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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) JUNE 11, 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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Item 5. OTHER EVENTS.
On June 11, 1999, V-ONE Corporation, a Delaware corporation ("Company"),
issued 1,287,554 shares of Series B Convertible Preferred Stock ("Series B
Stock") in the aggregate to Mr. Hai Hua Cheng and Mr. Wen Dar Wu (together
"Purchasers"), in equal amounts, for $2.33 per share (105% of the closing bid
price on June 10, 1999), or $3 million in the aggregate. Each share of Series B
Stock is initially convertible into one share of Common Stock, $0.001 par value
per share, of the Company ("Common Stock"). This investment represents a portion
of the $5 million investment originally proposed to be made by Scientek
Corporation.
The terms of the Series B Stock were determined by the Company's Board of
Directors.
Under the Subscription Agreement dated as of June 11, 1999 between the
Company and the Purchasers, the Company agreed to issue the Series B Stock to
the Purchasers in exchange for $1 million in cash and a promissory note in the
amount of $2 million. The principal amount of the promissory note is payable in
two installments of $1 million each, plus accrued interest, on July 14, 1999 and
August 13, 1999.
The net proceeds of the offering will be used for general working capital
purposes.
The Company is seeking to raise additional equity financing, and the
additional $2 million investment originally proposed to be made by Scientek
Corporation may be provided to the Company as part of this additional equity
financing. The Company agreed that if the price that investors pay in such
additional equity financing is lower than the price paid by the Purchasers or if
warrants are included as part of the additional equity financing, the Company
will provide additional warrants to the Purchasers to compensate them for this
difference.
On June 11, 1999, the Company entered into a registration rights agreement
with the Purchasers ("Registration Rights Agreement"). Under the Registration
Rights Agreement, the Company is obligated to file a registration statement with
the SEC by November 8, 1999 to register the resale of the shares of Common Stock
issuable upon conversion of the Series B Stock. The Company may also register in
this registration statement the resale of the 100,000 shares of Common Stock
issuable pursuant to a stock subscription warrant previously granted to TBCC
Funding Trust II.
As a result of the issuance of the Series B Stock, the exercise price per
share of the warrant issued to TBCC Funding Trust II to purchase 100,000 shares
of Common Stock has been reduced from $3.25 to $2.33.
The following is a summary of the terms of the Series B Stock:
DIVIDENDS. The Series B Stock bears no dividends.
CONVERSION RIGHTS. Each share of Series B Stock is convertible at any time
at the option of the holder into shares of Common Stock, subject to adjustment
for dilution.
The number of shares of Common Stock issuable per share of Series B Stock
is determined by dividing the initial purchase price of $2.33 per share by the
Conversion Price, which has been initially set at $2.33 per share. The
Conversion Price is subject to adjustment in the event the Company pays
dividends or makes distributions on, splits or reverse splits its Common Stock.
RANKING. The Series B Stock ranks (i) senior to the Common Stock, now or
hereafter issued, as to payment of dividends and distribution of assets upon
liquidation, dissolution, or winding up of the Company, whether voluntary or
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involuntary, and (ii) on a parity with or senior or junior to the shares of any
other class of preferred stock (or series of preferred stock of such class) that
the Board of Directors or the stockholders of the Company may from time to time
authorize, which class (or series thereof) by its terms ranks on a parity with
or senior or junior to, respectively, the shares of Series B Stock.
VOTING RIGHTS. The Series B Stock generally has no voting rights except as
otherwise provided by the Delaware General Corporation Law. However, the
affirmative vote or consent of the holders of a majority of the outstanding
shares of the Series B Stock, voting separately as a class, will be required for
any amendment of the Company's Amended and Restated Certificate of Incorporation
if such amendment would increase or decrease the aggregate number of authorized
shares of the Company's preferred stock, increase or decrease the par value of
the Company's preferred stock or alter or change the powers, preferences or
special rights of the Company's preferred stock so as to adversely affect the
Series B Stock; provided, however, that the creation and issuance of any class
or series of stock that is senior or junior to, or on a parity with, the Series
B Stock (as to dividends, liquidation preference or both, or otherwise) shall
not be deemed to affect materially and adversely such powers, preferences, or
special rights and any such increase or creation and issuance may be made
without any such vote by the holders of Series B Stock except as otherwise
required by law. Pursuant to the Subscription Agreement, the Purchasers have
agreed to vote all of the shares of Series B Stock in favor of any future
increase in the authorized shares of the Company's preferred and or common
stock.
SINKING FUND. The shares of Series B Stock are not subject to the
operation of a purchase, retirement or sinking fund.
LIQUIDATION PREFERENCE. The holders of the Series B Stock are entitled
to a liquidation preference of $2.33 per share.
The descriptions of the Certificate of Designations and of the agreements
and other documents described in this Form 8-K are qualified in their entirety
by reference to the exhibits filed with this Form 8-K.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
99.1 Certificate of Designations of Series B Convertible Preferred Stock.
99.2 Subscription Agreement dated as of June 11, 1999 between the Company and
the Purchasers.
99.3 Registration Rights Agreement dated as of June 11, 1999 between the
Company and the Purchasers.
99.4 Non-Negotiable Promissory Note dated June 11, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: June 22, 1999
V-ONE CORPORATION
By: /s/ David D. Dawson
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Name: David D. Dawson
Title: President and Chief Executive
Officer
V-ONE CORPORATION
CERTIFICATE OF DESIGNATIONS OF
SERIES B CONVERTIBLE PREFERRED STOCK
(Pursuant to Section 151 of the General Corporation
Law of the State of Delaware)
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V-ONE Corporation, a Delaware corporation (the "Corporation"), in
accordance with the provisions of Section 103 of the General Corporation Law of
the State of Delaware (the "DGCL") DOES HEREBY CERTIFY:
That pursuant to authority vested in the Board of Directors of the
Corporation by the Amended and Restated Certificate of Incorporation of the
Corporation, the Board of Directors of the Corporation, by unanimous written
consent dated June 11, 1999, adopted a resolution providing for the creation of
a series of the Corporation's Preferred Stock, $.001 par value, which series is
designated as "Series B Convertible Preferred Stock," which resolution is as
follows:
RESOLVED, that pursuant to authority vested in the Board of Directors by
the Amended and Restated Certificate of Incorporation of the Corporation, the
Board of Directors does hereby provide for the creation of a series of the
Preferred Stock, $.001 par value (hereinafter called the "Preferred Stock"), of
the Corporation, and to the extent that the voting powers and the designations,
preferences and relative, participating, optional or other special rights
thereof and the qualifications, limitations or restrictions of such rights have
not been set forth in the Amended and Restated Certificate of Incorporation of
the Corporation, does hereby fix the same as follows:
SERIES B CONVERTIBLE PREFERRED STOCK
SECTION 1. DEFINITIONS. As used herein, the following terms shall have the
following meanings:
"Board of Directors" or "Board" shall mean the Board of Directors of the
Corporation.
"Closing Bid Price" of any security on any date shall mean the closing bid
price of such security on such date on the principal securities exchange or
other market on which such security is listed for trading that constitutes the
principal securities market for such security, as reported by such exchange or
other market.
"Common Stock" shall mean the Common Stock, $.001 par value, of the
Corporation.
"Conversion Date" shall mean the date on which the notice of conversion is
actually received by the Corporation, whether by mail, courier, personal
service, telephone line facsimile transmission or other means, in case of a
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conversion at the option of the holder pursuant to Section 8.
"Conversion Notice" shall mean a written notice, duly signed by or on
behalf of the holder, stating the number of shares of Series B Convertible
Preferred Stock to be converted in the form specified in the Subscription
Agreement.
"Conversion Price" initially shall be equal to $2.33 per share, subject to
adjustment as hereinafter provided.
"Initial Purchase Price" shall mean $2.33 per share.
"Junior Liquidation Stock" shall mean the Common Stock or any other class
or series of the Corporation's capital stock ranking junior as to liquidation
rights to the Series B Convertible Preferred Stock.
"Liquidation Preference" shall mean, for each share of Series B
Convertible Preferred Stock, $2.33.
"Parity Liquidation Stock" shall mean any class or series of the
Corporation's capital stock having parity as to liquidation rights with the
Series B Convertible Preferred Stock.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement entered into between the Corporation and the original holders of the
shares of Series B Convertible Preferred Stock, as amended or modified from time
to time in accordance with its terms.
"Senior Liquidation Stock" shall mean any class or series of capital stock
of the Corporation ranking senior as to liquidation rights to the Series B
Convertible Preferred Stock.
"Series B Convertible Preferred Stock" shall mean the Series B Convertible
Preferred Stock, $.001 par value, of the Corporation.
"Subscription Agreement" shall mean the Subscription Agreement between the
Corporation and the original holders of shares of Series B Convertible Preferred
Stock pursuant to which the shares of Series B Convertible Preferred Stock were
issued.
SECTION 2. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series B Convertible Preferred Stock," and the number of shares
constituting the Series B Convertible Preferred Stock shall be 1,287,554, and
shall not be subject to increase.
SECTION 3. RANK. All Series B Convertible Preferred Stock shall rank (i)
senior to the Common Stock, now or hereafter issued, as to payment of dividends
and distribution of assets upon liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary, and (ii) on a parity with or
senior or junior to the shares of any other class of preferred stock (or series
of preferred stock of such class) that the Board of Directors or the
stockholders may from time to time authorize, which class (or series thereof) by
its terms ranks on a parity with or senior or junior to, respectively, the
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shares of Series B Convertible Preferred Stock.
SECTION 4. DIVIDENDS. The Series B Convertible Preferred Stock will bear
no dividends, and the holders of shares of Series B Convertible Preferred Stock
shall not be entitled to receive any dividends thereon.
SECTION 5. LIQUIDATION PREFERENCE. In the event of a liquidation,
dissolution, or winding up of the Corporation, whether voluntary or involuntary,
the holders of Series B Convertible Preferred Stock shall be entitled to receive
out of the assets of the Corporation, whether such assets constitute stated
capital or surplus of any nature, an amount per share of Series B Convertible
Preferred Stock equal to the Liquidation Preference, and no more, before any
payment shall be made or any assets distributed to the holders of Junior
Liquidation Stock; PROVIDED, HOWEVER, that such rights shall accrue to the
holders of Series B Convertible Preferred Stock only in the event that the
Corporation's payments with respect to the liquidation preference of the holders
of Senior Liquidation Stock are fully met. After the liquidation preferences of
the Senior Liquidation Stock are fully met, the entire assets of the Corporation
available for distribution shall be distributed ratably among the holders of the
Series B Convertible Preferred Stock and any Parity Liquidation Stock in
proportion to the respective preferential amounts to which each is entitled (but
only to the extent of such preferential amounts). After payment in full of the
liquidation price of the shares of the Series B Convertible Preferred Stock and
the Parity Liquidation Stock, the holders of such shares shall not be entitled
to any further participation in any distribution of assets by the Corporation.
Neither a consolidation or merger of the Corporation with another corporation
nor a sale or transfer of all or part of the Corporation's assets for cash,
securities, or other property in and of itself will be considered a liquidation,
dissolution or winding up of the Corporation.
SECTION 6. NO SINKING FUND. The shares of Series B Convertible Preferred
Stock shall not be subject to the operation of a purchase, retirement or sinking
fund.
SECTION 7. REDEMPTION. The holders of Series B Convertible Preferred Stock
shall not be entitled to have the Series B Convertible Preferred Stock redeemed
by the Corporation.
SECTION 8. CONVERSION.
(a) CONVERSION AT OPTION OF HOLDER. The holders of the Series B
Convertible Preferred Stock may convert at any time any or all of their shares
of Series B Convertible Preferred Stock into fully paid and nonassessable shares
of Common Stock and such other securities and property as herein after provided.
Each share of Series B Convertible Preferred Stock may be converted at the
office of the Corporation or at such other additional office or offices, if any,
as the Board of Directors may designate, into a number of fully paid and
nonassessable shares of Common Stock equal to the Initial Purchase Price divided
by the Conversion Price.
(b) OTHER PROVISIONS. (1) Notwithstanding anything to the contrary in this
Section 8(b), no change in the Conversion Price shall be made that would result
in the price at which a share of Series B Convertible Preferred Stock is
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converted being less than the par value of the Common Stock into which shares of
Series B Convertible Preferred Stock are at the time convertible.
(2) (A) The right of the holders of Series B Convertible Preferred
Stock to convert their shares shall be exercised by delivering (which may be
done by telephone line facsimile transmission) a Conversion Notice to the
Corporation, as provided above, along with the original certificate representing
such holder's Series B Convertible Preferred Stock.
(B) The Corporation shall pay any transfer tax arising in
connection with any conversion of shares of Series B Convertible Preferred Stock
except that the Corporation shall not, however, be required to pay any tax that
may be payable in respect of any transfer involved in the issue and delivery
upon conversion of shares of Common Stock in a name other than that of the
holder of the shares of the Series B Convertible Preferred Stock being
converted, and the Corporation shall not be required to issue or deliver any
such shares or other securities or property unless and until the person or
persons requesting the issuance thereof shall have paid to the Corporation the
amount of any such tax or shall have established to the satisfaction of the
Corporation that such tax has been paid. The number of shares of Common Stock to
be issued upon each conversion of shares of Series B Convertible Preferred Stock
shall be the number set forth in the applicable Conversion Notice, which number
shall be conclusive absent manifest error. The Corporation shall notify a holder
who has given a Conversion Notice of any claim of manifest error within three
business days after such holder gives such Conversion Notice. A Conversion
Notice shall be deemed for all purposes to be in proper form unless the
Corporation notifies a holder of shares of Series B Convertible Preferred Stock
being converted within three business days after a Conversion Notice has been
given (which notice shall specify all defects in the Conversion Notice).
(3) The Corporation (and any successor corporation) shall take all
action necessary so that a number of shares of the authorized but unissued
Common Stock (or common stock in the case of any successor corporation)
sufficient to provide for the conversion of the Series B Convertible Preferred
Stock outstanding upon the basis hereinbefore provided are at all times reserved
by the Corporation (or any successor corporation), free from preemptive rights,
for such conversion, subject to the provisions of the next succeeding paragraph.
If the Corporation shall issue any securities or make any change in its capital
structure that would change the number of shares of Common Stock into which each
share of the Series B Convertible Preferred Stock shall be convertible as herein
provided, the Corporation shall at the same time also make proper provision so
that thereafter there shall be a sufficient number of shares of Common Stock
authorized and reserved, free from preemptive rights, for conversion of the
outstanding Series B Convertible Preferred Stock on the new basis. If at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all of the outstanding shares of Series B
Convertible Preferred Stock, the Corporation promptly shall seek such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
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(4) In case of any consolidation or merger of the Corporation with
any other corporation (other than a wholly owned subsidiary of the Corporation)
in which the Corporation is not the surviving corporation, or in case of any
sale or transfer of all or substantially all of the assets of the Corporation,
or in the case of any share exchange pursuant to which all of the outstanding
shares of Common Stock are converted into other securities or property, the
Corporation shall make appropriate provision or cause appropriate provision to
be made so that each holder of shares of Series B Convertible Preferred Stock
then outstanding shall have the right thereafter to convert such shares of
Series B Convertible Preferred Stock into the kind of shares of stock and other
securities and property receivable upon such consolidation, merger, sale,
transfer, or share exchange by a holder of shares of Common Stock into which
such shares of Series B Convertible Preferred Stock could have been converted
immediately prior to the effective date of such consolidation, merger, sale,
transfer, or share exchange and on a basis that preserves the economic benefits
of the conversion rights of the holders of shares of Series B Convertible
Preferred Stock on a basis as nearly as practical as such rights exist hereunder
prior thereto. If, in connection with any such consolidation, merger, sale,
transfer, or share exchange, each holder of shares of Common Stock is entitled
to elect to receive securities, cash, or other assets upon completion of such
transaction, the Corporation shall provide or cause to be provided to each
holder of Series B Convertible Preferred Stock the right to elect the
securities, cash, or other assets into which the Series B Convertible Preferred
Stock held by such holder shall be convertible after completion of any such
transaction on the same terms and subject to the same conditions applicable to
holders of the Common Stock (including, without limitation, notice of the right
to elect, limitations on the period in which such election shall be made, and
the effect of failing to exercise the election). The Corporation shall not
effect any such transaction unless the provisions of this paragraph have been
complied with. The above provisions shall similarly apply to successive
consolidations, mergers, sales, transfers, or share exchanges.
(5) If a holder shall have given a Conversion Notice for shares of
Series B Convertible Preferred Stock, the Corporation shall issue and deliver to
such person certificates for the Common Stock within ten business days after
such Conversion Notice is given and the person converting shall be deemed to be
the holder of record of the Common Stock and all rights with respect to the
shares surrendered shall forthwith terminate except the right to receive the
Common Stock or other securities, cash, or other assets as herein provided. If a
holder is converting less than the total number of shares of Series B
Convertible Preferred Stock then owned by such holder and represented by a
certificate, the Corporation shall issue and deliver to such person a
certificate representing such person's remaining shares of Series B Convertible
Preferred Stock represented by the original certificate subsequent to such
conversion.
(6) No fractional shares of Common Stock shall be issued upon
conversion of Series B Convertible Preferred Stock but, in lieu of any fraction
share of Common Stock that would otherwise be issuable in respect of the
aggregate number of such shares surrendered for conversion at one time by the
same holder, the Corporation at its option (a) may pay in cash an amount equal
to the product of (i) the Closing Bid Price of a share of Common Stock on the
trading day immediately preceding the Conversion Date and (ii) such fraction of
a share or (b) may issue an additional share of Common Stock.
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(7) The Conversion Price is subject to adjustment from time to time
as follows:
(i) If the Corporation: (A) pays a dividend or makes a distribution
on its Common Stock in shares of its Common Stock; (B) subdivides its
outstanding shares of Common Stock into a greater number of shares; or (C)
combines its outstanding shares of Common Stock into a smaller number of shares;
then the Conversion Price in effect immediately prior to such action shall be
proportionately adjusted by multiplying the then Conversion 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 Conversion Price in effect, so that
the holder of a share of Series B Convertible Preferred Stock thereafter
converted may receive the aggregate number of shares of Common Stock of the
Corporation that such holder would have owned immediately following such action
if such shares of Series B Convertible Preferred Stock had been converted
immediately prior to such action.
(ii) The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision or combination.
(iii) Such adjustment shall be made successively whenever any event
listed above shall occur.
(8) Whenever the Conversion Price is adjusted as herein provided, the
Corporation shall send to each holder and each transfer agent, if any, for the
Series B Convertible Preferred Stock and the Common Stock, a statement signed by
the Chairman of the Board, the President, or any Vice President of the
Corporation stating the adjusted Conversion Price determined as provided in this
Section 8, and any adjustment so evidenced, given in good faith, shall be
binding upon all stockholders and upon the Corporation. Whenever the Conversion
Price is adjusted, the Corporation will give notice by mail to the holders of
record of Series B Convertible Preferred Stock, which notice shall be made
within 15 days after the effective date of such adjustment and shall state the
adjustment and the adjusted Conversion Price. Notwithstanding the foregoing
notice provisions, failure by the Corporation to give such notice or a defect in
such notice shall not affect the binding nature of such corporate action of the
Corporation.
SECTION 9. VOTING RIGHTS. Except as otherwise required by law or expressly
provided herein, shares of Series B Convertible Preferred Stock shall not be
entitled to vote on any matter.
The affirmative vote or consent of the holders of a majority of the
outstanding shares of the Series B Convertible Preferred Stock, voting
separately as a class, will be required for any amendment of the Corporation's
Amended and Restated Certificate of Incorporation if such amendment would
increase or decrease the aggregate number of authorized shares of Preferred
Stock, increase or decrease the par value of the Preferred Stock or alter or
change the powers, preferences or special rights of the Preferred Stock so as to
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adversely affect the Series B Convertible Preferred Stock; PROVIDED, HOWEVER,
that the creation and issuance of any class or series of stock that is senior or
junior to, or on a parity with, the Series B Convertible Preferred Stock (as to
dividends, liquidation preference or both, or otherwise) shall not be deemed to
affect materially and adversely such powers, preferences, or special rights and
any such increase or creation and issuance may be made without any such vote by
the holders of Series B Convertible Preferred Stock except as otherwise required
by law.
SECTION 10. OUTSTANDING SHARES. For purposes of this Certificate of
Designations, all shares of Series B Convertible Preferred Stock shall be deemed
outstanding except (i) from the date of surrender of certificates representing
shares of Series B Convertible Preferred Stock for conversion into Common Stock,
all shares of Series B Convertible Preferred Stock converted into Common Stock
and (ii) from the date of registration of transfer, all shares of Series B
Convertible Preferred Stock held of record by the Corporation or any subsidiary
or Affiliate (as defined herein) of the Corporation. For the purposes of this
Certificate of Designations, "Affiliate" means any person, other than the
original holders of the shares of Series B Convertible Preferred Stock, directly
or indirectly controlling or controlled by or under direct or indirect common
control with the Corporation. "Control" is the power to direct the management
and policies of a person, directly or through one or more intermediaries,
whether through the ownership of voting securities, by contract, or otherwise.
SECTION 11. REACQUIRED SHARES. Any shares of Series B Convertible
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares of the Series B Convertible Preferred Stock shall, upon their
cancellation, and upon the filing of an appropriate certificate with the
Secretary of the State of Delaware, become authorized but unissued shares of
preferred stock and may be reissued as part of a new series of preferred stock
to be created by resolution or resolutions of the Board of Directors.
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IN WITNESS WHEREOF, V-ONE Corporation has caused this certificate to be
signed by David D. Dawson, its Chairman, President and Chief Executive Officer,
as of the 11th day of June, 1999.
V-ONE CORPORATION
By /s/ David D. Dawson
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David D. Dawson
Chairman, President and
Chief Executive Officer
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT, dated as of June 11, 1999, by and between
V-ONE Corporation, a Delaware corporation, with headquarters located at 20250
Century Boulevard, Suite 300, Germantown, Maryland 20874 (the "Company"), and
Hai Hua Cheng and Wen Dar Wu (each a "Buyer" and collectively, the "Buyers").
W I T N E S S E T H:
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WHEREAS, the Buyers wish to purchase, upon the terms and subject to the
conditions of this Agreement, shares of non-voting, convertible preferred stock
of the Company that will be convertible into shares of Common Stock, $.001 par
value (the "Common Stock"), of the Company; and
WHEREAS, the Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D as promulgated by the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933
Act");
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
(a) SUBSCRIPTION. The Buyers hereby agree to purchase from the Company
such number of shares (the "Preferred Shares") of Series B Convertible Preferred
Stock, $.001 par value (the "Preferred Stock"), of the Company, having the terms
and conditions as set forth in the form of Certificate of Designations of the
Series B Convertible Preferred Stock attached hereto as ANNEX I (the
"Certificate of Designations"), as is equal to U.S. $3,000,000 divided by 105%
of the closing bid price of a share of the Company's Common Stock on the Nasdaq
National Market on the trading date immediately preceding the date of this
Agreement, rounded to the nearest number of whole shares, for $3,000,000. One
million dollars (U.S. $1,000,000) of the purchase price for the Preferred Shares
shall be payable in United States Dollars on the date hereof. Two million
dollars (U.S. $2,000,000) shall be payable by tendering a promissory note
("Note") in the form of ANNEX II. The shares of Common Stock issuable upon
conversion of the Preferred Shares are referred to herein as the "Conversion
Shares." The Conversion Shares and the Preferred Shares are referred to herein
collectively as the "Shares."
(b) FORM OF PAYMENT. The Buyers shall collectively pay the cash portion of
the aggregate purchase price for the Preferred Shares by delivering good funds
in United States Dollars to the Company and shall tender the Note. The portion
of the aggregate purchase price to be paid by each Buyer is set forth on
SCHEDULE A. Such delivery of funds and Note shall be made against delivery by
the Company of the certificates for the appropriate number of Preferred Shares
registered in the name of the appropriate Buyers. Promptly following payment by
the Buyers of the cash purchase price of the Preferred Shares and delivery of
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the Note, the Company shall deliver certificates for the Preferred Shares,
registered in the name of the appropriate Buyers, to the Buyers.
(c) METHOD OF PAYMENT. Payment of the cash portion of the aggregate
purchase price for the Preferred Shares shall be made by wire transfer of funds
to:
Citibank, F.S.B.
600 Pennsylvania Avenue
Washington, D.C. 20003
ABA#:254070116
Account #:17507449
Not later than 4:00 p.m., Washington, D.C. time, on the date prior to the
date hereof, the Buyers shall deposit with the Company the cash portion of the
aggregate purchase price for the Preferred Shares.
2. BUYERS REPRESENTATIONS, WARRANTIES, ETC.
Each Buyer represents and warrants to, and covenants and agrees with, the
Company as follows:
(a) PURCHASE FOR INVESTMENT. Each Buyer is purchasing the Preferred Shares
for his own account for investment only and not with a view toward the public
sale or distribution thereof;
(b) ACCREDITED INVESTOR. Each Buyer is an "accredited investor" as that
term is defined in Rule 501 of the General Rules and Regulations under the 1933
Act by reason of Rule 501(a)(5) or (6) of Regulation D;
(c) NON-U.S. PERSON. Each Buyer is not a "U.S. person" as that term is
defined in Rule 902(k) of Regulation S under the 1933 Act;
(d) REOFFERS AND RESALES. All subsequent offers and sales of the Shares by
each Buyer shall be made pursuant to a registration statement relating to the
Shares being offered and sold under the 1933 Act or pursuant to an exemption
from registration under the 1933 Act;
(e) COMPANY RELIANCE. Each Buyer understands that the Preferred Shares are
being offered and sold, and the Conversion Shares are being offered, to him in
reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying upon
the truth and accuracy of, and each Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of the Buyer to acquire the Preferred Shares and
to receive an offer of the Conversion Shares;
-2-
<PAGE>
(f) INFORMATION PROVIDED. Each Buyer and his advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Preferred
Shares and the offer of the Conversion Shares that have been requested by the
Buyer; each Buyer and his advisors, if any, have been afforded the opportunity
to ask questions of the Company and have received complete and satisfactory
answers to any such inquiries; without limiting the generality of the foregoing,
each Buyer has had the opportunity to obtain and to review the Company's (1)
Annual Reports on Form 10-K for the fiscal years ended December 31, 1996, 1997
and 1998, (2) Quarterly Reports on Form 10-Q for the quarters ended March 31,
1998 and 1999, June 30, 1998 and September 30, 1998, (3) Current Reports on Form
8-K filed May 14, September 25, November 9, November 24, and December 16, 1998
and March 12, and April 2, 1999 and (4) proxy statements for the Company's 1998
and 1999 Annual Meetings of Stockholders, in each case as filed with the SEC
(collectively, the "SEC Reports"); and each Buyer understands that his
investment in the Shares involves a high degree of risk;
(g) ABSENCE OF APPROVALS. Each Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Shares; and
(h) SUBSCRIPTION AGREEMENT AND NOTE. Each of this Agreement and the Note
has been duly and validly authorized, executed and delivered on behalf of each
Buyer and is a valid and binding agreement of the Buyer enforceable in
accordance with its terms, subject as to enforceability to general principles of
equity and to bankruptcy, insolvency, moratorium and other similar laws
affecting the enforcement of creditors' rights generally.
3. COMPANY REPRESENTATIONS, WARRANTIES, ETC.
The Company represents and warrants to, and covenants and agrees with,
each Buyer that:
(a) ORGANIZATION AND AUTHORITY. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite corporate power and authority to (i) own, lease
and operate its properties and to carry on its business as now being conducted,
and (ii) to execute, deliver and perform its obligations under this Agreement,
the Registration Rights Agreement, the form of which is attached hereto as ANNEX
III (the "Registration Rights Agreement"), the Certificate of Designations, and
the other agreements to be executed and delivered by the Company in connection
herewith, and to consummate the transactions contemplated hereby and thereby.
The Company has no subsidiaries.
(b) CAPITALIZATION. The authorized capital stock of the Company currently
consists of (a) 33,333,333 shares of Common Stock of which 16,773,075 shares
were outstanding on May 13, 1999, all of which are fully paid and nonassessable;
and (b) 13,333,333 shares of Preferred Stock, $.001 par value, some of which
shares are or will be designated as Series B Convertible Preferred Stock and
issued pursuant to this Agreement.
-3-
<PAGE>
(c) CONCERNING THE SHARES. The Shares have been duly authorized and the
Preferred Shares, when issued and paid for in accordance with this Agreement,
and the Conversion Shares, when issued upon conversion of the Preferred Shares,
will be duly and validly issued, fully paid and non-assessable and will not
subject the holder thereof to personal liability by reason of being such holder.
There are no preemptive or similar rights of any stockholder of the Company or
any other person to acquire any of the Shares. The Preferred Shares are not
being offered or sold by any form of general solicitation or general
advertising.
(d) SUBSCRIPTION AGREEMENT; REGISTRATION RIGHTS AGREEMENT. This Agreement
and the Registration Rights Agreement have been duly and validly authorized by
the Company, this Agreement has been duly executed and delivered on behalf of
the Company and this Agreement and the Registration Rights Agreement are valid
and binding obligations of the Company enforceable in accordance with their
respective terms, subject as to enforceability to general principles of equity
and to bankruptcy, insolvency, moratorium and other similar laws affecting the
enforcement of creditors' rights generally and limits upon rights to indemnity.
(e) NON-CONTRAVENTION. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the issuance of the Preferred
Shares as contemplated by this Agreement and the other transactions contemplated
by this Agreement, the Registration Rights Agreement and the terms of the
Preferred Stock do not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under, the
certificate of incorporation or the by-laws of the Company, or any indenture,
mortgage, deed of trust or other material agreement or instrument to which the
Company is a party or by which it or any of its properties or assets are bound
that would have a material adverse effect on the Company or any applicable law,
rule or regulation or any applicable decree, judgment or order of any court,
United States federal or state regulatory body, administrative agency or other
governmental body having jurisdiction over the Company or any of its properties
or assets that would have a material adverse effect on the Company.
(f) APPROVALS. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company for (1) the execution, delivery and performance by the Company of
this Agreement and the Registration Rights Agreement (except such authorization
of the SEC as is required with respect to accelerating the effectiveness of any
registration statement filed pursuant thereto), (2) the issuance and sale of the
Preferred Shares as contemplated by this Agreement and (3) the issuance of
Conversion Shares on conversion of the Preferred Shares (other than the filing
of an additional listing application with the Nasdaq National Market).
(g) INFORMATION PROVIDED. The information provided by or on behalf of the
Company to the Buyers in connection with the transactions contemplated by the
Agreement, including, without limitation, the information referred to in Section
2(f) of this Agreement, does not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
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<PAGE>
therein, in the light of the circumstances under which they are made, not
misleading.
(h) ABSENCE OF CERTAIN CHANGES. Since December 31, 1998, there has been no
material adverse change and no material adverse development in the business,
properties, operations, condition (financial or other), results of operations or
prospects of the Company, except as disclosed in the SEC Reports.
(i) ABSENCE OF CERTAIN PROCEEDINGS. Except as described in the SEC
Reports, there is no action, suit or proceeding, before or by any court, public
board or body or governmental agency pending or, to the knowledge of the
Company, threatened against the Company and, to the knowledge of the Company,
there is no inquiry or investigation before or by any court, public board or
body or governmental agency pending or threatened against the Company, in any
such case wherein an unfavorable decision, ruling or finding would have a
material adverse effect on the business, properties, operations, condition
(financial or other), results of operations or prospects of the Company or the
transactions contemplated by this Agreement or any of the documents contemplated
hereby or that could adversely affect the validity or enforceability of, or the
authority or ability of the Company to perform its obligations under, this
Agreement or any of such other documents.
(j) SEC FILINGS. The Company has timely filed all required forms, reports
and other documents with the SEC. All of such forms, reports and other documents
complied, when filed, in all material respects, with all applicable requirements
of the 1933 Act and the Securities Exchange Act of 1934, as amended ("1934
Act").
(k) NOTICE FILINGS. The Company is not the subject of any order, judgment
or decree temporarily, preliminarily or permanently enjoining the Company for
failure to comply with Rule 503 of Regulation D.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
(a) TRANSFER RESTRICTIONS. Each Buyer acknowledges that (1) the Preferred
Shares have not been and are not being registered under the provisions of the
1933 Act and, except as provided in the Registration Rights Agreement, the
Conversion Shares have not been and are not being registered under the 1933 Act,
and may not be transferred unless (A) subsequently registered thereunder or (B)
the Buyer shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Shares to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration; (2) any resale of Shares made in reliance on
Rule 144 promulgated under the 1933 Act may be made only in accordance with the
terms of said Rule and further, if said Rule is not applicable, any such resale
of Shares under circumstances in which the seller, or the person through whom
the resale is made, may be deemed to be an underwriter, as that term is used in
the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (3) neither the
Company nor any other person is under any obligation to register the Shares
(other than registration of the resale of the Conversion Shares pursuant to the
-5-
<PAGE>
Registration Rights Agreement) under the 1933 Act or to comply with the terms
and conditions of any exemption thereunder (other than pursuant to Section 4(d)
hereof and pursuant to the Registration Rights Agreement).
(b) RESTRICTIVE LEGENDS. (1) Each Buyer acknowledges and agrees that the
certificates for the Preferred Shares shall bear restrictive legends in
substantially the following form (and a stop-transfer order may be placed
against transfer of the Preferred Shares):
These securities have not been registered under the Securities Act of
1933, as amended (the "Act"), or any state securities laws. The sale to
the holder of these securities and of the shares of common stock issuable
upon conversion of these securities are not covered by a registration
statement under the Act or registration under state securities laws. These
securities have been acquired, and such shares of common stock 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 acceptable to the Company that such registration is not required.
(2) Each Buyer further acknowledges and agrees that the
certificates for the Conversion Shares issued upon conversion of the Preferred
Shares may bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates for the
Conversion Shares):
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 securities have been acquired for investment only and
may not be resold, transferred or assigned in the absence of registration
of the resale thereof or an opinion of counsel acceptable to the Company
that such registration is not required.
(c) VOTING OF PREFERRED SHARES. Each Buyer agrees to vote all of his
shares of Series B Convertible Preferred Stock in favor of any future increase
in the authorized shares of the Company's preferred stock and/or common stock.
(d) REGISTRATION RIGHTS AGREEMENT. The parties hereto agree to enter into
the Registration Rights Agreement on or before the date hereof.
(e) FORM D. The Company agrees to file a Form D with respect to the Shares
as required under Regulation D. Each Buyer agrees to cooperate with the Company
in connection with such filing and, upon request of the Company, to provide all
information relating to that Buyer reasonably required for such filing.
(f) AUTHORIZATION FOR TRADING; REPORTING STATUS. Promptly following the
date hereof, the Company shall file a notification for listing of additional
shares with the Nasdaq.
-6-
<PAGE>
5. ISSUANCE OF CERTIFICATES FOR PREFERRED SHARES; CONVERSION PROCEDURE.
(a) ISSUANCE OF CERTIFICATES. On the date hereof, following the delivery
by the Buyers of the aggregate purchase price for the Preferred Shares in
accordance with Section 1 hereof, the Company will issue certificates for the
Preferred Shares to the Buyers.
(b) CONVERSION PROCEDURE. In connection with the exercise of conversion
rights relating to the Preferred Shares, each Buyer or any subsequent holders of
the Preferred Shares shall complete, sign and furnish to the Company a Notice of
Conversion in the form attached hereto as ANNEX IV, which shall be deemed to
satisfy all requirements of the Certificate of Designations with respect to any
exercise of conversion rights by the Buyer or any such holders.
6. MISCELLANEOUS.
(a) This Agreement and the Note issued pursuant hereto shall be governed
by and construed and enforced under the internal laws of the State of New York
without giving effect to principles of conflict of laws. Each party hereto
hereby consents to jurisdiction of the federal and state courts located in the
State of Maryland in connection with any claim, lawsuit, civil action or other
proceeding arising out of or in connection with this Agreement and the Note and
the transactions contemplated hereby and thereby (collectively, "Claim"). Each
party hereto hereby waives and agrees not to assert by way of motion, as a
defense or otherwise in any Claim that he or it is not subject to the
jurisdiction of the above courts, that such Claim is brought in an inconvenient
forum, or that the venue of such Claim is improper.
(b) This Agreement may not be assigned by any Buyer without the prior
written consent of the Company. This Agreement shall be binding on each party's
successors and permitted assigns.
(c) This Agreement may be executed in counterparts by the parties hereto
on separate counterparts, all of which together shall constitute one and the
same instrument. A facsimile transmission of this Agreement bearing a signature
on behalf of a party hereto shall be legal and binding on such party.
(d) The headings, captions and footers of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
(e) If any provision of this Agreement shall be invalid or unenforceable
in any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
(f) This Agreement may be amended only by an instrument in writing signed
by the party to be charged with enforcement.
-7-
<PAGE>
(g) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
or any course of dealings between the parties, shall not operate as a waiver
thereof or an amendment hereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or
exercise of any other right or power.
(h) Any notices required or permitted to be given under the terms of this
Agreement shall be sent by mail or delivered personally (which shall include
telephone line facsimile transmission with answer back confirmation) or by
courier and shall be effective five days after being placed in the mail, if
mailed, or upon receipt, if delivered personally or by courier, in the case of
the Company addressed to the Company at its address shown in the introductory
paragraph of this Agreement, Attention: Chief Executive Officer (telephone line
facsimile transmission number (301) 515-5280) or, in the case of a Buyer, at his
address or telephone line facsimile transmission number shown on the signature
page of this Agreement, or such other address or telephone line facsimile
transmission number as a party shall have provided by notice to the other
parties in accordance with this provision. Each Buyer hereby designates as his
address for any notice required or permitted to be given to the Buyer pursuant
to the Certificate of Designations the address shown under his name on the
signature page of this Agreement, until such Buyer shall designate another
address for such purpose.
(i) The respective representations, warranties, covenants and agreements
of each Buyer and the Company contained in this Agreement or made by or on
behalf of them, respectively, pursuant to this Agreement shall survive the
delivery of payment for the Preferred Shares and shall remain in full force and
effect regardless of any investigation made by or on behalf of them or any
person controlling or advising any of them.
(j) This Agreement and its Annexes and Schedules set forth the entire
agreement among the parties hereto with respect to the subject matter hereof and
supersede all prior agreements and understandings, whether written or oral, with
respect thereto.
(k) The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the date
first above written.
V-ONE CORPORATION
By: /s/ David D. Dawson
------------------------------------------
Name: David D. Dawson
Title: Chairman, President and Chief
Executive Officer
/s/ Hai Hua Cheng
------------------------------------------
Name: Hai Hua Cheng
Address: 1F, No.2 Lane 47
Nankang Rd. Section 3,
Taipei, Taiwan
Facsimile No.:886-22783 6255
/s/ Wen Dar Wu
------------------------------------------
Name: William Wu (Wen Dar Wu)
Address: 1F, No.2 Lane 47
Nankang Rd. Section 3,
Taipei, Taiwan
Facsimile No.:886-22783 6255
-9-
<PAGE>
SCHEDULE A
NAME AMOUNT OF AGGREGATE PURCHASE PRICE
1. Hai Hua Cheng $1,500,000
2. Wen Dar Wu $1,500,000
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<PAGE>
ANNEX IV
TO
SUBSCRIPTION
AGREEMENT
NOTICE OF CONVERSION
OF CONVERTIBLE PREFERRED STOCK
SERIES B CONVERTIBLE PREFERRED STOCK
OF V-ONE CORPORATION
TO: V-ONE Corporation
20250 Century Blvd.
Suite 300
Germantown, Maryland 20874
Attention: David D. Dawson, Chairman of the Board, President and
Chief Executive Officer
Facsimile No.: (301) 515-5280
(1) Pursuant to the terms of the Series B Convertible Preferred Stock (the
"Preferred Stock") of V-ONE Corporation, a Delaware corporation (the "Company"),
the undersigned hereby elects to convert ________ shares of the Preferred Stock
into shares of Common Stock, $.001 par value (the "Common Stock"), of the
Company or such other securities into which the Preferred Stock is currently
convertible. Capitalized terms used in this Notice and not otherwise defined
herein have the respective meanings provided in the Certificate of Designations
for the Preferred Stock (the "Certificate of Designations").
(2) Please issue a certificate or certificates for shares of Common Stock
or other securities into which such number of shares of Preferred Stock is
convertible in the name(s) specified immediately below or, if additional space
is necessary, on an attachment hereto:
--------------------- ---------------------
Name Name
--------------------- ---------------------
Address Address
--------------------- ---------------------
SS or Tax ID Number SS or Tax ID Number
(3) The Conversion Date is _________. The Conversion Price is $__________.
<PAGE>
(4) If the shares of Common Stock have not been registered under the
Securities Act of 1933, as amended (the "Act"), the undersigned represents and
warrants that (i) the shares of Common Stock not so registered are being
acquired for the account of the undersigned for investment, and not with a view
to, or for resale in connection with, the public distribution thereof other than
pursuant to registration under the Act, and that the undersigned has no present
intention of distributing or reselling the shares of Common Stock not so
registered other than pursuant to registration under the Act and (ii) the
undersigned is an "accredited investor" as defined in Regulation D under the
Act. The undersigned further agrees that (A) the shares of Common Stock not so
registered shall not be sold or transferred unless either (i) they first shall
have been registered under the Act and applicable state securities laws or (ii)
the Company first shall have been furnished with an opinion of legal counsel
acceptable to the Company to the effect that such sale or transfer is exempt
from the registration requirements of the Act and (B) the Company may place a
legend on the certificate(s) for the shares of Common Stock not so registered to
that effect and place a stop-transfer restriction in its records relating to the
shares of Common Stock not so registered, all in accordance with the
Subscription Agreement, dated as of June 14, 1999, and the Certificate of
Designations.
Date ________________ ____________________________________________
Signature of Holder (Must be signed exactly
as name appears on the Preferred Stock
Certificate.)
2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of June 11, 1999 (this
"Agreement"), is made by and between V-ONE CORPORATION, a Delaware corporation
(the "Company"), and the person or persons named on the signature page hereto
(each an "Investor" and collectively the "Investors").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, in connection with the Subscription Agreement, dated as of June
11, 1999, between the Investors and the Company (the "Subscription Agreement"),
the Company has agreed, upon the terms and subject to the conditions of the
Subscription Agreement, to issue and sell to the Investors an aggregate of
1,287,554 shares (the "Preferred Shares") of Series B Convertible Preferred
Stock of the Company as provided in the Subscription Agreement, which shares of
Preferred Stock are convertible into shares (the "Conversion Shares") of Common
Stock, $.001 par value (the "Common Stock"), of the Company; and
WHEREAS, to induce the Investors to execute and deliver the Subscription
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "Securities
Act"), and applicable state securities laws with respect to the Conversion
Shares;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Investors
hereby agree as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have the
following meanings:
"Certificate of Designations" means the Certificate of Designations of the
Series B Convertible Preferred Stock as filed by the Company with the Secretary
of State of the State of Delaware.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"register," "registered," and "registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the Securities Act and pursuant to Rule 415 under the Securities
Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
"Registrable Securities" means the Conversion Shares.
<PAGE>
"Registration Period" means the period from the date hereof to the earlier
of (i) the date that is two years after the date hereof and (ii) the date on
which the Investors no longer beneficially own any Registrable Securities.
"Registration Statement" means a registration statement of the Company
under the Securities Act, including any amendment thereto.
(b) Capitalized terms defined in the introductory paragraph or the
recitals to this Agreement shall have the respective meanings therein provided.
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Subscription Agreement.
2. REGISTRATION.
(a) MANDATORY REGISTRATION. The Company shall prepare, and on or prior to
the date which is 150 days after the date hereof, file with the SEC a
Registration Statement on Form S-3 that, on the date of filing with the SEC,
covers the resale by the Investors of a number of shares of Common Stock at
least equal to the number of shares of Common Stock issuable upon conversion of
the Preferred Shares, determined as if the Preferred Shares were converted in
full on the date of filing of the Registration Statement with the SEC. The
Registration Statement required to be filed pursuant to this Section 2(a) may
also cover, in the discretion of the Company, the resale of additional shares of
Common Stock, including but not limited to the shares of Common Stock described
on SCHEDULE A hereto.
(b) CERTAIN OFFERINGS. If any offering pursuant to a Registration
Statement pursuant to Section 2(a) hereof involves an underwritten offering,
persons who hold a majority in interest of the securities covered by such
Registration Statement subject to such underwritten offering shall have the
right to select one legal counsel and an investment banker or bankers and
manager or managers to administer the offering, which investment banker or
bankers or manager or managers shall be reasonably satisfactory to the Company.
The Investors who hold the Registrable Securities to be included in such
underwriting shall pay all underwriting discounts and commissions and other fees
and expenses of such investment banker or bankers and manager or managers so
selected in accordance with this Section 2(b) (other than fees and expenses
relating to registration of Registrable Securities under federal or state
securities laws, which are payable by the Company pursuant to Section 5 hereof)
with respect to their Registrable Securities and the fees and expenses of such
legal counsel so selected by the Investors.
(c) ELIGIBILITY FOR FORM S-3. The Company meets the requirements for the
use of Form S-3 for registration of the Registrable Securities for resale by the
Investors.
3. OBLIGATIONS OF THE COMPANY. In connection with the registration of the
Registrable Securities, the Company shall:
(a) prepare promptly, and file with the SEC not later than 150 days after
the date hereof, a Registration Statement with respect to the number of
Registrable Securities provided in Section 2(a), and thereafter to use its best
efforts to cause each Registration Statement relating to Registrable Securities
2
<PAGE>
to become effective as soon as possible after such filing, and keep the
Registration Statement effective pursuant to Rule 415 at all times during the
Registration Period; and the Company represents and warrants to, and covenants
and agrees with, the Investors that the Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein), at the
time it is first filed with the SEC, at the time it is ordered effective by the
SEC and at all time during which it is required to be effective hereunder (and
each such amendment and supplement at the time it is filed with the SEC and at
all time during which it is available for use in connection with the offer and
sale of the Registrable Securities) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading;
(b) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period;
(c) furnish to each Investor whose Registrable Securities are included in
the Registration Statement and its legal counsel, (1) promptly after the same is
prepared and publicly distributed, filed with the SEC or received by the
Company, one copy of the Registration Statement and any amendment thereto, and
(2) such number of copies of a prospectus, including a preliminary prospectus,
and all amendments and supplements thereto and such other documents, as such
Investor may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Investor;
(d) if the Registrable Securities are being offered in an underwritten
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the underwriters of such
offering;
(e) as promptly as practicable after becoming aware of such event or
circumstance, notify each Investor of any event or circumstance of which the
Company has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, and deliver a number of copies of such supplement
or amendment to each Investor as such Investor may reasonably request;
(f) as promptly as practicable after becoming aware of such event, notify
each Investor who holds Registrable Securities being sold (or, in the event of
an underwritten offering, the managing underwriters) of the issuance by the SEC
of any stop order or other suspension of effectiveness of the Registration
Statement at the earliest possible time;
3
<PAGE>
(g) permit a single firm of counsel designated as selling stockholders'
counsel by the Investors who hold a majority in interest of the Registrable
Securities being sold to review and comment on the Registration Statement and
all amendments and supplements thereto a reasonable period of time prior to
their filing with the SEC; and
(h) take all other reasonable actions necessary to expedite and
facilitate disposition by the Investors of the Registrable Securities pursuant
to the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS. In connection with the registration of
the Registrable Securities, the Investors shall have the following obligations:
(a) It shall be a condition precedent to the obligations of the Company
to complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall furnish
to the Company such information regarding itself, the Registrable Securities
held by it and the intended method of disposition of the Registrable Securities
held by it as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. At least four (4) days prior
to the first anticipated filing date of the Registration Statement, the Company
shall notify each Investor of the information the Company requires from each
such Investor (the "Requested Information") if any of such Investor's
Registrable Securities are eligible for inclusion in the Registration Statement.
If at least one (1) business day prior to the filing date the Company has not
received the Requested Information from an Investor (a "Non-Responsive
Investor"), then the Company may file the Registration Statement without
including Registrable Securities of such Non-Responsive Investor (and if the
only Investor participating in the registration is a Non-Responsive Investor,
the Company shall not be required to file the Registration Statement prior to
the date that is five business days after the Requested Information is furnished
by such Investor);
(b) Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement;
(c) If persons holding a majority in interest of the securities covered
by the Registration Statement determine to engage the services of an
underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement;
(d) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
3(f), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
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Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(e) or 3(f) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice; and
(e) No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the Investors entitled hereunder to approve such arrangements, (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions and other fees and expenses of investment
bankers and any manager or managers of such underwriting and legal expenses of
the underwriters applicable with respect to its Registrable Securities, in each
case to the extent not payable by the Company pursuant to the terms of this
Agreement.
5. EXPENSES OF REGISTRATION. All reasonable expenses, other than
underwriting discounts and commissions and other fees and expenses of investment
bankers and other than brokerage commissions, incurred in connection with
registrations, filings or qualifications pursuant to Section 3, including,
without limitation, all registration, listing and qualifications fees, printers
and accounting fees and the fees and disbursements of counsel for the Company,
shall be borne by the Company; PROVIDED, HOWEVER, that the Investors shall bear
the fees and out-of-pocket expenses of any legal counsel retained by the
Investors.
6. INDEMNIFICATION. If any Registrable Securities are included in a
Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Investor who holds such Registrable Securities, the directors, if
any, of such Investor, the officers, if any, of such Investor, each person, if
any, who controls any Investor within the meaning of the Securities Act or the
Exchange Act, any underwriter (as defined in the Securities Act) for the
Investors, the directors, if any, of such underwriter and the officers, if any,
of such underwriter, and each person, if any, who controls any such underwriter
within the meaning of the Securities Act or the Exchange Act (each, an
"Indemnified Person"), against any losses, claims, damages, liabilities or
expenses (joint or several) incurred (collectively, "Claims") to which any of
them may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations in the Registration Statement, or
any post-effective amendment thereof, or any prospectus included therein: (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any post-effective amendment thereof or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus if used prior to the effective date of such
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Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation under the
Securities Act, the Exchange Act or any state securities law (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations"). Subject
to the restrictions set forth in Section 6(d) with respect to the number of
legal counsel, the Company shall reimburse the Investors and each such
underwriter or controlling person, promptly as such expenses are incurred and
are due and payable, for any legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (I) shall not apply to a Claim arising
out of or based upon a Violation that occurs in reliance upon and in conformity
with information furnished in writing to the Company by any Indemnified Person
or underwriter for such Indemnified Person expressly for use in connection with
the preparation of the Registration Statement, the prospectus or any such
amendment thereof or supplement thereto; (II) with respect to any preliminary
prospectus shall not inure to the benefit of any such person from whom the
person asserting any such Claim purchased the Registrable Securities that are
the subject thereof (or to the benefit of any person controlling such person) if
the untrue statement or omission of material fact contained in the preliminary
prospectus was corrected in the prospectus, as then amended or supplemented; and
(III) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company.
(b) In connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to indemnify and hold harmless, to the
same extent and in the same manner set forth in Section 6(a), the Company, each
of its directors, each of its officers who signs the Registration Statement,
each person, if any, who controls the Company within the meaning of the
Securities Act or the Exchange Act, any underwriter and any other stockholder
selling securities pursuant to the Registration Statement or any of its
directors or officers or any person who controls such stockholder or underwriter
within the meaning of the Securities Act or the Exchange Act (collectively and
together with an Indemnified Person, an "Indemnified Party"), against any Claim
to which any of them may become subject, under the Securities Act, the Exchange
Act or otherwise, insofar as such Claim arises out of or is based upon any
Violation by such Investor, or any of its directors, officers or shareholders;
and such Investor will reimburse any legal or other expenses reasonably incurred
by any Indemnified Party in connection with investigating or defending any such
Claim; PROVIDED, HOWEVER, that the indemnity agreement contained in this Section
6(b) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such Investor.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(b) with respect to any preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the preliminary prospectus
was corrected on a timely basis in the prospectus, as then amended or
supplemented.
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(c) The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information so furnished in writing by such persons
expressly for inclusion in the Registration Statement.
(d) Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel selected by the indemnifying party; PROVIDED,
HOWEVER, that an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. In such event, the Company shall pay for only one separate legal
counsel for the Investors; such legal counsel shall be selected by the persons
holding a majority in interest of the securities included in the Registration
Statement to which the Claim relates. The failure to deliver written notice to
the indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action. The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due and
payable.
7. CONTRIBUTION. To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; PROVIDED,
HOWEVER, that (a) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6, and (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of such fraudulent misrepresentation.
8. REPORTS UNDER EXCHANGE ACT. With a view to making available to the
Investors the benefits of Rule 144 promulgated under the Securities Act or any
other similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144; and
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(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act.
9. AMENDMENT OF AGREEMENT. Any provision of this Agreement may be amended
and the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and Investors who hold a majority in interest of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 9 shall be binding upon each Investor and the Company.
10. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable Securities
whenever such person or entity owns of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two or
more persons or entities with respect to the same Registrable Securities, the
Company shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.
(b) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
(by hand, by courier, by telephone line facsimile transmission or other means)
or sent by certified mail, return receipt requested, properly addressed and with
proper postage pre-paid (i) if to the Company, at V-ONE Corporation, 20250
Century Boulevard, Suite 300, Germantown, Maryland 20874, Attention: Chief
Executive Officer, telephone line facsimile transmission number (301) 515-5280,
and (ii) if to any Investor, at such address as such Investor shall have
provided in writing to the Company, or at such other address as each such party
furnishes by notice given in accordance with this Section 10(b), and shall be
effective, when personally delivered, upon receipt and, when so sent by
certified mail, four days after deposit with the United States Postal Service.
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be enforced, governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed entirely within such state. If any provision of this
Agreement is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any provision hereof that may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
hereof.
(e) This Agreement with its Schedule constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
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(f) An Investor may not assign its rights hereunder without the consent
of the Company. This Agreement shall inure to the benefit of and be binding upon
the successors and permitted assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.
(i) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other parties hereto by telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
V-ONE CORPORATION
By: /s/ David D. Dawson
-----------------------------------------
Name: David D. Dawson
Title: Chairman of the Board, President
and Chief Executive Officer
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By: /s/ Hai Hua Chen
-----------------------------------------
Name: Hai Hua Cheng
By: /s/ Wen Dar Wu
-----------------------------------------
Name: William Wu (Wen Dar Wu)
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SCHEDULE A
1. Pursuant to the Section 12.3 of the Stock Subscription Warrant to purchase
100,000 shares of the Company's Common Stock between the Company and TBCC
Funding Trust II ("TBCC") dated March 31, 1999 ("Warrant"), 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 TBBC written notice thereof and, if in the opinion of TBCC such registration
rights are more favorable than the registration rights provided under the
Warrant, TBCC can so notify the Company within thirty (30) days of receipt of
the foregoing notice from the Company, whereupon such registration rights shall
automatically be incorporated in the Warrant.
12
NON-NEGOTIABLE PROMISSORY NOTE
U.S. $2,000,000 June 11, 1999
For value received, the undersigned, Hai Hua Cheng and Wen Dar Wu, jointly
and severally (collectively, the "BORROWER"), promise to pay V-ONE CORPORATION,
a Delaware corporation ("LENDER"), (1) two million dollars (U.S. $2,000,000),
and (2) accrued and unpaid interest at the rate of 4.87% per annum. One million
dollars (U.S. $1,000,000) of the principal amount of this Note plus accrued
interest on the then outstanding principal amount of this Note shall be paid on
July 14, 1999 and one million dollars (U.S. $1,000,000) of the principal amount
of this Note plus accrued interest on the then outstanding principal amount of
this Note shall be paid on August 13, 1999.
Payment of principal and interest is to be made to the Lender at the
address specified in Section 1(c) of the Subscription Agreement dated as of June
11, 1999 between the Borrower and the Lender ("Agreement").
Time of payment is of the essence with respect to this Note.
The Borrower waives presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance,
default or enforcement of this Note.
If any one or more of the following described events of default (each, an
"Event of Default") shall occur and be continuing, the Lender shall, in addition
to all other rights and remedies available to the Lender, have the rights and
remedies set forth in the next paragraph of this Note:
(a) the Borrower shall default in the payment of principal, interest
or any other amount due on this Note when due, whether at maturity or by
acceleration or otherwise; or
(b) a proceeding shall have been instituted in a court having
jurisdiction in the premises seeking a decree or order for relief with respect
to the Borrower under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or for the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of the
Borrower, or for any substantial part of its properties, or for the winding up
or liquidation of its affairs, and such proceeding shall remain undismissed or
unstayed and in effect for a period of 15 consecutive days or such court shall
enter a decree or order granting the relief sought in such proceeding; or
(c) the Borrower shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, shall
consent to the entry of an order for relief in an involuntary case under any
such law, or shall consent to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of the Borrower or for any substantial part of its property,
or shall make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any action in
furtherance of any of the foregoing; or
<PAGE>
(d) the Borrower shall default in the due performance or observance
of any other covenant, condition or provision contained in this Note or in the
Agreement, and such Event of Default shall continue uncured for 5 days after
written notice thereof shall have been given to the Borrower by the Lender; or
(e) any representation or other statement of the Borrower contained
herein or in the Agreement shall be deemed materially false or misleading, or
any breach shall occur of any representation or other statement contained herein
or in the Agreement.
If an Event of Default shall occur, the Lender may by written notice to
the Borrower declare the unpaid balance of this Note then outstanding and
interest accrued thereon and all other liabilities of the Borrower to the Lender
hereunder and under the Agreement to be forthwith due and payable, and the same
shall thereupon become and be immediately due and payable, without presentment,
demand or protest of any kind, all of which are hereby expressly waived;
PROVIDED, HOWEVER, that, if an Event of Default described in subsection (b) or
(c) of the definition of "Event of Default" occurs, the unpaid balance of this
Note then outstanding and interest accrued thereon and all other liabilities of
the Borrower to the Lender hereunder and under the Agreement shall automatically
become and be due and payable, without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived.
This Note is issued pursuant to the Agreement and the Lender or any
subsequent holder hereof is entitled to the benefits thereof. If any provision
hereof shall for any reason be held invalid or unenforceable, no other provision
shall be affected thereby, and this Note shall be construed as if the invalid or
unenforceable provision had never been a part of it.
In the event of any action for the enforcement or defense of the Lender's
rights under the Agreement or under this Note, the Borrower shall pay the
reasonable costs and expenses, including reasonable attorneys' fees, incurred by
the Lender in connection with such actions.
This Note shall be governed by and construed and enforced under the
internal laws of the State of New York without giving effect to principles of
conflict of laws.
THE BORROWER HEREBY EMPOWERS ANY ATTORNEY OF ANY COURT OF RECORD, AFTER
DEMAND IS MADE HEREUNDER, TO APPEAR FOR THE BORROWER AND FILE AN AFFIDAVIT OF
JUDGMENT BY CONFESSION AGAINST THE BORROWER IN FAVOR OF THE LENDER OR ITS
SUCCESSORS OR ASSIGNS FOR THE ENTIRE PRINCIPAL BALANCE OF THIS NOTE, ALL ACCRUED
INTEREST AND ALL OTHER AMOUNTS DUE HEREUNDER, TOGETHER WITH REASONABLE
ATTORNEYS' FEES. THE BORROWER HEREBY FOREVER WAIVES AND RELEASES ALL ERRORS IN
SAID PROCEEDINGS AND ALL RIGHTS OF APPEAL AND ALL RELIEF FROM ANY AND ALL
APPRAISEMENT, STAY OR EXEMPTION LAWS OF ANY STATE NOW IN FORCE OR HEREAFTER
ENACTED. INTEREST ON ANY SUCH JUDGMENT SHALL ACCRUE AT 8% PER ANNUM.
NO SINGLE EXERCISE OF THE FOREGOING POWER TO CONFESS JUDGMENT, OR A SERIES
OF JUDGMENTS, SHALL BE DEEMED TO EXHAUST THE POWER, WHETHER OR NOT ANY SUCH
EXERCISE SHALL BE HELD BY ANY COURT TO BE INVALID, VOIDABLE, OR VOID, BUT THE
POWER SHALL CONTINUE UNDIMINISHED AND IT MAY BE EXERCISED FROM TIME TO TIME AS
OFTEN AS THE LENDER SHALL ELECT UNTIL SUCH TIME AS THE LENDER SHALL HAVE
RECEIVED PAYMENT IN FULL OF ALL PRINCIPAL AMOUNTS, INTERESTS AND ALL OTHER COSTS
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AND EXPENSES DUE AND PAYABLE PURSUANT TO THE AGREEMENT AND THIS OR ANY OTHER
NOTE ISSUED IN CONNECTION THEREWITH.
THE BORROWER IRREVOCABLY WAIVES ANY AN ALL RIGHTS THE BORROWER MAY HAVE TO
A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE RELATING TO
THIS NOTE OR THE AGREEMENT, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS NOTE
OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS. THE BORROWER
ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.
THE BORROWER ACKNOWLEDGES THAT IT HAS READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS NOTE, INCLUDING THE CONFESSION OF JUDGMENT AND WAIVER OF JURY
TRIAL, AND HAS BEEN ADVISED BY COUNSEL AS NECESSARY OR APPROPRIATE.
/s/ Hai Hua Cheng
------------------------------------------
Hai Hua Cheng
/s/ William Wu
------------------------------------------
William Wu (Wen Dar Wu)
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