EXHIBIT 10.4
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (the "Agreement") entered into as of this 12th
day of August, 2004 by and between LoyaltyPoint, Inc. (the "Company"), a
Delaware corporation, and American Express Incentive Services, LLC, a Missouri
limited liability company ("AEIS" or the "Holder").
WHEREAS, the Company and the Holder have entered into that certain
Stock and Warrants Purchase Agreement, dated as of the date hereof (the
"Purchase Agreement"); and
WHEREAS, the Company has agreed to provide certain registration rights
to the Holder in connection with the shares of Common Stock sold to the Investor
pursuant to the Purchase Agreement;
NOW, THEREFORE, the parties hereby agree as follows:
1. DEFINITIONS. Unless the context otherwise requires, the terms defined in this
Section 1 shall have the meanings herein specified for all purposes of this
Agreement, applicable to both the singular and plural forms of any of the terms
herein defined. All other capitalized terms shall have the meaning contained in
this Purchase Agreement.
Affiliate: With reference to any designated Person, any Person that has
a relationship with such designated Person whereby either of such Persons
directly or indirectly controls or is controlled by or is under common control
with the other. For this purpose "control" means the power, direct or indirect,
of one Person to direct or cause direction of the management and policies of
another, whether by contract, through voting securities or otherwise.
Commission: The Securities and Exchange Commission or any other
governmental body at the time administering the Securities Act of 1933.
Common Stock: The Company's authorized common stock, as constituted on
the date of this Agreement, any stock into which such Common Stock may
thereafter be changed and any stock of the Company of any other class, which is
not preferred as to voting, dividends or assets over any other class of stock of
the Company and which is not subject to redemption, issued to the holders of
shares of such Common Stock upon any re-classification thereof.
Company Securities: Any equity securities proposed to be sold by the
Company in the registration statement referred to.
Exchange Act: The Securities Exchange Act of 1934.
Holder: AEIS or any transferee, in whole or in part, of the Warrants
or the Common Stock issued upon exercise of the Warrants.
1
Person: A corporation, an association, a partnership, a limited
liability company, a joint venture, a trust, an organization, a business, an
entity, an individual, a government or political subdivision thereof or a
governmental body.
Registrable Securities: Common Stock issued pursuant to the Purchase
Agreement or issuable upon exercise of the Warrants and any securities of the
Company issued with respect to the Common Stock purchased pursuant to the
Purchase Agreement by way of stock dividend or stock split or in connection with
a combination, recapitalization, share exchange, consolidation or other
reorganization of the Company. As to any Registrable Securities, once issued
such securities shall cease to be Registrable Securities when (i) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (ii) they shall have been
distributed to the public pursuant to Rule 144 under the Securities Act or any
successor provision (any "Rule 144"), (iii) they shall have been otherwise
transferred, new certificates for them not bearing a legend restricting further
transfer shall have been delivered by the Company and subsequent disposition of
them shall not require registration or qualification of them under the
Securities Act or any similar state law then in force, (iv) such securities have
become eligible for sale under Rule 144 (k), (v) five years have elapsed from
the date of this Agreement, or (vi) they shall have ceased to be outstanding.
Provided, further, that in determining the number of Registrable Securities that
shall be registered, the Company shall not be obligated to register the maximum
number of shares that may be sold under Rule 144 as of the date upon which the
Company receives or gives the notice referred to in Section 2.
Securities Act: The Securities Act of 1933.
Selling Expenses: All underwriting discounts, selling commissions and
stock transfer taxes applicable to the securities registered by the Holder and
all fees and disbursements of counsel for the Holder.
2. RGISTRATION RIGHTS.
Section 2.1 Demand Registration. If prior to the time the Company is
eligible to use Form S-3 for offerings by selling stockholders the Company shall
receive a written request from the Holders of a majority of the Registrable
Securities then outstanding that the Company file a registration statement under
the Securities Act covering the registration of Registrable Securities pursuant
to this Section 2.1, then the Company shall, within 20 days after the receipt of
such written request, give written notice of such request (the "Request Notice")
to all Holders (if any other than AEIS), and effect, as soon as practicable, the
registration under the Securities Act of all Registrable Securities which
Holders request to be registered and included in such registration by written
notice given by such Holders to the Company within 20 days after receipt of the
Request Notice, subject only to the limitations of this Section 2.1; provided
that the Registrable Securities requested by all Holders to be registered
pursuant to such request must have an anticipated aggregate public offering
price (before any underwriting discounts and commissions) of not less than
$2,500,000. The Company is obligated to effect only one such registration
pursuant to this Section 2.1.
2
Section 2.2 Form S-3 Registration. Provided that the Company is
eligible to use Form S-3 for offerings by selling stockholders, in case the
Company shall receive from any Holder or Holders of at least 30% of Registrable
Securities then outstanding a written request or requests that the Company
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 the Company shall promptly give written notice of the proposed
registration and the Holder's or Holders' request therefor, and any related
qualification or compliance, to all other Holders (if any other than AEIS)of
Registrable Securities, and as soon as practicable, effect such registration and
all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any other
Holder or Holders joining in such request as are specified in a written request
given within 20 days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.2:
(a) if Form S-3 is not available for such offering;
(b) if the Holders, together with the holders of any other securities
of the Company 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 $1,000,000; or
(c) if the Company has, within the 12 month period preceding the date
of such request, already effected two registrations on Form S-3 for the Holders
pursuant to this Section 2.2.
Section 2.3 Piggyback Registration. If the Company at any time proposes
to register any of its equity securities under the Securities Act on any form
other than Form S-4 or Form S-8 (or any similar or successor form then in
effect), whether or not for sale for its own account, and if the registration
form proposed to be used may be used for the registration of Registrable
Securities, the Company shall in each such case give prompt written notice (and
in any event at least 10 business days prior written notice prior to the filing
of such registration statement) to the Holders of the Company's intention to do
so, such notice to specify the securities to be registered, the proposed numbers
and amounts thereof and the date not less than 10 days thereafter by which the
Company must receive the Holders' written indication of whether the Holders wish
to include their Registrable Securities in such registration statement and
advising the Holders of their rights under this Section 3. Upon the written
request of any Holder made on or before the date specified in such notice (which
request shall specify the number of Registrable Securities intended to be
disposed of by such Holder), the Company shall, subject to the limitations of
Sections 3.2(a) and 6.2 and to the extent permitted under Section 7, use its
commercially reasonable efforts to cause all such Registrable Securities, which
the Holders have so requested the registration thereof, to be registered under
the Securities Act (with the securities that the Company at the time proposes to
register), to the extent requisite to permit the sale or other disposition (in
accordance with the intended methods thereof as aforesaid) by the Holders of the
Registrable Securities to be so registered.
3
Section 2.4 Discontinuance. Notwithstanding anything to the contrary in
this Section 2, the Company shall have the right to discontinue any registration
under this Section 2 at any time prior to the effective date of such
registration if the registration of other securities giving rise to such
registration under this Section 2 is discontinued.
3. REGISTRATION PROCEDURES
Section 3.1 Obligations of the Company. If and whenever the Company is
required by the provisions hereof to effect or cause the registration of any
Registrable Securities under the Securities Act as provided herein, the Company
shall, as expeditiously as possible:
(a) prepare and file with the Commission (in the case of a registration
pursuant to Section 2, such filing to be made as soon thereafter as possible but
in any event within 60 days after the request by the Holder to register
Registrable Securities) a registration statement with respect to such
Registrable Securities and use all commercially reasonable efforts to cause such
registration statement to become and remain effective (provided that, before
filing a registration statement or prospectus or any amendments or supplements
thereto, the Company shall furnish to one counsel selected by the Holder copies
of all such documents proposed to be filed);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective as
provided in Section 3.2(a) and to comply with the provisions of the Securities
Act with respect to the sale or other disposition of all securities covered by
such registration statement during such period in accordance with the intended
methods of disposition by the seller or sellers thereof set forth in such
registration statement;
(c) furnish to counsel for the Holder and each underwriter of the
securities being sold by the Holder such number of copies of such registration
statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included in
such registration statement (including each preliminary prospectus), in
conformity with the requirements of the Securities Act, and such other
documents, as such counsel may reasonably request, in substantially the form in
which they are proposed to be filed with the Commission, in order to facilitate
the public sale or other disposition of the Registrable Securities owned by the
Holder;
(d) use all commercially reasonable efforts to register or qualify such
Registrable Securities covered by such registration statement under such other
securities or blue sky laws of New York, or any other state requested by a
Holder that does utilize a merit review or fairness approach in connection with
federally registered offerings, subject to the commitment of AEIS and the
Holders collectively not to request registration in any particular state unless
it has a good faith expectation that at least 300,000 shares will be offered for
sale in that state, and do any and all other acts and things which may be
necessary or advisable to enable the Holders and any underwriter to consummate
the disposition in such jurisdiction of such Registrable Securities owned by the
Holder. Provided, however, the Company shall not be required to register or
qualify such Registrable Securities in any particular jurisdiction in which the
Company 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.
4
(e) notify the Holder at any time when a prospectus relating to its
Registrable Securities is required to be delivered under the Securities Act, of
the Company's becoming aware that the prospectus included in the related
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing, and promptly prepare and furnish to the Holder and
each underwriter a reasonable number of copies of a prospectus supplemented or
amended so that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the circumstances
then existing;
(f) otherwise use all commercially reasonable efforts to comply with
all applicable rules and regulations of the Commission;
(g) to the extent applicable if the principal trading market for the
Company's Common Stock is a national securities exchange or The Nasdaq Stock
Market ("Nasdaq"), use all commercially reasonable efforts (i) to cause all such
Registrable Securities covered by such registration statement to be listed on
such national securities exchange or Nasdaq (if such Registrable Securities are
not already so listed) ;
(h) enter into such agreements (including an underwriting agreement in
customary form) and take such other actions as the Holder shall reasonably
request in order to expedite or facilitate the disposition of its Registrable
Securities;
(i) make available for inspection by the Holder and by any underwriter
participating in any disposition to be effected pursuant to such registration
statement and by any attorney, accountant or other agent retained by the Holder
or any such underwriter, all pertinent financial and other records, pertinent
corporate documents and properties of the Company, and cause all of the
Company's officers, directors, employees and the independent public accountants
who have audited its financial statements to supply all information reasonably
requested by the participating Holder, underwriter, attorney, accountant or
agent in connection with such registration statement;
(j) in the case of an underwritten offering, enable the Registrable
Securities to be in such denominations and registered in such names as the
underwriters may request at least two business days prior to the sale of the
Registrable Securities;
(k) notify the Holder of any stop order threatened or issued by the
Commission and take all actions reasonably necessary to prevent the entry of
such stop order or to remove it if entered; and
(l) in any public offering in which an underwriter has, either alone or
together with other underwriters, agreed to purchase the Common Stock from the
Holders ,obtain a cold comfort letter from the Company's independent public
accountants in customary form and covering such matters of the type customarily
covered by cold comfort letters as the Holders of a majority of the Registrable
Securities being sold reasonably request (provided that such
5
Registrable Securities constitute at least 10% of the securities covered by such
registration statement).
Section 3.2 Other Procedures.
(a) The Company shall be required to maintain the effectiveness of a
registration statement until the earlier of (i) the sale of all Common Stock
owned by the Holder or (ii) a total of three months (six months if registered on
Form S-3). In the event that the registration statement is required to be
amended or supplemented and the Company gives the Holder notice of such
requirement, the Holder shall cease all sales. The Company shall have no
liability to the Holder for delays in the Holder being able to sell the
Registerable Securities (i) if the Company uses its commercially reasonable
efforts to file post-effective amendments or supplements, (ii) where the
required financial statements are unavailable, or (iii) where the Company would
be required to disclose information that it has no duty to disclose under the
Securities Act, the Exchange Act, or the rules and regulations of the
Commission.
(b) The Holder shall be deemed to have agreed by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3.1(e) above, the Holder
shall forthwith discontinue its disposition of Registrable Securities pursuant
to the registration statement covering such Registrable Securities until the
Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by said Section 3.1(e) and, if so directed by the Company, shall
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in the Holder's possession of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice. In the event the Company shall give any such notice, the period
mentioned in Section 3.2(a) above shall be extended by the number of days during
the period from and including the date of the giving of such notice to and
including the date when the Holders shall have received the copies of the
supplemented or amended prospectus contemplated by Section 3.1(e) above.
(c) The Holder shall furnish to the Company in writing such information
and documents regarding it and the distribution of its securities as may
reasonably be required to be disclosed in the registration statement in question
by the rules and regulations under the Securities Act or under any other
applicable securities or blue sky laws of the jurisdiction referred to in
Section 3.1(d) above. The Holder shall also promptly execute any representation
letter concerning compliance with Regulation M under the Exchange Act (or any
successor rule or regulation).
(d) If any such registration or comparable statement refers to the
Holder by name or otherwise as the holder of any securities of the Company, but
such reference to the Holder by name or otherwise is not required by the
Securities Act or any similar federal statute then in force, then the Holder
shall have the right to require the deletion of the reference to the Holder.
6
Section 3.3 Priority of Accel Partners and Certain Other Investors.
(a) AEIS acknowledges that the Company is negotiating to sell
up to $4 million of its securities to Accel Partners and/or its affiliates
("Accel) and a limited number of investors not currently affiliated with the
Company. In the event that (i) the Company consummates the sale of least $3
million of its securities to Accel and these other investors and/or (ii) in the
future the Company sells at least $4 million of its securities to investors in
public or private offerings to or through an underwriter or selling
broker-dealer (any "Future Investors"), AEIS agrees to the extent requested to
subordinate all of its rights hereunder if requested by Accel or a majority
(based upon amounts invested) of the Future Investors.
(b) In addition to the subordination provisions contained in
Section 3.3(a) hereof, during any 12 month period commencing with the making of
a request described in this sentence, if AEIS seeks to exercise its demand, Form
S-3 or piggyback rights it shall give written notice to the Company, Accel and
the Future Investors that it wishes to exercises its rights hereunder. If within
20 days after the giving of such notice by AEIS to the Company, Accel and the
Future Investors, either Accel and/or a majority (based upon amounts invested)
of the Future Investors, as the case may be, requests that AEIS defer or limit
such rights, AEIS shall be bound by and comply with such written request for a
period not to exceed 90 days after which AEIS may exercise its rights hereunder
free of any restrictions from Accel and/or the Future Investors for the
remainder of such 12-month period.
(c) If AEIS elects to exercise its demand, Form S-3 or
piggyback rights hereunder, it shall give written notice to the Company, Accel
and/or the Future Investors to the extent applicable. AEIS may not exercise any
piggyback rights under this Agreement in connection with any registration
statement that has been initiated by Accel or Future Investors, whether such
registration statement is a demand, Form S-3 or in the case of Future Investors
a required registration, unless and then only to the extent that Accel and/or
the Future Investors have consented thereto in writing.
(d) In furtherance of the subordination rights of Accel and
any Future Investors, AEIS agrees that they shall be treated as third party
beneficiaries of this Agreement and shall have the right to enforce all of the
subordination provisions and limitations of the registration rights hereunder
independently of the Company and notwithstanding any waiver by or failure to act
of the Company.
Section 3.4 Priority on Demand Registrations. Except as provided in
Section 3.3, if a demand registration under Section 2.1 (a "Demand
Registration") is underwritten and the managing underwriters advise the Company
in writing that in their opinion the number of Registrable Securities requested
to be included exceeds the number that can be sold in such offering, at a price
reasonably related to fair value, the Company will include in such Demand
Registration (i) first, securities that the Company desires to include on its
own behalf, (ii) second, the Registrable Securities requested to be included in
such Demand Registration pro rata on the basis of the number of Registrable
Securities owned, and (iii) third, any securities of the Company that are not
Registrable Securities and have "piggyback" registration rights. A Demand
Registration shall not be considered to be the Holders' one Demand Registrations
under Section 2.1 hereof, if (i) the Holders are not able to register and sell
in the Demand Registration
7
at least 75 % of the Registrable Securities sought to be included in the Demand
Registration by such Holders, as specified in such Holders' notice by which the
demand was made, or (ii) the gross proceeds of the securities included in the
Demand Registration on behalf of the Company constitute at least 20% of the
total gross proceeds of the Demand Registration.
Section 3.5 Contemporaneous Demand. Except as provided in Section 3.3,
if any holder of the Company's securities that is not a holder of Registrable
Securities under this Agreement exercises demand registration rights to have the
Company register its securities under the Securities Act (a "Non-Holder
Registration") within a period of 30 days before or after the time the Holder
shall have requested a Demand Registration, then (i) the holders of Registrable
Securities that desire to be included in the Non-Holder Registration and the
holders of securities other than Registrable Securities that have registration
rights with respect to such registration shall be entitled to participate in the
Non-Holder Registration on a pro rata basis, according to the number of shares
owned by the holders seeking to have securities included in such registration,
(ii) the Company will pay all of the Registration Expenses of the Non-Holder
Registration (to the extent obligated under its agreement with such holder) and
(iii) the Non-Holder Registration shall not count as a Demand Registration with
respect to the Holders that shall have requested a Demand Registration within
such time period unless the Holders are able to register and sell at least 75%
of the Registrable Securities sought to be registered by the Holders in their
Demand Registration.
Section 3.6 Withdrawal of Demand. If the Holders of a majority of
Registrable Securities disapproves of the terms of an underwritten public
offering, such Holders may elect to withdraw the request for a Demand
Registration by providing written notice to the Company. In the event of such
withdrawal, and if such Holders reimburse the Company for Company Registration
Expenses (as defined in Section 4) arising directly from such Holders' request
for a Demand Registration, such initial request shall not count for purposes of
determining the Holders' right to a Demand Registration pursuant to Section 2.1
hereof.
Section 3.7 Limitations on Demands. The Company shall be entitled to
postpone for a reasonable period of time not to exceed ninety (90) days the
filing of any registration statement otherwise required to be prepared and filed
by it if, at the time it receives the request for a Demand Registration, the
Company determines, in its reasonable judgment, that such Demand Registration
would materially interfere with any then pending financing, acquisition,
corporate reorganization or other material transaction involving the Company,
and promptly gives the Holders who have requested registration of all or part of
their Registrable Securities written notice of such determination and the
reasons therefor. In such event, the Holders shall have the right to withdraw
the request for a Demand Registration by giving written notice to the Company
within 30 days after receipt of the notice of postponement (and, in the event of
such withdrawal, such request shall be ignored for purposes of determining the
Holders' right to a Demand Registration pursuant to Section 2.1. The Company may
not postpone the filing of a registration statement under this Section 3.7 more
than one time in any 12-month period.
Section 3.8 Priority on Primary Registrations. Subject to Section 3.3
hereof, if a piggyback registration under Section 2.3 (a "Piggyback
Registration") is an underwritten primary registration on behalf of the Company,
and the managing underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in such registration
8
exceeds the number which can be sold therein without adversely affecting the
marketability of the offering, the Company shall include in such registration
(a) first, the securities the Company proposes to sell, (b) second, the
Registrable Securities requested to be included in such registration, pro rata
among the Holders of such Registrable Securities (based upon the number of
Registrable Securities requested to be included), until such Registrable
Securities constitute 25% of the securities being registered, (c) third, other
securities requested to be included in such registration, pro rata among the
holders of such securities ; provided however, the holders of Registrable
Securities shall be entitled to register at least 25% of the securities being
registered.
Section 3.9 Priority on Secondary Registrations. Subject to Section 3.3
hereof, if a Piggyback Registration is an underwritten secondary registration on
behalf of holders of the Company's securities, and the managing underwriters
advise the Company in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number which can be
sold in such offering without adversely affecting the marketability of the
offering, the Company shall include in such registration (a) first, the
securities requested to be included therein by the holders requesting such
registration and the Registrable Securities requested to be included in such
registration, pro rata among the holders of such securities (based upon the
number of securities requested to be included) until such Registrable Securities
constitute 25% of the securities being registered, (b) second, the securities
requested to be included therein by the holders requesting such registration,
and the Registrable Securities requesting to be included in such registration,
in equal amounts between (i) the holders requesting such registration on the one
hand and (ii) the holders of Registrable Securities on the other hand, and (c)
other securities requested to be included in such registration, pro rata among
the holders of such securities..
Section 3.10 Holdback Agreements. No Holder of Registrable Securities
shall effect any public sale or distribution (including sales pursuant to Rule
144) of equity securities of the Company, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and the 180-day period beginning on the effective date of any underwritten
Demand Registration or any underwritten Piggyback Registration in which
Registrable Securities are included (except as part of such underwritten
registration), unless the underwriters managing the registered public offering
otherwise agree. In such event, the Holder agrees, if requested, to sign a
customary market stand-off or lock-up letter with the Company's managing
underwriter, and to comply with applicable rules and regulations of the
Securities and Exchange Commission ("Commission").
4. REGISTRATION EXPENSES
In connection with any registration of Registrable Securities pursuant
to Section 2, the Company shall, whether or not any such registration shall
become effective, from time to time, pay all expenses (other than Selling
Expenses) incident to its performance of or compliance herewith (the "Company
Registration Expenses"), including, without limitation, all registration, and
filing fees, fees and expenses of compliance with securities or blue sky laws,
word processing, duplicating expenses, messenger and delivery expenses, fees and
disbursements of counsel for the Company and all independent public accountants
and other Persons retained by the Company.
9
5. INDEMNIFICATION
Section 5.1 Indemnification by the Company. The Company shall
indemnify, to the extent permitted by law, the Holder and each Person, if any,
who controls the Holder within the meaning of Section 15 of the Securities Act
(collectively, "Holder Indemnified Parties"), from and against all losses,
claims, damages, liabilities and expenses, joint or several, to which any such
Holder Indemnified Party may become subject under the Securities Act, the
Exchange Act and all rules and regulations under each such Act, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in any registration statement as
contemplated hereby 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, (ii) any untrue statement or alleged untrue statement of
a material fact contained in any preliminary, final or summary prospectus,
together with the documents incorporated by reference therein (as amended or
supplemented if the Company shall have filed with the Commission any amendment
thereof or supplement thereto), or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, or (iii) any violation by the Company of any federal,
state or common law rule or regulation applicable to the Company and relating to
action of or inaction by the Company in connection with any such registration;
provided, however, that the Company shall not be liable to any such Holder
Indemnified Party insofar as the Company is entitled to indemnification under
Section 5.3 for such losses, claims, damages, liabilities, expenses, actions or
proceedings.
Section 5.2 Indemnification in Underwriting. If the offering pursuant
to any registration statement provided for hereunder is made through
underwriters, no action or failure to act on the part of such underwriters
(whether or not any such underwriter is an Affiliate of any Holder Indemnified
Party) shall affect the Company's obligations to indemnify the Holder
Indemnified Parties pursuant to Section 5.1. If the offering pursuant to any
registration statement provided for hereunder is made through underwriters, the
Company agrees to enter into an underwriting agreement in customary form with
such underwriters and to indemnify such underwriters, their officers and
directors, if any, and each Person, if any, who controls such underwriters
within the meaning of Section 15 of the Securities Act to the same extent as
hereinbefore provided with respect to the indemnification of the Holder
Indemnified Parties; provided, however, that the Company shall not be required
to indemnify any such underwriter, or any officer or director of such
underwriter or any Person who controls such underwriter within the meaning of
Section 15 of the Securities Act, to the extent that the loss, claim, damage,
liability, expense, action or proceeding for which indemnification is claimed
results from such underwriter's failure to send or give a copy of the amended or
supplemented final prospectus, at or prior to the written confirmation of the
sale of Registrable Securities, or to a Person asserting the existence of an
untrue statement or alleged untrue statement or omission or alleged omission if
such statement or omission was corrected in such amended or supplemented final
prospectus prior to such written confirmation and the underwriter was given
notice of the availability of such amended or supplemented final prospectus.
10
Section 5.3 Indemnification by the Holder. In connection with any
registration statement in which the Holder is participating, the Holder shall
furnish to the Company in writing such information as shall be reasonably
requested by the Company for use in any such registration statement or
prospectus and shall indemnify, to the extent permitted by law, the Company, its
officers and directors and each Person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act, against any losses, claims,
damages, liabilities, expenses, actions or proceedings resulting from (i) any
untrue statement or alleged untrue statement of a material fact or any omission
or alleged omission of a material fact required to be stated in the registration
statement or prospectus or preliminary prospectus or any amendment thereof or
supplement thereto, or necessary to make the statements therein not misleading,
but only to the extent that such untrue statement or omission is made in
reliance on or in conformity with any information so furnished in writing by the
Holder expressly for use therein; (ii) any failure by the Holder to register or
qualify the Registerable Securities under the securities laws of any state or
other jurisdiction; (iii) any failure by the Holder (or any brokerdealer acting
on behalf of the Holder) to deliver a prospectus; or (iv) any sale by the Holder
where the broker-dealer or agent acting on its behalf is not lawfully
registered.
Section 5.4 Contribution If for any reason the foregoing indemnity is
unavailable, then the indemnifying party shall contribute to the amount paid or
payable by the indemnified party as a result of such losses, claims, damages,
liabilities or expenses (i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party on the one hand and the
indemnified party on the other, or (ii) if the allocation provided by Section
5.5 above is not permitted by applicable law or provides a lesser sum to the
indemnified party than the amount hereinafter calculated, in such proportion as
is appropriate to reflect not only the relative benefits received by the
indemnifying party on the one hand and the indemnified party on the other but
also the relative fault of the indemnifying party and the indemnified party as
well as any other relevant equitable considerations. Notwithstanding the
foregoing, the Holder shall not be required to contribute any amount in excess
of the amount the Holder would have been required to pay to an indemnified party
if the indemnity under Section 5.1 was available. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
Section 5.5 Indemnification and Contribution Procedures.
(a) A party that seeks indemnification or contribution under this
Section 5 must promptly give the other party notice of any legal action.
However, a delay in notice does not relieve an indemnifying party of any
liability to an indemnified party, except to the extent the indemnifying party
shows that the delay prejudiced the defense of the action.
(b) The indemnifying party may participate in the defense at any time
or it may assume the defense by giving notice to the other party. After assuming
the defense, the indemnifying party:
(i) must select an attorney that is reasonably satisfactory to
the other party;
11
(ii) is not liable to the other party for any later attorney's
fees or for any other later expenses that the other party
incurs;
(iii) must not compromise or settle the action without the other
party's consent (but the other party must not unreasonably
withhold its consent); and
(iv) is not liable for any compromise or settlement made without
its consent.
(c) If the indemnifying party fails to assume the defense within 10
days after receiving notice of the action, the indemnifying party is bound by
any determination made in the action or by any compromise or settlement made by
the other party.
(d) An indemnifying party shall make payments of all amounts required
to be made pursuant to the foregoing provisions of this Section 5 to or for the
account of the indemnified party from time to time promptly upon receipt of
bills or invoices relating thereto or when otherwise due and payable.
(e) No Holder Indemnified Party shall have the power to settle any
action in which the indemnifying party is providing a defense under this Section
5.
6. CERTAIN LIMITATIONS ON REGISTRATION RIGHTS
Section 6.1 Underwritten Offerings. In the case of a registration under
Section 2.3, if the Company determines to enter into an underwriting agreement
in connection therewith, all Registrable Securities to be included in such
registration shall be subject to such underwriting agreement and no Person may
participate in such registration unless such Person agrees to sell such Person's
securities on the basis provided in such underwriting agreement and completes
and/or executes all questionnaires, indemnities, and other reasonable documents
which must be executed under the terms of such underwriting agreement.
Section 6.2 Board of Directors Determination. Notwithstanding the
foregoing rights under this Agreement, if the Company shall furnish to Holders
requesting the filing of a registration statement pursuant to Section 2, a
certificate signed by the President or Chief Executive Officer of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its stockholders
for such registration statement to be filed and it is therefore essential to
defer the filing of such registration statement, then the Company shall have the
right to defer such filing for a period of not more than 90 days after receipt
of the request of the initiating Holders; provided, however, that the Company
may not utilize this right more than once in any 12 month period.
7. RULE 144
The Company covenants that it shall file the reports required to be
filed under the Securities Act and the Exchange Act and the rules and
regulations adopted by the Commission thereunder (or, in the event that the
Company is not required to file such reports, it shall make publicly available
information as set forth in Rule 144(c)(2) promulgated under the Securities
Act), and it shall take such further action as the Holder may reasonably
request, or to the extent
12
required from time to time to enable the Holder to sell its Registrable
Securities without registration under the Securities Act within the limitation
of the exemption provided by Rule 144 under the Securities Act, (or successor
rule) ("Rule 144"). Upon request of any Holder, the Company shall deliver to the
Holder a written statement as to whether it has complied with such requirements.
8. TRANSFER OF REGISTRATION RIGHTS
If and to the extent that the Holder sells or otherwise disposes of
Registrable Securities in any transaction that does not require registration
under the Securities Act (other than a transaction exempt under Rule 144), the
rights of the Holder hereunder with respect to such Registrable Securities shall
be assignable to the transferee of such Registrable Securities; provided,
however, that such transferee agrees in writing to be bound by all the terms and
conditions of this Agreement.
9. RIGHTS OF AMERICAN EXPRESS INCENTIVE SERVICES, LLC. As long as American
Express Incentive Services, LLC has not sold or otherwise transferred 6,000,000
shares of Common Stock being issued to it (including shares issuable upon
exercise of warrants issued to it), the following shall apply:
(a) American Express Incentive Services, LLC shall have anti-dilution
protection in connection with the shares of Common Stock owned by it equal to
that held by the Company's chief executive officer.
(b) The Company's board of directors shall hold meetings at least once
each calendar quarter.
(c) American Express Incentive Services, LLC shall have the right to
designate one person to attend each meeting of the Company's board of directors
who shall be entitled to participate in all discussions and deliberations, but
shall not be entitled to any vote. The Company will provide such person with
notice of, agendas for, and copy of all materials distributed to directors
generally contemporaneously with distribution to the directors.
(d) American Express Incentive Services, LLC shall be entitled to
inspect the books and records of the Company on reasonable notice during normal
business hours, subject to executing a standard Confidentiality Agreement which
agreement may preclude American Express Incentive Services, LLC from being able
to sell its shares of Common Stock for periods of time as a result of such
inspection.
(e) The Company will furnish American Express Incentive Services, LLC
with a (i) business plan and annual operating budget when approved by the board
of directors, (ii) upon reasonable request, current financial statements for the
Company, (iii) audited financial statements within 90 days following the
conclusion of each fiscal year, and (iv) copies of all filings made with the
Commission promptly after such filings are made.
10. LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. Subject to Section 3.3
hereof, the Company shall not, without the prior written consent of a majority
of the shares of Common Stock then owned by the Holders, enter into any
agreement with any holder or prospective holder
13
of any securities of the Company which would have the effect of granting rights
which are inconsistent with the rights granted hereunder, including (i) the
right on demand of such holder to cause the Company to effect a registration of
such securities prior to the date on which a Holder can first make a demand
under Section 2.1 hereof or (ii) any right to include securities in any
registration statement filed under Section 2.3 hereof to the exclusion of
Registrable Securities that any Holder desires to include in any such offering
11. MISCELLANEOUS.
(a) Gender. Any reference to "it" or "its" shall also be deemed to
refer to "him" or "her" as applicable.
(b) Severability. In the event any parts of this Agreement are found to
be void, the remaining provisions of this Agreement shall nevertheless be
binding with the same effect as though the void parts were deleted.
(c) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The execution of this
Agreement may be by actual or facsimile signature.
(d) Benefit. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their legal representatives, successors and
assigns.
(e) Notices and Addresses. All notices, offers, acceptance and any
other acts under this Agreement (except payment) shall be in writing, and shall
be sufficiently given if delivered to the addressees in person, by Federal
Express or similar receipted next business day delivery, or by facsimile
delivery followed by overnight next business day delivery as follows:
the Company: LoyaltyPoint, Inc. with a copy to:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & Associates, P.A.
Suite 550 ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇ Attn: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
the Holder: American Express Incentive Services, LLC
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Legal Management
with a copy to: General Counsel's Office Law Department
of American Express Maritz, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇ ▇▇▇▇▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
14
or to such other address as any of them, by notice to the other may designate
from time to time. The transmission confirmation receipt from the sender's
facsimile machine shall be evidence of successful facsimile delivery. Time shall
be counted to, or from, as the case may be, the date of delivery.
(f) Attorney's Fees. In the event that there is any controversy or
claim arising out of or relating to this Agreement, or to the interpretation,
breach or enforcement thereof, and any action or proceeding including an
arbitration proceeding is commenced to enforce the provisions of this Agreement,
the prevailing parties shall be entitled to an award by the court or arbitrator,
as appropriate, of reasonable attorney's fees, costs and expenses.
(g) Oral Evidence. This Agreement constitutes the entire Agreement
between the parties and supersedes all prior oral and written agreements between
the parties hereto with respect to the subject matter hereof. Neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally, except by a statement in writing signed by the party or
parties against which enforcement or the change, waiver discharge or termination
is sought.
(h) Governing Law. This Agreement and any dispute, disagreement, or
issue of construction or interpretation arising hereunder whether relating to
its execution, its validity, the obligations provided herein or performance
shall be governed or interpreted according to the internal laws of the State of
Delaware without regard to choice of law considerations.
(i) Arbitration. Any controversy, dispute or claim arising out of or
relating to this Agreement, or its interpretation, application, implementation,
breach or enforcement which the parties are unable to resolve by mutual
agreement, shall be settled by submission by either party of the controversy,
claim or dispute to binding arbitration in Atlanta, Georgia (unless the parties
agree in writing to a different location), before three arbitrators in
accordance with the rules of the American Arbitration Association then in
effect. In any such arbitration proceeding the Parties agree to provide all
discovery deemed necessary by the arbitrators. The decision and award made by
the arbitrators shall be final, binding and conclusive on all parties hereto for
all purposes, and judgment may be entered thereon in any court having
jurisdiction thereof.
(j) Section or Paragraph Headings. Section headings herein have been
inserted for reference only and shall not be deemed to limit or otherwise
affect, in any matter, or be deemed to interpret in whole or in part any of the
terms or provisions of this Agreement.
(k) Force ▇▇▇▇▇▇. No party shall be responsible for failure or delay in
performance hereunder by reason of fire, flood, riot, strikes, labor disputes,
freight embargoes, interruption or failure in Internet, telephone or other
interconnection service or related equipment,) any material interruption in the
mail service or other means of communication with the United States, if the
Company shall have sustained a material or substantial loss by fire, flood,
accident, hurricane, earthquake, theft, sabotage, or other calamity or malicious
act which, whether or not such loss shall have been insured acts of God, any
outbreak or material escalation of hostilities, or any national emergency or war
(whether or note declared) affecting the United States, or other calamity or
crises including a terrorist act or act affecting the United States shall have
occurred, the effect of any of which is such as to make it, in the sole judgment
of or of the public enemy, war or civil
15
disturbances, any future laws, rules, regulations or acts of any government
(including any orders, rules or regulations issued by any official or agency of
such government) affecting a party that would delay or prohibit performance
hereunder, or any cause beyond the reasonable control of such party.
[Signature Pages Attached]
16
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed
by its duly authorized officer.
LoyaltyPoint, Inc.
________________________________ By: _____________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇,
Chief Executive Officer
--------------------------------
[Signature Page to Investor Rights Agreement (LoyaltyPoint)]
17
American Express Incentive Services, LLC
________________________________ By: ________________________________
________________________,Manager
--------------------------------
[Signature Page to Investor Rights Agreement (American Express)]
18