SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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): March 17 , 1999
OBJECTSOFT CORPORATION
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(Exact Name of Registrant as Specified in Charter)
Delaware 1-10751 22-3091075
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File No.) Identification No.)
Continental Plaza III, 433 Hackensack Avenue, Hackensack, NJ 07601
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (201) 343-9100
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events
On March 17, 1999, the Company closed a private financing (the
"Transaction") under a 6% Series E Convertible Preferred Stock Subscription
Agreement dated as of March 17, 1999 (the "Agreement") with Settondown Capital
International, Ltd. (the "Placement Agent") and several investors (the
"Investors") pursuant to which the Company sold, and the Investors purchased,
$2,000,000 of 6% Series E Convertible Preferred Stock (the "Preferred Stock")
and Warrants to purchase an aggregate of 50,000 shares of the Company's Common
Stock (the "Common Stock") for an aggregate purchase price of $2,000,000. The
Company agreed to promptly file a registration statement under the Securities
Act of 1933, as amended, registering for resale shares of Common Stock issuable
in connection with the Agreement.
Pursuant to the Agreement, the Company issued to the Placement Agent as
placement agent fees (i) 1,000 shares of Preferred Stock, (ii) a Warrant to
purchase 50,000 shares of Common Stock and (iii) three (3%) percent of the
investment amount in cash ($60,000).
Each share of Preferred Stock may be converted into shares of Common
Stock, beginning on the earlier of (i) sixty days following the closing of the
Transaction or (ii) the effective date of the registration statement covering
the resale of the Common Stock, at a conversion rate determined by dividing
$100, the purchase price per share of Preferred Stock, by the "Conversion
Price," which is the lesser of (x) the closing bid price for the Common Stock on
the day immediately preceding the closing date for the Transaction or (y) the
average of (A) the average of the three lowest closing bid prices of the Common
Stock during the (22) day trading period immediately preceding the conversion
date (the "Lookback Period") and (B) the converting holder's choice of five
consecutive closing bid prices of the Common during the Lookback Period. (The
Lookback Period is increased by two (2) trading days on the last trading day of
each month, starting on the first day of the fourth (4th) month from the closing
of the Transaction, until the Lookback Period equals a maximum of thirty (30)
trading days.)
The number of shares of Common Stock issuable to each holder at any
time upon conversion will not exceed the number of shares which, when aggregated
with all other shares of Common Stock then owned of record by such holder, would
result in such holder owning, in aggregate, more than 9.99% of all of the
Company's outstanding Common Stock on the date of conversion.
In connection with the Transaction, the parties to that certain Amended
and Restated 6% Series D Convertible Preferred Stock Subscription Agreement,
formerly known as the Private Equity Line of Credit Agreement, dated as of
December 30, 1998 (previously reported on the Company's Form 8-K filed on
January 15, 1999), agreed to terminate the second and third tranches thereof,
comprising the issuance and sale of an additional $1,000,000 of Series D
Convertible Preferred Stock.
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The foregoing is a brief description of the terms of the Transaction.
It is not complete and it is qualified in its entirety by reference to the
Agreement, the Certificate of Designation of the Series E Convertible Preferred
Stock, the Form of Warrant, the Registration Rights Agreement, the Escrow
Agreement and a press release issued on March 17, 1999, which have been filed as
Exhibits to this Current Report.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
Exhibit
No. Description
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4.1 - 6% Series E Convertible Preferred Stock Subscription
Agreement, dated as of March 17, 1999
4.2 - Certificate of Designation of Series E Preferred Stock
4.3 - Amended Certificate of Designation of Series E Preferred
Stock
4.4 - Form of Investors' Warrant
4.5 - Registration Rights Agreement dated as of March 17, 1999
99.1 - Press release issued on March 19, 1999
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SIGNATURE
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: March 19, 1999
OBJECTSOFT CORPORATION
By: /s/ David E.Y. Sarna
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David E.Y. Sarna
Chairman, Co-Chief Executive
Officer and Secretary
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EXHIBIT INDEX
Exhibit
No. Description
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4.1 6% Series E Convertible Preferred Stock Subscription
Agreement, dated as of March 17, 1999
4.2 Certificate of Designation of Series E Preferred Stock
4.3 Amended Certificate of Designation of Series E Preferred Stock
4.4 Form of Investors' Warrant
4.5 Registration Rights Agreement dated as of March 17, 1999
99.1 Press release issued on March 19, 1999
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6% SERIES E CONVERTIBLE PREFERRED STOCK SUBSCRIPTION AGREEMENT
STOCK SUBSCRIPTION AGREEMENT, dated as of March 17, 1999 (the
"Agreement"), among the entities listed on Schedule A annexed hereto (referred
to as the "Investor" or "Investors"), SETTONDOWN CAPITAL INTERNATIONAL, LTD.
(the "Placement Agent") located at Charlotte House, Charlotte Street, P.O. Box
N. 9204, Nassau, Bahamas, organized and existing under the laws of the Bahamas,
and OBJECTSOFT CORPORATION (Nasdaq SmallCap Stock Market Symbol "OSFT"), a
corporation organized and existing under the laws of the State of Delaware (the
"Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investors
and the Investors shall purchase (i) up to Two Million ($2,000,000) Dollars in
aggregate value of Preferred Stock (as defined below), and (ii) Warrants to
purchase an aggregate of up to 50,000 Warrant Shares (as defined below); and
WHEREAS, the Company shall issue to the Placement Agent, in return for
services rendered, the fees as set forth in Section 12.7 below; and
WHEREAS, such investments will be made in reliance upon the provisions
of Section 4(2) ("Section 4(2)") and Regulation D ("Regulation D") of the United
States Securities Act of 1933, as amended, and the regulations promulgated
thereunder (the "Securities Act"), and/or upon such other exemption from the
registration requirements of the Securities Act as may be available with respect
to any or all of the investments in Common Stock to be made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Certain Definitions
Section 1.1 "Bid Price" shall mean the closing bid price (as reported
by Bloomberg L.P.) of the Common Stock on the Principal Market.
Section 1.2 "Capital Shares" shall mean the Common Stock and any shares
of any other class of common stock whether now or hereafter authorized, having
the right to participate in the distribution of earnings and assets of the
Company.
Section 1.3 "Capital Shares Equivalents" shall mean any securities,
rights, or obligations that are convertible into or exchangeable for, or giving
any right to subscribe for, any Capital Shares of the Company or any warrants,
options or other rights to subscribe for or purchase Capital Shares or any such
convertible or exchangeable securities.
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Section 1.4 "Certificate of Designation" shall mean the Company's
Certificate of Designation setting forth all of the rights, privileges and
preferences of the Series E Preferred Stock, as annexed hereto as Exhibit A.
Section 1.5 "Closing" shall mean the closing of the purchase and sale
of the Preferred Stock and Warrants pursuant to Article II herein.
Section 1.6 "Closing Date" shall mean the Subscription Date.
Section 1.7 "Commitment Amount" shall mean up to the $2,000,000 which
the Investors have agreed to provide to the Company in order to purchase the
Preferred Shares and Warrants pursuant to the terms and conditions of this
Agreement.
Section 1.8 "Common Stock" shall mean the Company's common stock, par
value $0.0001 per share.
Section 1.9 "Damages" shall mean any loss, claim, damage, liability,
costs and expenses which shall include, but not be limited to, reasonable
attorney's fees, disbursements, costs and expenses of expert witnesses and
investigation.
Section 1.10 "Effective Date" shall mean the date on which the SEC
first declares effective a Registration Statement(s) registering the resale of
the Underlying Shares and Warrant Shares (as of the date the Registration
Statement is filed).
Section 1.11 "Escrow Agent" shall mean the law firm of Parker Chapin
Flattau & Klimpl, LLP, pursuant to the terms of the Escrow Agreement annexed
hereto as Exhibit C.
Section 1.12 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
Section 1.13 "Legend" shall have the meaning set forth in Section 8.1.
Section 1.14 "Material Adverse Effect" shall mean any effect on the
business, operations, properties, prospects, or financial condition of the
Company that is material and adverse to the Company and its subsidiaries and
affiliates, taken as a whole, and/or any condition, circumstance, or situation
that would prohibit or otherwise in any material respect interfere with the
ability of the Company to enter into and perform any of its obligations under
this Agreement, the Registration Rights Agreement, the Escrow Agreement, the
Certificate of Designation or the Warrants in any material respect.
Section 1.15 "NASD" shall mean the National Association of Securities
Dealers, Inc.
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Section 1.16 "Outstanding" when used with reference to shares of Common
Stock, Preferred Stock or Capital Shares (collectively the "Shares"), shall
mean, at any date as of which the number of such Shares is to be determined, all
issued and outstanding Shares, and shall include all such Shares issuable in
respect of outstanding scrip or any certificates representing fractional
interests in such Shares; provided, however, that "Outstanding" shall not mean
any such Shares then directly or indirectly owned or held by or for the account
of the Company.
Section 1.17 "Person" shall mean an individual, a corporation, a
partnership, an association, a limited liability company, a trust or other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
Section 1.18 "Preferred Stock" shall mean the Company's Series E
Preferred Stock with the rights, privileges and preferences, as set forth in the
Certificate of Designation attached hereto as Exhibit A.
Section 1.19 "Principal Market" shall mean the Nasdaq National Market,
or the Nasdaq SmallCap Market, whichever is at the time the principal trading
exchange or market for the Common Stock.
Section 1.20 "Purchase Price" shall mean an amount equal to the
"Purchase Price" of each share of Preferred Stock, as set forth in the
Certificate of Designation.
Section 1.21 "Registrable Securities" shall mean the Underlying Shares
and the Warrant Shares (i) in respect of which the Registration Statement
(covering these securities) has not been declared effective by the SEC, (ii)
which have not been sold under circumstances under which all of the applicable
conditions of Rule 144 (or any similar provision then in force) under the
Securities Act ("Rule 144") are met, (iii) which have not been otherwise
transferred to holders who may trade such shares without restriction under the
Securities Act, and (iv) the sales of which, in the opinion of counsel to the
Company, are subject to any time, volume or manner limitations pursuant to Rule
144 (or any similar provision then in effect) under the Securities Act.
Section 1.22 "Registration Rights Agreement" shall mean the agreement
regarding the filing of the Registration Statement for the resale of the
Registrable Securities, entered into between the Company, the Placement Agent,
and the Investors on the Subscription Date annexed hereto as Exhibit B.
Section 1.23 "Registration Statement" shall mean a registration
statement on Form S-3 (if use of such form is then available to the Company
pursuant to the rules of the SEC and, if not, on such other form promulgated by
the SEC for which the Company then qualifies and which counsel for the Company
shall deem appropriate, and which form shall be available for the resale of the
Registrable Securities to be registered thereunder in accordance with the
provisions of this Agreement, the Registration Rights Agreement, and the
Warrants and in accordance with the intended
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method of distribution of such securities), for the registration of the resale
by the Investors and the Placement Agent of the Registrable Securities under the
Securities Act.
Section 1.24 "Regulation D" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.25 "SEC" shall mean the U.S. Securities and Exchange
Commission.
Section 1.26 "Section 4(2)" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.27 "Securities" shall mean the Preferred Stock, the
Underlying Shares and the Warrant Shares.
Section 1.28 "Securities Act" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.29 "SEC Documents" shall mean the Company's latest Form 10-K
(and all amendments thereto) or 10-KSB (and all amendments thereto) as of the
time in question, all Form 10-Qs or 10-QSBs, Form 8-Ks filed thereafter and all
subsequent filings, including a Registration Statement on Form S-3 declared
effective on February 24, 1999, and the Proxy Statement for its latest fiscal
year as of the time in question, until such time as the Company no longer has an
obligation to maintain the effectiveness of a Registration Statement as set
forth in the Registration Rights Agreement.
Section 1.30 "Subscription Date" shall mean the date on which this
Agreement and all Exhibits and attachments hereto, are executed and delivered by
the parties hereto and all of the conditions relating to the purchase of the
Preferred Stock shall have been fulfilled.
Section 1.31 "Trading Day" shall mean any day during which the New York
Stock Exchange shall be open for business.
Section 1.32 "Underlying Shares" shall mean all shares of Common Stock
or other securities issued or issuable pursuant to conversion of the Preferred
Stock or exercise of the Warrants.
Section 1.33 "Warrants" shall mean the Warrant attached hereto as
Exhibit D.
Section 1.34 "Warrant Shares" shall mean all shares of Common Stock or
other securities issued or issuable pursuant to the exercise of the Warrants.
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ARTICLE II
Purchase and Sale of Preferred Stock and Warrants
Section 2.1 Preferred Stock. (a) The Company agrees to sell and the
Investors agree to purchase up to an aggregate principal amount of Two Million
($2,000,000) Dollars principal amount of Series E Preferred Stock as set forth
in (b) below. The number of shares of Common Stock issuable upon conversion of
the Preferred Stock shall be determined by dividing $2,000,000 by the conversion
formula contained in the Certificate of Designation.
(b) The Investors shall purchase (pro rata) an aggregate
principal amount of Two Million ($2,000,000) Dollars principal amount of
Preferred Stock on the Subscription Date upon the satisfaction of the following
conditions:
(i) delivery into escrow by the Company of an
aggregate principal amount of Two Million Dollars
($2,000,000) of original Preferred Stock, as more
fully set forth in the Escrow Agreement attached
hereto as Exhibit C;
(ii) the Investors shall have received an opinion of
counsel of the Company as set forth in this
Agreement;
(iii) the Investors shall have received a copy of the
filed Certificate of Designation and any amendments
thereto;
(iv) the Company shall have obtained all permits and
qualifications required by any state for the offer
and sale of the Preferred Stock, or shall have the
availability of exemptions therefrom. To the
knowledge of the Company, the offer, sale and
issuance of the Preferred Stock shall be legally
permitted by all laws and regulations to which the
Company is subject;
(v) the Company shall have performed, satisfied and
complied in all material respects with all covenants,
agreements and conditions required by this Agreement
and all Exhibits hereto, the Certificate of
Designation, the Escrow Agreement, the Registration
Rights Agreement and the Warrants, to be performed,
satisfied or complied with by the Company at or prior
to the Closing Date;
(vi) no statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction that
prohibits or directly and adversely affects any of
the transactions contemplated by this Agreement, and
no proceeding shall have been commenced that may have
the
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effect of prohibiting or adversely affecting any of
the transactions contemplated by this Agreement;
(vii) since the date of filing of the Company's most
recent SEC Document, no event that had or is
reasonably likely to have a Material Adverse Effect
has occurred;
(viii) the trading of the Common Stock is not
suspended by the SEC or the Principal Market, and the
Common Stock shall have been approved for listing or
quotation on and shall not have been delisted from
the Principal Market. The issuance of the Securities
with respect to the Closing of the Preferred Stock
shall not violate the shareholder approval or other
requirements of the Principal Market or the NASD.
Except as set forth on Schedule B attached hereto,
the Company shall not have been contacted by the NASD
concerning the delisting of the Common Stock on the
Principal Market, and the Company currently meets all
listing requirements during the thirty (30) day
period immediately preceding the Closing Date;
(ix) payment of fees as applicable as set forth in
Section 12.7 herein; and
(x) The representations and warranties of the Company
set forth in this Agreement shall be true and correct
in all material respects (except as to
representations and warranties, or portions thereof,
which by their terms are subject to a materiality or
similar standard, in which case such representations
and warranties shall be true and correct) as of the
date of this Agreement and as of the Subscription
Date as though made on and as of the Subscription
Date (except that representations and warranties that
by their terms speak as of the date of this Agreement
or some other date shall be true and correct only as
of such date) and the Investors shall have received a
certificate, dated the Subscription Date, signed by
an officer on behalf of the Company to such effect.
Section 2.2 Warrants. On the Closing Date, the Company will issue to
each of the Investors and the Placement Agent a Warrant, exercisable beginning
on the Closing Date and exercisable thereafter any time over the five-year
period subsequent to the Closing Date, to purchase an aggregate of 50,000
Warrant Shares pro rata with respect to each Investor and 50,000 Warrant Shares
for the Placement Agent at the Exercise Price (as defined in the Warrant). The
Warrants shall be delivered by the Company to the Escrow Agent, and delivered to
the Investors and Placement Agent pursuant to the terms of this Agreement and
the Escrow Agreement. The Warrant Shares shall be registered for resale pursuant
to the Registration Rights Agreement.
ARTICLE III
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Representations and Warranties of the Investors
Each of the Investors severally (as to itself) and not jointly
represents and warrants to the Company that:
Section 3.1 Intent. Such Investor is entering into this Agreement for
its own account and has no present arrangement (whether or not legally binding)
at any time to sell the Securities to or through any person or entity; provided,
however, that by making the representations herein, such Investor does not agree
to hold any of the Securities for any minimum or other specific term and
reserves the right to dispose of the Securities at any time in accordance with
federal and state securities laws applicable to such disposition.
Section 3.2 Sophisticated Investor. Such Investor is a sophisticated
investor (as described in Rule 506(b)(2)(ii) of Regulation D) and accredited
investor (as defined in Rule 501 of Regulation D), and such Investor has such
experience in business and financial matters that it is capable of evaluating
the merits and risks of an investment in the Securities. Such Investor
acknowledges that an investment in the Common Stock is speculative and involves
a high degree of risk. Such Investor has the ability to fund the purchase of the
Preferred Stock and Warrants, hold the Preferred Stock for an indefinite period
of time and is in a financial position to risk loss of its entire investment
contemplated hereby.
Section 3.3 Authority. This Agreement has been duly authorized and
validly executed and delivered by such Investor and is a valid and binding
agreement of such Investor enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
Section 3.4 Not an Affiliate. Such Investor is not an officer, director
or "affiliate" (as that term is defined in Rule 405 of the Securities Act) of
the Company.
Section 3.5 Organization and Standing. Such Investor is duly organized,
validly existing, and in good standing under the laws of the countries and/or
states of their incorporation or organization.
Section 3.6 Absence of Conflicts. The execution and delivery of this
Agreement and any other document or instrument executed in connection herewith,
and the consummation of the transactions contemplated thereby, and compliance
with the requirements thereof, will not violate any law, rule, regulation,
order, writ, judgment, injunction, decree or award binding on such Investor, or,
to the Investor's knowledge, (a) violate any provision of any indenture,
instrument or agreement to which such Investor is a party or is subject, or by
which such Investor or any of its assets is bound; (b) conflict with or
constitute a material default thereunder; (c) result in the creation or
imposition of any lien pursuant to the terms of any such indenture, instrument
or agreement, or constitute a breach of any fiduciary duty owed by such Investor
to any third party; or (d) require the approval of
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any third-party (which has not been obtained) pursuant to any material contract,
agreement, instrument, relationship or legal obligation to which such Investor
is subject or to which any of its assets, operations or management may be
subject.
Section 3.7 Disclosure; Access to Information. Such Investor has
received all documents, records, books and other information pertaining to its
investment in the Company that has been requested thereof, including the
opportunity to ask questions of, and receive answers from, the Company. The
Company is subject to the periodic reporting requirements of the Exchange Act,
and such Investor has reviewed or received copies of any such reports that have
been requested by it. Such Investor represents that it has reviewed the
Company's (i) Form 10-KSB for the year ended December 31, 1996, (ii) Form 10-KSB
for the year ended December 31, 1997, including the amendment thereto, filed on
or about April 30, 1998, (iii) Form 10-QSB's filed for the previous twelve
months, (iv) prospectuses dated October 22, 1997, September 29, 1998 and
February 24, 1999, (iv) Post-Effective Amendment to a Registration Statement on
Form SB-2 dated August 11, 1998 and (v) Current Report on Form 8-K filed January
15, 1999.
Section 3.8 Manner of Sale. At no time was such Investor presented with
or solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising in
connection with the offer and sale of the Securities.
Section 3.9 Registration or Exemption Requirements. Such Investor
further acknowledges and understands that the Securities may not be transferred,
resold or otherwise disposed of except in a transaction registered under the
Securities Act and any applicable state securities laws, or unless an exemption
from such registration is available. Such Investor understands that the
certificate(s) evidencing these Securities will be imprinted with a legend that
prohibits the transfer of these Securities unless (i) they are registered or
such registration is not required, and (ii) if the transfer is pursuant to an
exemption from registration other than Rule 144 under the Securities Act and, if
the Company shall so request in writing, an opinion of counsel reasonably
satisfactory to the Company is obtained to the effect that the transaction is so
exempt. Such Investor understands that the Preferred Stock and Warrants are
being offered and sold in reliance on transactional exemptions from the
registration requirements of federal and state securities laws and that the
Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of such Investor set
forth herein in order to determine the applicability of such exemptions and the
suitability of such Investor to acquire the Preferred Stock and Warrants.
Section 3.10 No Legal, Tax or Investment Advice. Such Investor
understands that nothing in this Agreement or any other materials presented to
such Investor in connection with the purchase and sale of the Securities
constitutes legal, tax or investment advice. Such Investor has relied on, and
has consulted with, such legal, tax and investment advisors as such Investor, in
its sole discretion, has deemed necessary or appropriate in connection with its
purchase of the Securities.
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Section 3.11 Put/Short Positions. Neither such Investor, nor any
affiliate of such Investor, have any present intention of entering into any put
option, short position or other similar position with respect to the Securities.
ARTICLE IV
Representations and Warranties of the Company
The Company represents and warrants to the Investors and the Placement
Agent that:
Section 4.1 Organization of the Company. The Company is a corporation
duly incorporated and existing in good standing under the laws of the State of
Delaware and has all requisite corporate authority to own its properties and to
carry on its business as now being conducted except as described in the SEC
Documents. The Company is duly qualified as a foreign corporation to do business
and is in good standing in every jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary,
other than those in which the failure so to qualify would not reasonably be
expected to have a Material Adverse Effect.
Section 4.2 Authority. (i) The Company has the requisite corporate
power and authority to enter into and, subject to shareholder approval in
regards to the issuance by the Company of more than 20% of the outstanding
shares of Common Stock, perform its obligations under this Agreement, the
Registration Rights Agreement, the Escrow Agreement, the Certificate of
Designation and Underlying Shares, Preferred Stock and the Warrant Shares, (ii)
the execution, issuance and delivery of this Agreement, the Registration Rights
Agreement, the Escrow Agreement, the Certificate of Designation, the Preferred
Stock, and the Warrants by the Company and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action and, other than the approval by the Company's Shareholders in
regards to the issuance by the Company of more than 20% of the outstanding
shares of Common Stock at a discount, no further consent or authorization of the
Company or its Board of Directors is required, and (iii) this Agreement, the
Registration Rights Agreement, the Escrow Agreement, the Certificate of
Designation, the Preferred Stock, and the Warrants have been duly executed and
delivered by the Company and constitute valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency, or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
Section 4.3 Capitalization. The authorized capital stock of the Company
consists of 20,000,000 shares of Common Stock, par value $0.0001, of which
6,870,135 shares are issued and outstanding, and 5,000,000 shares of Preferred
Stock, par value $0.0001, of which 10,000 are issued and outstanding. Except as
set forth in the SEC Documents or on Schedule 4.3 hereto, there are no
outstanding Capital Shares Equivalents. All of the outstanding shares of Common
Stock of the Company have been duly and validly authorized and issued and are
fully paid and nonassessable.
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Section 4.4 Common Stock. The Company has registered its Common Stock
pursuant to Section 12 of the Exchange Act and is in substantial compliance with
all reporting requirements of the Exchange Act, and the Company has maintained
all requirements for the continued listing or quotation of its Common Stock, and
such Common Stock is currently listed or quoted on the Principal Market. As of
the date hereof, the Principal Market is the Nasdaq SmallCap Stock Market.
Section 4.5 SEC Documents. The Company has delivered or made available
to the Investors true and complete copies of the SEC Documents filed by the
Company with the SEC during the twelve (12) months immediately preceding the
Subscription Date (including, without limitation, proxy information and
solicitation materials). The Company has not provided to any of the Investors
any information that, according to applicable law, rule or regulation, should
have been disclosed publicly prior to the date hereof by the Company, but which
has not been so disclosed. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and rules and regulations of the SEC
promulgated thereunder and none of the SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
U.S. generally accepted accounting principles applied on a consistent basis
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements) and fairly present in all material respects the
financial position of the Company as of the dates thereof and the results of
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
Section 4.6 Valid Issuances. When issued and payment has been made
therefor, the Preferred Stock, the Underlying Shares and the Warrants will be
duly and validly issued, fully paid, and nonassessable and the holders of the
Underlying Shares shall be entitled to all rights and preferences accorded to a
holder of Common Stock. Neither the issuance of the Preferred Stock, the
Underlying Shares or Warrants to the Placement Agent, nor the sales of the
Preferred Stock, the Underlying Shares and the Warrants pursuant to, nor the
Company's performance of its obligations under, this Agreement, the Registration
Rights Agreement, the Escrow Agreement, the Certificate of Designation, or the
Warrants will (i) result in the creation or imposition by the Company of any
liens, charges, claims or other encumbrances upon the Securities issued to the
Placement Agent, the Preferred Stock, the Underlying Shares, the Warrant Shares
or any of the assets of the Company, or (ii) entitle the holders of Outstanding
Capital Shares to preemptive or other rights to subscribe to or acquire any
Capital Shares or other securities of the Company.
Section 4.7 No General Solicitation or Advertising in Regard to this
Transaction. Neither the Company nor any of its affiliates nor any distributor
or any person acting on its or their behalf (i)
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has conducted or will conduct any general solicitation (as that term is used in
Rule 502(c) of Regulation D) or general advertising in connection with the offer
and sale of the Preferred Stock, the Underlying Shares or the Warrants, or (ii)
made any offers or sales of any security or solicited any offers to buy any
security under any circumstances that would require registration of the
Preferred Stock, the Underlying Shares or the Warrants under the Securities Act.
Section 4.8 Corporate Documents. The Company has furnished or made
available to each of the Investors true and correct copies of the Company's
Certificate of Incorporation, as amended and in effect on the date hereof (the
"Certificate"), and the Company's By-Laws, as amended and in effect on the date
hereof (the "By-Laws").
Section 4.9 No Conflicts. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby, including without limitation the issuance of
the Preferred Stock, the Warrants and the Underlying Shares, do not and will not
(i) result in a violation of the Company's Certificate of Incorporation or
By-Laws or (ii) conflict with, or constitute a material default (or an event
that with notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or cancellation of,
any material agreement, indenture, patent, patent license, instrument or any
"lock-up" or similar provision of any underwriting or similar agreement to which
the Company is a party, or (iii) result in a violation of any federal, state or
local law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations) applicable to the Company or by which any
property or asset of the Company is bound or affected (except for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect), nor is the Company otherwise in violation
of, conflict with or in default under any of the foregoing except as would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. The business of the Company is not being conducted in violation
of any law, ordinance or regulation of any governmental entity, except for
possible violations that either singly or in the aggregate would not reasonably
be expected to have a Material Adverse Effect. The Company is not required under
federal, state or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or issue and sell the Preferred Stock, or
Warrants, and issue the Underlying Shares upon conversion or exercise thereof,
in accordance with the terms hereof (other than any SEC, NASD, Nasdaq or state
securities filings that may be required to be made by the Company before or
subsequent to any Closing, any registration statement that may be filed pursuant
hereto, and any shareholder approval required by the rules applicable to
companies whose common stock trades on the Nasdaq SmallCap Market, including the
Nasdaq SmallCap notification form listing the additional shares of Common Stock
issuable hereunder, which the Company shall file with the Nasdaq Stock Market
promptly after the Closing Date); provided that, for purposes of the
representation made in this sentence, the Company is assuming and relying upon
the accuracy of the relevant representations and agreements of the Investors
herein.
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Section 4.10 No Material Adverse Change. Since September 30, 1998, no
Material Adverse Effect has occurred or exists with respect to the Company,
except as disclosed in the SEC Documents.
Section 4.11 No Undisclosed Liabilities. The Company has no liabilities
or obligations which are material, individually or in the aggregate, and are not
disclosed in the SEC Documents or otherwise publicly announced, other than those
set forth in the Company's financial statements or as incurred in the ordinary
course of the Company's businesses since September 30, 1998, and which,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.
Section 4.12 No Undisclosed Events or Circumstances. Since September
30, 1998, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, prospects, operations or financial
condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed in the SEC Documents.
Section 4.13 No Integrated Offering. To the Company's knowledge,
neither the Company nor any of its affiliates, nor any person acting on its or
their behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, other than pursuant to
this Agreement, under circumstances that would require registration of the
Common Stock under the Securities Act, except as set forth in the SEC Documents.
Section 4.14 Litigation and Other Proceedings. Except as may be set
forth in the SEC Documents, there are no lawsuits or proceedings pending or to
the knowledge of the Company threatened, against the Company, nor has the
Company received any written or oral notice of any such action, suit, proceeding
or investigation, which could reasonably be expected to have a Material Adverse
Effect. Except as set forth in the SEC Documents, no judgment, order, writ,
injunction or decree or award has been issued by or, so far as is known by the
Company, requested of any court, arbitrator or governmental agency which would
be reasonably expected to result in a Material Adverse Effect.
Section 4.15 Restrictions On Future Financings. The Company represents
that, unless it obtains the written approval of all of the Investors (which
approval shall not be unreasonably withheld), the Company will not enter into
any other equity financing agreement, or other financing arrangement, that
would: (a) cause the Common Stock issued in such financing to be salable and
freely tradeable before forty-five (45) days from the Closing Date, or (b)
affect the timeliness of the Registration Statement being declared effective.
Section 4.16 Brokers. Except for the Placement Agent, the Company has
taken no action which would give rise to any claim by any person for brokerage
commissions, finder's fees or similar payments by the Company or any Investor
relating to this Agreement or the transactions contemplated hereby.
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Section 4.17 Acknowledgment of Dilution. The number of shares of Common
Stock constituting Warrant Shares may increase substantially in certain
circumstances, including the circumstance where the trading price of the Common
Stock declines. The Company acknowledges that its obligation to issue Underlying
Shares upon conversion of shares of Preferred Stock and Warrant Shares upon
exercise of the Warrants is absolute and unconditional, regardless of the
dilution that such issuance may have on other shareholders of the Company.
ARTICLE V
Covenants of the Investors
Section 5.1 Compliance with Law. Each of the Investor's trading
activities with respect to shares of Common Stock will be in compliance with all
applicable state and federal securities laws, rules and regulations and rules
and regulations of the Principal Market on which the Common Stock is listed.
Section 5.2 Agreement To Vote. For so long as the Company has not
committed a material breach of this Agreement and the Exhibits annexed hereto,
and this Agreement has not been terminated, the Investors agree to vote all
shares of Common Stock beneficially held by them in favor of all nominees to the
Company's board of directors who are nominated by the then current Board of
Directors of the Company.
Section 5.3 Put/Short Positions. Neither the Investors, nor any
affiliate of the Investors, have any present intention of entering into any put
option, short position or other similar position with respect to the Securities.
ARTICLE VI
Covenants of the Company
Section 6.1 Registration Rights. The Company shall cause the
Registration Rights Agreement to remain in full force and effect so long as any
Registrable Securities remain outstanding and the Company shall comply in all
material respects with the terms thereof.
Section 6.2 Reservation of Common Stock. As of the date hereof, the
Company has reserved and the Company shall continue to reserve and keep
available at all times, free of preemptive rights, shares of Common Stock for
the purpose of enabling the Company to satisfy any obligation to issue the
Underlying Shares; such amount of shares of Common Stock to be reserved shall be
calculated based upon the minimum Purchase Price therefor under the terms of
this Agreement, the Certificate of Designation and the Warrants. The number of
shares so reserved from time to time, as theretofore increased or reduced as
hereinafter provided, may be reduced by the number of shares actually delivered
hereunder and the number of shares so reserved shall be increased or decreased
to
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reflect potential increases or decreases in the Common Stock that the Company
may thereafter be so obligated to issue by reason of adjustments to the
Preferred Stock and the Warrants.
Section 6.3 Listing of Common Stock. The Company hereby agrees to use
its best efforts to (i) maintain the listing of the Common Stock on a Principal
Market, and (ii) as soon as practicable list the Underlying Shares. The Company
further agrees, if the Company applies to have the Common Stock traded on any
other Principal Market or other exchange or automated interdealer quotation
system, it will include in such application the Underlying Shares, and will take
such other action as is reasonably necessary or desirable in the opinion of the
Investors to cause the Common Stock to be listed on such other Principal Market
or other exchange or automated interdealer quotation system as promptly as
possible. The Company will use its best efforts to comply with the rules and
regulations governing the listing and trading of its Common Stock on the
Principal Market (including, without limitation, maintaining sufficient net
tangible assets) and will comply in all material respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the
Principal Market. In the event the Company receives notification from Nasdaq
concerning delisting of the Common Stock on the Principal Market, the Company
will notify each Investor and use its best efforts to comply with all applicable
listing standards of the Principal Market.
Section 6.4 Exchange Act Registration. The Company will cause its
Common Stock to continue to be registered under Section 12 of the Exchange Act,
will comply in all material respects with its reporting and filing obligations
under the Exchange Act, and will not take any action or file any document
(whether or not permitted by Exchange Act or the rules thereunder) to terminate
or suspend such registration or to terminate or suspend its reporting and filing
obligations under said Act.
Section 6.5 Legends. The certificates evidencing the Common Stock to be
sold by the Investors pursuant to Article VIII shall be free of legends, except
as set forth in Article VIII.
Section 6.6 Corporate Existence. The Company will take all steps
reasonably necessary to preserve and continue the corporate existence of the
Company.
Section 6.7 Notice of Certain Events Affecting Registration or to have
a Closing For the Preferred Stock. The Company will immediately notify each of
the Investors upon the occurrence of any of the following events in respect of a
registration statement or related prospectus in respect of an offering of
Registrable Securities: (i) receipt of any request for additional information by
the SEC or any other federal or state governmental authority during the period
of effectiveness of the Registration Statement for amendments or supplements to
the Registration Statement or related prospectus; (ii) the issuance by the SEC
or any other federal or state governmental authority of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose; (iii) receipt of any notification with respect
to the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
that makes any statement made in the Registration Statement or related
prospectus or any
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document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires the making of any changes in the
Registration Statement, related prospectus or documents so that, in the case of
the Registration Statement, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and that in the case
of the related prospectus, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and (v) the Company's reasonable
determination that a post-effective amendment to the Registration Statement
would be appropriate; and the Company will promptly make available to the
Investors any such supplement or amendment to the related prospectus.
Section 6.8 Consolidation; Merger. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another entity (a "Consolidation Event") unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument the
obligation to deliver to the Investors such shares of stock and/or securities as
the Investors are entitled to receive pursuant to this Agreement.
Section 6.9 Issuance of the Underlying Shares. The issuance of the
Underlying Shares pursuant to exercise of the Warrants, and the conversion of
the Preferred Stock, shall be made in accordance with the provisions and
requirements of Section 4(2) of Regulation D and any applicable state securities
law.
Section 6.10 Conversion Limitations. The Company and the Investors
agree that, except as permitted by the Certificate of Designation, the total
number of shares of Common Stock issued and issuable upon the Preferred Stock
issued at the Closing Date pursuant to the Certificate of Designation and/or
upon exercise of the Warrants shall not exceed 19.99% of the number of shares of
Common Stock outstanding as of the Closing. In the event the number of shares of
Common Stock of the Company issued and issuable pursuant to the terms of the
Certificate of Designation and/or exercise of the Warrants exceeds 15% of the
number of shares of Common Stock outstanding as of the Closing Date and the
Company is subject to the aforementioned Nasdaq Marketplace Rule, or such other
similar requirement, the Company agrees that it shall include a resolution for
approval on its annual meeting of stockholders projected to take place in May
1999 for the purpose of approving below market price issuances of Common Stock
to the Investors equal to or in excess of 20% of the number of shares of Common
Stock outstanding as of the Closing Date as required by Section
4460(i)(1)(D)(ii) of the Nasdaq Marketplace Rules, or such other similar
requirement. In the event that the aforementioned proposal is not ratified by
the stockholders and the number of shares issued and issuable under the
Certificate of Designation and upon exercise of the Warrants exceeds in the
aggregate 19.99% of the number of shares of Common Stock outstanding as of the
Closing Date, the Company will use its reasonable efforts to obtain a waiver
from the Nasdaq Stock Market (or other applicable market or exchange) to permit
such issuances. With respect to such excess
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issuances, the Investors shall, at any time, have the option to convert or
exercise the remainder of their Securities which represent such excess at the
closing bid price of the previous day.
Section 6.11 Securities Compliance. The Company shall notify the SEC
and the Nasdaq SmallCap Market, in accordance with their requirements, of the
transactions contemplated by this Agreement, the Preferred Stock, the
Registration Rights Agreement and the Warrants, and shall take all other
necessary action and proceedings as may be required and permitted by applicable
law, rule and regulation, for the legal and valid issuance of the Preferred
Stock hereunder, the Underlying Shares issuable upon conversion thereof, the
Warrants and Warrant Shares issuable upon exercise of the Warrants.
Section 6.12 Notices. The Company agrees to provide all holders of
Preferred Stock and Warrants with copies of all notices and information,
including without limitation, notices and proxy statements in connection with
any meetings, that are provided generally to the holders of shares of Common
Stock, contemporaneously with the delivery of such notices or information to
such Common Stock holders.
ARTICLE VII
Due Diligence Review; Non-Disclosure of Non-Public Information
Section 7.1 Due Diligence Review. The Company shall make available for
inspection and review by the Investors, advisors to and representatives of the
Investors (who may or may not be affiliated with the Investors and who are
reasonably acceptable to the Company), and any underwriter participating in any
disposition of the Registrable Securities on behalf of the Investors pursuant to
the Registration Statement, any such registration statement or amendment or
supplement thereto or any blue sky, NASD or other filing, all financial and
other records, all SEC Documents and other filings with the SEC, and all other
corporate documents and properties of the Company as may be reasonably necessary
for the purpose of such review, and cause the Company's officers, directors and
employees to supply all such information reasonably requested by any of the
Investors or any such representative, advisor or underwriter in connection with
such Registration Statement (including, without limitation, in response to all
questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of the
Registration Statement for the sole purpose of enabling the Investors and such
representatives, advisors and underwriters and their respective accountants and
attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the Registration Statement.
Section 7.2 Non-Disclosure of Non-Public Information
(a) The Company shall not disclose non-public information to
the Investors, or advisors to, or representatives of the Investors unless prior
to disclosure of such information the Company identifies such information as
being non-public information and provides each Investor, and its advisors and
representatives with the opportunity to accept or refuse to accept such
non-public
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information for review. The Company may, as a condition to disclosing any
non-public information hereunder, require each of the Investor's advisors and
representatives to enter into a confidentiality agreement in form reasonably
satisfactory to the Company and the Investors.
(b) Nothing herein shall require the Company to disclose
non-public information to any of the Investors or their advisors or
representatives, and the Company represents that it does not disseminate
non-public information to any investors who purchase stock in the Company in a
public offering, to money managers or to securities analysts, provided, however,
that notwithstanding anything herein to the contrary, the Company will, as
hereinabove provided, immediately notify the advisors and representatives of the
Investors and, if any, underwriters, of any event or the existence of any
circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting non-public information
(whether or not requested of the Company specifically or generally during the
course of due diligence by such persons or entities), which, if not disclosed in
the prospectus included in the Registration Statement would cause such
prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements, therein, in light
of the circumstances in which they were made, not misleading. Nothing contained
in this Section shall be construed to mean that such persons or entities other
than the Investors (without the written consent of the Investors prior to
disclosure of such information) may not obtain non-public information in the
course of conducting due diligence in accordance with the terms of this
Agreement and nothing herein shall prevent any such persons or entities from
notifying the Company of their opinion that based on such due diligence by such
persons or entities, that the Registration Statement contains an untrue
statement of a material fact or omits a material fact required to be stated in
the Registration Statement or necessary to make the statements contained
therein, in light of the circumstances in which they were made, not misleading.
ARTICLE VIII
Legends
Section 8.1 Legends. Unless otherwise provided below, each certificate
representing the Securities will bear the following legend (the "Legend"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE
UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED
OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM, OR NOT
SUBJECT TO, SUCH REGISTRATION
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REQUIREMENTS. THE HOLDER OF THIS CERTIFICATE IS THE BENEFICIARY OF
CERTAIN OBLIGATIONS OF THE COMPANY SET FORTH IN A 6% SERIES E
CONVERTIBLE PREFERRED STOCK SUBSCRIPTION AGREEMENT DATED AS OF MARCH
17, 1999. A COPY OF THE PORTION OF THE AFORESAID AGREEMENT EVIDENCING
SUCH OBLIGATIONS MAY BE OBTAINED FROM THE COMPANY'S EXECUTIVE OFFICES.
Upon the execution and delivery hereof, the Company is issuing to the
transfer agent for its Common Stock (and to any substitute or replacement
transfer agent for its Common Stock upon the Company's appointment of any such
substitute or replacement transfer agent) instructions in substantially the form
of Exhibit F hereto. Such instructions shall be irrevocable by the Company from
and after the date hereof or from and after the issuance thereof to any such
substitute or replacement transfer agent, as the case may be, except as
otherwise expressly provided in the Registration Rights Agreement. It is the
intent and purpose of such instructions, as provided therein, to require the
transfer agent for the Common Stock from time to time upon transfer of
Registrable Securities by the Investors to issue certificates evidencing such
Registrable Securities free of the Legend during the following periods and under
the following circumstances and without consultation by the transfer agent with
the Company or its counsel and without the need for any further advice or
instruction or documentation to the transfer agent by or from the Company or its
counsel or the Investors:
(a) at any time after the Effective Date, upon surrender of
one or more certificates evidencing Common Stock that bear the Legend, to the
extent accompanied by a notice requesting the issuance of new certificates free
of the Legend to replace those surrendered; provided that (i) the Registration
Statement shall then be effective; (ii) the Investor(s) confirm to the transfer
agent that it has sold, pledged or otherwise transferred or agreed to sell,
pledge or otherwise transfer such Common Stock in a bona fide transaction to a
third party that is not an affiliate of the Company; and (iii) the Investor(s)
confirm to the transfer agent that the Investor(s) have complied with the
prospectus delivery requirement. The requirement set forth in subsection
8.1(a)(ii) shall only apply in the event the Company registers the Common Stock
pursuant to a Form S-3 registration statement pursuant to the Registration
Rights Agreement. In the event the Company registers the Common Stock by means
of a registration statement other then a Form S-3 registration statement, then
only the conditions in subsection 8.1(a)(i) and 8.1(a)(iii) herein shall apply.
(b) at any time upon any surrender of one or more certificates
evidencing Registrable Securities that bear the Legend, to the extent
accompanied by a notice requesting the issuance of new certificates free of the
Legend to replace those surrendered and containing representations that (i) the
Investor(s) is permitted to dispose of such Registrable Securities without
limitation as to amount or manner of sale pursuant to Rule 144(k) under the
Securities Act or (ii) the Investor(s) has sold, pledged or otherwise
transferred or agreed to sell, pledge or otherwise transfer such Registrable
Securities in a manner other than pursuant to an effective registration
statement, to a transferee who will upon such transfer be entitled to freely
tradeable securities.
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Any of the notices referred to above in this Section 8.1 may be sent by
facsimile to the Company's transfer agent.
Section 8.2 No Other Legend or Stock Transfer Restrictions. No legend
other than the one specified in Section 8.1 has been or shall be placed on the
share certificates representing the Common Stock, and no instructions or "stop
transfer orders," so called, "stock transfer restrictions," or other
restrictions have been or shall be given to the Company's transfer agent with
respect thereto other than as expressly set forth in this Article VIII.
Section 8.3 Investor's Compliance. Nothing in this Article shall affect
in any way any of the Investors' obligations under any agreement to comply with
all applicable securities laws upon resale of the Common Stock.
ARTICLE IX
Choice of Law
Section 9.1 Choice of Law; Venue; Jurisdiction. This Agreement will be
construed and enforced in accordance with and governed by the laws of the State
of New York, except for matters arising under the Securities Act, without
reference to principles of conflicts of law. Each of the parties consents to the
jurisdiction of the U.S. District Court sitting in the Southern District of the
State of New York or the state courts of the State of New York sitting in
Manhattan in connection with any dispute arising under this Agreement and hereby
waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non conveniens, to the bringing of any such proceeding
in such jurisdictions. Each party hereby agrees that if another party to this
Agreement obtains a judgment against it in such a proceeding, the party which
obtained such judgment may enforce same by summary judgment in the courts of any
country having jurisdiction over the party against whom such judgment was
obtained, and each party hereby waives any defenses available to it under local
law and agrees to the enforcement of such a judgment. Each party to this
Agreement irrevocably consents to the service of process in any such proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to such party at its address set forth herein. Nothing herein shall
affect the right of any party to serve process in any other manner permitted by
law. Each party waives its right to a trial by jury.
ARTICLE X
Assignment; Entire Agreement, Amendment; Termination
Section 10.1 Assignment. The provisions of this Agreement shall inure
to the benefit of, and be enforceable by, any transferee of any of the Common
Stock and Preferred Stock (except any transferee (i) who was a purchaser on the
open market or pursuant to Rule 144 or (ii) who is an owner of less than ten
(10%) percent of the original number of shares of Common Stock issued hereunder)
purchased or acquired by the Investors hereunder with respect to the Common
Stock and
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Preferred Stock held by such person, and upon the prior written consent of the
Company, which consent shall not unreasonably be withheld, the Investor's
interest in this Agreement may be assigned at any time, in whole or in part, to
any affiliate of an Investor who agrees to make the representations and
warranties contained in Article III and who agrees to be bound by the covenants
of Article V.
Section 10.2 Termination. This Agreement shall terminate upon the
earliest of (i) the date that all the Registrable Securities have been sold by
the Investors pursuant to the Registration Statement; (ii) the date the
Investors receive an opinion from counsel to the Company that all of the
Registrable Securities may be sold and all Registered Securities are, in fact,
sold under the provisions of Rule 144 with no limitations; or (iii) five and
one-half years after the Closing Date; provided, however, that the provisions of
Articles III, IV, V, VI (as long as the Securities are beneficially owned by any
of the Investors or the Placement Agent, or their permitted assigns), VII, VIII,
IX, X, and XI, herein, and the registration rights provisions for the
Registrable Securities held by the Investors and the Placement Agent set forth
in this Agreement, and the Registration Rights Agreement, shall survive the
termination of this Agreement.
ARTICLE XI
Notices
Section 11.1 Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by reputable courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
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If to the Company: ObjectSoft Corporation
Continental Plaza III
433 Hackensack Avenue
Hackensack, New Jersey 07601
Attention: Mr. David E.Y. Sarna, President
Telephone: (800) 816-8171
Facsimile: (201) 343-0056
With a copy to: Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
Attention: Melvin Weinberg, Esq.
Telephone: (212) 704-6000
Facsimile: (212) 704-6288
If to the Investors: At the addresses set forth on Schedule A
attached hereto.
Any party hereto may from time to time change its address or facsimile
number for notices under this Section 11.1 by giving at least ten (10) days'
prior written notice of such changed address or facsimile number to the other
party hereto.
Section 11.2 Indemnification. The Company agrees to indemnify and hold
harmless each of the Investors and each officer and director of the Investors or
person, if any, who controls the Investor within the meaning of the Securities
Act against any losses, claims, damages or liabilities, joint or several (which
shall, for all purposes of this Agreement, include, but not be limited to, all
reasonable costs of defense and investigation and all reasonable attorneys'
fees), to which the Investors may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon the breach by the Company of any
of its obligations, representations and warranties or covenants under this
Agreement.
Each of the Placement Agent and each Investor severally (and not
jointly) agrees that it will indemnify and hold harmless the Company, and each
officer and director of the Company or person, if any, who controls the Company
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities (which shall, for all purposes of this Agreement, include, but not
be limited to, all costs of defense and investigation and all attorneys' fees)
to which the Company or any such officer, director or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon the breach by the Placement Agent or an Investor, as the case may
be, of any of its obligations, representations and warranties or covenants under
this Agreement.
Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made
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against the indemnifying party under this Section, notify the indemnifying party
of the commencement thereof; but the omission so to notify the indemnifying
party will not relieve the indemnifying party from any liability which it may
have to any indemnified party otherwise than as to the particular item as to
which indemnification is then being sought solely pursuant to this Section. In
case any such action is brought against any indemnified party, and it notifies
the indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate in, and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, assume the defense thereof,
subject to the provisions herein stated and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party
under this Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation, unless the indemnifying party shall not pursue the
action to its final conclusion. The indemnified party shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall not be at the expense
of the indemnifying party if the indemnifying party has assumed the defense of
the action with counsel reasonably satisfactory to the indemnified party;
provided that if the indemnified party is one of the Investors, the fees and
expenses of such counsel shall be at the expense of the indemnifying party if
(i) the employment of such counsel has been specifically authorized in writing
by the indemnifying party, or (ii) the named parties to any such action
(including any impleaded parties) include both the Investor and the indemnifying
party and the Investor shall have been advised by such counsel that there may be
one or more legal defenses available to the indemnifying party different from or
in conflict with any legal defenses which may be available to the Investors (in
which case the indemnifying party shall not have the right to assume the defense
of such action on behalf of the Investors, it being understood, however, that
the indemnifying party shall in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable only for the
reasonable fees and expenses of one separate firm of attorneys for the
Investor(s), which firm shall be designated in writing by the Investor(s)). No
settlement of any action against an indemnified party shall be made without the
prior written consent of the indemnified party, which consent shall not be
unreasonably withheld.
Section 11.3 Contribution. In order to provide for just and equitable
contribution under the Securities Act in any case in which (i) the indemnified
party makes a claim for indemnification pursuant to Section 11.2 hereof but is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of Section 11.2 hereof
provide for indemnification in such case, or (ii) contribution under the
Securities Act may be required on the part of any indemnified party, then the
Company, the Placement Agent and the applicable Investor shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(which shall, for all purposes of this Agreement, include, but not be limited
to, all costs of defense and investigation and all reasonable attorneys' fees),
in either such case (after contribution from others) on the basis of relative
fault as well as any other relevant equitable considerations. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to
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above in Section 11.2 shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contributions from any person who was not guilty of such
fraudulent representation.
ARTICLE XII
Miscellaneous
Section 12.1 Counterparts; Facsimile; Amendments. This Agreement may be
executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which shall
be enforceable against the parties actually executing such counterparts and all
of which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original. This Agreement may be amended only by a writing
executed by the Company on the one hand, and a majority of the Investors and the
Placement Agent, on the other hand, or the Company on the one hand, and all of
the Investors on the other hand.
Section 12.2 Entire Agreement. This Agreement, the Exhibits or
Attachments hereto, which include, but are not limited to the Certificate of
Designation, the Warrants, the Escrow Agreement, and the Registration Rights
Agreement set forth the entire agreement and understanding of the parties
relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations and understandings between the parties,
both oral and written relating to the subject matter hereof. The terms and
conditions of all Exhibits and Attachments to this Agreement are incorporated
herein by this reference and shall constitute part of this Agreement as is fully
set forth herein.
Section 12.3 Survival; Severability. The representations, warranties,
covenants and agreements of the parties hereto shall survive each Closing
hereunder. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that, such severability shall be ineffective if it
materially changes the economic benefit of this Agreement to any party.
Section 12.4 Title and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 12.5 Reporting Entity for the Common Stock. The reporting
entity relied upon for the determination of the trading price or trading volume
of the Common Stock on any given Trading Day for the purposes of this Agreement
and all Exhibits shall be Bloomberg, L.P. or any successor
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thereto. The written mutual consent of the Investor and the Company shall be
required to employ any other reporting entity.
Section 12.6 Replacement of Certificates. Upon (i) receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing any shares of Common Stock and (ii) in
the case of any such loss, theft or destruction of such certificate, upon
delivery of an indemnity agreement or security reasonably satisfactory in form
and amount to the Company or (iii) in the case of any such mutilation, on
surrender and cancellation of such certificate, the Company at its expense will
execute and deliver, in lieu thereof, a new certificate of like tenor.
Section 12.7 Fees and Expenses. Each of the Company and the Investors
agrees to pay its own expenses incident to the performance of its obligations
hereunder, except that the Company shall pay on the Closing Date to the
Placement Agent (a) three (3%) percent of the Purchase Price in cash, (b) five
(5%) percent of the number of shares of Preferred Stock issued to the Investors
on the Closing Date on the same terms as Investors and (c) as provided in
Section 2.2, a Warrant to purchase 50,000 shares of Common Stock.
Section 12.8 Advice of Counsel. The Placement Agent and each Investor
hereby expressly acknowledge that they have had an opportunity to retain counsel
to represent them in connection with this Agreement and the transactions
contemplated hereby and have of their own free will foregone the retaining
thereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Preferred Stock
Subscription Agreement to be executed by the undersigned, thereunto duly
authorized, as of the date first set forth above.
OBJECTSOFT CORPORATION
By:
Name:
Title:
SETTONDOWN CAPITAL
INTERNATIONAL, LTD.
By:
Name:
Title:
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<PAGE>
Investors:
HEADWATERS CAPITAL
By:
Name:
Title:
AUSTOST ANSTALT SCHAAN
By:
Name:
Title:
BALMORE FUNDS, S.A.
By:
Name:
Title:
HSBC JAMES CAPEL CANADA, INC.
By:
Name:
Title:
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<PAGE>
TONGA PARTNERS, L.P.
By:
J. Carlo Cannell, General Partner
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Certificate of Designation of Series E
Convertible Preferred Stock
of
OBJECTSOFT CORPORATION
It is certified that:
A. The name of the corporation is ObjectSoft Corporation, a Delaware corporation
(hereinafter the "Company").
B. The certificate of incorporation of the Company, as amended, authorizes the
issuance of Five Million (5,000,000) shares of Preferred Stock, $.0001 par value
per share, and expressly vests in the Board of Directors of the Company the
authority provided therein to issue all of said shares in one or more series and
by resolution or resolutions to establish the designation and number and to fix
the relative rights and preferences of each series to be issued.
C. The Board of Directors of the Company, pursuant to the authority expressly
vested in it, has adopted the following resolutions creating a class of Series E
Preferred Stock:
RESOLVED, that a portion of the Five Million (5,000,000) authorized
shares of Preferred Stock of the Company shall be designated as a separate
series possessing the rights and preferences set forth below:
1. Designation and Amount. The shares of such series shall have a par
value of $.0001 per share and shall be designated as "Series E Preferred Stock"
(the "Series E Preferred Stock") and the number of shares constituting the
Series E Preferred Stock shall be Twenty-Five Thousand (25,000). The Series E
Preferred Stock shall be offered for sale at a purchase price of One Hundred
($100) Dollars per share (the "Purchase Price").
2. Dividends. Subject to the rights of the holders of the Company's
Series D Convertible Preferred Stock ("Series D Preferred Stock"), the holders
of the outstanding shares of Series E Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors, out of funds
legally available therefor, dividends at an annual rate of six percent (6%) of
the Purchase Price. Such dividends shall be deemed to accrue on the Series E
Preferred Stock and be cumulative, whether or not there are profits, surplus or
other funds of the Company legally available for the payment of dividends. All
dividends declared upon the Series E Preferred Stock shall be declared pro rata
per share. Subject to the rights of the holders of the Series D Preferred Stock,
if there shall not have been a sum sufficient for the payment therefor set
apart, the deficiency shall first be paid before any dividend or other
distribution shall be paid or declared and set apart with respect to any other
class of the Company's capital stock, now or hereafter outstanding. All accrued
dividends shall be immediately due and payable on the date such shares of Series
E Preferred Stock are converted into shares of Common Stock, par value $.0001
per share ("Common Stock") in accordance with Section 5 hereof, or are redeemed
in accordance with Section 6 hereof. Dividends may be paid in cash or
<PAGE>
additional registered shares of Common Stock of the Company, as may be
determined, from time to time, in the sole discretion of the Board of Directors.
The Company shall not be required to pay any dividends on the outstanding shares
of the Series E Preferred Stock prior to the Conversion Date and/or Redemption
Date (as defined below) for such shares.
For purposes of this Certificate, unless the context otherwise
requires, "distribution" shall mean the transfer of cash or property without
consideration, whether by way of dividend or otherwise, payable other than in
shares of Common Stock or other equity securities of the Company, or the
purchase or redemption of shares of Common Stock or other equity securities of
the Company (other than redemptions set forth in Section 6 below or repurchases
of Common Stock or other equity securities held by employees or consultants of
the Company upon termination of their employment or services pursuant to
agreements providing for such repurchase) for cash or property payable other
than in shares of Common Stock or other equity securities of the Company.
3. Liquidation, Dissolution or Winding Up
(a) Treatment at Liquidation, Dissolution or Winding Up. In
the event of any liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, before any distribution may be made with respect to
Common Stock or any other series of capital stock (except with respect to
holders of the Company's Series D Preferred Stock, which shall have senior
liquidation preferences to holders of the Series E Preferred Stock), holders of
each share of Series E Preferred Stock shall be entitled to be paid out of the
assets of the Company available for distribution to holders of the Company's
capital stock of all classes, whether such assets are capital, surplus, or
capital earnings, such amount per share of Series E Preferred Stock as would
have been payable had each such share been converted into Common Stock
immediately prior to such event of liquidation, dissolution or winding up
pursuant to the provisions of Section 5 plus all accrued dividends and
liquidated damages, if any (collectively, the "Liquidation Amount").
(b) If the assets of the Company available for distribution to
its shareholders shall be insufficient to pay the holders of shares of Series E
Preferred Stock the full amount of the Liquidation Amount to which they shall be
entitled, the holders of shares of Series E Preferred Stock shall share ratably
in any distribution of assets according to the amounts which would be payable
with respect to the shares of Series E Preferred Stock held by them upon such
distribution if all amounts payable on or which respect to said shares were paid
in full.
(c) After the payment of the Liquidation Amount shall have
been made in full to the holders of the Series E Preferred Stock or in the event
the holders cannot be located by the Company funds necessary for such payment
shall have been set aside by the Company in trust for the account of holders of
the Series E Preferred Stock so as to be available for such payments, the
holders of the Series E Preferred Stock shall be entitled to no further
participation in the distribution of the assets of the Company, and the
remaining assets of the Company legally available for distribution to its
shareholders shall be distributed among the holders of other classes of
securities of the Company in accordance with their respective terms.
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<PAGE>
(d) The holders of Series E Preferred Stock shall have no
priority or preference with respect to distributions made by the Company in
connection with the repurchase of shares of Common Stock issued to or held by
employees, directors or consultants upon termination of their employment or
services pursuant to agreements providing for the right of said repurchase
between the Company and such persons.
4. Voting Rights. Except as otherwise required by law, and except as
set forth in Section 8 of this Certificate, the holders of Series E Preferred
Stock shall not be entitled to vote upon any matter relating to the business or
affairs of the Company or for any other purpose.
5. Conversion Rights for the Series E Preferred Stock. The holders of
Series E Preferred Stock shall have conversion rights as follows ("Conversion
Rights"):
(a) Right to Convert. Each holder of Series E Preferred Stock
shall be entitled to convert, in whole or in part, in multiples of two hundred
fifty (250) shares, shares of Series E Preferred Stock, upon the earlier of (i)
the effective date of the registration statement covering the resale of the
Common Stock or (ii) the sixty-first (61) day following the date of the closing
("Closing Date") of the purchase of such Series E Preferred Stock, and at any
time thereafter.
(b) Conversion Rate. Each share of Series E Preferred Stock
may be converted into the number of fully-paid and non-assessable shares of
Common Stock of the Company calculated in accordance with the following formula
("Conversion Rate"):
The number of shares issuable upon conversion of one (1) share of
Series E Preferred Stock shall be determined by dividing the Purchase Price by
the Conversion Price, where:
(i) The Purchase Price is defined in Section 1
hereof;
(ii) the Conversion Price equals the lesser of (x)
the Closing Price, as that term is defined below, or (y) the average of Market
Price A and Market Price B, as these terms are defined below;
(iii) for purposes hereof, the term "Closing Price"
shall mean the closing bid price for the Common Stock as quoted by Bloomberg,
L.P., on the day immediately preceding the Closing Date; the term "Market Price
A" shall mean the average of the three lowest closing bid prices of the Common
Stock as quoted by Bloomberg, L.P., during the (22) day trading period
immediately preceding the Conversion Date (the "Lookback Period"); and the term
"Market Price B" shall mean the Company's choice of five consecutive closing bid
prices of the Common Stock as quoted by Bloomberg, L.P., during the Lookback
Period; provided, however, that with respect to both Market Price A and Market
Price B, the Lookback Period shall be increased by two (2) trading days on the
last trading day of each month, starting on the first day of the fourth (4th)
month from the Closing Date, until the Lookback Period equals a maximum of
thirty (30) trading days; and
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(iv) in the event the Common Stock is delisted from
the Nasdaq SmallCap Market and continues to be so delisted on the Conversion
Date, the Lookback Period shall be calculated from the last day of trading of
the Common Stock.
(c) Forced Conversion. In the event the holders of the Series
E Preferred Stock have not exercised the Conversion Rights set forth herein
within two years after the Closing Date, the Series E Preferred Stock shall
automatically be converted as if the holders had exercised their Conversion
Rights. In addition, in the event the Company closes on a public offering of its
shares of Common Stock at a price per share equal to or greater than two (2)
times the Closing Price, then at the election of the Company given by written
notice, each share of Series E Preferred Stock shall automatically convert into
shares of Common Stock on the date ("Offering Conversion Date") which is seven
(7) business days prior to the scheduled closing date of such public offering at
the applicable Conversion Rate above, and the Offering Conversion Date shall be
deemed the Conversion Date with respect to such shares.
(d) Capital Reorganization or Reclassification. If the Common
Stock issuable upon the conversion of the Series E Preferred Stock shall be
changed into the same or different number of shares of any class or classes of
stock, whether by capital reorganization, reclassification, stock split, stock
dividend, or similar event, then and in each such event, the holder of each
share of Series E Preferred Stock shall have the right thereafter to convert
such share into the kind and amount of shares of stock and other securities and
property receivable upon such capital reorganization, reclassification or other
change which such holder would have received had its shares of Series E
Preferred Stock been converted immediately prior to such capital reorganization,
reclassification or other change.
(e) Capital Reorganization, Merger or Sale of Assets. If at
any time or from time to time there shall be a capital reorganization of the
Common Stock (other than a subdivision, combination, reclassification or
exchange of shares provided for in Section 5(d) above), or a merger or
consolidation of the Company with or into another corporation, or the sale of
all or substantially all of the Company's properties and/or assets to any other
person or entity (any of which events is herein referred to as a
"Reorganization"), then as a part of such Reorganization, provision shall be
made so that the holders of the Series E Preferred Stock shall thereafter be
entitled to receive upon conversion of the Series E Preferred Stock, the number
of shares of stock or other securities or property of the Company, or of the
successor corporation resulting from such Reorganization, to which such holder
would have been entitled if such holder had converted its shares of Series E
Preferred Stock immediately prior to such Reorganization. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 5 with respect to the rights of the holders of the Series E
Preferred Stock after the Reorganization, to the end that the provisions of this
Section 5 (including adjustment of the number of shares issuable upon conversion
of the Series E Preferred Stock) shall be applicable after that event in as
nearly equivalent a manner as may be practicable.
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<PAGE>
(f) Certificate as to Adjustments; Notice by Company. Upon the
occurrence of each adjustment or readjustment of the Conversion Price of the
Series E Preferred Stock, the Company, at its expense, shall promptly compute
such adjustment or readjustment in accordance with the terms hereof and prepare
and furnish to each holder of such Series E Preferred Stock a certificate
executed by the president and chief financial officer (or in the absence of a
person designated as the chief financial officer, by the treasurer) setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment are based. The Company shall, upon written
request at any time of any holder of Series E Preferred Stock, furnish or cause
to be furnished to such holder a certificate setting forth (A) the Conversion
Price at the time in effect, and (B) the number of shares of Common Stock and
the amount, if any, of other property which at the time would be received upon
the conversion of a share of Series E Preferred Stock.
(g) Exercise of Conversion Rights. Holders of Series E
Preferred Stock may exercise their right to convert the Series E Preferred Stock
by telecopying an executed and completed Notice of Conversion to the Company and
delivering the original Notice of Conversion in the form annexed hereto as
Exhibit A ("Notice of Conversion") and the certificate representing the Series E
Preferred Stock by express courier. Each business date on which a Notice of
Conversion is telecopied to and received by the Company along with a copy of the
originally executed Series E Preferred Stock certificates in accordance with the
provisions hereof shall be deemed a "Conversion Date." The Company will
transmit, or instruct its transfer agent to transmit, the certificates
representing shares of Common Stock issuable upon conversion of any share of
Series E Preferred Stock (together with the certificates representing the Series
E Preferred Stock not so converted) to the holder thereof via express courier,
by electronic transfer or otherwise, within three (3) business days after the
Conversion Date provided the Company has received the original Notice of
Conversion and Series E Preferred Stock certificate being so converted on the
Conversion Date. In addition to any other remedies which may be available to the
holders of shares of Series E Preferred Stock, in the event that the Company
fails to deliver, or has failed to contact its transfer agent within two (2)
business days to deliver, such shares of Common Stock within such three (3)
business day period, the holder will be entitled to revoke the relevant Notice
of Conversion by delivering a notice to such effect to the Company whereupon the
Company and the holder shall each be restored to their respective positions
immediately prior to delivery of such Notice of Conversion. The Notice of
Conversion and Series E Preferred Stock certificates representing the portion of
the Series E Preferred Stock converted shall be delivered as follows:
To the Company: ObjectSoft Corporation
Continental Plaza III
433 Hackensack Avenue
Hackensack, New Jersey 07601
Fax: (201) 343-0056
In the event that shares representing the Common Stock issuable upon
conversion of the Series E Preferred Stock (the "Conversion Shares") are not
delivered by the Company, within three
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(3) business days of receipt by the Company of a valid Notice of Conversion and
the Series E Preferred Stock certificates to be converted, the Company shall pay
to the holders thereof, in immediately available funds, upon demand, as
liquidated damages for such failure and not as a penalty, for each $100,000 of
Series E Preferred Stock sought to be converted, $1000 for each of the first ten
(10) days and $2000 per day thereafter that the Conversion Shares are not
delivered, which liquidated damages shall run from the fourth business day after
the Conversion Date provided that the Company shall not be responsible for or
required to pay such liquidated damages if such failure to deliver or convert
was not caused by any actions or omissions of the Company or counsel to the
Company. Any and all payments required pursuant to this paragraph shall be
payable in cash.
(h) Lost or Stolen Certificates. Upon receipt by the Company
of evidence of the loss, theft, destruction or mutilation of any Series E
Preferred Stock certificate(s), and (in the case of loss, theft or destruction)
of indemnity or security reasonably satisfactory to the Company, and upon the
cancellation of the Series E Preferred Stock certificate(s), if mutilated, the
Company shall execute and deliver new certificates for Series E Preferred Stock
of like tenure and date. However, the Company shall not be obligated to reissue
such lost or stolen certificates for shares of Series E Preferred Stock if the
holder contemporaneously requests the Company to convert such Series E Preferred
Stock into Common Stock.
(i) Fractional Shares. No shares of Common Stock shall be
issued upon conversion of shares of Series E Preferred Stock. In lieu of any
fractional share to which the holder would be entitled for this paragraph, the
Company shall pay cash in an amount equal to the same fraction of the Conversion
Price of one share of Common Stock
(j) Partial Conversion. In the event some but not all of the
shares of Series E Preferred Stock represented by a certificate or certificates
surrendered by a holder are converted, the Company shall execute and deliver to
or to the order of the holder, at the expense of the Company, a new certificate
representing the number of shares of Series E Preferred Stock which were not
converted.
(k) Reservation of Common Stock. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the shares
of the Series E Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient or as may be available to effect the
conversion of all outstanding shares of the Series E Preferred Stock, and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all the then outstanding shares of the
Series E Preferred Stock, the Company shall use its best efforts to take such
corporate action as may 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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6. Redemption.
(a) The Company may redeem any or all of the outstanding
shares of the Series E Preferred Stock on any date (the "Redemption Date") set
by the Board of Directors of the Company for such redemption at any time at the
Redemption Price, as that term is defined below, for each share of Series E
Preferred Stock, to be paid in cash on the Redemption Date, provided, that
(except as hereinafter provided) the Company shall not send a Redemption Notice,
as that term is defined below, to any of the holders of Series E Preferred
Stock, unless it has good and clear funds, for payment of the Redemption Price
for the shares of Series E Preferred Stock it intends to redeem, in a bank
account controlled by the Company, and provided further, however, that in the
event the redemption is to be made simultaneously with the closing of a public
offering of the Company, then the Company may send a Redemption Notice even if
it does not have such good and clear funds, but not earlier than on the day
prior to the date the public offering is priced.
(b) The Redemption Price shall be calculated as follows:
(i) if the Redemption Date occurs sixty (60) days or
less after the Closing Date, the Redemption Price shall be an amount equal to
110% of the Purchase Price, plus an amount equal to all accrued but unpaid
dividends, whether or not declared, to but excluding the Redemption Date;
(ii) if the Redemption Date occurs more than sixty
(60) days but not more than one hundred twenty (120) days after the Closing
Date, the Redemption Price shall be an amount equal to 115% of the Purchase
Price, plus an amount equal to all accrued but unpaid dividends, whether or not
declared, to but excluding the Redemption Date;
(iii) if the Redemption Date occurs more than one
hundred and twenty (120) days but not more than one hundred eighty (180) days
after the Closing Date, the Redemption Price shall be an amount equal to 120% of
the Purchase Price, plus an amount equal to all accrued but unpaid dividends,
whether or not declared, to but excluding the Redemption Date;
(iv) if the Redemption Date occurs more than one
hundred eighty (180) days after the Closing Date, the Redemption Price shall be
an amount equal to the greater of (x) 120% of the Purchase Price, plus an amount
equal to all accrued but unpaid dividends, whether or not declared, to but
excluding the Redemption Date or (y) the Full Economic Benefit (as hereinafter
defined) that the holders of the Series E Preferred Stock would derive from
exercising their Conversion Right and selling the Common Stock on the date of
the Redemption Notice. For the purposes of this Agreement, the term Full
Economic Benefit shall mean an amount equal to the number of shares issuable
upon conversion of such shares of Series E Preferred Stock on the Redemption
Date multiplied by the average closing bid price of the Common Stock as quoted
by Bloomberg, L.P., for the last five (5) trading days immediately prior to the
Redemption Date;
(c) The Redemption Price shall be payable in cash. If fewer
than all of the outstanding shares of Series E Preferred Stock are to be
redeemed, the redemption shall be pro rata
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among the holders of the Series E Preferred Stock based upon the number of
shares held by such holders and subject to such other provisions as may be
determined by the Board of Directors of the Company.
(d) Five days prior to the Redemption Date, the Company shall
send, by facsimile transmission and by first class mail, postage prepaid, a
notice (the "Redemption Notice") to each holder of Series E Preferred Stock,
which notice shall contain all instructions and materials necessary to enable
such holders to tender Series E Preferred Stock pursuant to the redemption. Such
notice shall (i) state that a redemption is being effected, (ii) specify the
Redemption Date, (iii) state that holders will be required to surrender the
certificate or certificates representing such shares, properly endorsed, in the
manner and at the place specified in the notice prior to the close of business
on the business day prior to the Redemption Date, (iv) state that holders may
convert up to a maximum of 20% of their shares of Series E Preferred Stock into
shares of Common Stock, provided that, the Company receives the Notice of
Conversion within twenty-four (24) hours from the time the Redemption Notice was
received by such holder and that all other shares shall be deemed to have been
redeemed by the Company on the Redemption Date at the Redemption Price plus all
accrued but unpaid dividends whether or not declared. In the event the Company
fails to deliver the Redemption Price plus accrued and unpaid dividends on or
before (i) six (6) days after the date of the Redemption Notice or (ii) in the
event the redemption is made simultaneously with the closing of a public
offering of the Company, six (6) days after the closing date of such public
offering, the Redemption Notice shall be null and void and the Company will
relinquish its Redemption rights provided by this section.
(e) On the Redemption Date, unless the Company defaults in the
payment for the shares of Series E Preferred Stock tendered pursuant to the
redemption, dividends will cease to accrue with respect to the shares of Series
E Preferred Stock tendered. All rights of holders of such tendered shares will
terminate, except for the right to receive payment therefor, on the Redemption
Date.
(f) After receipt of the Redemption Notice, the holders of
Series E Preferred Stock may convert up to a maximum of 20% of their shares of
Series E Preferred Stock into shares of Common Stock, provided that the Company
receives the Notice of Conversion within twenty-four (24) hours from the time
the Redemption Notice was received by such holder.
(g) The Company may, at its option, at any time after the
mailing of the Redemption Notice pursuant to Section 6 (d) above, deposit the
aggregate amount payable upon redemption of the Series E Preferred Stock with a
bank or trust company (the "Depositary") having its principal office in New
York, New York, and having a combined capital and surplus (as shown by its then
most recently published financial statement) of at least $200,000,000,
designated by the Board of Directors of the Company, to be held in trust by the
Depositary for payment to the holders of the shares to be redeemed. Upon such
deposit, the Company shall be released and discharged from any obligation to pay
the Redemption Price of the shares to be redeemed, and the holders of the shares
instead shall have the right to receive from the Depositary only, and not from
the Company, the amount payable upon redemption of the shares on surrender to
the Depositary of the certificates
-8-
<PAGE>
representing the shares. Any money so deposited with the Depositary that is not
claimed after one (1) year from the Redemption Date shall be repaid to the
Company by the Depositary on demand, and the holder of any of the shares shall
thereafter look only to the Company for any payment to which the holder may be
entitled. Any interest which accrues on money deposited with the Depositary
shall belong to the Company and shall be paid to the Company from time to time
by the Depositary.
(h) Any Series E Preferred Stock redeemed or purchased by the
Company shall be canceled and shall have the status of authorized and unissued
shares of preferred stock, without designation as to class or series.
7. No Reissuance of Series E Preferred Stock. Any share or shares of
Series E Preferred Stock acquired by the Company by reason of redemption,
purchase, conversion or otherwise shall be canceled, shall return to the status
of authorized but unissued preferred stock of no designated series, and shall
not be reissuable by the Company as Series E Preferred Stock.
8. Restrictions and Limitations
(a) Amendments to Charter. The Company shall not amend its
certificate of incorporation without the approval by the holders of at least a
majority of the then outstanding shares of Series E Preferred Stock if such
amendment would:
(i) change the relative seniority rights of the
holders of Series E Preferred Stock as to the payment of dividends in relation
to the holders of any other capital stock of the Company, or create any other
class or series of capital stock entitled to seniority as to the payment of
dividends in relation to the holders of Series E Preferred Stock;
(ii) reduce the amount payable to the holders of
Series E Preferred Stock upon the voluntary or involuntary liquidation,
dissolution or winding up of the Company, or change the relative seniority of
the liquidation preferences of the holders of Series E Preferred Stock to the
rights upon liquidation of the holders of other capital stock of the Company, or
change the dividend rights of the holders of Series E Preferred Stock;
(iii) cancel or modify the conversion rights of the
holders of Series E Preferred Stock provided for in Section 5 herein; or
(iv) cancel or modify the rights of the holders of
the Series E Preferred Stock provided for in this Section 8.
9. Notices of Record Date. In the event of:
(a) any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other
-9-
<PAGE>
distribution, or any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to receive
any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company, any
merger of the Company, or any transfer of all or substantially all of the assets
of the Company to any other corporation, or any other entity or person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding up of the Company,
then and in each such event the Company shall mail or cause to be mailed to each
holder of Series E Preferred Stock a notice specifying (i) the date on which any
such record is to be taken for the purpose of such dividend, distribution or
right and a description of such dividend, distribution or right, (ii) the date
on which any such reorganization, reclassification, recapitalization, transfer,
merger, dissolution, liquidation or winding up is expected to become effective
and (iii) the time, if any, that is to be fixed, as to when the holders of
record of Common Stock (or other securities) shall be entitled to exchange their
shares of Common Stock (or other securities) for securities or other property
deliverable upon such reorganization, reclassification, recapitalization,
transfer, merger, dissolution, liquidation or winding up. Such notice shall be
mailed at least ten (10) days prior to the date specified in such notice on
which such action is to be taken.
10. Certificate of Incorporation. The statements contained in the
foregoing, creating and designating the said Series E issue of Preferred Stock
and fixing the number, powers, preferences and relative, optional,
participating, and other special rights and the qualifications, limitations and
restrictions shall, upon the effective date of said series, be deemed to be
included in and be a part of the Certificate of Incorporation of the Company
pursuant to the provisions of Sections 104 and 151 of the General Corporation
Law of the State of Delaware.
11. Limitation on Number of Conversion Shares.
(a) Notwithstanding any other provision herein, the Company shall not
be obligated to issue any shares of Common Stock upon conversion of the Series E
Preferred Stock if the issuance of such shares of Common Stock would exceed that
number of shares of Common Stock which the Company may issue upon conversion of
the Series E Preferred Stock (the "Exchange Cap") without breaching the
Company's obligations under the rules and regulations of The Nasdaq Stock
Market, Inc., except that such limitation shall not apply in the event that the
Company (a) obtains the approval of its stockholders as required by applicable
rules of The Nasdaq Sock Market, Inc., for issuances of Common Stock in excess
of such amount or (b) obtains a written opinion from outside counsel to the
Company that such approval is not required, which opinion shall be reasonably
satisfactory to the holders of a majority of the shares of Series E Preferred
Stock then outstanding; provided, however, that notwithstanding anything herein
to the contrary, the Company will issue (x) such number of shares of Common
Stock issuable upon conversion of the Series E Preferred Stock at the then
current
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<PAGE>
Conversion Price up to the Exchange Cap and (y) such number of shares of Common
Stock issuable upon conversion of the remaining outstanding Series E Preferred
Stock at the closing bid price for the Common Stock, as quoted by Bloomberg,
L.P., on the trading day immediately preceding the applicable Conversion Date.
Until such approval or written opinion is obtained, no holder of Series E
Preferred Stock pursuant to the 6% Series E Convertible Preferred Subscription
Agreement ("Purchase Agreement") shall be issued, upon conversion of Series E
Preferred Stock, shares of Common Stock in an amount greater than the product of
(i) the Exchange Cap amount multiplied by (ii) a fraction, the numerator of
which is the number of shares of Series E Preferred Stock issued to such holder
pursuant to the Purchase Agreement and the denominator of which is the aggregate
amount of all the shares of Series E Preferred Stock issued to all holders
pursuant to the Purchase Agreement (the "Cap Allocation Amount"). In the event
that any holder of Series E Preferred Stock shall convert all of such holder's
shares of Series E Preferred Stock into a number of shares of Common Stock
which, in the aggregate, is less than such holder's Cap Allocation Amount, then
the difference between such holder's Cap Allocation Amount and the number of
shares of Common Stock actually issued to such holder shall be allocated to the
respective Cap Allocation Amounts of the remaining holders of Series E Preferred
Stock on a pro rata basis in proportion to the number of shares of Series
Preferred Stock then held by each such holder. Nothing in this Paragraph 11
shall limit a holder's right to convert its shares of Series E Preferred Stock.
(b) On each Conversion Date, the number of shares of Common Stock
underlying the Series E Preferred Stock to be issued to each holder (not
including the outstanding shares of Series E Preferred Stock or the unissued
shares of Common Stock underlying the Series E Preferred Stock not to be issued
on such Conversion Date) will not exceed the number of such shares which, when
aggregated with all other shares of Common Stock then owned of record by such
holder, would result in such holder owning more than 9.99% of all of such Common
Stock as would be outstanding on such Conversion Date. The foregoing limitation
shall not apply in the event of an automatic conversion pursuant to subparagraph
5(c).
12. Ranking. The Series D Preferred Stock shall, with respect to
dividend rights and rights on liquidation, winding up and dissolution, rank
senior to any of the (i) Common Stock, (ii) Series E Preferred Stock and (iii)
any other class or series of stock of the Company which by its terms ranks
junior to the Series D Preferred Stock.
-11-
<PAGE>
Signed and attested to on March 8, 1999.
/s/ George Febish
-------------------------
George Febish, President
Attest:
/s/ David E.Y. Sarna
---------------------------------
David E.Y. Sarna, Secretary
Signed on March 8, 1999
-12-
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order
to Convert the Series E Preferred Stock)
The undersigned hereby irrevocably elects to convert ___ shares of Series E
Preferred Stock, Certificate No. ___ (the "Preferred Stock") into shares of
Common Stock of OBJECTSOFT CORPORATION (the "Company") according to the
conditions hereof, as of the date written below.
The undersigned represents and warrants that
(i) All offers and sales by the undersigned of the shares of
Common Stock issuable to the undersigned upon conversion of
the Series E Preferred Stock shall be made in compliance with
Regulation D, pursuant to an exemption from registration under
the Securities Act of 1933, as amended (the "Securities Act"),
or pursuant to registration of the Common Stock under the Act,
subject to any restrictions on sale or transfer set forth in
the purchase agreement between the Company and the original
holder of the Certificate submitted herewith for conversion.
(ii) Upon conversion pursuant to this Notice of Conversion, the
undersigned will not own of record (within the meaning of the
Securities Exchange Act of 1934, as amended) 9.9% or more of
the then issued and outstanding shares of the Company.
Date of Conversion Applicable Conversion Price
Number of shares of Common Stock $ Amount of Conversion
issuable upon Conversion
Signature Name
Address: Delivery of Shares to:
Amended
Certificate of Designation of Series E
Convertible Preferred Stock
of
OBJECTSOFT CORPORATION
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
It is hereby certified that:
1. The name of the corporation is ObjectSoft Corporation, a Delaware
corporation (hereinafter the "Company").
2. The Certificate of Designation of Series E Preferred Stock of the
Company was filed with the Secretary of State of Delaware on March 9, 1999.
3. No shares of Series E Preferred Stock have been issued.
4. The Certificate of Designation of Series E Preferred Stock of the
Company is hereby amended by deleting Section 5(b)(iii) in its entirety and
replacing it with a new Section 5(b)(iii), as follows:
"for purposes hereof, (w) the "closing bid price" shall mean,
for any security as of any date, the last closing bid price
for such security on the Nasdaq Stock Market as reported by
Bloomberg, L.P., or, if the Nasdaq Stock Market is not the
principal trading market for such security, the last closing
bid price of such security on the principal securities
exchange or trading market where such security is listed or
traded as reported by Bloomberg, L.P., or if the foregoing do
not apply, the last closing bid price of such security in the
over-the-counter market on the OTC Electronic Bulletin Board
for such security as reported by Bloomberg, L.P., or, the last
closing trade price of such security as reported by Bloomberg,
L.P., or, if no last closing bid or trade price is reported
for such security by Bloomberg, L.P., the closing bid price
shall be determined by reference to the closing bid price as
reported on the principal trading market, and if not so
reported shall be determined from the average of the bid
prices of any market makers for such security as reported in
the "pink sheets" published by the National Quotation Bureau,
Inc. If the closing bid price cannot be calculated for such
security on such date on any of the foregoing bases, the
closing bid price of such security on such date shall be the
fair market value as mutually agreed by the Company and the
holders of two thirds of the outstanding shares of Series E
Preferred Stock; (y) the term "Closing Price" shall mean the
closing bid price for the Common
<PAGE>
Stock on the day immediately preceding the Closing Date; (y)
the term "Market Price A" shall mean the average of the three
lowest closing bid prices of the Common Stock during the (22)
day trading period immediately preceding the Conversion Date
(the "Lookback Period"); and (z) the term "Market Price B"
shall mean the converting holders' choice of any five
consecutive closing bid prices of the Common Stock during the
Lookback Period; provided, however, that with respect to both
Market Price A and Market Price B, the Lookback Period shall
be increased by two (2) trading days on the last trading day
of each month, starting on the first day of the fourth (4th)
month from the Closing Date, until the Lookback Period equals
a maximum of thirty (30) trading days."
5. The Certificate of Designation of Series E Preferred Stock of the
Company is hereby further amended by deleting Section 5(b)(iv) in its entirety.
-2-
<PAGE>
6. This Amendment to the Certificate of Designation of Series E
Preferred Stock herein certified has been duly adopted in accordance with the
provisions of Section 151(g) of the General Corporation Law of the State of
Delaware.
Dated as of: March 16, 1999
OBJECTSOFT CORPORATION
By: /s/ George J. Febish
-----------------------------
George J. Febish, President
-3-
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY OTHER APPLICABLE STATE SECURITIES LAWS AND
HAS BEEN ISSUED IN RELIANCE UPON REGULATION D PROMULGATED UNDER THE SECURITIES
ACT. THIS WARRANT SHALL NOT CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN
OFFER TO BUY THE WARRANT IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
WOULD BE UNLAWFUL.
THIS WARRANT MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS, OR IN A TRANSACTION WHICH IS EXEMPT FROM
REGISTRATION UNDER THE PROVISIONS OF THE SECURITIES ACT AND UNDER PROVISIONS OF
APPLICABLE STATE SECURITIES LAWS; AND IN THE CASE OF AN EXEMPTION, ONLY IF THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
TRANSACTION DOES NOT REQUIRE REGISTRATION THEREOF.
No. __
WARRANT
To Purchase ______ Shares of Common Stock of
OBJECTSOFT CORPORATION
THIS CERTIFIES that, for value received,
_____________________________ (the "Investor") is entitled, upon the terms and
subject to the conditions hereinafter set forth, at any time on or after March
__, 1999 and on or prior to 5:00 P.M., New York time on March __, 2004 (the
"Termination Date") but not thereafter, to subscribe for and purchase from
OBJECTSOFT CORPORATION, a corporation incorporated under the laws of the State
of Delaware (the "Company"), ________________________ (______) shares (the
"Warrant Shares") of Common Stock, par value $.0001 per share of the Company
(the "Common Stock"). The exercise price of one share of Common Stock (the
"Exercise Price") under this Warrant shall be equal to $____. The Exercise Price
and the number of shares for which the Warrant is exercisable shall be subject
to adjustment as provided herein. This Warrant is being issued in connection
with that certain 6% Series E Convertible Preferred Stock Subscription Agreement
of even date herewith (the "Agreement"), and is subject to its terms and
conditions. In the event of any conflict between the terms of this Warrant and
the Agreement, the Agreement shall control in all respects.
<PAGE>
1. Title of Warrant. Prior to the expiration hereof and
subject to compliance with applicable laws, this Warrant and all rights
hereunder are transferable, in whole or in part, at the office or agency of the
Company by the holder hereof in person or by duly authorized attorney, upon
surrender of this Warrant together with the Assignment Form annexed hereto
properly endorsed.
2. Authorization of Shares. The Company covenants that all
shares of Common Stock which may be issued upon the exercise of rights
represented by this Warrant will, upon exercise of the rights represented by
this Warrant, be duly authorized, validly issued, fully-paid and nonassessable
and free from all taxes, liens and charges in respect of the issue thereof
(other than taxes in respect of any transfer occurring contemporaneously with
such issue).
3. Exercise of Warrant. Except as provided in Section 4 below,
exercise of the purchase rights represented by this Warrant may be made at any
time or from time to time before the close of business on the Termination Date,
or such earlier date on which this Warrant may terminate as provided in this
Warrant, by the surrender of this Warrant and the Notice of Exercise Form
annexed hereto duly executed, at the office of the Company (or such other office
or agency of the Company as it may designate by notice in writing to the
registered holder hereof at the address of such holder appearing on the books of
the Company) and upon payment of the Exercise Price of the shares thereby
purchased; whereupon the holder of this Warrant shall be entitled to receive a
certificate for the number of shares of Common Stock so purchased. Certificates
for shares purchased hereunder shall be delivered to the holder hereof within
three (3) business days after the date on which this Warrant shall have been
exercised as aforesaid. Payment of the Exercise Price of the shares may be by
certified check or cashier's check or by wire transfer of immediately available
funds to an account designated by the Company in an amount equal to the Exercise
Price multiplied by the number of Warrant Shares.
4. No Fractional Shares or Scrip. No fractional shares or
scrip representing fractional shares shall be issued upon the exercise of this
Warrant.
5. Charges, Taxes and Expenses. Issuance of certificates for
shares of Common Stock upon the exercise of this Warrant shall be made without
charge to the holder hereof for any issue or transfer tax or other incidental
expense in respect of the issuance of such certificate, all of which taxes and
expenses shall be paid by the Company, and such certificates shall be issued in
the name of the holder of this Warrant or in such name or names as may be
directed by the holder of this Warrant; provided however, that in the event
certificates for shares of Common Stock are to be issued in a name other than
the name of the holder of this Warrant, this Warrant when surrendered for
exercise shall be accompanied by the Assignment Form attached hereto duly
executed by the holder hereof; and provided further, that upon any transfer
involved in the issuance or delivery of any certificates for shares of Common
Stock, the Company may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental thereto.
-2-
<PAGE>
6. Closing of Books. The Company will not close its
shareholder books or records in any manner which prevents the timely exercise of
this Warrant for a period of time in excess of five (5) trading days per year.
7. No Rights as Shareholder until Exercise. This Warrant does
not entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company prior to the exercise thereof. Upon the surrender of
this Warrant and the payment of the aggregate Exercise Price, the Warrant Shares
so purchased shall be and be deemed to be issued to such holder as the record
owner of such shares as of the close of business on the later of the date of
such surrender or payment.
8. Assignment and Transfer of Warrant. This Warrant may be
assigned by the surrender of this Warrant and the Assignment Form annexed hereto
duly executed at the office of the Company (or such other office or agency of
the Company as it may designate by notice in writing to the registered holder
hereof at the address of such holder appearing on the books of the Company).
9. Loss, Theft, Destruction or Mutilation of Warrant. The
Company represents and warrants that upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant certificate or any stock certificate relating to the Warrant
Shares, and in case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to it, if mutilated, and upon surrender and cancellation
of such Warrant or stock certificate, the Company will make and deliver a new
Warrant or stock certificate of like tenor and dated as of such cancellation, in
lieu of such Warrant or stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or
appointed day for the taking of any action or the expiration of any right
required or granted herein shall be a Saturday, Sunday or a legal holiday, then
such action may be taken or such right may be exercised on the next succeeding
day not a legal holiday.
11. Effect of Certain Events. If the Common Stock issuable
upon exercise of this Warrant shall be changed into the same or different number
of shares of any class or classes of stock, whether by capital reorganization,
reclassification, stock split, stock dividend, or similar event, then and in
each such event, the holder of this Warrant shall have the right thereafter to
exercise this Warrant into the kind and amount of shares of stock and other
securities and property receivable upon such capital reorganization,
reclassification or other change which such holder would have received had this
Warrant been exercised immediately prior to such capital reorganization,
reclassification or other change. If at any time or from time to time there
shall be a capital reorganization of the Common Stock (other than a subdivision,
reclassification or exchange of shares provided in the previous sentence), or a
merger or consolidation of the Company with or into another corporation, or the
sale of all or substantially all of the Company's properties and/or assets to
any other person or entity (any of which events is herein referred to as a
"Reorganization"), then as part of such Reorganization, provision shall be made
so that the holders of this Warrant shall thereafter be entitled to receive upon
exercise of this Warrant, the number of shares of stock or other securities or
property of the Company, or of the successor corporation (or entity) resulting
from such Reorganization, to which such holder would have been entitled if such
holder had exercised its exercise rights granted hereunder immediately prior to
such Reorganization. In any such case,
-3-
<PAGE>
appropriate adjustment shall be made in the application of the provisions of
this Section with respect to the rights of the holder of this Warrant after the
Reorganization, to the end that the provision of this Section (including
adjustment of the number of shares issuable upon exercise of this Warrant) shall
be applicable after that event in as nearly equivalent manner as may be
practicable.
The Company agrees that the Warrant Shares shall be included
in the Registration Statement to be filed by the Company pursuant to the
Agreement.
12. Adjustments of Exercise Price and Number of Warrant
Shares. In the event the Company shall (i) declare or pay a dividend in shares
of Common Stock or make a distribution in shares of Common Stock to holders of
its outstanding Common Stock, (ii) subdivide its outstanding shares of Common
Stock, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock or (iv) issue any shares of its capital stock
in a reclassification of the Common Stock, then the number of Warrant Shares
purchasable upon exercise of this Warrant immediately prior thereto shall be
adjusted so that the holder of this Warrant shall be entitled to receive the
kind and number of Warrant Shares or other securities of the Company which he
would have owned or have been entitled to receive had such Warrant been
exercised in advance thereof. Upon each such adjustment of the kind and number
of Warrant Shares or other securities of the Company which are purchasable
hereunder, the holder of this Warrant shall thereafter be entitled to purchase
the number of Warrant Shares or other securities resulting from such adjustment
at an Exercise Price per such Warrant Share or other security obtained by
multiplying the Exercise Price in effect immediately prior to such adjustment by
the number of Warrant Shares purchasable pursuant hereto immediately prior to
such adjustment and dividing by the number of Warrant Shares or other securities
of the Company resulting from such adjustment. An adjustment made pursuant to
this Section shall become effective immediately after the effective date of such
event retroactive to the record date, if any, for such event.
13. Voluntary Adjustment by the Company. The Company may at
any time during the term of this Warrant reduce the then current Exercise Price
to any amount and for any period of time deemed appropriate by the Board of
Directors of the Company.
14. Notice of Adjustment. Whenever the number of Warrant
Shares or number or kind of securities or other property purchasable upon the
exercise of this Warrant or the Exercise Price is adjusted, as herein provided,
the Company shall promptly mail by registered or certified mail, return receipt
requested, to the holder of this Warrant notice of such adjustment or
adjustments setting forth the number of Warrant Shares (and other securities or
property) purchasable upon the exercise of this Warrant and the Exercise Price
of such Warrant Shares (and other securities or property) after such adjustment,
setting forth a brief statement of the facts requiring such adjustment and
setting forth the computation by which such adjustment was made. Such notice, in
absence of manifest error, shall be conclusive evidence of the correctness of
such adjustment.
15. Authorized Shares. The Company covenants that during the
period this Warrant is outstanding, it will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of the Warrant Shares upon the exercise of any purchase rights under this
Warrant. The Company further covenants that its issuance of this Warrant shall
constitute full authority to its officers who are charged with the duty of
executing stock certificates
-4-
<PAGE>
to execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant. The Company will take all
such reasonable action as may be necessary to assure that such Warrant Shares
may be issued as provided herein without violation of any applicable law or
regulation, or of any requirements of the NASDAQ SmallCap Market or any domestic
securities exchange upon which the Common Stock may be listed.
16. Miscellaneous.
(a) Choice of Law; Venue; Jurisdiction. This Warrant will be
construed and enforced in accordance with and governed by the laws of the State
of New York, except for matters arising under federal securities law, without
reference to principles of conflicts or choice of law thereof. Each of the
parties consents to the jurisdiction of the U.S. District Court sitting in the
Southern District of the State of New York or the state courts of the State of
New York sitting in Manhattan in connection with any dispute arising under this
Agreement and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions. Each party hereby agrees
that if another party to this Warrant obtains a judgment against it in such a
proceeding, the party which obtained such judgment may enforce same by summary
judgment in the courts of any country having jurisdiction over the party against
whom such judgment was obtained, and each party hereby waives any defenses
available to it under local law and agrees to the enforcement of such a
judgment. Each party to this Warrant irrevocably consents to the service of
process in any such proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to such party at its address set forth herein.
Nothing herein shall affect the right of any party to serve process in any other
manner permitted by law. Each party waives its right to a trial by jury.
(b) Restrictions. The holder hereof acknowledges that the
Warrant Shares acquired upon the exercise of this Warrant, if not registered,
will have restrictions upon resale imposed by state and federal securities laws.
Each certificate representing the Warrant Shares issued to the Holder upon
exercise will bear the following legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAWS AND
HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE
DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A
TRANSACTION THAT IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH
REGISTRATION."
-5-
<PAGE>
(c) Modification and Waiver. This Warrant and any provisions
hereof may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
(d) Notices. Any notice, request or other document required or
permitted to be given or delivered to the holders hereof by the Company shall be
delivered or shall be sent by certified or registered mail, postage prepaid, to
each such holder at its address as shown on the books of the Company or to the
Company at the address set forth in the Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer thereunto duly authorized as of the date first written
above.
OBJECTSOFT CORPORATION
By:
Name:
Title:
-6-
<PAGE>
NOTICE OF EXERCISE
To: OBJECTSOFT CORPORATION
(1) The undersigned hereby elects to purchase ________ shares
of Common Stock, par value $.0001 per share (the "Common Stock") of OBJECTSOFT
CORPORATION pursuant to the terms of the attached Warrant, and tenders herewith
payment of the exercise price in full, together with all applicable transfer
taxes, if any.
(2) Please issue a certificate or certificates representing
said shares of Common Stock in the name of the undersigned or in such other name
as is specified below:
-------------------------------
(Name)
-------------------------------
(Address)
-------------------------------
(3) The shares of Common Stock being issued in connection with
the exercise of the attached Warrant are [not] being issued in connection with
the sale of the Common Stock.
Dated:
Signature
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<PAGE>
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute
this form and supply required information.
Do not use this form to exercise the Warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights
evidenced thereby are hereby assigned to
_______________________________________________ whose address is
- ---------------------------------------------------------------.
- ---------------------------------------------------------------
Dated: ______________, 1999
Holder's Signature: _____________________________
Holder's Address: _____________________________
-----------------------------
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.
-8-
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of the 17th day
of March, 1999, among the entities listed on Schedule A (collectively referred
to as the "Investors"), SETTONDOWN CAPITAL INTERNATIONAL, LTD. (the "Placement
Agent", along with the Investors also referred to as the "Holders") located at
Charlotte House, Charlotte Street, P.O. Box N. 9204, Nassau, Bahamas, and
OBJECTSOFT CORPORATION, a corporation incorporated under the laws of the State
of Delaware, having its principal place of business at Continental Plaza III,
433 Hackensack Avenue, Hackensack, New Jersey 07601 (the "Company").
WHEREAS, the Investors are purchasing from the Company and the
Company is issuing and selling to the Investors, pursuant to the terms and
conditions of a 6% Series E Convertible Preferred Stock Subscription Agreement
dated as of the date hereof (the "Agreement"), an aggregate value of Preferred
Stock and Warrants of up to Two Million ($2,000,000) Dollars;
WHEREAS, upon the Closing, the Company shall issue to the
Placement Agent, in return for services rendered (in addition to other fees set
forth in the Agreement): (i) that number of shares of Preferred Stock equal to
five (5%) percent of the number of shares of Preferred Stock and (ii) a Warrant
to purchase 50,000 shares of Common Stock; and
WHEREAS, the Company desires to grant to the Holders the
registration rights set forth herein with respect to the Underlying Shares and
Warrant Shares (collectively hereinafter referred to as the "Stock" or
"Securities" of the Company), which shall not include the Preferred Stock. All
capitalized terms not otherwise defined herein shall have those meanings
ascribed to such terms in the Agreement.
NOW, THEREFORE, the parties hereto mutually agree as follows:
Section 1. Registrable Securities. As used herein the term
"Registrable Security" means the Underlying Shares and Warrant Shares; provided,
however, that with respect to any particular Registrable Security, such security
shall cease to be a Registrable Security when, as of the date of determination,
(i) it has been effectively registered for resale under the Securities Act of
1933, as amended (the "Securities Act") and disposed of pursuant thereto, (ii)
registration under the Securities Act is no longer required for the immediate
public distribution of such security as a result of the provisions of Rule 144
with no limitations promulgated under the Securities Act, or (iii) it has ceased
to be outstanding. The term "Registrable Securities" means any and/or all of the
securities falling within the foregoing definition of a "Registrable Security."
In the event of any merger, reorganization, consolidation, recapitalization or
other change in corporate structure affecting the Common Stock, such adjustment
shall be made in the definition of "Registrable Security" as is appropriate in
order to prevent any dilution or enlargement of the rights granted pursuant to
this Section 1.
<PAGE>
Section 2. Restrictions on Transfer. The Holders acknowledge
and understand that prior to the registration of the Securities as provided
herein, the Securities are "restricted securities" as defined in Rule 144
promulgated under the Securities Act. The Holders understand that no disposition
or transfer of the Securities may be made by the Holders in the absence of (i)
an opinion of counsel to the Holders that such transfer may be made without
registration under the Securities Act or (ii) such registration.
Section 3. Registration Rights.
(a) The Company agrees that it will prepare and file with the
Securities and Exchange Commission ("Commission"), no later than forty-five (45)
days after the Closing Date, a registration statement on Form S-3 or other form
under the Securities Act (the "Registration Statement"), at the sole expense of
the Company (except as provided in Section 3(c) hereof), in respect of all
holders of Registrable Securities, initially registering at least 1,500,000
shares of Common Stock (the "Initial Number of Registered Shares").
The Company shall use its reasonable efforts to cause the
Registration Statement to become effective within ninety (90) days from the
Closing Date. In the event the Commission prohibits the Company from registering
the number of shares of Common Stock as set forth above in the Registration
Statement, the Company will either amend the Registration Statement or file
other Registration Statements for the purpose of registering that number of
shares of Common Stock necessary pursuant to the terms of the Agreement and this
Registration Rights Agreement.
(b) The Company will maintain the effectiveness of any
Registration Statement or post-effective amendment filed under this Section 3
under the Securities Act until the earlier of (i) the date that all of the
Registrable Securities have been sold pursuant to the Registration Statement,
(ii) the date the holders thereof receive an opinion of counsel that all of the
Registrable Securities may be sold under the provisions of Rule 144 with no
limitations or (iii) five and one-half years after the Subscription Date. In the
event that the Initial Number of Registered Shares shall be insufficient to
cover all Registrable Securities, the Company shall file with the Commission
such other Registration Statement(s) necessary to register any Registrable
Securities then outstanding or reasonably expected to be issued which shall not
have been registered.
(c) All fees, disbursements and out-of-pocket expenses and
costs incurred by the Company in connection with the preparation and filing of
the Registration Statement under subparagraph 3(a) and in complying with
applicable securities and Blue Sky laws (including without limitation,
reasonable attorneys' fees thereof) shall be borne by the Company. The Holders
shall bear the cost of underwriting discounts and commissions, if any,
applicable to the Registrable Securities being registered and the fees and
expenses of its counsel. The Company shall qualify any of the securities for
sale in such states as such Holders reasonably designate and shall furnish
indemnification in the manner provided in Section 6 hereof. However, the Company
shall not be required to qualify any of the securities for sale in any state
which will require an escrow or other restriction relating to the Company and/or
the sellers. The Company at its expense will supply the Holders with copies of
the Registration Statement and the prospectus or offering circular included
therein and other related documents in such quantities as may be reasonably
requested by the Holders.
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<PAGE>
(d) The Company shall not be required by this Section 3 to
include a Holder's Registrable Securities in any Registration Statement which is
to be filed if, in the opinion of counsel for all of the Holders and the Company
(or, should they not agree, in the opinion of another counsel experienced in
securities law matters acceptable to counsel for the Holders and the Company)
the proposed offering or other transfer as to which such registration is
requested is exempt from applicable federal and state securities laws and would
result in all Investors or transferees obtaining securities which are not
"restricted securities" as defined in Rule 144 with no limitations under the
Securities Act.
(e) In the event the Registration Statement to be filed by the
Company pursuant to Section 3(a) above is not filed with the Commission within
thirty (30) days from the Closing Date and/or the Registration Statement is not
declared effective by the Commission within one hundred twenty (120) days from
the Closing Date, then the Company will pay to the Holders (pro rated on a daily
basis) in cash upon demand by the Holders, as liquidated damages for such
failure and not as a penalty, two (2%) percent of the Purchase Price of the then
outstanding Securities for every thirty (30) day period thereafter until the
Registration Statement has been filed and/or declared effective, provided that,
such demand is made by the Holders in writing within ninety (90) days of the
date on which the Company becomes liable for such liquidated damages in
accordance with this Section 3(e). Such payment of the liquidated damages shall
be made to the Holders in cash promptly upon demand, provided however, that the
payment of such liquidated damages shall not relieve the Company from its
obligations to register the Securities pursuant to this Section. The
aforementioned liquidated damages shall cease to accrue one year after the
Closing Date on the condition that the Holders may rely on Rule 144 with no
limitations for the resale of all of the Securities then held by the Holders.
If the Company does not remit the damages to the Holders as
set forth above, the Company will pay the Holders' reasonable costs of
collection, including reasonable attorneys' fees, in addition to the liquidated
damages. The registration of the Securities pursuant to this provision shall not
affect or limit Holders' other rights or remedies as set forth in this
Registration Rights Agreement.
(f) No provision contained herein shall preclude the Company
from selling securities pursuant to any Registration Statement in which it is
required to include Registrable Securities pursuant to this Section 3.
(g) If at any time or from time to time after the Closing
Date, the Company notifies the Holders in writing of the existence of a
Potential Material Event (as defined in Section 3(h) below), the Holders shall
not offer or sell any Registrable Securities or engage in any other transaction
involving or relating to Registrable Securities, from the time of the giving of
notice with respect to a Potential Material Event until such Holder receives
written notice from the Company that such Potential Material Event either has
been disclosed to the public or no longer constitutes a Potential Material
Event; provided, however, that the Company may not so suspend the right to such
holders of Securities for more than one (1) twenty (20) day period in the
aggregate during any twelve month period, during the periods the Registration
Statement is required to be in effect. If a Potential Material Event shall occur
prior to the date the Registration Statement is filed, then the Company's
obligation to file the Registration Statement shall be delayed without penalty
for not more than twenty
-3-
<PAGE>
(20) days. The Company must give each Holder notice in writing at least two (2)
business days prior to the first day of the blackout period.
(h) "Potential Material Event" means any of the following: (a)
the possession by the Company of material information not for disclosure in a
registration statement; or (b) any material engagement or activity by the
Company which would be adversely affected by disclosure in a registration
statement at such time, that the Registration Statement would be materially
misleading absent the inclusion of such information.
Section 4. Cooperation with Company. Holders will cooperate
with the Company in all respects in connection with this Registration Rights
Agreement, including timely supplying all information reasonably requested by
the Company and executing and returning all documents reasonably requested in
connection with the registration and sale of the Registrable Securities.
Section 5. Registration Procedures. If and whenever the
Company is required by any of the provisions of this Registration Rights
Agreement to effect the registration of any of the Registrable Securities under
the Securities Act, the Company shall (except as otherwise provided in this
Registration Rights Agreement), as expeditiously as possible:
(a) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the sale or
other disposition of all securities covered by such registration statement
whenever the Holder of such securities shall desire to sell or otherwise dispose
of the same (including prospectus supplements with respect to the sales of
securities from time to time in connection with a registration statement
pursuant to Rule 415 promulgated under the Act);
(b) furnish to each Holder such numbers of copies of a summary
prospectus or other prospectus, including a preliminary prospectus or any
amendment or supplement to any prospectus, in conformity with the requirements
of the Securities Act, and such other documents, as such Holder may reasonably
request in order to facilitate the public sale or other disposition of the
securities owned by such Holder;
(c) register and qualify the securities covered by the
Registration Statement under such other securities or blue sky laws of such
jurisdictions as the Holders shall reasonably request (subject to the
limitations set forth in Section 3(c) above), and do any and all other acts and
things which may be necessary or advisable to enable each Holder to consummate
the public sale or other disposition in such jurisdiction of the securities
owned by such Holder, except that the Company shall not for any such purpose be
required to qualify to do business as a foreign corporation in any jurisdiction
wherein it is not so qualified or to file therein any general consent to service
of process;
(d) list such securities on the NASDAQ SmallCap Market or
other national securities exchange on which any securities of the Company are
then listed if the listing of such securities is then permitted under the rules
of such exchange or NASDAQ; and
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<PAGE>
(e) notify each Holder of Registrable Securities covered by
the Registration Statement, at any time when a prospectus relating thereto
covered by the Registration Statement is required to be delivered under the
Securities Act, of the happening of any event of which it 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 not misleading in the light of the circumstances then existing.
Section 6. Indemnification.
(a) The Company agrees to indemnify and hold harmless the
Holders, each and every officer, director, affiliate and employee of the
Holders, and each person, if any, who controls each Holder within the meaning of
the Securities Act and each officer, director, affiliate or employee of each of
the Holders ("Distributing Holder") against any losses, claims, damages or
liabilities, joint or several (which shall, for all purposes of this
Registration Rights Agreement, include, but not be limited to, all costs of
defense and investigation and all reasonable attorneys' fees thereof), to which
the Distributing Holder may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration Statement,
or any related preliminary prospectus, final prospectus, offering circular,
notification or amendment or supplement thereto, or arise out of or are based
upon 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;
provided however, that the Company (i) will not be liable in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, preliminary prospectus,
final prospectus, offering circular, notification or amendment or supplement
thereto in reliance upon, and in conformity with, written information furnished
to the Company by the Distributing Holder specifically for use in the
preparation thereof, and (ii) will not be required to pay any amounts paid in
settlement of any loss, claim, damage or liability if such settlement is
effected without the consent of the Company, which consent shall not be
unreasonably withheld. This Section 6(a) shall not inure to the benefit of any
Distributing Holder with respect to any person asserting such loss, claim,
damage or liability who purchased the Registrable Securities which are the
subject thereof if the Distributing Holder failed to send or give (in violation
of the Securities Act or the rules and regulations promulgated thereunder) a
copy of the prospectus contained in such Registration Statement to such person
at or prior to the written confirmation of such person of the sale of such
Registrable Securities, where the Distributing Holder was obligated to do so
under the Securities Act or the rules and regulations promulgated thereunder.
This indemnity provision will be in addition to any liability which the Company
may otherwise have.
(b) Each Distributing Holder agrees that it will severally
(and not jointly) indemnify and hold harmless the Company, and each officer,
director, affiliate and employee of the Company or person, if any, who controls
the Company within the meaning of the Securities Act, against any losses,
claims, damages or liabilities (which shall, for all purposes of this
Registration Rights Agreement, include, but not be limited to, all costs of
defense and investigation and all reasonable attorneys' fees thereof) to which
the Company or any such officer, director, affiliate, employee or controlling
person may become subject under the Securities Act or otherwise, insofar
-5-
<PAGE>
as such losses claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement, or any related
preliminary prospectus, final prospectus, offering circular, notification or
amendment or supplement thereto, or arise out of or are based upon the omission
or the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, but in each
case only to the extent that such untrue statement or alleged untrue statement
or omission or alleged omission was made in the Registration Statement,
preliminary prospectus, final prospectus, offering circular, notification or
amendment or supplement thereto in reliance upon, and in conformity with,
information furnished to the Company by such Distributing Holder, specifically
for use in the preparation thereof. This indemnity provision will be in addition
to any liability which the Distributing Holder may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 6, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve the
indemnifying party from any liability which it may have to any indemnified party
otherwise than as to the particular item as to which indemnification is then
being sought solely pursuant to this Section 6. In case any such action is
brought against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
in, and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, assume the defense thereof, subject to the provisions
stated herein and after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying party
will not be liable to such indemnified party under this Section 6 for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation, unless
the indemnifying party shall not pursue the action to its final conclusion. The
indemnified party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the indemnified party; provided that, if the indemnified party
is the Distributing Holder, the fees and expenses of such counsel shall be at
the expense of the indemnifying party if the named parties to any such action
(including any impleaded parties) include both the Distributing Holder and the
indemnifying party and the Distributing Holder shall have been advised by such
counsel that there may be one or more legal defenses available to the
indemnifying party different from or in conflict with any legal defenses which
may be available to the Distributing Holder (in which case the indemnifying
party shall not have the right to assume the defense of such action on behalf of
the Distributing Holder, it being understood, however, that the indemnifying
party shall, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable only for the reasonable
fees and expenses of one separate firm of attorneys for the all indemnified
parties, which firm shall be designated in writing by the indemnified parties).
No settlement of any action against an indemnified party shall be made without
the prior written consent of the indemnified party, which consent shall not be
unreasonably withheld.
Section 7. Contribution. In order to provide for just and
equitable contribution under the Securities Act in any case in which (i) the
indemnified party makes a claim for indemnification
-6-
<PAGE>
pursuant to Section 6 hereof but is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of Section 6 hereof provide for indemnification in such
case or (ii) contribution under the Securities Act may be required on the part
of any indemnified party, then the Company and the applicable Distributing
Holder shall contribute to the aggregate losses, claims, damages or liabilities
to which they may be subject (which shall, for all purposes of this Registration
Rights Agreement, include, but not be limited to, all costs of defense and
investigation and all reasonable attorneys' fees thereof), in either such case
(after contribution from others) on the basis of relative fault as well as any
other relevant equitable considerations. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
the applicable Distributing Holder on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and the Distributing Holder agree that
it would not be just and equitable if contribution pursuant to this Section 7
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in this
Section 7. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this Section 7 shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
Section 8. Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by reputable courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company:
ObjectSoft Corporation
Continental Plaza III
433 Hackensack Avenue
Hackensack, New Jersey 07601
Attention: Mr. David E. Y. Sarna, President
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<PAGE>
Telephone: (800) 816-8171
Facsimile No.: (201) 343-0056
with a copy to:
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
Attention: Melvin Weinberg, Esq.
Telephone: (212) 704-6000
Facsimile No.: (212) 704-6288
If to the Investors at the addresses set forth on Schedule A
attached hereto.
If to the Placement Agent:
Settondown Capital International, Ltd.
Charlotte House, Charlotte Street
P.O. Box N. 9204
Nassau, Bahamas
Telephone: (242) 325-1033
Facsimile No.: (242) 323-7918
Either party hereto may from time to time change its address
or facsimile number for notices under this Section by giving at least ten (10)
days' prior written notice of such changed address or facsimile number to the
other party hereto.
Section 9. Assignment. This Registration Rights Agreement is
binding upon and inures to the benefit of the parties hereto and their
respective heirs, successors and permitted assigns. The rights granted the
Holders under this Registration Rights Agreement shall not be assigned without
the written consent of the Company, which consent shall not be unnecessarily
withheld. In the event of a transfer of the rights granted under this
Registration Rights Agreement, the Holders agree that the Company may require
that the transferee comply with reasonable conditions as determined in the
discretion of the Company.
Section 10. Counterparts; Facsimile; Amendments. This
Registration Rights Agreement may be executed in multiple counterparts, each of
which may be executed by less than all of the parties and shall be deemed to be
an original instrument which shall be enforceable against the parties actually
executing such counterparts and all of which together shall constitute one and
the same instrument. Except as otherwise stated herein, in lieu of the original
documents, a facsimile transmission or copy of the original documents shall be
as effective and enforceable as the original. This Registration Rights Agreement
may be amended only by a writing executed by the Company on the one hand, and a
majority of the Investors, and the Placement Agent, on the other hand, or the
Company on the one hand, and all of the Investors on the other hand.
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<PAGE>
Section 11. Termination of Registration Rights. The rights
granted pursuant to this Registration Rights Agreement shall terminate as to
each Holder (and permitted transferees or assignees) upon the occurrence of any
of the following:
(a) all Holder's Securities subject to this Registration
Rights Agreement have been registered;
(b) all of such Holder's Securities subject to this
Registration Rights Agreement may be sold without such registration pursuant to
Rule 144 with no limitations promulgated by the SEC pursuant to the Securities
Act without any restrictions;
(c) all of such Holder's Securities subject to this
Registration Rights Agreement can be sold pursuant to Rule 144(k).
Section 12. Headings. The headings in this Registration Rights
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Registration Rights Agreement.
Section 13. Governing Law; Venue; Jurisdiction. This
Registration Rights Agreement shall be construed and enforced in accordance with
and governed by the laws of the State of New York, except for matters arising
under the Securities Act, without reference to principles of conflicts or choice
of law thereof. Each of the parties consents to the jurisdiction of the U.S.
District Court sitting in the Southern District of the State of New York or the
state courts of the State of New York sitting in Manhattan in connection with
any dispute arising under this Registration Rights Agreement and hereby waives,
to the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions. Each party hereby agrees that if another party to this
Registration Rights Agreement obtains a judgment against it in such a
proceeding, the party which obtained such judgment may enforce same by summary
judgment in the courts of any country having jurisdiction over the party against
whom such judgment was obtained, and each party hereby waives any defenses
available to it under local law and agrees to the enforcement of such a
judgment. Each party to this Registration Rights Agreement irrevocably consents
to the service of process in any such proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to such party at its
address set forth herein. Nothing herein shall affect the right of any party to
serve process in any other manner permitted by law. Each party waives its right
to a trial by jury.
Section 14. Severability. If any provision of this
Registration Rights Agreement shall for any reason be held invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision hereof and this Registration Rights Agreement shall be construed as if
such invalid or unenforceable provision had never been contained herein.
Section 15. Entire Agreement. This Registration Rights
Agreement, together with all documents referenced herein, embody the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and supersedes all prior oral or written
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<PAGE>
agreements and understandings relating to the subject matter hereof. No
statement, representation, warranty, covenant or agreement of any kind not
expressly set forth in this Registration Rights Agreement shall affect, or be
used to interpret, change or restrict, the express terms and provisions of this
Registration Rights Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be executed by the undersigned, thereunto duly authorized,
as of the date first set forth above.
OBJECTSOFT CORPORATION
By:
Name:
Title:
SETTONDOWN CAPITAL
INTERNATIONAL, LTD.
By:
Name:
Title:
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<PAGE>
Investors:
HEADWATERS CAPITAL
By:
Name:
Title:
AUSTOST ANSTALT SCHAAN
By:
Name:
Title:
BALMORE FUNDS, S.A.
By:
Name:
Title:
HSBC JAMES CAPEL CANADA, INC.
By:
Name:
Title:
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<PAGE>
TONGA PARTNERS, L.P.
By:
J. Carlo Cannell, General Partner
-13-
OBJECTSOFT ANNOUNCES $2 MILLION IN CONVERTIBLE PREFERRED STOCK
FINANCING FROM INSTITUTIONAL INVESTORS AND PROPOSED PUBLIC
OFFERING OF UP TO $20 MILLION IN COMMON STOCK
Hackensack, New Jersey, March 19, 1999 - ObjectSoft Corporation (NASDAQ:OSFT)
announced today that it has closed a $2 million financing with several
institutional investors arranged by Settondown Capital International, Ltd.,
pursuant to which $2 million of Series E Convertible Preferred Stock of the
Company was issued and purchased by such investors. The financing was arranged
in part to meet early demand for the Company's FastTake(TM) product. The Series
E Preferred Stock is convertible into the Company's common stock at the original
closing date's market price for the common stock, subject to possible reduction
under a formula keyed to market prices during a lookback period of up to 30 days
prior to conversion. The resale of the common stock is restricted and subject to
registration with the Securities and Exchange Commission. Because of this $2
million financing, the Company will not draw down any additional amounts, or
issue any additional shares, under the Company's previously announced Series D
Convertible Preferred Stock financing which was first consummated in December
1998.
"This financing strengthens ObjectSoft financially, and is expected to
provide us with the necessary resources to continue to execute our business
plan," said David E.Y. Sarna, Chairman and Co-CEO of ObjectSoft.
The Company also announced that it has entered into a letter of intent
with a New York Stock Exchange member firm for a proposed underwritten secondary
public offering of up to $20 million of the Company's common stock. The public
offering is subject to various conditions, including execution of definitive
agreements, regulatory approvals and market conditions. The offering is likely
to take several months to complete. No further terms were disclosed.
This press release does not constitute an offer to sell or the
solicitation of an offer to buy the Company's securities. The proposed public
offering will be made only by means of a prospectus.
About ObjectSoft
Founded in 1990, ObjectSoft Corporation delivers value-added information and
service solutions through interactive kiosks with custom enclosures under the
brand names FastTake(TM) and SmartSign(TM). Installation and Field Service are
provided by IBM Corporation (NYSE: IBM). FastTake(TM) Video kiosks allows
consumers to preview 500 movie trailers, search up to 7,500 titles and the
ability to receive drop shipment to their home or workplace through e-commerce
and online transaction capabilities. Software provides retailers with monthly
updates to the database, advertising opportunities, point-of-purchase
promotions, demographic targeting and studio/retailer cross promotion.
ObjectSoft is a publicly-held company listed on NASDAQ. For more information on
ObjectSoft, visit their website at http://www.objectsoft.net.
This press release contains certain forward-looking statements concerning
ObjectSoft which are subject to a number of known and unknown risks that could
cause actual results, performance and achievements to differ materially from
those described or implied in the forward-looking
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statements. Among such risks are those discussed in the Company's Registration
Statements on Form SB-2 and Form S-3 and its Quarterly Reports on Form 10-QSB
and include, but are not limited to, limited operating history, recent
establishment of new business divisions, dependence on new and untested product,
risks related to technological factors and potential manufacturing difficulties.
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