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EXHIBIT 10.50
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FUTURELINK CORP.
MICROSOFT CORPORATION
SERIES A CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
JUNE 29, 2000
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FUTURELINK CORP.
SERIES A CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
This Agreement is made as of June 29, 2000, by and between FutureLink,
Inc., a Delaware corporation (the "Company"), and Microsoft Corporation, a
Washington corporation (the "Purchaser").
RECITALS
A. On June 28, 2000, the Company and the Purchaser entered into a
Commercial Agreement (the "Commercial Agreement"), a copy of which is attached
hereto as Exhibit A;
B. The Company desires to sell to the Purchaser, and the Purchaser
desires to purchase from the Company, shares of the Company's Series A 8%
Convertible Redeemable Preferred Stock convertible into the Company's Common
Stock (the "Common Stock"), on the terms and conditions set forth in the
Certificate of Designation of Series A Convertible Preferred Stock in the form
attached as Exhibit C (the "Designation") and to grant to Purchaser a Preferred
Stock Purchase Warrant (the "Warrant") in the form attached as Exhibit B;
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
promises hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
AGREEMENTS
SECTION 1
AUTHORIZATION AND SALE OF THE SHARES
1.1 AUTHORIZATION OF THE SHARES; WARRANT.
(a) The Company has authorized, or before the Closing (as
defined in Section 2.1 below) will have authorized, a new series of preferred
stock, designated Series A 8% Convertible Preferred Stock (the "Series A
Preferred Stock"), such Series having the rights, preferences and privileges
provided for in the Designation. Without limiting the generality of the
foregoing, the Company and the Purchaser hereby agree that the dividend payable
by the Company with respect to the Series A Preferred is payable in accordance
with Section 3 of the Designation attached hereto as Exhibit C.
(b) In addition, prior to the Closing, the Company will have
authorized the issuance and sale to the Purchaser of an aggregate of One Million
Four Hundred Twenty-Eight Thousand Five Hundred Seventy One (1,428,571) shares
(the "Shares") of the Series A Preferred Stock and the Warrant, which shall
entitle the holder thereof to purchase One Million One Hundred Forty-Two
Thousand Eight Hundred Fifty-Seven (1,142,857) shares of Preferred Stock at an
exercise price of Seven Dollars ($7.00) per share, for an aggregate purchase
price of Ten Million Dollars ($10,000,000) (the "Purchase Price").
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1.2 SALE OF SHARES AND WARRANT. Subject to the terms and conditions
hereof, at the Closing specified in Section 2.1 below, the Company will issue
and sell the Shares and the Warrant to the Purchaser, and the Purchaser will
purchase such Shares and the Warrant from the Company. The Common Stock of the
Company issued or issuable upon conversion of the Shares, including all shares
of Common Stock issuable in the event the Company pays dividends on the Shares
in additional shares of Series A Preferred Stock or Common Stock, or the
exercise or conversion of the Warrant is referred to as the "Conversion Stock."
The Shares, the Conversion Stock and any other securities issued or issuable in
respect of the Shares are sometimes collectively referred to as the
"Securities."
SECTION 2
CLOSING DATE; DELIVERY
2.1 CLOSING DATE. The purchase and sale of the Shares and the Warrant
shall occur at a closing (the "Closing") to be held at such time as shall be
designated by the Company by written notice and agreed to by the Purchaser (the
"Closing Date"). The Closing will take place at the offices of the Purchaser in
Redmond, Washington or at such other place as agreed to by the Purchaser and the
Company.
2.2 DELIVERY. At the Closing, the Company shall deliver to the
Purchaser a certificate, registered in Purchaser's name and representing the
Shares, and the Warrant against delivery to the Company of a check or wire
transfer payable to the order of the Company in the amount of Ten Million
Dollars ($10,000,000). The Shares shall be delivered free of any claims or liens
or encumbrances.
SECTION 3
COMPANY REPRESENTATIONS AND WARRANTIES
Except as disclosed in (a) the Schedule of Exceptions to the
representations and warranties of the Company attached hereto as Exhibit D, with
respect to the sections referenced therein, (b) with respect to Sections
3.6-3.14 only, the Financial Statements (as defined herein), (c) with respect to
Sections 3.6-3.14 only any filings made by the Company with the Securities and
Exchange Commission (the "SEC Filings"), or (d) with respect to Sections
3.6-3.14 only, the SEC Reports (as defined herein), the Company represents and
warrants to the Purchaser as set forth in this Section 3.
3.1 ORGANIZATION AND STANDING. Each of the Company and its subsidiaries
(i) is a corporation duly organized and validly existing under the laws of its
respective jurisdiction of incorporation and is in good standing as a domestic
corporation under the laws of said state, (ii) has all requisite corporate power
and authority to own and lease its properties and to conduct its business as
presently conducted, and, (iii) is duly qualified or licensed to do business as
a foreign corporation in good standing in each jurisdiction in which the nature
of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified does not and is not
reasonably expected to (x) individually or in the aggregate, have a material
adverse effect on the properties, business, results of operations, condition
(financial or
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otherwise), affairs or prospects of the Company and its subsidiaries, taken as a
whole, (y) interfere with or impair the Company's ability to perform its
obligations under this Agreement, the Commercial Agreement or the Warrant, or
(z) interfere with or prevent the consummation of any of the transactions
contemplated by said instruments (any of the events set forth in clauses (x),
(y) or (z), a "Material Adverse Effect").
3.2 CORPORATE POWER. The Company has all requisite legal and corporate
power to execute and deliver this Agreement and the Commercial Agreement, to
sell and issue the Shares and the Warrant hereunder, to issue the Conversion
Stock issuable upon conversion of the Shares and exercise or conversion of the
Warrant, and to carry out and perform its obligations under the terms of this
Agreement.
3.3 CAPITALIZATION. The authorized capital stock of the Company upon
the filing of the Designation with the Secretary of State of the State of
Delaware will consist of (a) 300,000,000 shares of Common Stock, of which
61,560,666 shares were issued and outstanding as of June 26, 2000, and (b)
20,000,000 shares of Preferred Stock of which 2,571,428 shares have been
designated Series A Preferred, 1,428,571 of which will be sold to the Purchaser
at the Closing. All of the outstanding shares of Common Stock have been, and all
of the shares of Series A Preferred Stock, when issued and sold at the Closing
will be, validly issued, fully paid and nonassessable, free of any liens or
encumbrances. The Series A Preferred Stock shall have the rights, preferences,
privileges and restrictions set forth in the Designation. No subscription,
warrant, option or other right to purchase or acquire any shares of any class of
capital stock of the Company or securities convertible into or exchangeable for
such capital stock are outstanding other than as set forth in the Schedule of
Exceptions.
3.4 AUTHORIZATION. The execution, delivery and performance of this
Agreement, the Commercial Agreement and the Warrant by the Company have been
duly authorized by all requisite corporate action. This Agreement, the
Commercial Agreement, the Investor Rights Agreement (defined below) and the
Warrant constitute valid and binding obligations of the Company enforceable in
accordance with their respective terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors, and rules of law
governing specific performance, injunctive relief or other equitable remedies.
The issuance and sale of the Shares will not give rise to any preemptive rights
or rights of first refusal on behalf of any person in existence on the date
hereof.
3.5 CONVERSION STOCK. The Conversion Stock (i) has been duly and
validly reserved for issuance, (ii) is not subject to preemptive or any other
similar rights of stockholders of the Company, and (iii) when issued in
accordance with the terms of the Designation or the Warrant, will be validly
issued and outstanding, fully paid and nonassessable, and free of any liens or
encumbrances, other than liens or encumbrances created by or imposed upon the
holders through no action of the Company.
3.6 ACCURACY OF REPORTS. All reports (the "SEC Reports") required to be
filed by the Company during the period from January 1, 1999 to the date of this
Agreement under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), have been duly filed, complied in all material respects with the Exchange
Act and the requirements of their respective
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forms (as of their respective filing dates), were complete and correct in all
material respects as of the dates at which the information was furnished, and
none contained (as of their respective dates of filing) any untrue statement of
a material fact nor omitted to state a material fact necessary in order to make
the statements made therein, in light of the circumstances in which made, not
misleading. Except to the extent that information contained in any SEC Report
has been revised or superseded by a later filed SEC Report, none of the SEC
Reports contains any untrue statement of a material fact or omits to state any
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.
3.7 FINANCIAL STATEMENTS AND CHANGES. Since January 1, 1998, the
financial statements of the Company included in the SEC Reports (the "Financial
Statements") comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with U.S. generally accepted
accounting principles ("GAAP") (except, in the case of unaudited statements as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present the consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operation and cash flows (or changes in financial position prior to the approval
of Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 95) for the periods then ending in accordance with GAAP (subject,
in the case of the unaudited statements, to normal year end audit adjustments).
Except as set forth in the filed SEC Reports, neither the Company nor any of its
subsidiaries has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) required by GAAP to be set forth on a
consolidated balance sheet of the Company and its consolidated subsidiaries or
in the notes thereto and which could reasonably be expected to have a Material
Adverse Effect.
Except as otherwise disclosed herein, in the Financial Statements, the
SEC Filings, the SEC Reports or the Schedule of Exceptions, since January 1,
1999, there has not been:
(a) Any material change in the assets, liabilities, financial
condition, business or results of operations of the Company from that reflected
in the Financial Statements except changes in the ordinary course of business
which do not, either in any individual case or in the aggregate, constitute a
Material Adverse Effect;
(b) Any change in the contingent obligations of the Company,
whether by way of guaranty, endorsement, indemnity, warranty or otherwise,
except such changes as do not, either individually or in the aggregate,
constitute a Material Adverse Effect;
(c) Any damage, destruction or loss, whether or not covered by
insurance, which could reasonably be expected to have a Material Adverse Effect;
(d) Any declaration or payment of any dividend or other
distribution of the assets or securities of the Company in respect of
outstanding Common Stock; or
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(e) Any other event or condition of any character that has
materially and adversely affected, or that could reasonably be expected to have
a Material Adverse Effect.
3.8 NO CONFLICT. The provisions of the Designation do not constitute
any violation, or conflict with or constitute a default under, any indenture,
mortgage, deed of trust or other agreement, instrument, court order, judgment,
decree, statute, rule or regulation (each a "Term" and collectively the "Terms")
to which the Company is a party or by which it is bound, subject to such
exceptions as would not have a Material Adverse Effect. The execution, delivery
and performance of and compliance with this Agreement and the Commercial
Agreement, the issuance of the Securities pursuant to the terms hereof and the
performance of the Company's obligations hereunder and thereunder (i) will not
result in any violation or be in conflict with or constitute a default under any
Term, (ii) will not result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of the Company
pursuant to any such Term, and (iii) will not conflict with or violate any
applicable law, rule, regulation, judgment, order or decree of any government,
governmental instrumentality or court having jurisdiction over the Company or
any of its assets or properties, subject to such exceptions as would not have a
Material Adverse Effect.
3.9 GOVERNMENTAL CONSENTS. No consent, approval or authorization of, or
designation, declaration or filing with, any Federal or state governmental
authority in the United States is required on the part of the Company in
connection with the valid execution and delivery of this Agreement and the
Commercial Agreement, the offer, sale or the issuance of the Securities or the
consummation of any other transaction contemplated hereby, except (i) the filing
of the Designation in the office of the State of Delaware, which will be
completed prior to the Closing, (ii) if required, qualifications or filings in
connection with exemptions under any applicable state "blue sky" laws and
Federal securities laws, which qualifications or exemptions, if required, will
have been obtained and will be effective on the Closing Date, or will be
obtained or filed after the Closing Date within the prescribed time in order to
secure such exemptions or qualifications, and (iii) where the failure to obtain
any required consent, approval, authorization or designation or to make any
required declaration or filing does not and is not reasonably expected to have a
Material Adverse Effect.
3.10 PATENTS, TRADEMARKS, ETC. The Company, to the best of its
knowledge, owns or has the right, or prior to the Closing will own or have the
right, to use all patents, trademarks, service marks, trade names, copyrights,
licenses and rights necessary to its business as now conducted, and, to the best
of its knowledge, is not infringing upon any person under or with respect to any
of the foregoing. The Company has not received any written communications
alleging that the Company has violated any patent, trademark, service ▇▇▇▇,
trade name, copyright or trade secret or other proprietary right of any other
person or entity, subject to such exceptions as would not have a Material
Adverse Effect. The Company is not aware that any of its employees is obligated
under any contract (including licenses, covenants or commitments of any nature)
or other agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would materially interfere with the Company's
employment of such employees. Neither the execution nor delivery of this
Agreement or the Commercial Agreement, nor the carrying on of the Company's
business by the employees of the Company will conflict with or result in a
breach of the terms, conditions or provisions of, or constitute a default under,
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any contract, covenant or instrument under which any of such employees is now
obligated. The Company does not believe it is necessary to utilize any
inventions of any of its employees made prior to their employment by the
Company, other than those inventions for which the intellectual property
relating thereto previously has been assigned to the Company.
3.11 LITIGATION. There is no suit, action or proceeding pending or
affecting the Company or any of its subsidiaries that, individually or in the
aggregate, could have a Material Adverse Effect, nor is there any judgment,
decree, injunction, rule or order of any governmental entity or arbitrator
outstanding against the Company or any of its subsidiaries having, or which,
could reasonably be expected to have, any such effect.
3.12 COMPLIANCE WITH LAWS. The Company is not in violation of any
applicable statute, rule, regulation, order or restriction of any domestic or
foreign government or any instrumentality or agency thereof in respect of the
conduct of its business or the ownership of its properties which could
reasonably be expected to have a Material Adverse Effect.
3.13 OFFERING OF SECURITIES. Neither the Company nor any person acting
on its behalf has taken or will take any action (including, without limitation,
any offering of any securities of the Company under circumstances which would
require, under the Securities Act of 1933, as amended (the "Securities Act"),
the integration of such offering with the offering and sale of the Securities)
which might subject the offering, issuance or sale of the Securities to the
registration requirements of Section 5 of the Securities Act.
3.14 NO MATERIAL ADVERSE EFFECT. Since the date of the most recent
audited balance sheet of the Company contained in the SEC Reports, there has
been no event or condition resulting in a Material Adverse Effect on the
Company.
SECTION 4
PURCHASER REPRESENTATIONS AND WARRANTIES AND
RESTRICTIONS ON TRANSFER IMPOSED BY THE SECURITIES ACT
Except as disclosed in the Schedule of Exceptions to Representations
and Warranties of the Purchaser attached hereto as Exhibit D-1, the Purchaser
represents and warrants to the Company with respect to the Shares, as follows:
4.1 INVESTMENT INTENT.
(a) Purchaser has substantial experience in business and
financial matters and is capable of evaluating the merits and risks of its
investment in the Company and is able to bear the economic risks of its
investment.
(b) Purchaser is an "accredited investor" as defined in Rule
501(a)(3) of Regulation D of the Securities Act.
(c) Purchaser is acquiring the Securities for investment for
its own account and not with a view to, or for resale in connection with, any
distribution thereof. Purchaser
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understands that the Securities have not been registered under the Securities
Act by reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature of
the investment intent as expressed herein.
(d) Purchaser acknowledges that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. Purchaser is aware of the
provisions of Rule 144 promulgated under the Securities Act ("Rule 144") which
permit limited resale of securities purchased in a private placement subject to
the satisfaction of certain conditions, including the existence of a public
market for the shares, the availability of certain current public information
about the Company, the resale occurring not less than one year after a party has
purchased and paid for the security to be sold, the sale being through a
"broker's transaction" or in a transaction directly with a "market maker" (as
provided by Rule 144(f)) and the number of shares being sold during any
three-month period not exceeding specified limitations.
4.2 CORPORATE POWER. Purchaser has all requisite legal and corporate
power to execute and deliver this Agreement and the Commercial Agreement and to
carry out and perform its obligations under the terms of this Agreement and the
Commercial Agreement.
4.3 AUTHORIZATION. The execution, delivery and performance of this
Agreement and the Commercial Agreement by the Purchaser has been duly authorized
by all requisite corporate action, and this Agreement and the Commercial
Agreement constitutes valid and binding obligations of Purchaser enforceable in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors, and rules of law governing
specific performance, injunctive relief or other equitable remedies.
4.4 GOVERNMENTAL CONSENTS. No consent, approval or authorization of, or
designation, declaration or filing with, any federal or state governmental
authority in the United States is required on the part of Purchaser in
connection with the valid execution and delivery of this Agreement and the
Commercial Agreement or the consummation of any other transaction contemplated
hereby or thereby, except for such filings as may be required under the Exchange
Act and the related rules and regulations thereunder subsequent to the issuance
of the Shares.
SECTION 5
CONDITIONS TO CLOSING
5.1 CONDITIONS TO PURCHASER'S OBLIGATIONS. The obligation of the
Purchaser to purchase the Shares at the Closing is subject to the fulfillment to
the reasonable satisfaction of the Purchaser on or prior to the Closing Date of
the following conditions any of which may be waived in whole or in part by the
Purchaser:
(a) The representations and warranties made by the Company in
Section 3 hereof shall be true and correct in all material respects when made,
and shall be true and correct in all material respects on the Closing Date;
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(b) All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to the Closing Date shall
have been performed or complied with in all material respects;
(c) The Purchaser shall have received from Paul, Hastings,
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel to the Company, an opinion addressed to the
Purchaser, dated the Closing Date, in substantially the form attached hereto as
Exhibit E;
(d) The Company shall have delivered to the Purchaser a
certificate, executed on the Company's behalf by the Chief Executive Officer or
Chief Financial Officer of the Company, dated the Closing Date and certifying to
the fulfillment of the conditions specified in paragraphs (a) and (b) of this
Section 5.1 in the form attached hereto as Exhibit F;
(e) The Company shall have entered into the Commercial
Agreement in substantially the form attached hereto as Exhibit A;
(f) The Company shall have executed and delivered to Purchaser
the Warrant substantially in the form attached hereto as Exhibit B;
(g) The Company shall have entered into the Investor Rights
Agreement with Purchaser dated the date hereof in substantially the form
attached hereto as Exhibit G (the "Investor Rights Agreement");
(h) The Company shall have obtained all necessary state "blue
sky" law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Securities;
(i) The Designation shall have been filed with and accepted by
the Delaware Secretary of State;
(j) All material matters of a legal nature which pertain to
this Agreement, and the transactions contemplated hereby, shall have been
approved by counsel to the Purchaser; and
(k) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, promulgated or issued or deemed
applicable to the proposed transactions by any legislature, administrative
agency, court or other governmental authority which would make consummation of
the proposed transactions pursuant to this Agreement illegal or render the
Company or the Purchaser unable to consummate the proposed transactions nor
shall there have been filed any proceeding in a court of competent jurisdiction
seeking to enjoin or restrain the transactions contemplated by this Agreement.
(l) The Company shall have delivered to Purchaser waivers or
consents from all governmental authorities or other parties necessary to
consummation of the transactions contemplated hereby, including waivers of those
rights of third parties described in Section 3.4 of the Schedule of Exceptions
of Company, in a form reasonably acceptable to Purchaser.
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(m) The Shares and Conversion Stock shall be free of any
claims or liens or encumbrances.
5.2 CONDITIONS TO COMPANY'S OBLIGATIONS. The Company's obligation to
sell and issue the Shares to the Purchaser at the Closing is subject to the
fulfillment to the Company's reasonable satisfaction on or prior to the Closing
Date of the following conditions, any of which may be waived in whole or in part
by the Company:
(a) The representations and warranties made by the Purchaser
in Section 4 hereof shall be true and correct in all material respects when
made, and shall be true and correct in all material respects on the Closing
Date;
(b) All covenants, agreements and conditions contained in this
Agreement to be performed by the Purchaser on or prior to the Closing Date shall
have been performed or complied with in all material respects;
(c) The Purchaser shall have delivered to the Company a
certificate executed on the Purchaser's behalf by an executive officer of the
Purchaser, dated as of the Closing Date and certifying to the fulfillment of the
conditions specified in paragraphs (a) and (b) of this Section 5.2 in the form
attached hereto as Exhibit H;
(d) The Purchaser shall have entered into the Commercial
Agreement in substantially the form attached hereto as Exhibit A;
(e) The Designation shall have been filed with the Delaware
Secretary of State;
(f) All material matters of a legal nature which pertain to
this Agreement, and the transactions contemplated hereby, shall have been
approved by counsel to the Company which approval will not be unreasonably
withheld or delayed; and
(g) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, promulgated or issued or deemed
applicable to the proposed transactions by any legislature, administrative
agency, court or other governmental authority which would make consummation of
the proposed transactions pursuant to this Agreement illegal or render the
Company or the Purchaser unable to consummate the proposed transactions nor
shall there have been filed any proceeding in a court of competent jurisdiction
seeking to enjoin or restrain the transactions contemplated by this Agreement.
SECTION 6
COVENANTS
6.1 REASONABLE BEST EFFORTS. Subject to the terms and conditions
provided in this Agreement, each of the parties hereto shall use commercially
reasonable best efforts to promptly take, or cause to be taken, all actions, and
to promptly do, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make
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effective the transactions contemplated hereby, to obtain all necessary waivers,
consents and approvals and to effect all necessary registrations and filings and
to remove any injunctions or other impediments or delays, legal or otherwise, in
order to consummate and make effective the transactions contemplated by this
Agreement for the purpose of securing to the parties hereto the benefits
contemplated by this Agreement.
6.2 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. Each party hereto, at
the request of the other party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby.
SECTION 7
MISCELLANEOUS
7.1 PUBLIC ANNOUNCEMENTS. The Company shall obtain the consent of the
Purchaser and the Purchaser shall obtain the consent of the Company prior to any
public announcement relating to this Agreement, provided that the Company shall
be permitted to make any public announcement which is required pursuant to the
Securities Act or the Exchange Act or the rules or regulations thereunder;
provided, however, that the Company shall, upon Purchaser's request, seek
confidential treatment of such materials or information that the Purchaser may
reasonably designate.
7.2 FINDER'S FEE.
(a) The Company (i) represents and warrants that the Company
has retained no finder or broker in connection with the transactions
contemplated by this Agreement, and (ii) hereby agrees to indemnify and to hold
the Purchaser harmless of and from any liability for commission or compensation
in the nature of a finder's fee to any broker or other person or firm (and the
costs and expenses of defending against such liability or asserted liability)
for which the Company, or any of its employees or representatives, is
responsible.
(b) The Purchaser (i) represents and warrants that the
Purchaser has retained no finder or broker in connection with the transactions
contemplated by this Agreement, and (ii) hereby agrees to indemnify and to hold
the Company harmless of and from any liability for any commission or
compensation in the nature of a finder's fee to any broker or other person or
firm (and the costs and expenses of defending against such liability or asserted
liability) for which the Purchaser, or any of its employees or representatives,
is responsible.
7.3 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to the Company or the Purchaser, upon any breach or
default under this Agreement, shall impair any such right, power or remedy, nor
shall it be construed to be a waiver of any such breach or default, or any
acquiescence therein, or of any similar breach or default thereafter occurring;
nor shall any waiver of any single breach or default be deemed a waiver of any
other breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character by the Company or the Purchaser of
any breach or default under this Agreement, or any waiver by the Company or the
Purchaser of any provisions or
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conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in writing, and all remedies, either under
this Agreement, or by law or otherwise afforded to the Company or the Purchaser,
shall be cumulative and not alternative.
7.4 WAIVERS AND AMENDMENTS. The obligations and rights of the Company
and the Purchaser under this Agreement may be waived or this Agreement may be
amended upon the written consent of the Company and the Purchaser. This
Agreement and the provisions hereof may not be waived or amended except pursuant
to a written instrument signed by the required party or parties as aforesaid.
7.5 SEVERABILITY. In the event that any provision of this Agreement
shall be deemed to be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby.
7.6 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by Purchaser and the Company
and shall survive the Closing of the transactions contemplated hereby for a
period of one year.
7.7 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
7.8 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be delivered (i) personally,
(ii) by facsimile transmission with written confirmation (other than the
automatic confirmation that is received from the recipient's facsimile machine)
of receipt by the recipient of such notice, or (iii) by a nationally recognized
overnight courier, in each case with all delivery or postal charges pre-paid.
Notices shall be addressed (i) if to the Purchaser, at the Purchaser's address
as set forth on the signature page of this Agreement, Attention: Chief Financial
Officer and Deputy General Counsel, Finance and Operations, (Fax (425)
▇▇▇-▇▇▇▇), with a copy to ▇▇▇▇▇▇▇ ▇▇▇▇ at ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP, 5000
Columbia Center, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ (Fax (▇▇▇) ▇▇▇-▇▇▇▇),
(ii) if to any permitted transferee of Series A Preferred hereunder, then to
Purchaser's address or such other address as the transferee shall furnish to the
Company in writing pursuant to the provisions hereof, or (iii) if to the
Company, at the Company's address set forth on the signature page of this
Agreement, Attention: Chief Financial Officer and General Counsel (Fax (215)
▇▇▇-▇▇▇▇), with copy to the attention of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Paul, Hasting, ▇▇▇▇▇▇▇▇
& ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ (Fax (415)
▇▇▇-▇▇▇▇) or at such other address as the Company shall have furnished to the
Purchaser (or transferees, as aforesaid) in writing.
Each such notice or communication, addressed and posted as aforesaid,
shall for all purposes of this Agreement be treated as effective or having been
given (i) when delivered, if delivered personally, (ii) the business day on
which the notice or communication is sent, if delivered by facsimile
transmission as provided above, or (iii) upon the earlier of its receipt or two
(2) business days after the business day of deposit with a nationally recognized
overnight courier, if delivered by such means.
-11-
13
7.9 ENTIRE AGREEMENT. This Agreement, the Commercial Agreement and the
other documents delivered pursuant hereto constitute the full and entire
understanding and agreement among the parties with regard to the subjects hereof
and thereof, and supersede any and all prior agreements and understandings among
the parties.
7.10 GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Washington as they
apply to contracts entered into and wholly to be performed within such state,
and without reference to its principles of conflicts of law or choice of law.
7.11 EXPENSES. The Company and the Purchaser shall each bear all
expenses that such respective party has incurred or incurs in connection with
this Agreement and the transactions contemplated hereby, and any amendments or
waivers hereto.
7.12 ATTORNEYS' FEES. In the event of any litigation in a court of
competent jurisdiction arising in connection with this Agreement and the
transactions contemplated hereby, the prevailing party in judgment shall be
entitled to recover reasonable legal fees and costs in connection with such
action including any appeals.
7.13 TITLES AND SUBTITLES. The titles of the Sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
7.14 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which together shall
constitute one instrument.
-12-
14
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first written above.
COMPANY
FUTURELINK CORP., a Delaware corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------------
Title: Chairman and CEO
----------------------------------
Address: 6 ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
PURCHASER
MICROSOFT CORPORATION, a Washington
corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇
-------------------------------------
▇▇▇▇ ▇▇▇▇▇
Vice President, Corporate Development
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-13-
15
EXHIBITS
Exhibit A - Commercial Agreement
Exhibit B - Form of Warrant
Exhibit C - Certificate of Designation of Series A Convertible Preferred Stock
Exhibit D - Schedule of Exceptions
Exhibit D-1 - Schedule of Purchaser Exceptions
Exhibit E - Legal Opinion of Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
Exhibit F - Form of FutureLink Compliance Certificate
Exhibit G - Form of Investor Rights Agreement
Exhibit H - Form of Purchaser Compliance Certificate
-14-
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EXHIBIT B
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT THEREOF UNDER SUCH ACT OR PURSUANT
TO RULE 144 OR AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY,
THAT SUCH REGISTRATION IS NOT REQUIRED.
JULY 6, 2000
FUTURELINK CORP.
PREFERRED STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, Microsoft Corporation, a
Washington corporation, is entitled to subscribe for and purchase, subject to
the provisions and upon the terms and conditions hereinafter set forth, ONE
MILLION ONE HUNDRED FORTY-TWO THOUSAND EIGHT HUNDRED FIFTY-SEVEN (1,142,857)
fully paid and nonassessable shares of Preferred Stock of FutureLink Corp., a
Delaware corporation (the "Company"). The Shares (as defined below) shall be
purchasable at a per share purchase price equal to SEVEN DOLLARS ($7.00) (such
price and such other price as shall result, from time to time, from the
adjustments specified in Section 4 hereof is herein referred to as the "Warrant
Price"). As used herein, (i) the term "Date of Grant" shall mean July 6, 2000,
and (ii) the term "Shares" shall mean the Preferred Stock to be issued by the
Company hereunder and any stock into or for which any such Preferred Stock may
hereafter be converted or exchanged.
1. Term. The purchase right represented by this Warrant is exercisable,
in whole or in part, at any time and from time to time for the period beginning
the Date of Grant through July 5, 2005 (the "Expiration Date"). If during such
term there is (i) any consolidation or merger of the Company, or any successor
of the Company, with or into any entity, or any other corporate reorganization
in which the Company, or any successor of the Company, shall not be the
continuing or surviving entity of such consolidation, merger or reorganization,
(ii) any transaction or any series of related transactions in which in excess of
50% of the voting power of Company, or any successor of the Company, is
transferred, or (iii) any sale of all or substantially all of the assets of the
Company or any successor of the Company, then adequate provision shall be made
as a part of such transaction for the assumption of this Warrant and the full
preservation of the economic benefits inherent in this Warrant. In the event of
any such transaction, a replacement warrant shall be promptly issued to the then
holder of this Warrant.
2. Method of Exercise; Payment; Issuance of New Warrant. Subject to
Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part and from time to time, at
the election of the holder hereof, by the surrender of this Warrant (with the
notice of exercise substantially in the form attached hereto as Exhibit A duly
completed and executed) at the principal office of the Company and by the
payment to the Company, by certified or bank check, or by wire transfer to an
account designated by the Company (a "Wire Transfer") of an amount equal to the
then applicable Warrant Price multiplied by the number of Shares then being
purchased. In lieu of exercising this warrant as provided
17
above, the holder thereof may by delivery of notice of exercise substantially in
the form of Exhibit A convert this warrant in whole or in part into a number of
shares determined by dividing (a) the aggregate Fair Market Value of the Shares
delivered for conversion minus the aggregate Warrant Price of such Shares by (b)
the Fair Market Value of one Share. For purposes hereof, Fair Market Value of a
Share shall mean the average closing price of the common stock of the Company on
the Nasdaq Exchange over the last ten (10) trading days prior to exercise. Such
mode of exercise shall be referred to as "Cashless Exercise." The person or
persons in whose name(s) any certificate(s) representing the Shares shall be
issuable upon exercise of this Warrant shall be deemed to have become the
holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the shares represented thereby (and such shares shall be deemed to
have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised. In the event of any exercise of the
rights represented by this Warrant, certificates for the shares of stock so
purchased shall be delivered to the holder hereof as soon as possible and in any
event within thirty (30) days after such exercise and, unless this Warrant has
been fully exercised or expired, a new Warrant representing the portion of the
Shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be issued to the holder hereof as soon as possible and in
any event within such thirty (30) day period.
3. Stock Fully Paid; Reservation of Shares. All Shares that may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance pursuant to the terms and conditions herein, including payment of the
Warrant Price or by means of Cashless Exercise, be fully paid and nonassessable,
and free from all taxes, liens and charges with respect to the issuance thereof,
other than those created or imposed upon the holders through no action of the
Company. During the period within which the rights represented by this Warrant
may be exercised, the Company will at all times have authorized, and reserved
for the purpose of the issuance upon exercise of the purchase rights evidenced
by this Warrant, a sufficient number of shares of its capital stock: to provide
for the exercise of the rights represented by this Warrant.
4. Adjustment of Warrant Price and Number of Shares. The number and
kind of securities purchasable upon the exercise of this Warrant by payment of
the Warrant Price or by Cashless Exercise shall be subject to adjustment from
time to time upon the occurrence of certain events, as follows:
(a) Reclassification. In case of any reclassification or
change of securities of the class issuable upon exercise of this Warrant (other
than a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination), the Company
shall duly execute and deliver to the holder of this Warrant a new Warrant (in
form and substance reasonably satisfactory to the holder of this Warrant), so
that the holder of this Warrant shall have the right to receive, at a total
purchase price not to exceed that payable upon the exercise of the unexercised
portion of this Warrant, and in lieu of the Shares theretofore issuable upon
exercise of this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification or change
by a holder of the number of Shares then purchasable under this Warrant. Such
new Warrant shall, provide for adjustments that shall be as nearly equivalent as
may be practicable to the adjustments provided
-2-
18
for in this Section 4. The provisions of this subsection (a) shall similarly
apply to successive reclassifications or changes.
(b) Subdivision or Combination of Shares. If the Company at
any time while this Warrant remains outstanding and unexpired shall subdivide or
combine its outstanding shares of capital stock into which this Warrant is
exercisable, the Warrant Price shall be proportionately decreased in the case of
a subdivision or increased in the case of a combination, effective at the close
of business on the date the subdivision or combination becomes effective.
(c) Stock Dividends and Other Distributions. If the Company at
any time while this Warrant is outstanding and unexpired shall (i) pay a
dividend with respect to its common stock issuable hereunder payable in the same
class or series of capital stock, or (ii) make any other distribution of common
stock with respect to its common stock (except any distribution specifically
provided for in Sections 4(a) and 4(b)), then the Warrant Price shall be
adjusted, from and after the date of determination of shareholders entitled to
receive such dividend or distribution, to that price determined by multiplying
the Warrant Price in effect immediately prior to such date of determination by a
fraction (i) the numerator of which shall be the total number of shares of the
applicable class or series of capital stock outstanding immediately prior to
such dividend or distribution, and (ii) the denominator of which shall be the
total number of shares of such class or series of capital stock outstanding
immediately after such dividend or distribution.
(d) Company to Prevent Dilution. If at any time or from time
to time conditions arise by reason of action taken by the Company, which are not
adequately covered by this Section 4, and which might materially and adversely
affect the exercise rights of the holder hereof, unless the adjustment necessary
shall be agreed by the Company and the holder hereof, the holder shall have the
right to require that the Board of Directors of the Company appoint a firm of
independent certified public accountants of national standing, reasonably
acceptable to the holder, who at the Company's expense shall give their opinion
upon the adjustment necessary with respect to the Warrant Price and the number
of Shares purchasable upon exercise of this Warrant, if any, so as to preserve,
without dilution, the exercise rights of the holder hereof. In the event that
the holder disputes such adjustment, the holder shall be entitled to select an
additional firm of independent certified public accountants of national standing
and paid for by the holder to calculate such adjustment and the Company and the
holder shall use their good faith best efforts to agree on such adjustment based
on the reports of the two accounting firms. In the event that the Company and
the holder are still unable to reach agreement as to such adjustment, the
Company and the holder agree to submit such determination to binding
arbitration. Upon determination of such adjustment, the Board of Directors shall
forthwith make the adjustments described therein.
5. Notice of Adjustments. Whenever the Warrant Price or the number of
Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the
Company shall deliver a certificate signed by its chief financial officer
setting forth, in reasonable detail, the event requiting the adjustment, and the
Warrant Price and the number of Shares purchasable hereunder after giving effect
to such adjustment, and shall cause copies of such certificate to be mailed
-3-
19
(without regard to Section 12 hereof, by first class mail, postage prepaid) to
the holder of this Warrant at such holder's last known address.
6. Fractional Shares. No fractional Shares will be issued in connection
with any exercise hereunder, but in lieu of such fractional shares the Company
shall make a cash payment therefor based on the fair market value of the Shares
on the date of exercise as reasonably determined in good faith by the Company's
Board of Directors.
7. Restriction on Transfer of Warrant or Shares. This Warrant and the
Shares (and the securities issuable, directly or indirectly, upon conversion of
the Shares, if any) shall be imprinted with a legend in substantially the
following form:
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO
RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
This Warrant and the Shares issuable upon exercise of this Warrant (and
the securities issuable, directly or indirectly, upon conversion of the Shares,
if any) may not be transferred or assigned in whole or in part without
compliance with applicable federal and state securities laws by the transferor
and the transferee including, without limitation, the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company. The Company shall not require holder to provide an opinion of counsel
if the transfer is to an affiliate of holder or if there is no material question
as to the availability of current information as referenced in Rule 144(c),
holder represents that it has complied with Rule 144(d) and (e) in reasonable
detail the selling broker represents that it has complied with Rule 144(f), and
the Company is provided with a copy of holder's notice of proposed sale. Without
limitation of the foregoing, the Shares (and the securities issuable, directly
or indirectly, upon conversion of the Shares, if any) shall not be sold,
transferred or disposed of during the 45 day period following exercise of this
Warrant.
8. Rights as Shareholders; Information. No holder of this Warrant, as
such, shall be entitled to vote or receive dividends or be deemed the holder of
Shares, nor shall anything contained herein be construed to confer upon the
holder of this Warrant, as such, any of the rights of a shareholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to shareholders at any meeting thereof, or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until this
Warrant shall have been exercised and the Shares purchasable upon the exercise
hereof shall have become deliverable, as provided herein. Notwithstanding the
foregoing, the Company will transmit to the holder of this Warrant such
information, documents and reports as are generally distributed to the holders
of any class or series of the securities of the Company concurrently with the
distribution thereof to the shareholders. Documents publicly available on the
SEC's ▇▇▇▇▇ system shall be deemed delivered to the holder for purposes of this
Section 8.
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9. Representations and Warranties. The Company represents and warrants
to the holder of this Warrant as follows:
(a) This Warrant has been duly authorized and executed by the
Company and is a valid and binding obligation of the Company enforceable in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and the rules of law or
principles at equity governing specific performance, injunctive relief and other
equitable remedies; and
(b) The Shares have been, or will be duly authorized and
reserved for issuance by the Company and, when issued in accordance with the
terms hereof will be validly issued, fully paid and non-assessable.
10. Modification and Waiver. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
11. Notices. Any notice, request, communication or other document
required or permitted to be given or delivered to the holder hereof or the
Company shall be delivered, or shall be sent by certified or registered mail,
postage prepaid, to each such holder at its address as shown on the books of the
Company or to the Company at the address indicated therefor on the signature
page of this Warrant.
12. Lost Warrants or Stock Certificates. The Company covenants to the
holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
13. Descriptive Headings. The descriptive headings of the several
sections of this Warrant are inserted for convenience only and do not constitute
a part of this Warrant. The language in this Warrant shall be construed as to
its fair meaning without regard to which party drafted this Warrant.
14. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the Commonwealth of Delaware.
15. Severability. The invalidity or unenforceability of any provision
of this Warrant in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction, or affect any other
provision of this Warrant, which shall remain in full force and effect.
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16. Entire Agreement; Modification. This Warrant constitutes the entire
agreement between the parties pertaining to the subject matter contained in it
and supersedes all prior and contemporaneous agreements, representations, and
undertakings of the parties, whether oral or written, with respect to such
subject matter.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and delivered by its proper and duly authorized officer as of the day
and year first written above.
FUTURELINK CORP., a Delaware corporation
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Address:
-------------------------------
-------------------------------
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EXHIBIT A
NOTICE OF EXERCISE
To: FutureLink Corp. (the "Company")
1. The undersigned hereby elects to purchase ___________ shares of
Preferred Stock of the Company pursuant to the terms of the attached Warrant and
herewith (check one):
[ ] Makes payment of $___________ therefor; or
[ ] Directs the Company to issue _________ shares, and to withhold
________ shares in lieu of cash payment.
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name or names as are specified
below:
------------------------------------
(Name)
------------------------------------
(Address)
------------------------------------
(Address)
------------------------------------
(Date)
------------------------------------
(Signature)
A-1
23
EXHIBIT C
CERTIFICATE OF DESIGNATION
OF
SERIES A CONVERTIBLE PREFERRED STOCK
FOR
FUTURELINK CORP.
FUTURELINK CORP., a Delaware corporation (the "Corporation"), pursuant
to the provisions of Section 151 of the General Corporation Law of the State of
Delaware, does hereby make this Certificate of Designation and does hereby state
and certify that pursuant to the authority expressly vested in the Board of
Directors of the Corporation by the Certificate of Incorporation of the
Corporation, the Board of Directors duly adopted the following resolutions,
which resolutions remain in full force and effect as of the date hereof.
RESOLVED, that, pursuant to Article Fourth of the Certificate of
Incorporation of the Corporation, the Board of Directors hereby authorizes the
issuance of, and fixes the designation and preferences and relative,
participating, optional, and other special rights, and qualifications,
limitations and restrictions, of a series of Preferred Stock consisting of
2,571,428 shares, without par value, to be designated "Series A Convertible
Preferred Stock" (the "Series A Stock").
RESOLVED, that each share of the Series A Stock shall rank equally in
all aspects and shall be subject to the following terms and provisions:
1. PREFERENCE ON LIQUIDATION.
(a) SERIES A PREFERENTIAL AMOUNT. In the event of any
voluntary or involuntary liquidation, distribution of assets (other than the
payment of dividends), dissolution or winding-up of the Corporation, before any
payment or distribution of the assets of the Corporation (whether capital or
surplus) shall be made to or set apart for the holders of shares of Common
Stock, the holders of shares of Series A Stock shall be entitled to receive
payment of the greater of (i) $7.00 per share of Series A Stock plus any accrued
but unpaid dividends (the "Series A Preferential Amount") held by or for them
(as appropriately adjusted for any accrued but unpaid stock dividend, stock
split, recapitalization or combination of Series A Stock) or (ii) their pro rata
share of the total value of the assets and funds of the Corporation to be
distributed, assuming the conversion of Series A Stock to Common Stock.
(b) INSUFFICIENT PROCEEDS. If, upon any liquidation,
distribution of assets, dissolution or winding-up of the Corporation, the assets
of the Corporation, or proceeds thereof, after distribution to any class or
series of stock ranking senior to the Series A Stock with respect to liquidation
rights ("Senior Stock"), distributable among the holders of shares of Series A
Stock and holders of shares of any other outstanding class or series of stock
ranking on a parity with the Series A Stock with respect to liquidation rights
("Parity Stock") shall be insufficient to pay in full the respective
preferential amounts on the shares of Series A Stock and Parity Stock, then such
assets, or the proceeds thereof, shall be distributed among such holders ratably
in accordance with the respective amounts which would be payable on such shares
if all amounts payable thereon were paid in full.
24
(c) SALE OF THE CORPORATION. At the election of the holders of
a majority of the Series A Stock, the merger or consolidation of the Corporation
into or with another Corporation, or the effectuation of a statutory exchange of
shares, or the sale, lease or transfer of all or substantially all of the assets
of the Corporation (a "Sale of the Corporation"), where, in any such case, the
valuation of the Corporation in connection with such transaction is less than
$520 million (a "Liquidating Sale"), shall be regarded as a liquidation,
dissolution or winding up of the Corporation within the meaning of this Section
1 and shall not be subject to the provisions of Section 4(h); provided, however,
that the merger or consolidation of the Corporation into or with another
Corporation, or the effectuation of a statutory exchange of shares, in which the
shareholders of the Corporation immediately prior to such transaction hold a
majority of the outstanding voting power of the surviving or acquiring entity
(or a parent Corporation thereof) immediately after such transaction by virtue
of their ownership of the Corporation's equity securities shall not be regarded
as a liquidation, dissolution or winding-up of the Corporation within the
meaning of this Section 1. In the case of a Liquidating Sale, the valuation of
the Corporation, and the amount of any liquidation preference to which the
holders of Senior Stock, Series A Stock and Parity Stock shall be entitled,
shall be computed in the same manner as if the Corporation's available assets
(valued at the value being given for the Corporation's shares or assets in such
transactions) were actually being distributed to all shareholders in connection
with such transaction.
2. VOTING.
(a) GENERAL RIGHTS. Except as otherwise provided herein or as
required by law, the Series A Stock shall be voted equally with the shares of
the Common Stock of the Corporation and not as a separate class, at any annual
or special meeting of shareholders of the Corporation, and may act by written
consent in the same manner as the Common Stock, in either case upon the
following basis: each holder of shares of Series A Stock shall be entitled to
such number of votes as shall be equal to the whole number of shares of Common
Stock into which such holder's aggregate number of shares of Series A Stock are
convertible immediately after the close of business on the record date fixed for
such meeting or the effective date of such written consent.
(b) ACTIONS REQUIRING SEPARATE VOTES OF SERIES A STOCK.
(i) For so long as shares of Series A Stock remain
outstanding, in addition to any other vote or consent required herein or by law,
the vote or written consent of the holders of at least two-thirds of the
outstanding Series A Stock voting as a class shall be necessary for effecting or
validating the following actions:
(A) Any amendment, alteration, or repeal of
any provision of the Articles of Incorporation or Bylaws of the Corporation or
any other action that materially and adversely alters or changes the voting
powers, preferences, or other special rights or privileges, or restrictions of
the Series A Stock; or
(B) Any increase in the authorized number of
shares of Series A Stock.
-2-
25
3. DIVIDENDS.
The Series A Stock shall be paid an annual dividend of $.56 per share
payable out of the funds or assets legally available therefor before any
dividend is paid on the Common Stock. If the funds or assets legally available
for payment of dividends are insufficient to pay such dividend, either in whole
or in part, then any unpaid portion of the dividend will become a charge against
the funds and assets of the Corporation, and will be paid in full by the
Corporation in subsequent years before any dividends are paid out on the Common
Stock in those years. The dividends payable on the Series A Stock shall be
payable in cash or, at the Corporation's option, in Common Stock of the
Corporation. In the event such dividends are paid in Common Stock a holder of
Series A Stock shall receive a number of shares of Common Stock equal to the
cash dividend otherwise payable divided by the average closing price of the
Common Stock on the Nasdaq National Market over the last 10 trading days ending
prior to the dividend payment date.
4. CONVERSION.
The holders of the Series A Stock shall have the following rights with
respect to the conversion of the Series A Stock into shares of Common Stock (the
"Conversion Rights"):
(a) VOLUNTARY CONVERSION. Subject to and in compliance with
the provisions of this Section 4, any shares of Series A Stock may, at the
option of the holder, be converted at any time into fully-paid and nonassessable
shares of Common Stock. The number of shares of Common Stock to which a holder
of Series A Stock shall be entitled upon conversion shall be the product
obtained by multiplying the "Series A Stock Conversion Rate" then in effect
(determined as provided in Section 4(b)) by the number of shares of Series A
Stock being converted.
(b) SERIES A STOCK CONVERSION RATE. The conversion rate in
effect at any time for conversion of the Series A Stock (the "Series A Stock
Conversion Rate") shall be the quotient obtained by dividing $7.00 by the
"Series A Conversion Price," calculated as provided in Section 4(c).
(c) CONVERSION PRICE. The Series A Conversion Price shall
initially be $7.00. The initial Series A Conversion Price shall be adjusted from
time to time in accordance with this Section 4. All references to the Series A
Conversion Price herein shall mean such price as so adjusted.
(d) MECHANICS OF CONVERSION. Each holder of Series A Stock who
desires to convert the same into shares of Common Stock pursuant to this Section
4 shall surrender the certificate or certificates therefor, duly endorsed, at
the office of the Corporation or any transfer agent for the Series A Stock, and
shall give written notice to the Corporation at such office that such holder
elects to convert the same. Such notice shall state the number of shares of
Series A Stock being converted. Thereupon, the Corporation shall promptly issue
and deliver at such office to such holder a certificate or certificates for the
number of shares of Common Stock to which such holder is entitled and shall
promptly pay in cash or, to the extent sufficient funds are not then legally
available therefor, in Common Stock (at the Common Stock's fair market value
based on the average trading price of the Common Stock on the Nasdaq National
Market
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over the last 10 trading days prior to the date of such conversion), any unpaid
dividends on the shares of Series A Stock being converted. Such conversion shall
be deemed to have been made at the close of business on the date of such
surrender of the certificates representing the shares of Series A Stock to be
converted, and the person entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder of such shares of Common Stock on such date.
(e) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Corporation shall at any time or from time to time after the original issue date
of the Series A Stock ("Original Issue Date") effect a subdivision of the
outstanding Common Stock without a corresponding subdivision of the Series A
Stock, the Series A Conversion Price in effect immediately before that
subdivision shall be proportionately decreased. Conversely, if the Corporation
shall at any time or from time to time after the Original Issue Date combine the
outstanding shares of Common Stock into a smaller number of shares without a
corresponding combination of the Series A Stock, the Series A Conversion Price
in effect immediately before the combination shall be proportionately increased.
Any adjustment under this Section 4(e) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(f) ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS.
If the Corporation at any time or from time to time after the Original Issue
Date makes, or fixes a record date for the determination of holders of Common
Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, in each such event the Series A Conversion
Price that is then in effect shall be decreased as of the time of such issuance
or, in the event such record date is fixed, as of the close of business on such
record date, by multiplying the Series A Conversion Price then in effect by a
fraction (i) the numerator of which is the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such issuance or
the close of business on such record date, and (ii) the denominator of which is
the total number of shares of Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of business on such record date
plus the number of shares of Common Stock issuable in payment of such dividend
or distribution; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Series A Conversion Price shall be recomputed accordingly as
of the close of business on such record date and thereafter the Series A
Conversion Price shall be adjusted pursuant to this Section 4(f) to reflect the
actual payment of such dividend or distribution.
(g) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. If at any time or from time to time after the Original Issue Date,
the Common Stock issuable upon the conversion of the Series A Stock is changed
into the same or a different number of shares of any class or classes of stock,
whether by recapitalization, reclassification or otherwise (other than a
Liquidating Sale or a transaction provided for elsewhere in this Section 4), in
any such event each holder of Series A Stock shall have the right thereafter to
convert such stock into the kind and amount of stock and other securities and
property receivable upon such recapitalization, reclassification or other change
by holders of the maximum number of shares of Common Stock into which such
shares of Series A Stock could have been converted immediately prior to such
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27
recapitalization, reclassification or change, all subject to further adjustment
as provided herein or with respect to such other securities or property by the
terms thereof.
(h) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF
ASSETS. If at any time or from time to time after the Original Issue Date, there
is a capital reorganization of the Common Stock (other than a Liquidating Sale
or a transaction provided for elsewhere in this Section 4), as a part of such
capital reorganization, provision shall be made so that the holders of the
Series A Stock shall thereafter be entitled to receive upon conversion of the
Series A Stock the number of shares of stock or other securities or property of
the Corporation to which a holder of the number of shares of Common Stock
deliverable upon conversion would have been entitled on such capital
reorganization, subject to adjustment in respect of such stock or securities by
the terms thereof. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 4 with respect to the rights of
the holders of Series A Stock after the capital reorganization to the end that
the provisions of this Section 4 (including adjustment of the Series A
Conversion Price then in effect and the number of shares issuable upon
conversion of the Series A Stock) shall be applicable after that event and be as
nearly equivalent as practicable.
(i) SALE OF SHARES BELOW SERIES A CONVERSION PRICE.
(i) If at any time or from time to time after the
Original Issue Date, the Corporation issues or sells, or is deemed by the
express provisions of this subsection (i) to have issued or sold, Additional
Shares of Common Stock (as defined in subsection (i)(iv) below), other than as a
dividend or other distribution on any class of stock as provided in Section 4(f)
above, and other than a subdivision or combination of shares of Common Stock as
provided in Section 4(e) above, for an Effective Price (as defined in subsection
(i)(iv) below) less than the then effective Series A Conversion Price then and
in each such case the then existing Series A Conversion Price shall be reduced,
as of the opening of business on the date of such issue or sale, to a price
determined by multiplying the Series A Conversion Price by a weighted average,
consisting of a fraction (i) the numerator of which shall be (A) the number of
shares of Common Stock deemed outstanding (as defined below) immediately prior
to such issue or sale, plus (B) the number of shares of Common Stock which the
aggregate consideration received (as defined in subsection (i)(ii)) by the
Corporation for the total number of Additional Shares of Common Stock so issued
would purchase at such Series A Conversion Price, and (ii) the denominator of
which shall be the number of shares of Common Stock deemed outstanding (as
defined below) immediately prior to such issue or sale plus the total number of
Additional Shares of Common Stock so issued. For the purposes of the preceding
sentence, the number of shares of Common Stock deemed to be outstanding as of a
given date shall be the sum of (A) the number of shares of Common Stock actually
outstanding, (B) the number of shares of Common Stock into which the then
outstanding shares of Series A Stock could be converted if fully converted on
the day immediately preceding the given date, and (C) the number of shares of
Common Stock which could be obtained through the exercise or conversion of all
other rights, options and convertible securities exercisable on the day
immediately preceding the given date.
(ii) For the purpose of making any adjustment
required under this Section 4(i), the consideration received by the Corporation
for any issue or sale of securities shall (A) to the extent it consists of cash,
be computed at the amount of cash received by the Corporation before deduction
of any underwriting or similar commissions, compensation or
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concessions paid or allowed by the Corporation in connection with such issue or
sale and without deduction of any expenses payable by the Corporation, (B) to
the extent it consists of property other than cash, be computed at the fair
value of that property as determined in good faith by the Board of Directors,
and (C) if Additional Shares of Common Stock, Convertible Securities (as defined
in subsection (i)(iii) below) or rights or options to purchase either Additional
Shares of Common Stock or Convertible Securities are issued or sold together
with other stock or securities or other assets of the Corporation for a
consideration which covers both, be computed as the portion of the consideration
so received that may be reasonably determined in good faith by the Board of
Directors to be allocable to such Additional Shares of Common Stock, Convertible
Securities or rights or options.
(iii) For the purpose of the adjustment required
under this Section 4(i), if the Corporation issues or sells any (i) stock or
other securities convertible into, Additional Shares of Common Stock (such
convertible stock or securities being herein referred to as "Convertible
Securities") or (ii) rights or options for the purchase of Additional Shares of
Common Stock or Convertible Securities and if the Effective Price of such
Additional Shares of Common Stock is less than the Series A Conversion Price in
each case the Corporation shall be deemed to have issued at the time of the
issuance of such rights or options or Convertible Securities the maximum number
of Additional Shares of Common Stock issuable upon exercise or conversion
thereof and to have received as consideration for the issuance of such shares an
amount equal to the total amount of the consideration, if any, received by the
Corporation for the issuance of such rights or options or Convertible
Securities, plus, in the case of such rights or options, the minimum amounts of
consideration, if any, payable to the Corporation upon the exercise of such
rights or options, plus, in the case of Convertible Securities, the minimum
amounts of consideration, if any, payable to the Corporation (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) upon the conversion thereof; provided that if in the case of
Convertible Securities the minimum amounts of such consideration cannot be
ascertained, but are a function of antidilution or similar protective clauses,
the Corporation shall be deemed to have received the minimum amounts of
consideration without reference to such clauses; provided further that if the
minimum amount of consideration payable to the Corporation upon the exercise or
conversion of rights, options or Convertible Securities is reduced over time or
on the occurrence or non-occurrence of specified events other than by reason of
antidilution adjustments, the Effective Price shall again be recalculated at
that time using the figure to which such minimum amount of consideration is
reduced; provided further that if the minimum amount of consideration payable to
the Corporation upon the exercise or conversion of such rights, options or
Convertible Securities is subsequently increased, the Effective Price shall be
again recalculated at that time using the increased minimum amount of
consideration payable to the Corporation upon the exercise or conversion of such
rights, options or Convertible Securities. No further adjustment of the Series A
Conversion Price as adjusted upon the issuance of such rights, options or
Convertible Securities, shall be made as a result of the actual issuance of
Additional Shares of Common Stock on the exercise of any such rights or options
or the conversion of any such Convertible Securities. If any such rights or
options or the conversion privilege represented by any such Convertible
Securities shall expire without having been exercised, the Series A Conversion
Price as adjusted upon the issuance of such rights, options or Convertible
Securities shall be readjusted to the Series A Conversion Price which would have
been in effect had an adjustment been made on the basis that the only Additional
Shares of Common Stock so issued were the Additional Shares of Common Stock, if
any,
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29
actually issued or sold on the exercise of such rights or options or rights of
conversion of such Convertible Securities, and such Additional Shares of Common
Stock, if any, were issued or sold for the consideration actually received by
the Corporation upon such exercise, plus the consideration, if any, actually
received by the Corporation for the granting of all such rights or options,
whether or not exercised, plus the consideration received for issuing or selling
the Convertible Securities actually converted, plus the consideration, if any,
actually received by the Corporation (other than by cancellation of liabilities
or obligations evidenced by such Convertible Securities) on the conversion of
such Convertible Securities; provided that such readjustment shall not apply to
prior conversions of Series A Stock.
(iv) "Additional Shares of Common Stock" shall mean
all shares of Common Stock issued by the Corporation or deemed to be issued
pursuant to this Section 4(i), whether or not subsequently reacquired or retired
by the Corporation other than the following: (A) shares of Common Stock issued
upon conversion of the Series A Stock; (B) options and the Common Stock issued
pursuant to such options (as adjusted for any stock dividends, combinations,
splits, recapitalizations and the like) after the Original Issue Date to
employees, officers or directors of, or consultants or advisors to the
Corporation or any subsidiary pursuant to stock option purchase or stock option
plans; or (C) shares of Common Stock issued pursuant to the exercise of options,
warrants or convertible securities outstanding as of the Original Issue Date.
The "Effective Price" of Additional Shares of Common Stock shall mean the
quotient determined by dividing the total number of Additional Shares of Common
Stock issued or sold, or deemed to have been issued or sold by the Corporation
under this Section 4(i), into the aggregate consideration received, or deemed to
have been received by the Corporation for such issue under this Section 4(i),
for such Additional Shares of Common Stock.
(j) CERTIFICATE OF ADJUSTMENT. In each case of an adjustment
or readjustment of the Series A Conversion Price for the number of shares of
Common Stock or other securities issuable upon conversion of the Series A Stock
if the Series A Stock is then convertible pursuant to this Section 4, the
Corporation, at its expense, shall compute such adjustment or readjustment in
accordance with the provisions hereof and prepare a certificate showing such
adjustment or readjustment, and shall mail such certificate, by first class
mail, postage prepaid, to each registered holder of Series A Stock at the
holder's address as shown in the Corporation's books. The certificate shall set
forth such adjustment or readjustment, showing in detail the facts upon which
such adjustment or readjustment is based, including a statement of (i) the
consideration received or deemed to be received by the Corporation for any
Additional Shares of Common Stock issued or sold or deemed to have been issued
or sold, (ii) the Series A Conversion Price at that time in effect, (iii) the
number of Additional Shares of Common Stock and (iv) the type and amount, if
any, of other property which at the time would be received upon conversion of
the Series A Stock.
(k) NOTICES OF RECORD DATE. Upon (i) any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, or (ii) any Sale of the Corporation, capital
reorganization of the Corporation, any reclassification or recapitalization of
the capital stock of the Corporation, or any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the Corporation shall
mail to each holder of Series A Stock at least twenty (20) days prior to the
record date specified therein a notice specifying (A) the date
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on which any such record is to be taken for the purpose of such dividend or
distribution and a description of such dividend or distribution, (B) the date on
which any such Sale of the Corporation, reorganization, reclassification,
recapitalization, dissolution, liquidation or winding up is expected to become
effective, and (C) the date, if any, that is to be fixed as to when the holders
of record of Common Stock (or other securities) shall be entitled to exchange
their shares of Common Stock (or other securities) for securities or other
property deliverable upon such Sale of the Corporation, reorganization,
reclassification, recapitalization, dissolution, liquidation or winding up.
(l) AUTOMATIC CONVERSION.
(i) Each share of Series A Stock may be converted at
the discretion of the Corporation into shares of Common Stock, based on the
then-effective Series A Conversion Price at any time where the average closing
price of the Common Stock on the Nasdaq National Market over the last 20 trading
days equals or exceeds $25.50 per share following fifteen days' written notice
from the Corporation to the holders of Series A Stock, which notice shall
include a certification that the conditions necessary for such Conversion have
occurred. Upon such conversion, any unpaid dividends shall be paid in accordance
with the provisions of Section 4(d); provided, however, if such conversion
occurs prior to July 5, 2001, the Corporation shall pay the holders of Series A
Stock dividends on the Series A Stock as if such shares had been outstanding for
at least twelve months. Upon such conversion, any warrants to purchase Series A
Stock which remain outstanding shall be converted automatically into warrants to
acquire Common Stock without any action by the holders of such warrants or the
Corporation.
(ii) Upon the termination of the notice period
specified in paragraph (i) above, the outstanding shares of Series A Stock shall
be converted automatically without any further action by the holders of such
shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent; provided, however, that
the Corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such conversion unless the certificates
evidencing such shares of Series A Stock are either delivered to the Corporation
or its transfer agent as provided below, or the holder notifies the Corporation
or its transfer agent that such certificates have been lost, stolen or destroyed
and executes an agreement satisfactory to the Corporation to indemnify the
Corporation from any loss incurred by it in connection with such certificates.
Upon the occurrence of such automatic conversion of the Series A Stock, the
holders of Series A Stock shall surrender the certificates representing such
shares at the office of the Corporation or any transfer agent for the Series A
Stock. Thereupon, there shall be issued and delivered to such holder promptly at
such office and in its name as shown on such surrendered certificate or
certificates, a certificate or certificates for the number of shares of Common
Stock into which the shares of Series A Stock surrendered were convertible on
the date on which such automatic conversion occurred, and any unpaid dividends
shall be paid in accordance with the provisions of Section 4(d).
(m) FRACTIONAL SHARES. No fractional shares of Common Stock
shall be issued upon conversion of Series A Stock. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Series A Stock by a holder thereof
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shall be aggregated for purposes of determining whether the conversion would
result in the issuance of any fractional share. If, after the aforementioned
aggregation, the conversion would result in the issuance of any fractional
share, the Corporation shall, in lieu of issuing any fractional share, pay cash
equal to the product of such fraction multiplied by the Common Stock's fair
market value (as determined by the Board of Directors) on the date of
conversion.
(n) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A Stock, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of the Series A Stock. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series A Stock, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
(o) NOTICES. Any notice required by the provisions of this
Section 4 shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed telex
or facsimile if sent during normal business hours of the recipient; if not, then
on the next business day, (iii) three (3) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (iv)
one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt. All notices
shall be addressed to each holder of record at the address of such holder
appearing on the books of the Corporation.
(p) NO IMPAIRMENT. The Corporation will not, by amendment of
its Articles of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation but will at all times in good faith assist in the carrying out of
all the provisions of this Section 4 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holder of the Series A Stock against impairment.
5. REDEMPTION.
(a) if the Corporation fails to obtain additional equity
funding of at least $20,000,000 from one or more sources on or after June 28,
2000 and before December 28, 2000 at the election of the holders of a majority
of the Series A Stock, the Corporation shall be required to redeem all
outstanding shares of Series A Stock, at the Applicable Redemption Price. For
purposes of this Section 5, the Applicable Redemption Price shall be $7.00 per
share plus all unpaid dividends.
(b) On June 28, 2004, at the election of a majority of the
holders of the Series A Stock, the Corporation shall be required to redeem all
outstanding shares of Series A Stock at the Applicable Redemption Price.
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(c) With respect to any redemption under Section 5(a), the
Applicable Redemption Price will be paid in cash. With respect to any redemption
under Section 5(b), the Corporation may elect to pay the Applicable Redemption
Price either in (i) cash, or (ii) in shares of Common Stock based upon the
average closing price of the Common Stock on the Nasdaq National Market over the
last 10 trading days prior to the Redemption Date. For purposes of clause (ii)
in the preceding sentence, in no event will the average closing price be deemed
to be less than $5.50 a Share.
(d) At least twenty (20) days prior to the date specified for
redemption in such notice (the "Redemption Date"), (i) notice of any redemption
pursuant to Section 5 shall be sent by or on behalf of the holders of the Series
A Stock to the Corporation at its corporate offices, provided, however, that
failure to give such notice or any defect therein or in the mailing thereof
shall not affect the validity of the proceedings for the redemption of any
shares of Series A Stock. Such notice shall state: (i) the Redemption Date; (ii)
the Applicable Redemption Price; and (iii) the number of shares of Series A
Stock to be redeemed and, if less than all shares held by such holder are to be
redeemed, the number of such shares to be redeemed. Upon the mailing of any such
notice of redemption, the Company shall become obligated to redeem at the time
of redemption specified thereon all shares called for redemption.
(e) Upon surrender, in accordance with said notice, of the
certificates for any shares so redeemed (properly endorsed or assigned for
transfer, if the Corporation shall so require), such shares shall be redeemed by
the Corporation at the Applicable Redemption Price. In case fewer than all the
shares represented by any such certificate are redeemed, a new certificate or
certificates shall be issued representing the unredeemed shares without cost to
the holder thereof.
(f) All shares of Series A Stock redeemed pursuant to this
Section 5 shall be restored to the status of authorized and unissued shares of
Series A Stock, without designation as to series and may thereafter be reissued
as shares of any series of preferred stock other than shares of Series A Stock.
6. RESTRICTION ON SALE. The holders of Common Stock issued upon
conversion of the Series A Stock shall not sell such shares of Common Stock for
at least forty-five (45) days following such conversion.
7. GENERAL PROVISIONS.
(a) The term "Person" as used herein means any Corporation,
partnership, trust, organization, association, other entity or individual.
(b) The term "outstanding," when used with reference to shares
of stock, shall mean issued shares, excluding shares held by the Corporation or
a subsidiary.
(c) All accounting terms used herein and not expressly defined
herein shall have the meanings given to them in accordance with generally
accepted accounting principles.
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(d) The headings of the sections, subsections, clauses and
subclauses herein are for convenience of reference only and shall not define,
limit or affect any of the provisions hereof.
Dated: July __, 2000
FUTURELINK CORP.
By:
------------------------------------
[Name]
Its:
-----------------------------------
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EXHIBIT D
EXHIBIT D SCHEDULE OF EXCEPTIONS
SECTION 3.3
Capitalization
As of June 26, 2000, the equity capitalization of FutureLink Corp. (the
"Company") included the following:
1. Stock Options to purchase 9,913,109 shares of common stock;
2. A Debenture convertible into 67,965 shares of common stock;
3. Warrants entitling their holders to purchase 7,967,673 shares of common
stock;
4. Exchangeable shares convertible into 2,199,973 shares of the Company's
common stock which have been issued to former shareholders of Charon
Systems Inc.;
5. 61,560,666 issued and outstanding shares of common stock; and
6. The Company has announced its intentions to effect a public offering of
an additional 6,000,000 shares of its common stock with another 900,000
shares of common stock issuable to the underwriters of the offering if
they exercise their over-allotment option in full.
SECTION 3.4
Authorization
FIRST REFUSAL AND PREEMPTIVE RIGHTS
1. In an Engagement Letter between ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co., Inc.
("GKM") and FutureLink Distribution Corp., a predecessor corporation to
the Company, dated May 28, 1999, the Company granted GKM a right of
first refusal to be the lead placement agent in connection with any
private sale of securities by the Company for eighteen (18) months
commencing October 15, 1999.
2. Dimensional Partners Ltd. and Dimensional Partners L.P. (collectively,
"Dimensional") are parties to that certain Securities Purchase
Agreement dated October 15, 1999 (the "October Purchase Agreement") by
and among the Company, Pequot Private Equity Fund II, L.P., Pequot
Partners Fund, L.P., Pequot International Fund, Inc. and Dimensional.
Dimensional has pre-emptive rights under the October Purchase Agreement
and a right to receive fifteen (15) days advance notice of the sale and
purchase of series A preferred stock (the "Sale") under the October
Purchase Agreement.
3. Pequot Private Equity Fund II, L.P., Pequot Partners Fund, L.P., Pequot
International Fund, Inc. and Pequot Endowment Fund, L.P. also have
pre-emptive rights under the October Purchase Agreement and the right
to receive fifteen (15) days advance notice of the Sale.
35
4. The Company has obtained a $10,000,000 line of credit with the Canadian
Imperial Bank of Commerce ("CIBC") pursuant to a Loan Agreement Dated May
4, 2000 among CIBC, the Company and its wholly owned subsidiary,
FutureLink Distribution Corp. (the "Loan Agreement"). The Loan Agreement
restricts the Company from paying dividends.
5. Smallcaps Online Group, LLC and ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇ have outstanding
warrants dated March 1, 2000 which have anti-dilution provisions which
are triggered by the Company issuing securities convertible into common
stock of the Company at a price lower than the current market price of
the Company's common stock as defined in such warrants.
6. Transamerica Business Credit Corporation Funding Trust II ("TBCC") has
outstanding warrants dated November 3, 1999 which have registration
rights provisions requiring the Company give TBCC notice of any
registration rights given to other security holders and the right for
TBCC to adopt such registration rights.
SCTION 3.5
Please refer to Section 3.4
SECTION 3.8
Please refer to Section 3.4
SECTION 3.10
Patents, Trademarks, Copyright
On June 30, 1999 the Company was informed that a Japanese patent law
firm (the "Law Firm") has stated that the ASP consortium as a whole may
conflict with U.S. Patent Number 5,775,995 issued on July 7, 1998. The
Company has not heard from the Law Firm since June 30, 1999. The patent
in question is directed at an interactive communication system for
communicating software from a host facility or distributor to end users
with the stated aim of delivering karaoke and video to end users. At
the end user level, a communication terminating device is provided
which can temporarily store the transmitted software and either delete
the software or block its use by the end user after a predetermined
time. However, it is the Company's position that any interpretation of
the patent which could impact the ASP consortium would be so broad as
to arguably cover all server-based computing.
36
EXHIBIT D-1
Schedule of Purchaser Exceptions
Such filings as maybe required by the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended, and similar filings required by the merger notification
or control laws of any applicable jurisdiction upon the exercise of the Warrant.
37
EXHIBIT E
July 6, 2000
Microsoft Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇-▇▇▇▇
Re: Series A Convertible Preferred Stock Purchase Agreement
Ladies and Gentlemen:
We have acted as special counsel to FutureLink Corp., a Delaware
corporation (the "Company"), in connection with the issue and sale of 1,428,571
shares (the "Shares") of the Company's Series A Convertible Preferred Stock (the
"Series A Preferred Stock") pursuant to the terms of the Series A Convertible
Preferred Stock Purchase Agreement dated June 29, 2000 (the "Purchase
Agreement"), by and between the Company and Microsoft Corporation, a Washington
corporation ("Microsoft"). Unless specifically defined herein or the context
requires otherwise, capitalized terms used herein shall have the meanings
assigned to them in the Purchase Agreement. This opinion is being furnished to
Microsoft in accordance with Section 5.1(c) of the Purchase Agreement.
In connection with the preparation of this opinion, we have reviewed
the Purchase Agreement, the Investor Rights Agreement, the Warrant, the
Commercial Agreement, the Designation, the certificate of incorporation and
bylaws of the Company and the records of corporate proceedings of the Company
(the Investor Rights Agreement, the Warrant and the Commercial Agreement are
collectively referred to herein as the "Related Documents"). We also have
examined such certificates of public officials, corporate records and documents
and other certificates, opinions and instruments, and have made such other
investigations, as we have deemed necessary in connection with the opinion
hereinafter set forth. As to certain issues of fact material to such opinion, we
have relied, without independent investigation, upon certificates of officers of
the Company, upon certificates and representations of government officials, and
upon the representations and warranties made by each party in the Purchase
Agreement.
38
Microsoft Corporation
July 6, 2000
Page 2
For purposes of this opinion, we have assumed, without independent
check for verification, the following: (i) the legal capacity of each natural
person signing any document or instrument examined by us; (ii) the legal
existence of all parties to the transaction other than the Company; (iii) the
power and authority of each person other than persons acting on behalf of the
Company to execute, deliver and perform each of the agreements, instruments or
documents executed and delivered by such person and to take each other action
taken or to be taken by such person under the Purchase Agreement; (iv) the due
authorization, execution and delivery by each person other than persons acting
on behalf of the Company of each document executed and delivered or to be
executed and delivered by such person; (v) that all of the documents have been
duly authorized, executed and delivered by, and are binding upon, and
enforceable against, each party thereto other than the Company; (vi) the payment
of all required taxes and fees imposed in connection with the execution, filing
or recording of documents; (vii) the genuineness of each signature, the
completeness of each document submitted to us, the authenticity of each document
reviewed by us as an original, the conformity to the original of each document
reviewed by us as a copy, and the authenticity of the original of each document
reviewed by us as a copy; (viii) that routine procedural matters such as service
of process or qualification to do business in the relevant jurisdictions will be
satisfied by the parties seeking to enforce the Purchase Agreement; (ix) that
there have been no undisclosed modifications of any provisions of any document
reviewed by us; (x) there are no other documents, agreements or understandings
between or among any of the parties to the Purchase Agreement which would
expand, waive or otherwise modify the respective rights and obligations of such
parties as set forth in the Purchase Agreement and the documents required or
contemplated thereby; and (xi) that the certificates of public officials dated
earlier than the date of this opinion remain accurate from such earlier date
through and including the date of this opinion.
Whenever a statement herein is qualified by "known to us," "to our
knowledge," "of which we are aware" or a similar phrase, it (i) is intended to
indicate that, during the course of our representation of the Company, no
information that would give us current actual knowledge of the inaccuracy of
such statement has come to our attention and (ii) is limited to the current,
actual knowledge of only those individual attorneys currently with our firm who
have devoted substantive legal attention to matters for the Company in
connection with the Purchase Agreement. Moreover, in connection with rendering
this opinion, we call to your attention that we have not searched any computer
database or the dockets of any court, or the real property records of any
recorder or the records of any administrative body, agency or other filing
office in any jurisdiction with respect to any matter.
Based upon the foregoing, and subject to the assumptions, exceptions,
qualifications and limitations set forth herein, we are of the opinion that:
1. The Company is a corporation validly existing under the laws of the
State of Delaware. The Company has the corporate power and authority to execute,
deliver and perform
39
Microsoft Corporation
July 6, 2000
Page 3
its obligations under the Purchase Agreement and each of the Related Documents
and has the corporate power and authority to own, lease and operate its
properties and to conduct its business as described in its filings under the
Securities Exchange Act of 1934, as amended.
2. The authorized capital stock of the Company consists of (i)
300,000,000 shares of common stock, par value $0.0001 per share ("Common
Stock"), of which 65,821,968 shares were issued and outstanding as of the close
of business on July 5, 2000, based solely on a certificate provided by American
Stock Transfer & Transfer Company, and (ii) 20,000,000 shares of preferred
stock, no par value ("Preferred Stock"), of which 2,117,648 shares have been
designated as Series A Convertible Preferred Stock ("Series A Stock"), of which
1,176,471 shares are to be sold to Microsoft pursuant to the Purchase Agreement.
3. The execution, delivery and performance by the Company of the
Purchase Agreement and each of the Related Documents has been duly authorized by
the Board of Directors of the Company. The Purchase Agreement and Related
Documents have been duly executed and delivered by the Company and constitutes
the legally valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as such obligation and
enforceability are limited by the effect of (i) any applicable bankruptcy,
fraudulent conveyance, fraudulent transfer, insolvency, reorganization,
receivership, liquidation, moratorium or similar law affecting creditors' rights
generally, (ii) any principles governing the availability of equitable remedies,
and (iii) public policy considerations, in each case whether considered in a
proceeding at equity or at law.
4. The execution, delivery and performance by the Company of the
Purchase Agreement and Related Documents will not (i) constitute a violation by
the Company of any provision of Applicable Laws; or (ii) violate any provision
of the Company's certificate of incorporation or bylaws.
5. The Designation has been duly executed by the Company and filed with
the Secretary of State of the State of Delaware.
6. The issuance, sale and delivery of the Shares and the Warrant have
been duly authorized by all requisite corporate action by the Company, and when
sold and delivered in accordance with the Purchase Agreement, the Shares will be
duly and validly issued and outstanding, fully paid and non-assessable, and any
additional shares of Series A Preferred Stock issued pursuant to the Warrant or
the Purchase Agreement or pursuant to the Designation, when issued in accordance
with the terms of the Warrant, the Purchase Agreement or the Designation will be
validly issued, fully paid and non-assessable. The Company has duly authorized
and reserved sufficient shares of its Common Stock for issuance upon conversion
of the Shares and the exercise of the Warrant.
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Microsoft Corporation
July 6, 2000
Page 4
7. No consent, approval, authorization or order of, or filing with, any
federal or Delaware court or governmental agency or body is required for the
execution and delivery of the Purchase Agreement and the Warrant, the issuance
and sale of the Shares and the Warrant, and the issuance of the shares of Common
Stock to be issued upon conversion of the Shares.
The foregoing opinions are subject to the following:
(a) The availability of specific performance, injunctive
relief and other equitable remedies is subject to the discretion of the tribunal
before which any proceeding therefor may be brought.
(b) We are members of the New York State Bar and, accordingly,
do not purport to be expert on or to be qualified to express any opinion herein
concerning, nor do we express any opinion herein concerning, the laws of any
jurisdiction other than the laws of the State of New York and the General
Corporation Law of the State of Delaware. We note that the Purchase Agreement
and the Commercial Agreement purport to be governed by the laws of the State of
Washington and the other Related Documents purport to be governed by the laws of
the State of Delaware. We are not members of the Delaware Bar or the Washington
Bar. For purposes of this opinion, we have assumed, with your permission, that
the laws of the State of Washington governing the enforceability of the Purchase
Agreement and the Commercial Agreement and that the laws of the State of
Delaware governing the enforceability of the other Related Documents are
identical to the laws of New York. As used herein, the term "Applicable Laws"
means laws and regulations of the State of New York that in our experience are
normally applicable to the transactions of the type contemplated in the Purchase
Agreement.
(c) Except as specifically stated otherwise in this letter, we
express no opinion on the following: (i) Federal and state securities laws and
regulations, including, without limitation, the "blue sky" laws of any state;
(ii) Federal and state pension and employee benefit laws and regulations; (iii)
Federal and state antitrust and unfair competition laws and regulations; (iv)
Federal and state laws and regulations concerning filing requirements, other
than requirements applicable to the Organizational Documents; (v) compliance
with fiduciary duty requirements; (vi) local laws or administrative orders;
(vii) Federal or state bankruptcy, fraudulent conveyance, fraudulent transfer,
insolvency, reorganization, receivership, liquidation, moratorium or similar law
affecting creditors' rights generally; and (viii) Federal and state
environmental laws and regulations.
(d) We express no opinion as to the enforceability of
prospective waivers of rights to notice or a hearing or other rights granted by
constitution or statute, or provisions purporting to consent to venue or waive
any objection to venue in a particular court in any state, relieve parties of
the consequences of their own negligence or misconduct, provisions granting
indemnity rights, rights of contribution or similar rights (or any guaranty
thereof) or provisions
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Microsoft Corporation
July 6, 2000
Page 5
purporting to establish evidentiary standards, or provisions purporting to
establish noncompetition or nonsolicitation covenants.
(e) The opinion expressed herein as to the enforceability of
the Purchase Agreement and the Related Documents is limited to the general
enforceability of such documents and the obligations set forth therein. The
enforceability of the Purchase Agreement and the Related Documents may be
limited by general principles of contract law which include (i) the
unenforceability of provisions to the effect that provisions therein may only be
amended or waived in writing to the extent that an oral agreement modifying such
provisions has been entered into, (ii) the general rule that, where less than
all of an agreement is enforceable, the balance is enforceable only when the
unenforceable portion is not an essential part of the agreed exchange, (iii) the
exercise of judicial discretion regarding the determination of damages and
entitlement to attorneys' fees and other costs, and (iv) the possible right of a
party which has materially failed to render or offer performance required by a
contract to cure that failure, unless permitting a cure would unreasonably
hinder the aggrieved party from making substitute arrangements for performance
or it was important in the circumstances to the aggrieved party that performance
occur by the date stated in such contract.
(f) We express no opinion as to (i) any provision of the
Purchase Agreement or any Related Documents purporting to provide for a method
of service of process which is inconsistent with applicable law or rules of the
relevant court, or (ii) any provision of the Purchase Agreement or any Related
Documents purporting to provide for the payment of costs or liquidated damages
upon termination of such agreement, or (iii) any consents of third parties that
may be required in connection with the execution, delivery and performance of
the Purchase Agreement or any Related Documents or the effects of the failure to
have obtained any such consents that may be required, or (iv) any provision
which purports to bind any party to agree to reach an agreement at a future
date.
(g) This opinion is limited to the matters expressly stated
herein and no opinions are to be inferred or may be implied beyond the matters
expressly so stated. This opinion is based upon the facts known to us, the
Purchase Agreement and the Related Documents examined by us and the law at the
date hereof and is given to you as of the date hereof. We assume no obligation
to supplement this opinion if any applicable laws change after the date of this
opinion, or if we become aware of any facts that might change the opinions
expressed above after the date of this opinion.
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Microsoft Corporation
July 6, 2000
Page 6
This opinion is being furnished only to the addressee hereof and is
solely for its benefit. This opinion may not be used or relied upon for any
other purpose, and may not be used, relied upon, disclosed, quoted, filed or
otherwise referred to by any other person, firm or corporation for any purpose,
without our prior written consent.
Very truly yours,
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
for PAUL, HASTINGS, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
43
EXHIBIT F
FUTURELINK CORP.
COMPLIANCE CERTIFICATE
On this 6th day of July, 2000, the undersigned hereby certifies,
pursuant to Section 5.1(d) of the Series A Convertible Preferred Stock Purchase
Agreement dated as of June 29th, 2000 (the "Agreement") between FutureLink
Corp., a Delaware corporation (the "Company"), and Microsoft Corporation, a
Washington corporation, that:
1. The representations and warranties made by the Company in Section 4
of the Agreement are true and correct in all material respects on the date
hereof, and
2. All covenants, agreements and conditions contained in the Agreement
to be performed by the Company on or before the date hereof have been performed
or complied with in all material respects.
IN WITNESS WHEREOF, the undersigned has caused this Compliance
Certificate to be duly executed and delivered as of the date first written
above.
FUTURELINK CORP.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
F-1
44
EXHIBIT G
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (this "AGREEMENT") is made and entered
into as of July 6, 2000 by and among Microsoft Corporation, a Washington
corporation ("INVESTOR"), and FutureLink Corp., a Delaware corporation (the
"COMPANY").
RECITALS
A. Pursuant to a Series A Convertible Preferred Stock Purchase
Agreement, dated of even date herewith by and among the Company and Investor
(the "PURCHASE AGREEMENT"), Investor has agreed to purchase from the Company,
and the Company has agreed to sell to the Investor, Series A 8.00% Convertible
Preferred Stock (the "PREFERRED STOCK"), and the Company has agreed to grant
Investor a Preferred Stock Purchase Warrant (the "WARRANT") to purchase
additional shares of the Preferred Stock. The Preferred Stock and the Warrant
are convertible into common stock ("COMMON STOCK") of the Company on the terms
and conditions set forth in the Certificate of Designation filed July 3, 2000 of
the Company, and the Warrant, respectively.
B. The Purchase Agreement provides that Investor shall be granted
certain information and registration rights, all as more fully set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
AGREEMENTS
1. INFORMATION
1.1 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Registrable Securities (as defined below) to the public without
registration, the Company agrees to use all reasonable efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act (as defined
below), at all times after the date of this Agreement;
(b) File with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
1934 Act (as defined below) (at any time after it has become subject to such
reporting requirements); and
(c) So long as any person owns all or any portion of the
Preferred Stock or any Registrable Securities, furnish to such holder forthwith
upon request a written statement by the Company as to its compliance with the
reporting requirements of said Rule 144, and of the Securities Act and the 1934
Act, a copy of the most recent annual or quarterly report of the
45
Company, and such other reports and documents of the Company as Investor may
reasonably request in availing itself of any rule or regulation of the
Commission allowing Investor to sell any such securities without registration.
2. REGISTRATION RIGHTS.
2.1 DEFINITIONS. For purposes of this Section 2:
(a) REGISTRATION. The terms "register," "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act, and the
declaration or ordering of effectiveness of such registration statement.
(b) REGISTRABLE SECURITIES. The term "Registrable Securities"
means: (1) all the shares of Common Stock of the Company issued or issuable upon
the conversion of the Preferred Stock; and (2) all shares of Common Stock of the
Company issued as a dividend or other distribution with respect to, or in
exchange for or in replacement of, all such shares of Common Stock described in
clause (1) of this subsection (b); excluding in all cases, however, any
Registrable Securities sold by a person pursuant to Rule 144 promulgated under
the Securities Act or pursuant to a registration statement.
(c) REGISTRABLE SECURITIES THEN OUTSTANDING. The number of
shares of "Registrable Securities then Outstanding" shall mean the number of
shares of Common Stock which are Registrable Securities and (1) are then issued
and outstanding or (2) are then issuable pursuant to the exercise or conversion
of the Preferred Stock.
(d) FORM S-3. The term "Form S-3" means such form under the
Securities Act as is in effect on the date hereof or any successor registration
form under the Securities Act subsequently adopted by the SEC which permits
inclusion or incorporation of substantial information by reference to other
documents filed by the Company with the SEC.
(e) SEC. The term "SEC" or "Commission" means the U.S.
Securities and Exchange Commission.
(f) SECURITIES ACT. The term "Securities Act" means the
Securities Act of 1933, as amended.
(g) 1934 ACT. The term "1934 Act" means the Securities
Exchange Act of 1934, as amended.
2.2 DEMAND REGISTRATION.
(a) REQUEST BY HOLDERS. If any time following January 5, 2001
the Company shall receive at any time a written request from any holder of
Registrable Securities who holds Registrable Securities (each such person
eligible to make a request, an "ELIGIBLE HOLDER" and each such person who makes
a request, a "REQUESTOR") that the Company file a registration statement under
the Securities Act covering the registration of Registrable Securities pursuant
to
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46
this Section 2.2, then the Company shall, within ten (10) business days of the
receipt of such written request, give written acknowledgment of such request
("REQUEST ACKNOWLEDGMENT") to each Eligible Holder. If an Eligible Holder
desires to include in any such registration statement all or any part of the
Registrable Securities then held, the Eligible Holder shall, within ten (10)
days after receipt of the above-described notice from the Company, so notify the
Company in writing, and in such notice shall inform the Company of the number of
Registrable Securities the Eligible Holder wishes to include in such
registration statement. Eligible Holders who elect to participate in an offering
(including but not limited to a Requestor) are referred to collectively as
"SELLING SHAREHOLDERS." The Company shall effect, as soon as practicable, the
registration under the Securities Act of all Registrable Securities which the
Selling Shareholders request to be registered and included in such registration,
subject only to the limitations of this Section 2.2; provided that the
Registrable Securities requested by the Requestor(s) to be registered pursuant
to such request must have an anticipated aggregate public offering price (before
any underwriting discounts and commissions) of not less than $3,000,000.
(b) UNDERWRITING. If a Requestor initiates the registration
request under this Section 2.2 and intends to distribute the Registrable
Securities covered by its request by means of an underwriting, then the
Requestor shall so advise the Company as a part of its request made pursuant to
this Section 2.2. In such event, the right of the Selling Shareholders to
include their Registrable Securities in such registration shall be conditioned
upon each Selling Shareholder's participation in such underwriting and the
inclusion of their Registrable Securities in the underwriting to the extent
provided herein. If the Requestor proposes to distribute its securities through
such underwriting, each Selling Shareholder shall enter into an underwriting
agreement in customary form with the managing underwriter or underwriters
selected for such underwriting by the Company and the Requestor. Notwithstanding
any other provision of this Section 2.2, if the underwriter(s) advise(s) the
Company in writing that marketing factors require a limitation of the number of
securities to be underwritten then the Company shall so advise the Selling
Shareholders, and the managing underwriter(s) may exclude shares (including
Registrable Securities) from the registration and the underwriting, and the
number of shares that may be included in the registration and the underwriting
shall be allocated, first, to the Requestor, and second, to the Selling
Shareholders based on the relative proportion of shares of all such Selling
Shareholders requested to be so registered, and third, to the Company. If a
Selling Shareholder disapproves of the terms of any such underwriting, the
Selling Shareholder may elect to withdraw therefrom by written notice to the
Company and the underwriter, delivered at least ten (10) business days prior to
the effective date of the registration statement. Any Registrable Securities
excluded and withdrawn from such underwriting shall be withdrawn from the
registration.
(c) MAXIMUM NUMBER OF DEMAND REGISTRATIONS. The Company is
obligated to effect only two (2) such registrations pursuant to this Section
2.2.
(d) DEFERRAL. Notwithstanding the foregoing, if the Company
shall furnish to the Selling Shareholders, a certificate signed by the President
or Chief Executive Officer of the Company stating that in the good faith
judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such registration statement
to be filed at that time and it is therefore essential to defer the filing of a
registration
-3-
47
statement pursuant to this Section 2.2, then the Company shall have the right to
defer such filing for a period of not more than sixty (60) days after receipt of
the request of the Requestor; provreided, however, that the Company may not
utilize this right more than once in any twelve (12) month period.
2.3 PIGGYBACK REGISTRATIONS. The Company shall notify each Eligible
Holder in writing at least twenty (20) business days prior to filing any
registration statement under the Securities Act for purposes of effecting a
public offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to any registration
under Section 2.2 or Section 2.4 of this Agreement, to any employee benefit plan
or a corporate reorganization, business combination or other rule 145
transaction) and will afford each Eligible Holder an opportunity to include in
such registration statement all or any part of the Registrable Securities then
held by each Eligible Holder. If an Eligible Holder of Registrable Securities
desires to include in any such registration statement all or any part of the
Registrable Securities then held, the Eligible Holder shall, within ten (10)
days after receipt of the above-described notice from the Company, so notify the
Company in writing, and in such notice shall inform the Company of the number of
Registrable Securities the Eligible Holder wishes to include in such
registration statement. If the Eligible Holder decides not to include all of its
Registrable Securities in any registration statement thereafter filed by the
Company, Eligible Holder shall nevertheless continue to have the right to
include any Registrable Securities in any subsequent registration statement or
registration statements as may be filed by the Company with respect to offerings
of its securities, all upon the terms and conditions set forth herein.
(a) UNDERWRITING. If a registration statement under which the
Company gives notice under this Section 2.3 is for an underwritten offering,
then the Company shall so advise Eligible Holders. In such event, the right of
Eligible Holders to include Registrable Securities in a registration pursuant to
this Section 2.3 shall be conditioned upon the Eligible Holder's participation
in such underwriting and the inclusion of Eligible Holder's Registrable
Securities in the underwriting to the extent provided herein. Each Selling
Shareholder shall, in such event, enter into an underwriting agreement in
customary form with the managing underwriter or underwriter(s) selected for such
underwriting. Notwithstanding any other provision of this Agreement, if the
managing underwriter determine(s) in good faith that marketing factors require a
limitation of the number of shares to be underwritten, then the managing
underwriter(s) may exclude shares (including Registrable Securities) from the
registration and the underwriting, and the number of shares that may be included
in the registration and the underwriting shall be allocated, first, to the
Company if such a offering is a primary offering on behalf of the Company, and
second, the shareholders who have exercised a demand registration right, and
third, to all other Selling Shareholders (and any other shareholders with
similar rights), based on the relative proportion of shares of all such Selling
Shareholders or other shareholders requested to be so registered. If any Selling
Shareholder who has elected to participate in the underwritten offering
disapproves of the terms of any such underwriting, such Selling Shareholder may
elect to withdraw therefrom by written notice to the Company and the
underwriter, delivered at least ten (10) business days prior to the effective
date of the registration statement. Any Registrable Securities excluded or
withdrawn from such underwriting shall be excluded and withdrawn from the
registration.
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48
2.4 FORM S-3 REGISTRATION. In case the Company shall receive from a
Requestor a written request that the Company effect a registration on Form S-3
and any related qualification or compliance with respect to all or a part of the
Registrable Securities owned by the Requestor, then the Company will as soon as
practicable, effect such registration and all such qualifications and
compliances as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of the Requestor's Registrable
Securities as are specified in such request; provided, however, that the Company
shall not be obligated to effect any such registration, qualification or
compliance pursuant to this Section 2.4:
(i) if Form S-3 is not available for such offering by the
Requestor;
(ii) if the Requestor proposes to sell Registrable Securities
and such other securities (if any) at an aggregate price to the public of less
than $2,000,000;
(iii) if the Company shall furnish to the Requestor a
certificate signed by the President or Chief Executive Officer of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such Form S-3 Registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement no more than once during any twelve (12) month period for a period of
not more than sixty (60) days after receipt of the request of the Requestor
under this Section 2.4;
(iv) if the Company has, within the twelve (12) month period
preceding the date of such request, already effected three (3) registrations for
the Requestor pursuant to Section 2.2 and Section 2.4; or
(v) in any particular jurisdiction in which the Company would
be required to qualify to do business or to execute a general consent to service
of process in effecting such registration, qualification or compliance or become
subject to taxation in any jurisdiction where it would be required to pay taxes
solely as a result of such filing.
(vi) NOT DEMAND REGISTRATION. Form S-3 registrations shall not
be deemed to be demand registrations as described in Section 2.2 above.
2.5 OBLIGATIONS OF THE COMPANY.
(a) EXPENSES. All expenses incurred in connection with a
registration pursuant to Sections 2.2, 2.3 and 2.4 including without limitation
all registration and qualification fees, printers' and accounting fees, fees and
disbursements of counsel for the Company, and the reasonable costs and expenses
of one counsel for the Selling Shareholders, but in no event shall the aggregate
cost of such counsel pursuant to this Agreement exceed $5,000 per registration
(but excluding underwriters' and brokers' discounts and commissions), shall be
borne by the Company. Each Selling Shareholder shall bear its respective
proportionate share (based on the total number of shares sold in such
registration) of all underwriting discounts or commissions payable to
underwriters or brokers in connection with such offerings.
-5-
49
(b) REGISTRATION. Whenever required to effect the registration
of any Registrable Securities under this Agreement, the Company shall, as
expeditiously as reasonably possible:
(i) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use all reasonable
efforts to cause such registration statement to become effective, and, upon the
request of Requestor, (y) keep a registration statement requested pursuant to
Section 2.2 effective for up to the later of one hundred eighty (180) days or
until the Selling Shareholders have completed the distribution described in the
registration statement relating thereto and (z) keep a registration statement
requested pursuant to Section 2.4 effective indefinitely pursuant to SEC Rule
415; provided, however, that the Selling Shareholders shall suspend use of a
prospectus contained in any such registration statement immediately upon receipt
of notice from the Company that the prospectus does not meet the requirements of
the Securities Act, 1934 Act or applicable regulations. In such event, the
Company shall use all reasonable efforts to amend promptly the registration
statement to conform the prospectus to the requirements of the Securities Act,
1934 Act and applicable regulations, unless the Company delivers a certificate
signed by the President or Chief Executive Officer of the Company stating that
in the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for an amendment to
such Form S-3 Registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the amendment to the Form
S-3 registration statement for a period of not more than sixty (60) days;
provided that this deferral mechanism may not be exercised more than once during
any twelve (12) month period and the sixty (60) day period referenced in clause
(y) above shall be extended one day for each day that the Company elects to
defer the filing under this sentence.
(ii) Prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(iii) Furnish to each Selling Shareholder or its
agents such number of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as they may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by them that are included in
such registration.
(iv) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Selling Shareholders, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or jurisdictions
or become subject to taxation in any jurisdiction where it would be required to
pay taxes solely as a result of such filing.
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50
(v) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter(s) of such offering. Each
Selling Shareholder shall also enter into and perform its obligations under such
an agreement.
(vi) Notify each Selling Shareholder at any time when
a prospectus relating to Registrable Securities is required to be delivered
under the Securities Act of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
(vii) Furnish, at the request of Requestor, on the
date that such Registrable Securities are delivered to the underwriters for
sale, if such securities are being sold through underwriters, or, if such
securities are not being sold through underwriters, on the date that the
registration statement with respect to such securities becomes effective, (i) an
opinion, dated as of such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Selling Shareholders (ii) a "comfort" letter dated as of such
date, from the independent certified public accountants of the Company, in form
and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to Requestor.
2.6 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Sections 2.2, 2.3 or
2.4 that each Selling Shareholder shall furnish to the Company such information
regarding it, the Registrable Securities held by it, and the intended method of
disposition of such securities as shall be required to timely effect the
registration of their Registrable Securities.
2.7 DELAY OF REGISTRATION. Neither Requestor nor any Eligible Holder
shall have any right to obtain or seek an injunction restraining or otherwise
delaying any such registration as the result of any controversy that might arise
with respect to the interpretation or implementation of this Section 2.
2.8 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) BY THE COMPANY. To the extent permitted by law, the
Company will indemnify and hold harmless, each Selling Shareholder, and their
respective members, officers, employees and agents, any underwriter (as defined
in the Securities Act) for the Selling Shareholders and each person, if any, who
controls any Selling Shareholder or underwriter within the meaning of the
Securities Act or the 1934 Act against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions
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in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"):
(i) any untrue statement or alleged untrue statement
of a material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto;
(ii) the omission or alleged omission to state
therein a material fact required to be stated therein, or necessary to make the
statements therein not misleading, or
(iii) any violation or alleged violation by the
Company of the Securities Act, the 1934 Act, any federal or state securities law
or any rule or regulation promulgated under the Securities Act, the 1934 Act or
any federal or state securities law in connection with the offering covered by
such registration statement;
and the Company will reimburse each Selling Shareholder and their respective
members, officers, employees and agents, underwriter or controlling person for
any legal or other expenses reasonably incurred by them, as incurred, in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided however, that (A) the Company will not be liable,
in an offering in which the Company did not execute an underwriting agreement or
in which there was no underwriter, to any Selling Shareholder under this section
with respect to any preliminary prospectus or the final prospectus to the extent
that any such loss, liability, claim, damage or expense of such holder results
from the fact that a Selling Shareholder sold Registrable Securities to a person
to whom there was not sent or given, at or prior to the written confirmation of
such sale, a copy of the final prospectus if the Company has previously and
timely furnished copies thereof to such holder; (B) the indemnity agreement
contained in this subsection 2.8(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the written consent of the Company (which consent
shall not be unreasonably withheld), and (C) the Company shall not be liable in
any such case for any such loss, claim, damage, liability or action to the
extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by a Selling Shareholder, or their
respective members, officers, employees and agents, underwriter or controlling
person thereof .
In addition, the Company agrees that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other proceeding
arising out of or based upon any statement or omission, or any alleged statement
or omission, described in this Section, the Company will reimburse each Selling
Shareholder on a monthly basis for all reasonable legal fees or other expenses
incurred in connection with investigating or defending any such claim, action,
investigation, inquiry or proceeding, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the Company's obligation
to reimburse each Selling Shareholder for such expenses and the possibility that
such payments might later be held to have been improper by a court of competent
jurisdiction. To the extent that any such interim reimbursement payment is so
held to have been improper, the person that received such payment shall promptly
return it to the Company, together with interest, compounded daily,
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52
determined on the basis of the prime rate announced from time to time by the
Bank of America (or its successor) (the "Prime Rate"). Any such interim
reimbursement payments which are not made to a Selling Shareholder or any person
entitled to indemnity within thirty (30) days of a request for reimbursement
shall bear interest at the Prime Rate from the date of such request.
(b) BY EACH SELLING SHAREHOLDER. To the extent permitted by
law, each Selling Shareholder will indemnify and hold harmless the Company, each
of its directors, each of its officers who have signed the registration
statement, each person, if any, who controls the Company within the meaning of
the Securities Act, and any underwriter against any losses, claims, damages or
liabilities (joint or several) to which the Company or any such director,
officer, controlling person, or underwriter may become subject under the
Securities Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereto) arise out
of or are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Selling Shareholder expressly for use in
connection with such registration; and such Selling Shareholder will reimburse
any legal or other expenses reasonably incurred by the Company or any such
director, officer, controlling person, or underwriter in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this subsection
2.8(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of such Selling Shareholder, which consent shall not be unreasonably withheld;
and provided further, that the total amounts payable in indemnity by any Selling
Shareholder under this Section 2.8(b) in respect of any Violation shall not
exceed the proceeds (net of underwriters' and brokers' discounts and
commissions) received by such Selling Shareholder in the registered offering out
of which such Violation arises. For the avoidance of doubt, this provision shall
not impose any indemnity obligation on a Selling Shareholder to the extent that
the Violation did not occur in reliance upon and in conformity with written
information furnished by such person.
(c) NOTICE. Promptly after receipt by an indemnified party
under this Section 2.8 of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 2.8,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that if the indemnifying party
assumes such defense the indemnifying party shall have no further liability for
the fees and expenses of counsel paid by the indemnified party, except that an
indemnified party shall have the right to retain its own counsel, with the fees
and expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential conflict of interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if prejudicial
to its ability to defend such action, shall relieve such indemnifying party of
any liability to the indemnified party under this Section 2.8, but the omission
so to deliver written notice to the indemnifying party will not
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relieve it of any liability that it may have to any indemnified party otherwise
than under this Section 2.8.
(d) CONTRIBUTION. If the indemnification provided in this
section 2.8 is unavailable or insufficient to hold harmless an indemnified party
under Section 2.8(a) or (b), then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to above (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Selling Shareholders on the other from the offering of the
securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand and the Selling Shareholder(s) on the other
in connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other equitable considerations.
The relative benefits received by the Company on the one hand and the Selling
Shareholder(s) on the other shall be deemed to be in the same proportion as the
total net proceeds from the offering received by the Company bear to the total
net proceeds received by the Selling Shareholder(s). The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact related to information supplied by the Company or written
information supplied by a Selling Shareholder, and the parties' relevant intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this paragraph (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending against any action or claim that is the subject of
this section. Notwithstanding the provisions of this section, a Selling
Shareholder shall not be required to contribute any amount in excess of the
amount of the total net proceeds (net of commissions) received by such Selling
Shareholder from the sale of the securities pursuant to this Agreement exceeds
the amount of any damages or expenses that a Selling Shareholder has otherwise
been required to pay, or has incurred, by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) SURVIVAL. The obligations of the Company and Eligible
Holders under this Section 2.8 shall survive the completion of any offering of
Registrable Securities in a registration statement, and otherwise.
2.9 TERMINATION OF THE COMPANY'S OBLIGATIONS. The Company shall have no
obligations pursuant to Sections 2.2 through 2.4 with respect to any Registrable
Securities proposed to be sold by a Requestor in a registration pursuant to
Section 2.2, 2.3 or 2.4 if, in the opinion of counsel to the Company, all such
Registrable Securities then requested to be registered by such Requestor may be
sold in a three (3) month period without registration under the Securities Act
pursuant to Rule 144 under the Securities Act.
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3. GENERAL PROVISIONS.
3.1 RIGHT TO DIRECTORSHIP/OBSERVER STATUS. For so long as the Investor
and its affiliates own at least 50% of the Preferred Stock originally purchased
by the Investor, or the Common Stock issued upon conversion of the Preferred
Stock, the Investor shall have the right to have a person designated by it
nominated to the Board of Directors of the Company. At each meeting of
shareholders at which any director of the class to which such director designee
is assigned are to be elected, such designee shall be included in the Board of
Directors' slate of nominees for election to the Board of Directors. At any time
where a nominee of Investor is not serving on the Board of Directors, Investor
may appoint a person to attend and speak at the meetings of the Board of
Directors in an observer capacity (but in such case the observer will have no
voting or other rights). The Company shall furnish Investor all internal budget,
financial and other information, whether or not available to the general public,
which is available to any other Company directors, provided that all such
information shall be maintained in accordance with the Confidentiality Agreement
between Company and Investor.
3.2 SUCCESSORS AND ASSIGNS. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties. This Agreement shall extend to all successive
transferees of the Preferred Stock and Registrable Securities, each of which
persons are hereby made third party beneficiaries hereof and may enforce the
terms of this Agreement as if such person was a direct party hereto.
3.3 THIRD PARTIES. Nothing in this Agreement, express or implied, is
intended to confer upon any person, other than the parties hereto and their
successors and assigns and third party beneficiaries hereof, any rights or
remedies under or by reason of this Agreement.
3.4 GOVERNING LAW. Except as noted below, this Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware.
3.5 COUNTERPARTS. This Agreement may be executed in two or more
counterparts each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.6 HEADINGS. The headings and captions used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting
this Agreement. All references in this Agreement to sections, paragraphs,
exhibits and schedules shall, unless otherwise provided, refer to sections and
paragraphs hereof and exhibits and schedules attached hereto, all of which
exhibits and schedules are incorporated herein by this reference.
3.7 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered, certified mail,
Federal Express, or other express courier, postage prepaid and addressed to
Investor at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn: Chief Financial
Officer and Deputy General Counsel, Finance and Operations (Fax (▇▇▇) ▇▇▇-▇▇▇▇),
with a copy to ▇▇▇▇▇▇▇ ▇▇▇▇ at ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ (Fax (▇▇▇) ▇▇▇-▇▇▇▇), and to Company, at 6
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇,
-▇▇-
▇▇
▇▇ ▇▇▇▇▇, Attn: Chief Financial Officer and General Counsel (Fax (▇▇▇) ▇▇▇-▇▇▇▇)
with a copy to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (Fax (▇▇▇) ▇▇▇-▇▇▇▇) or at such other address as
any party or Company may designate by giving ten (10) days advance written
notice to all other parties.
3.8 ATTORNEYS' FEES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to recover its reasonable attorneys' fees, experts' fees and costs,
including those for pretrial, trial, on appeal, in arbitration and in bankruptcy
and all other costs and necessary disbursements associated with any such
actions, in addition to any other relief to which such party may be entitled.
3.9 ADJUSTMENTS FOR STOCK SPLITS, ETC. Wherever in this Agreement there
is a reference to a specific number of shares of Common Stock of the Company of
any class or series, then, upon the occurrence of any subdivision, combination
or stock dividend of such class or series of stock, the specific number of
shares so referenced in this Agreement shall automatically be proportionally
adjusted to reflect the affect on the outstanding shares of such class or series
of stock by such subdivision, combination or stock dividend.
3.10 AGGREGATION OF STOCK. All shares held or acquired by affiliated
entities or persons shall be aggregated together for the purpose of determining
the availability of any rights under this Agreement.
3.11 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of Company and Investor (or, following assignment and
transfer of the Preferred Stock, by those holders owning more than 50% of the
Registrable Securities). Any amendment or waiver effected in accordance with
this Section shall be binding upon each future holder of Registrable Securities,
and Company. No waiver of any of the provisions of this Agreement shall be
deemed to be or shall constitute a waiver of any other provisions hereof,
whether or not similar, nor shall any such waiver constitute a continuing
waiver. No waiver shall be binding unless expressed as such in a document
executed by the party making the waiver.
3.12 SEVERABILITY. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision(s) shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision(s) were so excluded and shall be enforceable in accordance with
its terms.
3.13 ENTIRE AGREEMENT. This Agreement, together with all exhibits and
schedules hereto, constitutes the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes any and all
prior negotiations, correspondence, agreements, understandings duties or
obligations between the parties with respect to the subject matter hereof.
[The balance of this page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the date and year first above written.
"COMPANY"
FUTURELINK CORP., a Delaware corporation
By:
------------------------------------
Its:
-----------------------------------
Title:
---------------------------------
"INVESTOR"
MICROSOFT CORPORATION, a Washington
corporation
By:
------------------------------------
Its:
-----------------------------------
Title:
---------------------------------
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EXHIBIT H
MICROSOFT CORPORATION
COMPLIANCE CERTIFICATE
On this 6th day of July, 2000, the undersigned herby certifies,
pursuant to Section 5.2(c) of the Series A Convertible Preferred Stock Purchase
Agreement dated as of June 29, 2000 (the "Agreement) between FutureLink Corp., a
Delaware corporation (the "Company"), and Microsoft Corporation, a Washington
corporation, that:
1. The representations and warranties made by the Purchaser in Section
4 of the Agreement are true and correct in all material respects on the date
hereof, and
2. All covenants, agreements and conditions contained in the Agreement
to be performed by the Purchaser on or before the date hereof have been
performed or complied with in all material respects.
IN WITNESS WHEREOF, the undersigned has caused this Compliance
Certificate to be duly executed and delivered as of the date first written
above.
MICROSOFT CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
H-1