<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
October 22, 1997
Date of Report (Date of earliest event reported)
FIRST VIRTUAL HOLDINGS INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 000-21751 33-0612860
- ---------------------------- ------------------------ -------------------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
11975 El Camino Real, Suite 300
San Diego, California 92130-2543
(Address of principal executive offices)
(619) 793-2700
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 5. OTHER EVENTS
On October 22, 1997, First Virtual Holdings Incorporated (the "Company")
issued and sold an aggregate of 1,000 shares of its Series A Preferred Stock
(the "Series A Preferred Stock") and warrants to purchase 850,000 shares of
Common Stock at an exercise price of $5.75 per share (the "Warrants"). The
securities were issued and sold to accredited investors (the "Investors") in a
private offering pursuant to Regulation D of the Securities Act of 1933, as
amended (the "Private Placement"). Gross proceeds to the Company were
$5,000,000.
Each share of Series A Preferred Stock is convertible into the number of
shares of the Company's common stock (the "Common Stock") equal to (i) the
purchase price per share ($5,000) divided by (ii) the Conversion Price. Subject
to certain adjustment provisions, the Conversion Price is equal to the lower of
(a) $5.50 or (b) 80% of the average closing bid price on the Nasdaq National
Market ("Nasdaq") during the last ten days prior to the date of conversion.
Dividends on the Series A Preferred Stock are payable at a rate of $350 per
share per annum, either in cash or in shares of Common Stock.
Unless and until the Company's stockholders approve the Private
Placement at the Company's 1998 annual meeting of stockholders, no shares of
Common Stock shall be issuable upon conversion of the Series A Preferred Stock
or as dividends on the Series A Preferred Stock if such issuance would cause the
total number of shares of Common Stock issued to the Investors to exceed
1,760,000 shares. In addition, the Warrants will not be exercisable unless and
until the Private Placement is approved by the Company's stockholders. Any
shares of Series A Preferred Stock which cannot be converted into Common Stock
because the stockholders fail to approve the transaction will be redeemed by the
Company at 120% of their original purchase price.
The Company has agreed to file prior to December 19, 1997, a
registration statement under the Securities Act of 1933, as amended, to permit
the resale of the Common Stock issuable upon conversion of the Series A
Preferred Stock and upon exercise of the warrants.
In connection with the closing of the Private Placement, the Company
paid to a placement agent a commission fee of $50,000.
The Company's press release announcing the sale of the Series A
Preferred Stock, the Certificate of Designation of the Series A Preferred Stock,
and the form of Private Placement Purchase Agreement are filed as exhibits to
this Current Report on Form 8-K. This summary description of the transaction is
qualified in its entirety by reference to the documents filed as exhibits
hereto.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits in accordance with Item 601 of Regulation S-K:
Exhibits.
99.1 Press Release dated October 23, 1997.
99.2 Certificate of Designations of Series A Preferred Stock dated
October 15, 1997.
99.3 Form of Private Placement Purchase Agreement dated October 22,
1997 between First Virtual Holdings Incorporated and certain
investors.
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FIRST VIRTUAL HOLDINGS INCORPORATED
Dated: October 23, 1997 By: /s/ JOHN M. STACHOWIAK
-------------------------------------
John M. Stachowiak
Vice President, Finance &
Administration and Chief Financial
Officer
<PAGE> 4
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
NUMBER
<S> <C>
99.1 Press Release dated October 23, 1997.
99.2 Certificate of Designation of Series A Preferred Stock dated
October 15, 1997.
99.3 Form of Private Placement Purchase Agreement
dated October 22, 1997 between First Virtual
Holdings Incorporated and certain investors.
</TABLE>
<PAGE> 1
Exhibit 99.1
_______________________________________________________________________________
FOR FURTHER INFORMATION:
AT THE COMPANY:
John Stachowiak, [email protected]
Chief Financial Officer
(619) 350-3540
Todd Savitt, [email protected]
Director, Corporate Communications
(619) 350-3539
________________________________________________________________________________
FOR IMMEDIATE RELEASE
OCTOBER 23, 1997
FIRST VIRTUAL HOLDINGS SECURES $5,000,000 PRIVATE PLACEMENT
San Diego, Calif., October 23, 1997 - First Virtual Holdings Incorporated
(NASDAQ:FVHI), a leader in advanced communications and messaging systems
for Internet commerce, announced today that it has completed a private
placement of securities to a New York-based investment group, with gross
proceeds to First Virtual of $5.0 million.
The securities sold in the private placement consisted of 1,000 shares of First
Virtual Series A Convertible Preferred Stock, and warrants to purchase up to
850,000 shares of First Virtual Common Stock at $5.75 per share. The Series A
Convertible Preferred Stock is convertible into First Virtual Common Stock at
the option of the investors at a per share conversion price equal to the lesser
of $5.50 or 80 percent of the average closing bid price of the Common Stock for
the prior ten trading days. The Series A Convertible Preferred Stock is
redeemable for cash by the investors under certain circumstances, and carries
an annual dividend of seven percent payable in cash or shares of Common Stock.
Lee Stein, chairman and chief executive officer of First Virtual commented, "I
am very pleased that this financing has been completed so that we can continue
to focus our efforts on developing and delivering the Company's Interactive
Messaging Platform and its applications."
-more-
<PAGE> 2
First Virtual Holdings Incorporated
page 2
ABOUT FIRST VIRTUAL HOLDINGS
Founded in 1994, First Virtual Holdings develops and markets leading
interactive messaging services for electronic commerce that integrates secure
payment processing with intelligent messaging and interactive transactional
advertisements. Through the power of e-mail, this platform enables companies to
conduct relationship marketing using a sophisticated messaging system that
includes interactive transactional advertising banners, special transactional
offers, and creative interactive messaging.
The company has its headquarters in San Diego, with research facilities in Ann
Arbor, Mich., and data center facilities in Dallas and San Diego. First Virtual
Holdings has strategic relationships with First Data Corporation, First USA
Paymentech and GE Capital Corporation.
###
<PAGE> 1
EXHIBIT 99.2
CERTIFICATE OF DESIGNATION OF SERIES A
PREFERRED STOCK
of
FIRST VIRTUAL HOLDINGS INCORPORATED
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
We, the undersigned duly authorized officers of First Virtual Holdings
Incorporated, a corporation organized and existing under the General Corporation
Law of the State of Delaware (the "Company"), in accordance with the provisions
of Section 103 thereof, and pursuant to Section 151 thereof, do hereby certify:
That pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of the Company (the "Certificate of
Incorporation"), the Board of Directors of the Company on October 13, 1997,
adopted the following resolution creating a series of 1,000 shares of Series A
Preferred Stock, par value $0.001 per share:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Company in accordance with the provisions of its Certificate
of Incorporation, a series of Series A Preferred Stock of the Company be and it
hereby is created, that the shares of such series shall be designated as Series
A Preferred Stock (the "Series A Preferred Stock"), that the number of shares
constituting such series shall be 1,000 and that the designation and amount
thereof and the preferences and relative, optional and other special rights of
the shares of such series, and the qualifications, limitations or restrictions
thereof are as follows:
1. For purposes of this Certificate of Determination and the Certificate of
Incorporation, (i) any series of Preferred Stock of the Company entitled to
dividends and liquidation preference on a parity with the Series A Preferred
Stock shall be referred to as "Parity Preferred Stock," (ii) any series of
Preferred Stock ranking senior to the Series A Preferred Stock and Parity
Preferred Stock with respect to dividends and liquidation preference shall be
referred to as "Senior Stock," and (iii) the Common Stock and any series of
Preferred Stock ranking junior to the Series A Preferred Stock and Parity
Preferred Stock with respect to dividends and liquidation preference shall be
referred to as "Junior Stock." As of the date of this Certificate of
Determination there is not outstanding any Parity Preferred Stock or Senior
Stock.
2. In the event of any liquidation, dissolution or winding up of the Company,
either voluntary or involuntary, after setting apart or paying in full the
preferential amounts due to holders of Senior Stock, the holders of Series A
Preferred Stock and Parity Preferred Stock shall be entitled to receive, prior
and in preference to any distribution of any of the assets or surplus funds of
the Company to the holders of Junior Stock or common stock of the Company (the
"Common Stock") by reason of their ownership thereof, an amount equal to their
full liquidation preference, which in the case of shares of Series A Preferred
Stock shall be $5,000 per share, plus accrued and unpaid dividends (the
"Redemption Value"). If, upon such liquidation, dissolution or winding-up of the
Company, the assets of the Company available for distribution to the holders of
its stock be insufficient to permit the distribution in full of the amounts
receivable as aforesaid by the holders of Series A
<PAGE> 2
Preferred Stock and Parity Preferred Stock, then all such assets of the Company
shall be distributed ratably among the holders of Series A Preferred Stock and
Parity Preferred Stock in proportion to the amounts which each would have been
entitled to receive if such assets were sufficient to permit distribution in
full as aforesaid. Neither the consolidation nor merger of the Company nor the
sale, lease or transfer by the Company of all or any part of its assets shall be
deemed to be a liquidation, dissolution or winding-up of the Company for the
purposes of this paragraph.
3. The holders of the Series A Preferred Stock shall be entitled to receive
a dividend, payable quarterly on the first day of each calendar quarter
commencing January 1, 1998, which accrues from the date of issuance at the
annual rate of $350 per share. The dividends shall be payable at the option of
the Company either in cash or in shares of Common Stock which on the date of the
dividend payment have a value equal to the dividend, provided that dividends may
be paid in Common Stock only if the public sale thereof is permitted under a
then effective registration statement. The value of each share of Common Stock
for the purposes of any dividend payment shall be equal to the average of the
last reported sales prices therefor on the NASDAQ National Market on the last
five trading days prior to the date of the payment.
4. Conversion
(a) The holder shall have the right at any time in its sole
discretion, to convert the Series A Preferred Stock, in whole or
in part, into a number of shares (the "Conversion Shares") of
Common Stock equal to $5,000 per share converted divided by the
Conversion Price. The "Conversion Price" means the lesser of (1)
$5.50 (the "Cap") or (2) 80% (the "Percentage") of the average of
the closing bid price of a share of Common Stock of the Company
during the ten trading days prior to such conversion.
(b) In the event that the holder elects to exercise its conversion
rights hereunder, it shall give to the Company written notice (by
fax, overnight courier service or personal delivery) of such
election and shall surrender the stock certificates representing
the Series A Preferred Stock to be converted to the Company for
cancellation. Conversion shall be effective upon the giving of
such notice.
(c) All shares of Series A Preferred Stock outstanding as of
September 30, 2001 shall automatically convert into Common Stock
on that date at the Conversion Price then in effect, but only if
the Company's listing on the NASDAQ National Market has been in
effect at all times from and after September 30, 2000, and only
if the Common Stock issuable upon conversion of the Series A
Preferred Stock may then be resold publicly pursuant to an
effective registration statement under the Securities Act of 1933
or under Rule 144 thereunder and only to the extent such
conversion would not violate Section 5 of the Private Placement
Purchase Agreement between the Company and certain investors of
even date herewith (the "Private Placement Purchase Agreement").
(d) The Company shall at all times reserve and keep available out of
its authorized and unissued Common Stock, solely for issuance
upon the conversion of the Series A Preferred Stock as herein
provided, twice the number of shares of Common Stock as shall
from time to time be issuable upon the conversion of the Series A
Preferred Stock.
<PAGE> 3
(e) The Percentage and the Cap shall each be reduced by two
percentage points for each full 30-day period after the 135th day
after the date hereof in which the Registration Statement (as
defined in a Private Placement Purchase Agreement) has not been
declared effective, except to the extent that the effectiveness
of the Registration Statement has been delayed pursuant to
Section 4(g) of the Private Placement Purchase Agreement,
provided that neither the Cap nor the Percentage shall ever be
less than 50% of its initial value. The preceding sentence shall
not limit any other rights or remedies of the holders of Series A
Preferred Stock as a result of the breach by the Company of any
provisions herein relating to the Registration Statement or
otherwise.
(f) The Cap shall be equitably adjusted in case the Company shall
issue Common Stock as a dividend upon Common Stock, shall
subdivide the number of outstanding shares of its Common Stock
into a greater number of shares or shall contract the number of
outstanding shares of its common stock into a lesser number of
shares.
(g) Mergers, Consolidation or Sale
If any consolidation or merger of the Company into another
corporation whose aggregate capitalization is at least
$250,000,000, or the sale or conveyance of all or substantially
all of its assets to any corporation with such capitalization, or
any consolidation or merger or sale of assets for exclusively
cash consideration, shall be effected, then, as conditions
precedent to such transaction, (1) the holders of the Series A
Preferred Stock shall receive not less than 10 days' prior
written notice of such transaction, and (2) upon the consummation
of such transaction (in lieu of the shares of Common Stock
immediately theretofore receivable with respect to such Series A
Preferred Stock, upon the exercise of conversion rights) the
holders of the Series A Preferred Stock shall be issued such
publicly traded shares of stock, securities or assets as would
have been issued or payable with respect to or in exchange for
the number of outstanding shares of such Common Stock receivable
in such consolidation, merger or sale with respect to such Series
A Preferred Stock had the Series A Preferred Stock been converted
immediately prior to the consummation thereof. If any other
consolidation, merger or sale of all or substantially all the
Company's assets shall be effected, or if any capital
reorganization or reclassification of the Common Stock shall be
effected, then, as a condition precedent of such transaction,
appropriate provision shall be made to the end that conversion
rights hereunder (including, without limitation, provisions for
appropriate adjustments) shall thereafter be applicable, as
nearly as may be practicable in relation to the kind of stock,
securities or assets which are deliverable in respect of Common
Stock upon the consummation of such transaction.
(h) Shares of Series A Preferred Stock shall be convertible at any
time only to the extent that holder thereof would not as a result
of such conversion beneficially own more that 4.99% of the then
outstanding Common Stock. Beneficial ownership shall be defined
in accordance with Rule 13d-3 under the Securities Exchange Act
of 1934, as amended. The opinion of counsel to such holder shall
prevail in the event of any dispute on the calculation of the
holder's beneficial ownership.
(i) Should a holder of Series A Preferred Stock propose to convert
any Series A Preferred Stock at a Conversion Price which is less
than $4.00, the Company shall have the
<PAGE> 4
option to redeem all (but not any part) of the shares proposed to
be converted at a redemption price of $6,000 per share, plus any
accrued but unpaid dividends. The option shall be exercisable by
written notice from the Company to such holder which is given
within four business days of delivery of notice of conversion by
such holder and which is accompanied by payment of the redemption
price in full.
5. Certain Payments. In the event the Company fails within five business
days after conversion to deliver to a holder of Series A Preferred Stock
certificates for shares of Common Stock issued upon conversion of any shares of
Series A Preferred Stock, or if the Company fails timely to make any required
redemption payment in respect of any shares of Series A Preferred Stock, then,
without limiting such holder's other rights and remedies (including, without
limitation, rights and remedies available to such holder upon an event of
default), the Company shall forthwith pay to such holder an amount accruing at
the rate of $250 per day for each share of Series A Preferred Stock until such
certificates for shares of Common Stock are delivered. In no event shall the
aggregate amount for any day of all such payments for all Series A Preferred
Stock then outstanding exceed $7,500.
6. Without the consent of a majority-in-interest of the holders of the
Series A Preferred Stock, the Company shall not create any class of equity
security which is senior to or in parity with the Series A Preferred Stock in
liquidation rights, other than in connection with the sale of shares to existing
stockholders of the Company; or to an entity whose relationship with the Company
creates intangible value for the Company; or to fund merger and/or acquisition
related activity.
7. All share, redemption and similar amounts referred to herein are subject
to appropriate adjustment in the event of stock splits, stock dividends,
recapitalizations and similar events.
IN WITNESS WHEREOF, First Virtual Holdings Incorporated has caused this
Certificate of Designation to be executed by Lee H. Stein, its Chief Executive
Officer attested by Philip Bane, its Secretary, this 15th day of October, 1997.
FIRST VIRTUAL HOLDINGS INCORPORATED
/s/ LEE H. STEIN
Lee H. Stein, Chief Executive Officer
ATTEST
/s/ PHILIP BANE
Philip Bane, Secretary
<PAGE> 1
EXHIBIT 99.3
Private Placement Purchase Agreement
October 22, 1997
First Virtual Holdings Incorporated
11975 El Camino Real
San Diego, CA 92130
Gentlemen:
1. The undersigned ("Subscriber") has reviewed the filings which you (the
"Company") have made with the Securities Exchange Commission during the past 12
months. The Company represents and warrants to the Subscriber that all such
filings were made timely, are correct and accurate in all material respects and
in all material respects state all facts necessary to make such filings not
misleading. Subscriber has had the opportunity to discuss the Company's affairs
with the Company's officers.
2. At a closing (the "Closing") to occur at the offices of the Company
simultaneously herewith, the Subscriber will for $50,000 per Unit (as defined
below) purchase from the Company, and the Company will sell, the number of Units
set forth below opposite Subscriber's name below. Each Unit consists of 10
shares of Series A Convertible Preferred Stock (the "Preferred") having a
liquidation value of $5,000 per share (the "Preferred") and warrants (the
"Warrants") to purchase 8,500 shares of common stock of the Company, par value
$0.001 per share ("Common Stock"). Such purchase by Subscriber is part of an
offering in which an aggregate of 100 Units will be sold simultaneously with
such sale to Subscriber. The purchasers of the 100 Units are referred to herein
collectively as the "Purchasers." The purchase price will be paid in full and in
cash at the Closing. The date of the Closing is referred to herein as the
"Completion Date."
3. The Certificate of Determination for the Preferred is in the form of
Exhibit A. The Warrants are in the form of Exhibit B.
4. Registration.
(a) The Company represents that it has no knowledge of any facts or
circumstances which at any time from and after December 15, 1997
would make it ineligible to file registration statements on Form
S-3 for sales of securities by shareholders of the Company. The
Company will on or before December 19, 1997 file a registration
statement on Form S-3 (or on a similar form if S-3 is not
available) (the "Registration Statement") for the
non-underwritten public sale by the holders of the shares of
Common Stock which have theretofore been issued or which may
thereafter be issued on conversion of the Preferred or upon
exercise of the Warrants.
(b) The Company shall use its best efforts to cause the Registration
Statement to become effective not later than 60 days after the
date of filing, and, subject to Section 4(h), to remain effective
for two years with respect to Common Stock issued upon conversion
of Preferred Stock and three years with respect to Common Stock
issued upon exercise of Warrants; provided, however, that the
Subscriber shall provide all such information and materials
relating to the Subscriber, and take all such action as may be
required in order to permit the Company to comply with all the
applicable requirements of the SEC and to obtain any desired
acceleration of the effective date of such Registration
Statement, such provision of information and materials to be a
condition precedent to the obligations of the Company pursuant to
this Section. The registration shall be accompanied by blue sky
clearances in such states as the holders may reasonably request.
(c) The Company shall pay all expenses of the registration hereunder,
other than the holders' brokerage fees, discounts or commissions,
and transfer taxes, if any.
<PAGE> 2
(d) Registration rights may be assigned to assignees of the
Preferred, the Warrants or the underlying stock, but only with
the Company's prior written consent, which consent shall not be
unreasonably withheld or delayed. The provisions of this Section
are for the benefit of the Subscriber and Subscriber's personal
representatives and permitted assigns.
(e) In connection with such registration, the Company and the
Subscriber will sign indemnification agreements which are
conventional in transactions of this kind.
(f) Should Subscriber from time to time or times give to the Company
notice that it has assigned all or any part of the Preferred or
the Warrants or any shares of Common Stock issuable on conversion
or exercise in transactions permitted hereunder, the Company
shall, at no cost to Subscriber, within five business days file a
supplement to the registration statement to reflect the name(s)
of the transferee(s) as (a) selling shareholder(s).
(g) Notwithstanding Section 4(b), the Company shall be entitled to
postpone the declaration of effectiveness of any Registration
Statement prepared and filed pursuant to this Section 4 for a
reasonable period of time, but not in excess of 60 calendar days
after the applicable deadline, if the Board of Directors of the
Company determines that there exists material non-public
information about the Company which is not disclosed, and is
required to be disclosed, in the prospectus included in the
Registration Statement, and which information was not theretofore
known to the Company.
(h) Subscriber agrees that, upon receipt of any notice from the
Company of the happening of a Material Event, Subscriber will
forthwith discontinue disposition of the Common Stock pursuant to
any Registration Statement described in Section 4(b) for not more
than 45 days, before the end of which period, the Company agrees
to deliver to Subscriber copies of supplemented or amended
prospectuses prepared by the Company. "Material Event" means the
happening of any event during the period that the Registration
Statement described in Section 4(b) hereof is required to be
effective as a result of which such registration statement or the
related prospectus contains or may contain any untrue statement
of a material fact or omits or may omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading.
(i) Subscriber agrees that for a period of 12 months from the Closing
it shall not offer, sell, contract to sell, grant any option to
purchase or otherwise dispose of any Common Stock (each, a
"Sale") that Subscriber does not own as of such date, provided,
however, that no such restriction shall apply to any Common Stock
to be issued to Subscriber upon the conversion of any Preferred
which is converted within 10 business days after such Sale or
upon the exercise of any Warrants which are exercised within 10
business days after such Sale.
5. The Company covenants to call a meeting of stockholders on or before
April 30, 1998 and to hold such meeting not later than June 30, 1998 (the
"Annual Meeting") and to propose to the stockholders at such meeting that the
stockholders approve the issuance of shares on conversion of the Preferred and
on exercise of the Warrants. Lee H. Stein has agreed to vote in favor of such
approval, and the Board of Directors of the Company will recommend that the
stockholders of the Company vote in favor of such approval. Until such approval
is obtained, the Warrants shall not be exercisable, and the maximum number of
shares which will be issued on conversion of the Preferred by all Purchasers is
1,760,000, issuable on a first converted-first exercised basis. Should such
approval not be obtained on or before June 30, 1998, then until such approval is
obtained, the Company shall on demand by Subscriber made at any time or times
redeem any portion of the Preferred Stock which is not convertible under the
preceding sentence and which is designated by Subscriber for redemption (the
"Redeemed Portion") at a redemption price equal to $6,000 per share proposed to
be converted plus accrued but unpaid dividends. The redemption price for each
redemption demand shall be payable within 90 business days after such demand is
made, and shall accrue interest from the date of the demand by Subscriber at 11%
per annum or, if
<PAGE> 3
less, the maximum statutory interest rate in California. Interest shall be
payable on demand by Subscriber after such 90th day.
6. Certain General Representations.
(a) Subscriber represents and warrants that it is purchasing the
Units solely for investment solely for its own account and not
with a view to or for the resale or distribution or of Units, or
of the Preferred or any shares (the "Shares") of Common Stock
issuable upon conversion or exercise thereof .
(b) Subscriber understands that it may sell or otherwise transfer the
Units, the Preferred, the Warrants or the Shares only if such
transaction is duly registered under the Securities Act of 1933,
as amended, under the Registration Statement or otherwise, or if
Subscriber shall have received the favorable opinion of counsel
to the holder, which opinion shall be reasonably satisfactory to
counsel to the Company, to the effect that such sale or other
transfer may be made in the absence of registration under the
Securities Act of 1933, as amended (the "Securities Act") , and
registration or qualification in every applicable state. The
certificates representing the aforesaid securities will be
legended to reflect these restrictions, and stop transfer
instructions will apply. Subscriber realizes that the Units are
not a liquid investment.
(c) Subscriber has not relied upon the advice of a "Purchaser
Representative" (as defined in Regulation D of the Securities
Act) in evaluating the risks and merits of this investment.
Subscriber has the knowledge and experience to evaluate the
Company and the risks and merits relating thereto.
(d) Subscriber represents and warrants that Subscriber is an
"accredited investor" as such term is defined in Rule 501 of
Regulation D promulgated pursuant to the Securities Act of 1933,
as amended, and shall be such on the date any shares are issued
to the holder; Subscriber acknowledges that Subscriber is able to
bear the economic risk of losing Subscriber's entire investment
in the shares and understands that an investment in the Company
involves substantial risks; Subscriber has the power and
authority to enter into this agreement, and the execution and
delivery of, and performance under this agreement shall not
conflict with any rule, regulation, judgment or agreement
applicable to the Subscriber; and Subscriber has invested in
previous transactions involving restricted securities.
(e) Subscriber represents that Subscriber's investment decision to
purchase the Units was based exclusively on the Company's SEC
filings.
(f) The Subscriber acknowledges that it has been informed of, and has
considered in evaluating its investment in the Units, the
following factors (without limitation): (i) the Company's
business and prospects are highly dependent on the acceptance of
the Company's Internet Payment System and other Internet-related
products and services, and on widespread adoption of the Internet
as a medium for commercial transactions; (ii) the Company is
currently in the process of shifting the focus of its business
away from the Company's Internet Payment System and towards the
Company's Interactive Messaging Platform, and there can be no
assurance as to the technical viability or market acceptance of
the Interactive Messaging Platform, (iii) the market for
Internet-based transaction systems has only recently begun to
develop, is rapidly evolving and is characterized by an
increasing number of entrants and rapid technological change;
(iv) the future viability of the Internet as a medium for
commercial transactions is highly speculative; the Internet may
not prove to be a viable commercial marketplace because of
inadequate development of the necessary infrastructure, such as
reliable network backbone or timely development of complementary
products, such as high speed modems; (v) if the necessary
infrastructure or
<PAGE> 4
complementary products are not developed, if the Internet does
not become a viable commercial marketplace, or if the Company's
Internet Payment System and Interactive Messaging Platform are
not widely adopted by merchants and consumers, the Company's
business, operating results and financial condition will be
materially adversely affected; and (vi) the Company is currently
actively exploring various strategic options which may include
without limitation the acquisition of the Company or its assets
by a third party, or an acquisition by the Company of other
businesses or technologies, and the Company has engaged an
investment bank to advise it in connection with such strategic
options.
7. Fees and Expenses.
(a) The Company will upon Closing pay to Mueller Trading Company a
fee for all Purchasers which aggregates $50,000.
(b) The Company will at Closing pay a total of $15,000 to Oscar D.
Folger for his services as counsel to certain Purchasers in
connection herewith.
(c) Except as aforesaid, each party shall bear its own expenses in
connection with this transaction.
8. Funding Limitations; Certain Company Representations and Covenants.
(a) During the 200-day period after the Completion Date, but only so
long as the Purchasers in the aggregate continue to own not less
than 50% of the Preferred, the Company will not without the prior
written consent of Subscriber raise funds by way of the sale of
debt or equity securities pursuant to Regulation D or Regulation
S under the Securities Act except:
(i) from existing shareholders of the Company;
(ii) from an entity whose relationship with the Company creates
intangible value for the Company; or
(iii) to fund merger and or acquisition related activity.
(b) Notwithstanding anything to the contrary contained in Section
8(a), the Company may, upon 10 days' prior written notice to
Subscriber, raise additional funds within the period specified in
Section 8(a) to the extent the Board of Directors determines, in
good faith, that such action is necessary in order to allow the
Company to meet its obligations as they become due. The notice to
Subscriber aforesaid shall set forth in detail the nature of the
proposed financing and detailed factors and all other relevant
information which support the Board's determination as aforesaid.
(c) The Company represents that neither the issuance of the Preferred
or Warrants, nor the conversion or exercise thereof, will trigger
any rights under any outstanding securities of the Company.
(d) For so long as Subscriber owns any shares of Preferred, the
Company will promptly forward to Subscriber copies of all press
releases by the Company and all filings made by the Company with
the Securities and Exchange Commission.
9. The Preferred shall be transferable by the Investor only with the prior
written consent of the Company, which shall not be unreasonably withheld or
delayed. It shall be a condition precedent to any transfer that the transferee
enter into an agreement containing representations and covenants of the
transferee substantially similar to those contained in this Agreement.
<PAGE> 5
10. This Agreement may not be changed or terminated except by written
agreement of the Company and a majority-in-interest of the Purchasers. It shall
be binding on the parties and on their personal representatives and permitted
assigns. It sets forth all agreements of the parties. It shall be enforceable by
decrees of specific performance (without posting bond or other security) as well
as by other available remedies. This Agreement may be signed in counterparts.
This Agreement shall be governed by the internal laws of the State of
California. The California courts shall have exclusive jurisdiction over this
instrument and the enforcement thereof. Service of process shall be effective if
by certified mail, return receipt requested.
Subscriber: FIRST VIRTUAL HOLDINGS INCORPORATED
_________________________ By:_____________________________
Number of Units: _____________
