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Agreement, (ii) superceded in their entirety hereby, and (iii) the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