Green Dot 2010 Annual Report Download - page 86

Note 9 — Stockholders’ Equity (continued)
Registration Rights Agreement
We are a party to a registration rights agreement with certain of our investors, pursuant to which we
have granted those persons or entities the right to register shares of common stock held by them under the
Securities Act of 1933, as amended, or the Securities Act. Holders of these rights are entitled to demand
that we register their shares of common stock under the Securities Act so long as certain conditions are
satisfied and require us to include their shares of common stock in future registration statements that may
be filed, either for our own account or for the account of other security holders exercising registration rights.
In addition, after an initial public offering, these holders have the right to request that their shares of
common stock be registered on a Form S-3 registration statement so long as certain conditions are
satisfied and the anticipated aggregate sales price of the registered shares as of the date of filing of the
Form S-3 registration statement is at least $1 million. The foregoing registration rights are subject to
various conditions and limitations, including the right of underwriters of an offering to limit the number of
registrable securities that may be included in an offering. The registration rights terminate as to any
particular shares on the date on which the holder sells such shares to the public in a registered offering or
pursuant to Rule 144 under the Securities Act. We are generally required to bear all of the expenses of
these registrations, except underwriting commissions, selling discounts and transfer taxes.
We are not obligated under the registration rights agreement to transfer consideration, whether in
cash, equity instruments, or adjustments to the terms of the financial instruments that are subject to the
registration payment arrangement, to the investors, if the registration statement is not declared effective
within the specified time or if effectiveness of the registration statement is not maintained.
Redeemable Convertible Preferred Stock
In October 2006, we entered into an agreement with a card issuing bank to provide a co-branded GPR
card program with a major retail distributor. We also entered into equity financing transactions with the
bank and an affiliated investment entity, under which we issued a warrant to purchase 500,000 shares of
our common stock in October 2006 and 2,926,458 shares of Series D redeemable convertible preferred
stock, or Series D, in December 2006. We received cash consideration of $20.0 million from the equity
financing transactions. The holder of Series D was entitled to receive noncumulative dividends at a per
annum rate of $0.547 per share and to participate in dividends on common stock on an as-converted basis,
subject to the declaration by our board of directors out of funds legally available. Series D was redeemable
for cash at the option of the holder on the seventh anniversary of its issuance. Series D was also
convertible into our common stock any time prior to redemption, at the option of the holder, based on a
conversion ratio. In the event of any liquidation, dissolution or winding up of our company, the holder of
Series D was entitled to receive an amount equal to $6.834 per share plus 20% per annum from the date of
issuance.
The freestanding warrant we issued entitled the holder to purchase 500,000 shares of our common
stock at a per share price of $6.834 any time prior to the earliest of: a) the date of our initial public offering;
b) the date of a change in control of our company; or c) October 27, 2013. The warrant was not
redeemable.
We allocated the proceeds from the issuance of the Series D and the freestanding warrant to these
instruments on a relative fair value basis. The initial allocated value of the warrant calculated using an
option-pricing model was $1.3 million. As the warrant allowed settlement only in the underlying common
stock, it was recorded at its initial allocated value as a component of additional paid-in capital.
Due to the nature of the redemption feature and other provisions, we classified Series D as temporary
equity at its initial allocated value of $18.7 million. We determined that Series D did not contain any
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GREEN DOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)