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EXHIBIT 10.10
SERIES A PREFERRED STOCK
PURCHASE AGREEMENT
This SERIES A PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement"),
dated as of May 22, 1995, is by and between FIRST VIRTUAL HOLDINGS
INCORPORATED, a Wyoming corporation (the "Company"), and the purchasers listed
on the Schedule of Purchasers attached hereto as Exhibit A (the "Schedule of
Purchasers"). The persons, or entities listed thereon are hereinafter referred
to collectively as the "Purchasers" and individually as a "Purchaser."
RECITAL
A. The Company desires to issue and sell and the Purchasers
desire to purchase from the Company shares of the Company's Series A Preferred
Stock (the "Series A Preferred") upon the terms and conditions set forth
herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
and conditions herein contained, the parties hereto agree as follows:
SECTION 1
Authorization and Sale of the Securities
1.1 Authorization. The Company has, or before the Closing (as
hereinafter defined) will have, authorized the issuance and sale of 22,060
shares of its Series A Preferred Stock (the "Shares") , having the rights,
preferences and privileges as set forth in the Company's Restated Articles of
Incorporation (the "Restated Articles") in the form attached hereto as Exhibit
B.
1.2 Sale and Issuance. Subject to the terms and conditions hereof
and in reliance upon the representations, warranties and agreements contained
herein, the Company will issue and sell to each Purchaser, severally and not
jointly, and each Purchaser will purchase from the Company, severally and not
jointly, at the Closing, the number of Shares set forth opposite the
Purchaser's name on the Schedule of Purchasers, at a purchase price of $44.00
per Share. The Company's agreement with each Purchaser is a separate
agreement, and the sale of the Shares to each Purchaser is a separate sale.
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SECTION 2
Closing Date; Delivery
2.1 Closing Date. The closing of the purchase and sale of the
Shares hereunder (the "Closing") shall be held at 3:00 p.m. on May 22, 1995
(the "Closing Date") at the offices of Wilson, Sonsini, Xxxxxxxx & Xxxxxx, 000
Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx 00000, or at such other time and place as
shall be mutually agreed upon by the Company and the Purchaser.
2.2 Delivery. At the Closing, the Company shall deliver to each
Purchaser a certificate, in such denomination and registered in Purchaser's
name as set forth on the Schedule of Purchasers, representing the number of
Shares which Purchaser is purchasing from the Company against delivery to the
Company of a bank or cashier's check or wire transfer payable to the order of
the Company in the amount of the purchase price of the Shares to be purchased
by such Purchaser.
SECTION 3
Representations and Warranties of the Company
The term "to the knowledge of the Company" shall mean with respect to
any statement herein, to the actual knowledge, information and belief of the
Company after reasonable inquiries by senior management of the Company of the
officers and professional advisors of the Company. The Company hereby
represents and warrants to each Purchaser as follows, except as set forth on
Exhibit C attached hereto:
3.1 Organization and Standing: Articles and Bylaws. The Company
is a corporation duly organized and validly existing under the laws of the
state of Wyoming and is in good standing under such laws. The Company has the
requisite corporate power to own the properties owned by it and to conduct
business as now being conducted by it and as presently contemplated to be
conducted by it. The Company is duly licensed or qualified to do business as
a foreign corporation, and is in good standing, in each state wherein the
properties owned or leased or the business transacted by the Company makes such
qualification to do business as a foreign corporation necessary and where the
failure to qualify would have a material and adverse effect on the condition of
the Company, financial or otherwise, and no other jurisdiction has demanded,
requested or otherwise indicated that (or inquired whether) the Company is
required to so qualify.
3.2 Corporate Power. The Company has all requisite corporate
power to enter into this Agreement and will have at the Closing Date all
requisite corporate power to sell and issue the Shares and
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to carry out and perform its obligations under the terms of this Agreement.
3.3 Subsidiaries. The Company has no subsidiaries and does not
own of record or beneficially any capital stock or equity interest or
investment in any corporation, association or business entity.
3.4 Capitalization. Immediately prior to the Closing, the
Company's authorized capital stock will consist of an unlimited number of
shares of Common Stock of which 168,750 shares will be issued and outstanding
and 22,060 shares of Preferred Stock (the "Preferred Stock"), all of which have
been designated Series A Preferred Stock, none of which are outstanding. The
Series A Preferred Stock will have the rights, preferences, and privileges set
forth in the Restated Articles. No other series of Preferred Stock has been
designated. The Company has reserved 22,060 shares of Series A Preferred Stock
for issuance hereunder and 22,060 shares of Common Stock for issuance upon
conversion of the Series A Preferred Stock. In addition, immediately prior to
the Closing, the Company will have reserved 18,750 shares of Common Stock for
issuance pursuant to the Company's 1994 Incentive and Non-Statutory Stock
Option Plan, of which options to purchase 18,750 shares are outstanding and of
which 31,250 shares remain available for issuance. The number of shares of
Common Stock reserved for issuance upon conversion of Series A Preferred Stock
shall be adjusted from time to time to prevent dilution to the holders of the
Series A Preferred Stock as provided in the Restated Articles. All the
aforesaid issued and outstanding shares have been duly authorized and validly
issued, are fully paid and nonassessable and have been offered, issued, sold
and delivered by the Company in compliance with applicable Federal and state
securities laws. Except as set forth above or in Exhibit C, at the time of the
Closing there will be no outstanding preemptive, conversion or other rights,
options, warrants or agreements granted or issued by or binding upon the
Company for the purchase or acquisition of any shares of its capital stock.
The Company holds no shares of its capital stock in its treasury.
3.5 Authorization. All corporate action on the part of the
Company necessary for the authorization, execution, delivery and performance by
the Company of this Agreement and the consummation of the transactions
contemplated herein and for the authorization, issuance and delivery of the
Shares (and the Common Stock issuable upon conversion of the Shares) has been
taken or will be taken prior to the Closing. This Agreement constitutes a
legal, valid and binding obligation of the Company, enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization
and moratorium laws and other laws of general application affecting enforcement
of creditors' rights generally and to general equitable principles. The
execution, delivery and performance by the Company of this Agreement and
compliance
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therewith and the issuance and sale of the Shares will not result in any
violation of and will not conflict with, or result in a breach of any of the
terms of, or constitute a default under, the Company's Articles of
Incorporation or Bylaws or any mortgage, indenture, agreement, instrument,
judgment, decree, order, rule or regulation or other restriction to which the
Company is a party or by which it is bound or any provision of state or Federal
law to which the Company is subject, or result in the creation of any mortgage,
pledge, lien, encumbrance or charge upon any of the properties or assets of the
Company pursuant to any such term or result in the suspension, revocation,
impairment, forfeiture or non-renewal of any permit, license, authorization or
approval applicable to the company's operations or any of its assets or
properties. The Shares, when issued in compliance with the provisions of this
Agreement, will be validly issued, fully paid and nonassessable, and will be
free of any liens or encumbrances.
3.6 Outstanding Debt. Except as set forth on Exhibit C or in the
Financial Statements (as defined in Section 3.19), the Company has no
outstanding indebtedness for borrowed money and is not a guarantor or otherwise
contingently liable for any indebtedness for borrowed money (including, without
limitation, liability by way of agreement, contingent or otherwise, to
purchase, provide funds for payment, supply funds or otherwise invest in any
debtor or otherwise to insure any creditor against loss). There exists no
default under the provisions of any instrument evidencing any such indebtedness
or otherwise or of any agreement relating thereto.
3.7 Insurance. A correct and complete schedule of the policies of
insurance maintained by the Company is set forth in Exhibit C.
3.8 Shareholders, Directors and Officers; Indebtedness. Except as
set forth on Exhibit C, the Company is not indebted, directly or indirectly, to
any of its officers, directors or shareholders or any of their respective
relatives or affiliates. Except as set forth in Exhibit C, no officer,
director or shareholder of the Company, or any of their relatives or
affiliates, is indebted to the Company. To the knowledge of the Company's,
except as set forth on Exhibit C, none of the officers or directors or
significant employees or advisors of the Company, or their respective spouses,
or relatives, owns directly or indirectly, individually or collectively, a
material interest in any entity which is a competitor, customer or supplier of
(or has any existing contractual relationship with) the Company.
3.9 Litigation and Bankruptcy Proceedings.
(a) Except as set forth on Exhibit C, there is neither
pending nor, to the knowledge of the Company, threatened any action, suit,
proceeding or claim, or any basis therefor, whether or not purportedly on
behalf of the Company, to which the Company
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is or may be named as a party or its property is or may be subject, or to the
knowledge of the Company, to which any officer, key employee or principal
shareholder of the Company is subject and in which an unfavorable outcome,
ruling or finding in any such matter or for all such matters taken as a whole
might have a material adverse effect on the condition, financial or otherwise,
or operations of the Company; and the Company has no knowledge of any
unasserted claim, the assertion of which is likely and which, if asserted, will
seek damages, an injunction or other legal, equitable, monetary or nonmonetary
relief, which claim individually or collectively with other such unasserted
claims if granted would have a material adverse effect on the condition,
financial or otherwise, prospects or operations of the Company.
(b) The Company has not admitted in writing its inability
to pay its debts generally as they become due, filed or consented to the filing
against it of a petition in bankruptcy or a petition to take advantage of any
insolvency act, made an assignment for the benefit of creditors, consented to
the appointment of a receiver for itself or for the whole or any substantial
part of its property, or had a petition in bankruptcy filed against it, been
adjudicated a bankrupt or filed a petition or answer seeking reorganization or
arrangement under the Federal bankruptcy laws or any other similar law or
statute of the United States of America or any other jurisdiction.
3.10 Consents. No consent, approval, qualification, order or
authorization of, or filing with, any governmental authority, is required in
connection with the Company's valid execution, delivery or performance of this
Agreement or the offer, sale or issuance of the Shares by the Company, or the
consummation of any other transaction contemplated on the part of the Company
hereby except for the filing of the Restated Articles with the Wyoming
Secretary of State which filing will be completed prior to the Closing and
filing of notices required by applicable Federal and state securities laws.
3.11 Leases. Set forth on Exhibit C is a correct and complete list
(including the amount of rents called for and a description of the leased
property) of all material leases (involving more than $5,000 either
individually or in the aggregate if such leases are of a similar nature or with
the same lessor) under which the company is a lessee. The Company enjoys
peaceful and undisturbed possession under all such leases, all of such leases
are valid and subsisting and the Company has not received any notice of default
thereunder in any material respect.
3.12 Permits, Franchises, Licenses, Trademarks, Patents, and Other
Rights. To the knowledge of the Company, the Company has all governmental and
other permits, licenses and other similar authority necessary for the conduct
of its business as now being conducted by it, the lack of which could
materially and adversely
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affect the operations or condition, financial or otherwise, of the Company, and
it is not in default in any material respect under any of such permits,
licenses or other similar authority.
3.13 Issuance Taxes. All taxes, if any, imposed by law in
connection with the issuance, sale and delivery of the Shares shall have been
paid, and all laws imposing such taxes shall have been fully complied with,
prior to the Closing Date.
3.14 Offering. Subject in part to the truth and accuracy of the
Purchaser's representations set forth in Section 4 hereof, the offer, sale and
issuance of the Shares as contemplated by this Agreement are exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and from the registration or qualification requirements of
the laws of any applicable state or other jurisdiction, and neither the Company
nor anyone acting on its behalf will take any action hereafter that would cause
the loss of such exemption.
3.15 Employees. To the knowledge of the Company, no employee or
advisor of the company, is, or is now expected to be, in violation of any term
of any employment contract, patent disclosure agreement, proprietary
information and inventions agreement or any other contract or agreement or any
restrictive covenant or any other common law obligation to a former employer
relating to the right of any such employee to be employed by the Company
because of the nature of the business conducted or to be conducted by the
Company or to the use of trade secrets or proprietary information of others.
3.16 Employee Benefit Plan Obligations. The Company does not
maintain or have any obligations with respect to any employee benefit plan
(within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974 ("ERISA")). The Company is not, nor was it at any time, obligated
to contribute to any employee pension benefit plan which is or was a
multi-employer plan within the meaning of Section 3(37) of ERISA.
3.17 Registration Rights. Except as described in Exhibit C and as
provided for in this Agreement, the Company is not under any obligation to
register under the Securities Act any of its currently outstanding securities
or any of its securities which may hereafter be issued.
3.18 Disclosure. This Agreement and the Exhibits hereto as well as
any other document, certificate, schedule, financial, business or other written
statement described in Exhibit C or Exhibit D, do not contain any untrue
statement of a material fact and do not omit to state a material fact necessary
in order to make the statements contained herein or therein not misleading. To
the knowledge of the Company, there is no fact or circumstance which
materially, adversely affects the condition, financial or
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otherwise, assets, business or operations of the company which has not been
disclosed in writing to the Purchaser.
3.19 Financial Statements. The Company has delivered to the
Purchasers its audited financial statements as of December 31, 1994 and its
unaudited financial statements as at and for the periods ended January 31,
February 28 and March 31, 1995 (the "Financial Statements"). The Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated,
except that unaudited Financial Statements may not contain all footnotes
required by generally accepted accounting principles. The Financial Statements
fairly present the financial condition and operating results of the Company as
of the dates, and for the periods, indicated therein, subject in the case of
unaudited Financial Statements to normal year-end adjustments.
3.20 Material Agreements. Except as set forth on Exhibit C or in
the Financial Statements, the Company has no known liabilities or obligations,
contingent or otherwise, in excess of $5,000 individually or $10,000 in the
aggregate (other than liabilities or obligations incurred in the ordinary
course of business).
3.21 Intellectual Property. To the knowledge of the Company, the
Company has all franchises, permits, licenses, patents, patent rights,
trademarks, trademark rights, copyrights, trade secrets and other similar
authority necessary for the conduct of its business as now being conducted
(collectively, the "Claimed Rights"). The purchase and sale of Shares
contemplated by this Agreement will not cause a material violation, of the
terms or provisions of any of such Claimed Rights. Except as disclosed on
Exhibit C, there is neither pending, nor, to the Company's knowledge,
threatened, any claim or litigation against the Company contesting the validity
or right to use any of the Claimed Rights. Except as disclosed on Exhibit C,
to the knowledge of the Company, no person, corporation or other entity is
infringing the Claimed Rights. To the knowledge of the Company, the Company is
not currently using the confidential information or trade secrets of any person
without the consent of, or a grant of a license or other right to use such
information or trade secrets, from such other person or entity. Except as
disclosed on Exhibit C, there are no outstanding licenses or agreements of any
kind relating to the Claimed Rights, nor is the Company bound by or a party to
any licenses or agreements of any kind with respect to the Claimed Rights. The
Company has not received any written communications alleging that the Company
has violated or, by conducting its business as proposed, would violate any of
the Claimed Rights. To the knowledge of the Company, none of its employees is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of his or
her best efforts to promote the interests of the Company or that
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would conflict with the Company's business as proposed to be conducted.
Neither the execution and delivery of this Agreement, nor the conduct of the
Company's business by the employees of the Company, nor the conduct of the
Company's business as currently being conducted, will, to the knowledge of the
Company, conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any of such employees is now obligated. Except as
disclosed on Exhibit C, the Company does not believe it is or will be necessary
to utilize any inventions of any of its employees made prior to their
employment by the Company which are known not to be in the public domain.
3.22 Nondisclosure and Assignment Agreements. Except as disclosed
in Exhibit C, each employee, officer and consultant of the Company has executed
Nondisclosure and Assignment Agreement as provided to special counsel to the
Purchasers. Unless the board of directors determines otherwise, the Company
will ensure that each future employee, officer and consultant of the Company
signs such an agreement or a substantially similar agreement. To the knowledge
of the Company none of its employees, officers or consultants is in violation
of any such agreement, and the Company will use reasonable efforts to prevent
such violation.
SECTION 4
Representations and Warranties of the Purchasers
Each Purchaser, severally but not jointly, represents and warrants to
the Company as follows:
4.1 Organization and Standing. Unterberg Harris Interactive
Media, L.P. is a limited partnership duly organized and validly existing under
the laws of the state of and is in good standing under such laws. Sybase,
Inc., is a corporation duly organized and validly existing under the laws of
the state of and is in good standing under such laws.
4.2 Corporate Power. It has all requisite corporate power to
enter into this Agreement and will have at the Closing Date all requisite
corporate power to purchase the Shares and to carry out and perform its
obligations under the terms of this Agreement.
4.3 Authorization. All corporate action on its part necessary for
the authorization, execution, delivery and its performance of this Agreement
and the consummation of the transactions contemplated herein and for the
purchase of the Shares has been taken or will be taken prior to the Closing.
This agreement constitutes a legal, valid and binding obligation of each
Purchaser enforceable in accordance with its term, subject to applicable
bankruptcy, insolvency, reorganization and moratorium
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laws and other laws of general application affecting enforcement of creditors'
rights generally and to general equitable principles.
4.4 Experience; Awareness of Risk. It has such knowledge and
experience in financing and business matters that it is capable of evaluating
the merits and risks of this investment and of making an informed decision with
respect to the purchase of the Shares. It is aware that the Company's business
is in an industry and marketplace that is subject to rapid changes in its
technologies and structure which could adversely affect the Company's business
operations and understands that its investment in the Shares is subject to
substantial risks related to such conditions.
4.5 Investment. It is acquiring the Shares for investment for its
own account and not with the view to, or for resale in connection with, any
distribution thereof. It understands that at the time of the offer and sale
thereof to it the Shares have not been registered under the Securities Act by
reason of a specified exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature of
its investment intent as expressed herein.
4.6 Rule 144. It acknowledges that the Shares must be held
indefinitely unless they are subsequently registered under the Securities Act
or an exemption from such registration is available. It has been advised or is
aware of the provisions of Rule 144 promulgated under the Securities Act, which
permit limited resale of securities purchased in a private placement subject to
the satisfaction of certain conditions, and understands that such Rule may not
become available for resale of the Shares. It consents to affixing on
certificates representing the Shares the legend set forth in Section 8.3
hereof.
4.7 Access to Data; Reliance on Disclosure. It has had an
opportunity to discuss the Company's business, management and financial affairs
with its management and has had the opportunity to review the Company's books,
records and facilities. Except for the express representations and warranties
by the Company contained in this Agreement and its Exhibits, including the
items set forth in Exhibit D, it has not relied on any other representations or
statements by the Company or any representatives of the Company in entering
into the transactions contemplated by this Agreement.
4.8 Financial Condition. Its financial condition is such that it
is able to bear the economic risks of investment in the Shares including risk
of loss of its entire investment in the Shares should they become worthless,
taking into consideration the limitations on resale of the Shares noted above.
All information which it has provided to the Company concerning its financial
condition and knowledge of financial and business matters is correct and
complete.
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4.9 Agreement to Short Fiscal Year. It acknowledges that the
Company has been an S corporation, having made an election pursuant to Section
1362(a) of the Internal Revenue Code of 1986, as amended. As a result of the
authorization and issuance of the Shares, the S corporation status will
terminate. In order to obtain the benefit of any losses accruing prior to the
Closing Date, it hereby agrees to the election by the Company of a new fiscal
year, with the current fiscal year of the Company terminating on the date of
the Closing, or immediately prior thereto. It agrees that it shall execute and
deliver any documents or instruments reasonably necessary to make such
election, and that it shall not oppose or contest such election.
SECTION 5
Conditions to Closing of the Purchasers
The obligation of the Purchasers to purchase the Shares to be
purchased at the Closing is subject to the fulfillment to such Purchasers'
satisfaction on or prior to the Closing Date of each of the following
conditions:
5.1 Representations and Warranties Correct. The representations
and warranties made by the Company in Section 3 hereof shall be true and
correct in all material respects when made, and shall be true and correct in
all material respects on the Closing Date with the same force and effect as if
they had been made on and as of the Closing Date.
5.2 Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Company on
or prior to the Closing Date shall have been performed or complied with in all
material respects.
5.3 Compliance Certificate. The Company shall have delivered to
the Purchasers a certificate of the President and Secretary of the Company,
dated the Closing Date, certifying to the fulfillment of the conditions
specified in Sections 5.1 and 5.2 of this Agreement.
5.4 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated hereby and all
documents and instruments incident to such transactions shall be satisfactory
in substance and form to the Purchasers and their counsel.
5.5 Securities Law Compliance. All such actions and steps
necessary to assure compliance with applicable Federal and state securities
laws, including all authorizations, approvals or permits, if any, of any
governmental authority or regulatory body in any states where the Shares are
being sold that are required in
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connection with the lawful issuance and sale of the Shares pursuant to this
Agreement, shall have been duly obtained and shall be effective on and as of
the Closing.
5.6 Board of Directors. All corporate proceedings shall have been
taken in form and substance satisfactory to Purchasers and their counsel such
that, on the Closing Date, the Company's Board of Directors shall consist of
Xxx Xxxxx, Xxxxxx Xxxxxx, Xxx Xxxxx and either Xxxx Xxxxxx or Xxx Xxxxxxx.
SECTION 6
Conditions to Closing of the Company
The Company's obligation to sell the Shares to be purchased at the
Closing is subject to the fulfillment to its satisfaction on or prior to the
Closing Date of each of the following conditions:
6.1 Representations and Warranties Correct. The representations
and warranties made by all Purchasers in Section 4 hereof shall be true and
correct in all material respects when made, and shall be true and correct in
all material respects on the Closing Date with the same force and effect as if
they had been made on and as of the Closing Date.
6.2 Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by all the
Purchasers on or prior to the Closing Date shall have been performed or complied
with in all material respects.
6.3 Restated Articles. The Restated Articles shall have been
filed with the Wyoming Secretary of State.
SECTION 7
Covenants of the Company
The Company hereby covenants and agrees as follows:
7.1 Basic Financial Information. The Company will furnish the
following reports to each Purchaser (or its representative) so long as such
Purchaser owns at least 11,030 shares (as adjusted for stock splits and like
events) of Series A Preferred Stock (or of the Common Stock issued upon
conversion of such Series A Preferred Stock) and to Xxx Xxxxx ("Xxxxx") so long
as Xxxxx owns 50,000 shares (as adjusted for stock splits and like events) of
Common Stock, Xxxxxx X. Xxxxxx ("Xxxxxx") so long as Xxxxxx X. Xxxxxx and
Xxxxxx X. Xxxxxx, trustees of the TNKRGK Family T/D 12/23/76, Xxxxx X. Xxxxxx,
trustee of the Xxxxx X. Xxxxxx T/D 1/27/87, Xxxxx X.
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Xxxxxx, trustee of the Xxxxx X. Xxxxxx T/D 1/27/87, Xxxxxx X. Xxxxxx, trustee
of the Xxxxxx X. Xxxxxx T/D 1/27/89 own collectively 50,000 shares (as adjusted
for stock splits and like events) of Common Stock, and Xxx X. Xxxxx ("Xxxxx")
so long as Xxxxx and June X. Xxxxx own collectively 50,000 shares (as adjusted
for stock splits and like events) of Common Stock:
(a) As soon as practicable after the end of each fiscal year of
the Company, and in any event within 120 days thereafter, the consolidated
balance sheet of the Company and its subsidiaries, if any, as at the end of
such fiscal year, and consolidated statements of income and cash flow of the
Company and its subsidiaries, if any, for such year, prepared in accordance
with generally accepted accounting principles consistently applied and setting
forth in each case in comparative form the figures for the previous fiscal
year, all in reasonable detail and certified by independent public accountants
of recognized national standing who are among the six largest accounting firms
in the United States selected by the Company and approved by its Board of
Directors.
(b) As soon as practicable after the end each month in each fiscal
year of the Company, and in any event within 45 days thereafter, a consolidated
balance sheet of the Company and its subsidiaries, if any, as of the end of
each such month, and consolidated statements of income and sources and
applications of funds of the Company and its subsidiaries for such period and
for the current fiscal year to date, prepared in accordance with generally
accepted accounting principles consistently applied, subject to changes
resulting from year-end audit adjustments, all in reasonable detail and
certified by the principal financial or accounting officer of the Company.
(c) Annually (but in any event at least 30 days prior to the
commencement of each fiscal year of the Company) the yearly budget and
operating plan of the Company, in such manner and form as approved by the Board
of Directors of the Company, which plan shall include projected statements of
income and cash flow for such fiscal year and a projected balance sheet as of
the end of such fiscal year. Any material changes in such plan shall be
delivered to the Purchaser as promptly as practicable after such changes have
been approved by the Board of Directors of the Company.
The provisions of this Section 7.1 shall not be in limitation of any
rights which the Purchaser or holder of Common Stock may have with respect to
the books and records of the Company and its subsidiaries, or to inspect their
properties or discuss their affairs, finances and accounts; and, in the event
that the Company is unable to comply with the provisions of Section 7.1, the
Board of Directors of the Company shall, by resolution duly adopted, authorize
and cause a firm of independent public accountants of nationally recognized
standing which is among the six largest accounting firms in the United States
to prepare promptly and
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furnish such information to the Purchaser, Xxxxx, Xxxxx and Xxxxxx at the
Company's expense.
From the date the Company becomes subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in lieu of the information required pursuant to this Section 7.1,
Company may furnish to Purchasers, Xxxxx, Xxxxx and Xxxxxx copies of its annual
reports on Form 10-K, its quarterly reports on Form 10-Q, any current reports
on Form 8-K or such other information or interim reports as it provides to all
shareholders.
7.2 Visitation. The Company will permit Unterberg Harris
Interactive Media, L.P. (or a representative of Unterberg Harris Interactive
Media, L.P.), so long as such Purchaser owns at least 11,030 shares (as
adjusted for stock splits and like events) of Series A Preferred Stock
(including shares of Common Stock issued upon conversion of such Series A
Preferred Stock), to attend all meetings of the Company's Board of Directors
and provide copies of written materials provided to all members of the Board of
Directors, provided, however, that the Board of Directors shall have the right
to keep confidential from the Purchaser for such period of the time as the
Board of Directors deems reasonable any information and copies of written
materials the Board of Directors in good faith considers to be trade secrets or
to contain confidential or classified information or which the Company is
required by law or agreement with a third party to keep confidential.
7.3 Transfers of Rights. The rights granted to the Purchasers,
Xxxxx, Xxxxx and Xxxxxx under Section 7.1 hereof may be transferred or
assigned by a Purchaser to any transferee or assignee of any Shares, by Xxxxx
to any transferee of Xxxxx Securities (as defined in Section 8.2) or by Xxxxx
or Xxxxxx to any transferee of Founder Securities (as defined in Section 8.2)
provided that the Company is given written notice at the time of or within a
reasonable time after said transfer or assignment, stating the name and address
of said transferee or assignee and identifying the securities with respect to
which such rights are being transferred or assigned, and provided further that
the transferee or assignee holds following the transfer at least 11,030 shares
(as adjusted for stock splits and like events) of Series A Preferred Stock
(including shares of Common Stock issuable upon conversion thereof), 25,000
shares (as adjusted for stock splits and like events) of Xxxxx Securities or
25,000 shares (as adjusted for stock splits and like events) of Founder
Securities.
7.4 Right of First Refusal.
(a) New Issuances. The Company hereby grants to the Purchasers,
Xxxxx and the holders of Founder Securities a right of first refusal (the
"Right of First Refusal") to purchase a pro rata
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share of all (or any part) of New Securities (as defined in this Section 7.4)
that the Company may from time to time propose to sell and issue. Such pro
rata share, for purposes of this Right of First Refusal, is the ratio of (X)
the sum of the number of shares of Common Stock then owned by the Purchaser and
the number of shares of Common Stock issuable upon the conversion of the Shares
then owned by the Purchaser, or the number of shares of Xxxxx Securities then
owned by Xxxxx, or the number of shares of Founder Securities then owned by the
holder of Founder Securities, as the case may be, to (Y) the sum of the total
number of shares of Common Stock then outstanding, the total number of shares
of Common Stock issuable upon the conversion of the total number of Shares then
outstanding and the total number of shares of Common Stock issuable upon the
conversion of any other class or series of securities having a right of first
refusal substantially similar to the Right of First Refusal contained in this
Section 7.4. This Right of First Refusal shall be subject to the following
provisions:
(b) "New Securities" shall mean any Common Stock and
preferred stock of the Company whether or not authorized on the date hereof,
and rights, options, or warrants to purchase Common Stock or preferred stock
and securities of any type whatsoever that are, or may become, convertible into
Common Stock or preferred stock; provided, however, that "New Securities" does
not include the following:
(i) shares of Common Stock issuable upon conversion
of the Shares;
(ii) shares offered to the public pursuant to the IPO
(as defined in Section 8.2 hereof);
(iii) shares of Common Stock, or options to
purchase shares of Common Stock, issued or granted to officers, directors,
employees and consultants of the Company pursuant to stock plans and option
plans or other arrangements approved by the Board of Directors;
(iv) shares of Common stock or preferred stock
issued in connection with any stock split, stock dividend, or recapitalization
by the Company; or
(v) securities issuable or deliverable in
connection with an acquisition by the Company of another corporation or a
merger or consolidation of the Company into or with another corporation.
(c) In the event that the Company proposes to undertake
an issuance of New Securities, it shall give each Purchaser, Xxxxx and each
holder of Founder Securities written notice of its intention, describing the
type of New Securities, the price, and the general terms upon which the Company
proposes to issue the
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same. Each Purchaser, Xxxxx and each holder of Founder Securities shall have
20 business days after receipt of such notice to agree to purchase its pro rata
share of such New Securities at the price and upon the terms specified in the
notice by giving written notice to the Company and stating therein the quantity
of New Securities to be purchased. If any Purchaser, Xxxxx or holder of
Founder Securities fails to agree to purchase its full pro rata share within
such 20 business day period, the Company will give any Purchaser, Xxxxx or
holder of Founder Securities who did so agree (the "Electing Purchasers")
notice of the number of shares which were not subscribed for. Such notice may
be by telephone if followed by written confirmation within two days. The
Electing Purchasers shall have ten business days from the date of such notice
to agree to purchase pro rata all of the New Securities not purchased by such
non-purchasing Purchasers, Xxxxx or holders of Founder Securities, as the case
may be.
(d) In the event that the Purchasers, Xxxxx and holders of Founder
Securities fail to exercise in full the right of first refusal within the 20
business plus ten business day period specified above, the Company shall have
120 days thereafter to sell (or enter into an agreement pursuant to which the
sale of New Securities covered thereby shall be closed, if at all, within 60
days from the date of said agreement) the New Securities respecting which the
rights of the Purchaser, Xxxxx and holders of Founder Securities were not
exercised at a price and upon terms no more favorable to the purchasers thereof
than specified in the Company's notice. In the event the Company has not sold
the New Securities within such 120 day period (or sold and issued New
Securities in accordance with the foregoing within 60 days from the date of
such agreement) the Company shall not thereafter issue or sell any New
Securities, without first offering such New Securities to the Purchaser, Xxxxx
and holders of Founder Securities in the manner provided above.
(e) The Right of First Refusal granted under this Section 7.4
shall expire immediately prior to the IPO.
(f) This Right of First Refusal is nonassignable except to any
transferee to whom registration rights may be transferred pursuant to 8.14 of
this Agreement.
(g) This Right of First Refusal shall terminate as to any
Purchaser (or any transferee or assignee of such Purchaser) at such time as
such Purchaser ceases to own at least 5,515 (as adjusted for stock splits and
like events) Shares or a number of shares of Common Stock issued upon
conversion of at least 5,515 (as adjusted for stock splits and like events)
Shares or any combination thereof equivalent to at least 5,515 (as adjusted for
stock splits and like events) Shares. This Right of First Refusal shall
terminate as to Xxxxx (or any transferee or assignee of Xxxxx) at such time as
Xxxxx ceases to own at least 25,000 shares
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(as adjusted for stock splits and like events) of Xxxxx Securities. This Right
of First Refusal shall terminate as to a holder of Founder Securities (or any
transferee or assignee of such holder of Founder Securities) at such time as
such holder of Founder Securities ceases to own at least 50% of the number of
shares (as adjusted for stock splits and like events) of Founder Securities
acquired on March 11, 1994.
7.5 Stock and Option Issuances. So long as the holders of Series
A Preferred are entitled to elect a member of the Company's Board of Directors
in accordance with the Restated Articles (the "Preferred Director"), the
Company will not, without the approval of the Preferred Director, grant options
or warrants to purchase capital stock of the Company and/or sell shares of the
Company's Common Stock to any person who is, on the Closing Date, an officer or
director of the Company or to any entity in which any such person director owns
10% or more of the voting securities of such entity. Purchasers agree to elect
either Xxxx Xxxxxx or Xxx Xxxxxxx will as the Preferred Director.
7.6 Sybase, Inc.'s Investment.
(a) Subject to the obligations of the Company set forth
in the Restated Articles, without the prior written consent of Sybase, Inc.
("Sybase") the Company will not redeem, repurchase, reacquire or otherwise take
any action which would result in Sybase holding at any time an amount of the
Company's capital stock equal to or in excess of 20% of the total number of
shares of the Company's capital stock then outstanding.
(b) Sybase and the Company acknowledge the Company's
intention to utilize the Sybase platform in connection with the business of the
Company. In the event that the Company elects, in its sole discretion, not to
utilize the Sybase platform in connection with the business of the Company,
Sybase shall have the right to require the Company, to the extent the Shares
have not theretofore been converted into shares of Common Stock, to redeem all
of Sybase's Shares at a price equal to $44.00 per share plus all declared but
unpaid dividends. Sybase shall exercise the foregoing right by written notice
to the Company within 60 days following delivery of written notice to Sybase of
the decision of the Board of Directors of the Company not to utilize the Sybase
platform in connection with the business of the Company. In the event
insufficient funds are legally available to redeem all Shares electing to be
redeemed pursuant to this Section 7.6(b), the Company may (i) delegate its duty
to purchase Shares pursuant to this Section 7.6(b) or (ii) redeem as many of
the Shares as it has funds legally available and the Company's obligation to
redeem Shares shall be carried over and Shares shall continue to be purchased
as and when funds become legally available until all Shares entitled to be
redeemed pursuant to this Section 7.6(b) have been redeemed.
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SECTION 8
Restrictions on Transferability
of Securities; Compliance with Securities Act
8.1 Restrictions on Transferability. The Shares and the Common
Stock issuable upon conversion of the Shares (collectively, the "Securities")
shall not be transferable, except upon the conditions specified in this Section
8, which conditions are intended to insure compliance with the provisions of
the Securities Act. The Purchaser will cause any proposed transferee of
Restricted Securities (as hereinafter defined) held by the Purchaser to agree
to take and hold those securities subject to the provisions and upon the
conditions specified in this Section 8.
8.2 Certain Definitions. As used in this Section 8, the following
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission
or any other Federal agency at the time administering the Securities Act.
"Holder" shall mean any holder of Registrable Securities or
Xxxxx Securities.
"Founders" shall mean Xxxxxx X. Xxxxxx and Xxx X. Xxxxx.
"Founder Securities" shall mean the shares of Common Stock
acquired by Xxx X. Xxxxx, June X. Xxxxx, Xxxxxx X. Xxxxxx and Xxxxxx X. Xxxxxx,
trustees of the TNKRGK Family T/D 12/23/76, Xxxxx X. Xxxxxx, trustee of the
Xxxxx X. Xxxxxx T/D 1/27/87, Xxxxx X. Xxxxxx, trustee of the Xxxxx X. Xxxxxx
T/D 1/27/87, Xxxxxx X. Xxxxxx, trustee of the Xxxxxx X. Xxxxxx T/D 1/27/89 on
March 11, 1994, and any additional shares of Common Stock issued with respect
to such shares upon any stock split, stock dividend, recapitalization or
similar event, provided that the Founder Securities shall cease to be Founder
Securities if (i) such securities are sold in the public market pursuant to the
Company's IPO or otherwise or (ii) as to any such securities at such time as
the holder thereof may sell all such securities in a three month period
pursuant to Rule 144 or Rule 144(k) of the Securities Act.
"Initiating Holders" shall mean Holders of fifty percent (50%)
or more of the then outstanding Registrable Securities.
"IPO" shall mean an underwritten public offering pursuant to
an effective registration statement under the Securities Act, covering the
initial offer and sale of Common Stock for the account of the Company to the
public at an aggregate offering price to the public of not less than
$10,000,000 and a per share price to the public of at least $88.00 per share,
if the effective date of the registration statement is not later than May 31,
1996, and
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thereafter, $132.00 per share (as adjusted for stock splits and like events
after the Closing Date).
"Restricted Securities" shall mean the securities of the
Company required to bear or bearing the legend set forth in Section 8.3 hereof.
"Registrable Securities" shall mean (i) shares of Common Stock
issued or issuable upon conversion of the Shares, and (ii) any Common Stock
issued in respect of securities issued pursuant to the conversion of the Shares
or upon any stock split, stock dividend, recapitalization or similar event,
provided that, Registrable Securities shall cease to be Registrable securities
if (x) such securities are sold in the public market pursuant to the Company's
IPO or otherwise or (y) as to any such securities held by a Holder, at such
time as such Holder may sell all such securities in a three month period
pursuant to Rule 144 or Rule 144(k) of the Securities Act.
The terms "register", "registered" and "registration" shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the effectiveness of
such registration statement.
"Registration Expenses" shall mean all expenses incurred by
the Company in compliance with Sections 8.5, 8.6 and 8.8 hereof, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel for the Company which shall include any fees and
disbursements for legal services provided by counsel for the Company on behalf
of the Holders, blue sky fees and expenses for qualification or registration in
not more than five states, and the expense of any audit of the Company's fiscal
year-end financial statements incident to or required by any such registration
(but excluding the compensation of regular employees of the Company, which
shall be paid in any event by the Company).
"Xxxxx Securities" shall mean the shares of Common Stock
acquired by Xxxxx pursuant to that certain subscription Agreement dated
September 16, 1994, between the Company and Xxxxx and any additional shares of
Common Stock issued with respect to such shares upon any stock split, stock
dividend, recapitalization or similar event, provided that Xxxxx Securities
shall cease to be Xxxxx Securities if (i) such securities are sold in the
public market pursuant to the Company's IPO or otherwise or (ii) as to any such
securities at such time as the holder thereof may sell all such securities in a
three month period pursuant to Rule 144 or Rule 144(k) of the Securities Act.
"Selling Expenses" shall mean all underwriting discounts,
selling commissions and expense allowances applicable to the sale
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of Registrable Securities and all fees and disbursements of counsel for any
Holder (other than the fees and disbursements of the Company's counsel included
in Registration Expenses) and the expenses and costs referenced in the proviso
to the definition of Registration Expenses above.
8.3 Restrictive Legend. Each certificate representing the Shares
or any other securities issued in respect thereof upon any conversion thereof
or any stock split, stock dividend, recapitalization, merger, consolidation or
similar event, shall (unless permitted by this Section 8.3 or unless the
securities evidenced by such certificate shall have been sold pursuant to a
registration under the Securities Act) be stamped or otherwise imprinted with a
legend in substantially the following form (in addition to any legend required
under applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT")
OR UNDER THE CALIFORNIA CORPORATE SECURITIES LAW OF 1968 (THE
"CALIFORNIA ACT") AND ARE RESTRICTED SECURITIES. THE RESTRICTED
SECURITIES HAVE BEEN ACQUIRED FOR HOLDER'S OWN ACCOUNT AND NOT WITH A
VIEW TO DISTRIBUTE THEM TO THE PUBLIC. RESTRICTED SECURITIES MUST BE
HELD INDEFINITELY UNLESS THEY ARE SUBSEQUENTLY REGISTERED UNDER THE
ACT AND THE CALIFORNIA ACT OR AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
Upon request of a holder of such a certificate, the Company
shall remove the foregoing legend from the certificate or issue to such holder
a new certificate therefor free of any transfer legend, if, with such request,
the Company shall have received either (x) the opinion referred to in Section
8.4 to the effect that any transfer by such holder of the securities evidenced
by such certificate will not violate the Securities Act and applicable state
securities laws or (y) a written representation from such holder in accordance
with paragraph (k) of Rule 144, that such holder is not and has not during the
last three months been an affiliate of the Company and that at least three
years has elapsed since the later of the date the securities were acquired from
the issuer or from an affiliate of the issuer. The Company will use its best
efforts to assist any Holder in complying with the provisions of this Section
8.3 for removal of the legend set forth above.
8.4 Notice of Proposed Transfer. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in
all respects with the provisions of this Article 8. Prior to any proposed
transfer of any Restricted Securities (other than under circumstances described
in Sections 8.5, 8.6 and 8.8 hereof), the holder thereof shall give written
notice to the Company of such holder's intention to effect
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such transfer. Each such notice shall describe the manner and circumstances of
the proposed transfer in sufficient detail, and shall be accompanied (except in
transactions in compliance with Rule 144) by a written opinion of legal counsel
who shall be reasonably satisfactory to the Company, addressed to the Company
and reasonably satisfactory in form and substance to the Company's counsel, to
the effect that the proposed transfer of the Restricted Securities may be
effected without registration under the Securities Act and applicable state
securities laws whereupon the holder of such Restricted Securities shall be
entitled to transfer such Restricted Securities in accordance with the terms of
the notice delivered by the holder to the Company. Each certificate evidencing
the Restricted Securities transferred as above provided shall bear the
appropriate restrictive legend set forth in Section 8.3 above, except that such
certificate shall not bear such restrictive legend if the opinion of counsel
referred to above is to the further effect that such legend is not required in
order to establish compliance with any provisions of the Securities Act or
applicable state securities laws.
8.5 Requested Registration.
(a) Request for Registration. If at any time during the period
beginning six months after the closing of the Company's IPO and ending on the
fourth anniversary of the closing of the Company's IPO, the Company shall
receive from Initiating Holders a written request that the Company effect a
registration with respect to all of the Registrable Securities held by such
Initiating Holders the Company will:
(i) promptly give written notice of the proposed
registration to all other Holders; and
(ii) as soon as practicable, use its diligent best efforts
to effect such registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and appropriate compliance
with applicable regulations issued under the Securities Act) as may be so
requested and as would permit or facilitate the sale and distribution of all of
such Registrable Securities, together with all of the Registrable Securities or
Xxxxx Securities of any Holder or Holders joining in such request as are
specified in a written request given within 30 days after receipt of such
written notice from the Company.
The Company shall file a registration statement covering the
Registrable Securities and Xxxxx securities, if any, so requested to be
registered as soon as practicable after receipt of the request of the
Initiating Holders; provided, however, that if the Company shall furnish to
such Initiating Holders a certificate signed by the President of the Company
stating that in the good
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faith judgment of the Board of Directors of the Company the filing of such
registration statement would be seriously detrimental to the company and its
shareholders, the Company shall have the right to defer such filing for a
period of not more than 120 days after receipt of the request of the Initiating
Holders; and provided further than the Company shall have no obligation to
effect such registration if the Company would be required to conduct an audit
of an interim financial period.
The Company shall not be obligated to effect, or to take any action to
effect, any registration pursuant to this Section 8.5 after the Company has
effected two such registrations pursuant to this Section 8.5(a) and such
registrations have been declared or ordered effective by the Commission.
Any registration statement filed pursuant to this Section 8.5 may,
subject to the provisions of Section 8.5(b) below, include securities of the
Company being sold for the account of the Company.
(b) Underwriting. If the Initiating Holders intend to distribute
the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request made
pursuant to Section 8.5(a) and the Company shall include such information in
the written notice referred to in Section 8.5 (a) (i) above. The right of any
Holder to registration pursuant to Section 8.5(a) shall be conditioned upon
such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise mutually
agreed by a majority in interest of the Initiating Holders and such Holder with
respect to such participation and inclusion) to the extent provided herein. A
Holder may elect to include in such underwriting all or a part of the
Registrable Securities and/or Xxxxx Securities then held.
If the Company shall request inclusion in any registration pursuant to
Section 8.5 of securities being sold for its own account, the Initiating
Holders shall, on behalf of all Holders, offer to include the securities of the
Company in the underwriting and may condition such offer on the Company's
acceptance of the further applicable provisions of this paragraph. The Company
shall (together with all Holders proposing to distribute their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or representative of the underwriters selected for
such underwriting by a majority in interest of the Initiating Holders.
Notwithstanding any other provision of this Section 8.5, if the representative
of the underwriters advises the Initiating Holders in writing that marketing
factors require a limitation (the "Underwriter's Limitation") on the number of
shares to be underwritten, the Initiating Holders shall so advise the Company
and all Holders of Registrable Securities and Xxxxx Securities
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whose securities would otherwise be underwritten pursuant hereto, and the
number of shares of Registrable securities, Xxxxx Securities and other
securities that may be included in the registration and underwriting shall be
allocated in the following manner: First, the securities of the Company shall
be excluded from such registration and underwriting to the extent required by
such Underwriter's Limitation. If, after fully excluding the securities of the
Company from such underwriting and registration, a further reduction in the
number of shares to be included in such underwriting and registration is
required, the number of Xxxxx Securities to be included in such underwriting
and registration shall be reduced to the extent required by the Underwriter's
Limitation; provided, however, that the number of Xxxxx Securities to be
included in such registration and underwriting shall not be reduced to less
than 25% of the total number of securities included in such registration or
underwriting. If, after fully excluding the securities of the Company from
such underwriting and registration, and reducing the number of Xxxxx Securities
from such underwriting and registration to the full extent permitted by the
preceding sentence, a further reduction in the number of shares to be included
in such underwriting and registration is required, the number of shares that
may be included in the registration and underwriting shall be allocated among
all Holders of Registrable Securities in proportion, as nearly as practicable,
to the respective amounts of Registrable Securities held by such Holder at the
time of the filing of the registration statement. No Registrable Securities,
Xxxxx Securities or any other securities excluded from the underwriting by
reason of the Underwriter's Limitation shall be included in such registration.
If the Company in its sole discretion disapproves of the terms of the
underwriting, it may elect to withdraw therefrom by written notice to the
underwriter and the Initiating Holders. The securities so withdrawn shall also
be withdrawn from registration.
8.6 Company Registration.
(a) Holders' Rights. If, at any time, the Company shall
determine to register any of its securities either for its own account or the
account of a security holder or holders (other than Holders of Registrable
securities or Xxxxx securities) exercising their respective demand registration
rights, other than a registration relating solely to employee benefit plans, or
a registration relating solely to a Commission Rule 145 transaction, or a
registration on any registration form which does not permit secondary sales,
the Company will:
(i) promptly give to each Holder and each Founder written
notice thereof (which shall include a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under the applicable blue
sky or other state securities laws); and
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(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities, Xxxxx Securities and Founder
Securities specified in a written request or requests made by any Holder or
Founder within 30 days after receipt of the written notice from the Company
described in clause (i) above, except as set forth in Section 8.6(b) below.
Such written request may specify all or a part of a Holder's Registrable
Securities or Xxxxx Securities or of Founder securities.
(b) Underwriting. If the registration of which the
Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Holders and Founders as a part of
the written notice given pursuant to Section 8.6(a)(i). In such event the right
of any Holder or holder of Founder Securities to registration pursuant to
Section 8.6 shall be conditioned upon such Holder's or holders' of Founder
Securities participation in such underwriting and the inclusion of such
Holder's Registrable Securities or Xxxxx Securities or such Founder Securities,
as the case may be, in the underwriting to the extent provided herein. All
Holders and holders of Founder Securities proposing to distribute their
securities through such underwriting shall (together with the Company) enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected by the Company. Notwithstanding any other provision of
this Section 8.6, if the underwriter advises the Company in writing that
marketing factors require an Underwriter's Limitation on the number of shares
to be underwritten, the underwriter may (subject to the allocation priority set
forth below) limit the number of Registrable Securities, Xxxxx Securities and
Founder Securities to be included in the registration and underwriting, or in
the case of the Company's IPO, the underwriters may exclude all of the
Registrable Securities, Xxxxx Securities and Founder Securities from the
registration and underwriting. In such event, the Company shall so advise all
holders of securities requesting registration and, if applicable, the number of
shares or securities that are entitled to be included in the registration and
underwriting shall be allocated in the following manner: First, the number of
Founder Securities that shall be included in such registration and underwriting
shall be reduced to the extent required by the Underwriter's Limitation;
provided, however, that the number of Founder Securities to be included in such
registration and underwriting which is not for the Company's IPO shall not be
reduced to less than 10% of the total number of securities included in such
registration or underwriting. The number of shares of Founder Securities that
may be included in the registration and underwriting shall be allocated among
all holders of Founder Securities in proportion, as nearly as practicable, to
the respective amounts of securities which each such holder had originally
requested be included in such registration and underwriting. If, after fully
reducing the number of Founder
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Securities from such underwriting and registration to the full extent permitted
by the preceding sentence, a further reduction in the number of shares to be
included in such underwriting and registration is required, the number of
Registrable Securities and Xxxxx Securities that shall be included in the
registration and underwriting shall be reduced to the extent required by the
Underwriter Limitation, in proportion, as nearly as practicable, to the
respective amount of securities which such holder had originally requested be
included in such registration and underwriting; provided, however, that the
number of Registrable Securities to be included in such registration and
underwriting which is not for the Company's IPO shall not be reduced to less
than 20% of the total number of securities included in such registration or
underwriting; and provided further, that the number of Xxxxx Securities to be
included in such registration and underwriting which is not for the Company's
IPO shall not be reduced to less than 20% of the total number of securities
included in such registration or underwriting. The number of shares of
Registrable Securities and Xxxxx Securities that may be included in the
registration and underwriting shall be allocated among all Holders in
proportion, as nearly as practicable, to the respective amounts of securities
which each such Holder had originally requested be included in such
registration and underwriting. If, after reducing the number of Founder
Securities, Registrable Securities and Xxxxx Securities to be included in such
registration or underwriting to the full extent permitted in this section, a
further reduction in the number of shares to be included in such underwriting
and registration is required, then the number of securities of the Company that
shall be included in such registration and underwriting shall be reduced to the
extent required by the Underwriter's Limitation. If any Holder or holder of
Founder Securities disapproves of the terms of any such underwriting, such
Holder or holder of Founder Securities may elect to withdraw therefrom by
written notice to the Company and the underwriter. Any Registrable
Securities, Xxxxx Securities, Founder Securities or other securities excluded
or withdrawn from such underwriting shall be withdrawn from such registration.
8.7 Expenses of Registration. The Company shall bear all
Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to this Section 8 and all underwriting
discounts, selling commissions and expense allowances applicable to the sale of
any securities by the Company for its own account in any registration. All
Selling Expenses shall be borne by the Holders and holder of Founder
Securities, if any, whose securities are included in such registration pro rata
on the basis of the number of their Registrable Securities, Xxxxx Securities or
Founder Securities so registered, provided, however, that if in such
registration, the Company pays any expenses included in the defined term
"Selling Expenses" for other security holders, the Company will pay such
expenses for the Holders.
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8.8 Registration on Form S-3. The Company shall use its best
efforts to qualify for registration on Form S-3 or any comparable or successor
form or forms; and to that end the Company shall register (whether or not
required by law to do so) the Common Stock under the Exchange Act in accordance
with the provisions of the Exchange Act following the closing of the first
registration of any securities of the Company on Form XX-0, X-0 or any
comparable or successor form. After the Company has qualified for the use of
Form S-3, in addition to the rights contained in the foregoing provisions of
this Section 8, the Holders of Registrable Securities shall have unlimited
rights to request from time to time registrations on Form S-3 (such requests
shall be in writing and shall state the number of shares of Registrable
Securities to be disposed of and the intended methods of disposition of such
shares by such Holder or Holders) provided that in each case the aggregate
proceeds of such registration are expected to exceed $500,000.
8.9 Registration Procedures. In the case of each registration
effected by the Company pursuant to Section 8, the Company will keep each
Holder and holder of Founder Securities who is entitled to registration rights
hereunder advised in writing as to the initiation of each registration and as
to the completion thereof. At its expense, the Company will:
(a) Keep such registration effective for a period of six
months or until such Holders or holder of Founder Securities, if any, have
completed the distribution described in the registration statement relating
thereto; whichever first occurs; provided, however, that in the case of any
registration of Registrable Securities on Form S-3 which are intended to be
offered on a continuous or delayed basis, such six month period shall be
extended, if necessary, to keep the registration statement effective until all
such Registrable securities are sold;
(b) Prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of
securities covered by such registration statement;
(c) Furnish such number of prospectuses and other
documents incident thereto, including any amendment of or supplement to the
prospectus, as a Holder or holder of Founder Securities from time to time may
reasonably request;
(d) Notify each seller of Registrable Securities, Xxxxx
securities or Founder Securities covered by such registration statement at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue
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statement of a material fact or omits to state a fact required to be stated
therein or necessary to make the statements therein not misleading or
incomplete in the light of the circumstances then existing, and at the request
of any such seller, prepare and furnish to such seller a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchaser of such shares,
such prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or incomplete in the light of the
circumstances then existing;
(e) Cause all such Registrable Securities, Xxxxx
Securities or Founder Securities to be listed on each securities exchange on
which the same securities issued by the Company are then listed;
(f) Provide a transfer agent and registrar for all such
Registrable Securities, Xxxxx Securities or Founder Securities and a CUSIP
number for all such Registrable Securities, Xxxxx Securities or Founder
Securities, in each case not later than the effective date of such
registration;
(g) Make available for inspection by any seller of
Registrable Securities, Xxxxx Securities or Founder Securities, any underwriter
participating in any disposition pursuant to such registration statement, and
any attorney or accountant retained by any such seller or underwriter, all
financial and other records, pertinent corporate documents and properties of
the Company, and cause the Company's officers and directors to supply all
information reasonably requested by any such seller, underwriter, attorney or
accountant in connection with such registration statement; provided, however,
that such seller, underwriter, attorney or accountant shall agree to hold in
confidence and trust all information so provided;
(h) Furnish to each selling Holder and holder of Founder
Securities a signed counterpart, addressed to the selling Holder or holder of
Founder Securities, of
(i) an opinion of counsel for the Company, dated the
effective date of the registration statement, and
(ii) "comfort" letters signed by the Company's independent
public accountants who have examined and reported on the Company's
financial statements included in the registration statement, to the
extent permitted by the standards of the AICPA or other relevant
authorities,
covering substantially the same matters with respect to the registration
statement (and the prospectus included therein) and
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(in the case of the accountants' "comfort" letters, with respect to events
subsequent to the date of the financial statements) as are customarily covered
in opinions of issuer's counsel and in accountants' "comfort" letters delivered
to the underwriters in underwritten public offerings of securities;
(i) Furnish to each selling Holder and holder of Founder
Securities a copy of all documents filed with and all correspondence from or to
the Commission in connection with any such offering other than nonsubstantive
cover letters and the like;
(j) Otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least twelve months, but not more than eighteen months, beginning
with the first month after the effective date of the registration statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act; and
(k) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 8.5 hereof, the Company will
enter into any underwriting agreement reasonably necessary to effect the offer
and sale of Common Stock, provided such underwriting agreement contains
customary underwriting provisions and provided further that if the underwriter
so requests the underwriting agreement will contain customary contribution
provisions.
8.10 Indemnification.
(a) The Company will indemnify each Holder and holder of
Founder Securities, each of its officers, directors and partners, and each
person controlling such Holder and holder of Founder Securities, with respect
to each registration, qualification or compliance effected pursuant to this
Section 8, and each underwriter, if any, and each person who controls any
underwriter, and their respective counsel against all claims, losses, damages
and liabilities (or actions, proceedings or settlements in respect thereof)
arising out of or based on any untrue statement (or alleged untrue statement)
of a material fact contained in any prospectus, offering circular or other
document prepared by the Company (including any related registration statement,
notification or the like) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Company of the Securities Act
or any rule or regulation thereunder applicable to the Company and relating to
action or inaction required of the Company in connection with any such
registration, qualification or compliance, and will reimburse each such Holder
and holder of Founder Securities, each of its officers,
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directors and partners, and each person controlling such Holder and holder of
Founder Securities, each such underwriter and each person who controls any such
underwriter, for any legal and any other expenses as they are reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in
any such case to the extent that any such claim, loss, damage, liability or
expense arises out of or is based on any untrue statement (or alleged untrue
statement) or omission (or alleged omissions) based upon written information
furnished to the Company by such Holder, holder of Founder Securities or
underwriter and stated to be specifically for use therein.
(b) Each Holder whose Registrable Securities or Xxxxx Securities
and each holder of Founder Securities whose Founder Securities are included in
any registration, qualification or compliance effected pursuant to this Section
8 will indemnify the Company, each of its directors and officers and each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of the Securities Act and the rules and regulations thereunder, each
other such Holder and holder of Founder Securities and each of their officers,
directors and partners, and each person controlling such Holder and holder of
Founder Securities, and their respective counsel against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular or
other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and such Holders and
holders of Founder Securities, directors, officers, partners, persons,
underwriters or control persons for any legal or any other expenses as they are
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by such Holder or
holders of Founder Securities and stated to be specifically for use therein;
provided, however, that the obligations of such Holders and holders of Founder
Securities hereunder shall be limited to an amount equal to the proceeds to
each such Holder and holder of Founder Securities of securities sold under such
registration statement, prospectus, offering circular or other document as
contemplated herein.
(c) Each party entitled to indemnification under this Section 8.10
(the "Indemnified Party") shall give notice to the
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party required to provide indemnification (the "Indemnifying Party") promptly
after such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom, provided that
counsel for the Indemnifying Party, who shall conduct the defense of such claim
or any litigation resulting therefrom, shall be approved by the Indemnified
Party (whose approval shall not unreasonably be withheld), and the Indemnified
Party may participate in such defense at such party's expense, and provided
further that the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under this
Section 8 unless and only to the extent that such failure to give notice
results in material prejudice to the Indemnifying Party. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation. Each Indemnified Party
shall furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with defense of such claim and litigation resulting
therefrom.
8.11 Information by Holder. Each Holder of Registrable Securities
and/or Xxxxx Securities and each holder of Founder Securities to be included in
a registration referred to in this Section 8 shall furnish to the Company such
information regarding such Holder and such holder of Founder Securities and the
distribution proposed by such Holder and such holder of Founder Securities as
the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Section 8 and shall promptly advise the Company in writing
of any material changes to such information while the registration is in
effect. Each Holder and holder of Founder Securities agrees that upon notice
from the Company that a registration statement, prospectus, offering circular
or other document is required to be revised, amended, supplemented or replaced,
such Holder and holder of Founder Securities shall use its reasonable efforts
to cause all copies thereof to be promptly returned to the Company (including
copies thereof which are in the possession of any broker or other person acting
on behalf of the Holder or holder of Founder Securities), and the Holder and
holder of Founder Securities shall cease to make any public offer or sale of
the registered securities until the Company shall have revised, amended,
supplemented or replaced such registration statement, prospectus, offering
circular or other document.
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8.12 Limitations on Registration of Issues of Securities. From and
after the date of this Agreement, the Company shall not enter into any
agreement with any holder or prospective holder of any securities of the
company giving such holder or prospective holder a right to require the Company
to initiate any registration of any securities of the Company or to require the
Company, upon any registration of any of its securities, to include, among the
securities which the Company is then registering, securities owned by such
holder which are superior to the rights given to the Purchaser hereunder.
8.13 Rule 144. With a view to making available the benefits of
certain rules and regulations of the commission which may permit the sale of
the Restricted Securities to the public without registration, the Company
agrees to:
(a) Use its best efforts to make and keep public
information available (as those terms are understood and defined in Rule 144
under the Securities Act) at all times from and after, 90 days following the
effective date of the first registration under the Securities Act filed by the
Company for an offering of its securities to the general public;
(b) Use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act at any time after it has become subject to
such reporting requirements;
(c) So long as a Purchaser owns any Restricted
Securities, furnish to the Purchaser forthwith upon request a written statement
by the Company as to its compliance with the reporting requirements of Rule 144
(at any time from and after 90 days following the effective date of the first
registration statement filed by the Company for an offering of its securities
to the general public) , and of the Securities Act and the Exchange Act (at any
time after it has become subject to such reporting requirements), a copy of
the most recent annual or quarterly report of the Company, and such other
reports and documents so filed as the Purchaser may reasonably request in
availing itself of any rule or regulation of the Commission allowing the
Purchaser to sell any such securities without registration.
8.14 Transfer or Assignment of Registration Rights. The rights to
cause the Company to register securities granted to the Purchaser under
Sections 8.5, 8.6 and 8.8 may be transferred or assigned by a Purchaser to any
transferee or assignee of any Restricted Securities provided that (i) the
Company is given written notice at the time of or within a reasonable time
after said transfer or assignment, stating the name and address of said
transferee or assignee and identifying the securities with respect to which
such registration rights are being transferred or assigned, (ii) the transferee
or assignee of such rights assumes
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the obligations of such Purchaser under this Section 8, (iii) such transfer or
assignment does not delay the time when the Restricted Securities would have
been eligible to be sold pursuant to Rule 144 or Rule 144(k) of the Securities
Act had they not been so transferred or assigned, and (iv) the number of
transferees or assignees who hold less than 1% of the Company's outstanding
capital stock (assuming conversion of the Shares into Common Stock) shall not
exceed 20.
8.15 Lock-up Restrictions. Prior to the closing date of the IPO,
Purchaser shall agree that it will not, for a period of up to 180 days after
the effective date of the Company's registration statement relating to the IPO,
offer to sell, contract to sell or otherwise dispose of any shares of Common
Stock, or options or warrants to purchase any shares of Common Stock, owned
directly by such person or entity or with respect to which such person or
entity has the power of disposition other than (i) as a gift or (ii) with the
prior written consent of the Company, provided that all officers, directors and
holders of 5% of more of the Company's then outstanding capital stock also
agree to the same restrictions.
SECTION 9
Miscellaneous
9.1 Governing Law. This Agreement shall be governed in all
respects by the laws of the State of California.
9.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive (i) any investigation made by the
Purchasers and (ii) the Closing.
9.3 Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto; provided, however, except as otherwise set forth in Section
7.6(b) or this Section 9.3, the Company may not assign its rights or
obligations hereunder. Except as otherwise set forth in Section 8.14 hereof or
in this Section 9.3, nothing contained herein shall limit the Purchasers'
right, subject to applicable securities laws, to sell, transfer or otherwise
assign to whomever it elects, the Shares or the Common Stock issuable upon
conversion of the Shares and its rights under this Agreement, and upon such
sale, transfer or assignment, such transferee shall have all the rights of the
Purchasers as if such transferee were a party to this Agreement; provided
further, however, the Purchasers may not assign any rights or obligations set
forth in Section 7.2 hereof. Sybase hereby grants to the Company, or its
assignees, a right of first refusal to purchase all (or any part) of the Shares
or the Common Stock issuable upon conversion of the Shares and its rights under
this Agreement (the
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"Offered Shares") that Sybase may from time to time propose to sell, transfer
or otherwise assign. In the event that Sybase proposes to sell, transfer or
otherwise assign any Offered Shares, it shall give the Company written notice
of its intention, describing the proposed assignee, the price and the terms and
conditions upon which Sybase proposes to sell, transfer or otherwise assign
such Offered Shares. The Company (or its assignees) shall have 20 business
days after receipt of such notice to agree to purchase all (or any part) of
such Offered Shares at the price and upon the terms and conditions specified in
the notice by giving written notice to Sybase and stating therein the number of
Offered Shares to be purchased. If the Company (or its assignees) fails to
exercise the right of first refusal within the 20 business day period specified
above, Sybase shall have 120 days thereafter to sell, transfer or otherwise
assign the Offered Shares respecting which the rights of the Company (or its
assignee) were not exercised to the assignee identified in Sybase's notices at
a price and upon terms no more favorable to the proposed assignee than
specified in Sybase's notice.
9.4 Entire Agreement; Amendment. This Agreement (including the
Exhibits hereto) and the other documents delivered pursuant hereto constitute
the full and entire understanding and agreement between the parties with regard
to the subjects hereof and thereof. Neither this Agreement nor any term hereof
may be amended, waived, discharged or terminated, except by a written
instrument signed by the Company and the holder or holders of at least 50% of
the then outstanding Shares (including Common Stock issuable upon conversion
thereof) except that Section 8 hereof may be amended, waived, discharged or
terminated, by a written instrument signed by the Company and the holder or
holders of at least 50% of the then outstanding Registrable Securities. Except
as provided above, each holder of any of the Shares at the time or thereafter
outstanding shall be bound by any amendment or waiver given pursuant to this
Section 9.4 whether or not the certificate representing such Shares shall have
been marked to indicate such amendment or waiver.
9.5 Notices, etc. All notices and other communications required
or permitted hereunder shall be in writing and shall be sent by next day
courier, postage prepaid, or delivered either by hand or by messenger,
addressed (a) if to a Purchaser, addressed to such Purchaser at its address set
forth at the end of this Agreement, or at such other address as the Purchaser
shall have furnished to the Company in writing, or (b) if to any other holder
of the Shares at such address as such holder shall have furnished the Company
in writing, or, until any such holder so furnishes an address to the Company,
then to and at the address of the last holder thereof who has so furnished an
address to the Company, or (c) if to the Company, at its address set forth at
the end of this Agreement, or at such other address as the Company shall have
furnished to each holder in writing. All notices to the Purchaser
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shall also be sent by facsimile on the day that notice is sent by courier.
9.6 Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to any holder of any Shares or Common Stock
acquired upon conversion of the Shares upon any breach or default of the
Company under this Agreement, shall impair any such right, power or remedy of
such holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any holder of any breach or default under this Agreement, or any
waiver on the part of any holder of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any holder, shall be cumulative
and not alternative, provided, however, that Purchasers acknowledge and agree
that their sole and exclusive remedy for a breach by Company of its
representations and warranties contained in Section 3.21 shall be rescission of
this Agreement.
9.7 Separability. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
9.8 Agent's Fees.
(a) The Company (i) represents and warrants that it has
not retained a finder or broker in connection with the transactions
contemplated by this Agreement and (ii) hereby agrees to indemnify and to hold
the Purchasers harmless of and from any liability for commission or
compensation in the nature of an agent's fee to any broker or other person or
firm incurred in connection with the transactions contemplated hereby (and the
costs and expenses of depending against such liability or asserted liability)
arising from any act by the Company or any of its employees or representatives.
(b) Each Purchaser (i) represents and warrants that it
has retained no finder or broker in connection with the transactions
contemplated by this Agreement and (ii) hereby agrees to indemnify and to hold
the Company harmless from any liability for any commission or compensation in
the nature of an agent's fee to any broker or other person or firm incurred in
connection with the transactions contemplated hereby (and the costs and
expenses of defending against such liability or asserted liability) for which
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such Purchaser, or any of the Purchaser's employees or representatives, is
responsible.
9.9 Information Confidential. Each Purchaser acknowledges that
the terms and provisions of this Agreement and information received by it
pursuant hereto may be confidential and for its use only, and it will not use
such confidential information or reproduce, disclose or disseminate the terms
and provisions of this Agreement or such information to any other person (other
than its employees or agents having a need to know the contents of such
information, and its attorneys), except in connection with the exercise of
rights under this Agreement, unless the Company has made such information
available to the public generally or such Purchaser is required to disclose
such information by a governmental body or under federal securities laws.
9.10 Expenses. The Company and the Purchasers each shall bear its
own expenses and legal fees incurred on their behalf with respect to this
Agreement and the transactions contemplated hereby, except that the Company
shall pay the reasonable legal fees and out of pocket costs and expenses of
counsel for the Purchasers in an amount not to exceed $15,000.
9.11 Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
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9.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement as
of the date above written.
COMPANY PURCHASERS
FIRST VIRTUAL HOLDINGS UNTERBERG HARRIS INTERACTIVE
INCORPORATED, A WYOMING MEDIA, L.P.
CORPORATION
By: By:
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Title:President Title:
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Address: SYBASE, INC.
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By:
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Title:
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EXHIBIT A
Schedule of Purchasers
EXHIBIT B
Amended and Restated Articles of Incorporation
