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): December 31, 1998
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 December 30, 1998, the Company entered into an Amended and Restated
6% Series D Convertible Preferred Stock Subscription Agreement, formerly known
as the Private Equity Line of Credit Agreement (the "Agreement"), with several
investors (the "Investors") which provides, subject to the fulfillment of
various conditions, for the Investors to purchase up to $ 2,000,000 of 6% Series
D Convertible Preferred Stock (the "Preferred Shares") in three separate
tranches. On December 31, 1998, the Investors purchased the first tranche of
10,000 Preferred Shares (the "Initial Preferred Shares") and a Warrant to
purchase an aggregate of 50,000 shares of the Company's Common Stock (the
"Common Stock") for an aggregate puchase price of $1,000,000. The Company agreed
to promptly file a registration statement under the Securities Act of 1933, as
amended, registering for resale shares of the Company's Common Stock issuable in
connection with the Agreement.
Pursuant to the Agreement, and subject to the fulfilment of certain
conditions, the Investors will purchase 10,000 additional Preferred Shares at an
aggregate principal amount of $1,000,000 (the "Additional Preferred Shares").
The Additional Preferred Shares will be issued in two tranches (of 5,000
Preferred Shares each), with the first tranche of Additional Preferred Shares
occurring on the ninetieth day following the effectiveness of the registration
of the resale of the Common Stock underlying the Initial Preferred Shares. The
Investors will also receive Warrants to purchase an aggregate of 25,000 shares
of Common Stock for each of the two tranches of the Additional Preferred Shares.
The Company has the option of terminating each tranche of the Additional
Preferred Shares portion of the funding prior to the scheduled closing.
At the closing of the Initial Preferred Shares, the Company issued to
the placement agent (the "Placement Agent") 500 Preferred Shares, a Warrant to
purchase 40,000 shares of Common Stock and 2% of the investment amount in cash,
as placement agent fees. At the closing of each of the tranches of the
Additional Preferred Shares, the Company will pay the Placement Agent (i) 2% of
the investment amount in cash, (ii) 5% of the number of Preferred Shares issued
to the Investors, and (iii) a Warrant to purchase 20,000 shares of Common Stock.
Each Preferred Share may be converted into shares of Common Stock,
beginning sixty days following the closing of the purchase of such Preferred
Share, at a conversion rate determined by dividing $100, the purchase price per
Preferred Share, by the Conversion Price, which is the lesser of (a) 0.80 times
the average Closing Bid Price (as defined in the Certificate of Designation of
the Preferred Shares) of the Common Stock for the five trading days ending on
the day prior to conversion, or (b) $2.03. 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.
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The foregoing is a brief description of the terms of the financing
arrangement. It is not complete and it is qualified by reference to the
Agreement dated December 30, 1998, the Certificate of Designation of the Series
D Convertible Preferred Stock, as amended, the Form of Warrant, the Registration
Rights Agreement and a Press Release issued on December 31, 1998, 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* - Amended and Restated 6% Series D Convertible Preferred Stock
Subscription Agreement, formerly known as Private
Equity Line of Credit Agreement, dated as of
December 30, 1998
4.2* - Certificate of Designation of Series D Preferred Stock
4.3* - Amended Certificate of Designation of Series D Preferred Stock
4.4* - Form of Investors' Warrant
4.5* - Registration Rights Agreement dated as of December 30, 1998
99.1* - Press Release issued on December 31, 1998
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* Filed herewith.
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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: January 15, 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* Amended and Restated 6% Series D Convertible Preferred Stock
Subscription Agreement, formerly known as Private Equity Line of
Credit Agreement, dated as of December 30, 1998
4.2* Certificate of Designation of Series D Preferred Stock
4.3* Amended Certificate of Designation of Series D Preferred Stock
4.4* Form of Investors' Warrant
4.5* Registration Rights Agreement dated as of December 30, 1998
99.1* Press Release issued on December 31, 1998
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* Filed herewith.
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EXHIBIT 4.1
AMENDED AND RESTATED
6% SERIES D CONVERTIBLE PREFERRED STOCK SUBSCRIPTION AGREEMENT
FORMERLY KNOWN AS
PRIVATE EQUITY LINE OF CREDIT AGREEMENT
6% SERIES D CONVERTIBLE PREFERRED STOCK SUBSCRIPTION
AGREEMENT, dated as of December 30, 1998 (the "Agreement"), among the entities
listed on Schedule A attached 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 Small Cap 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,
from time to time as provided herein, and the Investors shall purchase (i) up to
Two Million ($2,000,000) Dollars aggregate value of Preferred Stock (as defined
below) in three tranches, and (ii) Warrants to purchase an aggregate of up to
100,000 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.
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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.
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 D Preferred Stock, as annexed hereto as Exhibit A.
Section 1.5 "Closing" shall mean one of the closings of a purchase and
sale of the Preferred Stock and Warrants pursuant to Article II below.
Section 1.6 "Closing Date" shall mean, with respect to the purchase of
the first tranche of Preferred Stock, on the Subscription Date. The Closing Date
for the second tranche of Preferred Stock shall be on a Trading Day ninety (90)
days after the first tranche's Effective Date subject to the satisfaction of
each of the conditions as set forth in Section 2.1. The Closing Date for the
third tranche shall be ninety (90) days from the later of the second tranche's
Effective Date or the ninetieth (90th) day following the Closing Date of the
second tranche. For each Closing Date, all conditions contained in this
Agreement must have been fulfilled at or prior to each Closing Date. In the
event such date shall fall on a holiday or a weekend, then the next business day
thereafter shall be the Closing Date.
Section 1.7 "Commitment Amount" shall mean up to the $2,000,000 which
the Investor has 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 "Compliance Certificate" shall mean a written notice to
each of the Investors certifying that the Company has complied in all material
respects with all obligations and conditions contained in this Agreement, in the
form annexed hereto as Exhibit D.
Section 1.10 "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 1.11 "Effective Date" shall mean the date on which the SEC
first declares effective Registration Statement(s) registering the resale of the
Underlying Shares and Warrant Shares (as of the date the Registration Statement
is filed).
Section 1.12 "Escrow Agent" shall mean the law firm of Goldstein,
Goldstein & Reis, LLP, pursuant to the terms of the Escrow Agreement attached as
Exhibit E.
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Section 1.13 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
Section 1.14 "Legend" shall have the meaning set forth in Section 8.1.
Section 1.15 "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 1.16 "NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.17 "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 1.18 "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 1.19 "Preferred Stock" shall mean the Company's Series D
Preferred Stock with the rights, privileges and preferences, as set forth in the
Certificate of Designation attached hereto as Exhibit A.
Section 1.20 "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 1.21 "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 1.22 "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
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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 1.23 "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 1.24 "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 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 1.25 "Regulation D" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.26 "SEC" shall mean the Securities and Exchange Commission.
Section 1.27 "Section 4(2)" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.28 "Securities" shall mean the Preferred Stock, the
Underlying Shares and the Warrant Shares.
Section 1.29 "Securities Act" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.30 "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 Post- Effective Amendment to a Registration
Statement on Form SB-2 dated August 11, 1998 and amendment to Form S-3 declared
effective September 29, 1998, 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 1.31 "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 first tranche
purchase shall have been fulfilled.
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Section 1.32 "Trading Day" shall mean any day during which the New York
Stock Exchange shall be open for business.
Section 1.33 "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 1.34 "Warrants" shall mean the Warrant attached hereto as the
Warrant.
Section 1.35 "Warrant Shares" shall mean all shares of Common Stock or
other securities issued or issuable pursuant to the exercise of the Warrants.
ARTICLE II
Purchase and Sale of Preferred Stock and Warrants
Section 2.1 Preferred Stock. 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 D Preferred Stock in three
separate tranches as set forth in (a), (b) and (c) 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.
(a) First Tranche. The Investors shall purchase (pro rata) an
aggregate principal amount of One Million ($1,000,000) Dollars (the "First
Tranche Investment Amount") 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 One Million ($1,000,000) Dollars of original Preferred
Stock, as more fully set forth in the Escrow Agreement attached hereto as
Exhibit E;
(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 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
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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 for the first tranche of the
Preferred Stock;
(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 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 for the first
tranche of the Preferred Stock shall not violate the shareholder approval
requirements of the Principal Market. Except as set forth on Schedule A attached
hereto, the Company shall not have been contacted by Nasdaq 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 for the first tranche; and
(ix) payment of fees as applicable as set forth in Section
12.7 below.
(b) Second Tranche. At the Company's sole option, as the
Company has the option to terminate the second tranche for any reason, the
Investors shall purchase (pro rata) an aggregate principal amount of Five
Hundred Thousand ($500,000) Dollars (the "Second Tranche Investment Amount")
principal amount of Preferred Stock, on the ninetieth (90th) day following the
first tranche's Effective Date and at the Company's request in writing ten (10)
days prior to the second tranche Closing Date, upon the satisfaction of the
following conditions:
(i) delivery into escrow by the Company of an aggregate
principal amount of Five Hundred Thousand ($500,000) Dollars of original
Preferred Stock, as more fully set forth in the Escrow Agreement attached hereto
as Exhibit E;
(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 certification from the
Company that the Certificate of Designation previously supplied to the Investors
on the Closing Date for the first tranche has not been altered and remains in
full force and effect;
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(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. The sale and issuance of the Preferred Stock shall be
legally permitted by all laws and regulations to which the Company is
subject;
(v) the Investors shall have received written certification
that the representations and warranties of the Company are true and
correct in all material respects as of the Closing Date for the second
tranche of the Preferred Stock as though made at each such time (except
for representations and warranties specifically made as of a particular
date) with respect to all periods, and as to all events and
circumstances occurring or existing to and including the Closing Date
for the second tranche of the Preferred Stock;
(vi) the Company shall have performed, satisfied and complied
in all material respects with all covenants, agreements and conditions
required by this Agreement, the Certificate of Designation, the
Registration Rights Agreement and the Warrants, to be performed,
satisfied or complied with by the Company at or prior to the Closing
Date for the second tranche of the Preferred Stock;
(vii) 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 effect of prohibiting or
adversely affecting any of the transactions contemplated by this
Agreement;
(viii) 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;
(ix) 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 for the first tranche of the Preferred Stock shall not
violate the shareholder approval requirements of the Principal Market.
Except as set forth on Schedule A 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 for the second tranche;
(x) payment of fees as set forth in Section 12.7 below; and
(xi) the Investors shall have received and been reasonably
satisfied with such other certificates and documents as shall have been
reasonably requested by the Investors in order for the Investor to
confirm the Company's satisfaction of the conditions set forth in this
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Section, including, without limitation, a certificate in substantially
the form and substance of Exhibit C hereto, executed in either case by
an executive officer of the Company and to the effect that all the
conditions to such Closing shall have been satisfied as at the date of
each such certificate.
(c) Third Tranche. At the Company's sole option, as the
Company has the option to terminate the third tranche for any reason (in the
event the Company has terminated the second tranche for any reason, the third
tranche is automatically terminated), the Investors shall purchase (pro rata) an
aggregate principal amount of Five Hundred Thousand ($500,000) Dollars (the
"Third Tranche Investment Amount") principal amount of Preferred Stock, on the
ninetieth (90th) day following the later of (a) the second tranche's Effective
Date or (b) the Closing Date for the second tranche, and upon the Company's
request in writing ten (10) days prior to the date of the third tranche's
Closing Date, upon the satisfaction of the following conditions:
(i) delivery into escrow by the Company of an aggregate
principal amount of Five Hundred Thousand ($500,000) Dollars of
original Preferred Stock, as more fully set forth in the Escrow
Agreement attached hereto as Exhibit E;
(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 certification from the
Company that the Certificate of Designation previously supplied to the
Investors on the Closing Date for the first and second tranches has not
been altered and remain in full force and effect;
(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. The sale and issuance of the Preferred Stock shall be
legally permitted by all laws and regulations to which the Company is
subject;
(v) the Investors shall have received written certification
that the representations and warranties of the Company are true and
correct in all material respects as of the Closing Date for the third
tranche of the Preferred Stock as though made at each such time (except
for representations and warranties specifically made as of a particular
date) with respect to all periods, and as to all events and
circumstances occurring or existing to and including the Closing Date
for the third tranche of the Preferred Stock;
(vi) the Company shall have performed, satisfied and complied
in all material respects with all covenants, agreements and conditions
required by this Agreement, the Certificate of Designation, the
Registration Rights Agreement and the Warrants, to be performed,
satisfied or complied with by the Company at or prior to the Closing
Date for the third tranche of the Preferred Stock;
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(vii) 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 effect of prohibiting or
adversely affecting any of the transactions contemplated by this
Agreement;
(viii) 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;
(ix) 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 Closings for the first and second tranches of the Preferred
Stock shall not violate the shareholder approval requirements of the
Principal Market. Except as set forth on Schedule A 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 for the third tranche;
(x) payment of fees as set forth in Section 12.7 below; and
(xi) the Investors shall have received and been reasonably
satisfied with such other certificates and documents as shall have been
reasonably requested by the Investors in order for the Investor to
confirm the Company's satisfaction of the conditions set forth in this
Section, including, without limitation, a certificate in substantially
the form and substance of Exhibit C hereto, executed in either case by
an executive officer of the Company and to the effect that all the
conditions to such Closing shall have been satisfied as at the date of
each such certificate.
In no event shall the Investors be obligated to purchase any shares of
Preferred Stock if a Registration Statement including the Underlying Shares is
not declared effective prior to eighteen (18) months after the Subscription
Date. The Company has the sole option of terminating its obligations to issue
the Preferred Stock in these Sections with respect to the second and/or third
tranches, by giving written notice to the Placement Agent and each of the
Investors at any time prior to eighty (80) days after the Effective Date with
respect to the previous tranche. The Preferred Stock shall be convertible
pursuant to the terms and conditions of the Certificate of Designation.
Section 2.2 The Warrants. On the Closing Dates of the first, second,
and third tranches, respectively, the Company will issue to the Investors and
the Placement Agent a Warrant, exercisable beginning on the Subscription Date or
Closing Date and then exercisable any time over the five year period there
following, to purchase an aggregate of 50,000 Warrant Shares pro rata for the
Investors for the first tranche and 25,000 Warrant Shares pro rata for the
Investors
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for each of the second and third tranches and 40,000 Warrant Shares for the
Placement Agent for the first tranche and 20,000 Warrant Shares for the
Placement Agent for each of the second and third tranches 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
Representations and Warranties of the Investors
Each of the Investors represent and warrant to the Company that:
Section 3.1 Intent. Each of the Investors are entering into this
Agreement for its own account and have 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, the
Investors do not agree to hold the Common Stock for any minimum or other
specific term and reserves the right to dispose of the Common Stock at any time
in accordance with federal and state securities laws applicable to such
disposition.
Section 3.2 Sophisticated Investor. Each of the Investors are
sophisticated investors (as described in Rule 506(b)(2)(ii) of Regulation D) and
accredited investors (as defined in Rule 501 of Regulation D), and the Investors
have such experience in business and financial matters that they are capable of
evaluating the merits and risks of an investment in the Securities. Each of the
Investors acknowledge that an investment in the Common Stock is speculative and
involves a high degree of risk. Each of the Investors has the ability to fund
the purchase of the Preferred Stock and Warrants.
Section 3.3 Authority. This Agreement has been duly authorized and
validly executed and delivered by each of the Investors and is a valid and
binding agreement of the Investors enforceable against each of them 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. None of the Investors is 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. Each of the Investors are 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 Investors, or, to
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the Investors knowledge, (a) violate any provision of any indenture, instrument
or agreement to which any of the Investors are a party or are subject, or by
which any of the Investors or any of their 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 Investors to
any third party; or (d) require the approval of any third-party (which has not
been obtained) pursuant to any material contract, agreement, instrument,
relationship or legal obligation to which any of the Investors is subject or to
which any of their assets, operations or management may be subject.
Section 3.7 Disclosure; Access to Information. Each of the Investors
have received all documents, records, books and other information pertaining to
Investors investment in the Company that have been requested by Investors,
including the opportunity to ask questions and receive answers. The Company is
subject to the periodic reporting requirements of the Exchange Act, and each of
the Investors has reviewed or received copies of any such reports that have been
requested by it. Each of the Investors represents that it has reviewed the
Company's, (i) Form 10-K for the year ended December 31, 1996, (ii) Form 10-K
for the year ended December 31, 1997, including the amendment thereto, filed on
or about April 30, 1998, (iii) Form 10-Q's filed for the previous twelve months,
(iv) prospectus' dated October 22, 1997, (iv) Post-Effective Amendment to a
Registration Statement on Form SB-2 dated August 11, 1998, and (v) an amendment
to Form S-3 declared effective on September 29, 1998.
Section 3.8 Manner of Sale. At no time were any of the Investors
presented with or solicited by or through any leaflet, public promotional
meeting, television advertisement or any other form of general solicitation or
advertising.
Section 3.9 Registration or Exemption Requirements. Each of the
Investors further acknowledge and understand 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. Each of the Investors 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.
Section 3.10 No Legal, Tax or Investment Advice. Each of the Investors
understands that nothing in this Agreement or any other materials presented to
the Investors in connection with the purchase and sale of the Securities
constitutes legal, tax or investment advice. The Investors have relied on, and
has consulted with, such legal, tax and investment advisors as it, in their sole
discretion, have deemed necessary or appropriate in connection with its purchase
of the Securities.
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Section 3.11 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 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
6,820,769 shares are issued and outstanding, and 5,000,000 shares of Preferred
Stock, par value $0.0001, none of which 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 Small Cap 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
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. Neither the issuance of
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 the 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) has conducted or will conduct
any general solicitation (as that term is used in Rule 502(c) of
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Regulation D) or general advertising with respect to any of the Preferred Stock,
the Underlying Shares, 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 Common Stock issued to the Placement
Agent, the Preferred Stock, the Underlying Shares and 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 and the Warrants, 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, instrument or any "lock-up" or similar provision of any
underwriting or similar agreement to which the Company is a party (with the
caveat contained in the Schedule attached hereto), 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 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, 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 Small Cap Market, including the Nasdaq Small Cap notification form
listing the additional shares of Common Stock issuable hereunder, which the
Company shall file with the Nasdaq Stock Market promptly after the Subscription
Dat or the Closing Date for each tranche); 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 December 31, 1997, 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 December 31, 1997, 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 December 31,
1997, 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 would 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 will 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 Effective Date of the last
tranche funded or closed, or (b) affect the timeliness of the Registration
Statement being declared effective.
Section 4.16 Conversion Limitations. The Company represents that,
except as permitted by the Certificate of Designation, the total number of
shares of Common Stock issuable upon the Preferred Stock issued at the first
tranche 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 First Tranche Closing. In the event the
number of shares of Common
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Stock of the Company 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 First Tranche 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 in excess of 20% of the number of shares of Common Stock outstanding
as of the First Tranche 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 issuable under the Certificate of Designation exceeds 19.99% of
the number of shares of Common Stock outstanding as of the First Tranche Closing
Date, the Company will seek a waiver from the Nasdaq Stock Market (or other
applicable market or exchange) to permit such issuances.
The Purchasers shall have the option to convert or exercise the
remainder of their Securities positions at the closing bid price of the previous
day any remaining amount in excess of twenty (20%) percent at any time. In the
event at any time the total number of shares of Common Stock issued from prior
tranches, added to the Underlying Shares which can be fully converted pursuant
to the Certificate of Designation and/or a full exercise of any Warrants, added
to the potential conversion of the new tranche (based upon the last closing bid
price) and the potential exercise of Warrants held but not exercised, equals
seventeen (17%) percent or above, the Investors shall have no obligation to fund
tranches second and/or third unless shareholders approval or a waiver from the
Nasdaq Stock Market is received.
ARTICLE V
Covenants of the Investors
Section 5.1 Compliance with Law. Each of the Investor's trading
activities with respect to shares of the Company's 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
Company's 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.
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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 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 maintain the listing of the Common Stock on a Principal
Market, and as soon as practicable (but in any event prior to the commencement
of the Commitment Period) to list the Underlying Shares. The Company further
agrees, if the Company applies to have the Common Stock traded on any other
Principal Market, 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 as promptly as possible. The Company will use its best efforts
to comply with 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 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 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 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.
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Section 6.6 Corporate Existence. The Company will take all steps
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 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. The
Company shall not request the Investors to proceed with closing either the
second or third tranches of Preferred Stock during the continuation of any of
the foregoing events.
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.
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Section 6.10 Legal Opinion. The Company's independent counsel shall
deliver to the Investors upon execution of this Agreement, and upon the Closings
for the second and third tranches in the form of Exhibit F annexed hereto.
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), 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, 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 information for review. The Company may, as a condition to disclosing
any non-public information hereunder, require each of the Investors 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
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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 U.S. 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. THE HOLDER OF THIS
CERTIFICATE IS THE BENEFICIARY OF CERTAIN OBLIGATIONS OF THE COMPANY
SET FORTH IN A 6% SERIES D CONVERTIBLE PREFERRED STOCK SUBSCRIPTION
AGREEMENT DATED AS OF DECEMBER 30, 1998. 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 G 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
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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, than
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.
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.
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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 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 the Investors 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 last tranche purchased; 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
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<PAGE>
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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<PAGE>
If to ObjectSoft Corporation:
David Sarna, President
Continental Plaza III
433 Hackensack Avenue
Hackensack, NJ 07601
Telephone: (800) 816-8171
Facsimile: (201) 343-0056
With a copy to: Melvin Weinberg, Esq.
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, NY 10036
Telephone: (212) 704-6000
Facsimile: (212) 704-6288
If to the Investors at the addresses set forth on Schedule A attached
hereto.
with a copy to:
(shall not constitute notice) Scott H. Goldstein, Esq.
Goldstein, Goldstein & Reis, LLP
65 Broadway, 10th Floor
New York, NY 10006
Telephone: (212) 809-4220
Facsimile: (212) 809-4228
Either 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, 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
costs of defense and investigation and all 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 of any term of this Agreement. This
indemnity agreement will be in addition to any liability which the Company may
otherwise have.
Each Investor agrees that it will indemnify and hold harmless the
Company, and each officer, 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
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<PAGE>
respect thereof) arise out of or are based upon the breach of any term of this
Agreement. This indemnity agreement will be in addition to any liability which
the Investors or any subsequent assignee may otherwise have.
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 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
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<PAGE>
Company 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 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 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.
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<PAGE>
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 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 the Put Shares 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 Investor
agrees to pay its own expenses incident to the performance of its obligations
hereunder, except that the Company shall pay on the Closing Date for the First
Tranche, (i) to the Placement Agent, (a) two (2%) percent of the First Tranche
Investment Amount in cash, (b) five (5%) percent of the number of shares of
Preferred Stock issued to the Investors on such Closing Date on the same terms
as Investors, and (c) as provided in Section 2.2, a Warrant to purchase 40,000
shares of Common Stock, and (ii) to Goldstein, Goldstein & Reis, LLP, Ten
Thousand ($10,000) Dollars in cash. The Company also agrees to pay, on the
Closings for both the second and third tranches of Preferred Stock, (i) to the
Placement Agent (a) two (2%) percent of the Second and Third Tranche Investment
Amount, in cash, (b) five (5%) percent of the number of shares of Preferred
Stock issued to the Investors, and (c) as provided in Section 2.2, a Warrant to
purchase twenty thousand (20,000) shares of Common Stock, on the Closings for
the second and third tranches, as applicable, and (ii) to Goldstein, Goldstein &
Reis, LLP, for legal and escrow expenses, Three Thousand ($3,000) Dollars, for
each of the second and third tranche Closings.
[Remainder of Page Intentionally Left Blank]
[Signature Page Follows]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this 6% Series D
Convertible Preferred Stock Subscription Agreement to be executed by the
undersigned, thereunto duly authorized, as of the date first set forth above.
OBJECTSOFT CORPORATION
By_________________________
SETTONDOWN CAPITAL INTER-
NATIONAL LTD.
By_________________________
AVALON CAPITAL, INC.
By_________________________
AUSTOST ANSTALT SCHAAN
By_________________________
BALMORE FUNDS S.A.
By_________________________
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EXHIBIT 4.2
Certificate of Designation of Series D
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 the 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 D
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 D Preferred Stock"
(the "Series D Preferred Stock") and the number of shares constituting the
Series D Preferred Stock shall be Thirty Thousand (30,000). The Series D
Preferred Stock shall be offered for sale at a purchase price of One-hundred
($100) dollars per share (the "Purchase Price").
2. Dividends. The holders of the outstanding shares of Series D
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 D 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. 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 D 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 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
<PAGE>
shall not be required to pay any dividends on the outstanding shares of the
Series D Preferred Stock prior to the Conversion Date and/or Redemption Date (as
defined below) for such shares.
For purposes of 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, holders of each share of
Series D 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 D 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 D
Preferred Stock the full amount of the Liquidation Amount to which they shall be
entitled the holders of shares of Series D 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 D 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 D 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 D Preferred Stock so as to be available for such payments, the
holders of the Series D 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.
(d) The holders of Series D 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
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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 D 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 D Preferred Stock. The holders of
Series D Preferred Stock shall have conversion rights as follows ("Conversion
Rights"):
(a) Right to Convert. Each holder of Series D Preferred Stock
shall be entitled convert, in whole or in part, in multiples of two hundred
fifty (250) shares, shares of Series D Preferred Stock, issued to such holder at
any time beginning sixty (60) days following the date ("Closing Date") of the
closing of the purchase of such Series D Preferred Stock ("Closing"), and at any
time thereafter.
(b) Conversion Rate. Each share of Series D 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 D 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)
0.80 times the average Closing Bid Price, as that term is defined below, of the
Common Stock for the five (5) trading days ending on the day prior to the
Conversion Date, as defined below, or (y) the Maximum Price, as that term is
defined below;
(iii) for purposes hereof, the term "Closing Bid
Price" shall mean the closing bid price for the Common Stock as quoted by
Bloomberg, LP and the term "Maximum Price" shall mean 0.80 times the average
Closing Bid Price for the five (5) trading days ending on the day prior to the
date of the first Closing of the issuance of shares of Series D Preferred Stock;
and
(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 Conversion Price shall be equal to 0.80 times the average Closing Bid
Price for the last five (5) trading days prior to the termination of trading,
0.80 times the average Closing Bid Price for the last five (5) trading days
prior to the Conversion Date or the Maximum Price, whichever is the least.
(c) Forced Conversion. In the event the holders of the Series
D Preferred Stock have not exercised the Conversion Rights set forth herein
within two years after the date of issuance
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of the Series D Preferred Stock, the Series D Preferred Stock shall
automatically be converted as if the holder 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 Maximum Price, then at the election of the Company given by written
notice, each share of Series D 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 D 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 D 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 D
Preferred Stock been converted immediately prior to such capital reorganization,
reclassification or other change and, in addition, for all purposes hereof, the
Maximum Price shall be appropriately adjusted in good faith by the Board of
Directors of the Company.
(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 D
Preferred Stock shall thereafter be entitled to receive upon conversion of the
Series D 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 D 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 D 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 D Preferred Stock) shall be
applicable after that event in as nearly equivalent a manner as may be
practicable.
(f) Certificate as to Adjustments; Notice by Company. Upon the
occurrence of each adjustment or readjustment of the Conversion Price of the
Series D 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 D 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
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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 D
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 D Preferred
Stock.
(g) Exercise of Conversion Rights. Holders of Series D
Preferred Stock may exercise their right to convert the Series D 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 D
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 D 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 D Preferred Stock (together with the certificates representing the Series
D 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 D 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 D 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 D Preferred Stock certificates representing the portion of
the Series D 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 D Preferred Stock (the "Conversion Shares") are not
delivered by the Company, within three (3) business days of receipt by the
Company of a valid Notice of Conversion and the Series D 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 D 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
-5-
<PAGE>
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 D
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 D Preferred Stock certificate(s), if mutilated, the
Company shall execute and deliver new certificates for Series D 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 D Preferred Stock if the
holder contemporaneously requests the Company to convert such Series D Preferred
Stock into Common Stock.
(i) Fractional Shares. No shares of Common Stock shall be
issued upon conversion of shares of Series D 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 D 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 D 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 D 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 D 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 D 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.
6. Redemption.
(a) The Company may redeem any or all of the outstanding
shares of the Series D Preferred Stock on any date (the "Redemption Date") set
by the Board of Directors of the Company for such redemption at any time at a
redemption price for each share of Series D Preferred Stock, to be paid in cash
on the Redemption Date, equal to the number of shares issuable upon conversion
of such shares of Series D Preferred Stock on the Redemption Date multiplied by
the average Closing Bid Price of the Common Stock for the last five (5) trading
days prior to the
-6-
<PAGE>
Redemption Date ("Redemption Price") plus an amount equal to all accrued but
unpaid dividends, whether or not declared, to but excluding the Redemption Date.
(b) Not less than 10 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 D Preferred
Stock, which notice shall contain all instructions and materials necessary to
enable such holders to tender Series D 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 any shares of Series D Preferred Stock not converted into shares of Common
Stock by the holder on or prior to the close of business on the business day
prior to the Redemption Date 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 the
Redemption Date, the Redemption Notice shall be null and void and the Company
will relinquish its Redemption rights provided by this section.
(c) On the Redemption Date, unless the Company defaults in the
payment for the shares of Series D Preferred Stock tendered pursuant to the
redemption, dividends will cease to accrue with respect to the shares of Series
D 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.
(d) The holders of Series D Preferred Stock may convert such
shares into shares of Common Stock on or prior to the close of business on the
business day prior to the Redemption Date.
7. No Reissuance of Series D Preferred Stock. Any share or shares of
Series D 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 D 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 D Preferred Stock if such
amendment would:
(i) change the relative seniority rights of the
holders of Series D 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 D Preferred Stock;
-7-
<PAGE>
(ii) reduce the amount payable to the holders of
Series D 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 D 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 D Preferred Stock;
(iii) cancel or modify the conversion rights of the
holders of Series D Preferred Stock provided for in Section 5 herein; or
(iv) cancel or modify the rights of the holders of
the Series D 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 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 D 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 D 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
-8-
<PAGE>
the Certificate of Incorporation of the Corporation 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.
Notwithstanding any other provision herein, the Company shall not
be obligated to issue any shares of Common Stock upon conversion of the Series D
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 D Preferred Stock (the "Exchange Cap") without breaching the
Company's obligations under the rules or regulations of The Nasdaq Stock Market,
Inc., except that such limitation shall not apply in the event that the
Corporation (a) obtains the approval of its stockholders as required by
applicable rules of The Nasdaq Stock Market, Inc. for issuances of Common Stock
in excess of such amount or (b) obtains a written opinion from outside counsel
to the Corporation that such approval is not required, which opinion shall be
reasonably satisfactory to the holders of a majority of the shares of Series D
Preferred Stock then outstanding; provided, however, that notwithstanding
anything herein to the contrary, the Corporation will issue (x) such number of
shares of Common Stock issuable upon conversion of the Series D Preferred Stock
at the then current Conversion Price up to the Exchange Cap and (y) such number
of shares of Common Stock issuable upon conversion of the remaining outstanding
Series D Preferred Stock at the Closing Bid Price on the trading day immediately
preceding the applicable Conversion Date. Until such approval or written opinion
is obtained, no holder of Series D Preferred Stock pursuant to the Amended and
Restated 6% Series D Convertible Preferred Subscription Agreement ("Purchase
Agreement") shall be issued, upon conversion of shares of Series D 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 D 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 D Preferred Stock issued to all holders pursuant to the
Purchase Agreement (the "Cap Allocation Amount"). In the event that any holder
of Series D Preferred Stock shall convert all of such holder's shares of Series
D 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 D Preferred Stock on a pro
rata basis in proportion to the number of shares of Series D 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 D Preferred Stock.
[THE REMAINDER OF THIS PAGE WAS INTENTIONALLY LEFT BLANK]
-9-
<PAGE>
Signed and attested to on December 29, 1998.
/s/ George Febish
-------------------------
George Febish, President
Attest:
/s/ David E.Y. Sarna
----------------------------
David E.Y. Sarna, Secretary
Signed on December 29, 1998
-10-
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order
to Convert the Series D Preferred Stock)
The undersigned hereby irrevocably elects to convert ___ shares of Series D
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 D 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 or deemed to beneficially own (within
the meaning of the Securities Exchange Act of 1934, as
amended) 4.9% 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:
-12-
------------------------------------
AMENDED CERTIFICATE OF DESIGNATION
OF SERIES D 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 D Preferred Stock of the
Company was filed with the Secretary of State of Delaware on December 29, 1998.
3. No shares of Series D Preferred Stock have been issued.
4. The Certificate of Designation of Series D Preferred Stock of the
Company is hereby amended by deleting Section 5(b)(iii) of the resolution
adopted by the Board of Directors of the Company and substituting the following
new Section 5(b)(iii):
"(iii) for purposes hereof, the term "Closing Bid
Price" shall mean the closing bid price for the Common Stock
as quoted by Bloomberg, LP and the term "Maximum Price" shall
mean $2.03; and"
5. The Certificate of Designation of Series D Preferred Stock of the
Company is hereby further amended by adding "(a)" to the beginning of the
existing paragraph of Section 11 of the resolution adopted by the Board of
Directors of the Company and by adding to the end of said Section 11 the
following new paragraph:
"(b) On each Conversion Date, the number of shares of
Common Stock underlying the Series D Preferred Stock to be
issued to each holder (not including the outstanding shares of
Series D Preferred Stock or the unissued shares of Common
Stock underlying the Series D 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)."
<PAGE>
6. The amendment to the Certificate of Designation of Series D
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.
Signed as of December 30, 1998
ObjectSoft Corporation
By: /s/ David E.Y. Sarna
--------------------------
David E.Y. Sarna, Chairman
-2-
EXHIBIT 4.4
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 THAT SUCH TRANSACTION DOES NOT
REQUIRE REGISTRATION OF THE WARRANT.
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
December 30, 1998 and on or prior to December 30, 2003 (the "Termination Date")
but not thereafter, to subscribe for and purchase from OBJECTSOFT CORPORATION, a
corporation incorporated in the State of Delaware (the "Company"), ____________
____________ (______) shares (the "Warrant Shares") of Common Stock, par value
US $.0001 per share of the Company (the "Common Stock"). The purchase 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 the 6% Series D Convertible Preferred
Stock Subscription Agreement dated on or about December 30, 1998 (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.
<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 times, 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 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 6%
Series D Convertible Preferred Stock Subscription Agreement dated as of December
30, 1998.
12. Adjustments of Exercise Price and Number of Warrant
Shares. The number and kind of securities purchasable upon the exercise of this
Warrant and the Exercise Price shall be subject to adjustment from time to time
upon the happening of any of the following.
In case 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 paragraph 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)
-4-
<PAGE>
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 the 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 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 Small Cap
Stock 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 the 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 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 U.S. 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
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<PAGE>
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".
(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.
[Remainder Of Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer thereunto duly authorized.
Dated: December 30, 1998
OBJECTSOFT CORPORATION
By_________________________
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<PAGE>
NOTICE OF EXERCISE
To: OBJECTSOFT CORPORATION
(1) The undersigned hereby elects to purchase ________ shares
of Common Stock, par value $ per shares (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
<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: ______________, 1998
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.
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EXHIBIT 4.5
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of the 30th day
of December, 1998, 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, and having its principle place of business at Continental
Plaza III, 433 Hackensack Avenue, Hackensack, NJ 07601 (the "Company").
WHEREAS, the Investors are purchasing from the Company and the
Company shall issue and sell to the Investors, pursuant to the terms and
conditions of a 6% Series D Convertible Preferred Stock Subscription Agreement
formerly known as Private Equity Line of Credit Agreement dated the date hereof
(the "Agreement"), from time to time as provided herein, and the Investors shall
purchase for an aggregate value of Preferred Stock and Warrants up to Two
Million ($2,000,000) Dollars; and
WHEREAS, the Company shall issue to the Placement Agent, in
return for services rendered (in addition to other fees set forth in the
Agreement): (a) upon the Closing of the first tranche, (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 40,000 shares of Common Stock on
the Subscription Date; (b) upon the closing of the second and third tranches
each that number of shares of Preferred Stock equal to five (5%) percent of the
number of shares of Preferred Stock and a Warrant to purchase 20,000 shares of
Common Stock upon each Closing Date; 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 (plus such additional shares of Common Stock issuable pursuant to
the terms of the Agreement, collectively hereinafter referred to as the "Stock"
or "Securities" of the Company), which shall not include the Preferred Stock.
All capitalized terms not defined herein shall have that meaning as set forth 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 "1933 Act") and disposed of pursuant thereto, (ii)
registration under the 1933 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 1933 Act, or (iii) it has ceased to be
outstanding. The term "Registrable Securities" means any and/or all of the
securities falling within
<PAGE>
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.
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 with
no limitations promulgated under the 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 1933 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"), forty-five (45) days after
the Subscription Date or the Closing Date of each tranche, a registration
statement (on Form S-3) or other form under the 1933 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, so as to
permit a resale of the Registrable Securities at least equal to the Registrable
Securities issuable upon conversion of the Preferred Stock and exercise of
Warrants issued as of the closing of the first tranche under the Act.
The Company shall use its reasonable best efforts to cause the
Registration Statement to become effective within ninety (90) days from the
Subscription Date or the Closing Date of each tranche. The number of shares
designated in the Registration Statement to be registered shall be At least
1,500,000 for the first tranche and 750,000 for each of the second and third
tranches. The Company agrees that it shall amend the Registration Statement, or
file a second and/or third Registration Statement, if necessary, to include any
number of shares of Registrable Securities as necessary pursuant to the terms of
the Agreement. In the event the SEC 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
agreement.
(b) The Company will maintain the effectiveness of any
Registration Statement or post-effective amendment filed under this Section 3
hereof current under the 1933 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.
(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) 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
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<PAGE>
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.
(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
1933 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
forty five (45) days from the Subscription Date or the Closing Date of each
tranche and/or the Registration Statement is not declared effective by the
Commission within one hundred twenty (120) days from the Subscription Date or
the Closing Date of each tranche, or, if there are not enough shares at any one
time to cover a potential full conversion then after a ninety (90) day period,
or the Registration Statement ceases to be effective for a twenty (20) day
period, 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. Such payment of the
liquidated damages shall be made to the Holders in cash, immediately 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 Subscription Date or the Closing Date of each tranche 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 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 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 Effective
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
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<PAGE>
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 (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 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 Agreement to effect the
registration of any of the Registrable Securities under the Securities Act, the
Company shall (except as otherwise provided in this 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
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<PAGE>
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 Small Cap Stock 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;
(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 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 1933 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 Agreement,
include, but not be limited to, all costs of defense and investigation and all
attorneys' fees), to which the Distributing Holder may become subject, under the
1933 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, or (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 personasserting 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 1933 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 1933 Act or the rules and regulations promulgated thereunder. This
indemnity provision will be in addition to any liability which the Company may
otherwise have.
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<PAGE>
(b) Each Distributing Holder agrees that it will 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 1933 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, affiliate, employee or controlling person may become
subject under the 1933 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 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
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 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 substantally
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
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<PAGE>
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 1933 Act in any case in which (i) the
indemnified party makes a claim for indemnification 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 1933 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 Agreement, include, but not be limited
to, all costs of defense and investigation and all 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 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 1933 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 ObjectSoft Corporation:
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<PAGE>
ObjectSoft Corporation
Continental Plaza III
433 Hackensack Avenue
Hackensack, NJ 07601
Telephone: (800) 816-8171
Fax: (201) 343-0056
with a copy to:
Melvin Weinberg, Esq.
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, NY 10036-8735
Telephone: (212) 704-6000
Facsimile: (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: (242) 323-7918
with a copy to:
Scott H. Goldstein, Esq.
(shall not constitute notice)
Goldstein, Goldstein & Reis, LLP
65 Broadway, 10th Floor
New York, New York 10006
Telephone: (212) 809-4220
Fax: (212) 809-4228
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 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
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
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<PAGE>
rights granted under this 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
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 11. Termination of Registration Rights. The rights
granted pursuant to this 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 Agreement have
been registered;
(b) all of such Holder's Securities subject to this 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 Agreement
can be sold pursuant to Rule 144(k).
Section 12. Headings. The headings in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 13. Governing 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.
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<PAGE>
Section 14. Severability. If any provision of this Agreement
shall for any reason be held invalid or unenforceable, such invalidity or
unenforceablity shall not affect any other provision hereof and this Agreement
shall be construed as if such invalid or unenforceable provision had never been
contained herein. Terms not otherwise defined herein shall be defined in
accordance with the Agreement.
Section 15. Capitalized Terms. All capitalized terms not
otherwise defined herein shall have the meaning assigned to them in the
Agreement.
Section 16. Entire Agreement. This 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 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 Agreement shall affect, or
be used to interpret, change or restrict, the express terms and provisions of
this Agreement.
[Remainder of Page Intentionally Left Blank]
[Signature Page Follows]
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Registration Rights Agreement to be duly executed, on the day and year first
above written.
OBJECTSOFT CORPORATION
By___________________________
SETTONDOWN CAPITAL INTER-
NATIONAL LTD.
By____________________________
Anthony L. M. Inder Riden
AVALON CAPITAL, INC.
By_________________________
AUSTOST ANSTALT SCHAAN
By_________________________
BALMORE FUNDS S.A.
By__________________________
-11-
HACKENSACK, N.J., Dec. 31 /PRNewswire/ -- ObjectSoft Corporation (Nasdaq: OSFT
today announced that it has elected to draw down an additional $1 million
through issuance of Series D preferred stock in association with the previously
announced Agreement with Settondown Capital International, Inc. in May 1998,
which previously netted $1.5 million to the Company. All Series C preferred
stock issued in conjunction with this past draw down and reported on the
Company's Form 10-QSB filings with the Securities and Exchange Commission have
been converted and no Series C preferred shares are presently outstanding.
The Series D preferred stock being issued pursuant to this most recent draw
down cannot be converted for 60 days and the resale of the common shares
underlying the Series D preferred is restricted and subject to registration
with the Securities and Exchange Commission.
The Company further noted that the S-8 filing posted today was a routine
registration of employee options, which were approved at the last year's annual
shareholders meeting. As required by law, it attached certain documents as
exhibits, including certain documents pertaining to the May 1998 agreement with
Settondown.
Yesterday, the Company also announced that it had received a commitment from
RCC Finance Group Ltd., a provider of secured leasing products, for a $1 million
master lease facility.
"We believe that ObjectSoft now has the necessary financing committed to be
able to meet its presently foreseeable operating expenses for 1999. Properly
capitalized, we can now aggressively exploit all sales and marketing
opportunities -- both in the United States and abroad. By introducing e-commerce
into the mainstream via this unique niche, ObjectSoft is looking forward to a
very exciting year ahead," said David E. Y. Sarna, ObjectSoft's chairman and
Co-CEO.
"ObjectSoft FastTake video kiosk is an exciting product and we are delighted
to continue to work with ObjectSoft and to continue to fund their growth
strategy," said Wayne Coleson, Settondown's United States
representative.
About ObjectSoft
Founded in 1990, ObjectSoft Corporation provides information and services
through public access kiosks. The Company's products, FastTake and SmartSign
kiosks enable organizations to interact with the general public in high density
pedestrian traffic areas. ObjectSoft is a publicly held company listed on
Nasdaq. For more information on ObjectSoft, visit their website at
http://www.objectsoftcorp.com.
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 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.
SOURCE ObjectSoft Corporation
