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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) December 8, 1997
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V-ONE CORPORATION
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(Exact name of registrant as specified in its charter)
Commission File No. 0-21511
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<TABLE>
<CAPTION>
<S> <C>
Delaware 52-1953278
(State or other jurisdiction of incorporation) (IRS Employer Identification No.)
20250 Century Boulevard - Suite 300
Germantown, Maryland 20874
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(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code:
(301) 515-5200
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(Former name or former address, if changed since last report.)
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<PAGE>
Item 5. OTHER EVENTS.
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On December 8, 1997, V-ONE Corporation, a Delaware corporation
("Company"), issued 4,000 shares of Series A Convertible Preferred Stock
("Series A Stock") to Advantage Fund II Ltd. ("Advantage") for $4 million in the
aggregate. Each share of Series A Stock is convertible into shares of Common
Stock, $0.001 par value per share, of the Company ("Common Stock") and warrants
to purchase shares of Common Stock ("Series A Warrants").
As a result of the issuance of the 4,000 shares of Series A Stock, the
Company issued to Wharton Capital Partners, Ltd. ("Wharton") for its services as
placement agent, warrants to purchase 60,000 shares of Common Stock at an
exercise price of $4.725 per share ("Agent Warrants"). The number of shares
issuable on exercise of the Agent Warrants and the exercise price per share is
subject to adjustment in certain circumstances. The Company also paid Wharton a
fee of $200,000. The Agent Warrants expire on December 8, 2002. The terms of the
Series A Stock and the Agent Warrants were determined by the Company's Board of
Directors.
On December 8, 1997, the Company and Advantage entered into a commitment
letter ("Commitment Letter") pursuant to which the Company agreed to issue, and
Advantage agreed to purchase, shares of a new series of preferred stock for $4
million on the same terms and conditions as the Series A Stock, subject to
certain conditions, some of which are that (1) the Company obtain shareholder
approval with respect to the issuance of the Series A Stock and any new series
of preferred stock, (2) the Company's stockholders' equity is at least $13.5
million, and (3) the ratio of the Company's total liabilities to stockholders'
equity is not less than 1:4. The commitment becomes effective 90 days after the
filing of the registration statement described below, and expires on December 8,
1998. The Company may terminate the Commitment Letter at any time, on ten days'
prior notice. Advantage also has the right to terminate the Commitment Letter in
certain circumstances. The Company is obligated to pay Advantage a
non-refundable commitment fee of $3,333 per month.
Under the Subscription Agreement dated December 3, 1997 between the
Company and Advantage, (1) the Company agreed not to sell any equity securities
or securities convertible into equity securities entitling the holder to
purchase shares of the Company's Common Stock at a price below the market price
of the Common Stock on the date of such issuance or acquisition ("Discounted
Securities") until 90 days have elapsed since the registration statement
described below has been declared effective by the Securities and Exchange
Commission ("SEC") and (2) the Company granted Advantage a right of first
refusal on sales of Discounted Securities until December 8, 1998. Under a letter
dated October 22, 1997 between the Company and Wharton ("Wharton Letter"), the
Company granted Wharton an exclusive on certain offshore or discounted
financings for a period ending on the 60th day following the date such
registration statement is declared effective by the SEC and a right of first
refusal on any offshore or discounted financings until June 8, 1998. Wharton has
agreed that its rights as described in the preceding sentence are subject and
secondary to the rights of Advantage and do not apply to any sale of preferred
stock pursuant to the Commitment Letter.
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Under the Wharton Letter, the Company is obligated to issue additional
warrants to Wharton to purchase 15,000 shares of Common Stock for each $1
million of additional financing provided by persons introduced by Wharton
(including the transaction contemplated by the Commitment Letter) at an exercise
price of $4.725 per share and to pay Wharton a fee equal to 5% of the amount
raised.
The net proceeds of the offering ($3.8 million) have been, and the net
proceeds of any additional issuance of pursuant to the Commitment Letter will
be, used for general working capital purposes.
On December 3, 1997, the Company entered into a registration rights
agreement with Advantage ("Advantage Registration Rights Agreement") and, on
December 8, 1997, the Company entered into a registration rights agreement with
Wharton ("Wharton Registration Rights Agreement" and, collectively with the
Advantage Registration Rights Agreement, the "Registration Rights Agreements").
Under the Registration Rights Agreements, the Company is obligated to file a
registration statement with the SEC by January 7, 1998 registering the shares of
Common Stock issuable upon conversion of the Series A Stock and the shares of
Common Stock issuable on exercise of the Series A Warrants and the Agent
Warrants. The Company anticipates registering 2,250,000 shares of Common Stock
under this registration statement, including 250,000 shares of Common Stock that
may be used to pay dividends on the Series A Stock. Advantage and Wharton have
also been granted certain piggy-back registration rights.
The following is a summary of the terms of the Series A Stock:
DIVIDENDS. Each share of Series A Stock is entitled to receive dividends
at a rate of $50.00 per annum, which are cumulative and accrue without interest
(other than with respect to dividends in arrears). Dividends are payable on
March 1, June 1, September 1 and December 1 of each year. Dividends not paid
when due bear interest at 12% per annum. The Company may pay dividends on the
Series A Stock in shares of Common Stock valued at the "Computed Price" of the
Common Stock. The "Computed Price" of a share of Common Stock is the product of
the applicable "Conversion Percentage" (which term is described below) and the
"Average Market Price." The "Average Market Price" is the average of the lowest
sale price on the Nasdaq National Market on each of the five trading days having
the lowest sale price during the 25 consecutive trading days prior to
measurement date, which in the case of a dividend paid in shares of Common Stock
is the dividend payment date.
No dividends may be paid on any parity dividend stock or junior dividend
stock (such as the Common Stock) until all accrued and unpaid dividends are paid
on the Series A Stock.
CONVERSION RIGHTS. Each share of Series A Stock is convertible at the
option of the holder into shares of Common Stock and Series A Warrants. The
number of Series A Warrants issuable on conversion of a share of Series A Stock
is the number of shares of Common Stock issued on conversion per share of Series
A Stock divided by 5. The exercise price per share of each Series A Warrant is
$4.77 per share. Each Series A Warrant is exercisable for 5 years from the date
of conversion. The number of shares of Common Stock issuable on exercise of the
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Series A Warrants and the exercise price per share is subject to adjustment in
certain circumstances.
The number of shares of Common Stock issuable per share of Series A
Stock is determined by dividing the sum of (a) $1,000, (b) accrued and unpaid
dividends, and (c) interest on dividends in arrears ("Conversion Amount") by the
lesser of (1) $4.77 ("Ceiling Price") and (2) the product of the applicable
Conversion Percentage and the Average Market Price on the conversion date. The
"Conversion Percentage" is generally 85%; however, if (1) the Company fails to
file the registration statement when required under the Advantage Registration
Rights Agreement, (2) the registration statement is not ordered effective by the
SEC within 90 days after December 8, 1997 or the Company fails to request
acceleration of the effective date of such registration statement when required
under the Advantage Registration Rights Agreement, (3) the registration
statement ceases to be available for use by any holder of Series Stock that is
named therein as a selling stockholder for any reason, or (4) a holder of Series
A Stock becomes unable to convert any shares of Series A Stock in accordance
with the Certificate of Designations of Series A Convertible Preferred Stock
("Certificate of Designations") (other than by reason of the 4.9% limitation
described below), then the applicable percentage is permanently reduced by 2%
per month up to a maximum aggregate reduction in the Conversion Percentage of
10%. However, in lieu of such reduction, the Company can make cash payments
equal to 2% of aggregate subscription price per share of Series A Stock (which
amount is limited to 10% of the aggregate subscription price). The Conversion
Amount is adjusted in the event the Company issues certain rights or warrants or
distributes to the holders of securities junior to the Series A Stock evidences
of indebtedness or assets.
No holder of Series A Stock is entitled to receive shares of Common
Stock on conversion of its Series A Stock to the extent that the sum of (1) the
shares of Common Stock owned by such holder and its affiliates and (2) the
shares of Common Stock issuable on conversion of the Series A Stock would result
in beneficial ownership by such holder and its affiliates of more than 4.9% of
the outstanding shares of Common Stock. Beneficial ownership for this purpose is
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended.
If a holder tenders his or her shares of Series A Stock for conversion
and does not receive certificates for all of the shares of Common Stock and
Series A Warrants to which such holder is entitled when required, then, among
other things, the Ceiling Price otherwise applicable to such conversion is
reduced by $.0954 and the Conversion Percentage otherwise applicable to such
conversion is reduced by 2%.
RANKING. The Series A Stock ranks (1) senior to the Common Stock, (2) on
a parity with any additional series of the class of preferred stock, which
series the Board of Directors may from time to time authorize, (3) on a parity
with the shares of any additional class of preferred stock (or series of
preferred stock of such class) that the Board of Directors or the stockholders
may from time to time authorize in accordance herewith, which class (or series
thereof) by its terms ranks on a parity with the shares of Series A Stock and
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(4) senior to any other class or series of preferred stock (other than as stated
in the immediately preceding clauses (2) and (3)) of the Company.
STATED CAPITAL. Under the Certificate of Designations, the amount to be
represented in stated capital at all times for each share of Series A Stock is
required to be the greater of (i) the quotient obtained by dividing (a) the sum
of (1) $1,000, (2) to the extent legally available, the accrued but unpaid
dividends on such share of Series A Stock, and (3) an amount equal to the
accrued and unpaid interest on dividends in arrears through the date of
determination by (b) the applicable Conversion Percentage and (ii) an amount
equal to the product obtained by multiplying (x) the number of shares of Common
Stock that would, at the time of such determination, be issuable on conversion
of one share of Series A Stock and any accrued and unpaid dividends thereon and
any accrued and unpaid interest on dividends thereon in arrears (determined
without regard to the 4.9% limitation) times (y) the arithmetic average of the
closing bid price of the Common Stock for the five consecutive trading days
ending one trading day prior to the date of such determination. The Company is
required to take such action as may be required to maintain the required amount
of stated capital not less frequently than monthly.
VOTING RIGHTS. The Series A Stock generally has no voting rights except
as otherwise provided by the Delaware General Corporation Law. However, the
affirmative vote or consent of the holders of a majority of the outstanding
shares of the Series A Stock, voting separately as a class, will be required for
(1) any amendment, alteration or repeal, whether by merger or consolidation or
otherwise, of the Company's Certificate of Incorporation if the amendment,
alteration or repeal materially and adversely affects the powers, preferences or
special rights of the Series A Stock, or (2) the creation and issuance of any
security of the Company that is senior to the Series A Stock as to dividend
rights or liquidation preference; provided, however, that any increase in the
authorized preferred stock of the Company or the creation and issuance of any
stock that is both junior as to dividend rights and liquidation preference is
not deemed to affect materially and adversely such powers, preferences or
special rights and any such increase or creation and issuance may be made
without any such vote by the holders of Series A Stock except as otherwise
required by law.
MANDATORY REDEMPTION. The Certificate of Designations provides that the
Company is not obligated to issue, upon conversion of the Series A Stock, more
than the number of shares of Common Stock that the Company may issue pursuant to
the rules of Nasdaq ("Maximum Share Amount"), less aggregate number of shares of
Common Stock issued by the Company as dividends on the Series A Stock. The
Company will seek approval from the holders of Common Stock to issue shares of
Common Stock in connection with the Series A Stock in excess of the amounts
permitted by Nasdaq Rule 4460(i)(1)(D).
If the Company would not be obligated to convert shares of Series A
Stock because of the Maximum Share Amount limitation, the Company is required to
give a notice to that effect to each holder of Series A Stock. In such event, a
holder may require the Company to redeem such portion of its Series A Stock that
cannot be converted as a result of this limitation at the "Share Limitation
Redemption Price." The "Share Limitation Redemption Price" is the greater of (i)
the quotient obtained by dividing (a) the sum of (1) $1,000, (2) an amount equal
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to the accrued but unpaid dividends on the share of Series A Stock to be
redeemed, and (3) an amount equal to the accrued and unpaid interest on
dividends in arrears on such share through the applicable redemption date by (b)
the applicable Conversion Percentage and (ii) an amount equal to the product
obtained by multiplying (x) the number of shares of Common Stock that would, but
for the redemption pursuant to this provision of the Certificate of
Designations, be issuable on conversion of one share of Series A Stock and any
accrued and unpaid dividends thereon and any accrued and unpaid interest on
dividends thereon in arrears (determined without regard to the 4.9% limitation)
times (y) the arithmetic average of the closing bid price of the Common Stock
for the five consecutive trading days ending one trading day prior to the
redemption date.
In addition, the Company is obligated to redeem all outstanding shares
of Series A Stock on December 8, 2000 at the "Redemption Price." The "Redemption
Price" is the greater of (i) the quotient obtained by dividing (a) the sum of
(1) $1,000, (2) an amount equal to the accrued but unpaid dividends on the share
of Series A Stock to be redeemed, and (3) an amount equal to the accrued and
unpaid interest on dividends in arrears on such share through the applicable
redemption date by (b) the applicable Conversion Percentage and (ii) an amount
equal to the product obtained by multiplying (x) the number of shares of Common
Stock that would, but for the redemption pursuant to this provision of the
Certificate of Designations, be issuable on conversion of one share of Series A
Stock and any accrued and unpaid dividends thereon and any accrued and unpaid
interest on dividends thereon in arrears (determined without regard to the 4.9%
limitation) times (y) the arithmetic average of the closing bid price of the
Common Stock for the five consecutive trading days ending one trading day prior
to the redemption date.
OPTIONAL REDEMPTION BY THE COMPANY. As long as the Company is in
compliance in all material respects with its obligations to the holders of
Series A Stock under the Certificate of Designations and the Advantage
Registration Rights Agreement, the Company may redeem all or, from time to time,
part of the outstanding shares of Series A Stock at the Redemption Price.
OPTIONAL REDEMPTION BY THE HOLDERS OF SERIES A STOCK. In the event an
"Optional Redemption Event" occurs, each holder of Series A Stock has the right
to require the Company to redeem all or a portion its shares of Series A Stock
at the "Optional Redemption Price." "Optional Redemption Event" means any one of
the following: (1) for any period of five consecutive trading days there is no
closing bid price of the Common Stock on any national securities exchange or the
Nasdaq National Market; (2) the Common Stock ceases to be listed for trading on
the Nasdaq National Market, the New York Stock Exchange ("NYSE"), the American
Stock Exchange ("AMEX") or the Nasdaq SmallCap Market; (3) the inability for 30
or more days (whether or not consecutive) of any holder of shares of Series A
Stock who is entitled to optional redemption rights to sell such shares of
Common Stock issued or issuable on conversion of shares of Series A Stock
pursuant to the registration statement described above for any reason on each of
such 30 days; (4) the Company fails or defaults in the timely performance of any
material obligation to a holder of shares of Series A Stock under the terms of
the Certificate of Designations or under the Advantage Registration Rights
Agreement or any other agreements or documents entered into in connection with
the issuance of shares of Series A Stock; (5) any consolidation or merger of the
Company with or into another entity (other than a merger or consolidation of a
subsidiary of the Company into the Company or a wholly owned subsidiary of the
Company) where the shareholders of the Company immediately prior to such
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transaction do not collectively own at least 51% of the outstanding voting
securities of the surviving corporation of such consolidation or merger
immediately following such transaction or the common stock of such surviving
corporation is not listed for trading on the Nasdaq National Market, the NYSE,
the AMEX or the Nasdaq SmallCap Market; or (6) the taking of any action,
including any amendment to the Company's Certificate of Incorporation, that
materially and adversely affects the rights of any holder of shares of Series A
Stock.
The "Optional Redemption Price" is the greater of (i) the quotient
obtained by dividing (a) the sum of (1) $1,000, (2) an amount equal to the
accrued but unpaid dividends on the share of Series A Stock to be redeemed, and
(3) an amount equal to the accrued and unpaid interest on dividends in arrears
on such share through the applicable redemption date by (b) the applicable
Conversion Percentage and (ii) an amount equal to the product obtained by
multiplying (x) the number of shares of Common Stock that would, but for the
redemption pursuant to this provision of the Certificate of Designations, be
issuable on conversion of one share of Series A Stock and any accrued and unpaid
dividends thereon and any accrued and unpaid interest on dividends thereon in
arrears (determined without regard to the 4.9% limitation) times (y) the
arithmetic average of the closing bid price of the Common Stock for the five
consecutive trading days ending one trading day prior to the redemption date.
LIMITATIONS ON REDEMPTIONS AND TENDER OFFERS. Neither the Company nor
any subsidiary of the Company may redeem, repurchase or otherwise acquire any
shares of Common Stock or other securities of the Company junior to the Series A
Stock in dividend rights or liquidation preference ("Junior Stock") if the
number of shares so repurchased, redeemed or otherwise acquired in such
transaction or series of related transactions (excluding any shares surrendered
to the Company in accordance with one of its stock option plans) is more than
either (x) 5% of the number of shares of Common Stock or such Junior Stock, as
the case may be, outstanding immediately prior to such transaction or series of
related transactions or (y) 1% of the number of shares of Common Stock or Junior
Stock, as the case may be, outstanding immediately prior to such transaction or
series of related transactions if such transaction or series of related
transactions is with any one person or group of affiliated persons, unless the
Company or such subsidiary offers to purchase for cash from each holder of
shares of Series A Stock at the time of such redemption, repurchase or
acquisition the same percentage of such holder's shares of Series A Stock as the
percentage of the number of outstanding shares of Common Stock or Junior Stock,
as the case may be, to be so redeemed, repurchased or acquired at a purchase
price per share of Series A Stock equal to the greater of (i) the quotient
obtained by dividing (a) the sum of (1) $1,000, (2) an amount equal to the
accrued but unpaid dividends on such share of Series A Stock, plus (3) an amount
equal to the accrued and unpaid interest on dividends in arrears through the
date of purchase by (b) the applicable Conversion Percentage and (ii) an amount
equal to the product obtained by multiplying (x) the number of shares of Common
Stock that would, but for this purchase, be issuable on conversion of one share
of Series A Stock and any accrued and unpaid dividends thereon and any accrued
and unpaid interest on dividends thereon in arrears (determined without regard
to the 4.9% limitation) times (y) the arithmetic average of the closing bid
price of the Common Stock for the five consecutive trading days ending one
trading day prior to the date of purchase.
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Neither the Company nor any subsidiary of the Company may (1) make any
tender offer or exchange offer ("Tender Offer") for outstanding shares of Common
Stock, unless the Company contemporaneously therewith makes an offer, or (2)
enter into an agreement regarding a Tender Offer for outstanding shares of
Common Stock by any person other than the Company or any subsidiary of the
Company, unless such person agrees with the Company to make an offer, in either
such case to each holder of outstanding shares of Series A Stock to purchase for
cash at the time of purchase in such Tender Offer the same percentage of shares
of Series A Stock held by such holder as the percentage of outstanding shares of
Common Stock offered to be purchased in such Tender Offer at a price per share
of Series A Stock equal to the greater of (i) the quotient obtained by dividing
(a) the sum of (1) $1,000, (2) an amount equal to the accrued but unpaid
dividends on such share of Series A Stock, and (3) an amount equal to the
accrued and unpaid interest on dividends in arrears through the date of purchase
by (b) the applicable Conversion Percentage and (ii) an amount equal to the
product obtained by multiplying (x) the number of shares of Common Stock that
would, but for this purchase, be issuable on conversion of one share of Series A
Stock and any accrued and unpaid dividends thereon and any accrued and unpaid
interest on dividends thereon in arrears (determined without regard to the 4.9%
limitation) times (y) the highest price per share of Common Stock offered in
such Tender Offer.
SINKING FUND. The shares of Series A Stock are not subject to the
operation of a purchase, retirement or sinking fund.
LIQUIDATION PREFERENCE. The holders of the Series A Stock are entitled
to a liquidation preference of $1,000 per share plus accrued and unpaid
dividends plus interest on accrued and unpaid dividends in arrears.
The descriptions of the Certificate of Designations and of the
agreements and other documents described in this Form 8-K are qualified in their
entirety by reference to the exhibits filed with this Form 8-K.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
99.1 Press Release dated December 9, 1997.
99.2 Certificate of Elimination of Certificate of Designation, Preferences
and Rights of Series A Convertible Preferred Stock.
99.3 Certificate of Designations of Series A Convertible Preferred Stock
99.4 Amended and Restated Bylaws, as of November 21, 1997.
99.5 Subscription Agreement dated as of December 3, 1997 between V-ONE
Corporation and Advantage Fund II Ltd.
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99.6 Registration Rights Agreement dated as of December 3, 1997 between
V-ONE Corporation and Advantage Fund II Ltd.
99.7 Commitment Letter dated December 8, 1997 between V-ONE Corporation and
Advantage Fund II Ltd.
99.8 Registration Rights Agreement dated as of December 8, 1997 between
V-ONE Corporation and Wharton Capital Partners, Ltd.
99.9 Warrant to purchase 60,000 shares of Common Stock issued on December 8,
1997 by V-ONE Corporation to Wharton Capital Partners, Ltd.
99.10 Letter agreement between V-ONE Corporation and Wharton Capital
Partners, Ltd. dated October 22, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: December 15, 1997
V-ONE CORPORATION
By:/s/ Charles B. Griffis
------------------------------------------
Name: Charles B. Griffis
Title: Senior Vice President, Chief Financial
Officer and Treasurer
V-ONE CORPORATION
20250 CENTURY BOULEVARD
SUITE 300
GERMANTOWN, MD 20874
(NASDAQ: VONE)
AT THE COMPANY AT FINANCIAL RELATIONS BOARD
Charles Griffis Paul Henning -- General Info (212) 661-8030
SVP, CFO and Treasurer Carolynne O'Grady -- Analyst (212) 661-8030
(301) 515-5243 Martin Gitlin -- Media (212) 661-8030
AT MILLER SHANDWICK
Mary Carlisle
(415) 962-9550
FOR IMMEDIATE RELEASE
December 9, 1997
V-ONE CORPORATION ANNOUNCES NEW FINANCING
GERMANTOWN, MD, DECEMBER 9, 1997 -- V-ONE Corporation (Nasdaq: VONE), a provider
of complete security solutions for use over public and private networks, today
announced that it has negotiated a $4 million private placement facilitated by
Wharton Capital, a New York based financial consulting firm. Under the terms of
the agreement, V-ONE will issue Series A convertible preferred stock to a single
institutional investor on December 8, 1997.
The Company also received a commitment, at the Company's option, from the same
institutional investor for an additional $4 million tranche of Series A
convertible preferred stock on substantially similar terms.
"The financing will provide V-ONE with the flexibility and resources to support
the important marketing efforts for its SmartGate(TM) security solutions," said
David Dawson, President and Chief Executive Officer.
Providing top-rated security products since 1993, V-ONE Corporation develops and
licenses SmartGate, a patented, award-winning client/server product that is the
foundation of V-ONE's products. Major financial institutions, government
agencies, and large health care organizations use SmartGate for its integrated
authentication, encryption and access control options. SmartGate tightly manages
controlled users accessing sensitive data without changing an organization's
existing firewalls, applications, legacy systems, or network architecture.
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V-ONE Corporation
Page 2
SmartGate also allows varying degrees of trust to be established in a network,
ensuring that different levels of access are permitted for different groups of
users. In May, SmartGate won a Best of Show award at Networld+Interop 97 in Las
Vegas for network server software. V-ONE is headquartered in Germantown, MD.
Product and security information, white papers and the company's latest news
releases may be accessed via V-ONE's World Wide Web site at
http://www.v-one.com.
To receive V-ONE's latest news and other corporate developments via fax at no
cost, please call 1-800-PRO-INFO. Use company code VONE. Or visit The Financial
Relations Board's web site at http://www.frbinc.com.
THIS RELEASE, OTHER THAN HISTORICAL FINANCIAL INFORMATION, MAY CONSIST OF
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THESE
STATEMENTS MAY DIFFER IN A MATERIAL WAY FROM ACTUAL FUTURE EVENTS. FOR INSTANCE,
FACTORS WHICH COULD CAUSE RESULTS TO DIFFER FROM FUTURE EVENTS INCLUDE RAPID
RATES OF TECHNOLOGICAL CHANGE AND INTENSE COMPETITION, AMONG OTHERS. READERS ARE
ALSO REFERRED TO THE DOCUMENTS FILED BY V-ONE CORPORATION WITH THE SEC,
SPECIFICALLY THE COMPANY'S REGISTRATION STATEMENT AS FILED ON FORM S-1 AND THE
LAST REPORT ON FORM 10-K WHICH IDENTIFY IMPORTANT RISK FACTORS FOR THE COMPANY.
###
V-ONE CORPORATION
CERTIFICATE OF ELIMINATION
OF
CERTIFICATE OF DESIGNATION, PREFERENCES, AND RIGHTS
OF
SERIES A CONVERTIBLE PREFERRED STOCK
(Pursuant to Section 151 of the Delaware General Corporation Law)
We, James F. Chen and Charles C. Chen, the President and Secretary,
respectively, of V-ONE Corporation, a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Company"), in
accordance with the provisions of Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority vested in the Board of Directors by the
Certificate of Incorporation of the Company and Section 151(g) of the Delaware
General Corporation Law, the Board of Directors on November 21, 1997 adopted the
following resolutions for the purpose of eliminating the Certificate of
Designation, Preferences and Rights of the Company's Series A Convertible
Preferred Stock from the Certificate of Incorporation:
WHEREAS, the Board of Directors initially authorized the issuance of an
aggregate of 1,183,402 shares of Series A Convertible Preferred Stock ("Series A
Stock") at a meeting held on April 4, 1996;
WHEREAS, the Board of Directors adopted a further resolution increasing
the number of shares of Series A Stock by 6,071 shares to a total of 1,189,473
shares on May 13, 1996;
WHEREAS, the Board of Directors adopted a further resolution decreasing
the number of shares of Series A Stock by 396,492 shares to a total of 792,981
shares on July 19, 1996;
WHEREAS, a Certificate of Amendment to the Certificate of Designation,
Preferences, and Rights of Series A Convertible Preferred Stock ("Amended
Certificate") dated September 9, 1996 amended the terms of the Series A Stock;
WHEREAS, there are no longer any outstanding shares of the Series A
Stock as a result of conversions and redemptions of the Series A Stock;
WHEREAS, Section 4 of the Amended Certificate provides that shares of
Series A Stock that have been converted shall be canceled and shall return to
the status of authorized but unissued Preferred Stock of no designated series;
and
WHEREAS, the Board of Directors of the Company has determined that no
further shares of Series A Stock will be issued pursuant to the Amended
Certificate; it is
<PAGE>
RESOLVED, that all authorized shares of the Series A Stock be, and they
hereby are, cancelled and that all such shares be, and they hereby are, returned
to the status of authorized but unissued Preferred Stock of no designated
series; and
FURTHER RESOLVED, that the proper officers of the Company be, and they
hereby are, authorized and directed on behalf of the Company to prepare, execute
and file documents, to amend or modify the same, to pay such fees, and to take
such other actions as may be necessary or appropriate for purposes of
eliminating from the Certificate of Incorporation of the Company all reference
to Series A Stock.
IN WITNESS WHEREOF, V-ONE Corporation has caused its corporate seal to
be hereunto affixed and this certificate to be signed by James F. Chen, its
President, and attested by Charles C. Chen, its Secretary, this 21st day of
November 1997.
V-ONE CORPORATION
By: /S/ JAMES F. CHEN
----------------------------
James F. Chen
President
Attest:
By: /S/ CHARLES C. CHEN
-----------------------
Charles C. Chen
Secretary
2
V-ONE CORPORATION
CERTIFICATE OF DESIGNATIONS OF
SERIES A CONVERTIBLE PREFERRED STOCK
(Pursuant to Section 151 of the General Corporation
Law of the State of Delaware)
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V-ONE Corporation, a Delaware corporation (the "Corporation"), in
accordance with the provisions of Section 103 of the General Corporation Law of
the State of Delaware (the "DGCL") DOES HEREBY CERTIFY:
That pursuant to authority vested in the Board of Directors of
the Corporation by the Amended and Restated Certificate of Incorporation of the
Corporation, the Board of Directors of the Corporation, by unanimous written
consent dated November 21, 1997, adopted a resolution providing for the creation
of a series of the Corporation's Preferred Stock, $.001 par value, which series
is designated as "Series A Convertible Preferred Stock," which resolution is as
follows:
RESOLVED, that pursuant to authority vested in the Board of
Directors by the Amended and Restated Certificate of Incorporation of the
Corporation, the Board of Directors does hereby provide for the creation of a
series of the Preferred Stock, $.001 par value (hereinafter called the
"Preferred Stock"), of the Corporation, and to the extent that the voting powers
and the designations, preferences and relative, participating, optional or other
special rights thereof and the qualifications, limitations or restrictions of
such rights have not been set forth in the Amended and Restated Certificate of
Incorporation of the Corporation, does hereby fix the same as follows:
SERIES A CONVERTIBLE PREFERRED STOCK
SECTION 1. DEFINITIONS. As used herein, the following terms shall
have the following meanings:
"Aggregated Person" shall mean any person whose beneficial
ownership of shares of Common Stock would be aggregated with the beneficial
ownership of shares of Common Stock by a holder of shares of Series A
Convertible Preferred Stock for purposes of Section 13(d) of the Exchange Act,
and Regulation 13D-G thereunder.
"AMEX" shall mean the American Stock Exchange, Inc.
"Average Market Price" for any date means the arithmetic average
of the Market Price on each of the five trading days, whether or not
consecutive, during the applicable Measurement Period having the lowest Market
Prices.
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"Board of Directors" or "Board" shall mean the Board of Directors
of the Corporation.
"Ceiling Price" shall mean $4.77 (subject to equitable
adjustments for stock splits, stock dividends, combinations, recapitalizations,
reclassifications and similar events occurring or with respect to which "ex-"
trading commences on or after the date of filing of this Certificate of
Designations with the Secretary of State of the State of Delaware) PROVIDED,
HOWEVER, that notwithstanding any other provision hereof (1) if (v) the
Corporation shall fail to file the Registration Statement with the SEC on or
before the date which is 30 days after the Issuance Date, (w) the Registration
Statement is not ordered effective by the SEC within 90 days after the Issuance
Date, (x) the Corporation shall fail to request acceleration of the Registration
Statement as and when required by Section 3(a) of the Registration Rights
Agreement, (y) the Registration Statement shall cease to be available for use by
any holder of shares of Series A Convertible Preferred Stock which is named
therein as a selling stockholder for any reason (including, without limitation,
by reason of an SEC stop order, a material misstatement or omission in the
Registration Statement or the information contained in the Registration
Statement having become outdated) as contemplated by clauses (10) and (11) of
the definition of Computation Date, or (z) a holder of shares of Series A
Convertible Preferred Stock shall have become unable to convert any shares of
Series A Convertible Preferred Stock in accordance with Section 10(a) (other
than by reason of the 4.9% limitation set forth in Section 10(a)), as
contemplated by clauses (12) and (13) of the definition of Computation Date,
then in each such case referred to in the preceding clauses (v) through (z) the
applicable price stated above in this paragraph shall be permanently reduced by
$.0954 on each Computation Date (pro rated in the case of any Computation Date
which is less than 30 days after a Computation Date) up to a maximum aggregate
reduction of $.477 (each such dollar amount in this proviso subject to equitable
adjustments for stock splits, stock dividends, combinations, recapitalizations,
reclassifications, and similar events occurring or with respect to which "ex-"
trading commences on and after the date of filing of this Certificate of
Designations with the Secretary of State of the State of Delaware) UNLESS, in
lieu of such reduction in respect of any particular Computation Date, the
Company shall have made cash payments on a timely basis in the amounts specified
in Section 2(c) of the Registration Rights Agreement and (2) the Ceiling Price
applicable to a particular conversion shall be subject to reduction as provided
in Section 10(b)(6).
"Closing Bid Price" of any security on any date shall mean the
closing bid price of such security on such date on the principal securities
exchange or other market on which such security is listed for trading which
constitutes the principal securities market for such security, as reported by
such exchange or other market.
"Common Stock" shall mean the Common Stock, $.001 par value, of
the Corporation.
"Computation Date" shall mean
(1) if the Corporation shall not have filed the Registration
Statement with the SEC on or prior to the date which is 30 days after
the Issuance Date, the date which is 31 days after the Issuance Date;
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(2) each date which is 30 days after the Computation Date
specified in the preceding clause (1), if the Corporation shall not have
filed the Registration Statement with the SEC prior to such 30th day;
(3) if the Corporation shall not have filed the Registration
Statement with the SEC on or prior to the date which is 30 days after
the Issuance Date, the date on which the Corporation shall have so filed
the Registration Statement;
(4) the date which is 91 days after the Issuance Date, unless the
Registration Statement theretofore has been declared effective by the
SEC;
(5) each date which is 30 days after the Computation Date
specified in the preceding clause (4), if the Registration Statement has
not been declared effective by the SEC prior to such 30th day;
(6) if the Registration Statement has not been declared effective
by the SEC within 90 days after the Issuance Date, the date on which the
Registration Statement is declared effective by the SEC;
(7) if the Corporation shall have failed to request acceleration
of the Registration Statement as and when required by Section 3(a) of
the Registration Rights Agreement, the date which is 30 days after the
date the Corporation was so required to request acceleration (if the
Corporation shall not have so requested acceleration prior to such 30th
day);
(8) each date which is 30 days after the Computation Date
referred to in the preceding clause (7), if the Corporation shall have
failed to so request acceleration of the Registration Statement prior to
such 30th day;
(9) if the Corporation shall have failed to request acceleration
of the Registration Statement as and when required by Section 3(a) of
the Registration Rights Agreement, the date on which the Corporation
shall have so requested acceleration of the Registration Statement;
(10) the date on which the Registration Statement has ceased for
30 days (whether or not consecutive) to be available, for use by any
holder of shares of Series A Convertible Preferred Stock which is named
therein as a selling stockholder with the SEC, if, at any time during
which the Registration Statement is required by the Registration Rights
Agreement to remain available for such use, the Registration Statement
ceases to be so available for any reason (including, without limitation,
by reason of an SEC stop order, a material misstatement or omission
therein or the information contained in the Registration Statement
having become outdated) and shall remain so unavailable on such 30th day
and each date which is the 30th day (whether or not consecutive) after
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such 30th day on which the Registration Statement shall have remained so
unavailable;
(11) the date on which the Registration Statement becomes
available for use by holders of shares of Series A Convertible Preferred
Stock, if, at any time during which the Registration Statement is
required by the Registration Rights Agreement to remain available for
such use, the Registration Statement ceases to be so available for any
reason (including, without limitation, by reason of an SEC stop order, a
material misstatement or omission therein or the information contained
in the Registration Statement having become outdated);
(12) the date on which any holder of shares of Series A
Convertible Preferred Stock shall have become unable for 30 days
(whether or not consecutive) to convert shares of Series A Convertible
Preferred Stock in accordance with Section 10(a) for any reason (other
than by reason of the 4.9% limitation set forth in Section 10(a)), if
any holder of shares of Series A Convertible Preferred Stock shall
remain unable so to convert shares of Series A Convertible Preferred
Stock on such 30th day and each date which is 30 days after such 30th
day if holders then remain unable to so convert; and
(13) the date on which holders of shares of Series A Convertible
Preferred Stock become able to convert shares of Series A Convertible
Preferred Stock in accordance with Section 10(a), if any holder of
shares of Series A Convertible Preferred Stock shall have become unable
to convert shares of Series A Convertible Preferred Stock in accordance
with Section 10(a) for any reason (other than by reason of the 4.9%
limitation set forth in Section 10(a));
PROVIDED, HOWEVER, that if more than one event which could give rise to a
Computation Date during any period shall have occurred, only one of such events
shall be deemed to result in a Computation Date so that the adjustments provided
herein by reason of the occurrence of a Computation Date shall be made only once
in respect of any period of time and then in the maximum amount based on all
such Computation Dates.
"Computed Price" of one share of Common Stock on any date shall
mean the product obtained by multiplying (a) the Conversion Percentage
applicable on such date TIMES (b) the Average Market Price of the Common Stock
for the Measurement Period with respect to such date; PROVIDED, HOWEVER, that in
no event shall the Computed Price be greater than the Ceiling Price (subject to
equitable adjustments for stock splits, stock dividends, combinations,
recapitalizations, reclassifications and similar events occurring or with
respect to which "ex-" trading commences on or after the date of filing of this
Certificate of Designations with the Secretary of State of the State of
Delaware).
"Conversion Agent" shall mean American Stock Transfer & Trust
Company, or its duly appointed successor.
"Conversion Amount" initially shall be equal to $1,000.00,
subject to adjustment as hereinafter provided.
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"Conversion Date" shall mean the date on which the notice of
conversion is actually received by the Conversion Agent, whether by mail,
courier, personal service, telephone line facsimile transmission or other means,
in case of a conversion at the option of the holder pursuant to Section 10(a).
"Conversion Notice" shall mean a written notice, duly signed by
or on behalf of the holder, stating the number of shares of Series A Convertible
Preferred Stock to be converted in the form specified in the Subscription
Agreement.
"Conversion Percentage" shall mean with respect to a Conversion
Date or a dividend payment date 85%; PROVIDED HOWEVER, that notwithstanding any
other provision hereof (1) if (v) the Corporation shall fail to file the
Registration Statement with the SEC on or before the date which is 30 days after
the Issuance Date, (w) the Registration Statement is not ordered effective by
the SEC within 90 days after the Issuance Date, (x) the Corporation shall fail
to request acceleration of the Registration Statement as and when required by
Section 3(a) of the Registration Rights Agreement, (y) the Registration
Statement shall cease to be available for use by any holder of shares of Series
A Convertible Preferred Stock which is named therein as a selling stockholder
for any reason (including, without limitation, by reason of an SEC stop order, a
material misstatement or omission in the Registration Statement or the
information contained in the Registration Statement having become outdated) as
contemplated by clauses (10) and (11) of the definition of Computation Date, or
(z) a holder of shares of Series A Convertible Preferred Stock shall have become
unable to convert any shares of Series A Convertible Preferred Stock in
accordance with Section 10(a) (other than by reason of the 4.9% limitation set
forth in Section 10(a)), as contemplated by clauses (12) and (13) of the
definition of Computation Date, then in each such case referred to in the
preceding clauses (v) through (z) the applicable percentage stated above in this
paragraph shall be permanently reduced by two percentage points on each
Computation Date (pro rated in the case of any Computation Date which is less
than 30 days after a Computation Date) up to a maximum aggregate reduction in
the Conversion Percentage pursuant to this proviso of ten percentage points
UNLESS, in lieu of such reduction in respect of any particular Computation Date,
the Company shall have made cash payments on a timely basis in the amounts
specified in Section 2(c) of the Registration Rights Agreement and (2) the
Conversion Percentage applicable to a particular conversion shall be subject to
reduction as provided in Section 10(b)(6).
"Conversion Rate" shall have the meaning provided in Section
10(a).
"Corporation Optional Redemption Notice" shall mean a notice
given by the Corporation to the holders of Series A Convertible Preferred Stock
pursuant to Section 9 which notice shall state (1) that the Corporation is
exercising its right to redeem all or a portion of the outstanding shares of
Series A Convertible Preferred Stock pursuant to Section 9, (2) the number of
shares of Series A Convertible Preferred Stock held by such holder which are to
be redeemed, (3) the Redemption Price per share of Series A Convertible
Preferred Stock to be redeemed or the formula for determining the same,
determined in accordance herewith and (4) the applicable Redemption Date.
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"Current Price" shall mean with respect to any date the
arithmetic average of the Closing Bid Price of the Common Stock on the 30
consecutive trading days commencing 45 trading days before such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Holder Optional Redemption Date" shall mean the date of
redemption of shares of Series A Convertible Preferred Stock pursuant to Section
11.
"Inconvertibility Notice" shall have the meaning provided in
Section 7(a)(2).
"Issuance Date" shall mean the first date of original issuance of
any shares of Series A Convertible Preferred Stock.
"Junior Dividend Stock" shall mean, collectively, the Common
Stock and any other class or series of capital stock of the Corporation ranking
junior as to dividends to the Series A Convertible Preferred Stock.
"Junior Liquidation Stock" shall mean the Common Stock or any
other class or series of the Corporation's capital stock ranking junior as to
liquidation rights to the Series A Convertible Preferred Stock.
"Liquidation Preference" shall mean, for each share of Series A
Convertible Preferred Stock, the sum of (i) all dividends accrued and unpaid
thereon to the date of final distribution to such holders, (ii) accrued and
unpaid interest on dividends in arrears (computed in accordance with Section
5(a)) to the date of distribution, and (iii) $1,000.00.
"Mandatory Redemption Notice" shall mean a notice given by the
Corporation to the holders of Series A Convertible Preferred Stock pursuant to
Section 7(b) which notice shall state (1) that the Corporation is required to
redeem all of the outstanding shares of Series A Convertible Preferred Stock
pursuant to Section 7(b), (2) the number of shares of Series A Convertible
Preferred Stock held by such holder which are to be redeemed, (3) the Redemption
Price per share of Series A Convertible Preferred Stock to be redeemed or the
formula for determining the same, determined in accordance herewith and (4) the
applicable Redemption Date.
"Market Price" of the Common Stock on any date means the lowest
sale price (regular way) for one share of Common Stock on such date on the first
applicable among the following: (a) the national securities exchange on which
the shares of Common Stock are listed which constitutes the principal securities
market for the Common Stock or (b) the Nasdaq, in either such case as reported
by Bloomberg, L.P.; PROVIDED, HOWEVER, that if during any Measurement Period
(which for purposes of this definition includes such other periods in which an
average price of the Common Stock is being determined):
(i) The Corporation shall declare or pay a dividend or make a
distribution to all holders of the outstanding Common Stock in shares of
Common Stock or fix any record date for any such action, then the Market
Price of the Common Stock for each day in such Measurement Period prior
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to the earlier of (1) the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution and
(2) the date on which ex-dividend trading in the Common Stock with
respect to such dividend or distribution begins shall be reduced by
multiplying the Market Price (determined without regard to this proviso)
for each such day in such Measurement Period by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at
the close of business on the earlier of (1) the record date fixed for
such determination and (2) the date on which ex-dividend trading in the
Common Stock with respect to such dividend or distribution begins and
the denominator shall be the sum of such number of shares and the total
number of shares constituting such dividend or other distribution;
(ii) The Corporation shall issue rights or warrants to all
holders of its outstanding shares of Common Stock, or fix a record date
for such issuance, which rights or warrants entitle such holders (for a
period expiring within forty-five (45) days after the date fixed for the
determination of stockholders entitled to receive such rights or
warrants) to subscribe for or purchase shares of Common Stock at a price
per share less than the Market Price (determined without regard to this
proviso) for any day in such Measurement Period which is prior to the
end of such 45-day period, then the Market Price for such day shall be
reduced so that the same shall equal the price determined by multiplying
the Market Price (determined without regard to this proviso) by a
fraction of which the numerator shall be the number of shares of Common
Stock outstanding at the close of business on the record date fixed for
the determination of stockholders entitled to receive such rights or
warrants plus the number of shares which the aggregate offering price of
the total number of shares so offered would purchase at such Market
Price, and of which the denominator shall be the number of shares of
Common Stock outstanding on the close of business on such record date
plus the total number of additional shares of Common Stock so offered
for subscription or purchase. In determining whether any rights or
warrants entitle the holders to subscribe for or purchase shares of
Common Stock at less than the Market Price (determined without regard to
this proviso), and in determining the aggregate offering price of such
shares of Common Stock, there shall be taken into account any
consideration received for such rights or warrants, the value of such
consideration, if other than cash, to be determined in good faith by a
resolution of the Board of Directors of the Corporation;
(iii) The outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock or a record date for any
such subdivision shall be fixed, then the Market Price of the Common
Stock for each day in such Measurement Period prior to the earlier of
(1) the day upon which such subdivision becomes effective and (2) the
date on which ex-dividend trading in the Common Stock with respect to
such subdivision begins shall be proportionately reduced, and
conversely, in case the outstanding shares of Common Stock shall be
combined into a smaller number of shares of Common Stock, the Market
Price for each day in such Measurement Period prior to the earlier of
(1) the date on which such combination becomes effective and (2) the
date on which trading in the Common Stock on a basis which gives effect
to such combination begins, shall be proportionately increased;
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(iv) The Corporation shall, by dividend or otherwise, distribute
to all holders of its Common Stock shares of any class of capital stock
of the Corporation (other than any dividends or distributions to which
clause (i) of this proviso applies) or evidences of its indebtedness,
cash or other assets (including securities, but excluding any rights or
warrants referred to in clause (ii) of this proviso and dividends and
distributions paid exclusively in cash and excluding any capital stock,
evidences of indebtedness, cash or assets distributed upon a merger or
consolidation) (the foregoing hereinafter in this clause (iv) of this
proviso called the "Securities"), or fix a record date for any such
distribution, then, in each such case, the Market Price for any day in
such Measurement Period prior to the earlier of (1) the record date for
such distribution and (2) the date on which ex-dividend trading in the
Common Stock with respect to such distribution begins shall be reduced
so that the same shall be equal to the price determined by multiplying
the Market Price (determined without regard to this proviso) by a
fraction of which the numerator shall be the Market Price (determined
without regard to this proviso) on such date less the fair market value
(as determined in good faith by resolution of the Board of Directors of
the Corporation) on such date of the portion of the Securities so
distributed or to be distributed applicable to one share of Common Stock
and the denominator shall be the Market Price (determined without regard
to this proviso); PROVIDED, HOWEVER, that in the event the then fair
market value (as so determined) of the portion of the Securities so
distributed applicable to one share of Common Stock is equal to or
greater than the Market Price (determined without regard to this clause
(iv) of this proviso) on any such day, in lieu of the foregoing
adjustment, adequate provision shall be made so that the holders of
shares of Series A Preferred Stock shall have the right to receive in
payment of dividends on the shares of Series A Preferred Stock or upon
conversion of the shares of Series A Preferred Stock, as the case may
be, the amount of Securities the holders of shares of Series A Preferred
Stock would have received had the number of shares of Common Stock to be
issued in payment of such dividends on the shares of Series A Preferred
Stock been issued, or had the holders of shares of Series A Preferred
Stock converted the shares of Series A Preferred Stock, in either such
case immediately prior to the record date for such distribution. If the
Board of Directors of the Corporation determines the fair market value
of any distribution for purposes of this clause (iv) by reference to the
actual or when issued trading market for any securities comprising all
or part of such distribution, it must in doing so consider the prices in
such market on the same day for which an adjustment in the Market Price
is being determined.
For purposes of this clause (iv) and clauses (i) and (ii) of this
proviso, any dividend or distribution to which this clause (iv) is
applicable that also includes shares of Common Stock, or rights or
warrants to subscribe for or purchase shares of Common Stock to which
clause (i) or (ii) of this proviso applies (or both), shall be deemed
instead to be (1) a dividend or distribution of the evidences of
indebtedness, assets, shares of capital stock, rights or warrants other
than such shares of Common Stock or rights or warrants to which clause
(i) or (ii) of this proviso applies (and any Market Price reduction
required by this clause (iv) with respect to such dividend or
distribution shall then be made) immediately followed by (2) a dividend
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or distribution of such shares of Common Stock or such rights or
warrants (and any further Market Price reduction required by clauses (i)
and (ii) of this proviso with respect to such dividend or distribution
shall then be made), except that any shares of Common Stock included in
such dividend or distribution shall not be deemed "outstanding at the
close of business on the date fixed for such determination" within the
meaning of clause (i) of this proviso;
(v) The Corporation or any subsidiary of the Corporation shall
(x) by dividend or otherwise, distribute to all holders of its Common
Stock cash in (or fix any record date for any such distribution), or (y)
repurchase or reacquire shares of its Common Stock (other than an Option
Share Surrender) for, in either case, an aggregate amount that, combined
with (1) the aggregate amount of any other such distributions to all
holders of its Common Stock made exclusively in cash after the Issuance
Date and within the twelve (12) months preceding the date of payment of
such distribution, and in respect of which no adjustment pursuant to
this clause (v) has been made, (2) the aggregate amount of any cash plus
the fair market value (as determined in good faith by a resolution of
the Board of Directors of the Corporation) of consideration paid in
respect of any repurchase or other reacquisition by the Corporation or
any subsidiary of the Corporation of any shares of Common Stock (other
than an Option Share Surrender) made after the Issuance Date and within
the twelve (12) months preceding the date of payment of such
distribution or making of such repurchase or reacquisition, as the case
may be, and in respect of which no adjustment pursuant to this clause
(v) has been made, and (3) the aggregate of any cash plus the fair
market value (as determined in good faith by a resolution of the Board
of Directors of the Corporation) of consideration payable in respect of
any Tender Offer by the Corporation or any of its subsidiaries for all
or any portion of the Common Stock concluded within the twelve (12)
months preceding the date of payment of such distribution or completion
of such repurchase or reacquisition, as the case may be, and in respect
of which no adjustment pursuant to clause (vi) of this proviso has been
made (such aggregate amount combined with the amounts in clauses (1),
(2) and (3) above being the "Combined Amount"), exceeds 10% of the
product of the Market Price (determined without regard to this proviso)
on any day in such Measurement Period prior to the earlier of (A) the
record date with respect to such distribution and (B) the date on which
ex-dividend trading in the Common Stock with respect to such
distribution begins or the date of such repurchase or reacquisition, as
the case may be, times the number of shares of Common Stock outstanding
on such date, then, and in each such case, the Market Price for such day
shall be reduced so that the same shall equal the price determined by
multiplying the Market Price (determined without regard to this proviso)
for such day by a fraction (i) the numerator of which shall be equal to
the Market Price (determined without regard to this proviso) for such
day less an amount equal to the quotient of (x) the excess of such
Combined Amount over such 10% and (y) the number of shares of Common
Stock outstanding on such day and (ii) the denominator of which shall be
equal to the Market Price (determined without regard to this proviso) on
such day; PROVIDED, HOWEVER, that in the event the portion of the cash
so distributed or paid for the repurchase or reacquisition of shares
(determined per share based on the number of shares of Common Stock
outstanding) applicable to one share of Common Stock is equal to or
greater than the Market Price (determined without regard to this clause
(v) of this proviso) of the Common Stock on any such day, in lieu of the
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foregoing adjustment, adequate provision shall be made so that the
holders of shares of Series A Preferred Stock shall have the right to
receive in payment of dividends on shares of Series A Preferred Stock or
upon conversion of shares of Series A Preferred Stock, as the case may
be, the amount of cash the holders of shares of Series A Preferred Stock
would have received had the number of shares of Common Stock to be
issued in payment of such dividends on shares of Series A Preferred
Stock been issued, or had the holders of shares of Series A Preferred
Stock converted shares of Series A Preferred Stock, in either such case,
immediately prior to the record date for such distribution or the
payment date of such repurchase, as applicable; or
(vi) A Tender Offer made by the Corporation or any of its
subsidiaries for all or any portion of the Common Stock shall expire and
such Tender Offer (as amended upon the expiration thereof) shall require
the payment to stockholders (based on the acceptance (up to any maximum
specified in the terms of the Tender Offer) of Purchased Shares (as
defined below)) of an aggregate consideration having a fair market value
(as determined in good faith by resolution of the Board of Directors of
the Corporation) that combined together with (1) the aggregate of the
cash plus the fair market value (as determined in good faith by a
resolution of the Board of Directors of the Corporation), as of the
expiration of such Tender Offer, of consideration payable in respect of
any other Tender Offers, by the Corporation or any of its subsidiaries
for all or any portion of the Common Stock expiring within the twelve
(12) months preceding the expiration of such Tender Offer and in respect
of which no adjustment pursuant to this clause (vi) has been made, (2)
the aggregate amount of any cash plus the fair market value (as
determined in good faith by a resolution of the Board of Directors of
the Corporation) of consideration paid in respect of any repurchase or
other reacquisition by the Corporation or any subsidiary of the
Corporation of any shares of Common Stock (other than an Option Share
Surrender) made after the Issuance Date and within the twelve (12)
months preceding the expiration of such Tender Offer and in respect of
which no adjustment pursuant to clause (v) of this proviso has been
made, and (3) the aggregate amount of any distributions to all holders
of Common Stock made exclusively in cash within twelve (12) months
preceding the expiration of such Tender Offer and in respect of which no
adjustment pursuant to clause (v) of this proviso has been made, exceeds
10% of the product of the Market Price (determined without regard to
this proviso) on any day in such period times the number of shares of
Common Stock outstanding on such day, then, and in each such case, the
Market Price for such day shall be reduced so that the same shall equal
the price determined by multiplying the Market Price (determined without
regard to this proviso) for such day by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding on
such day multiplied by the Market Price (determined without regard to
this proviso) for such day and the denominator shall be the sum of (x)
the fair market value (determined as aforesaid) of the aggregate
consideration payable to stockholders based on the acceptance (up to any
maximum specified in the terms of the Tender Offer) of all shares
validly tendered and not withdrawn as of the last time tenders could
have been made pursuant to such Tender Offer (the "Expiration Time")
(the shares deemed so accepted, up to any such maximum, being referred
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to as the "Purchased Shares") and (y) the product of the number of
shares of Common Stock outstanding (less any Purchased Shares) on such
day and the Market Price (determined without regard to this proviso) of
the Common Stock on the trading day next succeeding the Expiration Time.
If the application of this clause (vi) to any Tender Offer would result
in an increase in the Market Price (determined without regard to this
proviso) for any day, no adjustment shall be made for such Tender Offer
under this clause (vi) for such day;
PROVIDED FURTHER, HOWEVER, that if on any date there shall be no reported lowest
sale price (regular way) of such security, the "Market Price" on such date shall
be the lowest sale price (regular way) of such security on the date next
preceding such date on which a lowest sale price (regular way) for such security
has been so reported.
"Maximum Share Amount" shall mean 2,614,046 shares, or such
greater number as permitted by the rules of the Nasdaq (such amount to be
subject to equitable adjustment from time to time for stock splits, stock
dividends, combinations, capital reorganizations and similar events relating to
the Common Stock occurring or with respect to which "ex-" trading commences
after the date of filing this Certificate of Designations with the Secretary of
State of the State of Delaware), of Common Stock.
"Measurement Period" shall mean, with respect to any date, the
period of twenty five (25) consecutive trading days ending one trading day prior
to such date.
"Nasdaq" shall mean the Nasdaq National Market.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Option Share Surrender" means the surrender of shares of Common
Stock to the Corporation in payment of the exercise price or tax obligations
incurred in connection with the grant, vesting or exercise of a stock option
granted by the Corporation to any of its employees, directors or consultants.
"Optional Redemption Event" shall mean any one of the following
events:
(1) For any period of five consecutive trading days there shall
be no closing bid price of the Common Stock on any national securities
exchange or the Nasdaq;
(2) The Common Stock ceases to be listed for trading on the
Nasdaq, the NYSE, the AMEX or the Nasdaq SmallCap Market;
(3) The inability for 30 or more days (whether or not
consecutive) of any holder of shares of Series A Convertible Preferred
Stock who is entitled to optional redemption rights under Section 11 to
sell such shares of Common Stock issued or issuable on conversion of
shares of Series A Convertible Preferred Stock pursuant to the
Registration Statement for any reason on each of such 30 days;
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(4) The Corporation shall fail or default in the timely
performance of any material obligation to a holder of shares of Series A
Convertible Preferred Stock under the terms of this Certificate of
Designations or under the Registration Rights Agreement or any other
agreements or documents entered into in connection with the issuance of
shares of Series A Convertible Preferred Stock, as such instruments may
be amended from time to time;
(5) Any consolidation or merger of the Corporation with or into
another entity (other than a merger or consolidation of a subsidiary of
the Corporation into the Corporation or a wholly-owned subsidiary of the
Corporation) where the shareholders of the Corporation immediately prior
to such transaction do not collectively own at least 51% of the
outstanding voting securities of the surviving corporation of such
consolidation or merger immediately following such transaction or the
common stock of such surviving corporation is not listed for trading on
the Nasdaq, the NYSE, the AMEX or the Nasdaq SmallCap Market; or
(6) The taking of any action, including any amendment to the
Corporation's Certificate of Incorporation, which materially and
adversely affects the rights of any holder of shares of Series A
Convertible Preferred Stock.
"Optional Redemption Notice" shall have the meaning provided in
Section 11(b).
"Optional Redemption Price" shall mean the Redemption Price as if
the definition of Redemption Price in this Section 1 were modified such that (i)
the reference therein to "Section 7(b) or Section 9" were to Section 11 and (ii)
all references therein to "Redemption Date" were to the Holder Optional
Redemption Date.
"Parity Dividend Stock" shall mean any class or series or the
Corporation's capital stock ranking, as to dividends, on a parity with the
Series A Convertible Preferred Stock.
"Parity Liquidation Stock" shall mean any class or series of the
Corporation's capital stock having parity as to liquidation rights with the
Series A Convertible Preferred Stock.
"Redemption Date" shall mean the date of a redemption of shares
of Series A Convertible Preferred Stock pursuant to Section 7(b) or Section 9,
as the case may be, determined in accordance therewith.
"Redemption Price" shall mean the greater of (i) the quotient
(expressed in dollars) obtained by dividing (a) the sum of (1) $1,000, (2) an
amount equal to the accrued but unpaid dividends on the share of Series A
Convertible Preferred Stock to be redeemed, and (3) an amount equal to the
accrued and unpaid interest on dividends in arrears on such share (determined as
provided in Section 5) through the applicable Redemption Date BY (b) the
Conversion Percentage (expressed as a decimal) in effect on the Redemption Date
and (ii) an amount equal to the product obtained by multiplying (x) the number
of shares of Common Stock which would, but for the redemption pursuant to
Section 7(b) or Section 9, as the case may be, be issuable on conversion in
accordance with Section 10(a) of one share of Series A Convertible Preferred
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Stock and any accrued and unpaid dividends thereon and any accrued and unpaid
interest on dividends thereon in arrears if a Conversion Notice were given by
the holder of such share of Series A Convertible Preferred Stock on the
applicable Redemption Date (determined without regard to any limitation on
conversion based on beneficial ownership which is contained in Section 10(a))
TIMES (y) the arithmetic average of the Closing Bid Price of the Common Stock
for the five consecutive trading days ending one trading day prior to the
applicable Redemption Date.
"Registration Rights Agreement" shall mean the Registration
Rights Agreement entered into between the Corporation and the original holder of
the shares of Series A Convertible Preferred Stock, as amended or modified from
time to time in accordance with its terms.
"Registration Statement" shall mean the Registration Statement
required to be filed by the Corporation with the SEC pursuant to Section 2(a) of
the Registration Rights Agreement.
"SEC" shall mean the United States Securities and Exchange
Commission.
"Senior Dividend Stock" shall mean any class or series of capital
stock of the Corporation ranking senior as to dividends to the Series A
Convertible Preferred Stock.
"Senior Liquidation Stock" shall mean any class or series of
capital stock of the Corporation ranking senior as to liquidation rights to the
Series A Convertible Preferred Stock.
"Series A Convertible Preferred Stock" shall mean the Series A
Convertible Preferred Stock, $.001 par value, of the Corporation.
"Share Limitation Redemption Date" shall mean each date on which
the Corporation is required to redeem shares of Series A Convertible Preferred
Stock as provided in Section 7(a).
"Share Limitation Redemption Price" shall mean the Redemption
Price as if the definition of Redemption Price in this Section 1 were modified
such that (i) the reference therein to "Section 7(b) or Section 9" were to
Section 7(a) and (ii) all references therein to "Redemption Date" were to the
Share Limitation Redemption Date.
"Stockholder Approval" shall mean the approval by a majority of
the votes cast by the holders of shares of Common Stock (in person or by proxy)
at a meeting of the stockholders of the Corporation (duly convened at which a
quorum was present), or a written consent of holders of shares of Common Stock
entitled to such number of votes given without a meeting, of the issuance by the
Corporation of 20% or more of the Common Stock of the Corporation outstanding on
the Issuance Date for less than the greater of the book or market value of such
Common Stock on conversion of the Series A Convertible Preferred Stock, as and
to the extent required under Rule 4460(i) of the Nasdaq as in effect from time
to time or any successor provision.
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"Subscription Agreement" shall mean the Subscription Agreement
between the Corporation and the original holder of shares of Series A
Convertible Preferred Stock pursuant to which the shares of Series A Convertible
Preferred Stock were issued.
"Tender Offer" shall mean a tender offer or exchange offer.
"Warrants" means warrants to purchase Common Stock and such other
securities and property of the Corporation as provided in this Certificate of
Designations in the form set forth in Section 10(c).
SECTION 2. DESIGNATION AND AMOUNT. The shares of such series
shall be designated as "Series A Convertible Preferred Stock", and the number of
shares constituting the Series A Convertible Preferred Stock shall be 4,000, and
shall not be subject to increase.
SECTION 3. STATED CAPITAL. The amount to be represented in stated
capital at all times for each share of Series A Convertible Preferred Stock
shall be the greater of (i) the quotient (expressed in dollars) obtained by
dividing (a) the sum of (1) $1,000, (2) to the extent legally available, the
accrued but unpaid dividends on such share of Series A Convertible Preferred
Stock, and (3) an amount equal to the accrued and unpaid interest on dividends
in arrears (as provided in Section 5) through the date of determination BY (b)
the Conversion Percentage (expressed as a decimal) in effect on such date of
determination and (ii) an amount equal to the product obtained by multiplying
(x) the number of shares of Common Stock which would, at the time of such
determination, be issuable on conversion in accordance with Section 10(a) of one
share of Series A Convertible Preferred Stock and any accrued and unpaid
dividends thereon and any accrued and unpaid interest on dividends thereon in
arrears if a Conversion Notice (as defined herein) were given by the holder of
such share of Series A Convertible Preferred Stock on the date of such
determination (determined without regard to any limitation on conversion based
on beneficial ownership which is contained in 10(a)) TIMES (y) the arithmetic
average of the Closing Bid Price of the Common Stock for the five consecutive
trading days ending one trading day prior to the date of such determination. The
Corporation shall take such action as may be required to maintain the amount
required by this Section 3 to be represented in stated capital for the Series A
Convertible Preferred Stock not less frequently than monthly.
SECTION 4. RANK. All Series A Convertible Preferred Stock shall
rank (i) senior to the Common Stock, now or hereafter issued, as to payment of
dividends and distribution of assets upon liquidation, dissolution, or winding
up of the Corporation, whether voluntary or involuntary, (ii) on a parity with
any additional series of the class of Preferred Stock which series the Board of
Directors may from time to time authorize, both as to payment of dividends and
as to distributions of assets upon liquidation, dissolution, or winding up of
the Corporation, whether voluntary or involuntary, (iii) on a parity with the
shares of any additional class of preferred stock (or series of preferred stock
of such class) which the Board of Directors or the stockholders may from time to
time authorize in accordance herewith, which class (or series thereof) by its
terms ranks on a parity with the shares of Series A Convertible Preferred Stock
and (iv) senior to any other class or series of preferred stock (other than as
stated in the immediately preceding clauses (ii) and (iii)) of the Corporation.
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SECTION 5. DIVIDENDS AND DISTRIBUTIONS. (a) The holders of shares
of Series A Convertible Preferred Stock shall be entitled to receive, when, as,
and if declared by the Board of Directors out of funds legally available for
such purpose, dividends at the rate of $50.00 per annum per share, and no more,
which shall be fully cumulative, shall accrue without interest (except as
otherwise provided herein as to dividends in arrears) from the date of original
issuance and shall be payable quarterly on March 1, June 1, September 1, and
December 1 of each year commencing March 1, 1998 (except that if any such date
is a Saturday, Sunday, or legal holiday, then such dividend shall be payable on
the next succeeding day that is not a Saturday, Sunday, or legal holiday) to
holders of record as they appear on the stock books of the Corporation on such
record dates, not more than 20 nor less than 10 days preceding the payment dates
for such dividends, as shall be fixed by the Board. Dividends on the Series A
Convertible Preferred Stock shall be paid in cash or, subject to the limitations
in Section 5(b) hereof, shares of Common Stock of the Corporation or any
combination of cash and shares of Common Stock, at the option of the Corporation
as hereinafter provided. The amount of the dividends payable per share of Series
A Convertible Preferred Stock for each quarterly dividend period shall be
computed by dividing the annual dividend amount by four. The amount of dividends
payable for the initial dividend period and any period shorter than a full
quarterly dividend period shall be computed on the basis of a 360-day year of
twelve 30-day months. Dividends not paid on a payment date, whether or not such
dividends have been declared, will bear interest at the rate of 12% per annum
until paid. No dividends or other distributions, other than the dividends
payable solely in shares of any Junior Dividend Stock, shall be paid or set
apart for payment on any shares of Junior Dividend Stock, and no purchase,
redemption, or other acquisition shall be made by the Corporation of any shares
of Junior Dividend Stock (except for Option Share Surrenders) unless and until
all accrued and unpaid dividends on the Series A Convertible Preferred Stock and
interest on dividends in arrears at the rate specified herein shall have been
paid or declared and set apart for payment.
If at any time any dividend on any the Senior Dividend Stock
shall be in default, in whole or in part, no dividend shall be paid or declared
and set apart for payment on the Series A Convertible Preferred Stock unless and
until all accrued and unpaid dividends with respect to the Senior Dividend
Stock, including the full dividends for the then current dividend period, shall
have been paid or declared and set apart for payment, without interest. No full
dividends shall be paid or declared and set apart for payment on any Parity
Dividend Stock for any period unless all accrued but unpaid dividends (and
interest on dividends in arrears at the rate specified herein) have been, or
contemporaneously are, paid or declared and set apart for such payment on the
Series A Convertible Preferred Stock. No full dividends shall be paid or
declared and set apart for payment on the Series A Convertible Preferred Stock
for any period unless all accrued but unpaid dividends have been, or
contemporaneously are, paid or declared and set apart for payment on the Parity
Dividend Stock for all dividend periods terminating on or prior to the date of
payment of such full dividends. When dividends are not paid in full upon the
Series A Convertible Preferred Stock and the Parity Dividend Stock, all
dividends paid or declared and set apart for payment upon shares of Series A
Convertible Preferred Stock (and interest on dividends in arrears at the rate
specified herein) and the Parity Dividend Stock shall be paid or declared and
set apart for payment pro rata, so that the amount of dividends paid or declared
and set apart for payment per share on the Series A Convertible Preferred Stock
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and the Parity Dividend Stock shall in all cases bear to each other the same
ratio that accrued and unpaid dividends per share on the shares of Series A
Convertible Preferred Stock and the Parity Dividend Stock bear to each other.
Any references to "distribution" contained in this Section 5
shall not be deemed to include any stock dividend or distributions made in
connection with any liquidation, dissolution, or winding up of the Corporation,
whether voluntary or involuntary.
(b) If the Corporation elects in the exercise of its sole
discretion to issue shares of Common Stock in payment of dividends on the Series
A Convertible Preferred Stock, the Corporation shall issue and dispatch, or
cause to be issued and dispatched, by the third trading day after such dividend
payment date to each holder of such shares a certificate representing the number
of whole shares of Common Stock arrived at by dividing the per share Computed
Price of such shares of Common Stock on the applicable dividend payment date
into the total amount of cash dividends such holder would be entitled to receive
if the aggregate dividends on the Series A Convertible Preferred Stock held by
such holder which are being paid in shares of Common Stock were being paid in
cash; PROVIDED, HOWEVER, that if certificates representing shares of Common
Stock are issued and dispatched to holders of Series A Convertible Preferred
Stock subsequent to the fifth trading day after a dividend payment date, the
percentage used to calculate the Computed Price will be reduced by one for each
trading day after the third trading day following such dividend payment date to
the date of dispatch of shares of Common Stock. No fractional shares of Common
Stock shall be issued in payment of dividends. In lieu thereof, the Corporation
shall pay cash in an amount equal to the product of (x) the arithmetic average
of the Closing Bid Price of the Common Stock for the five consecutive trading
days prior to such dividend payment date TIMES (y) the fraction of a share of
Common Stock which would otherwise be issuable by the Corporation. The
Corporation shall not exercise its right to issue shares of Common Stock in
payment of dividends on Series A Convertible Preferred Stock if:
(i) the number of shares of Common Stock at the time authorized,
unissued and unreserved for all purposes, or held in the Corporation's
treasury, is insufficient to pay the portion of such dividends to be
paid in shares of Common Stock;
(ii) the issuance or delivery of shares of Common Stock as a
dividend payment would require registration with or approval of any
governmental authority under any law or regulation, and such
registration or approval has not been effected or obtained;
(iii) the shares of Common Stock to be issued as a dividend
payment have not been authorized for listing, upon official notice of
issuance, on any securities exchange or market on which the Common Stock
is then listed; or have not been approved for quotation if the Common
Stock is traded in the over-the-counter market;
(iv) the Computed Price (determined without regard to the proviso
to the definition thereof) is less than the par value of one share of
Common Stock;
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(v) the shares of Common Stock (A) cannot be sold or transferred
without restriction by unaffiliated holders who receive such shares of
Common Stock as a dividend payment or (B) are no longer listed on the
Nasdaq, the NYSE, the AMEX or the Nasdaq SmallCap Market;
(vi) the issuance of shares of Common Stock in payment of
dividends on Series A Convertible Preferred Stock held by any Aggregated
Person would result in any Aggregated Person beneficially owning more
than 4.9% of the Common Stock, determined as provided in the proviso to
the second sentence of Section 10(a) hereof; or
(vii) an Optional Redemption Event shall have occurred and any
holder shall be entitled to exercise optional redemption rights under
Section 11 hereof by reason of such Optional Redemption Event.
Shares of Common Stock issued in payment of dividends on Series A
Convertible Preferred Stock pursuant to this Section shall be, and for all
purposes shall be deemed to be, validly issued, fully paid and nonassessable
shares of Common Stock of the Corporation; the issuance and delivery thereof is
hereby authorized; and the dispatch thereof will be, and for all purposes shall
be deemed to be, payment in full of the cumulative dividends to which holders
are entitled on the applicable dividend payment date.
(c) Neither the Corporation nor any subsidiary of the Corporation
shall redeem, repurchase or otherwise acquire in any one transaction or series
of related transactions any shares of Common Stock, Junior Dividend Stock or
Junior Liquidation Stock if the number of shares so repurchased, redeemed or
otherwise acquired in such transaction or series of related transactions
(excluding any Option Share Surrender) is more than either (x) 5.0% of the
number of shares of Common Stock, Junior Dividend Stock or Junior Liquidation
Stock, as the case may be, outstanding immediately prior to such transaction or
series of related transactions or (y) 1% of the number of shares of Common
Stock, Junior Dividend Stock or Junior Liquidation Stock, as the case may be,
outstanding immediately prior to such transaction or series of related
transactions if such transaction or series of related transactions is with any
one person or group of affiliated persons, unless the Corporation or such
subsidiary offers to purchase for cash from each holder of shares of Series A
Convertible Preferred Stock at the time of such redemption, repurchase or
acquisition the same percentage of such holder's shares of Series A Convertible
Preferred Stock as the percentage of the number of outstanding shares of Common
Stock, Junior Dividend Stock or Junior Liquidation Stock, as the case may be, to
be so redeemed, repurchased or acquired at a purchase price per share of Series
A Convertible Preferred Stock equal to the greater of (i) the quotient
(expressed in dollars) obtained by dividing (a) the sum of (1) $1,000, (2) an
amount equal to the accrued but unpaid dividends on such share of Series A
Convertible Preferred Stock, PLUS (3) an amount equal to the accrued and unpaid
interest on dividends in arrears (determined as provided in Section 5) through
the date of purchase pursuant to this Section 5(c) BY (b) the Conversion
Percentage (expressed as a decimal) in effect on the date of purchase pursuant
to this Section 5(c) and (ii) an amount equal to the product obtained by
multiplying (x) the number of shares of Common Stock which would, but for the
purchase pursuant to this Section 5(c), be issuable on conversion in accordance
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with Section 10(a) of one share of Series A Convertible Preferred Stock and any
accrued and unpaid dividends thereon and any accrued and unpaid interest on
dividends thereon in arrears if a Conversion Notice were given by the holder of
such share of Series A Convertible Preferred Stock on the date of purchase
pursuant to this Section 5(c) (determined without regard to any limitation on
conversion based on beneficial ownership which is contained in Section 10(a))
TIMES (y) the arithmetic average of the Closing Bid Price of the Common Stock
for the five consecutive trading days ending one trading day prior to the date
of purchase pursuant to this Section 5(c).
(d) Neither the Corporation nor any subsidiary of the Corporation
shall (1) make any Tender Offer for outstanding shares of Common Stock, unless
the Corporation contemporaneously therewith makes an offer, or (2) enter into an
agreement regarding a Tender Offer for outstanding shares of Common Stock by any
person other than the Corporation or any subsidiary of the Corporation, unless
such person agrees with the Corporation to make an offer, in either such case to
each holder of outstanding shares of Series A Convertible Preferred Stock to
purchase for cash at the time of purchase in such Tender Offer the same
percentage of shares of Series A Convertible Preferred Stock held by such holder
as the percentage of outstanding shares of Common Stock offered to be purchased
in such Tender Offer at a price per share of Series A Convertible Preferred
Stock equal to the greater of (i) the quotient (expressed in dollars) obtained
by dividing (a) the sum of (1) $1,000, (2) an amount equal to the accrued but
unpaid dividends on such share of Series A Convertible Preferred Stock, and (3)
an amount equal to the accrued and unpaid interest on dividends in arrears
(determined as provided in Section 5) through the date of purchase pursuant to
this Section 5(d) BY (b) the Conversion Percentage (expressed as a decimal) in
effect on the date of purchase pursuant to this Section 5(d) and (ii) an amount
equal to the product obtained by multiplying (x) the number of shares of Common
Stock which would, but for the purchase pursuant to this Section 5(d), be
issuable on conversion in accordance with Section 10(a) of one share of Series A
Convertible Preferred Stock and any accrued and unpaid dividends thereon and any
accrued and unpaid interest on dividends thereon in arrears if a Conversion
Notice were given by the holder of such share of Series A Convertible Preferred
Stock on the date of purchase pursuant to this Section 5(d) (determined without
regard to any limitation on conversion based on beneficial ownership which is
contained in Section 10(a)) TIMES (y) the highest price per share of Common
Stock offered in such Tender Offer.
SECTION 6. LIQUIDATION PREFERENCE. In the event of a liquidation,
dissolution, or winding up of the Corporation, whether voluntary or involuntary,
the holders of Series A Convertible Preferred Stock shall be entitled to receive
out of the assets of the Corporation, whether such assets constitute stated
capital or surplus of any nature, an amount per share of Series A Convertible
Preferred Stock equal to the Liquidation Preference, and no more, before any
payment shall be made or any assets distributed to the holders of Junior
Liquidation Stock; PROVIDED, HOWEVER, that such rights shall accrue to the
holders of Series A Convertible Preferred Stock only in the event that the
Corporation's payments with respect to the liquidation preference of the holders
of Senior Liquidation Stock are fully met. After the liquidation preferences of
the Senior Liquidation Stock are fully met, the entire assets of the Corporation
available for distribution shall be distributed ratably among the holders of the
Series A Convertible Preferred Stock and any Parity Liquidation Stock in
proportion to the respective preferential amounts to which each is entitled (but
only to the extent of such preferential amounts). After payment in full of the
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liquidation price of the shares of the Series A Convertible Preferred Stock and
the Parity Liquidation Stock, the holders of such shares shall not be entitled
to any further participation in any distribution of assets by the Corporation.
Neither a consolidation or merger of the Corporation with another corporation
nor a sale or transfer of all or part of the Corporation's assets for cash,
securities, or other property in and of itself will be considered a liquidation,
dissolution or winding up of the Corporation.
SECTION 7. MANDATORY REDEMPTION.
(a) MANDATORY REDEMPTION BASED ON MAXIMUM SHARE AMOUNT. (1)
Notwithstanding any other provision herein, unless the Stockholder Approval
shall have been obtained from the stockholders of the Corporation or waived by
the Nasdaq, the Corporation shall not be required to issue upon conversion of
shares of Series A Convertible Preferred Stock pursuant to Section 10 more than
the Maximum Share Amount, less the aggregate number of shares of Common Stock
issued by the Corporation pursuant to Section 5 as dividends on the Series A
Convertible Preferred Stock. The Maximum Share Amount shall be allocated among
the shares of Series A Convertible Preferred Stock at the time of initial
issuance thereof pro rata based on the total number of authorized shares of
Series A Convertible Preferred Stock provided in Section 2. Each certificate for
shares of Series A Convertible Preferred Stock initially issued shall bear a
notation as to the number of shares constituting the portion of the Maximum
Share Amount allocated to the shares of Series A Convertible Preferred Stock
represented by such certificate for purposes of conversion thereof. The
Corporation shall maintain records which show the number of shares of Common
Stock issued by the Corporation pursuant to Section 5 as dividends on the shares
of Series A Convertible Preferred Stock represented by each certificate, which
records shall be controlling in the absence of manifest error. Upon surrender of
any certificate for shares of Series A Convertible Preferred Stock for transfer
or re-registration thereof (or, at the option of the holder, for conversion
pursuant to Section 10(a) of less than all of the shares of Series A Convertible
Preferred Stock represented thereby), the Corporation shall make a notation on
the new certificate issued upon such transfer or re-registration or evidencing
such unconverted shares, as the case may be, as to the remaining number of
shares of Common Stock from the Maximum Share Amount remaining available for
conversion of the shares of Series A Convertible Preferred Stock evidenced by
such new certificate (including, without limitation, by taking into account the
number of shares of Common Stock issued by the Corporation pursuant to Section 5
as a dividend on the shares of Series A Convertible Preferred Stock represented
by the certificate so surrendered and not previously reflected on the
certificate so surrendered, as shown on the records maintained by the
Corporation). If any certificate for shares of Series A Convertible Preferred
Stock is surrendered for split-up into two or more certificates representing an
aggregate number of shares of Series A Convertible Preferred Stock equal to the
number of shares of Series A Convertible Preferred Stock represented by the
certificate so surrendered (as reduced by any contemporaneous conversion of
shares of Series A Convertible Preferred Stock represented by the certificate so
surrendered), each certificate issued on such split-up shall bear a notation of
the portion of the Maximum Share Amount allocated thereto determined by pro rata
allocation from among the remaining portion of the Maximum Share Amount
allocated to the certificate so surrendered. If any shares of Series A
Convertible Preferred Stock represented by a single certificate are converted in
full pursuant to Section 10, all of the portion of the Maximum Share Amount
allocated to such shares of Series A Convertible Preferred Stock which remains
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unissued after such conversion shall be re-allocated pro rata to the outstanding
shares of Series A Convertible Preferred Stock held of record by the holder of
record at the close of business on the date of such conversion of the shares of
Series A Convertible Preferred Stock so converted, and if there shall be no
other shares of Series A Convertible Preferred Stock held of record by such
holder at the close of business on such date, then such portion of the Maximum
Share Amount shall be allocated pro rata among the shares of Series A
Convertible Preferred Stock outstanding on such date.
(2) The Corporation shall promptly, but in no event later than
five business days after the occurrence, give notice to each holder (by
telephone line facsimile transmission at such number as such holder has
specified in writing to the Corporation for such purposes or, if such holder
shall not have specified any such number, by overnight courier or first class
mail, postage prepaid, at such holder's address as the same appears on the stock
books of the Corporation) and any holder may at any time after the occurrence
give notice to the Corporation, in either case, if on any ten trading days
within any period of 20 consecutive trading days the Corporation would not have
been required to convert shares of Series A Convertible Preferred Stock of such
holder in accordance with Section 10(a) as a consequence of the limitations set
forth in Section 7(a)(1) had all outstanding shares of Series A Convertible
Preferred Stock held by such holder been converted into Common Stock on each
such day, determined without regard to the limitation, if any, on such holder
contained in the proviso to the second sentence of Section 10(a) (any such
notice, whether given by the Corporation or a holder, an "Inconvertibility
Notice"). If the Corporation shall have given or been required to give any
Inconvertibility Notice, or if a holder shall have given any Inconvertibility
Notice, then within ten business days after such Inconvertibility Notice is
given or was required to be given, the holder receiving or giving, as the case
may be, the Inconvertibility Notice shall have the right by written notice to
the Corporation (which written notice may be contained in the Inconvertibility
Notice given by the holder) to direct the Corporation to redeem the portion of
such holder's outstanding shares of Series A Convertible Preferred Stock (which,
if applicable, shall be all of such holder's outstanding shares of Series A
Convertible Preferred Stock) as shall not, on the business day prior to the date
of such redemption, be convertible into shares of Common Stock by reason of the
limitations set forth in Section 7(a)(1) (determined without regard to the
limitation, if any, on such holder contained in the proviso to the second
sentence of Section 10(a)), within ten business days after such holder so
directs the Corporation, at a price per share equal to the Share Limitation
Redemption Price. If a holder directs the Corporation to redeem outstanding
shares of Series A Convertible Preferred Stock and, prior to the date the
Corporation is required to redeem such shares of Series A Convertible Preferred
Stock, the Corporation would have been able, within the limitations set forth in
Section 7(a)(1), to convert all of such holder's outstanding shares of Series A
Convertible Preferred Stock (determined without regard to the limitation, if
any, on such holder contained in the proviso to the second sentence of Section
10(a)) on any ten trading days within any period of 20 consecutive trading days
commencing after the period of 20 consecutive trading days which gave rise to
the applicable Inconvertibility Notice from the Corporation or such holder of
shares of Series A Convertible Preferred Stock, as the case may be, had all of
such holder's outstanding shares of Series A Convertible Preferred Stock been
surrendered for conversion into Common Stock on each of such ten trading days
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within such 20 trading day period, then the Corporation shall not be required to
redeem any shares of Series A Convertible Preferred Stock by reason of such
Inconvertibility Notice.
(3) Notwithstanding the giving of any notice by the Corporation
to the holders of Series A Convertible Preferred Stock pursuant to Section
7(a)(2) or the giving or the absence of any notice by the holders of the Series
A Convertible Preferred Stock in response thereto or any redemption of shares of
Series A Convertible Preferred Stock pursuant to Section 7(a)(2), thereafter the
provisions of Section 7(a)(2) shall continue to be applicable on any occasion
unless the Stockholder Approval shall have been obtained from the stockholders
of the Corporation or waived by the Nasdaq.
(4) On each Share Limitation Redemption Date, the Corporation
shall make payment in immediately available funds of the applicable Share
Limitation Redemption Price to such holder of shares of Series A Convertible
Preferred Stock to be redeemed to or upon the order of such holder as specified
by such holder in writing to the Corporation at least one business day prior to
such Share Limitation Redemption Date. If the Corporation is required to redeem
all or any portion of a holder's outstanding shares of Series A Convertible
Preferred Stock pursuant to this Section 7(a), the Corporation shall make
payment to such holder of the shares of Series A Convertible Preferred Stock to
be redeemed in respect of each share of Series A Convertible Preferred Stock to
be redeemed of an amount equal to the Share Limitation Redemption Price. Upon
redemption of less than all of the shares of Series A Convertible Preferred
Stock evidenced by a particular certificate, promptly, but in no event later
than three business days after surrender of such certificate to the Corporation,
the Corporation shall issue a replacement certificate for the shares of Series A
Convertible Preferred Stock evidenced by such certificate which have not been
redeemed. Only whole shares of Series A Convertible Preferred Stock may be
redeemed.
(b) MANDATORY REDEMPTION AFTER THREE YEARS. The Corporation shall
redeem all the outstanding shares of Series A Convertible Preferred Stock in
accordance with this Section 7(b) on the date which is three years after the
Issuance Date. Not less than 20 or more than 30 days prior to such Redemption
Date, a Mandatory Redemption Notice under this Section 7(b) shall be delivered
to the holders of the shares of Series A Convertible Preferred Stock at their
addresses appearing on the records of the Corporation; PROVIDED, HOWEVER, that
any failure or defect in the giving of notice to any such holder shall not
affect the validity of notice to or the redemption of shares of Series A
Convertible Preferred Stock of any other holder. On such Redemption Date and
after receipt by the Corporation of certificates for shares of Series A
Preferred Stock to be redeemed pursuant to this Section 7(b), the Corporation
shall make payment of the applicable Redemption Price to each holder of shares
of Series A Convertible Preferred Stock to be redeemed to or upon the order of
such holder as specified by such holder in writing to the Corporation at least
one business day prior to the Redemption Date. The Corporation shall make
payment to the holders of the shares of Series A Convertible Preferred Stock to
be redeemed in respect of each share of Series A Convertible Preferred Stock to
be redeemed of an amount equal to the Redemption Price. Except as otherwise
permitted by Section 10 hereof in connection with a conversion of shares of
Series A Convertible Preferred Stock pursuant to Section 10(a), no share of
Series A Convertible Preferred Stock as to which the holder exercises the right
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of conversion pursuant to Section 10 hereof may be redeemed by the Corporation
pursuant to this Section 7(b) on or after the date of exercise of such
conversion right regardless of whether the Mandatory Redemption Notice shall
have been given prior to the date of exercise of such conversion right.
(c) NO OTHER MANDATORY REDEMPTION. The shares of Series A
Convertible Preferred Stock shall not be subject to mandatory redemption by the
Corporation except as provided herein.
SECTION 8. NO SINKING FUND. The shares of Series A Convertible
Preferred Stock shall not be subject to the operation of a purchase, retirement
or sinking fund.
SECTION 9. OPTIONAL REDEMPTION. So long as the Corporation is in
compliance in all material respects with its obligations to the holders of
shares of Series A Convertible Preferred Stock (including, without limitation,
its obligations under the Registration Rights Agreement and the provisions of
this Certificate of Designations), the Corporation shall have the right,
exercisable on not less than 20 days or more than 30 days written notice to the
holders of record of the shares of Series A Convertible Preferred Stock to be
redeemed, at any time to redeem all, and from time to time to redeem any part of
not less than 200 shares (or such lesser number of shares of Series A
Convertible Preferred Stock as shall remain outstanding at the time of exercise
of such redemption right), of Series A Convertible Preferred Stock in accordance
with this Section 9. Any Corporation Optional Redemption Notice under this
Section shall be delivered to the holders of the shares of Series A Convertible
Preferred Stock at their addresses appearing on the records of the Corporation;
PROVIDED, HOWEVER, that any failure or defect in the giving of notice to any
such holder shall not affect the validity of notice to or the redemption of
shares of Series A Convertible Preferred Stock of any other holder. On the
Redemption Date and after receipt by the Corporation of certificates for shares
of Series A Convertible Preferred Stock to be redeemed pursuant to this Section
9, the Corporation shall make payment of the applicable Redemption Price to each
holder of shares of Series A Convertible Preferred Stock to be redeemed to or
upon the order of such holder as specified by such holder in writing to the
Corporation at least one business day prior to the Redemption Date. If the
Corporation exercises its right to redeem all or a portion of the outstanding
shares of Series A Convertible Preferred Stock, the Corporation shall make
payment to the holders of the shares of Series A Convertible Preferred Stock to
be redeemed in respect of each share of Series A Convertible Preferred Stock to
be redeemed of an amount equal to the Redemption Price. Upon redemption of less
than all of the shares of Series A Convertible Preferred Stock evidenced by a
particular certificate, promptly, but in no event later than three business days
after surrender of such certificate to the Corporation, the Corporation shall
issue and deliver to the holder of record of the surrendered certificate (or
such holder's assignee) a replacement certificate for the shares of Series A
Convertible Preferred Stock which have not been redeemed. Only whole shares of
Series A Convertible Preferred Stock may be redeemed. If the Corporation
exercises its right to redeem less than all outstanding shares of Series A
Convertible Preferred Stock, then such redemption shall be made, as nearly as
practical, pro rata among the holders of record of the Series A Convertible
Preferred Stock. No share of Series A Convertible Preferred Stock as to which
the holder exercises the right of conversion pursuant to Section 10 or the
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optional repurchase right pursuant to Section 11 may be redeemed by the
Corporation pursuant to this Section 9 on or after the date of exercise of such
conversion right or optional redemption right, as the case may be, regardless of
whether the Corporation Optional Redemption Notice shall have been given prior
to the date of exercise of such conversion right or optional redemption right,
as the case may be.
SECTION 10. CONVERSION.
(a) CONVERSION AT OPTION OF HOLDER. The holders of the Series A
Convertible Preferred Stock may convert at any time any or all of their shares
of Series A Convertible Preferred Stock into units consisting of (i) fully paid
and nonassessable shares of Common Stock and such other securities and property
as hereinafter provided and (ii) Warrants. Each share of Series A Convertible
Preferred Stock may be converted at the office of the Conversion Agent or at
such other additional office or offices, if any, as the Board of Directors may
designate, into units initially consisting of (1) such number of fully paid and
nonassessable shares of Common Stock (calculated as to each conversion to the
nearest 1/100th of a share) determined by dividing (x) the sum of (i) $1,000,
(ii) accrued but unpaid dividends to the applicable Conversion Date on the share
of Series A Convertible Preferred Stock being converted, and (iii) accrued but
unpaid interest on the dividends on the share of Series A Convertible Preferred
Stock being converted in arrears to the applicable Conversion Date at the rate
provided in Section 5 (such sum, the "Conversion Amount") by (y) the lesser of
(a) the product of (I) the Conversion Percentage with respect to the applicable
Conversion Date TIMES (II) the Average Market Price of the Common Stock for the
Measurement Period with respect to the applicable Conversion Date and (b) the
Ceiling Price and (2) Warrants initially entitling the holder to purchase a
number of shares of Common Stock equal to the quotient obtained by dividing (x)
the number of shares of Common Stock issuable in respect of such conversion,
determined in accordance with clause (1) of this sentence, by (y) five, and
having the terms and conditions provided in Section 10(c) hereof, in each case
subject to adjustment as hereinafter provided (the "Conversion Rate"); PROVIDED,
HOWEVER, that in no event shall any holder of shares of Series A Convertible
Preferred Stock be entitled to convert any shares of Series A Convertible
Preferred Stock in excess of that number of shares of Series A Convertible
Preferred Stock upon conversion of which the sum of (1) the number of shares of
Common Stock beneficially owned by such holder or any Aggregated Person of such
holder (other than shares of Common Stock deemed beneficially owned through the
ownership of unconverted shares of Series A Convertible Preferred Stock and
unexercised Warrants) and (2) the number of shares of Common Stock issuable upon
the conversion of the number of shares of Series A Convertible Preferred Stock
with respect to which the determination in this proviso is being made, would
result in beneficial ownership by such holder and all Aggregated Persons of such
holder of more than 4.9% of the outstanding shares of Common Stock. For purposes
of the proviso to the immediately preceding sentence, beneficial ownership shall
be determined in accordance with Section 13(d) of the Exchange Act and
Regulation 13D-G thereunder, except as otherwise provided in clause (1) of the
proviso to the immediately preceding sentence.
(b) OTHER PROVISIONS. (1) Notwithstanding anything in this
Section 10(b) to the contrary, no change in the Conversion Amount pursuant to
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Section 10(b) shall actually be made until the cumulative effect of the
adjustments called for by this Section 10(b) since the date of the last change
in the Conversion Amount would change the Conversion Amount by more than 1%.
However, once the cumulative effect would result in such a change, then the
Conversion Rate shall actually be changed to reflect all adjustments called for
by this Section 10(b) and not previously made. Notwithstanding anything in this
Section 10(b), no change in the Conversion Amount shall be made that would
result in the price at which a share of Series A Convertible Preferred Stock is
converted being less than the par value of the Common Stock into which shares of
Series A Convertible Preferred Stock are at the time convertible.
(2) The holders of shares of Series A Convertible Preferred Stock
at the close of business on the record date for any dividend payment to holders
of Series A Convertible Preferred Stock shall be entitled to receive the
dividend payable on such shares on the corresponding dividend payment date
notwithstanding the conversion thereof after such dividend payment record date
or the Corporation's default in payment of the dividend due on such dividend
payment date; PROVIDED, HOWEVER, that the holder of shares of Series A
Convertible Preferred Stock surrendered for conversion during the period between
the close of business on any record date for a dividend payment and the opening
of business on the corresponding dividend payment date must pay to the
Corporation, within five days after receipt by such holder, an amount equal to
the dividend payable on such shares on such dividend payment date if such
dividend is paid by the Corporation to such holder. A holder of shares of Series
A Convertible Preferred Stock on a record date for a dividend payment who (or
whose transferee) tenders any of such shares for conversion into shares of
Common Stock and Warrants on or after such dividend payment date will receive
the dividend payable by the Corporation on such shares of Series A Convertible
Preferred Stock on such date, and the converting holder need not make any
payment of the amount of such dividend in connection with such conversion of
shares of Series A Convertible Preferred Stock. Except as provided above, no
adjustment shall be made in respect of cash dividends on Common Stock or Series
A Convertible Preferred Stock that may be accrued and unpaid at the date of
surrender of shares of Series A Convertible Preferred Stock.
(3) (A) The right of the holders of Series A Convertible
Preferred Stock to convert their shares shall be exercised by delivering (which
may be done by telephone line facsimile transmission) a Conversion Notice to the
Conversion Agent, as provided above. If a holder of Series A Convertible
Preferred Stock elects to convert any shares of Series A Convertible Preferred
Stock in accordance with Section 10(a), such holder shall not be required to
physically surrender the certificate(s) representing such shares of Series A
Convertible Preferred Stock to the Corporation unless all of the shares of
Series A Convertible Preferred Stock represented thereby are so converted. Each
holder of shares of Series A Convertible Preferred Stock and the Corporation
shall maintain records showing the number of shares so converted and the dates
of such conversions or shall use such other method, satisfactory to such holder
and the Corporation, so as to not require physical surrender of such
certificates upon each such conversion. In the event of any dispute or
discrepancy, such records of the Corporation shall be controlling and
determinative in the absence of manifest error. Notwithstanding the foregoing,
if any shares of Series A Convertible Preferred Stock evidenced by a particular
certificate therefor are converted as aforesaid, the holder of Series A
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<PAGE>
Convertible Preferred Stock may not transfer the certificate(s) representing
such shares of Series A Convertible Preferred Stock unless such holder first
physically surrenders such certificate(s) to the Corporation, whereupon the
Corporation will forthwith issue and deliver upon the order of such holder of
shares of Series A Convertible Preferred Stock new certificate(s) of like tenor,
registered as such holder of shares of Series A Convertible Preferred Stock
(upon payment by such holder of shares of Series A Convertible Preferred Stock
of any applicable transfer taxes) may request, representing in the aggregate the
remaining number of shares of Series A Convertible Preferred Stock represented
by such certificate(s). Each holder of shares of Series A Convertible Preferred
Stock, by acceptance of a certificate for such shares, acknowledges and agrees
that (1) by reason of the provisions of this paragraph, following conversion of
any shares of Series A Convertible Preferred Stock represented by such
certificate, the number of shares of Series A Convertible Preferred Stock
represented by such certificate may be less than the number of shares stated on
such certificate and by reason of Section 7(a), the number of shares of Common
Stock from the Maximum Share Amount allocated to the shares of Series A
Convertible Preferred Stock represented by such certificate for purposes of
conversion of such shares may be less than the number thereof stated on such
certificate and (2) the Corporation may place a legend on the certificates for
shares of Series A Convertible Preferred Stock which refers to or describes the
provisions of this paragraph.
(B) The Corporation shall pay any transfer tax arising in
connection with any conversion of shares of Series A Convertible Preferred Stock
except that the Corporation shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the issue and delivery
upon conversion of shares of Common Stock, Warrants or other securities or
property in a name other than that of the holder of the shares of the Series A
Convertible Preferred Stock being converted, and the Corporation shall not be
required to issue or deliver any such shares or other securities or property
unless and until the person or persons requesting the issuance thereof shall
have paid to the Corporation the amount of any such tax or shall have
established to the satisfaction of the Corporation that such tax has been paid.
The number of shares of Common Stock and Warrants to be issued upon each
conversion of shares of Series A Convertible Preferred Stock shall be the number
set forth in the applicable Conversion Notice which number shall be conclusive
absent manifest error. The Corporation shall notify a holder who has given a
Conversion Notice of any claim of manifest error within one business day after
such holder gives such Conversion Notice and no such claim of error shall limit
or delay performance of the Corporation's obligation to issue upon such
conversion the number of shares of Common Stock which are not in dispute. A
Conversion Notice shall be deemed for all purposes to be in proper form unless
the Corporation notifies a holder of shares of Series A Convertible Preferred
Stock being converted within one business day after a Conversion Notice has been
given (which notice shall specify all defects in the Conversion Notice) and any
Conversion Notice containing any such defect shall nonetheless be effective on
the date given if the converting holder promptly corrects all such defects.
(4) The Corporation (and any successor corporation) shall take
all action necessary so that a number of shares of the authorized but unissued
Common Stock (or common stock in the case of any successor corporation)
sufficient to provide for the conversion of the Series A Convertible Preferred
Stock outstanding and exercise of the Warrants issuable on such conversion upon
the basis hereinbefore provided are at all times reserved by the Corporation (or
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<PAGE>
any successor corporation), free from preemptive rights, for such conversion,
subject to the provisions of the next succeeding paragraph. If the Corporation
shall issue any securities or make any change in its capital structure which
would change the number of shares of Common Stock into which each share of the
Series A Convertible Preferred Stock shall be convertible or for which the
Warrants shall be exercisable as herein provided, the Corporation shall at the
same time also make proper provision so that thereafter there shall be a
sufficient number of shares of Common Stock authorized and reserved, free from
preemptive rights, for conversion of the outstanding Series A Convertible
Preferred Stock on the new basis. If at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the conversion
of all of the outstanding shares of Series A Convertible Preferred Stock and
exercise of all Warrants issued and issuable upon the conversion of the shares
of Series A Convertible Preferred Stock, the Corporation promptly shall seek
such corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
(5) In case of any consolidation or merger of the Corporation
with any other corporation (other than a wholly-owned subsidiary of the
Corporation) in which the Corporation is not the surviving corporation, or in
case of any sale or transfer of all or substantially all of the assets of the
Corporation, or in the case of any share exchange pursuant to which all of the
outstanding shares of Common Stock are converted into other securities or
property, the Corporation shall make appropriate provision or cause appropriate
provision to be made so that each holder of shares of Series A Convertible
Preferred Stock then outstanding shall have the right thereafter to convert such
shares of Series A Convertible Preferred Stock into the kind of shares of stock
and other securities and property receivable upon such consolidation, merger,
sale, transfer, or share exchange by a holder of shares of Common Stock into
which such shares of Series A Convertible Preferred Stock could have been
converted immediately prior to the effective date of such consolidation, merger,
sale, transfer, or share exchange and on a basis which preserves the economic
benefits of the conversion rights of the holders of shares of Series A
Convertible Preferred Stock on a basis as nearly as practical as such rights
exist hereunder prior thereto. If, in connection with any such consolidation,
merger, sale, transfer, or share exchange, each holder of shares of Common Stock
is entitled to elect to receive securities, cash, or other assets upon
completion of such transaction, the Corporation shall provide or cause to be
provided to each holder of Series A Convertible Preferred Stock the right to
elect the securities, cash, or other assets into which the Series A Convertible
Preferred Stock held by such holder shall be convertible after completion of any
such transaction on the same terms and subject to the same conditions applicable
to holders of the Common Stock (including, without limitation, notice of the
right to elect, limitations on the period in which such election shall be made,
and the effect of failing to exercise the election). The Corporation shall not
effect any such transaction unless the provisions of this paragraph have been
complied with. The above provisions shall similarly apply to successive
consolidations, mergers, sales, transfers, or share exchanges.
(6) If a holder shall have given a Conversion Notice for shares
of Series A Convertible Preferred Stock, the Corporation shall issue and deliver
to such person certificates for the Common Stock and Warrants issuable upon such
conversion within three business days after such Conversion Notice is given and
the person converting shall be deemed to be the holder of record of the Common
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Stock and Warrants issuable upon such conversion, and all rights with respect to
the shares surrendered shall forthwith terminate except the right to receive the
Common Stock and Warrants or other securities, cash, or other assets as herein
provided. If a holder shall have given a Conversion Notice as provided herein,
the Corporation's obligation to issue and deliver the certificates for Common
Stock and Warrants shall be absolute and unconditional, irrespective of any
action or inaction by the converting holder to enforce the same, any waiver or
consent with respect to any provision thereof, the recovery of any judgment
against any person or any action to enforce the same, any failure or delay in
the enforcement of any other obligation of the Corporation to the holder of
record, or any setoff, counterclaim, recoupment, limitation or termination, or
any breach or alleged breach by the holder or any other person of any obligation
to the Corporation or any violation or alleged violation of law by the holder or
any other person, and irrespective of any other circumstance which might
otherwise limit such obligation of the Corporation to the holder in connection
with such conversion. If the Corporation fails to issue and deliver the
certificates for the Common Stock and Warrants to the holder converting shares
of Series A Convertible Preferred Stock pursuant to the first sentence of this
paragraph as and when required to do so, in addition to any other liabilities
the Corporation may have hereunder and under applicable law (1) the Corporation
shall pay or reimburse such holder on demand for all out-of-pocket expenses
including, without limitation, reasonable fees and expenses of legal counsel
incurred by such holder as a result of such failure, (2) the Conversion
Percentage applicable to such conversion shall be reduced by two percentage
points from the Conversion Percentage otherwise applicable to such conversion,
(3) the Ceiling Price applicable to such conversion shall be reduced by $.0954
(subject to equitable adjustments for stock splits, stock dividends,
combinations, recapitalizations, reclassifications and similar events occurring
or with respect to which "ex-" trading commences on or after the date of filing
of this Certificate of Designations with the Secretary of State of the State of
Delaware) from the Ceiling Price otherwise applicable to such conversion and (4)
such holder may by written notice (which may be given by mail, courier, personal
service or telephone line facsimile transmission) or oral notice (promptly
confirmed in writing) given at any time prior to delivery to such holder of the
certificates for the shares of Common Stock and Warrants issuable upon such
conversion of shares of Series A Convertible Preferred Stock, rescind such
conversion, whereupon such holder shall have the right to convert such shares of
Series A Convertible Preferred Stock thereafter in accordance herewith.
(7) No fractional shares of Common Stock or Warrants to purchase
fractional shares of Common Stock shall be issued upon conversion of Series A
Convertible Preferred Stock but, in lieu of any fraction of a share of Common
Stock to purchase fractional shares of Common Stock or Warrants which would
otherwise be issuable in respect of the aggregate number of such shares
surrendered for conversion at one time by the same holder, the Corporation at
its option (a) may pay in cash an amount equal to the product of (i) the
arithmetic average of the Closing Bid Price of a share of Common Stock on the
three consecutive trading days ending on the trading day immediately preceding
the Conversion Date and (ii) such fraction of a share or (b) may issue an
additional share of Common Stock or Warrant to purchase an additional share of
Common Stock.
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(8) The Conversion Amount shall be adjusted from time to time
under certain circumstances, subject to the provisions of Section 10(b)(1), as
follows:
(i) In case the Corporation shall issue rights or warrants on a
pro rata basis to all holders of the Common Stock entitling such holders to
subscribe for or purchase Common Stock on the record date referred to below at a
price per share less than the Current Price for such record date, then in each
such case the Conversion Amount in effect on such record date shall be adjusted
in accordance with the formula
C1 = C x O + N
-----
O + N X P
-----
M
where
C1 = the adjusted Conversion Amount
C = the current Conversion Amount
O = the number of shares of Common Stock outstanding on the record
date.
N = the number of additional shares of Common Stock issuable
pursuant to the exercise of such rights or warrants.
P = the offering price per share of the additional shares (which
amount shall include amounts received by the Corporation in
respect of the issuance and the exercise of such rights or
warrants).
M = the Current Price per share of Common Stock on the record date.
Such adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights or warrants. If
any or all such rights or warrants are not so issued or expire or terminate
before being exercised, the Conversion Amount then in effect shall be readjusted
appropriately.
(ii) In case the Corporation shall, by dividend or otherwise,
distribute to all holders of its Junior Stock (as hereinafter defined) evidences
of its indebtedness or assets (including securities, but excluding any warrants
or subscription rights referred to in subparagraph (i) above and any dividend or
distribution paid in cash out of the retained earnings of the Corporation), then
in each such case the Conversion Amount then in effect shall be adjusted in
accordance with the formula
C1 = C x M
---
M - F
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where
C1 = the adjusted Conversion Amount
C = the current Conversion Amount
M = the Current Price per share of Common Stock on the record date
mentioned below.
F = the aggregate amount of such cash dividend and/or the fair
market value on the record date of the assets or securities to be
distributed divided by the number of shares of Common Stock
outstanding on the record date. The Board of Directors shall
determine such fair market value, which determination shall be
conclusive.
Such adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution.
For purposes of this subparagraph (ii), "Junior Stock" shall include any class
of capital stock ranking junior as to dividends or upon liquidation to the
Series A Convertible Preferred Stock.
(iii) All calculations hereunder shall be made to the nearest
cent or to the nearest 1/100 of a share, as the case may be.
(iv) If at any time as a result of an adjustment made pursuant to
Section 10(b)(5), the holder of any Series A Convertible Preferred Stock
thereafter surrendered for conversion shall become entitled to receive
securities, cash, or assets other than Common Stock and Warrants, the number or
amount of such securities or property so receivable upon conversion shall be
subject to adjustment from time to time in a manner and on terms nearly
equivalent as practicable to the provisions with respect to the Common Stock
contained in subparagraphs (i) to (iii) above.
(9) Except as otherwise provided above in this Section 10, no
adjustment in the Conversion Amount shall be made in respect of any conversion
for share distributions or dividends theretofore declared and paid or payable on
the Common Stock.
(10) Whenever the Conversion Amount is adjusted as herein
provided, the Corporation shall send to each holder and each transfer agent, if
any, for the Series A Convertible Preferred Stock, the Warrants and the Common
Stock, a statement signed by the Chairman of the Board, the President, or any
Vice President of the Corporation and by its Treasurer or its Secretary or an
Assistant Secretary stating the adjusted Conversion Amount determined as
provided in this Section 10, and any adjustment so evidenced, given in good
faith, shall be binding upon all stockholders and upon the Corporation. Whenever
the Conversion Amount is adjusted, the Corporation will give notice by mail to
the holders of record of Series A Convertible Preferred Stock, which notice
shall be made within 15 days after the effective date of such adjustment and
shall state the adjustment and the Conversion Amount. Notwithstanding the
foregoing notice provisions, failure by the Corporation to give such notice or a
defect in such notice shall not affect the binding nature of such corporate
action of the Corporation.
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(11) Whenever the Corporation shall propose to take any of the
actions specified in Section 10(b)(5) or in subparagraphs (i) or (ii) of Section
10(b)(8) which would result in any adjustment in the Conversion Amount under
this Section 10(b), the Corporation shall cause a notice to be mailed at least
20 days prior to the date on which the books of the Corporation will close or on
which a record will be taken for such action, to the holders of record of the
outstanding Series A Convertible Preferred Stock on the date of such notice.
Such notice shall specify the action proposed to be taken by the Corporation and
the date as of which holders of record of the Common Stock shall participate in
any such actions or be entitled to exchange their Common Stock for securities or
other property, as the case may be. Failure by the Corporation to mail the
notice or any defect in such notice shall not affect the validity of the
transaction.
(c) FORM OF WARRANT. The Warrants issuable upon conversion of
shares of Series A Convertible Preferred Stock shall be in the following form:
[FORM OF WARRANT]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS. THE SALE TO THE HOLDER OF
THIS SECURITY AND OF THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
SECURITY ARE NOT COVERED BY A REGISTRATION STATEMENT UNDER THE ACT OR
REGISTRATION UNDER STATE SECURITIES LAWS. THIS SECURITY HAS BEEN ACQUIRED, AND
SUCH SHARES OF COMMON STOCK MUST BE ACQUIRED, FOR INVESTMENT ONLY AND MAY NOT BE
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF REGISTRATION OF THE RESALE
THEREOF OR AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
Right to Purchase 1 Shares of
Common Stock of V-ONE Corporation
V-ONE CORPORATION
COMMON STOCK PURCHASE WARRANT
V-ONE CORPORATION, a Delaware corporation (the "Company") hereby
certifies that, for value received, [FILL IN NAME] or registered assigns (the
"Holder"), is entitled, subject to the terms set forth below, to purchase from
the Company at any time or from time to time after the date hereof, and before
- - ----------------
1 Insert appropriate number in accordance with Section 10(a) and 10(b) of the
Certificate of Designations
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<PAGE>
5:00 p.m., New York City time, on the Expiration Date (as defined herein), *
fully paid and nonassessable shares of Common Stock, $.001 par value, of the
Company at a purchase price per share equal to the Purchase Price (as
hereinafter defined). The number of such shares of Common Stock and the Purchase
Price are subject to adjustment as provided in this Warrant.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Business Day" as used herein shall mean a day on
which the New York Stock Exchange is open for business.
(b) The term "Common Stock" includes the Company's Common Stock,
$.001 par value per share, as authorized on the date hereof, and any
other securities into which or for which the Common Stock may be
converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
(c) The term "Company" shall include V-ONE Corporation and any
corporation that shall succeed to or assume the obligation of V-ONE
Corporation hereunder.
(d) The term "Expiration Date" refers to [INSERT DATE WHICH IS 5
YEARS AFTER CONVERSION DATE IN RESPECT OF WHICH WARRANT IS ISSUED].
(e) The term "Other Securities" refers to any stock (other than
Common Stock) and other securities of the Company or any other person
(corporate or otherwise) which the Holder of this Warrant at any time
shall be entitled to receive, or shall have received, on the exercise of
this Warrant, in lieu of or in addition to Common Stock, or which at any
time shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities pursuant to Section 4.
(f) The term "Purchase Price" shall mean $4.77, subject to
adjustment as provided in this Warrant.
1. EXERCISE OF WARRANT.
1.1 EXERCISE AT OPTION OF HOLDER. (a) This Warrant may be
exercised by the Holder hereof in full or in part at any time or from time to
time during the exercise period specified in the first paragraph hereof until
the Expiration Date by surrender of this Warrant and the subscription form
annexed hereto (duly executed) by such Holder, to the Company at its principal
office, accompanied by payment, in cash or by certified or official bank check
payable to the order of the Company in the amount obtained by multiplying (a)
the number of shares of Common Stock designated by the Holder in the
subscription form by (b) the Purchase Price then in effect. On any partial
exercise the Company will forthwith issue and deliver to or upon the order of
the Holder hereof a new Warrant or Warrants of like tenor, in the name of the
Holder hereof or as such Holder (upon payment by such Holder of any applicable
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transfer taxes) may request, providing in the aggregate on the face or faces
thereof for the purchase of the number of shares of Common Stock for which such
Warrant or Warrants may still be exercised.
(b) Notwithstanding any other provision of this Warrant, in no
event shall the holder of this Warrant be entitled at any time to purchase a
number of shares of Common Stock on exercise of this Warrant in excess of that
number of shares upon purchase of which the sum of (1) the number of shares of
Common Stock beneficially owned by such holder and any person whose beneficial
ownership of shares of Common Stock would be aggregated with such holder's
beneficial ownership of shares of Common Stock for purposes of Section 13(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
Regulation 13D-G thereunder (each an "Aggregated Person" and collectively, the
"Aggregated Persons") (other than shares of Common Stock deemed beneficially
owned through the ownership of the unexercised portion of this Warrant, any
warrant containing a restriction similar to this Section 1.1(b) and shares of
Series A Convertible Preferred Stock, $.001 par value, of the Company (the
"Series A Convertible Preferred Stock") beneficially owned by all such
Aggregated Persons) and (2) the number of shares of Common Stock issuable upon
exercise of the portion of this Warrant with respect to which the determination
in this sentence is being made, would result in beneficial ownership by any
Aggregated Person of more than 4.9% of the outstanding shares of Common Stock.
For purposes of the immediately preceding sentence, beneficial ownership shall
be determined in accordance with Section 13(d) of the Exchange Act and
Regulation 13D-G thereunder, except as otherwise provided in clause (1) of the
immediately preceding sentence.
1.2 NET ISSUANCE. Notwithstanding anything to the contrary
contained in Section 1.1, the Holder may elect to exercise this Warrant in whole
or in part by receiving shares of Common Stock equal to the net issuance value
(as determined below) of this Warrant, or any part hereof, upon surrender of
this Warrant at the principal office of the Company together with notice of such
election, in which event the Company shall issue to the Holder a number of
shares of Common Stock computed using the following formula:
X = Y (A-B)
-------
A
Where: X = the number of shares of Common Stock to be issued to the
Holder
Y = the number of shares of Common Stock as to which
this Warrant is to be exercised
A = the current fair market value of one share of
Common Stock calculated as of the last trading day
immediately preceding the exercise of this Warrant
B = the Purchase Price
As used herein, current fair market value of Common Stock as of a
specified date shall mean with respect to each share of Common Stock the average
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of the closing bid prices of the Common Stock on the principal securities market
on which the Common Stock may at the time be traded over a period of five
Business Days consisting of the day as of which the current fair market value of
a share of Common Stock is being determined (or if such day is not a Business
Day, the Business Day next preceding such day) and the four consecutive Business
Days prior to such day. If on the date for which current fair market value is to
be determined the Common Stock is not eligible for trading on any securities
market, the current fair market value of Common Stock shall be the highest price
per share which the Company could then obtain from a willing buyer (not a
current employee or director) for shares of Common Stock sold by the Company,
from authorized but unissued shares, as determined in good faith by the Board of
Directors of the Company, unless prior to such date the Company has become
subject to a merger, acquisition or other consolidation pursuant to which the
Company is not the surviving party, in which case the current fair market value
of the Common Stock shall be deemed to be the value received by the holders of
the Company's Common Stock for each share thereof pursuant to the Company's
acquisition.
2. DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE. As soon as
practicable after the exercise of this Warrant, and in any event within three
days thereafter, the Company at its expense (including the payment by it of any
applicable issue or stamp taxes) will cause to be issued in the name of and
delivered to the Holder hereof, or as such Holder (upon payment by such Holder
of any applicable transfer taxes) may direct, a certificate or certificates for
the number of fully paid and nonassessable shares of Common Stock (or Other
Securities) to which such Holder shall be entitled on such exercise, in such
denominations as may be requested by such Holder, plus, in lieu of any
fractional share to which such Holder would otherwise be entitled, cash equal to
such fraction multiplied by the then current fair market value (as determined in
accordance with subsection 1.2) of one full share, together with any other stock
or other securities any property (including cash, where applicable) to which
such Holder is entitled upon such exercise pursuant to Section 1 or otherwise.
Upon exercise of this Warrant as provided herein, the Company's obligation to
issue and deliver the certificates for Common Stock shall be absolute and
unconditional, irrespective of any action or inaction by the Holder to enforce
the same, any waiver or consent with respect to any provision thereof, the
recovery of any judgment against any person or any action to enforce the same,
any failure or delay in the enforcement of any other obligation of the Company
to the Holder, or any setoff, counterclaim, recoupment, limitation or
termination, or any breach or alleged breach by the Holder or any other person
of any obligation to the Company or any violation or alleged violation of law by
the Holder or any other person, and irrespective of any other circumstance which
might otherwise limit such obligation of the Company to the Holder in connection
with such exercise. If the Company fails to issue and deliver the certificates
for the Common Stock to the Holder pursuant to the first sentence of this
paragraph as and when required to do so, in addition to any other liabilities
the Company may have hereunder and under applicable law, the Company shall pay
or reimburse the Holder on demand for all out-of-pocket expenses including,
without limitation, fees and expenses of legal counsel incurred by the Holder as
a result of such failure.
3. ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK, PROPERTY, ETC.;
RECLASSIFICATION, ETC. In case at any time or from time to time, all the holders
of Common Stock (or Other Securities) shall have received, or (on or after the
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record date fixed for the determination of stockholders eligible to receive)
shall have become entitled to receive, without payment therefor,
(a) other or additional stock or other securities or property
(other than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of
earnings or earned surplus of the Company), or
(c) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate
rearrangement,
other than additional shares of Common Stock (or Other Securities) issued as a
stock dividend or in a stock-split (adjustments in respect of which are provided
for in Section 5), then and in each such case the Holder of this Warrant, on the
exercise hereof as provided in Section 1, shall be entitled to receive the
amount of stock and other securities and property (including cash in the cases
referred to in subdivisions (b) and (c) of this Section 3) which such Holder
would hold on the date of such exercise if on the date hereof the Holder had
been the holder of record of the number of shares of Common Stock called for on
the face of this Warrant and had thereafter, during the period from the date
hereof to and including the date of such exercise, retained such shares and all
such other or additional stock and other securities and property (including cash
in the case referred to in subdivisions (b) and (c) of this Section 3)
receivable by the Holder as aforesaid during such period, giving effect to all
adjustments called for during such period by Section 4.
4. EXERCISE UPON REORGANIZATION, CONSOLIDATION, MERGER, ETC. In
case at any time or from time to time, the Company shall (a) effect a
reorganization, (b) consolidate with or merge into any other person, (c) effect
an exchange of outstanding shares of the Company for securities of any other
person or (d) transfer all or substantially all of its properties or assets to
any other person under any plan or arrangement contemplating the dissolution of
the Company, then, in each such case, as a condition of such reorganization,
consolidation, merger, share exchange, sale or conveyance, the Company shall
cause effective provisions to be made so that the Holder shall have the right
thereafter, by exercising this Warrant (in lieu of the shares of Common Stock of
the Company purchasable and receivable upon exercise of the rights represented
hereby immediately prior to such transaction) to purchase the kind and amount of
shares of stock and other securities and property (including cash) receivable
upon such reorganization, consolidation, merger, share exchange, sale or
conveyance by a holder of the number of shares of Common Stock that might have
been received upon exercise of this Warrant immediately prior to such
reorganization, consolidation, merger, share exchange, sale or conveyance;
PROVIDED, HOWEVER, that in the event (a) the value of the stock, securities or
other assets or property (determined in good faith by the Board of Directors of
the Company) issuable or payable with respect to one share of Common Stock of
the Company purchasable and receivable upon the exercise of the rights
represented hereby immediately prior to such transaction is in excess of the
Purchase Price hereof in effect at the time of such reorganization,
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consolidation, merger, share exchange, sale or conveyance (after giving effect
to any adjustment in such Purchase Price required to be made under the terms of
this Warrant), and (b) the securities, if any, to be received in such
reorganization, consolidation, merger, share exchange, sale or conveyance are
publicly traded, then if the Company gives the Holder at least 20 Business Days
(or such lesser period as the Company gives notice of such transaction to the
holders of the outstanding shares of Common Stock) prior notice of such
reorganization, merger, share exchange, sale or conveyance this Warrant shall
expire unless exercised prior to such reorganization, consolidation, merger,
share exchange, sale or conveyance. Any such provision shall include provisions
for adjustments in respect of such shares of stock and other securities and
property that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Warrant. The provisions of this Section shall
apply to successive reorganizations, consolidations, mergers, share exchanges,
sales and conveyances.
5. ADJUSTMENT FOR EXTRAORDINARY EVENTS. In the event that the
Company shall (i) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (ii) subdivide or reclassify its
outstanding shares of Common Stock, or (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Purchase Price then in effect. The
Purchase Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 5.
The Holder of this Warrant shall thereafter, on the exercise hereof as provided
in Section 1, be entitled to receive that number of shares of Common Stock
determined by multiplying the number of shares of Common Stock which would be
issuable on such exercise as of immediately prior to such issuance by a fraction
of which (i) the numerator is the Purchase Price in effect immediately prior to
such issuance and (ii) the denominator is the Purchase Price in effect on the
date of such exercise.
6. FURTHER ASSURANCES. The Company will take all action that may
be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of stock, free from all taxes, liens
and charges with respect to the issue thereof, on the exercise of all or any
portion of this Warrant from time to time outstanding.
7. NOTICES OF RECORD DATE, ETC. In the event of
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend on, or any right to subscribe
for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company
or any transfer of all or substantially all of the assets of the Company
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to or consolidation or merger of the Company with or into any other
person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then and in each such event the Company will mail or cause to be mailed to the
Holder, at least ten days prior to such record date, a notice specifying (i) the
date on which any such record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock (or Other
Securities) shall be entitled to exchange their shares of Common Stock (or Other
Securities) for securities or other property deliverable on such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up, and (iii) the amount and character of
any stock or other securities, or rights or options with respect thereto,
proposed to be issued or granted, the date of such proposed issue or grant and
the persons or class of persons to whom such proposed issue or grant is to be
offered or made. Such notice shall also state that the action in question or the
record date is subject to the effectiveness of a registration statement under
the Securities Act of 1933, as amended (the "Securities Act"), or a favorable
vote of stockholders if either is required. Such notice shall be mailed at least
ten days prior to the date specified in such notice on which any such action is
to be taken or the record date, whichever is earlier.
8. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF WARRANTS.
The Company will at all times reserve and keep available, solely for issuance
and delivery on the exercise of this Warrant, all shares of Common Stock (or
Other Securities) from time to time issuable on the exercise of this Warrant.
9. TRANSFER OF WARRANT. This Warrant shall inure to the benefit
of the successors to and assigns of the Holder. This Warrant and all rights
hereunder, in whole or in part, is registrable at the office or agency of the
Company referred to below by the Holder hereof in person or by his duly
authorized attorney, upon surrender of this Warrant properly endorsed.
10. REGISTER OF WARRANTS. The Company shall maintain, at the
principal office of the Company (or such other office as it may designate by
notice to the Holder hereof), a register in which the Company shall record the
name and address of the person in whose name this Warrant has been issued, as
well as the name and address of each successor and prior owner of such Warrant.
The Company shall be entitled to treat the person in whose name this Warrant is
so registered as the sole and absolute owner of this Warrant for all purposes.
11. EXCHANGE OF WARRANT. This Warrant is exchangeable, upon the
surrender hereof by the Holder hereof at the office or agency of the Company
referred to in Section 10, for one or more new Warrants of like tenor
representing in the aggregate the right to subscribe for and purchase the number
of shares of Common Stock which may be subscribed for purchase hereunder, each
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of such new Warrants to represent the right to subscribe for and purchase such
number of shares as shall be designated by said Holder hereof at the time of
such surrender.
12. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
13. WARRANT AGENT. The Company may, by written notice to the
Holder, appoint an agent having an office in the United States of America, for
the purpose of issuing Common Stock (or Other Securities) on the exercise of
this Warrant pursuant to Section 1, exchanging this Warrant pursuant to Section
11, and replacing this Warrant pursuant to Section 12, or any of the foregoing,
and thereafter any such issuance, exchange or replacement, as the case may be,
shall be made at such office by such agent.
14. REMEDIES. The Company stipulates that the remedies at law of
the Holder of this Warrant in the event of any default or threatened default by
the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
15. NO RIGHTS OR LIABILITIES AS A STOCKHOLDER. This Warrant shall
not entitle the Holder hereof to any voting rights or other rights as a
stockholder of the Company. No provision of this Warrant, in the absence of
affirmative action by the Holder hereof to purchase Common Stock, and no mere
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of such Holder for the Purchase Price or as a stockholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.
16. NOTICES, ETC. All notices and other communications from the
Company to the registered Holder of this Warrant shall be mailed by first class
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such Holder or at the address shown for such Holder on
the register of Warrants referred to in Section 10.
17. INVESTMENT REPRESENTATIONS. By acceptance of this Warrant,
the Holder represents to the Company that this Warrant is being acquired for the
Holder's own account and for the purpose of investment and not with a view to,
or for sale in connection with, the distribution thereof, nor with any present
intention of distributing or selling the Warrant or the Common Stock issuable
upon exercise of the Warrant. The Holder acknowledges that the Holder has been
afforded the opportunity to meet with the management of the Company and to ask
questions of, and receive answers from, such management and the Company's
counsel about the business and affairs of the Company and concerning the terms
and conditions of the offering of this Warrant, and to obtain any additional
information, to the extent that the Company possessed such information or could
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acquire it without unreasonable effort or expense, necessary to verify the
accuracy of the information otherwise obtained by or furnished to the Holder in
connection with the offering of this Warrant. The Holder asserts that it may be
considered to be a sophisticated investor, is familiar with the risks inherent
in speculative investments such as in the Company, has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of the investment in this Warrant and the Common Stock
issuable upon exercise of this Warrant, and is able to bear the economic risk of
the investment. The Holder acknowledges and agrees that this Warrant and, except
as otherwise provided in the Registration Rights Agreement between the original
Holder of the Series A Convertible Preferred Stock and the Company, as amended
or modified from time to time (the "Registration Rights Agreement"), the Common
Stock issuable upon exercise of this Warrant (if any) have not been (and at the
time of acquisition by the Holder, will not have been or will not be),
registered under the Securities Act or under the securities laws of any state,
in reliance upon certain exemptive provisions of such statutes. The Holder
recognizes and acknowledges that such claims of exemption are based, in part,
upon the representations of the Holder contained herein. The Holder further
recognizes and acknowledges that because this Warrant and, except as provided in
the Registration Rights Agreement, the Common Stock issuable upon exercise of
this Warrant (if any) are unregistered, they may not be eligible for resale, and
may only be resold in the future pursuant to an effective registration statement
under the Securities Act and any applicable state securities laws, or pursuant
to a valid exemption from such registration requirements. Unless the shares of
Common Stock have theretofore been registered for resale or are otherwise exempt
from registration under the Securities Act, the Company may require, as a
condition to the issuance of Common Stock upon the exercise of this Warrant (i)
in the case of an exercise in accordance with Section 1.1 hereof, a confirmation
as of the date of exercise of the Holder's representations pursuant to this
Section 17 or (ii) in the case of an exercise in accordance with Section 1.2
hereof, an opinion (in form and substance reasonably satisfactory to the
Company) of counsel reasonably satisfactory to the Company that the shares of
Common Stock to be issued upon such exercise may be issued without registration
under the Securities Act.
18. LEGEND. Unless theretofore registered for resale under the
Securities Act or otherwise exempt from registration under the Securities Act
when issued upon exercise of this Warrant and when resold thereafter, each
certificate for shares issued upon exercise of this Warrant shall bear the
following legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
securities have been acquired for investment and may not be sold,
transferred or assigned in the absence of an effective
registration statement for the securities under the Securities
Act of 1933, as amended, or an opinion of counsel reasonably
acceptable to the Company that registration is not required under
said Act.
19. MISCELLANEOUS. This Warrant and any terms hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement or such change, waiver, discharge
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or termination is sought. This Warrant shall be construed and enforced in
accordance with and governed by the internal laws of the State of New York. The
headings in this Warrant are for purposes of reference only, and shall not limit
or otherwise affect any of the terms hereof. The invalidity or unenforceability
of any provision hereof shall in no way affect the validity or enforceability of
any other provision.
IN WITNESS WHEREOF, V-ONE Corporation has caused this Warrant to
be executed on its behalf by one of its officers thereunto duly authorized.
Dated: V-ONE CORPORATION
By: ___________________________
Name:
Title:
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO V-ONE CORPORATION
1. The undersigned Holder of the attached original, executed Warrant
hereby elects to exercise its purchase right under such Warrant with respect to
______________ shares of Common Stock, as defined in the Warrant, of V-ONE
Corporation, a Delaware corporation (the "Company").
2. The undersigned Holder (check one):
(a) elects to pay the aggregate purchase price for such shares of
Common Stock (the "Exercise Shares") (i) by lawful money of the
United States or the enclosed certified or official bank check
payable in United States dollars to the order of the Company in
the amount of $___________, or (ii) by wire transfer of United
States funds to the account of the Company in the amount of
$____________, which transfer has been made before or
simultaneously with the delivery of this Form of Subscription
pursuant to the instructions of the Company;
or
(b) elects to receive shares of Common Stock having a value equal to
the value of the Warrant calculated in accordance with Section
1.2 of the Warrant.
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3. Please issue a stock certificate or certificates representing the
appropriate number of shares of Common Stock in the name of the undersigned or
in such other names as is specified below:
Name:
---------------------------------------
Address:
-------------------------------------
-------------------------------------
Dated:____________ ___, _____ ____________________________
(Signature must conform to name of
Holder as specified on the face of the
Warrant)
---------------------------------------
---------------------------------------
(Address)
[END OF FORM OF WARRANT]
SECTION 11. REDEMPTION AT OPTION OF HOLDERS. (a) Each holder of
shares of Series A Convertible Preferred Stock shall be entitled, at such
holder's option, by notice to the Corporation given within 20 days after the
occurrence of an Optional Redemption Event, to require the Corporation to redeem
all or a portion of such shares following the occurrence of an Optional
Redemption Event.
(b) To exercise the optional redemption right, a holder of shares
of Series A Convertible Preferred Stock shall deliver to the Corporation a
notice of redemption (an "Optional Redemption Notice"), accompanied by the
certificate for the shares of Series A Convertible Preferred Stock to be
redeemed. Any Optional Redemption Notice shall state (1) that the holder
delivering such notice is thereby requiring the Corporation to redeem shares of
Series A Convertible Preferred Stock pursuant to this Section 11, (2) the
Optional Redemption Event giving rise to such redemption, and (3) the number of
shares of Series A Convertible Preferred Stock held by such holder which are to
be redeemed. In no event later than five business days following receipt of such
notice by the Corporation, the Corporation shall make payment in immediately
available funds of the Optional Redemption Price applicable on the date of such
redemption with respect to the shares of Series A Convertible Preferred Stock to
be redeemed to or upon the order of such holder as specified by such holder in
the Optional Redemption Notice. Upon redemption of less than all of the shares
of Series A Convertible Preferred Stock evidenced by a particular certificate,
promptly, but in no event later than three business days after surrender of such
certificate to the Corporation, the Corporation shall issue a replacement
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certificate for the shares of Series A Convertible Preferred Stock which have
not been redeemed. Only whole shares of Series A Convertible Preferred Stock may
be redeemed.
SECTION 12. VOTING RIGHTS. Except as otherwise required by law or
expressly provided herein, shares of Series A Convertible Preferred Stock shall
not be entitled to vote on any matter.
The affirmative vote or consent of the holders of a majority of
the outstanding shares of the Series A Convertible Preferred Stock, voting
separately as a class, will be required for (1) any amendment, alteration, or
repeal, whether by merger or consolidation or otherwise, of the Corporation's
Amended and Restated Certificate of Incorporation if the amendment, alteration,
or repeal materially and adversely affects the powers, preferences, or special
rights of the Series A Convertible Preferred Stock, or (2) the creation and
issuance of any Senior Dividend Stock or Senior Liquidation Stock; provided,
HOWEVER, that any increase in the authorized Preferred Stock of the Corporation
or the creation and issuance of any stock which is both Junior Dividend Stock
and Junior Liquidation Stock shall not be deemed to affect materially and
adversely such powers, preferences, or special rights and any such increase or
creation and issuance may be made without any such vote by the holders of Series
A Convertible Preferred Stock except as otherwise required by law.
SECTION 13. OUTSTANDING SHARES. For purposes of this Certificate
of Designations, all shares of Series A Convertible Preferred Stock shall be
deemed outstanding except (i) from the date of surrender of certificates
representing shares of Series A Convertible Preferred Stock for conversion into
Common Stock and Warrants, all shares of Series A Convertible Preferred Stock
converted into Common Stock and Warrants; (ii) from the date of registration of
transfer, all shares of Series A Convertible Preferred Stock held of record by
the Corporation or any subsidiary or Affiliate (as defined herein) of the
Corporation and (iii) from the Share Limitation Redemption Date, Redemption Date
or Optional Redemption Date all shares of Series A Convertible Preferred Stock
which are redeemed, so long as in each case the Share Limitation Redemption
Price, the Redemption Price or the Optional Redemption Price, as the case may
be, of such shares of Series A Convertible Preferred Stock shall have been paid
by the Corporation as and when required hereby. For the purposes of this
Certificate of Designations, "Affiliate" means any person, other than the
original holders of the shares of Series A Convertible Preferred Stock, directly
or indirectly controlling or controlled by or under direct or indirect common
control with the Corporation. "Control" is the power to direct the management
and policies of a person, directly or through one or more intermediaries,
whether through the ownership of voting securities, by contract, or otherwise.
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IN WITNESS WHEREOF, V-ONE Corporation has caused this certificate
to be signed by Charles B. Griffis, its Sr. Vice President and CFO, as of the
8th day of December, 1997.
V-ONE CORPORATION
By /S/ CHARLES B. GRIFFIS
-----------------------------
Charles B. Griffis
Sr. Vice President & CFO
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AMENDED AND RESTATED BYLAWS
OF
V-ONE CORPORATION
as of November 21, 1997
ARTICLE I.
MEETINGS OF SHAREHOLDERS
Section 1.1 PLACES OF MEETINGS. All meetings of the shareholders shall
be held at such place, either within or without the State of Delaware, as from
time to time may be fixed by the Board of Directors.
Section 1.2 ANNUAL MEETING. The annual meeting of the shareholders for
the election of Directors and transaction of such other business as may come
before the meeting shall be held at such date and time as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting. Unless otherwise designated by the Board of Directors, the annual
meeting shall be held on the first Friday of the month of June.
Section 1.3 SPECIAL MEETINGS. A special meeting of the shareholders for
any purpose or purposes may be called at any time by the President or the
Chairman of the Board or a majority of the Board of Directors as prescribed by
statute.
Section 1.4 NOTICE OF MEETINGS. Written notice of all meetings shall be
given, stating the place, date, and hour of the meeting and stating the place
within the city or other municipality or community at which the list of
stockholders of the Corporation may be examined. The notice of a meeting shall
in all instances state the purpose or purposes for which the meeting is called.
If any action is proposed to be taken which would, if taken, entitle
stockholders to receive payment for their shares of stock, the notice shall
include a statement of that purpose and to that effect. Except as otherwise
provided by the General Corporation Law of the State of Delaware, a copy of the
notice of any meeting shall be given, personally or by telex, telefax,
telephone, telegraph or postal mail, not less than ten days nor more than sixty
days before the date of the meeting, unless the lapse of the prescribed period
of time shall have been waived, and directed to each stockholder at his record
address or at such other address which he/she may have furnished by request in
writing to the Secretary of the Corporation. Notice by mail shall be deemed to
be given when deposited, with postage thereon prepaid, in the U.S. mail. If a
meeting is adjourned to another time, not more than thirty days hence, and/or to
another place, and if an announcement of the adjourned time and/or place is made
at the meeting, it shall not be necessary to give notice of the adjourned
meeting. Notice need not be given to any stockholder who submits a written
waiver of notice by him/her before or after the time stated therein. Attendance
of a person at a meeting of stockholders shall constitute a waiver of notice of
such meeting, except when the stockholder attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any meeting of the
stockholders need be specified in any written waiver of notice.
<PAGE>
Section 1.5 QUORUM. Any number of shareholders together holding at least
a majority of the outstanding shares of stock entitled to vote with respect to
the business to be transacted, who shall be present in person or represented by
proxy at any meeting duly called, shall constitute a quorum for the transaction
of business. If less than quorum shall be in attendance at the time for which a
meeting shall have been called, the meeting may be adjourned from time to time
by a majority of the shareholders present or represented by proxy without notice
other than by announcement at the meeting.
Section 1.6 PROXIES AND VOTING. Each shareholder shall, at every meeting
of the shareholders, be entitled to one vote in person or by proxy for each
share of capital stock having voting power held by such shareholder as of the
record date set for the meeting. All action requiring the approval of the
shareholders shall be authorized by a majority of the votes cast except where
the General Corporation Laws of the State of Delaware prescribes a different
percentage of votes and/or a different exercise of voting power; provided,
however, that directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. A proxy shall be authorized by an instrument
in writing, dated and signed by the shareholder entitled to vote or his duly
authorized attorney-in-fact. The original or a facsimile of the proxy shall be
filed with the Secretary. All voting may be taken either by voice vote or by
written ballots, except where otherwise required by law. No proxy shall be voted
after three years from its date, unless the proxy provides for a longer period.
Section 1.7 INSPECTORS AND JUDGES. The person presiding at any meeting
of shareholders may, but need not, appoint one or more inspectors or judges.
Each inspector or judge, if any, before entering upon the discharge of his/her
duties, shall take and sign an oath faithfully to execute the duties of
inspector or judge at such meeting with strict impartiality and according to the
best of his/her ability. The inspectors or judges, if any, shall determine the
<PAGE>
number of shares of stock outstanding and the voting power of each, the shares
of stock represented at the meeting, the existence of a quorum, the validity and
effect of proxies, and shall receive votes, ballots or consents, hear and
determine all challenges and questions arising in connection with the right to
vote, count and tabulate all votes, ballots or consents, determine the result,
and do such acts as are proper to conduct the election or vote with fairness to
all shareholders. On request of the person presiding at the meeting, the
inspector or inspectors or judge or judges, if any, shall make a report in
writing of any challenge, question or matter determined by him/her or them and
execute a certificate of any fact found by him/her or them.
Section 1.8 WRITTEN CONSENT. Any action required or permitted by law to
be taken at a shareholders' meeting may be taken without a meeting, without
action by the Board of Directors, without prior notice, and without a vote, if
consents in writing setting forth the action are signed by all shareholders
entitled to vote upon the action. Written consents, in order to be valid, must
be delivered by postal mail or telefax to the Secretary of the Corporation for
inclusion in the minutes or filing in the corporate minutes. Every written
consent shall bear the signature of each shareholder who makes the consent and
the date upon which the consent was signed.
ARTICLE II.
DIRECTORS
Section 2.1 POWERS OF DIRECTORS. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors, which shall exercise all powers of the Corporation, except as
otherwise expressly provided by law, the Certificate of Incorporation, or these
Bylaws.
Section 2.2 NUMBER OF DIRECTORS. The number of Directors which shall
constitute the Board of Directors shall be not more than seven. The first Board
of Directors shall consist of the following three Directors: James F. Chen,
Charles Chen, and H.H. Cheng. Thereafter, within the limits specified above, the
number of Directors shall be determined by resolution of the Board of Directors
at the annual meeting.
Section 2.3 ELECTION OF DIRECTORS. Directors shall be elected at each
annual meeting of shareholders to succeed those Directors whose terms have
expired and to fill any vacancies then existing. Directors shall hold their
offices for terms of one year and until their successors are elected on a
staggered basis as provided for in the Amended and Restated Certificate of
Incorporation.
Section 2.4 ADVANCE NOTICE OF NOMINATION OF DIRECTORS. Unless a Director
<PAGE>
is nominated by a member of the Board of Directors, no person shall be nominated
or elected as a Director unless the Board receives written notice of his
nomination not less than 120 calendar days in advance of the anniversary date of
the Corporation's previous year's annual meeting of stockholders.
Section 2.5 NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Newly created
directorships resulting from an increase in the authorized number of Directors
shall be filled by vote of a majority of the Directors then in office and shall
be distributed among the three classes of Directors so that, as nearly as
possible, each class will consist of an equal number of Directors. Vacancies in
the Board of Directors however occurring shall be filled by a majority of the
Directors then in office, although less than a quorum, or by a sole remaining
Director. A Director chosen to fill a vacancy shall have the same term as that
Director's predecessor.
Section 2.6 REMOVAL AND RESIGNATION OF DIRECTORS. Directors may be
removed from office only for cause at a meeting called expressly for that
purpose by the vote of shareholders holding not less than 67% of the shares
entitled to vote at an election of Directors or by a vote of a majority of the
Directors. Directors may resign at any time upon written notice to the
Corporation. Such resignation shall become effective upon receipt and need not
be accepted by the Board to become effective.
ARTICLE III.
BOARD OF DIRECTORS' MEETINGS
Section 3.1 REGULAR MEETINGS. The first meeting of the Board of
Directors shall be held at such time and place as shall be fixed by the vote of
the shareholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected Directors in order legally to constitute the
meeting, provided a quorum shall be present, or it may convene at such place and
time as shall be fixed by the consent in writing of all the Directors.
Thereafter regular meetings of the Board of Directors shall be held at such time
and place as the Board of Directors shall from time to time determine. No notice
shall be required for any such regular meetings.
Section 3.2 SPECIAL MEETINGS. Special meetings of the Board of
Directors, or the reconvening of any regular meeting, may be called by one-third
of the Directors then in office, or by the President or Chairman of the Board,
by giving: (1) no less than one day's actual notice to each Director by oral
communication, computer e-mail, telegram, telefax or telex; or (2) no less than
10 days' notice to each Director by registered letter.
<PAGE>
Section 3.3 PARTICIPATION IN MEETINGS BY TELEPHONE. Members of the Board
of Directors, or any Committee thereof, may participate in meetings by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other and be heard.
Section 3.4 UNANIMOUS WRITTEN CONSENT. Any action required or permitted
to be taken at any meeting of the Board of Directors, or of any Committee
thereof, may be taken without a meeting if all the members of the Board of
Directors or Committee consent thereto in writing and the writing is filed in
the minute book of the Corporation.
Section 3.5 QUORUM. Except as otherwise provided in these Bylaws, a
majority of the Directors in office shall constitute a quorum for the
transaction of business, and the vote of a majority of the Directors present at
any meeting at which a quorum is present shall be the act of the Board of
Directors. If a quorum shall fail to attend any meeting, a majority of those
Directors present may adjourn and reconvene the meeting at another place, date,
or time, without further notice other than an announcement at the originally
scheduled meeting.
Section 3.6 CONDUCT OF BUSINESS. The Board of Directors shall have the
authority to make, and from time to time to alter, amend and supplement, rules
of conduct for its own meetings. Any Director shall have the right to put any
item on the agenda of any meeting of the Board of Directors.
ARTICLE IV.
COMMITTEES
Section 4.1 ESTABLISHMENT. The Board of Directors, by resolution adopted
by a majority of the number of Directors fixed by these Bylaws, may establish
such Committees of the Board as it may deem advisable, consisting of not less
than two Directors; and the members, terms and authority of such Committees
shall be as set forth in the resolutions establishing the same; provided,
however, no Committee of the Board of Directors shall have the power to (1)
amend the Certificate of Incorporation; (2) adopt an agreement of merger or
consolidation; (3) recommend to the shareholders the sale, lease or exchange of
all or substantially all of the Corporation's assets; (4) recommend to the
shareholders a dissolution of the Corporation or a revocation of a dissolution;
(5) amend the Bylaws of the Corporation; (6) declare a dividend; (7) authorize
the issuance of stock; (8) change the number of Directors or fill a vacancy in
the Board of Directors or in any Committee; or (9) perform any other function
prohibited by law. Persons who are not directors may attend and participate in
Committee meetings in an advisory capacity at the invitation of the Committee,
but they may not vote.
<PAGE>
The Board of Directors may establish rules and regulations for the
conduct of the proceedings of any Committee and may appoint the chairman of the
Committee and a secretary of the Committee. To the extent that the Board of
Directors does not exercise these powers of appointment, they may be exercised
by the Committee, subject to the power of the Board of Directors to change the
Committee's action. Each Committee may be terminated at the will of the Board of
Directors.
Section 4.2 MEETINGS. Regular and special meetings of any Committee
established pursuant to this Article may be called and held subject to the same
requirements with respect to time, place and notice as are specified in these
Bylaws for regular and special meetings of the Board of Directors.
Section 4.3 QUORUM AND MANNER OF ACTING. A majority of the members of
any Committee serving at the time of any meeting thereof shall constitute a
quorum for the transaction of business at such meeting. The action of a majority
of those members present at a Committee meeting at which a quorum is present
shall constitute the act of the Committee.
Section 4.4 TERM OF OFFICE. Members of any Committee shall be elected as
above provided and shall hold office so long as they serve as Directors or until
their successors are elected by the Board of Directors or until such Committee
is dissolved by the Board of Directors.
Section 4.5 RESIGNATION AND REMOVAL. Any member of a Committee may
resign at any time by giving written notice of the member's intention to do so
to the President, the Chairman of the Board or the Secretary of the Corporation,
or may be removed, with or without cause, at any time by such vote of the Board
of Directors as would suffice for the member's election.
Section 4.6 VACANCIES. Any vacancy occurring in a Committee resulting
from any cause whatever may be filled by a majority of the number of Directors
fixed by these Bylaws or by a majority of the remaining Committee members.
ARTICLE V.
OFFICERS
Section 5.1 GENERAL. The executive officers of the Corporation shall be
chosen by the Board of Directors and shall be a Chairman of the Board and Chief
Executive Officer, a President, a Treasurer, a Secretary, and such
Vice-Presidents as the Board of Directors may from time to time determine. Other
offices may be established by the Board of Directors from time to time. Any
<PAGE>
number of offices may be held by the same person. Any number of offices may be
left temporarily vacant at the option of the Board of Directors. The officers of
the Corporation shall be reaffirmed or replaced at the first meeting of the
Board of Directors subsequent to each annual meeting of shareholders, unless the
Board of Directors determines, upon appointing an officer, that he/she shall
serve for a different term. All executive officers have a right to act as a
second signatory on contracts when such a second signature is required by law.
Section 5.2 CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER. The
offices of Chairman of the Board and Chief Executive Officer shall be separate
offices. They may be filled either by one or two individuals as the Board may
determine from time to time; provided, however, that the Chairman of the Board
shall be a member of the Board of Directors. The Chairman of the Board shall
preside at all meetings of the shareholders and the Board of Directors. The
Chief Executive Officer shall be responsible for putting into effect all orders
and resolutions of the Board of Directors and shall have general active
management of the business of the Corporation. Except where, by law, the
signature of the President is required, both the Chairman of the Board and the
Chief Executive Officer shall possess the same power as the President to sign
all certificates, contracts, and other instruments of the Corporation which may
be authorized by the Board of Directors.
Section 5.3 PRESIDENT. The President, in the absence of the Chairman of
the Board and Chief Executive Officer, shall preside at all meetings of the
shareholders and of the Board of Directors, shall have general and active
management of the business of the Corporation, and shall see that all orders and
resolutions of the Board of Directors are carried into effect. The President
shall have authority to sign all stock certificates, contracts and other
instruments of the Corporation, and to affix the seal of the Corporation to such
documents. The President has the authority to delegate portions of his power to
one or more Vice Presidents. The President shall perform such other functions as
the Board of Directors may from time to time require.
Section 5.4 CHIEF OPERATING OFFICER. The Chief Operating Officer shall
perform such functions as the Board of Directors may from time to time require.
Section 5.5 EXECUTIVE VICE PRESIDENT AND VICE PRESIDENT. In the absence
of the President, an Executive Vice President or a Vice President (as one or
more may be appointed by the Board of Directors; or in the absence of such
delegation appointed by the President) shall perform the duties of the
President. The Vice Presidents shall not have the power to sign stock
certificates, contracts or other instruments of the Corporation, nor to affix
the seal of the Corporation to such documents, unless authorized to do so by the
<PAGE>
President. The Vice Presidents shall perform such other functions as the Board
of Directors may from time to time require.
Section 5.6 TREASURER. The Treasurer shall have responsibility for the
Corporation's funds and for keeping full and accurate accounts of receipts and
disbursements in books belonging to the Corporation. The Treasurer shall
deposit, or authorize deposit of, all moneys and other valuable effects in the
name and to the credit of the Corporation in such depositories as may be
designated by the Board of Directors.
The Treasurer shall disburse, or authorize disbursements of, the funds
of the Corporation as necessary and proper for the operation of the Corporation,
taking proper receipts for such disbursements; provided, however, that the Board
of Directors shall, from time to time, set a maximum expenditure amount, and
disbursement of sums over and above such amount shall require a resolution of
the Board of Directors. The Treasurer may authorize another officer of the
Corporation or an accountant retained by the Corporation to disburse sums of the
Corporation necessary and proper for the daily operating expenses of the
Corporation, up to a maximum amount which the Treasurer shall set from time to
time, which will not exceed any maximum expenditure amount set by the Board of
Directors. The Treasurer shall not be required to be bonded.
The Treasurer shall, when required, render to the President or the Board
of Directors an account of the transactions and of the financial condition of
the Corporation. The accounting of the Corporation shall be maintained according
to generally accepted accounting principles. The Treasurer shall have the
authority to retain, from time to time, an attorney or accountant to review the
accounts, prepare the tax returns of the Corporation, and perform such other
services as may be necessary and proper to maintain the financial records of the
Corporation.
The Treasurer shall perform such other functions as the Board of
Directors may from time to time require.
Section 5.6 SECRETARY. The Secretary shall issue all authorized notices
for, and shall prepare and maintain custody of the minutes of, all meetings of
the shareholders and the Board of Directors. The Secretary shall have charge of
the corporate books. The Secretary shall have custody of the seal of the
Corporation and shall have authority to affix the seal to any instrument
requiring it and to attest to the authenticity of that seal by the Secretary's
signature. The Secretary shall authenticate records of the Corporation. The
Secretary shall sign all stock certificates. The Secretary shall perform such
other functions as the Board of Directors may from time to time require.
<PAGE>
Section 5.7 DELEGATION OF AUTHORITY. The Board of Directors may, from
time to time, delegate the powers and duties of any executive officer to any
other executive officer, and may designate the powers of non-executive officers
to any other officers or agents, notwithstanding the provisions hereof.
Section 5.8 COMPENSATION. The salaries of all officers and agents of the
Corporation shall be fixed by the Board of Directors or set forth in employment
agreements or other compensation arrangements approved by the Board.
Section 5.9 REMOVAL. Any officer may be removed at any time, with or
without cause, by the Board of Directors.
ARTICLE VI.
INDEMNIFICATION OF DIRECTORS, OFFICERS, AGENTS, AND EMPLOYEES
Section 6.1 RIGHT TO INDEMNIFICATION. Each person who was or is made a
party to or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a "proceeding"),
by reason of the fact that he/she is or was a Director, officer, agent, or
employee of the Corporation shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the General Corporation Law of
the State of Delaware, as the same exists or may hereafter be amended, against
any expenses, (including attorneys fees), judgments, fines and amounts paid in
settlement, actually and reasonably incurred by such person in connection
therewith. Notwithstanding the above, no Director shall be indemnified nor held
harmless in violation of the provisions set forth in the Certificate of
Incorporation; and no Director, officer, agent, or employee shall be indemnified
nor held harmless by the Corporation unless:
(1) In the case of conduct in his/her official capacity with the
Corporation, he/she acted in good faith and in a manner he/she
reasonably believed to be in the best interests of the Corporation;
(2) In all other cases, his/her conduct was at least not opposed
to the best interests of the Corporation nor in violation of the
Certificate, Bylaws or any agreement entered into by the Corporation;
and
(3) In the case of any criminal proceeding, he/she had no
reasonable cause to believe that his/her conduct was unlawful.
Section 6.2 RIGHT TO ADVANCEMENT OF EXPENSES. The right to
<PAGE>
indemnification conferred in Section 6.1 of this Article shall include the right
to be paid by the Corporation the expenses incurred in defending any such
proceeding in advance of its final disposition; provided, however, that such an
advancement of expenses shall be made only upon delivery to the Corporation of
(1) a statement of his/her good faith belief that he/she has met the standard of
conduct described in Section 6.1; and (2) an undertaking by or on behalf of the
indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision that he/she is not entitled to be
indemnified for such expenses.
Section 6.3 DETERMINATION AND AUTHORIZATION TO INDEMNIFY. The
Corporation may not indemnify a Director under Section 6.1 unless authorized
after a determination has been made that indemnification of the Director is
permissible in the circumstances because he/she has met the standard of conduct
in Section 6.1. This determination shall be made by the Board of Directors by a
majority vote of a quorum consisting of Directors not at the time parties to the
proceeding.
Section 6.4 NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification and
to the advancement of expenses conferred in this Article shall not be exclusive
of any other right which any person may have or hereafter acquire under any
statute, the Corporation's Certificate of Incorporation, agreement, vote of
shareholders or disinterested Directors, or otherwise.
Section 6.5 INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any Director, officer, employee or agent of the
Corporation against any expense, liability or loss.
ARTICLE VII.
STOCK
Section 7.1 ISSUANCE. The Corporation may issue shares of capital stock
of any class or series now or hereafter authorized in the Certificate of
Incorporation, in accordance with the authority granted by a Board of Directors
resolution.
Section 7.2. STOCK CERTIFICATES. Each shareholder shall be entitled to a
certificate signed in the name of the Corporation by the President and by the
Secretary, and affixed with the seal of the Corporation. The Treasurer may sign
in lieu of the Secretary. Signatures on the certificate may be facsimiles. In
case any officer who has signed or whose facsimile signature has been placed
upon such certificate shall have ceased to be such officer before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he/she were such officer at the date of its issue.
<PAGE>
Section 7.3 TRANSFER OF STOCK. Transfer of stock may be made only on the
transfer ledger of the Corporation kept at an office of the Corporation or in
the possession of the Secretary or the corporate transfer agent. Upon surrender
to the Corporation or the transfer agent of the Corporation of a certificate for
shares duly endorsed or accompanied by proper evidence of succession,
assignation or authority to transfer, it shall be the duty of the Corporation to
issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
Section 7.4 RECORD DATE. In order that the Corporation may determine the
shareholders entitled to notice of or to vote at any meeting of shareholders, or
to receive payment of any dividend or other distribution or allotment of any
rights, or to exercise any rights in respect of any change, conversion or
exchange of stock, the Board of Directors may fix a record date. Such record
date shall not precede the date on which the Board of Directors' resolution
fixing the record date is adopted, and shall not be more than 70 days prior to
the meeting or such other action as above described.
If no record date is fixed by the Board of Directors for determination
of who is entitled to vote or receive notice of a shareholders' meeting, the
record date shall be at the close of business on the day preceding the day on
which notice is given; or if notice is waived, at the close of business on the
day preceding the day on which the meeting is held. If no record date is set for
determining shareholders entitled to receive a dividend or other distribution or
allotment of rights or to exercise any rights in respect to any change,
conversion or exchange of stock, the record date shall be at the close of
business on the day on which the Board of Directors adopts a resolution relating
thereto.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this Section, such determination shall
apply to any adjournment thereof unless the Board of Directors fixes a new
record date, which it shall do if the meeting is adjourned to a date more than
120 days after the date fixed for the original meeting.
In order that the Corporation may determine the shareholders entitled to
consent in writing to corporate action taken without a meeting, the Board of
Directors may fix a record date, which shall not precede and shall not be more
than ten days after the date on which the resolution fixing the record date is
adopted. If no record date has been fixed by the Board of Directors, and the
Board of Directors is not required by law to take some action prior to the
action for which written consent is sought, the record date shall be the first
date on which a signed written consent is properly delivered to the Corporation.
If no record date had been fixed by the Board of Directors and the Board of
Directors is required by law to take some action prior to the action for which
<PAGE>
written consent is sought, the record date shall be the close of business on the
day on which the Board of Directors adopts a resolution taking such prior
action.
Section 7.5 REPLACEMENT CERTIFICATES. New stock certificates may be
issued to replace certificates lost, stolen, destroyed, or mutilated, upon such
terms and conditions, including proof of loss or destruction and the giving of a
satisfactory bond of indemnity, as the Board of Directors may from time to time
determine.
Section 7.6 HOLDERS OF RECORD. The Corporation shall be entitled to
treat the holder of record of any share or shares of capital stock as the holder
and owner in fact thereof for all purposes and shall not be bound to recognize
any equitable or other claim of right, title, or interest in such share or
shares on the part of any other person, whether or not the Corporation shall
have express or other notice thereof, except as otherwise provided by law.
Section 7.7 REGULATIONS. The issue, transfer, conversion and
registration of certificates of stock shall be governed by such other
regulations as the Board of Directors may establish.
ARTICLE VIII.
LIST OF SHAREHOLDERS
The officer or agent having charge of the transfer books for shares
shall make, at least ten days before each meeting of shareholders, a complete
list of the shareholders entitled to vote at such meeting, arranged by voting
group and within each voting group by class or series of shares, with the
address of each and the number of shares held by each, which list, for a period
of ten days prior to such meeting, shall be kept on file at the principal
business office of the Corporation and shall be subject to inspection by any
shareholder at any time during usual business hours. Such list shall also be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any shareholder during the whole time of the meeting. The
original share transfer book, or a duplicate thereof, shall be prima facie
evidence as to who are the shareholders entitled to examine such list or share
transfer book or to vote at any meeting of the shareholders.
<PAGE>
ARTICLE IX.
MISCELLANEOUS
Section 9.1 DIVIDENDS. Dividends upon the capital stock of the
Corporation may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of capital stock. Before payment of any dividend, there may be set aside
out of any funds of the Corporation available for dividends such sum or sums as
the Board of Directors in its absolute discretion, from time to time, believes
is proper as a reserve fund to meet contingencies, or equalize dividends, or for
such other purposes as the Board of Directors determines is conducive to the
interests of the Corporation. The Board of Directors may at any time modify or
abolish any such reserve fund.
Section 9.2 ANNUAL STATEMENT. The Board of Directors shall present at
each annual meeting, and at any special meeting of the shareholders when called
for by vote of the shareholders, a full and clear statement of the business and
condition of the Corporation.
Section 9.3 FISCAL YEAR. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors from time to time.
Section 9.4 CHECKS. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 9.5 SEAL. The Corporate seal shall have inscribed thereon the
name of the Corporation, the year of its organization and the words "Corporate
Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any manner reproduced.
Section 9.6 AMENDMENTS. These Bylaws may be altered, amended, repealed,
or replaced by new Bylaws by the affirmative vote of a majority of the Board of
Directors at any regular or special meeting of the Board of Directors unless the
Certificate of Incorporation or law reserve this power to the shareholders.
<PAGE>
I HEREBY CERTIFY that the foregoing is a full, true and correct copy of
the Bylaws of V-ONE Corporation, a Delaware corporation, as in effect on the
date hereof.
WITNESS my hand and the seal of the Corporation.
Dated: November 21, 1997 By: /S/ CHARLES CHEN
----------------
Charles Chen, Secretary
(SEAL)
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT, dated as of December 3, 1997, by and
between V-ONE CORPORATION, a Delaware corporation, with headquarters located at
20250 Century Boulevard, Suite 300, Germantown, Maryland 20874 (the "Company"),
and ADVANTAGE FUND II LTD., a British Virgin Islands corporation (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Buyer wishes to purchase, upon the terms and subject
to the conditions of this Agreement, shares of non-voting, convertible preferred
stock of the Company which will be convertible into units consisting of (1)
shares of Common Stock, $.001 par value (the "Common Stock"), of the Company and
(2) Common Stock Purchase Warrants to purchase shares of Common Stock (the
"Warrants"); and
WHEREAS, the Company and the Buyer are executing and delivering
this Agreement in reliance upon the exemption from securities registration
afforded by Rule 506 of Regulation D as promulgated by the Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 Act");
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
(a) SUBSCRIPTION. The Buyer hereby agrees to purchase from the Company the
number of shares (the "Preferred Shares") of Series A Convertible Preferred
Stock, $.001 par value (the "Preferred Stock"), of the Company set forth on the
signature page of this Agreement, having the terms and conditions as set forth
in the form of Certificate of Designations of the Series A Convertible Preferred
Stock attached hereto as ANNEX I (the "Certificate of Designations") at the
price per share and for the aggregate purchase price set forth on the signature
page of this Agreement. The purchase price for the Preferred Shares shall be
payable in United States Dollars. The shares of Common Stock issuable upon
conversion of the Preferred Shares are referred to herein as the "Conversion
Shares." The shares of Common Stock issuable in payment of dividends on the
Preferred Shares are referred to herein as the "Dividend Shares". The shares of
Common Stock issuable upon exercise of the Warrants are referred to herein as
the "Warrant Shares." The Conversion Shares, the Dividend Shares and the Warrant
Shares are referred to herein collectively as the "Common Shares." The Common
Shares and the Preferred Shares are referred to herein collectively as the
"Shares."
(b) FORM OF PAYMENT. The Buyer shall pay the purchase price for the Preferred
Shares by delivering good funds in United States Dollars to the escrow agent
(the "Escrow Agent") identified in the Joint Escrow Instructions attached hereto
as ANNEX II (the "Joint Escrow Instructions"). Such delivery of funds shall be
made against delivery by the Company of the certificates for the Preferred
<PAGE>
Shares registered in the name of the Buyer. Promptly following payment by the
Buyer to the Escrow Agent of the purchase price of the Preferred Shares, but in
no event later than two Business Days after such payment, the Company shall
deliver certificates for the Preferred Shares, registered in the name of the
Buyer, to the Escrow Agent. The certificates for the Preferred Shares shall be
delivered by the Company to the Escrow Agent on a delivery against payment basis
at the closing. By signing this Agreement, the Buyer and the Company each agrees
to all of the terms and conditions of, and becomes a party to, the Joint Escrow
Instructions, all of the provisions of which are incorporated herein by this
reference as if set forth in full. As used in this Agreement, the term "Business
Day" means any day other than a Saturday, Sunday or other day on which
commercial banks in The City of New York are authorized or required by law to
remain closed.
(c) METHOD OF PAYMENT. Payment of the purchase price for the Preferred Shares
shall be made by wire transfer of funds to:
Citibank, N.A.
153 East 53rd Street
New York, New York 10043
ABA#021000089
For credit to A/C#37179446
For credit to the account of Brian W. Pusch Attorney Escrow Account
Reference: Advantage/V-One
Not later than 4:00 p.m., New York City time, on the date which is three
Business Days after the Company shall have executed and delivered this Agreement
and returned a signed counterpart of this Agreement to the Buyer or its legal
counsel, the Buyer shall deposit with the Escrow Agent the aggregate purchase
price for the Preferred Shares.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.
The Buyer represents and warrants to, and covenants and agrees
with, the Company as follows:
(a) PURCHASE FOR INVESTMENT. The Buyer is purchasing the Preferred Shares for
its own account for investment only and not with a view towards the public sale
or distribution thereof;
(b) ACCREDITED INVESTOR. The Buyer is an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act by
reason of Rule 501(a)(3);
(c) REOFFERS AND RESALES. All subsequent offers and sales of the Shares by the
Buyer shall be made pursuant to registration of the Shares being offered and
sold under the 1933 Act or pursuant to an exemption from registration;
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(d) COMPANY RELIANCE. The Buyer understands that the Preferred Shares are being
offered and sold, and the Common Shares and the Warrants are being offered, to
it in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying
upon the truth and accuracy of, and the Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of the Buyer to acquire the Preferred Shares and
to receive an offer of the Common Shares and the Warrants;
(e) INFORMATION PROVIDED. The Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Preferred
Shares and the offer of the Common Shares and the Warrants which have been
requested by the Buyer; the Buyer and its advisors, if any, have been afforded
the opportunity to ask questions of the Company and have received complete and
satisfactory answers to any such inquiries; without limiting the generality of
the foregoing, the Buyer has had the opportunity to obtain and to review the
Company's (1) Annual Report on Form 10-K for the fiscal year ended December 31,
1996, (2) Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997,
June 30, 1997 and September 30, 1997 and (3) proxy statement for the Company's
1997 Annual Meeting of Stockholders, in each case as filed with the SEC
(collectively, the "SEC Reports"); and the Buyer understands that its investment
in the Shares involves a high degree of risk;
(f) ABSENCE OF APPROVALS. The Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Shares; and
(g) SUBSCRIPTION AGREEMENT. This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Buyer and is a valid and binding
agreement of the Buyer enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.
3. COMPANY REPRESENTATIONS, WARRANTIES, ETC.
The Company represents and warrants to, and covenants and agrees
with, the Buyer that:
(a) ORGANIZATION AND AUTHORITY. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has all requisite corporate power and authority to (i) own, lease and
operate its properties and to carry on its business as now being conducted, and
(ii) to execute, deliver and perform its obligations under this Agreement, the
Registration Rights Agreement, the form of which is attached hereto as ANNEX III
(the "Registration Rights Agreement"), the Certificate of Designations, the
Transfer Agent Instructions, the form of which is attached hereto as ANNEX IV
(the "Transfer Agent Instructions"), and the other agreements to be executed and
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delivered by the Company in connection herewith, and to consummate the
transactions contemplated hereby and thereby. The Company is duly qualified to
do business as a foreign corporation and is in good standing in all
jurisdictions wherein such qualification is necessary and where failure so to
qualify could have a material adverse effect on the business, properties,
operations, condition (financial or other), results of operations or prospects
of the Company. The Company has no subsidiaries.
(b) CAPITALIZATION. The authorized capital stock of the Company currently
consists of (a) 33,333,333 shares of Common Stock of which 13,070,235 shares
were outstanding on December 1, 1997, all of which are fully paid and
nonassessable; and (b) 13,333,333 shares of Preferred Stock, $.001 par value, of
which 4,000 shares will be designated as Series A Convertible Preferred Stock
and issued pursuant to this Agreement; and on the Closing Date (as defined
herein) there will be (x) no material increase from December 1, 1997 in the
number of shares of Common Stock outstanding (except for shares issued upon the
exercise of options and warrants outstanding on the date hereof or options or
similar rights granted subsequent to the date of this Agreement pursuant to the
Company's 1996 Incentive Stock Plan) and (y) no shares of preferred stock
outstanding except as issued pursuant to this Agreement. As of December 1, 1997,
the Company had outstanding options and warrants entitling the holders to
purchase 2,884,507 shares of Common Stock. Other than as set forth in the
preceding sentence (and other than options that may be granted subsequent to the
date of this Agreement under the Company's 1996 Incentive Stock Plan), the
Company does not have outstanding any material amount of securities (or
obligations to issue any such securities) convertible into, exchangeable for or
otherwise entitling the holders thereof to acquire shares of Common Stock,
except as disclosed in the SEC Reports. The outstanding shares of Common Stock
and outstanding options, warrants and other securities to purchase Common Stock
have been duly authorized and validly issued. None of such outstanding shares of
Common Stock, options, warrants and other securities has been issued in
violation of the preemptive rights of any securityholder of the Company. The
offers and sales of the outstanding shares of Common Stock and options, warrants
and other rights to acquire Common Stock were at all relevant times either
registered under the 1933 Act and applicable state securities laws or exempt
from such requirements, except for such non-compliance with state securities
laws which have not had and will not have a material adverse effect on the
business, properties, operations, condition (financial or other), results of
operations or prospects of the Company or the transactions contemplated by this
Agreement. Except as set forth on SCHEDULE 3(B), no holder of any of the
Company's securities has any rights, "demand," "piggy-back" or otherwise, to
have such securities registered by reason of the intention to file, filing or
effectiveness of the Registration Statement (as defined in the Registration
Rights Agreement).
(c) CONCERNING THE SHARES. The Shares have been duly authorized and the
Preferred Shares, when issued and paid for in accordance with this Agreement,
and the Common Shares, when issued upon conversion of the Preferred Shares, in
payment of dividends thereon or upon exercise of the Warrants, as the case may
be, will be duly and validly issued, fully paid and non-assessable and will not
subject the holder thereof to personal liability by reason of being such holder.
There are no preemptive or similar rights of any stockholder of the Company or
any other person to acquire any of the Shares. The Common Stock is listed for
trading on the Nasdaq National Market ("Nasdaq") and (1) the Company and the
Common Stock meet the criteria for continued listing and trading on Nasdaq; (2)
the Company has not been notified since October 24, 1996 by Nasdaq of any
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failure or potential failure to meet the criteria for continued listing and
trading on Nasdaq and (3) no suspension of trading in the Common Stock is in
effect. The Company knows of no reason that the Common Shares will not be
eligible for listing on Nasdaq.
(d) SUBSCRIPTION AGREEMENT; WARRANTS; REGISTRATION RIGHTS AGREEMENT; TRANSFER
AGENT INSTRUCTIONS. This Agreement, the Warrants, the Registration Rights
Agreement and the Transfer Agent Instructions have been duly and validly
authorized by the Company, this Agreement has been duly executed and delivered
on behalf of the Company and this Agreement is, and the Warrants, the
Registration Rights Agreement and the Transfer Agent Instructions, when executed
and delivered by the Company, will be, valid and binding obligations of the
Company enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally and limits upon rights to indemnity.
(e) NON-CONTRAVENTION. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the issuance of the Preferred
Shares as contemplated by this Agreement and the other transactions contemplated
by this Agreement, the Warrants, the Registration Rights Agreement, the terms of
the Preferred Stock and the Transfer Agent Instructions do not and will not
conflict with or result in a breach by the Company of any of the terms or
provisions of, or constitute a default under, the certificate of incorporation
or the by-laws of the Company, or any indenture, mortgage, deed of trust or
other material agreement or instrument to which the Company is a party or by
which it or any of its properties or assets are bound which would have a
material adverse effect on the Company or any applicable law, rule or regulation
or any applicable decree, judgment or order of any court, United States federal
or state regulatory body, administrative agency or other governmental body
having jurisdiction over the Company or any of its properties or assets which
would have a material adverse effect on the Company.
(f) APPROVALS. No authorization, approval or consent of any court, governmental
body, regulatory agency, self-regulatory organization, or stock exchange or
market or the stockholders of the Company is required to be obtained by the
Company for (1) the execution, delivery and performance by the Company of this
Agreement, the Registration Rights Agreement (except such authorization of the
SEC as is required with respect to accelerating the effectiveness of any
registration statement filed pursuant thereto) and the Transfer Agent
Instructions, (2) the issuance and sale of the Preferred Shares as contemplated
by this Agreement, (3) the issuance of Common Shares and Warrants on conversion
of the Preferred Shares and (4) the issuance of Common Shares on exercise of the
Warrants.
(g) INFORMATION PROVIDED. The information provided by or on behalf of the
Company to the Buyer in connection with the transactions contemplated by the
Agreement, including, without limitation, the information referred to in Section
2(e) of this Agreement, does not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. The Company has not filed any reports with the SEC under the
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<PAGE>
Securities Exchange Act of 1934, as amended (the "1934 Act"), since December 31,
1996 other than the SEC Reports.
(h) ABSENCE OF CERTAIN CHANGES. Since December 31, 1996, there has been no
material adverse change and no material adverse development in the business,
properties, operations, condition (financial or other), results of operations or
prospects of the Company, except as disclosed in the SEC Reports.
(i) ABSENCE OF CERTAIN PROCEEDINGS. There is no action, suit or proceeding,
before or by any court, public board or body or governmental agency pending or,
to the knowledge of the Company or any of its subsidiaries, threatened against
the Company and, to the knowledge of the Company, there is no inquiry or
investigation before or by any court, public board or body or governmental
agency pending or threatened against the Company, in any such case wherein an
unfavorable decision, ruling or finding could have a material adverse effect on
the business, properties, operations, condition (financial or other), results of
operations or prospects of the Company or the transactions contemplated by this
Agreement or any of the documents contemplated hereby or which could adversely
affect the validity or enforceability of, or the authority or ability of the
Company to perform its obligations under, this Agreement or any of such other
documents; the Company does not have pending before the SEC any request for
confidential treatment of information and to the best of the Company's knowledge
no such request will be made by the Company prior to the time the Registration
Statement relating to the Common Shares which is contemplated by the
Registration Rights Agreement is first ordered effective by the SEC; and to the
best of the Company's knowledge there is not pending or contemplated, and there
has been no, investigation by the SEC involving the Company or any director or
officer of the Company.
(j) PROPERTIES. The Company has good title to all property real and personal
(tangible and intangible) and other assets owned by it, free and clear of all
security interests, charges, mortgages, liens or other encumbrances, except such
as are described in the SEC Reports or such as do not materially interfere with
the use of such property made, or proposed to be made, by the Company. The
leases, licenses or other contracts or instruments under which the Company
leases, holds or is entitled to use any property, real or personal, are valid,
subsisting and enforceable with only such exceptions as do not materially
interfere with the use of such property made, or proposed to be made, by the
Company. The Company has not received notice of any material violation of any
applicable law, ordinance, regulation, order or requirement relating to its
owned or leased properties.
(k) LABOR RELATIONS. No material labor problem exists or, to the knowledge of
the Company, is imminent with respect to any of the employees of the Company.
(l) SEC FILINGS. The Company has timely filed all required forms, reports and
other documents with the SEC. All of such forms, reports and other documents
complied, when filed, in all material respects, with all applicable requirements
of the 1933 Act and the 1934 Act.
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<PAGE>
(m) ABSENCE OF BROKERS, FINDERS, ETC. No broker, finder or similar person is
entitled to any commission, fee or other compensation by reason of the
transactions contemplated by this Agreement other than as disclosed in writing
by the Company to the Buyer with respect to one such person prior to execution
and delivery of this Agreement by the Buyer, and the Company shall pay, and
indemnify and hold harmless the Buyer from, any claim made against the Buyer by
any person for any such commission, fee or other compensation.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
(a) TRANSFER RESTRICTIONS. The Buyer acknowledges that (1) the Preferred Shares
and the Warrants have not been and are not being registered under the provisions
of the 1933 Act and, except as provided in the Registration Rights Agreement,
the Common Shares have not been and are not being registered under the 1933 Act,
and may not be transferred unless (A) subsequently registered thereunder or (B)
the Buyer shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Shares or Warrants to be sold or transferred may be sold or transferred pursuant
to an exemption from such registration; (2) any resale of Shares or Warrants
made in reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any such resale of Shares or Warrants under circumstances in which
the seller, or the person through whom the resale is made, may be deemed to be
an underwriter, as that term is used in the 1933 Act, may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (3) neither the Company nor any other person is under any
obligation to register the Shares (other than registration of the resale of the
Common Shares pursuant to the Registration Rights Agreement) or the Warrants
under the 1933 Act or to comply with the terms and conditions of any exemption
thereunder (other than pursuant to Section 4(d) hereof and pursuant to the
Registration Rights Agreement).
(b) RESTRICTIVE LEGENDS. (1) The Buyer acknowledges and agrees that the
certificates for the Preferred Shares shall bear restrictive legends in
substantially the following form (and a stop-transfer order may be placed
against transfer of the Preferred Shares):
These securities have not been registered under the Securities Act of
1933, as amended (the "Act"), or any state securities laws. The sale to
the holder of these securities and of the shares of common stock and
warrants issuable upon conversion of these securities are not covered by
a registration statement under the Act or registration under state
securities laws. These securities have been acquired, and such shares of
common stock and warrants must be acquired, for investment only and may
not be sold, transferred or assigned in the absence of registration of
the resale thereof or an opinion of counsel reasonably acceptable to the
Company that such registration is not required.
(2) The Buyer acknowledges and agrees that the certificates for
the Warrants shall bear restrictive legends in substantially the following form
(and a stop-transfer order may be placed against transfer of the Warrants):
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This security has not been registered under the Securities Act of 1933,
as amended (the "Act"), or any state securities laws. The sale to the
holder of this security and of the shares of common stock issuable upon
exercise of this security are not covered by a registration statement
under the Act or registration under state securities laws. This security
has been acquired, and such shares of common stock must be acquired, for
investment only and may not be sold, transferred or assigned in the
absence of registration of the resale thereof or an opinion of counsel
reasonably acceptable to the Company that such registration is not
required.
(3) The Buyer further acknowledges and agrees that until such
time as the Common Shares have been registered for resale under the 1933 Act as
contemplated by the Registration Rights Agreement, the certificates for the
Common Shares issued upon conversion of the Preferred Shares, payment of
dividends thereon and exercise of the Warrants may bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of the certificates for the Common Shares):
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"). The securities
have been acquired for investment and may not be resold, transferred or
assigned in the absence of an effective registration statement for the
securities under the Act, or an opinion of counsel reasonably acceptable
to the Company that registration is not required under said Act.
(4) Once the Registration Statement required to be filed by the
Company pursuant to Section 2 of the Registration Rights Agreement has been
declared effective, thereafter (1) upon request of the Buyer the Company will
substitute certificates without restrictive legend for certificates for any
Common Shares issued prior to the date such Registration Statement is declared
effective by the SEC which bear such restrictive legend and remove any
stop-transfer restriction relating thereto promptly, but in no event later than
three days after surrender of such certificates by the Buyer and (2) the Company
shall not place any restrictive legend on certificates for Common Shares issued
on conversion of the Preferred Shares, payment of dividends thereon or exercise
of the Warrants or impose any stop-transfer restriction thereon.
(c) REGISTRATION RIGHTS AGREEMENT. The parties hereto agree to enter into the
Registration Rights Agreement on or before the Closing Date.
(d) FORM D; BLUE SKY LAWS. The Company agrees to file a Form D with respect to
the Shares and the Warrants as required under Regulation D and to provide a copy
thereof to the Buyer promptly after such filing. The Buyer agrees to cooperate
with the Company in connection with such filing and, upon request of the
Company, to provide all information relating to the Buyer reasonably required
for such filing.
(e) AUTHORIZATION FOR TRADING; REPORTING STATUS. On or before the Closing Date,
the Company shall file a notification for listing of additional shares with the
Nasdaq and shall provide evidence of such filing to the Buyer. So long as the
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Buyer beneficially owns any of the Preferred Shares, the Common Shares or the
Warrants, the Company shall file all reports required to be filed with the SEC
pursuant to Section 13 or 15(d) of the 1934 Act and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such
termination.
(f) USE OF PROCEEDS. Neither the Company nor any subsidiary of the Company owns
or has any present intention of acquiring any "margin stock" as defined in
Regulation G (12 CFR Part 207) of the Board of Governors of the Federal Reserve
System ("margin stock"), other than the acquisition of shares of Common Stock
surrendered to the Company in payment of the exercise price or tax obligations
incurred in connection with the grant, vesting or exercise of a stock option or
other award granted by the Company to any of its employees, directors or
consultants pursuant to its stock incentive plans or in connection with a loan
made to any such persons pursuant to such plans which acquisition is made
pursuant to the requirements of Regulation G governing margin stock. The
proceeds of sale of the Preferred Shares will be used for general working
capital purposes and in the operation of the Company's business, and up to
$2,000,000 thereof may be used to finance certain acquisitions of assets or
businesses. None of such proceeds will be used, directly or indirectly (1)
(other than financing its subsidiaries in the ordinary course of business) to
make any loan to or investment in any other person or (2) for the purpose,
whether immediate, incidental or ultimate, of purchasing or carrying any margin
stock or for the purpose of maintaining, reducing or retiring any indebtedness
which was originally incurred to purchase or carry any stock that is currently a
margin stock or for any other purpose which might constitute the transactions
contemplated by this Agreement a "purpose credit" within the meaning of such
Regulation G. Neither the Company nor any agent acting on its behalf has taken
or will take any action which might cause this Agreement or the transactions
contemplated hereby to violate Regulation G, Regulation T or any other
regulation of the Board of Governors of the Federal Reserve System or to violate
the 1934 Act, in each case as in effect now or as the same may hereafter be in
effect.
(g) BLUE SKY LAWS. On or before the Closing Date, the Company shall take such
action as shall be necessary to qualify, or to obtain an exemption for, the
Preferred Shares for sale to the Buyer pursuant to this Agreement and the Common
Shares and Warrants for issuance to the Buyer on conversion of the Preferred
Shares under such of the securities or "blue sky" laws of jurisdictions as shall
be applicable to the sale of the Preferred Shares pursuant to this Agreement and
the issuance to the Buyer of Common Shares and Warrants on conversion of the
Preferred Shares and the issuance of Common Shares on exercise of the Warrants.
The Company shall furnish copies of all filings, applications, orders and grants
or confirmations of exemptions relating to such securities or "blue sky" laws on
or prior to the Closing Date.
(g) CERTAIN EXPENSES. Whether or not the closing occurs, the Company shall pay
or reimburse the Buyer for all reasonable expenses (including, without
limitation, legal fees and expenses of counsel to the Buyer) incurred by the
Buyer, not in excess of $15,000, in connection with this Agreement and the
transactions contemplated hereby.
(i) CERTAIN ISSUANCES OF SECURITIES. (1) Unless the Company obtains Stockholder
Approval (as defined in the Certificate of Designations) or a waiver thereof
from Nasdaq, the Company will not issue any shares of Common Stock or shares of
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any other series of preferred stock or other securities convertible into,
exchangeable for or otherwise entitling the holder to acquire shares of Common
Stock which would be subject to the requirements of Rule 4460(i) of the Nasdaq
(or any successor or replacement provision thereof) and which would be
integrated with the sale of the Preferred Shares to the Buyer or the issuance of
Common Shares upon conversion thereof or upon exercise of the Warrants for
purposes of Rule 4460(i) of the Nasdaq (or any successor or replacement
provision thereof).
(2) During the period from the date of this Agreement to the date
on which the Registration Statement (as defined in the Registration Rights
Agreement) shall have been effective with the SEC for 90 consecutive days, the
Company shall not offer, sell, contract to sell or issue (or engage any person
to assist the Company in taking any such action) any equity securities or
securities convertible into, exchangeable for or otherwise entitling the holder
to acquire, any Common Stock at a price below the market price of the Common
Stock on the date of such issuance or acquisition ("Discounted Securities").
(3) Subject to the restrictions in Section 4(i)(1) above, during
the period from the date of execution and delivery of this Agreement to the date
which is one year after the Closing Date (as hereinafter defined), the Company
shall not offer, sell, contract to sell or issue (or engage any person to assist
the Company in taking any such action) any Discounted Securities without giving
the Buyer the first right to acquire the Discounted Securities on the same terms
at which the Discounted Securities are to be offered to other investors. The
Company shall give notice to the Buyer of the detailed terms of the Discounted
Securities proposed to be issued and such other information as requested by the
Buyer within three Business Days after receipt of such notice. The Buyer may by
notice to the Company exercise such right of first refusal at any time until the
later of (x) ten Business Days after such notice from the Company to the Buyer
and (y) two Business Days after the Company provides such additional information
as shall have timely been requested by the Buyer.
(4) Notwithstanding the provisions of clauses (2) and (3) above
of this Section 4(i), nothing therein shall prohibit the Company from issuing
securities (x) pursuant to compensation plans for employees, directors,
officers, advisers or consultants of the Company and in accordance with the
terms of such plans as in effect as of the date of this Agreement or (y) upon
exercise of conversion, exchange, purchase or similar rights issued, granted or
given by the Company and outstanding as of the date of this Agreement.
(j) BEST EFFORTS. Each of the parties shall use its best efforts timely to
satisfy each of the conditions to the other party's obligations to sell and
purchase the Preferred Shares set forth in Section 7 or 8, as the case may be,
of this Agreement on or before the Closing Date.
5. TRANSFER AGENT INSTRUCTIONS; CONVERSION PROCEDURE.
(a) TRANSFER AGENT INSTRUCTIONS. Promptly following the delivery by the Buyer of
the aggregate purchase price for the Preferred Shares in accordance with Section
1(c) hereof, and in any event prior to the Closing Date, the Company will (1)
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execute and deliver the Transfer Agent Instructions substantially in the form
attached hereto as ANNEX IV to and thereby irrevocably instruct, American Stock
Transfer & Trust Company, as Transfer Agent and Registrar (the "Transfer
Agent"), to issue certificates for the Common Shares from time to time upon
conversion of the Preferred Shares and exercise of the Warrants in such amounts
as specified from time to time (x) to the Transfer Agent in the Notices of
Conversion surrendered in connection with such conversions and referred to in
Section 5(b) of this Agreement and (y) upon exercise of the Warrants in such
amounts as specified from time to time to the Transfer Agent in the Form of
Subscription to be attached to the Warrants and surrendered in connection with
such exercises, and (2) appoint the Transfer Agent the conversion agent for the
Preferred Stock and the exercise agent for the Warrants. The certificates for
the Common Shares may bear the restrictive legend specified in Section 4(b) of
this Agreement prior to registration of the resale of the Common Shares under
the 1933 Act. The certificates for the Common Shares shall be registered in the
name of the Buyer or its nominee and in such denominations to be specified by
the Buyer in connection with each conversion of Preferred Shares or exercise of
Warrants, as the case may be. The Company warrants that no instruction other
than (x) such instructions referred to in this Section 5, (y) stop transfer
instructions to give effect to Section 4(a) hereof prior to registration of the
resale of the Common Shares under the 1933 Act and (z) the instructions required
by Section 3(n) of the Registration Rights Agreement will be given by the
Company to the Transfer Agent and that the Common Shares shall otherwise be
freely transferable on the books and records of the Company as and to the extent
provided in this Agreement. If the Transfer Agent seeks the Company's
concurrence in connection with a notice of conversion or warrant exercise, the
Company will immediately give such concurrence except to the extent the Company
notifies the Transfer Agent and the Buyer of manifest error in such notice of
conversion or warrant exercise in accordance with the Certificate of
Designations, the Warrants and the Transfer Agent Instructions. Nothing in this
Section 5(a) shall limit in any way the Buyer's obligations and agreement to
comply with the registration requirements of all applicable securities laws upon
any resale of Shares or Warrants by the Buyer. If the Buyer provides the Company
with an opinion of counsel reasonably satisfactory in form, scope and substance
to the Company that registration of a resale by the Buyer of any of the Shares
or the Warrants in accordance with clause (1)(B) of Section 4(a) of this
Agreement is not required under the 1933 Act, the Company shall permit the
transfer of such Shares and Warrants and, in the case of the Common Shares,
promptly, but in no event later than three days after receipt of such opinion,
instruct the Company's transfer agent to issue upon transfer one or more share
certificates in such name and in such denominations as specified by the Buyer.
Nothing in this Section 5(a) shall limit the obligations of the Company under
Section 3(n) of the Registration Rights Agreement.
(b) CONVERSION PROCEDURE. In connection with the exercise of conversion rights
relating to the Preferred Shares, the Buyer or any subsequent holder of the
Preferred Shares shall complete, sign and furnish to the Transfer Agent a Notice
of Conversion in the form attached hereto as ANNEX V, which shall be deemed to
satisfy all requirements of the Certificate of Designations with respect to any
exercise of conversion rights by the Buyer or any such holder.
6. CLOSING DATE.
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The date and time of the issuance and sale of the Preferred
Shares (the "Closing Date") shall be 12:00 noon, New York City time, on the date
which is one Business Day after the date on which the Buyer has deposited the
purchase price for the Preferred Shares with the Escrow Agent in accordance with
Section 1(c) hereof, or such other mutually agreed to time. The closing shall
occur on the Closing Date at the offices of the Escrow Agent.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL AND ISSUE.
The Buyer understands that the Company's obligation to sell the
Preferred Shares to the Buyer pursuant to this Agreement is conditioned upon the
satisfaction of the following conditions precedent on or before the Closing Date
(any or all of which may be waived by the Company in its sole discretion):
(a) The receipt and acceptance by the Company of this Agreement
as evidenced by execution of this Agreement by the Company and delivery of an
executed counterpart of this Agreement to the Buyer or its legal counsel;
(b) Delivery by the Buyer to the Escrow Agent of good funds as
payment in full of an amount equal to the purchase price for the Preferred
Shares in accordance with Section 1(c) hereof; and
(c) The accuracy on the Closing Date of the representations and
warranties of the Buyer contained in this Agreement as if made on the Closing
Date and the performance by the Buyer on or before the Closing Date of all
covenants and agreements of the Buyer required to be performed on or before the
Closing Date.
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase
the Preferred Shares on the Closing Date is conditioned upon the satisfaction of
the following conditions precedent on or before the Closing Date (any or all of
which may be waived by the Buyer in its sole discretion):
(a) Delivery by the Company to the Escrow Agent of the
certificates for the Preferred Shares in accordance with this Agreement;
(b) The accuracy on the Closing Date of the representations and
warranties of the Company contained in this Agreement as if made on the Closing
Date and the performance by the Company on or before the Closing Date of all
covenants and agreements of the Company required to be performed on or before
the Closing Date and receipt by the Buyer of a certificate, dated the Closing
Date, of the Chief Executive Officer or the Chief Financial Officer of the
Company confirming such matters and such other matters as the Buyer may
reasonably request;
(c) The receipt by the Buyer of confirmation of the filing with
the Secretary of State of the State of Delaware of the Certificate of
Designations;
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<PAGE>
(d) The receipt by the Buyer of a certificate, dated the Closing
Date, of the Secretary of the Company certifying (1) the certificate of
incorporation and by-laws of the Company as in effect on the Closing Date, (2)
all resolutions of the Board of Directors (and committees thereof) of the
Company relating to this Agreement and the transactions contemplated hereby and
(3) such other matters as reasonably requested by the Buyer; and
(e) Receipt by the Buyer on the Closing Date of an opinion of
counsel for the Company, dated the Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer, to the effect set forth in ANNEX VI
attached hereto.
9. MISCELLANEOUS.
(a) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York.
(b) This Agreement may be executed in counterparts and by the
parties hereto on separate counterparts, all of which together shall constitute
one and the same instrument. A facsimile transmission of this Agreement bearing
a signature on behalf of a party hereto shall be legal and binding on such
party. Although this Agreement is dated as of the date first set forth above,
the actual date of execution and delivery of this Agreement by each party is the
date set forth below such party's signature on the signature page hereof. Any
reference in this Agreement or in any of the documents executed and delivered by
the parties hereto in connection herewith to the date of execution and delivery
of this Agreement shall be deemed a reference to the later of such dates set
forth below each party's respective signature on the signature page hereof.
(c) The headings, captions and footers of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
(d) If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
(e) This Agreement may be amended only by an instrument in
writing signed by the party to be charged with enforcement.
(f) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, or any course of dealings between the parties, shall not operate as a
waiver thereof or an amendment hereof, nor shall any single or partial exercise
of any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof or
exercise of any other right or power.
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<PAGE>
(g) Any notices required or permitted to be given under the terms
of this Agreement shall be sent by mail or delivered personally (which shall
include telephone line facsimile transmission with answer back confirmation) or
by courier and shall be effective five days after being placed in the mail, if
mailed, or upon receipt, if delivered personally or by courier, in the case of
the Company addressed to the Company at its address shown in the introductory
paragraph of this Agreement, Attention: Chief Executive Officer (telephone line
facsimile transmission number (301) 515-5280) or, in the case of the Buyer, at
its address or telephone line facsimile transmission number shown on the
signature page of this Agreement, with a copy to Genesee International, Inc.,
10500 N.E. 8th Street, Suite 1920, Bellevue, Washington 98004-4332 (telephone
line facsimile transmission number (425) 462-4645) or such other address or
telephone line facsimile transmission number as a party shall have provided by
notice to the other party in accordance with this provision. The Buyer hereby
designates as its address for any notice required or permitted to be given to
the Buyer pursuant to the Certificate of Designations the address shown on the
signature page of this Agreement, with a copy to: Advantage Fund II Ltd., c/o
Genesee International, Inc., 10500 N.E. 8th Street, Suite 1920, Bellevue,
Washington 98004-4332 (facsimile number (425) 462-4645), until the Buyer shall
designate another address for such purpose.
(h) Prior to the Closing Date, the Buyer shall have the right to
assign its rights and obligations under this Agreement with respect to the
purchase of all or any portion of the Preferred Shares, provided any such
assignee, by written instrument duly executed by such assignee, assumes all
obligations of the Buyer hereunder with respect to the purchase of the portion
of the Preferred Shares so assigned and makes the same representations and
warranties with respect thereto as the Buyer makes in this Agreement (and states
its address and the location of its principal place of business for purposes of
complying with state securities laws), whereupon the Buyer shall be relieved of
any further obligations, responsibilities and liabilities with respect to the
purchase of all or the portion of the Preferred Shares the obligation for the
purchase of which has been so assigned. In the case of any such assignment, the
Company shall agree in writing with such assignee to make available to such
assignee the benefits of the Registration Rights Agreement with respect to the
Common Shares issuable on conversion of the Preferred Shares with respect to
which the purchase under this Agreement has been so assigned. Any transfer of
the Preferred Shares by the Buyer after the Closing Date shall be made in
accordance with Section 4(a).
(i) The respective representations, warranties, covenants and
agreements of the Buyer and the Company contained in this Agreement or made by
or on behalf of them, respectively, pursuant to this Agreement shall survive the
delivery of payment for the Preferred Shares and shall remain in full force and
effect regardless of any investigation made by or on behalf of them or any
person controlling or advising any of them.
(j) This Agreement and its Annexes set forth the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersede all prior agreements and understandings, whether written or oral, with
respect thereto.
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<PAGE>
(k) The Buyer shall have the right to terminate this Agreement by
giving notice to the Company at any time at or prior to the Closing Date if:
(1) the Company shall have failed, refused, or been unable at or
prior to the date of such termination of this Agreement to perform any
of its obligations hereunder;
(2) any other condition of the Buyer's obligations hereunder is
not fulfilled; or
(3) the closing shall not have occurred on a Closing Date on or
before December 10, 1997, other than solely by reason of a breach of
this Agreement by the Buyer.
Any such termination shall be effective upon the giving of notice thereof by the
Buyer. Upon such termination, the Buyer shall have no further obligation to the
Company hereunder and the Company shall remain liable for any breach of this
Agreement or the other documents contemplated hereby which occurred on or prior
to the date of such termination.
(l) The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of the
dates set forth below.
NUMBER OF SHARES: 4,000
PRICE PER SHARE: $1,000.00
AGGREGATE PURCHASE PRICE: $4,000,000.00
ADVANTAGE FUND II LTD.
By: /S/ A.P. DE GROOT
---------------------------------
A.P. de Groot
President
Date: DECEMBER 8, 1997
--------------------------------
Address: c/o CITCO
Kaya Flamboyan 9
Curacao, Netherlands Antilles
Facsimile No.: 011-599-9732-2008
V-ONE CORPORATION
By: /S/ CHARLES B. GRIFFIS
---------------------------------
Name: Charles B. Griffis
Title: Senior Vice President & CFO
Date: DECEMBER 8, 1997
--------------------------------
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<PAGE>
SCHEDULE 3(B)
1. Exchange Agreement between Virtual Open Network Environment Corporation and
Steven A. Cohen dated May 29, 1996 (up to 182,300 shares of Common Stock).
2. Exchange and Purchase Agreement between Virtual Open Network Environment
Corporation and the Lee DeVisser Trust dated April 9, 1996 (up to 109,856
shares of Common Stock).
3. Exchange and Purchase Agreement between Virtual Open Network Environment
Corporation and Golden Eagle Partners dated April 25, 1996 (up to 45,506
shares of Common Stock).
4. Exchange and Purchase Agreement between Virtual Open Network Environment
Corporation and Edgehill Capital Management, L.P. dated April __, 1996 (up
to 45,506 shares of Common Stock).
5. Exchange and Purchase Agreement between Virtual Open Network Environment
Corporation and John J. Egan IV dated April 29, 1996 (up to 13,665 shares of
Common Stock).
6. Exchange and Purchase Agreement between Virtual Open Network Environment
Corporation and Norman D. Fine dated April 10, 1996 (up to 9,488 shares of
Common Stock).
7. Exchange and Purchase Agreement between Virtual Open Network Environment
Corporation and Burnett Moody dated April __,1996 (up to 12,151 shares of
Common Stock).
8. Exchange and Purchase Agreement between Virtual Open Network Environment
Corporation and Kenneth Lissak dated May 29, 1996 (up to 54,662 shares of
Common Stock).
9. Exchange and Purchase Agreement between Virtual Open Network Environment
Corporation and Joseph and Rosa Lupo dated April 8, 1996 (up to 48,854
shares of Common Stock).
10. Exchange and Purchase Agreement between Virtual Open Network Environment
Corporation and Lewis M. Schott dated April __,1996 (up to 253,920 shares of
Common Stock).
11. Exchange and Purchase Agreement between Virtual Open Network Environment
Corporation and Stanley Shapiro dated April __,1996. This agreement relates
to shares held by Stanley Shapiro individually and by the Shapiro Trust,
Charlyn Page, Trustee (up to 87,873 shares of Common Stock in the
aggregate).
12. Exchange and Purchase Agreement between Virtual Open Network Environment
Corporation and Bryan T. Vanas dated April 9, 1996 (up to 85,428 shares of
Common Stock).
13. Registration Rights Agreement dated June 18, 1996 between Virtual Open
Network Environment Corporation and JMI Equity Fund II, L.P.
14. The Registration Rights Agreement to be dated as of the Closing Date between
V-ONE Corporation and Wharton Capital Partners, Ltd.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of December 3,
1997 (this "Agreement"), is made by and between V-ONE CORPORATION, a Delaware
corporation (the "Company"), and the person named on the signature page hereto
(the "Initial Investor").
W I T N E S S E T H:
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WHEREAS, in connection with the Subscription Agreement, dated
as of December 3, 1997, between the Initial Investor and the Company (the
"Subscription Agreement"), the Company has agreed, upon the terms and subject to
the conditions of the Subscription Agreement, to issue and sell to the Initial
Investor an aggregate of 4,000 shares (the "Preferred Shares") of preferred
stock of the Company as provided in the Subscription Agreement, which shares of
Preferred Stock are convertible into units consisting of (1) shares (the
"Conversion Shares") of Common Stock, $.001 par value (the "Common Stock"), of
the Company and (2) Common Stock Purchase Warrants to purchase shares (the
"Warrant Shares") of Common Stock (the "Warrants"); and
WHEREAS, to induce the Initial Investor to execute and deliver
the Subscription Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws with respect to the
Conversion Shares, the Warrant Shares and the shares of Common Stock issuable in
payment of dividends on the Preferred Shares;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agree as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have
the following meanings:
"Certificate of Designations" means the Certificate of
Designations of the Series A Convertible Preferred Stock as filed by the Company
with the Secretary of State of the State of Delaware.
"Computation Date" has the meaning provided in the Certificate
of Designations.
"Conversion Percentage" has the meaning provided in the
Certificate of Designations.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
<PAGE>
"Investor" or "Investors" means the Initial Investor and any
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
"register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
"Registrable Securities" means the Conversion Shares, the
Warrant Shares and any shares of Common Stock issued by the Company to any
Investor as a dividend on the Preferred Shares.
"Registration Period" means the period from the Closing Date
to the earlier of (i) the date which is three years after the Closing Date and
(ii) the date on which the Investors no longer beneficially own any Registrable
Securities.
"Registration Statement" means a registration statement of the
Company under the Securities Act, including any amendment thereto.
(b) As used in this Agreement, the term Investor includes (i)
each Investor (as defined above) and (ii) each person who is a permitted
transferee or assignee of the Registrable Securities pursuant to Section 9 of
this Agreement.
(c) Capitalized terms defined in the introductory paragraph or
the recitals to this Agreement shall have the respective meanings therein
provided. Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Subscription Agreement.
2. REGISTRATION.
(a) MANDATORY REGISTRATION. The Company shall prepare, and on
or prior to the date which is 30 days after the Closing Date, file with the SEC
a Registration Statement on Form S-3 which, on the date of filing with the SEC,
covers the resale by the Initial Investor of a number of shares of Common Stock
at least equal to the number of shares of Common Stock issuable upon conversion
of the Preferred Shares and the Warrants, determined as if the Preferred Shares,
together with accrued and unpaid dividends thereon, were converted in full and
the Warrants were exercised in full (and determined without regard to the
restriction in the proviso to the second sentence of Section 10(a) of the
Certificate of Designations) on the date of filing of the Registration Statement
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<PAGE>
with the SEC and as if the Preferred Shares were convertible and the Warrants
were exercisable on such date, and which Registration Statement shall state
that, in accordance with Rule 416 under the Securities Act, such Registration
Statement also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon conversion of the Preferred Shares and
exercise of the Warrants to prevent dilution resulting from stock splits, stock
dividends or similar transactions or by reason of changes in the conversion
price of the Preferred Shares in accordance with the terms thereof. If at any
time the number of shares of Common Stock included in the Registration Statement
required to be filed as provided in the first sentence of this Section 2(a)
shall be insufficient to cover the number of shares of Common Stock issuable on
conversion in full of the unconverted Preferred Shares and exercise in full of
the Warrants and Warrants which may be issued upon conversion of the unconverted
Preferred Shares, then promptly, but in no event later than 20 days after such
insufficiency shall occur, the Company shall file with the SEC an additional
Registration Statement on Form S-3 (which shall not constitute a post-effective
amendment to the Registration Statement filed pursuant to the first sentence of
this Section 2(a)) covering such number of shares of Common Stock as shall be
sufficient to permit such conversion. For all purposes of this Agreement such
additional Registration Statement shall be deemed to be the Registration
Statement required to be filed by the Company pursuant to Section 2(a) of this
Agreement, and the Company and the Investors shall have the same rights and
obligations with respect to such additional Registration Statement as they shall
have with respect to the initial Registration Statement required to be filed by
the Company pursuant to this Section 2(a). The Registration Statement required
to be filed pursuant to this Section 2(a) may also cover the resale (i) by the
person referred to in Section 3(m) of the Subscription Agreement and its
transferees of Common Stock issuable upon the exercise of certain warrants
issued to such person in connection with the transactions contemplated by the
Subscription Agreement and (ii) of any of the shares of Common Stock covered by
items 1 through 13 of Schedule 3(b) to the Subscription Agreement.
(b) CERTAIN OFFERINGS. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) hereof involves an underwritten
offering, persons who hold a majority in interest of the securities covered by
such Registration Statement subject to such underwritten offering shall have the
right to select one legal counsel and an investment banker or bankers and
manager or managers to administer the offering, which investment banker or
bankers or manager or managers shall be reasonably satisfactory to the Company.
The Investors who hold the Registrable Securities to be included in such
underwriting shall pay all underwriting discounts and commissions and other fees
and expenses of such investment banker or bankers and manager or managers so
selected in accordance with this Section 2(b) (other than fees and expenses
relating to registration of Registrable Securities under federal or state
securities laws, which are payable by the Company pursuant to Section 5 hereof)
with respect to their Registrable Securities and the fees and expenses of such
legal counsel so selected by the Investors.
(c) PAYMENTS BY THE COMPANY; ADJUSTMENTS OF CONVERSION TERMS.
If (1) the Company fails to file the Registration Statement with the SEC on or
prior to the date which is 30 days after the Issuance Date, (2) the Registration
Statement covering the Registrable Securities which is required to be filed by
the Company pursuant to the first sentence of Section 2(a) hereof is not ordered
effective by the SEC within 90 days after the Issuance Date, (3) the Company
shall fail to request acceleration of the effective date of the Registration
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<PAGE>
Statement as and when required by Section 3(a), (4) the Registration Statement
required to be filed by the Company pursuant to Section 2(a) shall cease to be
available for use by any holder of Preferred Shares which is named therein as a
selling stockholder for any reason (including, without limitation, by reason of
an SEC stop order, a material misstatement or omission in such Registration
Statement or the information contained in such Registration Statement having
become outdated) as contemplated by clauses (10) and (11) of the definition of
Computation Date or (5) a holder of Preferred Shares having become unable to
convert any Preferred Shares in accordance with Section 10(a) of the Certificate
of Designations (other than by reason of the 4.9% limitation set forth therein)
as contemplated by clauses (12) and (13) of the definition of Computation Date,
then, in lieu of the adjustment of the Conversion Percentage on any particular
Computation Date, the Company shall have the right to make payment to the
Initial Investor in such amount and at such time as shall be determined pursuant
to this Section 2(c). The amount to be paid by the Company to the Initial
Investor shall be determined as of each Computation Date, and such amount shall
be equal to two percent (2.0%) of the aggregate subscription price paid by the
Initial Investor for the Preferred Shares pursuant to the Subscription Agreement
(each, a "Periodic Amount"); PROVIDED, HOWEVER, that the maximum aggregate
amount paid pursuant to this Section 2(c) shall not exceed ten percent (10.0%)
of such aggregate subscription price. If the Company elects to make payment
hereunder of any Periodic Amount, such payment shall be made by the Company by
wire transfer in immediately available funds within two Business Days after the
applicable Computation Date to such account as shall be specified for such
purpose by the Initial Investor and if the Company fails to make timely payment
in full of any Periodic Amount, then, in respect of a particular Computation
Date, the Conversion Percentage and the Ceiling Price shall be adjusted in
respect of such Computation Date as provided in the Certificate of Designations.
(d) PIGGY-BACK REGISTRATIONS. If at any time the Company shall
determine to prepare and file with the SEC a Registration Statement relating to
an offering for its own account or the account of others under the Securities
Act of any of its equity securities, other than on Form S-4 or Form S-8 or their
then equivalents relating to equity securities to be issued solely in connection
with any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, the Company shall
send to each Investor who is entitled to registration rights under this Section
2(d) written notice of such determination and, if within ten (10) days after
receipt of such notice, such Investor shall so request in writing, the Company
shall include in such Registration Statement all or any part of the Registrable
Securities such Investor requests to be registered, except that if, in
connection with any underwritten public offering for the account of the Company
the managing underwriter(s) thereof shall impose a limitation on the number of
shares of Common Stock which may be included in the Registration Statement
because, in such underwriter(s)' judgment, such limitation is necessary to
effect an orderly public distribution, then the Company shall be obligated to
include in such Registration Statement only such limited portion of the
Registrable Securities with respect to which such Investor has requested
inclusion hereunder. Any exclusion of Registrable Securities shall be made pro
rata among the Investors seeking to include Registrable Securities, in
proportion to the number of Registrable Securities sought to be included by such
Investors; PROVIDED, HOWEVER, that the Company shall not exclude any Registrable
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<PAGE>
Securities unless the Company has first excluded all outstanding securities the
holders of which are not entitled by right to inclusion of securities in such
Registration Statement; and PROVIDED FURTHER, HOWEVER, that, after giving effect
to the immediately preceding proviso, any exclusion of Registrable Securities
shall be made pro rata with holders of other securities having the right to
include such securities in the Registration Statement, based on the number of
securities for which registration is requested except to the extent such pro
rata exclusion of such other securities is prohibited under any written
agreement entered into by the Company with the holder of such other securities
prior to the date of this Agreement, in which case such other securities shall
be excluded, if at all, in accordance with the terms of such agreement. No right
to registration of Registrable Securities under this Section 2(d) shall be
construed to limit any registration required under Section 2(a) hereof. The
obligations of the Company under this Section 2(d) may be waived by Investors
holding a majority in interest of the Registrable Securities and shall expire
after the Company has afforded the opportunity for the Investors to exercise
registration rights under this Section 2(d) for two registrations; PROVIDED,
HOWEVER, that any Investor who shall have had any Registrable Securities
excluded from any Registration Statement in accordance with this Section 2(d)
shall be entitled to include in an additional Registration Statement filed by
the Company the Registrable Securities so excluded. Notwithstanding any other
provision of this Agreement, if the Registration Statement required to be filed
pursuant to Section 2(a) of this Agreement shall have been ordered effective by
the SEC and the Company shall have maintained the effectiveness of such
Registration Statement as required by this Agreement and if the Company shall
otherwise have complied in all material respects with its obligations under this
Agreement, then the Company shall not be obligated to register any Registrable
Securities on such Registration Statement referred to in this Section 2(d).
(e) ELIGIBILITY FOR FORM S-3. The Company meets the
requirements for the use of Form S-3 for registration of the Registrable
Securities for resale by the Investors. The Company shall file all reports
required to be filed by the Company with the SEC in a timely manner so as to
become eligible for the use of Form S-3 and so as to maintain such eligibility
for the use of Form S-3.
3. OBLIGATIONS OF THE COMPANY. In connection with the
registration of the Registrable Securities, the Company shall:
(a) prepare promptly, and file with the SEC not later than 30
days after the Closing Date, a Registration Statement with respect to the number
of Registrable Securities provided in Section 2(a), and thereafter to use its
best efforts to cause each Registration Statement relating to Registrable
Securities to become effective as soon as possible after such filing, and keep
the Registration Statement effective pursuant to Rule 415 at all times during
the Registration Period; submit to the SEC, within three business days after the
Company learns that no review of the Registration Statement will be made by the
staff of the SEC or that the staff of the SEC has no further comments on the
Registration Statement, as the case may be, a request for acceleration of
effectiveness of the Registration Statement to a time and date not later than 48
hours after the submission of such request; and the Company represents and
warrants to, and covenants and agrees with, the Investors that the Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein), at the time it is first filed with the SEC, at the time it
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<PAGE>
is ordered effective by the SEC and at all time during which it is required to
be effective hereunder (and each such amendment and supplement at the time it is
filed with the SEC and at all time during which it is available for use in
connection with the offer and sale of the Registrable Securities) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
(b) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) furnish to each Investor whose Registrable Securities are
included in the Registration Statement and its legal counsel, (1) promptly after
the same is prepared and publicly distributed, filed with the SEC or received by
the Company, one copy of the Registration Statement and any amendment thereto,
each preliminary prospectus and prospectus and each amendment or supplement
thereto, each letter written by or on behalf of the Company to the SEC or the
staff of the SEC and each item of correspondence from the SEC or the staff of
the SEC relating to such Registration Statement (other than any portion of any
thereof which contains information for which the Company has sought confidential
treatment) and (2) such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents, as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor;
(d) use reasonable efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statement under such
securities or blue sky laws of such jurisdictions as the persons who hold a
majority in interest of the securities covered by such Registration Statement
being offered reasonably request, (ii) prepare and file in those jurisdictions
such amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof at all times until the end of the Registration Period,
(iii) take such other actions as may be necessary to maintain such registrations
and qualifications in effect at all times during the Registration Period and
(iv) take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; PROVIDED, HOWEVER, that
the Company shall not be required in connection therewith or as a condition
thereto (I) to qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (II) to subject
itself to general taxation in any such jurisdiction, (III) to file a general
consent to service of process in any such jurisdiction, (IV) to provide any
undertakings that cause more than nominal expense or burden to the Company or
(V) to make any change in its charter or by-laws, which in each case the Board
of Directors of the Company determines to be contrary to the best interests of
the Company and its stockholders;
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<PAGE>
(e) in the event that the Registrable Securities are being
offered in an underwritten offering, enter into and perform its obligations
under an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering;
(f) as promptly as practicable after becoming aware of such
event or circumstance, notify each Investor of any event or circumstance of
which the Company has knowledge, as a result of which the prospectus included in
the Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, and deliver a number of copies of such supplement
or amendment to each Investor as such Investor may reasonably request;
(g) as promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold (or, in
the event of an underwritten offering, the managing underwriters) of the
issuance by the SEC of any stop order or other suspension of effectiveness of
the Registration Statement at the earliest possible time;
(h) permit a single firm of counsel designated as selling
stockholders' counsel by the Investors who hold a majority in interest of the
Registrable Securities being sold to review and comment on the Registration
Statement and all amendments and supplements thereto a reasonable period of time
prior to their filing with the SEC;
(i) make generally available to its security holders as soon
as practical, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions of
Rule 158 under the Securities Act) covering a twelve-month period beginning not
later than the first day of the Company's fiscal quarter next following the
effective date of the Registration Statement;
(j) at the request of the persons who hold a majority in
interest of the securities covered by the Registration Statement, furnish on the
date that Registrable Securities are delivered to an underwriter, if any, for
sale in connection with the Registration Statement (i) a letter, dated such
date, from the Company's independent certified public accountants in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters;
and (ii) an opinion, dated such date, from counsel representing the Company for
purposes of such Registration Statement, in form and substance as is customarily
given in an underwritten public offering, addressed to the underwriters and the
Investors;
(k) make available for inspection by any Investor, any
underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by any such
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Investor or underwriter (collectively, the "Inspectors"), all pertinent
financial and other records, pertinent corporate documents and properties of the
Company (collectively, the "Records"), as shall be reasonably necessary to
enable each Inspector to exercise its due diligence responsibility, and cause
the Company's officers, directors and employees to supply all information which
any Inspector may reasonably request for purposes of such due diligence;
PROVIDED, HOWEVER, that each Inspector shall hold in confidence and shall not
make any disclosure (except to an Investor) of any Record or other information
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement, (ii) the release of such Records is ordered pursuant to
a subpoena or other order from a court or government body of competent
jurisdiction or (iii) the information in such Records has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company shall not be required to disclose any confidential
information in such Records to any Inspector until and unless such Inspector
shall have entered into confidentiality agreements (in form and substance
satisfactory to the Company) with the Company with respect thereto,
substantially in the form of this Section 3(k). Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at the Company's own
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, the Records deemed confidential. The Company shall hold
in confidence and shall not make any disclosure of information concerning an
Investor provided to the Company pursuant to Section 4(e) hereof unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor, at
such Investor's own expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information;
(l) use its best efforts (i) to cause all the Registrable
Securities covered by the Registration Statement to be listed on the Nasdaq
National Market ("Nasdaq") or such other principal securities market on which
securities of the same class or series issued by the Company are then listed or
traded or (ii) if securities of the same class or series as the Registrable
Securities are not then listed on Nasdaq or any such other securities market, to
cause all of the Registrable Securities covered by the Registration Statement to
be listed on the New York Stock Exchange, the American Stock Exchange or the
Nasdaq SmallCap Market;
(m) provide a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the effective date
of the Registration Statement;
(n) cooperate with the Investors who hold Registrable
Securities being offered and the managing underwriter or underwriters, if any,
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to facilitate the timely preparation and delivery of certificates (not bearing
any restrictive legends) representing Registrable Securities to be offered
pursuant to the Registration Statement and enable such certificates to be in
such denominations or amounts as the case may be, as the managing underwriter or
underwriters, if any, or the Investors may reasonably request and registered in
such names as the managing underwriter or underwriters, if any, or the Investors
may request; and, within three business days after a Registration Statement
which includes Registrable Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel selected by the Company to
deliver, to the transfer agent for the Registrable Securities (with copies to
the Investors whose Registrable Securities are included in such Registration
Statement) an instruction substantially in the form attached hereto as EXHIBIT 1
and an opinion of such counsel, if required by the Company's transfer agent, in
the form attached hereto as EXHIBIT 2;
(o) during the period the Company is required to maintain
effectiveness of the Registration Statement pursuant to Section 3(a), the
Company shall not bid for or purchase any Common Stock or any right to purchase
Common Stock or attempt to induce any person to purchase any such security or
right if such bid, purchase or attempt would in any way limit the right of the
Investors to sell Registrable Securities by reason of the limitations set forth
in Regulation M under the Exchange Act; and
(p) take all other reasonable actions necessary to expedite
and facilitate disposition by the Investor of the Registrable Securities
pursuant to the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations:
(a) It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least four (4)
days prior to the first anticipated filing date of the Registration Statement,
the Company shall notify each Investor of the information the Company requires
from each such Investor (the "Requested Information") if any of such Investor's
Registrable Securities are eligible for inclusion in the Registration Statement.
If at least one (1) business day prior to the filing date the Company has not
received the Requested Information from an Investor (a "Non-Responsive
Investor"), then the Company may file the Registration Statement without
including Registrable Securities of such Non-Responsive Investor (and if the
only Investor participating in the registration is a Non-Responsive Investor,
the Company shall not be required to file the Registration Statement prior to
the date which is two business days after the Requested Information is furnished
by such Investor);
(b) Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
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Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement;
(c) In the event persons holding a majority in interest of the
securities covered by the Registration Statement determine to engage the
services of an underwriter, each Investor agrees to enter into and perform such
Investor's obligations under an underwriting agreement, in usual and customary
form, including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement;
(d) Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(f)
or 3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice; and
(e) No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting arrangements
approved by the Investors entitled hereunder to approve such arrangements, (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements and (iii) agrees to pay its pro rata share of
all underwriting discounts and commissions and other fees and expenses of
investment bankers and any manager or managers of such underwriting and legal
expenses of the underwriters applicable with respect to its Registrable
Securities, in each case to the extent not payable by the Company pursuant to
the terms of this Agreement.
5. EXPENSES OF REGISTRATION. All reasonable expenses, other
than underwriting discounts and commissions and other fees and expenses of
investment bankers and other than brokerage commissions, incurred in connection
with registrations, filings or qualifications pursuant to Section 3, including,
without limitation, all registration, listing and qualifications fees, printers
and accounting fees and the fees and disbursements of counsel for the Company,
shall be borne by the Company, PROVIDED, HOWEVER, that the Investors shall bear
the fees and out-of-pocket expenses of any legal counsel retained by the
Investors.
6. INDEMNIFICATION. In the event any Registrable Securities
are included in a Registration Statement under this Agreement:
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(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within the meaning of the
Securities Act or the Exchange Act, any underwriter (as defined in the
Securities Act) for the Investors, the directors, if any, of such underwriter
and the officers, if any, of such underwriter, and each person, if any, who
controls any such underwriter within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities or expenses (joint or several) incurred (collectively,
"Claims") to which any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations in the
Registration Statement, or any post-effective amendment thereof, or any
prospectus included therein: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if used
prior to the effective date of such Registration Statement, or contained in the
final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state securities law or any rule or
regulation under the Securities Act, the Exchange Act or any state securities
law (the matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). Subject to the restrictions set forth in Section 6(d) with
respect to the number of legal counsel, the Company shall reimburse the
Investors and each such underwriter or controlling person, promptly as such
expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (I) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement, the prospectus or any such amendment thereof or supplement thereto,
if such prospectus was timely made available by the Company pursuant to Section
3(c) hereof; (II) with respect to any preliminary prospectus shall not inure to
the benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to Section 3(c) hereof; and (III)
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
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Person and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9.
(b) In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to indemnify and hold
harmless, to the same extent and in the same manner set forth in Section 6(a),
the Company, each of its directors, each of its officers who signs the
Registration Statement, each person, if any, who controls the Company within the
meaning of the Securities Act or the Exchange Act, any underwriter and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the Securities Act or the Exchange Act
(collectively and together with an Indemnified Person, an "Indemnified Party"),
against any Claim to which any of them may become subject, under the Securities
Act, the Exchange Act or otherwise, insofar as such Claim arises out of or is
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and such Investor will reimburse
any legal or other expenses reasonably incurred by any Indemnified Party in
connection with investigating or defending any such Claim; PROVIDED, HOWEVER,
that the indemnity agreement contained in this Section 6(b) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of such Investor, which consent shall not be
unreasonably withheld; PROVIDED, FURTHER, HOWEVER, that the Investor shall be
liable under this Section 6(b) for only that amount of a Claim as does not
exceed the amount by which the net proceeds to such Investor from the sale of
Registrable Securities pursuant to such Registration Statement exceeds the cost
of such Registrable Securities to such Investor. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
such Indemnified Party and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9. Notwithstanding anything to
the contrary contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented.
(c) The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information so furnished in writing by such persons
expressly for inclusion in the Registration Statement.
(d) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel selected by the indemnifying party
but reasonably acceptable to the Indemnified Person or the Indemnified Party, as
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the case may be; PROVIDED, HOWEVER, that an Indemnified Person or Indemnified
Party shall have the right to retain its own counsel with the fees and expenses
to be paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. In such event, the Company shall pay for only one
separate legal counsel for the Investors; such legal counsel shall be selected
by the persons holding a majority in interest of the securities included in the
Registration Statement to which the Claim relates. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted by
law; PROVIDED, HOWEVER, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6, (b) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty of such fraudulent
misrepresentation and (c) contribution by any seller of Registrable Securities
shall be limited in amount to the amount by which the net amount of proceeds
received by such seller from the sale of such Registrable Securities exceeds the
purchase price paid by such seller for such Registrable Securities.
8. REPORTS UNDER EXCHANGE ACT. With a view to making available
to the Investors the benefits of Rule 144 promulgated under the Securities Act
or any other similar rule or regulation of the SEC that may at any time permit
the Investors to sell securities of the Company to the public without
registration ("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company and (iii) such other information as may be reasonably requested to
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permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have
the Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of all or any portion
of such securities (or all or any portion of the Preferred Shares or Warrants)
only if: (a) the Investor agrees in writing with the transferee or assignee to
assign such rights, and a copy of such agreement is furnished to the Company
within a reasonable time after such assignment, (b) the Company is, within a
reasonable time after such transfer or assignment, furnished with written notice
of (i) the name and address of such transferee or assignee and (ii) the
securities with respect to which such registration rights are being transferred
or assigned, (c) immediately following such transfer or assignment the further
disposition of such securities by the transferee or assignee is restricted under
the Securities Act and applicable state securities laws, and (d) at or before
the time the Company received the written notice contemplated by clause (b) of
this sentence the transferee or assignee agrees in writing with the Company to
be bound by all of the provisions contained herein. In connection with any such
transfer the Company shall, at its sole cost and expense, promptly after such
assignment take such actions as shall be reasonably acceptable to the Initial
Investor and such transferee to assure that the Registration Statement and
related prospectus are available for use by such transferee for sales of the
Registrable Securities in respect of which the rights to registration have been
so assigned.
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Investors who
hold a majority in interest of the Registrable Securities. Any amendment or
waiver effected in accordance with this Section 10 shall be binding upon each
Investor and the Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall
be in writing and shall be deemed to be sufficiently given when personally
delivered (by hand, by courier, by telephone line facsimile transmission or
other means) or sent by certified mail, return receipt requested, properly
addressed and with proper postage pre-paid (i) if to the Company, at V-ONE
Corporation, 20250 Century Boulevard, Suite 300, Germantown, Maryland 20874,
Attention: Chief Executive Officer, telephone line facsimile transmission number
(301) 515-5280, (ii) if to the Initial Investor, c/o Genesee International,
Inc., 10500 N.E. 8th Street, Suite 1920, Bellevue, Washington 98004-4332,
telephone line facsimile transmission number (425) 462-4645 and (iii) if to any
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other Investor, at such address as such Investor shall have provided in writing
to the Company, or at such other address as each such party furnishes by notice
given in accordance with this Section 11(b), and shall be effective, when
personally delivered, upon receipt and, when so sent by certified mail, four
days after deposit with the United States Postal Service.
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be enforced, governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such State. In the event
that any provision of this Agreement is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision hereof.
(e) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) The Company acknowledges that any failure by the Company
to perform its obligations under this Agreement, including, without limitation,
the Company's obligations under Section 3(n), or any delay in such performance
could result in damages to the Investors and the Company agrees that, in
addition to any other liability the Company may have by reason of any such
failure or delay, the Company shall be liable for all direct and consequential
damages caused by any such failure or delay.
(j) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by telephone line facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
day and year first above written.
V-ONE CORPORATION
By /s/ Charles B. Griffis
------------------------------------
Name: Charles B. Griffis
Title: Sr. Vice President & CFO
ADVANTAGE FUND II LTD.
By /s/ A.P. de Groot
------------------------------------
A.P. de Groot
President
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EXHIBIT 1
TO
REGISTRATION
RIGHTS AGREEMENT
[Company Letterhead]
[Date]
American Stock Transfer & Trust Company
as Transfer Agent and Registrar
6201 Fifteenth Avenue
Brooklyn, New York 11219
Ladies and Gentlemen:
This letter shall serve as our irrevocable authorization and
direction to you [(1) to transfer or re-register the certificates for the shares
of Common Stock, $.001 par value (the "Common Stock"), of V-ONE Corporation, a
Delaware corporation (the "Company"), represented by certificate numbers
___________ and ____________ for an aggregate of ___________ shares (the
"Outstanding Shares") of Common Stock presently registered in the name of
Advantage Fund II Ltd. upon surrender of such certificate(s) to you,
notwithstanding the legend appearing on such certificates, and (2)]1 to issue
shares (the "Conversion Shares") of Common Stock to or upon the order of the
holder from time to time on conversion of the shares (the "Preferred Shares") of
Series A Convertible Preferred Stock, $.001 par value, of the Company, issued by
the Company upon receipt by you of a Notice of Conversion from such holder in
the form enclosed herewith and (3) to issue shares (the "Warrant Shares") of
Common Stock on exercise of the Common Stock Purchase Warrants (the "Warrants")
issued or to be issued to the holder or holders of the Preferred Shares to or
upon the order of the registered holder from time to time of the Warrants upon
surrender to you by such registered holder for exercise of Warrants and a
properly completed and duly executed form of subscription in the form enclosed
herewith. [The transfer or re-registration of the certificates for the
Outstanding Shares by you should be made at such time as you are requested to do
so by the record holder of the Outstanding Shares. The certificate issued upon
such transfer or re-registration should be registered in such name as requested
by the holder of record of the certificate surrendered to you and should not
bear any legend which would restrict the transfer of the shares represented
thereby. In addition, you are hereby directed to remove any stop-transfer
instruction relating to the Outstanding Shares.]2 Certificates for the
Conversion Shares and the Warrant Shares should not bear any restrictive legend
and should not be subject to any stop-transfer restriction.
Contemporaneously with the delivery of this letter, the
Company is delivering to you an opinion of Kirkpatrick & Lockhart LLP as to
____________________
1 Omit if no conversions of Preferred Stock have occurred before SEC
registration is declared effective.
1-17
<PAGE>
registration of [the Outstanding Shares and]* the Conversion Shares and the
Warrant Shares under the Securities Act of 1933, as amended.
Should you have any questions concerning this matter, please
contact me.
Very truly yours,
V-ONE CORPORATION
By: ____________________________
Name:
Title:
Enclosures
cc: Advantage Fund II Ltd.
1-18
<PAGE>
EXHIBIT 2
TO
REGISTRATION
RIGHTS AGREEMENT
__________________________________________________, 1997
American Stock Transfer & Trust Company
as Transfer Agent and Registrar
6201 Fifteenth Avenue
Brooklyn, New York 11219
V-ONE CORPORATION
Shares Of Common Stock
----------------------
Ladies and Gentlemen:
We are counsel to V-ONE Corporation, a Delaware corporation
(the "Company"), and we understand that Advantage Fund II Ltd. (the "Holder")
has purchased from the Company an aggregate of 4,000 shares (the "Preferred
Shares") of the Company's Series A Convertible Preferred Stock, $.001 par value
(the "Preferred Stock"). The Preferred Shares were purchased by the Holder
pursuant to a Subscription Agreement, dated as of December 3, 1997, between the
Holder and the Company (the "Subscription Agreement"). Pursuant to a
Registration Rights Agreement, dated as of December 3, 1997, between the Company
and the Holder (the "Registration Rights Agreement") entered into in connection
with the purchase by the Holder of the Preferred Shares, the Company agreed with
the Holder, among other things, to register for resale the shares of Common
Stock issuable upon conversion of the Preferred Shares (the "Conversion Shares")
and the shares of Common Stock (the "Warrant Shares") issuable upon exercise of
the Common Stock Purchase Warrants (the "Warrants") issued upon conversion of
the Preferred Shares under the Securities Act of 1933, as amended (the
"Securities Act"), upon the terms provided in the Registration Rights Agreement.
Pursuant to the Registration Rights Agreement, on _______________, the Company
filed a Registration Statement on Form S-3 (File No. 333-____________) (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") relating to the Conversion Shares and the Warrant Shares, which names the
Holder as a selling stockholder thereunder.
[Other introductory and scope of examination language to be
inserted]
Based on the foregoing, we are of the opinion that the
Conversion Shares and the Warrant Shares have been registered for resale under
the Securities Act.
This opinion may be relied upon by the Holder as if addressed
to the Holder. [Other appropriate language to be included.]
Very truly yours,
cc: Advantage Fund II Ltd.
2-19
ADVANTAGE FUND II LTD.
C/O CITCO
KAYA FLAMBOYAN 9
CURACAO, NETHERLANDS ANTILLES
December 8, 1997
V-ONE Corporation
20250 Century Boulevard
Suite 300
Germantown, Maryland 20874
COMMITMENT LETTER
Dear Sirs:
Advantage Fund II Ltd., a British Virgin Islands corporation
("Advantage"), is pleased to provide V-ONE Corporation, a Delaware corporation
(the "Company"), with this commitment letter in respect of an additional
investment of $4,000,000 in preferred stock of the Company upon and subject to
the terms and conditions set forth below. Capitalized terms used herein without
definition shall have the meanings given them in the Subscription Agreement,
dated as of December 3, 1997 (the "Series A Subscription Agreement"), between
the Company and Advantage, or in the Certificate of Designations referred to in
the Subscription Agreement.
1. THE TRANSACTION. Following the closing on the date hereof of
the issuance and sale to Advantage of 4,000 shares (the "Series A Preferred
Shares") of Series A Convertible Preferred Stock, $.001 par value, of the
Company for an aggregate purchase price of $4,000,000 pursuant to the
Subscription Agreement, Advantage or its designee is prepared to purchase shares
of a new series of preferred stock of the Company for an aggregate purchase
price of $4,000,000 on the same terms and conditions as the Series A Preferred
Shares, the Series A Subscription Agreement and the other agreements, documents
and transactions contemplated thereby (the "Transaction").
2. EFFECTIVE PERIOD; TERMINATION. (a) This commitment shall
become effective 90 days after the Registration Statement with respect to the
Common Shares shall have been declared effective by the SEC (the "Effective
Date") and shall expire one year after the date hereof, subject to earlier
termination (1) by the Company at any time upon ten days' prior written notice
to Advantage or (2) by Advantage as follows: (i) at any time after the 180th day
after the Effective Date upon ten days' prior written notice given by Advantage
to the Company; (ii) at any time (before or after the Effective Date) upon the
Company's failure to satisfy the conditions set forth in Sections 3(b), 3(e) or
3(f) or the Company's failure to comply with or perform, as and when required,
any of its material obligations set forth in this letter, in each case upon two
days' prior written notice given by Advantage to the Company; or (iii) if on any
of the Specified Dates (as defined in Section 4) the Company fails to satisfy
<PAGE>
any of the conditions set forth in Section 4, in each case upon two days' prior
written notice given by Advantage to the Company. In addition, this commitment
shall terminate automatically, without any action by any party hereto, upon the
commencement of any voluntary or involuntary case or other proceeding against
the Company seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or similar official of it or a substantial part of its
property, or the Company shall consent to any such relief or appointment, or the
Company shall make a general assignment for the benefit of creditors, or the
Company shall fail generally to pay its debts as they become due.
(b) To exercise its rights hereunder, the Company shall give
written notice thereof (the "Notice") to Advantage. Upon receipt of the Notice,
Advantage (or its designee) and the Company shall use their best efforts to
document and complete the Transaction. If any Series A Preferred Shares are
outstanding at the time of such exercise by the Company, Advantage shall deliver
to the Company a written consent to the Transaction pursuant to Section 12 of
the Certificate of Designations.
3. GENERAL CONDITIONS. The obligation of Advantage (or its
designee) to proceed with and complete the Transaction shall be subject to the
following general conditions:
(a) Since the date hereof, there shall have been no material
adverse change and no material adverse development in the business,
properties, operations, condition (financial or other), results of
operations or prospects of the Company.
(b) (1) The Company shall not have failed or defaulted in the
timely performance of any material obligation to Advantage or any holder
of the Series A Preferred Shares under the Series A Subscription
Agreement, the Certificate of Designations, the Registration Rights
Agreement or any other agreements or documents entered into in
connection with the issuance of the Series A Preferred Shares
(collectively, the "Series A Transaction Documents"), (2) the
representations and warranties of the Company made in the Series A
Transaction Documents continue at all times to be true and correct in
all material respects (except for representations and warranties given
as of a specific date which representations shall continue to be true
and correct as of such date), and (3) the Registration Statement shall
be available for use by the selling stockholders named therein.
(c) The Company shall have obtained Stockholder Approval with
respect to the issuance of the Series A Preferred Shares and the new
shares of preferred stock to be issued in the Transaction.
(d) After the date hereof, the Company shall have publicly
announced the hiring of a new Chief Executive Officer and such Chief
Executive Officer shall remain in office.
-2-
<PAGE>
(e) Since the date hereof, there shall not have occurred any
Optional Redemption Event (as defined in the Certificate of
Designations) as to which a holder of Series A Preferred Shares is
entitled to exercise its redemption rights with respect thereto or has
exercised such rights and the Company has not redeemed such holder's
Series A Preferred Shares as required by the Certificate of
Designations.
(f) Since the date hereof, there shall not have occurred a change
in the membership or size of the Company's Board of Directors such that
directors in office on the date hereof no longer constitute a majority
of the full Board.
(g) The parties shall negotiate, and, within 28 days after the
Notice Date, execute and deliver definitive agreements and documents in
forms substantially similar to those delivered in connection with the
purchase of the Series A Preferred Shares, PROVIDED, HOWEVER, that
Advantage (or its designee) shall not be obligated to execute such
definitive agreements if upon the execution thereof Advantage (or its
designee) would be entitled to terminate any of such agreements in
accordance with their respective terms.
4. ADDITIONAL CONDITIONS. The obligation of Advantage (or its
designee) to proceed with and complete the Transaction shall be subject to the
following additional conditions relating to the financial condition of the
Company and the trading of its Common Stock, which conditions must be satisfied
on each of the date the Notice is received by Advantage (the "Notice Date"), the
date of execution of the subscription agreement for the Transaction and the date
of the closing of the Transaction (such dates, together with the Notice Date are
referred to herein as the "Specified Dates"):
(a) Determined on the basis of the most recent financial
statements of the Company filed with the SEC under the 1934 Act,
(1) total stockholders' equity, including the Series A
Preferred Shares ("Total Stockholders' Equity"), of the Company
is at least $13,500,000; and
(2) the ratio of the Company's total liabilities to Total
Stockholders' Equity is not less than 1:4;
PROVIDED, HOWEVER, that Advantage (or its designee) shall not be
obligated to close the Transaction unless such financial statements are
as of a date no more than 60 days prior to the closing date of the
Transaction.
(b) The average closing bid price of the Common Stock on Nasdaq
for the five trading days prior to each of the Specified Dates is at
least $3.00 per share.
(c) The average daily trading volume of the Common Stock on
Nasdaq for the 30 trading days prior to each of the Specified Dates is
at least 40,000 shares.
-3-
<PAGE>
The price and number of shares referred to in Sections 4(b) and
4(c) above shall be subject to equitable adjustment from time to time on
terms reasonably acceptable to Advantage for (i) stock splits, (ii)
stock dividends, (iii) combinations, (iv) capital reorganizations, (v)
issuance to all holders of Common Stock of rights or warrants to
purchase shares of Common Stock at a price per share less than the
Current Price which would otherwise be applicable, (vi) the distribution
by the Company to all holders of Common Stock of evidences of
indebtedness of the Company or cash (other than regular quarterly cash
dividends), (vii) tender offers by the Company or any subsidiary of the
Company or other repurchases of shares of Common Stock in one or more
transactions which, individually or in the aggregate, result in the
purchase of more than 10% of the Common Stock outstanding and (viii)
similar events relating to the Common Stock.
5. COMMITMENT FEE. In consideration of providing this commitment,
on the date hereof and on the same day of each month hereafter until the earlier
of (i) the closing of the Transaction or (ii) the termination or expiration of
this commitment, the Company shall pay Advantage a non-refundable monthly
commitment fee of $3,333.00, which fee shall not be subject to proration or
refund for partial month periods.
6. INDEMNITY. The Company hereby agrees to indemnify and hold
harmless Advantage, any designee of Advantage who participates in the
Transaction and their respective directors, officers, employees, agents,
advisors, successors and assigns, and each person, if any, who controls any such
person within the meaning of the 1933 Act or the 1934 Act (collectively, the
"Indemnified Persons"), against any losses, claims, damages, or liabilities
asserted by or due to a person other than the Company or another Indemnified
Person or any expenses (including reasonable attorneys' fees) incurred by the
Indemnified Persons in connection therewith arising out of, or in connection
with, or as a result of: (i) the execution and delivery of this commitment
letter or any agreement or document relating to the Transaction contemplated
hereby or the performance by the Company or the Indemnified Persons of their
respective obligations hereunder or thereunder, (ii) the use of any proceeds
from the Transaction or (iii) any claim, litigation, investigation or proceeding
relating to any of the foregoing, whether or not the Indemnified Person is a
party hereto. The provisions of this Section 6 shall survive any termination of
this letter.
7. MISCELLANEOUS. All notices hereunder to the Company and
Advantage shall be given to the addresses and in the manner provided in the
Series A Subscription Agreement. All notices to the designee, if any, of
Advantage hereunder shall be given to such address as such designee shall advise
the Company in writing and in the manner provided in the Subscription Agreement.
This commitment letter is solely for the benefit of the parties hereto and, with
respect to Section 6, the Indemnified Persons and nothing contained herein shall
be deemed to confer upon anyone other than the Company, Advantage, and, with
respect to Section 6, the Indemnified Persons any right to insist on or enforce
the performance of any of the obligations contained herein. Except as otherwise
provided in Section 4(i)(3) of the Series A Subscription Agreement, this letter
supersedes any prior agreements, commitments, communications or letters with
respect to the subject matter hereof. This letter shall be governed by the
internal laws of the State of New York. This letter may be executed in
-4-
<PAGE>
counterparts, and a facsimile transmission hereof bearing a signature on behalf
of a party hereto shall be binding on such party.
-5-
<PAGE>
Very truly yours,
ADVANTAGE FUND II LTD.
By: /S/ A.P. DE GROOT
--------------------------
A.P. de Groot
President
Accepted and agreed as of the date first written above:
V-ONE CORPORATION
By: /S/ CHARLES B. GRIFFIS
----------------------------
Name: Charles B. Griffis
Title: Sr. Vice President & CFO
-6-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of December 8,
1997 (this "Agreement"), is made by and between V-ONE CORPORATION, a Delaware
corporation (the "Company"), and the person named on the signature page hereto
(the "Initial Holder").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, in connection with the engagement letter, dated
October 22, 1997, between the Initial Holder and the Company (the "Engagement
Letter"), the Company has agreed to issue on the date hereof to the Initial
Holder Common Stock Purchase Warrants (the "Warrants") to purchase shares (the
"Warrant Shares") of Common Stock, $.001 par value (the "Common Stock"), of the
Company; and
WHEREAS, in accordance with the Engagement Letter, the Company
has agreed to provide certain registration rights under the Securities Act of
1933, as amended, and the rules and regulations thereunder, or any similar
successor statute (collectively, the "Securities Act"), and applicable state
securities laws with respect to the Warrant Shares;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Holder hereby agree as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have
the following meanings:
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Investor" or "Investors" means the Initial Holder and any
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
"Issuance Date" means the date of this Agreement.
"register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
<PAGE>
"Registrable Securities" means the Warrant Shares.
"Registration Period" means the period from the Issuance Date
to the earlier of (i) the date which is three years after the Issuance Date and
(ii) the date on which the Investors no longer beneficially own any Registrable
Securities.
"Registration Statement" means a registration statement of the
Company under the Securities Act, including any amendment thereto.
(b) As used in this Agreement, the term Investor includes (i)
each Investor (as defined above) and (ii) each person who is a permitted
transferee or assignee of the Registrable Securities pursuant to Section 9 of
this Agreement.
(c) Capitalized terms defined in the introductory paragraph or
the recitals to this Agreement shall have the respective meanings therein
provided.
2. REGISTRATION.
(a) MANDATORY REGISTRATION. The Company shall prepare, and on
or prior to the date which is 30 days after the Issuance Date, file with the SEC
a Registration Statement on Form S-3 which, on the date of filing with the SEC,
covers the resale by the Initial Holder of a number of shares of Common Stock at
least equal to the number of shares of Common Stock issuable upon exercise of
the Warrants, determined as if the Warrants were exercised in full on the date
of filing of the Registration Statement with the SEC, and which Registration
Statement shall state that, in accordance with Rule 416 under the Securities
Act, such Registration Statement also covers such indeterminate number of
additional shares of Common Stock as may become issuable upon exercise of the
Warrants to prevent dilution resulting from stock splits, stock dividends or
similar transactions. If at any time the number of shares of Common Stock
included in the Registration Statement required to be filed as provided in the
first sentence of this Section 2(a) shall be insufficient to cover the number of
shares of Common Stock issuable on exercise in full of the Warrants, then
promptly, but in no event later than 20 days after such insufficiency shall
occur, the Company shall file with the SEC an additional Registration Statement
on Form S-3 (which shall not constitute a post-effective amendment to the
Registration Statement filed pursuant to the first sentence of this Section
2(a)) covering such number of shares of Common Stock as shall be sufficient to
permit such exercise. For all purposes of this Agreement such additional
Registration Statement shall be deemed to be the Registration Statement required
to be filed by the Company pursuant to Section 2(a) of this Agreement, and the
Company and the Investors shall have the same rights and obligations with
respect to such additional Registration Statement as they shall have with
respect to the initial Registration Statement required to be filed by the
Company pursuant to this Section 2(a). The Registration Statement required to be
filed pursuant to this Section 2(a) may also cover the resale (i) by Advantage
Fund II Ltd., a British Virgin Island corporation ("Advantage"), and its
transferees of shares of Common Stock issuable to such investor (x) upon the
conversion of shares of preferred stock purchased by Advantage on the date
-2-
<PAGE>
hereof and (y) upon the exercise of warrants to purchase shares of Common Stock
issuable upon conversion of such preferred stock, and (ii) any of the shares of
Common Stock covered by items 1 through 13 of Schedule 3(b) to that certain
Subscription Agreement, dated as of December 3, 1997, between the Company and
Advantage.
(b) CERTAIN OFFERINGS. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) hereof involves an underwritten
offering, persons who hold a majority in interest of the securities covered by
such Registration Statement subject to such underwritten offering shall have the
right to select one legal counsel and an investment banker or bankers and
manager or managers to administer the offering, which investment banker or
bankers or manager or managers shall be reasonably satisfactory to the Company.
The Investors who hold the Registrable Securities to be included in such
underwriting shall pay all underwriting discounts and commissions and other fees
and expenses of such investment banker or bankers and manager or managers so
selected in accordance with this Section 2(b) (other than fees and expenses
relating to registration of Registrable Securities under federal or state
securities laws, which are payable by the Company pursuant to Section 5 hereof)
with respect to their Registrable Securities and the fees and expenses of such
legal counsel so selected by the Investors.
(c) PIGGY-BACK REGISTRATIONS. If at any time the Company shall
determine to prepare and file with the SEC a Registration Statement relating to
an offering for its own account or the account of others under the Securities
Act of any of its equity securities, other than on Form S-4 or Form S-8 or their
then equivalents relating to equity securities to be issued solely in connection
with any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, the Company shall
send to each Investor who is entitled to registration rights under this Section
2(c) written notice of such determination and, if within ten (10) days after
receipt of such notice, such Investor shall so request in writing, the Company
shall include in such Registration Statement all or any part of the Registrable
Securities such Investor requests to be registered, except that if, in
connection with any underwritten public offering for the account of the Company
the managing underwriter(s) thereof shall impose a limitation on the number of
shares of Common Stock which may be included in the Registration Statement
because, in such underwriter(s)' judgment, such limitation is necessary to
effect an orderly public distribution, then the Company shall be obligated to
include in such Registration Statement only such limited portion of the
Registrable Securities with respect to which such Investor has requested
inclusion hereunder. Any exclusion of Registrable Securities shall be made pro
rata among the Investors seeking to include Registrable Securities, in
proportion to the number of Registrable Securities sought to be included by such
Investors; PROVIDED, HOWEVER, that the Company shall not exclude any Registrable
Securities unless the Company has first excluded all outstanding securities the
holders of which are not entitled by right to inclusion of securities in such
Registration Statement; and PROVIDED FURTHER, HOWEVER, that, after giving effect
to the immediately preceding proviso, any exclusion of Registrable Securities
shall be made pro rata with holders of other securities having the right to
include such securities in the Registration Statement, based on the number of
securities for which registration is requested except to the extent such pro
rata exclusion of such other securities is prohibited under any written
agreement entered into by the Company with the holder of such other securities
prior to the date of this Agreement, in which case such other securities shall
-3-
<PAGE>
be excluded, if at all, in accordance with the terms of such agreement. No right
to registration of Registrable Securities under this Section 2(c) shall be
construed to limit any registration required under Section 2(a) hereof. The
obligations of the Company under this Section 2(c) may be waived by Investors
holding a majority in interest of the Registrable Securities and shall expire
after the Company has afforded the opportunity for the Investors to exercise
registration rights under this Section 2(c) for two registrations; PROVIDED,
HOWEVER, that any Investor who shall have had any Registrable Securities
excluded from any Registration Statement in accordance with this Section 2(c)
shall be entitled to include in an additional Registration Statement filed by
the Company the Registrable Securities so excluded. Notwithstanding any other
provision of this Agreement, if the Registration Statement required to be filed
pursuant to Section 2(a) of this Agreement shall have been ordered effective by
the SEC and the Company shall have maintained the effectiveness of such
Registration Statement as required by this Agreement and if the Company shall
otherwise have complied in all material respects with its obligations under this
Agreement, then the Company shall not be obligated to register any Registrable
Securities on such Registration Statement referred to in this Section 2(c).
(d) ELIGIBILITY FOR FORM S-3. The Company meets the
requirements for the use of Form S-3 for registration of the Registrable
Securities for resale by the Investors. The Company shall file all reports
required to be filed by the Company with the SEC in a timely manner so as to
become eligible for the use of Form S-3 and so as to maintain such eligibility
for the use of Form S-3.
3. OBLIGATIONS OF THE COMPANY. In connection with the
registration of the Registrable Securities, the Company shall:
(a) prepare promptly, and file with the SEC not later than 30
days after the Issuance Date, a Registration Statement with respect to the
number of Registrable Securities provided in Section 2(a), and thereafter to use
its best efforts to cause each Registration Statement relating to Registrable
Securities to become effective as soon as possible after such filing, and keep
the Registration Statement effective pursuant to Rule 415 at all times during
the Registration Period; submit to the SEC, within three business days after the
Company learns that no review of the Registration Statement will be made by the
staff of the SEC or that the staff of the SEC has no further comments on the
Registration Statement, as the case may be, a request for acceleration of
effectiveness of the Registration Statement to a time and date not later than 48
hours after the submission of such request; and the Company represents and
warrants to, and covenants and agrees with, the Investors that the Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein), at the time it is first filed with the SEC, at the time it
is ordered effective by the SEC and at all time during which it is required to
be effective hereunder (and each such amendment and supplement at the time it is
filed with the SEC and at all time during which it is available for use in
connection with the offer and sale of the Registrable Securities) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
-4-
<PAGE>
(b) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) furnish to each Investor whose Registrable Securities are
included in the Registration Statement and its legal counsel, (1) promptly after
the same is prepared and publicly distributed, filed with the SEC or received by
the Company, one copy of the Registration Statement and any amendment thereto,
each preliminary prospectus and prospectus and each amendment or supplement
thereto, each letter written by or on behalf of the Company to the SEC or the
staff of the SEC and each item of correspondence from the SEC or the staff of
the SEC relating to such Registration Statement (other than any portion of any
thereof which contains information for which the Company has sought confidential
treatment) and (2) such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents, as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor;
(d) use reasonable efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statement under such
securities or blue sky laws of such jurisdictions as the persons who hold a
majority in interest of the securities covered by such Registration Statement
being offered reasonably request, (ii) prepare and file in those jurisdictions
such amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof at all times until the end of the Registration Period,
(iii) take such other actions as may be necessary to maintain such registrations
and qualifications in effect at all times during the Registration Period and
(iv) take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; PROVIDED, HOWEVER, that
the Company shall not be required in connection therewith or as a condition
thereto (I) to qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (II) to subject
itself to general taxation in any such jurisdiction, (III) to file a general
consent to service of process in any such jurisdiction, (IV) to provide any
undertakings that cause more than nominal expense or burden to the Company or
(V) to make any change in its charter or by-laws, which in each case the Board
of Directors of the Company determines to be contrary to the best interests of
the Company and its stockholders;
(e) in the event that the Registrable Securities are being
offered in an underwritten offering, enter into and perform its obligations
under an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering;
-5-
<PAGE>
(f) as promptly as practicable after becoming aware of such
event or circumstance, notify each Investor of any event or circumstance of
which the Company has knowledge, as a result of which the prospectus included in
the Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, and deliver a number of copies of such supplement
or amendment to each Investor as such Investor may reasonably request;
(g) as promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold (or, in
the event of an underwritten offering, the managing underwriters) of the
issuance by the SEC of any stop order or other suspension of effectiveness of
the Registration Statement at the earliest possible time;
(h) permit a single firm of counsel designated as selling
stockholders' counsel by the Investors who hold a majority in interest of the
Registrable Securities being sold to review and comment on the Registration
Statement and all amendments and supplements thereto a reasonable period of time
prior to their filing with the SEC;
(i) make generally available to its security holders as soon
as practical, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions of
Rule 158 under the Securities Act) covering a twelve-month period beginning not
later than the first day of the Company's fiscal quarter next following the
effective date of the Registration Statement;
(j) at the request of the persons who hold a majority in
interest of the securities covered by the Registration Statement, furnish on the
date that Registrable Securities are delivered to an underwriter, if any, for
sale in connection with the Registration Statement (i) a letter, dated such
date, from the Company's independent certified public accountants in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters;
and (ii) an opinion, dated such date, from counsel representing the Company for
purposes of such Registration Statement, in form and substance as is customarily
given in an underwritten public offering, addressed to the underwriters and the
Investors;
(k) make available for inspection by any Investor, any
underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by any such
Investor or underwriter (collectively, the "Inspectors"), all pertinent
financial and other records, pertinent corporate documents and properties of the
Company (collectively, the "Records"), as shall be reasonably necessary to
enable each Inspector to exercise its due diligence responsibility, and cause
the Company's officers, directors and employees to supply all information which
any Inspector may reasonably request for purposes of such due diligence;
PROVIDED, HOWEVER, that each Inspector shall hold in confidence and shall not
make any disclosure (except to an Investor) of any Record or other information
-6-
<PAGE>
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement, (ii) the release of such Records is ordered pursuant to
a subpoena or other order from a court or government body of competent
jurisdiction or (iii) the information in such Records has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company shall not be required to disclose any confidential
information in such Records to any Inspector until and unless such Inspector
shall have entered into confidentiality agreements (in form and substance
satisfactory to the Company) with the Company with respect thereto,
substantially in the form of this Section 3(k). Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at the Company's own
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, the Records deemed confidential. The Company shall hold
in confidence and shall not make any disclosure of information concerning an
Investor provided to the Company pursuant to Section 4(e) hereof unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor, at
such Investor's own expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information;
(l) use its best efforts (i) to cause all the Registrable
Securities covered by the Registration Statement to be listed on the Nasdaq
National Market ("Nasdaq") or such other principal securities market on which
securities of the same class or series issued by the Company are then listed or
traded or (ii) if securities of the same class or series as the Registrable
Securities are not then listed on Nasdaq or any such other securities market, to
cause all of the Registrable Securities covered by the Registration Statement to
be listed on the New York Stock Exchange, the American Stock Exchange or the
Nasdaq SmallCap Market;
(m) provide a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the effective date
of the Registration Statement;
(n) cooperate with the Investors who hold Registrable
Securities being offered and the managing underwriter or underwriters, if any,
to facilitate the timely preparation and delivery of certificates (not bearing
any restrictive legends) representing Registrable Securities to be offered
pursuant to the Registration Statement and enable such certificates to be in
such denominations or amounts as the case may be, as the managing underwriter or
underwriters, if any, or the Investors may reasonably request and registered in
such names as the managing underwriter or underwriters, if any, or the Investors
may request; and, within three business days after a Registration Statement
which includes Registrable Securities is ordered effective by the SEC, the
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<PAGE>
Company shall deliver, and shall cause legal counsel selected by the Company to
deliver, to the transfer agent for the Registrable Securities (with copies to
the Investors whose Registrable Securities are included in such Registration
Statement) an instruction substantially in the form attached hereto as EXHIBIT 1
and an opinion of such counsel, if required by the Company's transfer agent, in
the form attached hereto as EXHIBIT 2;
(o) during the period the Company is required to maintain
effectiveness of the Registration Statement pursuant to Section 3(a), the
Company shall not bid for or purchase any Common Stock or any right to purchase
Common Stock or attempt to induce any person to purchase any such security or
right if such bid, purchase or attempt would in any way limit the right of the
Investors to sell Registrable Securities by reason of the limitations set forth
in Regulation M under the Exchange Act; and
(p) take all other reasonable actions necessary to expedite
and facilitate disposition by the Investor of the Registrable Securities
pursuant to the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations:
(a) It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least four (4)
days prior to the first anticipated filing date of the Registration Statement,
the Company shall notify each Investor of the information the Company requires
from each such Investor (the "Requested Information") if any of such Investor's
Registrable Securities are eligible for inclusion in the Registration Statement.
If at least one (1) business day prior to the filing date the Company has not
received the Requested Information from an Investor (a "Non-Responsive
Investor"), then the Company may file the Registration Statement without
including Registrable Securities of such Non-Responsive Investor (and if the
only Investor participating in the registration is a Non-Responsive Investor,
the Company shall not be required to file the Registration Statement prior to
the date which is two business days after the Requested Information is furnished
by such Investor);
(b) Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement;
(c) In the event persons holding a majority in interest of the
securities covered by the Registration Statement determine to engage the
services of an underwriter, each Investor agrees to enter into and perform such
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<PAGE>
Investor's obligations under an underwriting agreement, in usual and customary
form, including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement;
(d) Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(f)
or 3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice; and
(e) No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting arrangements
approved by the Investors entitled hereunder to approve such arrangements, (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements and (iii) agrees to pay its pro rata share of
all underwriting discounts and commissions and other fees and expenses of
investment bankers and any manager or managers of such underwriting and legal
expenses of the underwriters applicable with respect to its Registrable
Securities, in each case to the extent not payable by the Company pursuant to
the terms of this Agreement.
5. EXPENSES OF REGISTRATION. All reasonable expenses, other
than underwriting discounts and commissions and other fees and expenses of
investment bankers and other than brokerage commissions, incurred in connection
with registrations, filings or qualifications pursuant to Section 3, including,
without limitation, all registration, listing and qualifications fees, printers
and accounting fees and the fees and disbursements of counsel for the Company,
shall be borne by the Company, PROVIDED, HOWEVER, that the Investors shall bear
the fees and out-of-pocket expenses of any legal counsel retained by the
Investors.
6. INDEMNIFICATION. In the event any Registrable Securities
are included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within the meaning of the
Securities Act or the Exchange Act, any underwriter (as defined in the
Securities Act) for the Investors, the directors, if any, of such underwriter
and the officers, if any, of such underwriter, and each person, if any, who
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<PAGE>
controls any such underwriter within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities or expenses (joint or several) incurred (collectively,
"Claims") to which any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations in the
Registration Statement, or any post-effective amendment thereof, or any
prospectus included therein: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if used
prior to the effective date of such Registration Statement, or contained in the
final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state securities law or any rule or
regulation under the Securities Act, the Exchange Act or any state securities
law (the matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). Subject to the restrictions set forth in Section 6(d) with
respect to the number of legal counsel, the Company shall reimburse the
Investors and each such underwriter or controlling person, promptly as such
expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (I) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement, the prospectus or any such amendment thereof or supplement thereto,
if such prospectus was timely made available by the Company pursuant to Section
3(c) hereof; (II) with respect to any preliminary prospectus shall not inure to
the benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to Section 3(c) hereof; and (III)
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Person and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9.
(b) In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to indemnify and hold
harmless, to the same extent and in the same manner set forth in Section 6(a),
the Company, each of its directors, each of its officers who signs the
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<PAGE>
Registration Statement, each person, if any, who controls the Company within the
meaning of the Securities Act or the Exchange Act, any underwriter and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the Securities Act or the Exchange Act
(collectively and together with an Indemnified Person, an "Indemnified Party"),
against any Claim to which any of them may become subject, under the Securities
Act, the Exchange Act or otherwise, insofar as such Claim arises out of or is
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and such Investor will reimburse
any legal or other expenses reasonably incurred by any Indemnified Party in
connection with investigating or defending any such Claim; PROVIDED, HOWEVER,
that the indemnity agreement contained in this Section 6(b) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of such Investor, which consent shall not be
unreasonably withheld; PROVIDED, FURTHER, HOWEVER, that the Investor shall be
liable under this Section 6(b) for only that amount of a Claim as does not
exceed the amount by which the net proceeds to such Investor from the sale of
Registrable Securities pursuant to such Registration Statement exceeds the cost
of such Registrable Securities to such Investor. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
such Indemnified Party and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9. Notwithstanding anything to
the contrary contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented.
(c) The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information so furnished in writing by such persons
expressly for inclusion in the Registration Statement.
(d) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel selected by the indemnifying party
but reasonably acceptable to the Indemnified Person or the Indemnified Party, as
the case may be; PROVIDED, HOWEVER, that an Indemnified Person or Indemnified
Party shall have the right to retain its own counsel with the fees and expenses
to be paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. In such event, the Company shall pay for only one
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<PAGE>
separate legal counsel for the Investors; such legal counsel shall be selected
by the persons holding a majority in interest of the securities included in the
Registration Statement to which the Claim relates. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted by
law; PROVIDED, HOWEVER, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6, (b) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty of such fraudulent
misrepresentation and (c) contribution by any seller of Registrable Securities
shall be limited in amount to the amount by which the net amount of proceeds
received by such seller from the sale of such Registrable Securities exceeds the
purchase price paid by such seller for such Registrable Securities.
8. REPORTS UNDER EXCHANGE ACT. With a view to making available
to the Investors the benefits of Rule 144 promulgated under the Securities Act
or any other similar rule or regulation of the SEC that may at any time permit
the Investors to sell securities of the Company to the public without
registration ("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have
the Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of all or any portion
of such securities (or all or any portion of the Warrants) only if: (a) the
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Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (b) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (i) the
name and address of such transferee or assignee and (ii) the securities with
respect to which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment the further disposition of
such securities by the transferee or assignee is restricted under the Securities
Act and applicable state securities laws, and (d) at or before the time the
Company received the written notice contemplated by clause (b) of this sentence
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein. In connection with any such transfer the
Company shall, at its sole cost and expense, promptly after such assignment take
such actions as shall be reasonably acceptable to the Initial Holder and such
transferee to assure that the Registration Statement and related prospectus are
available for use by such transferee for sales of the Registrable Securities in
respect of which the rights to registration have been so assigned.
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Investors who
hold a majority in interest of the Registrable Securities. Any amendment or
waiver effected in accordance with this Section 10 shall be binding upon each
Investor and the Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall
be in writing and shall be deemed to be sufficiently given when personally
delivered (by hand, by courier, by telephone line facsimile transmission or
other means) or sent by certified mail, return receipt requested, properly
addressed and with proper postage pre-paid (i) if to the Company, at V-ONE
Corporation, 20250 Century Boulevard, Suite 300, Germantown, Maryland 20874,
Attention: Chief Executive Officer, telephone line facsimile transmission number
(301) 515-5280, (ii) if to the Initial Holder, at Wharton Capital Partners,
Ltd., 545 Madison Avenue, New York, New York, 10022, telephone line facsimile
transmission number (212) 888-7054 and (iii) if to any other Investor, at such
address as such Investor shall have provided in writing to the Company, or at
such other address as each such party furnishes by notice given in accordance
with this Section 11(b), and shall be effective, when personally delivered, upon
receipt and, when so sent by certified mail, four days after deposit with the
United States Postal Service.
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
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<PAGE>
(d) This Agreement shall be enforced, governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such State. In the event
that any provision of this Agreement is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision hereof.
(e) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) The Company acknowledges that any failure by the Company
to perform its obligations under this Agreement, including, without limitation,
the Company's obligations under Section 3(n), or any delay in such performance
could result in damages to the Investors and the Company agrees that, in
addition to any other liability the Company may have by reason of any such
failure or delay, the Company shall be liable for all direct and consequential
damages caused by any such failure or delay.
(j) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by telephone line facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
day and year first above written.
V-ONE CORPORATION
By /s/ Charles B. Griffis
---------------------------------
Name: Charles B. Griffis
Title: Sr. Vice President & CFO
WHARTON CAPITAL
PARTNERS, LTD.
By /s/ Barry R. Minsky
---------------------------------
Name: Barry R. Minsky
Title: Chief Executive Officer
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<PAGE>
EXHIBIT 1
TO
REGISTRATION
RIGHTS AGREEMENT
[Company Letterhead]
[Date]
American Stock Transfer & Trust Company
as Transfer Agent and Registrar
6201 Fifteenth Avenue
Brooklyn, New York 11219
Ladies and Gentlemen:
This letter shall serve as our irrevocable authorization and
direction to you [(1) to transfer or re-register the certificates for the shares
of Common Stock, $.001 par value (the "Common Stock"), of V-ONE Corporation, a
Delaware corporation (the "Company"), represented by certificate numbers
____________ and __________ for an aggregate of _________ shares (the
"Outstanding Shares") of Common Stock presently registered in the name of
Wharton Capital Partners, Ltd. upon surrender of such certificate(s) to you,
notwithstanding the legend appearing on such certificates, and (2)]1 to issue
shares (the "Warrant Shares") of Common Stock on exercise of the Common Stock
Purchase Warrants (the "Warrants") to or upon the order of the registered holder
from time to time of the Warrants upon surrender to you by such registered
holder for exercise of Warrants and a properly completed and duly executed form
of subscription in the form enclosed herewith. [The transfer or re-registration
of the certificates for the Outstanding Shares by you should be made at such
time as you are requested to do so by the record holder of the Outstanding
Shares. The certificate issued upon such transfer or re-registration should be
registered in such name as requested by the holder of record of the certificate
surrendered to you and should not bear any legend which would restrict the
transfer of the shares represented thereby. In addition, you are hereby directed
to remove any stop-transfer instruction relating to the Outstanding Shares.]2
Certificates for the Warrant Shares should not bear any restrictive legend and
should not be subject to any stop-transfer restriction.
Contemporaneously with the delivery of this letter, the
Company is delivering to you an opinion of Kirkpatrick & Lockhart LLP as to
registration of [the Outstanding Shares and]* the Warrant Shares under the
Securities Act of 1933, as amended.
______________________
1 Omit if no exercises of Warrants have occurred before SEC registration is
declared effective.
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Should you have any questions concerning this matter, please
contact me.
Very truly yours,
V-ONE CORPORATION
By: _____________________________
Name:
Title:
Enclosures
cc: Wharton Capital Partners, Ltd.
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<PAGE>
EXHIBIT 2
TO
REGISTRATION
RIGHTS AGREEMENT
__________________________________, 1997
American Stock Transfer & Trust Company
as Transfer Agent and Registrar
6201 Fifteenth Avenue
Brooklyn, New York 11219
V-ONE CORPORATION
Shares of Common Stock
----------------------
Ladies and Gentlemen:
We are counsel to V-ONE Corporation, a Delaware corporation
(the "Company"). Pursuant to a Registration Rights Agreement, dated as of
December, 1997 (the "Registration Rights Agreement"), between the Company and
the Wharton Capital Partners, Ltd. (the "Holder"), the Company agreed with the
Holder, among other things, to register for resale the shares of Common Stock
(the "Warrant Shares") issuable upon exercise of certain Common Stock Purchase
Warrants (the "Warrants") under the Securities Act of 1933, as amended (the
"Securities Act"), upon the terms provided in the Registration Rights Agreement.
Pursuant to the Registration Rights Agreement, on ____________, the Company
filed a Registration Statement on Form S-3 (File No. 333-_________) (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") relating to the Warrant Shares, which names the Holder as a selling
stockholder thereunder.
[Other introductory and scope of examination language to be
inserted]
Based on the foregoing, we are of the opinion that the Warrant
Shares have been registered for resale under the Securities Act.
This opinion may be relied upon by the Holder as if addressed
to the Holder. [Other appropriate language to be included.]
Very truly yours,
cc: Wharton Capital Partners, Ltd.
2-18
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS. THE SALE TO THE HOLDER OF
THIS SECURITY AND OF THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
SECURITY ARE NOT COVERED BY A REGISTRATION STATEMENT UNDER THE ACT OR
REGISTRATION UNDER STATE SECURITIES LAWS. THIS SECURITY HAS BEEN ACQUIRED, AND
SUCH SHARES OF COMMON STOCK MUST BE ACQUIRED, FOR INVESTMENT ONLY AND MAY NOT BE
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF REGISTRATION OF THE RESALE
THEREOF OR AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
Dated: December 8, 1997 Right to Purchase 60,000 Shares of Common
Stock of V-ONE Corporation
V-ONE CORPORATION
COMMON STOCK PURCHASE WARRANT
V-ONE CORPORATION, a Delaware corporation (the "Company") hereby
certifies that, for value received, WHARTON CAPITAL PARTNERS, LTD. or registered
assigns (the "Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company at any time or from time to time after the date
hereof, and before 5:00 p.m., New York City time, on the Expiration Date (as
defined herein), 60,000 fully paid and nonassessable shares of Common Stock,
$.001 par value, of the Company at a purchase price per share equal to the
Purchase Price (as hereinafter defined). The number of such shares of Common
Stock and the Purchase Price are subject to adjustment as provided in this
Warrant.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Business Day" as used herein shall mean a day on
which the New York Stock Exchange is open for business.
(b) The term "Common Stock" includes the Company's Common Stock,
$.001 par value per share, as authorized on the date hereof, and any
other securities into which or for which the Common Stock may be
converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
(c) The term "Company" shall include V-ONE Corporation and any
corporation that shall succeed to or assume the obligation of V-ONE
Corporation hereunder.
<PAGE>
(d) The term "Expiration Date" refers to December 8, 2002.
(e) The term "Other Securities" refers to any stock (other than
Common Stock) and other securities of the Company or any other person
(corporate or otherwise) which the Holder of this Warrant at any time
shall be entitled to receive, or shall have received, on the exercise of
this Warrant, in lieu of or in addition to Common Stock, or which at any
time shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities pursuant to Section 4.
(f) The term "Purchase Price" shall mean $4.725, subject to
adjustment as provided in this Warrant.
1. EXERCISE OF WARRANT.
1.1 EXERCISE AT OPTION OF HOLDER. This Warrant may be exercised
by the Holder hereof in full or in part at any time or from time to time during
the exercise period specified in the first paragraph hereof until the Expiration
Date by surrender of this Warrant and the subscription form annexed hereto (duly
executed) by such Holder, to the Company at its principal office, accompanied by
payment, in cash or by certified or official bank check payable to the order of
the Company in the amount obtained by multiplying (a) the number of shares of
Common Stock designated by the Holder in the subscription form by (b) the
Purchase Price then in effect. On any partial exercise the Company will
forthwith issue and deliver to or upon the order of the Holder hereof a new
Warrant or Warrants of like tenor, in the name of the Holder hereof or as such
Holder (upon payment by such Holder of any applicable transfer taxes) may
request, providing in the aggregate on the face or faces thereof for the
purchase of the number of shares of Common Stock for which such Warrant or
Warrants may still be exercised.
1.2 NET ISSUANCE. Notwithstanding anything to the contrary
contained in Section 1.1, the Holder may elect to exercise this Warrant in whole
or in part by receiving shares of Common Stock equal to the net issuance value
(as determined below) of this Warrant, or any part hereof, upon surrender of
this Warrant at the principal office of the Company together with notice of such
election, in which event the Company shall issue to the Holder a number of
shares of Common Stock computed using the following formula:
X = Y (A-B)
-------
A
Where: X = the number of shares of Common Stock to be issued to the
Holder
Y = the number of shares of Common Stock as to which
this Warrant is to be exercised
A = the current fair market value of one share of
Common Stock calculated as of the last trading day
immediately preceding the exercise of this Warrant
-2-
<PAGE>
B = the Purchase Price
As used herein, current fair market value of Common Stock as of a
specified date shall mean with respect to each share of Common Stock the average
of the closing bid prices of the Common Stock on the principal securities market
on which the Common Stock may at the time be traded over a period of five
Business Days consisting of the day as of which the current fair market value of
a share of Common Stock is being determined (or if such day is not a Business
Day, the Business Day next preceding such day) and the four consecutive Business
Days prior to such day. If on the date for which current fair market value is to
be determined the Common Stock is not eligible for trading on any securities
market, the current fair market value of Common Stock shall be the highest price
per share which the Company could then obtain from a willing buyer (not a
current employee or director) for shares of Common Stock sold by the Company,
from authorized but unissued shares, as determined in good faith by the Board of
Directors of the Company, unless prior to such date the Company has become
subject to a merger, acquisition or other consolidation pursuant to which the
Company is not the surviving party, in which case the current fair market value
of the Common Stock shall be deemed to be the value received by the holders of
the Company's Common Stock for each share thereof pursuant to the Company's
acquisition.
2. DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE. As soon as
practicable after the exercise of this Warrant, and in any event within three
days thereafter, the Company at its expense (including the payment by it of any
applicable issue or stamp taxes) will cause to be issued in the name of and
delivered to the Holder hereof, or as such Holder (upon payment by such Holder
of any applicable transfer taxes) may direct, a certificate or certificates for
the number of fully paid and nonassessable shares of Common Stock (or Other
Securities) to which such Holder shall be entitled on such exercise, in such
denominations as may be requested by such Holder, plus, in lieu of any
fractional share to which such Holder would otherwise be entitled, cash equal to
such fraction multiplied by the then current fair market value (as determined in
accordance with subsection 1.2) of one full share, together with any other stock
or other securities any property (including cash, where applicable) to which
such Holder is entitled upon such exercise pursuant to Section 1 or otherwise.
Upon exercise of this Warrant as provided herein, the Company's obligation to
issue and deliver the certificates for Common Stock shall be absolute and
unconditional, irrespective of any action or inaction by the Holder to enforce
the same, any waiver or consent with respect to any provision thereof, the
recovery of any judgment against any person or any action to enforce the same,
any failure or delay in the enforcement of any other obligation of the Company
to the Holder, or any setoff, counterclaim, recoupment, limitation or
termination, or any breach or alleged breach by the Holder or any other person
of any obligation to the Company or any violation or alleged violation of law by
the Holder or any other person, and irrespective of any other circumstance which
might otherwise limit such obligation of the Company to the Holder in connection
with such exercise. If the Company fails to issue and deliver the certificates
for the Common Stock to the Holder pursuant to the first sentence of this
paragraph as and when required to do so, in addition to any other liabilities
the Company may have hereunder and under applicable law, the Company shall pay
-3-
<PAGE>
or reimburse the Holder on demand for all out-of-pocket expenses including,
without limitation, fees and expenses of legal counsel incurred by the Holder as
a result of such failure.
3. ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK, PROPERTY, ETC.;
RECLASSIFICATION, ETC. In case at any time or from time to time, all the holders
of Common Stock (or Other Securities) shall have received, or (on or after the
record date fixed for the determination of stockholders eligible to receive)
shall have become entitled to receive, without payment therefor,
(a) other or additional stock or other securities or property
(other than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of
earnings or earned surplus of the Company), or
(c) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate
rearrangement,
other than additional shares of Common Stock (or Other Securities) issued as a
stock dividend or in a stock-split (adjustments in respect of which are provided
for in Section 5), then and in each such case the Holder of this Warrant, on the
exercise hereof as provided in Section 1, shall be entitled to receive the
amount of stock and other securities and property (including cash in the cases
referred to in subdivisions (b) and (c) of this Section 3) which such Holder
would hold on the date of such exercise if on the date hereof the Holder had
been the holder of record of the number of shares of Common Stock called for on
the face of this Warrant and had thereafter, during the period from the date
hereof to and including the date of such exercise, retained such shares and all
such other or additional stock and other securities and property (including cash
in the case referred to in subdivisions (b) and (c) of this Section 3)
receivable by the Holder as aforesaid during such period, giving effect to all
adjustments called for during such period by Section 4.
4. EXERCISE UPON REORGANIZATION, CONSOLIDATION, MERGER, ETC. In
case at any time or from time to time, the Company shall (a) effect a
reorganization, (b) consolidate with or merge into any other person, (c) effect
an exchange of outstanding shares of the Company for securities of any other
person or (d) transfer all or substantially all of its properties or assets to
any other person under any plan or arrangement contemplating the dissolution of
the Company, then, in each such case, as a condition of such reorganization,
consolidation, merger, share exchange, sale or conveyance, the Company shall
cause effective provisions to be made so that the Holder shall have the right
thereafter, by exercising this Warrant (in lieu of the shares of Common Stock of
the Company purchasable and receivable upon exercise of the rights represented
hereby immediately prior to such transaction) to purchase the kind and amount of
shares of stock and other securities and property (including cash) receivable
upon such reorganization, consolidation, merger, share exchange, sale or
conveyance by a holder of the number of shares of Common Stock that might have
been received upon exercise of this Warrant immediately prior to such
-4-
<PAGE>
reorganization, consolidation, merger, share exchange, sale or conveyance;
PROVIDED, HOWEVER, that in the event (a) the value of the stock, securities or
other assets or property (determined in good faith by the Board of Directors of
the Company) issuable or payable with respect to one share of Common Stock of
the Company purchasable and receivable upon the exercise of the rights
represented hereby immediately prior to such transaction is in excess of the
Purchase Price hereof in effect at the time of such reorganization,
consolidation, merger, share exchange, sale or conveyance (after giving effect
to any adjustment in such Purchase Price required to be made under the terms of
this Warrant), and (b) the securities, if any, to be received in such
reorganization, consolidation, merger, share exchange, sale or conveyance are
publicly traded, then if the Company gives the Holder at least 20 Business Days
(or such lesser period as the Company gives notice of such transaction to the
holders of the outstanding shares of Common Stock) prior notice of such
reorganization, merger, share exchange, sale or conveyance this Warrant shall
expire unless exercised prior to such reorganization, consolidation, merger,
share exchange, sale or conveyance. Any such provision shall include provisions
for adjustments in respect of such shares of stock and other securities and
property that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Warrant. The provisions of this Section shall
apply to successive reorganizations, consolidations, mergers, share exchanges,
sales and conveyances.
5. ADJUSTMENT FOR EXTRAORDINARY EVENTS. In the event that the
Company shall (i) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (ii) subdivide or reclassify its
outstanding shares of Common Stock, or (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Purchase Price then in effect. The
Purchase Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 5.
The Holder of this Warrant shall thereafter, on the exercise hereof as provided
in Section 1, be entitled to receive that number of shares of Common Stock
determined by multiplying the number of shares of Common Stock which would be
issuable on such exercise as of immediately prior to such issuance by a fraction
of which (i) the numerator is the Purchase Price in effect immediately prior to
such issuance and (ii) the denominator is the Purchase Price in effect on the
date of such exercise.
6. FURTHER ASSURANCES. The Company will take all action that may
be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of stock, free from all taxes, liens
and charges with respect to the issue thereof, on the exercise of all or any
portion of this Warrant from time to time outstanding.
7. NOTICES OF RECORD DATE, ETC. In the event of
-5-
<PAGE>
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend on, or any right to subscribe
for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company
or any transfer of all or substantially all of the assets of the Company
to or consolidation or merger of the Company with or into any other
person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then and in each such event the Company will mail or cause to be mailed to the
Holder, at least ten days prior to such record date, a notice specifying (i) the
date on which any such record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock (or Other
Securities) shall be entitled to exchange their shares of Common Stock (or Other
Securities) for securities or other property deliverable on such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up, and (iii) the amount and character of
any stock or other securities, or rights or options with respect thereto,
proposed to be issued or granted, the date of such proposed issue or grant and
the persons or class of persons to whom such proposed issue or grant is to be
offered or made. Such notice shall also state that the action in question or the
record date is subject to the effectiveness of a registration statement under
the Securities Act of 1933, as amended (the "Securities Act"), or a favorable
vote of stockholders if either is required. Such notice shall be mailed at least
ten days prior to the date specified in such notice on which any such action is
to be taken or the record date, whichever is earlier.
8. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF WARRANTS.
The Company will at all times reserve and keep available, solely for issuance
and delivery on the exercise of this Warrant, all shares of Common Stock (or
Other Securities) from time to time issuable on the exercise of this Warrant.
9. TRANSFER OF WARRANT. This Warrant shall inure to the benefit
of the successors to and assigns of the Holder. This Warrant and all rights
hereunder, in whole or in part, is registrable at the office or agency of the
Company referred to below by the Holder hereof in person or by his duly
authorized attorney, upon surrender of this Warrant properly endorsed.
10. REGISTER OF WARRANTS. The Company shall maintain, at the
principal office of the Company (or such other office as it may designate by
notice to the Holder hereof), a register in which the Company shall record the
name and address of the person in whose name this Warrant has been issued, as
well as the name and address of each successor and prior owner of such Warrant.
-6-
<PAGE>
The Company shall be entitled to treat the person in whose name this Warrant is
so registered as the sole and absolute owner of this Warrant for all purposes.
11. EXCHANGE OF WARRANT. This Warrant is exchangeable, upon the
surrender hereof by the Holder hereof at the office or agency of the Company
referred to in Section 10, for one or more new Warrants of like tenor
representing in the aggregate the right to subscribe for and purchase the number
of shares of Common Stock which may be subscribed for purchase hereunder, each
of such new Warrants to represent the right to subscribe for and purchase such
number of shares as shall be designated by said Holder hereof at the time of
such surrender.
12. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
13. WARRANT AGENT. The Company may, by written notice to the
Holder, appoint an agent having an office in the United States of America, for
the purpose of issuing Common Stock (or Other Securities) on the exercise of
this Warrant pursuant to Section 1, exchanging this Warrant pursuant to Section
11, and replacing this Warrant pursuant to Section 12, or any of the foregoing,
and thereafter any such issuance, exchange or replacement, as the case may be,
shall be made at such office by such agent.
14. REMEDIES. The Company stipulates that the remedies at law of
the Holder of this Warrant in the event of any default or threatened default by
the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
15. NO RIGHTS OR LIABILITIES AS A STOCKHOLDER. This Warrant shall
not entitle the Holder hereof to any voting rights or other rights as a
stockholder of the Company. No provision of this Warrant, in the absence of
affirmative action by the Holder hereof to purchase Common Stock, and no mere
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of such Holder for the Purchase Price or as a stockholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.
16. NOTICES, ETC. All notices and other communications from the
Company to the registered Holder of this Warrant shall be mailed by first class
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such Holder or at the address shown for such Holder on
the register of Warrants referred to in Section 10.
17. INVESTMENT REPRESENTATIONS. By acceptance of this Warrant,
the Holder represents to the Company that this Warrant is being acquired for the
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<PAGE>
Holder's own account and for the purpose of investment and not with a view to,
or for sale in connection with, the distribution thereof, nor with any present
intention of distributing or selling the Warrant or the Common Stock issuable
upon exercise of the Warrant. The Holder acknowledges that the Holder has been
afforded the opportunity to meet with the management of the Company and to ask
questions of, and receive answers from, such management and the Company's
counsel about the business and affairs of the Company and concerning the terms
and conditions of the offering of this Warrant, and to obtain any additional
information, to the extent that the Company possessed such information or could
acquire it without unreasonable effort or expense, necessary to verify the
accuracy of the information otherwise obtained by or furnished to the Holder in
connection with the offering of this Warrant. The Holder asserts that it may be
considered to be a sophisticated investor, is familiar with the risks inherent
in speculative investments such as in the Company, has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of the investment in this Warrant and the Common Stock
issuable upon exercise of this Warrant, and is able to bear the economic risk of
the investment. The Holder acknowledges and agrees that this Warrant and, except
as otherwise provided in the Registration Rights Agreement between the original
Holder and the Company, as amended or modified from time to time (the
"Registration Rights Agreement"), the Common Stock issuable upon exercise of
this Warrant (if any) have not been (and at the time of acquisition by the
Holder, will not have been or will not be), registered under the Securities Act
or under the securities laws of any state, in reliance upon certain exemptive
provisions of such statutes. The Holder recognizes and acknowledges that such
claims of exemption are based, in part, upon the representations of the Holder
contained herein. The Holder further recognizes and acknowledges that because
this Warrant and, except as provided in the Registration Rights Agreement, the
Common Stock issuable upon exercise of this Warrant (if any) are unregistered,
they may not be eligible for resale, and may only be resold in the future
pursuant to an effective registration statement under the Securities Act and any
applicable state securities laws, or pursuant to a valid exemption from such
registration requirements. Unless the shares of Common Stock have theretofore
been registered for resale under the Securities Act, the Company may require, as
a condition to the issuance of Common Stock upon the exercise of this Warrant, a
confirmation as of the date of exercise of the Holder's representations pursuant
to this Section 17 (which confirmation may be given by so indicating on the
subscription form annexed hereto).
18. LEGEND. Unless theretofore registered for resale under the
Securities Act, each certificate for shares issued upon exercise of this Warrant
shall bear the following legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
securities have been acquired for investment and may not be sold,
transferred or assigned in the absence of an effective
registration statement for the securities under the Securities
Act of 1933, as amended, or an opinion of counsel reasonably
acceptable to the Company that registration is not required under
said Act.
19. MISCELLANEOUS. This Warrant and any terms hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement or such change, waiver, discharge
-8-
<PAGE>
or termination is sought. This Warrant shall be construed and enforced in
accordance with and governed by the internal laws of the State of New York. The
headings in this Warrant are for purposes of reference only, and shall not limit
or otherwise affect any of the terms hereof. The invalidity or unenforceability
of any provision hereof shall in no way affect the validity or enforceability of
any other provision.
-9-
<PAGE>
IN WITNESS WHEREOF, V-ONE Corporation has caused this Warrant to
be executed on its behalf by one of its officers thereunto duly authorized.
Dated: December 8, 1997 V-ONE CORPORATION
By: /S/ CHARLES B. GRIFFIS
--------------------------------
Name: Charles B. Griffis
Title: Senior Vice President
-10-
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO V-ONE CORPORATION
1. The undersigned Holder of the attached original, executed Warrant
hereby elects to exercise its purchase right under such Warrant with respect to
______________ shares of Common Stock, as defined in the Warrant, of V-ONE
Corporation, a Delaware corporation (the "Company").
2. The undersigned Holder (check one):
(a) elects to pay the aggregate purchase price for such shares of
Common Stock (the "Exercise Shares") (i) by lawful money of the
United States or the enclosed certified or official bank check
payable in United States dollars to the order of the Company in
the amount of $___________, or (ii) by wire transfer of United
States funds to the account of the Company in the amount of
$____________, which transfer has been made before or
simultaneously with the delivery of this Form of Subscription
pursuant to the instructions of the Company;
or
(b) elects to receive shares of Common Stock having a value equal to
the value of the Warrant calculated in accordance with Section
1.2 of the Warrant.
3. Please issue a stock certificate or certificates representing the
appropriate number of shares of Common Stock in the name of the undersigned or
in such other names as is specified below:
Name:
-----------------------------------------
Address:
-------------------------------------
-------------------------------------
4. By checking "Yes" below, the undersigned Holder hereby confirms that
its representations made to the Company in Section 17 of the Warrant are true
and correct as if given on the date hereof and that the acknowledgments and
other statements made by the Holder in Section 17 are hereby restated as of the
date hereof: Yes ____ No ____
Dated:
---------- ---, ----- -------------------------------------
S-11
<PAGE>
(Signature must conform to name of
Holder as specified on the face of the
Warrant)
(Address)
S-12
V-One Corporation
20250 Century Boulevard German Town, MD 20874
October 22, 1997
Wharton Capital Partners, Ltd.
545 Madison Avenue
New York, NY 10022
Gentlemen:
This letter is to confirm that Wharton Capital Partners Ltd. (Wharton) is
authorized to act as an exclusive financial consultant for V-One Corporation
(VONE) through October 31, 1997 for the purpose of introducing prospective
offshore purchasers to VONE in connection with the purchase of up to $8 million
of various types of offerings including but not limited to convertible
debentures and convertible preferreds of VONE under Regulation D of the
Securities Act of 1933 as amended, and carry terms mutually acceptable to the
parties. Purchases of VONE's offerings may be made in a single tranche or in
multiple tranches.
At the closing of each tranche, VONE agrees to pay to Wharton or its designee a
fee equal to 5% of the gross transaction amount for such tranche, which fee may
be deducted from the proceeds at closing and/or paid directly by the escrow
agent. As additional compensation, VONE agrees to pay Wharton or its designee
15,000 warrants per $1 million of financing subscribed for or pro rated portion
thereof, to buy fully registered VONE common stock for a period of five years
from the closing date of the first tranche at a strike price of 120% of the
market price at the time of closing the first tranche.
The fees set forth above are due and payable to Wharton irrespective of whether
the transaction closes during the term hereof or thereafter, provided that such
transaction is consummated with persons or entities introduced to VONE by
Wharton and will be deemed earned upon closing.
In addition, Wharton shall have an exclusive on any offshore or discounted
financings (other than strategic partners not in the business of investing) done
by VONE for a period of sixty days from the date the registration statement
becomes effective and right of first refusal on any offshore or discounted
financings for a period of 6 months from the date of closing.
VONE acknowledges that the relationships between Wharton and the persons and/or
entities to be introduced to VONE for the purposes contemplated by this
agreement are proprietary to Wharton and essential to its business. Accordingly,
VONE agrees, to keep the names of investors confidential, except for SEC
reporting purposes or if legally required and to a three-year period following
the execution of this agreement, that neither VONE, nor any of its officers
directors or other representatives, will contact, either directly or indirectly,
any sources introduced to VONE by Wharton hereunder for the purpose of arranging
any future financing for VONE or any of its affiliates, without the express
<PAGE>
2
written consent of Wharton and without satisfactory compensation to Wharton.
VONE also agrees not to issue any press releases relating to this transaction
without the prior review of Wharton.
VONE agrees that the subject offerings will be available at the closing and that
the common stock reserved for conversion will be duly authorized and will not
hinder Wharton's efforts hereunder. VONE further agrees, in consideration of
Wharton's consulting services as set forth above, that VONE will indemnify and
hold harmless Wharton's affiliates, officers, directors, members, partners,
agents, controlling persons and employees against any and all losses, claims,
damages or liabilities (collectively, "Losses") incurred in connection with or
as a result of either its engagement hereunder of any matter referred to in this
engagement letter (except to the extent that any such Losses result from the
gross negligence or bad faith of Wharton performing the services that are
subject of this letter) and the Company agrees that it will reimburse Wharton
and such other indemnified parties listed above for its and their legal and
other expenses.
Very truly yours,
V-ONE CORPORATION
/S/ CHARLES B. GRIFFIS
- - ---------------------------
Authorized Signature
Charles B. Griffis
SVP & CFO
10/24/97
