EXHIBIT 10.2
AMENDED AND RESTATED
REDEMPTION AND EXCHANGE AGREEMENT
THIS AMENDED AND RESTATED REDEMPTION AND EXCHANGE AGREEMENT (the
"Agreement"), dated as of June 14, 2001, by and between MicroStrategy
Incorporated, a Delaware corporation, with headquarters located at ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company"), and the investor
listed on the Schedule of Investor attached hereto (the "Investor"), amends and
restates in its entirety, subject to Section 9(d) hereof, that certain
Redemption and Exchange Agreement, dated April 3, 2001, by and between the
Company and the Investor, as amended by Amendment No. 1 to Redemption and
Exchange Agreement, dated as of June 4, 2001, and as amended by Amendment No. 2
to Redemption and Exchange Agreement, dated as of June 8, 2001, and as amended
by Amendment No. 3 to Redemption and Exchange Agreement, dated as of June 12,
2001, (as amended prior to this Agreement, the "Original Redemption and Exchange
Agreement").
WHEREAS:
A. The Company, the Investor and certain other entities (the "Other
Investors") have entered into that certain Securities Purchase Agreement, dated
as of June 17, 2000 (the "Securities Purchase Agreement"), pursuant to which the
Investor and the Other Investors purchased from the Company shares of the
Company's Series A Convertible Preferred Stock (the "Series A Preferred Stock"),
which are convertible into shares of the Company's Class A common stock, par
value $0.001 per share (the "Common Stock") (as converted, the "Series A
Conversion Shares"), in accordance with the terms of the Company's Certificate
of Designations, Preferences and Rights of the Series A Preferred Stock filed
with the Secretary of State of the State of Delaware on June 19, 2000 (the
"Series A Certificate of Designations");
B. Prior to the closing of the transactions contemplated hereby, the
Company will have authorized a following new series of its preferred stock, par
value $0.001 per share, known as the Company's Series B Convertible Preferred
Stock (the "Series B Preferred Stock"), which shall be convertible into shares
of Common Stock (as converted, the "Conversion Shares"), in accordance with the
terms of the Company's Certificate of Designations, Preferences and Rights of
the Series B Preferred Stock, in the form attached hereto as Exhibit A (the
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"Series B Certificate of Designations");
C. The Investor is the holder of that number of shares of Series A
Preferred Stock (each a "Series A Preferred Share" and, collectively, the
"Series A Preferred Shares") set forth opposite its name in Column 2 on the
Schedule of Investor;
D. Upon the terms and conditions set forth in this Agreement, the Company
wishes to redeem 200 of the Series A Preferred Shares (the "Series A Redemption
Shares", and the Investor wishes to allow the Company to redeem the Series A
Redemption Shares, for an aggregate redemption price of $2,000,000 in cash;
E. The Company and the Investor wish to exchange, upon the terms and
conditions set forth in this Agreement, an aggregate of 620 of the Series A
Preferred Shares for an aggregate number of shares of Common Stock equal to the
sum of (i) 1,159,022 shares of Common Stock, as adjusted for any stock splits,
stock dividends, stock combinations or other similar transactions (the "Fixed
Common Shares"), plus (ii) the Additional Common Shares (as defined in Section
1(b)) (the Fixed Common Shares and the Additional Common Shares issued pursuant
to this Agreement are collectively referred to as the "Common Shares");
F. The Company and the Investor wish to exchange, upon the terms and
conditions set forth in this Agreement, an aggregate of 530 of the Series A
Preferred Shares for an aggregate of 530 shares of Series B Preferred Stock, as
adjusted for any stock splits, stock dividends, stock combinations or other
similar transactions (the "Preferred Shares");
G. The exchange of the Series A Preferred Shares for the Common Shares
and the Preferred Shares is being made in reliance upon the exemption from
registration provided by Section 3(a)(9) of the Securities Act of 1933, as
amended (the "1933 Act"); and
H. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering an Amended and Restated
Registration Rights Agreement in the form attached hereto as Exhibit B (the
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"Amended and Restated Registration Rights Agreement") pursuant to which the
Company has agreed to provide certain registration rights under the 1933 Act and
the rules and regulations promulgated thereunder, and applicable state
securities laws.
NOW THEREFORE, the Company and the Investor hereby agree as follows:
1. REDEMPTION AND EXCHANGE OF SERIES A PREFERRED SHARES.
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a. Redemption of Series A Preferred Shares. Subject to satisfaction
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(or waiver) of the conditions set forth in Sections 6 and 7, the Company shall
redeem from the Investor and the Investor shall tender to the Company for
redemption on the Closing Date (as defined below) that number of Series A
Redemption Shares set forth opposite the Investor's name in Column 3 on the
Schedule of Investor (the "Closing"). The redemption price (the "Redemption
Price") to be paid by the Company for each Fixed Series A Redemption Share being
redeemed at the Closing shall be $10,000 in cash (such that the aggregate Fixed
Redemption Price for all Series A Redemption Shares being redeemed is
$2,000,000, as set forth opposite the Investor's name in Column 4 on the
Schedule of Investor).
b. Exchange of Series A Preferred Shares. Subject to satisfaction
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(or waiver) of the conditions set forth in Sections 6 and 7, the Company shall
at the Closing (i) issue to the Investor, and the Investor agrees to exchange
that number of the Investor's Series A Preferred Shares set forth opposite the
Investor's name in Column 5 on the Schedule of Investor for, that number of
Common Shares equal to the sum of (A) the number of Fixed Common Shares set
forth opposite the Investor's name in Column 6 on the Schedule of Investor, plus
(B) the Additional Common Shares (as defined below); and (ii) issue to the
Investor, and the Investor agrees to exchange that number of the Investor's
Series A Preferred Shares set
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forth opposite the Investor's name in Column 7 on the Schedule of Investor for,
that number of Series B Preferred Shares set forth opposite the Investor's name
in Column 8 on the Schedule of Investor. The "Additional Common Shares" means
the number of shares of Common Stock determined according to the following
formula:
$800,000
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Additional Common Share Exchange Price
where the "Additional Common Share Exchange Price" means the arithmetic average
of the Weighted Average Price (as defined in the Series A Certificate of
Designations) of the Common Stock on each of the five (5) consecutive trading
days ending on and including June 8, 2001.
c. Closing Date. The date and time of the Closing (the "Closing
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Date") shall be 10:00 a.m. Central Time, on June 14, 2001, subject to
notification of satisfaction (or waiver) of the conditions to the Closing set
forth in Sections 6 and 7 (or such other date as is mutually agreed to by the
Company and the Investor, but in no event later than June 15, 2001). The Closing
shall occur on the Closing Date at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇ Zavis, ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.
e. Form of Payment. On the Closing Date, (i) the Company (A) shall
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pay to the Investor the aggregate Redemption Price for the Series A Redemption
Shares, by wire transfer of immediately available funds in accordance with the
Investor's written wire instructions, and (B) shall issue and deliver to the
Investor certificates representing the Common Shares and Preferred Shares being
issued in exchange for the Investor's Series A Preferred Shares not being
redeemed by the Company or retained by the Investor (in such denominations as
the Investor shall request), and (ii) the Investor shall deliver to the Company
stock certificates (the "Series A Preferred Stock Certificates") representing
such number of the Series A Preferred Shares held by the Investor to be redeemed
or exchanged by the Company at the Closing.
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2. INVESTOR'S REPRESENTATIONS AND WARRANTIES.
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The Investor represents and warrants that:
a. Reliance on Exemptions. The Investor understands that the Common
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Shares, the Preferred Shares, the Conversion Shares and the Dividend Shares (as
defined in the Series B Certificate of Designations) (collectively, the
"Securities") are being offered to it in reliance on specific exemptions from
the registration requirements of the United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
the Investor's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Investor set forth herein in order to
determine the availability of such exemptions and the eligibility of the
Investor to acquire the Securities.
b. No Governmental Review. The Investor understands that no United
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States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
c. Transfer or Resale. The Investor understands that except as
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provided in the Amended and Restated Registration Rights Agreement: (i) the
Securities have not been and are not being registered under the 1933 Act or any
state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered thereunder, (B) the Investor
shall have delivered to the Company an opinion of counsel, in a generally
acceptable form, to the effect that such Securities to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an exemption from
such registration, or (C) the Investor provides the Company with reasonable
assurance that such Securities can be sold, assigned or transferred pursuant to
Rule 144 promulgated under the 1933 Act (or a successor rule thereto) ("Rule
144"); (ii) any sale of the Securities made in reliance on Rule 144 may be made
only in accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the seller
(or the person through whom the sale is made) may be deemed to be an underwriter
(as that term is defined in the ▇▇▇▇ ▇▇▇) may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
and (iii) neither the Company nor any other person is under any obligation to
register the Securities under the 1933 Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder.
Notwithstanding the foregoing, the Securities may be pledged in connection with
a bona fide margin account or other loan secured by the Securities.
d. Information. The Investor and its advisors, if any, have been
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furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the issuance of the Securities which
have been requested by the Investor. The Investor and its advisors, if any, have
been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by the Investor
or its advisors, if any, or its representatives shall modify, amend or affect
the Investor's right to rely on the Company's representations and warranties
contained in Sections 3 and 9(l) below. The Investor understands that its
investment in the Securities
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involves a high degree of risk. The Investor has sought such accounting, legal
and tax advice as it has considered necessary to make an informed investment
decision with respect to its acquisition of the Securities.
e. Legends. The Investor understands that the certificates or other
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instruments representing the Preferred Shares and, until such time as the sale
of the Common Shares and the Conversion Shares have been registered under the
1933 Act as contemplated by the Amended and Restated Registration Rights
Agreement, the stock certificates representing the Common Shares and the
Conversion Shares, except as set forth below, shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES
LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER
SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN SECURED BY THE SECURITIES.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for resale under the 1933 Act, (ii) in connection with
a sale transaction, such holder provides the Company with an opinion of counsel
reasonably satisfactory to the Company, in a generally acceptable form, to the
effect that a public sale, assignment or transfer of the Securities may be made
without registration under the 1933 Act, or (iii) such holder provides the
Company with reasonable assurances (including, if requested by the Company,
delivering such reasonable assurances to the Company's counsel in connection
with such counsel rendering an opinion on the validity of a sale by the Investor
pursuant to Rule 144) that the Securities can be sold pursuant to Rule 144
without any restriction as to the number of securities acquired as of a
particular date that can then be immediately sold.
f. Authorization; Enforcement; Validity. This Agreement and the
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Amended and Restated Registration Rights Agreement have been duly and validly
authorized, executed and delivered on behalf of the Investor and are valid and
binding agreements of the Investor enforceable against the Investor in
accordance with their terms, subject as to enforceability to general principles
of equity and to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
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g. Residency. The Investor is a resident of that country specified
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in its address on the Schedule of Investor.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
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The Company represents and warrants to the Investor that:
a. Organization and Qualification. The Company and its
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"Subsidiaries" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns capital stock or holds an equity or
similar interest which ownership entitles the Company to elect a majority of the
board of directors or similar governing body of such entity) are corporations
duly organized and validly existing in good standing under the laws of the
jurisdiction in which they are incorporated, and have the requisite corporate
power and authorization to own their properties and to carry on their business
as now being conducted. Each of the Company and its Subsidiaries is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not have
a Material Adverse Effect. As used in this Agreement, "Material Adverse Effect"
means any material adverse effect on the business, properties, assets,
operations, results of operations, or financial condition of the Company and its
Subsidiaries, if any, taken as a whole, or on the transactions contemplated
hereby or by the agreements and instruments to be entered into in connection
herewith, or on the authority or ability of the Company to perform its
obligations under the Transaction Documents (as defined below) or the Series B
Certificate of Designations. A complete list of entities in which the Company,
directly or indirectly, owns capital stock or holds an equity or similar
interest is set forth on Schedule 3(a).
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b. Authorization; Enforcement; Validity. The Company has the
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requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Amended and Restated Registration Rights
Agreement, the Irrevocable Transfer Agent Instructions (as defined in Section 5)
and each of the other agreements entered into by the parties hereto in
connection with the transactions contemplated by this Agreement (collectively,
the "Transaction Documents"), and to issue the Securities in accordance with the
terms hereof and thereof and to redeem the Series A Redemption Shares. The
execution and delivery of the Transaction Documents by the Company and the
execution and filing of the Series B Certificate of Designations by the Company
and the consummation by it of the transactions contemplated hereby and thereby,
including without limitation the redemption and exchange of the Series A
Preferred Shares, the issuance of the Common Shares and the Preferred Shares and
the reservation for issuance and the issuance of the Conversion Shares issuable
upon conversion of the Preferred Shares, have been duly authorized by the
Company's Board of Directors and no further consent or authorization is required
by the Company, its Board of Directors or its stockholders (except to the extent
that stockholder approval may be required pursuant to the rules of the Nasdaq
National Market for the issuance of a number of shares of Common Stock greater
than that number of shares of Common Stock that the Company may issue without
breaching the Company's obligations under the rules or regulations of the Nasdaq
National Market (the "Nasdaq 19.99% Rule")). The Transaction Documents have been
duly executed and delivered by the Company. The Transaction Documents constitute
the valid and binding
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obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by general principles
of equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of creditors' rights and remedies. The Series B Certificate of Designations has
been filed prior to the Closing Date with the Secretary of State of the State of
Delaware and will be in full force and effect, enforceable against the Company
in accordance with its terms and shall not have been amended unless in
compliance with its terms.
c. Capitalization. As of the date hereof, the authorized capital
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stock of the Company consists of (i) 330,000,000 shares of Class A common stock,
of which as of the date hereof 31,230,461 shares are issued and outstanding,
29,016,777 shares are reserved for issuance pursuant to the Company's stock
option and purchase plans (including shares reserved for issuance upon exercise
of options which have already been issued, but have not yet been exercised,
under such plans), 50,973,527 shares are reserved for issuance pursuant to
conversion of the Company's Class B common stock and 128,334 shares are issuable
and reserved for issuance pursuant to securities (other than the Series A
Preferred Stock, the Series B Preferred Stock, stock option and purchase plans
and the Company's Class B common stock) exercisable or exchangeable for, or
convertible into, shares of Common Stock, (ii) 165,000,000 shares of Class B
common stock, of which as of the date hereof 50,973,527 shares are issued and
outstanding and (iii) 5,000,000 shares of preferred stock, of which as of the
date hereof 12,500 shares of Series A Preferred Stock are issued and
outstanding. All of such outstanding shares have been, or upon issuance will be,
validly issued and are fully paid and nonassessable. As of the date hereof, the
Company has outstanding options to purchase 21,288,229 shares of Common Stock
and outstanding warrants to purchase 128,334 shares of Common Stock. Except as
disclosed in Schedule 3(c), (A) no shares of the Company's capital stock are
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subject to preemptive rights or any other similar rights (arising under Delaware
law, Virginia law, the Company's Certificate of Incorporation or By-laws or any
agreement or instrument to which the Company is a party) any liens or
encumbrances granted or created by the Company; (B) there are no outstanding
debt securities issued by the Company; (C) except as set forth in the third
sentence of this Section 3(c), there are no outstanding options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company or any of its Subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to issue additional shares of capital stock of the
Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries; (D) there are no outstanding securities or
instruments of the Company or any of its Subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries; (E) there are no securities or instruments containing anti-
dilution or similar provisions that will be triggered by the issuance of the
Securities as described in this Agreement; and (F) the Company does not have any
stock appreciation rights or "phantom stock" plans or agreements or any similar
plan or agreement. The Company has furnished to the Investor true and correct
copies of the Company's Certificate of Incorporation, as amended and as in
effect on the date hereof (the "Certificate of Incorporation"), and the
Company's By-laws, as amended and
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as in effect on the date hereof (the "By-laws"), and the terms of all securities
convertible into or exercisable or exchangeable for Common Stock and the
material rights of the holders thereof in respect thereto except for stock
options granted under any employee benefit plan or director stock option plan of
the Company approved by the board of directors of the Company. For purposes of
the Nasdaq 19.99% Rule, both the shares of Common Stock and the shares of the
Company's Class B common stock, par value $0.001, are included in the number of
outstanding shares for purposes of determining what percentage of the Company's
outstanding shares may be issued without violating the Nasdaq 19.99% Rule.
d. Issuance of Securities. As of the Closing, the Common Shares and
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the Preferred Shares will have been duly authorized and, upon issuance in
accordance with the terms hereof, shall be (i) validly issued, fully paid and
non-assessable, (ii) free from all taxes, liens and charges with respect to the
issuance thereof and (iii) with respect to the Preferred Shares, entitled to the
rights and preferences set forth in the Series B Certificate of Designations. As
of the Closing, at least 125% of that number of shares of Common Stock issuable
upon conversion of all the Preferred Shares outstanding immediately following
the Closing (without regard to any limitations on conversions, but subject to
adjustment pursuant to the Company's covenant set forth in Section 4(d) below)
will have been duly authorized and reserved for issuance upon conversion of the
Preferred Shares. Upon conversion or issuance in accordance with the Series B
Certificate of Designations, the Conversion Shares and the Dividend Shares, as
the case may be, will be validly issued, fully paid and nonassessable and free
from all taxes, liens and charges with respect to the issue thereof, with the
holders being entitled to all rights accorded to a holder of Common Stock. The
issuance by the Company of the Securities is exempt from registration under the
1933 Act.
e. No Conflicts. The execution, delivery and performance of the
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Transaction Documents by the Company, the performance by the Company of its
obligations under the Series B Certificate of Designations and the consummation
by the Company of the transactions contemplated hereby and thereby (including,
without limitation, the reservation for issuance and issuance of the Conversion
Shares) will not (i) result in a violation of the Certificate of Incorporation
or the By-laws; (ii) except as disclosed in Schedule 3(e), conflict with, or
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constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party; (iii)
result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and the rules and
regulations of the Principal Market (as defined below)) applicable to the
Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected. Neither the Company nor
its Subsidiaries is in violation of any term of its Certificate of Incorporation
or its By-laws or their organizational charter or by-laws, respectively. Except
as disclosed in Schedule 3(e), neither the Company or any of its Subsidiaries is
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in violation of any term of or in default under any contract, agreement,
mortgage, indebtedness, indenture, instrument, judgment, decree or order or any
statute, rule or regulation applicable to the Company or its Subsidiaries,
except where such violations and defaults would not result, either individually
or in the aggregate, in a Material Adverse Effect. The business of the Company
and its Subsidiaries is not being conducted, and shall not be conducted, in
violation of any law, ordinance or regulation of any governmental entity, except
where such violations would not result, either individually or in the aggregate,
in a Material Adverse Effect. Except as specifically contemplated by this
Agreement, as
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required under the 1933 Act, as required by Blue Sky filings or as required by
the Nasdaq 19.99% Rule, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency or any regulatory or self-regulatory agency in order for it
to execute, deliver or perform any of its obligations under or contemplated by
the Transaction Documents or to perform its obligations under the Series B
Certificate of Designations in accordance with the terms hereof or thereof.
Except as disclosed in Schedule 3(e), all consents, authorizations, orders,
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filings and registrations which the Company is required to obtain pursuant to
the preceding sentence have been obtained or effected on or prior to the date
hereof. The Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
f. SEC Documents; Financial Statements. Since December 31, 1999, the
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Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "1934 Act") (all of the
foregoing filed prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the "SEC Documents"). A
complete list of the Company's SEC Documents is set forth on Schedule 3(f).
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Except as disclosed on Schedule 3(f), as of the date hereof, the SEC Documents,
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as they may have been subsequently amended by filings made by the Company with
the SEC prior to the date hereof, complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents. None of the SEC
Documents, as of the date hereof and as they may have been subsequently amended
by filings made by the Company with the SEC prior to the date hereof, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except as disclosed on Schedule 3(f), as of their respective dates,
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the financial statements of the Company included in the SEC Documents complied
as to form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto. Except as
disclosed on Schedule 3(f), such financial statements have been prepared in
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accordance with generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Investor which is not
included in the SEC Documents, contains any untrue statement of a material fact
or omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstance under which they are or were made, not
misleading. As of the date hereof, the Company meets the requirements for use of
Form S-3 for registration of the resale of Registrable Securities (as defined in
the Amended and Restated Registration Rights Agreement). The Company is not
required to file and will not be required to file any agreement, note, lease,
mortgage, deed or other instrument entered into prior to the date hereof and to
which the Company is a party or by which the Company is bound which has not been
previously filed as an exhibit to its reports filed with the SEC under the 1934
Act.
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g. Absence of Certain Changes. Except as disclosed in Schedule 3(g)
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or as disclosed in the Company's Annual Report on Form 10-K for the Year Ended
December 31, 2000, in the Company's Quarterly Report on Form 10-Q for the Three
Months Ended March 31, 2001 or in the Company's Current Report on Form 8-K,
dated April 30, 2001, since December 31, 2000 there has been no change or
development that has had or could reasonably be expected to have a Material
Adverse Effect. The Company has not taken any steps, and does not currently
expect to take any steps, to seek protection pursuant to any bankruptcy law nor
does the Company or any of its Subsidiaries have any knowledge or reason to
believe that its creditors intend to initiate involuntary bankruptcy proceedings
or any actual knowledge of any fact which would reasonably lead a creditor to do
so. Except as disclosed in Schedule 3(g) or as disclosed in the Company's Annual
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Report on Form 10-K for the Year Ended December 31, 2000, or as disclosed on the
Company's Quarterly Report in Form 10-Q for the Three Months Ended March 31,
2001, since December 31, 2000 the Company has not declared or paid any
dividends, sold any assets, individually or in the aggregate, in excess of
$500,000 outside of the ordinary course of business or had capital expenditures,
individually or in the aggregate, in excess of $1,000,000.
h. Acknowledgment Regarding Redemption and Exchange of Investor's
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Series A Preferred Shares. The Company acknowledges and agrees that the Investor
-------------------------
is acting solely in the capacity of an arm's length purchaser with respect to
the Transaction Documents and the Series B Certificate of Designations and the
transactions contemplated hereby and thereby. The Company further acknowledges
that the Investor is not acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the Transaction Documents
and the Series B Certificate of Designations and the transactions contemplated
hereby and thereby and any advice given by the Investor or any of its
representatives or agents in connection with the Transaction Documents and the
Series B Certificate of Designations and the transactions contemplated hereby
and thereby is merely incidental to the Investor's entering into this Agreement.
The Company further represents to the Investor that the Company's decision to
enter into the Transaction Documents has been based solely on the independent
evaluation by the Company and its representatives.
i. No Solicitation. Neither the Company, nor any of its affiliates,
---------------
nor any person acting on its or their behalf, has paid or given, either directly
or indirectly, any commission or other remuneration to any person for soliciting
the exchange of the Series A Preferred Shares for the Common Shares or the
Preferred Shares or for any other transaction contemplated by this Agreement.
j. No Integrated Offering. Neither the Company, nor any of its
----------------------
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of any exchange or automated quotation system on
which any of the securities of the Company are listed or designated (except for
the issuance of securities on the Closing Date to holders of the Series A
Preferred Stock), nor will the Company or any of its Subsidiaries take any
action or steps that would cause the offering of the Securities to be integrated
with other offerings (except for the issuance of securities on the Closing Date
to holders of the Series A Preferred Stock).
10
k. Application of Takeover Protections. The Company and its board of
-----------------------------------
directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Certificate of Incorporation or the laws of
the state of its incorporation which is or could become applicable to the
Investor as a result of the transactions contemplated by this Agreement,
including, without limitation, the Company's issuance of the Securities and the
Investor's ownership of the Securities.
l. Rights Agreement. The Company has not adopted a shareholder
----------------
rights plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the Company.
m. No Other Agreements. The Company has not, directly or indirectly,
-------------------
made any agreements with the Investor relating to the terms or conditions of the
transactions contemplated by the Transaction Documents except as set forth in
the Transaction Documents.
n. Information. Neither the Company nor any of its Subsidiaries nor
-----------
any of their officers, directors, employees or agents have provided the Investor
with any material, nonpublic information.
o. Other Information. Schedule 3(o) includes certain information
-----------------
about the Company.
4. COVENANTS.
---------
a. Best Efforts. Each party shall use its best efforts to timely
------------
satisfy each of the conditions to be satisfied by it as provided in Sections 6
and 7 of this Agreement. Without limiting the generality of the foregoing, the
Company shall use its best efforts to obtain the consent of Foothill Capital
Corporation to the transactions contemplated by the Transaction Documents by
June 14, 2001.
b. Reporting Status. Until the later of (i) the date which is one
----------------
year after the date as of which the Investor may sell all of the Common Shares
and the Conversion Shares without restriction pursuant to Rule 144(k)
promulgated under the 1933 Act (or successor thereto) and (ii) the date which is
one (1) year after the Maturity Date (as defined in the Series B Certificate of
Designations) (the "Reporting Period"), the Company shall file all reports
required to be filed with the SEC pursuant to the 1934 Act, and the Company
shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would
otherwise permit such termination.
c. Financial Information. The Company agrees to send the following
---------------------
to the Investor during the Reporting Period: (i) within two (2) days after the
filing thereof with the SEC, a copy of its Annual Reports on Form 10-K, its
Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and any
registration statements (other than on Form S-8) or amendments filed pursuant to
the 1933 Act,
11
provided that if any such report is not filed with the SEC through ▇▇▇▇▇ then
the Company shall deliver a copy of such report to the Investor by facsimile on
the same day it is filed with the SEC; (ii) on the same day as the release
thereof, facsimile copies of all press releases issued by the Company or any of
its Subsidiaries; and (iii) copies of any notices and other information made
available or given to the stockholders of the Company generally,
contemporaneously with the making available or giving thereof to the
stockholders.
d. Reservation of Shares. The Company shall take all action
---------------------
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 125% of the number of shares of Common Stock needed to
provide for the issuance of the shares of Common Stock upon conversion of all
outstanding Preferred Shares (without regard to any limitations on conversions).
e. Listing. The Company shall promptly secure the listing of all of
-------
the Registrable Securities (as defined in the Amended and Restated Registration
Rights Agreement) upon each national securities exchange and automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to
official notice of issuance) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all Registrable Securities from
time to time issuable under the terms of the Transaction Documents and the
Series B Certificate of Designations. The Company shall use its best efforts to
maintain the Common Stock's authorization for quotation on the Nasdaq National
Market ("NASDAQ") or listing on The New York Stock Exchange, Inc. ("NYSE") (as
applicable, the "Principal Market"). Neither the Company nor any of its
Subsidiaries shall take any action which would be reasonably expected to result
in the delisting or suspension of the Common Stock from the Principal Market.
The Company shall pay all fees and expenses in connection with satisfying its
obligations under this Section 4(e).
f. Disclosure of Transactions and Other Material Information. Before
---------------------------------------------------------
9:00 a.m. (Eastern Time) on June 18, 2001, the Company shall file a Current
Report on Form 8-K (the "Announcing Form 8-K") with the SEC describing the terms
of the transactions contemplated by the Transaction Documents and by documents
relating to the issuance on the Closing Date of securities to other holders of
Series A Preferred Stock (the "Other Holder Documents") and including as
exhibits to such Current Report on Form 8-K this Agreement (including the
Disclosure Schedules to this Agreement), the Series B Certificate of
Designations, the Amended and Restated Registration Rights Agreement and the
Other Holder Documents, in the form required by the 1934 Act. If the Closing
does not occur on June 14, 2001 (or such later date as the Company and each
Investor agree in writing), then the Company shall file on June 15, 2001 (or
such later date as the Company and each Investor agree in writing), a Current
Report on Form 8-K with the SEC disclosing that the Closing did not occur. From
and after the filing of the Announcing Form 8-K with the SEC, the Investor shall
not be in possession of any material nonpublic information received from the
Company, any of its Subsidiaries or any of its respective officers, directors,
employees or agents, that is not disclosed in the Announcing Form 8-K. The
Company shall not, and shall cause each of its Subsidiaries and its and each of
their respective officers, directors, employees and agents not to, provide the
Investor with any material nonpublic information regarding the Company or any of
its Subsidiaries from and after the filing of the Announcing Form 8-K with the
SEC without the express written consent of the Investor. In the event of a
breach of the foregoing covenant by the Company, any of its
12
Subsidiaries, or any of its or their respective officers, directors, employees
and agents, and if the Company has not publicly disclosed the material nonpublic
information within 12 hours of written notice of the breach from the Investor,
in addition to any other remedy provided herein or in the Transaction Documents,
the Investor shall have the right to make a public disclosure, in the form of a
press release, public advertisement or otherwise, of such material nonpublic
information without the prior approval by the Company, its Subsidiaries, or any
of its or their respective officers, directors, employees or agents. The
Investor shall not have any liability to the Company, its Subsidiaries, or any
of its or their respective officers, directors, employees, shareholders or
agents for any such disclosure. Subject to the foregoing, neither the Company
nor the Investor shall issue any press releases or any other public statements
with respect to the transactions contemplated hereby or disclosing the name of
the Investor; provided, however, that the Company shall be entitled, without the
prior approval of the Investor, to make any press release or other public
disclosure with respect to such transactions (i) in substantial conformity with
the Announcing Form 8-K and contemporaneously therewith and (ii) as is required
by applicable law and regulations (provided that in the case of clause (i) the
Investor shall be consulted by the Company in connection with any such press
release or other public disclosure prior to its release).
g. Proxy Statement. The Company shall provide each stockholder
---------------
entitled to vote at the next annual meeting of stockholders of the Company,
which meeting shall occur on or before July 31, 2001 (the "Stockholder Meeting
Deadline"), a proxy statement, which has been previously reviewed by the
Investor and a counsel of its choice, soliciting each such stockholder's
affirmative vote at such annual stockholder meeting for approval of the
Company's issuance of all of the Securities as described in this Agreement in
accordance with applicable law and the rules and regulations of the Principal
Market (such affirmative approval being referred to herein as the "Stockholder
Approval"), and the Company shall use its best efforts to solicit its
stockholders' approval of such issuance of the Securities and to cause the Board
of Directors of the Company to recommend to the stockholders that they approve
such proposal.
h. Corporate Existence. So long as the Investor beneficially owns
-------------------
any Series B Preferred Stock, the Company shall maintain its corporate existence
and shall not sell all or substantially all of the Company's assets, except in
the event of a merger or consolidation or sale of all or substantially all of
the Company's assets, where the surviving or successor entity in such
transaction (i) assumes the Company's obligations hereunder and under the
agreements and instruments entered into in connection herewith and (ii) is a
publicly traded corporation whose common stock is quoted on or listed for
trading on Nasdaq or NYSE.
i. Pledge of Securities. The Company acknowledges and agrees that
--------------------
the Securities may be pledged by the Investor in connection with a bona fide
margin agreement or other loan secured by the Securities. The pledge of
Securities shall not be deemed to be a transfer, sale or assignment of the
Securities hereunder, and when effecting a pledge of Securities the Investor
shall not be required to provide the Company with any notice thereof or
otherwise make any delivery to the Company pursuant to this Agreement, any other
Transaction Document or the Series B Certificate of Designations, including
without limitation, Section 2(a) of this Agreement; provided that the Investor
and its pledgee shall be required to comply with the provisions of Section 2(a)
hereof in order to effect a sale, transfer or assignment of
13
Securities to such pledgee. The Company hereby agrees to execute and deliver
such documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by the Investor.
j. Expenses. Subject to Section 9(k) below, at the Closing, the
--------
Company shall pay a nonaccountable expense allowance of $31,600 to HFTP
Investment L.L.C.. (the Investor) or its designee(s), by wire transfer of
immediately available funds in accordance with each such Investor's written wire
instructions.
k. Limitation on Net Sales of Common Stock. So long as the Investor
---------------------------------------
holds any Preferred Shares, Conversion Shares or Common Shares, the Investor
agrees that after the date which is 13 trading days after June 19, 2001 it will
not enter into, directly or indirectly, any net sales of Common Stock on any
single day (each such day is referred to as a "Limited Sales Day") in excess of
that number of shares of Common Stock equal to the sum of (i) 0.8% of the daily
trading volume for the Common Stock (as reported by Bloomberg Financial Markets
("Bloomberg")) for that trading day (such amount, with respect to such Limited
Sales Day, is referred to as the Investor's "Daily Sales Amount"), plus (ii) the
aggregate amount of all the Investor's Daily Sales Amounts during the period
beginning on and including the date immediately following the Closing Date and
ending on and including the date immediately preceding the Limited Sales Day
with respect to which this determination is being made, less the net sales of
Common Stock made by the Investor on each of the days during such period;
provided, however, that the restrictions on net sales set forth above shall not
apply (i) on and after the first date on which there has been any Change of
Control (as defined in Section 4(b) of the Series B Certificate of Designations)
or an announcement of any pending, proposed or intended Change of Control, (ii)
on and after the first date on which there has occurred a Triggering Event (as
defined in Section 3(b) of the Series B Certificate of Designations) or an event
that with the passage of time and without being cured would constitute a
Triggering Event, (iii) if the Company is in default under the Series B
Certificate of Designations or, to the extent the Investor then holds Series A
Preferred Shares, the Series A Certificate of Designations for failing to effect
any requested conversion or redemption of any Preferred Shares pursuant to the
Series B Certificate of Designations or Series A Preferred Shares pursuant to
the Series A Certificate of Designations, respectively, (iv) on and after any
date on which the Company issues or sells or is deemed to have issued or sold
any securities with a Variable Price (as defined in the Series B Certificate of
Designations), except for the Settlement Notes (as defined in Section 2(f)(i) of
the Series B Certificate of Designations), (v) on and after the Stockholder
Meeting Deadline, if the Company fails to receive the Stockholder Approval on or
before the Stockholder Meeting Deadline, (vi) on and after the 30th trading day
prior to the date which is three (3) years after the Closing Date, or (vii) with
respect to any sale of Common Stock at a price equal to or greater than $17.50
(as adjusted for any stock splits, stock dividends, stock combinations or other
similar transactions) and any such sale shall be ignored for all purposes of
this Section 4(k).
l. Company's Right to Redeem Series A Preferred Shares. If the
---------------------------------------------------
Closing occurs on or prior to June 14, 2001, then at any time or times during
the period beginning on the Closing Date and ending on and including the date
which is 180 days after the Closing Date, the Company shall have the right, in
its sole discretion, to redeem up to 120 of the Series A Preferred Shares then
held by the Investor
14
(a "Redemption at Company's Election") for consideration per Series A Preferred
Share equal to the Conversion Amount (as defined in the Series A Certificate of
Designations) as of the applicable Company's Election Redemption Date (as
defined below) (the "Company's Election Redemption Price"). The Company shall
exercise its right to Redemption at Company's Election by providing the Investor
written notice ("Notice of Redemption at Company's Election") at least 15
Business Days prior to the date of consummation of such redemption ("Company's
Election Redemption Date"). The Notice of Redemption at Company's Election shall
indicate (x) the number of the Investor's Series A Preferred Shares the Company
has elected to redeem (the "Company's Election Redemption Shares"), and (y) the
Company's Election Redemption Date, which date shall not be after the date which
is 180 days after the Closing Date. If the Company has exercised its right of
Redemption at Company's Election and the conditions of this Section 4(l) have
been satisfied, then the Company's Election Redemption Shares outstanding on the
Company's Election Redemption Date shall be redeemed as of the Company's
Election Redemption Date by payment by the Company to the Investor of the
Company's Election Redemption Price for the Series A Preferred Shares being
redeemed. If required by Section 2(d)(viii) of the Series A Certificate of
Designations, the Investor shall thereupon surrender certificates representing
the Series A Preferred Shares redeemed to the Company. If the Company fails to
pay the full Company's Election Redemption Price on the Company's Election
Redemption Date for the Company's Election Redemption Shares pursuant to this
Section 4(l), then (A) the Company's Election Redemption Price shall bear
interest at the rate of 1.5% per month (prorated for partial months) until paid
in full, and (B) at any time thereafter and until the Company pays such unpaid
Company's Election Redemption Price in full, the Investor shall have the option
(the "Void Company Redemption Option") to, in lieu of redemption, require the
Company to promptly return to the Investor any or all of such Series A Preferred
Shares that were submitted for redemption by the Investor under this Section
4(l) and for which the Company's Election Redemption Price (together with any
interest thereon) has not been paid, by sending written notice thereof to the
Company via facsimile (the "Void Company Redemption Notice"). Upon the Company's
receipt of such Void Company Redemption Notice, (i) the Notice of Redemption at
Company's Election shall be null and void with respect to the Company's Election
Redemption Shares subject to the Void Company Redemption Notice and the Investor
shall be entitled to all of the rights under the Series A Certificate of
Designations, (ii) the Company shall immediately return the Series A Preferred
Shares subject to the Void Company Redemption Notice and (iii) the Conversion
Price (as defined in the Series A Certificate of Designations) for such Series A
Preferred Shares subject to such Void Company Redemption Notice shall be
adjusted to the lesser of (A) the Conversion Price (as defined in the Series A
Certificate of Designations) as in effect on the date on which the Void Company
Redemption Notice is delivered to the Company and (B) the lowest Weighted
Average Price (as defined in the Series A Certificate of Designations) of the
Common Stock during the period beginning on the date on which the Notice of
Redemption at Company's Election is delivered to the Investor and ending on the
date on which the Void Company Redemption Notice is delivered to the Company.
Notwithstanding the above, but subject to Section 5 of the Series A Certificate
of Designations, the Investor may convert any Series A Preferred Shares
(including Series A Preferred Shares selected for redemption pursuant to this
Section 4(l)) into Common Stock pursuant to Section 2(b) of the Series A
Certificate of Designations at any time on or prior to the date immediately
preceding the Company's Election Redemption Date. If the Company fails to timely
pay any Company's Election Redemption Price in accordance with this Section
4(l), then the
15
Company shall not be permitted to submit another Notice of Redemption at
Company's Election without the prior written consent of the Investor.
5. TRANSFER AGENT INSTRUCTIONS.
---------------------------
The Company shall issue irrevocable instructions to its transfer agent
in the form attached hereto as Exhibit C (the "Irrevocable Transfer Agent
---------
Instructions"), and any subsequent transfer agent, to issue certificates,
registered in the name of the Investor or its respective nominee(s), for the
Conversion Shares in such amounts as specified from time to time by the Investor
to the Company upon conversion of the Preferred Shares. Prior to registration of
the Common Shares and the Conversion Shares under the 1933 Act, all such
certificates shall bear the restrictive legend specified in Section 2(b) of this
Agreement. The Company warrants that no instruction other than the Irrevocable
Transfer Agent Instructions referred to in this Section 5 and stop transfer
instructions to give effect to Section 2(b) hereof (in the case of the Common
Shares and the Conversion Shares, prior to registration of the Common Shares and
the Conversion Shares under the ▇▇▇▇ ▇▇▇) will be given by the Company to its
transfer agent and that the Securities shall otherwise be freely transferable on
the books and records of the Company as and to the extent provided in this
Agreement and the Amended and Restated Registration Rights Agreement. If the
Investor provides the Company with an opinion of counsel, in a generally
acceptable form, to the effect that a public sale, assignment or transfer of
Securities may be made without registration under the 1933 Act or the Investor
provides the Company with reasonable assurances (including, if requested by the
Company, delivering such reasonable assurances to the Company's counsel in
connection with such counsel rendering an opinion on the validity of a sale by
such Investor pursuant to Rule 144) that the Securities can be sold pursuant to
Rule 144 without any restriction as to the number of securities acquired as of a
particular date that can then be immediately sold, the Company shall permit the
transfer, and, in the case of the Common Shares and the Conversion Shares,
promptly instruct its transfer agent to issue one or more certificates in such
name and in such denominations as specified by the Investor and without any
restrictive legend. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Investor by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Section 5 will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 5, that the
Investor shall be entitled, in addition to all other available remedies, to an
order and/or injunction restraining any breach and requiring immediate issuance
and transfer, without the necessity of showing economic loss and without any
bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING.
--------------------------------------------------
The obligation of the Company to redeem and exchange the Series A
Preferred Shares (including the issuance of the applicable number of Common
Shares and Preferred Shares to the Investor) at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
16
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion by providing
the Investor with prior written notice thereof:
a. The Investor shall have executed each of the Transaction
Documents to which it is a party and delivered the same to the Company.
b. The Series B Certificate of Designations shall have been filed
with the Secretary of State of the State of Delaware;
c. The Investor shall have delivered to the Company the Series A
Preferred Stock Certificates representing the Series A Preferred Shares to be
redeemed or exchanged by the Company from the Investor at the Closing.
d. The representations and warranties of the Investor shall be true
and correct as of the date when made and as of the Closing Date as though made
at that time (except for representations and warranties that speak as of a
specific date), and the Investor shall have performed, satisfied and complied
with the covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Investor at or
prior to the Closing Date.
e. The Company shall have obtained the consent of Foothill Capital
Corporation to the transactions contemplated by the Transaction Documents.
f. The Company shall have entered into separate amended and restated
redemption and exchange agreements relating to the Series A Preferred Stock with
each of the Other Investors and all conditions to the closings contemplated by
such agreements shall have been satisfied or waived.
7. CONDITIONS TO THE INVESTOR'S OBLIGATIONS AT CLOSING.
---------------------------------------------------
The obligation of the Investor hereunder to tender the Series A
Preferred Shares to the Company for redemption and exchange at the Closing is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for the Investor's sole
benefit and may be waived by the Investor at any time in its sole discretion by
providing the Company with prior written notice thereof:
a. The Company shall have executed each of the Transaction Documents
and delivered the same to the Investor.
b. The Series B Certificate of Designations shall have been filed
with the Secretary of State of the State of Delaware, and a copy certified by
the Secretary of State of the State of Delaware shall have been delivered to the
Investor.
c. The Company shall have delivered to the Investor the Redemption
Price for the number of Series A Redemption Shares being redeemed by the Company
from the Investor on the Closing
17
Date, by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Investor (and the Company shall have delivered the
amounts set forth in Section 4(j) by wire transfer of immediately available
funds to the Investor or its designee(s)).
d. The Company shall have executed and delivered to the Investor the
stock certificates (in such denominations as the Investor shall request) for the
Common Shares and the Preferred Shares, in each case being issued in exchange
for the Investor's Series A Preferred Shares (as set forth in Section 1(b)) at
the Closing.
e. The Common Stock (x) shall be designated for quotation or listed
on the Principal Market and (y) shall not have been suspended by the SEC or the
Principal Market from trading on the Principal Market nor shall suspension by
the SEC have been threatened in writing by the SEC; and the Common Shares and
the Conversion Shares issuable upon conversion of the Preferred Shares shall be
listed upon the Principal Market.
f. The representations and warranties of the Company shall be true
and correct as of the date when made and as of the Closing Date as though made
at that time (except for representations and warranties that speak as of a
specific date other than the representation contained in Section 3(c) which
shall be updated as of the Closing Date), other than the representation made in
the second sentence of Section 3(c), which representation shall be true and
correct in all material respects as of the Closing Date as though made at that
time, and the Company shall have performed, satisfied and complied with the
covenants, agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Company at or prior to the Closing
Date. The Investor shall have received a certificate, executed by the Chief
Executive Officer of the Company, dated as of the Closing Date, to the foregoing
effect and as to such other matters as may be reasonably requested by the
Investor, including, without limitation, an update as of the Closing Date
regarding the representation contained in Section 3(c) above.
g. The Investor shall have received the opinion of ▇▇▇▇ and ▇▇▇▇
LLP, dated as of the Closing Date, in the form of Exhibit D attached hereto.
---------
h. The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b) above and in a form reasonably
acceptable to the Investor, including, without limitation, containing a
determination by the Board of Directors of the Company that immediately prior to
the Closing the capital of the Company is not impaired (as determined in
accordance with Section 160(a)(1) of the Delaware General Corporation Law) and
that immediately following the Closing and after giving effect to the redemption
of all the shares of the Company's Series A Preferred Stock which the Company
redeemed at the Closing, whether from the Investor or from the Other Investors,
the capital of the Company would not be impaired (as determined in accordance
with Section 160(a)(1) of the Delaware General Corporation Law) (the
"Resolutions").
i. As of the Closing Date, the Company shall have reserved out of
its authorized and unissued Common Stock, solely for the purpose of effecting
the conversion of the Preferred Shares, at least
18
125% of that number of shares of Common Stock issuable upon conversion of all
the Preferred Shares outstanding immediately following the Closing (without
regard to any limitations on conversions).
j. The Irrevocable Transfer Agent Instructions, in the form of
Exhibit C attached hereto, shall have been delivered to and acknowledged in
---------
writing by the Company's transfer agent.
k. The Company shall have delivered to the Investor a certificate
evidencing the incorporation and good standing of (i) the Company and each
Subsidiary in such entity's state of incorporation or organization issued by the
Secretary of State of such state of incorporation or organization, and (ii) the
Company in Virginia issued by the Secretary of State of Virginia, each as of a
date within ten days of the Closing Date.
l. The Company shall have delivered to the Investor a certified copy
of the Certificate of Incorporation as certified by the Secretary of State of
the State of Delaware as of a date within ten days of the Closing Date.
m. The Company shall have delivered to the Investor a secretary's
certificate, dated as of the Closing Date, certifying as to (A) the Resolutions,
(B) the Certificate of Incorporation and (C) the By-laws, each as in effect at
the Closing.
n. The Company shall have delivered to the Investor a letter from
the Company's transfer agent certifying the number of shares of Common Stock
outstanding as of a date within five days of the Closing Date.
o. The Company shall have delivered to the Investor such other
documents relating to the transactions contemplated by the Transaction Documents
as the Investor or their counsel may reasonably request.
8. INDEMNIFICATION.
---------------
In consideration of the Investor's execution and delivery of the
Transaction Documents and in addition to all of the Company's other obligations
under the Transaction Documents and the Series B Certificate of Designations,
the Company shall defend, protect, indemnify and hold harmless the Investor and
each other holder of the Securities and all of their stockholders, officers,
directors, employees and direct or indirect investors and any of the foregoing
persons' agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or
19
obligation of the Company contained in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (c) any
cause of action, suit or claim brought or made against such Indemnitee (other
than a cause of action, suit or claim which is (x) brought or made by the
Company and (y) is not a shareholder derivative suit) and arising out of or
resulting from (i) the execution, delivery, performance or enforcement of the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, or (ii) the status of the Investor or holder of
the Securities as an investor in the Company. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law. Except as
otherwise set forth herein, the mechanics and procedures with respect to the
rights and obligations under this Section 8 shall be the same as those set forth
in Sections 6(a) and (d) of the Amended and Restated Registration Rights
Agreement, including, without limitation, those procedures with respect to the
settlement of claims and the Company's rights to assume the defense of claims.
9. MISCELLANEOUS.
-------------
a. Governing Law; Jurisdiction; Jury Trial. All questions concerning
---------------------------------------
the construction, validity, enforcement and interpretation of this Agreement
shall be governed by the internal laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
b. Counterparts. This Agreement may be executed in two or more
------------
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
c. Headings. The headings of this Agreement are for convenience of
--------
reference and shall not form part of, or affect the interpretation of, this
Agreement.
20
d. Severability. If any provision of this Agreement shall be invalid
------------
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
e. Entire Agreement; Effect on Prior Agreements; Amendments.
--------------------------------------------------------
i. Except for the Securities Purchase Agreement, the
Registration Rights Agreement dated as of June 17, 2000 by and among
the Company, the Investor and the Other Investors (the "Series A
Registration Rights Agreement"), the Series A Certificate of
Designations, the Waiver Agreements, each executed as of January 3,
2001, between the Company and the Investor, and the Irrevocable
Transfer Agent Instructions (as defined in the Securities Purchase
Agreement), this Agreement, the Series B Certificate of Designations
and each of the other Transaction Documents supersede all other prior
oral or written agreements between the Investor, the Company, their
affiliates and persons acting on their behalf with respect to the
matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with
respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the
Investor makes any representation, warranty, covenant or undertaking
with respect to such matters.
ii. No provision of this Agreement may be amended or waived
other than by an instrument in writing signed by the Company and the
holders of at least two-thirds (2/3) of the Common Shares and
Conversion Shares (assuming conversion of all outstanding Preferred
Shares without giving effect to any limitations on conversion) or, if
prior to the Closing Date, the Investor. No such amendment shall be
effective to the extent that it applies to less than all of the
holders of the Securities then outstanding. No consideration shall be
offered or paid to any person to amend or consent to a waiver or
modification of any provision of any of the Transaction Documents or
the Series B Certificate of Designations unless the same consideration
also is offered to all of the parties to the Transaction Documents or
holders of Securities, as the case may be.
f. Notices. Any notices, consents, waivers or other communications
-------
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending
21
party); or (iii) one (1) Business Day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company:
MicroStrategy Incorporated
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Chief Financial Officer
With a copy to:
▇▇▇▇ and ▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
If to the Transfer Agent:
American Stock Transfer & Trust Co.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
If to the Investor, to it at the address and facsimile number set forth
on the Schedule of Investor, with copies to the Investor's representatives as
set forth on the Schedule of Investor, or at such other address and/or facsimile
number and/or to the attention of such other person as the recipient party has
specified by written notice given to each other party five days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a nationally recognized overnight
delivery service shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.
22
g. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Securities. The Company shall not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the holders of at least two-thirds (2/3) of the Common Shares and
Conversion Shares (assuming conversion of all outstanding Preferred Shares
without giving effect to any limitations on conversion), including by merger or
consolidation, except pursuant to a Change of Control (as defined in Section
4(b) of the Series B Certificate of Designations) with respect to which the
Company is in compliance with Section 4 of the Series B Certificate of
Designations and Section 4(h) of this Agreement. The Investor may assign some or
all of its rights hereunder without the consent of the Company, provided,
however, that the transferee has agreed in writing to be bound by the applicable
provisions of this Agreement and the Company has consented to such assignment
and assumption, which consent shall not be unreasonably withheld.
Notwithstanding anything to the contrary contained in the Transaction Documents,
the Investor shall be entitled to pledge the Securities in connection with a
bona fide margin account or other loan secured by the Securities.
h. No Third Party Beneficiaries. Except with respect to Section
----------------------------
9(p), this Agreement is intended for the benefit of the parties hereto and their
respective permitted successors and assigns, and is not for the benefit of, nor
may any provision hereof be enforced by, any other person.
i. Survival. Unless this Agreement is terminated under Section 9(k),
--------
the representations and warranties of the Company and the Investor contained in
Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and 9,
and the indemnification provisions set forth in Section 8, shall survive the
Closing. The Investor shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.
j. Further Assurances. Each party shall do and perform, or cause to
------------------
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
k. Termination. In the event that the Closing shall not have
-----------
occurred with respect to the Investor on or before June 14, 2001 due to the
Company's or the Investor's failure to satisfy the conditions set forth in
Sections 6 and 7 above (and the nonbreaching party's failure to waive such
unsatisfied condition(s)), the nonbreaching party shall have the option to
terminate this Agreement with respect to such breaching party at the close of
business on such date without liability of any party to any other party;
provided, however, that if this Agreement is terminated pursuant to this Section
9(k), the Company shall remain obligated to reimburse the nonbreaching Investor
for the expenses described in Section 4(j) above.
23
l. Placement Agent. The Company acknowledges that it has not engaged
---------------
a placement agent in connection with the transactions contemplated by this
Agreement. The Company shall be responsible for the payment of any placement
agent's fees, financial advisory fees, or brokers' commissions relating to or
arising out of the transactions contemplated hereby. The Company shall pay, and
hold each Buyer harmless against, any liability, loss or expense (including,
without limitation, attorney's fees and out-of-pocket expenses) arising in
connection with any such claim.
m. No Strict Construction. The language used in this Agreement will
----------------------
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
n. Remedies. The Investor and each holder of the Securities shall
--------
have all rights and remedies set forth in the Transaction Documents and the
Series B Certificate of Designations and all rights and remedies which such
holders have been granted at any time under any other agreement or contract and
all of the rights which such holders have under any law. Any person having any
rights under any provision of this Agreement shall be entitled to enforce such
rights specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law.
o. Payment Set Aside. To the extent that the Company makes a payment
-----------------
or payments to the Investor hereunder or pursuant to the Amended and Restated
Registration Rights Agreement or the Series B Certificate of Designations or the
Investor enforces or exercises its rights hereunder or thereunder, and such
payment or payments or the proceeds of such enforcement or exercise or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company, a trustee, receiver or any other Person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of any
such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
p. Mutual General Release.
----------------------
i. In consideration of the releases set forth in Sections
9(p)(ii) and 9(p)(iii), effective as of the Closing, the Investor, on
behalf of itself and , to the extent permitted by law, its heirs,
executors, administrators, devisees, trustees, partners, directors,
officers, shareholders, employees, consultants, representatives,
predecessors, principals, agents, parents, associates, affiliates,
subsidiaries, attorneys, accountants, successors, successors-in-
interest and assignees (collectively, the "Investor Releasing
Persons"), hereby waives and releases, to the fullest extent permitted
by law, but subject to Section 9(p)(iv) below, any and all claims,
rights and causes of action, whether known or unknown (collectively,
24
the "Investor Claims"), that any of the Investor Releasing Persons
had, currently has or then has against (i) the Company, (ii) any of
the Company's current or former parents, shareholders, affiliates,
subsidiaries, predecessors or assigns, or (iii) any of the Company's
or such other persons' or entities' current or former officers,
directors, employees, agents, principals, investors, signatories,
advisors, consultants, spouses, heirs, estates, executors, attorneys,
auditors and associates and members of their immediate families
(collectively, the "Company Released Persons"), including, without
limitation, Investor Claims arising out of or relating to the
Securities Purchase Agreement, the Series A Registration Rights
Agreement and the Series A Certificate of Designations (collectively,
the "Released Documents") other than Investor Claims arising after the
Closing.
ii. In further consideration of the Investor entering into this
Agreement, effective as of the date of this Agreement, the Company on
behalf of itself and, to the extent permitted by law, its heirs,
executors, administrators, devisees, trustees, partners, directors,
officers, shareholders, employees, consultants, representatives,
predecessors, principals, agents, parents, associates, affiliates,
subsidiaries, attorneys, accountants, successors, successors-in-
interest and assignees (collectively, the "Company Releasing
Persons"), hereby waives and releases, to the fullest extent permitted
by law, but subject to Section 9(p)(iv) below, any and all claims,
rights and causes of action, whether known or unknown (collectively,
the "Company Claims"), that any of the Company Releasing Persons had
or currently has against (i) the Investor, (ii) any of the Investor's
respective current or former parents, shareholders, affiliates,
subsidiaries, predecessors or assigns, or (iii) any of the Investor's
or such other persons' or entities' current or former officers,
directors, employees, agents, principals, investors, signatories,
advisors, consultants, spouses, heirs, estates, executors, attorneys,
auditors and associates and members of their immediate families
(collectively, the "Investor Released Persons"), including, without
limitation, any Company Claims arising out of or relating to the
Released Documents; provided, however, that if the Investor breaches
its obligations under Section 4(a), then the release set forth in this
Section 9(p)(ii) shall be null and void and of no further force or
effect.
iii. In further consideration of the Investor entering into this
Agreement, effective as of the Closing, the Company on behalf of
itself and, to the extent permitted by law, the other Company
Releasing Persons, hereby waives and releases, to the fullest extent
permitted by law, but subject to Section 9(p)(iv) below, any and all
Company Claims, that any of the Company Releasing Persons had,
currently has or then has against any of the Investor Released
Persons, including, without limitation, any Company Claims arising out
of or relating to the Released Documents.
iv. The Company and the Investor acknowledge that the releases
set forth in Sections 9(p)(i), 9(p)(ii) and 9(p)(iii) above do not
affect any claim which any Company
25
Releasing Person or Investor Releasing Person may have under this
Agreement, Section 8 or Section 9(m) of the Securities Purchase
Agreement or Sections 5, 6 or 7 of the Series A Registration Rights
Agreement. For the avoidance of doubt, the Company acknowledges and
agrees that if any Series A Preferred Shares remain outstanding after
the Closing, such Series A Preferred Shares shall continue to have all
the rights and preferences set forth in the Series A Certificate of
Designations.
* * * * * *
26
IN WITNESS WHEREOF, the Investor and the Company have caused this
Amended and Restated Redemption and Exchange Agreement to be duly executed as of
the date first written above.
COMPANY: INVESTOR:
MICROSTRATEGY INCORPORATED HFTP INVESTMENT L.L.C.
By: Promethean Asset Management, L.L.C.
Its: Investment Manager
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
---------------------------- -----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇ Name: ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
----------------------- ------------------------
Title: President and CFO Its: Managing Member
---------------------- -------------------------
SCHEDULE OF INVESTOR
(Page 1 of 2)
(1) (2) (3) (4) (5) (6)
Total Number of Series A Series A Preferred
Investor's Name, Address Series A Redemption Redemption Shares Being Exchanged Total Fixed
and Facsimile Number Preferred Shares Shares Price for Common Shares Common Shares
------------------------------------------------------------------------------------------------------------------------------------
HFTP Investment L.L.C. 2,000 200 $2,000,000 620 1,159,022
c/o Promethean Asset Management, L.L.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Residence: New York
(Representatives)
Promethean Investment Group, L.L.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ Zavis
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
------------------------------------------------------------------------------------------------------------------------------------
SCHEDULE OF INVESTOR
(Page 2 of 2)
(1) (7) (8)
Series A
Preferred Shares Total Series B
Investor's Name, Address Being Exchanged Preferred
and Facsimile Number for Series B Shares
----------------------------------------------------------------------------------------------
HFTP Investment L.L.C. 530 530
c/o Promethean Asset Management, L.L.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Residence: New York
(Representatives)
Promethean Investment Group, L.L.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
------------------------------------------------------------------------------------------
SCHEDULES
---------
Schedule 3(a) - Subsidiaries
Schedule 3(c) - Capitalization
Schedule 3(e) - Conflicts
Schedule 3(f) - SEC Documents
Schedule 3(g) - Material Changes
Schedule 3(o) - Other Information
EXHIBITS
--------
Exhibit A - Form of Series B Certificate of Designations
Exhibit B - Form of Amended and Restated Registration Rights Agreement
Exhibit C - Form of Irrevocable Transfer Agent Instructions
Exhibit D - Form of Company Counsel Opinion
DISCLOSURE SCHEDULE
TO
AMENDED AND RESTATED REDEMPTION AND EXCHANGE AGREEMENT
BY AND AMONG
MICROSTRATEGY INCORPORATED
AND
HFTP INVESTMENT L.L.C.
JUNE 14, 2001
General Information
-------------------
This General Information section and the following sections, together
with all attachments referred to therein, all of which are incorporated herein
by reference, comprise the Disclosure Schedule referred to in the Amended and
Restated Redemption and Exchange Agreement, dated as of June 14, 2001, by and
among MicroStrategy Incorporated, on the one hand, and HFTP Investment L.L.C.,
on the other hand (which Agreement, together with all exhibits and schedules
thereto, including this Disclosure Schedule, is hereafter collectively referred
to as the "Agreement"). All capitalized terms used but not otherwise defined
herein shall have the respective meanings ascribed to them in the Agreement.
The representations and warranties of the Company contained in Section
3 of the Agreement and certain of the covenants of the Company contained in
Section 3 of the Agreement are made and given subject to the disclosures in this
Disclosure Schedule. Any disclosures contained in this Disclosure Schedule shall
be deemed to qualify the corresponding section of Section 3 of this Agreement.
Certain matters set forth in this Disclosure Schedule are included
solely for informational purposes for the convenience of the parties to the
Agreement. The inclusion of any information in the Disclosure Schedule shall not
be deemed to be an admission or acknowledgement, in and of itself, that such
information (i) is required by the terms of the Agreement to be disclosed, (ii)
is material to the Company, (iii) has had or would reasonably be expected to
have a material adverse effect on the Company or (iv) is outside the ordinary
course of business for the Company. Such information shall not be used as a
basis for interpreting the terms "material," "materially," "materiality,"
"Material," "Materiality," or words of similar meaning in the Agreement.
This Disclosure Schedule is qualified in its entirety by reference to
the specific provisions of the
Agreement and is not intended to constitute, and shall not be construed as
constituting, any representation, warranty or covenant of the Company, except as
and to the extent expressly provided in this Disclosure Schedule or the
Agreement.
Schedule 3(a)
-------------
Organization and Qualification
------------------------------
Aventine, Incorporated* (Delaware)
MicroStrategy Capital Corporation* (Delaware)
MicroStrategy Management Corporation* (Delaware)
MicroStrategy Services Corporation* (Delaware)
▇▇▇▇▇▇▇▇.▇▇▇ Incorporated* (Delaware)
MicroStrategy Australia Pty. Ltd. (Australia)
MicroStrategy Benelux B.V. (Netherlands)
MicroStrategy Brasil Ltda. (Brazil)
MicroStrategy Brasil Ltda. Sucursal Argentina (Argentina)
MicroStrategy Canada Incorporated* (Canada)
MicroStrategy Deutschland GmbH (Germany)
MicroStrategy France SARL (France)
MicroStrategy-FSC, Inc. (Barbados)
MicroStrategy GmbH (Austria)
MicroStrategy Iberica, S.A. (Spain)
MicroStrategy International Limited (Bermuda)
MicroStrategy International II Limited (Bermuda)
MicroStrategy Italy S.r.l. (Italy)
MicroStrategy Korea Co., Ltd. (Korea)
MicroStrategy Limited (United Kingdom)
MicroStrategy Mexico, S. de ▇.▇. de C.V. (Mexico)
MicroStrategy Schweiz AG (Switzerland)
▇▇▇▇▇▇▇▇.▇▇▇ International Limited (Bermuda)
iBasis, Inc.* (minority interest)
Medical Internet Solutions Inc.* (minority interest)
Xchange, Inc.* (minority interest)
CVent, Inc.* (minority interest)
World Investment Partners S.A. (minority interest)
*The interest owned or otherwise held directly or indirectly by MicroStrategy
Incorporated in these entities is subject to a pledge (or obligation to pledge)
in favor of Foothill Capital Corporation.
Schedule 3(c)
-------------
Capitalization
--------------
(A) None.
(B) In connection with the Stipulation of Settlement, dated January 11, 2001,
entered into among the Company and Lead Plaintiffs ▇▇▇▇▇ ▇▇▇▇▇▇, Atsukuni
Minami and Local 144 Nursing Home Pension Fund relating to the Company's
class action securities litigation (the "Settlement Agreement"), the
Company will issue five-year 7 1/2% Senior Unsecured Notes having an
aggregate principal amount of $80.5 million.
(C) (1) Under a Management Services Agreement, dated June 7, 2000,
MicroStrategy Management Corporation ("MMC"), a wholly-owned subsidiary of
the Company, has the right to purchase from the Company, in three
installments, approximately 143,000 shares of Class A Common Stock at a
purchase price equal to the par value of these shares ($.001 per share)
over a two year period expiring in September 2002. The specific number of
shares subject to the purchase right will depend on certain multipliers
relating to future revenues and employee-attrition rates of MicroStrategy
Brazil Ltda. Sucursal Argentina ("Argentinean Operations") over the two
year period and the operation of a collar on the aggregate market value of
the shares, which shall not exceed $5 million. In exchange for these share
purchase rights, MMC renders to the Company certain management services
with respect to the Argentinean Operations. MMC has subcontracted the
performance of such management services to ▇▇▇▇▇▇▇ ▇▇▇▇▇, to whom MMC
delivers the shares purchased from the Company.
(2) The Series A Convertible Preferred Stock of the Company is convertible
into Class A Common Stock at an initial conversion rate equal to the
average of the daily volume weighted average prices of the Class A Common
Stock for the 17 trading days following June 19, 2000 ("Closing Date")
(i.e., $33.3854). The Company, at its option, can require that the
preferred stock convert into Class A Common Stock on the second anniversary
of the Closing Date or may extend the term of the Series A Preferred Shares
for up to an additional two years. The conversion rate may adjust, subject
to certain limits and conditions, on the first anniversary of the Closing
Date and, if the Company elects to extend the maturity of the Series A
Preferred Shares, on each subsequent anniversary. The Series A Preferred
Shares carry a 7% dividend yield, payable in cash or Class A Common Stock,
at the Company's option.
(3) Each share of Series A Preferred Stock of ▇▇▇▇▇▇▇▇.▇▇▇ Incorporated
("▇▇▇▇▇▇▇▇.▇▇▇") is convertible into such number of fully paid and
nonassessable shares of Class A Common Stock of ▇▇▇▇▇▇▇▇.▇▇▇ as is
determined by dividing $3.19 by the conversion price in effect at the time
of conversion (currently $3.19 per share), which may be adjusted from time
to time. Upon the closing of a public offering of ▇▇▇▇▇▇▇▇.▇▇▇'s Class A
Common Stock at a price to the public of at least $10.00 share and
resulting in at least $30,000,000 of net proceeds to ▇▇▇▇▇▇▇▇.▇▇▇, all
outstanding shares of Series A Preferred Stock will automatically convert
into shares of Class A Common Stock.
(4) The Company will issue (i) 2,777,778 shares of Class A Common Stock
and (ii) warrants to purchase 1,900,000 shares of Class A Common Stock at
an exercise price of $40 per share, pursuant to the terms of the Settlement
Agreement.
(5) ▇▇▇▇▇▇▇▇.▇▇▇ Incorporated has granted options, currently outstanding,
to purchase 5,203,918 shares of its Class A Common Stock under its 2000
Stock Option Plan.
(D) (1) The terms of the Company's Series A Preferred Stock contain mandatory
redemption provisions.
(2) One of the Company's subsidiaries, ▇▇▇▇▇▇▇▇.▇▇▇ Incorporated, has
issued 16,536,049 shares of its Series A Preferred Stock. These shares are
mandatorily redeemable for $3.19 per share plus any dividends accrued or
declared but unpaid thereon at mandatory redemption dates of October 17,
2005, 2006 and 2007, with the maximum redemption portions at each date
being 33%, 50% and 100%, respectively.
(E) The Company has issued a warrant to purchase 50,000 shares of Class A
Common Stock to Foothill Capital Corporation ("Foothill"), which warrant
contains anti-dilution provisions.
(F) None.
Schedule 3(e)
-------------
No Conflicts
------------
The Company's compliance with its obligations under the Certificate of
Designations to redeem the Preferred Shares upon a Triggering Event (as defined
in the Certificate of Designations) or a Change of Control (as defined in
Section 4(b) of the Series B Certificate of Designations) currently would result
in a default under the Company's Amended and Restated Loan and Security
Agreement, dated as of June 14, 2001, with Foothill Capital Corporation unless
the Company were to obtain the consent of Foothill.
Schedule 3(f)
-------------
SEC Documents
-------------
Form Type Form Description Date Filed
--------- ---------------- ----------
10-Q Quarterly Report 5/15/01
PRE 14A Preliminary Proxy Statement 5/4/01
8-K Current Report 5/2/01
8-K Current Report 4/4/01
10-K Annual Report 4/2/2001
8-K Current Report 3/9/2001
10-Q/A Amended Quarterly Report 2/20/2001
8-K Current Report 2/15/2001
8-K Current Report 2/7/2001
10-Q/A Amended Quarterly Report 11/22/2000
10-Q Quarterly Report 11/14/2000
8-K Current Report 11/6/2000
10-Q Quarterly Report 8/15/2000
8-K Current Report 8/3/2000
8-K Current Report 6/19/2000
DEFR14A Revised Proxy Statement 5/30/2000
10-Q/A Amended Quarterly Report 5/30/2000
10-Q/A Amended Quarterly Report 5/30/2000
PRER14A Preliminary Proxy Statement 5/16/2000
10-Q Quarterly Report 5/15/2000
DEF14A Definitive Proxy Statement 5/1/2000
10-K Annual Report 4/13/2000
NT 10-K Notification of Late Filing 3/31/2000
8-K Current Report 3/23/2000
PRE 14A Preliminary Proxy Statement 3/14/2000
8-K Current Report 1/7/2000
Schedule 3(g)
-------------
Absence of Certain Changes
--------------------------
1. The Company has had capital expenditures of approximately $4.2 million in
the aggregate since December 31, 2000.
Schedule 3(o)
-------------
Other Information
-----------------
1. The Company has taken steps to reduce its workforce by approximately 600
persons and will incur related severance and restructuring charges. On May
4, 2001, the ▇▇▇▇▇▇▇▇.▇▇▇ Board approved a further restructuring which will
reduce the operations of the ▇▇▇▇▇▇▇▇.▇▇▇ down to approximately 35
employees by early July. These remaining employees will be utilized for,
among other things, the carrying out of ▇▇▇▇▇▇▇▇.▇▇▇'s existing contracts.
▇▇▇▇▇▇▇▇.▇▇▇ is currently analyzing the impact that the various actions
taken as part of the restructuring will have on its results of operations
for Q2 and the remainder of 2001. The Company anticipates that severance
and certain other termination benefit payments associated with the April
and May restructuring plans will be accrued and classified as
restructuring. Additionally, certain other costs associated with the
restructuring are expected to be included in the restructuring charge,
including costs associated with exiting and consolidating certain office
space, a provision for idle computers, software, printers, copiers, and/or
telecommunications equipment (cell phones, office phones, wireless
equipment, etc.), as well as professional fees and certain other costs.
2. The Company's earnings for the first quarter of 2001 were below consensus
estimates, as disclosed in the Company's Quarterly Report on Form 10-Q for
the Three Months ended March 31, 2001.