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EXHIBIT 10.13
PIVOTAL SOFTWARE INC.
CLASS F PREFERRED SHARE
SUBSCRIPTION AND PURCHASE AGREEMENT
January 15, 1999
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TABLE OF CONTENTS
1. SUBSCRIPTION FOR AND SALE OF SHARES.........................................1
1.1 Subscription for and Issuance of Class F Preferred Shares........1
1.2 Closing..........................................................1
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............................1
2.1 Organization, Good Standing and QUALIFICATION....................1
2.2 Capitalization and Voting Rights.................................2
2.3 Subsidiaries.....................................................2
2.4 Right, Power and Authority.......................................2
2.5 Authorization....................................................2
2.6 Valid Issuance of Preferred and Common Shares....................3
2.7 Corporate Records of the Company.................................3
2.8 Governmental Consents............................................4
2.9 Approval of Third Parties........................................4
2.10 Litigation.......................................................4
2.11 Proprietary Information and Shareholder Agreements...............4
2.12 Patents and Trademarks...........................................4
2.13 Compliance with Other Instruments................................5
2.14 Agreements; Action...............................................5
2.15 Related-Party Transactions.......................................6
2.16 Permits..........................................................7
2.17 Environmental and Safety Laws....................................7
2.18 Manufacturing and Marketing Rights...............................7
2.19 Disclosure.......................................................7
2.20 Registration Rights..............................................7
2.21 Corporate Documents..............................................7
2.22 Title to Property and Assets.....................................7
2.23 Interests in Real Property.......................................8
2.24 Financial Statements.............................................8
2.25 Changes..........................................................8
2.26 Goodwill.........................................................9
2.27 Financial Records of the Company.................................9
2.28 Debt Obligations of the Company..................................9
2.29 Guarantees and Other Agreements of the Company...................9
2.30 Tax Returns, Payments and Elections.............................10
2.31 Insurance.......................................................10
2.32 Labour Agreements and Actions...................................10
2.33 Conduct of the Company's Business...............................10
2.34 Real Property Holding Company...................................10
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS............................10
3.1 Organization, Good Standing and Qualification...................11
3.2 Authorization...................................................11
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3.3 Purchase Entirely for Own Account.............................11
3.4 Disclosure of Information.....................................12
3.5 No Prospectus.................................................12
3.6 Advertising...................................................13
3.7 Investment Experience.........................................13
3.8 Accredited Investor...........................................13
3.9 Restricted Securities.........................................13
3.10 Further Limitations on Disposition............................13
3.11 Legends.......................................................14
4. CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING............................15
4.1 Representations and Warranties................................15
4.2 Performance...................................................15
4.3 Compliance Certificate........................................15
4.4 Qualifications................................................15
4.5 Proceedings and Documents.....................................15
4.6 Directors.....................................................15
4.7 Opinion of Company Counsel....................................15
4.8 Investors' Rights Agreement...................................18
4.9 Shareholders Agreement.......................................
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING.........................18
5.1 Representations and Warranties................................18
5.2 Payment of Purchase PRICE.....................................18
5.3 California Qualification......................................19
6. MISCELLANEOUS..............................................................19
6.1 Survival of Warranties........................................19
6.2 Successors and Assigns........................................19
6.3 Governing Law.................................................19
6.4 Counterparts..................................................19
6.5 Titles and Subtitles..........................................19
6.6 Notices.......................................................19
6.7 Finder's Fee..................................................20
6.8 Expenses......................................................19
6.9 Amendments and Waivers........................................19
6.10 Severability..................................................20
6.11 Aggregation of Shares.........................................20
6.12 Entire Agreement..............................................20
6.13 Funds.........................................................21
6.14 Limitation of Liability.......................................21
6.15 Further Assurances............................................21
6.16 Non-Waiver....................................................21
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THIS SHARE SUBSCRIPTION AGREEMENT is made as of the 15th day of January 1999, by
and between Pivotal Software Inc., a British Columbia company (the "Company"),
and the investors listed on Schedule A hereto, each of which is herein referred
to as an "Investor" and collectively referred to as "Investors".
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. SUBSCRIPTION FOR AND SALE OF SHARES
1.1 SUBSCRIPTION FOR AND ISSUANCE OF CLASS F PREFERRED SHARES. Subject to the
terms and conditions of this Agreement, each Investor agrees, severally, to
subscribe for and purchase at the Closing and the Company agrees to allot and
issue and sell to each Investor at the Closing, that number of the Company's
Class F Preferred Shares set forth opposite each Investor's name on Schedule A
hereto for the purchase price set forth thereon.
1.2 CLOSING. The purchase and sale of the Class F Preferred Shares shall take
place at the offices of Xxxxx & Company, 0000 Xxxx Xxxxx, 000 Xxxxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxx Xxxxxxxx, xx January 15, 1999, or at such other time and
place as the Company and Investors acquiring in the aggregate more than half the
Class F Preferred Shares sold pursuant hereto mutually agree upon orally or in
writing (which time and place are designated as the "Closing"). At the Closing
the Company shall deliver to each Investor a certificate representing the Class
F Preferred Shares which such Investor is purchasing against delivery to the
Company by such Investor of a cheque in the amount of the purchase price
therefor payable to the Company's order.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each Investor as of the Closing
that, except as set forth on A Schedule of Exceptions attached hereto as
Schedule B and furnished to each investor specifically identifying the relevant
subparagraph hereof, which exceptions shall be deemed to be representations and
warranties as if made hereunder:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a company duly
organized, validly existing and in good standing under the laws of British
Columbia and has all requisite corporate power and authority to carry on its
business as now conducted and as proposed to be conducted. The Company is duly
qualified to transact business and is in good standing in each jurisdiction in
which the failure so to qualify would have a material adverse effect on its
business or properties.
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2.2 CAPITALIZATION AND VOTING RIGHTS. The authorized capital of the Company
consists, or will consist prior to the Closing, of:
(a) Preferred Shares. 11,946,474 Preferred Shares (the "Preferred
Shares"), of which 2,000,000 shares have been designated Class A
Preferred Shares, all of which are outstanding, 2,000,000 shares
have been designated Class B Preferred Shares, all of which are
outstanding, 2,658,228 shares have been designated Class D
Preferred Shares, all of which are outstanding, 4,000,000 shares
have been designated Class E Preferred Shares, all of which are
outstanding and 1,288,246 shares have been designated Class F
Preferred Shares, all of which will be sold pursuant to this
Agreement. The rights, privileges and preferences of the Class F
Preferred Shares are as stated in the Company's Altered
Memorandum and Articles filed with the Registrar of Companies
for British Columbia on December 29, 1998.
(b) Common Shares. 50,600,000 common shares ("Common Shares"), of
which 50,000,000 shares have been designated Class A Common
Shares,3,403,299 shares of which are issued and outstanding, and
600,000 shares have been designated Class B Common Shares,
476,786 shares of which are issued and outstanding.
(c) Except for (A) the conversion privileges of the outstanding
Class A Preferred Shares, Class B Preferred Shares, Class D
Preferred Shares, Class E Preferred Shares and Class F Preferred
Shares to be issued under this Agreement, (B) the rights
provided in paragraph 2.4 of the Investors' Rights Agreement,
and (C) 1,523,115 Common Shares reserved for options to
employees pursuant to the Company's Share Option Plan, of which
1,202,861 Common Shares are subject to options which have been
granted and are not exercised, particulars of which are as set
forth in Schedule C attached hereto, there are not outstanding
any options, warrants, rights (including conversion or
preemptive rights, other than preemptive rights under section 41
of the Company Act (British Columbia)) or agreements for the
purchase or acquisition from the Company of any of its shares.
The Company is not a party or subject to any agreement or
understanding, and, to the Company's knowledge, there IS no
agreement or understanding between any persons and/or entities,
which affects or relates to the voting or giving of written
consents with respect to any security or by a director of the
Company.
2.3 SUBSIDIARIES. The Company does not presently own or control, directly or
indirectly, any interest in any other corporation, association, or other
business entity, other than its US and UK subsidiaries.
2.4 RIGHT, POWER AND AUTHORITY. The Company has the capacity and authority to
enter into this Agreement, the Investors' Rights Agreement and the Shareholders
Agreement.
2.5 AUTHORIZATION. All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the authorization, execution
and delivery of this Agreement, the Investors'
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Rights Agreement and the Shareholders Agreement, the performance of all
obligations of the Company hereunder and thereunder and the authorization,
issuance (or reservation for issuance) and delivery of the Class F Preferred
Shares being sold hereunder and the Common Shares issuable upon conversion of
the Class F Preferred Shares has been taken or will be taken prior to the
Closing, including, without limitation, waiver of all pre-emptive rights and
rights of first offer or refusal, and this Agreement, the Investors' Rights
Agreement and the Shareholders Agreement constitute valid and legally binding
obligations of the Company, enforceable in accordance with their respective
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent the indemnification provisions contained in
the Investors' Rights Agreement may be limited by applicable federal or state
securities laws.
2.6 VALID ISSUANCE OF PREFERRED AND COMMON SHARES.
(a) The Class F Preferred Shares which are being purchased by the
Investors hereunder, when issued, sold and delivered in
accordance with the terms hereof for the consideration expressed
herein, will be duly and validly issued, fully paid and
nonassessable, free and clear of any liens, encumbrances or
charges whatsoever, and, based in part upon the representations
of the Investors in this Agreement, will be issued in compliance
with all applicable British Columbia securities laws, except
that the Company must file, within the prescribed time period,
with respect to the issue of any Class F Preferred Shares to
which the Securities Act (British Columbia) applies, a report in
Form 20 with the British Columbia Securities Commission together
with the appropriate fees and a fee checklist form. 12,051,737
of authorized but unissued Class A Common Shares have been duly
and validly reserved for issuance upon the conversion of the
Class A Preferred Shares, the Class B Preferred Shares, the
Class D Preferred Shares, the Class E Preferred Shares and the
Class F Preferred Shares and, upon issuance in accordance with
the terms of the Altered Memorandum and Articles, shall be duly
and validly issued, fully paid and nonassessable, and issued in
compliance with all applicable securities laws, as presently in
effect, of British Columbia.
(b) The outstanding Class A, Class B, Class D and Class E Preferred
Shares and Common Shares are all duly and validly authorized and
issued, fully paid and nonassessable, and were issued in
compliance with all applicable British Columbia securities laws.
2.7 CORPORATE RECORDS OF THE COMPANY. The corporate records and minute books of
the Company contain complete and accurate minutes of all meetings of the
directors and shareholders of the Company actually held since its incorporation
and all such meetings were duly called and held. The share certificate books,
register of security holders, register of transfers and register of directors of
the Company are complete and accurate.
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2.8 GOVERNMENTAL CONSENTS. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
Canadian or provincial governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement, the Investors' Rights Agreement or the Shareholders Agreement,
except that the Company must file, within the prescribed time period, with
respect to the issue of any Class F Preferred Shares to which the Securities Act
(British Columbia) applies, a report in Form 20 with the British Columbia
Securities Commission together with the appropriate fees and a fee checklist
form.
2.9 APPROVAL OF THIRD PARTIES. The Company is under no obligation, contractual
or otherwise, to request or obtain the consent of any person or entity to any of
the transactions contemplated in this Agreement, the Investors' Rights Agreement
or the Shareholders Agreement or to the sale, transfer, assignment or delivery
of the Class F Preferred Shares.
2.10 LITIGATION. There is no action, suit, proceeding or investigation pending
or currently threatened against the Company which questions the validity of this
Agreement, the Investors' Rights Agreement or the Shareholders Agreement or the
right of the Company to enter into any of them, or to consummate the
transactions contemplated hereby or thereby, or which might result, either
individually or in the aggregate, in any material adverse changes in the assets,
condition, affairs or prospects of the Company, financially or otherwise, or any
change in the current equity ownership of the Company, nor is the Company aware
that there is any basis for the foregoing. The foregoing includes, without
limitation, actions pending or threatened (or any basis therefor known to the
Company) involving the prior employment of any of the Company's employees, their
use in connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers, or their obligations
under any agreements with prior employers. The Company is not a party or subject
to the provisions of any order, writ, injunction, judgement or decree of any
court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
2.11 PROPRIETARY INFORMATION AND SHAREHOLDER AGREEMENTS. Each employee, officer
and consultant of the Company has executed a Proprietary Information and
Inventions Agreement in the form provided to counsel to the Investors. The
Company, after reasonable investigation, is not aware that any of its employees,
officers or consultants are in violation thereof, and the Company will use its
best efforts to prevent any such violation.
2.12 PATENTS AND TRADEMARKS. The Company has sufficient title and ownership of
all patents, trademarks, service marks, trade names, copyrights, trade secrets,
information, proprietary rights, processes and any other intellectual property
necessary for its business as now conducted and as proposed to be conducted
without any conflict with or infringement of the rights of others. There are no
outstanding options, licenses, or agreements of any kind relating to the
foregoing, nor is the Company bound by or a party to any options, licenses or
agreements of any kind with respect to the patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information, proprietary
rights, processes and any other intellectual property of any other person or
entity. The Company has not received any communications alleging and is not
aware of any allegations that the
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Company has violated or, by conducting its business as presently conducted or as
proposed, would violate any of the patents, trademarks, service marks, trade
names, copyrights or trade secrets or other proprietary rights or intellectual
property of any other person or entity. The Company is not aware that any of its
employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgement,
decree or order of any court or administrative agency, that would interfere with
the use of the employee's best efforts to promote the interests of the Company
or that would conflict with the Company's business as presently conducted or as
proposed to be conducted. Neither the execution nor delivery of this Agreement,
the Investors' Rights Agreement and the Shareholders Agreement nor the carrying
on of the Company's business by the employees of the Company, nor the conduct of
the Company's business as presently conducted or as proposed, will, to the
Company's knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated. The
Company does not believe it is or will be necessary to utilize any inventions of
any of its employees (or people it currently intends to hire) made prior to
their employment by the Company. No person or entity other than the Company has
any right to license or use commercially the source code for the Company's set
of products known as Pivotal Relationship.
2.13 COMPLIANCE WITH OTHER INSTRUMENTS.
(a) The Company is not in violation or default of any provisions of its
Altered Memorandum and Articles or of any instrument, judgement,
order, writ, decree or contract to which it is a party or by which it
is bound or, to its knowledge, of any provision of any Canadian
federal or provincial statute, rule or regulation applicable to the
Company. The execution, delivery and performance of this Agreement,
the Investors' Rights Agreement or the Shareholders Agreement and the
consummation of the transactions contemplated hereby and thereby will
not result in any such violation or be in conflict with or constitute,
with or without the passage of time and giving of notice, either a
default under any such provision, instrument, judgement, order, writ,
decree or contract or an event which results in the creation of any
lien, charge or encumbrance upon any assets of the Company or the
suspension, revocation, impairment, forfeiture, or nonrenewal of any
material permit, license, authorization, or approval applicable to the
Company, its business or operations or any of its assets or
properties.
(b) The Company has avoided every condition, and has not performed any
act, the occurrence of which would result in the Company's loss of any
right granted under any license, distribution or other agreement.
2.14 AGREEMENTS; ACTION.
(a) Except for agreements explicitly contemplated hereby and by the
Investors' Rights Agreement and the Shareholders Agreement, there are
no agreements, understandings
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or proposed transactions between the Company and any of its officers,
directors, affiliates, or any affiliate thereof.
(b) The Company has performed all of its obligations under, is entitled to
all benefits under, and is not in default or alleged to be in default
in respect of any material contracts.
(c) The Company has not (i) declared or paid any dividends, or authorized
or made any distribution upon or with respect to any class or series
of its capital shares, (ii) at December 31, 1998, incurred any
indebtedness for money borrowed or any other liabilities individually
in excess of $5,000 or, in the case of indebtedness and/or liabilities
individually less than $5,000, in excess of $25,000 in the aggregate,
(iii) made any loans or advances to any person, other than ordinary
advances for travel and other expenses (except as specifically
provided in Schedule B), or (iv) sold, exchanged or otherwise disposed
of any of its assets or rights, other than the sale of its inventory
in the ordinary course of business and sale of obsolete or unnecessary
items and equipment.
(d) For the purposes of subsection (c) above, all indebtedness and
liabilities involving the same person or entity (including persons or
entities the Company has reason to believe are affiliated therewith)
shall be aggregated for the purpose of meeting the individual minimum
dollar amounts of such subsection.
(e) The Company is not a party to and is not bound by any contract,
agreement or instrument, or subject to any restriction under its
Altered Memorandum and Articles, which adversely affects its business
as now conducted or as proposed to be conducted, its properties or its
financial condition.
(f) The Company has not engaged in the past three (3) months in any
discussion (i) with any representative of any corporation or
corporations regarding the consolidation or merger of the Company with
or into any such corporation or corporations, (ii) with any
corporation, partnership association or other business entity or any
individual regarding the sale, conveyance or disposition of all or
substantially all of the assets of the Company or a transaction or
series of related transactions in which more than fifty percent (50%)
of the voting power of the Company is disposed of, or (iii) regarding
any other form of acquisition, liquidation, dissolution or winding up
of the Company.
2.15 RELATED-PARTY TRANSACTIONS. Other than with respect to travel or business
expenses in the ordinary course, no employee, officer, or director of the
Company or member of his or her immediate family is indebted to the Company, nor
is the Company indebted (or committed to make loans or extend or guarantee
credit) to any of them for amounts that exceed $5,000, except as specifically
provided in Schedule B. To the best of the Company's knowledge, none of such
persons has any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated
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or with which the Company has a business relationship, or any firm or
corporation that competes with the Company, except that employees, officers, or
directors of the Company and members of their immediate families may own shares
in publicly traded companies that may compete with the Company. No member of the
immediate family of any officer or director of the Company is directly or
indirectly interested in any material contract with the Company.
2.16 PERMITS. The Company has all franchises, permits, licenses, and any similar
authority necessary for the conduct of its business as now being conducted by
it, the lack of which could materially and adversely affect the business,
properties, prospects, or financial condition of the Company and believes it can
obtain, without undue burden or expense, any similar authority for the conduct
of its business as planned to be conducted. The Company is not in default in any
material respect under any of such franchises, permits, licenses, or other
similar authority.
2.17 ENVIRONMENTAL AND SAFETY LAWS. To the best of its knowledge, the Company is
not in violation of any applicable statute, law, or regulation relating to the
environment or occupational health and safety, and to the best of its knowledge,
no material expenditures are or will be required in order to comply with any
such existing statute, law, or regulation.
2.18 (intentionally deleted)
2.19 DISCLOSURE. The Company has fully provided each Investor with all the
information which such Investor has requested for deciding whether to purchase
the Class F Preferred Shares and all information which the Company believes is
reasonably necessary to enable such Investor to make such decision. Neither this
Agreement, the Investors' Rights Agreement, and the Shareholders Agreement, nor
any other statements or certificates made or delivered in connection herewith or
therewith contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements herein or therein not misleading.
2.20 REGISTRATION RIGHTS. Except as provided in the Investors' Rights Agreement
and the Shareholders Agreement, the Company has not granted or agreed to grant
any registration rights, including piggyback rights, to any person or entity.
2.21 CORPORATE DOCUMENTS. Except for amendments necessary to satisfy
representations and warranties or conditions contained herein (the form of which
amendments has been approved by the Investors), the Altered Memorandum and
Articles of the Company are in the form previously provided to counsel for the
Investors.
2.22 TITLE TO PROPERTY AND ASSETS. The Company owns its Property and assets
free and clear of all mortgages, liens, loans and encumbrances, except such
encumbrances and liens which arise in the ordinary course of business and do not
materially impair the Company's ownership or use of such property or assets.
With respect to the property and assets it leases, the Company is in compliance
with such leases and, to the best of its knowledge, holds a valid leasehold
interest free of any liens, claims or encumbrances. The property and assets
owned and/or leased by the Company is all of the property and assets necessary
to conduct the Company's business as presently conducted.
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2.23 INTERESTS IN REAL PROPERTY. The Company is not the owner of or a party to
or bound by or obligated under any agreement or commitment to own any real
property.
2.24 FINANCIAL STATEMENTS. The Company has delivered to each Investor its
unaudited financial statements (balance sheet and profit and loss statement,
statement of shareholders' equity and statement of changes in financial
position) at June 30, 1998 and for the fiscal year then ended and its unaudited
financial statements (balance sheet and profit and loss statement) at and for
the six-month period ended December 31, 1998 (the "Financial Statements"). The
Financial Statements are complete and correct in all material respects and have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated and with each
other, except that the unaudited Financial Statements may not contain all
footnotes required by generally accepted accounting principles. The Financial
Statements accurately set out and describe the financial condition and operating
results of the Company as of the dates, and for the periods, indicated therein,
subject to normal year-end audit adjustments. Except as set forth in the
Financial Statements, the Company has no liabilities, contingent or otherwise,
other than (i) liabilities incurred in the ordinary course of business
subsequent to June 30, 1998, and (ii) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
generally accepted accounting principles to be reflected in the Financial
Statements, which, in both cases, individually or in the aggregate, are not
material to the financial condition or operating results of the Company. The
Company maintains and will continue to maintain a standard system of accounting
established and administered in accordance with Canadian and US generally
accepted accounting principles.
2.25 CHANGES. Since June 30, 1998 there has not been:
(a) any change in the assets, liabilities, financial condition or
operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business which
have not been, in the aggregate, materially adverse.
(b) any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting the assets, properties, financial
condition, operating results, prospects or business of the Company (as
such business is presently conducted and as It is proposed to be
conducted);
(c) any waiver by the Company of a valuable right or of a material debt
owed to it;
(d) any satisfaction or discharge of any lien, claim or encumbrance or
payment of any obligation by the Company, except in the ordinary
course of business and which is not material to the assets,
properties, financial condition, operating results or business of the
Company (as such business is presently conducted and as it is proposed
to be conducted);
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(e) any change or amendment to a material contract or arrangement by which
the Company or any of its assets or properties is bound or subject;
(f) any material change in any compensation arrangement or agreement with
any employee, director or officer; or
(g) to the Company's knowledge, any other event or condition of any
character which might materially and adversely affect the assets,
properties, financial condition, operating results or business of the
Company (as such business is presently conducted and as it is proposed
to be conducted).
2.26 GOODWILL. The Company is not aware of the occurrence or existence of any
fact, matter or thing which may have a material adverse effect on the business
of the Company.
2.27 FINANCIAL RECORDS OF THE COMPANY. The books and records of the Company have
been consistently kept in accordance with the Company's internal policies and do
fairly and correctly set out and disclose as at the date hereof in all material
respects:
(i) the assets, liabilities and shareholders' equity of the Company, all
as at the date hereof, and
(ii) the revenues and expenses of the Company for the period from and
including June 30, 1998 to the date hereof,
and all material financial transactions of the Company have been accurately
recorded in such books and records up to and including the date hereof and all
supporting information and material required for entry of all material
transactions into the books and records from and including June 30, 1998, to the
date hereof is and shall be available for inspection by the Investors and their
representatives. Without in any way limiting the generality of the foregoing,
all bonuses, commissions and other payments are reflected in the books of
account of the Company.
2.28 DEBT OBLIGATIONS OF THE COMPANY. Except as set forth in the Financial
Statements, the Company does not have any outstanding, and is not a party to or
bound by or obligated under, any bonds, debentures, mortgages, notes or other
indebtedness or other like instruments, agreements or arrangements, and the
Company is not a party to or bound by or obligated under any agreement to create
or issue any bonds, debentures, mortgages, notes or other indebtedness or other
like instruments, agreements or arrangements.
2.29 GUARANTEES AND OTHER AGREEMENTS OF THE COMPANY. Except as set out in the
Financial Statements, the Company is not a party to or bound by any agreement of
guarantee, indemnification, assumption or endorsement or any other like
commitment of the obligations, liabilities (contingent or otherwise) or
indebtedness of any person or entity, and the Company has not given any
guarantee or warranty in respect of any property, products or services sold or
leased by it except in the ordinary course of business.
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2.30 TAX RETURNS, PAYMENTS AND ELECTIONS. The Company has filed all tax returns
and reports as required by law. These returns and reports are true and correct
in all material respects. The Company has paid all taxes and other assessments
due, except those contested by it in good faith which are listed in the Schedule
of Exceptions. The provision for taxes of the Company as shown in the Financial
Statements is adequate for taxes due or accrued as of the date thereof. The
Company has not made any elections pursuant to Canadian tax laws (other than
elections which relate solely to methods of accounting, depreciation or
amortization) which would have a material effect on the Company, its financial
condition, its business as presently conducted or proposed to be conducted or
any of its properties or material assets.
2.31 INSURANCE. The Company has in full force and effect fire and casualty
insurance policies, with extended coverage, sufficient in amount (subject to
reasonable deductibles) to allow it to replace any of its properties that might
be damaged or destroyed. The Company has in full force and effect products
liability and errors and omissions insurance in amounts customary for companies
similarly situated.
2.32 LABOUR AGREEMENTS AND ACTIONS. The Company is not bound by or subject to
(and none of its assets or properties is bound by or subject to) any written or
oral, express or implied, contract, commitment or arrangement with any labour
union, and no labour union has requested or, to the knowledge of the Company,
has sought to represent any of the employees, representatives or agents of the
Company. There is no strike or other labour dispute involving the Company
pending, or to the knowledge of the Company threatened, which could have a
material adverse effect on the assets, properties, financial condition,
operating results, or business of the Company (as such business is presently
conducted and as it is proposed to be conducted), nor is the Company aware of
any labour organization activity involving its employees. The Company is not
aware that any officer or key employee, or that any group of key employees,
intends to terminate their employment with the Company, nor does the Company
have a present intention to terminate the employment of any of the foregoing.
Subject to general principles related to wrongful termination of employees, the
employment of each officer and employee of the Company is terminable at the will
of the Company upon reasonable notice or payment in lieu thereof.
2.33 CONDUCT OF THE COMPANY'S BUSINESS. The Company's business has been carried
on in the ordinary and normal course of business since June 30, 1998.
2.34 REAL PROPERTY HOLDING COMPANY. The Company is not a real property holding
company within the meaning of Xxxxxxx 000 xx xxx Xxxxxx Xxxxxx Internal Revenue
Code of 1986, as amended.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor hereby represents and warrants (as and to the extent that the
representation and warranty is applicable to it) that:
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3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each of Kleiner, Perkins,
Xxxxxxxx & Xxxxx VI, Integral Capital Partners II, LP, Integral Capital Partners
International II C.V. and Oak Investment Partners VI, L.P. is a duly formed and
validly existing partnership (or foreign partnership) under the laws of the
State of California, the State of Delaware or the Netherlands Antilles and is
resident (for investment decisions) in the State of California and has all
requisite power, right, authority and capacity to acquire, own and dispose of
the Class F Preferred Shares which will be sold to it pursuant to this
Agreement, to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby. Bank of Montreal Capital Corporation is a duly
formed and validly existing corporation under the Canada Business Corporations
Act, and KPMG Peat Marwick LLP is a duly formed and validly existing partnership
under the laws of and is a resident in the State of New York, and each of them
has all requisite power, right, authority and capacity to acquire, own and
dispose of the Class F Preferred Shares which will be sold to it pursuant to
this Agreement, to execute, deliver and perform this Agreement and to consummate
the transactions contemplated hereby.
3.2 AUTHORIZATION. All action on the part of each of the Investors necessary for
the authorization, execution and delivery of this Agreement, the Investors'
Rights Agreement and the Shareholders Agreement and the performance of all
obligations of the Investors hereunder and thereunder has been taken or will be
taken prior to the Closing, and this Agreement, the Investors' Rights Agreement
and the Shareholders Agreement constitute valid and legally binding obligations
of the Investors, enforceable in accordance with their respective terms, except
(i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium,
and other laws of general application affecting enforcement of creditors' rights
generally, and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies.
3.3 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with each Investor
in reliance upon such Investor's representation to the Company, which by such
Investor's execution of this Agreement such Investor hereby confirms, that
either:
(a) the Class F Preferred Shares to be received by such Investor and the
Class A Common Shares issuable upon conversion thereof (collectively,
the "Securities") will be acquired by the Investor for investment as
principal for such Investor's own account, not as a nominee or agent,
and the acquisition cost to the Investor is not less than Cdn.
$97,000; or
(b) the Investor carries on business as a portfolio manager in California
and is purchasing the Securities as an agent for accounts that are
fully managed by the Investor, and the aggregate acquisition cost to
the Investor is not less than Cdn. $97,000, provided that
(i) the total asset value of the investment portfolios the Investor
manages on behalf of clients is not less than Cdn. $20,000,000;
and
(ii) the form attached as Schedule "D" will be completed by the
Investor, and will be filed by the Company, on or before the 10th
day after the Closing, with the British Columbia Securities
Commission, and
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that the Securities will be acquired not with a view to resale or distribution
of any part thereof, and that such Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, each Investor further represents that such Investor does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participation to such person or to any third person,
with respect to any of the Securities. Each Investor represents that it has full
power and authority to enter into this Agreement. If the Investor is not an
individual but is a corporation, partnership, trust, fund, association or any
other organized group of persons, it was not created solely, nor is it used
primarily, to permit a group of individuals to purchase securities without a
prospectus and it will have an aggregate acquisition cost of purchasing the
Class F Preferred Shares of not less than Cdn. $97,000 or, if it is such an
entity created or used primarily for such purpose, each of the individuals who
form part of the group has contributed at least Cdn. $97,000 to such entity for
the purpose of purchasing the Class F Preferred Shares; and if the Investor is a
corporation, syndicate, partnership or other form of unincorporated
organization, it pre-existed the offering of the Class F Preferred Shares and
has a bona fide purpose other than investment in the Class F Preferred Shares
or, if created to permit such investment, the individual share of the aggregate
acquisition cost for each participant is not less than Cdn. $97,000.
3.4 DISCLOSURE OF INFORMATION. Each Investor believes it has received all the
information it considers necessary or appropriate for deciding whether to
purchase the Class F Preferred Shares. Each Investor further represents that it
has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Class F Preferred
Shares. The foregoing, however, does not limit or modify the representations and
warranties of the Company in Section 2 of this Agreement or the right of the
Investors to rely thereon. To the best of the Investor's knowledge, the offer of
the Class F Preferred Shares was not advertised; and no person has made to the
Investor any written or oral representations:
(a) that any person will resell or repurchase the Class F Preferred
Shares and any Class A Common Shares into which the Class F
Preferred Shares may be converted (together, the "Securities");
(b) that any person will refund the purchase price of the
Securities;
(c) as to the future price or value of the Securities; or
(d) that the Securities will be listed and posted for trading on a
stock exchange or that application has been made to list and
post the Securities for trading on a stock exchange.
3.5 NO PROSPECTUS. Each Investor acknowledges that no prospectus has been filed
by the Company in connection with the issuance of the Securities because the
issuance is exempted from the registration and prospectus requirements of the
Securities Act (British Columbia) (the "B.C.
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Act") and the rules and regulation (collectively the "B.C. Regulations")
promulgated pursuant to the B.C. Act and as a result:
(a) each such Investor is restricted from using most of the civil
remedies available under the B.C. Act and the B.C. Regulations;
(b) each such Investor may not receive information that would
otherwise be required to be provided to the Investor under the
B.C. Act and the B.C. Regulations; and
(c) the Company is relieved from certain obligations that would
otherwise apply under the B.C. Act and the B.C. Regulations.
3.6 ADVERTISING. Each Investor acknowledges that it has no knowledge of, and
will not be purchasing the Class F Preferred Shares, on the basis of any
advertising.
3.7 INVESTMENT EXPERIENCE. Each Investor is an investor in securities of
companies in the development stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Class F Preferred Shares. If other
than an individual, Investor also represents it has not been organized for the
purpose of acquiring the Class F Preferred Shares.
3.8 ACCREDITED INVESTOR. Each Investor that is a resident of the United States
is an "accredited investor" within the meaning of SEC Rule 501 of Regulation D,
as presently in effect.
3.9 RESTRICTED SECURITIES. It understands that the Securities are characterized
as "restricted securities" under the federal securities laws of the United
States and the securities laws of the Province of British Columbia and that
under such laws and applicable regulations such securities may be resold only in
certain limited circumstances. In this connection, each Investor, in the case of
a resident of the United States, represents that it is familiar with SEC Rule
144, as presently in effect, and understands the resale limitations imposed
thereby and by the Securities Act of 1933, as amended(the "1933 Act").
3.10 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting the
representations set forth above, each Investor further agrees not to make any
disposition of all or any portion of the Class F Preferred Shares (or the Common
Shares issuable upon the conversion thereof) unless and until the transferee has
agreed in writing for the benefit of the Company to be bound by the provisions
of this Section 3 and the Investors' Rights Agreement and Shareholders
Agreement, provided and to the extent that such provisions are then applicable,
and:
(a) there is then in effect a Registration Statement under the Act
covering such proposed disposition and such disposition is made
in accordance with such Registration Statement and/or a
prospectus qualifying the proposed disposition has been filed
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with the relevant securities authorities in Canada and a receipt
has been obtained therefor, as the case may be; or
(b) (i) such Investor shall have notified the Company of the
proposed disposition and shall have furnished the
Company with a detailed statement of the circumstances
surrounding the proposed disposition, and
(ii) if reasonably requested by the Company, such Investor
shall have furnished the Company with an opinion of
counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such
shares under the 1933 Act or is exempt from the
registration and prospectus requirements of the relevant
securities laws of Canada. It is agreed that the Company
will not require opinions of counsel for transactions
made pursuant to Rule 144 except in unusual
circumstances.
(c) Notwithstanding the provisions of paragraphs (a) and (b) above,
no such Registration Statement shall be necessary for a transfer
by an Investor which is a partnership to a partner of such
partnership or a retired partner of such partnership who retires
after the date hereof, or to the estate of any such partner or
retired partner or the transfer by gift, will or intestate
succession of any partner to his spouse or to the siblings,
lineal descendants or ancestors of such partner or his spouse,
if the transferee agrees in writing to be subject to the terms
hereof to the same extent as if he were an original Investor
hereunder.
3.11 LEGENDS. It is understood that the certificates evidencing the Class F
Preferred Shares (and the Class A Common Shares issuable upon conversion
thereof) will bear the following legends:
"These securities have not been registered under the United States
Securities Act of 1933. They may not be sold, offered for sale, pledged
or hypothecated in the absence of a registration statement in effect
with respect to the securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not required, or
unless sold pursuant to Rule 144 of such Act." and
"The securities represented by this certificate are subject to a hold
period and may not be traded in British Columbia until the expiry of the
hold period except as permitted by the Securities Act (British Columbia)
and rules and regulations made thereunder."
4. CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING
The obligations of each Investor under Section 1.1 of this Agreement are subject
to the fulfilment on or before the Closing of each of the following conditions,
the waiver of which shall not be effective against any Investor who does not
consent in writing thereto:
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4.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of the
Company contained in Section 2 shall be true on and as of the Closing with the
same effect as though such representations and warranties had been made on and
as of the date of such Closing.
4.2 PERFORMANCE. The Company shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
4.3 (intentionally deleted)
4.4 QUALIFICATIONS. The Commissioner of Corporations of the State of California
shall have issued a permit qualifying the offer and sale pursuant to this
Agreement of the Class F Preferred Shares and the underlying Class A Common
Shares to those Investors that are residents of California, or such offer and
sale shall be exempt from such qualification under the California Corporate
Securities Law of 1968, as amended.
4.5 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in connection
with the transactions contemplated at the Closing and all documents incident
thereto shall be reasonably satisfactory in form and substance to Investors'
counsel, and they shall have received all such counterpart original and
certified or other copies of such documents as they may reasonably request.
4.6 DIRECTORS. The directors of the Company shall have resolved pursuant to
Article 9.1 of the Articles of the Company that the number of directors shall be
six and the directors of the Company shall be Xxxxxx Xxxxxxx, Xxxxx Wales,
Xxxxxxx Xxxxxxxxx, Xxxxxx Xxxxx, Xxxxxx Xxxxx and Xxxxx Xxxxxx.
4.7 OPINION OF COMPANY COUNSEL. Each Investor shall have received from Xxxxx &
Company, counsel for the Company, an opinion, dated as of the Closing, in form
and substance satisfactory to counsel to the Investors, to the effect that:
(a) The Company is a company-duly organized, validly existing and in
good standing (except for the residency requirement as disclosed
in Schedule B hereto) in respect of the filing of annual reports
with the Registrar of Companies under the laws of British
Columbia, and the Company has the requisite corporate power and
authority to own its properties and to conduct its business.
(b) The Company has the capacity to do business in any state,
province or jurisdiction of the United States and Canada where
it seeks to do business, subject to complying with any
registration or filing requirements and subject to the
availability for use of its corporate name in any such state,
province or jurisdiction, and is so qualified in any state,
province or jurisdiction in which it is currently doing
business.
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(c) The Company has the requisite corporate power and authority to
execute, deliver and perform this Agreement, the Investors'
Rights Agreement and the Shareholders Agreement. The Agreement,
the Investors' Rights Agreement and the Shareholders Agreement
have been duly and validly authorized by the Company, duly
executed and delivered by an authorized officer of the Company
and this Agreement and the Shareholders Agreement constitute
legal, valid and binding obligations of the Company. Subject to
bankruptcy and other laws of general application affecting the
rights and remedies of creditors, the Agreement and the
Shareholders Agreement are enforceable according to their
respective terms, except that no opinion need be given as to the
availability of equitable remedies.
(d) The capitalization of the Company is as follows:
(i) Preferred Shares. 11,946,474 Preferred Shares (the
"Preferred Shares"), of which 2,000,000 shares have been
designated Class A Preferred Shares, all of which are
recorded in the books of the Company as having been duly
authorized, issued and delivered and as being validly
outstanding, fully paid and nonassessable, 2,000,000
shares have been designated Class B Preferred Shares,
all of which are recorded in the books of the Company as
having been duly authorized, issued and delivered and as
being validly outstanding, fully paid and nonassessable,
2,658,228 shares have been designated Class D Preferred
Shares, all of which are recorded in the books of the
Company as having been duly authorized, issued and
delivered and as being validly outstanding, fully paid
and nonassessable, 4,000,000 shares have been designated
Class E Preferred Shares, all of which are recorded in
the books of the Company as having been duly authorized,
issued and delivered and as being validly outstanding,
fully paid and nonassessable, and 1,288,246 shares have
been designated Class F Preferred Shares and are to be
sold pursuant to this Agreement. The Class F Preferred
Shares, when issued, sold and delivered in accordance
with the terms of this Agreement, will be validly
outstanding, fully paid and nonassessable, approved by
all requisite corporate action, and issued in compliance
with all applicable Canadian federal and provincial laws
regarding the sale of securities, except that the
Company must file, within the prescribed time period,
with respect to the issue of any Class F Preferred
Shares to which the Securities Act (British Columbia)
applies, a report in Form 20 with the British Columbia
Securities Commission together with the appropriate fees
and a fee checklist form and may be required to file
with the British Columbia Securities Commission the
Certificate referred to in Section 3.3. The respective
rights, privileges and preferences of the Class A
Prefer-red Shares, Class B Preferred Shares, Class D
Preferred Shares, Class E Preferred Shares and Class F
Preferred Shares are as stated in the Company's Altered
Memorandum and Articles attached as Exhibit A to this
Agreement. 12,051,737 of the authorized but unissued
Class A Common Shares have been duly and validly
reserved for issuance
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upon the conversion of the Class A Preferred Shares, the
Class B Preferred Shares, the Class D Preferred Shares,
the Class E Preferred Shares and the Class F Preferred
Shares and, when issued in accordance with the Company's
Articles, will be validly issued, fully paid and
nonassessable.
(ii) Common Shares. 50,600,000 Common Shares, of which
50,000,000 shares have been designated Class A Common
Shares, 3,403,299 shares of which are recorded in the
books of the Company as having been duly authorized,
issued and delivered and as being validly outstanding,
fully paid and nonassessable and were issued in
compliance with all applicable Canadian federal and
provincial laws regarding the sale of securities, and
600,000 shares have been designated Class B Common
Shares, 476,786 shares of which are recorded in the
books of the Company as having been duly authorized,
issued and delivered and as being validly outstanding,
fully paid and nonassessable and were issued in
compliance with all applicable Canadian federal and
provincial laws regarding the sale of securities.
(iii) Except for (A) the conversion privileges of the Class A
Preferred Shares, Class B Preferred Shares, Class D
Preferred Shares, Class E Preferred Shares and Class F
Preferred Shares (B) the rights of the Investors
pursuant to Section 2.4 of the Investors' Rights
Agreement, and (C) 1,523,115 Common Shares reserved for
options to employees pursuant to the Company's Option
Plan, of which 1,202,861 Common Shares are subject to
options which have been granted and are not exercised,
there are no preemptive rights or, to the best of
counsel's knowledge, options, warrants, conversion
privileges or other rights (or agreements for any such
rights) outstanding to purchase or otherwise obtain any
of the Company's securities.
(e) All corporate steps and proceedings have been taken by the
Company to allot and issue, as fully paid and non-assessable,
the 1,288,246 Class F Preferred Shares to be sold pursuant to
this Agreement.
(f) The execution, delivery, performance and compliance with the
terms of this Agreement and the Shareholders Agreement and
Sections 2 and 3 of the Investors' Rights Agreement do not
violate any provision of any applicable Canadian federal or
provincial, or, to the best of such counsel's knowledge, local
law, rule or regulation or any provision of the Company's
Altered Memorandum and Articles and, to the best of such
counsel's knowledge, do not conflict with or constitute a
default under the provision of any judgement, writ, decree,
order or agreement to which the Company is a party or by which
it is bound.
(g) All consents, approvals, orders or authorizations of, and all
qualifications, registrations, designations, declarations or
filings with, any Canadian federal or provincial governmental
authority on the part of the Company required in connection
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with the consummation of the transactions contemplated by this
Agreement, the Shareholders Agreement and sections 2 and 3 of
the Investors' Rights Agreement have been obtained, and are
effective, as of the Closing, except for the filing by the
Company, of a report in Form 20 with the British Columbia
Securities Commission together with appropriate fees and a fee
checklist form, and such counsel is not aware of any
proceedings, or threat thereof, which question the validity
thereof.
(h) Such counsel is not aware that there is any action, proceeding
or investigation pending, against the Company or any of its
officers, directors or employees, or that any of the foregoing
has received any threat thereof, which questions the validity of
the Agreement, the Investors' Rights Agreement or the
Shareholders Agreement or the right of the Company or its
officers, directors and employees to enter into such agreements
or which might result, either individually or in the aggregate,
in any material adverse change in the assets, condition, affairs
or prospects of the Company, nor is such counsel aware of any
litigation pending against the Company or that the Company has
received any threat thereof, by reason of the proposed
activities of the Company, the past employment relationships of
its officers, directors or employees, or negotiations by the
Company or any of its officers or directors with possible
investors in the Company or its business.
(i) Neither the Altered Memorandum nor the Articles of the Company
is in violation of any provision of the laws of British
Columbia.
4.8 INVESTORS' RIGHTS AGREEMENT. The Company and each Investor shall have
entered into the Investors' Rights Agreement of even date herewith.
4.9 SHAREHOLDERS AGREEMENT. The Company, Xxxxxx Xxxxxxx, Xxxxx Wales, Xxxxxxxx
Wales, The Xxxxxxx Family Trust, Boardwalk Ventures Inc., Daybreak Software
Inc., Fireweed Investments Inc. and the Investors shall each have entered into
the Shareholders Agreement of even date herewith.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING
The obligations of the Company to each Investor under this Agreement are subject
to the fulfilment on or before the Closing of each of the following conditions
by that Investor:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of the
Investor contained in Section 3 shall be true on and as of the Closing with the
same effect as though such representations and warranties had been made on and
as of the Closing.
5.2 PAYMENT OF PURCHASE PRICE. The Investor shall have delivered the purchase
price specified in Section 1.2 and entered into the Investors' Rights Agreement
and the Shareholders Agreement.
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5.3 CALIFORNIA QUALIFICATION. The Commissioner of Corporations of the State of
California shall have issued a permit qualifying the offer and sale to the
Investors that are resident in California of the Class F Preferred Shares and
the Class A Common Shares issuable upon the conversion thereof or such offer and
sale shall be exempt from such qualification under the California Corporate
Securities Law of 1968, as amended.
6. MISCELLANEOUS
6.1 SURVIVAL OF WARRANTIES. The warranties, representations and covenants of the
Company and Investors contained in or made pursuant to this Agreement shall
survive the execution and delivery of this Agreement and the Closing and shall
in no way be affected by any investigation of the subject matter thereof made by
or on behalf of the Investors or the Company.
6.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective successors and assigns of the parties (including transferees of
any Class F Preferred Shares sold hereunder or any Common Shares issued upon
conversion thereof). Nothing in this Agreement, express or implied, is intended
to confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations, or liabilities under
or by reason of this Agreement, except as expressly provided in this Agreement.
6.3 GOVERNING LAW. This Agreement shall be governed by and construed under the
laws of British Columbia and the laws of Canada applicable therein.
6.4 COUNTERPARTS. This Agreement may be executed in two or more counterparts or
facsimile counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
6.5 TITLES AND SUBTITLES. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.
6.6 NOTICES. Unless otherwise provided, any notice required or permitted under
this Agreement shall be given in writing and shall be deemed effectively given
by personal delivery to the party to be notified, by facsimile transmission or
by mailing from a United States or Canadian Post Office, by registered or
certified mail, postage prepaid and addressed to the party to be notified at the
address indicated for such party on the signature page hereof, or at such other
address as such party may designate by ten (10) days' advance written notice to
the other parties and any such notice will be considered to have been received,
if delivered, upon the date of delivery, if sent by facsimile, then on the
business day next following the date of transmission, and if mailed, then five
business days after the date of mailing. If normal mail service is interrupted
by strike, slowdown, force majeure or other cause, a notice sent by mail will
not be considered to be received until actually received, and the party sending
the notice will deliver or transmit by facsimile such notice in order to ensure
prompt receipt thereof.
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6.7 FINDER'S FEE. Each party represents that it neither is nor will be obligated
for any finders' fee or commission in connection with this transaction. Each
Investor agrees to indemnify and to hold harmless the Company from any liability
for any commission or compensation in the nature of a finders' fee (and the
costs and expenses of defending against such liability or asserted liability)
for which the Investor or any of its officers, partners, employees, or
representatives is responsible. The Company agrees to indemnify and hold
harmless each Investor from any liability for any commission or compensation in
the nature of a finders' fee (and the costs and expenses of defending against
such liability or asserted liability) for which the Company or any of its
officers, employees or representatives is responsible.
6.8 EXPENSES. Irrespective of whether the Closing is effected, the Company shall
pay all costs and expenses that it incurs with respect to the negotiation,
execution, delivery and performance of this Agreement. If the Closing is
effected, the Company shall, at the Closing, reimburse the reasonable fees and
disbursements of the Investors, not to exceed $2,500 per Investor. If any action
at law or in equity IS necessary to enforce or interpret the terms of this
Agreement or the Altered Memorandum and Articles, the prevailing party shall be
entitled to reasonable legal fees, costs and necessary disbursements in addition
to any other relief to which such party may be entitled.
6.9 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holders of a majority of the Class A
Common Shares issued or issuable upon conversion of the Class F Preferred
Shares. Any amendment or waiver effected in accordance with this paragraph shall
be binding upon each holder of any securities purchased under this Agreement at
the time outstanding (including securities into which such securities are
convertible), each future holder of all such securities, and the Company;
provided, however, that no condition set forth in Section 5 hereof may be waived
with respect to any Investor who does not consent thereto.
6.10 SEVERABILITY. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
6.11 AGGREGATION OF SHARES. All the Preferred Shares held or acquired by
affiliated entities or persons shall be aggregated together for the purpose of
determining the availability of any rights under this Agreement.
6.12 ENTIRE AGREEMENT. This Agreement and the documents referred to herein
constitute the entire agreement among the parties and no party shall be liable
or bound to any other party in any manner by any warranties, representations, or
covenants except as specifically set forth herein or therein.
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6.13 FUNDS. All references to funds and/or dollar amounts are stated in U.S.
currency, unless expressly stated otherwise.
6.14 LIMITATION OF LIABILITY. The Investors agree that the Company shall not be
liable for any damages suffered by the Investors resulting from a breach of any
of the warranties and representations set out in Section 2 hereof except to the
extent that the damages suffered by the Investors exceed the sum of $5,000 for
any individual breach and the aggregate sum of $25,000 for any one or more
breaches.
6.15 FURTHER ASSURANCES. The parties will execute and deliver all other
appropriate supplemental agreements and other instruments, and take any other
action necessary, to give full effect to this Agreement, and to make this
Agreement legally effective, binding and enforceable as between them, and as
against third parties.
6.16 NON-WAIVER. The failure of a party to insist upon the strict performance of
any term of this Agreement, or to exercise any right, or remedy contained in
this Agreement, will not be construed as a waiver or a relinquishment by that
party for the future, of that term, right or remedy.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
PIVOTAL SOFTWARE INC.
By: /s/ Xxxxxx Xxxxxxx
-------------------------
Xxxxxx Xxxxxxx, President
Address: 000-000 Xxxx Xxxxxxxxx
Xxxxx Xxxxxxxxx, XX X0X 0X0
Facsimile: 000-000-0000
INVESTORS:
KLEINER, PERKINS, XXXXXXXX & XXXXX VI
by: /s/ SIGNED
--------------------------
Address: 0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Facsimile: 000-000-0000
Attention: Xxxx Xxxxxxxxx
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INTEGRAL CAPITAL PARTNERS 11, L.P.
By Integral Capital Management II, L.P.,
its general partner
by: /s/ Xxxxxx Xxxxxxx
--------------------------
a General Partner
Address: 0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Facsimile: 000-000-0000
Attention: Xxxxx XxXxxxx or
Xxxx Xxxxxx
INTEGRAL CAPITAL PARTNERS INTERNATIONAL II, CV
By Integral Capital Management II, L.P.,
its Investment General Partner
by: /s/ Xxxxxx Xxxxxxx
----------------------------
a General Partner
Address: 0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Facsimile: 000-000-0000
Attention: Xxxxx XxXxxxx or
Xxxx Xxxxxx
BANK OF MONTREAL CAPITAL CORPORATION
By its manager, Ventures West Management TIP Inc.
per: /s/ SIGNED
----------------------------
Address: 000 - 0000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, XX X0X 4B 1
Facsimile: 000-000-0000
Attention: Xxxxx X. Xxxxx
22
26
MANAGING MEMBER OF VI, LLC,
THE GENE OF
OAK INVESTMENT PARTNERS VI.
LIMITED PARTNERSHIP
OAK INVESTMENT PARTNERS VI, L.P.
by: /s/ SIGNED
----------------------------
Address: 000 Xxxxxxxxxx Xxxxxx
Xxxxx 0000, Xxxx Xxxx, XX 00000
Facsimile: 000-000-0000
Attention: Mr. Xxxx Xxxxxx
KPMG PEAT MARWICK LLP
by: /s/ SIGNED
----------------------------
Address: Suite 2000 - 000 Xxxxxxxxx Xxxxxx, XX
Xxxxxxx, XX 00000
Facsimile: 6504044501
Attention: Xxx XxXxxxx
23
27
PIVOTAL SOFTWARE, INC.
SCHEDULE A
SCHEDULE OF INVESTORS
-------------------------------------------------------------------------------------------------------
CLASS F AMOUNT
PURCHASER ADDRESS SHARES (US$)
-------------------------------------------------------------------------------------------------------
Kliener Xxxxxxx Xxxxxxxx & Xxxxx 0000 Xxxx Xxxx Xxxx 309,557 $1,922,346
VI Xxxxx Xxxx, XX 00000
-------------------------------------------------------------------------------------------------------
Integral Capital Partners II, L.P. 0000 Xxxx Xxxx Xxxx 383,802 $2,383,410
Xxxxx Xxxx, XX 00000
-------------------------------------------------------------------------------------------------------
Integral Capital Partners 0000 Xxxx Xxxx Xxxx 99,290 $ 616,590
International II, C.V. Xxxxx Xxxx, XX 00000
-------------------------------------------------------------------------------------------------------
Bank of Montreal Capital c/o Ventures West Management 204,848 $1,272,104
Corporation TIP Inc.
0000-0000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, XX V63 481
-------------------------------------------------------------------------------------------------------
Oak Investment Partners VI, L.P. 000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000 129,718 $ 805,550
Xxxx Xxxx, Xxxxxxxxxx, 00000
-------------------------------------------------------------------------------------------------------
KPMG Peat Marwick LLP 2000 - 000 Xxxxxxxxx Xxxxxx, XX 161,031 $1,000,000
Xxxxxxx, Xxxxxxx, 00000
-------------------------------------------------------------------------------------------------------
TOTAL 1,288,246 $8,000,000
=======================================================================================================
24
28
SCHEDULE B
PIVOTAL SOFTWARE INC.
CLASS F PREFERRED SHARE PURCHASE AGREEMENT
SCHEDULE OF EXCEPTIONS
2.1, 21.3 The Company is currently in technical non-compliance of the
directors residency requirement under section 133 of the British
Columbia Company Act, as amended. Section 133(1) requires that
the majority of the directors of the Company be persons
ordinarily resident in Canada. At the present time, the Board of
Directors of the Company consists of 3 persons ordinarily
resident in Canada and 3 persons ordinarily resident in the US.
The Company has been advised by the Registrar of Companies that
no serious consequences flow from this technical non-compliance
and that no actions of the Company will be invalid as a result.
Further, this residency requirement is expected to be repealed
in the revised Company Act which is expected to come into force
within two years.
2.15 The Company has loaned Xxxxx Xxxxx, the Company's Vice President
of Sales, a total of US $24,489 of which $12,712 remains
outstanding. This amount was used to purchase shares in the
Company.
29
PIVOTAL SOFTWARE INC.
SCHEDULE C
Schedule of Shareholders and Share options Information as at January 12, 1998
COMMON SHARES
TOTAL SHARES
NAME COMMON A COMMON B
XXXX XXXXXXX 680,800 45,000
XXXXX WALES 669,550 56,250
XXXXXXXX WALES 644,550 56,250
XXXXXXX FAMILY TRUST 575,800 125,000
XXXXX XXXXX 2,034 63,700
XXXXXX XXXXXX 19,133
XXXX XXXXXXX 19,133
XXXX XXXXXX 342,500 62,500
XXXXXX XXXXXX 1,400 7,200
XXXX XXXXXXX 320
XXXXX XXXXXXXX 5,400
XXXXXXX XXXXXXXX 600
XXXXX XXXXXXX 580
XXX TUP CHONG 840 1,160
XXXXXX XXXXXXX 280 160
XXXXXXX XXXXXXXXX 320
XXXX MALES 1,600
XXXXXXX XXXXXX 160
XXXXXXX XXXX 160
SHARKA STUYT 14,250 4,000
XXXX XXXXXX 160
XXXXX XXXXXX 8,000
XXXXX XXXXX 38,400
XXXXXX XXXX 21,244
XXXXXX XXXXX 250,000
XXXX XXXXXXX 440
PAYMAN ARMIN 440
XXXX XXXXXXX 300
XXXXX XXXXX 136,000
30
Revolving Loan
--------------------------------------------------------
XXXXXX XXX 160
--------------------------------------------------------
XXXXXX XXXXXXX 160
--------------------------------------------------------
XXXXX XXXXX 300
--------------------------------------------------------
XXXXXXX XXXXXXXX 300
--------------------------------------------------------
XXXXX XXXXX 240
--------------------------------------------------------
XXXXX XXXXXX 1,180
--------------------------------------------------------
XXXXXX XXXXXXXX 1,812
--------------------------------------------------------
XXXXXXX XXXXXX 440
--------------------------------------------------------
XXXXX XXXXX 12,000
--------------------------------------------------------
XXX XXXXX 400
--------------------------------------------------------
XXX XXXXXX 625
--------------------------------------------------------
XXXX XXXXXXXXX 240
--------------------------------------------------------
XXXXXX XXXXX 300
--------------------------------------------------------
XXXXXXXXX XXX 160
--------------------------------------------------------
XXXX XXXX 160
--------------------------------------------------------
XXXX XXXXXX 1,042
--------------------------------------------------------
XXXXX XXXXXXXX 740
--------------------------------------------------------
XXXX XX 300
--------------------------------------------------------
XXXXX XX 160
--------------------------------------------------------
XXXXX XXXXXX 250
--------------------------------------------------------
XXXXXX XXX 140
--------------------------------------------------------
XXX XXXXXX 1,812
--------------------------------------------------------
XXXXX XXXXX 500
--------------------------------------------------------
XXXXX MAY 250
--------------------------------------------------------
XXXXXX XXXXXXX 250
--------------------------------------------------------
XXXXX XXXXX 550
--------------------------------------------------------
--------------------------------------------------------
TOTAL 3,403,299 476,786
--------------------------------------------------------
CLASS A PREFERRED SHARES
--------------------------------
NAME TOTAL
SHARES
--------------------------------
--------------------------------
BOARDWALK 857,143
VENTURES
--------------------------------
XXXX XXXXXXX 142,857
--------------------------------
DAYBREAK 428,572
SOFTWARE
--------------------------------
FIREWEED 428,571
INVESTMENTS
--------------------------------
Pivotal Subscription Agreement
Jan 15, 1999
31
-----------------------------
XXXXXXXX WALES 71,429
-----------------------------
XXXXX WALES 71,428
-----------------------------
-----------------------------
TOTAL 2,000,000
-----------------------------
CLASS B PREFERRED SHARES
-----------------------------
NAME TOTAL
SHARES
-----------------------------
KPCB VI 1,800,000
-----------------------------
INTEGRAL CAPITAL I 200,000
-----------------------------
-----------------------------
TOTAL 2,000,000
-----------------------------
CLASS D PREFERRED SHARES
-----------------------------
NAME TOTAL
SHARES
-----------------------------
VW BC TECHNOLOGY 1,645,570
-----------------------------
BoM CAPITAL CORP. 40,259
-----------------------------
INTEGRAL CAPITAL II 126,582
-----------------------------
KPCB VI 820,318
-----------------------------
OAK INVESTMENTS VI 24,918
-----------------------------
OAK VI AFFILIATE 581
FUND
-----------------------------
-----------------------------
TOTAL 2,658,228
-----------------------------
32
I CERTIFY THIS IS A COPY OF A
DOCUMENT FILED ON
DEC 29 1998
XXXX X. XXXXXX
REGISTRAR OF COMPANIES
PROVINCE OF BRITISH COLUMBIA
FORM 19
(SECTION 348)
COMPANY ACT
SPECIAL RESOLUTION
Certificate of
Incorporation No. 398393
The following special resolution was passed by the company referred to
below on the date stated:
Name of company PIVOTAL SOFTWARE INC.
Date resolution passed December 16, 1998
Resolution:
A. RESOLVED, as a special resolution, that the memorandum and
articles of the Company be altered by:
1. abrogating the special rights and restrictions attached to the
Common shares, Class A Preferred shares, Class B Preferred
shares, Class D Preferred shares and Class E Preferred shares
and deleting Part 21 of the articles of the Company in its
entirety;
2. changing the name or designation of the Common shares without
par value to that of Class A Common shares without par value;
3. increasing the authorized capital of the Company by creating
600,000 unissued Class B Common shares with a par value of $0.03
each and 1,288,246 unissued Class F Preferred shares without par
value; and
4. creating, defining and attaching to the Class A Common, Class B
Common, Class A Preferred, Class B Preferred, Class D Preferred,
Class E Preferred and Class F Preferred shares the special
rights and restrictions set forth in Schedule 2 attached hereto,
which shall be included as Part 21 of the articles of the
Company.
33
2. RESOLVED, as a special resolution, that the memorandum be in the
form attached and marked Schedule 1, so that the memorandum as
altered will, at the time of filing, comply with the Company
Act."
Certified a true copy December 22, 1998.
/s/ XXXXXX XXXXXXX
----------------------------------------
(Signature)
President & CEO
----------------------------------------
(Relationship to Company)
2
34
CLASS E PREFERRED SHARES
NAME TOTAL
SHARES
----------------------- ---------
OAK INVESTMENTS VI 1,476,658
----------------------- ---------
OAK VI AFFILIATE FUND 34,453
----------------------- ---------
KPCB VI 951,852
----------------------- ---------
INTEGRAL CAPITAL II 548,148
----------------------- ---------
INTEGRAL INT'L 192,593
----------------------- ---------
VW BC TECHNOLOGY 370,370
----------------------- ---------
BOM CAPITAL CORP. 370,370
----------------------- ---------
XXXXXX XXXXX 55,556
----------------------- ---------
TOTAL 4,000,000
----------------------- ---------
STOCK OPTION PLAN
Total Options which Board is 2,500,000
authorized to issue
------------------------------- ---------
Total Options issued to date 2,179,746
------------------------------- ---------
Options exercised to date 976,885
------------------------------- ---------
Unexercised options 1,202,861
------------------------------- ---------
Options available for granting 320,254
------------------------------- ---------
35
SCHEDULE D
CERTIFICATION BY FOREIGN PORTFOLIO MANAGER
The undersigned is purchasing securities of Pivotal Software Inc. (the
"Issuer").
The undersigned hereby certifies that:
a it is purchasing securities of the Issuer on behalf of managed accounts
over which it has absolute discretion as to purchasing and selling, and in
respect of which it receives no instructions from any person beneficially
interested in such accounts or from any other person;
b it carries on the business of managing the investment portfolios of clients
through discretionary authority granted those clients (a "portfolio
manager" business) in ________________________________ California, and it
is permitted by law to carry on a portfolio manager business in that
jurisdiction;
c it was not created solely or primarily for the purpose of purchasing
securities of the Issuer;
d the total asset value of the investment portfolios it manages on behalf of
clients is not less than Cdn $20,000,000;
e it does not believe, and has no reasonable grounds to believe, that any
resident of British Columbia has a beneficial interest in any of the
managed accounts for which it is purchasing; and
f the Issuer has provided it with a list of the directors, senior officers
and other insiders of the Issuer, and the persons that carry on investor
relations activities for the Issuer (which list is attached as a schedule
to this Form), and it does not believe, and has no reasonable grounds to
believe, that any of those persons has a beneficial interest in any of the
managed accounts for which it is purchasing, except as follows:
__________________________________________________________________________
(name of insider(s) or person(s) carrying on
investor relations activities for the Issuer that have a beneficial
interest in an account)
The undersigned acknowledges that it is bound by the provisions of the British
Columbia Securities Act including, without limitation, sections 70 and 93
concerning the filing of insider reports and reports of acquisitions.
Dated at _________________________ this __________________ day of _____, 19__.
(Name of Purchaser - please print)
(Authorized Signatory)
(Official Capacity - please print)
(please print name of individual whose signature appears
above, if different from name of purchaser printed above)
30
36
PIVOTAL SOFTWARE INC.
EXHIBIT A
ALTERED MEMORANDUM & ARTICLES
37
SCHEDULE 1
ATTACHED TO SPECIAL RESOLUTIONS OF
PIVOTAL SOFTWARE INC.
PASSED BY THE COMPANY ON DECEMBER 16,1998
MEMORANDUM
(ALTERED)
OF
PIVOTAL SOFTWARE INC.
I wish to be formed into a company with limited liability under the Company Act
in pursuance of this memorandum.
1. The name of the Company is PIVOTAL SOFTWARE INC.
2. The authorized capital of the Company consists of 62,546,474 shares divided
into:
(a) 50,000,000 Class A Common shares without par value;
(b) 600,000 Class B Common shares with a par value of $0.03 each;
(c) 2,000,000 Class A Preferred shares without par value;
(d) 2,000,000 Class B Preferred shares with a par value of $1.17 each;
(e) 2,658,228 Class D Preferred shares without par value;
(f) 4,000,000 Class E Preferred shares without par value; and
(g) 1,288,246 Class F Preferred shares without par value.
3. Special rights and restrictions attached to the shares are set out in the
articles.
38
SCHEDULE 2
ATTACHED TO SPECIAL RESOLUTIONS OF
PIVOTAL SOFTWARE INC.
PASSED BY THE COMPANY ON DECEMBER 16, 1998
PART 21
RIGHTS AND RESTRICTIONS ATTACHED TO THE CLASS A COMMON SHARES,
THE CLASS B COMMON SHARES,
THE CLASS A PREFERRED SHARES,
THE CLASS B PREFERRED SHARES,
THE CLASS D PREFERRED SHARES,
THE CLASS E PREFERRED SHARES,
AND THE CLASS F PREFERRED SHARES
21.1 DIVIDEND PROVISIONS
The holders of the Class A Preferred Shares, Class B Preferred Shares, Class D
Preferred Shares, Class E Preferred Shares and Class F Preferred Shares shall be
entitled to receive dividends, out of any assets legally available therefor,
when, as and if declared by the Board of Directors; however, in the event
dividends are paid on any other outstanding shares of this Company, the holders
of Class A, Class B, Class D, Class E and Class F Preferred Shares shall be
entitled to an amount per share equal to that paid on any other outstanding
shares of this Company as determined on a basis as if all the Preferred Shares
in question had been fully converted into Class A Common Shares under the
provisions of Article 21.4 (the "Converted Basis") on the date of record for the
payment of such dividend for such Class A, Class B, Class D, Class E and Class F
Preferred Shares. Such dividends shall not be cumulative.
21.2 LIQUIDATION PREFERENCE
(a) In the event of any liquidation, dissolution or winding up of this Company,
either voluntary or involuntary, the holders of Class F Preferred Shares
shall be entitled to receive, prior and in preference to any distribution
of any of the assets of this Company to the holders of Class A Preferred
Shares, Class B Preferred Shares, Class D Preferred Shares, Class E
Preferred Shares or Common Shares by reason of their ownership thereof, an
amount per share equal to the sum of:
(i) U.S. $6.21 for each outstanding Class F Preferred Share (adjusted to
reflect subsequent stock dividends, stock splits or recapitalization)
(the "Original Class F Issue Price"); and
39
(ii) an amount equal to any declared but unpaid dividends on such shares.
If upon the occurrence of such event, the assets and funds thus distributed
among the holders of the Class F Preferred Shares shall be insufficient to
permit the payment to such holders of the full aforesaid preferential amounts,
then the entire remaining assets and funds of the Company legally available for
distribution shall be distributed ratably among the holders of the Class F
Preferred Shares in proportion to the aggregate full aforesaid preferential
amounts to which each such holder would otherwise be entitled.
(b) Upon the completion of the distribution required by subparagraph (a) of
this Article 21.2, if assets remain in this Company, the holders of Class E
Preferred Shares shall be entitled to receive, prior and in preference to
any distribution of any of the assets of this Company to the holders of
Class A Preferred Shares, Class B Preferred Shares, Class D Preferred
Shares or Common Shares by reason of their ownership thereof, an amount per
share equal to the sum of:
(i) U.S. $1.35 for each outstanding Class E Preferred Share (adjusted to
reflect subsequent stock dividends, stock splits or recapitalization)
(the "Original Class E Issue Price"); and
(ii) an amount equal to any declared but unpaid dividends on such shares.
If upon the occurrence of such event, the assets and funds thus distributed
among the holders of the Class E Preferred Shares shall be insufficient to
permit the payment to such holders of the full aforesaid preferential amounts,
then the entire remaining assets and funds of the Company legally available for
distribution shall be distributed ratably among the holders of the Class E
Preferred Shares in proportion to the aggregate full aforesaid preferential
amounts to which each such holder would otherwise be entitled.
(c) Upon the completion of the distributions required by subparagraphs (a) and
(b) of this Article 21.2, if assets remain in this Company, the holders of
Class D Preferred Shares shall be entitled to receive, prior and in
preference to any distribution of any of the assets of this Company to the
holders of Class A Preferred Shares, Class B Preferred Shares or Common
Shares by reason of their ownership thereof, an amount per share equal to
the sum of:
(i) U.S. $0.79 for each outstanding Class D Preferred Share (adjusted to
reflect subsequent stock dividends, stock splits or recapitalization)
(the "Original Class D Issue Price"); and
(ii) an amount equal to any declared but unpaid dividends on such shares.
If upon the occurrence of such event, the assets and funds thus distributed
among the holders of the Class D Preferred Shares shall be insufficient to
permit the payment to such holders of the full aforesaid preferential amounts,
then the entire remaining assets and funds of the Company legally available for
distribution shall be distributed ratably among the holders of the Class D
Preferred
2
40
Shares in proportion to the aggregate full aforesaid preferential amounts to
which each such holder would otherwise be entitled.
(d) Upon the completion of the distributions required by subparagraphs (a), (b)
and (c) of this Article 21.2, if assets remain in this Company, the holders
of Class B Preferred Shares of this Company shall be entitled to receive,
prior and in preference to any distribution of any of the assets of this
Company to the holders of Class A Preferred Shares or Common Shares by
reason of their ownership thereof, an amount per share equal to the sum of:
(i) U.S. $1.00 for each outstanding Class B Preferred Share (adjusted to
reflect subsequent stock dividends, stock splits or recapitalization)
(the "Original Class B Issue Price"); and
(ii) an amount equal to any declared but unpaid dividends on such shares.
If upon the occurrence of such event, the assets and funds thus distributed
among the holders of the Class B Preferred Shares shall be insufficient to
permit the payment to such holders of the full aforesaid preferential amounts,
then the entire remaining assets and funds of the Company legally available for
distribution shall be distributed ratably among the holders of the Class B
Preferred Shares in proportion to the aggregate fall aforesaid preferential
amounts to which each such holder would otherwise be entitled.
(e) Upon the completion of the distributions required by subparagraphs (a),
(b), (c) and (d) of this Article 21.2, if assets remain in this Company,
the holders of Class A Preferred Shares of this Company shall be entitled
to receive, prior and in preference to any distribution of any of the
assets of this Company to the holders of Common Shares by reason of their
ownership thereof, an amount per share equal to the sum of:
(i) U.S. $0.30 for each outstanding Class A Preferred Share (adjusted to
reflect subsequent stock dividends, stock splits or recapitalization)
(the "Original Class A Issue Price"); and
(ii) an amount equal to any declared but unpaid dividends on such shares.
If upon the occurrence of such event, the assets and funds thus distributed
among the holders of the Class A Preferred Shares shall be insufficient to
permit the payment to such holders of the full aforesaid preferential amounts,
then the entire remaining assets and funds of the Company legally available for
distribution shall be distributed ratably among the holders of the Class A
Preferred Shares in proportion to the aggregate full aforesaid preferential
amounts to which each such holder would otherwise be entitled.
(f) Upon the completion of the distributions required by subparagraphs (a),
(b), (c), (d) and (e) of this Article 21.2, if assets remain in this
Company, the holders of the Class A Common Shares of this Company shall be
entitled to receive, prior and in preference to any distribution of any of
the assets of this Company to the holders of the Class B Common
3
41
Shares by reason of their ownership thereof, an amount per share equal to
any declared but unpaid dividends on such share.
If upon the occurrence of such event, the assets and funds thus distributed
among the holders of the Class A Common Shares shall be insufficient to permit
the payment to such holders of the full aforesaid preferential amounts, then the
entire remaining assets and funds of the Company legally available for
distribution shall be distributed ratably among the holders of the Class A
Common Shares in proportion to the aggregate full aforesaid preferential amounts
to which each such holder would otherwise be entitled.
(g) Upon the completion of the distributions required by subparagraphs (a),
(b), (c), (d), (e) and (f) of this Article 21.2, if assets remain in this
Company, the holders of the Class B Common Shares of this Company shall be
entitled to receive, prior and in preference to any distribution of any of
the assets of this Company to the holders of any other class of shares by
reason of their ownership thereof, an amount per share equal to any
declared but unpaid dividends on such share.
If upon the occurrence of such event, the assets and funds thus distributed
among the holders of the Class B Common Shares shall be insufficient to permit
the payment to such holders of the full aforesaid preferential amounts, then the
entire remaining assets and funds of the Company legally available for
distribution shall be distributed ratably among the holders of the Class B
Common Shares in proportion to the aggregate full aforesaid preferential amounts
to which each such holder would otherwise be entitled.
(h) After the distributions described in subparagraphs (a), (b), (c), (d), (e),
(f) and (g) of this Article 21.2 have been paid, the remaining assets of
the Company available for distribution to shareholders shall be distributed
among the holders of Class A Preferred Shares, Class B Preferred Shares,
Class D Preferred Shares, Class E Preferred Shares, Class F Preferred
Shares and Common Shares pro rata based on the number of shares of Common
Shares held by each on a Converted Basis.
(i) A reorganization of this Company or a consolidation or merger of this
Company with or into any other company or companies, or a sale, conveyance
or disposition of all or substantially all of the assets of this Company or
the completion of a transaction or class of related transactions in which
more than 50% of the voting power of the Company is disposed of, except for
and excluding a transaction described in Article 21.4(a)(iii)(A), shall be
deemed to be a liquidation, dissolution or winding up within the meaning of
this Article 21.2.
(j) Any securities to be delivered pursuant to subparagraph (i) above shall be
valued as follows:
(i) Securities not subject to a hold period or other similar restrictions on
free marketability:
4
42
(A) If traded on a securities exchange, the value shall be deemed to be
the average of the closing prices of the securities on such
exchange over the 30-day period ending three (3) days prior to
the closing;
(B) If actively traded over-the-counter, the value shall be deemed to be
the average of the closing bid or sale prices (whichever are
applicable) over the 30-day period ending three (3) days prior to
the closing; and
(C) If there is no active public market, the value shall be the fair
market value thereof, as mutually determined by this Company and
the holders of Preferred Shares which would be entitled to
receive such securities or the same type of securities and which
Preferred Shares represent at least a majority of the voting
power of all then outstanding shares of such Preferred Shares.
(ii) The method of valuation of securities subject to a hold period or other
restrictions on free marketability (other than restrictions arising
solely by virtue of a shareholder's status as an affiliate or former
affiliate) shall be to make an appropriate discount from the market
value determined as above in clause (i) (A), (B) or (C) to reflect the
approximate fair market value thereof, as mutually determined by this
Company and the holders of Preferred Shares which would be entitled to
receive such securities or the same type of securities and which
represent at least a majority of the voting power of all then
outstanding shares of such Preferred Shares.
(k) In the event the requirements of subparagraph (i) of this Article are not
complied with, the Company shall forthwith either:
(i) cause such closing to be postponed until such time as the requirements
of this Article 21.2 have been complied with, or
(ii) cancel such transaction, in which event the rights, preferences and
privileges of the holders of the Class A, Class B, Class D, Class
E and Class F Preferred Shares and Class A Common Shares shall
revert to and be the same as such rights, preferences and
privileges existing immediately prior to the date of the first
notice referred to in subparagraph (l) hereof.
(l) The Company shall give each holder of record of Class A, Class B, Class D,
Class E and Class F Preferred Shares written notice of such impending
transaction not later than twenty (20) days prior to the shareholders'
meeting called to approve such transaction, or twenty (20) days prior to
the closing of such transaction, whichever is earlier, and shall also
notify such holders in writing of the final approval of such transaction.
The first of such notices shall describe the material terms and conditions
of the impending transaction and the provision of this Article 21.2, and
the Company shall thereafter give such holders prompt notice of any
material changes. The transaction shall in no event take place sooner than
twenty (20) days after the Company has given the first notice provided for
herein or sooner than ten (10) days after the Company has given notice of
any material changes provided for herein; provided,
5
43
however, that such periods may be shortened upon the written consent of the
holders of Preferred Shares which are entitled to such notice rights or
similar notice rights and which represents at least a majority of the
voting power of all then outstanding shares of such Preferred Shares.
(m) The provisions of this Article 21.2 are in addition to the protective
provisions of Article 21.6 hereof.
21.3 RETRACTION AT REQUEST OF SHAREHOLDER AND REDEMPTION BY THE COMPANY
(a) On or at any time after June 30, 2001, the Company shall, after receipt by
it of the written request of the holders of not less than 75% of the
outstanding Class B, Class D, Class E and Class F Preferred Shares, redeem
in whole or in part the Class B, Class D, Class E and Class F Preferred
Shares by paying in cash therefor:
(i) for the Class B Preferred Shares a sum per share equal to U.S. $1.00
(adjusted to reflect subsequent stock dividends, stock splits or
recapitalization) together with all dividends declared, but unpaid,
with respect to such share to the Redemption Date (defined below)
(such total amount is hereinafter referred to as the "Class B
Redemption Price");
(ii) for the Class D Preferred Shares a sum per share equal to U.S. $0.79
(adjusted to reflect subsequent stock dividends, stock splits or
recapitalization) together with all dividends declared, but unpaid,
with respect to such share to the Redemption Date (such total amount
is hereinafter referred to as the "Class D Redemption Price");
(iii) for the Class E Preferred Shares a sum per share equal to U.S. $1.35
(adjusted to reflect subsequent stock dividends, stock splits or
recapitalization) together with all dividends declared, but unpaid,
with respect to such share to the Redemption Date (such total amount
is hereinafter referred to as the "Class E Redemption Price"); and
(iv) for the Class F Preferred Shares a sum per share equal to U.S. $6.21
(adjusted to reflect subsequent stock dividends, stock splits or
recapitalization) together with all dividends declared, but unpaid,
with respect to such share to the Redemption Date (such total amount
is hereinafter referred to as the "Class F Redemption Price").
(b) On or at any time after June 30, 2001, the Company may, after receipt by it
of written consent to redemption hereunder of the Class B, Class D, Class E
and Class F Preferred Shares, from the holders of Class B, Class D, Class E
and Class F Preferred Shares representing at least 75% of the voting power
of the then outstanding Class B, Class D, Class E and Class F Preferred
Shares of this Company, at any time it may lawfully do so, redeem in whole
or in part the Class B, Class D, Class E and Class F Preferred Shares by
paying in cash therefor a sum equal to the Class B Redemption Price in the
case of the Class B Preferred Shares, the Class D Redemption Price in case
of the Class D Preferred Shares, the Class E Redemption
6
44
Price in the case of the Class E Preferred Shares and the Class F
Redemption Price in the case of the Class F Preferred Shares so
redeemed.
(c) (i) In the event of any redemption of only a part of the then
outstanding Class B, Class D, Class E and Class F Preferred
Shares, this Company shall, except as provided in Article
21.3(c)(iii), effect such redemption pro rata in proportion to
the aggregate redemption price for each class.
(ii) Within thirty (30) days after receipt of the written request
referred to in Article 21.3(a) or the written consent referred
to in Article 21.3(b), as the case may be, the Company shall
give written notice by mail, first class postage prepaid, to
each holder of record (at the close of business on the business
day next preceding the day on which notice is given) of the
Class B, Class D, Class E and Class F Preferred Shares to be
redeemed, at the address last shown on the records of this
Company for such holder or given by the holder to this Company
for the purpose of notice or, if no such address appears or is
given, at the place where the principal executive office of this
Company is located, notifying such holder of the redemption to
be effected, specifying the number of shares to be redeemed from
such holder, the date fixed by the Company for the redemption of
any Class B, Class D, Class E and Class F Preferred Shares,
which date shall be not less than 30 but no more 60 days after
the date of such mailing (the "Redemption Date"), the Redemption
Price, the place at which payment may be obtained and the date
on which such holder's Conversion Rights (as hereinafter
defined) as to such shares terminate and calling upon such
holder to surrender to this Company, in the manner and at the
place designated, the holder's certificate or certificates
representing the shares to be redeemed (the "Redemption
Notice"). Except as provided in Article 21.3(c)(iii), on or
after the Redemption Date, each holder of Class B, Class D,
Class E and Class F Preferred Shares to be redeemed shall
surrender to this Company the certificate or certificates
representing such shares, in the manner and at the place
designated in the Redemption Notice, and thereupon the
Redemption Price of such shares shall be payable to the order of
the person whose name appears on such certificate or
certificates as the owner thereof and each surrendered
certificate shall be cancelled. In the event less than all the
shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.
(iii) From and after the Redemption Date, unless there shall have been
a default in payment of the Redemption Price, all rights of the
holders of such shares as holders of Class B, Class D, Class E
and Class F Preferred Shares (except the right to receive the
Redemption Price without interest upon surrender of their
certificate or certificates) shall cease with respect to such
shares, and such shares shall not thereafter be transferred on
the books of this Company or be deemed to be outstanding for any
purpose whatsoever. If the funds of this Company legally
available for redemption of Class B, Class D, Class E and Class
F Preferred Shares on any Redemption Date are insufficient to
redeem the total number of Class B, Class
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D, Class E and Class F Preferred Shares specified in the Redemption Notice to be
redeemed on such date, those funds which are legally available will be used as
follows:
A. First, the funds will be used to redeem the maximum possible number of
Class F Preferred Shares described in the Redemption Notice at the Class F
Redemption Price, in priority and preference to any payment to the holders
of Class B Preferred Shares, Class D Preferred Shares and Class E Preferred
Shares, and if such funds are insufficient to permit the payment of the
full Redemption Price for the Class F Preferred Shares that are described
in the Redemption Notice then the funds shall be paid ratably among the
holders of the Class F Preferred Shares in proportion to the aggregate full
preferential amounts to which each holder would otherwise be entitled as
provided in Article 21.2(a),
B. Second, if funds remain after paying in full the Class F Redemption Price
to the holders of Class F Preferred Shares, then the funds will be used to
redeem the maximum possible number of Class E Preferred Shares described in
the Redemption Notice at the Class E Redemption Price, in priority and
preference to any payment to the holders of Class B Preferred Shares and
Class D Preferred Shares, and if such funds are insufficient to permit the
payment of the full Redemption Price for the Class E Preferred Shares that
are described in the Redemption Notice then the funds shall be paid ratably
among the holders of Class E Preferred Shares in proportion to the
aggregate full preferential amounts to which each holder would otherwise be
entitled as provided in Article 21.2(b),
C. Third, if funds remain after paying in full the Class B Redemption Price to
the holders of Class E Preferred Shares, then the funds will be used to
redeem the maximum possible number of Class D Preferred Shares described in
the Redemption Notice at the Class D Redemption Price, in priority and
preference to any payment to the holders of Class B Preferred Shares, and
if such funds are insufficient to permit the payment of the full Redemption
Price for the Class D Preferred Shares that are described in the Redemption
Notice then the funds shall be paid ratably among the holders of Class D
Preferred Shares in proportion to the aggregate full preferential amounts
to which each holder would otherwise be entitled as provided in Article
21.2(c), and
D. Fourth, if funds remain after paying in full the Class D Redemption Price
to the holders of Class D Preferred Shares, then the funds will be used to
redeem the maximum possible number of Class B Preferred Shares described in
the Redemption Notice at the Class B Redemption Price, and if such funds
are insufficient to permit the payment of the full Redemption Price for the
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46
Class B Preferred Shares that are described in the Redemption Notice
then the funds shall be paid ratably among the holders of Class B
Preferred Shares in proportion to the aggregate full preferential
amounts to which each holder would otherwise be entitled as provided
in Article 21.2(d).
The Class B, Class D, Class E and Class F Preferred Shares not redeemed
shall remain outstanding and entitled to all the rights and preferences
provided herein. At any time thereafter when additional funds of the
Company are legally available for the redemption of Class B, Class D, Class
E and Class F Preferred Shares, such funds will immediately be used to
redeem the balance of the shares which the Company has become obligated to
redeem on any Redemption Date but which it has not redeemed, in the
priority set out above.
(iv) Three days prior to the Redemption Date, this Company shall deposit the
Redemption Price of all outstanding Class B, Class D, Class E and Class F
Preferred Shares designated for redemption in the Redemption Notice, and
not yet redeemed or converted, with a bank or trust company having
aggregate capital and surplus in excess of U.S. $50,000,000 as a trust fund
for the benefit of the respective holders of the shares designated for
redemption and not yet redeemed. Simultaneously, this Company shall deposit
irrevocable instruction and authority to such bank or trust company to
publish the notice of redemption thereof (or to complete such publication
if theretofore commenced) and to pay, on and after the date fixed for
redemption or prior thereto, the Redemption Price of the Class B, Class D,
Class E and Class F Preferred Shares to the holders thereof upon surrender
of their certificates duly endorsed for transfer. Any moneys deposited by
this Company pursuant to this Article 21.3(c) (iv) for the redemption of
shares which are thereafter converted into Class A Common Shares pursuant
to Article 21.4 hereof no later than the close of business on the
Redemption Date shall be returned to this Company forthwith upon such
conversion. The balance of any moneys deposited by this Company pursuant to
this Article 21.3(c)(iv) remaining unclaimed at the expiration of two years
following the Redemption Date shall thereafter be returned to this Company,
provided that the shareholder to which such monies would be payable
hereunder shall be entitled, upon proof of its ownership of Class B, Class
D, Class E or Class F Preferred Shares and payment of any bond requested by
the Company, to receive such monies but without interest from the
Redemption Date.
21.4 CONVERSION
The holders of the Class A, Class B, Class D, Class E and Class F Preferred
Shares shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert.
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47
(i) Subject to Article 21.4 (c), each Class A Preferred Share, Class B
Preferred Share, Class D Preferred Share, Class E Preferred Share and
Class F Preferred Share shall be convertible, at the option of the holder
thereof, at any time after the date of issuance of such share and (in the
case of a Class B Preferred Share, Class D Preferred Share, Class E
Preferred Share and Class F Preferred Share) prior to the close of
business on any Redemption Date as may have been fixed in any Redemption
Notice with respect to such share, at the office of this Company or any
transfer agent for the Class A Preferred Shares, Class B Preferred Shares,
Class D Preferred Shares, Class E Preferred Shares or Class F Preferred
Shares into such number of fully paid and non-assessable Class A Common
Shares as is determined by dividing the Original Class A Issue Price,
Original Class B Issue Price, Original Class D Issue Price, Original Class
E Issue Price or Original Class F Issue Price as applicable, by the
Conversion Price at the time in effect for such share. The initial
Conversion Price per share for Class A Preferred Shares, Class D Preferred
Shares, Class E Preferred Shares and Class F Preferred Shares shall be the
Original Class A Issue Price, the Original Class D Issue Price, the
Original Class E Issue Price and the Original Class F Issue Price,
respectively, and the initial Conversion Price per share for Class B
Preferred Shares shall be U.S. $0.95 (adjusted to reflect subsequent stock
dividends, stock splits or recapitalization); provided, however, that the
Conversion Price for the Class A Preferred Shares, Class B Preferred
Shares, Class D Preferred Shares, Class E Preferred Shares and Class F
Preferred Shares shall be subject to adjustment as set forth in Article
21.4(c).
(ii) In the event of a call for redemption of any Class B and/or Class D and/or
Class E and/or Class F Preferred Shares pursuant to Article 21.3 hereof,
the Conversion Rights shall terminate as to the shares designated for
redemption at the close of business on the Redemption Date, unless default
is made in payment of the Redemption Price.
(iii) Each Class A Preferred Share, Class B Preferred Share, Class D Preferred
Share, Class E Preferred Share and Class F Preferred Share shall
automatically be converted into Class A Common Shares at the Conversion
Price at the time in effect for such Class A Preferred Shares, Class B
Preferred Shares, Class D Preferred Shares, Class E Preferred Shares and
Class F Preferred Shares immediately upon the earlier of:
A. the acquisition of all or substantially all of the assets of the
Company by a third party or the consummation of a takeover of the
Company by a third party as a result of an offer to acquire all of
the issued shares of the Company, at a price or consideration which
results in payment to all of the shareholders of the Company of not
less than U.S. $7.50 per Common Share (adjusted to reflect subsequent
stock dividends, stock splits or recapitalization) calculated on a
basis that all of the Preferred Shares have been converted to Class A
Common Shares and without regard to any liquidation preferences for
any class of shares as set forth herein; and
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48
B. the consummation of the Company's sale of its Common Shares in a bona
fide, firm commitment underwriting pursuant to a registration
statement under the Securities Act of 1933 of the United States, as
amended, the public offering price of which was not less than U.S.
$7.50 per share (adjusted to reflect subsequent stock dividends, stock
splits or recapitalization) and U.S. $15,000,000 in the aggregate,
provided that the underwriters in such public offering are acceptable
to the holders of a majority of the Class B, Class D Class E and Class
F Preferred Shares, such acceptance not to be unreasonably withheld.
(b) Mechanics of Conversion. Before any holder of Class A Preferred Shares,
Class B Preferred Shares, Class D Preferred Shares, Class E Preferred
Shares or Class F Preferred Shares shall be entitled to convert the same to
Class A Common Shares, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of this Company or of
any transfer agent for the Class A Preferred Shares, Class B Preferred
Shares, Class D Preferred Shares, Class E Preferred Shares and Class F
Preferred Shares, and shall give written notice by mail, postage prepaid,
to this Company at its principal corporate office, of the election to
convert the same and shall state therein the name or names in which the
certificate or certificates for Class A Common Shares are to be issued.
This Company shall, as soon as practicable thereafter, issue and deliver at
such office to such holder of Class A Preferred Shares, Class B Preferred
Shares, Class D Preferred Shares, Class E Preferred Shares or Class F
Preferred Shares or to the nominee or nominees of such holder, a
certificate or certificates for the number of Class A Common Shares to
which such holder shall be entitled as aforesaid. Such conversion shall be
deemed to have been made immediately prior to the close of business on the
date of such surrender of the Class A Preferred Shares, Class B Preferred
Shares, Class D Preferred Shares, Class E Preferred Shares or Class F
Preferred Shares to be converted, and the person or persons entitled to
receive the Class A Common Shares issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such Class A
Common Shares as of such date. If the conversion is in connection with an
acquisition or take-over referred to in Article 21.4(a)(iii)(A) or in
connection with an underwritten offer of securities registered pursuant to
the Securities Act of 1933 of the United States, as amended, as set out in
Article 21.4(a)(iii)(B), the conversion may, at the option of any holder
tendering Class A Preferred Shares, Class B Preferred Shares, Class D
Preferred Shares, Class E Preferred Shares or Class F Preferred Shares for
conversion, be conditioned upon the consummation of the acquisition of the
assets or the take-over, or conditioned upon the closing with the
underwriter of the sale of securities pursuant to such offering, in which
event the person(s) entitled to receive the Class A Common Shares issuable
upon such conversion of the Class A Preferred Shares, Class B Preferred
Shares, Class D Preferred Shares, Class E Preferred Shares or Class F
Preferred Shares shall not be deemed to have converted such Class A
Preferred Shares, Class B Preferred Shares, Class D Preferred Shares, Class
E Preferred Shares or Class F Preferred Shares until immediately prior to
the closing of such acquisition, take-over or sale of securities.
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49
(c) Conversion Price Adjustments of Preferred Shares. The Conversion Price of
Class A Preferred Shares, Class B Preferred Shares, Class D Preferred
Shares, Class E Preferred Shares and Class F Preferred Shares shall be
subject to adjustment from time to time as follows:
(i) A. Upon each issuance by the Company of any Additional Shares
(as defined below), after the date upon which any of the Class B
Preferred Shares were first issued (the "Purchase Date" with
respect to the Class A and Class B Preferred Shares) or after the
date upon which any shares of the Class D Preferred Shares were
first issued (the "Purchase Date" with respect to the Class D
Preferred Shares) or after the date upon which any shares of the
Class E Preferred Shares were first issued (the "Purchase Date"
with respect to the Class E Preferred Shares) or after the date
upon which any shares of the Class F Preferred Shares were first
issued (the "Purchase Date" with respect to the Class F Preferred
Shares), without consideration or for a consideration per share
less than the Conversion Price for such class in effect
immediately prior to the issuance of such Additional Shares, the
Conversion Price for such class in effect immediately prior to
each such issuance shall forthwith (except as otherwise provided
in this Article 21.4(c)(i)) be adjusted to a price determined as
follows:
1. In the case of the Class A Preferred Shares, Class D
Preferred Shares, Class E Preferred Shares and Class F
Preferred Shares, by multiplying such Conversion Price by a
fraction, the numerator of which shall be the number of
Common Shares outstanding immediately prior to such issuance
plus the number of Common Shares which the aggregate
consideration received by the Company for such issuance
would purchase at such Conversion Price and the denominator
of which shall be the number of Common Shares outstanding
immediately prior to such issuance plus the number of such
Additional Shares; and
2. In the case of the Class B Preferred Shares no adjustment to
the Conversion Price for such class shall be made upon the
issuance by the Company of any Additional Shares unless the
consideration per share for such issuance is less than U.S.
$0.79 (adjusted to reflect subsequent stock dividends, stock
splits or recapitalization). In the event that Additional
Shares are issued by the Company for consideration per share
which is less than U.S. $0.79 (adjusted to reflect
subsequent stock dividends, stock splits or
recapitalization), then the Conversion Price for the Class B
Preferred Shares will be adjusted to a price determined by
multiplying the Conversion Price for Class B Preferred
Shares in effect immediately prior to such issuance by a
fraction, the numerator of which shall be the new
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50
Conversion Price for the Class D Preferred Shares for the
issuance of such Class D Preferred Shares and the
denominator of which shall be the Conversion Price for the
Class D Preferred Shares in effect immediately prior to the
issuance of such Additional Shares.
B. No adjustment of the Conversion Price for the Class A Preferred Shares,
Class B Preferred Shares, Class D Preferred Shares, Class E Preferred
Shares or Class F Preferred Shares shall be made in an amount less than one
cent U.S. per share, provided that any adjustments which are not required
to be made by reason of this Article 21.4(c)(i)B shall be carried forward
and shall be either taken into account in any subsequent adjustment made
prior to 3 years from the date of the event giving rise to the adjustment
being carried forward, or shall be made at the end of 3 years from the date
of the event giving rise to the adjustment being carried forward. Except to
the limited extent provided for in Article 21.4(c)(i)(E)(3) and (4), no
adjustment of such Conversion Price pursuant to this Article 21.4(c)(i)
shall have the effect of increasing the Conversion Price above the
Conversion Price in effect immediately prior to such adjustment.
C. In the case of the issuance of Common Shares for cash, the consideration
shall be deemed to be the amount of cash paid therefor before deducting any
reasonable discounts, commissions or other expenses allowed, paid or
incurred by this Company for any underwriting or otherwise in connection
with the issuance and sale thereof.
D. In the case of the issuance of Common Shares for a consideration in whole
or in part other than cash, the consideration other than cash shall be
deemed to be the fair value thereof as determined by the Board of Directors
irrespective of any accounting treatment.
E. In the case of the issuance (whether before, on or after the applicable
Purchase Date) of options to purchase or rights to subscribe for Common
Shares, securities by their terms convertible into or exchangeable for
Common Shares or options to purchase or rights to subscribe for such
convertible or exchangeable securities, the following provisions shall
apply for all purposes of this Article 21.4(c)(i) and (ii):
1. The aggregate maximum number of Common Shares deliverable upon
exercise (assuming the satisfaction of any conditions to
exercisability, including without limitation, the passage of time, but
without taking into account potential antidilution adjustments) of
such options to purchase or rights to subscribe for Common Shares
shall be deemed to have been issued at the time such options or rights
were issued and for a consideration equal to the consideration
(determined in the
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51
manner provided in Article 21.4(c)(i)(C) and (D)), if any, received by
the Company upon the issuance of such options or rights plus the
minimum exercise price provided in such options or rights (without
taking into account potential antidilution adjustments) for the Common
Shares covered thereby.
2. The aggregate maximum number of Common Shares deliverable upon
conversion of or in exchange (assuming the satisfaction of any
conditions to convertibility or exchangeability, including, without
limitation, the passage of time, but without taking into account
potential antidilution adjustments) for any such convertible or
exchangeable securities or upon the exercise of options to purchase or
rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof shall be deemed to have
been issued at the time such securities were issued or such options or
rights were issued and for a consideration, if any, received by the
Company for any such securities and related options or rights
(excluding any cash received on account of accrued interest or accrued
dividends), plus the minimum additional consideration, if any, to be
received by the Company (without taking into account potential
antidilution adjustments) upon the conversion or exchange of such
securities or the exercise of any related options or rights (the
consideration in each case to be determined in the manner provided in
Article 21.4(c)(i)(C)and (D)).
3. In the event of any change in the number of Common Shares deliverable
or in the consideration payable to this Company upon exercise of such
options or rights or upon conversion of or in exchange for such
convertible or exchangeable securities, including, but not limited to,
a change resulting from the antidilution provisions thereof, the
Conversion Price of the Class A Preferred Shares, Class B Preferred
Shares, Class D Preferred Shares, Class E Preferred Shares and Class F
Preferred Shares to the extent in any way affected by or computed
using such options, rights or securities, shall be recomputed to
reflect such change, but no further adjustment shall be made for the
actual issuance of Common Shares or any payment of such consideration
upon the exercise of any such options or rights or the conversion or
exchange of such securities.
4. Upon the expiration of any such options or rights, the termination of
any such rights to convert or exchange or the expiration of any
options or rights related to such convertible or exchangeable
securities, the Conversion Price of the Class A Preferred Shares,
Class B Preferred Shares, Class D Preferred Shares, Class E Preferred
Shares and Class F Preferred Shares to the extent in any way affected
14
52
by or computed using such options, rights or securities or options or
rights related to such securities, shall be recomputed to reflect the
issuance of only the number of Common Shares (and convertible or
exchangeable securities which remain in effect) actually issued upon
the exercise of such options or rights, upon the conversion or
exchange of such securities or upon the exercise of the options or
rights related to such securities.
5. The number of Common Shares deemed issued and the consideration deemed
paid therefor pursuant to Article 21.4(c)(i)(E)(1) and (2) shall be
appropriately adjusted to reflect any change, termination or
expiration of the type described in either Article 21.4(c)(i)(E)(3) or
(4).
(ii) "Additional Shares" shall mean any Common Shares issued (or deemed to have
been issued pursuant to Article 21.4(c)(i)(E)) by this Company after the
applicable Purchase Date other than:
A. Common Shares issued pursuant to a transaction described in
Article 21.4(c)(iii),
B. Common Shares issuable or issued to employees, consultants or
directors of this Company directly or pursuant to a share option
plan or restricted share plan approved by the Board of Directors
of this Company at any time when the total number of Common
Shares so issuable or issued (and any shares repurchased at cost
and not cancelled by the Company in connection with the
termination of employment which shares shall be available for
re-issue by the Company) does not exceed 2,500,000 (adjusted to
reflect subsequent stock dividends, stock splits or
recapitalization), or
C. Common Shares issued or issuable (I) in a public offering before
or in connection with which all outstanding Class A Preferred
Shares, Class B Preferred Shares, Class D Preferred Shares, Class
E Preferred Shares and Class F Preferred Shares will be converted
to Common Shares or (II) upon exercise of warrants or rights
granted to underwriters in connection with such a public
offering.
(iii) In the event the Company should at any time or from time to time after the
applicable Purchase Date fix a record date for the effectuation of a split
or subdivision of the outstanding Common Shares or the determination of
holders of Common Shares entitled to receive a dividend or other
distribution payable in additional Common Shares or other securities or
rights convertible into, or entitling the holder thereof to receive
directly or indirectly, additional
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53
Common Shares (hereinafter referred to as "Common Share
Equivalents") without payment of any consideration by such holder
for the additional Common Shares or the Common Share Equivalents
(including the additional Common Shares issuable upon conversion
or exercise thereof), then, as of such record date (or the date
of such dividend distribution, split or subdivision if no record
date is fixed), the Conversion Price of the Class A Preferred
Shares, Class B Preferred Shares, Class D Preferred Shares, Class
E Preferred Shares and Class F Preferred Shares shall be
appropriately decreased so that the number of Common Shares
issuable on conversion of each share of such class shall be
increased in proportion to such increase of the aggregate of
Common Shares outstanding and those issuable with respect to such
Common Share Equivalents with the number of shares issuable with
respect to Common Share Equivalents determined from time to time
in the manner provided for deemed issuances in Article
21.4(c)(i)(E).
(iv) If the number of Common Shares outstanding at any time after the
applicable Purchase Date is decreased by a consolidation of the
outstanding Common Shares, then, following the record date of such
consolidation, the Conversion Price for the Class A Preferred Shares,
Class B Preferred Shares, Class D Preferred Shares, Class E Preferred
Shares and Class F Preferred Shares shall be appropriately increased
so that the number of Common Shares issuable on conversion of each
share of such class shall be decreased in proportion to such decrease
in outstanding shares.
(d) Other Distributions. In the event this Company shall declare a distribution
payable in securities of other persons, evidences of indebtedness issued by
this Company or other persons, assets (excluding cash dividends) or options
or rights not referred to in Article 21.4(c)(iii), then, in each such case
for the purpose of this Article 21.4(d), the holders of the Class A
Preferred Shares, Class B Preferred Shares, Class D Preferred Shares, Class
E Preferred Shares or Class F Preferred Shares shall be entitled to a
proportionate share of any such distribution as though they were the
holders of the number of Common Shares of the Company into which their
Class A Preferred Shares, Class B Preferred Shares, Class D Preferred
Shares, Class E Preferred Shares or Class F Preferred Shares are
convertible as of the record date fixed for the determination of the
holders of Common Shares of the Company entitled to receive such
distribution.
(e) Recapitalizations. If at any time or from time to time there shall be a
recapitalization of the Common Shares (other than a subdivision,
consolidation or merger or sale of assets transaction provided for
elsewhere in this Article 21.4 or Article 21.2) provision shall be made so
that holders of the Class A Preferred Shares, Class B Preferred Shares,
Class D Preferred Shares, Class E Preferred Shares or Class F Preferred
Shares shall thereafter be entitled to receive upon conversion of the Class
A Preferred Shares, Class B Preferred Shares, Class D Preferred Shares,
Class E Preferred Shares or Class F Preferred Shares the number of shares
or other securities or property of the Company or otherwise, to which a
holder of Common Shares deliverable upon conversion would have been
entitled on such recapitalization. In any such case, appropriate adjustment
shall be made in the application
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of the provisions of this Article 21.4 with respect to the rights of
holders of the Class A Preferred Shares, Class B Preferred Shares, Class D
Preferred Shares, Class E Preferred Shares or Class F Preferred Shares
after the recapitalization to the end that the provisions of this Article
21.4 (including adjustments of the Conversion Price then in effect and the
number of shares issuable upon conversion of the Class A Preferred Shares,
Class B Preferred Shares, Class D Preferred Shares, Class E Preferred
Shares or Class F Preferred Shares), shall be applicable after that event
as nearly equivalent as may be practicable.
(f) No Impairment. This Company will not, by amendment of its Articles or
through any reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by
this Company, but will at all times in good faith assist in the carrying
out of all the provisions of this Article 21.4 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of holders of the Class A Preferred Shares, Class B
Preferred Shares, Class D Preferred Shares, Class E Preferred Shares or
Class F Preferred Shares against impairment.
(g) No Fractional Shares and Certificate as to Adjustments.
(i) No fractional shares shall be issued upon conversion of the Class A
Preferred Shares, Class B Preferred Shares, Class D Preferred Shares,
Class E Preferred Shares or Class F Preferred Shares, and the number
of Common Shares to be issued shall be rounded to the nearest whole
share. Whether or not fractional shares are issuable upon such
conversion shall be determined on the basis of the total number of
Class A Preferred Shares, Class B Preferred Shares, Class D Preferred
Shares, Class E Preferred Shares and Class F Preferred Shares that the
holder is at the time converting into Common Shares and the number of
Common Shares issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment of the
Conversion Price of Class A Preferred Shares, Class B Preferred
Shares, Class D Preferred Shares, Class E Preferred Shares or Class F
Preferred Shares pursuant to this Article 21.4, this Company, at its
expense, shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to each
holder of Class A Preferred Shares, Class B Preferred Shares, Class D
Preferred Shares, Class E Preferred Shares or Class F Preferred Shares
a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment
is based. This Company shall, upon the written request at any time of
any holder of Class A Preferred Shares, Class B Preferred Shares,
Class D Preferred Shares, Class E Preferred Shares or Class F
Preferred Shares, furnish or cause to be furnished to such holder a
like certificate setting forth
(A) such adjustment and readjustment,
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(B) the Conversion Price at the time in effect, and
(C) the number of Common Shares and the amount, if any,
of other property which at the time would be received upon the
conversion of a Class A Preferred Share, Class B Preferred Share,
Class D Preferred Share, Class E Preferred Share or Class F
Preferred Share.
(h) Notices of Record Date. In the event of any taking by this Company of a
record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend
(other than a cash dividend) or other distribution, any right to subscribe
for, purchase or otherwise acquire any shares of any class or any other
securities or property, or to receive any other right, this Company shall
mail to each holder of Class A Preferred Shares, Class B Preferred Shares,
Class D Preferred Shares, Class E Preferred Shares or Class F Preferred
Shares, at least 20 days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose
of such dividend, distribution or right and the amount and character of
such dividend, distribution or right.
(i) Reservation of Shares Issuable Upon Conversion. This Company shall at all
times reserve and keep available out of its authorized but unissued Common
Shares solely for the purpose of effecting the conversion of the Class A
Preferred Shares, Class B Preferred Shares, Class D Preferred Shares, Class
E Preferred Shares and Class F Preferred Shares such number of Common
Shares as shall from time to time be sufficient to effect the conversion of
all outstanding Class A Preferred Shares, Class B Preferred Shares, Class D
Preferred Shares, Class E Preferred Shares and Class F Preferred Shares;
and if at any time the number of authorized but unissued Common Shares
shall not be sufficient to effect the conversion of all then outstanding
Class A Preferred Shares, Class B Preferred Shares, Class D Preferred
Shares, Class E Preferred Shares and Class F Preferred Shares, in addition
to such other remedies as shall be available to the holder of such
Preferred Shares, this Company will take such corporate action as may, in
the opinion of its counsel, be necessary to increase its authorized but
unissued Common Shares to such number of shares as shall be sufficient for
such purposes.
(j) Notices. Any notice required by the provisions of this Article 21.4 to be
given to the holders of Class A Preferred Shares, Class B Preferred Shares,
Class D Preferred Shares, Class E Preferred Shares or Class F Preferred
Shares shall be deemed given if deposited in the United States mail or
Canadian mail, postage prepaid, and addressed to each holder of record at
that holder's address appearing on the books of this Company.
21.5 VOTING RIGHTS
The holder of each Class A Preferred Share, Class B Preferred Share, Class D
Preferred Share, Class E Preferred Share or Class F Preferred Share shall have
the fight to one vote for each Common Share
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into which such Class A Preferred Share, Class B Preferred Share, Class D
Preferred Share, Class E Preferred Share or Class F Preferred Share could then
be converted (with any fractional share determined on an aggregate conversion
basis being rounded to the nearest whole share), and with respect to such vote,
such holder shall have full voting rights and powers equal to the voting rights
and powers of the holders of Common Shares, and shall be entitled,
notwithstanding any provision hereof, to notice of any shareholders' meeting in
accordance with the Articles of the Company, and shall be entitled to vote,
together with holders of Common Shares, with respect to any question upon which
holders of Common Shares have the right to vote.
21.6 PROTECTIVE PROVISIONS
So long as Class B Preferred Shares, Class D Preferred Shares, Class E Preferred
Shares or Class F Preferred Shares are outstanding, this Company shall not
without first obtaining the approval (by vote or written consent as provided by
law) of the holders of at least 75% of the then outstanding shares of Class B
Preferred Shares, Class D Preferred Shares, Class E Preferred Shares and Class F
Preferred Shares acting together:
(a) sell, convey, or otherwise dispose of or encumber all or substantially
all of its property or business or merge into or consolidate with any
other company (other than a wholly owned subsidiary company) or effect
any transaction or series of related transactions in which more than
50% of the voting power of the Company is disposed of; or
(b) increase the authorized number of Class B Preferred Shares, Class D
Preferred Shares, Class E Preferred Shares or Class F Preferred
Shares.
21.7 STATUS OF CONVERTED OR REDEEMED SHARES
In the event any Class A Preferred Shares, Class B Preferred Shares, Class D
Preferred Shares, Class E Preferred Shares or Class F Preferred Shares shall be
redeemed or converted pursuant to Article 21.3 or Article 21.4 hereof, the
shares so converted or redeemed shall be cancelled and shall not be issuable by
the Company.
21.8 The holders of Class A Preferred Shares, Class B Preferred Shares, Class D
Preferred Shares, Class E Preferred Shares and Class F Preferred Shares shall
have the right in priority to any other class, and in priority to any third
party, to be offered by the Company the right to subscribe for and purchase:
(a) the shares of any class that may be authorized and created by the
Company subsequent to June 30, 1995; and
(b) any additional shares of any class existing on June 30, 1995 resulting
from any further increase in the Company's authorized capital,
subsequent to the said date;
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and subject to the provisions of the Company Act, the holders of any other class
of shares subordinate to the Class A Preferred, Class B Preferred, Class D
Preferred, Class E Preferred and Class F Preferred shareholders waive any
right of subscription and purchase that they as holders of such other class may
otherwise be entitled to.
21.9 COMMON SHARES
(a) INTERPRETATION. References in this Article 21 to Common Shares, and
not further described as Class A Common Shares or Class B Common
Shares, means both the Class A Common Shares and the Class B Common
Shares.
(b) DIVIDEND RIGHTS. Subject to the prior fights of holders of all classes
of shares at the time outstanding having prior rights as to dividends,
the holders of the Common Shares shall be entitled to receive, when
and as declared by the Board of Directors, out of any assets of the
Company legally available therefor, such dividends as may be declared
from time to time by the Board of Directors.
(c) LIQUIDATION RIGHTS. Upon the liquidation, dissolution or winding up of
the Company, the assets of the Company shall be distributed as
provided in Article 21.2.
(d) REDEMPTION. The Common Shares are not redeemable.
(e) VOTING RIGHTS. The holder of each Common Share shall have the fight to
one vote, and shall be entitled to notice of any shareholders' meeting
in accordance with the Articles of this Company, and shall be entitled
to vote upon such matters and in such manner as may be provided by
law.
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