<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
Date of Report (date of earliest event reported): August 5, 1997
CyberCash, Inc.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 0-27470 54-1725021
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification No.)
incorporation)
</TABLE>
2100 Reston Parkway, Reston, Virginia 20191
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 620-4200
<PAGE> 2
ITEM 5. OTHER EVENTS.
On August 5, 1997, CyberCash, Inc. (the "Company") issued 15,000 shares
of Series C Convertible Preferred Stock with a stated value of $1,000 per share
(the "Series C Preferred Stock") for an aggregate of $15 million in cash. The
securities were issued to two institutional investors in a private offering
pursuant to Regulation D of the Securities Act of 1933, as amended.
Each share of Series C Preferred Stock is convertible into the number
of shares of the Company's common stock (the "Common Stock") equal to (i) the
stated value ($1,000) plus a premium of 5% per annum of the stated value from
the date of issuance of the Series C Preferred Stock divided by (ii) the
Conversion Price. The Conversion Price is equal to the lowest closing price of
the Common Stock on the Nasdaq National Market ("Nasdaq") during a measurement
period ending one trading day prior to the conversion date. The measurement
period initially will be 10 consecutive trading days, and it increases by 2
trading days each month beginning January 16, 1998 and ending June 16, 1998,
when the measurement period will be 22 trading days.
The holders of the Series C Preferred Stock are subject to limits on
the number of shares they can convert at any one time. Unless the trading price
of the Common Stock on Nasdaq on the date of conversion is greater than either
$17 per share or 125% of the then applicable Conversion Price, the following
limits apply: Prior to January 3, 1998, the Series C Preferred Stock may not be
converted; beginning on January 3, 1998, each holder of Series C Preferred
Stock may convert up to 30% of its initial holding of Series C Preferred Stock
into Common Stock; beginning on February 2, 1998, it may convert up to 60% of
its initial holding; beginning on March 4, 1998, it may convert up to 90% of
its initial holding; and beginning on April 3, 1998, it may convert up to 100%
of its initial holding.
The Company has agreed to register under the Securities Act of 1933 the
resale of the Common Stock to be issued upon conversion of the Series C
Preferred Stock.
The Company's press release announcing the sale of the Series C
Preferred Stock as well as the Certificate of Designations of the Series C
Preferred Stock, a Securities Purchase Agreement and a Registration Rights
Agreement are filed as exhibits to this Current Report on Form 8-K. This
summary description of the transaction is qualified in its entirety by
reference to the documents filed as exhibits hereto.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(c) Exhibits.
The following are filed as exhibits to this Current Report on Form 8-K:
99.1 Press Release dated August 6, 1997.
99.2 Certificate of Designations of Series C Convertible Preferred
Stock.
99.3 Securities Purchase Agreement dated as of August 1, 1997 between
CyberCash, Inc., RGC International Investors, LDC and Halifax Fund, L.P.
99.4 Registration Rights Agreement dated as of August 1, 1997 between
CyberCash, Inc., RGC International Investors, LDC and Halifax Fund, L.P.
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CYBERCASH, INC.
By: \s\ James J. Condon
-----------------------
James J. Condon
Chief Financial Officer
August 8, 1997
<PAGE> 5
EXHIBIT INDEX
EXHIBIT NO.
99.1 Press Release dated August 6, 1997.
99.2 Certificate of Designations of Series C Convertible Preferred Stock.
99.3 Securities Purchase Agreement dated as of August 1, 1997 between
CyberCash, Inc., RGC International Investors, LDC and Halifax Fund,
L.P.
99.4 Registration Rights Agreement dated as of August 1, 1997 between
CyberCash, Inc., RGC International Investors, LDC and Halifax Fund,
L.P.
<PAGE> 1
EXHIBIT 99.1
CYBERCASH, INC.
2100 Reston Parkway
Reston, VA 20191
(Nasdaq: CYCH)
AT THE COMPANY AT THE FINANCIAL RELATIONS BOARD
- -------------- --------------------------------
Bill Melton, President and CEO Marianne Stewart - General Info (212) 661-8030
(703) 716-5204 Carolynne O'Grady - Analyst (212) 661-8030
James Condon, CFO Martin Gitlin - Media (212) 661-8030
(703) 716-5208
FOR IMMEDIATE RELEASE
- ---------------------
August 6, 1997
CYBERCASH, INC. RAISES $15 MILLION IN EQUITY
THROUGH PRIVATE PLACEMENT
RESTON, VA., AUGUST 6, 1997 -- CyberCash, Inc. (Nasdaq:CYCH), an innovative
technology services company that enables secure financial transactions on the
Internet, today announced that it has raised $15 million in equity capital
through a private placement of convertible preferred stock to two private
equity funds. According to James Condon, CyberCash CFO, "We believe that this
infusion of new equity, combined with the spending controls the Company has
instituted, should provide sufficient capital resources to carry CyberCash
through to profitability."
The preferred stock issued in the transaction is convertible into common stock
at a conversion price based on the market price for CyberCash stock on the
Nasdaq National Market System during a measurement period immediately preceding
the election to convert. The holders of the preferred stock are subject to
certain limits on the number of shares they can convert at any one time.
During the first five months, the holders may convert only if the market price
of the common stock is above $17 per share, or if it increases by at least 25%
during the measurement period. The Company has agreed to register the
underlying common stock for resale.
"We believe the structure of this transaction is quite favorable to our
existing stockholders," Mr. Condon said. "We are, in effect, raising today's
capital at tomorrow's prices. If our stock price increases, as we hope it
will, our stockholders will sustain less dilution than if we had simply sold
common stock at a typical discount from the current market price."
CyberCash, Inc., of Reston, Virginia, founded in August 1994, is a
technology-driven company that provides software and services to enable secure
financial transactions on the Internet. The Company offers a complete suite of
Internet payment solutions, including a credit card service, which handles
payments using major credit cards; the Company's innovative micropayment
service which enables cash
-MORE-
<PAGE> 2
CyberCash, Inc.
Page 2
transactions; and the secure electronic check service which allows
consumer-to-business and business-to-business funds transfer via checking
accounts. CyberCash works with virtually all transaction processing
institutions, and allows banks to offer secure Internet payment systems to
their customers.
This press release contains statements that are forward looking, including
statements about the Company's future profitability and stock price. They are
based on the Company's current expectations, and are subject to a number of
uncertainties and risks, and actual results may differ materially. The
uncertainties and risk include the pace of growth of Internet commerce, the
development by the Company and its competitors of new products and services,
strategic decisions by major participants in the industry, competitive pricing
pressures, legal and regulatory developments, general economic conditions, and
stock market developments affecting technology companies. Further information
abut these and other relevant risks and uncertainties may be found in the
Company's report on Form 10-K, and its other filings with the Securities and
Exchange Commission, all of which are available from the Commission and from
the Company's worldwide web site http://www.cybercash.com as well as other
sources.
To receive CyberCash's latest news and corporate developments via fax at no
cost, please call 1-800-PRO-INFO. Use company code CYCH. Additional
information on the Company can be obtained at http://www.cybercash.com.
###
<PAGE> 1
EXHIBIT 99.2
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
OF
SERIES C CONVERTIBLE PREFERRED STOCK
OF
CYBERCASH, INC.
(Pursuant to Section 151 of the
General Corporation Law of the State of Delaware)
CyberCash, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), hereby
certifies that the following resolutions were adopted by the Board of Directors
of the Corporation on August 1, 1997 pursuant to authority of the Board of
Directors as required by Section 151(g) of the General Corporation Law of the
State of Delaware:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (the "Board of Directors" or the
"Board") in accordance with the provisions of its Certificate of Incorporation,
the Board of Directors hereby authorizes a series of the Corporation's
previously authorized Preferred Stock, par value $.001 per share (the
"Preferred Stock"), and hereby states the designation and number of shares, and
fixes the relative rights, preferences, privileges, powers and restrictions
thereof as follows:
Series C Convertible Preferred Stock:
I. Designation and Amount
The designation of this series, which consists of 15,000 shares of
Preferred Stock, is Series C Convertible Preferred Stock (the "Series C
Preferred Stock") and the stated value shall be One Thousand Dollars ($1,000)
per share (the "Stated Value").
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II. Rank
The Series C Preferred Stock shall rank (i) prior to the
Corporation's common stock, par value $.001 per share (the "Common Stock");
(ii) prior to any class or series of capital stock of the Corporation hereafter
created (unless, with the consent of the holders of Series C Preferred Stock
obtained in accordance with Article IX hereof, such class or series of capital
stock specifically, by its terms, ranks senior to or pari passu with the Series
C Preferred Stock) (collectively, with the Common Stock, "Junior Securities");
(iii) pari passu with any class or series of capital stock of the Corporation
hereafter created (with the consent of the holders of Series C Preferred Stock
obtained in accordance with Article IX hereof) specifically ranking, by its
terms, on parity with the Series C Preferred Stock ("Pari Passu Securities");
and (iv) junior to any class or series of capital stock of the Corporation
hereafter created (with the consent of the holders of Series C Preferred Stock
obtained in accordance with Article IX hereof) specifically ranking, by its
terms, senior to the Series C Preferred Stock ("Senior Securities"), in each
case as to distribution of assets upon liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary.
III. Dividends
The Series C Preferred Stock shall not bear any dividends. In
no event, so long as any Series C Preferred Stock shall remain outstanding,
shall any dividend whatsoever (paid in cash, securities or other property) be
declared or paid upon, nor shall any such distribution be made upon, any Junior
Securities, nor shall any shares of Junior Securities be purchased or redeemed
by the Corporation nor shall any moneys be paid to or made available for a
sinking fund for the purchase or redemption of any Junior Securities (other
than a distribution of Junior Securities), without, in each such case, the
written consent of the holders of a majority of the outstanding shares of
Series C Preferred Stock, voting together as a class, provided that dividends
may be paid on Junior Securities only to the extent that dividends are paid on
the Series C Preferred Stock, on an as-converted basis.
IV. Liquidation Preference
A. If the Corporation shall commence a voluntary case
under the Federal bankruptcy laws or any other applicable Federal or State
bankruptcy, insolvency or similar law, or consent to the entry of an order for
relief in an involuntary case under any law or to the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its
property, or make an assignment for the benefit of its creditors, or admit in
writing its inability to pay its debts generally as they become due, or if a
decree or order for relief in respect of the Corporation shall be entered by a
court having jurisdiction in the premises in an involuntary case under the
Federal bankruptcy laws or any other applicable Federal or state bankruptcy,
insolvency or similar law resulting in the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or other similar
official) of the Corporation or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and any such decree or
order shall be unstayed and in effect for a period of thirty (30) consecutive
days and, on account of any such event, the Corporation shall liquidate,
dissolve or wind up, or if the
2
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Corporation shall otherwise liquidate, dissolve or wind up (each such event
being considered a "Liquidation Event"), no distribution shall be made to the
holders of any shares of capital stock of the Corporation (other than Senior
Securities) upon liquidation, dissolution or winding up unless prior thereto,
the holders of shares of Series C Preferred Stock, subject to Article VI, shall
have received the Liquidation Preference (as defined in Article IV.C) with
respect to each share. If upon the occurrence of a Liquidation Event, the
assets and funds available for distribution among the holders of the Series C
Preferred Stock and holders of Pari Passu Securities shall be insufficient to
permit the payment to such holders of the preferential amounts payable thereon,
then the entire assets and funds of the Corporation legally available for
distribution to the Series C Preferred Stock and the Pari Passu Securities
shall be distributed ratably among such shares in proportion to the ratio that
the Liquidation Preference payable on each such share bears to the aggregate
liquidation preference payable on all such shares.
B. At the option of the holders of a majority of Series
C Preferred Stock, the sale, conveyance or disposition of all or substantially
all of the assets of the Corporation, the effectuation by the Corporation of a
transaction or series of related transactions in which more than 50% of the
voting power of the Corporation is disposed of, or the consolidation, merger or
other business combination of the Corporation with or into any other Person (as
defined below) or Persons when the Corporation is not the survivor shall
either: (i) be deemed to be a liquidation, dissolution or winding up of the
Corporation pursuant to which the Corporation shall be required to distribute
upon consummation of such transaction an amount equal to 120% of the
Liquidation Preference with respect to each outstanding share of Series C
Preferred Stock in accordance with and subject to the terms of this Article IV
or (ii) be treated pursuant to Article VI.C(b) hereof. "Person" shall mean any
individual, corporation, limited liability company, partnership, association,
trust or other entity or organization.
C. For purposes hereof, the "Liquidation Preference"
with respect to a share of the Series C Preferred Stock shall mean an amount
equal to the sum of (i) the Stated Value thereof, plus (ii) an amount equal to
five percent (5%) per annum of such Stated Value for the period beginning on
the date of issuance of such share (the "Issue Date") and ending on the date of
final distribution to the holder thereof (pro rated for any portion of such
period). The liquidation preference with respect to any Pari Passu Securities
shall be as set forth in the Certificate of designation filed in respect
thereof.
V. Redemption
A. If any of the following events (each, a "Mandatory
Redemption Event") shall occur:
(i) The Corporation fails to issue shares of
Common Stock to the holders of Series C Preferred Stock upon exercise by the
holders of their conversion rights in accordance with the terms of this
Certificate of Designation (for a period of at least seventy-five (75) days if
such failure is solely as a result of the circumstances governed by the second
paragraph of Article VI.F below and the Corporation is using all commercially
reasonable efforts to authorize
3
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a sufficient number of shares of Common Stock as soon as practicable), fails to
transfer or to cause its transfer agent to transfer (electronically or in
certificated form) any certificate for shares of Common Stock issued to the
holders upon conversion of the Series C Preferred Stock as and when required by
this Certificate of Designation or the Registration Rights Agreement, dated as
of August 1, 1997, by and among the Corporation and the other signatories
thereto (the "Registration Rights Agreement"), fails to remove any restrictive
legend (or to withdraw any stop transfer instructions in respect thereof) on
any certificate or any shares of Common Stock issued to the holders of Series C
Preferred Stock upon conversion of the Series C Preferred Stock as and when
required by this Certificate of Designation, the Securities Purchase Agreement
dated as of August 1, 1997, by and between the Corporation and the other
signatories thereto (the "Purchase Agreement") or the Registration Rights
Agreement, or fails to fulfill its obligations pursuant to Sections 4(c), 4(e),
4(h), 4(i) or 5 of the Purchase Agreement (or makes any announcement that it
does not intend to honor the obligations described in this paragraph) and any
such failure shall continue uncured (or any announcement not to honor its
obligations shall not be rescinded) for twenty (20) business days;
(ii) The Corporation fails to obtain effectiveness
with the Securities and Exchange Commission (the "SEC") of the Registration
Statement (as defined in the Registration Rights Agreement) prior to December
31, 1997 or such Registration Statement lapses in effect (or sales otherwise
cannot be made thereunder, whether by reason of the Company's failure to amend
or supplement the prospectus included therein in accordance with the
Registration Rights Agreement or otherwise, other than by reason of an Allowed
Delay (as defined in the Registration Rights Agreement)) (a "Sale Restriction
Day") for more than thirty (30) consecutive days or sixty (60) days in any
twelve (12) month period after such Registration Statement becomes effective;
(iii) The Corporation shall make an assignment for
the benefit of creditors, or apply for or consent to the appointment of a
receiver or trustee for it or for all or substantially all of its property or
business; or such a receiver or trustee shall otherwise be appointed;
(iv) Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings for relief under any bankruptcy
law or any law for the relief of debtors shall be instituted by or against the
Corporation or any subsidiary of the Corporation;
(v) The Corporation shall fail to maintain the
listing of the Common Stock on the Nasdaq National Market ("Nasdaq"), the
Nasdaq SmallCap Market, the New York Stock Exchange or the American Stock
Exchange and such failure shall remain uncured for at least thirty (30) days,
then, upon the occurrence and during the continuation of any Mandatory
Redemption Event specified in subparagraphs (i), (ii) or (v) at the option of
the holders of more than 50% of the then outstanding shares of Series C
Preferred Stock by written notice (the "Mandatory Redemption Notice") to the
Corporation of such Mandatory Redemption Event, or upon the occurrence of any
Mandatory Redemption Event specified in subparagraphs (iii) or (iv), the
Corporation shall purchase each holder's shares of Series C Preferred Stock for
an amount per share equal to the greater of (1) 120% multiplied by the sum of
(a) the Stated Value of the shares to be redeemed, plus (b) an amount equal to
five percent (5%) per annum of such Stated Value for the period beginning on
the issuance of such shares and ending on the date of payment of the Mandatory
Redemption Amount (the "Mandatory Redemption Date") and (2) the "parity value"
of
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the shares to be redeemed, where parity value means the product of (a) the
number of shares of Common Stock issuable upon conversion of such shares in
accordance with Article VI below (treating the Trading Day immediately
preceding the Mandatory Redemption Date as the "Conversion Date" (as
hereinafter defined) (unless the Mandatory Redemption Event arises as a result
of a breach in respect of a specific Conversion Date in which case such
Conversion Date shall be the Conversion Date), multiplied by (b) the closing
sale price for the Common Stock on the principal trading market for such shares
on such "Conversion Date" (the greater of such amounts being referred to as the
"Mandatory Redemption Amount").
In the case of a Mandatory Redemption Event, if the
Corporation fails to pay the Mandatory Redemption Amount for each share within
five (5) business days of written notice that such amount is due and payable,
then (assuming there are sufficient authorized shares) in addition to all other
available remedies, each holder of Series C Preferred Stock shall have the
right at any time, so long as the Mandatory Redemption Event continues, to
require the Corporation, upon written notice, to immediately issue (in
accordance with and subject to the terms of Article VI below), in lieu of the
Mandatory Redemption Amount, with respect to each outstanding share of Series C
Preferred Stock held by such holder, the number of shares of Common Stock of
the Corporation equal to the Mandatory Redemption Amount divided by the
Conversion Price then in effect.
B. If the Series C Preferred Stock ceases to be
convertible as a result of the limitations described in the second paragraph of
Article VI.A below (a "19.99% Redemption Event"), and the Corporation has not
prior to, or within forty-five (45) days of, the date that such 19.99%
Redemption Event arises, (i) obtained approval of the issuance of the
additional shares of Common Stock by the requisite vote of the holders of the
then-outstanding Common Stock (not including any shares of Common Stock held by
present or former holders of Series C Preferred Stock that were issued upon
conversion of Series C Preferred Stock) or (ii) received other permission
pursuant to Nasdaq Requirement 4460(i) allowing the Corporation to resume
issuances of shares of Common Stock upon conversion of Series C Preferred
Stock, then the Corporation shall be obligated to redeem immediately all of the
then outstanding Series C Preferred Stock, in accordance with this Article V.B.
An irrevocable Redemption Notice shall be delivered promptly to the holders of
Series C Preferred Stock at their registered address appearing on the records
of the Corporation and shall state (1) that 19.99% of the Outstanding Common
Amount (as defined in Article VI.A below) has been issued upon exercise of the
Series C Preferred Stock, (2) that the Corporation is obligated to redeem all
of the outstanding Series C Preferred Stock and (3) the Mandatory Redemption
Date, which shall be a date within five (5) business days of the date of the
Redemption Notice. On the Mandatory Redemption Date, the Corporation shall
make payment of the Mandatory Redemption Amount (as defined in Article V.A.
above) in cash.
VI. Conversion at the Option of the Holder
A. (a) Subject to the conversion schedule set forth
in Section VI.A.(c) below, each holder of shares of Series C Preferred Stock
may, at its option at any time and from time to time after the date of issuance
thereof, upon surrender of the certificates therefor, convert any or all of its
shares of Series C Preferred Stock into Common Stock as follows (an "Optional
Conversion"). Each share of Series C Preferred Stock shall be convertible into
such number of
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fully paid and nonassessable shares of Common Stock as is determined by
dividing (1) the sum of (a) the Stated Value thereof, plus, (b) the Premium
Amount (as defined below), by (2) the then effective Conversion Price (as
defined below); provided, however, that, unless the Holder delivers a waiver in
accordance with the immediately following sentence, in no event (other than
pursuant to the Automatic Conversion (as defined in Article VII)) shall a
holder of shares of Series C Preferred Stock be entitled to convert any such
shares in excess of that number of shares upon conversion of which the sum of
(x) the number of shares of Common Stock beneficially owned by the holder and
its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of the
shares of Series C Preferred Stock) and (y) the number of shares of Common
Stock issuable upon the conversion of the shares of Series C Preferred Stock
with respect to which the determination of this proviso is being made, would
result in beneficial ownership by a holder and such holder's affiliates of more
than 4.9% of the outstanding shares of Common Stock. For purposes of the
proviso to the immediately preceding sentence, (i) beneficial ownership shall
be determined in accordance with Section 13(d) of the Securities Exchange Act
of 1934, as amended, and Regulation 13D-G thereunder, except as otherwise
provided in clause (x) of such proviso and (ii) a holder may waive the
limitations set forth therein by written notice to the Corporation upon not
less than sixty-one (61) days prior written notice (with such waiver taking
effect only upon the expiration of such sixty-one (61) day notice period). The
"Premium Amount" means the product of the Stated Value, multiplied by .05,
multiplied by (N/365), where "N" equals the number of days elapsed from the
date of issuance of the Series C Preferred Stock to and including the
Conversion Date (as defined in Article VI.B. below).
(b) If it is determined (upon written notice from
Nasdaq) that the provisions of Nasdaq Requirement 4460(i) are applicable to the
issuance of Common Stock upon conversion of the Series C Preferred Stock in
accordance with this Article VI, then notwithstanding anything to the contrary
contained herein, if at any time the aggregate number of shares of Common Stock
then issued upon conversion of the Series C Preferred Stock equals 19.99% of
the "Outstanding Common Amount" (as hereinafter defined), the Series C
Preferred Stock shall, from that time forward, cease to be convertible into
Common Stock in accordance with the terms of this Article VI and Article VII
below, unless the Corporation (i) has obtained approval of the issuance of the
Common Stock upon conversion of the Series C Preferred Stock by the requisite
vote, in person or by proxy, by the holders of the then-outstanding Common
Stock (not including any shares of Common Stock held by present or former
holders of Series C Preferred Stock that were issued upon conversion of Series
C Preferred Stock), or (ii) shall have otherwise obtained permission to allow
such issuances from Nasdaq in accordance with Nasdaq Requirement 4460(i). For
purposes of this paragraph, "Outstanding Common Amount" means (i) the number of
shares of the Common Stock outstanding on the date of issuance of the Series C
Preferred Stock pursuant to the Purchase Agreement plus (ii) any additional
shares of Common Stock issued thereafter in respect of such shares pursuant to
a stock dividend, stock split or similar event. The maximum number of shares
of Common Stock issuable as a result of the 19.99% limitation set forth herein
is hereinafter referred to as the "Maximum Share Amount." With respect to each
holder of Series C Preferred Stock, the Maximum Share Amount shall refer to
such holder's pro rata share thereof determined in accordance with Article X
below. In the event that Corporation obtains Stockholder Approval, the
approval of The Nasdaq Stock Market or otherwise concludes that it is able to
increase the number of shares to be issued above the Maximum Share Amount (such
increased number being the "New Maximum Share Amount"), the references to
Maximum Share Amount,
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above, shall be deemed to be, instead, references to the greater New Maximum
Share Amount. In the event that Stockholder Approval is not obtained, there
are insufficient reserved or authorized shares or a registration statement
covering the additional shares of Common Stock which constitute the New Maximum
Share Amount is not effective prior to the Maximum Share Amount being issued
(if such registration statement is necessary to allow for the public resale of
such securities), the Maximum Share Amount shall remain unchanged; provided,
however, that the Holder may grant an extension to obtain a sufficient reserved
or authorized amount of shares or of the effective date of such registration
statement. In the event that (a) the aggregate number of shares of Common
Stock issued pursuant to the outstanding Series C Preferred Stock represents at
least thirty percent (30%) of the Maximum Share Amount and (b) the sum of (x)
the aggregate number of shares of Common Stock issued upon conversion of Series
C Preferred Stock plus (y) the aggregate number of shares of Common Stock that
remain issuable upon conversion of Series C Preferred Stock, represents at
least one hundred percent (100%) of the Maximum Share Amount (the "Triggering
Event"), the Corporation will use its best efforts to seek and obtain
Stockholder Approval (or obtain such other relief as will allow conversions
hereunder in excess of the Maximum Share Amount) as soon as practicable
following the Triggering Event and before the Mandatory Redemption Date in
respect thereof.
(c) The holder of shares of the Series C
Preferred Stock may convert only up to that percentage of the Stated Value
(together with any Premium Amount to be paid thereon and other amounts payable
in respect thereof) specified below during the time period set forth opposite
such percentage:
<TABLE>
<CAPTION>
Percentage Time Period
---------- -----------
<S> <C>
0% 1-150 days following the Issue Date
30% 151-180 days following the Issue Date
60% 181-210 days following the Issue Date
90% 211-240 days following the Issue Date
100% 241 days following the Issue Date
</TABLE>
; provided, however, that there shall be excluded from any calculation of the
foregoing percentage any conversion(s) occurring on a Conversion Date on which
the trading price of the Common Stock is greater than either: (i) 125% of the
then applicable Conversion Price; or (ii) the lesser of 110% of the closing bid
price of the Common Stock on Nasdaq as reported by Bloomberg (as defined below)
on the Issue Date or $17.00.
B.(a) Subject to subparagraph (b) below, the "Conversion
Price" shall be Market Price (as defined herein) subject to adjustments
pursuant to the provisions of Article VI.C below). "Market Price" shall mean
100% of the single lowest closing price of the Common Stock on Nasdaq, or on
the principal securities exchange or other securities market on which the
Common Stock is then being traded (in each case, as reported by Bloomberg, L.P.
("Bloomberg")), during the then applicable Pricing Period (as defined herein)
ending one (1) Trading Day (as defined herein) prior to the date (the
"Conversion Date") the Conversion Notice is sent by a holder to the Corporation
in accordance with Article VI.E. "Trading Day" shall mean any day on which the
Common Stock is traded for any period on Nasdaq, or on the principal securities
exchange or other
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securities market on which the Common Stock is then being traded. The "Pricing
Period" shall mean:
Ten (10) consecutive Trading Days, for Conversion Dates on or before
January 15, 1998
Twelve (12) consecutive Trading Days, for Conversion Dates between and
inclusive of January 16, 1998 and February 15, 1998
Fourteen (14) consecutive Trading Days, for Conversion Dates between
and inclusive of February 16, 1998 and March 15, 1998
Sixteen (16) consecutive Trading Days, for Conversion Dates between
and inclusive of March 16, 1998 and April 15, 1998
Eighteen (18) consecutive Trading Days, for Conversion Dates between
and inclusive of April 16, 1998 and May 15, 1998
Twenty (20) consecutive Trading Days, for Conversion Dates between and
inclusive of May 16, 1998 and June 15, 1998
Twenty-Two (22) consecutive Trading Days, for Conversion Dates after
on or June 16, 1998.
(b) Notwithstanding anything contained in
subparagraph (a) of this Paragraph B to the contrary, in the event the
Corporation (i) makes a public announcement that it intends to consolidate or
merge with any other corporation (other than a merger in which the Corporation
is the surviving or continuing corporation and its capital stock is unchanged)
or sell or transfer all or substantially all of the assets of the Corporation
or (ii) any person, group or entity (including the Corporation) publicly
announces a tender offer to purchase 50% or more of the Corporation's Common
Stock (the date of the announcement referred to in clause (i) or (ii) is
hereinafter referred to as the "Announcement Date"), then the Conversion Price
shall, effective upon the Announcement Date and continuing through the Adjusted
Conversion Price Termination Date (as defined below), be equal to the lower of
(x) the Conversion Price which would have been applicable for an Optional
Conversion occurring on the Announcement Date and (y) the Conversion Price that
would otherwise be in effect. From and after the Adjusted Conversion Price
Termination Date, the Conversion Price shall be determined as set forth in
subparagraph (a) of this Article VI.B. For purposes hereof, "Adjusted
Conversion Price Termination Date" shall mean, with respect to any proposed
transaction or tender offer for which a public announcement as contemplated by
this subparagraph (b) has been made, the date upon which the Corporation (in
the case of clause (i) above) or the person, group or entity (in the case of
clause (ii) above) publicly announces the termination or abandonment of the
proposed transaction or tender offer which caused this subparagraph (b) to
become operative.
C. The Conversion Price shall be subject to adjustment
from time to time as follows:
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<PAGE> 9
(a) Adjustment to Conversion Price Due to Stock
Split, Stock Dividend, Etc. If at any time when Series C Preferred Stock is
issued and outstanding, the number of outstanding shares of Common Stock is
increased or decreased by a stock split, stock dividend, combination,
reclassification, rights offering below the Prevailing Trading Price (as
defined below) to all holders of Common Stock or other similar event, which
event shall have taken place during the reference period for determination of
the Conversion Price for any Optional Conversion or Automatic Conversion of the
Series C Preferred Stock, then the Conversion Price shall be calculated giving
appropriate effect to the stock split, stock dividend, combination,
reclassification or other similar event for the applicable Pricing Period. In
such event, the Corporation shall notify the Transfer Agent of such change on
or before the effective date thereof.
(b) Adjustment Due to Merger, Consolidation, Etc.
If, at any time when Series C Preferred Stock is issued and outstanding and
prior to the conversion of all Series C Preferred Stock, there shall be any
merger, consolidation, exchange of shares, recapitalization, reorganization, or
other similar event, as a result of which shares of Common Stock of the
Corporation shall be changed into the same or a different number of shares of
another class or classes of stock or securities of the Corporation or another
entity, or in case of any sale or conveyance of all or substantially all of the
assets of the Corporation other than in connection with a plan of complete
liquidation of the Corporation, then the holders of Series C Preferred Stock
shall thereafter have the right to receive upon conversion of the Series C
Preferred Stock, upon the bases and upon the terms and conditions specified
herein and in lieu of the shares of Common Stock immediately theretofore
issuable upon conversion, such stock, securities or assets which the holders of
Series C Preferred Stock would have been entitled to receive in such
transaction had the Series C Preferred Stock been converted in full (without
regard to any limitations on conversion contained herein) immediately prior to
such transaction, and in any such case appropriate provisions shall be made
with respect to the rights and interests of the holders of Series C Preferred
Stock to the end that the provisions hereof (including, without limitation,
provisions for adjustment of the Conversion Price and of the number of shares
of Common Stock issuable upon conversion of the Series C Preferred Stock) shall
thereafter be applicable, as nearly as may be practicable in relation to any
securities or assets thereafter deliverable upon the conversion of Series C
Preferred Stock. The Corporation shall not effect any transaction described in
this subsection (b) unless (a) it first gives, to the extent practical, thirty
(30) days' prior written notice (but in any event at least fifteen (15)
business days prior written notice) of such merger, consolidation, exchange of
shares, recapitalization, reorganization or other similar event or sale of
assets (during which time the holders of Series C Preferred Stock shall be
entitled to convert the Series C Preferred Stock) and (b) the resulting
successor or acquiring entity (if not the Corporation) assumes by written
instrument the obligations of this subsection (b). The above provisions shall
similarly apply to successive consolidations, mergers, sales, transfers or
share exchanges.
(c) Adjustment Due to Distribution. Subject to
Article III, if the Corporation shall declare or make any distribution of its
assets (or rights to acquire its assets) to holders of Common Stock as a
dividend, stock repurchase, by way of return of capital or otherwise (including
any dividend or distribution to the Corporation's shareholders in cash or
shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a
spin-off)) (a "Distribution"), then the holders of Series C Preferred Stock
shall be entitled, upon any conversion of shares of Series C Preferred Stock
after the date of record for determining shareholders entitled to such
Distribution, to receive the amount of such assets which would have been
payable to the holder with respect to
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<PAGE> 10
the shares of Common Stock issuable upon such conversion had such holder been
the holder of such shares of Common Stock on the record date for the
determination of shareholders entitled to such Distribution.
(d) Purchase Rights. Subject to Article III, if
at any time when any Series C Preferred Stock is issued and outstanding, the
Corporation issues any convertible securities or rights to purchase stock,
warrants, securities or other property (the "Purchase Rights") pro rata to the
record holders of any class of Common Stock, then the holders of Series C
Preferred Stock will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such holder could have
acquired if such holder had held the number of shares of Common Stock
acquirable upon complete conversion of the Series C Preferred Stock (without
regard to any limitations on conversion contained herein) immediately before
the date on which a record is taken for the grant, issuance or sale of such
Purchase Rights, or, if no such record is taken, the date as of which the
record holders of Common Stock are to be determined for the grant, issue or
sale of such Purchase Rights.
(e) Notice of Adjustments. Upon the occurrence
of each adjustment or readjustment of the Conversion Price pursuant to this
Article VI.C, the Corporation, at its expense, shall promptly compute such
adjustment or readjustment and prepare and furnish to each holder of Series C
Preferred Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is
based. The Corporation shall, upon the written request at any time of any
holder of Series C Preferred Stock, furnish to such holder a like certificate
setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at
the time in effect and (iii) the number of shares of Common Stock and the
amount, if any, of other securities or property which at the time would be
received upon conversion of a share of Series C Preferred Stock.
D. For purposes of Article VI.C(a) above, "Prevailing
Trading Price," which shall be measured as of the record date in respect of the
rights offering means (i) the average of the last reported sale prices for the
shares of Common Stock on Nasdaq as reported by Bloomberg, as applicable, for
the twenty (20) Trading Days immediately preceding such date, or (ii) if Nasdaq
is not the principal trading market for the shares of Common Stock, the average
of the last reported sale prices on the principal trading market for the Common
Stock during the same period as reported by Bloomberg, or (iii) if market value
cannot be calculated as of such date on any of the foregoing bases, the
Prevailing Trading Price shall be the fair market value as reasonably
determined in good faith by (a) the Board of Directors of the Corporation or,
(b) at the option of a majority-in-interest of the holders of the outstanding
Series C Preferred Stock by an independent investment bank of nationally
recognized standing in the valuation of businesses similar to the business of
the Corporation.
E. In order to convert Series C Preferred Stock into
full shares of Common Stock, a holder of Series C Preferred Stock shall: (i)
submit a copy of the fully executed notice of conversion in the form attached
hereto as Exhibit A ("Notice of Conversion") to the Corporation by facsimile
dispatched on the Conversion Date (or by other means resulting in notice to the
Corporation on the Conversion Date) at the office of the Corporation or its
designated Transfer Agent for the Series C Preferred Stock that the holder
elects to convert the same, which notice shall specify the number of shares of
Series C Preferred Stock to be converted, the applicable Conversion
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<PAGE> 11
Price and a calculation of the number of shares of Common Stock issuable upon
such conversion (together with a copy of the first page of each certificate to
be converted) prior to Midnight, New York City time (the "Conversion Notice
Deadline") on the date of conversion specified on the Notice of Conversion; and
(ii) surrender the original certificates representing the Series C Preferred
Stock being converted (the "Preferred Stock Certificates"), duly endorsed,
along with a copy of the Notice of Conversion to the office of the Corporation
or the Transfer Agent for the Series C Preferred Stock as soon as practicable
thereafter. The Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such conversion, unless
either the Preferred Stock Certificates are delivered to the Company or its
Transfer Agent as provided above, or the holder notifies the Corporation or its
Transfer Agent that such certificates have been lost, stolen or destroyed
(subject to the requirements of subparagraph (a) below). In the case of a
dispute as to the calculation of the Conversion Price, the Corporation shall
promptly issue such number of shares of Common Stock that are not disputed in
accordance with subparagraph (b) below. The Corporation shall submit the
disputed calculations to its outside accountant via facsimile within two (2)
business days of receipt of the Notice of Conversion. The accountant shall
audit the calculations and notify the Corporation and the holder of the results
no later than 48 hours from the time it receives the disputed calculations.
The accountant's calculation shall be deemed conclusive absent manifest error.
(a) Lost or Stolen Certificates. Upon receipt by
the Corporation of evidence of the loss, theft, destruction or mutilation of
any Preferred Stock Certificates representing shares of Series C Preferred
Stock, and (in the case of loss, theft or destruction) of indemnity reasonably
satisfactory to the Corporation, and upon surrender and cancellation of the
Preferred Stock Certificate(s), if mutilated, the Corporation shall execute and
deliver new Preferred Stock Certificate(s) of like tenor and date.
(b) Delivery of Common Stock Upon Conversion.
Upon the surrender of certificates as described above together with a Notice of
Conversion, the Corporation shall issue and, within two (2) business days after
such surrender (or, in the case of lost, stolen or destroyed certificates,
after provision of agreement and indemnification pursuant to subparagraph (a)
above) (the "Delivery Period"), deliver (or cause its Transfer Agent to so
issue and deliver) to or upon the order of the holder (i) that number of shares
of Common Stock for the portion of the shares of Series C Preferred Stock
converted as shall be determined in accordance herewith and (ii) a certificate
representing the balance of the shares of Series C Preferred Stock not
converted, if any. In addition to any other remedies available to the holder,
including actual damages and/or equitable relief, the Corporation shall pay to
a holder $2,000 per day in cash for each day beyond a two (2) day grace period
following the Delivery Period that the Corporation fails to deliver Common
Stock issuable upon surrender of shares of Series C Preferred Stock with a
Notice of Conversion until such time as the Corporation has delivered all such
Common Stock. Such cash amount shall be paid to such holder by the fifth day
of the month following the month in which it has accrued or, at the option of
the holder (by written notice to the Corporation by the first day of the month
following the month in which it has accrued), shall be convertible into Common
Stock in accordance with the terms of this Article VI.
In lieu of delivering physical certificates representing the
Common Stock issuable upon conversion, provided the Corporation's Transfer
Agent is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer ("FAST") program, upon request of the
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<PAGE> 12
holder and its compliance with the provisions contained in Article VI.A. and in
this Article VI.E., the Corporation shall use its best efforts to cause its
Transfer Agent to electronically transmit the Common Stock issuable upon
conversion to the holder by crediting the account of holder's Prime Broker with
DTC through its Deposit Withdrawal Agent Commission ("DWAC") system. The time
periods for delivery and penalties described in the immediately preceding
paragraph shall apply to the electronic transmittals described herein.
(c) No Fractional Shares. If any conversion of
Series C Preferred Stock would result in a fractional share of Common Stock or
the right to acquire a fractional share of Common Stock, such fractional share
shall be disregarded and the number of shares of Common Stock issuable upon
Conversion of the Series C Preferred Stock shall be the next higher number of
shares.
(d) Conversion Date. The "Conversion Date" shall
be the date specified in the Notice of Conversion, provided that the Notice of
Conversion is submitted by facsimile (or by other means resulting in notice) to
the Corporation or its Transfer Agent before Midnight, New York City time, on
the Conversion Date. The person or persons entitled to receive the shares of
Common Stock issuable upon conversion shall be treated for all purposes as the
record holder or holders of such securities as of the Conversion Date and all
rights with respect to the shares of Series C Preferred Stock surrendered shall
forthwith terminate except the right to receive the shares of Common Stock or
other securities or property issuable on such conversion and except that the
holders preferential rights as a holder of Series C Preferred Stock shall
survive to the extent the corporation fails to deliver such securities.
F. A number of shares of the authorized but unissued
Common Stock sufficient to provide for the conversion of the Series C Preferred
Stock outstanding at the then current Conversion Price shall at all times be
reserved by the Corporation, free from preemptive rights, for such conversion
or exercise. As of the date of issuance of the Series C Preferred Stock,
2,610,000 authorized and unissued shares of Common Stock have been duly
reserved for issuance upon conversion of the Series C Preferred Stock (the
"Reserved Amount"). The Reserved Amount shall be increased from time to time
in accordance with the Company's obligations pursuant to Section 4(h) of the
Purchase Agreement. In addition, if the Corporation shall issue any securities
or make any change in its capital structure which would change the number of
shares of Common Stock into which each share of the Series C Preferred Stock
shall be convertible at the then current Conversion Price, the Corporation
shall at the same time also make proper provision so that thereafter there
shall be a sufficient number of shares of Common Stock authorized and reserved,
free from preemptive rights, for conversion of the outstanding Series C
Preferred Stock.
If at any time a holder of shares of Series C Preferred Stock
submits a Notice of Conversion, and the Corporation does not have sufficient
authorized but unissued shares of Common Stock available to effect such
conversion in accordance with the provisions of this Article VI (a "Conversion
Default"), the Corporation shall issue to the holder (or holders, if more than
one holder submits a Notice of Conversion in respect of the same Conversion
Date, pro rata based on the ratio that the number of shares of Series C
Preferred Stock then held by each such holder bears to the aggregate number of
such shares held by such holders) all of the shares of Common Stock which are
available to effect such conversion. The number of shares of Series C
Preferred Stock included in the Notice of Conversion which exceeds the amount
which is then convertible into
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<PAGE> 13
available shares of Common Stock (the "Excess Amount") shall, notwithstanding
anything to the contrary contained herein, not be convertible into Common Stock
in accordance with the terms hereof until (and at the holder's option at any
time after) the date additional shares of Common Stock are authorized by the
Corporation to permit such conversion, at which time the Conversion Price in
respect thereof shall be the lesser of (i) the Conversion Price on the
Conversion Default Date (as defined below) and (ii) the Conversion Price on the
Conversion Date elected by the holder in respect thereof. The Corporation
shall use its best efforts to effect an increase in the authorized number of
shares of Common Stock as soon as possible following a Conversion Default. In
addition, the Corporation shall pay to the holder payments ("Conversion Default
Payments") for a Conversion Default in the amount of (a) (N/365), multiplied by
(b) the sum of the Stated Value plus the Premium Amount per share of Series C
Preferred Stock through the Authorization Date (as defined below), multiplied
by (c) the Excess Amount on the day the holder submits a Notice of Conversion
giving rise to a Conversion Default (the "Conversion Default Date"), multiplied
by (d) .24, where (i) N = the number of days from the Conversion Default Date
to the date (the "Authorization Date") that the Corporation authorizes a
sufficient number of shares of Common Stock to effect conversion of the full
number of shares of Series C Preferred Stock. The Corporation shall send
notice to the holder of the authorization of additional shares of Common Stock,
the Authorization Date and the amount of holder's accrued Conversion Default
Payments. The accrued Conversion Default Payment for each calendar month shall
be paid in cash or shall be convertible into Common Stock at the Conversion
Price, at the holder's option, as follows:
(a) In the event the holder elects to take such
payment in cash, cash payment shall be made to holder by the fifth day of the
month following the month in which it has accrued; and
(b) In the event the holder elects to take such
payment in Common Stock, the holder may convert such payment amount into Common
Stock at the Conversion Price (as in effect at the time of Conversion) at any
time after the fifth day of the month following the month in which it has
accrued in accordance with the terms of this Article VI (so long as there is
then a sufficient number of authorized shares).
Nothing herein shall limit the holder's right to pursue actual
damages for the Corporation's failure to maintain a sufficient number of
authorized shares of Common Stock, and each holder shall have the right to
pursue all remedies available at law or in equity (including a decree of
specific performance and/or injunctive relief).
G. Upon the occurrence of each adjustment or
readjustment of the Conversion Price pursuant to this Article VI, the
Corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to
each holder of Series C Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series C Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting forth (i) such
adjustment or readjustment, (ii) the Conversion Price at the time in effect and
(iii) the number of shares of Common Stock and the amount, if any, of other
securities or property which at the time would be received upon conversion of a
share of Series C Preferred Stock.
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VII. Automatic Conversion
So long as the Common Stock is freely tradeable (and not
subject to volume limitations) and there is not then a continuing Mandatory
Redemption Event, each share of Series C Preferred Stock issued and outstanding
on August 4, 2002, subject to any adjustment pursuant to Article V.A.(ii) (the
"Automatic Conversion Date"), automatically shall be converted into shares of
Common Stock on such date at the then effective Conversion Price in accordance
with, and subject to, the provisions of Article VI hereof (the "Automatic
Conversion"). The Automatic Conversion Date shall be delayed by one (1)
Trading Day for each Trading Day occurring prior thereto and prior to the full
conversion of the Series C Preferred Stock that (i) conversions are restricted
during any Stand-Off Period, as set forth in Section 4(f) of the Registration
Rights Agreement or (ii) sales cannot be made pursuant to the Registration
Statement (whether by reason of the Company's failure to properly supplement or
amend the prospectus included therein in accordance with the terms of the
Registration Rights Agreement or otherwise, including during any Allowed Delay
as described in the Registration Rights Agreement). The Automatic Conversion
Date shall be the Conversion Date for purposes of determining the Conversion
Price and the time within which certificates representing the Common Stock must
be delivered to the holder.
VIII. Voting Rights
The holders of the Series C Preferred Stock have no voting
power whatsoever, except as otherwise provided by the General Corporation Law
of the State of Delaware ("DGCL"), in this Article VIII, and in Article IX
below.
Notwithstanding the above, the Corporation shall provide each
holder of Series C Preferred Stock with prior notification of any meeting of
the shareholders (and copies of proxy materials and other information sent to
shareholders). In the event of any taking by the Corporation of a record of
its shareholders for the purpose of determining shareholders who are entitled
to receive payment of any dividend or other distribution, any right to
subscribe for, purchase or otherwise acquire (including by way of merger,
consolidation or recapitalization) any share of any class or any other
securities or property, or to receive any other right, or for the purpose of
determining shareholders who are entitled to vote in connection with any
proposed sale, lease or conveyance of all or substantially all of the assets of
the Corporation, or any proposed liquidation, dissolution or winding up of the
Corporation, the Corporation shall mail a notice to each holder, at least five
(5) days prior to the record date specified therein (or twenty (20) Trading
Days prior to the consummation of the transaction or event, whichever is
earlier), of the date on which any such record is to be taken for the purpose
of such dividend, distribution, right or other event, and a brief statement
regarding the amount and character of such dividend, distribution, right or
other event to the extent known at such time.
To the extent that under the DGCL the vote of the holders of
the Series C Preferred Stock, voting separately as a class or series as
applicable, is required to authorize a given action of the Corporation, the
affirmative vote or consent of the holders of at least a majority of the shares
of the Series C Preferred Stock represented at a duly held meeting at which a
quorum is present or by written consent of a majority of the shares of Series C
Preferred Stock (except as otherwise may be
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<PAGE> 15
required under the DGCL) shall constitute the approval of such action by the
class. To the extent that under the DGCL holders of the Series C Preferred
Stock are entitled to vote on a matter with holders of Common Stock, voting
together as one class, each share of Series C Preferred Stock shall be entitled
to a number of votes equal to the number of shares of Common Stock into which
it is then convertible using the record date for the taking of such vote of
shareholders as the date as of which the Conversion Price is calculated.
Holders of the Series C Preferred Stock shall be entitled to notice of all
shareholder meetings or written consents (and copies of proxy materials and
other information sent to shareholders) with respect to which they would be
entitled to vote, which notice would be provided pursuant to the Corporation's
bylaws and the DGCL.
IX. Protective Provisions
So long as shares of Series C Preferred Stock are outstanding,
the Corporation shall not, without first obtaining the approval (by vote or
written consent, as provided by the DGCL) of the holders of at least a majority
of the then outstanding shares of Series C Preferred Stock:
(a) alter or change the rights, preferences or
privileges of the Series C Preferred Stock or any Senior Securities so as to
affect adversely the Series C Preferred Stock;
(b) create any new class or series of capital
stock having a preference over the Series C Preferred Stock as to distribution
of assets upon liquidation, dissolution or winding up of the Corporation (as
previously defined in Article II hereof, "Senior Securities");
(c) create any new class or series of capital
stock ranking pari passu with the Series C Preferred Stock as to distribution
of assets upon liquidation, dissolution or winding up of the Corporation (as
previously defined in Article II hereof, "Pari Passu Securities");
(d) increase the authorized number of shares of
Series C Preferred Stock; or
(e) do any act or thing not authorized or
contemplated by this Certificate of Designation which would result in taxation
of the holders of shares of the Series C Preferred Stock under Section 305 of
the Internal Revenue Code of 1986, as amended (or any comparable provision of
the Internal Revenue Code as hereafter from time to time amended).
In the event holders of at least a majority of the then
outstanding shares of Series C Preferred Stock agree to allow the Corporation
to alter or change the rights, preferences or privileges of the shares of
Series C Preferred Stock, pursuant to subsection (a) above, so as to affect the
Series C Preferred Stock, then the Corporation will deliver notice of such
approved change to the holders of the Series C Preferred Stock that did not
agree to such alteration or change (the "Dissenting Holders") and Dissenting
Holders shall have the right for a period of ten (10) Trading Days to convert
pursuant to the terms of this Certificate of Designation as they exist prior to
such alteration or change or continue to hold their shares of Series C
Preferred Stock.
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<PAGE> 16
X. Pro Rata Allocations
The Maximum Share Amount and the Reserved Amount (including
any increases thereto) shall be allocated by the Corporation pro rata among the
holders of Series C Preferred Stock based on the number of shares of Series C
Preferred Stock then held by each holder relative to the total aggregate number
of shares of Series C Preferred Stock then outstanding.
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<PAGE> 17
IN WITNESS WHEREOF, this Certificate of Designation is
executed on behalf of the Corporation this 4th day of August, 1997.
CYBERCASH, INC.
By: /s/ Russell B. Stevenson, Jr.
---------------------------------
Russell B. Stevenson, Jr.
Secretary
17
<PAGE> 18
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Series C Preferred Stock)
The undersigned hereby irrevocably elects to convert ______
shares of Series C Preferred Stock, represented by stock certificate No(s).
__________ (the "Preferred Stock Certificates") into shares of common stock
("Common Stock") of CyberCash, Inc. (the "Corporation") according to the
conditions of the Certificate of Designation of Series C Preferred Stock, as of
the date written below. If securities are to be issued in the name of a person
other than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto and is delivering herewith such certificates. No fee will
be charged to the Holder for any conversion, except for transfer taxes, if any.
A copy of each Preferred Stock Certificate is attached hereto (or evidence of
loss, theft or destruction thereof).
The undersigned represents and warrants that all offers and
sales by the undersigned of the securities issuable to the undersigned upon
conversion of the Series C Preferred Stock shall be made pursuant to
registration of the securities under the Securities Act of 1933, as amended
(the "Act"), or pursuant to an exemption from registration under the Act.
Date of Conversion:
------------------------------
Applicable Conversion Price:
---------------------
Number of Shares of
Common Stock to be Issued:
-----------------------
Signature:
---------------------------------------
Name:
--------------------------------------------
Address:
-----------------------------------------
*The Corporation is not required to issue shares of Common Stock until the
original Series C Preferred Stock Certificate(s) (or evidence of loss, theft or
destruction thereof) to be converted are received by the Corporation or its
Transfer Agent. The Corporation shall issue and deliver shares of Common Stock
to an overnight courier not later than two (2) business days following receipt
of the original Preferred Stock Certificate(s) to be converted, and shall make
payments pursuant to the Certificate of Designation for the number of business
days such issuance and delivery is late.
<PAGE> 1
EXHIBIT 99.3
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of August
1, 1997, by and among CyberCash, Inc., a Delaware corporation, with
headquarters located at 2100 Reston Parkway, Third Floor, Reston, Virginia
20191 ("COMPANY"), and each of the purchasers set forth on the signature pages
hereto (the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Rule
506 under Regulation D ("REGULATION D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of
1933, as amended (the "1933 ACT");
B. The Company has authorized a new series of preferred stock, designated
as its Series C Convertible Preferred Stock (the "PREFERRED STOCK"), having the
rights, preferences and privileges set forth in the Certificate of
Designations, Rights and Preferences attached hereto as EXHIBIT "A" (the
"CERTIFICATE OF DESIGNATION");
C. The Preferred Stock is convertible into shares of Common Stock, par
value $.001 per share, of the Company (the "COMMON STOCK"), upon the terms and
subject to the limitations and conditions set forth in the Certificate of
Designation;
D. The Buyers desire to purchase and the Company desires to issue and
sell, upon the terms and conditions set forth in this Agreement, an aggregate
of fifteen thousand (15,000) shares of Preferred Stock, for an aggregate
purchase price of Fifteen Million Dollars ($15,000,000);
E. Each Buyer wishes to purchase, upon the terms and conditions stated in
this Agreement, the number of shares of Preferred Stock set forth immediately
below its name on the signature pages hereto; and
F. Contemporaneous with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement, in
the form attached hereto as EXHIBIT "B" (the "REGISTRATION RIGHTS AGREEMENT"),
pursuant to which the Company has agreed to provide certain registration rights
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws;
<PAGE> 2
NOW THEREFORE, the Company and each of the Buyers (severally and not
jointly) hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
a. Purchase of Preferred Shares. The Company shall
issue and sell to each Buyer and each Buyer severally agrees to purchase from
the Company such number of shares of Series C Preferred Stock (collectively,
together with any Preferred Stock issued in replacement thereof or as a
dividend thereon or otherwise with respect thereto in accordance with the terms
thereof, the "PREFERRED SHARES") and at the aggregate purchase price (the
"PURCHASE PRICE") as is set forth immediately below such Buyer's name on the
signature pages hereto. The issuance, sale and purchase of the Preferred
Shares shall take place at the closing (the "CLOSING"). Subject to the
satisfaction (or waiver) of the conditions thereto set forth in Section 6 and
Section 7 below, at the Closing, the Company shall issue and sell to each Buyer
and each Buyer shall purchase from the Company the aggregate number of
Preferred Shares which such Buyer is purchasing hereunder for the Purchase
Price. The aggregate number of Preferred Shares to be issued at the Closing is
Fifteen Thousand (15,000) for an aggregate purchase price of Fifteen Million
Dollars ($15,000,000).
b. Form of Payment. On the Closing Date (as defined
below), (i) each Buyer shall pay the Purchase Price for the Preferred Shares to
be issued and sold to it at the applicable Closing by wire transfer of
immediately available funds to the Company, in accordance with the Company's
written wiring instructions, against delivery of a duly executed certificate(s)
representing number of Preferred Shares which such Buyer is purchasing, and
(ii) the Company shall deliver such certificate(s) against delivery of such
Purchase Price.
c. Closing Date. Subject to the satisfaction (or
waiver) of the conditions thereto set forth in Section 6 and Section 7 below,
the date and time of the issuance and sale of the Preferred Shares pursuant to
this Agreement (the "CLOSING DATE") shall be 10:00 a.m. Eastern Time on August
5, 1997 or such other mutually agreed upon time. The Closing shall occur on
the Closing Date at the offices of the Company at 2100 Reston Parkway, Third
Floor, Reston, Virginia 20191.
2. BUYERS' REPRESENTATIONS AND WARRANTIES.
Each Buyer severally (and not jointly) represents and warrants to the
Company solely as to such Buyer that:
a. Investment Purpose. As of the date hereof, the Buyer
is purchasing the Preferred Shares and the shares of Common Stock issuable upon
conversion thereof (the "CONVERSION SHARES") and, collectively with the
Preferred Shares, the "SECURITIES") for its own account for investment only and
not with a view
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towards the public sale or distribution thereof. Pursuant to Section 2(a) of
the Registration Rights Agreement, the Company has agreed to file a
registration statement for the resale of the Conversion Shares, and further
acknowledges the Buyer may sell the Conversion Shares in accordance therewith.
b. Accredited Investor Status. The Buyer is an
"accredited investor" as that term is defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. The Buyer understands that
the Securities are being offered and sold to it in reliance upon specific
exemptions from the registration requirements of United States federal and
state securities laws and that the Company is relying upon the truth and
accuracy of, and the Buyer's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Buyer set forth herein in
order to determine the availability of such exemptions and the eligibility of
the Buyer to acquire the Securities.
d. Information. The Buyer and its advisors, if any,
have been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by the Buyer or its advisors. The Buyer
and its advisors, if any, have been afforded the opportunity to ask questions
of the Company and have received what the Buyer believes to be satisfactory
answers to any such inquiries. Neither such inquiries nor any other due
diligence investigation conducted by Buyer or any of its advisors or
representatives shall modify, amend or affect Buyer's right to rely on the
Company's representations and warranties contained in Section 3 below. The
Buyer understands that its investment in the Securities involves a significant
degree of risk and that the market price of the Common Stock has been volatile
and that no representation is being made as to the future value of the Common
Stock. The Buyer has the knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of an investment in
the Securities and has the ability to bear the economic risks of an investment
in the Securities.
e. Governmental Review. The Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of the
Securities.
f. Transfer or Resale. The Buyer understands that (i)
the Securities have not been and, except as provided in the Registration Rights
Agreement, are not being registered under the 1933 Act or any applicable state
securities laws, and may not be transferred unless (a) subsequently included in
an effective registration statement under the 1933 Act, or (b) the Buyer shall
have delivered to the Company an opinion of counsel (which opinion shall be
reasonably acceptable to the Company) to the effect that the Securities to be
sold or transferred may be sold or transferred pursuant to an exemption from
such registration or (c) sold pursuant to Rule 144 promulgated under the 1933
Act (or a successor rule); (ii) any sale of such Securities made in reliance on
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<PAGE> 4
Rule 144 may be made only in accordance with the terms of said Rule and
further, if said Rule is not applicable, any resale of such Securities under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the 1933 Act)
may require compliance with some other exemption under the 1933 Act or the
rules and regulations of the SEC thereunder; and (iii) neither the Company nor
any other person is under any obligation to register such Securities under the
1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder (in each case, other than pursuant to
the Registration Rights Agreement). Notwithstanding the foregoing, each Buyer
may pledge the Securities as collateral in connection with a bona fide margin
account or other lending arrangement in the ordinary course of Buyer's business
provided that such Buyer concludes that such pledge is exempt from the
registration requirements under the 1933 Act.
g. Legends. The Buyer understands that the Preferred
Shares and until such time as the Conversion Shares have been registered under
the 1933 Act, as contemplated by the Registration Rights Agreement, the
Conversion Shares may bear a restrictive legend in substantially the following
form (and a stop-transfer order may be placed against transfer of the
certificates for such Securities):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
securities have been acquired for investment and may not be sold,
transferred or assigned in the absence of an effective registration
statement for the securities under said Act, or an opinion of counsel,
in form, substance and scope reasonably acceptable to the Company,
that registration is not required under said Act."
The legend set forth above shall be removed and the Company shall
issue a certificate without such legend to the holder of any Security upon
which it is stamped, if, unless otherwise required by applicable state
securities laws, (a) such Security is registered for sale under an effective
registration statement filed under the 1933 Act, or (b) such holder provides
the Company with an opinion of counsel, in form, substance and scope reasonably
acceptable to the Company, to the effect that a public sale or transfer of such
Security may be made without registration under the 1933 Act and such Security
is so sold or transferred or (c) such holder provides the Company with
reasonable assurances that such Security can be sold pursuant to Rule 144(k)
under the 1933 Act (or a successor rule thereto) without any restriction as to
the number of Securities acquired as of a particular date that can then be
immediately sold. The Buyer agrees (and each person to whom the Buyer
transfers Securities in a private transaction shall agree as a condition to the
consummation of such transaction) to sell all Securities, including those
represented by a certificate(s) from which the legend has been removed, in
compliance with applicable prospectus delivery requirements, if any.
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h. Authorization; Enforcement. This Agreement and the
Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of the Buyer and are valid and binding agreements of
the Buyer enforceable in accordance with their terms.
i. Residency. The Buyer is a resident of the
jurisdiction set forth immediately below such Buyer's name on the signature
pages hereto.
j. No General Solicitation. The Buyer has not been
offered the Securities by any form of general solicitation or general
advertising.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Buyer that:
a. Organization and Qualification. The Company and each
of its Subsidiaries (as defined below), if any, is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated, with full power and authority
(corporate and other) to own, lease, use and operate its properties and to
carry on its business as and where now owned, leased, used, operated and
conducted. SCHEDULE 3(A) sets forth a list of all of the Subsidiaries of the
Company and the jurisdiction in which each is incorporated. The Company and
each of its Subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the nature of
the business conducted by it makes such qualification necessary except where
the failure to be so qualified or in good standing would not have a Material
Adverse Effect. "MATERIAL ADVERSE EFFECT" means any material adverse effect on
the operations, assets, financial condition or prospects of the Company or its
Subsidiaries, if any, taken as a whole, or on the transactions contemplated
hereby or by the agreements or instruments to be entered into in connection
herewith. "SUBSIDIARIES" means any corporation or other organization, whether
incorporated or unincorporated, in which the Company owns, directly or
indirectly, any equity or other ownership interest and in which such ownership
interest entitles the Company to elect a majority of the Board of Directors or
similar governing body.
b. Authorization; Enforcement. (i) The Company has all
requisite corporate power and authority to file and perform its obligations
under the Certificate of Designation and to enter into and perform this
Agreement and the Registration Rights Agreement and to consummate the
transactions contemplated hereby and thereby and to issue the Securities, in
accordance with the terms hereof and thereof, (ii) the execution and delivery
of this Agreement and the Registration Rights Agreement by the Company and the
consummation by it of the transactions contemplated hereby and thereby
(including without limitation the filing of the Certificate of Designation, the
issuance of the Preferred Shares and the issuance and reservation for issuance
of the Conversion Shares issuable upon conversion or exercise thereof) have
been duly
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<PAGE> 6
authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors, or its shareholders is
required, (iii) this Agreement has been duly executed and delivered and, prior
to the Closing, the Certificate of Designation will have been duly filed by the
Company, and (iv) each of this Agreement and the Certificate of Designation
constitutes, and upon execution and delivery by the Company of the Registration
Rights Agreement, such instrument will constitute, a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with
its terms.
c. Capitalization. As of the date hereof, the
authorized capital stock of the Company consists of (i) 25,000,000 shares of
Common Stock of which, as of July 29, 1997, 10,900,313 shares are issued and
outstanding, 2,971,429 shares are reserved for issuance pursuant to the
Company's stock option plans, 456,419 shares are reserved for issuance pursuant
to the Company's employee stock purchase plan, 50,000 shares are reserved for
issuance pursuant to securities (other than the Preferred Shares) exercisable
for, or convertible into or exchangeable for shares of Common Stock and
2,610,000 shares are reserved for issuance upon conversion of the Preferred
Shares (subject to adjustment pursuant to the Company's covenant set forth in
Section 4(h) below); and (ii) 5,000,000 shares of preferred stock, no shares of
which are issued and outstanding. All of such outstanding shares of capital
stock are, or upon issuance will be, duly authorized, validly issued, fully
paid and nonassessable. No shares of capital stock of the Company are subject
to preemptive rights or any other similar rights of the stockholders of the
Company or any liens or encumbrances imposed through the actions or failure to
act of the Company. Except as disclosed in SCHEDULE 3(C), as of the effective
date of this Agreement, (i) there are no outstanding options, warrants, scrip,
rights to subscribe for, puts, calls, rights of first refusal, agreements,
understandings, claims or other commitments or rights of any character
whatsoever relating to, or securities or rights convertible into or
exchangeable for any shares of capital stock of the Company or any of its
Subsidiaries, or arrangements by which the Company or any of its Subsidiaries
is or may become bound to issue additional shares of capital stock of the
Company or any of its Subsidiaries, and (ii) there are no agreements or
arrangements under which the Company or any of its Subsidiaries is obligated to
register the sale of any of its or their securities under the 1933 Act (except
the Registration Rights Agreement) and (iii) there are no anti-dilution or
price adjustment provisions contained in any security issued by the Company (or
in any agreement providing rights to security holders) that will be triggered
by the issuance of the Preferred Shares or Conversion Shares. The Company has
furnished to the Buyer true and correct copies of the Company's Certificate of
Incorporation as in effect on the date hereof ("CERTIFICATE OF INCORPORATION"),
the Company's By-laws, as in effect on the date hereof (the "BY-LAWS"), and the
terms of all securities convertible into or exercisable for Common Stock of the
Company and the material rights of the holders thereof in respect thereto.
d. Issuance of Shares. The Preferred Shares and
Conversion Shares are duly authorized and, upon issuance in accordance with the
terms of this Agreement
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(including the issuance of the Conversion Shares upon conversion of the
Preferred Shares in accordance with the Certificate of Designation) will be
validly issued, fully paid and non-assessable, and free from all taxes, liens
and charges with respect to the issue thereof and shall not be subject to
preemptive rights or other similar rights of stockholders of the Company. The
term Conversion Shares includes the shares of Common Stock issuable upon
conversion of the Preferred Shares, including without limitation, such
additional shares, if any, as are issuable as a result of the events described
in Section 2(c) of the Registration Rights Agreement. The Company understands
and acknowledges the potentially dilutive effect to the Common Stock of the
issuance of the Conversion Shares upon conversion of the Preferred Shares. The
Company further acknowledges that its obligation to issue Conversion Shares
upon conversion of the Preferred Shares in accordance with this Agreement and
the Certificate of Designation is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
stockholders of the Company.
e. No Conflicts. The execution, delivery and
performance of this Agreement and the Registration Rights Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the filing of the
Certificate of Designation and the issuance and reservation for issuance of the
Conversion Shares) will not (i) conflict with or result in a violation of any
provision of the Certificate of Incorporation or By-laws or (ii) violate or
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which with notice or lapse of time or both could become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to
which the Company or any of its Subsidiaries is a party, or result in a
violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations) applicable to the Company or
any of its Subsidiaries or by which any property or asset of the Company or any
of its Subsidiaries is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect).
Neither the Company nor any of its Subsidiaries is in violation of its
Certificate of Incorporation, By-laws or other organizational documents and
neither the Company nor any of its Subsidiaries is in default (and no event has
occurred which with notice or lapse of time or both could put the Company or
any of its Subsidiaries in default) under, and neither the Company nor any of
its Subsidiaries has taken any action or failed to take any action that would
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its Subsidiaries is a party or by which any property or assets of the
Company or any of its Subsidiaries is bound or affected, except for possible
defaults as would not, individually or in the aggregate, have a Material
Adverse Effect. The businesses of the Company and its Subsidiaries, if any, are
not being conducted, and shall not be conducted so long as a Buyer owns any of
the Securities, in violation of any law, ordinance or regulation of any
governmental entity.
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<PAGE> 8
Except as specifically contemplated by this Agreement and as required under the
1933 Act and any applicable state securities laws and the rules of the Nasdaq
National Market ("NASDAQ"), the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court
or governmental agency or any regulatory or self regulatory agency in order for
it to execute, deliver or perform any of its obligations under this Agreement
or the Registration Rights Agreement in accordance with the terms hereof or
thereof. Except as disclosed in SCHEDULE 3(E), all consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior
to the date hereof. The Company is not in violation of the listing
requirements of Nasdaq and does not reasonably anticipate that the Common Stock
will be delisted by Nasdaq in the foreseeable future. The Company is unaware
of any facts or circumstances which might reasonably be expected to give rise
to any of the foregoing.
f. SEC Documents, Financial Statements. Since December
31, 1995, the Company has timely filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC pursuant
to the reporting requirements of the Exchange Act of 1934, as amended (the
"1934 ACT") (all of the foregoing filed prior to the date hereof and all
exhibits included therein and financial statements and schedules thereto and
documents (other than exhibits) incorporated by reference therein, being
hereinafter referred to herein as the "SEC DOCUMENTS"). The Company has
delivered to each Buyer true and complete copies of the SEC Documents, except
for such exhibits and incorporated documents. As of their respective dates,
the SEC Documents complied in all material respects with the requirements of
the 1934 Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time
they were filed with the SEC, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. As of their respective dates, the
financial statements of the Company included in the SEC Documents complied as
to form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto. Such
financial statements have been prepared in accordance with generally accepted
accounting principles, consistently applied, during the periods involved
(except (i) as may be otherwise indicated in such financial statements or the
notes thereto, or (ii) in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed or summary
statements) and fairly present in all material respects the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). Except as set forth in the financial
statements of the Company included in the SEC Documents, the Company has no
liabilities, contingent or otherwise, other than (i) liabilities incurred in
the ordinary course of business subsequent to December 31, 1996 and (ii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under generally accepted
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accounting principles to be reflected in such financial statements, which,
individually or in the aggregate, are not material to the financial condition
or operating results of the Company.
g. Absence of Certain Changes. Except for losses
incurred in the ordinary course of business that have been publicly disclosed
prior to the date hereof, since December 31, 1996, there has been no material
adverse change and no material adverse development in the assets, liabilities,
business, properties, operations, financial condition, results of operations or
prospects of the Company or any of its Subsidiaries.
h. Absence of Litigation. There is no action, suit,
claim, proceeding, inquiry or investigation before or by any court, public
board, government agency, self-regulatory organization or body pending or, to
the knowledge of the Company or any of its Subsidiaries, threatened against or
affecting the Company or any of its Subsidiaries that could have a Material
Adverse Effect. SCHEDULE 3(H) contains a complete list and summary description
of any pending or threatened proceeding against or affecting the Company or any
of its Subsidiaries, without regard to whether it would have a Material Adverse
Effect.
i. Patents, Copyrights, etc. The Company and each of
its Subsidiaries owns or possesses the requisite licenses or rights to use all
patents, patent rights, inventions, know-how, trade secrets, trademarks,
service marks, service names, trade names and copyrights ("INTELLECTUAL
PROPERTY") necessary to enable it to conduct its business as now operated (and,
except as set forth in SCHEDULE 3(I) hereof, to the best of the Company's
knowledge, as presently contemplated to be operated in the future); there is no
claim or action by any person pertaining to, or proceeding pending, or to the
Company's knowledge threatened which challenges the right of the Company or of
a Subsidiary with respect to any Intellectual Property necessary to enable it
to conduct its business as now operated (and, except as set forth in SCHEDULE
3(I) hereof, to the best of the Company's knowledge, as presently contemplated
to be operated in the future); to the best of the Company's knowledge, the
Company's or its Subsidiaries, current and intended products, services and
processes do not infringe on any Intellectual Property or other rights held by
any person; and the Company is unaware of any facts or circumstances which
might give rise to any of the foregoing. The Company and each of its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of their Intellectual Property.
j. No Materially Adverse Contracts, Etc. Neither the
Company nor any of its Subsidiaries is subject to any charter, corporate or
other legal restriction, or any judgment, decree, order, rule or regulation
which in the judgment of the Company's officers has or is expected in the
future to have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is a party to any contract or agreement which in the judgment of
the Company's officers has or is expected to have a Material Adverse Effect.
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k. Tax Status. Except as set forth on SCHEDULE 3(K),
the Company and each of its Subsidiaries has made or filed all federal and
state income and all other tax returns, reports and declarations required by
any jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on
its books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
l. Certain Transactions. Except as set forth on
SCHEDULE 3(L) and except for arm's length transactions pursuant to which the
Company or any of its Subsidiaries makes payments in the ordinary course of
business upon terms no less favorable than the Company or any of its
Subsidiaries could obtain from third parties and other than the grant of stock
options disclosed on SCHEDULE 3(C), none of the officers, directors, or
employees of the Company is presently a party to any transaction with the
Company or any of its Subsidiaries (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director,
trustee or partner.
m. Disclosure. All information relating to or
concerning the Company or any of its Subsidiaries set forth in this Agreement
and provided to the Buyers pursuant to Section 2(d) hereof and otherwise in
connection with the transactions contemplated hereby is, taken as a whole, true
and correct in all material respects and the Company has not omitted to state
any material fact necessary in order to make the statements made herein or
therein, in light of the circumstances under which they were made, not
misleading. Except for the transactions contemplated hereby, no event or
circumstance has occurred or exists with respect to the Company or any of its
Subsidiaries or its or their business, properties, prospects, operations or
financial conditions, which, under applicable law, rule or regulation, requires
public disclosure or announcement by the Company but which has not been so
publicly announced or disclosed (assuming for this purposes that the Company's
reports filed under the 1934 Act are being incorporated into an effective
registration statement filed by the Company under the 1933 Act).
n. Acknowledgment Regarding Buyers' Purchase of
Preferred Shares. The Company acknowledges and agrees that the Buyers are
acting solely in the capacity of arm's length purchasers with respect to this
Agreement and the transactions
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contemplated hereby. The Company further acknowledges that no Buyer is acting
as a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to this Agreement and the transactions contemplated hereby and any
advice given by any Buyer or any of their respective representatives or agents
in connection with this Agreement and the transactions contemplated hereby is
merely incidental to the Buyers, purchase of the Preferred Shares. The Company
further represents to each Buyer that the Company's decision to enter into this
Agreement has been based solely on the independent evaluation of the Company
and its representatives.
o. No Integrated Offering. Neither the Company, nor any
of its affiliates, nor any person acting on its or their behalf, has directly
or indirectly made any offers or sales in any security or solicited any offers
to buy any security under circumstances that would require registration under
the 1933 Act of the issuance of the Securities to the Buyers. The issuance of
the Securities to the Buyers will not be integrated with any other issuance of
the Company's securities (past, current or future) which requires stockholder
approval under the rules of The Nasdaq Stock Market.
p. No Brokers. The Company has taken no action which
would give rise to any claim by any person for brokerage commissions, finder's
fees or similar payments relating to this Agreement or the transactions
contemplated hereby, except for dealings with Concorde Capital Corporation
Limited, whose commissions and fees will be paid for by the Company.
q. Permits; Compliance. The Company and each of its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and to
carry on its business as it is now being conducted (collectively, the "COMPANY
PERMITS"), and there is no action pending or, to the knowledge of the Company,
threatened regarding suspension or cancellation of any of the Company Permits.
Neither the Company nor any of its Subsidiaries is in conflict with, or in
default or violation of, any of the Company Permits or any law or regulation,
except for any such conflicts, defaults or violations which, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect. During the period commencing on December 31, 1996 and ending on the
date hereof, neither the Company nor any of its Subsidiaries has received any
notification with respect to possible conflicts, defaults or violations of
applicable laws, except for notices relating to possible conflicts, defaults or
violations, which conflicts, defaults or violations would not have a Material
Adverse Effect.
r. Environmental Matters.
(i) Except as set forth in SCHEDULE 3(r), there
are, to the Company's knowledge, with respect to the Company or any of its
Subsidiaries or any predecessor of the Company, no past or present violations
of Environmental Laws (as defined below), releases of any material into the
environment, actions, activities,
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circumstances, conditions, events, incidents, or contractual obligations which
may give rise to any common law environmental liability or any liability under
the Comprehensive Environmental Response, Compensation and Liability Act of
1980 or similar federal, state, local or foreign laws and neither the Company
nor any of its Subsidiaries has received any notice with respect to any of the
foregoing, nor is any action pending or, to the Company's knowledge, threatened
in connection with any of the foregoing. The term "ENVIRONMENTAL LAWS" means
all federal, state, local or foreign laws relating to pollution or protection
of human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants contaminants, or toxic or
hazardous substances or wastes (collectively, "HAZARDOUS MATERIALS") into the
environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all authorizations, codes, decrees, demands or
demand letters, injunctions, judgments, licenses, notices or notice letters,
orders, permits, plans or regulations issued, entered, promulgated or approved
thereunder.
(ii) Other than those that are or were stored,
used or disposed of in compliance with applicable law, no Hazardous Materials
are contained on or about any real property currently owned, leased or used by
the Company or any of its Subsidiaries, and no Hazardous Materials were
released on or about any real property previously owned, leased or used by the
Company or any of its Subsidiaries during the period the property was owned,
leased or used by the Company or any of its Subsidiaries, except in the normal
course of the Company's or any of its Subsidiaries' business.
(iii) Except as set forth in SCHEDULE 3(r), there
are no underground storage tanks on or under any real property owned, leased or
used by the Company or any of its Subsidiaries that are not in compliance with
applicable law.
s. Title to Property. The Company and its Subsidiaries
own no real property and have good and marketable title to all personal
property owned by them which is material to the business of the Company and its
Subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in Schedule 3(s) or such as would not have
a Material Adverse Effect. Any real property and facilities held under lease
by the Company and its Subsidiaries are held by them under valid, subsisting
and enforceable leases with such exceptions as would not have a Material
Adverse Effect.
t. Insurance. The Company and each of its Subsidiaries
are insured by insurers of recognized financial responsibility against such
losses and risks and in such amounts as management of the Company believes to
be prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has any
reason to believe that it will not be able to
12
<PAGE> 13
renew its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not have a Material Adverse Effect.
u. Internal Accounting Controls. The Company and each
of its Subsidiaries maintain a system of internal accounting controls
sufficient, in the judgment of the Company's board of directors, to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's
general or specific authorization and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
4. COVENANTS.
a. Best Efforts. The parties shall use their best
efforts to satisfy timely each of the conditions described in Section 6 and 7
of this Agreement.
b. Form D; Blue Sky Laws. The Company agrees to file a
Form D with respect to the Securities as required under Regulation D and to
provide a copy thereof to each Buyer promptly after such filing. The Company
shall, on or before the Closing Date, take such action as the Company shall
reasonably determine is necessary to qualify the Securities for sale to the
Buyers at the applicable closing pursuant to this Agreement under applicable
securities or "blue sky" laws of the states of the United States (or to obtain
an exemption from such qualification), and shall provide evidence of any such
action so taken to each Buyer on or prior to the Closing Date.
c. Reporting Status; Eligibility to Use Form S-3. The
Company's Common Stock is registered under Section 12(g) of the 1934 Act. So
long as any Buyer beneficially owns any of the Securities, the Company shall
timely file all reports required to be filed with the SEC pursuant to the 1934
Act, and the Company shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would permit such termination. The Company currently
meets, and will take all necessary action to continue to meet, the "registrant
eligibility" requirements set forth in the general instructions to Form S-3.
d. Use of Proceeds. The Company shall use the proceeds
from the sale of the Preferred Shares for working capital. Pending such uses,
the Company will invest the proceeds in short-term and investment grade
obligations.
e. Additional Equity Capital; Right of First Refusal.
Subject to the exceptions described below, the Company agrees that during the
period beginning on the date hereof and ending one hundred eighty (180) days
following the Closing Date
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<PAGE> 14
(the "LOCK-UP PERIOD"), the Company will not, without the prior written consent
of a majority-in-interest of the Buyers, negotiate or contract with any party
to obtain additional equity financing (including debt financing with an equity
component). In addition, subject to the exceptions described below, the
Company will not conduct any equity financing (including debt with an equity
component) ("FUTURE OFFERINGS") during the period beginning on the last day of
the Lock-Up Period and ending one hundred eighty (180) days thereafter unless
it shall have first delivered to each Buyer, at least fifteen (15) business
days prior to the closing of such Future Offering, written notice describing
the proposed Future Offering, including the terms and conditions thereof, and
providing each Buyer an option during the ten (10) day period following
delivery of such notice to purchase its pro rata share (based on the ratio that
the number of Preferred Shares purchased by it hereunder bears to the aggregate
number of Preferred Shares purchased hereunder) of the securities being offered
in the Future Offering on the same terms as contemplated by such Future
Offering (the limitations referred to in this and the immediately preceding
sentence are collectively referred to as the "CAPITAL RAISING LIMITATIONS").
The Capital Raising Limitations shall not apply to any transaction involving
(i) issuances of securities in a firm commitment underwritten public offering
(excluding a continuous offering pursuant to Rule 415 under the 1933 Act) or
(ii) issuances of securities in connection with a merger, consolidation or sale
of assets, or in connection with any strategic partnership or joint venture
(the primary purpose of which is not to raise equity capital), or in connection
with the disposition or acquisition of a business, product or license by the
Company. The Capital Raising Limitations also shall not apply to the issuance
of securities upon exercise or conversion of the Company's options, warrants or
other convertible securities outstanding as of the date hereof or to the grant
of additional options or warrants, or the issuance of additional securities,
under any Company stock option or restricted stock plan existing on the date
hereof or, if established hereafter, approved by a majority of the Company's
disinterested directors or the issuance of Common Stock at the market price
prevailing on the date of issuance to employees and directors wishing to
purchase additional shares on terms approved by a majority of the disinterested
members of the Board of Directors.
f. Expenses. The Company shall reimburse Rose Glen
Capital Management, L.P. ("RGC") for all expenses incurred by it in connection
with the negotiation, preparation, execution, delivery and performance of this
Agreement and the other agreements to be executed in connection herewith,
including, without limitation, attorneys' and consultants' fees and expenses.
The Company's obligation to reimburse RGC's expenses under this Section 4(f)
shall be limited to Thirty-Five Thousand Dollars ($35,000).
g. Financial Information. The Company agrees to send
the following reports to each Buyer holding Preferred Shares: (i) within ten
(10) days after the filing with the SEC, a copy of its Annual Report on Form
10-K, its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K;
(ii) within one (1) day after release, copies of all press releases issued by
the Company or any of its
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<PAGE> 15
Subsidiaries; and (iii) contemporaneously with the making available or giving
to the stockholders of the Company, copies of any notices or other information
the Company makes available or gives to such stockholders.
h. Reservation of Shares. The Company shall at all
times have authorized, and reserved for the purpose of issuance, a sufficient
number of shares of Common Stock to provide for the full conversion of the
outstanding Preferred Shares and issuance of the Conversion Shares in
connection therewith (based on the Conversion Price of the Preferred Shares in
effect from time to time). The Company shall not reduce the number of shares
of Common Stock reserved for issuance upon conversion of the Preferred Shares
without the consent of each Buyer, which consent will not be unreasonably
withheld. The Company shall use its best efforts at all times to maintain the
number of shares of Common Stock so reserved for issuance at no less than two
(2) times the number that is then actually issuable upon full conversion of the
Preferred Shares (based on the Conversion Price of the Preferred Shares in
effect from time to time). If at any time the number of shares of Common Stock
authorized and reserved for issuance is below the number of Conversion Shares
issued and issuable upon conversion or exercise of the Preferred Shares, the
Company will promptly take all corporate action necessary to authorize and
reserve a sufficient number of shares, including, without limitation, calling a
special meeting of shareholders to authorize additional shares, in the case of
an insufficient number of authorized shares, and using its best efforts to
obtain shareholder approval of an increase in such authorized number of shares.
i. Listing. The Company shall promptly secure the
listing of the Conversion Shares upon each national securities exchange or
automated quotation system, if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance) and shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all
Conversion Shares from time to time issuable upon conversion or exercise of the
Preferred Shares. The Company will obtain and maintain the listing and trading
of its Common Stock on Nasdaq, the Nasdaq SmallCap Market ("NASDAQ SMALLCAP"),
the New York Stock Exchange ("NYSE"), or the American Stock Exchange ("AMEX")
and will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the National Association of Securities
Dealers ("NASD") and such exchanges, as applicable. The Company shall promptly
provide to each Buyer copies of any notices it receives from Nasdaq regarding
the continued eligibility of the Common Stock for listing on Nasdaq.
j. Solvency. The Company (both before and after giving
effect to the transactions contemplated by this Agreement) is solvent and
currently the Company has no information that would lead it to reasonably
conclude that the Company would not have, nor does it intend to take any action
that would impair, its ability to pay its debts from time to time incurred in
connection therewith as such debts mature. The Company did not receive a
qualified opinion from its auditors with respect to its most
15
<PAGE> 16
recent fiscal year end and does not anticipate or know of any basis upon which
its auditors might issue a qualified opinion in respect of its current fiscal
year.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its transfer agent
to issue certificates, registered in the name of each Buyer or its nominee, for
the Conversion Shares in such amounts as specified from time to time by each
Buyer to the Company upon proper conversion or exercise of the Preferred Shares
(the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). Prior to registration of the
Conversion Shares under the 1933 Act, all such certificates shall bear the
restrictive legend specified in Section 2(g) of this Agreement. The Company
warrants that, assuming the Buyers are not "affiliates" of the Company under
applicable federal securities law, no instruction other than the Irrevocable
Transfer Agent Instructions referred to in this Section 5, and stop transfer
instructions to give effect to Section 2(f) hereof (in the case of the
Conversion Shares, prior to registration of the Conversion Shares under the
1933 Act), will be given by the Company to its transfer agent and that the
Securities shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement. Nothing in this Section shall affect in any way
the Buyer's obligations and agreement set forth in Section 2(g) hereof to
comply with all applicable prospectus delivery requirements, if any, upon
resale of the Securities. If a Buyer provides the Company with an opinion of
counsel, reasonably satisfactory to the Company in form, substance and scope,
that registration of a resale by such Buyer of any of the Securities is not
required under the 1933 Act, the Company shall permit the transfer, and, in the
case of the Conversion Shares, promptly instruct its transfer agent to issue
one or more certificates in such name and in such denominations as specified by
such Buyer. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyers, by vitiating the intent
and purpose of the transaction contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Section 5 will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Section, that the Buyers shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate transfer, without the necessity
of showing economic loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the
Preferred Shares to a Buyer at the Closing is subject to the satisfaction, at
or before the Closing Date of each of the following conditions thereto,
provided that these conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion:
16
<PAGE> 17
a. The applicable Buyer shall have executed this
Agreement and the Registration Rights Agreement, and delivered the same to the
Company.
b. The applicable Buyer shall have delivered the
Purchase Price in accordance with Section 1(b) above.
c. The Certificate of Designation shall have been
accepted for filing with the Secretary of State of Delaware.
d. The representations and warranties of the applicable
Buyer shall be true and correct in all material respects as of the date when
made and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and the
applicable Buyer shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the applicable Buyer
at or prior to the Closing Date.
e. No litigation, statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority
over the matters contemplated hereby which prohibits the consummation of any of
the transactions contemplated by this Agreement.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Preferred
Shares at the Closing is subject to the satisfaction, at or before the Closing
Date of each of the following conditions, provided that these conditions are
for such Buyer's sole benefit and may be waived by such Buyer at any time in
its sole discretion:
a. The Company shall have executed this Agreement and
the Registration Rights Agreement, and delivered the same to the Buyer.
b. The Certificate of Designation shall have been
accepted for filing with the Secretary of State of Delaware, and a copy thereof
certified by such Secretary of State shall have been delivered to such Buyer.
c. The Company shall have delivered to such Buyer duly
executed certificates (in such denominations as the Buyer shall request)
representing the Preferred Shares being so purchased in accordance with Section
1(b) above.
d. The Irrevocable Transfer Agent Instructions, in form
and substance satisfactory to a majority-in-interest of the Buyers, shall have
been delivered to and acknowledged in writing by the Company's Transfer Agent.
17
<PAGE> 18
e. The representations and warranties of the Company
shall be true and correct in all material respects as of the date when made and
as of the Closing Date as though made at such time (except for representations
and warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. The Buyer
shall have received a certificate or certificates, executed by the chief
executive officer of the Company, dated as of the Closing Date, to the
foregoing effect and as to such other matters as may be reasonably requested by
such Buyer including, but not limited to certificates with respect to the
Company's Certificate of Incorporation, By-laws and Board of Directors'
resolutions relating to the transactions contemplated hereby.
f. No litigation, statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority
over the matters contemplated hereby which prohibits the consummation of any of
the transactions contemplated by this Agreement.
g. The Conversion Shares shall have been authorized for
quotation on Nasdaq and trading in the Common Stock on Nasdaq shall not have
been suspended by the SEC or Nasdaq.
h. The Buyer shall have received an opinion of the
Company's counsel, dated as of the Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer and in substantially the same form as
EXHIBIT "C" attached hereto.
i. The Buyer shall have received an officer's
certificate described in Section 3(c) above, dated as of the Closing Date.
8. STANDSTILL AGREEMENT.
Each Buyer agrees that, for a period beginning on the date hereof and
ending twelve (12) months following the date on which it no longer owns any
Preferred Shares or Conversion Shares, it will not, directly or indirectly
(unless in any such cases specifically invited in writing to do so by the Board
of Directors of the Company), do any of the following:
(i) except as acquired pursuant to or otherwise
contemplated by this Agreement and the Certificate of Designation or as a
result of any stock split, stock dividend or similar recapitalization by the
Company, acquire, offer to acquire, or agree to acquire by purchase or
otherwise, individually or by joining a partnership, limited partnership,
syndicate or other "group" (as such term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT")) (any such
act, to
18
<PAGE> 19
"acquire"), any securities of the Company entitled to vote, or securities
convertible into or exercisable or exchangeable for such securities
(collectively, "VOTING SECURITIES") if, after such acquisition, the Buyer would
beneficially own 10% or more of the total combined voting power of the
Company's Voting Securities then outstanding;
(ii) form, join, participate in or encourage the
formation of a partnership, limited partnership, syndicate or other group for
the purpose of acquiring, holding or disposing of Voting Securities;
(iii) make, or in any way participate in, directly
or indirectly, any "solicitation" of "proxies" (as such terms are defined or
used in Regulation 14A under the Exchange Act) or become a "participant" in any
"election contest" (as such terms are defined or used in Rule 14a-11 under the
Exchange Act) with respect to the Company, or initiate, propose or otherwise
solicit stockholders of the Company for the approval of one or more stockholder
proposals with respect to the Company or induce or attempt to induce any other
person to initiate any stockholder proposal;
(iv) deposit any Voting Securities into a voting
trust or subject them to any voting agreement or other agreement or arrangement
with respect to the voting of such Voting Securities;
(v) otherwise act, directly or indirectly, alone or
in concert with others, to seek to control the management, Board of Directors,
policies or affairs of the Company, or solicit, propose, seek to effect or
negotiate with any other person with respect to any form of business
combination transaction with the Company or any affiliate thereof, or any
restructuring, recapitalization or similar transaction with respect to the
Company or any affiliate thereof, or announce or disclose an intent, purpose,
plan or proposal with respect to the Company or any voting securities
inconsistent with the provisions of this Agreement, including an intent,
purpose, plan or proposal that is conditioned on or would require the Company
to waive the benefit of or amend any provision of this Agreement, or assist,
participate in, facilitate or encourage or solicit any effort or attempt by any
person to do or seek to do any of the foregoing; and
(vi) encourage or render advice to or make any
recommendation or proposal to any person, or directly or indirectly
participate, aid and abet or otherwise induce any person to engage in any of
the actions prohibited by this Section 8 or to engage in any actions
inconsistent with such prohibitions.
9. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of Delaware without
regard to the principles of conflict of laws. The parties hereto hereby submit
to the exclusive jurisdiction of the United States Federal Courts located in
Delaware with respect to any
19
<PAGE> 20
dispute arising under this Agreement, the agreements entered into in connection
herewith or the transactions contemplated hereby or thereby.
b. Counterparts; Signatures by Facsimile. This
Agreement may be executed in two or more counterparts, all of which shall be
considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party.
This Agreement, once executed by a party, may be delivered to the other party
hereto by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
c. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. If any provision of this Agreement
shall be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Buyer
makes any representation, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be waived or amended other
than by an instrument in writing signed by the party to be charged with
enforcement.
f. Notices. Any notices required or permitted to be
given under the terms of this Agreement shall be sent by certified or
registered mail (return receipt requested) or delivered personally or by
courier (including a recognized overnight delivery service) or by facsimile and
shall be effective five days after being placed in the mail, if mailed by
regular U.S. mail, or upon receipt, if delivered personally or by courier
(including a recognized overnight delivery service) or by facsimile, in each
case addressed to a party. The addresses for such communications shall be:
If to the Company:
CyberCash, Inc.
2100 Reston Parkway, Third Floor
Reston, Virginia 20191
Attention: Chief Financial Officer
Facsimile: (703) 264-5928
With copy to:
Hogan & Hartson, L.L.P.
20
<PAGE> 21
111 South Calvert Street
Suite 1600
Baltimore, Maryland 21202
Attention: Michael J. Silver, Esq.
Facsimile: (410) 539-6981
If to a Buyer: To the address set forth immediately below such
Buyer's name on the signature pages hereto.
Each party shall provide notice to the other party of any change in
address.
g. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
assigns. Neither the Company nor any Buyer shall assign this Agreement or any
rights or obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, any Buyer may assign its rights hereunder to any
person that purchases Securities in a private transaction from a Buyer
(including a pledge of the Securities as collateral in connection with a bona
fide margin account or other lending arrangement in the ordinary course of
Buyer's business) or to any of its "affiliates," as that term is defined under
the 1934 Act, without the consent of the Company.
h. Third Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
i. Survival. The representations and warranties of the
Company and the agreements and covenants set forth in Sections 3, 4, 5, 8 and 9
shall survive the closing hereunder notwithstanding any due diligence
investigation conducted by or on behalf of the Buyers. The Company agrees to
indemnify and hold harmless each of the Buyers and all their officers,
directors, partners, employees and agents for loss or damage arising as a
result of or related to any breach or alleged breach by the Company of any of
its representations, warranties and covenants set forth in Sections 3 and 4
hereof or any of its covenants and obligations under this Agreement or the
Registration Rights Agreement, including advancement of expenses as they are
incurred.
j. Publicity. The Company and each of the Buyers shall
have the right to review a reasonable period of time before issuance of any
press releases, SEC, Nasdaq or NASD filings, or any other public statements
with specifically relating to the transactions contemplated hereby provided
that the Company shall be permitted, without prior approval of the Buyers, to
make any press release or SEC, Nasdaq or NASD filings with respect to the
transactions as may be required by applicable law and regulations.
21
<PAGE> 22
k. Further Assurances. Each party shall do and perform,
or cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
l. No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied
against any party.
22
<PAGE> 23
IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused
this Agreement to be duly executed as of the date first above written.
CYBERCASH, INC.
By: /s/ James J. Condon
-----------------------------------------
Name: James J. Condon
Its: Chief Financial Officer
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P.
By: RGC General Partner Corp.
By: /s/ Wayne D. Bloch
----------------------------------------
Wayne D. Bloch
Managing Director
RESIDENCE: Cayman Islands
ADDRESS:
c/o Rose Glen Capital Management, L.P.
Three Bala Plaza East
251 St. Asaphs Road
Suite 200
Bala Cynwyd, PA 19004
Facsimile: (610) 617-0570
Telephone: (610) 617-5900
AGGREGATE SUBSCRIPTION AMOUNT:
Number of Shares of Series C Convertible Preferred Stock: 10,000
Aggregate Purchase Price: $10,000,000.00
23
<PAGE> 24
IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused
this Agreement to be duly executed as of the date first above written.
HALIFAX FUND, L.P.
By: Palladin Group L.P., as attorney-in-fact
By: Palladin Capital Management LLC,
its general partner
By: /s/ Andrew Kaplan
------------------------------
Andrew Kaplan
Managing Director
RESIDENCE: Cayman Islands
ADDRESS:
c/o Palladin Group L.P.
40 West 57th Street
New York, NY 10019
Facsimile: (212) 698-0599
Telephone: (212) 698-0515
AGGREGATE SUBSCRIPTION AMOUNT:
Number of Shares of Series C Convertible Preferred Stock: 5,000
Aggregate Purchase Price: $5,000,000
24
<PAGE> 25
SCHEDULE 3(a)
<TABLE>
<CAPTION>
Subsidiary Jurisdiction of Incorporation
- ---------- -----------------------------
<S> <C>
CyberCash India Private Limited India
Reston Parkway I, Inc. Delaware
Reston Parkway II, Inc. Delaware
CyberCash International C.V. Netherlands
CC International B.V. Netherlands
CyberCash Japan C.V. Netherlands
CyberCash K.K. Japan
</TABLE>
25
<PAGE> 26
SCHEDULE 3(c)
(i)(A) Options to purchase 1,691,508 shares of common stock were outstanding
under the 1995 Stock Option Plan as of July 29, 1997.
(B) Options to purchase 47,158 shares of common stock were outstanding
under the 1995 Non-Employee Directors' Stock Option Plan as of July
29, 1997.
(C) Participating employees have rights to purchase common stock under the
Employee Stock Purchase Plan.
(D) Carnegie Mellon University holds warrants to purchase 50,000 shares
of common stock.
(E) The Company's director Garen Staglin has agreed to purchase 10,000
shares of common stock from the Company at the fair market price of
such stock.
(ii)(A) Amended and Restated Investors' Rights Agreement dated as of August
24, 1995 by and among CyberCash, Inc. and the other signatories
thereto, as amended on September 29, 1995
(B) Common Stock Purchase Agreement dated as of February 15, 1996 by and
between CyberCash, Inc. and Softbank Holdings, Inc.
(C) Warrant Certificate dated as of March 21, 1997
(D) Subscription Agreement dated as of March 21, 1997 by and between
CyberCash, Inc. and Carnegie Mellon University
(iii) None.
26
<PAGE> 27
SCHEDULE 3(e)
None.
27
<PAGE> 28
SCHEDULE 3(h)
None.
28
<PAGE> 29
SCHEDULE 3(i)
Digicash bv has registered the trademark "CyberCash" in the Benelux countries
on an "intent-to-use" basis. Digicash has filed an application, based on the
Benelux registration, to register the CyberCash mark in the United States. The
United States Patent and Trademark Office has issued an office action denying
the registration but has not taken final action on the registration
application.
29
<PAGE> 30
SCHEDULE 3(k)
None.
30
<PAGE> 31
SCHEDULE 3(l)
The Company's director Garen Staglin has agreed to purchase 10,000 shares of
common stock from the Company at the fair market price of such stock.
31
<PAGE> 32
SCHEDULE 3(r)
None.
32
<PAGE> 33
SCHEDULE 3(s)
None.
33
<PAGE> 1
EXHIBIT 99.4
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of August
1, 1997, by and among CyberCash, Inc., a Delaware corporation, with
headquarters located at 2100 Reston Parkway, Third Floor, Reston, Virginia
20191 (the "COMPANY"), and each of the undersigned (together with their
respective affiliates and any assignee or transferee of all of their respective
rights hereunder, the "INITIAL INVESTORS").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and
among the parties hereto of even date herewith (the "SECURITIES PURCHASE
AGREEMENT"), the Company has agreed, upon the terms and subject to the
conditions contained therein, to issue and sell to the Initial Investors shares
of its Series C Convertible Preferred Stock (the "PREFERRED STOCK") that are
convertible into shares (the "CONVERSION SHARES") of the Company's common stock
(the "COMMON STOCK"), upon the terms and subject to the limitations and
conditions set forth in the Certificate of Designations, Preferences and Rights
with respect to such Preferred Stock (the "CERTIFICATE OF DESIGNATION"); and
B. To induce the Initial Investors to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"1933 ACT"), and applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
of the Initial Investors hereby agree as follows: 1. DEFINITIONS.
a. As used in this Agreement, the following terms shall
have the following meanings:
(i) "INVESTORS" means the Initial Investors and
any transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
<PAGE> 2
(ii) "REGISTER," "REGISTERED," and "REGISTRATION"
refer to a registration effected by preparing and filing a Registration
Statement or Statements in compliance with the 1933 Act and pursuant to Rule
415 under the 1933 Act or any successor rule providing for offering securities
on a continuous basis ("RULE 415"), and the declaration or ordering of
effectiveness of such Registration Statement by the United States Securities
and Exchange Commission (the "SEC").
(iii) "REGISTRABLE SECURITIES" means the Conversion
Shares issued or issuable and any shares of capital stock issued or issuable as
a dividend on or in exchange for or otherwise with respect to any of the
foregoing.
(iv) "REGISTRATION STATEMENT" means a registration
statement of the Company under the 1933 Act.
b. Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings set forth in the Securities
Purchase Agreement.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare,
and, on or prior to the date which is twenty (20) days after the date of the
Closing under the Securities Purchase Agreement (the "CLOSING DATE"), file with
the SEC a Registration Statement on Form S-3 (or, if Form S-3 is not then
available, on such form of Registration Statement as is then available to
effect a registration of the Registrable Securities, subject to the consent of
the Initial Investors, which consent will not be unreasonably withheld) and
pursuant to Rule 415 covering the resale from time to time by the holders
thereof of the Registrable Securities underlying the Preferred Stock issued or
issuable pursuant to the Securities Purchase Agreement, which Registration
Statement, to the extent allowable under the 1933 Act and the Rules promulgated
thereunder (including Rule 416), shall state that such Registration Statement
also covers such indeterminate number of additional shares of Common Stock as
may become issuable upon conversion of the Preferred Stock (i) to prevent
dilution resulting from stock splits, stock dividends or similar transactions
or (ii) by reason of changes in the Conversion Price of the Preferred Stock in
accordance with the terms of the Certificate of Designation. The number of
shares of Common Stock initially included in such Registration Statement shall
be no less than two (2) times the number of Conversion Shares that are then
issuable upon conversion of the Preferred Stock without regard to any
limitation on the Investor's ability to convert the Preferred Stock.
b. Payments by the Company. The Company shall use its
best efforts to obtain effectiveness of the Registration Statement as soon as
practicable. If (except as specifically provided in the last sentence of this
paragraph) (i) the Registration Statement(s) covering the Registrable
Securities required to be filed by the Company pursuant to Section 2(a) hereof
is not declared effective by the SEC within ninety (90) days after the Closing
Date or if, after the Registration Statement has been declared effective by the
SEC, sales cannot be made pursuant to the Registration Statement, or (ii)
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the Common Stock is not listed or included for quotation on the Nasdaq National
Market ("NASDAQ"), the Nasdaq SmallCap Market ("NASDAQ SMALLCAP"), the New York
Stock Exchange (the "NYSE") or the American Stock Exchange (the "AMEX") after
being so listed or included for quotation, then the Company will make payments
to the Investors in such amounts and at such times as shall be determined
pursuant to this Section 2(c) as partial relief for the damages to the
Investors by reason of any such delay in or reduction of their ability to sell
the Registrable Securities (which remedy shall not be exclusive of any other
remedies available at law or in equity). The Company shall pay to each holder
of the Preferred Stock or Registrable Securities an amount equal to the
aggregate "Purchase Price" (as defined below) of the Preferred Stock
("AGGREGATE SHARE PRICE") multiplied by two hundredths (.020) times the sum of:
(i) the number of months (prorated for partial months) after the end of such
90-day period and prior to the date the Registration Statement is declared
effective by the SEC, provided, however, that there shall be excluded from such
period any delays which are solely attributable to changes required by the
Investors in the Registration Statement with respect to information relating to
the Investors, including, without limitation, changes to the plan of
distribution, or to the failure of the Investors to conduct their review of the
Registration Statement pursuant to Section 3(g) below in a reasonably prompt
manner; (ii) the number of months (prorated for partial months) that sales
cannot be made pursuant to the Registration Statement after the Registration
Statement has been declared effective (including, without limitation, when
sales cannot be made by reason of the Company's failure to properly supplement
or amend the prospectus included therein in accordance with the terms of this
Agreement); and (iii) the number of months (prorated for partial months) that
the Common Stock is not listed or included for quotation on Nasdaq, Nasdaq
SmallCap, NYSE or AMEX or that trading thereon is halted after the Registration
Statement has been declared effective. (For example, if the Registration
Statement becomes effective one (1) month after the end of such 90-day period,
the Company would pay $20,000 for each $1,000,000 of Aggregate Share Price. If
thereafter, sales could not be made pursuant to the Registration Statement for
an additional period of one (1) month, the Company would pay an additional
$20,000 for each $1,000,000 of Aggregate Share Price.) Such amounts shall be
paid in cash or, at each Investor's option, may be convertible into Common
Stock at the "CONVERSION PRICE" (as defined in the Certificate of Designation).
Any shares of Common Stock issued upon conversion of such amounts shall be
Registrable Securities. If the Investor desires to convert the amounts due
hereunder into Registrable Securities, it shall so notify the Company in
writing within two (2) business days of the date on which such amounts are
first payable in cash and such amounts shall be so convertible (pursuant to the
mechanics set forth under Article VI of the Certificate of Designation),
beginning on the last day upon which the cash amount would otherwise be due in
accordance with the following sentence. Payments of cash pursuant hereto shall
be made within five (5) days after the end of each period that gives rise to
such obligation, provided that, if any such period extends for more than thirty
(30) days, interim payments shall be made for each such thirty (30) day period.
The term "PURCHASE PRICE" means the purchase price paid by the Investors for
the Preferred Stock. Notwithstanding the foregoing, the Company shall not be
required to make any such payments (i) during any period in which sales cannot
be made under the Registration Statement or effectiveness is delayed due to any
act or omission to act by
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any Investor (such as a failure by an Investor to provide any information
required to be included in the Registration Statement or an attempt by any
Investor to effect a distribution inconsistent with the plan of distribution
set forth therein) or (ii) during an Allowed Delay (as defined in Section 3(e)
below) or (iii) during a Stand-Off Period (as defined in Section 4(f) below),
to the extent the aggregate number of days in any Stand-Off Period, together
with any Allowed Delay, does not exceed 120 days in any twelve (12) month
period.
c. Piggy-Back Registrations. Subject to the last
sentence of this Section 2(c), if at any time prior to the expiration of the
Registration Period (as hereinafter defined) the Company shall file with the
SEC a Registration Statement relating to an offering for its own account or the
account of others under the 1933 Act of any of its equity securities (other
than on Form S-4 or Form S-8 or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans), the Company shall send to each Investor who is
entitled to registration rights under this Section 2(c) written notice of such
filing and, if within ten (10) days after the effective date of such notice,
such Investor shall so request in writing, the Company shall include in such
Registration Statement all or any part of the Registrable Securities such
Investor requests to be registered, except that if, in connection with any
underwritten public offering for the account of the Company the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in the Registration Statement because, in
such underwriter(s)' judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Registration Statement only such limited
portion of the Registrable Securities with respect to which such Investor has
requested inclusion hereunder as the underwriter shall permit. Any exclusion of
Registrable Securities shall be made pro rata among the Investors seeking to
include Registrable Securities in proportion to the number of Registrable
Securities sought to be included by such Investors; provided, however, that the
Company shall not exclude any Registrable Securities unless the Company has
first excluded all outstanding securities, the holders of which are not
entitled to inclusion of such securities in such Registration Statement or are
not entitled to pro rata inclusion with the Registrable Securities; and
provided, further, however, that, after giving effect to the immediately
preceding proviso, any exclusion of Registrable Securities shall be made pro
rata with holders of other securities having the right to include such
securities in the Registration Statement other than holders of securities
entitled to inclusion of their securities in such Registration Statement by
reason of demand registration rights. No right to registration of Registrable
Securities under this Section 2(c) shall be construed to limit any registration
required under Section 2(a) hereof. If an offering in connection with which an
Investor is entitled to registration under this Section 2(c) is an underwritten
offering, then each Investor whose Registrable Securities are included in such
Registration Statement shall, unless otherwise agreed by the Company, offer and
sell such Registrable Securities in an underwritten offering using the same
underwriter or underwriters and, subject to the provisions of this Agreement,
on the same terms and conditions as other shares of Common Stock included in
such underwritten offering.
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d. Eligibility for Form S-3. The Company represents and
warrants that it meets the registrant eligibility and transaction requirements
for the use of Form S-3 for registration of a primary issuance of Common Stock
by the Company and for registration of the sale by the Initial Investors and
any other Investors of the Registrable Securities and the Company shall file
all reports required to be filed by the Company with the SEC in a timely manner
so as to maintain such eligibility for the use of Form S-3.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare promptly, and file with the
SEC not later than twenty (20) days after the Closing Date, a Registration
Statement with respect to the number of Registrable Securities provided in
Section 2(a), and thereafter use its best efforts to cause such Registration
Statement relating to Registrable Securities to become effective as soon as
possible after such filing, and, subject to any Allowed Delay, keep the
Registration Statement effective pursuant to Rule 415 at all times until such
date as is the earlier of (i) the date on which all of the Registrable
Securities have been sold and (ii) the date on which the Registrable Securities
(in the opinion of counsel to the Initial Investors) may be immediately sold
without restriction (including without limitation as to volume by each holder
thereof) without registration under the 1933 Act (the "REGISTRATION PERIOD")
(including under Rule 144(k)), which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any 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.
b. Subject to any Allowed Delay, the Company shall
prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to keep
the Registration Statement effective at all times during the Registration
Period, and, during such period, comply with the provisions of the 1933 Act
with respect to the disposition of all Registrable Securities of the Company
covered by the Registration Statement until such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof as set forth in the
Registration Statement. In the event the number of shares available under a
Registration Statement filed pursuant to this Agreement is insufficient to
cover all of the Registrable Securities issued or issuable upon conversion of
the Preferred Stock, the Company shall, if permitted, amend the Registration
Statement, or file a new Registration Statement (on the short form available
therefor, if applicable), so as to cover all of the Registrable Securities, in
each case, as soon as practicable, but in any event within twenty (20) business
days after the necessity therefor arises (based on the market price of the
Common Stock and other relevant factors on which the Company reasonably elects
to rely). The Company shall use its best efforts to
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<PAGE> 6
cause such amendment and/or new Registration Statement to become effective as
soon as practicable following the filing thereof. The provisions of Section
2(b) above shall be applicable with respect to such obligation, with the ninety
(90) days running from the day after the date on which the Company reasonably
first determines (or reasonably should have determined) the need therefor.
c. The Company shall furnish to each Investor whose
Registrable Securities are included in the Registration Statement and its legal
counsel (i) promptly after the same is prepared and publicly distributed, filed
with the SEC, or received by the Company, one copy of the Registration
Statement and any amendment thereto, each preliminary prospectus and prospectus
and each amendment or supplement thereto, and, in the case of the Registration
Statement referred to in Section 2(a), 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 such
Investor may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Investor. The Company will immediately
notify each Investor of the effectiveness of the Registration Statement or any
post-effective amendment.
d. The Company shall use reasonable efforts to (i)
register and qualify the Registrable Securities covered by the Registration
Statement under such other securities or "blue sky" laws of such jurisdictions
in the United States as the Investors who hold a majority in interest of the
Registrable Securities being offered reasonably request, (ii) prepare and file
in those jurisdictions such amendments (including post-effective amendments)
and supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (a) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (b) subject itself
to general taxation in any such jurisdiction, (c) file a general consent to
service of process in any such jurisdiction, (d) provide any undertakings that
cause the Company undue expense or burden, or (e) make any change in its
charter or bylaws, which in each case the Board of Directors of the Company
determines to be contrary to the best interests of the Company and its
stockholders.
e. As promptly as practicable after becoming aware of
such event, the Company shall notify each Investor of the happening of any
event, of which the Company has knowledge, as a result of which the prospectus
included in the Registration Statement, as then in effect, includes an untrue
statement of a material fact or omission to state a material fact required to
be stated therein or necessary to make the statements
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<PAGE> 7
therein not misleading, and use its best efforts promptly to prepare and file
with the SEC a supplement or amendment to, or document incorporated by
reference in, the Registration Statement to correct such untrue statement or
omission, and deliver such number of copies of such supplement or amendment to
each Investor as such Investor may reasonably request; provided that, for not
more than thirty (30) consecutive days (or not more than seventy-five (75)
consecutive days, provided that the event giving rise thereto is an acquisition
required to be reported in a Current Report on Form 8-K pursuant to Item 2
thereof, and further provided that the Company shall use its best efforts to
minimize the duration of such time period in the manner described below as soon
as possible following the occurrence of such event) for a total of not more
than ninety (90) days during any one year period, the Company may delay the
filing of such supplement, amendment or other document or other public
disclosure of the material non-public information concerning the Company, the
disclosure of which at the time is not, in the good faith opinion of the Board
of Directors of the Company, in the best interests of the Company and, in the
opinion of counsel to the Company, otherwise required (an "ALLOWED DELAY");
provided, further, that the Company shall promptly (i) 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
circumstances regarding) material non-public information giving rise to an
Allowed Delay and (ii) advise the Investors in writing to cease all sales under
the Registration Statement until the end of the Allowed Delay. Upon expiration
of the Allowed Delay, the Company shall again be bound by the first sentence of
this Section 3(e) with respect to the information giving rise thereto. The
Automatic Conversion Date (as defined in the Certificate of Designation) shall
be automatically extended by the number of days comprising Allowed Delays.
f. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order at the earliest possible moment and to notify each
Investor who holds Registrable Securities being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance of such order
and the resolution thereof.
g. The Company shall permit a single firm of counsel
designated by the Initial Investors to review the Registration Statement and
all amendments and supplements thereto (as well as all requests for
acceleration or effectiveness thereof) a reasonable period of time prior to
their filing with the SEC, and not file any document in a form to which such
counsel reasonably objects and will not request acceleration of the
Registration Statement without prior notice to such counsel, provided that, in
the event of the objection by such counsel, the Company's obligations to make
payments under Section 2(b) hereof shall be suspended until such objections are
withdrawn. The sections of the Registration Statement covering information
with respect to the Investors, the Investor's beneficial ownership of
securities of the Company or the Investors intended method of disposition of
Registrable Securities shall conform to the information provided to the Company
by each of the Investors.
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h. The Company shall make generally available to its
security holders as soon as practical, but not later than ninety (90) days
after the close of the period covered thereby, an earnings statement (in form
complying with the provisions of Rule 158 under the 1933 Act) covering a
twelve-month period beginning not later than the first day of the Company's
fiscal quarter next following the effective date of the Registration Statement.
i. At the request of any Investor, the Company shall
furnish, on the date that Registrable Securities are delivered to an
underwriter, if any, for sale in connection with the Registration Statement or,
if such securities are not being sold by an underwriter, on the date of
effectiveness thereof (i) an opinion, dated as of such date, from 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, if any, and the Investors and (ii) a letter,
dated such date, 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, if any, and the Investors.
j. The Company shall make available for inspection by
(i) any Investor, (ii) any underwriter participating in any disposition
pursuant to the Registration Statement, (iii) one firm of attorneys and one
firm of accountants or other agents retained by the Investors, and (iv) one
firm of attorneys retained by all such underwriters (collectively, the
"INSPECTORS") all pertinent financial and other records, and pertinent
corporate documents and properties of the Company (collectively, the
"RECORDS"), as shall be reasonably deemed necessary by each Inspector to enable
each Inspector to exercise its due diligence responsibility, and cause the
Company's officers, directors and employees to supply all information which any
Inspector may reasonably request for purposes of such due diligence; provided,
however, that each Inspector shall hold in confidence and shall not make any
disclosure (except to an Investor) of any Record or other information which the
Company determines in good faith to be confidential, and of which determination
the Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a material misstatement or material omission in
any Registration Statement, (b) the release of such Records is ordered pursuant
to a subpoena or other order from a court or government body of competent
jurisdiction, or (c) the information in such Records has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company shall not be required to disclose any
confidential information in such Records to any Inspector until and unless such
Inspector shall have entered into confidentiality agreements (in form and
substance satisfactory to the Company) with the Company with respect thereto,
substantially in the form of this Section 3(j). Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential. Nothing herein (or in
any other confidentiality agreement between the Company and any Investor)
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shall be deemed to limit the Investor's ability to sell Registrable Securities
in a manner which is otherwise consistent with applicable laws and regulations.
k. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a material misstatement or material omission in any Registration
Statement, (iii) the release of such information is ordered pursuant to a
subpoena or other order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this or any other agreement.
The Company agrees that it shall, upon learning that disclosure of such
information concerning an Investor is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt notice to
such Investor prior to making such disclosure, and allow the Investor, at its
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
l. The Company shall (i) cause all the Registrable
Securities covered by the Registration Statement to be listed on each national
securities exchange on which securities of the same class or series issued by
the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, or (ii) secure
the designation and quotation, of all the Registrable Securities covered by the
Registration Statement on the Nasdaq or, if not eligible for the Nasdaq on the
Nasdaq SmallCap and, without limiting the generality of the foregoing, to
arrange for at least two market makers to register with the National
Association of Securities Dealers, Inc. ("NASD") as such with respect to such
Registrable Securities.
m. The Company shall provide a transfer agent and
registrar, which may be a single entity, for the Registrable Securities not
later than the effective date of the Registration Statement.
n. The Company shall cooperate with the Investors who
hold Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to the Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or the Investors may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Investors may request, and, within three (3)
business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and
shall cause legal counsel selected by the Company to deliver, to the transfer
agent for the Registrable Securities (with copies to the Investors whose
Registrable Securities are included in such Registration Statement) an
instruction in the form attached hereto as EXHIBIT 1 and an opinion of such
counsel in the form attached hereto as EXHIBIT 2.
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o. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investors of
Registrable Securities pursuant to the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
a. It shall be a condition precedent to the obligations
of the Company to complete the registration pursuant to this Agreement with
respect to the Registrable Securities of a particular Investor that such
Investor shall furnish 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 three (3) business days prior to the first anticipated filing date of the
Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor.
b. Each Investor, by such Investor's 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 the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
c. In the event Investors holding a majority-in-interest
of the Registrable Securities being registered (with the approval of the
Initial Investors) determine to engage the services of an underwriter, each
Investor agrees to enter into and perform such Investor's 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 disposition of the
Registrable Securities, unless such Investor has notified the Company in
writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
d. Each Investor agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
3(e) or 3(f), such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or 3(f) and, if
so directed by the Company, such Investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a
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certificate of destruction) all copies in such Investor's possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice.
e. No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such Investor's
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 and any expenses in excess of those
payable by the Company pursuant to Section 5 below.
f. Each Investor, if so requested by the managing
underwriter in connection with a firm underwritten public offering of Common
Stock managed by an underwriter set forth on Schedule 1 hereto pursuant to an
effective registration statement, shall not convert any Preferred Shares for
ninety (90) days commencing upon the date specified by the Company (the
"Stand-Off Period"), but in no event sooner than ten (10) trading days after
such holder's receipt of the Company's request; provided, however, that:
(i) the Company may only request, and the holders of
Preferred Stock shall only be subject to, two (2) Stand-Off
Periods during the twenty-four (24) month period immediately
following the Closing Date and one (1) Stand-Off Period
thereafter (provided that, if the Stand-Off Period terminates
pursuant to clause (ii) below on any one occasion with respect
to the twenty-four (24) month period referred to above or on
any separate occasion with respect to the remaining period
thereafter, the Company may request and the holders will be
subject to a Stand-Off Period on one additional occasion
during such period);
(ii) the Market Stand-Off shall immediately terminate if the
registration statement for the underwritten public offering is
not declared effective on or before the thirtieth (30) trading
day after the Company's requested commencement date of the
Stand-Off Period; and
(iii) the Automatic Conversion Date (as defined in the
Certificate of Designation) shall be automatically extended by
the aggregate number of days for which the restrictions
imposed by the Stand-Off Period shall be effective.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualification fees, printers and accounting fees, the
fees and disbursements of counsel for the Company, and the
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reasonable fees and disbursements of one counsel (not to exceed, together with
other Investors' expenses associated with the transactions contemplated hereby,
$35,000) selected by the Investors pursuant to Section 3(g) hereof shall be
borne by the Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will
indemnify, hold harmless and defend (i) each Investor who holds such
Registrable Securities, (ii) the directors, officers, partners, employees,
agents and each person who controls any Investor within the meaning of the 1933
Act or the Securities Exchange Act of 1934, as amended (the "1934 ACT"), if
any, (iii) any underwriter (as defined in the 1933 Act) for the Investors, and
(iv) the directors, officers, partners, employees and each person who controls
any such underwriter within the meaning of the 1933 Act or the 1934 Act, if any
(each, an "INDEMNIFIED PERSON"), against any joint or several losses, claims,
damages, liabilities or expenses (collectively, together with actions,
proceedings or inquiries by any regulatory or self-regulatory organization,
whether commenced or threatened, in respect thereof, "CLAIMS") to which any of
them may become subject insofar as such Claims arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of a material fact in a
Registration Statement or the omission or alleged omission to state therein a
material fact required to be stated or necessary to make the statements therein
not misleading; (ii) any untrue statement or alleged untrue statement of a
material fact contained in the prospectus (as amended or supplemented, if the
Company files any amendment thereof or supplement thereto with the SEC) or the
omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading; or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities (the matters in the foregoing clauses (i) through (iii) being,
collectively, "VIOLATIONS"). Subject to the restrictions set forth in Section
6(c) with respect to the number of legal counsel, the Company shall reimburse
the Indemnified Person, promptly as such expenses are incurred and are due and
payable, for any reasonable legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim
arising out of or based upon a Violation which occurs in reliance upon and in
conformity with information furnished in writing to the Company by any
Indemnified Person or underwriter for such Indemnified Person expressly for use
in connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to Section 3(c) hereof; (ii) shall not apply
to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld; and (iii) shall not inure to the benefit of any
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Indemnified Person if the untrue statement or omission of material fact
contained in a preliminary prospectus, if any, was corrected on a timely basis
in the prospectus, as then amended or supplemented, such corrected prospectus
was timely made available by the Company pursuant to Section 3(c) hereof, and
the Indemnified Person was promptly advised in writing not to use the incorrect
prospectus prior to the use giving rise to a Violation and such Indemnified
Person, notwithstanding such advice, used it. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in
which an Investor is participating, each such Investor agrees severally and not
jointly to indemnify, hold harmless and defend, to the same extent and in the
same manner set forth in Section 6(a), the Company, each of its directors, each
of its officers who signs the Registration Statement, each person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act, any
underwriter and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any person who
controls such stockholder or underwriter within the meaning of the 1933 Act or
the 1934 Act (collectively and together with an Indemnified Person, an
"INDEMNIFIED PARTY"), against any Claim to which any of them may become
subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim
arises out of or is based upon any Violation by such Investor, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished to the Company by such
Investor expressly for use in connection with such Registration Statement; and
subject to Section 6(c) such Investor will reimburse any legal or other
expenses (promptly as such expenses are incurred and are due and payable)
reasonably incurred by them in connection with investigating or defending any
such Claim; provided, however, that the indemnity agreement contained in this
Section 6(b) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such Investor,
which consent shall not be unreasonably withheld; provided, further, however,
that the Investor shall be liable under this Agreement (including this Section
6(b) and Section 7) for only that amount as does not exceed the gross proceeds
to such Investor as a result of the sale of Registrable Securities pursuant to
such Registration Statement. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such Indemnified
Party and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section 6(b)
with respect to any preliminary prospectus shall not inure to the benefit of
any Indemnified Party if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on a timely basis in the
prospectus, as then amended or supplemented.
c. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against
any indemnifying party under this Section 6, deliver
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<PAGE> 14
to the indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and
any other party represented by such counsel in such proceeding. The
indemnifying party shall pay for only one separate legal counsel for the
Indemnified Persons or the Indemnified Parties, as applicable, and such legal
counsel shall be selected by Investors holding a majority-in-interest of the
Registrable Securities included in the Registration Statement to which the
Claim relates (with the approval of a majority-in-interest of the Initial
Investors), if the Investors are entitled to indemnification hereunder, or the
Company, if the Company is entitled to indemnification hereunder, as
applicable. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this Section 6, except to the extent that the
indemnifying party is actually prejudiced in its ability to defend such action.
The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due and
payable.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall
be entitled to contribution from any seller of Registrable Securities who was
not guilty of such fraudulent misrepresentation, and (iii) contribution
(together with any indemnification or other obligations under this Agreement)
by any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such Registrable
Securities.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation of
the SEC that
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may at any time permit the investors to sell securities of the Company to the
public without registration ("RULE 144"), the Company agrees to:
a. make and keep public information available, as those
terms are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and
other documents required of the Company under the 1933 Act and the 1934 Act so
long as the Company remains subject to such requirements (it being understood
that nothing herein shall limit the Company's obligations under Section 4(c) of
the Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor
owns Registrable Securities, promptly upon request, (i) a written statement by
the Company that it has complied with the reporting requirements of Rule 144,
the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed
by the Company, and (iii) such other information as may be reasonably requested
to permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically assignable by
an Investor to any transferee of at least 25% of the Registrable Securities
then held by such Investor if: (i) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment, (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned, (iii) following such transfer or assignment,
the further disposition of such securities by the transferee or assignee is
restricted under the 1933 Act and applicable state securities laws, (iv) at or
before the time the Company receives the written notice contemplated by clause
(ii) of this sentence, the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained herein, (v) such
transfer shall have been made in accordance with the applicable requirements of
the Securities Purchase Agreement, and (vi) such transferee shall be an
"ACCREDITED INVESTOR" as that term defined in Rule 501 of Regulation D
promulgated under the 1933 Act.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with written consent of the Company, each
of the Initial Investors (to the extent such Initial Investor still owns at
least 25% of the Registrable Securities
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originally purchased by it) and Investors who hold a majority interest of the
remaining Registrable Securities. Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon each Investor and the
Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
b. Any notices required or permitted to be given under
the terms hereof shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile and shall be effective five days
after being placed in the mail, if mailed by regular U.S. mail, or upon
receipt, if delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile, in each case addressed to a party.
The addresses for such communications shall be:
If to the Company:
CyberCash, Inc.
2100 Reston Parkway, Third Floor
Reston, Virginia 20191
Attention: Chief Financial Officer
Facsimile: (703) 264-5928
With copy to:
Hogan & Hartson, L.L.P.
111 South Calvert Street
Suite 1600
Baltimore, Maryland 21202
Attention: Michael J. Silver, Esq.
Facsimile: (410) 539-6981
If to an Investor: to the address set forth immediately below such Investor's
name on the signature pages to the Securities Purchase Agreement.
c. Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such right
or remedy, shall not operate as a waiver thereof.
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d. This Agreement shall be enforced, governed by and
construed in accordance with the laws of Delaware applicable to agreements made
and to be performed entirely within such State. In the event that any
provision of this Agreement is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any provision hereof which may prove invalid
or unenforceable under any law shall not affect the validity or enforceability
of any other provision hereof. The parties hereto hereby submit to the
exclusive jurisdiction of the United States Federal Courts located in Delaware
with respect to any dispute arising under this Agreement or the transactions
contemplated hereby.
e. This Agreement and the Securities Purchase Agreement
(including all schedules and exhibits thereto) constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein. This Agreement and the
Securities Purchase Agreement supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a
party, may be delivered to the other party hereto by facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this
Agreement.
i. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the
other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
j. Except as otherwise provided herein, all consents and
other determinations to be made by the Investors pursuant to this Agreement
shall be made by Investors holding a majority of the Registrable Securities,
determined as if the all of the shares of Preferred Stock then outstanding have
been converted into or exercised for Registrable Securities.
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k. The language used in this Agreement will be deemed to
be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
IN WITNESS WHEREOF, the Company and the undersigned Initial Investors
have caused this Agreement to be duly executed as of the date first above
written.
CYBERCASH, INC.
By: /s/ James J. Condon
-------------------------
Name: James J. Condon
Its: Chief Financial Officer
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P., Investment Manager
By: RGC General Partner Corp.
By: /s/ Wayne D. Bloch
-----------------------
Wayne D. Bloch
Managing Director
HALIFAX FUND, L.P.
By: Palladin Group, L.P., as attorney-in-fact
By: Palladin Capital Management LC, its general partner
By: /s/ Andrew Kaplan
--------------------
Andrew Kaplan
Managing Director
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SCHEDULE 1
APPROVED UNDERWRITERS
Goldman, Sachs
Merrill Lynch
Morgan Stanley
Lehman Brothers
Smith Barney
Salomon Brothers
JP Morgan
PaineWebber
Donaldson, Lufkin & Jenrette
Bear, Stearns & Co.
First Boston
Lazard Freres
Hambrecht & Quist
Robertson, Stephens & Company
Alex. Brown & Sons
Cowen & Company
Montgomery Securities
Prudential Securities
19
