UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended: September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number 0-21511
V-ONE CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 52-1953278
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
20250 Century Blvd., Suite 300, Germantown, Maryland 20874
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(Address of principal executive offices) (Zip Code)
(301) 515-5200
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X ] No [ ].
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT NOVEMBER 12, 1998
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COMMON STOCK, $0.001 PAR VALUE PER SHARE 13,930,379
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V-ONE Corporation
Quarterly Report on Form 10-Q
INDEX
Page No.
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PART I. FINANCIAL INFORMATION 3
Item 1. Condensed Financial Statements 3
Condensed Balance Sheets as of September 30, 1998 3
(unaudited) and December 31, 1997 (unaudited)
Condensed Statements of Operations for the Three and 4
Nine Months Ended September 30, 1998 and 1997
(unaudited)
Condensed Statements of Cash Flows for the Nine Months 5
Ended September 30, 1998 and 1997 (unaudited)
Notes to the Condensed Financial Statements (unaudited) 6
Item 2 Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
Item 3 Quantitative and Qualitative Disclosures About 11
Market Risk
PART II. OTHER INFORMATION 12
Signatures 14
2
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
V-ONE CORPORATION
CONDENSED BALANCE SHEETS
(unaudited)
September 30, December 31,
1998 1997
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ASSETS
Current assets:
Cash and cash equivalents $ 529,657 $ 6,203,525
Accounts receivable, net 6,239,770 2,556,979
Inventory, net 860,156 368,120
Prepaid expenses and other current assets 240,593 328,261
------------------- -------------------
Total current assets 7,870,176 9,456,885
Property and equipment, net 897,599 1,001,581
Licensing fee, net 326,142 538,434
Other assets 985,005 863,186
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Total assets $ 10,078,922 $ 11,860,086
=================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 2,074,498 $ 1,151,589
Deferred income 572,268 412,647
Notes payable - current 9,425 16,667
Capital lease obligations - current 63,950 17,126
------------------- -------------------
Total current liabilities 2,720,141 1,598,029
Notes payable - noncurrent - 5,555
Deferred rent - 36,879
Capital lease obligations - noncurrent 204,662 295,306
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Total liabilities 2,924,803 1,935,769
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Commitments and contingencies
Series A convertible preferred stock, mandatorily redeemable,
$0.001 par value; 13,333,333 shares authorized;
2,462 and 4,000 shares outstanding
as of September 30, 1998 and December 31, 1997,
respectively (liquidation preference of $2,472,258) 2,188,884 3,766,297
------------------- -------------------
Shareholders' equity:
Common stock, $0.001 par value; 33,333,333 shares authorized;
13,915,379 and 13,070,235 shares issued and outstanding as
of September 30, 1998 and December 31, 1997, respectively 13,915 13,070
Additional paid-in capital 26,669,890 24,649,538
Notes receivable from sales of common stock ( 50,726) ( 166,011)
Accumulated deficit (21,667,844) (18,338,577)
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Total shareholders' equity 4,965,235 6,158,020
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Total liabilities and shareholders' equity $ 10,078,922 $ 11,860,086
=================== ===================
The accompanying notes are an integral part of these financial statements.
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V-ONE CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
Three months Three months Nine months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Revenues:
Products $ 2,258,486 $ 2,639,337 $ 7,868,417 $ 6,929,365
Consulting and services 139,319 125,015 436,665 383,583
---------------- ---------------- ---------------- -----------------
Total revenues 2,397,805 2,764,352 8,305,082 7,312,948
---------------- ---------------- ---------------- -----------------
Cost of revenues:
Products 285,140 666,231 1,041,062 1,514,088
Consulting and services 45,000 27,745 68,060 60,033
---------------- ---------------- ---------------- -----------------
Total cost of revenues 330,140 693,976 1,109,122 1,574,121
---------------- ---------------- ---------------- -----------------
Gross profit 2,067,665 2,070,376 7,195,960 5,738,827
---------------- ---------------- ---------------- -----------------
Operating expenses:
Sales and marketing 1,557,069 1,334,930 4,635,497 5,135,365
General and administrative 880,468 583,446 2,907,687 2,431,358
Research and development 1,050,560 658,563 2,928,523 2,112,512
Restructuring charge - - - 800,000
---------------- ---------------- ---------------- -----------------
Total operating expenses 3,488,097 2,576,939 10,471,707 10,479,235
Operating loss (1,420,432) (506,56) (3,275,747) (4,740,408)
---------------- ---------------- ---------------- -----------------
Other (expense) income:
Interest expense (8,405) (742) (51,870) (5,248)
Interest income 14,940 73,662 122,930 291,303
---------------- ---------------- ---------------- -----------------
Total other income 6,535 72,920 71,060 286,055
---------------- ---------------- ---------------- -----------------
Net loss (1,413,897) (433,64) (3,204,687) (4,454,353)
Deemed dividend on preferred stock 13,701 - 13,701 -
Dividend on preferred stock 30,775 - 110,879 -
---------------- ---------------- ---------------- -----------------
Loss attributable to holders
of common stock $ (1,458,373) $ 433,64) $ (3,329,267) $ (4,454,353)
================ ================ ================ =================
Basic and diluted loss per share
attributable to holders of
common stock $ (0.10) $ (0.0) $ (0.25) $ (0.35)
================ ================ ================ =================
Weighted average number of
common shares outstanding 13,907,408 12,956,924 13,559,314 12,806,831
================ ================ ================ =================
The accompanying notes are an integral part of these financial statements.
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<CAPTION>
V-ONE CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
Nine months Nine months
ended ended
September 30, September 30,
1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net loss $ ( 3,329,267) $ (4,454,353)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 466,446 362,286
Noncash charge related to issuance of warrants 394,000 -
Changes in assets and liabilities:
Accounts receivable, net (3,682,791) (2,640,061)
Inventory, net (492,036) 77,328
Prepaid expenses and other assets (34,151) (330,312)
Accounts payable, accrued expenses and deferrals 1,045,641 (302,584)
------------------ ----------------
Net cash used in operating activities (5,507,578) (7,287,696)
------------------ ----------------
Cash flows from investing activities:
Purchase of property and equipment (150,172) (459,430)
Investment in affiliate - (250,000)
Collection of note receivable - 88,480
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Net cash used in investing activities (150,172) (620,950)
------------------ ----------------
Cash flows from financing activities:
Exercise of options and warrants 200,791 1,057,688
Payment of stock issuance costs (49,413) -
Dividends paid (110,879) -
Principal payments on capitalized lease (43,820) (62,761)
obligations
Repayment of notes payable (12,797) (8,333)
------------------ ----------------
Net cash (used in) provided by
financing activities (16,118) 986,594
------------------ ----------------
Net decrease in cash and cash equivalents (5,673,868) (6,922,052)
Cash and cash equivalents at beginning of period 6,203,525 10,894,375
------------------ ----------------
Cash and cash equivalents at end of period $ 529,657 $ 3,972,323
================== ================
The accompanying notes are an integral part of these financial statements.
</TABLE>
5
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V-ONE CORPORATION
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The condensed financial statements for the three and nine months ended September
30, 1998 and September 30, 1997 of V-ONE Corporation ("V-ONE" or the "Company")
are unaudited and reflect all adjustments, consisting of normal recurring
adjustments, which are, in the opinion of management, necessary to present
fairly the results for the interim periods. These financial statements should be
read in conjunction with the audited financial statements for the year ended
December 31, 1997, which are included in the Company's 1997 Annual Report on
Form 10-K ("Form 10-K").
The preparation of financial statements to be in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates and would
impact future results of operations and cash flows.
The results of operations for the three and nine month periods ended September
30, 1998 are not necessarily indicative of the results expected for the full
year ending December 31, 1998.
2. Risks and Uncertainties
The Company invests its cash primarily in money market funds with an
international commercial bank. The Company has not experienced any losses to
date on its invested cash. The Company's cash balances exceed Federal insured
amounts. The Company sells its product to a wide variety of customers in a
variety of industries. The Company performs ongoing credit evaluations of its
customers but does not require collateral or other security to support customer
accounts receivable. In management's opinion, the Company has provided
sufficient provisions to prevent a significant impact of credit losses to the
financial statements.
3. Computation of Net Loss Per Common Share
The Company adopted Statement of Financial Accounting Standards No. 128,
Earnings Per Share ("SFAS 128") effective December 31, 1997. All prior period
net loss per share amounts have been restated to comply with the provisions of
SFAS 128. Basic earnings (or loss) per share is computed by dividing net income
or (loss) by the weighted average number of shares of common stock outstanding.
Diluted earnings per share is computed by dividing net income by the weighted
average common and potentially dilutive common equivalent shares outstanding.
However, the computation of diluted loss per share was antidilutive in each of
the periods presented; therefore, basic and diluted loss per share are the same
for all periods.
4. Series A Convertible Preferred Stock
During the six months ended June 30, 1998, holders of Series A Convertible
Preferred Stock ("Series A Stock"), which is mandatorily redeemable, had elected
to convert a total of 1,538 shares into 720,670 shares of Common Stock at
conversion prices ranging from $2.1038 to $2.2950 per share, and received
warrants to purchase 144,135 shares of Common Stock at an exercise price of
$4.77 per share. No conversion of Series A Stock took place during the quarter
ended September 30, 1998.
Due to the Maximum Share Amount limitation found in Section 7(a)(1) of the
Certificate of Designations of the Series A Stock ("Certificate"), the Company
is not presently obligated to convert shares of Series A Stock held by Advantage
Fund II Ltd. ("Advantage"). On September 21, 1998, the Company sent an
inconvertibility notice to Advantage pursuant to Section 7(a)(2) of the
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Certificate indicating that, as of September 11, 1998, Advantage had the right
to have 619 shares of Series A Stock redeemed by the Company for the Share
Limitation Redemption Price (which term is defined in the Certificate). This
amount will vary as the market price of the Company's Common Stock changes.
On September 22, 1998, the Company and Advantage entered into a waiver agreement
("Waiver Agreement") and Amendment No. 1 ("Amendment No. 1") to the Registration
Rights Agreement dated as of December 3, 1997 by and between the Company and
Advantage (as amended, "Registration Rights Agreement"). Pursuant to the Waiver
Agreement, Advantage has waived its right until November 20, 1998 (1) to convert
or require the Company to redeem its Series A Stock under certain circumstances,
(2) to an adjustment to the "Ceiling Price" and the "Conversion Percentage" (as
such terms are defined in the Certificate), and (3) to the "Periodic Amount"
pursuant to Section 2(c) of the Registration Rights Agreement (the term
"Periodic Amount" is defined in Section 2(c) of the Registration Rights
Agreement).
Under the Waiver Agreement, the Company also has the right to redeem the Series
A Stock held by Advantage at any time until November 20, 1998 at a price of
$1,300 per share. If the shares of Series A Stock are so redeemed, all accrued
dividends will be waived by Advantage, without any additional payment by the
Company. The Company entered into a Placement Agent Agreement on October 9, 1998
with LaSalle St. Securities, Inc. ("LaSalle") to raise the funds needed to
redeem the shares of Series A Stock held by Advantage. (See note 6.)
In consideration for Advantage entering into the Waiver Agreement, the Company
granted to Advantage warrants to purchase 100,000 shares of the Company's Common
Stock at an exercise price of $2.125 per share and warrants to purchase an
additional 389,441 shares of the Company's Common Stock at an exercise price of
$4.77 per share, all of which expire on September 21, 2003 (collectively
"Additional Warrants"). As a result of issuing the Additional Warrants, the
Company will ratably record a deemed dividend over the effective period of the
Waiver Agreement. In addition, under the terms of the Waiver Agreement,
Advantage will no longer receive Series A Warrants upon conversion of the Series
A Stock. The Series A Stock is convertible solely into shares of Common Stock as
provided in the Certificate without any other adjustment to the terms of
conversion as a result of this change. Pursuant to the terms of Amendment No. 1,
the Company has agreed to file a registration statement with respect to the
shares of Common Stock underlying the Additional Warrants.
5. New Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133). SFAS 133 is effective for fiscal years
beginning after June 15, 1999 and cannot be applied retroactively. SFAS 133
establishes accounting and reporting standards requiring that every derivative
instrument be recorded in the balance sheet as either an asset or liability
measured at its fair value. SFAS 133 requires that changes in the derivative's
fair value be recognized currently in earning unless specific hedge accounting
criteria are met. The Company currently plans to adopt SFAS 133 effective
January 1, 2000, and will determine both the method and impact of adoption prior
to that date.
The Financial Accounting Standards Board has issued new standards that became
effective for reporting periods after December 15, 1997, Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130) and
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information" (SFAS 131). Effective March 31, 1998,
the Company adopted SFAS 130 and SFAS 131. The adoption of these standards has
no material affect on the Company's financial statements.
In October 1997, the AICPA issued Statement of Position (SOP) 97-2, "Software
Revenue Recognition", which superseded SOP 91-1 effective January 1, 1998.
Effective January 1, 1998, the Company adopted SOP 97-2. The adoption of this
statement has no material affect on the Company's financial statements.
6. Subsequent Event
PRIVATE PLACEMENT OF COMMON STOCK
On October 9, 1998, the Company entered into a Placement Agent Agreement with
LaSalle to solicit the sale of V-ONE's Common Stock. The Company is seeking to
sell not less than 1,800,000 shares of Common Stock and not more than 2,722,070
shares at a price of $2.00 per share. LaSalle and its designees would receive
warrants for 50,000 shares of Common Stock at an exercise price of $2.125 per
share if at least 1,800,000 shares are sold. The private placement has not yet
been consummated.
7
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Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements within the meaning of Section 21E
of the Securities Exchange Act of 1934. These statements may differ in a
material way from actual future events. For instance, factors that could cause
results to differ from future events include rapid rates of technological change
and intense competition, among others. The Company's total revenues and
operating results have varied substantially from quarter to quarter and should
not be relied upon as an indication of future results. Several factors may
affect the ability to forecast the Company's quarterly operating results,
including the size and timing of individual software and hardware sales; the
length of the Company's sales cycle; the level of sales and marketing, research
and development and administrative expenses; and general economic conditions.
Operating results for a given period could be disproportionately affected by any
shortfall in expected revenues. In addition, fluctuations in revenues from
quarter to quarter have had and are expected to continue to have a significant
impact on the Company's results of operations. The Company's growth in recent
periods may not be an accurate indication of future results of operations in
light of the Company's short operating history, the evolving nature of the
network security market and the uncertainty of the demand for Internet and
intranet products in general and the Company's products in particular. Because
the Company's operating expenses are based on anticipated revenue levels, the
timing of revenue recognition can cause significant variations in operating
results from quarter to quarter.
Readers are also referred to the documents filed by the Company with the
Securities and Exchange Commission, specifically the Company's last report on
Form 10-K that identifies important risk factors for the Company.
RESULTS OF OPERATIONS
REVENUES
Total revenues decreased by 13.3% to approximately $2,398,000 for the third
quarter of 1998 down from $2,764,000 in the same period of 1997. For the nine
months ended September 30, 1998, total revenues increased 13.6% to $8,305,000
from $7,313,000 in the same period of 1997. The quarterly decrease was due to
reduced sales of the Company's bundled turnkey firewall product, SmartWall, and
the entering into of several transactions where the earnings process was not yet
complete, while the increase for the nine month period reflected continued
growth in sales of the Company's software Virtual Private Network ("VPN")
product, SmartGate. Product revenues are derived primarily from software
licenses and the sale of hardware products. Product revenues were approximately
$2,259,000 and $7,868,000 for the quarter and nine months ended September 30,
1998, respectively, a decrease of 14.4% and an increase of 13.6% over the same
periods in 1997, as lower sales of SmartWall during the quarter were offset by
sales growth of SmartGate over the entire period. Consulting and services
revenues were approximately $139,000 and $437,000 for the quarter and nine
months ended September 30, 1998, respectively, an increase of 11.4% and 13.8%
over the same periods in 1997, and reflect the increase in sales of services
complementary to the Company's products, including consulting, maintenance and
training.
COST OF REVENUES
Total cost of revenues as a percentage of total revenues were approximately
25.1% and 13.8% for the three months and approximately 21.5% and 13.4% for the
nine months ended September 30, 1997 and 1998, respectively. Total cost of
revenues is composed of cost of product revenues and cost of consulting and
services revenues.
Cost of product revenues consists principally of the costs of computer hardware,
licensed technology, manuals and labor associated with the distribution and
support of the Company's products. Cost of product revenues as a percentage of
product revenues decreased from 25.2% for the third quarter of 1997 to 12.6% in
the same period of 1998. Cost of product revenues as a percentage of product
revenues also decreased in the nine months ended September 30, 1998 to 13.2%
from 21.9% in the same period of 1997. Cost of product revenues was
8
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approximately $285,000 for the third quarter of 1998 compared with $666,000 in
same period of 1997. Cost of product revenues was approximately $1,041,000 for
the nine months ended September 30, 1998 compared with $1,514,000 for the same
period of 1997. The dollar and percentage decreases for the three month period
ended September 30, 1998 were primarily attributable to decreased sales combined
with an increase in the proportion of sales from software licenses as compared
to turnkey hardware sales. The dollar and percentage decrease for the nine month
period ended September 30, 1998 were primarily attributable to an increase in
the proportion of sales from software licenses as compared to turnkey hardware
sales.
Cost of consulting and services revenues consists principally of personnel and
related costs incurred in providing consulting, support and training services to
customers. Cost of consulting and services revenues as a percentage of
consulting and services revenues increased from 22.2% for the third quarter of
1997 to 32.3% in the same period of 1998. Cost of consulting and services
revenues as a percentage of consulting and services revenues decreased in the
nine months ended September 30, 1998 to 15.6% from 15.7% in the same period of
1997. Cost of consulting and services revenues were approximately $28,000 for
the third quarter of 1997 compared with $45,000 in the same period of 1998. Cost
of consulting and services revenues was approximately $60,000 for the nine
months ended September 30, 1997 compared with $68,000 for the same period of
1998. The dollar and percentage increases in the third quarter of 1998 were
primarily attributable to increased consulting and service revenues and higher
costs related to software maintenance. The dollar increase and the small
percentage decrease for the nine months ended September 30, 1998 was primarily
attributable to lower costs related to software maintenance spread over higher
consulting and services revenues.
OPERATING EXPENSES
Sales and Marketing -- Sales and marketing expenses consist principally of the
costs of sales and marketing personnel, advertising, promotions and trade shows.
Sales and marketing expenses increased by 16.6% to approximately $1,557,000 in
the third quarter of 1998, up from approximately $1,335,000 in the same period
of 1997. Sales and marketing expenses decreased in the nine month period ended
September 30, 1998 to approximately $4,635,000, down from approximately
$5,135,000 in the same period of 1997. As a percentage of total revenue, sales
and marketing expenses were 64.9% and 55.8%, respectively, for the three month
and nine month periods ended September 30, 1998 compared to 48.3% and 70.2%,
respectively, in the comparable periods of 1997. The percentage and dollar
increases in the three months ended September 30, 1998 were due to the inclusion
of approximately $200,000 in reserve for bad debt expense spread over lower
revenues during the quarter, while the dollar and percentage decreases in the
nine month period were principally due to the charge of approximately $551,000
for bad debt expense that was incurred in the second quarter of 1997. Sales and
marketing expenses are expected remain at current levels but fall as a
percentage of total revenues in the near term as a result of the Company's
continuing sales and marketing efforts. This statement is based on current
expectations. It is forward-looking, and the actual results could differ
materially. For information about factors that could cause the actual results to
differ materially, please refer to Item 1. "Business - Risk Factors That May
Affect Future Results and Market Price of Common Stock" in the Company's Form
10-K.
General and Administrative -- General and administrative expenses consist
principally of the costs of finance, management and administrative personnel and
facilities expenses. General and administrative expenses increased by 50.9% to
approximately $880,000 in the third quarter of 1998, up from approximately
$583,000 in the same period of 1997. General and administrative expenses
increased in the nine month period ended September 30, 1998 to approximately
$2,908,000, up from approximately $2,431,000 in the same period of 1997. As a
percentage of revenue, expenses were 36.7% and 35.0% for the three and nine
month periods ended September 30, 1998 compared to 21.1% and 33.2% in the
comparable periods of 1997. The dollar and percentage increases in the third
quarter of 1998 were principally due to additions to senior management this
year. The dollar and percentage increases for the nine months ended September
30, 1998 were primarily due to noncash charges of approximately $394,000
attributable to anti-dilution adjustments to the terms of the warrants held by
JMI Equity Fund II, L.P., which were triggered by conversions of Series A Stock
during the period, and the bad debt reserve. A noncash charge of approximately
$29,000 will be incurred upon successful completion of the private placement
because of a further anti-dilution adjustment to the exercise price of these
warrants to $2.00 per share. See Note 4 to the Notes to the Condensed Financial
Statements. The Company anticipates that general and administrative expenses,
exclusive of noncash charges and reserves for bad debts, will increase modestly
in future periods. This statement is based on current expectations. It is
forward-looking, and the actual results could differ materially. For information
about factors that could cause the actual results to differ materially, please
refer to Item 1. "Business - Risk Factors That May Affect Future Results and
Market Price of Common Stock" in the Company's Form 10-K.
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Research and Development -- Research and development expenses consist
principally of the costs of research and development personnel and other
expenses associated with the development of new products and enhancement of
existing products. Research and development increased by 59.5% to approximately
$1,051,000 in the third quarter of 1998, up from approximately $659,000 in the
same period of 1997. Research and development also increased in the nine month
period ended September 30, 1998 to approximately $2,929,000, up by 38.6% from
approximately $2,113,000 in the same period of 1997. As a percentage of total
revenue, expenses were 43.8% and 35.3% for the three month and nine month
periods ended September 30, 1998 compared to 23.8% and 28.9% in 1997. The dollar
and percentage increases were primarily due to increases in the number of
personnel associated with the Company's product development efforts. The Company
believes that a continuing commitment to research and development is required to
remain competitive. Accordingly, the Company intends to allocate substantial
resources to research and development, but research and development expenses may
vary as a percentage of total revenues. This statement is based on current
expectations. It is forward-looking, and the actual results could differ
materially. For information about factors that could cause the actual results to
differ materially, please refer to Item 1. "Business - Risk Factors That May
Affect Future Results and Market Price of Common Stock" in the Company's Form
10-K.
Restructuring Charge -- Restructuring charge expense in the second quarter of
1997 consisted of the costs associated with the Company's shift in its sales and
marketing efforts toward a channel distribution strategy. Accordingly, the
Company recognized a restructuring charge of $800,000, comprised of $400,000
relating to certain marketing expenses and $400,000 relating to the reductions
in the Company's workforce in 1997. No restructuring charge was incurred for the
third quarter of 1998 or 1997 or for the nine months ended September 30, 1998.
Interest Income and Expenses -- Interest income represents interest earned on
cash and cash equivalents. Interest income decreased from approximately $123,000
and $291,000 for the three and nine month periods ended September 30, 1997,
respectively, to approximately $15,000 and $74,000 for the three and nine month
periods ended September 30, 1998, respectively. The decreases were attributable
to reduced levels of cash and cash equivalents. Interest expense represents
interest payable or accreted on promissory notes and capitalized lease
obligations. Interest expense increased from approximately $1,000 and $5,000 for
the three and nine month periods ended September 30, 1997, respectively, to
approximately $8,000 and $52,000 for the three and nine month periods ended
September 30, 1998, respectively. The increases were due to capitalized lease
obligations.
Income Taxes -- The Company did not incur income tax expenses in December 31,
1995, 1996 and 1997 as a result of the net loss incurred during these periods.
As of September 30, 1998, the Company has significant net operating loss carry
forwards because of net losses incurred since inception.
Dividends on Preferred Stock -- The Company provided approximately $31,000 for a
dividend on the Series A Stock and approximately $14,000 for a deemed dividend
(arising from the issuance of warrants for 100,000 shares of Common Stock at an
exercise price of $2.125 per share and warrants for 389,441 shares of Common
Stock at an exercise price of $4.77 per share as a result of the Waiver
Agreement) for the three month period ended September 30, 1998 and approximately
$111,000 and $14,000, respectively, for the nine month period ended September
30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities used cash of approximately $7,288,000 and
$5,618,000 for the nine months ended September 30, 1997 and 1998, respectively.
Cash used in operating activities for the nine months ended September 30, 1998
resulted principally from net losses and increases in accounts receivable,
partially offset by an increase in accounts payable, the noncash charge related
to the issuance of warrants and depreciation.
Capital expenditures for property and equipment were approximately $459,000 and
$150,000 for the nine months ended September 30, 1997 and 1998, respectively.
These expenditures have generally been for computer workstations and personal
computers, office furniture and equipment, and leasehold additions and
improvements. The Company expects to purchase additional computer equipment in
1998. In the nine months ended September 30, 1997, the Company made an
investment of $250,000 in Network Flight Recorder, Inc.
10
<PAGE>
The Company believes that its current cash and cash equivalents and funds that
may be generated from on-going operations, from the private placement described
in Note 4 to the financial statements for the period ended September 30, 1998,
and from other financing activities will be sufficient to finance the Company's
operations at least through September 30, 1999. The Company will, however, need
to raise additional capital either through the private placement or other
financing activities in the short term to redeem the Series A Stock and to
finance its ongoing operations.
As of September 30, 1998, the Company had an accumulated deficit of
approximately $21,670,000. The Company currently expects to incur net losses in
the next quarter.
YEAR 2000 ISSUE
The Year 2000 issue concerns the potential exposures related to the automated
generation of business and financial misinformation resulting from the
application of computer programs that have been written using six digits (e.g.,
12/31/99), rather than eight (e.g., 12/31/1999), to define the applicable year
of business transactions.
V-ONE has completed the identification and assessment of most of its IT systems,
and those systems have been modified by the suppliers of those systems to V-ONE
to address Year 2000 problems. In addition to its internal systems, V-ONE has
begun to assess the level of Year 2000 problems associated with its suppliers of
software incorporated or bundled with its products, other suppliers, customers
and creditors. V-ONE has also started its identification and assessment of its
non-IT systems, which include its telephone systems, heating and
air-conditioning, elevators, and other business equipment.
V-ONE's own software products are Year 2000 compliant.
V-ONE's costs to date for its Year 2000 compliance program, excluding the
salaries of its employees, has not been material. In fact, most of V-ONE's IT
systems have been modified by the suppliers of those systems and such
modifications were included as part of normal upgrades of those systems.
Although V-ONE has not completed its assessment, it does not currently believe
that the future costs associated with its remaining IT systems or its non-IT
systems will be material.
V-ONE cannot determine currently its most likely worst case Year 2000 scenario,
as it has not identified and assessed all of its systems, particularly its
non-IT systems. As V-ONE completes its identification and assessment of internal
and third party systems, it expects to develop contingency plans for various
worst-case scenarios. V-ONE expects to complete such contingency planning by
September 1999. A failure to address Year 2000 issues successfully could have a
material adverse effect on the Company's business, financial condition or
results of operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
11
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
(b) On December 8, 1997, the Company issued 4,000 shares of Series A Stock to
Advantage for $4 million in the aggregate. Advantage currently holds 2,462
shares of Series A Stock. 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 was convertible into warrants to purchase shares of Common Stock
("Series A Warrants").
Due to the Maximum Share Amount limitation found in Section 7(a)(1) of the
Certificate, the Company is not presently obligated to convert shares of Series
A Stock held by Advantage. On September 21, 1998, the Company sent an
inconvertibility notice to Advantage pursuant to Section 7(a)(2) of the
Certificate indicating that, as of September 11, 1998, Advantage had the right
to have some of its shares of Series A Stock redeemed by the Company for the
Share Limitation Redemption Price (which term is defined in the Certificate).
On September 22, 1998, the Company and Advantage entered into the Waiver
Agreement and Amendment No. 1 to the Registration Rights Agreement. Pursuant to
the Waiver Agreement, Advantage has until November 20, 1998 waived its right (1)
to convert or require the Company to redeem its Series A Stock under certain
circumstances, (2) to an adjustment to the "Ceiling Price" and the "Conversion
Percentage" (as such terms are defined in the Certificate), and (3) to the
"Periodic Amount" pursuant to Section 2(c) of the Registration Rights Agreement
(the term "Periodic Amount" is defined in Section 2(c) of the Registration
Rights Agreement).
Under the Waiver Agreement, the Company also has the right to redeem the Series
A Stock held by Advantage at any time until November 20, 1998 at a price of
$1,300 per share. If the shares of Series A Stock are so redeemed, all accrued
dividends will be waived by Advantage, without any additional payment by the
Company.
Simultaneously with the execution of the Waiver Agreement, the Company granted
to Advantage warrants to purchase 100,000 shares of the Company's Common Stock
at an exercise price of $2.125 per share and warrants to purchase 389,441 shares
of the Company's Common Stock at an exercise price of $4.77 per share, all of
which expire on September 21, 2003 (collectively "Additional Warrants"). In
addition, under the terms of the Waiver Agreement, Advantage will no longer
receive Series A Warrants upon conversion of the Series A Stock. The Series A
Stock is convertible solely into shares of Common Stock as provided in the
Certificate without any other adjustment to the terms of conversion as a result
of this change. Pursuant to the terms of Amendment No. 1, the Company has agreed
to file a registration statement with respect to the shares of Common Stock
underlying the Additional Warrants.
The descriptions of the Certificate, the Waiver Agreement, Amendment No. 1 and
of the agreements and other documents described in this Form 10-Q are qualified
in their entirety by reference to the exhibits filed with the Company's Form 8-K
dated September 22, 1998 and with the Company's Form 8-K dated December 15,
1997.
(c) Warrants Issued to Directors
On August 7, 1998, the Company issued warrants to purchase 10,000 shares each of
Common Stock at an exercise price of $2.688 per share to William E. Odom and A.
L. "Tom" Giannopoulos, both of whom are directors of the Company. These warrants
were issued in consideration for their service as directors of the Company in
reliance on Section 4(2) of the Securities Act of 1933.
Warrants Issued to Advantage
On September 22, 1998, the Company issued warrants to purchase 489,441 shares of
Common Stock to Advantage Fund II Ltd. ("Advantage") in consideration of
Advantage's entering into the Waiver Agreement, dated September 22, 1998.
12
<PAGE>
389,441 of the warrants are exercisable at a price of $4.77 per share and
100,000 of the warrants are exercisable at $2.125 per share. The warrants were
issued pursuant to Rule 506 of Regulation D promulgated under the Securities Act
of 1933.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this quarterly report on Form
10-Q for the period ended September 30, 1998.
Exhibit Index
EXHIBIT DESCRIPTION
10.1 Inconvertibility Notice, dated September 21, 1998. (1)
10.2 Waiver Agreement, dated September 22, 1998, between the Company and
Advantage. (1)
10.3 Amendment No. 1 dated September 22, 1998 to the Registration Rights
Agreement between the Company and Advantage. (1)
10.4 Warrant Granted to Advantage to Purchase 100,000 shares of the
Company's Common Stock. (1)
10.5 Warrant Granted to Advantage to Purchase 389,441 shares of the
Company's Common Stock. (1)
10.6 Waiver Letter, dated November 5, 1998, between the Company and
Advantage.
10.7 Placement Agent Agreement, dated October 9, 1998, between the Company
and LaSalle.
10.8 Amendment No. 1 to Placement Agent Agreement, dated November 9, 1998,
between the Company and LaSalle.
10.9 Escrow Agreement, dated October 9, 1998, among the Company, LaSalle and
LaSalle National Bank.
10.10 Amendment No. 1 to Escrow Agreement, dated November 9, 1998, among the
Company, LaSalle and LaSalle National Bank.
10.11 Form of Subscription Documents.
10.12 Form of Addendum #1 to Subscription Documents.
10.13 Form of Addendum #2 to Subscription Documents.
10.14 Form of Warrant to Purchase 50,000 shares of the Company's Common
Stock.
10.15 Form of Warrant Granted to A. L. Giannopoulos to Purchase 10,000 shares
of the Company's Common Stock.
10.16 Form of Warrant Granted to William E. Odom to Purchase 10,000 shares of
the Company's Common Stock.
27 Financial data schedule
- --------------------
(1) Incorporated by reference to the Company's filing on Form 8-K dated
September 22, 1998.
(b) Reports on Form 8-K
Form 8-K dated September 22, 1998 reporting under Item 5.
13
<PAGE>
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.
V-ONE CORPORATION
Registrant
Date: November 16, 1998 By: /s/ Charles B. Griffis
----------------------------------------
Name: Charles B. Griffis
Title: Senior Vice President, Chief Financial
Officer and Treasurer (Duly authorized
officer and Principal Financial Officer)
14
V-ONE Corporation
20250 Century Blvd., Suite 300
Germantown, Maryland 20874
November 5, 1998
VIA TELECOPIER
Advantage Fund II Ltd.
c/o CITCO
Kaya Flamboyan 9
Curacao, Netherlands Antilles
Re: V-ONE Corporation - Registration Statement on Form S-3
Ladies and Gentlemen:
We are sending you this letter in connection with the proposed waiver by
Advantage Fund II Ltd. ("Advantage") of the requirement that V-ONE Corporation
("Company") file a Registration Statement on Form S-3 ("Registration Statement")
with the SEC registering certain shares of common stock of the Company on or
prior to November 6, 1998. This letter shall set forth the terms of such waiver
as understood by the Company and Advantage.
On September 22, 1998 the Company and Advantage entered into that certain
Amendment No. 1 ("Amendment") to the Registration Rights Agreement dated as of
December 3, 1997 by and between the Company and Advantage ("Agreement").
Pursuant to the Amendment, under Section 2(a) of the Agreement the Company
is obligated to prepare and file with the SEC the Registration Statement which
covers the resale of 489,441 shares of common stock of the Company underlying
certain warrants issued to Advantage ("New Warrants"). The terms of the
Amendment indicate that the Company is required to file the Registration
Statement on or prior to November 6, 1998 (which date is 45 days after the date
the New Warrants were issued). In addition under the terms of the Amendment if
the Registration Statement is not ordered effective by December 31, 1998 (which
date is 100 days after the date the New Warrants were issued), then upon such
date and on each monthly anniversary thereof for so long as the Registration
Statement is not ordered effective, the Company shall pay Advantage $10,000 up
to a total aggregate amount of $50,000.
The Company and Advantage have now agreed to extend the date by which the
Registration Statement must be filed with the SEC by 14 days. The Company will
be obligated to prepare and file the Registration Statement on or before
November 20, 1998. Such filing, if it occurs after November 6, 1998, shall not
constitute a breach under the Amendment or the Agreement. In addition, the
Company and Advantage have now agreed that the date by which the Registration
Statement must be ordered effective by the SEC shall be changed from December
31, 1998 to January 14, 1999. If such Registration Statement is ordered
effective by January 14, 1999 it shall not constitute a breach under the
Amendment or the Agreement.
<PAGE>
Advantage Fund II Ltd.
November 5, 1998
Page 2
The failure to file the Registration Statement on or before November 20,
1998 shall not constitute an "Optional Redemption Event" as that term is defined
in the Company's Certificate of Designations of the Series A Convertible
Preferred Stock dated December 8, 1997 ("Certificate") and will not trigger any
optional redemption rights pursuant to Section 11 of the
Certificate.
All other terms under the Amendment and the Agreement shall remain in full
force and effect.
In connection with the implementation of this waiver, Advantage agrees not
to sell, transfer or otherwise dispose of (collectively "transfer") any of the
shares of the Company's Series A Convertible Preferred Stock owned by Advantage,
unless prior to any such proposed transfer, the transferee agrees in writing for
the benefit of the Company to be bound by the terms of this letter.
If the terms of this letter are satisfactory please sign on behalf of
Advantage as indicated and return it to the undersigned officer of the Company.
V-ONE CORPORATION
By: /s/ Charles B. Griffis
-------------------------------------
Charles B. Griffis, Senior Vice
President and Chief Financial Officer
ACCEPTED AND AGREED TO:
ADVANTAGE FUND II LTD.
By: /s/ Walter Reich
-----------------------------
Name: Inter Caribbean Services Ltd.
-----------------------------
Title: Secretary
-----------------------------
V-ONE CORPORATION
SHARES OF COMMON STOCK
PLACEMENT AGENT AGREEMENT
THE PLACEMENT AGENT AGREEMENT (the "AGREEMENT") is entered into as of the
date set forth on the signature page hereof by and between V-ONE Corporation, a
Delaware corporation (the "COMPANY"), and LaSalle St. Securities, Inc., an
Illinois corporation (the "PLACEMENT AGENT").
The Company proposes to offer and sell solely to "accredited investors" as
such term is defined in Regulation D ("REGULATION D") promulgated under the
Securities Act of 1933, as amended (the "ACT"), upon the terms and subject to
the conditions set forth in the accompanying form of subscription agreement (the
"SUBSCRIPTION AGREEMENT") attached as an exhibit to the Offering Memorandum (as
defined below), shares ("SHARES") of the Company's common stock, par value
$0.001 per share ("COMMON STOCK"), at the prevailing closing bid price for the
Shares on the Nasdaq National Market on the day of the Closing of this placement
(as defined below), but in no event less than $1.625 per Share (the "OFFERING
PRICE"), such that the gross sale proceeds raised is at least $3,600,000. The
Company has reserved the right to sell additional Shares with additional gross
sale proceeds of no more than $2,400,000 on the same terms set forth above in
the event this Offering is oversubscribed (the "OVER SUBSCRIPTION OPTION"). An
investor must purchase a minimum of $100,000 of the Common Stock; however, this
requirement may be waived by the Company in its sole discretion. All Shares are
offered subject to the right of the Company to reject any subscription for
Shares in whole or in part for any reason whatsoever or to sell to any
prospective investor less than the number of Shares subscribed for by such
prospective investor and subject to certain other conditions. This transaction
is referred to herein as the "OFFERING."
The Company has determined to use the services of the Placement Agent as
its exclusive agent to solicit subscriptions for the Shares on a "best efforts"
basis through the earlier of (a) October 26, 1998; or (b) the sale of all Shares
offered, which period can be extended upon agreement of the Company and the
Placement Agent to November 20, 1998 without notice to investors (the "OFFERING
PERIOD"). The Placement Agent hereby agrees to act in such capacity and to use
its best efforts to find purchasers for the Shares in accordance with the terms
and conditions of this Agreement.
Accompanying this Agreement is a copy of the Company's Confidential
Private Placement Memorandum and the subscription documents (including a
Purchaser Representative Questionnaire) attached as an exhibit thereto (the
"SUBSCRIPTION DOCUMENTS") and prepared for use in conjunction with the offer and
sale of the Shares. Investors who subscribe for the Shares (the "SUBSCRIBERS")
will be required to complete the Subscription Documents and execute the
Subscription Agreement forming a part thereof. Such Confidential Private
Placement Memorandum dated October 9, 1998 (and its exhibits) together with the
Subscription Documents is herein called the "OFFERING MEMORANDUM," except that,
if the Confidential Private Placement Memorandum shall be supplemented or
amended as herein provided, the term "OFFERING MEMORANDUM" shall refer, from and
after the supplement or amendment has been delivered to the Placement Agent, to
the Subscription Documents and the Confidential Private Placement Memorandum and
the exhibits thereto as so amended or supplemented.
<PAGE>
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Placement Agent that:
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of Delaware, and has the power and authority
to carry on its business as conducted or proposed to be conducted by it and to
hold title to its property, which business and property is described in the
Offering Memorandum. The Company has the corporate power and authority to
execute and deliver this Agreement, to conduct such business and to perform its
obligations hereunder and consummate the transactions contemplated by each set
of Subscription Documents tendered by a Subscriber that is accepted by the
Company.
(b) When (i) the Company has received payment for subscriptions in
accordance with the provisions of the Subscription Documents and the Offering
Memorandum and (ii) certificates evidencing the Shares have been issued to the
respective Subscribers therefor, the Shares will be validly issued, fully paid
and non-assessable.
(c) As of the date of the Offering Memorandum and to the best of the
Company's knowledge after due inquiry, the Offering Memorandum does not include
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(d) Except as disclosed in the Offering Memorandum, there are no
actions, suits, proceedings or investigations pending or, to the best of the
Company's knowledge, threatened against or affecting the Company which could
prevent or interfere with or adversely affect the execution and delivery by the
Company of this Agreement or the performance by the Company of its obligations
hereunder or the offering, issuance and sale of the Shares, or which,
individually or in the aggregate, would have a material adverse effect on the
value of the assets or the operation of the business of the Company.
(e) Except as otherwise disclosed in the Offering Memorandum, all
requisite authorizations, approvals or orders from any court, governmental or
regulatory official or body necessary to permit the Company to conduct its
business as described in the Offering Memorandum will have been obtained or are
in the process of being applied for prior to the Closing Date (as hereinafter
defined). All requisite authorizations, approvals or orders from any court or
any governmental or regulatory official or body necessary for the consummation
by the Company of the transactions contemplated by this Agreement will have been
obtained or are in the process of being applied for prior to the Closing Date;
PROVIDED, HOWEVER, that the Company (i) shall file the Registration Statement
contemplated by Section 8 of the Subscription Agreement forming part of the
Subscription Documents within the time period contemplated by such section, (ii)
shall file an additional listing application with Nasdaq National Market
regarding the Shares and the Underlying Shares (as hereinafter defined) within
15 days of the Closing Date and (iii) shall file any documents required by
federal or state securities laws or the securities laws of foreign jurisdictions
either before or after the Closing Date as required by the laws of such
jurisdictions.
(f) This Agreement has been duly and validly authorized, executed
and delivered by the Company and constitutes the valid and binding agreement of
the Company, enforceable in accordance with its terms, except that (i) such
enforcement may be subject to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other similar
laws relating to or affecting creditors' rights generally and general principals
of equity (regardless of whether such enforcement is considered in a proceeding
in equity or at law) and (ii) the indemnification provisions of this Agreement
2
<PAGE>
may be held to violate public policy (under either federal or state law) in the
context of the offer or sale of securities.
(g) The Company's execution and delivery of this Agreement, the
fulfillment of the terms set forth herein and the consummation of the
transactions contemplated herein will not conflict with or constitute a breach
of, or default under (i) the Company's articles of incorporation or by-laws,
(ii) any material agreement, indenture or instrument by which the Company is
bound (except to the extent such conflict, breach or default would not have a
material adverse effect on the value of the assets or the operation of the
business of the Company), or (iii) any law, administrative regulation or court
decree (except to the extent such conflict, breach or default would not have a
material adverse effect on the value of the assets or the operation of the
business of the Company).
(h) It is the Company's present intention to utilize the proceeds
from the sale of the Shares substantially in the manner set forth in the
Offering Memorandum. Further, the Company has no present intention to make any
material changes in its business as described in the Offering Memorandum.
(i) The Company represents and warrants that the financial
statements of the Company contained on the Exhibits to the Offering Memorandum
have been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods covered thereby, and present fairly
the financial position of the Company as of the date indicated. In the opinion
of management, all adjustments (consisting only of normal recurring adjustments)
have been made which are considered necessary for a fair presentation of such
information for the periods presented. Except for the transactions contemplated
by the Offering Memorandum, there has been no material adverse change in the
condition of the Company, financial or otherwise, from that set forth in the
Offering Memorandum.
(j) On the date hereof, and at the Closing Date, the Company is not
or will not be an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
(k) Neither the Company nor any of its affiliates have received or
are entitled to receive, directly or indirectly, any compensation or other
benefit in connection with the Offering including, but not limited to, any
commission or similar fee, except as described in the Offering Memorandum.
(l) The Company has not paid or awarded, and will not pay or award,
directly or indirectly, any commission or other compensation to any person
engaged to render investment advice to a potential purchaser of the Shares as an
inducement to advise the purchase of the Shares, except as such commissions or
other compensation may be paid or awarded to the Placement Agent in accordance
with this Agreement in connection with the sale of the Shares as described in
the Offering Memorandum.
(m) Any written or oral information provided to prospective
purchasers of Shares by authorized representatives of the Company other than the
Placement Agent ("AUTHORIZED PERSONS") will not contain any untrue statement of
a material fact or, when taken together with the information set forth in the
Offering Memorandum, omit 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.
(n) The sale of the Shares has been duly and validly authorized by
the Company. There are no outstanding options, warrants or other rights to
purchase or otherwise acquire any Shares of the Company or any security
convertible into such Shares, except as described in the Offering Memorandum.
3
<PAGE>
(o) None of the Company or, to the Company's knowledge, any of its
current directors or officers:
(i) would be required to make any disclosure required pursuant
to Items 103 or 401(f) of Regulation S-K with respect to such person that
has not previously been made in a filing by the Company with the
Securities and Exchange Commission ("COMMISSION");
(ii) is subject to a United States Postal Service false
representation order entered within five years prior to the date hereof;
or is subject to a restraining order or preliminary injunction entered
under Section 3007 of title 39, United States Code, with respect to any
conduct alleged to constitute postal fraud;
(iii) has been or has been named as an underwriter of any
securities covered by any registration statement which is the subject of
any pending proceeding under Section 8 of the Act, or is the subject of
any refusal order or stop order entered thereunder within five years prior
to the date hereof; or
(iv) has filed a registration statement that is the subject of
a currently effective stop order entered pursuant to any state's
securities law within five years prior to the date hereof.
(p) Other than the Placement Agent, the Company has not contracted
with any person to act as a finder or investment adviser in connection with
these transactions described herein and the Company agrees to indemnify the
Placement Agent with respect to any claim for such a finder's fee in connection
with the Offering. No current director or owner of more than 10% of the
Company's outstanding shares of Common Stock (other than Kern Capital
Management, LLC and Advantage Fund II Ltd., of which the Company has no
knowledge) is a member of a broker-dealer registered with the National
Association of Securities Dealers, Inc. (the "NASD") or an employee or
associated member of a broker-dealer registered with the NASD.
(q) On the date hereof and at the Closing Date, the Company will not
be disqualified pursuant to Rule 507(a) of Regulation D from relying on the
exemption contained in Rule 506 of Regulation D.
(r) The Company is not:
(i) currently subject to any state administrative enforcement
order or judgment entered by that state's securities administrator within
five years prior to the date hereof or subject to any state's
administrative enforcement order or judgment in which fraud or deceit,
including but not limited to making untrue statements of material facts
and omitting to state material facts, was found and the order or judgment
was entered within five years prior to the date hereof; or
(ii) subject to any state's administrative enforcement order
or judgment that prohibits, denies or revokes the use of any exemption
from registration in connection with the offer, purchase or sale of
securities.
2. REPRESENTATIONS AND WARRANTIES OF THE PLACEMENT AGENT. The
Placement Agent hereby represents, warrants and agrees with the Company that:
(a) The Placement Agent is a corporation duly organized, validly
existing and in good standing under the laws of the State of Illinois, with the
corporate power and authority to conduct its business, to execute and deliver
this Agreement, and to perform the obligations contemplated herein.
4
<PAGE>
(b) This Agreement has been duly and validly authorized, executed
and delivered by the Placement Agent and constitutes the valid, binding and
enforceable agreement of the Placement Agent, except to the extent that (i) such
enforcement may be subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws
relating to or affecting the rights of creditors generally and general
principles of equity (regardless of whether such enforcement is considered in a
proceeding in equity or at law), and (ii) the indemnification provisions of this
Agreement may be held to violate public policy (under either federal or state
law) in the context of the offer or sale of securities.
(c) The Placement Agent's execution and delivery of this Agreement,
and the performance of its obligations hereunder, will not result in a breach or
violation of any of the terms and provisions of, or constitute a default under,
its articles of incorporation or bylaws, any agreement or instrument to which it
is a party or by which it is bound, or any judgment, decree, order or, to its
knowledge, any statute, rule or regulation applicable to Placement Agent.
(d) As of the date of the Offering Memorandum, the information
contained in the Offering Memorandum relating to the Placement Agent, if any,
does not include any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(e) The Placement Agent is (i) a broker-dealer duly registered
pursuant to the provisions of the Securities Exchange Act of 1934, as amended
("EXCHANGE ACT"); (ii) a member in good standing of the NASD; and (iii) duly
registered as a broker-dealer under the applicable statutes and regulations of
each state in which the Shares will be offered and sold, except (A) such states
or other jurisdictions in the United States in which the Placement Agent is
exempt from registration or such registration is not otherwise required and (B)
such jurisdictions where the Shares will be offered and sold outside of the
United States, in which jurisdictions the Shares will be offered and sold
through broker-dealers duly registered under the applicable laws of such
jurisdictions who are selected by the Placement Agent to offer and sell the
Shares in such jurisdictions. The Placement Agent will maintain all its
registrations as well as those of each individual who participates in the offer
or sale of the Shares as the Placement Agent's agent or registered
representative, in good standing throughout the Offering Period and the
Placement Agent will comply with all statutes and other requirements of law
applicable to it with respect to its brokerage activities within those
jurisdictions. To the extent required by applicable law, any individual who
participates in the offer or sale of the Shares as the Placement Agent's agent
or registered representative will be duly registered as a registered
representative or principal of the Placement Agent pursuant to the provisions of
the NASD rules.
(f) Neither Placement Agent nor any of its directors or officers nor
any beneficial owner of 10% or more of any class of its equity securities, nor
any of their respective affiliates (nor any other person serving in a similar
capacity):
(i) has been convicted within ten years prior to the date
hereof of any crime or offense involving the purchase or sale of any
security, involving the making of a false statement with the Commission,
or arising out of such person's conduct as an underwriter, broker, dealer,
municipal securities dealer or investment adviser;
(ii) is subject to any order, judgment or decree of any court
of competent jurisdiction temporarily or preliminarily enjoining or
5
<PAGE>
restraining, or is subject to any order, judgment, or decree of any court
of competent jurisdiction, entered within five years prior to the date
hereof, permanently enjoining or restraining such person from engaging in
or continuing any conduct or practice in connection with the purchase or
sale of any security, involving the making of a false filing with the
Commission or arising out of the conduct of the business of an
underwriter, broker, dealer, municipal securities dealer or investment
adviser;
(iii) is subject to an order of the Commission entered
pursuant to Section 15(b), 15B(a), or 15B(c) of the Exchange Act, or is
subject to an order of the Commission entered pursuant to Section 203(e)
or (f) of the Investment Advisers Act of 1940;
(iv) is suspended or expelled from membership in, or suspended
or barred from association with a member of, an exchange registered as a
national securities exchange pursuant to Section 6 of the Exchange Act, an
association registered as a national securities association under Section
15A of the Exchange Act, or a Canadian securities exchange or association
for any act or omission constituting conduct inconsistent with just and
equitable principles of trade;
(v) is subject to a United States Postal Service false
representation order entered within five years prior to the date hereof;
or is subject to a restraining order or preliminary injunction entered
under Section 3007 of title 39, United States Code, with respect to any
conduct alleged to constitute postal fraud;
(vi) has been or has been named as an underwriter of any
securities covered by any registration statement which is the subject of
any pending proceeding or examination under Section 8 of the Act, or is
the subject of any refusal order or stop order entered thereunder within
five years prior to the date hereof;
(vii) has taken or failed to take any other act or are subject
to any other order or proceedings, that would make unavailable any limited
offering exemption from registration or qualification requirements of
federal or state securities laws;
(viii) has filed a registration statement that is the subject
of a currently effective stop order entered pursuant to any state's
securities law within five years prior to the date hereof;
(ix) has been convicted within five years prior to the date
hereof of any felony or misdemeanor in connection with the offer, purchase
or sale of any security or any felony involving fraud or deceit, including
but not limited to forgery, embezzlement, obtaining money under false
pretenses, larceny or conspiracy to defraud;
(x) is currently subject to any state administrative
enforcement order or judgment entered by that state's securities
administrator within five years prior to the date hereof or is subject to
any state's administrative enforcement order or judgment in which fraud or
deceit, including but not limited to making untrue statements of material
facts and omitting to state material facts, was found and the order or
judgment was entered within five years prior to the date hereof;
(xi) is subject to any state's administrative enforcement
order or judgment that prohibits, denies or revokes the use of any
exemption from registration in connection with the offer, purchase or sale
of securities; or
(xii) is currently subject to any order, judgment or decree of
any court of competent jurisdiction temporarily or preliminarily
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restraining or enjoining, or is subject to any order, judgment or decree
of any court of competent jurisdiction permanently restraining or
enjoining, such party from engaging in or continuing any conduct or
practice in connection with the purchase or sale of any security or
involving the making of any false filing with the state entered within
five years prior to the date hereof.
3. SALE OF THE SHARES BY THE PLACEMENT AGENT. The Company and the
Placement Agent hereby agree as follows:
(a) The Offering will be made solely to accredited investors to whom
the Placement Agent has furnished copies of the Offering Memorandum and in
reliance upon the exemption from registration under Section 4(2) of the Act and
the provisions of Rule 506 of Regulation D, and as permitted in the
jurisdictions in which the Shares are to be offered. The Placement Agent shall
make reasonable inquiry to determine whether an accredited investor is
purchasing for its own account or if it is purchasing for the account of others.
In the case of any purchaser acting on behalf of others, the Placement Agent
shall require such other persons(s) to complete the Subscription Documents.
(b) The Company hereby appoints the Placement Agent as its exclusive
selling agent to solicit prospective purchasers of the Shares and as such to
effect sales of the Shares, on a best efforts basis, for the Company during the
period commencing with the date of the Offering Memorandum and ending on the
Closing Date. Notwithstanding the foregoing, the Placement Agent is not acting
as a selling agent with respect to any sale of the Shares to any existing
shareholder of the Company. The Company may not terminate the Placement Agent's
agency hereunder other than upon the Placement Agent's failure to perform its
obligations hereunder in a material respect, upon the Placement Agent's material
breach of any of its representations and warranties contained herein or upon the
Placement Agent's gross negligence or willful misconduct. Subject to the terms
and conditions and upon the basis of the representations and warranties herein
set forth, the Placement Agent accepts such appointment and agrees to use its
best efforts to find prospective purchasers for the Shares in accordance with
the terms and conditions of this Agreement.
(c) Each person desiring to purchase Shares (a "SUBSCRIBER") will be
required to complete and execute the Subscription Documents. Each Subscriber
will deliver payment by check payable to the order of "LaSalle National Bank
Escrow Agent for V-ONE Corporation" or by wire transfer, in the amount of the
aggregate purchase price of the Shares subscribed for, to the Escrow Agent (as
hereinafter defined). Each Subscriber will return to the Placement Agent such
Subscription Documents together with such check (or wire transfer) and any other
documents that may be required under state or foreign securities laws or by the
Company. Neither the Placement Agent nor any investment adviser is permitted to
sign any Subscription Documents for any Subscriber. The Placement Agent will
ascertain that each set of Subscription Documents submitted by a Subscriber has
been completed and executed by such Subscriber, and Placement Agent will then
forward such Subscription Documents, such other documents and a copy of such
check or information regarding such wire transfer to the Company and shall
forward such check and a copy of such Subscription Documents and other documents
to LaSalle National Bank, Chicago, Illinois (the "ESCROW AGENT").
(d) The Placement Agent shall transmit all checks and Subscription
Documents to the Escrow Agent by the end of the next business day following
receipt by the Placement Agent. Transmittal of the Subscription Documents and
the other information described in Section 3(c) to the Company will be effected
in accordance with the same timetable.
(e) Upon receipt of a Subscriber's Subscription Documents, the
Company will determine promptly whether it wishes to accept the Subscriber as a
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holder of Shares in the Company, it being understood that the Company reserves
the right to reject the tender of any Subscription Documents before the end of
the second business day following the Company's receipt of the Subscription
Documents, and to reject all tenders after the $3,600,000 in gross sale proceeds
have been raised (subject to the Company's right to raise an additional
$2,400,000 as previously described); PROVIDED, HOWEVER, that any acceptance by
the Company is subject to the fulfillment of all of the terms and conditions
relating to the Offering contained in this Agreement and the Offering
Memorandum, and that any failure by the Company to expressly reject a tender of
Subscription Documents shall not be deemed to constitute an acceptance thereof.
Should the Company determine to reject a tender, it will promptly notify the
Escrow Agent and the Placement Agent of such determination. The Placement Agent
will notify the Subscriber of such determination, and the Escrow Agent will
issue and mail (or wire transfer) to the Subscriber, a check in an amount equal
to the tendered subscription amount for the Shares by noon of the business day
following the day that the Company indicates to the Escrow Agent that the tender
has been rejected.
(f) Pending the Closing, all payments received and accepted from
Subscribers, will be deposited in an escrow account (the "ESCROW ACCOUNT") with
the Escrow Agent. However, mere deposit of a check or receipt of a wire transfer
will not constitute acceptance by the Company of Subscription Documents. Such
funds may be temporarily invested only in investments described in the Escrow
Agreement ("ESCROW AGREEMENT") dated the date hereof among the Company, the
Placement Agent and the Escrow Agent. Prior to the Closing, the Company will
have no right to obtain any funds from the Escrow Agent. The right of the
Company to receive funds, including any interest on the funds, at the Closing is
subject to fulfillment of the conditions specified in Section 8 hereof. Funds,
including any interest on the funds, will be made available to the Company at
the Closing.
(g) Prior to the Closing or termination of the Offering, the Company
shall from time to time amend the Offering Memorandum in order to update the
information contained therein as follows, and the Placement Agent shall
cooperate with the Company in connection with any amendments thereto. In such
event, the Company promptly will notify the Placement Agent by telephone,
promptly confirmed in writing by telecopy, to suspend solicitation of offers to
purchase Shares, and, if so notified by the Company, the Placement Agent shall
forthwith suspend such solicitation and cease using the Offering Memorandum
until such time as the Company advises that solicitation may be resumed. If
requested to do so by the Company, the Placement Agent shall also provide such
amended or supplemented Offering Memorandum to each Subscriber who has
previously submitted Subscription Documents and offer such Subscriber the
opportunity to revoke its subscription for Shares. If, in connection therewith,
the Company shall, with the cooperation of the Placement Agent, decide to amend
or supplement the Offering Memorandum, the Company (i) will advise the Placement
Agent promptly by telephone (with confirmation in writing by telecopy), (ii)
will prepare an amendment or supplement to the Offering Memorandum that will
correct such untrue statement or omission or will make such other change as may
be necessary, and (iii) will supply such amended or supplemented Offering
Memorandum to the Placement Agent. If such amendment or supplement is
satisfactory in all respects to the Placement Agent, the Placement Agent will
resume the solicitation of offers to purchase Shares.
(h) The Placement Agent (i) has not offered or sold and, prior to
the expiration of the period of six months from the Closing Date (as hereinafter
defined), will not offer or sell any Shares to persons in the United Kingdom
except to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the purposes of
their businesses or otherwise in circumstances that have not resulted and will
not result in an offer to the public in the United Kingdom within the meaning of
the Public Offers of Securities Regulations 1995, (ii) has complied and will
comply with all applicable provisions of the Financial Services Act 1986 with
respect to anything done by it in relation to the Shares in, from or otherwise
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<PAGE>
involving the United Kingdom, and (iii) has only issued or passed on and will
only issue or pass on in the United Kingdom any document received by it in
connection with the issue of the Shares to a person who is of a kind described
in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1995 or is a person to whom such document may otherwise
lawfully be issued or passed on; and (iv) has complied and will comply with all
securities laws in the United Kingdom and elsewhere in Europe in connection with
the offering of Shares.
(i) The Placement Agent acknowledges that the distribution of the
Shares to purchasers in Ontario, Canada has not been qualified by a prospectus
filed under the Securities Act (Ontario) and represents and agrees that (i) it
has not offered or sold and will not offer or sell, directly or indirectly, the
Shares to purchasers in Ontario except pursuant to an exemption from the
prospectus filing requirement of the Securities Act (Ontario); (ii) it has
complied and will comply with all applicable provisions of the Securities Act
(Ontario) in connection with the offer and sale of the Shares in Ontario; and
(iii) it has distributed in Ontario documents relating to the distribution of
the Shares only to persons eligible to purchase Shares pursuant to an exemption
from the prospectus filing requirements of the Securities Act (Ontario).
(j) The Placement Agent acknowledges that the distribution of the
Shares to purchasers in Sweden has not been qualified by a prospectus filed
under the Swedish Financial Instruments Trading Act (LAGEN OM HANDEL MED
FINANSIELLA INSTRUMENT) and represents and agrees that it has complied and will
comply with the Swedish Investment Firms Act (LAGEN OM VARDEPAPPERSRORELSE), the
Financial Instruments Trading Act and all other applicable laws and regulations
in respect of the offer and sale of Shares in Sweden.
4. CLOSING DATE. The Company may hold a "CLOSING" of the Offering at
any time after (i) subscriptions for the minimum of $3,600,000 in gross sale
proceeds have been received and accepted, (ii) the Escrow Agent confirms that
such proceeds constitute "collected funds" (as such term is defined in the
Escrow Agreement), and (iii) all the conditions to the right of the Company to
obtain funds as set forth in this Agreement, including Section 8 hereof, have
been satisfied. On the date of the Closing ("CLOSING DATE") (A) the Company and
the Placement Agent shall jointly notify the Escrow Agent to release the funds
from the Escrow Account; (B) the Company will issue the Shares or instruct its
transfer agent to issue the Shares to each person whose Subscription Documents
have been accepted by the Company (individually, a "PURCHASER" and,
collectively, the "PURCHASERS"); (C) counsel for the Company shall deliver its
opinion to the Placement Agent as provided by Section 8 hereof; and (D) all
accepted subscription amounts will be delivered to the Company. The Offering
will expire on the earlier of (a) $6,000,000 in gross sale proceeds have been
raised relating to the sale of Shares or (b) October 26, 1998, unless the
Offering is extended to November 20, 1998, upon agreement of the Company and the
Placement Agent, without notice to the prospective investors. Pending the
Closing, each Subscriber's payment accompanying its Subscription Documents will
be deposited in a segregated escrow account with the Escrow Agent.
5. COMPENSATION. For the services of the Placement Agent in
soliciting and obtaining purchasers of the Shares, the Company agrees to pay the
Placement Agent at the Closing (as hereinafter defined), (i) a selling
commission equal to eight percent (8%) of the aggregate gross sale proceeds
received from the sale of Shares (the "SELLING COMMISSION"), plus an amount
equal to one and one-half percent (1.5%) of the aggregate gross sale proceeds
received from the sale of Shares ("EXPENSE ALLOWANCE"), as a nonaccountable
expense allowance. In the event that the Offering is terminated for any reason
by the Company other than a breach of the representations or warranties by the
Placement Agent, the Company agrees to pay all accountable fees, costs and
disbursements incurred and/or due and payable by Placement Agent and its legal
counsel up to an amount, which shall not exceed $30,000. In the event the
Offering is terminated by Placement Agent for any reason other than a breach of
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<PAGE>
the representations or warranties by the Company, each party shall bear its own
expenses relating to the Offering.
(a) Upon the Closing, the Company will issue to the Placement Agent
or its designees at a per Share exercise price equal to the greater of $2.125
and the Offering Price (the "WARRANT PRICE") a warrant ("AGENT WARRANT")
entitling the Agent to purchase an aggregate of 50,000 shares of Common Stock.
The Agent Warrant is exercisable at any time after one year from the initial
closing of the Offering and shall expire, if not exercised, five (5) years from
the date of the Closing (the "WARRANT EXERCISE TERM"). The Aggregate Warrant
Price shall be payable by giving the Placement Agent the option to pay the
exercise price either (i) by reducing the shares issuable upon exercise by such
number of shares as the fair market value of which is equal to the exercise
price for the number of shares to be exercised or (ii) by paying cash.
(b) If, at any time during the Warrant Exercise Term, the Company
shall determine to prepare and file with the Commission a Registration Statement
relating to an offering for its own account or the account of others under the
Act of any of its shares of Common Stock (other than on Form S-4 or Form S-8 or
their then equivalents), the Company shall send to then holders ("HOLDERS") of
the Agent Warrants and/or the shares of Common Stock then issued or issuable on
exercise of the Agent Warrants ("UNDERLYING SHARES") written notice of such
determination and, if within ten (10) days after receipt of such notice, one or
more of such Holders shall so request in writing, the Company shall include in
such Registration Statement all or any part of the Underlying Shares such
Holders request 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 that 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 Underlying Shares with
respect to which such Holders have requested inclusion hereunder. Any exclusion
of Underlying Shares shall be made pro rata among the Holders seeking to include
Underlying Shares, in proportion to the number of Underlying Shares sought to be
included by such Holders; PROVIDED, HOWEVER, that the Company shall not exclude
any Underlying Shares 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
Underlying Shares 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. The
obligations of the Company under this Section 5(b) may be waived by Holders
holding a majority in interest of the Underlying Shares and shall expire with
respect to a Holder when all of such Holder's Underlying Shares may be sold
pursuant to Rule 144(k).
(c) 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 the Registration Statements
described in Section 5(b), 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 each Holder shall bear the fees and out-of-pocket
expenses of any legal counsel retained by such Holder.
(d) The Selling Commissions and Expense Allowance will be paid on or
promptly following the Closing.
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(e) The Placement Agent will not be entitled to a Selling Commission
or the Expense Allowance with respect to any tendered Subscription Documents
that are rejected by the Company or in which it is determined that the
solicitation or obtaining of purchasers by the Placement Agent was made in
violation of the securities laws of the United States or any state or other
jurisdiction or this Agreement.
6. FURTHER AGREEMENTS OF THE COMPANY.
(a) The Company covenants and agrees that it will pay or cause to be
paid (i) all expenses, if any, in connection with the soliciting and obtaining
of purchasers of the Shares including reasonable travel expenses in connection
with investor presentations, and (ii) all expenses and fees in connection with
the preparation, delivery and shipping of the Offering Memorandum (including the
exhibits to the Offering Memorandum and any amendments or supplements thereto);
PROVIDED, HOWEVER, that the Placement Agent shall be solely responsible for the
payment of all of the fees and costs of its counsel.
(b) The Company will furnish to the Placement Agent promptly as soon
as the same shall be filed copies of all filings by the Company on Form D for
the Offering.
(c) For three years from the Closing Date, neither the Company nor
any affiliate will utilize the names of Subscribers obtained by the Placement
Agent for the purpose of solicitation, or contact such persons in connection
with any other offering by the Company or an affiliate of the Company or other
security by the Company or an affiliate of the Company, unless such person was
originally introduced to the Placement Agent by the Company or an affiliate of
the Company. Should the names of such persons be utilized contrary to the
foregoing, the Company shall pay to the Placement Agent an amount equal to six
percent (6%) of the amount invested by such persons in such other offering. This
amount shall be due and payable upon the date such person's proceeds are
invested.
(d) The Company agrees that it will furnish or make available to the
Placement Agent or the Placement Agent's counsel any and all documentation
reasonably requested in connection with the Placement Agent's due diligence
efforts regarding information in the Offering Memorandum.
(e) The Company and all of its affiliates will not take any action
in connection with the Offering which would cause the Offering not to comply
with Section 4(2) of the Act and Regulation D.
(f) The Company will not sell Shares to any person if the Company
has reason to believe that material information supplied or representations or
warranties made by that person are not fully accurate and unless immediately
prior to making such sale the Company reasonably believes that such person is an
"accredited investor" within the meaning of Section 501(a) of Regulation D.
(g) The Company shall exercise reasonable care to assure the
Subscribers are not underwriters within the meaning of Section 2(11) of the Act,
shall take all actions required by Rule 502(d) of Regulation D and shall place a
legend on each certificate which is provided to the purchasers stating that the
Shares have not been registered under the Act and, where applicable, state
securities laws, and setting forth or referring to the restrictions on
transferability and sale of the Shares.
(h) The Company shall make available to each offeree and any
individual advising such offeree the opportunity to ask questions and receive
answers concerning the Company and the terms and conditions of the Offering, and
to obtain any additional information, to the extent that such information is in
the possession of the Company or can be acquired by any of it without
unreasonable effort or expense, necessary to verify the accuracy of the
information contained in the Offering Memorandum.
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<PAGE>
(i) The Company will duly and timely file (i) with the Commission
all required Form Ds with respect to the sale of the Shares and (ii) all forms
required to be filed under applicable state securities laws and regulations and
by the regulatory agencies charged with enforcement thereof.
(j) The Company will notify the Placement Agent immediately upon
receipt thereof and confirm the notice in writing of the issuance by the
Commission or any state securities administrator of any order enjoining the sale
of the Shares or of the initiation of any proceeding for that purpose. The
Company will make every reasonable effort to prevent the issuance of any such
order and, if any such order shall be issued, to obtain the lifting of the order
at the earliest possible time.
(k) For a period of two (2) years after the date of this Agreement,
if the Company decides to retain the services of an investment banking firm, the
Company will notify the Placement Agent about any Business Transaction (as
hereinafter defined) and will consider the Placement Agent's proposal to act as
the Company's agent for the Business Transaction. A "BUSINESS TRANSACTION" means
any merger involving the Company or any of its subsidiaries, the acquisition by
the Company or any of its subsidiaries of any entity or the assets thereof and
the acquisition of the Company or any of its subsidiaries by another entity. The
Company agrees to pay the Placement Agent compensation calculated in accordance
with the Lehman formula if the Placement Agent introduces an acquisition or
merger candidate to the Company and the acquisition or merger is consummated.
7. FURTHER AGREEMENTS OF THE PLACEMENT AGENT.
(a) The Placement Agent hereby represents that it is currently, and
will remain throughout the offering of Shares, a member in good standing of the
NASD. The Placement Agent agrees that it will not allow commissions to be paid
to any other broker-dealer, including foreign broker-dealers registered pursuant
to the Exchange Act.
(b) The Placement Agent agrees that it will accept subscriptions
only from investors who have received a copy of the Offering Memorandum, who
have fully completed and executed the appropriate Subscription Documents, and
who the Placement Agent has reasonable grounds to believe, on the basis of
information obtained from the Subscriber and any other information known by the
Placement Agent, that the investor is an "accredited investor" as such term is
defined in Regulation D. The Placement Agent will not give any information or
make any representation in connection with the offering of the Shares other than
those contained in the Offering Memorandum furnished by the Company. The
Placement Agent agrees not to publish, circulate or use any other advertisement
or solicitation material without the prior written approval of the Company or
otherwise conduct the Offering in a manner which would be deemed to be general
advertising or general solicitation or violate any federal or state securities
laws applicable to the Offering.
(c) The Placement Agent agrees that if and when the Company supplies
it with copies of any supplement to the Offering Memorandum, the Placement Agent
will affix such copies of such supplement to copies of the Offering Memorandum
already in the Placement Agent's possession, and that thereafter the Placement
Agent will only distribute Offering Memoranda containing such supplement and
that the Placement Agent will accept subscriptions only from investors who have
received a copy of the Offering Memorandum containing such supplement. The
Placement Agent further agrees to comply with all instructions from the Company
concerning the destruction of out-dated Offering Memoranda and the use of
supplemented or amended Offering Memoranda.
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(d) The Placement Agent agrees to solicit Subscribers only in the
states and other jurisdictions that have been approved in advance by the Company
with any limitations described therein and in the states and jurisdictions in
which the Placement Agent is licensed or qualified to make offers and sales of
the Shares.
(e) The Placement Agent and all of its affiliates will not take any
action in connection with the Offering that would cause the Offering not to
comply with Section 4(2) of the Act or Regulation D.
(f) The Placement Agent will not sell Shares to any Person if the
Placement Agent has reason to believe that material information supplied or
representations or warranties made by that person are not fully accurate and
unless immediately prior to making such sale the Placement Agent reasonably
believes that such Person is an "accredited investor" within the meaning of
Section 501(a) of Regulation D.
(g) The Placement Agent or any person acting on its behalf will not
offer the Shares by means of any form of general solicitation or general
advertising.
8. CONDITIONS TO THE RIGHT OF THE COMPANY TO OBTAIN FUNDS. The right
of the Company to obtain funds from the Escrow Agent on the Closing Date is
subject to the accuracy of and compliance with the representations and
warranties of the Company contained in Section 1 hereof as of the date hereof
and as of the Closing Date, to the accuracy of the statements of the Company
made pursuant to the provisions hereof, and to the following further conditions:
(a) No order enjoining the sale of the Shares or of the initiation
of any proceeding for that purpose will have been issued prior to the Closing
Date and will be in effect at that date, and no proceedings for the issuance of
such order will be pending or threatened at that date.
(b) On the Closing Date, there will have been furnished to the
Placement Agent the opinion of the counsel for the Company, dated as of the
Closing Date, subject to such assumptions as such counsel will deem necessary to
render such opinion, substantially to the effect that:
(i) the Company is a corporation organized under the laws of
the State of Delaware and is validly existing as a corporation under such
laws;
(ii) the sale and issuance of the Shares has been duly
authorized by all necessary corporate action on the part of the Company.
When subscriptions for the Shares have been accepted by the Company and
payment in full has been received, the Shares will be duly authorized,
validly issued, fully paid and nonassessable;
(iii) this Agreement has been duly and validly authorized,
executed and delivered, by and on behalf of the Company and constitutes
the valid and binding agreement, enforceable in accordance with its terms,
of the Company; PROVIDED, HOWEVER, that the opinion as to enforceability
of this Agreement may be subject to bankruptcy, insolvency,
reorganization, moratorium, liquidation, receivership, fraudulent
conveyance, fraudulent transfer or other similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies or
by other equitable principles of general application and PROVIDED FURTHER,
HOWEVER, that such counsel need express no opinion as to the
enforceability of any indemnification and contribution provisions
contained in this Agreement;
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(iv) to the knowledge of such counsel, the consummation of the
transactions contemplated herein do not conflict with or result in a
material breach of any of the terms, provisions or conditions of any
material agreement or instrument to which the Company is a party or by
which the Company may be bound, or violate any order, rule or regulation
applicable to the Company of any court or governmental body or
administrative agency having jurisdiction over the Company;
(v) to the knowledge of such counsel, there is no litigation
or governmental proceeding pending, threatened against or involving the
property or business of the Company, which would materially and adversely
affect the value of the assets or the operation of the business of the
Company; and
(vi) based on the Company's and the Placement Agent's
representations, warranties and covenants set forth in this Agreement, and
the Purchasers' representations, warranties and covenants in the
Subscription Documents, the Shares may be issued without registration
under the Act. In addition, for purposes of rendering the opinions set
forth in this Paragraph (vii), such counsel may assume that (A) all of the
purchasers from the Company of the Shares will be "accredited investors"
within the meaning of Rule 501 of Regulation D, (B) the offering of the
Shares cannot be integrated with any other offering of securities by the
Company, (C) neither the Company, the Placement Agent nor any person
acting on its behalf has offered the Shares by means of any form of
general solicitation or general advertising, (D) the limitations on resale
of the Shares are implemented by the Company as required by Rule 502(d) of
Regulation D, (E) the Company timely files a Form D and amendments thereto
as required by Rule 503 of Regulation D, and (F) the Company is not
disqualified from relying on Rule 506 of Regulation D pursuant to Rule
507(a) of Regulation D.
(c) The representations and warranties of the Company herein will be
true and correct in all material respects as of the Closing Date, as if made as
of the Closing Date, and all agreements herein contained to be performed on the
part of the Company at or prior to the Closing Date will have been so performed.
Upon receipt by the Company of such certificates and documents, the
Company will direct the Escrow Agent in writing to release to the Company the
funds in the Escrow Account.
If any of the conditions specified in this Section 8 will not have been
fulfilled when and as required by this Agreement, this Agreement and all
Placement Agent's obligations hereunder may be canceled at, or at any time prior
to, the Closing Date by Placement Agent. Any such cancellation will be without
liability on the Placement Agent's part. Notice of such cancellation will be
given to the Company at the address specified in Section 12 hereof, in writing,
or by telecopy or telephone confirmed in writing.
9. INDEMNIFICATION.
(a) Subject to the provisions of paragraphs (b) through (e) of this
Section 9: the Company agrees to indemnify and hold harmless Placement Agent and
each person who controls Placement Agent within the meaning of the Act
(collectively, the "PLACEMENT AGENT INDEMNIFIED PARTIES") against any losses,
claims, damages or liabilities, joint or several, to which such Placement Agent
Indemnified Party may become subject under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in the Offering Memorandum, (ii) the omission or alleged
omission to state in the Offering Memorandum a material fact required to be
stated therein or necessary to make the statements therein, in light of the
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circumstances under which they were made, not misleading, or (iii) the Company's
breach of any of the representations and warranties in Section 1 of this
Agreement or failure to comply with any of the provisions of Section 3 or
Section 6 of this Agreement; and will reimburse the Placement Agent Indemnified
Parties for any legal or other expenses reasonably incurred by such Placement
Agent Indemnified Party in connection with investigating or defending any such
claim, liability or action; PROVIDED, HOWEVER, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability (i) arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company by the Placement
Agent specifically for use with reference to the Placement Agent in the
preparation of the Offering Memorandum or (ii) is primarily the result of the
Placement Agent's willful misconduct or gross negligence. This indemnity
agreement will be in addition to any liability which the Company may otherwise
have.
(b) The Company agrees to indemnify and hold harmless the Placement
Agent Indemnified Parties, in the manner and to the extent provided in Paragraph
(a) of this Section 9; PROVIDED, HOWEVER, that no such indemnification by the
Company of the Placement Agent Indemnified Parties will be permitted under this
Agreement against any liability, loss or damage incurred by them in connection
with any claim or settlement alleging federal or state securities law
violations, unless such lawsuits alleging such claims are successfully defended
and a court approves indemnification of litigation costs, unless such lawsuits
are dismissed with prejudice on the merits, or unless such lawsuits are settled
and a court approves the settlement and the indemnification.
(c) The Placement Agent agrees to indemnify and hold harmless the
Company and each person who controls the Company within the meaning of the Act
(collectively, the "COMPANY INDEMNIFIED PARTIES"), against any losses, claims,
damages or liabilities to which such respective Company Indemnified Party may
become subject under the Act or otherwise insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon (i) any untrue statement or alleged untrue statement of a material fact
contained in the Offering Memorandum, (ii) the omission or alleged omission to
state in the Offering Memorandum 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 or (iii) the Placement Agent's breach of any
of the representations and warranties in Section 2 of this Agreement or failure
to comply with any of the provisions of Section 3 or Section 7 of this
Agreement, with respect to clauses (i) or (ii) only, to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and conformity with written
information furnished to the Company by the Placement Agent specifically for use
with reference to Placement Agent in the preparation of the Offering Memorandum;
and will reimburse each such Company Indemnified Party for any legal or other
expenses reasonably incurred by such Company Indemnified Party in connection
with investigating or defending any such loss, claim, damage, liability or
action. This indemnity agreement will be in addition to any liability that
Placement Agent may otherwise have.
(d) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying party
under this Section 9, promptly notify in writing the indemnifying party of the
commencement thereof; and the omission so to promptly notify the indemnifying
party will relieve it from any liability under this Section 9 as to the
particular item for which indemnification is then being sought, but not from any
other liability that it may have to any indemnified party. In no event shall the
indemnifying party be liable for the fees and expenses of more than one counsel
for all indemnified parties in connection with any one action or separate but
substantially similar or related actions arising out of the same general
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<PAGE>
allegations or circumstances (other than such local counsel as may be employed
by counsel to the indemnified parties to render legal advice with respect to the
laws of, or legal services in, states or jurisdictions other than those states
and jurisdictions in which counsel to the indemnified parties is admitted to
practice law.) In case any such action is brought against any indemnified party,
and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and, to the extent
that it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, and upon such assumption the indemnifying party
will not be liable to such indemnified party under this Section 9 for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation. Any such
indemnifying party will not be liable to any such indemnified party on account
of any settlement of any claim or action effected without the consent of such
indemnifying party.
10. EFFECTIVE DATE. Provided that at least one counterpart of this
Agreement will then have been executed and delivered, this Agreement will become
effective upon delivery by the Company of telecopies, correspondence or other
notification to the Placement Agent indicating the Offering Memorandum is
released for distribution.
11. SURVIVAL OF INDEMNITIES, WARRANTIES AND REPRESENTATIONS. The
respective indemnity agreements of the Company and Placement Agent contained in
Section 9 hereof, and the representations and warranties of the Company and
Placement Agent set forth herein, will remain operative and in full force and
effect, regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of the Company or Placement Agent, or any
controlling person referred to in Section 9, and will survive the delivery of
and payment for the Shares, and any successor to the Placement Agent or the
Company or of any such controlling person or any legal representative of any
such controlling person, as the case may be, will be entitled to the benefit of
the respective indemnity agreements.
12. NOTICES. Except as is otherwise provided in this Agreement, (a)
whenever notice is required by the Provisions of this Agreement or otherwise to
be given to the Company, such notice will be in writing addressed to the Company
at 20250 Century Blvd., Suite 300, Germantown, Maryland 20874, attention:
Charles Griffis; and (b) whenever notice is required by the provisions of this
Agreement or otherwise to be given to Placement Agent, such notice will be in
writing addressed to the Placement Agent at 810 W. Washington Blvd. Chicago,
Illinois 60607, Attention: Michael Grady. Any notice referred to herein may be
given in writing or by telecopy or telephone and if by telecopy or telephone
will be immediately confirmed in writing. Notice (unless actual) will be
effective upon mailing or telecopy transmission, as the case may be.
13. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement is made
solely for the benefit of Placement Agent, the Company and the controlling
persons referred to in Section 9 hereof, and their respective successors and
assigns, and no other person will acquire or have any right by virtue or this
Agreement, and the term "successors and assigns," as used in this Agreement,
will not include any Purchaser.
14. GOVERNING LAW. This Agreement is to be governed by and construed
in accordance with the laws of the State of New York, without regard to
principles of conflicts of law.
15. FURTHER CONDITIONS. Until the Closing Date, this Agreement may
be terminated by the Placement Agent at its option by giving notice to the
Company, if (a) the Company shall have become a party to any litigation which,
in the opinion of counsel to the Placement Agent, could have a material adverse
effect on the value of the assets or operation of the business of the Company,
(b) there shall have been, since the respective dates as of which information is
16
<PAGE>
in the Offering Memorandum, any material adverse change in the condition,
financial or otherwise, of the Company, which change in the Placement Agent's
reasonable judgment shall render it inadvisable to proceed with the delivery of
the Shares, (c) there shall have been any important change in market levels,
major catastrophe, substantial change in national, international or world
affairs, national calamity, postal strike, act of God or other event or
occurrence which, in the Placement Agent's reasonable judgment, will materially
disrupt the financial markets of the United States, or (d) a general banking
moratorium shall have been declared by federal or state authorities.
16. COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall constitute
one and the same Agreement.
17. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
of the Placement Agent and the Company with respect to the subject matter hereof
and terminates and supersedes all prior agreements and understandings between or
among the Placement Agent and the Company with respect to the subject matter
hereof.
18. HEADINGS. The descriptive headings in this Agreement have been
inserted for convenience only and do not constitute a part of this Agreement.
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<PAGE>
IN WITNESS whereof, the parties have signed this Agreement as of the 9th
day of October, 1998.
V-ONE CORPORATION
By: /s/ Charles B. Griffis
-------------------------------------------
Charles B. Griffis, Chief Financial Officer
LASALLE ST. SECURITIES, INC.
By: /s/ Michael Grady
-----------------------------
Michael Grady, Vice President
V-ONE CORPORATION
SHARES OF COMMON STOCK
AMENDMENT NO. 1 TO PLACEMENT AGENT AGREEMENT
This Amendment No. 1 dated November 9, 1998 to the Placement Agent
Agreement dated October 9, 1998, (the "AGREEMENT") by and between V-ONE
Corporation, a Delaware corporation (the "COMPANY"), and LaSalle St. Securities,
Inc., an Illinois corporation (the "PLACEMENT AGENT").
The Company and the Placement Agent hereby agree to amend the Agreement as
set forth below:
1. The second paragraph on the page 1 of the Agreement is hereby amended
and restated in its entirety as follows:
The Company proposes to offer and sell solely to "accredited investors" as
such term is defined in Regulation D ("REGULATION D") promulgated under the
Securities Act of 1933, as amended (the "ACT"), upon the terms and subject to
the conditions set forth in the accompanying form of subscription agreement (the
"SUBSCRIPTION AGREEMENT") attached as an exhibit to the Offering Memorandum (as
defined below), 1,800,000 shares of the Company's common stock, par value $0.001
per share ("COMMON STOCK"), at a price of $2.00 per share (the "OFFERING
PRICE"), representing gross sale proceeds of $3,600,000. The Company may sell an
additional 922,070 shares of Common Stock (an additional $1,844,140 in gross
sale proceeds) on the same terms described above (the "OVER SUBSCRIPTION
OPTION"). (The 1,800,000 shares and the 922,070 shares are hereinafter referred
to as the "SHARES"). An investor must purchase a minimum of 50,000 Shares
($100,000); however, this requirement may be waived by the Company in its sole
discretion. All Shares are offered subject to the right of the Company to reject
any subscription for Shares in whole or in part for any reason whatsoever or to
sell to any prospective investor less than the number of Shares subscribed for
by such prospective investor and subject to certain other conditions. This
transaction is referred to herein as the "OFFERING."
2. The second to the last sentence of Section 4 on page 9 is hereby
revised as follows:
The Offering will expire on the earlier of (a) the sale of 2,722,070
Shares ($5,444,140 in gross sale proceeds) or (b) November 16, 1998, unless the
Offering is extended to November 20, 1998, upon agreement of the Company and the
Placement Agent, without notice to the prospective investors.
3. The first sentence of Section 5 (a) on page 10 is hereby revised
as follows:
Upon the Closing, the Company will issue to the Placement Agent or its
designees at a per Share exercise price of $2.125 (the "WARRANT PRICE") a
warrant ("AGENT WARRANT") entitling the Agent to purchase an aggregate of 50,000
shares of Common Stock.
<PAGE>
IN WITNESS whereof, the parties have signed this Amendment No. 1 to the
Placement Agent Agreement as of the day and year first above written.
V-ONE CORPORATION
By: /s/ Charles B. Griffis
------------------------------------
Charles B. Griffis, Chief Financial
Officer
LASALLE ST. SECURITIES, INC.
By: /s/ Michael Grady
-----------------------------
Michael Grady, Vice President
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "AGREEMENT") is made and entered into as of
this 9th day of October, 1998, by and among LaSalle National Bank (the "ESCROW
AGENT"), V-ONE Corporation (the "COMPANY") and LaSalle St. Securities, Inc. (the
"SELLING AGENT").
A. The Company proposes to offer (the "OFFERING") for sale solely to
accredited investors (individually a "SUBSCRIBER" and collectively the
"SUBSCRIBERS") through the Selling Agent such number of shares of the Company's
common stock, $0.001 par value per share, ("SHARES") so that the gross sale
proceeds based on the Offering Price per share (as hereinafter defined) is at
least equal to $3,600,000 ("MINIMUM PROCEEDS"); provided, however, that the
Company may raise up to an additional $2,400,000 in gross sale proceeds. The
"OFFERING PRICE" shall be equal to the prevailing closing bid price for the
Shares on the Nasdaq National Market on the date of closing ("CLOSING DATE") of
such Offering, but in no event less than $1.625 per share. The Shares shall be
sold in reliance upon Regulation D promulgated under the Securities Act of 1933,
as amended (the "ACT"), and Section 4(2) of the Act, and as permitted in the
jurisdictions in which the Shares are to be offered;
B. The Company and the Selling Agent desire to establish an escrow account
in which funds received from Subscribers will be deposited; and
C. LaSalle National Bank agrees to serve as Escrow Agent in accordance
with the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the foregoing recitals, the mutual
promises contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. ESTABLISHMENT OF ESCROW ACCOUNT. On or prior to the date of the
commencement of the Offering, the parties shall establish an interest-bearing
escrow account with the Escrow Agent, which escrow account shall be entitled
"V-ONE Corporation Escrow Account" (the "ESCROW ACCOUNT"). During the Escrow
Period (as defined in Section 2 herein) the Selling Agent will instruct
Subscribers to make checks for subscriptions for Shares payable to the order of
the Escrow Agent as follows: "LaSalle National Bank, as Escrow Agent for V-ONE
Corporation." Any checks received that are made payable to a party other than
the Escrow Agent shall be returned by the Selling Agent to the Subscriber. All
wire transfers of subscriptions for Shares shall also be sent to the Escrow
Account at the Escrow Agent.
2. ESCROW PERIOD. The "ESCROW PERIOD" shall begin with the
commencement of the Offering and shall terminate upon the earlier to occur of
the following dates:
2.1. October 26, 1998 (I.E., seventeen (17) days from the
date of the Confidential Private Placement Memorandum relating to the Offering),
subject to extension(s) by the mutual agreement of the Company and the Selling
<PAGE>
Agent until November 20, 1998 without notice to investors (the "EXPIRATION
DATE"), or
2.2. The date upon which determination is made by the Company
to terminate the Offering prior to the Expiration Date.
The Company is aware and understands that, during the Escrow Period,
it is not entitled to any funds deposited in escrow and no amounts deposited in
the Escrow Account shall become the property of the Company or any other entity,
or be subject to the debts of the Company or any other entity, until the closing
of the Offering.
3. DEPOSITS INTO THE ESCROW ACCOUNT. The Selling Agent agrees that
it shall deliver all monies received from Subscribers for the payment of the
Shares (the "ESCROW FUNDS") to the Escrow Agent for deposit in the Escrow
Account, by noon of the next business day following the receipt, together with a
copy of the subscription documents (the "SUBSCRIPTION DOCUMENTS"), which shall
set forth, among other things, the Subscriber's name and address, the aggregate
subscription amount and whether the consideration received was in the form of a
check, draft, or money order. At the same time, the Selling Agent shall deliver
the original Subscription Documents to the Company. The Selling Agent shall
deliver the Escrow Documents to the following branch office of LaSalle National
Bank:
LaSalle National Bank
135 South LaSalle Street
Chicago, Illinois 60603
Attn: Corporate Trust, Pamela Ristau
Each business day, the Escrow Agent shall notify the Company which
Subscription Documents it has received, the subscription amount associated with
each such Subscription Documents and whether such amounts constitute "collected
funds" (as hereinafter defined).
4. DISBURSEMENTS FROM THE ESCROW ACCOUNT.
4.1. On the Closing Date, the amount of Escrow Funds in the
Escrow Account on such date shall be disbursed to the Company, along with
interest thereon. In no event will the Escrow Funds be released to the Company
unless an amount equal to the Minimum Proceeds is received by the Escrow Agent
in collected funds. For purposes of this Agreement, the term "collected funds"
shall mean all funds received by the Escrow Agent that have cleared normal
banking channels and are in the form of cash. The Selling Agent agrees to
furnish to the Escrow Agent all appropriate U.S. tax forms from each Subscriber
in order to comply with U.S. tax regulations.
4.2. In the event the Escrow Agent does not receive the
Minimum Proceeds on or before the Expiration Date or the Offering is terminated
pursuant to Section 2.2 of this Agreement, the Company shall notify the Escrow
Agent in writing of termination of the Offering, and shall instruct the Escrow
Agent to return, within five (5) business days following receipt of such
2
<PAGE>
notification, to each Subscriber the amount received from the Subscriber,
without interest thereon and without charge or deduction, and the Escrow Agent
shall notify the Company and the Selling Agent of its distribution of the funds.
The funds returned to each Subscriber shall be free and clear of any and all
claims of the Escrow Agent, the Company or any of its creditors.
5. COLLECTION PROCEDURE.
5.1. The Escrow Agent is hereby authorized to forward each
Subscriber's check for collection and, upon collection of the proceeds of each
check, deposit the collected proceeds in the Escrow Account. As an alternative,
the Escrow Agent may telephone the bank on which the check is drawn to confirm
that the check has been paid. Any check returned unpaid to the Escrow Agent
shall be returned to the Selling Agent. In such cases, the Escrow Agent will
promptly notify the Company of such return.
5.2. If the Company rejects any subscription, in whole or in
part, for which the Escrow Agent has already collected funds, the Escrow Agent
shall promptly issue a refund check for the amount rejected by the Company to
the rejected Subscriber without interest thereon and without charge or
deduction. If the Company rejects any subscription, in whole or in part, for
which the Escrow Agent has not yet collected funds, the Escrow Agent shall
promptly issue a check in the amount of the Subscriber's original check (or in
the amount which was rejected by the Company) to the rejected Subscriber after
the Escrow Agent has cleared such funds without interest thereon and without
charge or deduction. If the Escrow Agent has not yet submitted a rejected
Subscriber's check for collection, the Escrow Agent shall promptly remit the
Subscriber's check directly to the Subscriber, unless the Company has only
rejected the subscription in part, in which circumstance the Escrow Agent shall
promptly issue a check for the amount rejected without interest thereon and
without charge or deduction to the rejected Subscriber after the Escrow Agent
has cleared such funds.
5.3. All returns and deliveries to a Subscriber hereunder
shall be mailed by regular first class mail to the residential or business
address appearing on the Subscriber's Subscription Documents. Any payment to a
Subscriber required by this Section 5 may be made by a check or draft drawn on
the Escrow Account.
6. INVESTMENT OF ESCROW FUNDS. The Escrow Agent may invest the
Escrow Funds only in such accounts or investments as the Company may specify by
written notice. The Company may only specify investment in (1) bank accounts,
(2) bank money-market accounts, (3) short-term certificates of deposit issued by
a bank, (4) short-term securities issued or guaranteed by the U.S. Government,
(5) banker acceptances, (6) commercial paper, (7) municipal securities or (8)
money market funds authorized to invest only in short-term securities such as
commercial paper, certificates of deposit, fully-collateralized repurchase
agreements and/or U.S. government obligations. The Escrow Agent may use its own
Bond Department in executing purchases and sales of investments.
3
<PAGE>
7. COMPENSATION. The Escrow Agent shall provide its escrow services
hereunder in consideration of the amount of $5,000, which amount shall be paid
upon the opening of the Escrow Account.
8. EXCULPATION AND INDEMNIFICATION OF ESCROW AGENT.
8.1. The Escrow Agent shall have no duties or
responsibilities other than those expressly set forth herein. The Escrow Agent
shall have no duty to enforce any obligation of any person to make any payment
or delivery, to direct or cause any payment or delivery to be made, or to
enforce any obligation of any person to perform any act. The Escrow Agent shall
be under no liability to anyone by reason of any failure on the part of any
party hereto (other than itself) or any other person, or any maker, guarantor,
endorser or other signatory of any document to perform such person's obligations
under any such document. Except as provided in this Agreement and except for
instructions given to the Escrow Agent relating to the Escrow Account as
provided for in this Agreement or accepted by the Escrow Agent, the Escrow Agent
shall not be obligated to recognize any agreement between any or all of the
persons referred to herein, notwithstanding that references thereto may be made
herein and the Escrow Agent has knowledge thereof.
8.2. The Escrow Agent shall not be liable for any action
taken or omitted by it, or any action suffered by it to be taken or omitted, in
good faith and in the exercise of its own best judgment, and may rely
conclusively and shall be protected in acting upon, any order, notice, demand,
certificate, opinion or advice of counsel (including counsel chosen by the
Escrow Agent), statement, instrument, report or other paper or document (not
only as to its due execution and the validity and effectiveness of its
provisions, but also as to the truth and acceptability of any information
therein contained) which is believed by the Escrow Agent to be genuine and to be
signed or presented by the proper person or persons. Except as provided by
Section 2 of this Agreement, the Escrow Agent shall not be bound by any notice
or demand, or any waiver, modification, termination or rescission of this Escrow
Agreement or any of the terms hereof, unless evidenced by a writing delivered to
the Escrow Agent signed by the proper party or parties and, if the duties or
rights of the Escrow Agent are affected, unless it shall give its prior written
consent thereto.
8.3. The Escrow Agent shall not be responsible for the
sufficiency or accuracy of the form of, or the execution, validity, value,
genuineness of, any document or property received, held or delivered by it
hereunder, or of any signature or endorsement thereon, or for any lack of
endorsement thereon, or for any description therein, nor shall the Escrow Agent
be responsible or liable in any respect on account of the identity, authority or
rights of the persons executing or delivering or purporting to execute or
deliver any property or document including this Escrow Agreement. The Escrow
Agent shall have no responsibility with respect to the use or application of any
funds or other property paid or delivered by the Escrow Agent pursuant to the
provisions hereof, provided, however, that nothing herein shall relieve the
Escrow Agent from liability for gross negligence or willful misconduct in
connection with the use or application of any Escrow Funds. The Escrow Agent
shall not be liable for any loss which may be incurred by reason of any
4
<PAGE>
investment of any monies which it holds hereunder if made in accordance with
Section 6 herein.
8.4. The Escrow Agent shall have the right to assume, in the
absence of written notice to the contrary from the proper person or persons,
that a fact or any event, by reason of which an action would or might be taken
by the Escrow Agent, does not exist or has not occurred, without incurring
liability for any action taken or omitted, in good faith and in the exercise of
its own best judgment, in reliance upon such assumption.
8.5. To the extent that the Escrow Agent becomes liable for
the payment of taxes, including withholding taxes, in respect of income derived
from the investment of funds held hereunder or any payment made hereunder, the
Escrow Agent may pay such taxes. The Escrow Agent shall be indemnified and held
harmless by the other parties hereto against any liability for taxes and for any
penalties or interest in respect of taxes, on such investment income or payments
in the manner provided in Section 8.6.
8.6. The Escrow Agent shall be indemnified and held harmless,
jointly and severally by the other parties hereto, from and against any
expenses, including reasonable counsel fees and disbursements, or loss suffered
by the Escrow Agent in connection with any action, suit or other proceeding
involving any claim, or in connection with any claim or demand, which, in any
way, directly or indirectly arises out of or relates to this Agreement, the
services of the Escrow Agent hereunder, the monies or other property held by it
hereunder or any income earned from investment of such monies (except from
liability for its own gross negligence or willful misconduct). Promptly after
the receipt by the Escrow Agent of notice of any demand or claim or the
commencement of any action, suit or proceeding, the Escrow Agent shall, if a
claim in respect thereof is to be made against any of the other parties hereto,
notify such other parties thereof in writing, but unless such notice was not
made promptly by the Escrow Agent the failure by the Escrow Agent to give such
notice shall not relieve any party from any liability which such party may have
to the Escrow Agent hereunder.
For the purposes hereof, the term "expense and loss" shall include
all amounts paid or payable to satisfy any claim, demand or liability, or in
settlement of any claim, demand, action, suit or proceeding settled with the
express written consent of the Escrow Agent and the indemnifying party, and all
costs and expenses, including, but not limited to, reasonable counsel fees and
disbursements, paid or incurred in investigation or defending against any such
claim, demand, action, suit or proceeding. Notwithstanding anything herein to
the contrary, the other parties shall not be required to indemnify or hold
harmless the Escrow Agent for any liabilities, costs or expenses incurred in
connection with or as a result of the Escrow Agent's gross negligence or willful
misconduct related to any action required of it herein.
8.7. If any dispute or difference arises between the Company
and any Subscriber or any other third person, or if any conflicting demand shall
be made upon the Escrow Agent, the Escrow Agent shall not be required to
determine the same or take any action in the premises; but the Escrow Agent may
await settlement of the controversy by final appropriate legal proceedings, or
the Escrow Agent may file suit in interpleader in the courts of the State of
5
<PAGE>
Illinois, for the purpose of having the respective rights of the parties
adjudicated and may deposit with the court any or all monies held hereunder.
Upon institution of such interpleader suit or other action, depositing the
Escrow Funds with the court and giving notice of such action to the parties
involved either by personal service, or in accordance with the order of the
court, the Escrow Agent shall be fully released and discharged from all further
obligations hereunder with respect to the Escrow Funds so deposited.
From time to time, on and after the date hereof, the other parties
hereto shall deliver, or cause to be delivered, such further documents and
instruments and shall do any further acts, or cause such further acts to be done
as the Escrow Agent or the Company shall reasonably request to carry out more
effectively the provisions and purposes of this Agreement, to evidence company
compliance herewith or to assure itself that it is protected in acting
hereunder.
9. TERMINATION OF AGREEMENT AND RESIGNATION OF ESCROW AGENT.
9.1. This Escrow Agreement shall terminate at the end of the
Escrow Period, as described in Section 2 herein; provided, however, that the
rights and obligations of the parties hereto shall survive the termination
hereof.
9.2. The Escrow Agent may resign at any time and be
discharged from its duties as escrow agent hereunder by giving the Company at
least fifteen (15) days notice hereof. As soon as practicable after its
resignation, the Escrow Agent shall turn over to a successor escrow agent
appointed by the other parties hereto all monies and property held hereunder
upon presentation of the document appointing the new escrow agent and its
acceptance thereof. If no new escrow agent is so appointed within a thirty-day
period following such notice of resignation, the Escrow Agent may deposit the
aforesaid monies and property with any court in the State of Illinois that it
deems appropriate.
10. CONSENTS TO SERVICE OF PROCESS. Each of the parties hereto
hereby irrevocably consents to the jurisdiction of the courts of the State of
Illinois and of any federal court located in such state in connection with any
action, suit or other proceeding arising out of or relating to this Agreement or
any action taken or omitted hereunder, and waives personal service of any
summons, complaint or other process and agrees that the service thereof may be
made by certified or registered mail directed to such person at such person's
address for purposes of notices hereunder. Should the person so served fail to
appear or answer within the time prescribed by law, that person shall be deemed
in default and judgment may be entered by the complaining party against that
person for the amount as demanded in any summons, complaint or other process so
served.
11. NOTICES. All notices required by this Agreement shall be in
writing and shall be deemed to have been duly given if sent by first-class mail,
overnight courier service or by hand delivery (with signed return receipt) to
the respective addresses as follows:
6
<PAGE>
(a) To the Company:
20250 Century Boulevard.
Suite 300
Germantown, Maryland 20874
Attention: Charles Griffis
Telephone: (301) 515-5200
Facsimile: (301) 515-5280
(b) To the Escrow Agent:
LaSalle National Bank
135 South LaSalle Street
Chicago, Illinois 60603
Attention: Pamela S. Ristau
Telephone: 312-904-2554
Facsimile: 312-904-2236
(c) To the Selling Agent:
LaSalle St. Securities, Inc.
810 West Washington Street
Chicago, Illinois 60607
Attention: Michael Grady
Telephone: 312-705-3006
Facsimile: 312-705-3000
12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement
to be duly executed by their authorized representatives as of the date first
written above.
V-ONE CORPORATION
By: /s/ Charles B. Griffis
--------------------------
Charles B. Griffis
Chief Financial Officer
LASALLE NATIONAL BANK
By: /s/ Pamela S. Ristau
--------------------------
Name: Pamela S. Ristau
--------------------------
Title: Trust Officer &
Assistant Secretary
--------------------------
LASALLE ST. SECURITIES, INC.
By: /s/ Michael Grady
--------------------------
Michael Grady
Vice-President
8
AMENDMENT NO. 1 TO ESCROW AGREEMENT
This Amendment No. 1 dated November 9, 1998 to the Escrow Agreement dated
October 9, 1998, (the "AGREEMENT") by and among LaSalle National Bank (the
"ESCROW AGENT"), V-ONE Corporation (the "COMPANY") and LaSalle St.
Securities, Inc. (the "SELLING AGENT").
The Escrow Agent and the Company and the Selling Agent hereby agree to
amend the Agreement as set forth below:
1. Paragraph A on page 1 of the Agreement is hereby revised in its
entirety as follows:
A. The Company proposes to offer (the "OFFERING") for sale solely to
accredited investors (individually a "SUBSCRIBER" and collectively the
"SUBSCRIBERS") through the Selling Agent 1,800,000 shares of the Company's
common stock, $0.001 par value per share, at a price of $2.00 per share
(the "OFFERING PRICE") representing $3,600,000 in gross sale proceeds
("MINIMUM PROCEEDS"). The Offering will not close unless $3,600,000 in
gross sale proceeds have been received and accepted by the Company. The
Company may sell an additional 922,070 shares (an additional $1,844,140 in
gross sale proceeds) on the same terms described above ("OVER SUBSCRIPTION
OPTION"). (The 1,800,000 shares and the 922,070 shares are hereinafter
referred to as the "SHARES"). The Shares shall be sold in reliance upon
Regulation D promulgated under the Securities Act of 1933, as amended (the
"ACT"), and Section 4(2) of the Act, and as permitted in the jurisdictions
in which the Shares are to be offered.
IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to be
duly executed by their authorized representatives as of the date first written
above.
V-ONE CORPORATION
By: /s/ Charles B. Griffis
-----------------------
Charles B. Griffis
Chief Financial Officer
LASALLE NATIONAL BANK
By: /s/ Pamela S. Ristau
-----------------------
Name: Pamela S. Ristau
-----------------------
Title: Trust Officer &
Assistant Secretary
-----------------------
LASALLE ST. SECURITIES, INC.
By: /s/ Michael Grady
-----------------------
Michael Grady
Vice-President
V-ONE CORPORATION
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$3,600,000 in gross sale proceeds
as described in the
Confidential Private Placement Memorandum
dated October 9, 1998
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SUBSCRIPTION DOCUMENTS
-----------------
The completed documents must be returned to LaSalle St. Securities,
Inc. (the "PLACEMENT AGENT") at the following address:
LaSalle St. Securities, Inc.
810 W. Washington Blvd
Chicago, Illinois 60607
Attention: Michael Grady
This Offering is conditioned upon the receipt of subscriptions for at
least $3,600,000 in gross sale proceeds for shares of Common Stock, $0.001 par
value per share (the "COMMON STOCK"), of V-ONE Corporation, a Delaware
corporation (the "COMPANY") at a purchase price equal to the prevailing closing
bid price of the Common Stock on the Nasdaq National Market the day of the
closing of the placement with a price not to be less and $1.625 per share (the
"PURCHASE PRICE"), and the receipt of the aggregate Purchase Price therefor on
or before the Expiration Date of the Offering (as defined below). The Company
will hold a Closing of the Offering (the "CLOSING") upon receipt and acceptance
by the Company of subscriptions for at least $3,600,000 in gross sale proceeds.
Pending the Closing, each prospective investor's payment accompanying the
Subscription Documents will be deposited in a segregated escrow account with
LaSalle National Bank (the "ESCROW AGENT"). The Offering is expected to expire
on October 26, 1998 (the "EXPIRATION DATE") (i.e., seventeen (17) days from the
date of the Company's October 9, 1998, Confidential Private Placement Memorandum
(the "MEMORANDUM"), which Expiration Date may be extended by the mutual
agreement of the Company and the Placement Agent (as defined below) until
November 20, 1998 without notice to investors. The Company has the right, in its
sole discretion, to accept or reject any subscription in whole or in part.
Purchase price payments must be delivered to LaSalle National Bank, 135 South
LaSalle Street, Chicago, Illinois. If subscriptions for at least $3,600,000 in
gross sale proceeds have not been received and accepted by the Company, and the
aggregate subscription amount therefor has not been received, on or before the
Expiration Date, the Offering will be terminated and all funds will be returned
promptly to subscribers without any interest thereon, and without charge or
deduction.
If a prospective investor has relied upon a purchaser representative in
connection with evaluating the purchase of Common Stock, such prospective
investor must have the purchaser representative complete a Purchaser
Representative Questionnaire, which is available upon request from the Company.
No person is authorized to receive the Subscription Documents unless
preceded or accompanied by a copy of the Memorandum, as may be amended or
supplemented from time to time and which Memorandum amends and restates any
prior confidential private placement memorandum relating to the shares of Common
Stock covered by the Offering. Reproduction or circulation of the Subscription
Documents, in whole or in part, is prohibited.
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THE SECURITIES ARE BEING OFFERED FOR SALE ONLY TO "ACCREDITED INVESTORS"
AS THAT TERM IS DEFINED IN RULE 501 UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. IN ORDER FOR THE COMPANY TO MAKE A DETERMINATION AS TO AN INVESTOR'S
STATUS AS AN ACCREDITED INVESTOR, EACH INVESTOR IS REQUIRED TO MAKE CERTAIN
REPRESENTATIONS AND WARRANTIES AND TO COMPLETE CERTAIN INFORMATION ALL OF WHICH
IS CONTAINED IN THE PROSPECTIVE INVESTOR QUESTIONNAIRE.
BY EXECUTING THE SIGNATURE PAGE INCLUDED HEREIN, EACH SUBSCRIBER
ACKNOWLEDGES AND AGREES AS FOLLOWS:
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE ENTITY ISSUING THE SECURITIES AND THE TERMS OF THE OFFERING,
INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN
RECOMMENDED OR APPROVED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR
REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED
THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT, THE SUBSCRIPTION
DOCUMENTS, OR THE CONFIDENTIAL OFFERING MEMORANDUM AND ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS
AGREE THEY ARE ACQUIRING THE SHARES FOR INVESTMENT AND NOT WITH A VIEW TO RESALE
OR DISTRIBUTION. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR
THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME, THE
SHARES ARE SPECULATIVE INVESTMENTS WHICH INVOLVE A HIGH DEGREE OF RISK OF LOSS
BY INVESTORS OF THEIR ENTIRE INVESTMENT. INVESTORS AGREE THEY HAVE NOT BEEN
INDUCED TO INVEST BY ANY FORM OF GENERAL SOLICITATION OF GENERAL ADVERTISING.
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SUBSCRIPTION AGREEMENT
V-ONE Corporation
20250 Century Boulevard - Suite 300
Germantown, Maryland 20874
Gentlemen:
1. PURCHASE AND SALE. V-ONE Corporation, a Delaware corporation (the
"COMPANY"), has offered for sale, and the undersigned purchaser (the
"PURCHASER") hereby tenders this subscription and applies for the purchase of
such number of shares ("SHARES") of common stock, $0.001 par value per share
(the "COMMON STOCK") as can be purchased with the undersigned's subscription
amount of $______ at the prevailing closing bid price for the Shares on the
Nasdaq National Market on the day of the Closing of this placement (as defined
below), but in no event less than $1.625 per Share (the "OFFERING PRICE"). The
Offering is expected to expire on October 26, 1998 (seventeen (17) days from the
date of the Memorandum (as previously defined)), subject to extension(s) by the
mutual agreement of the Company and LaSalle St. Securities, Inc. (the "PLACEMENT
AGENT") until November 20, 1998 without notice to investors (the "EXPIRATION
DATE"). The Offering is conditioned upon the Company's receipt and acceptance of
subscriptions for a minimum of $3,600,000 in gross sale proceeds and the
Company's receipt of such amount by the Expiration Date. The Company has
reserved the right to raise an additional $2,400,000 in gross sale proceeds on
the same terms set forth above in the event this Offering is oversubscribed (the
"OVER SUBSCRIPTION OPTION"). The Purchaser must subscribe for a minimum of
$100,000 of Shares, which requirement may be waived in the Company's sole
discretion. Together with this Subscription Agreement, the Purchaser is
delivering to the Company the full subscription amount for the Shares (the
"PURCHASE PRICE") subscribed for. This subscription may be rejected by the
Company in its sole discretion in whole or in part. THE SIGNATURE OF THE
UNDERSIGNED ON THE SIGNATURE PAGE CONSTITUTES THE EXECUTION OF THIS SUBSCRIPTION
AGREEMENT.
2. AMOUNT AND METHOD OF PAYMENT. Payment of the Purchase Price
required to purchase the Shares subscribed for hereunder is being made by check
payable to "LaSalle National Bank as Escrow Agent for V-ONE Corporation" or wire
transfer in the amount of the Purchase Price for the undersigned's subscription
to such account at the Escrow Agent (as previously defined), which represents
payment in full for the subscribed Shares. If payment is to be made by wire
transfer, the Purchaser shall contact the Placement Agent to obtain appropriate
wire transfer instructions. If a subscription is rejected in whole or in part or
if the Offering is terminated for any reason, the Purchaser's subscription shall
be void and all funds received from the Purchaser shall be returned as soon as
practicable to the Purchaser without any interest thereon, and without charge or
deduction.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. In order to induce
the Company to accept this subscription, the Purchaser hereby represents and
warrants to, and covenants with, the Company as follows:
(a) (i) The undersigned understands that the Shares have not
been registered under the Securities Act of 1933, as amended (the "ACT")
or the securities laws of any state, by reason of their contemplated
issuance in transactions exempt from the prospectus and delivery
requirements of the Act pursuant to Section 4(2) thereof, and that the
reliance on such exemption from registration is predicated in part on
these representations and warranties of the Purchaser. The Purchaser
acknowledges that pursuant to Section 6(b) hereof a restrictive legend
consistent with the foregoing has been or will be placed on the
certificates representing the Shares. The Purchaser understands that
neither the Securities and Exchange Commission ("SEC") nor any state
securities commission has approved the Shares or passed upon or endorsed
the merits of the investment or reviewed or confirmed the accuracy or
determined the adequacy of any information furnished to the Purchaser in
connection with the Offering.
(ii) The Purchaser is acquiring the Shares solely for
the account of the Purchaser, for investment purposes only, and not with a
view toward the resale or distribution thereof. The Purchaser further
agrees not to transfer the Shares in violation of the Act or any
applicable state securities law, and no one other than the Purchaser has
any beneficial interest in the Shares;
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(iii) The Shares are and will be "restricted
securities," as said term is defined in Rule 144 promulgated under the
Act;
(iv) The Purchaser agrees that it will not sell or
otherwise dispose of any of the Shares unless such sale or other
disposition (x) has been registered under the Act or, in the opinion of
counsel, is exempt from registration under the Act and (y) has been
registered or qualified or, in the opinion of such counsel, is exempt from
registration or qualification under applicable state securities laws. The
Purchaser may not sell, transfer, or otherwise dispose of the Shares
except in compliance with the applicable rules of the SEC;
(v) The Purchaser is an "accredited investor," as such
term is defined in Rule 501(a) of Regulation D promulgated under the Act;
and
(vi) The Purchaser is not an officer, director or
"affiliate" (as that term is defined in Rule 405 promulgated under the
Act) of the Company.
(b) (i) The Purchaser has received and carefully reviewed the
Company's Confidential Offering Memorandum dated as of October 9, 1998, as
may be amended or supplemented from time to time (the "MEMORANDUM") which
Memorandum amends and restates any prior confidential private placement
memorandum relating to the Shares covered by this Offering;
(ii) The Purchaser has had a reasonable opportunity to
ask questions of and receive answers from the Company concerning the
Company and the Offering and to verify the accuracy of any representation
or information set forth in the Memorandum, and all such questions, if
any, have been answered to the full satisfaction of the Purchaser;
(iii) The Purchaser has received from the Company, and
has reviewed, such information which the Purchaser considers necessary or
appropriate to evaluate the risks and merits of an investment in the
Shares, including without limitation, the Memorandum. The Purchaser
acknowledges that the information set forth under the heading of "Risk
Factors" in the Memorandum is specifically incorporated herein by
reference and forms an integral part of this Subscription Agreement;
(iv) The Purchaser has such knowledge and expertise in
financial and business matters that the Purchaser is capable of evaluating
the merits and risks involved in an investment in the Shares and
acknowledges that an investment in the Shares entails a number of very
significant risks and funds should only be invested if the Purchaser is
able to withstand the total loss of his investment;
(v) Except as set forth in this Subscription Agreement,
no representations or warranties have been made to the Purchaser by the
Company or any agent, employee or affiliate of the Company. The Purchaser
has relied solely on the representations, warranties, covenants and
agreements of the Company in this Subscription Agreement and on the
Purchaser's examination and independent investigation in making its
decision to acquire the Shares, including review of the Memorandum and the
Company's current SEC filings;
(vi) The Purchaser understands that the Shares are being
offered and sold expressly conditioned upon the satisfaction of specific
exemptions from the registration requirements of federal and state
securities laws and that the Company is relying upon the truth and
accuracy of the representations, warranties, agreements, acknowledgments
and understandings of the Purchaser set forth herein and in the related
investor questionnaire in order to determine the applicability of such
exemptions and the suitability of the Purchaser to acquire the Shares. The
Purchaser acknowledges that it is solely the Purchaser's responsibility to
satisfy itself as to the full observance by this Offering and the sale of
the Shares to Purchaser of the laws of any jurisdiction outside of the
United States and Purchaser has done so and that his or its state or
country of residence is set forth in such investor questionnaire;
(vii) If an individual, the Purchaser is over 21 years
old and is legally competent to execute this Subscription Agreement; if an
entity, the Purchaser is duly authorized to invest in the Shares, and the
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individual signing this Subscription Agreement has been duly authorized by
the Purchaser to do so;
(viii) The Purchaser has full power and authority to
execute and deliver this Subscription Agreement and to perform the
Purchaser's obligations hereunder, and this Subscription Agreement is a
legally binding obligation of the Purchaser enforceable against Purchaser
in accordance with its terms; and
(ix) The Purchaser has not incurred any obligation for
any finder's or broker's agent's fees or commission in connection with the
transactions contemplated hereby.
(c) All the information which the undersigned has furnished to
the Company, or which is set forth herein, is correct and complete as of
the date of this Subscription Agreement, and if there should be any
material change in such information, the Purchaser will immediately
furnish such revised or corrected information to the Company. Unless the
Company receives written notice to the contrary from the Purchaser prior
to the Company's acceptance of this subscription, the Company shall be
entitled to assume that the preceding is accurate in all respects on the
date of the Closing ("CLOSING DATE").
4. BINDING EFFECT. The Purchaser understands that this subscription
is not binding upon the Company until the Company accepts it, which acceptance
is at the sole discretion of the Company and is to be evidenced by the Company's
execution of the Signature Page where indicated. This Subscription Agreement
shall be null and void if the Company does not accept it as aforesaid. Upon
acceptance by the Company and receipt of the Purchase Price, the Company will
issue the Shares to the Purchaser.
5. ACCEPTANCE IN PART. The Purchaser understands that the Company
may, in its sole discretion, reject this subscription in whole or in part and
reduce this subscription in any amount and to any extent.
6. RESTRICTIVE LEGEND AND STOP-TRANSFER INSTRUCTIONS.
(a) The Purchaser shall comply with all of the following
restrictions prior to reselling any of the Shares:
(i) The Purchaser shall notify the Company about any
proposed resale which notice must be received by the Company at least five
business days prior to such resale;
(ii) All offers or sales of such securities by the
Purchaser in the United States or to U.S. persons may only be made
pursuant to an effective registration filed under the Act or by an
exemption from registration under the Act and in compliance with all
applicable state securities laws; and
(iii) If requested by the Company, the Purchaser shall
provide a satisfactory opinion from legal counsel that the Purchaser's
resale complies with this section.
(b) Any certificate or certificates representing the Shares
shall bear an appropriate legend evidencing the preceding restrictions.
7. INDEMNIFICATION - PLACEMENT.
(a) The Purchaser agrees to indemnify the Company and hold it
harmless from and against any and all losses, damages, liabilities, costs
and expenses (including, but not limited to, any and all expenses
reasonably incurred in investigating or defending against any litigation
commenced or threatened or any claim whatsoever) which it may sustain or
incur in connection with the breach by the Purchaser of any
representation, warranty or covenant made by it herein or in any other
document furnished by the undersigned to the Company in connection with
the undersigned's investment in the Shares.
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(b) The Company agrees to indemnify the Purchaser and hold it
harmless from and against any and all losses, damages, liabilities, costs
and expenses (including, but not limited to, any and all expenses
reasonably incurred in investigating or defending against any litigation
commenced or threatened or any claim whatsoever) which it may sustain or
incur in connection with the breach by the Company of any representation,
warranty or covenant made by it herein.
8. REGISTRATION OF SHARES. The Company hereby agrees to use its best
efforts to file a registration statement with respect to the resale of the
Shares purchased by the Purchaser pursuant to the Offering within a reasonable
time after the date of the Closing (as defined in the Memorandum), but in no
event later than 45 days after the date of the Closing. In connection with the
foregoing, the Company will as expeditiously as practicable:
(a) prepare and file with the SEC a registration statement
with respect to such Shares and use its best efforts to cause such
registration statement to become and remain effective for such period, not
to exceed six months, as may be reasonably necessary to effect the sale of
such securities;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period, which need not exceed six months, and
comply with the provisions of the Act with respect to the disposition of
all securities covered by such registration statement during such period
in accordance herewith and with the intended methods of disposition by the
sellers thereof set forth in such registration statement;
(c) furnish to each seller of Shares under such registration
statement, such number of copies of such registration statement, each
amendment and supplement thereto, the prospectus included in such
registration statement (including each preliminary prospectus) and such
other documents as such seller or underwriters may reasonably request in
order to facilitate the disposition of the Shares, owned by such seller or
the sale of such securities by such underwriters; and
(d) register or qualify such Shares, under the securities or
blue sky laws of such jurisdictions in the United States as any seller
reasonably requests and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Shares, owned by such seller
(provided, however, that the Company will not be required (i) to qualify
generally to do business in any jurisdiction where it would not otherwise
be required to qualify but for this subparagraph or (ii) to subject itself
to taxation in any such jurisdiction).
9. REGISTRATION EXPENSES. All expenses incident to the Company's
performance of or compliance with this Agreement, including, without limitation,
all registration and filing fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses, messenger and delivery expenses,
and fees and disbursements of the Company's independent certified public
accountants, and legal counsel, underwriters (excluding discounts and
commissions attributable to the Shares), and other persons retained by the
Company (all such expenses being herein called "REGISTRATION EXPENSES"), will be
borne by the Company. All costs and expenses other than Registration Expenses
relating to the offer and sale of Shares pursuant hereto (e.g., fees and
expenses of underwriters, underwriting discounts, selling commissions and
taxes), and the fees and expenses of counsel engaged by the sellers of Shares,
shall be the responsibility of such sellers. In addition, the Company will pay
its internal expenses (including, without limitation, all salaries and expenses
of its officers and employees performing legal or accounting duties), the
expense of any annual audit or quarterly review, the expense of any liability
insurance obtained by the Company and the expenses and fees for listing the
Shares to be registered on each securities exchange or transaction reporting
system on which shares of Common Stock are then listed.
10. INDEMNIFICATION - REGISTRATION.
(a) The Company agrees to indemnify, to the extent permitted
by law, each seller of Shares, its officers and directors and each person
who controls such seller (within the meaning of the Act or the Securities
Exchange Act of 1934, as amended ("EXCHANGE ACT")) against all losses,
claims, damages, liabilities and expenses (including, without limitation,
attorneys' fees except as limited by Section 10(c)) caused by any untrue
or alleged untrue statement of a material fact contained in any
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registration statement, prospectus or any amendment thereof or supplement
thereto or any omission or alleged omission of 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, except
insofar as the same are caused by or contained in any information
furnished in writing to the Company by such seller expressly for use
therein or by such seller's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished such seller with a sufficient number of copies of
the same. In connection with an underwritten offering, the Company will
indemnify such underwriters, their officers and directors and each person
who controls such underwriters (within the meaning of the Act or the
Exchange Act) to the same extent as provided above with respect to the
indemnification of the sellers of Shares. The reimbursements required by
this Section 10(a) will be made by periodic payments during the course of
the investigation or defense, as and when bills are received or expenses
incurred.
(b) In connection with any registration statement in which a
seller of Shares, is participating, each such seller will furnish to the
Company in writing such information and affidavits as the Company
reasonably requests for use in connection with any such registration
statement or prospectus or any amendment thereof or supplement thereto
and, to the extent permitted by law, will indemnify the Company, its
directors and officers and each person who controls the Company (within
the meaning of the Act or the Exchange Act) against any losses, claims,
damages, liabilities and expenses (including, without limitation,
attorneys' fees except as limited by Section 10(c)) resulting from any
untrue statement of a material fact contained in the registration
statement, prospectus or preliminary prospectus or any amendment thereof
or supplement thereto or any omission of 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, but only to the
extent that such untrue statement or omission is contained in any
information or affidavit so furnished in writing by such seller; provided
that the obligation to indemnify will be several, not joint and several,
among such sellers of Shares, and the liability of each such seller of
Shares will be in proportion to, and provided further that such liability
will be limited to, the net amount received by such seller from the sale
of Shares pursuant to such registration statement.
(c) Any person entitled to indemnification hereunder will (i)
give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist with respect to such
claim, permit such indemnifying party to assume the defense of such claim
with counsel reasonably satisfactory to the indemnified party. The
indemnifying party will not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent will
not be unreasonably withheld). An indemnifying party who is not entitled
to, or elects not to, assume the defense of a claim will not be obligated
to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless
in the reasonable judgment of any indemnified party a conflict of interest
may exist between such indemnified party and any other of such indemnified
parties with respect to such claim.
(d) The indemnification provided for under this Agreement will
remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified party or any officer, director or controlling
person of such indemnified party and will survive the transfer of Shares.
The Company and each seller of Shares also agrees to make such provisions
as are reasonably requested by any indemnified party for contribution to
such party in the event the Company's or such seller's indemnification is
unavailable for any reason.
11. CONFIDENTIALITY. The Purchaser acknowledges and agrees that
all information relating to the Company and this subscription, including, but
not limited to, the information contained in the Memorandum, shall be
kept confidential by the Purchaser, except as otherwise required by law or
made public other than by or through the undersigned.
12. NONTRANSFERABILITY. Neither this Subscription Agreement
nor any of the rights of the Purchaser hereunder may be transferred or
assigned by the Purchaser.
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13. AMENDMENT; ENTIRE AGREEMENT; GOVERNING LAW. This Subscription
Agreement (i) may only be modified by a written instrument executed by the
Purchaser and the Company, (ii) together with the Investor Questionnaire and
Signature Page, sets forth the entire agreement of the Purchaser and the Company
with respect to the subject matter hereof and supersedes all prior agreements
and understandings between or among the parties with respect to the subject
matter hereof, (iii) shall be governed by the laws of the State of Delaware
applicable to contracts made and to be wholly performed therein, and (iv) shall
inure to the benefit of, and be binding upon, the Company and the Purchaser and
their respective heirs, legal representatives, successors and assigns.
14. NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered by certified
or registered mail (first class postage pre-paid), guaranteed overnight
delivery, or facsimile transmission if such transmission is confirmed by
delivery by certified or registered mail (first class postage pre-paid) or
guaranteed overnight delivery, to the following addresses and telecopy numbers
(or to such other addresses or telecopy numbers which such party shall
subsequently designate in writing to the other party): (a) If to the Company:
V-ONE Corporation, 20250 Century Boulevard - Suite 300, Germantown, Maryland
20874, Attention: Charles B. Griffis; facsimile: (301) 515-5280; and (b) If to
the Purchaser: to the address set forth on the investor questionnaire
accompanying this Subscription Agreement; with a copy to: LaSalle St.
Securities, Inc., 810 West Washington Blvd, Chicago, Illinois 60607, Attention:
Michael Grady; facsimile: (312) 705-3000.
15. PRONOUNS. Unless the context otherwise requires, all personal
pronouns used in this Subscription Agreement, whether in the masculine, feminine
or neuter gender, shall include all other genders.
THE SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISK OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME.
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IMPORTANT:
Please Complete Investor Name:
-------------------------
LaSalle St. Account No.:
---------------
Offering Memorandum No.
----------------
(from the cover of the Offering
Memorandum)
ALLOCATED |_|
WAIT LIST |_|
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INDIVIDUAL INVESTOR QUESTIONNAIRE
-----------------------------
V-ONE CORPORATION
-----------------------------
V-ONE Corporation
20250 Century Boulevard - Suite 300
Germantown, Maryland 20874
The information contained in this Questionnaire is being furnished in
order to determine whether the undersigned's subscription to purchase the Shares
of V-ONE Corporation (the "Company") may be accepted. The Company will not offer
or sell Shares to any investor who has not completed a Questionnaire.
ALL INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED
CONFIDENTIALLY.
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IF YOU ARE PURCHASING SHARES WITH YOUR SPOUSE, OR, IF YOU ARE MARRIED
AND LIVE IN A COMMUNITY PROPERTY STATE, BOTH YOU AND YOUR SPOUSE MUST SIGN THE
SIGNATURE PAGE (PAGE I-6).
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IF YOU ARE PURCHASING SHARES WITH ANOTHER PERSON NOT YOUR SPOUSE, YOU
MUST EACH FILL OUT A SEPARATE QUESTIONNAIRE. Please make a photocopy of
pages I-1 to I-8 and return both completed Questionnaires to the Company in the
same envelope.
- -------------------------------------------------------------------------------
===============================================================================
THIS INVESTOR QUESTIONNAIRE WILL BE DEEMED TO HAVE BEEN EXECUTED FOR ALL
PURPOSES WHEN THE INVESTOR SIGNS THE SIGNATURE PAGE ANNEXED HERETO.
===============================================================================
I-1
<PAGE>
I. PLEASE INDICATE DESIRED TYPE OF OWNERSHIP OF SHARES:
|_| Individual
|_| Joint Tenants (rights of survivorship)
|_| Tenants in Common (no rights of survivorship)
II. PLEASE CHECK ONE OF THE FOLLOWING:
I live in a community property state.
|_| Yes
|_| No
III. PLEASE CHECK ANY OF STATEMENTS 1-3 BELOW THAT APPLY TO YOU:
|_| 1. I have an individual net worth or joint net worth* with my
spouse in excess of $1,000,000.
|_| 2. I have had an individual income* in excess of $200,000 in each of
the two most recently completed years and I reasonably expect an
individual income in excess of $200,000 in the current year.
|_| 3. My spouse and I have had a joint income* in excess of $300,000 in
each of the two most recently completed years and we reasonably
expect a joint income in excess of $300,000 in the current year.
IV. OTHER CERTIFICATIONS.
By signing the Signature Page, I certify the following (or, if I am
purchasing Shares with my spouse as co-owner, each of us certifies the
following):
(a) that I am at least 21 years of age; and
(b) that the name, home address and social security number or
taxpayer identification number as set forth in this Questionnaire
are true, correct and complete; and
- --------------------------
* For purposes of this Questionnaire, the term "net worth" means the
excess of total assets over total liabilities INCLUDING home, home
furnishings and automobiles. In determining income, an investor should
add to his or her adjusted gross income as reflected on his or her most
recent federal income tax return any amounts attributable to tax-exempt
income received, losses claimed as a limited partner in any limited
partnership, deductions claimed for depletion, contributions to IRA or
Keogh retirement plans, alimony payments and any amount by which income
from long-term capital gains has been reduced in arriving at adjusted
gross income.
I-2
<PAGE>
(c) that one of the following is true and correct (check one):
SPOUSE, IF
PURCHASER CO-OWNER
- ------------ -----------
|_| |_| I am a United States citizen or resident of the
United States for United States federal income tax
purposes.
|_| |_| I am neither a United States citizen nor a
resident of the United States for United States
federal income tax purposes.
ALL PROSPECTIVE INVESTORS MUST MAKE THE FOLLOWING CERTIFICATION:
The undersigned's total proposed investment in the Shares:
does NOT represent more than:
|_| 10% of the undersigned's net worth.
|_| 15% of the undersigned's net worth.
|_| 20% of the undersigned's net worth.
|_| 25% of the undersigned's net worth.
|_| 50% of the undersigned's net worth.
|_| DOES represent more than 50% of the undersigned's net worth.
V. GENERAL INFORMATION.
(a) PERSONAL INFORMATION.
PURCHASER:
Name:_________________________________________________________________________
Social Security or Taxpayer Identification Number:____________________________
Residence Address:____________________________________________________________
(Number and Street)
______________________________________________________________________________
(City) (State) (Zip Code)
Residence Telephone Number:___________________________________________________
(Area Code) (Number)
Name of Business:_________________________ Title:_____________________________
Business Address:_____________________________________________________________
(Number and Street)
______________________________________________________________________________
(City) (State) (Zip Code)
Business Telephone Number:____________________________________________________
(Area Code) (Number)
I prefer to have correspondence sent to: |_| Residence |_| Business
I-3
<PAGE>
NASD Affiliation or Association, if any:______________________________________
If none, check here |_|
SPOUSE, IF CO-OWNER:
Name:_________________________________________________________________________
Social Security or Taxpayer Identification Number:____________________________
Residence Address:____________________________________________________________
(Number and Street)
______________________________________________________________________________
(City) (State) (Zip Code)
Residence Telephone Number
(IF DIFFERENT FROM PURCHASER'S):______________________________________________
(Area Code) (Number)
Business Address
(IF DIFFERENT FROM PURCHASER'S):______________________________________________
(Number and Street)
______________________________________________________________________________
(City) (State) (Zip Code)
Business Telephone Number
(IF DIFFERENT FROM PURCHASER'S):______________________________________________
(Area Code) (Number)
I prefer to have correspondence sent to: |_| Residence |_| Business
NASD Affiliation or Association, if any:______________________________________
If none, check here |_|
VI. REGISTRATION RIGHTS INFORMATION.
(a) Please provide the following information:
The nature of any position, office or other material relationship
that you have had with the Company or any of its predecessors or
affiliates during the past three years:
__________________________________________________________________
The number of shares of Common Stock of the Company you currently
own, if any (not including any shares subscribed for herein):
__________________________________________________________________
The number of shares of Common Stock of the Company you have the
right to acquire, if any (including shares of Common Stock
underlying warrants):
__________________________________________________________________
Describe the arrangement under which you have the right to acquire
the shares of Common Stock listed in the preceding paragraph above:
__________________________________________________________________
VII. SIGNATURE.
The Signature Page is contained on Page I-6.
I-4
<PAGE>
----------------------------------
SIGNATURE PAGE
----------------------------------
INDIVIDUAL INVESTORS
V-ONE Corporation
20250 Century Boulevard - Suite 300
Germantown, Maryland 20874
Ladies and Gentlemen:
The undersigned subscriber for Shares hereby submits to you this Signature
Page which constitutes the signature page for (a) the attached Investor
Questionnaire and (b) the attached Subscription Agreement. The undersigned
represents and agrees that THE EXECUTION OF THIS SIGNATURE PAGE CONSTITUTES THE
EXECUTION OF EACH OF THE FOREGOING DOCUMENTS, and, in addition, acknowledges,
certifies, represents and agrees with you as follows:
1. INVESTOR QUESTIONNAIRE. The information contained in the Investor
Questionnaire, including the social security number, is complete and accurate as
of the date hereof and may be relied upon by you, and the undersigned will
notify you immediately of any material change in any of such information which
may occur prior to the acceptance of the undersigned's subscription and will
promptly send you written confirmation thereof.
2. SUBSCRIPTION INFORMATION (to be completed by investor).
Subscription amount: $___________________________________________
Name(s) in which Shares are to be registered:
__________________________________________________________________
__________________________________________________________________
Form of joint ownership (if applicable). (If one of these boxes
is checked, subscriber and co-subscriber must both sign all
documents):
Tenants-by-Entirety |_| Joint Tenants |_|
Tenants-In-Common |_|
If the Shares hereby subscribed for are to be owned by more than one
person in any manner, the undersigned understands and agrees that all of the
co-investors in such Shares must sign this Signature Page and complete an
Investor Questionnaire in order for this subscription to be accepted.
I-5
<PAGE>
IN WITNESS WHEREOF, the undersigned represent(s), under penalty of
perjury, that the foregoing statements are true and correct and that he or she
has (they have) executed the Investor Questionnaire, the Subscription Agreement
and the Signature Page this _______________ day of ____________________________,
199___.
_______________________________________ ______________________________
Please Print Name of Investor Signature of Investor
_______________________________________ ______________________________
Please Print Name of Co-Investor Signature of Investor
[[[AUTHORIZATION TO TRANSFER FUNDS FROM CUSTOMER ACCOUNT TO ESCROW AGENT]]]
The undersigned authorize(s) LaSalle St. Securities, Inc. to debit
Customer Account #_________________ at LaSalle St. Securities, Inc. and to
transfer the amount of the aggregate purchase price for the Shares subscribed
to LaSalle National Bank as Escrow Agent.
____________________________________
Signature of Investor
____________________________________
Signature of Investor
THE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED UNLESS SUCH SHARES ARE INCLUDED IN AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND ARE QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL, CONCURRED WITH BY COUNSEL TO THE
COMPANY, HAS BEEN DELIVERED TO THE EFFECT THAT SUCH REGISTRATION AND
QUALIFICATION OF SUCH SHARES ARE NOT REQUIRED.
I-6
<PAGE>
TO BE COMPLETED AND SIGNED BY REGISTERED REPRESENTATIVE
I hereby represent on recommending the purchase of Shares in the Company
that I, the Registered Representative:
1. have reasonable grounds to believe, on the basis of information
obtained from the participant and any other information known by me, that the
Purchaser is an "accredited investor" as such term is defined in Rule 501(a) of
Regulation D promulgated under the Act;
2. have, prior to execution of the written Subscription Agreement,
informed the Purchaser of all pertinent facts relating to the liquidity and
marketability of the Shares during the term of the investment.
I further represent that I am registered to offer and sell securities of
the type offered in this Offering in the state in which this Offering is made.
______________________________________________
Registered Representative Signature Date
______________________________________________
Print Name of Registered Representative
______________________________________________
Broker-Dealer Firm Name
______________________________________________
Street Address
______________________________________________
City & State Zip Code
I-7
<PAGE>
NOT TO BE COMPLETED BY SUBSCRIBER
PAYMENT OF PURCHASE PRICE, SIGNATURE PAGE AND INVESTOR QUESTIONNAIRE RECEIVED
AND SUBSCRIPTION ACCEPTED ON ________________________, 199___.
V-ONE Corporation
By:____________________________________
Its:____________________________________
I-8
<PAGE>
---------------------------------------
IMPORTANT:
Please Complete Investor Name:
-------------------------
LaSalle St. Account No.:
---------------
Offering Memorandum No.
----------------
(from the cover of the Offering
Memorandum)
ALLOCATED |_|
WAIT LIST |_|
---------------------------------------
CORPORATION QUESTIONNAIRE
-----------------------------
V-ONE CORPORATION
-----------------------------
V-ONE Corporation
20250 Century Boulevard - Suite 300
Germantown, Maryland 20874
The information contained in this Questionnaire is being furnished in
order to determine whether the undersigned CORPORATION's subscription to
purchase the Shares of V-ONE Corporation (the "Company") may be accepted. The
Company will not offer or sell the Shares to any investor who has not completed
a Questionnaire.
INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED
CONFIDENTIALLY.
===============================================================================
THIS INVESTOR QUESTIONNAIRE WILL BE DEEMED TO HAVE BEEN EXECUTED FOR ALL
PURPOSES WHEN THE INVESTOR SIGNS THE SIGNATURE PAGE ANNEXED HERETO.
===============================================================================
C-1
<PAGE>
I. PLEASE CHECK STATEMENTS 1 OR 2 AND 3 BELOW, AS APPLICABLE:
|_| 1. If the undersigned CORPORATION was formed for the specific
purpose of acquiring the Shares, each of the shareholders of
the undersigned CORPORATION is able to certify that such
shareholder meets at least one of the following conditions:
(a) The shareholder is a natural person whose individual
net worth* or joint net worth with his or her spouse
exceeds $1,000,000.
(b) The shareholder is a natural person whose individual
income* was in excess of $200,000 in each of the two
most recently completed years and who reasonably expects
an individual income in excess of $200,000 in the
current year.
(c) The shareholder is a natural person who, together with
his or her spouse, has had a joint income* in excess of
$300,000 in each of the two most recently completed
years and who reasonably expects a joint income in
excess of $300,000 in the current year.
(d) The shareholder is an entity in which all of the equity
owners satisfy (a), (b) or (c) above.
|_| 2. The undersigned CORPORATION: (i) was not formed for the
specific purpose of acquiring the Shares; AND (ii) has total
assets in excess of $5,000,000.
|_| 3. The CORPORATION is one of the following:
(a) A bank as defined in Section 3(a)(2) of the Securities
Act of 1933, whether acting in its individual or
fiduciary capacity.
(b) A broker or dealer registered pursuant to Section 15
of the Securities Exchange Act of 1934.
(c) An insurance company as defined in Section 2(13) of the
Securities Act of 1933;
(d) An investment company registered under the Investment
Company Act of 1940 or a "business development company"
as defined in Section 2(a)(48) of such act.
(e) A Small Business Investment Company licensed by the
U.S. Small Business Administration under Section 301(c)
or (d) of the Small Business Investment Act of 1958.
(f) A private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of
1940.
- -----------------------------
* For purposes of this Questionnaire, the term "net worth" means the excess
of total assets over total liabilities INCLUDING home, home furnishings
and automobiles. In determining income, an investor should add to his or
her adjusted gross income as reflected on his or her most recent federal
income tax return any amounts attributable to tax-exempt income received,
losses claimed as a limited partner in any limited partnership, deductions
claimed for depletion, contributions to IRA or Keogh retirement plans,
alimony payments and any amount by which income from long-term capital
gains has been reduced in arriving at adjusted gross income.
C-2
<PAGE>
- -------------------------------------------------------------------------------
IF YOU CHECKED STATEMENT 1 IN SECTION I, YOU MUST PROVIDE A LETTER
SIGNED BY AN OFFICER OF THE UNDERSIGNED CORPORATION LISTING THE NAME OF EACH
SHAREHOLDER AND THE REASON (UNDER STATEMENT 1) WHY SUCH SHAREHOLDER QUALIFIES
AS AN ACCREDITED INVESTOR (ON THE BASIS OF NET WORTH, INDIVIDUAL INCOME OR
JOINT INCOME), OR EACH SHAREHOLDER MUST PROVIDE A COMPLETED INDIVIDUAL
INVESTOR QUESTIONNAIRE.
- -------------------------------------------------------------------------------
II. OTHER CERTIFICATIONS.
By signing the Signature Page, the undersigned certifies the following:
(a) that the CORPORATION's purchase of the Shares will be solely for
the CORPORATION's own account and not for the account of any other
person; and
(b) that the purchase by the CORPORATION is directed by a person who
has such knowledge and experience in financial and business matters
that he/she is capable of evaluating the merits and risks of an
investment in the Shares and of making an informed investment
decision; and
(c) that the CORPORATION's name, address of principal office, place
of formation and taxpayer identification number as set forth in this
Questionnaire are true, correct and complete; and
(d) that one of the following is true and correct (check one):
|_| the CORPORATION is a corporation organized in or under the
laws of the United States or any political subdivision
thereof; or
|_| the CORPORATION is a corporation which is neither created
nor organized in or under the United States or any political
subdivision thereof, but which has made an election under
either Section 897(i) or 897(k) of the United States Internal
Revenue Code of 1986, as amended, to be treated as a domestic
corporation for certain purposes of United States federal
income taxation. (A COPY OF THE INTERNAL REVENUE SERVICE
ACKNOWLEDGMENT OF THE UNDERSIGNED'S ELECTION MUST BE ATTACHED
TO THIS SUBSCRIPTION AGREEMENT IF THIS PROVISION IS
APPLICABLE); or
|_| neither (i) nor (ii) above is true.
ALL PROSPECTIVE INVESTORS MUST MAKE THE FOLLOWING CERTIFICATION:
The undersigned's total proposed investment in the Shares:
does NOT represent more than:
|_| 10% of the undersigned's net worth.
|_| 15% of the undersigned's net worth.
|_| 20% of the undersigned's net worth.
|_| 25% of the undersigned's net worth.
|_| 50% of the undersigned's net worth.
|_| DOES represent more than 50% of the undersigned's net worth.
C-3
<PAGE>
III. GENERAL INFORMATION.
(a) PROSPECTIVE PURCHASER (THE CORPORATION):
Name:_________________________________________________________________________
Principal Place of Business:__________________________________________________
(Number and Street)
______________________________________________________________________________
(City) (State) (Zip Code)
Address for Correspondence (if different):____________________________________
(Number and Street)
______________________________________________________________________________
(City) (State) (Zip Code)
Telephone Number:_____________________________________________________________
(Area Code) (Number)
State of Incorporation:_______________________________________________________
Date of Formation:____________________________________________________________
Taxpayer Identification Number:_______________________________________________
NASD Affiliation or Association of Trustee(s), if any:________________________
If none, check here |_|
Number of Shareholders:_______________________________________________________
Principal Activity of Corporation:____________________________________________
(b) INDIVIDUAL WHO IS EXECUTING THIS QUESTIONNAIRE ON BEHALF OF
THE CORPORATION:
Name:_________________________________________________________________________
Position or Title:____________________________________________________________
IV. REGISTRATION RIGHTS INFORMATION.
(a) Please provide the following information:
The nature of any position, office or other material relationship
that you have had with the Company or any of its predecessors or
affiliates during the past three years:
__________________________________________________________________
The number of shares of Common Stock of the Company you currently
own, if any (not including any shares subscribed for herein):
__________________________________________________________________
The number of shares of Common Stock of the Company you have the
right to acquire, if any (including shares of Common Stock
underlying warrants):
__________________________________________________________________
C-4
<PAGE>
Describe the arrangement under which you have the right to acquire
the shares of Common Stock listed in the preceding paragraph above:
__________________________________________________________________
V. SIGNATURE.
The Signature Page is contained on Page C-7.
C-5
<PAGE>
----------------------------------
SIGNATURE PAGE
----------------------------------
CORPORATE INVESTOR
V-ONE Corporation
20250 Century Boulevard - Suite 300
Germantown, Maryland 20874
Ladies and Gentlemen:
The undersigned subscriber for Shares hereby submits to you this Signature
Page which constitutes the signature page for (a) the attached Investor
Questionnaire and (b) the attached Subscription Agreement. The undersigned
represent and agrees that THE EXECUTION OF THIS SIGNATURE PAGE CONSTITUTES THE
EXECUTION OF EACH OF THE FOREGOING DOCUMENTS and, in addition, acknowledges,
certifies, represents and agrees with you as follows:
1. INVESTOR QUESTIONNAIRE. The information contained in the Investor
Questionnaire, including the undersigned's taxpayer identification number, is
complete and accurate as of the date hereof and may be relied upon by you, and
the undersigned will notify you immediately of any material change in any of
such information which may occur prior to the acceptance of the undersigned's
subscription and will promptly send you written confirmation thereof.
2. SUBSCRIPTION INFORMATION (to be completed by investor).
Subscription amount: $____________________________________________
Name(s) in which Shares are to be registered:
__________________________________________________________________
__________________________________________________________________
3. INVESTMENT AUTHORIZATION. The undersigned corporation has all requisite
authority to acquire the Shares hereby subscribed for and to enter into the
Subscription Agreement and further, the undersigned officer or partner of the
subscribing entity has been duly authorized by all requisite action on the part
of such entity to execute this Signature Page on its behalf.
C-6
<PAGE>
IN WITNESS WHEREOF, the undersigned represent(s), under penalty of
perjury, that the foregoing statements are true and correct and that it has
caused the Investor Questionnaire, the Subscription Agreement and the Signature
Page to be duly executed and authorized on its behalf this _____ day of
______________, 199___.
____________________________________
Name of Investor
By:
________________________________
Signature of Authorized Person
____________________________________
Print name and title
[[[AUTHORIZATION TO TRANSFER FUNDS FROM CUSTOMER ACCOUNT TO ESCROW AGENT]]]
The undersigned authorize(s) LaSalle St. Securities, Inc. to debit
Customer Account #_________________ at LaSalle St. Securities, Inc. and to
transfer the amount of the aggregate purchase price for the Shares subscribed
to LaSalle National Bank as Escrow Agent.
____________________________________
Name of Investor
By:
________________________________
Signature of Authorized Person
____________________________________
Print name and title
THE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED UNLESS SUCH SHARES ARE INCLUDED IN AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND ARE QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL, CONCURRED WITH BY COUNSEL TO THE
COMPANY, HAS BEEN DELIVERED TO THE EFFECT THAT SUCH REGISTRATION AND
QUALIFICATION OF SUCH SHARES ARE NOT REQUIRED.
C-7
<PAGE>
TO BE COMPLETED AND SIGNED BY REGISTERED REPRESENTATIVE
I hereby represent on recommending the purchase of Shares in the Company
that I, the Registered Representative:
1. have reasonable grounds to believe, on the basis of information
obtained from the participant and any other information known by me, that the
Purchaser is an "accredited investor" as such term is defined in Rule 501(a) of
Regulation D promulgated under the Act;
2. have, prior to execution of the written Subscription Agreement,
informed the Purchaser of all pertinent facts relating to the liquidity and
marketability of the Shares during the term of the investment.
I further represent that I am registered to offer and sell securities of
the type offered in this Offering in the state in which this Offering is made.
______________________________________________
Registered Representative Signature Date
______________________________________________
Print Name of Registered Representative
______________________________________________
Broker-Dealer Firm Name
______________________________________________
Street Address
______________________________________________
City & State Zip Code
C-8
<PAGE>
NOT TO BE COMPLETED BY SUBSCRIBER
PAYMENT OF PURCHASE PRICE, SIGNATURE PAGE AND INVESTOR QUESTIONNAIRE RECEIVED
AND SUBSCRIPTION ACCEPTED ON ______________________________, 199___.
V-ONE Corporation
By:____________________________________
Its:____________________________________
C-9
<PAGE>
---------------------------------------
IMPORTANT: Investor Name:
Please Complete
---------------------------------------
PARTNERSHIP QUESTIONNAIRE
-----------------------------
V-ONE CORPORATION
-----------------------------
V-ONE Corporation
20250 Century Boulevard - Suite 300
Germantown, Maryland 20874
The information contained in this Questionnaire is being furnished in
order to determine whether the undersigned PARTNERSHIP's subscription to
purchase the Shares of V-ONE Corporation (the "Company") may be accepted. The
Company will not offer or sell Shares to any investor who has not completed a
Questionnaire.
INFORMATION CONTAINED IN THIS QUESTIONNIARE WILL BE TREATED
CONFIDENTIALLY.
===============================================================================
THIS INVESTOR QUESTIONNAIRE WILL BE DEEMED TO HAVE BEEN EXECUTED FOR ALL
PURPOSES WHEN THE AUTHORIZED SIGNATORY SIGNS THE SIGNATURE PAGE ANNEXED
HERETO.
===============================================================================
P-1
<PAGE>
I. PLEASE CHECK STATEMENTS 1 AND 2 BELOW, AS APPLICABLE:
|_| 1. Each of the partners of the undersigned PARTNERSHIP is
able to certify that such partner meets at least one of the
following conditions:
(a) The partner is a natural person whose
individual net worth* or joint net worth with his or her
spouse exceeds $1,000,000.
(b) The partner is a natural person whose
individual income* was in excess of $200,000 in each of
the two most recent years and who reasonably expects an
individual income in excess of $200,000 in the current
year.
(c) The partner is a natural person who, together with
his or her spouse, has had a joint income* in excess of
$300,000 in each of the two most recent years and who
reasonably expects a joint income in excess of $300,000
in the current year.
(d) The partner is an entity in which all of the equity
owners satisfy (a), (b) or (c) above.
|_| 2. The undersigned PARTNERSHIP: (i) was not formed for the
specific purpose of acquiring the Shares; AND (ii) has total
assets in excess of $5,000,000.
- -------------------------------------------------------------------------------
IF YOU CHECKED STATEMENT 1 IN SECTION I AND DID NOT CHECK STATEMENT 2,
YOU MUST PROVIDE A LETTER SIGNED BY A GENERAL PARTNER OF THE UNDERSIGNED
PARTNERSHIP LISTING THE NAME OF EACH PARTNER (WHETHER A GENERAL OR LIMITED
PARTNER) AND THE REASON (UNDER STATEMENT 1) SUCH PARTNER QUALIFIES AS AN
ACCREDITED INVESTOR (ON THE BASIS OF NET WORTH, INDIVIDUAL INCOME OR JOINT
INCOME), OR EACH PARTNER MUST PROVIDE A COMPLETE INDIVIDUAL INVESTOR
QUESTIONNAIRE.
- -------------------------------------------------------------------------------
II. OTHER CERTIFICATIONS.
By signing the PARTNERSHIP Signature Page, the undersigned certifies the
following:
(a) that the purchase by the PARTNERSHIP is directed by a
person who has such knowledge and experience in
financial and business matters that he/she is capable of
evaluating the merits and risks of an investment in the
Shares and of making an informed investment decision;
and
(b) that the PARTNERSHIP's name, address of principal
office, place of formation and taxpayer identification
number as set forth in this Questionnaire are true,
correct and complete; and
- -----------------------------
* For purposes of this Questionnaire, the term "net worth" means the
excess of total assets over total liabilities INCLUDING home, home
furnishings and automobiles. In determining income, an investor should
add to his or her adjusted gross income as reflected on his or her most
recent federal income tax return any amounts attributable to tax-exempt
income received, losses claimed as a limited partner in any limited
partnership, deductions claimed for depletion, contributions to IRA or
Keogh retirement plans, alimony payments and any amount by which income
from long-term capital gains has been reduced in arriving at adjusted
gross income.
P-2
<PAGE>
(c) that one of the following is true and correct
(check one):
|_| the PARTNERSHIP is a partnership formed in or
under the laws of the United States or any
political subdivision thereof; or
|_| the PARTNERSHIP is not a partnership formed in or
under the laws of the United States or any
political subdivision thereof.
ALL PROSPECTIVE INVESTORS MUST MAKE THE FOLLOWING CERTIFICATION:
The PARTNERSHIP'S total proposed investment in the Shares:
|_| does NOT represent more than 10% of the Partnership's net worth and
such net worth is at least $200,000 OR does NOT represent more than 25% of the
Partnership's net worth and such net worth is at least $250,000 and the
Partnership had an annual income of at least $100,000 in 1996 and 1997 and
reasonably expects to reach the same income level in 1998.
|_| does represent more than 10% of the Partnership's net worth and such
net worth is at least $200,000 OR does represent more than 25% of the
Partnership's net worth and such net worth is at least $250,000 and the
Partnership had an annual income of at least $100,000 in 1996 and 1997 and
reasonably expects to reach the same income level in 1998.
III. GENERAL INFORMATION.
(a) PROSPECTIVE PURCHASER (THE PARTNERSHIP):
Name:_________________________________________________________________________
Address:______________________________________________________________________
(Number and Street)
______________________________________________________________________________
(City) (State) (Zip Code)
Address for Correspondence (if different):____________________________________
(Number and Street)
______________________________________________________________________________
(City) (State) (Zip Code)
Telephone Number:_____________________________________________________________
(Area Code) (Number)
State in which Formed:________________________________________________________
Date of Formation:____________________________________________________________
Taxpayer Identification Number:_______________________________________________
NASD Affiliation or Association of Partner(s), if any:________________________
P-3
<PAGE>
If none, check here |_|
Number of Partners:___________________________________________________________
Principal Activity of Partnership:____________________________________________
(b) INDIVIDUAL WHO IS EXECUTING THIS QUESTIONNAIRE ON BEHALF OF
THE PARTNERSHIP:
Name:_________________________________________________________________________
Position or Title:____________________________________________________________
IV. REGISTRATION RIGHTS INFORMATION.
(a) Please provide the following information:
The nature of any position, office or other material relationship
that you have had with the Company or any of its predecessors or
affiliates during the past three years:
__________________________________________________________________
The number of shares of Common Stock of the Company you currently
own, if any (not including any shares subscribed for herein):
__________________________________________________________________
The number of shares of Common Stock of the Company you have the
right to acquire, if any (including shares of Common Stock
underlying warrants):
__________________________________________________________________
Describe the arrangement under which you have the right to acquire
the shares of Common Stock listed in the preceding paragraph above:
__________________________________________________________________
V. SIGNATURE.
The Signature Page is contained on Pages P5 - P6.
P-4
<PAGE>
----------------------------------
SIGNATURE PAGE
----------------------------------
PARTNERSHIP INVESTOR
V-ONE Corporation
20250 Century Boulevard - Suite 300
Germantown, Maryland 20874
Ladies and Gentlemen:
The undersigned subscriber for Shares hereby submits to you this
Partnership Signature Page which constitutes the signature page for (a) the
attached Partnership Questionnaire and (b) the attached Subscription Agreement.
The undersigned represents and agrees that THE EXECUTION OF THIS SIGNATURE PAGE
CONSTITUTES THE EXECUTION OF EACH OF THE FOREGOING DOCUMENTS and, in addition,
acknowledges, certifies, represents and agrees with you as follows:
1. PARTNERSHIP QUESTIONNAIRE. The information contained in the
Partnership Questionnaire, including the undersigned's taxpayer identification
number, is complete and accurate as of the date hereof and may be relied upon by
you, and the undersigned will notify you immediately of any material change in
any of such information which may occur prior to the acceptance of the
undersigned's subscription and will promptly send you written confirmation
thereof.
2. SUBSCRIPTION INFORMATION (to be completed by investor).
Subscription amount: $___________________________________________
Name(s) in which Shares are to be registered:
__________________________________________________________________
__________________________________________________________________
3. INVESTMENT AUTHORIZATION. The undersigned partnership has all
requisite authority to acquire the Shares hereby subscribed for and to enter
into the Subscription Agreement and further, the undersigned officer or partner
of the subscribing entity has been duly authorized by all requisite action on
the part of such entity to execute this Signature Page on its behalf.
P-5
<PAGE>
IN WITNESS WHEREOF, the undersigned represent(s), under penalty of
perjury, that the foregoing statements are true and correct and that his or her
signature on the Signature Page constitutes the execution of the Partnership
Questionnaire and the Subscription Agreement on behalf of the subscriber
partnership this _____ day of ______________, 199__.
____________________________________
Name of Investor
By: ______________________________
Signature of Authorized Person
____________________________________
Print name and title
[[[AUTHORIZATION TO TRANSFER FUNDS FROM CUSTOMER ACCOUNT TO ESCROW AGENT]]]
Z
The undersigned authorize(s) LaSalle St. Securities, Inc. to debit
Customer Account #_________________ at LaSalle St. Securities, Inc. and to
transfer the amount of the aggregate purchase price for the Shares subscribed
to LaSalle National Bank as Escrow Agent.
____________________________________
Name of Investor
By:
________________________________
Signature of Authorized Person
____________________________________
Print name and title
THE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED UNLESS SUCH SHARES ARE INCLUDED IN AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND ARE QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL, CONCURRED WITH BY COUNSEL TO THE
COMPANY, HAS BEEN DELIVERED TO THE EFFECT THAT SUCH REGISTRATION AND
QUALIFICATION OF SUCH SHARES ARE NOT REQUIRED.
P-6
<PAGE>
TO BE COMPLETED AND SIGNED BY REGISTERED REPRESENTATIVE
I hereby represent on recommending the purchase of Shares in the Company
that I, the Registered Representative:
1. have reasonable grounds to believe, on the basis of information
obtained from the participant and any other information known by me, that the
Purchaser is an "accredited investor" as such term is defined in Rule 501(a) of
Regulation D promulgated under the Act;
2. have, prior to execution of the written Subscription Agreement,
informed the Purchaser of all pertinent facts relating to the liquidity and
marketability of the Shares during the term of the investment.
I further represent that I am registered to offer and sell securities of
the type offered in this Offering in the state in which this Offering is made.
______________________________________________
Registered Representative Signature Date
______________________________________________
Print Name of Registered Representative
______________________________________________
Broker-Dealer Firm Name
______________________________________________
Street Address
______________________________________________
City & State Zip Code
P-7
<PAGE>
NOT TO BE COMPLETED BY SUBSCRIBER
PAYMENT OF PURCHASE PRICE, SIGNATURE PAGE AND INVESTOR QUESTIONNAIRE RECEIVED
AND SUBSCRIPTION ACCEPTED ON ______________________________, 199___.
V-ONE Corporation
By:____________________________________
Its:____________________________________
P-8
October __, 1998
To: V-ONE Corporation LaSalle St. Securities, Inc.
20250 Century Boulevard, Suite 300 810 W. Washington Boulevard
Germantown, Maryland 20874 Chicago, Illinois 60607
Ladies and Gentlemen:
Reference is made to the Confidential Private Placement Memorandum dated
October 9, 1998 of V-ONE Corporation as supplemented by the Supplement thereto
dated October 9, 1998 (collectively, the "Memorandum").
The undersigned ("Purchaser") hereby amends its Subscription Agreement
contained in the Subscription Documents relating to the offering described in
the Memorandum by inserting a new Section 3(d), which reads as follows:
(d) The Purchaser's ordinary activities involve it in
acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of its business and the
Purchaser is a person of the kind described in Article (11)(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1995 (United Kingdom) or is a person to whom such document may
otherwise be lawfully issued or passed on.
Except as modified by this letter, the Purchaser's Subscription Agreement
remains in full force and effect.
Very truly yours,
_____________________________
Name of Purchaser
By:
______________________________
Signature of Authorized Person
______________________________
Print Name and Title
ACCEPTED AND AGREED:
V-ONE CORPORATION
By:
_______________________
Its:
_______________________
ADDENDUM #2 TO SUBSCRIPTION DOCUMENTS
November 9, 1998
To: V-ONE Corporation LaSalle St. Securities, Inc.
20250 Century Boulevard, Suite 300 810 W. Washington Boulevard
Germantown, Maryland 20874 Chicago, Illinois 60607
Ladies and Gentlemen:
Reference is made to the Confidential Private Placement Memorandum dated
October 9, 1998 of V-ONE Corporation as supplemented by the Supplement (No. 1)
thereto dated October 9, 1998 and Supplement No. 2 thereto dated November 9,
1998 (collectively, the "Memorandum").
The undersigned ("Purchaser") hereby acknowledges receipt of the
Memorandum and amends the Subscription Documents as follows:
1. The second paragraph on Page 1 of the Subscription Documents is
hereby replaced in its entirety by the following paragraph:
This Offering is conditioned upon the receipt of subscriptions for the
purchase of at least 1,800,000 shares of Common Stock, $0.001 par value per
share (the "COMMON STOCK"), at a purchase price of $2.00 per share (such
aggregated amount being referred to as the "PURCHASE PRICE"), and the receipt of
the full Purchase Price therefor on or before the Expiration Date of the
Offering (as defined below). The Company will hold a Closing of the Offering
(the "CLOSING") upon receipt and acceptance of $3,600,000 in gross sale proceeds
(i.e., subscriptions for 1,800,000 shares). The Company may sell an additional
922,070 shares (an additional $1,844,140 in gross sale proceeds) on the same
terms described above. Pending the Closing, each prospective investor's payment
accompanying the Subscription Documents will be deposited in a segregated escrow
account with the Escrow Agent. As more fully described in the Company's
Confidential Private Placement Memorandum dated October 9, 1998 and as
supplemented on October 9, 1998 and November 9, 1998 (the "Memorandum"), the
Offering is expected to expire on November 16, 1998 (the "EXPIRATION DATE"),
which Expiration Date may be extended by the mutual agreement of the Company and
the Placement Agent (as defined below) until November 20, 1998 without notice to
investors. The Company has the right, in its sole discretion, to accept or
reject any subscription in whole or in part. Purchase price payments will be
delivered to LaSalle National Bank, 135 South LaSalle Street, Chicago, Illinois
(the "ESCROW AGENT") for deposit in an interest-bearing account by noon of the
next business day following the receipt thereof. If subscriptions for at least
1,800,000 shares of Common Stock have not been received and accepted, and the
full Purchase Price therefor has not been received, on or before the Expiration
Date, the Offering will be terminated and all funds will be returned promptly to
subscribers without any interest thereon, and without charge or deduction.
2. The Subscription Agreement contained in the Subscription Documents
relating to the offering described in the Memorandum is hereby revised by
deleting Section 1 in its entirety with a new Section 1 which reads in its
entirety as follows:
1. PURCHASE AND SALE. V-ONE Corporation, a Delaware corporation
(the "COMPANY"), has offered for sale, and the undersigned purchaser
(the "PURCHASER") hereby tenders this subscription and applies for
the purchase of the number of shares ("SHARES") of common stock,
$0.001 par value per Share (the "COMMON STOCK") set forth on the
Signature Page at the purchase price of $2.00 (the "OFFERING PRICE").
The Offering is expected to expire on November 16, 1998, subject to
extension(s) by the mutual agreement of the Company and the Placement
Agent until November 20, 1998 without notice to investors (the
"EXPIRATION DATE"). The Offering is conditioned upon the Company's
receipt and acceptance of subscriptions for 1,800,000 shares and the
Company's receipt of the full Purchase Price therefor ($3,600,000) by
the "Expiration Date". The Company has reserved the right to sell up
to an additional 922,070 shares (an additional $1,844,140 in gross
<PAGE>
sale proceeds) on the same terms set forth above in the event this
Offering is oversubscribed (the "Over Subscription Option"). The
Purchaser must subscribe for a minimum of 50,000 shares ($100,000),
which requirement may be waived in the Company's sole discretion.
Together with this Subscription Agreement, the Purchaser is
delivering to the Company the full amount of the Purchase Price for
the shares (the "PURCHASE PRICE") subscribed for. This subscription
may be rejected by the Company in its sole discretion in whole or in
part. THE SIGNATURE OF THE UNDERSIGNED ON THE SIGNATURE PAGE
CONSTITUTES THE EXECUTION OF THIS SUBSCRIPTION AGREEMENT.
2. The Subscription Agreement contained in the Subscription
Documents relating to the offering described in the Memorandum is
hereby further revised by deleting Section 3(b)(i) in its entirety
with a new Section 3(b)(i) which reads in its entirety as follows:
The Purchaser has received and carefully reviewed the
Company's Confidential Offering Memorandum dated as of October 9,
1998, as amended and supplemented by the Supplement (No. 1) thereto
dated October 9, 1998 and Supplement No. 2 thereto dated November 9,
1998 and as may be further amended or supplemented from time to time
(the "Memorandum") which Memorandum relates to the Shares covered by
this Offering;
Except as modified by this letter, the Purchaser's Subscription Agreement
remains in full force and effect.
3. The Signature Page contained in the Subscription Documents is hereby
amended by replacing Section 2 in its entirety with a new Section 2 which reads
in its entirety as follows:
2. SUBSCRIPTION INFORMATION (to be completed by investor).
Number of shares subscribed for:.......................
__________________
Aggregate purchase price (number of shares x $2.00--
minimum purchase 50,000 shares for $100,000):.........
$_________________
Name(s) in which Shares are to be registered:
____________________________________________________________________
____________________________________________________________________
Very truly yours,
______________________________
Name of Purchaser
By:
___________________________
Signature of Authorized Person
______________________________
Print Name and Title
ACCEPTED AND AGREED:
V-ONE CORPORATION
By:
______________________
Its:
______________________
2
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 ISSUABLE UPON EXERCISE 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 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 _________ 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, ________________, a _____________
corporation, 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 _:__ _.m., New York City Time on October __,1999, and before 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.
<PAGE>
(d) The term "Expiration Date" refers to October __, 2003.
(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) that 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 $_______, 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" (as defined below) 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 one share 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 that 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 that
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-
<PAGE>
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) that 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
-4-
<PAGE>
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 that 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.
-5-
<PAGE>
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 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
-6-
<PAGE>
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 that 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
-7-
<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 is an
"accredited investor" as defined in Rule 501(a)(3) under the Securities Act, 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 Placement Agent Agreement dated as of
October 9, 1998 between LaSalle St. Securities, Inc. and the Company, as amended
or modified on the date hereof and as subsequently amended or modified from time
to time (the "Placement 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 Placement 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 in
a manner that would no longer require such legend 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 "Act"),
or any state securities laws. The sale to the holder of these
-8-
<PAGE>
securities is not covered by a registration statement under the Act
or registration under state securities laws. These securities have
been 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.
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 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: November __, 1998 V-ONE CORPORATION
By:
______________________________________
Name: Charles B. Griffis
Title: Senior Vice President and Chief
Financial Officer
-9-
<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:
_____________________________________
_____________________________________
Dated:
____________ ___,____ ___________________________________
(Signature must conform to name
of Holder as specified on the
face of the Warrant)
___________________________________
___________________________________
(Address)
-10-
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND
MAY NOT BE SOLD TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF REGISTRATION OR THE AVAILABILITY OF AN EXEMPTION FROM
REGISTRATION UNDER SAID ACT AND LAWS.
Warrant to Subscribe for
10,000 shares
Warrant to Subscribe for Common Stock
of
V-ONE CORPORATION
THIS CERTIFIES that A.L. Giannopoulos ("Holder") has the right to
subscribe from V-ONE Corporation, a Delaware corporation ("Corporation"), not
more than 10,000 fully paid and nonassessable shares of the Corporation's Common
Stock $.001 par value per share ("Common Stock"), at a price of $2.688 per share
("Exercise Price").
The Holder of this Warrant agrees with the Corporation that this Warrant
is issued and all rights hereunder shall be held subject to all of the
conditions, limitations and provisions set forth herein.
1. DEFINITIONS. The following capitalized terms, when used in this
Warrant, shall have the following meanings:
1.01 "Beneficiary" means an individual, trust or estate who or that, by
will or the laws of descent and distribution, succeeds to the rights and
obligations of the Holder under this Warrant upon the Holder's death.
1.02 "Board" means the Board of Directors of the Corporation.
1.03 "Fair Market Value" of a share of Common Stock means, as of any
given date, the closing sales price of a share of Common Stock on such date on
the principal national securities exchange on which the Common Stock is then
traded or, if the Common Stock is not then traded on a national securities
exchange, the closing sales price or, if none, the average of the bid and asked
prices of the Common Stock on such date as reported on the National Association
of Securities Dealers Automated Quotation System ("Nasdaq"); PROVIDED, HOWEVER,
that, if there were no sales reported as of such date, Fair Market Value shall
be computed as of the last date preceding such date on which a sale was
reported; PROVIDED, FURTHER, that, if any such exchange or quotation system is
closed on any day on which Fair Market Value is to be determined, Fair Market
Value shall be determined as of the first date immediately preceding such date
on which such exchange or quotation system was open for trading. In the event
the Common Stock is not admitted to trade on a securities exchange or quoted on
Nasdaq, the Fair Market Value of a share of Common Stock as of any given date
<PAGE>
shall be as determined in good faith by the Board, which determination may be
based on, among other things, the opinion of one or more independent and
reputable appraisers qualified to value companies in the Corporation's line of
business. Notwithstanding the foregoing, the Fair Market Value of a share of
Common Stock shall never be less than par value per share.
2. VESTING. This Warrant is exercisable in full on the date hereof.
This Warrant may not be exercised after August 6, 2003.
3. EXERCISE OF WARRANT UPON TERMINATION OF SERVICE. If the Holder's
service as a director of the Corporation terminates by reason of his death, the
right of the Holder's Beneficiaries to exercise this Warrant shall expire upon
the expiration of one year from the date of the Holder's death or on August 6,
2003, whichever is earlier. If the Holder's service as a director of the
Corporation terminates other than by reason of the Holder's death, this Warrant
expires on the termination of three months following the date of such
termination of service or on August 6, 2003, whichever is earlier.
4. EXERCISE. This Warrant shall be exercisable by written notice to the
Corporation, which must be received by the Secretary of the Corporation not
later than 5:00 P.M. local time at the principal executive office of the
Corporation on the expiration date of this Warrant. Such written notice shall
set forth (a) the number of shares of Common Stock being purchased, (b) the
aggregate exercise price for the shares of Common Stock being purchased, (c) the
exact name as it should appear on the stock certificate(s) to be issued for the
shares of Common Stock being purchased, and (d) the address to which the stock
certificate(s) should be sent. The aggregate exercise price of shares of Common
Stock purchased upon exercise of this Warrant shall be paid in full (a) in cash,
(b) by delivery to the Corporation of already owned shares of Common Stock that
have been held for at least six months, or (c) in any combination of cash and
such already owned shares of Common Stock.
In the event that any shares of Common Stock shall be transferred to the
Corporation to satisfy all or any part of the aggregate exercise price, the part
of the aggregate exercise price deemed to have been satisfied by such transfer
of shares of Common Stock shall be equal to the product derived by multiplying
the Fair Market Value as of the date of exercise times the number of shares of
Common Stock transferred to the Corporation. The Holder may not transfer to the
Corporation in satisfaction of the aggregate exercise price any fraction of a
share of Common Stock, and any portion of the aggregate exercise price that
would represent less than a full share of Common Stock must be paid in cash by
the Holder.
5. TAXES. The Corporation shall be entitled to withhold (or secure
payment from the Holder in lieu of withholding) the amount of any withholding or
other tax required by law to be withheld or paid by the Corporation with respect
to this Warrant. The Corporation may defer issuance of Common Stock under this
Warrant unless indemnified to its satisfaction against any liability for any
such tax. The amount of such withholding or tax payment shall be determined by
the Corporation or its delegate and shall be payable by the Holder at such time
as the Corporation determines. The Holder shall be permitted to satisfy his tax
or withholding obligation by (a) having cash withheld from the Holder's salary
2
<PAGE>
or other compensation payable by the Corporation, (b) the payment of cash by the
Holder to the Corporation, (c) the payment in shares of Common Stock already
owned by the Holder valued at Fair Market Value, and/or (d) the withholding from
this Warrant, at the appropriate time, of a number of shares of Common Stock
sufficient, based upon the Fair Market Value of such Common Stock, to satisfy
such tax or withholding requirements.
6. CERTAIN EVENTS.
6.01 RECAPITALIZATION. The number and kind of shares subject to this
Warrant and the Exercise Price of this Warrant shall be appropriately adjusted
to reflect any stock dividend, stock split, combination or exchange of shares,
merger, consolidation or other change in capitalization with a similar
substantive effect upon this Warrant. The Board shall have the power and sole
discretion to determine the nature and amount of the adjustment to be made in
each case.
6.02 SALE OR REORGANIZATION. After any reorganization, merger, or
consolidation in which the Corporation is or is not the surviving entity, the
Holder shall, at no additional cost, be entitled, upon the exercise of this
Warrant to the extent exercisable prior to such event to receive (subject to any
required action by stockholders), in lieu of the number of shares of Common
Stock then receivable on exercise pursuant to this Warrant, to the number and
class of shares of stock or other securities to which the Holder would have been
entitled pursuant to the terms of the reorganization, merger, or consolidation
if, at the time of such reorganization, merger, or consolidation, the Holder had
been the holder of record of a number of shares of Common Stock equal to the
number of shares of Common Stock then receivable on exercise of this Warrant.
Comparable rights shall accrue to the Holder in the event of successive
reorganizations, mergers, or consolidations of the character described above.
6.03 EXISTENCE OF THIS WARRANT. The existence of this Warrant shall
shall not affect the right of the Corporation or its stockholders to make or
authorize any and all adjustments, recapitalizations, reclassifications,
reorganizations and other changes in the Corporation's capital structure, the
Corporation's business, any merger or consolidation of the Corporation, any
issue of bonds, debentures or preferred stock of the Corporation, the
Corporation's liquidation or dissolution, any sale or transfer of all or any
part of the Corporation's assets or business, or any other corporate act or
proceeding, whether of a similar nature or otherwise.
7. APPLICABLE LAW. This Warrant is issued under and shall for all
purposes be governed by and construed in accordance with the laws of the
State of Delaware, without giving effect to principles of conflict of laws.
8. RESTRICTIONS ON TRANSFER. This Warrant and the Common Stock issuable
on exercise hereof have not been registered under the Securities Act of 1933,
as amended, or the securities laws of any state, and may not be sold,
transferred, pledged, hypothecated or otherwise disposed of in the absence of
registration or the availability of an exemption from registration under said
Act and laws, and any shares of Common Stock issued upon exercise of this
Warrant shall bear an appropriate legend to that effect.
3
<PAGE>
9. BENEFIT OF THIS WARRANT. Nothing in this Warrant shall be
construed to confer upon any person other than the Corporation, the Holder and
the Holder's Beneficiaries any legal or equitably right, remedy or claim under
this Warrant and this Warrant shall be for the sole and exclusive benefit of the
Corporation and the Holder.
10. LOSS OF WARRANT. Upon receipt by the Corporation of evidence of the
loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of indemnity or security reasonably satisfactory to
the Corporation, and upon surrender and cancellation or this Warrant, if
mutilated, the Corporation shall execute and deliver a new Warrant of like tenor
and date.
11. NOTICE TO CORPORATION. Notice or demands pursuant to this
Warrant to be given or made by the Holder of this Warrant to or on the
Corporation shall be sufficiently given or made if sent by certified or
registered mail, return receipt requested, postage prepaid, and addressed, until
another address is designated in writing by the Corporation, V-ONE Corporation,
20250 Century Boulevard, Germantown, MD 20874, Attention: Chief Financial
Officer.
IN WITNESS WHEREOF, the Corporation has caused this Warrant Certificate to
be duly executed under its corporate seal as of the 7th day of August, 1998.
V-ONE CORPORATION
By: /s/ Charles Griffis
-----------------------
Name: Charles Griffis
Title: Senior Vice President
ACCEPTED AND AGREED:
/s/ A.L. Giannopoulos
- ----------------------
A.L. Giannopoulos
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND
MAY NOT BE SOLD TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF REGISTRATION OR THE AVAILABILITY OF AN EXEMPTION FROM
REGISTRATION UNDER SAID ACT AND LAWS.
Warrant to Subscribe for
10,000 shares
Warrant to Subscribe for Common Stock
of
V-ONE CORPORATION
THIS CERTIFIES that William E. Odom ("Holder") has the right to subscribe
from V-ONE Corporation, a Delaware corporation ("Corporation"), not more than
10,000 fully paid and nonassessable shares of the Corporation's Common Stock
$.001 par value per share ("Common Stock"), at a price of $2.688 per share
("Exercise Price").
The Holder of this Warrant agrees with the Corporation that this Warrant
is issued and all rights hereunder shall be held subject to all of the
conditions, limitations and provisions set forth herein.
1. DEFINITIONS. The following capitalized terms, when used in this
Warrant, shall have the following meanings:
1.01 "Beneficiary" means an individual, trust or estate who or that, by
will or the laws of descent and distribution, succeeds to the rights and
obligations of the Holder under this Warrant upon the Holder's death.
1.02 "Board" means the Board of Directors of the Corporation.
1.03 "Fair Market Value" of a share of Common Stock means, as of any
given date, the closing sales price of a share of Common Stock on such date on
the principal national securities exchange on which the Common Stock is then
traded or, if the Common Stock is not then traded on a national securities
exchange, the closing sales price or, if none, the average of the bid and asked
prices of the Common Stock on such date as reported on the National Association
of Securities Dealers Automated Quotation System ("Nasdaq"); PROVIDED, HOWEVER,
that, if there were no sales reported as of such date, Fair Market Value shall
be computed as of the last date preceding such date on which a sale was
reported; PROVIDED, FURTHER, that, if any such exchange or quotation system is
closed on any day on which Fair Market Value is to be determined, Fair Market
Value shall be determined as of the first date immediately preceding such date
on which such exchange or quotation system was open for trading. In the event
the Common Stock is not admitted to trade on a securities exchange or quoted on
Nasdaq, the Fair Market Value of a share of Common Stock as of any given date
<PAGE>
shall be as determined in good faith by the Board, which determination may be
based on, among other things, the opinion of one or more independent and
reputable appraisers qualified to value companies in the Corporation's line of
business. Notwithstanding the foregoing, the Fair Market Value of a share of
Common Stock shall never be less than par value per share.
2. VESTING. This Warrant is exercisable in full on the date hereof.
This Warrant may not be exercised after August 6, 2003.
3. EXERCISE OF WARRANT UPON TERMINATION OF SERVICE. If the Holder's
service as a director of the Corporation terminates by reason of his death, the
right of the Holder's Beneficiaries to exercise this Warrant shall expire upon
the expiration of one year from the date of the Holder's death or on August 6,
2003, whichever is earlier. If the Holder's service as a director of the
Corporation terminates other than by reason of the Holder's death, this Warrant
expires on the expiration of three months following the date of such termination
of service or on August 6, 2003, whichever is earlier.
4. EXERCISE. This Warrant shall be exercisable by written notice to
the Corporation, which must be received by the Secretary of the Corporation not
later than 5:00 P.M. local time at the principal executive office of the
Corporation on the expiration date of this Warrant. Such written notice shall
set forth (a) the number of shares of Common Stock being purchased, (b) the
aggregate exercise price for the shares of Common Stock being purchased, (c) the
exact name as it should appear on the stock certificate(s) to be issued for the
shares of Common Stock being purchased, and (d) the address to which the stock
certificate(s) should be sent. The aggregate exercise price of shares of Common
Stock purchased upon exercise of this Warrant shall be paid in full (a) in cash,
(b) by delivery to the Corporation of already owned shares of Common Stock that
have been held for at least six months, or (c) in any combination of cash and
such already owned shares of Common Stock.
In the event that any shares of Common Stock shall be transferred to the
Corporation to satisfy all or any part of the aggregate exercise price, the part
of the aggregate exercise price deemed to have been satisfied by such transfer
of shares of Common Stock shall be equal to the product derived by multiplying
the Fair Market Value as of the date of exercise times the number of shares of
Common Stock transferred to the Corporation. The Holder may not transfer to the
Corporation in satisfaction of the aggregate exercise price any fraction of a
share of Common Stock, and any portion of the aggregate exercise price that
would represent less than a full share of Common Stock must be paid in cash by
the Holder.
5. TAXES. The Corporation shall be entitled to withhold (or secure
payment from the Holder in lieu of withholding) the amount of any withholding or
other tax required by law to be withheld or paid by the Corporation with respect
to this Warrant. The Corporation may defer issuance of Common Stock under this
Warrant unless indemnified to its satisfaction against any liability for any
such tax. The amount of such withholding or tax payment shall be determined by
the Corporation or its delegate and shall be payable by the Holder at such time
as the Corporation determines. The Holder shall be permitted to satisfy his tax
or withholding obligation by (a) having cash withheld from the Holder's salary
2
<PAGE>
or other compensation payable by the Corporation, (b) the payment of cash by the
Holder to the Corporation, (c) the payment in shares of Common Stock already
owned by the Holder valued at Fair Market Value, and/or (d) the withholding from
this Warrant, at the appropriate time, of a number of shares of Common Stock
sufficient, based upon the Fair Market Value of such Common Stock, to satisfy
such tax or withholding requirements.
6. CERTAIN EVENTS.
6.01 RECAPITALIZATION. The number and kind of shares subject to
this Warrant and the Exercise Price of this Warrant shall be appropriately
adjusted to reflect any stock dividend, stock split, combination or exchange of
shares, merger, consolidation or other change in capitalization with a similar
substantive effect upon this Warrant. The Board shall have the power and sole
discretion to determine the nature and amount of the adjustment to be made in
each case.
6.02 SALE OR REORGANIZATION. After any reorganization, merger,
or consolidation in which the Corporation is or is not the surviving entity, the
Holder shall, at no additional cost, be entitled, upon the exercise of this
Warrant to the extent exercisable prior to such event to receive (subject to any
required action by stockholders), in lieu of the number of shares of Common
Stock then receivable on exercise pursuant to this Warrant, to the number and
class of shares of stock or other securities to which the Holder would have been
entitled pursuant to the terms of the reorganization, merger, or consolidation
if, at the time of such reorganization, merger, or consolidation, the Holder had
been the holder of record of a number of shares of Common Stock equal to the
number of shares of Common Stock then receivable on exercise of this Warrant.
Comparable rights shall accrue to the Holder in the event of successive
reorganizations, mergers, or consolidations of the character described above.
6.03 EXISTENCE OF THIS WARRANT. The existence of this Warrant shall
not affect the right of the Corporation or its stockholders to make or authorize
any and all adjustments, recapitalizations, reclassifications, reorganizations
and other changes in the Corporation's capital structure, the Corporation's
business, any merger or consolidation of the Corporation, any issue of bonds,
debentures or preferred stock of the Corporation, the Corporation's liquidation
or dissolution, any sale or transfer of all or any part of the Corporation's
assets or business, or any other corporate act or proceeding, whether of a
similar nature or otherwise.
7. APPLICABLE LAW. This Warrant is issued under and shall for all
purposes be governed by and construed in accordance with the laws of the State
of Delaware, without giving effect to principles of conflict of laws.
8. RESTRICTIONS ON TRANSFER. This Warrant and the Common Stock
issuable on exercise hereof have not been registered under the Securities Act of
1933, as amended, or the securities laws of any state, and may not be sold,
transferred, pledged, hypothecated or otherwise disposed of in the absence of
registration or the availability of an exemption from registration under said
Act and laws, and any shares of Common Stock issued upon exercise of this
Warrant shall bear an appropriate legend to that effect.
3
<PAGE>
9. BENEFIT OF THIS WARRANT. Nothing in this Warrant shall be
construed to confer upon any person other than the Corporation, the Holder and
the Holder's Beneficiaries any legal or equitably right, remedy or claim under
this Warrant and this Warrant shall be for the sole and exclusive benefit of the
Corporation and the Holder.
10. LOSS OF WARRANT. Upon receipt by the Corporation of evidence of
the loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of indemnity or security reasonably satisfactory to
the Corporation, and upon surrender and cancellation or this Warrant, if
mutilated, the Corporation shall execute and deliver a new Warrant of like tenor
and date.
11. NOTICE TO CORPORATION. Notice or demands pursuant to this
Warrant to be given or made by the Holder of this Warrant to or on the
Corporation shall be sufficiently given or made if sent by certified or
registered mail, return receipt requested, postage prepaid, and addressed, until
another address is designated in writing by the Corporation, V-ONE Corporation,
20250 Century Boulevard, Germantown, MD 20874, Attention: Chief Financial
Officer.
IN WITNESS WHEREOF, the Corporation has caused this Warrant Certificate to
be duly executed under its corporate seal as of the 7th day of August, 1998.
V-ONE CORPORATION
By: /s/ Charles Griffis
---------------------
Name: Charles Griffis
Title: Senior Vice President
ACCEPTED AND AGREED:
/s/ William E. Odom
- -----------------------
William E. Odom
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS CONTAINED IN THE COMPANY'S FORM 10-Q FOR THE
THREE MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 529,657
<SECURITIES> 0
<RECEIVABLES> 7,983,219
<ALLOWANCES> 1,743,449
<INVENTORY> 860,156
<CURRENT-ASSETS> 7,870,176
<PP&E> 1,567,410
<DEPRECIATION> 669,811
<TOTAL-ASSETS> 10,078,922
<CURRENT-LIABILITIES> 2,720,141
<BONDS> 0
2,188,884
0
<COMMON> 13,915
<OTHER-SE> 4,965,235
<TOTAL-LIABILITY-AND-EQUITY> 10,078,922
<SALES> 8,305,082
<TOTAL-REVENUES> 8,305,082
<CGS> 1,109,122
<TOTAL-COSTS> 10,471,707
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (51,870)
<INCOME-PRETAX> (3,275,747)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,275,747)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (124,580)
<NET-INCOME> (3,329,267)
<EPS-PRIMARY> (.25)
<EPS-DILUTED> (.25)
</TABLE>
