EXHIBIT 10.2
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WARRANT PURCHASE AGREEMENT
This WARRANT PURCHASE AGREEMENT dated January 8, 1999 (the "Agreement"), is
made by and between BANYAN SYSTEMS INCORPORATED, a Massachusetts corporation
(the "Corporation"), and MICROSOFT CORPORATION, a Washington corporation (the
"Purchaser").
The Corporation wishes to sell to the Purchaser, and the Purchaser wishes
to acquire from the Corporation, a Common Stock Purchase Warrant, in the form of
Exhibit A (the "Warrant"), to purchase an aggregate of One Million Seven Hundred
Fifty Thousand (1,750,000) shares of Common Stock, par value $.01 per share, of
the Corporation, upon the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual benefits to be derived from
this Agreement and of the representations, warranties, conditions and promises
hereinafter contained, intending to be legally bound hereby, the parties hereby
agree as follows:
ARTICLE I
ISSUANCE OF WARRANT
Simultaneously herewith, the Corporation is issuing and delivering the
Warrant to the Purchaser for investment purposes only and not with a view to
resale thereof. The parties agree that $4,160,214 of the funding provided by
Purchaser to the Corporation on the Effective Date under the Alliance Agreement
dated the date hereof between the Purchaser and the Corporation (the "Alliance
Agreement") is allocated to the purchase price of the Warrant.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
The Corporation represents and warrants to the Purchaser and agrees that:
2.1. Organization; Good Standing The Corporation is a corporation duly
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organized, validly existing and subsisting under the laws of the Commonwealth of
Massachusetts and is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction in which the nature of its business or
the ownership of its property makes such qualification necessary, except where
the failure to be so qualified will not have a material adverse effect on the
Corporation, and has the corporate power and authority to own and lease its
properties, to carry on its business as presently conducted, and to execute,
deliver and perform its obligations under this Agreement and the Warrant.
2.2. Due Authorization The execution, delivery and performance of this
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Agreement and the Warrant have been duly authorized by all requisite corporate
action by the Corporation and will not violate or result in a breach of any
provision of any law, statute, rule or regulation, any order of any court or
other agency, the Articles of Incorporation (the "Charter") or Bylaws of the
Corporation (the "Bylaws"), or result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon the properties or assets of
the Corporation, in each case except as would not have a material adverse effect
on the Corporation or the ability of the Corporation to perform its obligations
hereunder.
2.3. Binding Obligation; No Consents This Agreement and the Warrant have
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been duly executed and delivered by the Corporation and constitute valid and
legally binding obligations of the Corporation, enforceable in accordance with
their respective terms, except as rights to indemnity and contribution under the
Warrant may be limited by applicable law and except as the enforcement hereof
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally or by general equitable
principles. No registration or filing with, or consent or approval of, or other
action by, any Federal, state or other governmental
department, commission, board, bureau, agency or instrumentality or any third
party is necessary for the execution, delivery and performance of this Agreement
or the Warrant or for the issuance of the shares of Common Stock issuable upon
exercise of the Warrant (the "Warrant Shares") other than those required under
applicable federal and state securities laws (the "Securities Consents and
Filings"). The Corporation covenants and agrees to make and obtain all required
Securities Consents and Filings within the applicable statutory periods
prescribed for such consents and filings.
2.4. Capitalization The authorized capital stock of the Corporation
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consists of 35,000,000 shares of Common Stock, $0.01 par value per share (the
"Common Stock")(of which 18,970,982 shares are issued and outstanding, 1,848,000
shares are held in treasury, 2,386,661 shares have been reserved for issuance
pursuant to the Corporation's stock and option plans and other outstanding
options and warrants, and 3,947,380 shares have been reserved for issuance upon
conversion of shares of Preferred Stock), and 1,000,000 shares of Preferred
Stock, $0.01 par value per share, of which 263,158 shares have been designated
as Series A Convertible Preferred (all of which are issued and outstanding),
65,790 shares have been designated as Series B Convertible Preferred (all of
which are reserved for issuance pursuant to outstanding warrants) and 65,790
shares have been designated as Series C Convertible Preferred (all of which are
reserved for issuance pursuant to outstanding Warrants). Schedule 2.4 attached
hereto contains a complete and correct description of the percentage ownership
of each subsidiary of the Company, beneficially and of record, and the names
(and the percentage ownership) of any other owners thereof. All of the
aforesaid issued and outstanding shares of the Corporation and the subsidiaries
of the Corporation are duly authorized and validly issued, fully paid and
nonassessable and have been offered, issued, sold and delivered by such entity
in compliance in all material respects with applicable federal and state
securities laws, except where such noncompliance would not have a material
adverse effect on the Corporation. Schedule 2.4 also contains a complete and
accurate description of all agreements to which the Corporation is a party that
obligate the Corporation to register any of its equity securities with the
Securities and Exchange Commission (the "Registration Agreements"). The
Corporation has provided to Purchaser true and complete copies of all such
Registration Agreements, as amended to date. All of the shares of Common Stock
issuable under the Warrant have been duly reserved for issuance upon exercise of
the Warrant.
2.5. Litigation, Etc. There are no material (i) actions, suits, claims,
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legal or administrative proceedings or to the Corporation's knowledge,
investigations pending against the Corporation or any of its subsidiaries
relating to or affecting the Corporation, whether at law or in equity, or before
or by any governmental authority or arbitrator, which if determined adversely
against the Corporation or any of its subsidiaries could reasonably be expected
to materially adversely affect the business, results of operations, financial
condition, assets, liabilities or prospects of the Corporation and its
subsidiaries, taken as a whole, or (ii) judgments, decrees, injunctions or
orders of any governmental authority or arbitrator against the Corporation or
any of its subsidiaries that could reasonably be expected to materially
adversely affect the business, results of operations, financial condition,
assets, liabilities or prospects of the Corporation and its subsidiaries, taken
as a whole.
2.6. Financial Information. The Corporation has delivered to Purchaser
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copies of the Corporations: (i) audited financial statements at and for the
years ended December 31, 1995, 1996 and 1997 and (ii) unaudited financial
statements for each of the first three fiscal quarters of 1998 (collectively,
the "Financial Statements"). The Financial Statements are in accordance with
the books and records of the Corporation and in all material respects present
fairly the financial condition and results of operations of the Corporation, as
at the dates and for the periods indicated, and have been prepared in accordance
with generally accepted accounting principles consistently applied, except as
may be otherwise stated therein and, with respect to any unaudited financial
statements, except for such adjustments, consistently applied, necessary for
such fair presentation.
2.7. Corporation Information The Corporation has delivered to Purchaser
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copies of all periodic and other reports filed by the Corporation with the
Securities and Exchange Commission (the "Commission") under the Securities
Exchange Act of 1934, as amended, on or after January 1, 1998 and all proxy
statements, annual reports and other materials distributed to the Corporation's
shareholders on or after January 1, 1998 (collectively, the "Corporation
Information"). The Corporation Information is true, correct and complete in all
material respects as of the respective dates of the information set forth
therein, and the Corporation Information, as of its respective dates, does not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or
Warrant Purchase Agreement--Page 2
necessary to make the statements therein not misleading in light of the
circumstances under which such statements were made.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Corporation that:
3.1. Organization The Purchaser is a corporation duly organized, validly
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existing and in good standing under the laws of the State of Washington and has
the corporate power and authority to execute, deliver and perform its
obligations under this Agreement.
3.2. Due Authorization The execution, delivery and performance of this
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Agreement have been duly authorized by all requisite action by the Purchaser and
will not violate or result in a breach of any provision of any law, statute,
rule or regulation, any order of any court or other agency, or the Articles of
Incorporation or Bylaws of the Purchaser, in each case except as would not have
an adverse effect on the Purchaser or the ability of the Purchaser to perform
its obligations hereunder.
3.3. Binding Obligation; No Consents This Agreement constitutes a valid
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and legally binding obligation of the Purchaser, enforceable in accordance with
its terms. No registration or filing with, or consent or approval of, or other
action by, any Federal, state or other governmental department, commission,
board, bureau, agency or instrumentality or any third party is necessary for the
execution, delivery and performance of this Agreement by the Purchaser.
3.4. Investment Representations
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(a) The Purchaser is acquiring the Warrant hereunder and will acquire
Warrant Shares upon the exercise of the Warrant for its own account, for
investment and not with a view to the distribution thereof.
(b) The Purchaser understands that the Warrant and Warrant Shares
will not be registered under the Securities Act of 1933, as amended (the
"Securities Act"), by reason of their issuance in a transaction exempt from the
registration requirements of the Securities Act and that they must be held
indefinitely unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from registration.
(c) The Purchaser understands that the exemption from registration
afforded by Rule 144 (the provisions of which are known to the Purchaser)
promulgated under the Securities Act depends upon the satisfaction of various
conditions and that, if applicable, Rule 144 may only afford the basis for sales
under certain circumstances and only in limited amounts.
(d) The Purchaser is an "accredited investor" (as such term is
defined in Rule 501(a) promulgated under the Securities Act).
ARTICLE IV
WARRANT FORFEITURE PROVISIONS
4.1 Termination of the Alliance Agreement. The termination of the
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Alliance Agreement under the following situations will affect the rights of the
Purchaser with respect to the Warrant and any Spin Off Warrant (as defined in
the Warrant, and referred to collectively herein as the "Warrants") and the
shares of Common Stock purchased thereunder (the "Warrant Shares") as specified
in this Article IV below. The effective date of termination of the Alliance
Agreement is referred to herein as the "Termination Date."
(a) In the event the Alliance Agreement is terminated by the Purchaser
pursuant to the provisions of Section 13.2 or 14.4 thereof and the Termination
Date is on or prior to January 31, 2000, on the Termination Date and without any
further action on the part of the Corporation the Purchaser shall (i) forfeit
rights to purchase 41% of the Warrant Shares then purchasable under the Warrants
and (ii) sell to the Corporation 41% of the
Warrant Purchase Agreement--Page 3
Warrant Shares purchased under the Warrants prior to the Termination Date
(including all Distribution Assets and Additional Distribution Assets (as such
terms are defined in Section 4 of the Warrant) paid or distributed with respect
thereto).
(b) In the event the Alliance Agreement is terminated by the
Corporation on or prior to the following dates pursuant to the provisions of
Section 13.2 of the Alliance Agreement (a "Microsoft Breach"), on the
Termination Date and without any further action on the part of the Corporation
the Purchaser shall (i) forfeit the following percentage of rights to purchase
Warrant Shares under the Warrants and (ii) sell to the Corporation the following
percentage of the Warrant Shares purchased under the Warrants prior to the
Termination Date (including all Distribution Assets and Additional Distribution
Assets paid or distributed with respect thereto):
Termination Date Percentage Forfeiture
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June 30, 1999 100%
January 31, 2000 41%
January 31, 2001 16%
4.2 Procedures for Forfeiture. In the event the Purchaser shall forfeit
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rights to the Warrants and Warrant Shares pursuant to the provisions of Section
4.1, upon receipt of a written request of the Corporation the Purchaser shall
return to the Corporation (within 10 business days of receipt of the
Corporation's written request therefor) the Warrants for cancellation and the
Corporation shall reissue and return to the Purchaser (within 5 business days of
receipt of the original Warrants) one or more replacement Warrants, as the case
may be, of like tenor representing the balance of the rights thereunder to which
the Purchaser has not so forfeited (the "Warrant Reissue"). In addition,
simultaneously with the Warrant Reissue, Purchaser shall sell to the Corporation
and the Corporation shall purchase the Warrant Shares forfeited pursuant to the
provisions of Section 4.1 (including all Distribution Assets and Additional
Distribution Assets paid or distributed with respect thereto), if any, for a
purchase price equal to Purchaser's purchase price therefor under the Warrants.
4.3 Buyout of Remaining Warrants. In the event the Alliance Agreement is
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terminated by the Corporation due to a Microsoft Breach or pursuant to the
provisions of Section 14.4 thereof and the Termination Date occurs on or prior
to January 31, 2001, the Corporation shall, at its option (which option shall
expire 15 days after the Termination Date), purchase and the Purchaser shall
sell to the Corporation all remaining rights to purchase Warrant Shares under
the Warrants which are not forfeited pursuant to the provisions of Section 4.1
above (together with all Distribution Assets and Additional Distribution Assets
held in the Escrow Account (as defined in the Warrant) with respect to such
rights to purchase Warrant Shares). The purchase price per share for the
remaining rights under the Warrants shall equal the Deemed Market Value (as
defined below) per share of common stock (or such other security into which such
warrant is then convertible (the "Conversion Stock")) as of the Termination Date
less the then applicable exercise price per share specified in each Warrant.
The purchase price for all Distribution Assets and Additional Distribution
Assets, if any, shall equal the Fair Market Value thereof (as defined below).
The purchase price shall be paid by the Corporation on or prior to 30 days
following the Termination Date (the "Closing Date") and shall be payable, at the
election of the Corporation, in cash or shares of Common Stock of the
Corporation (valued at the closing price for the Common Stock on the Nasdaq
Stock Market (or such other primary stock market or exchange on which the stock
then trades (the "Primary Market") on the last trading day immediately prior to
the Closing Date), or any combination of cash and shares of Common Stock of the
Corporation. As used herein, the "Deemed Market Value" of the a publicly traded
security shall equal the average of the closing prices for the security on the
Nasdaq Stock Market (or such other primary stock market or exchange on which the
security then trades) for a period of 30 trading days commencing on the date
which is 15 trading days prior to the Termination Date and ending on the date
which is 15 trading days after the Termination Date. As used herein, the "Fair
Market Value" of any Distribution Assets or Additional Distribution Assets shall
equal (i) if such assets are publicly traded securities, the Deemed Market Value
thereof, (ii) if such assets are cash, the amount thereof as of the Termination
Date, and (iii) if such assets are other than cash or publicly traded securities
the fair value thereof as of the Termination Date as mutually determined in good
faith by the Purchaser and the Corporation. In the event that the Purchaser and
the Corporation do not mutually agree on any amount which is payable under this
Section 4.3, the parties will submit such determination within 10 business days
of the date such payment is due to an independent national accounting firm which
shall not be the primary auditor for either the Purchaser or the Corporation to
Warrant Purchase Agreement--Page 4
determine such amount by "Baseball Arbitration." The determination of the
accounting firm shall be (i) limited to determining the amount in dispute under
this Section 4.3, (ii) made within 10 business days of submission thereof and
(iii) final and binding on the parties and shall be enforceable in a court of
law. For purposes hereof, "Baseball Arbitration" shall mean a procedure under
which each party proposes a resolution of the amount in dispute to the
independent accountant and the independent accountant chooses one party's
proposal in its entirety without compromising the proposals of the parties or
exercising discretion unrelated to the parties' proposal. The fee of the
accounting firm shall be paid by the party whose proposal is not selected.
ARTICLE V
MISCELLANEOUS
5.1. Amendment, Modification or Waiver This Agreement shall not be
---------------------------------
altered or otherwise amended except pursuant to an instrument in writing signed
by each of the parties hereto.
5.2. Entire Agreement; Content of Exhibits This Agreement, and the
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Exhibit attached hereto and the Agreement contain the entire agreement of the
parties with respect to the transactions contemplated hereby and thereby and
supersede all prior agreements or understandings among the parties with respect
thereto. The Corporation acknowledges that Microsoft is acquiring the Warrant
solely as an investment and not in connection with the performance of services
by Microsoft and agrees to treat this Agreement, the Warrant and all actions
taken in connection therewith consistently with such characterization for all
purposes.
5.3. Descriptive Headings Descriptive headings are for convenience only
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and shall not control or affect the meaning or construction of any provision of
this Agreement.
5.4. Counterparts This Agreement may be executed in two counterparts, and
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each such counterpart hereof shall be deemed to be an original instrument, but
all such counterparts together shall constitute but one agreement.
5.5. Governing Law This Agreement shall be governed by and construed in
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accordance with the laws of the Commonwealth of Massachusetts, without regard to
its conflicts of laws principles.
5.6. Benefits of Agreement All the terms and provisions of this Agreement
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shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. Anything contained herein to the contrary
notwithstanding, this Agreement shall not be assignable by any party hereto
without the consent of the other party hereto.
[Remainder of page intentionally blank]
Warrant Purchase Agreement--Page 5
IN WITNESS WHEREOF, each of the parties has caused this Warrant Purchase
Agreement to be executed on its behalf as of the date first above written.
CORPORATION: BANYAN SYSTEMS INCORPORATED
By: /s/ Xxxxxxx X. Xxxxxxxxx
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Xxxxxxx X. Xxxxxxxxx
Vice President, Chief Financial Officer
PURCHASER: MICROSOFT CORPORATION
By: /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Vice President, Finance;
Chief Financial Officer
Warrant Purchase Agreement--Page 6
SCHEDULE 2.4
REGISTRATION AGREEMENTS
Securities Issuance Agreement dated as of September 4, 1997 between
Foothill Capital Corporation and Banyan Systems Incorporated.
Preferred Stock and Warrant Purchase Agreement dated as of March 5,
1998 between HarbourVest Partners V-Direct Fund, L.P. and Banyan Systems
Incorporated.
SUBSIDIARIES
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Jurisdiction of
Company Incorporation
------- ---------------
1. Banyan Systems International Incorporated Massachusetts
000 Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000
2. Banyan Securities Corporation Massachusetts
000 Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000
3. Banyan Systems Asia-Pacific Incorporated Massachusetts
000 Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000
4. Banyan Systems (UK) Ltd. England
Banyan House
Northwood Park
Gatwick Road
Xxxxxxx, West Sussex, U.K.
5. Banyan Systems (Holland) B.V. Holland
Xxxxxxxxxxxx 00
0000 XX MAARSSEN
The Netherlands
6. Banyan Systems (Deutschland) Germany
GmbH
Xxxxxxxxxxxx. 00
00000 Xxxxxxxxxxx
Xxxxxxx
7. Banyan Systems (France) S.A.R.L. France
00 Xxx Xxxxxxx xx Xxxxxxxxxx
00000 Xxxxxxxx
Xxxxxx
8. Beyond Incorporated Delaware
000 Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000
9. Banyan Systems S.A. de C.V Mexico
Xxxxx Xxxxxx 27-202
Col. San Pablo Tepetlapa
Mexico, D.F. 04380
10. Banyan Systems Asia Pacific Ltd. Hong Kong
1301 Xxxxxxxx Xxxxx
00 Xxxxxxxxxx Xxxx
Xxxxxxx
Xxxx Xxxx
11. Banyan Systems (Taiwan), Incorporated Massachusetts
000 Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000
12. Nihon Banyan Systems K.K. Japan
Kokusaikougyo Gobancho
K Xxxx.
00 Xxxxxxxx, Xxxxxxx-xx
Xxxxx 000 Xxxxx
13. Banyan Systems (Korea) Co., Ltd. Korea
6F Eunseoung Xxxx.
000-00 Xxxxxxx-Xxxx
Xxxxxxx-xx
Xxxxx, Xxxxx 135-729
14. Banyan Systems do Brasil Ltda. Brazil
Av. Xxxxx Xxxxxxx Xx.
999-13 Andar
CEP 04707-910, Sao Paulo
SP Brasil
15. Banyan Enterprise Networks South Africa
P.O. Box 98910
Sloanpark
Xxxxxxxxx 0000
Xxxxxxxxxxxx, Xxxxx Xxxxxx
16. Xxxxxxxxxx.xxx Incorporated Delaware
000 Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000
17. Switchboard Incorporated Delaware
000 Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Warrant Purchase Agreement--Page 8
BANYAN OWNERSHIP OF SUBSIDIARIES
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Equity Structure of Switchboard
Certificate of Incorporation, as Amended:
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Authorized Common Stock, $0.01 par value per share
(the "Common Stock"): 17,500,000 shares
Authorized Preferred Stock, $0.01 par value per share
(the "Preferred Stock"): 4,000,000 shares
Designations of the Preferred Stock:
Series A Convertible Preferred Stock ("Series A
Stock"): 750,000 shares
Series B Convertible Preferred Stock ("Series B
Stock"): 1,500,000 shares
Outstanding shares of Common Stock
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Ownership: 7,015,000 shares total
7,000,000 shares - Banyan Systems Incorporated
750 shares - Xxxxxx Xxxxxxx
500 shares - Xxxxxxx Xxxxxxxx
1,500 shares - Xxxxx X. Xxxx
1,000 shares - Vishwanthan Ramamurphy
2,000 shares - Xxxxxxxxxxx Xxxx
7,500 shares - Xxxxxx Xxxxxx
1,750 shares - Xxxxxxxx X. Xxxx
Outstanding shares of Series A Stock:
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Ownership: 750,000 shares total
375,000 shares - America Online, Inc.
375,000 shares - Digital City Inc.
Outstanding shares of Series B Stock: 0 shares total
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Warrant Purchase Agreement--Page 9
Outstanding Series B Stock Purchase Warrants:
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3.75% of the issued and outstanding
shares of capital stock of Switchboard
Incorporated on a fully diluted basis
on the date of exercise, subject to
adjustment
- America Online, Inc.
(The Company believes the foregoing Warrant to America Online, Inc. has
expired pursuant to its terms.)
3.75% of the issued and outstanding
shares of capital stock of Switchboard
Incorporated on a fully diluted basis
on the date of exercise, subject to
adjustment
- Digital City Inc.
(The Company believes the foregoing warrant to Digital City Inc. has
expired pursuant to its terms.)
Outstanding Common Stock Purchase Warrants:
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A maximum of 250,000 shares, subject
to adjustment - America Online, Inc.
(The Company believes the foregoing warrant to America Online, Inc. has
expired pursuant to its terms.)
Up to 300,000 shares, subject
to adjustment - Continuum Software Inc.
1996 Stock Incentive Plan:
-------------------------
Shares of Common Stock Authorized for issuance:
1,500,000 shares
Outstanding Options to Purchase Common Stock (as of
December 31, 1998): 1,205,625 shares
Nihon Banyan Systems K.K.
-------------------------
The Company owns a 66.67% interest in Nihon Banyan Systems K.K. with the
remaining 33.33% interest owned collectively by Marubeni Corporation and NTT
Technology Corporation.
Other Subsidiaries
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Other than Switchboard Incorporated and Nihon Banyan Systems K.K., all of
the subsidiaries of the Company listed in Schedule 2.4 are wholly owned by the
Company.
Warrant Purchase Agreement--Page 10
