Exhibit 10.5
REGISTRATION RIGHTS AGREEMENT
by and between
MICROSTRATEGY INCORPORATED
and
FOOTHILL CAPITAL CORPORATION
Dated as of February 9, 2001
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REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of February
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9, 2001, by and between MicroStrategy Incorporated, a Delaware corporation (the
"Company"), and Foothill Capital Corporation, a California corporation (the
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"Lender").
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W I T N E S S E T H :
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WHEREAS, simultaneously herewith, the Company and Lender have entered
into a Loan and Security Agreement, dated as of the date hereof (the "Loan and
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Security Agreement").
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WHEREAS, in order to induce Lender to enter into the Loan and Security
Agreement, the Company is issuing and delivering to Lender (the "Initial
Holder") a warrant (the "Warrant") to purchase Class A Common Shares (the Class
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A Common Shares issued or issuable upon exercise of the Warrant are hereinafter
referred to as the "Warrant Shares"), and the Company has further agreed to
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provide certain registration rights in respect of the Registrable Securities (as
defined below) on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein and for other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, and intending to be
legally bound hereby, the Company hereby agrees with the Initial Holder as
follows:
1. DEFINITIONS. As used in this Agreement, the following terms
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shall have the following meanings:
"Affiliate" shall mean (i) with respect to any Person, any other
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Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person, and (ii) with respect to any
individual, shall also mean the spouse, sibling, child, step-child, grandchild,
niece, nephew or parent of such Person, or the spouse thereof.
"Common Shares" shall mean shares of Class A common stock, par value
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$0.001 per share, of the Company.
"Company" shall have the meaning set forth in the preamble.
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"Exchange Act" shall mean the Securities Exchange Act of 1934, as
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amended from time to time, and the rules and regulations thereunder, or any
successor statute.
"Holder" shall mean the Initial Holder for so long as it is the
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registered owner of any Registrable Securities and its heirs, successors and
permitted assigns (including any permitted transferees of Registrable
Securities) who acquire or are otherwise the transferee of Registrable
Securities, directly or indirectly, from such Initial Holder (or any subsequent
Holders), for so long as such heirs, successors and permitted assigns are the
registered owner of any Registrable Securities. For purposes of this Agreement,
a Person will be deemed to be a Holder whenever such Person holds an option to
purchase, or a security convertible into or exercisable or exchangeable for,
Registrable Securities, whether or not such purchase, conversion, exercise or
exchange has actually been effected and disregarding any legal restrictions upon
the exercise of such rights. Registrable Securities issuable upon exercise of
an
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option or upon conversion, exchange or exercise of another security shall be
deemed outstanding for the purposes of this Agreement.
"Holders' Counsel" shall mean one firm of counsel (per registration)
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to the Holders of Registrable Securities participating in such registration,
which counsel shall be selected by the Majority Holders of the Registration.
"Initial Holder" shall mean the Lender.
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"Majority Holders" shall mean one or more Holders of Registrable
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Securities who would hold a majority of the Registrable Securities then
outstanding.
"Majority Holders of the Registration" shall mean, with respect to a
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particular registration, one or more Holders of Registrable Securities who would
hold a majority of the Registrable Securities to be included in such
registration.
"NASD" shall mean the National Association of Securities Dealers, Inc.
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"Loan and Security Agreement" shall have the meaning set forth in the
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preamble.
"Person" shall mean any individual, firm, partnership, corporation,
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trust, joint venture, association, joint stock company, limited liability
company, unincorporated organization or any other entity or organization,
including a government or agency or political subdivision thereof, and shall
include any successor (by merger or otherwise) of such entity.
"Piggyback Registration" shall mean a registration required to be
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effected by the Company pursuant to Section 2.1.
"Piggyback Registration Statement" shall mean a registration statement
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of the Company, which covers the Registrable Securities requested to be included
therein pursuant to the provisions of Section 2.1 and all amendments and
supplements to such registration statement, including post-effective amendments,
in each case including the Prospectus contained therein, all exhibits thereto
and all material incorporated by reference (or deemed to be incorporated by
reference) therein.
"Prospectus" shall mean the prospectus included in a Registration
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Statement (including, without limitation, any preliminary prospectus and any
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act) and any such Prospectus as amended or
supplemented by any prospectus supplement, and all other amendments and
supplements to such Prospectus, including post-effective amendments, and in each
case including all material incorporated by reference (or deemed to be
incorporated by reference) therein.
"Registrable Securities" shall mean (i) any Warrant Shares issued upon
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exercise of the Warrant and (ii) any other securities of the Company (or any
successor or assign of the Company, whether by merger, consolidation, sale of
assets or otherwise) which may be issued with respect to, in exchange for, or in
substitution of, Warrant Shares by reason of any dividend
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or stock split, combination of shares, merger, consolidation, recapitalization,
reclassification, reorganization, sale of assets or similar transaction. As to
any particular Registrable Securities, such securities shall cease to be
Registrable Securities when (A) a registration statement with respect to the
sale of such securities shall have been declared effective under the Securities
Act and such securities shall have been disposed of in accordance with such
registration statement, (B) such securities are sold pursuant to Rule 144 (or
any similar provisions then in force) under the Securities Act, (C) such
securities have been otherwise transferred, a new certificate or other evidence
of ownership for them not bearing the legend restricting further transfer shall
have been delivered by the Company and subsequent public distribution of them
shall not require registration under the Securities Act, (D) such securities
shall have ceased to be outstanding, or (E) such securities are sold or
otherwise transferred to a Person which, by virtue of Section 6.6 of this
Agreement, is not entitled to the rights provided by this Agreement.
"Registration Expenses" shall mean any and all reasonable out of
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pocket expenses incident to performance of or compliance with this Agreement by
the Company and its subsidiaries, including, without limitation (i) all SEC,
stock exchange, NASD and other registration, listing and filing fees, (ii) all
fees and expenses incurred in connection with compliance with state securities
or blue sky laws and compliance with the rules of any stock exchange (including
fees and disbursements of counsel for the Company in connection with such
compliance and the preparation of any required blue sky memorandum or legal
investment survey), (iii) all printers' fees and costs incurred in printing,
distributing, mailing and delivering any Registration Statement, any Prospectus
and any other document relating to the performance of or compliance with this
Agreement, (iv) the fees and disbursements of counsel for the Company, (v) the
fees and disbursements of all independent public accountants retained by the
Company (including the expenses of any audit and/or "cold comfort" letters) and
the fees and expenses of other Persons, including experts, retained by the
Company, (vi) the expenses incurred by the Company in connection with making
road show presentations and holding meetings with potential investors to
facilitate the distribution and sale of Registrable Securities, (vii) any fees
and disbursements of underwriters customarily paid by issuers or sellers of
securities, (viii) premiums and other costs of policies of insurance required by
the underwriters against liabilities arising out of the public offering of the
Registrable Securities being registered, and (ix) all internal expenses of the
Company (including all salaries and expenses of officers and employees
performing legal or accounting duties); provided, however, Registration Expenses
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shall not include discounts and commissions payable to underwriters, selling
brokers, dealer managers or other similar Persons engaged in the distribution of
any of the Registrable Securities; and provided further, that in any case where
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Registration Expenses are not to be borne by the Company, such expenses shall
not include salaries of Company personnel or general overhead expenses of the
Company, auditing fees, premiums or other expenses relating to liability
insurance required by underwriters of the Company or other expenses for the
preparation of financial statements or other data normally prepared by the
Company in the ordinary course of its business or which the Company would have
incurred in any event.
"Registration Statement" shall mean any registration statement of the
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Company which covers any Registrable Securities and all amendments and
supplements to any such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference (or deemed to be
incorporated by reference) therein.
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"SEC" shall mean the Securities and Exchange Commission, or any
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successor agency having jurisdiction to enforce the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended
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from time to time, and the rules and regulations thereunder, or any successor
statute.
"Underwriters" shall mean the underwriters, if any, of the offering
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being registered under the Securities Act.
"Underwritten Offering" shall mean a sale of securities of the Company
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to an Underwriter or Underwriters for reoffering to the public.
"Warrant Shares" shall mean the Common Shares or other securities
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issued or issuable upon the exercise of the Warrant.
"Warrant" shall mean the warrant issued to the Initial Holder pursuant
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to the Loan and Security Agreement, together with any additional warrants issued
in accordance with the terms thereof.
2. REGISTRATION UNDER THE SECURITIES ACT.
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2.1 Piggyback Registration.
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(a) Right to Include Registrable Securities. If the Company at any
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time or from time to time during the one year period commencing on the date of
this Agreement (the "Piggyback Period") proposes to register any of its
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securities under the Securities Act (other than in a registration on Form S-4 or
S-8 or any successor form to such forms) whether or not pursuant to registration
rights granted to other holders of its securities and whether or not for sale
for its own account, the Company shall deliver prompt written notice (which
notice shall be given at least 20 days prior to such proposed registration) to
all Holders of Registrable Securities of its intention to undertake such
registration, describing in reasonable detail the proposed registration and
distribution and of such Holders' right to participate in such registration
under this Section 2.1 as hereinafter provided. Subject to the other provisions
of this paragraph (a) and Section 2.1(b), upon the written request of any Holder
made within 15 days after the receipt of such written notice (which request
shall specify the amount of Registrable Securities to be registered and the
intended method of disposition thereof), the Company shall effect the
registration under the Securities Act of all Registrable Securities requested by
Holders to be so registered (a "Piggyback Registration"), to the extent required
to permit the disposition (in accordance with the intended methods thereof as
aforesaid) of the Registrable Securities so to be registered, by inclusion of
such Registrable Securities in the Registration Statement which covers the
securities which the Company proposes to register and shall cause such
Registration Statement to become and remain effective with respect to such
Registrable Securities in accordance with the registration procedures set forth
in Section 4. If a Piggyback Registration involves an Underwritten Offering,
immediately upon notification to the Company from the Underwriter of the price
at which such securities are to be sold, the Company shall so advise each
participating Holder. The Holders requesting inclusion in a Piggyback
Registration may, at any time prior to the effective date of the Piggyback
Registration Statement (and for any reason),
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revoke such request by delivering written notice to the Company revoking such
requested inclusion.
If at any time after giving written notice of its intention to
register any securities and prior to the effective date of the Piggyback
Registration Statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each Holder of Registrable Securities and, thereupon, (A) in
the case of a determination not to register, the Company shall be relieved of
its obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses
incurred in connection therewith) and (B) in the case of a determination to
delay such registration, the Company shall be permitted to delay the
registration of such Registrable Securities for the same period as the delay in
registering such other securities; provided, however, that if such delay shall
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extend beyond 120 days from the date the Company received a request to include
Registrable Securities in such Piggyback Registration, then the Company shall
again give all Holders the opportunity to participate therein and shall follow
the notification procedures set forth in the preceding paragraph. No delay or a
series of delays of a registration beyond the Piggyback Period shall prejudice
the Holders' rights under this Section 2.1. Accordingly, Holders who requested
inclusion in a Piggyback Registration delayed by the Company beyond the
Piggyback Period may, at the election of such Holder, continue to include such
Holder's Registrable Securities in such registration. There is no limitation on
the number of such Piggyback Registrations pursuant to this Section 2.1 which
the Company is obligated to effect during the Piggyback Period.
(b) Priority in Piggyback Registration. If a Piggyback Registration
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involves an Underwritten Offering (on a firm commitment basis), and the sole or
the lead managing Underwriter, as the case may be, of such Underwritten Offering
shall advise the Company that, in its opinion, the amount of securities
(including Registrable Securities) requested to be included in such registration
exceeds the amount which can be sold in such offering without materially
interfering with the successful marketing of the securities being offered, the
Company shall deliver prompt notice to each holder of such determination by the
sole or lead managing Underwriter and shall include in such registration, to the
extent of the number which the Company is so advised may be included in such
offering without such effect, (i) in the case of a registration initiated by the
Company, (A) first, the securities that the Company proposes to register for its
own account (but solely to the extent that the proceeds thereof shall not be
used to purchase shares of common stock of the Company or other securities of
the Company), (B) second, the Registrable Securities requested to be included in
such registration by the Holders and any other Persons holding registration
rights pari passu with rights of the Holders hereunder (not including Affiliates
of the Company), allocated pro rata in proportion to the number of Registrable
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Securities requested to be included in such registration by each of them, and
(C) third, other securities of the Company to be registered on behalf of any
other Person, and (ii) in the case of a registration initiated by a Person other
than the Company, (A) first, the Registrable Securities requested to be included
in such registration by any Persons initiating such registration requested to be
included in such registration by any Persons initiating such registration, (B)
second, the Registrable Securities requested to be included in such registration
by the Holders and any other Persons holding registration rights pari passu with
rights of the Holders hereunder (not including Affiliates of the Company),
allocated pro rata in proportion to
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the number of securities requested to be included in such registration by each
of them, and (C) third, the securities that the Company proposes to register for
the account of it and its Affiliates, provided, however, that in the event the
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Company will not, by virtue of this Section 2.1(b), include in any such
registration all of the Registrable Securities of any Holder requested to be
included in such registration, such Holder may, upon written notice to the
Company given within three days of the time such Holder first is notified of
such matter, reduce the amount of Registrable Securities it desires to have
included in such registration, whereupon only the Registrable Securities, if
any, it desires to have included will be so included and the Holders not so
reducing shall be entitled to a corresponding pro rata increase in the amount of
Registrable Securities to be included in such registration.
(c) Limitations on Piggyback Registration. The Company shall not be
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required to effect any registration of Registrable Securities hereunder in
connection with (i) the Company's registration of securities issuable in
connection with the settlement or other resolution of the class action lawsuit
filed in the United States District Court for the Eastern District of Virginia,
captioned In re MicroStrategy Inc. Securities Litigation, Civ. No. 00-473-A and
(ii) the exercise of certain registration rights held by the holders of the
Company's Series A Convertible Preferred Stock (or any Common Shares issued with
respect thereto).
2.2 Underwritten Offering. Notwithstanding anything herein to the
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contrary, no Holder of Registrable Securities may participate in any
underwritten registration hereunder unless such Holder (i) agrees to enter into
an underwriting agreement in customary form with the Underwriter or Underwriters
selected for the underwriting by the Company and (ii) accurately completes and
executes in a timely manner all questionnaires, powers of attorney, indemnities,
custody agreements, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
2.3 Expenses. The Company shall pay all Registration Expenses in
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connection with any Piggyback Registration whether or not such registration
shall become effective and whether or not all Registrable Securities originally
requested to be included in such registration are withdrawn or otherwise
ultimately not included in such registration.
2.4 Conversions; Exercises. Notwithstanding anything to the contrary
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herein, in order for any Registrable Securities that are issuable upon the
exercise of conversion rights, options or warrants to be included in any
registration pursuant to Section 2 hereof, the exercise of such conversion
rights, options or warrants must be effected no later than immediately prior to
the closing of any sales under the Registration Statement pursuant to which such
Registrable Securities are to be sold.
2.5 "Stand-Off" Agreement. Each Holder, if requested by the Company,
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shall not sell or otherwise transfer or dispose of any Registrable Securities
for a period of 90 days following the effective date of any registration
statement of the Company (other than a registration statement on Form S-8),
provided, that the officers and directors of the Company also agree to such
restrictions and, except to the extent, and only to the extent, that such
Registrable Securities are covered by such registration statement. The Company
may impose stop-transfer instructions with respect to any Registrable Securities
subject to the foregoing restrictions until the end of such 90 day period.
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2.6 Confidentiality of Notices. Any Holder receiving any notice from
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the Company regarding the Company's plans to file a registration statement shall
treat such notice confidentially and shall not disclose such information to any
person other than as necessary to exercise its rights under this Agreement
except (i) as required by law or (ii) if such information is or becomes
generally available to the public other than as a result of a disclosure by the
a Holder.
3. [INTENTIONALLY OMITTED].
4. REGISTRATION PROCEDURES.
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4.1 Obligations of the Company. Whenever the Company is required to
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effect the registration of Registrable Securities under the Securities Act
pursuant to Section 2 of this Agreement, the Company shall promptly:
(a) prepare and file with the SEC the requisite Registration
Statement to effect such registration, which Registration Statement shall comply
as to form in all material respects with the requirements of the applicable form
and include all financial statements required by the SEC to be filed therewith,
and the Company shall use its commercially reasonable efforts to cause such
Registration Statement to become effective (provided, that the Company may
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discontinue any registration of its securities that are not Registrable
Securities, and, under the circumstances specified in Section 2.1(a), its
securities that are Registrable Securities);
(b) prepare and file with the SEC such amendments and supplements to
such Registration Statement and the Prospectus used in connection therewith as
may be necessary (i) to keep such Registration Statement effective, and (ii) to
comply with the provisions of the Securities Act with respect to the disposition
of all Registrable Securities covered by such Registration Statement, in each
case until such time as all of such Registrable Securities have been disposed of
in accordance with the intended methods of disposition by the seller(s) thereof
set forth in such Registration Statement; provided, that the Company shall not
be required to keep any Registration Statement effective for a period exceeding
60 days;
(c) furnish, without charge, to each selling Holder of such
Registrable Securities, such reasonable number of copies of such Registration
Statement, each amendment and supplement thereto (in each case including all
exhibits), and the Prospectus included in such Registration Statement (including
each preliminary Prospectus) in conformity with the requirements of the
Securities Act, and other documents, as such selling Holder and Underwriter may
reasonably request in order to facilitate the public sale or other disposition
of the Registrable Securities owned by such selling Holder (the Company hereby
consenting to the use in accordance with applicable law of each such
Registration Statement (or amendment or post-effective amendment thereto) and
each such Prospectus (or preliminary prospectus or supplement thereto) by each
such selling Holder of Registrable Securities in connection with the offering
and sale of the Registrable Securities covered by such Registration Statement or
Prospectus);
(d) prior to any public offering of Registrable Securities, use its
commercially reasonable efforts to register or qualify all Registrable
Securities and other securities covered by such Registration Statement under
such other securities or blue sky laws of such U.S. jurisdictions as any selling
Holder of Registrable Securities covered by such Registration
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Statement may reasonably request to enable such selling Holder to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
selling Holder and to continue such registration or qualification in effect in
each such jurisdiction for as long as such Registration Statement remains in
effect (including through new filings or amendments or renewals), and do any and
all other reasonable acts and things which may be necessary or advisable to
enable any such selling Holder to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such selling Holder;
(e) use its commercially reasonable efforts to obtain all other
approvals, consents, exemptions or authorizations from such governmental
agencies or authorities as may be necessary to enable the selling Holders of
such Registrable Securities to consummate the disposition of such Registrable
Securities;
(f) notify Holders' Counsel and each Holder of Registrable Securities
covered by such Registration Statement: (i) when the Registration Statement has
been filed and when the same has become effective, (ii) of the issuance by the
SEC of any stop order suspending the effectiveness of the Registration Statement
or the initiation or threat of any proceedings for that purpose, (iii) of the
receipt by the Company of any notification with respect to the suspension of the
qualification of any Registrable Securities for sale under the securities or
blue sky laws of any jurisdiction or the initiation of any proceeding for such
purpose, (iv) of the Company's reasonable determination that a post-effective
amendment to a Registration Statement would be appropriate or that there exists
circumstances not yet disclosed to the public which make further sales under
such Registration Statement inadvisable pending such disclosure and post-
effective amendment; and, if the notification relates to an event described in
any of clauses (ii) through (iv) of this Section 4.1(f) or in the event of the
existence of any fact of which the Company becomes aware or the happening of any
event which results in (A) the Registration Statement containing an untrue
statement of a material fact or omitting to state a material fact required to be
stated therein or necessary to make any statements therein not misleading, or
(B) the Prospectus included in such Registration Statement containing an untrue
statement of a material fact or omitting to state a material fact required to be
stated therein or necessary to make any statements therein, in the light of the
circumstances under which they were made, not misleading, the Company shall
promptly prepare a supplement or post-effective amendment to such Registration
Statement or related Prospectus or any document incorporated therein by
reference or file any other required document so that (1) such Registration
Statement shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and (2) as thereafter delivered to the
purchasers of the Registrable Securities being sold thereunder, such Prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein in the light of the circumstances under which they were made not
misleading (and shall furnish to each such Holder a reasonable number of copies
of such Prospectus so supplemented or amended); and if the notification relates
to an event described in clause (ii) of this Section 4.1(f), the Company shall
use all commercially reasonable efforts to prevent the entry of such stop order
or to remove it if entered;
(i) provide a CUSIP number for all Registrable Securities and provide
and cause to be maintained a transfer agent and registrar for all such
Registrable Securities covered by such Registration Statement not later than the
effectiveness of such Registration Statement;
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(j) otherwise use commercially reasonable efforts to comply with all
applicable rules and regulations of the SEC and any other governmental agency or
authority having jurisdiction over the offering;
(k) use its best efforts to cause all such Registrable Securities to
be duly included for quotation on the Nasdaq Stock Market's National Market or
listed on the principal national securities exchange on which the Company's
similar securities are then listed, if applicable;
(l) enter into and perform customary agreements (including, if
applicable, an underwriting agreement in customary form) and provide officers'
certificates and other customary closing documents;
(m) cooperate with each selling Holder of Registrable Securities and
each Underwriter participating in the disposition of such Registrable Securities
and their respective counsel in connection with any filings required to be made
with the NASD;
(n) cooperate with the selling Holders of Registrable Securities and
the sole or lead managing Underwriter, if any, to facilitate the timely
preparation and delivery of certificates not bearing any restrictive legends
representing the Registrable Securities to be sold, and cause such Registrable
Securities to be issued in such denominations and registered in such names in
accordance with the underwriting agreement prior to any sale of Registrable
Securities to the Underwriters or, if not an Underwritten Offering, in
accordance with the instructions of the selling Holders of Registrable
Securities which shall be given at least five business days prior to any sale of
Registrable Securities;
(o) if requested by any selling Holder of Registrable Securities,
furnish to such Holder participating in the offering, without charge, at least
one manually-signed copy of the Registration Statement and any post-effective
amendments thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those deemed to be
incorporated by reference);
(p) if requested by any selling Holder of Registrable Securities,
promptly incorporate in a prospectus supplement or post-effective amendment such
information concerning such Holder of Registrable Securities as the selling
Holder of Registrable Securities reasonably requests to be included therein and
as is appropriate in the reasonable judgment of the Company and its counsel;
make all required filings of such Prospectus supplement or post-effective
amendment as soon as notified of the matters to be incorporated in such
Prospectus supplement or post-effective amendment; and supplement or make
amendments to any Registration Statement if requested by the sole or lead
managing Underwriter of such Registrable Securities; and
(q) use commercially reasonable efforts to take all other steps
necessary to expedite or facilitate the registration and disposition of the
Registrable Securities contemplated hereby.
4.2 Seller Information. The Company may require each selling Holder
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of Registrable Securities as to which any registration is being effected to
furnish to the Company
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such information regarding such seller and the disposition of such securities as
the Company may from time to time reasonably request in writing; provided,
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however, that such information shall be used only in connection with such
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Registration. If any Registration Statement or comparable statement under "blue
sky" laws refers to any Holder by name or otherwise as the Holder of any
securities of the Company, then such Holder shall have the right to require (i)
the insertion therein of language, in form and substance satisfactory to such
Holder and the Company, to the effect that the holding by such Holder of such
securities is not to be construed as a recommendation by such Holder of the
investment quality of the Company's securities covered thereby and that such
holding does not imply that such Holder will assist in meeting any future
financial requirements of the Company, and (ii) in the event that such reference
to such Holder by name or otherwise is not in the judgment of the Company, as
advised by counsel, required by the Securities Act or any similar federal
statute or any state "blue sky" or securities law then in force, the deletion of
the reference to such Holder.
4.3 Notice to Discontinue.
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(a) Each Holder of Registrable Securities agrees by acquisition of
such Registrable Securities that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 4.1(f)(ii) through
4.1(f)(iv), such Holder shall forthwith discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 4.1(f) and, if so directed by the
Company, such Holder shall deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in such Holder's possession of
the Prospectus covering such Registrable Securities which is current at the time
of receipt of such notice.
(b) In the event that, in the reasonable judgment of the Company, it
is advisable to suspend use of a Prospectus included in a Registration Statement
due to pending material developments or other events that have not been publicly
disclosed and as to which the Company reasonably believes public disclosure
would be detrimental to the Company, the Company shall notify all Holders of
Registrable Securities covered by such Registration Statement to such effect,
and, upon receipt of such notice, each such Holder shall forthwith discontinue
disposition of Registrable Securities pursuant to such Registration Statement
until such Holder has received copies of a supplemented or amended Prospectus or
until such Holder is advised in writing by the Company that the then current
Prospectus may be used and has received copies of any additional or supplemental
filings that are incorporated or deemed incorporated by reference in such
Prospectus.
(c) If the Company shall give any notice provided for under Section
4.3(a) or 4.3(b), the Company shall extend the period during which such
Registration Statement shall be maintained effective pursuant to this Agreement
(including, without limitation, the period referred to in Section 4.1(b)) by the
number of days during the period from and including the date of the giving of
such notice to and including the date when the Holder shall have received the
copies of the supplemented or amended prospectus contemplated by and meeting the
requirements of Section 4.1(f).
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5. INDEMNIFICATION; CONTRIBUTION.
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5.1 Indemnification by the Company. The Company agrees to indemnify
------------------------------
and hold harmless, to the fullest extent permitted by law, each Holder of
Registrable Securities, its officers, directors, partners, members,
stockholders, employees, Affiliates, advisers, attorneys and agents
(collectively, "Agents") and each Person who controls such Holder (within the
meaning of the Securities Act) and its Agents with respect to each registration
which has been effected pursuant to this Agreement, against any and all losses,
claims, damages or liabilities, joint or several, actions or proceedings
(whether commenced or threatened) in respect thereof, and expenses (as incurred
or suffered and including, but not limited to, any and all expenses incurred in
investigating, preparing or defending any litigation or proceeding, whether
commenced or threatened, and the reasonable fees, disbursements and other
charges of legal counsel) in respect thereof (collectively, "Claims"), insofar
as such Claims arise out of or are based upon any untrue or alleged untrue
statement of a material fact contained in any Registration Statement or
Prospectus (including any preliminary, final or summary prospectus and any
amendment or supplement thereto) related to any such registration or any
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by the Company of the Securities Act or any rule or regulation
thereunder applicable to the Company and relating to action or inaction required
of the Company in connection with any such registration, or any qualification or
compliance incident thereto; provided, however, that the Company will not be
-------- -------
liable in any such case to the extent that any such Claims arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
or omission or alleged omission of a material fact so made in reliance upon and
in conformity with written information furnished to the Company by a Holder,
Underwriter or other indemnified person hereunder expressly for use therein.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of any Person who may be entitled to
indemnification pursuant to this Section 5 and shall survive the transfer of
securities by such Holder.
5.2 Indemnification by Holders. Each Holder, if Registrable
--------------------------
Securities held by it are included in the securities as to which a registration
is being effected, agrees to, severally and not jointly, indemnify and hold
harmless, to the fullest extent permitted by law, the Company, and its Agents,
each other Person who participates as an Underwriter or selling stockholder in
the offering or sale of such securities and its Agents and each Person who
controls the Company and its Agents against any and all Claims, insofar as such
Claims arise out of or are based upon any untrue or alleged untrue statement of
a material fact contained in any Registration Statement or Prospectus (including
any preliminary, final or summary prospectus and any amendment or supplement
thereto) related to any such registration, or any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such Holder expressly for use therein;
provided, however, that the aggregate amount which any such Holder shall be
- -------- -------
required to pay pursuant to this Section 5.2 shall in no event be greater than
the amount of the net proceeds received by such Holder upon the sale of the
Registrable Securities pursuant to the Registration Statement giving rise to
such Claims less all amounts previously paid by such Holder with respect to any
such Claims. Such indemnity shall remain in full force and effect
12
regardless of any investigation made by or on behalf of any Person who may be
entitled to indemnification pursuant to this Section 5 and shall survive the
transfer of securities by such Holder.
5.3 Conduct of Indemnification Proceedings. Promptly after receipt
--------------------------------------
by an indemnified party of notice of any Claim or the commencement of any action
or proceeding involving a Claim under this Section 5, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party pursuant to Section 5, (i) notify the indemnifying party in writing of the
Claim or the commencement of such action or proceeding; provided, that the
--------
failure of any indemnified party to provide such notice shall not relieve the
indemnifying party of its obligations under this Section 5, except to the extent
the indemnifying party is materially and actually prejudiced thereby and shall
not relieve the indemnifying party from any liability which it may have to any
indemnified party otherwise than under this Section 5, and (ii) permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided, however, that any indemnified
-------- -------
party shall have the right to employ separate counsel and to participate in the
defense of such claim, but the fees and expenses of such counsel shall be at the
expense of such indemnified party unless (A) the indemnifying party has agreed
in writing to pay such fees and expenses, (B) the indemnifying party shall have
failed to assume the defense of such claim and employ counsel reasonably
satisfactory to such indemnified party within 20 days after receiving notice
from such indemnified party that the indemnified party believes it has failed to
do so, or (C) in the reasonable judgment of any such indemnified party, based
upon advice of counsel, a conflict of interest shall exist between such
indemnified party and the indemnifying party with respect to such claims; it
being understood, however, that the indemnifying party shall not, in connection
with any one such action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (in addition to no more than one firm of local
counsel) at any time for all such indemnified parties. No indemnifying party
shall be liable for any settlement of any such claim or action effected without
its written consent, which consent shall not be unreasonably withheld. No
indemnifying party shall, without the consent of the indemnified party, which
consent shall not be unreasonably withheld, consent to entry of any judgment or
enter into any settlement of any claim or action in respect of which
indemnification or contribution may be sought hereunder, unless such settlement,
(i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim, (ii) does not include a statement
as to or an admission of fault, culpability or a failure to act, by or on behalf
of any indemnified party, and (3) does not provide for any action on the part of
any party other than the payment of money damages which is to be paid in full by
the indemnifying party.
5.4 Contribution. If the indemnification provided for in Section 5.1
------------
or 5.2 from the indemnifying party for any reason is unavailable to (other than
by reason of exceptions provided therein), or is insufficient to hold harmless
an indemnified party hereunder in respect of any Claim, then the indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such Claim in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party, on the one hand, and the indemnified party, on the other
hand, in connection with the actions which resulted in such Claim, as well as
any other relevant equitable considerations. The relative fault of such
13
indemnifying party and indemnified party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. If, however, the foregoing allocation is not permitted by applicable
law, then each indemnifying party shall contribute to the amount paid or payable
by such indemnified party in such proportion as is appropriate to reflect not
only such relative faults but also the relative benefits of the indemnifying
party and the indemnified party as well as any other relevant equitable
considerations.
5.5. Other Indemnification. Indemnification similar to that
---------------------
specified in the preceding Sections 5.1 and 5.2 (with appropriate modifications)
shall be given by the Company and each selling Holder of Registrable Securities
with respect to any required registration or other qualification of securities
under any Federal or state law or regulation of any governmental authority,
other than the Securities Act. The indemnity agreements contained herein shall
be in addition to any other rights to indemnification or contribution which any
indemnified party may have pursuant to law or contract.
5.6 Indemnification Payments. The indemnification and contribution
------------------------
required by this Section 5 shall be made by periodic payments of the amount
thereof during the course of any investigation or defense, as and when bills are
received or any expense, loss, damage or liability is incurred.
6. GENERAL.
-------
6.1 Adjustments Affecting Registrable Securities. The Company agrees
--------------------------------------------
that it shall not effect or permit to occur any combination or subdivision of
shares which would adversely affect the ability of the Holder of any Registrable
Securities to include such Registrable Securities in any registration
contemplated by this Agreement.
6.2 Registration Rights to Others. Other than as set forth on
-----------------------------
Schedule A attached hereto, the Company represents and warrants that it is not
currently a party to any agreement with respect to its securities granting
registration rights to Persons. Except for the registration rights set forth in
Section 2.3(c), if the Company shall at any time hereafter provide to any holder
of any securities of the Company rights with respect to the registration of such
securities under the Securities Act (not including any such rights which have
been previously granted), such rights shall not be more favorable than the
rights provided in this Agreement to the Holders unless the Company shall
provide (by way of amendment to this Agreement or otherwise) such more favorable
terms or conditions to the Holders.
6.3 Availability of Information; Rule 144; Rule 144A; Other
-------------------------------------------------------
Exemptions. The Company covenants that it shall timely file any reports required
- ----------
to be filed by it under the Securities Act or the Exchange Act (including, but
not limited to, the reports under Sections 13 and 15(d) of the Exchange Act
referred to in subparagraph (c) of Rule 144 under the Securities Act), and that
it shall take such further action as any Holder of Registrable Securities may
reasonably request, all to the extent required from time to time to enable such
Holder to sell
14
Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (i) Rule 144 and Rule
144A under the Securities Act, as such rules may be amended from time to time,
or (ii) any other rule or regulation now existing or hereafter adopted by the
SEC. Upon the request of any Holder of Registrable Securities, the Company
shall deliver to such Holder a written statement as to whether it has complied
with such requirements.
6.4 Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified,
supplemented or terminated, and waivers or consents to departures from the
provisions hereof may not be given, without the written consent of the Company
and the Majority Holders; provided, however, that no such amendment,
-------- -------
modification, supplement, waiver or consent to departure shall reduce the
aforesaid percentage of Registrable Securities without the written consent of
all of the Holders of Registrable Securities; and provided further, that nothing
-------- -------
herein shall prohibit any amendment, modification, supplement, termination,
waiver or consent to departure the effect of which is limited only to those
Holders who have agreed to such amendment, modification, supplement,
termination, waiver or consent to departure.
6.5 Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand delivery, telecopier, any
courier guaranteeing overnight delivery or first class registered or certified
mail, return receipt requested, postage prepaid, addressed to the applicable
party at the address set forth below or such other address as may hereafter be
designated in writing by such party to the other parties in accordance with the
provisions of this Section:
If to the Company: MicroStrategy Incorporated
8000 Towers Crescent Drive
Suite 1400
Vienna, Virginia 22182
Attn: General Counsel
Fax No.(703) 847-4837
with copies to: Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attn: Mitchel Appelbaum, Esq.
Thomas S. Ward, Esq.
Fax No.(617) 526-5000
if to Initial Holder: Foothill Capital Corporation
2450 Colorado Avenue
Suite 3000 West
Santa Monica, California 90404
Attn: Business Finance Division Manager
Fax No.(310) 453-7413
15
with copies to: Brobeck, Phleger & Harrison LLP
550 South Hope Street
Los Angeles, California 90071-2604
Attn: John F. Hilson, Esq.
Fax No: (213) 745-3345
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; when receipt is
acknowledged, if telecopied; on the next business day, if timely delivered to a
courier guaranteeing overnight delivery; and five days after being deposited in
the mail, if sent first class or certified mail, return receipt requested,
postage prepaid.
6.6 Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the parties hereto and their respective heirs,
successors and permitted assigns (including any permitted transferee of the
Warrant or Registrable Securities). Any Holder may assign to any permitted (as
determined under the Warrant) transferee of its Warrant or Registrable
Securities (other than a transferee that acquires such Registrable Securities in
a registered public offering or pursuant to a sale under Rule 144 of the
Securities Act (or any successor rule)), its rights and obligations under this
Agreement; provided, however, if any permitted transferee shall take and hold
-------- -------
Warrant or Registrable Securities, such transferee shall promptly notify the
Company and by taking and holding such Registrable Securities such permitted
transferee shall automatically be entitled to receive the benefits of and be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement as if it were a party hereto (and shall,
for all purposes, be deemed a Holder under this Agreement). If the Company
shall so request any heir, successor or permitted assign (including any
permitted transferee) wishing to avail itself of the benefits of this Agreement
shall agree in writing to acquire and hold the Registrable Securities subject to
all of the terms hereof. For purposes of this Agreement, "successor" for any
entity other than a natural person shall mean a successor to such entity as a
result of such entity's merger, consolidation, sale of substantially all of its
assets, or similar transaction. Except as provided above or otherwise permitted
by this Agreement, neither this Agreement nor any right, remedy, obligation or
liability arising hereunder or by reason hereof shall be assignable by any
Holder or by the Company without the consent of the other parties hereto.
6.7 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which, when so executed and delivered, shall be deemed to
be an original, but all of which counterparts, taken together, shall constitute
one and the same instrument.
6.8 Descriptive Headings, Etc. The headings in this Agreement are
--------------------------
for convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein. Unless the context of this Agreement
otherwise requires: (1) words of any gender shall be deemed to include each
other gender; (2) words using the singular or plural number shall also include
the plural or singular number, respectively; (3) the words "hereof", "herein"
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and Section and paragraph references are to the Sections and
paragraphs of this Agreement unless otherwise
16
specified; (4) the word "including" and words of similar import when used in
this Agreement shall mean "including, without limitation," unless otherwise
specified; (5) "or" is not exclusive; and (6) provisions apply to successive
events and transactions.
6.9 Severability. In the event that any one or more of the
------------
provisions, paragraphs, words, clauses, phrases or sentences contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision, paragraph, word, clause, phrase or
sentence in every other respect and of the other remaining provisions,
paragraphs, words, clauses, phrases or sentences hereof shall not be in any way
impaired, it being intended that all rights, powers and privileges of the
parties hereto shall be enforceable to the fullest extent permitted by law.
6.10 CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. THE VALIDITY OF
------------------------------------------
THIS AGREEMENT, THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF, AND
THE RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER
OR RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.
THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE
AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA.
THE COMPANY AND THE INITIAL HOLDER WAIVE, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
----- ---
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
- ----------
ACCORDANCE WITH THIS SECTION 6.10.
------------
THE COMPANY AND THE INITIAL HOLDER HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. THE COMPANY AND THE INITIAL HOLDER REPRESENT THAT EACH HAS
REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A
COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
6.11 Remedies; Specific Performance. The parties hereto acknowledge
------------------------------
that money damages would not be an adequate remedy at law if any party fails to
perform in any material respect any of its obligations hereunder, and
accordingly agree that each party, in addition to any other remedy to which it
may be entitled at law or in equity, shall be entitled to seek to compel
specific performance of the obligations of any other party under this Agreement,
without the posting of any bond, in accordance with the terms and conditions of
this Agreement
17
in any court specified in Section 6.10 hereof, and if any action should be
brought in equity to enforce any of the provisions of this Agreement, none of
the parties hereto shall raise the defense that there is an adequate remedy at
law. Except as otherwise provided by law, a delay or omission by a party hereto
in exercising any right or remedy accruing upon any such breach shall not impair
the right or remedy or constitute a waiver of or acquiescence in any such
breach. No remedy shall be exclusive of any other remedy. All available remedies
shall be cumulative.
6.12 Entire Agreement. This Agreement and the other document
----------------
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
6.13 Further Assurances. Each party hereto shall do and perform or
------------------
cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments and
documents as any other party hereto reasonably may request in order to carry out
the intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
6.14 Construction. The Company and the Initial Holder acknowledge
------------
that each of them has had the benefit of legal counsel of its own choice and has
been afforded an opportunity to review this Agreement with its legal counsel and
that this Agreement shall be construed as if jointly drafted by the Company and
the Holders.
6.15 No Inconsistent Agreement. The Company will not hereafter enter
-------------------------
into any agreement which is inconsistent with the rights granted to the Holders
in this Agreement.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
THE COMPANY:. INITIAL HOLDER:
MICROSTRATEGY INCORPORATED FOOTHILL CAPITAL CORPORATION
By: /s/ Eric F. Brown By: /s/ Brian Duffy
_____________________________________ _____________________
Name: Eric F. Brown Name: Brian Duffy
_____________________________________ _____________________
Title: President and Chief Financial Officer Title: Senior Vice President
_____________________________________ _____________________
[SIGNATURE PAGE TO THE REGISTRATION RIGHTS AGREEMENT]
19
TABLE OF CONTENTS
-----------------
Page
----
1. DEFINITIONS................................................................. 2
2. REGISTRATION UNDER THE SECURITIES ACT....................................... 5
2.1 Demand Registration................................................. 5
2.2 Incidental Registration............................................. 5
2.5 Expenses............................................................ 7
2.6 Conversions; Exercises.............................................. 7
3. HOLDBACK ARRANGEMENTS....................................................... 8
4. REGISTRATION PROCEDURES..................................................... 8
4.1 Obligations of the Company.......................................... 8
4.2 Seller Information.................................................. 11
4.3 Notice to Discontinue............................................... 11
5. INDEMNIFICATION; CONTRIBUTION............................................... 12
5.1 Indemnification by the Company...................................... 12
5.2 Indemnification by Holders.......................................... 13
5.3 Conduct of Indemnification Proceedings.............................. 13
5.4 Contribution........................................................ 14
5.5. Other Indemnification.............................................. 14
5.6 Indemnification Payments............................................ 14
6. GENERAL..................................................................... 15
6.1 Adjustments Affecting Registrable Securities........................ 15
6.2 Registration Rights to Others....................................... 15
6.3 Availability of Information; Rule 144; Rule 144A; Other Exemptions.. 15
6.4 Amendments and Waivers.............................................. 15
6.5 Notices............................................................. 15
6.6 Successors and Assigns.............................................. 16
6.7 Counterparts........................................................ 17
6.8 Descriptive Headings, Etc........................................... 17
6.9 Severability........................................................ 17
6.10 Choice of Law and Venue; Jury Trial Waiver......................... 17
6.11 Remedies; Specific Performance..................................... 18
6.12 Entire Agreement................................................... 18
6.13 Further Assurances................................................. 18
6.14 Construction....................................................... 19
6.15 No Inconsistent Agreement.......................................... 19