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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): February 5, 1998
CYBERCASH, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-27470 54-1725021
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification No.)
incorporation)
2100 Reston Parkway, Reston, Virginia 20191
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 620-4200
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ITEM 5. OTHER EVENTS.
On February 5, 1998, CyberCash, Inc. (the "Company") issued 15,000
shares of Series D Convertible Preferred Stock with a stated value of $1,000
per share (the "Series D Preferred Stock") and options to purchase up to
354,191 shares of the Company's common stock (the "Investment Options"). The
securities were issued to two institutional investors in a private offering
pursuant to Regulation D of the Securities Act of 1933, as amended, for an
aggregate of $15 million in cash.
Each share of Series D 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 D 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 August 1, 1998 and ending February 1, 1999,
when the measurement period will be 22 trading days.
The holders of the Series D 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 $11.65 per share or 125% of the then applicable Conversion Price, the
following limits apply: Prior to August 3, 1998, the Series D Preferred Stock
may not be converted; beginning on August 3, 1998, each holder of Series D
Preferred Stock may convert up to 30% of its initial holding of Series D
Preferred Stock into Common Stock; beginning on September 2, 1998, it may
convert up to 60% of its initial holding; beginning on October 2, 1998, it may
convert up to 90% of its initial holding; and beginning on November 1, 1998, it
may convert up to 100% of its initial holding.
The exercise price of the Investment Options is equal to the lesser of
(a) the average of $10.59 and the market price of the Company's common stock at
the end of 1998 and (b) 110% of the stock market price at the end of 1998. The
Investment Options may be exercised between January 1, 1999 and February 5,
2003.
In addition, the Company is committed to sell, and the investors are
committed to buy, additional shares of Series D Preferred Stock and Investment
Options for an additional $15 million in cash upon the satisfaction of certain
conditions, including that the market price of the common stock is at least
$13.76 per share and that stockholder approval is obtained at the Company's
annual meeting in late June 1998.
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 D
Preferred Stock and upon exercise of the Investment Options.
The Company's press release announcing the sale of the Series D
Preferred Stock and the Investment Options as well as the Certificate of
Designations of the Series D Preferred Stock, a Securities Purchase Agreement,
a Registration Rights Agreement and the Investment Options 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:
3.4 Certificate of Designations of Series D Convertible Preferred
Stock.
4.2 Securities Purchase Agreement dated as of February 5, 1998
between CyberCash, Inc., RGC International Investors, LDC and Halifax Fund,
L.P.
4.3 Registration Rights Agreement dated as of February 5, 1998
between CyberCash, Inc., RGC International Investors, LDC and Halifax Fund,
L.P.
4.4 Investment Option dated February 5, 1998 issued to RGC
International Investors, LDC.
4.5 Investment Option dated February 5, 1998 issued to Halifax
Fund, L.P.
99.1 Press Release dated February 5, 1998.
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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
February 10, 1998
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EXHIBIT INDEX
EXHIBIT NO.
3.4 Certificate of Designations of Series D Convertible Preferred
Stock.
4.2 Securities Purchase Agreement dated as of February 5, 1998
between CyberCash, Inc., RGC International Investors, LDC and
Halifax Fund, L.P.
4.3 Registration Rights Agreement dated as of February 5, 1998
between CyberCash, Inc., RGC International Investors, LDC and
Halifax Fund, L.P.
4.4 Investment Option dated February 5, 1998 issued to RGC
International Investors, LDC.
4.5 Investment Option dated February 5, 1998 issued to Halifax
Fund, L.P.
99.1 Press Release dated February 5, 1998.
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EXHIBIT 3.4
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
OF
SERIES D 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 February 2, 1998 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 D Convertible Preferred Stock:
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I. Designation and Amount
The designation of this series, which consists of 30,000 shares of
Preferred Stock, is Series D Convertible Preferred Stock (the "Series D
Preferred Stock") and the stated value shall be One Thousand Dollars ($1,000)
per share (the "Stated Value").
II. Rank
The Series D 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 D 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
D 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 D Preferred Stock
obtained in accordance with Article IX hereof) specifically ranking, by its
terms, on parity with the Series D Preferred Stock ("Pari Passu Securities");
(iv) junior to the Corporation's Series C Convertible Preferred Stock, par
value $.001 per share (the "Series C Preferred Stock"); and (v) junior to any
class or series of capital stock of the Corporation hereafter created (with the
consent of the holders of Series D Preferred Stock obtained in accordance with
Article IX hereof) specifically ranking, by its terms, senior to the Series D
Preferred Stock (collectively, with 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 D Preferred Stock shall not bear any dividends. In
no event, so long as any Series D 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 D 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 D 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
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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 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 D 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 D 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 D 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
D 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 D
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 D 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:
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(i) The Corporation fails to issue shares of
Common Stock to the holders of Series D 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 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 D Preferred
Stock as and when required by this Certificate of Designation or the
Registration Rights Agreement, dated as of February 5, 1998, 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 D Preferred Stock upon conversion
of the Series D Preferred Stock as and when required by this Certificate of
Designation, the Securities Purchase Agreement dated as of February 5, 1998, 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 June 5,
1998 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 D
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
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Corporation shall purchase each holder's shares of Series D 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 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 D 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 D
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 D 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 D Preferred Stock that were issued upon
conversion of Series D 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 D Preferred
Stock, then the Corporation shall be obligated to redeem immediately all of the
then outstanding Series D Preferred Stock, in accordance with this Article V.B.
An irrevocable Redemption Notice shall be delivered promptly to the holders of
Series D 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 D Preferred Stock, (2) that the Corporation is obligated to redeem all
of the outstanding Series D 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.
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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 D 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 D Preferred Stock into Common Stock as follows (an "Optional
Conversion"). Each share of Series D Preferred Stock shall be convertible into
such number of 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 D 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 D Preferred Stock) and (y) the number of shares of Common
Stock issuable upon the conversion of the shares of Series D 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 such share of the Series D Preferred Stock to and including
the Conversion Date (as defined in Article VI.B. below).
(b) If at any time the aggregate number of shares
of Common Stock then issued upon conversion of the Series D Preferred Stock
and, to the extent integrated with the Series D Preferred Stock, exercise of
the Investment Options, equals 19.99% of the "Outstanding Common Amount" (as
hereinafter defined), the Series D 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 D 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 D Preferred Stock that
were issued upon conversion of Series D 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 D 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 D 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
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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, 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 D 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 D Preferred Stock plus
(y) the aggregate number of shares of Common Stock that remain issuable upon
conversion of Series D 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 D
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 February 5, 1998
30% 151-180 days following February 5, 1998
60% 181-210 days following February 5, 1998
90% 211-240 days following February 5, 1998
100% 241 days following February 5, 1998
</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) $11.65.
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
the Applicable Percentage (as defined below) times 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
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on Nasdaq, or on the principal securities exchange or other securities market
on which the Common Stock is then being traded. "Applicable Percentage" shall
mean 85%; provided, however, that (i) for conversions occurring between
February 5, 1998 and February 4, 1999, the Applicable Percentage shall equal
100% and (ii) for conversions occurring between February 5, 1999 and August 4,
1999, the Applicable Percentage shall equal 92.5%. The "Pricing Period" shall
mean:
Ten (10) consecutive Trading Days, for Conversion Dates on or before July 31,
1998
Twelve (12) consecutive Trading Days, for Conversion Dates between and inclusive
of August 1, 1998 and August 31, 1998
Fourteen (14) consecutive Trading Days, for Conversion Dates between and
inclusive of September 1, 1998 and September 30, 1998
Sixteen (16) consecutive Trading Days, for Conversion Dates between and
inclusive of October 1, 1998 and October 31, 1998
Eighteen (18) consecutive Trading Days, for Conversion Dates between and
inclusive of November 1, 1998 and November 30, 1998
Twenty (20) consecutive Trading Days, for Conversion Dates between and inclusive
of December 1, 1998 and December 31, 1998
Twenty-Two (22) consecutive Trading Days, for Conversion Dates after on or
January 1, 1999.
(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:
(a) Adjustment to Conversion Price Due to Stock
Split, Stock Dividend, Etc. If at any time when Series D 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
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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 D 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 D Preferred Stock is issued and outstanding and
prior to the conversion of all Series D 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 D Preferred Stock
shall thereafter have the right to receive upon conversion of the Series D
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 D Preferred Stock would have been entitled to receive in such
transaction had the Series D 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 D 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 D 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 D
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 D Preferred Stock shall be
entitled to convert the Series D 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 D Preferred Stock
shall be entitled, upon any conversion of shares of Series D 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 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.
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<PAGE> 10
(d) Purchase Rights. Subject to Article III, if
at any time when any Series D 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 D
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 D 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 D
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 D 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 D 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 D 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 D Preferred Stock into
full shares of Common Stock, a holder of Series D 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 D Preferred Stock that the holder
elects to convert the same, which notice shall specify the number of shares of
Series D Preferred Stock to be converted, the applicable Conversion 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 D 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
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<PAGE> 11
Agent for the Series D 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 D 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 D Preferred Stock
converted as shall be determined in accordance herewith and (ii) a certificate
representing the balance of the shares of Series D 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 D 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 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.
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<PAGE> 12
(c) No Fractional Shares. If any conversion of
Series D 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 D 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 D 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 D 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 D 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. The number of authorized and unissued shares of Common Stock set
forth in Section 3(c) of the Purchase Agreement have been duly reserved for
issuance upon conversion of the Series D 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 D 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 D
Preferred Stock.
If at any time a holder of shares of Series D 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 D
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 D
Preferred Stock included in the Notice of Conversion which exceeds the amount
which is then convertible into 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
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<PAGE> 13
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 D 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 D 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 D 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 D 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 D Preferred Stock.
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<PAGE> 14
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 D Preferred Stock issued and outstanding
on February 5, 2003, 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 D 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 D 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 D 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 D 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 D 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 D
Preferred Stock (except as otherwise may be 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 D Preferred Stock
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<PAGE> 15
are entitled to vote on a matter with holders of Common Stock, voting together
as one class, each share of Series D 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 D 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 D 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
seventy-five (75%) percent of the then outstanding shares of Series D Preferred
Stock:
(a) alter or change the rights, preferences or
privileges of the Series D Preferred Stock or any Senior Securities so as to
affect adversely the Series D Preferred Stock;
(b) create any new class or series of capital
stock having a preference over the Series D 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 D 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 D 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 D 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 D Preferred Stock agree to allow the Corporation
to alter or change the rights, preferences or privileges of the shares of
Series D Preferred Stock, pursuant to subsection (a) above, so as to affect the
Series D Preferred Stock, then the Corporation will deliver notice of such
approved change to the holders of the Series D 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 D
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 D Preferred Stock based on the number of shares of Series D
Preferred Stock then held by each holder relative to the total aggregate number
of shares of Series D Preferred Stock then outstanding.
IN WITNESS WHEREOF, this Certificate of Designation is
executed on behalf of the Corporation this 5th day of February, 1998.
CYBERCASH, INC.
By: /s/ RUSSELL B. STEVENSON, JR.
----------------------------------
Russell B. Stevenson, Jr.
Secretary
16
<PAGE> 17
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Series D Preferred Stock)
The undersigned hereby irrevocably elects to convert ______
shares of Series D 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 D 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 D 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 D 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.
17
<PAGE> 1
EXHIBIT 4.2
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of February
5, 1998, 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 D 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 Company has authorized the issuance to the Buyers of investment
options, in the form attached hereto as "EXHIBIT B", to purchase an aggregate
of Seven Hundred Eight Thousand Three Hundred Eighty-Two (708,382) shares of
Common Stock (the "INVESTMENT OPTIONS");
E. The Buyers desire to purchase and the Company desires to issue and
sell, upon the terms and conditions set forth in this Agreement, (i) an
aggregate of thirty thousand (30,000) shares of Preferred Stock, and (ii)
Investment Options to purchase an aggregate of Seven Hundred Eight Thousand
Three Hundred Eighty-Two (708,382) shares of Common Stock for an aggregate
purchase price of Thirty Million Dollars ($30,000,000);
F. Each Buyer wishes to purchase, upon the terms and conditions stated in
this Agreement, the number of shares of Preferred Stock and Investment Options
set forth immediately below its name on the signature pages hereto; and
G. 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 "C" (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 D 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 Investment Options and at the aggregate
purchase price with respect to the First Closing (as defined below) and the
Second Closing (as defined below) (each, a "PURCHASE PRICE" and collectively,
the "PURCHASE PRICES") as is set forth immediately below such Buyer's name on
the signature pages hereto. The issuance, sale and purchase of the Preferred
Shares and Investment Options shall take place at two (2) closings, the first
of which is hereinafter referred to as the "FIRST CLOSING" and the second of
which is referred to as the "SECOND CLOSING". The aggregate number of
Preferred Shares to be issued at the First Closing is Fifteen Thousand (15,000)
and the aggregate number of Investment Options to be issued at the First
Closing is Three Hundred Fifty-Four Thousand One Hundred Ninety-One (354,191)
for an aggregate purchase price of Fifteen Million Dollars ($15,000,000) and
the aggregate number of Preferred Shares to be issued at the Second Closing is
Fifteen Thousand (15,000) and the aggregate number of Investment Options to be
issued at the Second Closing is Three Hundred Fifty-Four Thousand One Hundred
Ninety-One (354,191) for an aggregate purchase price of Fifteen Million Dollars
($15,000,000). Subject to the satisfaction (or waiver) of the conditions
thereto set forth in Section 6 and Section 7 below, (i) at the First Closing,
the Company shall issue and sell to each Buyer and each Buyer shall purchase
from the Company the number of Preferred Shares and Investment Options which
such Buyer is purchasing hereunder and as set forth below such Buyer's name on
the signature pages hereto for a price equal to 50% of the aggregate of the
Purchase Prices and (ii) at the Second Closing the Company shall issue and sell
to each Buyer and each Buyer shall purchase from the Company of the aggregate
number of Preferred Shares and Investment Options which such Buyer is
purchasing hereunder and as set forth below such Buyer's name on the signature
pages hereto for a price equal to fifty percent (50%) of the aggregate of the
Purchase Prices.
b. Form of Payment. On each Closing Date (as defined
below), (i) each Buyer shall pay the purchase price for the Preferred Shares
and Investment Options 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 and Investment Options
which such Buyer is purchasing, and (ii) the Company shall deliver such
certificate(s) and Investment Options 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 (i) in the case of the First
Closing 10:00 a.m. Eastern Time on February 5, 1998 and (ii) in the case of the
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Second Closing, 10:00 a.m. Eastern Time as soon as practicable (but no less
than two (2) days) following the satisfaction (or waiver) of the conditions to
such closing set forth in Section 7(b) below or, in such case, such other
mutually agreed upon time. Each Closing shall occur on each 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. The Buyer is purchasing the
Preferred Shares and the shares of Common Stock issuable upon conversion
thereof (the "CONVERSION SHARES"), the Investment Options and the shares of
Common Stock issuable upon exercise thereof (the "INVESTMENT OPTION SHARES"
and, collectively with the Preferred Shares, Conversion Shares and Investment
Options, the "SECURITIES") for its own account for investment only and not with
a view 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 Investment
Option 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
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<PAGE> 4
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
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 Investment Options and until such time as the Conversion Shares and
Investment Option Shares have been registered under the 1933 Act, as
contemplated by the Registration Rights Agreement, the Conversion Shares and
Investment Option 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
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<PAGE> 5
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.
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.
k. Nasdaq Rule 4460(i). The Buyer acknowledges that the
Company will be unable to issue Common Stock in excess of 19.99% of the
Company's currently outstanding Common Stock upon conversion of the Preferred
Shares and, to the extent integrated with the Series D Preferred Stock,
exercise of the Investment Options, in the absence of (i) the approval of the
issuance of the Preferred Shares by the Company's stockholders; (ii) a waiver
by The Nasdaq Stock Market of the provisions of Nasdaq Marketplace Rule 4460(i)
("RULE 4460(I)"); or (iii) the provisions of Rule 4460(i) no longer being
applicable to the Company, including where the Common Stock of the Company is
no longer listed on The Nasdaq Stock Market or other securities exchange or
quotation system which required stockholder approval for issuances similar to
those required by Rule 4460(i).
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<PAGE> 6
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, the Registration Rights Agreement and the Investment Options 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 Investment Options
and the issuance and reservation for issuance of the Conversion Shares and
Investment Option Shares issuable upon conversion or exercise thereof) have
been duly 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 (except as contemplated hereby), (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 and the
Investment Options, such instrument will constitute, a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with
its terms.
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<PAGE> 7
c. Capitalization. As of January 30, 1998, the
authorized capital stock of the Company consists of (i) 25,000,000 shares of
Common Stock of which, 11,056,068 shares are issued and outstanding, 2,526,844
shares are reserved for issuance upon conversion of the Series C Convertible
Preferred Stock (the "SERIES C PREFERRED STOCK"), 2,944,197 shares are reserved
for issuance pursuant to the Company's stock option plans, 441,100 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 and the Investment Options) exercisable for, or convertible
into or exchangeable for shares of Common Stock and 3,582,700 shares are
reserved for issuance upon conversion of the Preferred Shares and exercise of
the Investment Options issued in respect of the First Closing and, prior to the
Second Closing, if applicable, a number of shares will be reserved equal to two
(2) times the number of shares of Common Stock then issuable upon conversion of
the Preferred Shares and exercise of the Investment Options issued in respect
of the Second Closing (each 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, of which 13,500 shares of Series C Preferred Stock 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 with respect to the Series C Preferred Stock).
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 the registration rights agreement dated
August 1, 1997 with respect to the Series C Preferred Stock) 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 or the Investment Options and the Investment Option 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, Conversion
Shares and Investment Option Shares are duly authorized and, upon issuance in
accordance with the terms of this Agreement (including the issuance of the
Conversion Shares upon conversion of the
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<PAGE> 8
Preferred Shares in accordance with the Certificate of Designation and the
issuance of the Investment Option Shares upon exercise of the Investment
Options in accordance with the terms thereof) 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 and Investment Option Shares upon conversion or exercise of
the Preferred Shares and the Investment Options. The Company further
acknowledges that its obligation to issue Conversion Shares upon conversion of
the Preferred Shares and Investment Option Shares upon exercise of the
Investment Options in accordance with this Agreement, the Investment Options
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 (except to the extent stockholder approval is
required hereunder).
e. No Conflicts. The execution, delivery and
performance of this Agreement, the Registration Rights Agreement and the
Investment Option 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 and Investment Option 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
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<PAGE> 9
be conducted so long as a Buyer owns any of the Securities, in violation of any
law, ordinance or regulation of any governmental entity. 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,
the Registration Rights Agreement or the Investment Options 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
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<PAGE> 10
commitments incurred in the ordinary course of business and not required under
generally accepted 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. For purposes of this
Agreement, the terms "material adverse change" and "material adverse
development" shall exclude continuing losses that are consistent with the
Company's historical losses.
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
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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.
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).
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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 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 and Cappello Capital Corporation, 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.
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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, 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.
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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 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 with respect to the First Closing, 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 with respect to the First Closing.
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; provided, however, that
the Company shall be permitted to terminate its status as an issuer required to
file reports under the 1934 Act in the event the Company merges or consolidates
with or sells all or substantially all of its assets to a corporation which is
a publicly traded corporation whose common stock is listed for trading on the
NYSE,
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Nasdaq or AMEX. 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 and the Investment Options for working
capital and to fund acquisitions and strategic investments. 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 in respect of the First Closing and ninety (90) days
following the Closing Date in respect of the Second Closing (the "LOCK-UP
PERIODS"), 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 Periods 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.
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<PAGE> 16
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 Twenty Thousand Dollars ($20,000).
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 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) and full exercise of the Investment Options and the
issuance of the Investment Option Shares in connection therewith (based on the
Exercise Price of the Investment Options 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 and Investment Option Shares
issued and issuable upon conversion or exercise of the Preferred Shares and the
Investment Options, 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 and the Investment Option Shares from time to time issuable
upon conversion or exercise of the Preferred Shares and the Investment Options.
The Company will obtain and
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<PAGE> 17
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 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.
k. Stockholder Approval. The Company shall hold an
annual or special meeting of its stockholders no later than June 30, 1998 and
use its best efforts to obtain at such meeting such approvals of the Company's
stockholders as may be required to issue all of the shares of Common Stock
issuable upon conversion or exercise of, or otherwise with respect to, the
Preferred Shares, the Series C Convertible Preferred Stock and the Investment
Options in accordance with Rule 4460(i) (or any successor rule thereto which
may then be in effect) (the "STOCKHOLDER APPROVAL"). The Company shall comply
with the filing and disclosure requirements of Section 14 under the Exchange
Act in connection with the solicitation, acquisition and disclosure of such
Stockholder Approval. The Company represents and warrants that its Board of
Directors has approved, and will recommend that the Company's stockholders
approve, the proposal contemplated by this Section 4(k) and shall so indicate
such recommendation in the proxy statement used to solicit such Stockholder
Approval. The Company shall use its best efforts to cause its officers and
directors to vote in favor of the proposal contemplated by this Section 4(k).
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 and Investment Option 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 and Investment Options (the "IRREVOCABLE
TRANSFER AGENT INSTRUCTIONS"). Prior to registration of the Conversion Shares
and Investment Option 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
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<PAGE> 18
other than the Irrevocable Transfer Agent Instructions referred to in this
Section 5, the notification by the Company to the transfer agent of the
conversion of the Preferred Shares or the exercise of the Investment Options
and stop transfer instructions to give effect to Section 2(f) hereof (in the
case of the Conversion Shares and Investment Option Shares, prior to the
effectiveness of the registration statement relating to the Conversion Shares
and Investment Option 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 and Investment Options to a Buyer at each of the First Closing
and Second Closing, as applicable is subject to the satisfaction, at or before
the Closing Date in respect of such closing, 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.
a. With respect to the First Closing and Second Closing:
(i) The applicable Buyer shall have executed this
Agreement and the Registration Rights Agreement, and delivered the same to the
Company.
(ii) The applicable Buyer shall have delivered the
applicable Purchase Price in accordance with Section 1(b) above.
(iii) The Certificate of Designation shall have
been accepted for filing with the Secretary of State of Delaware.
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(iv) 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 each 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 each Closing Date.
(v) 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.
b. With respect to the Second Closing:
(i) The closing bid price of the Common Stock on
the Nasdaq Stock Market or the principal securities exchange or quotation
system on which the Common Stock is traded on the trading day immediately
preceding the Closing Date with respect to the Second Closing is equal to or
greater than $13.76.
(ii) The stockholders of the Company shall have
approved the matter set forth in Section 4(k).
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Preferred
Shares at each of the First Closing and the Second Closing, as applicable, is
subject to the satisfaction, at or before the Closing Date in respect of such
closing 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. With respect to the First Closing and the Second
Closing:
(i) The Company shall have executed this Agreement
and the Registration Rights Agreement, and delivered the same to the Buyer.
(ii) 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.
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(iii) The Company shall have delivered to such Buyer
duly executed certificates (in such denominations as the Buyer shall request)
representing the Preferred Shares and the Investment Options being so purchased
in accordance with Section 1(b) above.
(iv) 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.
(v) 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 each 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 each
Closing Date. The Buyer shall have received a certificate or certificates,
executed by the chief executive officer of the Company, dated as of each
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.
(vi) 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.
(vii) The Conversion Shares and Investment Option
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.
(viii) The Buyer shall have received an opinion of
the Company's counsel, dated as of each Closing Date, in form, scope and
substance reasonably satisfactory to the Buyer and in substantially the same
form as EXHIBIT "D" attached hereto.
(ix) The Buyer shall have received an officer's
certificate described in Section 3(c) above, dated as of each Closing Date.
(x) William Melton and Daniel Lynch shall have
agreed to vote in favor of the matter set forth in Section 4(k).
b. With respect to the Second Closing:
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(i) The registration statement(s) filed by the
Company pursuant to Section 2(a) of the Registration Rights Agreement covering
the resale of the Registrable Securities (as defined in the Registration Rights
Agreement) underlying the Preferred Shares and the Investment Options issued or
issuable at the First Closing and the Second Closing and shall be effective and
no stop order shall have been issued in respect thereof.
(ii) Since the Closing Date in respect of the
First Closing, 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.
(iii) At any time on or after the 90th day
following the Closing Date in respect to the First Closing, the closing bid
price of the Common Stock on the Nasdaq Stock Market or the principal
securities exchange or quotation system on which the Common Stock is traded
shall be equal to or greater than $13.76 for any five (5) consecutive trading
days and the Company provides notice to the Buyers to that effect.
(iv) The closing bid price of the Common Stock on
the Nasdaq Stock Market or the principal securities exchange or quotation
system on which the Common Stock is traded on the trading day immediately
preceding the Closing Date with respect to the Second Closing is equal to or
greater than $13.76.
(v) Ninety (90) days shall have elapsed since the
Closing Date with respect to the First Closing and no more than one (1) year
shall have elapsed since the Closing Date with respect to the First Closing.
(vi) The stockholders of the Company shall have
approved the matter set forth in Section 4(k).
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, the Certificate of Designation and the
Investment Options 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 "acquire"), any
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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
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Federal Courts located in Delaware with respect to any 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
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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 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
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make any press release or SEC, Nasdaq or NASD filings with respect to the
transactions as may be required by applicable law and regulations.
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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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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
-----------------------------------------------
James J. Condon
Chief Financial Officer
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P.
By: RGC General Partner Corp.
By: /s/ GARY S. KAMINSKY
-----------------------------------------------
Gary S. Kaminsky
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:
<TABLE>
<CAPTION>
First Closing
-------------
<S> <C>
Number of Shares of Series D Convertible Preferred Stock: 10,000
Number of Investment Options 236,127
Aggregate Purchase Price: $10,000,000
Second Closing
--------------
Number of Shares of Series D Convertible Preferred Stock: 10,000
Number of Investment Options 236,127
Aggregate Purchase Price: $10,000,000
</TABLE>
26
<PAGE> 27
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:
<TABLE>
<CAPTION>
First Closing
-------------
<S> <C>
Number of Shares of Series D Convertible Preferred Stock: 5,000
Number of Investment Options 118,064
Aggregate Purchase Price: $5,000,000
Second Closing
--------------
Number of Shares of Series D Convertible Preferred Stock: 5,000
Number of Investment Options 118,064
Aggregate Purchase Price: $5,000,000
</TABLE>
27
<PAGE> 28
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
CyberCash GmbH Germany
CyberCash Asia Limited Hong Kong
</TABLE>
<PAGE> 29
SCHEDULE 3(c)
(i)(A) Options to purchase 1,908,857 shares of common stock were
outstanding under the 1995 Stock Option Plan as of January 30,
1998.
(B) Options to purchase 42,158 shares of common stock were outstanding
under the 1995 Non-Employee Directors' Stock Option Plan as of
January 30, 1998.
(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) Holders of the Series C Convertible Preferred Stock have certain
rights under the Securities Purchase Agreement dated as of August
1, 1997, including a right of first refusal with respect to equity
financings by the Company.
(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.
(E) Registration Rights Agreement dated as of August 1, 1997 by and
among CyberCash, Inc. and the Investors (as defined therein).
(iii) None.
<PAGE> 30
SCHEDULE 3(e)
None.
<PAGE> 31
SCHEDULE 3(h)
None.
<PAGE> 32
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.
<PAGE> 33
SCHEDULE 3(k)
None.
<PAGE> 34
SCHEDULE 3(l)
None.
<PAGE> 35
SCHEDULE 3(r)
None.
<PAGE> 36
SCHEDULE 3(s)
None.
<PAGE> 1
EXHIBIT 4.3
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of February
5, 1998, 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 (i)
shares of its Series D 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
(ii) investment options (the "INVESTMENT OPTIONS") to acquire 708,382 shares of
Common Stock (the "INVESTMENT OPTION SHARES"), upon the terms and subject to
the limitations and conditions set forth in the Investment Options dated
February 5, 1998; 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:
<PAGE> 2
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.
(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 and Investment Option Shares (including any additional shares issued
pursuant to Articles VI.E(b) and VI.F of the Certificate of Designation) 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
First 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
2
<PAGE> 3
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) 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
3
<PAGE> 4
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 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
4
<PAGE> 5
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.
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
5
<PAGE> 6
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 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
6
<PAGE> 7
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 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
7
<PAGE> 8
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.
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
8
<PAGE> 9
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) 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
9
<PAGE> 10
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.
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
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<PAGE> 11
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 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
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<PAGE> 12
(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 reasonable fees and
disbursements of one counsel (not to exceed, together with other Investors'
expenses associated with the transactions contemplated hereby, $20,000)
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
12
<PAGE> 13
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 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.
13
<PAGE> 14
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 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
14
<PAGE> 15
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 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
15
<PAGE> 16
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 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
16
<PAGE> 17
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.
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.
17
<PAGE> 18
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.
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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
18
<PAGE> 19
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
-------------------------------------------------------
James J. Condon
Chief Financial Officer
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P., Investment Manager
By: RGC General Partner Corp.
By: /s/ GARY S. KAMINSKY
-------------------------------------------------------
Gary S. Kaminsky
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
<PAGE> 20
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
<PAGE> 1
EXHIBIT 4.4
THIS INVESTMENT OPTION AND THE SHARES ISSUABLE UPON THE EXERCISE OF
THIS INVESTMENT OPTION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN A
SECURITIES PURCHASE AGREEMENT DATED AS OF FEBRUARY 5, 1998, NEITHER
THIS INVESTMENT OPTION NOR ANY OF SUCH SHARES MAY BE SOLD, OFFERED
FOR SALE, ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION UNDER SUCH ACT OR AN OPINION OF COUNSEL THAT
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT
TO RULE 144 UNDER SUCH ACT. ANY SUCH SALE, ASSIGNMENT OR TRANSFER
MUST ALSO COMPLY WITH APPLICABLE STATE SECURITIES LAWS.
Right to
Purchase
236,127
Shares of
Common
Stock, par
value $.001
per share
INVESTMENT OPTION
THIS CERTIFIES THAT, for value received, RGC International
Investment, LDC or its registered assigns, is entitled to purchase from
CyberCash, Inc., a Delaware corporation (the "Company"), at any time or from
time to time during the period specified in Paragraph 2 hereof, Two Hundred
Thirty-Six Thousand One Hundred Twenty-Seven (236,127) fully paid and
nonassessable shares of the Company's Common Stock, par value $.001 per share
(the "Common Stock"), at the Exercise Price (as defined below). The "Exercise
Price" shall mean the lesser of (i) 110% of the Year End Market Price (as
defined below) and (ii) the average of (a) $10.59 and (b) the Year End Market
Price. "Year End Market Price" shall mean the average closing bid price of the
Common Stock on the Nasdaq National Market or the principal
<PAGE> 2
securities exchange on which the Common Stock is traded for the five (5) trading
days ending December 31, 1998. The term "Investment Option Shares," as used
herein, refers to the shares of Common Stock purchasable hereunder. The
Investment Option Shares and the Exercise Price are subject to adjustment as
provided in Paragraph 4 hereof. The term Investment Option means this Investment
Option and the other investment options issued pursuant to that certain
Securities Purchase Agreement, dated February 5, 1998, by and among the Company
and the Buyers listed on the execution page thereof (the "Securities Purchase
Agreement").
This Investment Option is subject to the following terms, provisions,
and conditions:
1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
Subject to the provisions hereof, this Investment Option may be exercised by the
holder hereof, in whole or in part, by the surrender of this Investment Option,
together with a completed exercise agreement in the form attached hereto (the
"Exercise Agreement"), to the Company during normal business hours on any
business day at the Company's principal executive offices (or such other office
or agency of the Company as it may designate by notice to the holder hereof),
and upon (i) payment to the Company in cash, by certified or official bank check
or by wire transfer for the account of the Company of the Exercise Price for the
Investment Option Shares specified in the Exercise Agreement or (ii) if the
resale of the Investment Option Shares by the holder is not then registered
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "Securities Act"), delivery to the Company of a written
notice of an election to effect a "Cashless Exercise" (as defined in Section
11(c) below) for the Investment Option Shares specified in the Exercise
Agreement. The Investment Option Shares so purchased shall be deemed to be
issued to the holder hereof or such holder's designee, as the record owner of
such shares, as of the close of business on the date on which this Investment
Option shall have been surrendered, the completed Exercise Agreement shall have
been delivered, and payment shall have been made for such shares as set forth
above. Certificates for the Investment Option Shares so purchased, representing
the aggregate number of shares specified in the Exercise Agreement, shall be
delivered to the holder hereof within a reasonable time, not exceeding three (3)
business days, after this Investment Option shall have been so exercised. The
certificates so delivered shall be in such denominations as may be requested by
the holder hereof and shall be registered in the name of such holder or such
other name as shall be designated by such holder. If this Investment Option
shall have been exercised only in part, then, unless this Investment Option has
expired, the Company shall, at its expense, at the time of delivery of such
certificates, deliver to the holder a new Investment Option representing the
number of shares with respect to which this Investment Option shall not then
have been exercised.
Notwithstanding anything in this Investment Option to the contrary,
in no event shall the Holder of this Investment Option be entitled to exercise a
number of Investment Options (or portions thereof) in excess of the number of
Investment Options (or portions thereof) upon exercise of which the sum of (i)
the number of shares of Common Stock beneficially owned by the Holder and its
affiliates (other than shares of Common Stock which may be
-2-
<PAGE> 3
deemed beneficially owned through the ownership of the unexercised Investment
Options and unconverted shares of Series D Preferred Stock (as defined in the
Securities Purchase Agreement) and (ii) the number of shares of Common Stock
issuable upon exercise of the Investment Options (or portions thereof) with
respect to which the determination described herein is being made, would result
in beneficial ownership by the Holder and its affiliates of more than 4.9% of
the outstanding shares of Common Stock. For purposes of the immediately
preceding sentence, (a) 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 (i) hereof
and (b) the holder of this Investment Option may waive the limitations set forth
therein by written notice to the Company upon not less than sixty-one (61) days
prior notice (with such waiver taking effect only upon the expiration of such
61-day notice period).
2. PERIOD OF EXERCISE. This Investment Option is exercisable at any
time or from time to time on or after January 1, 1999 and before 5:00 p.m., New
York City time on February 5, 2003 (the "Exercise Period").
3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants
and agrees as follows:
(a) SHARES TO BE FULLY PAID. All Investment Option Shares will,
upon issuance in accordance with the terms of this Investment Option, be validly
issued, fully paid, and nonassessable and free from all taxes, liens, and
charges with respect to the issue thereof.
(b) RESERVATION OF SHARES. During the Exercise Period, the
Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of this Investment Option, a sufficient number of shares
of Common Stock to provide for the exercise of this Investment Option.
(c) LISTING. The Company shall promptly secure the listing
of the shares of Common Stock issuable upon exercise of the Investment Option
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 upon exercise of this Investment Option) and shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all shares
of Common Stock from time to time issuable upon the exercise of this Investment
Option; and the Company shall so list on each national securities exchange or
automated quotation system, as the case may be, and shall maintain such listing
of, any other shares of capital stock of the Company issuable upon the exercise
of this Investment Option if and so long as any shares of the same class shall
be listed on such national securities exchange or automated quotation system.
(d) CERTAIN ACTIONS PROHIBITED. The Company will not, by
amendment of its charter or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed by it hereunder, but will at all
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times in good faith assist in the carrying out of all the provisions of this
Investment Option and in the taking of all such action as may reasonably be
requested by the holder of this Investment Option in order to protect the
exercise privilege of the holder of this Investment Option against dilution or
other impairment, consistent with the tenor and purpose of this Investment
Option. Without limiting the generality of the foregoing, the Company (i) will
not increase the par value of any shares of Common Stock receivable upon the
exercise of this Investment Option above the Exercise Price then in effect, and
(ii) will take all such actions as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Investment Option.
(e) SUCCESSORS AND ASSIGNS. This Investment Option will be binding
upon any entity succeeding to the Company by merger, consolidation, or
acquisition of all or substantially all the Company's assets.
4. ANTIDILUTION PROVISIONS. During the Exercise Period, the Exercise
Price and the number of Investment Option Shares shall be subject to adjustment
from time to time as provided in this Paragraph 4.
In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
to the nearest cent.
(a) ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON
ISSUANCE OF COMMON Stock. Except as otherwise provided in Paragraphs 4(c) and
4(e) hereof, if and whenever on or after the date of issuance of this Investment
Option, the Company issues or sells, or in accordance with Paragraph 4(b) hereof
is deemed to have issued or sold, any shares of Common Stock for no
consideration or for a consideration per share (before deduction of reasonable
expenses or commissions or underwriting discounts or allowances in connection
therewith) less than the Market Price (as hereinafter defined) on the date of
issuance (a "Dilutive Issuance"), then immediately upon the Dilutive Issuance,
the Exercise Price will be reduced to a price determined by multiplying the
Exercise Price in effect immediately prior to the Dilutive Issuance by a
fraction, (i) the numerator of which is an amount equal to the sum of (x) the
number of shares of Common Stock actually outstanding immediately prior to the
Dilutive Issuance, plus (y) the quotient of the aggregate consideration,
calculated as set forth in Paragraph 4(b) hereof, received by the Company upon
such Dilutive Issuance divided by the Market Price in effect immediately prior
to the Dilutive Issuance, and (ii) the denominator of which is the total number
of shares of Common Stock Deemed Outstanding (as defined below) immediately
after the Dilutive Issuance.
(b) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes of
determining the adjusted Exercise Price under Paragraph 4(a) hereof, the
following will be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any
manner issues or grants any investment options, rights or options, whether or
not immediately exercisable, to subscribe for or to purchase Common Stock or
other securities convertible into or exchangeable for Common Stock ("Convertible
Securities") (such investment options, rights
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<PAGE> 5
and options to purchase Common Stock or Convertible Securities are hereinafter
referred to as "Options") and the price per share for which Common Stock is
issuable upon the exercise of such Options is less than the Market Price on the
date of issuance or grant of such Options, then the maximum total number of
shares of Common Stock issuable upon the exercise of all such Options will, as
of the date of the issuance or grant of such Options, be deemed to be
outstanding and to have been issued and sold by the Company for such price per
share. For purposes of the preceding sentence, the "price per share for which
Common Stock is issuable upon the exercise of such Options" is determined by
dividing (i) the total amount, if any, received or receivable by the Company as
consideration for the issuance or granting of all such Options, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the exercise of all such Options, plus, in the case of Convertible
Securities issuable upon the exercise of such Options, the minimum aggregate
amount of additional consideration payable upon the conversion or exchange
thereof at the time such Convertible Securities first become convertible or
exchangeable, by (ii) the maximum total number of shares of Common Stock
issuable upon the exercise of all such Options (assuming full conversion of
Convertible Securities, if applicable). No further adjustment to the Exercise
Price will be made upon the actual issuance of such Common Stock upon the
exercise of such Options or upon the conversion or exchange of Convertible
Securities issuable upon exercise of such Options.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
manner issues or sells any Convertible Securities, whether or not immediately
convertible (other than where the same are issuable upon the exercise of
Options) and the price per share for which Common Stock is issuable upon such
conversion or exchange is less than the Market Price on the date of issuance,
then the maximum total number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities will, as of the date
of the issuance of such Convertible Securities, be deemed to be outstanding and
to have been issued and sold by the Company for such price per share. For the
purposes of the preceding sentence, the "price per share for which Common Stock
is issuable upon such conversion or exchange" is determined by dividing (i) the
total amount, if any, received or receivable by the Company as consideration for
the issuance or sale of all such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the conversion or exchange thereof at the time such Convertible Securities
first become convertible or exchangeable, by (ii) the maximum total number of
shares of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities. No further adjustment to the Exercise Price will be made
upon the actual issuance of such Common Stock upon conversion or exchange of
such Convertible Securities.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If there is a
change at any time in (i) the amount of additional consideration payable to the
Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the conversion or exchange of
any Convertible Securities; or (iii) the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock (other than
under or by reason of provisions designed to protect against dilution), the
Exercise Price in effect at the time of such change will be readjusted to the
Exercise Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided
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<PAGE> 6
for such changed additional consideration or changed conversion rate, as the
case may be, at the time initially granted, issued or sold.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. If, in any case, the total number of shares of Common Stock issuable
upon exercise of any Option or upon conversion or exchange of any Convertible
Securities is not, in fact, issued and the rights to exercise such Option or to
convert or exchange such Convertible Securities shall have expired or
terminated, the Exercise Price then in effect will be readjusted to the Exercise
Price which would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination (other than in respect of
the actual number of shares of Common Stock issued upon exercise or conversion
thereof), never been issued.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common
Stock, Options or Convertible Securities are issued, granted or sold for cash,
the consideration received therefor for purposes of this Investment Option will
be the amount received by the Company therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable expenses
paid or incurred by the Company in connection with such issuance, grant or sale.
In case any Common Stock, Options or Convertible Securities are issued or sold
for a consideration part or all of which shall be other than cash, the amount of
the consideration other than cash received by the Company will be the fair value
of such consideration, except where such consideration consists of securities,
in which case the amount of consideration received by the Company will be the
Market Price thereof as of the date of receipt. In case any Common Stock,
Options or Convertible Securities are issued in connection with any acquisition,
merger or consolidation in which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be the fair value of such
portion of the net assets and business of the non-surviving corporation as is
attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair value of any consideration other than cash or securities
will be determined in good faith by the Board of Directors of the Company.
(vi) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No adjustment
to the Exercise Price will be made (i) upon the exercise of any investment
options, options or convertible securities granted, issued and outstanding on
the date of issuance of this Investment Option (including any shares of Series D
Preferred Stock issued on or subsequent to the date of issuance of this
Investment Option); (ii) upon the grant or exercise of any stock or options
which may hereafter be granted or exercised under any employee benefit plan of
the Company now existing or to be implemented in the future, so long as the
issuance of such stock or options is approved by a majority of the independent
members of the Board of Directors of the Company or a majority of the members of
a committee of independent directors established for such purpose; or (iii) upon
the exercise of the Investment Options.
(c) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company at
any time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise
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<PAGE> 7
Price in effect immediately prior to such subdivision will be proportionately
reduced. If the Company at any time combines (by reverse stock split,
recapitalization, reorganization, reclassification or otherwise) the shares of
Common Stock acquirable hereunder into a smaller number of shares, then, after
the date of record for effecting such combination, the Exercise Price in effect
immediately prior to such combination will be proportionately increased.
(d) ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Paragraph 4, the number of
shares of Common Stock issuable upon exercise of this Investment Option shall be
adjusted by multiplying a number equal to the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
issuable upon exercise of this Investment Option immediately prior to such
adjustment and dividing the product so obtained by the adjusted Exercise Price.
(e) CONSOLIDATION, MERGER OR SALE. In case of any consolidation of
the Company with, or merger of the Company into any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company, then as a condition of such consolidation, merger or sale or
conveyance, adequate provision will be made whereby the holder of this
Investment Option will have the right to acquire and receive upon exercise of
this Investment Option in lieu of the shares of Common Stock immediately
theretofore acquirable upon the exercise of this Investment Option, such shares
of stock, securities or assets as may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
acquirable and receivable upon exercise of this Investment Option had such
consolidation, merger or sale or conveyance not taken place. In any such case,
the Company will make appropriate provision to insure that the provisions of
this Paragraph 4 hereof will thereafter be applicable as nearly as may be in
relation to any shares of stock or securities thereafter deliverable upon the
exercise of this Investment Option. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor corporation (if other than the Company) assumes by
written instrument the obligations under this Paragraph 4 and the obligations to
deliver to the holder of this Investment Option such shares of stock, securities
or assets as, in accordance with the foregoing provisions, the holder may be
entitled to acquire.
(f) DISTRIBUTION OF ASSETS. In case the Company shall declare or
make any distribution of its assets (including cash) to holders of Common Stock
as a partial liquidating dividend, by way of return of capital or otherwise,
then, after the date of record for determining stockholders entitled to such
distribution, but prior to the date of distribution, the holder of this
Investment Option shall be entitled upon exercise of this Investment Option for
the purchase of any or all of the shares of Common Stock subject hereto, to
receive the amount of such assets which would have been payable to the holder
had such holder been the holder of such shares of Common Stock on the record
date for the determination of stockholders entitled to such distribution.
(g) NOTICE OF ADJUSTMENT. Upon the occurrence of any event which
requires any adjustment of the Exercise Price, then, and in each such case, the
Company shall give notice
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<PAGE> 8
thereof to the holder of this Investment Option, which notice shall state the
Exercise Price resulting from such adjustment and the increase or decrease in
the number of Investment Option Shares purchasable at such price upon exercise,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based. Such calculation shall be certified by the
chief financial officer of the Company.
(h) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(i) NO FRACTIONAL SHARES. No fractional shares of Common Stock are
to be issued upon the exercise of this Investment Option, but the Company shall
pay a cash adjustment in respect of any fractional share which would otherwise
be issuable in an amount equal to the same fraction of the Market Price of a
share of Common Stock on the date of such exercise.
(j) OTHER NOTICES. In case at any time:
(i) the Company shall declare any dividend upon the Common
Stock payable in shares of stock of any class or make any other distribution
(including dividends or distributions payable in cash out of retained earnings)
to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or other
rights;
(iii) there shall be any capital reorganization of the
Company, or reclassification of the Common Stock, or consolidation or merger of
the Company with or into, or sale of all or substantially all its assets to,
another corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Investment
Option (a) notice of the date on which the books of the Company shall close or a
record shall be taken for determining the holders of Common Stock entitled to
receive any such dividend, distribution, or subscription rights or for
determining the holders of Common Stock entitled to vote in respect of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up and (b) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, notice of the date (or, if not then known, a reasonable
approximation thereof by the Company) when the same shall take place. Such
notice shall also specify the date on which the holders of Common Stock shall be
entitled to receive such dividend, distribution, or subscription rights or to
exchange their Common Stock for stock or other securities or property
deliverable upon such reorganization, reclassification,
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<PAGE> 9
consolidation, merger, sale, dissolution, liquidation, or winding-up, as the
case may be. Such notice shall be given at least 30 days prior to the record
date or the date on which the Company's books are closed in respect thereto.
Failure to give any such notice or any defect therein shall not affect the
validity of the proceedings referred to in clauses (i), (ii), (iii) and (iv)
above.
(k) CERTAIN EVENTS. If any event occurs of the type contemplated
by the adjustment provisions of this Paragraph 4 but not expressly provided for
by such provisions, the Company will give notice of such event as provided in
Paragraph 4(g) hereof, and the Company's Board of Directors will make an
appropriate adjustment in the Exercise Price and the number of shares of Common
Stock acquirable upon exercise of this Investment Option so that the rights of
the Holder shall be neither enhanced nor diminished by such event.
(L) CERTAIN DEFINITIONS.
(i) "Common Stock Deemed Outstanding" shall mean the number of
shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Company), plus (x) pursuant to Paragraph
4(b)(i) hereof, the maximum total number of shares of Common Stock issuable upon
the exercise of Options, as of the date of such issuance or grant of such
Options, if any, and (y) pursuant to Paragraph 4(b)(ii) hereof, the maximum
total number of shares of Common Stock issuable upon conversion or exchange of
Convertible Securities, as of the date of issuance of such Convertible
Securities, if any.
(ii) "Market Price," as of any date, (i) means the average of
the last reported sale prices for the shares of Common Stock on the Nasdaq
National Market ("Nasdaq") for the five (5) trading days immediately preceding
such date as reported by Bloomberg, L.P. ("Bloomberg"), 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 Market Price
shall be the fair market value as reasonably determined in good faith by (a) the
Board of Directors of the Corporation or, at the option of a
majority-in-interest of the holders of the outstanding Investment Options by (b)
an independent investment bank of nationally recognized standing in the
valuation of businesses similar to the business of the corporation. The manner
of determining the Market Price of the Common Stock set forth in the foregoing
definition shall apply with respect to any other security in respect of which a
determination as to market value must be made hereunder.
(iii) "Common Stock," for purposes of this Paragraph 4,
includes the Common Stock, par value $.001 per share, and any additional class
of stock of the Company having no preference as to dividends or distributions on
liquidation, provided that the shares purchasable pursuant to this Investment
Option shall include only shares of Common Stock, par value $.001 per share, in
respect of which this Investment Option is exercisable, or shares resulting from
any subdivision or combination of such Common Stock, or in the case of any
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<PAGE> 10
reorganization, reclassification, consolidation, merger, or sale of the
character referred to in Paragraph 4(e) hereof, the stock or other securities or
property provided for in such Paragraph.
5. ISSUE TAX. The issuance of certificates for Investment Option
Shares upon the exercise of this Investment Option shall be made without charge
to the holder of this Investment Option or such shares for any issuance tax or
other costs in respect thereof, provided that the Company shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than the holder of this
Investment Option.
6. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Investment Option
shall not entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company. No provision of this Investment Option, in the
absence of affirmative action by the holder hereof to purchase Investment Option
Shares, and no mere enumeration herein of the rights or privileges of the holder
hereof, shall give rise to any liability of such holder for the Exercise Price
or as a shareholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
7. TRANSFER, EXCHANGE, AND REPLACEMENT OF INVESTMENT OPTION.
(a) RESTRICTION ON TRANSFER. This Investment Option and the rights
granted to the holder hereof are transferable, in whole or in part, upon
surrender of this Investment Option, together with a properly executed
assignment in the form attached hereto, at the office or agency of the Company
referred to in Paragraph 7(e) below, provided, however, that any transfer or
assignment shall be subject to the conditions set forth in Paragraph 7(f) hereof
and to the applicable provisions of the Securities Purchase Agreement. Until due
presentment for registration of transfer on the books of the Company, the
Company may treat the registered holder hereof as the owner and holder hereof
for all purposes, and the Company shall not be affected by any notice to the
contrary. Notwithstanding anything to the contrary contained herein, the
registration rights described in Paragraph 8 are assignable only in accordance
with the provisions of that certain Registration Rights Agreement, dated as of
February 5, 1998, by and among the Company and the other signatories thereto
(the "Registration Rights Agreement").
(b) INVESTMENT OPTION EXCHANGEABLE FOR DIFFERENT DENOMINATIONS.
This Investment Option is exchangeable, upon the surrender hereof by the holder
hereof at the office or agency of the Company referred to in Paragraph 7(e)
below, for new Investment Options of like tenor representing in the aggregate
the right to purchase the number of shares of Common Stock which may be
purchased hereunder, each of such new Investment Options to represent the right
to purchase such number of shares as shall be designated by the holder hereof at
the time of such surrender.
(c) REPLACEMENT OF INVESTMENT OPTION. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Investment Option and, in the case of any such loss, theft,
or destruction, upon delivery of an indemnity agreement reasonably satisfactory
in form and amount to the Company, or, in the case of any
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<PAGE> 11
such mutilation, upon surrender and cancellation of this Investment Option, the
Company, at its expense, will execute and deliver, in lieu thereof, a new
Investment Option of like tenor.
(d) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of this
Investment Option in connection with any transfer, exchange, or replacement as
provided in this Paragraph 7, this Investment Option shall be promptly canceled
by the Company. The Company shall pay all taxes (other than securities transfer
taxes) and all other expenses (other than legal expenses, if any, incurred by
the Holder or transferees) and charges payable in connection with the
preparation, execution, and delivery of Investment Options pursuant to this
Paragraph 7.
(e) REGISTER. The Company shall maintain, at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Investment
Option, in which the Company shall record the name and address of the person in
whose name this Investment Option has been issued, as well as the name and
address of each transferee and each prior owner of this Investment Option.
(f) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the time of
the surrender of this Investment Option in connection with any exercise,
transfer, or exchange of this Investment Option, this Investment Option (or, in
the case of any exercise, the Investment Option Shares issuable hereunder),
shall not be registered under the Securities Act of 1933, as amended (the
"Securities Act") and under applicable state securities or blue sky laws, the
Company may require, as a condition of allowing such exercise, transfer, or
exchange, (i) that the holder or transferee of this Investment Option, as the
case may be, furnish to the Company a written opinion of counsel, which opinion
and counsel are acceptable to the Company, to the effect that such exercise,
transfer, or exchange may be made without registration under said Act and under
applicable state securities or blue sky laws, (ii) that the holder or transferee
execute and deliver to the Company an investment letter in form and substance
acceptable to the Company and (iii) that the transferee be an "accredited
investor" as defined in Rule 501(a) promulgated under the Securities Act;
provided that no such opinion, letter or status as an "accredited investor"
shall be required in connection with a transfer pursuant to Rule 144 under the
Securities Act. The first holder of this Investment Option, by taking and
holding the same, represents to the Company that such holder is acquiring this
Investment Option for investment and not with a view to the distribution
thereof.
8. REGISTRATION RIGHTS. The initial holder of this Investment Option
(and certain assignees thereof) is entitled to the benefit of such registration
rights in respect of the Investment Option Shares as are set forth in Section 2
of the Registration Rights Agreement.
9. NOTICES. All notices, requests, and other communications required
or permitted to be given or delivered hereunder to the holder of this Investment
Option shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed, to such holder at the address shown for such holder on
the books of the Company, or at such other address as shall have been furnished
to the Company by notice from such holder. All notices, requests, and other
communications required or permitted to be given or delivered hereunder to the
Company shall
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<PAGE> 12
be in writing, and shall be personally delivered, or shall be sent by certified
or registered mail or by recognized overnight mail courier, postage prepaid and
addressed, to the office of the Company at 2100 Reston Parkway, Third Floor,
Reston, Virginia 20191, Attention: Chief Financial Officer, or at such other
address as shall have been furnished to the holder of this Investment Option by
notice from the Company. Any such notice, request, or other communication may be
sent by facsimile, but shall in such case be subsequently confirmed by a writing
personally delivered or sent by certified or registered mail or by recognized
overnight mail courier as provided above. All notices, requests, and other
communications shall be deemed to have been given either at the time of the
receipt thereof by the person entitled to receive such notice at the address
of such person for purposes of this Paragraph 9, or, if mailed by registered or
certified mail or with a recognized overnight mail courier upon deposit with the
United States Post Office or such overnight mail courier, if postage is prepaid
and the mailing is properly addressed, as the case may be.
10. GOVERNING LAW. THIS INVESTMENT OPTION SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
DELAWARE WITHOUT REGARD TO THE BODY OF LAW CONTROLLING CONFLICTS OF LAW.
11. MISCELLANEOUS.
(a) AMENDMENTS. This Investment Option and any provision hereof
may only be amended by an instrument in writing signed by the Company and the
holder hereof.
(b) DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Investment Option are inserted for purposes of reference
only, and shall not affect the meaning or construction of any of the provisions
hereof.
(c) CASHLESS EXERCISE. Notwithstanding anything to the contrary
contained in this Investment Option, if the resale of the Investment Option
Shares by the holder is not then registered pursuant to an effective
registration statement under the Securities Act, this Investment Option may be
exercised by presentation and surrender of this Investment Option to the Company
at its principal executive offices with a written notice of the holder's
intention to effect a cashless exercise, including a calculation of the number
of shares of Common Stock to be issued upon such exercise in accordance with the
terms hereof (a "Cashless Exercise"). In the event of a Cashless Exercise, in
lieu of paying the Exercise Price in cash, the holder shall surrender this
Investment Option for that number of shares of Common Stock determined by
multiplying the number of Investment Option Shares to which it would otherwise
be entitled by a fraction, the numerator of which shall be the difference
between the then current Market Price per share of the Common Stock and the
Exercise Price, and the denominator of which shall be the then current Market
Price per share of Common Stock.
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IN WITNESS WHEREOF, the Company has caused this Investment Option to
be signed by its duly authorized officer.
CYBERCASH, INC.
By: /s/ JAMES J. CONDON
------------------------------------
Name: James J. Condon
Title: Chief Financial Officer
Dated as of February 5, 1998
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<PAGE> 14
FORM OF EXERCISE AGREEMENT
Dated: ________, ____.
To:
-----------------------------
The undersigned, pursuant to the provisions set forth in the within
Investment Option, hereby agrees to purchase ________ shares of Common Stock
covered by such Investment Option, and makes payment herewith in full therefor
at the price per share provided by such Investment Option in cash or by
certified or official bank check in the amount of, or, if the resale of such
Common Stock by the undersigned is not currently registered pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
by surrender of securities issued by the Company (including a portion of the
Investment Option) having a market value (in the case of a portion of this
Investment Option, determined in accordance with Section 11(c) of the Investment
Option) equal to $_________. Please issue a certificate or certificates for such
shares of Common Stock in the name of and pay any cash for any fractional share
to:
Name:
--------------------------------
Signature:
--------------------------------
Address:
--------------------------------
--------------------------------
Note: The above signature should correspond
exactly with the name on the face of the
within Investment Option.
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Investment Option, a new Investment Option is to be
issued in the name of said undersigned covering the balance of the shares
purchasable thereunder less any fraction of a share paid in cash.
<PAGE> 15
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the within Investment Option,
with respect to the number of shares of Common Stock covered thereby set forth
hereinbelow, to:
<TABLE>
<CAPTION>
Name of Assignee Address No of Shares
- ---------------- ------- ------------
<S> <C> <C>
</TABLE>
, and hereby irrevocably constitutes and appoints ______________
________________________ as agent and attorney-in-fact to transfer said
Investment Option on the books of the within-named corporation, with full power
of substitution in the premises.
Dated: _____________________, ____,
In the presence of
- ------------------
Name:
------------------------------------------------
Signature:
--------------------------------------
Title of Signing Officer or Agent (if any):
------------------------------------------------
Address:
----------------------------------------
----------------------------------------
Note: The above signature should correspond
exactly with the name on the face of the
within Investment Option.
<PAGE> 1
EXHIBIT 4.5
THIS INVESTMENT OPTION AND THE SHARES ISSUABLE UPON THE EXERCISE OF
THIS INVESTMENT OPTION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN A
SECURITIES PURCHASE AGREEMENT DATED AS OF FEBRUARY 5, 1998, NEITHER
THIS INVESTMENT OPTION NOR ANY OF SUCH SHARES MAY BE SOLD, OFFERED
FOR SALE, ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION UNDER SUCH ACT OR AN OPINION OF COUNSEL THAT
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT
TO RULE 144 UNDER SUCH ACT. ANY SUCH SALE, ASSIGNMENT OR TRANSFER
MUST ALSO COMPLY WITH APPLICABLE STATE SECURITIES LAWS.
Right to
Purchase
118,064
Shares of
Common
Stock, par
value $.001
per share
INVESTMENT OPTION
THIS CERTIFIES THAT, for value received, Halifax Fund, L.P. or its
registered assigns, is entitled to purchase from CyberCash, Inc., a Delaware
corporation (the "Company"), at any time or from time to time during the period
specified in Paragraph 2 hereof, One Hundred Eighteen Thousand Sixty-Four
(118,064) fully paid and nonassessable shares of the Company's Common Stock, par
value $.001 per share (the "Common Stock"), at the Exercise Price (as defined
below). The "Exercise Price" shall mean the lesser of (i) 110% of the Year End
Market Price (as defined below) and (ii) the average of (a) $10.59 and (b) the
Year End Market Price. "Year End Market Price" shall mean the average closing
bid price of the Common Stock on the Nasdaq National Market or the principal
securities exchange on which the Common Stock is traded for the five (5) trading
days ending December 31, 1998. The term "Investment Option Shares," as used
herein, refers to the shares of Common Stock purchasable hereunder. The
Investment Option Shares and the Exercise Price are subject to adjustment as
provided in Paragraph 4 hereof. The term Investment Option means this Investment
Option and the other investment options issued pursuant to that certain
Securities Purchase Agreement, dated
<PAGE> 2
February 5, 1998, by and among the Company and the Buyers listed on the
execution page thereof (the "Securities Purchase Agreement").
This Investment Option is subject to the following terms, provisions,
and conditions:
1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
Subject to the provisions hereof, this Investment Option may be exercised by the
holder hereof, in whole or in part, by the surrender of this Investment Option,
together with a completed exercise agreement in the form attached hereto (the
"Exercise Agreement"), to the Company during normal business hours on any
business day at the Company's principal executive offices (or such other office
or agency of the Company as it may designate by notice to the holder hereof),
and upon (i) payment to the Company in cash, by certified or official bank check
or by wire transfer for the account of the Company of the Exercise Price for the
Investment Option Shares specified in the Exercise Agreement or (ii) if the
resale of the Investment Option Shares by the holder is not then registered
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "Securities Act"), delivery to the Company of a written
notice of an election to effect a "Cashless Exercise" (as defined in Section
11(c) below) for the Investment Option Shares specified in the Exercise
Agreement. The Investment Option Shares so purchased shall be deemed to be
issued to the holder hereof or such holder's designee, as the record owner of
such shares, as of the close of business on the date on which this Investment
Option shall have been surrendered, the completed Exercise Agreement shall have
been delivered, and payment shall have been made for such shares as set forth
above. Certificates for the Investment Option Shares so purchased, representing
the aggregate number of shares specified in the Exercise Agreement, shall be
delivered to the holder hereof within a reasonable time, not exceeding three (3)
business days, after this Investment Option shall have been so exercised. The
certificates so delivered shall be in such denominations as may be requested by
the holder hereof and shall be registered in the name of such holder or such
other name as shall be designated by such holder. If this Investment Option
shall have been exercised only in part, then, unless this Investment Option has
expired, the Company shall, at its expense, at the time of delivery of such
certificates, deliver to the holder a new Investment Option representing the
number of shares with respect to which this Investment Option shall not then
have been exercised.
Notwithstanding anything in this Investment Option to the contrary,
in no event shall the Holder of this Investment Option be entitled to exercise a
number of Investment Options (or portions thereof) in excess of the number of
Investment Options (or portions thereof) upon exercise of which the sum of (i)
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 unexercised Investment Options and
unconverted shares of Series D Preferred Stock (as defined in the Securities
Purchase Agreement) and (ii) the number of shares of Common Stock issuable upon
exercise of the Investment Options (or portions thereof) with respect to which
the determination described herein
-2-
<PAGE> 3
is being made, would result in beneficial ownership by the Holder and its
affiliates of more than 4.9% of the outstanding shares of Common Stock. For
purposes of the immediately preceding sentence, (a) 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 (i) hereof and (b) the holder of this Investment Option may waive the
limitations set forth therein by written notice to the Company upon not less
than sixty-one (61) days prior notice (with such waiver taking effect only upon
the expiration of such 61-day notice period).
2. PERIOD OF EXERCISE. This Investment Option is exercisable at any
time or from time to time on or after January 1, 1999 and before 5:00 p.m., New
York City time on February 5, 2003 (the "Exercise Period").
3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants
and agrees as follows:
(a) SHARES TO BE FULLY PAID. All Investment Option Shares will,
upon issuance in accordance with the terms of this Investment Option, be validly
issued, fully paid, and nonassessable and free from all taxes, liens, and
charges with respect to the issue thereof.
(b) RESERVATION OF SHARES. During the Exercise Period, the Company
shall at all times have authorized, and reserved for the purpose of issuance
upon exercise of this Investment Option, a sufficient number of shares of Common
Stock to provide for the exercise of this Investment Option.
(c) LISTING. The Company shall promptly secure the listing of the
shares of Common Stock issuable upon exercise of the Investment Option 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
upon exercise of this Investment Option) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all shares of
Common Stock from time to time issuable upon the exercise of this Investment
Option; and the Company shall so list on each national securities exchange or
automated quotation system, as the case may be, and shall maintain such listing
of, any other shares of capital stock of the Company issuable upon the exercise
of this Investment Option if and so long as any shares of the same class shall
be listed on such national securities exchange or automated quotation system.
(d) CERTAIN ACTIONS PROHIBITED. The Company will not, by amendment
of its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Investment Option and
in the taking of all such action as may reasonably be requested by the holder of
this Investment Option in order to protect the exercise privilege of the holder
of this Investment Option against
-3-
<PAGE> 4
dilution or other impairment, consistent with the tenor and purpose of this
Investment Option. Without limiting the generality of the foregoing, the Company
(i) will not increase the par value of any shares of Common Stock receivable
upon the exercise of this Investment Option above the Exercise Price then in
effect, and (ii) will take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Investment
Option.
(e) SUCCESSORS AND ASSIGNS. This Investment Option will be binding
upon any entity succeeding to the Company by merger, consolidation, or
acquisition of all or substantially all the Company's assets.
4. ANTIDILUTION PROVISIONS. During the Exercise Period, the Exercise
Price and the number of Investment Option Shares shall be subject to adjustment
from time to time as provided in this Paragraph 4.
In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
to the nearest cent.
(a) ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON
ISSUANCE OF COMMON Stock. Except as otherwise provided in Paragraphs 4(c) and
4(e) hereof, if and whenever on or after the date of issuance of this Investment
Option, the Company issues or sells, or in accordance with Paragraph 4(b) hereof
is deemed to have issued or sold, any shares of Common Stock for no
consideration or for a consideration per share (before deduction of reasonable
expenses or commissions or underwriting discounts or allowances in connection
therewith) less than the Market Price (as hereinafter defined) on the date of
issuance (a "Dilutive Issuance"), then immediately upon the Dilutive Issuance,
the Exercise Price will be reduced to a price determined by multiplying the
Exercise Price in effect immediately prior to the Dilutive Issuance by a
fraction, (i) the numerator of which is an amount equal to the sum of (x) the
number of shares of Common Stock actually outstanding immediately prior to the
Dilutive Issuance, plus (y) the quotient of the aggregate consideration,
calculated as set forth in Paragraph 4(b) hereof, received by the Company upon
such Dilutive Issuance divided by the Market Price in effect immediately prior
to the Dilutive Issuance, and (ii) the denominator of which is the total number
of shares of Common Stock Deemed Outstanding (as defined below) immediately
after the Dilutive Issuance.
(b) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes of
determining the adjusted Exercise Price under Paragraph 4(a) hereof, the
following will be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any
manner issues or grants any investment options, rights or options, whether or
not immediately exercisable, to subscribe for or to purchase Common Stock or
other securities convertible into or exchangeable for Common Stock ("Convertible
Securities") (such investment options, rights and options to purchase Common
Stock or Convertible Securities are hereinafter referred to as "Options") and
the price per share for which Common Stock is issuable upon the exercise of
-4-
<PAGE> 5
such Options is less than the Market Price on the date of issuance or grant of
such Options, then the maximum total number of shares of Common Stock issuable
upon the exercise of all such Options will, as of the date of the issuance or
grant of such Options, be deemed to be outstanding and to have been issued and
sold by the Company for such price per share. For purposes of the preceding
sentence, the "price per share for which Common Stock is issuable upon the
exercise of such Options" is determined by dividing (i) the total amount, if
any, received or receivable by the Company as consideration for the issuance or
granting of all such Options, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise of all such
Options, plus, in the case of Convertible Securities issuable upon the exercise
of such Options, the minimum aggregate amount of additional consideration
payable upon the conversion or exchange thereof at the time such Convertible
Securities first become convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the exercise of all such Options
(assuming full conversion of Convertible Securities, if applicable). No further
adjustment to the Exercise Price will be made upon the actual issuance of such
Common Stock upon the exercise of such Options or upon the conversion or
exchange of Convertible Securities issuable upon exercise of such Options.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
manner issues or sells any Convertible Securities, whether or not immediately
convertible (other than where the same are issuable upon the exercise of
Options) and the price per share for which Common Stock is issuable upon such
conversion or exchange is less than the Market Price on the date of issuance,
then the maximum total number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities will, as of the date
of the issuance of such Convertible Securities, be deemed to be outstanding and
to have been issued and sold by the Company for such price per share. For the
purposes of the preceding sentence, the "price per share for which Common Stock
is issuable upon such conversion or exchange" is determined by dividing (i) the
total amount, if any, received or receivable by the Company as consideration for
the issuance or sale of all such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the conversion or exchange thereof at the time such Convertible Securities
first become convertible or exchangeable, by (ii) the maximum total number of
shares of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities. No further adjustment to the Exercise Price will be made
upon the actual issuance of such Common Stock upon conversion or exchange of
such Convertible Securities.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If there is a
change at any time in (i) the amount of additional consideration payable to the
Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the conversion or exchange of
any Convertible Securities; or (iii) the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock (other than
under or by reason of provisions designed to protect against dilution), the
Exercise Price in effect at the time of such change will be readjusted to the
Exercise Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided
-5-
<PAGE> 6
for such changed additional consideration or changed conversion rate, as the
case may be, at the time initially granted, issued or sold.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. If, in any case, the total number of shares of Common Stock issuable
upon exercise of any Option or upon conversion or exchange of any Convertible
Securities is not, in fact, issued and the rights to exercise such Option or to
convert or exchange such Convertible Securities shall have expired or
terminated, the Exercise Price then in effect will be readjusted to the Exercise
Price which would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination (other than in respect of
the actual number of shares of Common Stock issued upon exercise or conversion
thereof), never been issued.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common
Stock, Options or Convertible Securities are issued, granted or sold for cash,
the consideration received therefor for purposes of this Investment Option will
be the amount received by the Company therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable expenses
paid or incurred by the Company in connection with such issuance, grant or sale.
In case any Common Stock, Options or Convertible Securities are issued or sold
for a consideration part or all of which shall be other than cash, the amount of
the consideration other than cash received by the Company will be the fair value
of such consideration, except where such consideration consists of securities,
in which case the amount of consideration received by the Company will be the
Market Price thereof as of the date of receipt. In case any Common Stock,
Options or Convertible Securities are issued in connection with any acquisition,
merger or consolidation in which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be the fair value of such
portion of the net assets and business of the non-surviving corporation as is
attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair value of any consideration other than cash or securities
will be determined in good faith by the Board of Directors of the Company.
(vi) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No adjustment
to the Exercise Price will be made (i) upon the exercise of any investment
options, options or convertible securities granted, issued and outstanding on
the date of issuance of this Investment Option (including any shares of Series D
Preferred Stock issued on or subsequent to the date of issuance of this
Investment Option); (ii) upon the grant or exercise of any stock or options
which may hereafter be granted or exercised under any employee benefit plan of
the Company now existing or to be implemented in the future, so long as the
issuance of such stock or options is approved by a majority of the independent
members of the Board of Directors of the Company or a majority of the members of
a committee of independent directors established for such purpose; or (iii) upon
the exercise of the Investment Options.
(c) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company at
any time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater
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<PAGE> 7
number of shares, then, after the date of record for effecting such subdivision,
the Exercise Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company at any time combines (by reverse stock
split, recapitalization, reorganization, reclassification or otherwise) the
shares of Common Stock acquirable hereunder into a smaller number of shares,
then, after the date of record for effecting such combination, the Exercise
Price in effect immediately prior to such combination will be proportionately
increased.
(d) ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Paragraph 4, the number of
shares of Common Stock issuable upon exercise of this Investment Option shall be
adjusted by multiplying a number equal to the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
issuable upon exercise of this Investment Option immediately prior to such
adjustment and dividing the product so obtained by the adjusted Exercise Price.
(e) CONSOLIDATION, MERGER OR SALE. In case of any consolidation of
the Company with, or merger of the Company into any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company, then as a condition of such consolidation, merger or sale or
conveyance, adequate provision will be made whereby the holder of this
Investment Option will have the right to acquire and receive upon exercise of
this Investment Option in lieu of the shares of Common Stock immediately
theretofore acquirable upon the exercise of this Investment Option, such shares
of stock, securities or assets as may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
acquirable and receivable upon exercise of this Investment Option had such
consolidation, merger or sale or conveyance not taken place. In any such case,
the Company will make appropriate provision to insure that the provisions of
this Paragraph 4 hereof will thereafter be applicable as nearly as may be in
relation to any shares of stock or securities thereafter deliverable upon the
exercise of this Investment Option. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor corporation (if other than the Company) assumes by
written instrument the obligations under this Paragraph 4 and the obligations to
deliver to the holder of this Investment Option such shares of stock, securities
or assets as, in accordance with the foregoing provisions, the holder may be
entitled to acquire.
(f) DISTRIBUTION OF ASSETS. In case the Company shall declare or
make any distribution of its assets (including cash) to holders of Common Stock
as a partial liquidating dividend, by way of return of capital or otherwise,
then, after the date of record for determining stockholders entitled to such
distribution, but prior to the date of distribution, the holder of this
Investment Option shall be entitled upon exercise of this Investment Option for
the purchase of any or all of the shares of Common Stock subject hereto, to
receive the amount of such assets which would have been payable to the holder
had such holder been the holder of such shares of Common Stock on the record
date for the determination of stockholders entitled to such distribution.
-7-
<PAGE> 8
(g) NOTICE OF ADJUSTMENT. Upon the occurrence of any event which
requires any adjustment of the Exercise Price, then, and in each such case, the
Company shall give notice thereof to the holder of this Investment Option, which
notice shall state the Exercise Price resulting from such adjustment and the
increase or decrease in the number of Investment Option Shares purchasable at
such price upon exercise, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based. Such calculation
shall be certified by the chief financial officer of the Company.
(h) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(i) NO FRACTIONAL SHARES. No fractional shares of Common Stock are
to be issued upon the exercise of this Investment Option, but the Company shall
pay a cash adjustment in respect of any fractional share which would otherwise
be issuable in an amount equal to the same fraction of the Market Price of a
share of Common Stock on the date of such exercise.
(j) OTHER NOTICES. In case at any time:
(i) the Company shall declare any dividend upon the Common
Stock payable in shares of stock of any class or make any other distribution
(including dividends or distributions payable in cash out of retained earnings)
to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or other
rights;
(iii) there shall be any capital reorganization of the
Company, or reclassification of the Common Stock, or consolidation or merger of
the Company with or into, or sale of all or substantially all its assets to,
another corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Investment
Option (a) notice of the date on which the books of the Company shall close or a
record shall be taken for determining the holders of Common Stock entitled to
receive any such dividend, distribution, or subscription rights or for
determining the holders of Common Stock entitled to vote in respect of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up and (b) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, notice of the date (or, if not then known, a reasonable
approximation thereof by the Company) when the same shall take place. Such
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<PAGE> 9
notice shall also specify the date on which the holders of Common Stock shall be
entitled to receive such dividend, distribution, or subscription rights or to
exchange their Common Stock for stock or other securities or property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation, or winding-up, as the case may be. Such notice
shall be given at least 30 days prior to the record date or the date on which
the Company's books are closed in respect thereto. Failure to give any such
notice or any defect therein shall not affect the validity of the proceedings
referred to in clauses (i), (ii), (iii) and (iv) above.
(k) CERTAIN EVENTS. If any event occurs of the type contemplated
by the adjustment provisions of this Paragraph 4 but not expressly provided for
by such provisions, the Company will give notice of such event as provided in
Paragraph 4(g) hereof, and the Company's Board of Directors will make an
appropriate adjustment in the Exercise Price and the number of shares of Common
Stock acquirable upon exercise of this Investment Option so that the rights of
the Holder shall be neither enhanced nor diminished by such event.
(l) CERTAIN DEFINITIONS.
(i) "Common Stock Deemed Outstanding" shall mean the number of
shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Company), plus (x) pursuant to Paragraph
4(b)(i) hereof, the maximum total number of shares of Common Stock issuable upon
the exercise of Options, as of the date of such issuance or grant of such
Options, if any, and (y) pursuant to Paragraph 4(b)(ii) hereof, the maximum
total number of shares of Common Stock issuable upon conversion or exchange of
Convertible Securities, as of the date of issuance of such Convertible
Securities, if any.
(ii) "Market Price," as of any date, (i) means the average of
the last reported sale prices for the shares of Common Stock on the Nasdaq
National Market ("Nasdaq") for the five (5) trading days immediately preceding
such date as reported by Bloomberg, L.P. ("Bloomberg"), 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 Market Price
shall be the fair market value as reasonably determined in good faith by (a) the
Board of Directors of the Corporation or, at the option of a
majority-in-interest of the holders of the outstanding Investment Options by (b)
an independent investment bank of nationally recognized standing in the
valuation of businesses similar to the business of the corporation. The manner
of determining the Market Price of the Common Stock set forth in the foregoing
definition shall apply with respect to any other security in respect of which a
determination as to market value must be made hereunder.
(iii) "Common Stock," for purposes of this Paragraph 4,
includes the Common Stock, par value $.001 per share, and any additional class
of stock of the Company having no preference as to dividends or distributions on
liquidation, provided that the shares
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<PAGE> 10
purchasable pursuant to this Investment Option shall include only shares of
Common Stock, par value $.001 per share, in respect of which this Investment
Option is exercisable, or shares resulting from any subdivision or combination
of such Common Stock, or in the case of any reorganization, reclassification,
consolidation, merger, or sale of the character referred to in Paragraph 4(e)
hereof, the stock or other securities or property provided for in such
Paragraph.
5. ISSUE TAX. The issuance of certificates for Investment Option
Shares upon the exercise of this Investment Option shall be made without charge
to the holder of this Investment Option or such shares for any issuance tax or
other costs in respect thereof, provided that the Company shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than the holder of this
Investment Option.
6. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Investment Option
shall not entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company. No provision of this Investment Option, in the
absence of affirmative action by the holder hereof to purchase Investment Option
Shares, and no mere enumeration herein of the rights or privileges of the holder
hereof, shall give rise to any liability of such holder for the Exercise Price
or as a shareholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
7. TRANSFER, EXCHANGE, AND REPLACEMENT OF INVESTMENT OPTION.
(a) RESTRICTION ON TRANSFER. This Investment Option and the rights
granted to the holder hereof are transferable, in whole or in part, upon
surrender of this Investment Option, together with a properly executed
assignment in the form attached hereto, at the office or agency of the Company
referred to in Paragraph 7(e) below, provided, however, that any transfer or
assignment shall be subject to the conditions set forth in Paragraph 7(f) hereof
and to the applicable provisions of the Securities Purchase Agreement. Until due
presentment for registration of transfer on the books of the Company, the
Company may treat the registered holder hereof as the owner and holder hereof
for all purposes, and the Company shall not be affected by any notice to the
contrary. Notwithstanding anything to the contrary contained herein, the
registration rights described in Paragraph 8 are assignable only in accordance
with the provisions of that certain Registration Rights Agreement, dated as of
February 5, 1998, by and among the Company and the other signatories thereto
(the "Registration Rights Agreement").
(b) INVESTMENT OPTION EXCHANGEABLE FOR DIFFERENT DENOMINATIONS.
This Investment Option is exchangeable, upon the surrender hereof by the holder
hereof at the office or agency of the Company referred to in Paragraph 7(e)
below, for new Investment Options of like tenor representing in the aggregate
the right to purchase the number of shares of Common Stock which may be
purchased hereunder, each of such new Investment Options to represent the right
to purchase such number of shares as shall be designated by the holder hereof at
the time of such surrender.
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<PAGE> 11
(c) REPLACEMENT OF INVESTMENT OPTION. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Investment Option and, in the case of any such loss, theft,
or destruction, upon delivery of an indemnity agreement reasonably satisfactory
in form and amount to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Investment Option, the Company, at its
expense, will execute and deliver, in lieu thereof, a new Investment Option of
like tenor.
(d) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of this
Investment Option in connection with any transfer, exchange, or replacement as
provided in this Paragraph 7, this Investment Option shall be promptly canceled
by the Company. The Company shall pay all taxes (other than securities transfer
taxes) and all other expenses (other than legal expenses, if any, incurred by
the Holder or transferees) and charges payable in connection with the
preparation, execution, and delivery of Investment Options pursuant to this
Paragraph 7.
(e) REGISTER. The Company shall maintain, at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Investment
Option, in which the Company shall record the name and address of the person in
whose name this Investment Option has been issued, as well as the name and
address of each transferee and each prior owner of this Investment Option.
(f) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the time of
the surrender of this Investment Option in connection with any exercise,
transfer, or exchange of this Investment Option, this Investment Option (or, in
the case of any exercise, the Investment Option Shares issuable hereunder),
shall not be registered under the Securities Act of 1933, as amended (the
"Securities Act") and under applicable state securities or blue sky laws, the
Company may require, as a condition of allowing such exercise, transfer, or
exchange, (i) that the holder or transferee of this Investment Option, as the
case may be, furnish to the Company a written opinion of counsel, which opinion
and counsel are acceptable to the Company, to the effect that such exercise,
transfer, or exchange may be made without registration under said Act and under
applicable state securities or blue sky laws, (ii) that the holder or transferee
execute and deliver to the Company an investment letter in form and substance
acceptable to the Company and (iii) that the transferee be an "accredited
investor" as defined in Rule 501(a) promulgated under the Securities Act;
provided that no such opinion, letter or status as an "accredited investor"
shall be required in connection with a transfer pursuant to Rule 144 under the
Securities Act. The first holder of this Investment Option, by taking and
holding the same, represents to the Company that such holder is acquiring this
Investment Option for investment and not with a view to the distribution
thereof.
8. REGISTRATION RIGHTS. The initial holder of this Investment Option
(and certain assignees thereof) is entitled to the benefit of such registration
rights in respect of the Investment Option Shares as are set forth in Section 2
of the Registration Rights Agreement.
9. NOTICES. All notices, requests, and other communications required
or permitted to be given or delivered hereunder to the holder of this Investment
Option shall be in writing,
-11-
<PAGE> 12
and shall be personally delivered, or shall be sent by certified or registered
mail or by recognized overnight mail courier, postage prepaid and addressed, to
such holder at the address shown for such holder on the books of the Company, or
at such other address as shall have been furnished to the Company by notice from
such holder. All notices, requests, and other communications required or
permitted to be given or delivered hereunder to the Company shall be in writing,
and shall be personally delivered, or shall be sent by certified or registered
mail or by recognized overnight mail courier, postage prepaid and addressed, to
the office of the Company at 2100 Reston Parkway, Third Floor, Reston, Virginia
20191, Attention: Chief Financial Officer, or at such other address as shall
have been furnished to the holder of this Investment Option by notice from the
Company. Any such notice, request, or other communication may be sent by
facsimile, but shall in such case be subsequently confirmed by a writing
personally delivered or sent by certified or registered mail or by recognized
overnight mail courier as provided above. All notices, requests, and other
communications shall be deemed to have been given either at the time of the
receipt thereof by the person entitled to receive such notice at the address
of such person for purposes of this Paragraph 9, or, if mailed by registered or
certified mail or with a recognized overnight mail courier upon deposit with the
United States Post Office or such overnight mail courier, if postage is prepaid
and the mailing is properly addressed, as the case may be.
10. GOVERNING LAW. THIS INVESTMENT OPTION SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
DELAWARE WITHOUT REGARD TO THE BODY OF LAW CONTROLLING CONFLICTS OF LAW.
11. MISCELLANEOUS.
(a) AMENDMENTS. This Investment Option and any provision hereof
may only be amended by an instrument in writing signed by the Company and the
holder hereof.
(b) DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Investment Option are inserted for purposes of reference
only, and shall not affect the meaning or construction of any of the provisions
hereof.
(c) CASHLESS EXERCISE. Notwithstanding anything to the contrary
contained in this Investment Option, if the resale of the Investment Option
Shares by the holder is not then registered pursuant to an effective
registration statement under the Securities Act, this Investment Option may be
exercised by presentation and surrender of this Investment Option to the Company
at its principal executive offices with a written notice of the holder's
intention to effect a cashless exercise, including a calculation of the number
of shares of Common Stock to be issued upon such exercise in accordance with the
terms hereof (a "Cashless Exercise"). In the event of a Cashless Exercise, in
lieu of paying the Exercise Price in cash, the holder shall surrender this
Investment Option for that number of shares of Common Stock determined by
multiplying the number of Investment Option Shares to which it would otherwise
be entitled by a fraction, the numerator of which shall be the difference
between the then current Market Price per share of the Common Stock and the
Exercise Price, and the denominator of which shall be the then current Market
Price per share of Common Stock.
-12-
<PAGE> 13
IN WITNESS WHEREOF, the Company has caused this Investment Option to
be signed by its duly authorized officer.
CYBERCASH, INC.
By: /s/ JAMES J. CONDON
-------------------------------------
Name: James J. Condon
Title: Chief Financial Officer
Dated as of February 5, 1998
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<PAGE> 14
FORM OF EXERCISE AGREEMENT
Dated: ________, ____.
To:
-----------------------------
The undersigned, pursuant to the provisions set forth in the within
Investment Option, hereby agrees to purchase ________ shares of Common Stock
covered by such Investment Option, and makes payment herewith in full therefor
at the price per share provided by such Investment Option in cash or by
certified or official bank check in the amount of, or, if the resale of such
Common Stock by the undersigned is not currently registered pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
by surrender of securities issued by the Company (including a portion of the
Investment Option) having a market value (in the case of a portion of this
Investment Option, determined in accordance with Section 11(c) of the Investment
Option) equal to $_________. Please issue a certificate or certificates for such
shares of Common Stock in the name of and pay any cash for any fractional share
to:
Name:
------------------------------------
Signature:
------------------------------------
Address:
------------------------------------
------------------------------------
Note: The above signature should correspond
exactly with the name on the face of the
within Investment Option.
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Investment Option, a new Investment Option is to be
issued in the name of said undersigned covering the balance of the shares
purchasable thereunder less any fraction of a share paid in cash.
<PAGE> 15
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the within Investment Option,
with respect to the number of shares of Common Stock covered thereby set forth
hereinbelow, to:
<TABLE>
<CAPTION>
Name of Assignee Address No of Shares
- ---------------- ------- ------------
<S> <C> <C>
</TABLE>
, and hereby irrevocably constitutes and appoints ______________
________________________ as agent and attorney-in-fact to transfer said
Investment Option on the books of the within-named corporation, with full power
of substitution in the premises.
Dated: _____________________, ____,
In the presence of
- ------------------
Name:
------------------------------------------------
Signature: ------------------------------------
Title of Signing Officer or Agent (if any):
------------------------------------------------
Address:
------------------------------------
------------------------------------
Note: The above signature should correspond
exactly with the name on the face of the
within Investment Option.
<PAGE> 1
EXHIBIT 99.1
CYBERCASH, INC.
2100 Reston Parkway
Reston, VA 20191
(Nasdaq: CYCH)
AT THE COMPANY AT THE FINANCIAL RELATIONS BOARD
James Condon, CFO Marianne Stewart - General Info
(703) 716-5208 (212) 661-8030
FOR IMMEDIATE RELEASE
February 5, 1998
CYBERCASH, INC. RAISES $15 MILLION IN EQUITY
THROUGH PRIVATE PLACEMENT
RESTON, VA., February 5, 1998 -- CyberCash, Inc. (Nasdaq:CYCH), a
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 and options to two
private equity funds. In addition, the Company will receive a second investment
of $15 million if certain conditions are satisfied. James Condon, CyberCash
CFO, stated that "We believe that, with this additional capital, CyberCash will
be able to take advantage of opportunities that will reinforce its position as
the leading provider of Internet payment services."
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 specified 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 $11.65 per share or if
the market price of the Common Stock increases by at least 25% during the
measurement period. The Company also issued to the preferred stock investors
options to purchase common stock at an exercise price based on the current
market price and the stock market price at the end of 1998. The Company has
agreed to register for resale the common stock underlying the preferred stock
and options.
The Company is committed to sell, and the investors are committed to
buy, convertible preferred stock and options for an additional $15 million upon
the satisfaction of certain conditions, including that the market price of the
common stock is at least $13.76 per share and that certain stockholder
approvals are obtained at the Company's annual meeting in late June 1998.
The Company intends to report its fourth quarter and full year 1997
results on February 9, 1998.
<PAGE> 2
CyberCash, Inc., of Reston, Virginia, founded in August 1994, is a
leading provider of secure Internet commerce solutions 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 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.
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.
