1
EXHIBIT 10.15
FIRST VIRTUAL HOLDINGS INCORPORATED
AMENDED AND RESTATED SHAREHOLDER RIGHTS AGREEMENT
This Amended and Restated Shareholder Rights Agreement (the "AGREEMENT"),
dated as of August 26, 1996, is entered into by and among First Virtual Holdings
Incorporated, a Delaware corporation (the "COMPANY"), and the individuals and
entities listed on Exhibit A attached hereto (collectively, the "SHAREHOLDERS").
R E C I T A L S
A. Those Shareholders designated as Series A Shareholders on Exhibit A
hereto (the "SERIES A HOLDERS") are parties with the Company to the Series A
Preferred Stock Purchase Agreement dated as of May 25, 1995 (the "SERIES A
AGREEMENT"), the Shareholder designated as Series B Shareholder (the "SERIES B
HOLDER") on Exhibit A hereto is a party with the Company to the Series B
Preferred Stock Purchase Agreement (the "SERIES B AGREEMENT") dated as of
December 22, 1995, the Shareholder designated as Series C Shareholder (the
"SERIES C HOLDER") on Exhibit A hereto is a party with the Company to the
Securities Purchase Agreement (the "SECURITIES AGREEMENT") dated as of July 5,
1996, and the Shareholder Designated as Series D Shareholder (the "SERIES D
HOLDER") on Exhibit A hereto is a party with the Company to the Series D
Preferred Stock Purchase Agreement (the "SERIES D AGREEMENT") dated as of August
26, 1996 (the "CLOSING DATE").
B. The Company, the Series A Holders, the Series B Holder and the Series C
Holder are parties to a Shareholder Rights Agreement dated July 3, 1996 (the
"PRIOR SHAREHOLDER RIGHTS AGREEMENT").
C. In order to induce the Series D Holder to enter into the Series D
Agreement, the parties to the Prior Shareholder Rights Agreement wish to amend
and restate such agreement to allow the Series D Holder to become a party to
such agreement.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties hereto agree that the Prior Shareholder
Rights Agreement shall be amended and restated in its entirety to read as
follows:
1. Certain Definitions. As used in this Agreement, the terms defined in
the preamble to this Agreement shall have the meanings given therein and the
following terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or
any other Federal agency at the time administering the Securities Act.
2
"Holder" shall mean any holder of Registrable Securities or Xxxxx
Securities.
"Founders" shall mean Xxxxxx X. Xxxxxx and Xxx X. Xxxxx.
"Founder Securities" shall mean the shares of Common Stock acquired
by Xxx X. Xxxxx, June X. Xxxxx, Xxxxxx X. Xxxxxx and Xxxxxx X. Xxxxxx, trustees
of the TNKRGK Family T/D 12/23/76, Xxxxx X. Xxxxxx, trustee of the Xxxxx X.
Xxxxxx T/D 1/27/87, Xxxxx X. Xxxxxx, trustee of the Xxxxx X. Xxxxxx T/D 1/27/87,
Xxxxxx X. Xxxxxx, trustee of the Xxxxxx X. Xxxxxx T/D 1/27/89 on March 11, 1994,
and any additional shares of Common Stock issued with respect to such shares
upon any stock split, stock dividend, recapitalization or similar event,
provided that the Founder Securities shall cease to be Founder Securities if (i)
such securities are sold in the public market pursuant to the Company's IPO or
otherwise or (ii) as to any such securities at such time as the holder thereof
may sell all such securities in a three month period pursuant to Rule 144 or
Rule 144(k) of the Securities Act.
"Initiating Holders" shall mean Holders of thirty percent (30%) or
more of the then outstanding Registrable Securities.
"IPO" shall mean an underwritten public offering pursuant to an
effective registration statement under the Securities Act, covering the initial
offer and sale of Common Stock for the account of the Company to the public at
an aggregate offering price to the public of not less than $10,000,000 and a per
share price to the public of at least $7.50 per share (as adjusted for stock
splits and like events after the Closing Date).
"Preferred Stock" shall mean the Series A Preferred, Series B
Preferred, Series C Preferred and Series D Preferred Stock.
"Restricted Securities" shall mean the securities of the Company
required to bear or bearing the legend set forth in Section 3 hereof.
"Registrable Securities" shall mean shares of Common Stock issued
pursuant to the Securities Agreement or issued or issuable upon conversion of
the Preferred Stock (including the shares of Preferred Stock issuable upon
exercise of any warrants to purchase Preferred Stock or Common Stock issuable
upon exercise of warrants to purchase Common Stock issued pursuant to the
Securities Agreement, to the extent that such warrants are exercisable, and
shares issued with respect to such Registrable Securities in connection with
stock splits stock dividends and similar events), provided that, Registrable
Securities shall cease to be Registrable Securities if (x) such securities are
sold in the public market pursuant to the Company's IPO or otherwise or (y) as
to any such securities held by a Holder, at such time as such Holder may
immediately sell all such securities in a three month period pursuant to Rule
144 or Rule 144(k) of the Securities Act.
The terms "register", "registered" and "registration" shall refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
-2-
3
"Registration Expenses" shall mean all expenses incurred by the
Company in compliance with Sections 5, 6 and 8 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company which shall include any fees and
disbursements for legal services provided by counsel for the Company on behalf
of the Holders, blue sky fees and expenses for qualification or registration in
not more than five states, and the expense of any audit of the Company's fiscal
year-end financial statements incident to or required by any such registration
(but excluding the compensation of regular employees of the Company, which shall
be paid in any event by the Company).
"Xxxxx Securities" shall mean the shares of Common Stock acquired by
Xxx Xxxxx ("Xxxxx") pursuant to that certain Subscription Agreement dated
September 16, 1994, between the Company and Xxxxx and any additional shares of
Common Stock issued with respect to such shares upon any stock split, stock
dividend, recapitalization or similar event, provided that Xxxxx Securities
shall cease to be Xxxxx Securities if (i) such securities are sold in the public
market pursuant to the Company's IPO or otherwise or (ii) as to any such
securities at such time as the holder thereof may sell all such securities in a
three month period pursuant to Rule 144 or Rule 144(k) of the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Exchange Act" shall mean the Securities Exchange of 1934, as
amended.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and expense allowances applicable to the sale of Registrable
Securities and all fees and disbursements of counsel for any Holder (other than
the fees and disbursements of the Company's counsel included in Registration
Expenses, and the fees of one special counsel to the Holders and holders of
Founder Securities, which shall be borne by the Company).
"Series A Preferred" shall mean shares of Series A Preferred Stock
of the Company.
"Series B Preferred" shall mean shares of Series B Preferred Stock
of the Company.
"Series C Preferred" shall mean shares of Series C Preferred Stock
of the Company.
"Series D Preferred" shall mean shares of Series D Preferred Stock
of the Company.
"Shares" shall mean all Registrable Securities, Founder Securities
and Xxxxx Securities.
2. Restrictions on Transferability. The Restricted Securities shall not be
transferred except upon the conditions specified in this Agreement, which
conditions are intended to ensure compliance with the provisions of the
Securities Act. Any transferee of Restricted Securities shall take and hold
those securities subject to the provisions and upon the conditions specified in
this Agreement.
3. Restrictive Legend. Each certificate representing (i) the Shares, and
(ii) shares of the Company's Common Stock issued upon conversion of the
Preferred Stock, and (iii) any other securities issued in respect of the Shares,
or the Common Stock issued upon conversion of the Preferred Stock,
-3-
4
upon any stock split, stock dividend, recapitalization, merger, consolidation or
similar event, shall (unless otherwise permitted or unless the securities
evidenced by such certificate shall have been registered under the Securities
Act) be stamped or otherwise imprinted with a legend substantially in the
following form (in addition to any legend required under applicable state
securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, (THE "ACT") OR ANY STATE SECURITIES LAWS. SUCH SHARES MAY NOT
BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF SUCH REGISTRATION OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT. COPIES OF THE AGREEMENTS
COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER MAY
BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL
EXECUTIVE OFFICE OF THE CORPORATION.
Upon request of a holder of such a certificate, the Company shall
remove the foregoing legend from the certificate or issue to such holder a new
certificate therefor free of any transfer legend, if, with such request, the
Company shall have received either the opinion referred to in Section 4(a) or
the "no-action" letter referred to in Section 4(b) to the effect that any
transfer by such holder of the securities evidenced by such certificate will not
violate the Securities Act and applicable state securities laws, unless any such
transfer legend may be removed pursuant to Rule 144(k), in which case no such
opinion or "no-action" letter shall be required, and provided that the Company
shall not be obligated to remove any such legends prior to the date of the
release of the lock-up provisions set forth in Section 15 hereof following the
initial public offering of the Company's Common Stock under the Securities Act.
4. Notice of Proposed Transfers. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 4. Prior to any proposed transfer
of any Restricted Securities (other than under circumstances described in
Section 5, 6 or 8 hereof), the holder thereof shall give written notice to the
Company of such holder's intention to effect such transfer. Each such notice
shall describe the manner and circumstances of the proposed transfer in
sufficient detail, and shall be accompanied (except in transactions in
compliance with Rule 144 promulgated under the Securities Act or for a transfer
to a holder's majority owned subsidiary or an entity that directly or indirectly
controls a majority of the voting securities of such holder or to such holder's
spouse, ancestors, descendants or a trust for any of their benefit, or in
transactions involving the distribution without consideration of Restricted
Securities by a holder to any of its partners or retired partners or to the
estate of any of its partners or retired partners) by either (a) a written
opinion of legal counsel to the holder who shall be reasonably satisfactory to
the Company, addressed to the Company, to the effect that the proposed transfer
of the Restricted Securities may be effected without registration under the
Securities Act or (b) a "no-action" letter from the Commission to the effect
that the distribution of such securities without registration will not result in
a recommendation by the staff of the Commission that action be taken with
respect thereto, whereupon the holder of such Restricted Securities shall be
entitled to transfer such Restricted Securities in accordance with the terms of
the notice delivered by such
-4-
5
holder to the Company. Each certificate evidencing the Restricted Securities
transferred as above provided shall bear the restrictive legend set forth in
Section 3 above, except that such certificate shall not bear such restrictive
legend after the date of the Company's initial public offering under the
Securities Act if the opinion of counsel or "no-action" letter referred to above
expressly indicates that such legend is not required in order to establish
compliance with the Act or if such legend is no longer required pursuant to Rule
144(k).
5. Requested Registrations.
(a) Request for Registration. If at any time during the period
beginning six months after the closing of a registered public offering by the
Company and ending on the fourth anniversary of the closing of such offering,
the Company shall receive from Initiating Holders a written request that the
Company effect a registration with respect to the Registrable Securities
specified by such Initiating Holders the Company will:
(i) promptly give written notice of the proposed registration
to all other Holders; and
(ii) as soon as practicable, use its diligent best efforts to
effect such registration (including, without limitation, the
execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable
regulations issued under the Securities Act) as may be so requested
and as would permit or facilitate the sale and distribution of all
of such Registrable Securities, together with the Registrable
Securities or Xxxxx Securities specified by any Holder or Holders
joining in such request as are specified in a written request given
within 30 days after receipt of such written notice from the
Company.
The Company shall file a registration statement covering the
Registrable Securities and Xxxxx Securities, if any, so requested to be
registered as soon as practicable after receipt of the request of the Initiating
Holders; provided, however, that if the Company shall furnish to such Initiating
Holders a certificate signed by the representatives of the underwriters of the
offering to which such registration statement relates, to the effect that market
conditions are such that a delay in the filing of such registration statement is
advisable (or, in the event of a non-underwritten offering, a certificate signed
by the President of the Company stating that in the good faith judgment of the
Board of Directors of the Company a delay in filing such registration statement
is necessary in order to avoid a serious detriment to the Company), the Company
shall have the right, exercisable on only one occasion, to defer such filing for
a period of not more than 120 days after receipt of the request of the
Initiating Holders; and provided further than the Company shall have no
obligation to effect such registration if the Company would be required to
conduct an audit of an interim financial period if the Holders do not undertake
to pay the reasonable fees and expenses of the Company's auditor with respect to
such audit.
The Company shall not be obligated to effect, or to take any action
to effect, any registration pursuant to this Section 5 after the Company has
effected two such registrations pursuant to this Section 5 and such
registrations have been declared or ordered effective by the Commission.
-5-
6
Any registration statement filed pursuant to this Section 5(a) may,
subject to the provisions of Section 5(b) below, include securities of the
Company being sold for the account of the Company.
(b) Underwriting. If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
Section 5(a) and the Company shall include such information in the written
notice referred to in Section 5(a)(i) above. The right of any Holder to
registration pursuant to Section 5(a) shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities or Xxxxx Securities in the underwriting (unless otherwise
mutually agreed by a majority in interest of the Initiating Holders and such
Holder with respect to such participation and inclusion) to the extent provided
herein. A Holder may elect to include in such underwriting all or a part of the
Registrable Securities and/or Xxxxx Securities then held.
If the Company shall request inclusion in any registration pursuant
to Section 5(a) of securities being sold for its own account, the Initiating
Holders shall, on behalf of all Holders, offer to include the securities of the
Company in the underwriting and may condition such offer on the Company's
acceptance of the further applicable provisions of this paragraph. The Company
shall (together with all Holders proposing to distribute their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or representative of the underwriters selected for
such underwriting by a majority in interest of the Initiating Holders.
Notwithstanding any other provision of this Section 5, if the representative of
the underwriters advises the Initiating Holders in writing that marketing
factors require a limitation (the "Underwriter's Limitation") on the number of
shares to be underwritten, the Initiating Holders shall so advise the Company
and all Holders of Registrable Securities and Xxxxx Securities whose securities
would otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities, Xxxxx Securities and other securities that may be
included in the registration and underwriting shall be allocated in the
following manner: First, the securities of the Company shall be excluded from
such registration and underwriting to the extent required by such Underwriter's
Limitation. If, after fully excluding the securities of the Company from such
underwriting and registration, a further reduction in the number of shares to be
included in such underwriting and registration is required, the number of Xxxxx
Securities to be included in such underwriting and registration shall be reduced
to the extent required by the Underwriter's Limitation; provided, however, that
the number of Xxxxx Securities to be included in such registration and
underwriting shall not be reduced to less than 12.5% of the total number of
securities included in such registration or underwriting. If, after fully
excluding the securities of the Company from such underwriting and registration,
and reducing the number of Xxxxx Securities from such underwriting and
registration to the full extent permitted by the preceding sentence, a further
reduction in the number of shares to be included in such underwriting and
registration is required, the number of shares that may be included in the
registration and underwriting shall be allocated among all Holders of
Registrable Securities in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by each Holder at the time of
the filing of the registration statement. No Registrable Securities, Xxxxx
Securities or any other securities excluded from the underwriting by reason of
the Underwriter's Limitation shall be included in such registration. If the
Company or any holder in its sole discretion disapproves of the terms of the
underwriting, it may elect to withdraw therefrom by written notice to the
underwriter and the Initiating Holders. The securities so withdrawn shall also
be withdrawn from registration.
-6-
7
(c) Additional Demand Registration Right. In the event that General
Electric Capital Corporation ("GECC") shall not have had the opportunity to
register at least 72,000 shares of Registrable Securities held by GECC pursuant
to Section 5(a) or Section 6 hereof pursuant to a registration initiated within
30 days after expiration of the underwriters' "lock-up" applicable to GECC in
connection with the Company's initial public stock offering, the Company shall,
upon the written request of GECC, use its best efforts to effect a registration
with respect to the number of Registrable Securities specified by GECC, provided
that such number of Registrable Securities shall not exceed the difference
between (a) 72,000 shares, and (b) the number of Registrable Securities GECC had
previously had an opportunity to register pursuant to Section 5(a) or Section 6,
if any.
The Company shall have no obligation to effect a registration
pursuant to this Section 5(c) if the Company would be required to conduct an
audit of an interim financial period if GECC does not undertake to pay the
reasonable fees and expenses of the Company's auditor with respect to such
audit. The Company shall comply with the requirements of Section 7, 9 and 10
hereof with respect to any registration effected pursuant to this Section 5(c),
except that the Company shall have no obligation to keep any registration
statement filed pursuant to this Section 5(c) effective for a period of more
than sixty (60) days.
The Company shall not be obligated to take any action to effect more
than one registration pursuant to this Section 5(c). This Section 5(c) shall
expire at such time as GECC has had an opportunity to register no less than
72,000 Registrable Securities pursuant to Section 5(a), Section 6(b) or Section
8 hereof.
6. Company Registration.
(a) If, at any time, the Company shall determine to register any of
its securities either for its own account or the account of a security holder or
holders (other than Holders of Registrable Securities or Xxxxx Securities)
exercising their respective demand registration rights, other than (i) a
registration relating solely to employee benefit plans, (ii) a registration
relating solely to a Commission Rule 145 transaction involving the acquisition
of a business (but not a Rule 145 Transaction designed solely to exchange
restricted securities for registered securities in a manner that is the
functional equivalent of registration rights), (iii) a registration pursuant to
Section 5(c) hereof, or (iv) a registration on any registration form which does
not permit secondary sales, the Company will:
(i) promptly give to each Holder and each Founder written
notice thereof (which shall include a list of the jurisdictions in
which the Company intends to attempt to qualify such securities
under the applicable blue sky or other state securities laws); and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all of the Registrable Securities,
Xxxxx Securities and Founder Securities specified in a written
request or requests made by any Holder or Founder within 30 days
after receipt of the written notice from the Company described in
clause (i) above, except as set forth in Section 6(b) below. Such
written request may specify all or a part of a Holder's Registrable
Securities, Xxxxx Securities or Founder Securities.
-7-
8
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders and Founders as a part of the written notice
given pursuant to Section 6(a)(i). In such event the right of any Holder or
holder of Founder Securities to registration pursuant to Section 6 shall be
conditioned upon such Holder's or holders' of Founder Securities participation
in such underwriting and the inclusion of such Holder's Registrable Securities
or Xxxxx Securities or such Founder Securities, as the case may be, in the
underwriting to the extent provided herein. All Holders and holders of Founder
Securities proposing to distribute their securities through such underwriting
shall (together with the Company) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected by the Company.
Notwithstanding any other provision of this Section 6, if the underwriter
advises the Company in writing that marketing factors require an Underwriter's
Limitation on the number of shares to be underwritten, the underwriter may
(subject to the allocation priority set forth below) limit the number of
Registrable Securities, Xxxxx Securities and Founder Securities to be included
in the registration and underwriting, or in the case of the Company's IPO, the
underwriters may exclude all of the Registrable Securities, Xxxxx Securities and
Founder Securities from the registration and underwriting. In such event, the
Company shall so advise all holders of securities requesting registration and,
if applicable, the number of shares or securities that are entitled to be
included in the registration and underwriting shall be allocated in the
following manner: First, the number of Founder Securities that shall be included
in such registration and underwriting shall be reduced to the extent required by
the Underwriter's Limitation; provided, however, that the number of Founder
Securities to be included in such registration and underwriting which is not for
the Company's IPO shall not be reduced to less than 5% of the total number of
securities included in such registration or underwriting. The number of shares
of Founder Securities that may be included in the registration and underwriting
shall be allocated among all holders of Founder Securities in proportion, as
nearly as practicable, to the number of shares of Founder Securities held by
each holder of Founder Securities. If, after fully reducing the number of
Founder Securities from such underwriting and registration to the full extent
permitted by the preceding sentence, a further reduction in the number of shares
to be included in such underwriting and registration is required, the number of
Registrable Securities and Xxxxx Securities that shall be included in the
registration and underwriting shall be reduced to the extent required by the
Underwriter Limitation, in proportion, as nearly as practicable, to the number
of shares of Xxxxx Securities and Registrable Securities held by each Holder;
provided, however, that the number of Registrable Securities to be included in
such registration and underwriting which is not for the Company's IPO shall not
be reduced to less than 20% of the total number of securities included in such
registration or underwriting; and provided further, that the number of Xxxxx
Securities to be included in such registration and underwriting which is not for
the Company's IPO shall not be reduced to less than 10% of the total number of
securities included in such registration or underwriting. The number of shares
of Registrable Securities and Xxxxx Securities that may be included in the
registration and underwriting shall be allocated among all Holders in
proportion, as nearly as practicable, to the number of shares of Xxxxx
Securities and Registrable Securities held by each Holder. If, after reducing
the number of Founder Securities, Registrable Securities and Xxxxx Securities to
be included in such registration or underwriting to the full extent permitted in
this section, a further reduction in the number of shares to be included in such
underwriting and registration is required, then the number of securities of the
Company that shall be included in such registration and underwriting shall be
reduced to the extent required by the Underwriter's Limitation. If any Holder or
holder of Founder Securities disapproves of the terms of any such underwriting,
such Holder or holder of Founder Securities may elect to withdraw therefrom by
written notice to the Company and the underwriter. Any Registrable
-8-
9
Securities, Xxxxx Securities, Founder Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
7. Expenses of Registration. The Company shall bear all Registration
Expenses incurred in connection with any registration, qualification or
compliance pursuant to this Agreement and all underwriting discounts, selling
commissions and expense allowances applicable to the sale of any securities by
the Company for its own account in any registration. All Selling Expenses shall
be borne by the Holders and holders of Founder Securities, if any, whose
securities are included in such registration pro rata on the basis of the number
of their Registrable Securities, Xxxxx Securities or Founder Securities so
registered, provided, however, that if in such registration, the Company pays
any expenses included in the defined term "Selling Expenses" for other security
holders, the Company will pay such expenses for the Holders.
8. Registration on Form S-3. The Company shall use its best efforts to
qualify for registration on Form S-3 or any comparable or successor form or
forms, and to that end the Company shall register (whether or not required by
law to do so) the Common Stock under the Exchange Act in accordance with the
provisions of the Exchange Act following the closing of the first registration
of any securities of the Company on Form XX-0, X-0 or any comparable or
successor form. After the Company has qualified for the use of Form S-3, in
addition to the rights contained in the foregoing provisions of this Agreement,
the Holders of Registrable Securities shall have unlimited rights to request
from time to time registrations on Form S-3 (such requests shall be in writing
and shall state the number of shares of Registrable Securities to be disposed of
and the intended methods of disposition of such shares by such Holder or
Holders) provided that in each case the aggregate proceeds of such registration
are expected to exceed $500,000.
9. Registration Procedures. In the case of each registration effected by
the Company pursuant to this Agreement, the Company will keep each Holder and
holder of Founder Securities who is entitled to registration rights hereunder
advised in writing as to the initiation of each registration and as to the
completion thereof. At its expense, the Company will:
(a) Except as otherwise provided herein, keep such registration
effective for a period of six months or until such Holders or holder of Founder
Securities, if any, have completed the distribution described in the
registration statement relating thereto, whichever first occurs; provided,
however, that in the case of any registration of Registrable Securities on Form
S-3 that are intended to be offered on a continuous or delayed basis, such six
month period shall be extended, if necessary, to keep the registration statement
effective until all such Registrable Securities are sold;
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of securities
covered by such registration statement;
(c) Furnish such number of prospectuses and other documents incident
thereto, including supplements and amendments, as a Holder or holder of Founder
Securities may reasonably request;
-9-
10
(d) Notify each seller of Registrable Securities, Xxxxx Securities
or Founder Securities covered by such registration statement at any time when a
prospectus relating thereto is required to be delivered under the Securities Act
of the happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state a fact required to be stated therein or
necessary to make the statements therein not misleading or incomplete in the
light of the circumstances then existing, and at the request of any such seller,
prepare and furnish to such seller a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchaser of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading or
incomplete in the light of the circumstances then existing;
(e) Cause all such Registrable Securities, Xxxxx Securities or
Founder Securities to be listed on each securities exchange on which the same
securities issued by the Company are then listed;
(f) Provide a transfer agent and registrar for all such Registrable
Securities, Xxxxx Securities or Founder Securities and a CUSIP number for all
such Registrable Securities, Xxxxx Securities or Founder Securities, in each
case not later than the effective date of such registration;
(g) Make available for inspection by any seller of Registrable
Securities, Xxxxx Securities or Founder Securities, any underwriter
participating in any disposition pursuant to such registration statement, and
any attorney or accountant retained by any such seller or underwriter, all
financial and other records, pertinent corporate documents and properties of the
Company, and cause the Company's officers and directors to supply all
information reasonably requested by any such seller, underwriter, attorney or
accountant in connection with such registration statement; provided, however,
that such seller, underwriter, attorney or accountant shall agree to hold in
confidence and trust all information so provided;
(h) Furnish to each selling Holder and holder of Founder Securities
a signed counterpart, addressed to the selling Holder or holder of Founder
Securities, of
(i) an opinion of counsel for the Company, dated the effective
date of the registration statement, and
(ii) "comfort" letters signed by the Company's independent
public accountants who have examined and reported on the Company's
financial statements included in the registration statement, to the
extent permitted by the standards of the AICPA or other relevant
authorities, covering substantially the same matters with respect to
the registration statement (and the prospectus included therein) and
(in the case of the accountants' "comfort" letters, with respect to
events subsequent to the date of the financial statements) as are
customarily covered in opinions of issuer's counsel and in
accountants' "comfort" letters delivered to the underwriters in
underwritten public offerings of securities;
-10-
11
(i) Furnish to each selling Holder and holder of Founder Securities
a copy of all documents filed with and all correspondence from or to the
Commission in connection with any such offering other than nonsubstantive cover
letters and the like;
(j) Otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than eighteen
months, beginning with the first month after the effective date of the
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act;
(k) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 6 hereof, the Company will
enter into any underwriting agreement reasonably necessary to effect the offer
and sale of Common Stock, provided such underwriting agreement contains
customary underwriting provisions and provided further that if the underwriter
so requests the underwriting agreement will contain customary contribution
provisions; and
(l) From and after the date of this Agreement, the Company shall not
enter into any agreement with any holder or prospective holder of any securities
of the Company giving such holder or prospective holder rights that are superior
to the rights given to the holders of Registrable Securities hereunder to
require the Company to initiate registration of any securities of the Company or
to require the Company, upon any registration of any of its securities, to
include, among the securities that the Company is then registering, securities
owned by such holder, unless such agreement does not adversely affect the
registration rights of the holders of Registrable Securities hereunder.
10. Indemnification.
(a) The Company will indemnify each Holder and holder of Founder
Securities, each of its officers, directors, agents , employees and partners,
and each person controlling such Holder and holder of Founder Securities, with
respect to each registration, qualification or compliance effected pursuant to
this Agreement, and each underwriter, if any, and each person who controls any
underwriter, and their respective counsel against all claims, losses, damages
and liabilities (or actions, proceedings or settlements in respect thereof)
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any prospectus, offering circular or other document
prepared by the Company (including any related registration statement,
notification or the like) incident to any such registration, qualification or
compliance, or based on 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, 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, qualification or compliance, and will reimburse each such Holder
and holder of Founder Securities, each of its officers, directors, agents,
employees and partners, and each person controlling such Holder and holder of
Founder Securities, each such underwriter and each person who controls any such
underwriter, for any legal and any other expenses as they are reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement (or alleged untrue statement)
or omission (or alleged
-11-
12
omissions) based upon written information furnished to the Company by such
Holder, holder of Founder Securities or underwriter and stated to be
specifically for use therein.
(b) Each Holder whose Registrable Securities or Xxxxx Securities and
each holder of Founder Securities whose Founder Securities are included in any
registration, qualification or compliance effected pursuant to this Agreement
will indemnify the Company, each of its directors and officers and each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of the Securities Act and the rules and regulations thereunder, each
other such Holder and holder of Founder Securities and each of their officers,
directors and partners, and each person controlling such Holder and holder of
Founder Securities, and their respective counsel against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular or
other document, 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, and will reimburse the Company and such Holders and
holders of Founder Securities, directors, officers, partners, persons,
underwriters or control persons for any legal or any other expenses as they are
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by such Holder or
holders of Founder Securities and stated to be specifically for use therein;
provided, however, that the obligations of such Holders and holders of Founder
Securities hereunder shall be limited to an amount equal to the proceeds to each
such Holder and holder of Founder Securities of securities sold under such
registration statement, prospectus, offering circular or other document as
contemplated herein.
(c) Each party entitled to indemnification under this Section 10
(the "INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense; and provided further that if any Indemnified
Party reasonably concludes that there may be one or more legal defenses
available to it that are not available to the Indemnifying Party, or that such
claim or litigation involves or could have an effect on matters beyond the scope
of this Agreement, then the Indemnified Party may retain its own counsel at the
expense of the Indemnifying Party; and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement unless and only to
the extent that such failure to give notice results in material prejudice to the
Indemnifying Party. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself
-12-
13
or the claim in question as an Indemnifying Party may reasonably request in
writing and as shall be reasonably required in connection with defense of such
claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 10 is held
by a court of competent jurisdiction to be unavailable to an Indemnified Party
with respect to any loss, liability, claim, damage or expense referred to
herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
11. Information by Holder. Each Holder of Registrable Securities and/or
Xxxxx Securities and each holder of Founder Securities to be included in a
registration referred to in this agreement shall furnish to the Company such
information regarding such Holder and such holder of Founder Securities, the
securities to be offered and sold and the intended plan of distribution of the
securities by such Holder and such holder of Founder Securities as the Company
may reasonably request in writing and as shall be reasonably required in
connection with any registration, qualification or compliance referred to in
this Agreement and shall promptly advise the Company in writing of any material
changes to such information while the registration is in effect. Each Holder and
holder of Founder Securities agrees that upon notice from the Company that a
registration statement, prospectus, offering circular or other document is
required to be revised, amended, supplemented or replaced, such Holder and
holder of Founder Securities shall use its reasonable efforts to cause all
copies thereof in its possession to be promptly returned to the Company
(including copies thereof which are in the possession of any broker or other
person acting on behalf of the Holder or holder of Founder Securities), and the
Holder and holder of Founder Securities shall cease to make any public offer or
sale of the registered securities until the Company shall have revised, amended,
supplemented or replaced such registration statement, prospectus, offering
circular or other document.
12. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of the
Restricted Securities to the public without registration, the Company agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times from
and after ninety (90) days following the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the general public;
-13-
14
(b) Use its reasonable best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act at any time after it has become subject to
such reporting requirements; and
(c) So long as a Shareholder owns any Restricted Securities, furnish
to the Shareholder forthwith upon request a written statement by the Company as
to its compliance with the reporting requirements of Rule 144 (at any time from
and after ninety (90) days following the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), and of the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents as a Shareholder may reasonably request in availing itself of any rule
or regulation of the Commission allowing a Shareholder to sell any such
securities without registration.
13. No-Action Letter or Opinion of Counsel in Lieu of Registration.
Notwithstanding anything in this Agreement to the contrary, if at any time after
the closing of the initial offering to the public of the Company's Common Stock
pursuant to a firm commitment registered underwriting in which the aggregate
gross proceeds received by the Company exceed $10,000,000 (the "PUBLIC
OFFERING") of its securities under the Securities Act the Company shall have
obtained from the Commission a "no-action" letter, upon which the holders of
Registrable Securities are reasonably justified in relying, in which the staff
of the Commission has indicated that it will recommend that no action be taken
if, without registration under the Securities Act, any Holder disposes of
Registrable Securities, Xxxxx Securities or Founder Securities covered by any
request for registration made under this Agreement in the manner in which such
Holder proposes to dispose of the Registrable Securities, Xxxxx Securities or
Founder Securities included in such request, or if in the opinion of counsel for
the Company concurred in by counsel for such Holder no registration under the
Securities Act is required in connection with such disposition, the Registrable
Securities, Xxxxx Securities or Founder Securities included in such request
shall not be eligible for registration under this Agreement for so long as such
no action position remains available to such Holder; provided, however, with
respect to any Holder who may be deemed to be an "affiliate," as that term is
defined under Rule 144, if, notwithstanding the opinion of such counsel, the
Holder is unable to dispose of all of the Registrable Securities, Xxxxx
Securities or Founder Securities included in his request in the manner in which
such Holder so proposes without registration, the Registrable Securities
included in such request shall be eligible for registration under this
Agreement.
14. Transfer or Assignment of Registration Rights. The rights to cause the
Company to register a Shareholder's securities granted by the Company under
Section 5 hereof may be transferred or assigned by a Shareholder to a transferee
or assignee of any of the Restricted Securities, provided that the Company is
given written notice prior to the time that such right is exercised, stating the
name and address of said transferee or assignee and identifying the securities
with respect to which such registration rights are being transferred or
assigned, and provided further that the transferee or assignee of such rights is
not deemed by the Board of Directors of the Company, in its reasonable judgment,
to be a competitor of the Company; and provided further that the transferee or
assignee of such rights assumes in writing the obligations of a Shareholder
under this Agreement.
15. "Lock-Up" Agreement. Each Shareholder agrees, if requested by the
Company and an underwriter of Common Stock (or other securities) of the Company
in connection with the Company's
-14-
15
Public Offering, not to sell or otherwise transfer or dispose of any Common
Stock (or other securities) of the Company held by such Shareholder 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 Securities Act relating to such Public Offering, provided that
all officers and directors of the Company who then hold Common Stock (or other
securities) of the Company enter into similar agreements, and provided further
that, in no event, shall a Shareholder be prohibited from transferring or
selling Common Stock or other securities of the Company to an affiliate of such
Shareholder.
Such agreement shall be in writing in a form reasonably satisfactory
to the Company and such underwriter. The Company may impose stop-transfer
instructions with respect to the Shares (or securities) subject to the foregoing
restriction until the end of said period. The Company agrees that any release of
shares subject to the foregoing lock-up agreement shall be made on a pro rata
basis among all Shareholders based upon their percentage ownership of the
outstanding shares of Common Stock of the Company.
16. Preemptive Rights.
(a) New Issuances. The Company hereby agrees not to issue or sell
any "NEW SECURITIES" (as defined in this Section 16) in a transaction in which
the Company receives any consideration other than cash without the prior written
consent of holders of a majority of the outstanding Preferred Stock (voting
together as a single class). The Company hereby grants to the Shareholders a
right (the "PREEMPTIVE RIGHT") to purchase all or any part of their pro rata
portion of any New Securities that the Company may, from time to time, propose
to sell and issue for solely for cash. Such pro rata share, for purposes of this
Preemptive Right, is the ratio of (x) the sum of the number of shares of Common
Stock then owned by such Shareholder and the number of shares of Common Stock
issuable upon the conversion of any such Preferred Stock, to (y) the sum of the
total number of shares of Common Stock then outstanding and the total number of
shares of Common Stock issuable upon the conversion of the total number of
shares of Preferred Stock then outstanding. This Preemptive Right shall be
subject to the following provisions:
(i) "NEW SECURITIES" shall mean any common stock or preferred
stock of the Company, whether or not authorized on the date hereof,
and rights, options or warrants to purchase Common Stock or
preferred stock and securities of any type whatsoever that are, or
may become, convertible into Common Stock or Preferred Stock;
provided, however, that "NEW SECURITIES" does not include the
following:
(A) shares of capital stock of the Company issuable upon
conversion or exercise of any currently outstanding securities
or any New Securities issued in accordance with this
agreement;
(B) shares or options granted to officers, directors and
employees of, and consultants to, the Corporation in a manner
determined by the Board of Directors and in an amount not to
exceed 1,962,025 shares (as adjusted for stock
-15-
16
splits, stock dividends, recapitalizations and similar events)
at any time outstanding;
(C) shares issuable upon exercise of options or warrants
to purchase shares of Series A Preferred Stock, Series B
Preferred Stock and Common Stock of the Corporation issued to
First USA Merchant Services, Inc., National Direct Marketing
Corp., Xxx X. Xxxxx, Xxxxxx X. Xxxxxx, Xxx Xxxxx, Xxxxxxxxx
Xxxxxxxxxx and Xxxxxxxx Xxxx prior to the date hereof;
(D) warrants to purchase up to 50,000 shares issued or
issuable to General Electric Capital Corporation or its
affiliates, and the shares issuable upon exercise of such
warrants;
(E) up to 2,500,000 shares, and warrants to purchase any
portion of such shares, issuable to First Data Corporation,
VISA International Service Association or other entities in
connection with marketing relationships entered into with such
entities; or
(F) shares of Common Stock or Preferred Stock issued in
connection with any pro rata stock split, stock dividend or
recapitalization by the Company (in which case, all numbers of
shares and per share amounts referenced in this Section
16(a)(i) will be adjusted accordingly).
(ii) In the event that the Company proposes to undertake an
issuance of New Securities for cash, it shall give each Shareholder
written notice (the "NOTICE") of its intention, describing the type
of New Securities, the price, and the general terms upon which the
Company proposes to issue the same. Each Shareholder shall have
twenty (20) business days after receipt of such notice to agree to
purchase all or any portion of its pro rata share of such New
Securities at the price and upon the terms specified in the notice
by giving written notice to the Company and stating therein the
quantity of New Securities to be purchased. If any Shareholder fails
to agree to purchase its full pro rata share within such twenty (20)
business day period, the Company will give the Shareholders who did
so agree (the "ELECTING SHAREHOLDERS") notice of the number of
shares that were not subscribed for. Such notice may be by telephone
if followed by written confirmation within two days. The Electing
Shareholders shall have five (5) business days from the date of
receipt of such notice to agree to purchase all or any portion of
such Electing Shareholders pro rata portion of the New Securities
not purchased in response to the Notice.
(iii) In the event that any New Securities subject to the
Preemptive Right are not be purchased by the Shareholders within the
twenty (20) business plus five (5) business day period specified
above, the Company shall have one hundred twenty (120) days
thereafter to sell (or enter into an agreement pursuant to which the
sale of New Securities that had been subject to the Preemptive Right
shall be closed, if at all, within sixty (60) days from the date of
said agreement) the New Securities with respect to which
-16-
17
the rights of the Shareholders were not exercised at a price and
upon terms, including manner of payment, no more favorable to the
purchasers thereof than specified in the Notice. In the event the
Company has not sold all offered New Securities within such one
hundred twenty (120) day period (or sold and issued New Securities
in accordance with the foregoing within sixty (60) days from the
date of such agreement) the Company shall not thereafter issue or
sell any New Securities, without first offering such New Securities
to the Shareholders in the manner provided above.
(iv) This Preemptive Right is nonassignable except to any
transferee to whom registration rights may be transferred under this
Agreement.
(v) This Preemptive Right shall terminate as to any
Shareholder (or any transferee or assignee of such Shareholder) at
such time as such Shareholder ceases to own any Shares or Common
Stock issuable upon conversion of the Shares, and shall terminate as
to all shareholders immediately prior to the closing of the IPO.
17. Certain Rights.
(a) Basic Financial Information. The Company will furnish the
following reports to each Shareholder (or its representative) so long as such
Shareholder owns at least 75,000 shares (as adjusted for stock splits and like
events) of Preferred Stock (including the Common Stock issued upon conversion of
such Preferred Stock), Xxxxx Securities or Founder Securities:
(i) As soon as practicable after the end of each fiscal year
of the Company, and in any event within 120 days thereafter, the
consolidated balance sheet of the Company and its subsidiaries, if
any, as at the end of such fiscal year, and consolidated statements
of income and cash flow of the Company and its subsidiaries, if any,
for such year, prepared in accordance with generally accepted
accounting principles consistently applied and setting forth in each
case in comparative form the figures for the previous fiscal year,
all in reasonable detail and certified by independent public
accountants of recognized national standing that are among the six
largest accounting firms in the United States selected by the
Company and approved by its Board of Directors.
(ii) As soon as practicable after the end each month in each
fiscal year of the Company, and in any event within 45 days
thereafter, a consolidated balance sheet of the Company and its
subsidiaries, if any, as of the end of each such month, and
consolidated statements of income and cash flow of the Company and
its subsidiaries for such period and for the current fiscal year to
date, prepared in accordance with generally accepted accounting
principles consistently applied, subject to changes resulting from
year-end audit adjustments, all in reasonable detail and certified
by the principal financial or accounting officer of the Company.
(iii) Annually (but in any event at least 30 days prior to the
commencement of each fiscal year of the Company) the yearly budget
and operating plan of the Company, in such manner and form as
approved by the Board of Directors of the Company, which
-17-
18
plan shall include projected statements of income and cash flow for
such fiscal year and a projected balance sheet as of the end of such
fiscal year. Any material changes in such plan shall be delivered to
the Shareholders as promptly as practicable after such changes have
been approved by the Board of Directors of the Company.
The provisions of this Section 17(a) shall not be in limitation of any
rights that the Shareholders may have with respect to the books and records of
the Company and its subsidiaries, or to inspect their properties or discuss
their affairs, finances and accounts; and, in the event that the Company is
unable to comply with the provisions of Section 17(a), the Board of Directors of
the Company shall, by resolution duly adopted, authorize and cause a firm of
independent public accountants of nationally recognized standing that is among
the six largest accounting firms in the United States to prepare promptly and
furnish such information to the eligible Shareholders at the Company's expense.
From the date the Company becomes subject to the reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
lieu of the information required pursuant to this Section 17(a), Company may
furnish to the Shareholders copies of its annual reports on Form 10-K, its
quarterly reports on Form 10-Q, any current reports on Form 8-K and such other
information or interim reports as it provides to all shareholders.
(b) Transfers of Rights. The rights granted to the Shareholders
under Section 17(a) hereof may be transferred or assigned by a Shareholder to
any transferee or assignee of any Shares, Xxxxx Securities or Founder
Securities, provided that the Company is given written notice at the time of or
within a reasonable time after such transfer or assignment, stating the name and
address of the transferee or assignee and identifying the securities with
respect to which such rights are being transferred or assigned, and provided
further that the transferee or assignee holds following the transfer at least
75,000 shares (as adjusted for stock splits and like events) of Preferred Stock
(including shares of Common Stock issuable upon conversion thereof), Xxxxx
Securities or Founder Securities.
(c) Protective Provisions. In addition to any rights of the
Preferred Stock under applicable law or under the Certificate of Incorporation
or Bylaws of the Company, the Company will not, and will not permit any
subsidiary of the Company to take any of the following actions without the prior
written consent of holders of a majority of the outstanding shares of Preferred
Stock of the Company (voting together as a single class, on an as-converted to
Common Stock basis): (i) make or permit any payment of a distribution with
respect to, or repurchase of any shares of, the Common Stock by the Company or
any entity in which the Company holds a majority equity interest (but excluding
employee share repurchases upon bona fide termination by the Company of the
employment of such individual at less than fair market value); (ii) enter into
any transaction with an affiliate of the Company or any spouse or relative of
such affiliate; (iii) effect any transfer, in one or more transactions, of a
material portion of the Company's assets to any subsidiary, partnership or joint
venture; (iv) permit the incurrence of indebtedness or the issuance of any
security by any subsidiary; or (v) permit any issuance or other sale or
disposition of the capital stock of any subsidiary.
18. Visitation. The Company will permit each of Sybase, Inc., Unterberg
Harris Interactive Media, L.P., GECC and First Data Corporation ("FDC") (or a
representative of thereof), so long as such Shareholder owns at least 125,000
shares (as adjusted for stock splits and like events) of Preferred Stock
-18-
19
(including shares of Common Stock issued upon conversion of such Preferred
Stock), during such periods as no designee of such Shareholder is a member of
the Company's Board of Directors, to attend all meetings of the Board of
Directors and will provide to such shareholders copies of written materials
provided to all members of the Board of Directors; provided, however, that the
Board of Directors shall have the right to keep confidential from such
Shareholders for such period of the time as the Board of Directors deems
reasonable any information and copies of written materials the Board of
Directors in good faith considers to be trade secrets or to contain confidential
or classified information or which the Company is required by law or agreement
with a third party to keep confidential.
19. Sybase Inc. Rights
(a) Subject to the obligations of the Company set forth in its
Amended and Restated Articles of Incorporation (the "Restated Articles"),
without the prior written consent of Sybase, Inc. ("SYBASE") the Company will
not redeem, repurchase, reacquire or otherwise take any action which would
result in Sybase holding at any time an amount of the Company's capital stock
equal to or in excess of 20% of the total number of shares of the Company's
capital stock then outstanding.
(b) Sybase and the Company acknowledge the Company's intention to
utilize the Sybase platform in connection with the business of the Company. In
the event that the Company elects, in its sole discretion, not to utilize the
Sybase platform in connection with the business of the Company, Sybase shall
have the right to require the Company, to the extent the Shares have not
theretofore been converted into shares of Common Stock, to redeem all of
Sybase's Shares at a price equal to $1.76 per share plus all declared but unpaid
dividends. Sybase shall exercise the foregoing right by written notice to the
Company within 60 days following delivery of written notice to Sybase of the
decision of the Board of Directors of the Company not to utilize the Sybase
platform in connection with the business of the Company. In the event
insufficient funds are legally available to redeem all Shares electing to be
redeemed pursuant to this Section 19(b), the Company may (i) delegate its duty
to purchase Shares pursuant to this Section 19(b) or (ii) redeem as many of the
Shares as it has funds legally available and the Company's obligation to redeem
Shares shall be carried over and Shares shall continue to be purchased as and
when funds become legally available until all Shares entitled to be redeemed
pursuant to this Section 19(b) have been redeemed.
20. Board of Directors
(a) Election of Directors. For so long as this Section 20 is in
effect, each of First USA, Xxx X. Xxxxx ("XXXXX"), Xxxxxx X. Xxxxxx ("XXXXXX")
and Xxx Xxxxx ("XXXXX"), shall have the right to nominate for election to the
Company's Board of Directors one member of the Board (collectively the "DIRECTOR
DESIGNEES"). In addition, if the Company does not effect an initial public
offering of its Common Stock prior to December 31, 1996, GECC and FDC shall each
have the right to nominate a Director Designee. The Company agrees to take all
actions necessary or appropriate to present each of the Director Designees to
the Shareholders for election as a director. The Shareholders agree to take all
actions necessary to elect each of the Director Designees to the Board of
Directors of the Company and each of them agrees to vote their shares in favor
of election of the Director Designees. If a Director Designee resigns or is
removed by a vote of the Company's shareholders, or if his or her Board seat is
otherwise vacated for any reason, then the Shareholder
-19-
20
represented by such Director Designee shall have the right to nominate his or
her replacement, and each Shareholder agrees to vote its shares for the election
of such replacement Director Designee. The provisions of this Section 21 shall
be construed to constitute the granting of proxies coupled with interests.
(b) Effectiveness and Termination of Rights. The rights of First
USA, Xxxxx, Xxxxxx and Xxxxx pursuant to Section 20(a) shall terminate and be
without further effect upon the earlier of (i) the closing of the IPO and (ii)
as to each such Shareholder, at such time as the number of shares of the
Company's capital stock beneficially held by such Shareholder and its affiliates
constitute less than 8% of the Company's capital stock in the case of First USA
and Messrs. Xxxxx, Xxxxxx and Xxxxx, or less than 1.5% of the Company's capital
stock in the case of GECC and FDC, after giving effect to the exercise of all
outstanding but unexercised options (whether or not vested), warrants or other
securities exercisable for or convertible into shares of capital stock of the
Company.
21. Termination of Prior Agreements. The parties to the Prior Shareholder
Rights Agreement agree that the Prior Shareholder Rights Agreement shall
terminate and be superseded in its entirety by this Agreement. The parties to
the Prior Shareholder Rights Agreement further waive all preemptive rights or
rights of first refusal that such parties may be entitled to with respect to the
issuance and sale of (a) the Series D Preferred pursuant to the Series D
Preferred Stock Purchase Agreement, (b) the stock warrant issued pursuant to the
Series D Preferred Stock Purchase Agreement (the "Warrant"), (c) shares of
Common Stock issuable upon conversion of shares of Series D Preferred sold
pursuant to the Series C Agreement, and (d) shares issuable upon exercise of the
Warrant.
22. Governing Law. This Agreement shall be governed in all respects by the
laws of the State of Delaware, without giving effect to the conflicts of laws
principles thereof.
23. Entire Agreement. This Agreement and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof.
24. Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties hereto.
25. Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
upon delivery to the party to be notified in person or by courier service or
five days after deposit with the United States mail, by First Class mail,
postage prepaid, addressed (a) if to a Shareholder, at the Shareholder's address
as set forth on Exhibit A hereto, or (b) if to any other holder of any
securities, at such address as such holder shall have furnished the other
parties hereto in writing, or, until any such holder so furnishes an address to
the Company, then to and at the address of the last holder of such Shares who
has so furnished an address to the Company, or (c) if to the Company, to First
Virtual Holdings Incorporated, 00000 Xx Xxxxxx Xxxx, Xxxxx 000, Xxx Xxxxx XX
00000 and addressed to the attention of the President, or at such other address
as the Company shall have furnished to the Shareholders, with a copy to Xxxxxxx
X. XxXxxxx, Esq., Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, 000 Xxxx Xxxx Xxxx, Xxxx
Xxxx XX 00000.
-20-
21
26. Amendments or Waivers. This Agreement may not be amended, waived,
discharged or terminated other than by written instrument signed by (a) holders
of more than seventy-five percent (75%) of the outstanding shares of Preferred
Stock of the Company (on an as-converted to Common Stock basis) and (b) holders
of more than fifty percent (50%) of the then outstanding Common Stock; provided
that any amendment or waiver adversely affecting holders of a series of
Preferred Stock but not so affecting other series of Preferred Stock shall
require the consent of holders of more than fifty percent (50%) of the then
outstanding shares of the adversely affected series (in particular, the consent
of holders of a majority of the Series C Preferred Stock shall be required for
any amendment or waiver of Section 5(c) hereof or the right of GECC and FDC to
nominate a Director Designee pursuant to Section 21 hereof). No amendment to
this Agreement will be necessary in order to add an additional party as a
Shareholder hereunder upon the acquisition of shares of Common Stock by such
party, or a Shareholder and Holder hereunder upon acquisition of shares of
Preferred Stock by such party (provided, in each case, that such Shares are
issued or transferred to such party in accordance with this Agreement and the
Restated Articles).
27. Waiver of Conflict. Each party to this Agreement that has been or
continues to be represented by Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx P.C., counsel to
the Company, hereby acknowledges that Rule 3-310 of the Rules of Professional
Conduct promulgated by the State Bar of California requires an attorney to avoid
representations in which the attorney has or had a relationship with another
party interested in the representation without the informed written consent of
all parties affected. By executing this Agreement, each such party gives his or
its informed written consent to the representation of the Company by Xxxxxx
Xxxxxxx Xxxxxxxx & Xxxxxx P.C. in connection with this Agreement and the
transactions contemplated hereby.
28. Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be executed by fewer than all of parties hereto,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
-21-
22
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
FIRST VIRTUAL HOLDINGS
INCORPORATED
By: /s/ Xxx X. Xxxxx
--------------------------------------
Xxx X. Xxxxx, President
SHAREHOLDERS
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ General Electric Capital Corporation
-----------------------------------------
FIRST USA MERCHANT SERVICES, INC.
By: /s/ Phil Taken
--------------------------------------
Title: General Counsel
------------------------------------
SYBASE, INC.
By: /s/ Xxxxxx Xxxxxxx
---------------------------------------
UNTERBERG HARRIS INTERACTIVE MEDIA, L.P.
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------------
Xxxxxx X. Xxxxxxx
Partner
---------------------------------------
-22-
