EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
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REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of August 30,
1996 by and among Preferred Payment Systems, Inc., a Delaware corporation
(including its successors by merger, acquisition, reorganization or otherwise,
the "Company"), the investors named on Schedule A attached hereto (the
"Investors") and the current shareholders and optionholders of the Company named
on Schedule B attached hereto (the "Shareholder").
WHEREAS, the Investors propose to purchase certain convertible subordinated
notes in the aggregate principal amount of $10,000,000 (the "Convertible Notes")
pursuant to a Convertible Note Purchase Agreement dated as of the date hereof
(the "Purchase Agreement") by ad among the Company, the Investors and certain of
the Shareholders.
WHEREAS, the Convertible Notes are convertible into shares of Convertible
Redeemable Preferred Stock of the Company (the "Convertible Preferred Stock")
and shares of Redeemable Preferred Stock of the Company.
WHEREAS, the execution and delivery of this Agreement is a condition
precedent to the transactions contemplated by the Purchase Agreement.
NOW, THEREFORE, in consideration of the premises, as an inducement to the
Investors to consummate the transactions contemplated by the Purchase Agreement,
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Company hereby covenants and agrees with each
Investor as follows:
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Commission" shall mean the United States Securities and Exchange
Commission, or any other federal agency at the time administering the Securities
Act.
"Common Stock" shall mean (i) the Company's common stock, par value
$.01 per share, as authorized on the date of this Agreement, (ii) any other
capital stock of any class or classes (however designated) of the Company,
authorized on or after the date hereof, the holders of which shall have the
right, without limitation as to amount per share, either to all or to a share of
the balance of current dividends and liquidating distributions after the payment
of dividends and distributions on any shares entitled to preference in the
payment thereof, and the holders of which shall ordinarily, in the absence of
contingencies, be entitled to vote for the election of directors of the Company
(even though the right so to vote has been suspended by the happening of such a
contingency), and (iii) any other securities into which or for which any of the
securities described in (i) or (ii) above may be converted or exchanged pursuant
to a plan of recapitalization, reorganization, merger, sale of assets or
otherwise.
"Conversion Shares" shall mean shares of the Company's Common Stock
issued and issuable upon conversion of the Convertible Preferred Stock.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar successor federal statute, and the rules and regulations
of the Commission thereunder, all as the same shall be in effect at the time.
"Person" shall mean an individual, a corporation, a partnership, a
joint venture, a trust, an unincorporated organization, a limited liability
company or partnership, a government and any agency or political subdivision
thereof.
"Registrable Securities" shall mean (i) the Conversion Shares or
shares of any other securities issued and issuable upon conversion of the
Convertible Preferred Stock, and (ii) any other securities issued and issuable
with respect to any such shares described in clause (i) above by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization (it being
understood that for purposes of this Agreement, a Person will be deemed to be a
holder of Registrable Securities whenever such Person has the right to then
acquire or obtain form the Company any Registrable Securities, whether or not
such acquisition has actually been effected.)
"Registration Expenses" shall mean the expenses so described in
Section 6.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
2. Demand Registration.
(a) At any time after the earlier to occur of (i) August 30, 1998 or
(ii) the date on which the Company becomes subject to Section 13 or Section
15(d) of the Exchange Act, the holders of at least twenty percent (20%) of the
Registrable Securities may request the Company register under the Securities Act
the Registrable Securities held by such requesting holders (such amount to be at
least 20% of the Registrable Securities or a lesser percentage, if the
reasonably anticipated aggregate offering price to the public of such public
offering (net of reasonably anticipated underwriting discounts and commissions)
would exceed $3,000,000) in the manner specified in such request. Upon receipt
of such request, the Company shall promptly deliver notice of such request to
all Persons holding Registrable Securities who shall then have thirty (30) days
to notify the Company in writing of their desire to be included in such
registration. If the request for registration contemplates an underwritten
public offering, the Company shall state such in written notice and in such
event the right of any Person to participate in such registration shall be
conditioned upon their participation in such underwritten public offering and
the inclusion of their Registrable Securities in the underwritten public
offering to the extent provided herein. The Company will use its best efforts
to expeditiously effect the
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registration of all Registrable Securities whose holders request participation
in such registration under the Securities Act, but only to the extent provided
for in the following provisions of this Agreement; provided, however, that the
Company shall not be required to effect registration pursuant to a request under
this Section 2 more than two (2) times for the holders of Registrable Securities
as a group. Notwithstanding anything to the contrary contained herein, no
request may be made under this Section 2 within 180 days after the effective
date of a registration statement filed by the Company covering a firm commitment
underwritten public offering in which the holders of Registrable Securities
shall have been entitled to join pursuant to Section 4 and in which there shall
have been effectively registered all Registrable Securities as to which
registration shall have been requested.
(b) If a request for registration pursuant to this section 2 is made
and the Company has not previously effected an initial underwritten public
offering of its securities, the Company may include in such requested
registration any authorized but unissued shares of Common Stock (or authorized
treasury shares) for sale by the Company to effect an initial public offering;
and if the managing underwriter of such initial public offering determines in
good faith that the total number of securities sought to be included in such
offering should be limited due to the necessity of including in such
underwriting or registration securities to be sold for the account of the
Company, the number of shares of Common Stock sought to be included on behalf of
the Company shall not be reduced until all other shares of securities sought to
be included in such initial public offering (including Registrable Securities)
are first reduced in accordance with the priorities set forth in Section 4
hereof. Notwithstanding anything herein to the contrary, in the event (x) the
number of shares of Common Stock so included by the Company pursuant to this
clause (b) exceeds the number of Registrable Securities requested to be included
by the holders who originally requested such registration or (y) if the number
of Registrable Securities requested to be included by any holders is reduced by
operation of the preceding sentence of this clause (b), then such registration
shall be deemed to be a registration in accordance with and pursuant to Section
4 and the holders of Registrable Securities shall not be deemed to have
exercised one of their rights to request registration under Section 2.
(c) With respect to a request for registration pursuant to this
Section 2 other than a request as described in clause (b) above, the Company may
include in each such requested registration any authorized but unissued shares
of Common Stock (or authorized treasury shares) for sale by the Company and the
Shareholders may include in each such requested registration shares of Common
Stock held by such Shareholders; provided, however, that any such shares of
Common Stock shall not be included to the extent that the managing underwriter
of the offering (if the offering is underwritten) or the holders of a majority
of the shares of the Registrable Securities who requested the registration (if
the offering is not underwritten), determine(s) in good faith that the inclusion
of such shares will interfere with the successful marketing of the shares of the
Registrable Securities to be included in the registration. If a requested
registration involves an underwritten public offering and the managing
underwriter of such offering determines in good faith that the number of
securities sought to be offered should be limited due to market conditions, then
the number of securities to be included in such underwritten public
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offering shall be reduced to a number deemed satisfactory by such managing
underwriter, provided that the shares to be excluded shall be determined in the
following order of priority: (i) securities held by any other Persons (other
than the Shareholders and holders of Registrable Securities) having a
contractual, incidental "piggy back" right to include such securities in the
registration statement, (ii) securities held by the Shareholders, (iii)
securities offered on behalf of the Company, (iv) Registrable Securities of
holders who did not make the original request for registration and, if
necessary, (v) Registrable Securities of holders who requested such registration
pursuant to Section 2. If there is a reduction of the number of Registrable
Securities pursuant to clauses (iv) and (v), such reduction shall be made on a
pro rata basis (based upon the aggregate number of Registrable Securities held
by such holders).
(d) Whenever a requested registration pursuant to Section 2(a) is for
an underwritten public offering, the Company shall have the right to approve the
managing underwriter chosen by the holders of a majority of the Registrable
Securities to be sold in such offering (which approval will not be unreasonably
withheld or delayed). The Company may not cause any other registration of
securities for sale for its own account (other than a registration effected
solely to implement an employee benefit plan or a transaction to which Rule 145
of the Commission is applicable) to become effective within 90 days following
the effective date of any registration required pursuant to this Section 2.
(e) If, at the time of any request to register Registrable Securities
pursuant to Section 2(a), the Company is preparing a registration statement for
a public offering (other than a registration effected solely to implement an
employee benefit plan or a transaction to which Rule 145 of the Commission is
applicable) which in fact is filed and becomes effective within ninety (90) days
after the request, or is engaged in any activity (including a concurrent or
proposed security issuance or acquisition) which, in the good faith
determination of the Company's board of directors, would be adversely affected
by the requested registration to the material detriment of the Company, then the
Company may at is option direct that such request be delayed for a period (the
"Black-Out Period") not in excess of 120 days from the effective date of such
offering or the date of commencement of such other activity, as the case may be.
The aggregate amount of Black-Out Periods in any consecutive twelve month period
shall not exceed 120 days. Nothing in this Section 2(e) shall prelude a holder
of Registrable Securities from enjoying registration rights which it might
otherwise possess under Section 4 hereof.
3. Form-3.
(a) After the first public offering of its securities registered
under the Securities Act, the Company shall use its best efforts to qualify and
remain qualified to register securities on Form S-3 (or any successor form)
under the Securities Act. The holders of at least twenty (20%) of the
Registrable Securities shall have the right to request any number of
registrations on Form S-3 (or any successor form) for the Registrable Securities
held by such requesting holders, including registrations for the sale of such
Registrable Securities on a delayed or continuous basis pursuant to Rule 415
under the
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Securities Act. Such requests shall be in writing and shall state the number of
shares of Registrable Securities to be disposed of and the intended method of
disposition of such shares by such holder or holders. The Company shall give
notice to all other holders of the Registrable Securities of the receipt of a
request for registration pursuant to this Section 3 and such holders of
Registrable Securities shall then have thirty (30) days to notify the Company in
writing of their desire to participate in the registration.
(b) If, at the time of any request to register Registrable Securities
pursuant to this Section 3, the Company is preparing a registration statement
for a public offering (other than a registration effected solely to implement an
employee benefit plan or a transaction to which Rule 145 of the Commission is
applicable) which in fact is filed and becomes effective within ninety (90) days
after the request, or is engaged in any activity (including a concurrent or
proposed security issuance or acquisition) which, in the good faith
determination of the Company's board of directors, would be adversely affected
by the requested registration to the material detriment of the Company, then the
Company may request a Black-Out Period in accordance with, and subject to,
Section 2(e) hereof. Subject to the foregoing, the Company will use its best
efforts, in each case, to effect promptly the registration of the Registrable
Securities to the extent requested by the holder or holders thereof on Form S-3
and to keep such registration effective until the Registrable Securities
registered thereunder are sold.
(c) In the case of a registration for the sale of Registrable
Securities on a delayed or continuous basis pursuant to Rule 415 of the
Securities Act (a "Shelf Registration Statement"), upon receipt of any notice (a
"Suspension Notice") from the Company of the happening of any event which makes
any statement made in the Shelf Registration Statement or related prospectus
untrue or which requires the making of any changes in such Shelf Registration
Statement or prospectus so that they will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein in light of the circumstances under
which they were made not misleading, each holder of Registrable Securities
registered under such Shelf Registration Statement shall forthwith discontinue
disposition of such Registrable Securities pursuant to such Shelf Registration
Statement until such holder's receipt of the copies of the supplemented or
amended prospectus or until it is advised in writing (the "Advice") by the
Company that the use of the prospectus may be resumed, and has received copies
of any additional or supplemental filings which are incorporated by reference in
the prospectus; provided, however, that the Company shall not give a Suspension
Notice until after the Shelf Registration Statement has been declared effective
and shall not give more than one Suspension Notice during any period of twelve
consecutive months and in no event shall the period from the date on which any
holder receives a Suspension Notice to the date on which any holder receives
either the Advice or copies of the supplemented or amended prospectus (the
"Suspension Period') exceed 60 days. In the event that the Company shall give
any Suspension Notice, the Company shall use its best efforts and take such
actions as are reasonably necessary to render the Advice and end the Suspension
Period as promptly as practicable.
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4. Piggyback Registration. If the Company at any time proposes to
register any of its securities under the Securities Act (including, without
limitation, pursuant to a demand of any stockholder of the Company exercising
registration rights) for sale to the public (except with respect to registration
statements on Forms X-0, X-0 or another form not available for registering the
Registrable Securities for sale to the public), each such time it will give
written notice at the applicable address of record to each holder of Registrable
Securities and to each Shareholder of its intention to do so. Upon the written
request of any of such holders of the Registrable Securities and/or any such
Shareholders, given within twenty (20) days after receipt by such Person of such
notice, the Company will, subject to the limits contained in this Section 4, use
its best efforts to cause all such Registrable Securities of said requesting
holders and all such Common Stock of said requesting Shareholders to be
registered under the Securities Act and qualified for sale under any state blue
sky law, all to the extent required to permit such sale or other disposition of
said Registrable Securities and Common Stock so registered; provided, however,
that if the Company is advised in writing in good faith by any managing
underwriter of the Company's securities being offered in a public offering
pursuant to such registration statement that the amount to be sold by persons
other than the Company (collectively, "Selling Stockholders") is greater than
the amount which can be offered without adversely affecting the offering, the
Company may reduce the amount offered for the accounts of Selling Stockholders
(including such holders of shares of Registrable Securities) to a number deemed
satisfactory by such managing underwriter; provided that the shares to be
excluded shall be determined in the following order of priority: (i) securities
held by any Persons not having any such contractual, incidental registration
rights, (ii) securities held by any Persons having contractual, incidental
registration rights pursuant to an agreement which is not this Agreement, (iii)
securities held by the Shareholders, and (iv) the Registrable Securities sought
to be included by the holders as determined on a pro rata basis (based upon the
aggregate number of Registrable Securities held by such holders); provided
further however, that in the event the holders Registrable Securities shall have
received in the aggregate net proceeds of at least $30 million from the previous
sale of Registrable Securities, then the securities sought to be included by the
Shareholders and the Registrable Securities sought to be included by the holders
shall be reduced on a pro rata basis notwithstanding clauses (iii) and (iv)
above.
5. Registration Procedures. If and whenever the Company is required by
the provisions of this Agreement to use its best efforts to effect the
registration of any of its securities under the Securities Act, the Company
will, as expeditiously as possible:
(i) use its best efforts diligently to prepare and file with the
Commission a registration statement on the appropriate form under the Securities
Act with respect to such securities, which form shall comply as to form in all
material respects with the requirements of the applicable form and include all
financial statements required by the Commission to be filed therewith, and use
its best efforts to cause such registration statement to become and remain
effective until completion of the proposed offering;
(ii) prepare and file with the Commission such amendments and
supplements
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to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective and to comply
with the provisions of the Securities Act with respect to the sale or other
disposition of all securities covered by such registration statement whenever
the seller or sellers of such securities shall desire to sell or otherwise
dispose of the same, but only to the extent provided in this Agreement;
(iii) furnish to each selling holder and the underwriters, if any,
such number of copies of such Registration Statement, any amendments thereto,
any documents incorporated by reference therein, the prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as such selling holder may reasonably request in
order to facilitate the public sale or other disposition of the securities owned
by such selling holder;
(iv) use every reasonable effort to register or qualify the
securities covered by such registration statement under such other securities or
state blue sky laws of such jurisdictions as each selling holder shall
reasonably request, and do any and all other acts and things which may be
necessary under such securities or blue sky laws to enable such selling holder
to consummate the public sale or other disposition in such jurisdictions of the
securities owned by such selling holder, except that the Company shall not for
any such purpose be required to qualify to do business as a foreign corporation
in any jurisdiction wherein it is not so qualified;
(v) within a reasonable time before each filing of the registration
statement or prospectus or amendments or supplements thereto with the
Commission, furnish to counsel selected by the holders of Registrable Securities
copies of such documents proposed to be filed, which documents shall be subject
to the reasonable approval of such counsel;
(vi) promptly notify each selling holder of Registrable Securities,
such selling holders' counsel and any underwriter and (if requested by any such
Person) confirm such notice in writing, of the happening of any event which
makes any statement made in the registration statement or related prospectus
untrue or which requires the making of any changes in such registration
statement or prospectus so that they will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein in light of the circumstances under
which they were made not misleading; and, as promptly as practicable thereafter,
prepare and file with the Commission and furnish a supplement or amendment to
such prospectus so that, as thereafter deliverable to the purchasers of such
Registrable Securities, such prospectus will not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading;
(vii) use its best efforts to prevent the issuance of any order
suspending the effectiveness of a registration statement, and if one is issued
use its best efforts to obtain the withdrawal of any order suspending the
effectiveness of a registration statement at the earliest possible moment;
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(viii) if requested by the managing underwriter or underwriters (if
any), any selling holder, or such selling holder's counsel, promptly incorporate
in a prospectus supplement or post-effective amendment such information as such
Person requests to be included therein, including, without limitation, with
respect to the securities being sold by such selling holder to such underwriter
or underwriters, the purchase price being paid therefor by such underwriter or
underwriters and with respect to any other terms of an underwritten offering of
the securities to be sold in such offering, and promptly make all required
filings of such prospectus supplement or post-effective amendment;
(ix) make available to each selling holder, any underwriter
participating in any disposition pursuant to a registration statement, and any
attorney, accountant or other agent or representative retained by any such
selling holder or underwriter (collectively, the "Inspectors"), all financial
and other records, pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably necessary to enable them
to exercise their due diligence responsibility, and cause the Company's
officers, directors and employees to supply all information requested by any
such Inspector in connection with such registration statement;
(x) enter into any reasonable underwriting agreement required by the
proposed underwriter(s) for the selling holders, if any, and use its best
efforts to facilitate the public offering of the securities;
(xi) furnish to each prospective selling holder a signed counterpart,
addressed to the prospective selling holder, of (A) an opinion of counsel for
the Company, dated the effective date of the registration statement, and (B) a
"comfort" letter signed by the independent public accountants who have certified
the Company's financial statements included in the registration statement,
covering substantially the same matters with respect to the registration
statement (and the prospectus included therein) and (in the case of the
accountants' letter) with respect to events subsequent to the date of the
financial statements, as are customarily covered (at the time of such
registration) in opinions of the Company's counsel and in accountants' letters
delivered to the underwriters in underwritten public offerings of securities;
(xii) use its best efforts to cause the securities covered by such
registration statement to be listed on the securities exchange or quoted on the
quotation system on which the Common Stock of the Company is then listed or
quoted (or if the Common Stock is not yet listed or quoted, then on such
exchange or quotation system as the selling holders and the Company shall
determine);
(xiii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission and make generally available to its
security holders, in each case as soon as practicable, but not later than 45
days after the close of the period covered thereby (90) days in case the period
covered corresponds to a fiscal year of the Company), an earnings statement of
the Company which will satisfy the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder (or any comparable successor provisions); and
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(xiv) otherwise cooperate with the underwriters), the Commission and
other regulatory agencies and take all actions and execute and deliver or cause
to be executed and delivered all documents necessary to effect the registration
of any securities under this Agreement.
6. Expenses. All expenses incurred in effecting the registrations
provided for in Sections 2, 3 and 4, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company and fees of one counsel for the selling holders of
Registrable Securities (which counsel shall be selected by the holders of not
less than a majority of the Registrable Securities to be included in any such
registration), underwriting expenses (other than fees, commissions or
discounts), expenses of any audits incident to or required by any such
registration and expenses of complying with the securities or blue sky laws of
any jurisdictions pursuant to Section 5(iv) hereof (all of such expenses
referred to as "Registration Expenses"), shall be paid by the Company.
7. Indemnification. (a) The Company shall indemnify and hold harmless
the selling holder of such securities, each underwriter (as defined in the
Securities Act), and each other Person who participates in the offering of such
securities and each other Person, if any, who controls (within the meaning of
the Securities Act) such seller, underwriter or participating Person
(individually and collectively the "Indemnified Person") against any losses,
claims, damages or liabilities (collectively the "liability"), joint or several,
to which such Indemnified Person may become subject under the Securities Act or
any other statute or at common law, insofar as such liability (or action in
respect thereof) arises out of or is based upon (i) any untrue statement or
alleged untrue statement of any material fact contained, on the effective date
thereof, in any registration statement under which such securities were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereto, or (ii)
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.
Except as otherwise provided in Section 7(d), the Company shall reimburse each
such Indemnified Person in connection with investigating or defending any such
liability; provided, however, that.the Company shall not be liable to any
Indemnified Person in any such case to the extent that any such liability arises
out of or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, preliminary or
final prospectus, or amendment or supplement thereto in reliance upon and in
conformity with information furnished in writing to the Company by such Person
specifically for use therein, or upon such statement or omission therein based
on the authority of an expert within the meaning of that term as defined in the
Securities Act (but only if the Company had no reasonable ground to believe, and
did not believe, that the statements made on the authority of an expert were
untrue or that there was an omission to state a material fact); and provided
further, that the Company shall not be required to indemnify any Person against
any liability arising from any untrue or misleading statement or omission
contained in any preliminary prospectus if such deficiency is corrected in the
final prospectus or for any liability which arises out of the failure of any
Person to deliver a prospectus as required by the Securities Act regardless of
any investigation made by or on behalf of such Indemnified
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Person and shall survive transfer of such securities by such seller.
(b) Each selling holder of any securities included in such
registration being effected, indemnify and hold harmless each other selling
holder of any securities, the Company, its directors and officers, each
underwriter and each other Person, if any, who controls the Company or such
underwriter (individually and collectively also the "Indemnified Person"),
against any liability, joint or several, to which any such Indemnified Person
may become subject under the Securities Act or any other statute or at common
law, insofar as such liability (or actions in respect thereof) arises out of or
is based upon (i) any untrue statement or alleged untrue statement of any
material fact contained, on the effective date thereof, in any registration
statement under which securities were registered under the Securities Act at the
request of such selling holder, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto, or (ii) any omission
or alleged omission by such selling holder to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in the case of (i) and (ii) to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission was made in such registration statement, preliminary or final
prospectus, amendment or supplement thereto in reliance upon and in conformity
with information furnished in writing to the Company by such selling holder
specifically for use therein, and then only to the extent that such untrue
statement or alleged untrue statement or omission or alleged omission by the
selling holder was not based on the authority of an expert as to which the
selling holder had no reasonable ground to believe, and did not believe, that
the statement made on the authority of such expert was untrue or that there was
an omission to state a material fact. Such selling holder shall reimburse any
Indemnified Person for any legal fees incurred in investigating or defending any
such liability; provided, however, that such selling holder's obligations
hereunder shall be limited to an amount equal to the proceeds to such selling
holder of the securities sold in any such registration; and provided, further,
however, that no selling holder shall be required to indemnify any Person
against any liability arising from any untrue or misleading statement or
omission contained in any preliminary prospectus if such deficiency is corrected
in the final prospectus or for any liability which arises out of the failure of
any Person to deliver a prospectus as required by the Securities Act.
(c) Indemnification similar to that specified in Sections 7(a) and
(b) shall be given by the Company and each selling holder (with such
modifications as may be appropriate) with respect to any required registration
or other qualification of their securities under any federal or state law or
regulation of governmental authority other than the Securities Act.
(d) In the event the Company, any selling holder or other Person
receives a complaint, claim or other notice of any liability or action, giving
rise to a claim for indemnification under Sections 7(a), (b) or (c), the Person
claiming indemnification under such paragraphs shall promptly notify the Person
against whom indemnification is sought of such complaint, notice, claim or
action, and such indemnifying Person shall have the right to investigate and
defend any such loss, claim, damage, liability or action. The Person
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claiming indemnification shall have the right to employ separate counsel in any
such action and to participate in the defense thereof but the fees and expenses
of such counsel shall not be at the expense of the Person against whom
indemnification is sought (unless the indemnifying party fails to promptly
defend, in which case the fees and expenses of such separate counsel shall be
home by the Person against whom indemnification is sought). In no event shall a
Person against whom indemnification is sought be obligated to indemnify any
Person for any settlement of any claim or action effected without the
indemnifying Person's prior written consent.
8. Compliance with Rule 144. In the event that the Company (i) registers
a class of securities under Section 12 of the Exchange Act or (ii) shall
commence to file reports under Section 13 or 15(d) of the Exchange Act,
thereafter, the Company will use its best efforts thereafter to file with the
Commission such information as is required under the Exchange Act for so long as
there are holders of Registrable Securities; and in such event, the Company
shall use its best efforts to take all action as may be required as a condition
to the availability of Rule 144 under the Securities Act (or any comparable
successor rules). The Company shall furnish to any holder of Registrable
Securities upon request a written statement executed by the Company as to the
steps it has taken to comply with the current public information requirement of
Rule 144 (or such comparable successor rules). After the occurrence of the
first underwritten public offering of Common Stock of the Company pursuant to an
offering registered under the Securities Act on Form S-1 or Form SB-1 (or any
comparable successor forms), subject to the limitations on transfers imposed by
this Agreement, the Company shall use its best efforts to facilitate and
expedite transfers of Registrable Securities pursuant to Rule 144 under the
Securities Act, which efforts shall include timely notice to its transfer agent
to expedite such transfers of Registrable Securities.
9. "Market Stand-off" Agreement. In connection with the Company's initial
underwritten public offering, the holders of Registrable Securities and the
Shareholders, if requested in good faith by the Company and the managing
underwriter of the Company's securities, shall agree not to sell or otherwise
transfer or dispose of any securities of the Company held by them (except for
any securities sold pursuant to such registration statement) for a period
following the effective date of the applicable registration statement as agreed
to by such parties, provided, however that in no event shall such period exceed
180 days. In connection with any other underwritten public offering by the
Company, to the extent holders of not less than a majority of the Registrable
Securities have agreed with the managing underwriter(s) not to sell or otherwise
transfer or dispose of any of the Registrable Securities held by each them for a
period of time after the effective date of any such registration statement in
order to effect an orderly public distribution thereof, then each holder of
Registrable Securities and each Shareholder, if requested in good faith by the
Company and the managing underwriter, shall enter into and execute such an
agreement with such managing underwriter(s) and the Company pertaining to a
restriction on the transfer of any securities of the Company then held by them
(and not included in such registration) during such same time period and on the
same terms and conditions as the agreement made by said holders of a majority of
the Registrable Securities.
-11-
10. Amendments. The provisions of this Agreement may be amended, and the
Company may take any action herein prohibited or omit to perform any act herein
required to be performed by it, only if the Company has obtained the written
consent of the holders of at least sixty-seven percent (67%) of the Registrable
Securities.
11. Transferability of Registration Rights. The registration rights set
forth in this Agreement are transferable to each transferee of Registrable
Securities, other than a transferee whose activities, products or services are
competitive with the activities, products or services of the Company as of the
date of such transfer. Each subsequent holder of Registrable Securities must
consent in writing to be bound by the terms and conditions of this Agreement in
order to acquire the rights granted pursuant to this Agreement.
12. Rights Which May Be Granted to Subsequent Investors. Other than
permitted transferees of Registrable Securities under Section 11 hereof, the
Company shall not, without the prior written consent of holders of at least
fifty one percent (51%) of the Registrable Securities, (a) allow purchasers of
the Company's securities or transferees of securities held by the Shareholders
to become a party to this Agreement or (b) grant any other registration rights
to any third parties.
13. Damages. The Company recognizes and agrees that each holder of
Registrable Securities will not have an adequate remedy if the Company fails to
comply with the terms and provisions of this Agreement and that damages will not
be readily ascertainable, and the Company expressly agrees that, in the event of
such failure, it shall not oppose an application by any holder of Registrable
Securities or any other Person entitled to the benefits of this Agreement
requiring specific performance of any and all provisions hereof or enjoining the
Company from continuing to commit any such breach of this Agreement.
14. Miscellaneous.
(a) All notices, requests, demands and other communications provided
for hereunder shall be in writing and mailed (by first class registered or
certified mail, postage prepaid), telegraphed, sent by express overnight courier
service or electronic facsimile transmission (with a copy by mail), or delivered
to the applicable party at the addresses indicated below:
If to the Company:
Preferred Payment Systems, Inc.
0000 Xxxx Xxxxx Xxxx,
Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx
Telecopy No.: (000) 000-0000
-12-
With a copy to:
XxXxxxxxx, Will & Xxxxx
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
If to the Investors:
TA Associates, Inc.
Xxxx Xxxxxx Xxxxx, Xxxxx 0000
000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxxxxxx
Telecopy No.: (000) 000-0000
With a copy to:
Xxxxxxx, Procter & Xxxx LLP
Exchange Place
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
If to any other holder of Registrable Securities or the Shareholders:
At such Person's address for notice as set forth in the books and
records of the Company
or, as to each of the foregoing, at such other address as shall be designated by
such Person in a written notice to other parties complying as to delivery with
the terms of this subsection (a). All such notices, requests, demands and other
communications shall, when mailed, telegraphed or sent, respectively, be
effective (i) two days after being deposited in the mails or (ii) one day after
being delivered to the telegraph company, deposited with the express overnight
courier service or sent by electronic facsimile transmission, respectively,
addressed as aforesaid.
(b) This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts.
(c) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
-13-
(d) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this Agreement, and
this Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-14-
IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed as of the date first set forth above.
PREFERRED PAYMENT SYSTEMS, INC.
By:________________________________
Name:
Title:
SHAREHOLDERS:
___________________________________
Xxxxxx X. Xxxxxx
___________________________________
Xxxxx X. Xxxxx
___________________________________
Xxxxx X. Xxxxx
___________________________________
Xxxxx Xxxxxxxxxx
___________________________________
Xxxxx X. Xxxxxxxx
___________________________________
Xxxxxxxx Xxxxxx
___________________________________
Xxxxxx Xxxxxx
___________________________________
Xxxxxx X. Xxxxxxxx
-15-
____________________________________
Xxxxxx X. Xxxxxx
___________________________________
Xxxxx X. Xxxxxxxxx
-16-
IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed as of the date first set forth above.
PREFERRED PAYMENT SYSTEMS, INC.
By:________________________________
Name:
Title:
SHAREHOLDERS:
___________________________________
Xxxxxx X. Xxxxxx
___________________________________
Xxxxx X. Xxxxx
___________________________________
Xxxxx X. Xxxxx
___________________________________
Xxxxx Xxxxxxxxxx
___________________________________
Xxxxx X. Xxxxxxxx
___________________________________
Xxxxxxxx Xxxxxx
___________________________________
Xxxxxx Xxxxxx
___________________________________
Xxxxxx X. Xxxxxxxx
-17-
___________________________________
Xxxxxx X. Xxxxxx
___________________________________
Xxxxx X. Xxxxxxxxx
___________________________________
Xxxx X. Xxxxxxxxxxx
___________________________________
Xxxxxx X. Xxxxxx
___________________________________
Xxx X. Xxxxxx
___________________________________
Xxxxxxxx X. Xxxx
___________________________________
Xxxxxxxx X. Xxxxxxxxx
___________________________________
Xxxx X. Xxxxxxx
___________________________________
Xxxxx X. Xxxxx
___________________________________
Xxxxx Xxxxxxx
___________________________________
Xxxxx Xxxxxx
-18-
___________________________________
Xxx Xxxxx
___________________________________
Xxxx Xxxx XxXxxxx
___________________________________
Xxxxx Master
___________________________________
Xxxxx Xxxxxxx
-19-
___________________________________
Xxxx X. Xxxxxxxxxxx
___________________________________
Xxxxxx X. Xxxxxx
___________________________________
Xxx X. Xxxxxx
___________________________________
Xxxxxxxx X. Xxxx
___________________________________
Xxxxxxxx X. Xxxxxxxxx
___________________________________
Xxxx X. Xxxxxxx
___________________________________
Xxxxx X. Xxxxx
___________________________________
Xxxxx Xxxxxxx
___________________________________
Xxxxx Xxxxxx
___________________________________
Xxx Xxxxx
___________________________________
Xxxx Xxxx XxXxxxx
-20-
___________________________________
Xxxxx Master
___________________________________
Xxxxx Xxxxxxx
-21-
___________________________________
Xxxx X. Xxxxxxxxxxx
___________________________________
Xxxxxx X. Xxxxxx
___________________________________
Xxx X. Xxxxxx
___________________________________
Xxxxxxxx X. Xxxx
___________________________________
Xxxxxxxx X. Xxxxxxxxx
___________________________________
Xxxx X. Xxxxxxx
___________________________________
Xxxxx X. Xxxxx
___________________________________
Xxxxx Xxxxxxx
___________________________________
Xxxxx Xxxxxx
___________________________________
Xxx Xxxxx
___________________________________
Xxxx Xxxx XxXxxxx
-22-
___________________________________
Xxxxx Master
___________________________________
Xxxxx Xxxxxxx
-23-
___________________________________
Xxxx X. Xxxxxxxxxxx
___________________________________
Xxxxxx X. Xxxxxx
___________________________________
Xxx X. Xxxxxx
___________________________________
Xxxxxxxx X. Xxxx
___________________________________
Xxxxxxxx X. Xxxxxxxxx
___________________________________
Xxxx X. Xxxxxxx
___________________________________
Xxxxx X. Xxxxx
___________________________________
Xxxxx Xxxxxxx
___________________________________
Xxxxx Xxxxxx
___________________________________
Xxx Xxxxx
___________________________________
Xxxx Xxxx XxXxxxx
-24-
___________________________________
Xxxxx Master
___________________________________
Xxxxx Xxxxxxx
-25-
___________________________________
Xxxx X. Xxxxxxxxxxx
___________________________________
Xxxxxx X. Xxxxxx
___________________________________
Xxx X. Xxxxxx
___________________________________
Xxxxxxxx X. Xxxx
___________________________________
Xxxxxxxx X. Xxxxxxxxx
___________________________________
Xxxx X. Xxxxxxx
___________________________________
Xxxxx X. Xxxxx
___________________________________
Xxxxx Xxxxxxx
___________________________________
Xxxxx Xxxxxx
___________________________________
Xxx Xxxxx
___________________________________
Xxxx Xxxx XxXxxxx
-26-
___________________________________
Xxxxx Master
___________________________________
Xxxxx Xxxxxxx
-27-
___________________________________
Xxxx X. Xxxxxxxxxxx
___________________________________
Xxxxxx X. Xxxxxx
___________________________________
Xxx X. Xxxxxx
___________________________________
Xxxxxxxx X. Xxxx
___________________________________
Xxxxxxxx X. Xxxxxxxxx
___________________________________
Xxxx X. Xxxxxxx
___________________________________
Xxxxx X. Xxxxx
___________________________________
Xxxxx Xxxxxxx
___________________________________
Xxxxx Xxxxxx
___________________________________
Xxx Xxxxx
___________________________________
Xxxx Xxxx XxXxxxx
-28-
___________________________________
Xxxxx Master
___________________________________
Xxxxx Xxxxxxx
-29-
INVESTORS:
ADVENT NEW YORK L.P.
By: TA Associates VI L.P., its General Partner
By: TA Associates Inc., its General Partner
By: _______________________________________
Name: Xxxxxxxx X. Xxxxxxxxx
Title: Attorney-in-Fact
TA VENTURE INVESTORS LIMITED
PARTNERSHIP
By: _______________________________________
Name: Xxxxxxxx X. Xxxxxxxxx
Title: Attorney-in-Fact
ADVENT VII L.P.
By: TA Associates VII L.P., its General Partner
By: TA Associates Inc., its General Partner
By: _______________________________________
Name: Xxxxxxxx X. Xxxxxxxxx
Title: Attorney-in-Fact
ADVENT ATLANTIC AND PACIFIC III, L.P.
By: TA Associates AAP III Partners, its General Partner
By: TA Associates, Inc.
By: _______________________________________
Name: Xxxxxxxx X. Xxxxxxxxx
Title: Attorney-in-Fact
-30-
SCHEDULE A
----------
to
Registration Rights Agreement
List of Investors
-----------------
Advent New York L.P.
TA Venture Investors Limited Partnership
Advent VII L.P.
Advent Atlantic and Pacific III, L.P.
-31-
