Document:

Exhibit 4.2

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (the “Agreement”)
is made and entered into as of this 12th day of April, 2002 by and among First
Virtual Communications, Inc., a Delaware corporation (the “Company”), and the
“Investors” named in that certain Purchase Agreement by and among the Company
and the Investors (the “Purchase Agreement”).

The parties hereby agree as follows:

1.             Certain
Definitions.

As used in this Agreement, the following terms shall
have the following meanings:

“Affiliate”
means, with respect to any person, any other person which directly or
indirectly controls, is controlled by, or is under common control with, such
person.

“Business Day”
means a day, other than a Saturday or Sunday, on which banks in New York City
are open for the general transaction of business.

“Common Stock”
shall mean the Company’s common stock, par value $0.001 per share, and any
securities into which such shares may hereafter be reclassified.

“Investors”
shall mean the Investors identified in the Purchase Agreement and any Affiliate
or permitted transferee of any Investor who is a subsequent holder of any
Warrants or Registrable Securities.

“Prospectus”
shall mean the prospectus included in any Registration Statement, as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by such
Registration Statement and by all other amendments and supplements to the
prospectus, including post-effective amendments and all material incorporated
by reference in such prospectus.

“Register,”
“registered” and “registration” refer to a registration made by
preparing and filing a Registration Statement or similar document in compliance
with the 1933 Act (as defined below), and the declaration or ordering of
effectiveness of such Registration Statement or document.

“Registrable
Securities” shall mean the shares of Common Stock issued (i) pursuant to
the Purchase Agreement, and (ii) upon the exercise of the Warrants, if any, and
any other securities issued or issuable with respect to or in exchange for
Registrable Securities; provided, that, a security shall cease to be a
Registrable Security upon (A) sale pursuant to a Registration Statement or Rule
144 under the 1933 Act, or (B) such security becoming eligible for sale by the
Investors pursuant to Rule 144(k). 
Unless the context otherwise requires, “Registrable Securities” includes
both the outstanding Initial Registrable Securities and the outstanding
Remaining Registrable Securities (as such terms are defined herein).

 

 

“Registration
Statement” shall mean any registration statement of the Company filed under
the 1933 Act that covers the resale of any of the Registrable Securities
pursuant to the provisions of this Agreement, amendments and supplements to
such Registration Statement, including post-effective amendments, all exhibits
and all material incorporated by reference in such Registration Statement.

“Required
Investors” means the Investors holding a majority of the Registrable
Securities.

“SEC” means
the U.S. Securities and Exchange Commission.

“1933 Act”
means the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.

“1934 Act”
means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.

“Warrants”
means, the warrants to purchase shares of Common Stock issued to the Investors
pursuant to the Purchase Agreement, the form of which is attached to the
Purchase Agreement as Exhibit A.

“Warrant Shares”
means the shares of Common Stock issuable upon the exercise of the Warrants.

2.             Registration.

(a)           Registration
Statements.

(i)            Promptly following the First Closing
Date (as defined in the Purchase Agreement) but no later than thirty (30) days
after the First Closing Date, the Company shall prepare and file with the SEC
one Registration Statement on Form S-3 (or, if Form S-3 is not then available
to the Company, on such form of registration statement as is then available to
effect a registration for resale of the Registrable Securities, subject to the
Required Investors’ consent), covering the resale of all of the Registrable
Securities (including Registrable Securities issuable upon the conversion or
exercise, as applicable, of the Initial Securities (as defined in the Purchase
Agreement)) (the “Initial Registrable Securities”).  Such Registration Statement also shall cover, to the extent
allowable under the 1933 Act and the rules promulgated thereunder (including
Rule 416), such indeterminate number of additional shares of Common Stock
resulting from stock splits, stock dividends or similar transactions with
respect to the Registrable Securities. 
The Company shall use its reasonable best efforts to obtain from each
person who now has piggyback registration rights a waiver of those rights with
respect to the Registration Statement. 
The Registration Statement (and each amendment or supplement thereto,
and each request for acceleration of effectiveness thereof) shall be provided
in accordance with Section 3(c) to the Investors and their counsel prior to its
filing or other submission.

(ii)           Promptly following any Subsequent
Closing Date (as defined in the 

 

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Purchase
Agreement) but no later than thirty (30) days after any Subsequent Closing
Date, the Company shall prepare and file with the SEC one Registration
Statement on Form S-3, or amend the Registration Statement filed in connection
with the First Closing , if not yet effective, (or, if Form S-3 is not then
available to the Company, on such form of registration statement as is then
available to effect a registration for resale of the Registrable Securities,
subject to the Required Investors’ consent), covering the resale of all of the
Registrable Securities (including Registrable Securities issuable upon the
conversion or exercise, as applicable, of the Remaining Securities (as defined
in the Purchase Agreement)) (the “Remaining Registrable Securities”).  Such Registration Statement also shall
cover, to the extent allowable under the 1933 Act and the rules promulgated
thereunder (including Rule 416), such indeterminate number of additional shares
of Common Stock resulting from stock splits, stock dividends or similar
transactions with respect to the Remaining Registrable Securities.  The Company shall use its reasonable best
efforts to obtain from each person who now has piggyback registration rights a
waiver of those rights with respect to the Registration Statement.  The Registration Statement (and each
amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided in accordance with Section 3(c) to the
Investors and their counsel prior to its filing or other submission.

(b)           Expenses.  The Company will pay all expenses associated
with each registration, including filing and printing fees, counsel and
accounting fees and expenses, costs associated with clearing the Registrable
Securities for sale under applicable state securities laws, listing fees, fees
and expenses of one counsel to the Investors, not to exceed $7,500, and the
Investors’ reasonable expenses in connection with the registration, but
excluding discounts, commissions, fees of underwriters, fees and expenses of
legal counsel to the Investors (except as provide above), selling brokers,
dealer managers or similar securities industry professionals with respect to
the Registrable Securities being sold.

(c)           Effectiveness.

(i)            The Company shall use commercially
reasonable efforts to have each Registration Statement declared effective as
soon as practicable, but in any event, no later than ninety (90) days after the
First Closing Date or Subsequent Closing Date, as applicable.  The Company shall notify the Investors by
facsimile or e-mail as promptly as practicable, and in any event, within
twenty-four (24) hours, after any Registration Statement is declared effective
and shall provide the Investors no later than one Business Day thereafter with
copies of any related Prospectus to be used in connection with the sale or
other disposition of the securities covered thereby.

(ii)           For not more than twenty (20)
consecutive days or for a total of not more than forty-five (45) days in any
twelve (12) month period, the Company may delay the disclosure of material
non-public information concerning the Company, by suspending the use of any
Prospectus included in any registration contemplated by this Section containing
such information, the disclosure of which at the time is not, in the good faith
opinion of the Company, in the best interests of the Company (an “Allowed
Delay”); provided, that the Company shall promptly (a) notify the Investors in
writing of the existence of (but in no event, without the prior written consent
of an Investor, shall the Company disclose to such Investor any of the facts or

 

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circumstances regarding) material non-public
information giving rise to an Allowed Delay, and (b) advise the Investors in
writing to cease all sales under the Registration Statement until the end of
the Allowed Delay.

(d)           Underwritten Offering.  If any offering pursuant to a Registration
Statement pursuant to Section 2(a) hereof involves an underwritten offering,
the Company shall have the right to select an investment banker and manager to
administer the offering, which investment banker or manager shall be reasonably
satisfactory to the Required Investors.

3.             Company
Obligations.  The Company will use
commercially reasonable efforts to effect the registration of the Registrable
Securities in accordance with the terms hereof, and pursuant thereto the
Company will, as expeditiously as possible:

(a)           use commercially reasonable efforts
to cause such Registration Statement to become effective and to remain
continuously effective for a period that will terminate upon the earlier of (i)
the date on which all Registrable Securities covered by such Registration
Statement as amended from time to time, have been sold, and (ii) the date on
which all Registrable Securities covered by such Registration Statement may be
sold pursuant to Rule 144(k);

(b)           prepare and file with the SEC such
amendments and post-effective amendments to the Registration Statement and the
Prospectus as may be necessary to keep the Registration Statement effective for
the period specified in Section 3(a) and to comply with the provisions of the
1933 Act and the 1934 Act with respect to the distribution of all of the
Registrable Securities covered thereby;

(c)           provide copies to and permit counsel
designated by the Investors to review each Registration Statement and all
amendments and supplements thereto no fewer than five (5) days prior to their
filing with the SEC and not file any document to which such counsel reasonably
objects;

(d)           furnish to the Investors and their
legal counsel (i) promptly after the same is prepared and publicly distributed,
filed with the SEC, or received by the Company (but not later than two (2)
Business Days after the filing date, receipt date or sending date, as the case
may be, one (1) copy of any Registration Statement and any amendment thereto,
each preliminary prospectus and Prospectus and each amendment or supplement
thereto, and each letter written by or on behalf of the Company to the SEC or
the staff of the SEC, and each item of correspondence from the SEC or the staff
of the SEC, in each case relating to such Registration Statement (other than
any portion of any thereof which contains information for which the Company has
sought confidential treatment), and (ii) such number of copies of a Prospectus,
including a preliminary prospectus, and all amendments and supplements thereto
and such other documents as each Investor may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such Investor
that are covered by the related Registration Statement;

 

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(e)           in the event the Company selects an
underwriter for the offering, the Company shall enter into and perform its reasonable
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the underwriter of such offering;

(f)            if required by the underwriter, or
if any Investor is described in the Registration Statement as an underwriter,
the Company shall furnish, on the effective date of the Registration Statement
(except with respect to clause (i) below) and on the date that Registrable
Securities are delivered to an underwriter, if any, for sale in connection with
the Registration Statement (including any Investor deemed to be an
underwriter), (i) (A) in the case of an underwritten offering, an opinion,
dated as of the closing date of the sale of Registrable Securities to the
underwriters, from independent legal counsel representing the Company for
purposes of such Registration Statement, in form, scope and substance as is
customarily given in an underwritten public offering, addressed to the
underwriters and the Investors participating in such underwritten offering or
(B) in the case of an “at the market” offering, an opinion, dated as of or
promptly after the effective date of the Registration Statement to the
Investors, from independent legal counsel representing the Company for purposes
of such Registration Statement, in form, scope and substance as is customarily
given in a public offering, addressed to the Investors, and (ii) a letter,
dated as of the effective date of such Registration Statement and confirmed as
of the applicable dates described above, from the Company’s independent
certified public accountants in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters (including any Investor deemed
to be an underwriter);

(g)           use commercially reasonable efforts
to (i) prevent the issuance of any stop order or other suspension of
effectiveness and, (ii) if such order is issued, obtain the withdrawal of any
such order at the earliest possible moment;

(h)           prior to any public offering of
Registrable Securities, use commercially reasonable efforts to register or
qualify or cooperate with the Investors and their counsel in connection with
the registration or qualification of such Registrable Securities for offer and
sale under the securities or blue sky laws of such jurisdictions requested by
the Investors and do any and all other commercially reasonable acts or things
necessary or advisable to enable the distribution in such jurisdictions of the
Registrable Securities covered by the Registration Statement;

(i)            use commercially reasonable efforts
to cause all Registrable Securities covered by a Registration Statement to be
listed on each securities exchange, interdealer quotation system or other
market on which similar securities issued by the Company are then listed;

(j)            immediately notify the Investors, at
any time when a Prospectus relating to Registrable Securities is required to be
delivered under the 1933 Act, upon discovery that, or upon the happening of any
event as a result of which, the 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 

 

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not misleading in light of the circumstances then
existing, and at the request of any such holder, promptly prepare and furnish
to such holder a reasonable number of copies of a supplement to or an amendment
of such Prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such Prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances then existing; and

(k)           otherwise use commercially reasonable
efforts to comply with all applicable rules and regulations of the SEC under
the 1933 Act and the 1934 Act, take such other actions as may be reasonably
necessary to facilitate the registration of the Registrable Securities
hereunder; and make available to its security holders, as soon as reasonably
practicable, but not later than the Availability Date (as defined below), an
earnings statement covering a period of at least twelve (12) months, beginning
after the effective date of each Registration Statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the 1933 Act,
including Rule 158 promulgated thereunder (for the purpose of this subsection
3(k), “Availability Date” means the 45th day following the end of the fourth
fiscal quarter that includes the effective date of such Registration Statement,
except that, if such fourth fiscal quarter is the last quarter of the Company’s
fiscal year, “Availability Date” means the 90th day after the end of such
fourth fiscal quarter).

(l)            With a view to making available to
the Investors the benefits of Rule 144 (or its successor rule) and any other
rule or regulation of the SEC that may at any time permit the Investors to sell
shares of Common Stock to the public without registration, the Company
covenants and agrees to:  (i) make and
keep public information available, as those terms are understood and defined in
Rule 144, until the earlier of (A) six months after such date as all of the
shares of Common Stock purchased by them pursuant to the Purchase Agreement
(including the Warrant Shares) may be resold pursuant to Rule 144(k) or any
other rule of similar effect or (B) such date as all of the shares of Common
Stock purchased by them pursuant to the Purchase Agreement (including the
Warrant Shares) shall have been resold; (ii) file with the SEC in a timely
manner all reports and other documents required of the Company under the 1934
Act; and (iii) furnish to each Investor upon request, as long as such Investor
owns any shares of Common Stock purchased by them pursuant to the Purchase
Agreement (including the Warrant Shares), (A) a written statement by the
Company that it has complied with the reporting requirements of the 1934 Act,
but no more than once per year, (B) a copy of the Company’s most recent Annual
Report on Form 10-K or Quarterly Report on Form 10-Q, and (C) such other
information as may be reasonably requested in order to avail such Investor of
any rule or regulation of the SEC that permits the selling of any such shares
of Common Stock without registration.

4.             Due
Diligence Review; Information.  The
Company shall make available, during normal business hours, for inspection and
review by the Investors, advisors to and representatives of the Investors (who
may or may not be affiliated with the Investors and who are reasonably
acceptable to the Company), any underwriter participating in any disposition of
shares of Common Stock on behalf of the Investors pursuant to a Registration
Statement or amendments or supplements thereto or any blue sky, NASD or other
filing, all financial and other records, all SEC Filings (as defined in the
Purchase Agreement) and other filings with the SEC, and all other 

 

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relevant corporate
documents and properties of the Company as may be reasonably necessary for the
purpose of such review, and cause the Company’s officers, directors and
employees, within a reasonable time period, to supply all such relevant
information reasonably requested by the Investors or any such representative,
advisor or underwriter in connection with such Registration Statement
(including, without limitation, in response to all relevant questions and other
inquiries reasonably made or submitted by any of them), prior to and from time
to time after the filing and effectiveness of the Registration Statement for
the sole purpose of enabling the Investors and such representatives, advisors
and underwriters and their respective accountants and attorneys to conduct
initial and ongoing due diligence with respect to the Company and the accuracy
of such Registration Statement; provided, however, that such persons enter into
an appropriate confidentiality agreement with the Company with respect thereto.

The Company shall
not disclose material nonpublic information to the Investors, or to advisors to
or representatives of the Investors, unless prior to disclosure of such
information the Company identifies such information as being material nonpublic
information and provides the Investors, such advisors and representatives with
the opportunity to accept or refuse to accept such material nonpublic
information for review and any Investor wishing to obtain such information
enters into an appropriate confidentiality agreement with the Company with
respect thereto.

5.             Obligations
of the Investors.

(a)           Each Investor shall furnish in
writing to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it, as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request.  At least five (5) Business Days prior to the
first anticipated filing date of any Registration Statement, the Company shall
notify each Investor of the information the Company requires from such Investor
if such Investor elects to have any of the Registrable Securities included in
the Registration Statement.  An Investor
shall provide such information to the Company at least two (2) Business Days
prior to the first anticipated filing date of such Registration Statement if
such Investor elects to have any of the Registrable Securities included in the
Registration Statement.

(b)           Each Investor, by its acceptance of
the Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of a
Registration Statement hereunder, unless such Investor has notified the Company
in writing of its election to exclude all of its Registrable Securities from
such Registration Statement.

(c)           In the event the Company, at the
request of the Investors, determines to engage the services of an underwriter,
such Investor agrees to enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are reasonably
required in order to expedite or facilitate the dispositions of the Registrable
Securities.

 

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(d)           Each Investor agrees that, upon
receipt of any notice from the Company of either (i) the commencement of an
Allowed Delay pursuant to Section 2(c)(ii) or (ii) the happening of an event
pursuant to Section 3(j) hereof, such Investor will immediately discontinue
disposition of Registrable Securities pursuant to the Registration Statement
covering such Registrable Securities, until the Investor’s receipt of the
copies of the supplemented or amended prospectus filed with the SEC and
declared effective and, if so directed by the Company, the Investor shall
deliver to the Company (at the expense of the Company) or destroy (and deliver
to the Company a certificate of destruction) all copies in the Investor’s
possession of the Prospectus covering the Registrable Securities current at the
time of receipt of such notice.

(e)           No Investor may participate in any third
party underwritten registration hereunder unless it (i) agrees to sell the
Registrable Securities on the basis provided in any underwriting arrangements
in usual and customary form entered into by the Company, (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions. 
Notwithstanding the foregoing, no Investor shall be required to make any
representations to such underwriter, other than those with respect to itself
and the Registrable Securities owned by it, including its right to sell the
Registrable Securities, and any indemnification in favor of the underwriter by
the Investors shall be several and not joint and limited in the case of any
Investor, to the proceeds received by such Investor from the sale of its
Registrable Securities.  The scope of
any such indemnification in favor of an underwriter shall be limited to the
same extent as the indemnity provided in Section 6(b) hereof.

6.             Indemnification.

(a)           Indemnification by the Company.  The Company will indemnify and hold harmless
each Investor and its officers, directors, members, employees and agents,
successors and assigns, and each other person, if any, who controls such
Investor within the meaning of the 1933 Act, against any losses, claims,
damages or liabilities, joint or several, to which they may become subject under
the 1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon: (i)
any untrue statement or alleged untrue statement of any material fact contained
in any Registration Statement, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof; (ii) any blue sky
application or other document executed by the Company specifically for that
purpose or based upon written information furnished by the Company filed in any
state or other jurisdiction in order to qualify any or all of the Registrable
Securities under the securities laws thereof (any such application, document or
information herein called a “Blue Sky Application”); (iii) the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading; (iv) any violation
by the Company or its agents of any rule or regulation promulgated under the
1933 Act applicable to the Company or its agents and relating to action or
inaction required of the Company in connection with such registration; or (v)
any failure to register or qualify the Registrable Securities included in any
such Registration in any state where the Company or its agents has
affirmatively undertaken or agreed in writing that the Company will undertake
such registration or qualification on an Investor’s behalf (the undertaking of
any underwriter chosen by the

 

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Company being attributed to the Company) and will
reimburse such Investor, and each such officer, director or member and each
such controlling person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company
will not be liable in any such case if and to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in conformity
with information furnished by such Investor or any such controlling person in
writing specifically for use in such Registration Statement or Prospectus.

(b)           Indemnification by the Investors.  In connection with any registration pursuant
to the terms of this Agreement, each Investor will furnish to the Company in
writing such information as the Company reasonably requests concerning the
holders of Registrable Securities or the proposed manner of distribution for
use in connection with any Registration Statement or Prospectus and agrees,
severally but not jointly, to indemnify and hold harmless, to the fullest
extent permitted by law, the Company, its directors, officers, employees,
agents, stockholders, successors and assigns and each person who controls the
Company (within the meaning of the 1933 Act) against any losses, claims,
damages, liabilities and expense (including reasonable attorney fees) resulting
from any untrue statement of a material fact or any omission of a material fact
required to be stated in the Registration Statement or Prospectus or
preliminary prospectus or amendment or supplement thereto or necessary to make
the statements therein not misleading, to the extent, but only to the extent
that such untrue statement or omission is contained in any information
furnished in writing by such Investor to the Company specifically for inclusion
in such Registration Statement or Prospectus or amendment or supplement thereto.  In no event shall the liability of an
Investor be greater in amount than the dollar amount of the proceeds (net of
all expense paid by such Investor in connection with any claim relating to this
Section 6 and the amount of any damages such holder has otherwise been required
to pay by reason of such untrue statement or omission) received by such
Investor upon the sale of the Registrable Securities included in the
Registration Statement giving rise to such indemnification obligation.

(c)           Conduct of Indemnification
Proceedings.  Any person entitled to
indemnification hereunder shall (i) give prompt notice to the indemnifying
party of any claim with respect to which it seeks indemnification and (ii)
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party; provided that any
person entitled to indemnification hereunder shall have the right to employ
separate counsel and to participate in the defense of such claim, but the fees
and expenses of such counsel shall be at the expense of such person unless (a)
the indemnifying party has agreed to pay such fees or expenses, or (b) the
indemnifying party shall have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such person or (c) in the reasonable
judgment of any such person, based upon written advice of its counsel, a
conflict of interest exists between such person and the indemnifying party with
respect to such claims (in which case, if the person notifies the indemnifying
party in writing that such person elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such claim on behalf of such person); and provided,
further, that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its obligations
hereunder, except to the extent that such failure to give 

 

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notice shall materially adversely affect the
indemnifying party in the defense of any such claim or litigation.  It is understood that the indemnifying party
shall not, in connection with any proceeding in the same jurisdiction, be
liable for fees or expenses of more than one separate firm of attorneys at any
time for all such indemnified parties. 
No indemnifying party will, except with the consent of the indemnified
party, consent to entry of any judgment or enter into any settlement that does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
of such claim or litigation.

(d)           Contribution.  If for any reason the indemnification
provided for in the preceding paragraphs (a) and (b) is unavailable to an
indemnified party or insufficient to hold it harmless, other than as expressly
specified therein, then the indemnifying party shall contribute to the amount
paid or payable by the indemnified party as a result of such loss, claim,
damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnified party and the indemnifying party, as well as
any other relevant equitable considerations. 
No person guilty of fraudulent misrepresentation within the meaning of
Section 11(f) of the 1933 Act shall be entitled to contribution from any person
not guilty of such fraudulent misrepresentation.  In no event shall the contribution obligation of a holder of
Registrable Securities be greater in amount than the dollar amount of the
proceeds (net of all expenses paid by such holder in connection with any claim
relating to this Section 6 and the amount of any damages such holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission) received by it upon the sale of the
Registrable Securities giving rise to such contribution obligation.

7.             Miscellaneous.

(a)           Amendments and Waivers.  This Agreement may be amended only by a
writing signed by the Company and the Required Investors.  The Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company shall have obtained the written consent to such amendment,
action or omission to act, of the Required Investors.

(b)           Notices.  All notices and other communications
provided for or permitted hereunder shall be made as set forth in Section 9.4
of the Purchase Agreement.

(c)           Assignments and Transfers by
Investors.  The provisions of this
Agreement shall be binding upon and inure to the benefit of the Investors and
their respective successors and assigns. 
Upon compliance with the requirements of Section 9.1 of the Purchase
Agreement, an Investor may transfer or assign, in whole or from time to time in
part, to one or more persons its rights hereunder in connection with the
transfer of Registrable Securities by such Investor to such person, provided
that such Investor complies with all laws applicable thereto and provides written
notice of assignment to the Company promptly after such assignment is effected.

(d)           Assignments and Transfers by the
Company.  This Agreement may not be
assigned by the Company (whether by operation of law or otherwise) without the
prior 

 

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written consent of the Required Investors, provided,
however, that the Company may assign its rights and obligations and delegate
its duties hereunder to any surviving or successor corporation in connection
with a merger or consolidation of the Company with another corporation, or a
sale, transfer or other disposition of all or substantially all of the
Company’s assets to another corporation, without the prior written consent of
the Required Investors, after notice duly given by the Company to each
Investor.

(e)           Benefits of the Agreement.  The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective permitted
successors and assigns of the parties. 
Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.

(f)            Counterparts; Faxes.  This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.  This Agreement may also be executed via
facsimile, which shall be deemed an original.

(g)           Titles and Subtitles.  The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

(h)           Severability.  Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof but shall be interpreted as if it
were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.  To the extent
permitted by applicable law, the parties hereby waive any provision of law
which renders any provisions hereof prohibited or unenforceable in any respect.

(i)            Further Assurances.  The parties shall execute and deliver all
such further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.

(j)            Entire Agreement.  This Agreement is intended by the parties as
a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein.  This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.

(k)           Governing Law; Consent to
Jurisdiction.  This Agreement shall
be governed by, and construed in accordance with, the internal laws of the
State of New York without regard to the choice of law principles thereof.  Each of the parties hereto irrevocably 

 

11

 

 

submits to the exclusive jurisdiction of the courts of
the State of New York located in New York County and the United States District
Court for the Southern District of New York for the purpose of any suit,
action, proceeding or judgment relating to or arising out of this Agreement and
the transactions contemplated hereby. 
Service of process in connection with any such suit, action or
proceeding may be served on each party hereto anywhere in the world by the same
methods as are specified for the giving of notices under this Agreement.  Each of the parties hereto irrevocably consents
to the jurisdiction of any such court in any such suit, action or proceeding
and to the laying of venue in such court. 
Each party hereto irrevocably waives any objection to the laying of
venue of any such suit, action or proceeding brought in such courts and
irrevocably waives any claim that any such suit, action or proceeding brought
in any such court has been brought in an inconvenient forum.

(l)            Additional Parties.  Notwithstanding anything to the contrary
contained herein, if the Company shall issue additional Common Stock and
Warrants pursuant to the Purchase Agreement, any purchaser of such shares may
become a party to this Agreement by executing and delivering an additional
counter-part signature page to this Agreement and shall be deemed an “Investor”
hereunder and a holder of “Remaining Registrable Securities,” provided,
however, such Investor shall not be deemed a holder of the “Initial
Registrable Securities” for the purposes of this Agreement.

 

 

 

12

 

 

IN WITNESS
WHEREOF, the parties have executed this Agreement or caused their duly
authorized officers to execute this Agreement as of the date first above
written.

	
  The Company:

  	
  FIRST VIRTUAL
  COMMUNICATIONS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Timothy A.
  Rogers

  
	
   

  	
  Name:

  	
  Timothy A.
  Rogers

  
	
   

  	
  Title:

  	
  Chief Financial
  Officer

  
	
   

  	
   

  	
   

  
	
  The Investors:

  	
  SPECIAL
  SITUATIONS FUND III, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Austin Marxe

  
	
   

  	
  Name:

  	
  Austin Marxe

  
	
   

  	
  Title:

  	
  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  SPECIAL
  SITUATIONS CAYMAN FUND, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Austin Marxe

  
	
   

  	
  Name:

  	
  Austin Marxe

  
	
   

  	
  Title:

  	
  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  SPECIAL
  SITUATIONS PRIVATE EQUITY FUND, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Austin Marxe

  
	
   

  	
  Name:

  	
  Austin Marxe

  
	
   

  	
  Title:

  	
  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  SPECIAL
  SITUATIONS TECHNOLOGY FUND, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Austin Marxe

  
	
   

  	
  Name:

  	
  Austin Marxe

  
	
   

  	
  Title:

  	
  General Partner

  

 

 

13

 

 

	
   

  	
   

  	
   

  
	
   

  	
  STRATFORD
  PARTNERS, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mark Fain

  
	
   

  	
  Name:

  	
  Mark Fain

  
	
   

  	
  Title:

  	
  General Partner

  

 

 

14

 

 

	
   

  	
   

  	
   

  
	
   

  	
  NET ONE
  SYSTEMS CO., LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kazuo Sato

  
	
   

  	
  Name:

  	
  Kazuo Sato

  
	
   

  	
  Title:

  	
  President
  and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Ralph Ungermann

  
	
   

  	
  Ralph Ungermann

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Norman Gaut

  
	
   

  	
  Norman Gaut

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Shigeru Ota

  
	
   

  	
  Shigeru Ota

  

 

 

15Exhibit 4.3

 

THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT.  THIS WARRANT HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT OR EXEMPTION FROM REGISTRATION UNDER THE
FOREGOING LAWS.

 

                SUBJECT TO THE PROVISIONS OF SECTION 10 HEREOF, THIS
WARRANT SHALL BE VOID AFTER 5:00 P.M. EASTERN TIME ON APRIL 12, 2007 (the
“EXPIRATION DATE”).

 

No. CSW-___

 

FIRST
VIRTUAL COMMUNICATIONS, INC.

 

WARRANT
TO PURCHASE _________ SHARES OF

COMMON
STOCK, PAR VALUE $0.001 PER SHARE

 

                For VALUE RECEIVED, ____________________
(“Warrantholder”), is entitled to purchase, subject to the provisions of this
Warrant, from First Virtual Communications, Inc., a Delaware corporation
(“Company”), at any time after October 11, 2002 and not later than 5:00 P.M.,
Eastern time, on the Expiration Date (as defined above), at an exercise price
per share equal to $1.01 (the exercise price in effect being herein called the
“Warrant Price”), _________ shares (“Warrant Shares”) of the Company’s Common
Stock, par value $0.001 per share (“Common Stock”).  The number of Warrant Shares purchasable upon exercise of this
Warrant and the Warrant Price shall be subject to adjustment from time to time
as described herein.

 

                Section 1.               Registration.  The Company shall maintain books for the
transfer and registration of the Warrant. 
Upon the initial issuance of this Warrant, the Company shall issue and
register the Warrant in the name of the Warrantholder.

 

                Section 2.               Transfers.  As provided herein, this Warrant may be
transferred only pursuant to a registration statement filed under the
Securities Act of 1933, as amended (“Securities Act”), or an exemption from
such registration.  Subject to such
restrictions, the Company shall transfer this Warrant from time to time upon
the books to be maintained by the Company for that purpose, upon surrender
thereof for transfer properly endorsed or 
accompanied by appropriate instructions for transfer and such other
documents as may be reasonably required by the Company, including, if required
by the Company, an opinion of its counsel to the effect that such transfer is
exempt from the registration requirements of the Securities Act of 1933, to
establish that such transfer is being made in accordance with the terms hereof,
and a new Warrant shall be issued to the transferee and the surrendered Warrant
shall be canceled by the Company.

 

 

                Section 3.               Exercise
of Warrant.  Subject to the
provisions hereof, the Warrantholder may exercise this Warrant in whole or in
part at any time upon surrender of the Warrant, together with delivery of the
duly executed Warrant exercise form attached hereto as Appendix A (the
“Exercise Agreement”) and payment by cash, certified check or wire transfer of
funds for the aggregate Warrant Price for that number of Warrant Shares then
being purchased, to the Company during normal business hours on any business
day at the Company’s principal executive offices (or such other office or
agency of the Company as it may designate by notice to the holder hereof).  The Warrant Shares so purchased shall be
deemed to be issued to the holder hereof or such holder’s designee, as the
record owner of such shares, as of the close of business on the date on which
this Warrant shall have been surrendered (or evidence of loss, theft or
destruction thereof and security or indemnity satisfactory to the Company), the
Warrant Price shall have been paid and the completed Exercise Agreement shall
have been delivered.  Certificates for
the Warrant Shares so purchased, representing the aggregate number of shares
specified in the Exercise Agreement, shall be delivered to the holder hereof
within a reasonable time, not exceeding three (3) business days, after this
Warrant shall have been so exercised. 
The certificates so delivered shall be in such denominations as may be
requested by the holder hereof and shall be registered in the name of such
holder or such other name as shall be designated by such holder.  If this Warrant shall have been exercised
only in part, then, unless this Warrant has expired, the Company shall, at its
expense, at the time of delivery of such certificates, deliver to the holder a
new Warrant representing the number of shares with respect to which this
Warrant shall not then have been exercised. 
As used herein, “business day” means a day, other than a Saturday or
Sunday, on which banks in New York City are open for the general transaction of
business.  Each exercise hereof shall
constitute the re-affirmation by the Warrantholder that the representations and
warranties contained in Sections 5.3, 5.4, 5.5, 5.6, 5.7, 5.8 and 5.9 of the
Purchase Agreement (as defined below) are true and correct in all respects with
respect to the Warrantholder as of the time of such exercise.

 

                Section 4.               Compliance
with the Securities Act of 1933. The Company may cause the legend set forth
on the first page of this Warrant to be set forth on each Warrant or similar
legend on any security issued or issuable upon exercise of this Warrant, unless
counsel for the Company is of the opinion as to any such security that such
legend is unnecessary.

 

                Section 5.               Payment
of Taxes.  The Company will pay any
documentary stamp taxes attributable to the initial issuance of Warrant Shares
issuable upon the exercise of the Warrant; provided, however, that the Company
shall not be required to pay any tax or taxes which may be payable in respect
of any transfer involved in the issuance or delivery of any certificates for
Warrant Shares in a name other than that of the registered holder of this
Warrant in respect of which such shares are issued, and in such case, the
Company shall not be required to issue or deliver any certificate for Warrant
Shares or any Warrant until the person requesting the same has paid to the
Company the amount of such tax or has established to the Company’s reasonable
satisfaction that such tax has been paid. 
The holder shall be responsible for income taxes due under federal,
state or other law, if any such tax is due.

 

                Section 6.               Mutilated
or Missing Warrants.  In case this
Warrant shall be mutilated, lost, stolen, or destroyed, the Company shall issue
in exchange and substitution of and upon 

 

 

2

 

cancellation of the
mutilated Warrant, or in lieu of and substitution for the Warrant lost, stolen
or destroyed, a new Warrant of like tenor and for the purchase of a like number
of Warrant Shares, but only upon receipt of evidence reasonably satisfactory to
the Company of such loss, theft or destruction of the Warrant, and with respect
to a lost, stolen or destroyed Warrant, reasonable indemnity or bond with
respect thereto, if requested by the Company.

 

                Section 7.               Reservation
of Common Stock.  The Company hereby
represents and warrants that there have been reserved, and the Company shall at
all applicable times keep reserved until issued (if necessary) as contemplated
by this Section 7, out of the authorized and unissued shares of Common Stock,
sufficient shares to provide for the exercise of the rights of purchase
represented by this Warrant.  The
Company agrees that all Warrant Shares issued upon due exercise of the Warrant
shall be, at the time of delivery of the certificates for such Warrant Shares,
duly authorized, validly issued, fully paid and non-assessable shares of Common
Stock of the Company.

 

                Section 8.               Adjustments.  Subject and pursuant to the provisions of
this Section 8, the Warrant Price and number of Warrant Shares subject to this
Warrant shall be subject to adjustment from time to time as set forth
hereinafter.

 

                                (a)           If
the Company shall, at any time or from time to time while this Warrant is
outstanding, pay a dividend or make a distribution on its Common Stock in
shares of Common Stock, subdivide its outstanding shares of Common Stock into a
greater number of shares or combine its outstanding shares of Common Stock into
a smaller number of shares or issue by reclassification of its outstanding
shares of Common Stock any shares of its capital stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), then the number of Warrant Shares purchasable
upon exercise of the Warrant and the Warrant Price in effect immediately prior
to the date upon which such change shall become effective, shall be adjusted by
the Company so that the Warrantholder thereafter exercising the Warrant shall
be entitled to receive the number of shares of Common Stock or other capital
stock which the Warrantholder would have received if the Warrant had been
exercised immediately prior to such event upon payment of a Warrant Price that
has been adjusted to reflect a fair allocation of the economics of such event
to the Warrantholder.  Such adjustments
shall be made successively whenever any event listed above shall occur.

 

                                (b)           If
any capital reorganization, reclassification of the capital stock of the
Company, consolidation or merger of the Company with another corporation in
which the Company is not the survivor, or sale, transfer or other disposition
of all or substantially all of the Company’s assets to another corporation
shall be effected, then, as a condition of such reorganization,
reclassification, consolidation, merger, sale, transfer or other disposition,
lawful and adequate provision shall be made whereby each Warrantholder shall
thereafter have the right to purchase and receive upon the basis and upon the
terms and conditions herein specified and in lieu of the Warrant Shares
immediately theretofore issuable upon exercise of the Warrant, such shares of
stock, securities or assets as would have been issuable or payable with respect
to or in exchange for a number of Warrant Shares equal to the number of Warrant
Shares immediately theretofore issuable upon exercise of the Warrant, had such
reorganization, reclassification,

 

 

3

 

consolidation, merger,
sale, transfer or other disposition not taken place, and in any such case
appropriate provision shall be made with respect to the rights and interests of
each Warrantholder to the end that the provisions hereof (including, without
limitation, provision for adjustment of the Warrant Price) shall thereafter be
applicable, as nearly equivalent as may be practicable in relation to any
shares of stock, securities or properties thereafter deliverable upon the
exercise thereof.  The Company shall not
effect any such consolidation, merger, sale, transfer or other disposition
unless prior to or simultaneously with the consummation thereof the successor
corporation (if other than the Company) resulting from such consolidation or
merger, or the corporation purchasing or otherwise acquiring such assets or
other appropriate corporation or entity shall assume the obligation to deliver
to the holder of the Warrant, at the last address of such holder appearing on
the books of the Company, such shares of stock, securities or assets as, in accordance
with the foregoing provisions, such holder may be entitled to purchase, and the
other obligations under this Warrant. 
The provisions of this paragraph (b) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, sales, transfers
or other dispositions.

 

                                (c)           In
case the Company shall fix a payment date for the making of a distribution to
all holders of Common Stock (including any such distribution made in connection
with a consolidation or merger in which the Company is the continuing
corporation) of evidences of indebtedness or assets (other than cash dividends
or cash distributions payable out of consolidated earnings or earned surplus or
dividends or distributions referred to in Section 8(a)), or subscription rights
or warrants, the Warrant Price to be in effect after such payment date shall be
determined by multiplying the Warrant Price in effect immediately prior to such
payment date by a fraction, the numerator of which shall be the total number of
shares of Common Stock outstanding multiplied by the Market Price (as defined
below) per share of Common Stock immediately prior to such payment date, less
the fair market value (as determined by the Company’s Board of Directors in
good faith) of said assets or evidences of indebtedness so distributed, or of
such subscription rights or warrants, and the denominator of which shall be the
total number of shares of Common Stock outstanding multiplied by such Market
Price per share of Common Stock immediately prior to such payment date.  “Market Price” as of a particular date (the
“Valuation Date”) shall mean the following: (a) if the Common Stock is then
listed on a national stock exchange, the closing sale price of one share of
Common Stock on such exchange on the last trading day prior to the Valuation
Date; (b) if the Common Stock is then quoted on The Nasdaq Stock Market, Inc.
(“Nasdaq”), the closing sale price of one share of Common Stock on Nasdaq on
the last trading day prior to the Valuation Date or, if no such closing sale
price is available, the average of the high bid and the low asked price quoted
on Nasdaq on the last trading day prior to the Valuation Date; or (c) if the
Common Stock is not then listed on a national stock exchange or quoted on
Nasdaq, the Fair Market Value of one share of Common Stock as of the Valuation
Date, shall be determined in good faith by the Board of Directors of the
Company and the Warrantholder.  The
Board of Directors of the Company shall respond promptly, in writing, to an
inquiry by the Warrantholder prior to the exercise hereunder as to the Market
Value of a share of Common Stock as determined by the Board of Directors of the
Company.  In the event that the Board of
Directors of the Company and the Warrantholder are unable to agree upon the
Market Value in respect of subpart (c) hereof, the Company and the
Warrantholder shall jointly select an appraiser, who is experienced in such
matters.  The decision

 

 

4

 

of such appraiser shall
be final and conclusive, and the cost of such appraiser shall be borne evenly
by the Company and the Warrantholder. 
Such adjustment shall be made successively whenever such a payment date
is fixed.

 

                                (d)           For the term of this Warrant, in
addition to the provisions contained above, the Warrant Price shall be subject
to adjustment as provided below. An adjustment to the Warrant Price shall
become effective immediately after the payment date in the case of each
dividend or distribution and immediately after the effective date of each other
event which requires an adjustment.

 

                                (e)           In
the event that, as a result of an adjustment made pursuant to this Section 8,
the holder of this Warrant shall become entitled to receive any shares of
capital stock of the Company other than shares of Common Stock, the number of
such other shares so receivable upon exercise of this Warrant shall be subject
thereafter to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Warrant Shares
contained in this Warrant.

 

                                (f)            Except as provided in subsection (g)
hereof, if and whenever the Company shall issue or sell, or is, in accordance
with any of subsections (f)(l) through (f)(7) hereof, deemed to have issued or
sold, any shares of Common Stock for a consideration per share less than the
Warrant Price in effect immediately prior to the time of such issue or sale,
then and in each such case (a “Trigger Issuance”) the then-existing
Warrant Price, shall be reduced, as of the close of business on the effective
date of the Trigger Issuance, to a price determined as follows:

 

	
   

  	
  Adjusted Warrant Price =

  	
  (A x B) + D

  	
   

  
	
   

  	
   

  	
  A+C

  	
   

  

 

                where

 

                “A” equals the number of shares
of Common Stock outstanding, including Additional Shares (as defined below)
deemed to be issued hereunder, immediately preceding such Trigger Issuance;

 

                “B” equals the Warrant Price in
effect immediately preceding such Trigger Issuance;

 

                “C” equals the number of
Additional Shares of Common Stock issued or deemed issued hereunder as a result
of the Trigger Issuance; and

 

                “D” equals the aggregate
consideration, if any, received or deemed to be received by the Company upon
such Trigger Issuance.

 

provided, however,
that in no event shall the Warrant Price after giving effect to such Trigger
Issuance be greater than the Warrant Price in effect prior to such Trigger
Issuance.

 

5

 

 

                                For purposes of this subsection (f),
“Additional Shares of Common Stock” shall mean all shares of Common Stock
issued by the Company or deemed to be issued pursuant to this subsection (f),
other than Excluded Issuances (as defined in subsection (g) hereof).

 

                                For purposes of this subsection (f),
the following subsections (f)(l) to (f)(8) shall also be applicable (subject,
in each such case, to the provisions of subsection (g) hereof) and to each
other subsection contained in this subsection (f):

 

                                                                                (f)(1)  Issuance of Rights or Options.  In case at any time the Company shall in any
manner grant (directly and not by assumption in a merger or otherwise) any
warrants or other rights to subscribe for or to purchase, or any options for
the purchase of, Common Stock or any stock or security convertible into or
exchangeable for Common Stock (such warrants, rights or options being called
“Options” and such convertible or exchangeable stock or securities being called
“Convertible Securities”) whether or not such Options or the right to convert
or exchange any such Convertible Securities are immediately exercisable, and
the price per share for which Common Stock is issuable upon the exercise of
such Options or upon the conversion or exchange of such Convertible Securities
(determined by dividing (i) the sum (which sum shall constitute the applicable
consideration) of (x) the total amount, if any, received or receivable by the
Company as consideration for the granting of such Options, plus (y) the
aggregate amount of additional consideration payable to the Company upon the
exercise of all such Options, plus (z), in the case of such Options which
relate to Convertible Securities, the aggregate amount of additional
consideration, if any, payable upon the issue or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (ii) the total
maximum number of shares of Common Stock issuable upon the exercise of such
Options or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options) shall be less than the Warrant
Price in effect immediately prior to the time of the granting of such Options,
then the total number of shares of Common Stock issuable upon the exercise of
such Options or upon conversion or exchange of the total amount of such
Convertible Securities issuable upon the exercise of such Options shall be
deemed to have been issued for such price per share as of the date of granting
of such Options or the issuance of such Convertible Securities and thereafter
shall be deemed to be outstanding for purposes of adjusting the Warrant
Price.  Except as otherwise provided in
subsection 8(f)(3), no adjustment of the Warrant Price shall be made upon the
actual issue of such Common Stock or of such Convertible Securities upon
exercise of such Options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.

 

                                                                                (f)(2)  Issuance of Convertible Securities.  In case the Company shall in any manner
issue (directly and not by assumption in a merger or otherwise) or sell any
Convertible Securities, whether or not the rights to exchange or convert any

 

 

6

 

such Convertible
Securities are immediately exercisable, and the price per share for which
Common Stock is issuable upon such conversion or exchange (determined by
dividing (i) the sum (which sum shall constitute the applicable consideration)
of (x) the total amount received or receivable by the Company as consideration
for the issue or sale of such Convertible Securities, plus (y) the aggregate amount
of additional consideration, if any, payable to the Company upon the conversion
or exchange thereof, by (ii) the total number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities)
shall be less than the Warrant Price in effect immediately prior to the time of
such issue or sale, then the total maximum number of shares of Common Stock
issuable upon conversion or exchange of all such Convertible Securities shall
be deemed to have been issued for such price per share as of the date of the
issue or sale of such Convertible Securities and thereafter shall be deemed to
be outstanding for purposes of adjusting the Warrant Price, provided that (a)
except as otherwise provided in subsection 8(f)(3), no adjustment of the
Warrant Price shall be made upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities and (b) no further
adjustment of the Warrant Price shall be made by reason of the issue or sale of
Convertible Securities upon exercise of any Options to purchase any such
Convertible Securities for which adjustments of the Warrant Price have been
made pursuant to the other provisions of subsection 8(f).

                                                                                (f)(3)
Change in Option Price or Conversion Rate; Termination of Options or
Convertible Securities.  Upon the
happening of any of the following events, namely, if the purchase price
provided for in any Option referred to in subsection 8(f)(l) hereof, the
additional consideration, if any, payable upon the conversion or exchange of
any Convertible Securities referred to in subsections 8(f)(l) or 8(f)(2), or
the rate at which Convertible Securities referred to in subsections 8(f)(l) or
8(f)(2) are convertible into or exchangeable for Common Stock shall change at
any time (including, but not limited to, changes under or by reason of
provisions designed to protect against dilution), the Warrant Price in effect
at the time of such event shall forthwith be readjusted to the Warrant Price
which would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold.  On
the termination of any Option for which any adjustment was made pursuant to
this subsection 8(f) or any right to convert or exchange Convertible Securities
for which any adjustment was made pursuant to this subsection 8(f) (including
without limitation upon the redemption or purchase for consideration of
Convertible Securities by the Company), the Warrant Price then in effect
hereunder shall forthwith be changed to the Warrant Price which would have been
in effect at the time of such termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such termination,
never been issued.

 

 

7

 

                                                                                (f)(4)
Stock Dividends.  Other than pursuant to
a declaration of a dividend or other distribution by the Company for which an
adjustment has been made pursuant to Section 8Aa), 8(b) or 8(c) above, subject
to the provisions of this Section 8(f), in case the Company shall declare a
dividend or make any other distribution upon any stock of the Company (other
than the Common Stock) payable in Common Stock, Options or Convertible
Securities, then any Common Stock, Options or Convertible Securities, as the
case may be, issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.

 

                                                                          (f)(5)
Consideration for Stock.  In case any
shares of Common Stock, Options or Convertible Securities shall be issued or
sold for cash, the consideration received therefor shall be deemed to be the
gross amount received by the Company therefor, without deduction of any
expenses incurred or any underwriting commissions or concessions paid or
allowed by the Company in connection therewith.  In case any shares of Common Stock, Options or Convertible Securities
shall be issued or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Company shall be deemed to be the
fair value of such consideration as determined in good faith by the Board of
Directors of the Company, without deduction of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Company in
connection therewith.  In case any
Options shall be issued in connection with the issue and sale of other
securities of the Company, together comprising one integral transaction in
which no specific consideration is allocated to such Options by the parties
thereto, such Options shall be deemed to have been issued for such
consideration as determined in good faith by the Board of Directors of the
Company.  If Common Stock, Options or
Convertible Securities shall be issued or sold by the Company and, in
connection therewith, other Options or Convertible Securities (the “Additional
Rights”) are issued, then the consideration received or deemed to be received
by the Company shall be reduced by the fair market value of the Additional
Rights (as determined using the Black-Scholes option pricing model or another
method mutually agreed to by the Company and the Warrantholder).  The Board of Directors of the Company shall
respond promptly, in writing, to an inquiry by the Warrantholder as to the fair
market value of the Additional Rights. 
In the event that the Board of Directors of the Company and the
Warrantholder are unable to agree upon the fair market value of the Additional
Rights, the Company and the Warrantholder shall jointly select an appraiser,
who is experienced in such matters.  The
decision of such appraiser shall be final and conclusive, and the cost of such
appraiser shall be borne evenly by the Company and the Warrantholder.

 

                                                                                (f)(6)
Record Date.  In case the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them (i) to receive a dividend or other distribution payable in Common Stock,
Options or Convertible Securities or (ii) to subscribe for or purchase Common
Stock, Options or Convertible 

 

 

8

 

Securities, then
such record date shall be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon the declaration
of such dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.

 

                                                                                (f)(7)
Treasury Shares.  The number of shares
of Common Stock outstanding at any given time shall not include shares owned or
held by or for the account of the Company or any of its wholly-owned
subsidiaries, and the disposition of any such shares (other than the
cancellation or retirement thereof) shall be considered an issue or sale of
Common Stock for the purpose of this subsection (f).

 

                                                                                (f)(8)
Notwithstanding any other provision in Section 8(f) to the contrary, if a
reduction in the Warrant Price pursuant to Section 8(f) (other than as set
forth in this clause (f)(8)) would require the Company to obtain stockholder
approval of the transactions giving rise to this Warrant pursuant to the rules
of Nasdaq, (i) the Warrant Price shall be reduced to the maximum extent that
would not require stockholder approval under such rules, and (ii) the Company
shall use its commercially reasonable efforts to obtain such stockholder
approval as soon as reasonably practicable, including by calling a special
meeting of stockholders to vote on such Warrant Price adjustment.

 

                                (g)           Anything herein to the
contrary notwithstanding, the Company shall not be required to make any
adjustment of the Warrant Price in the case of the issuance of (A) capital
stock, Options or Convertible Securities issued or issuable to directors, officers,
employees or consultants of the Company in connection with their service to the
Company pursuant to an equity compensation program or similar arrangement
approved by the Board of Directors or, as required by law, the stockholders of
the Company, (B) shares of Common Stock issued or issuable upon the conversion
or exercise of Options or Convertible Securities (including Series A Preferred
Stock of the Company (“Series A Preferred Stock”)) issued prior to the date
hereof, including shares issued or issuable pursuant to the operation of any
anti-dilution provisions applicable to such Options or Convertible Securities,
(C) shares of Common Stock issued or issuable by reason of a dividend, stock
split or other distribution on the Common Stock or Series A Preferred Stock,
(but only to the extent that such a dividend, split or distribution results in
an adjustment in the Warrant Price pursuant to the other provisions of this
Warrant), (D) capital stock, Options or Convertible Securities issued in
connection with any acquisition of all or substantially all of the assets,
stock or business or line of business of another entity, in accordance with
agreements or other arrangements approved by the Board of Directors of the
Company; (E) shares of Common Stock issued or issuable pursuant to the Purchase
Agreement; (F) this Warrant or any additional warrants to purchase Common Stock
issued pursuant to the Purchase Agreement and the shares of Common Stock issued
or issuable upon exercise of this Warrant or any such additional warrants; (G)
capital stock, Options or Convertible Securities for which an adjustment is
made pursuant to Sections 8(a), (b) or (c) of this Warrant, and (H) capital
stock, Options or Convertible Securities issued pursuant to any bona fide
equipment leasing 

 

 

9

 

arrangement or debt financing from a bank or similar
financial institution approved by the Board of Directors (collectively, “Excluded Issuances”).

 

                Section 9.               Fractional
Interest.  The Company shall not be
required to issue fractions of Warrant Shares upon the exercise of this
Warrant.  If any fractional share of
Common Stock would, except for the provisions of the first sentence of this
Section 9, be deliverable upon such exercise, the Company, in lieu of
delivering such fractional share, shall pay to the exercising holder of this
Warrant an amount in cash equal to the Fair Market Value of such fractional
share of Common Stock on the date of exercise. 
As used in this Warrant, “Fair Market Value” of a share of Common Stock
as of a particular date (the “Valuation Date”) shall mean the following: (a) if
the Common Stock is then listed on a national stock exchange, the closing sale
price of one share of Common Stock on such exchange on the last trading day
prior to the Valuation Date; (b) if the Common Stock is then quoted on Nasdaq,
the closing sale price of one share of Common Stock on Nasdaq on the last
trading day prior to the Valuation Date or, if no such closing sale price is
available, the average of the high bid and the low sales price quoted on Nasdaq
on the last trading day prior to the Valuation Date; or (c) if the Common Stock
is not then listed on a national stock exchange or quoted on Nasdaq, the Fair
Market Value of one share of Common Stock as of the Valuation Date, shall be
determined in good faith by the Board of Directors of the Company.

 

                Section 10.             Extension
of Expiration Date.  If the Company
fails to cause any Registration Statement covering Registrable Securities
(unless otherwise defined herein, capitalized terms are as defined in the
Registration Rights Agreement relating to the Warrant Shares (the “Registration
Rights Agreement”)) to be declared effective prior to the applicable dates set
forth therein, or if any of the events specified in Section 2(c)(ii) of the
Registration Rights Agreement occurs, and the Blackout Period (whether alone,
or in combination with any other Blackout Period) continues for more than 60
days in any 12 month period, or for more than a total of 90 days, then the
Expiration Date of this Warrant shall be extended one day for each day beyond
the 60-day or 90-day limits, as the case may be, that the Blackout Period
continues.

 

                Section 11.             Benefits.  Nothing in this Warrant shall be construed
to give any person, firm or corporation (other than the Company and the
Warrantholder) any legal or equitable right, remedy or claim, it being agreed
that this Warrant shall be for the sole and exclusive benefit of the Company
and the Warrantholder.

 

                Section 12.             Notices
to Warrantholder.  Upon the
happening of any event requiring an adjustment of the Warrant Price, the
Company shall promptly give written notice thereof to the Warrantholder at the
address appearing in the records of the Company, stating the adjusted Warrant
Price and the adjusted number of Warrant Shares resulting from such event and
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based. 
Failure to give such notice to the Warrantholder or any defect therein
shall not affect the legality or validity of the subject adjustment.

 

                Section 13.             Identity
of Transfer Agent.  The Transfer
Agent for the Common Stock is Computer Share Trust Company.  Upon the appointment of any subsequent
transfer agent for the 

 

 

10

 

Common Stock or other
shares of the Company’s capital stock issuable upon the exercise of the rights
of purchase represented by the Warrant, the Company will mail to the
Warrantholder a statement setting forth the name and address of such transfer
agent.

 

                Section 14.             Notices.  Unless otherwise provided, any notice
required or permitted under this Warrant shall be given in writing and shall be
deemed effectively given as hereinafter described (i) if given by personal
delivery, then such notice shall be deemed given upon such delivery, (ii) if
given by telex or telecopier, then such notice shall be deemed given upon
receipt of confirmation of complete transmittal, (iii) if given by mail, then
such notice shall be deemed given upon the earlier of (A) receipt of such
notice by the recipient or (B) three days after such notice is deposited in
first class mail, postage prepaid, and (iv) if given by an internationally
recognized overnight air courier, then such notice shall be deemed given one
day after delivery to such carrier.  All
notices shall be addressed as follows: if to the Warrantholder, at its address
as set forth in the Company’s books and records and, if to the Company, at the
address as follows, or at such other address as the Warrantholder or the
Company may designate by ten days’ advance written notice to the other:

 

                                                If to the Company:

 

First Virtual Communications, Inc.

3393 Octavius Drive

Santa Clara, California 95054

Attention:  Chief Financial Officer

Fax:  (408) 748-2241

 

                                                With a copy to:

 

Cooley Godward LLP

4401 Eastgate Mall

San Diego, California
92121-1909

Attention:  Julie M. Robinson, Esq.

Fax:  (858) 550-6420

 

                Section 15.             Registration
Rights.  The initial holder of this
Warrant is entitled to the benefit of certain registration rights with respect
to the shares of Common Stock issuable upon the exercise of this Warrant as
provided in the Registration Rights Agreement, and any subsequent holder hereof
may be entitled to such rights.

 

                Section 16.             
Successors.  All the covenants and
provisions hereof by or for the benefit of the Warrantholder shall bind and
inure to the benefit of its respective successors and assigns hereunder.

 

                Section 17.             Governing
Law.  This Warrant shall be governed
by, and construed in accordance with, the internal laws of the State of New
York, without reference to the choice of law provisions thereof.  The Company and, by accepting this Warrant,
the Warrantholder, each 

 

 

11

 

irrevocably submits to
the exclusive jurisdiction of the courts of the State of New York located in
New York County and the United States District Court for the Southern District
of New York for the purpose of any suit, action, proceeding or judgment
relating to or arising out of this Warrant and the transactions contemplated
hereby.  Service of process in
connection with any such suit, action or proceeding may be served on each party
hereto anywhere in the world by the same methods as are specified for the
giving of notices under this Warrant. 
The Company and, by accepting this Warrant, the Warrantholder, each
irrevocably consents to the jurisdiction of any such court in any such suit,
action or proceeding and to the laying of venue in such court.  The Company and, by accepting this Warrant,
the Warrantholder, each irrevocably waives any objection to the laying of venue
of any such suit, action or proceeding brought in such courts and irrevocably waives
any claim that any such suit, action or proceeding brought in any such court
has been brought in an inconvenient forum.

 

                Section 18.             Call Provision.  Notwithstanding any other provision
contained herein to the contrary, in the event that the closing bid price of a
share of Common Stock as traded on the Nasdaq (or such other exchange or stock
market on which the Common Stock may then be listed or quoted) exceeds $2.50
(appropriately adjusted for any stock split, reverse stock split, stock
dividend or other reclassification or combination of the Common Stock occurring
after the date hereof) for twenty (20) consecutive trading sessions and all of
the shares of Common Stock issuable hereunder either (i) are registered
pursuant to an effective Registration Statement (as defined in the Registration
Rights Agreement) which is available for sales of such shares of Common Stock
or (ii) no longer constitute Registrable Securities (as defined in the
Registration Rights Agreement), the Company, upon thirty (30) days prior
written notice (the “Notice Period”) following such twenty (20) day period, to
the Warrantholder, may call this Warrant, in whole but not in part, at a
redemption price equal to $0.01 per share of Common Stock then purchasable
pursuant to this Warrant; provided, however, that the Company simultaneously
redeems all Company Warrants (as defined in Section 20 below) on the same
terms.  Notwithstanding any such notice
by the Company, the Warrantholder shall have the right to exercise this Warrant
prior to the end of the Notice Period.

 

                Section 19.             No Rights as Stockholder.  Prior to the exercise of this Warrant, the
Warrantholder shall not have or exercise any rights as a stockholder of the
Company by virtue of its ownership of this Warrant.

 

                Section 20.             Amendment; Waiver.  This Warrant is one of a series of Warrants
of like tenor issued by the Company pursuant to the Purchase Agreement, dated
as of March 29, 2002 (the “Purchase Agreement”), among the Company and the
original holders of Warrants, and initially covering an aggregate of 3,343,000
shares of Common Stock (collectively, the “Company Warrants”).  Any term of this Warrant may be amended or
waived (including the adjustment provisions included in Section 8 of this
Warrant) upon the written consent of the Company and the holders of Company
Warrants representing at least 50% of the number of shares of Common Stock then
subject to all outstanding Company Warrants (the “Majority Holders”); provided,
that (x) any such amendment or waiver must apply to all Company Warrants; and
(y) the number of Warrant Shares subject to this Warrant, the Warrant Price and

 

 

12

 

the Expiration Date may not be amended, and the right to exercise this
Warrant may not be altered or waived, without the written consent of the
Warrantholder.

 

                Section 21.             Section Headings.  The section heading in this Warrant are for
the convenience of the Company and the Warrantholder and in no way alter,
modify, amend, limit or restrict the provisions hereof.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13

 

 

                IN WITNESS WHEREOF, the Company has caused this
Warrant to be duly executed, as of the 12th day of April, 2002.

 

	
   

  	
   

  	
  FIRST VIRTUAL
  COMMUNICATIONS, INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   /s/ Killko A. Caballero

  	
   

  
	
   

  	
   

  	
   

  	
  Killko A. Caballero

  	
   

  
	
   

  	
   

  	
   

  	
  Chief Financial Officer

  	
   

  
	
   

  	
   

  	
   

  	
  and President

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

 

 

 

 

 

 

 

 

 

14

 

APPENDIX A

FIRST VIRTUAL COMMUNICATIONS, INC.

WARRANT EXERCISE FORM

 

To: First Virtual
Communications, Inc.

 

                The undersigned hereby irrevocably elects to exercise
the right of purchase represented by the within Warrant (“Warrant”) for, and to
purchase thereunder by the payment of the Warrant Price and surrender of the
Warrant, _______________ shares of Common Stock (“Warrant Shares”) provided for
therein, and requests that certificates for the Warrant Shares be issued as
follows:

 

 

	
   

  	
   

  	
   

  
	
   

  	
  Name

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Federal Tax ID or
  Social Security No.

  	
   

  

 

	
   

  	
  and delivered by

  	
  (certified mail to the
  above address, or 

  (electronically (provide DWAC

  	
   

  	
   

  
	
  Instructions:___________________),
  or

  	
   

  	
   

  	
   

  
	
   

  	
  (other (specify): 

  	
   

  	
   

  	
   

  
	
   

  	
  ).

  	
   

  	
   

  	
   

  
							

 

and, if the number of
Warrant Shares shall not be all the Warrant Shares purchasable upon exercise of
the Warrant, that a new Warrant for the balance of the Warrant Shares
purchasable upon exercise of this Warrant be registered in the name of the
undersigned Warrantholder or the undersigned’s Assignee as below indicated and
delivered to the address stated below.

 

 

	
  Dated: 

  	
   

  	
  ,

  	
   

  	
   

  

 

	
  Note:  The signature must correspond with the
  name of the registered holder as written on the first page of the Warrant in
  every particular, without alteration or enlargement or any change whatever,
  unless the Warrant has been assigned.

  	
   

  	
  Signature:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name (please print)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Federal Identification
  or 

  Social Security No.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

 

15

 

	
   

  	
   

  	
  Assignee:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

 

 

 

 

 

 

 

 

 

 

 

16

 

SCHEDULE A

 

 

	
  Name of
  Purchaser

  	
   

  	
  Number of
  Warrants

  
	
  Special Situations Fund III, L.P.

  	
   

  	
  1,250,000

  
	
  Special Situations Cayman Fund, L.P.

  	
   

  	
  416,700

  
	
  Special Situations Technology Fund, L.P.

  	
   

  	
  416,650

  
	
  Stratford Partners, L.P.

  	
   

  	
  208,334

  
	
  Net One Systems Co., Ltd.

  	
   

  	
  833,334

  
	
  Ralph Ungermann

  	
   

  	
  79,094

  
	
  Norman E. Gaut

  	
   

  	
  104,167

  
	
  Shigeru Ota

  	
   

  	
  34,722

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17

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