<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
Date of report (Date of earliest event reported): OCTOBER 15, 1999
Commission File No. 0-24833
<TABLE>
<CAPTION>
FUTURELINK CORP.
- -----------------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
<S> <C>
DELAWARE 95-4763404
- --------------------------------------------------- ------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
300, 250 - 6th Avenue S.W., Calgary, Alberta CANADA T2P 3H7
- --------------------------------------------------- ------------------------------------
(Address of principal executive offices) (ZIP Code)
(403) 216-6000
- -----------------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
FUTURELINK DISTRIBUTION CORP.
- -----------------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
</TABLE>
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
A. On October 15, 1999, FutureLink Distribution Corp., a Colorado corporation,
("FutureLink Colorado") effected its reincorporation as a Delaware corporation
by merging with its wholly-owned subsidiary, FutureLink California Acquisition
Corp. ("FutureLink California" or the "Registrant"), a Delaware corporation,
with the Registrant continuing as the surviving corporation of the merger (the
"Merger"). In connection with the Merger, the name of the Registrant has been
changed to FutureLink Corp. Upon consummation of the Merger, each share of
common stock of FutureLink Colorado was exchanged for one share of common stock
of the Registrant and the stockholders of FutureLink Colorado became
stockholders of FutureLink Corp., in accordance with the terms of an Agreement
and Plan of Merger between the two companies dated August 1, 1999 (the
"Agreement and Plan of Merger"). The reincorporation and merger were approved
by the shareholders of FutureLink Colorado at a meeting held on September 23,
1999. A description of the terms of the merger and of the common stock of the
Registrant is contained at pages III-1 to III-8 (attached as an exhibit hereto
as "Description of Merger and summary of relevant Delaware Law" and incorporated
herein by reference) and at pages A-1 to A-28 (the Agreement and Plan of Merger)
in the definitive Proxy Statement of FutureLink Colorado dated August 30, 1999.
The Agreement and Plan of Merger and the Registrant's certificate of
incorporation and by-laws are attached hereto as exhibits, which are
incorporated herein by reference.
B. On October 15, 1999, the Company completed its previously announced
acquisition of Executive LAN Management, Inc., which carries on business as
Micro Visions ("Micro Visions"). Pursuant to the acquisition, Micro Visions'
shareholders received $12 million in cash and 7,200,000 shares of the
Registrant's common stock. In addition, Micro Visions shareholders may be
issued further shares based on the satisfaction of certain performance criteria
in 1999. The Agreement and Plan of Reorganization and Merger dated June 2, 1999
(the "Acquisition Agreement") pursuant to which this acquisition was completed
was filed as Exhibit 10.1 to the Current Report on Form 8-K filed by the
Registrant with the Securities and Exchange Commission on June 16, 1999. The
Acquisition Agreement was amended to provide that the acquisition would be
effected through a newly formed wholly-owned subsidiary, FutureLink Micro
Visions Acquisition Corp., a Delaware corporation. This amendment to the
Acquisition Agreement is attached as an exhibit hereto and is incorporated
herein by reference. The acquisition was approved by the Registrant's
shareholders at a meeting held on September 23, 1999.
Audited financial statements for Micro Visions at December 31, 1998 and
for the twelve month periods ended December 31, 1997 and 1998, unaudited
financial statements for Micro Visions at June 30, 1999 and for the six months
ended June 30, 1998 and 1999 and unaudited pro forma financial statements for
the fiscal year ended December 31, 1998 and for the six months ended June 30,
1999 are attached to this Current Report on Form 8-K.
ITEM 5. OTHER EVENTS
A. On October 15, 1999, the Registrant entered into a Securities Purchase
Agreement and Registration Rights Agreement with Pequot Private Equity Fund II,
L.P. and certain other investors ("Pequot") whereby the Registrant sold
5,454,545 shares of common stock at a price of $5.50 per share and warrants to
purchase 1,433,404 shares of common stock of the Registrant at an exercise price
of $8.50 per share (the "Financing"). The Securities Purchase Agreement
provides for the issuance of 3,636,364 additional shares of common stock and
warrants to purchase an additional 939,323 shares of common stock under the same
terms, including pricing, for an additional $20 million gross proceeds to the
Registrant, upon the satisfaction of certain conditions. A portion of the
proceeds of the financing was used to pay the cash portion of the Micro Visions
acquisition.
2
<PAGE> 3
Copies of the Securities Purchase Agreement, the Registration Rights
Agreement, and the form of Warrant are filed herewith as exhibits and are
incorporated herein by reference.
Gerard Klauer Mattison & Co., Inc., which acted as the Registrant's
placement agent with regard to the Financing, will receive agent's warrants, in
the same form as the warrants issued to Pequot, to purchase up to 909,091 shares
of common stock at an exercise price of $8.50 per share, assuming all 9,090,909
shares of common stock are purchased by Pequot.
B. In connection with the Financing, the Board of Directors increased the
number of directors from 7 to 9, and two directors designated by Pequot, Gerald
A. Poch and James P. McNeil, were elected by the Board of Directors to fill the
newly created board positions.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED:
Audited financial statements for Micro Visions as at December 31, 1998
and for the 12 month periods ended December 31, 1997 and 1998 and
unaudited financial statements for Micro Visions as at June 30, 1999 and
for the six month periods ended June 30, 1998 and 1999 are attached to
this Report.
(b) PRO FORMA FINANCIAL INFORMATION:
Unaudited pro forma financial statements showing the combination of the
Registrant with Micro Visions as at December 31, 1998 and for the twelve
months ended December 31, 1998 and as at June 30, 1999 and for the six
months ended June 30, 1999 are attached to this Report.
(c) EXHIBITS:
2.1 Agreement and Plan of Merger between FutureLink Distribution
Corp., a Colorado corporation, and FutureLink California
Acquisition Corp., a Delaware corporation, dated August 1, 1999.
2.2 Certificate of Merger of FutureLink Distribution Corp., a
Colorado corporation, with and into FutureLink California
Acquisition Corp., a Delaware corporation.
2.3 Amending Agreement dated October 15, 1999 to the Agreement
and Plan of Reorganization and Merger dated June 2, 1999 among
FutureLink Distribution Corp., a Colorado corporation, FutureLink
California Acquisition Corp., a Delaware corporation and Executive
LAN Management, Inc., d.b.a. Micro Visions, among others.
2.4 Securities Purchase Agreement dated October 15, 1999 by and
among the Registrant, Pequot Private Equity Fund II, L.P. and
certain other investors (without schedules).
3.1 Certificate of Incorporation of the Registrant.
3.2 By-laws of the Registrant.
4.1 Registration Rights Agreement dated October 15, 1999 by and
among the Registrant, Pequot Private Equity Fund II, L.P. and
certain other investors.
3
<PAGE> 4
4.2 Form of Warrant dated October 15, 1999.
23.1 Consent of Ernst & Young, LLP, the Registrant's independent
auditors.
99.1 News Release of the Registrant dated October 18, 1999.
99.2 News Release of the Registrant dated October 18, 1999.
99.3 News Release of the Registrant dated October 18, 1999.
99.4 Description of Merger of FutureLink Distribution Corp., a
Colorado corporation, with and into FutureLink California
Acquisition Corp., a Delaware corporation, with a summary of
relevant Delaware law.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FUTURELINK CORP.
By: [signed: R. Kilambi] Date: October 26, 1999
----------------------------------
Raghu Kilambi, Chief Financial Officer
4
<PAGE> 5
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit No. Description Numbered Page
- ----------- ----------- -------------
<S> <C> <C>
2.1 Agreement and Plan of Merger between FutureLink
Distribution Corp., a Colorado corporation, and
FutureLink California Acquisition Corp., a Delaware
corporation, dated August 1, 1999.
2.2 Certificate of Merger of FutureLink Distribution
Corp., a Colorado corporation, with and into
FutureLink California Acquisition Corp., a Delaware
corporation.
2.3 Amending Agreement dated October 15, 1999 to the
Agreement and Plan of Reorganization and Merger dated
June 2, 1999 among FutureLink Distribution Corp., a
Colorado corporation, FutureLink California
Acquisition Corp., a Delaware corporation and
Executive LAN Management, Inc., d.b.a. Micro Visions,
among others.
2.4 Securities Purchase Agreement dated October 15,
1999 by and among the Registrant, Pequot Private
Equity Fund II, L.P. and certain other investors
(without schedules).
3.1 Certificate of Incorporation of the Registrant.
3.2 By-laws of the Registrant.
4.1 Registration Rights Agreement dated October 15,
1999 by and among the Registrant, Pequot Private
Equity Fund II, L.P. and certain other investors.
4.2 Form of Warrant dated October 15, 1999.
23.1 Consent of Ernst & Young, LLP, the Registrant's
independent auditors.
99.1 News Release of the Registrant dated October 18, 1999.
99.2 News Release of the Registrant dated October 18, 1999.
99.3 News Release of the Registrant dated October 18, 1999.
99.4 Description of Merger of FutureLink Distribution
Corp., a Colorado corporation, with and into
FutureLink California Acquisition Corp., a Delaware
corporation, with a summary of relevant Delaware law.
</TABLE>
5
<PAGE> 6
AUDITED FINANCIAL STATEMENTS AND INTERIM
UNAUDITED FINANCIAL STATEMENTS FOR MICRO VISIONS
1
<PAGE> 7
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Executive LAN Management, Inc., dba Micro Visions
We have audited the accompanying balance sheets of Executive LAN
Management, Inc., dba Micro Visions as of December 31, 1998 and 1997, and the
related statements of income, shareholders' equity, and cash flows for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Executive LAN Management,
Inc., dba Micro Visions at December 31, 1998 and 1997, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
[Signed: Ernst & Young LLP]
Irvine California,
April 30, 1999,
Except for Note 8, as to which the date is
June 24, 1999
2
<PAGE> 8
EXECUTIVE LAN MANAGEMENT, INC.,
dba MICRO VISIONS
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1998 1997
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 157,000 $ 690,000
Accounts receivable, less allowance for doubtful accounts
of $115,000 in 1998 and $79,000 in 1997................ 2,063,000 1,052,000
Inventories............................................... 815,000 231,000
Advances due from officers................................ 2,000 72,000
Other current assets...................................... 15,000 1,000
---------- ----------
Total current assets........................................ 3,052,000 2,046,000
Property and equipment, less accumulated depreciation of
$122,000 in 1998 and $83,000 in 1997...................... 389,000 83,000
Other assets................................................ 146,000 33,000
---------- ----------
Total assets................................................ $3,587,000 $2,162,000
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 797,000 $ 169,000
Line of credit............................................ 261,000 150,000
Income taxes payable...................................... 153,000 237,000
Deferred income taxes..................................... 435,000 235,000
Accrued expenses and other liabilities.................... 464,000 432,000
Deferred revenues......................................... 73,000 90,000
---------- ----------
Total current liabilities................................... 2,183,000 1,313,000
Commitments
Shareholders' equity
Common stock, no par value:
Authorized shares -- 1,000,000
Issued and outstanding shares -- 200 in 1998 and 1997.. 10,000 10,000
Retained earnings......................................... 1,394,000 839,000
---------- ----------
Total shareholders' equity.................................. 1,404,000 849,000
---------- ----------
Total liabilities and shareholders' equity.................. $3,587,000 $2,162,000
========== ==========
</TABLE>
See accompanying notes.
3
<PAGE> 9
EXECUTIVE LAN MANAGEMENT, INC.,
dba MICRO VISIONS
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------
1998 1997
---------- ----------
<S> <C> <C>
Revenues:
Consulting revenues......................................... $5,088,000 $2,709,000
Software revenues........................................... 3,274,000 1,478,000
Computer equipment sales.................................... 4,797,000 4,972,000
Training revenues........................................... 290,000 62,000
Maintenance revenues and other income....................... 220,000 344,000
---------- ----------
13,669,000 9,565,000
Costs and expenses:
Cost of revenues............................................ 8,867,000 6,734,000
Selling, general and administrative......................... 3,937,000 1,951,000
Interest expense (income), net.............................. 10,000 (53,000)
---------- ----------
12,814,000 8,632,000
---------- ----------
Income before income taxes.................................. 855,000 933,000
Provision for income taxes.................................. 178,000 395,000
---------- ----------
Net income.................................................. $ 677,000 $ 538,000
========== ==========
Basic and diluted earnings per share........................ $ 3,385 $ 2,690
========== ==========
Weighted average shares (basic and diluted)................. 200 200
========== ==========
</TABLE>
See accompanying notes.
4
<PAGE> 10
EXECUTIVE LAN MANAGEMENT, INC.,
dba MICRO VISIONS
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
---------------- RETAINED
SHARES AMOUNT EARNINGS TOTAL
------ ------- ---------- ----------
<S> <C> <C> <C> <C>
Balance at December 31, 1996................................ 200 $10,000 $ 301,000 $ 311,000
Net income................................................ -- -- 538,000 538,000
--- ------- ---------- ----------
Balance at December 31, 1997................................ 200 10,000 839,000 849,000
--- ------- ---------- ----------
Net income................................................ -- -- 677,000 677,000
Distributions to shareholders............................. -- -- (122,000) (122,000)
--- ------- ---------- ----------
Balance at December 31, 1998................................ 200 $10,000 $1,394,000 $1,404,000
=== ======= ========== ==========
</TABLE>
See accompanying notes.
5
<PAGE> 11
EXECUTIVE LAN MANAGEMENT, INC.,
dba MICRO VISIONS
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
-----------------------
1998 1997
----------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 677,000 $ 538,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 39,000 20,000
Change in operating assets and liabilities:
Accounts receivable.................................... (1,011,000) (495,000)
Inventories............................................ (584,000) (183,000)
Other current assets................................... (14,000) --
Advance due from officers.............................. 70,000 (72,000)
Other assets........................................... (113,000) (25,000)
Accounts payable and accrued expenses.................. 660,000 281,000
Income taxes payable................................... (84,000) 237,000
Deferred income taxes.................................. 200,000 141,000
Deferred revenues...................................... (17,000) 90,000
----------- ---------
Net cash (used in) provided by operating activities......... (177,000) 532,000
INVESTING ACTIVITIES
Purchases of equipment...................................... (345,000) (50,000)
FINANCING ACTIVITIES
Distribution to shareholders................................ (122,000) --
Net borrowings (repayment) from/of line of credit........... 111,000 (93,000)
----------- ---------
Net cash used in financing activities....................... (11,000) (93,000)
Increase (decrease) in cash................................. (533,000) 389,000
Cash at beginning of year................................... 690,000 301,000
----------- ---------
Cash at end of year......................................... $ 157,000 $ 690,000
=========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid............................................... $ 4,000 $ 11,000
Income taxes paid........................................... 62,000 17,000
</TABLE>
See accompanying notes.
6
<PAGE> 12
EXECUTIVE LAN MANAGEMENT, INC.,
dba MICRO VISIONS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Executive LAN Management dba Micro Visions (the "Company") was incorporated
in California in 1993 and is a leading reseller and service provider of thin
client/server-based computing systems. The Company also provides a full line of
information technology consulting services including internet/intranet
consulting, LAN/WAN implementation, internetworking analysis and design,
application deployment and desktop management, and Year 2000 consulting. The
Company's principal markets are in the U.S.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.
REVENUE RECOGNITION
The Company recognizes consulting revenues upon delivery of service.
Software license revenues are recognized upon delivery of the software. Computer
equipment sales are recognized upon shipment of the equipment. Training revenues
are recognized upon delivery of training services. Maintenance revenues are
recognized ratably over the period of the maintenance contract.
UNBILLED ACCOUNTS RECEIVABLES
Unbilled accounts receivable, representing unbilled consulting services, of
$89,000 and $65,000 at December 31, 1998 and 1997, respectively, are included in
accounts receivable on the accompanying balance sheets.
INVENTORY
Inventory is stated at the lower of cost (first-in, first out) or market
and primarily consists of prepackaged third party computer software.
7
<PAGE> 13
EXECUTIVE LAN MANAGEMENT, INC.,
dba MICRO VISIONS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is computed on a
straight-line method based upon the estimated useful lives of the related assets
which range from five to seven years. Leasehold improvements are depreciated
using the straight-line method over seven years. Property and equipment were
comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1998 1997
--------- -------
<S> <C> <C>
Office furniture............................................ $ 90,000 $15,000
Computer equipment.......................................... 376,000 149,000
Leasehold improvements...................................... 45,000 2,000
--------- -------
511,000 166,000
Less accumulated depreciation and amortization.............. (122,000) (83,000)
--------- -------
$ 389,000 $83,000
========= =======
</TABLE>
LONG-LIVED ASSETS
Effective January 1, 1997, the Company adopted Statement of Financial
Accounting Standards No. 121 ("SFAS No. 121"), Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of, which requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present. Implementation of SFAS No. 121 was
immaterial to the financial statements of the Company.
INCOME TAXES
Prior to July 1, 1998, the Company utilized the liability method to account
for income taxes as set forth in SFAS No. 109, Accounting for Income Taxes.
Under the liability method, deferred taxes are determined based on differences
between the financial statement and tax bases of assets and liabilities using
enacted tax rates.
Effective July 1, 1998, the stockholders of the Company elected, under
Subchapter S of the Internal Revenue Code, to include the Company's income in
their own income for federal income tax purposes. Accordingly, the Company is
generally not subject to federal income taxes.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist principally of cash,
receivables, accounts payable, and borrowings. The Company believes all the
financial instruments' recorded values approximate current values.
CONCENTRATION OF CREDIT RISK
The Company sells the majority of its products and provides services to
various customers, which include a variety of large companies and distributors
throughout the United States. In 1998, sales to the Company's largest customer
accounted for 10% of total sales. Accounts receivable from that customer
represented 12% of total accounts receivable at December 31, 1998. In 1997,
sales to the Company's two largest customers accounted for 47% and 19% of total
sales. Accounts receivable from those customers aggregated 44% of total accounts
receivable at December 31, 1997. The Company provides for uncollectible amounts
upon recognition of revenue and when specific credit problems arise. During 1998
and 1997, the Company did not perform credit evaluations on its customers,
however, the Company required a twenty-five percent deposit for its first time
customers. The Company generally does not require collateral on its accounts
receivable.
8
<PAGE> 14
EXECUTIVE LAN MANAGEMENT, INC.,
dba MICRO VISIONS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
ADVERTISING
The Company expenses advertising costs as incurred. These costs include
promotional literature, direct mailing brochures, telemarketing, and trade
shows. Advertising expense for the years ended December 31, 1998 and 1997 was
$106,000 and $11,000, respectively.
NET INCOME PER SHARE
Effective January 1, 1998, the Company adopted SFAS No. 128, Earnings Per
Share, and restated all prior period earnings per share (EPS) data, as required.
SFAS No. 128 replaced the presentation of primary and fully diluted EPS pursuant
to APB Opinion No. 15, Earnings Per Share, with the presentation of basic and
diluted EPS. Basic EPS excludes dilution and is computed by dividing net income
by the weighted average number of common shares outstanding for the period.
Diluted net income per share is computed by dividing net income by the weighted
average number of common shares outstanding for the period and the dilutive
effect, if any, of stock options and warrants outstanding for the period.
COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted SFAS No. 130, Reporting
Comprehensive Income, which establishes standards for reporting and displaying
comprehensive income and its components in the financial statements. For the
years ended December 31, 1998 and 1997, the Company did not have any components
of comprehensive income as defined by SFAS No. 130.
SEGMENTS OF A BUSINESS ENTERPRISE
Effective January 1, 1998, the Company adopted SFAS No. 131, Disclosures
about Segments of an Enterprise and Related Information, SFAS 131 superseded
SFAS No. 14, Financial Reporting for Segments of a Business Enterprise. SFAS No.
131 establishes standards for the way that public business enterprises report
information about operating segments in annual consolidated financial statements
and requires that those enterprises report selected information about operating
segments in interim financial reports. SFAS No. 131 also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. The adoption of SFAS No. 131 did not affect the consolidated results
of operations or financial position of the Company.
2. INCOME TAXES
Provision (benefit) for income taxes is comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1998 1997
-------- --------
<S> <C> <C>
Current:
Federal................................................... $(22,000) $201,000
State..................................................... -- 53,000
-------- --------
(22,000) 254,000
-------- --------
Deferred:
Federal................................................... 162,000 120,000
State..................................................... 38,000 21,000
-------- --------
200,000 141,000
-------- --------
Total provision for income taxes............................ $178,000 $395,000
======== ========
</TABLE>
9
<PAGE> 15
EXECUTIVE LAN MANAGEMENT, INC.,
dba MICRO VISIONS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets (liabilities) are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1998 1997
--------- ---------
<S> <C> <C>
Deferred tax assets:
Depreciation.............................................. $ 1,000 $ 1,000
--------- ---------
Total deferred tax assets................................... 1,000 1,000
--------- ---------
Deferred tax liabilities:
Inventory adjustment...................................... (213,000) (92,000)
Accrual to cash adjustment................................ (223,000) (144,000)
--------- ---------
Net deferred tax liabilities................................ (436,000) (236,000)
--------- ---------
Total net deferred tax liabilities.......................... $(435,000) $(235,000)
========= =========
</TABLE>
On July 1, 1998, the Company changed its tax status, as defined by the
Internal Revenue Code, to Subchapter S, which eliminated the requirement for the
Company to pay federal income taxes as net income is passed through and taxable
to the individual stockholders. A state provision for income taxes will be
recorded based on a California statutory rate of 1.5% for Subchapter S
Corporations.
Income tax benefit computed at the statutory federal income tax rate (34%)
and income tax expense provided in the financial statements differ as follows
for the years ended December 31:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Benefit computed at the statutory rate...................... $291,000 $317,000
S Corp income not subject to tax............................ (111,000) --
Nondeductible expenses...................................... (6,000) 6,000
Statement income tax, net of federal income tax benefit..... 19,000 54,000
Other....................................................... (15,000) 18,000
-------- --------
Income tax expense.......................................... $178,000 $395,000
======== ========
</TABLE>
3. LINE OF CREDIT
The Company entered into a $2.5 million line of credit agreement with a
financial institution to finance its inventory purchases. The available credit
line is based on a percentage of the Company's eligible accounts receivable
balance less the outstanding balance owed to the financial institution. The
outstanding balance bears interest at prime plus 3.03% (10.78% at December 31,
1998). At December 31, 1998, the unused credit line was $2,134,000.
Substantially all of the Company's assets are collateral under the credit
agreement.
10
<PAGE> 16
EXECUTIVE LAN MANAGEMENT, INC.,
dba MICRO VISIONS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. COMMITMENTS
The Company has entered into various operating leases ranging from three to
five years for its facilities. Rentals under certain leases have rent escalation
clauses as set forth in their respective lease agreements. Future minimum rental
commitments as of December 31, 1998 are as follows:
<TABLE>
<S> <C>
1999....................................................... $ 279,000
2000....................................................... 267,000
2001....................................................... 244,000
2002....................................................... 181,000
2003....................................................... 91,000
----------
$1,062,000
==========
</TABLE>
Rent expense was $135,000 and $36,000 for the years ended December 31, 1998
and 1997, respectively.
5. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1998 1997
-------- --------
<S> <C> <C>
Numerator:
Net income................................................ $677,000 $538,000
Denominator:
Shares used in computing basic and diluted earnings per
share.................................................. 200 200
======== ========
Basic and diluted earnings per share........................ $ 3,385 $ 2,690
======== ========
</TABLE>
6. RELATED PARTY TRANSACTIONS
During 1997 and 1998, the Company made various advances to its officers.
Advances in 1997 aggregated $72,000 with one advance to a shareholder in the
amount of $68,000. This advance was canceled by the Company in 1998 and recorded
as a bonus payment. Outstanding advances to officers at December 31, 1998 was
$2,000.
7. PENSION PLANS
The Company has three defined contribution pension plans covering employees
over the age of 21 years with one year of service. The Company's contribution
requirements under these plans range from zero percent to one hundred percent of
participants' eligible annual compensation as defined in the plan documents. The
Company's combined contributions to these plans for the years ended December 31,
1998 and 1997 were $108,000 and $15,000, respectively.
8. SUBSEQUENT EVENTS
On June 2, 1999, the Company and the Company's shareholders signed an
Agreement and Plan of Reorganization and Merger (the "Agreement") with
FutureLink Distribution Corp. ("FutureLink"). The Agreement provides for a
merger of the Company with a subsidiary of FutureLink such that the Company's
outstanding stock shall be converted into and become a right to receive the
consideration as set forth in the agreement. The merger is to take place as soon
as practicable after the satisfaction or waiver of the conditions set forth in
the Agreement and is anticipated to be completed by October 1999.
11
<PAGE> 17
EXECUTIVE LAN MANAGEMENT, INC.,
dba MICRO VISIONS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
9. IMPACT OF YEAR 2000 (UNAUDITED)
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. The Company has
completed an assessment of their IT systems as well as the software and hardware
sold to its customers noting that they are Year 2000 compliant. The Company's IT
systems primarily consist of its financial reporting system. In July 1998, the
Company purchased and implemented a Year 2000 compliant financial reporting
software package totaling $42,000. The Company's non-IT systems primarily
consist of heating, sprinklers and security equipment at the Company's
facilities. The Company will complete its review and remediation of its non-IT
systems and its IT systems other than the financial reporting system by October
1, 1999. The Company estimates that the total remaining costs to complete any
required modifications, upgrades or replacements of its IT and non-IT systems
will not have a material adverse effect on its business or results of
operations. The Company has obtained Year 2000 compliant certification letters
from its major software and hardware vendors noting that their software and
hardware sold by the Company are Year 2000 compliant. However, the failure of
the Company's other vendors and suppliers to be fully Year 2000 compliant with
regards to their products by January 1, 2000 could result in interruptions in
the Company's normal business work operations. The Company is currently
developing contingency plans to address the year 2000 issues that may pose a
significant risk to the Company's ongoing operations. The Company expects to
complete the contingency plans by October 31, 1999.
12
<PAGE> 18
EXECUTIVE LAN MANAGEMENT, INC.,
DBA MICROVISIONS
BALANCE SHEETS
(SEE BASIS OF PRESENTATION -- NOTE 1)
(ALL AMOUNTS STATED IN $U.S.)
<TABLE>
<CAPTION>
JUNE 30
------------------------
1999 1998
---------- ----------
UNAUDITED
<S> <C> <C>
ASSETS
CURRENT
Cash........................................................ $ 244,000 $ 545,000
Accounts receivable, net.................................... 3,738,000 1,641,000
Inventory................................................... 423,000 274,000
Other current assets........................................ 56,000 51,000
---------- ----------
TOTAL CURRENT ASSETS........................................ 4,461,000 2,511,000
---------- ----------
Capital assets, net......................................... 484,000 137,000
Other assets................................................ 224,000 88,000
---------- ----------
709,000 225,000
---------- ----------
TOTAL ASSETS................................................ $5,169,000 $2,736,000
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Line of credit.............................................. $ 798,000 $ 528,000
Accounts payable and accrued liabilities.................... 1,945,000 452,000
Income taxes payable........................................ 242,000 179,000
Deferred income taxes....................................... 450,000 378,000
Deferred revenues........................................... 119,000 135,000
---------- ----------
TOTAL CURRENT LIABILITIES................................... 3,554,000 1,672,000
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, no par value:
Authorized Authorized shares -- 1,000,000
Issued and outstanding -- 200 in 1999 and 1998.......... 10,000 10,000
Retained earnings........................................... 1,605,000 1,054,000
---------- ----------
TOTAL SHAREHOLDERS' EQUITY.................................. 1,615,000 1,064,000
---------- ----------
$5,169,000 $2,736,000
========== ==========
</TABLE>
See accompanying notes.
13
<PAGE> 19
EXECUTIVE LAN MANAGEMENT, INC.,
DBA MICROVISIONS
STATEMENTS OF INCOME AND RETAINED EARNINGS
(ALL AMOUNTS STATED IN $U.S.)
<TABLE>
<CAPTION>
6 MONTH PERIOD
ENDED JUNE 30
------------------------
1999 1998
---------- ----------
UNAUDITED
<S> <C> <C>
REVENUE
Consulting services......................................... $3,192,000 $ 889,000
Hardware and software sales................................. 5,583,000 3,001,000
Other....................................................... 547,000 1,571,000
---------- ----------
9,322,000 5,461,000
---------- ----------
EXPENSES
Hardware and software purchases............................. 4,706,000 2,606,000
Contracts, payroll and benefits............................. 3,077,000 1,754,000
Selling, general and administrative......................... 1,176,000 740,000
Interest.................................................... 7,000 --
Depreciation................................................ 41,000 3,000
---------- ----------
9,007,000 5,103,000
---------- ----------
INCOME BEFORE INCOME TAXES.................................. 315,000 358,000
Provision for income taxes (note 2)......................... 104,000 143,000
---------- ----------
INCOME AND COMPREHENSIVE INCOME FOR THE PERIOD.............. $ 215,000 $ 215,000
========== ==========
RETAINED EARNINGS, BEGINNING OF PERIOD...................... 1,394,000 1,394,000
RETAINED EARNINGS, END OF PERIOD............................ $1,605,000 $1,609,000
========== ==========
</TABLE>
See accompanying notes.
14
<PAGE> 20
EXECUTIVE LAN MANAGEMENT, INC.,
DBA MICROVISIONS
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(ALL AMOUNTS STATED IN $U.S.)
<TABLE>
<CAPTION>
COMMON STOCK
----------------- RETAINED
SHARES AMOUNT EARNINGS
------ ------- ----------
UNAUDITED
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1997.................................. 200 $10,000 $ 839,000
Net income................................................ 215,000
--- ------- ----------
BALANCE, MARCH 31, 1998..................................... 200 10,000 1,054,000
Net income................................................ 462,000
Distributions to stockholders............................. (122,000)
--- ------- ----------
BALANCE, DECEMBER 31, 1998.................................. 200 10,000 1,394,000
Net income................................................ 211,000
--- ------- ----------
BALANCE, JUNE 30, 1999...................................... 200 $10,000 $1,605,000
=== ======= ==========
</TABLE>
See accompanying notes.
15
<PAGE> 21
EXECUTIVE LAN MANAGEMENT, INC.,
DBA MICROVISIONS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(ALL AMOUNTS STATED IN $U.S.)
<TABLE>
<CAPTION>
6 MONTH PERIOD
ENDED JUNE 30
-----------------------
1999 1998
----------- --------
UNAUDITED
<S> <C> <C>
CASH FLOWS USED IN OPERATING ACTIVITIES
Net income for the period................................... $ 210,000 $215,000
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation.............................................. 41,000 3,000
Changes in operating assets and liabilities:
Accounts receivable.................................... (1,675,000) (589,000)
Inventories............................................ 392,000 (43,000)
Other current assets................................... (39,000) 22,000
Other assets........................................... (78,000) (55,000)
Accounts payable and accrued expenses.................. 789,000 (64,000)
Deferred revenues...................................... 46,000 45,000
----------- --------
(314,000) (466,000)
----------- --------
CASH FLOWS USED IN INVESTING ACTIVITIES
Capital assets purchased.................................... (136,000) (57,000)
----------- --------
(136,000) (57,000)
=========== ========
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayment) from/of line of credit........... 537,000 378,000
----------- --------
537,000 378,000
=========== ========
INCREASE/(DECREASE) IN CASH................................. 87,000 (145,000)
Cash, beginning of period................................... 157,000 690,000
----------- --------
CASH, END OF PERIOD......................................... $ 244,000 $545,000
=========== ========
</TABLE>
See accompanying notes.
16
<PAGE> 22
EXECUTIVE LAN MANAGEMENT, INC.,
DBA MICROVISIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying financial statements have been prepared on a consistent
basis with that of the annual financial statements and reflect all adjustments
which are, in the opinion of management, necessary to reflect a fair
presentation for the periods being presented.
2. INCOME TAXES
On July 1, 1998, the Company changed its tax status, as defined by the
Internal Revenue Code, to Subchapter S, which eliminated the requirement for the
Company to pay federal income taxes as net income is passed through and taxable
to the individual stockholders. The June 30, 1999 income tax figure includes the
federal income taxes related to the income earned by the Company for the period.
3. PROPOSED CHANGE IN CONTROL
On June 2, 1999, the Company and the Company's shareholders signed an
Agreement and Plan of Reorganization and Merger (the "Agreement") with
FutureLink Distribution Corp. ("FutureLink"). The Agreement provides for a
merger of the Company with a subsidiary of FutureLink such that the Company's
outstanding stock shall be converted into and become a right to receive the
consideration as set forth in the agreement. The merger is to take place as soon
as practicable after the satisfaction or waiver of each of the conditions set
forth in the Agreement and is anticipated to be completed by October 1, 1999.
17
<PAGE> 23
PRO FORMA FINANCIAL STATEMENTS SHOWING
IMPACT OF THE MICRO VISIONS ACQUISITION ON FUTURELINK
AS AT JUNE 30, 1999 AND DECEMBER 31, 1998
1
<PAGE> 24
FUTURELINK DISTRIBUTION CORP.
PRO FORMA BALANCE SHEET
JUNE 30, 1999
UNAUDITED
(ALL AMOUNTS IN UNITED STATES THOUSANDS OF DOLLARS EXCEPT EARNINGS PER SHARE)
<TABLE>
<CAPTION>
MICRO PRO FORMA NOTE PRO FORMA
FUTURELINK VISIONS ADJUSTMENTS REFERENCE CONSOLIDATED
---------- ------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CURRENT
Cash........................ $ 258 $ 244 -- $ 502
Accounts receivable......... 2,117 3,738 -- 5,855
Prepaid expenses............ 1,702 -- -- 1,702
Inventory................... 126 423 -- 549
Other current assets........ -- 56 -- 56
------- ------ ------- -------
4,203 4,461 -- 8,664
------- ------ ------- -------
Capital assets.............. 2,298 484 -- 2,782
Other assets................ -- 224 -- 224
Goodwill.................... 4,628 -- $44,083 (2.1), (2.3) 48,711
Employee and consultants
base...................... 2,284 -- -- 2,284
Investments................. 1,220 -- (1,220) (2.1), (2.2) --
------- ------ ------- -------
10,430 709 42,863 54,003
------- ------ ------- -------
TOTAL ASSETS................ $14,633 $5,169 $42,863 $62,665
======= ====== ======= =======
CURRENT
Line of credit.............. $ 639 $ 798 -- $ 1,437
Accounts payable and accrued
liabilities............... 1,615 1,945 $ 103 (2.2) 3,663
Income taxes payable........ -- 242 -- 242
Deferred income taxes....... -- 450 -- 450
Interest payable............ 113 -- -- 113
Notes payable............... 152 -- -- 152
Convertible debentures,
net....................... 88 -- -- 88
Due to former shareholders
of Micro Visions.......... -- -- 11,000 (2.1) 11,000
Deferred revenues........... 50 119 -- 169
------- ------ ------- -------
2,657 3,554 11,103 17,314
------- ------ ------- -------
Capital lease obligation.... 34 -- -- 34
Convertible debentures,
net....................... 7,556 -- -- 7,556
Deferred taxes.............. 974 -- -- 974
------- ------ ------- -------
TOTAL LIABILITIES........... 11,221 3,554 11,103 25,878
------- ------ ------- -------
Paid up shares.............. 3 10 3 (2.1)
(10) (2.2) 6
Capital in excess of par.... 10,663 -- 33,372 (2.1) 44,035
To be issued................ 2 -- -- 2
Contributed surplus......... 14,636 -- -- 14,636
Cumulative translation
account................... (210) -- -- (210)
Retained
Earnings/(Deficit)........ (21,682) 1,605 (1,605) (2.2) (21,682)
------- ------ ------- -------
3,412 1,615 31,762 36,787
------- ------ ------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY...... $14,633 $5,169 $42,863 $62,665
======= ====== ======= =======
</TABLE>
See accompanying notes to unaudited pro forma financial statements.
2
<PAGE> 25
FUTURELINK DISTRIBUTION CORP.
PRO FORMA STATEMENT OF INCOME AND LOSS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
UNAUDITED
(ALL AMOUNTS IN UNITED STATES THOUSANDS OF DOLLARS EXCEPT EARNINGS PER SHARE)
<TABLE>
<CAPTION>
MICRO PRO FORMA NOTE PRO FORMA
FUTURELINK VISIONS ADJUSTMENTS REFERENCE CONSOLIDATED
---------- ------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES
Consulting................................ $ 2,346 $3,192 -- $ 5,538
Hardware and software sales............... 884 5,583 -- 6,467
Server farm and other sales............... 225 547 -- 772
--------- ------ ------- -----------
3,455 9,322 -- 12,777
========= ====== ======= ===========
EXPENSES
Contracts, payroll and benefits........... 3,224 3,077 -- 6,301
Hardware and software purchases........... 822 4,706 -- 5,528
Selling, general and administration and
other................................... 2,971 1,176 -- 4,147
Interest expense.......................... 7,406 7 -- 7,413
Depreciation.............................. 350 41 -- 391
Goodwill and other amortization........... 2,427 -- $ 4,409 (3.1) 6,836
--------- ------ ------- -----------
17,200 9,007 4,409 30,616
========= ====== ======= ===========
NET LOSS FROM OPERATIONS.................. (13,745) 315 (4,409) (17,839)
Unusual item.............................. (845) -- -- (845)
--------- ------ ------- -----------
NET PROFIT/(LOSS) BEFORE TAX.............. (14,590) 315 (4,409) (18,684)
Deferred tax benefit...................... 238 (104) -- 134
--------- ------ ------- -----------
NET PROFIT/(LOSS) AFTER TAX............... $ (14,352) $ 211 $(4,409) $ (18,550)
========= ====== ======= ===========
LOSS PER COMMON SHARE..................... $ (2.39) $ (1.55)
--------- -----------
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING............................. 5,995,831 (4) 11,995,831
--------- -----------
</TABLE>
See accompanying notes to unaudited pro forma financial statements.
3
<PAGE> 26
FUTURELINK DISTRIBUTION CORP.
PRO FORMA STATEMENT OF INCOME AND LOSS
FOR THE YEAR ENDED DECEMBER 31, 1998
UNAUDITED
(ALL AMOUNTS IN UNITED STATES THOUSANDS OF DOLLARS EXCEPT EARNINGS PER SHARE)
<TABLE>
<CAPTION>
MICRO PRO FORMA NOTE PRO FORMA
FUTURELINK VISIONS ADJUSTMENTS REFERENCE CONSOLIDATED
---------- ------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES
Consulting.......................... $ 1,471 $5,088 -- $ 6,559
Hardware and software sales......... 963 8,071 -- 9,034
Other............................... 3 510 -- 513
--------- ------ ------- ----------
2,437 13,669 -- 16,106
========= ====== ======= ==========
EXPENSES
Contracts, payroll and benefits..... 3,662 2,092 -- 5,754
Hardware and software purchases..... 880 6,775 -- 7,655
Selling, general and
administration.................... 691 3,898 -- 4,589
Interest expense.................... 1,304 10 -- 1,314
Depreciation........................ 119 39 -- 158
Amortization........................ 697 -- $ 8,832 (3.1) 9,529
Other expenses...................... 295 -- -- 295
--------- ------ ------- ----------
7,648 12,814 8,832 29,294
========= ====== ======= ==========
PROFIT/(LOSS) FROM OPERATIONS....... (5,211) 855 (8,832) (13,188)
Loss on sale of assets.............. (48) -- -- (48)
Equity loss of affiliate............ (860) -- -- (860)
Minority interest................... 34 -- -- 34
--------- ------ ------- ----------
(874) -- -- (874)
========= ====== ======= ==========
PROFIT/(LOSS) BEFORE INCOME TAXES... (6,085) 855 (8,832) (14,062)
Provision for income taxes.......... 205 (178) -- 27
--------- ------ ------- ----------
NET PROFIT/(LOSS) AFTER TAX......... $ (5,880) $ 677 $(8,832) $ (14,035)
========= ====== ======= ==========
LOSS PER COMMON SHARE............... $ (1.86) $ (1.53)
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING....................... 3,169,314 (4) 9,169,314
--------- ----------
</TABLE>
See accompanying notes to unaudited pro forma financial statements.
4
<PAGE> 27
FUTURELINK DISTRIBUTION CORP.
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(ALL AMOUNTS IN UNITED STATES DOLLARS)
On June 2, 1999, FutureLink Distribution Corp. ("FutureLink") entered into
an Agreement and Plan of Reorganization and Merger (the "Agreement") with
Executive LAN Management, Inc. ("Micro Visions"). The Agreement provides for a
merger of Micro Visions with FutureLink such that Micro Visions' outstanding
stock shall be sold to FutureLink in exchange for $12,000,000 cash and 6,000,000
FutureLink common shares, as well as contingent consideration of 2,400,000
common shares subject to the achievement of certain targets. The merger is to
take place as soon as practicable after the satisfaction or waiver of the
conditions set forth in the Agreement and is anticipated to be completed by the
end of September 1999.
1. The accompanying unaudited pro forma consolidated financial statements have
been prepared by management from the unaudited financial statements of
FutureLink and Micro Visions as at June 30, 1999 for the three month period
then ended and the audited financial statements of FutureLink and Micro
Visions as at December 31, 1998 and for the year then ended, together with
other information available to the companies. In the opinion of the
management of FutureLink, these pro forma consolidated financial statements
include all adjustments necessary for fair presentation in accordance with
accounting principles generally accepted in the United States. These pro
forma consolidated financial statements may not be indicative of the
financial position or the results of operations that actually would have
occurred if the events reflected therein had been in effect on the dates
indicated nor of the financial position or the results of operations which
may be obtained in the future.
These pro forma financial statements should be read in conjunction with the
audited and unaudited financial statements of the companies.
2. The pro forma consolidated balance sheet at June 30, 1999 gives effect to
the following assumptions and transactions, all of which will become
effective on the date of the fulfillment or waiver of the conditions of the
Micro Visions Acquisition Agreement as if the effective date of that
agreement was June 30, 1999:
2.1 The acquisition of all of the outstanding common shares of Micro
Visions in exchange for cash consideration of $12,000,000 and
6,000,000 common shares of FutureLink with an ascribed value of
$33,375,000 ($1,000 to paid up shares and $33,374,000 to capital in
excess of par) based on the average share trading price at the time
of signing the Agreement. As at June 30, 1999, $1,000,000 had been
paid to the former shareholders of Micro visions as a deposit towards
the acquisition. The remaining $11,000,000 will be paid in accordance
with the terms of the agreement as follows:
-- $500,000 July 31, 1999
-- $500,000 August 31, 1999
-- $10,000,000 at closing
The acquisition has been accounted for in these pro forma
consolidated financial statements by the purchase method. The
purchase price has been allocated to the net assets acquired based on
their estimated fair values, as follows:
5
<PAGE> 28
FUTURELINK DISTRIBUTION CORP.
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1999
(ALL AMOUNTS IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
PURCHASE
ALLOCATION
----------
$(000'S)
<S> <C>
Net assets acquired......................................... $ 1,615
Goodwill.................................................... 44,083
-------
Purchase price.............................................. $45,698
=======
Consideration:
Cash........................................................ $12,000
Common shares of FutureLink................................. 33,375
Acquisition costs........................................... 323
-------
Total consideration......................................... $45,698
=======
</TABLE>
2.2 The allocation to goodwill of the estimated costs of the acquisition
described in 2.1 above, in the amount of $323,000, $103,000 of which
was payable and $220,000 of which had been incurred prior to June 30,
1999 and the elimination of the share capital ($10,000) and retained
earnings ($1,603,000) of Micro Visions on its acquisition.
2.3 Additional consideration payable to the former shareholders of Micro
Visions has not been reflected in the pro forma consolidated
financial statements as the outcome of the contingency cannot be
reasonably determined at this time. The additional share
consideration, which will be recorded as additional purchase price
consideration (goodwill) if and when it becomes payable, is based
upon the achievement of the following performance criteria as
described in the Agreement for the period from January 1, 1999 to
December 31, 1999:
(a) 1,200,000 FutureLink common shares to be issued if Micro Visions
achieves sales in excess of $18,000,000;
(b) 720,000 FutureLink common shares to be issued if Micro Visions
enlists 100 new customers; and
(c) 480,000 FutureLink common shares to be issued if Micro Visions
installs and integrates at least 200 new servers.
2.4 A dividend which may be declared by Micro Visions prior to closing
has not been reflected in the pro forma consolidated financial
statements as the amount cannot be reasonably estimated at this time.
As per the Agreement, the dividend amount, if any, will be equivalent
to the federal and state income tax in respect of income earned by
Micro Visions from the beginning of the current fiscal year of Micro
Visions (being October 1, 1998) through to closing of the Agreement.
The amount of any dividend paid would result in a corresponding
amount being allocated to goodwill.
3. The pro forma consolidated statements of income for the six months ended
June 30, 1999 and the year ended December 31, 1998 give effect to the
acquisition of Micro Visions as described in 2.1 and 2.2 above which will
become effective on the date of the fulfillment or waiver of the conditions
of the Agreement as if the transactions had occurred January 1, 1999, and
January 1, 1998, respectively. The following adjustments are reflected:
3.1 The amortization of goodwill attributable to the allocation of the
purchase price of Micro Visions in excess of the carrying value of
the net assets acquired (see 2.1 and 2.2 above) calculated on a
straight line basis over a period of 5 years.
6
<PAGE> 29
FUTURELINK DISTRIBUTION CORP.
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1999
(ALL AMOUNTS IN UNITED STATES DOLLARS)
4. The weighted average number of shares outstanding and the loss per share
give retroactive effect to the share consolidation of 5 to 1 on June 1,
1999.
The weighted average number of shares outstanding has been adjusted to give
effect to the shares issued upon acquisition of Micro Visions as though
they had been outstanding as at the beginning of the period. The weighted
average number of shares outstanding does not include the contingent share
consideration.
Fully diluted earnings per share does not differ from basic earnings per
share.
7
<PAGE> 1
EXHIBIT 2.1
FUTURELINK CORP.
AGREEMENT AND PLAN OF MERGER
OF
FUTURELINK CALIFORNIA ACQUISITION CORP.
(A DELAWARE CORPORATION)
AND
FUTURELINK DISTRIBUTION CORP.
(A COLORADO CORPORATION)
THIS AGREEMENT AND PLAN OF MERGER dated as of August 1, 1999 (the "Agreement")
is between FutureLink California Acquisition Corp., a Delaware corporation
("FutureLink Delaware") and FutureLink Distribution Corp., a Colorado
corporation ("FutureLink Colorado"). FutureLink Delaware and FutureLink Colorado
are sometimes referred to herein as the "Constituent Corporations."
RECITALS
A. FutureLink Delaware is a corporation duly organized and existing under the
laws of the State of Delaware and has an authorized capital of 1,500 shares, all
of which are designated "common stock," no par value. As of the date hereof, 500
shares of common stock and no shares of preferred stock are issued and
outstanding.
B. FutureLink Colorado is a corporation duly organized and existing under the
laws of the State of Colorado and has an authorized capital of 105,000,000
shares, 100,000,000 of which are designated "common stock," par value $0.0001
per share, and 5,000,000 of which are designated "Preferred Stock," no par
value, undesignated as to series, rights, preferences, privileges or
restrictions. As of August 1, 1999, 6,441,913 shares of common stock and no
shares of preferred stock were issued and outstanding.
C. The Board of Directors of FutureLink Colorado has determined that, for the
purpose of effecting the reincorporation of FutureLink Colorado in the State of
Delaware, it is advisable and in the best interests of FutureLink Colorado and
its shareholders that FutureLink Colorado merge with and into FutureLink
Delaware upon the terms and conditions herein provided.
D. The respective Boards of Directors of FutureLink Delaware and FutureLink
Colorado have approved this Agreement and have directed that this Agreement be
submitted to a vote of their respective sole stockholder and shareholders and
executed by the undersigned officers.
NOW, THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, FutureLink Delaware and FutureLink Colorado hereby agree, subject
to the terms and conditions hereinafter set forth, as follows:
I. MERGER
I.1 MERGER. In accordance with the provisions of this Agreement, the Delaware
General Corporation Law and the Colorado Business Corporation Act, FutureLink
Colorado shall be merged with and into FutureLink Delaware in a transaction
qualifying as a reorganization within the meaning of Section 368(a)(1)(F) of the
Internal Revenue Code (the "Merger"), the separate existence of FutureLink
Colorado shall cease and FutureLink Delaware shall survive the Merger and shall
continue to be governed by the laws of the State of Delaware. FutureLink
Delaware shall be, and is herein sometimes referred to as, the "Surviving
Corporation." The name of the Surviving Corporation shall be FutureLink Corp. or
some other such name as the Board of Directors of the Surviving Corporation
shall choose.
I.2 FILING AND EFFECTIVENESS. The Merger shall become effective when the
following actions have been completed:
(a) This Agreement and Merger have been adopted and approved by the
stockholders of each Constituent Corporation in accordance with the
requirements of the Delaware General Corporation Law and the Colorado
Business Corporation Act;
1
<PAGE> 2
(b) All of the conditions precedent to the consummation of the Merger
specified in this Agreement have been satisfied or duly waived by the
party entitled to satisfaction thereof;
(c) An executed Certificate of Merger or an executed counterpart of this
Agreement meeting the requirements of the Delaware General Corporation
Law has been filed with the Secretary of State of the State of
Delaware; and
(d) Executed Articles of Merger or an executed counterpart of this
Agreement meeting the requirements of the Colorado Business
Corporation Act has been filed with the Secretary of State of the
State of Colorado.
The date and time when the Merger shall become effective, as aforesaid, is
herein called the "Effective Date of the Merger."
I.3 EFFECT OF THE MERGER. Upon the Effective Date of the Merger, the separate
existence of FutureLink Colorado shall cease and FutureLink Delaware, as the
Surviving Corporation, (i) shall continue to possess all of its assets, rights,
powers and property as constituted immediately prior to the Effective Date of
the Merger, (ii) shall be subject to all actions previously taken by its and
FutureLink Colorado's Board of Directors, (iii) shall succeed, without other
transfer, to all of the assets, rights, powers and property of FutureLink
Colorado in the manner more fully set forth in Section 259 of the Delaware
General Corporation Law, (iv) shall continue to be subject to all of the debts,
liabilities and obligations of FutureLink Delaware as constituted immediately
prior to the Effective Date of the Merger, and (v) shall succeed, without other
transfer, to all of the debts, liabilities and obligations of FutureLink
Colorado in the same manner as if FutureLink Delaware had itself incurred them,
all as more fully provided under the applicable provisions of the Delaware
General Corporation Law and the Colorado Business Corporation Act.
II. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
II.1 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation as set forth
in Exhibit "1" hereto shall, at the Effective Date of the Merger, become the
Certificate of Incorporation of the Surviving Corporation until duly amended in
accordance with the provisions thereof and applicable law.
II.2 BYLAWS. The Bylaws attached as Exhibit "2" hereto shall be the Bylaws of
the Surviving Corporation until duly amended in accordance with the provisions
thereof and applicable law.
II.3 DIRECTORS AND OFFICERS. The directors and officers of FutureLink Colorado
immediately prior to the Effective Date of the Merger shall be the directors and
officers of the Surviving Corporation until their successors shall have been
duly elected and qualified or until as otherwise provided by law, or the
Certificate of Incorporation of the Surviving Corporation or the Bylaws of the
Surviving Corporation.
III. MANNER OF CONVERSION OF STOCK
III.1 FUTURELINK COLORADO COMMON STOCK. Upon the Effective Date of the Merger,
each share of FutureLink Colorado common stock issued and outstanding
immediately prior thereto shall, by virtue of the Merger and without any action
by the Constituent Corporations, the holder of such shares or any other person,
be converted into and exchanged for one (1) fully paid and non-assessable share
of common stock, par value $0.0001 per share, of the Surviving Corporation.
III.2 FUTURELINK COLORADO OPTIONS, STOCK PURCHASE RIGHTS AND CONVERTIBLE
SECURITIES.
(a) Upon the Effective Date of the Merger, the Surviving Corporation shall
assume and continue the stock option plans and all other employee
benefit plans of FutureLink Colorado. Each outstanding and unexercised
option or other right to purchase or security convertible into
FutureLink Colorado common stock shall become an option or right to
purchase or a security convertible into the Surviving Corporation's
common stock on the basis of one share of the Surviving Corporation's
common stock for each share of FutureLink Colorado common stock
issuable pursuant to any such option, stock purchase right or
convertible security, on the same terms and conditions and at an
exercise price per share equal to the exercise price applicable to any
such FutureLink Colorado
2
<PAGE> 3
option, stock purchase right or convertible security at the Effective
Date of the Merger. There are no options, purchase rights for or
securities convertible into Preferred Stock of FutureLink Colorado.
(b) A number of shares of the Surviving Corporation's common stock shall
be reserved for issuance upon the exercise of options, stock purchase
rights and convertible securities equal to the number of shares of
FutureLink Colorado common stock so reserved immediately prior to the
Effective Date of the Merger.
III.3 FUTURELINK DELAWARE COMMON STOCK. Upon the Effective Date of the Merger,
each share of common stock, no par value, of FutureLink Delaware issued and
outstanding immediately prior thereto, if any, shall by virtue of the Merger and
without any action by FutureLink Delaware, the holder of such shares or any
other person, be canceled and returned to the status of authorized but unissued
shares.
III.4 EXCHANGE OF CERTIFICATES. After the Effective Date of the Merger, each
holder of an outstanding certificate representing shares of FutureLink Colorado
common stock may, at such stockholder's option, surrender the same for
cancellation to, as exchange agent (the "Exchange Agent"), and each such holder
shall be entitled to receive in exchange therefor a certificate or certificates
representing the number of shares of the Surviving Corporation's common stock
into which the surrendered shares were converted as herein provided. Unless and
until so surrendered, each outstanding certificate theretofore representing
shares of FutureLink Colorado common stock shall be deemed for all purposes to
represent the number of shares of the Surviving Corporation's common stock into
which such shares of FutureLink Colorado common stock were converted in the
Merger.
The registered owner on the books and records of the Surviving Corporation
or the Exchange Agent of any shares of stock represented by such outstanding
certificate shall, until such certificate shall have been surrendered for
transfer or conversion or otherwise accounted for to the Surviving Corporation
or the Exchange Agent, have and be entitled to exercise any voting and other
rights with respect to and to receive dividends and other distributions upon the
shares of common stock of the Surviving Corporation represented by such
outstanding certificate as provided above.
Each certificate representing common stock of the Surviving Corporation so
issued in the Merger shall bear the same legends, if any, with respect to the
restrictions on transferability as the certificates of FutureLink Colorado so
converted and given in exchange therefore, unless otherwise determined by the
Board of Directors of the Surviving Corporation in compliance with applicable
laws, or other such additional legends as agreed upon by the holder and the
Surviving Corporation or required by applicable law.
If any certificate for shares of FutureLink Delaware stock is to be issued
in a name other than that in which the certificate surrendered in exchange
therefor is registered, it shall be a condition of issuance thereof that the
certificate so surrendered shall be properly endorsed and otherwise in proper
form for transfer, that such transfer otherwise be proper and comply with
applicable securities laws and that the person requesting such transfer pay to
FutureLink Delaware or the Exchange Agent any transfer or other taxes payable by
reason of issuance of such new certificate in a name other than that of the
registered holder of the certificate surrendered or establish to the
satisfaction of FutureLink Delaware that such tax has been paid or is not
payable.
IV. GENERAL
IV.1 COVENANTS OF FUTURELINK DELAWARE. FutureLink Delaware covenants and agrees
that it will, on or before the Effective Date of the Merger:
(a) file any and all documents necessary for the assumption by FutureLink
Delaware of all of the franchise tax liabilities of FutureLink
Colorado; and
(b) take such other actions to effect the Merger as may be required by the
Colorado Business Corporation Act.
IV.2 FURTHER ASSURANCES. From time to time, as and when required by FutureLink
Delaware or by its successors or assigns, there shall be executed and delivered
on behalf of FutureLink Colorado such deeds
3
<PAGE> 4
and other instruments, and there shall be taken or caused to be taken by
FutureLink Delaware and FutureLink Colorado such further and other actions as
shall be appropriate or necessary in order to vest or perfect in or conform of
record or otherwise by FutureLink Delaware the title to and possession of all
the property, interests, assets, rights, privileges, immunities, powers,
franchises and authority of FutureLink Colorado and otherwise to carry out the
purposes of this Agreement, and the officers and directors of FutureLink
Delaware are fully authorized in the name and on behalf of FutureLink Colorado
or otherwise to take any and all such action and to execute and deliver any and
all such deeds and other instruments.
IV.3 ABANDONMENT. At any time before the Effective Date of the Merger, this
Agreement may be terminated and the Merger may be abandoned for any reason
whatsoever by the Board of Directors of either FutureLink Colorado or of
FutureLink Delaware, or of both, notwithstanding the approval of this Agreement
by the shareholders of FutureLink Colorado or by the sole stockholder of
FutureLink Delaware, or by both.
IV.4 AMENDMENT. The Boards of Directors of the Constituent Corporations may
amend this Agreement at any time prior to the filing of this Agreement (or
certificate in lieu thereof) with the Secretaries of State of the States of
Delaware and Colorado, provided that an amendment made subsequent to the
adoption of this Agreement by the stockholders of either Constituent Corporation
shall not: (a) alter or change the amount or kind of shares, securities, cash,
property and/or rights to be received in exchange for or on conversion of all or
any of the shares of any class or series thereof of such Constituent
Corporation; (b) alter or change any term of the Certificate of Incorporation of
the Surviving Corporation to be effected by the Merger; or (c) alter or change
any of the terms and conditions of this Agreement if such alteration or change
would adversely affect the holders of any class or series of capital stock of
any Constituent Corporation.
IV.5 REGISTERED OFFICE. The registered office of the Surviving Corporation in
the State of Delaware is 15 E. North Street, Dover, Delaware 19901, County of
Kent and Incorporating Services, Ltd. is the registered agent of the Surviving
Corporation at such address.
IV.6 AGREEMENT. Executed copies of this Agreement will be on file at the
principal place of business of the Surviving Corporation at 300, 250 -- 6th
Avenue S.W., Calgary, Alberta, CANADA T2P 3H7 and copies thereof will be
furnished to any stockholder of either Constituent Corporation, upon request and
without cost.
IV.7 GOVERNING LAW. This Agreement shall in all respects be construed,
interpreted and enforced in accordance with and governed by the laws of the
State of Delaware and, so far as applicable, the provisions of the Colorado
Business Corporation Act.
IV.8 COUNTERPARTS. In order to facilitate the filing and recording of this
Agreement, the same may be executed in any number of counterparts, each of which
shall be deemed to be an original and all of which together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, this Agreement having first been approved by the
resolutions of the Board of Directors of FutureLink Distribution Corp., a
Delaware corporation, and FutureLink Distribution Corp., a Colorado corporation,
is hereby executed on behalf of each of such two corporations and attested by
their respective officers thereunto duly authorized.
FUTURELINK CALIFORNIA
ACQUISITION CORP., a Delaware corporation
By: [signed: C. Chell]
CAMERON B. CHELL
Chief Executive Officer
4
<PAGE> 5
ATTEST:
[signed: K.B. Scott]
KYLE B.A. SCOTT
Secretary
FUTURELINK DISTRIBUTION CORP.,
a Colorado corporation
By: [signed: C. Chell]
CAMERON B. CHELL
Chief Executive Officer
ATTEST:
[signed: K.B. Scott]
KYLE B.A. SCOTT
Secretary
5
<PAGE> 1
EXHIBIT 2.2
FUTURELINK CORP.
CERTIFICATE OF MERGER
OF
FUTURELINK DISTRIBUTION, CORP.,
a Colorado corporation
WITH AND INTO
FUTURELINK CALIFORNIA ACQUISITION CORP.,
a Delaware corporation
(Under Section 252 of the General
Corporation Law of the State of Delaware)
FutureLink California Acquisition Corp., a Delaware corporation, hereby
certifies that:
1. The name and state of incorporation of each of the constituent
corporations is as follows:
(a) FutureLink Distribution, Corp., a Colorado corporation
("Distribution"); and
(b) FutureLink California Acquisition Corp., a Delaware corporation
("Acquisition").
2. The Agreement and Plan of Merger (the "Agreement and Plan of Merger"),
dated as of August 1, 1999, among Acquisition and Distribution has been
approved, adopted, certified, executed and acknowledged by each of the
constituent corporations in accordance with Section 252 (and with respect to
Acquisition, by written consent of its sole stockholder in accordance with
Section 228) of the General Corporation Law of the State of Delaware.
3. The name of the surviving corporation is FutureLink California
Acquisition Corp. (the "Surviving Corporation"). The name of the Surviving
Corporation shall be amended in the merger to be "FutureLink Corp."
4. The Certificate of Incorporation of FutureLink California Acquisition
Corp. as in effect immediately prior to the merger shall be amended as set
forth in Exhibit A hereto and, as so amended, shall be the Certificate of
Incorporation of the Surviving Corporation.
5. The executed Agreement and Plan of Merger is on file at the principal
place of business of the Surviving Corporation at 6 Morgan Street, Suite 116,
Irvine, CA 92816.
<PAGE> 2
6. A copy of the Agreement and Plan of Merger will be furnished by the
Surviving Corporation, on request and without cost, to any stockholder of any
constituent corporation.
7. The authorized capital stock of Distribution is as follows:
<TABLE>
<CAPTION>
CLASS NUMBER OF SHARES PAR VALUE
----- ----------------- ----------------
<S> <C> <C> <C>
Common Stock 100,000,000 $.0001
Preferred Stock 5,000,000 No Par Value
</TABLE>
IN WITNESS WHEREOF, FutureLink California Acquisition Corp. has caused this
certificate to be signed as of the 15th day of October, 1999.
FutureLink California Acquisition Corp.
By: [signed: R. Kilambi]
------------------------------
Name: R. Kilambi
Title: C.F.O.
<PAGE> 1
EXHIBIT 2.3
FUTURELINK CORP.
ASSIGNMENT AND AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF REORGANIZATION
AND MERGER
This Assignment and Amendment No. 1 ("Agreement") to the Agreement and
Plan of Reorganization and Merger ("Merger Agreement") is dated October 15,
1999 and is entered into on the one side by FutureLink California Acquisition
Corp., a Delaware corporation ("Old Merger Sub") and FutureLink Distribution
Corp., a Colorado corporation ("Old Parent"), FutureLink Corp., a Delaware
corporation ("New Parent"), and FutureLink Micro Visions Acquisition Corp., a
Delaware corporation, and on the other side by Executive Lan Management, Inc.,
a California corporation ("Company"), the Holmes Trust dated July 22, 1997,
Glen C. Holmes and Christine M. Holmes (collectively referred to as the
"Company Shareholder").
WHEREAS, Old Parent was merged into Old Merger Sub, as surviving
corporation, on or about October 15, 1999; and
WHEREAS, Old Merger Sub has changed its name to "FutureLink Corp.," a
Delaware corporation (referred to herein as "New Parent"), on October 15, 1999.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
I. Assignment of the Merger Agreement
A. The Company and the Company Shareholder hereby acknowledge that by
virtue of the merger between Old Parent and Old Merger Sub, New Parent is the
successor in interest to all the rights, interests and obligations of the Old
Parent and Old Merger Sub under the Merger Agreement.
B. New Parent hereby assigns all the rights, interests and obligations of
Old Merger Sub to the Merger Agreement to FutureLink Micro Visions Acquisition
Corp., a Delaware corporation and wholly-owned subsidiary of the New Parent
("New Merger Sub"), and New Merger Sub hereby accepts such assignment and
assumes such obligations.
C. The Company and the Company Shareholder hereby consent to such
assignment of all the rights, interests and obligations of Old Merger Sub to the
Merger Agreement to New Merger Sub.
D. The parties hereto hereby agree that this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
<PAGE> 2
II. Amendment to the Merger Agreement
This Agreement amends the Merger Agreement between the parties. The
Merger Agreement is hereby amended as follows:
A. The introduction to the Merger Agreement shall read as follows:
"THIS AGREEMENT AND PLAN OF REORGANIZATION AND MERGER (this
"Agreement"), is made and entered into as of June 2, 1999 and amended
as of October 15, 1999, by and among FUTURELINK CORP., a Delaware
corporation ("Parent"), FUTURELINK MICRO VISIONS ACQUISITION CORP., a
Delaware corporation and wholly-owned subsidiary of Parent ("Merger
Sub"), EXECUTIVE LAN MANAGEMENT, INC., a California corporation (the
"Company"), and the HOLMES TRUST dated July 22, 1997, GLEN C. HOLMES,
and CHRISTINE M. HOLMES (together, the "Company Shareholder"). Merger
Sub and the Company are sometimes collectively referred to herein as
the "Constituent Corporations."
B. Section 1.3 of the Merger Agreement, as presently existing, is hereby
deleted and the following substituted therefor:
"The Merger shall become effective upon the filing of an Agreement of
Merger with the Secretary of State of the State of Delaware in such
form as is required by, and executed in accordance with the relevant
provisions of the Delaware General Corporation Law on the Closing Date
(the "Agreement of Merger"). The term "Effective Time" shall be the
date and time of the filing of the Agreement of Merger with the
Secretary of State of the State of Delaware or such later time as is
specified in the Agreement of Merger."
C. All references to "California General Corporation Law" as presently
existing in the Merger Agreement are hereby deleted and replaced by "Delaware
General Corporation Law."
D. The first sentence of Section 2.2(a) of the Merger Agreement, as
presently existing, is hereby deleted and the following substituted therefor:
<PAGE> 3
"(a) each share of Company Stock outstanding immediately prior to the
Effective Time, shall automatically be converted into and become
a right to receive a pro rata portion of (i) a Promissory Note
(the "Note") issued by the Parent for the benefit of the Company
in the amount of $12,000,000.00 less the Deposit ("Note
Consideration") and less any retention bonuses paid by Parent to
key employee of the Company, pursuant to agreement between the
parties, (ii) 6,000,000 shares of Parent Stock ("Stock
Consideration"), (iii) the Additional Consideration as set forth
in Section 2.3, and (iv) the Contingent Payments as set forth in
Section 2.4 below (the Note Consideration, Stock Consideration,
Additional Consideration and Contingent Payments are collectively
referred to as the "Merger Consideration"). The Note, a copy of
which is attached hereto as Exhibit A, will be fully payable upon
the closing of the financing for the transactions contemplated
hereby on terms satisfactory to Parent and Company Shareholder.
This Note will be secured by the shares of Common Stock of Merger
Sub issued for the benefit of the Parent."
E. All references to "Cash Consideration" as presently existing in the
Merger Agreement are hereby deleted and replaced by "Note Consideration."
F. The first sentence of Section 3.2(a) of the Merger Agreement, as
presently existing, is hereby deleted and the following substituted therefor:
"The authorized capital stock of the Company consists of 1,000,000
shares of Common Stock, of which 200 are issued and outstanding as of
the date hereof."
G. The first sentence of Section 4.1 of the Merger Agreement, as presently
existing, is hereby deleted and the following substituted therefor:
"Parent is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and Merger Sub is a
corporation duly organized, validly exiting and in good standing under
the laws of the State of Delaware."
H. The first sentence of Section 4.3(a) of the Merger Agreement, as
presently existing, is hereby deleted and the following substituted therefor:
"As of the date of October 15, 1999, the authorized capital stock of
Parent consists solely of (i) 300,000,000 shares of Parent Stock, of
which (A) 10,244,343 shares are issued and outstanding, (B) no shares
are issued and held in treasury (which does not include the shares
reserved for issuance set forth in the clause (C) below) and no shares
are held by Subsidiaries of Parent, and (C) all convertible debt
shares, warrants, options and convertible equity shares are set out on
Schedule 4.21 of the Parent Disclosure Schedules and (ii) 20,000,000
shares of preferred stock, no par value per share, none of which are
issued and outstanding."
<PAGE> 4
I. Section 7.1(d) (Registration Rights Agreement) of the Merger
Agreement, as presently existing, is hereby deleted.
J. Section 7.1(e) (Financing) of the Merger Agreement, as presently
existing, is hereby deleted.
K. All reference to Exhibit C, as presently existing, is hereby deleted.
L. In all other respects the Agreement remains unchanged and in full force
and effect as of the date hereof.
III. The Company and the Company Shareholder hereby agree that this Agreement
does not violate any of the covenants, representations and warranties contained
in the Merger Agreement.
[SIGNATURES ON THE FOLLOWING PAGE]
<PAGE> 5
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereby on the date first written above.
FUTURELINK CORP.,
a Delaware corporation
By: [signed: R. Kilambi]
-----------------------------------------
Name: Raghunath Kilambi
Title: Chief Financial Officer
EXECUTIVE LAN MANAGEMENT, INC.,
a California corporation
By: [signed: Glen C. Holmes]
-----------------------------------------
Name: Glen C. Holmes
Title: President
HOLMES TRUST, dated July 22, 1997
By: [signed: Glen C. Holmes]
-----------------------------------------
Name: Glen C. Holmes
Title: Trustee
GLEN C. HOLMES
[signed: Glen C. Holmes]
---------------------------------------------
CHRISTINE M. HOLMES
[signed: Christine M. Holmes]
---------------------------------------------
FUTURELINK MICRO VISIONS ACQUISITION
CORP., a Delaware corporation
By: [signed: R. Kilambi]
-----------------------------------------
<PAGE> 6
Name: Raghunath Kilambi
Title: Chief Financial Officer
<PAGE> 1
EXHIBIT 2.4
FUTURELINK CORP.
SECURITIES PURCHASE AGREEMENT
BY AND AMONG
FUTURELINK CORP.,
PEQUOT PRIVATE EQUITY FUND II, L.P.
AND
CERTAIN OTHER INVESTORS
DATED AS OF
OCTOBER 15, 1999
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I
Definitions
Section 1.1 "Action"
1
Section 1.2 "Affiliate"
1
Section 1.3 "Agreement"
1
Section 1.4 "ASYNC"
1
Section 1.5 "ASYNC Acquisition"
1
Section 1.6 "ASYNC Closing"
2
Section 1.7 "Benefit Arrangements"
2
Section 1.8 "Blue Sky Laws"
2
Section 1.9 "Board"
2
Section 1.10 "Business Day"
2
Section 1.11 "Buyers"
2
Section 1.12 "Change of Control"
2
Section 1.13 "Closing"
2
Section 1.14 "Closing Date"
2
Section 1.15 "CNI"
2
Section 1.16 "CNI Acquisition"
3
Section 1.17 "CNI Closing"
3
Section 1.18 "Code"
3
2
<PAGE> 3
Section 1.19 "Commitment"
3
Section 1.20 "Company"
3
Section 1.21 "Company Charter"
3
Section 1.22 "Company Common Stock"
3
Section 1.23 "Company Plans"
3
Section 1.24 "Company Preferred Stock"
3
Section 1.25 "Company Properties"
3
Section 1.26 "Company Reports"
3
Section 1.27 "Company Securities"
4
Section 1.28 "Company Stock"
4
Section 1.29 "Company Warrants"
4
Section 1.30 "Controlled Group Liability"
4
Section 1.31 "Convertible Debt"
4
Section 1.32 "Debt Instruments"
4
Section 1.33 "Employee Benefit Plans"
4
Section 1.34 "Employees"
4
Section 1.35 "Employment Agreements"
4
Section 1.36 "Environmental Laws"
4
Section 1.37 "Equity Securities"
5
Section 1.38 "ERISA"
5
Section 1.39 "ERISA Affiliates"
5
Section 1.40 "Exchange Act"
5
3
<PAGE> 4
Page
----
Section 1.41 "Fully Diluted Basis"
5
Section 1.42 "GAAP"
5
Section 1.43 "Government Authority"
5
Section 1.44 "HSR Act"
5
Section 1.45 "Indemnified Party"
5
Section 1.46 "Initial Closing"
5
Section 1.47 "Insurance Policies"
6
Section 1.48 "IRS"
6
Section 1.49 "Liabilities"
6
Section 1.50 "Liens"
6
Section 1.51 "Loss and Expenses"
6
Section 1.52 "Material Adverse Effect"
6
Section 1.53 "Merger"
6
Section 1.54 "MicroVisions"
7
Section 1.55 "MicroVisions Acquisition"
7
Section 1.56 "MicroVisions Acquisition Agreement"
7
Section 1.57 "MicroVisions Closing"
7
Section 1.58 "Pension Plans"
7
Section 1.59 "Permitted Liens"
7
Section 1.60 "person"
7
Section 1.61 "PPE II"
7
Section 1.62 "Preemptive Notice"
8
4
<PAGE> 5
Page
----
Section 1.63 "Preemptive Right Pro Rata Share"
8
Section 1.64 "Public Offering"
8
Section 1.65 "Registration Rights Agreement"
8
Section 1.66 "Regulatory Filings"
8
Section 1.67 "SEC"
8
Section 1.68 "Second Closing"
8
Section 1.69 "Securities Act"
8
Section 1.70 "Securities Laws"
8
Section 1.71 "Subsidiaries"
8
Section 1.72 "Tax"
9
Section 1.73 "Tax Return"
9
Section 1.74 "Voting Agreement"
9
Section 1.75 "Welfare Plans"
9
ARTICLE II
Purchase and Sale of Company Securities; Closings
Section 2.1 Purchase and Sale
9
Section 2.2 Consideration
10
Section 2.3 Additional Agreements and Closing Deliveries
10
Section 2.4 Time and Place of Closings
10
Section 2.5 Right to Assign
11
5
<PAGE> 6
ARTICLE III
Representations and Warranties of the Company
Page
----
Section 3.1 Organization and Qualification; Subsidiaries
11
Section 3.2 Authority Relative to Agreements; Board Approval
12
Section 3.3 Capital Stock
12
Section 3.4 No Conflicts; No Defaults; Required Filings and Consents
13
Section 3.5 SEC and Other Documents; Financial Statements
14
Section 3.6 Litigation; Compliance With Law
16
Section 3.7 Absence of Certain Changes or Events
16
Section 3.8 Tax Matters
17
Section 3.9 Compliance with Agreements; Material Agreements
18
Section 3.10 Financial Records; Company Charter and By-laws; Corporate Records
20
Section 3.11 Properties; Capital Expenditures; Other Assets
20
Section 3.12 Environmental Matters
22
Section 3.13 Employees and Employee Benefit Plans
22
Section 3.14 Labor Matters
24
Section 3.15 Affiliate Transactions
25
Section 3.16 Insurance
25
Section 3.17 Delaware Takeover Law
25
Section 3.18 Brokers or Finders
25
Section 3.19 Y2K Matters
25
Section 3.20 Knowledge Defined
26
Section 3.21 No Change of Control
26
Section 3.22 Intellectual Property.
26
6
<PAGE> 7
Section 3.23 Liability Insurance.
28
Section 3.24 Acquisitions
28
Section 3.25 No Undisclosed Liabilities
29
Section 3.26 The Merger
29
Section 3.27 Disclosure
29
ARTICLE IV
Representations and Warranties of Buyers
Section 4.1 Organization
30
Section 4.2 Due Authorization
30
Section 4.3 Conflicting Agreements and Other Matters
30
Section 4.4 Acquisition for Investment; Sophistication
30
Section 4.5 Resources
31
Section 4.6 Brokers or Finders
31
Section 4.7 Investment Company Matters
31
ARTICLE V
Covenants Relating to Closing
Section 5.1 Taking of Necessary Action
32
Section 5.2 Registration Rights Agreement
32
Section 5.3 Public Announcements; Confidentiality
32
Section 5.4 Conduct of the Business
33
Section 5.5 Information and Access
34
Section 5.6 Notification of Certain Matters
34
Section 5.7 Hart Scott-Rodino Filing.
34
7
<PAGE> 8
ARTICLE VI
Certain Additional Covenants
Section 6.1 Use of Proceeds
35
Section 6.2 Actions Requiring Consent of the Buyers
35
Section 6.3 Preemptive Right
35
Section 6.4 Board of Director Nominations
36
ARTICLE VII
Conditions to Closings
Section 7.1 Conditions of Initial Closing
37
Section 7.2 Conditions of Second Closing
38
Section 7.3 Conditions of Sale
40
ARTICLE VIII
Survival; Indemnification
Section 8.1 Survival
40
Section 8.2 Indemnification
41
Section 8.3 Third-Party Claims
42
ARTICLE IX
Termination
Page
----
Section 9.1 Termination
43
Section 9.2 Procedure and Effect of Termination
43
Section 9.3 Expenses
44
8
<PAGE> 9
ARTICLE X
Miscellaneous
Section 10.1 Counterparts
44
Section 10.2 Governing Law
44
Section 10.3 Entire Agreement
44
Section 10.4 Notices
45
Section 10.5 Successors and Assigns
45
Section 10.6 Headings
46
Section 10.7 Amendments and Waivers
46
Section 10.8 Interpretation; Absence of Presumption
46
Section 10.9 Severability
46
Section 10.10 Further Assurances
47
Section 10.11 Specific Performance
47
Section 10.12 Several Liability
47
Section 10.13 Interpretation of Schedules
47
9
<PAGE> 10
EXHIBITS
Exhibit A Form of Warrant
Exhibit B Registration Rights Agreement
Exhibit C Voting Agreement
Exhibit D Board Resolutions
10
<PAGE> 11
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of October
15, 1999, is made by and between FUTURELINK CORP., a Delaware corporation (the
"Company"), Pequot Private Equity Fund II, L.P. and the other investors listed
on Schedule I hereto ("Buyers").
RECITALS:
WHEREAS, Buyers wish to purchase from the Company, and the Company wishes
to sell to Buyers, for an aggregate purchase price of $50 million in cash,
9,090,909 shares of the Company's common stock, par value $0.0001 per share
(the "Company Common Stock"), and warrants (the "Company Warrants") in the form
of Exhibit A hereto to purchase 2,372,727 shares of Company Common Stock, on
the terms set forth herein;
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
hereby agree as follows:
ARTICLE I
Definitions
As used in this Agreement, the following terms shall have the following
respective meanings:
Section 2.1 "Action"
shall mean any action, suit, arbitration, inquiry, proceeding or
investigation by or before any Government Authority.
Section 2.2 "Affiliate"
shall have the meaning ascribed thereto in Rule 12b- 2 promulgated under
the Exchange Act, and as in effect on the date hereof.
Section 2.3 "Agreement"
shall have the meaning set forth in the first paragraph hereof.
Section 2.4 "ASYNC"
shall mean ASYNC Technologies, Inc., a Michigan corporation and ASYNC
Technical Institute, Inc., a Michigan corporation.
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Section 2.5 "ASYNC Acquisition"
shall mean the acquisition of 100% of the equity of ASYNC by the Company
pursuant to the Agreement and Plan of Reorganization and Merger dated as of
September 7, 1999 among the Company, a Subsidiary of the Company and ASYNC.
Section 2.6 "ASYNC Closing"
shall mean the closing of the ASYNC Acquisition.
Section 2.7 "Benefit Arrangements"
shall have the meaning set forth in Section 3.13(i).
Section 2.8 "Blue Sky Laws"
shall have the meaning set forth in Section 3.4(e).
Section 2.9 "Board"
shall mean the Board of Directors of the Company.
Section 2.10 "Business Day"
shall mean any day other than a Saturday, a Sunday or a bank holiday in New
York, N.Y.
Section 2.11 "Buyers"
shall have the meaning set forth in the first paragraph hereof, together
with the successors and assigns of such entities.
Section 2.12 "Change of Control"
shall mean any transaction as a result of which any person, group or entity
(i) shall acquire beneficial ownership, or the right to acquire beneficial
ownership, of 30% or more of the outstanding shares of Company Common Stock or
(ii) shall have the right or the ability to elect, or shall have elected, more
than one half of the members of the Company's Board.
Section 2.13 "Closing"
shall mean the Initial Closing and/or the Second Closing.
Section 2.14 "Closing Date"
shall mean the date on which a Closing shall occur.
Section 2.15 "CNI"
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shall mean CN Networks, Inc., a California corporation.
Section 2.16 "CNI Acquisition"
shall mean the acquisition of 100% of the equity of CNI by the Company
pursuant to the Agreement and Plan of Reorganization and Merger dated as of
September 7, 1999 among the Company, a Subsidiary of the Company, CNI and
certain other parties.
Section 2.17 "CNI Closing"
shall mean the closing of the CNI Acquisition.
Section 2.18 "Code"
shall mean the Internal Revenue Code of 1986, as amended, and any successor
thereto, including all of the Treasury regulations promulgated thereunder.
Section 2.19 "Commitment"
shall have the meaning set forth in Section 3.7.
Section 2.20 "Company"
shall mean FutureLink Corp., a Delaware corporation, and its predecessors,
including Futurelink Distribution Corp., a Colorado corporation ("FutureLink
Colorado"). For purposes of Sections 3.5 through 3.27 and related (including
definitional) provisions of this Agreement, "Company" shall also include
MicroVisions.
Section 2.21 "Company Charter"
shall mean the Certificate of Incorporation of the Company and any
amendment or supplement thereto, as in effect on the date hereof.
Section 2.22 "Company Common Stock"
shall have the meaning set forth in the second paragraph hereof.
Section 2.23 "Company Plans"
shall have the meaning set forth in Section 3.13(b).
Section 2.24 "Company Preferred Stock"
shall have the meaning set forth in Section 3.3(a).
Section 2.25 "Company Properties"
shall have the meaning set forth in Section 3.11(a).
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Section 2.26 "Company Reports"
shall have the meaning set forth in Section 3.5(a).
Section 2.27 "Company Securities"
shall mean the shares of Company Common Stock and the Company Warrants
purchased by Buyers pursuant hereto.
Section 2.28 "Company Stock"
shall mean, collectively, the Company Common Stock and any other shares of
capital stock of the Company.
Section 2.29 "Company Warrants"
shall have the meaning set forth in the second paragraph hereof.
Section 2.30 "Controlled Group Liability"
shall have the meaning set forth in Section 3.13(h).
Section 2.31 "Convertible Debt"
shall mean indebtedness convertible into or exchangeable for Equity
Securities.
Section 2.32 "Debt Instruments"
shall mean all notes, loan agreements, mortgages, deeds of trust or similar
instruments which evidence or secure any indebtedness owing by the Company or
any of its Subsidiaries.
Section 2.33 "Employee Benefit Plans"
shall have the meaning set forth in Section 3.13(i).
Section 2.34 "Employees"
shall have the meaning set forth in Section 3.13(h).
Section 2.35 "Employment Agreements"
shall have the meaning set forth in Section 3.7.
Section 2.36 "Environmental Laws"
shall mean U.S. and Canadian federal, state, provincial and local laws,
ordinances, common law, orders, statutes, and regulations relating to the
pollution or protection of the
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environment or of flora or fauna or their habitat or of human health and
safety, or to the cleanup or restoration of the environment.
Section 2.37 "Equity Securities"
shall mean any Company Common Stock, any securities exercisable or
exchangeable for or convertible into Company Common Stock or Company Preferred
Stock and any rights, options or warrants to acquire any of the foregoing.
Section 2.38 "ERISA"
shall mean the Employee Retirement Income Security Act of 1974, as amended,
and any successor thereto.
Section 2.39 "ERISA Affiliates"
shall mean any entity which is under "common control" with the Company,
within the meaning of Section 4001(b)(1) of ERISA.
Section 2.40 "Exchange Act"
shall have the meaning set forth in Section 3.4(e).
Section 2.41 "Fully Diluted Basis"
shall mean a calculation that includes (i) then outstanding Company Common
Stock, (ii) Company Common Stock issuable in exchange for Company Warrants,
(iii) Company Common Stock issuable under the Convertible Debt, (iv) Company
Common Stock issuable under option or other equity-incentive plans listed on
Schedule 3.13(b) and awards issued pursuant thereto, and (v) Company Common
Stock issuable pursuant to any other security, agreement or arrangement, all of
which are described on Schedule 3.3(a).
Section 2.42 "GAAP"
shall have the meaning set forth in Section 3.5(b).
Section 2.43 "Government Authority"
shall mean any government or state (or any subdivision thereof) of or in
the United States, or Canada, or any agency, authority, bureau, commission,
department or similar body or instrumentality thereof, or any governmental court
or tribunal.
Section 2.44 "HSR Act"
means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
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Section 2.45 "Indemnified Party"
shall mean Buyer or the Company, as the context may require.
Section 2.46 "Initial Closing"
shall mean the Closing held on the date hereof.
Section 2.47 "Insurance Policies"
shall have the meaning set forth in Section 3.16.
Section 2.48 "IRS"
shall mean the Internal Revenue Service.
Section 2.49 "Liabilities"
shall mean, as to any person, all debts, adverse claims, liabilities and
obligations, direct, indirect, absolute or contingent of such person, whether
known or unknown, accrued, vested or otherwise, whether in contract, tort,
strict liability or otherwise and whether or not actually reflected, or required
by GAAP to be reflected, in such person's or entity's balance sheets or other
books and records, including, without limitation, (i) obligations arising from
non-compliance with any law, rule or regulation of any Government Authority or
imposed by any court or any arbitrator of any kind, (ii) all indebtedness or
liability of such person for borrowed money, or for the purchase price of
property or services (including trade obligations), (iii) all obligations of
such person as lessee under leases, capital or other, (iv) liabilities of such
person in respect of plans covered by Title IV of ERISA, or otherwise arising in
respect of plans for Employees or former Employees or their respective families
or beneficiaries, (v) reimbursement obligations of such person in respect of
letters of credit, (vi) all obligations of such person arising under acceptance
facilities, (vii) all liabilities of other persons or entities, directly or
indirectly, guaranteed, endorsed (other than for collection or deposit in the
ordinary course of business) or discounted with recourse by such person or with
respect to which the person in question is otherwise directly or indirectly
liable, (viii) all obligations secured by any Lien on property of such person,
whether or not the obligations have been assumed, and (ix) all other items which
have been, or in accordance with GAAP would be, included in determining total
liabilities on the liability side of the balance sheet.
Section 2.50 "Liens"
shall mean all liens, mortgages, deeds of trust, deeds to secure debt,
security interests, pledges, claims, charges, easements and other encumbrances
of any nature whatsoever.
Section 2.51 "Loss and Expenses"
shall have the meaning set forth in Section 8.2(a).
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Section 2.52 "Material Adverse Effect"
shall mean a material adverse effect on the financial condition, results of
operations, business or prospects of the Company and its Subsidiaries taken as a
whole.
Section 2.53 "Merger"
shall mean the merger of FutureLink Colorado with and into the Company,
pursuant to the Merger Agreement dated as of August 1, 1999.
Section 2.54 "MicroVisions"
shall mean Executive Lan Management, Inc., a California corporation.
Section 2.55 "MicroVisions Acquisition"
shall mean the acquisition of 100% of the equity interests in MicroVisions
by the Company pursuant to the MicroVisions Acquisition Agreement.
Section 2.56 "MicroVisions Acquisition Agreement"
shall have the meaning set forth in Section 3.24(a).
Section 2.57 "MicroVisions Closing"
shall mean the closing of the MicroVisions Acquisition.
Section 2.58 "Pension Plans"
shall have the meaning set forth in Section 3.13(h).
Section 2.59 "Permitted Liens"
shall mean (i) Liens (other than Liens imposed under ERISA or any
Environmental Law or in connection with any Environmental Claim) for taxes or
other assessments or charges of Governmental Authorities that are not yet
delinquent or that are being contested in good faith by appropriate proceedings,
in each case, with respect to which adequate reserves are being maintained by
the Company or its Subsidiaries to the extent required by GAAP, (ii) statutory
Liens of landlords, carriers, warehousemen, mechanics, materialmen and other
Liens (other than Liens imposed under ERISA or any Environmental Law or in
connection with any Environmental Claim) imposed by law and created in the
ordinary course of business for amounts not yet overdue or which are being
contested in good faith by appropriate proceedings, in each case, with respect
to which adequate reserves or other appropriate provisions are being maintained
by the Company or its Subsidiaries to the extent required by GAAP, all of which
Permitted Liens do not exceed $100,000 in the aggregate.
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Section 2.60 "person"
shall mean any individual, corporation, partnership, limited liability
company, joint venture, trust, unincorporated organization, other form of
business or legal entity or Government Authority.
Section 2.61 "PPE II"
shall mean Pequot Private Equities II, L.P., and its successors or assigns.
Section 2.62 "Preemptive Notice"
shall have the meaning set forth in Section 6.3(b).
Section 2.63 "Preemptive Right Pro Rata Share"
shall have the meaning set forth in Section 6.3(a).
Section 2.64 "Public Offering"
means the sale of Common Stock to the public pursuant to an effective
registration statement (other than a registration statement on Form S-4 or S-8
or any similar or successor form or forms) filed under the Securities Act.
Section 2.65 "Registration Rights Agreement"
shall have the meaning set forth in Section 2.3(a).
Section 2.66 "Regulatory Filings"
shall have the meaning set forth in Section 3.4(e).
Section 2.67 "SEC"
shall mean the Securities and Exchange Commission.
Section 2.68 "Second Closing"
shall mean the Closing to be held following satisfaction or waiver of the
conditions set forth in Section 7.2.
Section 2.69 "Securities Act"
shall have the meaning set forth in Section 3.4(e).
Section 2.70 "Securities Laws"
shall have the meaning set forth in Section 3.5(a).
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Section 2.71 "Subsidiaries"
shall mean with respect to any person, any corporation, partnership,
limited liability company, joint venture, business trust or other entity, of
which such person, directly or indirectly, owns or controls 50% or more of the
securities or other interests entitled to vote in the election of directors or
others performing similar functions with respect to such corporation or other
organization, or to otherwise control such corporation, partnership, limited
liability company, joint venture, business trust or other entity. Without
limiting the generality of the foregoing, the Company's Subsidiaries include
each of the entities set forth on Schedule 3.1(d).
Section 2.72 "Tax"
means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Section 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add- on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not. The term "Tax" also includes any
amounts payable pursuant to any tax sharing agreement to which any relevant
entity is liable as a successor or pursuant to contract.
Section 2.73 "Tax Return"
means any return, declaration, report, claim for refund, or information
return or statement relating to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.
Section 2.74 "Voting Agreement"
shall have the meaning set forth in Section 2.3(a).
Section 2.75 "Welfare Plans"
shall have the meaning set forth in Section 3.13(h).
ARTICLE II
Purchase and Sale of Company Securities; Closings
Section 1.1 Purchase and Sale.
Subject to the terms and conditions hereof, the Company will sell, convey,
assign, transfer, and deliver, and Buyers will purchase and acquire from the
Company,
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(a) an aggregate of 9,090,909 shares (7,818,181 shares at the Initial
Closing and 1,272,728 shares at the Second Closing) of Company Common Stock (the
"Purchased Shares"), and
(b) an aggregate of 2,372,727 Company Warrants (2,054,545 Company Warrants
at the Initial Closing and 318,182 Company Warrants at the Second Closing) to
purchase shares of Company Common Stock at an exercise price of $8.50 per share
(the "Purchased Warrants," and, together with the Purchased Shares, the
"Purchased Securities"),
The Purchased Securities shall be sold to and purchased by the Buyers in the
amounts set forth on Schedule 1.
Section 1.2 Consideration.
Subject to the terms and conditions hereof, at each Closing, each Buyer shall
deliver to the Company the amount set forth opposite its name on Schedule 1 by
wire transfer of immediately available funds in U.S. dollars to the account or
accounts specified by the Company.
Section 1.3 Additional Agreements and Closing
Deliveries.
(a) At the Initial Closing the Company, each Buyer and Glen C. Holmes
shall enter into a registration rights agreement substantially in the form
attached as Exhibit B (the "Registration Rights Agreement"), and each Buyer and
Glen C. Holmes shall enter into a voting agreement substantially in the form
attached as Exhibit C (the "Voting Agreement").
(b) In addition to the other things required to be done hereby, at each
Closing, the Company shall deliver, or cause to be delivered, to each Buyer the
following: (i) a certificate representing the number of Purchased Shares and a
certificate representing the number of Purchased Warrants to be issued and
delivered to such Buyer at such Closing, free and clear of all Liens, with all
necessary share transfer and other documentary stamps attached, (ii) a
certificate, dated the appropriate Closing Date and validly executed on behalf
of the Company, as contemplated by Section 7.1(a), or 7.2(a), as appropriate,
(iii) evidence or copies of any consents, approvals, orders, qualifications or
waivers required pursuant to Article VII, (iv) all certificates and other
instruments and documents required by this Agreement to be delivered by the
Company to such Buyer at or prior to such Closing, and (v) such other
instruments reasonably requested by such Buyer, as may be necessary or
appropriate to confirm or carry out the provisions of this Agreement.
(c) In addition to the delivery of its portion of the
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Purchase Price and the other things required to be done hereby, at each
Closing, each Buyer shall deliver, or cause to be delivered, to the Company the
following: (i) a certificate, dated the relevant Closing Date and validly
executed by Buyer, as contemplated by Section 7.3(a), (ii) if not previously
delivered to the Company, all other certificates, documents, instruments and
writings required pursuant hereto to be delivered by or on behalf of such
Buyer, and (iii) such other instruments reasonably requested by the Company, as
may be necessary or appropriate to confirm or carry out the provisions of this
Agreement.
Section 1.5 Time and Place of Closings.
The Closings shall take place at 10:00 a.m. New York time on the first
business day following satisfaction or waiver of all conditions to the
obligations of the parties hereunder (other than conditions relating to
deliveries of instruments, certificates and opinions to be delivered by the
parties or their representatives at a Closing itself), at the offices of Dewey
Ballantine LLP, 1301 Avenue of the Americas, New York, New York, or at such
other place and time as the Company and Buyers shall mutually agree.
Section 1.6 Right to Assign.
Each Buyer may assign its rights and delegate its obligations created
hereby to purchase Company Securities to any fund managed by Pequot Capital
Management, Inc. or JDS Capital Management Inc.
ARTICLE I
Representations and Warranties of the Company
The Company hereby represents and warrants to Buyers as follows:
Section 2.1 Organization and Qualification;
Subsidiaries.
(a) The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware. The Company has all
requisite corporate power and authority to own, operate, lease and encumber its
properties and carry on its business as now conducted, and to enter into this
Agreement the Registration Rights Agreement, and the Company Warrants and to
perform its obligations hereunder and thereunder.
(b) MicroVisions and each of the Subsidiaries of the Company is a
corporation, partnership or limited liability company duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, and has the corporate, partnership or limited
liability
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company power and authority to own its properties and to carry on its business
as it is now being conducted.
(c) Except as set forth on Schedule 3.1(c), MicroVisions and each of the
Company and its Subsidiaries is duly qualified to do business and in good
standing in each jurisdiction in which the ownership of its property or the
conduct of its business requires such qualification, except for any failures to
be so qualified or to be in good standing as would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.
(d) Schedule 3.1(d) sets forth the name of each Subsidiary of the Company
(whether owned, directly or indirectly, through one or more intermediaries).
All of the outstanding shares of capital stock of, or other equity interest in,
each of the Subsidiaries owned by the Company are duly authorized, validly
issued, fully paid and nonassessable, and are owned, directly or indirectly, by
the Company free and clear of all Liens, except as set forth in Schedule
3.1(d). The following information for each Subsidiary is set forth in Schedule
3.1(d), if applicable: (i) its name and jurisdiction of incorporation or
organization, (ii) the type of and percentage interest held by the Company in
the Subsidiary and the names of and percentage interest held by the other
interest holders, if any, in the Subsidiary, and (iii) any loans from the
Company to, or priority payments due to the Company from, the Subsidiary, and
the rate of return thereon. Except as contemplated hereby and as set forth on
Schedule 3.1(d), there are no existing options, warrants, calls, subscriptions,
convertible securities or other rights, agreements or commitments which
obligate the Company or any of the Subsidiaries to issue, transfer or sell any
shares of capital stock or equity interests in any of the Subsidiaries.
(e) Prior to the consummation of the Merger FutureLink Colorado was duly
incorporated, validly existing and in good standing under the laws of the State
of Colorado and qualified to do business and in good standing in each
jurisdiction in which the ownership of its property or the conduct of its
business required such qualification, except for any failures to be so
qualified or to be in good standing as would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.
Section 2.3 Authority Relative to Agreements; Board
Approval.
(a) The execution, delivery and performance of this Agreement, the
Registration Rights Agreement and the Company Warrants have been duly and
validly authorized by all necessary corporate action on the part of the
Company. This Agreement, the Registration Rights Agreement and the Company
Warrants have been (or in the case of Company Warrants to be delivered at the
Second Closing, will
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have been) duly executed and delivered by the Company for itself and constitute
the valid and legally binding obligations of the Company, enforceable against
the Company in accordance with their terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights or
general principles of equity.
(b) The Board of Directors of the Company has, as of the date hereof,
approved this Agreement, the Registration Rights Agreement, the Company
Warrants and the transactions contemplated hereby and thereby.
(c) The shares of Company Common Stock to be acquired pursuant to this
Agreement, and the shares of Company Common Stock issuable upon exercise of the
Purchased Warrants, have been duly authorized for issuance, and upon issuance
will be duly and validly issued, fully paid and nonassessable.
(d) Neither the issue and sale of the shares of the Purchased Securities
hereunder nor the issuance of Company Common Stock upon exercise of the Company
Warrants will give any person the right to demand payment for its shares or
give rise to any preemptive or similar rights.
Section 2.5 Capital Stock.
(a) The authorized capital stock of the Company as of the date hereof
consists of 300,000,000 shares of Company Common Stock, par value $0.0001 per
share, and 20,000,000 shares of Preferred Stock, no par value (the "Company
Preferred Stock"). As of the date hereof, after giving effect to the
MicroVisions Acquisition and the transactions contemplated hereby, there are
10,244,343 shares of Company Common Stock issued and outstanding and no shares
of Company Preferred Stock issued and outstanding. All such issued and
outstanding shares of Company Common Stock are duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights. Except as set forth
on Schedule 3.3(a), the Company has no outstanding bonds, debentures, notes or
other obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities the holders of which have the
right to vote) with the stockholders of the Company on any matter. As of the
date hereof, except as set forth in Schedule 3.3(a) to this Agreement, there
are no existing options, warrants, calls, subscriptions, convertible
securities, or other rights, agreements or commitments which obligate the
Company to issue, transfer or sell any shares of capital stock or other equity
interests of the Company. Schedule 3.3(a) shows the pro forma capitalization
of the Company as of the Closing Date assuming consummation of the ASYNC
Acquisition, the CNI Acquisition, the MicroVisions Acquisition and the
transactions contemplated hereby. No person has any preemptive rights with
respect to the issuance of the Purchased Shares, the Purchased Warrants, or the
Company Common Stock issuable upon exercise of the Purchased Warrants. The
Company will use its commercially reasonable efforts to cause the conversion of
the
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Commonwealth April/May 1999 Convertible Debentures listed on Schedule 3.3(a) as
per discussions with the Buyers.
(b) Except for interests in the Subsidiaries of the Company and except as
set forth in Schedule 3.3(b), none of the Company or any of its Subsidiaries
owns directly or indirectly any interest or investment (whether equity or debt)
in any corporation, partnership, limited liability company, joint venture,
business, trust or entity (other than investments in short-term investment
securities).
Section 2.7 No Conflicts; No Defaults; Required
Filings and Consents.
(a) Neither the execution and delivery by the Company hereof nor the
consummation by the Company of the transactions contemplated hereby in
accordance with the terms hereof will:
(i) conflict with or result in a breach of any provision of the
Company Charter or the by-laws of the Company;
(ii) result in a breach or violation of, a default under, or the
triggering of any payment or other obligations pursuant to, or, except as
set forth in Schedule 3.9(g), accelerate vesting under, any employment
agreement, any compensation plan or any grant or award made under any of
the foregoing;
(iii) violate or conflict with any statute, regulation, judgment,
order, writ, decree or injunction applicable to the Company or its
Subsidiaries or MicroVisions;
(iv) subject to the Company obtaining the third party consents set
forth in Schedule 3.4 (d), violate or conflict with or result in a breach
of any provision of, or constitute a default (or any event which, with
notice or lapse of time or both, would constitute a default) under, or
result in the termination or in a right of termination or cancellation
of, or accelerate the performance required by, or result in the creation
of any Lien upon any of the properties of the Company or its Subsidiaries
or MicroVisions under, or result in being declared void, voidable or
without further binding effect, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust or any
license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which the Company or its
Subsidiaries or MicroVisions is a party, or by which the Company or its
Subsidiaries or MicroVisions or any of their properties is bound or
affected; or
(v) require any consent, approval or authorization of, or
declaration, filing or registration with, any Government Authority, other
than any
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filings required under the Securities Act of 1933, as amended (the
"Securities Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), state securities laws ("Blue Sky Laws") the HSR Act
(collectively, the "Regulatory Filings").
(b) Subject to the accuracy of the representations and warranties of the
Buyers contained in Article IV, neither the Company nor any agent acting for it
has offered any of the securities being sold hereunder or solicited offers to
buy such securities in violation of the Securities Act or any applicable state
"blue sky" securities laws (and without limitation of the foregoing, neither
the Company nor any of its agents have offered such securities through any
general solicitation or advertising); and neither the Company nor any of its
agents shall take any action which would cause the offer and sale of securities
as contemplated by this Agreement to be in violation of such laws.
Section 2.9 SEC and Other Documents; Financial
Statements.
(a) The Company has delivered or made available to Buyer each registration
statement, report, proxy statement or information statement and all exhibits,
amendments and supplements thereto prepared by it or relating to its properties
since January 1, 1999, which are listed in Schedule 3.5(a), each in the form
(including exhibits and any amendments and supplements thereto) filed with the
SEC (collectively, the "Company Reports"). Except as set forth on Schedule
3.5(a), the Company Reports were filed with the SEC in a timely manner and
constitute all forms, reports and documents required to be filed by the Company
under the Securities Act, the Exchange Act and the rules and regulations
promulgated thereunder (the "Securities Laws"). Except as set forth on
Schedule 3.5(a), as of their respective dates, the Company Reports (i) complied
as to form in all material respects with the applicable requirements of the
Securities Laws and (ii) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. There is no
unresolved violation asserted by any Government Authority with respect to any
of the Company Reports.
(b) Each of the balance sheets included in or incorporated by reference
into the Company Reports (including the related notes and schedules) fairly
presented the financial position of the entity or entities to which it relates
as of its date and each of the statements of operations, stockholders' equity
(deficit) and cash flows included in or incorporated by reference into the
Company Reports (including any related notes and schedules) fairly presented
the results of operations, retained earnings or cash flows, as the case may be,
of the entity or entities to which it relates for the periods set forth
therein, in each case in accordance with United
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States generally accepted accounting principles ("GAAP") consistently applied
during the periods involved, except as may be noted therein and except, in the
case of the unaudited statements, for the absence of notes thereto, and subject
to normal recurring year-end adjustments which have not been and will not be
material in nature or amount.
(c) Company Unaudited Financial Statements. Schedule 3.5(c) sets forth
unaudited consolidated balance sheets of the Company and its Subsidiaries as of
July 31, 1999, and August 31, 1999, and related statements of income for the
monthly periods then ended, which financial statements were prepared solely for
internal use by Company management and have not been reviewed by the Company's
external auditors (the "COMPANY UNAUDITED FINANCIAL STATEMENTS"). The Company
Unaudited Financial Statements present fairly, in all material-respects, the
financial position of the Company and its Subsidiaries as of the dates of and
for the periods covered by such financial statements in accordance with GAAP,
consistently applied, except (i) as noted therein, (ii) for the absence of
notes thereto and (iii) for normal recurring month-end, quarter-end and
year-end adjustments which will the Company does not believe will be material
in nature or amount.
(d) MicroVisions Unaudited Financial Statements. Schedule 3.5(d) sets
forth the following financial statements of MicroVisions, which financial
statements were delivered to the Company by MicroVisions: (i) the balance
sheets of MicroVisions as of December 31, 1998, and December 31, 1997, and the
related statements of income for the respective years then ended (the
"MicroVisions Audited Financial Statements"), (ii) the balance sheet of
MicroVisions as of June 30, 1999, and the related statement of income for the
six (6) month period then ended, which have not been reviewed by the Company's
or MicroVisions' external auditors (the "MICROVISIONS 6-MONTH FINANCIAL
STATEMENTS") and (iii) the balance sheet of MicroVisions as of July 31, 1999,
and August 31, 1999, and related statements of income for the monthly periods
then ended, which were prepared solely for internal use by MicroVisions and the
Company and have not been reviewed by the Company's or MicroVisions' external
auditors (the "MICROVISIONS MONTHLY REPORTS").
(i) The MicroVisions Audited Financial Statements present fairly, in
all material respects, the financial position of MicroVisions as of the
dates of and for the periods covered by such financial statements in
accordance with GAAP consistently applied.
(ii) The MicroVisions 6-Month Financial Statements present fairly,
in all material respects, the financial position of MicroVisions as of
the dates of and for the periods covered by such financial statements in
accordance with GAAP consistently applied, except (x) as noted therein,
(y) for the absence of notes thereto and (z) for normal recurring
month-end, quarter-end and year-end adjustments which will not be
material in nature or amount.
(iii) The MicroVisions Monthly Reports present fairly,
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in all material respects, the financial position of MicroVisions as of
the dates of and for the periods covered by such financial statements in
accordance with GAAP consistently applied, except (x) as noted therein,
(y) for the absence of notes thereto and (z) for normal recurring
month-end, quarter-end and year-end adjustments which will not be
material in nature or amount.
(d) The projections of the Company, MicroVisions, CNI and ASYNC delivered
to Buyers by the Company under cover of a letter dated the date hereof were
prepared on the basis of assumptions that the Company believes to be
reasonable, which assumptions are stated in the notes to such projections.
Section 2.11 Litigation; Compliance With Law.
(a) Except as set forth on Schedule 3.6, there are no Actions pending or,
to the Company's knowledge, threatened against the Company or any of its
Subsidiaries that could, individually or in the aggregate, result in a Material
Adverse Effect, or which question the validity hereof or any action taken or to
be taken in connection herewith. Except as disclosed in Schedule 3.6(a) or in
the Company Reports there are no continuing orders, injunctions or decrees of
any Government Authority to which the Company or any of its Subsidiaries is a
party or by which any of its properties or assets are bound.
(b) None of the Company or its Subsidiaries is in violation of any
statute, rule, regulation, order, writ, decree or injunction of any Government
Authority or any body having jurisdiction over them or any of their respective
properties which, if enforced, could, individually or in the aggregate, result
in a Material Adverse Effect.
Section 2.13 Absence of Certain Changes or Events.
Except as disclosed in the Company Reports filed with the SEC prior to the
date hereof or in Schedule 3.7, since December 31, 1998, the Company and each of
its Subsidiaries has conducted its business only in the ordinary course, and
there has not been (a) any change, circumstance or event that could reasonably
be expected to result in a Material Adverse Effect, (b) any declaration, setting
aside or payment of any dividend or other distribution with respect to the
Company Common Stock, (c) any commitment, contractual obligation, borrowing,
capital expenditure or transaction (each, a "Commitment") entered into by the
Company or any of its Subsidiaries outside the ordinary course of business, or
(d) any material change in the Company's accounting principles, practices or
methods.
Section 2.14 Tax Matters.
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(a) Except as set forth on Schedule 3.8(a), the Company and each of its
Subsidiaries has timely filed with the appropriate taxing authority all Tax
Returns required to be filed by it or has timely requested extensions and any
such request has been granted and has not expired. Each such Tax Return is
complete and accurate in all respects. All Taxes shown as owed by the Company
or any of its Subsidiaries on any Tax Return or claimed or asserted to be due,
from or with respect to any of them, have been paid, except for Taxes being
contested in good faith and for which adequate reserves have been taken. The
Company and each of its Subsidiaries have properly made due and sufficient
accruals for all Taxes for such periods subsequent to the periods covered by
such Tax Returns as required by GAAP. The Company and each of its Subsidiaries
have made all required current estimated Tax payments sufficient to avoid any
understatement penalties. None of the Company or any of its Subsidiaries has
executed or filed with the IRS or any other taxing authority any agreement now
in effect extending the period for assessment or collection of any Tax. Except
as set forth in Schedule 3.8(a), none of the Company or any of its Subsidiaries
is being audited or examined by any taxing authority with respect to any Tax or
is a party to any pending action or proceedings by any taxing authority for
assessment or collection of any Tax, and no claim for assessment or collection
of any Tax has been asserted against it. No audit or investigation report has
been issued in the five years prior to the date of this Agreement relating to
Taxes due from or with respect to the Company or any of its Subsidiaries, their
perspective incomes, assets or operations. True and complete copies of all
federal, state and local income or franchise Tax Returns filed by the Company
and each of its Subsidiaries for 1997 and 1998 and all communications relating
thereto have been delivered to Buyer or made available to representatives of
Buyer prior to the date hereof. No claim has been made in writing or, to the
Company's knowledge, otherwise by an authority in a jurisdiction where the
Company or any of its Subsidiaries does not file Tax Returns that it is or may
be subject to taxation by that jurisdiction. Except as set forth in Schedule
3.8(a), there is no dispute or claim concerning any Tax liability of the
Company or any of its Subsidiaries, (i) claimed or raised by any taxing
authority in writing or (ii) as to which the Company or any of its Subsidiaries
has knowledge.
(b) Any amount or other entitlement that could be received (whether in
cash or property or the vesting of property) as a result of any of the
transactions contemplated hereby by any Employee, officer, or director of the
Company or any of its Affiliates who is a "disqualified individual" (as such
term is defined in proposed Treasury Regulation Section 1.280G-1) under any
employment, severance or termination agreement, other compensation arrangement
or plan currently in effect would not be characterized as an "excess parachute
payment" (as such term is defined in Section 280G(b)(1) of the Code).
(c) The disallowance of a deduction under Section 162(m) of the Code for
employee remuneration will not apply to any amount paid or payable by the
Company or any of its Subsidiaries (or any issuance of stock pursuant to the
exercise of any stock option) under any contract, stock plan, program,
arrangement or understanding currently in effect.
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(d) None of the Company or any of its Subsidiaries is a party to, bound by,
or obligated under, any Tax sharing agreement (whether or not written).
(e) All Taxes that the Company or the Subsidiaries have been or are
required by law to withhold or to collect for payment have been duly withheld
and collected, and have been paid over to the appropriate taxing authority.
(f) There are no liens for Taxes upon the assets of the Company or any of
the Subsidiaries, except for liens arising as a matter of law relating to
current Taxes not yet due.
(g) None of the Company nor any of its Subsidiaries has issued or will
issue any indebtedness which constitutes "corporate acquisition indebtedness"
within the meaning of Section 279 of the Code or the Treasury Regulations
thereunder.
Section 2.17 Compliance with Agreements; Material
Agreements.
(a) Neither the Company nor any of its Subsidiaries is in default under or
in violation of any provision of its charter or by-laws (or equivalent
documents).
(b) The Company and each of its Subsidiaries have filed all material
reports, registrations and statements, together with any amendments required to
be made with respect thereto, that they were required to file with any
Government Authority and all other material reports and statements required to
be filed by them, including any report or statement required to be filed
pursuant to the laws, rules or regulations of the United States and Canada, and
have paid all fees or assessments due and payable in connection therewith
(provided that this representation does not cover tax matters, which are
addressed in Section 3.8 above). No regulatory agency has asserted that the
Company or any Subsidiary is in violation of any requirement of law.
(c) The Company Reports or Schedule 3.9(c) set forth (i) a description of
all material indebtedness of the Company and each of its Subsidiaries, whether
unsecured, or secured or collateralized by mortgages, deeds of trust or other
security interests in any assets of the Company and each of its Subsidiaries,
or otherwise and (ii) each Commitment entered into by the Company or any of its
Subsidiaries (including any guarantees of any third party's debt or any
obligations in respect of letters of credit issued for the Company's or any
Subsidiary's account) which may result in total payments or liability in excess
of $100,000. True and complete copies of the documents relating to the
foregoing have been delivered or made available to Buyers prior to the date
hereof. Neither the Company nor any of its Subsidiaries is in default, and, to
the
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Company's knowledge, no event has occurred which, with the giving of notice or
the lapse of time or both, would constitute a default, under any of the
documents described in clause (i) or (ii) of this paragraph or in respect of
any payment obligations thereunder. All joint venture and partnership
agreements to which the Company or any of its Subsidiaries is a party as of the
date hereof are set forth in Schedule 3.9(c), all of which are in full force
and effect as against the Company or such Subsidiary and, to the Company's
knowledge, as against the other parties thereto, and none of the Company or any
of its Subsidiaries is in default, and, to the Company's knowledge, no event
has occurred which, with the giving of notice or the lapse of time or both,
would constitute a default, with respect to any obligations thereunder, except
as would not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect. To the Company's knowledge, the other
parties to such agreements are not in breach of any of their respective
obligations thereunder, except as would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect. There is no
condition with respect to the Company's Subsidiaries (including with respect to
the partnership agreements for the Company's Subsidiaries that are
partnerships) that could, individually or in the aggregate, result in a
Material Adverse Effect.
(d) Schedule 3.9(d) sets forth a complete and accurate list of all
material agreements to which the Company or any of its Subsidiaries is a party
relating to (i) the purchase or lease of computer or telecommunications
hardware, software or services from third parties; (ii) the provision of
computer or telecommunication hardware, software or services to customers; and
(iii) any agency agreements relating to any of the foregoing. True and
complete copies of such agreements have been provided to Buyers.
(e) Schedule 3.9(e) sets forth a complete and accurate list of all
material agreements entered into by the Company as of the date hereof which are
not listed in any other Schedule hereto, including material Debt Instruments.
(f) Except as set forth on Schedule 3.9(f), each agreement set forth in
Schedules 3.9(d) and 3.9(e) is in full force and effect as against the Company
or its Subsidiaries, as applicable, and to the Company's knowledge, as against
the other parties thereto; no payments, if any, thereunder are delinquent; the
Company is not in default thereunder; and no notice of default thereunder has
been sent or received by the Company or any of its Subsidiaries. Except as set
forth on Schedule 3.9(f), no event has occurred which, with notice or lapse of
time or both, would constitute a default by the Company under any agreement set
forth in Schedules 3.9(d) and 3.9(e). To the Company's knowledge, the other
parties to such agreements are not in breach of their respective obligations
thereunder, except as could not, individually or in the aggregate, result in a
Material Adverse Effect. True and complete copies of each such agreement have
been provided to Buyers prior to the date hereof.
(g) Schedule 3.9(g) sets forth a complete and accurate list of all
agreements of the Company in effect on the date hereof relating to transactions
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with affiliates and potential conflicts of interest. Each agreement or
arrangement set forth in Schedule 3.9(g) is in full force and effect, and the
Company, each of its Subsidiaries, and, to the Company's knowledge, the other
parties thereto are in compliance with such agreements. True and complete
copies of each such agreement or arrangement have been provided to Buyer.
(h) Subject to the Company's obtaining the third party consents set forth
in Schedule 3.4(d), and except as set forth on Schedule 3.9(h), there are no
change of control or similar provisions in any employment, severance, stock
option, stock incentive, or other agreement or arrangement to which the Company
or any of its Subsidiaries is a party which would be triggered by the
transactions contemplated by this Agreement or the MicroVisions Acquisition,
the CNI Acquisition or the ASYNC Acquisition. Schedule 3.9(h) identifies the
obligations (including any payment or other obligation, forgiveness of debt,
other release from obligations, or acceleration of vesting) which are created,
accelerated, triggered, modified or released by the execution, delivery or
performance of this Agreement or the MicroVision Acquisition, the CNI
Acquisition or the ASYNC Acquisition or the consummation of the transactions
contemplated hereby or thereby.
Section 2.19 Financial Records; Company Charter and
By-laws; Corporate Records.
(a) The books of account and other financial records of the Company and
each of its Subsidiaries are in all respects true and complete, have been
maintained in accordance with good business practices, and are accurately
reflected in all respects in the financial statements included in the Company
Reports.
(b) The Company has previously delivered to Buyers true and complete
copies of the Company Charter and the By-laws of the Company, as amended to
date, and the charter, by-laws, organization documents, partnership agreements
and joint venture agreements of its Subsidiaries, and all amendments thereto.
All such documents are listed in Schedule 3.10(b).
(c) The minute books and other records of corporate or partnership
proceedings of the Company and each of its Subsidiaries contain in all material
respects accurate records of all meetings and accurately reflect in all
material respects all other corporate action of the stockholders and directors
and any committees of the Board of Directors of the Company and their
Subsidiaries which are corporations and all actions of the partners of the
Subsidiaries which are partnerships.
Section 2.21 Properties; Capital Expenditures; Other
Assets.
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(a)Schedule 3.11(a) sets forth a complete and accurate list and the address
of all real property leased by the Company or any of its Subsidiaries or
otherwise used by the Company or its Subsidiaries in the conduct of their
respective businesses or operations (collectively, and together with the land at
each address referenced in Schedule 3.11(a) and all buildings, structures and
other improvements and fixtures located on or under such land and all easements,
rights and other appurtenances to such land, the "Company Properties").
Neither the Company nor any of its Subsidiaries owns, holds or occupies any
real property or any interest in real property other than such leasehold
interests. All of such leases are in full force and effect with no default by
the Company or any Subsidiary and, to the Company's knowledge, no material
default by any other party thereto.
(b) Except as set forth in Schedule 3.11(b), the Company has no knowledge
(i) that any currently required certificate, permit or license (including
building permits and certificates of occupancy for tenant spaces) from any
Government Authority having jurisdiction over any Company Property or any
agreement, easement or other right which is necessary to permit the lawful use,
occupancy or operation of the existing buildings, structures or other
improvements which constitute a part of any of the Company Properties or which
are necessary to permit the lawful use and operation of utility service to any
Company Property or of any existing driveways, roads or other means of egress
and ingress to and from any of the Company Properties has not been obtained or
is not in full force and effect, or of any pending modification or cancellation
of any of same, or (ii) of any violation by any Company Property of any United
States or Canadian federal, state or municipal law, ordinance, order,
regulation or requirement, including any applicable zoning law or building
code, as a result of the use or occupancy of such Company Property or
otherwise. The Company has no knowledge of uninsured physical damage to any
Company Property.
(c) The Company has no knowledge that any condemnation, eminent domain or
rezoning proceedings are pending or threatened with respect to any of the
Company Properties.
(d) Schedule 3.11(d) sets forth the Company's and each Subsidiary's
capital expenditure budget and schedule, which describes the capital
expenditures which the Company or any Subsidiary has made or anticipates making
from July 1, 1999 through December 31, 2000.
(e) The Company and each of its Subsidiaries have good and sufficient
title to all the personal and non-real properties and assets reflected in their
books and records as being owned by them (including those reflected in the
balance sheets of the Company and its Subsidiaries as of June 30, 1999, except
as since sold or otherwise disposed of in the ordinary course of business),
free and clear of all Liens other than Permitted Liens.
Section 2.23 Environmental Matters.
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Each of the Company and its Subsidiaries has obtained, and now maintains as
currently valid and effective, all permits, certificates of financial
responsibility and other governmental authorizations required to be obtained by
the Company or any Subsidiary under the Environmental Laws (the "Environmental
Permits") in connection with the operation of its businesses and properties.
Except as set forth on Schedule 3.12, each of the Company and its Subsidiaries,
and each Company Property is and has been in compliance with all terms and
conditions of the Environmental Permits and all Environmental Laws and no
liability exists under any Environmental Laws or otherwise with respect to
prior operations or activities. Except as set forth on Schedule 3.12, the
Company has no knowledge of any circumstances or conditions that may prevent or
interfere with such compliance in the future.
Section 2.24 Employees and Employee Benefit Plans.
(a) Schedule 3.13(a)(i) sets forth a complete and accurate list of all
employment agreements between the Company or any of its Subsidiaries and
directors, officers or employees of the Company or any of its Subsidiaries that
are not substantially on the terms reflected in the form of agreement attached
as Schedule 3.1(a)(ii) or that contain any change of control provisions or
provide for any severance benefits above statutory minimums. Except for the
employees who are parties to such employment agreements, all of the employees
of the Company and each of its Subsidiaries are employed on an at-will basis
(except for restrictions or limitations on the at-will basis of such employees
imposed by law or equity or general principles of law or equity).
(b) The Company Reports or Schedule 3.13(b) sets forth a complete and
accurate list of all Employee Benefit Plans and all material Benefit
Arrangements which cover Employees of the Company or any of its Subsidiaries
with respect to their employment relationship with the Company or any of its
Subsidiaries (the "Company Plans"). Such Schedule identifies as such each
Employee Benefit Plan that is intended to be qualified under section 401(a) of
the Code. With respect to each Company Plan, the Company will make available
to Buyer true and complete copies of: (i) the plans and related trust documents
and amendments thereto, (ii) the most recent summary plan descriptions, if any,
and the most recent annual report, if any, and (iii) the most recent actuarial
valuation (to the extent applicable). In the case of any unwritten Plan, the
Company will make available a written description thereof.
(c) With respect to each Company Plan, (i) the Company and each of its
Subsidiaries is in compliance in all material respects with the terms of each
Company Plan and with the requirements prescribed by all applicable statutes,
orders or governmental rules or regulations, (ii) the Company and each of its
Subsidiaries has contributed to each Pension Plan included in the Company Plans
not less than the amounts accrued for such plan for all plan periods for which
payment is due, and
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(iii) none of the Company or any of its Subsidiaries has any funding commitment
or other accrued liabilities except as set forth on Schedule 3.13(c) or as
reserved for in the financial statements in or incorporated by reference into
the Company Reports. As to each Employee Benefit Plan intended to be qualified
under section 401(a) of the Code, the Company has received a favorable
determination letter from the Internal Revenue Service and nothing has occurred
since the date of such letter to impair its continued validity and
effectiveness, assuming that the Plan is amended on a timely basis to comply
with any changes in legislative, regulatory or administrative requirements as
to which the remedial amendment period has not yet ended.
(d) Except as set forth on Schedule 3.13(d), none of the Company or any of
its Subsidiaries has made any commitment to establish any new Employee Benefit
Plan, to modify any Employee Benefit Plan, or to increase benefits or
compensation of Employees of the Company or any of its Subsidiaries (except for
normal increases in compensation consistent with past practices), and no
intention to do so has been communicated to Employees of the Company or any of
its Subsidiaries.
(e) There are no pending or, to the Company's knowledge, anticipated
claims (excluding routine claims for benefits made in the ordinary course of
Company Plan activities) against or otherwise involving any of the Company
Plans or any fiduciaries thereof with respect to their duties to the Company
Plans and no suit, action or other litigation has been brought against or with
respect to any such Company Plans.
(f) Neither the Company nor any of the ERISA Affiliates has, at any time
after September 25, 1980, contributed to, or been required to contribute to,
any "multiemployer plan" (as defined in Sections 3(37) and 4001(a)(3) of
ERISA).
(g) Except as required by the continuation coverage requirements of
Section 601 et seq. of ERISA and Section 4980B of the Code or requirements of
state law and regulations and except as set forth on Schedule 3.13(g), the
Company and its Subsidiaries do not maintain or contribute to any plan or
arrangement which provides or has any liability to provide life insurance,
medical or other employee welfare benefits described in Section 3(1) of ERISA
to any Employee or former Employee following his retirement or termination of
employment and, to the Company's knowledge, the Company and its Subsidiaries
have never represented, promised or contracted (whether in oral or written
form) to any Employee or former Employee that such benefits would be provided.
(h) For purposes hereof, "Employee Benefit Plans" means each and all
"employee benefit plans" as defined in Section 3(3) of ERISA maintained or
contributed to by the Company or a Subsidiary or in which the Company or a
Subsidiary participates or participated and which provides benefits to
Employees, including (i) any such plans that are "employee welfare benefit
plans" as defined in
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Section 3(1) of ERISA, including retiree medical and life insurance plans
("Welfare Plans"), and (ii) any such plans that constitute "employee pension
benefit plans" as defined in Section 3(2) of ERISA ("Pension Plans"). "Benefit
Arrangements" means life and health insurance, hospitalization, savings, bonus,
deferred compensation, incentive compensation, holiday, vacation, severance
pay, sick pay, sick leave, disability, tuition refund, service award, company
car, scholarship, relocation, patent award, fringe benefit, individual
employment, consultancy or severance contracts and other polices or practices
of the Company or a Subsidiary providing employee or executive compensation or
benefits to Employees maintained or contributed to by the Company or a
Subsidiary, other than Employee Benefit Plans. "Employees" mean all current
employees, former employees and retired employees of the Company or any of its
Subsidiaries, including employees on disability, layoff or leave status.
"Controlled Group Liability" means any and all liabilities (other than such
liabilities that arise solely out of, or relate solely to, the Company Plans)
of the ERISA Affiliates (other than the Company and its Subsidiaries) under (i)
Title IV of ERISA, (ii) Section 302 of ERISA, (iii) Sections 412 and 4971 of
the Code, (iv) the continuation coverage requirements of Section 601 et seq. of
ERISA and Section 4980B of the Code, and (v) corresponding or similar
provisions of foreign laws or regulations.
(i) With respect to each Company Plan that is subject to Title IV or
Section 302 of ERISA or Section 412 or 4971 of the Code: (i) there does not
exist any accumulated funding deficiency within the meaning of Section 412 of
the Code or Section 302 of ERISA, whether or not waived, (ii) the fair market
value of the assets of such plan equals or exceeds the actuarial present value
of all accrued benefits under such plan, on a termination basis, (iii) no
reportable event within the meaning of Section 4043(c) of ERISA has occurred,
with respect to which notice has not been waived, and the consummation of the
transactions contemplated by this Agreement will not result in the occurrence
of any such reportable event, and (iv) all premiums due to the Pension Benefit
Guaranty Corporation have been timely paid in full.
(j) There does not now exist, nor do any circumstances exist that could
result in, any Controlled Group Liability that would be a liability of the
Company or a Subsidiary following the Closing. Without limiting the generality
of the foregoing, neither the Company nor any ERISA Affiliate has engaged in
any transaction described in Section 4069 or Section 4204 of ERISA.
(k) Except as set forth in Schedule 3.13(k), neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated hereby will (either alone or in conjunction with any other event
other than a termination of employment with respect to which the employee being
terminated receives payments or benefits that he would have received if he had
terminated or been terminated and without regard to the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby)
result in, cause the accelerated vesting or delivery of, or increase the amount
or value of, any payment or benefit to any employee of the Company.
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Section 2.26 Labor Matters.
Except as set forth in Schedule 3.14, none of the Company or any of its
Subsidiaries is a party to, or bound by, any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor union
organization. There is no unfair labor practice or labor arbitration proceeding
pending or, to the knowledge of the Company, threatened against the Company or
any of its Subsidiaries. To the knowledge of the Company, there are no
organizational efforts with respect to the formation of a collective bargaining
unit presently being made or threatened involving employees of the Company or
any of its Subsidiaries.
Section 2.27 Affiliate Transactions.
Schedule 3.15 sets forth a complete and accurate list of all transactions,
series of related transactions or currently proposed transactions or series of
related transactions entered into by the Company or any of its Subsidiaries
since January 1, 1997 which are of the type required to be disclosed by the
Company pursuant to Item 404 of Regulation S-K of the Securities Laws. True and
complete copies of all agreements or contracts relating to such transactions
have been provided to Buyers prior to the date hereof.
Section 2.28 Insurance.
The Company maintains insurance policies, including liability policies,
covering the assets, business, equipment, properties, operations, employees,
officers and directors of the Company and each of its Subsidiaries
(collectively, the "Insurance Policies"), which are of a type and in amounts
customarily carried by persons conducting businesses similar to those of the
Company and its Subsidiaries. There is no material claim by the Company or any
of its Subsidiaries pending under any of the material Insurance Policies as to
which coverage has been questioned, denied or disputed by the underwriters of
such policies.
Section 2.29 Delaware Takeover Law.
The terms of Section 203 of the Delaware General Corporation Law will not
apply to any transaction contemplated hereby or to the ownership of the
Purchased Shares, the Purchased Warrants or the Company Common Stock to be
issued to Buyers upon exercise of the Purchased Warrants.
Section 2.30 Brokers or Finders.
Except for Gerard, Klauer & Mattison, whose fees and expenses shall be paid
by the Company pursuant to the letter agreement dated May 28, 1999, as amended
by a letter agreement dated October 11, 1999, a copy of which has been furnished
to Buyers, no agent, broker, investment banker or other firm or person,
including any of the foregoing that is an Affiliate of the Company, is or will
be entitled to any broker's or finder's fee or any other commission or similar
fee from the Company or any Buyer in connection with
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this Agreement or any of the transactions contemplated hereby.
Section 2.31 Y2K Matters.
All information technology presently expected to be used by the Company or
any Subsidiary on or following December 31, 1999 in the administration and the
business operations of the Company or any Subsidiary, including, without
limitation, in all products and services (i) provided by the Company or any
Subsidiary whether to third parties or for internal use or (ii) to the best of
the Company's knowledge after reasonable investigation, used in combination with
any information technology of its clients, customers, suppliers or vendors,
accurately processes or will process date and time data (including, but not
limited to, calculating, comparing and sequencing) from, into and between the
years 1999 and 2000 and the twentieth century and the twenty-first century,
including leap year calculations and neither performance nor functionality of
such technology will be affected by dates prior to, during and after the year
2000. Except as set forth on Schedule 3.19, neither the Company nor any
Subsidiary has any obligation under warranty agreements, service agreements or
otherwise to remedy any information technology defect relating to the year 2000.
Section 2.32 Knowledge Defined.
As used herein, the phrase "to the Company's knowledge" (or words of
similar import) means the actual knowledge of any of Philip Ladouceur, Glen
Holmes, Raghu Kilambi and Kyle Scott and includes any facts, matters or
circumstances set forth in any written notice from any Government Authority or
any other material written notice received by the Company or any of its
Subsidiaries, and also including any matter of which any Buyer informs the
Company in writing.
Section 2.33 No Change of Control.
Except as set forth on Schedule 3.21, since June 30, 1999 no Change of
Control of the Company has occurred and to the Company's knowledge no event has
occurred which is reasonably likely to lead to a Change of Control.
Section 2.34 Intellectual Property.
(a) For purposes of this Section 3.22, "Intellectual Property" shall mean,
collectively: (x) all U.S. and foreign registered, unregistered and pending (i)
trade names, trade dress, trademarks, service marks, assumed names, business
names and logos, and all registrations and applications therefor, together with
all goodwill symbolized thereby, (ii) computer software, data files, source and
object codes, user interfaces, manuals and other specifications and
documentation and all know-how relating thereto, except generally available
off-the-shelf programs (collectively, the "Computer Software"), (iii)
copyrights (including, without limitation, those in Computer Software, and all
registrations and applications therefor), (iv) utility and design patents,
registered designs and invention disclosures (including, without limitation,
those relating
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to Computer Software), and all grants, registrations and applications therefor
(collectively, the "Patents"), (v) trade secrets, inventions, processes,
formulae, know-how, concepts, ideas, research and development, designs,
business plans, strategies, marketing and other information and customer lists
(collectively, the "Trade Secrets"), and (vi) other intellectual property,
including, without limitation, adequate research and development facilities;
and (y) all license, assignment, distribution or other agreements relating to
any of the items set forth in clause (x) above (collectively, the "Contracts").
(b) Schedule 3.22(b) sets forth a complete and accurate list of (I) all
material Intellectual Property in which the Company or any of its Subsidiaries
has an ownership interest, indicating the owner thereof, and all applications,
registrations and grants with respect thereto (collectively, the "Owned
Property"), provided that such list need not identify non-material unregistered
copyrights unless such copyrights relate to proprietary Computer Software, (II)
all Intellectual Property (other than the Owned Property) which is used in or
relates to the Business (including the business of any Subsidiary), indicating
the owner thereof, and (III) all material Contracts with respect to the
Intellectual Property referred to in clauses (I) and (II) above. The
Intellectual Property included in clauses (I) and (II) above is collectively
referred to herein as the "Company Intellectual Property".
(c) Except as set forth on Schedule 3.22(b), the Company or a Subsidiary is
the sole and exclusive owner of the Owned Property, and is listed in the records
of the appropriate U.S. and/or foreign governmental agencies as the sole and
exclusive owner of record for each registration, grant and application listed in
Schedule 3.22(b).
(d) Except as set forth on Schedule 3.22(b), no act has been done or
omitted to be done by the Company or any Subsidiary, or any licensee thereof,
which has had or could have the effect of impairing or dedicating to the public,
or entitling any U.S. or foreign governmental authority or any other Person to
cancel, forfeit, modify or consider abandoned, any Owned Property, or give any
Person any rights with respect thereto (other than pursuant to a Contract listed
in Schedule 3.22), and all of the Company's or a Subsidiary's rights in the
Company Intellectual Property are valid, enforceable and free of defects.
Neither the Company nor any Subsidiary has any knowledge of any facts or claims
which cause or would cause any Patent included in the Company Intellectual
Property to be invalid or unenforceable, and neither the Company nor any
Subsidiary has received any notice that any Person may bring such a claim.
(e) Except as set forth on Schedule 3.22, the Company and each of its
Subsidiaries owns or otherwise has the valid right to use through a Contract
listed on Schedule X any and all Intellectual Property that is used in or is
necessary or advisable for the conduct of the Business as currently conducted
and as contemplated to be conducted, free and clear of any lien, encumbrance,
royalty or other payment obligations (except for royalties payable in respect of
off-the-shelf Computer Software at standard commercial rates and ordinary course
payments made under
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software hosting and reselling agreements in connection with the Company's
provision of application service provider services) and otherwise on
commercially reasonable terms.
(e) None of the Company, any of its Subsidiaries or their businesses as
currently conducted or as contemplated to be conducted (except that no
representation or warranties as to the businesses of CNI and ASYNC is made in
this paragraph), is in conflict with or in violation or infringement of, nor has
the Company or any of its Subsidiaries received any notice of any conflict with
or violation or infringement of, nor are proceedings or claims pending, nor have
any such proceedings or claims been instituted or asserted in writing against
the Company or any of its Subsidiaries, nor are any proceedings threatened,
alleging any violation, nor is there any valid basis for any such proceeding or
claim, of any rights or asserted rights of any other Person with respect to any
Intellectual Property of such other Person.
(f) No proceedings or claims in which the Company or any of its
Subsidiaries alleges that any Person is infringing upon, or otherwise violatng,
any Company Property are pending, and none have been served by, instituted or
asserted by the Company or any such Subsidiary, nor are any proceedings
threatened alleging any such violation or infringement, nor does the Company or
any such Subsidiary know of any valid basis for any such proceeding or claim.
(g) Neither the Company nor any of its Subsidiaries has, prior to the date
hereof, divulged, furnished to or made accessible to any Person, any Trade
Secrets included in the Company Property without prior thereto having obtained
an enforceable agreement of confidentiality from such Person, and all such
confidentiality agreements are listed on Schedule 3.22.
(h) The Company and each of its Subsidiaries have obtained from all
individuals who participated in any respect in the invention or authorship of
any Owned Property (as employees of the Company or one of its Subsidiaries, as
consultants, as employees of consultants or otherwise) effective waivers of any
and all ownership rights of such individuals in such Owned Property, and
assignments to the Company or one of its Subsidiaries of all rights with respect
thereto, other than from such individuals whose copyrightable works the Company
hereby represent to be "works made for hire" within the meaning of Section 101
of the Copyright Act of 1976.] No officer or employee of the Company or any
Subsidiary is subject to any agreement with any other Person or entity which
gives to any other Person any interest in inventions or other intellectual
property of a type that are related to the types of businesses currently
conducted by the Company or any Subsidiary, or requires such officer or employee
to keep confidential any trade secrets, proprietary data, customer lists or
other business information or which restricts such officer or employee from
engaging in competitive activities or solicitation of customers.
(i) The Company and each of its Subsidiaries have taken all actions which
are necessary or advisable in order to fully protect the Company
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Property in a manner consistent with prudent commercial practice in the
computer services industry.
Section 2.33 Liability Insurance.
The Company maintains liability insurance for its directors and officers
under a policy with [insurance company], a copy of which policy (together with
all endorsements, amendments, supplements and related materials) has been
provided to Buyers.
Section 2.34 Acquisitions.
(a) As of the time of the Initial Closing, the MicroVisions Acquisition
will have been consummated in accordance with the Agreement and Plan of
Reorganization and Merger dated as of June 2, 1999 by and among the Company,
MicroVisions and certain other entities, as amended by that certain Assignment
and Amendment No. 1 dated October 15, 1999, among the Company, MicroVisions and
FutureLink MicroVisions Acquisition Corp. (the "MicroVisions Acquisition
Agreement"), with no waiver, except as set forth in Schedule 3.24(a), of any
closing conditions thereto (and with all material governmental and third party
consents, filings and notices required in connection therewith having been made
or obtained) by the Company and, with no material change in the disclosures made
to the Company in the disclosure schedule delivered on June 2, 1999 pursuant to
the MicroVisions Acquisition Agreement. A true and complete copy of the
MicroVisions Acquisition Agreement and each disclosure schedule, exhibit,
amendment or supplement thereto has been delivered to Buyer and are attached
hereto as Schedule 3.24(a).
(b) The Company has delivered to Buyer complete and correct copies of all
material documents delivered to the Company in connection with the ASYNC
Acquisition and the CNI Acquisition, including the acquisition agreements and
disclosure schedules pertaining thereto, which are attached hereto as Schedule
3.24(b). To the Company's knowledge, all representations, warranties and
disclosures made in such documents or in connection therewith are true and
correct and the Company is not aware of any event or circumstance that presents
a substantial possibility of either such transaction failing to close on the
terms set forth in the ASYNC Acquisition Agreement and the CNI Acquisition
Agreement.
Section 2.36 No Undisclosed Liabilities.
Except as and to the extent set forth in the Company Reports and the
Company's financial statements filed with the SEC or in any Schedule hereto,
none of the Company or any of its Subsidiaries has any Liabilities (nor do there
exist any circumstance which are likely to give rise to Liabilities) other than
Liabilities incurred in the ordinary course of business and consistent with past
practice since June 30, 1999.
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Section 2.37 The Merger.
All steps necessary for the consummation of the Merger, including all
approvals, have been validly taken or obtained; certificates of withdrawal and
merger in the forms attached as Schedule 3.26 have been filed with the
Secretaries of the State of Colorado and Delaware; and the Merger has become
effective on the terms set forth in the Merger Agreement and such certificates.
No shareholders of FutureLink Colorado have taken the steps required under
Colorado law to assert dissenter's or appraisal rights in connection with the
Merger.
Section 2.38 Disclosure.
Neither this Agreement nor any certificate, instrument or written statement
furnished or made to Buyers by or on behalf of the Company pursuant to this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein and
therein in light of the circumstances under which they were made not misleading.
No changes have occurred that would require any amendment or supplement to the
Company Reports if Company Securities were being offered publicly as of the date
hereof or as of the date of either Closing.
ARTICLE II
Representations and Warranties of Buyers
Each Buyer hereby represents and warrants to the Company as follows:
Section 3.1 Organization.
Such Buyer is a the type of entity indicated on Schedule 1, duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization, as listed on Schedule 1. Such Buyer has all requisite power and
authority to carry on its business as now conducted, and to enter into this
Agreement, and the Registration Rights Agreement and to perform its obligations
hereunder and thereunder.
Section 3.2 Due Authorization.
The execution, delivery and performance of this Agreement and the
Registration Rights Agreement have been duly and validly authorized by all
necessary action on the part of such Buyer. This Agreement has been duly
executed and delivered by such Buyer and constitutes the valid and legally
binding obligations of such Buyer, enforceable against such Buyer in accordance
with its terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights or general principles of
equity.
Section 3.3 Conflicting Agreements and Other Matters.
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Neither the execution and delivery of this Agreement nor the performance by
such Buyer of its obligations hereunder will conflict with, result in a breach
of the terms, conditions or provisions of, constitute a default under, result in
the creation of any mortgage, security interest, encumbrance, lien or charge of
any kind upon any of the properties or assets of such Buyer pursuant to, or
require any consent, approval or other action by or any notice to or filing with
any Government Authority pursuant to, the organizational documents or agreements
of such Buyer or any agreement, instrument, order, judgment, decree, statute,
law, rule or regulation by which such Buyer is bound, except for filings under
the HSR Act and filings after the Closing under Section 13(d) or Section 16 of
the Exchange Act.
Section 3.4 Acquisition for Investment; Sophistication.
(a) Such Buyer is acquiring the Company Securities being purchased by it
for its own account for the purpose of investment and not with a view to or for
sale in connection with any distribution thereof, and such Buyer has no present
intention or plan to effect any distribution of shares of Company Common Stock,
provided that the disposition of Company Common Stock owned by such Buyer shall
at all times be and remain within its control, subject to the provisions of this
Agreement and the Registration Rights Agreement. The certificates representing
the Purchased Securities shall bear a prominent legend with respect to the
restrictions on transfer under the Securities Act and under applicable state
securities laws. Prior to any proposed transfer of any Purchased Securities,
unless such transfer is made pursuant to an effective registration statement
under the Securities Act, such Buyer will deliver to the Company an opinion of
counsel, reasonably satisfactory in form and substance to the Company, to the
effect that the Purchased Securities may be sold or otherwise transferred
without registration under the Securities Act. The Company will remove the
legend relating to Securities Act restrictions from any Purchased Securities at
any time two years after issuance if such Buyer delivers to the Company an
opinion of counsel, reasonably satisfactory in form and substance to the
Company, to the effect that such Purchased Securities are no longer subject to
transfer restrictions under the Securities Act. Upon original issuance thereof,
and until such time as the same shall have been registered under the Securities
Act or sold pursuant to Rule 144 promulgated thereunder (or any similar rule or
regulation) each certificate for the Purchased Securities shall bear any
restricted securities legend required hereby, unless such legend is no longer
required hereunder. Such Buyer is able to bear the economic risk of the
acquisition of Purchased Securities pursuant hereto and can afford to sustain a
total loss on such investment, and has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of the proposed investment.
(b) Such Buyer is an "accredited investor" as such term is defined in
Regulation D promulgated under the Securities Act.
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Section 3.6 Resources.
Such Buyer has requisite cash, cash equivalents, equity commitments or
other sources of financing available to consummate the transactions contemplated
hereby.
Section 3.7 Brokers or Finders.
Such Buyer has not engaged any agent, broker, investment banker or other
firm or person that will be entitled to any broker's or finder's fee or any
other commission or similar fee in connection with this Agreement or any of the
transactions contemplated hereby for which the Company or any of its Affiliates
will be responsible.
Section 3.8 Investment Company Matters.
Such Buyer is not, and after giving effect to the purchase of Company
Common Stock contemplated hereby will not be, an "investment company" or an
entity "controlled" by an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended.
ARTICLE III
Covenants Relating to Closing
Section 2.1 Taking of Necessary Action.
(a) Each party hereto agrees to use its commercially reasonable best
efforts promptly to take or cause to be taken all action and promptly to do or
cause to be done all things necessary, proper or advisable under applicable laws
and regulations to consummate and make effective the transactions contemplated
by this Agreement and the Registration Rights Agreement, subject to the terms
and conditions hereof and thereof, including all actions and things necessary to
cause all conditions precedent set forth in Article 7 to be satisfied.
(b) The Company shall use its commercially reasonable best efforts to
obtain the consent set forth in Schedule 3.4(d).
(c) From the date hereof until the date on which the persons nominated
pursuant to Section 6.4 first become members of the Board, (i) no grant or award
of options or other similar equity-related or incentive compensation shall be
made pursuant to or by amendment to the agreements listed on Schedule 3.9(g),
and (ii) no employment, stock option or other agreement shall be entered into
which contains a change-of-control or similar provision.
Section 2.3 Registration Rights Agreement.
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At the Closing, the Company and each Buyer shall enter into the
Registration Rights Agreement.
Section 2.4 Public Announcements; Confidentiality.
(a) Subject to each party's disclosure obligations imposed by law and any
stock exchange or similar rules and the confidentiality provisions contained in
Section 5.3(b), the Company and each Buyer will cooperate with each other in the
development and distribution of all news releases and other public information
disclosures with respect to this Agreement and any of the transactions
contemplated hereby or thereby. If a party is required by law or any stock
exchange or similar rule to issue a news release or other public announcement,
it shall advise the other party in advance thereof and use reasonable best
efforts to cause a mutually agreeable release or announcement to be issued.
(b) Each Buyer agrees that all information provided to it or any of its
representatives pursuant to this Agreement shall be kept confidential, and such
Buyer shall not (x) disclose such information to any persons other than the
directors, officers, employees, financial advisors, investors, lenders, legal
advisors, accountants, consultants and Affiliates of such Buyer who reasonably
need to have access to the confidential information and who are advised of the
confidential nature of such information or (y) use such information in a manner
which would be detrimental to the Company; provided, however, the foregoing
obligation of each Buyer shall not (i) relate to any information that (1) is or
becomes generally available to the public other than as a result of unauthorized
disclosure by such Buyer or by persons to whom such Buyer has made such
information available, (2) is or becomes available to such Buyer on a
non-confidential basis from a third party that is not, to such Buyer's
knowledge, bound by any other confidentiality agreement with the Company, or
(ii) prohibit disclosure of any information if required by law, rule,
regulation, court order or other legal or governmental process, provided that in
such event the party which believes it is so required to make any such
disclosure shall (x) give the Company reasonable advance notice thereof to the
extent practicable, (y) to the extent practicable, give the Company the
opportunity, at its expense, to oppose any such required disclosure or seek
confidential treatment thereof by the recipient of such information and (z)
cooperate with the Company in connection therewith. Buyers acknowledge that
United States securities laws restrict trading in securities while in possession
of material non-public information, and they shall not, directly or indirectly,
alone or with others, in any manner acquire or attempt to acquire or dispose of
any securities of the Company in violation of such laws.
Section 2.6 Conduct of the Business.
Except for transactions contemplated hereby, during the period from the
date hereof to the date on which the persons nominated by PPE II pursuant to
Section 6.4 first become
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members of the Board, each of the Company and each Subsidiary, except as
otherwise consented to or approved by such Buyer in writing or as permitted or
required hereby, (x) has conducted and will conduct its business and has
engaged and will engage in transactions only in the ordinary course consistent
with past practice, and (y) will not:
(i) change any provision of the Company Charter or the Bylaws of the
Company in a manner that would be adverse to any Buyer;
(ii) except for (A) issuances of shares of Company Common Stock in
consideration for the acquisition of assets by the Company in bona fide
arm's-length transactions and subject to the limitations set forth in the
Company Charter (and which issuances in any event shall not exceed 10% of
the shares of Company Common Stock outstanding, on a pro forma basis,
assuming the consummation of the transactions contemplated by this
Agreement), (B) grants of options or the issuance or reacquisition of
shares of Company Common Stock pursuant to the agreements listed on
Schedule 3.13(b) or the awards listed on Schedule 3.3(a) or automatic
awards pursuant to the terms of any stock option plan, change the number of
shares of the authorized or issued capital stock of the Company or issue or
grant any option, warrant, call, commitment, subscription, right to
purchase or agreement of any character relating to the authorized or issued
capital stock of the Company, or any securities convertible into shares of
such stock, or split, combine or reclassify any shares of the capital stock
of the Company or declare, set aside or pay any dividend, other
distribution (whether in cash, stock or property or any combination
thereof) in respect of the capital stock of the Company, or redeem or
otherwise acquire any shares of such capital stock;
(iii) take any action or permit any of its Subsidiaries to take any
action which would violate Section 6.2; or
(iv) enter into any employment agreement, or permit any of its
Subsidiaries to enter into any employment agreement with any officer or
other employee.
Section 2.8 Information and Access.
From the date hereof until the date of the Second Closing, the Company and
its Subsidiaries shall afford to each Buyer and its accountants, counsel and
other representatives full and reasonable access during normal business hours
(and at such other times as the parties may mutually agree) to its properties,
books, contracts, commitments, records and personnel and, during such period,
shall furnish promptly to each Buyer (1) a copy of each report, schedule and
other document filed or received by it pursuant to the requirements of the
Securities Laws, and (2) all other information concerning their businesses,
personnel and the Company Properties as such Buyer may reasonably request.
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Section 2.9 Notification of Certain Matters.
Each of Buyer and the Company shall use its good faith efforts to notify
the other party in writing of its discovery of any matter that would render any
of such party's or the other party's representations and warranties contained
herein untrue or incorrect in any material respect, but the failure of either
party to so notify the other party shall not be deemed a breach of this
Agreement.
Section 2.10 Hart Scott-Rodino Filing.
The Company and each Buyer required to do so shall make an appropriate
filing of a Notification and Report Form pursuant to the HSR Act with respect to
the transactions contemplated hereby as promptly as practicable and supply as
promptly as practicable any additional information and documentary material that
may be requested pursuant to the HSR Act and take all other actions necessary to
cause the expiration or termination of the applicable waiting periods under the
HSR Act as soon as practicable.
ARTICLE II
Certain Additional Covenants
Section 1.1 Use of Proceeds.
The Company shall use the funds received pursuant hereto for the funding of
the Company's infrastructure, for working capital for the Company's current
business and for pending and proposed acquisitions, provided that the Company
shall be allowed to hold the funds in short term investments pending such use.
Section 1.2 Actions Requiring Consent of the Buyers(a).
(a) Until the earlier to occur of (i) the date Buyers collectively hold
Equity Securities representing less than 5% of the Equity Securities outstanding
on a Fully-Diluted Basis, (ii) the date the right to nominate any persons for
election as director of the Company pursuant to Section 6.4 hereof ceases to
exist in accordance with such Section 6.4, and (iii) the third anniversary of
the Initial Closing, the Company shall not and shall not permit any material
direct or indirect Subsidiary any of the following actions without the prior
written consent of the holders of a majority of the Company Securities then held
by all Buyers:
(b) effect any merger, amalgamation, corporate reorganization or business
combination or otherwise acquire or dispose of any assets in a single
transaction or series of related transactions if, as a result of such
transactions the assets or revenues of the Company and its Subsidiaries taken as
a whole are, or are reasonably likely to be, increased or decreased by 25% or
more; or redeem or repurchase any Equity Securities with a fair market value in
excess of $5,000,000; or
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(c) engage in any new line of business (other than natural extensions of
the Company's current businesses) or otherwise materially alter the business,
operations or activities of the Company and its Subsidiaries as currently
conducted.
Section 1.2 Preemptive Right(a).
(a) For a period of eighteen (18) months following the date hereof, if the
Company shall propose to issue any Equity Securities for cash (other than
issuances with respect to employee benefit plans or in connection with a Public
Offering), then each Buyer shall have the right to subscribe in cash on the
proposed terms for any amount up to its Preemptive Right Pro Rata Share of such
Equity Securities. The "Preemptive Right Pro Rata Share" of a Buyer shall be,
at any given time, (i) such number of Equity Securities proposed to be issued
for cash multiplied by (ii) a fraction, the numerator of which is the number of
Equity Securities then held by such Buyer and the denominator of which is the
total number of Equity Securities issued and outstanding on a Fully-Diluted
Basis before giving effect to the new issuance.
(b) In the event that a preemptive right arises this Section 6.3, the
Company shall give each Buyer written notice (the "Preemptive Notice") of its
intention to issue Equity Securities for cash, the price, the identity of the
proposed subscriber, the principal terms upon which the Company proposes to
issue the same and any other material information given to the proposed
subscriber which has not already been provided to Buyers. Each Buyer shall have
fifteen Business Days from the delivery date of any Preemptive Notice to agree
to subscribe for a number of Equity Securities, as the case may be, up to its
Preemptive Right Pro Rata Share (in each case calculated prior to the issuance)
for the price and upon the terms specified in the Preemptive Notice by giving
written notice to the Company and stating therein the number of Equity
Securities, as the case may be, to be subscribed.
Section 1.2 Board of Director Nominations.
As soon as practicable after the Initial Closing, the Company's Board will
be expanded to include two persons nominated by PPE II. Thereafter, so long as
the Buyers collectively continue to hold shares of Company Common Stock
representing at least 50% of the Company Common Stock purchased pursuant to this
Agreement, PPE II, or any other Buyer to which PPE II shall have transferred its
rights under this Section 6.4, shall have the right to nominate two persons for
election as directors of the Company. Such right to nominate persons for
election as directors of the Company shall be reduced to one person in the event
the Buyers collectively no longer hold shares of Company Common Stock
representing at least 50% of the Company Common Stock purchased pursuant to this
Agreement, and shall remain at one as long as the Buyers collectively own shares
of Company Common Stock representing at least 25% of the Company Common Stock
purchased pursuant to this Agreement; provided, that (a) once the Buyers lose
the right to nominate two directors pursuant to this Section 6.4 because they
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collectively no longer hold shares of Company Common Stock representing at
least 50% of the Company Common Stock purchased pursuant to this Agreement, such
right shall be permanently lost regardless of whether the Buyers thereafter
acquire shares of Company Common which would cause them to own shares in excess
of such threshold, and (b) once the Buyers lose the right to nominate one
director pursuant to this Section 6.4 because they collectively no longer hold
shares of Company Common Stock representing at least 25% of the Company Common
Stock purchased pursuant to this Agreement, such right shall be permanently lost
regardless of whether the Buyers thereafter acquire shares of Company Common
which would cause them to own shares in excess of such threshold. PPE II's
rights under this Section 6.4 may be transferred to other Buyers who purchase
Company Common Stock directly from the Company at the First Closing or Second
Closing but otherwise may not be transferred to any other person. As a
condition to the nomination of any person for election as a director under this
Section 6.4, PPE II (or its permitted assignee) shall and shall cause such
nominee to provide to the Company all information which would be required to be
disclosed in a proxy statement or other filing required in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Exchange Act and the rules and regulations promulgated thereunder.
ARTICLE I
Conditions to Closings
Section 0.1 Conditions of Initial Closing.
The obligation of each Buyer to purchase and pay for the Purchased
Securities to be purchased by it hereunder is subject to satisfaction or waiver
of each of the following conditions precedent:
(a) Representations and Warranties; Covenants. The representations and
warranties of the Company contained herein shall have been true and correct in
all respects on and as of the date hereof, and shall be true and correct in all
respects on and as of the time of the Closing, with the same effect as though
such representations and warranties had been made on and as of the Closing Date
(except for representations and warranties that speak as of a specific date or
time other than the Closing Date (which need only be true and correct in all
respects as of such date or time)), other than, in all such cases, such failures
to be true and/or correct as would not in the aggregate reasonably be expected
to have a Material Adverse Effect; provided, however, that if any of the
representations and warranties is already qualified in any respect by
materiality or as to Material Adverse Effect for purposes of this Section 7.1(a)
such materiality or Material Adverse Effect qualification will be in all
respects ignored (but subject to the overall standard as to Material Adverse
Effect set forth immediately prior to this proviso). The covenants and
agreements of the Company to be performed on or before the date of the Initial
Closing in accordance with this Agreement shall have
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been duly performed in all respects, other than (except for the covenants set
forth in Sections 5.1, 5.2 and 5.3, as to which the proviso set forth in this
other-than clause shall not apply) for such failures to have been performed as
would not in the aggregate reasonably be expected to have a Material Adverse
Effect (provided, however, that if any such covenant or agreement is already
qualified in any respect by materiality or as to Material Adverse Effect for
purposes of determining whether this condition has been satisfied, such
materiality or Material Adverse Effect qualification will be in all respects
ignored and such covenant or agreement shall have been performed in all
respects without regard to such qualification (but subject to the overall
exception as to Material Adverse Effect set forth immediately prior to this
proviso)). The Company shall have delivered to Buyer at the Closing a
certificate of an appropriate officer in form and substance reasonably
satisfactory to Buyer dated the Closing Date to such effect.
In making any determination as to Material Adverse Effect under this
Section 7.1(a), the matters referred to in such Section shall be aggregated and
considered together.
(b) No Material Adverse Change. Since December 31, 1998 there shall not
have been any change, circumstance or event which has had, or presents a
substantial possibility of, a Material Adverse Effect.
(c) Registration Rights Agreement and Voting Agreement. The Registration
Rights Agreement and the Voting Agreement shall have been executed and delivered
by the parties thereto.
(d) No Injunction, etc. There shall not be in effect any final order,
decree or injunction of a court or Governmental Authority of competent
jurisdiction which enjoins or prohibits consummation of the transactions
contemplated hereby; there shall be no threatened or pending Action by any
Governmental Authority seeking to enjoin or prohibit such consummation; and
there shall be no pending or threatened Actions which would reasonably be
expected to have a material adverse effect on the Company or any Subsidiary or
on the ability of the Company to consummate the transactions contemplated hereby
or to issue the Company Securities.
(e) Simultaneous Purchases by Other Buyers. Each other Buyer shall be
prepared to proceed with the Closing on a simultaneous basis.
(f) Legal Opinion. Each Buyer shall have received on opinion or opinions
from the Company's legal counsel in form and substance satisfactory to such
Buyer.
(g) Management Agreements. The Company shall have entered into an
amendment to its employment agreement with Philip Ladouceur in the form provided
to Buyers.
(h) No Defaults. The Company shall not have taken
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any action or omitted to take any action which action or omission shall have
caused a material default or breach of its covenants or agreements hereunder.
Section 0.2 Conditions of Second Closing.
The obligation of each Buyer to purchase and pay for the Company Securities
to be purchased by its at the Second Closing hereunder is subject to
satisfaction or waiver of each of the following conditions precedent:
(a) Representations and Warranties; Covenants. The representations and
warranties of the Company contained herein shall have been true and correct in
all respects on and as of the date hereof, and shall be true and correct in all
respects on and as of the time of the Second Closing, with the same effect as
though such representations and warranties had been made on and as of the Second
Closing Date (except for representations and warranties that speak as of a
specific date or time other than the Second Closing Date (which need only be
true and correct in all respects as of such date or time)), other than, in all
such cases, such failures to be true and/or correct as would not in the
aggregate reasonably be expected to have a Material Adverse Effect; provided,
however, that if any of the representations and warranties is already qualified
in any respect by materiality or as to Material Adverse Effect for purposes of
this Section 7.2(a) such materiality or Material Adverse Effect qualification
will be in all respects ignored (but subject to the overall standard as to
Material Adverse Effect set forth immediately prior to this proviso). The
covenants and agreements of the Company to be performed on or before the date of
the Initial Closing in accordance with this Agreement shall have been duly
performed in all respects, other than (except for the covenants set forth in
Sections 5.1, 5.2 and 5.3, as to which the proviso set forth in this other-than
clause shall not apply) for such failures to have been performed as would not in
the aggregate reasonably be expected to have a Material Adverse Effect
(provided, however, that if any such covenant or agreement is already qualified
in any respect by materiality or as to Material Adverse Effect for purposes of
determining whether this condition has been satisfied, such materiality or
Material Adverse Effect qualification will be in all respects ignored and such
covenant or agreement shall have been performed in all respects without regard
to such qualification (but subject to the overall exception as to Material
Adverse Effect set forth immediately prior to this proviso)). The Company shall
have delivered to Buyer at the Second Closing a certificate of an appropriate
officer in form and substance reasonably satisfactory to Buyer dated the Second
Closing Date to such effect.
In making any determination as to Material Adverse Effect under this
Section 7.2(a), the matters referred to in such Section shall be aggregated and
considered together.
(b) No Material Adverse Change. Since December 31, 1998 there shall not
have been any change, circumstance or event which has had, or presents a
substantial possibility of, a Material Adverse Effect.
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<PAGE> 51
(c) No Injunction, etc. There shall not be in effect any final order,
decree or injunction of a court or Governmental Authority of competent
jurisdiction which enjoins or prohibits consummation of the transactions
contemplated hereby; there shall be no threatened or pending Action by any
Governmental Authority seeking to enjoin or prohibit such consummation; and
there shall be no pending or threatened Actions which would reasonably be
expected to have a material adverse effect on the Company or any Subsidiary or
on the ability of the Company to consummate the transactions contemplated hereby
or to issue the Company Securities.
(d) Simultaneous Purchases by Other Buyers. Each other Buyer shall be
prepared to proceed with the Second Closing on a simultaneous basis.
(e) Legal Opinion. Buyer shall have received from counsel to the Company,
a legal opinion addressed to the Buyers, dated as of the Second Closing Date, in
the form and substance reasonably satisfactory to the Buyers.
(f) Hart Scott-Rodino. Any applicable waiting period under the HSR Act
with respect to the transactions contemplated by this Agreement shall have
expired or been terminated and all other material authorizations, consents,
approvals or clearances of any Governmental Entity necessary for the
consummation of the Second Closing shall have been obtained.
Section 0.5 Conditions of Sale.
The obligations of the Company to issue and sell the Company Securities at
the Initial Closing and at the Second Closing are subject to satisfaction or
waiver of each of the following conditions precedent:
(a) Representations and Warranties; Covenants. The representations and
warranties of each Buyer contained herein shall have been true and correct in
all respects on and as of the date hereof, and shall be true and correct in all
respects on and as of the relevant Closing Date with the same effect as though
such representations and warranties had been made on and as of the relevant
Closing Date (except for representations and warranties that speak as of a
specific date or time other than such Closing Date (which need only be true and
correct in all respects as of such date or time)), other than, in all such
cases, such failures to be true and/or correct as would not in the aggregate
reasonably be expected to have a Material Adverse Effect on the Company or
Buyer's ability to consummate the transactions contemplated hereby; provided,
however, that if any of the representations and warranties is already qualified
in any respect by materiality or as to Material Adverse Effect for purposes of
this Section 7.4(a) such materiality or Material Adverse Effect qualification
will be in all respects ignored (but subject to the overall standard as to
Material Adverse Effect set forth immediately prior to this proviso). The
covenants and agreements of each Buyer to be performed on or before the relevant
Closing Date in accordance with this Agreement shall
51
<PAGE> 52
have been duly performed in all respects, other than (except for each Buyer's
obligation to pay the relevant Purchase Price at the relevant Closing, except
for Buyer's covenants set forth in Sections 5.2 and 5.3, as to which the
proviso set forth in this other-than clause shall not apply) for such failures
to have been performed as would not in the aggregate reasonably be expected to
have a Material Adverse Effect on the Company or such Buyer's ability to
consummate the transactions contemplated hereby (provided, however, that if any
such covenant or agreement is already qualified in any respect by materiality
or as to Material Adverse Effect for purposes of determining whether this
condition has been satisfied, such materiality or Material Adverse Effect
qualification will be in all respects ignored and such covenant or agreement
shall have been performed in all respects without regard to such qualification
(but subject to the overall exception as to Material Adverse Effect set forth
immediately prior to this proviso)). Buyer shall have delivered to the Company
at the relevant Closing a certificate of an appropriate officer in form and
substance reasonably satisfactory to the Company dated the relevant Closing
Date to such effect.
(b) No Injunction. There shall not be in effect any final order, decree or
injunction of a court or Governmental Authority of competent jurisdiction which
enjoins or prohibits consummation of the transactions contemplated hereby.
ARTICLE I
Survival; Indemnification
Section 0.1 Survival.
Other than the representations contained in Sections 3.1, 3.2, 3.3, 3.4,
3.5, 3.8 and 3.12 (which shall survive indefinitely all representations,
warranties and covenants and agreements of the parties contained herein,
including indemnity or indemnification agreements contained herein, or in any
Schedule or Exhibit hereto, or any certificate, document or other instrument
delivered in connection herewith shall survive the Closing until 5:00 p.m. New
York time on October 15, 2002. No Action or proceeding may be brought with
respect to any of the representations and warranties, or any of the covenants or
agreements which survive until October 15, 2002, unless written notice thereof,
setting forth in reasonable detail the claimed misrepresentation or breach of
warranty or breach of covenant or agreement, shall have been delivered to the
party alleged to have breached such representation or warranty or such covenant
or agreement on or prior to October 15, 2002.
Section 0.2 Indemnification.
(a) Subject to Section 8.1, from and after the Closing
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<PAGE> 53
Date, each Buyer shall indemnify and hold harmless the Company, its successors
and assigns, from and against any and all damages, claims, losses, expenses,
costs, obligations, and liabilities, including liabilities for all reasonable
attorneys' fees and expenses (including attorney and expert fees and expenses
incurred to enforce the terms of this Agreement) (collectively, "Loss and
Expenses") suffered, directly or indirectly, by the Company by reason of, or
arising out of, (i) any breach as of the date made or deemed made (including the
date of the Initial Closing and the date of the Second Closing) or required to
be true of any representation or warranty made by such Buyer in or pursuant to
this Agreement, or (ii) any failure by such Buyer to perform or fulfill any of
its covenants or agreements set forth herein.
(b) Subject to Section 8.1, from and after the Closing Date, the Company
shall indemnify and hold harmless each Buyer, its successors and assigns, from
and against any and all Loss and Expenses, suffered, directly or indirectly, by
such Buyer by reason of, or arising out of, (i) any breach as of the date made
or deemed made (including the date of the Initial Closing and the date of the
Second Closing) or required to be true of any representation or warranty made by
the Company in or pursuant to this Agreement and any statements made in any
certificate, schedule or other document delivered by or on behalf of the Company
pursuant to this Agreement, or (ii) any failure by the Company to perform or
fulfill any of its covenants or agreements set forth herein.
(c) Notwithstanding the foregoing, neither any Buyer nor the Company shall
be responsible for any Loss and Expenses as provided by paragraphs (a) and (b),
respectively, of this Section 8.2 until the cumulative aggregate amount of such
Loss and Expenses suffered by all Buyers or the Company, as the case may be,
exceeds $150,000, after which point all Loss and Expenses incurred in excess of
$150,000 shall be recoverable, provided that the recovery of each Buyer shall be
capped at 100% of the amount invested by it hereunder except in the case of
fraud or willful breach. Except with respect to third-party claims being
defended in good faith or claims for indemnification with respect to which there
exists a good faith dispute, the indemnifying party shall satisfy its
obligations hereunder within 30 days of receipt of a notice of claim under this
Article 8. For the purposes of calculating Loss and Expenses relating to any
breach of a representation or warranty, the representations and warranties shall
be read as if they did not include any qualifiers relating to materially or
Material Adverse Effect.
(d) Notwithstanding anything to the contrary contained herein, the rights
of the parties to be indemnified under this Article VIII with respect to this
Agreement and the transactions contemplated thereby are the sole and exclusive
remedies of the parties with respect to any claims relating to or arising from
this Agreement or the transactions contemplated hereby. In connection with the
transactions contemplated hereby, none of the Company's officers, directors,
shareholders or representatives shall have any liability hereunder and the
Company shall have no liability (including for claims based upon federal or
state securities laws or common law) except
53
<PAGE> 54
pursuant hereto.
Section 0.3 Third-Party Claims.
If a claim by a third party is made against an Indemnified Party and if
such Indemnified Party intends to seek indemnity with respect thereto under this
Article, such Indemnified Party shall promptly notify the indemnifying party in
writing of such claims setting forth such claims in reasonable detail; provided,
however, the foregoing notwithstanding, the failure of any Indemnified Party to
give any notice required to be given hereunder shall not affect such Indemnified
Party's right to indemnification hereunder except to the extent the indemnifying
party from whom such indemnity is sought shall have been prejudiced in its
ability to defend the claim or action for which such indemnification is sought
by reason of such failure. The indemnifying party shall have 20 days after
receipt of such notice to undertake, through counsel of its own choosing and at
its own expense, the settlement or defense thereof, and the Indemnified Party
shall cooperate with it in connection therewith; provided, however, that the
Indemnified Party may participate in such settlement or defense through counsel
chosen by such Indemnified Party, provided that the fees and expenses of such
counsel shall be borne by such Indemnified Party. The Indemnified Party shall
not pay or settle any claim which the indemnifying party is contesting without
the consent of the indemnifying party, which shall not be unreasonably withheld.
If the indemnifying party does not notify the Indemnified Party within 20 days
after the receipt of the Indemnified Party's notice of a claim of indemnity
hereunder that it elects to undertake the defense thereof, the Indemnified Party
shall have the right to contest, settle or compromise the claim but shall not
thereby waive any right to indemnity therefor pursuant to this Agreement.
ARTICLE I
Termination
Section /.1 Termination.
(a) This Agreement may be terminated at any time prior to the Initial
Closing by:
(i) the mutual consent of the Company and each Buyer;
(ii) any Buyer (if it is not in breach of any of its material
obligations hereunder) in the event of a breach or failure by the Company
that is material in the context of the transactions contemplated hereby of
any representation, warranty, covenant or agreement by the Company
contained herein which has not been, or cannot be, cured within 10 Business
Days after written notice of such breach is given to the Company; or
54
<PAGE> 55
(iii) the Company (if it is not in breach of any of its material
obligations hereunder) in the event of a breach or failure by Buyer that is
material in the context of the transactions contemplated hereby of any
representation, warranty, covenant or agreement by Buyer contained herein
which has not been, or cannot be, cured within 10 Business Days after
written notice of such breach is given to Buyer.
(b) The obligations of the parties hereunder with regard to the
transactions to be consummated at the Second Closing may be terminated (x) as
contemplated by clause (a) above, or (y), if the Second Closing shall not occur
prior to January 15, 2000, unless the failure of such occurrence shall be due to
the failure of the party seeking to terminate this Agreement to perform or
observe any material covenant or agreement set forth herein required to be
performed or observed by such party on or before the date of the Second Closing.
Section /.3 Procedure and Effect of Termination.
In the event of termination of this Agreement by either or both of the
Company and Buyer pursuant to Section 9.1(a), written notice thereof shall
forthwith be given by the terminating party to the other party hereto, and this
Agreement shall thereupon terminate and become void and have no effect, and the
transactions contemplated hereby shall be abandoned without further action by
the parties hereto, except that the provisions of Sections 5.4 (Public
Announcements; Confidentiality), 9.3 (Expenses), and Article X (as it relates to
any other surviving provisions), and any related definitional, interpretive or
other provisions necessary for the logical interpretation of such provisions,
shall survive the termination of this Agreement; provided, however, that such
termination shall not relieve any party hereto of any liability for any breach
of this Agreement. In the event of termination of the obligations relating to
the Second Closing pursuant to Section 9.1(b) after consummation of the First
Closing, all provisions hereof other than those relating solely to the Second
Closing shall remain in full force and effect; provided that such termination
shall not relieve any party hereto of any liability for any breach of this
Agreement.
Section /.4 Expenses.
(a) Except as set forth in this Agreement, whether or not any Stock
Purchase is consummated, all legal and other costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses; provided, however, that if
Closing does not occur due to Buyer's termination of this Agreement, then the
Company shall pay Buyer's reasonable out of pocket expenses, which shall serve
as liquidated damages and be Buyer's sole remedy in such event, except that if
the Closing shall not occur due to a willful breach by the Company, the Company
shall pay all of Buyer's damages resulting
55
<PAGE> 56
therefrom. If the Closing shall occur the Company shall, at the Closing,
reimburse Buyers for their out-of-pocket expenses in connection with the
transactions contemplated hereby, in an amount not to exceed $125,000. The
Company shall pay 50% and the Buyers collectively shall pay 50% of the HSR
filing fees required in connection with the transactions contemplated hereby
regardless of whether either or both of the Closings are consummated.
ARTICLE
Miscellaneous
Section /.1 Counterparts.
This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same agreement, and shall become effective when
one or more counterparts have been signed by each party hereto and delivered to
each other party. Copies of executed counterparts transmitted by telecopy,
telefax or other electronic transmission service shall be considered original
executed counterparts for purposes of this Section, provided receipt of copies
of such counterparts is confirmed.
Section /.2 Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York without reference to the choice of law principles
thereof.
Section /.3 Entire Agreement.
This Agreement (including agreements referenced herein) and the Schedules
and Exhibits hereto contain the entire agreement between the parties with
respect to the subject matter hereof and there are no agreements,
understandings, representations or warranties between the parties other than
those set forth or referred to herein, except as set forth in the Pequot/FLNK
Agreement dated the date hereof. This Agreement is not intended to confer upon
any person not a party hereto (and their successors and assigns) any rights or
remedies hereunder. The confidentiality agreement relating to the transactions
contemplated hereby is superseded hereby.
Section /.4 Notices.
All notices and other communications hereunder shall be sufficiently given
for all purposes hereunder if in writing and delivered personally, sent by
documented overnight delivery service or, to the extent receipt is confirmed,
telecopy, telefax or other electronic transmission service to the appropriate
address or number as set forth below. Notices to the Company shall be addressed
to:
Futurelink Corp.
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<PAGE> 57
6 Morgan, Suite 100
Irvine, California 92618
Attention: Raghu Kilambi
with a copy to:
Paul, Hastings, Janofsky & Walker
399 Park Avenue
31st Floor
New York, New York 10022-4697
Attention: Tom Pollock
Telecopy: 212-319-4090
or at such other address and to the attention of such other person as the
Company may designate by written notice to Buyers. Notices to Buyers shall be
addressed to:
Pequot Capital Management Inc.
500 Nyala Farm Road
Westport, Connecticut 06880
Attention:
Telecopy: 203-429-2400
with a copy to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
Attention: William J. Phillips
Telecopy: 212-259-6333
Section /.5 Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, provided the rights
of Buyers under Sections 2.5 and 6.4 may only be assigned to the extent
permitted by such Sections and the rights of Buyers under the other provisions
hereof shall not be binding upon or inure to the benefit of any transferee in a
public offering or in a Rule 144 sale.
Section /.6 Headings.
The Section, Article and other headings contained in this Agreement are
inserted for convenience of reference only and will not affect the meaning or
interpretation of this Agreement. All references to Sections or Articles
contained herein mean Sections or Articles of this Agreement unless otherwise
stated.
Section /.7 Amendments and Waivers.
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<PAGE> 58
This Agreement may not be modified or amended except by an instrument or
instruments in writing signed by the party against whom enforcement of any such
modification or amendment is sought. Either party hereto may, only by an
instrument in writing, waive compliance by the other party hereto with any term
or provision hereof on the part of such other party hereto to be performed or
complied with. The waiver by any party hereto of a breach of any term or
provision hereof shall not be construed as a waiver of any subsequent breach.
Section /.8 Interpretation; Absence of Presumption.
(a) For the purposes hereof, (i) words in the singular shall be held to
include the plural and vice versa and words of one gender shall be held to
include the other gender as the context requires, (ii) the terms "hereof",
"herein", and "herewith" and words of similar import shall, unless otherwise
stated, be construed to refer to this Agreement as a whole (including all of the
Schedules and Exhibits hereto) and not to any particular provision of this
Agreement, and Article, Section, paragraph, Exhibit and Schedule references are
to the Articles, Sections, paragraphs, Exhibits and Schedules to this Agreement
unless otherwise specified, (iii) the word "including" and words of similar
import when used in this Agreement shall mean "including, without limitation,"
unless the context otherwise requires or unless otherwise specified, (iv) the
word "or" shall not be exclusive, and (v) provisions shall apply, when
appropriate, to successive events and transactions.
(b) This Agreement shall be construed without regard to any presumption or
rule requiring construction or interpretation against the party drafting or
causing any instrument to be drafted.
Section /.10 Severability.
Any provision hereof which is invalid or unenforceable shall be ineffective
to the extent of such invalidity or unenforceability, without affecting in any
way the remaining provisions hereof.
Section /.11 Further Assurances.
The Company and each Buyer agree that, from time to time, whether before,
at or after any Closing Date, each of them will execute and deliver such further
instruments of conveyance and transfer and take such other action as may be
necessary to carry out the purposes and intents hereof.
Section /.12 Specific Performance.
Each Buyer and the Company acknowledge that, in view of the uniqueness of
the parties hereto, the parties hereto would not have an adequate remedy at law
for money
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<PAGE> 59
damages in the event that this Agreement were not performed in accordance with
its terms, and therefore agree that the parties hereto shall be entitled to
specific enforcement of the terms hereof in addition to any other remedy to
which the parties hereto may be entitled at law or in equity.
Section /.13 Several Liability.
The obligations and liabilities of Buyers under or in connection with this
Agreement are several and not joint (or joint and several).
Section /.14 Interpretation of Schedules.
Any matter set forth on any Schedule shall be deemed to be referred to on
all other Schedules to which such matter logically relates and where such
reference would be appropriate and can reasonably be inferred from the matters
disclosed on the first Schedule as if set forth on such other Schedules.
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<PAGE> 60
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of each
of the parties hereto as of the day first above written.
FUTURELINK CORP.
By: [signed : R. Kilambi]
Name: R. Kilambi
Title: C.F.O.
PEQUOT PRIVATE EQUITY FUND II, L.P.
By: Pequot Capital Management, Inc.,
as investment manager
By: [signed : David J. Malat]
Name: David J. Malat
Title: Chief Financial Officer
PEQUOT PARTNERS FUND, L.P.
By: Pequot Capital Management, Inc.,
as investment manager
By: [signed : David J. Malat]
Name: David J. Malat
Title: Chief Financial Officer
PEQUOT INTERNATIONAL FUND, INC.
By: Pequot Capital Management, Inc.,
as investment advisor
By: [signed : David J. Malat]
Name: David J. Malat
Title: Chief Financial Officer
DIMENSIONAL PARTNERS LTD.
By: JDS Capital Management, Inc.,
its investment subadvisor
By: [signed : Joseph Samberg]
Name: Joseph Samberg
Title: President
DIMENSIONAL PARTNERS L.P.
By: JDS Capital Management, Inc.,
its investment manager
By: [signed : Joseph Samberg]
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<PAGE> 61
Name: Joseph Samberg
Title: President
61
<PAGE> 62
SCHEDULE 1
TO THE SECURITIES PURCHASE AGREEMENT
DATED OCTOBER 15, 1999
PURCHASED SECURITIES
<TABLE>
<CAPTION>
TOTAL CASH
BUYERS INITIAL CLOSING SECOND CLOSING RECEIVED
COMMON STOCK WARRANTS COMMON STOCK WARRANTS
AT $5.50 PER SHARE AT $5.50 PER SHARE --------
<S> <C> <C> <C> <C> <C>
PEQUOT PRIVATE EQUITY FUND II,
L.P.
Pequot Capital Management, Inc.
500 Nyala Farm Road
Westport, CT 06880
Jurisdiction of Organization:
Delaware 2,545,454 668,921 1,090,911 272,727 $20,000,007.50
PEQUOT PARTNERS FUND, L.P.
Pequot Capital Management, Inc.
500 Nyala Farm Road
Westport, CT 06880
Jurisdiction of Organization:
Delaware 1,363,636 358,351 0 0 $ 7,499,998.00
PEQUOT INTERNATIONAL FUND, INC.
Pequot Capital Management, Inc.
500 Nyala Farm Road
Westport, CT 06880
Jurisdiction of Organization:
British Virgin Islands 1,363,636 358,351 0 0 $ 7,499,998.00
DIMENSIONAL PARTNERS, LTD.
Corporate Center
West Bay Road
P.O. Box 31106-SMB
Grand Cayman, Cayman Islands
Jurisdiction of Organization:
Cayman Islands 2,036,364 535,137 145,454 36,364 $11,999,999.00
DIMENSIONAL PARTNERS, L.P.
JDS Capital Management, Inc.
780 Third Avenue
45th Floor
New York, NY 10017
Jurisdiction of Organization:
Delaware 509,091 133,785 36,363 9,091 $ 2,999,997.00
TOTAL SECURITIES PURCHASED 7,818,181 2,054,545 1,272,728 318,182
</TABLE>
<PAGE> 63
<TABLE>
<S> <C> <C> <C> <C> <C>
TOTAL CASH RECEIVED $42,999,995.50 $7,000,004.00 $49,999,999.50
</TABLE>
<PAGE> 1
EXHIBIT 3.1
FUTURELINK CORP.
CERTIFICATE OF INCORPORATION OF FUTURELINK CORP.
ARTICLE I
The name of this corporation is FutureLink Corp. (the "Corporation").
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is 15 E. North Street, Dover, Delaware 19901, County of Kent. The
name of its registered agent at such address is Incorporating Services, Ltd.
ARTICLE III
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of Delaware.
ARTICLE IV
The Corporation is authorized to issue two classes of stock to be
designated, respectively, preferred stock, no par value ("Preferred Stock"),
and shares of common stock, par value $0.0001 per share ("Common Stock"). The
total number of shares of Common Stock that the Corporation shall have
authority to issue is 300,000,000. The total number of shares of Preferred
Stock that the Corporation shall have authority to issue is 20,000,000. The
Preferred Stock may be issued from time to time in one or more series.
The Corporation shall from time to time in accordance with the laws of the
State of Delaware increase the authorized amount of its Common Stock if at any
time the number of Common Stock remaining unissued and available for issuance
shall not be sufficient to permit conversion of the Preferred.
The Board of Directors is hereby authorized, subject to limitations
prescribed by law and the provisions of this Article IV, by resolution to
provide for the issuance of the shares of Preferred Stock in one or more
series, and to establish from time to time the number of shares to be included
in each such series, and to fix the designation, powers, privileges,
preferences, and relative participating, optional or other rights, if any, of
the shares of each such series and the qualifications, limitations or
restrictions thereof.
The authority of the Board with respect to each series shall include, but
not be limited to, determination of the following:
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<PAGE> 2
A. The number of shares constituting that series (including an increase
or decrease in the number of shares of any such series (but not below the
number of shares in any such series then outstanding)) and the distinctive
designation of that series;
B. The dividend rate on the shares of that series, whether dividends
shall be cumulative, and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that series;
C. Whether that series shall have the voting rights (including multiple
or fractional votes per share) in addition to the voting rights provided by
law, and, if so, the terms of such voting rights;
D. Whether that series shall have conversion privileges, and, if so, the
terms and conditions of such privileges, including provision for adjustment of
the conversion rate in such events as the Board of Directors shall determine;
E. Whether or not the shares of that series shall be redeemable, and, if
so, the terms and conditions of such redemption, including the date or dates
upon or after which they shall be redeemable, and the amount per share payable
in case of redemption, which amount may vary under different conditions and at
different redemption rates;
F. Whether that series shall have a sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and the amount of such
sinking funds;
G. The rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, and the
relative rights of priority, if any, of payment of shares of that series; and
H. Any other relative rights, preferences and limitations of that series.
No holders of shares of the Corporation of any class, now or hereafter
authorized, shall have any preferential or preemptive rights to subscribe for,
purchase or receive any shares of the Corporation of any class, now or
hereafter authorized, or any options or warrants for such shares, or any rights
to subscribe for, purchase or receive any securities convertible to or
exchangeable for such shares, which may at any time be issued, sold or offered
for sale by the Corporation, except in the case of any shares of Preferred
Stock to which such rights are specifically granted by any resolution or
resolutions of the Board of Directors adopted pursuant to this Article IV.
ARTICLE V
The Corporation is to have perpetual existence.
ARTICLE VI
For the management of the business and for the conduct of the affairs of
the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation, of its directors and of its
2
<PAGE> 3
stockholders or any class thereof, as the case may be, it is further provided
that:
A . The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors. The number of directors
of this Corporation shall be as set forth in the Bylaws of the Corporation.
B. In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware, the Board of Directors is expressly authorized
to make, alter, amend, or repeal the Bylaws of the Corporation.
C. The directors of the Corporation need not be elected by written ballot
unless the Bylaws of the Corporation so provide.
D. Advance notice of stockholder nomination for the election of directors
and of any other business to be brought by stockholders before any meeting of
the stockholders of the Corporation shall be given in the manner provided in
the Bylaws of the Corporation.
E. No action shall be taken by the stockholders of the Corporation except
at an annual or special meeting of the stockholders called in accordance with
the Bylaws and no action shall be taken by the stockholders by written consent.
ARTICLE VII
At the election of directors of the Corporation, no holder of stock of any
class or series shall be entitled to cumulative voting rights as to the
directors to be elected.
ARTICLE VIII
The Corporation reserves the right to amend, alter, change, or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by the laws of the State of Delaware, and all rights
conferred herein are granted subject to this reservation.
ARTICLE IX
A. To the fullest extent permitted by the Delaware General Corporation
Law as the same exists or as may hereafter be amended, no director of the
Corporation shall be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director.
B. The Corporation may indemnify to the fullest extent permitted by law
any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he, his testator or intestate is or was a director, officer or employee of
the Corporation or any predecessor of the Corporation or serves or served at
any other enterprise as a director, officer or employee at the request of the
Corporation or any predecessor to the Corporation.
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C. Neither any amendment nor repeal of this Article IX, nor the adoption
of any statute (unless such statute so requires) or provision of the
Corporation's Certificate of Incorporation inconsistent with this Article IX,
shall eliminate or reduce the effect of this Article IX, with respect of any
matter occurring, or any action or proceeding accruing or arising or that, but
for this Article IX, would accrue or arise, prior to such amendment, repeal, or
adoption of any inconsistent provision.
ARTICLE X
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the laws of the State of Delaware)
outside of the State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the Bylaws of the
Corporation.
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EXHIBIT 3.2
FUTURELINK CORP.
BYLAWS
OF
FUTURELINK CORP.
(A DELAWARE CORPORATION)
I. CORPORATE OFFICES
I.1 REGISTERED OFFICE
The registered office of the corporation shall be fixed in the certificate
of incorporation of the corporation.
I.2 OTHER OFFICES
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
II. MEETINGS OF STOCKHOLDERS
II.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place within or outside the
State of Delaware designated by the board of directors. In the absence of any
such designation, stockholders' meetings shall be held at the principal
executive office of the corporation.
II.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date and at
a time designated by the board of directors. In the absence of such designation,
the annual meeting of stockholders shall be held on the third Tuesday in June in
each year at 10:00 a.m. However, if such day falls on a legal holiday, then the
meeting shall be held at the same time and place on the next succeeding full
business day. At the meeting, directors shall be elected, and any other proper
business may be transacted if brought before the meeting in accordance with
Section 2.5 of these Bylaws.
II.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board, or by the chief executive
officer.
II.4 NOTICE OF STOCKHOLDERS' MEETINGS
Except as otherwise provided by the General Corporation Law of Delaware,
all notices of meetings of stockholders shall be sent or otherwise given in
accordance with Section 2.6 of these bylaws not less than ten (10) nor more than
sixty (60) days before the date of the meeting. The notice shall specify the
place, date and hour of the meeting and (i) in the case of a special meeting,
the purpose or purposes for which the meeting is called (no business other than
that specified in the notice may be transacted) or (ii) in the case of the
annual meeting, those matters which the board of directors, at the time of
giving the notice, intends to present for action by the stockholders (but any
proper matter may be presented at the meeting for such action). The notice of
any meeting at which directors are to be elected shall include the name of any
nominee or nominees who, at the time of the notice, the board intends to present
for election.
II.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
(a) To be properly brought before an annual meeting, nominations for the
election of directors or other business must be (i) specified in the
notice of meeting (or any supplement thereto) given by or at the
direction of the board of directors, (ii) otherwise properly brought
before the meeting by or at the direction of the board of directors or
(iii) otherwise properly brought before the meeting by a stockholder
in accordance with Section 2.5 (b). To be properly brought before a
special meeting,
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nominations for the election of directors or other business must be
specified in the notice of meeting (or any supplement thereto) given
by or at the direction of the board of directors.
(b) For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in
writing to the Secretary of the corporation. To be timely, such
stockholder's notice must be delivered to or mailed and received by
the secretary of the corporation not less than 60 days prior to the
meeting; provided, however, that in the event that less than 60 days
notice or prior public disclosure of the date of the meeting is given
or made to stockholders, notice by the stockholder to be timely must
be so received not later than the close of business on the seventh day
following the day on which such notice of the date of the meeting was
mailed or such public disclosure was made. A stockholder's notice to
the Secretary shall set forth as to each matter the stockholder
proposes to bring before the annual meeting: (i) a brief description
of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii)
the name and address, as they appear on the corporation's books, of
the stockholder proposing such business, (iii) the class and number of
shares of the corporation which are beneficially owned by the
stockholder, (iv) any material interest of the stockholder in such
business and (v) any other information that is required to be provided
by the stockholder pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), in his capacity
as a proponent to a stockholder proposal. Notwithstanding the
foregoing, in order to include information with respect to a
stockholder proposal in the proxy statement and form of proxy for a
stockholder's meeting, stockholders must provide notice as required by
the regulations promulgated under the Exchange Act. Notwithstanding
anything in these bylaws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the
procedures set forth in this Section 2.5. The chairman of the annual
meeting shall, if the facts warrant, determine and declare at the
meeting that business was not properly brought before the meeting and
in accordance with the provisions of this Section 2.5, and, if he or
she should so determine, he or she shall so declare at the meeting
that any such business not properly brought before the meeting shall
not be transacted.
(c) Only persons who are nominated in accordance with the procedures set
forth in this paragraph (c) shall be eligible for election as
directors. Nominations of persons for election to the Board of
Directors of the corporation may be made at a meeting of stockholders
by or at the direction of the Board of Directors or by any stockholder
of the corporation entitled to vote in the election of directors at
the meeting who complies with the notice procedures set forth in this
paragraph (c). Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made pursuant to timely
notice in writing to the Secretary of the corporation in accordance
with the provisions of paragraph (b) of this Section 2.5. Such
stockholder's notice shall set forth (i) as to such stockholder giving
notice, the information required to be provided pursuant to paragraph
(b) of this Section 2.5; and (ii) as to each person, if any, whom the
stockholder proposes to nominate for election or re-election as a
director: (A) the name, age, business address and residence address of
such person, (B) the principal occupation or employment of such
person, (C) the class and number of shares of the corporation which
are beneficially owned by such person, (D) a description of all
arrangements or understandings between the stockholder and each
nominee and any other person or persons (naming such person or
persons) pursuant to which the nominations are to be made by the
stockholder and (E) any other information relating to such person that
is required to be disclosed in solicitations of proxies for elections
of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Exchange Act (including without limitation
such person's written consent to being named in the proxy statement,
if any, as a nominee and to serving as a director if elected). At the
request of the Board of Directors, any person nominated by a
stockholder for election as a director shall furnish to the Secretary
of the corporation that information required to be set forth in the
stockholder's notice of nomination which pertains to the nominee. No
person shall be eligible for election as a director of the corporation
unless nominated in accordance with the procedures set forth in this
paragraph (c). The chairman of the meeting shall, if the facts
warrants, determine and declare at the meeting that
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a nomination was not made in accordance with the procedures prescribed
by these bylaws, and if he should so determine, he shall so declare at
the meeting, and the defective nomination shall be disregarded.
II.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders shall be given either
personally or by first-class mail or by telegraphic or other written
communication. Notices not personally delivered shall be sent charges prepaid
and shall be addressed to the stockholder at the address of that stockholder
appearing on the books of the corporation or given by the stockholder to the
corporation for the purpose of notice. Notice shall be deemed to have been given
at the time when delivered personally or deposited in the mail or sent by
telegram or other means of written communication. If any notice addressed to a
stockholder at the address of that stockholder appearing on the books of the
corporation is returned to the corporation by the United States Postal Service
marked to indicate that the United States Postal Service is unable to deliver
the notice to the stockholder at that address, then all future notices or
reports shall be deemed to have been duly given without further mailing if the
same shall be available to the stockholder on written demand of the stockholder
at the principal executive office of the corporation for a period of one (1)
year from the date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
II.7 QUORUM
The holders of one-third in voting power of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. Where a separate vote by a class or classes is
required, one-third, present in person or by proxy, of the shares of such class
or classes entitled to take action with respect to that vote on that matter
shall constitute a quorum. If, however, such quorum is not present or
represented at any meeting of the stockholders, then either (i) the chairman of
the meeting or (ii) the holders of a majority of the shares represented at the
meeting and entitled to vote thereat, present in person or represented by proxy,
shall have power to adjourn the meeting in accordance with Section 2.8 of these
bylaws.
When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which, by express provision of the laws of the State of Delaware or
of the certificate of incorporation or these bylaws, a different vote is
required, in which case such express provision shall govern and control the
decision of the question.
If a quorum be initially present, the stockholders may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum, if any action taken is approved by a
majority of the stockholders initially constituting the quorum.
II.8 ADJOURNED MEETING; NOTICE
Any stockholders' meeting, annual or special, whether or not a quorum is
present, may be adjourned from time to time by (i) the chairman of the meeting
or (ii) the vote of the holders of a majority of the shares represented at that
meeting and entitled to vote thereat, either in person or by proxy. In the
absence of a quorum, no other business may be transacted at that meeting except
as provided in Section 2.7 of these bylaws.
When a meeting is adjourned to another time and place, unless these bylaws
otherwise require, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
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II.9 VOTING
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.12 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint
owners, and to voting trusts and other voting agreements).
Except as may be otherwise provided in the certificate of incorporation or
these bylaws, each stockholder shall be entitled to one vote for each share of
capital stock held by such stockholder. Any stockholder entitled to vote on any
matter may vote part of the shares in favor of the proposal, refrain from voting
the remaining shares or, may vote them against the proposal; but, if the
stockholder fails to specify the number of shares which the stockholder is
voting affirmatively, it will be conclusively presumed that the stockholder's
approving vote is with respect to all shares which the stockholder is entitled
to vote.
II.10 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT
The transactions of any meeting of stockholders, either annual or special,
however called and noticed, and wherever held, shall be as valid as though they
had been taken at a meeting duly held after regular call and notice, if a quorum
be present either in person or by proxy, and if, either before or after the
meeting, each person entitled to vote, who was not present in person or by
proxy, signs a written waiver of notice or a consent to the holding of the
meeting or an approval of the minutes thereof. The waiver of notice or consent
or approval need not specify either the business to be transacted or the purpose
of any annual or special meeting of stockholders. All such waivers, consents,
and approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by law to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.
II.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise provided in the certificate of incorporation, any action
required or permitted to be taken at any annual or special meeting of
stockholders may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing setting forth the action so taken
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Such consents shall be delivered to the corporation by delivery to it
registered office in the state of Delaware, its principal place of business, or
an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested.
Every written consent shall bear the date of signature of each stockholder
who signs the consent, and no written consent shall be effective to take the
corporate action referred to therein unless, within sixty (60) days after the
date the earliest dated consent is delivered to the corporation, a written
consent or consents signed by holders of a sufficient number of votes to take
action are delivered to the corporation in the manner prescribed in the first
paragraph of this section.
Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the General
Corporation Law of Delaware if such action had been voted on by stockholders at
a meeting thereof, then the certificate filed under such section shall state, in
lieu of any statement required by such section concerning any vote of
stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.
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II.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING
For purposes of determining the stockholders entitled to notice of any
meeting or to vote thereat the board of directors may fix, in advance, a record
date, which shall not precede the date upon which the resolution fixing the
record date is adopted by the board of directors and which shall not be more
than sixty (60) days nor less than ten (10) days before the date of any such
meeting, and in such event only stockholders of record on the date so fixed are
entitled to notice and to vote, notwithstanding any transfer of any shares on
the books of the corporation after the record date.
If the board of directors does not so fix a record date the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the business day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting
unless the board of directors fixes a new record date for the adjourned meeting,
but the board of directors shall fix a new record date if the meeting is
adjourned for more than thirty (30) days from the date set for the original
meeting.
In order that the corporation may determine the stockholders entitled to
consent to corporate action in writing without a meeting, the board of directors
may fix a record date, which record date shall neither precede nor be more than
ten (10) days after the date upon which such resolution is adopted by the board
of directors. Any stockholder of record seeking to have the stockholders
authorize or take action by written consent shall, by written notice to the
secretary, request the board of directors to fix a record date. The board of
directors shall promptly, but in all events within ten (10) days after the date
on which such notice is received, adopt a resolution fixing the record date.
If the board of directors has not fixed a record date within such time, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the board of directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
corporation in the manner prescribed in the first paragraph of Section 2.11 of
these bylaws. If the board of directors has not fixed a record date within such
time and prior action by the board of directors is required by law, the record
date for determining stockholders entitled to consent to corporate action in
writing without a meeting shall be at the close of business on the date on which
the board of directors adopts the resolution taking such prior action.
The record date for any other purpose shall be as provided in Section 8.1
of these bylaws.
II.13 PROXIES
Every person entitled to vote for directors, or on any other matter, shall
have the right to do so either in person or by one or more agents authorized by
a written proxy signed by the person and filed with the secretary of the
corporation in accordance with the procedure established for the meeting or
taking of action in writing, as the case may be, but no such proxy shall be
voted or acted upon after three (3) years from its date, unless the proxy
provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission, telefacsimile or otherwise) by the
stockholder or the stockholder's attorney-in-fact. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(e) of the General Corporation Law of Delaware
(relating to the irrevocability of proxies).
II.14 ORGANIZATION
The chairman of the board, or in the absence of the chairman of the board,
the chief executive officer, and in the absence of the chief executive officer,
the president, and in the absence of the president, the vice presidents, in
order of their rank as fixed by the board of directors, shall call the meeting
of the stockholders to order, and shall act as chairman of the meeting. In the
absence of the chairman of the board, the chief executive officer, the
president, and all of the vice presidents, the stockholders shall appoint a
chairman for such meeting. The chairman of any meeting of stockholders shall
determine the order of business and the procedures at the meeting, including
such matters as the regulation of the manner of voting and the conduct of
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business. The date and time of the opening and closing of the polls for each
matter upon which the stockholders will vote at the meeting shall be announced
at the meeting. The secretary of the corporation shall act as secretary of all
meetings of the stockholders, but in the absence of the secretary at any meeting
of the stockholders, the chairman of the meeting may appoint any person to act
as secretary of the meeting.
II.15 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present. The stock
ledger shall be the only evidence as to who are the stockholders entitled to
examine the stock ledger, the list of stockholders or the books of the
corporation, or to vote in person or by proxy at any meeting of stockholders and
of the number of shares held by each such stockholder.
II.16 INSPECTORS OF ELECTION
The corporation may, and to the extent required by law, shall, in advance
of any meeting of stockholders, appoint one or more inspectors to act at the
meeting and make a written report thereof. The corporation may designate one or
more persons as alternate inspectors to replace any inspector who fails to act.
If no inspector or alternate is able to act at a meeting of stockholders, the
person presiding at the meeting may, and to the extent required by law, shall,
appoint one or more inspectors to act at the meeting. Each inspector, before
entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his ability. Every vote taken by ballots shall be
counted by an inspector or inspectors appointed by the chairman of the meeting.
Such inspectors shall:
(a) determine the number of shares outstanding and the voting power of
each, the number of shares represented at the meeting, the existence
of a quorum, and the authenticity, validity, and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any way arising in
connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine and certify the result; and
(g) do any other acts that may be proper to conduct the election or vote
with fairness to all stockholders.
II.17 INSPECTORS OF ELECTION AND PROCEDURES FOR COUNTING WRITTEN CONSENTS
Within three (3) business days after receipt of the earliest dated consent
delivered to the corporation in the manner provided in Section 228(c) of the
General Corporation Law of Delaware or the determination by the board of
directors of the corporation that the corporation should seek corporate action
by written consent, as the case may be, the secretary may, but is not required
to, engage nationally recognized independent inspectors of elections for the
purpose of performing a ministerial review of the validity of the consents and
revocations. The cost of retaining inspectors of election shall be borne by the
corporation.
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Consents and revocations shall be delivered to the inspectors upon receipt
by the corporation, the stockholder or stockholders soliciting consents or
soliciting revocations in opposition to action by consent proposed by the
corporation (the "Soliciting Stockholders") or their proxy solicitors or other
designated agents. As soon as consents and revocations are received, the
inspectors shall review the consents and revocations and shall maintain a count
of the number of valid and unrevoked consents. The inspectors shall keep such
count confidential and shall not reveal the count to the corporation, the
Soliciting Stockholders or their representatives or any other person or entity.
As soon as practicable after the earlier of W sixty (60) days after the date of
the earliest dated consent delivered to the corporation in the manner provided
in Section 228(c) of the General Corporation Law of Delaware or (ii) a written
request therefor by the corporation or the Soliciting Stockholders (whichever is
soliciting consents) (which request, except in the case of corporate action by
written consent taken pursuant to the solicitations of not more than ten (10)
persons, may be made no earlier than after such reasonable amount of time after
the commencement date of the applicable solicitation of consents as is necessary
to permit the inspectors to commence and organize their count, but in no event
less than five (5) days after such commencement date), notice of which request
shall be given to the party opposing the solicitation of consents, if any, which
request shall state that the corporation or Soliciting Stockholders, as the case
may be, have a good faith belief that the requisite number of valid and
unrevoked consents to authorize or take the action specified in the consents has
been received in accordance with these bylaws, the inspectors shall issue a
preliminary report to the corporation and the Soliciting Stockholders stating: W
the number of valid consents; (ii) the number of valid revocations; (iii) the
number of valid and unrevoked consents; (iv) the number of invalid consents; M
the number of invalid revocations; and (vi) whether, based on their preliminary
count, the requisite number of valid and unrevoked consents has been obtained to
authorize or take the action specified in the consents.
Unless the corporation and the Soliciting Stockholders shall agree in
writing to a shorter or longer period, the corporation and the Soliciting
Stockholders shall have 48 hours to review the consents and revocations and to
advise the inspectors and the opposing party in writing as to whether they
intend to challenge the preliminary report of the inspectors. If no written
notice of an intention to challenge the preliminary report is received within 48
hours after the inspectors' issuance of the preliminary report, the inspectors
shall issue to the corporation and the Soliciting Stockholders their final
report containing the information from the inspectors' determination with
respect to whether the requisite number of valid and unrevoked consents was
obtained to authorize and take the action specified in the consents. If the
corporation or the Soliciting Stockholders issue written notice of an intention
to challenge the inspectors' preliminary report within 48 hours after the
issuance of that report, a challenge session shall be scheduled by the
inspectors as promptly as practicable. A transcript of the challenge session
shall be recorded by a certified court reporter. Following completion of the
challenge session, the inspectors shall as promptly as practicable issue their
final report to the corporation and the Soliciting Stockholders, which report
shall contain the information included in the preliminary report, plus all
changes made to the vote totals as a result of the challenge and a certification
of whether the requisite number of valid and unrevoked consents was obtained to
authorize or take the action specified in the consents. A copy of the final
report of the inspectors shall be included in the book in which the proceedings
of meetings of stockholders are recorded.
III. DIRECTORS
III.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware and to
any limitations in the certificate of incorporation or these bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
III.2 NUMBER OF DIRECTORS
The board of directors shall consist of no less than three (3) and no more
than eleven (11) members. The number of directors may be changed by an amendment
to this bylaw, duly adopted by the board of directors or by the stockholders, or
by a duly adopted amendment to the certificate of incorporation. No reduction of
the authorized number of directors shall have the effect of removing any
director before that director's term of
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office expires. If for any cause, the directors shall not have been elected at
an annual meeting, they may be elected as soon thereafter as convenient at a
special meeting of the stockholders called for that purpose in the manner
provided in these Bylaws.
III.3 ELECTION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, directors shall hold
office until the expiration of the term for which elected and until a successor
has been elected and qualified; except that if any such election shall not be so
held, such election shall take place at a stockholders' meeting called and held
in accordance with the General Corporation Law of Delaware.
Directors need not be stockholders unless so required by the certificate of
incorporation or these bylaws, wherein other qualifications for directors may be
prescribed.
Elections of directors need not be by written ballot.
III.4 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to the chairman
of the board, the president, the secretary or the board of directors, unless the
notice specifies a later time for that resignation to become effective. If the
resignation of a director is effective at a future time, only a majority of the
board of directors then in office, including those who have so resigned (until
the effective date of such resignation), shall have the power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective.
Vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote of
the stockholders or by court order may be filled only by the affirmative vote of
a majority of the shares represented and voting at a duly held meeting at which
a quorum is present (which shares voting affirmatively also constitute a
majority of the required quorum). Each director so elected shall hold office
until the next annual meeting of the stockholders and until a successor has been
elected and qualified.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting from any increase
in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled
only by a majority of the directors then in office, although less
than a quorum, or by a sole remaining director.
(ii) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions
of the certificate of incorporation, vacancies and newly created
directorships of such class or classes or series may be filled only
by a majority of the directors elected by such class or classes or
series thereof then in office, or by a sole remaining director so
elected. In the event that no directors elected by such class or
classes of stock or series remain, the majority of the other
directors then in office, although less than a quorum, or a sole
remaining director may fill such vacancy or vacancies.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole board
(as constituted immediately prior to any such increase), then the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten (10) percent of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to
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replace the directors chosen by the directors then in office as aforesaid, which
election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
III.5 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of incorporation
or by these bylaws, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors; provided, however, that, if and so
long as stockholders of the corporation are entitled to cumulative voting, if
less than the entire board is to be removed, no director may be removed without
cause if the votes cast against his removal would be sufficient to elect him if
then cumulatively voted at an election of the entire board of directors.
Whenever the holders of any class or series are entitled to elect one or more
directors by the certificate of incorporation, this Section 3.5 shall apply, in
respect to the removal without cause of a director or directors so elected, to
the vote of the holders of the outstanding shares of that class or series and
not to the vote of the outstanding shares as a whole.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of such director's term of office.
III.6 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
Regular meetings of the board of directors may be held at any place within
or outside the State of Delaware that has been designated from time to time by
resolution of the board. In the absence of such a designation, regular meetings
shall be held at the principal executive office of the corporation. Special
meetings of the board may be held at any place within or outside the State of
Delaware that has been designated in the notice of the meeting or, if not stated
in the notice or if there is no notice, at the principal executive office of the
corporation.
Any meeting of the board, regular or special, may be held by conference
telephone or similar communication equipment, so long as all directors
participating in the meeting can hear one another; and all such participating
directors shall be deemed to be present in person at the meeting.
III.7 FIRST MEETINGS
The first meeting of each newly elected board of directors shall be held at
such time and place as shall be fixed by the vote of the stockholders at the
annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected board of directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
III.8 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice at
such time as shall from time to time be determined by the board of directors. If
any regular meeting day shall fall on a legal holiday, then the meeting shall be
held at the same time and place on the next succeeding full business day.
III.9 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail,
telecopy or telegram, charges prepaid, addressed to each director at that
director's address as it is shown on the records of the corporation. If the
notice is mailed, it shall be deposited in the United States mail at least two
(2) days before the time of the holding of the meeting. If the notice is
delivered personally or by telephone, telecopy or telegram, it shall be
delivered personally or by telephone or telecopy or to the telegraph company at
least four (4) hours before the time of the holding of the meeting. Any oral
notice given personally or by telephone may be communicated either to the
director or to a person at
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the office of the director who the person giving the notice has reason to
believe will promptly communicate it to the director. If the meeting is to be
held at the principal executive office of the corporation, the notice need not
specify the place of the meeting. Moreover, a notice of special meeting need not
state the purpose of such meeting, and, unless indicated in the notice thereof,
any and all business may be transacted at a special meeting.
III.10 QUORUM
A majority of the authorized number of directors shall constitute a quorum
for the transaction of business, except to adjourn as provided in Section 3.12
of these bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the board of directors, subject to the provisions of the
certificate of incorporation and applicable law.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the quorum for that meeting.
III.11 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice, whether before or after the meeting, or (ii) who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such directors. All such waivers shall be filed with the corporate
records or made part of the minutes of the meeting. A waiver of notice need not
specify the purpose of any regular or special meeting of the board of directors.
III.12 ADJOURNMENT
A majority of the directors present, whether or not constituting a quorum,
may adjourn any meeting of the board to another time and place.
III.13 NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting of the board
need not be given unless the meeting is adjourned for more than twenty-four (24)
hours. If the meeting is adjourned for more than twenty-four (24) hours, then
notice of the time and place of the adjourned meeting shall be given before the
adjourned meeting takes place, in the manner specified in Section 3.9 of these
bylaws, to the directors who were not present at the time of the adjournment.
III.14 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the board of directors may
be taken without a meeting, provided that all of the members of the board
individually or collectively consent in writing to that action. Such action by
written consent shall have the same force and effect as a unanimous vote of the
board of directors. Such written consent and any counterparts thereof shall be
filed with the minutes of the proceedings of the board of directors.
III.15 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if any,
for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.15 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
III.16 APPROVAL OF LOANS TO OFFICERS
The corporation may tend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or any of its
subsidiaries, including any officer or employee who is a director of the
corporation or any of its subsidiaries, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest and may be unsecured, or secured in such manner as the board of
directors shall
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approve, including, without limitation, a pledge of shares of stock of the
corporation. Nothing contained in this section shall be deemed to deny, limit or
restrict the powers of guaranty or warranty of the corporation at common law or
under any statute.
III.17 SOLE DIRECTOR PROVIDED BY CERTIFICATE OF INCORPORATION
In the event only one director is required by these bylaws or the
certificate of incorporation, then any reference herein to notices, waivers,
consents, meetings or other actions by a majority or quorum of the directors
shall be deemed to refer to such notice, waiver, etc., by such sole director,
who shall have all the rights and duties and shall be entitled to exercise all
of the powers and shall assume all the responsibilities otherwise herein
described as given to the board of directors.
III.18 CONDUCT OF BUSINESS
At any meeting of the board of directors, business shall be transacted in
such order and manner as the board may from time to time determine, and all
matters shall be determined by the vote of a majority of the directors present,
except as otherwise provided herein or required by law.
IV. COMMITTEES
IV.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one or more committees, each
consisting of one or more directors, to serve at the pleasure of the board. The
board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. The appointment of members or alternate members of a committee
requires the vote of a majority of the authorized number of directors. Any
committee, to the extent provided in the resolution of the board, shall have and
may exercise all the powers and authority of the board, but no such committee
shall have the power or authority to (i) amend the certificate of incorporation
(except that a committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by the board
of directors as provided in Section 151 (a) of the General Corporation Law of
Delaware, fix the designations and any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation or fix the number of shares
of any series of stock or authorize the increase or decrease of the shares of
any series), (ii) adopt an agreement of merger or consolidation under Sections
251 or 252 of the General Corporation Law of Delaware, (iii) recommend to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, (iv) recommend to the stockholders a
dissolution of the corporation or a revocation of a dissolution or (v) amend the
bylaws of the corporation; and, unless the board resolution establishing the
committee, a supplemental resolution of the board of directors, the bylaws or
the certificate of incorporation expressly so provide, no such committee shall
have the power or authority to declare a dividend, to authorize the issuance of
stock, or to adopt a certificate of ownership and merger pursuant to Section 253
of the General Corporation Law of Delaware.
IV.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and taken
in accordance with, the following provisions of Article III of these bylaws:
Section 3.6 (place of meetings; meetings by telephone), Section 3.8 (regular
meetings), Section 3.9 (special meetings; notice), Section 3.10 (quorum),
Section 3.11 (waiver of notice), Section 3.12 (adjournment), Section 3.13
(notice of adjournment) and Section 3.14 (board action by written consent
without meeting), with such changes in the context of those bylaws as are
necessary to substitute the committee and its members for the board of directors
and its members; provided, however, that the time of regular meetings of
committees may be determined either by resolution of the board of directors or
by resolution of the committee, that special meetings of committees may also be
called by resolution of the board of directors, and that notice of special
meetings of committees shall also be given to all
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alternate members, who shall have the right to attend all meetings of the
committee. The board of directors may adopt rules for the government of any
committee not inconsistent with the provisions of these bylaws.
IV.3 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.
V. OFFICERS
V.1 OFFICERS
The Corporate Officers of the corporation shall be a president, a secretary
and a chief financial officer. The corporation may also have, at the discretion
of the board of directors, a chairman of the board, a chief executive officer, a
chief operating officer, a chief technical officer, one or more vice presidents
(however denominated), one or more assistant secretaries, a treasurer, one or
more assistant treasurers and such other officers as may be appointed in
accordance with the provisions of Section 5.3 of these bylaws. Any number of
offices may be held by the same person.
In addition to the Corporate Officers of the Company described above, there
may also be such Administrative Officers of the corporation as may be designated
and appointed from time to time by the president of the corporation in
accordance with the provisions of Section 5.12 of these bylaws.
V.2 APPOINTMENT OF OFFICERS
The Corporate Officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Section 5.3 or Section 5.5 of
these bylaws, shall be chosen by the board of directors, subject to the rights,
if any, of an officer under any contract of employment, and shall hold their
respective offices for such terms as the board of directors may from time to
time determine.
V.3 SUBORDINATE OFFICERS
The board of directors may appoint, or may empower the president to
appoint, such other Corporate Officers as the business of the corporation may
require, each of whom shall hold office for such period, have such power and
authority, and perform such duties as are provided in these bylaws or as the
board of directors may from time to time determine.
The president may from time to time designate and appoint Administrative
Officers of the corporation in accordance with the provisions of Section 5.12 of
these bylaws.
V.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of a Corporate Officer under any contract of
employment, any Corporate Officer may be removed, either with or without cause,
by the board of directors at any regular or special meeting of the board or,
except in case of a Corporate Officer chosen by the board of directors, by any
Corporate Officer upon whom such power of removal may be conferred by the board
of directors.
Any Corporate Officer may resign at any time by giving written notice to
the corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the Corporate
Officer is a party.
Any Administrative Officer designated and appointed by the president may be
removed, either with or without cause, at any time by the president. Any
Administrative Officer may resign at any time by giving written notice to the
president or to the secretary of the corporation.
V.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
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V.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise such other
powers and perform such other duties as may from time to time be assigned to him
by the board of directors or as may be prescribed by these bylaws. If there is
no president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
V.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the board of
directors to the chairman of the board, if there be such an officer, the
president shall, unless a separate chief executive officer be appointed by the
board of directors, be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction and control of the business and the officers of the corporation. In
the absence or nonexistence of a chairman of the board or a separate chief
executive officer, he or she shall preside at all meetings of the stockholders
and at all meetings of the board of directors. He or she shall have the general
powers and duties of management usually vested in the office of president of a
corporation, and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or these bylaws.
The president shall, without limitation, have the authority to execute
bonds, mortgages and other contracts requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the corporation.
V.8 VICE PRESIDENTS
In the absence or disability of the president, and if there is no chairman
of the board, the vice presidents, if any, in order of their rank as fixed by
the board of directors or, if not ranked, a vice president designated by the
board of directors, shall perform all the duties of the president and when so
acting shall have all the powers of, and be subject to all the restrictions
upon, the president. The vice presidents shall have such other powers and
perform such other duties as from time to time may be prescribed for them
respectively by the board of directors, these bylaws, the president or the
chairman of the board.
V.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of the board of directors,
committees of directors and stockholders. The minutes shall show the time and
place of each meeting, whether regular or special (and, if special, how
authorized and the notice given), the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the board of directors required to be given by law or by
these bylaws. He or she shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the board of directors or by these bylaws.
V.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings and shares.
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The books of account shall at all reasonable times be open to inspection by any
director for a purpose reasonably related to his position as a director.
The chief financial officer shall deposit all money and other valuables in
the name and to the credit of the corporation with such depositories as may be
designated by the board of directors. He or she shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his or
her transactions as chief financial officer and of the financial condition of
the corporation, and shall have such other powers and perform such other duties
as may be prescribed by the board of directors or these bylaws.
V.11 ASSISTANT SECRETARY
The assistant secretary, if any, or, if there is more than one, the
assistant secretaries in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the secretary or in the event of his or her inability or refusal
to act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
V.12 ADMINISTRATIVE OFFICERS
In addition to the Corporate Officers of the corporation as provided in
Section 5.1 of these bylaws and such subordinate Corporate Officers as may be
appointed in accordance with Section 5.3 of these bylaws, there may also be such
Administrative Officers of the corporation as may be designated and appointed
from time to time by the president of the corporation. Administrative Officers
shall perform such duties and have such powers as from time to time may be
determined by the president or the board of directors in order to assist the
Corporate Officers in the furtherance of their duties. In the performance of
such duties and the exercise of such powers, however, such Administrative
Officers shall have limited authority to act on behalf of the corporation as the
board of directors shall establish, including but not limited to limitations on
the dollar amount and on the scope of agreements or commitments that may be made
by such Administrative Officers on behalf of the corporation, which limitations
may not be exceeded by such individuals or altered by the president without
further approval by the board of directors.
V.13 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing powers, authority and duties, all officers of
the corporation shall respectively have such authority and powers and perform
such duties in the management of the business of the corporation as may be
designated from time to time by the board of directors.
VI. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS
VI.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner permitted by
the General Corporation Law of Delaware as the same now exists or may hereafter
be amended, indemnify any person against expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement actually and reasonably
incurred in connection with any threatened, pending or completed action, suit,
or proceeding in which such person was or is a party or is threatened to be made
a party by reason of the fact that such person is or was a director or officer
of the corporation. For purposes of this Section 6. 1, a "director" or "officer"
of the corporation shall mean any person W who is or was a director or officer
of the corporation, (ii) who is or was serving at the request of the corporation
as a director or officer of another corporation, partnership, joint venture,
trust or other enterprise or (iii) who was a director or officer of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
The corporation shall be required to indemnify a director or officer in
connection with an action, suit, or proceeding (or part thereof) initiated by
such director or officer only if the initiation of such action, suit, or
proceeding (or part thereof) by the director or officer was authorized by the
board of Directors of the corporation.
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The corporation shall pay the expenses (including attorney's fees) incurred
by a director or officer of the corporation entitled to indemnification
hereunder in defending any action, suit or proceeding referred to in this
Section 6.1 in advance of its final disposition; provided, however, that payment
of expenses incurred by a director or officer of the corporation in advance of
the final disposition of such action, suit or proceeding shall be made only upon
receipt of an undertaking by the director or officer to repay all amounts
advanced if it should ultimately be determined that the director or officer is
not entitled to be indemnified under this Section 6.1 or otherwise.
The rights conferred on any person by this Article shall not be exclusive
of any other rights which such person may have or hereafter acquire under any
statute, provision of the corporation's Certificate of Incorporation, these
bylaws, agreement, vote of the stockholders or disinterested directors or
otherwise.
Any repeal or modification of the foregoing provisions of this Article
shall not adversely affect any right or protection hereunder of any person in
respect of any act or omission occurring prior to the time of such repeal or
modification.
VI.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the maximum extent and in the
manner permitted by the General Corporation Law of Delaware as the same now
exists or may hereafter be amended, to indemnify any person (other than
directors and officers) against expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred in
connection with any threatened, pending or completed action, suit, or
proceeding, in which such person was or is a party or is threatened to be made a
party by reason of the fact that such person is or was an employee or agent of
the corporation. For purposes of this Section 6.2, an "employee" or "agent" of
the corporation (other than a director or officer) shall mean any person who
is or was an employee or agent of the corporation, (ii) who is or was serving at
the request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise or (iii) who was an
employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
VI.3 INSURANCE
The corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify him or her
against such liability under the provisions of the General Corporation Law of
Delaware.
VII. RECORDS AND REPORTS
VII.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at such
place or places as designated by the board of directors, keep a record of its
stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books and other records of its business and properties.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
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VII.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders and its other books and records for a purpose
reasonably related to his or her position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
VII.3 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, if any, the chief executive officer, if separate
from the president, the president, any vice president, the chief financial
officer, the secretary or any assistant secretary of this corporation, or any
other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent and exercise on behalf of this
corporation all rights incident to any and all shares of the stock of any other
corporation or corporations standing in the name of this corporation. The
authority herein granted may be exercised either by such person directly or by
any other person authorized to do so by proxy or power of attorney duly executed
by such person having the authority.
VII.4 CERTIFICATION AND INSPECTION OF BYLAWS
The original or a copy of these bylaws, as amended or otherwise altered to
date, certified by the secretary, shall be kept at the corporation's principal
executive office and shall be open to inspection by the stockholders of the
corporation, at all reasonable times during office hours.
VIII. GENERAL MATTERS
VIII.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the stockholders entitled to receive payment of
any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the board of directors may fix, in advance, a record date, which shall not
precede the date upon which the resolution fixing the record date is adopted and
which shall not be more than sixty (60) days before any such action. In that
case, only stockholders of record at the close of business on the date so fixed
are entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided by law.
If the board of directors does not so fix a record date, then the record
date for determining stockholders for any such purpose shall be at the close of
business on the day on which the board of directors adopts the applicable
resolution.
VIII.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
VIII.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
The board of directors, except as otherwise provided in these bylaws, may
authorize and empower any officer or officers, or agent or agents, to enter into
any contract or execute any instrument in the name of and on behalf of the
corporation; such power and authority may be general or confined to specific
instances. Unless so authorized or ratified by the board of directors or within
the agency power of an officer, no officer, agent or employee shall have any
power or authority to bind the corporation by any contract or engagement or to
pledge its credit or to render it liable for any purpose or for any amount.
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VIII.4 STOCK CERTIFICATES; TRANSFER; PARTLY PAID SHARES
The shares of the corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and, upon request,
every holder of uncertificated shares, shall be entitled to have a certificate
signed by, or in the name of the corporation by, the chairman or vice-chairman
of the board of directors, or the president or vice-president, and by the
treasurer or an assistant treasurer, or the secretary or an assistant secretary
of such corporation representing the number of shares registered in certificate
form. Any or all of the signatures on the certificate may be a facsimile. In
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate has ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the corporation with the same effect as if he or she were such officer,
transfer agent or registrar at the date of issue.
Certificates for shares shall be of such form and device as the board of
directors may designate and shall state the name of the record holder of the
shares represented thereby; its number; date of issuance; the number of shares
for which it is issued; a summary statement or reference to the powers,
designations, preferences or other special rights of such stock and the
qualifications, limitations or restrictions of such preferences and/or rights,
if any; a statement or summary of liens, if any; a conspicuous notice of
restrictions upon transfer or registration of transfer, if any; a statement as
to any applicable voting trust agreement; if the shares be assessable, or, if
assessments are collectible by personal action, a plain statement of such facts.
Upon surrender to the secretary or transfer agent of the corporation of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, or upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
VIII.5 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences and the relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
VIII.6 LOST CERTIFICATES
Except as provided in this Section 8.6, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The board of
directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; the
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board may require indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
VIII.7 TRANSFER AGENTS AND REGISTRARS
The board of directors may appoint one or more transfer agents or transfer
clerks, and one or more registrars, each of which shall be an incorporated bank
or trust company -- either domestic or foreign, who shall be appointed at such
times and places as the requirements of the corporation may necessitate and the
board of directors may designate.
VIII.8 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction and definitions in the General Corporation Law of Delaware shall
govern the construction of these bylaws. Without limiting the generality of this
provision, as used in these bylaws, the singular number includes the plural, the
plural number includes the singular, and the term "person" includes both an
entity and a natural person.
VIII.9 DIVIDENDS
The directors of the corporation, subject to any restrictions contained in
the certificate of incorporation, may declare and pay dividends upon the shares
of its capital stock pursuant to the General Corporation Law of Delaware.
Dividends may be paid in cash, in property, or in shares of the corporation's
capital stock.
The directors of the corporation may set apart out of any of the funds of
the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
VIII.10 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
VIII.11 SEAL
The corporation may adopt a corporate seal, which may be altered at
pleasure, and may use the same by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced.
VIII.12 STOCK TRANSFER AGREEMENTS
The corporation shall have power to enter into and perform any agreement
with any number of stockholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
VIII.13 REGISTERED STOCKHOLDERS
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
VIII.14 NOTICES
Except as otherwise specifically provided herein or required by law, all
notices required to be given to any stockholder, director, officer, employee or
agent shall be in writing and may in every instance be effectively given by hand
delivery, by mail, postage paid, or by facsimile transmission. Any such notice
shall be addressed to such stockholder, director, officer, employee or agent at
his last known address as it appears on the books of
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the corporation. The time when such notice shall be deemed received, if hand
delivered, or dispatched, if sent by mail or facsimile, transmission, shall be
the time of the giving of the notice.
IX. AMENDMENTS
The original or other bylaws of the corporation may be adopted, amended or
repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its certificate of incorporation, confer the power to adopt,
amend or repeal bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal bylaws.
Whenever an amendment or new bylaw is adopted, it shall be copied in the
book of bylaws with the original bylaws, in the appropriate place. If any bylaw
is repealed, the fact of repeal with the date of the meeting at which the repeal
was enacted or the filing of the operative written consent(s) shall be stated in
said book.
X. DISSOLUTION
If it should be deemed advisable in the judgment of the board of directors
of the corporation that the corporation should be dissolved, the board, after
the adoption of a resolution to that effect by a majority of the whole board at
any meeting called for that purpose, shall cause notice to be mailed to each
stockholder entitled to vote thereon of the adoption of the resolution and of a
meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation entitled
to vote thereon votes for the proposed dissolution, then a certificate stating
that the dissolution has been authorized in accordance with the provisions of
Section 275 of the General Corporation Law of Delaware and setting forth the
names and residences of the directors and officers shall be executed,
acknowledged, and filed and shall become effective in accordance with Section
103 of the General Corporation Law of Delaware. Upon such certificate's becoming
effective in accordance with Section 103 of the General Corporation Law of
Delaware, the corporation shall be dissolved.
Whenever all the stockholders entitled to vote on a dissolution consent in
writing, either in person or by duly authorized attorney, to a dissolution, no
meeting of directors or stockholders shall be necessary. The consent shall be
filed and shall become effective in accordance with Section 103 of the General
Corporation Law of Delaware. Upon such consent's becoming effective in
accordance with Section 103 of the General Corporation Law of Delaware, the
corporation shall be dissolved. If the consent is signed by an attorney, then
the original power of attorney or a photocopy thereof shall be attached to and
filed with the consent. The consent filed with the Secretary of State shall have
attached to it the affidavit of the secretary or some other officer of the
corporation stating that the consent has been signed by or on behalf of all the
stockholders entitled to vote on a dissolution; in addition, there shall be
attached to the consent a certification by the secretary or some other officer
of the corporation setting forth the names and residences of the directors and
officers of the corporation.
XI. CUSTODIAN
XI.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
The Court of Chancery, upon application of any stockholder, may appoint one
or more persons to be custodians and, if the corporation is insolvent, to be
receivers, of and for the corporation when:
(i) at any meeting held for the election of directors the stockholders
are so divided that they have failed to elect successors to directors
whose terms have expired or would have expired upon qualification of
their successors; or
(ii) the business of the corporation is suffering or is threatened with
irreparable injury because the directors are so divided respecting
the management of the affairs of the corporation that the required
vote for action by the board of directors cannot be obtained and the
stockholders are unable to terminate this division; or
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(iii) the corporation has abandoned its business and has failed within a
reasonable time to take steps to dissolve, liquidate or distribute
its assets.
XI.2 DUTIES OF CUSTODIAN
The custodian shall have all the powers and title of a receiver appointed
under Section 291 of the General Corporation Law of Delaware, but the authority
of the custodian shall be to continue the business of the corporation and not to
liquidate its affairs and distribute its assets, except when the Court of
Chancery otherwise orders and except in cases arising under Sections 226(a)(3)
or 352(a)(2) of the General Corporation Law of Delaware.
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EXHIBIT 4.1
FUTURELINK CORP.
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of October 15,
1999, by and among Futurelink Corp., a Delaware corporation (the "Company") and
the stockholders signatories hereto (each, a "Stockholder" and together the
"Stockholders").
Terms and Conditions
In consideration of the mutual covenants and agreements contained in this
Agreement and the Purchase Agreement, and intending to be legally bound, the
parties hereto agree as follows:
. Definitions. As used in this Agreement, the following terms have the
meanings indicated below or in the referenced sections of this Agreement:
"Common Stock." The Company's Common Stock, $.0001 par value per share,
as the same may be constituted from time to time.
"Demand Registration." As defined in Section 3(a) hereof.
"Exchange Act." The Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder.
"NASD." The National Association of Securities Dealers, Inc.
"Person." An individual, a partnership, a corporation, a limited
liability company or partnership, an association, a joint stock company, a
trust, a business trust, a joint venture, an unincorporated organization or a
government entity or any department, agency, or political subdivision thereof.
"Piggyback Registration." As defined in Section 4(a) hereof.
"Registrable Securities." Any shares of Common Stock of the Company held
by the Stockholders named on Schedule I hereto and any shares of Common Stock
that such Stockholder has the right to acquire, or does acquire, upon the
conversion or exercise of any option, warrant or other convertible security of
the Company or, in either case, their transferees; provided, that a Registrable
Security ceases to be a Registrable Security when (i) it is registered under
the Securities Act, (ii) it is sold or transferred in accordance with the
requirements of Rule 144 (or similar provisions then in effect) promulgated by
the SEC under the Securities Act ("Rule 144"), or (iii) it is eligible to be
sold or transferred under Rule 144 without holding period or volume
limitations.
"Registration Expenses." As defined in Section 7(a) hereof.
"SEC." The United States Securities and Exchange Commission.
"Securities Act." The Securities Act of 1933, as amended, and the rules
and regulations
<PAGE> 2
thereunder.
. Securities Subject to this Agreement.
Holders of Registrable Securities. A Person is deemed to be a holder of
Registrable Securities whenever that Person owns, directly or beneficially, or
has the right to acquire Registrable Securities, disregarding any legal
restrictions upon the exercise of that right.
(a) Majority of Registrable Securities. As used in this Agreement, the
term "majority of the Registrable Securities" means 51% or more of the
Registrable Securities being registered unless the context indicates that it is
51% or more of the Registrable Securities then issued and outstanding.
Section 2. Demand Registration.
(a) Request for Registration. Subject to the provisions of Section 3(b),
at any time and from time to time any one or more holders of Registrable
Securities may demand that the Company register all or part of its Registrable
Securities under the Securities Act such number of times and with such
restrictions as set forth opposite such holders name in Schedule I hereto (a
"Demand Registration"), provided, that for any Demand Registration the
aggregate number of shares to be registered per Demand Registration shall (i)
represent not less than 3% of the then issued and outstanding shares of Common
Stock of the Company or (ii) have a market value of at least $5 million as
measured by the average of the closing bid and asked price of the Common Stock
on the date immediately preceding the date of the demand. Within ten (10) days
after receipt of a demand, the Company will notify in writing all holders of
Registrable Securities of the demand. Any holder who wants to include his or
its Registrable Securities in the Demand Registration must notify the Company
within ten (10) business days of receiving the notice of the Demand
Registration. Except as provided in this Section 3, the Company will include
in all Demand Registrations all Registrable Securities for which the Company
receives the timely written demands for inclusion and may include such newly
issued shares as the Company may desire. All demands made pursuant to this
Section 3(a) must specify the number of Registrable Securities to be registered
and the intended method of disposing of the Registrable Securities.
(b) Form of Registration. The Demand Registration will be on Form S-3
whenever the Company is permitted to use such form, unless the holders of a
majority of the Registrable Securities or the underwriter reasonably request
registration on an expanded form. The Company will use commercially reasonable
efforts to qualify for registration on Form S-3.
(c) Registration Expenses. The Company will pay all Registration Expenses
for any Demand Registrations.
(d) Selection of Underwriters. The holders requesting the Demand
Registration shall select the investment banker(s) and manager(s) that will
administer the offering; provided, that the Company shall have given its prior
written consent to such selection (which consent shall not be unreasonably
delayed, conditioned or withheld). The Company and the holders of Registrable
Securities whose shares are being registered shall enter into a
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customary underwriting agreement with such investment banker(s) and manager(s).
(d) Priority on Demand Restrictions. If the managing underwriter gives
the Company and the holders of the Registrable Securities being registered a
written opinion that the number of Registrable Securities requested to be
included in the Demand Registration exceeds the number of securities that can
be sold, the Company will include in the registration only the number of
Registrable Securities that the underwriters believe can be sold. The number
of securities registered shall be allocated, first to the Company, to the
extent it wishes to register newly issued shares, then to the holders
requesting the Demand Registration, and then pro rata among the other holders
of Registrable Securities, on the basis of the total number of Company
securities requested to be included in the registration. In addition, if the
managing underwriter shall advise the Company, in writing or otherwise, that an
underwriters' over-allotment option, not in excess of 15% of the total offering
to be so effected, is necessary or desirable for the marketing of such
offering, all Company securities which are to be included in such offering
pursuant to this Section 3(e) shall be allocated first to the primary portion
of such offering and then to the underwriters' over-allotment portion on the
basis of the priority described in the preceding sentence.
(e) Delay in Filing. Notwithstanding the foregoing, the Company may delay
in filing a registration statement in connection with a Demand Registration and
may withhold efforts to cause the registration statement to become effective,
if the Company determines in good faith that such registration might (1)
interfere with or affect the negotiation or completion of any transaction or
other material event that is being contemplated by the Company (whether or not
a final decision has been made to undertake such transaction) at the time the
right to delay is exercised, or (2) involve initial or continuing disclosure
obligations that might not be in the best interest of the Company's
stockholders. The Company may exercise such right to delay or withhold efforts
not more than twice in any twelve (12) month period and for not more than
ninety (90) days at a time. If, after a registration statement becomes
effective, the Company advises the holders of registered shares that the
Company considers it appropriate for the registration statement to be amended,
the holders of such shares shall suspend any further sales of their registered
shares until the Company advises them that the registration statement has been
amended. The 180-day time period referred to in Section 6(a)(3) during which
the registration statement must be kept current after its effective date shall
be extended for an additional number of business days equal to the number of
business days during which the right to sell shares was suspended pursuant to
the preceding sentence.
(f) Effective Demand Registration. A registration shall not constitute a
Demand Registration until it has become effective and remains continuously
effective for the lesser of (i) the period during which all Registrable
Securities registered in the Demand Registration are sold and (ii) 180 days;
provided, however, that a registration shall not constitute a Demand
Registration if (w) after such Demand Registration has become effective, such
registration or the related offer, sale or distribution of Registrable
Securities thereunder is interfered with by any stop order, injunction or other
order or requirement of the SEC or other governmental agency or court for any
reason not attributable to the holders requesting the Demand Registration or
the holders of Registrable Securities requesting to be included in such
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registration and such interference is not thereafter eliminated within five (5)
business days, or (x) the conditions specified in the underwriting agreement,
if any, entered into in connection with such Demand Registration are not
satisfied or waived, other than by reason of a failure on the part of the
holders requesting the Demand Registration or the holders of Registrable
Securities requesting to be included in such registration, or (y) the number of
Registrable Securities sold by the holders in such Demand Registration is less
than fifty percent (50%) of the number of Registrable Securities requested to
be included in such Demand Registration or (z) the number of Registrable
Securities registered by the Company in such Demand Registration is less than
seventy-five percent (75%) of the number of Registrable Securities requested to
be included in such Demand Registration.
(g) Requirement to Register. Notwithstanding anything else contained in
this Agreement to the contrary, to the extent a holder of Registrable
Securities has been delayed, restricted or otherwise prevented from registering
any or all such Registrable Securities as such holder may desire for a period
of eighteen (18) months from either (i) the date of this Agreement or (ii) if a
Demand Registration right has been exercised by such holder, from the effective
date of such registration statement filed pursuant to such Demand Registration
due to, among other things, any provisions contained in this Agreement or
Schedule I hereto, then (a) such holder shall be permitted to exercise any of
its Demand Registration or Piggyback Registration rights hereunder (subject to
the provisions hereof), (b) the Company shall be obligated to promptly upon
exercise of such rights, in accordance with the terms hereof, register all of
such Registrable Securities immediately without regard to any delaying,
prioritizing or restrictive provisions and (c) from the effective date of the
registration statement filed pursuant to such holder's Demand Registration or
Piggyback Registration until six (6) months following completion of the sale of
such Registrable Securities, the Company shall not register or make any public
sale or distribution of its equity securities (except pursuant to registrations
on Form S-8 or S-4 or any successor form).
Section 3 Piggyback Registrations.
(a) Right to Piggyback. Whenever the Company proposes to register
(including on behalf of a selling stockholder) any of its securities under the
Securities Act (except for the registration of securities to be offered
pursuant to an employee benefit plan on Form S-8, pursuant to a registration
made on Form S-4 or any successor forms then in effect) at any time other than
pursuant to a Demand Registration and the registration form to be used may be
used for the registration of the Registrable Securities (a "Piggyback
Registration"), it will so notify in writing all holders of Registrable
Securities no later than the earlier to occur of (i) the tenth (10th) day
following the Company's receipt of notice of exercise of other demand
registration rights, or (ii) forty-five (45) days prior to the anticipated
filing date. Subject to the provisions of Section 4(c), the Company will
include in the Piggyback Registration all Registrable Securities, on a pro rata
basis based upon the total number of Registrable Securities with respect to
which the Company has received written requests for inclusion within fifteen
(15) business days after the applicable holder's receipt of the Company's
notice. Such Registrable Securities may be made subject to an underwriters'
over-allotment option, if so requested by the managing underwriter. The
holders of Registrable Securities may withdraw all or any part of the
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Registrable Securities from a Piggyback Registration at any time before ten
(10) business days prior to the effective date of the Piggyback Registration.
The Company, the holders of Registrable Securities and any Person who hereafter
become entitled to register its securities in a registration initiated by the
Company must sell their securities on the same terms and conditions. A
registration of Registrable Securities pursuant to this Section 4 shall not be
counted as a Demand Registration under Section 3.
(b) Piggyback Expenses. The Company shall pay to the holders of the
Registrable Securities included in a Piggyback Registration all Registration
Expenses of those holders (except to the extent prohibited by applicable state
securities laws).
(c) Priority on Piggyback Registrations. If the managing underwriter
gives the Company its written opinion that the total number or dollar amount of
securities requested to be included in the registration exceeds the number or
dollar amount of securities that can be sold, the Company will include the
securities in the registration in the following order of priority: (i) first,
all securities the Company or the holder for whom the Company is effecting the
registration, as the case may be, proposes to sell; (ii) second, up to the full
number or dollar amount of Registrable Securities requested to be included in
the registration (allocated pro rata among the holders of Registrable
Securities, on the basis of the dollar amount or number of Registrable
Securities requested to be included, as the case may be); and (iii) third, any
other securities (provided they are of the same class as the securities sold by
the Company) requested to be included, allocated among the holders of such
securities in such proportions as the Company and those holders may agree. In
the event that the managing underwriter advises the Company that an
underwriters' over-allotment option is necessary or advisable, the preceding
priority shall apply to the determination of which securities are to be
included in the primary portion of such registration.
(d) Selection of Underwriters. If any Piggyback Registration is an
underwritten offering, the Company will select the investment banker(s) and
manager(s) that will administer the offering. The Company and the holders of
Registrable Securities whose shares are being registered shall enter into a
customary underwriting agreement with such investment banker(s) and manager(s).
Section 4. Holdback Agreements.
(a) Restrictions on Public Sale by Securities Holders. Each Stockholder
agrees not to make any public sale or distribution of equity securities of the
Company (except as part of the underwritten registration effected pursuant to a
Demand Registration or a Piggyback Registration or pursuant to registration on
Form S-8 or any successor form), including a sale pursuant to Rule 144, during
such customary period prior to and following the effective date of any
underwritten Demand Registration or any underwritten Piggyback Registration as
any managing underwriter(s) of such underwriting may reasonably request.
(b) Restrictions on Public Sale by the Company and Others. The Company
agrees not to make any public sale or distribution of its equity securities, or
any securities convertible into or exchangeable or exercisable for its equity
securities, including a sale under
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Regulation D under the Securities Act or under any other exemption of the
Securities Act (except as part of the underwritten registration effected
pursuant to a Demand Registration or a Piggyback Registration or pursuant to
registrations on Forms S-8 or S-4 or any successor form), during such customary
period prior to and following the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration as any managing
underwriter(s) of such underwriting may reasonably request. The Company also
agrees to use reasonable efforts to cause each holder of at least 5% (on a
fully-diluted basis) of its equity securities (other than Registrable
Securities) or any securities convertible into or exchangeable or exercisable
for its equity securities (other than Registrable Securities), purchased from
the Company at any time on or after the date of this Agreement (other than in a
registered public offering), to agree not to make any public sale or
distribution of those securities, including a sale pursuant to Rule 144 (except
as part of the underwritten registration, if permitted), during the seven (7)
days prior to and the 180 days after the effective date of the registration
unless the managing underwriter(s) agrees otherwise.
Section 5. Registration Procedures.
(a) Obligations of the Company. Whenever the holders of Registrable
Securities request the registration of any Registrable Securities pursuant to
this Agreement, the Company shall use its best efforts to register and to
permit the sale of the Registrable Securities in accordance with the intended
method of disposition. To carry out this obligation, the Company shall as
expeditiously as practicable:
(1) prepare and file with the SEC a registration statement on the
appropriate form and use commercially reasonable efforts to cause the
registration statement to become effective. At least ten (10) days before
filing a registration statement or prospectus or at least three (3)
business days before filing any amendments or supplements thereto, the
Company will furnish to the counsel of the holders of a majority of the
Registrable Securities being registered copies of all documents proposed
to be filed for that counsel's review and approval, which approval shall
not be unreasonably withheld or delayed;
(2) immediately notify each seller of Registrable Securities of any
stop order threatened or issued by the SEC and take all actions reasonably
required to prevent the entry of a stop order or if entered to have it
rescinded or otherwise removed;
(3) prepare and file with the SEC such amendments and supplements to
the registration statement and the corresponding prospectus necessary to
keep the registration statement effective for 180 days or such shorter
period as may be required to sell all Registrable Securities covered by
the registration statement; and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered
by the registration statement during each period in accordance with the
sellers' intended methods of disposition as set forth in the registration
statement;
(4) furnish to each seller of Registrable Securities a sufficient
number of copies of the registration statement, each amendment and
supplement thereto
6
<PAGE> 7
(in each case including all exhibits), the corresponding prospectus
(including each preliminary prospectus), and such other documents as a
seller may reasonably request to facilitate the disposition of the
seller's Registrable Securities;
(5) use its best efforts to register or qualify the Registrable
Securities under securities or blue sky laws of jurisdictions in the
United States of America as any seller requests and do any and all other
reasonable acts and things that may be necessary or advisable to enable
the seller to consummate the disposition of the seller's Registrable
Securities in such jurisdiction; provided, however, that the Company shall
not be obligated to qualify as a foreign corporation to do business under
the laws of any jurisdiction in which it is not then qualified or to file
any general consent to service of process;
(6) notify each seller of Registrable Securities, at any time when a
prospectus is required to be delivered under the Securities Act, of any
event as a result of which the prospectus or any document incorporated
therein by reference contains an untrue statement of a material fact or
omits to state any material fact necessary to make the statements therein
not misleading in light of the circumstances under which such statements
were made, and prepare a supplement or amendment to the prospectus or any
such document incorporated therein so that thereafter the prospectus will
not contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading in
light of the circumstances under which such statements were made;
(7) cause all registered Registrable Securities to be listed on each
securities exchange, if any, on which similar securities issued by the
Company are then listed;
(8) provide an institutional transfer agent and registrar and a CUSIP
number for all Registrable Securities on or before the effective date of
the registration statement;
(9) enter into such customary agreements (including an underwriting
agreement in customary form) and take all other actions in connection with
those agreements as the holders of the Registrable Securities being
registered or the underwriters, if any, reasonably request to expedite or
facilitate the disposition of the Registrable Securities;
(10) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to
the registration statement, and any attorney, accountant, or other agent
of any seller or underwriter, all financial and other records, pertinent
corporate documents, and properties of the Company, and cause the
Company's officers, directors and employees to supply all information
requested by any seller, underwriter, attorney, accountant, or other agent
in connection with the registration statement; provided that an
appropriate and customary confidentiality agreement is executed by any
such seller, underwriter, attorney, accountant or other agent;
7
<PAGE> 8
(11) in connection with any underwritten offering, obtain a "comfort"
letter from the Company's independent public accountants in customary form
and covering those matters customarily covered by "comfort" letters as the
holders of Registrable Securities being registered or the managing
underwriter reasonably requests (and, if the Company is able after using
commercially reasonable efforts, the letter shall be addressed to holders
of the Registrable Securities, the Company and the underwriters);
(12) in connection with any underwritten offering, furnish, at the
request of any holder of Registrable Securities being registered or
underwriter(s) of the offering, an opinion of counsel representing the
Company for the purposes of the registration, in the form and substance
customarily given to underwriters in an underwritten public offering and
reasonably satisfactory to counsel representing the holders of Registrable
Securities being registered and the underwriter(s) of the offering,
addressed to the underwriters and to the holders of the Registrable
Securities being registered;
(13) use its best efforts to comply with all applicable rules and
regulations of the SEC, and make available to its security holders, as
soon as reasonably practicable, an earnings statement complying with the
provisions of Section 11(a) of the Securities Act and covering the period
of at least twelve (12) months, but not more than eighteen (18) months,
beginning with the first month after the effective date of the
Registration Statement;
(14) cooperate with each seller of Registrable Securities and each
underwriter participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings
required to be made with the NASD; and
(15) take all other steps reasonably necessary to effect the
registration of the Registrable Securities contemplated hereby.
(b) Seller Information. In the event of any registration by the Company,
from time to time, the Company may require each seller of Registrable
Securities subject to the registration to furnish to the Company information
regarding such seller and the distribution of the securities subject to the
registration, and such seller shall furnish all such information requested by
the Company.
(c) Notice to Discontinue. Each holder of Registrable Securities agrees
by acquisition of such securities that, upon receipt of any notice from the
Company of any event of the kind described in Section 6(a)(6), the holder will
discontinue disposition of Registrable Securities until the holder receives
copies of the supplemented or amended prospectus contemplated by Section
6(a)(6). In addition, if the Company requests, the holder will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies
then in the holder's possession, of the prospectus covering the Registrable
Securities current at the time of receipt of the notice. If the Company gives
any such notice, the time period mentioned in Section 6(a)(3) shall be extended
by the number of days elapsing between the date of notice and the date that
each seller receives the copies of the supplemented or amended prospectus
8
<PAGE> 9
contemplated in Section 6(a)(6).
(d) Notice by Holders. Whenever the holders of Registrable Securities
have requested that any Registrable Securities be registered pursuant to this
Agreement, those holders shall notify the Company, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event, which as to any holder of Registrable
Securities is (i) to his or its respective knowledge, (ii) solely within his or
its respective knowledge and (iii) solely as to matters concerning that holder
of the Registrable Securities, as a result of which the prospectus included in
the registration statement contains an untrue statement of a material fact or
omits to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Section 6. Registration Expenses.
(a) Generally. All Registration Expenses incident to the Company's
performance of or compliance with this Agreement shall be paid as provided in
this Agreement. The term "Registration Expenses" includes without limitation
all registration filing fees, reasonable professional fees and other reasonable
expenses of the Company's compliance with federal, state and other securities
laws (including fees and disbursements of counsel for the underwriters in
connection with state or other securities law qualifications and
registrations), printing expenses, messenger, telephone and delivery expenses;
reasonable fees and disbursements of counsel for the Company; reasonable fees
and disbursement of all independent certified public accountants (including the
expenses of any audit or "comfort" letters required by or incident to
performance of the obligations contemplated by this Agreement); fees and
expenses of the underwriters (excluding discounts and commissions); fees and
expenses of any special experts retained by the Company at the request of the
managing underwriters in connection with the registration; and applicable stock
exchange and NASD registration and filing fees. The term "Registration
Expenses" does not include the Company's internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit and the fees and
expenses incurred in connection with the listing of the securities to be
registered on each securities exchange on which similar securities issued by
the Company are then listed, all of which shall be paid by the Company, nor
does it include underwriting fees or commissions or transfer taxes, all of
which shall be paid by the sellers of Registrable Securities.
(b) Other Expenses. To the extent the Company is not required to pay
Registration Expenses, each holder of securities included in any registration
will pay those Registration Expenses allocable to the holder's securities so
included, and any Registration Expenses not allocable will be borne by all
sellers in proportion to the number of securities each registers.
Section 7. Indemnification.
(a) Indemnification by Company. In the event of any registration of
Registrable Securities under the Securities Act pursuant to this Agreement, to
the full extent permitted by law, the Company agrees to indemnify each holder
of Registrable Securities, its
9
<PAGE> 10
officers, directors, trustees, partners, employees, advisors and agents, and
each Person who controls the holder (within the meaning of the Securities Act
and the Exchange Act) against all losses, claims, damages, liabilities and
expenses caused by any untrue or allegedly untrue statement of material fact
contained in any registration statement under which such Registrable Securities
were registered under the Securities Act, any prospectus or preliminary
prospectus contained therein or any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which such
statements were made, except to the extent the untrue or allegedly untrue
statement or omission or alleged omission resulted from information that the
holder furnished in writing to the Company expressly for use therein. In
connection with a firm or best efforts underwritten offering, to the extent
customarily required by the managing underwriter, the Company will indemnify
the underwriters, their officers and directors and each Person who controls the
underwriters (within the meaning of the Securities Act and the Exchange Act),
to the extent customary in such agreements.
(b) Indemnification by Holders of Securities. In connection with any
registration statement, each participating holder of Registrable Securities
will furnish to the Company in writing such information and affidavits as the
Company reasonably requests for use in connection with any registration
statement or prospectus and each holder agrees to indemnify, to the extent
permitted by law, the Company, its directors, officers, trustees, partners,
employees, advisors and agents, and each Person who controls the Company
(within the meaning of the Securities Act and the Exchange Act) against any
losses, claims, damages, liabilities and expenses resulting from any untrue or
allegedly untrue statement of a material fact or any omission or alleged
omission to state a material fact required to be stated in the registration
statement or prospectus or any amendment thereof or supplement thereto
necessary to make the statements therein not misleading in light of the
circumstances under which such statements were made, but only to the extent
that the untrue or allegedly untrue statement or omission or alleged omission
is contained in or omitted from any information or affidavit the holder
furnished in writing to the Company expressly for use therein and only in an
amount not exceeding the net proceeds received by the holder with respect to
securities sold pursuant to such registration statement. In connection with a
firm or best efforts underwritten offering, to the extent customarily required
by the managing underwriter, each participating holder of Registrable
Securities will indemnify the underwriters, their officers and directors and
each Person who controls the underwriters (within the meaning of the Securities
Act and the Exchange Act), to the extent customary in such agreements.
(c) Indemnification Proceedings. Any Person entitled to indemnification
under this Agreement will (i) give prompt notice to the indemnifying party of
any claim with respect to which it seeks indemnification and (ii) unless in the
indemnified party's reasonable judgment a conflict of interest may exist
between the indemnified and indemnifying parties with respect to the claim,
permit the indemnifying party to assume the defense of the claim with counsel
reasonably satisfactory to the indemnified party. If the indemnifying party
does not assume the defense, the indemnifying party will not be liable for any
settlement made without its consent (but that consent may not be unreasonably
withheld). No indemnifying party will consent to entry of any judgment or will
enter into any settlement that does not include as an
10
<PAGE> 11
unconditional term thereof the claimant's or plaintiff's release of the
indemnified party from all liability concerning the claim or litigation. An
indemnifying party who is not entitled to or elects not to assume the defense
of a claim will not be under an obligation to pay the fees and expenses of more
than one counsel for all parties indemnified by the indemnifying party with
respect to the claim, unless in the reasonable judgment of any indemnified
party a conflict of interest may exist between the indemnified party and any
other indemnified party with respect to the claim, in which event the
indemnifying party shall be obligated to pay the fees and expenses of no more
than one additional counsel for the indemnified parties.
(d) Contribution. If the indemnification provided for in Section 8(a) or
(b) is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or expenses referred to therein, then each indemnifying
party thereunder shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the Company and the participating holders of Registrable Securities in
connection with the statements or omissions that resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of the Company and the
participating holders of Registrable Securities shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or by the
participating holders of Registrable Securities and the parties' relative
intent and knowledge.
The parties hereto agree that it would not be just and equitable if
contribution pursuant this Section 8(d) were determined by pro rata allocation
or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding anything herein to the contrary, no participating holder of
Registrable Securities shall be required to contribute any amount in excess of
the amount by which the net proceeds of the offering (before deducting
expenses, if any) received by such participating holder exceeds the amount of
any damages that such participating holder has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
Section 7. Rule 144. The Company covenants that it will file the reports
required to be filed by it under the Securities Act and the Exchange Act and
the rules and regulations adopted by the SEC thereunder, and it will take such
further action as any holder of Registrable Securities reasonably may request,
all to the extent required from time to time, to enable such holder to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (i) Rule 144 under the Securities Act,
or (ii) any similar rule or regulation hereafter adopted by the SEC. Upon the
request of any holder of Registrable Securities, the Company will deliver to
such holder a written statement as to whether it has complied with Rule 144's
or any successor rule's requirements. The Company also covenants that in such
event it will provide all such information and it will take such further action
as any holder of Registrable Securities reasonably may request to enable such
holder to sell Registrable
11
<PAGE> 12
Securities without registration under the Securities Act within the limitation
of Rule 144 under the Securities Act or any successor rule requirements.
Section 7. Participation in Underwritten Registration. No Person may
participate in any underwritten registration without (a) agreeing to sell
securities on the basis provided in underwriting arrangements approved by the
Persons entitled hereunder to approve such arrangements (the holders of the
Registrable Securities in a Demand Registration pursuant to Section 3(d) and
the Company in a Piggyback Registration pursuant to Section 4(d)), and (b)
completing and executing all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required by the underwriting
arrangements.
Section 8. Miscellaneous.
(a) Recapitalizations, Exchanges, etc. The provisions of this Agreement
shall apply to the full extent set forth herein with respect to (i) the shares
of Common Stock held by the Stockholders, (ii) any and all shares of voting
common stock of the Company into which the shares of such Common Stock are
converted, exchanged or substituted in any recapitalization or other capital
reorganization by the Company and (iii) any and all equity securities of the
Company or any successor or assign of the Company (whether by merger,
consolidation, sale of assets or otherwise) which may be issued in respect of,
in conversion of, in exchange for or in substitution of, such shares of Common
Stock and shall be appropriately adjusted for any stock dividends, splits,
reverse splits, combinations, recapitalizations and the like occurring after
the date hereof. The Company shall use its best efforts to cause any successor
or assign (whether by sale, merger or otherwise) to enter into a new
registration rights agreement with the holders of Registrable Securities on
terms substantially the same as this Agreement as a condition of any such
transaction.
(b) Amendment. This Agreement may be amended or modified only by a
written agreement executed by the Company and the Stockholders.
(c) Attorneys' Fees. In any legal action or proceeding brought to enforce
any provision of this Agreement, the prevailing party shall be entitled to
recover all reasonable expenses, charges, court costs and attorneys' fees in
addition to any other available remedy at law or in equity.
(d) Benefit of Parties; Assignment. All of the terms and provisions of
this Agreement shall be binding on and inure to the benefit of the parties and
their respective successors and assigns, including without limitation all
subsequent holders of securities entitled to the benefits of this Agreement who
agree in writing to become bound by the terms of this Agreement. Without
limiting the generality of the foregoing, this Agreement and the rights and
obligations of a holder of Registrable Securities hereunder may be assigned, in
whole or in part, upon notice to the Company, to a Person who owns, or
simultaneously with the assignment of the rights under this Agreement to such
Person, will own, shares of capital stock of the Company.
(e) Captions. The captions of the sections and subsections of this
Agreement
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<PAGE> 13
are solely for convenient reference and shall not be deemed to affect the
meaning or interpretation of any provision of this Agreement.
(f) Cooperation. The parties agree that after execution of this Agreement
they will from time to time, upon the request of any other party and without
further consideration, execute, acknowledge and deliver in proper form any
further instruments and take such other action as any other party may
reasonably require to carry out effectively the intent of this Agreement.
(g) Counterparts; Facsimile Execution. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
agreement. Facsimile execution and delivery of this Agreement shall be legal,
valid and binding execution and delivery for all purposes.
(h) Entire Agreement. This Agreement contains the entire understanding of
the parties with respect to the subject matter of this Agreement and supersedes
all prior agreements and understandings between the parties with respect
thereto. There are no promises, covenants or undertakings other than those
expressly set forth or provided for in this Agreement.
(i) Governing Law. The internal law of the State of New York will govern
the interpretation, construction, and enforcement of this Agreement and all
transactions and agreements contemplated hereby, notwithstanding any state's
choice of law rules to the contrary.
(j) No Inconsistent Agreements. The Company represents and warrants that
it has not granted to any Person the right to request or require the Company to
register any securities issued by the Company other than the rights contained
herein. Except with the prior written consent of the holders of Registrable
Securities, the Company will not enter into any agreement with respect to its
securities that shall grant to any Person registration rights that in any way
conflict with or are prior in right to the rights provided under this
Agreement.
(k) Notices. All notices, requests, demands, or other communications that
are required or may be given pursuant to the terms of this Agreement shall be
in writing and delivery shall be deemed sufficient in all respects and to have
been duly given on the date of service if delivered personally to the party to
whom notice is to be given, or upon receipt if mailed by first class mail,
return receipt requested, postage prepaid, and properly addressed to the
addresses of the parties set forth in the Purchase Agreement or to such other
address(es) as the respective parties hereto shall from time to time designate
to the other(s) in writing.
(l) Specific Performance. Each of the parties agrees that damages for a
breach of or default under this Agreement would be inadequate and that in
addition to all other remedies available at law or in equity that the parties
and their successors and assigns shall be entitled to specific performance or
injunctive relief, or both, in the event of a breach or a threatened breach of
this Agreement.
(m) Validity of Provisions. Should any part of this Agreement for any
reason be declared by any court of competent jurisdiction to be invalid, that
decision shall not affect the
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<PAGE> 14
validity of the remaining portion, which shall continue in full force and
effect as if this Agreement had been executed with the invalid portion
eliminated, it being the intent of the parties that they would have executed
the remaining portion of the Agreement without including any part or portion
that may for any reason be declared invalid.
14
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
FUTURELINK CORP.
By: [signed: R. Kilambi]
Name: R. Kilambi
Title: C.F.O.
PEQUOT PRIVATE EQUITY FUND II, L.P.
By: Pequot Capital Management, Inc., as
investment manager
By: [signed: David J. Malat]
Name: David J. Malat
Title: Chief Financial Officer
PEQUOT INTERNATIONAL FUND, INC.
By: Pequot Capital Management, Inc., as
investment advisor
By: [signed: David J. Malat]
Name: David J. Malat
Title: Chief Financial Officer
PEQUOT PARTNERS FUND, L.P.
By: Pequot Capital Management, Inc., as
investment manager
By: [signed: David J. Malat]
Name: David J. Malat
Title: Chief Financial Officer
15
<PAGE> 16
DIMENSIONAL PARTNERS LTD.
By: JDS Capital Management, Inc.,
its investment subadvisor
By: [signed: Joseph Samberg]
Name: Joseph Samberg
Title: President
DIMENSIONAL PARTNERS L.P.
By: JDS Capital Management, Inc.,
its investment manager
By: [signed: Joseph Samberg]
Name: Joseph Samberg
Title: President
[signed: Glen C. Holmes]
________________________________________
GLEN C. HOLMES
GERARD KLAUER MATTISON & CO., INC.
By: [signed: David B. Stetson]
Name: David B. Stetson
Title: Managing Director
16
<PAGE> 17
SCHEDULE I
<TABLE>
<CAPTION>
Name and Address Number of Demand Other
of Stockholder Registrations Restrictions
<S> <C> <C>
1. Pequot Private Equity Fund II Two Demand No Demand
Pequot International Fund, Inc. Registrations on Registrations may
Pequot Partners Fund, L.P. Form S-1 in the be requested prior
Dimensional Partners Ltd. aggregate for all to April 15, 2000
Dimensional Partners L.P. Investors;
(collectively, the "Investors") Unlimited number of
Demand
Registrations on
Form S-3
2. Glen Holmes None
3. Gerard Klauer Mattison & Co.,
Inc. None
</TABLE>
17
<PAGE> 1
EXHIBIT 4.2
FUTURELINK CORP.
FORM OF WARRANT
The attached Form of Warrant is the form of security evidencing warrants issued
to Pequot Private Equity Fund II, L.P. and other investors who acquired common
stock and warrants to acquire common stock of FutureLink Corp. on October 15,
1999, and also is the Form of Warrant for agent's warrants issued to Gerard
Klauer Mattison & Co., Inc., as placement agent.
Should the entire $50,000,000 of the private placement be funded (upon
completion of certain conditions), the following parties shall receive the
following warrants to acquire common stock of FutureLink Corp. at an exercise
price of $8.50 per share:
WARRANT HOLDER NO. OF WARRANTS
-------------- ---------------
Pequot Private Equity Fund II, L.P. 941,648
Pequot Partners Fund, L.P. 358,351
Pequot International Fund, Inc. 358,351
Dimensional Partners, Ltd. 571,501
Dimensional Partners, L.P. 142,876
Gerard Klauer Mattison & Co., Inc. 909,091
<PAGE> 2
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO, AND ARE
TRANSFERABLE ONLY UPON COMPLIANCE WITH, THE PROVISIONS OF A SECURITIES PURCHASE
AGREEMENT DATED AS OF OCTOBER 15, 1999 AMONG FUTURELINK CORP. AND CERTAIN OF ITS
STOCKHOLDERS AND THE RESTRICTIONS ON TRANSFER CONTAINED HEREIN. A COPY OF THE
ABOVE REFERENCED AGREEMENT IS ON FILE AT THE OFFICES OF FUTURELINK CORP.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY APPLICABLE STATE
SECURITIES LAWS, AND MAY NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID
ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT
TO PURCHASE ________ SHARES OF COMMON STOCK OF
FUTURELINK CORP.
No. ______ Dated October 15, 1999
THIS CERTIFIES THAT, for value received, _____________ or (subject to
the restrictions on transfer contained herein and the provisions of the
Securities Purchase Agreement (as hereinafter defined)) its registered assigns
(the "Holder") is entitled to purchase from Futurelink Corp., a Delaware
corporation (the "Company"), at any time or from time to time after 9:00 a.m.,
New York City time, on the date hereof and prior to 5:00 p.m., New York City
time, on October 15, 2004 (the "Expiration Date"), at the place where the
Warrant Agency (as hereinafter defined) is located, at the Exercise Price (as
hereinafter defined), the number of shares of common stock, $.0001 par value
(the "Common Stock"), of the Company specified above, all subject to adjustment
and upon the terms and conditions as hereinafter provided.
Capitalized terms used and not otherwise defined in this Warrant shall
have the meanings set forth in Article IV hereof.
2
<PAGE> 3
ARTICLE I
EXERCISE OF WARRANTS
1.1. Method of Exercise. To exercise this Warrant in whole or in part,
the Holder shall deliver to the Company at the Warrant Agency, (a) this Warrant,
(b) a written notice, substantially in the form of the subscription notice
attached hereto as Annex 1, of such Holder's election to exercise this Warrant,
which notice shall specify the number of shares of Common Stock to be purchased,
the denominations of the share certificate or certificates desired and the name
or names of the Eligible Holder(s) in which such certificates are to be
registered, and (c) payment of the Exercise Price with respect to such shares of
Common Stock. Such payment may be made, at the option of the Holder, by cash,
money order, certified or bank cashier's check or wire transfer; provided,
however, that the Holder shall have the right (the "Right of Cashless
Exercise"), at its election, in lieu of delivering the Exercise Price in cash,
to instruct the Company in the form of subscription notice to retain, in payment
of the Exercise Price, a number of shares of Common Stock (the "Payment Shares")
equal to the quotient of the aggregate Exercise Price of the shares as to which
this Warrant is then being exercised divided by the Average Closing Price as of
the date of exercise and to deduct the Payment Shares from the shares to be
delivered to the Holder.
The Company shall, as promptly as practicable and in any event within
five (5) Business Days thereafter, execute and deliver or cause to be executed
and delivered, in accordance with such subscription notice, a certificate or
certificates representing the aggregate number of shares of Common Stock
specified in said notice (less the number of Payment Shares, if applicable). The
share certificate or certificates so delivered shall be in such denominations as
may be specified in such notice (or, if such notice shall not specify
denominations, one certificate shall be issued) and shall be issued in the name
of the Holder or such other name or names of Eligible Holder(s) as shall be
designated in such notice. Such certificate or certificates shall be deemed to
have been issued, and such Holder or any other person so designated to be named
therein shall be deemed for all purposes to have become holders of record of
such shares, as of the date the aforementioned notice is received by the
Company. If this Warrant shall have been exercised only in part, the Company
shall, at the time of delivery of the certificate or certificates, deliver to
the Holder a new Warrant evidencing the right to purchase the remaining shares
of Common Stock called for by this Warrant, which new Warrant shall in all other
respects be identical with this Warrant. The Company shall pay all expenses
payable in connection with the preparation, issuance and delivery of share
certificates and new Warrants as contemplated by Section 2.6 below (other than
transfer or similar taxes in connection with the transfer of securities), except
that, if share certificates or new Warrants shall be registered in a name or
names other than the name of the Holder, funds sufficient to pay all transfer
taxes payable as a result of such transfer shall be paid by the Holder at the
time of delivering the aforementioned notice or promptly upon receipt of a
written request of the Company for payment.
If this Warrant shall be surrendered for exercise within any period
during which the transfer books for shares of the Common Stock of the Company or
other securities
3
<PAGE> 4
purchasable upon the exercise of this Warrant are closed for any purpose, the
Company shall not be required to make delivery of certificates for the
securities purchasable upon such exercise until the date of the reopening of
said transfer books.
1.2. Shares To Be Fully Paid and Nonassessable. All shares of Common
Stock issued upon the exercise of this Warrant shall be validly issued, fully
paid and nonassessable.
1.3. No Fractional Shares To Be Issued. The Company shall not be
required to issue fractions of shares of Common Stock upon exercise of this
Warrant. If any fraction of a share would, but for this Section, be issuable
upon any exercise of this Warrant, in lieu of such fractional share the Company
shall pay to the Holder, in cash, an amount equal to the same fraction of the
Average Closing Price per share of outstanding shares of Common Stock on the
Business Day immediately prior to the date of such exercise.
1.4. Securities Laws; Share Legend. The Holder, by acceptance of this
Warrant, agrees that this Warrant and all shares of Common Stock issuable upon
exercise of this Warrant will be disposed of only in accordance with the
Securities Act of 1933, as amended (the "Securities Act") and the rules and
regulations of the Securities and Exchange Commission (the "Commission")
promulgated thereunder, as well as any restrictions contained in the Securities
Purchase Agreement. In addition to any other legend which the Company may deem
advisable under the Securities Act and applicable state securities laws, all
certificates representing shares of Common Stock (as well as any other
securities issued hereunder in respect of any such shares) issued upon exercise
of this Warrant shall be endorsed as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO,
AND ARE TRANSFERABLE ONLY UPON COMPLIANCE WITH, THE PROVISIONS OF A
SECURITIES PURCHASE AGREEMENT DATED AS OF OCTOBER 15, 1999, AMONG
FUTURELINK CORP. AND CERTAIN OF ITS STOCKHOLDERS. A COPY OF THE ABOVE
REFERENCED AGREEMENT IS ON FILE AT THE OFFICES OF FUTURELINK CORP.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR OFFERED FOR
SALE OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED.
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Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the
Securities Act) shall also bear such legend unless, in the opinion of counsel
(in form and substance reasonably satisfactory to the Company) selected by the
Holder of such certificate and reasonably acceptable to the Company, the
securities represented thereby need no longer be subject to restrictions on
resale under the Securities Act.
ARTICLE II
WARRANT AGENCY; TRANSFER, EXCHANGE AND
REPLACEMENT OF WARRANT
2.1. Warrant Agency. Until such time, if any, as an independent agency
shall be appointed by the Company to perform services described herein with
respect to this Warrant (the "Warrant Agency"), the Company shall perform the
obligations of the Warrant Agency provided herein at its principal office
address or such other address as the Company shall specify by prior written
notice to the Holder.
2.2. Ownership of Warrant. The Company may deem and treat the person in
whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by any person
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for registration of transfer
as provided in this Article II.
2.3. Transfer of Warrant. This Warrant may only be transferred to a
purchaser subject to and in accordance with this Section 2.3, and any attempted
transfer which is not in accordance with this Section 2.3 shall be null and void
and the transferee shall not be entitled to exercise any of the rights of the
holder of this Warrant. The Company agrees to maintain at the Warrant Agency
books for the registration of such transfers of Warrants, and transfer of this
Warrant and all rights hereunder shall be registered, in whole or in part, on
such books, upon surrender of this Warrant at the Warrant Agency in accordance
with this Section 2.3, together with a written assignment of this Warrant,
substantially in the form of the assignment attached hereto as Annex 2, duly
executed by the Holder or its duly authorized agent or attorney-in-fact, with
signatures guaranteed by a bank or trust company or a broker or dealer
registered with the NASD, and funds sufficient to pay any transfer taxes payable
upon such transfer. Upon surrender of this Warrant in accordance with this
Section 2.3, the Company (subject to being satisfied that such transfer is in
compliance with Section 1.4) shall execute and deliver a new Warrant or Warrants
of like tenor and representing in the aggregate the right to purchase the same
number of shares of Common Stock in the name of the assignee or assignees and in
the denominations specified in the instrument of assignment, and this Warrant
shall promptly be canceled. Notwithstanding the foregoing, a Warrant may be
exercised by a new holder without having a new Warrant issued. The Company shall
not be required to pay any Federal or state transfer tax or charge that may be
payable in respect of any transfer of this
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Warrant or the issuance or delivery of certificates for Common Stock in a name
other than that of the registered holder of this Warrant.
2.4. Division or Combination of Warrants. This Warrant may be divided
or combined with other Warrants, in connection with the partial exercise of this
Warrant, upon surrender hereof and of any Warrant or Warrants with which this
Warrant is to be combined at the Warrant Agency, together with a written notice
specifying the names and denominations in which the new Warrant or Warrants are
to be issued, signed by the holders hereof and thereof or their respective duly
authorized agents or attorneys-in-fact. Subject to compliance with Section 2.3
as to any transfer which may be involved in the division or combination, the
Company shall execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with such notice.
2.5. Loss, Theft, Destruction of Warrant Certificates. Upon receipt by
the Company of evidence reasonably satisfactory to the Company of the loss,
theft, destruction or mutilation of this Warrant and, in the case of any such
loss, theft or destruction, upon receipt of indemnity or security (in customary
form) reasonably satisfactory to the Company, or, in the case of any such
mutilation, upon surrender and cancellation of such Warrant and upon
reimbursement of the Company's reasonable incidental expenses, the Company will
make and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant,
a new Warrant of like tenor and representing the right to purchase the same
aggregate number of shares of Common Stock.
2.6. Expenses of Delivery of Warrants. Except as otherwise expressly
provided herein, the Company shall pay all expenses (other than transfer taxes
as described in Section 2.3) and other charges payable in connection with the
preparation, issuance and delivery of Warrants hereunder and shares of Common
Stock upon the exercise hereof.
ARTICLE III
ANTIDILUTION PROVISIONS
3.1. Adjustments Generally. The Exercise Price and the number of shares
of Common Stock (or other securities or property) issuable upon exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events, as provided in this Article III.
3.2. Common Share Reorganization. If the Company shall subdivide its
outstanding shares of Common Stock into a greater number of shares or
consolidate its outstanding shares of Common Stock into a smaller number of
shares (any such event being called a "Common Share Reorganization"), then (a)
the Exercise Price shall be adjusted, effective immediately after the record
date at which the holders of shares of Common Stock are determined for purposes
of such Common Share Reorganization, to a price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction,
the
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numerator of which shall be the number of shares of Common Stock outstanding on
such record date before giving effect to such Common Share Reorganization and
the denominator of which shall be the number of shares of Common Stock
outstanding after giving effect to such Common Share Reorganization, and (b) the
number of shares of Common Stock subject to purchase upon exercise of this
Warrant shall be adjusted, effective at such time, to a number determined by
multiplying the number of shares of Common Stock subject to purchase immediately
before such Common Share Reorganization by a fraction, the numerator of which
shall be the number of shares outstanding after giving effect to such Common
Share Reorganization and the denominator of which shall be the number of shares
of Common Stock outstanding immediately before such Common Share Reorganization.
3.3. Common Share Distribution. (a) If, other than in an Exempt
Distribution, the Company shall issue or otherwise sell any shares of its Common
Stock (any such issuance or sale other than an Exempt Distribution, including
any event described in paragraphs (b) and (c) of this Section 3.3, hereafter
being called a "Common Share Distribution"), the Exercise Price shall be reduced
to the price (calculated to the nearest cent) determined by multiplying the
Exercise Price in effect immediately prior to such Common Share Distribution by
a fraction, the numerator of which shall be the sum of (A) the number of shares
of Common Stock outstanding immediately prior to such Common Share Distribution
multiplied by the Appraised Fair Market Value on the date of such Common Share
Distribution plus (B) the consideration received by the Company upon such Common
Share Distribution, and the denominator of which shall be the product of (1) the
total number of shares of Common Stock outstanding immediately after such Common
Share Distribution, multiplied by (2) the Appraised Fair Market Value on the
date of such Common Share Distribution.
No adjustment of the Exercise Price shall be made in an amount less
than 1% of such Exercise Price, but any such lesser adjustment shall be carried
forward and shall be made at the time of, and together with, the next subsequent
adjustment which together with any adjustments so carried forward shall
aggregate an amount equal to or greater than 1% of such Exercise Price.
If any Common Share Distribution shall require an adjustment to the
Exercise Price pursuant to the foregoing provisions of this Section 3.3, then
effective at the time such adjustment is made, the number of shares of Common
Stock subject to purchase upon exercise of this Warrant shall be increased to a
number determined by multiplying the number of shares of Common Stock subject to
purchase immediately before such Common Share Distribution by a fraction, the
numerator of which shall be the number of shares outstanding immediately after
giving effect to such Common Share Distribution and the denominator shall be the
sum of the number of shares outstanding immediately before giving effect to such
Common Share Distribution plus the number of shares of Common Stock which the
aggregate consideration received by the Company with respect to such Common
Share Distribution would purchase at the Appraised Fair Market Value on the date
of such Common Share Distribution (before giving effect to such Common Share
Distribution). The provisions of this Section 3.3 shall not operate to increase
the Exercise Price or reduce the number of shares of Common Stock subject to
purchase upon exercise of this Warrant.
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(b) If, other than in an Exempt Distribution, the Company shall issue,
sell, distribute or otherwise grant in any manner (whether directly or by
assumption in a merger or otherwise) any rights to subscribe for or to purchase,
or any warrants or options for the purchase of, Common Stock or any stock or
securities convertible into or exchangeable for Common Stock (such rights,
warrants or options being herein called "Options" and such convertible or
exchangeable stock or securities being herein called "Convertible Securities"),
whether or not such Options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the price per share for
which shares of Common Stock are issuable upon exercise of such Options or upon
conversion or exchange of such Convertible Securities (determined by dividing
(i) the aggregate amount, if any, received or receivable by the Company as
consideration for the granting of such Options, plus the minimum aggregate
amount of additional consideration payable to the Company upon the exercise of
all such Options, plus, in the case of Options to acquire Convertible
Securities, the minimum aggregate amount of additional consideration, if any,
payable upon the issue or sale of such Convertible Securities and upon the
conversion or exchange thereof, by (ii) the total maximum number of shares of
Common Stock issuable upon the exercise of such Options or upon the conversion
or exchange of all such Convertible Securities issuable upon the exercise of
such Options) shall be less than the Appraised Fair Market Value on the date of
granting such Options (before giving effect to such grant), then, for purposes
of paragraph (a) above, the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or exchange of all
such Convertible Securities issuable upon the exercise of such Options shall be
deemed to have been issued as of the date of granting of such Options and
thereafter shall be deemed to be outstanding and the Company shall be deemed to
have received as consideration such price per share, determined as provided
above, therefor, provided, however upon the expiration or termination of
Convertible Securities or Options, if any thereof shall not have been converted,
exchanged or exercised, the number of shares of Common Stock deemed to be issued
and outstanding pursuant to this subsection (b) shall be reduced by such number
of shares as to which Convertible Securities or Options shall have expired or
terminated unexercised, and such shares shall no longer be deemed to be issued
and outstanding, and the Exercise Price then in effect shall be readjusted and
thereafter be the price which it would have been had adjustment been made on the
basis of the issuance only of shares actually issued pursuant to such
Convertible Securities or Options. Except as otherwise provided in paragraph (d)
below, no additional adjustment of the Exercise Price shall be made upon the
actual exercise of such Options or upon conversion or exchange of such
Convertible Securities.
(c) If, other than in an Exempt Distribution, the Company shall issue,
sell or otherwise distribute (whether directly or by assumption in a merger or
otherwise) any Convertible Securities, whether or not the rights to exchange or
convert thereunder are immediately exercisable, and the price per share for
which shares of Common Stock are issuable upon such conversion or exchange
(determined by dividing (i) the aggregate amount received or receivable by the
Company as consideration for the issue, sale or distribution of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion or exchange thereof, by (ii) the
total
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maximum number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities) shall be less than the Appraised
Fair Market Value on the date of such issue, sale or distribution (before giving
effect to such issue, sale or distribution), then, for purposes of paragraph (a)
above, the total maximum number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securities shall be deemed to
have been issued as of the date of the issue, sale or distribution of such
Convertible Securities and thereafter shall be deemed to be outstanding and the
Company shall be deemed to have received as consideration such price per share,
determined as provided above, therefor, provided, however upon the expiration or
termination of Convertible Securities or Options, if any thereof shall not have
been converted, exchanged or exercised, the number of shares of Common Stock
deemed to be issued and outstanding pursuant to this subsection (c) shall be
reduced by such number of shares as to which Convertible Securities or Options
shall have expired or terminated unexercised, and such shares shall no longer be
deemed to be issued and outstanding, and the Exercise Price then in effect shall
be readjusted and thereafter be the price which it would have been had
adjustment been made on the basis of the issuance only of shares actually issued
pursuant to such Convertible Securities or Options. Except as otherwise provided
in paragraph (d) below, no additional adjustment of the Exercise Price shall be
made upon the actual conversion or exchange of such Convertible Securities, and,
if any such issue, sale or distribution of such Convertible Securities is made
upon exercise of any Options to purchase any such Convertible Securities for
which adjustments to the Exercise Price have been or are to be made pursuant to
other provisions of this Section 3.3, no further adjustment of the Exercise
Price shall be made by reason of such issue, sale or distribution.
(d) If the purchase price provided for in any Option referred to in
paragraph (b) above, the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in paragraph
(b) or (c) above, or the rate at which any Convertible Securities referred to in
paragraph (b) or (c) above are convertible into or exchangeable for Common Stock
shall change at any time (other than under or by reason of provisions designed
to protect against dilution upon an event which results in a related adjustment
pursuant to this Article III), the Exercise Price then in effect shall forthwith
be readjusted (effective only with respect to any exercise of this Warrant after
such readjustment) to the Exercise Price which would then be in effect had the
adjustment made upon the issue, sale, distribution or grant of such Options or
Convertible Securities been made based upon such changed purchase price,
additional consideration or conversion rate, as the case may be; provided,
however, that such readjustment shall give effect to such change only with
respect to such Options and Convertible Securities as then remain outstanding.
(e) If any shares of Common Stock, Options or Convertible Securities
shall be issued, sold or distributed for cash, the consideration received
therefor shall be deemed to be the amount received by the Company therefor,
after deduction therefrom of any expenses incurred and any underwriting
commission or concessions paid or allowed by the Company in connection
therewith. If any shares of Common Stock, Options or Convertible Securities
shall be issued, sold or distributed for a consideration other than cash, the
amount of the consideration other than cash received by the Company shall be
deemed to be the Fair Market Value of such consideration, after deduction of any
expenses incurred and any underwriting
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commissions or concessions paid or allowed by the Company in connection
therewith. If any shares of Common Stock, Options or Convertible Securities
shall be issued in connection with any merger in which the Company is the
surviving corporation, the amount of consideration therefor shall be deemed to
be the Fair Market Value of such portion of the assets and business of the
nonsurviving corporation as shall be attributable to such shares of Common
Stock, Option or Convertible Securities, as the case may be. If any Options
shall be issued in connection with the issue and sale of other securities of the
Company, together comprising one integral transaction in which no specific
consideration is allocated to such Options by the parties thereto, such Options
shall be deemed to have been issued for an amount of consideration equal to the
Fair Market Value thereof.
3.4. Capital Reorganization. If there shall be any consolidation or
merger to which the Company is a party, other than a consolidation or a merger
in which the Company is a continuing corporation and which does not result in
any reclassification of, or change (other than a Common Share Reorganization or
a change in par value) in, outstanding shares of Common Stock, or any sale or
conveyance of the property of the Company as an entirety or substantially as an
entirety (any such event being called a "Capital Reorganization"), then,
effective upon the effective date of such Capital Reorganization, the Holder
shall have the right to purchase, upon exercise of this Warrant, the kind and
amount of shares of stock and other securities and property (including cash)
which the Holder would have owned or have been entitled to receive after such
Capital Reorganization if this Warrant had been exercised immediately prior to
such Capital Reorganization. As a condition to effecting any Capital
Reorganization, the Company or the successor or surviving corporation, as the
case may be, shall execute and deliver to the Holder and to the Warrant Agency
an agreement as to the Holder's rights in accordance with this Section 3.4,
providing for subsequent adjustments as nearly equivalent as may be practicable
to the adjustments provided for in this Article III. The provisions of this
Section 3.4 shall similarly apply to successive Capital Reorganizations.
3.5. Adjustment Rules. (a) Any adjustments pursuant to this Article III
shall be made successively whenever an event referred to herein shall occur.
(b) No adjustment shall be made pursuant to this Article III in respect
of the issuance from time to time of shares of Common Stock upon the exercise of
this Warrant.
(c) If the Company shall set a record date to determine the holders of
shares of Common Stock for purposes of a Common Stock Reorganization or Capital
Reorganization and shall legally abandon such action prior to effecting such
action, then no adjustment shall be made pursuant to this Article III in respect
of such action.
3.6. Proceeding Prior to Any Action Requiring Adjustment. As a
condition precedent to the taking of any action which would require an
adjustment pursuant to this Article III, the Company shall take any action which
may be necessary, including obtaining regulatory approvals or exemptions, in
order that the Company may thereafter validly and legally issue as fully paid
and nonassessable all shares of Common Stock which the Holder is entitled to
receive upon exercise hereof.
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3.7. Notice of Dividends, Distributions and Adjustments. The Company
shall give notice to the Holder at least 15 days prior to any record date in
respect of the payment of dividends or other distributions on the Common Stock,
or in respect of any Common Share Reorganization or Capital Reorganization
describing, in each case, such event in reasonable detail and specifying such
record date. In addition, no later than 15 days after the effective date or
record date, as the case may be, of any Common Share Reorganization, Common
Share Distribution or Capital Reorganization or any other action that requires
an adjustment pursuant to this Article III or any grant, issuance or sale
covered by Section 3.9, the Company shall give notice to the Holder of such
event, describing such event in reasonable detail and specifying the record date
or effective date, as the case may be, and, if determinable, the required
adjustment and the computation thereof. If the required adjustment is not
determinable at the time of such notice, the Company shall give notice to the
Holder of such adjustment and computation promptly after such adjustment becomes
determinable.
3.8. Dividends Not Paid Out of Earnings or Earned Surplus. In the event
the Company shall declare a dividend upon the Common Stock (other than a
dividend payable in Common Stock) payable otherwise than out of earnings or
earned surplus, determined in accordance with generally accepted accounting
principles, including the making of appropriate deductions for minority
interests, if any, in subsidiaries (herein referred to as "Liquidating
Dividends"), then, as soon as possible after the exercise of this Warrant, the
Company shall pay to the person exercising such Warrant an amount equal to the
aggregate value at the time of such exercise of all Liquidating Dividends
(including but not limited to the Common Stock which would have been issued at
the time of such earlier exercise and all other securities which would have been
issued with respect to such Common Stock by reason of stock splits, stock
dividends, mergers or reorganizations, or for any other reason). For the
purposes of this Paragraph 3.8, a dividend other than in cash shall be
considered payable out of earnings or earned surplus only to the extent that
such earnings or earned surplus are charged an amount equal to the fair value of
such dividend as determined in good faith by the Board of Directors of the
Company.
3.9 Grant, Issue or Sale of Options, Convertible Securities, or Rights.
If at any time or from time to time the Company shall grant, issue or sell any
Options, Convertible Securities or rights to purchase property (the "Purchase
Rights") pro rata to the record holders of any class of Common Stock of the
Company and such grants, issuances or sales do not result in an adjustment of
the Purchase Price under Section 3.3 hereof, then the holder of this Warrant
shall be entitled to acquire (within thirty (30) days after the later to occur
of the initial exercise date of such Purchase Rights or receipt by such holder
of the notice concerning Purchase Rights as to which such holder may be entitled
under Paragraph 3.7) and upon the terms applicable to such Purchase Rights
either:
(i) the aggregate Purchase Rights which such holder could have
acquired if it had held the number of shares of Common Stock acquirable
upon exercise of this Warrant immediately before the grant, issuance or
sale of such Purchase Rights;
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provided that if any Purchase Rights were distributed to holders of
Common Stock without the payment of additional consideration by such
holders, the corresponding Purchase Rights shall be distributed to the
exercising holder of this Warrant as soon as possible after such
exercise and it shall not be necessary for the exercising holder of
this Warrant specifically to request delivery of such rights; or
(ii) in the event that any such Purchase Rights shall have
expired or shall expire prior to the end of said thirty (30) day
period, the number of shares of Common Stock or the amount of property
which such holder could have acquired upon such exercise at the time or
times at which the Company granted, issued or sold such expired
Purchase Rights.
3.10 Adjustment by Board of Directors. If any event occurs as to which,
in the opinion of the Board of Directors of the Company, the provisions of this
Article III are not strictly applicable or if strictly applicable would not
fairly protect the rights of the holder of this Warrant in accordance with the
essential intent and principles of such provisions, then the Board of Directors
shall make an adjustment in the application of such provisions, in accordance
with such essential intent and principles, so as to protect such rights as
aforesaid, but in no event shall any adjustment have the effect of increasing
the Exercise Price or decreasing the number of shares of Common Stock into which
the Warrant is exercisable as otherwise determined pursuant to any of the
provisions of this Article III except in the case of a combination of shares of
a type contemplated in Paragraph 3.2 and then in no event to an amount larger
than the Exercise Price as adjusted pursuant to Paragraph 3.2.
ARTICLE IV
DEFINITIONS
The following terms, as used in this Warrant, have the following
respective meanings:
"Appraised Fair Market Value" means, as of any date, in respect of
shares of Common Stock, the Average Closing Price, if clauses (i), (ii) or (iii)
of the definition of Average Closing Price applies or, if clause (iv) of such
definition obtains, the Fair Market Value per share of Common Stock, as
determined by a qualified independent appraiser of national standing having not
less than five (5) years' experience in the valuation of securities, the
selection of which is mutually agreed by the Holder and the Company. In all
cases where Appraised Fair Market Value is determined by an independent
appraiser, as aforesaid, one half of such appraiser's fees and expenses shall be
paid by each of the Holder and the Company. For the purposes of this definition,
the agreement of the Holders of a majority in interest of the Warrants issued
pursuant to the Securities Purchase Agreement shall be deemed to be approval of
all Holders of Warrants issued pursuant to the Securities Purchase Agreement.
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"Average Closing Price" means, as of any date, (i) if shares of Common
Stock are listed on a national securities exchange, the average of the closing
sale prices per share therefor on the largest securities exchange on which such
shares are traded on the last ten (10) trading days before such date, (ii) if
such shares are listed on The Nasdaq National Market but not on any national
securities exchange, the average of the average of the closing bid and asked
prices per share therefor on The Nasdaq National Market on the last ten (10)
trading days before such date, (iii) if such shares are not listed on either a
national securities exchange or The Nasdaq National Market, the average of the
average of the closing bid and asked prices per share therefor in the over the
counter market on the last twenty (20) trading days before such date or, (iv) if
no such sales prices are available, the Fair Market Value of the Company per
share of outstanding Common Stock as of such date.
"Business Days" means each day in which banking institutions in New
York, New York are not required or authorized by law or executive order to
close.
"Capital Reorganization" has the meaning set forth in Section 3.4.
"Common Share Distribution" has the meaning set forth in Section
3.3(a).
"Common Share Reorganization" has the meaning set forth in Section 3.2.
"Common Stock" has the meaning set forth in the first paragraph of this
Warrant.
"Company" has the meaning set forth in the first paragraph of this
Warrant.
"Convertible Securities" has the meaning set forth in Section 3.3(b).
"Eligible Holder" means the Holder and any permitted transferee of the
Holder pursuant to and in accordance with this Warrant and the Securities
Purchase Agreement.
"Exempt Distribution" means an issuance or other sale by the Company
of any shares of its Common Stock:
(i) pursuant to a Common Share Reorganization;
(ii) (a) to the Company's officers or directors or (b) to the
Company's officers, directors or employees pursuant to employee stock
option, benefit or incentive plans established for their benefit,
whether in existence on the date hereof or approved by the Board of
Directors of the Company after the date hereof, provided that the
number of shares of Common Stock issued from and after October 15, 1999
pursuant to all issuances and sales pursuant to this subparagraph (ii)
does not exceed, in the aggregate, ten percent (10%) of the Fully
Diluted Capital of the Company as of October 15, 1999;
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(iii) at a price per share of more than the greater of (a) the
Exercise Price or (b) eighty percent (80%) of the Appraised Fair Market
Value, which in the case of an issuance in connection with a merger or
acquisition shall be measured on the date of the execution of the
definitive documentation with respect to such merger of acquisition;
(iv) upon the conversion or exercise of any options, warrants
or other convertible securities of the Company outstanding on October
15, 1999 and disclosed on the disclosure schedules to the Securities
Purchase Agreement or upon the consummation of the CNI Acquisition or
the ASYNC Acquisition (each as defined in the Securities Purchase
Agreement); or
(v) to the Holder or any Affiliate thereof other than an
issuance pursuant to Section 6.3 of the Securities Purchase Agreement.
"Exercise Price" means US$8.50 per share of Common Stock, subject to
adjustment pursuant to Article III.
"Expiration Date" has the meaning set forth in the first paragraph of
this Warrant.
"Fair Market Value" means the fair market value of the business,
property or assets in question as determined in good faith by the Board of
Directors of the Company and unless waived by a majority in interest of the
Holders of the Warrants issued pursuant to the Securities Purchase Agreement
confirmed by an independent nationally recognized financial advisor with
expertise in valuing companies of this type, or determined as otherwise
specifically provided herein.
"Fully Diluted Capital" means, on any given date:
(i) all shares, units and other participation interests,
however denominated, of any Common Stock issued and outstanding on such
date; and
(ii) all shares, units and other participation interests,
however denominated, of any Common Stock declared as a dividend or
distribution on any Common Stock, but unpaid as of such date; and
(iii) all shares, units and other participation interests,
however denominated, of any Common Stock issuable upon exercise or
conversion of or in exchange for any option, subscription right or
convertible security, or any other contractual right, however
denominated, entitling the holder thereof to acquire from the Company
any Common Stock.
Fully Diluted Capital shall include all Common Stock issuable upon exercise of
this Warrant. With respect to any Common Stock issuable as provided in paragraph
(iii) above and which is
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indeterminable as to amount by virtue of any condition or contingency thereon,
Fully Diluted Capital shall include the greatest amount of Common Stock that may
reasonably be issuable thereon.
"Holder" has the meaning set forth in the first paragraph of this
Warrant.
"NASD" means The National Association of Securities Dealers, Inc.
"Options" has the meaning set forth in Section 3.3(b).
"Payment Shares" has the meaning set forth in Section 1.1.
"Right of Cashless Exercise" has the meaning set forth in Section 1.1.
"Securities Act" means the Securities Act of 1933, as amended, and any
successor Federal statute, and the rules and regulations of the Securities and
Exchange Commission (or its successor) thereunder, all as the same shall be in
effect from time to time.
"Securities Purchase Agreement" means the Securities Purchase Agreement
dated as of October 15, 1999 by and among the Company and Pequot Private Equity
Fund II and certain other investors named therein.
"Warrant Agency" has the meaning set forth in Section 2.1.
"Warrants" means this Warrant and the other Warrants issued pursuant to
the Securities Purchase Agreement.
ARTICLE V
MISCELLANEOUS
5.1. Governing Law. This Warrant shall be governed in all respects by
the laws of the State of New York, without reference to its conflicts of law
principles.
5.2. Covenants To Bind Successor and Assigns. All covenants,
stipulations, promises and agreements contained in this Warrant by or on behalf
of the Company shall bind its successors and assigns, whether or not so
expressed.
5.3. Entire Agreement. This Warrant constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof and no party shall be liable or bound to any other party in any
manner by any warranties, representations, or covenant except as specifically
set forth herein or therein.
15
<PAGE> 16
5.4. Waivers and Amendments. No failure or delay of the Holder in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of such right or power, or any abandonment
or discontinuance of steps to enforce such a right or power, preclude any other
or further exercise thereof or the exercise of any other right or power. The
rights and remedies of the Holder are cumulative and not exclusive of any rights
or remedies which it would otherwise have. The provisions of this Warrant may be
amended, modified or waived with (and only with) the written consent of the
Company and the Holders of a majority in interest of the Warrants then
outstanding; provided, however, that no such amendment, modification or waiver
shall, without the written consent of the Holders of any Warrant, (a) change the
number of shares of Common Stock subject to purchase upon exercise of such
Warrant, the Exercise Price or provisions for payment thereof or (b) amend,
modify or waive the provisions of Section 5.4 or Article III of such Warrant.
Any such amendment, modification or waiver effected pursuant to this
Section shall be binding upon the Holders of all Warrants and upon the Company,
except as provided in the proviso to the last sentence of the preceding
paragraph. In the event of any such amendment, modification or waiver the
Company shall give prompt notice thereof to all holders of Warrants and, if
appropriate, notation thereof shall be made on all Warrants thereafter
surrendered for registration of transfer or exchange.
5.5. Notices. All notices or other communications required or permitted
hereunder shall be in writing and shall be mailed by express, registered or
certified mail, postage prepaid, return receipt requested, sent by telecopy
(with confirmation of transmission received and followed by the posting of a
"hard copy" of the notice or communication by first-class U.S. mail), or by
courier service guaranteeing overnight delivery with charges prepaid, or
otherwise delivered by hand or by messenger, and shall be conclusively deemed to
have been received by a party hereto and to be effective on the day on which
delivered or telecopied to such party at its address set forth below (or at such
other address as such party shall specify to the other parties hereto in
writing), or, if sent by registered or certified mail, on the third business day
after the day on which mailed, addressed to such party at such address.
In the case of the Holder, such notices and communications shall be
addressed to its address as shown on the books maintained by the Warrant Agency,
unless the Holder shall notify the Company and the Warrant Agency in writing
that notices and communications should be sent to a different address, in which
case such notices and communications shall be sent to the address specified by
the Holder. In the case of the Company, such notices and communications shall be
addressed as follows: Attention: Raghu Kilambi, Futurelink Corp., 6 Morgan
Street, Suite 100, Irvine, California 92618.
5.6. Survival of Agreements; Representations and Warranties, etc. All
warranties, representations and covenants made by the Company herein shall be
considered to have been relied upon by the Holder and shall survive the issuance
and delivery of the Warrant, regardless of any investigation made by the Holder,
and shall continue in full force and effect so long as this Warrant is
outstanding.
16
<PAGE> 17
5.7. Severability. In case any one or more of the provisions contained
in this Warrant shall be held to be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby. The
parties shall endeavor in good faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
5.8. Section Headings. The section headings used herein are for
convenience of reference only, do not constitute a part of this Warrant and
shall not affect the construction of or be taken into consideration in
interpreting this Warrant.
5.9. No Rights as Stockholder; No Limitations on Company Action. This
Warrant shall not entitle the Holder to any rights as a stockholder of the
Company. No provision of this Warrant and no right or option granted or
conferred hereunder shall in any way limit, affect or abridge the exercise by
the Company of any of its corporate rights or powers to recapitalize, amend its
certificate of incorporation, reorganize, consolidate or merge with or into
another corporation or to transfer all or any part of its property or assets, or
the exercise of any other of its corporate rights or powers.
17
<PAGE> 18
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized representative.
FUTURELINK CORP.
By:______________________________
Name: Philip Ladouceur
Title:
18
<PAGE> 19
Annex 1
SUBSCRIPTION NOTICE
Dated:________________
The undersigned hereby irrevocably elects to exercise the
right of purchase evidenced by the attached Warrant for, and to purchase
thereunder, __________ shares of Common Stock of Futurelink Corp. as provided
for therein. The undersigned:
[ ] tenders herewith payment of the Exercise Price (as defined in the
attached Warrant) for such shares in the form of cash, money order,
certified or bank cashier's check or wire transfer.
[ ] hereby instructs you to retain, in payment of the Exercise Price
for such shares, a number of shares of Common Stock (the "Payment
Shares") equal to the quotient of the aggregate Exercise Price for such
shares divided by the Average Closing Price (as defined in the attached
Warrant) as of the date hereof and to deduct the Payment Shares from
the shares to be delivered.
(Please check box to indicate method of payment of the Exercise Price.)
INSTRUCTIONS FOR REGISTRATION OF COMMON STOCK
Please issue a certificate or certificates for such shares of Common
Stock in the following name or names and denominations:
Name:_________________________________________________
(Please typewrite or print in block letters.)
Address:______________________________________________
Denomination:_________________________________________
REPRESENTATIONS AND WARRANTIES
In connection with the exercise of the attached Warrant, the
undersigned hereby represents and warrants that:
(i) unless registered pursuant to a registration rights agreement or
otherwise, it recognizes that the shares of Common Stock issuable pursuant to
the attached Warrant have not
<PAGE> 20
been registered under the Securities Act of 1933, as amended (the "Securities
Act") or any applicable state securities laws, and may not transferred, sold, or
offered for sale unless registered pursuant to the Securities Act and all
applicable state securities laws or unless an exemption from such registration
in available and the Company has received an opinion to that effect from counsel
reasonably satisfactory to the Company;
(ii) it recognizes that the shares of Common Stock issuable pursuant to
the attached Warrant are subject to, and are transferable only upon compliance
with, the provisions of the Securities Purchase Agreement;
(iii) if the undersigned is an individual, the undersigned is an
"accredited investor" as that term is defined in Rule 501(a)(5) or (6) of
Regulation D promulgated under the Securities Act by reason that the undersigned
is an individual (i) having an individual net worth, or a joint net worth with
the undersigned's spouse, at the time of the purchase that exceeds $1,000,000,
or (ii) who had an individual income in excess of $200,000 in each of the two
most recent years or joint income with the undersigned's spouse in excess of
$300,000 in each of those years and has a reasonable expectation of reaching the
same income level in the current year; or if the undersigned is a corporation or
other entity, the undersigned is an "accredited investor" as that term is
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D promulgated under the
Securities Act; and
(iv) it is purchasing the shares of Common Stock for investment and not
with a view to resale or distribution or any present intention to resell or
distribute, except in compliance with the Securities Act and all applicable
state securities laws.
ISSUANCE OF NEW WARRANT
If said number of shares shall not be all the shares issuable upon
exercise of the attached Warrant, a new Warrant is to be issued in the name of
the undersigned for the balance remaining of such shares less any fraction of a
share paid in cash.
Signature:___________________________________
Note: The above signature should correspond exactly with
the name on the face of the attached Warrant or with
the name of the assignee appearing in the
assignment form below.
ii
<PAGE> 21
Annex 2
ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers
unto:
Name:________________________________________________
(Please typewrite or print in block letters)
Address:_____________________________________________
the right to purchase Common Stock (as defined in the attached Warrant)
represented by the attached Warrant to the extent of _______________ shares as
to which such right is exercisable and does hereby irrevocably constitute and
appoint ________________________________________________________________
__________________________________________________, attorney-in-fact, to
transfer said Warrant on the books of Futurelink Corp., with full power of
substitution in the premises.
Dated:________________
Signature:_________________________________________________
Note: The above signature should correspond exactly with
the name on the face of the attached Warrant.
<PAGE> 1
EXHIBIT 23.1
FUTURE LINK CORP.
Consent of Independent Auditors
We consent to the incorporation by reference of our report dated April 30, 1999,
except for Note 8, as to which the date is June 24, 1999, with respect to the
financial statements of Executive LAN Management, Inc., dba Micro Visions, in
the Registration Statement (S-8, No. 333-84679) pertaining to the FutureLink
Corp. Stock Option Plan, included in FutureLink Corp.'s Current Report on Form
8-K dated October 15, 1999.
/s/ Ernst & Young LLP
Orange County, California
October 27, 1999
<PAGE> 1
EXHIBIT 99.1
FUTURELINK CORP.
FUTURELINK REINCORPORATES TO DELAWARE
IRVINE, CALIF. - OCT. 18, 1999 - FutureLink Corp. (OTC BB:FLNK), a leading
application service provider (ASP) and the number one provider of server-based
computing solutions from Citrix Systems (NASDAQ: CTXS), today announced that in
accordance with approval received at the company's recent shareholders'
meeting, FutureLink has reincorporated from Colorado to Delaware and has
changed its name from FutureLink Distribution Corp.to FutureLink Corp. These
changes have no impact on the trading of FutureLink stock, whose symbol remains
FLNK on the OTC Bulletin Board.
ABOUT FUTURELINK
FutureLink is a founder of the Application Service Provider (ASP) industry and
a founding member of the ASP Industry Consortium. According to Forrester
Research Inc., the application rental market is projected to reach $6 billion
by 2001. FutureLink provides small and mid-sized businesses (10-1,000
employees) with off-site, Internet-based computing, allowing subscribers to
escape costly hardware/software upgrade cycles, precisely control total cost of
technology ownership and focus on their core businesses.
FutureLink's expertise in application hosting on a monthly subscription basis,
outsourcing and facility management, and business practices consulting enables
the company to offer an all-inclusive, trouble-free ASP service at a
predictable price. FutureLink, The Computer Utility Company(TM), offers
computer and information service as transparently and reliably as today's
utilities deliver electricity, water and telephone services.
For more information, contact FutureLink toll-free at (877) 216-6001; e-mail:
[email protected]; or visit the FutureLink Web site at
http://www.futurelink.net.
###
Forward-looking statements and comments in this news release are made pursuant
to safe harbor provisions of the Securities Exchange Act of 1934. Such
statements relating to, among other things, the prospects for the companies to
complete the transaction and enhance operating results, are necessary subject
to risks and uncertainties, some of which are significant in scope and nature.
These risks may be further discussed in periodic reports and registration
statements to be filed by the company from time to time with the Securities and
Exchange Commission in the future.
<PAGE> 1
EXHIBIT 99.2
FUTURELINK CORP.
FUTURELINK COMPLETES ACQUISITION OF
MICRO VISIONS
ASP ADDS 1,300 TO ITS APPLICATION HOSTING SERVICES CUSTOMER BASE
IRVINE, CALIF. - OCT. 18, 1999 - FutureLink Corp. (OTC BB:FLNK), a leading
Application Service Provider (ASP) and the number one provider of server-based
computing solutions from Citrix Systems (NASDAQ: CTXS), today announced it has
completed its acquisition of Micro Visions of Irvine, Calif., North America's
largest reseller and integrator of Citrix server-based computing products. The
transaction, approved by FutureLink shareholders in September, significantly
expands the scope of FutureLink's ASP and Internet software rental services.
Terms of the agreement for Micro Visions' shareholders included the payment of
$12 million cash and 7.2 million FutureLink common shares with the possibility
of a further 1.2 million earn-out common shares being paid, depending on 1999
performance.
"With the addition of MicroVisions' unmatched pool of Citrix systems engineers,
FutureLink is well positioned to meet the escalating demand for corporate and
hosted ASP services," said Philip R. Ladouceur, executive chairman and CEO of
FutureLink. "Micro Visions' industry expertise will be a vital contribution to
FutureLink's mission to make access to software as easy as picking up the phone
and getting a dial tone."
Combined pro forma revenues for FutureLink and Micro Visions for the six months
ending June 30, 1999 reached $12.8 million. The acquisition expands
FutureLink's nationwide presence, adding offices in Atlanta, Irvine, Los
Angeles, Phoenix, Las Vegas, and Raleigh/Durham. Micro Visions adds 1,300
organizations to FutureLink's rapidly growing customer base. Micro Visions'
revenues and financial results will be included in FutureLink's consolidated
financial results commencing in the fourth quarter of 1999.
ABOUT FUTURELINK
FutureLink is a founder of the Application Service Provider (ASP) industry and
a founding member of the ASP Industry Consortium. According to Forrester
Research Inc., the application rental market is projected to reach $6 billion
by 2001. FutureLink provides small and mid-sized businesses (10-1,000
employees) with off-site, Internet-based computing, allowing subscribers to
escape costly hardware/software upgrade cycles, precisely control total cost of
technology ownership and focus on their core businesses.
<PAGE> 2
FutureLink's expertise in application hosting on a monthly subscription basis,
outsourcing and facility management, and business practices consulting enables
the company to offer an all-inclusive, trouble-free ASP service at a
predictable price. FutureLink, The Computer Utility Company(TM), offers
computer and information service as transparently and reliably as today's
utilities deliver electricity, water and telephone services.
For more information, contact FutureLink toll-free at (877) 216-6001; e-mail:
[email protected]; or visit the FutureLink Web site at
http://www.futurelink.net.
###
Forward-looking statements and comments in this news release are made pursuant
to safe harbor provisions of the Securities Exchange Act of 1934. Such
statements relating to, among other things, the prospects for the companies to
complete the transaction and enhance operating results, are necessary subject
to risks and uncertainties, some of which are significant in scope and nature.
These risks may be further discussed in periodic reports and registration
statements to be filed by the company from time to time with the Securities and
Exchange Commission in the future.
<PAGE> 1
EXHIBIT 99.3
FUTURELINK CORP.
FUTURELINK ANNOUNCES $50 MILLION INVESTMENT BY
SYNDICATE LED BY PEQUOT CAPITAL MANAGEMENT
IRVINE, CALIF. - OCT. 18, 1999 - FutureLink Corp. (OTC BB:FLNK), a leading
application service provider (ASP) and the number one provider of server-based
computing solutions from Citrix Systems (NASDAQ: CTXS), announced today that a
syndicate, led by Pequot Capital Management, has agreed to invest $50 million
in FutureLink in exchange for newly issued shares of Common Stock and Warrants.
FutureLink used part of the capital to close the Micro Visions acquisition
(see separate press release dated October 18, 1999) and will use the remainder
of the capital to close the pending acquisitions of Computer Networks, Inc. and
Async Technologies, Inc. as well as to fund future acquisitions of leading
corporate application service provider integrators, to grow its ASP customer
base through its industry leading channel program, and for other working
capital purposes.
FutureLink, The Computer Utility Company(TM), provides customers with direct
access to software applications for a monthly fee. With the completion of the
Micro Visions acquisition and the pending closing of the Computer Networks,
Inc. and Async Technologies, Inc. acquisitions, FutureLink will be the dominant
Citrix integrator in North America with three Citrix Platinum offices and ten
Gold offices nationwide. FutureLink's service allows small to mid-size
organizations to outsource computing service and support, and precisely manage
the total cost of technology ownership. For a flat fee, FutureLink customers
subscribe to the computer utility service on a per-seat basis, receiving
thin-client or PC hardware and fast Internet access to brand-name application
software and complete support services.
Gerald A. Poch, a Principal of Pequot Capital Management, and Jim McNiel, a
Vice President of Pequot Private Equity, will join the Board of Directors of
FutureLink. Mr. Poch, before joining Pequot, served as President and CEO of GE
Capital Information Technology Solutions, formerly AmeriData, Inc., and serves
as a director and Co-chairman of MessageMedia, Inc. and also serves as director
of NewRiver Investor Communications, Inc., Elastic Networks, Watchmark Corp.,
Lucent Digital Radio, and PenGroup.com. Jim McNiel was formerly Executive Vice
President of Corporate Development at Cheyenne Software, and also serves as a
director of Netegrity, Inc., Mediappraise and Asia Online.
In a separate announcement today, Philip R. Ladouceur was named FutureLink's
CEO. Mr. Ladouceur remains the firm's Executive Chairman.
"With Pequot Capital's funding, FutureLink is positioned to execute our
aggressive plan to make access to software applications as easy as picking up
the phone and getting a dial tone," said Philip R. Ladouceur, Executive
Chairman and CEO of FutureLink. "We are
<PAGE> 2
also delighted to add the extensive industry experience of Pequot Capital's
principals to our Board."
"We are very excited to be investing in and working closely with FutureLink.
During this year, FutureLink has emerged as a leader in the rapidly growing
field of application service providers, whereby software applications can be
outsourced, ensuring better quality of service at cost effective pricing. We
believe that FutureLink's national server-based computing and
application-hosting capability through its offices in North America is unique,"
stated Gerald A. Poch.
The Pequot Capital Management Funds span company lifecycle financing, from
venture capital and private equity to small-cap and large-cap investments. The
investment will be funded in three tranches, the first of which closed Friday
in the amount of $30 million; an additional $13 million will close upon
conversion of certain convertible securities, and the remaining $7 million will
close once the expiration date under Hart-Scott-Rodino has elapsed. The $50
million equity financing involves issuing 9,090,909 shares and an additional
2,372,727 warrants to purchase shares of common stock at $8.50 per share.
Gerard Klauer Mattison & Co., Inc. of New York acted as FutureLink's financial
advisor and placement agent for this financing.
ABOUT FUTURELINK
FutureLink is a founder of the Application Service Provider (ASP) industry and
a founding member of the ASP Industry Consortium. According to Forrester
Research Inc., the application rental market is projected to reach $6 billion
by 2001. FutureLink provides small and mid-sized businesses (10-1,000
employees) with off-site, Internet-based computing, allowing subscribers to
escape costly hardware/software upgrade cycles, precisely control total cost of
technology ownership and focus on their core businesses.
<PAGE> 3
FutureLink's expertise in application hosting on a monthly subscription basis,
outsourcing and facility management, and business practices consulting enables
the company to offer an all-inclusive, trouble-free ASP service at a predictable
price. FutureLink, The Computer Utility Company(TM), offers computer and
information service as transparently and reliably as today's utilities deliver
electricity, water and telephone services.
For more information, contact FutureLink toll-free at (877) 216-6001; e-mail:
[email protected]; or visit the FutureLink Web site at
http://www.futurelink.net.
ABOUT PEQUOT CAPITAL MANAGEMENT, INC.
The Pequot Private Equity Funds are the private placement/direct investment arm
of Pequot Capital Management, Inc. The Pequot Private Equity Funds invest in
public and late stage private companies in information technology,
telecommunications and healthcare. The Pequot Venture Fund invests in seed and
early stage technology companies. Pequot Capital Management, Inc. is a
research-intensive investment firm with more than US$6 billion in assets under
management. Pequot Capital, which is 100 percent employee-owned, is
headquartered in Westport, Connecticut, with offices in New York City and
California.
###
Forward-looking statements and comments in this news release are made pursuant
to safe harbor provisions of the Securities Exchange Act of 1934. Such
statements relating to, among other things, the prospects for the companies to
complete the transaction and enhance operating results, are necessary subject
to risks and uncertainties, some of which are significant in scope and nature.
These risks may be further discussed in periodic reports and registration
statements to be filed by the company from time to time with the Securities and
Exchange Commission in the future.
<PAGE> 1
EXHIBIT 99.4
FUTURELINK CORP.
REINCORPORATION IN DELAWARE
BACKGROUND TO THE REINCORPORATION
At the last meeting of Shareholders held November 30, 1998, management of
the Company requested Shareholder approval to reincorporate and continue the
Company as a Delaware corporation. Unfortunately, too few Shareholders were in
attendance, either in person or by proxy, to consider the matter. Management
still believes that continuing in Delaware would be beneficial, given that most
publicly traded U.S. corporate entities are incorporated in Delaware and
Delaware corporate law is more familiar than Colorado law. In order to continue
in Delaware, a corporation must merge or consolidate with a Delaware
corporation. As such, the Company incorporated Acquisition Co. in Delaware as a
wholly-owned subsidiary to both assist in achieving the structure of the
Acquisition and to allow for the possibility of merging with this subsidiary to
continue in Delaware, subject to Shareholder approval.
THE REINCORPORATION
The Board of Directors believes that the best interests of the Company and
its shareholders will be served by changing the state of incorporation of the
Company from Colorado to Delaware. The Company believes that its shareholders
will benefit from the well-established principles of corporate governance that
Delaware law affords.
As discussed below, the principal reasons for Reincorporation are the
greater flexibility under Delaware corporate law, the substantial body of case
law interpreting that law, and the increased ability of the Company to attract
and retain qualified directors. Although Delaware law provides the opportunity
for the Board of Directors to adopt various mechanisms which may enhance the
Board of Directors' ability to negotiate favorable terms for the Shareholders in
the event of an unsolicited takeover attempt, the Company is not aware of any
such attempt and the Reincorporation is not being proposed in order to prevent a
current unsolicited takeover attempt. The Reincorporation is also not being
undertaken in response to any present attempt known to the Board of Directors to
acquire control of the Company, obtain representation on the Board of Directors,
or take significant action that affects the Company.
Shareholders are urged to read carefully the following sections of this
Proxy Statement, including the related Schedules, before voting on the
Reincorporation. Please note that in Colorado a holder of stock is referred to
as "shareholder" and in Delaware a holder of stock is referred to as a
"stockholder." This difference is one in terminology only and does not affect
the ownership of the shares or the rights granted to stockholders or
shareholders, as the case may be.
The Reincorporation will be effected by merging the Company into
Acquisition Co. (the "Merger"). Upon completion of the Merger, Amalco will
continue in Delaware and will continue to operate the business of the Company
under the name FutureLink Corp. or such other name as the Board of Directors may
deem appropriate. As part of the transaction, certain changes in the Company's
governance structure will be affected as described below. Pursuant to the
Reincorporation Agreement between the Company and Acquisition Co., a copy of
which is attached as Schedule "A", the proposed Reincorporation will be effected
as follows:
- If the proposal for Reincorporation is adopted, upon completion of the
merger, each outstanding Common Share of the Company, par value at
$.0001 per share, will automatically be converted into one share of
Amalco common stock, par value $.0001 per share. Shareholders will
receive instructions from the Company's transfer agent regarding the
exchange of their certificates of the Company's Common Shares for
certificates representing Amalco common stock. Until such time, stock
certificates which previously represented the Company's Common Shares
will represent the number of shares of common stock of Amalco into which
such shares convert upon the Reincorporation.
1
<PAGE> 2
- The Company's Amended Stock Option Plan, if approved by the Shareholders
at the Meeting, shall become a plan of Amalcos'. Each outstanding option
to purchase a share of the Company's Common Shares under the Amended
Stock Option Plan or any other option or warrant will become a common
share of or, an option or warrant, as the case may be, to acquire the
like number of shares of Amalco common stock, par value $0.0001 per
share.
- The Company's Preferred Stock, having no par value, if any is issued and
outstanding as of the date of Reincorporation, will automatically be
converted into one share of Amalco preferred stock, par value $0.0001
per share, having the same rights, privileges and obligations granted
under the Company's Articles of Incorporation.
The Reincorporation has been unanimously approved by the Company's Board of
Directors. If approved by the Shareholders, it is anticipated that the effective
date of the Reincorporation will be as soon as reasonably practicable following
the Meeting (the "Effective Date"). However, pursuant to the Reincorporation
Agreement, the Reincorporation may be abandoned or the Reincorporation Agreement
may be amended by the Board of Directors (except that certain principal terms
may not be amended without shareholder approval) either before or after
shareholder approval has been obtained and prior to the Effective Date of the
Reincorporation if, in the opinion of the Board of Directors of either company,
circumstances arise that make it inadvisable to proceed.
Shareholders of the Company will have dissenters' rights of appraisal with
respect to the Reincorporation. See "Comparison of the Corporation Laws of
Colorado and Delaware and of the Charter Documents of FutureLink Colorado and
FutureLink Delaware-Dissenter/Appraisal Rights" and "Rights of Dissenting
Shareholders". The discussion set forth below is qualified in its entirety by
reference to the Reincorporation Agreement and the Certificate of Incorporation
of FutureLink Delaware (the "Delaware Certificate") and Bylaws of FutureLink
Delaware (the "Delaware Bylaws"), copies of which are attached hereto as
Schedule "A", and Exhibit 1 and 2 to Schedule "A", respectively.
VOTE REQUIRED FOR THE REINCORPORATION
APPROVAL OF THE REINCORPORATION WILL REQUIRE THE AFFIRMATIVE VOTE OF THE
HOLDERS OF 2/3 OF THE ISSUED AND OUTSTANDING COMMON SHARES AS OF THE RECORD
DATE. Approval of the Reincorporation will also constitute approval of (i) the
Reincorporation Agreement, (ii) the Certificate of Incorporation, (iii) the
Bylaws of FutureLink Corp., including the authorization of the Company's Board
of Directors to alter the number of directors without stockholder approval, the
authorization of a classified Board of Directors, the continued denial of
cumulative voting, and the elimination of the right of stockholders holding 10%
of the voting power of all stockholders to call a special meeting of
stockholders, and (iv) the assumption of the Company's Amended Stock Option
Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAVE UNANIMOUSLY DETERMINED THAT THE REINCORPORATION
IS IN THE BEST INTERESTS OF THE COMPANY, IS FAIR TO THE SHAREHOLDERS AND AS SUCH
HAS AUTHORIZED THE SUBMISSION OF THE REINCORPORATION RESOLUTION TO THE
SHAREHOLDERS.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT FUTURELINK
SHAREHOLDERS VOTE FOR THE EXTRAORDINARY RESOLUTION APPROVING
THE REINCORPORATION.
PRINCIPAL REASONS FOR THE REINCORPORATION
As the Company plans for the future, the Board of Directors and management
believe that it is essential to be able to draw upon well-established principles
of corporate governance in making legal and business decisions. The prominence
and predictability of Delaware corporate law provide a reliable foundation on
which the Company's governance decisions can be based, and the Company believes
that shareholders will benefit from the responsiveness of Delaware corporate law
and Delaware courts to their needs and to those of the corporation they own.
2
<PAGE> 3
Prominence, Predictability and Flexibility of Delaware Law. For many
years, Delaware has followed a policy of encouraging incorporation in that state
and, in furtherance of that policy, has been a leader in adopting, construing
and implementing comprehensive, flexible corporate laws responsive to the legal
and business needs of corporations organized under its laws. Many corporations
have chosen Delaware initially as a state of incorporation or have subsequently
changed corporate domicile to Delaware in a manner similar to that proposed by
the Company. Because of Delaware's prominence as the state of incorporation for
many major corporations, both the legislature and courts in Delaware have
demonstrated an ability and a willingness to act quickly and effectively to meet
changing business needs. Moreover, the Delaware courts have developed
considerable expertise in dealing with corporate issues and a substantial body
of case law construing Delaware law and establishing public policies with
respect to corporate legal affairs.
Well-Established Principles of Corporate Governance. There is substantial
judicial precedent in the Delaware courts as to the legal principles applicable
to actions that may be taken by a corporation and as to the conduct of the Board
of Directors that is permissible under the business judgment rule. The Company
believes that its shareholders will benefit from the well-established principles
of corporate governance that Delaware law affords.
Increased Ability to Attract and Retain Qualified Directors. Both Colorado
and Delaware law permit a corporation to include a provision in its articles or
certificate of incorporation which reduces or eliminates the monetary liability
of directors for breaches of fiduciary duty in certain circumstances. The
increasing frequency of claims and litigation directed against directors and
officers has greatly expanded the risks facing directors and officers of
corporations in exercising their respective duties. The amount of time and money
required to respond to such claims and to defend such litigation can be
substantial. It is the Company's desire to reduce these risks to its directors
and officers, and to limit situations in which monetary damages can be recovered
against directors so that the Company may continue to attract and retain
qualified directors who otherwise might be unwilling to serve because of the
risks involved. The Company believes that Delaware case law regarding a
corporation's ability to limit director liability is more developed and provides
more guidance than Colorado law.
NO CHANGE IN THE BOARD MEMBERS, BUSINESS, MANAGEMENT, STOCK OPTION PLAN OR
PHYSICAL LOCATION OF THE COMPANY
The Reincorporation will effect only a change in the legal domicile of the
Company and certain other changes of a legal nature, certain of which changes
are described in this Proxy Statement. The Reincorporation will not result in
any change in the business, management, fiscal year, assets or liabilities
(except to the extent of legal and other costs of effecting the
Reincorporation), or location of the principal facilities of the Company. The
name of FutureLink upon the Reincorporation will be FutureLink Corp. or such
other similar name as the Board of Directors may deem appropriate. The Amended
Stock Option Plan, if approved, will be continued by Amalco, and each option to
purchase the Company's Common Shares issued pursuant to such plans will
automatically be converted into an option or right to purchase the appropriate
number of shares of Amalco common stock, upon the same terms, and subject to the
same conditions as set forth in such plan. The Company's other employee benefit
arrangements will also be continued by Amalco upon the terms and subject to the
conditions currently in effect.
ANTI-TAKEOVER IMPLICATIONS
Delaware, like many other states, permits a corporation to adopt a number
of measures, either in its certificate of incorporation or bylaws or otherwise,
which are designed to reduce a corporation's vulnerability to unsolicited
takeover attempts. While the Reincorporation is not being proposed primarily to
prevent an unsolicited takeover attempt, nor is it in response to any present
attempt known to the Board of Directors to acquire control of the Company,
obtain representation on the Board of Directors or take significant action that
affects the Company, certain effects of the Reincorporation may be considered to
have anti-takeover implications. Section 203 of the General Corporation Law of
Delaware ("Section 203"), from which Amalco does not intend to opt out,
restricts certain "business combinations" with "interested stockholders" for
three years following the date that a person or entity becomes an interested
stockholder, unless the Board of
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Directors approves the business combination in advance and/or other requirements
are met. See "Comparison of the Corporation Laws of Colorado and Delaware and of
the Charter Documents of FutureLink Colorado and FutureLink Delaware -
Stockholder Approval of Certain Business Combinations." For example, the Amalco
Bylaws (see Exhibit 2 to Schedule "A") will continue to deny cumulative voting
and will eliminate the right of stockholders controlling 10% or more of the
voting shares to call a special meeting. The continued denial of cumulative
voting could be viewed as having an anti-takeover effect in that it can make it
more difficult for a minority stockholder to gain a seat on the Board. The
elimination of the right of holders controlling ten percent (10%) or more of the
voting shares to call a special meeting of stockholders, which is mandatory
under Colorado law, could be viewed as a way to limit the ability of a
significant stockholder to obtain approval by the other stockholders in a
takeover situation. For a detailed discussion of many of the differences between
the laws of Colorado and Delaware and of the changes that will be implemented as
part of the Reincorporation, see "Comparison of the Corporation Laws of Colorado
and Delaware and of the Charter Documents of FutureLink Colorado and FutureLink
Delaware."
Both Colorado and Delaware law also permit a corporation to adopt measures
such as stockholder rights plans (sometimes called poison pills). There is
substantial judicial precedent in the Delaware courts as to the legal principles
applicable to defensive measures and as to the conduct of a Board of Directors
under the business judgment rule with respect to unsolicited takeover attempts.
The Board of Directors has no present intention following the
Reincorporation to adopt a stockholder rights plan (which would not require
stockholder approval) or amend the Certificate of Incorporation or Bylaws (which
might require stockholder approval) to include provisions which might deter an
unsolicited takeover attempt. However, in the discharge of its fiduciary
obligations to its shareholders, the Board of Directors of the Company will
continue to evaluate the Company's vulnerability to potential unsolicited bids
to acquire the Company on unfavorable terms and to consider strategies to
enhance the Board's ability to negotiate with an unsolicited bidder.
POSSIBLE DISADVANTAGES
Despite the unanimous belief of the Board of Directors that the
Reincorporation is in the best interests of the Company and its shareholders,
such proposal may be disadvantageous to the extent that (i) certain antitakeover
measures available under Delaware law can be adopted by the Board of Directors
acting without Shareholder approval, and (ii) the Reincorporation could have the
effect of discouraging a future takeover attempt which is not approved by the
Board of Directors, but which a majority of the Shareholders may consider to be
in their best interests, or in which Shareholders may receive a substantial
premium for their shares over the then current market value or over their cost
basis in such shares. For example, Shareholders who might wish to participate in
a tender offer opposed by the Board of Directors may not have an opportunity to
do so. As a result, to the extent that such provisions enable the Board of
Directors to resist a takeover or a change in control of the Company, they may
strengthen the tenure and authority of the Board of Directors and enable the
Board of Directors to thwart the desires of a majority of the Shareholders.
For a comparison of shareholders' rights and the powers of management under
Delaware and Colorado law, see "Comparison of the Corporation Laws of Colorado
and Delaware and of the Charter Documents of FutureLink Colorado and FutureLink
Delaware" below.
The Reincorporation will also result in the Company incurring additional
taxes in Delaware. See "Delaware Franchise Tax".
The Board of Directors has considered these potential disadvantages and has
concluded that the potential benefits of the Reincorporation outweigh the
possible disadvantages for the Company and its shareholders.
COMPARISON OF THE CORPORATION LAWS OF COLORADO AND DELAWARE AND OF THE CHARTER
DOCUMENTS OF FUTURELINK COLORADO AND FUTURELINK DELAWARE
In general, the Company's corporate affairs are governed at present by the
corporate law of Colorado, the Company's state of incorporation, and by the
Articles of Incorporation of the Company (the "Colorado
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Articles") and the Bylaws of the Company (the "Colorado Bylaws"), which have
been adopted pursuant to Colorado law. The Colorado Articles and Colorado Bylaws
are available for inspection during business hours at the principal executive
offices of the Company. In addition, copies may be obtained by writing to the
Company at its principal office, suite 300, 250-6th Avenue S.W., Calgary,
Alberta, Canada T2P 3H7.
If the Reincorporation Resolution is adopted, the Company will merge into,
and its business will be continued by, Acquisition Co. Following the
Reincorporation, issues of corporate governance and control will be governed by
Delaware law rather than Colorado law. The Colorado Articles and Colorado Bylaws
will, in effect, be replaced by the Delaware Certificate and the Delaware
Bylaws, copies of which are attached as Exhibit 1 and 2 to Schedule "A" to this
Proxy Statement. Accordingly, the differences among these documents between
Delaware and Colorado law are relevant to your decision whether to approve the
proposal.
The corporate laws of Colorado and Delaware and the provisions of the
Colorado and Delaware charter documents differ in many respects. Although it is
not practical to summarize all of such differences in this Proxy Statement, the
principal differences which could materially affect the rights of Shareholders
are discussed below. Shareholders are requested to read the following discussion
in conjunction with the Reincorporation Agreement, the Delaware Certificate and
the Delaware Bylaws attached to this Proxy Statement.
Size of Board of Directors. Colorado law requires that the number of
persons constituting a corporation's Board of Directors, whether a specific
number or a range of size, be fixed by or in accordance with the Bylaws.
Colorado law permits either the Board of Directors or the shareholders to amend
the provision in the Bylaws that establishes the number of directors, although a
bylaw adopted by the shareholders fixing the size of the board might prohibit
further amendment by the directors. Presently, the Company's Board of Directors
consists of seven (7) members and that number could be changed by the directors.
Delaware law permits the fixing of the number of directors in the
certificate of incorporation, in which case the number of directors may be
changed only by the manner specified in the certificate of incorporation or by
amendment of the certificate of incorporation, which would require approval of
both the stockholders and the Board. The Delaware Certificate provides (i) that
the number of directors shall be designated in the Delaware Bylaws, and (ii)
that the Board of Directors acting alone is authorized to amend the Delaware
Bylaws fixing the number of directors. The Delaware Bylaws currently provide
that the number of directors shall be between three (3) and eleven (11).
Cumulative Voting for Directors. Under Colorado law, there is no
cumulative voting in the election of directors unless it is so specified in the
Articles of Incorporation. Similarly, cumulative voting is not available under
Delaware law unless provided in the corporation's certificate of incorporation,
and, like the Company's Articles of Incorporation, the Delaware Certificate does
not provide for cumulative voting.
The continued denial of cumulative voting in the Delaware Certificate will
make it more difficult for a minority stockholder or stockholders to obtain
representation on the Board of Directors without the concurrence of holders of a
majority of the shares. In addition, while the proposal is not intended as an
anti-takeover device, the denial of cumulative voting may also have certain
anti-takeover effects.
Under Delaware law, in the case of a corporation having cumulative voting,
if less than the entire Board of Directors is to be removed, no director may be
removed without cause if the votes cast against such director's removal would be
sufficient to elect such director if then cumulatively voted at an election of
the entire board. The continued denial of cumulative voting set forth in this
proposal will make it more difficult for minority stockholders to prevent the
removal of a director without cause and may make the Company more vulnerable to
takeover attempts in that respect.
Removal of Directors. Under Colorado law, shareholders may remove
directors without cause if corporation's Articles of Incorporation do not
provide otherwise and if the number of votes cast in favor of removal exceeds
the number of votes cast against removal. The Colorado Articles allow such
removal without cause because they do not provide otherwise. In addition, the
Colorado Bylaws specifically provide that the Company's directors may be removed
without cause by the shareholders. A director may be removed only if the votes
cast in favor of removal exceed the votes cast against.
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Under Delaware law, stockholders may not remove directors on a classified
Board of Directors without cause unless the corporation's Certificate of
Incorporation provides for removal without cause. The Delaware Certificate and
Bylaws do not provide that directors may be removed by the stockholders without
cause. The term "cause" with respect to the removal of directors is not defined
in the General Corporation Law of Delaware, and its meaning has not been
precisely delineated by the Delaware courts.
Filling Vacancies on the Board of Directors. Under Colorado law, any
vacancy on the board of directors, including a vacancy resulting from an
increase in the number of directors and a vacancy resulting from a removal of a
director with or without cause, may be filled by the shareholders or the board
of directors. If the number of directors remaining in office constitute fewer
than a quorum of the board, the remaining board members may fill the vacancy by
the affirmative vote of a majority of all the directors remaining in office.
Under the Colorado Bylaws, any vacancy on the board of directors, including an
increase in the number of directors and vacancies occurring in the board for any
reason other than removal of a director without cause may be filled by a vote of
a majority of the directors then in office, even if less than a quorum exists.
Vacancies occurring by reason of the removal of a directors without cause shall
be filled by a vote of the stockholders.
Under Delaware law, vacancies and newly created directorships may be filled
by a majority of the directors then in office (even though less than a quorum)
unless otherwise provided in the certificate of incorporation or bylaws (and
unless the certificate of incorporation directs that a particular class is to
elect such director, in which case any other directors elected by such class, or
a sole remaining director, shall fill such vacancy). Like the Colorado Bylaws,
the Delaware Bylaws provide that any vacancy created by the removal of a
director by the stockholders of FutureLink Delaware or by court order may be
filled only by the stockholders. Following the Reincorporation, the Board of
Directors could, although it has no current intention to do so, amend the
Delaware Bylaws to provide that directors may fill any vacancy created by
removal of directors by the stockholders.
Shareholder Power to Call Special Meeting of Shareholders. Under Colorado
law, a special meeting of shareholders may be called by the Board of Directors,
persons authorized by the Bylaws or the Board of Directors, or holders of at
least 10% of all shares entitled to be cast at such a meeting. Under Delaware
law, a special meeting of stockholders may be called by the Board of Directors
or by any other person authorized to do so in the Certificate of Incorporation
or the Bylaws. The Delaware Certificate provides that such a meeting may be
called only by the Board, the Chairman of the Board, or the President.
Eliminating the ability of stockholders holding 10% of the voting power of all
stockholders to call a special meeting may lengthen the amount of time required
to take stockholder actions because the Company and the Board of Directors are
only required to hold one meeting of stockholders per year. Such elimination of
a stockholder power to call special meetings is a limitation on stockholder
rights but may deter hostile takeover attempts because, without the ability to
call a special meeting, a holder or group of holders controlling a majority in
interest of the corporation's capital stock will not be able to amend the Bylaws
or remove directors until the annual meeting of stockholders is held.
Right to Inspect Corporate Records. The right to inspect corporate records
is more limited by Colorado law than by Delaware law.
Under Delaware law, any stockholder has the right to inspect for "any
proper purpose" the corporation's stock ledger, list of stockholders and other
books and records. A "proper purpose" means a purpose reasonably related to such
person's interest as a stockholder. If the stockholder has complied with the
notice requirement, the burden of proof is on the corporation to establish that
the inspection is for an "improper purpose."
Under Colorado law, a shareholder is entitled to inspect, upon five days
notice, the following:
(a) Articles of Incorporation;
(b) Bylaws;
(c) Minutes of shareholder's meeting for the past three years;
(d) Written communications within the past three years to shareholders;
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(e) Names and business addresses of current directors and officers;
(f) Most recent corporate report; and
(g) Annual and published financial statements for the past three years.
In addition to the above, the shareholder is entitled to inspect excerpts
from board, shareholders and committee minutes, accounting records and the
shareholder list. The right is limited to a shareholder who has been a
shareholder for at least three months preceding the demand or holds at least 5%
of all the outstanding shares of any class of shares and if the demand is made
in good faith and for a proper purpose, and the records are directly connected
with the described purpose.
Stockholder approval of Certain Business Combinations. In recent years, a
number of states have adopted special laws designed to make certain kinds of
"unfriendly" corporate takeovers, or other transactions involving a corporation
and one or more of its significant stockholders, more difficult. Under Section
203 of the General Corporation law of Delaware ("Section 203"), certain
"business combinations" of a Delaware corporation with "any interested
stockholder" are subject to a three-year moratorium unless specified conditions
are met. Colorado has no comparable statute.
Section 203 prohibits a Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for three years following the date
that such person or entity becomes an interested stockholder. With certain
exceptions, an interested stockholder is a person or entity who or which owns,
individually or with or through any rights to acquire stock pursuant to an
option, warrant, agreement, arrangement or understanding, or upon the exercise
of conversion or exchange rights, and stock with respect to which the person has
voting rights only), or is an affiliate or associate of the corporation and was
the owner, individually or with or through certain other persons or entities, of
fifteen percent (15%) or more of such voting stock at any time within the
previous three years, or is an affiliate or associate of any of the foregoing.
For purposes of Section 203, the term "business combination" is defined
broadly to include mergers with or caused by the interested stockholder, sales
or other dispositions to the interested stockholder (except proportionately with
the corporation's other stockholders) of assets of the corporation or a direct
or indirect majority-owned subsidiary equal in aggregate market value equal to
ten percent (10%) or more of the aggregate market value of either the
corporation's consolidated assets or all of its outstanding stock; the issuance
or transfer by the corporation or a direct or indirect majority-owned subsidiary
of stock of the corporation or such subsidiary to the interested stockholder
(except for certain transfers in a conversion or exchange or a pro rata
distribution or certain other transactions, none of which increase the
interested stockholder's proportionate ownership of any class or series of the
corporation's or such subsidiary's stock or of the corporation's voting stock);
any transaction involving the corporation or any direct or indirect majority
owned subsidiary of the corporation which has the effect, directly or
indirectly, of increasing the proportionate share of the stock of any class or
series, or securities convertible to such stock, of the corporation or the
majority-owned subsidiary which is owned by the interested stockholder (except
as a result of immaterial changes due to fractional share adjustments or as a
result of purchases or redemptions not caused, directly or indirectly, by the
interested stockholder); or receipt by the interested stockholder (except
proportionately as a stockholder), directly or indirectly, of any loans,
advances, guarantees, pledges or other financial benefits provided by or through
the corporation or a subsidiary.
Section 203 only applies to certain publicly held corporations that have
voting stock that is (i) listed on a national securities exchange, (ii)
authorized for quotation on the Nasdaq Stock Market (iii) held of record by more
than 2,000 stockholders or (iv) Section 203 may apply to those corporations who
elect to be governed by the said section. If the Company were to reincorporate
as of the Record Date, FutureLink Delaware would not be subject to Section 203.
The Company intends to apply for quotation on the NASDAQ small cap market and if
the application is approved, Section 203 would apply to it.
Loans to Officers, Directors and Employees. Colorado law provides that a
corporation may not authorize any loan or guaranty for the benefit of any
director until at least 10 days after providing written notice of the proposed
authorization to shareholders who would be entitled to vote if the issue of the
loan or guaranty were submitted to a vote of the shareholders.
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Under Delaware law, a corporation may make loans to, or guarantee the
obligations of, officers or other employees when in the judgment of the board of
directors, the loan or guaranty may reasonably be expected to benefit the
corporation. Both Colorado law and Delaware law permit such loans or guaranties
to be unsecured and without interest.
Dissenter/Appraisal Rights. Under both Colorado and Delaware law, a
shareholder of a corporation participating in certain major corporate
transactions may, under varying circumstances, be entitled to dissent from the
transaction and exercise rights to receive cash in the amount of the fair market
value of his or her shares in lieu of the consideration he or she otherwise
would receive in the transaction.
Shareholders of a Colorado corporation are entitled to dissenters' rights
in the event of most mergers or share exchanges and the consummation of a sale,
lease, exchange or other disposition of all, or substantially all, of the
property of the corporation other than in the usual and regular course of its
business. In connection with the Reincorporation and the Acquisition,
Shareholders of the Company are entitled to exercise dissenters' rights. Strict
compliance with the procedures for exercise of dissenters' rights is required.
Dissenting Shareholders must follow closely the procedures described in the
summary of dissenters' rights in "Rights of Dissenting Shareholders."
Under Delaware law, the rights described are referred to as "appraisal
rights." Appraisal rights are not available (i) with respect to the sale, lease
or exchange of all or substantially all of the assets of a corporation, (ii)
with respect to a merger or consolidation by a corporation the shares of which
are either listed on a national securities exchange or are held of record by
more than 2,000 holders if such stockholders receive only shares of the
surviving corporation or shares of any other corporation which are either listed
on a national securities exchange or held of record by more than 2,000 holders,
plus cash in lieu of fractional shares, or (iii) to stockholders of a
corporation surviving a merger if no vote of the stockholders of the surviving
corporation is required to approve the merger because the merger agreement does
not amend the existing certificate of incorporation, each share of the surviving
corporation outstanding prior to the merger is an identical outstanding or
treasury share after the merger, and the number of shares to be issued in the
merger does not exceed 20% of the shares of the surviving corporation
outstanding immediately prior to the merger and if certain other conditions are
met. Under Delaware law, the Court of Chancery will determine the fair value of
shares exercising appraisal rights.
Amendment of Bylaws. The Delaware Bylaws may be amended or repealed either
by the Board of Directors or by the holders of a majority of the outstanding
stock of the Company. Under Colorado law the bylaws may be amended by the
shareholders by a majority vote at a meeting at which a quorum is present,
unless otherwise provided.
Dissolution. Under Colorado law, dissolution must be authorized by the
board of directors and recommended to the shareholders for approval. For the
Company, Shareholder approval requires 2/3 of the votes entitled to be cast on
the proposed dissolution, voting by class. Under Delaware law, unless the board
of directors approves the proposal to dissolve, the dissolution must be approved
by stockholders holding 100% of the total voting power of the corporation. Only
if the dissolution is initiated by the board of directors may it be approved by
a simple majority of the corporation's stockholders. In the event of such a
board-initiated dissolution, Delaware law allows a Delaware corporation to
include in its certificate of incorporation a supermajority voting requirement
in connection with dissolutions. However, the Delaware Certificate contains no
such supermajority voting requirement, and a majority of shares voting at a
meeting at which a quorum is present would be sufficient to approve a
dissolution of Acquisition Co. which had previously been approved by its Board
of Directors.
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