EXHIBIT 10.5
FUJITSU MODIFICATION AGREEMENT
THIS AGREEMENT (the "AGREEMENT") is made effective as of the 11th day of
December 1997 among Digital River, Inc., a Minnesota corporation
("DR-MINNESOTA"), Digital River, Inc., a Delaware corporation ("DR-DELAWARE"),
Fujitsu Limited, a corporation organized under the laws of Japan ("FUJITSU") and
the undersigned parties who are parties to some or all of the documents
described herein (collectively "OTHER PARTIES").
WITNESSETH
WHEREAS, DR-Minnesota is being reincorporated in Delaware as DR-Delaware
and survives temporarily as a wholly-owned subsidiary of DR-Delaware for
technical reasons. It is intended that, as between DR-Minnesota and DR-
Delaware, DR-Delaware is the entity that may undertake an initial public
offering of its common stock at some future date. As used hereafter, "DR" shall
mean DR-Minnesota or DR-Delaware, as applicable and appropriate to carry out the
intent of this Agreement;
WHEREAS, DR, Fujitsu and the Other Parties have entered into various
agreements in the past in connection with an investment by Fujitsu in DR and now
desire to terminate such agreements, except as specifically provided herein;
WHEREAS, DR and Fujitsu desire to enter into a new agreement which will set
forth the terms of the ongoing relationship between DR and Fujitsu and, except
as explicitly provided herein, supercede the Prior Agreements (as defined
below); and
WHEREAS, the Other Parties desire to be released from the obligations
contained in and release their rights under the Prior Agreements between DR,
Fujitsu and the respective Other Parties.
NOW THEREFORE, in consideration of the foregoing and the covenants and
agreements hereinafter set forth, the parties agree as follows:
1. TERMINATION OF AGREEMENTS. Except as explicitly provided in Section 5 of
this Agreement, the following agreements (the "Prior Agreements") are
hereby: (i) terminated as of the effective date of this Agreement, (ii)
superceded in their entirety hereby, and (iii) the parties are hereby
released from all obligations under the Prior Agreements.
a. Stock Purchase Agreement dated August 30, 1994 between DR,
Fujitsu, Xxxx Xxxxxxx and MacUSA, Inc.;
b. Investors' Rights Agreement dated August 30, 1994 between DR,
Fujitsu and Xxxx Xxxxxxx;
c. Personal Guaranty and Stock Pledge Agreement dated August 30,
1994 for the benefit of DR and Fujitsu from Xxxx Xxxxxxx;
d. Employment and Non-Competition Agreement dated August 30, 1994
between DR and Xxxx Xxxxxxx;
e. Voting Agreement dated August 30, 1994 between DR, Fujitsu and
Xxxx Xxxxxxx;
f. Memorandum of Understanding dated August 30, 1994 between DR,
Fujitsu, Xxxx Xxxxxxx and MacUSA, Inc.;
g. Non-Competition Agreement dated August 30, 1994 between DR, Xxxx
Xxxxxxx and MacUSA, Inc.; and
h. That certain letter agreement between DR and Fujitsu dated as of
October 17, 1997.
i. Any and all amendments or other modifications to any of the
foregoing agreements listed in a-h above, except for any modification
set forth in this Agreement.
2. ISSUANCE OF DR COMMON STOCK. As consideration for Fujitsu entering into
this agreement, DR, concurrent with the execution of this Agreement, will
issue to Fujitsu an additional total of 90,000 shares of DR Common Stock
(on a post-split basis). Following completion of the transaction
contemplated hereby, Fujitsu shall own beneficially and of record 3,290,000
shares of DR Common Stock (on a post-split basis).
3. DIRECTOR DESIGNEE. Until such time as Fujitsu owns less than ten percent
(10%) of the outstanding Common Stock of DR, Fujitsu shall be entitled to
designate one representative on the Board of Directors of DR. In
furtherance of such right:
a. Fujitsu shall be entitled to nominate one individual to the Board
of Directors of DR (the "Fujitsu Nominee"), which nominee shall be
presented to the shareholders of DR at the annual shareholder meeting
as a management nominee endorsed by the Board.
b. While the parties to this Agreement understand that there can be
no guarantee of the election of the Fujitsu Nominee by the
shareholders of DR, the Other Parties hereby agree to use their best
efforts to secure the presentation of the Fujitsu Nominee as a
management nominee endorsed by the Board for election by the
shareholders of DR and to secure the election of the Fujitsu Nominee
to the Board.
c. In addition, the Other Parties hereby agree that they will vote
any and all shares of DR Common Stock held by them of record or
beneficially in favor of the Fujitsu Nominee.
d. If and when DR's Board of Directors deems it appropriate, it will
consider naming a second Fujitsu designee to the Board.
e. In the event that the Fujitsu Nominee is not elected to the Board
of Directors of DR and Fujitsu (together with its affiliates,
successors, and assigns) holds at least ten percent (10%) of the
outstanding shares of Common Stock of DR, Fujitsu shall (i) be
entitled to notice of all meetings of the Board of Directors and to
receive a copy of all materials disseminated to the members of the
Board of Directors, have the right to send one representative to each
meeting of the Board of Directors as an observer; such observer shall
have the right to participate fully in all aspects of the Board
meeting but shall not have a right to vote and (ii) be entitled to
receive the following information:
i. ANNUAL REPORTS. As soon as practicable in any event
within 120 days after the end of each fiscal year of the DR, a
consolidated Balance Sheet as of the end of such fiscal year, a
consolidated Statement of Income and a consolidated Statement of
Cash Flows of the DR and its subsidiaries for such year, setting
forth in each case in
comparative form the figures from the DR's previous fiscal year
(if any), all prepared in accordance with generally accepted
accounting principles and practices and audited by nationally
recognized independent certified public accountants (such
obligation may be satisfied by delivery to the Investor of a Form
10-K or Form 10-KSB as filed with the Securities and Exchange
Commission);
ii. QUARTERLY REPORTS. As soon as practicable, and in any
case within forty-five (45) days of the end of each fiscal
quarter of the DR (except the last quarter of the DR's fiscal
year), quarterly unaudited financial statements, including an
unaudited Balance Sheet, and an unaudited Statement of Income and
an unaudited Statement of Cash Flows, and commencing six (6)
months after the Effective Date a comparison to the DR's
operating plan and budget and statements of the Chief Financial
officer of the DR explaining any significant differences in the
statements from the DR's operating plan and budget for the period
and stating that such statements fairly present the consolidated
financial position and consolidated financial results of the DR
for the fiscal quarter covered (such obligation may be satisfied
by delivery to the Investor of a Form 10-Q for Form 10-QSB as
filed with the Securities and Exchange Commission);
iii. MONTHLY REPORTS. As soon as practicable, and in any
case within forty-five days of the end of each calendar month
(except that last month of the DR's fiscal year), monthly
unaudited financial statements, including an unaudited Balance
Sheet and an unaudited Statement of Income and an unaudited
Statement of Cash Flows, together with a comparison to the DR's
operating plan and budget and statements of the Chief Financial
Officer of the DR explaining any significant differences in the
statements from the DR's operating plan and budget for the month
covered and stating that such statements fairly present the
consolidated financial position and consolidated financial
results of the DR for the month covered; and
iv. ANNUAL BUDGET. As soon as practicable and in any event
no later than sixty (60) days after the close of each fiscal year
of the DR, an annual operating plan and budget, prepared on a
monthly basis, for the next immediate fiscal year. The DR shall
also furnish to such Investor, within a reasonable time of its
preparation, amendments to the annual budget, if any.
f. TERMINATION OF CERTAIN RIGHTS. The DR's obligations under
Section 3.e. above will terminate upon (i) the closing of the DR's
initial public offering of Common Stock pursuant to an effective
registration statement filed under the U.S. Securities Act of 1933, as
amended (the "Securities Act") in which the gross proceeds raised for
the DR's account (calculated before deduction of underwriters'
discounts and commissions) exceeds $5,000,000 and the per share price
exceeds $2.00; or (ii) the DR becoming subject to the reporting
requirements of the Exchange Act of 1934, whichever is sooner.
g. RULE 144A INFORMATION. The DR agrees to provide Investor, upon
request, with such written information as may be required in order to
permit such Investor to resell any shares of the DR's stock pursuant
to Rule 144A promulgated under the Securities Act, provided that no
interim audit is required to do so.
4. REGISTRATION RIGHTS.
a. Definitions. For purposes of this Section 4:
i. REGISTRATION. The terms "REGISTER," "REGISTERED," and
"REGISTRATION" refer to a registration effected by preparing and
filing a registration statement in compliance with the Securities
Act, and the declaration or ordering of effectiveness of such
registration statement.
ii. REGISTRABLE SECURITIES. The term "REGISTRABLE
SECURITIES" means: (1) all the shares of Common Stock of DR owned
by Fujitsu or Fujitsu's assignee(s), and by Xxxx Xxxxxxx or his
assignee(s); and (2) any shares of Common Stock of DR issued as
(or issuable upon the conversion of exercise of any warrant,
right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in
replacement of, all such shares of Common Stock described in
clause (1) of this subsection (ii); EXCLUDING, however, any
Registrable Securities sold to the public or sold pursuant to
Rule 144 promulgated under the Securities Act.
iii. HOLDER. For purposes of this Section 4, the term
"Holder" means any person owning of record Registrable Securities
that have not been sold to the public or pursuant to Rule 144
promulgated under the Securities Act or any assignee or record of
such Registrable Securities to whom rights under this Section 4
have been duly assigned in accordance with this Agreement.
iv. FORM S-3. The term "Form S-3" means such form under
the Securities Act as is in effect on the date hereof or any
successor registration form under the Securities Act subsequently
adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by
DR with the SEC.
v. SEC. The term "SEC" or "Commission" means the U.S.
Securities and Exchange Commission.
b. PIGGYBACK REGISTRATIONS. DR shall notify all Holders of
Registrable Securities in writing at least thirty (30) days prior to
filing any registration statement under the Securities Act for
purposes of effecting a public offering of securities of DR
(including, but not limited to, registration statements relating to
offerings of securities of DR other than DR's initial public offering,
whether on behalf of DR or selling shareholders, but EXCLUDING
registration statements relating to any registration under Section
4.c. of this Agreement or to any employee benefit plan or a corporate
reorganization) and will afford each such Holder an opportunity to
include in such registration statement all or any part of the
Registrable Securities then held by such Holder. Each Holder desiring
to include in any such registration statement all or any part of the
Registrable Securities held by such Holder shall, within twenty (20)
days after receipt of the above-described notice from DR, so notify DR
in writing, and in such notice shall inform DR of the number of
Registrable Securities such Holder wishes to include in such
registration statement. If a Holder decides not to include all of its
Registrable Securities in any registration statement thereafter filed
by DR, such Holder shall nevertheless continue to have the right to
include any Registrable Securities in any subsequent registration
statement or registration statements as may be filed by DR with
respect to offerings of its securities, all upon the terms and
conditions set forth herein.
i. UNDERWRITING. If a registration statement under which
DR gives notice under this Section 4.b. is for an underwritten
offering, then DR shall so advise the Holders of Registrable
Securities. In such event, the right of any such Holder's
Registrable Securities to be included in a registration pursuant
to this Section 4.b. shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of
such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall
enter into an underwriting agreement in customary form with the
managing underwriter or underwriter(s) selected for such
underwriting. Notwithstanding any other provision of this
Agreement, if the managing underwriter determine(s) in good faith
that marketing factors require a limitation of the number of
shares to be underwritten, then the managing underwriter(s) may
exclude shares (including Registrable Securities) from the
registration and the underwriting, and the number of shares that
may be included in the registration and the underwriting shall be
allocated, FIRST, to DR; and SECOND, to each of the Holders
requesting inclusion of their Registrable Securities in such
registration statement on a pro rata basis based on the total
number of Registrable Securities then held by each such Holder;
PROVIDED, HOWEVER, that the right of the underwriters to exclude
shares (including Registrable Securities) from the registration
and underwriting as described above shall be restricted so that
all shares that are not Registrable Securities and are held or
controlled by individuals who are employees or directors of DR
(or any subsidiary of DR) shall first be excluded from such
registration and underwriting before any Registrable Securities
are so excluded. If any Holder disapproves of the terms of any
such underwriting, such Holder may elect to withdraw therefrom by
written notice to DR and the underwriter, provided that such
notice shall not be effective until ten (10) business days after
delivered to DR except that, if the registration statement has
been declared effective prior to the 10th day, such withdrawal
shall be of no effect. Any Registrable Securities excluded or
withdrawn from such underwriting shall be excluded and withdrawn
from the registration.
ii. EXPENSES. All expenses incurred in connection with a
registration pursuant to this Section 4.b. (excluding
underwriters' and brokers' discounts and commissions), including,
without limitation all federal and "blue sky" registration and
qualification fees, printers' and accounting fees, fees and
disbursements of counsel for DR and reasonable fees and
disbursements of one counsel for the selling Holders shall be
borne by DR to the extent permitted under federal and applicable
state laws.
c. FORM S-3 REGISTRATION. In case DR shall receive from any Holder
a written request or requests that DR effect a registration on Form
S-3 and any related qualification or compliance with respect to all or
a part of the Registrable Securities owned by such Holder or Holders,
then DR will:
i. NOTICE. Promptly give written notice of the purposed
registration and the Holder's or Holders' request therefor, and any
related qualification or compliance, to all other Holders or
Registrable Securities; and
ii. REGISTRATION. Use its diligent best efforts to effect such
registration as soon as possible and all such qualifications and
compliances as may be so requested and as would permit or facilitate
the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any
other Holder or Holders joining in such request as are specified in a
written request given within twenty (20) days after receipt of such
written notice from DR; PROVIDED, HOWEVER, that DR shall not be
obligated to effect any such registration, qualification or compliance
pursuant to this Section 4.c.:
(1) if Form S-3 is not available for such offering by the
Holders;
(2) if the Holders, together with the holders of any other
securities of DR entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities
(if any) at an aggregate price to the public of less than
$500,000;
(3) if DR shall furnish to the Holders a certificate signed
by the President or Chief Executive Officer of DR stating that in
the good faith judgment of the Board of Directors of DR, it would
be seriously detrimental to DR and its shareholders for such Form
S-3 Registration to be effected at such time, in which event DR
shall have the right to defer the filing of the Form S- 3
registration statement no more than once during any twelve-month
period for a period of not more than one hundred twenty (120)
days after receipt of the request of the Holder or Holders under
this Section 4.c.
(4) if DR has within the twelve (12) month period preceding
the date of such request, already effected one (1) registration
on Form S-3 for the Holders pursuant to this Section 4.c.;
(5) in any particular jurisdiction in which DR would be
required to qualify to do business or to execute a general
consent to service of process in effecting such registration,
qualification or compliance; or
(6) for a period of up to ninety (90) days if the Chief
Executive Officer of DR certifies in writing to the Holders that
DR currently contemplates a public offering of its securities
within the next ninety (90) days.
iii. EXPENSES. Subject to the foregoing, DR shall file a
Form S-3 registration statement covering the Registrable
Securities and other securities so requested to be registered
pursuant to this Section 4.c. as soon as practicable after
receipt of the request or requests of the Holders for such
registration. DR shall pay all expenses incurred in connection
with each registration requested pursuant to this Section 4.c.
(excluding underwriters' or brokers' discounts and commissions),
including without limitation all filing, registration and
qualification, printers' and accounting fees and the reasonable
fees and disbursements of one counsel for the selling Holder or
Holders and counsel for DR.
d. OBLIGATIONS OF DR. Whenever required to effect the registration
of any Registrable Securities under this Agreement, DR shall, as
expeditiously as reasonably possible:
i. Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best
efforts to cause such registration statement to become effective,
and, upon the request of the Holders of a majority of the
Registrable Securities registered thereunder, keep such
registration statement effective for up to ninety (90) days or
until all such Registrable Securities have been distributed,
whichever is shorter.
ii. Within such ninety (90) day period, prepare and file
with the SEC 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 all securities covered by such registration Statement.
iii. Furnish to the Holders such number of copies of a
prospects, including a preliminary prospectus, in conformity with
the requirements of the Securities Act, and such other documents
as they may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by them that are
included in such registration.
iv. Use its best efforts to register and qualify the
Securities covered by such registration statement under such
other securities or Blue Sky laws of such jurisdictions as shall
be reasonably requested by the Holders, provided that DR shall
not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service
of process in any such states or jurisdictions.
v. In the event of are underwritten public offering, enter
into and perform its obligations under an underwriting agreement,
in usual and customary form, with the managing underwriter(s) of
such offering. Each Holder participating in such underwriting
shall also enter into and perform its obligations under such an
agreement.
vi. Notify each Holder of Registrable 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 material fact required to be stated therein or
necessary to make the statements therein not misleading in the
light of the circumstances then existing.
vii. Furnish, at the request of any Holder requesting
registration of Registrable Securities, on the date that such
Registrable Securities are delivered to underwriters for sale, if
such securities are being sold though underwriters, or, if such
securities are not being sold through underwriters, on the date
that the registration statement with respect to such securities
becomes effective, (i) an opinion, dated as of such date, of the
counsel representing DR for the purposes of such registration, in
form and substance as is customarily given to underwriters in an
underwritten public offering and reasonably satisfactory to a
majority in interest of the Holders requesting registration,
addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities and (ii) a
"comfort" letter dated as of such date, from the independent
certified public accountants of DR, in form and substance as is
customarily given by independent certified public accountants to
underwriters in an underwritten public offering and reasonably
satisfactory to a majority in interest of the Holders requesting
registration addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities.
e. FURNISH INFORMATION. It shall be a condition precedent to the
obligations of DR to take any action pursuant to Sections 4.b., 4.c or
4.d that the selling Holders shall furnish to DR such information
regarding themselves, the Registrable Securities held by them and the
intended method of disposition of such securities as shall be required
or reasonably requested to timely effect the registration of their
Registrable Securities.
f. INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Sections 4.b., 4.c. or
4.d.:
i. By DR. To the extent permitted by law, DR will
indemnify and hold harmless each Holder, the partners, officers
and directors of each Holder, any underwriter
(as defined in the Securities Act) for such Holder and each
person, if any, who controls such Holder or underwriter within
the meaning of the Securities Act or the Securities Exchange Act
of 1934, as amended (the "1934 ACT"), against any losses, claims,
damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or
violations (collectively a "VIOLATION"):
(1) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein
or any amendments or supplements thereto;
(2) the 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
(3) any violation or alleged violation by DR of the
Securities Act, the 1934 Act, any federal or state securities law
or any rule or regulation promulgated under the Securities Act,
the 1934 Act or any federal or state securities law in connection
with the offering covered by such registration statement;
and DR will reimburse each such Holder, partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them, as incurred, in connection with investigating or defending any
such loss, claim, damage, liability or action; PROVIDED, HOWEVER, that the
indemnity agreement contained in this subsection 4.f.(i) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of DR (which consent shall
not be unreasonably withheld), nor shall DR be liable in any case for any such
loss, claim, damage, liability or action to the extent that it arises out of or
is based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by such Holder, partner, officer, director, underwriter or
controlling person of such Holder.
ii. BY SELLING HOLDERS. To the extent permitted by law,
each selling Holder will indemnify and hold harmless DR, each of
its directors, each of its officers who have signed the
registration statement, each person, if any, who controls DR
within the meaning of the Securities Act, any underwriter and any
other Holder selling securities under such registration statement
or any of such other Holder's partners, directors or officers or
any person who controls such Holder within the meaning of the
Securities Act or the 1934 Act, against any losses, claims,
damages or liabilities (joint or several) to which DR or any such
director, officer, controlling person, underwriter or other such
Holder, partner or director, officer or controlling person of
such other Holder may become subject under the Securities Act,
the 1934 Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation in each
case to the extent (and only to the extent) that such Violation
occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in
connection with such registration; and each such Holder will
reimburse any legal or other expenses reasonably incurred by DR
or any such director, officer, controlling person, underwriter or
other Holder, partner, officer, director or controlling person of
such other Holder in connection with the investigating or
defending any such loss, claim, damage, liability or action;
PROVIDED, HOWEVER, that the
indemnity agreement contained in this subsection 4.f.(ii) shall
not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be
unreasonably withheld; and provided further, that the total
amounts payable in indemnity by a Holder under this Section
4.f.(ii) in respect of any Violation shall not exceed the net
proceeds received by such Holder in the registered offering out
of which such Violation arises.
iii. NOTICE. Promptly after receipt by an indemnified party
under this Section 4.f. of notice of the commencement of any
action (including any governmental action), such indemnified
party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 4.f., deliver to the
indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate
in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the
parties; PROVIDED, HOWEVER, that an indemnified party shall have
the right to retain its own counsel, with the fees and expenses
to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying
party would be inappropriate due to actual or potential conflict
of interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action, if
prejudicial to its ability to defend such action, shall relieve
such indemnifying party of any liability to the indemnified party
under this Section 4.f., but the omission so to deliver written
notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise
than under this Section 4.f.
iv. DEFECT ELIMINATED IN FINAL PROSPECTUS. The foregoing
indemnity agreements of DR and Holders are subject to the
condition that, insofar as they relate to any Violation made in a
preliminary prospectus but eliminated or remedied in the amended
prospectus on file with the SEC at the time the registration
statement in question becomes effective or the amended prospectus
filed with the SEC pursuant to SEC Rule 424(b) (the "FINAL
PROSPECTUS"), such indemnity agreement shall not inure to the
benefit of any person if a copy of the Final Prospectus was
furnished to the indemnified party and was not furnished to the
person asserting the loss, liability, claim or damage at or prior
to the time such action is required by the Securities Act.
v. CONTRIBUTION. In order to provide for just and
equitable contribution to joint liability under the Securities
Act in any case in which either (i) any Holder exercising rights
under this Agreement, or any controlling person of any such
Holder, makes a claim for indemnification pursuant to this
Section 4.f. but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right
of appeal) that such indemnification may not be enforced in such
case notwithstanding the fact that this Section 4.f. provides for
indemnification in such case, or (ii) contribution under the
Securities Act may be required on the part of any such selling
Holder or any such controlling person in circumstances for which
indemnification is provided under this Section 4.f.; then, and in
each such case, DR and such Holder will contribute to the
aggregate losses, claims, damages or liabilities to which they
may be subject (after contribution from others) in such
proportion so that such Holder is responsible for the
portion represented by the percentage that the public offering
price of its Registrable Securities offered by and sold under the
registration statement bears to the public offering price of all
securities offered by and sold under such registration statement
and DR and other selling Holders are responsible for the
remaining portion; PROVIDED, HOWEVER, that, in any such case, (A)
no such Holder will be required to contribute any amount in
excess of the public offering price of all such Registrable
Securities offered and sold by such Holder pursuant to such
registration statement; and (B) no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) will be entitled to contribution from any
person or entity who was not guilty of such fraudulent
misrepresentation.
vi. SURVIVAL. The obligations of DR and Holders under this
Section 4.f. shall survive the completion of any offering of
Registrable Securities in a registration statement and otherwise.
g. "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees that it
or he shall not, to the extent requested by DR or an underwriter of
securities of DR, sell or otherwise transfer or dispose of any
Registrable Securities or other shares of stock of DR then owned by
such Holder (other than to donees who agree to be similarly bound) for
up to one hundred eighty (180) days following the effective date of a
registration statement of DR filed under the Securities Act; PROVIDED,
HOWEVER, that:
i. such agreement shall be applicable only to the first
such registration statement of DR which covers securities to be
sold on its behalf to the public in an underwritten offering but
not to Registrable Securities sold pursuant to such registration
statement; and
ii. all executive officers and directors and employees of
DR then holding Common Stock of DR enter into similar agreements.
In order to enforce the foregoing covenant, DR shall have the right to place
restrictive legends on the certificates representing the shares subject to this
Section and to impose stop transfer instructions with respect to the Registrable
Securities and such other shares of stock of each Holder and Xxxxxxx (and the
shares or securities of every other person subject to the foregoing restriction)
until the end of such period.
h. RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the Commission which may at any
time permit the sale of the Registrable Securities to the public
without registration, after such time as a public market exists for
the Common Stock of DR, DR agrees to:
i. make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at
all times after the effective date of the first registration under the
Securities Act filed by DR for an offering of its securities to the
general public;
ii. use its best efforts to file with the Commission in a timely
manner all reports and other documents required of DR under the
Securities Act and the 1934 Act (at any time after it has become
subject to such reporting requirements); and
iii. so long as a Holder owns any Registrable Securities, to
furnish to the Holder forthwith upon request a written statement by DR
as to its compliance with the reporting requirements of said Rule 144
(at any time after 90 days after the effective date of the first
registration statement filed by DR for an offering of its securities
to the general public), and of the Securities Act and the 1934 Act (at
any time after it has become subject to the reporting requirements of
the 1934 Act), a copy of the most recent annual or quarterly report of
DR, and such other reports and documents of DR as a Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing a Holder to sell any such securities without
registration (at any time after DR has become subject to the reporting
requirements of the 1934 Act).
DR shall have no further obligations pursuant to Section 4.h. when, in
the opinion of counsel to DR, all shares held by all Holders may be sold by
such Holders under Rule 144(k) under the Securities Act.
i. TERMINATION OF DR'S OBLIGATIONS. DR shall have no obligations
pursuant to Sections 4.b. and 4.c. with respect to: (i) any request or
requests for registration made by any Holder on a date more than five
(5) years after the closing date of DR's initial public offering; or
(ii) any Registrable Securities proposed to be sold by a Holder in a
registration pursuant to Section 4.b. or 4.c. if, in the opinion of
counsel to DR, all such Registrable Securities proposed to be sold by
a Holder may be sold in a three-month period without registration
under the Securities Act pursuant to Rule 144 under the Securities
Act.
j. LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after
the date of this Agreement, DR shall not, without the prior written
consent of the Holders, enter into any agreement with any holder or
prospective holder of any securities of DR which would give such
prospective shareholder registration rights superior to those granted
to the Holders hereunder or which would allow such holder or
prospective holder to include such securities in any registration
filed under Section 4.2 hereof, unless under the terms of such
agreement, such holder or prospective holder may include such
securities in any such registration only to the extent that the
inclusion of its securities will not reduce the amount of the
Registrable Securities of the Holders which is included; PROVIDED,
HOWEVER, that DR may, without consent of the Holders, grant senior
registration rights to the managing underwriter of DR's initial public
offering in connection with the issuance of a warrant to such
underwriter provided that such registration rights are in compliance
with the requirements of the National Association of Securities
Dealers.
5. TECHNOLOGY LICENSING AGREEMENT. The technology licensing agreement dated
August 30, 1994 previously executed between DR and Fujitsu shall remain in
full force and effect and all parties agree to be subject to the rights and
obligations flowing from the technology license agreement as amended below
("TECHNOLOGY LICENSE AGREEMENT"). The Technology License Agreement is
hereby amended as follows:
a. Fujitsu specifically acknowledges that the provisions of section
3.1 have been fully satisfied and no obligations remain.
b. The following sentence is added to Section 1.2: "The term "DR
Technology" is intended to include only the technology referred to by
the parties as the "Dolphin" technology and described in the patent
applications listed in Exhibit A.
c. Fujitsu and DR agree that the Technology is not employed in the
current business conducted by DR relating to digital distribution of
software via the Internet.
d. Section 3.3(b) is deleted.
e. Section 8 is deleted.
The parties agree that the Technology License Agreement shall survive any
termination or expiration of this Agreement.
6. NON-COMPETITION AGREEMENT. Promptly following the execution of this
Agreement, DR and Xxxx Xxxxxxx will execute and deliver a non-competition
agreement in the form approved by DR's Board.
7. TERM AND TERMINATION. This Agreement will continue from its effective date
until terminated as follows:
a. By a party, effective immediately, if Fujitsu or DR should become
the subject of any voluntary or involuntary bankruptcy, receivership
or other insolvency proceedings or make an assignment or other
arrangement for the benefit of its creditors, or if Fujitsu or DR
should be nationalized or have any of its material assets
expropriated; or
b. The right of Fujitsu to have its Fujitsu Nominee elected to the
Board of DR granted under Section 3 hereof shall terminate as provided
in Section 3 or immediately upon the closing of an initial public
offering of the Common Stock of DR.
c. The registration rights granted under Section 4 hereof shall
terminate as provided in Section 4 or after a period of five (5) years
following the closing of an initial public offering of the Common
Stock of DR.
8. GOVERNING LAW. The validity, interpretation and performance of this
Agreement shall be governed by the laws of the State of Minnesota, without
regard to the choice of law principles thereunder.
9. DISPUTE RESOLUTION. Any controversy arising out of or relating to this
Agreement, any modification or extensions hereof, or any order, sale or
performance hereunder, including any claim for damages, rescission, or
both, shall be settled by binding arbitration with one (1) arbitrator in
Hennepin County, Minnesota, in accordance with the Commercial Rules then
pertaining of the American Arbitration Association. Judgment on the award
may be entered in any Court of competent jurisdiction. The parties consent
that any process or notice of motion or other application to either of said
courts, and any paper in connection with arbitration, may be served by
certified mail, return receipt requested, by personal service or in such
other manner as may be permissible under the rules of the applicable court
or arbitration tribunal, provided a reasonable time for appearance is
allowed. The parties further agree that arbitration proceedings must be
instituted within eighteen (18) months after the claimed breach occurred,
and that the failure to institute arbitration proceedings within such
period shall constitute an absolute bar to the institution of any
proceedings and a waiver of all such claims. The prevailing party in any
arbitration or other legal proceedings shall be entitled, in addition to
any other rights or remedies it may have, to reimbursement for its expenses
incurred thereby and in any subsequent enforcement of a judgment including
court and arbitration costs, reasonable attorneys' fees, and witness fees
including those of expert witnesses.
10. SPECIFIC PERFORMANCE. Each party's obligation under this Agreement is
unique. If any party should default in its obligations under this
Agreement, the parties each acknowledge that it would be extremely
impracticable to measure the resulting damages. Accordingly, the
nondefaulting party, in addition to any other available rights or remedies,
may xxx in equity for specific performance, and the parties each expressly
waive the defense that a remedy in damages will be adequate. In particular,
the parties agree that Fujitsu shall be entitled to specific performance
with respect to its rights under Section 3 (Election of Fujitsu Nominee to
DR Board) and Section 4 (Registration Rights).
11. ASSIGNMENT.
a. Fujitsu may freely assign its rights and obligations under this
Agreement and all shares of DR Common Stock Fujitsu owns to
wholly-owned affiliates of Fujitsu; PROVIDED, HOWEVER, that such
assignment and transfer shall only be permitted to the extent that
applicable United States laws, including, without limitation,
applicable state and federal securities laws, permit.
b. DR may freely assign its rights and obligations under this
Agreement in connection with a merger or acquisition of DR or
substantially all of its assets. DR may otherwise assign its rights
and obligations hereunder only with the prior written consent of
Fujitsu and the Other Parties, but only to the extent that such Other
Parties own or are transferees, beneficially or of record, of shares
of Common Stock of DR currently owned by Xxxx Xxxxxxx.
c. Xxxx Xxxxxxx may transfer all shares of DR Common Stock he owns,
along with any and all rights related thereto pursuant to this
Agreement or otherwise, to MacUSA, Inc., Tech Squared Inc. or any of
their wholly-owned subsidiaries; PROVIDED, HOWEVER, that such
assignment and transfer shall only be permitted: (i) to the extent
that applicable United States laws, including, without limitation,
applicable state and federal securities laws, permit and (ii) such
transferee is bound in writing by Xxxxxxx'x obligations as a
shareholder for the election of the Fujitsu Nominee under Section 3
hereof.
d. Any assignment or transfer pursuant to this Section 8 shall only
be valid if the assignor/transferor party provides the other parties
to this Agreement with prior written notice of such assignment or
transfer.
12. WAIVER.
a. The failure of any party to exercise promptly any right granted
hereunder or to require strict performance of any obligation of such
other parties hereunder shall not be deemed to be a waiver of such
right or the right to demand subsequent performance of any and all
such obligations by the non-performing party.
b. Notwithstanding the foregoing, the parties hereby expressly waive
any failure by DR to obtain any consent required under the Prior
Agreements or any other breach thereof.
13. SEVERABILITY. All provisions of this Agreement shall be deemed severable.
The enforceability, illegality or invalidity of any provision herein or
portion thereof shall not affect the enforceability, legality or validity
of any other, further or additional provision hereof, all of which shall
remain valid, binding and enforceable in accordance with their terms.
Should any provision, term or condition of this Agreement be held
unenforceable, illegal or invalid as being too broad with respect to
duration, scope or subject matter, such provision, term or condition shall
be deemed and construed to be reduced to the maximum duration, scope or
subject matter allowable under applicable law.
14. NOTICE. All notices under this Agreement shall be in writing and shall be
given by Federal Express, DHL, other internationally recognized courier, or
facsimile addressed to the respective parties at their addresses set forth
on the signature page below, or to such other address of which a party may
advise the others in writing. Notices will be deemed given when sent.
15. ENTIRE AGREEMENT. Except as explicitly referenced herein with respect to
the Technology License Agreement and the Distribution Agreement between DR
and Fujitsu Software Corporation, this Agreement embodies the whole
agreement of the parties with respect to the subject matter hereof. There
are no promises, terms, conditions or obligations other than those
contained herein. No modification of this Agreement or any of its terms
shall be effective unless in writing and executed by the duly authorized
representatives of the parties.
16. COUNTERPARTS. This Agreement may be executed in any number of counterparts
each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the
day and year first above written.
DIGITAL RIVER, INC. Fujitsu LIMITED
(a Delaware corporation)
By /s/ Xxxx X. Xxxxxxx By /s/ Xxxxxx Xxxxxxxx
Its President Its Associate General Mgr
0000 Xxxx 00xx Xxxxxx
Xxxxx, XX 00000 -------------------------
-------------------------
DIGITAL RIVER, INC. MACUSA, INC.
(a Minnesota corporation)
By /s/ Xxxx Xxxxx By /s/ Xxxx X. Xxxxxxx
Its Secretary Its President
0000 Xxxx 00xx Xxxxxx 0000 Xxxx 00xx Xxxxxx
Xxxxx, XX 00000 Xxxxx, XX 00000
XXXX XXXXXXX
/s/ Xxxx Xxxxxxx
0000 Xxxxxxxxx Xxxx
Xxxxxxxx, XX
