Stock Purchase Warrant - Software Technologies Corp. and Electronic Data Systems Corp.
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD
PURSUANT TO RULE 144 UNDER SUCH ACT.
Void after
July 31, 2002
SOFTWARE TECHNOLOGIES CORPORATION
WARRANT TO PURCHASE 800,000 SHARES OF COMMON STOCK
This Warrant is issued to Electronic Data Systems Corp. ("EDS") by
Software Technologies Corporation, a California corporation (the "Company"), on
February 2, 2000 (the "Warrant Issue Date"). This Warrant is issued pursuant to
the terms of that certain Warrant Purchase Agreement (the "Purchase Agreement")
dated as of January 31, 2000.
1. Purchase of Shares. Subject to the terms and conditions hereinafter
set forth and set forth in the Purchase Agreement, the holder of this Warrant is
entitled, upon surrender of this Warrant at the principal office of the Company
(or at such other place as the Company shall notify the holder hereof in
writing), to purchase from the Company up to 800,000 fully paid and
nonassessable shares of the Common Stock of the Company, as more fully described
below. The number of shares of Common Stock issuable pursuant to this Section 1
(the "Shares") shall be subject to adjustment pursuant to Section 8 hereof.
2. Purchase Price. The per share purchase price for the Shares shall be
$10.00, as adjusted from time to time pursuant to Section 8 hereof (the
"Exercise Price").
3. Exercise Period. This Warrant may be exercised at the sole discretion
of EDS (subject to the conditions set forth herein) after the earliest to occur
(the "Exercise Date") of (i) the date of the filing of a registration statement
under the Securities Act of 1933, as amended, in connection with the issuance
and sale of shares of the Company's Common Stock in the Company's first
underwritten public offering, (ii) the date of an agreement (A) to sell or
transfer all or substantially all of the Company's assets (an "Asset Sale"), or
(B) pursuant to which the Company is to be acquired by another entity by means
of any transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation) that results in the
transfer of fifty percent (50%) or more of the outstanding voting power of the
Company to persons or entities that were not shareholders of the Company prior
to such transaction (a "Merger") or (iii) January 31, 2001; and this Warrant
shall remain so exercisable until the earliest to occur (the
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"Termination Date") of (x) July 31, 2002, (y) the date of the closing of the
Company's Asset Sale, or (z) the date of the closing of the Company's Merger.
Starting on the Exercise Date, this Warrant shall be exercisable for
that number of shares of the Company's Common Stock equal to the amount of such
shares that have vested in accordance with a vesting schedule to be agreed upon
by the Company and EDS. The holder of this Warrant understands that this Warrant
shall only become exercisable at such times as the milestones set forth in such
vesting schedule are achieved. In the event that this Warrant has not become
exercisable as to an aggregate of at least 800,000 shares on or prior to
February 1, 2002, then (provided the Termination Date has not occurred) EDS
shall be obligated to make a one-time payment to the Company equal to $2.2
million. Such payment shall be made by EDS to the Company by check or wire
transfer no later than February 15, 2002. Any such payment made under this
provision by EDS shall have no effect on the exercisability of any portion of
this Warrant that had previously become exercisable.
To the extent that any shares will have vested under the Warrant at the
time that EDS is required to make a one-time payment specified in this Section,
EDS may utilize the "Net Exercise" provision in Section 5 herein to exercise
that vested portion of the Warrant and, in lieu of receiving shares equal to the
value of the portion of the Warrant being canceled (less the aggregate exercise
price), forfeit the right to receive that number of shares that would be
equivalent to the dollar amount of the one-time payment for which EDS is then
obligated to make, based on the fair market value per share of the Common Stock
as calculated in Section 5 herein.
4. Method of Exercise. While this Warrant remains outstanding and
exercisable in accordance with Section 3 above, the holder may exercise, in
whole or in part, the purchase rights evidenced hereby. Such exercise shall be
effected by:
(a) the surrender of the Warrant (for notice of partial
exercise, if not for the entire 800,000 shares), together with a duly executed
copy of the form of subscription attached hereto, to the Secretary of the
Company at its principal offices; and
(b) the payment to the Company of an amount equal to the
aggregate Exercise Price for the number of Shares being purchased.
5. Net Exercise. In lieu of cash exercising this Warrant, the holder of
this Warrant may elect to receive shares equal to the value of this Warrant (or
the portion thereof being canceled) by surrender of this Warrant at the
principal office of the Company together with notice of such election, in which
event the Company shall issue to the holder hereof a number of shares of Common
Stock computed using the following formula:
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Y (A - B)
---------
X = A
Where
X -- The number of shares of Common Stock to be issued to the holder of
this Warrant.
Y -- The number of shares of Common Stock as to which this Warrant is
being exercised.
A -- The fair market value of one share of the Company's Common Stock.
B -- The Exercise Price (as adjusted to the date of such calculations).
For purposes of this Paragraph 5, the fair market value of Common Stock shall
mean the average of the closing bid and asked prices of the Common Stock quoted
in the over-the-counter market in which the Common Stock is traded or the
closing price quoted on any exchange on which the Common Stock is listed,
whichever is applicable, as published in the Western Edition of The Wall Street
Journal for the ten (10) trading days prior to the date of determination of fair
market value (or such shorter period of time during which such stock was traded
over-the-counter or on such exchange). If the Common Stock is not traded on the
over-the-counter market or on an exchange, the fair market value shall be the
price per share as shall be determined in good faith by the Company's Board of
Directors or, if EDS objects to such determination, by nationally recognized
investment bankers mutually acceptable to EDS. Notwithstanding the foregoing, in
the event this Warrant is exercised pursuant to this paragraph after the date of
the final prospectus for the Company's IPO and prior to the closing of such IPO,
the fair market value of the Common Stock shall be equal to the public offering
price set forth on the cover of the Company's prospectus.
6. Certificates for Shares. Upon the exercise of the purchase rights
evidenced by this Warrant, one or more certificates for the number of Shares so
purchased shall be issued as soon as practicable thereafter, and in any event
within ten (10) days of the delivery of the subscription notice.
7. Issuance of Shares. The Company covenants that the Shares, when
issued pursuant to the exercise of this Warrant, will be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens, and charges
with respect to the issuance thereof.
8. Adjustment of Exercise Price and Number of Shares. The number of and
kind of securities purchasable upon exercise of this Warrant and the Exercise
Price shall be subject to adjustment from time to time as follows:
(a) Subdivisions, Combinations and Other Issuances. If the
Company shall at any time prior to the expiration of this Warrant subdivide its
Common Stock, by split-up or otherwise, or combine its Common Stock, or issue
additional shares of its Common Stock or
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Common Stock as a dividend with respect to any shares of its Common Stock, the
number of Shares issuable on the exercise of this Warrant shall forthwith be
proportionately increased in the case of a subdivision or stock dividend, or
proportionately decreased in the case of a combination. Appropriate adjustments
shall also be made to the purchase price payable per share, but the aggregate
purchase price payable for the total number of Shares purchasable under this
Warrant (as adjusted) shall remain the same. Any adjustment under this Section
8(a) shall become effective at the close of business on the date the subdivision
or combination becomes effective, or as of the record date of such dividend, or
in the event that no record date is fixed, upon the making of such dividend.
(b) Reclassification, Reorganization and Consolidation. In case
of any reclassification, capital reorganization, or change in the Common Stock
of the Company (other than as a result of a subdivision, combination, or stock
dividend provided for in Section 8(a) above), then, as a condition of such
reclassification, reorganization, or change, lawful provision shall be made, and
duly executed documents evidencing the same from the Company or its successor
shall be delivered to the holder of this Warrant, so that the holder of this
Warrant shall have the right at any time prior to the expiration of this Warrant
to purchase, at a total price equal to that payable upon the exercise of this
Warrant, the kind and amount of shares of stock and other securities and
property receivable in connection with such reclassification, reorganization, or
change by a holder of the same number of shares of Common Stock as were
purchasable by the holder of this Warrant immediately prior to such
reclassification, reorganization, or change. In any such case appropriate
provisions shall be made with respect to the rights and interest of the holder
of this Warrant so that the provisions hereof shall thereafter be applicable
with respect to any shares of stock or other securities and property deliverable
upon exercise hereof, and appropriate adjustments shall be made to the purchase
price per share payable hereunder, provided the aggregate purchase price shall
remain the same.
(c) Notice of Adjustment. When any adjustment is required to be
made in the number or kind of shares purchasable upon exercise of the Warrant,
or in the Exercise Price, the Company shall promptly notify the holder of such
event and of the number of shares of Common Stock or other securities or
property thereafter purchasable upon exercise of this Warrant.
9. Registration Rights.
(a) Piggyback Registration. Commencing one year following the
closing date of the Company's IPO, if (but without any obligation to do so) the
Company proposes to register any of its stock or other securities under the
Securities Act of 1933, as amended, (the "Act") in connection with the public
offering of such securities solely for cash (other than a registration relating
solely to the sale of securities to participants in a Company stock plan, a
registration pursuant to a Rule 145 transaction, a registration on any form
which does not include substantially the same information as would be required
to be included in a registration statement covering the sale of the Warrant
Securities or a registration in which the only Common Stock being registered is
Common Stock issuable upon conversion of debt securities which are also being
registered), the Company shall, at such time, promptly give EDS written notice
of such registration. Upon the written request of EDS given within ten (10) days
after mailing of such notice by the Company, the
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Company shall, subject to the provisions of Section 9(b) below, cause to be
registered under the Act any of the Shares that have then vested under the
Warrant that EDS has requested to be registered.
(b) Underwriting Requirements. In connection with any offering
involving an underwriting of shares of the Company's capital stock in which EDS
makes a written request pursuant to Section 9(a) hereof, the Company shall not
be required under this Section 9 to include any of EDS' Shares in such
underwriting unless EDS accepts the terms of the underwriting as agreed upon
between the Company and the underwriters selected by it (or by other persons
entitled to select the underwriters), and then only in such quantity as the
underwriters determine in their sole discretion will not jeopardize the success
of the offering by the Company. If the total amount of securities, including
EDS' Shares, requested by shareholders to be included in such offering exceeds
the amount of securities sold other than by the Company that the underwriters
determine in their sole discretion is compatible with the success of the
offering, then the Company shall be required to include in the offering only
that number of such securities, including EDS' Shares, which the underwriters
determine in their sole discretion will not jeopardize the success of the
offering, but in no event shall (i) the amount of securities of EDS included in
the offering be reduced below ten percent (10%) of the total amount of
securities included in such offering, in which case EDS may be excluded entirely
if the underwriters make the determination described above and no other
shareholder's securities are included. Allocation of securities to be sold in
any such offering shall be made on a pro-rata basis among any selling
shareholders involved in such offering according to the total number of
securities held by each such selling shareholder and entitled to inclusion
therein on the basis of a registration rights agreement with the Company.
10. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant, but in lieu of such fractional shares the Company shall make a cash
payment therefor on the basis of the Exercise Price then in effect.
11. No Stockholder Rights. Prior to exercise of this Warrant, the holder
shall not be entitled to any rights of a stockholder with respect to the Shares,
including (without limitation) the right to vote such Shares, receive dividends
or other distributions thereon, exercise preemptive rights or be notified of
stockholder meetings, and such holder shall not be entitled to any notice or
other communication concerning the business or affairs of the Company.
12. Successors and Assigns. The terms and provisions of this Warrant and
the Purchase Agreement shall inure to the benefit of, and be binding upon, the
Company its successors and assigns. This Warrant cannot be assigned by EDS
without the express written consent of the Company. Notwithstanding the
foregoing, this Warrant may be assigned, sold or otherwise transferred in whole
or in part by EDS to an affiliate of EDS, and such assignment, sale or transfer
shall not require the consent of the Company so long as such assignment, sale or
transfer complies with applicable laws, rules and regulations, and provided that
EDS has provided the Company with prior written notice of any such transfer.
13. Amendments and Waivers. Any term of this Warrant may be amended and
the observance of any term of this Warrant may be waived (either generally or in
a particular
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instance and either retroactively or prospectively), with the written consent of
the Company and EDS. Any waiver or amendment effected in accordance with this
Section shall be binding upon EDS, each holder of any Shares purchased under
this Warrant at the time outstanding (including securities into which such
Shares have been converted), each future holder of all such Shares, and the
Company.
14. Market Stand-off Agreement. The holder of this Warrant agrees not to
sell or otherwise transfer or dispose of any Common Stock (or other securities)
of the Company held by such holder during a period of time determined by the
Company and its underwriters (not to exceed 180 days) following the effective
date of the registration statement of the Company filed under the Act with
respect to the Company's initial public offering. The holder of this Warrant
further agrees to execute any standard lock-up agreement that the underwriters
require in connection with such offering. The Company may impose stop-transfer
instructions with respect to the Common Stock (or securities) subject to the
foregoing restriction until the end of said period.
15. Governing Law. This Warrant shall be governed by the laws of the
State of California as applied to agreements among California residents made and
to be performed entirely within the State of California.
SOFTWARE TECHNOLOGIES CORPORATION
By: /S/ JAMES DEMETRIADES
---------------------------------
James Demetriades
Chief Executive Officer
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SOFTWARE TECHNOLOGIES CORPORATION
404 E. HUNTINGTON DRIVE
MONROVIA, CA 91016
January 31, 2000
Electronic Data Systems Corporation
5400 Legacy Drive
MS H3-3D-05
Plano, TX 75024
Attn: General Counsel
Re: WARRANT TO PURCHASE 800,000 SHARES OF COMMON STOCK
Ladies and Gentlemen:
This is to confirm that the shares of Common Stock of Software
Technologies Corporation (the "STC") that may be purchased upon exercise of that
certain Warrant to Purchase Shares of Common Stock dated as of February 2, 2000
(the "Warrant") issued by STC to Electronic Data Systems Corporation ("EDS")
shall become vested and exercisable (up to a maximum of 800,000 shares in the
aggregate) for 40,000 shares of STC Common Stock for each integral increment of
five (5) opportunity introductions by EDS to a client, customer or prospect of
EDS which result in a signed license between STC and such person (with each
signed license resulting in a minimum of $150,000 in revenue to STC), with
credit being given - at the rate of one such additional license for each
$500,000 in STC license revenue (for purposes of clarification and by way of
example, if a single customer results in $2.5 million in STC license revenue,
EDS will earn credit for five (5) opportunity introductions) - for additional
signed licenses (up to 20 such additional credits for a single customer) from
such a client, customer or prospect which provides at least $2.5 million in STC
license revenue.
Each metric will be deemed to be achieved and the related portion of the
Warrant shall become vested upon the confirmation by STC of the signing of the
required license agreements. In order for the corresponding portion of the
Warrant to become exercisable, the metric must be achieved on or prior to
January 31, 2002.
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This letter is being provided pursuant to Section 3 of the Warrant.
Sincerely,
SOFTWARE TECHNOLOGIES CORPORATION
By: James T. Demetriades
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Title: President & Chief Executive Officer
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Agreed to:
ELECTRONIC DATA SYSTEMS CORPORATION
By:
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Title:
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