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<SEC-DOCUMENT>0000950123-96-004906.txt : 19960910

<SEC-HEADER>0000950123-96-004906.hdr.sgml : 19960910

ACCESSION NUMBER:     0000950123-96-004906

CONFORMED SUBMISSION TYPE:   S-1/A

PUBLIC DOCUMENT COUNT:       24

FILED AS OF DATE:     19960906

SROS:         NONE

 

FILER:

 

    COMPANY DATA:

       COMPANY CONFORMED NAME:          MEMBERWORKS INC

       CENTRAL INDEX KEY:           0001020996

       STANDARD INDUSTRIAL CLASSIFICATION:    SERVICES-BUSINESS SERVICES, NEC [7389]

       STATE OF INCORPORATION:         DE

 

    FILING VALUES:

       FORM TYPE:    S-1/A

       SEC ACT:      1933 Act

       SEC FILE NUMBER:  333-10541

       FILM NUMBER:      96626997

 

    BUSINESS ADDRESS:

       STREET 1:     680 WASHINGTON BLVD., SUITE 1100

       CITY:         STAMFORD

       STATE:        CT

       ZIP:          06901

       BUSINESS PHONE:       2033247635

</SEC-HEADER>

<DOCUMENT>

<TYPE>S-1/A

<SEQUENCE>1

<DESCRIPTION>AMENDMENT NO. 1 TO FORM S-1

<TEXT>

 

<PAGE>   1

 

  

   AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 6, 1996

   

 

  

                                                      REGISTRATION NO. 333-10541

   

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

 

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                             ---------------------

 

  

                                AMENDMENT NO. 1

   

  

                                       TO

   

 

                                    FORM S-1

                             REGISTRATION STATEMENT

                                     UNDER

                           THE SECURITIES ACT OF 1933

                             ---------------------

 

                            MEMBERWORKS INCORPORATED

             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                             ---------------------

 

<TABLE>

<S>                                 <C>                                 <C>

              DELAWARE                              7389                             06-1276882

  (STATE OR OTHER JURISDICTION OF       (PRIMARY STANDARD INDUSTRIAL              (I.R.S. EMPLOYER

   INCORPORATION OR ORGANIZATION)       CLASSIFICATION CODE NUMBER)            IDENTIFICATION NUMBER)

</TABLE>

 

                             ---------------------

 

         680 WASHINGTON BLVD.; SUITE 1100; STAMFORD, CONNECTICUT 06901

                                 (203) 324-7635

         (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING

            AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

                             ---------------------

 

                                GARY A. JOHNSON

                     PRESIDENT AND CHIEF EXECUTIVE OFFICER

                            MEMBERWORKS INCORPORATED

                        680 WASHINGTON BLVD., SUITE 1100

                          STAMFORD, CONNECTICUT 06901

                                 (203) 324-7635

               (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE

               NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)

                             ---------------------

 

                                   COPIES TO:

 

<TABLE>

<S>                                                  <C>

                MARK G. BORDEN, ESQ.                                 ALAN K. AUSTIN, ESQ.

            THOMAS L. BARRETTE, JR., ESQ.                           STEVEN V. BERNARD, ESQ.

                    HALE AND DORR                                     DAVID S. KIM, ESQ.

                   60 STATE STREET                             WILSON SONSINI GOODRICH & ROSATI

             BOSTON, MASSACHUSETTS 02109                           PROFESSIONAL CORPORATION

                   (617) 526-6000                                     650 PAGE MILL ROAD

                                                                  PALO ALTO, CALIFORNIA 94304

                                                                        (415) 493-9300

</TABLE>

 

                             ---------------------

 

        APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:

            As soon as practicable after the effective date hereof.

 

     If any of the securities being registered on this Form are to be offered on

a delayed or continuous basis pursuant to Rule 415 under the Securities Act of

1933, check the following box.  / /

 

     If this Form is filed to register additional securities for an offering

pursuant to Rule 462(b) under the Securities Act, check the following box and

list the Securities Act registration statement number of the earlier effective

registration statement for the same offering.  / / __________

 

     If this Form is a post-effective amendment filed pursuant to Rule 462(c)

under the Securities Act, check the following box and list the Securities Act

registration statement number of the earlier effective registration statement

for the same offering.  / / __________

 

     If delivery of the prospectus is expected to be made pursuant to Rule 434,

please check the following box.  / /

                             ---------------------

 

     THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR

DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL

FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION

STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF

THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME

EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY

DETERMINE.

 

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

<PAGE>   2

 

  

                                EXPLANATORY NOTE

   

 

  

     This Amendment No. 1 to Registration Statement of Form S-1 (File No.

333-10541) of MemberWorks Incorporated is filed solely to file copies of the

exhibits listed in Item 16 hereto.

   

<PAGE>   3

 

                                    PART II

 

                     INFORMATION NOT REQUIRED IN PROSPECTUS

 

ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

 

     The following table sets forth the various expenses, all of which will be

borne by the Registrant, in connection with the sale and distribution of the

securities being registered, other than the underwriting discounts and

commissions. All amounts shown are estimates except for the Securities and

Exchange Commission registration fee and the NASD filing fee.

 

<TABLE>

    <S>                                                                        <C>

    SEC Registration Fee...................................................    $   20,690

    NASD Filing Fee........................................................         6,500

    Nasdaq National Market Listing Fee.....................................         6,500

    Blue Sky Fees and Expenses.............................................        20,000

    Transfer Agent and Registrar Fees......................................        10,000

    Accounting Fees and Expenses...........................................       275,000

    Legal Fees and Expenses................................................       275,000

    Printing and Mailing Expenses..........................................       150,000

    Miscellaneous..........................................................       136,310

                                                                               ----------

              Total........................................................    $  900,000

                                                                                =========

</TABLE>

 

ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

 

     Article Eighth of the Registrant's Amended and Restated Certificate of

Incorporation (the "Restated Certificate of Incorporation") provides that no

director of the Registrant shall be personally liable for any monetary damages

for any breach of fiduciary duty as a director, except to the extent that the

Delaware General Corporation Law prohibits the elimination or limitation of

liability of directors for breach of fiduciary duty.

 

     Article Ninth of the Registrant's Restated Certificate of Incorporation

provides that a director or officer of the Registrant (a) shall be indemnified

by the Registrant against all expenses (including attorneys' fees), judgments,

fines and amounts paid in settlement incurred in connection with any litigation

or other legal proceeding (other than an action by or in the right of the

Registrant) brought against him by virtue of his position as a director or

officer of the Registrant if he acted in good faith and in a manner he

reasonably believed to be in, or not opposed to, the best interests of the

Registrant, and, with respect to any criminal action or proceeding, had no

reasonable cause to believe his conduct was unlawful and (b) shall be

indemnified by the Registrant against all expenses (including attorneys' fees)

and amounts paid in settlement incurred in connection with any action by or in

the right of the Registrant brought against him by virtue of his position as a

director or officer of the Registrant if he acted in good faith and in a manner

he reasonably believed to be in, or not opposed to, the best interests of the

Registrant, except that no indemnification shall be made with respect to any

matter as to which such person shall have been adjudged to be liable to the

Registrant, unless a court determines that, despite such adjudication but in

view of all of the circumstances, he is entitled to indemnification of such

expenses. Notwithstanding the foregoing, to the extent that a director or

officer has been successful, on the merits or otherwise, including, without

limitation, the dismissal of an action without prejudice, he is required to be

indemnified by the Registrant against all expenses (including attorneys' fees)

incurred in connection therewith. Expenses shall be advanced to a Director or

officer at his request, provided that he undertakes to repay the amount advanced

if it is ultimately determined that he is not entitled to indemnification for

such expenses.

 

     Indemnification is required to be made unless the Registrant determines

that the applicable standard of conduct required for indemnification has not

been met. In the event of a determination by the Registrant that the director or

officer did not meet the applicable standard of conduct required for

 

                                      II-1

<PAGE>   4

 

indemnification, or if the Registrant fails to make an indemnification payment

within 60 days after such payment is claimed by such person, such person is

permitted to petition the court to make an independent determination as to

whether such person is entitled to indemnification. As a condition precedent to

the right of indemnification, the director or officer must give the Registrant

notice of the action for which indemnity is sought and the Registrant has the

right to participate in such action or assume the defense thereof.

 

     Article Ninth of the Registrant's Restated Certificate of Incorporation

further provides that the indemnification provided therein is not exclusive, and

provides that in the event that the Delaware General Corporation Law is amended

to expand the indemnification permitted to directors or officers the Registrant

must indemnify those persons to the fullest extent permitted by such law as so

amended.

 

     Section 145 of the Delaware General Corporation Law provides that a

corporation has the power to indemnify a director, officer, employee or agent of

the corporation and certain other persons serving at the request of the

corporation in related capacities against amounts paid and expenses incurred in

connection with an action or proceeding to which he is or is threatened to be

made a party by reason of such position, if such person shall have acted in good

faith and in a manner he reasonably believed to be in or not opposed to the best

interests of the corporation, and, in any criminal proceeding, if such person

had no reasonable cause to believe his conduct was unlawful; provided that, in

the case of actions brought by or in the right of the corporation, no

indemnification shall be made with respect to any matter as to which such person

shall have been adjudged to be liable to the corporation unless and only to the

extent that the adjudicating court determines that such indemnification is

proper under the circumstances.

 

     Under the Underwriting Agreement, the Underwriters are obligated, under

certain circumstances, to indemnify directors and officers of the Registrant

against certain liabilities, including liabilities under the Securities Act.

Reference is made to the form of Underwriting Agreement filed as Exhibit 1

hereto.

 

ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES

 

     On March 30, 1994, the Registrant sold an aggregate of 38,358 shares of

Class A Common Stock and 38,358 shares of Series F Preferred Stock to accredited

investors for an aggregate purchase price of $1 million pursuant to Regulation D

of the Commission promulgated under the Securities Act ("Regulation D"). On

September 28, 1994, the Registrant sold an aggregate of 40,000 shares of Series

G Preferred Stock and warrants to acquire the same number of shares of Class A

Common Stock to accredited investors for an aggregate purchase price of $4

million pursuant to Regulation D. Effective August 3, 1995, all 40,000 shares of

Series G Preferred Stock and warrants acquired were redeemed by the Registrant

for an aggregate redemption amount of $4,000,400, plus a preferred dividend of

$401,611. Additionally, the Registrant substituted 15,726 warrants to acquire

Class A Common Stock, exercisable at $0.01 per share, for the warrants redeemed

by the Registrant. On August 3, August 15 and August 21, 1995, the Registrant

sold an aggregate of 317,150 shares of Series H Convertible Preferred Stock to

accredited investors for an aggregate purchase price of $12,999,979 pursuant to

Regulation D.

 

     On March 30, 1994, the Registrant issued a warrant to acquire 7,672 shares

of Class A Common Stock at an exercise of $26.07 per share, subject to

adjustment for dilution. On September 9, 1994, the Company issued a warrant in

conjunction with the Bank Credit Agreement to acquire 20,000 shares of Class A

Common Stock at an exercise price of $15.00 per share, subject to adjustment for

dilution when issued. The warrant is exercisable at any time prior to December

31, 1999. In connection with the redemption of 40,000 shares of Series G

Preferred Stock and attached warrants to acquire 40,000 shares of Series A

Preferred Stock, the Registrant issued warrants to acquire 15,726 shares of

Class A Common Stock, exercisable at $0.01 per share.

 

                                      II-2

<PAGE>   5

 

  

ITEM 16.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

   

 

     (A) EXHIBITS

 

  

<TABLE>

<CAPTION>

EXHIBIT

  NO.                                         DESCRIPTION

- --------  -----------------------------------------------------------------------------------

<C>       <S>

     **1  Form of Underwriting Agreement.

     2.1  Agreement and Plan of Corporate Separation, dated August 9, 1995, between the

          Registrant, Impaq Marketing Corporation, Impaq Publishing Corp. and Daniel

          Klabunde.

     3.1  Restated Certificate of Incorporation of the Registrant.

   **3.2  Restated Certificate of Incorporation of the Registrant, to be filed upon closing

          of this offering.

    *3.3  Restated By-laws of the Registrant.

     **4  Specimen Certificate for shares of Common Stock, $0.01 par value, of the

          Registrant.

     4.2  Amended and Restated Stockholders' Agreement, dated as of December 28, 1990, by and

          among the Registrant and each of the signatories thereto, as amended.

     4.3  Amended and Restated Registration Rights Agreement, dated as of September 9, 1994

          between the Registrant and Brown Brothers Harriman & Co.

     4.4  Registration Rights Agreement, dated September 20, 1995 among the Registrant and

          the Stockholders set forth on Schedule I thereto.

     **5  Opinion of Hale and Dorr with respect to the validity of the securities being

          offered.

    10.1  Amended Employee Incentive Stock Option Plan.

   *10.2  1995 Executive Officers' Stock Option Plan.

   *10.3  1995 Non-Employee Directors' Stock Option Plan.

  **10.4  1996 Stock Option Plan.

  **10.5  1996 Employee Stock Purchase Plan.

   *10.6  401(k) Profit Sharing Plan of the Registrant, dated April 1, 1996.

   *10.7  Term Lease Master Agreement between IBM Credit Corporation and the Registrant,

          dated as of November 26, 1991.

    10.8  Master Lease Agreement between Bankers Leasing Association, Inc. and the

          Registrant, dated as of May 7, 1996.

    10.9  Promissory Note between Thomas St. Denis and the Registrant, dated September 9,

          1994.

   10.10  Promissory Note between Gary Johnson and the Registrant, dated September 9, 1994.

   10.11  Amended and Restated Credit Agreement, dated as of April 8, 1996 among the

          Registrant, the lender parties thereto and Brown Brothers Harriman & Co.

   10.12  Warrant Agreement dated as of September 9, 1994, between the Registrant and Brown

          Brothers Harriman & Co.

   10.13  Form of Warrant for the Purchase of Class A Common Stock, dated March 30, 1994.

   10.14  Form of Stock Subscription Warrant, dated as of July 31, 1995.

   10.15  Form of Stock Subscription Warrant with Voting Rights, dated August 3, 1995

   10.16  Form of Stock Subscription Warrant, dated August 15, 1995.

   10.17  Shareholder Guarantee made as of September 9, 1994 by Gary Johnson, Thomas St.

          Denis and Dennis Walker in favor of the lenders named in the Credit Agreement and

          Brown Brothers Harriman & Co.

   10.18  Shareholder Pledge Agreement, dated as of September 9, 1994, among Gary Johnson,

          Thomas St. Denis and Dennis Walker and Brown Brothers Harriman & Co.

   10.19  Consulting Agreement, dated as of January 1, 1996, by and between the Registrant,

          Giga Information Group, Inc. and Neill Brownstein.

  +10.20  Agreement dated as of October 7, 1994 by and between Sears, Roebuck and Co. and the

          Registrant.

</TABLE>

   

 

                                      II-3

<PAGE>   6

 

  

<TABLE>

<CAPTION>

EXHIBIT

  NO.                                         DESCRIPTION

- --------  -----------------------------------------------------------------------------------

<C>       <S>

  +10.21  License Agreement, dated August 1, 1990, by and between the Registrant and Sears

          Roebuck and Co.

   10.22  Lease Agreement between Stamford Towers Limited Partnership and the Registrant,

          dated January 15, 1996.

   10.23  Business Property Lease between V and R Joint Venture and the Registrant, dated

          October 4, 1995.

   10.24  Arena Tower II Lease Agreement by and between Arena Tower II Corporation and the

          Registrant, dated February 12, 1996, as amended.

    **11  Computation of unaudited pro forma net loss per share.

    **21  Subsidiaries of the Registrant.

  **23.1  Consent of Hale and Dorr (included in Exhibit 5).

   *23.2  Consent of Price Waterhouse LLP.

     *24  Power of Attorney (included on page II-5).

     *27  Financial Data Schedule.

</TABLE>

   

 

- ---------------

  

 * Previously filed.

   

 

  

** To be filed by amendment.

   

 

  

 +Confidential treatment requested as to certain portions, which portions are

  omitted and filed separately with the Commission.

   

 

     (B) FINANCIAL STATEMENT SCHEDULES

 

     Schedule II -- Valuation and Qualifying Accounts

 

     All other schedules have been omitted because they are not required or

because the required information is given in the Consolidated Financial

Statements or Notes thereto.

 

ITEM 17.  UNDERTAKINGS

 

     Insofar as indemnification for liabilities arising under the Securities Act

may be permitted to directors, officers and controlling persons of the

Registrant pursuant to the provisions contained in the Restated Certificate of

Incorporation and Amended and Restated By-laws of the Registrant and the laws of

the State of Delaware, or otherwise, the Registrant has been advised that in the

opinion of the Securities and Exchange Commission such indemnification is

against public policy as expressed in the Securities Act and is, therefore,

unenforceable. In the event that a claim for indemnification against such

liabilities (other than the payment by the Registrant of expenses incurred or

paid by a director, officer or controlling person of the Registrant in the

successful defense of any action, suit or proceeding) is asserted by such

director, officer or controlling person in connection with the securities being

registered, the Registrant will, unless in the opinion of its counsel the matter

has been settled by controlling precedent, submit to a court of appropriate

jurisdiction the question whether such indemnification by it is against public

policy as expressed in the Securities Act and will be governed by the final

adjudication of such issue.

 

     The undersigned Registrant hereby undertakes to provide to the Underwriters

at the closing specified in the Underwriting Agreement certificates in such

denominations and registered in such names as required by the Underwriters to

permit prompt delivery to each purchaser.

 

     The undersigned Registrant hereby undertakes that:

 

          (1) For purposes of determining any liability under the Securities

     Act, the information omitted from the form of prospectus filed as part of

     this Registration Statement in reliance upon Rule 430A and contained in a

     form of prospectus filed by the Registrant pursuant to

 

                                      II-4

<PAGE>   7

 

     Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to

     be part of this Registration Statement as of the time it was declared

     effective.

 

          (2) For the purpose of determining any liability under the Securities

     Act, each post effective amendment that contains a form of prospectus shall

     be deemed to be a new registration statement relating to the securities

     offered therein, and the offering of such securities at that time shall be

     deemed to be the initial bona fide offering thereof.

 

                                      II-5

<PAGE>   8

 

                                   SIGNATURES

 

  

     Pursuant to the requirements of the Securities Act of 1933, as amended, the

Registrant has duly caused this Amendment No. 1 to Registration Statement to be

signed on its behalf by the undersigned, thereunto duly authorized, in the City

of Stamford, State of Connecticut, on this 6th day of September, 1996.

   

 

                                          MemberWorks Incorporated

 

  

                                          By: /s/  GARY A. JOHNSON

   

 

                                          --------------------------------------

                                             Gary A. Johnson

                                             President, Chief Executive

  

                                             Officer and Director

   

 

  

                                   SIGNATURES

   

 

  

     Pursuant to the requirements of the Securities act of 1933, as amended,

this Amendment No. 1 to Registration Statement has been signed below by the

following persons in the capacities and on the dates indicated.

   

 

  

<TABLE>

<CAPTION>

              SIGNATURE                               TITLE                        DATE

- -------------------------------------   ---------------------------------   ------------------

<C>                                     <S>                                 <C>

        /s/  GARY A. JOHNSON            President, Chief Executive          September 6, 1996

- -------------------------------------     Officer and Director (Principal

           Gary A. Johnson                Executive Officer)

                  *                     Executive Vice President and        September 6, 1996

- -------------------------------------     Director

          Dennis P. Walker

                  *                     Chief Financial Officer             September 6, 1996

- -------------------------------------     (Principal Financial and

           James B. Duffy                 Accounting Officer)

                  *                     Director                            September 6, 1996

- -------------------------------------

         Stephen J. Clearman

                  *                     Director                            September 6, 1996

- -------------------------------------

           Alec L. Ellison

                  *                     Director                            September 6, 1996

- -------------------------------------

         Michael R. O'Brien

                  *                     Director                            September 6, 1996

- -------------------------------------

           Marc S. Tesler

    By:     /s/  GARY A. JOHNSON

- -------------------------------------

           Gary A. Johnson

          Attorney-in-Fact

</TABLE>

   

 

                                      II-6

<PAGE>   9

 

                                 EXHIBIT INDEX

 

  

<TABLE>

<CAPTION>

EXHIBIT                                                                          SEQUENTIAL

  NO.                                  DESCRIPTION                               PAGE NUMBER

- -------   ---------------------------------------------------------------------  -----------

<C>       <S>                                                                    <C>

   **1    Form of Underwriting Agreement. .....................................

   2.1    Agreement and Plan of Corporate Separation, dated August 9, 1995,

          between the Registrant, Impaq Marketing Corporation, Impaq Publishing

          Corp. and Daniel Klabunde.

   3.1    Restated Certificate of Incorporation of the Registrant. ............

 **3.2    Restated Certificate of Incorporation of the Registrant, to be filed

          upon closing of this offering. ......................................

  *3.3    Restated By-laws of the Registrant. .................................

   **4    Specimen Certificate for shares of Common Stock, $0.01 par value, of

          the Registrant. .....................................................

   4.2    Amended and Restated Stockholders' Agreement, dated as of December

          28, 1990, by and among the Registrant and each of the signatories

          thereto, as amended.

   4.3    Amended and Restated Registration Rights Agreement, dated as of

          September 20, 1995 between the Registrant and Brown Brothers Harriman

          & Co. ...............................................................

   4.4    Registration Rights Agreement, dated September 28, 1994 among the

          Registrant and the Stockholders set forth on Schedule I thereto. ....

   **5    Opinion of Hale and Dorr with respect to the validity of the

          securities being offered. ...........................................

  10.1    Amended Employee Incentive Stock Option Plan. .......................

 *10.2    1995 Executive Officers' Stock Option Plan. .........................

 *10.3    1995 Non-Employee Directors' Stock Option Plan. .....................

**10.4    1996 Stock Option Plan. .............................................

**10.5    1996 Employee Stock Purchase Plan. ..................................

 *10.6    401(k) Profit Sharing Plan of the Registrant, dated April 1,

          1996. ...............................................................

 *10.7    Term Lease Master Agreement between IBM Credit Corporation and the

          Registrant, dated as of November 26, 1991. ..........................

  10.8    Master Lease Agreement between Bankers Leasing Association, Inc. and

          the Registrant, dated as of May 7, 1996. ............................

  10.9    Promissory Note between Thomas St. Denis and the Registrant, dated

          September 9, 1994. ..................................................

 10.10    Promissory Note between Gary Johnson and the Registrant, dated

          September 9, 1994. ..................................................

 10.11    Amended and Restated Credit Agreement, dated as of April 8, 1996

          among the Registrant, the lender parties thereto and Brown Brothers

          Harriman & Co. ......................................................

 10.12    Warrant Agreement dated as of September 9, 1994, between the

          Registrant and Brown Brothers Harriman & Co. ........................

 10.13    Form of Warrant for the Purchase of Class A Common Stock, dated March

          30, 1994. ...........................................................

 10.14    Form of Stock Subscription Warrant, dated as of July 31, 1995. ......

 10.15    Form of Stock Subscription Warrant with Voting Rights, dated August

          3, 1995. ............................................................

 10.16    Form of Stock Subscription Warrant, dated August 15, 1995. ..........

</TABLE>

   

<PAGE>   10

 

  

<TABLE>

<CAPTION>

EXHIBIT                                                                          SEQUENTIAL

  NO.                                  DESCRIPTION                               PAGE NUMBER

- -------   ---------------------------------------------------------------------  -----------

<C>       <S>                                                                    <C>

 10.17    Shareholder Guarantee made as of September 9, 1994 by Gary Johnson,

          Thomas St. Denis and Dennis Walker in favor of the lenders named in

          the Credit Agreement and Brown Brothers Harriman & Co. ..............

 10.18    Shareholder Pledge Agreement, dated as of September 9, 1994, among

          Gary Johnson, Thomas St. Denis and Dennis Walker and Brown Brothers

          Harriman & Co. ......................................................

 10.19    Consulting Agreement, dated as of January 1, 1996, by and between the

          Registrant, Giga Information Group, Inc. and Neill Brownstein. ......

+10.20    Agreement dated as of October 7, 1994 by and between Sears, Roebuck

          and Co. and the Registrant. .........................................

+10.21    License Agreement, dated August 1, 1990, by and between the

          Registrant and Sears Roebuck and Co. ................................

 10.22    Lease Agreement between Stamford Towers Limited Partnership and the

          Registrant, dated January 15, 1996. .................................

 10.23    Business Property Lease between V and R Joint Venture and the

          Registrant, dated October 4, 1995. ..................................

 10.24    Arena Tower II Lease Agreement by and between Arena Tower II

          Corporation and the Registrant, dated February 12, 1996, as

          amended. ............................................................

  **11    Computation of unaudited pro forma net loss per share. ..............

  **21    Subsidiaries of the Registrant. .....................................

**23.1    Consent of Hale and Dorr (included in Exhibit 5). ...................

 *23.2    Consent of Price Waterhouse LLP. ....................................

   *24    Power of Attorney. ..................................................

   *27    Financial Data Schedule. ............................................

</TABLE>

   

 

- ---------------

  

 * Previously filed.

   

 

  

** To be filed by amendment.

   

 

  

 + Confidential treatment requested as to certain portions, which portions are

   omitted and filed separately with the Commission.

   

</TEXT>

</DOCUMENT>

<DOCUMENT>

<TYPE>EX-2.1

<SEQUENCE>2

<DESCRIPTION>AGREEMENT AND PLAN OF CORPORATE SEPARATION

<TEXT>

 

<PAGE>   1

                                                                Exhibit 2.1

 

                   AGREEMENT AND PLAN OF CORPORATE SEPARATION

 

         Agreement dated the 9th day of August, 1995 between CardMember

Publishing Corporation, a Delaware corporation with a principal office located

at Stamford, Connecticut ("CardMember"), Impaq Marketing Corporation, a Delaware

corporation with a principal office located at Stamford, Connecticut

("Marketing"), Impaq Publishing Corp., a Nebraska corporation with a principal

office located at Omaha, Nebraska ("Newco") and Daniel Klabunde of Omaha,

Nebraska ("Klabunde").

 

         WHEREAS, on May 18, 1992 CardMember entered into an Agreement (the

"1992 Agreement") with Impaq Publishing Corporation ("Publishing"), Marketing

and Klabunde providing for the acquisition of substantially all of the assets

used in the discount coupon book business which was operated in Omaha, Nebraska

(the "Coupon Book Business"). The 1992 Agreement provided for the issuance of

24,143 shares of Class B Common Stock of CardMember to Publishing.

 

         WHEREAS, the 1992 Agreement was closed in accordance with its terms as

of May 18, 1992.

 

         WHEREAS, Publishing was dissolved shortly after the closing and 24,143

shares of Class B Common Stock of CardMember were distributed to Klabunde, its

sole shareholder.

 

         WHEREAS, Marketing has owned and operated the Coupon Book Business

continuously since May 18, 1992 in conjunction with other businesses.

 

         WHEREAS, Marketing has transferred substantially all of the operating

assets used in the Coupon Book Business to Newco.

<PAGE>   2

 

         WHEREAS, Newco is a wholly owned subsidiary of CardMember and Newco has

title to certain of the operating assets which are used to operate the Coupon

Book Business.

 

         WHEREAS, since May 18, 1992 Klabunde has been President and Chief

Executive Officer of Marketing and has been primarily responsible for the

operation of the Coupon Book Business.

 

         WHEREAS, CardMember now desires to exchange all the issued and

outstanding stock of Newco for all of the Class B Common Stock of CardMember

issued to Klabunde pursuant to the 1992 Agreement.

 

         NOW THEREFORE, in consideration of the foregoing recitals which are

incorporated with and are made a part of this Agreement, and in further

consideration of the mutual covenants and agreements hereinafter contained, the

parties hereto agree as follows:

 

         1.       Transfer of CardMember and Newco shares.

 

                  On the closing date, CardMember shall transfer and assign 100

shares of Newco common stock to Klabunde and Klabunde shall transfer and assign

to CardMember 24,143 shares of Class B Common Stock to CardMember. On the

closing date, Klabunde will deliver certificates for shares of CardMember duly

endorsed with signatures guaranteed with documentary stamps affixed at

Klabunde's expense so as to make CardMember the sole owner thereof free and

clear of all claims and encumbrances. On such closing date, delivery of the

Newco shares will be made to Klabunde. The closing will take place on August 9,

1995 and shall be effective as of the close of business on June 30, 1995.

 

         2.       Release of Liens.

 

                                      -2-

<PAGE>   3

                  Attached hereto as Exhibit 2 is a list of all pledges,

equities, licenses, security interests, claims, liens, or encumbrances (the

"Liens") to which any of the assets of Newco were subject. CardMember shall have

obtained releases of all such Liens covering any of the assets of Newco prior to

the closing. Copies of the releases shall be provided to Newco prior to the

closing.

 

         3.       Representations and Warranties of CardMember.

                  CardMember and Marketing represent and warrant that:

 

                  (a) Cardmember has full power and authority to enter into this

Agreement.

 

                  (b) The 100 shares of Newco common stock to be transferred by

CardMember to Klabunde under Section 1 hereof are, and on the closing date will

be, all of the issued and outstanding stock of Newco, duly authorized, validly

issued, fully paid and non-accessible. CardMember is the lawful and equitable

owner of all the Newco common stock, free and clear of all security interests,

liens, claims, options, charges and encumbrances. Good title, free and clear of

all security interests, liens, claims, rights, charges or other encumbrances

whatsoever to all of the Newco common stock will pass to Klabunde at the

closing.

 

                  (c) Drafts of the audited consolidated financial statements of

CardMember restated as of June 30, 1994 and June 30, 1993, and the unaudited

consolidated balance sheet, consolidated income statement, and consolidated

statement of cash flows for the nine months ended March 31, 1995 (the "Financial

Statements") have been delivered to Klabunde. The Financial Statements are true

and complete statements of the financial condition of CardMember as of the dates

therein specified. Final versions of the Financial Statements will be delivered

to Klabunde within 60 days of the closing. The final version of the Financial

Statements to be

 

                                      -3-

<PAGE>   4

delivered to Klabunde will not differ in any material way from

the drafts of the Financial Statements which have been delivered to Klabunde.

 

                  (d) Except as listed on Exhibit 3(d), since June 30, 1994: (i)

the business and affairs of CardMember and Marketing have been conducted and

carried on in the ordinary course consistent with their past practices; (ii)

except for personal property (including inventory and supplies) purchased, sold

or leased in the ordinary course of business consistent with their past

practices, CardMember and Marketing have not purchased, sold, leased, mortgaged,

pledged or otherwise acquired or disposed of any material properties or assets;

(iii) there has been no adverse change in or with respect to the financial

condition, operations, prospects, rights, results of operations, assets,

management, liabilities or business of CardMember or Marketing and no state of

facts exists which may reasonably be expected to give rise to any such adverse

change; and (iv) there has been no change by CardMember and Marketing in any

method of financial or tax accounting method or practice.

 

                  (e) CardMember has delivered to Klabunde the amended and

restated Articles of Incorporation of CardMember filed in the offices of the

Delaware Secretary of State on September 29, 1994, certified by the Secretary

of State of the State of Delaware. This amendment defines the rights of

Class B Common Shares of CardMember. Such Articles of Incorporation have not

been further amended and are in full force and effect.

 

                  (f) Exhibit 3(f) contains a true, complete and correct list

and description of each pending lawsuit, administrative proceeding, arbitration,

labor dispute, or governmental inspection or investigation which affect the

operations or assets of Newco. To the knowledge of CardMember and Marketing,

there are no material (individually or in the aggregate) legal

 

                                      -4-

<PAGE>   5

actions or administrative or governmental investigations or proceedings

threatened against CardMember or Marketing that would affect the operations or

assets of Newco. To the knowledge of CardMember and Marketing, there is no

existing state of facts, circumstance or contemplated event that is likely to

give rise to a material action, proceeding or investigation which would affect

the operations or assets of Newco.

 

                  (g) Exhibit 3(g) is a balance sheet of Newco which is a true

and complete statement of the financial condition of Newco as of June 30, 1995.

Except as disclosed on Exhibit 3(g), there are no liabilities, either fixed or

contingent, other than normally recurring contracts or obligations in the

ordinary course of business; and no such contracts or obligations are liens or

other liabilities which, if disclosed, would adversely affect the financial

condition of Newco as reflected in Exhibit 3(g).

 

                  (h) Newco has good and marketable title to all of its assets

and properties reflected in its books and records as being owned, including the

assets and properties reflected as being owned in the financial statements

listed on Exhibit 3(g), free and clear of all pledges, leases, equities,

licenses, security interests, claims, liens, encumbrances or defects, except

such as described on Exhibit 3(h).

 

                  (i) Following the transactions contemplated herein, with

respect to CardMember and Impaq, both individually and in the aggregate; (i) the

fair value of CardMember's and Impaq's assets will exceed their respective

liabilities (including identified contingent liabilities); (ii) the present fair

market value of CardMember's and Impaq's assets will be greater than their

respective liability on debts as such debts become absolute and matured;

 

                                      -5-

<PAGE>   6

and (iii) CardMember and Impaq will be able to pay their debts as they mature

following the consummation of the transactions contemplated herein.

 

                  (j) None of the information, documents, certificates or

instruments furnished or to be furnished by CardMember, Marketing or any of

their representatives in connection with this Agreement or otherwise in

connection with the transactions contemplated hereby are false or misleading in

any respect or contain any misstatement of fact or omit to state any facts

required to be stated to make the statement therein not misleading. The

representations and warranties made herein are made by CardMember and Marketing

with the knowledge and expectation that Klabunde and Newco are placing reliance

thereon. To the extent that any portion of the representations and warranties

made herein were made to the knowledge of CardMember or Marketing, CardMember

and Marketing represent that they have made due and reasonable inquiry with

respect thereto. The representations under this Paragraph 3(j) are subject to

the representations contained in Paragraph 11 of this Agreement.

 

         4.       Conditions of Closing.

 

                  At the closing, and as a condition thereof, the following

documents shall be executed and delivered:

 

                  (a) Klabunde' s resignation as an officer and director of

Marketing.

 

                  (b) A General Release by Klabunde in favor of CardMember and

Marketing excepting obligations arising under this Agreement, and a General

Release by CardMember and Marketing in favor of Klabunde excepting obligations

arising under this Agreement.

 

                  (c) Legal opinion of CardMember's counsel in the form attached

hereto as Exhibit 4(d).

 

                                      -6-

<PAGE>   7

 

                  (d) The cancelled Promissory Note between Marketing as the

debtor and CardMember as the lender, executed by Klabunde in his capacity as

President of Marketing and in his individual capacity, in the amount of

$50,006.00, dated September 20, 1994.

 

                  (e) A check payable to the law firm of McGrath, North, Mullin

& Kratz in the amount of $3,000.00 plus any amount for services rendered by

McGrath, North, Mullin & Kratz for the formation of Newco.

 

                  (f) Officer's Certificate of CardMember and Marketing executed

by Gary Johnson as President of CardMember and Marketing.

 

                  (g) Officer's Certificate of Newco executed by Klabunde as

President of Newco.

 

                  (h) Consent of the holders of the Preferred Stock of

CardMember to the transactions contemplated by the Agreement.

 

                  (i) Release on Form UCC-3 from Brown, Brothers & Harriman.

 

         5.       Delivery of Records.

 

                  CardMember agrees that on or before the closing date that it

will cause to be delivered to Newco copies of such corporate records or other

documents which are necessary for the continued operation of the Coupon Book

Business as Klabunde may reasonably request.

 

         6.       Notices.

 

                  Any notice which any of the parties hereto may desire to serve

upon any of the other parties hereto shall be in writing and shall be

conclusively deemed to have been received by the party to whom addressed, if

mailed, postage prepaid, U.S. registered mail, to the following addresses:

 

                                      -7-

<PAGE>   8

 

CardMember Publishing Company

655 Washington Boulevard

Stamford, CT 06901

Attn:    Gary Johnson, President

 

Impaq Marketing Corporation

655 Washington Boulevard

Stamford, CT 06901

Attn: Gary Johnson, President

 

Impaq Publishing Corp.

11225 Davenport, Suite 102

Omaha, NE 68154-2627

 

Daniel Klabunde

11225 Davenport, Suite 102

Omaha, Nebraska 68154-2627

 

         7.       Successors.

 

                  This Agreement shall be binding upon and inure to the benefit

of the successors and assigns of the parties hereto.

 

         8.       Tax Attributes.

 

                  The parties hereto agree that for tax purposes the parties

will each report the transactions contemplated by this Agreement as a tax-free

reorganization pursuant to Internal Revenue Code 368(a)(1)(D) and 355. The

parties hereto agree that the only gain on the transaction that will be reported

will be the gain recognized by Marketing pursuant to Internal Revenue Code

311(b) caused by Marketing's distribution of the Newco assets to CardMember,

such gain to be in an amount equal to no more than $273,299 less Marketing's

basis in such assets. Klabunde agrees that he will not permit Newco to report a

basis for its assets existing on the closing date, including intangibles, which

exceeds $273,299.00. Klabunde agrees that he will not cause Newco to make any

claim for the net operating loss which has been incurred

 

                                      -8-

<PAGE>   9

through June 30, 1995 by Marketing, unless the Internal Revenue Service has

disallowed the use of the net operating loss by CardMember or Marketing.

 

         9.       Indemnification.

 

                  (a)      Indemnity.

 

                  CardMember and Marketing shall indemnify and hold Klabunde and

Newco harmless against and in respect of:

 

                  (i) All debts, liabilities and obligations of CardMember or

Marketing (whether accrued, absolute, contingent, or known or unknown) existing

or arising on or resulting from events which occurred or failed to occur on or

before the closing, to the extent not reflected as a liability in the Newco

balance sheet provided pursuant to Paragraph 3(g) of this Agreement unless such

debt, liability or obligation is one that should have been disclosed by Klabunde

in accordance with the provisions of Paragraph 11 but was not disclosed as

required by Paragraph 11.

 

                  (ii) Any liability, loss, claim, damage or deficiency

resulting directly or indirectly from any misrepresentation, breach of warranty

or nonfulfillment of any agreement on the part of CardMember or Marketing under

this Agreement, or from any misrepresentation in or omission from any

certificate or other instrument furnished or to be furnished to Klabunde or

Newco hereunder.

 

                  (iii) Except to the extent of non-income taxes that are

reserved as a current tax liability on the Newco balance sheet set forth at

Exhibit 3(g), all taxes of Cardmember, Marketing and Newco, and any of their

affiliates, relating to transactions,

 

                                      -9-

<PAGE>   10

business, operations, or matters that occurred or failed to occur on or before

the closing or with respect to any period of such entities through the closing.

 

                  (iv) All other actions, suits, proceedings, demands,

assessments, adjustments, costs and expenses incident to the foregoing,

including, without limitation, actual attorneys' fees and other out-of-pocket

expenses except as otherwise provided in Paragraph 13 of this Agreement.

 

         (b)      Notice of Claims.

 

                  Newco and Klabunde agree to give CardMember notice of any and

all claims asserted against Newco or Klabunde for which indemnification is or

may be sought under this Paragraph 9. Such notice shall be given within a

reasonable time after receipt of written notice of such claim by Newco or

Klabunde. Failure to give such notice shall not abrogate or diminish

CardMember's or Marketing's obligation under this Paragraph 9 if CardMember or

Marketing have or receive knowledge of the existence of any such claim by any

other means or if such failure does not prejudice CardMember's or Marketing's

ability to defend such claim.

 

         (c)      Defense of Claim.

 

                  In any litigation, administrative proceeding, negotiation or

arbitration pertaining to any claim for which indemnification is sought under

this Paragraph 9, CardMember and Marketing shall have the right to select legal

counsel to represent Klabunde and Newco, and to otherwise control such

litigation, proceedings, negotiations and arbitration. If CardMember and

Marketing elect to control such litigation, proceeding, negotiation or

arbitration, Klabunde and Newco shall at all times have the right to fully

participate in the defense at their own expense. If CardMember and Marketing

shall, within a reasonable time after notice, fail to

 

                                      -10-

<PAGE>   11

defend, Klabunde and Newco shall have the right, but not the obligation, to

undertake the defense of and to compromise or settle the claim or other matter

on behalf, for the account, and at the risk of CardMember and Marketing. If the

claim is one that cannot by its nature be defended solely by CardMember and

Marketing then Klabunde and Newco shall make available all information and

assistance as CardMember and Marketing may reasonably request. Notwithstanding

the foregoing provisions of this Paragraph 9, should the subject matter of the

litigation, proceeding, negotiation or arbitration include a claim against

Klabunde and Newco seeking permanent injunctive relief, Klabunde and Newco shall

have the right to take exclusive control of the defense of the entire

proceeding.

 

                  (d)      Costs Included.

 

                           The amounts for which Klabunde and Newco may seek

indemnification under this Paragraph 9 shall extend to and include the actual

attorney's fees, accountant's fees, costs of litigation and other reasonable

expenses incurred in the defense of any claim and any amounts paid in settlement

or compromise of any claims asserted against them to the extent that the claim

asserted would have been subject to the indemnification provisions of this

Paragraph 9.

 

         10. CardMember and Newco Undertakings After the Closing.

 

         After the closing, CardMember or Newco, whichever is applicable, hereby

agrees to the following:

 

                  (a) CardMember, and any entity in which CardMember has an

interest, shall not, for a period of two (2) years following the closing, sell

coupon books with a thickness of more than one half inch each to charitable

organizations located within the following markets: Los Angeles San Gabriel

Valley, Denver, Phoenix, San Francisco, San Francisco South Bay,

 

                                      -11-

<PAGE>   12

Seattle, San Diego, Los Angeles South Bay, Los Angeles West, Omaha, Lincoln,

Kansas City, St. Louis, Fort Lauderdale, Dallas, and Houston.

 

                  (b) CardMember will sell to Newco an amount of CardMember's

Travel Club Membership Books as Newco shall request, not to exceed 10,000

copies, at a price not to exceed $2.00 per book. Any request by Newco for an

amount of CardMember's Travel Club Membership Books shall be for a minimum of

2,000 books and shall be in 2,000 book increments thereafter. CardMember shall

provide any requested books within 30 days of CardMember's receipt of Newco's

order.

 

                  (c) CardMember agrees to sell to Newco movie theater tickets

for American Multi- Cinema, Pacific Theaters, Sony/Loews Theaters, National

Amusements, General Cinema and Cineplex Odeon movie theaters in an amount equal

to the purchase price paid by CardMember for such tickets, for the duration of

CardMember's agreement with the theaters and/or ticket availability.

 

                  (d) Newco agrees to sell to CardMember movie theater tickets

for United Artists Theaters and Edward Theater in an amount equal to the

purchase price paid by Newco for such tickets, for the duration of Newco's

agreement with the theaters and/or ticket availability.

 

         11.      Representation of Klabunde.

 

                  Klabunde represents that he has disclosed all material facts,

liabilities, or obligations, contingent or otherwise, relating to Newco and its

business operations to CardMember and Impaq of which Klabunde has actual

knowledge or, through the exercise of reasonable due diligence should have had

knowledge of, and Klabunde further represents that

 

                                      -12-

<PAGE>   13

 

<PAGE>   14

all material assets and liabilities of Newco of which Klabunde has knowledge

have been disclosed on the balance sheet listed as Exhibit 3(g).

 

         12.      Survival of Representations.  Warranties.  Covenants and

Indemnifications.

 

                  All representations, warranties, covenants and

indemnifications made in or pursuant to this Agreement shall survive the closing

hereunder until such time as the applicable statutory period of limitations,

plus any possible extensions, if an extension has been granted or agreed to, for

any federal, state or local tax liabilities has expired with respect to the

periods in which the transactions contemplated by this Agreement occur, except

for any indemnification under Paragraph 9(a)(i), 9(a)(iii), 9(a)(iv), 9(b), 9(c)

and 9(d), which shall survive indefinitely.

 

         13.      Burger King Litigation.

 

                  The parties hereto agree that any liability resulting from

that certain lawsuit filed against Marketing by Simmonds Restaurant Management,

Inc. in the District Court of Douglas County, Nebraska, Docket 938, No. 943 (the

"Burger King Litigation"), which lawsuit is listed as a liability on the Newco

balance sheet provided in accordance with Paragraph 3(f), shall be the

responsibility of Newco, subject to the following provisions and exception.

Newco shall be responsible for resolving this litigation as soon as practical,

including the payment of a reasonable settlement amount; provided, however, that

the parties hereto also agree that CardMember and Marketing shall reimburse

Newco in an amount equal to one-half (1/2) the amount of any liability incurred

by Newco in resolving the matter (including attorney's fees, accountant's fees,

costs of litigation and other reasonable expenses incurred in the defense of

the claim) whether such amount is the result of final litigation or settlement

of the matter. CardMember and Marketing reserve the right to settle the

litigation for an amount which

 

                                      -13-

<PAGE>   15

CardMember and Marketing, in their discretion, find reasonable if Newco has not

resolved the matter by September 30, 1995. Any settlement by CardMember or

Marketing of the Burger King Litigation shall in no way relieve CardMember or

Marketing of their responsibility to reimburse Newco for one-half (1/2) the

amount of any liability incurred by Newco and resulting from the Burger King

Litigation, as provided in this Paragraph 13. The authority given to CardMember

and Marketing to settle the Burger King Litigation after September 30, 1995 does

not diminish in any way Newco's authority over any litigation in connection with

the Burger King Litigation, whether occurring before or after September 30,

1995, which litigation, if any, shall be under the complete control of Newco.

 

         14.      Confidentiality.

 

                  Klabunde and Newco shall hold in strict confidence and shall

not disclose to any third party, unless ordered to do so by a court of competent

jurisdiction, any of the financial information concerning CardMember and

Marketing which is not generally available to the public which has been provided

by CardMember and Marketing to Klabunde and/or Newco in conjunction with the

transactions contemplated by this Agreement.

 

                                      -14-

<PAGE>   16

 

         In witness whereof the parties have set their hands as of the year and

date first above written.

 

                                               CARDMEMBER PUBLISHING CORPORATION

                                     

                                               By:      /s/ Gary Johnson

                                                        ------------------------

                                                        Gary Johnson

                                               Its:     President

                                     

                                               IMPAQ MARKETING CORPORATION

                                     

                                               By:      /s/ Gary Johnson

                                                        ------------------------

                                                        Gary Johnson

                                               Its:     President

                                     

                                               IMPAQ PUBLISHING CORP.

                                     

                                               By:      /s/ Daniel Klabunde

                                                        ------------------------

                                                        Daniel Klabunde

                                               Its:     President

                                     

                                               DANIEL KLABUNDE

                                     

                                               /s/ Daniel Klabunde

                                               ---------------------------------

 

 

                                      -15-

<PAGE>   17

 

                                   EXHIBIT 2

 

                                     LIENS

 

         All of the assets of Impaq Marketing Corporation are subject to a lien

in favor of Brown, Brothers & Harriman. A UCC financing statement has been filed

with the Secretary of State of Nebraska. A Release of this Lien will be

delivered at the closing.

 

         The transactions contemplated by the Agreement require the consent of

holders of the Preferred Stock of CardMember Publishing Corporation. CardMember

will obtain a written consent of the Preferred Stockholders of the Corporation

to the Agreement and Plan of Corporate Separation.

 

                                      -16-

<PAGE>   18

 

                                  EXHIBIT 3(d)

 

                    CONDUCT OF BUSINESS SINCE JUNE 30. 1994

 

Since June 30, 1994:

 

         (i)      The business and affairs of CardMember and Marketing have been

                  conducted and carried on in the ordinary course consistent

                  with their past practices;

 

         (ii)     Except for personal property (including inventory and

                  supplies) purchased, sold or leased in the ordinary course of

                  business consistent with their past practices, CardMember and

                  Marketing have not purchased, sold, leased, mortgaged, pledged

                  or otherwise acquired or disposed of any material properties

                  or assets;

 

         (iii)    There has been no adverse change in or with respect to the

                  financial condition, operations, prospects, rights, results of

                  operations, assets, management liabilities or business of

                  CardMember or Marketing and no state of facts exist which may

                  reasonably be expected to give rise to any such adverse

                  change; and

 

         (iv)     There has been no change by CardMember and Marketing in any

                  method of financial or tax accounting method or practice.

 

                                      -17-

<PAGE>   19

 

                                  EXHIBIT 3(f)

 

                                   LITIGATION

 

         The only litigation for which Newco is responsible is a lawsuit pending

in the District Court of Douglas County, Nebraska, brought by Simmonds

Restaurant Management, Inc. bearing Docket Number 938, No. 943. Newco has

assumed responsibility for this lawsuit pursuant to Paragraph 13 of the

Agreement.

 

                                      -18-

<PAGE>   20

 

                                  EXHIBIT 3(g)

 

                             IMPAQ PUBLISHING CORP.

 

                         BALANCE SHEET AT JUNE 30, 1995

 

<TABLE>

<CAPTION>

ASSETS

- ------

<S>                                                                   <C>      

Cash On-Hand                                                          $  175,000

 

Bill of Sale dated August ___, 1995                                          -0-

 

Total Assets$175.000

 

LIABILITIES(1)

 

Trade Payables                                                               -0-

                                                                      ----------

 

Total Liabilities                                                     $      -0-

 

STOCKHOLDERS EQUITY

 

Common Stockholders Equity, Common Stock,

$1 Par Value, Authorized 10,000 Shares,

Issue 100 Shares                                                      $      100

 

Additional Paid-In Capital                                               174,900

 

Total Stockholder's Equity                                            $  175,000

                                                                      ----------

 

TOTAL LIABILITIES AND EQUITY                                          $  175,000

                                                                      ==========

</TABLE>

 

 

- ---------------------

         (1) There is a pending litigation matter against the company by

Simmonds Restaurant Management Service, Inc. in the District Court of Douglas

County, Nebraska, Docket Number 938, No. 943. The amount of damages which may be

assessed against the company is unknown.

 

                                      -19-

<PAGE>   21

                                  EXHIBIT 3(h)

 

                                TITLE TO ASSETS

 

         Newco has good and marketable title to all of its assets and properties

reflected in its books and records as being owned, including the assets and

properties reflected as being owned in the financial statements listed on

Exhibit 3(g), free and clear of all pledges, leases, equities, licenses,

security interests, claims, liens, encumbrances or defects.

 

                                      -20-

<PAGE>   22

 

                                  EXHIBIT 4(d)

 

                                 LEGAL OPINION

 

                                             July ___, 1995

 

Mr.  Dan Klabunde

11225 Davenport, Suite 108

Omaha, Nebraska 68154-2627

 

Impaq Publishing Corp.

11225 Davenport, Suite 108

Omaha, Nebraska 68154-2627

 

Gentlemen:

 

         We have acted as counsel for CardMember Publishing Corporation, a

Delaware corporation, and Impaq Marketing Corporation, a Delaware corporation

(hereinafter collectively referred to as the "Companies"), in connection with

the preparation, execution, delivery and performance of a certain Agreement and

Plan of Corporate Separation dated of even date herewith (the "Agreement") by

and between the Companies and you. This opinion is delivered to you pursuant to

Paragraph 4(d) of the Agreement. Unless otherwise defined herein, or as the

context hereof otherwise requires, each term used herein with its initial letter

capitalized has the meaning given to such term in the Agreement.

 

         As such counsel, we have participated in the preparation of, or have

otherwise examined, the Agreement and have reviewed the Articles of

Incorporation, By-Laws and certain other corporate records of the Companies, and

such other agreements, certificates, instruments and documents and matters of

law as we have deemed necessary to reach the conclusions hereinafter set forth.

 

         Based on the foregoing, it is our opinion that:

 

         1. The Companies are corporations duly organized, validly existing and

in good standing under the laws of the State of Delaware and have all requisite

corporate power and authority to own, operate and lease their properties and to

carry on their business as now being conducted. The Companies have all requisite

corporate power and authority to execute and deliver the Agreement and the

various other agreements required to be entered into by them pursuant to the

terms of the Agreement (the "Ancillary Agreements"), and to carry out the

respective terms thereof.

 

         2. The execution, delivery and performance by the Companies of the

Agreement and the Ancillary Agreements, and the consummation by them of the

transactions contemplated

 

                                      -21-

<PAGE>   23

therein, have been duly authorized by the Companies' Boards of Directors and by

all other necessary corporate action on the part of the Companies. The Agreement

and the Ancillary Agreements constitute the legal, valid and binding obligation

of the Companies and the Shareholders enforceable in accordance with their

respective terms.

 

         3. The execution, delivery and performance by the Companies of the

Agreement and the Ancillary Agreements, and the consummation by them of the

transactions contemplated therein, will not (a) violate or conflict with any

provision of the Companies' Articles of Incorporation or By-Laws; (b) violate

any provision of any applicable law, statute, rule or regulation to which the

assets of Newco or the Companies are subject or any judgment, order, writ or

decree of any court applicable to the assets of Newco or the Companies or any

governmental permit, license, order or approval held or utilized by the

Companies in the operation of their businesses; or (c) result in the breach of,

conflict with, or constitute a default or event of default under (whether by

notice or the lapse of time or both), or result in the modification or

termination of, or result in the creation or imposition of any lien, security

interest, charge or encumbrance upon any of the assets of Newco, pursuant to any

commitment, contract or other agreement or instrument to which the Companies or

any of their shareholders are a party or by which the Companies or any of their

shareholders or any of their respective assets or property is or may be bound or

affected or from which the Companies or any of their shareholders derives

substantial benefits.

 

         4. To the best of our knowledge, Newco has good and marketable title to

all its assets, free and clear of all liens, claims, encumbrances, pledges,

leases, security interests, or defects, except such as described on Exhibit 3(h)

to the Agreement.

 

         5. To the best of our knowledge, no consent, approval, authorization or

order of, or qualification with, any court, regulatory authority or other

governmental body is required in connection with the consummation by the

Companies of the transactions contemplated by the Agreement or the Ancillary

Agreements.

 

         We are members of the Bar of the State of Connecticut and do not

purport to be experts on any laws other than the laws of the State of

Connecticut, the business corporation laws of the State of Connecticut and

Delaware and the federal laws of the United States. Consequently, we do not

render any opinions on any laws other than the laws of the State of

Connecticut, the business corporation laws of the State of Connecticut and

Delaware and the federal laws of the United States.

 

                                                    Very truly yours           

                                                   

                                                    DISERIO MARTIN O'CONNOR &

                                                    CASTIGLIONI

                                                   

                                                    By: /s/ Brian O'Connor

                                                       ------------------------

                                                       Brian O'Connor

 

                                      -22-

</TEXT>

</DOCUMENT>

<DOCUMENT>

<TYPE>EX-3.1

<SEQUENCE>3

<DESCRIPTION>RESTATED CERTIFICATE OF INCORPORATION

<TEXT>

 

<PAGE>   1

                                                                     Exhibit 3.1

 

                     RESTATED CERTIFICATE OF INCORPORATION

 

                                       OF

 

                            MEMBERWORKS INCORPORATED

 

                  (FORMERLY CARDMEMBER PUBLISHING CORPORATION)

                          (INCORPORATED JULY 12, 1989)

 

                        PURSUANT TO SECTION 242 AND 245

                         OF THE GENERAL CORPORATION LAW

                            OF THE STATE OF DELAWARE

 

         MEMBERWORKS INCORPORATED (the "Corporation"), a corporation organized

and existing under and by virtue of the General Corporation Law of the State of

Delaware (the "General Corporation Law"), hereby certifies as follows:

 

         FIRST: The name of the Corporation is Memberworks Incorporated. A

Certificate of Incorporation of the Corporation was originally filed by the

Corporation with the Secretary of the State of Delaware on July 12, 1989.

 

         SECOND: The Restated Certificate of Incorporation which restates and

integrates the Certificate of Incorporation of the Corporation, as amended, was

duly adopted in accordance with the provisions of Section 242 and 245 of the

General Corporation Law, and was approved by unanimous consent of the Board of

Directors of the Corporation.

 

         THIRD: The text of the Certificate of Incorporation, as amended, is

hereby restated to read in its entirety as follows:

 

                                   ARTICLE I

       

         The name of the Corporation is MemberWorks Incorporated.

 

                                   ARTICLE II

 

         The address, including street, number, city and county, of the

registered office of the corporation in the State of Delaware is 1013 Centre

Road, County of New Castle, and the name of the registered agent of the

corporation in the State of Delaware at such address is The Prentice-Hall

Corporation System, Inc.

 

                                  ARTICLE III

               

         The purpose of the corporation is to engage in any lawful act or

activity for which corporations may be organized under the General Corporation

Law of the State of Delaware.

<PAGE>   2

                                   ARTICLE IV

 

         The total number of shares of all classes of stock which the

Corporation has authority to issue is Forty-One Million (41,000,000) shares,

consisting of Forty Million (40,000,000) shares of Common Stock, par value of

One Cent ($0.01) per share (the "Common Stock"), and One Million (1,000,000)

shares of Preferred Stock, par value of One Cent ($0.01) per share (the

"Preferred Stock").

 

                                (a) COMMON STOCK

       

         Section 1. Designation. The Common Stock shall be divided into Common

Stock, of which the corporation has the authority to issue Thirty-Two Million

(32,000,000) shares, and Class A Common Stock, of which the corporation has

authority to issue Eight Million (8,000,000) shares.

 

         The Common Stock and the Class A Common Stock are hereafter

collectively referred to as the "Common Stock". Except as otherwise provided

herein, all shares of Common Stock and Class A Common Stock will be identical

and will entitle the holders thereof to the same rights, privileges, benefits

and notices.

 

         Section 2. Voting Rights. The holders of shares of Common Stock shall

be entitled to one vote for each share so held with respect to all matters voted

on by the stockholders of the corporation, subject in all cases to Section

(b)(II)(4) and (b)(III)(1)(b)(iii) of this Article IV.

 

         Section 3. Liquidation Rights. Subject to the prior and superior rights

of the Preferred Stock and the special right of the Class A Common Stock as set

forth in Section (b)(II)(2) of this Article IV, upon any voluntary or

involuntary liquidation, dissolution or winding up of the affairs of the

corporation, the holders of Common Stock and the holders of Convertible

Preferred Stock shall be entitled to receive all remaining assets of the

corporation ratably on a share for share basis as if the Convertible Preferred

Stock had been converted to Common Stock.

 

         Section 4. Dividends. Subject to the prior and superior rights of the

Preferred Stock, dividends may be paid on the Common Stock as and when declared

by the Board of Directors, and the holders of Common Stock shall be entitled to

participate in such dividends ratably on a per share basis; provided that if

dividends are declared which are payable in shares of Common Stock or Class A

Common Stock, dividends shall be declared which are payable at the same rate on

both classes of stock and the dividends payable in shares of Common Stock shall

be payable to holders of that class of stock and the dividends payable in shares

of Class A Common Stock shall be payable to holders of that class of stock;

provided further that no dividend may be declared or paid on the Common Stock

(other than a dividend payable in the form of shares of Common Stock)

 

 

                                      -2-

<PAGE>   3

unless an equivalent dividend is declared and paid on the Convertible Preferred

Stock in accordance with Section (b)(II)(1) of this Article IV.

 

         Section 5. Conversion. The holders of Class A Common Stock shall have

conversion rights as follows:

 

         (a) Right to Convert. Each share of Class A Common Stock shall be

convertible, without the payment of any additional consideration by the holder

thereof and at the option of the holder thereof, at any time after the date of

issuance of such share, at the office of the corporation or any transfer agent

for the Common Stock, into one fully paid and nonassessable share of Common

Stock.

 

         (b) Automatic Conversion. Each share of Class A Common Stock shall,

without any action on the part of the holder thereof, automatically be converted

into one share of Common Stock upon the closing of a Qualifying Public Offering

(as defined in Section (b)(I)(1)(b) of this Article IV) (in the event of which

offering, the person(s) entitled to receive the Common Stock issuable upon such

conversion of the Class A Common Stock shall not be deemed to have converted

that Class A Common Stock until immediately prior to the closing of such

offering). Thereafter, all certificates representing shares of Class A Common

Stock shall be deemed to represent shares of Common Stock. Each person who holds

of record Class A Common Stock immediately prior to such automatic conversion

shall be entitled to all dividends which have accrued or been declared to the

time of the automatic conversion, but not paid on the Class A Common Stock,

pursuant to Section 4 hereof. Such dividends shall be paid to all such holders

within thirty (30) days of the automatic conversion.

 

         (c) Mechanics of Conversion. (i) Before any holder of Class A Common

Stock shall be entitled to convert the same into shares of Common Stock pursuant

to Section 5(a) above, such holder shall surrender the certificate or

certificates therefor, duly endorsed, at the office of the corporation or of any

transfer agent for the Common Stock, and shall give written notice to the

corporation at such office that such holder elects to convert the same and shall

state therein such holder's name or the name or names of such holder's nominees

in which such holder wishes the certificate or certificates for shares of Common

Stock to be issued. The corporation shall, as soon as practicable thereafter

(but in any event within five business days), issue and deliver at such office

to such holder of Class A Common Stock, or to such holder's nominee or nominees,

a certificate or certificates for the number of shares of Common Stock to which

such holder shall be entitled as set forth above. Such conversion shall be

deemed to have been made immediately prior to the close of business on the date

of such surrender of the shares of Class A Common Stock to be converted, and the

person or persons entitled to receive the shares of Common Stock issuable upon

conversion shall be treated for all purposes as the record holder or holders of

such shares of Common Stock on such date.

 

 

                                       -3-

<PAGE>   4

         (ii) Any holder of Class A Common Stock whose shares have been

converted into shares of Common Stock pursuant to Section 5(b) above shall be

entitled to surrender the certificate or certificates therefor, duly endorsed,

at the office of the corporation or any transfer agent for the Common Stock, and

the corporation shall, as soon as practicable thereafter (but in any event

within five business days), issue and deliver at such office to such holder, or

to such holder's nominee or nominees, a certificate or certificates for the

number of shares of Common Stock to which such holder shall be entitled as set

forth above.

 

         (d) Subdivisions. If the corporation in any manner subdivides or

combines the outstanding shares of one class of Common Stock, the outstanding

shares of the other class of Common Stock will be proportionately subdivided or

combined."

 

                              (b) PREFERRED STOCK

 

         Section 1. Designation. The Preferred Stock shall be divided into seven

series, Series A Preferred Stock, of which the corporation has authority to

issue TWO HUNDRED TWENTY FIVE THOUSAND (225,000) shares, Series B Preferred

Stock, of which the corporation has authority to issue TWO HUNDRED EIGHTEEN

THOUSAND EIGHT HUNDRED EIGHTEEN (218,818) shares, Series C Preferred Stock, of

which the corporation has authority to issue EIGHTY EIGHT THOUSAND THREE HUNDRED

THIRTY-NINE (88,339) shares, Series D Preferred Stock, of which the corporation

has authority to issue FORTY-EIGHT THOUSAND THREE HUNDRED EIGHTY-THREE (48,383)

shares, Series E Preferred Stock, of which the corporation has authority to

issue FORTY-TWO THOUSAND ONE HUNDRED SEVENTY-EIGHT (42,178) shares, Series F

Preferred Stock, of which the corporation has authority to issue THIRTY-EIGHT

THOUSAND THREE HUNDRED FIFTY-EIGHT (38,358) shares, and Series H Preferred

Stock, of which the corporation has authority to issue THREE HUNDRED SEVENTEEN

THOUSAND ONE HUNDRED FIFTY (317,150) shares. There are no authorized shares of

Series G Preferred Stock.

 

         The Series A Preferred Stock, the Series B Preferred Stock, the Series

C Preferred Stock, the Series D Preferred Stock, the Series E Preferred Stock,

the Series F Preferred Stock, and the Series H Preferred Stock are hereafter

collectively referred to as the "Preferred Stock." The Series A Preferred Stock,

the Series B Preferred Stock, the Series C Preferred Stock, the Series D

Preferred Stock and Series H Preferred Stock are collectively referred to as the

"Convertible Preferred Stock." The Series E Preferred Stock and the Series F

Preferred Stock are collectively referred to as the "Mezzanine Preferred Stock."

 

         Except as otherwise provided herein, all shares of Series A Preferred

Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred

Stock, Series E Preferred Stock, Series F Preferred Stock and Series H Preferred

Stock will be identical

 

 

                                       -4-

<PAGE>   5

and will entitle the holders thereof to the same rights, privileges, benefits

and notices.

 

I. Term Applicable Only to Convertible Preferred Stock.

 

         Section 1. Conversion into Common Stock. The holders of the Convertible

Preferred Stock shall have conversion rights as follows (the "Conversion

Rights"):

 

         (a) Right to Convert. Each share of Convertible Preferred Stock shall

be convertible, without the payment of any additional consideration by the

holder thereof and at the option of the holder thereof, at any time after the

date of issuance of such share, at the office of the corporation or any transfer

agent for the Preferred Stock, into such number of fully paid and nonassessable

shares of Class A Common Stock as is determined by dividing (i) in the case of

the Series A Preferred Stock, three dollars and thirty-three and one third cents

($3.3333) by the Series A Conversion Price, determined as hereinafter provided,

in effect at the time of conversion, (ii) in the case of the Series B Preferred

Stock, Nine Dollars and Fourteen Cents ($9.14) by the Series B Conversion Price,

determined as hereinafter provided, in effect at the time of the conversion,

(iii) in the case of the Series C Preferred Stock, Eleven Dollars and Thirty Two

Cents ($11.32) by the Series C Conversion Price, determined as hereinafter

provided, in effect at the time of the conversion, (iv) in the case of the

Series D Preferred Stock, Fifteen Dollars and Fifty Cents ($15.50) by the Series

D Conversion Price, determined as hereinafter provided, in effect at the time of

such conversion and (v) in the case of the Series H Preferred Stock, forty

dollars and ninety nine cents ($40.99) by the Series H Conversion Price,

determined as hereinafter provided, in effect at the time of the conversion. The

Conversion Price at which shares of Class A Common Stock shall be deliverable

upon conversion without the payment of any additional consideration by the

holder thereof shall initially be three dollars and thirty-three and one third

cents ($3.3333) per share of Class A Common Stock for the Series A Preferred

Stock (the "Series A Conversion Price"), nine dollars and fourteen cents ($9.14)

per share of Class A Common Stock for the Series B Preferred Stock (the "Series

B Conversion Price"), eleven dollars and thirty-two cents ($11.32) per share of

Class A Common Stock for the Series C Preferred Stock (the "Series C Conversion

Price"), fifteen dollars and fifty cents ($15.50) per share of Class A Common

Stock for the Series D Preferred Stock (the "Series D Conversion Price") and

forty dollars and ninety nine cents ($40.99) per share of Class A Common Stock

for the Series H Preferred Stock (the "Series H Conversion Price"). Such initial

Series A Conversion Price, Series B Conversion Price, Series C Conversion Price,

Series D Conversion Price and Series H Conversion Price shall be subject to

adjustment, in order to adjust the number of shares of Class A Common Stock into

which the Convertible Preferred Stock is convertible, as hereinafter provided.

 

         (b) Automatic Conversion. Each share of Convertible Preferred Stock

shall, without any action on the part of the holder thereof, automatically be

converted into such number of fully paid and nonassessable shares of Class B

Common Stock as is

 

 

                                       -5-

<PAGE>   6

determined by dividing (i) in the case of the Series A Preferred Stock, three

dollars and thirty-three and one third cents ($3.3333) by the Series A

Conversion Price in effect at the time of conversion, (ii) in the case of the

Series B Preferred Stock, nine dollars and fourteen cents ($9.14) by the Series

B Conversion Price in effect at the time of the conversion, (iii) in the case of

the Series C Preferred Stock, eleven dollars and thirty-two cents ($11.32) by

the Series C Conversion Price in effect at the time of the conversion, (iv) in

the case of the Series D Preferred Stock, fifteen dollars and fifty cents

($15.50) by the Series D Conversion Price in effect at the time of the

conversion, and (v) in the case of the Series H Preferred Stock, forty dollars

and ninety-nine cents ($40.99) by the Series H Conversion Price in effect at the

time of the conversion, upon the closing of a firm commitment underwritten

public offering pursuant to an effective registration statement under the

Securities Act of 1933, as amended, covering the offer and sale of Common Stock

for the account of the corporation to the public at a public offering price of

at least one and one-half times the then effective Series H Conversion Price in

which the aggregate net proceeds (after underwriters discounts and commissions)

to the Company are at least $10,000,000 ("Qualifying Public Offering") (in the

event of which offering, the person(s) entitled to receive the Class B Common

Stock issuable upon such conversion of the Convertible Preferred Stock shall not

be deemed to have converted that Convertible Preferred Stock until immediately

prior to the closing of such offering). Thereafter, all certificates

representing shares of Convertible Preferred Stock so converted shall be deemed

to represent shares of Class B Common Stock. Each person who holds of record

Convertible Preferred Stock immediately prior to such automatic conversion shall

be entitled to all dividends which have accrued or been declared to the time of

the automatic conversion, but not paid on the Convertible Preferred Stock,

pursuant to Section (b) (11) (1) hereof. Such dividends shall be paid to all

such holders within thirty (30) days of the automatic conversion.

 

         (c) Mechanics of Conversion. (i) No fractional shares of Common Stock

shall be issued upon conversion of the Convertible 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 Series A Conversion Price, in the case of the Series A Preferred

Stock, the then effective Series B Conversion Price, in the case of the Series B

Preferred Stock, the then effective Series C Conversion Price, in the case of

the Series C Preferred Stock, the then effective Series D Conversion Price, in

the case of the Series D Preferred Stock, and the then effective Series H

Conversion Price, in the case of the Series H Preferred Stock.

 

                  (ii) Before any holder of Convertible Preferred Stock shall be

entitled to convert the same into full shares of Common Stock pursuant to

Section 1(a) above, such holder shall surrender the certificate or certificates

therefor, duly endorsed, at the office of the corporation or of any transfer

agent for the Convertible Preferred Stock, and shall give written notice to the

corporation at such office that such holder elects to convert the same and shall

state therein such holder's name or the name or names of such holder's nominees

in which such holder wishes the certificate or

 

 

                                       -6-

<PAGE>   7

certificates for shares of Class A Common Stock to be issued. The corporation

shall, as soon as practicable thereafter (but in any event within five business

days), issue and deliver at such office to such holder of Convertible Preferred

Stock, or to such holder's nominee or nominees, a certificate or certificates

for the number of shares of Common Stock to which such holder shall be entitled

as set forth above, together with cash in lieu of any fraction of a share. Such

conversion shall be deemed to have been made immediately prior to the close of

business on the date of such surrender of the shares of Convertible Preferred

Stock to be converted, and the person or persons entitled to receive the shares

of Common Stock issuable upon conversion shall be treated for all purposes as

the record holder or holders of such shares of Common Stock on such date.

 

                  (iii) Any holder of Convertible Preferred Stock whose shares

have been converted into shares of Class B Common Stock pursuant to Section 1(b)

above shall be entitled to surrender the certificate or certificates therefor,

duly endorsed, at the office of the corporation or any transfer agent for the

Convertible Preferred Stock, and the corporation shall as soon as practicable

(but in any event within five business days), issue and deliver at such office

to such holder, or to such holder's nominee or nominees, a certificate or

certificates for the number of shares of Class B Common Stock to which such

holder shall be entitled as set forth above, together with cash in lieu of any

fraction of a share.

 

         (d) Adjustments to Conversion Price for Diluting Issues:

 

                  (i) Special Definitions. For purposes of this Section 1(d),

the following definitions shall apply:

 

                           (1) "Option" shall mean rights, options or warrants

to subscribe for, purchase or otherwise acquire either Common Stock or

Convertible Securities.

 

                           (2) "Original Issue Date" shall mean the date on

which a share of Convertible Preferred Stock was first issued.

 

                           (3) "Convertible Securities" shall mean any evidences

of indebtedness, shares (other than Common Stock and Convertible Preferred

Stock) or other securities directly or indirectly convertible into or

exchangeable for Common Stock.

 

                           (4) "Conversion Price" shall mean the Series A

Conversion Price, in the case of the Series A Preferred Stock, the Series B

Conversion Price, in the case of the Series B Preferred Stock, the Series C

Conversion Price, in the case of the Series C Preferred Stock, the Series D

Conversion Price, in the case of the Series D Preferred Stock and the Series H

Conversion Price in the case of the Series H Preferred Stock. All adjustments to

the Conversion Price pursuant to this Section 1(d) shall be computed separately

for the Series A Preferred Stock (based on the Series A Conversion

 

 

                                       -7-

<PAGE>   8

Price), for the Series B Preferred Stock (based on the Series B Conversion

Price), for the Series C Preferred Stock (based on the Series C Conversion

Price), for the Series D Preferred Stock (based on the Series D Conversion

Price) and for the Series H Preferred Stock (based on the Series H Conversion

Price).

 

                           (5) "Additional Shares of Common Stock" shall mean

all shares of Common Stock issued (or, pursuant to Section 1 (d) (iii), deemed

to be issued) by the corporation after the Original Issue Date, other than

shares of Common Stock issued or issuable:

 

                           (A) upon conversion of shares of Convertible

Preferred Stock;

 

                           (B) to officers, directors or employees of, or

consultants to, the corporation pursuant to a stock purchase or option plan or

other employee stock incentive program (collectively, the "Plans") approved by

the Board of Directors in an amount not to exceed two hundred fifty-five

thousand (225,000) shares of Class B Common Stock (including all outstanding

options to purchase Class B Common Stock issued pursuant to the Plans);

 

                           (C) upon conversion of shares of Class A Common

Stock;

 

                           (D) to certain stockholders of the corporation

pursuant to a Purchase Agreement dated as of May 4, 1993 and March 30, 1994

between the corporation and such stockholders;

 

                           (E) in connection with the purchase by a wholly-

owned subsidiary of the corporation of all the assets of Impaq Publishing

Corporation pursuant to that certain Agreement and Plan of Reorganization, dated

as of May 18, 1992, in an amount not to exceed Twenty Four Thousand One Hundred

Forty-Three (24,143) shares of Class B Common Stock;

 

                           (F) upon issuance or exercise of the Warrants;

 

                           (G) upon issuance or exercise of the Voting Warrants;

or

 

                           (H) by way of dividend or other distribution on

shares of Common Stock excluded from the definition of Additional Shares of

Common Stock by the foregoing clauses (A), (B), (C), (D), (E), (F), (G), or this

clause (H) or on shares of Common Stock so excluded.

 

                  (ii) No Adjustment of Conversion Price. No adjustment in the

number of shares of Common Stock into which the Convertible Preferred Stock is

convertible shall be made, by adjustment in the Conversion Price of Convertible

Preferred Stock in

 

 

                                       -8-

<PAGE>   9

respect of the issuance of Additional Shares of Common Stock or otherwise,

unless the consideration per share for an Additional Share of Common Stock

issued or deemed to be issued by the corporation is less than the Conversion

Price in effect on the date of, and immediately prior to, the issue of such

Additional Share of Common Stock.

 

                  (iii) Issue of Securities Deemed Issue of Additional Shares of

Common Stock.

 

                           (1) Options and Convertible Securities. In the event

the corporation at any time or from time to time after the Original Issue Date

shall issue any Options or Convertible Securities or shall fix a record date for

the determination of holders of any class of securities entitled to receive any

such Options or Convertible Securities, then the maximum number of shares (as

set forth in the instrument relating thereto without regard to any provisions

contained therein for a subsequent adjustment of such number) of Common Stock

issuable upon the exercise of such Options or, in the case of Convertible

Securities and Options therefor, the conversion or exchange of such Convertible

Securities, shall be deemed to be Additional Shares of Common Stock issued as of

the time of such issue or, in case such a record date shall have been fixed, as

of the close of business on such record date, provided that Additional Shares of

Common Stock shall not be deemed to have been issued unless the consideration

per share (determined pursuant to Section 1(d)(v) hereof), of such Additional

Shares of Common Stock would be less than the Conversion Price in effect on the

date of and immediately prior to such issue, or such record date, as the case

may be, and provided further that in any such case in which Additional Shares of

Common Stock are deemed to be issued:

 

                           (A) no further adjustment in the Conversion Price

shall be made upon the subsequent issue of Convertible Securities or shares of

Common Stock upon the exercise of such Options or conversion or exchange of such

Convertible Securities;

 

                           (B) if such Options or Convertible Securities by

their terms provide, with the passage of time or otherwise, for any increase or

decrease in the consideration payable to the corporation, or increase or

decrease in the number of shares of Common Stock issuable, upon the exercise,

conversion or exchange thereof, the Conversion Price computed upon the original

issue thereof (or upon the occurrence of a record date with respect thereto),

and any subsequent adjustments based thereon, shall, upon any such increase or

decrease becoming effective, be recomputed to reflect such increase or decrease

insofar as it affects such Options or the rights of conversion or exchange under

such Convertible Securities;

 

                           (C) upon the expiration of any such Options or any

rights of conversion or exchange under such Convertible Securities which shall

not have been exercised, the Conversion Price computed upon the original issue

thereof (or upon the occurrence of a record date with respect thereto), and any

subsequent adjustments based thereon, shall, upon such expiration, be recomputed

as if:

 

 

                                       -9-

<PAGE>   10

                                    (I) in the case of Convertible Securities or

Options for Common Stock the only Additional Shares of Common Stock issued were

the shares of Common Stock, if any, actually issued upon the exercise, of such

Options or the conversion or exchange of such Convertible Securities and the

consideration received therefor was the consideration actually received by the

corporation for the issue of all such Options, whether or not exercised, plus

the consideration actually received by the corporation upon such exercise, or

for the issue of all such Convertible Securities which were actually converted

or exchanged, plus the additional consideration, if any, actually received by

the corporation upon such conversion or exchange, and

 

                                    (II) in the case of Options for Convertible

Securities only the Convertible Securities, if any, actually issued upon the

exercise thereof were issued at the time of issue of such Options, and the

consideration received by the corporation for the Additional Shares of Common

Stock deemed to have been then issued was the consideration actually received by

the corporation for the issue of all such Options, whether or not exercised,

plus the consideration deemed to have been received by the corporation

(determined pursuant to Section 1(d)(v)) upon the issue of the Convertible

Securities with respect to which such Options were actually exercised;

 

                           (D) no readjustment pursuant to clause (B) or (C)

above shall have the effect of increasing the Conversion Price to an amount

which exceeds the lower of (i) the Conversion Price on the original adjustment

date, or (ii) the Conversion Price that would have resulted from any issuance of

Additional Shares of Common Stock between the original adjustment date and such

readjustment date;

 

                           (E) in the case of any Options which expire by their

terms not more than 30 days after the date of issue thereof, no adjustment of

the Conversion Price shall be made until the expiration or exercise of all such

Options, whereupon such adjustment shall be made in the same manner provided in

clause (C) above; and

 

                           (F) if such record date shall have been fixed and

such Options or Convertible Securities are not issued on the date fixed

therefor, the adjustment previously made in the Conversion Price which became

effective on such record date shall be cancelled as of the close of business on

such record date, and thereafter the Conversion Price shall be adjusted pursuant

to this Section 1(d) (iii) as of the actual date of their issuance.

 

                  (2) Stock Dividends, Stock Distributions and Subdivisions. In

the event the corporation at any time or from time to time after the Original

Issue Date shall declare or pay any dividend or make any other distribution on

the Common Stock payable in Common Stock, or effect a subdivision of the

outstanding shares of Common Stock (by reclassification or otherwise than by

payment of a dividend in Common Stock), then and in any such event, Additional

Shares of Common Stock shall be deemed to have been issued:

 

 

                                      -10-

<PAGE>   11

                           (A) in the case of any such dividend or distribution,

immediately after the close of business on the record date for the determination

of holders of any class of securities entitled to receive such dividend or

distribution, or

 

                           (B) in the case of any such subdivision, at the close

of business on the date immediately prior to the date upon which such corporate

action becomes effective.

 

         If such record date shall have been fixed and such dividend shall not

have been fully paid on the date fixed therefor, the adjustment previously made

in the Conversion Price which became effective on such record date shall be

cancelled as of the close of business on such record date, and thereafter the

Conversion Price shall be adjusted pursuant to this Section 1(d)(iii) as of the

time of actual payment of such dividend.

 

                  (iv)  Adjustment of Conversion Price Upon Issuance of

                        Additional Shares of Common Stock.

 

         In the event the corporation shall issue or shall be deemed to issue

Additional Shares of Common Stock (including Additional Shares of Common Stock

deemed to be issued pursuant to Section 1(d)(iii), but excluding Additional

Shares of Common Stock issued pursuant to Section 1(d)(iii)(2), which event is

dealt with in Section 1(d)(vi) hereof) without consideration or for a

consideration per share less than the Conversion Price in effect on the date of

and immediately prior to such issue, then and in such issue, such Conversion

Price shall be reduced, concurrently with such issue in order to increase the

number of shares of Common Stock into which the Convertible Preferred Stock is

convertible, to a price determined by multiplying such Conversion Price by a

fraction (x) the numerator of which shall be (1) the number of shares of Common

Stock outstanding immediately prior to such issue (including shares of Common

Stock issuable upon conversion of any outstanding Convertible Preferred Stock or

Convertible Securities or upon exercise of any outstanding Options), plus (2)

the number of shares of Common Stock which the aggregate consideration received

by the corporation for the total number of Additional Shares of Common Stock so

issued would purchase at such Conversion Price, and (y) the denominator of which

shall be (1) the number of shares of Common Stock outstanding immediately prior

to such issue (including shares of Common Stock issuable upon conversion of any

outstanding Preferred Stock or Convertible Securities or upon exercise of any

outstanding Options), plus (2) the number of such Additional Shares of Common

Stock so issued.

 

                  (v) Determination of Consideration. For purposes of this

Section 1(d), the consideration received by the corporation for the issue of any

Additional Shares of Common Stock shall be computed as follows:

 

                           (1) Cash and Property: Such consideration shall:

 

 

                                      -11-

<PAGE>   12

                                    (A) insofar as it consists of cash, be

computed at the aggregate amount of cash received by the corporation excluding

amounts paid or payable for accrued interest or accrued dividends;

 

                                    (B) insofar as it consists of property other

than cash, be computed at the fair value thereof at the time of such issue, as

determined in good faith by the Board of Directors; and

 

                                    (C) in the event Additional Shares of Common

Stock are issued together with other shares or securities or other assets of the

corporation for consideration which covers both, be the proportion of such

consideration so received, computed as provided in clauses (A) and (B) above, as

determined in good faith by the Board of Directors.

 

                           (2) Options and Convertible Securities. The

consideration per share received by the corporation for Additional Shares of

Common Stock deemed to have been issued pursuant to Section 1(d)(iii)(1),

relating to Options and Convertible Securities, shall be determined by dividing

 

                                    (x) the total amount, if any, received or

receivable by the corporation as consideration for the issue of such Options or

Convertible Securities, plus the minimum aggregate amount of additional

consideration (as set forth in the instruments relating thereto, without regard

to any provision contained therein for a subsequent adjustment of such

consideration) payable to the corporation upon the exercise of such Options or

the conversion or exchange of such Convertible Securities, or in the case of

Options for Convertible Securities, the exercise of such Options or the

conversion or exchange of such Convertible Securities, or in the case of Options

for Convertible Securities, the exercise of such Options for Convertible

Securities and the conversion or exchange of such Convertible Securities, by

 

                                    (y) the maximum number of shares of Common

Stock (as set forth in the instruments relating thereto, without regard to any

provision contained therein for a subsequent adjustment of such number) issuable

upon the exercise of such Options or the conversion or exchange of such

Convertible Securities.

 

                  (vi)     Adjustment for Dividends, Distributions,

                           Subdivisions, Combinations or Consolidation of Common

                           Stock.

 

                           (1) Stock Dividends, Distributions or Subdivisions.

In the event the corporation shall issue Additional Shares of Common Stock

pursuant to Section 1(d)(iii)(2) in a stock dividend, stock distribution or

subdivision, the Conversion Price in effect immediately prior to such stock

dividend, stock distribution or subdivision shall, concurrently with the

effectiveness of such stock dividend, stock distribution or subdivision, be

proportionately decreased.

 

 

                                      -12-

<PAGE>   13

                           (2) Combinations or Consolidations. In the event the

outstanding shares of Common Stock shall be combined or consolidated, by

reclassification or otherwise, into a lesser number of shares of Common Stock,

the Conversion Price in effect immediately prior to such combination or

consolidation shall, concurrently with the effectiveness of such combination or

consolidation, be proportionately increased.

 

                  (vii) Adjustment for Merger or Reorganization, etc.

 

         In case of any recapitalization, reorganization, reclassification,

consolidation, merger or the conveyance of all or substantially all of the

assets of the corporation pursuant to which the holders of Common Stock are

entitled to receive (either directly or on subsequent liquidation) stock,

securities or assets with respect to or in exchange for Common Stock (an

"Organic Change"), each of the holders of Convertible Preferred Stock shall

thereafter have the right to acquire and receive, in lieu of or in addition to

(as the case may be) the shares of Common Stock acquirable and receivable upon

conversion of such holder's Convertible Preferred Stock, such shares of stock,

securities or assets as such holder would have received if such holder had

converted its Convertible Preferred Stock immediately prior to such Organic

Change. In each such case, the corporation shall also make appropriate

provisions to insure that each share of Convertible Preferred Stock shall

thereafter be convertible into the number 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 Convertible Preferred Stock

would have been entitled upon such consolidation, merger or conveyance and that

appropriate adjustment (as determined by the Board of Directors) shall be made

in the application of the provisions herein set forth with respect to the rights

and interest thereafter of the holders of the Convertible Preferred Stock, to

the end that the provisions set forth herein (including provisions with respect

to changes in and other adjustments of the Series A Conversion Price, the Series

B Conversion Price, the Series C Conversion Price, the Series D Conversion Price

and the Series H 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 Convertible Preferred Stock.

The corporation shall not effect any such Organic Change unless prior to the

consummation thereof, the successor entity (if other than the corporation)

assumes by written instrument the obligations set forth herein.

 

                  (e) No Impairment. The corporation will not, by amendment of

its Certificate of Incorporation 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 Section 1 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

Preferred Stock against impairment.

 

 

                                      -13-

<PAGE>   14

                  (f) Certificate as to Adjustments. Upon the occurrence of each

adjustment or readjustment of the Conversion Price pursuant to this Section 1,

the corporation at its expense shall promptly compute such adjustment or

readjustment in accordance with the terms hereof and furnish to each holder of

Convertible 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 Convertible Preferred Stock, furnish or cause to be

furnished to such holder a like certificate setting forth (i) such adjustments

and readjustments, (ii) the Conversion Price at the time in effect, and (iii)

the number of shares of Common Stock and the amount, if any, of other property

which at the time would be received upon the conversion of Convertible Preferred

Stock.

 

                  (g) Notices of Record Date. In the event of any taking by the

corporation of a record of the holders of any class of securities for the

purpose of determining the holders thereof who are entitled to receive any

dividend (other than a cash dividend which is the same as cash dividends paid in

previous quarters) or other distribution, the corporation shall mail to each

holder of Convertible Preferred Stock at least ten (10) days prior to the date

specified herein, a notice specifying the date on which any such record is to be

taken for the purpose of such dividend or distribution.

 

                  (h) Common Stock Reserved. The corporation shall reserve and

keep available out of its authorized but unissued Common Stock such number of

shares of Common Stock as shall from time to time be sufficient to effect

conversion of the Convertible Preferred Stock.

 

II. Terms Applicable to All Preferred Stock.

 

         Section 1. Dividend Rights.

 

         (a) Priorities. So long as any Mezzanine Preferred Stock remains

outstanding, neither the corporation nor any Subsidiary shall directly or

indirectly pay or declare any dividend or make any distribution upon any

Convertible Preferred Stock, if at the time of or immediately after such

dividend or distribution the corporation has failed to pay the full amount of

dividends accrued on the Mezzanine Preferred Stock, or directly or indirectly

pay or declare any dividend or make any distribution upon any Common Stock.

 

         (b) Mezzanine Preferred Stock. (i) Dividend Rate. When and as declared

by the corporation's board of directors, to the extent permitted under the

General Corporation Law of Delaware, the corporation shall pay preferential

dividends to the holders of the Mezzanine Preferred Stock as provided in this

Section 1. Except as otherwise provided herein, dividends on each share of the

Mezzanine Preferred Stock shall accrue on a daily basis at the rate of 8% per

annum of the sum of the applicable Liquidation Value thereof, plus all

accumulated and unpaid dividends thereon, from and

 

 

                                      -14-

<PAGE>   15

including the date of issuance of such share to and including the date on which

the applicable Liquidation Value of such share (plus all accrued and unpaid

dividends thereon) is paid. Such dividends shall accrue whether or not they have

been declared and whether or not there are profits, surplus or other funds of

the corporation legally available for the payment of dividends. The date on

which the corporation initially issues any share of Mezzanine Preferred Stock

shall be deemed to be its "date of issuance" regardless of the number of times

transfer of such share is made on the stock records maintained by or for the

corporation and regardless of the number of certificates which may be issued to

evidence such share.

 

                  (ii) Dividend Reference Dates. All accrued dividends on the

Mezzanine Preferred Stock shall be payable on May 1 of each year beginning May

1, 1994, in the case of the Series E Preferred Stock, and May 1, 1995, in the

case of the Series F Preferred Stock (the "Dividend Reference Dates"). To the

extent not paid on any Dividend Reference Date, all dividends which have accrued

on each share of Mezzanine Preferred Stock outstanding during the twelve-month

period (or other period in the case of the initial Dividend Reference Date)

ending upon each such Dividend Reference Date shall be accumulated and shall

remain accumulated dividends with respect to such share until paid.

 

                  (iii) Distribution of Partial Dividend Payments. Except as

otherwise provided herein, if at any time the corporation pays less than the

total amount of dividends then accrued with respect to the Mezzanine Preferred

Stock, such payment shall be distributed ratably among the holders of Mezzanine

Preferred Stock based upon the aggregate accrued and unpaid dividends held by

each such holder.

 

         (c) Convertible Preferred Stock. (i) Subject to the prior and superior

rights of the Mezzanine Preferred Stock, the holders of outstanding Convertible

Preferred Stock shall be entitled to receive, when, if and as declared by the

Board of Directors, dividends at such rate as may be declared by the Board of

Directors from time to time. Such dividends shall be non-cumulative and shall be

payable only when, if and as declared by the Board of Directors and only to the

extent funds are legally available therefor.

 

                  (ii) Notwithstanding the provisions of this Section 1(d) but

subject to Section 1(a) hereof, dividends which have been declared on the

Convertible Preferred Stock but have not been paid prior to an automatic

conversion pursuant to Section (b) (I) (1) (b) hereof shall be payable, to the

extent funds are legally available therefor, within thirty (30) days after the

date of the automatic conversion, to each person who holds of record Convertible

Preferred Stock immediately prior to the automatic conversion. Subject to

Section 1(a) hereof, in the event adequate funds are not legally available for

such payment, payment shall be made when the Board of Directors declares such

funds to be legally available; provided that in no event shall any other

dividend payments be made until this payment obligation is satisfied in full

(except for dividends on the Mezzanine Preferred Stock in accordance with this

Section 1).

 

 

                                      -15-

<PAGE>   16

                  (iii) Subject to Section 1(a) hereof, the Board of Directors

may not declare or pay a dividend payable upon shares of Common Stock (other

than a dividend payable in the form of shares of Common Stock) unless,

simultaneously therewith, the Board declares a dividend payable upon the

Convertible Preferred Stock at the same rate (on an as-converted basis) as the

rate declared upon the Common Stock.

 

         Section 2. Liquidation Rights.

 

         (a) Mezzanine Preferred Stock. Upon any liquidation, dissolution or

winding up of the corporation, each holder of Mezzanine Preferred Stock shall be

entitled to be paid, before any distribution or payment is made upon any Junior

Securities, an amount in cash equal to the aggregate applicable Liquidation

Value (plus all accrued and unpaid dividends) of all shares of Mezzanine

Preferred Stock held by such holder, and the holders of Mezzanine Preferred

Stock shall not be entitled to any further payment. If upon any such

liquidation, dissolution or winding up of the corporation, the corporation's

assets to be distributed among the holders of the Mezzanine Preferred Stock are

insufficient to permit payment to such holders of the aggregate amount which

they are entitled to be paid, then the entire assets to be distributed shall be

distributed ratably among such holders based upon the aggregate applicable

Liquidation Value (plus all accrued and unpaid dividends) of Mezzanine Preferred

Stock held by each such holder.

 

         (b) Convertible Preferred Stock and Class A Common Stock.

 

                  (i) Subject to the prior and superior rights of the Mezzanine

Preferred Stock, in the event of any voluntary or involuntary liquidation,

dissolution or winding up of the affairs of the corporation, the holders of each

share of Series A Preferred Stock shall be entitled to receive an amount equal

to THREE DOLLARS AND THIRTY THREE AND ONE THIRD CENTS ($3.3333) per share (the

"Series A Liquidation Preference"), the holders of each share of Series B

Preferred Stock shall be entitled to receive an amount equal to NINE DOLLARS AND

FOURTEEN CENTS ($9.14) per share (the "Series B Liquidation Preference"), the

holders of each share of Series C Preferred Stock shall be entitled to receive

an amount equal to ELEVEN DOLLARS AND THIRTY~TWO CENTS ($11.32) per share (the

"Series C Liquidation Preference"), the holders of each share of Series D

Preferred Stock shall be entitled to receive an amount equal to FIFTEEN DOLLARS

AND FIFTY CENTS ($15.50) per share (the "Series D Liquidation Preference") and

the holders of each share of Series H Preferred Stock shall be entitled to

receive an amount equal to FORTY DOLLARS AND NINETY-NINE CENTS ($40.99) per

share (the "Series H Liquidation Preference"), in each case plus accrued,

declared and unpaid dividends to the date thereof, if any, prior and in

preference to any distribution of any of the assets or surplus funds of the

corporation to the holders of the Common Stock by reason of their ownership

thereof. If upon any such liquidation, dissolution or winding up of the

corporation, the Corporation's assets to be distributed among the holders of the

Convertible Preferred Stock are insufficient to permit payment to such

 

 

                                      -16-

<PAGE>   17

holders of the aggregate amount which they are entitled to be paid, then the

entire assets to be distributed shall be distributed ratably among such holders

based upon the aggregate applicable amounts that they are owed. After the

payment or the setting apart of the full payment to the holders of the

Convertible Preferred Stock, then the holders of Class A Common Stock shall be

entitled to receive a special liquidation preference equal to ONE CENT ($0.01)

per share plus all capital contributed by such holder in the purchase of such

holder's shares of Class A Common Stock as reflected on the books of the Company

(including the purchase price paid for shares of Convertible Preferred Stock

which have been converted into shares of Class A Common Stock). The preferences

set forth in this Section 2(b)(i) shall be proportionately adjusted for stock

dividends, stock distributions or subdivisions, combinations, reclassification

or the like. After the payment or the setting apart of payment to the holders of

Class A Common Stock, then the holders of Convertible Preferred Stock and the

holders of Common Stock shall be entitled to receive all remaining assets of the

corporation ratably on a share for share basis as if the Convertible Preferred

Stock had been converted to Common Stock immediately prior thereto.

 

                  (ii) All of the preferential amounts to be paid to the holders

of the Convertible Preferred Stock under this Section (b) (11) (2) (b) shall be

paid or set apart for payment before the payment or setting apart for payment of

any amount for, or the distribution of any assets of the corporation to, the

holders of the Class A Common Stock in connection with such liquidation,

dissolution or winding up and all of the preferential amount to be paid to the

holders of the Class A Common Stock under this Section (b)(II)(2)(b) shall be

paid or set apart for payment before the payment or setting apart for payment of

any amount for, or the distribution of, any remaining assets of the corporation.

 

                  (iii) If the assets or surplus funds to be distributed to the

holders of the Convertible Preferred Stock are insufficient to permit the

payment to such holders of their full preferential amount, the assets and

surplus funds legally available for distribution shall be distributed ratably

among the holders of the Convertible Preferred Stock in proportion to the full

preferential amount each such holder is otherwise entitled to receive. If the

assets or surplus funds to be distributed to the holders of Class A Common Stock

are insufficient to permit the payment to such holders of their full

preferential amount, the assets and surplus funds legally available for

distribution shall be distributed ratably among the holders of the Class A

Common Stock in proportion to the full preferential amount each such holder is

otherwise entitled to receive.

 

         (c) Deemed Liquidation. For the purposes of this Section 2, the merger

or consolidation of the corporation into or with another entity or entities in

which the corporation shall not survive, or the sale or transfer of all or

substantially all the assets of the corporation, or a merger in which the

corporation is the survivor but its Common Stock is exchanged for stock,

securities or property of another entity, or a merger in which the corporation

is the survivor but the holders of the corporation's outstanding

 

 

                                      -17-

<PAGE>   18

capital stock possessing the voting power (under ordinary circumstances) to

elect a majority of the corporation's board of directors immediately prior to

the merger do not continue to own the corporation's outstanding capital stock

possessing the voting power (under ordinary circumstances) to elect a majority

of the corporation's board of directors immediately after the merger, shall be

deemed to be a liquidation, dissolution, and winding up of the corporation, and

the holders of the Preferred Stock shall be entitled to receive payment of the

amounts payable with respect to the Preferred Stock upon a liquidation,

dissolution or winding up in cancellation of their shares upon the consummation

of any such transaction. Each holder of Convertible Preferred Stock shall have

the right to elect the benefits of either this Section 2 or Section (b) (I) (1)

(d) (vii) in connection with any such transaction. Each holder of Mezzanine

Preferred Stock shall have the right to elect the benefits of either this

Section 2 or Section (b) (II) (3) (c) (iii) in connection with any such

transaction.

 

         (d) The corporation shall mail written notice of such liquidation,

dissolution or winding up, not less than 60 days prior to the payment date

stated therein, to each record holder of Preferred Stock.

 

                  Section 3. Redemption.

 

         (a) Priorities. So long as any Mezzanine Preferred Stock remains

outstanding and subject to Section (b) (II) (5) (b), neither the corporation nor

any Subsidiary shall directly or indirectly redeem, purchase or otherwise

acquire any Convertible Preferred Stock, if immediately after such redemption,

purchase or acquisition, any Event of Noncompliance would exist with respect to

the Mezzanine Preferred Stock.

 

         (b) Redemption of Convertible Preferred Stock. Subject to Section 3(a)

above and Section (b)(II)(5)(b), at any time on or after July 31, 2001, each

holder of the Convertible Preferred Stock shall have the right to compel the

corporation to purchase (the "Redemption Right") any or all of such holder's

shares of Convertible Preferred Stock at a price equal to (a) in the case of the

Series A Preferred, the greater of the then Fair Market Value (as defined below

in this Section 3) of the Series A Preferred Stock, or the Series A Liquidation

Preference (the "Series A Redemption Price"), (b) in the case of the Series B

Preferred Stock, the greater of the then Fair Market Value of the Series B

Preferred Stock, or the Series B Liquidation Preference (the "Series B

Redemption Price"), (c) in the case of the Series C Preferred Stock, the greater

of the then Fair Market Value of the Series C Preferred Stock, or the Series C

Liquidation Preference (the "Series C Redemption Price"), (d) in the case of the

Series D Preferred Stock, the greater of the then Fair Market Value of the

Series D Preferred Stock, or the Series D Liquidation Preference (the "Series D

Redemption Price") and (e) in the case of the Series H Preferred Stock, the

greater of the then Fair Market Value of the Series H Preferred Stock or the

Series H Liquidation Preference (the "Series H Redemption Price").

 

 

                                      -18-

<PAGE>   19

         For purposes of this Section 3, "Fair Market Value" of the Series A

Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock, the

Series D Preferred Stock or the Series H Preferred Stock means the fair market

value of the Series A Preferred Stock, the Series B Preferred Stock, the Series

C Preferred Stock, the Series D Preferred Stock or the Series H Preferred Stock,

respectively, taking into account the value of the Company's entire common

equity on a going concern basis as between a willing buyer and a willing seller

in an arm's-length transaction and taking into account all other relevant

factors determinative of value. The corporation shall select an independent

appraiser and the holder(s) of a majority of the Convertible Preferred Stock

(based on the number of shares of Common Stock into which such Convertible

Preferred Stock is convertible) for which redemption is requested, shall select

an independent appraiser. Each appraiser shall render his opinion as to the Fair

Market Value of the Convertible Preferred Stock for which redemption is

requested. The two appraisers shall be given thirty (30) days from the date both

appraisers are engaged within which to render their opinions as to the Fair

Market Value of such Convertible Preferred Stock. In the event that the lower

appraisal is at least 90% of the higher appraisal, then the average of the two

appraisals shall constitute and be deemed the Fair Market Value of such

Convertible Preferred Stock. If the lower appraisal is not greater than or equal

to 90% of the higher appraisal, then the two appraisers shall select a third

appraiser to render his opinion as to the Fair Market Value of such Convertible

Preferred Stock. The third appraiser shall be given thirty (30) days from the

date he is engaged within which to render his opinion as to the Fair Market

Value of such Convertible Preferred Stock. In such case, the third appraisal

shall constitute and be deemed the Fair Market Value of such Convertible

Preferred Stock. The corporation shall bear the costs of the appraisals. After

the determination of Fair Market Value following the exercise of the Redemption

Right, each holder of Convertible Preferred Stock may rescind its exercise of

such Redemption Right.

 

         Any holder requesting redemption shall give written notice thereof (the

"Redemption Notice") to the corporation at least ninety (90) days prior to the

requested date of the redemption (the "Redemption Date"). Such Redemption Notice

shall state the series and the number of shares of Convertible Preferred Stock

to be redeemed. Notwithstanding the foregoing, the holders of 51% of each series

of Convertible Preferred Stock shall have the right to postpone for a specified

period of time or waive such rights of all holders of each respective series of

Convertible Preferred Stock by written notice to the corporation given at least

fifteen (15) days prior to the Redemption Date.

 

         Within ten days after receipt of the Redemption Notice, the corporation

shall give notice of any requested redemption by mail, postage prepaid, to all

holders of record of the Convertible Preferred Stock, such notice to be

addressed to each holder at the address as it appears on the stock transfer

books of the corporation and to specify the date of the redemption and the

number of shares of the holder requested to be redeemed. Each of the other

holders of Convertible Preferred Stock shall have the right to exercise the

Redemption Right and compel the corporation to purchase any or all of

 

 

                                      -19-

<PAGE>   20

such holder's shares of Convertible Preferred Stock at the Series A Redemption

Price, the Series B Redemption Price, the Series C Redemption Price, the Series

D Redemption Price or the Series H Redemption Price, as the case may be, on the

Redemption Date by delivery of a Redemption Notice to the corporation within ten

days after receipt of notice of the requested redemption from the corporation.

On or after the Redemption Date (unless postponed or waived as provided in the

preceding paragraph), the holder or holders requesting the redemption shall

surrender his certificate for the number of shares to be redeemed as stated in

the Redemption Notice. If less than all of the shares represented by such

certificates are redeemed, a new certificate shall forthwith be issued for the

shares that are not redeemed.

 

         If the funds of the corporation legally available for redemption on any

Redemption Date are insufficient to redeem the total number of shares requested

to be redeemed on such date, those funds which are legally available shall be

used to redeem to maximum possible number of shares requested to be redeemed

ratably among the holders of shares of Convertible Preferred Stock requested to

be redeemed based upon the aggregate Series A Redemption Price, Series B

Redemption Price, Series C Redemption Price, Series D Redemption Price and/or

Series H Redemption Price, as the case may be, of such shares held by each such

holder. At any time thereafter when additional funds of the corporation are

legally available for redemption of Convertible Preferred Stock, such funds

shall immediately be used to redeem the balance of any Convertible Preferred

Stock which the corporation has become obligated to redeem on any Redemption

Date but which it has not redeemed.

 

         (c) Redemption of Mezzanine Preferred Stock.

 

                  (i) Scheduled Redemptions. The corporation shall redeem all

outstanding shares of Series E Preferred Stock on April 30, 1998, at a price per

share equal to the Series E Liquidation Value thereof (plus all accrued and

unpaid dividends thereon), and the corporation shall redeem all outstanding

shares of Series F Preferred Stock on April 30, 1999, at a price per share equal

to the Series F Liquidation Value thereof (plus all accrued and unpaid dividends

thereon). The date on which any shares of Mezzanine Preferred Stock are required

to be redeemed is referred to herein as the "Scheduled Redemption Date").

 

                  (ii) Redemption Payment. For each share of Mezzanine Preferred

Stock which is to be redeemed, the corporation shall be obligated on the

Redemption Date to pay to the holder thereof (upon surrender by such holder at

the corporation's principal office of the certificate representing such Share)

an amount in immediately available funds equal to the applicable Liquidation

Value of such share (plus all accrued and unpaid dividends thereon). If the

funds of the corporation legally available for redemption of shares on any

Redemption Date are insufficient to redeem the total number of shares to be

redeemed on such date, those funds which are legally available shall be used to

redeem the maximum possible number of shares ratably among the

 

 

                                      -20-

<PAGE>   21

holders of the shares to be redeemed based upon the aggregate applicable

Liquidation Value of such shares (plus all accrued and unpaid dividends thereon)

held by each such holder. At any time thereafter when additional funds of the

corporation are legally available for the redemption of shares, such funds shall

immediately be used to redeem the balance of the shares which the corporation

has become obligated to redeem on any Redemption Date but which it has not

redeemed.

 

                  (iii) Special Redemptions.

 

                           (A) If a Change in Ownership has occurred or the

corporation obtains knowledge that a Change in Ownership is to occur, the

corporation shall give prompt written notice of such Change in Ownership

describing in reasonable detail the definitive terms and date of consummation

thereof to each holder of Mezzanine Preferred Stock, but in any event such

notice shall not be given later than five days after the occurrence of such

Change in Ownership. The holder or holders of a majority of the Series E

Preferred Stock then outstanding may require the corporation to redeem all or

any portion of the Series E Preferred Stock owned by such holder or holders, and

the holder or holders of a majority of the Series F Preferred Stock then

outstanding may require the corporation to redeem all or any portion of the

Series F Preferred Stock owned by such holder or holders, in each case at a

price per Share equal to the applicable Liquidation Value thereof (plus all

accrued and unpaid dividends thereon) by giving written notice to the

corporation of such election prior to the later of (a) 21 days after receipt of

the corporation's notice and (b) five days prior to the consummation of the

Change in Ownership (the "Expiration Date"). The corporation shall give prompt

written notice of any such election to all other holders of Mezzanine Preferred

Stock within five days after the receipt thereof, and each such holder shall

have until the later of (a) the Expiration Date or (b) ten days after receipt of

such second notice to request redemption (by giving written notice to the

corporation) of all or any portion of the Series E Preferred Stock or Series F

Preferred Stock owned by such holder. Upon receipt of such election(s), the

corporation shall be obligated to redeem the aggregate number of shares

specified therein on the later of (a) the occurrence of the Change in Ownership

or (b) five days after the corporation's receipt of such election(s). If in any

case a proposed Change in Ownership does not occur, all requests for redemption

in connection therewith shall be automatically rescinded. The term "Change in

Ownership" means any sale or issuance or series of sales and/or issuances of

shares of the corporation's capital stock by the corporation or any holders

thereof immediately after which the holders of the corporation's capital stock

possessing the voting power (under ordinary circumstances) to elect a majority

of the corporation's board of directors immediately prior to such sale or

issuance or series of sales or issuances do not continue to own the

corporation's outstanding capital stock possessing the voting power (under

ordinary circumstances) to elect a majority of the corporation's board of

directors.

 

                           (B) If a Fundamental Change is proposed to occur, the

corporation shall give written notice of such Fundamental Change describing in

reasonable detail the

 

 

                                      -21-

<PAGE>   22

definitive terms and date of consummation thereof to each holder of Mezzanine

Preferred Stock not more than 45 days nor less than 20 days prior to the

consummation thereof. The holder or holders of a majority of the Mezzanine

Preferred Stock then outstanding may require the corporation to redeem all or

any portion of the Mezzanine Preferred Stock owned by such holder or holders at

a price per Share equal to the applicable Liquidation Value thereof (plus all

accrued and unpaid dividends thereon) by giving written notice to the

corporation of such election prior to the later of (a) ten days prior to the

consummation of the Fundamental Change or (b) ten days after receipt of notice

from the corporation. The corporation shall give prompt written notice of such

election to all other holders of Mezzanine Preferred Stock (but in any event

within five days prior to the consummation of the Fundamental Change), and each

such holder shall have until two days after the receipt of such notice to

request redemption (by written notice given to the corporation) of all or any

portion of the Mezzanine Preferred Stock owned by such holder. Upon receipt of

such election(s), the corporation shall be obligated to redeem the aggregate

number of shares specified therein upon the consummation of such Fundamental

Change. If any proposed Fundamental Change does not occur, all requests for

redemption in connection therewith shall be automatically rescinded. The term

"Fundamental Change" means (a) a sale or transfer of more than 30% of the assets

of the corporation and its Subsidiaries on a consolidated basis (measured by

either book value in accordance with generally accepted accounting principles

consistently applied or fair market value determined in the reasonable good

faith judgment of the corporation's board of directors) in any transaction or

series of transactions (other than sales of inventory in the ordinary course of

business) and (b) any merger or consolidation to which the corporation is a

party, except for a merger in which the corporation is the surviving corporation

and, after giving effect to such merger, the holders of the corporation's

outstanding capital stock possessing a majority of the voting power (under

ordinary circumstances) to elect a majority of the corporation's board of

directors immediately prior to the merger shall own the corporation's

outstanding capital stock possessing the voting power (under ordinary

circumstances) to elect a majority of the corporation's board of directors.

 

                  (C) Redemptions made pursuant to this paragraph (iii) shall

not relieve the corporation of its obligation to redeem Mezzanine Preferred

Stock on the Scheduled Redemption Date pursuant Section (b) (II) (3) (c) (i)

hereof.

 

                  (D) The corporation may redeem shares of Mezzanine Preferred

Stock pursuant to this paragraph (iii) only after all shares of Mezzanine

Preferred Stock for which requests for redemption have been made hereunder have

been redeemed in full.

 

         (iv) Redemption After Public Offering. The corporation shall, at the

request (by written notice given to the corporation) of the holders of a

majority of the Mezzanine Preferred Stock, apply all of the net cash proceeds

from any Public Offering remaining after deduction of all discounts,

underwriters' commissions and other reasonable expenses to redeem shares of

Mezzanine Preferred Stock at a price per share equal to the

 

 

                                      -22-

<PAGE>   23

applicable Liquidation Value thereof (plus all accrued and unpaid dividends

thereon). Such redemption shall take place on a date fixed by the corporation,

which date shall be not more than five days after the corporation's receipt of

such proceeds. Redemptions of shares pursuant to this paragraph shall not

relieve the corporation of its obligation to redeem shares on the Scheduled

Redemption Date.

 

         (v) Optional Redemptions. The corporation may at any time repurchase

all or any portion of the Mezzanine Preferred Stock then outstanding. On any

such redemption, the corporation shall pay a price per share of Mezzanine

Preferred Stock equal to the applicable Liquidation Value thereof plus all

accrued and unpaid dividends thereon and a premium equal to the following

percentage of the applicable Liquidation Value:

 

<TABLE>

<CAPTION>

- ---------------------------------------------------------------------------------

Redemption Occurs                                   Series E            Series F

   On or After               But Prior to           % Premium           % Premium

- ---------------------------------------------------------------------------------

<S>                         <C>                     <C>                  <C>

   May 1, 1993              April 30, 1994             10                  N/A

- ---------------------------------------------------------------------------------

   May 1, 1994              April 30, 1995              8                   10

- ---------------------------------------------------------------------------------

   May 1, 1995              April 30, 1996              6                    8

- ---------------------------------------------------------------------------------

   May 1, 1996              April 30, 1997              4                    6

- ---------------------------------------------------------------------------------

   May 1, 1997              April 30, 1998              2                    4

- ---------------------------------------------------------------------------------

   May 1, 1998              April 30, 1999              0                    2

- ---------------------------------------------------------------------------------

</TABLE>

 

Redemptions made pursuant to this paragraph shall not relieve the corporation of

its obligation to redeem shares of Mezzanine Preferred Stock on the Scheduled

Redemption Date.

 

         (vi) Notice of Redemption. The corporation shall mail written notice of

each redemption of any Mezzanine Preferred Stock (other than a redemption at the

request of a holder or holders of Mezzanine Preferred Stock) to each record

holder thereof not more than 30 nor less than 10 days prior to the date of which

such redemption is to be made. Upon mailing any notice of redemption which

relates to a redemption at the corporation's option, the corporation shall

become obligated to redeem the total number of shares of Mezzanine Preferred

Stock specified in such notice. If not all the Mezzanine Preferred Stock

represented by any certificate is redeemed, a new certificate representing the

number of unredeemed shares Mezzanine Preferred Stock shall be issued to the

holder thereof without cost to such holder within three business days after

surrender of the certificate representing the redeemed shares.

 

         (vii) Determination of the Number of Each Holder's Shares to be

Redeemed. The number of shares of Mezzanine Preferred Stock to be redeemed from

each holder

 

 

                                      -23-

<PAGE>   24

thereof in redemptions hereunder shall be the number of Shares determined by

multiplying the total number of shares of Mezzanine Preferred Stock to be

redeemed times a fraction, the numerator of which shall be the total number of

shares of Mezzanine Preferred Stock then held by such holder and the denominator

of which shall be the total number of shares of Mezzanine Preferred Stock then

outstanding.

 

         (d) Dividends After Redemption Date. No share of Preferred Stock is

entitled to any dividends accruing after the date on which the Series A

Liquidation Preference, Series B Liquidation Preference, Series C Liquidation

Preference, Series D Liquidation Preference, Series E Liquidation Value, Series

F Liquidation Value, or the Series H Preference Amount, as the case may be, of

such share (plus all accrued and unpaid dividends thereon) is paid to the holder

thereof. On such date all rights of the holder of such share shall cease, and

such share shall not be deemed to be outstanding.

 

         (e) Redeemed or Otherwise Acquired Shares. Any shares of Preferred

Stock which are redeemed or otherwise acquired by the corporation shall be

cancelled and shall not be reissued, sold or transferred.

 

         (f) Other Redemptions or Acquisitions.

 

                  (i) Neither the corporation nor any Subsidiary shall redeem or

otherwise acquire any Mezzanine Preferred Stock, except as expressly authorized

herein or pursuant to a purchase offer made pro-rata to all holders of the

Mezzanine Preferred Stock on the basis of the applicable Liquidation Value of

Mezzanine Preferred Stock owned by each such holder.

 

                  (ii) Neither the corporation nor any Subsidiary shall redeem

or otherwise acquire any Convertible Preferred Stock, except as expressly

authorized herein or pursuant to a purchase offer made pro-rata to all holders

of Convertible Preferred Stock on the basis of the Series A Liquidation

Preference, the Series B Liquidation Preference, the Series C Liquidation

Preference, the Series D Liquidation Preference or the Series H Liquidation

Preference, as applicable, of such Convertible Preferred Stock.

 

         Section 4. Voting Rights.

 

 

         (a) Mezzanine Preferred Stock. Except as otherwise provided in Section

(b) (III) (1) (b) or Section 5 below or otherwise required by law, the holders

of Mezzanine Preferred Stock shall have no voting rights (provided that each

holder of Mezzanine Preferred Stock shall be entitled to notice of all

stockholders meetings at the same time and in the same manner as notice is given

to the stockholders entitled to vote at such meeting).

 

                                      -24-

<PAGE>   25

         (b) Convertible Preferred Stock. Except as otherwise required by law,

the holders of Convertible Preferred Stock, the holders of Common Stock and the

holders of Voting Warrants shall be entitled to notice of all stockholders

meetings and to vote upon any matter submitted to stockholders for a vote, on

the following basis, except as otherwise provided in Section 4(c) and Section

(b) (III) (1) (b) (iii) below for the election of directors:

 

                  (i) Holders of Common Stock shall have one vote per share;

 

                  (ii) Except as otherwise expressly provided in Section 4(b)

(iii) below, holders of each share of Convertible Preferred Stock shall have the

number of votes equal to the number of shares of Common Stock into which the

Convertible Preferred Stock is convertible, as adjusted from time to time

pursuant to Section (b) (I) (1);

 

                  (iii) (A) In the event that (w) the corporation shall fail to

pay dividends or redeem the Convertible Preferred Stock when required pursuant

to Sections (b) (II) (1) and (b) (II) (3) hereof when funds are legally

available therefor and such failure to pay or redeem continues for thirty (30)

days from the date when such payment or redemption is required, (x) the

corporation shall be in default of any material covenant contained in this

Certificate of Incorporation, or in the Amended and Restated Stockholders

Agreement dated as of December 28, 1990, as amended from time to time, by and

among the corporation and the signatories thereto (the "Stockholders Agreement")

and such default is not cured by the corporation or waived within thirty (30)

days of notice thereof unless, upon application of the corporation's best

efforts, such default cannot be cured by the corporation within (30) days, then

if such default is not cured by the corporation within sixty (60) days of notice

thereof, (y) there shall occur a default under the terms of any agreement

pursuant to which the corporation has incurred any material indebtedness, which

default is not cured by the corporation or waived within thirty (30) days of

notice thereof or of acceleration of the indebtedness related thereto, or (z)

the corporation commences a voluntary case or other proceeding, or consents to

the commencement of an involuntary case or other proceeding seeking liquidation,

reorganization or other relief with respect to it or its debts under the Federal

bankruptcy laws, as now constituted or hereafter amended, or under any other

bankruptcy, insolvency or similar law now or hereafter in effect or fails to

have any such involuntary case or other proceeding dismissed within ninety (90)

days or makes a general assignment for the benefit of creditors or materially

compromises debt with creditors or suffers acceleration of any material

obligation to a third party, then, in any such event, the holders of outstanding

Convertible Preferred Stock shall, subject to the special voting rights of the

Mezzanine Preferred Stock set forth in Section (b) (III) (1) (b) (iii) be

entitled to (a) that number of votes per share on all matters to be voted on by

stockholders as is equal to five times the number of shares of Common Stock into

which each such share of Convertible Preferred Stock held by such holder is

convertible, and, (b) voting together as a single class, elect the number of

directors constituting a majority of the directors of the corporation, and the

holders of the Convertible Preferred Stock

 

 

                                      -25-

<PAGE>   26

and the holders of the Common Stock, voting together, and on an as converted to

common basis, shall be entitled to elect the remaining directors of the

corporation.

 

                           (B) If and when none of the conditions set forth in

clause (A) above continue to exist, then each holder of outstanding Convertible

Preferred Stock shall have that number of votes per share as is equal to the

number of shares of Common Stock into which each such share of Convertible

Preferred Stock held by such holder is convertible; but always subject to the

same provisions vesting the number of votes per share specified in clause (A)

above in the holders of the shares of Convertible Preferred Stock in case of

further defaults as provided in clause (A) above; and

 

                  (iv) Holders of any Voting Warrant shall have the number of

votes equal to the number of shares of Common Stock into which such Voting

Warrant is exercisable, as adjusted from time to time pursuant to the terms of

such Voting Warrant;

 

         (c) Whenever under the provisions of Section 4(b) (iii) (A) hereof the

holders of Convertible Preferred Stock shall have the right to elect the number

of directors constituting a majority of the directors of the corporation, the

Board of the Directors shall, within ten (10) days after delivery to the

corporation at its principal office of a request to such effect by the holders

of shares of Convertible Preferred Stock representing at least ten percent (10%)

of the votes entitled to be cast by the holders of the Convertible Preferred

Stock, call a special meeting of the stockholders for the election of directors,

to be held upon not less than ten (10) nor more than twenty (20) days' notice to

such holders. If such notice of meeting is not given within the ten days

required above, the holders of Convertible Preferred Stock requesting the

calling of such meeting may also call such meeting and shall have access to the

stock books and records of the corporation. The terms of office of all persons

who are then directors shall terminate at such meeting upon the election of

their successors. The Board of Directors elected pursuant to this Section 4(c)

shall use their best efforts to cause the corporation to cure or remedy the

event or events giving rise to the voting rights provided in Section 4(b) (iii)

(A).

 

         (d) Upon the termination of the voting rights provided by Section 4(b)

(iii) (A) above, the Board of Directors shall call a special meeting of

stockholders at which all directors will be elected as provided in Section 4(b)

(i) and Section 4(b) (ii) above, and the terms of office of all persons who are

then directors of the corporation shall terminate immediately upon the election

of their successors.

 

         Section 5. Covenants.

 

         (a) Preferred Stock Covenants I. So long as any shares of Preferred

Stock shall be outstanding (as adjusted for all subdivisions and combinations),

the corporation shall not, without first obtaining the affirmative vote or

written consent of 80% of the outstanding shares of the Convertible Preferred

Stock voting as a class (with each share

 

 

                                      -26-

<PAGE>   27

of Preferred Stock having one vote), a majority of the outstanding shares of

Series E Preferred Stock and a majority of the outstanding shares of Series F

Preferred Stock:

 

                  (i) reclassify any Common Stock into shares having any

preference or priority as to dividends or assets superior to or on a parity with

any such preference or priority of the Preferred Stock;

 

                  (ii) pay or declare any dividend or distribution on any shares

of Common Stock or apply any of its assets to the redemption, retirement,

purchase or other acquisition directly or indirectly, through subsidiaries or

otherwise, of any shares of Common Stock except repurchases from employees of

the corporation upon termination of employment and except purchases pursuant to

any rights of first refusal the corporation may have under the Stockholders

Agreement;

 

                  (iii) increase the authorized number of directors constituting

the Board of Directors of the corporation;

 

                  (iv) use the proceeds of the issuance of the Series B

Preferred Stock to repay any loans to the corporation's stockholders or repay or

prepay any loans to the corporation's stockholders in violation of any of its

loan or credit agreements or other financing arrangements.

 

                  (v) (i) amend or repeal any provision of, or add any provision

to, Sections (b) (II) (1) (a) or (b), (b) (II) (2) (a) or (c), (b) (II) (3) (a)

, (c) or (f) (i) , (b) (II) (4) (a), (b) (II) (5) or (b) (III) or (b)(IV)(1) to

the extent any definitions are used in the foregoing Sections, or (b)(IV)(2)(a)

of the Corporation's Certificate of Incorporation, or (ii) or adopt, amend or

repeal any other provisions of, or add any provision to, the corporation's

Certificate of Incorporation or Bylaws if (in the case of this clause (ii) only)

such action would alter or change or otherwise adversely affect the preferences,

rights, privileges or powers of, or the restrictions provided for the benefit

of, the Mezzanine Preferred Stock;

 

                  (vi) create or issue any other class or classes of stock or

series of Preferred Stock or any securities superior to or on parity with the

Mezzanine Preferred Stock;

 

                  (vii) increase the authorized number of shares of Mezzanine

Preferred Stock;

 

         (b) Preferred Stock Covenants II. So long as any shares of Preferred

Stock shall be outstanding (as adjusted for all subdivisions and Combinations),

the corporation shall not without first obtaining the affirmative vote or

written consent of a majority of the outstanding shares of Preferred Stock,

voting as a single class (with each share of Preferred Stock having one vote):

 

                                      -27-

<PAGE>   28

                  (i) amend or repeal any provision of, or add any provision to,

the corporation's Certificate of Incorporation or Bylaws if such action would

alter or change the preferences, rights, privileges or powers of, or the

restrictions provided for the benefit of, the Convertible Preferred Stock;

 

                  (ii) create or issue any other class or classes of stock or

series of Preferred Stock or any securities superior to or on a parity with the

Convertible Preferred Stock;

 

                  (iii) increase the authorized number of shares of Convertible

Preferred Stock;

       

                  (vi) merge or consolidate or sell, lease, exchange or

otherwise dispose of all or any material portion of its property and assets;

               

                  (vi) liquidate, dissolve or effect a recapitalization or

reorganization in any form of transaction (including, without limitation, any

reorganization into partnership form);

 

                  (vii) transfer, by sale, license or otherwise, any

intellectual property rights of the corporation;

 

                  (viii) issue or sell any shares of its capital stock, or any

rights or options to acquire any shares of its capital stock, other than (i)

issuances of Class A Common Stock upon conversion of the Preferred Stock, (ii)

issuances of Class B Common Stock upon conversion of Class A Common Stock, (iii)

issuances of Common Stock or Preferred Stock in the form of dividends payable on

shares of outstanding Common Stock or Preferred Stock, respectively, (iv)

issuances of up to 112,000 Employee Shares (as defined in Section 5.17 of the

Stockholders Agreement) (including all outstanding options to purchase Employee

Shares), (v) issuances of Class A Common Stock upon exercise of the Warrants,

and (vi) issuances of Class A Common Stock upon exercise of the Voting Warrants.

 

         (c) Mezzanine Preferred Stock Covenant. So long as any shares of

Mezzanine Preferred Stock shall be outstanding, the corporation shall not,

without first obtaining the affirmative vote or written consent of 80% of the

outstanding shares of Series E Preferred Stock and 80% of the outstanding shares

of Series F Preferred Stock, directly or indirectly, through Subsidiaries or

otherwise, pay or declare any dividend or distribution on any Junior Security,

apply any of its assets to redeem, retire, purchase or otherwise acquire any

Junior Security, other than repurchases pursuant to Section 2.5 of the

Stockholders Agreement.

 

 

                                      -28-

<PAGE>   29

         (d) Series H Preferred Stock Covenant. The holders of the Series H

Preferred Stock shall be entitled to elect one (1) member of the corporation's

Board of Directors in accordance with the terms of the Third Securities Purchase

Agreement.

 

III. Terms Applicable to Mezzanine Preferred Stock Only.

 

         Section 1. Events of Noncompliance.

 

                  (a) Definition. An Event of Noncompliance shall be deemed to

have occurred if:

 

                  (i) the corporation fails to pay on any Dividend Reference

Date after the Scheduled Redemption Date the full amount of dividends then

accrued on the Mezzanine Preferred Stock whether or not such payment is

otherwise legally permissible or is prohibited by any other agreement to which

the corporation is subject;

 

                  (ii) the corporation fails to make any redemption payment with

respect to the Mezzanine Preferred Stock which it is obligated to make

hereunder, whether or not such payment is then legally Permissible or is

prohibited by any agreement to which the corporation is subject;

 

                  (iii) the corporation breaches or otherwise fails to perform

or observe in any material respect any other covenant or agreement set forth

herein, in the Series E Purchase Agreement, the Securities Purchase Agreement or

the Stockholders Agreement; provided that in the event the corporation

inadvertently breaches any covenant or agreement set forth in the Series E

Purchase Agreement, the Securities Purchase Agreement or the Stockholders

Agreement, no Event of Noncompliance shall be deemed to have occurred unless

such breach is not cured within 30 days after the corporation has notice or

knowledge of such breach;

 

                  (iv) the corporation breaches any representation or warranty

contained in the Series E Purchase Agreement or Securities Purchase Agreement in

any material respect;

 

                  (v) the corporation or any Subsidiary makes an assignment for

the benefit of creditors or admits in writing its inability to pay its debts

generally as they become due; or an order, judgment or decree is entered

adjudicating the corporation or any Subsidiary bankrupt or insolvent; or any

order for relief with respect to the corporation or any Subsidiary is entered

under the Federal Bankruptcy Code; or the corporation or any Subsidiary

petitions or applies to any tribunal for the appointment of a custodian,

trustee, receiver or liquidator of the corporation or any Subsidiary or of any

substantial part of the assets of the corporation or any Subsidiary, or

commences any proceeding (other than a proceeding for the voluntary liquidation

and dissolution of a Subsidiary) relating to the corporation or any Subsidiary

under any bankruptcy,

 

 

                                      -29-

<PAGE>   30

reorganization, arrangement, insolvency, readjustment of debt, dissolution or

liquidation law of any jurisdiction; or any such petition or application is

filed, or any such proceeding is commenced, against the corporation or any

Subsidiary and either (a) the corporation or any such Subsidiary by any act

indicates its approval thereof, consent thereto or acquiescence therein or (b)

such petition, application or proceeding is not dismissed within 60 days;

 

                  (vi) a judgment in excess of $100,000 is rendered against the

corporation or any Subsidiary and, within 60 days after entry thereof, such

judgment is not discharged in accordance with the terms thereof or execution

thereof stayed pending appeal, or within 60 days after the expiration of any

such stay, such judgment is not discharged in accordance with the terms thereof;

 

                  (vii) any of the events set forth in Section 4(b) (iii) above

shall occur entitling the holders of Convertible Preferred Stock to the special

voting rights described in Section 4(b) above; or

 

                  (viii) the corporation or any Subsidiary defaults in the

performance of any obligation or agreement pursuant to which the corporation has

incurred any material indebtedness, which default is not cured by the

Corporation within thirty (30) days after such default or if the effect of such

default is to cause such indebtedness to become due prior to its stated maturity

or to permit the holder or holders of any obligation to cause such indebtedness

to become due prior to its stated maturity.

 

         (b) Consequences of Certain Events of Noncompliance.

 

                  (i) If an Event of Noncompliance has occurred, the dividend

rate on the Mezzanine Preferred Stock shall increase immediately by an increment

of 4 percentage point(s). Thereafter, until such time as no Event of

Noncompliance exists, the dividend rate shall increase automatically at the end

of each succeeding 365-day period by an additional increment of 2 percentage

point(s). Any increase of the dividend rate resulting from the operation of this

Paragraph shall terminate as of the close of business on the date on which no

Event of Noncompliance exists, subject to subsequent increases Pursuant to this

paragraph.

 

                  (ii) If an Event of Noncompliance has occurred, the holder or

holders of a majority of the Series E Preferred Stock then outstanding may

demand (by written notice delivered to the corporation) immediate redemption of

all or any portion of the Series E Preferred Stock owned by such holder or

holders, and the holder or holders of a majority of the Series F Preferred Stock

then outstanding may demand (by written notice delivered to the corporation)

immediate redemption of all or any portion of the Series F Preferred Stock owned

by such holder or holders, in each case at a price per Share equal to the

applicable Liquidation Value thereof (plus all accrued and unpaid dividends

thereon). The corporation shall give prompt written notice of such election to

the other

 

 

                                      -30-

<PAGE>   31

holders of Mezzanine Preferred Stock (but in any event within five days after

receipt of the initial demand for redemption), and each such other holder may

demand immediate redemption of all or any portion of such holder's Mezzanine

Preferred Stock by giving written notice thereof to the corporation within seven

days after receipt of the corporation's notice. The corporation shall redeem all

Mezzanine Preferred Stock as to which rights under this paragraph have been

exercised within 15 days after the receipt of the initial demand for redemption.

 

                  (iii) If an Event of Noncompliance of the type described in

Section (1) (a) (i) or (1) (a) (ii) has occurred and has continued for 60 days

or any other Event of Noncompliance has occurred, the number of directors

constituting the corporation's board of directors shall, at the request of the

holders of a majority of the Mezzanine Preferred Stock then outstanding, be

increased by one member, and the holders of Mezzanine Preferred Stock will have

the special right, voting separately as a single class (with each share being

entitled to one vote) and to the exclusion of all other classes of the

corporation's stock, to elect an individual to fill such newly created

directorship, to fill any vacancy of such directorship and to remove any

individual elected to such directorship. The special voting rights contained in

Section (1) (b) (ii) shall be prior to any voting rights of the Convertible

Preferred Stock pursuant to Section (b) (II) (4) (b) (iii) above. The newly

created directorship will constitute a separate class of directors, and the

director elected by the holders of the Mezzanine Preferred Stock will be

entitled to cast a number of votes on each matter considered by the board of

directors (including for purposes of determining the existence of a quorum)

equal to the sum of the number of votes entitled to be cast by all of the other

directors plus one, and the corporation shall amend its Bylaws so that there can

be no quorum of the board of directors if the director elected by the Mezzanine

Preferred Stock is not present. The special right of the holders of Mezzanine

Preferred Stock to elect members of the board of directors may be exercised at

the special meeting called pursuant to this subparagraph (iii), at any annual or

other special meeting of Stockholders and, to the extent and in the manner

permitted by applicable law, pursuant to a written consent in lieu of a

stockholders meeting. Such special right shall continue until such time as there

is no longer any Event of Noncompliance in existence, at which time such special

right shall terminate subject to revesting upon the occurrence and continuation

of any Event of Noncompliance which gives rise to such special right hereunder.

 

         At any time when such special right has vested in the holders of

Mezzanine Preferred Stock, a proper officer of the corporation shall, upon the

written request of the holder of at least 10% of the Series E Preferred Stock or

Series F Preferred Stock then outstanding, addressed to the secretary of the

corporation, call a special meeting of the holders of Mezzanine Preferred Stock

for the purpose of electing a director pursuant to this subparagraph. Such

meeting shall be held at the earliest legally permissible date at the principal

office of the corporation, or at such other place designated by the holders of

at least 10% of the Series E Preferred Stock or Series F Preferred Stock then

outstanding. If such meeting has not been called by a proper officer of the

corporation

 

 

                                      -31-

<PAGE>   32

within 10 days after personal service of such written request upon the secretary

of the corporation or within 20 days after mailing the same to the secretary of

the corporation at its principal office, then the holders of at least 10% of the

Series E Preferred Stock or Series F Preferred Stock then outstanding may

designate in writing one of their number to call such meeting at the expense of

the corporation, and such meeting may be called by such person so designated

upon the notice required for annual meetings of Stockholders and shall be held

at the corporation's principal office, or at such other place designated by the

holders of at least 10% of the Series E Preferred Stock or Series F Preferred

Stock then outstanding. Any holder of Mezzanine Preferred Stock so designated

shall be given access to the stock record books of the corporation for the

purpose of causing a meeting of stockholders to be called pursuant to this

paragraph.

 

         At any meeting or at any adjournment thereof at which the holders of

Mezzanine Preferred Stock have the special right to elect directors, the

presence, in person or by proxy, of the holders of a majority of the Mezzanine

Preferred Stock then outstanding shall be required to constitute a quorum for

the election or removal of any director by the holders of the Mezzanine

Preferred Stock exercising such special right. The vote of a majority of such

quorum shall be required to elect or remove any such director.

 

         Any director so elected by the holders of Mezzanine Preferred Stock

shall continue to serve as a director until the date on which there is no longer

any Event of Noncompliance in existence. After the special right to elect

directors has terminated, the number of directors constituting the board of

directors of the corporation shall decrease to such number as constituted the

whole board of directors of the corporation immediately prior to this occurrence

of the Event or Events of Noncompliance giving rise to the special right to

elect directors.

 

                  (iv) If any Event of Noncompliance exists, each holder of

Mezzanine Preferred Stock shall also have any other rights which such holder is

entitled to under any contract or agreement at any time and any other rights

which such holder may have pursuant to applicable law.

 

IV. Miscellaneous.

 

                  Section 1. Definitions.

 

         "Fourth Securities Purchase Agreement" means the Securities Purchase

Agreement, dated August 15, 1995, among the corporation and certain investors,

as such agreement may from time to time be amended in accordance with its terms.

 

         "Junior Securities" means any of the corporation's capital stock or

other equity securities other than the Mezzanine Preferred Stock.

 

 

                                      -32-

<PAGE>   33

         "Liquidation Value" means the Series E Liquidation Value, in the case

of the Series E Preferred Stock, and the Series F Liquidation Value, in the case

of the Series F Preferred Stock.

 

         "Public Offering" means any offering by the corporation of its equity

securities to the public pursuant to an effective registration statement under

the Securities Act of 1933, as then in effect, or any comparable statement under

any similar federal statute then in force.

 

         "Redemption Date" as to any share of Preferred Stock means the date

specified in the notice of any redemption at the corporation's option or the

applicable date specified herein in the case of any other redemption; provided

that no such date shall be a Redemption Date unless the aggregate amount

required to be paid upon such redemption is actually paid in full on such date,

and if not so paid in full, the Redemption Date shall be the date on which such

amount is fully paid.

 

         "Securities Purchase Agreement" means the Securities Purchase Agreement

dated March 30, 1994 by and among the corporation and certain investors, as such

agreement may from time to time be amended in accordance with its terms.

 

         "Securities E Liquidation Value" of any share of Series E Preferred

Stock as of any particular date shall be equal to $23.7091.

 

         "Series E Purchase Agreement" means the Purchase Agreement, dated as of

May 4, 1993, by and among the corporation and certain investors, as such

agreement may from time to time be amended in accordance with its terms.

 

         "Series F Liquidation Value" of any share of Series F Preferred Stock

as of any particular date shall be equal to $26.07.

 

         "Subsidiary" means any corporation of which the shares of outstanding

capital stock possessing the voting power (under ordinary circumstances) in

electing the board of directors are, at the time as of which any determination

is being made, owned by the corporation either directly or indirectly through

Subsidiaries.

 

         "Third Securities Purchase Agreement" means the Securities Purchase

Agreement dated as of July 31, 1995, among the corporation and certain

investors, as such agreement may from time to time be amended in accordance with

its terms.

 

         "Voting Warrants" means those stock subscription warrants with voting

rights for the purchase of Class A Common Stock of the corporation dated August

3, 1995, and issued to Sprout Growth II, L.P. and DLJ Capital Corporation as

such warrants may from time to time be amended in accordance with their terms.

 

 

                                      -33-

<PAGE>   34

         "Warrants" means (i) those certain warrants for the purchase of Class A

Common Stock dated March 30, 1994 and issued pursuant to the Securities Purchase

Agreement, (ii) those certain warrants for the purchase of Class A Common Stock

dated September 9, 1994, and issued to Brown Brothers Hariman & Co. and (iii)

those certain warrants for the purchase of 10,000 shares of Class A Common Stock

in the aggregate as contemplated by the Third Securities Purchase Agreement and

the Fourth Securities Purchase Agreement, in each case as such warrants may from

time to time be amended in accordance with their terms.

 

         Section 2. Amendment and Waiver.

 

                  (a) Subject to the provisions of Sections (b)(II)(5) hereof,

no amendment, modification or waiver of this Certificate of Incorporation shall

be binding or effective without the prior written consent of a majority of the

issued and outstanding shares of Common Stock, voting as a single class, and a

majority of the issued and outstanding Preferred Stock voting as a single class

(with each share of Preferred Stock having one vote) provided that no change in

the terms hereof may be accomplished by merger or consolidation of the

corporation with another corporation or entity unless the corporation has

obtained the prior written consent provided for herein. Any amendment,

modification or waiver of this Certificate of Incorporation in violation of

Section (b)(II)(5) hereof shall be null and void.

 

                  (b) Notwithstanding anything to the contrary herein, the

preferential rights granted herein to the Series H Preferred Stock in Section

(b)(II)(5)(d) shall not be modified without the affirmative vote of the holders

of a majority of the issued and outstanding shares of Series H Preferred Stock.

 

                  (c) Notwithstanding the foregoing, no amendment to the rights

of any of the Series A, B, C, D or H Preferred Stock, which by their terms

affect such Series adversely or differently from the rights of any of the other

Series of Convertible Preferred Stock, shall be effective without the

affirmative vote of the holders of a majority of the issued and outstanding

shares of the Series of Preferred Stock so affected.

 

         Section 3. Residual Rights. All rights accruing to the outstanding

shares of the corporation not expressly provided for to the contrary herein

shall be vested in the Common Stock.

 

                                   ARTICLE V

                                  INCORPORATOR

 

         The name and mailing address of the incorporator are as follows:

 

                  Frances A. Wrigley                   1 Gulf & Western Plaza

                                                       New York, NY 10023-7773

 

 

                                      -34-

<PAGE>   35

                                   ARTICLE VI

 

         The corporation is to have perpetual existence.

 

 

                                  ARTICLE VII

 

         Whenever a compromise or arrangement is proposed between this

corporation and its creditors or any class of them and/or between this

corporation and its stockholders or any class of them, any court of equitable

jurisdiction within the State of Delaware may, on the application in a summary

way of this corporation or of any creditor or stockholder thereof or on the

application of any receiver or receivers appointed for this corporation under

Section 291 of Title 8 of the Delaware Code or on the application of trustees in

dissolution or of the any receiver or receivers appointed for this corporation

under Section 279 of Title 8 of the Delaware Code order a meeting of the

creditors or class of the creditors, and/or of the stockholders or class of

stockholders of this corporation, as the case may be, to be summoned in such

manner as the said court directs. If a majority in number representing three

fourths in value of the creditors or class of creditors, and/or of the

stockholders or class of stockholders of this corporation, as the case may be,

agree to any compromise or arrangement and to any reorganization of this

corporation as consequence of such compromise or arrangement, the said

compromise or arrangement and the said reorganization shall, if sanctioned by

the court to which the said application has been made, be binding on all the

creditors or class of creditors, and/or all the stockholders or class of

stockholders, of this corporation, as the case may be, and also on this

corporation.

 

 

                                  ARTICLE VIII

 

         For the management of the business and for the conduct of the affairs

of the corporation, and in further definition, limitation, and regulation of the

powers of the corporation and of its directors and of its stockholders or any

class thereof, as the case may be, it is further provided:

 

         1.       The management of the business and the conduct of the affairs

                  of the corporation shall be vested in its Board of Directors.

                  The number of directors which shall constitute the whole Board

                  of Directors shall be fixed by, or in the manner provided in,

                  the Bylaws. The phrase "whole Board" and the phrase "total

                  number of directors" shall be deemed to have the same meaning,

                  to wit, the total number of directors which the

 

 

                                      -35-

<PAGE>   36

                  corporation would have if there were no vacancies. No election

                  of directors need be by written ballot.

 

         2.       After the original or other Bylaws of the corporation have

                  been adopted, amended, or repealed, as the case may be, in

                  accordance with the provisions of Section 109 of the General

                  Corporation Law of the State of Delaware, and, after the

                  corporation has received any payment for any of its stock, the

                  power to adopt, amend, or repeal the Bylaws of the corporation

                  may be exercised by the Board of Directors of the corporation;

                  provided, however, that any provision for the classification

                  of directors of the corporation for staggered terms pursuant

                  to the provisions of subsection (d) of Section 141 of the

                  General Corporation Law of the State of Delaware shall be set

                  forth in an initial Bylaw or in a Bylaw adopted by the

                  stockholders entitled to vote of the corporation unless

                  provisions for such classification shall be set forth in this

                  certificate of incorporation.

 

         3.       Whenever the corporation shall be authorized to issue only one

                  class of stock, each outstanding share shall entitle the

                  holder thereof to notice of, and the right to vote at, any

                  meeting of the stockholders. Whenever the corporation shall be

                  authorized to issue more than one class of stock, no

                  outstanding share of any class of stock which is denied voting

                  power under the provisions of the certificate of incorporation

                  shall entitle the holder thereof to the right to vote at any

                  meeting of stockholders except as the provisions of paragraph

                  (2) of subsection (b) of Section 242 of the General

                  Corporation Law of the State of Delaware shall otherwise

                  require; provided, that no share of any such class which is

                  otherwise denied voting power shall entitle the holder thereof

                  to vote upon the increase or decrease in the number of

                  authorized shares of said class.

 

                                   ARTICLE IX

 

 

         The personal liability of the directors of the corporation is hereby

eliminated to the fullest extent permitted by paragraph (7) of subsection (b) of

Section 102 of the General Corporation Law of the State of Delaware, as the same

may be amended and supplemented. Any repeal or modification of this Article

Ninth shall not adversely affect any right or protection of a director of the

corporation existing at the time of such repeal or modification.

 

 

                                      -36-

<PAGE>   37

                                   ARTICLE X

 

 

         The corporation shall, to the fullest extent permitted by Section 145

of the General Corporation Law of the State of Delaware, as the same may be

amended and supplemented, indemnify any and all persons whom it shall have power

to indemnify under said section from and against any and all of the expenses,

liabilities, or other matters referred to in or covered by said section, and the

indemnification provided for herein shall not be deemed exclusive of any other

rights to which those indemnified may be entitled under any Bylaw, agreement,

vote of stockholders or disinterested directors or otherwise, both as to action

in his official capacity and as to action in another capacity while holding such

office, and shall continue as to a person who has ceased to be a director,

officer, employee, or agent and shall inure to the benefit of the heirs,

executors, and administrators of such a person.

 

                                   ARTICLE XI

 

         From time to time any of the provisions of this certificate of

incorporation may be amended, altered or repealed, and other provisions

authorized by the laws of the State of Delaware at the time in force may be

added or inserted in the manner and at the time prescribed by said laws, and all

rights at any time conferred upon the stockholders of the corporation by this

certificate of incorporation are granted subject to the provisions of this

Article ELEVENTH.

 

                                  ARTICLE XII

 

         The corporation expressly elects not to be governed by Section 203 of

the general corporation Law of the State of Delaware.

 

 

                                      -37-

<PAGE>   38

         IN WITNESS WHEREOF, the undersigned has caused this Restated

Certificate of Incorporation to be duly executed on its behalf as of August 30,

1996.

 

 

                                            MEMBERWORKS INCORPORATED

 

 

                                            By: /s/ Gary Johnson

                                               --------------------------

                                               Gary Johnson, President

 

 

                                      -38-

 

 

</TEXT>

</DOCUMENT>

<DOCUMENT>

<TYPE>EX-4.2

<SEQUENCE>4

<DESCRIPTION>AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT

<TEXT>

 

<PAGE>   1

                                                                     Exhibit 4.2

 

                       CARDMEMBER PUBLISHING CORPORATION

                              AMENDED AND RESTATED

                            STOCKHOLDERS' AGREEMENT

 

            AGREEMENT, dated as of this 28th day of December, 1990, by and among

Cardmember Publishing Corporation, a Delaware corporation (the "Company"), and

each of the signatories hereto.

 

                                    RECITALS

 

            WHEREAS, pursuant to an Agreement dated as of July 12, 1989 among

the Founders (as defined below), each of the Founders purchased Restricted

Securities (as defined below) of the Company;

 

            WHEREAS, pursuant to a Stockholders' Agreement (the "Stockholders

Agreement") dated as of July 31, 1989 by and among the Company, GeoCapital (as

defined below) and the Founders, GeoCapital purchased Restricted Securities of

the Company and the Founders, GeoCapital and the Company agreed to impose

certain obligations and restrictions on the Restricted Securities owned by

GeoCapital and the Founders and on the conduct of the Company's Stockholders;

 

            WHEREAS, on December 15, 1989, GeoCapital transferred 10,500 shares

of Restricted Securities to Bernard Goldstein and, on the date hereof, Bernard

Goldstein purchased an additional 4,923 shares of Restricted Securities at a

price of $9.14 per share;

 

            WHEREAS, pursuant to a Purchase Agreement (as defined below), each

of the Investors (as defined below), other than Bernard Goldstein, are

purchasing Restricted Securities of the Company; and

 

            WHEREAS, such parties desire to promote their mutual interests and

the interests of the Company by amending and restating the Stockholders

Agreement as set forth herein.

 

            NOW, THEREFORE, in consideration of the premises and of the mutual

covenants and agreements herein contained, the parties hereto agree as follows:

 

                                   ARTICLE 1

 

                                  DEFINITIONS

 

            1.1 As used herein, the following terms, unless the context clearly

indicates otherwise, shall have the following meanings:

 

            "Affiliate" of any particular Person shall mean any other Person

controlling, controlled by or under common control with such particular Person,

or a member of a

<PAGE>   2

Person's Immediate Family, or in the case of a Founder, a Person closely

associated with such Founder, or, in the case of an Investor, a general partner

of such Investor.

 

            "Chancellor" shall mean Chancellor Capital Management, Inc., a New

York corporation.

 

            "Commitment Letter" shall mean the commitment letter dated December

17, 1990 from Mid City Bank to the Company.

 

            "Common Stock" shall mean the Class A Common Stock of the Company,

$.01 par value per share and/or the Class B Common Stock of the Company, $.01

par value per share.

 

            "Founders" shall mean Gary Johnson, Thomas St. Denis and Dennis

Walker.

 

            "Founders Shares" shall mean (a) the shares of Class A Common Stock

of the Company, par value $0.01 per share, issued to the Founders on July 28,

1989, (b) the shares of Class B Common Stock of the Company, par value $0.01 per

share, issued or issuable upon conversion of the Class A Common Stock and (c)

any securities issued with respect to the securities referred to in clauses (a)

and (b) by way of a stock dividend or stock split or in connection with a stock

combination, recapitalization, merger, consolidation or other reorganization. As

to any particular Founders Shares, such shares shall cease to be Founders Shares

when they have been distributed to the public pursuant to an offering registered

under the Securities Act or sold to the public through a broker, dealer or

market maker in compliance with Rule 144 under the Securities Act (or any

similar rule then in force).

 

            "Guaranty" shall mean the Founders' personal guarantee of the

$2,000,000 loan to be made by Mid City Bank to the Company pursuant to the

Commitment Letter.

 

            "GeoCapital" shall mean GeoCapital II, L.P., a Delaware limited

partnership.

 

            "Holder" shall mean any holder (including, without limitation, a

Permitted Transferee) of outstanding Common Stock or Preferred Stock which has

not been sold pursuant to a public offering or public sale.

 

            "Holder of Common Stock" shall mean any holder (including without

limitation, a Permitted Transferee) of outstanding Common Stock which has not

been sold pursuant to a public offering or Public sale.

 

            "Immediate Family" shall mean any ancestor, descendant (adopted or

natural) or spouse of any Person, or of the spouse of such Person, or any

custodian or trustee for the account or benefit of such Person.

 

 

                                      -2-

<PAGE>   3

 

<PAGE>   4

            "Investors" shall mean GeoCapital, Goldstein, each of the Persons

listed on the attached Schedule of Stockholders under the heading "Chancellor

Entities" and any of their Permitted Transferees.

 

            "Mid City Bank" shall mean Mid City Bank of Omaha, Nebraska.

 

            "Permitted Transferee" shall mean (a) in the case of an individual,

the Immediate Family of such person, a trust solely for the benefit of such

person or his Immediate Family, the estate or legal representatives of such

person and any partnership, corporation or other entity wholly-owned by such

person, (b) in the case of a partnership, any of its partners (general and/or

limited), the estates of such partners and any partnership, corporation or other

entity wholly-owned by such partnership or such partners, and (c) in the case of

a corporation, any corporation controlled by, controlling, or under common

control with such transferor corporation, provided that during the term of this

Agreement such transferee corporation shall remain a corporation controlled by,

controlling or under common control with such transferor corporation. For

purposes of this definition, "control" shall mean (x) direct or indirect

beneficial ownership of more than fifty percent (50%) of each class of voting

securities of the controlled corporation and (y) the power to elect a majority

of the Board of Directors (or similar management committee) of the controlled

corporation.

 

            "Person" shall mean an individual, a partnership, a corporation, an

association, a joint stock company, a trust, a joint venture, an unincorporated

organization and a governmental entity or any department, agency or political

subdivision thereof.

 

            "Preferred Stock" shall mean the Series A Preferred Stock and/or the

Series B Preferred Stock.

 

            "Purchase Agreement" shall mean the Purchase Agreement dated as of

the date hereof by and among the Company, the Investors (other than Bernard

Goldstein) and the Founders.

 

            "Qualifying Public Offering" shall mean a public offering pursuant

to a registration statement filed with and declared effective by the Securities

and Exchange Commission covering the offer and sale of Common Stock for the

account of the Company to the public at a price to the public of not less than

300% of the Series B Conversion Price (as defined in the Amendment to the

Certificate of Incorporation attached hereto as Exhibit A) then in effect, in

which the aggregate net proceeds (after underwriting discounts and commissions)

to the Company are at least $10,000,000.

 

            "Register," "registered" and "registration" shall refer to a

registration effected by preparing and filing a registration statement in

compliance with the Securities Act

 

 

                                      -3-

<PAGE>   5

and applicable rules and regulations thereunder, and the declaration or ordering

of the effectiveness of such registration statement.

 

            "Registrable Securities" shall mean (a) the shares of Class B Common

Stock issued or issuable upon conversion of the Preferred Stock, (b) the shares

of Class B Common Stock issued or issuable upon conversion of the Class A Common

Stock into which shares of Preferred Stock have been converted, (c) any Common

Stock issued in respect of securities referred to in clauses (a) and (b) by way

of a stock split or stock dividend, or in connection with a combination of

shares, recapitalization, merger, consolidation or other reorganization and (d)

any other shares of Common Stock owned by Holders of the securities described in

clauses (a), (b) and (c) above. As to any particular Registrable Securities,

such securities will cease to be Registrable Securities when they have been

distributed to the public pursuant to an offering registered under the

Securities Act or sold to the public through a broker, dealer or market maker in

compliance with Rule 144 under the Securities Act (or any similar rule then in

force). For purposes of this Agreement, a person or entity will be deemed to be

a Holder of Registrable Securities whenever such person or entity has the right

to acquire directly or indirectly such Registrable Securities (upon conversion

or exercise in connection with a transfer of securities or otherwise, but

disregarding any restrictions or limitations upon the exercise of such right),

whether or not such acquisition has actually been effected.

 

            "Restricted Securities" shall mean (a) the shares of Preferred Stock

purchased by GeoCapital on July 31, 1989, (b) the shares of Preferred Stock

purchased by Bernard Goldstein from GeoCapital on December 15, 1989 and from the

Company on December 28, 1990, (c) the shares of Preferred Stock purchased by the

Investors pursuant to the Purchase Agreement, (d) the shares of Common Stock

issued or issuable upon conversion of the Preferred Stock, (e) the shares of

Class B Common Stock issued or issuable upon conversion of the Class A Common

Stock into which shares of Preferred Stock purchased by the Investors have been

converted, (f) the shares of Class A Common Stock purchased by the Founders on

July 28, 1989, (g) the shares of Class B Common Stock issued or issuable upon

the conversion of the Class A Common Stock purchased by the Founders, (h) the

shares of Class B Common Stock to be issued pursuant to Section 5.17 hereunder,

and (i) any securities issued with respect to the securities referred to in

clauses (a), (b), (c), (d), (e), (f) (g) or (h) by way of a stock dividend,

Stock split or in connection with a stock combination, recapitalization, merger,

consolidation or other reorganization. As to any particular Restricted

Securities, such securities will cease to be Restricted Securities when they

have (a) been effectively registered under the Securities Act and disposed of in

accordance with the registration statement covering them, (b) become eligible

for sale pursuant to Rule 144 (or any similar provision then in force) under the

Securities Act or (c) subject to the provisions of Article 4 of this Agreement,

been otherwise legally transferred and new certificates for them not bearing the

Securities Act legend set forth in Section 4.6 have been issued. Whenever any

particular securities cease to be Restricted Securities, the holder thereof

 

 

                                      -4-

<PAGE>   6

shall be entitled to receive from the Company, without expense, new securities

of like tenor not bearing a Securities Act legend of the character set forth in

Section 4.6.

 

            "Securities Act" means the Securities Act of 1933, as amended, or

any similar federal law then in force.

 

            "Securities Exchange Act" shall mean the Securities Exchange Act of

1934, as amended, or any similar federal law then in force.

 

            "Securities and Exchange Commission" includes any governmental body

or agency succeeding to the functions thereof.

 

            "Series A Preferred Stock" shall mean the Series A Preferred Stock

of the Company, par value $0.01 per share, having the rights, restrictions,

privileges and preferences set forth in the Amendment to the Certificate of

Incorporation attached hereto as Exhibit A.

 

            "Series B Preferred Stock" shall mean the Series B Preferred Stock

of the Company, par value $0.01 per share, having the rights, restrictions,

privileges and preferences set forth in the Amendment to the Certificate of

Incorporation attached hereto as Exhibit A.

 

            "Transfer" shall mean any transfer, sale, assignment, pledge,

hypothecation or other disposition.

 

            "Underlying Common Stock" shall mean (a) the Common Stock issued or

issuable upon conversion of the Preferred Stock, (b) the Class B Common Stock

issued or issuable upon conversion of the Class A Common Stock into which shares

of Preferred Stock have been converted and (c) any Common Stock issued or

issuable with respect to the Securities referred to in clauses (a) and (b) above

by way of a stock dividend or stock split or in connection with a combination of

shares, recapitalization, merger, consolidation or other reorganization. For

purposes of this Agreement, any person or entity who holds Preferred Stock shall

be deemed to be the holder of the Underlying Common Stock obtainable upon

conversion of the Preferred Stock in connection with the transfer thereof or

otherwise, regardless of any restriction or limitation on the conversion of the

Preferred Stock. As to any particular shares of Underlying Common Stock, such

shares shall cease to be Underlying Common Stock when they have been (a)

effectively registered under the Securities Act and disposed of in accordance

with the registration statement covering them or (b) distributed to the public

through a broker, dealer or market maker pursuant to Rule 144 under the

Securities Act (or any similar provision then in force).

 

 

                                      -5-

<PAGE>   7

                                   ARTICLE 2

 

                            SUBSCRIPTION FOR SHARES

 

            2.1 Subscription for Shares of Common Stock. Each of the Founders

has purchased 225,000 Founders Shares. In consideration of the issuance of such

shares, each of the Founders paid on July 12, 1989 (the "Transfer Date") the

purchase price set forth on the Schedule of Stockholders attached hereto and

agrees that his purchase is subject to the provisions of this Agreement. Dennis

Walker represents and warrants to the Company and the Investors that, as of the

Transfer Date, he had good and marketable title to all of the assets transferred

to the Company and listed on the Schedule of Stockholders as payment for the

225,000 shares of Class A Common Stock purchased by Walker on the Transfer Date,

free and clear of any pledges, liens, leases, encumbrances, security interests,

charges or similar restrictions of any nature other than those which have arisen

in the ordinary course of business and which do not detract materially from the

value of or interfere with the use of any of the assets.

 

            2.2   Subscription for Shares of Series A Preferred Stock.

 

            (a) GeoCapital subscribed for the number of shares of Series A

Preferred Stock set forth opposite its name on the Schedule of Stockholders

attached hereto under the column labelled "Number of Shares of Series A

Preferred". In consideration of the issuance of, such Series A Preferred Stock,

GeoCapital paid the purchase price of ($3.3333) per share of Series A Preferred

Stock to the Company for the full purchase price. The Company, upon receipt of

GeoCapital's payment, delivered to GeoCapital a certificate representing the

shares of Series A Preferred Stock, which shares are fully paid and

non-assessable.

 

            (b) The closing of the purchase and sale of the shares of Series A

Preferred Stock took place on July 31, 1989 (the "Closing").

 

            2.3 Purchase of Shares of Series B Preferred Stock. Pursuant to the

Purchase Agreement, each of the Investors purchased the number of shares of

Series B Preferred Stock set forth opposite its name on the Schedule of

Stockholders attached hereto under the column labelled "Number of Shares of

Series B Preferred" for the purchase price set forth opposite its name on the

Schedule of Stockholders under the column labelled "Total Price for Series B

Preferred."

 

            2.4 Investment Representation. At and as of the Closing, GeoCapital

made the following representations and warranties to the Company, which

representations and warranties are hereby confirmed:

 

            (a) It has such knowledge and experience in financial and business

matters and such experience in evaluating and investing in newly organized

companies

 

 

                                      -6-

<PAGE>   8

such as the Company as to be capable of evaluating the merits and risks of an

investment in the shares of Preferred Stock. It recognizes that the purchase of

the shares of Preferred Stock involves a substantial degree of risk and it has

the financial ability to bear the economic risk of its investment, has adequate

means for providing for its current needs and contingencies and has no need for

liquidity with respect to its investment in the Company.

 

            (b) It is acquiring the shares of Preferred Stock for investment for

its own account, for investment purposes only, and not with the view to, for

resale in connection with, any public distribution thereof. It understands that

the shares of Preferred Stock have not been registered under the Securities Act

by reason of a specified exemption from the registration provisions of the

Securities Act which depends upon, among other things, the bona fide nature of

its investment intent as expressed herein.

 

            (c) It acknowledges that the shares of Preferred Stock and

Underlying Common Stock must be held indefinitely unless they are subsequently

registered under the Securities Act or any exemption from such registration is

available. It has been advised or is aware of the provisions of Rule 144

promulgated under the Securities Act, which permits limited resale of shares

purchased in a private placement subject to the satisfaction of certain

conditions, and that such rule may not become available for resale of the shares

of Preferred Stock or Underlying Common Stock.

 

            (d) It has relied upon independent investigations made by it or its

representatives, and that it or its representatives have had an opportunity to

discuss the Company's business, management and financial affairs with its

management, to review the Company's facilities, and to obtain such additional

information concerning its investment in the shares in order for it to evaluate

the merits and risks of an investment in the shares of Preferred Stock, and has

determined that the shares are a suitable investment for it and that at this

time it could bear a complete loss of its investment.

 

            (e) It is an "accredited investor," as that term is defined in

Regulation D under the Securities Act.

 

            (f) It is a limited partnership with its principal places of

business in New Jersey.

 

            2.5   Vesting.

 

            (a) All of the Founder Shares shall be subject to repurchase in

accordance with this Section 2.5 (the "Purchase Option") and shall be "Unvested

Stock" until they become fully vested in accordance with subsection 2.5(h)

hereof. In the event any of the Founders shall cease to be employed by or act as

a consultant to the Company (including a parent or subsidiary of the Company) on

account of such

 

 

                                      -7-

<PAGE>   9

Founder voluntarily terminating his employment with the Company or on account of

the Company terminating such Founder for any reason, or no reason, with or

without cause, and if Mid City Bank shall have released such Founder from its

obligations under the guarantee within 120 days after the date of such

termination, then (i) prior to December 31, 1992, the Company shall have the

right to purchase from that Founder or his personal representative, as the case

may be, all (but not less than all) of the Founders Shares purchased by such

Founder for an aggregate purchase price of $275,000, or (ii) on or after

December 31, 1992 but prior to December 31, 1994, the Company shall have the

right to purchase from the Founder, or his personal representative, as the case

may be, all (or any part) of the Founders Shares purchased by such Founder at

the then current fair market value of such shares. In addition, in the event any

of the Founders shall cease to be employed by or act as a consultant to the

Company (including a parent or subsidiary of the Company) on account of

termination by the Company and if Mid City Bank shall not have released such

Founder from its obligations under the Guarantee within 120 days after the date

of such termination, then (i) if such termination was without cause, then the

Company shall be obligated to purchase from such Founder, and (ii) if such

termination was for cause, then the Company shall have the right (but not the

obligation) to Purchase from such Founder, (x) prior to December 31, 1992, all

(but not less than all) of such Founder's Shares purchased by such Founder for

an aggregate purchase price of $667,000 or (y) on or after December 31, 1992 but

prior to December 31, 1994, the number of Founder's Shares purchased by such

Founder having a fair market value equal to $667,000 for a purchase price of

$667,000. For purposes of this Section 2.5, "cause" shall mean (a) conviction or

entry of a plea of nolo contendere for a felony, a crime of moral turpitude or

other crime involving dishonesty, disloyalty or fraud, (b) willful misconduct or

fraud with respect to the Company as determined by a court or other governmental

body of competent jurisdiction or (c) any significant violation of any statutory

or common law duty of loyalty to the Company as determined by a court or other

governmental body of competent jurisdiction. In the event that the parties are

unable to agree upon the fair market value of the Founder Shares, the Founders

shall select an independent appraiser and the Company shall select an

independent appraiser. Each appraiser shall render his opinion as to the fair

market value. The two appraisers shall be given thirty (30) days from the date

both appraisers are engaged within which to render their opinions as to the fair

market value. In the event that the lower appraisal is at least 90% of the

higher appraisal, then the average of the two appraisals shall constitute and be

deemed the fair market value of the Founder Shares. If the lower appraisal is

not greater than or equal to 90% of the higher appraisal, then the two

appraisers shall select a third appraiser to render his opinion as to the fair

market value. The third appraiser shall be given thirty (30) days from the date

he is engaged within which to render his opinion as to the fair market value. In

such case, the third appraisal shall constitute and be deemed the fair market

value of the Founder Shares. Each party shall bear the costs of the appraisal

made at its request and the cost of the third appraisal, if any, will be shared

equally, one-half by the Founders and one-half by the Company.

 

 

                                      -8-

<PAGE>   10

            (b) The Purchase Option shall be exercised by written notice (the

"Repurchase Notice") to the Founder no later than 60 days after the effective

date of termination of his employment or consulting arrangement. The Repurchase

Notice shall set forth the number of Founder Shares subject to the Purchase

Option to be acquired from the Founder (the "Repurchased Stock"). The closing of

the purchase transactions shall take place on the date designated by the Company

in the Repurchase Notice which date shall not be more than 90 days after the

delivery of the Repurchase Notice. On such date, the Company will deliver to the

Founder the full purchase price of the Repurchased Stock in cash (by certified

or cashiers' check) or by the cancellation of all or a portion of any

outstanding indebtedness of the Founder to the Company that has been

acknowledged by the Company's accounting firm as being due and owing, or both,

such choice to be at the option of the Company. In exchange for payment of the

full purchase price the Founder will deliver the certificates representing the

Repurchased Stock, duly endorsed in blank or accompanied by duly executed stock

powers, to the Company. The Company, as purchaser of the Repurchased Stock

hereunder, will be entitled to receive customary representations and warranties

from the Founder regarding the sale of the Repurchased Stock, it being

understood, however, that the Founder shall not be required to make any

representations or warranties with respect to the business activities of the

Company.

 

            (c) In the event of any stock split, stock dividend, reverse stock

split, combination of shares, merger, consolidation, reorganization or

recapitalization of or with respect to any Founder Shares, the purchase price,

the number and the type of shares or property subject to the Purchase Option by

the Company hereunder shall be equitably adjusted as determined by the Board in

good faith, taking into consideration any shares or property distributed (other

than cash dividends) with respect to the Founder Shares.

 

            (d) Except as set forth in Section 2.6 below, the Founders each

agree that he will not Transfer any Unvested Stock. The Founders each agree that

certificates representing the Founder Shares will bear a legend to the effect

that such shares are subject to the Purchase Option pursuant to the terms of

this Section 2.5.

 

            (e) Except as set forth in Section 2.5(d) of this Agreement, each of

the Founders shall have full rights as a stockholder with respect to the

Unvested Stock.

 

            (f) In the event the Company is prohibited by law from exercising

any or all of the Purchase Option or does not elect to exercise all or any part

of the Purchase Option, the Investors shall have the right (but not the

obligation) to exercise the Purchase Option to the extent the Company is unable

or elects not to do so based on the same procedures as set forth in subsections

2.5(a), 2.5(b) and 2.5(c) above, except that the time periods specified in such

subsections shall not begin to run until the Investors have received written

notice from the Company that it is unable or elects not to exercise the Purchase

Option.

 

 

                                      -9-

<PAGE>   11

            (g) Subject to Section 2.6 below, as security for his faithful

performance of the terms of this Agreement and to insure that the Unvested Stock

will be available for delivery upon exercise of the Purchase Option as herein

provided, each of the Founders agrees to deliver to and deposit with the

Secretary of the Corporation, as Escrow Agent in this transaction, two stock

assignments duly endorsed (with date and number of shares blank), together with

the certificate or certificates evidencing the Unvested Stock; said documents

are to be held by the Escrow Agent and delivered by the Escrow Agent to the

Founders when the Unvested Stock becomes fully vested in accordance with

subsection 2.5(h) hereof, or, if the Company or the Investors exercise the

Purchase Option prior to December 31, 1994, then to the Company or the Investors

in accordance with this Section 2.5.

 

            (h) Notwithstanding anything to the contrary contained in this

Section 2.5, any Unvested Stock will become fully vested, and no longer subject

to the Purchase Option, on December 31, 1994 if the Purchase Option has not been

exercised by the Company or the Investors within the periods set forth above or,

if earlier, upon (i) the liquidation of the Company, (ii) the sale of all or

substantially all the assets of the Company, (iii) a merger, consolidation or

reorganization whereby the holders of the Company's voting securities (on a

fully diluted basis and assuming conversion of all the Preferred Stock)

immediately prior to the merger, consolidation or reorganization own less than

fifty percent (50%) of the new or surviving Company or (iv) the Company's and

the Investors' failure to exercise the Purchase Option with respect to such

shares of Unvested Stock within the time periods specified in subsections

2.5(a), 2.5(b) and 2.5(f).

 

      (i)   Section 2.5 (i) has been intentionally Omitted.

 

            2.6 Pledge of Founders Shares. Each of the Investors hereby consents

to the pledge by the Founders of the Founders Shares to Mid City Bank to secure

the Guarantee provided that, upon termination or release of such pledge, Mid

City Bank agrees to return the stock certificates representing Founders Shares

to the Secretary of the Company to be held or delivered in accordance with

Section 2.5(g) hereof.

 

                                   ARTICLE 3

 

                             ELECTION OF DIRECTORS

 

            3.1 Election; Removal. Pursuant to the By-laws of the Company, the

number of Directors comprising the Company's Board of Directors (the "Board")

has

 

 

                                      -10-

<PAGE>   12

been initially fixed by resolution of the Board at seven. The Holders will vote

their respective shares and take all other actions reasonably necessary to

maintain the number of members of the Board at seven (subject to subsection (b)

below). During the term of this Agreement, all the shares of Preferred Stock and

Common Stock held by any Holder, whether owned now or hereafter acquired, shall

be voted in accordance with the provisions hereof on all of the following

matters on which the stockholders of the Company vote:

 

            (a) Immediately upon receiving notice of any stockholders' meeting

at which members of the Board are to be elected, (i) GeoCapital shall designate

a minimum of one of two candidates (the "GeoCapital Representatives"), (ii)

Chancellor shall designate one candidate (the "Chancellor Representative"),

(iii) Gary Johnson, Thomas St. Denis and Dennis Walker shall each be candidates

for the Board (subject to subsection (b) below), and (iv) the GeoCapital

Representatives, the Chancellor Representative and the Founders then on the

Board shall designate one candidate (the "Independent Representative") who,

without the consent of the Founders, shall not be an Affiliate of the Investors

and, without the consent of the Investors, shall not be an Affiliate of the

Founders. Each Holder hereby binds itself to vote its shares, or give its

written consent to, the election of the candidates designated, as set forth in

this Section 3.1(a). Pursuant to the By-Laws of the Company, the GeoCapital

Representative may appoint the second GeoCapital Representative (for a total of

two GeoCapital Representatives) and the Investors and the Founders may appoint

the Independent Director (subject to subsection (b) below) without stockholder

action. Directors designated pursuant to this Section 3.1(a) may be removed only

by the Person entitled to designate such Director Pursuant to this Section

3.1(a).

 

            (b) In the event that the employment by the Company of one of the

Founders (as described in Section 5.19 herein) is terminated for any reason, or

no reason, with or without cause, (i) the terminating Founder shall immediately

resign from the Board and (ii) GeoCapital shall cause one of its designees on

the Board to resign. In the event that the employment by the Company of two of

the Founders is terminated for any reason, or no reason, with or without cause,

(i) the terminating Founder shall immediately resign from the Board and the

remaining Founder shall be entitled to designate one additional candidate for

the Board (the "Additional Founder Director"), (ii) each of the Investors shall

maintain one Board seat and (iii) the Independent Representative shall maintain

one Board seat. In the event that the employment by the Company of three of the

Founders is terminated for any reason, or no reason, with or without cause, (i)

the last Founder to leave the employ of the Company shall immediately resign

from the Board and cause the Additional Founder Director to resign immediately,

(ii) the last Founder to leave the employ of the Company and the Investors shall

cause the Independent Representative to resign immediately and (iii) each of the

Investors shall maintain one Board seat and the Investors shall designate a

third Board member. The Holders will vote their shares and take all other

actions reasonably

 

 

                                      -11-

<PAGE>   13

necessary to cause the By-Laws to be amended to decrease the size of the Board

to two and to accomplish the foregoing.

 

            (c) Except as set forth in subsection (b) above and except with

respect to the Founders, in the event any Director elected to the Board after

being designated as a candidate for membership pursuant to this Agreement dies,

resigns, is removed or otherwise ceases to serve as a member of the Board, the

Company shall give notice thereof to the party or parties having designated such

Director, and such party or parties agree(s) to designate a successor and notify

the Company of its selection. If a vacancy on the Board is filled by the

remaining Directors with a Director who is not the successor designated by the

party entitled to designate such successor, each Holder agrees to cast its votes

for, or give its written consent to, the removal of such Director at any time

upon receipt of instructions in writing to such effect, signed by the party or

parties entitled to designate the Directors;

 

            (d) Meetings of the Board of Directors may be called by any Director

on five days' notice to each Director, either personally or by mail and shall be

held within a 40 mile radius of New York City unless consented to otherwise by

all Board members.

 

            (e) Any designation pursuant to this Article 3 shall be made in

writing and shall be signed by such designating party;

 

            (f) Each Holder agrees to cast its votes for, or give its written

consent to, the removal of a designee on the Board at any time upon receipt of

instructions in writing to such effect, signed by the designating party.

 

            3.2 Initial Designees. The initial designees pursuant to Section 3.1

are Stephen J. Clearman as a designee of GeoCapital, and Gary Johnson, Thomas

St. Denis and Dennis Walker as the designees of the Founders.

 

            3.3 Certificate of Incorporation. The Provisions of Sections 3.1 and

3.2 shall not apply whenever the holders of Preferred Stock are entitled to and

exercise their rights under the provisions of subsections (b)(5)(a)(iii) and

(b)(5)(b) of Article IV of the Company's Certificate of Incorporation; provided,

however, that whenever the holders of Preferred Stock exercise such rights, all

shares of Preferred Stock held by any Holder, whether now owned or hereafter

acquired, shall be voted such that Chancellor shall designate one member of the

Board.

 

            3.4 Termination. This Article 3 shall terminate upon the first to

occur of (a) a Qualifying Public Offering and (b) the tenth anniversary of the

date hereof unless extended by the parties in accordance with Section 218 of the

Delaware General Corporation Law.

 

 

                                      -12-

<PAGE>   14

                                   ARTICLE 4

 

                    TRANSFER OF STOCK; RIGHT OF FIRST OFFER

 

            4.1   Transfer of Restricted Securities.

 

            (a) Restricted Securities are transferable only pursuant to (i)

public offerings registered under the Securities Act, (ii) Rule 144 or Rule 144A

promulgated by the Securities and Exchange Commission (or any similar rule or

rules then in force) if such rule is available, and (iii) subject to the

conditions specified in paragraph (b) below and in Sections 4.2, 4.3 and 4.4,

any other legally available means of transfer.

 

            (b) In connection with the Transfer of any Restricted Securities

(other than a Transfer described in subparagraph (a) (i) or (ii) above), the

Holder thereof will deliver written notice to the Company describing in

reasonable detail the Transfer or proposed Transfer, together with an opinion of

counsel which (to the Company's reasonable satisfaction) is knowledgeable in

securities law matters to the effect that such Transfer of Restricted Securities

may be effected without registration under the Securities Act or any applicable

state securities laws. In addition, if the Holder of the Restricted Securities

delivers to the Company an opinion of such counsel that no subsequent Transfer

of such Restricted Securities will require registration under the Securities Act

or any applicable state securities laws, the Company will promptly upon such

contemplated Transfer deliver new certificates for such Restricted Securities

which do not bear the Securities Act legend set forth in Section 4.6. If the

Company is required to deliver new certificates for such Restricted Securities

bearing such legend, the Holder thereof will not Transfer the same until the

prospective transferee has confirmed to the Company in writing its agreement to

be bound by the conditions contained in this Agreement and the other

restrictions on Transfer imposed by the Securities Act or any applicable state

securities laws.

 

            (c) It shall be a condition to the Transfer of any Restricted

Securities that the transferee thereof (including without limitation a Permitted

Transferee) agrees to be bound by the provisions of this Agreement as if

originally a party hereto.

 

            (d) Upon the request of any Holder, the Company shall promptly

supply to such Holder its prospective transferee(s) all information regarding

the Company required to be delivered in connection with a Transfer pursuant to

Rule 144A promulgated by the Securities and Exchange Commission.

 

            4.2   Transfer Procedure.

 

            (a) A Holder may not Transfer any of its interest in any Common

Stock except (i) pursuant to a public offering registered under the Securities

Act, (ii) pursuant to a public sale under Rule 144 (except those transactions

described in Rule 144(k) if the

 

 

                                      -13-

<PAGE>   15

Company's shares have not become publicly traded), or any similar provision then

in effect, (iii) to a Permitted Transferee or (iv) pursuant to the provisions of

Section 2.5 (collectively, "Excused Transfers"), without first offering to sell

the Restricted Securities pursuant to the provisions of Sections 4.2.

 

            (b) Any Holder of Common Stock (other than the Investors) wishing to

Transfer all or any of Common Stock (the "Offering Stockholder"), other than

pursuant to an Excused Transfer, shall deliver a written notice (an "Offer

Notice") to the Secretary of the Company. The Offer Notice will describe in

reasonable detail the number of shares being offered, the purchase price

requested (all of which shall be payable in cash and/or promissory notes, or any

combination thereof), and all other material terms and conditions of the

proposed transfer. The Company shall then promptly deliver a copy of the Offer

Notice to the Investors.

 

            (c) Within 30 days after receipt of the Offer Notice, if any of the

Investors desires to acquire all or any portion of the Common Stock proposed to

be transferred, it shall notify the Company in writing (the "Purchase Notice")

of the number of the shares of Common Stock it wishes to purchase. If the total

number of shares of Common Stock specified in the Purchase Notice exceeds the

number of shares to be transferred, each Investor electing to purchase shares (a

"Purchasing Investor") shall have priority, up to the number of shares specified

in its Purchase Notice, to purchase such proportion of the shares to be

transferred as the number of shares of Underlying Common Stock it owns bears to

the total number of shares of Underlying Common Stock owned by each Purchasing

Investor. If any Common Stock remain unpurchased after this allocation, the

Company shall notify each Purchasing Investor of the number of shares remaining

unpurchased, and such shares shall be available for purchase by each Purchasing

Investor, upon notice to the Company within fifteen days of receipt of the

Company's notice of available shares, of its percentage of ownership interest

unless that factor is required to apportion all of the remaining shares among

electing members of the Purchasing Investors.

 

            (d) If for any reason the Investors do not elect to purchase all of

the Common Stock offered pursuant to the Offer Notice, the Founders shall be

offered the second option to purchase the Common Stock being offered and not

purchased by the Investors based on the same procedure as is set forth in

Section 4.2(c) above. Within 30 days after receipt of the Purchase Notice, each

of the Founders shall notify the Offering Stockholder, the Investors and the

Company in writing (the "Founder Notice") whether he wishes to purchase any of

the Common Stock being offered.

 

            (e) Subject to the provisions of Section 4.4, if for any reason the

Investors and the Founders do not elect to purchase all of the Common Stock

offered pursuant to the Offer Notice, the Company shall be offered the third

option to purchase the Common Stock being offered and not purchased by the

Investors or the Founders. Within 5 (five) days after receipt of the Founder

Notice, the Company shall notify the

 

 

                                      -14-

<PAGE>   16

Offering Stockholder and the Investors in writing whether it wishes to purchase

the Common Stock being offered; provided that if the Company determines that it

is prohibited from purchasing all such Common Stock under applicable state law

or pursuant to any agreement by which it is bound, the 5 day period shall be

reduced to one day.

 

            (f) Subject to the provisions of Section 4.4, the purchase of the

Common Stock pursuant to this Section 4.2 shall be closed at the Company's

executive offices within not less than 30 days but not more than 60 days after

the last notice hereunder is received by the parties. At the closing, the

purchasers will pay the Offering Stockholder the purchase price for the Common

Stock as set forth in the Offer Notice, and the Offering Stockholder will

execute and deliver the certificate or certificates evidencing such Common Stock

to the purchaser or purchasers or their nominees. The purchases of the Common

Stock hereunder will be entitled to receive customary representations and

warranties from the Offering Stockholder regarding the sale of the Common Stock.

 

            (g) In the event that neither the Investors, the Founders nor the

Company have elected to purchase all of the Common Stock offered pursuant to the

Offer Notice, the Offering Stockholder may, subject to the provisions of

Sections 4.1 and 4.4 hereof, transfer the Common Stock specified in the Offer

Notice and on other terms no more favorable to the transferee(s) thereof than

specified in the Offer Notice during the 60-day period immediately following the

last date on which the last of the Investors, Founder, and/or the Company could

elect to purchase the Common Stock. Any Common Stock not transferred within such

day period will be subject to the provisions of this Section 4.2 upon subsequent

transfer.

 

            4.3  Transfer Procedure - Sale By Investor to a Competitor

 

            (a) An Investor may not Transfer any of its interest in any

Preferred Stock or Underlying Common Stock (collectively, the "Investor

Securities") to a Competitor of the Company (as defined below) without first

offering to sell the Investor Securities pursuant to the provisions of this

Section 4.3. For purposes of this Section 4.3 a "Competitor" shall mean: (i) any

entity primarily engaged in the business of selling services or merchandise to

credit card customers via direct marketing, (ii) any entity primarily engaged in

the business of publishing magazines of the type then marketed by the Company

and/or (iii) any officer, director or owner of 10% or more of the voting

securities of an entity of the type described in (i) and (ii) above.

Notwithstanding the foregoing, a Transfer to a financial institution, including

without limitation a bank, pension fund, or investment fund, which is purchasing

Investor Securities for investment purposes only, shall not be deemed a Transfer

to a Competitor.

 

            (b) Any Investor wishing to Transfer all or any of its Investor

Securities to a Competitor (the "Offering Investor") shall deliver a written

notice (the "Investor's

 

 

                                      -15-

<PAGE>   17

Offer Notice") to the Secretary of the Company. The Investor's Offer Notice will

describe in reasonable detail the number of shares being offered, the purchase

price requested (all of which shall be payable in cash and/or promissory notes,

or any combination thereof), and all other material terms and conditions of the

proposed transfer. The Company shall then promptly deliver a copy of the

Investor's Offer Notice to the Founders.

 

            (c) Within 10 days after receipt of the Investor's Offer Notice, the

Founders may elect to acquire all (but not less than all) of the Investor

Securities Proposed to be transferred, by notifying the Company in writing (the

"Founders' Purchase Notice") of the number of the Investor Securities they wish

to purchase. If the total number of Investor Securities specified in the

Founders Purchase Notice exceeds the number of shares to be transferred, each

Founder electing to purchase shares (a "Purchasing Founder") shall have

priority, up to the number of shares specified in its Founders' Purchase Notice,

to purchase such proportion of the shares to be transferred as the number of

shares of Common Stock owned by each Purchasing Founder bears to the total

number of shares of Common Stock owned by each Purchasing Founder. If any

Investor Securities remain unpurchased after this allocation, the Company shall

notify each Purchasing Founder of the number of shares remaining unpurchased,

and such shares shall be available for purchase by each Purchasing Founder, upon

notice to the Company within fifteen days of receipt of the Company's notice of

available shares, irrespective of its percentage of ownership interest unless

that factor is required to apportion all of the remaining shares among electing

members of the Purchasing Founders.

 

            (d) If for any reason the Founders do not elect to purchase all of

the Investor Securities offered pursuant to the Investor's Offer Notice, the

Company shall be offered the second option to purchase the Investor Securities

being offered and not purchased by the Founders. Within 5 days after receipt of

the Founders Purchase Notice, the Company shall notify the Offering Investor in

writing whether it wishes to purchase the Investor Securities being offered;

provided that if the Company determines that it is prohibited from purchasing

all such Investor Securities under applicable state law or pursuant to any

agreement by which it is bound, the 5-day period shall be reduced to one day.

 

            (e) The purchase of the Investor Securities pursuant to this

Section 4.3 shall be closed at the Company's executive offices within not less

than 5 days but not more than 30 days after the last notice hereunder is

received by the parties. At the closing, the purchasers will pay the Offering

Investor the purchase price for the Restricted Securities as set forth in the

Investor's Offer Notice, and the Offering Investor will execute and deliver the

certificate or certificates evidencing such Investor Securities to the purchase

or purchasers or their nominees. The purchasers of the Investor Securities

hereunder will be entitled to receive customary representations and warranties

from the Offering Investor regarding the sale of the Investor Securities, it

being

 

 

                                      -16-

<PAGE>   18

understood that the Investors shall not be required to make any representations

or warranties with respect to the business activities of the Company.

 

            (f) In the event that neither the Founders nor the Company have

elected to purchase all of the Investor Securities offered pursuant to the

Investor's Offer Notice, the Offering Investor may, subject to the provisions of

Section 4.1 hereof, transfer the Investor Securities specified in the Investor's

Offer Notice and on other terms no more favorable to the transferee (s) thereof

than specified in the Investor's Offer Notice during the 60-day period

immediately following the last date on which the last of the Founders and/or the

Company could elect to purchase the Investor Securities. Any Investor Securities

not transferred within such 60-day period will be subject to the provisions of

this Section 4.3 upon subsequent transfer.

 

            4.4   Participation Rights.

 

            (a) Any Holder of Common Stock (other than the Investors) wishing to

Transfer all or any of its Common Stock (the "Selling Stockholder"), other than

pursuant to an Excused Transfer, shall deliver written notice (a "Sale Notice")

to the Secretary of the Company. The Sale Notice shall describe in reasonable

detail the identity of the prospective transferee(s) and the terms and

conditions of the contemplated Transfer. The Company shall then promptly deliver

a copy of the Sale Notice to the Investors.

 

            (b) The Investors may elect to participate in the contemplated

Transfer by delivering written notice to the Selling Stockholder and the Company

within 30 days after receipt by the Investor of the Sale Notice. If any

Investors (a "Participating Investor") has elected to participate in such sale

(including a sale under Sections 4.2 (e) and (f) hereof) the Selling Stockholder

and the participating Investors will be entitled to sell in the contemplated

Transfer, at the same price and on the same terms, the number of Common Stock

and/or Preferred Stock equal to the product of (i) the quotient determined by

dividing the number of shares desired to be sold by such person by the aggregate

number of shares desired to be sold by the Selling Stockholder and the

Participating Investors and (ii) the number of shares to be sold in the

contemplated Transfer. Each Selling Stockholder agrees to use best efforts to

obtain the agreement of the prospective transferee(s) to the participation of

the Participating Investors in the contemplated Transfer and to the inclusion of

Preferred Stock in the contemplated Transfer, and each Selling Stockholder

agrees not to transfer any Restricted Securities to the prospective

transferee(s) if any such transferee declines to allow the participation of the

Participating Investors in accordance with the terms of this Section 4.4. If any

portion of the Preferred Stock is included in any Transfer under this Section

4.4, the purchase price for the Preferred Stock shall be equal to the purchase

price which the holders of Preferred Stock would have received if they converted

the Preferred Stock to Common Stock immediately prior to the contemplated

Transfer.

 

 

                                      -17-

<PAGE>   19

            4.5   First Refusal Rights.

 

            (a) Except for the issuance of shares (i) pursuant to a public

offering registered under the Securities Act, (ii) shares of Common Stock issued

upon conversion of the Preferred Stock or the Class A Common Stock, (iii) in

connection with the acquisition of another business (whether by a purchase of

assets, purchase of stock, merger or otherwise) whereby the Company owns more

than fifty percent (50%) of the voting power of the surviving entity, or (iv) to

the Company's directors, officers, employees or consultants not in excess of the

number of shares permitted under Section (b) (7) (k) (iv) of the Company's

Certificate of Incorporation (as amended as of the date hereof), if the Company

authorizes the issuance and sale of any shares of equity or any securities

containing options or rights to acquire any shares of equity, other than as a

dividend on the outstanding shares, the Company will first offer to sell to the

Investors a portion of such securities equal to the percentage determined by

dividing (A) the number of shares of Underlying Common Stock then held by such

Investor, by (B) the total number of shares of Underlying Common Stock then held

by all Investors. The Investors will be entitled to purchase such stock or

securities at the same price and on the same terms as such stock or securities

are to be offered to any other persons.

 

            (b) Each Investor must exercise its purchase rights hereunder within

30 days after receipt of written notice from the Company describing in

reasonable detail the stock or securities being offered, the purchase price

thereof, the payment terms and such Investor's percentage allotment by

delivering written notice to the Company describing its election hereunder. If

all of the stock and securities offered to the Investors is not fully subscribed

by such Investors, the remaining stock and securities will be reoffered to the

Investors purchasing their full allotment upon the terms set forth in this

Section 4.5, except that such Investors must exercise their purchase rights

within ten days after receipt of such reoffer.

 

            (c) Upon the expiration of the offering periods described above, the

Company will be free to sell such Stock or securities which such Investors have

not elected to purchase during the 120 days following such expiration on terms

and conditions no more favorable to the purchasers thereof than those offered to

such Investors. Any stock or securities offered or sold by the Company after

such 120-day period must be reoffered to the Investors pursuant to the terms of

this Section 4.5

 

            4.6 Legends. Each certificate for the Restricted Securities will be

imprinted with a legend substantially in the following form (the "Securities Act

Legend") until such securities have ceased to be Restricted Securities:

 

            The securities represented by this certificate have not been

            register under the Securities Act of 1933, as amended, or under any

            state securities laws. The transfer of the securities represented by

            this certificate is subject to

 

 

                                      -18-

<PAGE>   20

            certain rights of first offer, restrictions on transfer, voting

            agreements and other conditions specified in an Amended and Restated

            Stockholder's Agreement, dated as of December 28, 1990, among the

            issuer (the "Company") and certain investors of the Company, and the

            Company reserve the right to refuse the transfer of such securities

            until such conditions have been fulfilled with respect to such

            transfer. A copy of such conditions will be furnished by the Company

            to the holder hereof upon written request and without charge.

 

            4.7 Violations of this Agreement. For purposes of this Article 4,

any party who has failed to give notice of the election of an option hereunder

within the specified time period will be deemed to have waived his rights in

such option on the day after the last day of such period. Any Transfer made in

violation of Article 4 of this Agreement shall be null and void. The Company

shall not be require (a) to transfer on its books any securities of the Company

Transferred in violation of any provisions of this Agreement or (b) to treat as

owner of such securities, or to accord the right to vote as such owner, or to

pay dividends to, any transferee to whom such securities are Transferred in

violation of this Agreement.

 

            4.8 Termination of Rights. The rights and obligations set forth in

this Article 4 shall terminate and be of no further force and effect following

the closing of the Company's first Qualifying Public Offering. Notwithstanding

the foregoing, the rights and obligation set forth in Section 4.2 and Section

4.3 shall terminate and be of no further force and effect as of July 31, 1993.

 

                                   ARTICLE 5

 

                                   COVENANTS

 

            5.1 Basic Financial Information. The Company will furnish the

following reports to each Investor (so long as such Investor (or its

representative) holds any Preferred Stock or Underlying Common Stock) and to

each holder of at least 5% of the outstanding Preferred Stock and to each holder

of at least 5% of the Underlying Common Stock.

 

            (a) As soon as practicable after the end of each fiscal year of the

Company, and in any event within ninety (90) days thereafter, a consolidated

balance sheet of the Company and its subsidiaries, if any, as at the end of such

fiscal year, and consolidated statements of income and sources and applications

of funds of the Company and its subsidiaries, if any, for such year, prepared in

accordance with generally accepted accounting principles consistently applied

and setting forth in each case in comparative form the figures for the previous

fiscal year, all in reasonable detail and accompanied by a report and an

unqualified opinion, prepared in accordance with

 

 

                                      -19-

<PAGE>   21

generally accepted auditing standards, of independent public accountants of

recognized national standing selected by the Company, and including a Company

prepared comparison to the Company's current business plan delivered to each

Investor pursuant to Section 5.1(c) hereof for that fiscal year.

 

            (b) As soon as practicable after the end of each month and in any

event within thirty (30) days thereafter a consolidated balance sheet of the

Company and its subsidiaries, if any, as at the end of such month, and

consolidated statements of income and sources and applications of funds of the

Company and its subsidiaries, if any, for each month and for the current fiscal

year of the Company to date, prepared in accordance with generally accepted

accounting principles consistently applied, together with a comparison of such

statements to the corresponding periods of the prior fiscal year and to the

Company's current business plan then in effect as approved by its Board of

Directors and delivered to the Investor pursuant to Section 5.1(c) hereof, and

certified, subject to changes resulting from year-end audit adjustments, by the

principal financial or accounting officer of the Company.

 

            (c) Annually (but in any event at least fifteen (15) days prior to

the commencement of each fiscal year of the Company) the business plan of the

Company, in such manner and form as approved by the Board of Directors of the

Company, which business plan shall include a projection of income and a

projected cash flow statement for such fiscal year and a projected balance sheet

as of the end of such fiscal year. Any material changes in such business plan

shall be delivered to the Investors as promptly as practicable after such

changes have been approved by the Board of Directors of the Company.

 

            (d) As soon as practicable after the end of each fiscal year and in

any event within ninety (90) days thereafter, (A) a report from the Company's

independent public accountants reporting on compliance with any agreement

pursuant to which the Company has borrowed money or sold its securities and (B)

a copy of the annual management review letter of such independent public

accountants to the Company.

 

            (e) As soon as practicable after transmission or occurrence, and in

any event within ten (10) days thereof, (A) copies of any reports or

communications delivered to any class of the Company's security holders or to

the financial community, including any filings by the Company, or by any of its

officers or directors relating to the Company, with any securities exchange, the

Securities and Exchange Commission or the National Association of Securities

Dealers, Inc., (B) notice of any event which might have a material effect on the

Company's business, prospects or condition, financial or otherwise, or on the

Investor's investment in the Preferred Stock or in the Common Stock issuable

upon conversion of the Preferred Stock, and (C) notice of breach or failure to

comply with any representation, warranty, covenant or agreement of the Company

contained herein, including the exhibits hereto.

 

 

                                      -20-

<PAGE>   22

            (f) With reasonable promptness, such other information and data with

respect to the Company and its subsidiaries as any such person may from time to

time reasonably request.

 

            (g) From the date the Company becomes subject to the reporting

requirement of the Securities Exchange Act, and in lieu of the financial

information required pursuant to Sections 5.1(a) and (b) hereof, copies of its

annual reports on Form 10-K and its quarterly reports on Form 10-Q,

respectively, and all reports on Form 8-K.

 

            (h) For purposes of this Agreement, Chancellor shall be deemed to be

the holder of all Preferred Stock and Underlying Common Stock owned of record or

beneficially by any Person for which Chancellor acts as trustee, investment

advisor, investment manager or in any other similar fiduciary capacity or/by any

employee or former employee of Chancellor, and all of Chancellor's holdings of

Preferred Stock and Underlying Common Stock shall be aggregated for purposes of

meeting any threshold tests under this Agreement Notwithstanding anything

contained herein to the contrary, with respect to any holder of Preferred Stock

or Underlying Common Stock for which Chancellor acts as trustee, investment

advisor, investment manager or in any other similar fiduciary capacity or who is

an employee or former employee of Chancellor, the Company shall be required to

deliver the information and materials referred to in Sections 5.1 and 5.3 only

to Chancellor, and Chancellor shall exercise all rights and remedies on behalf

of such holders under this Agreement.

 

            5.2 Inspection of Property. The Company will permit any

representatives designated by any Investor (so long as such Investor holds any

Preferred Stock or any Underlying Common Stock) or any holder of at least 5% of

the outstanding Preferred Stock or at least 5% of the Underlying Common Stock,

upon reasonable notice and during normal business hours and such other times as

any such Investor may reasonably request, to (i) visit and inspect any of the

properties of the Company and its Subsidiaries, (ii) examine the corporate and

financial records of the Company and its Subsidiaries (unless such examination

is not permitted by federal, state or local law) and make copies thereof or

extracts therefrom and (iii) discuss the affairs, finances and accounts of any

such corporations with the directors, officers, key employees and independent

accountants of the Company and its subsidiaries. The presentation of an executed

copy of this Agreement by any Investor or any such holder of Preferred Stock or

Underlying Common Stock to the Company's independent accountants shall

constitute the Company's permission to its independent accountants to

participate in discussions with such Persons.

 

            5.3 Attendance at Board Meetings. The Company shall give each

Investor (so long as such Investor holds any Preferred Stock or Underlying

Common Stock) and each holder of at least 10% of the outstanding Preferred Stock

or at least 10% of Underlying Common Stock written notice of each meeting of its

Board of Directors and each committee thereof at least five days prior to the

date of each such meeting, and

 

 

                                      -21-

<PAGE>   23

the Company shall permit a representative of each such person or entity to

attend as an observer all meetings of its Board of Directors and all committees

thereof. Each representative shall be entitled to receive all written materials

and other information (including, without limitation, copies of meeting minutes)

given to Directors in connection with such meetings at the same time such

materials and information are given to the directors. If the Company proposes to

take any action by written consent in lieu of a meeting of its board of

directors or of any committee thereof, the Company shall give written notice

thereof to each such Person or entity prior to the effective date of such

consent describing in reasonable detail the nature and substance of such action.

The Company shall pay the reasonable out-of-pocket expenses of each

representative incurred in connection with attending such board and committee

meetings.

 

            5.4 Current Public Information. At all times after the Company has

filed a registration statement with the Securities and Exchange Commission

Pursuant to the requirements of either of the Securities Act or the Securities

Exchange Act, the Company will file all reports required to be filed by it under

the Securities Act and the Securities Exchange Act and the rules and regulations

adopted by the Securities and Exchange Commission thereunder, and will take such

further action as any holder of Restricted Securities may reasonably request,

all to the extent required to enable such holder to sell Restricted Securities

pursuant to (i) Rule 144 adopted by the Securities and Exchange Commission under

the Securities Act (as such rule may be amended from time to time) or any

similar rule or regulation hereafter adopted by the Securities and Exchange

Commission or (ii) a registration statement on Form S-2 or S-3 or any similar

registration form hereafter adopted by the Securities and Exchange Commission.

Upon request, the Company shall deliver to any holder of Restricted Securities a

written statement as to whether it has complied with such requirements.

 

            5.5 Prompt Payment of Taxes. etc. The Company and its Subsidiaries

will promptly pay and discharge, or cause to be paid and discharged, when due

and payable, all lawful taxes, assessments and governmental charges or levies

imposed upon the income, profits, property or business of the Company or any

subsidiary and all claims for labor, materials or supplies which if unpaid would

by law become a lien upon any of its properties, in each case to the extent the

failure to pay or discharge such obligations might have a material adverse

effect upon the financial condition, operating results, assets, operations or

business prospects of the Company and its subsidiaries; provided, however, that

any such tax, assessment, charge or levy need not be paid if the validity

thereof shall currently be contested in good faith by appropriate proceedings

and if the Company and its subsidiaries shall have set aside on its books

adequate reserves with respect thereto, and provided, further, that the Company

and its subsidiaries will pay all such taxes, assessments, charges or levies

forthwith upon the commencement of proceedings to foreclose any lien which may

have attached as security therefor. The Company and its subsidiaries will

promptly pay or cause to be paid when due, or in conformance with customary

trade terms, all other material indebtedness Incident to the operations of the

Company or its subsidiaries.

 

 

                                      -22-

<PAGE>   24

            5.6 Maintenance of Properties and Compliance with Contracts and

Leases. The Company and its subsidiaries will keep its properties and those of

its subsidiaries in good repair, working order and condition, reasonable wear

and tear excepted, and from time to time make all needful and proper repairs,

renewals, replacements, additions and improvements thereto; and the Company and

its subsidiaries will at all times comply with each provision of all obligations

pursuant to any contract or agreement, whether oral or written, as such

obligations become due, including, without limitation, all leases to which any

of them is a party or under which any of them occupies property, in each case to

the extent the breach of such provision might have a material adverse effect on

the condition, financial or otherwise, or operations of the Company or its

subsidiaries.

 

            5.7 Insurance. The Company and its subsidiaries will maintain, with

responsible and reputable insurance companies or associations, insurance

covering its properties, buildings, machinery, equipment, tools, furniture,

fixtures and operations (including, without limitation, comprehensive general

liability and hazard insurance and medical malpractice and professional

liability insurance), in such amounts and covering such risks as is required by

any governmental authority or other regulatory body having jurisdiction with

respect thereto or as is carried generally in accordance with sound business

practice by companies in similar businesses similarly situated.

 

            5.8 Accounts and Records. Company and its subsidiaries will keep

true records and books of account in which full, true and correct entries will

be made of all dealings or transactions in relation to its business and affairs

in accordance With generally accepted accounting principles applied on a

consistent basis.

 

            5.9 Independent Accountants. The Company and its subsidiaries will

retain independent public accountants of recognized national standing who shall

audit the Company's financial statements at the end of each fiscal year. In the

event the services of the independent public accountants so selected, or any

firm of independent public accountants hereafter employed by the Company or any

of its subsidiaries, are terminated, the Company or such subsidiaries will

promptly thereafter notify the Investors, and will request the firm of

independent public accountants whose services are terminated to deliver to the

Investors a letter of such firm setting forth the reasons for the termination of

their services. In the event of such termination, the Company or such

subsidiaries will promptly thereafter engage another firm of independent public

accountants of recognized national standing. In its notice to the Investors, the

Company shall state whether the change of accountants was recommended or

approved by the Board of Directors of the Company or such subsidiary or any

committee thereof.

 

            5.10 Compliance with Requirements of Governmental Authorities. The

Company and each of its subsidiaries shall duly observe and conform to all

applicable laws, rules and regulations of all governmental authorities relating

to the conduct of their businesses, the violation of which might have a material

adverse effect upon the

 

 

                                      -23-

<PAGE>   25

condition, financial or otherwise, operating results, assets, operations or

business prospects of the Company and its subsidiaries.

 

            5.11 Maintenance of Corporate Existence, etc. The Company and its

subsidiaries shall maintain in full force and effect their respective corporate

existence, rights and all material licenses, permits, approvals, qualifications,

consents and other authorizations necessary for the lawful conduct of their

respective businesses and operations wherever conducted, and other rights in or

to use patents, processes, licenses, trademarks, trade names or copyrights owned

or possessed by any of them and deemed by the Company or any subsidiary to be

necessary to the conduct of their respective businesses without, to the

Company's best knowledge, any conflict with any business in or rights of others

to use such patents, processes, licenses, trademarks, trade names or copyrights.

 

            5.12 Availability of Common Stock for Conversion. The Company will,

from time to time, in accordance with the laws of the State of Delaware,

increase the authorized amount of Common Stock if at any time the number of

shares of Common Stock remaining unissued and available for issuance shall be

insufficient to permit conversion of all the then outstanding shares of

Preferred Stock.

 

            5.13 Proprietary Information and Non-Competition Agreements. The

Company will cause (i) each person now or hereafter employed by it or any

subsidiary with access to confidential information and (ii) each person now or

hereafter employed by it or any subsidiary and designate as a "key person" by

the Board of Directors to enter into a proprietary information agreement and

agreement not to compete in the form to be approved by the Board of Directors of

the Company as a condition precedent to the employment of such individual.

 

            5.14 Key Man Life Insurance. The Company shall maintain with

financially sound and reputable insurers term life insurance on the lives of

Gary Johnson, Thomas St. Denis and Dennis Walker in the amounts of $500,000 each

and on such other key personnel as may be specified from time to time by the

holders of 51% of the Underlying Common Stock, and shall maintain the Company as

the sole beneficiary of the Proceeds thereof. Such policy shall not be

cancelable by the Company without prior approval of the holders of 51%

Underlying Common Stock. The Company will inform the Investors annually as to

the effectiveness of such policy. The amount and periods of such coverage shall

be as determined from time to time by 51% in interest of the Investors (based on

share ownership assuming conversion of the Preferred Stock).

 

            5.15 Transactions with Affiliates. The Company and its subsidiaries

shall not, without the prior approval of the majority of the disinterested

members of the Board of Directors, engage in any loans, leases, contracts,

agreement to sell, transfer or otherwise dispose of any of the assets of the

Company or its subsidiaries, whether now

 

 

                                      -24-

<PAGE>   26

owned or hereafter acquire, or other transactions with any director, officer or

key employee of the Company or any of its subsidiaries, any affiliate of such

director, officer or key employee, or any member of any such person's Immediate

Family, including the parents, spouse, children and other relatives of any such

person, except for travel allowances in the ordinary course of business, or the

furnishing or sale of services or products to or the acquisition or purchase of

services or products front any corporation, partnership, proprietorship,

association, joint venture or other person or entity in which any such director,

officer or key employee or member of such person's family has a material

interest.

 

      5.16  Certain Restrictions on Corporate Action.

 

            The consent of the Board of Directors shall be required in order for

the Company to:

 

            (a) make or commit to make any loans or guaranty any obligations; or

 

            (b) make or commit to make any single expenditure or series of

related expenditures in excess of $50,000.

 

            5.17 Stock Plan. The Company will reserve 30,000 shares (including

shares reserved for options outstanding on the date hereof) of the Company's

Class B Common Stock for issuance to directors, officers, employees and

consultants of the Company for the purpose of attracting and retaining such

personnel (the "Employee Shares"). The persons to whom such shares are sold and

the terms and conditions of such sale shall be determined by the Board of

Directors, provided that such issuance shall be conditioned upon the purchaser

entering into a stock purchase agreement in the form approved by the Board of

Directors.

 

            5.18 Compensation Committee. The Board of Directors shall choose a

compensation Committee consisting of three members, two of whom shall be chosen

by the GeoCapital Representatives and one of whom shall be chosen by a majority

of the Board of Directors and agree to by each of the Founders so long as each

such Founder is a member of the Board of Directors. Procedures for removal and

filling vacancies shall be substantially as set forth in Section 3.1 herein. The

Compensation Committee shall adjust the compensation of key employees (as

determined by the Board of Directors and the GeoCapital Representatives),

consultants and other agents of the Company.

 

            5.19 Employment of Messrs. Johnson, St. Denis and Walker. The

Company will employ Gary Johnson, Thomas St. Denis and Dennis Walker to manage

the Company for such period as the Board of Directors may determine. For the

year ended July 31, 1990, the Company will pay each of Messrs. Johnson, St.

Denis and Walker at an initial annual rate of $100,000. Thereafter, compensation

shall be determined by the Compensation Committee. During the term of employment

each of

 

 

                                      -25-

<PAGE>   27

Messrs. Johnson, Walker and St. Denis agrees to devote his entire working time,

attention and energies to the performance of the business of the Company. In

connection with the foregoing, the Company and each of Messrs. Johnson, Walker

and St. Denis have executed the agreement attached hereto as Exhibit B.

 

            5.20  Indemnification.

 

            (a) The Company and each of the Founders agree, jointly and

severally, to indemnify each of the Investors, its partners and the Immediate

Family of such partners, against all losses, claims, damages, liabilities,

expenses (including reasonable attorney's fees) and other costs, resulting from

or arising out of a breach of the representations contained in Section 7.17(a)

and 7.17(b) herein and the agreement between the Company and each of Messrs.

Johnson and St. Denis set forth as Exhibit B hereto subject to the following

limitations:

 

                  (i) The Founders' personal indemnification with respect to the

representations, under Section 7.17(a), shall expire on the 27st day following

July 31, 1989, provided, however, that such personal indemnification shall not

extend to any losses, claims, etc. resulting from the Company's marketing and

sale of the Travel Arrangements product which is defined on Schedule 5.20(a).

 

                  (ii) The Founders' personal indemnification with respect to

the representations under Section 7.17 (b) shall extend only to such losses,

claims, etc. arising from business engaged in by the Company without approval by

the Investor delivered at a properly held meeting of the Board of Directors.

 

                  (iii) The Investors shall not be entitled to indemnification

by the Founders or the Company under Section 7.17 (b) for losses, claims, etc.

arising from business engaged in by the Company without the approval of a

majority of the Founders, delivered at a properly held meeting of the Board of

Directors, or, in the event that less than three Founders remain on the Board of

Directors, the approval of at least one Founder.

 

                  (iv) In the interests of avoiding duplication of legal

services and, accordingly, legal fees, in the event of any claims advanced

against the Company and/or the Investors giving rise to indemnification under

this Section 5.20(a), the Investor agrees to employ the attorneys representing

the Company in connection with such claims, the cost of which shall be borne by

the Company, unless said attorneys are prevented from representing both the

interests of the Company and the Investor by the Code Of Professional

Responsibility. In the latter instance, the cost of Investor's reasonable

attorney's fees shall be borne by the Company.

 

            (b) The Company and Dennis P. Walker agree to indemnify each of the

Investors, its partners and the Immediate Family of such partners, and Messrs.

Johnson

 

 

                                      -26-

<PAGE>   28

and St. Denis against all losses, claims, damages, liabilities, expenses

(including reasonable attorneys fees) and other costs, resulting from or arising

out of a breach of the representations contained in Section 7.17(c) and Section

7.17(d) herein or the representations contained in the agreement between the

Company and Walker set forth as Exhibit B hereto subject to the following

limitations:

 

                  (i) Walker's personal indemnification with respect to any

losses, claims, etc. arising from business engaged in by the Company which is

set forth in the Business Plan of DRW dated May 1989 or the Product Plan (as

defined in Section 7.2) shall survive the termination of this Agreement.

 

                  (ii) Walker's personal indemnification shall extend only to

losses, claims, etc. arising from business engaged in by the Company not set

forth in the Business Plan or Product Plan without the approval by the Investors

and Messrs. Johnson and St. Denis delivered at a properly held meeting of the

Board of Directors.

 

                  (iii) The Investors and the Messrs. Johnson and St. Denis

shall not be entitled to indemnification by Walker or the Company for losses,

claims, etc. arising from business engaged. In by the Company without the

approval of Walker delivered at a properly held meeting of the Board of

Directors; provided that Walker's failure to approve such business is expressly

due to the potential for the Company's engagement in such business to cause

Walker to breach the aforementioned representations, all as stated in writing by

Walker.

 

                  (iv) In the interests of avoiding duplication of legal

services and accordingly, legal fees, in the event of any claim advanced against

the Investor and/or the Founders giving rise to indemnification under this

Section 5.20(b), the Investors and the Founders agree to employ one legal

counsel in connection with such claims, the cost of which shall be borne by the

Company, unless said legal counsel is Prevented from representing both the

interests of the Investors and the Founders by the Code of Professional

Responsibility. In the latter instance, the cost of Investors' and Founders'

separate reasonable attorneys fees shall be borne by the Company.

 

            5.21 Public Disclosures. The Company shall not, nor shall it permit

any subsidiary of the Company to, disclose any Investor's name or identity as an

investor in the Company in any press release or other public announcement or in

any document or material filed with any government entity, without the prior

written consent of such Investor, unless such disclosure is required by

applicable law or Government regulations or by order of a court of competent

jurisdiction, in which case prior to making such disclosure the Company shall

give written notice to such Investor describing in reasonable detail the

proposed content of such disclosure and shall permit the Investor to review and

comment upon the form and substance or such disclosure; provided that in the

case of any Person for which Chancellor acts as a trustee, investment manager,

investment adviser or in any other similar capacity or any

 

 

                                      -27-

<PAGE>   29

employee or former employee of Chancellor, the form and Substance of such

disclosure shall be subject to Chancellor's prior written approval.

 

            5.22 Use of Proceeds. Neither the Company nor any subsidiary of the

Company shall use any of the proceeds from the sale of the Preferred Stock to an

Investor for which Chancellor acts as a trustee, investment advisor, investment

manager or in any other similar fiduciary capacity to repay any indebtedness of

the Company or any subsidiary of the Company owed to Chancellor or any of its

Affiliates.

 

            5.23 Termination of Covenants. The covenants set forth in Sections

5.2, 5.3 and 5.5 through 5.19 hereof shall terminate and be of no further force

and effect following the closing of the Company's first Qualifying Public

Offering.

 

                                   ARTICLE 6

 

                              REGISTRATION RIGHTS

 

            6.1   Registration on Request.

 

            (a) At any time after the date hereof, upon the written request of

either (i) prior to such time as the Company has completed a public offering of

its equity securities under the Securities Act, the Holders of a majority of the

Registrable Securities or (ii) after such time as the Company has completed a

public offering of its equity securities under the Securities Act, the Holders

of at least 20% of the Registrable Securities, requesting that the Company

effect the registration under the Securities Act of all or part of such

Investor's Registrable Securities and specifying the intended method of

disposition thereof and whether or not such requested registration is to be an

underwritten offering, the Company will promptly give written notice of such

requested registration to all other Investors holding Registrable Securities and

thereupon the Company will use its best efforts to effect the registration under

the Securities Act of:

 

      (i)   the Registrable Securities which the Company has been so requested

to register by such holders, and

 

      (ii) all other Registration Securities which the Company has been

requested to register by the holders thereof by written request given to the

Company within 30 days after the giving of such written notice by the Company

(which request shall specify the intended method of disposition of such

Registrable Securities), all to the extent requisite to permit the disposition

(in accordance with the intended methods thereof as aforesaid) of the

Registration Securities so to be registered.

 

            (b) Whenever the Company Shall effect a registration pursuant to

this Section 6.1 in connection with an underwritten offering of Registrable

Securities, no

 

 

                                      -28-

<PAGE>   30

securities other than each Investor's Registrable Securities shall be included

among the Securities covered by such registration unless (i) the managing

underwriter of such offering shall have advised each Investor holding

Registrable Securities to be covered by such registration in writing that the

inclusion of such other securities would not adversely affect such offering, in

which case securities to be issued by the Company may be included or (ii) all

Investors holding Registrable Securities to be covered by such registration

shall have consented in writing to the inclusion of securities to be issued by

the Company or securities held by other stockholders of the Company. Whenever

the Company shall effect a registration pursuant to this Section 6.1 other than

in connection with an underwritten offering of Registrable Securities, no

securities held by stockholders of the Company other than the Investors shall be

covered by such registration unless all Investors holding Registrable Securities

to be covered by such registration shall have consented in writing thereto.

 

            (c) Registration under this Section 6.1 shall be on such appropriate

registration form of the Commission (i) as shall be selected by the Company and

as shall be reasonably acceptable to the holders of more than 80% (by number of

shares) of the Investors' Registrable Securities so to be register and (ii) as

shall permit the disposition of such Registrable Securities in accordance with

the intended method or methods of disposition specified in their request for

such registration. The Company agrees to include in any such registration

statement all information which holders of Registrable Securities being register

shall reasonably request.

 

            (d) If a requested registration pursuant to this Section 6.1

involves an underwritten offering, the underwriter or underwriters thereof shall

be selected by the holders of more than 80% (by number of shares) of the

Investors' Registrable Securities to be so registered, subject to the Company's

approval which will not be reasonably withheld.

 

            (e) If a requested registration pursuant to this Section 6.1

involves an underwritten offering, and the managing underwriter shall advise the

Company in writing (with a copy to each holder of Registrable Securities

requesting registration) that, in its Opinion, the number of securities

requested to be included in such registration exceeds the number which can be

sold in such offering within a price range acceptable to the holders of 80% (by

number of shares) of the Investor's Registrable Securities requested to be

included in such registration, the Company will (i) not include in such

registration securities held by it or any person other than an Investor and (ii)

include in such registration, to the extent of the number which the Company is

so advised can be sold in such offering, Registrable Securities requested to be

included in such registration, pro rata among the Investors requesting such

registration on the basis of the percentage of the Registrable Securities of the

Company held by the Investors which have requested that such Registrable

Securities be included.

 

 

                                      -29-

<PAGE>   31

            (f) Notwithstanding the foregoing, the Company shall not be

obligated to effect, or to take any action to effect, any such registration

pursuant to this Section 6.1 after the Company has effected two such

registrations pursuant to this Section 6.1; provided, that a registration will

not count as a registration pursuant to this Section 6.1 until it shall have

been declared or ordered effective and the sales of such Registrable Securities

shall have closed; provided further, that the second such registration will not

count as one of the registrations pursuant to this Section 6.1 unless the

holders of Registrable Securities are able to register and sell at least 75% of

the Registrable Securities requested to be included in such registration;

provided further, that any registration effected pursuant to this Section 6.1

which includes any Registrable Securities of the Company or any other person who

is not an Investor shall not be included as one of the two aforementioned

registrations.

 

      6.2   Incidental Registration.

 

            (a) If at any time the Company proposes to register any of its

securities under the Securities Act, whether of its own accord or at the request

or demand of any holder of such securities, and if the registration form

proposed to be used may be used for the registration of Registrable Securities

or Founder Shares, the Company will thereupon give prompt written notice to the

holders of Registrable Securities and holders of Founder Shares of its intention

to proceed with the registration (hereinafter the "Incidental Registration"),

and, upon the written request of any such holder made within 15 days after the

receipt of any such notice (which request will specify the Registrable

Securities intended to be disposed of by such holder and state the intended

method of disposition thereof). The Company will use its best efforts to cause

all such Registrable Securities, the holders of which have so requested the

registration thereof, to be included in such Incidental Registration.

 

            (b) If an Incidental Registration is in connection with an

underwritten public offering, and if the managing underwriters advise the

Company in writing that in their opinion the amount of Securities requested to

be included in such registration (whether by the Company or holders of the

Company's securities pursuant to any rights granted by the Company to demand

inclusion of any such Securities in such registration) exceeds the amount of

such securities which can be sold in such offering, the Company will include in

such offering the amount of securities requested to be included which in the

opinion of such underwriters can be sold as follows: (a) first, all the shares

shall be included which are proposed to be sold by the Company; (b) to the

extent possible, all the shares which are proposed to be sold by a holder

exercising demand registration rights shall be included; (c) if shares can still

be included, the number of shares of capital stock that may be included shall be

allocated among all Investors holding Registrable Securities and Founders

holding Founder Shares seeking to exercise registration rights in proportion, as

nearly as practicable, to the respective amounts of shares of stock which they

had requested to be included in such registration at the time of filing the

registration statement; provided, however, that if the managing

 

 

                                      -30-

<PAGE>   32

underwriters advise the Company in writing that in their opinion the amount of

securities requested to be included in such registration by the Investors and

the Founders exceeds the amount of such securities which can be sold in such

Offering pursuant to this subsection (c), then of the total shares to be

included in such registration pursuant to this subsection (c), up to 66 2/3% of

them shall be Registrable Securities and up to 33 1/3% of them shall be Founder

Shares; and (d) if shares can still be included, securities which are proposed

to be sold by a holder seeking to exercise registration rights.

 

            (c) No holder of Registrable Securities or Founder Shares may

participate in any underwritten Incidental Registration unless such holder (a)

agrees to sell such Registrable Securities or Founder Shares on the basis

provided in any underwriting arrangement approved by the Company and (b)

completes and executes all questionnaires, powers of attorney, indemnities,

underwriting arrangements and other documents required under the terms of such

underwriting arrangements.

 

            6.3 Registration Procedures. In connection with any registration of

any Registrable Securities or Founder Shares under the Securities Act as

provided in this Article 6, the Company will:

 

            (i) prepare and file with the Securities and Exchange Commission a

registration statement, and use its best efforts to cause such registration

statement to become effective and to keep such registration statement effective

for a period of not less than six months or such shorter period in which the

disposition of all securities in accordance with the intended methods of

disposition by the seller or sellers thereof set forth in such registration

statement shall be completed and to comply with the provisions of the Securities

Act (to the extent applicable to the Company) with respect to such disposition;

 

            (ii) prepare and file with the Securities and Exchange Commission

such amendments and supplements to such registration statement and the

prospectus used in connection with such registration statement as may be

necessary to comply with the Provisions of the Securities Act with respect to

the disposition of all securities covered by such registration statement;

 

            (iii) furnish to each seller of such Registrable Securities or

Founder Shares, and any underwriter such number of copies of such registration

statement and of each such amendment and supplement thereto (in each case

including all exhibits), such number of copies of the prospectus included in

such registration statement (including each preliminary prospectus), in

conformity with the requirements of the Securities Act and such other documents

as such seller or any underwriter may reasonably request tn order to facilitate

the disposition of the Registrable Securities or Founder Shares owned by such

seller;

 

 

                                      -31-

<PAGE>   33

            (iv) provide a transfer agent and registrar for all such Registrable

Securities and Founder Shares covered by such registration statement not later

than the effective date of such registration statement;

 

            (v) notify each seller of such Registrable Securities or Founder

Shares, and any underwriter at any time when a prospectus relating thereto is

required to be delivered under the Securities Act of the happening of any event

as a result of which the prospectus included in such registration statement

contains an untrue statement of a material fact or omits any fact necessary to

make the statements therein not misleading; each seller will immediately upon

receipt of such notice of the occurrence of such event discontinue its

disposition of the Registrable Securities or Founder Shares pursuant to the

registration statement until its receipt of a supplement or amendment to such

prospectus which shall cause such prospectus not to contain an untrue statement

of a material fact or not to state any fact necessary to make the statements

therein not misleading, and if so directed by the Company will then deliver to

the Company all copies other than permanent file copies of the prospectus

covering such Registrable Securities or Founder Shares which was current at the

time of receipt of such notice;

 

            (vi) cause all such Registrable Securities and Founder Shares to be

listed on each securities exchange on which the same class of securities issued

by the Company is then listed;

 

            (vii) if the Incidental Registration is in connection with an

underwritten distribution, enter into such customary agreements (including an

underwriting agreement in customary form) and take all such other actions as

reasonably required in order to expedite or facilitate the disposition of such

Registrable Securities or Founder Shares;

 

            (viii) make available for inspection by any seller of Registrable

Securities or Founder Shares, any underwriter participating in any disposition

pursuant to such registration Statement, and any attorney, accountant or other

agent retained by any such seller or underwriter, all financial and other

records, pertinent corporate documents and properties of the Company, and cause

the Company' officers, directors and employees to supply all information

reasonably requested by any such seller, underwriter, attorney, accountant or

agent in connection with such registration

 

            (ix) use its best efforts to register or qualify all Registrable

Securities and Founder Shares and other securities Covered by such registration

statement under such other securities or blue sky laws of such jurisdictions as

each seller thereof shall reasonably request, to keep such registration or

qualification in effect for so long as such registration statement remains in

effect, and take any other action which may be reasonably necessary or advisable

to enable such seller to consummate the disposition in such jurisdictions of the

securities owned by such seller, except that the Company shall not for any such

purpose be required to qualify generally to do business as a

 

 

                                      -32-

<PAGE>   34

foreign corporation in any jurisdiction wherein it would not, but for the

requirements of this subdivision (ix), be obligated to be so qualified or to

consent to general service of process in any such jurisdiction;

 

            (x) furnish to each seller of Registrable Securities or Founder

Shares a signed counterpart, addressed to such seller, except as provided in (2)

below (and the underwriters, if any), of,

 

            (1) an opinion of counsel for the Company, dated the effective date

      of such registration statement (and, if such registration includes an

      underwritten public offering, dated the date of the closing under the

      underwriting agreement), reasonably satisfactory in form and substance to

      such seller, covering substantially the same matters with respect to such

      registration statement (and the prospectus included therein) as are

      customarily covered in opinions of issuer's counsel delivered to the

      underwriters in underwritten public offerings, and such other legal

      matters as such seller (or the underwriters, if any) may reasonably

      request; and

 

            (2) a "comfort" letter, dated the effective date of such

      registration statement (and, if such registration includes an underwritten

      public offering, dated the date of the closing under the underwriting

      agreement), signed by the independent public accountants who have

      certified the Company's financial statements included in such registration

      statement, addressed to each seller, to the extent the same can be

      reasonably obtained, and addressed to the underwriters, if any, covering

      substantially the same matters with respect to such registration statement

      (and the prospectus included therein) and with respect to events

      subsequent to the date of such financial statements, as are customarily

      covered in accountants' letters delivered to the underwriters in

      underwritten public offerings of securities and such other financial

      matters as such seller (or the underwriters, if any) may reasonably

      request;

 

            (xi) otherwise use its best efforts to comply with all applicable

rules and regulations of the Securities and Exchange Commission, and make

available to its security Holders, as soon as reasonably practicable, an

earnings statement covering the period of at least twelve months, but not more

than eighteen months, beginning with the first full calendar month after the

effective date of such registration statement, which earnings statement shall

satisfy the provisions of Section 11(a) of the Securities Act; and

 

            (xii) take all such other actions as the holders of a majority of

the Registrable Securities or Founder Shares being sold and the underwriters, if

any, reasonably request in order to expedite or facilitate the disposition of

such Registrable Securities (including without limitation effecting a stock

split or combination of shares).