<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO _____
___________
Commission File Number: 000-27693
PCSupport.com, Inc.
(Exact name of small business issuer as specified in its charter)
Nevada 98-0211769
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 280, 4400 Dominion Street V5G 4G3
Burnaby, British Columbia, Canada (Zip Code)
(Address of principal executive offices)
Issuer's Telephone Number: (604) 419-4490
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES [X] NO [_]
There were 9,969,329 shares of the Company's common stock outstanding on May 5,
2000.
Transitional Small Business Disclosure Format (check one): YES [_] NO [X]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS.................................. 1
ITEM 2 - PLAN OF OPERATION..................................... 11
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS..................................... 13
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS............. 13
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES....................... 14
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS... 14
ITEM 5 - OTHER INFORMATION..................................... 15
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K...................... 15
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Interim Consolidated Balance Sheets
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
----------- ----------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 6,016,277 $ 795,809
Accounts receivable 30,731 14,728
Prepaid expenses - 33,950
Deposits and advances 36,783 49,256
----------- ----------
Total current assets 6,083,791 893,743
Property and equipment 195,248 11,210
Intangible asset 1,643 2,697
----------- ----------
$ 6,280,682 $ 907,650
=========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 152,355 $ 68,266
Convertible promissory notes of $1,000,000, less
unamortized deemed discount of $500,000 (note 3(b)) 500,000 -
----------- ----------
Total current liabilities 652,355 68,266
Stockholders' equity (note 4):
Common stock, $0.001 par value, authorized 100,000,000 shares;
issued 6,429,729 shares at March 31, 2000 and 6,007,169
shares at June 30, 1999 6,430 6,007
fully paid share subscriptions for 2,812,600 shares at
March 31, 2000 (notes 4(c)(i) and (ii), 4(d)) and nil shares
at June 30, 1999 5,487,005 -
Additional paid-in capital 5,567,897 1,981,782
Deferred stock compensation (980,265) (198,909)
Treasury stock, 285,000 shares at March 31, 2000 and
June 30, 1999 - -
Deficit accumulated during the development stage (4,452,740) (949,496)
----------- ----------
Total stockholders' equity 5,628,327 839,384
----------- ----------
$ 6,280,682 $ 907,650
=========== ==========
Commitments and contingencies (note 5)
Subsequent events (note 4(c)(i), 5(a) and 6)
</TABLE>
See accompanying notes to interim consolidated financial statements.
1
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Interim Consolidated Statements of Operations
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Period from
December 10,
Nine months ended Three months ended 1997
March 31, March 31, (inception) to
----------------------------- ------------------------- March 31,
2000 1999 2000 1999 2000
----------- ---------- ----------- ---------- --------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Revenue $ 7,358 $ - $ 5,038 $ - $ 7,457
Cost of services 51,942 - 49,810 - 52,028
----------- ---------- ----------- ---------- -----------
Gross profit (loss) (44,584) - (44,772) - (44,571)
----------- ---------- ----------- ---------- -----------
Operating expenses:
Research and development 556,719 11,505 173,570 4,963 577,179
Marketing and promotion 624,655 24,954 261,621 18,129 1,222,676
General and administrative 879,349 124,951 253,122 59,261 1,203,864
----------- ---------- ----------- ---------- -----------
2,060,723 161,410 688,613 82,353 3,003,719
----------- ---------- ----------- ---------- -----------
Loss from operations (2,105,307) (161,410) (733,385) (82,353) (3,048,290)
Interest income (expense), net
(note 3(b)) (1,397,937) 571 (1,405,921) 544 (1,404,450)
----------- ---------- ----------- ---------- -----------
Loss for the period $(3,503,244) $ (160,839) $(2,139,306) $ (81,809) $(4,452,740)
=========== ========== =========== ========== ===========
Net loss per common share,
basic and diluted $ (0.57) $ (0.15) $ (0.33) $ (0.06) $ (1.51)
=========== ========== =========== ========== ===========
Weighted average common
shares outstanding, basic
and diluted 6,175,408 1,106,407 6,390,810 1,323,950 2,952,290
=========== ========== =========== ========== ===========
</TABLE>
See accompanying notes to interim consolidated financial statements.
2
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Interim Consolidated Statements of Stockholders' Equity
(Unaudited)
(Expressed in U.S. Dollars)
Nine months ended March 31, 2000
Period from December 10, 1997 (inception) to March 31, 2000
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Shares Additional Deferred During Total
----------------- Share Paid-in Stock Development Stockholders'
Shares Amount Subscriptions Capital Compensation Stage Equity
------ ------ ------------- ------- ------------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 10, 1997
(inception) 200 $ - $ - $ - $ - $ - $ -
Issuance of common stock for
compensation in January, valued
at $0.13 per share 489,800 490 - 65,157 - - 65,647
Sale of common stock in January,
$0.13 per share 510,000 510 - 67,642 - - 68,152
Net loss - - - - - (182,294) (182,294)
--------- ------ ---------- ---------- ----------- ----------- -----------
Balance, June 30, 1998 1,000,000 1,000 - 132,799 - (182,294) (48,495)
Fair value of common stock
purchase warrants granted to
creditor - - - 8,407 - - 8,407
Sale of common stock in January,
$0.85 per share, net of
issuance costs of $131,708 291,838 292 - 116,062 - - 116,354
Issuance of common stock for
services in January and May,
valued at approximately
$0.85 per share 52,848 53 - 45,101 - - 45,154
Conversion of note payable to
common stock 66,029 66 - 109,977 - - 110,043
Issuance of common stock for
services in January 63,440 63 - 53,861 - - 53,924
Issuance of common stock for
services in April 1,500,000 1,500 - 777,620 (392,356) - 386,764
Amortization of deferred stock
compensation - - - - 45,247 - 45,247
Issuance of common stock for
acquisition in June, net of
acquisition costs of $46,753 3,033,014 3,033 - 886,155 - - 889,188
Treasury stock repurchased by
Company in June, not cancelled (285,000) - - (148,200) 148,200 - -
Net loss - - - - - (767,202) (767,202)
--------- ------ ---------- ---------- ----------- ----------- -----------
Balance, June 30, 1999 5,722,169 6,007 - 1,981,782 (198,909) (949,496) 839,384
Exercise of warrants in July 68,400 69 - 58,197 - - 58,266
Shares issued to consultant in
settlement of accrued liability 4,160 4 - 6,504 - - 6,508
Fair value of options issued to
employees and consultants - - - 226,864 - - 226,864
Conversion of notes payable in
January 350,000 350 - 500,550 - - 500,900
Fully paid warrants to be issued
as financing compensation cost
(note 3(b)) - - - 1,794,000 (1,794,000) - -
Beneficial conversion feature of
notes payable issued in February
(note 3(b)) - - - 1,000,000 - - 1,000,000
Amortization of deferred stock
compensation - - - - 1,012,644 - 1,012,644
Fully paid unit subscription in
March, net of $20,399 in cash
financing costs (note 4(c)(i)) - - 1,215,601 - - - 1,215,601
Fully paid share subscription
in March, net of $25,000 in
cash financing costs
(note 4(c)(ii)) - - 4,083,000 - - - 4,083,000
Fully paid exercise of warrants,
shares unissued (note 4(d)) - - 188,404 - - - 188,404
Net loss - - - - - (3,503,244) (3,503,244)
--------- ------ ---------- ---------- ----------- ----------- -----------
Balance, March 31, 2000 6,144,729 $6,430 $5,487,005 $5,567,897 $ (980,265) $(4,452,740) $ 5,628,327
========= ====== ========== ========== =========== =========== ===========
</TABLE>
See accompanying notes to interim consolidated financial statements.
3
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Interim Consolidated Statements of Cash Flows
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Period from
December 10, 1997
Nine months ended (inception) to
March 31, March 31,
2000 1999 2000
--------------------------- -----------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Loss for the period $(3,503,244) $(160,839) $(4,452,740)
Items not affecting cash:
Depreciation and amortization 43,824 2,113 49,780
Stock options issued to employees and contractors 232,437 - 232,437
Common stock issued in exchange for services - 71,330 551,838
Warrants issued for services 6,088 - 6,088
Deemed discount amortization on promissory note 500,000 - 500,000
Amortization of deferred stock compensation 1,012,644 - 1,012,644
Discount on notes payable - 8,407 8,407
Loss on debt extinguishment and other (4,323) - (4,323)
Changes in operating assets and liabilities:
Accounts receivable (16,003) (7,363) (30,731)
Prepaid expenses 33,950 - -
Deposits and advances 12,473 242 (36,783)
Accounts payable and accrued liabilities 84,089 14,885 152,355
----------- --------- -----------
Net cash used in operating activities (1,598,065) (71,225) (2,011,028)
----------- --------- -----------
Cash flows from investing activities:
Purchase of property and equipment (226,808) (11,907) (243,185)
Purchase of intangible asset - - (3,486)
----------- --------- -----------
Net cash used in investing activities (226,808) (11,907) (246,671)
----------- --------- -----------
Cash flows from financing activities:
Proceeds from issuance of notes payable - 62,314 110,043
Proceeds from issuance of bridge loan - - 17,088
Repayment of bridge loan - - (17,088)
Cash acquired in acquisition - - 888,932
Proceeds from promissory notes 1,500,000 - 1,500,000
Proceeds from exercise of share purchase warrants 246,740 - 246,740
Net proceeds from sale of common stock 5,298,601 116,354 5,528,261
----------- --------- -----------
Net cash provided by financing activities 7,045,341 178,668 8,273,976
----------- --------- -----------
Net increase in cash and cash equivalents 5,220,468 95,536 6,016,277
Cash and cash equivalents at beginning of period 795,809 - -
----------- --------- -----------
Cash and cash equivalents at end of period $ 6,016,277 $ 95,536 $ 6,016,277
=========== ========= ===========
Supplemental disclosure of non-cash financing activities:
Notes payable converted into common stock and
warrants $ 500,000 $ 110,043 $ 610,043
Deferred stock compensation 1,794,000 - 1,992,909
Common stock issued to settle accrued liability 6,508 - 6,508
Income taxes paid - - -
Interest paid 2,584 - 2,584
=========== ========= ===========
</TABLE>
See accompanying notes to interim consolidated financial statements.
4
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements
(Unaudited)
(Expressed in U.S. Dollars)
Nine months ended March 31, 2000
Period from December 10, 1997 (inception) to March 31, 2000
- --------------------------------------------------------------------------------
1. Nature of development stage activities:
These interim consolidated financial statements have been prepared on a
going concern basis in accordance with United States generally accepted
accounting principles. The going concern basis of presentation assumes the
Company will continue in operation for the foreseeable future and will be
able to realize its assets and discharge its liabilities and commitments in
the normal course of business. Certain conditions, as discussed below,
currently exist which raise substantial doubt upon the validity of this
assumption. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
The Company's future operations are dependent upon the market's acceptance
of its services and the Company's ability to secure cost-effective third
party license service supply agreements. There can be no assurance that the
Company's services will be able to secure market acceptance or that cost
effective license and service supply agreements will exist or continue to
exist. As of March 31, 2000, the Company is considered to be in the
development stage as the Company has not generated significant revenues and
is continuing to develop its business. Operations have primarily been
financed through the issuance of equity instruments and debt. The Company
does not have sufficient working capital to sustain operations until March
31, 2001. Additional debt or equity financing will be required to fund
operations and may not be available on reasonable terms or on any terms at
all.
2. Basis of presentation:
(a) These interim consolidated financial statements have been prepared using
generally accepted accounting principles in the United States. The
interim financial statements include the accounts of the Company's
wholly-owned subsidiary, Reconnaissance International Ltd. and all
adjustments, consisting solely of normal recurring adjustments, which in
management's opinion are necessary for a fair presentation of the
financial results for the interim periods. The financial statements have
been prepared consistent with the accounting policies described in the
Company's Annual Report on Form 10-SB filed with the Securities and
Exchange Commission for the year ended June 30, 1999, and should be read
in conjunction therewith. Certain comparative figures have been
reclassified to conform to the presentation adopted in the current
period.
5
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements, page 2
(Unaudited)
(Expressed in U.S. Dollars)
Nine months ended March 31, 2000
Period from December 10, 1997 (inception) to March 31, 2000
- --------------------------------------------------------------------------------
2. Basis of presentation (continued):
(b) Use of estimates:
The preparation of interim consolidated financial statements in
accordance with United States generally accepted accounting principles
requires management to make estimates and assumptions that affect the
amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the consolidated financial
statements and reported revenues and expenses for the reporting
periods. Actual results may significantly differ from these estimates.
(c) Net loss per share:
Basic loss per share is computed using the weighted average number of
common stock outstanding during the periods. Diluted loss per share is
computed using the weighted average number of common and potentially
dilutive common stock outstanding during the period. As the Company has
a net loss in each of the periods presented, basic and diluted net loss
per share is the same.
Excluded from the computation of diluted loss per share for the periods
ended March 31, 2000 are warrants to purchase 2,141,838 (March 31,
1999 - 311,838) shares of common stock, options to purchase 819,750
(March 31, 1999 - nil) shares of common stock and fully paid share
subscriptions for 2,812,600 shares of common stock (March 31, 1999 -
nil), because their effects would be anti-dilutive.
Also excluded from the computation of diluted loss per share for the
periods ended March 31, 2000 are 500,000 (March 31, 1999 - nil) shares
of potential common stock resulting from the assumed conversion of
convertible notes payable because their effects would be anti-dilutive.
3. Debt financings:
(a) Revolving debt facility:
On January 11, 2000, the Company negotiated a $1,000,000 revolving debt
facility. No funds were drawn against this facility before it was
rescinded by mutual consent of the Company and the lender prior to
March 31, 2000.
6
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements, page 3
(Unaudited)
(Expressed in U.S. Dollars)
Nine months ended March 31, 2000
Period from December 10, 1997 (inception) to March 31, 2000
- --------------------------------------------------------------------------------
3. Debt financings (continued):
(b) Convertible promissory notes:
On February 29, 2000, the Company issued promissory notes ("Convertible
Promissory Notes") to private investors totaling $1,000,000,
convertible into common stock of the Company at a conversion rate of
$2.00 per common share. The notes bear interest at an annual rate of
10% and are payable monthly. The notes are convertible, together with
accrued interest, any time by the holders and are convertible by the
Company 60 days after their issuance date. The promissory notes mature
120 days after their issuance and may be secured by a General Security
Agreement covering all assets of the Company.
These notes carry a beneficial conversion feature valued at $1,225,000,
equal to the aggregate excess of the market value of the Company's
common shares at the date of agreement over the conversion rate. The
beneficial conversion feature recorded was limited to the proceeds of
the promissory note offering of $1,000,000 and is being amortized to
interest expense over the period to the earliest conversion date.
Interest expense recognized upon amortization totaled $500,000 during
the period ended March 31, 2000 and the remaining unamortized balance
of the conversion feature of $500,000 is recorded as a discount on the
convertible promissory notes.
Under the terms of the financing agreement, the Company granted
1,000,000 "A" Warrants and 500,000 "B" warrants to its agent for the
$1,000,000 Convertible Promissory Notes financing and for future
general financing services. Each "A" warrant entitles the holder to
acquire one common share at an exercise price of $1.25 per share in the
first year and $1.75 in the second year. Each "B" warrant entitles the
holder to acquire one common share at an exercise price of $2.00 per
share in the first year and $2.50 in the second year. The estimated
fair value of the warrants of $1,794,000 was recorded as deferred
finance costs and is being amortized to interest expense over the
period to the earliest conversion date.
The Company has committed to register with the United States Securities
and Exchange Commissions ("SEC") all shares issuable upon exercise of
the "A" and "B" warrants and all shares issuable upon conversion of
this debt facility (note 5(c)).
7
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements, page 4
(Unaudited)
(Expressed in U.S. Dollars)
Nine months ended March 31, 2000
Period from December 10, 1997 (inception) to March 31, 2000
- --------------------------------------------------------------------------------
4. Stockholders' equity:
(a) Stock options and stock-based compensation:
During the three months ended March 31, 2000, the Company recorded non-
cash compensation expense of approximately $51,000 (March 31, 1999 -
nil) related to the issuance of options to purchase shares of common
stock to employees and consultants. The options have exercise prices
ranging from $1.00 to $6.06 and have a vesting period ranging from
immediate up to 36 months.
(b) Conversion of notes payable into equity:
On January 11, 2000, the Company agreed to convert outstanding
promissory notes totaling $500,000 into 350,000 common shares and
warrants to purchase 240,000 common shares at a price of $1.40 per
share. The warrants expire January 2002. The loss on extinguishment of
debt was approximately $900. The Company has committed to register these
common shares and common shares issuable upon exercise of the warrants
with the SEC (note 5(c)).
(c) Subscriptions:
(i) Shares and warrants:
In March 2000, the Company completed a private placement issuing
618,000 units to investors for proceeds of $1,215,601, net of
$20,399 of cash financing costs. Each unit consists of one common
share of the Company and one warrant to purchase an additional one-
half of one common share at an exercise price of $1.00 per one-half
share. As at March 31, 2000, the 618,000 common shares were fully
paid for, but were not issued. The warrants expire March, 2001.
Subsequent to March 31, 2000, the Company sold an additional 48,000
units to investors for net proceeds of $96,000.
8
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements, page 5
(Unaudited)
(Expressed in U.S. Dollars)
Nine months ended March 31, 2000
Period from December 10, 1997 (inception) to March 31, 2000
- --------------------------------------------------------------------------------
4. Stockholders' equity (continued):
(c) Subscriptions (continued):
(ii) Shares:
Also in March 2000, the Company completed a private placement
relating to the subscription for 2,054,000 common shares of the
Company for proceeds of $4,083,000, net of $25,000 of cash
financing costs. As at March 31, 2000, the 2,054,000 common
shares were fully paid for, but were not issued. The Company
agreed to issue warrants to purchase 500,000 common shares at
$2.00 per share for consulting and advisory services in
connection with this transaction. The warrants will expire March
2002. The estimated fair value of these warrants at the date of
grant was $1,736,000 and has been recorded as a cost of the
private placement as a charge to additional paid-in capital.
The Company has committed to issue and register these common
shares and also register any common shares issuable upon the
exercise of the warrants with the SEC (note 5(c)).
(d) Warrants exercised:
In March, 2000, investors exercised warrants to purchase 140,600 shares
of the Company's common stock for proceeds of $188,404. As at March 31,
2000, these shares were not issued.
5. Commitments:
(a) Internet portal advertising agreement:
Subsequent to March 31, 2000, the Company entered into an agreement
with an Internet service company to allow the Company to advertise its
services on the Internet service company's Web site for a one year
term. Also, the Company has agreed to create a co-branded Web site to
provide its services to the Internet service company's customers for a
two year term. The Company is committed to paying $570,000 under the
agreement for the remainder of fiscal year 2000, $2,460,000 in fiscal
year 2001, and $2,250,000 in fiscal year 2002.
9
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements, page 6
(Unaudited)
(Expressed in U.S. Dollars)
Nine months ended March 31, 2000
Period from December 10, 1997 (inception) to March 31, 2000
- --------------------------------------------------------------------------------
5. Commitments (continued):
(b) Financing agreement:
The Company entered into a financing agreement with ICE Holdings North
America, LLC in March 2000. Subject to the completion of direct and
indirect financing milestones, the Company will be required to issue and
register with SEC (note 5(c)) 1,000,000 warrants as consideration for
their services. As at March 31, 2000 no warrants were earned.
(c) Registration of shares:
The Company has committed to file with the SEC a registration statement
to register all common shares or common shares issuable upon the
exercise of warrants and all other shares issuable upon conversion of
Convertible Promissory Notes issued or committed to be issued during the
three months ended March 31, 2000.
6. Subsequent events:
(a) Subsequent to March 31, 2000, the Company completed a private placement
for the subscription of 645,000 common shares at a price per share of
$2.125. The gross proceeds of $1,370,625 were received by the Company on
closing.
(b) Subsequent to March 2000, the Company entered into an operating lease
for office space. The lease has a 5 year term commencing September 1,
2000 and requires annual non-cancellable lease payments of $595,000. The
Company is in the process of negotiating the cancellation or sub-lease
of its existing premise agreement.
10
<PAGE>
ITEM 2 - PLAN OF OPERATION
All statements, other than statements of historical fact, included in this
Form 10-QSB, involve assumptions, known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
PCSupport.com, Inc. (the "Company"), to be materially different from any future
results, performance or achievements expressed or implied by such statements
contained in this Form 10-QSB. Such potential risks and uncertainties include,
without limitation, the impact of competitive products and pricing, the need to
raise additional capital, uncertain markets for the Company's products and
services, the Company's dependence on third parties and licensing/service supply
agreements, and the ability of competitors to license the same technologies the
Company uses for the PC Support Center or develop or license other functionally
equivalent technologies.
The following describes in general terms the Company's plan of operation
and development strategy for the next twelve-month period (the "Next Year").
During the Next Year, the Company's primary focus will be to expand marketing
efforts for its services, continue to enhance its PC Support Center, and to
develop and/or contract to provide the infrastructure necessary to deliver its
services to subscribers and customers.
a. Current Services
----------------
The Company currently offers three services. Its current primary service,
the PC Support Center, is a Web-based support portal for PCs which aggregates a
number of support technologies, including software and driver updates, hard disk
maintenance, a technical support forum, and others. Global Replace combines an
on-line backup service for notebook and desktop computers with three methods of
restoring data in the event of a PC failure. Phoenix allows a notebook user to
transfer a full-image of all data, applications, preferences and settings to a
new notebook.
b. Cash Flow Requirements
----------------------
Between February and April, 2000, the Company raised aggregate gross
proceeds of $6,810,625 from the sale of common stock and units consisting of
common stock and warrants, $1,000,000 from the sale of convertible notes and
$188,404 from the exercise of previously issued warrants. The Company believes
that its existing cash reserves are sufficient to sustain operations at their
current levels until at least September 30, 2000. However, the Company is
planning to hire new employees continuously to fulfill its obligations to
AltaVista, Telus and other partners and to continue the development and
implementation of additional features of the PC Support Center. The Company's
agreements with AltaVista require the Company to make large and continuing
payments. These commitments and plans will require working capital
in excess of the Company's cash reserves. The Company anticipates funding these
additional working capital requirements either through the proceeds from a
private placement of securities or through revenues generated from customers.
The investment banking firm engaged by the Company has agreed to use its best
efforts to secure for the Company an equity financing of at least $3,000,000 by
June 30, 2000, which would be more than sufficient to provide the Company with
the working capital necessary for the Company to proceed with its current
business plan through the Next Year.
The Company does not currently have any commitment from any third party to
provide additional financing, and may be unable to obtain financing on
reasonable terms or at all. Furthermore, if the Company raises additional
working capital through equity, its shareholders will experience dilution. If
the Company is unable to secure additional financing when needed and its
revenues are inadequate to provide the necessary working capital, it may be
required to slow down or suspend its growth or reduce the scope of its then
current level of business operations, any of which would have a material adverse
effect on the Company's competitive position.
c. Sales and Marketing
-------------------
The Company plans to increase marketing efforts for its services through
direct and indirect channels, including the following:
Web Portals. The Company has successfully negotiated agreements or letters
of intent with several companies to offer its PC Support Center services
through a branded support portal to their users, the largest of which are
11
<PAGE>
AltaVista (with whom the Company has an agreement), Telus (with whom the
Company has a non-binding letter of intent) and Pivotal Corp (with whom the
Company has a non-binding letter of intent). The Company is continuing to
develop additional partnership agreements with other Web portals. However,
there can be no assurance that an agreement will be reached with any other
Web portal companies or that the existing agreements (which have not yet
generated revenues for the Company) will generate significant revenues in
the future.
PC Manufacturers. The Company is negotiating with PC manufacturers to
market its services to the manufacturers' customers, and the Company plans
to expand its marketing efforts to other top PC manufacturers during the
Next Year. No definitive agreements have yet been reached with any PC
manufacturer, and there can be no assurance that any such agreements can be
reached on terms favorable to the Company or at all.
OEMS. The Company is negotiating with companies which integrate PCs with
Internet access and other related services and sell them to PC end-users
via a monthly payment schedule over a number of years, typically three, to
include its services.
Computer Service Companies. There are several international companies
which provide a comprehensive range of computer services that permit large
corporations to out-source some or all of their PC support requirements.
The Company's services complement and extend the range of such support
services. In April 1999 the Company entered into an agreement with Unisys,
an international computer service company, to private label Global Replace
under the Unisys brand name for resale to Unisys' corporate customers. The
Company intends to market its services to other international service
companies during the Next Year, although there can be no assurance that the
Company will be able to negotiate any agreements with computer service
companies.
Managed Storage. In 1998, the Company entered into a contract with Storage
Technologies Inc. ("StorageTek") in which the Company licensed StorageTek's
backup storage software, which the Company markets under the name Global
Replace. StorageTek also agreed to market the Company's hardware
replacement services in conjunction with its own backup software. In the
fiscal year ending June 30, 1999, StorageTek did not secure any orders for
the Company's services, and no orders have been secured to date during the
current fiscal year. StorageTek has recently spun off its backup storage
division into Managed Storage Inc.; as a result, Managed Storage is the
successor-in-interest to StorageTek under StorageTek's contract with the
Company. During the Next Year, the Company intends to expand its training
and co-selling activities with Managed Storage.
Direct Sales. The Company is marketing to a small number of large and
small corporations on a direct basis. Although no contracts have been
secured to date, the Company intends to expand its direct marketing efforts
to a select number of large corporations in the United States and Canada.
There can be no assurance that any contracts will be reached with any
company on a direct basis.
d. Research and Development
------------------------
The Company's primary research and development effort over the Next Year
will be to continue to add features to the PC Support Center (which the Company
launched in October 1999) and to release subsequent versions during the Next
Year. Due to the constantly evolving nature of the Internet and related
technologies, the Company will continuously monitor changes in PC support
technologies and Internet-based support offerings with the goal of adding
additional functionality in new releases of the PC Support Center. An Education
Center was added to the PCSupport Center in January, 2000, which provides self-
administered tutorials for PC users. A service called "FixMyPC" was also added
to the PC Support Center in January, 2000, which allows a technician to take
control of the user's PC with the user's permission and to perform preventive
maintenance and solve technical problems using an online chat session. The
Company also entered into a partnership with Micro Warranty Services which will
enable the Company to offer extended warranty and onsite service.
12
<PAGE>
Among the functions and services the Company expects to add to the PC
Support Center over the next six months are: email notification of driver and
other recommended updates, virus scan, telephone support, PC performance
enhancement, enhanced platform maintenance, asset-tracking, anti-theft
deterrent, theft and damage insurance, and repair co-ordination. There can be
no assurance, however, that all or any of these features will be added. The
Company expects to incur costs of between $1,000,000 and $1,200,000 over the
Next Year in order to develop and implement these additional functions of the PC
Support Center.
e. Operations
----------
The Company expects the number of subscribers to the PC Support Center and
branded portals to increase rapidly over the Next Year. To deliver the services
in support of the PC Support Center, the Company plans to rapidly expand the
number of technicians the Company employs directly and also expects to enter
into one or more outsourcing agreements with third parties to provide technical
support. In addition, the Company plans to hire employees in other departments
as well, as discussed below under "Employees." The Company anticipates that
there will be a significant lag between incurring the expenses to support the PC
Support Center and generating revenues from these expenditures because the PC
Support Center's basic services are currently offered free of charge.
To support the Global Replace program, the Company will expand its
capability to restore full image backups onto replacement notebooks. During the
Next Year, the Company plans to develop infrastructure internally to provide the
capacity to restore three to five notebooks per working day. To increase
capacity beyond this level to meet future demand, the Company will contract the
restoration process to an external computer services firm.
f. Employees
---------
During the Next Year, the Company plans to hire additional employees in
every department, including senior management employees in sales and marketing,
as well as additional technical, operations, sales and marketing, and
administrative staff as required to expand its service offerings, sales and
marketing efforts, and to maintain service levels to its then existing and new
subscribers. The number and skill sets of individual employees will be
primarily dependent on the relative rates of growth of its different services,
and the extent to which sales and marketing, operations, and development are
executed internally or contracted to outside parties. Subject to the
availability of sufficient working capital and assuming significant customer
acceptance of its products, the Company currently plans to increase staffing to
approximately 130 people during the Next Year, although there can be no
assurance that such hiring will take place or will be adequate to execute the
growth plans as described herein.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None.
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
During the quarter ended March 31, 2000, the Company made the following
sales of securities without the registration of such securities under the
Securities Act of 1933, as amended (the "Act"):
a. On January 11, 2000, the Company issued 10,000 warrants to two individuals
in connection with corporate finance services, including the introduction
of the Company to ICE Holdings North America LLC. These warrants enable the
holders to purchase 10,000 common shares at a price of $1.05 for three
years. This offering was made without registration under the Act in
reliance upon the exemption from registration afforded by Section 4(2) of
the Act and Rule 506 of Regulation D promulgated thereunder.
b. On February 29, 2000, the Company issued promissory notes convertible into
common shares to 13 investors for aggregate gross proceeds of $1,000,000.
These notes carried a coupon of 10% payable in common shares at a rate of
$2.00 per common share. These notes were also convertible into 500,000
common shares (plus
13
<PAGE>
accrued interest payable at a rate of $2.00 per common share) at anytime at
the holder's option, and at the Company's option at any time after April
29, 2000. On March 8, 2000, the Company issued 1,000,000 two-year "A"
warrants and 500,000 two-year "B" warrants to Mike Lee and Associates, an
adviser, in consideration of ongoing financial consulting services provided
to the Company, including services in connection with the placement of the
convertible notes described above and other related services. The "A"
warrants are exercisable into common shares at a price of $1.25 in the
first year and $1.75 in the second year. The "B" warrants are exercisable
into common shares at a price of $2.00 in the first year and $2.50 in the
second year. These offerings were made without registration under the Act
in reliance upon the exemption from registration afforded by Section 4(2)
of the Act and Rule 506 of Regulation D promulgated thereunder.
c. Between February 29, 2000 and April 21, 2000, the Company issued an
aggregate of 666,000 units, each unit consisting of one (1) common share
and one-half (1/2) common share purchase warrant, to 16 investors, for
aggregate gross proceeds of $1,332,000. Each warrant entitles the holder
to acquire a further common share for a period expiring twelve (12) months
after its original issuance at a price of $2.00 per share. This offering
was made without registration under the Act in reliance upon the exemption
from registration afforded by Section 4(2) of the Act and Rule 506 of
Regulation D promulgated thereunder.
d. On March 21, 2000, the Company issued 2,054,000 shares of common stock to
42 investors for aggregate gross proceeds of $4,108,000. This offering was
made without registration under the Act in reliance upon the exemption from
registration afforded by Section 4(2) of the Act and Rule 506 of Regulation
D promulgated thereunder. On March 24, 2000, the Company agreed to issue
500,000 warrants to Wolverton Securities, in consideration of financial
consulting services provided to the Company in connection with the sales of
the 2,054,000 shares described above. These offerings were made without
registration under the Act in reliance upon the exemption from registration
afforded by Section 4(2) of the Act and Rule 506 of Regulation D
promulgated thereunder.
e. On March 31, 2000, the Company agreed to issue 140,600 shares of common
stock to 29 investors upon the exercise of 140,600 warrants, for aggregate
gross proceeds of $188,404. These shares were issued pursuant to
Regulation S under the Act due to the foreign nationality of the investors.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
14
<PAGE>
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a. The exhibits listed in the accompanying Index to Exhibits are filed as
part of this Quarterly Report on Form 10-QSB.
b. Reports on Form 8-K: None.
15
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PCSUPPORT.COM, INC.
Date: May 15, 2000 By: /s/ Michael G. McLean
----------------------------------------
Michael G. McLean
President and Chief Executive Officer
Date: May 15, 2000 By: /s/ David W. Rowat
----------------------------------------
David W. Rowat
Vice President,
Finance and Business Development
16
<PAGE>
INDEX TO EXHIBITS
-----------------
Exhibit
Number Description
- ------ -----------
4.1 Form of Warrants issued on January 11, 2000 to Irwin Olian and Stanley
Elbaum.
4.2 Form of Warrants issued to Purchasers in February, 2000 Unit Offering.
4.3 Form of Convertible Notes issued on February 29, 2000.
4.4 Form of "A" Warrant issued on March, 10, 2000 to Mike Lee & Associates.
4.5 Form of "B" Warrant issued on March, 10, 2000 to Mike Lee & Associates.
10.1 Directors, Officers and Employee Stock Option Plan, as amended by the
Company's Board of Directors on November 30, 1999.
10.2 Standard Form of Stock Option Agreement, as amended by the Company's
Board of Directors on November 30, 1999.
10.3 Amendment dated as of March 7, 2000 to the Stock Pooling and Escrow
Agreement among the Company, Advanced Financial Services Inc., Alan
Ackerman, David Rowat, Clifford Rowlands, Michael McLean, Steve
Macbeth, The Dromond Group Ltd., and Owen, Bird.
10.4 Term Sheet dated as of February 24, 2000 between the Company and Mike
Lee & Associates.
10.5 Employment Agreement dated as of March 1, 2000 between the Company and
Michael McLean.
10.6 Notice of Termination dated as of March 31, 2000 from the Company to
The Dromond Technologies Group, Inc.
10.7 Purchasing Schedule No. 2 dated as of March 13, 2000 between the
Company and Motive Communications, Inc.
27 Financial Data Schedule
17
<PAGE>
EXHIBIT 4.1
NO. ___
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE HEREUNDER HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAWS AND MUST BE HELD INDEFINITELY UNLESS
SUBSEQUENTLY REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR DISPOSED OF PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS.
WARRANT
-------
Company: PCSupport.com, Inc., a Nevada corporation
Number of Shares: 5,000
Class of Stock: Common Stock
Issue Date: January 11, 2000
Expiration Date: January 11, 2003
FOR VALUE RECEIVED, the adequacy and receipt of which is hereby
acknowledged, PCSupport.com, Inc., a Nevada corporation (the "Company"), hereby
certifies that ________ and his successors and assigns, are entitled to purchase
from the Company FIVE THOUSAND (5,000) fully paid and non-assessable shares of
Common Stock of the Company at any time and from time to time on and after the
date which is three (3) months from the Issue Date until 12:00 midnight New York
local time on the Expiration Date at an exercise price of ONE DOLLAR AND FIVE
CENTS ($1.05) per share of Common Stock, on the terms and conditions hereinafter
set forth.
1. Certain Definitions. As used in this Warrant, the following terms
-------------------
have the following definitions:
"Additional Shares of Common Stock" means all shares of Common Stock
---------------------------------
issued or issuable by the Company after the date of this Warrant, except for
shares of Common Stock issued or issuable upon (i) the exercise of currently
outstanding options or warrants or (ii) the conversion of currently outstanding
Convertible Securities.
"Common Stock" means the Company's common stock, $.001 par value per
------------
share, and includes shares of any new class of the Company's securities which
are not limited to a fixed sum or percentage of par value in respect of the
rights of the holders thereof to participate in dividends and in the
distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the Company.
"Company" is defined in the introduction above.
-------
"Conversion Date" means the date that the Company receives this
---------------
Warrant pursuant to the Warrantholders' conversion right pursuant to Section 4
hereof, or on such later date as specified by the Warrantholders.
"Convertible Securities" means evidence of indebtedness, shares of
----------------------
stock or other securities which are at any time directly or indirectly
convertible into or exchangeable for shares of Common Stock.
"Current Market Price" of a share of Common Stock or of any other
--------------------
security as of a relevant date means: (i) the Fair Value thereof as determined
in accordance with clause (ii) of the definition of Fair Value with respect to
Common Stock or any other security that is not listed on a national
<PAGE>
securities exchange or traded on the over-the-counter market or quoted on NASDAQ
(including the OTC Electronic Bulletin Board), and (ii) the average of the daily
closing prices for the twenty (20) trading days before such date (excluding any
trades which are not bona fide arm's length transactions) with respect to Common
Stock or any other security that is listed on a national securities exchange or
traded on the over-the-counter market or quoted on NASDAQ (including the OTC
Electronic Bulletin Board). The closing price for each day shall be (i) the last
sale price of shares of Common Stock or such other security, regular way, on
such date or, if no such sale takes place on such date, the average of the
closing bid and asked prices thereof on such date, in each case as officially
reported on the principal national securities exchange on which the same are
then listed or admitted to trading, or (ii) if no shares of Common Stock or if
no securities of the same class as such other security are then listed or
admitted to trading on any national securities exchange, the average of the
reported closing bid and asked prices thereof on such date in the over-the-
counter market as shown by the National Association of Securities Dealers
automated quotation system or, if no shares of Common Stock or if no securities
of the same class as such other security are then quoted in such system, as
published by the National Quotation Bureau, Incorporated or any similar
successor organization, and in either case as reported by any member firm of the
New York Stock Exchange selected by the Warrantholders.
"Exchange Act" means the Securities Exchange Act of 1934.
------------
"Exercise Period" means the period commencing on the date which is
---------------
three (3) months from the Issue Date and ending at 12:00 midnight New York local
time on the Expiration Date.
"Exercise Price" means One Dollar and Five Cents ($1.05), as may be
--------------
adjusted from time to time pursuant to Section 6.
"Expiration Date" is defined in the introduction above.
---------------
"Fair Value" means: (i) with respect to a share of Common Stock or any
----------
other security, the Current Market Price thereof, and (ii) with respect to any
other property, assets, business or entity, an amount determined in accordance
with the following procedure: The Company and the holders of the Warrants and
Warrant Shares, as applicable, shall use their best efforts to mutually agree to
a determination of Fair Value within ten (10) days of the date of the event
requiring that such a determination be made. If the Company and such holders
are unable to reach agreement within said ten (10) day period, the Company and
such holders shall within ten (10) days of the expiration of the ten (10) day
period referred to above each retain a separate independent investment banking
firm (which firm shall not be the investment banking firm regularly retained by
the Company). If either the Company or such holders fails to retain such an
investment banking firm during such period, then the independent investment
banking firm retained by such holders or the Company, as the case may be, acting
alone, shall take the actions outlined below. Such firms shall determine
(within thirty (30) days of their being retained) the Fair Value of the
security, property, assets, business or entity, as the case may be, in question
and deliver their opinion in writing to the Company and to such holders. If
such firms cannot jointly make the determination, then, unless otherwise
directed by agreement of the Company and such holders, such firms, in their sole
discretion, shall choose another investment banking firm independent of the
Company and such holders, which firm shall make the determination and render an
opinion as promptly as practicable. In either case, the determination so made
shall be conclusive and binding on the Company and such holders. The fees and
expenses of any such determination made by any and all such independent
investment banking firms shall be paid 50% by the Company and 50% by the
Warrantholders. If there is more than one holder of Warrants, and/or Warrant
Shares entitled to a determination of Fair Value in any particular instance,
each action to be taken by the holders of such Warrants and/or Warrant Shares
under this Section shall be taken by a majority in interest of such holders and
the action taken by such majority (including as to any mutual agreement with the
Company with respect to Fair Value and as to any selection of investment banking
firms) shall be binding upon all such holders. In the case of a determination
of the Fair Value per share of Common Stock, the Company and such holders shall
not take into consideration, and shall instruct all such investment banking
firms not to take into consideration, any premium for shares representing
control of the Company, any discount for any minority interest therein or any
restrictions on transfer under applicable federal and state securities laws or
otherwise.
2
<PAGE>
"Issue Date" is defined in the introduction above.
----------
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Warrant(s)" means this Warrant and any warrants issued in exchange or
----------
replacement of this Warrant or upon transfer hereof.
"Warrantholder(s)" means Irwin Olian and his successors and assigns.
----------------
"Warrant Shares" means shares of Common Stock issuable to
--------------
Warrantholders pursuant to this Warrant.
2. Exercise of Warrant. This Warrant may be exercised, in whole or in
-------------------
part, at any time and from time to time during the Exercise Period by written
notice to the Company and upon payment to the Company of the Exercise Price for
the shares of Common Stock in respect of which the warrant is exercised.
3. Form of Payment of Exercise Price. Anything contained herein to the
---------------------------------
contrary notwithstanding, at the option of the Warrantholders, the Exercise
Price may be paid in any one or a combination of the following forms: (a) by
wire transfer to the Company, (b) by the Warrantholders' cashier's or bank check
to the Company, and/or (c) by the surrender to the Company of Warrants, Warrant
Shares, Common Stock and/or other securities of the Company and/or any
subsidiaries of the Company having a Fair Value equal to the Exercise Price.
4. Cashless Exercise/Conversion. In lieu of exercising this Warrant as
----------------------------
specified in Sections 2 and 3 above, the Warrantholders may from time to time at
the Warrantholders' option convert this Warrant, in whole or in part, into a
number of shares of Common Stock of the Company determined by dividing (A) the
aggregate Fair Value of such shares or other securities otherwise issuable upon
the exercise of this Warrant minus the aggregate Exercise Price of such shares
by (B) the Fair Value of one such share.
5. Certificates for Warrant Shares: New Warrant. The Company agrees that
--------------------------------------------
the Warrant Shares shall be deemed to have been issued to the Warrantholders as
the record owner of such Warrant Shares as of the close of business on the date
on which payment for such Warrant Shares has been made (or deemed to be made by
conversion) in accordance with the terms of this Warrant. Certificates for the
Warrant Shares shall be delivered to the Warrantholders within a reasonable
time, not exceeding five (5) business days, after this Warrant has been
exercised or converted. A new Warrant representing the number of shares, if any,
with respect to which this Warrant remains exercisable also shall be issued to
the Warrantholders within such time so long as this Warrant has been surrendered
to the Company at the time of exercise.
6. Adjustment of Exercise Price, Number of Shares and Nature of
------------------------------------------------------------
Securities Issuable Upon Exercise of Warrants.
- ----------------------------------
(a) Exercise Price: Adjustment of Number of Shares. The Exercise
----------------------------------------------
Price shall be subject to adjustment from time to time as hereinafter provided.
Upon each adjustment of the Exercise Price (except for any adjustment under
Section 6(b), in which case the number of shares that can be purchased will not
be adjusted), the Warrantholders shall thereafter be entitled to purchase, at
the Exercise Price resulting from such adjustment, a number of shares determined
by multiplying the Exercise Price in effect immediately prior to such adjustment
by the number of shares purchasable pursuant hereto immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(b) Adjustment of Exercise Price Upon Issuance of Common Stock. If
----------------------------------------------------------
and whenever after the date hereof the Company shall (i) reprice any outstanding
options, warrants, or Convertible Securities or (ii) issue or sell Additional
Shares of Common Stock or options,
3
<PAGE>
warrants or Convertible Securities to any person solely by virtue of such
person's holding outstanding options, warrants or Convertible Securities, then,
if the lowest price relating to any such repricing, issuance or sale, is lower
than the Exercise Price in effect immediately prior to such repricing, issuance
or sale, then the Exercise Price shall be reduced to equal such lowest price.
No adjustment of the Exercise Price, however, shall be made in an
amount less than $.01 per share, but any such lesser adjustment shall be carried
forward and shall be made at the time and together with the next subsequent
adjustment which, together with any adjustments so carried forward, shall amount
to $.10 per share or more.
The provisions of this Section 6(b) shall not apply to any
Additional Shares of Common Stock which are distributed to holders of Common
Stock pursuant to a stock split or dividend for which an adjustment is provided
for under Section 6(e).
(c) Reorganization, Reclassification, Consolidation, Merger or Sale.
---------------------------------------------------------------
If any capital reorganization of the Company or reclassification of the capital
stock of the Company, or any consolidation or merger of the Company with another
corporation, or a sale of all or substantially all of the Company's assets to
another corporation shall be effected in such a way that holders of Common
Stock shall be entitled to receive cash, stock, securities or assets with
respect to or in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provisions shall be made whereby the Warrantholders shall thereafter
have the right to purchase and receive upon the basis and upon the terms and
conditions specified in this Warrant upon exercise of this Warrant and in lieu
of the shares of the Common Stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby, such cash, shares
of stock, securities or assets as may be issued or payable with respect to or in
exchange for a number of outstanding shares of Common Stock equal to the number
of shares of such Common Stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby, and in any such
case appropriate provision shall be made with respect to the rights and interest
of the Warrantholders to the end that the provisions hereof (including, without
limitation, provisions for adjustments of the Exercise Price and of the number
of shares purchasable and receivable upon the exercise of this Warrant) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise hereof.
The Company shall not effect any consolidation, merger or sale of all or
substantially all of the assets of the Company unless prior to or simultaneous
with the consummation thereof the successor corporation (if other than the
Company) resulting from such consolidation, merger or purchase of such assets
shall assume, by written instrument executed and mailed or delivered to the
Warrantholders, the obligation to deliver to such Warrantholders such cash (or
cash equivalent), shares of stock, securities or assets as, in accordance with
the foregoing provisions, the Warrantholders may be entitled to receive and
containing the express assumption of such successor corporation of the due and
punctual performance and observance of each provision of this Warrant to be
performed and observed by the Company and of all liabilities and obligations of
the Company hereunder; provided, however, in the case during the 18-month period
following the Issue Date of any consolidation or merger of the Company with
another corporation or the sale of all or substantially all of its assets to
another corporation effected in such a manner that the holders of Common Stock
shall be entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, at the election of each Warrantholder, in lieu
of receiving such stock, securities or assets, such Warrantholder shall receive
cash equal to the Fair Value of the Common Stock issuable upon exercise of the
Warrant, less the Exercise Price payable upon exercise thereof.
(d) Company to Prevent Dilution. In case at any time or from time to
---------------------------
time conditions arise by reason of action taken by the Company, which are not
adequately covered by the provisions of this Section 6, and which might
materially and adversely affect the exercise rights of the Warrantholders under
any provision of this Warrant, unless the adjustment necessary shall be agreed
upon by the Company and the Warrantholders, the Board of Directors of the
Company shall appoint a firm of independent certified public accountants of
recognized national standing (who have not been employed by the Company within
the last five years), acceptable to the Warrantholders, who at the Company's
expense shall give their opinion upon the adjustment, if any, on a basis
consistent with the standards established in the other provisions of this
Section 6, necessary with respect to the Exercise Price and the number of
shares purchasable upon exercise of the Warrants, so as to preserve, without
dilution, the
4
<PAGE>
exercise rights of the Warrantholders. Upon receipt of such opinion, such Board
of Directors shall forthwith make the adjustments described therein; provided
that no such adjustments shall have the effect of increasing the Exercise Price
or decreasing the number of Warrant Shares as otherwise determined pursuant to
this Section 6.
(e) Stock Splits, Stock Dividends and Reverse Splits. In case at any
------------------------------------------------
time the Company shall subdivide its outstanding shares of Common Stock into a
greater number of shares or shall effect a stock dividend, the Exercise Price in
effect immediately prior to such subdivision or stock dividend shall be
proportionately reduced and the number of shares of Common Stock purchasable
pursuant to this Warrant immediately prior to such subdivision or stock dividend
shall be proportionately increased, and conversely, in case at any time the
Company shall combine its outstanding shares of Common Stock into a smaller
number of shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased and the number of shares of
Common Stock purchasable upon the exercise of this Warrant immediately prior to
such combination shall be proportionately reduced.
(f) Dissolution, Liquidation and Wind-Up. In case the Company shall,
------------------------------------
at any time prior to the expiration of this Warrant, dissolve, liquidate or wind
up its affairs, the Warrantholders shall be entitled, upon the exercise of this
Warrant, to receive in lieu of the shares of Common Stock of the Company which
such Warrantholders would have been entitled to receive, the same kind and
amount of assets as would have been issued, distributed or paid to such
Warrantholders upon any such dissolution, liquidation or winding up with respect
to such shares of Common Stock of the Company, had such Warrantholders been the
holders of record of the Warrant Shares receivable upon the exercise of this
Warrant on the record date for the determination of those persons entitled to
receive any such liquidating distribution.
7. Special Agreements of the Company.
---------------------------------
(a) Reservation of Shares. The Company covenants and agrees that all
---------------------
Warrant Shares will, upon issuance, be validly issued, fully paid and
nonassessable and free from all preemptive rights of any Shareholder, and from
all taxes, liens and charges with respect to the issue thereof. The Company
further covenants and agrees that during the period within which the rights
represented by this Warrant may be exercised, the Company will at all times have
authorized, and reserved, a sufficient number of shares of Common Stock to
provide for the exercise of the rights represented by this Warrant. The Company
hereby covenants and agrees to take all such action as may be necessary to
assure that the par value per share of the Common Stock is at all times equal to
or less than the Exercise Price.
(b) Avoidance of Certain Actions. The Company will not, by amendment
----------------------------
of its Articles of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, issue or sale of securities or otherwise, avoid
or take any action which would have the effect of avoiding the observance or
performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in carrying out all of the
provisions of this Warrant and in taking all of such action as may be necessary
or appropriate in order to protect the rights of the Warrantholders against
dilution or other impairment of their rights hereunder.
(c) Securing Governmental Approvals. If any shares of Common Stock
-------------------------------
required to be reserved for the purposes of exercise of this Warrant require
registration with or approval of any governmental authority under any federal
law (other than the Securities Act) or under any state law before such shares
may be issued upon exercise of this Warrant, the Company will, at its expense,
as expeditiously as possible, cause such shares to be duly registered or
approved, as the case may be.
(d) Listing on Securities Exchanges; Registration. If, and so long
---------------------------------------------
as, any class of the Company's Common Stock shall be listed on any national
securities exchange (as defined in the Exchange Act) or quoted on NASDAQ, the
Company will, at its expense, obtain and maintain the approval for listing or
quotation, as the case may be, upon official notice of issuance of all Warrant
Shares, and maintain the listing or quotation, as the case may be, of Warrant
Shares after their issuance; and the Company will so list on such national
securities exchange or have quoted on NASDAQ, will register under the Exchange
Act (or any similar statute then in effect), and will maintain such listing or
5
<PAGE>
quotation of, any other securities that at any time are issuable upon exercise
of this Warrant if and at the time any securities of the same class shall be
listed on such national securities exchange by the Company or quoted on NASDAQ.
(e) Information Rights. So long as the Warrantholders hold this
------------------
Warrant and/or any of the Warrant Shares, the Company shall deliver to the
Warrantholders (i) promptly after mailing, copies of all communications to the
shareholders of the Company, (ii) within ninety (90) days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company certified by the independent public accountants of recognized standing,
and (iii) within forty-five (45) days after the end of each of the first three
quarters of each fiscal year, the Company's quarterly, unaudited financial
statements.
(f) Preemptive Rights. In the event the Company offers to the
-----------------
Company's shareholders the right to purchase any securities of the Company, then
all shares of Common Stock issuable pursuant to the Warrants shall be deemed to
be issued and outstanding and held by the Warrantholders and the Warrantholders
shall be entitled to participate in such rights offering.
(g) Compliance with Law. The Company shall comply with all
-------------------
applicable laws, rules and regulations of the United States and of all states,
municipalities and agencies and of any other jurisdiction applicable to the
Company and shall do all things necessary to preserve, renew and keep in full
force and effect and in good standing its corporate existence and authority
necessary to continue its business.
8. Fractional Shares. No fractional shares or scrip representing
-----------------
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon exercise hereof, the Company
shall pay to the Warrantholder an amount in cash equal to such fraction
multiplied by the Current Market Value of one share of Common Stock.
9. Notices of Stock Dividends, Subscriptions, Reclassifications,
-------------------------------------------------------------
Consolidations, Mergers, etc. If at any time: (i) the Company shall declare a
- ----------------------------
cash dividend (or an increase in the then existing dividend rate), or declare a
dividend on Common Stock payable otherwise than in cash out of its net earnings
after taxes for the prior fiscal year; or (ii) the Company shall authorize the
granting to the holders of Common Stock of rights to subscribe for or purchase
any shares of capital stock of any class or of any other rights; or (iii) there
shall be any capital reorganization, or reclassification, or redemption of the
capital stock of the Company, or consolidation or merger of the Company with, or
sale of all or substantially all of its assets to, another corporation or firm;
or (iv) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company, then the Company shall give to the Warrantholders at
the addresses of such Warrantholders as shown on the books of the Company, at
least twenty (20) days prior to the applicable record date hereinafter
specified, a written notice summarizing such action or event and stating the
record date for any such dividend or rights (or, if a record date is not to be
selected, the date as of which the holders of Common Stock of record entitled to
such dividend or rights are to be determined), the date on which any such
reorganization, reclassification, consolidation, merger, sale of assets,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected the holders of Common Stock of record shall be
entitled to effect any exchange of their shares of Common Stock for cash (or
cash equivalent), securities or other property deliverable upon any such
reorganization, reclassification, consolidation, merger, sale of assets,
dissolution, liquidation or winding up.
10. Registered Holder; Transfer of Warrants or Warrant Shares.
---------------------------------------------------------
(a) Maintenance of Registration Books; Ownership of this Warrant.
------------------------------------------------------------
The Company shall keep at its principal office a register in which the Company
shall provide for the registration, transfer and exchange of this Warrant. The
Company shall not at any time, except upon the dissolution, liquidation or
winding-up of the Company, close such register so as to result in preventing or
delaying the exercise or transfer of this Warrant.
6
<PAGE>
(b) Exchange and Replacement. This Warrant is exchangeable upon
------------------------
surrender hereof by the registered holder to the Company at its principal office
for new Warrants of like tenor and date representing in the aggregate the right
to purchase the number of shares purchasable hereunder, each of such new
Warrants to represent the right to purchase such number of shares as shall be
designated by said registered holder at the time of surrender. Subject to
compliance with all restrictions and provisions of this Warrant, this Warrant
and all rights hereunder are transferable in whole or in part upon the books of
the Company by the registered holder hereof in person or by duly authorized
attorney, and new Warrants shall be made and delivered by the Company, of the
same tenor and date as this Warrant but registered in the name of the
transferee(s), upon surrender of this Warrant, duly endorsed, to said office of
the Company accompanied by a Form of Assignment in the form attached hereto as
Exhibit "B". Upon receipt by the Company of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of this Warrant, and upon
surrender and cancellation of this Warrant, if mutilated, the Company will make
and deliver a new Warrant of like tenor, in lieu of this Warrant, without
requiring the posting of any bond or the giving of any other security, and the
Warrantholders will indemnify and hold the Company harmless against all claims,
losses, liabilities, damages, deficiencies, costs and expenses, including
reasonable attorneys' fees and expenses of investigation and defense incurred,
suffered or accrued by any of them, directly or indirectly, as a result of or
based upon the making or deliverance of such new Warrant. This Warrant shall be
promptly cancelled by the Company upon the surrender hereof in connection with
any exchange, transfer or replacement. The Company shall pay all expenses,
taxes and other charges payable in connection with the preparation, execution
and delivery of Warrants pursuant to this Section 10.
(c) Warrants and Warrant Shares Not Registered. The Warrantholders,
------------------------------------------
by accepting this Warrant, acknowledge that this Warrant and the Warrant Shares
are not being registered under the Securities Act on the grounds that the
issuance of this Warrant and the offering and sale of such Warrant Shares are
exempt from registration under Section 4(2) of the Securities Act as not
involving any public offering, and the Warrantholders represent that they are
acquiring this Warrant for investment and not with a view to distribution.
11. Registration.
------------
(a) Registration Under the Securities Act. The Warrant and the
-------------------------------------
Warrant Shares and any of the other securities issuable upon exercise of the
Warrant have not been registered under the Securities Act for public resale.
Upon exercise, in part or in whole, of the Warrant, certificates representing
the shares of Common Stock and any other securities issuable upon exercise, of
the Warrant (collectively, the "Warrant Securities") shall bear the following
legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act") for public resale, and may not be offered or sold
except pursuant to (i) an effective registration statement under the
Securities Act, or (ii) an opinion of counsel, if such opinion shall
be reasonably satisfactory to counsel to the issuer, that an exemption
from registration under the Securities Act is available.
(b) Piggyback Registration. If the Company proposes for any reason
----------------------
to register Primary Shares (as hereinafter defined) under the Securities Act
(other than on Form S-4 or Form S-8 promulgated under the Securities Act or any
successor forms thereto) by filing a registration statement with the Securities
and Exchange Commission (the "Commission") and such registration, together with
any prior registration(s) of Primary Shares (as hereinafter defined) (other than
on Form S-4 or Form S-8 promulgated under the Securities Act or any successor
forms thereto), would cause the Company to have registered in excess of
$3,000,000 of Primary Shares (other than on Form S-4 or Form S-8 promulgated
under the Securities Act or any successor forms thereto), then the
Warrantholders shall be entitled to piggyback registration rights, as set forth
herein, with respect to such registration and all subsequent registrations of
Primary Shares or Other Shares (other than on Form S-4 or Form S-8 promulgated
under the Securities Act or any successor forms thereto). If the Company
proposes for any reason to register Primary Shares or Other Shares, and such
registration is a registration as to which the Warrantholders have piggyback
registration rights pursuant to the previous sentence, the Company shall
promptly give
7
<PAGE>
written notice to the Warrantholders of its intention to so register such
Primary Shares or Other Shares and, upon the written request, delivered to the
Company within 15 days after delivery of any such notice by the Company, of the
Warrantholders to include in such registration Warrant Securities (which request
shall specify the number of Warrant Securities proposed to be included in such
registration), the Company shall use its commercially reasonable best efforts to
cause all such Warrant Securities of the Warrantholders delivering such notice
to be included in such registration on the same terms and conditions as the
securities otherwise being sold in such registration; provided, however, that if
the managing underwriter, if any, for the offering advises the Company that the
inclusion of all Warrant Securities requested to be included in such
registration would interfere with the successful marketing (including pricing)
of the Primary Shares or Other Shares proposed to be registered by the Company,
then the number of Primary Shares, Warrant Securities and Other Shares proposed
to be included in such registration shall be included in the following order:
(i) if the Company proposes to register Primary Shares:
(A) first, the Primary Shares; and
(B) second, the Warrant Securities and Other Shares requested to
be included in such registration (or, if necessary, such Warrant Securities and
Other Shares pro rata among the holders thereof based upon the number of Warrant
Securities and Other Shares requested by each such holder); or
(ii) if the Company proposes to register Other Shares pursuant to a
request for registration by the holders of such Other Shares:
(A) first, the Other Shares held by the parties demanding
such registration;
(B) second, the Warrant Securities and Other Shares (other than
shares registered pursuant to Section 11(b)(ii)(A) hereof) requested to be
registered by the holders thereof (or, if necessary, pro rata among the holders
thereof based on the number of Warrant Securities and Other Shares requested to
be registered by such holders); and
(C) Third, the Primary Shares.
For purposes hereof the term "Other Shares" means at any time those shares
of Common Stock held by any person (or issuable upon exercise or conversion of
any security held by such person) that do not constitute Primary Shares or
Warrant Securities. The term "Primary Shares" means at any time the authorized
but unissued shares of Common Stock and shares of Common Stock held by the
Company in its treasury.
(c) Covenants of the Company With Respect to Registration. In
-----------------------------------------------------
connection with any registration under Section 11(b) hereof, the Company
covenants and agrees as follows:
(i) The Company shall use commercially reasonable best efforts
to have any registration statements declared effective at the earliest possible
time, and shall furnish the holders desiring to sell Warrant Securities such
number of prospectuses as shall reasonably be requested.
(ii) The Company shall pay all costs (excluding any underwriting
or selling commissions or other charges of any broker-dealer or any attorney or
other person acting on behalf of holders of Warrant Securities), fees and
expenses in connection with all registration statements filed pursuant to
Sections 11(b) hereof including, without limitation, the Company's legal and
accounting fees, printing expenses, blue sky fees and expenses.
(iii) The Company will take all necessary action which may be
reasonably required in qualifying or registering the Warrant Securities included
in a registration statement for offering
8
<PAGE>
and sale under the securities or blue sky laws of the states requested by the
holders of Warrant Securities.
(iv) The Company shall indemnify each of the holders of the
Warrant Securities to be sold pursuant to any registration statement and each
person, if any, who controls such holder within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act, against all loss, claim,
damage, expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which any
of them may become subject under the Securities Act, the Exchange Act or
otherwise, arising from such registration statement; provided, however, that the
-------- -------
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Company by or on behalf of the holder specifically for inclusion therein.
(v) Nothing contained in this Agreement shall be construed as
requiring the Warrantholders to exercise the Warrant prior to the initial filing
of any registration statement or the effectiveness thereof.
(vi) If the offering is underwritten, the Company shall furnish
to each holder of Warrant Securities participating in the offering and to each
underwriter a signed counterpart, addressed to such holder or underwriter, of
(i) an opinion of counsel to the Company, dated the effective date of such
registration statement (and, an opinion dated the date of the closing under the
underwriting agreement), and (ii) a "cold comfort" letter dated the effective
date of such registration statement (and, if such registration includes an
underwritten public offering, a letter dated the date of the closing under the
underwriting agreement) signed by the independent public accountants who have
issued a report on the Company's financial statements included in such
registration statement, in each case covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to events
subsequent to the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offering of securities that utilize the
particular form of registration statement which is then being utilized by the
Company.
(vii) The Company shall as soon as practicable after the
effective date of the registration statement, and in any event within 15 months
thereafter, make "generally available to its security holders" (within the
meaning of Rule 158 under the Securities Act) an earnings statement (which need
not be audited) complying with Section 11(a) of the Securities Act and covering
a period of at least 12 consecutive months beginning after the effective date of
the registration statement.
(viii) The Company shall deliver promptly to each holder of
Warrant Securities participating in the offering requesting the correspondence
and memoranda described below and the managing underwriter copies of all
correspondence between the Commission and the Company, its counsel or auditors
and all memoranda relating to discussions with the Commission or its staff with
respect to the registration statement and permit the holder and underwriter to
do such investigation, upon reasonable advance notice, with respect to
information contained in or omitted from the registration statement as it deems
reasonably necessary to comply with applicable securities laws or rules of the
National Association of Securities Dealers, Inc. ("NASD"). Such investigation
shall include access to books, records and properties and opportunities to
discuss the business of the Company with its officers and independent auditors,
all to such reasonable extent and at such reasonable times and as often as any
such holder shall reasonably request as it deems necessary to comply with
applicable securities laws or NASD rules.
(ix) Until the earlier of (A) one year following the
effectiveness of a registration statement filed pursuant to Section 11(b) hereof
or (B) until all of the Warrant Securities are sold, the Company shall notify
the holder of such Warrant Securities on a timely basis at any time when a
prospectus relating to such Warrant Securities is required to be delivered under
the Securities Act, of the
9
<PAGE>
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing and, at the request of the holder, prepare and
furnish to the holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the offerees of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make statements therein not misleading in
light of the circumstances then existing.
12. Representation and Warranties. The Company hereby represents and
-----------------------------
warrants to and covenants with Warrantholder that:
(a) Organization and Capitalization of the Company. The Company is a
----------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada. As of the date hereof, the authorized capital of the
Company consists of 100,000,000 shares of Common Stock of which 6,425,569 shares
of Common Stock are issued and outstanding. The Company has, and at all times
during the Exercise Period will have, reserved for issuance pursuant to the
Warrants that number of shares of Common Stock that are issuable pursuant to the
Warrants. No unissued shares of Common Stock are reserved for any purpose other
than for issuance upon the exercise of the Warrants, except that there are
1,136,438 shares of Common Stock reserved for issuance upon the exercise of
outstanding warrants and options. All of the outstanding shares of Common Stock
have been validly issued without violation of any preemptive or similar rights,
are fully paid and nonassessable and have been issued in compliance with all
federal and applicable state securities laws.
(b) Authority. The Company has full corporate power and authority to
---------
execute and deliver this Warrant, to issue the shares of Common Stock issuable
upon exercise of this Warrant, and to perform all of its obligations hereunder,
and the execution, delivery and performance hereof has been duly authorized by
all necessary corporate action on its part. This Warrant has been duly executed
on behalf of the Company and constitutes the legal, valid and binding obligation
of the Company enforceable in accordance with its terms.
(c) No Legal Bar. Neither the execution, delivery or performance of
------------
this Warrant nor the issuance of the shares of Common Stock issuable upon
exercise of this Warrant will (a) conflict with or result in a violation of the
Articles of Incorporation or By-Laws of the Company, (b) conflict with or result
in a violation of any law, statute, regulation, order or decree applicable to
the Company or any affiliate, (c) require any consent or authorization or filing
with, or other act by or in respect of any governmental authority, or (d) result
in a breach of, constitute a default under or constitute an event creating
rights of acceleration, termination or cancellation under any mortgage, lease,
contract, franchise, instrument or other agreement to which the Company is a
party or by which it is bound.
(d) Validity of Shares. When issued upon the exercise of this
------------------
Warrant as contemplated herein, the shares of Common Stock so issued will have
been validly issued and will be fully paid and nonassessable. On the date
hereof, the par value of the Common Stock is less than the Exercise Price per
share of Common Stock.
(e) Rule 144. The Company covenants that it will file, on a timely
--------
basis, all reports required to be filed by it under the Securities Act and the
Exchange Act, and it will take such further action as any Warrantholders may
request, all to the extent required from time to time to enable such
Warrantholders to sell Warrant Shares without registration under the Securities
Act within the limitation of the conditions provided by (i) Rule 144 under the
Securities Act, as such rule may be amended from time to time, or (ii) any
similar rule or regulation hereafter adopted by the Securities and Exchange
Commission. Upon the request of any holder of Warrant Shares, the Company will
deliver to such holder a written statement verifying that it has complied with
such information requirements.
10
<PAGE>
13. Miscellaneous Provisions.
------------------------
(a) CHOICE OF LAW AND VENUE.
-----------------------
(i) THE VALIDITY OF THIS WARRANT, ITS CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT AND THE RIGHTS OF THE PARTIES HERETO SHALL BE
DETERMINED UNDER, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEVADA.
(ii) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING
IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE
FEDERAL OR STATE COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA. THE PARTIES EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED IN ANY SUCH COURT, AND THE
PARTIES HEREBY WAIVE ANY OBJECTION WHICH EITHER MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION AND HEREBY CONSENT TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY ANY SUCH COURT. FURTHERMORE, THE
COMPANY AND WARRANTHOLDER EACH WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE
LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF "FORUM NON CONVENIENS" OR
TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH
THIS SECTION 12(a)(ii).
(iii) WAIVER OF JURY TRIAL. THE COMPANY AND WARRANTHOLDER HEREBY
--------------------
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS WARRANT. IN THE EVENT OF LITIGATION, A COPY
OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
(b) Notices. All notices or demands by any party relating to this
-------
Warrant shall be in writing and shall be personally delivered or sent by
registered or certified mail, postage prepaid, return receipt requested, or by
receipted overnight delivery service to the Company and Warrantholder, as the
case may be, at their addresses set forth below:
If to Company: Suite 280, 4400 Dominion Street
Burnaby, British Columbia, Canada V5G 4G3
Attention: David W. Rowat, Vice President, Finance and
Business Development
If to Warrantholder: [Insert address.]
The parties hereto may change the address at which they are to
receive notices hereunder by notice in writing in the foregoing manner given to
the other. All notices or demands sent in accordance with this Section 13(b)
shall be deemed received on the earlier of the date of actual receipt or three
(3) calendar days after the deposit thereof in the mail or one (1) calendar day
after deposit thereof with an overnight delivery service.
(c) Successors and Assigns. This Warrant shall bind and inure to the
----------------------
benefit of the respective successors and assigns of each of the parties hereto.
Warrantholder and his successors and assigns may assign this Warrant and its
rights and duties hereunder. The Warrantholder reserves the right to sell,
assign and/or transfer all or any part of, or any interest in Warrantholder's
rights and benefits hereunder.
(d) Attorneys' Fees. Should the Company or any Warrantholder retain
---------------
counsel for the purpose of enforcing, or preventing the breach of, any provision
hereof including the institution of any action or proceeding, whether by
arbitration, judicial or quasi-judicial action or otherwise, to enforce any
provision hereof or for damages for any alleged breach of any provision hereof,
or for a declaration of such party's rights or obligations hereunder, then,
whether such matter is settled by negotiation, or by arbitration or judicial
determination, the prevailing party shall be entitled to be reimbursed by the
losing
11
<PAGE>
party for all costs and expenses incurred thereby, including reasonable
attorneys' fees for the services rendered to such prevailing party.
(e) Entire Agreement; Amendments and Waivers. This Warrant sets
----------------------------------------
forth the entire understanding of the parties with respect to the transactions
contemplated hereby. The failure of any party to seek redress for the violation
or to insist upon the strict performance of any term of this Warrant shall not
constitute a waiver of such term and such party shall be entitled to enforce
such term without regard to such forbearance. This Warrant may be amended, the
Company may take any action herein prohibited or omit to take action herein
required to be performed by it, and any breach of or compliance with any
covenant, agreement, warranty or representation may be waived, only if the
Company has obtained the written consent or written waiver of the majority in
interest of the Warrantholders, and then such consent or waiver shall be
effective only in the specific instance and for the specific purpose for which
given.
(f) Severability. If any term of this Warrant as applied to any
------------
person or to any circumstance is prohibited, void, invalid or unenforceable in
any jurisdiction, such term shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or invalidity without in any way affecting any
other term of this Warrant or affecting the validity or enforceability of this
Warrant or of such provision in any other jurisdiction.
(g) Headings. The headings in this Warrant are inserted only for
--------
convenience of reference and shall not be used in the construction of any of its
terms.
(h) Survival of Representations, Warranties and Covenants. All
-----------------------------------------------------
representations, warranties and covenants contained herein shall survive the
exercise or conversion of this Warrant (or any part hereof) or the termination
or expiration of the rights hereunder. The Warrantholder and each holder of
Warrant Shares shall continue to be entitled to the rights contained herein
indefinitely until, by their respective terms, they are no longer operative.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officers effective as of the date first set forth above.
PCSupport.com, Inc.
a Nevada corporation,
By:__________________________________
Name:
Title:
12
<PAGE>
EXHIBIT "A"
FORM OF EXERCISE
(To be signed only upon exercise of Warrant)
To: ________________________________
________________________________
________________________________
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, _____________* shares of Common Stock of
___________________ and herewith makes payment therefor by the following method
or methods described in the Warrant ___________________________________, and
requests that the certificates for such shares be issued in the name of, and
delivered to, ______________________, whose address is
_________________________________________.
Dated: ____________________
______________________________________________________________________
(Signature must conform in all respects to name of holder as specified
on the face of the Warrant)
______________________________________________________________________
(Address)
_____________________
* Insert here the number of shares called for on the face of the Warrant (or,
in the case of a partial exercise, the portion thereof as to which the
Warrant is being exercised), in either case without making any adjustment
for additional Common Stock or any other stock or other securities or
property or cash which, pursuant to the adjustment provisions of the
Warrant, may be deliverable upon exercise.
13
<PAGE>
EXHIBIT "B"
FORM OF ASSIGNMENT
(To be signed only upon transfer of Warrant)
For value received, the undersigned hereby sells, assigns and transfers
unto _____________________________ the right represented by the within Warrant
to purchase ________ shares of Common Stock of ____________________ to which the
within Warrant relates, and appoints ___________________________ as Attorney-in-
Fact to transfer such right on the books of ________________________ with full
power of substitution in the premises. The Warrant being transferred hereby is
the Common Stock Purchase Warrant issued by PCSupport.com, Inc. as of January
11, 2000.
Dated: ____________________
______________________________________________________________________
(Signature must conform in all respects to name of holder as specified
on the face of the Warrant)
______________________________________________________________________
(Address)
14
<PAGE>
EXHIBIT 4.2
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON THEIR EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED UNLESS
COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT, OR AN OPINION OF
COUNSEL SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY SUCH TRANSFER IS
EXEMPT FROM SUCH REGISTRATION.
PCSUPPORT.COM, INC.
COMMON STOCK
PURCHASE WARRANT
1. Issuance. For value received, the receipt of which is hereby
--------
acknowledged by PCSupport.com, Inc., a Nevada corporation (the "Company"),
________________, or registered assigns (the "Holder"), is hereby granted the
right to purchase, at any time until March ___, 2001 (the "Expiration Date,"
subject to Section 6.2), ______________ fully paid and nonassessable shares of
the Company's common stock, par value $.001 (the "Common Stock"), at the
exercise price of $2.00 per share (the "Exercise Price"), subject to adjustments
as set forth in Section 6 hereof.
2. Exercise of Warrants.
--------------------
2.1 Payment of Exercise Price; Cashless Exercise. This Warrant is
--------------------------------------------
exercisable in whole or in part at the Exercise Price per share of Common Stock
payable hereunder, payable in cash or by certified or official bank check. The
Holder may also elect a "cashless" exercise, in which
X = (M - P) * N
-----------
M
X is the number of shares of Common Stock to be received by the Holder
upon the "cashless" exercise;
M is the fair market value of a share of Common Stock on the date of
exercise. If the stock is regularly quoted on a recognized securities market,
its fair market value shall be the closing price of the Common Stock on the date
of exercise; however, if no closing price is available, then the average of the
high bid and low asked price on that day will be used. In the absence of an
established market, the fair market value shall be determined in good faith by
the Company's Board of Director;
P is the Exercise Price; and
N is the number of shares submitted for cashless exercise, with the
maximum number being the shares subject to this Warrant.
2.2 Procedure for Exercise. Upon surrender of this Warrant with the
----------------------
annexed Notice of Exercise Form duly executed, together with payment of the
Exercise Price for
1
<PAGE>
the shares of Common Stock purchased, the Holder shall be entitled to receive a
certificate or certificates for the shares of Common Stock so purchased.
3. Reservation of Shares. The Company hereby agrees that at all times
---------------------
during the term of this Warrant there shall be reserved for issuance upon
exercise of this Warrant such number of shares of its Common Stock as shall be
required for issuance upon exercise of this Warrant (the "Warrant Shares").
4. Mutilation or Loss of Warrant. Upon receipt by the Company of
-----------------------------
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) receipt of
reasonably satisfactory indemnification, and (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will execute and deliver
a new Warrant of like tenor and date and any such lost, stolen, destroyed or
mutilated Warrant shall thereupon become void.
5. No Rights as Shareholder. The Holder shall not, by virtue hereof, be
------------------------
entitled to any rights of a shareholder of the Company, either at law or in
equity, and the rights of the Holder are limited to those expressed in this
Warrant and are not enforceable against the Company except to the extent set
forth herein.
6. Effect of Certain Transactions
------------------------------
6.1 Adjustments for Stock Splits, Stock Dividends Etc. If the number
-------------------------------------------------
of outstanding shares of Common Stock of the Company are increased or decreased
by a stock split, reverse stock split, stock dividend, stock combination,
recapitalization or the like, the Exercise Price and the number of shares
purchasable pursuant to this Warrant shall be adjusted proportionately so that
the ratio of (i) the aggregate number of shares purchasable by exercise of this
Warrant to (ii) the total number of shares outstanding immediately following
such stock split, reverse stock split, stock dividend, stock combination,
recapitalization or the like shall remain unchanged, and the aggregate purchase
price of shares issuable pursuant to this Warrant shall remain unchanged.
6.2 Expiration Upon Certain Transactions. If at any time the Company
------------------------------------
proposes to engage in (i) an initial public offering of the Company's Common
Stock with an offering price at or above the Exercise Price, as adjusted or (ii)
a merger or consolidation of the Company in which the Company will not survive,
in which holders of the Company's Common Stock will receive consideration at or
above the Exercise Price, as adjusted, then this Warrant will terminate 10 days
from the Holder's receipt of written notice from the Company of its intention to
complete such a transaction. The Holder may exercise this warrant within the 10
day period pursuant to Section 2.
6.3 Adjustments for Reorganization, Mergers, Consolidations or Sales
----------------------------------------------------------------
of Assets. If at any time there is a capital reorganization of the Common Stock
- ---------
(other than a recapitalization, combination, or the like provided for elsewhere
in this Section 6) or merger or consolidation of the Company with another
corporation (other than one covered by Section 6.2(ii)), or the sale of all or
substantially all of the Company's properties and assets to any other person,
then, as a part of such reorganization, merger, consolidation or sale, provision
shall be made so that the Holder shall thereafter be entitled to receive upon
exercise of this Warrant (and only to the extent this Warrant is exercised), the
number of shares of stock or other securities or
2
<PAGE>
property of the Company, or of the successor corporation resulting from such
merger or consolidation or sale, to which a holder of Common Stock, or other
securities, deliverable upon the exercise of this Warrant would otherwise have
been entitled on such capital reorganization, merger, consolidation or sale. In
any such case, appropriate adjustments shall be made in the application of the
provisions of this Section 6 (including adjustment of the Exercise Price then in
effect and number of Warrant Shares purchasable upon exercise of this Warrant)
which shall be applicable after such events.
7. Transfer to Comply with the Securities Act. This Warrant has not been
------------------------------------------
registered under the Securities Act of 1933, as amended, (the "Act") and has
been issued to the Holder for investment and not with a view to the distribution
of either the Warrant or the Warrant Shares. Neither this Warrant nor any of
the Warrant Shares or any other security issued or upon exercise of this Warrant
may be sold, transferred, pledged or hypothecated in the absence of an effective
registration statement under the Act relating to such security or an opinion of
counsel satisfactory to the Company that registration is not required under the
Act. Each certificate for the Warrant, the Warrant Shares and any other
security issued or issuable upon exercise of this Warrant shall contain a legend
in form and substance satisfactory to counsel for the Company, setting forth the
restrictions on transfer contained in this Section.
8. Notices. Any notice or other communication required or permitted
-------
hereunder shall be in writing and shall be delivered personally or sent by
certified, registered or express mail, postage pre-paid. Any such notice shall
be deemed given when so delivered personally, or if mailed, two days after the
date of deposit in the United States mails, as follows:
If to the Company, to:
PCSupport.com, Inc.
Suite 280, 4400 Dominion Street
Burnaby, British Columbia, Canada
Attention: David W. Rowat, Vice President,
Finance and Business Development
With a copy to:
Troy & Gould Professional Corporation
1801 Century Park East, 16th Floor
Los Angeles, CA 90067
Attention: Sanford J. Hillsberg, Esq.
If to the Holder, to:
[Insert address.]
Any party may designate another address or person for receipt of notices
hereunder by notice given to the other parties in accordance with this Section.
9. Supplements and Amendments; Whole Agreement. This Warrant may be
-------------------------------------------
amended or supplemented only by an instrument in writing signed by the parties
hereto. This Warrant contains the full understanding of the parties hereto with
respect to the subject matter
3
<PAGE>
hereof, and there are no representations, warranties, agreements or
understandings other than expressly contained herein.
10. Governing Law. This Warrant shall be deemed to be a contract made
-------------
under the laws of the State of Nevada and for all purposes shall be governed by
and construed in accordance with the laws of such State applicable to contracts
to be made and performed entirely within such State.
11. Counterparts. This Warrant may be executed in any number of
------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
12. Descriptive Headings. Descriptive headings of the several Sections of
--------------------
this Warrant are inserted for convenience only and shall not control or affect
the meaning or construction of any of the provisions hereof.
[Signature page follows.]
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of
March __, 2000.
PCSUPPORT.COM, INC.
By:___________________________________
Name:
Title:
5
<PAGE>
NOTICE OF EXERCISE OF WARRANT
The undersigned hereby irrevocably elects to exercise the right,
represented by the Warrant dated as of _______________________________ to
purchase _____________ shares of the Common Stock of PCSupport.com, Inc., and
tenders herewith payment in accordance with Section 2 of the Common Stock
Purchase Warrant.
Please deliver the stock certificate to:
______________________________________
______________________________________
______________________________________
Dated:____________________
By:_______________________
CASH: $_____________________
6
<PAGE>
EXHIBIT 4.3
PROMISSORY NOTE
---------------
$________________ February 29, 2000
Los Angeles, California
FOR VALUE RECEIVED, the undersigned, PCSUPPORT.COM, INC., a Nevada
corporation ("Maker"), hereby promises to pay to the order of _________________
("Holder") the principal amount of ___________________ ($__________), together
with interest thereon, as hereinafter described. Unless converted into shares
of common stock of the Maker ("Common Stock") prior thereto, the entire
outstanding principal balance of this Note, together with interest thereon,
shall be due and payable on February 29, 2002. All dollar amounts set forth
herein are expressed in U.S. dollars.
Simple interest shall accrue on the balance of this Note outstanding from
time to time at the rate of 10.00% per annum. Each payment made pursuant to
this Note shall be credited first on interest then due and the remainder on
principal; and interest shall thereupon cease to accrue upon the principal so
credited.
All or a portion of any unpaid principal or accrued interest under this
Note may be converted into shares of Common Stock at a price of $2.00 per share.
Such conversion may be effected by Holder at any time by written notice to Maker
specifying the amount of unpaid principal and accrued interest to be converted.
Amounts outstanding under this Note may not be prepaid; provided, however, that
Maker may convert all or a portion of any unpaid principal or accrued interest
at any time after 60 days from the date hereof by written notice to Holder
specifying the amount of unpaid principal and accrued interest to be converted.
Promptly after any such conversion notice, Holder shall surrender to Maker this
Note, and Maker shall deliver to Holder duly executed stock certificates
representing the Common Stock into which such debt is being converted (along
with a substitute promissory note representing any unconverted debt, if
necessary).
If this Note is not paid in accordance with the terms hereof, Maker agrees
to pay all costs and expenses of collection when incurred, including, without
limitation, reasonable attorneys' fees and expenses and court costs.
Any notice given pursuant to this Note shall be in writing and shall
conform to the requirements set forth in the Loan Agreement dated as of February
29, 2000 between Maker and Holder.
This Note shall be governed by and construed and enforced in accordance
with the internal laws of the State of California.
<PAGE>
Maker expressly waives presentment for payment, notice of dishonor,
protest, notice of protest, and diligence in collection.
PCSUPPORT.COM, INC.
By:__________________________________
Name:
Title:
<PAGE>
EXHIBIT 4.4
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON THEIR EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED UNLESS
COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT, OR AN OPINION OF
COUNSEL SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY SUCH TRANSFER IS
EXEMPT FROM SUCH REGISTRATION.
PCSUPPORT.COM, INC.
COMMON STOCK
PURCHASE WARRANT
1. Issuance. For value received, the receipt of which is hereby
--------
acknowledged by PCSupport.com, Inc., a Nevada corporation (the "Company"),
_____________, or registered assigns (the "Holder"), is hereby granted the right
to purchase, at any time until March 10, 2002 (the "Expiration Date"),
_______________ fully paid and nonassessable shares of the Company's common
stock, par value $.001 (the "Common Stock"), at an exercise price of (a) $2.00
per share for the period from the date hereof until the day before the one year
anniversary from the date hereof and (b) $2.50 per share for the period
beginning on the one year anniversary from the date hereof and ending on the
Expiration Date (in either case, the "Exercise Price"), subject to adjustments
as set forth in Section 6 hereof.
2. Exercise of Warrants.
--------------------
2.1 Payment of Exercise Price; Cashless Exercise. Beginning on the
--------------------------------------------
ninety-first day from the date hereof, this Warrant is exercisable in whole or
in part at the Exercise Price per share of Common Stock payable hereunder,
payable in cash or by certified or official bank check. The Holder may also
elect a "cashless" exercise, in which
X = (M - P) * N
-----------
M
X is the number of shares of Common Stock to be received by the Holder
upon the "cashless" exercise;
M is the fair market value of a share of Common Stock on the date of
exercise. If the stock is regularly quoted on a recognized securities market,
its fair market value shall be the closing price of the Common Stock on the date
of exercise; however, if no closing price is available, then the average of the
high bid and low asked price on that day will be used. In the absence of an
established market, the fair market value shall be determined in good faith by
the Company's Board of Director;
P is the Exercise Price; and
N is the number of shares submitted for cashless exercise, with the
maximum number being the shares subject to this Warrant.
1
<PAGE>
2.2 Procedure for Exercise. Upon surrender of this Warrant with the
----------------------
annexed Notice of Exercise Form duly executed, together with payment of the
Exercise Price for the shares of Common Stock purchased, the Holder shall be
entitled to receive a certificate or certificates for the shares of Common Stock
so purchased.
3. Reservation of Shares. The Company hereby agrees that at all times
---------------------
during the term of this Warrant there shall be reserved for issuance upon
exercise of this Warrant such number of shares of its Common Stock as shall be
required for issuance upon exercise of this Warrant (the "Warrant Shares").
4. Mutilation or Loss of Warrant. Upon receipt by the Company of
-----------------------------
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) receipt of
reasonably satisfactory indemnification, and (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will execute and deliver
a new Warrant of like tenor and date and any such lost, stolen, destroyed or
mutilated Warrant shall thereupon become void.
5. No Rights as Shareholder. The Holder shall not, by virtue hereof, be
------------------------
entitled to any rights of a shareholder of the Company, either at law or in
equity, and the rights of the Holder are limited to those expressed in this
Warrant and are not enforceable against the Company except to the extent set
forth herein.
6. Effect of Certain Transactions
------------------------------
6.1 Adjustments for Stock Splits, Stock Dividends Etc. If the number
-------------------------------------------------
of outstanding shares of Common Stock of the Company are increased or decreased
by a stock split, reverse stock split, stock dividend, stock combination,
recapitalization or the like, the Exercise Price and the number of shares
purchasable pursuant to this Warrant shall be adjusted proportionately so that
the ratio of (i) the aggregate number of shares purchasable by exercise of this
Warrant to (ii) the total number of shares outstanding immediately following
such stock split, reverse stock split, stock dividend, stock combination,
recapitalization or the like shall remain unchanged, and the aggregate purchase
price of shares issuable pursuant to this Warrant shall remain unchanged.
6.2 [Intentionally omitted.]
6.3 Adjustments for Reorganization, Mergers, Consolidations or Sales
----------------------------------------------------------------
of Assets. If at any time there is a capital reorganization of the Common Stock
- ---------
(other than a recapitalization, combination, or the like provided for elsewhere
in this Section 6) or merger or consolidation of the Company with another
corporation or the sale of all or substantially all of the Company's properties
and assets to any other person, then, as a part of such reorganization, merger,
consolidation or sale, provision shall be made so that the Holder shall
thereafter be entitled to receive upon exercise of this Warrant (and only to the
extent this Warrant is exercised), the number of shares of stock or other
securities or property of the Company, or of the successor corporation resulting
from such merger or consolidation or sale, to which a holder of Common Stock, or
other securities, deliverable upon the exercise of this Warrant would otherwise
have been entitled on such capital reorganization, merger, consolidation or
sale. In any such case, appropriate adjustments shall be made in the
application of the provisions of this Section 6
2
<PAGE>
(including adjustment of the Exercise Price then in effect and number of Warrant
Shares purchasable upon exercise of this Warrant) which shall be applicable
after such events.
7. Transfer to Comply with the Securities Act. This Warrant has not been
------------------------------------------
registered under the Securities Act of 1933, as amended, (the "Act") and has
been issued to the Holder for investment and not with a view to the distribution
of either the Warrant or the Warrant Shares. Neither this Warrant nor any of
the Warrant Shares or any other security issued or upon exercise of this Warrant
may be sold, transferred, pledged or hypothecated in the absence of an effective
registration statement under the Act relating to such security or an opinion of
counsel satisfactory to the Company that registration is not required under the
Act. Each certificate for the Warrant, the Warrant Shares and any other
security issued or issuable upon exercise of this Warrant shall contain a legend
in form and substance satisfactory to counsel for the Company, setting forth the
restrictions on transfer contained in this Section.
8. Registration Rights. Pursuant to the Term Sheet entered into by the
-------------------
Company and Mike Lee and Associates dated on or about February 24, 2000, the
Company agrees to promptly prepare and file the appropriate registration
statement with the Securities and Exchange Commission covering the Warrant
Shares and to keep such registration current for a period of two years from the
date hereof.
9. Notices. Any notice or other communication required or permitted
-------
hereunder shall be in writing and shall be delivered personally or sent by
certified, registered or express mail, postage pre-paid. Any such notice shall
be deemed given when so delivered personally, or if mailed, two days after the
date of deposit in the United States mails, as follows:
If to the Company, to:
PCSupport.com, Inc.
Suite 280, 4400 Dominion Street
Burnaby, British Columbia, Canada
Attention: David W. Rowat, Vice President,
Finance and Business Development
With a copy to:
Troy & Gould Professional Corporation
1801 Century Park East, 16th Floor
Los Angeles, CA 90067
Attention: Sanford J. Hillsberg, Esq.
If to the Holder, to:
[Insert address.]
Any party may designate another address or person for receipt of notices
hereunder by notice given to the other parties in accordance with this Section.
10. Supplements and Amendments; Whole Agreement. This Warrant may be
-------------------------------------------
amended or supplemented only by an instrument in writing signed by the parties
hereto. This
3
<PAGE>
Warrant contains the full understanding of the parties hereto with respect to
the subject matter hereof, and there are no representations, warranties,
agreements or understandings other than expressly contained herein.
11. Governing Law. This Warrant shall be deemed to be a contract made
-------------
under the laws of the State of Nevada and for all purposes shall be governed by
and construed in accordance with the laws of such State applicable to contracts
to be made and performed entirely within such State.
12. Counterparts. This Warrant may be executed in any number of
------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
13. Descriptive Headings. Descriptive headings of the several Sections of
--------------------
this Warrant are inserted for convenience only and shall not control or affect
the meaning or construction of any of the provisions hereof.
14. Assignability. This Warrant or any part thereof may be hereafter
-------------
assigned by the Holder to any accredited investor executing documents reasonably
required by the Company. Any such assignment shall be binding on the Company
and shall inure to the benefit of any such assignee.
[Signature page follows.]
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of
March 8, 2000.
PCSUPPORT.COM, INC.
By:________________________________
Name:
Title:
5
<PAGE>
NOTICE OF EXERCISE OF WARRANT
The undersigned hereby irrevocably elects to exercise the right,
represented by the Warrant dated as of _______________________________ to
purchase _____________ shares of the Common Stock of PCSupport.com, Inc., and
tenders herewith payment in accordance with Section 2 of the Common Stock
Purchase Warrant.
Please deliver the stock certificate to:
______________________________________
______________________________________
______________________________________
Dated:___________________
By:______________________
CASH: $_____________________
6
<PAGE>
EXHIBIT 4.5
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON THEIR EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED UNLESS
COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT, OR AN OPINION OF
COUNSEL SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY SUCH TRANSFER IS
EXEMPT FROM SUCH REGISTRATION.
PCSUPPORT.COM, INC.
COMMON STOCK
PURCHASE WARRANT
1. Issuance. For value received, the receipt of which is hereby
--------
acknowledged by PCSupport.com, Inc., a Nevada corporation (the "Company"),
______________, or registered assigns (the "Holder"), is hereby granted the
right to purchase, at any time until March 10, 2002 (the "Expiration Date"),
_______________ fully paid and nonassessable shares of the Company's common
stock, par value $.001 (the "Common Stock"), at an exercise price of (a) $1.25
per share for the period from the date hereof until the day before the one year
anniversary from the date hereof and (b) $1.75 per share for the period
beginning on the one year anniversary from the date hereof and ending on the
Expiration Date (in either case, the "Exercise Price"), subject to adjustments
as set forth in Section 6 hereof.
2. Exercise of Warrants.
--------------------
2.1 Payment of Exercise Price; Cashless Exercise. Beginning on the
--------------------------------------------
ninety-first day from the date hereof, this Warrant is exercisable in whole or
in part at the Exercise Price per share of Common Stock payable hereunder,
payable in cash or by certified or official bank check. The Holder may also
elect a "cashless" exercise, in which
X = (M - P) * N
-----------
M
X is the number of shares of Common Stock to be received by the Holder
upon the "cashless" exercise;
M is the fair market value of a share of Common Stock on the date of
exercise. If the stock is regularly quoted on a recognized securities market,
its fair market value shall be the closing price of the Common Stock on the date
of exercise; however, if no closing price is available, then the average of the
high bid and low asked price on that day will be used. In the absence of an
established market, the fair market value shall be determined in good faith by
the Company's Board of Director;
P is the Exercise Price; and
N is the number of shares submitted for cashless exercise, with the
maximum number being the shares subject to this Warrant.
1
<PAGE>
2.2 Procedure for Exercise. Upon surrender of this Warrant with the
----------------------
annexed Notice of Exercise Form duly executed, together with payment of the
Exercise Price for the shares of Common Stock purchased, the Holder shall be
entitled to receive a certificate or certificates for the shares of Common Stock
so purchased.
3. Reservation of Shares. The Company hereby agrees that at all times
---------------------
during the term of this Warrant there shall be reserved for issuance upon
exercise of this Warrant such number of shares of its Common Stock as shall be
required for issuance upon exercise of this Warrant (the "Warrant Shares").
4. Mutilation or Loss of Warrant. Upon receipt by the Company of
-----------------------------
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) receipt of
reasonably satisfactory indemnification, and (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will execute and deliver
a new Warrant of like tenor and date and any such lost, stolen, destroyed or
mutilated Warrant shall thereupon become void.
5. No Rights as Shareholder. The Holder shall not, by virtue hereof, be
------------------------
entitled to any rights of a shareholder of the Company, either at law or in
equity, and the rights of the Holder are limited to those expressed in this
Warrant and are not enforceable against the Company except to the extent set
forth herein.
6. Effect of Certain Transactions
------------------------------
6.1 Adjustments for Stock Splits, Stock Dividends Etc. If the number
-------------------------------------------------
of outstanding shares of Common Stock of the Company are increased or decreased
by a stock split, reverse stock split, stock dividend, stock combination,
recapitalization or the like, the Exercise Price and the number of shares
purchasable pursuant to this Warrant shall be adjusted proportionately so that
the ratio of (i) the aggregate number of shares purchasable by exercise of this
Warrant to (ii) the total number of shares outstanding immediately following
such stock split, reverse stock split, stock dividend, stock combination,
recapitalization or the like shall remain unchanged, and the aggregate purchase
price of shares issuable pursuant to this Warrant shall remain unchanged.
6.2 [Intentionally omitted.]
6.3 Adjustments for Reorganization, Mergers, Consolidations or Sales
----------------------------------------------------------------
of Assets. If at any time there is a capital reorganization of the Common Stock
- ---------
(other than a recapitalization, combination, or the like provided for elsewhere
in this Section 6) or merger or consolidation of the Company with another
corporation or the sale of all or substantially all of the Company's properties
and assets to any other person, then, as a part of such reorganization, merger,
consolidation or sale, provision shall be made so that the Holder shall
thereafter be entitled to receive upon exercise of this Warrant (and only to the
extent this Warrant is exercised), the number of shares of stock or other
securities or property of the Company, or of the successor corporation resulting
from such merger or consolidation or sale, to which a holder of Common Stock, or
other securities, deliverable upon the exercise of this Warrant would otherwise
have been entitled on such capital reorganization, merger, consolidation or
sale. In any such case, appropriate adjustments shall be made in the
application of the provisions of this Section 6
2
<PAGE>
(including adjustment of the Exercise Price then in effect and number of Warrant
Shares purchasable upon exercise of this Warrant) which shall be applicable
after such events.
7. Transfer to Comply with the Securities Act. This Warrant has not been
------------------------------------------
registered under the Securities Act of 1933, as amended, (the "Act") and has
been issued to the Holder for investment and not with a view to the distribution
of either the Warrant or the Warrant Shares. Neither this Warrant nor any of
the Warrant Shares or any other security issued or upon exercise of this Warrant
may be sold, transferred, pledged or hypothecated in the absence of an effective
registration statement under the Act relating to such security or an opinion of
counsel satisfactory to the Company that registration is not required under the
Act. Each certificate for the Warrant, the Warrant Shares and any other
security issued or issuable upon exercise of this Warrant shall contain a legend
in form and substance satisfactory to counsel for the Company, setting forth the
restrictions on transfer contained in this Section.
8. Registration Rights. Pursuant to the Term Sheet entered into by the
-------------------
Company and Mike Lee and Associates dated on or about February 24, 2000, the
Company agrees to promptly prepare and file the appropriate registration
statement with the Securities and Exchange Commission covering the Warrant
Shares and to keep such registration current for a period of two years from the
date hereof.
9. Notices. Any notice or other communication required or permitted
-------
hereunder shall be in writing and shall be delivered personally or sent by
certified, registered or express mail, postage pre-paid. Any such notice shall
be deemed given when so delivered personally, or if mailed, two days after the
date of deposit in the United States mails, as follows:
If to the Company, to:
PCSupport.com, Inc.
Suite 280, 4400 Dominion Street
Burnaby, British Columbia, Canada
Attention: David W. Rowat, Vice President,
Finance and Business Development
With a copy to:
Troy & Gould Professional Corporation
1801 Century Park East, 16th Floor
Los Angeles, CA 90067
Attention: Sanford J. Hillsberg, Esq.
If to the Holder, to:
[Insert address.]
Any party may designate another address or person for receipt of notices
hereunder by notice given to the other parties in accordance with this Section.
10. Supplements and Amendments; Whole Agreement. This Warrant may be
-------------------------------------------
amended or supplemented only by an instrument in writing signed by the parties
hereto. This
3
<PAGE>
Warrant contains the full understanding of the parties hereto with respect to
the subject matter hereof, and there are no representations, warranties,
agreements or understandings other than expressly contained herein.
11. Governing Law. This Warrant shall be deemed to be a contract made
-------------
under the laws of the State of Nevada and for all purposes shall be governed by
and construed in accordance with the laws of such State applicable to contracts
to be made and performed entirely within such State.
12. Counterparts. This Warrant may be executed in any number of
------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
13. Descriptive Headings. Descriptive headings of the several Sections of
--------------------
this Warrant are inserted for convenience only and shall not control or affect
the meaning or construction of any of the provisions hereof.
14. Assignability. This Warrant or any part thereof may be hereafter
-------------
assigned by the Holder to any accredited investor executing documents reasonably
required by the Company. Any such assignment shall be binding on the Company
and shall inure to the benefit of any such assignee.
[Signature page follows.]
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of
March 8, 2000.
PCSUPPORT.COM, INC.
By:______________________________
Name:
Title:
5
<PAGE>
NOTICE OF EXERCISE OF WARRANT
The undersigned hereby irrevocably elects to exercise the right,
represented by the Warrant dated as of _______________________________ to
purchase _____________ shares of the Common Stock of PCSupport.com, Inc., and
tenders herewith payment in accordance with Section 2 of the Common Stock
Purchase Warrant.
Please deliver the stock certificate to:
______________________________________
______________________________________
______________________________________
Dated:_____________________
By:________________________
CASH: $_____________________
6
<PAGE>
EXHIBIT 10.1
PCSUPPORT.COM INC.
DIRECTORS, OFFICERS AND SENIOR MANAGEMENT
STOCK OPTION PLAN
1. ESTABLISHMENT AND PURPOSE
There is hereby established the PCsupport.com Inc. Directors, Officers and
Senior Management Stock Option Plan (the "Directors and Senior Management Plan"
or the "Plan"). The purpose of the Directors and Senior Management Plan is to
provide a means whereby PCsupport.com Inc., incorporated under the laws of the
state of Nevada (the "Company"), may, through the grant of options to purchase
common shares of the Company ("Shares") to directors, officers, consultants and
senior full-time and part-time employees of the Company and to companies
providing management services to the Company, attract and retain persons of
ability as directors, officers, consultants, senior full-time and part-time
employees and management services companies, and motivate such persons to exert
their best efforts on behalf of the Company and any subsidiary of the Company.
Persons shall be deemed to be "consultants" if they are under contract to
perform services for the Company, but are not employees of the Company. Persons
shall be deemed to be "part-time" employees of the Company if they are hired to
work on a regular basis, averaging less than 40 hours per week for operational
staff or less than 37.5 hours per week for clerical staff; or are hired for a
temporary assignment or for a specific project.
2. NUMBER OF SHARES AVAILABLE UNDER THE PLAN
The Company is hereby authorized to grant share purchase options
("Options") from time to time to directors, officers, consultants and full-time
and part-time employees of the Company or of any Subsidiary thereof to purchase
Shares and such shares are hereby conditionally allotted and shall be reserved
for issue upon exercise of Options, subject to adjustment as provided for in
paragraphs 4(h) and 4(i) and subject further to the limitations as to number and
other provisions herein set forth. If any Option shall terminate, expire or,
with the consent of the optionee, be cancelled as to any shares, a new Option
may thereafter be granted covering such Shares. The number of Shares available
for grant of Options under the Plan, subject to Options and reserved for
issuance pursuant to the Plan or subject to options or reserved for issuance
pursuant to any other employee share purchase or option plan of the Company, or
any proposed share compensation arrangements shall not at any time result in:
a) the number of Shares reserved for issuance pursuant to stock options
granted to insiders exceeding 15% of the outstanding issue;
b) the issuance to insiders, within a one-year period, of a number of
shares exceeding 15% of the outstanding issue; or
<PAGE>
-2-
c) the issuance to any individual, within a one-year period, of a number
of shares exceeding 5% of the outstanding issue.
For the purposes of paragraphs 2(b) and 2(c), "outstanding issue" is determined
on the basis of the total number of Shares in the Company that are outstanding
immediately prior to the share issuance in question, excluding shares issued
pursuant to share compensation arrangements over the preceding one-year period.
For the purposes of paragraphs 2(a), 2(b) and 2(c), an entitlement granted prior
to the grantee becoming an insider will be excluded in determining the number of
shares issuable to insiders.
3. ADMINISTRATION
The Directors and Senior Management Plan shall be administered under the
supervision of the Board of Directors of the Company or by a duly appointed
executive committee of the Board of Directors (both of which are referred to
herein as the "Board").
Subject to the provisions of the Directors and Senior Management Plan, the
Board shall have the power to (a) determine and designate from time to time
those directors, officers, consultants and senior full-time and part-time
employees of the Company or of any Subsidiary to whom Options are to be granted
and the number of Shares to be optioned to each of such director, officer,
consultant and senior full-time and part-time employee; and (b) determine the
time or times when, and the manner in which, each Option shall be exercisable
and the duration of the exercise period.
An individual who has been granted an Option may, if he is otherwise
eligible, be granted an additional option or options under the Directors and
Senior Management Plan or any other option or purchase plans of the Company if
the Board shall so determine.
The Board may interpret the Directors and Senior Management Plan,
prescribe, amend and rescind any rules and regulations necessary or appropriate
for the administration of the Directors and Senior Management Plan, and make
such other determinations and take such other action as it deems necessary or
advisable. Without limiting the generality of the foregoing sentence, the Board
may, in its discretion, treat all or any portion of any period during which an
optionee is on an approved leave of absence from the Company or a Subsidiary as
a period of employment or directorship of such optionee by the Company or such
Subsidiary, as the case may be, for the purpose of accrual of his rights under
his Option. Any interpretation, determination or other action made or taken by
the Board shall be final, binding and conclusive.
4. TERMS AND CONDITIONS
Each Option shall be evidenced by an agreement (a "Stock Option
Agreement"), in form approved by the Board, which shall be subject to the
following express terms and conditions and to such other terms and conditions as
the Board may deem appropriate.
<PAGE>
-3-
a) Option Period. Each Option Agreement shall specify the period for
which the Option granted thereunder is exercisable (which in no event
shall exceed five years from the date of grant) and shall provide that
the Option shall expire at the end of such period.
b) Option Price. The option price per Share shall be determined by the
Board at the time any Option is granted, provided:
i) if the Shares are listed for trading on a public stock exchange,
the minimum exercise price per Share shall be the average market
price for the twenty trading days immediately preceding the day
on which the Option is granted; and
ii) if the Shares are not listed for trading on a public stock
exchange, the minimum exercise price per Share shall be the fair
value of the Shares as at the day the Option is granted, as
determined by the Board.
c) Payment of Purchase Price Upon Exercise. The purchase price of the
Shares issued on exercise of an Option shall be paid in cash or
certified cheque to the Company at the time of exercise.
d) Death or Termination of Employment. If:
i) an optionee shall die while (A) an employee of the Company or of
a Subsidiary or a director of the Company, or (B) within 30 days
after termination of his employment with the Company or a
Subsidiary or his directorship in the Company in accordance with
clause (ii), his Option may be exercised, to the extent that the
optionee shall have been entitled to do so at the date of death,
by the person or persons to whom the optionee's rights under the
Option pass by will or applicable law, or if no such person has
such right, by his executors or administrators, at any time, or
from time to time, within one year of the date of death, but in
any event not later than the expiration date specified in
accordance with subparagraph 4(a); and
ii) an optionee's employment by the Company or a Subsidiary or his
directorship in the Company shall terminate for any reason
whosoever, he may exercise his Option, to the extent that he may
be entitled to do so at the date of the termination of his
employment, or directorship, at any time, or from time to time,
within 30 days of the date of termination of his employment, or
directorship, but in any event not later than the expiration date
specified in accordance with subparagraph 4(a).
e) Non-transferability. No Option shall be transferable other than by
will or by the laws of descent and distribution. During the lifetime
of an optionee, an Option shall be exercisable only by him.
<PAGE>
-4-
f) Qualification. Each Option shall be subject to the requirement that if
at any time the Board shall determine, in its discretion, that the
registration, qualification or other approval of or in connection with
the Directors and Senior Management Plan or the Shares covered thereby
is necessary or desirable under any provincial, state or federal law,
then such Option may not be exercisable, in whole or in part, unless
and until such registration, qualification or approval shall have been
obtained free of any condition not acceptable to the Board. The
optionee shall, to the extent applicable, cooperate with the Company
in relation thereto and shall have no claim or cause of action against
the Company or any of its officers or directors as a result of any
failure by the Company to take any steps to obtain any such
registration, qualification or approval. The grant of Options and the
issuance of Shares under the Directors and Senior Management Plan
shall be carried out in compliance with all applicable statutes,
regulations of governmental authorities and applicable stock
exchanges.
g) Adjustments in Event of Change in Shares. In the event of a change in
the Shares by reason of any stock dividend, recapitalization,
reorganization, merger, consolidation, subdivision, combination,
exchange of shares or any similar change affecting the Shares, the
number and kind of Shares which thereafter may be optioned and sold
under the Directors and Senior Management Plan and the number and kind
of Shares subject to option in outstanding option agreements and the
purchase price per Share thereof shall be appropriately adjusted
consistent with such change in such manner as the Board may deem
equitable and prevent substantial dilution or enlargement of the
rights granted to, or available for, participants in the Directors and
Senior Management Plan.
h) Amalgamation or Merger. If the Company amalgamates or merges with any
other company or companies by way of arrangement, sale of its assets
and undertakings or otherwise, the Company shall ensure that all
Options then outstanding will be allowed to be carried forward
following such event of amalgamation or merger and that each optionee
shall have an election:
(A) to carry his Option forward and the number of shares in the
corporation resulting from such amalgamation or merger which
are under Option shall be the number of shares in such
corporation which the optionee would have received if he had
exercised his Option in full prior to the date of such
amalgamation or merger and the purchase price of such
corporation shall be appropriately set; or
(B) to exercise his Option in full prior to the date of such
amalgamation or merger notwithstanding any provision of the
particular Option agreement entered into by such optionee
relating to the timing of exercise of the shares held under
such Option.
i) Control Change. If there is a Control Change then the Company will
forthwith notify all optionees in writing of such fact and each
optionee shall have the right
<PAGE>
-5-
to either (A) exercise any Options then outstanding but not vested in
accordance with the terms of the applicable Stock Option Agreement
within the ten day period following the Control Change notwithstanding
any provision of the applicable Stock Option agreement entered into by
such optionee relating to the timing of exercise of the Options or (B)
not exercise any Options then outstanding but carry his Option forward
in accordance with all the terms of the Plan and the applicable Stock
Option Agreement.
For purposes of this section:
"Control Change" means the occurrence of both:
(A) the acquisition or continuing ownership of securities
("Convertible Securities") convertible into, exchangeable for or
representing the right to acquire shares of the Company and/or
shares of the Company as a result of which a person, group of
persons or person acting jointly or in concert, or persons
associated or affiliated within the meaning of the statute under
which the Company is incorporated with any such person, group of
persons or any of such persons acting jointly or in concert
(collectively, "Acquirors"), beneficially own shares of the
Company and/or Convertible Securities such that, assuming only
the conversion, exchange or exercise of Convertible Securities
beneficially owned by the Acquirors, the Acquirors would
beneficially own shares that would entitle the holders thereof to
cast more than 20% of the votes attaching to all shares in the
capital of the Company that may be cast to elect Directors of the
Company; and
(B) the exercise of the voting power of all or any such shares so as
to cause or result in the election of two or more directors of
the Company who were not Incumbent Directors.
"Incumbent Director" means any member of the Board of Directors of the
Company who was a member of the Board of Directors of the Company
immediately prior to a Control Change and any successor to an
Incumbent Director who was recommended or elected or appointed to
succeed any Incumbent Director by the affirmative vote of the
Directors when that affirmative vote includes the affirmative vote of
a majority of the Incumbent Directors then on the Board of Directors
of the Company.
j) Liquidation. In the event the Board shall adopt a plan of complete
liquidation, all Options shall become immediately exercisable in full,
notwithstanding that they were initially granted on an installment
basis.
k) No Rights as Shareholder. No optionee shall have any rights as a
shareholder with respect to any shares subject to his Option prior to
the date of issuance to him of a certificate or certificates for such
Shares.
<PAGE>
-6-
l) No Rights to Continued Employment. The Directors and Senior Management
Plan and any Option granted under the Directors and Senior Management
Plan shall not confer upon any optionee any right with respect to
continuance of employment by the Company or any Subsidiary, nor shall
they interfere in any way with the right of the Company or any
Subsidiary by which an optionee is employed to terminate his
employment at any time in accordance with applicable law.
5. AMENDMENT AND DISCONTINUANCE
The Board may from time to time amend (subject to regulatory approval)
suspend, terminate or discontinue the Directors and Senior Management Plan.
Without the written consent of an optionee, no amendment or suspension of the
Directors and Senior Management Plan shall alter or impair any Option granted to
him under the Directors and Senior Management Plan.
6. PROCEEDS FROM SALE OF SHARES
Any cash proceeds from the sale of Shares issued upon exercise of the
Options shall be added to the general funds of the Company and shall thereafter
be used from time to time for such corporate purposes as the Board may
determine.
7. GENDER
Wherever the masculine is used herein it will be deemed to include the
feminine.
<PAGE>
EXHIBIT 10.2
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT made as of the _____ day of ____________ between
PCSUPPORT.COM INC., a corporation under the laws of the state of Nevada (herein
called the "Company"), and _______________________________ (herein called the
"Optionee").
WITNESSES THAT WHEREAS:
A. The Optionee is a director, officer, consultant or senior full-time or
part-time employee of the Company or of a subsidiary of the Company, or a
company providing management services to the Company.
B. The Company has established a Directors and Senior Management Plan (the
"Plan") for the purpose of motivating directors, officers, consultants,
senior full-time and part-time employees and management services companies
("Qualified Persons") to exert their best efforts on behalf of the Company
and any subsidiary of the Company.
C. The Company has agreed to grant to the Optionee an option to purchase
common shares in the capital of the Company on the terms and subject to the
conditions contained herein.
NOW THEREFORE, in consideration of the sum of $10 paid by the Optionee to
the Company and other valuable consideration, the receipt of which is hereby
acknowledged by the Company, and in consideration of the mutual agreements and
their respective covenants contained herein, the parties hereby agree to the
following terms and the Company grants the following option:
1. OPTION
1.01 The Company hereby grants to the Optionee, upon the terms and subject to
the conditions contained herein and subject to all the terms and provisions of
the Plan, the right (herein called the "Option"), exercisable only during the
period (the "Option Period") provided in paragraph 1.02 hereof, to require the
Company to sell to the Optionee ___________ common shares (herein called the
"Optioned Shares") in the capital of the Company, at a price (herein called the
"Exercise Price") of $_________ per share.
1.02 The Option shall be irrevocable until and including _______________ and
shall, upon the expiration of the Option Period, immediately expire and
terminate and be of no further force or effect whatsoever with respect to those
of the Optioned Shares in respect of which the Option has not by that time been
exercised. The Option shall vest in the Optionee in __ equal tranches at the
rate of one tranche per month commencing _______, 1999 and the Optionee shall
not be entitled to exercise the Option in respect of any Optioned Shares except
when and if the aggregate number of Optioned Shares in respect of which the
Optionee has vested rights exceeds the number of Options exercised by the
Optionee.
1.03 If the Optionee ceases during the Option Period to be a Qualified Person,
the Option shall, upon the termination of the Option Period or the date upon
which the Optionee so ceases,
<PAGE>
-2-
whichever is earlier, cease and terminate and be of no further force or effect
whatsoever 30 days after such termination with respect to those of the Optioned
Shares in respect of which the Option has not by that time been exercised.
1.04 If the Optionee by reason of his death ceases during the Option Period to
be a Qualified Person, the Optionee's executor or other personal representative
shall be entitled during the Option Period or during the period of one year
following the Optionee's death, whichever is the shorter period, to exercise the
Option in the same manner and to the same extent as the Optionee was entitled
immediately prior to the time of his death, following which period the Option
shall immediately cease and terminate and be of no further force and effect
whatsoever with respect to the Optioned Shares in respect of which the Option
has not by that time been exercised.
1.05 The grant of the Option contained herein and every exercise of the Option
and every term of this agreement and every amendment hereto shall be subject to
the requirements and restrictions (if any) and to the approval (if required) of
the appropriate securities and other relevant regulatory authorities. The
Company will exercise its best efforts to obtain all such regulatory,
shareholder and other approvals as may be required in connection with the
granting or exercise of the Option, and the Optionee will cooperate to the
extent reasonably necessary to obtain such approvals.
2. MANNER OF EXERCISE OF OPTION
2.01 Subject to the provisions hereof, the Optionee shall be entitled to
exercise the Option with respect to all or from time to time any part of the
Optioned Shares.
2.02 Subject to the provisions hereof, the Option shall be exercisable in whole
or from time to time in part by the Optionee delivering a notice (a "Notice") in
writing to the Company's registered office. The Notice shall specify the number
of Optioned Shares in respect of which the Option is being exercised at that
time and shall be accompanied by payment, by bank draft or certified cheque, in
full of the Exercise Price for the number of Optioned Shares specified in the
Notice. Subject to the provisions hereof, every such exercise of the Option
shall constitute a binding agreement for the purchase and sale of the Optioned
Shares specified in the Notice. Upon an exercise of the Option as aforesaid, the
Company will, subject to the provisions hereof, forthwith deliver to the
Optionee at the most recent address for the Optionee indicated on the records of
the Company (or as the Optionee shall have otherwise directed in the Notice) a
certificate in the name of the Optionee representing the Optioned Shares
purchased.
2.03 Nothing contained herein or done pursuant hereto shall oblige the Optionee
to purchase or pay for any Optioned Shares except those Optioned Shares in
respect of which the Optionee shall have exercised the Option in the manner
herein provided.
2.04 The Optionee shall have no rights whatsoever as a shareholder of the
Company in respect of any of the Optioned Shares (including without limitation
any right to vote or to receive dividends or any other distribution therefrom or
thereon) other than the Optioned Shares in respect of which the Optionee shall
have exercised the Option in the manner provided herein and which shall have
accordingly been issued to the Optionee by the Company.
<PAGE>
-3-
3. GENERAL
3.01 The Optionee and the Company represent that the Optionee is a Qualified
Person.
3.02 Time shall be of the essence of this agreement.
3.03 This instrument shall be governed by and construed in accordance with the
laws of the Province of British Columbia.
3.04 In this instrument, unless there is something in the subject matter or the
context inconsistent therewith:
a) words importing the singular include the plural and vice versa, words
importing gender include the masculine, feminine and neuter genders
and words importing a person include an individual, a body corporate,
and a partnership, syndicate and any other unincorporated association
of persons;
b) a reference to a paragraph, subparagraph, clause or schedule means
that paragraph, subparagraph or clause in or schedule attached to this
instrument;
c) the words "herein", "hereof", "hereunder", "hereby", "hereto" and
similar expressions refer to this instrument generally and not to any
particular paragraph, subparagraph, clause or other part or division
of this instrument; and
d) the insertion of titles and headings is for convenience of reference
only and shall not affect the interpretation hereof.
3.05 This instrument shall enure to the benefit of and be binding upon the
Company and its successors and assigns. This agreement shall be binding upon the
Optionee and his heirs executors, administrators, personal legal
representatives, successors and assigns. Except to the extent provided in
paragraph 1.04, this option agreement and the Option are non-assignable and non-
transferable by the Optionee.
IN WITNESS WHEREOF the parties hereto have executed this instrument as of
the date first above written.
PCSUPPORT.COM INC.
Per:
__________________________________
Authorized Signatory
<PAGE>
-4-
SIGNED, SEALED AND DELIVERED BY )
<> )
in the presence of )
)
)
_____________________________________ ) _____________________________________
Name ) <>
)
)
_____________________________________ )
Address )
)
)
_____________________________________ )
Occupation )
)
<PAGE>
EXHIBIT 10.3
AMENDMENT TO
STOCK POOLING AND ESCROW AGREEMENT - REVISED
THIS AGREEMENT made as of the 07/th/ day of March, 2000, among PCSUPPORT.COM
INC., a corporation under the laws of the state of Nevada (herein called the
"Company"), the persons listed on Schedule A attached hereto (herein called the
"Shareholders") and Owen, Bird, (the "Escrow Agent").
WITNESSES THAT WHEREAS:
A. The Parties entered into a Stock Pooling and Escrow Agreement dated July
31, 1999, and
B. The Parties wish to accelerate the release of certain shares held by Alan
Ackerman.
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein, the parties hereby agree as follows:
Amendment to Schedule C. The Escrow Agent shall be instructed to release
certificates from the Pooled Securities for Alan Ackerman according to the
following amended schedule:
March 6, 2000: 100,000
May 25, 2000: 0
November 25, 2000: 38,889
May 25, 2001: 86,111
IN WITNESS WHEREOF the parties hereto have executed this instrument as of
the date first above written.
PCSUPPORT.COM INC.
Per: _______________________________
Authorized Signatory
<PAGE>
-2-
SIGNED, SEALED AND DELIVERED BY )
STEVE MACBETH in the presence of )
)
)
___________________________________ )
Name ) /s/ Steve Macbeth
) -------------------------------------
) STEVE MACBETH
___________________________________ )
Address )
)
)
___________________________________ )
Occupation )
)
SIGNED, SEALED AND DELIVERED BY )
MICHAEL MCLEAN in the presence of )
)
)
___________________________________ )
Name ) /s/ Michael McLean
) -------------------------------------
) MICHAEL MCLEAN
___________________________________ )
Address )
)
)
___________________________________ )
Occupation )
)
SIGNED, SEALED AND DELIVERED BY )
CLIFF ROWLANDS in the presence of )
)
)
___________________________________ )
Name ) /s/ Cliff Rowlands
) -------------------------------------
) CLIFF ROWLANDS
___________________________________ )
Address )
)
)
___________________________________ )
Occupation )
)
<PAGE>
-3-
SIGNED, SEALED AND DELIVERED BY )
DAVID ROWAT in the presence of )
)
)
___________________________________ ) /s/ David Rowat
Name ) -------------------------------------
) DAVID ROWAT
)
___________________________________ )
Address )
)
)
___________________________________ )
Occupation )
)
SIGNED, SEALED AND DELIVERED BY )
ALAN ACKERMAN in the presence of )
)
)
___________________________________ ) /s/ Alan Ackerman
Name ) --------------------------------------
) ALAN ACKERMAN
)
___________________________________ )
Address )
)
)
___________________________________ )
Occupation )
)
ADVANCED FINANCIAL SERVICES INC. THE DROMOND GROUP LTD.
Per:_______________________________ Per:___________________________________
Authorized Signatory Authorized Signatory
<PAGE>
-4-
SCHEDULE A
SHAREHOLDERS
Name of Shareholder No. of Shares No. of Options and
Warrants
Advanced Financial Services Inc. 576,029 20,000
Alan Ackerman 225,000 0
David Rowat 200,000 100,000
Cliff Rowlands 0 100,000
Michael McLean 312,500 33,333
Steve Macbeth 312,500 33,333
The Dromond Group Ltd. 553,400 0
Totals
2,179,429 286,666
<PAGE>
EXHIBIT 10.4
[Letterhead of PCSupport.com, Inc.]
Term Sheet between
PCsupport.com, Inc. ("PCSP", "Borrower")
and
Mike Lee and Associates ("MLA")
Term Convertible Debt Facility.
All dollar amounts are referenced in US dollars.
Issuer: PCsupport.com, Inc.
MLA: Mike Lee and Associates, domiciled at 14 Woodbridge Road,
Hingham, MA, 02043.
Issue: US$1,000,000 Term Convertible Debt Facility. Debt is convertible,
together with interest accrued and unpaid, into Common Shares of
PCSP at a price of $2.00 per Common Share. This conversion will
occur anytime at Lender's discretion, or at Borrower's discretion
anytime after 60 days after the date of signing of the contract.
Such Common Shares to be registered as contemplated below.
Lender: Accredited Investors designated by MLA. Accredited Investors are
defined in Exhibit A.
Interest: This Debt Facility shall bear interest at a rate of 10% per
annum. Interest to accrue until Debt Facility is converted into
Common Shares.
Drawdown: At Borrower's request.
Security: Convertible Debt Facility to be secured by General Security
Agreement on the assets of PCSP (including, but not limited to
PCSP's URLs).
Prepayment: No prepayment feature.
Fee: MLA shall receive 1,000,000 'A' warrants and 5 00,000 'B'
warrants, each set of warrants will have a two-year term. Each
'A' warrant entities the holder to acquire one Common Share of
PCSP at a price of $1.25 in the first year and $1.75 in the
second year. Each 'B' warrant entitles the holder to acquire one
Common Share of PCSP at a price of $2.00 in the first year and
$2.50 in the second year. Prior to the Closing Date, MLA will
advise PCSP of the specific individuals or entities who are to
<PAGE>
receive such warrants. Immediately upon Closing, PCSP
will issue such warrants in accordance with such advice.
MLA may not exercise the warrants for a period of 90
days after the date of closing. The warrants will be
transferable at the option of the holder to accredited
investors.
Advisory Services: MLA will use best efforts to introduce PCSP to
significant retail, institutional, financial analyst and
nationally recognized investment banking opportunities
and provide general business advice. All reasonable
business-related expenses towards these introductions
will be paid by PCSP. Expenses greater than $1500 must
receive prior approval. The 'A' and 'B' warrants will
constitute the entire fee to MLA for such advisory
services until the time that PCSP is launched on the
NASDAQ Small Cap or National Markets exchange with
significant retail, institutional, analyst and
nationally-recognized investment banker support. At such
time, the parties will determine the future services to
be provided by MLA to PCSP, if any, and the compensation
for such future services.
Registration: PCSP commits, upon funding of the Convertible Debt
Facility, to immediately prepare and file with the
Securities and Exchange Commission a registration
statement under the Securities Act of 1933 as amended,
to register all of PCSP's Common Shares issuable upon
exercise of the 'A' and 'B' warrants, and all other
shares issuable upon conversion of the Convertible Debt
Facility, together with all other shares, options and
warrants which enjoy piggy-back registration rights or
which PCSP wishes to register at this time. The likely
format will be a Form SB-2. PCSP will maintain the
registration statement current for a period of two years
from the data of Closing of this transaction.
Term: This Debt Facility shall have a term ("Term") of 120
days. If at 60 days after the date of signing of the
contract, PCSP has not secured additional financing with
gross aggregate proceeds of at least US$2,000,000, MLA
agrees to, upon notification from PCSP, use best efforts
to provide financing for PCSP before the end of the Term
on terms approximately as follows: at least 1 million
Common Shares at a share price of at least $2.00 with
one-half warrant exercisable for one year at $2.00 per
share, with similar registration rights as contemplated
herein.
Acceptance: Signatures by facsimile will be acceptable to both
parties until original signed copies are in the
possession of both parties.
<PAGE>
AGREED:
/s/ David W. Rowat
- --------------------------------
PCsupport.com, Inc.
/s/ Michael Lee
- --------------------------------
Mike Lee and Assoc.
2-24-2000
- --------------------------------
Date
<PAGE>
EXHIBIT A
Definition of Accredited Investor
An "accredited investor" means:
(i) a natural person who either (a) has (along with his/her spouse)
a net worth which exceeds $1,000,000 at the time of the purchase or (b) has had
an individual income in excess of $200,000 (or a joint income with his/her
spouse which exceeds $300,000) for each of the two most recent years and has a
reasonable expectation of reaching the same income level (or joint income level)
in the current year;
(ii) any bank or savings and loan association acting in its
individual or fiduciary capacity, any registered broker-dealer, insurance
company, registered investment company, business development company, small
business investment company or employee benefit plan (a) if the investment
decision is made by a fiduciary which is a bank, savings and loan association,
insurance company or registered investment advisor or (b) if the plan has total
assets in excess of $5,000,000 or (c) if a self-directed plan, the investment
decisions are made solely by persons that are accredited investors;
(iii) any private business development company;
(iv) any organization under section 501(c)(3) of the Internal Revenue
Code, corporation, Massachusetts or similar business trust or partnership, not
formed for the specific purpose of acquiring the securities offered, with total
assets in excess of $5,000,000;
(v) any trust with assets in excess of $5,000,000 not formed for the
specific purpose of buying the securities offered, whose purchase is directed by
a "sophisticated person";
(vi) any director or executive officer of the issuer; or
(vii) any entity in which all equity owners are accredited investors.
<PAGE>
EXHIBIT 10.5
EMPLOYMENT CONTRACT
BETWEEN
PCSUPPORT.COM, INC. ("PCsupport.com")
AND
Michael G. McLean ("McLean")
1. Position: Chief Executive Officer.
2. Reporting: to the Board of Directors of PCsupport.com.
3. Start Date: March 1, 2000.
4. Salary: $8300 per month, increasing to $12,500 per month on April 1,
2000.
5. Compensation Committee Review. The Board of Directors of PCsupport.com
will establish a Compensation Committee. Such Committee will review the
compensation packages for all employees and contractors filling senior
executive positions and will cause such packages, including salary, cash
incentives and performance options, and severance obligations, to be
adjusted to industry standards for the technology industry in the Vancouver
area.
6. Cash Incentives. Subject to the Compensation Committee Review,
PCsupport.com will provide to McLean an annual Base Cash Incentive equal to
50% of annual salary, which will vary between 0 and 1.5 times the Base Cash
Incentive, subject to McLean's performance against mutually agreed
objectives.
7. Annual Review. PCsupport.com will review McLean's performance and
compensation package no less than annually.
8. Benefits:
8.1 Vacation. Four weeks paid vacation in each calendar year, to be
increased from time to time in accordance with PCsupport.com's standard
policy. Unused vacation period can accumulate only until August 31 of the
following year.
8.2 Health and other Benefits. According to such plans in place for all
PCsupport.com employees.
10. Severance. If PCsupport.com terminates McLean's contract other than for
cause, ("Termination"), PCsupport.com will provide nine months severance
plus one month for each year or partial year of employment or full-time
contract work. All termination payments will be made in a manner most tax-
efficient for McLean. Pursuant to clause 5, the Compensation Committee will
recommend compensation packages for the senior
<PAGE>
executives. Notwithstanding the provisions in this clause, if the
Compensation Committee recommends severance provisions that are more
beneficial to McLean in McLean's sole opinion, then such provisions will
apply and this clause will be deleted and the provisions recommended by the
Compensation Committee will take precedence.
11. Non-compete and non-disclosure. McLean agrees to be bound by non-compete
and non-disclosure agreements standard in the industry.
12. Non-assignment. This Contract may not be assigned without the prior
written consent of McLean.
AGREED:
For PCsupport.com: /s/ Steve Macbeth
-----------------------------------
Steve Macbeth
/s/ Mike McLean
-----------------------------------
Mike McLean
Date: ___________________________________
<PAGE>
EXHIBIT 10.6
NOTICE OF TERMINATION
31 March 2000
The Consulting Contract entered into between Dromond Technologies Group, Inc.
and PCsupport.com, Inc. is hereby terminated as of this date.
AGREED:
Per: PCsupport.com
/s/ David W. Rowat
----------------------------
David W. Rowat
Per: Dromond Technologies Group, Inc.
/s/ Steve Macbeth
----------------------------
Steve Macbeth
<PAGE>
EXHIBIT 10.7
Agreement Number: SWS990001
Purchasing Schedule No. 2
March 13, 2000
This Purchasing Schedule No. 2 ("Schedule") documents the product licenses
and services being purchased by Licensee under the terms and conditions of the
License Agreement dated December 29, 1999, between Motive Communications, Inc.,
a Delaware corporation with an office at 9211 Waterford Centre Blvd., Suite 100,
Austin, TX 78758 and PC Support.com ("Licensee"). In the event of conflict
between the License Agreement and this Schedule, the terms of this Schedule
shall control.
1. SOFTWARE PROGRAMS
Licensee is licensing the Infrastructure Software Programs specified below for a
period of thirteen months and two weeks (the "Term") commencing on the effective
date of this Schedule. During the Term, Licensee may deploy an unlimited number
of the Infrastructure Software Programs. In consideration for the twelve-month
use rights of the Infrastructure Software Programs granted hereunder Licensee
agrees to pay Motive an initial annual fee of $150,000. Upon execution of this
Schedule Motive shall issue an invoice for the $150,000.
Infrastructure Software Programs
--------------------------------
Motive Duet Server
Motive Solo Server
Motive Integration Server
Motive Support Desktop
Motive Studio
Motive Support Tuner (provided at no additional charge)
2. USE MODELS AND RIGHTS
A. Customers. Under this Schedule Licensee may use the Infrastructure Software
Programs to provide technical support to its Customers. For purposes of this
Schedule Customers are customers of Licensee that fall into the following
categories:
. PC Manufacturers that ship less than 149,000 units per year in North America.
One Authorized End User equals one unit of product. In the event Licensee
wishes to enter into Motive solution based discussions with PC Manufacturer
excluded from this definition, Licensee shall request permission from Motive
and provided Motive is not currently engaged with the PC Manufacturer the
parties will negotiate in good faith the best course of action with respect
to a Motive based solution for this PC Manufacturer.
. Internet Service Providers (ISP) that have less than 400,000 subscribers. One
Authorized End User equals one unique subscriber. Motive understands that due
to the nature of the ISP market a subscriber base may increase rapidly due to
mergers, acquisitions and other market factors. Provided Licensee has signed
a Motive based solution contract with an ISP with less than 400,000
subscribers prior to their growth beyond 400,000 subscribers Licensee may
continue to sell to this ISP. In the event that an ISP under a Motive based
solution contract
<PAGE>
merges with an ISP that is a current Motive customer, both parties shall work
together to find a mutually beneficial resolution.
. Small to Medium Companies - companies that have no more than 5,000 employees.
One Authorized End User equals one employee.
. Walk-In Customers - individual consumers to whom Licensee provides Motive
powered Internet based technical support via Licensee's Internet Web Site
www.pcsupport.com or some other Web Site powered by Licensee.
-----------------
With the exception of the Motive Support tuner, which may be distributed freely
to Customers, and the Motive Support Desktop and Motive Studio, as specified
below, all Infrastructure Software Programs must be located at a Licensee site
and may only be accessed or used by Licensee employees. Use of the Motive
Support Tuner shall be solely for receiving technical support through the Motive
system. Any distribution of the Motive Support Tuner, Motive Support Desktop or
Motive Studio, as provided for herein, shall be done under an agreement that
contains the same protections and restrictions contained in the License
Agreement. Licensee shall be liable for any obligations or liabilities over and
above those granted in the License Agreement.
With respect to working with ISP Customers (under Model I) and PC Manufacturer
Customers (under Model III) the following terms shall apply to the use of the
Motive Support Desktop and Motive Studio. Licensee may, upon Motive's prior
written approval, provide their Authorized Affiliates with the Motive Support
Desktop and Motive Studio. For purposes of this Schedule "Authorized
Affiliates" are individuals or companies with whom Licensee has entered into a
contract whereby this individual or company has been authorized by Licensee to
provide a portion (Level 1, 2 or 3) of the technical support to Licensee's
Customers. Any use of the Motive Support Desktop and Motive Studio by the
Authorized Affiliate shall be solely for collaborating and providing resolution
to technical support requests of Customers entitled to receive Motive based
technical support from Licensee. Licensee will escalate and communicate
technical support requests or issues to Authorized Affiliate using the Motive
Support Desktop. Any resolution or fix provided by Authorized Affiliate shall
be passed through the use of the Motive Support Desktop to Licensee who will in
turn provide this solution to the Customer. Prior to the distribution of the
Motive Support Desktop and Motive Studio Licensee must secure Motive's prior
written consent by providing a written request containing the name of the
Authorized Affiliate and the quantity of Motive Support Desktops and Motive
Studio that will be distributed or deployed.
B. Limited Functionality. During this Term, Licensee may provide Small to
Medium Companies and Walk-In Customers with limited self-service technical
support ("Limited Support"). Limited Support is restricted to the following
self-service capabilities: a) providing Internet browser self-service support,
and b) displaying to the Authorized End User the following PC data: memory, disk
space, shortcuts, system parameters, and resident hardware and software.
Limited Support may be provided to no more than 400,000 Authorized End Users
(Small to Medium Companies and Walk-In Customers only) that are not already
signed up to receive any type of service offering from Licensee that
incorporates Motive technology. Licensee will track this by assigning a Market
Building Self-Service License (MBSSL) to each Authorized End User. A MBSSL
allows an Authorized End User to receive Limited Support from Licensee through
the use of the Software Programs for a period of twelve (12) months from date of
2
<PAGE>
assignment. Licensee may use the MBSSL to harvest data from an Authorized End
User's PC and Licensee may use this data for internal purposes only. Licensee
may not use the data harvested with the MBSSL to leverage the selling of non-
Motive based products or services. These MBSSLs shall be distributed at no
charge to Authorized End Users.
MBSSL are not transferable. Upon Licensee's completion of the distribution of
the 400,000 MBSSLs, Licensee and Motive shall negotiate in good faith the terms
necessary for the distribution of additional MBSSLs at no additional charge. On
a quarterly basis Licensee shall provide Motive with a report detailing the
number of MBSSLs that were distributed in the previous quarter.
C. Full Functionality. Based on the following models, Licensee may deploy End
User Licenses. An End User License will enable an Authorized End User to
receive an unlimited amount of technical support from Licensee through the use
of the Infrastructure Software Programs. Based on the type of Customer, the
following fees and models shall apply.
I. Small to Medium Businesses, Walk-In and ISPs (defined above):
. For each Customer that signs up for Licensee's fee based Internet
technical support offering, Licensee shall assign the applicable number
of End User Licenses.
. End User Licenses must be purchased in quantities of at least 1,000 and
are not transferable.
. All End User Licenses are valid for twelve months starting from the
first day of the month following the date of order.
. Licensee will issue all orders on a Licensee purchase order with all
payment terms being net 30 from date of order.
. Orders may be placed at any time during the Term or any extension
thereof.
. During the first six months of the Term the price payable by Licensee to
Motive for each End User License shall be $14 per year. During the
remaining six months of the Term the per unit charge for the End User
Licenses shall be based on the cumulative price list (below). This means
the price shall be determined by adding the total quantity of End User
Licenses (excluding the MBSSLs) purchased under this model during the
initial six months of the Term and finding the corresponding fee on the
applicable row that represents the total number of End User Licenses
purchased to date under this Schedule.
-------------------------------------------------------
Number of End Users Annual Fee
-------------------------------------------------------
greater than 25,000 $25.00
-------------------------------------------------------
25,000 $21.00
-------------------------------------------------------
50,000 $17.50
-------------------------------------------------------
100,000 $14.00
-------------------------------------------------------
250,000 $11.00
-------------------------------------------------------
500,000 $ 8.50
-------------------------------------------------------
1,000,000 $ 6.25
-------------------------------------------------------
2,000,000 $ 4.50
-------------------------------------------------------
3
<PAGE>
II. ISP (as defined above) - Dialer Protection Service
. Under this model Licensee may only use Motive Solo Server and Motive
Support Tuner in conjunction with the End User License to support a
Dialer Application and network settings. A Dialer Application is used to
store, retrieve, and dial phone numbers via a modem to connect to an
ISP.
. End User Licenses must be purchased in quantities of at least 20,000 and
are not transferable.
. All End User License are valid for twelve months starting from the first
day of the month following the date of order.
. Licensee will issue all orders on a Licensee purchase order with all
payment terms being net 30 from date of order.
. Orders may be placed at any time during the Term or any extension
thereof.
. The fee payable by Licensee to Motive for the End User License under
this model shall be $1 per Authorized End User or 50% of Licensee's sale
price, whichever is greater.
III. PC Manufacturers (defined above)
. Licensee may resell End User Licenses to PC Manufacturers (defined
above) for distribution on said PC Manufacturer's product(s).
Distribution shall be one End User License for each personal computer
(PC).
. The End User Licenses distributed under this model shall be used solely
to deliver In-Warranty support to Authorized End Users through the use
of a co-branded online support portal.
. The co-branding of the support portal shall be a Licensee and PC
manufacture co-branding but shall maintain the Motive powered logo.
. This co-branded online support portal shall be powered by the
Infrastructure Software Programs licensed to Licensee hereunder and
Licensee shall maintain the support portal including the Infrastructure
Software Programs.
. With the exception of the Motive Support Tuner, which shall be included
on each unit of product shipped by the PC Manufacturer, the
Infrastructure Software Programs shall not be accessed or used by the PC
Manufacturer, its agents or subcontractors.
. End User Licenses must be purchased in quantities of at least 10,000 and
are not transferable.
. All End User Licenses are valid for twelve months starting from the
first day of the month following the date of order.
. Licensee will issue all orders on a Licensee purchase order with all
payment terms being net 30 from date of order.
. Orders may be placed at any time during the Term or any extension
thereof.
4
<PAGE>
. The fees payable by Licensee to Motive for the End User License under
this model shall be as specified in the table below.
------------------------------------------------------------
Number of End User Licenses Per Unit (PC) Fee
------------------------------------------------------------
0-50,000 $4.25
------------------------------------------------------------
50,001-100,000 $3.50
------------------------------------------------------------
100,001-250,000 $2.80
------------------------------------------------------------
250,001-500,000 $2.20
------------------------------------------------------------
As specified in this Section 2, the license term of the End User Licenses shall
be twelve months from date or order. Many of these End User Licenses shall be
valid beyond the Initial Term of this Agreement. In order to continue to
support the End User Licenses beyond the Term, Licensee must renew the Term of
this Schedule.
All prices in this Schedule shall be valid until March 2, 2001.
3. MAINTENANCE, SUPPORT AND ACTIVELINK
During the Term and any renewal thereof, the following shall be included at no
additional charge:
. 5x10 maintenance and support of the Software Programs
. ActiveLink Premium Subscription Service
4. SCHEDULE RENEWAL AND TERMINATION
At the end of the Term, this Schedule and the rights granted herein for the
Infrastructure Software Programs shall renew for a second year at the price
specified below. Thereafter, it shall continue to renew annually to Motive's
then current renewal fees until cancelled by Licensee in accordance with this
Section. Licensee may prevent any subsequent renewal by providing Motive with
written notice of cancellation at least thirty (30) days prior to the renewal
date.
------------------------------------------------------------------
Year 2 Infrastructure Software
Number of End Users* Programs Annual Fee
------------------------------------------------------------------
greater than 250,000 $ 150,000
------------------------------------------------------------------
250,001-500,000 $ 250,000
------------------------------------------------------------------
500,001-1,000,000 $ 500,000
------------------------------------------------------------------
1,000,001-2,000,000 $ 750,000
------------------------------------------------------------------
2,000,001-3,000,000 $1,000,000
------------------------------------------------------------------
* Number of End Users represents the total number of End User Licenses
distributed during the Term.
Upon termination or cancellation of this Schedule, Licensee's rights to all
Infrastructure Software Programs and ActiveLink Service shall terminate in
accordance with Sections 8 and 7,
5
<PAGE>
respectively, of the License Agreement. Additionally, Licensee's right to
support its Customers through the use of the Infrastructure Software Programs
shall terminate.
5. GENERAL TERMS AND CONDITIONS
. All prices are based on Licensee acting as a customer reference.
. In addition to the limitations on PC Manufacturers set forth in
Section 2.A of this Schedule, the following companies, including their
subsidiaries and affiliates, are excluded from that definition and
Licensee shall not approach them with a Motive based solution or
service offering: Dell Computer Corporation, Compaq Computer
Corporation, Gateway Companies, Inc., Hewlett-Packard Company, Packard
Bell/NEC, Toshiba, Acer, Fujitsu, Apple Computer, International
Business Machines Corporation, Midwest Micro, Winbook and Tigre
Direct.
. The ISPs and PC Manufacturers Licensee is authorized to work with
under this Schedule shall be limited to the North American operations
of these Customers.
. This Schedule shall be valid only if signed on or before March 13,
2000. All fees exclude taxes.
. The licenses, use rights and other terms granted under Schedule 1
shall remain unaffected. Additionally, the licenses in each schedule
shall be used solely for the purpose set forth in their respective
schedules.
Licensee, by its execution hereof, orders and purchases for delivery, under
these terms and conditions, the Software Programs and support Services provided
in accordance with this Schedule.
Motive Communications, Inc. ("Motive") PC Support.com ("Licensee")
By: /s/ Christopher A. Burch By: /s/ Mike McLean
-------------------------------- -------------------------------
Name: Christopher A. Burch Name: Mike McLean
------------------------------ -----------------------------
Title: Director, Business Ops. Title: President & CEO
----------------------------- ----------------------------
Date: March 14, 2000 Date: Mar 14/00
------------------------------ -----------------------------
6
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<PERIOD-START> JAN-01-2000 JUL-01-1999
<PERIOD-END> MAR-31-2000 MAR-31-2000
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<RECEIVABLES> 30,731 30,731
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<INTEREST-EXPENSE> 1,405,921 1,397,937
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