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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) JUNE 30, 1999
------------------------------
V-ONE CORPORATION
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(Exact name of registrant as specified in its charter)
Commission File No. 0-21511
DELAWARE 52-1953278
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(State or other jurisdiction of incorporation) (IRS Employer Identification No.)
20250 Century Boulevard - Suite 300
Germantown, Maryland 20874
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(301) 515-5200
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(Former name or former address, if changed since last report.)
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<PAGE>
Item 5. Other Events.
On February 24, 1999, V-ONE Corporation ("Company") obtained a $3,000,000
term loan from Transamerica Business Credit Corporation ("Transamerica")
pursuant to that certain Loan and Security Agreement dated as of February 24,
1999 ("Loan Agreement"). The term loan is due on August 31, 1999. In connection
with this loan, the Company granted a security interest in all of its assets,
including its intellectual property, to Transamerica.
On March 31, 1999, the Company and Transamerica entered into an Amendment
Agreement ("First Amendment") to the Loan Agreement. Under the terms of the
First Amendment, Transamerica waived the default created when the Company
received a "going concern" opinion from its independent auditors. In
consideration for such waiver, the Company agreed to (i) grant TBCC Funding
Trust II, an affiliate of Transamerica, warrants to purchase 100,000 shares of
common stock of the Company at an exercise price of $3.25 per share and (ii)
accept an additional financial covenant that the Company's net worth will be
$5,000,000 as of June 30, 1999 and September 30, 1999. The exercise price of
these warrants was subsequently reduced to $2.33 per share.
On June 30, 1999, the Company and Transamerica entered into a second
Amendment Agreement ("Second Amendment") to the Loan Agreement. Under the terms
of the Second Amendment, Transamerica has (i) waived the requirement that the
Company have a net worth of $5 million on June 30, 1999, (ii) amended the
promissory note issued by the Company in connection with the Loan Agreement to
extend the maturity date of the term loan to February 28, 2000 and grant to
Transamerica the option to convert the term loan to a revolving loan on February
28, 2000, and (iii) deleted the acquisition fee required under the Loan
Agreement. In consideration for the Second Amendment, the Company has agreed to
(i) issue seven-year warrants to purchase 50,000 of the Company's common stock
at an exercise price of $3.75 per share, (ii) pay a $150,000 fee to Transamerica
on February 28, 2000, (iii) use 30% of any equity raised by the Company after
completion of the current round (approximately $10-12 million) of financing to
prepay the term loan, (iv) amortize $100,000 in principal of the term loan per
month beginning on September 1, 1999 and (v) pay the balance of principal and
accrued and unpaid interest on the term loan on February 28, 2000. In the Second
Amendment, the Company also agreed to pay Transamerica a prepayment fee of the
net present value of all interest that would have accrued through the scheduled
maturity date on the principal amount being prepaid (assuming a rate of interest
per annum equal to the rate of interest then in effect on the term loan on the
date of the prepayment) discounted, on a simple interest basis, at the rate of
6% per annum. This prepayment fee is also due on any acceleration of the term
loan, but is not due as a result of a prepayment under clause (iii) above.
The description of the above agreement is qualified in its entirety by
reference to the exhibits filed with or incorporated by reference in this Form
8-K.
Item 7. Financial Statements and Exhibits.
2
<PAGE>
(c) Exhibits. The following exhibits are filed with or incorporated by
reference in this Form 8-K:
EXHIBIT DESCRIPTION
99.1 Amendment Agreement dated June 30, 1999 to Loan and Security
Agreement dated February 24, 1999, as amended, between V-ONE
Corporation and Transamerica Business Credit Corporation.
99.2 Stock Subscription Warrant dated June 30, 1999 issued to TBCC
Funding Trust II.
3
<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.
Dated: July 1, 1999
V-ONE CORPORATION
By: /s/ David D. Dawson
----------------------------
Name: David D. Dawson
Title: Chairman and CEO
4
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TBCC
AMENDMENT AGREEMENT
BORROWER: V-ONE CORPORATION,
A DELAWARE CORPORATION
ADDRESS: 20250 CENTURY BOULEVARD, SUITE 300
GERMANTOWN, MARYLAND 20874
DATE: JUNE 30, 1999
THIS AMENDMENT AGREEMENT (this "Amendment") is entered into as of the above
date, between the above borrower (the "Borrower"), having its chief executive
office and principal place of business at the address shown above, and
TRANSAMERICA BUSINESS CREDIT CORPORATION, a Delaware corporation ("TBCC"),
having its principal office at 9399 West Higgins Road, Suite 600, Rosemont,
Illinois 60018 and having an office at 76 Batterson Park Road, Farmington,
Connecticut 06032-2591.
TBCC and the Borrower agree to amend and supplement the Loan and Security
Agreement between them, dated February 24, 1999, as amended (as amended, the
"Loan Agreement"), as follows. (This Amendment, the Loan Agreement, any prior
written amendments to the Loan Agreement signed by TBCC and the Borrower, and
all other written documents and agreements between TBCC and the Borrower, are
referred to herein collectively as the "Loan Documents." Capitalized terms used
but not defined in this Amendment shall have the meanings set forth in the Loan
Agreement.)
1. AMENDMENTS. Effective the Closing Date (as defined below), the
Schedule is amended as follows:
(a) The Term Loan Maturity Date (Section 4 of the Schedule) shall be
February 28, 2000.
(b) The second and third sentences of the second paragraph of Section 1(A)
of the Schedule are deleted in their entirety and replaced by the
following:
On the Term Loan Maturity Date, TBCC shall have the option (but not
the obligation) to convert the Term Loan to a Revolving Loan. If TBCC
agrees to convert the Term Loan to a Revolving Loan and if , on the
Term Loan Maturity Date, the principal amount of the outstanding Term
Loan exceeds the Revolving Loan Credit Limit, Borrower shall repay
the Term Loan in an amount equal to such excess.
2. WAIVERS.
(a) Effective the Closing Date, TBCC waives compliance with Section 5.15
of the Loan Agreement for the fiscal quarter ending June 30, 1999.
(b) Effective the Closing Date, TBCC waives compliance with Section 6.8
of the Loan Agreement in order to permit the issuance by Borrower of
Series C Convertible Preferred Stock, PROVIDED, HOWEVER, that such waiver
does not extend to, and shall not be deemed to include, payment of any
cash dividends thereon.
3. OTHER PROVISIONS.
(a) The Acquisition Fee (Section 3 of the Schedule) is hereby deleted.
Effective the Closing Date, any and all references in the Loan Documents
to such Acquisition Fee shall be of no further force or effect.
<PAGE>
TBCC Amendment Agreement
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(b) The Term Note dated February 24, 1999, in the amount of $3,000,000,
executed by the Borrower in favor of TBCC, is amended in its entirety by a
Term Note in the form of EXHIBIT A hereto, to be delivered by Borrower on
or prior to the Closing Date. In consideration therefor, the Borrower
agrees to pay TBCC a Term Note re-negotiation fee of $150,000 on February
28, 2000. Effective the Closing Date, the Term Note dated February 24,
1999 will be deemed replaced by such new Term Note.
(c) With respect to any Borrower's delinquent payments of principal or
interest due (pursuant to the Amended Term Note dated June 30, 1999) (each
such delinquent payment a "Late Payment"), Borrower agrees to pay to TBCC,
with respect to each Late Payment, for each day following the contractual
due date of such Late Payment through and including the day such Late
Payment is rendered to TBCC (the "Forbearance Period"), additional
interest on the unpaid principal amount outstanding during the Forbearance
Period at a rate equal to 2.0% per annum, pro-rated on a daily basis for
each day of such Forbearance Period. Such additional interest shall be due
and payable to TBCC immediately upon Borrower's receipt from TBCC of a
written statement of the amount due TBCC in accordance with this
subsection 3(c).
(d) In connection with TBCC's security interest in that certain
Non-Negotiable Promissory Note dated June 11, 1999, in the amount of
$2,000,000, executed by Hai Hua Cheng and Wen Dar Wu (collectively, the
"Note Parties") in favor of Borrower (the "Note"), Borrower shall deliver
the following to TBCC on or prior to the Closing Date: (i) the Note; and
(ii) an indorsement (allonge) with respect to such Note.
(e) Subsequent to closing of the current equity round pursuant to the
Letter of Intent from Janney Montgomery Scott dated June 30, 1999,
Borrower shall apply 30% of any future equity contributions (regardless of
amount, but excluding the exercise of employee stock options and warrants
existing as of the date hereof) to reduce the principal balance of the
Loans, such payment is not considered a prepayment for purposes of the
Prepayment Fee per the Term Note.
4. CONDITIONS PRECEDENT. The effectiveness of the foregoing amendments
shall be subject to the conditions precedent that:
(a) TBCC shall have received seven-year warrants to purchase 50,000 shares
of common stock of the Borrower, on the terms to be set forth in a Stock
Subscription Warrant (the "Warrant"), in form and substance satisfactory
to TBCC, at an exercise price equal to $3.75 per share. Said warrants
shall be deemed fully earned on the date of issuance thereof, shall be in
addition to all interest and other fees, and shall be non-refundable;
(b) Borrower shall have delivered the new Term Note pursuant to subsection
3(b) hereof; and
(c) Pursuant to subsection 3(d) hereof, Borrower shall have delivered to
TBCC the following: (i) the Note, and; (ii) an indorsement (allonge),
executed in blank, with respect to such Note.
The date of satisfaction of the foregoing conditions precedent is the "Closing
Date".
5. REPRESENTATIONS TRUE. To induce TBCC to enter into this Amendment, the
Borrower hereby confirms and restates, as of the date hereof, the
representations and warranties made by it in Section 4 of the Loan Agreement.
For the purposes of this Section 5 each reference in Section 4 of the Loan
Agreement to "this Agreement," and the words "hereof," "herein," "hereunder," or
words of like import in such Section, shall mean and be a reference to the Loan
Agreement as amended by this Amendment.
6. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND ANY DISPUTE ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, WHETHER
SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE GOVERNED BY THE
INTERNAL LAWS AND DECISIONS OF THE STATE OF ILLINOIS.
7. GENERAL PROVISIONS. TBCC's execution and delivery of, or acceptance
of, this Amendment and any other documents and instruments in connection
herewith shall not be deemed to create a course of dealing or otherwise create
any express or implied duty by it to provide any other or further amendments,
consents or waivers in the future. This Amendment, the Loan Agreement, and the
other Loan Documents set forth in full all of the representations and agreements
of the parties with respect to the subject matter hereof and supersede all prior
2
<PAGE>
TBCC Amendment Agreement
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discussions, representations, agreements and understandings between the parties
with respect to the subject hereof. Except as herein expressly amended and
supplemented, all of the terms and provisions of the Loan Agreement and the
other Loan Documents shall continue in full force and effect and the same are
hereby ratified and confirmed. This Amendment forms part of the Loan Agreement
and the terms of the Loan Agreement are incorporated herein by reference.
BORROWER: TBCC:
V-ONE CORPORATION TRANSAMERICA BUSINESS CREDIT
CORPORATION
By: /s/ David D. Dawson By: /s/ Robert D. Pomeroy, Jr.
-------------------- ----------------------------
Title: CEO Title: Robert D. Pomeroy, Jr.
Executive Vice President
3
<PAGE>
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TERM NOTE
$3,000,000 CHICAGO, ILLINOIS JUNE 30, 1999
FOR VALUE RECEIVED, V-ONE CORPORATION, a Delaware corporation having its
chief executive office and principal place of business at 20250 Century
Boulevard, Suite 300, Germantown, Maryland 20874 (the "Borrower"), hereby
unconditionally and absolutely promises to pay to the order of TRANSAMERICA
BUSINESS CREDIT CORPORATION, a Delaware corporation ("TBCC"), at TBCC's office
at 9399 West Higgins Road, Suite 600, Rosemont, Illinois 60018, or at such other
location as TBCC may from time to time designate, in lawful money of the United
States of America and in immediately available funds, the principal amount equal
to $3,000,000, as follows: (i) six consecutive monthly principal installments of
$100,000 each, beginning on September 1, 1999 and continuing on the first day of
each succeeding month, through and including February 1, 2000; and (ii) one
payment of the entire unpaid principal balance of this Note, plus any and all
accrued and unpaid interest, on February 28, 2000 (the "Term Loan Maturity
Date"). The Borrower further promises to pay interest in like money and funds at
TBCC's office specified above (or at such other location as TBCC may from time
to time designate) on the unpaid principal amount hereof from time to time
outstanding from and including the date hereof until paid in full (both before
and after judgment), on the first Business Day of each month, and on the Term
Loan Maturity Date, at a rate equal to 12.53% per annum, PROVIDED, HOWEVER, that
if Borrower fails to pay any principal payment required hereby on the date such
principal payment is due and payable, the interest rate hereunder shall be
increased by two percent per annum, prorated on a daily basis for each day that
such principal payment remains due and payable, through and including the day
such principal payment is paid (at which time, unless any other Event of Default
has occurred and is continuing, the original interest rate hereunder shall again
take effect); and PROVIDED FURTHER that (without duplication of the foregoing
interest rate increase) following the occurrence and during the continuance of
any Event of Default, the interest rate hereunder shall be increased by two
percent per annum. Interest shall be calculated on the basis of a 360-day year
for the actual number of days elapsed. All capitalized terms used herein which
are not defined herein shall have the meanings ascribed to such terms in the
Loan and Security Agreement between TBCC and Borrower dated February 24, 1999,
as amended (as amended, the "Loan Agreement").
Whenever any payment to be made hereunder shall be stated to be due on a
day that is not a Business Day, the payment may be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the amount of interest due hereunder.
This Note is entitled to the benefit of all terms and conditions of, and
the security of all security interests, liens, mortgages, deeds of trust and
rights granted pursuant to, the Loan Agreement and the other Loan Documents, and
is subject to optional and mandatory prepayment as provided therein. The
principal of this Note may be prepaid, in whole or in part, at the option of the
Borrower, upon 3 days' prior notice to TBCC. Partial prepayments hereof shall be
applied to the installments of principal hereof in the inverse order of
maturity. Accrued interest on any principal amount hereof prepaid shall be due
on the prepayment date as to the principal amount hereof prepaid. Any prepayment
hereof shall be subject to payment of an additional payment (the "Prepayment
Fee") equal to the net present value of all interest that would have accrued
through the scheduled maturity date on the principal amount being prepaid
(assuming a rate of interest per annum equal to the rate of interest then in
effect hereunder on the date of the prepayment) discounted, on a simple interest
basis, at the rate of 6% per annum. The Prepayment Fee shall also be due and
payable upon any acceleration hereof pursuant to the Loan Agreement.
Upon the occurrence of any one or more Events of Default, all amounts then
remaining unpaid on this Note may be declared to be or may automatically become
immediately due and payable as provided in the Loan Agreement.
The Borrower acknowledges that the holder of this Note may assign,
transfer or sell all or a portion of its rights and interests to and under this
Note to one or more Persons as provided in the Loan Agreement and that such
Persons shall thereupon become vested with all of the rights and benefits of
TBCC in respect hereof as to all or that portion of this Note which is so
assigned, transferred or sold.
In the event of any conflict between the terms hereof and the terms and
provisions of the Loan Agreement, the terms and provisions of the Loan Agreement
shall control.
<PAGE>
The Borrower and all other parties that at any time may be liable hereupon
in any capacity, jointly or severally, waive presentment, demand for payment,
protest and notice of dishonor of this Note and authorize the holder hereof,
without notice, to increase or decrease the rate of interest on any amount owing
under this Note in accordance with the Loan Agreement. The Borrower further
waives promptness, diligence, notice of acceptance and any other notice with
respect to any of the Obligations and any requirement that TBCC exhaust any
rights or take any action against any other Person or any Collateral. The
Borrower further hereby waives notice of or proof of reliance by TBCC upon this
Note, and the Obligations shall conclusively be deemed to have been created,
contracted, incurred, renewed, extended, amended or waived in reliance upon this
Note. The Borrower shall make all payments hereunder and under the Loan
Agreement without defense, offset or counterclaim. No failure to exercise and no
delay in exercising any rights hereunder on the part of the holder hereof shall
operate as a waiver of such rights. This Note may not be changed orally, but
only by an agreement in writing, which is signed by the party or parties against
whom enforcement of any waiver, change, modification or discharge is sought.
<PAGE>
EXHIBIT A TO AMENDMENT AGREEMENT
THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS NOTE AND THE OTHER
LOAN DOCUMENTS AND ANY DISPUTE ARISING OUT OF OR IN CONNECTION WITH THIS NOTE,
WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE GOVERNED BY
THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAW PROVISIONS) AND DECISIONS
OF THE STATE OF ILLINOIS.
ALL DISPUTES ARISING UNDER OR IN CONNECTION WITH THIS NOTE AND ANY OTHER
LOAN DOCUMENT BETWEEN THE BORROWER AND TBCC, WHETHER SOUNDING IN CONTRACT, TORT,
EQUITY OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE AND FEDERAL COURTS LOCATED
IN CHICAGO, ILLINOIS, AND THE COURTS TO WHICH AN APPEAL THEREFROM MAY BE TAKEN;
PROVIDED, HOWEVER, THAT TBCC SHALL HAVE THE RIGHT, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, TO PROCEED AGAINST THE BORROWER OR ITS PROPERTY IN ANY LOCATION
REASONABLY SELECTED BY TBCC IN GOOD FAITH TO ENABLE TBCC TO REALIZE ON SUCH
PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF TBCC. THE
BORROWER WAIVES ANY OBJECTION THAT THE BORROWER MAY HAVE TO THE LOCATION OF THE
COURT IN WHICH TBCC HAS COMMENCED A PROCEEDING, INCLUDING, WITHOUT LIMITATION,
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON FORUM NON CONVENIENS.
THE BORROWER HEREBY IRREVOCABLY DESIGNATES CT CORPORATION SYSTEM, 1209
ORANGE STREET, WILMINGTON, DELAWARE 19801, AS THE DESIGNEE AND AGENT OF THE
BORROWER TO RECEIVE, FOR AND ON BEHALF OF THE BORROWER, SERVICE OF PROCESS IN
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS NOTE OR ANY OTHER LOAN
DOCUMENT. IT IS UNDERSTOOD THAT A COPY OF SUCH PROCESS SERVED ON SUCH AGENT AT
ITS ADDRESS WILL BE PROMPTLY FORWARDED BY MAIL TO THE BORROWER AND ITS LEGAL
COUNSEL DESIGNATED IN THE SCHEDULE, BUT THE FAILURE OF THE BORROWER OR SUCH
LEGAL COUNSEL TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY THE SERVICE OF
SUCH PROCESS. NOTHING HEREIN SHALL AFFECT THE RIGHT OF TBCC TO SERVE LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
THE BORROWER AND, BY ITS ACCEPTANCE HEREOF, TBCC EACH HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,
OR IN ANY WAY RELATING TO: (I) THIS NOTE; OR (II) ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN TBCC AND BORROWER; OR (III) ANY CONDUCT, ACTS OR
OMISSIONS OF TBCC OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH TBCC OR BORROWER; IN EACH
OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
V-ONE CORPORATION
By: /s/ David D. Dawson
---------------------------
2
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
NO.
STOCK SUBSCRIPTION WARRANT
TO PURCHASE COMMON STOCK OF
V-ONE CORPORATION (THE "COMPANY")
DATE OF INITIAL ISSUANCE: JUNE 30, 1999
THIS CERTIFIES THAT for value received, TBCC FUNDING TRUST II or its
registered assigns (hereinafter called the "Holder") is entitled to purchase
from the Company, at any time during the Term of this Warrant, Fifty-Thousand
(50,000) shares of common stock, par value $.001 per share, of the Company (the
"Common Stock"), at the Warrant Price, payable as provided herein. The exercise
of this Warrant shall be subject to the provisions, limitations and restrictions
herein contained, and may be exercised in whole or in part.
SECTION 1. DEFINITIONS.
For all purposes of this Warrant, the following terms shall have the
meanings indicated:
"COMMON STOCK" shall mean and include the Company's authorized common
stock, $.001 par value, as constituted at the date hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"TERM OF THIS WARRANT" shall mean the period beginning on the date of
initial issuance hereof and ending on the seventh anniversary of such date of
initial issuance.
"WARRANT PRICE" shall mean $3.75 per share, subject to adjustment in
accordance with Section 5 hereof.
"WARRANTS" shall mean this Warrant and any other Warrant or Warrants
issued in connection with the Loan and Security Agreement dated as of February
24, 1999, between the Company and Transamerica Business Credit Corporation
("TBCC") (as amended by the Amendment Agreement of even date herewith between
the Company and TBCC, and as further amended, the "Loan and Security Agreement")
<PAGE>
to the original holder of this Warrant, or any transferees from such original
holder or this Holder.
"WARRANT SHARES" shall mean shares of Common Stock purchased or
purchasable by the Holder of this Warrant upon the exercise hereof.
SECTION 2. EXERCISE OF WARRANT.
2.1 PROCEDURE FOR EXERCISE OF WARRANT. To exercise this Warrant in whole
or in part (but not as to any fractional share of Common Stock), the Holder
shall deliver to the Company at its office referred to in Section 13 hereof at
any time and from time to time during the Term of this Warrant: (i) the Notice
of Exercise in the form attached hereto, (ii) cash, certified or official bank
check payable to the order of the Company, wire transfer of funds to the
Company's account, or cancellation of any indebtedness of the Company to the
Holder (or any combination of any of the foregoing) in the amount of the Warrant
Price for each share being purchased, and (iii) this Warrant. Notwithstanding
any provisions herein to the contrary, if the Current Market Price (as defined
in Section 5) is greater than the Warrant Price (at the date of calculation, as
set forth below), in lieu of exercising this Warrant as hereinabove permitted,
the Holder may elect to receive shares of Common Stock equal to the value (as
determined below) of this Warrant (or the portion thereof being canceled) by
surrender of this Warrant at the office of the Company referred to in Section 13
hereof, together with the Notice of Exercise, in which event the Company shall
issue to the Holder that number of shares of Common Stock computed using the
following formula:
CS = WCS X (CMP-WP)
CMP
Where
CS equals the number of shares of Common Stock to be issued to the
Holder
WCS equals the number of shares of Common Stock purchasable under the
Warrant or, if only a portion of the Warrant is being exercised, the
portion of the Warrant being exercised (at the date of such
calculation)
CMP equals the Current Market Price (at the date of such calculation)
WP equals the Warrant Price (as adjusted to the date of such
calculation)
In the event of any exercise of the rights represented by this Warrant, a
certificate or certificates for the shares of Common Stock so purchased,
registered in the name of the Holder or such other name or names as may be
designated by the Holder, shall be delivered to the Holder hereof within a
reasonable time, not exceeding fifteen (15) days, after the rights represented
by this Warrant shall have been so exercised; and, unless this Warrant has
expired, a new Warrant representing the number of shares (except a remaining
fractional share), if any, with respect to which this Warrant shall not then
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<PAGE>
have been exercised shall also be issued to the Holder hereof within such time.
The person in whose name any certificate for shares of Common Stock is issued
upon exercise of this Warrant shall for all purposes be deemed to have become
the holder of record of such shares on the date on which the Warrant was
surrendered and payment of the Warrant Price and any applicable taxes was made,
irrespective of the date of delivery of such certificate, except that, if the
date of such surrender and payment is a date when the stock transfer books of
the Company are closed, such person shall be deemed to have become the holder of
such shares at the close of business on the next succeeding date on which the
stock transfer books are open.
2.2 TRANSFER RESTRICTION LEGEND. Each certificate for Warrant Shares
shall bear the following legend (and any additional legend required by (i) any
applicable state securities laws and (ii) any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof unless at the time of exercise such Warrant Shares shall be registered
under the Securities Act:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold or
transferred in the absence of such registration or an exemption
therefrom under said Act."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution under a registration statement of the securities
represented thereby) shall also bear such legend unless, in the opinion of
counsel for the holder thereof (which counsel shall be reasonably satisfactory
to counsel for the Company) the securities represented thereby are not, at such
time, required by law to bear such legend.
SECTION 3. COVENANTS AS TO COMMON STOCK. The Company covenants and agrees that
all shares of Common Stock that may be issued upon the exercise of the rights
represented by this Warrant shall, upon issuance, be validly issued, fully paid
and nonassessable, and free from all taxes, liens and charges with respect to
the issue thereof. The Company further covenants and agrees that it shall pay
when due and payable any and all federal and state taxes which may be payable in
respect of the issue of this Warrant or any Common Stock or certificates
therefor issuable upon the exercise of this Warrant. The Company further
covenants and agrees that the Company shall at all times have authorized and
reserved, free from preemptive rights, a sufficient number of shares of Common
Stock to provide for the exercise of the rights represented by this Warrant. The
Company further covenants and agrees that if any shares of capital stock to be
reserved for the purpose of the issuance of shares upon the exercise of this
Warrant require registration with or approval of any governmental authority
under any federal or state law before such shares may be validly issued or
delivered upon exercise, then the Company shall in good faith and as
expeditiously as possible endeavor to secure such registration or approval, as
the case may be. If and so long as the Common Stock issuable upon the exercise
of this Warrant is listed on any national securities exchange, the Company
shall, if permitted by the rules of such exchange, list and keep listed on such
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<PAGE>
exchange, upon official notice of issuance, all shares of such Common Stock
issuable upon exercise of this Warrant.
SECTION 4. ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of the Warrant
Price as provided in Section 5, the Holder shall thereafter be entitled to
purchase, at the Warrant Price resulting from such adjustment, the number of
shares (calculated to the nearest tenth of a share) obtained by multiplying the
Warrant Price in effect immediately prior to such adjustment by the number of
shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the Warrant Price resulting from such
adjustment.
SECTION 5. ADJUSTMENT OF WARRANT PRICE. The Warrant Price shall be subject to
adjustment from time to time as follows:
(i) If the Company shall at any time or from time to time during the
Term of this Warrant issue shares of Common Stock other than Excluded Stock (as
hereinafter defined) without consideration or for a consideration per share less
than the Warrant Price in effect immediately prior to the issuance of such
Common Stock, the Warrant Price in effect immediately prior to each such
issuance or adjustment shall forthwith (except as provided in this clause (i))
be adjusted to a price equal to the consideration per share for which such
additional shares of Common Stock are so issued.
For the purposes of any adjustment of the Warrant Price pursuant to this clause
(i), the following provisions shall be applicable:
1. In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid therefor.
2. In the case of the issuance of Common Stock for a consideration in
whole or in part other than cash, the consideration other than cash
shall be deemed to be the fair market value thereof as determined
by the Board of Directors of the Company, irrespective of any
accounting treatment; provided, however, that such fair market
value as determined by the Board of Directors, together with any
cash consideration being paid, shall not exceed the aggregate
Current Market Price (as hereinafter defined) of the shares of
Common Stock being issued.
3. In the case of the issuance of (i) options to purchase or rights to
subscribe for Common Stock, (ii) securities or obligations by their
terms convertible into or exchangeable for Common Stock or (iii)
options to purchase or rights to subscribe for such convertible or
exchangeable securities or obligations:
(A) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or
rights to subscribe for Common Stock shall be deemed to have
been issued at the time such options or rights were issued and
for a consideration equal to the consideration (determined in
the manner provided in subdivisions (1) and (2) above with the
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proviso in subdivision (2) being applied to the number of
shares of Common Stock deliverable upon such exercise), if
any, received by the Company upon the issuance of such options
or rights plus the minimum purchase price provided in such
options or rights for the Common Stock covered thereby;
(B) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities or obligations or upon
the exercise of options to purchase or rights to subscribe for
such convertible or exchangeable securities or obligations and
subsequent conversions or exchanges thereof shall be deemed to
have been issued at the time such securities or obligations
were issued or such options or rights were issued and for a
consideration equal to the consideration received by the
Company for any such securities or obligations and related
options or rights (excluding any cash received on account of
accrued interest or accrued dividends), plus the additional
consideration, if any, to be received by the Company upon the
conversion or exchange of such securities or obligations or
the exercise of any related options or rights (the
consideration in each case to be determined in the manner
provided in subdivisions (1) and (2) above with the proviso in
subdivision (2) being applied to the number of shares of
Common Stock deliverable upon such conversion, exchange or
exercise);
(C) on any change in the number of shares of Common Stock
deliverable upon exercise of any such options or rights or
conversion of or exchange for such convertible or exchangeable
securities or obligations, other than a change resulting from
the antidilution provisions thereof, the Warrant Price shall
forthwith be readjusted to such Warrant Price as would have
obtained had the adjustment made upon the issuance of such
options, rights or securities or obligations not converted
prior to such change or options or rights related to such
securities or obligations not converted prior to such change
being made upon the basis of such change; and
(D) on the expiration of any such options or rights, the
termination of any such rights to convert or exchange or the
expiration of any options or rights related to such
convertible or exchangeable securities or obligations, the
Warrant Price shall forthwith be readjusted to such Warrant
Price as would have obtained had the adjustment made upon the
issuance of such options, rights, securities or options or
rights related to such securities or obligations being made
upon the basis of the issuance of only the number of shares of
Common Stock actually issued upon the conversion or exchange
of such securities or obligations or upon the exercise of the
options or rights related to such securities or obligations.
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(ii) "Excluded Stock" shall mean shares of Common Stock issued by the
Company (1) as a stock dividend payable in shares of Common Stock or upon any
subdivision or split-up of the outstanding shares of Common Stock, and (2) in
connection with the issuance of up to 1,200,000 shares of Common Stock
(including any share of Common Stock deemed to have been issued pursuant to
subdivision (3) of clause (i) above) (appropriately adjusted for stock splits
and combinations) to directors, officers, or employees of, or consultants to,
the Company (other than in connection with their services).
(iii) If, at any time during the Term of this Warrant, the number of
shares of Common Stock outstanding is increased by a stock dividend payable in
shares of Common Stock or by a subdivision or split-up of shares of Common
Stock, then, following the record date fixed for the determination of holders of
Common Stock entitled to receive such stock dividend, subdivision or split-up,
the Warrant Price shall be appropriately decreased so that the number of shares
of Common Stock issuable upon the exercise hereof shall be increased in
proportion to such increase in outstanding shares.
(iv) If, at any time during the Term of this Warrant, the number of
shares of Common Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date for such
combination, the Warrant Price shall appropriately increase so that the number
of shares of Common Stock issuable upon the exercise hereof shall be decreased
in proportion to such decrease in outstanding shares.
(v) In case, at any time during the Term of this Warrant, the Company
shall declare a cash dividend upon its Common Stock payable otherwise than out
of earnings or earned surplus or shall distribute to holders of its Common Stock
shares of its capital stock (other than Common Stock), stock or other securities
of other persons, evidences of indebtedness issued by the Company or other
persons, assets (excluding cash dividends and distributions) or options or
rights (excluding options to purchase and rights to subscribe for Common Stock
or other securities of the Company convertible into or exchangeable for Common
Stock), then, in each such case, immediately following the record date fixed for
the determination of the holders of Common Stock entitled to receive such
dividend or distribution, the Warrant Price in effect thereafter shall be
determined by multiplying the Warrant Price in effect immediately prior to such
record date by a fraction of which the numerator shall be an amount equal to the
difference of (x) the Current Market Price of one share of Common Stock minus
(y) the fair market value (as determined by the Board of Directors of the
Company, whose determination shall be conclusive) of the amount of cash, stock,
securities, evidences of indebtedness, assets, options or rights, as the case
may be, so distributed in respect of one share of Common Stock, and of which the
denominator shall be such Current Market Price.
(vi) All calculations under this Section 5 shall be made to the nearest
cent or to the nearest one-tenth (1/10) of a share, as the case may be.
(vii) For the purpose of any computation pursuant to this Section 5, the
Current Market Price at any date of one share of Common Stock shall be deemed to
be the average of the daily closing prices for the 15 consecutive business days
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ending on the last business day before the day in question (as adjusted for any
stock dividend, split, combination or reclassification that took effect during
such 15 business day period). The closing price for each day shall be the last
reported sales price regular way or, in case no such reported sales took place
on such day, the average of the last reported bid and asked prices regular way,
in either case on the principal national securities exchange on which the Common
Stock is listed or admitted to trading or as reported by Nasdaq (or if the
Common Stock is not at the time listed or admitted for trading on any such
exchange or if prices of the Common Stock are not reported by Nasdaq then such
price shall be equal to the average of the last reported bid and asked prices on
such day as reported by The National Quotation Bureau Incorporated or any
similar reputable quotation and reporting service, if such quotation is not
reported by The National Quotation Bureau Incorporated); provided, however, that
if the Common Stock is not traded in such manner that the quotations referred to
in this clause (vii) are available for the period required hereunder, the
Current Market Price shall be determined in good faith by the Board of Directors
of the Company or, if such determination cannot be made, by a nationally
recognized independent investment banking firm selected by the Board of
Directors of the Company (or if such selection cannot be made, by a nationally
recognized independent investment banking firm selected by the American
Arbitration Association in accordance with its rules).
(viii) Whenever the Warrant Price shall be adjusted as provided in this
Section 5, the Company shall prepare a statement showing the facts requiring
such adjustment and the Warrant Price that shall be in effect after such
adjustment. The Company shall cause a copy of such statement to be sent by mail,
first class postage prepaid, to each Holder of this Warrant at its, his or her
address appearing on the Company's records. Where appropriate, such copy may be
given in advance and may be included as part of the notice required to be mailed
under the provisions of subsection (x) of this Section 5.
(ix) Adjustments made pursuant to clauses (iii), (iv) and (v) above shall
be made on the date such dividend, subdivision, split-up, combination or
distribution, as the case may be, is made, and shall become effective at the
opening of business on the business day next following the record date for the
determination of stockholders entitled to such dividend, subdivision, split-up,
combination or distribution.
(x) In the event the Company shall propose to take any action of the
types described in clauses (iii), (iv), or (v) of this Section 5, the Company
shall forward, at the same time and in the same manner, to the Holder of this
Warrant such notice, if any, which the Company shall give to the holders of
capital stock of the Company.
(xi) In any case in which the provisions of this Section 5 shall require
that an adjustment shall become effective immediately after a record date for an
event, the Company may defer until the occurrence of such event issuing to the
Holder of all or any part of this Warrant which is exercised after such record
date and before the occurrence of such event the additional shares of capital
stock issuable upon such exercise by reason of the adjustment required by such
event over and above the shares of capital stock issuable upon such exercise
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before giving effect to such adjustment exercise; provided, however, that the
Company shall deliver to such Holder a due bill or other appropriate instrument
evidencing such Holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
SECTION 6. OWNERSHIP.
6.1 OWNERSHIP OF THIS WARRANT. The Company may deem and treat the person
in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration of transfer
as provided in this Section 6.
6.2 TRANSFER AND REPLACEMENT. This Warrant and all rights hereunder are
transferable in whole or in part upon the books of the Company by the Holder
hereof in person or by duly authorized attorney, and a new Warrant or Warrants,
of the same tenor as this Warrant but registered in the name of the transferee
or transferees (and in the name of the Holder, if a partial transfer is
effected) shall be made and delivered by the Company upon surrender of this
Warrant duly endorsed, at the office of the Company referred to in Section 13
hereof. Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft or destruction, and, in such case, of indemnity or security
reasonably satisfactory to it, and upon surrender of this Warrant if mutilated,
the Company shall make and deliver a new Warrant of like tenor, in lieu of this
Warrant; provided that if the Holder hereof is an instrumentality of a state or
local government or an institutional holder or a nominee for such an
instrumentality or institutional holder an irrevocable agreement of indemnity by
such Holder shall be sufficient for all purposes of this Section 6, and no
evidence of loss or theft or destruction shall be necessary. This Warrant shall
be promptly cancelled by the Company upon the surrender hereof in connection
with any transfer or replacement. Except as otherwise provided above, in the
case of the loss, theft or destruction of a Warrant, the Company shall pay all
expenses, taxes and other charges payable in connection with any transfer or
replacement of this Warrant, other than stock transfer taxes (if any) payable in
connection with a transfer of this Warrant, which shall be payable by the
Holder. Holder shall not transfer this Warrant and the rights hereunder except
in compliance with federal and state securities laws.
SECTION 7. MERGERS, CONSOLIDATION, SALES. In the case of any proposed
consolidation or merger of the Company with another entity, or the proposed sale
of all or substantially all of its assets to another person or entity, or any
proposed reorganization or reclassification of the capital stock of the Company,
then, as a condition of such consolidation, merger, sale, reorganization or
reclassification, the Company shall give 30 days' prior written notice thereof
to the Holder hereof and lawful and adequate provision shall be made whereby the
Holder of this Warrant shall thereafter have the right to receive upon the basis
and upon the terms and conditions specified herein, in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable hereunder, such
shares of stock, securities or assets as may (by virtue of such consolidation,
merger, sale, reorganization or reclassification) be issued or payable with
respect to or in exchange for the number of shares of such Common Stock
purchasable hereunder immediately before such consolidation, merger, sale,
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reorganization or reclassification. In any such case appropriate provision shall
be made with respect to the rights and interests of the Holder of this Warrant
to the end that the provisions hereof shall thereafter be applicable as nearly
as may be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of this Warrant.
SECTION 8. NOTICE OF DISSOLUTION OR LIQUIDATION. In case of any distribution of
the assets of the Company in dissolution or liquidation (except under
circumstances when the foregoing Section 7 shall be applicable), the Company
shall give notice thereof to the Holder hereof and shall make no distribution to
shareholders until the expiration of thirty (30) days from the date of mailing
of the aforesaid notice and, in any case, the Holder hereof may exercise this
Warrant within thirty (30) days from the date of the giving of such notice, and
all rights herein granted not so exercised within such thirty-day period shall
thereafter become null and void.
SECTION 9. NOTICE OF EXTRAORDINARY DIVIDENDS. If the Board of Directors of the
Company shall declare any dividend or other distribution on its Common Stock
except out of earned surplus or by way of a stock dividend payable in shares of
its Common Stock, the Company shall mail notice thereof to the Holder hereof not
less than thirty (30) days prior to the record date fixed for determining
shareholders entitled to participate in such dividend or other distribution, and
the Holder hereof shall not participate in such dividend or other distribution
unless this Warrant is exercised prior to such record date. The provisions of
this Section 9 shall not apply to distributions made in connection with
transactions covered by Section 7.
SECTION 10. FRACTIONAL SHARES. Fractional shares shall not be issued upon the
exercise of this Warrant but in any case where the Holder would, except for the
provisions of this Section 10, be entitled under the terms hereof to receive a
fractional share upon the complete exercise of this Warrant, the Company shall,
upon the exercise of this Warrant for the largest number of whole shares then
called for, pay a sum in cash equal to the excess of the value of such
fractional share (determined in such reasonable manner as may be prescribed in
good faith by the Board of Directors of the Company) over the Warrant Price for
such fractional share.
SECTION 11. SPECIAL ARRANGEMENTS OF THE COMPANY. The Company covenants and
agrees that during the Term of this Warrant, unless otherwise approved by the
Holder of this Warrant:
11.1 SHALL NOT AMEND CERTIFICATE. The Company shall not amend its
Certificate of Incorporation to eliminate as an authorized class of capital
stock that class denominated as "Common Stock" on the date hereof.
11.2 SHALL BIND SUCCESSORS. This Warrant shall be binding upon any
corporation or other person or entity succeeding to the Company by merger,
consolidation or acquisition of all or substantially all of the Company's
assets.
SECTION 12. REGISTRATION RIGHTS; ETC.
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12.1 CERTAIN DEFINITIONS. As used in this Section 12, the following terms
shall have the following respective meanings:
"COMMISSION" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"REGISTRABLE SECURITIES" shall mean the Warrant Shares less any Warrant Shares
theretofore sold to the public or in a private placement.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the effectiveness of such registration statement.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the Company in
compliance with Section 12.2 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company, which shall be paid in any
event by the Company).
"SELLING EXPENSES" shall mean all underwriting discounts and selling commissions
applicable to the sale of Registrable Securities, all fees and disbursements of
counsel for any Holder and any blue sky fees and expenses excluded from the
definition of "Registration Expenses."
"HOLDER" shall mean any holder of outstanding Warrant Shares or Registrable
Securities which (except for purposes of determining "Holders" under Section
12.5 hereof) have not been sold to the public.
"OTHER SHAREHOLDERS" shall mean holders of securities of the Company who are
entitled by contract with the Company or who are permitted by the Company to
have securities included in a registration of the Company's securities.
12.2 COMPANY REGISTRATION.
--------------------
(a) NOTICE OF REGISTRATION. If the Company shall determine to register
any of its securities either for its own account or the account of a security
holder or holders, other than a registration relating solely to employee benefit
plans, or a registration relating solely to a Commission Rule 145 transaction,
or a registration on any registration form which does not permit secondary
sales, or other than with respect to any registration statement which has been
filed prior to the date hereof, the Company shall:
(i) promptly give to each Holder written notice thereof (which shall
include a list of the jurisdictions in which the Company intends to attempt to
qualify such securities under the applicable blue sky or other state securities
laws); and
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(ii) include in such registration (and any related qualification under
blue sky laws or other compliance), and in any underwriting involved therein,
all the Registrable Securities specified in a written request or requests, made
by any Holder within fifteen (15) days after receipt of the written notice from
the Company described in clause (i) above, subject to any limitations on the
number of shares as set forth in Section 12.2(b) below.
(b) UNDERWRITING. (a) If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the written notice given pursuant
to Section 12.2(a)(i). In such event, the right of any Holder to registration
pursuant to Section 12.2 shall be conditioned upon such Holder's participation
in such underwriting and the inclusion of such Holder's Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company, directors and officers and the Other Shareholders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for underwriting by
the Company.
Notwithstanding any other provision of this Section 12.2, if the
underwriter determines that marketing factors require a limitation on the number
of shares to be underwritten, the underwriter may (subject to the allocation
priority set forth below) exclude from such registration and underwriting some
or all of the Registrable Securities which would otherwise be underwritten
pursuant hereto. The Company shall so advise all holders of securities
requesting registration, and the number of shares of securities that are
entitled to be included in the registration and underwriting shall be allocated
in the following manner. The number of shares that may be included in the
registration and underwriting on behalf of such Holders, directors and officers
and Other Shareholders shall be allocated among such Holders, directors and
officers and Other Shareholders in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities and other securities which they had
requested to be included in such registration at the time of filing the
registration statement.
If any Holder of Registrable Securities or any officer, director or Other
Shareholder disapproves of the terms of any such underwriting, it, he or she may
elect to withdraw therefrom by written notice to the Company and the
underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
12.3 REGISTRATION RIGHTS. In the event that the Company grants
registration rights, including demand registration rights, to any other holder
of securities of the Company, the Company shall promptly give to the Holder
written notice thereof and, if in the opinion of the Holder such registration
rights are more favorable than the registration rights provided under this
Warrant, the Holder shall so notify the Company within thirty (30) days of
receipt of the foregoing notice from the Company, whereupon such registration
rights shall automatically be deemed to be incorporated in this Warrant.
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12.4 EXPENSES OF REGISTRATION. The Company shall bear all Registration
Expenses incurred in connection with any registration, qualification and
compliance by the Company pursuant to Section 12.2 hereof. All Selling Expenses
shall be borne by the holders of the securities so registered pro rata on the
basis of the number of their shares so registered.
12.5 REGISTRATION PROCEDURES. In the case of each registration effected
by the Company pursuant to this Section 12, the Company shall keep each Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. The Company shall, at its expense:
(i) keep such registration effective for a period of one hundred twenty
(120) days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs;
(ii) furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request; and
(iii) use its best efforts to register or qualify the Registrable
Securities under the securities laws or blue-sky laws of such jurisdictions as
any Holder may request; provided, however, that the Company shall not be
obligated to register or qualify such Registrable Securities in any particular
jurisdiction in which the Company would be required to execute a general consent
to service of process in order to effect such registration, qualification or
compliance, unless the Company is already subject to service in such
jurisdiction and except as may be required by the Securities Act or applicable
rules or regulations thereunder.
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12.6 INDEMNIFICATION.
(i) The Company, with respect to each registration, qualification and
compliance effected pursuant to this Section 12, shall indemnify and hold
harmless each Holder, each of its officers, directors, partners, and agents, and
each party controlling such Holder, and each underwriter, if any, and each party
who controls any underwriter, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances under which such statements were made, or any violation by the
Company of the Securities Act or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance, and shall
reimburse each such Holder, each of its officers, directors, partners, and
agents, and each party controlling such Holder, each such underwriter and each
party who controls any such underwriter, for any legal and any other expenses
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, provided that the Company shall not be liable in
any such case to the extent that any such claim, loss, damage, liability or
expense arises out of or is based on any untrue statement or omission based
solely upon written information furnished to the Company by such Holder or
underwriter, as the case may be, and stated to be specifically for use in any
prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance.
(ii) Each Holder shall, if Registrable Securities held by it, him or her
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify and hold harmless the Company, each of
its directors and officers and each underwriter, if any, of the Company's
securities covered by such a registration statement and each party who controls
the Company or such underwriter against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which such statements were made,
and shall reimburse the Company and such directors, officers, partners, agents,
parties, underwriters or control persons for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document solely in reliance upon and in
conformity with written information furnished to the Company by such Holder and
stated to be specifically for use in any prospectus, offering circular or other
document (including any related registration statement, notification or the
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like) incident to any such registration, qualification or compliance; provided,
however, that the obligations of such Holders hereunder shall be limited to an
amount equal to the proceeds to each such Holder of securities sold as
contemplated herein.
(iii) Each party entitled to indemnification under this Section 12.6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense (unless the Indemnified Party shall have been
advised by counsel that actual or potential differing interests or defenses
exist or may exist between the Indemnifying Party and the Indemnified Party, in
which case such expense shall be paid by the Indemnifying Party), and provided
further that the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under this
Section 12. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall provide such information as may be
reasonably requested by an Indemnifying Party in order to enable such
Indemnifying Party to defend a claim as to which indemnity is sought.
12.7 INFORMATION BY HOLDER. Each Holder of Registrable Securities, and
each Other Shareholder holding securities included in any registration, shall
furnish to the Company such information regarding such Holder or Other
Shareholder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Section 12.
12.8 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of the
Registrable Securities to the public without registration, the Company agrees
to:
(i) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times from
and after ninety (90) days following the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the general public;
(ii) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Securities
Exchange Act of 1934, as amended (the "Exchange Act") at any time after it has
become subject to such reporting requirements; and
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(iii) So long as the Holder owns any Registrable Securities, furnish to
the Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 (at any time from and
after ninety (90) days following the effective date of the first registration
statement in connection with an offering of its Securities to the general
public), and of the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
so filed as the Holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing the Holder to sell any such securities
without registration.
SECTION 13. NOTICES. Any notice or other document required or permitted to be
given or delivered to the Holder shall be delivered at, or sent by certified or
registered mail to, the Holder at Transamerica Technology Finance Division, 76
Batterson Park Road, Farmington, Connecticut 06032, Attention: Assistant Vice
President, Lease Administration, with a copy to the Lender at Riverway II, West
Office Tower, 9399 West Higgins Road, Rosemont, Illinois 60018, Attention: Legal
Department or to such other address as shall have been furnished to the Company
in writing by the Holder. Any notice or other document required or permitted to
be given or delivered to the Company shall be delivered at, or sent by certified
or registered mail to, the Company at 20250 Century Boulevard, Suite 250,
Germantown, Maryland 20874 or to such other address as shall have been furnished
in writing to the Holder by the Company. Any notice so addressed and mailed by
registered or certified mail shall be deemed to be given when so mailed. Any
notice so addressed and otherwise delivered shall be deemed to be given when
actually received by the addressee.
SECTION 14. NO RIGHTS AS STOCKHOLDER; LIMITATION OF LIABILITY. This Warrant
shall not entitle the Holder to any of the rights of a shareholder of the
Company except upon exercise in accordance with the terms hereof. No provision
hereof, in the absence of affirmative action by the Holder to purchase shares of
Common Stock, and no mere enumeration herein of the rights or privileges of the
Holder, shall give rise to any liability of the Holder for the Warrant Price
hereunder or as a shareholder of the Company, whether such liability is asserted
by the Company or by creditors of the Company.
SECTION 15. LAW GOVERNING. THE VALIDITY, INTERPRETATION, AND ENFORCEMENT OF THIS
WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES
THEREOF.
SECTION 16. MISCELLANEOUS.
16.1 INVESTMENT REPRESENTATION. By acceptance of this Warrant, the Holder
represents to the Company that this Warrant is being acquired for the Holder's
own account and for the purpose of investment and not with a view to, or for
sale in connection with, the distribution thereof, nor with any present
intention of distributing or selling the Warrant or the Common Stock issuable
upon exercise of the Warrant. The Holder acknowledges that the Holder has been
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<PAGE>
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, it 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 Section 12 of this Warrant, 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 Section 12 hereof, 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, a
confirmation as of the date of exercise of the Holder's representations pursuant
to this Section 16.
16.2 AMENDMENTS. This Warrant and any provision hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by both
parties (or any respective predecessor in interest thereof). The headings in
this Warrant are for purposes of reference only and shall not affect the meaning
or construction of any of the provisions hereof.
16.3 DEFINITIONS. All capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Loan and Security
Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly
authorized officer this 30th day of June, 1999.
V-ONE Corporation
By: /s/ David D. Dawson
-------------------
Title: CEO
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[CORPORATE SEAL]
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<PAGE>
FORM OF NOTICE OF EXERCISE
[To be signed only upon exercise of the Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE WITHIN WARRANT
The undersigned hereby exercises the right to purchase _________ shares of
Common Stock which the undersigned is entitled to purchase by the terms of the
within Warrant according to the conditions thereof, and herewith
[check one]
/ / makes payment of $__________ therefor; or
/ / directs the Company to issue ______ shares, and to withhold ____
shares in lieu of payment of the Warrant Price, as described in
Section 2.1 of the Warrant.
All shares to be issued pursuant hereto shall be issued in the name of and the
initial address of such person to be entered on the books of the Company shall
be:
The shares are to be issued in certificates of the following denominations:
______________________________________
[Type Name of Holder]
By:___________________________________
Title:________________________________
Dated: _______________________________
<PAGE>
FORM OF ASSIGNMENT
(ENTIRE)
[To be signed only upon transfer of entire Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED ___________________________ hereby sells, assigns and
transfers unto _______________________________ all rights of the undersigned
under and pursuant to the within Warrant, and the undersigned does hereby
irrevocably constitute and appoint _____________________ Attorney to transfer
the said Warrant on the books of the Company, with full power of substitution.
________________________________
[Type Name of Holder]
By:_____________________________
Title:__________________________
Dated:__________________________
NOTICE
The signature to the foregoing Assignment must correspond to the name as written
upon the face of the within Warrant in every particular, without alteration or
enlargement or any change whatsoever.
<PAGE>
FORM OF ASSIGNMENT
(PARTIAL)
[To be signed only upon partial transfer of Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED _________________________ hereby sells, assigns and transfers
unto _______________________________ (i) the rights of the undersigned to
purchase ___ shares of Common Stock under and pursuant to the within Warrant,
and (ii) on a non-exclusive basis, all other rights of the undersigned under and
pursuant to the within Warrant, it being understood that the undersigned shall
retain, severally (and not jointly) with the transferee(s) named herein, all
rights assigned on such non-exclusive basis. The undersigned does hereby
irrevocably constitute and appoint __________________________ Attorney to
transfer the said Warrant on the books of the Company, with full power of
substitution.
[Type Name of Holder]
By:_____________________________
Title:__________________________
Dated:__________________________
NOTICE
The signature to the foregoing Assignment must correspond to the name as written
upon the face of the within Warrant in every particular, without alteration or
enlargement or any change whatsoever.
