statements of profits and losses and of surplus, and balance sheets of the corporate Borrower certified by the Chief Financial Officer of the corporate Borrower, as applicable, in accordance with generally accepted accounting principles, consistently applied. 5.4 Chancellor Corp. Portfolio. During the term of the loan neither Borrowers nor any of their nominees to the Board of Directors of Chancellor Corp. shall vote to pledge, encumber or hypothecate the set amount of the chancellor corp. equipment lease portfolio without the prior written consent of FCI. 6. NEGATIVE COVENANTS 6.1 Change in Control. Without FCI's prior written consent, there shall be (i) no change in the ownership, interest or control of the corporate Borrower, and (ii) no sale, transfer, assignment or encumbrance of any shares of stock of the corporate Borrower. 6.2 Liens or Encumbrances. The Borrowers shall not cause, permit, or allow to remain any liens or encumbrance upon the Collateral without the prior written consent of FCI which consent shall not be unreasonably withheld. 6.3 Publicity. The Borrowers shall not publicize or advertise in any signs, advertising materials, sales brochures, or other sales offering materials the name of FCI as a source of financing without the prior express written permission of FCI. 6.4 Other Financing. The Borrowers shall not procure, obtain or guarantee any other financing without obtaining the prior written consent of FCI which consent shall not be reasonably withheld. 6.5 No Assignment. The Borrowers shall not assign the Loan or any rights under this Agreement 7. EVENTS OF DEFAULT AND REMEDIES. Exhibit 2- Page 5 7.1 Events of Default. The occurrence of any of the following events shall constitute an "Event of Default" under this Agreement: 7.1.1 A default in the payment of interest or principal under the Note; 7.1.2 The occurrence of an Event of Default under the Security Agreement, as that term is defined in the Security Agreement: 7.1.3 The making by the Borrowers of any representation or warranty, in this Agreement or in any other Loan Document, which shall be found to be inaccurate, untrue, or breached in any material respect; 7.1.4 A sale, transfer, pledge, conveyance, or encumbrance of any of the Collateral, or a sale, transfer, pledge, conveyance, or encumbrance of any interest in, or of any stock ownership of, the Borrowers, whether by operation of law or otherwise, without FCl's prior written consent unless the proceeds therefrom are used to pay the principal and accrued interest due on the Note; 7.1.5 The failure by any Borrowers to perform any other covenant, term, or condition of this Agreement; 7.1.6 The issuance at the request of any Person, of an order or decree in any court of competent jurisdiction, enjoining or prohibiting the Borrowers or FCI from carrying out the provisions of this Agreement, if any such order or decree is not vacated within thirty (30) days after issuance. 7.2 Cure. With regard to the defaults referred to in Section 7.1 other than default in the payment of money (a "Non-Monetary Default"), notwithstanding anything to the contrary contained in this Agreement, an "Event of Default" shall not be deemed to have occurred under this Agreement unless the Non-Monetary Default shall not have been cured ~thin ten (10) days after written notice of such default has been sent by FCI to the Borrowers or the Borrowers shall not have diligently commenced to prosecute to completion the cure of the Non-Monetary Default within such ten (10) day period. Notwithstanding the foregoing, an Event of Default shall be deemed to have occurred if total cure of the Non-Monetary Default is not completed within ninety (90) days after written notice of default is sent by FCI to the Borrower. 7.3 Remedies. 7.3.1 Upon the occurrence of an Event of Default, FCI may: 7.3.1.1 declare immediately due and payable, with interest, all monies advanced under this Agreement, and accordingly accelerate payment of the Note: and/or 7.3.1.2 commence a foreclosure of the security interest or take any other action permitted by law, notwithstanding anything contrary in the Security Agreement. 7.3.2 The remedies provided in this Agreement shall be in addition to and not in substitution for the rights and remedies which would otherwise be vested in FCI in law or equity under the Note or the Security Agreement and any other Loan Documents, all of which rights and remedies are specifically reserved by FCI. The failure by FCI to exercise any of the remedies provided in this Agreement shall not preclude resort to any other remedy or remedies, nor shall the exercise of any of the remedies provided in this Agreement prevent the subsequent or concurrent resort to any other remedy or remedies which by law or equity shall be vested in FCI for the recovery of damages or otherwise, in the event of an Event of Default shall occur under this Agreement. No delay or omission by FCI in exercising any right or remedy accruing upon the happening of an Event of Default shall impair any such right or remedy, nor shall any such delay or omission be construed as a waiver of any such Event of Default. Every right and remedy hereby conferred upon FCI may be exercised from time to time and as Exhibit 2- Page 6 often as shall be deemed expedient or advisable by FCI. No waiver of any Event of Default shall extend to or affect any other Event of Default. 8. ADDITIONAL DOCUMENTS. The Borrower shall execute and deliver to FCI such additional documents as FCI shall require in its reasonable discretion. 9. MISCELLANEOUS. 9.1 FCI Not Partner of the Borrowers. Notwithstanding anything to the contrary contained in or implied in this Agreement, FCI, by this Agreement or by any action pursuant to this Agreement, shall not be deemed a partner or, or joint venturer with, the Borrowers. 9.2 Notices. All notices required or allowed to by given under this Agreement shall be delivered by hand or sent by a recognized overnight delivery service or by Certified Mail, Return Receipt Requested, addressed as set forth below, provided that additional or other addresses within the United States of America for the giving of notices may be designated in the future by the giving of written notice thereof to the other party. In the case of notice by certified mail or overnight courier, notice shall be deemed effectively made when the receipt is signed or when the attempted initial delivery is refused or cannot be made because of a change of address of which the sending par~ has not been notified. All notices shall be addressed as follows: If to FCl: First Capital, Inc. 407 Church Street, N.E., Suite L Vienna, VA 22180 With a copy to: Lee C. Summers, Esq. Lee C. Summers, P.A 2300 Glades Road, Suite 460W Boca Raton, FL 33431 If to Borrowers: Brian Adley 12 Waltham Street Lexington, MA 02173 With a copy to: Richard Arrighi, Esq. Hinckley, Allen & Snyder One Financial Center Boston, MA 02111 9.3 Attorneys' Fees and Expenses.In the event of a dispute arising out of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees and all expenses and costs incurred by the prevailing par~. In such event and wherever provision is otherwise made in this Agreement for payment of attorneys fees or counsel's fees or expenses incurred by a party, such provision shall include, but not be limited to, reasonable attorneys's or counsel's (including paralegals' and similar persons') fees and all expenses and costs incurred in any and all judicial, bankruptcy, reorganization, administrative, or other proceedings, including appellate proceedings, whether such fees or expenses arise before proceedings are commenced or after entry of a final judgment. Exhibit 2- Page 7 9.4 Rules of Construction. 9.4.1 A capitalized term shall have the meaning assigned to it in Section 1.2, or as specifically defined in any other Section or Subsection of this Agreement; 9.4.2 An accounting term not otherwise defined shall have the meaning assigned to it in accordance with generally accepted accounting principles; 9.4.3 Use of any gender shall include all other genders; 9.4.4 "or" is not exclusive; 9.4.5 "and" may be conjunctive or distinctive in the sole and absolute discretion of FCI; 9.4.6 Captions of Sections and Subsections are for convenient reference only, and shall not affect the construction or interpretation of any of the terms or provisions of this Agreement; and 9.4.7 Reasonableness is not implied in any requirement of consent, approval, or satisfaction and unless specifically stated otherwise, all consents, approvals or satisfactions under this Agreement shall be in FCI's sole and absolute discretion. 9.5 Modification, Waiver, Consent. Any modification or waiver of any provision of this Agreement or any consent to any departure by any Borrowers therefrom shall not be effective unless the same is in writing and signed by an authorized officer of PCI, and then such modification, waiver, or consent shall be effective only in the specific purpose given any notice to or demand on any Borrower not specifically required of FCI under this Agreement shall not entitle the Borrowers to any other or further notice or demand in the same, or other circumstances unless specifically required under this Agreement. 9.6 Entire Agreement. The Loan Documents contain the entire agreement between the parties to this Agreement and there are no promises, agreements, conditions, undertakings, warranties and representations, whether written or oral, express or implied, between the parties to this Agreement other than set forth in the Loan Documents. 9.7 Assignment. Any of the rights and obligations of FCI under the Loan Documents may be assigned by FCI to another lender, including, but not limited to, a related affiliate corporation of FCI, provided that FCI shall remain the lead lender and shall not assign all of its interest in the Loan. Any such assignment by FCI shall not be done prior to June 1, 1996. In such event, the Borrowers agree to attorn to such assignee and to execute such consents and documentation do not add to the obligations of the Borrowers. FCI shall also have the right to participate the Loan with other lenders, including but not limited to, related affiliate corporations of FCI. The Borrowers shall not assign this Agreement, the proceeds of the Loan advanced under this Agreement, or its rights under this Agreement. 9.8 Time. Time is of the essence as to all matters provided for in this Agreement. If any inconsistency may exist between the applicable time periods or dates set forth in this Agreement, and those contained in any other Loan Document, the time periods and dates set forth in this Agreement shall control. 9.9 Strict Performance. Strict performance of all conditions contained in this Agreement is required as to all matters provided for in this Agreement. 9.10 Accrual of Interest Under the Note. Interest under the Note shall commence to accrue as of the date of disbursal or wire transfer by FCI notwithstanding whether the Borrowers shall receive the benefit of such monies as of such date and even if such monies are held in escrow pursuant to the terms of any escrow agreement or Exhibit 2- Page 8 arrangement. When monies are disbursed by wire transfer, then such monies shall be considered advanced at the time of the transmission of the wire rather than the time of receipt thereof by the receiving bank. 9.11 Virginia Law. The terms and conditions of this Agreement shall be governed by the laws of the State of Virginia and the laws of the United States of America, without application of conflicts of law principles. 9.12 Invalidity. If any one or more of the provisions contained in this Agreement is declared or found by a court of competent jurisdiction to be invalid, illegal or unenforceable, such provision or portion thereof shall be deemed stricken and severed and the remaining provisions of this Agreement shall continue in full force and effect; provided, however, that should any obligation of the Borrowers be determined to be unenforceable, then thereafter FCI shall have no further obligations hereunder. 9.13 Binding Effect. This Agreement, subject to the provisions of Section 9.7 of this Agreement, shall be binding upon and inure to the benefit of the respective permitted successors and assigns of the Borrowers and FCI 9.14 Monies. All references to monies in this Agreement shall be deemed to mean lawful monies of the United States of America. 9.15 Counterparts. This Agreement may be executed in counterparts and each shall be considered an original, but together all counterparts shall comprise only one agreement. This Agreement was delivered in Vienna, Fairfax County, Virginia, on the day and year set forth in the first paragraph of this Agreement. VESTEX CAPITAL CORP. a Massachusetts corporation By: Brian M. Adley, Chairman -------------------------------- FIRST CAPITAL, INC. a Virginia Corporation By: /S/ -------------------------------- Brian M. Adley ----------------------------------- Brian Adley Exhibit 2- Page 9 Addendum to 4.2 Until closing and receipt of the preferred shares of Chancellor Corporation ("Chancellor") has been issued by chancellor's Trust Agent or by Chancellor, or until closing has occurred whereby counsel of Vestex Capital Corporation ("VCC"), Hinckley, Allen & Snyder, cannot warrant or represent the terms of this Section, the following shall be deemed sufficient regarding compliance with this Agreement. Under the pains and penalties of perjury, I, Brian M. Adley, individually and as Chairman of VCC do hereby represent and warrant that these shares will not be pledged or assigned in any manner whatsoever, and immediately upon receipt of the preferred shares or closing of Chancellor (currently scheduled for March 28 or 29, 1996) whichever occurs first shall cause legal letter to be presented and comply with the terms and conditions of this Agreement. By: Brian M. Adley ------------------- Brian M. Adley, Individually By: Brian M. Adley ------------------- Brian M. Adley, Chairman of Vestex Capital Corporation COMMONWEALTH OF MASSACHUSETTS MIDDLESEX, ss. _______________, 1996 The personally appeared the above named, Brian M. Adley, and acknowledged the foregoing instrument to be his free act and deed before me. /s/________________________ Notary Public My Commission Expires: ______________ Exhibit 2- Page 10 EX-99.3 4 CERTIFICATE OF DESIGNATION CUSIP No. 1588 28 10 3 Schedule 13D ---------------------- ------------ Amendment No. 1 Exhibit 3 EXHIBIT 3 CHANCELLOR CORPORATION Clerk's Certificate The undersigned hereby certifies that he is the duly elected Clerk of Chancellor Corporation (hereinafter called the "Corporation"), organized and existing under and by virtue of the Massachusetts Business Corporation Law, and does hereby further certify as follows: At a meeting of the Board of Directors of the Corporation held on March 21, 1996, the following resolution was duly adopted, pursuant to Chapter 156B, Section 71 of the Massachusetts General Laws: SERIESAA CONVERTIBLE PREFERRED STOCK. Five million (5,000,000) shares of the authorized and unissued Preferred Stock of the Corporation are hereby designated "SeriesAA Convertible Preferred Stock" (the "SeriesAA Preferred Stock") with the following rights, preferences, powers, privileges and restrictions, qualifications and limitations. 1. Dividends. (a) The holders of shares of SeriesAA Preferred Stock shall be entitled to receive cash dividends only to the same extent and in the same amounts as dividends are declared and paid with respect to common stock as if the Preferred Stock had been converted to Common Stock in accordance with Section 4 hereof on the date such dividends are declared. 2. Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations and Asset Sales. (a) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of SeriesAA Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, after and subject to the payment in full of all amounts required to be distributed to the holders of any other class or series of stock of the Corporation ranking on liquidation prior and in preference to the SeriesAA Preferred Stock (collectively referred to as "Senior Preferred Stock"), but before any payment shall be made to the holders of Common Stock or any other class or series of stock ranking on liquidation junior to the SeriesAA Preferred Stock (such Common Stock and other stock being collectively referred to as "Junior Stock") by reason of their ownership thereof, an equal to the greater of (i)$.50 per share (subject to amount appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares), plus any dividends declared or accrued but unpaid thereon, or (ii)such amount per share as would have been payable had each such share been converted into Common Stock pursuant to Section4 immediately prior to such liquidation, dissolution or winding up. If upon any such liquidation, dissolution or winding up of the Corporation the remaining assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of SeriesAA Preferred Stock the full amount to which they shall be entitled, the holders of shares of SeriesAA Preferred Stock and any class or series of stock ranking on liquidation on a parity with the SeriesAA Preferred Stock shall share ratably in any distribution of the remaining assets and funds of the Corporation in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. (b) After the payment of all preferential amounts required to be paid to the holders of Senior Preferred Stock, SeriesAA Preferred Stock and any other class or series of stock ofthe Corporation ranking on liquidation on a parity with the SeriesAA Preferred Stock, upon the dissolution, liquidation or winding up of the Exhibit 3- Page 1 Corporation, the holders of shares of Junior Stock then outstanding shall be entitled to receive the remaining assets and funds of the Corporation available for distribution to its stockholders. (c) In the event of any merger or consolidation of the Corporation into or with another corporation (except one in which the holders of capital stock of the Corporation immediately prior to such merger or consolidation continue to hold at least 80% by voting power of the capital stock of the surviving corporation), or the sale of all or substantially all the assets of the Corporation, if the holders of at least a majority of the then outstanding shares of SeriesAA Preferred Stock so elect by giving written notice thereof to the Corporation at least three days before the effective date of such event, then such merger, consolidation or asset sale shall be deemed to be a liquidation of the Corporation, and all consideration payable to the stockholders of the Corporation (in the case of a merger or consolidation), or all consideration payable to the Corporation, together with all other available assets of the Corporation (in the case of an asset sale), shall be distributed to the holders of capital stock of the Corporation in accordance with Subsections2(a) and 2(b) above. The Corporation shall promptly provide to the holders of shares of SeriesAA Preferred Stock such information concerning the terms of such merger, consolidation or asset sale and the value of the assets of the Corporation as may reasonably be requested by the holders of SeriesAA Preferred Stock in order to assist them in determining whether to make such an election. If the holders of the SeriesAA Preferred Stock make such an election, the Corporation shall use its best efforts to amend the agreement or plan of merger or consolidation to adjust the rate at which the shares of capital stock of the Corporation are converted into or exchanged for cash, new securities or other property to give effect to such election. The amount deemed distributed to the holders of SeriesAA Preferred Stock upon any such merger or consolidation shall be the cash or the value of the property, rights or securities distributed to such holders by the acquiring person, firm or other entity. The value of such property, rights or other securities shall be determined in good faith by the Board of Directors of the Corporation. If no notice of the election permitted by this Subsection(c) is given, the provisions of Subsection4(h) shall apply. (d) The Corporation may not liquidate, dissolve or wind up if the assets of the Corporation then available for distribu tion to its stockholders shall be insufficient to pay the holders of shares of SeriesAA Preferred Stock the full amount to which they shall be entitled upon such liquidation, dissolution or winding up under this Section2, without the prior written approval of the holders of a majority of the then outstanding shares of SeriesAA Preferred Stock. 3. Voting. (a) Each holder of outstanding shares of SeriesAA Preferred Stock shall be entitled to the number of votes equal to the number of whole shares of Common Stock into which the shares of SeriesAA Preferred Stock held by such holder are then convertible (as adjusted from time to time pursuant to Section4 hereof), at each meeting of stockholders of the Corporation (and written actions of stockholders in lieu of meetings) with respect to any and all matters presented to the stockholders of the Corporation for their action or consideration. Except as provided by law, by the provisions of Subsection3(b), 3(c), 3(d) or 3(e) below or by the provisions establishing any other series of SeriesPreferred Stock, holders of SeriesAA Preferred Stock and of any other outstanding series of SeriesPreferred Stock shall vote together with the holders of Common Stock as a single class. (b) Prior to April 11, 1998, any of the following transactions: Exhibit 3- Page 2 (i) any issuance or transfer by the Corporation of capital stock or other securities of the Corporation to an interested stockholder, considering Vestex Corporation or any of their respective affiliates or associates (as defined in Mass. Gen. Laws c.110F, (3) as being interested stockholders for the purposes hereof, other than the issuance of common stock pursuant to the conversion of preferred stock; or (ii) any merger, consolidation or sale of assets described in Mass. Gen. Laws c.110F, (3(c)(2), involving the Corporation and any interested stockholder, considering Vestex, the Purchaser, and each of their respective affiliates and associates as being an interested stockholder for the purposes hereof; or (iii) any action taken by the Corporation which results in a going private transaction subject to Rule 13e-3 under the Securities Exchange Act of 1934; or (iv) the payment to any interested stockholder of any fee or other benefit described in Mass. Gen. laws c.110F, (c)(5), considering the above-named parties and each of their respective affiliates and associates as being an interested stockholder for purposes hereof; shall require the approval of the holders of a majority of the outstanding shares of the Corporation's Common Stock not held by the above-named or their respective affiliates, unless approved in writing by a majority of the Continuing Directors then in office. For this purpose, the term "Continuing Directors" shall mean those directors of the Corporation who either were directors of the Corporation prior to April 11, 1996 or were subsequently nominated for election as successor directors by a majority of such persons or their designated successors. 4. Optional Conversion. The holders of the SeriesAA Preferred Stock shall have conversion rights as follows (the "Conversion Rights"): (a) Right to Convert. Each share of SeriesAA Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing $.50 by the Conversion Price (as defined below) in effect at the time of conversion. The "Conversion Price" shall initially be $.50. Such initial Conversion Price, and the rate at which shares of SeriesAA Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below. In the event of a liquidation of the Corporation, the Conversion Rights shall terminate at the close of business on the first full day preceding the date fixed for the payment of any amounts distributable on liquidation to the holders of SeriesAA Preferred Stock. (b) Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the SeriesAA Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the then effective Conversion Price. (c) Mechanics of Conversion. (i) In order for a holder of SeriesAA Preferred Stock to convert shares of SeriesAA Preferred Stock into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of SeriesAA Preferred Stock, at the office of the transfer agent for the SeriesAA Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of the SeriesAA Preferred Stock represented by such certificate or certificates. Such notice shall state such holder's name or the names of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his or its attorney duly authorized in writing. The date of receipt of such certificates and notice by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) shall be the conversion date ("Conversion Date"). The Corporation shall, as soon as practicable after the Conversion Date, issue and deliver at such office to such holder of SeriesAA Preferred Stock, or to his or its nominees, a certificate or certificates for the number of Exhibit 3- Page 3 shares of Common Stock to which such holder shall be entitled, together with cash in lieu of any fraction of a share. (ii) The Corporation shall at all times when the SeriesAA Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued stock, for the purpose of effecting the conversion of the SeriesAA Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding SeriesAA Preferred Stock. Before taking any action which would cause an adjustment reducing the Conversion Price below the then par value of the shares of Common Stock issuable upon conversion of the SeriesAA Preferred Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Conversion Price. (iii) Upon any such conversion, no adjustment to the Conversion Price shall be made for any declared or accrued but unpaid dividends on the SeriesAA Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion. (iv) All shares of SeriesAA Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares, including the rights, if any, to receive notices and to vote, shall immediately cease and terminate on the Conversion Date, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor and payment of any dividends declared or accrued but unpaid thereon. Any shares of SeriesAA Preferred Stock so converted shall be retired and cancelled and shall not be reissued, and the Corporation (without the need for stockholder action) may from time to time take such appropriate action as may be necessary to reduce the authorized SeriesAA Preferred Stock accordingly. (v) The Corporation shall pay any and all issue and other taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of SeriesAA Preferred Stock pursuant to this Section4. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of SeriesAA Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid. (d)Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the date on which a share of Series AA Preferred Stock was first issued (the "Original Issue Date") effect a subdivision of the outstanding Common Stock, the Conversion Price then in effect immediately before that subdivision shall be proportionately decreased. If the Corporation shall at any time or from time to time after the Original Issue Date effect a subdivision of the SeriesAA Preferred Stock, the Conversion Price then in effect immediately before that subdivision shall be proportionately increased. If the Corporation shall at any time or from time to time after the Original Issue Date combine the outstanding shares of Common Stock, the Conversion Price then in effect immediately before the combination shall be proportionately increased. If the Corporation shall at any time or from time to time after the Original Issue Date combine the outstanding shares of SeriesAA Preferred Stock, the Conversion Price then in effect immediately before the combination shall be proportionately decreased. Any adjustment under this paragraph shall become effective at the close of business on the date the subdivision or combination becomes effective. (e)Adjustment for Certain Dividends and Distributions. In the event the Corporation at any time, or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each such event the Conversion Price for the SeriesAA Preferred Stock then in effect shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the Exhibit 3- Page 4 close of business on such record date, by multiplying the Conversion Price for the SeriesAA Preferred Stock then in effect by a fraction: (1) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and (2) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Price for the SeriesAA Preferred Stock shall be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Price for the SeriesAA Preferred Stock shall be adjusted pursuant to this paragraph as of the time of actual payment of such dividends or distributions; and provided further, however, that no such adjustment shall be made if the holders of SeriesAA Preferred Stock simultaneously receive a dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock as they would have received if all outstanding shares of SeriesAA Preferred Stock had been converted into Common Stock on the date of such event. (f)Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time after the Original Issue Date for the SeriesAA Preferred Stock shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation other than shares of Common Stock, then and in each such event provision shall be made so that the holders of the SeriesAA Preferred Stock shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon, the amount of securities of the Corporation that they would have received had the SeriesAA Preferred Stock been converted into Common Stock on the date of such event and had they thereafter, during the period from the date of such event to and including the conversion date, retained such securities receivable by them as aforesaid during such period, giving application to all adjustments called for during such period under this paragraph with respect to the rights of the holders of the SeriesAA Preferred Stock; and provided further, however, that no such adjustment shall be made if the holders of SeriesAA Preferred Stock simultaneously receive a dividend or other distribution of such securities in an amount equal to the amount of such securities as they would have received if all outstanding shares of SeriesAA Preferred Stock had been converted into Common Stock on the date of such event. (g)Adjustment for Reclassification, Exchange, or Substitution. If the Common Stock issuable upon the conversion of the SeriesAA Preferred Stock shall be changed into the same or a different number of shares of any class or classes of stock, whether by capital reorganization, reclassification, or otherwise (other than a subdivision or combination of shares or stock dividend provided for above, or a reorganization, merger, consolidation, or sale of assets provided for below), then and in each such event the holder of each such share of SeriesAA Preferred Stock shall have the right thereafter to convert such share into the kind and amount of shares of stock and other securities and property receivable upon such reorganization, reclassification, or other change, by holders of the number of shares of Common Stock into which such shares of SeriesAA Preferred Stock might have been converted immediately prior to such reorganization, reclassification, or change, all subject to further adjustment as provided herein. (h)Adjustment for Merger or Reorganization, etc. In case of any consolidation or merger of the Corporation with or into another corporation or the sale of all or substantially all of the assets of the Corporation to another corporation (other than a consolidation, merger or sale which is covered by Subsection2(c)), each share of SeriesAA Preferred Stock shall thereafter be convertible (or shall be converted into a security which shall be convertible) into the kind and amount of shares of stock or other securities or property to which a holder of the number of shares of Common Stock of the Corporation deliverable upon conversion of such SeriesAA Preferred Stock would have been entitled upon such consolidation, merger or sale; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors) shall be made in the application of the provisions in this Exhibit 3- Page 5 Section4 set forth with respect to the rights and interest thereafter of the holders of the SeriesAA Preferred Stock, to the end that the provisions set forth in this Section4 (including provisions with respect to changes in and other adjustments of the Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other property thereafter deliverable upon the conversion of the SeriesAA Preferred Stock. (i)No Impairment. The Corporation will not, by amendment of its Articles of Organization or through any reorganization, transfer of assets, consolidation, merger, 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 to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section4 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the SeriesAA Preferred Stock against impairment. (j)Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section4, the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of SeriesAA Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of SeriesAA Preferred Stock, furnish or cause to be furnished to such holder a similar certificate setting forth (i)such adjustments and readjustments, (ii)the Conversion Price then in effect, and (iii)the number of shares of Common Stock and the amount, if any, of other property which then would be received upon the conversion of SeriesAA Preferred Stock. (k)Notice of Record Date. In the event: (i) that the Corporation declares a dividend (or any other distribution) on its Common Stock payable in Common Stock or other securities of the Corporation; (ii) that the Corporation subdivides or combines its outstanding shares of Common Stock; (iii) of any reclassification of the Common Stock of the Corporation (other than a subdivision or combination of its outstanding shares of Common Stock or a stock dividend or stock distribution thereon), or of any consolidation or merger of the Corporation into or with another corporation, or of the sale of all or substantially all of the assets of the Corporation; or (iv) of the involuntary or voluntary dissolution, liquidation or winding up of the Corporation then the Corporation shall cause to be filed at its principal office or at the office of the transfer agent of the SeriesAA Preferred Stock, and shall cause to be mailed to the holders of the SeriesAA Preferred Stock at their last addresses as shown on the records of the Corporation or such transfer agent, at least ten days prior to the date specified in (A) below or twenty days before the date specified in (B) below, a notice stating (A) the record date of such dividend, distribution, subdivision or combination, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, subdivision or combination are to be determined, or (B) the date on which such reclassification, consolidation, merger, sale, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, dissolution or winding up. (l) Special Payment Upon Conversion. Upon the conversion of any shares of Series AA Preferred Stock within five years after their Original Issue Date, an amount of cash (or shares of Common Stock of the Corporation, in the circumstances contemplated herein) shall be paid at the following rates to the holder of Exhibit 3- Page 6 such shares if (but only if) the Corporation has, prior to such conversion, issued additional equity securities of the Corporation (other than upon the exercise of warrants outstanding on the Original Issue Date or options then or thereafter granted to employees of the Corporation) or debt securities convertible into equity securities of the Corporation and, in connection with the issuance of such additional equity securities or convertible debt, the Corporation has received aggregate cash consideration in excess of $7,500,000 (the final such issuance which causes such aggregate cash consideration to exceed $7,500,000 being hereinafter referred to as the "Additional Equity Investment"): If the Additional Equity Amount per share Investment occurs and the (as a rate per conversion takes place within annum from Original the following period after the Issue Date through date of original issuance: date of conversion) within one year $.035 within two years but not within one year .03 within three years but not within two years .025 within four years but not within three years .02 within five years but not within four years .015 If the Corporation shall have received an Additional Equity Investment, then, at any time after April 11, 1998, the foregoing amounts may, at the Corporation's election, be paid to the holder of Series AA Preferred Stock by delivery of a number of shares of Common Stock equal to the quotient obtained by dividing (x) the aggregate amount due by (y) 50% of the value per share of the Common Stock. For purposes of this paragraph, the value of each share of Common Stock shall be deemed to be the average of the last reported sales price for Common Stock admitted to trading on a national securities exchange or quoted on the Nasdaq National Market, or the average of the closing bid and market prices for such stock quoted on the Nasdaq Small Cap Market, the Electronic Bulletin Board or other quotations publication medium during the forty (40) trading days immediately prior to the date of such payment so paid may be either authorized or unissued shares or treasury shares. 5. Mandatory Retirement. (a) At any time after April 11, 1999, the Corporation shall be authorized, at its sole discretion to cause all outstanding shares of Series AA Preferred Stock to automatically be retired by (i) paying each holder of such shares any amounts owing under Section 4(l) above and (ii) converting such shares of Series AA Preferred Stock into shares of Common Stock, at the then effective conversion rate. The number of authorized shares of Preferred Stock shall be automatically reduced by the number of shares of Preferred Stock that had been designated as Series AA Preferred Stock, and all provisions included under the caption "Series AA Convertible Preferred Stock", and all references to the Series AA Preferred Stock, shall be deleted and shall be of no further force or effect. (b) All holders of record of shares of SeriesAA Preferred Stock shall be given written notice of effective date of such retirement (the "Mandatory Date") and the place designated for mandatory retirement of all such shares of SeriesAA Preferred Stock pursuant to this Section5. Such notice need not be given in advance of the occurrence of the Mandatory Conversion Date. Such notice shall be sent by first class or registered mail, postage prepaid, to each record holder of SeriesAA Preferred Stock at such holder's address last shown on the Exhibit 3- Page 7 records of the transfer agent for the SeriesAA Preferred Stock (or the records of the Corporation, if it serves as its own transfer agent). Upon receipt of such notice, each holder of shares of SeriesAA Preferred Stock shall surrender his or its certificate or certificates for all such shares to the Corporation at the place designated in such notice, and shall thereafter receive certificates for the number of shares of Common Stock to which such holder is entitled pursuant to this Section5. On the Mandatory Conversion Date, all rights with respect to the SeriesAA Preferred Stock so converted, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock) will terminate, except only the rights of the holders thereof, upon surrender of their certificate or certificates therefor, to receive certificates for the number of shares of Common Stock into which such SeriesAA Preferred Stock has been converted. If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his or its attorney duly authorized in writing. As soon as practicable after the Mandatory Conversion Date and the surrender of the certificate or certificates for SeriesAA Preferred Stock, the Corporation shall cause to be issued and delivered to such holder, or on his or its written order, a certificate or certificates for the number of full shares of Common Stock issuable on such retirement and conversion in accordance with the provisions hereof and cash as provided in Subsection4(b) in respect of any fraction of a share of Common Stock otherwise issuable upon such conversion. (c) All certificates evidencing shares of SeriesAA Preferred Stock which are required to be surrendered for conversion in accordance with the provisions hereof shall, from and after the Mandatory Conversion Date, be deemed to have been retired and cancelled and the shares of SeriesAA Preferred Stock represented thereby converted into Common Stock for all purposes, notwithstanding the failure of the holder or holders thereof to surrender such certificates on or prior to such date. The Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized SeriesAA Preferred Stock accordingly. IN WITNESS WHEREOF, the undersigned has signed this Certificate this 12th day of April, 1996. /s/ David W. Parr ------------------------- David W. Parr, Clerk Exhibit 3- Page 8 EX-99.4 5 LONG-TERM VOTING AGREEMENT CUSIP No. 1588 28 10 3 Schedule 13D ---------------------- ------------ Amendment No. 1 Exhibit 4 EXHIBIT 4 - --------- VOTING AGREEMENT VOTING AGREEMENT, dated as of April 11, 1996 (the "Agreement"), is made by and among Chancellor Corporation, a Massachusetts corporation (the "Company"), Vestex Corporation and Vestex Capital Corporation, each a Massachusetts corporation (collectively, "Vestex"), each of those persons who are directors of the Company and who have entered into this Agreement (individually referred to as a "Director" and collectively referred to as the "Directors") and each of those persons who are employees of the Company and who have entered into this Agreement (individually referred to as an "Employee" and collectively referred to as the "Employees"). W I T N E S S E T H: WHEREAS, the Company, Bruncor Inc., a New Brunswick corporation and an affiliate of the Company ("Bruncor"), and Vestex have entered into a Recapitalization and Stock Purchase Agreement dated as of September20, 1994, as successively amended by four amendments (the "Recapitalization Agreement"), providing for, among other things, the purchase by Vestex of 1,600,000 shares of the Company's Common Stock (the "Common Shares") from Bruncor and the subsequent purchase by Vestex of 5,000,000 shares of the Company's SeriesAA Convertible Preferred Stock (the "Preferred Shares") from the Company (such transactions referred to as the "Purchases"); WHEREAS, it is the intention of the parties that, following the consummation of both the Purchases, the Board of Directors of the Company will consist of up to seven members, up to two of whom will be nominees of Vestex; and WHEREAS, it is the intention of the parties that upon consummation of the Purchases the business of the Company and its subsidiaries will continue to be conducted in the ordinary and usual course of its business with such changes as are determined by the Board of Directors of the Company; and WHEREAS, it is the intention of Vestex to preserve the goodwill of the Company and to allow the Company to maintain and expand the valuable business relationships established by it; and WHEREAS, the Company intends, subject to the continuing review of the Company's Board of Directors, to continue the Company's efforts to expand its business, and to permit the Company to operate its business under its current management and from its existing location and under its current corporate name; and WHEREAS, the parties understand the importance and desirability of maintaining an active public trading market for the Company's common stock; and WHEREAS, Vestex has no present intention of taking any action which would cause (a)the Company's common stock to cease to be quoted in the over-the-counter market by member firms of the National Association of Securities Dealers Inc. or (b)the Company to no longer be subject to Sections 12 or 13 of the Securities Exchange Act of 1934, as amended; and WHEREAS, the parties intend that certain types of corporate transactions proposed to occur within two years following the consummation of the Purchases will require the approval of either (i)the holders of a majority of the outstanding shares of the Company's common stock not held by Vestex or its affiliates or (ii)a majority of those directors then in office who are not affiliates of Vestex and who either were directors of the Company prior to the Purchases or subsequently were elected as successor directors (A)with a plurality of the votes cast by the holders of the outstanding shares of the Company's common stock not held by Vestex or its Exhibit 4 - Page 1 affiliates or (B)by designation of a majority of the Continuing Directors then in office ("Continuing Directors"); and WHEREAS, the parties hereto wish to agree on certain other matters relating to the voting of certain shares of the Company's common stock and preferred stock held by Vestex and to the operation of the business of the Company following the consummation of the Purchases; NOW, THEREFORE in consideration of the mutual covenants and agreements set forth herein, the parties hereto hereby agree as follows: ARTICLE I 1.1. Voting of Shares. (a) In any and all elections of directors of the Company (whether at a meeting or by written consent in lieu of a meeting) prior to the Company's 2001 Annual Meeting of Stockholders, Vestex, the Directors and the Employees shall vote or cause to be voted ("Vote") any and all Shares (as defined in Section 1.2 below) owned by it or its affiliates, or over which it or its affiliates have voting control, and otherwise use their respective best efforts, so as to fix the number of directors of the Company at seven and to elect directors as provided herein. Upon consummation of Vestex's purchase of the Preferred Shares, the Board shall consist of up to two members designated by Vestex (one of whom shall be subject to ratification by a majority of the directors theretofore in office ("Ratification")) and five members who shall be Continuing Directors (one of whom shall be subject to Ratification). The directors initially designated by Vestex are Brian M. Adley and another person yet to be designated (the "New Vestex Nominee"), and the directors initially designated by the Continuing Directors are Bruce M. Dayton, Thomas W. Killilea, Richard D. Rizzo, StephenG. Morison and another person yet to be designated (the "New Non-Vestex Nominee"). The designation of the New Vestex Nominee and the New Non-Vestex Nominee and the designation of their respective successors shall require Ratification. Messrs. Dayton and Killilea and the New Vestex Nominee shall be subject to re-election at the Company's 1996 Annual Meeting of Stockholders (and, if re-elected in 1996) at the 1999 Annual Meeting of Stockholders, Messrs. Adley and Rizzo shall be subject to re-election at the Company's 1997 Annual Meeting of Stockholders (and, if re-elected in 1997) at the 2000 Annual Meeting of Stockholders, and Mr. Morison (who would have been subject to re-election at the 1995 Annual Meeting of Stockholders, had such a meeting been held) and the New Non-Vestex Nominee shall be subject to re-election at the Company's 1996 Annual Meeting of Stockholders (and, if re-elected in 1996) at the 1998 Annual Meeting of Stockholders. All Shares subject to this Agreement shall be voted (i) at the 1996 Annual Meeting for the re-election of Messrs. Dayton, Killilea and Morison and, if they have by then been nominated and received Ratification, the New Vestex Nominee and the New Non-Vestex Nominee, for the respective terms specified above, (ii) at the 1997 and 2000 Annual Meetings for the re- election of Messrs. Adley (or other nominee of Vestex) and Rizzo, (iii) at the 1998 Annual Meeting for the re-election of Mr. Morison and for the election of one other nominee designed by a majority of the directors then in office (who may, but need not, be the New Non-Vestex Nominee, (or up to two Continuing Directors in substitution for them), and (iv) at the 1999 Annual Meeting for the re-election of Messrs. Dayton and Killilea (or up to two other Continuing Directors in substitution for them) and for one other nominee designated by a majority of the directors then in office (who may, but need not, be the New Vestex Nominee. At any re- election of a Continuing Director, the parties shall cast all of their votes in favor of such Continuing Director if he chooses to stand for re-election and is unopposed; in favor of the designee of a majority of the Continuing Directors then in office if such Continuing Director chooses not to stand for re-election and such designee is unopposed; or, in the case of a contested election, in favor of the candidate who receives a plurality of the votes cast by the holders of the outstanding shares of the Company's common stock not held by Vestex or its affiliates. (b) The Company shall provide the Continuing Directors and Vestex with 30 days' prior written notice of any intended mailing of a notice to stockholders for a meeting at which directors are to be Exhibit 4 - Page 2 elected (except that only 10 days' prior notice shall be required prior to the 1996 Annual Meeting). Vestex, the Continuing Directors and the Board of Directors shall give written notice to all other parties to this Agreement, no later than 20 days prior to such mailing (3 days in the case of the 1996 Annual Meeting), of the persons designated by Vestex, by the Continuing Directors and by the entire Board, respectively, as nominees for election as directors. The Company agrees to nominate as directors the individuals designated, or to be designated, pursuant to Section 1(a). If Vestex or the Continuing Directors shall fail to give notice to the Company as provided above, it shall be deemed that the designees of Vestex or the Continuing Directors, as the case may be, then serving as directors shall be their designees for reelection. (c) Vestex shall not vote to remove any director designated by the Continuing Directors or by the entire Board, and the Continuing Directors shall not vote to remove any director designated by Vestex or by the entire Board, except upon (i)the written instruction of the party or parties who designated such director or (ii)demonstration by clear and convincing evidence of bad faith or willful misconduct that has caused the Company substantial injury. In the event of any such removal, the vacancy shall be filled by a designee of Vestex, if the director whose removal occasioned the vacancy was a designee of Vestex, by a designee of the remaining Continuing Directors, if the director whose removal occasioned the vacancy was a Continuing Director, or by a designee of the entire Board, if the director whose removal occasioned the vacancy was a designee of the entire Board. 1.2. Shares. "Shares" shall mean and include any and all Preferred Shares, Common Shares and other shares of capital stock of the Company, by whatever name called, which carry voting rights (including voting rights which arise by reason of default) and shall include any shares now owned or subsequently acquired by any party, however acquired, including without limitation stock splits and stock dividends. 1.3. Termination. This Agreement shall terminate in its entirety on the fifth anniversary of the date of this Agreement or on the day immediately prior to the date of the Company's 2001 Annual Meeting of Stockholders, whichever occurs first. 1.4. No Revocation. The voting agreements contained herein are coupled with an interest and may not be revoked, except by written consent of the Continuing Directors and Vestex. Each of the Continuing Directors and Vestex agrees not to take any action to amend any provisions of the Articles of Organization or the By-Laws of the Company relating to the election, removal or indemnification of directors, or any other matter pertaining to the subject matter of this Agreement, as in effect upon consummation of the Purchases as contemplated by the Recapitalization Agreement, without the prior written consent of the Continuing Directors and Vestex. 1.5. Indemnification. In the event that any director elected pursuant to Section1 of this Agreement shall be made or threatened to be made a part to any action, suit or proceeding with respect to which he may be entitled to indemnification by the Company pursuant to its Articles of Organization or By-Laws, or otherwise, he shall be entitled to be represented in such action, suit or proceeding by counsel of his choice and the reasonable expenses of such representation shall be reimbursed by the Company to the extent provided in or authorized by said Articles of Organization or By-Laws. The Company agrees that it shall comply with the provisions of Sections 7.04, 7.07 and 7.10 of the Recapitalization Agreement in regard to indemnification and directors' and officers' liability insurance. In consideration of entering into this Agreement, each party hereto acknowledges and agrees that, to the maximum extent permitted by applicable law, neither Mr.Rizzo, as the person entitled to direct the voting of the Shares to be Voted under Section 2.1, nor, should the entire Board succeed to the right to vote such Shares, any director, have any liability for monetary damages to Vestex or any other party based upon his acts or omissions or alleged acts or omissions in connection with the voting of such Shares; and each such party, including without limitation Vestex, hereby irrevocably waives any right, claim or cause of action for money damages based upon the same. Exhibit 4 - Page 3 1.6. Restrictive Legend. All certificates representing Shares owned or hereafter acquired by Vestex or any transferee of Vestex bound by this Agreement shall have affixed thereto a legend substantially in the following form: "The shares of stock represented by this certificate are subject to certain voting agreements as set forth in a Voting Agreement by and among the registered owner of this certificate, the Company and certain other stockholders of the Company, a copy of which is available for inspection at the offices of the Clerk of the Company." 1.7. Transfers of Rights. Any transferee to whom Shares are transferred by Vestex, whether voluntarily or by operation of law, shall be bound by the voting obligations imposed upon the transferor under this Agreement, and, subject to the provisions of Section3.1 below, shall be entitled to the rights granted to the transferor under this Agreement, to the same extent as if such transferee were Vestex hereunder. ARTICLE II 2.1. Voting of Certain Shares Owned by Vestex. Commencing on the date of this Agreement, the number of Preferred Shares specified herein (the "Shares to be Voted") shall be Voted as specified by Richard D. Rizzo (or, in the event Mr.Rizzo ceases to be a director of the Company or declines to Vote the Shares to be Voted, as specified by a successor jointly appointed by Vestex and the Board of Directors or, in the absence of such an appointment, as specified by a majority of the entire Board of Directors). The number of Shares to be Voted shall be equal to the amount by which (a) all Shares owned of record or beneficially by Vestex and its affiliates shall exceed (b) 39.6% of the total number of shares of common stock and preferred stock of the Company then outstanding, without deeming shares underlying unexercised stock options or warrants to be outstanding. The Shares to be Voted shall be Voted for the election of directors in the manner provided in Section1 and in respect of all other matters which may be presented for action by the Company's stockholders, whether at an Annual or Special Meeting or by written action, as designated by Mr.Rizzo (or by a successor or by a majority of the entire Board of Directors, as the case may be). The provisions of this Section2.1 shall continue in effect for 18 months following the date of this Agreement, provided that they shall terminate if at any time during such 18-month period the number of shares referred to in clause(b) above exceeds the number of shares referred to in clause(a) above, so that there are no longer any Shares to be Voted. The number of Shares to be Voted shall increase or decrease automatically to the extent that changes in the number of shares referred to in clause(a) or (b) above shall occur from time to time. 2.2 Special Approval. Prior to April 11, 1998, any of the following transactions: (a) any issuance or transfer by the Company of capital stock or other securities of the Company to an interested stockholder, considering Vestex or any of its affiliates or associates (as defined in Mass. Gen. Laws c.110F, (3) as being interested stockholders for the purposes hereof, other than the issuance of common stock pursuant to the conversion of Preferred Shares; or (b) any merger, consolidation or sale of assets described in Mass. Gen. Laws c.110F, 3(c)(2), involving the Company and any interested stockholder, considering Vestex and each of its respective affiliates and associates as being an interested stockholder for the purposes hereof; or (c) any action taken by the Company which results in a going private transaction subject to Rule 13e-3 under the Securities Exchange Act of 1934; or (d) the payment to any interested stockholder of any fee or other benefit described in Mass. Gen. Laws c.110F, 3(c)(5), considering Vestex and each of its affiliates and associates as being an interested Exhibit 4 - Page 4 stockholder for purposes hereof, other than fees contemplated by the Recapitalization Agreement and the exhibits thereto; shall require the approval of either (i) a majority of the Continuing Directors then in office or (ii) the holders of a majority of the outstanding shares of the Company's Common Stock not held by Vestex or its respective affiliates; and the Company or Vestex shall not attempt to commence or effect any of such transactions without obtaining such approval. The foregoing provisions do not apply to any transaction (such as the issuance of shares of capital stock to non-affiliates of Vestex or mergers with non-affiliates of Vestex) in which Vestex and its affiliates are not in a conflict of interest position. ARTICLE III 3.1. Assignment. The rights of Vestex hereunder may from time to time be assigned as a whole, but only if assigned together with any rights of Vestex under the Recapitalization Agreement, to any direct or indirect wholly-owned subsidiary of Vestex; provided, however, that any such assignment shall not relieve Vestex of its obligations hereunder. Vestex may also assign a portion of its rights hereunder to any purchaser of Shares which undertakes in writing to be bound by the obligations of Vestex hereunder, in which case all decisions to be made by Vestex and such other purchaser shall be made by the holders of a majority of the Shares outstanding from time to time. Notwithstanding any provision of this Agreement to the contrary, Vestex may, in its discretion, sell Shares, free and clear of the obligations imposed under this Agreement and without any benefit of the rights conferred under this Agreement: (a) in a public offering or in the public securities markets; or (b) in a private transaction to one or more purchasers which are not "affiliates" or "associates" (as defined in Mass. Gen. Laws c.110F ) of Vestex in an amount not exceeding 1,000,000 Shares to any one purchaser or "group" of purchasers (within the meaning of Rule 13d-1 under the Securities Exchange Act of 1934, as amended); provided, however, that Shares sold by Vestex in any transaction which is primarily intended as a device or artifice to avoid the obligations imposed by this Agreement, shall remain subject to such obligations and the benefits conferred by this Agreement. Other than as permitted by this Section 3.1, this Agreement shall not be assignable by any party hereto without the prior written consent of the other parties. 3.2. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given (and shall be deemed to have been duly received if so given) if personally delivered or sent by telegram, cable, or telex, or by registered or certified mail, postage prepaid, addressed to the respective parties as follows: If to any Continuing Director, to him at the address listed below, with a copy to the Company and to Hale and Dorr, 60 State Street, Boston, Massachusetts 02109, Attention: Edward Young, Esq. Brian M. Adley c/o Vestex Corporation 12 Waltham Street Lexington, Massachusetts 02173 Bruce M. Dayton 10 Dover Lane Lexington, Massachusetts 02173 Thomas W. Killilea 14 Union Wharf Boston, Massachusetts 02109 Stephen G. Morison Gingerbread Hill Marblehead, Massachusetts 01945 Exhibit 4 - Page 5 Richard D. Rizzo 12 Algonquin Avenue Andover, Massachusetts 01810 If to the Company: Chancellor Corporation 745 Atlantic Avenue Boston, Massachusetts 02021 Attention: President With copies to Hale and Dorr, as provided above. If to Vestex: Vestex Corporation 12 Waltham Street Lexington, Massachusetts 02173 With copies to: Hinckley, Allen & Snyder One Financial Center Boston, Massachusetts 02111 Attention: Richard C. Arrighi, Esq. or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall only be effective upon receipt. 3.3. Amendment; Modification. This Agreement may only be amended or modified by an instrument in writing signed by Vestex and the Continuing Directors then in office. 3.4. No Waiver of Rights. No failure or delay on the part of either party in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercises thereof or of any other right, power or privilege. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available. 3.5. Counterparts. This Agreement may be executed in any number of counterparts, and by separate parties on separate counterparts, each of which shall be deemed an original but all of which together shall constitute but one and the same instrument. 3.6. Agreement Binding on Successors and Assigns. Subject to the provisions of Section3.1 hereof, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Upon election, any additional persons besides the Directors who serve as Continuing Directors shall be added as parties to this Agreement. Each Director or other Continuing Director who ceases to serve as a director in accordance with the terms of this Agreement shall thereupon automatically cease to be a party to this Agreement. Exhibit 4 - Page 6 3.7. Specific Performance. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state thereof having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. 3.8. Benefit of Recapitalization Agreement. Vestex agrees that each Continuing Director shall have the benefit of the terms and conditions of the Recapitalization Agreement that relate to the future conduct of the business of the Company and the agreement of Vestex to use their best efforts to locate and obtain capital for the Company as though such terms and conditions were set forth herein as running from Vestex to each of the Continuing Directors. Each Continuing Director shall have the right to enforce such terms and conditions on his own behalf or on behalf of the Company against Vestex. 3.9. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. 3.10. Entire Agreement, Assignability, Etc. This Agreement, together with the Recapitalization Agreement, including all exhibits and schedules thereto, (i) constitutes the entire agreement, and supersedes all other prior agreements and understandings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof (including, without limitation, insofar as it relates to agreements among the parties hereto as distinct from agreements between such parties and other persons not parties hereto, the Interim Voting Agreement dated as of July 25, 1995), (ii) is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder, and (iii) shall not be assignable by operation of law or otherwise. IN WITNESS WHEREOF, the parties hereto have duly executed or caused this Agreement to be duly executed under seal on the day and year first above written. /s/ Brian M.Adley ----------------------------------- Brian M. Adley /s/ Bruce M. Dayton ----------------------------------- Bruce M. Dayton /s/ Thomas W. Killilea ----------------------------------- Thomas W. Killilea /s/ Stephen G. Morison ----------------------------------- Stephen G. Morison /s/ Richard D. Rizzo ----------------------------------- Richard D. Rizzo CHANCELLOR CORPORATION Exhibit 4 - Page 7 By:/s/ Stephen G. Morison___ President VESTEX CAPITAL CORPORATION VESTEX CORPORATION By: /s/ Brian M. Adley By: /s/ Brian M. Adley Title: President President The following persons have become additional parties to the foregoing Agreement as of the respective dates set forth below: - -------------------------- ---------------------------------- Date New Vestex Nominee Exhibit 4 - Page 8 EX-99.5 6 REGISTRATION RIGHTS AGREEMENT CUSIP No. 1588 28 10 3 Schedule 13D ---------------------- ------------ Amendment No. 1 Exhibit 5 EXHIBIT 5 REGISTRATION RIGHTS AGREEMENT This Agreement dated as of April 11, 1996 is entered into by and among Chancellor Corporation, a Massachusetts corporation (the "Company"), Vestex Corporation, a Massachusetts corporation ("Vestex"), and Vestex Capital Corporation, a Massachusetts corporation ("Capital") and, together with Vestex, the ("Purchaser"). WHEREAS, the Company, the Purchaser and Bruncor, Inc. have entered into a Recapitalization and Stock Purchase Agreement dated as of September20, 1994 (as subsequently amended, the "Purchase Agreement"); and WHEREAS, the Company and the Purchaser desire to provide for certain arrangements with respect to the registration of shares of capital stock of the Company under the Securities Act of 1933; NOW, THEREFORE, in consideration of the mutual promises and covenants contained in this Agreement, the parties hereto agree as follows: 1. Certain Definitions. As used in this Agreement, the following terms shall have the following respective meanings: "Commission" means the Securities and Exchange Commission, or any other Federal agency at the time administering the Securities Act. "Common Stock" means the common stock, $.01 par value per share, of the Company. "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any similar Federal statute, and the rules and regulations of the Commission issued under such Act, as they each may, from time to time, be in effect. "Registration Statement" means a registration statement filed by the Company with the Commission for a public offering and sale of Common Stock (other than a registration statement on Form S-8 or Form S-4, or their successors, or any other form for a similar limited purpose, or any registration statement covering only securities proposed to be issued in exchange for securities or assets of another corporation). "Registration Expenses" means the expenses described in Section5. "Registrable Shares" means (i)the Common Shares and the Preferred Shares, as those terms are defined in the Purchase Agreement, (ii)the shares of Common Stock issued or issuable upon conversion of the Preferred Shares and (iii)any other shares of Common Stock issued in respect of such shares (because of stock splits, stock dividends, reclassifications, recapitalizations, or similar events); provided, however, that shares of Common Stock which are Registrable Shares shall cease to be Registrable Shares (i)upon any sale pursuant to a Registration Statement or Rule144 under the Securities Act or (ii)upon any sale in any manner to a person or entity which, by virtue of Section14 of this Agreement, is not entitled to the rights provided by this Agreement. Wherever reference is made in this Agreement to a request or consent of holders of a certain percentage of Registrable Shares, the determination of such percentage shall include shares of Common Stock issuable upon conversion of the Preferred Shares even if such conversion has not yet been effected. "Securities Act" means the Securities Act of 1933, as amended, or any similar Federal statute, and the rules and regulations of the Commission issued under such Act, as they each may, from time to time, be in effect. Exhibit 5 - Page 1 "Shares" shall have the meanings assigned in the preamble of the Purchase Agreement to the terms "Preferred Shares" and "Common Shares." "Stockholders" means the Purchaser and any persons or entities to whom the rights granted under this Agreement are transferred by the Purchaser, its successors or assigns pursuant to Section14 hereof. 2. Required Registrations. (a) At any time after April 11, 1996, a Stockholder or Stockholders holding in the aggregate at least 20% of the Registrable Shares may request, in writing, that the Company effect the registration on FormS-1 or Form S-2 (or any successor form) of Registrable Shares owned by such Stockholder or Stockholders that either (i)constitute at least 20% of the Registrable Shares or (ii)have an aggregate offering price of at least $2,000,000 (based on the then current market price or fair value). If the holders initiating the registration intend to distribute the Registrable Shares by means of an underwriting, they shall so advise the Company in their request. In the event such registration is underwritten, the right of other Stockholders to participate shall be conditioned on such Stockholders' participation in such underwriting. Upon receipt of any such request, the Company shall promptly give written notice of such proposed registration to all Stockholders. Such Stockholders shall have the right, by giving written notice to the Company within 30 days after the Company provides its notice, to elect to have included in such registration such of their Registrable Shares as such Stockholders may request in such notice of election; provided that if the underwriter (if any) managing the offering determines that, because of marketing factors, all of the Registrable Shares requested to be registered by all Stockholders may not be included in the offering, then all Stockholders who have requested registration shall participate in the registration pro rata based upon the number of Registrable Shares which they have requested to be so registered. Thereupon, the Company shall, as expeditiously as possible, use its best efforts to effect the registration on FormS-1 or FormS-2 (or any successor form) of all Registrable Shares which the Company has been requested to so register (provided, that the Company may in its discretion delay the filing of any registration statement for a period of up to 90 days from the date of the giving of written notice of such delay). (b) At any time that the Company is eligible to file a Registration Statement on FormS-3 with respect to offerings by its stockholders (or any successor form relating to secondary offerings), a Stockholder or Stockholders holding in the aggregate at least 25% of the Registrable Shares may request the Company, in writing, to effect the registration on FormS-3 (or such successor form), of Registrable Shares owned by such Stockholder or Stockholders. Upon receipt of any such request, the Company shall promptly give written notice of such proposed registration to all Stockholders. Such Stockholders shall have the right, by giving written notice to the Company within 30 days after the Company provides its notice, to elect to have included in such registration such of their Registrable Shares as such Stockholders may request in such notice of election; provided that if the underwriter (if any) managing the offering determines that, because of marketing factors, all of the Registrable Shares requested to be registered by all Stockholders may not be included in the offering, then all Stockholders who have requested registration shall participate in the registration prorata based upon the number of Registrable Shares which they have requested to be so registered. Thereupon, the Company shall, as expeditiously as possible, use its best efforts to effect the registration on Form S-3 (or such successor form) of all Registrable Shares which the Company has been requested to so register. (c) The Company shall not be required to effect more than one registration pursuant to paragraph (a) above, except that it shall be required to effect up to two additional registrations pursuant to paragraph (a)above during any twelve-month period if, at the time of such registration, the Company is not eligible to use Form S-3. In addition, the Company shall not be required to effect any registration (other than on FormS-3 or any successor form relating to secondary offerings) within six months after the effective date of any other Registration Statement of the Company. Exhibit 5 - Page 2 (d) If at the time of any request to register Registrable Shares pursuant to this Section2, the Company is engaged or has fixed plans to engage within 30 days of the time of the request in a registered public offering as to which the Stockholders may include Registrable Shares pursuant to Section3 or is engaged in any other activity which, in the good faith determination of the Company's Board of Directors, would be adversely affected by the requested registration to the material detriment of the Company, then the Company may at its option direct that such request be delayed for a period not in excess of six months from the effective date of such offering or the date of commencement of such other material activity, as the case may be, such right to delay a request to be exercised by the Company not more than once in any two-year period. 3. Incidental Registration. (a) Whenever the Company proposes to file a Registration Statement (other than pursuant to Section2) at any time and from time to time, it will, prior to such filing, give written notice to all Stockholders of its intention to do so and, upon the written request of a Stockholder or Stockholders given within 20 days after the Company provides such notice (which request shall state the intended method of disposition of such Registrable Shares), the Company shall use its best efforts to cause all Registrable Shares which the Company has been requested by such Stockholder or Stockholders to register to be registered under the Securities Act to the extent necessary to permit their sale or other disposition in accordance with the intended methods of distribution specified in the request of such Stockholder or Stockholders; provided that the Company shall have the right to postpone or withdraw any registration effected pursuant to this Section3 without obligation to any Stockholder. (b) In connection with any registration under this Section3 involving an underwriting, the Company shall not be required to include any Registrable Shares in such registration unless the holders thereof accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it (provided that such terms must be consistent with this Agreement). If in the opinion of the managing underwriter it is appropriate because of marketing factors to limit the number of Registrable Shares to be included in the offering, then the Company shall be required to include in the registration only that number of Registrable Shares, if any, which the managing underwriter believes should be included therein; provided that (i)in no event shall the number of Registrable Shares included in the offering be reduced below 10% of the total number of Registerable Shares of Common Stock requested to be included in the offering, and (ii)no persons or entities other than the Company, the Stockholders and persons or entities holding registration rights granted in accordance with Section10 hereof shall be permitted to include securities in the offering. If the number of Registrable Shares to be included in the offering in accordance with the foregoing is less than the total number of shares which the holders of Registrable Shares have requested to be included, then the holders of Registrable Shares who have requested registration and other holders of securities entitled to include them in such registration shall participate in the registration pro rata based upon their total ownership of shares of Common Stock (giving effect to the conversion into Common Stock of all securities convertible thereinto). If any holder would thus be entitled to include more securities than such holder requested to be registered, the excess shall be allocated among other requesting holders pro rata in the manner described in the preceding sentence. 4. Registration Procedures. If and whenever the Company is required by the provisions of this Agreement to use its best efforts to effect the registration of any of the Registrable Shares under the Securities Act, the Company shall: (a) file with the Commission a Registration Statement with respect to such Registrable Shares and use its best efforts to cause that Registration Statement to become and remain effective; (b) as expeditiously as possible prepare and file with the Commission any amendments and supplements to the Registration Statement and the prospectus included in the Registration Statement as may be necessary to keep the Registration Statement effective, in the case of a firm commitment underwritten public offering, until each underwriter has completed the distribution of all securities purchased by it and, in the case of Exhibit 5 - Page 3 any other offering, until the earlier of the sale of all Registrable Shares covered thereby or 120 days after the effective date thereof; (c) as expeditiously as possible furnish to each selling Stockholder such reasonable numbers of copies of the prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as the selling Stockholder may reasonably request in order to facilitate the public sale or other disposition of the Registrable Shares owned by the selling Stockholder; and (d) as expeditiously as possible use its best efforts to register or qualify the Registrable Shares covered by the Registration Statement under the securities or Blue Sky laws of such states as the selling Stockholders shall reasonably request, and do any and all other acts and things that may be necessary or desirable to enable the selling Stockholders to consummate the public sale or other disposition in such states of the Registrable Shares owned by the selling Stockholder; provided, however, that the Company shall not be required in connection with this paragraph (d) to qualify as a foreign corporation or execute a general consent to service of process in any jurisdiction. If the Company has delivered preliminary or final prospectuses to the selling Stockholders and after having done so the prospectus is amended to comply with the requirements of the Securities Act, the Company shall promptly notify the selling Stockholders and, if requested, the selling Stockholders shall immediately cease making offers of Registrable Shares and return all prospectuses to the Company. The Company shall promptly provide the selling Stockholders with revised prospectuses and, following receipt of the revised prospectuses, the selling Stockholders shall be free to resume making offers of the Registrable Shares. 5. Allocation of Expenses. The Company will pay all Registration Expenses of all registrations under this Agreement; provided, however, that if a registration under Section2 is withdrawn at the request of the Stockholders requesting such registration (other than as a result of information concerning the business or financial condition of the Company which is made known to the Stockholders after the date on which such registration was requested) and if the requesting Stockholders elect not to have such registration counted as a registration requested under Section2, the requesting Stockholders shall pay the Registration Expenses of such registration pro rata in accordance with the number of their Registrable Shares included in such registration. For purposes of this Section5, the term "Registration Expenses" shall mean all expenses incurred by the Company in complying with this Agreement, including, without limitation, all registration and filing fees, exchange listing fees, printing expenses, fees and expenses of counsel for the Company and the fees and expenses of one counsel selected by the selling Stockholders to represent the selling Stockholders, state Blue Sky fees and expenses, and the expense of any special audits incident to or required by any such registration, but excluding underwriting discounts, selling commissions and the fees and expenses of selling Stockholders' own counsel (other than the counsel selected to represent all selling Stockholders). 6. Indemnification and Contribution. (a) In the event of any registration of any of the Registrable Shares under the Securities Act pursuant to this Agreement, the Company will indemnify and hold harmless the seller of such Registrable Shares, each underwriter of such Registrable Shares, and each other person, if any, who controls such seller or underwriter within the meaning of the Securities Act or the Exchange Act against any losses, claims, damages or liabilities, joint or several, to which such seller, underwriter or controlling person may become subject under the Securities Act, the Exchange Act, state securities or Blue Sky laws or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement under which such Registrable Shares were registered under the Securities Act, any preliminary prospectus or final prospectus contained in the Registration Statement, or any amendment or supplement to such Registration Statement, or arise out of or are based upon the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and the Company will reimburse such seller, underwriter and each Exhibit 5 - Page 4 such controlling person for any legal or any other expenses reasonably incurred by such seller, underwriter or controlling person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any untrue statement or omission made in such Registration Statement, preliminary prospectus or final prospectus, or any such amendment or supplement, in reliance upon and in conformity with information furnished to the Company, in writing, by or on behalf of such seller, underwriter or controlling person specifically for use in the preparation thereof. (b) In the event of any registration of any of the Registrable Shares under the Securities Act pursuant to this Agreement, each seller of Registrable Shares, severally and not jointly, will indemnify and hold harmless the Company, each of its directors and officers and each underwriter (if any) and each person, if any, who controls the Company or any such underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages or liabilities, joint or several, to which the Company, such directors and officers, underwriter or controlling person may become subject under the Securities Act, Exchange Act, state securities or Blue Sky laws or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement under which such Registrable Shares were registered under the Securities Act, any preliminary prospectus or final prospectus contained in the Registration Statement, or any amendment or supplement to the Registration Statement, or arise out of or are based upon any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, if the statement or omission was made in reliance upon and in conformity with information relating to such seller furnished in writing to the Company by or on behalf of such seller specifically for use in connection with the preparation of such Registration Statement, prospectus, amendment or supplement; provided, however, that the obligations of such Stockholders hereunder shall be limited to an amount equal to the proceeds to each Stockholder of Registrable Shares sold in connection with such registration. (c) Each party entitled to indemnification under this Section6 (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom; provided, that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not be unreasonably withheld); and, provided, further, that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section6. The Indemnified Party may participate in such defense at such party's expense; provided, however, that the Indemnifying Party shall pay such expense if representation of such Indemnified Party by the counsel retained by the Indemnifying Party would be inappropriate due to actual or potential differing interests between the Indemnified Party and any other party represented by such counsel in such proceeding. No Indemnifying Party, in the defense of any such claim or litigation shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect of such claim or litigation, and no Indemnified Party shall consent to entry of any judgment or settle such claim or litigation without the prior written consent of the Indemnifying Party. (d) In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any holder of Registrable Shares exercising rights under this Agreement, or any controlling person of any such holder, makes a claim for indemnification pursuant to this Section6 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section6 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any such selling Stockholder or any such controlling person in circumstances for which indemnification is provided under this Section6; then, in each such case, the Company and such Stockholder will contribute to the aggregate losses, Exhibit 5 - Page 5 claims, damages or liabilities to which they may be subject (after contribution from others) in such proportions so that such holder is responsible for the portion represented by the percentage that the public offering price of its Registrable Shares offered by the Registration Statement bears to the public offering price of all securities offered by such Registration Statement, and the Company is responsible for the remaining portion; provided, however, that, in any such case, (A)no such holder will be required to contribute any amount in excess of the proceeds to it of all Registrable Shares sold by it pursuant to such Registration Statement, and (B)no person or entity guilty of fraudulent misrepresentation, within the meaning of Section11(f) of the Securities Act, shall be entitled to contribution from any person or entity who is not guilty of such fraudulent misrepresentation. 7. Indemnification with Respect to Underwritten Offering. In the event that Registrable Shares are sold pursuant to a Registration Statement in an underwritten offering pursuant to Section2, the Company agrees to enter into an underwriting agreement containing customary representations and warranties with respect to the business and operations of an issuer of the securities being registered and customary covenants and agreements to be performed by such issuer, including without limitation customary provisions with respect to indemnification by the Company of the underwriters of such offering. 8. Information by Holder. Each Stockholder including Registrable Shares in any registration shall furnish to the Company such information regarding such Stockholder and the distribution proposed by such Stockholder as the Company may reasonably request in writing and as shall be required in connection with any registration, qualification or compliance referred to in this Agreement. 9. "Stand-Off" Agreement. Each Stockholder, if requested by the Company and the managing underwriter of an offering by the Company of Common Stock or other securities of the Company pursuant to a Registration Statement, shall agree not to sell publicly or otherwise transfer or dispose of any Registrable Shares or other securities of the Company held by such Stockholder for a specified period of time (not to exceed 90 days) following the effective date of such Registration Statement. 10. Limitations on Subsequent Registration Rights. The Company shall not, without the prior written consent of Stockholders holding at least a majority of the Registrable Shares, enter into any agreement (other than this Agreement) with any holder or prospective holder of any securities of the Company which would allow such holder or prospective holder (a)to include securities of the Company in any Registration Statement, unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only on terms substantially similar to the terms on which holders of Registrable Shares may include shares in such registration, or (b)except in the case of Bruncor Inc. as the holder of warrants to purchase 250,000 shares of Common Stock and certain lenders to the Company as holders of warrants to purchase a total of 449,439 shares of Common Stock to make a demand registration which could result in such registration statement being declared effective prior to December31, 2004. 11. Rule 144 Requirements. After the earliest of (i)the closing of the sale of securities of the Company pursuant to a Registration Statement, (ii)the registration by the Company of a class of securities under Section12 of the Exchange Act, or (iii)the issuance by the Company of an offering circular pursuant to Regulation A under the Securities Act, the Company agrees to: (a) comply with the requirements of Rule144(c) under the Securities Act with respect to current public information about the Company; (b) use its best efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements); and (c) furnish to any holder of Registrable Shares upon request (i) a written statement by the Company as to its compliance with the requirements of said Rule 144(c), and the reporting requirements of the Exhibit 5 - Page 6 Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), (ii) a copy of the most recent annual or quarterly report of the Company, and (iii) such other reports and documents of the Company as such holder may reasonably request to avail itself of any similar rule or regulation of the Commission allowing it to sell any such securities without registration. 12. Mergers, Etc. The Company shall not, directly or indirectly, enter into any merger, consolidation or reorganization in which the Company shall not be the surviving corporation unless the proposed surviving corporation shall, prior to such merger, consolidation or reorganization, agree in writing to assume the obligations of the Company under this Agreement, and for that purpose references hereunder to "Registrable Shares" shall be deemed to be references to the securities which the Stockholders would be entitled to receive in exchange for Registrable Shares under any such merger, consolidation or reorganization; provided, however, that the provisions of this Section12 shall not apply in the event of any merger, consolidation or reorganization in which the Company is not the surviving corporation if all Stockholders are entitled to receive in exchange for their Registrable Shares consideration consisting solely of (i)cash, (ii)securities of the acquiring corporation which may be immediately sold to the public without registration under the Securities Act, or (iii)securities of the acquiring corporation which the acquiring corporation has agreed to register within 90days of completion of the transaction for resale to the public pursuant to the Securities Act. 13. Termination. All of the Company's obligations to register Registrable Shares under this Agreement shall terminate on the tenth anniversary of this Agreement. 14. Transfers of Rights. This Agreement, and the rights and obligations of each Purchaser hereunder, may be assigned by such Purchaser to any person or entity to which Shares are transferred by such Purchaser, and such a permitted transferee shall be deemed a "Purchaser" for purposes of this Agreement; provided that the transferee provides written notice of such assignment to the Company. 15. General. (a) Notices. All notices, requests, consents, and other communications under this Agreement shall be in writing and shall be delivered by hand or mailed by first class certified or registered mail, return receipt requested, postage prepaid: If to the Company, at 745 Atlantic Avenue, Boston, Massachusetts 02110, Attention: President, or at such other address or addresses as may have been furnished in writing by the Company to the Purchaser, with a copy to Edward Young, Esq., Hale and Dorr, 60 State Street, Boston, Massachusetts 02109; or If to a Stockholder, c/o Vestex Corporation at 12 Waltham Street, Lexington, Massachusetts 02173, or at such other address or addresses as may have been furnished to the Company in writing by such Stockholder, with a copy to Richard Arrighi, Esq., Hinckley, Allen & Snyder, One Financial Center, Boston, Massachusetts 02111. Notices provided in accordance with this Section15(a) shall be deemed delivered upon personal delivery or two business days after deposit in the mail. (b) Entire Agreement. This Agreement embodies the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings relating to such subject matter. (c) 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), with the written consent of the Company and the holders of at least a majority of the Registrable Shares; provided, that this Agreement may be amended with the consent of the holders of less Exhibit 5 - Page 7 than all Registrable Shares only in a manner which affects all Registrable Shares in the same fashion. No waivers of or exceptions to any term, condition or provision of this Agreement, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision. (d) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall be one and the same document. (e) Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (f) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. Executed as of the date first written above. COMPANY: CHANCELLOR CORPORATION By:/s/ Stephen G. Morison -------------------------------- Title: CEO ----------------------------- PURCHASER: VESTEX CORPORATION By:/s/ Brian M. Adley -------------------------------- Title: CEO ----------------------------- VESTEX CAPITAL CORPORATION By:/s/ Brian M.Adley -------------------------------- Title: CEO ----------------------------- Exhibit 5 - Page 8 -----END PRIVACY-ENHANCED MESSAGE-----