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Exhibit 10.1
INFINITY FINANCIAL TECHNOLOGY, INC.
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (the "Agreement") is made as of January
__, 1994 by and among Infinity Financial Technology, Inc., a California
corporation (the "Company"), the entities listed on the Schedule of Investors
attached hereto (the "Investors") and Roger A. Lang, Denny K. Paul, Robin Vasan,
Charles Marston, Kishore Bopardikar and Tejbir Sidhu ("Management").
RECITALS
A. Certain of the Investors (the "Series A Investors") have
acquired an aggregate of 500,000 shares of Series A Preferred Stock of the
Company.
B. Certain of the Investors and the Company are parties to the
Series C Preferred Stock Purchase Agreement dated as of January __, 1994 (the
"Purchase Agreement").
C. The obligations of the Company and the Investors (other than
the Series A Investors) under the Purchase Agreement are conditioned, among
other things, upon the execution and delivery of this Agreement by the Investors
and the Company.
D. The Company desires to grant, and the Investors desire to be
granted, the rights created herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, all parties hereto agree as follows:
1. CERTAIN DEFINITIONS. All capitalized terms used and not
otherwise defined herein shall have the meanings given them in the Purchase
Agreement. As used in this Agreement, 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.
"Conversion Stock" means the Common Stock issued or issuable
upon conversion of the Preferred Stock.
"Holder" shall mean (i) any person or entity holding or
having the right to acquire Registrable Securities, and (ii) any person holding
Registrable Securities to whom the rights under this Agreement have been
transferred in accordance with Section 5.10 hereof.
"Initiating Holders" shall mean any Holders who in the
aggregate hold not less than 50% of the Registrable Securities.
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"Management Stock" means all Common Stock now or hereafter
held by Management.
"Preferred Stock" shall mean (i) the Series C Preferred Stock
of the Company issued pursuant to the Purchase Agreement and (ii) the Price
Waterhouse Preferred Stock.
"Price Waterhouse Preferred Stock" shall mean up to 500,000
shares of Series D Preferred Stock of the Company, or any other series of
preferred stock of the Company, sold by the Company to Price Waterhouse or any
affiliate or affiliates thereof.
"Registrable Securities" shall mean (i) the Conversion Stock,
(ii) the Management Stock and the Common Stock issued or issuable upon
conversion of the Series A Preferred Stock; provided, that the Management Stock
and the Common Stock issued or issuable upon conversion of the Series A
Preferred Stock shall not be deemed Registrable Securities for the purpose of
Sections 5.1, 5.3, 5.4 and 5.10 hereof; and (iii) any Common Stock of the
Company issued or issuable in respect of the shares referenced in (i) or (ii)
above, subject to the limitations in (ii) above, upon any stock split, stock
dividend, recapitalization, or similar event, or any Common Stock otherwise
issuable with respect to the shares referenced in (i) or (ii) above; provided,
however, that such shares or other securities shall only be treated as
Registrable Securities if and so long as they have not been sold to or through a
broker or dealer or underwriter in a public distribution or a public securities
transaction.
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 the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses, except as
otherwise stated below, incurred by the Company in complying with Sections 5.1,
5.2 and 5.3 hereof, including, without limitation, all registration,
qualification and filing fees, printing expenses, escrow fees, fees and
disbursements of counsel for the Company, blue sky fees and expenses, the
expense of any special audits 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) and the reasonable fees and disbursements
of one counsel for all Holders.
"Restricted Securities" shall mean the securities of the
Company required to bear the legend set forth in Section 3 hereof.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the securities
registered by the Holders and, except as set forth under "Registration
Expenses," all fees and disbursements of counsel for any Holder.
2. RESTRICTIONS ON TRANSFERABILITY. The Preferred Stock, the
Conversion Stock and any other securities issued in respect of the Preferred
Stock or the Conversion Stock upon any
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stock split, stock dividend, recapitalization, merger, consolidation or similar
event shall not be sold, assigned, transferred or pledged except upon the
conditions specified in this Agreement, which conditions are intended to ensure
compliance with the provisions of the Securities Act. The Investors will cause
any proposed purchaser, assignee, transferee, or pledgee of any such shares held
by the Investors to agree to take and hold such securities subject to the
provisions and upon the conditions specified in this Agreement.
3. RESTRICTIVE LEGEND. Each certificate representing (i) the
Preferred Stock, (ii) the Conversion Stock, and (iii) any other securities
issued in respect of the Preferred Stock or the Conversion Stock upon any stock
split, stock dividend, recapitalization, merger, consolidation or similar event,
shall (unless otherwise permitted by the provisions of Section 4 below) be
stamped or otherwise imprinted with a legend in substantially the following form
(in addition to any legends required by the Bylaws of the Company or under
applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR
IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. SUCH
SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SAID ACT.
COPIES OF THE AGREEMENTS COVERING THE PURCHASE OF THESE
SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO
COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS
CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.
Each Investor and/or Holder consents to the Company making a notation on its
records and giving instructions to any transfer agent of the Preferred Stock or
the Common Stock in order to implement the restrictions on transfer established
in this Agreement.
4. NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 4. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities (other than (i) a
transfer not involving a change in beneficial ownership, (ii) in transactions
involving the distribution without consideration of Restricted Securities by the
Investor to any of its partners, or retired partners, or to the estate of any of
its partners or retired partners, (iii) in transactions involving the transfer
without consideration of Restricted Securities by the Investor during his
lifetime by way of gift or on death by will or intestacy, (iv) in transactions
involving the transfer or distribution of Restricted Securities by a corporation
to any subsidiary, parent or affiliated corporation of such corporation, or (v)
in transactions in compliance with Rule 144), unless there is in effect a
registration statement under the Securities
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Act covering the proposed transfer, the holder thereof shall give written notice
to the Company of such holder's intention to effect such transfer, sale,
assignment or pledge. Each such notice shall describe the manner and
circumstances of the proposed transfer, sale, assignment or pledge in sufficient
detail, and shall be accompanied, at such holder's expense by either (A) an
unqualified written opinion of legal counsel who shall be, and whose legal
opinion shall be, reasonably satisfactory to the Company addressed to the
Company, to the effect that the proposed transfer of the Restricted Securities
may be effected without registration under the Securities Act, or (B) a "no
action" letter from the Commission to the effect that the transfer of such
securities without registration will not result in a recommendation by the staff
of the Commission that action be taken with respect thereto, whereupon the
holder of such Restricted Securities shall be entitled to transfer such
Restricted Securities in accordance with the terms of the notice delivered by
the holder to the Company. Each certificate evidencing the Restricted Securities
transferred as above provided shall bear, except if such transfer is made
pursuant to Rule 144, the appropriate restrictive legends set forth in Section 3
above, except that such certificate shall not bear such restrictive legend if,
in the opinion of counsel for such holder and the Company, such legends are not
required in order to establish compliance with any provision of the Securities
Act.
5. REGISTRATION.
5.1 REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION. In case the
Company shall receive from Initiating Holders a written request that the Company
effect any registration, qualification or compliance with respect to not less
than one-half of their shares of Registrable Securities, or any lesser number of
shares if the anticipated aggregate offering price, net of underwriting
discounts and commissions, would exceed ten million dollars ($10,000,000), the
Company will:
(i) promptly give written notice of
the proposed registration, qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its
best efforts to effect such registration, qualification or compliance
(including, without limitation, appropriate qualification under applicable blue
sky or other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental
requirements or regulations) as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any Holder or Holders joining in such request
as are specified in a written request received by the Company within 20 days
after receipt of such written notice from the Company; provided, however, that
the Company shall not be obligated to take any action to effect any such
registration, qualification or compliance pursuant to this Section 5.1:
(A) In any particular
jurisdiction in which the Company would be required to execute a general consent
to service of process in effecting such registration, qualification or
compliance unless the Company is already subject to service in such jurisdiction
and except as may be required by the Securities Act;
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(B) Prior to the earlier of
January 31, 1999 or six (6) months after the effective date of the Company's
first registered public offering of its stock;
(C) If the Company, within
ten (10) days of the receipt of the request of the Initiating Holders, gives
notice of its bona fide intention to effect the filing of a registration
statement with the Commission within ninety (90) days of receipt of such request
(other than a registration of securities in a Rule 145 transaction or with
respect to an employee benefit plan);
(D) During the period
starting with the date of filing of, and ending on the date 180 days immediately
following the effective date of, any registration statement pertaining to
securities of the Company (other than a registration of securities in a Rule 145
transaction or with respect to an employee benefit plan), provided that the
Company is actively employing in good faith all reasonable efforts to cause such
registration statement to become effective;
(E) After the Company has
effected two such registrations pursuant to this Section 5.1(a), and such
registrations have been declared or ordered effective;
(F) Within twelve (12)
months after the Company has effected such a registration pursuant to this
Section 5.1(a), and such registration has been declared or ordered effective; or
(G) If the Company shall
furnish to such Initiating Holders a certificate signed by the President of the
Company stating that in the good faith judgment of the Board of Directors it
would be seriously detrimental to the Company or its shareholders for a
registration statement to be filed in the near future, in which case the
Company's obligation to use its best efforts to register, qualify or comply
under this Section 5.1 shall be deferred for a period not to exceed 180 days
from the date of receipt of written request from the Initiating Holders,
provided that the Company may not exercise this deferral right more than once
per twelve-month period.
Subject to the foregoing clauses (A) through (G), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the request or requests of
the Initiating Holders.
(b) UNDERWRITING. In the event that a registration
pursuant to Section 5.1 is for a public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
Section 5.1(a)(i), and the right of any Holder to registration pursuant to
Section 5.1 shall be conditioned upon such Holder's participation in such
underwriting arrangements, and the inclusion of such Holder's Registrable
Securities in the underwriting to the extent requested shall be limited to the
extent provided herein.
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
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managing underwriter selected for such underwriting by a majority in interest of
the Initiating Holders, but subject to the Company's reasonable approval.
Notwithstanding any other provision of this Section 5.1, if the managing
underwriter advises the Initiating Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Company shall so advise all Holders of Registrable Securities, and the number of
shares of Registrable 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 Registrable Securities held by such
Holders at the time of filing the registration statement. No Registrable
Securities excluded from the underwriting by reason of the underwriter's
marketing limitation shall be included in such registration. To facilitate the
allocation of shares in accordance with the above provisions, the Company or the
underwriters may round the number of shares allocated to any Holder to the
nearest 100 shares.
If any Holder of Registrable Securities disapproves of the terms of
the underwriting, such person may elect to withdraw therefrom by written notice
to the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration, and such Registrable Securities shall not be
transferred in a public distribution prior to 180 days after the effective date
of such registration, or such other shorter period of time as the underwriters
may require.
5.2 COMPANY REGISTRATION.
(a) NOTICE OF REGISTRATION. If at any time or from
time to time the Company shall determine to register any of its equity
securities, either for its own account or for the account of a security holder
or holders, other than (A) a registration relating solely to employee benefit
plans, or (B) a registration relating solely to a Rule 145 transaction, the
Company will:
(i) promptly give to each Holder written
notice thereof; and
(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 specified in a
written request or requests, made within 30 days after receipt of such written
notice from the Company, by any Holder.
(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 as a part of the written
notice given pursuant to Section 5.2(a)(i). In such event the right of any
Holder to registration pursuant to Section 5.2 shall be conditioned upon such
Holder's participation in such underwriting, and the inclusion of Registrable
Securities in the underwriting shall be limited to the extent provided herein.
All Holders proposing to distribute their securities through such
underwriting shall (together with the Company and the other holders distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by the Company. Notwithstanding any other provision of this Section 5.2, if the
managing underwriter determines that marketing factors require a
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limitation of the number of shares to be underwritten, the managing underwriter
may limit the Registrable Securities to be included in such registration (i) in
the case of the Company's initial public offering, to zero, and (ii) in the case
of any other offering, to an amount no less than 25% of all shares to be
included in such offering; provided however, that (x) any such limitation or
"cut-back" shall be first applied to all shares proposed to be sold in such
offering other than for the account of the Company which are not Registrable
Securities, (y) notwithstanding clause (x), in no event shall any shares being
sold by a shareholder exercising a demand registration right similar to that
granted in Section 5.1 be included in such offering and (z) the number of shares
of Registrable Securities to be included in such underwriting shall not be
reduced unless the Management Stock and the Common Stock issued or issuable upon
conversion of the Series A Preferred Stock are first entirely excluded from the
underwriting. The Company shall so advise all Holders and other holders
distributing their securities through such underwriting, and the number of
shares of Registrable Securities or other securities that may be included in the
registration and underwriting shall be first allocated among all the Holders in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by such Holder at the time of filing the Registration Statement.
To facilitate the allocation of shares in accordance with the above provisions,
the Company may round the number of shares allocated to any Holder or holder to
the nearest 100 shares.
If any Holder of Registrable Securities disapproves of the terms of
any such underwriting, he may elect to withdraw therefrom by written notice to
the Company and the managing underwriter. Any securities excluded or withdrawn
from such underwriting shall be withdrawn from such registration, and shall not
be transferred in a public distribution prior to 120 days after the effective
date of the registration statement relating thereto, or such other shorter
period of time as the underwriters may require.
(c) RIGHT TO TERMINATE REGISTRATION. The Company shall
have the right to terminate or withdraw any registration initiated by it under
this Section 5.2 prior to the effectiveness of such registration whether or not
any Holder has elected to include securities in such registration.
5.3 REGISTRATION ON FORM S-3.
(a) If any Holder or Holders request that the Company
file a registration statement on Form S-3 (or any successor form to Form S-3)
for a public offering of shares of the Registrable Securities the reasonably
anticipated aggregate price to the public of which would equal or exceed
$1,000,000, and the Company is a registrant entitled to use Form S-3 to register
the Registrable Securities for such an offering, the Company shall use its best
efforts to cause such Registrable Securities to be registered for the offering
on such form and to cause such Registrable Securities to be qualified in such
jurisdictions as such Holder or Holders may reasonably request; provided,
however, that the Company shall not be required to effect more than one
registration pursuant to this Section 5.3 in any six (6) month period. The
Company shall inform other Holders of the proposed registration and offer them
the opportunity to participate. In the event the registration is proposed to be
part of a firm commitment underwritten public offering, the substantive
provisions of Section 5.1(b) shall be applicable to each such registration
initiated under this Section 5.3.
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(b) Notwithstanding the foregoing, the Company
shall not be obligated to take any action pursuant to this Section 5.3:
(i) in any particular jurisdiction in
which the Company would be required to execute a general consent to service of
process in effecting such registration, qualification or compliance unless the
Company is already subject to service in such jurisdiction and except as may be
required by the Securities Act;
(ii) if the Company, within ten (10)
days of the receipt of the request of the initiating Holders, gives notice of
its bona fide intention to effect the filing of a registration statement with
the Commission within ninety (90) days of receipt of such request (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan);
(iii) after the Company has effected
two such registrations pursuant to Section 5.3(a), and such registrations have
been declared or ordered effective;
(iv) during the period starting with
the date of filing of, and ending on the date 180 days immediately following the
effective date of, any registration statement pertaining to securities of the
Company (other than a registration of securities in a Rule 145 transaction or
with respect to an employee benefit plan), provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective; or
(v) if the Company shall furnish to
such Holder or Holders a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors it would be
seriously detrimental to the Company or its shareholders for registration
statements to be filed in the near future, in which case the Company's
obligation to use its best efforts to file a registration statement shall be
deferred for a period not to exceed 180 days from the receipt of the request to
file such registration by such Holder or Holders, provided that the Company may
not exercise this deferral right more than once per twelve-month period.
5.4. LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS.
From and after the Closing Date, the Company shall not enter into any agreement
granting any holder or prospective holder of any securities of the Company
registration rights with respect to such securities without the written consent
of the holders of a majority of the Registrable Securities then outstanding,
unless (i) such other registration rights are subordinate to the registration
rights granted to the Holders hereunder, and (ii) the holders of such rights are
subject to market standoff obligations no more favorable to such persons than
those contained herein. The Investors acquiring Registrable Securities on the
Closing Date hereby consent to the execution of this Agreement after the date
hereof by the purchaser or purchasers of the Price Waterhouse Preferred Stock.
Upon execution, such purchaser or purchasers shall be deemed Investors hereunder
as if set forth on the Schedule of Investors attached hereto.
5.5. EXPENSES OF REGISTRATION. All Registration
Expenses incurred in connection with (i) two registrations pursuant to
Section 5.1, (ii) all registrations pursuant to
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Section 5.2, and (iii) two registrations pursuant to Section 5.3, shall be borne
by the Company; provided, however, that the Company shall not be required to pay
for any Registration Expenses incurred in connection with a registration
pursuant to Section 5.1 or 5.3 if the registration request is subsequently
withdrawn at the request of the Holders of a majority of the Registrable
Securities to be registered (in which case all Holders initially participating
in such registration shall bear such expenses), unless the Holders of a majority
of the Registrable Securities agree to forfeit their right to one registration
pursuant to Section 5.1 or 5.3, respectively. Unless otherwise stated, all
Selling Expenses relating to securities registered on behalf of the Holders and
all other registration expenses shall be borne by the Holders of such securities
pro rata on the basis of the number of shares so registered.
5.6. REGISTRATION PROCEDURES. In the case of each
registration, qualification or compliance effected by the Company pursuant to
this Agreement, the Company will keep each Holder advised in writing as to the
initiation of each registration, qualification and compliance and as to the
completion thereof. At its expense the Company will:
(a) Prepare and file with the Commission a
registration statement with respect to such securities and use its best efforts
to cause such registration statement to become and remain effective for at least
one hundred twenty (120) days or until the distribution described in the
registration statement has been completed, whichever first occurs; and
(b) Furnish to the Holders participating in
such registration and to the underwriters of the securities being registered
such reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as such Holders and
underwriters may reasonably request in order to facilitate the public offering
of such securities.
5.7. INDEMNIFICATION.
(a) The Company will indemnify each Holder of
Registrable Securities included in a registration pursuant to this Agreement,
each of its officers and directors and partners, and each person controlling
such Holder within the meaning of Section 15 of the Securities Act, with respect
to which registration, qualification or compliance has been effected pursuant to
this Agreement, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, 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, the Securities Exchange Act of 1934, state securities law or any
rule or regulation promulgated under such laws applicable to the Company in
connection with any such registration, qualification or compliance, and the
Company will reimburse each such Holder, each of its officers, directors and
partners, and each person controlling such Holder, each such underwriter
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and each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred, as such expenses are incurred, in connection with
investigating, preparing or 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 omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written information
furnished to the Company by any Holder, controlling person or underwriter and
stated to be specifically for use therein; provided, however, that the foregoing
indemnity agreement is subject to the condition that, insofar as it relates to
any such untrue statement, alleged untrue statement, omission or alleged
omission made in a preliminary prospectus on file with the Commission at the
time the registration statement becomes effective or the amended prospectus
filed with the Commission pursuant to Rule 424(b) (the "Final Prospectus"), such
indemnity agreement shall not inure to the benefit of any underwriter, or any
Holder, if there is no underwriter, if a copy of the Final Prospectus 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, and if the
Final Prospectus would have cured the defect giving rise to the loss, liability,
claim or damage.
(b) Each Holder will, if Registrable Securities held
by such Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, 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 Section 15 of the
Securities Act, and each other such Holder, each of its officers, directors and
partners and each person controlling such Holder within the meaning of Section
15 of the Securities Act, against all expenses, 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, or any violation by such Holder of the Securities Act, the
Securities Exchange Act of 1934, state securities laws or any rule or regulation
promulgated under such laws applicable to such Holder in connection with any
such registration, qualification or compliance, and will reimburse the Company,
such other Holders, such directors, officers, partners, persons, underwriters or
control persons for any legal or any other expenses reasonably incurred, as such
expenses are incurred, in connection with investigating, preparing 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 and
stated to be specifically for use therein. Notwithstanding the foregoing, the
liability of each Holder under this Section 5.7(b) shall be limited in an amount
equal to the net proceeds of the shares sold by such Holder, unless such
liability arises out of or is based on willful misconduct by such Holder.
(c) Each party entitled to indemnification under this
Section 5.7 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as
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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 litigation, 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 Agreement unless
the failure to give such notice is materially prejudicial to an Indemnifying
Party's ability to defend such action, and provided further that the
Indemnifying Party shall not assume the defense for matters as to which
representation of both the Indemnifying Party and the Indemnified Party by the
same counsel would be inappropriate due to actual or potential differing
interests between them, but shall instead in such event pay the fees and costs
of separate counsel for the Indemnified 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.
5.8. INFORMATION BY HOLDER. The Holder or Holders of
Registrable Securities included in any registration shall furnish to the Company
such information regarding such Holder or Holders, the Registrable Securities
held by them and the distribution proposed by such Holder or Holders as the
Company may request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Agreement.
5.9. 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 Restricted Securities to the public without
registration, after such time as a public market exists for the Common Stock of
the Company, the Company agrees to use its best efforts to:
(a) Make and keep public information available,
as those terms are understood and defined in Rule 144 under the Securities Act,
at all times after the effective date that the Company becomes subject to the
reporting requirements of the Securities Act or the Securities Exchange Act of
1934, as amended;
(b) File with the Commission in a timely manner
all reports and other documents required of the Company under the Securities Act
and the Securities Exchange Act of 1934, as amended (at any time after it has
become subject to such reporting requirements); and
(c) So long as a Holder owns any Restricted
Securities to furnish to such Holder forthwith upon request a written statement
by the Company 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 the Company for an offering of its securities to
the general public) and of the Securities Act and the Securities Exchange Act of
1934 (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 of the Company and other information in the
possession of or reasonably obtainable by the Company as the Holder may
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reasonably request in availing itself of any rule or regulation of the
Commission allowing the Holder to sell any such securities without registration.
5.10. TRANSFER OF REGISTRATION RIGHTS. The rights to
cause the Company to register securities granted Investors under Sections 5.1,
5.2 and 5.3 may be assigned to a transferee or assignee in connection with any
transfer or assignment of Registrable Securities by the Investor provided that:
(i) such transfer may otherwise be effected in accordance with applicable
securities laws, (ii) such assignee or transferee acquires at least 100,000
shares of Preferred Stock and/or Conversion Stock held by the assignor or
transferor (appropriately adjusted for recapitalizations, stock splits and the
like), (iii) written notice is promptly given to the Company and (iv) such
transferee agrees to be bound by the provisions of this Agreement.
Notwithstanding the foregoing, the rights to cause the Company to register
securities may be assigned to (A) any affiliated partnership or constituent
partner or retired partner of an Investor which is a partnership, or (B) an
officer, director or shareholder or a subsidiary, parent or affiliated
corporation of an Investor which is a corporation, or (C) a family member or
trust for the benefit of an Investor who is an individual, without compliance
with item (ii) above, provided written notice thereof is promptly given to the
Company and the transferee agrees to be bound by the provisions of this
Agreement.
5.11. TERMINATION OF REGISTRATION RIGHTS. The rights
granted pursuant to Sections 5.2 and 5.3 of this Agreement shall terminate as to
any Holder at such time as such Holder (i) can sell all of his Registrable
Securities pursuant to Rule 144(k) promulgated under the Securities Act or (ii)
can sell all of his Registrable Securities pursuant to Rule 144 promulgated
under the Securities Act in any ninety (90) day period.
6. FINANCIAL INFORMATION.
(a) The Company will provide the following
reports to each Investor (other than the Series A Investors):
(i) As soon as practicable after the
end of each fiscal year, and in any event within 90 days thereafter,
consolidated balance sheets of the Company and its subsidiaries, if any, as of
the end of such fiscal year, and consolidated statements of operations and of
cash flows and shareholders' equity of the Company and its subsidiaries, if any,
for such year, prepared in accordance with generally accepted accounting
principles and setting forth in each case in comparative form the figures for
the previous fiscal year, all in reasonable detail and audited by independent
public accountants of national standing selected by the Company;
(ii) As soon as practicable after the
end of the first, second and third quarterly accounting periods 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 quarterly period, and consolidated statements of operations and of cash
flows 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 (other than for accompanying notes), subject to changes resulting
from year-end audit adjustments, in reasonable detail and signed by the
principal financial or accounting officer of the Company;
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(iii) Within 30 days after the end of
each monthly accounting period, a consolidated condensed balance sheet of the
Company and its subsidiaries, if any, as of the end of each such monthly period,
and consolidated condensed statement of operations 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 (other than for
accompanying notes), subject to changes resulting from year-end audit
adjustments, signed by the principal financial or accounting officer of the
Company; and
(iv) At least 30 days prior to the
beginning of each fiscal year, a budget adopted by the Company's Board of
Directors for the fiscal year, prepared on a monthly basis, including balance
sheets and sources and applications of funds statements for such months, and, as
soon as prepared, any other budgets or revised budgets prepared by the Company.
7. INSPECTION. The Company shall permit each Investor (other
than the Series A Investors), at such Investor's expense, to visit and inspect
the Company's properties, to examine its books of account and records and to
discuss the Company's affairs, finances and accounts with its officers, all at
such reasonable times as may be requested by such Investor; provided, however,
that the Company shall not be obligated pursuant to this Section 7 to provide
access to any information which it reasonably considers to be a trade secret or
similar confidential information.
8. CONFIDENTIALITY. Each Investor (other than the Series A
Investors) and transferee acknowledges and agrees that any information obtained
pursuant to Section 6 or 7 which may be considered "inside" non-public
information will not be utilized by such Investor or transferee in connection
with purchases or sales of the Company's securities and will not be disclosed by
any such Investor or transferee.
9. RIGHT OF FIRST REFUSAL.
(a) The Company hereby grants to each Qualified
Investor (as defined in this Section 9) a right of first offer with respect to
future sales of New Securities (as defined in this Section 9) by the Company.
For purposes of this Section 9, a Qualified Investor shall mean any Investor
(other than a Series A Investor) who holds at least 100,000 shares of Preferred
Stock and/or Conversion Stock (appropriately adjusted for recapitalizations,
stock splits and the like).
(b) Except as set forth below, "New Securities" shall
mean any shares of capital stock of the Company, including Common Stock and any
series of preferred stock, whether now authorized or not, and rights, options or
warrants to purchase said shares of Common Stock or preferred stock, and
securities of any type whatsoever that are, or may become, convertible into or
exchangeable for said shares of Common Stock or preferred stock. Notwithstanding
the foregoing, "New Securities" does not include (i) the Conversion Stock, (ii)
the Price Waterhouse Preferred Stock, (iii) Common Stock offered to the public
generally pursuant to a registration statement under the Securities Act in
connection with the Company's initial public offering, (iv) securities issued
pursuant to the acquisition of another corporation by the Company by merger,
purchase of all or substantially all of the assets or other reorganization
whereby the Company or its shareholders own more than fifty percent (50%) of the
voting power
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of the surviving or successor corporation, (v) up to 7,300,000 shares (net of
any repurchases) of the Company's Common Stock or related options, warrants or
other rights to purchase such Common Stock issued on or after the inception of
the Company to employees, officers and directors of, and consultants to, the
Company, pursuant to arrangements approved by the Board of Directors of the
Company, (vi) stock issued pursuant to any rights, agreements or convertible
securities, including without limitation options and warrants, provided that (x)
such rights, agreements or convertible securities were outstanding prior to the
date of this Agreement, or (y) the rights of first refusal established by this
Section 9 applied with respect to the initial sale or grant by the Company of
such rights, agreements or convertible securities, or (vii) stock issued in
connection with any stock split, stock dividend or recapitalization by the
Company.
(c) In the event the Company proposes to
undertake an issuance of New Securities, it shall give each Qualified Investor
written notice of its intention, describing the amount and type of New
Securities, and the price and terms upon which the Company proposes to issue the
same. Each Qualified Investor shall have fifteen (15) days from the date of
receipt of any such notice to agree to purchase up to its respective Pro Rata
Share (as defined below) of such New Securities for 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. A Qualified Investor's
"Pro Rata Share" of New Securities, for purposes of this right of first offer,
is the ratio that (i) the sum of the number of shares of Common Stock then held
by such Qualified Investor and the number of shares of Common Stock issuable
upon conversion of the Preferred Stock then held by such Qualified Investor
bears to (ii) the sum of the total number of shares of Common Stock then
outstanding and the number of shares of Common Stock issuable upon exercise or
conversion of all then outstanding securities exercisable for or convertible
into, directly or indirectly, Common Stock.
(d) In the event all of the New Securities are
not elected to be purchased by Qualified Investors within fifteen (15) days
after the notice pursuant to Section 9(c) above, the Company shall have ninety
(90) days thereafter to sell the New Securities not elected to be purchased by
Qualified Investors at the price and upon the terms no more favorable to the
purchasers of such securities than specified in the Company's notice. In the
event the Company has not sold the New Securities within said ninety (90) day
period, the Company shall not thereafter issue or sell any New Securities
without first offering such securities in the manner provided above.
(e) The right of first refusal hereunder is not
assignable except by each of such Qualified Investors to any party who acquires
at least 100,000 shares of the Preferred Stock and/or Conversion Stock
(appropriately adjusted for recapitalizations, stock splits and the like).
10. TERMINATION OF COVENANTS. The covenants set forth in Sections
6, 7 and 9 shall terminate and be of no further force or effect upon the
consummation of a firm commitment underwritten public offering or at such time
as the Company is required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended, whichever shall occur first.
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11. STANDOFF AGREEMENT. In connection with the initial public
offering of the Company's securities, each Investor and Holder agrees, upon
request of the Company or the underwriters managing any underwritten offering of
the Company's securities, not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any securities of the
Company (other than those included in the registration) without the prior
written consent of the Company or such underwriters, as the case may be, for
such period of time (not to exceed one hundred eighty (180 days) from the
effective date of such registration as may be requested by the underwriters,
provided that all officers and directors of the Company who own stock of, or
hold options to purchase stock of, the Company and all other persons who hold 5%
or more of the then outstanding capital stock of the Company also agree to such
restrictions. The Investors and Holders agree that the Company may instruct its
transfer agent to place stop-transfer notations in its records to enforce the
provisions of this Section 11.
12. DETERMINATION OF SHARE AMOUNTS AND PERCENTAGES. For the
purposes of determining the minimum holdings set forth in this Agreement,
including without limitation the minimum holdings pursuant to Sections 5.10,
9(a), 9(e) and 13(b), the following rules shall govern:
(a) All shares held by entities affiliated with
the Holder shall be deemed held by such Holder, and any Holder which is a
partnership shall be deemed to hold any shares of Preferred Stock and/or
Conversion Stock originally purchased by such Holder and subsequently
distributed to partners of such Holder, but which have not been resold by such
partners.
(b) When shares of Preferred Stock are counted
together with shares of Conversion Stock or shares of Common Stock, shares of
Preferred Stock shall be counted on an as-converted into Common Stock basis, and
the term "Conversion Stock" shall mean only the shares of Common Stock which
have been issued pursuant to conversion of Preferred Stock.
13. AMENDMENT.
(a) Any provision of Section 5 of this Agreement
may be amended or the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of a majority of the Registrable
Securities then outstanding or deemed to be outstanding. Any amendment or waiver
effected in accordance with this Section 13(a) shall be binding upon each
Investor and each Holder of Registrable Securities at the time outstanding or
deemed to be outstanding (including securities into which such securities are
convertible), each future holder of all such securities, and the Company.
(b) Except as expressly provided herein, no
other Section of this Agreement may be amended, waived, discharged or terminated
other than by a written instrument signed by the party against whom enforcement
of any such amendment, waiver, discharge or termination is sought; provided,
however, that holders of a majority of the Preferred Stock and Conversion Stock
may, with the Company's prior written consent, waive, modify or amend on behalf
of all Holders any provisions hereof so long as the effect thereof will be that
all such persons will be treated in the same manner.
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14. GOVERNING LAW. This Agreement and the legal relations between
the parties arising hereunder shall be governed by and interpreted in accordance
with the laws of the State of California as such laws are applied to agreements
between California residents entered into and to be performed entirely within
California. The parties hereto agree to submit to the jurisdiction of the
federal and state courts of the State of California with respect to the breach
or interpretation of this Agreement or the enforcement of any and all rights,
duties, liabilities, obligations, powers, and other relations between the
parties arising under this Agreement.
15. ENTIRE AGREEMENT. This Agreement constitutes the full and
entire understanding and agreement between the parties regarding the matters set
forth herein. 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.
16. NOTICES, ETC. All notices and other communications required
or permitted hereunder shall be in writing and shall be deemed effectively given
upon personal delivery to the party to be notified or three (3) days after
deposit with the United States mail, by registered or certified mail, postage
prepaid, addressed (a) if to an Investor, at such Investor's address as set
forth on the Schedule of Investors attached hereto, or at such other address as
such Investor shall have furnished to the Company in writing in accordance with
this Section 16, (b) if to any other holder of Preferred Stock or Conversion
Stock, at such address as such holder shall have furnished the Company in
writing in accordance with this Section 16, 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 principal office.
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17. 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.
The foregoing agreement is hereby executed as of the date first above
written.
"COMPANY"
INFINITY FINANCIAL TECHNOLOGY, INC.,
a California corporation
By:______________________________________________
Title:___________________________________________
"INVESTOR"
SEQUOIA CAPITAL GROWTH FUND
SEQUOIA TECHNOLOGY PARTNERS III
By:______________________________________________
Title:___________________________________________
"MANAGEMENT"
- ---------------------------------------
Name
- ---------------------------------------
Signature
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SCHEDULE OF INVESTORS
Sequoia Capital Growth Fund
Sequoia Technology Partners III
Series A Investors
Roger A. Lang and Sue Jane Lang
Craig P. Duling
Jagtar and Shivtej Sandhu