<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 000-24931
SECURITY FIRST TECHNOLOGIES CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
DELAWARE 58-2395199
<S> <C> <C>
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
3390 PEACHTREE ROAD, NE, SUITE 1700
ATLANTA, GEORGIA 30326
(Address of principal executive offices) (Zip Code)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (404) 812-6200
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X . No .
----- -----
Shares of common stock outstanding as of May 10, 1999: 25,428,778
================================================================================
1
<PAGE> 2
SECURITY FIRST TECHNOLOGIES CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
------------------ -----------------
(IN THOUSANDS EXCEPT SHARE
AND PER SHARE DATA)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 22,803 $ 14,504
Investment securities available for sale (cost of $1,799 at
March 31, 1999 and December 31, 1998) 7,349 3,936
Accounts receivable, net of allowance for doubtful accounts and billing
adjustments of $582 at March 31, 1999 and $415 at December 31, 1998 7,593 17,520
Other current assets 3,498 1,310
------------------ -----------------
Total current assets 41,243 37,270
Premises and equipment, net 4,642 5,355
Intangible assets, net 3,075 2,914
Other assets 1,266 2,754
------------------ -----------------
Total assets $ 50,226 $ 48,293
================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 897 $ 3,232
Accrued expenses 5,744 4,386
Deferred revenues 13,151 10,378
Current portion of capital lease obligation 413 875
------------------ -----------------
Total current liabilities 20,205 18,871
Deferred revenues 11,753 12,034
Capital lease obligation, excluding current portion 107 159
------------------ -----------------
Total liabilities 32,065 31,064
------------------ -----------------
Stockholders' equity:
Preferred stock, $0.01 par value. Authorized 5,000,000 shares 23,136 11,911
Common stock, $0.01 par value. Authorized 60,000,000
shares. Issued and outstanding 25,076,292 and 24,527,004
shares at March 31, 1999 and December 31, 1998, respectively 251 246
Additional paid-in capital 88,716 86,810
Receivable from the sale of stock (11,065) -
Accumulated deficit (86,098) (82,840)
Accumulated other comprehensive income:
Net unrealized gains on investment securities available for sale, net of
taxes 3,441 1,325
Cumulative foreign currency translation adjustment (220) (223)
------------------ -----------------
Total stockholders' equity 18,161 17,229
------------------ -----------------
Total liabilities and stockholders' equity $ 50,226 $ 48,293
================== =================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
2
<PAGE> 3
SECURITY FIRST TECHNOLOGIES CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------------------------
1999 1998
------------------- --------------------
(IN THOUSANDS EXECEPT SHARE
AND PER SHARE DATA)
Revenues:
<S> <C> <C>
Software licenses $ 2,308 $ 669
Professional services 8,145 2,449
Data center 1,547 310
------------------- --------------------
Total revenues 12,000 3,428
------------------- --------------------
Direct costs:
Software licenses 133 20
Professional services 5,322 1,570
Data center 1,687 1,823
------------------- --------------------
Total direct costs 7,142 3,413
------------------- --------------------
Gross margin 4,858 15
Operating expenses:
Selling and marketing 1,079 1,071
Product development 4,375 3,383
General and administrative 1,592 1,204
Depreciation and amortization 1,194 637
Amortization of goodwill and acquisition charges 103 2,088
------------------- --------------------
Total operating expenses 8,343 8,383
------------------- --------------------
Operating loss (3,485) (8,368)
Interest income 227 255
------------------- --------------------
Loss from continuing operations (3,258) (8,113)
Loss from discontinued operations - (465)
------------------- --------------------
Net loss $ (3,258) $ (8,578)
================== ==================
Basic and diluted net loss per common share
from continuing operations $ (0.13) $ (0.39)
Basic and diluted net loss per common share from
discontinued operations - (0.02)
------------------- --------------------
Basic and diluted net loss per common share $ (0.13) $ (0.41)
=================== ===================
Weighted average number of shares of
common stock outstanding 24,698,334 21,047,842
=================== ====================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE> 4
SECURITY FIRST TECHNOLOGIES CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED STOCK
-------------------------------------------------------------------------------
SERIES A SERIES B SERIES C
-------------------------- ------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------------------------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1998 636,464 $ 1,911 749,064 $ 10,000 - $ -
Net loss - - - - - -
Change in net unrealized gains
on investment securities
available for sale, net of taxes - - - - - -
Change in cumulative foreign
currency translation
adjustment, net of taxes - - - - - -
Conversion of preferred stock
to common stock (170,014) (802) - - - -
Preferred stock issued - - - - 215,000 12,027
Payment on receivable from
the sale of stock - - - - - -
Interest earned on receivable from
the sale of stock - - - - - -
Common stock issued upon
exercise of stock options - - - - - -
Change in deferred stock
option compensation - - - - - -
Comprehensive loss
------------------------- -------------------------- -----------------------
Balance March 31, 1999 466,450 $ 1,109 749,064 $ 10,000 215,000 $ 12,027
========================= ========================== =======================
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCK
--------------------------
SHARES AMOUNT
--------------------------
<S> <C> <C>
Balance December 31, 1998 24,527,004 $ 245
Net loss - -
Change in net unrealized gains
on investment securities
available for sale, net of taxes - -
Change in cumulative foreign
currency translation
adjustment, net of taxes - -
Conversion of preferred stock
to common stock 340,028 4
Preferred stock issued - -
Payment on receivable from
the sale of stock - -
Interest earned on receivable from
the sale of stock - -
Common stock issued upon
exercise of stock options 209,260 2
Change in deferred stock
option compensation - -
Comprehensive loss
-------------------------
Balance March 31, 1999 25,076,292 $ 251
=========================
</TABLE>
4
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SECURITY FIRST TECHNOLOGIES CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
(LOSS)
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
RECEIVABLE ACCUMULATED
ADDITIONAL FROM THE OTHER TOTAL
PAID-IN SALE OF ACCUMULATED COMPREHENSIVE STOCKHOLDERS'
CAPITAL STOCK DEFICIT INCOME EQUITY
----------- ---------- ------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1998 $ 86,811 $ - $ (82,840) 1,102 $ 17,229
Net loss - - (3,258) - (3,258)
Change in net unrealized gains
on investment securities
available for sale, net of taxes - - - 2,114 2,114
Change in cumulative foreign
currency translation
adjustment, net of taxes - - - 5 5
Conversion of preferred stock
to common stock 798 - - - -
Preferred stock issued - (12,027) - - -
Payment on receivable from
the sale of stock - 962 - - 962
Interest earned on receivable from
the sale of stock 80 - - - 80
Common stock issued upon
exercise of stock options 920 - - - 922
Change in deferred stock
option compensation 107 - 107
Comprehensive loss
------------- ---------------- --------------- -------------- ------------
Balance March 31, 1999 $ 88,716 $ (11,065) $ (86,098) $ 3,221 18,161
------------- ---------------- --------------- ------------- ------------
</TABLE>
<TABLE>
<CAPTION>
COMPREHENSIVE
INCOME
------------
<S> <C>
Balance December 31, 1998 $ (3,258)
Net loss
Change in net unrealized gains
on investment securities 2,114
available for sale, net of taxes
Change in cumulative foreign
currency translation 5
adjustment, net of taxes
Conversion of preferred stock
to common stock
Preferred stock issued
Payment on receivable from
the sale of stock
Interest earned on receivable from
the sale of stock
Common stock issued upon
exercise of stock options
Change in deferred stock
option compensation
----------------
$ (1,139)
Comprehensive loss ----------------
Balance March 31, 1999
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE> 6
SECURITY FIRST TECHNOLOGIES CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------------------
1999 1998
---------------- ---------------
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (3,258) $ (8,578)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Loss from discontinued operations - 465
Depreciation and amortization including acquisition charges 1,297 2,725
Compensation expense for stock options 107 706
Provision for doubtful accounts receivable and billing adjustments 490 30
Decrease (increase) in accounts receivable 9,437 (914)
Increase in other assets (704) (365)
(Decrease) increase in accounts payable (2,335) 1,181
Increase in accrued expenses 59 19
Increase (decrease) in deferred revenue 2,492 (241)
----------------- ----------------
Net cash provided by (used in) continuing operating activities 7,585 (4,972)
Net cash used in discontinued operations - (39)
----------------- ----------------
7,585 (5,011)
----------------- ----------------
Cash flows from investing activities:
Sales of investment securities available for sale - 1,983
Maturities of investment securities available for sale - 2,000
Purchases of premises, equipment and purchased technology (741) (585)
----------------- ----------------
Net cash (used in) provided by investing activities (741) 3,398
----------------- ----------------
Cash flows from financing activities:
Payment on subscription receivable 962 -
Sale of common stock, net of expenses - 970
Proceeds from exercise of stock options 922 23
Payments on capital lease obligations (514) -
Interest income on receivable from sale of stock 80
----------------- ----------------
Net cash provided by financing activities 1,450 993
----------------- ----------------
Effect of exchange rate changes on cash 5 (3)
----------------- ----------------
Net increase in cash 8,299 (623)
Cash and cash equivalents at beginning of period 14,504 3,137
---------------- ---------------
Cash and cash equivalents at end of period $ 22,803 $ 2,514
================ ===============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
6
<PAGE> 7
SECURITY FIRST TECHNOLOGIES CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
Security First Technologies Corporation, through its wholly-owned
subsidiary Security First Technologies, Inc. (collectively, "S1" or the
"Company"), develops integrated internet software applications that enable
financial service companies to offer products, services and transactions over
the internet in a secure environment. S1 also offers product integration,
training and data center processing services.
Security First Technologies Corporation is the successor company to
Security First Network Bank ("SFNB") as a result of the reorganization completed
on September 30, 1998. The reorganization has been accounted for in a manner
similar to a pooling of interests and, as a result, the historical financial
statements of SFNB have become the historical financial statements of the
Company.
The consolidated financial statements include the accounts of Security
First Technologies Corporation and its wholly owned subsidiary, Security First
Technologies, Inc. Significant intercompany accounts and transactions have been
eliminated in consolidation. The consolidated financial statements for the three
month period ended March 31, 1999 and 1998 are unaudited and do not include
information or footnotes necessary for a complete presentation of financial
condition, results of operations and cash flows. The interim financial
statements include all adjustments, consisting only of normal recurring
adjustments, which in the opinion of management are necessary to present fairly
the Company's consolidated financial statements. The results of operations for
the three months ended March 31, 1999 are not necessarily indicative of the
expected results for the year ending December 31, 1999.
On April 14, 1999, the board of directors approved a 2-for-1 stock split
of the Company's common stock payable on May 7, 1999 to holders of record on
April 26, 1999. All share and per share data have been adjusted retroactively to
reflect the split.
2. STOCK PURCHASE AND WARRANT AGREEMENTS
On February 19,1999, S1 entered into alliances with Hewlett-Packard and
Andersen Consulting. As part of these alliances, Hewlett-Packard agreed to make
a $10.0 million equity investment in the Company's common stock and Andersen
Consulting agreed to make a $4.0 million equity investment in the Company's
common stock. In addition, Andersen Consulting received warrants to purchase up
to an additional 200,000 shares of S1 common stock. The warrant will vest, if at
all, in three installments of 40,000, 80,000 and 80,000 shares only if the
Company enters into agreements to sell its services or license its products to
specified customers as a result of its relationship with Andersen Consulting.
The warrant expires in February 2001. The per share price of the common stock
issuable to Andersen Consulting is $54.94 and the warrant installment is
available for exercise for a period of two years after the vesting date. The
Company expects to record a non-cash charge for the fair value of each warrant
installment which will be measured at the reporting date in which achievement of
the targets is probable. The fair value will be remeasured at each subsequent
reporting date until the installment is earned. In the event such remeasurement
results in increases or decreases from the initial fair value, such increases or
decreases will be recognized over the period that the installment is earned.
On February 25, 1999, the Company entered into an agreement with Royal
Bank of Canada ("Royal Bank") under which Royal Bank agreed to implement the
Company's entire suite of Virtual Financial Manager software. Royal Bank has
agreed to pay $50.0 million to the Company over the next five years on the
following schedule: the first $5.0 million, of which $4.0 million was paid upon
execution of the contract, is due to be paid no later than February 2000, and
the remaining amounts are to be paid equally over a four year period after Royal
Bank has implemented Virtual Financial Manager. If Royal Bank terminates its
minimum payment obligation, it is required to pay a termination fee equal to 40%
of the unpaid amount. In connection with this agreement, the Company also issued
215,000 shares of a newly designated series of convertible preferred stock
(Series C) and granted to Royal Bank a warrant
7
<PAGE> 8
exercisable for 800,000 shares of common stock at a price of $30.00 per share.
The preferred stock will be convertible on a two-for-one basis into the
Company's common stock if Royal Bank meets its $50.0 million commitment under
the software license and development agreement. The warrant will vest in four
equal installments if, as of four annual measurement dates beginning one year
after the S1 products are implemented, Royal Bank has an additional one
million end users using the Virtual Financial Manager software.
The Company recorded a subscription receivable of $12.0 million, the
estimated fair value of the convertible preferred stock at issuance, and will
reduce such subscription receivable, including imputed interest, as the payments
under the arrangement are received. Additionally, the Company expects to record
a non-cash charge for the fair value of the warrants on the date when it becomes
probable that the warrants will become exercisable.
3. SUBSEQUENT EVENTS
On April 14, 1999, the board of directors approved a 2-for-1 stock split
of the Company's common stock payable on May 7, 1999 to holders of record on
April 26, 1999. All share and per share data have been adjusted retroactively to
reflect the split.
On April 30, 1999, the Company entered into a seven year operating lease
for a total of 71,000 square feet of data center and office space. The minimum
annual payments under the lease are $609,000 in 1999, $1.2 million in 2000, $1.3
million in 2001, $1.3 million in 2002, $1.3 in 2003 and $3.8 million in years
thereafter.
On April 30, 1999, the Company received $14.0 million and issued 254,804
shares of common stock to Andersen Consulting and Hewlett Packard to complete
the sale of stock described above.
On May 17, 1999, Security First Technologies Corporation ("S1") announced
transactions with Intuit Inc. ("Intuit"), Edify Corporation ("Edify") and FICS
Group N.V. ("FICS").
In the Intuit transaction, S1 and Intuit, including its affiliates,
announced that the companies entered into a strategic alliance to deliver
on-line personal financial software and services to financial institutions. S1
and Intuit also entered into a Stock Purchase and Option Agreement pursuant to
which Intuit agreed to purchase 970,813 shares of S1 common stock for $50.0
million, and S1 granted an option for as many as 5,429,187 additional shares if
the Edify and FICS transactions close by March 31, 2000.
In the FICS transaction, S1 entered into a Share Purchase Agreement
pursuant to which an S1 Belgian subsidiary will acquire FICS. S1 also entered
into a Stock Purchase Agreement pursuant to which the stock and option holders
of S1 will acquire up to 20,000,000 shares of S1 common stock. The FICS
transaction is subject to applicable regulatory filings and notices, as well as
approval by the stockholders of S1 and customary closing conditions. The
acquisition of FICS by the Belgian subsidiary of S1 also is subject to the
subsidiary obtaining financing for the acquisition.
In the Edify transaction, S1 entered into an Agreement and Plan of
Merger (the "Merger Agreement") by which S1 will acquire Edify in a
stock-for-stock exchange (the "Merger"). S1 will issue 0.330969 shares for each
share of Edify stock. The Merger is subject to applicable stockholder approvals
of both S1 and Edify and applicable regulatory filings and notices, as well as
customary closing conditions. Edify also granted to S1 a stock option for newly
issued shares of Edify stock (the "Option Agreement").
4. EARNINGS PER SHARE
Basic earnings per share is calculated as income available to common
stockholders divided by the weighted average number of common shares outstanding
during the period. Diluted earnings per share is calculated to reflect the
potential dilution that would occur if stock options or other contracts to issue
common stock were exercised and resulted in additional common stock that would
share in the earnings of the Company. Because of the Company's net losses, the
issuance of additional shares of common stock under stock options and warrants
or upon the conversion of preferred stock would be antidilutive. The total
number of common shares that would have been included in the Company's
computation of diluted earnings per share if they had been dilutive at March 31,
1999 was 11,330,778.
5. SEGMENT REPORTING
S1 operates in three business segments, Professional Services, Data
Center and Product Development. The Professional Services segment provides
integration, training, consulting and product enhancement services related to
S1's software products. The Product Development segment creates new products to
supplement the existing product suite. The Data Center segment provides
processing and support services to the customers using S1's software products in
the S1 data center. S1 manages the business based on these operating segments.
The information presented in the consolidated statements of operations reflects
the revenues and costs associated with these segments that management uses to
make operating decisions and assess performance.
S1 evaluates the performance of its Professional Services and Data Center
operating segments based on revenues and direct costs only. S1 evaluates the
performance of its Product Development segment based on direct costs only. S1
does not assess the performance of its segments on other measures of income or
expense, such as depreciation and amortization, operating income or net income.
In addition, as the assets of S1 are primarily located in its corporate office
in the United States and not allocated to any specific segment, the Company does
not produce reports that measure the performance based on any asset-based
metrics.
For the three months ended March 31, 1999 three major customers accounted
for approximately 44%, 17% and 12% of total revenues, respectively.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
This quarterly report contains forward-looking statements and information
relating to us and our subsidiary. The words "believes," "expects," "may,"
"will," "should," "projects," "contemplates," "anticipates," "forecasts,"
"intends" or similar terminology identify forward-looking statements. These
statements are based on the beliefs of management as well as assumptions made
using information currently available to management. Because these statements
reflect the current views of management concerning future events, they involve
risks, uncertainties and assumptions. Therefore, actual results may differ
significantly from the results discussed in the forward-looking statements. We
undertake no obligation to update publicly any forward-looking statement for any
reason, even if new information becomes available.
The following discussion should be read in conjunction with the unaudited
consolidated financial statements and notes appearing elsewhere herein and the
Company's Form 10-K for the year ended December 31, 1998.
GENERAL
Security First Technologies Corporation, commonly known as S1, develops
integrated, brandable internet applications that enable companies offering
financial services to create their own financial portals. Prior to September 30,
1998, we were the technology subsidiary of Security First Network Bank, which
was the first internet bank. On September 30, 1998, we completed a
reorganization to separate our banking and technology businesses, and then sold
the banking business to a subsidiary of Royal Bank of Canada. S1 developed the
technology which enabled Security First Network Bank to begin offering banking
services over the internet. We released version 4.0 of our product in 1998 and
intend to continue our product development efforts, which include the
introduction of version 5.0.
Revenues
S1's revenues are derived primarily from three sources:
Software licenses. S1 receives license fees from direct licensees of
Virtual Financial Manager and third party data processors. Direct licensees
install and operate Virtual Financial Manager in their own data center. S1
generally receives an initial license fee plus ongoing fees which are based on
either the number of end-users or a percentage of the initial license fee. The
initial software license fees are generally recognized as revenue on a
straight-line basis over either the term of the agreement or, for contracts
without a term, the estimated useful life of the software products. The ongoing
fees are recognized as revenue in the month earned.
Third party data processors install Virtual Financial Manager in their
own data processing centers and license the product to their client
institutions, typically smaller financial services entities like community banks
and thrifts. S1 receives monthly fees from third party data processors based on
the total number of end-users served by the processors' client institutions.
These fees are recognized as revenue in the period earned.
Professional Services. S1 provides professional services related to the
installation and integration of Virtual Financial Manager. These services
include:
- - installing the product at direct licensees and third party data processing
centers,
- - integrating the financial institution's data processing systems with the S1
data center for data center clients,
- - product enhancements,
- - consulting, and
- - training.
9
<PAGE> 10
Customers are charged and revenues are recognized for these services
primarily on a time and materials basis. These revenues are recognized as the
services are performed.
Data Center. S1 receives recurring monthly fees from financial
institutions who have chosen to license S1's Virtual Financial Manager and
outsource the processing of their financial transactions to the S1 data center.
The monthly fees are based on the number of end-users of the client institution,
subject to a minimum monthly fee. In addition, S1 receives monthly fees for
technical support. These revenues are generally recognized as the services are
performed.
10
<PAGE> 11
RESULTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE, PER AVERAGE CUSTOMER, END-USER AND END-USER
ACCOUNTS)
<TABLE>
<CAPTION>
QUARTER ENDED
3/31/98 6/30/98
----------- -----------
<S> <C> <C>
REVENUES:
Software licenses $ 669 $ 770
Professional services 2,449 3,185
Data center 310 594
------------ --------------
Total revenues 3,428 4,549
------------ --------------
DIRECT COSTS:
Software licenses 20 20
Professional services 1,570 2,230
Data center 1,823 1,825
------------ --------------
Total direct costs 3,413 4,075
------------ --------------
Gross margin 15 474
------------ --------------
OPERATING EXPENSES:
Selling and marketing 1,071 1,137
Product development 3,383 3,607
General and administrative 1,204 1,236
Depreciation and amortization 637 652
Amortization of goodwill and acquisition charges 2,088 2,083
------------ --------------
Total operating expenses 8,383 8,715
------------ --------------
Operating loss (8,368) (8,241)
Interest income 255 135
------------ --------------
LOSS FROM CONTINUING OPERATIONS $ (8,113) $ (8,106)
------------ --------------
NET LOSS PER COMMON SHARE:
Loss per common share from continuing operations before
non-recurring charges, goodwill amortization and acquisition charges $ (0.29) $ (0.28)
Loss per common share from non-recurring charges
and goodwill amortization and acquisition charges (0.10) (0.10)
------------ --------------
Loss per common share from continuing operations $ (0.39) $ (0.38)
------------ --------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 21,048 21,526
DATA CENTER REVENUE PER QUARTERLY AVERAGE CUSTOMERS $ 9.64 $ 13.34
PROFESSIONAL SERVICES REVENUE PER AVERAGE SERVICES FTE(1) $ 52 $ 42
CASH PROVIDED BY (USED IN) CONTINUING OPERATIONS $ (4,972) $ (3,980)
CASH AND INVESTMENT SECURITIES $ 15,352 $ 8,971
NUMBER OF END-USERS:
Data center 44,000 58,100
Third party data processors 2,000 4,000
Direct software licensees 5,800 40,000
------------ --------------
Total 51,800 102,100
------------ --------------
NUMBER OF END-USER ACCOUNTS:
Data center 69,400 94,600
Third party data processors 4,400 8,400
Direct software licensees 26,200 160,000
------------ --------------
Total 100,000 263,000
------------ --------------
(1) Excludes revenue from pass through costs.
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
9/30/98 12/31/98
----------- ------------
<S> <C> <C>
REVENUES:
Software licenses $ 1,069 $ 2,273
Professional services 4,549 6,035
Data center 927 1,350
---------------- ------------
Total revenues 6,545 9,658
---------------- ------------
DIRECT COSTS:
Software licenses 20 443
Professional services 2,806 3,921
Data center 1,937 1,633
---------------- ------------
Total direct costs 4,763 5,997
---------------- ------------
Gross margin 1,782 3,661
---------------- ------------
OPERATING EXPENSES:
Selling and marketing 955 1,560
Product development 3,717 3,918
General and adminstrative 1,370 2,184
Depreciation and amortization 761 3,297
Amortization of goodwill and acquisition charges 110 103
---------------- ------------
Total operating expenses 6,913 11,062
---------------- ------------
Operating loss (5,131) (7,401)
Interest income 52 141
---------------- ------------
LOSS FROM CONTINUING OPERATIONS $ (5,079) $ (7,260)
---------------- ------------
NET LOSS PER COMMON SHARE:
Loss per common share from continuing operations before
non-recurring charges, goodwill amortization and acquisition charges $ (0 .22) $ (0.20)
Loss per common share from non-recurring charges
and goodwill amortization and acquisition charges (0 .01) (0.11)
---------------- ------------
Loss per common share from continuing operations $ (0 .23) $ (0.31)
---------------- ------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 22,351 23,194
DATA CENTER REVENUE PER QUARTERLY AVERAGE CUSTOMERS $ 14.75 $ 15.21
PROFESSIONAL SERVICES REVENUE PER AVERAGE SERVICES FTE(1) $ 54 $ 50
CASH PROVIDED BY (USED IN) CONTINUING OPERATIONS $ 595 $ (3,547)
CASH AND INVESTMENT SECURITIES $ 17,779 $ 14,504
NUMBER OF END-USERS:
Data center 77,000 93,000
Third party data processors 7,500 16,000
Direct software licensees 67,000 104,000
---------------- ------------
Total 151,500 213,000
---------------- ------------
NUMBER OF END-USER ACCOUNTS:
Data center 128,000 148,000
Third party data processors 15,000 42,000
Direct software licensees 244,000 352,000
---------------- ------------
Total 387,000 542,000
---------------- ------------
(1) Excludes revenue from pass through costs.
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
3/31/99
----------
<S> <C>
REVENUES:
Software licenses $ 2,308
Professional services 8,145
Data center 1,547
------------
Total revenues 12,000
------------
DIRECT COSTS:
Software licenses 133
Professional services 5,322
Data center 1,687
------------
Total direct costs 7,142
------------
Gross margin 4,858
------------
OPERATING EXPENSES:
Selling and marketing 1,079
Product development 4,375
General and adminstrative 1,592
Depreciation and amortization 1,194
Amortization of goodwill and acquisition charges 103
------------
Total operating expenses 8,343
------------
Operating loss (3,485)
Interest income 227
------------
LOSS FROM CONTINUING OPERATIONS $ (3,258)
------------
NET LOSS PER COMMON SHARE:
Loss per common share from continuing operations before
non-recurring charges, goodwill amortization and acquisition charges $ (0.13)
Loss per common share from non-recurring charges
and goodwill amortization and acquisition charges -
------------
Loss per common share from continuing operations $ (0.13)
------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 24,698
DATA CENTER REVENUE PER QUARTERLY AVERAGE CUSTOMERS $ 15.99
PROFESSIONAL SERVICES REVENUE PER AVERAGE SERVICES FTE(1) $ 59
CASH PROVIDED BY (USED IN) CONTINUING OPERATIONS $ 7,585
CASH AND INVESTMENT SECURITIES $ 22,803
NUMBER OF END-USERS:
Data center 100,200
Third party data processors 24,000
Direct software licensees 139,000
------------
Total 263,200
------------
NUMBER OF END-USER ACCOUNTS:
Data center 161,000
Third party data processors 62,000
Direct software licensees 469,000
------------
Total 692,000
------------
(1) Excludes revenue from pass through costs.
</TABLE>
11
<PAGE> 12
SUMMARY INCOME STATEMENT ANALYSIS
(AS A PERCENTAGE OF TOTAL REVENUES)
<TABLE>
<CAPTION>
QUARTER ENDED
3/31/98 6/30/98 9/30/98 12/31/98 3/31/99
------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
REVENUES:
Software licenses 20% 17% 16% 24% 19%
Professional services 71% 70% 70% 62% 68%
Data center 9% 13% 14% 14% 13%
------------ ------------ ------------ ------------ -----------
Total revenues 100% 100% 100% 100% 100%
------------ ------------ ------------ ------------ -----------
DIRECT COSTS:
Software licenses 1% 0% 0% 5% 1%
Professional services 46% 49% 43% 41% 44%
Data center 53% 40% 30% 17% 14%
------------ ------------ ------------ ------------ -----------
Total direct costs 100% 90% 73% 62% 60%
------------ ------------ ------------ ------------ -----------
Gross margin 0% 10% 27% 38% 40%
------------ ------------ ------------ ------------ -----------
OPERATING EXPENSES:
Selling and marketing 31% 25% 15% 16% 9%
Product development 99% 79% 57% 41% 36%
General and adminstrative 35% 27% 21% 23% 13%
Depreciation and amortization 19% 14% 12% 34% 10%
Amortization of goodwill and acquisition charges 61% 46% 2% 1% 1%
------------ ------------ ------------- ------------ -------------
Total operating expenses 245% 192% 106% 115% 70%
------------ ------------ ------------- ------------ -------------
Operating loss -244% -181% -78% -77% -29%
------------ ------------ ------------- ------------ -------------
</TABLE>
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
Revenues
S1's total revenues increased by $8.6 million to $12.0 million for the
three months ended March 31, 1999 from $3.4 million in the three months ended
March 31, 1998, an increase of 250%. The primary components of first quarter
1999 revenue were $2.3 million in software license fees, $8.2 million in
professional service fees and $1.5 million in data center fees. As a result of
the size of the companies S1 does business with, the magnitude of the
implementations for companies of this size and our limited amount of capacity to
perform implementations, in any given period a significant portion of our
revenues may be attributed to a limited number of clients. For the three months
ended March 31, 1999 three major customers accounted for approximately 44%, 17%
and 12% of total revenues, respectively.
Software Licenses. Software license fees increased by $1.6 million to
$2.3 million in the three months ended March 31, 1999 from $669,000 in the three
months ended March 31, 1998, an increase of 245%. Software license fees
represented 19% of total revenues in the three months ended March 31, 1999
compared to 20% of total revenues in the three months ended March 31, 1998. This
increase in software license fees relates primarily to the recognition of
revenue from licensing agreements entered into in the fourth quarter of 1998.
These license fees have been recorded as deferred revenue and are recognized as
revenue over a three-year maintenance period. S1 expects to experience a slight
decrease in software license revenues in the second quarter 1999 as certain
licenses were completely recognized by the end of the first quarter 1999.
Professional Services. Professional services revenues increased by $5.7
million to $8.2 million in the three months ended March 31, 1999 from $2.4
million in the three months ended March 31, 1998, an increase of 233%.
Professional services revenues represented 68% of total revenues in the three
months ended March 31, 1999 compared to 71% of total revenues in the three
months ended March 31, 1998. This increase in professional services revenue in
the first quarter 1999 was driven by projects at a number of large financial
services companies and upgrades to version 4.0. Additionally, included in first
quarter 1999 is approximately $2.3 million of revenue for professional services
related to product enhancement projects, which include the initial development
of an insurance product.
12
<PAGE> 13
Data Center. Data center revenues increased by $1.2 million to $1.5
million in the three months ended March 31, 1999 from $310,000 in the three
months ended March 31, 1998, an increase of 399%. Data center revenues
represented 13% of total revenues in the three months ended March 31, 1999
compared to 9% of total revenues in the three months ended March 31, 1998. This
increase can be attributed to increased end-users using S1's internet financial
applications, the initiation of minimum fees based on capacity requirements and
increased support fees. The average quarterly revenue per billable end-user
increased to $15.99 in the first quarter 1999 from $9.64 in the first quarter
1998. Management anticipates that the average quarterly revenue per billable
end-user will decrease as financial services entities increase the number of
their customers using the product.
Revenues associated with the data center are directly influenced by the
number of financial services entities that are using Virtual Financial Manager
products through the S1 data center and the number of end-users of these
financial services entities. During the month of March 1999, the data center
processed in excess of 161,000 internet accounts, representing approximately
100,000 end-users. This represents an increase of 133% in the number of accounts
processed from approximately 69,000 and an increase of 127% in the number of
end-users from approximately 44,000 for the month of March 1998. At March 31,
1999, there were 12 financial services organizations implemented in the S1 data
center.
Direct Costs
Direct costs increased by $3.7 million to $7.1 million in the three
months ended March 31, 1999 from $3.4 million in the three months ended March
31, 1998, an increase of 109%. Direct costs represented 60% of total revenues in
the year ended March 31, 1999 compared to 100% of total revenues in the year
ended March 31, 1998.
Software License Costs. Direct software license costs consist primarily
of the cost of third-party software used in the Virtual Financial Manager suite.
Direct costs associated with software licenses increased by $113,000 to $133,000
in the three months ended March 31, 1999 from $20,000 in the three months ended
March 31, 1998, a increase of 565%. The increase in direct software license
costs in the first quarter 1999 relates primarily to the cost of third-party
software used in VFM Relationship Management. Direct costs associated with
software licenses represented 6% of software license fees in the three months
ended March 31, 1999 compared to 3% of software license fees in the three months
ended March 31, 1998.
Professional Services Costs. Direct professional services costs consist
primarily of personnel and related infrastructure costs. Direct costs associated
with professional services increased by $3.7 million to $5.3 million in the
three months ended March 31, 1999 from $1.6 million in the three months ended
March 31, 1998, an increase of 239%. The increase is the result of an increase
in personnel costs related to the professional services projects. Currently, S1
is in the process of converting all financial services entities to Virtual
Financial Manager version 4.0. These conversions will require a significant
portion of S1's implementation resources. Direct costs associated with
professional services represented 65% of professional services revenues in the
three months ended March 31, 1999 compared to 64% of professional services
revenues in the three months ended March 31, 1998.
Data Center Costs. Direct data center costs consist of personnel and
computer equipment costs. Direct costs associated with data center services
decreased by $136,000 to $1.7 million in the three months ended March 31, 1999
from $1.8 million in the three months ended March 31, 1998, a decrease of 7%. In
an effort to contain data center costs, S1 ended its data center facilities
management agreement with a third party in the fourth quarter of 1998. The
decrease in direct data center costs is primarily attributable to the cost
savings from both the elimination of the cost-plus arrangement and the ability
to more efficiently use the existing infrastructure. Based on current costs,
management anticipates that the data center will reach a break-even gross margin
in the second quarter of 1999. Direct data center costs represented 109% of data
center revenues in the three months ended March 31, 1999 compared to 588% of
data center revenues in the three months ended March 31, 1998. On April 30,
1999, S1 entered into an operating lease for data center and office facilities.
The data center operations will be transitioned to the new location during the
third quarter of 1999 which is anticipated to result inan increase in data
center costs in the third quarter as a result of the relocation.
13
<PAGE> 14
Operating Expenses
Operating expenses decreased by $40,000 to $8.3 million in the three
months ended March 31, 1999 from $8.4 million in the three months ended March
31, 1998, a decrease of less than 1%.
Selling and Marketing. Selling and marketing expenses remained consistent
between the first quarter 1998 and 1999 at $1.1 million. Selling and marketing
expenses were 9% of total revenues in the three months ended March 31, 1999
compared to 31% of total revenues in the three months ended March 31, 1998. The
decrease in selling and marketing expenses as a percentage of sales was due to
S1's ability to leverage its relatively fixed selling and marketing expenses
over a larger revenue base.
Product Development. Product development expenses increased by $992,000
to $4.4 million in the three months ended March 31, 1999 from $3.4 million in
the three months ended March 31, 1998, an increase of 29%. Product development
expenses were 36% of total revenues in the three months ended March 31, 1999
compared to 99% of total revenues in the three months ended March 31, 1998. The
dollar increase relates primarily to an increase in personnel expenses for
additional product development initiatives. During the first quarter 1999, S1's
development efforts included the next version of the VFM platform, additional
integration capabilities, Bill Presentment, the next version of Investments and
Business Banking. The decrease as a percentage of S1's total revenues in the
three months ended March 31, 1999 from the three months ended March 31, 1998
resulted from its ability to leverage product development expenses over a larger
revenue base.
General and Administrative. General and administrative expenses increased
by $388,000 million to $1.6 million in the three months ended March 31, 1999
from $1.2 million in the three months ended March 31, 1998, an increase of 32%.
General and administrative expenses were 13% of total revenues in the three
months ended March 31, 1999 compared to 35% of total revenues in the three
months ended March 31, 1998. The increase relates to the expanded personnel
infrastructure to manage S1's growth. The decrease as a percentage of our total
revenues in the three months ended March 31, 1999 from the three months ended
March 31, 1998 resulted from its ability to leverage general and administrative
expenses over a larger revenue base.
Depreciation and Amortization. Depreciation and amortization expenses
increased by $557,000 to $1.2 million in the three months ended March 31, 1999
from $637,000 in the three months ended March 31, 1998, an increase of 87%.
Depreciation and amortization expenses were 10% of total revenues for the three
months ended March 31, 1999 compared to 19% of total revenues in the three
months ended March 31, 1998. The increase in depreciation and amortization
related to purchased technology for development tools used by S1's product
developers and development licenses for the integration of third party software
with S1's VFM suite.
Amortization of Goodwill. Amortization of goodwill and acquisition
charges decreased $2.0 million to $103,000 in the three months ended March 31,
1999 from $2.1 million in the three months ended March 31, 1998, a decrease of
95%. Amortization of goodwill and acquisition charges were 1% of total revenues
in the three months ended March 31, 1999 compared to 61% of total revenues in
the three months ended March 31, 1998. Included in first quarter 1998 is
amortization of intangible assets related to an acquisition in 1997 which is not
included in the first quarter 1999 as these amounts were fully amortized during
1998.
LIQUIDITY AND CAPITAL RESOURCES
Total stockholders' equity increased to $18.2 million as of March 31,
1999 from $17.2 million at December 31, 1998. The increase in stockholders'
equity is attributable to the increase in the unrealized gain on investment
securities available for sale, stock option exercises and compensation, offset
by the first quarter net loss of $3.3 million.
As part of the Royal Bank agreements signed in March 1998, S1 issued to
Royal Bank's subsidiary four separate options to purchase up to an aggregate
$10.0 million in capital stock of S1. The first option, which was exercised in
December 1998 for 420,876 shares, had a per share exercise price of $5.94. The
second option has a per share exercise price of $6.54 and expires at the end of
June 1999. The third option has a per share exercise price of $7.19 and expires
at the end of December 1999. The fourth option has a per share exercise price of
$7.91 and expires at the
14
<PAGE> 15
end of June 2000. If the second, third and fourth options are exercised in full,
S1 will issue an additional 1,046,760 shares of stock for $7.5 million in cash
over the remaining option period.
At March 31, 1999, S1 had $22.8 million in cash to fund future operations
and $7.6 million in accounts receivable. On February 19, 1999, S1 entered into a
stock purchase agreement with Hewlett Packard to purchase $10 million of the
Company's common stock. In addition, on February 19, 1999 S1 entered into a
stock purchase agreement with Andersen Consulting to purchase $4 million of S1's
common stock. On April 30, 1999, the Company issued 254,804 shares of common
stock and received $14.0 million to complete the stock sales to Hewlett-Packard
and Andersen Consulting. Cash provided by operations for the first quarter 1999
was $7.6 million compared to cash used in continuing operations of $5.0 million
in comparable period in 1998. Included in the first quarter 1999 cash from
operations is $3 million for license fees. Management believes that S1 has
adequate cash resources available to fund operations through the next twelve
months.
On February 19, 1999, S1 granted a warrant to Andersen Consulting to
purchase up to 200,000 shares of S1 common stock. The warrant will vest, if at
all, in three installments of 40,000, 80,000 and 80,000 shares only if S1 enters
into agreements to sell its services or license its products to specified
customers as a result of the relationship with Andersen Consulting. The warrant
expires in February 2001. The per share price of the common stock issuable to
Andersen Consulting is $54.94 and the warrant installment is available for
exercise for a period of two years after the vesting date.
The Company expects to record a non-cash charge for the fair value of
each warrant installment which will be measured at the reporting date in which
achievement of the targets is probable. The fair value will be remeasured at
each subsequent reporting date until the installment is earned. In the event
such remeasurement results in increases or decreases from the initial fair
value, such increases or decreases will be recognized over the period that the
installment is earned. The amount of the non-cash charges in any particular
quarter associated with the grant of the warrant to Andersen Consulting could be
significant as a result of future changes in the trading price of the Company's
common stock at the end of each quarter and at the date each installment is
earned.
On February 25, 1999, S1 entered into an agreement with Royal Bank under
which Royal Bank agreed to implement S1's entire suite of Virtual Financial
Manager software. Royal Bank has agreed to pay $50.0 million over the next five
years on the following schedule: the first $5.0 million, of which $4.0 million
was paid upon execution of the contract, is due to be paid no later than
February 2000, and the remaining amounts are to be paid equally over a four year
period after Royal Bank has implemented Virtual Financial Manager. In connection
with this agreement, S1 also issued 215,000 shares of a newly designated series
of convertible preferred stock (Series C) and granted to Royal Bank a warrant
exercisable for 800,000 shares of common stock at an exercise price of $30.00
per share. The preferred stock will be convertible on a two-for-one basis into
S1's common stock if Royal Bank meets its $50.0 million commitment under the
software license and development agreement. The warrant will vest in four equal
installments if, as of four annual measurement dates, Royal Bank has a specified
number of customers using the Virtual Financial Manager software.
The Company recorded a subscription receivable of $12.0 million, the
estimated fair value of the convertible preferred stock at issuance, and will
reduce such subscription receivable, including imputed interest, as the payments
under the arrangement are received. Additionally, the Company expects to record
a non-cash charge for the fair value of the warrants on the date when it becomes
probable that they will become exercisable.
Basic earnings per share is calculated as income available to common
stockholders divided by the weighted average number of common shares outstanding
during the period. Diluted earnings per share is calculated to reflect the
potential dilution that would occur if stock options or other contracts to issue
common stock were exercised and resulted in additional common stock that would
share in the earnings of the Company. Because of the Company's net losses, the
issuance of additional shares of common stock under stock options and warrants
or upon the conversion of preferred stock would be antidilutive. The total
number of common shares that would have been included in the Company's
computation of diluted earnings per share if they had been dilutive at March 31,
1999 was 11,330,778.
15
<PAGE> 16
YEAR 2000 READINESS DISCLOSURE STATEMENT
The year 2000 issue relates to the use by many existing computer programs
of only two digits to identify a year in the date field. If not corrected, many
computer applications could fail or create erroneous results by or at the year
2000. S1 recognizes the need to ensure that potential year 2000 software
failures will not adversely impact its operations. The year 2000 issues impact
S1 both on an external basis in connection with the products and services S1
offers to clients, as well as on an internal basis as to its own operations and
systems.
As to external year 2000 issues related to the products and services S1
offers to clients, a company-wide task force, with representation from all major
business units, was established by S1 in 1997 to evaluate and manage the risks,
solutions and cost associated with addressing this issue. The Task Force has
identified all business systems, products and services, including third party
software used by S1 and in conjunction with Virtual Financial Manager, has made
an initial assessment as to whether they are year 2000 compliant, and is
implementing actions for the systems, products and services which are not year
2000 compliant. S1 believes that based on the assessments completed to date,
that material year 2000 issues can be corrected. The failure of S1 or
third-party software which is used by S1 or in conjunction with Virtual
Financial Manager to be year 2000 compliant could have a material adverse impact
on S1's financial position and results of operations.
S1 developed its newest version of the Virtual Financial Manager
software, version 4.0, which was released in 1998, to be year 2000 compliant.
Extensive "time machine" testing has been conducted on Virtual Financial Manager
and all of the underlying software products that it utilizes. As we implement
this new version of Virtual Financial Manager for each of our clients, we also
will conduct complete "end to end" testing. At March 31, 1999, 50% of client
systems requiring upgrades to version 4.0 were completed. Management anticipates
that all clients will be converted to the new version, with testing completed,
by third quarter 1999. Any failure to complete the conversions in a timely
manner could have a material adverse effect on S1's business. These conversions
will require a significant portion of S1's implementation resources.
Because S1 is a relatively new enterprise, without old legacy and other
computer systems, the year 2000 issues with respect to S1's internal operations
and systems are not as complex as might otherwise be the case. S1's Task Force
has developed and implemented a strategy to minimize the impact of year 2000
technology problems. S1's strategic plan includes regular reporting of progress
to S1's management and board of directors.
Under the direction of its Task Force, S1 believes it has identified all
hardware, software, networks and other processing platforms, and customer and
vendor dependencies affected by the year 2000 date change. The assessment
included information systems as well as environment systems that are dependent
on embedded microchips, such as security systems, elevators, and telephone
systems. S1 has completed activities related to the assessment phase. While the
assessment phase is essentially complete, S1 will continue to revisit all third
party suppliers throughout 1999 to insure that previously acquired compliance
statements have not changed.
The next phase of the Task Force's plan is a renovation phase which has
been underway since early in 1998. The majority of S1's internal and vendor
systems were year 2000 ready by March 31, 1999, with the remainder targeted for
completion by the second quarter of 1999. All desktop systems have been tested
with failing systems scheduled for replacement. Upgrades for critical financial
and other infrastructure systems have been completed. As to S1's systems which
are vendor supplied, S1 has either had the vendor confirm year 2000 readiness,
or has made plans to replace the system.
The Task Force has commenced a testing phase of S1's internal systems,
including testing of incremental changes to hardware and software components.
The testing phase is expected to be completed by June 30, 1999, but will
continue as needed on newly acquired applications and new vendor upgrades.
The costs incurred in addressing the year 2000 problem are being expensed
as incurred in compliance with generally accepted accounting principles. None of
these costs are expected to materially impact the results of operations in any
one period. Significant portions of the costs to be incurred are not expected to
be incremental but rather are related to current development efforts.
16
<PAGE> 17
S1 has identified and evaluated potential year 2000 related worst case
scenarios that could result from the failure to identify, test, and validate
all critical date dependent applications and embedded microchips that affect
core business processes and the failure of external forces, such as third party
vendors and utilities, to have properly remedied their systems. Potential worst
case scenarios being addressed include the inability to service customers
through S1's data center, the failure of Virtual Financial Manager, extended
electrical power outages, extended telephone communication outages, ACH and
payroll deposit file transmission difficulties and excessive negative media
coverage.
A contingency plan is being drafted by S1 to address identified potential
worst case scenarios. Alternative solutions for business resumption and
approaches to minimize the impact of each scenario are being formulated. Any
unaddressed year 2000 issue could adversely affect S1's business, financial
condition and results of operations.
17
<PAGE> 18
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and qualitative disclosures about market risk were included
in Item 7A of the Security First Technologies Corporation's 1998 Form 10-K.
There have been no significant changes in the Company's market risk from
December 31, 1998.
18
<PAGE> 19
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(a) Not applicable.
(b) Not applicable.
(c) All share and price information which follows has been adjusted for
a two-for-one split of S1's common stock paid on May 7, 1999.
On February 19, 1999, S1 issued to Anderson Consulting LLP a Warrant to
purchase 200,000 shares of S1's common stock for a price per share of $54.94.
The rights represented by the Warrant are contingent upon the vesting
requirements set forth in section 1 of the Warrant, a copy of which is filed as
Exhibit 10.4 to this report and incorporated herein by reference.
On February 25, 1999, S1 issued to Royal Bank of Canada a Warrant to
purchase 800,000 shares of S1's common stock at a price per share of $30.00. The
rights represented by the Warrant are contingent on the number of Warrant
Customers, as more particularly described in section 1 of the Warrant, a copy of
which is filed as Exhibit 10.5 to this report and incorporated herein by
reference.
On February 25, 1999, S1 issued to Royal Bank of Canada 215,000 shares of
S1's series C redeemable convertible preferred stock for a purchase price of
$0.01 per share. Each share of series C preferred stock is convertible into two
shares of S1's common stock contingent upon satisfaction of the terms and
conditions specified in Section 3 of the Certificate of Designation for the
series C preferred stock, which is filed as Exhibit 3 to this report and
incorporated herein by reference. The offer and sale of the stock satisfied the
requirements of Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act") (transactions by an issuer not involving any public offering).
On April 30, 1999, S1 issued to Hewlett-Packard Company 182,004 shares of
S1's common stock for an aggregate purchase price of $10.0 million pursuant to
a Stock Purchase Agreement, dated as of February 19, 1999, by and between S1 and
Hewlett Packard, as amended on April 30, 1999, a copy of which is filed as
Exhibit 10.2 to this report. The offer and sale of the stock satisfied the
requirements of Section 4(2) of the Securities Act (transactions by an issuer
not involving any public offering).
On April 30, 1999, S1 issued to AC II Technology (ACT II) B.V. ("AC II")
72,800 shares of S1's common stock for an aggregate purchase price of $4.0
million pursuant to a Stock Purchase Agreement, dated as of February 19, 1999,
by and between S1 and ACT II, as amended on April 30, 1999, a copy of which is
filed as Exhibit 10.3 to this report. The offer and sale of the stock satisfied
the requirements of Section 4(2) of the Securities Act (transactions by an
issuer not involving any public offering).
(d) Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
19
<PAGE> 20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit
No. Description
--- -----------
3 Certificate of Designation for Series C Redeemable
Convertible Preferred Stock of Security First Technologies
Corporation ("S1").
4 Specimen certificate for S1's Series C Redeemable
Convertible Preferred Stock.
10.1 Registration Rights Agreement, dated as of February 25,
1999, by and among S1, Royal Bank of Canada and RBC
Holdings (Delaware) Inc.
10.2 Stock Purchase Agreement, dated as of February 19, 1999, by
and between S1 and Hewlett-Packard Company, as amended on
April 30, 1999.
10.3 Stock Purchase Agreement, dated as of February 19, 1999, by
and between S1 and AC II Technology (ACT II) B.V., as
amended on April 30, 1999.
10.4 Warrant, dated February 19, 1999, issued to Andersen
Consulting LLP.
10.5 Warrant, dated February 25, 1999, issued to Royal Bank of
Canada.
27 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the registrant during the quarter
for which this report is filed.
20
<PAGE> 21
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, thereunto duly authorized, as of May 14, 1999.
SECURITY FIRST TECHNOLOGIES
CORPORATION
By: /s/ ROBERT F. STOCKWELL
-----------------------
Robert F. Stockwell
Chief Financial Officer and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
21
<PAGE> 22
EXHIBIT INDEX
Exhibit
No. Description
3 Certificate of Designation for Series C Redeemable Convertible
Preferred Stock of Security First Technologies
Corporation ("S1").
4 Specimen certificate for S1's Series C Redeemable Convertible
Preferred Stock.
10.1 Registration Rights Agreement, dated as of February 25, 1999, by
and among S1, Royal Bank of Canada and RBC Holdings (Delaware)
Inc.
10.2 Stock Purchase Agreement, dated as of February 19, 1999, by
and between S1 and Hewlett-Packard Company, as amended on
April 30, 1999.
10.3 Stock Purchase Agreement, dated as of February 19, 1999, by
and between S1 and AC II Technology (ACT II) B.V., as amended on
April 30, 1999.
10.4 Warrant, dated February 19, 1999, issued to Andersen
Consulting LLP.
10.5 Warrant, dated February 25, 1999, issued to Royal Bank of
Canada.
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 3
CERTIFICATE OF DESIGNATION
OF
SECURITY FIRST TECHNOLOGIES CORPORATION
The undersigned DOES HEREBY CERTIFY that the following resolution was duly
adopted on February 24, 1999, by the duly appointed Special Committee of the
Board of Directors (the "Special Committee" of the "Board") of SECURITY FIRST
TECHNOLOGIES CORPORATION, a Delaware corporation (the "Corporation") acting
pursuant to the authority conferred upon the Special Committee by the Board in
resolutions duly adopted by the Board on February 17, 1999 and in accordance
with the provisions of Sections 141(c) and 151(g) of the General Corporation Law
of the State of Delaware (the "DGCL"):
RESOLVED, that pursuant to authority expressly granted to, and vested in,
the Board by the provisions of the amended and restated certificate of
incorporation of the Corporation (the "Certificate of Incorporation"), and
pursuant to authority expressly granted to, and vested in, the Special Committee
in resolutions duly adopted by the Board in accordance with Section 151(a) of
the DGCL, there is hereby created a Series C Preferred Stock, as set forth below
in this Certificate of Designation.
SERIES C REDEEMABLE CONVERTIBLE PREFERRED STOCK
The Corporation is hereby authorized to issue 215,000 shares of preferred
stock, authorized pursuant to Section 4.3 of the Corporation's Certificate of
Incorporation, as a series of preferred stock, which series shall be designated
"Series C Redeemable Convertible Preferred Stock" (hereinafter referred to as
the "Series C Preferred Stock") and shall have the following rights and
preferences:
1. Dividends
The holders of record of shares (the "Holders") of the Series C Preferred
Stock shall not have any preference with respect to dividends over the holders
of the Common Stock, and shall be entitled to the payment of any and all
dividends or other distributions, only when in accordance with applicable law
and to the extent declared by the Board of Directors of the Corporation.
2. Voting
Except as otherwise provided by law and except as hereinafter provided, the
Holders of the Series C Preferred Stock shall have no voting rights and shall
not be entitled to notice of meetings of shareholders.
3. Conversion
The Holders of the Series C Preferred Stock shall have the right to convert
such shares into shares of Common Stock of the Corporation, on a one-for-one
basis (subject to adjustment as provided in Section 3(d) below), contingent upon
satisfaction of the terms and conditions specified in this Section 3. Unless
accelerated pursuant to the provisions of Section 3(a)(ii) below, the right to
convert shares of Series C Preferred Stock into shares of Common Stock will
vest, if at all, in five installments (each, an "Installment"), on each of five
specified dates (each, a "Calculation Date"),
<PAGE> 2
which dates shall be (i) February 25, 2000 (the "Initial Calculation Date"),
(ii) the first business day in Atlanta, Georgia following the one year
anniversary of the "Completion Date" (as such term is defined in Section 2.1.F
of the RBC/SONE Agreement, dated February 25, 1999) (the "Second Calculation
Date"), and (iii) each of the respective first business days in Atlanta, Georgia
following the three successive anniversary dates of the Second Calculation Date.
Upon vesting, the first Installment will give the Holders the right to convert
21,500 shares of Series C Preferred Stock into an equal number of shares of
Common Stock and each of the successive four Installments will give the Holders
the right to convert 48,375 shares of Series C Preferred Stock into an equal
number of shares of Common Stock. The terms and conditions for vesting of an
Installment and the conversion of a vested Installment shall be as follows:
(a) Conditions of Conversion. (i) The right to convert the
shares of Series C Preferred Stock into shares of the Corporation's Common Stock
will vest as to one Installment on each Calculation Date (each, a "Vesting
Date") if and only if the Corporation has received in the twelve calendar months
prior to such Calculation Date as to such Installment aggregate gross payments
of "Fees" (as such term is defined in Sectrion 2.1.C of the RBC/SONE Agreement,
dated February 25, 1999) from the Holders of at least $5,000,000 (US) with
respect to the Initial Calculation Date, and $11,250,000 (US) with respect to
each Calculation Date thereafter (the "Threshold Amount"). The right to convert
underlying vested Installments shall be exercisable as and when provided by
Section 3(b).
(ii) If the Corporation receives aggregate gross payments of
Fees in excess of the Threshold Amount for a particular Calculation Date, the
amount of the payments exceeding the Threshold Amount may be applied against the
Threshold Amount for the next Installment, provided, that if such payments
exceeding the Threshold Amount equal or exceed any integral multiple of
$11,250,000 in any such twelve-month period, the Holders may, in their sole
discretion, elect to have the number of additional Installments equal to such
integral multiple vest as of such Vesting Date in addition to the current
Installment. Upon the election by the Holders of any such accelerated vesting of
Installments, the number of Installments for which the conversion option may
still vest shall be decreased by such integral multiple, and the Final
Conversion Date (as defined below) shall be accelerated accordingly.
(iii) If the Corporation does not receive aggregate gross
payments of Fees of at least the Threshold Amount in any particular calendar
year, the Holders shall not have the right to, or otherwise be permitted to,
convert the number of shares covered by such year's Installment into Common
Stock at any time.
(b) Time for Exercise of Vested Conversion Options. Upon vesting
of an Installment, the Holders shall have the right to convert the Series C
Preferred Stock covered by such Installment for a period of 90 days commencing
upon the Vesting Date for each respective Installment (to "Conversion Period").
The Holders' right to exercise their option to convert the Series C Preferred
Stock covered by the fourth Installment shall be exercisable for a period of 90
days commencing one year from the Vesting Date for that Installment.
Notwithstanding the foregoing or any other provision to the contrary herein, if
(i) the Holder is not otherwise permitted or authorized under Section 4 of the
Bank Holding Company Act of 1956, as amended, to hold more than 4.999% of the
total number of shares of Common Stock then outstanding, and (ii) conversion of
an Installment, in whole or in part, would cause the Holder to own more than
4.999% of the total number of shares of Common Stock then outstanding, then the
Conversion Period as to such Installment shall be extended to 10 days following
notice from the Corporation to the Holders that exercise of such Installment, in
whole or in part, would not cause the Holders to hold more than 4.999% of the
total number of shares of Common Stock then outstanding.
(c) Mechanics of Conversion. The right to convert shares of the
Series C Preferred Stock into shares of Common Stock of the Corporation (if
applicable) shall be exercisable
<PAGE> 3
by delivering the certificate or certificates for the shares to be converted,
properly endorsed to the Corporation or in blank, along with a written notice of
its intention to convert such shares, to the Secretary of the Corporation at the
home office of the Corporation. The conversion of the shares of Series C
Preferred Stock shall be effective as of the date on which the Corporation
receives both such certificate or certificates and such notice of conversion.
(d) All shares of Common Stock issued upon the conversion of any
shares of Series C Preferred Stock shall be fully paid and non-assessable.
(e) The number of shares of Common Stock of the Corporation into
which the shares of Series C Preferred Stock can be converted shall be subject
to adjustment from time to time as follows:
(i) If, at any time after the issuance of any shares of Series C
Preferred Stock, the Corporation pays or makes a dividend or other
distribution on any class of capital stock of the Corporation in Common
Stock of the Corporation, then the number of shares of Common Stock into
which each share of Series C Preferred Stock may be converted shall be
increased by multiplying such number by a fraction, the denominator of
which is the number of shares of such Common Stock outstanding at the close
of business on the day immediately preceding the date of such distribution
and the numerator of which is the sum of such number of shares and the
total number of shares constituting such dividend or other distribution,
such increase to become effective immediately after the opening of business
on the day following such distribution.
(ii) If, at any time after the issuance of any shares of
Series C Preferred Stock, the outstanding shares of Common Stock of the
Corporation are subdivided into a greater number of such shares, then the
number of shares of Common Stock into which each share of Series C
Preferred Stock may be converted shall be proportionately increased, and,
conversely, if, at any time after the issuance of any shares of Series C
Preferred Stock, the outstanding shares of Common Stock of the Corporation
are combined into a smaller number of such shares, then the number of
shares of Common Stock into which each share of Series C Preferred Stock
may be converted shall be proportionately decreased, such increase or
decrease, as the case may be, to become effective immediately after the
opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(iii) The reclassification (including any reclassification upon
a merger in which the Corporation is the continuing corporation) of the
Common Stock of the Corporation into securities, including other than
shares of such Common Stock, shall be deemed to involve a subdivision or
combination, as the case may be, of the number of shares of the Common
Stock of the Corporation outstanding immediately prior to such
reclassification into the number of shares of such Common Stock outstanding
immediately thereafter and the effective date of such reclassification
shall be deemed to be the day upon which such subdivision or combination
becomes effective, within the meaning of subparagraph (ii) above.
4. Liquidation
In the event of the liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary, the Holders of the shares of
Series C Preferred Stock shall be entitled to receive, out of the assets of the
Corporation available for distribution to stockholders, an amount equal to $0.01
per share of Series C Preferred Stock.
<PAGE> 4
5. Reservation of Common Stock
So long as any shares of Series C Preferred Stock are outstanding, the
Corporation shall maintain a sufficient number of authorized but unissued shares
of Common Stock to provide for the conversion of all outstanding shares of
Series C Preferred Stock into shares of Common Stock.
6. Mandatory Redemption
(a) Any shares of Series C Preferred Stock that do not vest and
become convertible into shares of Common Stock in accordance with Section 3
above on or before March 31, 2004 will be redeemed by the Corporation for an
amount equal to $0.01 per share on the 90th day following the Final Conversion
Date or, if such date is not a day on which banks in Atlanta, Georgia are open
for business (a "Business Day"), the next such Business Day (the "Redemption
Date"). The Corporation will provide the Holders with written notice of the
redemption of shares of Series C Preferred Stock which have not vested 10
Business Days prior to the Redemption Date. Payment of the redemption price
shall be made by the Corporation by check or, at the option of the Corporation,
wire transfer or other immediately available funds.
(b) Upon mailing of the notice of redemption and following payment of
the redemption price on the Redemption Date (unless default shall be made by the
Corporation in providing money for the payment of the redemption price, and
subject to the other terms of this certificate of designations) such shares
shall no longer be deemed to be outstanding, and all rights of the Holders
thereof as shareholders of the Corporation, other than the right to receive the
redemption price from the Corporation) shall cease.
7. Lock-up and Legend
With respect to any Installments that vest on the first three Calculation
Dates, each share of Common Stock received upon any conversion of such Series C
Preferred Stock shall be non-transferable for two years from the date on which
the relevant Series C Preferred Stock vested, unless permitted by the Board of
Directors of the Corporation. With respect to any Installments that vest on the
fourth Calculation Date, each share of Common Stock received upon any conversion
of such Series C Preferred Stock shall be non-transferable for one year from the
date on which the relevant Series C Preferred Stock vested, unless permitted by
the Board of Directors of the Corporation. Any other offer, sale or other
purported transfer of such shares of Common Stock shall be void ab initio and
the purported transferee thereof shall possess no rights in such shares of
Common Stock.
Each certificate representing shares of Common Stock into which shares of
Series C Preferred Stock have been converted shall bear the following legend (in
addition to any legend required by applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY OTHER FEDERAL
OR STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT AND ANY OTHER APPLICABLE FEDERAL SECURITIES LAWS COVERING SUCH SECURITIES
OR THE CORPORATION RECEIVES AN OPINION OF COUNSEL IN FORM SATISFACTORY TO THE
CORPORATION THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
ADDITIONALLY, THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE
IS SUBJECT TO CERTAIN RESTRICTIONS SPECIFIED IN
<PAGE> 5
SECTION 7 OF THE CERTIFICATE OF DESIGNATION OF SECURITY FIRST TECHNOLOGIES
CORPORATION DATED FEBRUARY 24, 1999 AS TO THE SERIES C REDEEMABLE
CONVERTIBLE PREFERRED STOCK, AND NO TRANSFER OF SHARES SHALL BE VALID OR
EFFECTIVE ABSENT COMPLIANCE WITH SUCH RESTRICTIONS. A COPY OF THE
CERTIFICATE OF DESIGNATION MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST
MADE BY THE REGISTERED HOLDER OF THIS CERTIFICATE TO THE SECRETARY OF THE
CORPORATION.
The legend endorsed on a stock certificate pursuant to this Section 7,
insofar as it relates to registration under the Securities Act of 1933, as
amended, shall be removed and the Corporation shall issue a certificate without
such legend to the holder of such shares, if such shares are registered under
applicable federal securities laws and a prospectus meeting the requirements of
the rules and regulations of the Securities and Exchange Commission is available
or if such holder provides to the Corporation an opinion of counsel to such
holder reasonably satisfactory to the Corporation, to the effect that a public
sale, transfer or assignment of such shares may be made without registration and
without compliance with any restrictions. The legend endorsed on a stock
certificate pursuant to this Section 7, insofar as it relates to additional
transfer restrictions specified herein, shall be removed upon the expiration of
the applicable provisions.
IN WITNESS WHEREOF, SECURITY FIRST TECHNOLOGIES CORPORATION has caused this
Certificate of Designation to be made under the seal of the Corporation and
signed by James S. Mahan, III, its Chief Executive Officer and President, and
attested by Nancy K. Kenley, its Secretary, this 24th day of February, 1999.
SECURITY FIRST TECHNOLOGIES CORPORATION
By: /s/ James S. Mahan, III
-------------------------------------
Chief Executive Officer and President
[SEAL]
Attest:
/s/ Nancy Kenley
- --------------------
Secretary
<PAGE> 1
EXHIBIT 4
SERIES C PREFERRED SERIES C PREFERRED
NUMBER [SECURITY FIRST LOGO APPEARS HERE] SHARES
SFPC-
SECURITY FIRST TECHNOLOGIES CORPORATION
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
SEE REVERSE
SIDE FOR
CERTAIN LEGENDS
This Certifies that SPECIMEN
is the owner of
FULLY PAID AND NONASSESSABLE SHARES OF SERIES C REDEEMABLE CONVERTIBLE
PREFERRED STOCK, PAR VALUE $0.01 PER SHARE, OF
Security First Technologies Corporation (the "Corporation"), a Delaware
corporation with its principal executive office located in Atlanta, Georgia. The
shares represented by this certificate are transferable only on the stock
transfer books of the Corporation by the holder of record hereof, or by his or
her duly authorized attorney or legal representative, upon the surrender of this
certificate properly endorsed.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
executed by the signature of its duly authorized officers and has caused its
corporate seal to be hereunto affixed.
Dated:
SECURITY FIRST TECHNOLOGIES CORPORATION
[SEAL]
--------------------------------- BY: ---------------------------------
SECRETARY PRESIDENT
<PAGE> 2
SECURITY FIRST TECHNOLOGIES CORPORATION
The shares represented by this certificate are issued subject to all the
provisions of the certificate of incorporation and bylaws of Security First
Technologies Corporation (the "Corporation") as from time to time amended
(copies of which are on file at the principal executive office of the
Corporation), to all of which the holder by acceptance hereof assents.
The Corporation is authorized to issue more than one class or series of
stock. The Corporation will furnish to any shareholder, upon request and without
charge, a full statement of the powers, designations, preferences and relative,
participating, optional, or other special rights of each authorized class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights, to the extent that the same have been fixed, and
of the authority of the board of directors to designate the same with respect to
other series. Such request may be made to the Corporation at its principal
executive office.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT- Custodian
TEN ENT - as tenants by the entireties --------- ---------
JT TEN - as joint tenants with right (Coat) (Minor)
survivorship and not as under Uniform Gifts to Minors
tenants in common Act
----------------
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, hereby sell, assign and transfer unto
--------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE:
--------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING POSTAL CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
shares represented by the within certificate,
- ----------------------------------
and do hereby irrevocably constitute and appoint Attorney
------------------------
to transfer the said shares on the books of the Corporation with full power of
substitution in the premises.
Dated
-----------------------
------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH
THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE
IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATEVER
SIGNATURE(S) GUARANTEED: THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM) PURSUANT TO S.E.C. RULE 17Ad-15.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED ("THE ACT") OR ANY OTHER FEDERAL OR STATE
SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED
UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY OTHER
APPLICABLE FEDERAL SECURITIES LAWS COVERING SUCH SECURITIES OR THE CORPORATION
RECEIVES AN OPINION OF COUNSEL IN FORM SATISFACTORY TO THE CORPORATION THAT AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
<PAGE> 1
EXHIBIT 10.1
REGISTRATION RIGHTS AGREEMENT
BY AND AMONG
SECURITY FIRST TECHNOLOGIES CORPORATION,
ROYAL BANK OF CANADA
AND
RBC HOLDINGS (DELAWARE) INC.
DATED AS OF FEBRUARY 25, 1999
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement"), dated as of February
25, 1999, is entered into by and among Security First Technologies Corporation,
a Delaware corporation ("SFTC"), Royal Bank of Canada, a Canadian banking
company ("Royal Bank"), and RBC Holdings (Delaware) Inc., a Delaware corporation
("RBHC," and together with Royal Bank, "RBC").
WHEREAS, Royal Bank and SFTC have entered into other agreements on even
date herewith, the result of which may be that RBC may acquire additional shares
of SFTC common stock, no par value per share ("Common Stock"); and
WHEREAS, as an inducement to Royal Bank and SFTC to enter into such other
agreements, the parties have determined that it is in their respective best
interests for SFTC to provide RBC with the registration rights set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements, covenants and
promises contained herein, and for other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties agree as follows:
SECTION 1. SUPERSEDING CLAUSE.
This Agreement amends and supersedes the registration rights provisions
set forth in Section 2 of the Common Stock Purchase and Option Agreement, by and
between Security First Network Bank and RBHC, dated as of March 9, 1998.
SECTION 2. REGISTRATION RIGHTS.
2.1 PIGGYBACK REGISTRATION RIGHTS.
2.1(a) Except as provided at Section 2.1(b) below, if at any time
or times beginning six months after the date hereof through and including eight
years from the date hereof, SFTC proposes to make a public offering of its
Common Stock, which requires registration under applicable rules and regulations
of the Securities and Exchange Commission ("SEC") (or any successor regulator
thereto as to federal securities laws), other than an offering not suitable for
inclusion of shares of selling stockholders for offer to the public, such as
shares being offered in connection with an employment benefit plan or in
connection with a merger, SFTC shall give written notice of the proposed
registration to RBC at least 14 business days prior to the proposed filing date
of the registration form with the SEC, and at the written
<PAGE> 3
request of RBC delivered to SFTC within 10 days after the receipt of such
notice, SFTC shall include in such registration and offering, and in any
underwriting of such offering, all shares of Common Stock that (i) RBC is not
contractually or otherwise prohibited from selling, and (ii) that have been
designated for registration in RBC's request. SFTC may withdraw any proposed
registration statement or offering of securities under this Section 2 at any
time without any liability to RBC hereunder.
2.1(b) If a registration in which RBC has the right to participate
pursuant to this Section 2 is an underwritten public offering and the managing
underwriter advises SFTC in writing that in its opinion the number of securities
requested to be included in such registration exceeds the number that can be
sold in such offering consistent with the pricing expectations of SFTC, then
SFTC first shall include in such offering the Common Stock proposed to be sold
by SFTC if consistent with the aforementioned opinion of the managing
underwriter, and second shall include the Common Stock requested to be included
in such registration by RBC and other selling stockholders who hold registration
rights pursuant to pre-existing written agreements with SFTC, if any, pro rata
based upon the number of shares of Common Stock requested by each such selling
stockholder to be included in such registration, or in such other amounts upon
which SFTC, RBC and the other selling stockholders may agree. The five year
limitation on registration rights set forth in Section 2.1(a) shall not apply to
any shares of RBC's Common Stock excluded from registration by virtue of this
Section 2.1(b).
2.2 DEMAND REGISTRATION RIGHTS.
2.2(a) At any time after six months from the date hereof through
and including eight years from the date hereof, RBC may request registration for
sale under the Securities Act of 1933, as amended (the "Securities Act") of any
shares of Common Stock owned by RBC and of which RBC is not contractually or
otherwise prohibited from selling (a "Demand Registration"), provided, however,
that (i) SFTC shall only be obligated to effect three Demand Registrations for
RBC, (ii) SFTC shall not be obligated to effect a Demand Registration unless RBC
requests registration for sale of shares that represent at least 50% of the
aggregate amount of Common Stock then owned by RBC, and (iii) SFTC shall not be
required to conduct an underwritten offering. A Demand Registration shall
specify the approximate number of shares of Common Stock requested to be
registered and the anticipated per share price range for such offering.
2.2(b) A Demand Registration shall be deemed to occur when such
registration becomes effective under the Securities Act, except that if, after
it becomes effective, such Demand Registration is interfered with by any stop
order, injunction or other order or requirement of the SEC (or any successor
regulator thereto as to federal securities laws) or any other governmental
authority, such
<PAGE> 4
registration shall not be deemed to have been effected unless such stop order,
injunction or other order shall have been subsequently vacated or removed.
2.3 REGISTRATION PROCEDURES.
2.3(a) SFTC shall have no obligation to include shares of Common
Stock owned by RBC in a registration statement pursuant to Section 2.1 or
Section 2.2 hereof unless and until RBC has furnished SFTC with all information
and statements about or pertaining to Royal Bank and RBHC in such reasonable
detail and on such timely basis as is reasonably deemed by SFTC to be necessary
or appropriate for the preparation of the registration statement.
2.3(b) Whenever RBC has requested that its shares of Common Stock
be registered pursuant to Section 2.1 or Section 2.2 hereof, SFTC shall, subject
to its rights under Section 2.1(a) to withdraw the registration statement and
the other provisions of Section 2.1 and Section 2.2:
(1) prepare and file with the SEC a registration
statement with respect to such shares and use its reasonable efforts to cause
such registration statement to become effective as soon as practicable after the
filing thereof (provided that before filing a registration statement or
prospectus or any amendments or supplements thereto, SFTC shall furnish counsel
for RBC with copies of all such documents proposed to be filed);
(2) prepare and file with the SEC as promptly as is
reasonably practicable such amendments and supplements to such registration
statement and prospectus contained therein as may be necessary to keep such
registration statement effective for a period of not less than three months or
until RBC has completed the distribution described in such registration
statement, whichever occurs first;
(3) furnish to RBC the number of copies of such
registration statement, each amendment and supplement thereto, the prospectus
contained in such registration statement (including each preliminary
prospectus), and such other documents as RBC may reasonably request;
(4) use reasonable efforts to register or qualify such
shares under the state blue sky or securities or banking laws ("Blue Sky Laws")
of such jurisdictions as RBC reasonably requests (and to keep such registrations
and qualifications effective for a period of three months, or until RBC has
completed the distribution of such shares, whichever occurs first), and to do
any and all other acts and things that may be reasonably necessary or advisable
to enable RBC to consummate the disposition of such shares in such
jurisdictions; provided, however, that SFTC will not be required to do any of
the following: (i) qualify generally to do business in any jurisdiction where it
would not be required but for this
<PAGE> 5
Section 2.3(b), (ii) subject itself to taxation in any such jurisdiction, or
(iii) file any general consent to service of process in any such jurisdiction;
(5) promptly notify RBC at any time when a prospectus
relating thereto is required to be delivered under applicable federal securities
laws during the period that SFTC is required to keep the registration statement
effective, of the occurrence of any event as a result of which the prospectus
included in such registration statement contains an untrue statement of a
material fact or omits any fact necessary to make the statements therein in the
light of the circumstances under which they were made, not misleading, and
prepare a supplement or amendment to the prospectus so that, as thereafter
delivered to the purchasers of such shares, the prospectus will not contain an
untrue statement of a material fact or omit to state any fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading;
(6) use reasonable efforts to cause all such shares to
be listed on a securities exchange or the Nasdaq Stock Market; and
(7) provide a transfer agent and registrar (if SFTC does
not already have such an agent) for all such shares not later than the effective
date of such registration statement.
2.4 REGISTRATION EXPENSES.
2.4(a) If, pursuant to Section 2.1 or Section 2.2 hereof, shares
of Common Stock owned by RBC are included in a registration statement, then RBC
shall pay all transfer taxes, if any, relating to the sale of its shares of
Common Stock, the fees and expenses of its own counsel, and its pro rata portion
of any underwriting discounts or commissions or the equivalent thereof.
2.4(b) Except for the fees and expenses specified in Section
2.4(a) hereof and except as provided below in this Section 2.4(b), SFTC shall
pay all expenses incident to the registration and to SFTC's performance of or
compliance with this Agreement, including, without limitation, all registration
and filing fees, fees and expenses of compliance, with Blue Sky Laws,
underwriting discounts, fees, and expenses (other than RBC's pro rata portion of
any underwriting discounts or commissions or the equivalent thereof), printing
expenses, messenger and delivery expenses, and fees and expenses of counsel for
SFTC and all independent certified public accountants and other persons retained
by SFTC. With respect to any registration pursuant to Section 2.2 hereof, SFTC
shall pay its internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties)
and the expenses and fees for listing the securities to be registered on an
exchange or on the Nasdaq Stock Market.
<PAGE> 6
2.5 INDEMNITY AND CONTRIBUTION.
2.5(a) In the event that any shares of Common Stock owned by RBC
are sold by means of a registration statement pursuant to Section 2.1 or Section
2.2 hereof, RBC (for the purposes of this paragraph 2.5(a), the "Indemnifying
Person") agrees to indemnify and hold harmless SFTC, each of SFTC's officers and
directors, and each person, if any, who controls or may control SFTC within the
meaning of the Securities Act (for the purposes of this paragraph 2.5(a), SFTC,
its officers and directors, and any such other persons being hereinafter
referred to individually as an "Indemnified Person" and collectively as
"Indemnified Persons") from and against all demands, claims, actions or causes
of action, assessments, losses, damages, liabilities, costs, and expenses,
including, without limitation, interest, penalties, and reasonable attorneys'
fees and disbursements, asserted against, resulting to, imposed upon, or
incurred by such Indemnified Person, directly or indirectly (collectively,
hereinafter referred to in the singular as a "Claim" and in the plural as
"Claims"), based upon, arising out of, or resulting from any untrue statement of
a material fact contained in the registration statement or any omission to state
therein a material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading, to
the extent that such Claim is based upon, arises out of or results from any
untrue statement or omission based upon information furnished to SFTC by RBC in
a written document provided by RBC for use in connection with the registration
statement.
2.5(b) SFTC (for the purposes of this paragraph 2.5(b), the
"Indemnifying Person") agrees to indemnify and hold harmless RBC, its officers
and directors, each person, if any, who controls or may control RBC within the
meaning of the Securities Act and any underwriters participating in the
distribution of Common Stock pursuant to a registration statement (for the
purposes of this paragraph 2.5(b), RBC, its officers and directors, and any such
other persons also being hereinafter referred to individually as an "Indemnified
Person" and collectively as "Indemnified Persons") from and against all Claims
based upon, arising out of, or resulting from any untrue statement of a material
fact contained in the registration statement or any omission to state therein a
material fact necessary in order to make the statement made therein, in the
light of the circumstances under which they were made, not misleading, provided
that SFTC will not be liable in any such case to the extent that any such Claim
arises out of or results from any untrue statement or omission based upon
information furnished to SFTC by RBC in a written document provided by RBC for
use in connection with the registration statement.
2.5(c) The indemnification set forth herein shall be in addition
to any liability SFTC or RBC may otherwise have in connection with any
registration of Common Stock. Within a reasonable time after receiving
definitive notice of any Claim in respect of which an Indemnified Person may
seek indemnification under
<PAGE> 7
this Section 2.5, such Indemnified Person shall submit written notice thereof to
Indemnifying Person. The failure of the Indemnified Person so to notify the
Indemnifying Person of any such Claim shall not relieve the Indemnifying Person
from any liability it may have hereunder except to the extent that (a) such
liability was caused or increased by such omission, or (b) the ability of the
Indemnifying Person to reduce such liability was materially adversely affected
by such omission. In addition, the omission of the Indemnified Person so to
notify the Indemnifying Person of any such Claim shall not relieve the
Indemnifying Person from any liability it may have otherwise than hereunder. The
Indemnifying Person shall have the right to undertake, by counsel or
representatives of its own choosing, the defense, compromise, or settlement
(without admitting liability of the Indemnifying Person) of any such Claim
asserted, such defense, compromise, or settlement to be undertaken at the
expense and risk of the Indemnifying Person, and the Indemnified Person shall
have the right to engage separate counsel, at its own expense, which counsel for
the Indemnifying Person shall keep informed and consult with in a reasonable
manner. In the event the Indemnifying Person shall fail to undertake such
defense by its own representatives, the Indemnifying Person shall give prompt
written notice of such election to the Indemnified Person, and the Indemnified
Person shall undertake the defense, compromise, or settlement (without admitting
liability of the Indemnified Person) thereof on behalf of and for the account
and risk of the Indemnifying Person by counsel or other representatives
designated by the Indemnified Person. In the event that any Claim shall arise
out of a transaction or cover any period or periods wherein SFTC and RBC shall
each be liable hereunder for part of the liability or obligation arising
therefrom, then the parties shall, each choosing its own counsel and bearing its
own expenses, defend such Claim, and no settlement or compromise of such Claim
may be made without the joint consent or approval of SFTC and RBC.
Notwithstanding the foregoing, no Indemnifying Person shall be obligated
hereunder with respect to amounts paid in settlement of any Claim if such
settlement is effected without the consent of such Indemnifying Person (which
consent shall not be unreasonably withheld).
2.5(d) If the indemnification provided for in this Section 2.5 is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party (as defined in either Section 2.5(a) or 2.5(b)) with respect to any Claim,
then RBC or SFTC, as applicable and as the case may be (each an "Indemnifying
Party"), in lieu of indemnifying an Indemnified Party hereunder, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Claim in such proportion as is appropriate to reflect the relative fault
of the Indemnifying Party on the one hand and of the Indemnified Party on the
other in connection with the statements or omissions which resulted in such
claim.
<PAGE> 8
SECTION 3. TERMINATION.
3.1 MUTUAL CONSENT.
The parties may terminate this Agreement at any time by mutual
written agreement.
3.3 EFFECT OF TERMINATION.
Termination of this Agreement pursuant to this Section 3 shall not
relieve any party of any liability for a default or other breach, default or
nonperformance under this Agreement. Notwithstanding the foregoing, no party
hereto shall be liable for consequential or punitive damages in connection with
such termination.
SECTION 4. MISCELLANEOUS.
4.1 ADDITIONAL ACTIONS AND DOCUMENTS.
Each of the parties hereto agrees that it will, at any time, take
or cause to be taken such further actions, and execute, deliver and file or
cause to be executed, delivered and filed such further documents and instruments
as may be necessary or reasonably requested in connection with the consummation
of transactions contemplated by this Agreement or in order to fully effectuate
the purposes, terms and conditions of this Agreement.
4.2 NOTICES.
All notices, demands, requests, or other communications which may
be or are required to be given or made by any party to any other party pursuant
to this Agreement shall be in writing and shall be hand delivered, mailed by
first-class registered or certified mail, return receipt requested, postage
prepaid, or delivered by overnight air courier, addressed as follows:
(i) if to SFTC:
Security First Technologies Corporation
3390 Peachtree Road, NE, Suite 1700
Atlanta, Georgia 30326
Attn.: President
<PAGE> 9
with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Attn.: Stuart G. Stein, Esq.
(ii) if to RBHC:
RBC Holdings (Delaware) Inc.
1 Place Ville Marie
Montreal, Canada H3C 5A7
Attn.: Vice President - Business Development
(iii) if to Royal Bank:
Royal Bank of Canada
16th Floor, South Tower
Royal Bank Plaza
200 Bay Street
Toronto, Ontario M5J 2J2
Attn.: Vice President - Business Development
with a copy (which shall not constitute notice) to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Attn.: Lawrence J. Hohlt
or such other address as the addressee may indicate by written notice to the
other parties. Each notice, demand, request, or communication which shall be
given or made in the manner described above shall be deemed sufficiently given
or made for all purposes at such time as it is delivered to the addressee (with
the return receipt, the delivery receipt, or the affidavit of messenger being
deemed conclusive but not exclusive evidence of such delivery) or at such time
as delivery is refused by the addressee upon presentation.
4.3. WAIVER.
No waiver by any party of any failure or refusal of any other
party to comply with its obligations under this Agreement shall be deemed a
waiver of any other or subsequent failure or refusal to so comply by such other
party. No waiver shall be valid unless in writing signed by the party to be
charged and only to the extent therein set forth.
<PAGE> 10
4.4 BINDING EFFECT.
This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
4.5 ENTIRE AGREEMENT; AMENDMENT.
This Agreement, including the other instruments and documents
referred to herein or delivered pursuant hereto, contains the entire agreement
among the parties with respect to the subject matter hereof and supersedes all
prior oral or written agreements, commitments or understandings with respect to
such matters. No amendment, modification or discharge of this Agreement shall be
valid or binding unless set forth in writing and duly executed by the party
against whom enforcement of the amendment, modification or discharge is sought.
4.6 GOVERNING LAW.
This Agreement, the rights and obligations of the parties hereto,
and any claims or disputes relating thereto, shall be governed by and construed
under and in accordance with the laws of the State of Delaware, excluding the
choice of law rules thereof.
4.7 SIGNATURE IN COUNTERPARTS.
This Agreement may be executed in separate counterparts, none of
which need contain the signatures of all parties, each of which shall be deemed
to be an original, and all of which taken together constitute one and the same
instrument. It shall not be necessary in making proof of this Agreement to
produce or account for more than the number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto.
4.8 NO THIRD PARTY BENEFICIARIES.
Except as expressly provided herein, this Agreement is made and
entered into for the sole protection and benefit of the parties hereto, and no
other person or entity shall have any right of action hereon, right to claim any
right or benefit from the terms contained herein or be deemed a third party
beneficiary hereunder.
4.9 ASSIGNABILITY.
All terms and provisions of this Agreement shall be binding upon
and inure to the benefit of the parties hereto, and their respective
transferees, successors and assigns; provided, however, that neither this
Agreement nor any
<PAGE> 11
rights, privileges, duties and obligations of the parties hereto may be assigned
or delegated by any party hereto without the prior written consent of all the
parties to this Agreement and any such purported or attempted assignment shall
be null and void ab initio and of no force or effect provided, further that RBC
may assign this Agreement, including rights, privileges, duties and obligations
hereunder to any parent or subsidiary corporation affiliate of RBC so long as
such assignment does not in any way materially delay or otherwise materially
adversely impact the ability of the parties hereto to effect the transactions
contemplated hereby.
4.10 PARTIES NOT PARTNERS.
Nothing contained in this Agreement shall constitute any party as
a partner with, agent for or principal of any one or more of the other parties
or their successors and assigns.
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered as of the date first above written.
SECURITY FIRST TECHNOLOGIES CORPORATION
By: /s/ James S. Mahan III
-----------------------------------------
Name: James S. Mahan III
----------------------------------
Title: CEO
----------------------------------
RBC HOLDINGS (DELAWARE) INC.
By: Ray S. Chang
------------------------------------------
Name: Ray S. Chang
-----------------------------------
Title: Chairman of the Board & President
-----------------------------------
By: Charles F. Seitz
------------------------------------------
Name: Charles F. Seitz
-----------------------------------
Title: Treasurer and Secretary
ROYAL BANK OF CANADA
By: /s/ Jim Rager
------------------------------------------
Name: Jim Rager
-----------------------------------
Title: Vice Chair Royal Bank
-----------------------------------
By: /s/ Robert Horton
------------------------------------------
Name: Robert Horton
-----------------------------------
Title: Vice President Business Development
-----------------------------------
<PAGE> 1
EXHIBIT 10.2
STOCK PURCHASE AGREEMENT*
BY AND BETWEEN
SECURITY FIRST TECHNOLOGIES CORPORATION
AND
HEWLETT-PACKARD COMPANY
DATED AS OF FEBRUARY 19, 1999
* AS AMENDED ON APRIL 30, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. PURCHASE AND SALE OF THE SHARES....................................................... 1
-------------------------------
1.1 Sale and Issuance of the Shares....................................................... 1
-------------------------------
1.2 Closing............................................................................... 2
-------
SECTION 2. REGISTRATION RIGHTS.................................................................. 2
-------------------
2.1 Demand Registration Rights............................................................ 2
--------------------------
2.2 Registration Procedures............................................................... 3
-----------------------
2.3 Registration Expenses................................................................. 4
---------------------
2.4 Indemnity and Contribution............................................................ 4
--------------------------
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION.................................... 6
-------------------------------------------------
3.1 Organization and Standing............................................................. 6
-------------------------
3.2 Authorization; Binding Obligation..................................................... 6
---------------------------------
3.3 Capitalization........................................................................ 7
--------------
3.4 Validity of Shares; Issuance.......................................................... 7
----------------------------
3.5 No Consents........................................................................... 7
-----------
3.6 Non-Contravention..................................................................... 7
-----------------
3.7 Additional Information................................................................ 8
----------------------
SECTION 4. REPRESENTATIONS AND WARRANTIES OF
---------------------------------
PURCHASER.................................................................................. 8
---------
4.1 Organization and Standing............................................................. 8
-------------------------
4.2 Authorization......................................................................... 8
-------------
4.3 Non-Contravention..................................................................... 8
-----------------
4.4 No Consents........................................................................... 9
-----------
4.5 Adequate Resources.................................................................... 9
------------------
4.6 Investment Experience................................................................. 9
---------------------
4.7 Investment Intent..................................................................... 9
-----------------
4.8 Registration or Exemption Requirements................................................ 10
--------------------------------------
4.9 No Legal, Tax or Investment Advice.................................................... 10
----------------------------------
SECTION 5. ADDITIONAL AGREEMENTS................................................................ 10
---------------------
5.1 Nonsolicitation....................................................................... 10
---------------
5.2 Lock-up Covenant...................................................................... 10
----------------
SECTION 6. CONDITIONS TO CLOSING................................................................ 11
---------------------
6.1 Conditions to Obligations of All Parties.............................................. 11
----------------------------------------
6.2 Conditions to Obligations of Purchaser................................................ 11
--------------------------------------
6.3 Conditions to Obligations of the Corporation.......................................... 12
--------------------------------------------
SECTION 7. CLOSING.............................................................................. 12
-------
7.1 Deliveries by the Corporation......................................................... 12
-----------------------------
7.2 Deliveries by the Purchaser........................................................... 13
---------------------------
SECTION 8. LEGEND............................................................................... 13
------
8.1 Endorsement........................................................................... 13
-----------
8.2 Removal of Legend..................................................................... 14
-----------------
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
SECTION 9. TERMINATION.......................................................................... 14
-----------
9.1 Mutual Consent........................................................................ 14
--------------
9.2 Other Termination..................................................................... 14
-----------------
9.3 Effect of Termination................................................................. 15
---------------------
SECTION 10. MISCELLANEOUS....................................................................... 15
-------------
10.1 Additional Actions and Documents..................................................... 15
--------------------------------
10.2 Expenses............................................................................. 15
--------
10.3 Notices.............................................................................. 15
-------
10.4 Waiver............................................................................... 16
------
10.5 Binding Effect....................................................................... 17
--------------
10.6 Entire Agreement; Amendment.......................................................... 17
---------------------------
10.7 Severability......................................................................... 17
------------
10.8 Headings............................................................................. 17
--------
10.9 Governing Law........................................................................ 17
-------------
10.10 Signature in Counterparts........................................................... 17
-------------------------
10.11 No Third Party Beneficiaries........................................................ 17
----------------------------
10.12 Assignability....................................................................... 18
-------------
10.13 Parties Not Partners................................................................ 18
--------------------
</TABLE>
<PAGE> 4
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement"), dated as of the 19th day of
February, 1999, is entered into by and among Security First Technologies
Corporation, a Delaware corporation (the "Corporation") and Hewlett-Packard
Company, a Delaware corporation ("Purchaser").
WHEREAS, concurrent with, and as an inducement to the parties entering into
this Agreement, the Corporation and Purchaser are entering into a Memorandum of
Understanding (the "MOU") pursuant to which the Corporation and Purchaser intend
to develop a strategic relationship;
WHEREAS, as part of the aforementioned strategic relationship, Purchaser
also desires to subscribe for, and acquire from the Corporation, such number of
shares (the "Shares") of the Corporation's common stock, par value $.01 per
share ("Common Stock"), as determined by dividing the Purchase Price (as defined
below in Section 1.1(a)) by the applicable per share price of the Shares (as
described below in Section 1.1), on the terms and under the conditions specified
herein;
WHEREAS, the Corporation desires to sell and issue to Purchaser the Shares
on the terms and under the conditions specified herein; and
*
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement, the
sufficiency of which is hereby acknowledged, the parties mutually agree as
follows:
SECTION 1. PURCHASE AND SALE OF THE SHARES.
1.1 Sale and Issuance of the Shares.
1.1. At the Closing (as defined below in Section 1.2(a)) and
subject to the terms and conditions of this Agreement, Purchaser hereby
subscribes for, and agrees to purchase, the Shares, and the Corporation agrees
to sell and issue to Purchaser at the Closing for the Purchase Price, the
Shares. The aggregate purchase price to be paid by Purchaser shall be
$10,000,000 (such aggregate amount, the "Purchase Price"), and the number of
Shares shall be determined by dividing the Purchase Price by the average closing
asking price per share of the Common Stock, as quoted on the Nasdaq Stock Market
National Market Tier, for each of the 10 trading days preceding the business day
immediately before the Closing Date (as defined in Section 1.2(a) below), and
rounding down to the nearest whole share, if the quotient would otherwise
produce fractional shares. The number of Shares shall then be doubled so as to
give effect to the Split as if the Split had been paid immediately prior to the
Closing.
* Recital deleted.
<PAGE> 5
1.2 Closing.
1.2(a). The closing (the "Closing") of the transaction shall
take place on April 30, 1999, or such other date not later than May 15, 1999 as
the parties hereto shall mutually agree (the "Closing Date").
1.2(b). The Closing shall take place on the Closing Date at
10:00 a.m., Washington, D.C. time, at the offices of Hogan & Hartson L.L.P.,
555 13th Street, N.W., Washington, D.C. 20004, or at such other time and place
as the parties shall mutually agree.
SECTION 2. REGISTRATION RIGHTS.
2.1 Demand Registration Rights.
2.1(a). At any time between the respective dates 18 months after
the Closing Date (or such earlier date upon which the covenant at Section 5.2
below terminates) and two years after the Closing Date, Purchaser may request
registration for sale under the Securities Act of any Common Stock owned by
Purchaser (a "Demand Registration"), provided, however, that (i) the Corporation
shall only be obligated to effect one Demand Registration for Purchaser, and
(ii) the Corporation shall not be obligated to effect a Demand Registration
unless Purchaser requests registration for sale of Common Stock that represents
at least 50% of the aggregate amount of Common Stock then owned by Purchaser. A
Demand Registration shall specify the approximate number of shares of Common
Stock that Purchaser requests be registered and the anticipated per share price
range for such offering.
2.1(b). A Demand Registration shall be deemed to occur when such
registration becomes effective under the Securities Act, except that if, after
it becomes effective, such Demand Registration is interfered with by any stop
order, injunction or other order or requirement of the SEC (or any successor
regulator thereto as to federal securities laws) or any other governmental
authority, such registration shall not be deemed to have been effected unless
such stop order, injunction or other order shall have been subsequently vacated
or removed.
2.2 Registration Procedures.
2.2(a). The Corporation shall have no obligation to include
Common Stock owned by Purchaser in a registration statement unless and until
Purchaser has furnished the Corporation with all information and statements
about or pertaining to Purchaser in such reasonable detail and on such timely
basis as is reasonably deemed by the Corporation to be necessary or appropriate
for the preparation of the registration statement.
<PAGE> 6
2.2(b). Whenever Purchaser has requested that its Common Stock be
registered pursuant to Section 2.1 hereof, the Corporation shall, subject to the
provisions of Section 2.1 and Section 2.2:
(1) prepare and file with the SEC a registration statement
with respect to such Common Stock covered by the Demand Registration and use its
reasonable efforts to cause such registration statement to become effective as
soon as practicable after the filing thereof (provided that before filing a
registration statement or prospectus or any amendments or supplements thereto,
the Corporation shall furnish counsel for Purchaser with copies of all such
documents proposed to be filed);
(2) prepare and file with the SEC such amendments and
supplements to such registration statement and prospectus contained therein as
may be necessary to keep such registration statement effective for a period of
not less than three months or until Purchaser has completed the distribution
described in such registration statement, whichever occurs first;
(3) furnish to Purchaser the number of copies of such
registration statement, each amendment and supplement thereto, the prospectus
contained in such registration statement (including each preliminary
prospectus), and such other documents as Purchaser may reasonably request;
(4) if required by applicable law, use reasonable efforts
to register or qualify such shares under the state blue sky or securities laws
("Blue Sky Laws") of such jurisdictions as Purchaser reasonably requests (and to
keep such registrations and qualifications effective for a period of three
months, or until Purchaser has completed the distribution of such shares,
whichever occurs first), and to do any and all other acts and things that may be
reasonably necessary or advisable to enable Purchaser to consummate the
disposition of such shares in such jurisdictions; provided, however, that the
Corporation will not be required to do any of the following: (i) qualify
generally to do business in any jurisdiction where it would not be required but
for this Section 2.2(b), (ii) subject itself to taxation in any such
jurisdiction, or (iii) file any general consent to service of process in any
such jurisdiction;
(5) promptly notify Purchaser at any time when a prospectus
relating thereto is required to be delivered under applicable federal securities
laws during the period that the Corporation is required to keep the registration
statement effective, of the occurrence of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
and prepare a supplement or amendment to the prospectus so that, as thereafter
delivered to the purchasers of such shares, the prospectus will not contain an
untrue statement of a material fact or omit to state any fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; and
(6) use reasonable efforts to cause all such shares of
Common Stock to be listed on the Nasdaq Stock Market National Market Tier (or
such other securities exchange on which the Common Stock is then listed).
2.3 Registration Expenses.
2.3(a). If, pursuant to Section 2.1 hereof, Common Stock owned by
Purchaser is included in a registration statement, then Purchaser shall pay all
transfer taxes, if any, relating to the sale of its Common Stock, the fees and
expenses of its own counsel, and its pro rata portion of any underwriting
discounts or commissions or the equivalent thereof.
<PAGE> 7
2.3(b). Except for the fees and expenses specified in Section 2.3(a)
hereof and except as provided below in this Section 2.3(b), the Corporation
shall pay all expenses incident to the registration and to the Corporation's
performance of or compliance with this Agreement, including, without limitation,
all registration and filing fees, fees and expenses of compliance, with Blue Sky
Laws, printing expenses, messenger and delivery expenses, and fees and expenses
of counsel for the Corporation and all independent certified public accountants
and other persons retained by the Corporation. With respect to any registration
pursuant to Section 2.3 hereof, the Corporation shall pay its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties) and the expenses and fees for
listing the securities to be registered on the Nasdaq Stock Market National
Market Tier, if applicable.
2.4 Indemnity and Contribution.
2.4(a). In the event that any Common Stock owned by Purchaser is sold
by means of a registration statement pursuant to Section 2.1 hereof, Purchaser
(for the purposes of this paragraph 2.4(a), the "Indemnifying Person") agrees to
indemnify and hold harmless the Corporation, each of the Corporation's officers
and directors, and each person, if any, who controls or may control the
Corporation within the meaning of the Securities Act (for the purposes of this
paragraph 2.4(a), the Corporation, its officers and directors, and any such
other persons being hereinafter referred to individually as an "Indemnified
Person" and collectively as "Indemnified Persons") from and against all demands,
claims, actions or causes of action, assessments, losses, damages, liabilities,
costs, and expenses, including, without limitation, interest, penalties, and
reasonable attorneys' fees and disbursements, asserted against, resulting to,
imposed upon, or incurred by such Indemnified Person, directly or indirectly
(collectively, hereinafter referred to in the singular as a "Claim" and in the
plural as "Claims"), based upon, arising out of, or resulting from (i) any
untrue statement of a material fact contained in the registration statement or
any omission to state therein a material fact necessary in order to make the
statements made therein not misleading, or (ii) any untrue statement of a
material fact contained in the prospectus, or any supplement or amendment
thereto, or any omission to state therein a material fact necessary in order to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading, to the extent that such Claim is based upon,
arises out of or results from information furnished to the Corporation by
Purchaser for use in connection with the registration statement.
2.4(b). The Corporation (for the purposes of this paragraph 2.4(b),
the "Indemnifying Person") agrees to indemnify and hold harmless Purchaser, its
officers and directors, each person, if any, who controls or may control
Purchaser within the meaning of the Securities Act (for the purposes of this
paragraph 2.4(b), Purchaser, its officers and directors, and any such other
persons also being hereinafter referred to individually as an "Indemnified
Person" and collectively as "Indemnified Persons") from and against all Claims
based upon, arising out of, or resulting from (i) any untrue statement of a
material fact contained in the registration statement or any omission to state
therein a material fact necessary in order to make the statement made therein
not misleading, or (ii) any untrue statement of a material fact contained in the
prospectus, or any supplement or amendment thereto, or any omission to state
therein a material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading, to
the extent that such Claim is based upon, arises out of or results from
information furnished by the Corporation in the registration statement.
2.4(c). The indemnification set forth herein shall be in addition to
any liability the Corporation or Purchaser may otherwise have in connection with
any registration of such Common Stock. Within a reasonable time after receiving
definitive notice of any Claim in respect of which an Indemnified Person may
seek indemnification under this Section 2.4, such Indemnified Person shall
submit written notice thereof to Indemnifying Person. The failure of the
Indemnified Person so to notify the Indemnifying Person of any such Claim shall
not relieve the Indemnifying Person from
<PAGE> 8
any liability it may have hereunder except to the extent that (a) such liability
was caused or increased by such failure, or (b) the ability of the Indemnifying
Person to reduce such liability was materially adversely affected by such
failure. In addition, the failure of the Indemnified Person to so notify the
Indemnifying Person of any such Claim shall not relieve the Indemnifying Person
from any liability it may have otherwise than hereunder. The Indemnifying Person
shall have the right to undertake, by counsel or representatives of its own
choosing, the defense, compromise, or settlement (without admitting liability of
the Indemnifying Person or the Indemnified Person) of any such Claim asserted,
such defense, compromise, or settlement to be undertaken at the expense and risk
of the Indemnifying Person, and the Indemnified Person shall have the right to
engage separate counsel, at its own expense, which counsel for the Indemnifying
Person shall keep informed and consult with in a reasonable manner. In the event
the Indemnifying Person shall fail to undertake such defense by its own
representatives, the Indemnifying Person shall give prompt written notice of
such election to the Indemnified Person, and the Indemnified Person shall
undertake the defense, compromise, or settlement (without admitting liability of
the Indemnified Person or the Indemnifying Person) thereof on behalf of and for
the account and risk of the Indemnifying Person by counsel or other
representatives designated by the Indemnified Person. In the event that any
Claim shall arise out of a transaction or cover any period or periods wherein
the Corporation and Purchaser shall each be liable hereunder for part of the
liability or obligation arising therefrom, then the parties shall, each choosing
its own counsel and bearing its own expenses, defend such Claim, and no
settlement or compromise of such Claim may be made without the joint consent or
approval of the Corporation and Purchaser. Notwithstanding the foregoing, no
Indemnifying Person shall be obligated hereunder with respect to amounts paid in
settlement of any Claim if such settlement is effected without the consent of
such Indemnifying Person (which consent shall not be unreasonably withheld).
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION.
The Corporation represents and warrants to Purchaser as follows:
3.1 Organization and Standing.
The Corporation is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware, and has the full
corporate power and authority to own and operate its properties and assets and
to carry on its business as currently conducted. The Corporation holds all
licenses and permits required for the conduct of its business as now conducted
which, if not in the Corporation's possession, could have a material adverse
effect on the Corporation's financial condition or results of operations, taken
as a whole. The Corporation is duly qualified as a foreign corporation and is in
good standing in all jurisdictions where the conduct of its business or its
ownership or leasing of property requires such qualification, except where the
failure to so qualify would not have a material adverse effect on the
Corporation's financial condition or results of operations, taken as a whole.
3.2 Authorization; Binding Obligation.
The Corporation has all requisite corporate power and authority to
enter into and to deliver this Agreement and perform its obligations hereunder.
The execution, delivery and performance of this Agreement by the Corporation and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Corporation.
This Agreement, when executed and delivered by the Corporation, shall constitute
a valid and binding obligation of the Corporation enforceable in accordance with
its terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws effecting the enforcement of
creditor's rights.
<PAGE> 9
3.3 Capitalization.
The authorized capital stock of the Corporation consists of 60,000,000
shares of Common Stock, of which 12,263,502 are issued and outstanding as of
December 31, 1998, and 5,000,000 shares of preferred stock, of which 636,464 of
the 1,637,832 shares designated Series A Preferred Stock are issued and
outstanding as December 31, 1998 and of which all of the 749,064 Shares
designated Series B Redeemable Convertible Preferred Stock are issued and
outstanding as of December 31, 1998. All of the Corporation's outstanding shares
of capital stock were validly issued and are fully paid and nonassessable. As of
December 31, 1998, except for (i) 4,399,635 shares subject to issuance upon
exercise of options and an additional 806,918 reserved for issuance pursuant to
options not yet granted, and (ii) shares reserved for issuance upon conversion
of the Series A Preferred Stock and the Series B Preferred Stock, there are no
shares of the Corporation's capital stock reserved for issuance or any options,
warrants, rights (including conversion or preemptive rights) or agreements for
the purchase from the Corporation of any shares of its capital stock or
securities exercisable for or convertible into its capital stock.
3.4 Validity of Shares; Issuance.
The Shares, when issued in compliance with the provisions of this
Agreement will be validly issued, fully paid and nonassessable, and free of any
liens or encumbrances, and will be issued in compliance with all applicable
federal banking laws.
3.5 No Consents.
No governmental orders, permissions, consents, approvals or
authorizations are required to be obtained by the Corporation and no filings are
required to be made by the Corporation in connection with the execution and
delivery of this Agreement and the issuance of the Shares hereunder, except as
have been so obtained or made prior to the Closing or, with respect to any that
need to be obtained or made subsequent to the Closing, as will be obtained or
made in a timely manner after the Closing, except where the failure to obtain
such orders, permissions, consents, approvals or authorizations or to make such
filings would not have a material adverse effect on the Corporation's financial
condition or results of operations or business prospects, taken as a whole.
3.6 Non-Contravention.
The execution, delivery and performance of, and compliance with, this
Agreement will not (a) violate any provision of the articles of incorporation or
bylaws of the Corporation; (b) conflict with or result in a breach of, or
default under, or result in the creation of any lien, claim, charge or other
encumbrance upon any of the assets or properties of the Corporation pursuant to
the provisions of any material agreement, mortgage, indenture or other document
or instrument to which the Corporation is a party or by which the Corporation or
any of its properties or assets is bound, or (c) violate any existing statutes,
laws, ordinances, regulations, orders and other rules of law applicable to the
Corporation or any of its properties or assets, or applicable to the
Corporation's power or authority to perform its obligations under this
Agreement.
3.7 Additional Information.
The information contained in the Corporation's registration statement
on Form 8-A, as filed with the SEC on September 30, 1998, and all other reports
filed subsequent thereto through the Closing Date pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
did not and will not, as the case may be, at the respective dates of filing with
the SEC, contain any untrue statement of a material fact or omit to state a
material fact
<PAGE> 10
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser represents and warrants to the Corporation as follows:
4.1 Organization and Standing.
Purchaser is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Purchaser has the full
corporate power and authority to own and operate its properties and assets and
to carry on its business as currently conducted. Purchaser holds all licenses
and permits required for the conduct of its business as now conducted which, if
not in Purchaser's possession, could have a material adverse effect on
Purchaser's financial condition or results of operations, taken as a whole.
Purchaser is duly qualified as a foreign corporation and is in good standing in
all jurisdictions where the conduct of its business or its ownership or leasing
of property requires such qualification, except where the failure to so qualify
would not have a material adverse effect on Purchaser's financial condition or
results of operations, taken as a whole.
4.2 Authorization.
Purchaser has all requisite corporate power and authority to
enter into and to deliver this Agreement. The execution, delivery and
performance of this Agreement by Purchaser and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Purchaser. This Agreement, when executed and
delivered by Purchaser, shall constitute a valid and binding obligation of
Purchaser enforceable in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws effecting the enforcement of creditor's rights.
4.3 Non-Contravention.
The execution, delivery and performance of, and compliance with,
this Agreement will not (a) violate any provision of the articles of
incorporation or bylaws of Purchaser; (b) conflict with or result in a breach
of, or default under, or result in the creation of any lien, claim, charge or
other encumbrance upon any of the assets or properties of Purchaser pursuant to
the provisions of any material agreement, mortgage, indenture or other document
or instrument to which Purchaser is a party or by which Purchaser or any of its
properties or assets is bound, or (c) violate any existing statutes, laws,
ordinances, regulations, orders and other rules of law applicable to Purchaser
or any of its properties or assets, or applicable to Purchaser's power or
authority to perform its obligations under this Agreement.
4.4 No Consents.
No governmental orders, permissions, consents, approvals or
authorizations are required to be obtained by Purchaser and no filings are
required to be made by Purchaser in connection with the execution and delivery
of this Agreement and the purchase of the Shares hereunder, except as have been
so obtained or made prior to the Closing or, with respect to any that need to be
obtained or made subsequent to the Closing, as will be obtained or made in a
timely manner after the Closing, except where the failure to obtain such orders,
permissions, consents,
<PAGE> 11
approvals or authorizations or to make such filings would not have a material
adverse effect on Purchaser's financial condition or results of operations
or business prospects, taken as a whole.
4.5 Adequate Resources.
Purchaser has sufficient cash and other resources to perform its
obligations hereunder.
4.6 Investment Experience.
Purchaser is an "accredited investor" as defined in Rule 501(a) under
the Securities Act. Purchaser is aware of the Corporation's business affairs and
financial condition and has had access to and has acquired sufficient
information about the Corporation to reach an informed and knowledgeable
decision to acquire the Shares. Purchaser has such business and financial
experience as is required to give it the capacity to protect its own interests
in connection with the purchase of the Shares. Purchaser is able to bear the
economic risk of holding the Shares for an indefinite period, including the loss
of Purchaser's entire investment. The Shares were not offered or sold to
Purchaser by any form of general solicitation or advertising.
4.7 Investment Intent.
Purchaser is purchasing the Shares for its own account as principal,
for investment purposes only, and not with a view to, or for, resale,
distribution or fractionalization thereof, in whole or in part, within the
meaning of the Securities Act. Purchaser understands that its acquisition of the
Shares has not been registered under the Securities Act or registered or
qualified under any state securities law in reliance on specific exemptions
therefrom, which exemptions may depend upon, among other things, the bona fide
nature of Purchaser's investment intent as expressed herein.
4.8 Registration or Exemption Requirements.
Purchaser further acknowledges and understands that the Shares may be
required to be held indefinitely, and they may not be resold or otherwise
transferred except in a transaction registered under the Securities Act or where
an exemption from such registration is available. Purchaser understands that the
certificate(s) evidencing the Shares will be imprinted with a legend that
prohibits the transfer of the Shares unless (a) they are registered or such
registration is not required, and (b) if the transfer is pursuant to an
exemption from registration other than Rule 144 promulgated under the Securities
Act and, if the Corporation shall so request in writing, an opinion of counsel
satisfactory to the Corporation is obtained to the effect that the transaction
is so exempt and in compliance with applicable state law.
4.9 No Legal, Tax or Investment Advice.
Purchaser understands that nothing in this Agreement or any other
materials presented to Purchaser in connection with the purchase and sale of the
Shares constitutes legal, tax or investment advice. Purchaser has consulted such
legal, tax and investment advisors as it, in its sole discretion, has deemed
necessary or appropriate in connection with its purchase of the Shares.
<PAGE> 12
SECTION 5. ADDITIONAL AGREEMENTS.
5.1 Nonsolicitation.
From the date hereof through and including until 18 months after the
Closing Date (or such earlier date upon which the covenant at Section 5.2 below
terminates), each party hereto agrees that such party's employees who are
involved in the transactions described in the MOU will not, without the other
party's prior written consent solicit for employment any person who is involved
in the transactions described in the MOU as an employee of the other party (it
being understood that this Section 5.1 shall not prohibit the placing of general
employment advertisements or solicitations not specifically targeted to any
employee or employees of the other party);
5.2 Lock-up Covenant.
During the period beginning on the date hereof and ending on the date
18 months after the Closing Date (or such earlier date described below),
Purchaser covenants that it will not, without the prior written consent of the
Corporation, offer, sell or otherwise dispose of, directly or indirectly, any
capital stock of the Corporation which Purchaser may own directly, indirectly or
beneficially; provided, however, that Purchaser may transfer some or all of the
Shares to a corporation, partnership or other legal entity controlled by
Purchaser, if such transferee agrees in writing to hold any Shares received
subject to the provisions of this Agreement and to transfer such Shares back to
Purchaser if such transferee ceases to be controlled by Purchaser. The
restrictions on transfer described in this Section 5.2 will terminate in the
event (i) the Corporation breaches either of Sections I(A) or (B) in the MOU or
any successor provisions thereto specifically identified as such in any other
agreement between the Corporation and the Purchaser entered into subsequent to
this Agreement, and (ii) such breach is not cured in accordance with the terms
of the MOU or such subsequent agreement.
SECTION 6. CONDITIONS TO CLOSING.
6.1 Conditions to Obligations of All Parties.
The obligations of each party to consummate the transactions
contemplated by this Agreement are subject to the satisfaction, on or before the
date of the Closing, of each of the following conditions precedent:
6.1(a). Termination. This Agreement shall not have been terminated
in accordance with its terms.
6.1(b). No Governmental Action. No action or proceeding by or before
any governmental authority shall have been instituted or threatened (and not
subsequently dismissed, settled or otherwise terminated) which is reasonably
expected to restrain, prohibit or invalidate the transactions contemplated by
this Agreement or to affect adversely the financial condition and business
prospects of the Corporation.
6.2 Conditions to the Obligations of Purchaser.
The obligations of Purchaser to purchase the Shares as contemplated by
this Agreement are subject to the satisfaction, on or before the date of the
Closing, of each of the following conditions precedent, any one or more of which
may be waived by Purchaser, in its sole and absolute discretion:
<PAGE> 13
6.2(a). Representations and Warranties. The representations and
warranties of the Corporation contained in this Agreement shall be true, correct
and complete in all material respects when made and shall be true and correct on
the date of the Closing, with the same force and effect as if made on the date
of the Closing.
6.2(b). Compliance with Covenants. The Corporation shall have in all
material respects performed all obligations and agreements and complied with all
covenants contained in this Agreement to be performed and complied with by the
Corporation on or prior to the date of the Closing.
6.2(c). Legal Opinion. The Corporation shall have delivered to the
Purchaser an opinion of counsel to the Corporation regarding due authorization
of the Shares by the Corporation and valid issuance of the Shares.
6.3 Conditions to Obligations of the Corporation.
The obligations of the Corporation to sell the Shares as contemplated
by this Agreement are subject to the satisfaction, on or before the date of the
Closing, of each of the following conditions precedent, any one or more of which
may be waived by the Corporation, in its sole and absolute discretion:
6.3(a). Representations and Warranties. The representations and
warranties of Purchaser contained in this Agreement shall be true, correct and
complete in all material respects when made and shall be true and correct as of
the date of the Closing with the same force and effect as if made on the date of
the Closing.
6.3(b). Compliance with Covenants. Purchaser shall have in all
material respects performed all obligations and agreements and complied with all
covenants contained in this Agreement to be performed and complied with by it on
or prior to the date of the Closing.
SECTION 7. CLOSING.
7.1 Deliveries by the Corporation.
At the Closing, the Corporation shall deliver to Purchaser the
following:
(1) A certificate or certificates registered in Purchaser's
name, representing all of the Shares.
(2) A copy of the resolutions of the Board of Directors of the
Corporation, as certified as of the Closing Date by the Secretary of the
Corporation, as being true, correct and complete and then in full force and
effect, authorizing the execution, delivery and performance of this Agreement by
the Corporation, the authorization, sale, issuance and delivery of the Shares,
and the performance of the Corporation's obligations hereunder.
(3) A certificate of the Corporation signed by an authorized
officer of the Corporation certifying that the representations and warranties of
the Corporation made herein are true, complete and correct in all material
respects as of the date of this Agreement and are true and correct as of the
date of the Closing, and the Corporation has in all material respects performed
all obligations and agreements and complied with all covenants required to be
performed or complied with by the Corporation on or prior to the Closing.
<PAGE> 14
(4) An opinion of counsel as described in Section 6.2(c) above.
(5) Such other certificates, instruments or documents as
Purchaser may reasonably request in order to effect and document the
transactions contemplated hereby.
7.2 Deliveries by Purchaser.
At the Closing, Purchaser shall deliver to the Corporation the
following:
(1) The Purchase Price, in cash or by wire transfer or certified
or bank cashier's check, payable to the order of the Corporation.
(2) A certificate of Purchaser signed by an authorized officer
of Purchaser certifying that the representations and warranties of Purchaser
made herein are true, complete and correct in all material respects as of the
date of this Agreement and are true and correct as of the date of the Closing,
and Purchaser has in all material respects performed all obligations and
agreements and complied with all covenants required to be performed or complied
with by Purchaser on or prior to the Closing.
(3) Such other certificates, instruments or documents as the
Corporation may reasonably request in order to effect and document the
transaction contemplated hereby.
SECTION 8. LEGEND.
8.1 Endorsement.
Each certificate representing the Shares shall bear the following
legend (in addition to any legend required by applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY
OTHER FEDERAL OR STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND ANY OTHER APPLICABLE FEDERAL SECURITIES LAWS
COVERING SUCH SECURITIES OR THE CORPORATION RECEIVES AN OPINION OF COUNSEL
IN FORM SATISFACTORY TO THE CORPORATION THAT AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
ADDITIONALLY, THE TRANSFER OF THE SHARES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS SPECIFIED IN THE STOCK
PURCHASE AGREEMENT DATED FEBRUARY _, 1999 (THE "AGREEMENT") BETWEEN THE
CORPORATION AND THE ORIGINAL PURCHASER, AND NO TRANSFER OF SHARES SHALL BE
VALID OR EFFECTIVE ABSENT COMPLIANCE WITH SUCH RESTRICTIONS. ALL SUBSEQUENT
HOLDERS OF THIS CERTIFICATE WILL HAVE AGREED TO BE BOUND BY CERTAIN OF THE
TERMS OF THE AGREEMENT, INCLUDING SECTION 5.2 OF THE AGREEMENT. COPIES OF
THE AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
REGISTERED HOLDER OF THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION.
<PAGE> 15
8.2 Removal of Legend.
The legend endorsed on a stock certificate pursuant to Section 8.1 of
this Agreement, insofar as it relates to registration under the Securities Act,
shall be removed and the Corporation shall issue a certificate without such
legend to the holder of such Shares, if such Shares are registered under
applicable federal securities laws and a prospectus meeting the requirements of
the rules and regulations of the SEC is available or if such holder provides to
the Corporation an opinion of counsel to such holder reasonably satisfactory to
the Corporation, to the effect that a public sale, transfer or assignment of
such Shares may be made without registration and without compliance with any
restrictions. The legend endorsed on a stock certificate pursuant to Section 8.1
of this Agreement, insofar as it relates to additional restrictions specified in
this Agreement, shall be removed upon the expiration of the applicable
provisions referenced therein.
SECTION 9. TERMINATION.
9.1 Mutual Consent.
The parties may terminate this Agreement at any time by mutual written
agreement.
9.2 Other Termination.
The Corporation or the Purchaser may terminate this Agreement by
giving notice (a "Termination Notice") to the other parties at the time
designated in this Section or, in the absence of such designation, at any time
up to and including the date of the Closing, if any one or more of the following
shall have occurred and be continuing:
9.2(a). Termination By Any Party. Any party may terminate this
Agreement under any one or more of the following circumstances:
(1) at any time after May 16, 1999, or, if the Corporation
shall have extended the Closing Date pursuant to Section 1.2(a) of this
Agreement, after July 16, 1999, if the Closing shall not have occurred for any
reason other than a default or non-performance of its obligations hereunder by
the party giving such notice;
(2) a court or other governmental authority of competent
jurisdiction shall have issued an order, writ, injunction or decree or shall
have taken any other action permanently restraining or otherwise prohibiting the
purchase of the Shares contemplated hereby and such order, writ, injunction,
decree or other action shall have become final and nonappealable.
9.2(b). Termination By Purchaser. Purchaser may terminate this
Agreement on the Closing Date, if any condition precedent set forth in Sections
6.1 or 6.2 shall not have been satisfied.
9.2(c). Termination By the Corporation. The Corporation may terminate
this Agreement on the Closing Date, if any condition precedent set forth in
Sections 6.1 or 6.3 shall not have been satisfied.
9.3 Effect of Termination.
Termination of this Agreement pursuant to this Section shall not
relieve any party of any liability for a default or other breach, default or
nonperformance under this Agreement.
<PAGE> 16
Notwithstanding the foregoing, no party hereto shall be liable for consequential
or punitive damages in connection with such termination.
SECTION 10. MISCELLANEOUS.
10.1 Additional Actions and Documents.
Each of the parties hereto agrees that it will, at any time, prior to,
at or after the Closing, take or cause to be taken such further actions, and
execute, deliver and file or cause to be executed, delivered and filed such
further documents and instruments (including export license applications) as may
be necessary or reasonably requested in connection with the consummation of the
purchase and sale contemplated by this Agreement or in order to fully effectuate
the purposes, terms and conditions of this Agreement.
10.2 Expenses.
Except as specified in Section 2, each party hereto shall pay its own
expenses incurred in connection with this Agreement and in the preparation for
and consummation of the transactions contemplated hereby.
10.3 Notices.
All notices, demands, requests, or other communications which may be
or are required to be given or made by any party to any other party pursuant to
this Agreement shall be in writing and shall be hand delivered, mailed by
first-class registered or certified mail, return receipt requested, postage
prepaid, or delivered by overnight air courier, addressed as follows:
(i) if to the Corporation:
Security First Technologies Corporation
3390 Peachtree Road, NE, Suite 1700
Atlanta, Georgia 30326
Attn.: President
with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Attn.: Stuart G. Stein, Esq.
(iii) if to Purchaser:
Hewlett-Packard Company
Enterprise Computing Solutions Organization
19447 Pruneridge Avenue
Mail Stop 44UH
Cupertino, California 95014-0683
Attn.: Controller
<PAGE> 17
with a copy (which shall not constitute notice) to:
Hewlett-Packard Company
3000 Hanover Street, MS 20BQ
Palo Alto, California 94304
Attn.: General Counsel
or such other address as the addressee may indicate by written notice to the
other parties. Each notice, demand, request, or communication which shall be
given or made in the manner described above shall be deemed sufficiently given
or made for all purposes at such time as it is delivered to the addressee (with
the return receipt, the delivery receipt, or the affidavit of messenger being
deemed conclusive but not exclusive evidence of such delivery) or at such time
as delivery is refused by the addressee upon presentation.
10.4 Waiver.
No waiver by any party of any failure or refusal of any other party to
comply with its obligations under this Agreement shall be deemed a waiver of any
other or subsequent failure or refusal to so comply by such other party. No
waiver shall be valid unless in writing signed by the party to be charged and
only to the extent therein set forth.
10.5 Binding Effect.
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns.
10.6 Entire Agreement; Amendment.
This Agreement, including the other instruments and documents referred
to herein or delivered pursuant hereto, contains the entire agreement among the
parties with respect to the subject matter hereof and supersedes all prior oral
or written agreements, commitments or understandings with respect to such
matters. No amendment, modification or discharge of this Agreement shall be
valid or binding unless set forth in writing and duly executed by the party
against whom enforcement of the amendment, modification or discharge is sought.
10.7 Severability.
If any part of any provision of this Agreement shall be invalid or
unenforceable under applicable law, such part shall be ineffective to the extent
of such invalidity or unenforceability only, without in any way affecting the
remaining parts of such provisions or the remaining provisions of said
Agreement.
10.8 Headings.
The headings of the sections and subsections contained in this
Agreement are inserted for convenience only and do not form a part or affect the
meaning, construction or scope thereof.
10.9 Governing Law.
<PAGE> 18
This Agreement, the rights and obligations of the parties hereto,
and any claims or disputes relating thereto, shall be governed by and construed
under and in accordance with the laws of the State of Delaware, excluding the
choice of law rules thereof.
10.10 Signature in Counterparts.
This Agreement may be executed in separate counterparts, none of
which need contain the signatures of all parties, each of which shall be deemed
to be an original, and all of which taken together constitute one and the same
instrument. It shall not be necessary in making proof of this Agreement to
produce or account for more than the number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto.
10.11 No Third Party Beneficiaries.
Except as expressly provided herein, this Agreement is made and
entered into for the sole protection and benefit of the parties hereto, and no
other person or entity shall have any right of action hereon, right to claim any
right or benefit from the terms contained herein or be deemed a third party
beneficiary hereunder.
10.12 Assignability.
All terms and provisions of this Agreement shall be binding upon
and inure to the benefit of the parties hereto, and their respective
transferees, successors and assigns; provided, however, that neither this
Agreement nor any rights, privileges, duties and obligations of the parties
hereto may be assigned or delegated by any party hereto without the prior
written consent of all the parties to this Agreement and any such purported or
attempted assignment shall be null and void ab initio and of no force or effect
provided, further that Purchaser may assign this Agreement, including rights,
privileges, duties and obligations hereunder to any affiliate of Purchaser which
is wholly or substantially owned directly or indirectly by Purchaser so long as
such assignment does not in any way materially delay or otherwise materially
adversely impact the ability of the parties hereto to effect the transactions
contemplated hereby.
10.13 Parties Not Partners.
Nothing contained in this Agreement shall constitute any party as
a partner with, agent for or principal of any one or more of the other parties
or their successors and assigns
[SIGNATURE PAGE FOLLOWS]
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered as of the date first above written.
SECURITY FIRST TECHNOLOGIES CORPORATION
By: /s/ Robert F. Stockwell
----------------------------------------------
Name: Robert F. Stockwell
----------------------------------------
Title: Treasurer
---------------------------------------
HEWLETT-PACKARD COMPANY
By: /s/ Jon E. Flaxman
---------------------------------------
Name: Jon E. Flaxman
---------------------------------
Title: ECSO Controller
--------------------------------
<PAGE> 1
EXHIBIT 10.3
STOCK PURCHASE AGREEMENT*
BY AND BETWEEN
SECURITY FIRST TECHNOLOGIES CORPORATION
AND
AC II TECHNOLOGY (ACT II) B.V.
DATED AS OF FEBRUARY 19, 1999
* AS AMENDED ON APRIL 30, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. PURCHASE AND SALE OF THE SHARES.............................................. 1
-------------------------------
1.1 Sale and Issuance of the Shares............................................... 1
-------------------------------
1.2 Closing....................................................................... 2
-------
SECTION 2. REGISTRATION OF THE SHARES................................................... 2
--------------------------
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION............................ 6
-------------------------------------------------
3.1 Organization and Standing..................................................... 6
-------------------------
3.2 Authorization; Binding Obligation............................................. 6
---------------------------------
3.3 Capitalization................................................................ 6
--------------
3.4 Validity of Shares; Issuance.................................................. 7
----------------------------
3.5 No Consents................................................................... 7
-----------
3.6 Non-Contravention............................................................. 7
-----------------
3.7 Additional Information........................................................ 7
----------------------
SECTION 4. REPRESENTATIONS AND WARRANTIES OF
---------------------------------
PURCHASER.......................................................................... 8
---------
4.1 Organization and Standing..................................................... 8
-------------------------
4.2 Authorization................................................................. 8
-------------
4.3 Non-Contravention............................................................. 8
-----------------
4.4 No Consents................................................................... 9
-----------
4.5 Adequate Resources............................................................ 9
------------------
4.6 Investment Experience......................................................... 9
---------------------
4.7 Investment Intent............................................................. 9
-----------------
4.8 Registration or Exemption Requirements........................................ 10
--------------------------------------
4.9 No Legal, Tax or Investment Advice............................................ 10
----------------------------------
SECTION 5. ADDITIONAL AGREEMENTS........................................................ 10
---------------------
5.1 Permitted Transfers........................................................... 10
-------------------
5.2 Other Approvals............................................................... 10
---------------
SECTION 6. CONDITIONS TO CLOSING........................................................ 11
---------------------
6.1 Conditions to Obligations of All Parties...................................... 11
----------------------------------------
6.2 Conditions to Obligations of Purchaser........................................ 11
--------------------------------------
6.3 Conditions to Obligations of the Corporation.................................. 12
--------------------------------------------
SECTION 7. CLOSING...................................................................... 12
-------
7.1 Deliveries by the Corporation................................................. 12
-----------------------------
7.2 Deliveries by the Purchaser................................................... 12
---------------------------
SECTION 8. LEGEND....................................................................... 13
------
8.1 Endorsement................................................................... 13
-----------
8.2 Removal of Legend............................................................. 13
-----------------
SECTION 9. TERMINATION.................................................................. 13
-----------
9.1 Mutual Consent................................................................ 13
--------------
9.2 Other Termination............................................................. 14
-----------------
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
9.3 Effect of Termination......................................................... 14
---------------------
SECTION 10. MISCELLANEOUS............................................................... 14
-------------
10.1 Additional Actions and Documents............................................. 14
--------------------------------
10.2 Expenses..................................................................... 15
--------
10.3 Notices...................................................................... 15
-------
10.4 Waiver....................................................................... 16
------
10.5 Binding Effect............................................................... 16
--------------
10.6 Entire Agreement; Amendment.................................................. 16
---------------------------
10.7 Severability................................................................. 16
------------
10.8 Headings..................................................................... 16
--------
10.9 Governing Law................................................................ 17
-------------
10.10 Signature in Counterparts................................................... 17
-------------------------
10.11 No Third Party Beneficiaries................................................ 17
----------------------------
10.12 Assignability............................................................... 17
-------------
10.13 Parties Not Partners........................................................ 17
--------------------
</TABLE>
<PAGE> 4
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement"), dated as of the 19th day
of February, 1999, is entered into by and among Security First Technologies
Corporation, a Delaware corporation (the "Corporation") and AC II Technology
(ACT II) B.V., a private limited company organized under the laws of the
Netherlands ("Purchaser").
WHEREAS, Purchaser desires to subscribe for, and acquire from the
Corporation, a number of shares (the "Shares") of the Corporation's common
stock, par value $.01 per share ("Common Stock"), as determined by dividing the
Purchase Price (as defined below in Section 1.1(a)) by the applicable per share
price of the Shares (as described below in Section 1.1), on the terms and under
the conditions specified herein;
WHEREAS, the Corporation desires to sell and issue to Purchaser the
Shares on the terms and under the conditions specified herein; and
*
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement, the sufficiency of which is hereby acknowledged, the parties mutually
agree as follows:
SECTION 1. PURCHASE AND SALE OF THE SHARES.
1.1 Sale and Issuance of the Shares.
1.1. At the Closing (as defined below in Section 1.2(a)) and
subject to the terms and conditions of this Agreement, Purchaser hereby
subscribes for, and agrees to purchase, the Shares, and the Corporation agrees
to sell and issue to Purchaser at the Closing for the Purchase Price, the
Shares. The aggregate purchase price to be paid by Purchaser shall be $4,000,000
(such aggregate amount, the "Purchase Price"), and the number of Shares shall be
determined by dividing the Purchase Price by the average closing asking price
per share of the Common Stock, as quoted on the Nasdaq Stock Market National
Market Tier, for each of the 10 trading days preceding the business day
immediately before the Closing Date (as defined in Section 1.2(a) below), and
rounding down to the nearest whole share, if the quotient would otherwise
produce fractional shares. The number of Shares shall then be doubled so as to
give effect to the Split as if the Split had been paid immediately prior to the
Closing.
* Recital deleted.
<PAGE> 5
1.2 Closing.
1.2(a). The closing (the "Closing") of the transaction shall take
place on April 30, 1999, or such other date not later than May 15, 1999 as the
parties hereto shall mutually agree (the "Closing Date").
1.2(b). The Closing shall take place on the Closing Date at 10:00
a.m., Washington, D.C. time, at the offices of Hogan & Hartson L.L.P., 555 13th
Street, N.W., Washington, D.C. 20004, or at such other time and place as the
parties shall mutually agree.
SECTION 2. REGISTRATION OF THE SHARES.
2.1(a). The Corporation shall within 180 days of the Closing Date
(unless Purchaser in its sole discretion agrees to extend such time period, in
which case the Corporation shall file as soon as reasonably practicable) a
registration statement ("Registration Statement") with the SEC to effect the
registration under the Securities Act of the Shares eligible for sale by
Purchaser in accordance with the following:
(i) The Corporation shall not be required to conduct an
underwritten offering.
(ii) If, after it becomes effective, such Registration Statement
is interfered with by any stop order, injunction or other order or
requirement of the SEC (or any successor regulator thereto as to federal
securities laws) or any other governmental authority, such registration
shall not be deemed to have been effected unless such stop order,
injunction or other order shall have been subsequently vacated or removed.
(iii) The Corporation shall have no obligation to include the
Shares owned by Purchaser in a Registration Statement unless and until
Purchaser has furnished the Corporation with all information and statements
about or pertaining to Purchaser in such reasonable detail and on such
timely basis as is reasonably deemed by the Corporation to be necessary or
appropriate for the preparation of the Registration Statement.
(iv) The Corporation shall, subject to the other provisions of
this Section 2:
(1) use its reasonable efforts to cause the Registration
Statement to become effective as soon as practicable after the filing
thereof;
(2) prepare and file with the SEC as promptly as is
reasonably practicable such amendments and supplements to the
Registration Statement contained therein as may be necessary to keep
such Registration Statement effective until the first anniversary of
the Closing Date or until Purchaser has completed the distribution
described in such Registration Statement, whichever occurs first;
<PAGE> 6
(3) furnish to Purchaser the number of copies of such
Registration Statement, each amendment and supplement thereto;
(4) use reasonable efforts to register or qualify such
shares under the state blue sky or securities or banking laws ("Blue
Sky Laws") of such jurisdictions as Purchaser reasonably requests (and
to keep such registrations and qualifications effective for a period
of three months, or until Purchaser has completed the distribution of
such shares, whichever occurs first), and to do any and all other acts
and things that may be reasonably necessary or advisable to enable
such Purchaser to consummate the disposition of such shares in such
jurisdictions; provided, however, that the Corporation will not be
required to do any of the following: (i) qualify generally to do
business in any jurisdiction where it would not be required but for
this Section 2, (ii) subject itself to taxation in any such
jurisdiction, or (iii) file any general consent to service of process
in any such jurisdiction;
(5) promptly notify Purchaser at any time during the period
that the Corporation is required to keep the Registration Statement
effective, of the occurrence of any event as a result of which such
Registration Statement contains an untrue statement of a material fact
or omits any fact necessary to make the statements therein in the
light of the circumstances under which they were made, not misleading,
and prepare a supplement or amendment to the Registration Statement so
that, as thereafter delivered to the purchasers of such shares, the
Registration Statement will not contain an untrue statement of a
material fact or omit to state any fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; and
(6) use reasonable efforts to cause all such shares to be
listed on a securities exchange or the Nasdaq National Market System.
(v) If, pursuant to this Section 2, the Shares owned by
Purchaser are included in a Registration Statement, then Purchaser shall
pay all transfer taxes, if any, relating to the sale of the Shares, the
fees and expenses of its own counsel, and its pro rata portion of any
underwriting discounts or commissions or the equivalent thereof.
(vi) Except for the fees and expenses specified in paragraph (v)
of this Section 2 and except as provided this paragraph (vi), the
Corporation shall pay all expenses incident to the registration and to the
Corporation's performance of or compliance with this Agreement, including,
without limitation, all registration and filing fees, fees and expenses of
compliance, with Blue Sky Laws, underwriting discounts, fees, and expenses
(other than Purchaser's pro rata portion of any underwriting discounts or
commissions or the equivalent thereof), printing expenses, messenger and
delivery expenses, and fees and expenses of counsel for the Corporation and
all independent certified public accountants and other persons retained by
the Corporation.
(vii) In the event that the Shares owned by Purchaser are sold
by means of a Registration Statement pursuant to this Section 2, Purchaser
(for the purposes of this paragraph (vii), the "Indemnifying Person")
agrees to indemnify and hold harmless the Corporation, each of the
Corporation's officers and directors, and each person, if any, who controls
or may control the Corporation within the meaning of the Securities Act
(for the purposes of this paragraph (vii), the Corporation, its officers
and directors, and any such other persons being referred to individually as
an "Indemnified Person" and collectively as "Indemnified Persons") from and
against all demands, claims, actions or causes of action, assessments,
losses, damages, liabilities, costs, and expenses, including, without
limitation,
<PAGE> 7
interest, penalties, and reasonable attorneys' fees and disbursements, asserted
against, resulting to, imposed upon, or incurred by such Indemnified Person,
directly or indirectly (collectively, referred to for purposes of this paragraph
(vii) and the corresponding provision of paragraph (viii) below in the singular
as a "Claim" and in the plural as "Claims"), based upon, arising out of, or
resulting from any untrue statement of a material fact contained in the
Registration Statement or any omission to state therein a material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading, to the extent that
such Claim is based upon, arises out of or results from any untrue statement or
omission based upon information furnished to the Corporation by Purchaser in a
written document provided by Purchaser for use in connection with the
Registration Statement.
(viii) The Corporation (for the purposes of this paragraph
(viii), the "Indemnifying Person") agrees to indemnify and hold harmless
Purchaser and any underwriters participating in the distribution of Common Stock
pursuant to a Registration Statement (for the purposes of this paragraph (viii),
Purchaser and any such other persons also being referred to individually as an
"Indemnified Person" and collectively as "Indemnified Persons") from and against
all Claims based upon, arising out of, or resulting from any untrue statement of
a material fact contained in the Registration Statement or any omission to state
therein a material fact necessary in order to make the statement made therein,
in the light of the circumstances under which they were made, not misleading,
provided that the Corporation will not be liable in any such case to the extent
that any such Claim arises out of or results from any untrue statement or
omission based upon information furnished to the Corporation by Purchaser in a
written document provided by Purchaser for use in connection with the
Registration Statement.
(ix) The indemnification set forth herein shall be in addition
to any liability the Corporation or Purchaser may otherwise have in connection
with any registration of the Shares. Within a reasonable time after receiving
definitive notice of any Claim in respect of which an Indemnified Person may
seek indemnification under this Section 2, such Indemnified Person shall submit
written notice thereof to such Indemnifying Person. The failure of the
Indemnified Person so to notify the Indemnifying Person of any such Claim shall
not relieve the Indemnifying Person from any liability it may have hereunder
except to the extent that (a) such liability was caused or increased by such
omission, or (b) the ability of the Indemnifying Person to reduce such liability
was materially adversely affected by such omission. In addition, the omission of
the Indemnified Person so to notify the Indemnifying Person of any such Claim
shall not relieve the Indemnifying Person from any liability it may have
otherwise than hereunder. The Indemnifying Person shall have the right to
undertake, by counsel or representatives of its own choosing, the defense,
compromise, or settlement (without admitting liability of the Indemnifying
Person) of any such Claim asserted, such defense, compromise, or settlement to
be undertaken at the expense and risk of the Indemnifying Person, and the
Indemnified Person shall have the right to engage separate counsel, at its own
expense, which counsel for the Indemnifying Person shall keep informed and
consult with in a reasonable manner. In the event the Indemnifying Person shall
fail to undertake such defense by its own representatives, the Indemnifying
Person shall give prompt written notice of such election to the Indemnified
Person, and the Indemnified Person shall undertake the defense, compromise, or
settlement (without admitting liability of the Indemnified Person) thereof on
behalf of and for the account and risk of the Indemnifying Person by counsel or
other representatives designated by the Indemnified Person. In the event that
any Claim shall arise out of a transaction or cover any period or periods
wherein the Corporation and Purchaser shall each be liable hereunder for part of
the liability or obligation arising therefrom, then the parties shall, each
choosing its own counsel and bearing its own expenses, defend such Claim, and no
settlement or compromise of such Claim may be made without the joint consent or
approval of the
<PAGE> 8
Corporation and Purchaser. Notwithstanding the foregoing, no Indemnifying
Person shall be obligated hereunder with respect to amounts paid in
settlement of any Claim if such settlement is effected without the consent
of such Indemnifying Person (which consent shall not be unreasonably
withheld).
(x) If the indemnification provided for in this Section 2 is
held by a court of competent jurisdiction to be unavailable to an
Indemnified Party (as defined in either paragraph (vii) or (viii)) with
respect to any Claim, then Purchaser or the Corporation, as applicable and
as the case may be (each an "Indemnifying Party"), in lieu of indemnifying
an Indemnified Party hereunder, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Claim in such
proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the
other in connection with the statements or omissions which resulted in such
claim.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION.
The Corporation represents and warrants to Purchaser as follows:
3.1 Organization and Standing.
The Corporation is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware, and has the full
corporate power and authority to own and operate its properties and assets and
to carry on its business as currently conducted. The Corporation holds all
licenses and permits required for the conduct of its business as now conducted
which, if not in the Corporation's possession, could have a material adverse
effect on the Corporation's financial condition or results of operations, taken
as a whole. The Corporation is duly qualified as a foreign corporation and is in
good standing in all jurisdictions where the conduct of its business or its
ownership or leasing of property requires such qualification, except where the
failure to so qualify would not have a material adverse effect on the
Corporation's financial condition or results of operations, taken as a whole.
3.2 Authorization; Binding Obligation.
The Corporation has all requisite corporate power and authority to
enter into and to deliver this Agreement and perform its obligations hereunder.
The execution, delivery and performance of this Agreement by the Corporation and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Corporation.
This Agreement, when executed and delivered by the Corporation, shall constitute
a valid and binding obligation of the Corporation enforceable in accordance with
its terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws effecting the enforcement of
creditor's rights.
3.3 Capitalization.
The authorized capital stock of the Corporation consists of 60,000,000
shares of Common Stock, of which 12,263,502 are issued and outstanding as of
December 31, 1998, and 5,000,000 shares of preferred stock, of which 636,464 of
the 1,637,832 shares designated Series A Preferred Stock are issued and
outstanding as December 31, 1998 and of which all of the 749,064 Shares
designated Series B Redeemable Convertible Preferred Stock are issued and
outstanding as of December 31, 1998. All of the Corporation's outstanding shares
of capital stock were validly issued and are fully paid and nonassessable. As of
December 31, 1998, except for (i) 4,399,635 shares
<PAGE> 9
subject to issuance upon exercise of options and an additional 806,918 reserved
for issuance pursuant to options not yet granted, and (ii) shares reserved for
issuance upon conversion of the Series A Preferred Stock and the Series B
Preferred Stock, there are no shares of the Corporation's capital stock reserved
for issuance or any options, warrants, rights (including conversion or
preemptive rights) or agreements for the purchase from the Corporation of any
shares of its capital stock or securities exercisable for or convertible into
its capital stock.
3.4 Validity of Shares; Issuance.
The Shares, when issued in compliance with the provisions of this
Agreement will be validly issued, fully paid and nonassessable, and free of any
liens or encumbrances, and will be issued in compliance with all applicable
federal banking laws.
3.5 No Consents.
No governmental orders, permissions, consents, approvals or
authorizations are required to be obtained by the Corporation and no filings are
required to be made by the Corporation in connection with the execution and
delivery of this Agreement and the issuance of the Shares hereunder, except as
have been so obtained or made prior to the Closing or, with respect to any that
need to be obtained or made subsequent to the Closing, as will be obtained or
made in a timely manner after the Closing, except where the failure to obtain
such orders, permissions, consents, approvals or authorizations or to make such
filings would not have a material adverse effect on the Corporation's financial
condition or results of operations or business prospects, taken as a whole.
3.6 Non-Contravention.
The execution, delivery and performance of, and compliance with, this
Agreement will not (a) violate any provision of the articles of incorporation or
bylaws of the Corporation; (b) conflict with or result in a breach of, or
default under, or result in the creation of any lien, claim, charge or other
encumbrance upon any of the assets or properties of the Corporation pursuant to
the provisions of any material agreement, mortgage, indenture or other document
or instrument to which the Corporation is a party or by which the Corporation or
any of its properties or assets is bound, or (c) violate any existing statutes,
laws, ordinances, regulations, orders and other rules of law applicable to the
Corporation or any of its properties or assets, or applicable to the
Corporation's power or authority to perform its obligations under this
Agreement.
3.7 Additional Information.
The information contained in the Corporation's registration statement
on Form 8-A, as filed with the SEC on September 30, 1998, and all other reports
filed subsequent thereto through the date hereof pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
did not at the respective dates of filing with the SEC contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser represents and warrants to the Corporation as follows:
<PAGE> 10
4.1 Organization and Standing.
Purchaser is a private limited company duly organized, validly
existing and in good standing under the laws of the Netherlands. Purchaser has
the full corporate power and authority to own and operate its properties and
assets and to carry on its business as currently conducted. Purchaser holds all
licenses and permits required for the conduct of its business as now conducted
which, if not in Purchaser's possession, could have a material adverse effect on
Purchaser's financial condition or results of operations, taken as a whole.
Purchaser is duly qualified and is in good standing in all jurisdictions where
the conduct of its business or its ownership or leasing of property requires
such qualification, except where the failure to so qualify would not have a
material adverse effect on Purchaser's financial condition or results of
operations, taken as a whole. Purchaser is a member of the Andersen Consulting
Worldwide Organization (as defined below) and is an affiliate of Andersen
Consulting LLP.
4.2 Authorization.
Purchaser has all requisite power and authority to enter into and to
deliver this Agreement. The execution, delivery and performance of this
Agreement by Purchaser and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary action on the part of
Purchaser. This Agreement, when executed and delivered by Purchaser, shall
constitute a valid and binding obligation of Purchaser enforceable in accordance
with its terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws effecting the enforcement of
creditor's rights.
4.3 Non-Contravention.
The execution, delivery and performance of, and compliance with, this
Agreement will not (a) violate any provision of the governing instruments of
Purchaser; (b) conflict with or result in a breach of, or default under, or
result in the creation of any lien, claim, charge or other encumbrance upon any
of the assets or properties of Purchaser pursuant to the provisions of any
material agreement, mortgage, indenture or other document or instrument to which
Purchaser is a party or by which Purchaser or any of its properties or assets is
bound, or (c) violate any existing statutes, laws, ordinances, regulations,
orders and other rules of law applicable to Purchaser or any of its properties
or assets, or applicable to Purchaser's power or authority to perform its
obligations under this Agreement.
4.4 No Consents.
No governmental orders, permissions, consents, approvals or
authorizations are required to be obtained by Purchaser and no filings are
required to be made by Purchaser in connection with the execution and delivery
of this Agreement and the purchase of the Shares hereunder, except as have been
so obtained or made prior to the Closing or, with respect to any that need to be
obtained or made subsequent to the Closing, as will be obtained or made in a
timely manner after the Closing, except where the failure to obtain such orders,
permissions, consents, approvals or authorizations or to make such filings would
not have a material adverse effect on Purchaser's financial condition or results
of operations or business prospects, taken as a whole.
4.5 Adequate Resources.
Purchaser has sufficient cash and other resources to perform its
obligations hereunder.
<PAGE> 11
4.6 Investment Experience.
Purchaser is an "accredited investor" as defined in Rule 501(a)
under the Securities Act. Purchaser is aware of the Corporation's business
affairs and financial condition and has had access to and has acquired
sufficient information about the Corporation to reach an informed and
knowledgeable decision to acquire the Shares. Purchaser has such business and
financial experience as is required to give it the capacity to protect its own
interests in connection with the purchase of the Shares. Purchaser is able to
bear the economic risk of holding the Shares for an indefinite period, including
the loss of Purchaser's entire investment. The Shares were not offered or sold
to Purchaser by any form of general solicitation or advertising.
4.7 Investment Intent.
Purchaser is purchasing the Shares for its own account as principal,
for investment purposes only, and not with a view to, or for, resale,
distribution or fractionalization thereof, in whole or in part, within the
meaning of the Securities Act. Purchaser understands that its acquisition of the
Shares has not been registered under the Securities Act or registered or
qualified under any state securities law in reliance on specific exemptions
therefrom, which exemptions may depend upon, among other things, the bona fide
nature of Purchaser's investment intent as expressed herein.
4.8 Registration or Exemption Requirements.
Purchaser further acknowledges and understands that the Shares may
be required to be held indefinitely, and they may not be resold or otherwise
transferred except in a transaction registered under the Securities Act or where
an exemption from such registration is available. Purchaser understands that the
certificate(s) evidencing the Shares will be imprinted with a legend that
prohibits the transfer of the Shares unless (a) they are registered or such
registration is not required, and (b) if the transfer is pursuant to an
exemption from registration other than Rule 144 promulgated under the Securities
Act and, if the Corporation shall so request in writing, an opinion of counsel
satisfactory to the Corporation is obtained to the effect that the transaction
is so exempt and in compliance with applicable state law.
4.9 No Legal, Tax or Investment Advice.
Purchaser understands that nothing in this Agreement or any other
materials presented to Purchaser in connection with the purchase and sale of the
Shares constitutes legal, tax or investment advice. Purchaser has consulted such
legal, tax and investment advisors as it, in its sole discretion, has deemed
necessary or appropriate in connection with its purchase of the Shares.
Section 5. ADDITIONAL AGREEMENTS.
5.1 Permitted Transfers.
For 180 days from the Closing Date, Purchaser may transfer some or all
of the Shares to a corporation, partnership or other affiliate of Purchaser, if
such transferee agrees in writing to hold any Shares received subject to the
provisions of this Agreement and to transfer such Shares back to Purchaser if
such transferee ceases to be controlled by Purchaser. For purposes of this
section, an "affiliate of Purchaser" shall mean any member of the Andersen
Consulting Worldwide Organization or any entity which is at the relevant time
directly or indirectly controlled by any such entity or any entity which is
otherwise part of the Andersen Consulting Worldwide Organization. After the
above-referenced 180 day period, the restrictions of this section 5.1 shall no
longer apply.
<PAGE> 12
5.2 Other Approvals.
The parties shall cooperate and use their best efforts to obtain all
written consents and approvals of other persons in connection with the purchase
of the Shares contemplated hereby.
SECTION 6. CONDITIONS TO CLOSING.
6.1 Conditions to Obligations of All Parties.
The obligations of each party to consummate the transactions
contemplated by this Agreement are subject to the satisfaction, on or before the
date of the Closing, of each of the following conditions precedent:
6.1(a). Termination. This Agreement shall not have been terminated in
accordance with its terms.
6.1(b). No Governmental Action. No action or proceeding by or before
any governmental authority shall have been instituted or threatened (and not
subsequently dismissed, settled or otherwise terminated) which is reasonably
expected to restrain, prohibit or invalidate the transactions contemplated by
this Agreement or to affect adversely the financial condition and business
prospects of the Corporation.
6.1(c). Third Party Consents. Receipt by the parties hereto of any
and all third party consents required by this Agreement.
6.2 Conditions to the Obligations of Purchaser.
The obligations of Purchaser to purchase the Shares contemplated by
this Agreement are subject to the satisfaction, on or before the date of the
Closing, of each of the following conditions precedent, any one or more of which
may be waived by Purchaser, in its sole and absolute discretion:
6.2(a). Representations and Warranties. The representations and
warranties of the Corporation contained in this Agreement shall be true, correct
and complete in all material respects when made and shall be true and correct on
the date of the Closing, with the same force and effect as if made on the date
of the Closing.
6.2(b). Compliance with Covenants. The Corporation shall have in all
material respects performed all obligations and agreements and complied with all
covenants contained in this Agreement to be performed and complied with by the
Corporation on or prior to the date of the Closing.
6.3 Conditions to Obligations of the Corporation.
The obligations of the Corporation to consummate the transactions
contemplated by this Agreement are subject to the satisfaction, on or before the
date of the Closing, of each of the following conditions precedent, any one or
more of which may be waived by the Corporation, in its sole and absolute
discretion:
6.3(a). Representations and Warranties. The representations and
warranties of Purchaser contained in this Agreement shall be true, correct and
complete in all material respects
<PAGE> 13
when made and shall be true and correct as of the date of the Closing with the
same force and effect as if made on the date of the Closing.
6.3(b). Compliance with Covenants. Purchaser shall have in all
material respects performed all obligations and agreements and complied with all
covenants contained in this Agreement to be performed and complied with by it on
or prior to the date of the Closing.
SECTION 7. CLOSING.
7.1 Deliveries by the Corporation.
At the Closing, the Corporation shall deliver to Purchaser the
following:
(1) A certificate or certificates registered in Purchaser's
name, representing all of the Shares.
(2) A copy of the resolutions of the Board of Directors of the
Corporation, as certified as of the Closing Date by the Secretary of the
Corporation, as being true, correct and complete and then in full force and
effect, authorizing the execution, delivery and performance of this Agreement by
the Corporation, the authorization, sale, issuance and delivery of the Shares,
and the performance of the Corporation's obligations hereunder.
(3) A certificate of the Corporation signed by an authorized
officer of the Corporation certifying that the representations and warranties of
the Corporation made herein are true, complete and correct in all material
respects as of the date of this Agreement and are true and correct as of the
date of the Closing, and the Corporation has in all material respects performed
all obligations and agreements and complied with all covenants required to be
performed or complied with by the Corporation on or prior to the Closing.
(4) Such other certificates, instruments or documents as
Purchaser may reasonably request in order to effect and document the
transactions contemplated hereby.
7.2 Deliveries by Purchaser.
At the Closing, Purchaser shall deliver to the Corporation the
following:
(1) The Purchase Price, in cash or by wire transfer or certified
or bank cashier's check, payable to the order of the Corporation.
(2) A certificate of Purchaser signed by an authorized officer
of Purchaser, or such other officer satisfactory to the Corporation, certifying
that the representations and warranties of Purchaser made herein are true,
complete and correct in all material respects as of the date of this Agreement
and are true and correct as of the date of the Closing, and Purchaser has in all
material respects performed all obligations and agreements and complied with all
covenants required to be performed or complied with by Purchaser on or prior to
the Closing.
(3) Such other certificates, instruments or documents as the
Corporation may reasonably request in order to effect and document the
transaction contemplated hereby.
<PAGE> 14
Section 8. Legend.
8.1 Endorsement.
Each certificate representing the Shares shall bear the following
legend (in addition to any legend required by applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY
OTHER FEDERAL OR STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND ANY OTHER APPLICABLE FEDERAL SECURITIES LAWS
COVERING SUCH SECURITIES OR THE CORPORATION RECEIVES AN OPINION OF COUNSEL
IN FORM SATISFACTORY TO THE CORPORATION THAT AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
8.2 Removal of Legend.
The legend endorsed on a stock certificate pursuant to Section 8.1 of
this Agreement shall be removed and the Corporation shall issue a certificate
without such legend to the holder of such Shares, if such Shares are registered
under applicable federal securities laws and a prospectus meeting the
requirements of the rules and regulations of the SEC is available or if such
holder provides to the Corporation an opinion of counsel to such holder
reasonably satisfactory to the Corporation, to the effect that a public sale,
transfer or assignment of such Shares may be made without registration and
without compliance with any restrictions.
SECTION 9. TERMINATION.
9.1 Mutual Consent.
The parties may terminate this Agreement at any time by mutual written
agreement.
9.2 Other Termination.
The Corporation or the Purchaser may terminate this Agreement by
giving notice (a "Termination Notice") to the other parties at the time
designated in this Section or, in the absence of such designation, at any time
up to and including the date of the Closing, if any one or more of the following
shall have occurred and be continuing:
9.2(a). Termination By Any Party. Any party may terminate this
Agreement under any one or more of the following circumstances:
(1) at any time after May 16, 1999, or, if the Corporation shall
have extended the Closing Date pursuant to Section 1.2(a) of this Agreement,
after July 16, 1999, if the Closing shall not have occurred for any reason other
than a default or non-performance of its obligations hereunder by the party
giving such notice;
(2) a court or other governmental authority of competent
jurisdiction shall have issued an order, writ, injunction or decree or shall
have taken any other action
<PAGE> 15
permanently restraining or otherwise prohibiting the purchase of the Shares
contemplated hereby and such order, writ, injunction, decree or other action
shall have become final and nonappealable.
9.2(b). Termination By Purchaser. Purchaser may terminate this
Agreement on the Closing Date, if any condition precedent set forth in Sections
6.1 or 6.2 shall not have been satisfied.
9.2(c). Termination By the Corporation. The Corporation may terminate
this Agreement on the Closing Date, if any condition precedent set forth in
Sections 6.1 or 6.3 shall not have been satisfied.
9.3 Effect of Termination.
Termination of this Agreement pursuant to this Section shall not
relieve any party of any liability for a default or other breach, default or
nonperformance under this Agreement. Notwithstanding the foregoing, no party
hereto shall be liable for consequential or punitive damages in connection with
such termination.
Section 10. MISCELLANEOUS.
10.1 Additional Actions and Documents.
Each of the parties hereto agrees that it will, at any time, prior to,
at or after the Closing, take or cause to be taken such further actions, and
execute, deliver and file or cause to be executed, delivered and filed such
further documents and instruments (including export license applications) as may
be necessary or reasonably requested in connection with the consummation of the
purchase and sale contemplated by this Agreement or in order to fully effectuate
the purposes, terms and conditions of this Agreement.
10.2 Expenses.
Except as specified in Section 2, each party hereto shall pay its own
expenses incurred in connection with this Agreement and in the preparation for
and consummation of the transactions contemplated hereby.
10.3 Notices.
All notices, demands, requests, or other communications which may be
or are required to be given or made by any party to any other party pursuant to
this Agreement shall be in writing and shall be hand delivered, mailed by
first-class registered or certified mail, return receipt requested, postage
prepaid, or delivered by overnight air courier, addressed as follows:
(i) if to the Corporation:
Security First Technologies Corporation
3390 Peachtree Road, NE, Suite 1700
Atlanta, Georgia 30326
Attn.: President
with a copy (which shall not constitute notice) to:
<PAGE> 16
Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Attn.: Stuart G. Stein, Esq.
(iii) if to Purchaser:
AC II Technology (ACT II) B.V.
1661 Page Mill Road
Palo Alto, CA 94304
Attn.: Chief Financial Officer
with a copy (which shall not constitute notice) to:
Andersen Consulting LLP
1661 Page Mill Road
Palo Alto, CA 94304
Attn.: General Counsel
or such other address as the addressee may indicate by written notice to the
other parties. Each notice, demand, request, or communication which shall be
given or made in the manner described above shall be deemed sufficiently given
or made for all purposes at such time as it is delivered to the addressee (with
the return receipt, the delivery receipt, or the affidavit of messenger being
deemed conclusive but not exclusive evidence of such delivery) or at such time
as delivery is refused by the addressee upon presentation.
10.4 Waiver.
No waiver by any party of any failure or refusal of any other party to
comply with its obligations under this Agreement shall be deemed a waiver of any
other or subsequent failure or refusal to so comply by such other party. No
waiver shall be valid unless in writing signed by the party to be charged and
only to the extent therein set forth.
10.5 Binding Effect.
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns.
10.6 Entire Agreement; Amendment.
This Agreement, including the other instruments and documents referred
to herein or delivered pursuant hereto, contains the entire agreement among the
parties with respect to the subject matter hereof and supersedes all prior oral
or written agreements, commitments or understandings with respect to such
matters. No amendment, modification or discharge of this Agreement shall be
valid or binding unless set forth in writing and duly executed by the party
against whom enforcement of the amendment, modification or discharge is sought.
10.7 Severability.
If any part of any provision of this Agreement shall be invalid or
unenforceable under applicable law, such part shall be ineffective to the extent
of such invalidity or unenforceability only,
<PAGE> 17
without in any way affecting the remaining parts of such provisions or the
remaining provisions of said Agreement.
10.8 Headings.
The headings of the sections and subsections contained in this
Agreement are inserted for convenience only and do not form a part or affect the
meaning, construction or scope thereof.
10.9 Governing Law.
This Agreement, the rights and obligations of the parties hereto, and
any claims or disputes relating thereto, shall be governed by and construed
under and in accordance with the laws of the State of Delaware, excluding the
choice of law rules thereof.
10.10 Signature in Counterparts.
This Agreement may be executed in separate counterparts, none of
which need contain the signatures of all parties, each of which shall be deemed
to be an original, and all of which taken together constitute one and the same
instrument. It shall not be necessary in making proof of this Agreement to
produce or account for more than the number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto.
10.11 No Third Party Beneficiaries.
Except as expressly provided herein, this Agreement is made and
entered into for the sole protection and benefit of the parties hereto, and no
other person or entity shall have any right of action hereon, right to claim any
right or benefit from the terms contained herein or be deemed a third party
beneficiary hereunder.
10.12 Assignability.
All terms and provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto, and their respective transferees,
successors and assigns; provided, however, that neither this Agreement nor any
rights, privileges, duties and obligations of the parties hereto may be assigned
or delegated by any party hereto without the prior written consent of all the
parties to this Agreement and any such purported or attempted assignment shall
be null and void ab initio and of no force or effect provided, further that
Purchaser may assign this Agreement, including rights, privileges, duties and
obligations hereunder to any affiliate of Purchaser which is wholly or
substantially owned directly or indirectly by Purchaser so long as such
assignment does not in any way materially delay or otherwise materially
adversely impact the ability of the parties hereto to effect the transactions
contemplated hereby.
10.13 Parties Not Partners.
Nothing contained in this Agreement shall constitute any party as a
partner with, agent for or principal of any one or more of the other parties or
their successors and assigns
[SIGNATURE PAGE FOLLOWS]
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first above written.
SECURITY FIRST TECHNOLOGIES CORPORATION
By: /s/ Robert F. Stockwell
------------------------------------
Name: Robert F. Stockwell
-----------------------------
Title: Chief Financial Officer
----------------------------
& Treasurer
----------------------------
AC II TECHNOLOGY (ACT II) B.V.
By: /s/ Michael L. Emmons
------------------------------------
Name: Michael L. Emmons
-----------------------------
Title: Director
----------------------------
<PAGE> 1
EXHIBIT 10.4
WARRANT
NEITHER THE WARRANT REPRESENTED HEREBY NOR THE SECURITIES ISSUABLE UPON EXERCISE
THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). NONE OF SUCH SECURITIES MAY BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT, OR (ii) AN AVAILABLE EXEMPTION FROM
REGISTRATION UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES AND UPON
DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO
COUNSEL FOR THE COMPANY, THAT SUCH EXEMPTION FROM REGISTRATION UNDER THE ACT IS
AVAILABLE.
DATE: February 19, 1999
NO.: W-AC-1
WARRANT TO PURCHASE
100,000 SHARES OF
COMMON STOCK
OF
SECURITY FIRST TECHNOLOGIES CORPORATION
Securities First Technologies Corporation, a Delaware corporation (the
"Company"), hereby issues to Andersen Consulting LLP (the "Holder") this warrant
to purchase from the Company 100,000 shares of the Company's common stock, $.01
par value per share (the "Common Stock"), for a price per share (the "Exercise
Price") equal to the per share price of the Common Stock sold by the Company to
an Affiliate (as defined below) of the Holder pursuant to the certain Stock
Purchase Agreement dated as of February 19, 1999.
1. Exercise.
1.1 Contingent Vesting of Right to Exercise. (a) General. The rights
represented by this warrant are contingent upon the Holder's success in meeting
the vesting requirements set forth below. Unless accelerated pursuant to the
provisions of section 1.1(e) below, vesting of the rights represented by this
warrant will occur, if at all, in three separate installments (each, an
"Installment") and only upon the Holder's attainment of the performance-based
incentives specified in the description of each Installment. If vesting of a
particular Installment has not occurred prior to the second anniversary of the
date hereof, the rights represented by this warrant will be void as to the
number of shares of Common Stock underlying such Installment.
(b) First Installment. If the targeted and credible marketing
efforts of the Holder or its Affiliates or the targeted and credible joint
marketing efforts of the Company and the Holder or its Affiliates, produce any
of (i) the sale of a license by the Company of substantially all of any of its
Virtual Financial Manager(R) ("VFM") banking, brokerage or insurance modules, or
any successor module thereof, or (ii) a contract for the Company to provide data
processing services for not less than three years (including extensions) or
(iii) a client-funded development contract of $5.0 million or more (any of (i),
(ii) or (iii) to be referred to hereinafter as a "Successful Result") to two of
the companies listed on Exhibit B hereto (as such list may be amended from time
to time by the mutual agreement of the Company and the Holder) (the "Target
Companies"), then the Holder may, subject to and in accordance with the
provisions of section 1.2, exercise this warrant to purchase up to 20,000 shares
of Common Stock.
<PAGE> 2
(c) Second Installment. If the targeted and credible marketing
efforts of the Holder or its Affiliates, or the targeted and credible joint
marketing efforts of the Company and the Holder or its Affiliates, produce a
Successful Result with respect to four additional Target Companies (excluding
Successful Results counted in the vesting of the First Installment), then the
Holder may, subject to and in accordance with the provisions of section 1.2,
exercise this warrant to purchase up to an additional 40,000 shares of Common
Stock.
(d) Third Installment. If the targeted and credible marketing
efforts of the Holder or its Affiliates, or the targeted and credible joint
marketing efforts of the Company and the Holder or its Affiliates, produce a
Successful Result with respect to two additional Target Companies (excluding
Successful Results counted in the vesting of either the First Installment or the
Second Installment), then the Holder may, subject to and in accordance with the
provisions of section 1.2, exercise this warrant to purchase up to an additional
40,000 shares of Common Stock.
(e) Acceleration of Vesting. Upon a "Change of Control" (defined
below) of the Company, this warrant shall become fully vested without regard to
whether the incentives of a particular Installment have been met. For purposes
of this Warrant, a "Change of Control" shall mean:
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d) (3) or 14(d) (2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or
more of either the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however, that
for purposes of this paragraph (i), the following acquisitions shall not
constitute a Change of Control: (1) any acquisition by the Company, or (2) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any other corporation controlled by the Company; or
(ii) Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (1) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly or indirectly, more than
50% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, or (2) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company, such corporation
resulting from such Business Combination or a corporation controlled by any of
them) beneficially owns, directly or indirectly, 50% or more of, respectively,
the then outstanding shares of common stock of the corporation resulting from
such Business Combination or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such ownership
existed prior to the Business Combination; or
(iii) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company without the establishment of a
successor corporation.
1.2 Mechanics of Exercise. Beginning at such time as an Installment
vests, the Holder may exercise this warrant in whole or from time to time in
part, to purchase such numbers of
<PAGE> 3
shares as to which this warrant has vested, until 5:00 PM (Atlanta, Georgia
time) on the second anniversary of the date of vesting (the "Exercise Period"),
by (a) the surrender of this warrant, along with the purchase form attached as
Exhibit A (the "Purchase Form"), properly executed, at the address of the
Company set forth in section 6.2 (or such other address as the Company may
designate by notice in writing to the Holder at its address set forth in section
6.2) and (b) the payment to the Company of the exercise price by check, payable
to the order of the Company, or by wire transfer or other immediately available
funds, for the number of shares of Common Stock specified in the Purchase Form,
together with any applicable stock transfer taxes. A certificate representing
the shares of Common Stock so purchased and, in the event of an exercise of
fewer than all the rights represented by this warrant, a new warrant in the form
of this warrant issued in the name of the Holder or its designee(s) and
representing a new warrant to purchase a number of shares of Common Stock equal
to the number of shares of Common Stock as to which this warrant was theretofore
exercisable less the number of shares of Common Stock as to which this warrant
shall theretofore have been exercised, shall be delivered to the Holder or such
designee(s) as promptly as practicable, but in no event later than three
business days, after this warrant shall have been so exercised. Any shares of
Common Stock acquired by the Holder or any Permitted Transferee upon exercise of
this warrant shall be referred to as "Registrable Shares" for sections 2 and 3
of this warrant.
2. Registration Rights.
2.1 Piggyback Registration. If, at any time after exercise of the
warrant in whole or in part by the Holder, the Company plans to register any
of its shares of Common Stock for sale under the Securities Act of 1933, as
amended (the "Securities Act"), whether or not for sale for the Company's own
account, on a form and in a manner that would also permit registration of
Registrable Shares for sale under the Securities Act, the Company shall give
written notice to the Holder and any Permitted Transferee of the Company's
intention to effect such registration at least thirty (30) days prior to the
anticipated filing of such registration statement. If, within twenty (20) days
after the giving of such notice by the Company, the Holder or any Permitted
Transferee shall deliver to the Company a written request specifying the number
of Registrable Shares such Holder or Permitted Transferee desires to offer and
sell, and the intended disposition thereof, the Company shall use its
commercially reasonable efforts to effect the registration of all such
Registrable Shares that the Company has been requested to register, provided:
(a) if, at any time after giving written notice of its
intention to register any securities and prior to the effectiveness of the
registration statement filed in connection therewith, the Company shall
determine for any reason not to register any such securities, the Company may,
at its election, give written notice of such determination to the Holder and
each Permitted Transferee who made a request as provided in this section 2.1,
and thereupon the Company shall be relieved of its obligation to register any
Registrable Shares in connection with such registration (but not from its
obligations under this section 2.1), without prejudice, however, to the
registration rights generally provided under this section 2; and
(b) if such registration involves an underwritten public
offering, the Holder and any Permitted Transferee requesting to be included in
the Company's registration must sell their Registrable Shares to the
underwriters selected by the Company on the same terms and conditions as are
applicable to the Company.
(c) The Company shall not be obligated to effect any
registration of Registrable Shares under this section 2.1 as a result of the
registration of any of its securities in connection with mergers, acquisitions,
exchange offers, dividend reinvestment plans or option or other employee benefit
plans.
<PAGE> 4
2.2 Demand Registration. (a) At any time after the second
anniversary of the date of this warrant, the Holder and any Permitted Transferee
may request registration for sale under the Securities Act of any Registrable
Shares then owned by the Holder or such Permitted Transferee (a "Demand
Registration"), provided, however, that (i) the Company shall only be obligated
to effect one Demand Registration with respect to the Registrable Shares, and
(ii) the Company shall not be obligated to effect a Demand Registration unless
the Holder or any such Permitted Transferee requests registration for sale of
Registrable Shares that represent at least 50% of the aggregate amount of
Registrable Shares then owned by the Holder and all such Permitted Transferees.
A Demand Registration shall specify the approximate number of shares of Common
Stock that the Holder or such Permitted Transferee requests be registered and
the anticipated per share price range for such offering.
(b) A Demand Registration shall be deemed to occur when such
registration becomes effective under the Securities Act, except that if, after
it becomes effective, such Demand Registration is interfered with by any stop
order, injunction or other order or requirement of the Securities and Exchange
Commission ("SEC") or any other governmental authority, such registration shall
not be deemed to have been effected unless such stop order, injunction or other
order shall have been subsequently vacated or removed.
2.3 Expenses. The Company shall pay all expenses incident to the
performance by it of its registration obligations under this section 2,
including (i) all stock exchange, SEC registration, listing and filing fees,
(ii) all expenses incurred in connection with the preparation, printing and
distribution of the Registration Statement and Prospectus and any other document
or amendment thereto and the mailing and delivery of copies thereof to the
underwriter and dealers, (iii) fees and disbursements of counsel for the Company
and of the independent public accountants and other experts of the Company; (iv)
the cost of printing or producing any agreement(s) among underwriters,
underwriting agreement(s) and blue sky or legal investment memoranda, any
selling agreements and any other documents in connection with the offering, sale
or delivery of Registrable Shares to be disposed of; (v) all expenses in
connection with the qualification of Registrable Shares to be disposed of for
offering and sale under state securities laws, including the fees and
disbursements of counsel for the underwriters in connection with such
qualification and in connection with any blue sky and legal investment surveys
(but not for any other fees or disbursements of counsel for the underwriters);
(vi) the filing fees incident to securing any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of Registrable
Shares to be disposed of; and (vii) fees and expenses incurred in connection
with the listing of Registrable Shares on each securities exchange or quotation
system on which the Common Stock is then listed. The Holder and any Permitted
Transferee offering and selling Registrable Shares hereby shall be responsible
for the payment of any brokerage and sales commissions, fees and disbursements
of such Holder's or Permitted Transferee's counsel, and any transfer taxes
relating to the sale or disposition of the Registrable Shares.
2.4 No Right to Select Underwriters. The Holder and any Permitted
Transferee offering and selling Registrable Shares in an underwritten offering
shall have no right to select the lead managing underwriter of the offering,
which shall be an investment banking firm of nationally recognized standing
reasonably satisfactory to the Company.
2.5 Registration Procedures. (a) Upon the Company's receipt from the
Holder or any Permitted Transferee of a request to offer and sell any
Registrable Shares pursuant to a Registration Statement as provided in this
warrant, the Company will, as expeditiously as possible:
(i) use its commercially reasonable efforts to register or
qualify the Registrable Shares by the time the applicable Registration Statement
is declared effective by the SEC under all applicable state securities or "blue
sky" laws of such jurisdictions as the Holder or any Permitted Transferee shall
reasonably request in writing, to keep each such registration or
<PAGE> 5
qualification effective during the period required for the consummation of the
public offering, and to do any and all other acts and things which may be
reasonably necessary or advisable to enable the Holder or any Permitted
Transferee to consummate the disposition in each such jurisdiction of the
Registrable Shares owned by such Holder or Permitted Transferee; provided,
however, that the Company shall not be required to (x) qualify generally to do
business in any jurisdiction or to register as a broker or dealer in such
jurisdiction where it would not otherwise be required to qualify but for this
section 2.5, (y) subject itself to taxation in any such jurisdiction, or (z)
submit to the general service of process in any such jurisdiction;
(ii) prepare and file with the SEC such amendments and
supplements to the Registration Statement and the Prospectus as may be
necessary to keep the Registration Statement effective and to comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Shares until 90 days from the date the Registration Statement became
effective or such earlier time as all Registrable Shares have been disposed of
in accordance with the intended methods of disposition set forth in the
Registration Statement;
(iii) furnish to the Holder, any such Permitted Transferee and
any underwriter of such Registrable Shares such number of conformed copies of
the 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 the Registration Statement (including each preliminary prospectus
and any summary prospectus), in conformity with the requirements of the
Securities Act, such documents incorporated by reference in the Registration
Statement or Prospectus, and such other documents as the Contributors or such
underwriter may reasonably request;
(iv) cause the Registrable Shares to be listed on each national
securities exchange or quotation system on which the Common Stock is then
listed, if the listing of such securities is then permitted under the rules of
such exchange;
(v) enter into such customary agreements as an authorized
officer of the Company deems necessary or appropriate to effect the public
offering pursuant to the Registration Statement (including, in the case of an
underwritten public offering, an underwriting agreement), and the Holder or any
such Permitted Transferee on whose behalf Registrable Shares are to be
distributed by such underwriters, shall also be parties to any such underwriting
agreement;
(vi) obtain a "cold comfort" letter or letters from the
Company's independent public accountants and furnish a signed counterpart of a
customary opinion of counsel of the Company, in each case, addressed to the
Holder or any such Permitted Transferee (and the underwriters, if any), in
customary form and substance, dated the effective date of the Registration
Statement (and, if such registration includes an underwritten public offering,
dated the date of the closing under the underwriting agreement);
(vii) notify the Holder or any such Permitted Transferee
immediately upon the happening of any event as a result of which a Prospectus
included in a 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, in the light of the
circumstances under which they were made, not misleading, and, subject to the
provisions of this section 2, at the request of the Holder or any such Permitted
Transferee prepare and furnish to the Holder or any such Permitted Transferee as
many copies of a supplement to or an amendment of such Prospectus as the Holder
or any such Permitted Transferee reasonably request so that, as thereafter
delivered to the purchasers of such Registrable Shares, such Prospectus shall
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading; and
<PAGE> 6
(viii) make available for reasonable inspection by, or give
reasonable access to, the Holder or any such Permitted Transferee, by any
underwriter participating in any disposition to be effected pursuant to the
Registration Statement and by any attorney, accountant or other agent retained
by the Holder or any such Permitted Transferee, all pertinent financial and
other records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors and employees to supply all information
reasonably requested by the Holder or any such Permitted Transferee, underwriter
or other person in connection with the offering thereunder.
(b) In connection with any underwritten public offering of
Registrable Shares, management of the Company shall participate in customary
road show meetings reasonably requested (and reasonable in scope in light of the
size of the offering) upon reasonable prior notice by the lead managing
underwriter of such offering.
(c) The Company may require the Holder or any Permitted
Transferee selling Registrable Shares as to which any registration is being
effected to furnish the Company with such information regarding the Holder or
any such Permitted Transferee and the distribution of such securities as
required to be included in the Registration Statement as the Company may from
time to time reasonably request in writing, and the Company shall have no
obligation to include Registrable Shares owned by the Holder or any such
Permitted Transferee in the Registration Statement unless and until the Holder
or such Permitted Transferee has furnished the Company with all information and
statements about or pertaining to the Holder or such Permitted Transferee in
such reasonable detail and on such timely basis as is reasonably deemed by the
Company to be necessary or appropriate for the preparation of the Registration
Statement.
(d) If a registration pursuant to this section 2 involves an
underwritten public offering and the lead managing underwriter of such
offering advises the Company that, in its judgment, the number of shares of
Common Stock proposed to be included in such underwritten public offering by the
Company and the Holder or any Permitted Transferee should be limited due to
market conditions, then the Company will promptly so advise the Holder or any
other Permitted Transferee which has requested to offer and sell Registrable
Shares in the offering, and the Company and the Holder or any Permitted
Transferee will include in such offering the number of shares which, in the
opinion of the lead managing underwriter can be sold (the "Maximum Offering
Amount"). The Maximum Offering Amount shall be allocated first, to the full
extent of shares of Common Stock the Company desires to sell, and second, if any
shares remain under the Maximum Offering Amount, to the Holder, any such
Permitted Transferee and to any other persons possessing similar registration
rights to these piggyback registration rights, pro rata in accordance with each
request for inclusion made by each such person. In the event that the
underwriting agreement executed in connection with such offering provides for an
overallotment option to be granted to the underwriters, and if such option is
exercised by the underwriters, the allocation priority established above shall
govern the allocation with respect to the sale of any shares of Common Stock and
Registrable Shares pursuant to such exercise by the underwriters.
(e) In the event that the Holder or any Permitted Transferee
exercises its piggyback registration rights to offer and sell Registrable
Shares in an underwritten public offering initiated by any other person or
persons possessing registration rights similar to those conveyed upon the Holder
and any such Permitted Transferee by this warrant, the Holder and each such
Permitted Transferee agree that the allocation priority for such offering shall
be comparable to the allocation priority established above, except that the
Holder or any Permitted Transferee shall participate in such offering with the
lowest level of priority, pro rata in accordance with each request for inclusion
made by each such other person possessing similar registration rights.
<PAGE> 7
3. Indemnification.
3.1 Indemnification by the Company. The Company agrees to indemnify
and hold harmless the Holder and any Permitted Transferee who participates in
any offering or sale of Registrable Shares, each person (if any) who
participates as an underwriter in any offering and sale of Registrable Shares,
and each person, if any, who controls the Holder, any such Permitted Transferee
or such underwriter within the meaning of Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and their respective directors, trustees, officers, partners, agents,
employees and affiliates as follows:
(a) against any and all loss, liability, claim, damage and
expense (joint or several) and action or proceeding (whether commenced or
threatened) whatsoever ("Losses"), as incurred, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment thereto) pursuant to which the
Registrable Shares were registered under the Securities Act, including all
documents incorporated therein by reference, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statements therein not misleading or arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in any
Prospectus (or any amendment or supplement thereto), including all documents
incorporated therein by reference, or the omission or alleged omission therefrom
of a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(b) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any governmental
agency or body, commenced or threatened, or of any claim whatsoever based upon
any such untrue statement or omission, or any such alleged untrue statement or
omission, if such settlement is effected with the written consent of the Company
(which consent will not be unreasonably withheld); and
(c) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel), reasonably incurred in
investigating, preparing or defending against any Losses or any litigation, or
investigation or proceeding by any governmental agency or body, commenced or
threatened, in each case whether or not a party, or any claim whatsoever based
upon any such untrue statement or omission, or any such alleged untrue statement
or omission, to the extent that any such expense is not paid under subparagraph
(a) or (b) above;
provided, however, that the indemnity provided pursuant to this section 3.1 does
not apply to any indemnified party with respect to any Loss or expense to the
extent arising out of (i) 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 such indemnified party expressly for use
in the Registration Statement (or any amendment thereto) or the Prospectus (or
any amendment or supplement thereto), or (ii) such indemnified party's failure
to deliver an amended or supplemental Prospectus if such Loss or expense would
not have arisen had such delivery occurred.
3.2 Indemnification of the Company. The Holder or any Permitted
Transferee who participates in an offering or sale of Registrable Shares agrees
to indemnify and hold harmless the Company, each person (if any) who
participates as an underwriter in any offering and sale of Registrable Shares
and each person, if any, who controls the Company within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, and their respective
directors, trustees, officers, partners, agents, employees and affiliates, as
follows:
<PAGE> 8
(a) against any and all Loss and expense whatsoever, as
incurred, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement (or any
amendment thereto) pursuant to which the Registrable Shares were registered
under the Securities Act, including all documents incorporated therein by
reference, or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading or arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in any Prospectus (or any
amendment or supplement thereto), including all documents incorporated therein
by reference, or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(b) against any and all Loss and expense whatsoever, as
incurred, to the extent of the aggregate amount paid in settlement of any
litigation, or investigation or proceeding by any governmental agency or body,
commenced or threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission, if such
settlement is effected with the written consent of the Holder or any such
Permitted Transferee (which consent will not be unreasonably withheld); and
(c) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel), reasonably
incurred in investigating, preparing or defending against any Loss or any
litigation, or investigation or proceeding by any governmental agency or body,
commenced or threatened, in each case whether or not a party, or any claim
whatsoever based upon any such untrue statement or omission, or any such alleged
untrue statement or omission, to the extent that any such expense is not paid
under subparagraph (a) or (b) above;
provided, however, that the indemnity provided pursuant to this section 3.2
shall only apply with respect to any Loss or expense to the extent arising out
of (i) 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 the Holder or such Permitted Transferee expressly for use in the
Registration Statement (or any amendment thereto) or the Prospectus (or any
amendment or supplement thereto), or (ii) the failure of the Holder or such
Permitted Transferee to deliver an amended or supplemental Prospectus if such
Loss or expense would not have arisen had such delivery occurred.
Notwithstanding the provisions of this section 3.2, neither the Holder nor any
such Permitted Transferee shall be required to indemnify the Company or its
indemnified persons hereunder with respect to any amount in excess of the amount
of the total proceeds to the Holder or such Permitted Transferee, as the case
may be, from sales of the Registrable Shares of the Holder or such Permitted
Transferee under the Registration Statement with respect to such offering, and
neither the Holder nor any such Permitted Transferee shall be liable under this
section 3.2 for any statements or omissions of the any other participant
contained in or omitted from the Registration Statement or the Prospectus.
3.3 Conduct of Indemnification Proceedings. The indemnified party
shall give reasonably prompt notice to the indemnifying party of any action or
proceeding commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify the indemnifying party shall not relieve it
from any liability which it may have under the indemnity agreement provided in
section 3.1 or 3.2 above, unless and to the extent it did not otherwise learn of
such action and the lack of notice by the indemnified party results in the
forfeiture by the indemnifying party of substantial rights and defenses. If the
indemnifying party so elects within a reasonable time after receipt of such
notice, the indemnifying party may assume the defense of such action or
proceeding at such indemnifying party's own expense with counsel chosen by the
indemnifying party and approved by the indemnified party, which approval shall
not be unreasonably withheld; provided, however, that the indemnifying party
will not settle any such action or proceeding without the written consent of the
indemnified party unless, as a condition to such settlement, the indemnifying
<PAGE> 9
party secures the unconditional release of the indemnified party; and provided
further, that if the indemnified party reasonably determines that a conflict of
interest exists where it is advisable for the indemnified party to be
represented by separate counsel or that, upon advice of counsel, there may be
legal defenses available to it which are different from or in addition to those
available to the indemnifying party, then the indemnifying party shall not be
entitled to assume such defense and the indemnified party shall be entitled to
separate counsel at the indemnifying party's expense. If the indemnifying party
is not entitled to assume the defense of such action or proceeding as a result
of the proviso to the preceding sentence, the indemnifying party's counsel shall
be entitled to conduct the indemnifying party's defense and counsel for the
indemnified party shall be entitled to conduct the defense of the indemnified
party, it being understood that both such counsel will cooperate with each other
to conduct the defense of such action or proceeding as efficiently as possible.
If the indemnifying party is not so entitled to assume the defense of such
action or does not assume such defense, after having received the notice
referred to in the first sentence of this paragraph, the indemnifying party will
pay the reasonable fees and expenses of counsel for the indemnified party. In
such event, however, the indemnifying party will not be liable for any
settlement effected without the written consent of the indemnifying party (which
consent will not be unreasonably withheld). Except as expressly stated herein,
if an indemnifying party is entitled to assume, and assumes, the defense of such
action or proceeding in accordance with this paragraph, the indemnifying party
shall not be liable for any fees and expenses of counsel for the indemnified
party incurred thereafter in connection with such action or proceeding.
3.4 Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for
in this section 3 is unavailable to an indemnified party, the indemnifying party
shall contribute to the aggregate Losses and expenses of the nature contemplated
by such indemnity agreement incurred by any indemnified party, (i) in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and the indemnified parties on the other, in connection
with the statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative fault of but also the relative benefits to the
Company on the one hand and each participating Holder or Permitted Transferee,
as applicable, on the other, in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative benefits to the
indemnifying party and the indemnified party shall be determined by reference
to, among other things, the total proceeds received by the indemnifying party
and the indemnified party in connection with the offering to which such losses,
claims, damages, liabilities or expenses relate. The relative fault of the
indemnifying party and indemnified party shall be determined by reference to,
among other things, whether the action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
the indemnifying party or the indemnified party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action.
The parties hereto agree that it would not be just or equitable if
contribution pursuant to this section 3.4 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this section 2.4, neither the Holder nor any
Permitted Transferee shall be required to contribute any amount in excess of the
amount of the total proceeds to such person from sales of the Registrable Shares
of such person under the Registration Statement.
Notwithstanding the foregoing, 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. For purposes of this section 3.4, each person, if
any, who controls an indemnified party within the meaning of Section 15 of the
<PAGE> 10
Securities Act shall have the same rights to contribution as such indemnified
party, and each director of the Company, each officer of the Company who signed
a Registration Statement and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act shall have the same
rights to contribution as the Company.
The indemnity agreements contained in this section 3 shall be in
addition to any other rights (to indemnification, contribution or otherwise)
which any indemnified party may have pursuant to law or contract and shall
remain operative and in full force and effect regardless of any investigation
made or omitted by or on behalf of any indemnified party and shall survive the
transfer of any Registrable Shares by the Holder or any Permitted Transferee.
4. Antidilution. In case the Company shall (i) pay a dividend in shares
of Common Stock or make a distribution in shares of Common Stock, (ii) subdivide
its outstanding shares of Common Stock (including, without limitation, by way of
stock splits and the like), (iii) combine its outstanding shares of Common Stock
into a smaller number of shares of Common Stock or (iv) issue by
reclassification of its shares of Common Stock other securities of the Company
(including any such reclassification in connection with a consolidation or
merger in which the Company is the surviving corporation), the number of shares
of Common Stock purchasable upon exercise of this warrant immediately prior
thereto shall be adjusted so that the Holder shall be entitled to receive the
number of shares of Common Stock or the kind and number of other securities of
the Company which it would have owned or have been entitled to receive after the
happening of any of the events described above had this warrant been exercised
immediately prior to the happening of such event or any record date with respect
thereto, and the exercise price per share shall be adjusted appropriately. An
adjustment made pursuant to this section 2 shall become effective immediately
after the effective date of each such event retroactive to the record date, if
any, for such event, without amendment or modification required to this
document.
5. Limited Transferability. Until such time as a Registration Statement
covering all of the Registrable Shares has been declared effective by the SEC or
such time as all shares of Common Stock acquired upon exercise of this warrant
may be sold pursuant to Rule 144(k) under the Securities Act, the Holder
covenants that it will not, without the prior written consent of the Company,
offer, sell or otherwise dispose of, directly or indirectly, this warrant;
provided, however, that the Holder may transfer this warrant to a corporation,
partnership or other Affiliate of the Holder (in any such case, a "Permitted
Transferee"), if such Permitted Transferee agrees in writing to hold this
warrant or any shares received subject to the provisions of this warrant and to
transfer this warrant or such shares back to the Holder if such Permitted
Transferee ceases to be an Affiliate of the Holder. Any offer, sale or other
purported transfer of this warrant shall be void ab initio and the purported
transferee thereof shall possess no rights in this warrant. For purposes of this
warrant, an "Affiliate" of the Holder shall include any member of the Andersen
Consulting Worldwide Organization or any entity which is at the relevant time
directly or indirectly controlled by any such entity or any entity which is
otherwise part of the Andersen Consulting Worldwide Organization.
6. Payment of Taxes. The Company shall cause all shares of Common Stock
issued upon the exercise of this warrant to be validly issued, fully paid and
nonassessable and not subject to preemptive rights. The Company shall pay all
expenses in connection with, and all taxes and other governmental charges that
may be imposed on the Company with respect to the issuance or delivery of the
shares of Common Stock upon exercise of this warrant, except for such taxes or
charges imposed by law upon the Holder.
7. Reservation of Shares. From and after the date of this warrant, the
Company shall at all times reserve and keep available for issuance upon the
exercise of this warrant a number of its authorized but unissued shares of
Common Stock sufficient to permit the exercise in full of this warrant.
<PAGE> 11
8. Miscellaneous.
8.1 Securities Act Restrictions. The Holder acknowledges that this
warrant may not be sold, transferred or otherwise disposed of without
registration under the Act or an applicable exemption from the registration
requirements of the Act and, accordingly, this warrant and all certificates
representing the Common Stock issuable upon the exercise of this warrant shall
bear a legend in the form set forth on the top of page one of this warrant.
8.2 Notices. Any notices and other communications under this
warrant shall be in writing and may be given by any of the following
methods: (a) personal delivery; (b) facsimile transmission; (c) registered or
certified mail, postage prepaid, return receipt requested; or (d) overnight
delivery service. Notices shall be sent to the appropriate party at its address
or facsimile number given below (or at such other address or facsimile number
for such party as shall be specified by notice given hereunder): if to the
Company, to it at: 3390 Peachtree Road, Suite 1700, Atlanta, GA 30326-1108, Fax
No. (404) 812-6727, Attention: Chief Financial Officer, and if to the Holder, to
it at: 1661 Page Mill Road, Palo Alto, CA 94304, Fax No. (650) 842-2956,
Attention: General Counsel. All such notices and communications shall be deemed
received upon (a) actual receipt thereof by the addressee, (b) actual delivery
thereof to the appropriate address or (c) in the case of a facsimile
transmission, upon transmission thereof by the sender and issuance by the
transmitting machine of a confirmation slip confirming that the number of pages
constituting the notice have been transmitted without error. In the case of
notices sent by facsimile transmission, the sender shall contemporaneously mail
a copy of the notice to the addressee at the address provided for above.
However, such mailing shall in no way alter the time at which the facsimile
notice is deemed received.
8.3 Amendment. This warrant may be modified or amended or the
provisions of this warrant may be waived only with the written consent of the
Company and the Holder.
8.4 Governing Law. This warrant shall be governed by the law of the
State of Delaware, without regard to the provisions thereof relating to
conflicts of laws.
IN WITNESS WHEREOF, the Company has caused this warrant to be executed by
an officer thereunto duly authorized.
SECURITY FIRST TECHNOLOGIES CORPORATION
By: /s/ Robert F. Stockwell
------------------------------------
Name: Robert F. Stockwell
Title: Treasurer
<PAGE> 1
EXHIBIT 10.5
WARRANT
NEITHER THE WARRANT REPRESENTED HEREBY NOR THE SECURITIES ISSUABLE UPON EXERCISE
THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). NONE OF SUCH SECURITIES MAY BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT, OR (ii) AN AVAILABLE EXEMPTION FROM
REGISTRATION UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES AND UPON
DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO
COUNSEL FOR THE COMPANY, THAT SUCH EXEMPTION FROM REGISTRATION UNDER THE ACT IS
AVAILABLE.
DATE: February 25, 1999
NO.: W-RBC1
WARRANT TO PURCHASE
400,000 SHARES OF
COMMON STOCK
OF
SECURITY FIRST TECHNOLOGIES CORPORATION
Securities First Technologies Corporation, a Delaware corporation (the
"Company"), hereby issues to Royal Bank of Canada (the "Holder") this warrant to
purchase from the Company 400,000 shares of the Company's common stock, $.01 par
value per share (the "Common Stock"), at varying prices per share as set forth
in the table presented in section 1.1 (b) below. References in this warrant to
the "Exercise Price" shall mean the exercise price per share of Common Stock
payable with respect to a particular Installment (as such term is defined
below).
1. Exercise.
1.1 Contingent Vesting of Right to Exercise. (a) General. The
rights represented by this warrant are contingent upon the number of Warrant
Customers (as such term is defined in Section 3.2.B of the RBC/SONE Agreement,
dated February 25, 1999) of the Holder on each of four specified dates (each, a
"Calculation Date"), which dates shall be (i) the first business day in Atlanta,
Georgia following the "Completion Date" (as such term is defined in Section
2.1.F of the RBC/SONE Agreement, dated February 25, 1999), and (ii) each of the
respective first business days in Atlanta, Georgia following the three
successive anniversary dates of the Completion Date. Unless accelerated pursuant
to the provisions of section 1.1(c) below, vesting of the rights represented by
this warrant will occur, if at all, in four equal installments (each, an
"Installment") on the day immediately following a given Calculation Date if and
only if the number of Warrant Customers meets or exceeds the threshold numbers,
which shall be calculated as of each Calculation Date (each, a "Customer
Minimum") specified in the tabular description of each Installment. If vesting
of a particular Installment has not occurred as of its Calculation Date, the
rights represented by this warrant will be void as to the number of shares of
Common Stock underlying such Installment.
(b) Vesting Table. The table below sets forth for each
Installment as of the applicable Calculation Dates the number of shares of
Common Stock to which the Installment relates, Customer Minimum and Exercise
Prices for each Installment.
Number of Warrant Per Share
Calculation Shares in Customer Exercise Price
Installment Date Installment Minimum
<PAGE> 2
1 Initial 100,000 1,000,000 $60.00
2 Second 100,000 2,000,000 $60.00
3 Third 100,000 3,000,000 $60.00
4 Fourth 100,000 4,000,000 $60.00
(c) Acceleration of Vesting. Upon a "Change of Control"
(defined below) of the Company, this warrant shall become fully vested without
regard to whether the incentives of a particular Installment have been met. For
purposes of this warrant, a "Change of Control" shall mean:
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d) (3) or 14(d) (2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 80% or
more of either the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however, that
for purposes of this paragraph (i), the following acquisitions shall not
constitute a Change of Control: (1) any acquisition directly from the Company,
(2) any acquisition by the Company, or (3) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
other corporation controlled by the Company; or
(ii) Consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (1) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly or indirectly, more than
50% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, or (2) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company, such corporation
resulting from such Business Combination or a corporation controlled by any of
them) beneficially owns, directly or indirectly, 80% or more of, respectively,
the then outstanding shares of common stock of the corporation resulting from
such Business Combination or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such ownership
existed prior to the Business Combination; or
(iii) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company without the establishment of a
successor corporation.
1.2 Mechanics of Exercise. Beginning at such time as an Installment
vests, the Holder may exercise this warrant in whole or from time to time in
part, to purchase such numbers of shares as to which this warrant has vested,
until 5:00 PM (Atlanta, Georgia time) on the 90th day following the date of
vesting (the "Exercise Period"), by (a) the surrender of this warrant, along
with the purchase form attached as Exhibit A (the "Purchase Form"), properly
executed, at the address of the
<PAGE> 3
Company set forth in section 6.2 (or such other address as the Company may
designate by notice in writing to the Holder at its address set forth in section
6.2) and (b) the payment to the Company of the applicable Exercise Price for
such Installment by check, payable to the order of the Company, or by wire
transfer or other immediately available funds, for the number of shares of
Common Stock specified in the Purchase Form, together with any applicable stock
transfer taxes. A certificate representing the shares of Common Stock so
purchased and, in the event of an exercise of any of the first three
Installments or, with respect to the fourth Installment, upon exercise of fewer
than all the remaining rights represented by this warrant, a new warrant in the
form of this warrant issued in the name of the Holder or its designee(s) and
representing a new warrant to purchase a number of shares of Common Stock equal
to the number of shares of Common Stock as to which this warrant was theretofore
exercisable less the number of shares of Common Stock as to which this warrant
shall theretofore have been exercised or shall have become void, shall be
delivered to the Holder or such designee(s) as promptly as practicable, but in
no event later than three business days, after this warrant shall have been so
exercised. Notwithstanding the foregoing or any other provision to the contrary
herein, if (i) the Holder is not otherwise permitted or authorized under Section
4 of the Bank Holding Company Act of 1956, as amended, to hold more than 4.999%
of the total number of shares of Common Stock then outstanding, and (ii)
exercise of an Installment, in whole or in part, would cause the Holder to own
more than 4.999% of the total number of shares of Common Stock then outstanding,
then the Exercise Period as to such Installment shall be extended to 10 days
following notice from the Corporation to the Holder that exercise of such
Installment, in whole or in part, would not cause the Holder to hold more than
4.999% of the total number of shares of Common Stock then outstanding.
2. Antidilution. In case the Company shall (i) pay a dividend in
shares of Common Stock or make a distribution in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock (including, without limitation,
by way of stock splits and the like), (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock or (iv) issue by
reclassification of its shares of Common Stock other securities of the Company
(including any such reclassification in connection with a consolidation or
merger in which the Company is the surviving corporation), the number of shares
of Common Stock purchasable upon exercise of this warrant immediately prior
thereto shall be adjusted so that the Holder shall be entitled to receive the
number of shares of Common Stock or the kind and number of other securities of
the Company which it would have owned or have been entitled to receive after the
happening of any of the events described above had this warrant been exercised
immediately prior to the happening of such event or any record date with respect
thereto, and the exercise price per share shall be adjusted appropriately. An
adjustment made pursuant to this section 2 shall become effective immediately
after the effective date of each such event retroactive to the record date, if
any, for such event, without amendment or modification required to this
document.
3. Limited Transferability. The Holder covenants that it will not,
without the prior written consent of the Company, offer, sell or otherwise
dispose of, directly or indirectly, this warrant. The Holder further covenants
that it will not, without the prior written consent of the Company, offer, sell
or otherwise dispose of, directly or indirectly, any shares of the Company's
capital stock which the Holder may acquire from time to time upon exercise of
this warrant for the first and second Installments, for a two-year period
commencing upon the date the right to acquire each such respective share vests,
and for the third Installment, for a one-year period commencing upon the date of
acquisition of each such respective share vests. Notwithstanding the foregoing,
the Holder or any of its permitted transferees hereunder may transfer this
warrant or some or all of any such shares of the Company's capital stock to a
corporation, partnership or other legal entity controlled by the Holder, if such
transferee agrees in writing to hold this warrant or any shares received subject
to the provisions of this warrant and to transfer this warrant or such shares
back to the Holder if such transferee ceases to be controlled by the Holder. Any
offer, sale or other purported transfer of this warrant shall be void ab initio
and the purported transferee thereof shall possess no rights in this warrant and
this warrant shall be canceled and shall cease to be outstanding.
<PAGE> 4
4. Payment of Taxes. The Company shall cause all shares of Common Stock
issued upon the exercise of this warrant to be validly issued, fully paid and
nonassessable and not subject to preemptive rights. The Company shall pay all
expenses in connection with, and all taxes and other governmental charges that
may be imposed with respect to the issuance or delivery of the shares of Common
Stock upon exercise of this warrant, unless such tax or charge is imposed by law
upon the Holder.
5. Reservation of Shares. From and after the date of this warrant, the
Company shall at all times reserve and keep available for issuance upon the
exercise of this warrant a number of its authorized but unissued shares of
Common Stock sufficient to permit the exercise in full of this warrant.
6. Miscellaneous.
6.1 Securities Act Restrictions. The Holder acknowledges that this
warrant may not be sold, transferred or otherwise disposed of without
registration under the Act or an applicable exemption from the registration
requirements of the Act and, accordingly, this warrant and all certificates
representing the Common Stock issuable upon the exercise of this warrant shall
bear a legend in the form set forth on the top of page one of this warrant.
6.2 Notices. Any notices and other communications under this warrant
shall be in writing and may be given by any of the following methods: (a)
personal delivery; (b) facsimile transmission; (c) registered or certified mail,
postage prepaid, return receipt requested; or (d) overnight delivery service.
Notices shall be sent to the appropriate party at its address or facsimile
number given below (or at such other address or facsimile number for such party
as shall be specified by notice given hereunder): if to the Company, to it at:
3390 Peachtree Road, Suite 1700, Atlanta, GA 30326-1108, Fax No. (404) 812-6727,
Attention: Chief Financial Officer, and if to the Holder, to it at: Royal Bank
of Canada, 16th Floor, South Tower, Royal Bank Plaza, 200 Bay Street, Toronto,
Ontario M5J 2J2, Fax No. (416) 974-9334, Attention: Vice President, Business
Development. All such notices and communications shall be deemed received upon
(a) actual receipt thereof by the addressee, (b) actual delivery thereof to the
appropriate address or (c) in the case of a facsimile transmission, upon
transmission thereof by the sender and issuance by the transmitting machine of a
confirmation slip confirming that the number of pages constituting the notice
have been transmitted without error. In the case of notices sent by facsimile
transmission, the sender shall contemporaneously mail a copy of the notice to
the addressee at the address provided for above. However, such mailing shall in
no way alter the time at which the facsimile notice is deemed received.
6.3 Amendment. This warrant may be modified or amended or the
provisions of this warrant may be waived only with the written consent of the
Company and the Holder.
6.4 Governing Law. This warrant shall be governed by the law of the
State of Delaware, without regard to the provisions thereof relating to
conflicts of laws.
7. Legend.
Each certificate representing shares of Common Stock issued as a
result of the exercise of any Installment shall bear the following legend (in
addition to any legend required by applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY
OTHER FEDERAL OR STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED OR HYPOTHECATED
<PAGE> 5
UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY
OTHER APPLICABLE FEDERAL SECURITIES LAWS COVERING SUCH SECURITIES OR THE
CORPORATION RECEIVES AN OPINION OF COUNSEL IN FORM SATISFACTORY TO THE
CORPORATION THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
ADDITIONALLY, THE TRANSFER OF THE SHARES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS SPECIFIED IN SECTION 3 OF
THE WARRANT OF FIRST TECHNOLOGIES CORPORATION DATED FEBRUARY 25, 1999, AND
NO TRANSFER OF SHARES SHALL BE VALID OR EFFECTIVE ABSENT COMPLIANCE WITH
SUCH RESTRICTIONS. A COPY OF THE WARRANT MAY BE OBTAINED AT NO COST BY
WRITTEN REQUEST MADE BY THE REGISTERED HOLDER OF THIS CERTIFICATE TO THE
SECRETARY OF THE CORPORATION.
The legend endorsed on a stock certificate pursuant to this Section 7, insofar
as it relates to registration under the Securities Act of 1933, as amended,
shall be removed and the Corporation shall issue a certificate without such
legend to the holder of such shares, if such shares are registered under
applicable federal securities laws and a prospectus meeting the requirements of
the rules and regulations of the Securities and Exchange Commission is available
or if such holder provides to the Corporation an opinion of counsel to such
holder reasonably satisfactory to the Corporation, to the effect that a public
sale, transfer or assignment of such shares may be made without registration and
without compliance with any restrictions. The legend endorsed on a stock
certificate pursuant to this Section 7, insofar as it relates to additional
transfer restrictions specified herein, shall be removed upon the expiration of
the applicable provisions.
IN WITNESS WHEREOF, the Company has caused this warrant to be executed by
an officer thereunto duly authorized.
SECURITY FIRST TECHNOLOGIES CORPORATION
By: /s/ James S. Mahan III
---------------------------------------
Name: James S. Mahan III
Title: CEO
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