<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-27470
CYBERCASH, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 54-1725021
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
2100 RESTON PARKWAY, RESTON, VA 20191
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (703) 620-4200
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
Common Stock, $0.001 Par Value 15,723,023 Shares
(Class) (Outstanding at September 30, 1998)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements........................... 3
Consolidated Statements of Operations for the three and nine
months ended September 30, 1998 and 1997.................. 3
Consolidated Balance Sheets as of September 30, 1998 and
December 31, 1997......................................... 4
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1998 and 1997......................... 5
Notes to Consolidated Financial Statements.................. 6
Item 2. Management's Discussion and Analysis of Financial Conditions
and Results of Operations................................. 10
Item 3. Qualitative and Quantitative Market Risk Disclosure......... 13
PART II OTHER INFORMATION
Item 1. Legal Proceedings........................................... 14
Item 2. Changes in Securities....................................... 14
Item 3. Defaults upon Senior Securities............................. 15
Item 4. Submission of Matters to a Vote of Security-Holders......... 15
Item 5. Other Information........................................... 15
Item 6. Exhibits and Reports on Form 8-K............................ 15
Signatures............................................................ 16
</TABLE>
2
<PAGE> 3
PART I -- FINANCIAL INFORMATION
ITEM I. CONSOLIDATED FINANCIAL STATEMENTS
CYBERCASH, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- ---------------------------
1998 1997 1998 1997
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues................................ $ 4,522,285 $ 1,514,243 $ 8,169,621 $ 2,481,999
Cost of Revenues........................ 2,406,713 772,085 4,958,730 2,286,578
----------- ----------- ------------ ------------
Gross Profit............................ 2,115,572 742,158 3,210,891 195,421
Costs and expenses:
Research and development.............. 2,342,087 2,621,230 6,355,774 7,468,960
Sales and marketing................... 3,637,281 2,635,106 11,241,282 7,718,055
General and administrative............ 1,866,326 1,450,741 5,441,037 4,691,063
Amortization of intangibles........... 1,936,521 -- 3,227,535 --
Write-off of NetBill technology
license............................ -- -- -- 2,162,500
Restructuring Charge.................. -- -- 608,755 344,242
----------- ----------- ------------ ------------
Loss from operations.................... (7,666,643) (5,964,919) (23,663,492) (22,189,399)
Interest and other income............... 45,293 405,851 876,110 1,099,217
Other expense........................... (10,723) -- (119,776) --
----------- ----------- ------------ ------------
Net loss................................ $(7,632,073) $(5,559,068) $(22,907,158) $(21,090,182)
=========== =========== ============ ============
Net loss per share...................... $ (0.51) $ (0.52) $ (1.71) $ (1.96)
=========== =========== ============ ============
</TABLE>
See accompanying notes.
3
<PAGE> 4
CYBERCASH, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 16,403,249 $ 13,222,234
Short-term investments.................................... -- 8,779,773
Restricted cash........................................... 347,733 263,132
Accounts receivable....................................... 4,004,876 2,706,776
Prepaid expenses and other current assets................. 2,892,225 816,730
------------ ------------
Total current assets........................................ 23,648,083 25,788,645
Property and equipment, net................................. 7,826,722 4,671,350
Investment in affiliates.................................... 1,344,127 342,155
Other long-term assets...................................... 862,423 557,124
Goodwill and other intangible assets, net................... 67,043,824 --
------------ ------------
Total assets................................................ $100,725,179 $ 31,359,274
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 2,215,342 $ 801,252
Accrued bonus and employee benefits....................... 743,603 474,942
Other accrued expenses.................................... 1,668,474 266,946
Deferred revenue.......................................... 919,443 209,806
------------ ------------
Total current liabilities................................... 5,546,862 1,752,946
Commitments
Series C Convertible Preferred Stock, $.001 par value;
15,000 shares authorized and designated, 1,000 shares
issued and outstanding as of September 30, 1998 and
13,500 shares issued and outstanding as of December 31,
1997; liquidation preference of $1,057,671 at September
30, 1998............................................... 296,296 13,013,772
Series D Convertible Preferred Stock, $.001 par value;
30,000 shares authorized and designated, 21,000 shares
issued and outstanding as of September 30, 1998;
liquidation preference of $21,681,781 at September 30,
1998................................................... 20,620,358 --
Stockholders' equity:
Common Stock, $.001 par value; 40,000,000 shares
authorized; 15,743,023 shares issued and 15,723,023
outstanding as of September 30, 1998 and 11,075,246
shares issued and 11,055,246 outstanding as of December
31, 1997............................................... 15,743 11,075
Additional paid-in capital................................ 161,913,137 81,896,532
Accumulated deficit....................................... (86,843,498) (63,936,340)
Treasury stock, at cost, 20,000 shares.................... (120,000) (120,000)
Accumulated other comprehensive income.................... (423,602) (332,288)
Receivable from sale of Common Stock...................... (263,812) (803,338)
Unearned compensatory stock options....................... (16,305) (123,085)
------------ ------------
Total stockholders' equity.................................. 74,261,663 16,592,556
------------ ------------
Total liabilities and stockholders' equity.................. $100,725,179 $ 31,359,274
============ ============
</TABLE>
See accompanying notes.
4
<PAGE> 5
CYBERCASH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
1998 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................. $(22,907,158) $(21,090,182)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation........................................... 2,236,376 1,793,700
Amortization........................................... 3,227,535 --
Write-off of NetBill technology license................ -- 2,162,500
(Gain) Loss on disposal of assets...................... 211,973 (16,558)
Accrued interest on receivable from sale of Common
Stock................................................ (23,364) (16,551)
Compensation expense related to stock options.......... 83,632 128,312
Changes in operating assets and liabilities:
Accounts receivable.................................. (1,298,100) (1,231,024)
Prepaid expenses and other current assets............ (2,160,096) 150,675
Other long-term assets............................... (305,299) 7,110
Accounts payable and accrued expenses................ 3,084,279 (665,994)
Deferred revenue..................................... 709,637 239,588
------------ ------------
Net cash used in operating activities............. (17,140,485) (18,538,424)
INVESTING ACTIVITIES
(Purchases) Sales of short-term investments............... 8,779,773 (8,779,773)
Acquisition of ICVerify, net of cash received.......... (16,040,399) --
Investment in affiliates.................................. (1,001,972) (82,645)
Purchases of property and equipment....................... (5,603,721) (980,665)
------------ ------------
Net cash used in investing activities............. (13,866,419) (9,843,083)
FINANCING ACTIVITIES
Proceeds from issuance of Preferred Stock................. 29,262,372 14,275,945
Proceeds from sale of Common Stock........................ 3,600,000 --
Proceeds from receivable from sale of Common Stock........ 562,890 20,000
Proceeds from the issuance of Common Stock through the
Employee Stock Purchase Plan........................... 163,152 239,551
Proceeds from the issuance of Common Stock through the
Employee Stock Option Plan............................. 690,819 706,853
------------ ------------
Net cash provided by financing activities......... 34,279,233 15,242,349
------------ ------------
Effect of exchange rate changes on cash and cash
equivalents............................................... (91,314) (21,776)
------------ ------------
Net increase (decrease) in cash and cash equivalents........ 3,181,015 (13,160,934)
Cash and cash equivalents at beginning of period............ 13,222,234 33,687,076
------------ ------------
Cash and cash equivalents at end of period.................. $ 16,403,249 $ 20,526,142
============ ============
</TABLE>
See accompanying notes.
5
<PAGE> 6
CYBERCASH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF OPERATIONS
CyberCash, Inc. ("CyberCash" or the "Company") was incorporated on August
29, 1994 in the state of Delaware and was in the development stage from date of
inception through December 31, 1996. CyberCash is the world leader in secure,
convenient payment technologies and services, enabling e-commerce across the
entire market spectrum from electronic retailing environments to the Internet.
CyberCash provides a complete line of software products and services
allowing merchants, billers, financial institutions and consumers to conduct
secure transactions using the broadest array of popular payment forms. Credit,
debit, purchase cards, cash, checks, smart cards and alternative payment types
(e.g., "frequent buyer" or loyalty programs) are all supported by CyberCash
payment solutions. Leading brands of CyberCash and its subsidiaries include
Agile Wallet(TM), InstaBuy(TM), ICVERIFY(R), PCVERIFY(TM), CashRegister,
NetVERIFY(TM), CyberCoin(R) and PayNow(TM).
For financial institutions, software developers and integrators, commerce
and Internet service providers, and technology partners, CyberCash solutions are
the preferred choice, offering unmatched ease and flexibility in integrating
payment capabilities into value-added offerings to customers.
The accompanying interim consolidated financial statements and notes
thereto are unaudited, but have been prepared in accordance with generally
accepted accounting principles for interim financial information and should be
read in conjunction with the Company's consolidated financial statements found
in the Company's Form 10-K. In the opinion of management, all adjustments
(consisting only of normal, recurring adjustments) considered necessary to
reflect fairly the Company's consolidated financial position and consolidated
results of operations have been included. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. The results of operations for the three and
nine months ended September 30, 1998 and 1997 are not necessarily indicative of
the results for the full year.
2. INTANGIBLE ASSETS
Intangible assets are recorded at cost and amortized using the
straight-line method over the following estimated useful lives:
<TABLE>
<S> <C>
Developed technology........................................ 3 years
Assembled workforce......................................... 5 years
Trademark and tradename..................................... 10 years
Goodwill.................................................... 10 years
</TABLE>
The Company evaluates the recoverability of intangible assets based on
estimated undiscounted operating income over the amortization periods, giving
consideration to sales and cost benefits expected to be realized by the
consolidated entity from the acquisition and integration of acquired entities.
3. REVENUE RECOGNITION
The Company recognizes transaction processing revenues, merchant set-up and
account fees, hardware and software product sales, software development and
technology license fees as the related services are performed or products are
shipped. In those cases where customers have duplication rights for the software
products, revenue is recognized upon receipt of reports of units produced by the
customers. Maintenance and support revenue is recognized ratably over the term
of the agreement, which in most cases is one year.
6
<PAGE> 7
CYBERCASH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. ACQUISITION OF ICVERIFY, INC.
On April 30, 1998, CyberCash acquired all the outstanding shares of common
stock of ICVerify, Inc. ("ICVerify") from its shareholders for $70.7 million,
including fees and expenses. The purchase price included $16.25 million in cash
and 2.3 million in shares of CyberCash Common Stock. The consolidated financial
statements include the results of operations of ICVerify since the date of
acquisition.
The acquisition has been accounted for as a purchase and, accordingly, the
purchase price has been allocated to the assets and liabilities acquired at
their estimated fair value as of the date of acquisition. Of the purchase price,
$400,000 was allocated to ICVerify's net assets, and the remainder was allocated
to intangible assets, as follows:
<TABLE>
<S> <C>
Developed technology........................................ $2,700,000
Assembled workforce......................................... $800,000
Trademark and tradename..................................... $1,500,000
Goodwill.................................................... $65,300,000
</TABLE>
Accumulated amortization is $3,228,000 at September 30, 1998.
The Company's unaudited pro forma consolidated condensed statements of
income for the nine months ended September 30, 1998 and 1997, assuming the
acquisition of ICVERIFY was effected at the beginning of each period, are
summarized as follows:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------
1998 1997
------------ ------------
<S> <C> <C>
Revenue..................................................... $ 10,763,707 $ 7,589,622
Net loss.................................................... $(27,521,577) $(18,203,366)
------------ ------------
Net loss available to Common Stockholders................... $(28,117,465) $(18,315,818)
------------ ------------
Weighted average shares outstanding......................... 14,753,533 13,143,558
Basic earnings per share.................................... $ (1.91) $ (1.39)
============ ============
Diluted earnings per share.................................. $ (1.91) $ (1.39)
============ ============
</TABLE>
This pro forma information does not purport to be indicative of the results
which may have been obtained had the acquisition been consummated at the date
assumed.
5. PRIVATE PLACEMENT
On both February 5, 1998 and July 14, 1998, the Company completed private
placements of equity securities. It issued an aggregate of 30,000 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 an aggregate of
708,382 shares of the Company's Common Stock (the "Investment Options"). The two
private placements resulted in net proceeds of approximately $14,409,000 and
$14,800,000, respectively. The Series D Preferred Stock has no voting rights and
is convertible into the number of shares of the Company's Common Stock equal to
the stated value of $1,000 per share plus a premium of 5% per annum of the
stated value from the respective dates of issuance of the Series D Preferred
Stock divided by a conversion price. The conversion price is equal to the lowest
closing price of the Company's Common Stock during the measurement period ending
one trading day prior to the conversion date, multiplied by a "conversion
percentage." The conversion percentage is 100% through February 4, 1999, 92.5%
from February 5, 1999 to August 4, 1999 and 85% thereafter. The Company has
accreted the premium of 5% per annum to the Series D Preferred Stock carrying
value.
7
<PAGE> 8
CYBERCASH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Series D Preferred Stock is convertible at the option of the holders
subject to certain limits and redeemable upon the occurrence of certain events
such as dissolution. The Company has filed a registration statement under the
Securities Act of 1933 for the resale of the underlying Common Stock into which
the Series D Preferred Stock may be converted.
As of the date of this report, the holders of the Company's Series C
Convertible Preferred Stock have converted all 15,000 shares of Series C
Preferred Stock into an aggregate of 1,301,343 shares of Common Stock.
As of the date of this report, the holders of the Company's Series D
Preferred Stock had converted an aggregate of 24,000 shares of Series D
Preferred Stock into an aggregate of 2,953,806 shares of Common Stock. 6,000
shares of Series D Preferred Stock remain outstanding.
The exercise price of the Investment Options is equal to the lesser of the
average of $10.59 and the market price of the Company's Common Stock at the end
of 1998 and 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.
6. WARRANT AGREEMENT
The Company issued three warrants to First USA Bank in November 1998 (the
"FUSA Warrants"). The warrants collectively give First USA the right to purchase
up to 2,200,000 shares of common stock of the Company, subject to adjustment as
provided in the FUSA Warrants. Under the first warrant, 600,000 shares of Common
Stock may be acquired from January 1, 1999 through June 30, 1999 at a per share
price of $12.50. From July 1, 1999 through December 31, 1999, these same shares
may be acquired at a per share price of $17.00. From January 1, 2000 through
September 30, 2003, these same shares may be acquired at a per share price of
$32.00. Under the second warrant, 600,000 shares of Common Stock may be acquired
from January 1, 1999 through December 31, 1999 at a per share price of $17.00.
From January 1, 2000 through September 30, 2003, these same shares may be
acquired at a per share price of $32.00. Under the third warrant, 1,000,000
shares of Common Stock may be acquired from January 1, 1999 through September
30, 2003 at a per share price of $32.00.
7. NET LOSS PER SHARE
The following table sets forth the computation of basic and diluted net
loss per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- ---------------------------
1998 1997 1998 1997
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Numerator:
Net loss............................... $(7,632,073) $(5,559,068) $(22,907,158) $(21,090,182)
Accrued dividends to Preferred
Stockholders......................... (251,132) (112,452) (595,888) (112,452)
----------- ----------- ------------ ------------
Net loss available to Common
Stockholders......................... $(7,883,205) $(5,671,520) $(23,503,046) $(21,202,634)
=========== =========== ============ ============
Demominator:
Weighted average shares outstanding.... 15,436,576 10,912,656 13,756,866 10,843,558
Basic earnings per share............... $ (0.51) $ (0.52) $ (1.71) $ (1.96)
=========== =========== ============ ============
Diluted earnings per share............. $ (0.51) $ (0.52) $ (1.71) $ (1.96)
=========== =========== ============ ============
</TABLE>
8. COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 ("SFAS No. 130"), Reporting Comprehensive Income.
SFAS No. 130 establishes new rules for the reporting and presentation of
comprehensive income and its components. SFAS No. 130 requires unrealized gains
or losses on the Company's foreign currency translation adjustments, which prior
to adoption was reported separately in stockholders' equity, to be included in
other comprehensive income. Prior year financial statements have been
reclassified to conform to the requirements of SFAS No. 130.
8
<PAGE> 9
CYBERCASH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of comprehensive income for the nine months ended September
30, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- ---------------------------
1998 1997 1998 1997
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Net loss............................... $(7,632,073) $(5,559,068) $(22,907,158) $(21,090,182)
Foreign currency translation
adjustments.......................... 771 3,214 (91,314) (21,776)
----------- ----------- ------------ ------------
Comprehensive income................... $(7,631,302) $(6,336,105) $(22,998,472) $(15,556,104)
=========== =========== ============ ============
</TABLE>
The components of accumulated other comprehensive income at September 30,
1998 and December 31, 1997 are as follows:
<TABLE>
<CAPTION>
FOREIGN CURRENCY
TRANSLATION
----------------
<S> <C>
December 31, 1997........................................... $(332,288)
Current period other comprehensive income................... (91,314)
---------
September 30, 1998.......................................... $(423,602)
=========
</TABLE>
9. YEAR 2000 COMPLIANCE
The "year 2000" compliance issue involves a number of related issues
associated with the new millennium. In the electronic commerce environment,
potential year 2000 obstacles include issues such as payment card expiration
dates, on-line processing, batch/offline processing, reporting and leap year
2000. Overcoming these obstacles requires reviewing every element of a system,
including software written in-house, software purchased from third parties,
hardware elements, payment processing partners and electronic storefront
integrators.
The Company is committed to ensuring that its software and services are
entirely year 2000 compliant before the millenium date change. To meet this
objective, the Company already has conducted an internal review of software
components developed by the Company that are contained in its CashRegister
payment service. The 1.x and 2.x releases of the Company's CashRegister product
are not year 2000 compliant. The Company believes that its CashRegister 3.x
release is year 2000 compliant and is taking steps to verify that this is so.
ICVerify began testing the ICVERIFY product for year 2000 compliance in 1996,
beginning with version 1.04 for DOS. All versions of PCVERIFY and NetVERIFY,
which were introduced after 1996, have been tested successfully for year 2000
compliance.
The Company is determining whether to make releases of its software that
are not year 2000 compliant obsolete and to migrate customers to year 2000
compliant releases or, alternatively, to issue updates to the earlier releases
that will make the earlier releases year 2000 compliant. CyberCash encourages
all new customers to use only versions of its software that the Company believes
to be year 2000 compliant.
The certification standards imposed by many payment processors provide an
independent measure of verification that the Company's services and products are
year 2000 compliant. Many of these certification standards, which are intended
to assure that financial information passed to the processors conform with the
processors' protocols, include testing procedures for year 2000 compliance. The
Company and ICVerify have obtained certification on most of their respective
services and products from many, although not all, payment processors. Of the
processors from whom certifications have been obtained, the Company is not aware
of any material failure by its software to comply with the payment processors'
certification standards. However, the Company does not control the payment
processors' certification standards or their data protocols. Consequently, there
can be no assurance whether transactions effected over the Company's products or
using the
9
<PAGE> 10
CYBERCASH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company's services will continue to be year 2000 compliant if the protocols
established by the payment processors are not year 2000 compliant or if the
certification standards fail to test for year 2000 compliance.
The Company's payment solutions often are integrated by third parties with
other electronic commerce software solutions. The Company and ICVerify provide
written documentation and in-house training to integrators detailing the code
specifications that need to be followed to integrate CyberCash or ICVerify
software, as applicable, with other solutions. However, there can be no
assurance whether transactions initiated at an electronic storefront that
integrates one of the Company's products or services will continue to be year
2000 compliant if (i) the integrator fails to comply with the Company's or
ICVerify's code specifications, (ii) the Company or ICVerify's software is not
configured and used in accordance with its related documentation, or (iii) the
underlying operating system of the host machine or any other software used with
or in the host machine is not also year 2000 compliant.
It is possible that the Company's operations could also be affected if
software or systems it uses to provide its services or for management or
communications are not year 2000 compliant. The Company is taking steps,
including retaining outside consultants and establishing an internal task force,
to identify and remedy any problems. At this time the Company does not believe
that the costs associated with this effort will be material.
The Company believes that it has managed risk of revenue and customer
service interruption due to the year 2000 threat to immaterial levels. However,
existing industry standards in year 2000 compliance efforts cannot guarantee
100% accuracy. Accordingly, the Company may experience future uncertainties
regarding year 2000 compliance of its services and products. There can be no
assurance that all of the Company's products and services will be year 2000
compliant prior to January 1, 2000, even though the Company and ICVerify, Inc.
designed and tested most of its product offerings to be year 2000 compliant. Nor
can there be assurances that the Company's currently compliant products do not
contain undetected problems associated with year 2000 compliance. Such problems
may result in litigation and/or increased expenses negatively affecting future
operating results.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the
accompanying interim consolidated financial statements and notes thereto.
Historical results and percentage relationships among any amounts in the
financial statements are not necessarily indicative of trends in operating
results for any future period. This discussion contains, in addition to
historical information, forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ significantly from the
results discussed in the forward-looking statements. The uncertainties and risks
include the pace of growth of Internet commerce, development by the Company and
its competitors of new products and services, the ability of the Company to form
alliances with banks and other financial institutions to distribute the
Company's services, strategic decisions by major participants in the industry,
integration of the ICVerify, Inc. product offerings with the service offerings
of the Company, competitive pricing pressures, legal and regulatory
developments, and general economic conditions. Further information about these
and other relevant risks and uncertainties may be found in the Company's Annual
Report on Form 10-K.
OVERVIEW
The Company's future operating performance will depend in large part on the
rate of growth of electronic commerce and what role payment systems, like those
offered by the Company, will play in electronic commerce. Moreover, the market
for electronic payment services is still immature and is changing rapidly. It is
not certain that the Company's services will find acceptance in the market. The
Company's revenue expectations have been based partly on expectations of future
demand rather than on actual experience. Since its inception in August 1994, the
Company has devoted most of its efforts to business development and marketing in
preparation for, and anticipation of, the growth in electronic commerce that it
expects will create
10
<PAGE> 11
a substantial market for its Internet payment services. The Company has also
made significant investments in software development, computers, networking
systems and telecommunications equipment. Largely, as a result of the expenses
associated with these efforts, the Company's operating expenses increased each
quarter through the end of 1996, but were maintained at approximately $7.5
million for each quarter through March 31, 1998.
On April 30, 1998, the Company completed the acquisition of ICVerify, a
company that develops and markets payment systems software, for $16,250,000 in
cash and 2,300,000 shares of Common Stock. The Company's operating expenses
increased to approximately $12.2 million for each of the quarters ending June 30
and September 30, 1998, as a result of consolidating the operating results of
ICVerify. The Company expects operating expenses to be maintained at
approximately this level for the foreseeable future.
During 1997 and 1998, the Company has continued its efforts to establish a
strong market position and to lay the foundations for growth in recurring
revenues as electronic commerce increases. Meanwhile, the Company has generated
significant revenues from agreements with strategic allies or joint venture
partners to finance all or part of the development work necessary to adapt the
Company's technology to new uses or to foreign markets. The Company intends to
continue to seek revenues from development work it performs in connection with
strategic alliances in order to help finance its overall development program.
If electronic commerce continues to grow during 1998; if there is a
resulting increase in the demand for electronic payment services; and if the
Company's efforts to develop and market new products and services are
successful; the Company believes it is strategically positioned to be able to
capture a significant share of its market. The rate of growth of the electronic
market and the Company's success in it remain, however, subject to considerable
uncertainty.
RESULTS OF OPERATIONS
Revenues. The Company's revenues for the three months ended September 30,
1998 and 1997 were $4,522,000 and $1,514,000, respectively and $8,170,000 and
$2,482,000 for the nine months ended September 30, 1998 and 1997, respectively.
For the three months ended September 30, 1998, the Company generated its
revenues from sales of ICVERIFY payment software, providing its recurring
services and development work associated with the licensing of its technology.
The Company anticipates that revenues from payment software sales will continue
to represent an increasing portion of its total revenue during the next several
quarters as the market for electronic commerce continues to gain momentum. These
revenues are, however, subject to some degree of seasonal variation. Merchants
tend to be reluctant to modify their payment systems during the fourth quarter
holiday period, and thus sales of payment software are likely to be slower
during that period.
The Company's secure credit card transport service has come under
increasing competitive pressure, which has required the Company in some cases to
reduce the fees it charges for that service. Those reductions have been offset,
however, by increases in the number of merchants to whom the Company provides
the service, with the result that revenues from the credit card service have
continued to increase, although at a slower rate than would have been the case
if prices had remained the same. The Company expects that competition, and thus
pressures on pricing, will continue to characterize the market for its credit
card service.
Revenues from licensing and development, are expected to continue to be
material. They are generally less predictable and more inclined to vary from
period to period than revenues from fees paid by merchants and other customers.
Accordingly, the Company may experience significant fluctuations in future
quarterly operating results.
Cost of Revenues. Cost of revenues consist primarily of cost of operations
to provide transaction processing and customer support, labor costs for
providing development work associated with licensing activities and cost of
ICVERIFY payment system software. Cost of revenues increased $1,635,000 from
11
<PAGE> 12
$772,000 for the three months ended September 30, 1997 to $2,407,000 for the
three months ended September 30, 1998 and increased $2,672,000 from $2,287,000
for the nine months ended September 30, 1997 to $4,959,000 for the nine months
ended September 30, 1998. The increases are attributable primarily to the
acquisition of ICVerify, which added the cost of goods for the ICVERIFY payment
system software and increased customer support costs. In addition, the Company
independently enlarged and enhanced its customer support operations.
Research and Development. Research and development expenses consist
primarily of compensation expense and consulting fees to support the development
of the Company's services and technologies. Research and development expenses
decreased $279,000 from $2,621,000 for the three months ended September 30, 1997
to $2,342,000 for the three months ended September 30, 1998 and decreased
$1,113,000 from $7,469,000 for the nine months ended September 30, 1997 to
$6,356,000 for the nine months ended September 30, 1998. This decrease is a
result of the Company carrying out an increasing amount of development work at
its lower-cost Bangalore, India facility instead of using outside consultants or
employees working in the United States. This effect was partially offset by an
increase in U.S.-based development personnel as a result of the ICVerify
acquisition. In addition, the Company's financed a portion of its development
work in the first nine months of 1998 through development contracts with its
joint ventures and strategic allies. The Company plans to continue to perform a
significant amount of research and development. Its ability to continue to
finance a portion of its research and development with revenues from work paid
for by joint ventures and strategic allies is uncertain. Accordingly, research
and development expenses could increase in the future. To date, all of the
Company's software development costs have been expensed as incurred. The Company
will continue to expense such costs until it can demonstrate that it may realize
future benefits from costs incurred on its software.
Sales and Marketing. Sales and marketing expenses consist primarily of
compensation expense and advertising and marketing costs. Sales and marketing
expenses increased $1,002,000 from $2,635,000 for the three months ended
September 30, 1997 to $3,637,000 for the three months ended September 30, 1998
and increased $3,523,000 from $7,718,000 for the nine months ended September 30,
1997 to $11,241,000 for the nine months ended September 30, 1998. A large
portion of 1998 sales and marketing expense was related to raising brand
awareness of CyberCash through television and magazine advertisements. In
addition, during the quarters ended June 30 and September 30, 1998 the Company
began promoting ICVerify's payment system software products. The Company
anticipates that its sales and marketing expenses will continue to be
significant.
General and Administrative. General and administrative expenses consist
primarily of compensation expense and fees for professional services and other
expenses associated with the general management and administration of the
Company. General and administrative expenses increased $416,000 from $1,451,000
for the three months ended September 30, 1997 to $1,866,000 for the three months
ended September 30, 1998 and increased $750,000 from $4,691,000 for the nine
months ended September 30, 1997 to $5,441,000 for the nine months ended
September 30, 1998. This increase is primarily due to an increase in shareholder
related activities, an increase in personnel as a result of the ICVerify
acquisition and costs related to the upgrading of the administrative computer
infrastructure. The Company anticipates that its general and administrative
expenses will continue to be significant as it continues to develop and expand
its operations.
Restructuring Charge. Restructuring charges consist of severance and other
expenses related to reduction-in-force of the Company's employee base. In
February 1997 and June 1998, the Company reduced the size of its employee base
by approximately 10% and 20%, respectively which resulted in costs of $344,000
and $609,000, respectively.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1998, the Company had cash and cash equivalents of
$16,403,000, which represented an increase of $3,181,000 over cash and cash
equivalents of $13,222,000 at December 31, 1997. This increase was the result of
net cash proceeds of $32,862,000 from the Company's private placement of its
Series D Preferred Stock on February 5 and July 14, 1998 and sale of common
stock to three of the Company's
12
<PAGE> 13
directors, $8,780,000 from sales of short-term investments and non-cash expenses
of $5,548,000 for depreciation, amortization and compensation expense related to
stock options. This was offset by the $16,250,000 in cash consideration given in
the acquisition of ICVerify, a net loss of $22,907,000, cash outflows for
capital expenditures of $5,604,000 and investment in affiliates of $1,002,000.
Other less significant items also affected changes in the Company's cash
position during the period.
The Company currently anticipates that its existing cash resources,
supplemented by future cash flows from operations, will be sufficient to meet
the Company's anticipated cash needs, including working capital, for at least
twelve to fifteen months. Thereafter, the Company may need to raise additional
funds. The Company may need to raise additional funds sooner than anticipated in
order to fund more rapid expansion, to develop new or enhanced services, to
respond to competitive pressures or to acquire complementary businesses or
technologies. If the Company does raise additional funds through the issuance of
equity securities, the percentage ownership of the stockholders of the Company
will be reduced, stockholders may experience additional dilution, or such equity
securities may have rights, preferences or privileges senior to those of the
holders of the Company's Common Stock. There can be no assurance that additional
financing will be available now or in the future. If adequate funds are not
available or are not available on acceptable terms, the Company may be unable to
develop or enhance its services, take advantage of future opportunities, or
respond to competitive pressures, which could have a material adverse effect on
the Company's business, financial condition or operating results.
ITEM 3. QUALITATIVE AND QUANTITATIVE MARKET RISK DISCLOSURE.
Not Applicable.
13
<PAGE> 14
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 13, 1998, a class action lawsuit was filed in the Delaware
Chancery Court against the Company, its Board of Directors, and James J. Condon,
the Chief Financial Officer. The suit claims that the "continuing director"
provision of the shareholder rights plan adopted by the Board of Directors on
June 26, 1998 violated Delaware law and sought injunctive relief and unspecified
damages. The Company understands that the law firm representing the plaintiffs
has filed several similar suits against other companies that have similar
provisions in their shareholder rights plans. The Company believes that the
rights plan is in compliance with Delaware law. Nevertheless, to avoid the
expense and distraction of protracted litigation, it has engaged in settlement
discussions with counsel for the plaintiff class with a view toward settling the
suit. If the Company is unable to reach a settlement agreement, it will defend
the suit aggressively. While the litigation and settlement discussions are in an
early stage, the Company does not believe that the suit will have a material
adverse effect on the Company.
ITEM 2. CHANGES IN SECURITIES
As of the date of this report, the holders of the Company's Series C
Convertible Preferred Stock have converted all 15,000 shares of Series C
Preferred Stock into an aggregate of 1,301,343 shares of Common Stock.
As of the date of this report, the holders of the Company's Series D
Preferred Stock had converted an aggregate of 24,000 shares of Series D
Preferred Stock into an aggregate of 2,953,806 shares of Common Stock. 6,000
shares of Series D Preferred Stock remain outstanding.
On September 16, 1998, William Melton, President and Chief Executive of the
Company of the completed the purchase of 350,000 shares of the Company's Common
Stock for an aggregate of $3.5 million. In addition, Michael L. Rothschild, a
director of the Company, purchased 10,000 shares of the Company's Common Stock
for an aggregate of $100,000.
On July 17, 1998, Garen K. Staglin, a director of the Company, purchased
16,700 shares of the Company's Common Stock for an aggregate of $200,000.
In November 1998, the Company issued three warrants to First USA Bank, a
subsidiary of BancOne Corporation (collectively, the "FUSA Warrants") in
connection with the two parties entering into an agreement for First USA to
market the Company's InstaBuy(TM) service, built on the Company's new Agile
Wallet(TM) platform. The warrants collectively give First USA the right to
purchase up to 2,200,000 shares of common stock of the Company, subject to
adjustment as provided in the FUSA Warrants. Under the first warrant, 600,000
shares of Common Stock may be acquired from January 1, 1999 through June 30,
1999 at a per share price of $12.50. From July 1, 1999 through December 31,
1999, these same shares may be acquired at a per share price of $17.00. From
January 1, 2000 through September 30, 2003, these same shares may be acquired at
a per share price of $32.00. Under the second warrant, 600,000 shares of Common
Stock may be acquired from January 1, 1999 through December 31, 1999 at a per
share price of $17.00. From January 1, 2000 through September 30, 2003, these
same shares may be acquired at a per share price of $32.00. Under the third
warrant, 1,000,000 shares of Common Stock may be acquired from January 1, 1999
through September 30, 2003 at the per share price of $32.00.
The number of shares of Common Stock that may be acquired pursuant to the
FUSA Warrants may be subject to adjustment in the event the Company pays a stock
dividend or makes a stock distribution on its Common Stock, effects a stock
split or reverse stock split, or distributes rights, options or warrants to all
holders of the Company's Common Stock.
The Company will not register the FUSA Warrants pursuant to the Securities
Act of 1933, as amended, in reliance upon representations made by FUSA that is
an "accredited investor" within the meaning of
14
<PAGE> 15
Rule 501(a) of Regulation D and that it is acquiring the FUSA Warrants for its
own account for investment only and not with a view toward the public sale or
distribution thereof. Under the FUSA Warrants, the Company has agreed to
register the Common Stock acquired upon exercise of the FUSA Warrants under
certain specified circumstances set forth more fully therein.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None.
ITEM 5. OTHER INFORMATION
In order to present a proposal at the 1999 Annual Meeting of Stockholders,
a CyberCash Stockholder must provide written notice of the proposal to the
Company no later than March 31, 1999 at 2100 Reston Parkway, Reston, Virginia
22091, Attention: General Counsel. The Company intends to use discretionary
voting authority with respect to any matter brought before the 1999 annual
meeting of which the Company has not received written notice by March 31, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<S> <C>
4.1 Form of Warrant 98-1 dated as of November 6, 1998 between
the Company and First USA Bank.
4.2 Form of Warrant 98-2 dated as of November 6, 1998 between
the Company and First USA Bank.
4.3 Form of Warrant 98-3 dated as of November 6, 1998 between
the Company and First USA Bank.
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
On February 10, 1998, the Company filed a Form 8-K that reported under
items 5 and 7 the closing of a private placement of convertible preferred stock
on February 5, 1998.
On March 18, 1998, the Company filed a Form 8-K that reported under item 5
that, on March 16, 1998, the Company had entered into a non-binding agreement to
acquire ICVerify, Inc., of Oakland, California for 2,300,000 shares of the
Company's Common Stock and $16,250,000 in cash.
On May 1, 1998, the Company filed a Form 8-K that reported under items 2
and 7 therein the consummation of the Company's acquisition of ICVerify in a
merger transaction.
On May 27, 1998, the Company filed a Form 8-K/A, under which it submitted
the financial statements and pro forma financial information prescribed by Rule
3-05 of Regulation S-X and Article 11 of Regulation S-X, respectively, in
connection with the acquisition of ICVerify.
On June 30, 1998, the Company filed a form 8-K that reported under item 5
therein the Company's preliminary estimate of revenues for the quarter ending
June 30, 1998.
On July 2, 1998, the Company filed a Form 8-K that reported under item 5
and 7 the adoption of a shareholder Rights Plan on June 26, 1998.
On July 16, 1998, the Company filed a Form 8-K that reported under items 5
and 7 the closing of a private placement of convertible preferred stock on July
16, 1998.
On September 18, 1998, the Company filed a Form 8-K and Form 8-K/A that
reported under item 5 the sale of common stock on September 16, 1998.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CYBERCASH, INC.
(Registrant)
/s/ WILLIAM N. MELTON
William N. Melton
President and Chief Executive Officer
Date: November 13, 1998
/s/ JAMES J. CONDON
James J. Condon
Chief Operating Officer
and Chief Financial Officer
Date: November 13, 1998
16
<PAGE> 1
EXHIBIT 4.1
Warrant No. 98-1
WARRANT AND WARRANT AGREEMENT
Dated as of November 6, 1998
<PAGE> 2
THIS WARRANT AND THE SHARES OBTAINABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL SUCH
WARRANT OR SHARES ARE REGISTERED UNDER SUCH ACT OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY IS OBTAINED TO THE EFFECT THAT SUCH
REGISTRATION IS NOT REQUIRED.
CYBERCASH, INC.
WARRANT AND WARRANT AGREEMENT
This certifies that in consideration of the covenants and agreements of the
parties contained in the Operating Agreement dated October 15, 1998, the
adequacy of which consideration is hereby acknowledged, First USA Bank, or its
registered permitted assigns (the "Holder") is entitled to subscribe for and
purchase up to 600,000 shares (subject to adjustment as described herein) of
fully paid and nonassessable Common Stock (the "Warrant Shares") of CyberCash,
Inc., a Delaware corporation (the "Company"), upon exercise of this Warrant and
subject to the provisions and upon the terms and conditions hereinafter set
forth.
SECTION 1. Term; Exercise of Warrant. Subject to the terms of
this Warrant, the Holder shall have the right to receive from the Company the
number of fully paid and nonassessable Warrant Shares which the Holder may at
the time be entitled to receive on exercise of such Warrant and payment to the
Company of the Exercise Price (as defined below) then in effect for such Warrant
Shares; provided, however, that such Warrant shall be exercised in minimum
increments of 100,000 shares (as proportionately adjusted for any stock splits,
stock dividends or the like). This Warrant is exercisable commencing at the
opening of business on January 1, 1999 until 5:00 p.m., Eastern time on
September 30, 2003. If not exercised prior to 5:00 p.m., Eastern time on
September 30, 2003, this Warrant shall become void and all rights thereunder and
all rights in respect thereof shall cease as of such time.
This Warrant may be exercised upon surrender to the Company at
its office designated for such purpose (the address of which is set forth in
Section 10 hereof) during normal business hours (9:00 a.m. to 5:00 p.m. Eastern
Time) this Warrant with the form of election to purchase duly filled in and
signed, which signature shall be guaranteed by a bank or trust company having an
office or correspondent in the United States or a broker or dealer which is a
member of a registered securities exchange or the National Association of
Securities Dealers, Inc., and upon payment to the Company of the Exercise Price
(as defined in Section 3), subject to adjustment pursuant to Section 7, for the
number of Warrant Shares in respect of which the Warrant is then exercised.
Payment of the aggregate Exercise Price shall be made in cash or by certified or
official bank check payable to the order of the Company or pursuant to the
cashless exercise provisions set forth in Section 3.
Subject to the provisions of Section 2 hereof, upon such
surrender of this Warrant and payment of the Exercise Price the Company shall
issue and cause to be delivered with all reasonable dispatch to or upon the
written order of the Holder and in such name or names as the Holder may
designate, a certificate or certificates for the number of full Warrant Shares
issuable upon the exercise of such Warrant together with cash as provided in
Section 8;
<PAGE> 3
provided, however, that if any reclassification, consolidation, merger or lease
or sale of assets is proposed to be effected by the Company as described in
subsection (f) of Section 7 hereof, or a tender offer or an exchange offer for
shares of Common Stock of the Company shall be made, upon such surrender of
Warrant and payment of the Exercise Price as aforesaid, the Company shall, as
soon as possible, but in any event not later than two business days thereafter,
issue and cause to be delivered the full number of Warrant Shares issuable upon
the exercise of such Warrant in the manner described in this sentence together
with cash as provided in Section 8. Such certificate or certificates shall be
deemed to have been issued and any person so designated to be named therein
shall be deemed to have become a holder of record of such Warrant Shares as of
the date of the surrender of such Warrant and payment of the Exercise Price.
The Warrant may be exercised, at the election of the Holder,
either in full or from time to time in part (in minimum increments of 100,000).
In the event that the Warrant is exercised in respect of fewer than all of the
Warrant Shares issuable on such exercise at any time prior to the date of
expiration of the Warrant, a new Warrant will be issued and delivered pursuant
to the provisions of this Section.
All Warrants surrendered upon exercise of Warrants shall be
canceled and disposed of by the Company.
So long as First USA or any assignee or transferee of the
Warrant is a bank holding company or a subsidiary of a bank holding company (a
"Bank Affiliate") as defined in the Bank Holding Company Act of 1956, as
amended, or other applicable banking laws of the United States and the rules and
regulations promulgated thereunder (the "Bank Holding Company Act"), no such
Bank Affiliate shall acquire Common Stock of the Company by exercise of the
Warrant or otherwise, without prior notice to or approval of the Federal Reserve
Board, if after giving effect to such exercise, the Bank Affiliate would own
more than five percent (5%) of the outstanding voting securities of the Company,
or if such exercise or conversion would otherwise violate the Bank Holding
Company Act. Shares of Common Stock may otherwise be acquired in the event that:
(i) The Company shall vote to merger or consolidate with or
into any other person, and after giving effect to such merger or consolidation,
the Bank Affiliate would not own more than 5% of the outstanding voting
securities of the surviving corporation;
(ii) Holder desires to sell shares of Common Stock in
connection with any proposed purchase of Common Stock by one or more other
persons (other than a Bank Affiliate) in which no such person acquires more than
two percent (2%) of the Company's Common Stock; or
(iii) Holder exercises registration rights pursuant to this
Warrant and Warrant Agreement and agrees to sell the Common Stock pursuant to
the registration statement resulting therefrom in a widely dispersed public
offering.
-2-
<PAGE> 4
SECTION 2. Payment of Taxes. The Company will pay all
documentary stamp taxes, if any, attributable to the initial issuance of Warrant
Shares upon the exercise of Warrants.
SECTION 3. Exercise Price. (a) The purchase price for each
share of Common Stock deliverable upon exercise of this Warrant (the "Exercise
Price") shall be determined as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Beginning (9:00 am) Ending (5:00 pm) Exercise Price
January 1, 1999 June 30, 1999 $12.50
July 1, 1999 December 31, 1999 $17.00
January 1, 2000 September 20, 2003 $32.00
</TABLE>
(b) In lieu of delivering the Exercise Price as set forth in
subparagraph (a), the Holder may exercise this Warrant by conversion, in whole
or in part (but in increments of not less than 100,000 shares), into shares of
Common Stock, by instructing the Company in writing ("Notice of Conversion") to
deliver to the Holder (without payment by the Holder of any Exercise Price or of
any other cash or consideration) that number of shares of Common Stock equal to
the quotient obtained by dividing:
(i) the value of this Warrant at the time the conversion
right is exercised (determined by subtracting the
aggregate Exercise Price in effect immediately prior
to the exercise of the conversion right from the
aggregate fair market value (as determined in
accordance with Section 7 hereof) of the shares of
Common Stock issuable upon exercise of this Warrant
immediately prior to the exercise of the conversion
right) by
(ii) the current fair market value (as determined in
accordance with Section 7 hereof) of one share of
Common Stock immediately prior to the exercise of the
conversion right,
and multiplying the quotient so obtained by a fraction equal to the portion of
this Warrant which the Holder desires to exercise.
The Notice of Conversion may be given by circling the
appropriate option in the Notice of Exercise attached hereto.
SECTION 4. Mutilated or Missing Warrant Certificates. In case
the Warrant shall be mutilated, lost, stolen or destroyed, the Company shall
issue, in exchange and substitution for and upon cancellation of the mutilated
Warrant, or in lieu of and substitution for the Warrant lost, stolen or
destroyed, a new Warrant of like tenor and representing an equivalent number of
Warrant Shares, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction of such Warrant and indemnity, if
requested, also reasonably satisfactory to it.
SECTION 5. Valid Issuance of Warrant; Reservation of Warrant
Shares.
-3-
<PAGE> 5
The execution and delivery of this Warrant and Warrant
Agreement and the issuance and sale of the Common Stock upon exercise of the
Warrant pursuant to its terms (i) are within the corporate power and authority
of the Company and (ii) have been duly authorized by all requisite corporate
proceedings on the part of the Company. This Warrant and Warrant Agreement has
been duly executed and delivered by the Company and constitutes a valid and
binding agreement of the Company, enforceable in accordance with its terms,
except that (i) such enforcement maybe subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought. The capitalization of the Company as of June 30, 1998 is as set
forth in the Company's quarterly report on Form 10-Q filed with the Securities
and Exchange Commission on August 14, 1998.
The Company will at all times reserve and keep available, free
from preemptive rights, out of the aggregate of its authorized but unissued
Common Stock or its authorized and issued Common Stock held in its treasury, for
the purpose of enabling it to satisfy any obligation to issue Warrant Shares
upon exercise of the Warrant, the maximum number of shares of Common Stock which
may then be deliverable upon the exercise of the outstanding Warrant.
The Company or, if appointed, the transfer agent for the
Common Stock (the "Transfer Agent") and every subsequent transfer agent for any
shares of the Company's capital stock issuable upon the exercise of any of the
rights of purchase aforesaid will be irrevocably authorized and directed at all
times to reserve such number of authorized shares as shall be required for such
purpose.
Before taking any action which would cause an adjustment
pursuant to Section 7 hereof to reduce the Exercise Price below the then par
value (if any) of the Warrant Shares, the Company will take any corporate action
which may, in the opinion of its counsel, be necessary in order that the Company
may validly and legally issue fully paid and nonassessable Warrant Shares at the
Exercise Price as so adjusted.
-4-
<PAGE> 6
The Company covenants that all Warrant Shares which may be
issued upon exercise of this Warrant will, upon issue, be fully paid,
nonassessable, free of preemptive rights and free from all documentary stamp
taxes, and liens, charges and security interests with respect to the issue
thereof.
SECTION 6. Delivery of Information; Obtaining Stock Exchange
Listings.
(a) The Company will from time to time take all action which
may be necessary so that the Warrant Shares, immediately upon their issuance
upon the exercise of this Warrant, will be listed on the principal securities
exchanges and automated quotation systems within the United States of America,
if any, on which other shares of Common Stock are then listed.
(b) During the term of this Warrant and Warrant Agreement, the
Company agrees to provide to First USA (so long as it is a Holder): (i) copies
of any of the following reports filed with the SEC: Annual Report on Form 10-K,
its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K; (ii)
copies of all press releases issued by the Company or any of its Subsidiaries;
and (iii) copies of any notices or other information the Company generally makes
available or provides to stockholders. The Company's obligation to provide any
such information to First USA shall be satisfied by the electronic delivery of
information to Clinton Walker at [email protected] and/or by facsimile
to Clinton Walker at (302) 884-8361 (fax) and (302) 434-7677 (phone) or such
other electronic address or telephone number as shall be provided in writing to
the Company.
SECTION 7. Adjustment of Exercise Price and Number of Warrant Shares
Issuable. The Exercise Price and the number of Warrant Shares issuable upon the
exercise of the Warrant are subject to adjustment from time to time upon the
occurrence of the events enumerated in this Section 7. For purposes of this
Section 7, "Common Stock" means shares now or hereafter authorized of any class
of common stock of the Company and any other stock of the Company, however
designated, that has the right (subject to any prior rights of any class or
series of preferred stock) to participate in any distribution of the assets or
earnings of the Company without limit as to per share amount.
-5-
<PAGE> 7
(a) Adjustment for Change in Common Stock.
If the Company: (i) pays a dividend or makes a distribution on
its Common Stock in shares of its Common Stock; (ii) subdivides its outstanding
shares of Common Stock into a greater number of shares; or (iii) combines its
outstanding shares of Common Stock into a smaller number of shares; then the
Exercise Price in effect immediately prior to such action (and each Exercise
Price provided for in Section 3 hereof) shall then be adjusted in accordance
with the formula:
E* = E x O
--
A
Where:
E*= the adjusted Exercise Price
E = the current Exercise Price
O = the number of shares of Common Stock outstanding prior to such
action
A = the number of shares of Common Stock outstanding immediately
after such action
In the case of a dividend or distribution the adjustment shall
become effective immediately after the payment date for such dividend or
distribution, or the effective date of such other corporate action including,
but not limited to, a subdivision or combination.
If after an adjustment the Holder upon exercise of the Warrant
may receive shares of two or more classes of capital stock of the Company, the
Company shall determine the allocation of the adjusted Exercise Price between
the classes of capital stock. After such allocation, the exercise privilege, the
number of shares issuable upon such exercise, and the Exercise Price of each
class of capital stock shall thereafter be subject to adjustment on terms
comparable to those applicable to Common Stock in this Section 7.
Such adjustment shall be made successively whenever any event
listed above shall occur.
-6-
<PAGE> 8
(b) Adjustment for Rights Issue.
If the Company distributes any rights, options or warrants to
all holders of its Common Stock entitling them at any time after the record date
mentioned below to purchase shares of Common Stock at a price per share less
than the Fair Market Value (as defined in Section 7(c)) per share on such record
date relating to such distribution, the Exercise Price in effect immediately
prior to such action (and each Exercise Price provided in Section 3 hereof)
shall be adjusted in accordance with the formula:
O +N x P
-----
E* = E x M
----------
O + N
where:
E* = the adjusted Exercise Price.
E = the current Exercise Price.
O = the number of shares of Common Stock outstanding on the record date.
N = the number of additional shares of Common Stock issuable upon exercise of
the rights, options or warrants offered.
P = the exercise price per share of the additional shares issuable upon
exercise of the rights, options or warrants.
M = the Fair Market Value per share of Common Stock on the record date.
The adjustment shall be made successively whenever any such
rights, options or warrants are issued and shall become effective immediately
after the record date for the determination of stockholders entitled to receive
the rights, options or warrants. If at the end of the period during which such
rights, options or warrants are exercisable, not all rights, options or warrants
shall have been exercised, the Exercise Price shall be immediately readjusted to
what it would have been if "N" in the above formula had been the number of
shares actually issued.
Notwithstanding the foregoing, if the Company distributes or
issues rights to all holders of its Common Stock pursuant to a shareholder
rights plan, then no adjustment shall be made pursuant to this Section 7(b) upon
such distribution or issuance if, upon exercise of the Warrant, the Holder
receives the same type and number of unexpired rights it would have received (as
adjusted for any event described in Sections 7(a) or (f)) had it exercised the
Warrant, and been a holder of the shares of Common Stock issuable upon exercise
thereof, prior to the record date for such distribution or issuance.
-7-
<PAGE> 9
(c) Fair Market Value.
"Fair Market Value" per share of Common Stock or any other
security (herein collectively referred to as a "Security") or for any other
asset at any date shall be:
(1) if the Security is registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the average of the daily
Market Prices for each business day during the period commencing 30 business
days before such date and ending on the date one day prior to such date or, if
the Security has been registered under the Exchange Act for less than 30
consecutive business days before such date, then the average of the daily Market
Prices for all of the business days before such date for which daily Market
Prices are available. If the Market Price is not determinable for at least 15
business days in such period, the Fair Market Value of the Security shall be
determined as if the Security was not registered under the Exchange Act; or
(2) if the asset or Security is not registered under the
Exchange Act, (i) the value of the asset or Security determined in good faith by
the Board of Directors of the Company and certified in a board resolution, based
on the most recently completed arm's length transaction between the Company and
a person other than an affiliate of the Company in which such determination is
necessary and the closing of which occurs on such date or shall have occurred
within the six months preceding such date, or (ii) if no such transaction shall
have occurred on such date or within such six-month period, the value of the
asset or Security determined pursuant to the procedures set forth in Section
7(h).
The "Market Price" for any Security on any business day means:
(i) if such Security is listed or admitted to trading on any securities
exchange, the closing price, regular way, on such day on the principal exchange
on which such Security is traded, or if no sale takes place on such day, the
average of the closing bid and asked prices on such day, (ii) if such Security
is not then listed or admitted to trading on any securities exchange, the last
reported sale price on such day, or if there is no such last reported sale price
on such day, the average of the closing bid and the asked prices on such day, as
reported by a reputable quotation source designated by the Company, or (iii) if
neither clause (i) nor (ii) is applicable, the average of the reported high bid
and low asked prices on such day, as reported by a reputable quotation service,
or a newspaper of general circulation in the Borough of Manhattan, City of New
York, customarily published on each business day, designated by the Company. If
there are no such prices on a business day, then the Market Price shall not be
determinable for such business day.
(d) When De Minimis Adjustment May Be Deferred.
No adjustment in the Exercise Price need be made unless the
adjustment would require an increase or decrease of at least 1% in the Exercise
Price. Any adjustments that are not made shall be carried forward and taken into
account in any subsequent adjustment.
-8-
<PAGE> 10
All calculations under this Section shall be made to the
nearest cent or to the nearest 1/20th of a share, as the case may be.
(e) When No Adjustment Required.
No adjustment shall be made for a transaction referred to in
subsections (a) or (b) of this Section 7 if Holder is to participate in the
transaction on a basis and with notice that is fair and appropriate in light of
the basis and notice on which holders of Common Stock participate in the
transaction.
No adjustment shall be made for rights to purchase Common
Stock pursuant to a Company plan for reinvestment of dividends or interest.
No adjustment shall be made for a change in the par value of
the Common Stock.
To the extent this Warrant becomes convertible into cash, no
adjustment need be made thereafter as to the cash. Interest will not accrue on
the cash.
(f) Reorganization of Company.
If any reclassification of the Common Stock of the Company or
any consolidation or merger of the Company with another entity, or the sale or
lease of all or substantially all of the Company's assets to another entity
shall be effected in such a way that holders of the Common Stock of the Company
shall be entitled to receive stock, securities or assets with respect to or in
exchange for such Common Stock, then, as a condition precedent to such
reclassification, consolidation, merger, sale or lease, lawful and adequate
provisions shall be made whereby the Holder shall thereafter have the right to
purchase and receive upon the basis and the terms and conditions specified in
this Warrant, including, without limitation, the requirements set forth in
Section 6(b), and in lieu of the shares of Common Stock immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby,
such shares of stock, securities or assets as may be issued or payable in such
reclassification, consolidation, merger, sale or lease with respect to or in
exchange for the number of shares of Common Stock purchasable and receivable
upon the exercise of the rights represented hereby had such rights been
exercised immediately prior thereto, and in any such case appropriate provision
shall be made with respect to the rights and interests of the Holder to the end
that the provisions hereof (including, without limitation, provisions for
adjustments of the Exercise Price and of the number of shares of Common Stock
purchasable and receivable upon the exercise of the Warrant) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise hereof. The successor
corporation (if other than the Company) resulting from such reclassification,
consolidation or merger or the corporation purchasing or leasing such assets
shall assume by a supplemental Warrant, executed and mailed or delivered to the
Holder, the obligation to deliver to the Holder such shares of stock, securities
or assets as, in accordance with the foregoing provisions, Holder may be
entitled to purchase.
-9-
<PAGE> 11
If the issuer of securities deliverable upon exercise of the
supplemental Warrant is an affiliate of the formed, surviving, transferee or
lessee corporation, that issuer shall join in the supplemental Warrant.
If this subsection (f) applies, subsections (a) and (b) of
this Section 7 do not apply.
(g) Adjustment in Number of Shares of Common Stock.
Upon each adjustment of the Exercise Price pursuant to this
Section 7, the Warrant outstanding prior to the making of the adjustment in the
Exercise Price shall thereafter evidence the right to receive upon payment of
the adjusted Exercise Price that number of shares of Common Stock (calculated to
the nearest 1/20th of a share) obtained from the following formula:
E*
--
N* = N x E
where:
N* = the adjusted number of Warrant Shares issuable upon exercise of the
Warrant by payment of the adjusted Exercise Price.
N = the number of Warrant Shares previously issuable upon exercise of the
Warrant by payment of the Exercise Price prior to adjustment.
E* = the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
(h) Disputes; Fair Market Value Determination.
If a dispute shall at any time arise between the Company and
the Holder with respect to any matters hereunder including adjustments to the
number of shares of Common Stock, the Exercise Price, or a determination as to
Fair Market Value provided for herein, such dispute shall be conclusively
determined by either the Holder and the Company agreeing on a single independent
investment bank of recognized national standing to resolve the dispute or, if
the Holder and the Company cannot agree on a single investment bank after an
additional seven days, each of the Holder and the Company shall appoint an
independent investment bank of recognized national standing with appropriate
experience involving companies comparable to the Company and the dispute shall
be mutually resolved by the two investment banks. If the two investment banks
are not able to reach agreement within 20 days, then they shall within five days
appoint a third independent investment bank of recognized national standing with
appropriate experience involving companies comparable to the Company and the
dispute shall be definitively resolved by such third investment bank within 20
days. Each party shall pay the costs, fees and expenses of its respective
investment bankers and the parties shall split the costs of the third investment
bank.
-10-
<PAGE> 12
SECTION 8. Fractional Interests. The Company shall not be
required to issue fractional Warrant Shares on the exercise of the Warrant. The
number of full Warrant Shares which shall be issuable upon the exercise thereof
shall be computed on the basis of the aggregate number of Warrant Shares
purchasable on exercise of the Warrants so presented. If any fraction of a
Warrant Share would, except for the provisions of this Section 8, be issuable on
the exercise of Warrant (or specified portion thereof), the Company shall pay an
amount in cash equal to the Fair Market Value on the day immediately preceding
the date the Warrant is presented for exercise, multiplied by such fraction.
SECTION 9. Notices to the Holder. Upon any adjustment of the
Exercise Price pursuant to Section 7, the Company shall promptly thereafter (i)
cause to be filed with the Secretary of the Company a certificate setting forth
the Exercise Price after such adjustment and setting forth in reasonable detail
the method of calculation and the facts upon which such calculations are based
and setting forth the number of Warrant Shares (or portion thereof) issuable
after such adjustment in the Exercise Price, upon exercise of this Warrant and
payment of the adjusted Exercise Price, and (ii) cause to be given to the Holder
written notice of such adjustments by first-class mail, postage prepaid. Where
appropriate, such notice may be given in advance and included as a part of the
notice required to be mailed under the other provisions of this Section 9.
In case:
(a) the Company shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for
or purchase shares of Common Stock or of any other subscription rights
or warrants; or
(b) the Company shall authorize the distribution to all
holders of shares of Common Stock of evidences of its indebtedness or
assets (other than cash dividends or cash distributions payable out of
earnings or earned surplus or dividends or distributions payable in
shares of Common Stock); or
(c) of any consolidation or merger to which the Company is a
party and for which approval of any shareholders of the Company is
required, or of the conveyance or transfer of all or substantially all
of the properties and assets of the Company, or of any reclassification
or change of Common Stock issuable upon exercise of the Warrant (other
than a change in par value, or from par value to no par value, or from
no par value to par value, or as a result of a subdivision or
combination), or a tender offer or exchange offer for shares of Common
Stock; or
(d) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company; or
(e) the Company proposes to take any action that would require
an adjustment in the Exercise Price pursuant to subsections (a), (b) or
(c) of Section 7 and if the Company does not arrange for the Holder to
participate pursuant to subsection (f)
-11-
<PAGE> 13
of Section 7, or if the Company takes any action that would require a
supplemental Warrant pursuant to subsection (f) of Section 7;
then the Company shall cause to be given to the Holder, prior to the applicable
record date hereinafter specified, or promptly in the case of events for which
there is no record date, by first-class mail, postage prepaid, a written notice
stating (i) the date as of which the holders of record of shares of Common Stock
to be entitled to receive any such rights, options, warrants or distribution are
to be determined, or (ii) the initial expiration date set forth in any tender
offer or exchange offer for shares of Common Stock, or (iii) the date on which
any such consolidation, merger, conveyance, transfer, dissolution, liquidation
or winding up is expected to become effective or consummated, and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange such shares for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up; provided, however, that the
Holder shall not be entitled to receive notice prior to any public announcement
thereof by the Company. The failure to give the notice required by this Section
9 or any defect therein shall not affect the legality or validity of any
distribution, right, option, warrant, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up, or the vote upon any action.
Nothing contained in this Warrant shall be construed as
conferring upon the Holder the right to vote or to consent or to receive notice
as shareholders in respect of the meetings of shareholders or the election of
Directors of the Company or any other matter, or any rights whatsoever as
shareholders of the Company.
SECTION 10. Notices to Company and the Holder. Unless
otherwise provided herein, any notice, request, instruction or other document to
be given hereunder by any party to the others shall be in writing and delivered
in person or by courier or by facsimile transmission (with receipt confirmed),
or mailed by certified mail, postage prepaid, return receipt requested (such
mailed notice to be effective on the date such receipt is acknowledged), as
follows:
If to the Company:
CyberCash, Inc.
2100 Reston Parkway
Reston, Virginia 20191
Telecopy No.: (703) 264-5928
-12-
<PAGE> 14
With a copy to:
Hogan & Hartson, L.L.P.
111 South Calvert Street, 16th Floor
Baltimore, Maryland 21202
Attn: Amy Bowerman Freed, Esquire
Telecopy No.: (410) 539-6981
If to the Holder:
First USA Bank
201 N. Walnut Street
Wilmington, Delaware 19801
Attn: Clinton Walker
Telecopy No.: (302)-884-8361
With a copy to:
Wilmer, Cutler & Pickering
2445 M Street, NW
Washington, D.C. 20037
Attn: Russell J. Bruemmer
Telecopy No.: (202) 663-6363
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
SECTION 11. Supplements and Amendments. The Company may not
supplement or amend this Warrant without the prior written approval of the
Holder.
SECTION 12. Successors and Assignment. All the covenants and
provisions of this Warrant by or for the benefit of the Company shall bind and
inure to the benefit of its respective successors and assigns hereunder. This
Warrant is not assignable or transferable by the Holder except in increments of
100,000 Warrant Shares or by operation of law.
SECTION 13. Governing Law. This Warrant shall be deemed to be
a contract made under the laws of the State of Delaware and for all purposes
shall be construed in accordance with the internal laws of said State, excluding
choice of law provisions.
SECTION 14. Benefits of This Warrant. Nothing in this Warrant
shall be construed to give to any person or corporation other than the Company
and the Holder any legal or equitable right, remedy or claim under this Warrant;
but this Warrant shall be for the sole and exclusive benefit of the Company and
the Holder.
-13-
<PAGE> 15
SECTION 15. Demand and Piggy Back Registrations.
(a) Subject to the provisions of this Section 15, one
or more Holders of at least 51% of the Common Stock issuable upon exercise of
Warrants 98-1, 98-2 and 98-3 (the "Registrable Securities") may make one request
(the "Demand Request") registration for sale under the Securities Act of the
Registrable Securities, provided that such Holders request registration for sale
of a number of shares which represents at least 51% of the total number of
shares of Common Stock held by all Holders on the date of such Demand Request.
The Company shall thereafter, as expeditiously as practicable, use its best
efforts to file with the SEC under the Securities Act of 1933 (the "Securities
Act") a registration statement on the appropriate form covering all Registrable
Securities specified in the Demand Request (the "Registration Statement"). The
Demand Request shall specify the intended methods of disposition thereof and the
information required by Item 507 of Regulation S-K under the Securities Act.
Upon such Demand Request, subject to this Section 15, the Company shall use its
best efforts to promptly effect the registration of such Registrable Securities
under (i) the Securities Act, and (ii) if applicable, the blue sky laws of such
jurisdictions as any Holder of such Registrable Securities requesting such
registration or any underwriter, if any, may reasonably request. The Company
shall be deemed to have effected a Demand Registration if the Registration
Statement relating to such Demand Request is filed with the SEC but the
requesting Holders inform the Company that they desire that the Registration
Statement be withdrawn or abandoned; provided, however, that such withdrawal
does not result from action or inaction on the part of the Company that has
materially and adversely affected the value of such registration to the
participating Holders, or if the Registration Statement is declared effective by
the SEC and remains effective until the earlier of the date on which (i) all the
Registrable Securities subject to such Registration Statement have been disposed
of, (ii) nine months have elapsed from the date of such effectiveness or (iii)
the Registrable Securities are eligible for resale under Securities Act Rule
144(k). If at any time or from time to time during the time period applicable to
the Demand Registration any of the Holders of the Registrable Securities covered
by a Registration Statement desire to sell Registrable Securities in an
underwritten offering, the investment banker or investment bankers that will
manage the offering will be selected by the Holders of at least 51% of the
Registrable Securities included in such offering; provided that the selection of
any such investment banker or investment bankers is subject to the approval and
consent by the Company. The Company shall not be required to file any
Registration Statement pursuant to this Section 15(a) for a deferral period of
up to 120 days if the Board of Directors of the Company in good faith determines
that such registration would interfere with any proposed offering of shares of
the Company's capital stock, pending financing transaction, or acquisition,
corporate reorganization or other significant transaction involving the Company.
(b) If the Company proposes to make a registered public
offering of any of its Common Stock under the Securities Act (except for
offerings on Forms S-4, S-8 or any successor forms), the Company agrees on each
such occasion during the term of this Warrant, subject to the provisions of this
Section 15, to give written notice of the proposed registration to Holder, not
less than 15 days prior to the proposed filing date of the registration
statement, and at the written request of Holder delivered in writing to the
Company within 10 days after the receipt of said notice, the Company agrees,
subject to the provisions of this Section 15, to
-14-
<PAGE> 16
include in the registration statement and offering, and in any underwriting of
the offering, all Warrant Shares as may have been designated in the Holder's
request.
(c) Underwriter Discretion. If a registration in which the
Holder has the right to participate pursuant to this Section 15 is an
underwritten registration on behalf of the Company, and the managing
underwriters advise the Company, that, in their opinion, the number of
securities requested to be included in the registration exceeds the number which
can be sold in the offering, the Company shall allocate the number of shares to
be included in the registration statement as follows: (i) first, all of the
securities of the Company proposed to be sold by the Company, (ii) second,
stockholders, optionholders or warrantholders with registration rights in
existence as of January 1, 1999; and (iii) third, the Common Stock requested to
be sold by Holder and all other requesting Holders of Warrants issued on January
1, 1999, reduced, pro rata, in accordance with the percentage interests in the
Company held by each of them.
(d) Information Required. The Company shall have no obligation
to include shares of Common Stock owned by Holder in a registration statement
pursuant to this Section 15, unless and until the Holder shall have furnished
the Company with all information and statements about or pertaining to Holder in
the reasonable detail and on a timely basis as is reasonably deemed by the
Company to be necessary or appropriate with respect to the preparation of the
registration statement.
(e) Hold-back. In the event that the Company effects an
underwritten public offering of any security, the Holder agrees, if requested by
the managing underwriters, not to effect any public sale or distribution,
including any sale pursuant to Rule 144 under the Securities Act, of any Common
Stock (except as part of the underwritten offering) during the 90-day period
commencing with the effective date of the registration statement for the
offering.
(f) Expenses. If, pursuant to Section 15 hereof, shares of
Common Stock owned by any Holder are included in a registration statement, the
Holder shall pay all transfer taxes, if any, relating to the sale of its shares,
the fees and expenses of its own counsel, and its pro rata portion of any
underwriting discounts or commissions or the equivalent thereof. The Company
agrees to pay all expenses incident to the registration including all
registration and filing fees, fees and expenses of compliance with securities or
blue sky laws, underwriting discounts, fees and expenses (other than the
Holder's pro rata portion of any underwriting discounts or commissions or the
equivalent thereof), printing expenses, messenger and delivery expenses, and
fees and expenses of counsel for the Company and all independent certified
public accountants and other persons retained by the Company.
(g) Indemnification. In the event that any shares of Common
Stock owned by a Holder are sold by means of a registration statement pursuant
to this Section 15, the Company agrees to indemnify and hold harmless the
Holder, each of its officers and directors, and each person, if any, who
controls or may control the Holder within the meaning of the Securities Act (the
Holder, its officers and directors., and any other persons being hereinafter
referred to individually as an "Indemnified Person" and collectively as
"Indemnified Persons") from and against all demands, claims, actions or causes
of action, assessments, losses,
-15-
<PAGE> 17
damages, liabilities, costs, and expenses, including, without limitation,
interest, penalties, and reasonable attorneys' fees and disbursements, asserted
against, resulting to, imposed upon or incurred by the Indemnified Person,
directly or indirectly (hereinafter referred to in this Section 15 or, the
singular as a "claim" and in the plural as "claims"), based upon, arising out of
or resulting from any untrue statement of a material fact obtained in the
registration statement or any omission to state therein a material fact
necessary to make the statement made therein, in the light of the circumstances
under which they were made, not misleading, except insofar as the claim is based
upon, rises out of or results from information furnished to the Company in
writing by the Holder for use in connection with the registration statement. The
Holder agrees to indemnify and hold harmless the Company, its officers and
directors, and each person, if any, who controls or may control the Company
within the meaning of the Securities Act (the Company, it's officers and
directors, and any other persons also being hereinafter referred to individually
as an "Indemnified Person" and collectively as "Indemnified Persons") from and
against all claims based upon, arising out of or resulting from any untrue
statement of a material fact contained in the registration statement or any
omission to state therein a material fact necessary in order to make the
statement made therein, in the light of the circumstances under which they were
made, not misleading, to the extent that the claim is based upon, arises out of
or results from information furnished to the Company in writing by the Holder
for use in connection with the registration statement. Promptly after actually
receiving definitive notice of any claim in respect of which an Indemnified
Person may seek indemnification under this Section 15, the Indemnified Person
shall submit written notice thereof to either the Company or the Holder, as the
case may be (sometimes being hereinafter referred to as an "Indemnifying
Person"). The omission of the Indemnified Person to so notify the Indemnifying
Person of any claim shall not relieve the Indemnifying Person from any liability
it may have hereunder except to the extent that (a) the liability was caused or
increased by the omission, or (b) the ability of the Indemnifying Person to
reduce the liability was materially adversely affected by the omission. In
addition, the omission of the Indemnified Person so to notify the Indemnifying
Person of any claim shall not relieve the Indemnifying Person from any liability
it may have otherwise than hereunder. The Indemnifying Person shall have the
right to undertake, by counsel or representatives of its own choosing, the
defense, compromise or settlement (without admitting liability of the
Indemnified Person) of and the claim asserted, the defense, compromise or
settlement to be undertaken at the expense and risk of the Indemnifying Person,
and the Indemnified Person shall have the right to engage separate counsel, at
its own expense, whom counsel for the Indemnifying Person shall keep informed
and consult with in a reasonable manner. In the event the Indemnifying Person
shall elect not to undertake the defense by its own representatives, the
Indemnifying Person shall give prompt written notice of the election to the
Indemnified Person, and the Indemnified Person shall undertake the defense,
compromise or settlement (without admitting liability of the Indemnified Person)
thereof on behalf of and for the account and risk of the Indemnifying Person by
counsel or other representatives designated by the Indemnified Person. In the
event that any claim shall arise out of a transaction or cover any period or
periods wherein the Company and the Holder shall each be liable hereunder for
part of the liability or obligation arising therefrom, then the parties shall,
each choosing its own counsel and bearing its own expenses, defend the claim,
and no settlement or compromise of the claim may be made without the joint
consent or approval of the Company and the Holder. Notwithstanding the
foregoing, no Indemnifying Person shall be obligated hereunder with respect to
amounts paid in settlement of any claim if the settlement is effected without
the consent of the Indemnifying Person (which consent shall not be unreasonably
withheld).
-16-
<PAGE> 18
(h) Termination of Registration Rights. The Company's
obligations and the Holder's rights under this Section 15 shall terminate if, in
the reasonable opinion of the Company, the shares of Common Stock issuable upon
exercise of the Warrant pursuant to Section 3(b) hereof would be eligible for
resale by the Holder under Securities Act Rule 144(k).
SECTION 16. Counterparts. This Warrant and Warrant Agreement
may be executed in any number of counterparts and each of such counterparts
shall for all purposes be deemed to be an original, and all such counterparts
shall together constitute but one and the same instrument.
[Signature Page To Follow]
-17-
<PAGE> 19
Date: November 6, 1998 CyberCash, Inc.
By: /s/ JAMES J. CONDON
- ------------------------ -------------------------------------
Name: James J. Condon
Title: Chief Financial Officer
RECEIVED BY:
First USA Bank
By:
- ------------------------ -------------------------------------
Name:
Title:
-18-
<PAGE> 20
[Form of Election to Purchase]
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant, to receive _________ shares of Common Stock
and herewith tenders (a) payment for such shares to the order of CyberCash, Inc.
in the amount of $_____ in accordance with the terms hereof or (b) elects to
exercise its right of conversion set forth in Section 3(b) of the attached
warrant. The undersigned requests that a certificate for such shares be
registered in the name of _______________________________________, whose address
is _______________________________ and that such shares be delivered to
________________ whose address is _________________________________. If said
number of shares is less than all of the shares of Common Stock purchasable
hereunder, the undersigned requests that a new Warrant representing the
remaining balance of such shares be registered in the name of ______________,
whose address is _________________________, and that such Warrant be delivered
to _________________, whose address is __________________.
The undersigned represents that the aforesaid shares of Common
Stock are being acquired for the account of the undersigned for investment and
not with a view to, or for resale in connection with, the distribution thereof
and that the undersigned has no present intention of distributing or reselling
such shares.
The undersigned is an "accredited investor" as defined in
Securities and Exchange Commission Rule 501(a) pursuant to the Securities Act,
as amended.
Signature:
-------------------------
Date:
-------------------
Signature Guaranteed:
-------------------
19
<PAGE> 1
EXHIBIT 4.2
Warrant No. 98-2
WARRANT AND WARRANT AGREEMENT
Dated as of November 6, 1998
<PAGE> 2
THIS WARRANT AND THE SHARES OBTAINABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL SUCH
WARRANT OR SHARES ARE REGISTERED UNDER SUCH ACT OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY IS OBTAINED TO THE EFFECT THAT SUCH
REGISTRATION IS NOT REQUIRED.
CYBERCASH, INC.
WARRANT AND WARRANT AGREEMENT
This certifies that in consideration of the covenants and agreements of the
parties contained in the Operating Agreement dated October 15, 1998, the
adequacy of which consideration is hereby acknowledged, First USA Bank, or its
registered permitted assigns (the "Holder") is entitled to subscribe for and
purchase up to 600,000 shares (subject to adjustment as described herein) of
fully paid and nonassessable Common Stock (the "Warrant Shares") of CyberCash,
Inc., a Delaware corporation (the "Company"), upon exercise of this Warrant and
subject to the provisions and upon the terms and conditions hereinafter set
forth.
SECTION 1. Term; Exercise of Warrant. Subject to the terms of this
Warrant, the Holder shall have the right to receive from the Company the number
of fully paid and nonassessable Warrant Shares which the Holder may at the time
be entitled to receive on exercise of such Warrant and payment to the Company of
the Exercise Price (as defined below) then in effect for such Warrant Shares;
provided, however, that such Warrant shall be exercised in minimum increments of
100,000 shares (as proportionately adjusted for any stock splits, stock
dividends or the like). This Warrant is exercisable commencing at the opening of
business on January 1, 1999 until 5:00 p.m., Eastern time on September 30, 2003.
If not exercised prior to 5:00 p.m., Eastern time on September 30, 2003, this
Warrant shall become void and all rights thereunder and all rights in respect
thereof shall cease as of such time.
This Warrant may be exercised upon surrender to the Company at its
office designated for such purpose (the address of which is set forth in Section
10 hereof) during normal business hours (9:00 a.m. to 5:00 p.m. Eastern Time)
this Warrant with the form of election to purchase duly filled in and signed,
which signature shall be guaranteed by a bank or trust company having an office
or correspondent in the United States or a broker or dealer which is a member of
a registered securities exchange or the National Association of Securities
Dealers, Inc., and upon payment to the Company of the Exercise Price (as defined
in Section 3), subject to adjustment pursuant to Section 7, for the number of
Warrant Shares in respect of which the Warrant is then exercised. Payment of the
aggregate Exercise Price shall be made in cash or by certified or official bank
check payable to the order of the Company or pursuant to the cashless exercise
provisions set forth in Section 3.
Subject to the provisions of Section 2 hereof, upon such surrender
of this Warrant and payment of the Exercise Price the Company shall issue and
cause to be delivered with all reasonable dispatch to or upon the written order
of the Holder and in such name or names as the Holder may designate, a
certificate or certificates for the number of full Warrant Shares issuable upon
the exercise of such Warrant together with cash as provided in Section 8;
<PAGE> 3
provided, however, that if any reclassification, consolidation, merger or lease
or sale of assets is proposed to be effected by the Company as described in
subsection (f) of Section 7 hereof, or a tender offer or an exchange offer for
shares of Common Stock of the Company shall be made, upon such surrender of
Warrant and payment of the Exercise Price as aforesaid, the Company shall, as
soon as possible, but in any event not later than two business days thereafter,
issue and cause to be delivered the full number of Warrant Shares issuable upon
the exercise of such Warrant in the manner described in this sentence together
with cash as provided in Section 8. Such certificate or certificates shall be
deemed to have been issued and any person so designated to be named therein
shall be deemed to have become a holder of record of such Warrant Shares as of
the date of the surrender of such Warrant and payment of the Exercise Price.
The Warrant may be exercised, at the election of the Holder, either
in full or from time to time in part (in minimum increments of 100,000). In the
event that the Warrant is exercised in respect of fewer than all of the Warrant
Shares issuable on such exercise at any time prior to the date of expiration of
the Warrant, a new Warrant will be issued and delivered pursuant to the
provisions of this Section.
All Warrants surrendered upon exercise of Warrants shall be canceled
and disposed of by the Company.
So long as First USA or any assignee or transferee of the Warrant is
a bank holding company or a subsidiary of a bank holding company (a "Bank
Affiliate") as defined in the Bank Holding Company Act of 1956, as amended, or
other applicable banking laws of the United States and the rules and regulations
promulgated thereunder (the "Bank Holding Company Act"), no such Bank Affiliate
shall acquire Common Stock of the Company by exercise of the Warrant or
otherwise, without prior notice to or approval of the Federal Reserve Board, if
after giving effect to such exercise, the Bank Affiliate would own more than
five percent (5%) of the outstanding voting securities of the Company, or if
such exercise or conversion would otherwise violate the Bank Holding Company
Act. Shares of Common Stock may otherwise be acquired in the event that:
(i) the Company shall vote to merger or consolidate with or into any
other person, and after giving effect to such merger or consolidation, the Bank
Affiliate would not own more than 5% of the outstanding voting securities of the
surviving corporation;
(ii) Holder desires to sell shares of Common Stock in connection
with any proposed purchase of Common Stock by one or more other persons (other
than a Bank Affiliate) in which no such person acquires more than two percent
(2%) of the Company's Common Stock; or
(iii) Holder exercises registration rights pursuant to this Warrant
and Warrant Agreement and agrees to sell the Common Stock pursuant to the
registration statement resulting therefrom in a widely dispersed public
offering.
SECTION 2. Payment of Taxes. The Company will pay all documentary
stamp taxes, if any, attributable to the initial issuance of Warrant Shares upon
the exercise of Warrants.
-2-
<PAGE> 4
SECTION 3. Exercise Price. (a) The purchase price for each share of
Common Stock deliverable upon exercise of this Warrant (the "Exercise Price")
shall be determined as follows:
Beginning (9:00 am) Ending (5:00 pm) Exercise Price
January 1, 1999 December 31, 1999 $17.00
January 1, 2000 September 20, 2003 $32.00
(b) In lieu of delivering the Exercise Price as set forth in
subparagraph (a), the Holder may exercise this Warrant by conversion, in whole
or in part (but in increments of not less than 100,000 shares), into shares of
Common Stock, by instructing the Company in writing ("Notice of Conversion") to
deliver to the Holder (without payment by the Holder of any Exercise Price or of
any other cash or consideration) that number of shares of Common Stock equal to
the quotient obtained by dividing:
(i) the value of this Warrant at the time the conversion
right is exercised (determined by subtracting the
aggregate Exercise Price in effect immediately prior to
the exercise of the conversion right from the aggregate
fair market value (as determined in accordance with
Section 7 hereof) of the shares of Common Stock issuable
upon exercise of this Warrant immediately prior to the
exercise of the conversion right) by
(ii) the current fair market value (as determined in
accordance with Section 7 hereof) of one share of Common
Stock immediately prior to the exercise of the
conversion right,
and multiplying the quotient so obtained by a fraction equal to the portion of
this Warrant which the Holder desires to exercise.
The Notice of Conversion may be given by circling the appropriate
option in the Notice of Exercise attached hereto.
SECTION 4. Mutilated or Missing Warrant Certificates. In case the
Warrant shall be mutilated, lost, stolen or destroyed, the Company shall issue,
in exchange and substitution for and upon cancellation of the mutilated Warrant,
or in lieu of and substitution for the Warrant lost, stolen or destroyed, a new
Warrant of like tenor and representing an equivalent number of Warrant Shares,
but only upon receipt of evidence reasonably satisfactory to the Company of such
loss, theft or destruction of such Warrant and indemnity, if requested, also
reasonably satisfactory to it.
-3-
<PAGE> 5
SECTION 5. Valid Issuance of Warrant; Reservation of Warrant Shares.
The execution and delivery of this Warrant and Warrant Agreement and
the issuance and sale of the Common Stock upon exercise of the Warrant pursuant
to its terms (i) are within the corporate power and authority of the Company and
(ii) have been duly authorized by all requisite corporate proceedings on the
part of the Company. This Warrant and Warrant Agreement has been duly executed
and delivered by the Company and constitutes a valid and binding agreement of
the Company, enforceable in accordance with its terms, except that (i) such
enforcement maybe subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
and (ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought. The
capitalization of the Company as of June 30, 1998 is as set forth in the
Company's quarterly report on Form 10-Q filed with the Securities and Exchange
Commission on August 14, 1998.
The Company will at all times reserve and keep available, free from
preemptive rights, out of the aggregate of its authorized but unissued Common
Stock or its authorized and issued Common Stock held in its treasury, for the
purpose of enabling it to satisfy any obligation to issue Warrant Shares upon
exercise of the Warrant, the maximum number of shares of Common Stock which may
then be deliverable upon the exercise of the outstanding Warrant.
The Company or, if appointed, the transfer agent for the Common
Stock (the "Transfer Agent") and every subsequent transfer agent for any shares
of the Company's capital stock issuable upon the exercise of any of the rights
of purchase aforesaid will be irrevocably authorized and directed at all times
to reserve such number of authorized shares as shall be required for such
purpose.
Before taking any action which would cause an adjustment pursuant to
Section 7 hereof to reduce the Exercise Price below the then par value (if any)
of the Warrant Shares, the Company will take any corporate action which may, in
the opinion of its counsel, be necessary in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares at the Exercise
Price as so adjusted.
The Company covenants that all Warrant Shares which may be issued
upon exercise of this Warrant will, upon issue, be fully paid, nonassessable,
free of preemptive rights and free from all documentary stamp taxes, and liens,
charges and security interests with respect to the issue thereof.
-4-
<PAGE> 6
SECTION 6. Delivery of Information; Obtaining Stock Exchange
Listings.
(a) The Company will from time to time take all
action which may be necessary so that the Warrant Shares, immediately upon their
issuance upon the exercise of this Warrant, will be listed on the principal
securities exchanges and automated quotation systems within the United States of
America, if any, on which other shares of Common Stock are then listed.
(b) During the term of this Warrant and Warrant
Agreement, the Company agrees to provide to First USA (so long as it is a
Holder): (i) copies of any of the following reports filed with the SEC: Annual
Report on Form 10-K, its Quarterly Reports on Form 10-Q and any Current Reports
on Form 8-K; (ii) copies of all press releases issued by the Company or any of
its Subsidiaries; and (iii) copies of any notices or other information the
Company generally makes available or provides to stockholders. The Company's
obligation to provide any such information to First USA shall be satisfied by
the electronic delivery of information to Clinton Walker at
[email protected] and/or by facsimile to Clinton Walker at (302)
884-8361 (fax) and (302) 434-7677 (phone) or such other electronic address or
telephone number as shall be provided in writing to the Company.
SECTION 7. Adjustment of Exercise Price and Number of Warrant Shares
Issuable. The Exercise Price and the number of Warrant Shares issuable upon the
exercise of the Warrant are subject to adjustment from time to time upon the
occurrence of the events enumerated in this Section 7. For purposes of this
Section 7, "Common Stock" means shares now or hereafter authorized of any class
of common stock of the Company and any other stock of the Company, however
designated, that has the right (subject to any prior rights of any class or
series of preferred stock) to participate in any distribution of the assets or
earnings of the Company without limit as to per share amount.
-5-
<PAGE> 7
(a) Adjustment for Change in Common Stock.
If the Company: (i) pays a dividend or makes a distribution on its
Common Stock in shares of its Common Stock; (ii) subdivides its outstanding
shares of Common Stock into a greater number of shares; or (iii) combines its
outstanding shares of Common Stock into a smaller number of shares; then the
Exercise Price in effect immediately prior to such action (and each Exercise
Price provided for in Section 3 hereof) shall then be adjusted in accordance
with the formula:
E* = E x O
---
A
Where:
E*= the adjusted Exercise Price
E = the current Exercise Price
O = the number of shares of Common Stock outstanding prior to such
action
A = the number of shares of Common Stock outstanding immediately after
such action
In the case of a dividend or distribution the adjustment shall
become effective immediately after the payment date for such dividend or
distribution, or the effective date of such other corporate action including,
but not limited to, a subdivision or combination.
If after an adjustment the Holder upon exercise of the Warrant may
receive shares of two or more classes of capital stock of the Company, the
Company shall determine the allocation of the adjusted Exercise Price between
the classes of capital stock. After such allocation, the exercise privilege, the
number of shares issuable upon such exercise, and the Exercise Price of each
class of capital stock shall thereafter be subject to adjustment on terms
comparable to those applicable to Common Stock in this Section 7.
Such adjustment shall be made successively whenever any event listed
above shall occur.
-6-
<PAGE> 8
(b) Adjustment for Rights Issue.
If the Company distributes any rights, options or warrants to all
holders of its Common Stock entitling them at any time after the record date
mentioned below to purchase shares of Common Stock at a price per share less
than the Fair Market Value (as defined in Section 7(c)) per share on such record
date relating to such distribution, the Exercise Price in effect immediately
prior to such action (and each Exercise Price provided in Section 3 hereof)
shall be adjusted in accordance with the formula:
O +N x P
-----
E* = E x M
--------
O + N
where:
E*= the adjusted Exercise Price.
E = the current Exercise Price.
O = the number of shares of Common Stock outstanding on the record date.
N = the number of additional shares of Common Stock issuable upon exercise
of the rights, options or warrants offered.
P = the exercise price per share of the additional shares issuable upon
exercise of the rights, options or warrants.
M = the Fair Market Value per share of Common Stock on the record date.
The adjustment shall be made successively whenever any such rights,
options or warrants are issued and shall become effective immediately after the
record date for the determination of stockholders entitled to receive the
rights, options or warrants. If at the end of the period during which such
rights, options or warrants are exercisable, not all rights, options or warrants
shall have been exercised, the Exercise Price shall be immediately readjusted to
what it would have been if "N" in the above formula had been the number of
shares actually issued.
Notwithstanding the foregoing, if the Company distributes or issues
rights to all holders of its Common Stock pursuant to a shareholder rights plan,
then no adjustment shall be made pursuant to this Section 7(b) upon such
distribution or issuance if, upon exercise of the Warrant, the Holder receives
the same type and number of unexpired rights it would have received (as adjusted
for any event described in Sections 7(a) or (f)) had it exercised the Warrant,
and been a holder of the shares of Common Stock issuable upon exercise thereof,
prior to the record date for such distribution or issuance.
-7-
<PAGE> 9
(c) Fair Market Value.
"Fair Market Value" per share of Common Stock or any other security
(herein collectively referred to as a "Security") or for any other asset at any
date shall be:
(1) if the Security is registered under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), the average of the daily Market Prices
for each business day during the period commencing 30 business days before such
date and ending on the date one day prior to such date or, if the Security has
been registered under the Exchange Act for less than 30 consecutive business
days before such date, then the average of the daily Market Prices for all of
the business days before such date for which daily Market Prices are available.
If the Market Price is not determinable for at least 15 business days in such
period, the Fair Market Value of the Security shall be determined as if the
Security was not registered under the Exchange Act; or
(2) if the asset or Security is not registered under the Exchange
Act, (i) the value of the asset or Security determined in good faith by the
Board of Directors of the Company and certified in a board resolution, based on
the most recently completed arm's length transaction between the Company and a
person other than an affiliate of the Company in which such determination is
necessary and the closing of which occurs on such date or shall have occurred
within the six months preceding such date, or (ii) if no such transaction shall
have occurred on such date or within such six-month period, the value of the
asset or Security determined pursuant to the procedures set forth in Section
7(h).
The "Market Price" for any Security on any business day means: (i)
if such Security is listed or admitted to trading on any securities exchange,
the closing price, regular way, on such day on the principal exchange on which
such Security is traded, or if no sale takes place on such day, the average of
the closing bid and asked prices on such day, (ii) if such Security is not then
listed or admitted to trading on any securities exchange, the last reported sale
price on such day, or if there is no such last reported sale price on such day,
the average of the closing bid and the asked prices on such day, as reported by
a reputable quotation source designated by the Company, or (iii) if neither
clause (i) nor (ii) is applicable, the average of the reported high bid and low
asked prices on such day, as reported by a reputable quotation service, or a
newspaper of general circulation in the Borough of Manhattan, City of New York,
customarily published on each business day, designated by the Company. If there
are no such prices on a business day, then the Market Price shall not be
determinable for such business day.
(d) When De Minimis Adjustment May Be Deferred.
No adjustment in the Exercise Price need be made unless the
adjustment would require an increase or decrease of at least 1% in the Exercise
Price. Any adjustments that are not made shall be carried forward and taken into
account in any subsequent adjustment.
-8-
<PAGE> 10
All calculations under this Section shall be made to the nearest
cent or to the nearest 1/20th of a share, as the case may be.
(e) When No Adjustment Required.
No adjustment shall be made for a transaction referred to in
subsections (a) or (b) of this Section 7 if Holder is to participate in the
transaction on a basis and with notice that is fair and appropriate in light of
the basis and notice on which holders of Common Stock participate in the
transaction.
No adjustment shall be made for rights to purchase Common Stock
pursuant to a Company plan for reinvestment of dividends or interest.
No adjustment shall be made for a change in the par value of the
Common Stock.
To the extent this Warrant becomes convertible into cash, no
adjustment need be made thereafter as to the cash. Interest will not accrue on
the cash.
(f) Reorganization of Company.
If any reclassification of the Common Stock of the Company or any
consolidation or merger of the Company with another entity, or the sale or lease
of all or substantially all of the Company's assets to another entity shall be
effected in such a way that holders of the Common Stock of the Company shall be
entitled to receive stock, securities or assets with respect to or in exchange
for such Common Stock, then, as a condition precedent to such reclassification,
consolidation, merger, sale or lease, lawful and adequate provisions shall be
made whereby the Holder shall thereafter have the right to purchase and receive
upon the basis and the terms and conditions specified in this Warrant,
including, without limitation, the requirements set forth in Section 6(b), and
in lieu of the shares of Common Stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby, such shares of
stock, securities or assets as may be issued or payable in such
reclassification, consolidation, merger, sale or lease with respect to or in
exchange for the number of shares of Common Stock purchasable and receivable
upon the exercise of the rights represented hereby had such rights been
exercised immediately prior thereto, and in any such case appropriate provision
shall be made with respect to the rights and interests of the Holder to the end
that the provisions hereof (including, without limitation, provisions for
adjustments of the Exercise Price and of the number of shares of Common Stock
purchasable and receivable upon the exercise of the Warrant) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise hereof. The successor
corporation (if other than the Company) resulting from such reclassification,
consolidation or merger or the corporation purchasing or leasing such assets
shall assume by a supplemental Warrant, executed and mailed or delivered to the
Holder, the obligation to deliver to the Holder such shares of stock, securities
or assets as, in accordance with the foregoing provisions, Holder may be
entitled to purchase.
-9-
<PAGE> 11
If the issuer of securities deliverable upon exercise of the
supplemental Warrant is an affiliate of the formed, surviving, transferee or
lessee corporation, that issuer shall join in the supplemental Warrant.
If this subsection (f) applies, subsections (a) and (b) of this
Section 7 do not apply.
(g) Adjustment in Number of Shares of Common Stock.
Upon each adjustment of the Exercise Price pursuant to this Section
7, the Warrant outstanding prior to the making of the adjustment in the Exercise
Price shall thereafter evidence the right to receive upon payment of the
adjusted Exercise Price that number of shares of Common Stock (calculated to the
nearest 1/20th of a share) obtained from the following formula:
E*
---
N* = N x E
where:
N* = the adjusted number of Warrant Shares issuable upon exercise of the
Warrant by payment of the adjusted Exercise Price.
N = the number of Warrant Shares previously issuable upon exercise of the
Warrant by payment of the Exercise Price prior to adjustment.
E* = the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
(h) Disputes; Fair Market Value Determination.
If a dispute shall at any time arise between the Company and the
Holder with respect to any matters hereunder including adjustments to the number
of shares of Common Stock, the Exercise Price, or a determination as to Fair
Market Value provided for herein, such dispute shall be conclusively determined
by either the Holder and the Company agreeing on a single independent investment
bank of recognized national standing to resolve the dispute or, if the Holder
and the Company cannot agree on a single investment bank after an additional
seven days, each of the Holder and the Company shall appoint an independent
investment bank of recognized national standing with appropriate experience
involving companies comparable to the Company and the dispute shall be mutually
resolved by the two investment banks. If the two investment banks are not able
to reach agreement within 20 days, then they shall within five days appoint a
third independent investment bank of recognized national standing with
appropriate experience involving companies comparable to the Company and the
dispute shall be definitively resolved by such third investment bank within 20
days. Each party shall pay the costs, fees and expenses of its respective
investment bankers and the parties shall split the costs of the third investment
bank.
-10-
<PAGE> 12
SECTION 8. Fractional Interests. The Company shall not be required
to issue fractional Warrant Shares on the exercise of the Warrant. The number of
full Warrant Shares which shall be issuable upon the exercise thereof shall be
computed on the basis of the aggregate number of Warrant Shares purchasable on
exercise of the Warrants so presented. If any fraction of a Warrant Share would,
except for the provisions of this Section 8, be issuable on the exercise of
Warrant (or specified portion thereof), the Company shall pay an amount in cash
equal to the Fair Market Value on the day immediately preceding the date the
Warrant is presented for exercise, multiplied by such fraction.
SECTION 9. Notices to the Holder. Upon any adjustment of the
Exercise Price pursuant to Section 7, the Company shall promptly thereafter (i)
cause to be filed with the Secretary of the Company a certificate setting forth
the Exercise Price after such adjustment and setting forth in reasonable detail
the method of calculation and the facts upon which such calculations are based
and setting forth the number of Warrant Shares (or portion thereof) issuable
after such adjustment in the Exercise Price, upon exercise of this Warrant and
payment of the adjusted Exercise Price, and (ii) cause to be given to the Holder
written notice of such adjustments by first-class mail, postage prepaid. Where
appropriate, such notice may be given in advance and included as a part of the
notice required to be mailed under the other provisions of this Section 9.
In case:
(a) the Company shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for or
purchase shares of Common Stock or of any other subscription rights or
warrants; or
(b) the Company shall authorize the distribution to all holders of
shares of Common Stock of evidences of its indebtedness or assets (other
than cash dividends or cash distributions payable out of earnings or
earned surplus or dividends or distributions payable in shares of Common
Stock); or
(c) of any consolidation or merger to which the Company is a party
and for which approval of any shareholders of the Company is required, or
of the conveyance or transfer of all or substantially all of the
properties and assets of the Company, or of any reclassification or change
of Common Stock issuable upon exercise of the Warrant (other than a change
in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination), or a tender
offer or exchange offer for shares of Common Stock; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(e) the Company proposes to take any action that would require an
adjustment in the Exercise Price pursuant to subsections (a), (b) or (c)
of Section 7 and if the Company does not arrange for the Holder to
participate pursuant to subsection (f)
-11-
<PAGE> 13
of Section 7, or if the Company takes any action that would require a
supplemental Warrant pursuant to subsection (f) of Section 7;
then the Company shall cause to be given to the Holder, prior to the applicable
record date hereinafter specified, or promptly in the case of events for which
there is no record date, by first-class mail, postage prepaid, a written notice
stating (i) the date as of which the holders of record of shares of Common Stock
to be entitled to receive any such rights, options, warrants or distribution are
to be determined, or (ii) the initial expiration date set forth in any tender
offer or exchange offer for shares of Common Stock, or (iii) the date on which
any such consolidation, merger, conveyance, transfer, dissolution, liquidation
or winding up is expected to become effective or consummated, and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange such shares for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up; provided, however, that the
Holder shall not be entitled to receive notice prior to any public announcement
thereof by the Company. The failure to give the notice required by this Section
9 or any defect therein shall not affect the legality or validity of any
distribution, right, option, warrant, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up, or the vote upon any action.
Nothing contained in this Warrant shall be construed as conferring
upon the Holder the right to vote or to consent or to receive notice as
shareholders in respect of the meetings of shareholders or the election of
Directors of the Company or any other matter, or any rights whatsoever as
shareholders of the Company.
SECTION 10. Notices to Company and the Holder. Unless otherwise
provided herein, any notice, request, instruction or other document to be given
hereunder by any party to the others shall be in writing and delivered in person
or by courier or by facsimile transmission (with receipt confirmed), or mailed
by certified mail, postage prepaid, return receipt requested (such mailed notice
to be effective on the date such receipt is acknowledged), as follows:
If to the Company:
CyberCash, Inc.
2100 Reston Parkway
Reston, Virginia 20191
Telecopy No.: (703) 264-5928
-12-
<PAGE> 14
With a copy to:
Hogan & Hartson, L.L.P.
111 South Calvert Street, 16th Floor
Baltimore, Maryland 21202
Attn: Amy Bowerman Freed, Esquire
Telecopy No.: (410) 539-6981
If to the Holder:
First USA Bank
201 N. Walnut Street
Wilmington, Delaware 19801
Attn: Clinton Walker
Telecopy No.: (302)-884-8361
With a copy to:
Wilmer, Cutler & Pickering
2445 M Street, NW
Washington, D.C. 20037
Attn: Russell J. Bruemmer
Telecopy No.: (202) 663-6363
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
SECTION 11. Supplements and Amendments. The Company may not
supplement or amend this Warrant without the prior written approval of the
Holder.
SECTION 12. Successors and Assignment. All the covenants and
provisions of this Warrant by or for the benefit of the Company shall bind and
inure to the benefit of its respective successors and assigns hereunder. This
Warrant is not assignable or transferable by the Holder except in increments of
100,000 Warrant Shares or by operation of law.
SECTION 13. Governing Law. This Warrant shall be deemed to be a
contract made under the laws of the State of Delaware and for all purposes shall
be construed in accordance with the internal laws of said State, excluding
choice of law provisions.
SECTION 14. Benefits of This Warrant. Nothing in this Warrant shall
be construed to give to any person or corporation other than the Company and the
Holder any legal or equitable right, remedy or claim under this Warrant; but
this Warrant shall be for the sole and exclusive benefit of the Company and the
Holder.
-13-
<PAGE> 15
SECTION 15. Demand and Piggy Back Registrations.
(a) Subject to the provisions of this Section 15, one or more
Holders of at least 51% of the Common Stock issuable upon exercise of all
Warrants 98-1, 98-2 and 98-3 (the "Registrable Securities") may make one request
(the "Demand Request") registration for sale under the Securities Act of the
Registrable Securities, provided that such Holders request registration for sale
of a number of shares which represents at least 51% of the total number of
shares of Common Stock held by all Holders on the date of such Demand Request.
The Company shall thereafter, as expeditiously as practicable, use its best
efforts to file with the SEC under the Securities Act of 1933 (the "Securities
Act") a registration statement on the appropriate form covering all Registrable
Securities specified in the Demand Request (the "Registration Statement"). The
Demand Request shall specify the intended methods of disposition thereof and the
information required by Item 507 of Regulation S-K under the Securities Act.
Upon such Demand Request, subject to this Section 15, the Company shall use its
best efforts to promptly effect the registration of such Registrable Securities
under (i) the Securities Act, and (ii) if applicable, the blue sky laws of such
jurisdictions as any Holder of such Registrable Securities requesting such
registration or any underwriter, if any, may reasonably request. The Company
shall be deemed to have effected a Demand Registration if the Registration
Statement relating to such Demand Request is filed with the SEC but the
requesting Holders inform the Company that they desire that the Registration
Statement be withdrawn or abandoned; provided, however, that such withdrawal
does not result from action or inaction on the part of the Company that has
materially and adversely affected the value of such registration to the
participating Holders, or if the Registration Statement is declared effective by
the SEC and remains effective until the earlier of the date on which (i) all the
Registrable Securities subject to such Registration Statement have been disposed
of, (ii) nine months have elapsed from the date of such effectiveness or (iii)
the Registrable Securities are eligible for resale under Securities Act Rule
144(k). If at any time or from time to time during the time period applicable to
the Demand Registration any of the Holders of the Registrable Securities covered
by a Registration Statement desire to sell Registrable Securities in an
underwritten offering, the investment banker or investment bankers that will
manage the offering will be selected by the Holders of at least 51% of the
Registrable Securities included in such offering; provided that the selection of
any such investment banker or investment bankers is subject to the approval and
consent by the Company. The Company shall not be required to file any
Registration Statement pursuant to this Section 15(a) for a deferral period of
up to 120 days if the Board of Directors of the Company in good faith determines
that such registration would interfere with any proposed offering of shares of
the Company's capital stock, pending financing transaction, or acquisition,
corporate reorganization or other significant transaction involving the Company.
(b) If the Company proposes to make a registered public offering of
any of its Common Stock under the Securities Act (except for offerings on Forms
S-4, S-8 or any successor forms), the Company agrees on each such occasion
during the term of this Warrant, subject to the provisions of this Section 15,
to give written notice of the proposed registration to Holder, not less than 15
days prior to the proposed filing date of the registration statement, and at the
written request of Holder delivered in writing to the Company within 10 days
after the receipt of said notice, the Company agrees, subject to the provisions
of this Section 15, to
-14-
<PAGE> 16
include in the registration statement and offering, and in any underwriting of
the offering, all Warrant Shares as may have been designated in the Holder's
request.
(c) Underwriter Discretion. If a registration in which the Holder
has the right to participate pursuant to this Section 15 is an underwritten
registration on behalf of the Company, and the managing underwriters advise the
Company, that, in their opinion, the number of securities requested to be
included in the registration exceeds the number which can be sold in the
offering, the Company shall allocate the number of shares to be included in the
registration statement as follows: (i) first, all of the securities of the
Company proposed to be sold by the Company, (ii) second, stockholders,
optionholders or warrantholders with registration rights in existence as of
January 1, 1999; and (iii) third, the Common Stock requested to be sold by
Holder and all other requesting Holders of Warrants issued on January 1, 1999,
reduced, pro rata, in accordance with the percentage interests in the Company
held by each of them.
(d) Information Required. The Company shall have no obligation to
include shares of Common Stock owned by Holder in a registration statement
pursuant to this Section 15, unless and until the Holder shall have furnished
the Company with all information and statements about or pertaining to Holder in
the reasonable detail and on a timely basis as is reasonably deemed by the
Company to be necessary or appropriate with respect to the preparation of the
registration statement.
(e) Hold-back. In the event that the Company effects an underwritten
public offering of any security, the Holder agrees, if requested by the managing
underwriters, not to effect any public sale or distribution, including any sale
pursuant to Rule 144 under the Securities Act, of any Common Stock (except as
part of the underwritten offering) during the 90-day period commencing with the
effective date of the registration statement for the offering.
(f) Expenses. If, pursuant to Section 15 hereof, shares of Common
Stock owned by any Holder are included in a registration statement, the Holder
shall pay all transfer taxes, if any, relating to the sale of its shares, the
fees and expenses of its own counsel, and its pro rata portion of any
underwriting discounts or commissions or the equivalent thereof. The Company
agrees to pay all expenses incident to the registration including all
registration and filing fees, fees and expenses of compliance with securities or
blue sky laws, underwriting discounts, fees and expenses (other than the
Holder's pro rata portion of any underwriting discounts or commissions or the
equivalent thereof), printing expenses, messenger and delivery expenses, and
fees and expenses of counsel for the Company and all independent certified
public accountants and other persons retained by the Company.
(g) Indemnification. In the event that any shares of Common Stock
owned by a Holder are sold by means of a registration statement pursuant to this
Section 15, the Company agrees to indemnify and hold harmless the Holder, each
of its officers and directors, and each person, if any, who controls or may
control the Holder within the meaning of the Securities Act (the Holder, its
officers and directors., and any other persons being hereinafter referred to
individually as an "Indemnified Person" and collectively as "Indemnified
Persons") from and against all demands, claims, actions or causes of action,
assessments, losses,
-15-
<PAGE> 17
damages, liabilities, costs, and expenses, including, without limitation,
interest, penalties, and reasonable attorneys' fees and disbursements, asserted
against, resulting to, imposed upon or incurred by the Indemnified Person,
directly or indirectly (hereinafter referred to in this Section 15 or, the
singular as a "claim" and in the plural as "claims"), based upon, arising out of
or resulting from any untrue statement of a material fact obtained in the
registration statement or any omission to state therein a material fact
necessary to make the statement made therein, in the light of the circumstances
under which they were made, not misleading, except insofar as the claim is based
upon, rises out of or results from information furnished to the Company in
writing by the Holder for use in connection with the registration statement. The
Holder agrees to indemnify and hold harmless the Company, its officers and
directors, and each person, if any, who controls or may control the Company
within the meaning of the Securities Act (the Company, it's officers and
directors, and any other persons also being hereinafter referred to individually
as an "Indemnified Person" and collectively as "Indemnified Persons") from and
against all claims based upon, arising out of or resulting from any untrue
statement of a material fact contained in the registration statement or any
omission to state therein a material fact necessary in order to make the
statement made therein, in the light of the circumstances under which they were
made, not misleading, to the extent that the claim is based upon, arises out of
or results from information furnished to the Company in writing by the Holder
for use in connection with the registration statement. Promptly after actually
receiving definitive notice of any claim in respect of which an Indemnified
Person may seek indemnification under this Section 15, the Indemnified Person
shall submit written notice thereof to either the Company or the Holder, as the
case may be (sometimes being hereinafter referred to as an "Indemnifying
Person"). The omission of the Indemnified Person to so notify the Indemnifying
Person of any claim shall not relieve the Indemnifying Person from any liability
it may have hereunder except to the extent that (a) the liability was caused or
increased by the omission, or (b) the ability of the Indemnifying Person to
reduce the liability was materially adversely affected by the omission. In
addition, the omission of the Indemnified Person so to notify the Indemnifying
Person of any claim shall not relieve the Indemnifying Person from any liability
it may have otherwise than hereunder. The Indemnifying Person shall have the
right to undertake, by counsel or representatives of its own choosing, the
defense, compromise or settlement (without admitting liability of the
Indemnified Person) of and the claim asserted, the defense, compromise or
settlement to be undertaken at the expense and risk of the Indemnifying Person,
and the Indemnified Person shall have the right to engage separate counsel, at
its own expense, whom counsel for the Indemnifying Person shall keep informed
and consult with in a reasonable manner. In the event the Indemnifying Person
shall elect not to undertake the defense by its own representatives, the
Indemnifying Person shall give prompt written notice of the election to the
Indemnified Person, and the Indemnified Person shall undertake the defense,
compromise or settlement (without admitting liability of the Indemnified Person)
thereof on behalf of and for the account and risk of the Indemnifying Person by
counsel or other representatives designated by the Indemnified Person. In the
event that any claim shall arise out of a transaction or cover any period or
periods wherein the Company and the Holder shall each be liable hereunder for
part of the liability or obligation arising therefrom, then the parties shall,
each choosing its own counsel and bearing its own expenses, defend the claim,
and no settlement or compromise of the claim may be made without the joint
consent or approval of the Company and the Holder. Notwithstanding the
foregoing, no Indemnifying Person shall be obligated hereunder with respect to
amounts paid in settlement of any claim if the settlement is effected without
the consent of the Indemnifying Person (which consent shall not be unreasonably
withheld).
-16-
<PAGE> 18
(h) Termination of Registration Rights. The Company's obligations
and the Holder's rights under this Section 15 shall terminate if, in the
reasonable opinion of the Company, the shares of Common Stock issuable upon
exercise of the Warrant pursuant to Section 3(b) hereof would be eligible for
resale by the Holder under Securities Act Rule 144(k).
SECTION 16. Counterparts. This Warrant and Warrant Agreement may be
executed in any number of counterparts and each of such counterparts shall for
all purposes be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument.
[Signature Page To Follow]
-17-
<PAGE> 19
Date: November 6, 1998 CyberCash, Inc.
By: /s/ JAMES J. CONDON
- ------------------------ -----------------------------------
Name: James J. Condon
---------------------------------
Title: Chief Financial Officer
--------------------------------
RECEIVED BY:
First USA Bank
By:
- --------------------------- ----------------------------------
Name:
---------------------------------
Title:
--------------------------------
-18-
<PAGE> 20
[Form of Election to Purchase]
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant, to receive _________ shares of Common Stock and
herewith tenders (a) payment for such shares to the order of CyberCash, Inc. in
the amount of $_____ in accordance with the terms hereof or (b) elects to
exercise its right of conversion set forth in Section 3(b) of the attached
warrant. The undersigned requests that a certificate for such shares be
registered in the name of _______________________________________, whose address
is _______________________________ and that such shares be delivered to
________________ whose address is _________________________________. If said
number of shares is less than all of the shares of Common Stock purchasable
hereunder, the undersigned requests that a new Warrant representing the
remaining balance of such shares be registered in the name of ______________,
whose address is _________________________, and that such Warrant be delivered
to _________________, whose address is __________________.
The undersigned represents that the aforesaid shares of Common Stock
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling such
shares.
The undersigned is an "accredited investor" as defined in Securities
and Exchange Commission Rule 501(a) pursuant to the Securities Act, as amended.
Signature:______________________________
Date:___________________
Signature Guaranteed:___________________
19
<PAGE> 1
EXHIBIT 4.3
Warrant No. 98-3
WARRANT AND WARRANT AGREEMENT
Dated as of November 6, 1998
<PAGE> 2
THIS WARRANT AND THE SHARES OBTAINABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL SUCH
WARRANT OR SHARES ARE REGISTERED UNDER SUCH ACT OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY IS OBTAINED TO THE EFFECT THAT SUCH
REGISTRATION IS NOT REQUIRED.
CYBERCASH, INC.
WARRANT AND WARRANT AGREEMENT
This certifies that in consideration of the covenants and agreements of the
parties contained in the Operating Agreement dated October 15, 1998, the
adequacy of which consideration is hereby acknowledged, First USA Bank, or its
registered permitted assigns (the "Holder") is entitled to subscribe for and
purchase up to 1,000,000 shares (subject to adjustment as described herein) of
fully paid and nonassessable Common Stock (the "Warrant Shares") of CyberCash,
Inc., a Delaware corporation (the "Company"), upon exercise of this Warrant and
subject to the provisions and upon the terms and conditions hereinafter set
forth.
SECTION 1. Term; Exercise of Warrant. Subject to the terms of
this Warrant, the Holder shall have the right to receive from the Company the
number of fully paid and nonassessable Warrant Shares which the Holder may at
the time be entitled to receive on exercise of such Warrant and payment to the
Company of the Exercise Price (as defined below) then in effect for such Warrant
Shares; provided, however, that such Warrant shall be exercised in minimum
increments of 100,000 shares (as proportionately adjusted for any stock splits,
stock dividends or the like). This Warrant is exercisable commencing at the
opening of business on January 1, 1999 until 5:00 p.m., Eastern time on
September 30, 2003. If not exercised prior to 5:00 p.m., Eastern time on
September 30, 2003, this Warrant shall become void and all rights thereunder and
all rights in respect thereof shall cease as of such time.
This Warrant may be exercised upon surrender to the Company at
its office designated for such purpose (the address of which is set forth in
Section 10 hereof) during normal business hours (9:00 a.m. to 5:00 p.m. Eastern
Time) this Warrant with the form of election to purchase duly filled in and
signed, which signature shall be guaranteed by a bank or trust company having an
office or correspondent in the United States or a broker or dealer which is a
member of a registered securities exchange or the National Association of
Securities Dealers, Inc., and upon payment to the Company of the Exercise Price
(as defined in Section 3), subject to adjustment pursuant to Section 7, for the
number of Warrant Shares in respect of which the Warrant is then exercised.
Payment of the aggregate Exercise Price shall be made in cash or by certified or
official bank check payable to the order of the Company or pursuant to the
cashless exercise provisions set forth in Section 3.
Subject to the provisions of Section 2 hereof, upon such
surrender of this Warrant and payment of the Exercise Price the Company shall
issue and cause to be delivered with all reasonable dispatch to or upon the
written order of the Holder and in such name or names as the Holder may
designate, a certificate or certificates for the number of full Warrant Shares
issuable upon the exercise of such Warrant together with cash as provided in
Section 8;
<PAGE> 3
provided, however, that if any reclassification, consolidation, merger or lease
or sale of assets is proposed to be effected by the Company as described in
subsection (f) of Section 7 hereof, or a tender offer or an exchange offer for
shares of Common Stock of the Company shall be made, upon such surrender of
Warrant and payment of the Exercise Price as aforesaid, the Company shall, as
soon as possible, but in any event not later than two business days thereafter,
issue and cause to be delivered the full number of Warrant Shares issuable upon
the exercise of such Warrant in the manner described in this sentence together
with cash as provided in Section 8. Such certificate or certificates shall be
deemed to have been issued and any person so designated to be named therein
shall be deemed to have become a holder of record of such Warrant Shares as of
the date of the surrender of such Warrant and payment of the Exercise Price.
The Warrant may be exercised, at the election of the Holder,
either in full or from time to time in part (in minimum increments of 100,000).
In the event that the Warrant is exercised in respect of fewer than all of the
Warrant Shares issuable on such exercise at any time prior to the date of
expiration of the Warrant, a new Warrant will be issued and delivered pursuant
to the provisions of this Section.
All Warrants surrendered upon exercise of Warrants shall be
canceled and disposed of by the Company.
So long as First USA or any assignee or transferee of the
Warrant is a bank holding company or a subsidiary of a bank holding company (a
"Bank Affiliate") as defined in the Bank Holding Company Act of 1956, as
amended, or other applicable banking laws of the United States and the rules and
regulations promulgated thereunder (the "Bank Holding Company Act"), no such
Bank Affiliate shall acquire Common Stock of the Company by exercise of the
Warrant or otherwise, without prior notice to or approval of the Federal Reserve
Board, if after giving effect to such exercise, the Bank Affiliate would own
more than five percent (5%) of the outstanding voting securities of the Company,
or if such exercise or conversion would otherwise violate the Bank Holding
Company Act. Shares of Common Stock may otherwise be acquired in the event that:
(i) the Company shall vote to merger or consolidate with or
into any other person, and after giving effect to such merger or consolidation,
the Bank Affiliate would not own more than 5% of the outstanding voting
securities of the surviving corporation;
(ii) Holder desires to sell shares of Common Stock in
connection with any proposed purchase of Common Stock by one or more other
persons (other than a Bank Affiliate) in which no such person acquires more than
two percent (2%) of the Company's Common Stock; or
(iii) Holder exercises registration rights pursuant to this
Warrant and Warrant Agreement and agrees to sell the Common Stock pursuant to
the registration statement resulting therefrom in a widely dispersed public
offering.
-2-
<PAGE> 4
SECTION 2. Payment of Taxes. The Company will pay all
documentary stamp taxes, if any, attributable to the initial issuance of Warrant
Shares upon the exercise of Warrants.
SECTION 3. Exercise Price. (a) The purchase price for each
share of Common Stock deliverable upon exercise of this Warrant (the "Exercise
Price") shall be determined as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Beginning (9:00 am) Ending (5:00 pm) Exercise Price
January 1, 1999 September 20, 2003 $32.00
</TABLE>
(b) In lieu of delivering the Exercise Price as set forth in
subparagraph (a), the Holder may exercise this Warrant by conversion, in whole
or in part (but in increments of not less than 100,000 shares), into shares of
Common Stock, by instructing the Company in writing ("Notice of Conversion") to
deliver to the Holder (without payment by the Holder of any Exercise Price or of
any other cash or consideration) that number of shares of Common Stock equal to
the quotient obtained by dividing:
(i) the value of this Warrant at the time the conversion
right is exercised (determined by subtracting the
aggregate Exercise Price in effect immediately prior
to the exercise of the conversion right from the
aggregate fair market value (as determined in
accordance with Section 7 hereof) of the shares of
Common Stock issuable upon exercise of this Warrant
immediately prior to the exercise of the conversion
right) by
(ii) the current fair market value (as determined in
accordance with Section 7 hereof) of one share of
Common Stock immediately prior to the exercise of the
conversion right,
and multiplying the quotient so obtained by a fraction equal to the portion of
this Warrant which the Holder desires to exercise.
The Notice of Conversion may be given by circling the
appropriate option in the Notice of Exercise attached hereto.
SECTION 4. Mutilated or Missing Warrant Certificates. In case
the Warrant shall be mutilated, lost, stolen or destroyed, the Company shall
issue, in exchange and substitution for and upon cancellation of the mutilated
Warrant, or in lieu of and substitution for the Warrant lost, stolen or
destroyed, a new Warrant of like tenor and representing an equivalent number of
Warrant Shares, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction of such Warrant and indemnity, if
requested, also reasonably satisfactory to it.
SECTION 5. Valid Issuance of Warrant; Reservation of Warrant
Shares.
The execution and delivery of this Warrant and Warrant
Agreement and the issuance and sale of the Common Stock upon exercise of the
Warrant pursuant to its terms (i)
-3-
<PAGE> 5
are within the corporate power and authority of the Company and (ii) have been
duly authorized by all requisite corporate proceedings on the part of the
Company. This Warrant and Warrant Agreement has been duly executed and delivered
by the Company and constitutes a valid and binding agreement of the Company,
enforceable in accordance with its terms, except that (i) such enforcement maybe
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights and (ii) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought. The capitalization of the
Company as of June 30, 1998 is as set forth in the Company's quarterly report on
Form 10-Q filed with the Securities and Exchange Commission on August 14, 1998.
The Company will at all times reserve and keep available, free
from preemptive rights, out of the aggregate of its authorized but unissued
Common Stock or its authorized and issued Common Stock held in its treasury, for
the purpose of enabling it to satisfy any obligation to issue Warrant Shares
upon exercise of the Warrant, the maximum number of shares of Common Stock which
may then be deliverable upon the exercise of the outstanding Warrant.
The Company or, if appointed, the transfer agent for the
Common Stock (the "Transfer Agent") and every subsequent transfer agent for any
shares of the Company's capital stock issuable upon the exercise of any of the
rights of purchase aforesaid will be irrevocably authorized and directed at all
times to reserve such number of authorized shares as shall be required for such
purpose.
Before taking any action which would cause an adjustment
pursuant to Section 7 hereof to reduce the Exercise Price below the then par
value (if any) of the Warrant Shares, the Company will take any corporate action
which may, in the opinion of its counsel, be necessary in order that the Company
may validly and legally issue fully paid and nonassessable Warrant Shares at the
Exercise Price as so adjusted.
The Company covenants that all Warrant Shares which may be
issued upon exercise of this Warrant will, upon issue, be fully paid,
nonassessable, free of preemptive rights and free from all documentary stamp
taxes, and liens, charges and security interests with respect to the issue
thereof.
SECTION 6. Delivery of Information; Obtaining Stock Exchange
Listings.
(a) The Company will from time to time take
all action which may be necessary so that the Warrant Shares, immediately upon
their issuance upon the exercise of this Warrant, will be listed on the
principal securities exchanges and automated quotation systems within the United
States of America, if any, on which other shares of Common Stock are then
listed.
-4-
<PAGE> 6
(b) During the term of this Warrant and
Warrant Agreement, the Company agrees to provide to First USA (so long as it is
a Holder): (i) copies of any of the following reports filed with the SEC: Annual
Report on Form 10-K, its Quarterly Reports on Form 10-Q and any Current Reports
on Form 8-K; (ii) copies of all press releases issued by the Company or any of
its Subsidiaries; and (iii) copies of any notices or other information the
Company generally makes available or provides to stockholders. The Company's
obligation to provide any such information to First USA shall be satisfied by
the electronic delivery of information to Clinton Walker at
[email protected] and/or by facsimile to Clinton Walker at (302)
884-8361 (fax) and (302) 434-7677 (phone) or such other electronic address or
telephone number as shall be provided in writing to the Company.
SECTION 7. Adjustment of Exercise Price and Number of Warrant
Shares Issuable. The Exercise Price and the number of Warrant Shares issuable
upon the exercise of the Warrant are subject to adjustment from time to time
upon the occurrence of the events enumerated in this Section 7. For purposes of
this Section 7, "Common Stock" means shares now or hereafter authorized of any
class of common stock of the Company and any other stock of the Company, however
designated, that has the right (subject to any prior rights of any class or
series of preferred stock) to participate in any distribution of the assets or
earnings of the Company without limit as to per share amount.
(a) Adjustment for Change in Common Stock.
If the Company: (i) pays a dividend or makes a distribution on
its Common Stock in shares of its Common Stock; (ii) subdivides its outstanding
shares of Common Stock into a greater number of shares; or (iii) combines its
outstanding shares of Common Stock into a smaller number of shares; then the
Exercise Price in effect immediately prior to such action shall then be adjusted
in accordance with the formula:
E* = E x O
---
A
Where:
E*= the adjusted Exercise Price
E = the current Exercise Price
O = the number of shares of Common Stock outstanding prior to such
action
A = the number of shares of Common Stock outstanding immediately
after such action
In the case of a dividend or distribution the adjustment shall
become effective immediately after the payment date for such dividend or
distribution, or the effective date of such other corporate action including,
but not limited to, a subdivision or combination.
If after an adjustment the Holder upon exercise of the Warrant
may receive shares of two or more classes of capital stock of the Company, the
Company shall determine the allocation of the adjusted Exercise Price between
the classes of capital stock. After such
-5-
<PAGE> 7
allocation, the exercise privilege, the number of shares issuable upon such
exercise, and the Exercise Price of each class of capital stock shall thereafter
be subject to adjustment on terms comparable to those applicable to Common Stock
in this Section 7.
Such adjustment shall be made successively whenever any event
listed above shall occur.
(b) Adjustment for Rights Issue.
If the Company distributes any rights, options or warrants to
all holders of its Common Stock entitling them at any time after the record date
mentioned below to purchase shares of Common Stock at a price per share less
than the Fair Market Value (as defined in Section 7(c)) per share on such record
date relating to such distribution, the Exercise Price in effect immediately
prior to such action shall be adjusted in accordance with the formula:
O +N x P
-----
E* = E x M
--------
O + N
where:
E* = the adjusted Exercise Price.
E = the current Exercise Price.
O = the number of shares of Common Stock outstanding on the record date.
N = the number of additional shares of Common Stock issuable upon exercise
of the rights, options or warrants offered.
P = the exercise price per share of the additional shares issuable upon
exercise of the rights, options or warrants.
M = the Fair Market Value per share of Common Stock on the record date.
The adjustment shall be made successively whenever any such
rights, options or warrants are issued and shall become effective immediately
after the record date for the determination of stockholders entitled to receive
the rights, options or warrants. If at the end of the period during which such
rights, options or warrants are exercisable, not all rights, options or warrants
shall have been exercised, the Exercise Price shall be immediately readjusted to
what it would have been if "N" in the above formula had been the number of
shares actually issued.
Notwithstanding the foregoing, if the Company distributes or
issues rights to all holders of its Common Stock pursuant to a shareholder
rights plan, then no adjustment shall be made pursuant to this Section 7(b) upon
such distribution or issuance if, upon exercise of the Warrant, the Holder
receives the same type and number of unexpired rights it would have received (as
adjusted for any event described in Sections 7(a) or (f)) had it exercised the
Warrant, and been a holder of the shares of Common Stock issuable upon exercise
thereof, prior to the record date for such distribution or issuance.
-6-
<PAGE> 8
(c) Fair Market Value.
"Fair Market Value" per share of Common Stock or any other
security (herein collectively referred to as a "Security") or for any other
asset at any date shall be:
(1) if the Security is registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the average of the daily
Market Prices for each business day during the period commencing 30 business
days before such date and ending on the date one day prior to such date or, if
the Security has been registered under the Exchange Act for less than 30
consecutive business days before such date, then the average of the daily Market
Prices for all of the business days before such date for which daily Market
Prices are available. If the Market Price is not determinable for at least 15
business days in such period, the Fair Market Value of the Security shall be
determined as if the Security was not registered under the Exchange Act; or
(2) if the asset or Security is not registered under the
Exchange Act, (i) the value of the asset or Security determined in good faith by
the Board of Directors of the Company and certified in a board resolution, based
on the most recently completed arm's length transaction between the Company and
a person other than an affiliate of the Company in which such determination is
necessary and the closing of which occurs on such date or shall have occurred
within the six months preceding such date, or (ii) if no such transaction shall
have occurred on such date or within such six-month period, the value of the
asset or Security determined pursuant to the procedures set forth in Section
7(h).
The "Market Price" for any Security on any business day means:
(i) if such Security is listed or admitted to trading on any securities
exchange, the closing price, regular way, on such day on the principal exchange
on which such Security is traded, or if no sale takes place on such day, the
average of the closing bid and asked prices on such day, (ii) if such Security
is not then listed or admitted to trading on any securities exchange, the last
reported sale price on such day, or if there is no such last reported sale price
on such day, the average of the closing bid and the asked prices on such day, as
reported by a reputable quotation source designated by the Company, or (iii) if
neither clause (i) nor (ii) is applicable, the average of the reported high bid
and low asked prices on such day, as reported by a reputable quotation service,
or a newspaper of general circulation in the Borough of Manhattan, City of New
York, customarily published on each business day, designated by the Company. If
there are no such prices on a business day, then the Market Price shall not be
determinable for such business day.
(d) When De Minimis Adjustment May Be Deferred.
No adjustment in the Exercise Price need be made unless the
adjustment would require an increase or decrease of at least 1% in the Exercise
Price. Any adjustments that are not made shall be carried forward and taken into
account in any subsequent adjustment.
-7-
<PAGE> 9
All calculations under this Section shall be made to the
nearest cent or to the nearest 1/20th of a share, as the case may be.
(e) When No Adjustment Required.
No adjustment shall be made for a transaction referred to in
subsections (a) or (b) of this Section 7 if Holder is to participate in the
transaction on a basis and with notice that is fair and appropriate in light of
the basis and notice on which holders of Common Stock participate in the
transaction.
No adjustment shall be made for rights to purchase Common
Stock pursuant to a Company plan for reinvestment of dividends or interest.
No adjustment shall be made for a change in the par value of
the Common Stock.
To the extent this Warrant becomes convertible into cash, no
adjustment need be made thereafter as to the cash. Interest will not accrue on
the cash.
(f) Reorganization of Company.
If any reclassification of the Common Stock of the Company or
any consolidation or merger of the Company with another entity, or the sale or
lease of all or substantially all of the Company's assets to another entity
shall be effected in such a way that holders of the Common Stock of the Company
shall be entitled to receive stock, securities or assets with respect to or in
exchange for such Common Stock, then, as a condition precedent to such
reclassification, consolidation, merger, sale or lease, lawful and adequate
provisions shall be made whereby the Holder shall thereafter have the right to
purchase and receive upon the basis and the terms and conditions specified in
this Warrant, including, without limitation, the requirements set forth in
Section 6(b), and in lieu of the shares of Common Stock immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby,
such shares of stock, securities or assets as may be issued or payable in such
reclassification, consolidation, merger, sale or lease with respect to or in
exchange for the number of shares of Common Stock purchasable and receivable
upon the exercise of the rights represented hereby had such rights been
exercised immediately prior thereto, and in any such case appropriate provision
shall be made with respect to the rights and interests of the Holder to the end
that the provisions hereof (including, without limitation, provisions for
adjustments of the Exercise Price and of the number of shares of Common Stock
purchasable and receivable upon the exercise of the Warrant) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise hereof. The successor
corporation (if other than the Company) resulting from such reclassification,
consolidation or merger or the corporation purchasing or leasing such assets
shall assume by a supplemental Warrant, executed and mailed or delivered to the
Holder, the obligation to deliver to the Holder such shares of stock, securities
or assets as, in accordance with the foregoing provisions, Holder may be
entitled to purchase.
-8-
<PAGE> 10
If the issuer of securities deliverable upon exercise of the
supplemental Warrant is an affiliate of the formed, surviving, transferee or
lessee corporation, that issuer shall join in the supplemental Warrant.
If this subsection (f) applies, subsections (a) and (b) of
this Section 7 do not apply.
(g) Adjustment in Number of Shares of Common Stock.
Upon each adjustment of the Exercise Price pursuant to this
Section 7, the Warrant outstanding prior to the making of the adjustment in the
Exercise Price shall thereafter evidence the right to receive upon payment of
the adjusted Exercise Price that number of shares of Common Stock (calculated to
the nearest 1/20th of a share) obtained from the following formula:
E*
---
N* = N x E
where:
N* = the adjusted number of Warrant Shares issuable upon exercise of the
Warrant by payment of the adjusted Exercise Price.
N = the number of Warrant Shares previously issuable upon exercise of the
Warrant by payment of the Exercise Price prior to adjustment.
E* = the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
(h) Disputes; Fair Market Value Determination.
If a dispute shall at any time arise between the Company and
the Holder with respect to any matters hereunder including adjustments to the
number of shares of Common Stock, the Exercise Price, or a determination as to
Fair Market Value provided for herein, such dispute shall be conclusively
determined by either the Holder and the Company agreeing on a single independent
investment bank of recognized national standing to resolve the dispute or, if
the Holder and the Company cannot agree on a single investment bank after an
additional seven days, each of the Holder and the Company shall appoint an
independent investment bank of recognized national standing with appropriate
experience involving companies comparable to the Company and the dispute shall
be mutually resolved by the two investment banks. If the two investment banks
are not able to reach agreement within 20 days, then they shall within five days
appoint a third independent investment bank of recognized national standing with
appropriate experience involving companies comparable to the Company and the
dispute shall be definitively resolved by such third investment bank within 20
days. Each party shall pay the costs, fees and expenses of its respective
investment bankers and the parties shall split the costs of the third investment
bank.
-9-
<PAGE> 11
SECTION 8. Fractional Interests. The Company shall not be
required to issue fractional Warrant Shares on the exercise of the Warrant. The
number of full Warrant Shares which shall be issuable upon the exercise thereof
shall be computed on the basis of the aggregate number of Warrant Shares
purchasable on exercise of the Warrants so presented. If any fraction of a
Warrant Share would, except for the provisions of this Section 8, be issuable on
the exercise of Warrant (or specified portion thereof), the Company shall pay an
amount in cash equal to the Fair Market Value on the day immediately preceding
the date the Warrant is presented for exercise, multiplied by such fraction.
SECTION 9. Notices to the Holder. Upon any adjustment of the
Exercise Price pursuant to Section 7, the Company shall promptly thereafter (i)
cause to be filed with the Secretary of the Company a certificate setting forth
the Exercise Price after such adjustment and setting forth in reasonable detail
the method of calculation and the facts upon which such calculations are based
and setting forth the number of Warrant Shares (or portion thereof) issuable
after such adjustment in the Exercise Price, upon exercise of this Warrant and
payment of the adjusted Exercise Price, and (ii) cause to be given to the Holder
written notice of such adjustments by first-class mail, postage prepaid. Where
appropriate, such notice may be given in advance and included as a part of the
notice required to be mailed under the other provisions of this Section 9.
In case:
(a) the Company shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for
or purchase shares of Common Stock or of any other subscription rights
or warrants; or
(b) the Company shall authorize the distribution to all
holders of shares of Common Stock of evidences of its indebtedness or
assets (other than cash dividends or cash distributions payable out of
earnings or earned surplus or dividends or distributions payable in
shares of Common Stock); or
(c) of any consolidation or merger to which the Company is a
party and for which approval of any shareholders of the Company is
required, or of the conveyance or transfer of all or substantially all
of the properties and assets of the Company, or of any reclassification
or change of Common Stock issuable upon exercise of the Warrant (other
than a change in par value, or from par value to no par value, or from
no par value to par value, or as a result of a subdivision or
combination), or a tender offer or exchange offer for shares of Common
Stock; or
(d) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company; or
(e) the Company proposes to take any action that would require
an adjustment in the Exercise Price pursuant to subsections (a), (b) or
(c) of Section 7 and if the Company does not arrange for the Holder to
participate pursuant to subsection (f)
-10-
<PAGE> 12
of Section 7, or if the Company takes any action that would require a
supplemental Warrant pursuant to subsection (f) of Section 7;
then the Company shall cause to be given to the Holder, prior to the applicable
record date hereinafter specified, or promptly in the case of events for which
there is no record date, by first-class mail, postage prepaid, a written notice
stating (i) the date as of which the holders of record of shares of Common Stock
to be entitled to receive any such rights, options, warrants or distribution are
to be determined, or (ii) the initial expiration date set forth in any tender
offer or exchange offer for shares of Common Stock, or (iii) the date on which
any such consolidation, merger, conveyance, transfer, dissolution, liquidation
or winding up is expected to become effective or consummated, and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange such shares for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up; provided, however, that the
Holder shall not be entitled to receive notice prior to any public announcement
thereof by the Company. The failure to give the notice required by this Section
9 or any defect therein shall not affect the legality or validity of any
distribution, right, option, warrant, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up, or the vote upon any action.
Nothing contained in this Warrant shall be construed as
conferring upon the Holder the right to vote or to consent or to receive notice
as shareholders in respect of the meetings of shareholders or the election of
Directors of the Company or any other matter, or any rights whatsoever as
shareholders of the Company.
SECTION 10. Notices to Company and the Holder. Unless
otherwise provided herein, any notice, request, instruction or other document to
be given hereunder by any party to the others shall be in writing and delivered
in person or by courier or by facsimile transmission (with receipt confirmed),
or mailed by certified mail, postage prepaid, return receipt requested (such
mailed notice to be effective on the date such receipt is acknowledged), as
follows:
If to the Company:
CyberCash, Inc.
2100 Reston Parkway
Reston, Virginia 20191
Telecopy No.: (703) 264-5928
-11-
<PAGE> 13
With a copy to:
Hogan & Hartson, L.L.P.
111 South Calvert Street, 16th Floor
Baltimore, Maryland 21202
Attn: Amy Bowerman Freed, Esquire
Telecopy No.: (410) 539-6981
If to the Holder:
First USA Bank
201 N. Walnut Street
Wilmington, Delaware 19801
Attn: Clinton Walker
Telecopy No.: (302)-884-8361
With a copy to:
Wilmer, Cutler & Pickering
2445 M Street, NW
Washington, D.C. 20037
Attn: Russell J. Bruemmer
Telecopy No.: (202) 663-6363
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
SECTION 11. Supplements and Amendments. The Company may not
supplement or amend this Warrant without the prior written approval of the
Holder.
SECTION 12. Successors and Assignment. All the covenants and
provisions of this Warrant by or for the benefit of the Company shall bind and
inure to the benefit of its respective successors and assigns hereunder. This
Warrant is not assignable or transferable by the Holder except in increments of
100,000 Warrant Shares or by operation of law.
SECTION 13. Governing Law. This Warrant shall be deemed to be
a contract made under the laws of the State of Delaware and for all purposes
shall be construed in accordance with the internal laws of said State, excluding
choice of law provisions.
SECTION 14. Benefits of This Warrant. Nothing in this Warrant
shall be construed to give to any person or corporation other than the Company
and the Holder any legal or equitable right, remedy or claim under this Warrant;
but this Warrant shall be for the sole and exclusive benefit of the Company and
the Holder.
-12-
<PAGE> 14
SECTION 15. Demand and Piggy Back Registrations.
(a) Subject to the provisions of this Section 15, one
or more Holders of at least 51% of the Common Stock issuable upon exercise of
all Warrants 98-1, 98-2 and 98-3 (the "Registrable Securities") may make one
request (the "Demand Request") registration for sale under the Securities Act of
the Registrable Securities, provided that such Holders request registration for
sale of a number of shares which represents at least 51% of the total number of
shares of Common Stock held by all Holders on the date of such Demand Request.
The Company shall thereafter, as expeditiously as practicable, use its best
efforts to file with the SEC under the Securities Act of 1933 (the "Securities
Act") a registration statement on the appropriate form covering all Registrable
Securities specified in the Demand Request (the "Registration Statement"). The
Demand Request shall specify the intended methods of disposition thereof and the
information required by Item 507 of Regulation S-K under the Securities Act.
Upon such Demand Request, subject to this Section 15, the Company shall use its
best efforts to promptly effect the registration of such Registrable Securities
under (i) the Securities Act, and (ii) if applicable, the blue sky laws of such
jurisdictions as any Holder of such Registrable Securities requesting such
registration or any underwriter, if any, may reasonably request. The Company
shall be deemed to have effected a Demand Registration if the Registration
Statement relating to such Demand Request is filed with the SEC but the
requesting Holders inform the Company that they desire that the Registration
Statement be withdrawn or abandoned; provided, however, that such withdrawal
does not result from action or inaction on the part of the Company that has
materially and adversely affected the value of such registration to the
participating Holders, or if the Registration Statement is declared effective by
the SEC and remains effective until the earlier of the date on which (i) all the
Registrable Securities subject to such Registration Statement have been disposed
of, (ii) nine months have elapsed from the date of such effectiveness or (iii)
the Registrable Securities are eligible for resale under Securities Act Rule
144(k). If at any time or from time to time during the time period applicable to
the Demand Registration any of the Holders of the Registrable Securities covered
by a Registration Statement desire to sell Registrable Securities in an
underwritten offering, the investment banker or investment bankers that will
manage the offering will be selected by the Holders of at least 51% of the
Registrable Securities included in such offering; provided that the selection of
any such investment banker or investment bankers is subject to the approval and
consent by the Company. The Company shall not be required to file any
Registration Statement pursuant to this Section 15(a) for a deferral period of
up to 120 days if the Board of Directors of the Company in good faith determines
that such registration would interfere with any proposed offering of shares of
the Company's capital stock, pending financing transaction, or acquisition,
corporate reorganization or other significant transaction involving the Company.
(b) If the Company proposes to make a registered public
offering of any of its Common Stock under the Securities Act (except for
offerings on Forms S-4, S-8 or any successor forms), the Company agrees on each
such occasion during the term of this Warrant, subject to the provisions of this
Section 15, to give written notice of the proposed registration to Holder, not
less than 15 days prior to the proposed filing date of the registration
statement, and at the written request of Holder delivered in writing to the
Company within 10 days after the receipt of said notice, the Company agrees,
subject to the provisions of this Section 15, to
-13-
<PAGE> 15
include in the registration statement and offering, and in any underwriting of
the offering, all Warrant Shares as may have been designated in the Holder's
request.
(c) Underwriter Discretion. If a registration in which the
Holder has the right to participate pursuant to this Section 15 is an
underwritten registration on behalf of the Company, and the managing
underwriters advise the Company, that, in their opinion, the number of
securities requested to be included in the registration exceeds the number which
can be sold in the offering, the Company shall allocate the number of shares to
be included in the registration statement as follows: (i) first, all of the
securities of the Company proposed to be sold by the Company, (ii) second,
stockholders, optionholders or warrantholders with registration rights in
existence as of January 1, 1999; and (iii) third, the Common Stock requested to
be sold by Holder and all other requesting Holders of Warrants issued on January
1, 1999, reduced, pro rata, in accordance with the percentage interests in the
Company held by each of them.
(d) Information Required. The Company shall have no obligation
to include shares of Common Stock owned by Holder in a registration statement
pursuant to this Section 15, unless and until the Holder shall have furnished
the Company with all information and statements about or pertaining to Holder in
the reasonable detail and on a timely basis as is reasonably deemed by the
Company to be necessary or appropriate with respect to the preparation of the
registration statement.
(e) Hold-back. In the event that the Company effects an
underwritten public offering of any security, the Holder agrees, if requested by
the managing underwriters, not to effect any public sale or distribution,
including any sale pursuant to Rule 144 under the Securities Act, of any Common
Stock (except as part of the underwritten offering) during the 90-day period
commencing with the effective date of the registration statement for the
offering.
(f) Expenses. If, pursuant to Section 15 hereof, shares of
Common Stock owned by any Holder are included in a registration statement, the
Holder shall pay all transfer taxes, if any, relating to the sale of its shares,
the fees and expenses of its own counsel, and its pro rata portion of any
underwriting discounts or commissions or the equivalent thereof. The Company
agrees to pay all expenses incident to the registration including all
registration and filing fees, fees and expenses of compliance with securities or
blue sky laws, underwriting discounts, fees and expenses (other than the
Holder's pro rata portion of any underwriting discounts or commissions or the
equivalent thereof), printing expenses, messenger and delivery expenses, and
fees and expenses of counsel for the Company and all independent certified
public accountants and other persons retained by the Company.
(g) Indemnification. In the event that any shares of Common
Stock owned by a Holder are sold by means of a registration statement pursuant
to this Section 15, the Company agrees to indemnify and hold harmless the
Holder, each of its officers and directors, and each person, if any, who
controls or may control the Holder within the meaning of the Securities Act (the
Holder, its officers and directors., and any other persons being hereinafter
referred to individually as an "Indemnified Person" and collectively as
"Indemnified Persons") from and against all demands, claims, actions or causes
of action, assessments, losses,
-14-
<PAGE> 16
damages, liabilities, costs, and expenses, including, without limitation,
interest, penalties, and reasonable attorneys' fees and disbursements, asserted
against, resulting to, imposed upon or incurred by the Indemnified Person,
directly or indirectly (hereinafter referred to in this Section 15 or, the
singular as a "claim" and in the plural as "claims"), based upon, arising out of
or resulting from any untrue statement of a material fact obtained in the
registration statement or any omission to state therein a material fact
necessary to make the statement made therein, in the light of the circumstances
under which they were made, not misleading, except insofar as the claim is based
upon, rises out of or results from information furnished to the Company in
writing by the Holder for use in connection with the registration statement. The
Holder agrees to indemnify and hold harmless the Company, its officers and
directors, and each person, if any, who controls or may control the Company
within the meaning of the Securities Act (the Company, it's officers and
directors, and any other persons also being hereinafter referred to individually
as an "Indemnified Person" and collectively as "Indemnified Persons") from and
against all claims based upon, arising out of or resulting from any untrue
statement of a material fact contained in the registration statement or any
omission to state therein a material fact necessary in order to make the
statement made therein, in the light of the circumstances under which they were
made, not misleading, to the extent that the claim is based upon, arises out of
or results from information furnished to the Company in writing by the Holder
for use in connection with the registration statement. Promptly after actually
receiving definitive notice of any claim in respect of which an Indemnified
Person may seek indemnification under this Section 15, the Indemnified Person
shall submit written notice thereof to either the Company or the Holder, as the
case may be (sometimes being hereinafter referred to as an "Indemnifying
Person"). The omission of the Indemnified Person to so notify the Indemnifying
Person of any claim shall not relieve the Indemnifying Person from any liability
it may have hereunder except to the extent that (a) the liability was caused or
increased by the omission, or (b) the ability of the Indemnifying Person to
reduce the liability was materially adversely affected by the omission. In
addition, the omission of the Indemnified Person so to notify the Indemnifying
Person of any claim shall not relieve the Indemnifying Person from any liability
it may have otherwise than hereunder. The Indemnifying Person shall have the
right to undertake, by counsel or representatives of its own choosing, the
defense, compromise or settlement (without admitting liability of the
Indemnified Person) of and the claim asserted, the defense, compromise or
settlement to be undertaken at the expense and risk of the Indemnifying Person,
and the Indemnified Person shall have the right to engage separate counsel, at
its own expense, whom counsel for the Indemnifying Person shall keep informed
and consult with in a reasonable manner. In the event the Indemnifying Person
shall elect not to undertake the defense by its own representatives, the
Indemnifying Person shall give prompt written notice of the election to the
Indemnified Person, and the Indemnified Person shall undertake the defense,
compromise or settlement (without admitting liability of the Indemnified Person)
thereof on behalf of and for the account and risk of the Indemnifying Person by
counsel or other representatives designated by the Indemnified Person. In the
event that any claim shall arise out of a transaction or cover any period or
periods wherein the Company and the Holder shall each be liable hereunder for
part of the liability or obligation arising therefrom, then the parties shall,
each choosing its own counsel and bearing its own expenses, defend the claim,
and no settlement or compromise of the claim may be made without the joint
consent or approval of the Company and the Holder. Notwithstanding the
foregoing, no Indemnifying Person shall be obligated hereunder with respect to
amounts paid in settlement of any claim if the settlement is effected without
the consent of the Indemnifying Person (which consent shall not be unreasonably
withheld).
-15-
<PAGE> 17
(h) Termination of Registration Rights. The Company's
obligations and the Holder's rights under this Section 15 shall terminate if, in
the reasonable opinion of the Company, the shares of Common Stock issuable upon
exercise of the Warrant pursuant to Section 3(b) hereof would be eligible for
resale by the Holder under Securities Act Rule 144(k).
SECTION 16. Counterparts. This Warrant and Warrant Agreement
may be executed in any number of counterparts and each of such counterparts
shall for all purposes be deemed to be an original, and all such counterparts
shall together constitute but one and the same instrument.
[Signature Page To Follow]
-16-
<PAGE> 18
Date: November , 1998 CyberCash, Inc.
---
By: /s/ JAMES J. CONDON
- ------------------------ -------------------------------------
Name: James J. Condon
-------------------------------------
Title: Chief Financial Officer
-------------------------------------
RECEIVED BY:
First USA Bank
By:
- ------------------------ -------------------------------------
Name:
--------------------------------
Title:
-------------------------------
-17-
<PAGE> 19
[Form of Election to Purchase]
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant, to receive _________ shares of Common Stock
and herewith tenders (a) payment for such shares to the order of CyberCash, Inc.
in the amount of $_____ in accordance with the terms hereof or (b) elects to
exercise its right of conversion set forth in Section 3(b) of the attached
warrant. The undersigned requests that a certificate for such shares be
registered in the name of _______________________________________, whose address
is _______________________________ and that such shares be delivered to
________________ whose address is _________________________________. If said
number of shares is less than all of the shares of Common Stock purchasable
hereunder, the undersigned requests that a new Warrant representing the
remaining balance of such shares be registered in the name of ______________,
whose address is _________________________, and that such Warrant be delivered
to _________________, whose address is __________________.
The undersigned represents that the aforesaid shares of Common
Stock are being acquired for the account of the undersigned for investment and
not with a view to, or for resale in connection with, the distribution thereof
and that the undersigned has no present intention of distributing or reselling
such shares.
The undersigned is an "accredited investor" as defined in
Securities and Exchange Commission Rule 501(a) pursuant to the Securities Act,
as amended.
Signature:
_______________________________
Date:___________________
Signature Guaranteed:
_________________________
18
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 16,403,249
<SECURITIES> 0
<RECEIVABLES> 4,659,876
<ALLOWANCES> 655,000
<INVENTORY> 0
<CURRENT-ASSETS> 23,648,083
<PP&E> 13,649,722
<DEPRECIATION> 5,823,000
<TOTAL-ASSETS> 100,725,179
<CURRENT-LIABILITIES> 5,546,862
<BONDS> 0
20,916,654
0
<COMMON> 15,743
<OTHER-SE> 74,245,920
<TOTAL-LIABILITY-AND-EQUITY> 100,725,179
<SALES> 4,522,285
<TOTAL-REVENUES> 4,522,885
<CGS> 2,406,713
<TOTAL-COSTS> 2,406,713
<OTHER-EXPENSES> 9,782,215
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (7,632,073)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,632,073)
<EPS-PRIMARY> (.51)
<EPS-DILUTED> (.51)
</TABLE>
