WARRANT AGREEMENT
Dated as of
[ ], 1998
among
CYBERSHOP INTERNATIONAL, INC.
X.X. XXXXXXXXX, TOWBIN
and
XXXXXXXXXX & CO. INC.
---------------------------------------------
Warrants for
Common Stock of
CyberShop International, Inc.
---------------------------------------------
TABLE OF CONTENTS
Page
ARTICLE 1
Definitions
SECTION 1.01. Definitions............................................... 1
SECTION 1.02. Other Definitions......................................... 3
SECTION 1.03. Rules of Construction..................................... 3
ARTICLE 2
Warrant Certificates
SECTION 2.01. Form and Dating........................................... 4
SECTION 2.02. Legend.................................................... 4
SECTION 2.03. Execution................................................. 5
SECTION 2.04. Registration.............................................. 5
SECTION 2.05. Transfer and Exchange..................................... 5
SECTION 2.06. Replacement Certificates.................................. 6
ARTICLE 3
Exercise Terms
SECTION 3.01. Exercise Price............................................ 7
SECTION 3.02. Exercise Periods.......................................... 7
SECTION 3.03. Expiration................................................ 7
SECTION 3.04. Manner of Exercise........................................ 7
SECTION 3.05. Issuance of Warrant Shares................................ 8
SECTION 3.06. Fractional Warrant Shares................................. 9
SECTION 3.07. Reservation of Warrant Shares............................. 9
SECTION 3.08. Compliance with Law....................................... 10
ARTICLE 4
Antidilution Provisions
SECTION 4.01. Changes in Common Stock................................... 10
SECTION 4.02. Cash Dividends and Other
Distributions........................................... 11
SECTION 4.03. Rights Issue To All Holders of
Common Stock............................................ 12
SECTION 4.04. Other Issuances of Common Stock or
Rights.................................................. 13
i
SECTION 4.05. Combination; Liquidation.................................. 14
SECTION 4.06. Other Events.............................................. 15
SECTION 4.07. Superseding Adjustment.................................... 15
SECTION 4.08. Minimum Adjustment........................................ 16
SECTION 4.09. Notice of Adjustment...................................... 16
SECTION 4.10. Notice of Certain Transactions............................ 17
SECTION 4.11. Adjustment to Warrant
Certificate............................................. 17
ARTICLE 5
Registration Rights
SECTION 5.01. Effectiveness of Registration
Statements............................................ 18
SECTION 5.02. Blue Sky.................................................. 18
SECTION 5.03. Accuracy of Disclosure.................................... 19
SECTION 5.04. Indemnification........................................... 19
SECTION 5.05. Additional Acts........................................... 23
SECTION 5.06. Expenses.................................................. 23
ARTICLE 6
Miscellaneous
SECTION 6.01. SEC Reports and Other Information......................... 24
SECTION 6.02. Persons Benefitting....................................... 24
SECTION 6.03. Rights of Holders......................................... 24
SECTION 6.04. Amendment................................................. 24
SECTION 6.05. Notices................................................... 25
SECTION 6.06. Governing Law............................................. 26
SECTION 6.07. Successors................................................ 26
SECTION 6.08. Multiple Originals........................................ 26
SECTION 6.09. Table of Contents......................................... 26
SECTION 6.10. Severability.............................................. 26
EXHIBIT A Form of Face of Warrant Certificate
ii
WARRANT AGREEMENT dated as of [ ], 1998 (this "Agreement"),
among CYBERSHOP INTERNATIONAL, INC., a Delaware corporation
("CyberShop"), and X.X. XXXXXXXXX, TOWBIN and Xxxxxxxxxx & Xx.Xxx.
as Purchasers (the "Purchasers").
WHEREAS, CyberShop desires to issue to the Purchasers 230,000 warrants
(the "Warrants") described herein which will initially entitle the Purchasers to
purchase in the aggregate 230,000 shares of common stock, par value $.001 per
share, of CyberShop (the "Common Stock") in connection with an initial public
offering by CyberShop of 2,300,000 shares of the Company's Common Stock (not
including shares offered pursuant to the over-allotment option (the "Shares")).
Each Warrant will entitle the Purchasers to purchase one share of Common Stock,
subject to adjustment as provided herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth and for other good and valuable consideration, the
parties hereto agree as follows:
ARTICLE 1
Definitions
SECTION 1.01. Definitions.
"Affiliate" of any Person means any other Person, directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For the purposes of this definition, "control" when
used with respect to any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; provided, however, that
beneficial ownership of 10% or more of the voting securities of a Person shall
be decreed to be control. The terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Board" means the Board of Directors of CyberShop or any committee
thereof duly authorized to act on behalf of such Board of Directors.
"Business Day" means each day that is not a Saturday, a Sunday or a day
on which banking institutions are not required to be open in the State of New
York.
2
"Cashless Exercise Ratio" means a fraction, the numerator of which is
the excess of the Current Market Value per share of Common Stock on the Exercise
Date over the Exercise Price per share as of the Exercise Date and the
denominator of which is the Current Market Value per share of the Common Stock
on the Exercise Date.
"Combination" means an event in which CyberShop consolidates with,
merges with or into, or sells all or substantially all of its assets to another
Person.
"Current Market Value" per share of Common Stock or any other security
at any date means: (i) if the security is not registered under the Exchange Act,
(a) the value of the security, determined in good faith by the Board and
certified in a board resolution, based on the most recently completed
arm's-length transaction between CyberShop and a Person other than an Affiliate
of CyberShop, the closing of which occurred on such date or within the six-month
period preceding such date, or (b) if no such transaction shall have occurred on
such date or within such six-month period, the value of the security as
determined by an independent financial expert; or (ii) if the security is
registered under the Exchange Act, the average of the last reported sale price
of the Common Stock on the Nasdaq SmallCap Market or any other exchange or
market on which the Common Stock is traded (or the equivalent in an
over-the-counter market) for each Business Day during the period commencing 15
Business Days before such date and ending on the date one day prior to such
date, or if the security has been registered under the Exchange Act for less
than 15 consecutive Business Days before such date, the average of the last
reported sale prices (or such equivalent) for all of the Business Days before
such date for which daily closing bid prices are available (provided, however,
that if the closing bid price is not determinable for at least 10 Business Days
in such period, the "Current Market Value" of the security shall be determined
as if the security were not registered under the Exchange Act).
"Exchange Act" means the Securities Exchange Act of 1934.
"Exercise Date" means, for a given Warrant, the day on which such
Warrant is exercised pursuant to Section 3.04.
"Issue Date" means the date on which Warrants are initially issued.
3
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"SEC" means the Securities and Exchange Commission, or any successor
agency or body performing substantially similar functions.
"Securities Act" means the Securities Act of 1933.
"Warrant Certificates" mean the registered certificates issued by
CyberShop under this Agreement representing the Warrants.
"Warrant Shares" mean the shares of Common Stock (and any other
securities) for which the Warrants are exercisable.
SECTION 1.02. Other Definitions.
Defined in
Term Section
"Agreement"........................................... Recitals
"Cashless Exercise"................................... 3.04
"Certificate Register"................................ 2.04
"Common Stock"........................................ Recitals
"Company"............................................. Recitals
"Exercise Price"...................................... 3.01
"Expiration Date"..................................... 3.02(b)
"Holders"............................................. 2.04
"Registrar"........................................... 3.07
"Registration Statement".............................. 5.01
"Shares".............................................. Recitals
"Successor Company"................................... 4.05(a)
"Transfer Agent"...................................... 3.05
"Warrants"............................................ Recitals
SECTION 1.03. Rules of Construction. Unless the text otherwise
requires:
(i) a defined term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting
principles as in effect from time to time;
(iii) "or" is not exclusive;
4
(iv) "including" means including without limitation; and
(v) words in the singular include the plural and words in the
plural include the singular.
ARTICLE 2
Warrant Certificates
SECTION 2.01. Form and Dating. Each Warrant Certificate shall be
substantially in the form of Exhibit A, which is hereby incorporated in and
expressly made a part of this Agreement. The Warrant Certificates may have
notations, legends or endorsements required by law, stock exchange rule,
agreements to which CyberShop is subject, if any, or usage (provided that any
such notation, legend or endorsement is in a form acceptable to CyberShop) and
shall bear the legends required by Section 2.02. Each Warrant Certificate shall
be dated the date of its countersignature. The terms of the Warrant Certificate
set forth in Exhibit A are part of the terms of this Agreement.
SECTION 2.02. Legend. Each Warrant Certificate shall bear the following
legend:
THE COMMON STOCK, PAR VALUE $.001 PER SHARE, OF CYBERSHOP FOR WHICH
THIS WARRANT IS EXERCISABLE MAY NOT BE OFFERED OR SOLD IN THE UNITED
STATES ABSENT REGISTRATION UNDER THE SECURITIES ACT OF 1933 (THE
"SECURITIES ACT"), AND ANY APPLICABLE STATE SECURITIES LAWS, OR AN
APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS. ACCORDINGLY,
NO HOLDER SHALL BE ENTITLED TO EXERCISE SUCH HOLDER'S WARRANTS AT ANY
TIME UNLESS, AT THE TIME OF EXERCISE, (i) A REGISTRATION STATEMENT
UNDER THE SECURITIES ACT RELATING TO THE SHARES OF COMMON STOCK
ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAS BEEN FILED WITH, AND
DECLARED EFFECTIVE BY, THE SECURITIES AND EXCHANGE COMMISSION (THE
"SEC"), AND NO STOP ORDER SUSPENDING THE EFFECTIVENESS OF SUCH
REGISTRATION STATEMENT HAS BEEN ISSUED BY THE SEC, OR (ii) THE ISSUANCE
OF SUCH SHARES IS PERMITTED PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS AND NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
5
HEREIN MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED WITHIN THE "UNITED
STATES" OR TO "U.S. PERSONS" (AS DEFINED IN REGULATION S UNDER THE
SECURITIES ACT) IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED
THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT.
SECTION 2.03. Execution. Warrants entitling the Purchasers to purchase
in the aggregate up to 230,000 Warrant Shares shall be executed on behalf of
CyberShop by the President or Vice President of CyberShop and attested by the
signature of the Secretary or Assistant Secretary of CyberShop.
SECTION 2.04. Registration. The Warrants shall be numbered and shall be
registered by CyberShop as they are issued. CyberShop shall keep a register
("Certificate Register") of the Warrant Certificates and of their transfer and
exchange. The Certificate Register shall show the names and addresses of the
respective Holders (as defined below) and the date and number of Warrants
represented on the face of each Warrant Certificate. CyberShop shall be entitled
to treat the registered holder of any Warrant (the "Holder") as the owner in
fact thereof for all purposes and shall not be bound to recognize any equitable
or other claim to or interest in such Warrant on the part of any other Person,
and shall not be liable for any registration or transfer of any Warrant which is
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary. One hundred thirty-eight thousand (138,000) Warrants shall be
registered initially in the name of "X.X. Xxxxxxxxx, Towbin", and ninety-two
thousand (92,000) Warrants shall be registered in the name of "Xxxxxxxxxx & Co.
Inc.
SECTION 2.05. Transfer and Exchange. The Warrants may not be
transferred, assigned, sold or hypothecated by the Holder except in accordance
with this Section 2.05 or in an involuntary assignment by operation of law to
the Holder's personal representative.
(a) Each Holder of Warrants, by acceptance thereof, represents and
acknowledges that such Warrants have not been and will not be registered under
the Securities Act on the grounds that the issuance of such Warrants is exempt
from registration under Section 4(2) of the Securities Act as not involving any
public offering. Each Holder of Warrants represents and warrants that such
Holder (i) is acquiring this Warrant for investment for such Holder's own
account, with no intention of reselling or otherwise distributing the same,
subject, nevertheless, to any requirement of law that the disposition of such
Holder's
6
property shall at all times be within such Holder's control, (ii) is an
"accredited investor" as defined in Rule 501 of Regulation D under the
Securities Act, (iii) has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
investments made or to be made in connection with the acquisition and exercise
of the Warrants, and (iv) has been provided all such information and access to
information concerning such Holder's investment hereunder as such Holder has
requested from CyberShop. The Warrants may not be transferred except (1) to
officers and partners of the Purchasers, (2)(x) pursuant to an effective
registration statement under the Act or (y) in the case of transfers other than
those described in clause (2)(x), upon the conditions specified in Section 2.02
hereof, which conditions are intended, among other things, to ensure compliance
with the provisions of the Act in respect of the transfer of such Warrant, and
(3) upon compliance with applicable state securities laws.
(b) The Warrant Certificates shall be issued in registered form
only and shall be transferable only upon the surrender of such Warrant
Certificate for registration of transfer. When a Warrant Certificate is
presented to CyberShop with a request to register a transfer, CyberShop shall
register the transfer as requested if the requirements of Section 8-401(1) of
the Uniform Commercial Code as in effect in the State of New York are met. All
Warrant Certificates issued upon any registration of transfer or exchange of
Warrant Certificates shall be valid obligations of CyberShop, entitled to the
same benefits under this Agreement as the Warrant Certificates surrendered upon
such registration of transfer or exchange. No service charge will be made to a
Holder for any registration of transfer or exchange upon surrender of any
Warrant Certificate. However, CyberShop may require payment of a sum sufficient
to cover any tax, assessment or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Warrant Certificates
but not for any exchange or original issuance (not involving a transfer)
pursuant to Section 3.04 or 3.05.
SECTION 2.06. Replacement Certificates. If a mutilated Warrant
Certificate is surrendered to CyberShop or if the Holder of a Warrant
Certificate claims that the Warrant Certificate has been lost, destroyed or
wrongfully taken, CyberShop shall issue a replacement Warrant Certificate if the
requirements of Section 8-405 of the Uniform Commercial Code as in effect in the
State of New York are met. Such Holder shall furnish an indemnity bond
sufficient in the judgment of CyberShop to protect CyberShop
7
from any loss which it may suffer if a Warrant Certificate is replaced.
CyberShop may charge the Holder for its expenses in replacing a Warrant
Certificate. Every replacement Warrant Certificate is an additional obligation
of CyberShop. CyberShop may not issue new Warrant Certificates to replace
Warrant Certificates to the extent they represent Warrants which have been
exercised or Warrants which CyberShop has purchased or otherwise acquired.
ARTICLE 3
Exercise Terms
SECTION 3.01. Exercise Price. Each Warrant shall initially entitle the
Holder thereof, subject to adjustment pursuant to the terms of this Agreement,
to purchase one share of Common Stock for a per share exercise price (the
"Exercise Price") of $[ ].
SECTION 3.02. Exercise Periods. (a) Subject to the terms and conditions
set forth herein, the Warrants shall be exercisable at any time or from time to
time after [ ], 1999; provided, however, that holders of Warrants will be able
to exercise their Warrants only if (i) the Registration Statement relating to
the Warrant Shares is effective, or (ii) the exercise of such Warrants is exempt
from the registration requirements of the Securities Act, and the Warrant Shares
are qualified for sale or exempt from qualification under the applicable
securities laws of the states or other jurisdictions in which such holders
reside.
(b) No Warrant shall be exercisable after [ ], 2003 (the "Expiration
Date").
SECTION 3.03. Expiration. Each Warrant shall terminate and become void
as of the earlier of (i) the close of business on the Expiration Date or (ii)
the date such Warrant is exercised. CyberShop shall give notice not less than 90
and not more than 120 days prior to the Expiration Date to the Holders of all
then outstanding Warrants to the effect that the Warrants will terminate and
become void as of the close of business on the Expiration Date; provided,
however, that if CyberShop fails to give notice as provided in this Section
3.03, the Warrants will nevertheless expire and become void on the Expiration
Date.
SECTION 3.04. Manner of Exercise. Warrants may be exercised upon (i)
surrender to CyberShop, or its duly
8
authorized agent, of the related Warrant Certificate, together with the form of
election to purchase Common Stock on the reverse thereof duly filled in and
signed by the Holder thereof, and (ii) payment to CyberShop, or its duly
authorized agent, for the account of CyberShop, of the Exercise Price for each
Warrant Share issuable upon the exercise of such Warrants then exercised. Such
payment shall be made (i) in cash or by certified or official bank check payable
to the order of CyberShop or by wire transfer of funds to an account designated
by CyberShop for such purpose or (ii) without the payment of cash, by reducing
the number of shares of Common Stock obtainable upon the exercise of a Warrant
so as to yield a number of shares of Common Stock upon the exercise of such
Warrant equal to the product of (a) the number of shares of Common Stock
issuable as of the Exercise Date upon the exercise of such Warrant (if payment
of the Exercise Price were being made in cash) and (b) the Cashless Exercise
Ratio. An exercise of a Warrant in accordance with the immediately preceding
sentence is herein called a "Cashless Exercise". Upon surrender of a Warrant
Certificate representing more than one Warrant in connection with the holder's
option to elect a Cashless Exercise, the number of shares of Common Stock
deliverable upon a Cashless Exercise shall be equal to the number of shares of
Common Stock issuable upon the exercise of Warrants that the holder specifies
are to be exercised pursuant to a Cashless Exercise multiplied by the Cashless
Exercise Ratio. All provisions of this Agreement shall be applicable with
respect to a surrender of a Warrant Certificate pursuant to a Cashless Exercise
for less than the full number of Warrants represented thereby. Subject to
Section 3.02, the rights represented by the Warrants shall be exercisable at the
election of the Holders thereof either in full at any time or from time to time
in part and in the event that a Warrant Certificate is surrendered for exercise
of less than all the Warrants represented by such Warrant Certificate at any
time prior to the Expiration Date, a new Warrant Certificate representing the
remaining Warrants shall be by CyberShop.
SECTION 3.05. Issuance of Warrant Shares. Subject to Section 2.06, upon
the surrender of Warrant Certificates and payment of the per share Exercise
Price, as set forth in Section 3.04, CyberShop shall issue and cause a transfer
agent for the Common Stock ("Transfer Agent") to countersign and deliver to or
upon the written order of the Holder and in such name or names as the Holder may
designate a certificate or certificates for the number of full Warrant Shares so
purchased upon the exercise of such Warrants or other securities or property to
which it is entitled, registered or otherwise, to the Person or Persons entitled
9
to receive the same, together with cash as provided in Section 3.06 in respect
of any fractional Warrant Shares otherwise issuable upon such exercise. Such
certificate or certificates shall be deemed to have been issued and any Person
so designated to be named therein shall be deemed to have become a holder of
record of such Warrant Shares as of the date of the surrender of such Warrant
Certificates and payment of the per share Exercise Price, as aforesaid;
provided, however, that if, at such date, the transfer books for the Warrant
Shares shall be closed, the certificates for the Warrant Shares in respect of
which such Warrants are then exercised shall be issuable as of the date on which
such books shall next be opened and until such date CyberShop shall be under no
duty to deliver any certificates for such Warrant Shares; provided further,
however, that such transfer books, unless otherwise required by law, shall not
be closed at any one time for a period longer than 20 calendar days.
SECTION 3.06. Fractional Warrant Shares. CyberShop shall not be
required to issue fractional Warrant Shares on the exercise of Warrants. If more
than one Warrant shall be exercised in full at the same time by the same Holder,
the number of full Warrant Shares which shall be issuable upon such exercise
shall be computed on the basis of the aggregate number of Warrant Shares
purchasable pursuant thereto. If any fraction of a Warrant Share would, except
for the provisions of this Section 3.06, be issuable on the exercise of any
Warrant (or specified portion thereof), CyberShop shall pay at the time of
exercise an amount in cash equal to the Current Market Value per Warrant Share,
as determined on the day immediately preceding the date the Warrant is
exercised, multiplied by such fraction, computed to the nearest whole cent.
SECTION 3.07. Reservation of Warrant Shares. CyberShop shall at all
times keep reserved out of its authorized shares of Common Stock a number of
shares of Common Stock sufficient to provide for the exercise of all outstanding
Warrants. The registrar for the Common Stock (the "Registrar") shall at all
times until the Expiration Date reserve such number of authorized shares as
shall be required for such purpose. CyberShop will keep a copy of this Agreement
on file with the Transfer Agent. All Warrant Shares which may be issued upon
exercise of Warrants shall, upon issue, be fully paid, nonassessable, free of
preemptive rights and free from all taxes, liens, charges and security interests
with respect to the issue thereof. CyberShop will supply such Transfer Agent
with duly executed stock certificates for such purpose and will itself provide
or otherwise make available any cash which may be payable as
10
provided in Section 3.06. CyberShop will furnish to such Transfer Agent a copy
of all notices of adjustments (and certificates related thereto) transmitted to
each Holder.
Before taking any action which would cause an adjustment pursuant to
Article 4 to reduce the Exercise Price below the then par value (if any) of the
Common Stock, CyberShop shall take any and all corporate action which may, in
the opinion of its counsel, be necessary in order that CyberShop may validly and
legally issue fully paid and nonassessable shares of Common Stock at the
Exercise Price as so adjusted.
CyberShop covenants that all shares of Common Stock which may be issued
upon exercise of Warrants will, upon issue, be fully paid, nonassessable, free
of preemptive rights, free from all taxes and free from all liens, charges and
security interests, created by or through CyberShop, with respect to the issue
thereof.
SECTION 3.08. Compliance with Law. Notwith standing anything in this
Agreement to the contrary, in no event shall a Holder be entitled to exercise a
Warrant unless (i) a registration statement filed under the Securities Act in
respect of the issuance of the Warrant Shares is then effective or (ii) in the
opinion of counsel to CyberShop the exercise of such Warrants is exempt from the
registration requirements of the Securities Act and such securities are
qualified for sale or exempt from qualification under the applicable securities
laws of the States or other jurisdictions in which such holders reside.
ARTICLE 4
Antidilution Provisions
SECTION 4.01. Changes in Common Stock. In the event that at any time or
from time to time CyberShop shall (i) pay a dividend or make a distribution on
its Common Stock in shares of its Common Stock or other shares of its capital
stock, (ii) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, (iii) combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock or (iv) increase or
decrease the number of shares of Common Stock outstanding by reclassification of
its Common Stock, then the number of shares of Common Stock issuable upon
exercise of each Warrant immediately after the happening of such event shall be
adjusted to a number determined by multiplying the number of shares of Common
Stock that such holder would have owned
11
or have been entitled to receive upon exercise had such Warrants been exercised
immediately prior to the happening of the events described above (or, in the
case of a dividend or distribution of Common Stock or other shares of capital
stock, immediately prior to the record date therefor) by a fraction, the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately after the happening of the events described above and
the denominator of which shall be the total number of shares of Common Stock
outstanding immediately prior to the happening of the events described above;
and subject to Section 4.08, the Exercise Price for each Warrant shall be
adjusted to a number determined by dividing the Exercise Price immediately prior
to such event by such fraction. An adjustment made pursuant to this Section 4.01
shall become effective immediately after the effective date of such event,
retroactive to the record date therefor in the case of a dividend or
distribution in shares of Common Stock or other shares of CyberShop's capital
stock.
SECTION 4.02. Cash Dividends and Other Distributions. In the event that
at any time or from time to time CyberShop shall distribute to all holders of
Common Stock (i) any dividend or other distribution of cash, evidences of its
indebtedness, shares of its capital stock or any other assets, properties or
securities or (ii) any options, warrants or other rights to subscribe for or
purchase any of the foregoing (other than, in each case, (w) the issuance of any
rights under a shareholder rights plan, (x) any dividend or distribution
described in Section 4.01, (y) any rights, options, warrants or securities
described in Section 4.03 and (z) any cash dividends or other cash distributions
from current or retained earnings), then the number of shares of Common Stock
issuable upon the exercise of each Warrant shall be increased to a number
determined by multiplying the number of shares of Common Stock issuable upon the
exercise of such Warrant immediately prior to the record date for any such
dividend or distribution by a fraction, the numerator of which shall be the
Current Market Value per share of Common Stock on the record date for such
dividend or distribution and the denominator of which shall be such Current
Market Value per share of Common Stock on the record date for such dividend or
distribution less the sum of (x) the amount of cash, if any, distributed per
share of Common Stock and (y) the fair value (as determined in good faith by the
Board, whose determination shall be evidenced by a board resolution, a copy of
which will be sent to Holders upon request) of the portion, if any, of the
distribution applicable to one share of Common Stock consisting of evidences of
indebtedness, shares of stock, securities,
12
other assets or property, warrants, options or subscription or purchase rights;
and, subject to Section 4.08, the Exercise Price shall be adjusted to a number
determined by dividing the Exercise Price immediately prior to such record date
by the above fraction. Such adjustments shall be made whenever any distribution
is made and shall become effective as of the date of distribution, retroactive
to the record date for any such distribution; provided, however, that CyberShop
is not required to make an adjustment pursuant to this Section 4.02 if at the
time of such distribution CyberShop makes the same distribution to Holders of
Warrants as it makes to holders of Common Stock pro rata based on the number of
shares of Common Stock for which such Warrants are exercisable (whether or not
currently exercisable). No adjustment shall be made pursuant to this Section
4.02 which shall have the effect of decreasing the number of shares of Common
Stock issuable upon exercise of each Warrant or increasing the Exercise Price.
SECTION 4.03. Rights Issue To All Holders of Common Stock. In the event
that at any time or from time to time CyberShop shall issue to all holders of
Common Stock without any charge, rights, options or warrants entitling the
holders thereof to subscribe for shares of Common Stock, or securities
convertible into or exchangeable or exercisable for Common Stock, entitling such
holders to sub scribe for or purchase shares of Common Stock at a price per
share that is lower at the record date for such issuance than the then Current
Market Value per share of Common Stock other than in connection with the
adoption of a shareholder rights plan by CyberShop, then the number of shares of
Common Stock issuable upon the exercise of each Warrant shall be increased to a
number determined by multiplying the number of shares of Common Stock
theretofore issuable upon exercise of each Warrant by a fraction, the numerator
of which shall be the number of shares of Common Stock outstanding on the date
of issuance of such rights, options, warrants or securities plus the number of
additional shares of Common Stock offered for subscription or purchase or into
or for which such securities that are issued are convertible, exchangeable or
exercisable, and the denominator of which shall be the number of shares of
Common Stock outstanding on the date of issuance of such rights, options,
warrants or securities plus the total number of shares of Common Stock which the
aggregate consideration expected to be received by CyberShop (assuming the
exercise or conversion of all such rights, options, warrants or securities)
would purchase at the then Current Market Value per share of Common Stock.
Subject to Section 4.08, in the event of any such adjustment, the Exercise Price
shall be adjusted to a number determined by dividing the Exercise
13
Price immediately prior to such date of issuance by the aforementioned fraction.
Such adjustment shall be made immediately after such rights, options or warrants
are issued and shall become effective, retroactive to the record date for the
determination of stockholders entitled to receive such rights, options, warrants
or securities. No adjustment shall be made pursuant to this Section 4.03 which
shall have the effect of decreasing the number of shares of Common Stock
purchasable upon exercise of each Warrant or of increasing the Exercise Price.
SECTION 4.04 Other Issuances of Common Stock or Rights. In the event
that at any time or from time to time CyberShop shall issue (i) shares of Common
Stock (subject to the provisions below), (ii) rights, options or warrants
entitling the holders thereof to subscribe for shares of Common Stock (provided,
however, that no adjustment shall be made upon the exercise of such rights,
options or warrants), or (iii) securities convertible into or exchangeable or
exercisable for Common Stock (provided, however, that no adjustment shall be
made upon the conversion, exchange or exercise of such securities (other than
issuances specified in (i), (ii) or (iii) which are made as the result of
anti-dilution adjustments in such securities)), at a price per share at the
record date of such issuance that is less than the then Current Market Value per
share of Common Stock, then the number of shares of Common Stock issuable upon
the exercise of each Warrant shall be increased to a number determined by
multiplying the number of shares of Common Stock theretofore issuable upon
exercise of each Warrant by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately after such sale or
issuance plus the number of additional shares of Common Stock offered for
subscription or purchase or into or for which such securities that are issued
are convertible, exchangeable or exercisable, and the denominator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
sale or issuance plus the total number of shares of Common Stock which the
aggregate consideration expected to be received by CyberShop (assuming the
exercise or conversion of all such rights, options, warrants or securities, if
any) would purchase at the then Current Market Value per share of Common Stock;
and subject to Section 4.08 the Exercise Price shall be adjusted to a number
determined by dividing the Exercise Price immediately prior to such date of
issuance by the aforementioned fraction; provided, however, that no adjustment
to the number of Warrant Shares issuable upon the exercise of the Warrants or to
the Exercise Price shall be made as a result of (i) the issuance of shares of
Common Stock under any warrants, options or other rights existing on the date
14
hereof, (ii) the issuance of shares of Common Stock in bona fide public
offerings that are underwritten or in which a placement agent is retained by
CyberShop or (iii) the issuance of options, or shares of Common Stock pursuant
to any option, under any employee benefit plans approved by the Board of
Directors. Such adjustments shall be made whenever such rights, options or
warrants or convertible securities are issued. No adjustment shall be made
pursuant to this Section 4.04 which shall have the effect of decreasing the
number of shares of Common Stock issuable upon exercise of each warrant or of
increasing the Exercise Price. For purposes of Section 4.04 only, any issuance
of Common Stock, or rights, options or warrants to subscribe for, or other
securities convertible into or exercisable or exchangeable for, Common Stock,
which issuance (or agreement to issue) (A) is in exchange for or otherwise in
connection with the acquisition of the property (excluding any such exchange
exclusively for cash) of any Person and (B) is at a price per share equal to the
lower of the Current Market Value at the time an agreement in principle is
reached or at the time a definitive agreement is entered into, shall be deemed
to have been made at a price per share equal to the Current Market Value per
share at the record date with respect to such issuance (the time of closing or
consummation of such exchange or acquisition) if such definitive agreement is
entered into within 90 days of the date of such agreement in principle.
SECTION 4.05. Combination; Liquidation. (a) Except as provided in
Section 4.05(b), in the event of a Combination, each Holder shall have the right
to receive upon exercise of the Warrants the kind and amount of shares of
capital stock or other securities or property which such Holder would have been
entitled to receive upon or as a result of such Combination had such Warrant
been exercised immediately prior to such event. Unless paragraph 4.05(b) is
applicable to a Combination, CyberShop shall provide that the surviving or
acquiring Person (the "Successor Company") in such Combination will enter into
an agreement confirming the Holders' rights pursuant to this Section 4.05(a) and
providing for adjustments, which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article 4. The provisions of
this Section 4.05(a) shall similarly apply to successive Combinations involving
any Successor Company.
(b) In the event of (i) a Combination where consideration to the
holders of Common Stock in exchange for their shares is payable solely in cash
or (ii) the dissolution, liquidation or winding-up of CyberShop, the holders of
the Warrants shall be entitled to receive, upon
15
surrender of their Warrant Certificates, distributions on an equal basis with
the holders of Common Stock or other securities issuable upon exercise of the
Warrants, as if the Warrants had been exercised immediately prior to such event,
less the Exercise Price.
In case of any Combination described in this Section 4.05(b), the
surviving or acquiring Person and, in the event of any dissolution, liquidation
or winding-up of CyberShop, CyberShop, shall deposit promptly with an
independent agent appointed for such purpose the funds, if any, necessary to pay
to the holders of the Warrants the amounts to which they are entitled as
described above. After such funds and the surrendered Warrant Certificates are
received, such agent is required to deliver a check in such amount as is
appropriate (or, in the case of consideration other than cash, such other
consideration as is appropriate) to such Person or Persons as it may be directed
in writing by the Holders surrendering such Warrants.
SECTION 4.06. Other Events. If any event occurs as to which the
foregoing provisions of this Article 4 are not strictly applicable or, if
strictly applicable, would not, in the good faith judgment of the Board, fairly
and adequately protect the purchase rights of the Warrants in accordance with
the essential intent and principles of such provisions, then such Board shall
make such adjustments in the application of such provisions, in accordance with
such essential intent and principles, as shall be reasonably necessary, in the
good faith opinion of such Board, to protect such purchase rights as aforesaid,
but in no event shall any such adjustment have the effect of increasing the
Exercise Price or decreasing the number of shares of Common Stock issuable upon
exercise of any Warrant.
SECTION 4.07. Superseding Adjustment. Upon the expiration of any
rights, options, warrants or conversion or exchange privileges which resulted in
adjustments pursuant to this Article 4, if any thereof shall not have been
exercised, the number of Warrant Shares issuable upon the exercise of each
Warrant shall be readjusted pursuant to the applicable section of Article 4 as
if (A) the only shares of Common Stock issuable upon exercise of such rights,
options, warrants, conversion or exchange privileges were the shares of Common
Stock, if any, actually issued upon the exercise of such rights, options,
warrants or conversion or exchange privileges and (B) shares of Common Stock
actually issued, if any, were issuable for the consideration actually received
by CyberShop upon such exercise plus the aggregate consideration, if any,
actually received by CyberShop for
16
the issuance, sale or grant of all such rights, options, warrants or conversion
or exchange privileges whether or not exercised and the Exercise Price shall be
readjusted inversely; provided, however, that no such readjustment shall (except
by reason of an intervening adjustment under Section 4.01) have the effect of
decreasing the number of Warrant Shares purchasable upon the exercise of each
Warrant or increase the Exercise Price by an amount in excess of the amount of
the adjustment initially made in respect of the issuance, sale or grant of such
rights, options, warrants or conversion or exchange privileges.
SECTION 4.08. Minimum Adjustment. The adjust ments required by the
preceding Sections of this Article 4 shall be made whenever and as often as any
specified event requiring an adjustment shall occur, except that no adjust ment
of the Exercise Price or the number of shares of Common Stock issuable upon
exercise of Warrants that would otherwise be required shall be made unless and
until such adjustment either by itself or with other adjustments not previously
made increases or decreases by at least 1% the Exercise Price or the number of
shares of Common Stock issuable upon exercise of Warrants immediately prior to
the making of such adjustment. Any adjustment representing a change of less than
such minimum amount shall be carried forward and made as soon as such
adjustment, together with other adjustments required by this Article 4 and not
previously made, would result in a minimum adjustment. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at the close of
business on the date of its occurrence. In computing adjustments under this
Article 4, fractional interests in Common Stock shall be taken into account to
the nearest one-hundredth of a share.
SECTION 4.09. Notice of Adjustment. Whenever the Exercise Price or the
number of shares of Common Stock and other property, if any, issuable upon
exercise of the Warrants is adjusted, as herein provided, CyberShop shall
promptly deliver to the Holders in accordance with Section 6.06 a certificate of
a firm of independent accountants selected by the Board (who may be the regular
accountants employed by CyberShop) setting forth, in reasonable detail, the
event requiring the adjustment and the method by which such adjustment was
calculated (including a description of the basis on which (i) the Board
determined the fair value of any evidences of indebtedness, other securities or
property or warrants, options or other subscription or purchase rights and (ii)
the Current Market Value of the Common Stock was determined, if either of such
determinations were required), and specifying the Exercise
17
Price and the number of shares of Common Stock issuable upon exercise of
Warrants after giving effect to such adjustment.
SECTION 4.10. Notice of Certain Transactions. In the event that
CyberShop shall propose to (a) pay any dividend payable in securities of any
class to the holders of its Common Stock or to make any other non-cash dividend
or distribution to the holders of its Common Stock, (b) offer the holders of its
Common Stock rights to subscribe for or to purchase any securities convertible
into shares of Common Stock or shares of stock of any class or any other
securities, rights or options, (c) issue any (i) shares of Common Stock, (ii)
rights, options or warrants entitling the holders thereof to subscribe for
shares of Common Stock, or (iii) securities convertible into or exchangeable or
exercisable for Common Stock (in the case of (i), (ii) and (iii), if such
issuance or adjustment would result in an adjustment hereunder), (d) effect any
capital reorganization, reclassification, consolidation or merger, (e) effect
the voluntary or involuntary dissolution, liquidation or winding-up of CyberShop
or (f) make a tender offer or exchange offer with respect to the Common Stock,
CyberShop shall within 5 days send to the Holders a notice of such proposed
action or offer. Such notice shall be mailed to the Holders at their addresses
as they appear in the Certificate Register, which shall specify the record date
for the purposes of such dividend, distribution or rights, or the date such
issuance or event is to take place and the date of participation therein by the
holders of Common Stock, if any such date is to be fixed, and shall briefly
indicate the effect of such action on the Common Stock and on the number and
kind of any other shares of stock and on other property, if any, and the number
of shares of Common Stock and other property, if any, issuable upon exercise of
each Warrant and the Exercise Price after giving effect to any adjustment
pursuant to Article 4 which will be required as a result of such action. Such
notice shall be given as promptly as possible and (x) in the case of any action
covered by clause (a) or (b) above, at least 10 days prior to the record date
for determining holders of the Common Stock for purposes of such action or (y)
in the case of any other such action, at least 20 days prior to the date of the
taking of such proposed action or the date of participation therein by the
holders of Common Stock, whichever shall be the earlier.
SECTION 4.11. Adjustment to Warrant Certificate. The form of Warrant
Certificate need not be changed because of any adjustment made pursuant to this
Article 4, and Warrant Certificates issued after such adjustment may state the
same Exercise Price and the same number of shares of
18
Common Stock issuable upon exercise of the Warrants as are stated in the Warrant
Certificates initially issued pursuant to this Agreement. CyberShop, however,
may at any time in its sole discretion make any change in the form of Warrant
Certificate that it may deem appropriate to give effect to such adjustments and
that does not affect the substance of the Warrant Certificate, and any Warrant
Certificate thereafter issued or countersigned, whether in exchange or
substitution for an outstanding Warrant Certificate or otherwise, may be in the
form as so changed.
ARTICLE 5
Registration Rights
SECTION 5.01. Effectiveness of Registration Statement. CyberShop shall
cause to be filed pursuant to Rule 415 (or any successor provision) of the
Securities Act a registration statement covering the issuance of Warrant Shares
to the Holders upon exercise of the Warrants by the Holders thereof (the
"Registration Statement") and shall use its reasonable efforts to cause the
Registration Statement to be declared effective on or before the first
anniversary of the Issue Date. CyberShop shall cause the Registration Statement
to remain effective until the earlier of (i) such time as all Warrants have been
exercised and (ii) the Expiration Date. CyberShop shall (i) furnish to each
Holder, without charge, at least one copy of the Registration Statement and any
amendments thereto, (ii) for so long as any Registration Statement is effective,
deliver to each Holder, without charge, as many copies of the final prospectus
included in such Registration Statement and any amendment or supplement thereto
as such Holder may reasonably request and (iii) if in the opinion of counsel for
the Holders any amendment or supplement to the Registration Statement is
required to enable the Holder to resell Warrant Shares, effect such amendments
or supplements and cooperate in any arrangement with respect to such resale.
SECTION 5.02. Blue Sky. CyberShop shall use its reasonable efforts to
register or qualify the Warrant Shares under all applicable securities laws,
blue sky laws or similar laws of all jurisdictions in the United States and
Canada in which any Holder of Warrants may or may be deemed to purchase Warrant
Shares upon the exercise of Warrants and shall use its reasonable efforts to
maintain such registration or qualification through the earlier of (i) such time
as all Warrants have been exercised or (ii) the Expiration Date; provided,
however, that CyberShop
19
shall not be required to qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this Section 5.02 or
to take any action which would subject it to general service of process or to
taxation in any such jurisdiction where it is not then so subject.
SECTION 5.03. Accuracy of Disclosure. To the extent any Holder uses the
Registration Statement for any resale of Warrant Shares as provided in clause
(iii) of Section 5.01, CyberShop represents and warrants to each Holder and
agrees for the benefit of each Holder that (i) the Registration Statement and
any amendment thereto will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements contained therein not misleading; and (ii) the prospectus
delivered to such Holder upon the exercise of Warrants and the documents
incorporated by reference therein will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that CyberShop shall have no liability under clauses (i) or (ii) of this Section
5.03 with respect to any such untrue statement or omission made in any
Registration Statement in reliance upon and in conformity with information
furnished to CyberShop by or on behalf of the Holders specifically for inclusion
therein.
SECTION 5.04. Indemnification. To the extent any Holder uses the
Registration Statement for any resale of Warrant Shares as provided in clause
(iii) of Section 5.01:
(a) In connection with any Registration Statement, CyberShop
agrees to indemnify and hold harmless each Holder of the Warrants and each
person, if any, who controls such Holder within the meaning of the Securities
Act or the Exchange Act (each Holder and such controlling persons being referred
to collectively as the "Indemnified Parties") from and against any losses,
claims, damages or liabilities, joint or several, or any actions in respect
thereof (including but not limited to any losses, claims, damages, liabilities
or actions relating to purchases and sales of the Warrant Shares) to which each
Indemnified Party may become subject under the Securities Act, the Exchange Act
or otherwise, insofar as such losses, claims, damages, liabilities or actions
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in such Registration Statement or prospectus or in
any amendment or supplement thereto, or arise out of,
20
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,
in light of the circumstances under which they were made, not misleading, and
shall reimburse, as incurred, the Indemnified Parties for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action in respect thereof;
provided, however, that (i) CyberShop shall not be liable in any such case to
the extent that such loss, claim, damage or liability arises out of or is based
upon any untrue statement or alleged untrue statement or omission or alleged
omission made in such Registration Statement or any preliminary or final
prospectus or in any amendment or supplement thereto in reliance upon and in
conformity with written information pertaining to such Holder and furnished to
CyberShop by or on behalf of such Holder specifically for inclusion therein,
(ii) with respect to any untrue statement or omission or alleged untrue
statement or omission made in any prospectus relating to such Registration
Statement, the indemnity agreement contained in this subsection (a) shall not
inure to the benefit of any person as to which there is a prospectus delivery
requirement (a "Delivering Seller") that sold the Securities to the person
asserting any such losses, claims, damages or liabilities to the extent that any
such loss, claim, damage or liability of such Delivering Seller results from the
fact that there was not sent or given to such person, on or prior to the written
confirmation of such sale, a copy of the relevant prospectus, as amended and
supplemented, provided that (I) CyberShop shall have previously furnished copies
thereof to such Delivering Seller in accordance with this Agreement and (II)
such furnished prospectus, as amended and supplemented, would have corrected any
such untrue statement or omission or alleged untrue statement or omission, and
(iii) this indemnity agreement will be in addition to any liability which
CyberShop may otherwise have to such Indemnified Party.
(b) In connection with any Registration Statement, each Holder of
the Warrants, severally and not jointly, will indemnify and hold harmless
CyberShop and each person, if any, who controls CyberShop within the meaning of
the Securities Act or the Exchange Act and the directors, officers, agents and
employees of such controlling persons from and against any losses, claims,
damages or liabilities or any actions in respect thereof to which CyberShop or
any such controlling person or director, officers, agent or employee of such
controlling person may become subject under the Securities Act, the Exchange Act
or otherwise, insofar as such losses, claims, damages, liabilities or actions
21
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in such Registration Statement or preliminary or
final prospectus or in any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, but in each case only to the extent that
the untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information pertaining
to such Holder and furnished to CyberShop by or on behalf of such Holder
specifically for inclusion therein; and, subject to the limitation set forth
immediately preceding this clause, shall reimburse, as incurred, CyberShop for
any legal or other expenses reasonably incurred by CyberShop or any such
controlling person in connection with investigating or defending any loss,
claim, damage, liability or action in respect thereof. This indemnity agreement
will be in addition to any liability which such Holder may otherwise have to
CyberShop or any of its controlling persons.
(c) Promptly after receipt by an indemnified party under this
section of notice of the commencement of any action or proceeding (including a
governmental investigation), 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, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) or (b) above, except to the
extent that it is prejudiced or harmed in any material respect by failure to
give such prompt notice. 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 therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with one counsel (and local counsel as
necessary) reasonably satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), 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, other than reasonable costs of investigation, subsequently incurred by
such indemnified party in connection with the defense
22
thereof. No indemnifying party shall, without the prior written consent of the
indemnified party, not to be unreasonably withheld, effect any settlement of any
pending or threatened action in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party unless such settlement includes an unconditional release of
such indemnified party from all liability on any claims that are the subject
matter of such action. No indemnifying party shall be liable for any amounts
paid in settlement of any action or claim without its written consent, which
consent shall not be unreasonably withheld, but if settled in accordance with
its written consent or if there be a final judgment of the plaintiff in any such
action, the indemnifying party agrees to indemnify and hold harmless any
indemnified party from and against any loss or liability by reason of such
settlement or judgment.
(d) If the indemnification provided for in this section is
unavailable or insufficient to hold harmless an indemnified party under
subsections (a) or (b) above for any reason other than as provided in subsection
(c) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to in subsection (a) or (b)
above (i) in such proportion as is appropriate to reflect the relative benefits
received by the indemnifying party or parties on the one hand and the
indemnified party on the other or (ii) if the allocation provided by the
foregoing clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the indemnifying party or parties on
the one hand and the indemnified party on the other in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault of the parties 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 CyberShop on the one hand or
such Holder or such other indemnified person, as the case may be, on the other,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid by
an indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party
23
in connection with investigating or defending any action or claim which is the
subject of this subsection (d). Notwithstanding any other provision of this
Section 5(d), the Holders shall not be required to contribute any amount in
excess of the amount by which the net proceeds received by such Holders from the
sale of the Warrant Shares pursuant to the Registration Statement exceeds the
amount of damages which such Holders would have otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For purposes
of this paragraph (d), each officer, director, employee, representative and
agent of an indemnified party and each person, if any, who controls such
indemnified party within the meaning of the Securities Act or the Exchange Act
shall have the same rights to contribution as such indemnified party, and each
officer, director, employee, representative and agent of CyberShop and each
person, if any, who controls CyberShop within the meaning of the Securities Act
or the Exchange Act shall have the same rights to contribution as CyberShop.
(e) The agreements contained in this section shall survive the
sale of the Warrant Shares pursuant to the Registration Statement, as the case
may be, and shall remain in full force and effect, regardless of any termination
or cancellation of this Agreement or any investigation made by or on behalf of
any indemnified party.
SECTION 5.05 Additional Acts. If the issuance or sale of any Common
Stock or other securities issuable upon the exercise of the Warrants requires
registration or approval of any governmental authority (other than the
registration requirements under the Securities Act), or the taking of any other
action under the laws of the United States of America or any political
subdivision thereof before such securities may be validly offered or sold in
compliance with such laws, then CyberShop covenants that it will, in good faith
and as expeditiously as reasonably possible, use all reasonable efforts to
secure and maintain such registration or approval or to take such other action,
as the case may be.
SECTION 5.06. Expenses. All expenses incident to CyberShop's
performance of or compliance with its obligations under this Article 5 will be
borne by CyberShop, including without limitation: (i) all SEC, stock exchange or
National Association of Securities Dealers, Inc.
24
registration and filing fees, (ii) all reasonable fees and expenses incurred in
connection with compliance with state securities or blue sky laws, (iii) all
reasonable expenses of any Persons incurred by or on behalf of CyberShop in
preparing or assisting in preparing, printing and distributing the Registration
Statement or any other registration statement, prospectus, any amendments or
supplements thereto and other documents relating to the performance of and
compliance with this Article 5, (iv) the fees and disbursements of counsel for
CyberShop and (v) the fees and disbursements of the independent public
accountants of CyberShop, including the expenses of any special audits or
comfort letters required by or incident to such performance and compliance.
ARTICLE 6
Miscellaneous
SECTION 6.01. SEC Reports and Other Information. Notwithstanding that
CyberShop may not be subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, CyberShop shall file with the SEC and thereupon
provide the Holders with such annual reports and such information, documents and
other reports as are specified in Sections 13 and 15(d) of the Exchange Act and
applicable to a U.S. corporation subject to such Sections, such information,
documents and other reports to be so filed and provided at the times specified
for the filing of such information, documents and reports under such Sections.
SECTION 6.02. Persons Benefitting. Nothing in this Agreement is
intended or shall be construed to confer upon any Person other than CyberShop
and the Holders any right, remedy or claim under or by reason of this agreement
or any part hereof.
SECTION 6.03. Rights of Holders. Holders of unexercised Warrants are
not entitled to (i) receive dividends or other distributions, (ii) receive
notice of or vote at any meeting of the stockholders, (iii) consent to any
action of the stockholders, (iv) receive notice as stockholders of any other
proceedings of CyberShop, (v) exercise any preemptive rights or (vi) exercise
any other rights whatsoever as stockholders of CyberShop.
SECTION 6.04. Amendment. This Agreement may be amended by the parties
hereto without the consent of any Holder for the purpose of curing any
ambiguity, or of curing, correcting or supplementing any defective provision
25
contained herein or adding or changing any other provisions with respect to
matters or questions arising under this Agreement as CyberShop may deem
necessary or desirable (including without limitation any addition or
modification to provide for compliance with the transfer restrictions set forth
herein); provided, however, that such action shall not adversely affect the
rights of any of the Holders. Any amendment or supplement to this Agreement that
has an adverse effect on the interests of the Holders shall require the written
consent of the Holders of a majority of the then outstanding Warrants. The
consent of each Holder affected shall be required for any amendment pursuant to
which the Exercise Price would be increased or the number of Warrant Shares
issuable upon exercise of Warrants would be decreased (other than pursuant to
adjustments provided herein) or the exercise period with respect to the Warrants
would be shortened. In determining whether the Holders of the required number of
Warrants have concurred in any direction, waiver or consent, Warrants owned by
CyberShop or by any Person directly or indirectly controlling or controlled by
or under direct or indirect common control with CyberShop shall be disregarded
and deemed not to be outstanding. Subject to the foregoing, only Warrants
outstanding at the time shall be considered in any such determination.
SECTION 6.05. Notices. Any notice or communication shall be in writing
and delivered in Person or mailed by first-class mail addressed as follows:
if to CyberShop:
CyberShop International, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx,
Chairman of the Board
with a copy to:
Xxxxx Xxxx
Xxxxx Constant & Xxxxxxxx
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
26
if to the Purchasers:
X.X. Xxxxxxxxx, Towbin
Xxxxxxxxxx & Co. Inc.
c/o X.X. Xxxxxxxxx, Towbin
Swiss Bank Tower
00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxxx
A. Xxxxxx Xxxxxx
CyberShop or the Purchasers by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Holder shall be mailed to the
Holder at the Holder's address as it appears on the Certificate Register and
shall be suffi ciently given if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
SECTION 6.06. Governing Law. The laws of the State of New York shall
govern this Agreement and the Warrant Certificates.
SECTION 6.06. Successors. All agreements of CyberShop in this Agreement
and the Warrant Certificates shall bind its successors.
SECTION 6.08. Multiple Originals. The parties may sign any number of
copies of this Agreement. Each signed copy shall be an original, but all of them
together represent the same agreement. One signed copy is enough to prove this
Agreement.
SECTION 6.09. Table of Contents. The table of contents and headings of
the Articles and Sections of this Agreement have been inserted for convenience
of reference only, are not intended to be considered a part hereof and shall not
modify or restrict any of the terms or provisions hereof.
SECTION 6.10. Severability. The provisions of this Agreement are
severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any
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manner affect such clause or provision in any other jurisdiction or any other
clause or provision of this Agreement in any jurisdiction.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the date first written above.
CYBERSHOP INTERNATIONAL, INC.,
by
-----------------------------
Name:
Title:
X.X. XXXXXXXXX, TOWBIN, as Purchaser,
by
-----------------------------
Name:
Title:
Xxxxxxxxxx & Co. Inc., as Purchaser,
by
-----------------------------
Name:
Title:
EXHIBIT A
[FORM OF FACE OF WARRANT CERTIFICATE]
THE COMMON STOCK, PAR VALUE $.001 PER SHARE, OF CYBERSHOP
INTERNATIONAL, INC. ("CYBERSHOP") FOR WHICH THIS WARRANT IS EXERCISABLE MAY NOT
BE OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION UNDER THE SECURITIES
ACT OF 1933 (THE "SECURITIES ACT"), AND ANY APPLICABLE STATE SECURITIES LAWS, OR
AN APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS. ACCORDINGLY, NO
HOLDER SHALL BE ENTITLED TO EXERCISE SUCH HOLDER'S WARRANTS AT ANY TIME UNLESS,
AT THE TIME OF EXERCISE, (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT
RELATING TO THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF THIS
WARRANT HAS BEEN FILED WITH, AND DECLARED EFFECTIVE BY, THE SECURITIES AND
EXCHANGE COMMISSION (THE "SEC"), AND NO STOP ORDER SUSPENDING THE EFFECTIVENESS
OF SUCH REGISTRATION STATEMENT HAS BEEN ISSUED BY THE SEC, OR (ii) THE ISSUANCE
OF SUCH SHARES IS PERMITTED PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT, OR ANY STATE SECURITIES LAWS AND NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
WITHIN THE "UNITED STATES" OR TO "U.S. PERSONS" (AS DEFINED IN REGULATION S
UNDER THE SECURITIES ACT) IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT.
No. [ ] Certificate for ______ Warrants
to Purchase __________ shares of Common Stock
VOID AFTER 5.00 P.M. NEW YORK TIME
on [ ], 2003
WARRANTS TO PURCHASE COMMON STOCK OF
CYBERSHOP INTERNATIONAL, INC.
THIS CERTIFIES THAT , or its registered assigns, is the registered
holder of the number of Warrants set forth above (the "Warrants"). Each Warrant
entitles the registered holder thereof (the "Holder"), at its option and subject
to the provisions contained herein and in the Warrant Agreement referred to
below, to purchase from CyberShop International, Inc., a Delaware corporation
("CyberShop"), [ ] shares of Common Stock, par value of $.001 per share, of
CyberShop (the "Common Stock") at the per share exercise price of $[ ] (the
"Exercise Price"), or by Cashless Exercise referred to below. This Warrant
Certificate shall terminate and become void as of the close of business on [ ],
2003 (the "Expiration Date") or upon the exercise hereof as to all the shares of
Common Stock subject hereto. The number of shares issuable upon exercise of the
Warrants and the Exercise Price per share shall be subject to adjustment from
time to time as set forth in the Warrant Agreement.
This Warrant Certificate is issued under and in accordance with a
Warrant Agreement dated as of [ ], 1998 (the "Warrant Agreement"), among
CyberShop, and X.X. Xxxxxxxxx, Towbin and Xxxxxxxxxx & Co. Inc. (the
EXHIBIT A
"Purchasers"), and is subject to the terms and provisions contained in the
Warrant Agreement, to all of which terms and provisions the Holder of this
Warrant Certificate consents by acceptance hereof. The Warrant Agreement is
hereby incorporated herein by reference and made a part hereof. Reference is
hereby made to the Warrant Agreement for a full statement of the respective
rights, limitations of rights, duties and obligations of CyberShop and the
Holders of the Warrants. Capitalized terms used but not defined herein shall
have the meanings ascribed thereto in the Warrant Agreement. A copy of the
Warrant Agreement may be obtained for inspection by the Holder hereof upon
written request to CyberShop at 000 Xxxxxxx Xxxxxx, Xxx Xxxx, XX 00000,
Attention: Secretary.
Subject to the terms of the Warrant Agreement, the Warrants may be
exercised in whole or in part (i) by presentation of this Warrant Certificate
with the Election to Purchase attached hereto duly executed and with the
simultaneous payment of the Exercise Price in cash (subject to adjustment) to
CyberShop or its duly authorized agent for the account of CyberShop at the
principal office of CyberShop or (ii) by Cashless Exercise. Payment of the
Exercise Price in cash shall be made by certified or official bank check payable
to the order of CyberShop or by wire transfer of funds to an account designated
by CyberShop for such purpose. Payment by Cashless Exercise shall be made
without the payment of cash by reducing the amount of Common Stock that would be
obtainable upon the exercise of a Warrant and payment of the Exercise Price in
cash so as to yield a number of shares of Common Stock upon the exercise of such
Warrant equal to the product of (1) the number of shares of Common Stock for
which such Warrant is exercisable as of the Exercise Date (if the Exercise Price
were being paid in cash) and (2) a fraction, the numerator of which is the
excess of the Current Market Value per share of Common Stock on the Exercise
Date over the Exercise Price per share as of the Exercise Date and the
denominator of which is the Current Market Value per share of the Common Stock
on the Exercise Date.
As provided in the Warrant Agreement and subject to the terms and
conditions therein set forth, the Warrants shall be exercisable at any time on
or after the first anniversary of the date of the Closing; provided, however,
that Holders of Warrants will be able to exercise their Warrants only if a shelf
registration statement relating to the Common Stock underlying the Warrants is
effective or the exercise of such Warrants is exempt from the registration
requirements of the Securities Act of 1933 and such securities are qualified for
sale or exempt from qualification under the applicable securities laws of the
states or other jurisdictions in which such Holders reside; provided further,
however, that no Warrant shall be exercisable after the fifth anniversary of the
date of the Closing.
In the event CyberShop enters into a Combination, the Holder hereof
will be entitled to receive upon exercise of the Warrants the kind and amount of
shares of capital stock or other securities or other property of such surviving
entity as the Holder would have been entitled to receive upon or as a result of
the combination had the Holder exercised its Warrants immediately prior to such
Combination; provided, however, that in the event that, in connection with such
Combination, consideration to holders of Common Stock in exchange for their
shares is payable solely in cash or in the event of the dissolution, liquidation
or winding-up of CyberShop, the Holder hereof will be entitled to receive such
cash distributions as the Holder would have received had the Holder exercised
its Warrants immediately prior to such Combination, less the Exercise Price.
EXHIBIT A
As provided in the Warrant Agreement, the number of shares of Common
Stock issuable upon the exercise of the Warrants and the Exercise Price are
subject to adjustment upon the happening of certain events.
CyberShop may require payment of a sum sufficient to pay all taxes,
assessments or other governmental charges in connection with the transfer or
exchange of the Warrant Certificates pursuant to Section 2.05 of the Warrant
Agreement, but not for any exchange or original issuance (not involving a
transfer) with respect to temporary Warrant Certificates, the exercise of the
Warrants or the issuance of the Warrant Shares.
Upon any partial exercise of the Warrants, there shall be countersigned
and issued to the Holder hereof a new Warrant Certificate representing those
Warrants which were not exercised. This Warrant Certificate may be exchanged at
the principal office of CyberShop by presenting this Warrant Certificate
properly endorsed with a request to exchange this Warrant Certificate for other
Warrant Certificates evidencing an equal number of Warrants. No fractional
Warrant Shares will be issued upon the exercise of the Warrants, but CyberShop
shall pay an amount in cash equal to the Current Market Value per Warrant Share
on the day immediately preceding the date the Warrant is exercised, multiplied
by the fraction of a Warrant Share that would be issuable on the exercise of any
Warrant.
All shares of Common Stock issuable by CyberShop upon the exercise of
the Warrants shall, upon such issue, be duly and validly issued and fully paid
and non-assessable.
CyberShop shall be entitled to treat the Holder of any Warrant as the
owner in fact thereof for all purposes and shall not be bound to recognize any
equitable or other claim to or interest in such Warrant on the part of any other
Person, and shall not be liable for any registration or transfer of any Warrant
which is registered or to be registered in the name of a fiduciary or the
nominee of a fiduciary.
EXHIBIT A
The Warrants do not entitle any holder hereof to any of the rights of a
shareholder of CyberShop.
This Warrant Certificate shall not be valid or obligatory for any
purpose until it shall have been attested by the Secretary or Assistant
Secretary of CyberShop.
CYBERSHOP INTERNATIONAL, INC.,
by
-----------------------------
Name:
Title: [President or Vice
President]
DATED:
Attest:
-----------------------------
Name:
Title: [Secretary or Assistant Secretary]
EXHIBIT A
FORM OF ELECTION TO PURCHASE WARRANT SHARES
(to be executed only upon exercise of Warrants)
CYBERSHOP INTERNATIONAL, INC.
The undersigned hereby irrevocably elects to exercise Warrants at an
exercise price per Warrant (subject to adjustment) of $[ ] to acquire shares of
Common Stock, par value $.001 per share, of CyberShop International, Inc. on the
terms and conditions specified within the Warrant Certificate and the Warrant
Agreement therein referred to, surrenders this Warrant Certificate and all
right, title and interest therein to CyberShop International, Inc. and directs
that the shares of Common Stock deliverable upon the exercise of such Warrants
be registered or placed in the name and at the address specified below and
delivered thereto.
Date:
(Signature of Owner)
(Street Address)
(City) (State) (Zip Code)
Signature Guaranteed by:
[Signature must be guaranteed by an
eligible Guarantor Institution (banks,
stock brokers, savings and loan
associations and credit unions) with
membership in an approved guarantee
medallion program pursuant to
Securities and Exchange Commission
Rule b 17Ad-5]
EXHIBIT A
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
Any unexercised Warrants represented by the Warrant Certificate to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
