EXHIBIT 10.1
AMENDED AND RESTATED
REDEMPTION AND EXCHANGE AGREEMENT
THIS AMENDED AND RESTATED REDEMPTION AND EXCHANGE AGREEMENT (this
"Agreement"), dated as of June 14, 2001, by and among MicroStrategy
Incorporated, a Delaware corporation, with headquarters located at 0000
Xxxxxxxxxxxxx Xxxxx, XxXxxx, Xxxxxxxx 00000 (the "Company"), and the investors
listed on the Schedule of Investors attached hereto (individually, an "Investor"
and collectively, the "Investors"), amends and restates in its entirety, subject
to Section 9(d) hereof, that certain redemption and exchange agreement, dated as
of April 3, 2001, by and among the Company and each of the Investors, as amended
by Amendment No. 1 to Redemption and Exchange Agreement, dated as of June 4,
2001, and as amended by Amendment No. 2 to Redemption and Exchange Agreement,
dated as of June 8, 2001, and as amended by Amendment No. 3 to Redemption and
Exchange Agreement, dated as of June 12, 2001,(as amended prior to this
Agreement, the "Original Redemption and Exchange Agreement").
WHEREAS:
A. The Company, the Investors and certain other entities (the "Other
Investors") have entered into that certain Securities Purchase Agreement, dated
as of June 17, 2000 (the "Securities Purchase Agreement"), pursuant to which the
Investors and the Other Investors purchased from the Company shares of the
Company's Series A Convertible Preferred Stock (the "Series A Preferred Stock"),
which are convertible into shares of the Company's Class A common stock, par
value $0.001 per share (the "Common Stock") (as converted, the "Series A
Conversion Shares"), in accordance with the terms of the Company's Certificate
of Designations, Preferences and Rights of the Series A Preferred Stock filed
with the Secretary of State of the State of Delaware on June 19, 2000 (the
"Series A Certificate of Designations");
B. Prior to the closing of the transactions contemplated hereby, the
Company will have authorized the following new series of its preferred stock,
par value $0.001 per share: (1) the Company's Series B Convertible Preferred
Stock (the "Series B Preferred Stock"), which shall be convertible into shares
of Common Stock (as converted, the "Series B Conversion Shares"), in accordance
with the terms of the Company's Certificate of Designations, Preferences and
Rights of the Series B Preferred Stock, in the form attached hereto as Exhibit A
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(the "Series B Certificate of Designations"), (2) the Company's Series C
Convertible Preferred Stock (the "Series C Preferred Stock"), which shall be
convertible into shares of Common Stock (as converted, the "Series C Conversion
Shares"), in accordance with the terms of the Company's Certificate of
Designations, Preferences and Rights of the Series C Preferred Stock, in the
form attached hereto as Exhibit B (the "Series C Certificate of Designations"),
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(3) the Company's Series D Convertible Preferred Stock (the "Series D Preferred
Stock"), which shall be convertible into shares of Common Stock (as converted,
the "Series D Conversion Shares"), in accordance with the terms of the Company's
Certificate of Designations, Preferences and Rights of the Series D Preferred
Stock, in the form attached hereto as Exhibit C (the "Series D Certificate of
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Designations"), and (4) the Company's Series E Convertible Preferred Stock (the
"Series E Preferred Stock" and, collectively with the Series B Preferred Stock,
the Series C
Preferred Stock and the Series D Preferred Stock, the "Preferred Stock"), which
shall be convertible into shares of Common Stock (as converted, the "Series E
Conversion Shares" and, collectively with the Series B Conversion Shares, the
Series C Conversion Shares and the Series D Preferred Stock, the "Conversion
Shares"), in accordance with the terms of the Company's Certificate of
Designations, Preferences and Rights of the Series E Preferred Stock, in the
form attached hereto as Exhibit D (the "Series D Certificate of Designations"
and, collectively with the Series B Certificate of Designations, the Series C
Certificate of Designations and the Series D Certificate of Designations, the
"Certificates of Designations");
C. Each Investor is the holder of that number of shares of Series A
Preferred Stock (each a "Series A Preferred Share" and, collectively, the
"Series A Preferred Shares") set forth opposite its name in Column 2 on the
Schedule of Investors;
D. Upon the terms and conditions set forth in this Agreement, the Company
wishes to redeem an aggregate of 600 of the Series A Preferred Shares, and each
of the Investors wishes to allow the Company to redeem such Series A Preferred
Shares, for an aggregate redemption price of $6,000,000 in cash (pro rata based
on the number of Series A Preferred Shares held by each such Investor relative
to 6,000 Series A Preferred Shares);
E. The Company and each Investor wish to exchange, upon the terms and
conditions set forth in this Agreement, an aggregate of 500 of the Series A
Preferred Shares for an aggregate of 1,000,000 shares of Common Stock, as
adjusted for any stock splits, stock dividends, stock combinations or other
similar transactions (the "Common Shares"), (pro rata based on the number of
Series A Preferred Shares held by each such Investor relative to 6,000 Series A
Preferred Shares);
F. The Company and each Investor wish to exchange, upon the terms and
conditions set forth in this Agreement, an aggregate of 1,590 of the Series A
Preferred Shares for an aggregate of 1,590 shares of Series B Preferred Stock,
as adjusted for any stock splits, stock dividends, stock combinations or other
similar transactions (the "Series B Preferred Shares"), (pro rata based on the
number of Series A Preferred Shares held by each such Investor relative to 6,000
Series A Preferred Shares);
G. The Company and each Investor wish to exchange, upon the terms and
conditions set forth in this Agreement, an aggregate of 1,590 of the Series A
Preferred Shares for an aggregate of 1,590 shares of Series C Preferred Stock,
as adjusted for any stock splits, stock dividends, stock combinations or other
similar transactions (the "Series C Preferred Shares"), (pro rata based on the
number of Series A Preferred Shares held by each such Investor relative to 6,000
Series A Preferred Shares);
H. The Company and each Investor wish to exchange, upon the terms and
conditions set forth in this Agreement, an aggregate of 1,360 of the Series A
Preferred Shares for an aggregate number of shares of Series D Preferred Stock
equal to the sum of (i) 1,295.6 shares of Series D Preferred Stock, as adjusted
for any stock splits, stock dividends, stock combinations or other similar
transactions (the "Fixed Series D Preferred Shares"), plus (ii) the Additional
Series D Preferred Shares (as defined in Section 1(b)) (the Fixed Series D
Preferred Shares and the Additional Series D Preferred Shares are collectively
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referred to as the "Series D Preferred Shares") (pro rata based on the number of
Series A Preferred Shares held by each such Investor relative to 6,000 Series A
Preferred Shares);
I. The Company and each Investor wish to exchange, upon the terms and
conditions set forth in this Agreement, an aggregate of 360 of the Series A
Preferred Shares for an aggregate of 360 shares of Series E Preferred Stock, as
adjusted for any stock splits, stock dividends, stock combinations or other
similar transactions (the "Series E Preferred Shares" and, collectively with the
Series B Preferred Shares, the Series C Preferred Shares and the Series D
Preferred Shares, the "Preferred Shares"), (pro rata based on the number of
Series A Preferred Shares held by each such Investor relative to 6,000 Series A
Preferred Shares);
J. The exchange of the Series A Preferred Shares for the Common Shares
and the Preferred Shares is being made in reliance upon the exemption from
registration provided by Section 3(a)(9) of the Securities Act of 1933, as
amended (the "1933 Act"); and
K. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering an Amended and Restated
Registration Rights Agreement in the form attached hereto as Exhibit E (the
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"Amended and Restated Registration Rights Agreement") pursuant to which the
Company has agreed to provide certain registration rights under the 1933 Act and
the rules and regulations promulgated thereunder, and applicable state
securities laws.
NOW THEREFORE, the Company and the Investors hereby agree as follows:
1. REDEMPTION AND EXCHANGE OF SERIES A PREFERRED SHARES.
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a. Redemption of Series A Preferred Shares. Subject to satisfaction
(or waiver) of the conditions set forth in Sections 6 and 7, the Company shall
redeem from each Investor and each Investor shall tender to the Company for
redemption on the Closing Date (as defined below) that number of such Investor's
Series A Preferred Shares set forth opposite such Investor's name in Column 3 on
the Schedule of Investors (which number of Series A Preferred Shares in the
aggregate equals 600 Series A Preferred Shares) (the "Closing"). The redemption
price (the "Redemption Price") to be paid by the Company for each Series A
Preferred Share being redeemed at the Closing shall be $10,000 in cash (such
that the aggregate Redemption Price for all Series A Preferred Shares being
redeemed is $6,000,000, in the respective amounts set forth opposite each
Investor's name in Column 4 on the Schedule of Investors).
b. Exchange of Series A Preferred Shares. Subject to satisfaction
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(or waiver) of the conditions set forth in Sections 6 and 7, the Company shall
at the Closing (i) issue to each Investor, and each Investor severally agrees to
exchange that number of such Investor's Series A Preferred Shares set forth
opposite such Investor's name in Column 5 on the Schedule of Investors (which
number of Series A Preferred Shares in the aggregate equals 500 Series A
Preferred Shares) for, that number of Common Shares set forth opposite such
Investor's name in Column 6 on the Schedule of Investors (which number of Common
Shares in the aggregate equals 1,000,000 Common Shares); (ii) issue to each
Investor, and each Investor severally agrees to exchange that number of such
Investor's Series A Preferred Shares set
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forth opposite such Investor's name in Column 7 on the Schedule of Investors
(which number of Series A Preferred Shares in the aggregate equals 1,590 Series
A Preferred Shares) for, that number of Series B Preferred Shares set forth
opposite such Investor's name in Column 8 on the Schedule of Investors (which
number of Series B Preferred Shares in the aggregate equals 1,590 Series B
Preferred Shares); (iii) issue to each Investor, and each Investor severally
agrees to exchange that number of such Investor's Series A Preferred Shares set
forth opposite such Investor's name in Column 9 on the Schedule of Investors
(which number of Series A Preferred Shares in the aggregate equals 1,590 Series
A Preferred Shares) for, that number of Series C Preferred Shares set forth
opposite such Investor's name in Column 10 on the Schedule of Investors (which
number of Series C Preferred Shares in the aggregate equals 1,590 Series C
Preferred Shares); (iv) issue to each Investor, and each Investor severally
agrees to exchange that number of such Investor's Series A Preferred Shares set
forth opposite such Investor's name in Column 11 on the Schedule of Investors
(which number of Series A Preferred Shares in the aggregate equals 360 Series A
Preferred Shares) for, that number of Series E Preferred Shares set forth
opposite such Investor's name in Column 12 on the Schedule of Investors (which
number of Series E Preferred Shares in the aggregate equals 360; and (v) issue
to each Investor, and each Investor severally agrees to exchange that number of
such Investor's Series A Preferred Shares set forth opposite such Investor's
name in Column 13 on the Schedule of Investors (which number of Series A
Preferred Shares in the aggregate equals 1,360 Series A Preferred Shares) for,
that number of Series D Preferred Shares equal to the sum of (A) the number of
Fixed Series D Preferred Shares set forth opposite such Investor's name in
Column 14 on the Schedule of Investors (which number of Fixed Series D Preferred
Shares in the aggregate equals 1,295.6 Fixed Series D Preferred Shares), plus
(B) such Investor's allocated percentage (set forth opposite such Investor's
name in Column 13 on the Schedule of Investors) of the Additional Series D
Preferred Shares. The "Additional Series D Preferred Shares" means the number of
shares of Series D Preferred Stock determined according to the following
formula:
$2,400,000
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(Additional Series D Preferred Share Exchange Price)(2,000)
where the "Additional Series D Preferred Share Exchange Price" means the
arithmetic average of the Weighted Average Price (as defined in the Series
A Certificate of Designations) of the Common Stock on each of the five (5)
consecutive trading days ending on and including June 8, 2001.
c. Closing Date. The date and time of the Closing (the "Closing
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Date") shall be 10:00 a.m. Central Time, on June 14, 2001, subject to
notification of satisfaction (or waiver) of the conditions to the Closing set
forth in Sections 6 and 7 (or such other date as is mutually agreed to by the
Company and each Investor, but in no event later than June 15, 2001). The
Closing shall occur on the Closing Date at the offices of Xxxxxx Xxxxxx Zavis,
000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000-0000.
d. Form of Payment. On the Closing Date, (i) the Company (A) shall
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pay to each Investor the aggregate Redemption Price for the Series A Preferred
Shares held by such Investor which the Company is redeeming at the Closing, by
wire transfer of immediately available funds in accordance
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with such Investor's written wire instructions, and (B) shall issue and deliver
to each Investor certificates representing the Common Shares and the Preferred
Shares being issued in exchange for such Investor's Series A Preferred Shares
not being redeemed (in such denominations as such Investor shall request), and
(ii) each Investor shall deliver to the Company stock certificates (the "Series
A Preferred Stock Certificates") representing such number of the Series A
Preferred Shares held by such Investor (as indicated opposite such Investor's
name on the Schedule of Investors).
2. INVESTOR'S REPRESENTATIONS AND WARRANTIES.
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Each Investor represents and warrants with respect to only itself
that:
a. Reliance on Exemptions. Such Investor understands that the Common
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Shares, the Preferred Shares, the Conversion Shares and the Dividend Shares (as
defined in each of the Series B Certificate of Designations, the Series C
Certificate of Designations and the Series E Certificate of Designations)
(collectively, the "Securities") are being offered to it in reliance on specific
exemptions from the registration requirements of the United States federal and
state securities laws and that the Company is relying in part upon the truth and
accuracy of, and such Investor's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such Investor set
forth herein in order to determine the availability of such exemptions and the
eligibility of such Investor to acquire the Securities.
b. No Governmental Review. Such Investor understands that no United
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States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
c. Transfer or Resale. Such Investor understands that except as
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provided in the Amended and Restated Registration Rights Agreement: (i) the
Securities have not been and are not being registered under the 1933 Act or any
state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered thereunder, (B) such Investor
shall have delivered to the Company an opinion of counsel, in a generally
acceptable form, to the effect that such Securities to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an exemption from
such registration, or (C) such Investor provides the Company with reasonable
assurance that such Securities can be sold, assigned or transferred pursuant to
Rule 144 promulgated under the 1933 Act (or a successor rule thereto) ("Rule
144"); (ii) any sale of the Securities made in reliance on Rule 144 may be made
only in accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the seller
(or the person through whom the sale is made) may be deemed to be an underwriter
(as that term is defined in the 0000 Xxx) may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
and (iii) neither the Company nor any other person is under any obligation to
register the Securities under the 1933 Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder.
Notwithstanding the foregoing, the Securities may be pledged in connection with
a bona fide margin account or other loan secured by the Securities.
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d. Information. Such Investor and its advisors, if any, have been
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furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the issuance of the Securities which
have been requested by such Investor. Such Investor and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Investor
or its advisors, if any, or its representatives shall modify, amend or affect
such Investor's right to rely on the Company's representations and warranties
contained in Sections 3 and 9(l) below. Such Investor understands that its
investment in the Securities involves a high degree of risk. Such Investor has
sought such accounting, legal and tax advice as it has considered necessary to
make an informed investment decision with respect to its acquisition of the
Securities.
e. Legends. Such Investor understands that the certificates or other
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instruments representing the Preferred Shares and, until such time as the sale
of the Common Shares and the Conversion Shares have been registered under the
1933 Act as contemplated by the Amended and Restated Registration Rights
Agreement, the stock certificates representing the Common Shares and the
Conversion Shares, except as set forth below, shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES
LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY THE SECURITIES.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for resale under the 1933 Act, (ii) in connection with
a sale transaction, such holder provides the Company with an opinion of counsel
reasonably satisfactory to the Company, in a generally acceptable form, to the
effect that a public sale, assignment or transfer of the Securities may be made
without registration under the 1933 Act, or (iii) such holder provides the
Company with reasonable assurances (including, if requested by the Company,
delivering such reasonable assurances to the Company's counsel in connection
with such counsel rendering an opinion on the validity of a sale by such
Investor pursuant to Rule 144) that the Securities can be sold pursuant to Rule
144 without any restriction as to the number of securities acquired as of a
particular date that can then be immediately sold.
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f. Authorization; Enforcement; Validity. This Agreement and the
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Amended and Restated Registration Rights Agreement have been duly and validly
authorized, executed and delivered on behalf of such Investor and are valid and
binding agreements of such Investor enforceable against such Investor in
accordance with their terms, subject as to enforceability to general principles
of equity and to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
g. Residency. Such Investor is a resident of that country specified
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in its address on the Schedule of Investors.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
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The Company represents and warrants to each of the Investors that:
a. Organization and Qualification. The Company and its
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"Subsidiaries" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns capital stock or holds an equity or
similar interest which ownership entitles the Company to elect a majority of the
board of directors or similar governing body of such entity) are corporations
duly organized and validly existing in good standing under the laws of the
jurisdiction in which they are incorporated, and have the requisite corporate
power and authorization to own their properties and to carry on their business
as now being conducted. Each of the Company and its Subsidiaries is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not have
a Material Adverse Effect. As used in this Agreement, "Material Adverse Effect"
means any material adverse effect on the business, properties, assets,
operations, results of operations, or financial condition of the Company and its
Subsidiaries, if any, taken as a whole, or on the transactions contemplated
hereby or by the agreements and instruments to be entered into in connection
herewith, or on the authority or ability of the Company to perform its
obligations under the Transaction Documents (as defined below) or any of the
Certificates of Designations. A complete list of entities in which the Company,
directly or indirectly, owns capital stock or holds an equity or similar
interest is set forth on Schedule 3(a).
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b. Authorization; Enforcement; Validity. The Company has the
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requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Amended and Restated Registration Rights
Agreement, the Certificates of Designations, the Irrevocable Transfer Agent
Instructions (as defined in Section 5) and each of the other agreements entered
into by the parties hereto in connection with the transactions contemplated by
this Agreement (collectively, the "Transaction Documents"), and to issue the
Securities in accordance with the terms hereof and thereof and to redeem the 600
Series A Preferred Shares being redeemed pursuant to this Agreement. The
execution and delivery of the Transaction Documents by the Company and the
execution and filing of each of the Certificates of Designations by the Company
and the consummation by it of the transactions contemplated hereby and thereby,
including without limitation the redemption and exchange of the Series A
Preferred Shares, the issuance of the Common Shares and the Preferred Shares and
the reservation for issuance and
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the issuance of the Conversion Shares issuable upon conversion of the Preferred
Shares, have been duly authorized by the Company's Board of Directors and no
further consent or authorization is required by the Company, its Board of
Directors or its stockholders (except to the extent that stockholder approval
may be required pursuant to the rules of the Nasdaq National Market for the
issuance of a number of shares of Common Stock greater than that number of
shares of Common Stock that the Company may issue without breaching the
Company's obligations under the rules or regulations of the Nasdaq National
Market (the "Nasdaq 19.99% Rule")). The Transaction Documents have been duly
executed and delivered by the Company. The Transaction Documents constitute the
valid and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies. Each of
the Certificates of Designations has been filed prior to the Closing Date with
the Secretary of State of the State of Delaware and will be in full force and
effect, enforceable against the Company in accordance with its terms and shall
not have been amended unless in compliance with its terms.
c. Capitalization. As of the date hereof, the authorized capital
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stock of the Company consists of (i) 330,000,000 shares of Class A common stock,
of which as of the date hereof 31,230,461 shares are issued and outstanding,
29,016,777 shares are reserved for issuance pursuant to the Company's stock
option and purchase plans (including shares reserved for issuance upon exercise
of options which have already been issued, but have not yet been exercised,
under such plans), 50,973,527 shares are reserved for issuance pursuant to
conversion of the Company's Class B common stock and 128,334 shares are issuable
and reserved for issuance pursuant to securities (other than the Series A
Preferred Stock, the Preferred Stock, stock option and purchase plans and the
Company's Class B common stock) exercisable or exchangeable for, or convertible
into, shares of Common Stock, (ii) 165,000,000 shares of Class B common stock,
of which as of the date hereof 50,973,527 shares are issued and outstanding and
(iii) 5,000,000 shares of preferred stock, of which as of the date hereof 12,500
shares of Series A Preferred Stock are issued and outstanding. All of such
outstanding shares have been, or upon issuance will be, validly issued and are
fully paid and nonassessable. As of the date hereof, the Company has outstanding
options to purchase 21,288,229 shares of Common Stock and outstanding warrants
to purchase 128,334 shares of Common Stock. Except as disclosed in Schedule
3(c), (A) no shares of the Company's capital stock are subject to preemptive
rights or any other similar rights (arising under Delaware law, Virginia law,
the Company's Certificate of Incorporation or By-laws or any agreement or
instrument to which the Company is a party) any liens or encumbrances granted or
created by the Company; (B) there are no outstanding debt securities issued by
the Company; (C) except as set forth in the third sentence of this Section 3(c),
there are no outstanding options, warrants, scrip, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries; (D) there are
no outstanding securities or instruments of the Company or any of its
Subsidiaries which contain any
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redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries; (E) there are no securities or instruments containing anti-
dilution or similar provisions that will be triggered by the issuance of the
Securities as described in this Agreement; and (F) the Company does not have any
stock appreciation rights or "phantom stock" plans or agreements or any similar
plan or agreement. The Company has furnished to each Investor true and correct
copies of the Company's Certificate of Incorporation, as amended and as in
effect on the date hereof (the "Certificate of Incorporation"), and the
Company's By-laws, as amended and as in effect on the date hereof (the "By-
laws"), and the terms of all securities convertible into or exercisable or
exchangeable for Common Stock and the material rights of the holders thereof in
respect thereto except for stock options granted under any employee benefit plan
or director stock option plan of the Company approved by the board of directors
of the Company. For purposes of the Nasdaq 19.99% Rule, both the shares of
Common Stock and the shares of the Company's Class B common stock, par value
$0.001, are included in the number of outstanding shares for purposes of
determining what percentage of the Company's outstanding shares may be issued
without violating the Nasdaq 19.99% Rule.
d. Issuance of Securities. As of the Closing, the Common Shares and
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the Preferred Shares will have been duly authorized and, upon issuance in
accordance with the terms hereof, shall be (i) validly issued, fully paid and
non-assessable, (ii) free from all taxes, liens and charges with respect to the
issuance thereof and (iii) with respect to the Preferred Shares, entitled to the
rights and preferences set forth in the respective Certificates of Designations.
As of the Closing, (A) at least 125% of that number of shares of Common Stock
issuable upon conversion of all the Series B Preferred Shares and the Series C
Preferred Shares outstanding immediately following the Closing (without regard
to any limitations on conversions, but subject to adjustment pursuant to the
Company's covenant set forth in Section 4(d) below) will have been duly
authorized and reserved for issuance upon conversion of the such Preferred
Shares, (B) at least 100% of that number of shares of Common Stock issuable upon
conversion of all the Series D Preferred Shares outstanding immediately
following the Closing (without regard to any limitations on conversions, but
subject to adjustment pursuant to the Company's covenant set forth in Section
4(d) below) will have been duly authorized and reserved for issuance upon
conversion of the such Preferred Shares and (C) at least 1,542,857 of shares of
Common Stock will have been duly authorized and reserved for issuance upon
conversion of the Series E Preferred Shares, subject to adjustment pursuant to
the Company's covenant set forth in Section 4(d) below). Upon conversion or
issuance in accordance with the applicable Certificates of Designations, the
Conversion Shares and the Dividend Shares, as the case may be, will be validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issue thereof, with the holders being entitled to all rights
accorded to a holder of Common Stock. The issuance by the Company of the
Securities is exempt from registration under the 1933 Act.
e. No Conflicts. The execution, delivery and performance of the
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Transaction Documents by the Company, the performance by the Company of its
obligations under the Certificates of Designations and the consummation by the
Company of the transactions contemplated hereby and thereby (including, without
limitation, the reservation for issuance and issuance of the Conversion Shares)
will not (i) result in a violation of the Certificate of Incorporation or the
By-laws; (ii) except as disclosed in Schedule 3(e), conflict with, or constitute
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a default (or an event which with notice or lapse of time or both would
9
become a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture or instrument
to which the Company or any of its Subsidiaries is a party; (iii) result in a
violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations and the rules and regulations
of the Principal Market (as defined below)) applicable to the Company or any of
its Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected. Neither the Company nor its Subsidiaries is
in violation of any term of its Certificate of Incorporation or its By-laws or
their organizational charter or by-laws, respectively. Except as disclosed in
Schedule 3(e), neither the Company or any of its Subsidiaries is in violation of
-------------
any term of or in default under any contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its Subsidiaries, except where such
violations and defaults would not result, either individually or in the
aggregate, in a Material Adverse Effect. The business of the Company and its
Subsidiaries is not being conducted, and shall not be conducted, in violation of
any law, ordinance or regulation of any governmental entity, except where such
violations would not result, either individually or in the aggregate, in a
Material Adverse Effect. Except as specifically contemplated by this Agreement,
as required under the 1933 Act, as required by Blue Sky filings or as required
by the Nasdaq 19.99% Rule, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency or any regulatory or self-regulatory agency in order for it
to execute, deliver or perform any of its obligations under or contemplated by
the Transaction Documents or to perform its obligations under the Certificates
of Designations in accordance with the terms hereof or thereof. Except as
disclosed in Schedule 3(e), all consents, authorizations, orders, filings and
-------------
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof. The
Company and its Subsidiaries are unaware of any facts or circumstances which
might give rise to any of the foregoing.
f. SEC Documents; Financial Statements. Since December 31, 1999, the
-----------------------------------
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "1934 Act") (all of the
foregoing filed prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the "SEC Documents"). A
complete list of the Company's SEC Documents is set forth on Schedule 3(f).
-------------
Except as disclosed on Schedule 3(f), as of the date hereof, the SEC Documents,
-------------
as they may have been subsequently amended by filings made by the Company with
the SEC prior to the date hereof, complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents. None of the SEC
Documents, as of the date hereof and as they may have been subsequently amended
by filings made by the Company with the SEC prior to the date hereof, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except as disclosed on Schedule 3(f), as of their respective dates,
-------------
the financial statements of the Company included in the SEC Documents complied
as to form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto. Except as
disclosed on Schedule 3(f), such financial statements have been prepared in
-------------
accordance with generally accepted accounting principles, consistently
10
applied, during the periods involved (except (i) as may be otherwise indicated
in such financial statements or the notes thereto, or (ii) in the case of
unaudited interim statements, to the extent they may exclude footnotes or may be
condensed or summary statements) and fairly present in all material respects the
financial position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Investors which is
not included in the SEC Documents, contains any untrue statement of a material
fact or omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstance under which they are or
were made, not misleading. As of the date hereof, the Company meets the
requirements for use of Form S-3 for registration of the resale of Registrable
Securities (as defined in the Amended and Restated Registration Rights
Agreement). The Company is not required to file and will not be required to file
any agreement, note, lease, mortgage, deed or other instrument entered into
prior to the date hereof and to which the Company is a party or by which the
Company is bound which has not been previously filed as an exhibit to its
reports filed with the SEC under the 1934 Act.
g. Absence of Certain Changes. Except as disclosed in Schedule 3(g)
-------------------------- -------------
or as disclosed in the Company's Annual Report on Form 10-K for the Year Ended
December 31, 2000, in the Company's Quarterly Report on Form 10-Q for the Three
Months Ended March 31, 2001 or in the Company's Current Report on Form 8-K,
dated April 30, 2001, since December 31, 2000 there has been no change or
development that has had or could reasonably be expected to have a Material
Adverse Effect. The Company has not taken any steps, and does not currently
expect to take any steps, to seek protection pursuant to any bankruptcy law nor
does the Company or any of its Subsidiaries have any knowledge or reason to
believe that its creditors intend to initiate involuntary bankruptcy proceedings
or any actual knowledge of any fact which would reasonably lead a creditor to do
so. Except as disclosed in Schedule 3(g) or as disclosed in the Company's Annual
-------------
Report on Form 10-K for the Year Ended December 31, 2000 or as disclosed in the
Company's Quarterly Report on Form 10-Q for the Three Months Ended March 31,
2001, since December 31, 2000, the Company has not declared or paid any
dividends, sold any assets, individually or in the aggregate, in excess of
$500,000 outside of the ordinary course of business or had capital expenditures,
individually or in the aggregate, in excess of $1,000,000.
h. Acknowledgment Regarding Redemption and Exchange of Investor's
--------------------------------------------------------------
Series A Preferred Shares. The Company acknowledges and agrees that each of the
-------------------------
Investors is acting solely in the capacity of an arm's length purchaser with
respect to the Transaction Documents and the Certificates of Designations and
the transactions contemplated hereby and thereby. The Company further
acknowledges that each Investor is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to the
Transaction Documents and the Certificates of Designations and the transactions
contemplated hereby and thereby and any advice given by any of the Investors or
any of their respective representatives or agents in connection with the
Transaction Documents and the Certificates of Designations and the transactions
contemplated hereby and thereby is merely incidental to such Investor's entering
into this Agreement. The Company further represents to each Investor that the
Company's decision to enter into the Transaction Documents has been based solely
on the independent evaluation by the Company and its representatives.
11
i. No Solicitation. Neither the Company, nor any of its affiliates,
---------------
nor any person acting on its or their behalf, has paid or given, either directly
or indirectly, any commission or other remuneration to any person for soliciting
the exchange of the Series A Preferred Shares for the Common Shares or the
Preferred Shares or for any other transaction contemplated by this Agreement.
j. No Integrated Offering. Neither the Company, nor any of its
----------------------
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of any exchange or automated quotation system on
which any of the securities of the Company are listed or designated (except for
the issuance of securities on the Closing Date to holders of the Series A
Preferred Stock), nor will the Company or any of its Subsidiaries take any
action or steps that would cause the offering of the Securities to be integrated
with other offerings (except for the issuance of securities on the Closing Date
to holders of the Series A Preferred Stock).
k. Application of Takeover Protections. The Company and its board of
------------------------------------
directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar anti-
takeover provision under the Certificate of Incorporation or the laws of the
state of its incorporation which is or could become applicable to the Investors
as a result of the transactions contemplated by this Agreement, including,
without limitation, the Company's issuance of the Securities and the Investors'
ownership of the Securities.
l. Rights Agreement. The Company has not adopted a shareholder
----------------
rights plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the Company.
m. No Other Agreements. The Company has not, directly or indirectly,
-------------------
made any agreements with any Investor relating to the terms or conditions of the
transactions contemplated by the Transaction Documents except as set forth in
the Transaction Documents.
n. Information. Neither the Company nor any of its Subsidiaries nor
-----------
any of their officers, directors, employees or agents have provided the
Investors with any material, nonpublic information.
o. Other Information. Schedule 3(o) includes certain information
----------------- -------------
about the Company.
4. COVENANTS.
---------
a. Best Efforts. Each party shall use its best efforts to timely
------------
satisfy each of the conditions to be satisfied by it as provided in Sections 6
and 7 of this Agreement. Without limiting the
12
generality of the foregoing, the Company shall use its best efforts to obtain
the consent of Foothill Capital Corporation to the transactions contemplated by
the Transaction Documents by June 14, 2001.
b. Reporting Status. Until the later of (i) the date which is one
----------------
year after the date as of which the Investors may sell all of the Common Shares
and the Conversion Shares without restriction pursuant to Rule 144(k)
promulgated under the 1933 Act (or successor thereto) and (ii) the date which is
one (1) year after the Maturity Date (as defined in each of the Certificates of
Designations) (the "Reporting Period"), the Company shall file all reports
required to be filed with the SEC pursuant to the 1934 Act, and the Company
shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would
otherwise permit such termination.
c. Financial Information. The Company agrees to send the following
---------------------
to each Investor during the Reporting Period: (i) within two (2) days after the
filing thereof with the SEC, a copy of its Annual Reports on Form 10-K, its
Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and any
registration statements (other than on Form S-8) or amendments filed pursuant to
the 1933 Act, provided that if any such report is not filed with the SEC through
XXXXX then the Company shall deliver a copy of such report to each Investor by
facsimile on the same day it is filed with the SEC; (ii) on the same day as the
release thereof, facsimile copies of all press releases issued by the Company or
any of its Subsidiaries; and (iii) copies of any notices and other information
made available or given to the stockholders of the Company generally,
contemporaneously with the making available or giving thereof to the
stockholders.
d. Reservation of Shares. The Company shall take all action
---------------------
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than (i) 125% of the number of shares of Common Stock needed
to provide for the issuance of the shares of Common Stock upon conversion of all
outstanding Series B Preferred Shares and Series C Preferred Shares (without
regard to any limitations on conversions), (ii) 100% of the number of shares of
Common Stock needed to provide for the issuance of the shares of Common Stock
upon conversion of all outstanding Series D Preferred Shares (without regard to
any limitations on conversions) and (iii) 150% of the number of shares of Common
Stock needed to provide for the issuance of the shares of Common Stock upon
conversion of all outstanding Series E Preferred Shares (without regard to any
limitations on conversions), assuming for purposes of this determination that
the Conversion Price (as defined in the Series E Certificate of Designations)
for the Series E Preferred Shares is $3.50 (subject to adjustment for stock
splits, stock dividends, stock combinations and other similar transactions after
the Closing Date) during the period beginning on the Closing Date and ending on
and including the date which is 180 days after the Closing Date).
e. Listing. The Company shall promptly secure the listing of all of
-------
the Registrable Securities (as defined in the Amended and Restated Registration
Rights Agreement) upon each national securities exchange and automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to
official notice of issuance) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all Registrable Securities from
time to time issuable under the terms of the Transaction Documents and the
Certificates of Designations. The Company shall use its best efforts
13
to maintain the Common Stock's authorization for quotation on the Nasdaq
National Market ("NASDAQ") or listing on The New York Stock Exchange, Inc.
("NYSE") (as applicable, the "Principal Market"). Neither the Company nor any of
its Subsidiaries shall take any action which would be reasonably expected to
result in the delisting or suspension of the Common Stock from the Principal
Market. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 4(e).
f. Disclosure of Transactions and Other Material Information. Before
---------------------------------------------------------
9:00 a.m. (Eastern Time) on June 18, 2001, the Company shall file a Current
Report on Form 8-K (the "Announcing Form 8-K") with the SEC describing the terms
of the transactions contemplated by the Transaction Documents and by documents
relating to the issuance on the Closing Date of securities to other holders of
Series A Preferred Stock (the "Other Holder Documents") and including as
exhibits to such Current Report on Form 8-K this Agreement (including the
Disclosure Schedules to this Agreement), each of the Certificates of
Designations, the Amended and Restated Registration Rights Agreement and the
Other Holder Documents, in the form required by the 1934 Act. If the Closing
does not occur on June 14, 2001 (or such later date as the Company and each
Investor agree in writing), then the Company shall file on June 15, 2001 (or
such later date as the Company and each Investor agree in writing), a Current
Report on Form 8-K with the SEC disclosing that the Closing did not occur. From
and after the filing of the Announcing Form 8-K with the SEC, no Investor shall
be in possession of any material nonpublic information received from the
Company, any of its Subsidiaries or any of its respective officers, directors,
employees or agents, that is not disclosed in the Announcing Form 8-K. The
Company shall not, and shall cause each of its Subsidiaries and its and each of
their respective officers, directors, employees and agents not to, provide any
Investor with any material nonpublic information regarding the Company or any of
its Subsidiaries from and after the filing of the Announcing Form 8-K with the
SEC without the express written consent of such Investor. In the event of a
breach of the foregoing covenant by the Company, any of its Subsidiaries, or any
of its or their respective officers, directors, employees and agents, or in the
event an Investor receives notice of a Loan Default (as defined in Section 1 of
the Series E Certificate of Designations) from Foothill Capital Corporation
pursuant to Section 1 of the Series E Certificate of Designations, and if the
Company has not publicly disclosed the material nonpublic information within 12
hours of written notice from such Investor of the breach or the Loan Default
notice, in addition to any other remedy provided herein or in the Transaction
Documents, an Investor shall have the right to make a public disclosure, in the
form of a press release, public advertisement or otherwise, of such material
nonpublic information without the prior approval by the Company, its
Subsidiaries, or any of its or their respective officers, directors, employees
or agents. No Investor shall have any liability to the Company, its
Subsidiaries, or any of its or their respective officers, directors, employees,
shareholders or agents for any such disclosure. Subject to the foregoing,
neither the Company nor any Investor shall issue any press releases or any other
public statements with respect to the transactions contemplated hereby or
disclosing the name of any Investor; provided, however, that the Company shall
be entitled, without the prior approval of any Investor, to make any press
release or other public disclosure with respect to such transactions (i) in
substantial conformity with the Announcing Form 8-K and contemporaneously
therewith and (ii) as is required by applicable law and regulations (provided
that in the case of clause (i) each Investor shall be consulted by the Company
in connection with any such press release or other public disclosure prior to
its release).
14
g. Proxy Statement. The Company shall provide each stockholder
---------------
entitled to vote at the next annual meeting of stockholders of the Company,
which meeting shall occur on or before July 31, 2001 (the "Stockholder Meeting
Deadline"), a proxy statement, which has been previously reviewed by the
Investors and a counsel of their choice, soliciting each such stockholder's
affirmative vote at such annual stockholder meeting for approval of the
Company's issuance of all of the Securities as described in this Agreement in
accordance with applicable law and the rules and regulations of the Principal
Market (such affirmative approval being referred to herein as the "Stockholder
Approval"), and the Company shall use its best efforts to solicit its
stockholders' approval of such issuance of the Securities and to cause the Board
of Directors of the Company to recommend to the stockholders that they approve
such proposal.
h. Corporate Existence. So long as an Investor beneficially owns any
-------------------
Preferred Stock, the Company shall maintain its corporate existence and shall
not sell all or substantially all of the Company's assets, except in the event
of a merger or consolidation or sale of all or substantially all of the
Company's assets, where the surviving or successor entity in such transaction
(i) assumes the Company's obligations hereunder and under the agreements and
instruments entered into in connection herewith and (ii) is a publicly traded
corporation whose common stock is quoted on or listed for trading on Nasdaq or
NYSE.
i. Pledge of Securities. The Company acknowledges and agrees that
--------------------
the Securities may be pledged by an Investor in connection with a bona fide
margin agreement or other loan secured by the Securities. The pledge of
Securities shall not be deemed to be a transfer, sale or assignment of the
Securities hereunder, and no Investor effecting a pledge of Securities shall be
required to provide the Company with any notice thereof or otherwise make any
delivery to the Company pursuant to this Agreement, any other Transaction
Document or the Certificates of Designations, including without limitation,
Section 2(a) of this Agreement; provided that an Investor and its pledgee shall
be required to comply with the provisions of Section 2(a) hereof in order to
effect a sale, transfer or assignment of Securities to such pledgee. The Company
hereby agrees to execute and deliver such documentation as a pledgee of the
Securities may reasonably request in connection with a pledge of the Securities
to such pledgee by an Investor.
j. Expenses. Subject to Section 9(k) below, at the Closing, the
--------
Company shall pay a nonaccountable expense allowance of $55,107 to Xxxxxx
Capital Ltd. (an Investor) or its designee(s) and $25,933 to Xxxxxxx Capital
Ltd. (an Investor) or its designee(s), by wire transfer of immediately available
funds in accordance with each such Investor's written wire instructions.
k. Limitation on Net Sales of Common Stock. So long as an Investor
---------------------------------------
holds any Preferred Shares, Conversion Shares or Common Shares, such Investor
agrees that it will not enter into, directly or indirectly, any net sales of
Common Stock on any single day (each such day is referred to as a "Limited Sales
Day") in excess of that number of shares of Common Stock equal to the sum of (i)
the product of (A) the quotient of (x) the number of Series A Preferred Shares
held by such Investor on the date of this Agreement, divided by (y) 6,000,
multiplied by (B) 2.4% of the daily trading volume for the
15
Common Stock (as reported by Bloomberg Financial Markets ("Bloomberg")) for that
trading day (such amount, with respect to such Limited Sales Day, is referred to
as such Investor's "Daily Sales Amount"), plus (ii) the aggregate amount of all
such Investor's Daily Sales Amounts during the period beginning on and including
the date immediately following the Closing Date and ending on and including the
date immediately preceding the Limited Sales Day with respect to which this
determination is being made, less the net sales of Common Stock made by such
Investor on each of the days during such period; provided, however, that the
restrictions on net sales set forth above shall not apply (i) on and after the
first date on which there has been any Change of Control (as defined in Section
4(b) of the Series B Certificate of Designations) or an announcement of any
pending, proposed or intended Change of Control, (ii) on and after the first
date on which there has occurred a Triggering Event (as defined in Section 3(b)
of the applicable Certificates of Designations) or an event that with the
passage of time and without being cured would constitute a Triggering Event,
(iii) if the Company is in default under any of the Certificates of Designations
for failing to effect any requested conversion or redemption of any Preferred
Shares pursuant to the applicable Certificates of Designations, (iv) on and
after any date on which the Company issues or sells or is deemed to have issued
or sold any securities with a Variable Price (as defined in the Series B
Certificate of Designations), except for the Settlement Notes (as defined in
Section 2(f)(i) of the Series B Certificate of Designations), (v) on and after
the Stockholder Meeting Deadline, if the Company fails to receive the
Stockholder Approval on or before the Stockholder Meeting Deadline, (vi) on and
after the 30th trading day prior to the date which is three (3) years after the
Closing Date, or (vii) with respect to any sale of Common Stock at a price equal
to or greater than $17.50 (as adjusted for any stock splits, stock dividends,
stock combinations or other similar transactions) and any such sale shall be
ignored for all purposes of this Section 4(k).
l. Restrictions on Issuances of Preferred Shares. The Company shall
---------------------------------------------
not issue any shares of Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock or Series E Preferred Stock to anyone other than the
Investors, except on the Closing Date concurrent with the Closing to holders of
the Series A Preferred Stock.
m. Notice of Loan Default. If the Company or the lender under the
----------------------
Loan and Security Agreement (as defined in the Series E Certificate of
Designations) delivers notice of a Loan Default (as defined in Section 1 of the
Series E Certificate of Designations) to an Investor pursuant to Section 1 of
the Certificate of Designations or the Company delivers an Elective Default
Notice (as defined in Section 6 of the Series E Certificate of Designations)
pursuant to Section 6 of the Series E Certificate of Designations or the Company
delivers a Proceeds Default Notice (as defined in Section 7 of the Series E
Certificate of Designations) pursuant to Section 7 of the Series E Certificate
of Designations, and in any such case there no longer exists a Loan Default,
then in each such case the Company shall deliver written notice ("Loan Default
Cure Notice") to each Investor within one (1) Business Day of such Loan Default
no longer being in existence; provided that prior to or current with the
Company's delivery of a Loan Default Cure Notice to an Investor, the Company
shall publicly disclose the contents of the Loan Default Cure Notice and that
such Loan Default no longer exists.
16
5. TRANSFER AGENT INSTRUCTIONS.
---------------------------
The Company shall issue irrevocable instructions to its transfer agent
in the form attached hereto as Exhibit F (the "Irrevocable Transfer Agent
---------
Instructions"), and any subsequent transfer agent, to issue certificates,
registered in the name of each Investor or its respective nominee(s), for the
Conversion Shares in such amounts as specified from time to time by each
Investor to the Company upon conversion of the Preferred Shares. Prior to
registration of the Common Shares and the Conversion Shares under the 1933 Act,
all such certificates shall bear the restrictive legend specified in Section
2(b) of this Agreement. The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 5 and stop
transfer instructions to give effect to Section 2(b) hereof (in the case of the
Common Shares and the Conversion Shares, prior to registration of the Common
Shares and the Conversion Shares under the 0000 Xxx) will be given by the
Company to its transfer agent and that the Securities shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Amended and Restated Registration Rights
Agreement. If an Investor provides the Company with an opinion of counsel, in a
generally acceptable form, to the effect that a public sale, assignment or
transfer of Securities may be made without registration under the 1933 Act or
the Investor provides the Company with reasonable assurances (including, if
requested by the Company, delivering such reasonable assurances to the Company's
counsel in connection with such counsel rendering an opinion on the validity of
a sale by such Investor pursuant to Rule 144) that the Securities can be sold
pursuant to Rule 144 without any restriction as to the number of securities
acquired as of a particular date that can then be immediately sold, the Company
shall permit the transfer, and, in the case of the Common Shares and the
Conversion Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by such
Investor and without any restrictive legend. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the
Investors by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5 will be inadequate and agrees, in
the event of a breach or threatened breach by the Company of the provisions of
this Section 5, that the Investors shall be entitled, in addition to all other
available remedies, to an order and/or injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING.
--------------------------------------------------
The obligation of the Company to redeem and exchange the Series A
Preferred Shares (including the issuance of the applicable number of Common
Shares and Preferred Shares) at the Closing is subject to the satisfaction, at
or before the Closing Date, of each of the following conditions, provided that
these conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion by providing each Investor with prior
written notice thereof:
a. Such Investor shall have executed each of the Transaction
Documents to which it is a party and delivered the same to the Company.
17
b. Each of the Certificates of Designations shall have been filed
with the Secretary of State of the State of Delaware;
c. Such Investor shall have delivered to the Company the Series A
Preferred Stock Certificates representing the Series A Preferred Shares to be
redeemed or exchanged by the Company from such Investor at the Closing.
d. The representations and warranties of such Investor shall be true
and correct as of the date when made and as of the Closing Date as though made
at that time (except for representations and warranties that speak as of a
specific date), and such Investor shall have performed, satisfied and complied
with the covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by such Investor at or
prior to the Closing Date.
e. The Company shall have obtained the consent of Foothill Capital
Corporation to the transactions contemplated by the Transaction Documents.
f. The Company shall have entered into separate amended and restated
redemption and exchange agreements relating to the Series A Preferred Stock with
each of the Other Investors and all conditions to the closings contemplated by
such agreements shall have been satisfied or waived.
7. CONDITIONS TO EACH INVESTOR'S OBLIGATIONS AT CLOSING.
----------------------------------------------------
The obligation of each Investor hereunder to tender the Series A
Preferred Shares to the Company for redemption and exchange at the Closing is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for each Investor's
sole benefit and may be waived by such Investor at any time in its sole
discretion by providing the Company with prior written notice thereof:
a. The Company shall have executed each of the Transaction Documents
and delivered the same to such Investor.
b. Each of the Certificates of Designations shall have been filed
with the Secretary of State of the State of Delaware, and a copy of each
certified by the Secretary of State of the State of Delaware shall have been
delivered to such Investor.
c. The Company shall have delivered to such Investor the Redemption
Price for the number of Series A Preferred Shares being redeemed by the Company
from such Investor (as set forth in Section 1(a)) on the Closing Date, by wire
transfer of immediately available funds pursuant to the wire instructions
provided by such Investor (and, with respect to Xxxxxx Capital Ltd. and Xxxxxxx
Capital Ltd., the Company shall have delivered the amounts set forth in Section
4(j) by wire transfer of immediately available funds to such Investor).
18
d. The Company shall have executed and delivered to such Investor
(i) the stock certificates (in such denominations as such Investor shall
request) for the Common Shares being issued in exchange for such Investor's
Series A Preferred Shares (as set forth in Section 1(b)) at the Closing, and
(ii) the stock certificates (in such denominations as such Investor shall
request) for the Preferred Shares being issued in exchange for such Investor's
Series A Preferred Shares (as set forth in Section 1(b)) at the Closing.
e. The Common Stock (x) shall be designated for quotation or listed
on the Principal Market and (y) shall not have been suspended by the SEC or the
Principal Market from trading on the Principal Market nor shall suspension by
the SEC have been threatened in writing by the SEC; and the Common Shares and
the Conversion Shares issuable upon conversion of the Preferred Shares shall be
listed upon the Principal Market.
f. The representations and warranties of the Company shall be true
and correct as of the date when made and as of the Closing Date as though made
at that time (except for representations and warranties that speak as of a
specific date other than the representation contained in Section 3(c) which
shall be updated as of the Closing Date), other than the representation made in
the second sentence of Section 3(c), which representation shall be true and
correct in all material respects as of the Closing Date as though made at that
time, and the Company shall have performed, satisfied and complied with the
covenants, agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Company at or prior to the Closing
Date. Such Investor shall have received a certificate, executed by the Chief
Executive Officer of the Company, dated as of the Closing Date, to the foregoing
effect and as to such other matters as may be reasonably requested by such
Investor, including, without limitation, an update as of the Closing Date
regarding the representation contained in Section 3(c) above.
g. Such Investor shall have received the opinion of Xxxx and Xxxx
LLP, dated as of the Closing Date, in the form of Exhibit G attached hereto.
---------
h. The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b) above and in a form reasonably
acceptable to such Investor, including, without limitation, containing a
determination by the Board of Directors of the Company that immediately prior to
the Closing the capital of the Company is not impaired (as determined in
accordance with Section 160(a)(1) of the Delaware General Corporation Law) and
that immediately following the Closing and after giving effect to the redemption
of all the shares of the Company's Series A Preferred Stock which the Company
redeemed at the Closing, whether from the Investors or from the Other Investors,
the capital of the Company would not be impaired (as determined in accordance
with Section 160(a)(1) of the Delaware General Corporation Law) (the
"Resolutions").
i. As of the Closing Date, the Company shall have reserved out of
its authorized and unissued Common Stock, (A) at least 125% of that number of
shares of Common Stock issuable upon conversion of all the Series B Preferred
Shares and the Series C Preferred Shares outstanding immediately following the
Closing (without regard to any limitations on conversions, but subject to
adjustment pursuant
19
to the Company's covenant set forth in Section 4(d)) for issuance upon
conversion of the such Preferred Shares, (B) at least 100% of that number of
shares of Common Stock issuable upon conversion of all the Series D Preferred
Shares outstanding immediately following the Closing (without regard to any
limitations on conversions, but subject to adjustment pursuant to the Company's
covenant set forth in Section 4(d)) for issuance upon conversion of the such
Preferred Shares and (C) at least 1,542,857 of shares of Common Stock for
issuance upon conversion of the Series E Preferred Shares (subject to adjustment
pursuant to the Company's covenant set forth in Section 4(d)).
j. The Irrevocable Transfer Agent Instructions, in the form of
Exhibit E attached hereto, shall have been delivered to and acknowledged in
---------
writing by the Company's transfer agent.
k. The Company shall have delivered to such Investor a certificate
evidencing the incorporation and good standing of (i) the Company and each
Subsidiary in such entity's state of incorporation or organization issued by the
Secretary of State of such state of incorporation or organization, and (ii) the
Company in Virginia issued by the Secretary of State of Virginia, each as of a
date within ten days of the Closing Date.
l. The Company shall have delivered to such Investor a certified
copy of the Certificate of Incorporation as certified by the Secretary of State
of the State of Delaware as of a date within ten days of the Closing Date.
m. The Company shall have delivered to such Investor a secretary's
certificate, dated as of the Closing Date, certifying as to (A) the Resolutions,
(B) the Certificate of Incorporation and (C) the By-laws, each as in effect at
the Closing.
n. The Company shall have delivered to such Investor a letter from
the Company's transfer agent certifying the number of shares of Common Stock
outstanding as of a date within five days of the Closing Date.
o. The Company shall have delivered to the Investor such other
documents relating to the transactions contemplated by the Transaction Documents
as the Investors or their counsel may reasonably request.
8. INDEMNIFICATION.
---------------
In consideration of each Investor's execution and delivery of the
Transaction Documents and in addition to all of the Company's other obligations
under the Transaction Documents and the Certificates of Designations, the
Company shall defend, protect, indemnify and hold harmless each Investor and
each other holder of the Securities and all of their stockholders, officers,
directors, employees and direct or indirect investors and any of the foregoing
persons' agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of
20
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and disbursements
(the "Indemnified Liabilities"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the Company contained
in the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (c) any cause of action, suit or claim brought
or made against such Indemnitee (other than a cause of action, suit or claim
which is (x) brought or made by the Company and (y) is not a shareholder
derivative suit) and arising out of or resulting from (i) the execution,
delivery, performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, or (ii) the
status of such Investor or holder of the Securities as an investor in the
Company. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. Except as otherwise set forth herein, the
mechanics and procedures with respect to the rights and obligations under this
Section 8 shall be the same as those set forth in Sections 6(a) and (d) of the
Amended and Restated Registration Rights Agreement, including, without
limitation, those procedures with respect to the settlement of claims and the
Company's rights to assume the defense of claims.
9. MISCELLANEOUS.
-------------
a. Governing Law; Jurisdiction; Jury Trial. All questions concerning
---------------------------------------
the construction, validity, enforcement and interpretation of this Agreement
shall be governed by the internal laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
b. Counterparts. This Agreement may be executed in two or more
------------
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile
21
signature shall be considered due execution and shall be binding upon the
signatory thereto with the same force and effect as if the signature were an
original, not a facsimile signature.
c. Headings. The headings of this Agreement are for convenience of
--------
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be invalid or
------------
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction; provided, however, that if Section 9(p)
shall be invalid or unenforceable in any jurisdiction, then, notwithstanding
that this Agreement otherwise amends and restates the Original Redemption and
Exchange Agreement, Section 9(p) of the Original Redemption and Exchange
Agreement shall remain in full force and effect.
e. Entire Agreement; Effect on Prior Agreements; Amendments.
--------------------------------------------------------
i. Except for the Securities Purchase Agreement, the Registration
Rights Agreement dated as of June 17, 2000 by and among the Company,
the Investors and the Other Investors (the "Series A Registration
Rights Agreement"), the Series A Certificate of Designations, the
Waiver Agreements, each executed as of January 3, 2001, among the
Company and each of the Investors, and the Irrevocable Transfer Agent
Instructions (as defined in the Securities Purchase Agreement), this
Agreement, the Certificates of Designations and each of the other
Transaction Documents supersede all other prior oral or written
agreements between each Investor, the Company, their affiliates and
persons acting on their behalf with respect to the matters discussed
herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set
forth herein or therein, neither the Company nor any Investor makes any
representation, warranty, covenant or undertaking with respect to such
matters.
ii. If the Closing occurs on or prior to June 14, 2001 (or such
later date as the Company and each Investor agree in writing), then
effective as of the Closing, each Investor, severally and not jointly,
permanently waives the Company's compliance with its obligations under
the Securities Purchase Agreement, except for Sections 8 and 9 of the
Securities Purchase Agreement. If the Closing occurs on or prior to
June 14, 2001 (or such later date as the Company and each Investor
agree in writing), then effective as of the Closing, each Investor,
severally and not joint, permanently waives the Company's compliance
with its obligations under the Series A Registration Rights Agreement,
except for Sections 5, 6 and 7 of the Series A Registration Rights
Agreement. If the Closing occurs on or prior to June 14, 2001 (or such
later date as the Company and each Investor agree in writing), then
effective as of the Closing, the Company permanently waives each
Investor's compliance with its obligations under the Series A
Registration Rights Agreement, except for Sections 6 and 7 of the
Series A Registration Rights Agreement.
22
iii. No provision of this Agreement may be amended or waived other
than by an instrument in writing signed by the Company and the holders
of at least two-thirds (2/3) of the Common Shares and Conversion Shares
(assuming conversion of all outstanding Preferred Shares without giving
effect to any limitations on conversion) or, if prior to the Closing
Date, the Investors holding at least two-thirds (2/3) of the Series A
Preferred Shares then outstanding. No such amendment shall be effective
to the extent that it applies to less than all of the holders of the
Securities then outstanding. No consideration shall be offered or paid
to any person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents or the Certificates of
Designations unless the same consideration also is offered to all of
the parties to the Transaction Documents or holders of Securities, as
the case may be.
f. Notices. Any notices, consents, waivers or other communications
-------
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one (1) Business Day after deposit
with a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to the Company:
MicroStrategy Incorporated
0000 Xxxxxxxxxxxxx Xxxxx
XxXxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxx, Chief Financial Officer
With a copy to:
Xxxx and Xxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxx, Esq.
23
If to the Transfer Agent:
American Stock Transfer & Trust Co.
00 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxx
If to an Investor, to it at the address and facsimile number set forth on
the Schedule of Investors, with copies to such Investor's representatives as set
forth on the Schedule of Investors, or at such other address and/or facsimile
number and/or to the attention of such other person as the recipient party has
specified by written notice given to each other party five days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a nationally recognized overnight
delivery service shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.
g. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Securities. The Company shall not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the holders of at least two-thirds (2/3) of the Common Shares and
Conversion Shares (assuming conversion of all outstanding Preferred Shares and
without giving effect to any limitations on conversion), including by merger
or consolidation, except pursuant to a Change of Control (as defined in Section
4(b) of the Series B Certificate of Designations) with respect to which the
Company is in compliance with Section 4 of each of the Certificates of
Designations and Section 4(h) of this Agreement. An Investor may assign some or
all of its rights hereunder without the consent of the Company, provided,
however, that the transferee has agreed in writing to be bound by the applicable
provisions of this Agreement and the Company has consented to such assignment
and assumption, which consent shall not be unreasonably withheld.
Notwithstanding anything to the contrary contained in the Transaction Documents,
the Investors shall be entitled to pledge the Securities in connection with a
bona fide margin account or other loan secured by the Securities.
h. No Third Party Beneficiaries. Except with respect to Section 9(p),
----------------------------
this Agreement is intended for the benefit of the parties hereto and their
respective permitted successors and assigns, and is not for the benefit of, nor
may any provision hereof be enforced by, any other person.
i. Survival. Unless this Agreement is terminated under Section 9(k),
--------
the representations and warranties of the Company and the Investors contained in
Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and 9,
and the indemnification provisions set forth in
24
Section 8, shall survive the Closing. Each Investor shall be responsible only
for its own representations, warranties, agreements and covenants hereunder.
j. Further Assurances. Each party shall do and perform, or cause to
------------------
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
k. Termination. In the event that the Closing shall not have
-----------
occurred with respect to an Investor on or before June 14, 2001 due to the
Company's or such Investor's failure to satisfy the conditions set forth in
Sections 6 and 7 above (and the nonbreaching party's failure to waive such
unsatisfied condition(s)), the nonbreaching party shall have the option to
terminate this Agreement with respect to such breaching party at the close of
business on such date without liability of any party to any other party;
provided, however, that if this Agreement is terminated pursuant to this Section
9(k), the Company shall remain obligated to reimburse any nonbreaching Investor
for the expenses described in Section 4(j) above.
l. Placement Agent. The Company acknowledges that it has not engaged
---------------
a placement agent in connection with the transactions contemplated by this
Agreement. The Company shall be responsible for the payment of any placement
agent's fees, financial advisory fees, or brokers' commissions relating to or
arising out of the transactions contemplated hereby. The Company shall pay, and
hold each Buyer harmless against, any liability, loss or expense (including,
without limitation, attorney's fees and out-of-pocket expenses) arising in
connection with any such claim.
m. No Strict Construction. The language used in this Agreement will
----------------------
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
n. Remedies. Each Investor and each holder of the Securities shall
--------
have all rights and remedies set forth in the Transaction Documents and the
Certificates of Designations and all rights and remedies which such holders have
been granted at any time under any other agreement or contract and all of the
rights which such holders have under any law. Any person having any rights under
any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
o. Payment Set Aside. To the extent that the Company makes a payment
-----------------
or payments to any Investor hereunder or pursuant to the Amended and Restated
Registration Rights Agreement or any of the Certificates of Designations or the
Investors enforce or exercise their rights hereunder or thereunder, and such
payment or payments or the proceeds of such enforcement or exercise
25
or any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside, recovered from, disgorged by or are required to be
refunded, repaid or otherwise restored to the Company, a trustee, receiver or
any other Person under any law (including, without limitation, any bankruptcy
law, state or federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such enforcement or setoff had not
occurred.
p. Mutual General Release.
----------------------
i. In consideration of the releases set forth in Sections
9(p)(ii) and 9(p)(iii), effective as of the Closing, each Investor,
severally and not jointly, on behalf of itself and, to the extent
permitted by law, its heirs, executors, administrators, devisees,
trustees, partners, directors, officers, shareholders, employees,
consultants, representatives, predecessors, principals, agents,
parents, associates, affiliates, subsidiaries, attorneys, accountants,
successors, succesors-in-interest and assignees (collectively, the
"Investor Releasing Persons"), hereby waives and releases, to the
fullest extent permitted by law, but subject to Section 9(p)(iv)
below, any and all claims, rights and causes of action, whether known
or unknown (collectively, the "Investor Claims"), that any of the
Investor Releasing Persons had, currently has or then has against (i)
the Company, (ii) any of the Company's current or former parents,
shareholders, affiliates, subsidiaries, predecessors or assigns, or
(iii) any of the Company's or such other persons' or entities' current
or former officers, directors, employees, agents, principals,
investors, signatories, advisors, consultants, spouses, heirs,
estates, executors, attorneys, auditors and associates and members of
their immediate families (collectively, the "Company Released
Persons"), including, without limitation, Investor Claims arising out
of or relating to the Securities Purchase Agreement, the Series A
Registration Rights Agreement and the Series A Certificate of
Designations (collectively, the "Released Documents") other than
Investor Claims arising after the Closing.
ii. In further consideration of the Investors entering into this
Agreement, effective as of the date of this Agreement, the Company on
behalf of itself and, to the extent permitted by law, its heirs,
executors, administrators, devisees, trustees, partners, directors,
officers, shareholders, employees, consultants, representatives,
predecessors, principals, agents, parents, associates, affiliates,
subsidiaries, attorneys, accountants, successors, successors-in-
interest and assignees (collectively, the "Company Releasing
Persons"), hereby waives and releases, to the fullest extent permitted
by law, but subject to Section 9(p)(iv) below, any and all claims,
rights and causes of action, whether known or unknown (collectively,
the "Company Claims"), that any of the Company Releasing Persons had
or currently has against (i) the Investors, (ii) any of the Investors'
respective current or former parents, shareholders, affiliates,
subsidiaries, predecessors or assigns, or (iii) any of the Investors'
or such other persons' or entities' current or former officers,
26
directors, employees, agents, principals, investors, signatories,
advisors, consultants, spouses, heirs, estates, executors, attorneys,
auditors and associates and members of their immediate families
(collectively, the "Investor Released Persons"), including, without
limitation, any Company Claims arising out of or relating to the
Released Documents; provided, however, that if such Investor breaches
its obligations under Section 4(a), then the release set forth in this
Section 9(p)(ii) shall be null and void and of no further force or
effect.
iii. In further consideration of the Investors entering into this
Agreement, effective as of the Closing, the Company on behalf of
itself and, to the extent permitted by law, the other Company
Releasing Persons, hereby waives and releases, to the fullest extent
permitted by law, but subject to Section 9(p)(iv) below, any and all
Company Claims, that any of the Company Releasing Persons had,
currently has or then has against any of the Investor Released
Persons, including, without limitation, any Company Claims arising out
of or relating to the Released Documents.
iv. The Company and each of the Investors acknowledge that the
releases set forth in Sections 9(p)(i), 9(p)(ii) and 9(p)(iii) above
do not affect any claim which any Company Releasing Person or Investor
Releasing Person may have under this Agreement, Section 8 or Section
9(m) of the Securities Purchase Agreement or Sections 5, 6 or 7 of the
Series A Registration Rights Agreement.
* * * * * *
27
IN WITNESS WHEREOF, the Investors and the Company have caused this
Amended and Restated Redemption and Exchange Agreement to be duly executed as of
the date first written above.
COMPANY: INVESTORS:
MICROSTRATEGY INCORPORATED XXXXXX CAPITAL LTD.
By: /s/ Xxxx X. Xxxxx By: /s/ Xxxxxx X. Xxxxxxx
--------------------------- -------------------------------
Name: Xxxx X. Xxxxx Name: Xxxxxx X. Xxxxxxx
Title: President Its: Authorized Signatory
XXXXXXX CAPITAL LTD.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxxx
Its: Authorized Signatory
SCHEDULE OF INVESTORS
(Page 1 of 2)
(1) (2) (3) (4) (5) (6)
Series A Preferred Aggregate Shares Being Total
Investor's Name, Address Preferred Shares Being Redemption Price Exchanged for Common
and Facsimile Number Shares Redeemed Common Shares Shares
-------------------------------------------------------------------------------------------------------------------------
Xxxxxx Capital Ltd. 4,080 408 $4,080,000 340 680,000
c/o Citadel Investment Group, L.L.C.
000 Xxxx Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Cayman Islands
(Representatives)
Xxxxxx Xxxxxx Xxxxx
000 X. Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Xxxxxxx Capital Ltd. 1,920 192 $1,920,000 160 320,000
c/o Citadel Investment Group, L.L.C.
000 Xxxx Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Cayman Islands
(Representatives)
Xxxxxx Xxxxxx Xxxxx
000 X. Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
(7) (8)
Series A
Preferred Total
Shares Being Series B
Investor's Name, Address Exchange for Preferred
and Facsimile Number Series Shares
--------------------------------------------------------------------------------------
Xxxxxx Capital Ltd. 1,081.2 1,081.2
c/o Citadel Investment Group, L.L.C.
000 Xxxx Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Cayman Islands
(Representatives)
Xxxxxx Xxxxxx Xxxxx
000 X. Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Xxxxxxx Capital Ltd. 508.8 508.8
c/o Citadel Investment Group, L.L.C.
000 Xxxx Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Cayman Islands
(Representatives)
Xxxxxx Xxxxxx Xxxxx
000 X. Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
SCHEDULE OF INVESTORS
(Page 2 of 2)
(1) (9) (10) (11) (12) (13)
Series A Series A
Series A Preferred Preferred Preferred
Shares Being Total Series C Shares Being Total Series Shares Being
Investor's Name, Address Exchanged for Preferred Exchange for E Preferred Exchange for
and Facsimile Number Series C Shares Series E Shares Series D
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxx Capital Ltd. 1,081.2 1,081.2 244.8 244.8 924.8
c/o Citadel Investment Group, L.L.C.
000 Xxxx Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Cayman Islands
(Representatives)
Xxxxxx Xxxxxx Xxxxx
000 X. Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Xxxxxxx Capital Ltd. 508.8 508.8 115.2 115.2 435.2
c/o Citadel Investment Group, L.L.C.
000 Xxxx Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Cayman Islands
(Representatives)
Xxxxxx Xxxxxx Xxxxx
000 X. Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
(1) (14) (15)
Allocated
Total Fixed Percentage of the
Series D Additional Series
Investor's Name, Address Preferred D Preferred
and Facsimile Number Shares Shares
-------------------------------------------------------------------------------------------
Xxxxxx Capital Ltd. 881.0 68%
c/o Citadel Investment Group, L.L.C.
000 Xxxx Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Cayman Islands
(Representatives)
Xxxxxx Xxxxxx Xxxxx
000 X. Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Xxxxxxx Capital Ltd. 414.6 32%
c/o Citadel Investment Group, L.L.C.
000 Xxxx Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Cayman Islands
(Representatives)
Xxxxxx Xxxxxx Xxxxx
000 X. Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
SCHEDULES
---------
Schedule 3(a) - Subsidiaries
Schedule 3(c) - Capitalization
Schedule 3(e) - Conflicts
Schedule 3(f) - SEC Documents
Schedule 3(g) - Material Changes
Schedule 3(o) - Other Information
EXHIBITS
--------
Exhibit A - Form of Series B Certificate of Designations
Exhibit B - Form of Series C Certificate of Designations
Exhibit C - Form of Series D Certificate of Designations
Exhibit D - Form of Series E Certificate of Designations
Exhibit E - Form of Amended and Restated Registration Rights Agreement
Exhibit F - Form of Irrevocable Transfer Agent Instructions
Exhibit G - Form of Company Counsel Opinion
DISCLOSURE SCHEDULE
TO
AMENDED AND RESTATED REDEMPTION AND EXCHANGE AGREEMENT
BY AND AMONG
MICROSTRATEGY INCORPORATED
AND
XXXXXX CAPITAL LTD. AND XXXXXXX CAPITAL LTD.
JUNE 14, 2001
General Information
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This General Information section and the following sections, together with
all attachments referred to therein, all of which are incorporated herein by
reference, comprise the Disclosure Schedule referred to in the Amended and
Restated Redemption and Exchange Agreement, dated as of June 14, 2001, by and
among MicroStrategy Incorporated, on the one hand, and Xxxxxx Capital Ltd. and
Xxxxxxx Capital Ltd., on the other hand (which Agreement, together with all
exhibits and schedules thereto, including this Disclosure Schedule, is hereafter
collectively referred to as the "Agreement"). All capitalized terms used but not
otherwise defined herein shall have the respective meanings ascribed to them in
the Agreement.
The representations and warranties of the Company contained in Section 3 of
the Agreement and certain of the covenants of the Company contained in Section 3
of the Agreement are made and given subject to the disclosures in this
Disclosure Schedule. Any disclosures contained in this Disclosure Schedule shall
be deemed to qualify the corresponding section of Section 3 of this Agreement.
Certain matters set forth in this Disclosure Schedule are included solely
for informational purposes for the convenience of the parties to the Agreement.
The inclusion of any information in the Disclosure Schedule shall not be deemed
to be an admission or acknowledgement, in and of itself, that such information
(i) is required by the terms of the Agreement to be disclosed, (ii) is material
to the Company, (iii) has had or would reasonably be expected to have a material
adverse effect on the Company or (iv) is outside the ordinary course of business
for the Company. Such information shall not be used as a basis for interpreting
the terms "material," "materially," "materiality," "Material," "Materiality," or
words of similar meaning in the Agreement.
This Disclosure Schedule is qualified in its entirety by reference to
the specific provisions of the
Agreement and is not intended to constitute, and shall not be construed as
constituting, any representation, warranty or covenant of the Company, except as
and to the extent expressly provided in this Disclosure Schedule or the
Agreement.
Schedule 3(a)
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Organization and Qualification
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Aventine, Incorporated* (Delaware)
MicroStrategy Capital Corporation* (Delaware)
MicroStrategy Management Corporation* (Delaware)
MicroStrategy Services Corporation* (Delaware)
Xxxxxxxx.xxx Incorporated* (Delaware)
MicroStrategy Australia Pty. Ltd. (Australia)
MicroStrategy Benelux B.V. (Netherlands)
MicroStrategy Brasil Ltda. (Brazil)
MicroStrategy Brasil Ltda. Sucursal Argentina (Argentina)
MicroStrategy Canada Incorporated* (Canada)
MicroStrategy Deutschland GmbH (Germany)
MicroStrategy France SARL (France)
MicroStrategy-FSC, Inc. (Barbados)
MicroStrategy GmbH (Austria)
MicroStrategy Iberica, S.A. (Spain)
MicroStrategy International Limited (Bermuda)
MicroStrategy International II Limited (Bermuda)
MicroStrategy Italy S.r.l. (Italy)
MicroStrategy Korea Co., Ltd. (Korea)
MicroStrategy Limited (United Kingdom)
MicroStrategy Mexico, S. de X.X. de C.V. (Mexico)
MicroStrategy Schweiz AG (Switzerland)
Xxxxxxxx.xxx International Limited (Bermuda)
iBasis, Inc.* (minority interest)
Medical Internet Solutions Inc.* (minority interest)
Xchange, Inc.* (minority interest)
CVent, Inc.* (minority interest)
World Investment Partners S.A. (minority interest)
*The interest owned or otherwise held directly or indirectly by MicroStrategy
Incorporated in these entities is subject to a pledge (or obligation to pledge)
in favor of Foothill Capital Corporation.
Schedule 3(c)
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Capitalization
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(A) None.
(B) In connection with the Stipulation of Settlement, dated January 11, 2001,
entered into among the Company and Lead Plaintiffs Xxxxx Xxxxxx, Atsukuni
Minami and Local 144 Nursing Home Pension Fund relating to the Company's
class action securities litigation (the "Settlement Agreement"), the
Company will issue five-year 7 1/2% Senior Unsecured Notes having an
aggregate principal amount of $80.5 million.
(C) (1) Under a Management Services Agreement, dated June 7, 2000,
MicroStrategy Management Corporation ("MMC"), a wholly-owned subsidiary of
the Company, has the right to purchase from the Company, in three
installments, approximately 143,000 shares of Class A Common Stock at a
purchase price equal to the par value of these shares ($.001 per share)
over a two year period expiring in September 2002. The specific number of
shares subject to the purchase right will depend on certain multipliers
relating to future revenues and employee-attrition rates of MicroStrategy
Brazil Ltda. Sucursal Argentina ("Argentinean Operations") over the two
year period and the operation of a collar on the aggregate market value of
the shares, which shall not exceed $5 million. In exchange for these share
purchase rights, MMC renders to the Company certain management services
with respect to the Argentinean Operations. MMC has subcontracted the
performance of such management services to Xxxxxxx Xxxxx, to whom MMC
delivers the shares purchased from the Company.
(2) The Series A Convertible Preferred Stock of the Company is convertible
into Class A Common Stock at an initial conversion rate equal to the
average of the daily volume weighted average prices of the Class A Common
Stock for the 17 trading days following June 19, 2000 ("Closing Date")
(i.e., $33.3854). The Company, at its option, can require that the
preferred stock convert into Class A Common Stock on the second anniversary
of the Closing Date or may extend the term of the Series A Preferred Shares
for up to an additional two years. The conversion rate may adjust, subject
to certain limits and conditions, on the first anniversary of the Closing
Date and, if the Company elects to extend the maturity of the Series A
Preferred Shares, on each subsequent anniversary. The Series A Preferred
Shares carry a 7% dividend yield, payable in cash or Class A Common Stock,
at the Company's option.
(3) Each share of Series A Preferred Stock of Xxxxxxxx.xxx Incorporated
("Xxxxxxxx.xxx") is convertible into such number of fully paid and
nonassessable shares of Class A Common Stock of Xxxxxxxx.xxx as is
determined by dividing $3.19 by the conversion price in effect at the time
of conversion (currently $3.19 per share), which may be adjusted from time
to time. Upon the closing of a public offering of Xxxxxxxx.xxx's Class A
Common Stock at a price to the public of at least $10.00 share and
resulting in at least $30,000,000 of net proceeds to Xxxxxxxx.xxx, all
outstanding shares of Series A Preferred Stock will automatically convert
into shares of Class A Common Stock.
(4) The Company will issue (i) 2,777,778 shares of Class A Common Stock
and (ii) warrants to purchase 1,900,000 shares of Class A Common Stock at
an exercise price of $40 per share, pursuant to the terms of the Settlement
Agreement.
(5) Xxxxxxxx.xxx Incorporated has granted options, currently outstanding,
to purchase 5,203,918 shares of its Class A Common Stock under its 2000
Stock Option Plan.
(D) (1) The terms of the Company's Series A Preferred Stock contain mandatory
redemption provisions.
(2) One of the Company's subsidiaries, Xxxxxxxx.xxx Incorporated, has
issued 16,536,049 shares of its Series A Preferred Stock. These shares are
mandatorily redeemable for $3.19 per share plus any dividends accrued or
declared but unpaid thereon at mandatory redemption dates of October 17,
2005, 2006 and 2007, with the maximum redemption portions at each date
being 33%, 50% and 100%, respectively.
(E) The Company has issued a warrant to purchase 50,000 shares of Class A
Common Stock to Foothill Capital Corporation ("Foothill"), which warrant
contains anti-dilution provisions.
(F) None.
Schedule 3(e)
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No Conflicts
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The Company's compliance with its obligations under the Certificates of
Designations to redeem the Preferred Shares upon a Triggering Event (as defined
in the Certificates of Designations) or a Change of Control (as defined in
Section 4(b) of the Series B Certificate of Designations, Section 4(b) of the
Series C Certificate of Designations or Section 4(b) of the Series E Certificate
of Designations) currently would result in a default under the Company's Amended
and Restated Loan and Security Agreement, dated as of June 14, 2001, with
Foothill Capital Corporation unless the Company were to obtain the consent of
Foothill.
Schedule 3(f)
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SEC Documents
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Form Type Form Description Date Filed
--------- ---------------- ----------
10-Q Quarterly Report 5/15/01
PRE 14A Preliminary Proxy Statement 5/4/01
8-K Current Report 5/2/01
8-K Current Report 4/4/01
10-K Annual Report 4/2/2001
8-K Current Report 3/9/2001
10-Q/A Amended Quarterly Report 2/20/2001
8-K Current Report 2/15/2001
8-K Current Report 2/7/2001
10-Q/A Amended Quarterly Report 11/22/2000
10-Q Quarterly Report 11/14/2000
8-K Current Report 11/6/2000
10-Q Quarterly Report 8/15/2000
8-K Current Report 8/3/2000
8-K Current Report 6/19/2000
DEFR14A Revised Proxy Statement 5/30/2000
10-Q/A Amended Quarterly Report 5/30/2000
10-Q/A Amended Quarterly Report 5/30/2000
PRER14A Preliminary Proxy Statement 5/16/2000
10-Q Quarterly Report 5/15/2000
DEF14A Definitive Proxy Statement 5/1/2000
10-K Annual Report 4/13/2000
NT 10-K Notification of Late Filing 3/31/2000
8-K Current Report 3/23/2000
PRE 14A Preliminary Proxy Statement 3/14/2000
8-K Current Report 1/7/2000
Schedule 3(g)
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Absence of Certain Changes
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1. The Company has had capital expenditures of approximately $4.2 million in
the aggregate since December 31, 2000.
Schedule 3(o)
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Other Information
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I. The Company has taken steps to reduce its workforce by approximately 600
persons and will incur related severance and restructuring charges. On May
4, 2001, the Xxxxxxxx.xxx Board approved a further restructuring which will
reduce the operations of the Xxxxxxxx.xxx down to approximately 35
employees by early July. These remaining employees will be utilized for,
among other things, the carrying out of Xxxxxxxx.xxx's existing contracts.
Xxxxxxxx.xxx is currently analyzing the impact that the various actions
taken as part of the restructuring will have on its results of operations
for Q2 and the remainder of 2001. The Company anticipates that severance
and certain other termination benefit payments associated with the April
and May restructuring plans will be accrued and classified as
restructuring. Additionally, certain other costs associated with the
restructuring are expected to be included in the restructuring charge,
including costs associated with exiting and consolidating certain office
space, a provision for idle computers, software, printers, copiers, and/or
telecommunications equipment (cell phones, office phones, wireless
equipment, etc.), as well as professional fees and certain other costs.
2. The Company's earnings for the first quarter of 2001 were below consensus
estimates, as disclosed in the Company's Quarterly Report on Form 10-Q for
the Three Months ended March 31, 2001.
