Exhibit 10.2
AMENDMENT NO. 1 TO STOCK REGISTRATION AND OPTION AGREEMENT
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THIS AMENDMENT NO. 1 TO STOCK REGISTRATION AND OPTION AGREEMENT
("Amendment No. 1") is made and entered into as of the 1st day of December,
1997, by and among XLCONNECT SOLUTIONS, INC., a Pennsylvania corporation
(the "Company"), INTELLIGENT ELECTRONICS, INC., a Pennsylvania corporation
("IE") and XL SOURCE, INC. (formerly known as The Future Now of Arkansas,
Inc.), an Arkansas corporation ("XLS" and together with IE, the "Holder").
BACKGROUND
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The Company and the Holder are each parties to a Stock Registration
and Option Agreement, dated as of May 31, 1996 (the "Original Agreement").
Capitalized terms used in this Amendment No. 1 and not otherwise defined
in this Amendment No. 1 shall have the meanings ascribed to them in the
Original Agreement. The Original Agreement, inter alia, granted to the
Holder certain rights relating to the purchase of shares of the Company's
Common Stock.
Pursuant to the terms of Section 6.1(a) of a Common Stock Purchase
Warrant (the "Warrant"), dated February 28, 1997, issued by the Company to
Microsoft Corporation, a Washington corporation ("Microsoft"), the Company
agreed to grant to Microsoft certain "piggyback" registration rights
relating to the Warrant Shares (as such term is defined in the Warrant).
These registration rights may, under certain circumstances, be inconsistent
with the "demand" registration rights granted to the Holder pursuant to the
Original Agreement. The Company and the Holder therefore each desire to
amend the Original Agreement in order to modify the Holder's demand
registration rights in order to reconcile such rights with Microsoft's
piggyback rights, all as more particularly described below.
Pursuant to the terms of Section 8(b)(ii) of the Original Agreement
the Holder is deemed automatically to exercise the option upon the exercise
of any option or other award granted under the Company Stock Plan. The
parties now desire to amend the Original Agreement to provide for a similar
deemed automatic exercise upon the exercise of that certain Common Stock
Purchase Warrant dated February 28, 1997 and issued by the Company to
Microsoft, and to provide for the making by the Holder, upon any deemed
automatic exercise, of certain representations and warranties to the
Company.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations contained herein, and intending to be legally bound, the
parties, subject to the terms and conditions set forth herein, agree as
follows:
ARTICLE I
AMENDMENTS TO ORIGINAL AGREEMENT
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1.1. Amendment to Section 1(a) of the Original Agreement.
Notwithstanding the provisions of Section 1(a) of the Original Agreement,
Microsoft shall be entitled to include Warrant Shares in a Demand
Registration (upon Microsoft's request thereof in accordance with the terms
set forth in Section 6.1(a) of the Warrant) without the written consent of
67% of the shares of Restricted Stock to be included in such registration.
1.2. Amendment to Section 1(b) of the Original Agreement. In the
event that Microsoft shall elect to include Warrant Shares in a Demand
Registration that is in the form of an underwritten offering, and the
managing underwriter or underwriters of such offering shall advise that the
aggregate amount of Restricted Stock requested to be included in such
offering (which for purposes of the second sentence of Section 1(b) of the
Original Agreement shall include the number of Warrant Shares requested by
Microsoft to be included in the offering) will materially and adversely
affect the success of such offering, then notwithstanding the provisions
set forth in the second sentence of Section 1(b) of the Original Agreement,
the number of shares of Restricted Stock to be included in the offering
shall be allocated first pro rata among the Holders, on the one hand, and
the holders of the Warrant (or a portion thereof), on the other, in
accordance with each such parties' ownership of the Company's Common Stock
(assuming full exercise of the Warrant in the case of any holder thereof),
and then shall be allocated pro rata among the Holders on the basis of the
number of shares of Restricted Stock to be included in such registration.
1.3. Amendment to Section 8(b)(ii) of the Original Agreement.
Section 8(b)(ii) of the Original Agreement is hereby amended to read, in
its entirety, as follows:
(ii) notwithstanding anything to the contrary herein contained,
in the event that any shares of Common Stock are issued prior to the
Distribution upon the exercise of (A) any option or other award granted
under the Company's 1996 Long-Term Incentive Plan (a "Company Stock
Option"), or (B) the Common Stock Purchase Warrant dated February 28, 1997
and issued to Microsoft Corporation (the "Microsoft Warrant"), the Option
shall automatically be deemed to have been exercised in respect of a number
of shares of Common Stock equal to 4 times the number of shares of Common
Stock issued upon the exercise of the Company Stock Option or the Microsoft
Warrant, as applicable (unless the Holder shall have theretofore notified
the Company in writing that the Holder shall have terminated the foregoing
automatic exercise feature of the option), and the closing of the purchase
and sale of the shares of Common Stock subject to such automatic exercise
of the Option (the "Automatic Exercise Shares") shall occur (or shall be
deemed to have occurred) concurrently with the issuance of shares of Common
Stock pursuant to the Company Stock Option or the Microsoft Warrant, as
applicable. An exercise pursuant to this subsection shall be revocable by
the Holder within five business days after exercise. In the event that it
shall have been impractical to effect the deliveries contemplated by the
second preceding sentence at the time that the closing of the purchase and
sale of the Automatic Exercise Shares shall have been deemed to have
occurred, such deliveries shall be made as promptly as practicable
thereafter; provided, however, that such Automatic Exercise Shares shall
nonetheless be deemed to have been issued to the Holder concurrently with
the issuance of shares of Common Stock pursuant to the Company Stock Option
or the Microsoft Warrant, as applicable, and legal title to funds of the
Holder (which shall be held in trust by the Holder for the benefit of the
Company pending the delivery thereof to the Company) in an amount equal to
the aggregate purchase price for the Automatic Exercise Shares shall be
deemed to have concurrently passed to the Company in consideration of such
issuance of the Automatic Exercise Shares.
1.4. Amendment to Section 8(c) of the Original Agreement. A new
sentence is added to the end of Section 8(c) of the Original Agreement,
which sentence shall read, in its entirety, as follows:
Upon any exercise of the Option, the Holder shall be deemed to have
represented and warranted to the Company that (i) it is purchasing the
shares of Common Stock for its own account and for investment purposes, not
with the intention of distributing them, (ii) it has such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits of an investment in the Common Stock, (iii) it
understands that the shares of Common Stock to be purchased upon exercise
of the Option are "restricted securities" within the meaning of the
Securities Act, that they cannot be sold or transferred without
registration under the Securities Act and applicable state securities laws,
or an exemption therefrom and, accordingly, it may have to hold the shares
of Common Stock indefinitely, (iv) it can afford the loss of its entire
investment in the shares of Common Stock, and (v) it has had an opportunity
to review such information and make inquiries of such persons as it
determined was necessary or appropriate in order to make an informed
decision concerning the purchase of the shares upon exercise of the Option.
ARTICLE II
General Provisions
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2.1. Interpretation. When a reference is made in this Amendment No.
1 to a Section, such reference shall be to a Section of this Amendment No.
1 unless otherwise indicated. The headings contained in this Amendment No.
1 are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Amendment No. 1.
2.2. Counterparts. This Amendment No. 1 may be executed in one or
more counterparts, each of which shall be an original, but all of which
together shall constitute but one and the same instrument.
2.3. Entire Agreement; No Third-Party Beneficiaries. This Amendment
No. 1 and the Original Agreement collectively constitute the entire
agreement and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter of
this Amendment No. 1 and are not intended to confer upon any person, other
than Microsoft and the parties hereto, any rights or remedies hereunder.
2.4. Governing Law. This Amendment No. 1 shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Pennsylvania,
without giving effect to the principles of conflict of laws of such
Commonwealth.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
No. 1 to be executed as of the date first written above.
XLCONNECT SOLUTIONS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
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Title: Vice President
XLSOURCE, INC. (formerly known as
The Future Now of Arkansas, Inc.)
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
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Title: VP
INTELLIGENT ELECTRONICS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
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Title: CFO