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SECURITIES PURCHASE AGREEMENT
Among
DIGITAL COURIER TECHNOLOGIES, INC.,
XXXXX XXXXXXX STRATEGIC GROWTH FUND, LTD.,
and
XXXXX XXXXXXX STRATEGIC GROWTH FUND, L.P.
Dated as of March ___, 1999
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is dated as of
March __, 1999, among Digital Courier Technologies, Inc., a Delaware corporation
(the "Company"), Xxxxx Xxxxxxx Strategic Growth Fund, Ltd., a Cayman Islands
exempt company ("Xxxxx Xxxxxxx Limited"), and Xxxxx Xxxxxxx Strategic Growth
Fund, L.P., a New York limited partnership ("Xxxxx Xxxxxxx XX"). Xxxxx Xxxxxxx
Limited and Xxxxx Xxxxxxx XX, are each referred to herein as a "Purchaser" and
are collectively referred to herein as the "Purchasers."
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers, and the
Purchasers desire to acquire from the Company, 800,000 units of the Company's
securities (the "Tranche C Units"), each Tranche C Unit to consist of .00045
share (each, a "Tranche C Share") of the Company's Series A Convertible
Preferred Stock, no par value (the "Series A Preferred Stock"), and one warrant
(each, a "Tranche C Warrant"), to purchase one share of the Company's common
stock par value $.0001 (the "Common Stock");
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers, and the
Purchasers desire to acquire from the Company, 1,600,000 units of the Company's
securities (the "Tranche D Units" and, together with the Tranche C Units, the
"Units"), each Tranche D Unit to consist of .00045 share (each, a "Tranche D
Share" and, together with the Tranche C Shares, the "Shares") of the Company's
Series B Convertible Preferred Stock (the "Series B Preferred Stock", and
together with the Series A Preferred Stock, the "Preferred Stock") and one
Warrant to purchase one share of Common Stock at a strike price set at 110% of
the per share price of the Trance D Units (each a "Tranche D Warrant," and,
together with the Tranche C Warrants, the "Warrants");
WHEREAS, the Company and the Purchasers desire to terminate the rights
and obligations of the Purchasers to purchase from the Company the Tranche B
Units, the Tranche B Shares and the Tranche B Warrants, as set forth in the
Securities Purchase Agreement between the Purchasers and the Company, dated as
of November 23, 1998 and amended as of December 2, 1998 (the "Tranche A/B
Securities Purchase Agreement").
IN CONSIDERATION of the mutual covenants contained in this Agreement,
the Company and each Purchaser agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE UNITS
1.1 Purchase and Sale.
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(a) Subject to the terms and conditions set forth herein, the Company
shall issue and sell to the Purchasers, and the Purchasers, severally and not
jointly, shall purchase from the Company:
(i) On the Tranche C Closing Date (as defined below), an aggregate
of 800,000 Tranche C Units, for a purchase price of $4.50 per Tranche C Unit;
and
(ii) On the Tranche D Closing Date (as defined below), an aggregate
of 1,600,000 Tranche D Units, for a purchase price (the "Tranche D Purchase
Price") per Tranche D Unit equal to $7.00 per Tranche D Unit.
(b) Each Purchaser shall purchase that number of Units set forth
opposite such Purchaser's name in Schedule I attached hereto and each Purchaser
shall deliver to the Company the portion of the purchase price for each of the
Tranche C Units and the Tranche D Units as set forth next to its name on
Schedule I.
(c) The Series A Preferred Stock shall have the respective rights,
preferences and priviledges set forth in the certificate of designation, the
form of which is attached hereto as Exhibit A (the "Series A Certificate of
Designation"). The Series B Preferred Stock shall have respective rights,
preferences and privileges set forth in the certificate of designation, the form
of which is attached hereto as Exhibit A (the "Series B Certificate of
Designation", and together with the Series A Certificate of Designation, the
"Certificates of Designation"). The Series B Preferred Stock shall be identical
to the Series A Preferred Stock and shall rank pari passu with the Series A
Preferred Stock with regard to dividends, liquidation, voting rights and any
other preferential rights designated therein, except that the conversion price
for conversion of the Series B Preferred Stock shall be $7.00 per share.
1.2 The Closings.
(a) The Tranche C Closing. The closing of the purchase and sale of the
Tranche C Units (the "Tranche C Closing") shall take place at the offices of
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P., 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, or by transmission by facsimile and overnight courier, immediately
following the execution hereof or such later date or different location as the
parties shall agree, but not prior to the date that the conditions set forth in
Section 4.1 have been satisfied or waived by the appropriate party (the "Tranche
C Closing Date"). At the Tranche C Closing:
(i) The Purchasers shall deliver to the Company an aggregate of
$3,600,000 in United States dollars in immediately available funds to an account
designated in writing by the Company;
(ii) Within three (3) business days after the Tranche C Closing Date
the Company shall deliver to Xxxxx Xxxxxxx Limited the certificates representing
the number of Tranche C Shares purchased by Xxxxx Xxxxxxx Limited as set forth
in Schedule I hereto;
(iii) The Company shall deliver to Xxxxx Xxxxxxx Limited a Warrant,
substantially in the form of Exhibit B hereto, representing the number of
Tranche C Warrants purchased by Xxxxx Xxxxxxx Limited as set forth in Schedule I
hereto;
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(iv) Within three (3) business days after the Tranche C Closing Date
the Company shall deliver to Xxxxx Xxxxxxx XX the certificates representing the
number of Tranche C Shares purchased by Xxxxx Xxxxxxx XX as set forth in
Schedule I hereto;
(v) The Company shall deliver to Xxxxx Xxxxxxx XX a Warrant,
substantially in the form of Exhibit B hereto, representing the number of
Tranche C Warrants purchased by Xxxxx Xxxxxxx XX as set forth in Schedule I
hereto; and
(vi) The parties shall execute and deliver each of the documents
referred to in Section 4.1 hereof;
(vii) The Company shall pay to Xxxxx Xxxxxxx Asset Management, LLC
("Xxxxx Xxxxxxx Asset") a fee of $50,000 (the "Xxxxx Xxxxxxx Asset Fee") in
United States dollars in immediately available funds to an account designated in
writing by Xxxxx Xxxxxxx Asset, of which $25,000 shall have been delivered to
Xxxxx Xxxxxxx Asset upon the signing of the term sheet and $25,000 shall be
delivered at the Tranche C Closing.
(b) The Tranche D Closing-Purchasers Option. Subject to the terms and
conditions set forth in Section 4.2 and elsewhere in this Agreement, the
Purchasers shall have the right at any time within 24 months of the Tranche C
Closing to deliver a written notice to the Company (a "Tranche D Notice")
requiring the Company to issue and sell any or all of the Tranche D Units. The
closing of the purchase and sale of the Tranche D Units (the "Tranche D
Closing") shall take place in the same manner as the Tranche C Closing, within
two (2) business days of the date after delivery of the Tranche D Notice (the
"Tranche D Date"); provided that in no case shall the Tranche D Closing take
place unless and until the conditions listed in Section 4.2 have been satisfied
or waived by the appropriate party. At the Tranche D Closing:
(i) The Purchasers shall deliver to the Company an aggregate of the
number of Tranche D Units purchased by each of them multiplied by the Tranche D
Purchase Price in United States dollars in immediately available funds to an
account designated in writing by the Company;
(ii) Within three (3) business days after the Tranche D Closing Date
the Company shall deliver to Xxxxx Xxxxxxx Limited the certificates representing
the number of Tranche D Shares purchased by Xxxxx Xxxxxxx Limited as set forth
in Schedule I hereto;
(iii) The Company shall deliver to Xxxxx Xxxxxxx Limited a Warrant,
substantially in the form of Exhibit B hereto, representing the number of
Tranche D Warrants purchased by Xxxxx Xxxxxxx Limited as set forth in Schedule I
hereto;
(iv) Within three (3) business days after the Tranche D Closing Date
the Company shall deliver to Xxxxx Xxxxxxx XX the certificates representing the
number of Tranche D Shares purchased by Xxxxx Xxxxxxx XX as set forth in
Schedule I hereto;
(v) The Company shall deliver to Xxxxx Xxxxxxx XX a Warrant,
substantially in the form of Exhibit B hereto, representing the number of
Tranche D; and Warrants purchased by Xxxxx Xxxxxxx XX as set forth in Schedule I
hereto; and
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(vi) The parties shall execute and deliver each of the documents
referred to in Section 4.2 hereof.
(vii) The Company shall pay to Xxxxx Xxxxxxx Asset the Xxxxx
Simmpson Asset Fee.
(c) The Tranche D Closing-Company's Option Subject to the terms and
conditions set forth in Section 4.2 and elsewhere in this Agreement, the Company
shall have the one time right at any time within 24 months of the Tranche C
Closing to deliver a written notice to the Company (a "Tranche D Company
Notice") requiring the Purchaser to purchase any or all of their pro rata
portion of the Tranche D Units. If the Company determines to exercise its right
under this Section 1.2(c), it shall notify the Purchasers ten (10) days prior to
the exercise of such right. The closing of the purchase and sale of the Tranche
C Units (the "Tranche C Closing") shall take place in the same manner as the
Tranche C Closing, on such date indicated in the Tranche D Company Notice (the
"Tranche D Date"); provided that in no case shall the Tranche D Closing take
place unless and until the conditions listed in Section 4.2 have been satisfied
or waived by the appropriate party. At the Tranche D Closing:
(i) The Purchasers shall deliver to the Company an aggregate of the
number of Tranche D Units purchased by each of them multiplied by the Tranche D
Purchase Price in United States dollars in immediately available funds to an
account designated in writing by the Company;
(ii) The Company shall deliver to Xxxxx Xxxxxxx Limited the
certificates representing the number of Tranche D Shares purchased by Xxxxx
Xxxxxxx Limited as set forth in Schedule I hereto;
(iii) The Company shall deliver to Xxxxx Xxxxxxx Limited a Warrant,
substantially in the form of Exhibit B hereto, representing the number of
Tranche D Warrants purchased by Xxxxx Xxxxxxx Limited as set forth in Schedule I
hereto;
(iv) The Company shall deliver to Xxxxx Xxxxxxx XX the certificates
representing the number of Tranche D Shares purchased by Xxxxx Xxxxxxx XX as set
forth in Schedule I hereto;
(v) The Company shall deliver to Xxxxx Xxxxxxx XX a Warrant,
substantially in the form of Exhibit B hereto, representing the number of
Tranche D; and Warrants purchased by Xxxxx Xxxxxxx XX as set forth in Schedule I
hereto; and
(vi) The parties shall execute and deliver each of the documents
referred to in Section 4.2 hereof.
(vii) The Company shall deliver to Xxxxx Xxxxxxx Asset the Xxxxx
Xxxxxxx Asset Fee.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. The
Company hereby makes the following representations and warranties to each of the
Purchasers:
(a) Organization and Qualification. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, with the requisite corporate power and authority to own and
use its properties and assets and to carry on its business as currently
conducted. Except as set forth in Schedule 2.1(a), the Company has no
subsidiaries (collectively, the "Subsidiaries"). Each of the Subsidiaries is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, with the full corporate power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Each of the Company and the Subsidiaries is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, would not, individually or
in the aggregate, (x) adversely affect the legality, validity or enforceability
of any of this Agreement or the Transaction Documents (as defined below) or any
of the transactions contemplated thereby, (y) have or result in a material
adverse effect on the results of operations, assets, prospects, or financial
condition of the Company and its Subsidiaries, taken as a whole or (z) adversely
impair the Company's ability to perform fully on a timely basis its obligations
under any Transaction Document (any of (x), (y) or (z), being a "Material
Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by this Agreement, the Certificates of Designation, the Warrants
and the Registration Rights Agreement (as defined below) (collectively, the
"Transaction Documents"), and otherwise to carry out its obligations hereunder
and thereunder. The execution and delivery of each of this Agreement and the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action and no further action is required by the Company, its
Board of Directors or its stockholders. Each of this Agreement and the
Transaction Documents has been duly executed by the Company and when delivered
in accordance with the terms hereof will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
(c) Capitalization. As of the date hereof and immediately prior to
the Tranche C Closing Date, the authorized capital stock of the Company is as
set forth in Schedule 2.1(c). The issuance and sale of all interests in such
capital stock have been in compliance with all applicable federal and state
securities laws. No shares of Common Stock are entitled to preemptive or similar
rights, nor is any holder of the Common Stock entitled to preemptive or similar
rights arising out of any agreement or understanding with the Company by virtue
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of any of this Agreement or the Transaction Documents. Except by virtue of this
Agreement, the Tranche A/B Securities Purchase Agreement or as disclosed in
Schedule 2.1(c), other than the Warrants and the warrants (the "A/B Warrants")
pursuant to the Tranche A/B Purchase Agreement, there are no outstanding
options, warrants, rights to subscribe to, calls or commitments of any character
whatsoever relating to securities, rights or obligations convertible into or
exchangeable for, or giving any person any right to subscribe for or acquire any
shares of Common Stock, or contracts, commitments, understandings, or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. No anti-dilution or similar adjustment
provision of securities of the Company will be triggered by the issuance of the
Units except as described on Schedule 2.1(c). The Company is not subject
(contingent or otherwise) to repurchase or otherwise acquire or retire any units
of its capital stock or any security convertible into or exchangeable for any of
its capital stock. Except as specifically disclosed in the SEC Documents (as
defined below), no Person or group of related Persons beneficially owns (as
determined pursuant to Rule 13d-3 promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) or has the right to acquire by
agreement with or by obligation binding upon the Company beneficial ownership of
in excess of 5% of the Common Stock. "Person" means an individual or
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
(d) Authorization and Validity; Issuance of Shares. All of the
Shares and the Warrants have been duly authorized, and when delivered against
payment therefor as contemplated hereby, will be validly issued, fully paid and
non-assessable free and clear of all liens, encumbrances and rights of first
refusals ("Liens") and will not be subject to any preemptive or similar rights.
The shares of Common Stock issuable upon exercise of the Warrants or upon
conversion of the Shares (the "Underlying Shares") are and will at all times
hereafter continue to be duly authorized and reserved for issuance and upon
issuance the Underlying Shares will be validly issued, fully paid and
nonassessable free and clear of all Liens.
(e) No Conflicts. The execution, delivery and performance of this
Agreement and the Transaction Documents by the Company and the consummation by
the Company of the transactions contemplated hereby and thereby (including the
issuance of the Underlying Shares) do not and will not (i) conflict with or
violate any provision of the articles of incorporation, bylaws or other charter
documents of the Company or any of the Subsidiaries, (ii) subject to obtaining
the consents referred to in Section 2.1(f), conflict with, or constitute a
default (or an event which 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 agreement, indenture or instrument
(evidencing a Company or Subsidiary debt or otherwise) to which the Company or
any Subsidiary is a party or by which any property or asset of the Company or
any Subsidiary is bound or affected, or (iii) result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority to which the Company or any Subsidiary is
subject (including Federal and state securities laws and regulations), or by
which any material property or asset of the Company or any Subsidiary is bound
or affected.
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(f) Consents and Approvals. Except as specifically set forth in
Schedule 2.1(f), neither the Company nor any Subsidiary is required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other person in connection with the execution,
delivery and performance by the Company of this Agreement or the Transaction
Documents, other than (i) the approval of the Company's Board of Directors and
the filings of the Certificates of Designation with the Secretary of State of
Delaware, which filings and approvals with respect to each of the Tranche C
Shares and the Tranche D Shares shall be effected on or prior to the Tranche C
Closing Date and Tranche D Closing Date, respectively, (ii) the filing of a
registration statement with the Securities and Exchange Commission (the
"Commission"), which shall be filed in accordance with and in the time periods
set forth in the Registration Rights Agreement, (iii) the application(s) or any
letter(s) acceptable to the National Market System of the Nasdaq Stock Market
("Nasdaq") for the listing of the Shares and Underlying Shares with Nasdaq (and
with any other national securities exchange or market on which the Common Stock
is then listed), and (iv) any filings, notices or registrations under applicable
state securities laws (together with the consents, waivers, authorizations,
orders, notices and filings referred to in Schedule 2.1(f), the "Required
Approvals").
(g) Litigation; Proceedings. Except as specifically set forth in
Schedule 2.1(g), there is no action, suit, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries or any of their respective
properties before or by any court, governmental or administrative agency or
regulatory authority (federal, state, county, local or foreign) which (i)
adversely affects or challenges the legality, validity or enforceability of any
of this Agreement or the Transaction Documents or (ii) would individually or in
the aggregate, have a Material Adverse Effect.
(h) No Default or Violation. Except as set forth on Schedule 2.1
(h), neither the Company nor any Subsidiary (i) is in default under or in
violation or breach of any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound, (ii) is in violation of any order of any court, arbitrator
or governmental body applicable to it, or (iii) is in violation of any statute,
rule or regulation of any governmental authority to which it is subject.
(i) Disclosure; Absence of Certain Changes. Neither this Agreement,
the Schedules to this Agreement, nor the Transaction Documents contains any
untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements made herein and therein, in light of
the circumstances under which they were made, not misleading. Except as
disclosed in Schedule 2.1(i) or the SEC Documents filed on XXXXX at least five
business days prior to the date hereof, since June 30, 1998 there has been no
material adverse change and no material adverse development in the business,
properties, operations, financial condition, liabilities or results of
operations or, insofar as can reasonably be foreseen, prospects of the Companies
or the Subsidiaries. The Company has not taken any steps, and does not currently
expect to take any steps, to seek protection pursuant to any bankruptcy law nor
does the Company or any of its Subsidiaries have any knowledge or reason to
believe that its creditors intend to initiate involuntary bankruptcy
proceedings. No event, liability, development or circumstance has occurred or
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exists, or is contemplated to occur, with respect to the Company or its
Subsidiaries or their respective business, properties, operations or financial
condition or, insofar as can reasonably be foreseen, prospects, that would be
required to be disclosed by the Company under applicable securities laws on a
registration statement (including by way of incorporation by reference) filed
with the SEC, on the date this representation is made or deemed to be made,
relating to an issuance and sale by the Company of its Common Stock and which
has not been publicly disclosed.
(j) Private Offering. The Company and all Persons acting on its
behalf have not directly or indirectly made, and will not make, offers or sales
of any securities or solicited any offers to buy any security under
circumstances that would require registration of the Units, the Shares, the
Warrants or the Underlying Shares or the issuance of such securities under the
Securities Act of 1933, as amended (the "Securities Act"). The issuance of the
Units, the Shares, the Warrants and the Underlying Shares to the Purchasers will
not be integrated with any other issuance of the Company's securities (past,
current, or future) that would violate any securities laws exemptions under the
Securities Act or otherwise adversely affect the Purchasers' ability to resell
the Units, the Shares, the Warrants or the Underlying Shares under the
Securities Act. Subject to the accuracy and completeness of the representations
and warranties of the respective Purchasers contained in Section 2.2 hereof, the
offer and sale by the Company to the Purchasers of the Units is exempt from the
registration requirements of the Securities Act.
(k) SEC Documents; Financial Statements. The Common Stock of the
Company is registered pursuant to Section 12(g) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). The Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it
under the Exchange Act, including pursuant to Section 13, 14 or 15(d) thereof
(the foregoing materials and all exhibits included therein and financial
statements and schedules thereto and documents (other than exhibits to such
documents) incorporated by reference therein being collectively referred to
herein as the "SEC Documents"), on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Documents prior to
the expiration of any such extension. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Documents, when filed,
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. All material agreements to which the Company or any Subsidiary is a
party or to which the property or assets of the Company or any Subsidiary are
subject have been filed as exhibits to the SEC Documents as required. 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 Commission with respect thereto as in
effect at the time of filing. Such financial statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved, except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all material
respects the financial position of the Company as of and for 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. Neither the Company nor any of its Subsidiaries or any of their
officers, directors, employees or agents have provided the Purchasers or their
agents or counsel with any material, nonpublic information. The Company
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acknowledges that the Purchasers will be trading in the securities of the
Company in reliance on the foregoing representation and warranty.
(l) Seniority. No class of equity securities of the Company will be
senior to the Preferred Stock in right of payment, whether upon liquidation,
dissolution or otherwise including any series of preferred stock currently
outstanding. So long as any Preferred Stock remains outstanding, the Company
shall not exchange, redeem, or convert any of the Company's capital stock for
indebtedness, including convertible debt, of the Company.
(m) Investment Company. The Company is not, and is not controlled by
or under common control with an affiliate (an "Affiliate") of an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(n) Broker's Fees. Except for the Xxxxx Xxxxxxx Asset Fee and as
disclosed on Schedule 2.1(n) no fees or commissions or similar payments with
respect to the transactions contemplated by this Agreement or the Transaction
Documents have been paid or will be payable by the Company to any broker,
financial advisor, finder, investment banker, or bank. The Purchasers shall have
no obligation with respect to any fees or with respect to any claims made by or
on behalf of other Persons for fees of a type contemplated in this Section
2.1(n) that may be due in connection with the transactions contemplated by this
Agreement and the Transaction Documents.
(o) Form S-3 Eligibility. The Company is, and at the Tranche C
Closing Date and the Tranche D Closing Date will be, eligible to register
securities (including the Shares and the Underlying Shares) for resale with the
Commission under Form S-3 (or any successor form) promulgated under the
Securities Act.
(p) Listing and Maintenance Requirements Compliance. The principal
market on which the Common Stock is currently traded is Nasdaq. Except as
disclosed in Schedule 2.1(p), since the date that the Company has been listed on
Nasdaq, the Company has not received notice (written or oral) from Nasdaq (or
any stock exchange, market or trading facility on which the Common Stock is or
has been listed (or on which it has been quoted)) to the effect that the Company
is not in compliance with the listing or maintenance requirements of such market
or exchange. The Company is not aware of any facts which would reasonably lead
to delisting or suspension of the Common Stock by Nasdaq. After giving effect to
the transactions contemplated by this Agreement and the Transaction Documents,
the Company believes that it is and will be in compliance with all such
maintenance requirements .
(q) Patents and Trademarks. The Company or its Subsidiaries have, or
have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and rights
(collectively, the "Intellectual Property Rights") which are necessary for use
in connection with its business, as currently conducted and as described in the
SEC Documents. To the best knowledge of the Company, there is no existing
infringement by another Person of any of the Intellectual Property Rights which
are necessary for use in connection with the Company's business which would
individually or in the aggregate, have a Material Adverse Effect and the Company
is not infringing on any other person's Intellectual Property Rights.
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(r) Employee Relations. Neither the Company nor any of its
Subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its Subsidiaries, is any such dispute threatened. Neither the
Company nor any of its Subsidiaries is a party to a collective bargaining
agreement, and the Company and its Subsidiaries believe that relations with
their employees are good. Except as set forth on Schedule 2.1(r), no executive
officer (as defined in Rule 501(f) of the Securities Act) has notified the
Company that such officer intends to leave the Company or otherwise terminate
such officer's employment with the Company.
(s) Registration Rights; Rights of Participation. Except for the
registration rights agreement pursuant to the Tranche A/B Securities Purchase
Agreement and as described on Schedule 2.1(s) hereto, (i) the Company has not
granted or agreed to grant to any Person any rights (including "piggy-back"
registration rights) to have any securities of the Company registered with the
Commission or any other governmental authority which has not been satisfied and
(ii) no Person, including, but not limited to, current or former shareholders of
the Company, underwriters, brokers or agents, has any right of first refusal,
preemptive right, right of participation, or any similar right to participate in
the transactions contemplated by this Agreement or any Transaction Document.
(t) Title. Except as disclosed in Schedule 2.1(t), the Company and
the Subsidiaries have good and marketable title in fee simple to all real
property and personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all Liens,
except for Liens that do not materially affect the value of such property and do
not interfere with the use made and proposed to be made of such property by the
Company and the Subsidiaries. Any real property and facilities held under lease
by the Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and the Subsidiaries.
(u) Permits. The Company and the Subsidiaries possess all
certificates, authorizations, licenses, easements, consents, approvals, orders
and permits necessary to own, lease and operate their respective properties and
to conduct their respective businesses as currently conducted except where the
failure to possess such permits would not, individually or in the aggregate,
have a Material Adverse Effect ("Material Permits"), and there is no proceeding
pending, or, to the knowledge of the Company, threatened relating to the
revocation, modification, suspension or cancellation of any Material Permit.
Neither the Company nor any of the Subsidiaries is in conflict with or default
or violation of any Material Permit.
(v) Insurance. The Company and each of its Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverages as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business.
10
(w) Internal Accounting Controls. The Company and each of the
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(x) Tax Status; FIRPTA. The Company and each of the Subsidiaries has
made or filed all federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charged that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on it books provisions reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim. The Company is not a "United States
real property holding corporation" within the meaning of Section 847(c)(2) of
the Internal Revenue Code of 1986, as amended.
(y) Transactions With Affiliates. Except as set forth on Schedule
2.1(y), none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company or any of its Subsidiaries
(other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any corporation, partnership,
trust or entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner other than
transactions that would not require disclosure under Section 404 of Regulation
S-K of the Securities Act and the Exchange Act.
(z) Application to Takeover Protection. The Company and its Board of
Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination or other
similar anti-takeover provision under the laws of the state of its incorporation
which is or could become applicable to the Purchasers as a result of the
transactions contemplated by this Agreement or the Transaction Documents. None
of the transactions contemplated by this Agreement or the Transaction Documents,
including the exercise of the Warrants will trigger any poison pill provisions
of any of the Company's stockholders' rights or similar agreements.
(aa) Environmental Laws. The Company and its Subsidiaries (i) are in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
11
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permits, licenses or other approvals would not result in
a Material Adverse Effect.
(bb) Foreign Corrupt Practices. Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Company used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
materially violated or is in material violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or made any unlawful bribe,
rebate, payoff, influence payment, kickback or other unlawful payment to any
foreign or domestic government official or employee.
2.2 Representations and Warranties of the Purchasers. Each of the
Purchasers, severally and not jointly, hereby represents and warrants to the
Company as follows:
(a) Organization; Authority. Such Purchaser is a company,
corporation or limited partnership duly formed, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or formation
with the requisite power and authority, corporate or otherwise, to enter into
and to consummate the transactions contemplated hereby and by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder.
The purchase by such Purchaser of the Units hereunder has been duly authorized
by all necessary action on the part of such Purchaser. Each of this Agreement
and the Registration Rights Agreement has been duly executed and delivered by
such Purchaser and constitutes the valid and legally binding obligation of such
Purchaser, enforceable against such Purchaser in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity.
(b) Investment Intent. Such Purchaser is acquiring the Units for its
own account for investment purposes only and not with a present view to or for
distributing or reselling the Units, the Shares, the Warrants or the Underlying
Shares or any part thereof or interest therein in violation of any securities
laws; provided, however, that by making the representations herein, such
Purchaser does not agree to hold any of the Units, the Shares, the Warrants or
the Underlying Shares for any minimum or other specific term and reserves the
right to dispose of the securities at any time in accordance with or pursuant to
a registration statement or an exemption under the Securities Act.
(c) Purchaser Status. At the time such Purchaser was offered the
Units, and at the Tranche C Closing Date and the Tranche D Closing Date, (i) it
was and will be an "accredited investor" as defined in Rule 501 under the
Securities Act or (ii) such Purchaser, either alone or together with its
representatives, had and will have such knowledge, sophistication and experience
in business and financial matters so as to be capable of evaluating the merits
and risks of the prospective investment in the Units.
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(d) Reliance. Each Purchaser understands and acknowledges that (i)
the Units are being offered and sold to the Purchaser without registration under
the Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act under Section 4(2) of the Securities Act or
Regulation D promulgated thereunder and (ii) the availability of such exemption,
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the representations set forth in this Section 2.2 and such Purchaser hereby
consents to such reliance.
The Company acknowledges and agrees that the Purchasers make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS
3.1 Transfer Restrictions.
----------------------
(a) If any Purchaser should decide to dispose of the Units, the
Shares, the Warrants or the Underlying Shares held by it, each Purchaser
understands and agrees that it may do so only pursuant to an effective
registration statement under the Securities Act, to the Company or pursuant to
an available exemption from the registration requirements of the Securities Act.
The Company shall announce any material non-public information it legally is
obligated to announce on or prior to the Effective Date (as defined in the
Registration Rights Agreement) of the registration statement filed pursuant to
the Registration Rights Agreement and shall not enter into any subsequent
non-disclosure agreements that would prevent it from announcing any such
information that otherwise legally could have been announced on or prior to the
Effective Date. In connection with any transfer of any Units, Shares, Warrants
or Underlying Shares other than pursuant to an effective registration statement
or to the Company, the Company may require the transferor thereof to provide to
the Company a written opinion of counsel experienced in the area of United
States securities laws selected by the transferor, the form and substance of
which opinion shall be customary for opinions of counsel in comparable
transactions, to the effect that such transfer does not require registration of
such transferred securities under the Securities Act. Notwithstanding the
foregoing, the Company hereby consents to and agrees to register any transfer by
any Purchaser to an Affiliate of such Purchaser or to an Affiliate of another
Purchaser, or any transfer among any such Affiliates, provided that transferee
certifies to the Company that it is an "accredited investor" as defined in Rule
501(a) under the Securities Act. Any such transferee shall be bound by the terms
of this Agreement and shall have the rights of a Purchaser under this Agreement
and the Registration Rights Agreement.
(b) Each Purchaser agrees to the imprinting, so long as is required
by this Section 3.1(b), of the following legend on the Shares, the Warrants, and
the Underlying Shares:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
13
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT.
Neither the Shares, the Warrants, nor the Warrant Underlying Shares
shall contain the legend set forth above if (i) the issuance of any of such
securities occurs at any time while the Registration Statement is effective
under the Securities Act and the issuance is covered by such Registration
Statement, (ii) in the opinion of counsel to the Company experienced in the area
of United States securities laws such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission) or (iii) in the opinion of
counsel to the Company experienced in the area of United States securities laws
such Shares, Warrants or Underlying Shares may be sold pursuant to Rule 144. The
Company agrees that it will provide each Purchaser, upon request, with a
certificate or certificates representing Shares, Warrants or Underlying Shares,
free from such legend at such time as such legend is no longer required
hereunder.
3.2 Stop Transfer Instruction. Except as otherwise required by law, the
Company may not make any notation on its records or give instructions to any
transfer agent of the Company which enlarge the restrictions of transfer set
forth in Section 3.1.
3.3 Furnishing of Information. As long as any Purchaser owns the Units,
the Shares, the Warrants or the Underlying Shares, the Company will cause the
Common Stock to continue at all times to be registered under Section 12 of the
Exchange Act, will timely file (or obtain extensions in respect thereof and file
within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to Section 13, 14 or 15(d) of the
Exchange Act and promptly furnish the Purchasers with true and complete copies
of all such filings and will not take any action or file any document (whether
or not permitted by the Exchange Act or the rules thereunder) to terminate or
suspend such reporting and filing obligations. The Company further covenants
that it will take such further action as any holder of the Units, the Shares,
the Warrants or the Underlying Shares may reasonably request, all to the extent
required from time to time to enable such Person to sell the Units, the Shares,
the Warrants or the Underlying Shares without registration under the Securities
Act within the limitation of the exemptions provided by Rule 144 promulgated
under the Securities Act.
3.4 Blue Sky Laws. In accordance with the Registration Rights
Agreement, the Company shall qualify the Shares and the Underlying Shares under
the securities or Blue Sky laws of such jurisdictions as the Purchasers may
request and shall continue such qualification at all times through the third
anniversary of the Tranche D Closing Date.
3.5 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Units, the Shares, the Warrants or the Underlying Shares in a manner that
would require the registration under the Securities Act of the sale the Units,
of the Shares, the Warrants, the Underlying Shares or Underlying Shares to any
Purchaser.
14
3.6 Listing and Reservation of Shares and Underlying Shares.
--------------------------------------------------------
(a) The Company shall (i) not later than 15 days after the Tranche C
Closing Date and as soon as practicable after any Tranche D Closing Date prepare
and file with the Nasdaq (as well as any other national securities exchange or
market on which the Common Stock is then listed) an additional shares listing
application or a letter acceptable to Nasdaq covering and listing a number of
shares of Common Stock which is at least equal the aggregate amount of
Underlying Shares sold in the Tranche C Closing or Tranche D Closing, as
applicable, (ii) take all steps necessary to cause the Underlying Shares to be
approved for listing on Nasdaq (as well as on any other national securities
exchange or market on which the Common Stock is then listed) as soon as possible
thereafter, (iii) maintain, so long as any other shares of Common Stock shall be
so listed, such listing of all such Underlying Shares, and (iv) provide to the
Purchasers evidence of such listing. Neither the Company nor any of its
Subsidiaries shall take any action which may result in the delisitng or
suspension of the Common Stock on Nasdaq. The Company shall promptly provide to
each Purchaser copies of any notices it receives from the Nasdaq regarding the
continued eligibility of the Common Stock for listing on such automated
quotation system. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 3.6(a).
(b) The Company at all times shall reserve shares of its authorized
but unissued Common Stock for issuance the number of shares of Common Stock
which would be issuable upon exercise of the Warrants or conversion of the
Shares. Shares of Common Stock reserved for issuance upon the exercise of the
Warrants as set forth in Section 3.6(a) shall be allocated pro rata to each of
the Purchasers in accordance with the amount of Units issued and delivered to
such Purchaser at the Tranche C Closing and Tranche D Closing, as applicable.
3.7 Notice of Breaches.
-------------------
(a) The Company and each Purchaser shall give prompt written notice
to the other of any breach by it of any representation, warranty or other
agreement contained in this Agreement or in the Registration Rights Agreement,
as well as any events or occurrences arising after the date hereof and prior to
the Tranche C Closing or the Tranche D Closing Date, as applicable, which would
reasonably be likely to cause any representation or warranty or other agreement
of such party, as the case may be, contained herein to be incorrect or breached
as of such Closing Date provided such notice will not constitute material
non-public information. However, no disclosure by either party pursuant to this
Section 3.7 shall be deemed to cure any breach of any representation, warranty
or other agreement contained herein or in the Registration Rights Agreement.
(b) Notwithstanding the generality of Section 3.7(a), the Company
shall promptly notify, provided such notification will not constitute material
non-public information, each Purchaser of any notice or claim (written or oral)
that it receives from any lender of the Company or any Subsidiary to the effect
that the consummation of the transactions contemplated hereby and by the
Registration Rights Agreement violates or would violate any written agreement or
understanding between such lender and the Company or any Subsidiary, and the
Company shall promptly furnish by facsimile to the Purchasers a copy of any
written statement in support of or relating to such claim or notice.
15
(c) The default by any Purchaser of any of its obligations,
representations or warranties under this Agreement or the Registration Rights
Agreement shall not be imputed to, and shall have no effect upon, any other
Purchaser or affect the Company's obligations under this Agreement any
Transaction Document to any non-defaulting Purchaser.
3.8 Conversion Obligations of the Company. The Company covenants to
convert Shares and to deliver Underlying Shares in accordance with the terms and
conditions and time period set forth in the respective Certificates of
Designation.
3.9 Future Financings. Except for (i) the issuance of securities upon
exercise or conversion of the Company's options, warrants or other convertible
securities outstanding as of the date hereof or (ii) the grant of additional
options or warrants, or the issuance of additional securities, under any Company
stock option or restricted stock plan for the benefit of the Company's employees
or directors, if the Company shall issue any equity securities (including any
debt financing with an equity component) (the "Future Financing") prior to the
Effectiveness Date for the Tranche C Shares and the Underlying Shares for the
Tranche C Warrant, at an effective price per share of less than $4.50 per share
(such price the "Future Share Price"), then the Company shall issue to the
Purchasers additional Common Stock such that the effective price per share paid
by the Purchasers at the Tranche C Closing shall equal the Future Share Price,
and the definition of Tranche C Shares shall include such additional shares.
3.10 Use of Proceeds. The Company shall use all of the proceeds from
the sale of the Units for working capital and general corporate purposes and not
for the satisfaction of any portion of Company borrowings outside the normal
course of business or to redeem Company equity or equity-equivalent securities.
Pending application of the proceeds of this placement in the manner permitted
hereby, the Company will invest such proceeds in interest bearing accounts
and/or short-term, investment grade interest bearing securities.
3.11 Reimbursement. In the event that any Purchaser, other than by
reason of its gross negligence or willful misconduct, becomes involved in any
capacity in any action, proceeding or investigation brought by or against any
person, including shareholders of the Company, in connection with or as a result
of (a) any misrepresentation or breach of any representation or warranty made by
the Company in this Agreement or the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation of the Company contained in this
Agreement or the Transaction Documents or any other certificate, instrument or
document hereby or thereby, or (c) any cause of action, suit or claim brought or
made against such Purchaser and arising out of or resulting from the execution,
delivery, performance or enforcement of this Agreement or the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby, the Company will reimburse such Purchaser for its legal and other
actual out-of-pocket expenses (including the cost of any investigation and
preparation) incurred in connection therewith. The reimbursement obligations of
the Company under this paragraph shall be in addition to any liability which the
Company may otherwise have, shall extend upon the same terms and conditions to
any affiliate of the Purchasers and partners, directors, agents, employees and
controlling persons (if any), as the case may be, of the Purchasers and any such
affiliate, and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Company, the Purchasers and
16
any such affiliate and any such Person. The Company also agrees that neither the
Purchasers or any such Affiliates, partners, directors, agents, employees or
controlling persons shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the Company in connection with or
as a result of the consummation of this Agreement or any of the Transaction
Documents except to the extent that any losses, claims, damages, liabilities or
expenses incurred by the Company result from the gross negligence or willful
misconduct of such Purchaser or entity in connection with the transactions
contemplated by this Agreement or the Registration Rights Agreement. To the
extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment and
satisfaction of its obligations hereunder which is permissible under applicable
law.
3.12 Transactions With Affiliates. So long as any Units, Shares,
Warrants or Underlying Shares are held by any Purchaser, the Company shall not,
and shall cause each of its Subsidiaries not to, enter into, amend, modify or
supplement any agreement, transaction, commitment or arrangement with any of its
respective officers, directors, Persons who were officers or directors at any
time during the previous two years, stockholders who beneficially own 5% or more
of the Common Stock, or Affiliates or with any individual related by blood,
marriage or adoption to any such individual or with any entity in which any such
entity or individual owns a 5% or more beneficial interest (each a "Related
Party"), except for (a) customary employment arrangements and benefit programs
on reasonable terms, (b) any agreement, transaction, commitment or arrangement
on an arms-length basis on terms no less favorable than terms which would have
been obtained from a person other than such Related Party, or (c) any agreement,
transaction, commitment or arrangement which is approved by a majority of the
disinterested directors of the Company. For purposes hereof, any director who is
also an officer of the Company or any Subsidiary of the Company shall not be a
disinterested director with respect to any such agreement, transaction,
commitment or arrangement. "Affiliate" for purposes of this Section 3.13 only
means, with respect to any person or entity, another person or entity that,
directly or indirectly, (i) has a 5% or more equity interest in that person or
entity, (ii) has 5% or more common ownership with that person or entity, (iii)
controls that person or entity, or (iv) shares common control with that person
or entity. "Control" or "controls" for purposes hereof means that a person or
entity has the power, direct or indirect, to conduct or govern the policies of
another person or entity.
3.13 Transfer Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent, and any subsequent transfer agent, to issue
certificates, registered in the name of each Purchaser or its respective
nominee(s), for the Shares and the Underlying Shares in such amounts as
specified from time to time by each Purchaser to the Company in the form
attached hereto as Exhibit C (the "Irrevocable Transfer Agent Instructions").
Prior to registration of the Shares and Underlying Shares under the Securities
Act, all such certificates shall bear the restrictive legend specified in
Section 3.1(b) of this Agreement. The Company warrants that no instruction other
than the Irrevocable Transfer Agent Instructions referred to in this Section
3.13, and stop transfer instructions to give effect to Section 3.1 hereof (in
the case of the Underlying Shares, prior to registration of the Underlying
Shares under the Securities Act) will be given by the Company to its transfer
agent and that the Units, the Shares, the Warrants and the Underlying Shares
shall otherwise be freely transferable on the books and records of the Company
as and to the extent provided in this Agreement and the Registration Rights
Agreement. If a Purchaser provides the Company with an opinion of counsel, in
17
form and substance customary for opinions of counsel in comparable transactions,
to the effect that a public sale, assignment or transfer of the Units, the
Shares, the Warrants and the Underlying Shares may be made without registration
under the Securities Act or the Purchaser provides the Company with reasonable
assurances that the Units, the Shares, the Warrants and the Underlying Shares
can be sold pursuant to Rule 144 without any restriction as to the number of
securities acquired as of a particular date that can then be immediately sold,
the Company shall permit the transfer, and, in the case of the Shares and the
Underlying Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by such
Purchaser and without any restrictive legend. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the
Purchasers by violating the intent and purpose of the transactions contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 3.13 will be inadequate and agrees,
in the event of a beach or threatened breach by the Company of the provisions of
this Section 3.13, that the Purchasers, shall be entitled, in addition to all
other available remedies, to an order and/or injunction restraining any breach
and requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.
3.14 Filing of Form 8K. On or before the 3rd business day following
each of the Tranche C Closing Date and the Tranche D Closing Date, the Company
shall file Form 8-K with the Commission describing the terms of the transaction
contemplated by this Agreement and the Transaction Documents in the form
required by the Exchange Act.
ARTICLE IV
CONDITIONS
4.1 (a) Conditions Precedent to the Obligation of the Company to Sell
the Tranche C Units. The obligation of the Company to sell the Tranche C Units
hereunder is subject to the satisfaction or waiver (with prior written notice to
each Purchaser) by the Company, at or before the Tranche C Closing, of each of
the following conditions:
(i) Accuracy of the Purchasers' Representations and Warranties. The
representations and warranties of each Purchaser in this Agreement shall be true
and correct in all material respects as of the date when made and as of the
Tranche C Closing Date;
(ii) Performance by the Purchasers. Each Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Purchaser at or prior to the Tranche C Closing; and
(iii) No Injunction. 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 which
prohibits the consummation of any of the transactions contemplated by this
Agreement or the Transaction Documents.
(b) Conditions Precedent to the Obligation of the Purchasers to
Purchase the Tranche C Units. The obligation of each Purchaser hereunder to
18
acquire and pay for the Tranche C Units is subject to the satisfaction or waiver
by such Purchaser, at or before the Tranche C Closing, of each of the following
conditions:
(i) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company set forth in this Agreement and in
the Registration Rights Agreement shall be true and correct in all respects as
of the date when made and as of the Tranche C Closing Date;
(ii) Performance by the Company. The Company shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Tranche C Closing;
(iii) No Injunction. 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 which
prohibits the consummation of any of the transactions contemplated by this
Agreement and the Transaction Documents;
(iv) No Suspensions of Trading in Common Stock. The trading in the
Common Stock shall not have been suspended by the Commission or on Nasdaq which
suspension shall remain in effect;
(v) Listing of Common Stock. Nasdaq shall have approved, if
required, for listing upon notice of issuance the Underlying Shares;
(vi) Required Approvals. All Required Approvals shall have been
obtained other than those relating solely to the Tranche D Units;
(vii) Shares of Common Stock. The Company shall have duly reserved
the number of Underlying Shares required by this Agreement and the Transaction
Documents to be reserved for issuance upon the exercise of the Tranche C
Warrants or the conversion of the Tranche C Shares;
(viii) Certificate of Designation. The Series A Certificate of
Designation shall have been duly approved by the Company's Board of Directors
and filed with the Secretary of State of Delaware, and the Company shall have
delivered a copy thereof to the Purchaser certified as filed by the office of
the Secretary of State of Delaware;
(ix) Adverse Changes. Since the date of the financial statements
included in the Company's Quarterly Report on Form 10-Q or Annual Report on Form
10-K, whichever is more recent, last filed prior to the date of this Agreement,
no event which had a Material Adverse Effect shall have occurred which is not
disclosed on any Schedule hereto or otherwise in writing to each of the
Purchasers;
(x) Change of Control. No Change of Control shall have occurred
between the date hereof and the Tranche C Closing Date. "Change of Control"
means the occurrence of any of (i) an acquisition after the date hereof by an
individual or legal entity or "group" (as described in Rule 13d-5(b)(1)
19
promulgated under the Exchange Act), other than the Purchasers or any of their
Affiliates, of in excess of 50% of the voting securities of the Company, (ii) a
replacement of more than one-half of the members of the Company's Board of
Directors which is not approved by those individuals who are members of the
Board of Directors on the date hereof in one or a series of related
transactions, (iii) the merger of the Company with or into another entity, (iv)
the consolidation or sale of all or substantially all of the assets of the
Company in one or a series of related transactions or (v) the execution by the
Company of an agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth above in (i), (ii), (iii) or (iv); and
(xi) Transfer Agent Instructions. The Irrevocable Transfer Agent
Instructions, in the form of Exhibit C attached hereto, shall have been
delivered the Company's transfer agent.
(c) Documents and Certificates. At the Tranche C Closing, the Company
shall have delivered to the Purchasers, the following in form and substance
reasonably satisfactory to the Purchasers:
(i) Opinion. An opinion of the Company's legal counsel in the form
attached hereto as Exhibit D dated as of the Tranche C Closing Date;
(ii) Stock Certificate. A stock certificate(s) representing the
number of Tranche C Shares purchased by such Purchaser as set forth next to such
Purchaser's name on Schedule I, registered in the name of such Purchaser, each
in form satisfactory to the Purchaser;
(iii) Warrant. A Warrant(s) representing the Tranche C Warrants
purchased by such Purchaser as set forth next to such Purchaser's name on
Schedule I, registered in the name of such Purchaser;
(iv) Registration Rights. The Company shall have executed and
delivered the Registration Rights Agreement;
(v) Officer's Certificate. An Officer's Certificate dated the
Tranche C Closing Date and signed by an executive officer of the Company
confirming the accuracy of the Company's representations, warranties and
covenants as of such Closing Date and confirming the compliance by the Company
with the conditions precedent set forth in this Section 4.1 as of the Tranche C
Closing Date.
(vi) Secretary's Certificate. A Secretary's Certificate dated the
Tranche C Closing Date and signed by the Secretary or Assistant Secretary of the
Company certifying (A) that attached thereto is a true and complete copy of the
Certificate of Incorporation of the Company, as in effect on the Tranche C
Closing Date, (B) that attached thereto is a true and complete copy of the
by-laws of the Company, as in effect on the Tranche C Closing Date and (C) that
attached thereto is a true and complete copy of the resolutions duly adopted by
the Board of Directors of the Company authorizing the execution, delivery and
performance this Agreement and of the Transaction Documents, and that such
resolutions have not been modified, rescinded or revoked.
20
4.2 (a) Conditions Precedent to the Obligation of the Company to Sell the
Tranche D Units. The obligation of the Company to sell the Tranche D Units
hereunder is subject to the satisfaction or waiver (with prior written notice to
each Purchaser) by the Company, at or before the Tranche D Closing, of each of
the following conditions:
(i) Accuracy of the Purchasers' Representations and Warranties. The
representations and warranties of each Purchaser in this Agreement shall be true
and correct in all material respects as of the date when made and as of the
Tranche D Closing Date (except for representations and warranties that speak as
of a specific date);
(ii) Performance by the Purchasers. Each Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Purchaser at or prior to the Tranche D Closing; and
(iii) No Injunction. 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 which
prohibits the consummation of any of the transactions contemplated by this
Agreement and the Transaction Documents.
(b) Conditions Precedent to the Obligation of the Purchasers to
Purchase the Tranche D Units. The obligation of each Purchaser hereunder to
acquire and pay for the Tranche D Units is subject to the satisfaction or waiver
by each Purchaser, at or before the Tranche D Closing, of each of the following
conditions:
(i) Tranche C. The Tranche C Closing shall have occurred;
(ii) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company contained herein and in the
Registration Rights Agreement shall be true and correct in all respects as of
the date when made and as of the Tranche D Closing Date (except for
representations and warranties that speak as of a specific date);
(iii) Performance by the Company. The Company shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement and the Transfer Documents to be
performed, satisfied or complied with by the Company at or prior to the Tranche
D Closing Date;
(iv) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court of governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement and the Transfer Documents;
(v) Registration Statements for Tranche C. The Registration
Statement with respect to the Underlying Shares with respect to the Tranche C
Warrant and the Tranche C Shares shall have been declared effective under the
Securities Act by the SEC; and on the Tranche D Closing such Registration
Statement shall be effective, not subject to any stop order and not be subject
to any suspension pursuant to Section [3(p)] of the Registration Rights
21
Agreement, and shall have been effective and shall not have been subject to any
stop order for the thirty (30) business days prior to such Closing Date and no
stop order shall be pending or threatened as at such Closing Date. (vi) Adverse
Changes. Since the date of the financial statements included in the Company's
Quarterly Report on Form 10-Q or Annual Report on Form 10-K, whichever is more
recent, last filed prior to the date of this Agreement, no event which had a
Material Adverse Effect shall have occurred which is not disclosed on any
Schedule hereto or otherwise in writing to each of the Purchasers;
(vii) Litigation. No litigation shall have been instituted or
threatened against the Company which could reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect;
(viii) Management. There shall have been no substantial changes in
the position or responsibilities of the Chief Executive Officer and the Chief
Financial Officer of the Company;
(ix) No Suspensions of Trading in Common Stock. The trading in the
Common Stock shall not have been suspended by the Commission or on Nasdaq
(except for any suspension of trading of limited duration solely to permit
dissemination of material information regarding the Company);
(x) Listing of Common Stock. The Underlying Shares shall on the
Tranche D Closing Date be, listed for trading on Nasdaq, or other exchange
acceptable to Purchasers;
(xi) Required Approvals. All Required Approvals shall have been
obtained.
(xii) Shares of Common Stock. The Company shall have duly reserved
the number of Underlying Shares required by this Agreement to be reserved for
issuance upon exercise of the Tranche D Warrants or the conversion of the
Tranche D Shares.
(xiii) Certificate of Designation. The Company shall have filed with
the Secretary of State of the State of Delaware the Certificate of Designation
with respect to the Series B Preferred Stock.
(xiv) Performance of Conversion/Exercise Obligations. The Company
shall have delivered Underlying Shares upon conversion of the Tranche C Shares
or exercise of the Tranche C Warrant and otherwise performed its obligations in
accordance with the terms, conditions and timing requirements of the Series A
Certificate of Designation and the other Transaction Documents.
(xv) Change of Control. No Change of Control in the Company shall
have occurred;
22
(xvi) Common Stock Price. The Per Share Market Value of the Common
Stock shall have been more than the Tranche D Purchase Price per share for at
least 30 consecutive trading days prior to the Tranche D Closing Date and at
least equal to the Tranche D Purchase Price on the day before the Tranche D
Closing Date; provided, however, that in no event shall the Tranche D Closing
occur on a date which is prior to the 16th calendar day of the month following
such 30 consecutive trading day period. The "Per Share Market Value" means on
any particular date the closing bid price per share of the Common Stock on such
date on Nasdaq or other registered national stock exchange on which the Common
Stock is then listed or if there is no such price on such date, then the closing
bid price on such exchange or quotation system on the date nearest preceding
such date; and
(xvii) Transfer Agent Instructions. The Irrevocable Transfer Agent
Instructions, in the form of Exhibit C attached hereto, shall have been
delivered the Company's transfer agent.
(c) Documents and Certificates. At the Tranche D Closing, the Company
shall have delivered to the Purchasers, the following in form and substance
reasonably satisfactory to the Purchasers:
(i) Opinion. An opinion of the Company's legal counsel, in
substantially the form attached hereto as Exhibit D dated as of the Tranche D
Closing Date;
(ii) Stock Certificate. A stock certificate(s) representing the
Tranche D Shares purchased by such Purchaser as set forth next to such
Purchaser's name on Schedule I, registered in the name of such Purchaser, each
in form satisfactory to the Purchaser;
(iii) Warrant. A Warrant(s) representing the Tranche D Warrants
being purchased at by such Purchaser as set forth next to such Purchaser's name
on Schedule I, registered in the name of such Purchaser, and set at a strike
price equal to 110% of the per share purchase price of the Tranche D Units;
(iv) Officer's Certificate. The Company shall deliver to the
Purchasers an Officer's Certificate dated the Tranche D Closing Date and signed
by an executive officer of the Company confirming the accuracy of the Company's
representations, warranties and covenants as of the Tranche D Closing Date and
confirming the compliance by the Company with the conditions precedent set forth
in this Section 4.2(b) as of the Tranche D Closing Date.
(v) Secretary's Certificate. A Secretary's Certificate dated the
Tranche D Closing Date and signed by the Secretary or Assistant Secretary of the
Company certifying (A) that attached thereto is a true and complete copy of the
Certificate of Incorporation of the Company, as in effect on the Tranche D
Closing Date, (B) that attached thereto is a true and complete copy of the
bylaws of the Company, as in effect on the Tranche D Closing Date and (C) that
attached thereto is a true and complete copy of the resolutions duly adopted by
the Board of Directors of the Company authorizing the execution, delivery and
performance of the Agreement and the Transaction Documents and that such
resolutions have not been modified, rescinded or revoked.
23
ARTICLE V
MISCELLANEOUS
5.1 Fees and Expenses. Except as set forth in the Registration Rights
Agreement and as otherwise set forth in this Agreement, each party shall pay the
fees and expenses of its advisers, counsel, accountants and other experts, if
any, and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all stamp and other taxes and duties levied in connection with the
issuance of the Shares and the Underlying Shares pursuant hereto.
5.2 Entire Agreement; Amendments. This Agreement, together with the
Exhibits and Schedules hereto and the Registration Rights Agreement contain the
entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, with
respect to such matters.
5.3 Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct
answer back received), telecopy or facsimile (with transmission confirmation
report) at the address or number designated below (if received by 7:00 p.m. EST
where such notice is to be received), or the first business day following such
delivery (if delivered on a business day after during normal business hours
where such notice is to be received) or (b) on the second business day following
the date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications are (i) if to the Company to Digital
Courier Technologies, Inc., 000 Xxxxx Xxxxxx, Xxxxx 000 XX Xxx 0000, Xxxx Xxxx,
XX 00000 attn: Xxxxxxxx Xxxxxxx, fax no. (000) 000 0000 and (ii) if to any
Purchaser to the address as set forth on Schedule II hereto with copies to Akin,
Gump, Strauss, Xxxxx & Xxxx, L.L.P., 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Attn: Xxxxx Xxxx, fax no. (000) 000-0000, or such other address as may be
designated in writing hereafter, in the same manner, by such person.
5.4 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
both the Company and the Purchasers; or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter. Notwithstanding the foregoing, no
such amendment shall be effective to the extent that it applies to less than all
of the holders of the Units outstanding. The Company shall not offer or pay any
consideration to a Purchaser for consenting to such an amendment or waiver
unless the same consideration is offered to each Purchaser and the same
consideration is paid to each Purchaser which consents to such amendment or
waiver.
5.5 Headings; Interpretive Matters. The headings herein are for convenience
only, do not constitute a part of this Agreement and shall not be deemed to
24
limit or affect any of the provisions hereof. No provision of this Agreement
will be interpreted in favor of, or against, any of the parties hereto by reason
of the extent to which any such party or its counsel participated in the
drafting thereof or by reason of the extent to which any such provision is
inconsistent with any prior draft hereof or thereof.
5.6 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each of the Purchasers. The Purchasers may
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Company, except that any assignees must make the
representations and warranties set forth in Section 2.2 and otherwise comply
with the terms of this Agreement otherwise applicable to its assignor. This
provision shall not limit a Purchaser's right to transfer securities in
accordance with all of the terms of this Agreement or under the Registration
Rights Agreement.
5.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
5.8 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof. Each party hereby
irrevocably submits to the nonexclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consent to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law.
5.9 Survival. The agreements, covenants, representations, warranties and
provisions contained in this Agreement shall survive the delivery of the Units
pursuant to this Agreement and each closing hereunder and any exercise of the
Warrants.
5.10 Execution. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
5.11 Publicity. The Company and the Purchasers shall consult with each
other in issuing any press releases or otherwise making public statements with
25
respect to the transactions contemplated hereby and neither party shall issue
any such press release or otherwise make any such public statement without the
prior written consent of the other, which consent shall not be unreasonably
withheld or delayed, except that no prior consent shall be required if such
disclosure is required by law, in which such case the disclosing party shall
provide the other party with prior notice of such public statement. The Company
shall not publicly or otherwise disclose the names of any of the Purchasers
without each such Purchaser's prior written consent. The Purchasers and their
affiliated companies shall, without further cost, have the right to use in its
advertising, marketing or other similar materials all or parts of the Company's
press releases that focus on the Transaction forming the subject matter of this
Agreement or which make reference to the Transaction. The Purchasers understand
that this grant by the Company only waives objections that the Company might
have to the use of such materials by the Purchasers and in no way constitutes a
representation by the Company that references in such materials to the
activities of third-parties have been cleared or constitute a fair use.
5.12 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
5.13 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchasers
will be entitled to specific performance of the obligations of the Company under
this Agreement or the Transaction Documents without the showing of economic loss
and without any bond or other security being required. Each of the Company and
the Purchasers (severally and not jointly) agree that monetary damages would not
be adequate compensation for any loss incurred by reason of any breach of its
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
5.14 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of the other Purchasers hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement or out of the
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
5.15 Payment Set Aside. To the extent that the Company makes a payment or
payment to the Purchasers hereunder or pursuant to the Registration Rights
Agreement or the Purchasers enforce or exercise their rights hereunder or
26
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared fraudulent
or preferential, set aside, recovered from, disgorged by or are required to be
refunded, repaid or otherwise restored to the Company, a trustee, receiver or
any other Person under any law (including, without limitation, any bankruptcy
law, state or federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such enforcement or setoff had not
occurred.
5.16 Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
5.17 Tranche A/B Securities Purchase Agreement. The Company and the
Purchasers acknowledge and agree that the Purchasers' rights and obligations to
purchase the the Tranche B Units, the Tranche B Shares and the Tranche B
Warrants shall be terminated as of the date hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
SIGNATURE PAGE FOLLOWS]
27
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
DIGITAL COURIER TECHNOLOGIES, INC.
By:
-------------------------------------
Name:
Title:
28
XXXXX XXXXXXX STRATEGIC
GROWTH FUND, LTD.
By: Xxxxx Xxxxxxx Asset Management, LLC
By:
-------------------------------------
Name:
Title:
XXXXX XXXXXXX STRATEGIC
GROWTH FUND, L.P.
By: Xxxxx Xxxxxxx Capital, LLC
its general partner
By:
-------------------------------------
Name:
Title:
29
No. of Tranche C Tranche C No. of Tranche Tranche D
Name of Purchaser Units Purchase Price D Units Purchase Price
----------------- ----- -------------- ------- --------------
Xxxxx Xxxxxxx Strategic
Growth Fund, Ltd.
Xxxxx Xxxxxxx Strategic
Growth Fund, L.P.
30
Schedule II
Name of Purchaser Address
----------------- -------
Xxxxx Xxxxxxx Strategic Growth Fund, Ltd. 000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxx
Fax: (000) 000-0000
Xxxxx Xxxxxxx Strategic Growth Fund, L.P. 000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxx
Fax: (000) 000-0000
31
Exhibit A
[Certificate of Designation]
CERTIFICATE OF DESIGNATION
OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
DIGITAL COURIER TECHNOLOGIES, INC.
-------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
-------------------------
Digital Courier Technologies, Inc., a Delaware corporation (the
"Company") certifies that pursuant to the authority contained in ARTICLE V of
its Certificate of Incorporation, as amended (the "Certificate of
Incorporation"), and in accordance with the provisions of Section 151 of the
General Corporation Law of the State of Delaware, the Board of Directors of the
Company (the "Board of Directors") by unanimous written consent dated March 3,
1999, duly approved and adopted the following resolution which resolution
remains in full force and effect on the date hereof:
RESOLVED, that pursuant to the authority vested in the Board of
Directors by the Certificate of Incorporation, the Board of Directors does
hereby designate, create, authorize and provide for the issue of a series of
preferred stock having no par value, and having a stated value of $10,000 per
share, which shall be designated as Series A Convertible Preferred Stock (the
"Preferred Stock") consisting of 360 shares, having voting powers, designations,
preferences, limitations, restrictions, and relative rights as follows:
32
CERTIFICATE OF DESIGNATION OF
CONVERTIBLE PREFERRED STOCK, SERIES A OF
DIGITAL COURIER TECHNOLOGIES, INC.
1. Designation, Amount, Par Value and Stated Value. The series of
preferred stock shall be designated as Convertible Preferred Stock, Series A
("Preferred Stock"), and the number of shares so designated shall be 360 (which
shall not be subject to increase without the consent of each of the Holders of
the Preferred Stock ("Holders")). Each share of Preferred Stock, no par value,
shall have a stated value of $10,000 per share (the "Stated Value").
2. Dividends. Holders of the outstanding Preferred Stock shall not be
entitled to receive any dividends in respect of the Preferred Stock.
3. Voting Rights. Except as otherwise provided herein and as otherwise
required by law, the Preferred Stock shall have no voting rights. However, so
long as any shares of Preferred Stock are outstanding, the Company shall not and
shall cause its subsidiaries not to, without the affirmative vote of the Holders
of a majority of the shares of the Preferred Stock then outstanding, (a) alter
or change adversely the absolute or relative powers, preferences or rights given
to the Preferred Stock, (b) alter or amend this Certificate of Designation, (c)
amend its Articles of Incorporation, bylaws or other charter documents so as to
affect adversely any rights of any Holders, (d) increase the authorized number
of shares of Preferred Stock, (e) sell all or substantially all of its assets,
(f) merge with or into another company or (g) enter into any agreement with
respect to the foregoing.
4. Liquidation. Upon any liquidation, dissolution or winding-up of the
Company, whether voluntary or involuntary (a "Liquidation"), the Holders shall
be entitled to receive out of the assets of the Company, whether such assets are
capital or surplus, for each share of Preferred Stock an amount equal to the
Stated Value. If the assets of the Company shall be insufficient to pay in full
all amounts due to the Holders then the entire assets to be distributed to the
Holders shall be distributed among the Holders and the holders of all of the
outstanding Common Stock of the Company ratably in accordance with the
respective amounts that would be payable on such shares if all amounts payable
thereon were paid in full. A sale, conveyance or disposition of all or
substantially all of the assets of the Company or the consummation by the
Company of a transaction or series of related transactions in which more than
50% of the voting power of the Company is disposed of, or a consolidation or
merger of the Company with or into any other company or companies shall not be
treated as a Liquidation, but instead shall be subject to the provisions of
Section 7. The Company shall mail written notice of any such Liquidation, not
less than 45 days prior to the payment date stated therein, to each Holder.
5. Mechanics of Conversion.
(a) Holder's Delivery Requirements. Each share of Preferred
Stock shall be convertible into shares of Common Stock at the
Conversion Ratio (as defined in Section 10) at the option of the Holder
in whole or in part at any time after the Original Issue Date. The
Holders shall effect conversions by surrendering to the Company the
certificate or certificates representing the shares of Preferred Stock
to be converted, together with a copy of the form of conversion notice
attached hereto as Exhibit A (the "Conversion Notice"). Each Conversion
Notice shall specify the Holder, the number of shares of Preferred
Stock to be converted and the date on which such conversion is to be
effected, which date may not be prior to the date the Holder delivers
such Conversion Notice by facsimile (the "Conversion Date"). If no
Conversion Date is specified in a Conversion Notice, the Conversion
Date shall be the date that the Conversion Notice is deemed delivered
33
pursuant to Section 11. Subject to Section 5(b) hereof, each Conversion
Notice, once given, shall be irrevocable. If the Holder is converting
less than all shares of Preferred Stock represented by the certificate
or certificates tendered by the Holder with the Conversion Notice, or
if a conversion hereunder cannot be effected in full for any reason,
the Company shall promptly cause to be delivered to such Holder (in the
manner and within the time set forth in Section 5(b)) a new certificate
for such number of shares of Preferred Stock as have not been
converted. Shares of Preferred Stock converted into Common Stock shall
be cancelled and shall have the status of authorized but unissued
shares of undesignated stock.
(b) Company's Response. Not later than three (3) Trading Days
after any Conversion Date, the Company will cause to be delivered to
the Holder (i) a certificate or certificates which shall be free of
restrictive legends and trading restrictions (other than those required
by Section 3.l(b) of the Purchase Agreement) representing the number of
shares of Common Stock being acquired upon the conversion of shares of
Preferred Stock and (ii) one or more certificates representing the
number of shares of Preferred Stock not converted. Upon request of the
Holder, in lieu of physical delivery of the shares of Preferred Stock,
provided the Company's transfer agent is participating in the
Depositary Trust Company ("DTC") Fast Automated Securities Transfer
("FAST") program, upon request of the Holder and in compliance with the
provisions hereof, the Company shall use its best efforts to cause its
transfer agent to electronically transmit any certificate or
certificates required to be delivered to the Holder under this Section
5 by crediting the account of the Holder's Prime Broker with DTC
through its Deposit Withdrawal Agent Commission system. The time period
for delivery described herein shall apply to the electronic
transmittals described herein.. If in the case of any Conversion Notice
such certificate or certificates are not delivered to or as directed by
the applicable Holder by the third Trading Day after the Conversion
Date, the Holder shall be entitled at any time on or before its receipt
of such certificate or certificates thereafter, to rescind such
conversion by written notice to the Company, in which event the Company
shall immediately return the certificates representing the shares of
Preferred Stock for which Common Stock was not delivered pursuant to
such conversion.
(c) Liquidation Damages; etc.
-------------------------
(i) If the Company fails to deliver to the Holder
such certificate or certificates pursuant to this Section 5 on
or prior to the third Trading Day after the Conversion Date
(the "Delivery Date"), in addition to all other remedies that
such Holder may pursue hereunder or under the Purchase
Agreement, the Company shall pay to such Holder in cash, as
liquidated damages and not as a penalty, $5,000 per day until
such certificates are delivered. If the Company fails to
deliver to the Holder such certificate or certificates
pursuant to this Section 5 prior to the 15th day after the
Conversion Date the Company shall, at the Holder's option,
redeem from funds legally available therefor at the time of
such redemption, such number of shares of Preferred Stock then
held by such Holder, as requested by such Holder. If such
Holder opts to redeem any number of shares of Preferred Stock
pursuant to this Section 5(c)(i), then the Company shall
immediately notify all other Holders of such Holder's election
to redeem and, at any other Holders' option, which shall be
exercised within two business days thereof, redeem, from funds
legally available therefor at the time of such redemption,
such number of shares of Preferred Stock then held by such
other Holder, as requested by such Holder, which redemption
shall be simultaneous with other redemptions referred to
above. The redemption price shall be equal to the sum of the
number of shares of Preferred Stock then held by such Holder
multiplied by (1) the average Per Share Market Value for the
five Trading Days immediately preceding (x) the Conversion
Date or (y) the date of payment in full by the Company of such
prepayment price, whichever is greater, multiplied by, (2) the
Conversion Ratio calculated on the Conversion Date. If the
Holder has requested that the Company redeem shares of
34
Preferred Stock pursuant to this Section and the Company fails
for any reason to pay the redemption price referenced above
within seven days after such notice is deemed delivered
pursuant to Section 5(c)(i), the Company will pay interest on
the redemption price at a rate of 15% per annum in cash to
such Holder, accruing from such seventh day until the
redemption price and any accrued interest thereon is paid in
full. Nothing herein shall limit a Holder's right to pursue
actual damages for the Company's failure to deliver
certificates representing shares of Common Stock upon
conversion within the period specified herein (including,
without limitation, damages relating to any purchase of shares
of Common Stock by such Holder to make delivery on a sale
effected in anticipation of receiving certificates
representing shares of Common Stock upon conversion, such
damages to be in an amount equal to (A) the aggregate amount
paid by such Holder for the shares of Common Stock so
purchased minus (B) the aggregate amount of net proceeds, if
any, received by such Holder from the sale of the shares of
Common Stock issued by the Company pursuant to such
conversion), and such Holder shall have the right to pursue
all remedies available to it at law or in equity (including,
without limitation, a decree of specific performance and/or
injunctive relief).
(ii) In addition to any other rights available to the
Holder, if the Company fails to deliver to the Holder such
certificate or certificates pursuant to Section 5(c)(i) by the
Delivery Date and after the Delivery Date the Holder purchases
(in an open market transaction or otherwise) shares of Common
Stock to deliver to the satisfaction of a sale by such Holder
of the Underlying Shares which the Holder anticipated
receiving on the Delivery Date upon such conversion (a "Buy-In
), then the Company shall pay in cash to the Holder (in
addition to any remedies available to or elected by the
Holder) the amount by which (A) the Holder's total purchase
price (including brokerage commissions, if any) for the shares
of Common Stock purchased for a Buy-In exceeds (B) the
aggregate Conversion Price for the number of shares of Common
Stock in the Buy-In for which such conversion was not timely
honored. For example, if the Holder purchases shares of Common
Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted conversion of $10,000
aggregate Conversion Price for the number of shares of Common
Stock in the Buy-In, the Company shall be required to pay the
Holder $1,000. The Holder shall provide the Company written
notice indicating the amounts payable to the Holder in respect
of the Buy-In.
(d) Conversion Price. The conversion price for each share of Preferred
Stock (the "Conversion Price") in effect on any Conversion Date shall be $4.50,
subject to adjustment from time to time pursuant to the provisions of Sections 7
and 8 hereof.
(e) Restriction on Conversion by Either the Registered Owner or the
Company. Notwithstanding anything herein to the contrary, in no event shall any
Holder or the Company have the right or be required to convert shares of
Preferred Stock if as a result of such conversion the aggregate number of shares
of Common Stock beneficially owned by such Registered Owner and its Affiliates
would exceed 9.99% of the outstanding shares of the Common Stock following such
exercise. For purposes of this Section 5(e), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended. The provisions of this Section 5(e) may be waived by a Holder
as to itself (and solely as to itself) upon not less than 65 days prior written
notice to the Company, and the provisions of this Section 5(e) shall continue to
apply until such 65th day (or later, if stated in the notice of waiver).
Registration Requirements.
(a) Reservation of Underlying Shares. The Company covenants that it
will at all times reserve and keep available out of its authorized and unissued
Common Stock solely for the purpose of issuance upon conversion of the Preferred
35
Stock and free from preemptive rights or any other actual contingent purchase
rights of persons other than the Holders of Preferred Stock, not less than 100%
of such number of shares of Common Stock as shall (subject to any additional
requirements of the Company as to reservation of such shares set forth in the
Purchase Agreement) be issuable (taking into account the adjustments of Section
7) upon the conversion of all outstanding shares of Preferred Stock (without
regard to any limitations on conversion). The Company covenants that all shares
of Common Stock that shall be so issuable shall, upon issue, be duly and validly
authorized, issued and fully paid, nonassessable and freely tradable.
(b) Registration Delay Payments. Notwithstanding the foregoing, the
provisions of Section 2(d) of the Registration Statement are incorporated herein
by reference.
7. Adjustment of Conversion Price.
(a) Common Stock Dividends; Common Stock Splits; Reverse Common Stock
Splits. If the Company, at any time after the Issuance Date (a) shall pay a
stock dividend on its Common Stock, (b) subdivide outstanding shares of Common
Stock into a larger number of shares, (c) combine outstanding shares of Common
Stock into a smaller number of shares, or (d) issue by reclassification of
shares of Common Stock any shares of capital stock of the Company, then
Conversion Price shall be multiplied by a fraction, the numerator of which shall
be the number of shares of Common Stock (excluding treasury shares, if any)
outstanding before such event and the denominator of which shall be the number
of shares of Common Stock outstanding after such event. Any adjustment made
pursuant to this paragraph 7(a) shall become effective immediately after the
record date for the determination of shareholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.
(b) Rights; Warrants. If the Company, at any time after the Issuance
Date, shall issue rights or warrants to all of the holders of its Preferred
Stock entitling them to subscribe for or purchase shares of Common Stock at a
price per share less than the Per Share Market Value of Common Stock at the
record date mentioned below, the Conversion Price shall be multiplied by a
fraction, the denominator of which shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding on the date of issuance of such
rights or warrants plus the number of additional shares of Common Stock offered
for subscription or purchase, and the numerator of which shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding on the
date of issuance of such rights or warrants plus the number of shares which the
aggregate offering price of the total number of shares so offered would purchase
at such Per Share Market Value. Such adjustment shall be made whenever such
rights or warrants are issued, and shall become effective immediately after the
record date for the determination of shareholders entitled to receive such
rights or warrants.
(c) Subscription Rights. If the Company, at any time after the Issuance
Date, shall distribute to all of the holders of Common Stock evidences of its
indebtedness or assets or rights or warrants to subscribe for or purchase any
security (excluding those referred to in paragraphs 7(a) and (b) above), then in
each such case the Conversion Price at which the Preferred Stock shall
thereafter be convertible shall be determined by multiplying the Conversion
Price in effect immediately prior to the record date fixed for determination of
shareholders entitled to receive such distribution by a fraction, the
denominator of which shall be the Per Share Market Value of Common Stock
determined as of the record date mentioned above, and the numerator of which
shall be such Per Share Market Value of the Common Stock on such record date
less the then fair market value at such record date of the portion of such
assets or evidence of indebtedness so distributed applicable to one outstanding
share of Common Stock as determined by the Board of Directors in good faith;
provided, however, that in the event of a distribution exceeding ten percent
(10%) of the net assets of the Company, such fair market value shall be
determined by a nationally recognized or major regional investment banking firm
or firm of independent certified public accountants of recognized standing (an
"Appraiser") selected in good faith by the Holders of the Preferred Stock; and
provided, further, that the Company, after receipt of the determination by such
Appraiser shall have the right to select in good faith an additional Appraiser
meeting the same qualifications, in which case the fair market value shall be
equal to the average of the determinations by each such Appraiser. Such
adjustment shall be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.
36
(d) Rounding. All calculations under this Section 7 shall be made to
the nearest cent or the nearest l/l00th of a share, as the case may be.
(e) Notice of Adjustment. Whenever the Conversion Price is adjusted
pursuant to paragraphs 7(a), (b) or (c), the Company shall promptly mail to the
Holders a notice setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment.
(f) Redemption Event. In case of (A) any reclassification of the Common
Stock, (B) any Change of Control Transaction, (C) any compulsory share exchange
pursuant to which the Common Stock is converted into other securities, cash or
property or (D) (i) the Company's notice to any Holder of the Preferred Stock,
including by way of public announcement, at any time, of its intention, for any
reason, not to comply with proper requests for the conversion of any shares of
the Preferred Stock or (ii) the Company's refusal to honor a duly executed
Conversion Notice delivered pursuant to Section 5 hereof (clauses (A) through
(D) above are referred to as a "Redemption Event"), in the case of (A), (B) and
(C), the Holders shall have the right thereafter to convert the shares of
Preferred Stock for shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of Common Stock following such
Redemption Event, and the Holders shall be entitled upon such event to receive
such amount of securities, cash or property as the shares of the Common Stock of
the Company into which the shares of Preferred Stock could have been converted
immediately prior to such Redemption Event (without taking into account any
limitations or restrictions on the convertibility of the Securities) would have
been entitled; provided, however, that in the case of a transaction specified in
(B) in which holders of the Company's Common Stock receive cash, the Holders
shall have the right to convert the shares of Preferred Stock for such number of
shares of the surviving company equal to the amount of cash into which the
shares of Preferred Stock are convertible divided by the fair market value of
the shares of the surviving company on the effective date of the merger;
provided, further, that in the case of an event specified in (D), the Holders
shall have the option to require the Company to redeem, from funds legally
available therefor at the time of such redemption, its shares of Common Stock
immediately theretofore acquirable and receivable upon the conversion of such
Holder's Preferred Stock at a price per share equal to the product of (i) the
average Per Share Market Value for the five Trading Days immediately preceding
(1) the effective date, the date of the closing, date of occurrence or the date
of the announcement, as the case may be, of the Redemption Event triggering such
redemption right or (2) the date of payment in full by the Company of the
redemption price hereunder, whichever is greater, and (ii) the Conversion Ratio
calculated on the effective date, the date of the closing, date of occurrence or
the date of the announcement, as the case may be or, at the option of the
Holder, on the date of submission of a Redemption Notice. The entire redemption
price shall be paid in cash, and the terms of payment of such redemption price
shall be subject to the provisions set forth in Section 9(b). In the case of
(A), (B) and (C), the terms of any such Redemption Event shall include such
terms so as to continue to give to the Holders the right to receive the
securities, cash or property set forth in this Section 7(f) upon any conversion
or redemption following such Redemption Event. This provision shall similarly
apply to successive Redemption Events.
(g) Reclassification, Etc. If:
A. the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
B. the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
C. the Company shall authorize the granting to the
holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock
of any class or of any rights; or
D. the approval of any shareholders of the Company shall
be required in connection with any reclassification
of the Common Stock of the Company, any consolidation
or merger to which the Company is a party, any sale
or transfer of all or substantially all of the assets
of the Company, of any compulsory share of exchange
whereby the Common Stock is converted into other
securities, cash or property; or
37
E. the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of
the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of the conversion of the Preferred Stock, and shall cause to be
mailed to the Holders at the address specified herein, at least 20 calendar days
prior to the applicable record or effective date hereinafter specified, a notice
(provided such notice shall not include any material non-public information)
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided, however, that
the failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice.
(h) Adjustment to Conversion Price. In order to prevent dilution of the
rights granted under this Certificate of Designations, the Conversion Price will
be subject to adjustment at any time prior to that day which is thirty (30)
Business Days after the Effectiveness Date of the Registration Statement (as
such terms are defined in the Registration Rights Agreement), as provided in
this Section 7(h):
(i) Adjustment of Conversion Price upon Issuance of Common Stock. If at
any time after the Issuance Date the Company issues or sells, or is deemed
to have issued or sold, any shares of Common Stock (other than the
Underlying Shares or shares of Common Stock deemed to have been issued by
the Company in connection with an Approved Stock Plan (as defined below)
or shares of Common Stock issuable upon the exercise of any options or
warrants outstanding on the date hereof and listed in Schedule 2.1(c) of
the Purchase Agreement or shares of Common Stock issued or deemed to have
been issued as consideration for an acquisition by the Company of a
division, assets or business (or stock constituting any portion thereof)
from another person) for a consideration per share less than the
Conversion Price in effect immediately prior to such issuance or sale,
then immediately after such issue or sale the Conversion Price then in
effect shall be reduced to an amount equal to the consideration per share
of Common Stock of such issuance or sale. For purposes of determining the
adjusted Conversion Price under this Section 7(h)(i), the following shall
be applicable:
(A) Issuance of Options. If at any time after the Issuance
Date the Company in any manner grants any rights or options to subscribe
for or to purchase Common Stock or any stock or other securities
convertible into or exchangeable for Common Stock (other than the
Underlying Shares or shares of Common Stock deemed to have been issued by
the Company in connection with an Approved Stock Plan (as defined below)
or shares of Common Stock issuable upon the exercise of any options or
warrants outstanding on the date hereof and listed in Schedule 2.1(c) of
the Purchase Agreement or shares of Common Stock issued or deemed to have
been issued as consideration for an acquisition by the Company of a
division, assets or business (or stock constituting any portion thereof)
from another Person) (such rights or options being herein called "Options"
and such convertible or exchangeable stock or securities being herein
called "Convertible Securities") and the price per share for which Common
Stock is issuable upon the exercise of such Options or upon conversion or
exchange of such Convertible Securities is less than the Conversion Price
in effect immediately prior to such grant, then the Conversion Price shall
be adjusted to equal the price per share for which Common Stock is
issuable upon the exercise of such Options or upon the conversion or
exchange of such Convertible Securities. No adjustment of the Conversion
Price shall be made upon the actual issuance of such Common Stock or of
such Convertible Securities upon the exercise of such Options or upon the
actual issuance of such Common Stock upon conversion or exchange of such
Convertible Securities.
(B) Issuance of Convertible Securities. If at any time after
the Issuance Date the Company in any manner issues or sells any
Convertible Securities (other than the Underlying Shares or shares of
Common Stock deemed to have been issued by the Company in connection with
an Approved Stock Plan (as defined below) or shares of Common Stock
issuable upon the exercise of any options or warrants outstanding on the
date hereof and listed in Schedule 2.1(c) of the Purchase Agreement or
shares of Common Stock issued or deemed to have been issued as
consideration for an acquisition by the Company of a division, assets or
38
business (or stock constituting any portion thereof) from another Person)
and the price per share for which Common Stock is issuable upon such
conversion or exchange is less than the Conversion Price in effect
immediately prior to issuance or sale, then the Conversion Price shall be
adjusted to equal the price per share for which Common Stock is issuable
upon the conversion or exchange of such Convertible Securities. No
adjustment of the Conversion Price shall be made upon the actual issue of
such Common Stock upon conversion or exchange of such Convertible
Securities, and if any such issue or sale of such Convertible Securities
is made upon exercise of any Options for which adjustment of the
Conversion Price had been or are to be made pursuant to other provisions
of this Section 6(h)(i), no further adjustment of the Conversion Price
shall be made by reason of such issue or sale.
(C) Change in Option Price or Rate of Conversion. If there
is a change at any time in (i) the purchase price provided for in any
Options, (ii) the additional consideration, if any, payable upon the
issue, conversion or exchange of any Convertible Securities or (iii) the
rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock, then the Conversion Price in effect at the
time of such change shall be readjusted to the Conversion Price which
would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold; provided that no adjustment
shall be made if such adjustment would result in an increase of the
Conversion Price then in effect.
(D) Certain Definitions. For purposes of determining the
adjusted Conversion Price under this Section 7(h)(i), the following terms
have meanings set forth below:
(I) "Approved Stock Plan" shall mean any contract, plan
or agreement which has been approved by the Board of Directors of the
Company, pursuant to which the Company's securities may be issued to any
employee, officer, director or consultant.
(II) "Common Stock Deemed Outstanding" means, at any
given time, the number of shares of Common Stock issued and outstanding at
such time, plus the number of shares of Common Stock deemed to be
outstanding pursuant to Sections 7(h)(i)(A) and 7(h)(i)(B) hereof
regardless of whether the Options or Convertible Securities are actually
exercisable at such time, but excluding any shares of Common Stock
issuable upon conversion of the Preferred Stock.
(E) Effect on Conversion Price of Certain Events. For
purposes of determining the adjusted Conversion Price under this Section
7(h)(i), the following shall be applicable:
(I) Calculation of Consideration Received. If any
Common Stock, Options or Convertible Securities are issued or sold or
deemed to have been issued or sold for cash, the consideration received
therefor will be deemed to be the net amount received by the Company
therefor. In case any Common Stock, Options or Convertible Securities are
issued or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Company will be the fair
value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the
Company will be the arithmetic average of the Per Share Market Values of
such security for the five (5) consecutive Trading Days immediately
preceding the date of receipt. In case any Common Stock, Options or
Convertible Securities are issued to the owners of the non-surviving
entity in connection with any merger in which the Company is the surviving
entity the amount of consideration therefor will be deemed to be the fair
value of such portion of the net assets and business of the non-surviving
entity as is attributable to such Common Stock, Options or Convertible
Securities, as the case may be. The fair value of any consideration other
than cash or securities will be determined jointly by the Company and the
registered owners of a majority of the shares of Preferred Stock then
outstanding. If such parties are unable to reach agreement within ten (10)
days after the occurrence of an event requiring valuation (the "Valuation
Event"), the fair value of such consideration will be determined within
forty-eight (48) hours of the tenth (10th) day following the Valuation
Event by an Appraiser selected in good faith by the Company, and agreed
upon in good faith by the registered owners of a majority of the shares of
Preferred Stock then outstanding. The determination of such Appraiser
shall be binding upon all parties absent manifest error.
39
(II) Integrated Transactions. In case any Option is
issued in connection with the issue or sale of other securities of the
Company, together comprising one integrated transaction in which no
specific consideration is allocated to such Options by the parties
thereto, the Options will be deemed to have been issued for an aggregate
consideration of $.001.
(III) Treasury Shares. The number of shares of Common
Stock outstanding at any given time does not include shares owned or held
by or for the account of the Company, and the disposition of any shares so
owned or held will be considered an issue or sale of Common Stock.
(IV) Record Date. If the Company takes a record of the
holders of Common Stock for the purpose of entitling them (1) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (2) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date will be deemed to
be the date of the issue or sale of the shares of Common Stock deemed to
have been issued or sold upon the declaration of such dividend or the
making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(V) Certain Events. If any event occurs of the type
contemplated by the provisions of Section 7(h)(i) (subject to the
exceptions stated therein) but not expressly provided for by such
provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity
features), then the Company's Board of Directors will make an appropriate
adjustment in the Conversion Price so as to protect the rights of the
Holders or assigns; provided, however, that no such adjustment will
increase the Conversion Price as otherwise determined pursuant to this
Section 7(h).
Notwithstanding the foregoing, in no event shall any provision in this
Section 7 cause the Conversion Price to be greater than the Conversion Price on
the Date of Issuance.
8. Major Announcement. If the Company (i) makes a public announcement
that it intends to enter into a Change of Control Transaction (as defined in
Section 10) or (ii) any person, group or entity (including the Company, but
excluding a Holder or any affiliate of a Holder) publicly announces a bona fide
tender offer, exchange offer or other transaction to purchase 50% or more of the
Common Stock (such announcement being referred to herein as a "Major
Announcement" and the date on which a Major Announcement is made, the
"Announcement Date"), then, in the event that a Holder seeks to convert shares
of Preferred Stock on or following the Announcement Date, the Conversion Price
shall, effective upon the Announcement Date and continuing through the earlier
to occur of the consummation of the proposed transaction or tender offer,
exchange offer or other transaction and the Abandonment Date (as defined below),
be equal to the lesser of (A) the Conversion Price in effect on the Trading Day
immediately preceding the Announcement Date for such Preferred Stock and (B) the
Conversion Price on such Conversion Date. "Abandonment Date" means with respect
to any proposed transaction or tender offer, exchange offer or other transaction
for which a public announcement as contemplated by this paragraph has been made,
the date upon which the Company (in the case of clause (i) above) or the person,
group or entity (in the case of clause (ii) above) publicly announces the
termination or abandonment of the proposed transaction or tender offer, exchange
offer or another transaction which caused this paragraph to become operative.
9. INTENTIONALLY OMITTED.
10. Definitions. For the purposes hereof, the following terms shall
have the following meanings:
"Change of Control Transaction" means the occurrence of any of (i) an
acquisition after the date hereof by an individual or legal entity or "group"
(as described in Section 13(d)(3) of the Exchange Act), of in excess of 50% of
the voting securities of the Company, (ii) a replacement of more than one-half
of the members of the Company's board of directors which is not approved by a
majority of those individuals who are members of the board of directors on the
date hereof, or their duly elected successors who are directors immediately
40
prior to such transaction, in one or a series of related transactions, (iii) the
merger of the Company with or into another entity, unless following such
transaction, the Holders of the Company's securities continue to hold at least
50% of such securities following such transaction, (iv) consolidation or sale of
all or substantially all of the assets of the Company in one or a series of
related transactions, or (v) the execution by the Company of an agreement to
which the Company is a party or by which it is bound, providing for any of the
events set forth above in (i), (ii), (iii) or (iv).
"Closing Date" means the date of the closing of the purchase and sale
of the Preferred Stock.
"Commission" means the United States Securities and Exchange
Commission, or any successor to such agency.
"Common Stock" means the Company's common stock, $.0001 par value per
share, of the Company and stock of any other class into which such shares may
hereafter have been reclassified or changed.
"Conversion Ratio" means, at any time, a fraction, the numerator of
which is the Stated Value and the denominator of which is the Conversion Price
at such time.
"Nasdaq" means The National Market System of the Nasdaq Stock Market.
"Original Issue Date" shall mean the date of the first issuance of any
shares of the Preferred Stock regardless of the number of transfers of any
particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.
"Per Share Market Value" means on any particular date (a) the closing
bid price per share of the Common Stock on such date on the Nasdaq or other
registered national stock exchange on which the Common Stock is then listed or
if there is no such price on such date, then the closing bid price on such
exchange or quotation system on the date nearest preceding such date, or (b) if
the Common Stock is not listed then on the Nasdaq or any registered national
stock exchange, the closing bid price for a share of Common Stock in the
over-the-counter market, as reported by the Nasdaq or in the National Quotation
Bureau Incorporated or similar organization or agency succeeding to its
functions of reporting prices) at the close of business on such date, or (c) if
the Common Stock is not then publicly traded the fair market value of a share of
Common Stock as determined by an Appraiser selected in good faith by the Holders
of a majority in interest of the shares of the Preferred Stock; provided,
however, that the Company, after receipt of the determination by such Appraiser,
shall have the right to select in good faith an additional Appraiser, in which
case, the fair market value shall be equal to the average of the determinations
by each such Appraiser; and provided, further that all determinations of the Per
Share Market Value shall be appropriately adjusted for any stock dividends,
stock splits or other similar transactions during such period.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Purchase Agreement" means the Convertible Preferred Stock Purchase
Agreement, dated as of the Original Issue Date, among the Company and the
original Holders of the Preferred Stock.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Original Issue Date, by and among the Company and the
original Holders.
41
"Trading Day" means (a) a day on which the Common Stock is traded on
the Nasdaq or other registered national stock exchange on which the Common Stock
has been listed, or (b) if the Common Stock is not listed on the Nasdaq or any
registered national stock exchange, a day or which the Common Stock is traded in
the over-the-counter market, as reported by the OTC Bulletin Board, or (c) if
the Common Stock is not quoted on the OTC Bulletin Board, a day on which the
Common Stock is quoted in the over-t -counter market as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency succeeding
its functions of reporting prices); provided, however, that in the event that
the Common Stock is not listed or quoted as set forth in (a), (b) and (c)
hereof, then Trading Day shall mean any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close.
"Underlying Shares" means the number of shares of Common Stock into
which the Shares are convertible in accordance with the terms hereof and the
Purchase Agreement.
11. Notices. Except as otherwise provided in the event of conversion of
shares of Preferred Stock, all notices or other communications required
hereunder shall be in writing and shall be deemed to have been received (a) upon
hand delivery (receipt acknowledged) or delivery by telex (with correct answer
back received) telecopy or facsimile (with transmission confirmation report) at
the address or number designated below (if received by 8:00 p.m. EST where such
notice is to be received), or the first business day following such delivery (if
received after 8:00 p.m. EST where such notice is to be received) or (b) on the
second business day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur; and shall be regarded as properly
addressed if sent to the parties or their representatives at the addresses given
below:
To the Company: Digital Courier Technologies, Inc.
000 Xxxxx Xxxxxx, Xxxxx 000
X.X. Xxx 0000
Xxxx Xxxx, Xxxx 00000
Attn: Xxxxxxxx Xxxxxxx
Phone: 000-000-0000
Fax: 000-000-0000
To the Holders: Xxxxx Xxxxxxx Strategic Growth Fund, Ltd.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
Xxxxx Xxxxxxx Strategic Growth Fund, L.P.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
42
with copies to: Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
or such other address as any of the above may have furnished to the other
parties in writing by registered mail, return receipt requested.
12. Lost or Stolen Certificates. Upon receipt by the
Company of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of any stock
certificates representing Preferred Stock, and, in the case of
loss, theft or destruction, of any indemnification undertaking
by the Holder to the Company in customary form and, in the
case of mutilation, upon surrender and cancellation of such
Series A Stock certificate(s), the Company shall execute and
deliver new preferred stock certificate(s) of like tenor and
date; provided, however, the Company shall not be obligated to
re-issue preferred stock certificates if the Holder
contemporaneously requests the Company to convert such
Preferred Stock into Common Stock.
13. Remedies Characterized; Other Obligations, Breaches and Injunctive
Relief. The remedies provided in this Certificate of Designation shall be
cumulative and in addition to all other remedies available under this
Certificate of Designation, at law or in equity (including a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall be
deemed a waiver of compliance with the provisions giving rise to such remedy and
nothing herein shall limit a Holder's right to pursue actual damages for any
failure by the Company to comply with the terms of this Certificate of
Designation. The Company covenants to each Holder of Preferred Stock that there
shall be no characterization concerning this instrument other than as expressly
provided herein. Amounts set forth or provided for herein with respect to
payments, conversion and the like (and the computation thereof) shall be the
amounts to be received by the Holder thereof and shall not, except as expressly
provided herein, be subject to any other obligation of the Company (or the
performance thereof). The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holders of the
Preferred Stock and that the remedy at law in the event of any such breach may
be inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, the Holders of the Preferred Stock shall be
entitled, in addition to all other available remedies, to an injection
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
14. Specific Shall Not Limit General; Construction. No specific
provision contained in this Certificate of Designation shall limit or modify any
more general provision contained herein. This Certificate of Designation shall
be deemed to be jointly drafted by the Company and all Purchasers (as defined in
this Purchase Agreement) and shall not be construed against any person as the
drafter hereof.
15. Failure or Indulgence Not Waiver. No failure or delay on the part
of a Holder of Preferred Stock in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.
16. Fractional Shares. Upon a conversion hereunder, the Company shall
not be required to issue stock certificates representing fractions of shares of
Common Stock, but may if otherwise permitted, make a cash payment in respect of
any final fraction of a share based on the Per Share Market Value at such time.
43
If the Company elects not, or is unable, to make such a cash payment, the Holder
of a share of Preferred Stock shall be entitled to receive, in lieu of the final
fraction of a share, one whole share of Common Stock.
17. Payment of Tax Upon Issue of Transfer. The issuance of certificates
for shares of the Common Stock upon conversion of the Preferred Shares shall be
made without charge to the Holders thereof for any documentary stamp or similar
taxes that may be payable in respect of the issue or delivery of such
certificate, provided that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificate upon conversion in a name other than that of the Holders
so converted and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
18. Shares Owned by Company Deemed Not Outstanding. In determining
whether the holders of the outstanding shares of Preferred Stock have concurred
in any direction, consent or waiver under this Certificate of Designations,
shares of Preferred Stock which are owned by the Company or any other obligor on
the warrants or by any person directly or indirectly controlling or controlled
by or under direct or indirect common control with the Company or any other
obligor on such shares shall be disregarded and deemed not to be outstanding for
the purpose of any such determination; provided that any Preferred Stock owned
by the Purchasers (as defined in the Purchase Agreement) shall be deemed
outstanding for purposes of making such a determination. Preferred Stock so
owned which have been pledged in good faith may be regarded as outstanding if
the pledgee establishes to the satisfaction of the Company the pledgee's right
so to act with respect to such warrants and that the pledgee is not the Company
or any other obligor upon the securities or any person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company or any other obligor on the preferred stock.
19. Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction hereof.
[Signature page follows]
44
IN WITNESS WHEREOF Digital Courier Technologies, Inc. has caused this
Certificate to be signed by its Executive Vice President and Assistant Secretary
respectively, on this 3rd day of March, 1999.
-------------------------
Name: Xxxxxxxx Xxxxxxx
Title: Executive Vice President
-------------------------
Name: Xxxxxx Xxxxxx
Title: Assistant Secretary
45
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder in order to
Convert shares of Series __ Preferred Stock)
The undersigned hereby elects to convert the number of shares of Series
__ Convertible Preferred Stock indicated below, into shares of common stock, par
value $.0001 per share (the "Common Stock"), of Digital Courier Technologies,
Inc. (the "Company") according to the conditions hereof, as of the date written
below. If shares are to be issued in the name of a person other than
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be charged to the
Holder for any conversion, except for such transfer taxes, if any.
Conversion calculations:
--------------------------------------------
Date to Effect Conversion
--------------------------------------------
Number of shares of Series __ Preferred Stock
to be Converted
--------------------------------------------
Number of shares of Common Stock to be Issued
--------------------------------------------
Applicable Conversion Price
--------------------------------------------
Signature
--------------------------------------------
Name
--------------------------------------------
Address
46
Exhibit B
[Warrant]
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE ACT.
March 3, 1999
[800,000] shares Warrant No. ______
DIGITAL COURIER TECHNOLOGIES, INC.
STOCK PURCHASE WARRANT
Registered Owner: Xxxxx Xxxxxxx Strategic Growth Fund, Ltd.
This certifies that, for value received, Digital Courier Technologies,
Inc., a Delaware corporation, the ("Company") grants the following rights to the
Registered Owner, or assigns, of this Warrant:
1. Issue. Upon tender (as defined in section 5 hereof) to the
Company, the Company shall issue to the Registered Owner, Xxxxx Xxxxxxx
Strategic Growth Fund, Ltd., or assigns, up to the number of shares specified in
paragraph 2 hereof of fully paid and nonassessable shares of Common Stock, par
value $.0001 per share ("Common Stock"), that the Registered Owner, or assigns,
is otherwise entitled to purchase.
2. Number of Shares. The total number of shares of Common Stock
that the Registered Owner, or assigns, of this Warrant is entitled to receive
upon exercise of this Warrant is 800,000 shares of Common Stock, subject to
adjustment from time to time as set forth in paragraph 6 below. The Company
shall at all times reserve and hold available sufficient shares of Common Stock
to satisfy all conversion and purchase rights represented by outstanding
convertible securities, options and warrants, including this Warrant. The
Company covenants and agrees that all shares of Common Stock that may be issued
upon the exercise of this Warrant shall, upon issuance, be duly and validly
issued, fully paid and nonassessable, and free from all taxes, liens and charges
with respect to the purchase and the issuance of the shares.
3. Exercise Price. (a) The initial exercise price of this Warrant,
the price at which the shares of stock issuable upon exercise of this Warrant
may be purchased, is $5.23 per share, and upon the six-month anniversary of the
date hereof, shall be adjusted as set forth in section 3(b) hereof, and subject
to adjustment from time to time pursuant to the provisions of paragraph 6 below
(the "Exercise Price").
(b) At 5:00 p.m. on September 4, 1999 (the "Reset Date"), the
Exercise Price shall be adjusted to be equal to the lesser of (i) $5.23 per
share, or (ii) the average Per Share Market Value during any five (5)
47
consecutive Trading Days during the period of the 22 Trading Days immediately
preceding the Reset Date. The Registered Owner shall send written notice to the
Company of the Exercise Price, as adjusted pursuant to this paragraph, together
with computation of such adjusted Exercise Price and the computation of the
average Per Share Market Value for each such five-day period, no later than the
second (2nd) Business Day after the Reset Date. The Exercise Price shall be
deemed to be adjusted to such new Exercise Price unless the Company notifies the
Registered Owner within one (1) Business Day after receipt of such written
notice from the Registered Owner that the Company disagrees with the computation
of such adjustment. If the Registered Owner and the Company fail to agree upon
the adjusted Exercise Price within one (1) Business Day after the Company has
given such notice, the Exercise Price shall be computed promptly by a securities
firm acceptable to both the Registered Owner and the Company, and such
computation shall be final.
4. Exercise Period. This Warrant may only be exercised 120 days
after the Effectiveness Date of the Registration Statement as defined in the
Registration Rights Agreement and up to and including , _____ [2004] (the
"Exercise Period"). If not exercised during this period, this Warrant and all
rights granted under this Warrant shall expire and lapse.
5. Tender.
(a) This Warrant may be exercised, in whole or in part, by
(i) actual delivery of (a) the Exercise Price in cash, (b) a duly executed
Warrant Exercise Form, a copy of which is attached to this Warrant as Exhibit A,
properly executed by the Registered Owner, or assigns, of this Warrant, and (c)
by surrender of this Warrant or (ii) if the resale of the Warrant Shares by the
Registered Owner is not then registered pursuant to an effective registration
statement under the Securities Act, delivery to the Company of a written notice
of an election to effect a "Cashless Exercise" (as defined below) for the
Warrant Shares specified in the Warrant Exercise Form. The Warrant Shares so
purchased shall be deemed to be issued to the Registered Owner as of the close
of business on the date on which this Warrant shall have been surrendered, the
completed Warrant Exercise Form shall have been delivered and payment shall have
been made for such shares as set forth above. The payment and Warrant Exercise
Form must be delivered to the registered office of the Company either in person
or as set forth in Section 11 hereof.
(b) Commencing ninety (90) days from the Filing Date (as
defined in the Registration Rights Agreement), if, and only if, at the time of
exercise of this Warrant, the Warrant Shares are not saleable pursuant to an
effective registration statement, then in addition to the exercise of all or a
part of this Warrant by payment of the Exercise Price in cash as provided above,
and in lieu of such payment, the Registered Owner shall have the right to effect
a cashless exercise (a "Cashless Exercise"). In the event of a Cashless Exercise
the Registered Owner may exercise this Warrant in whole or in part by
surrendering this Warrant in exchange for the number of shares of Common Stock
equal to the product of (x) the number of shares as to which this Warrant is
being exercised multiplied by (y) a fraction, the numerator of which is the Per
Share Market Value of the Common Stock less the Exercise Price then in effect
and the denominator of which is the Per Share Market Value (in each case
adjusted for fractional shares as herein provided).
(c) In lieu of physical delivery of the Warrant Shares,
provided the Company's transfer agent is participating in the Depositary Trust
Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon
request of the Registered Owner and in compliance with the provisions hereof,
the Company shall use its best efforts to cause its transfer agent to
electronically transmit the Warrant Shares to the Registered Owner by crediting
the account of the Registered Owner's Prime Broker with DTC through its Deposit
Withdrawal Agent Commission system. The time period for delivery described
herein shall apply to the electronic transmittals described herein. (d)
Certificates for the Warrant Shares so purchased, representing the aggregate
number of shares specified in the Warrant Exercise Form, shall be delivered to
the Registered Owner within a reasonable time, not exceeding three (3) Business
Days, after this Warrant shall have been so exercised. The
48
certificates so delivered shall be in such denominations as may be requested by
the Registered Owner and shall be registered in the name of the Registered Owner
or such other name as shall be designated by such Registered Owner. If this
Warrant shall have been exercised only in part, then, unless this Warrant has
expired, the Company shall, at its expense, at the time of delivery of such
certificates, deliver to the Registered Owner a new Warrant representing the
number of shares with respect to which this Warrant shall not then have been
exercised.
6. Further Adjustment of Exercise Price.
(a) If the Company, at any time while this Warrant is
outstanding, (a) shall pay a stock dividend on its Common Stock, (b) subdivide
outstanding shares of Common Stock into a larger number of shares, (c) combine
outstanding shares of Common Stock into a smaller number of shares, or (d) issue
by reclassification of shares of Common Stock any shares of capital stock of the
Company, the Exercise Price shall be multiplied by a fraction the numerator of
which shall be the number of shares of Common Stock (excluding treasury shares,
if any) outstanding before such event and the denominator of which shall be the
number of shares of Common Stock outstanding after such event. Any adjustment
made pursuant to this paragraph (6)(a) shall become effective immediately after
the record date for the determination of shareholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re- classification.
(b) If the Company, at any time while this Warrant is
outstanding, shall issue rights or warrants to all of the holders of Common
Stock entitling them to subscribe for or purchase shares of Common Stock at a
price per share less than the Per Share Market Value of Common Stock at the
record date mentioned below, the Exercise Price shall be multiplied by a
fraction, the denominator of which shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding on the date of issuance of such
rights or warrants plus the number of additional shares of Common Stock offered
for subscription or purchase, and the numerator of which shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding on the
date of issuance of such rights or warrants plus the number of shares which the
aggregate offering price of the total number of shares so offered would purchase
at such Per Share Market Value. Such adjustment shall be made whenever such
rights or warrants are issued, and shall become effective immediately after the
record date for the determination of shareholders entitled to receive such
rights or warrants. However, upon the expiration of any right or warrant to
purchase Common Stock the issuance of which resulted in an adjustment in the
Exercise Price pursuant to this paragraph (6)(b), if any such right or warrant
shall expire and all or any portion thereof shall not have been exercised, the
Exercise Price shall immediately upon such expiration be re-computed and
effective immediately upon such expiration be increased to the price which it
would have been (but reflecting any other adjustments in the Exercise Price made
pursuant to the provisions of section (g) after the issuance of such rights or
warrants) had the adjustment of the Exercise Price made upon the issuance of
such rights or warrants been made on the basis of offering for subscription or
purchase only that number of shares of Common Stock (if any) actually purchased
upon the exercise of such rights or warrants actually exercised.
(c) If the Company, at any time while this Warrant is
outstanding, shall distribute to all of the holders of Common Stock evidences of
its indebtedness or assets or rights or warrants to subscribe for or purchase
any security (excluding those referred to in paragraphs 6(a) and (b) above),
then in each such case the Exercise Price at which the Warrant shall thereafter
be exercisable shall be determined by multiplying the Exercise Price in effect
immediately prior to the record date fixed for determination of shareholders
entitled to receive such distribution by a fraction the denominator of which
shall be the Per Share Market Value of Common Stock determined as of the record
date mentioned above, and the numerator of which shall be such Per Share Market
Value of the Common Stock on such record date less the then fair market value at
such record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
the Board of Directors in good faith; provided, however, that in the event of a
distribution exceeding ten percent (10%) of the net assets of the Company, such
fair market value shall be determined by a nationally recognized or major
regional investment banking firm or firm of independent certified public
accountants of recognized standing (an "Appraiser") selected in good faith by
the Registered Owner of the Warrant; and provided, further, that the Company,
after receipt of the determination by such Appraiser shall have the right to
select an additional Appraiser meeting the same qualifications, in good faith,
in which case the fair market value shall be equal to the average of the
49
determinations by each such Appraiser. Such adjustment shall be made whenever
any such distribution is made and shall become effective immediately after the
record date mentioned above.
(d) All calculations under this section 6 shall be made to
the nearest cent or the nearest l/l00th of a share, as the case may be.
(e) Whenever the Exercise Price is adjusted pursuant to
paragraphs 6(a), (b) or (c), the Company shall promptly mail to the holder of
the Warrant, a notice setting forth the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment.
(f) In case of (A) any reclassification of the Common
Stock, (B) any Change of Control (as defined in the Purchase Agreement), (C) any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property or (D) the Company's notice to any Registered
Owner, including by way of public announcement, at any time, of its intention,
for any reason, not to comply with proper requests for the exercise of any such
warrants (clauses (A) through (D) above referred to as a "Redemption Event"), in
the case of (A), (B) and (C), the Registered Owner shall have the right
thereafter to convert the Warrant for shares of stock and other securities, cash
and property receivable upon or deemed to be held by holders of Common Stock
following such Redemption Event, and the Registered Owner shall be entitled upon
such event to receive such amount of securities, cash or property as the shares
of the Common Stock of the Company into which the Warrant could have been
converted immediately prior to such Redemption Event (without taking into
account any limitations or restrictions on the convertibility of the Securities)
would have been entitled; provided, however, that in the case of a transaction
specified in (B) in which holders of the Company's Common Stock receive cash,
the Registered Owner shall have the right to convert the Warrant Shares for such
number of shares of the surviving company equal to the amount of cash into which
the Warrant is convertible divided by the fair market value of the shares of the
surviving company on the effective date of the merger; provided, further, that
in the case of an event specified in (D), the Registered Owner shall have the
option to require the Company to redeem, from funds legally available therefor
at the time of such redemption, its shares of Common Stock immediately
theretofore acquirable and receivable upon the conversion of such Registered
Owner's Warrants at a price per share equal to the product of (i) the average
Per Share Market Value for the five Trading Days immediately preceding (1) the
effective date, the date of the closing, date of occurrence or the date of the
announcement, as the case may be, of the Redemption Event triggering such
redemption right or (2) the date of payment in full by the Company of the
redemption price hereunder, whichever is greater, and (ii) the number of shares
of Common Stock of the Company into which the Warrant could have been converted
immediately prior to such Redemption Event. The entire redemption price shall be
paid in cash. In the case of (A), (B) and (C) the terms of any such Redemption
Event shall include such terms so as to continue to give to the Registered Owner
the right to receive the securities, cash or property set forth in this Section
6(f) upon any conversion or redemption following such Redemption Event. This
provision shall similarly apply to successive Redemption Events.
(g) If:
A. the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
B. the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
C. the Company shall authorize the granting to the
holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock
of any class or of any rights; or
D. the approval of any shareholders of the Company shall
be required in connection with any reclassification of
the Common Stock of the Company, any consolidation or
merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of
the Company, of any compulsory share of exchange
whereby the Common Stock is converted into other
securities, cash or property; or
50
E. the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of
the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of exercise of this Warrant, and shall cause to be mailed to the
Registered Owner of this Warrant at its address as it shall appear below, at
least 30 calendar days prior to the applicable record or effective date
hereinafter specified, a notice (provided such notice shall not include any
material non-public information) stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which the holders of
Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or share exchange
is expected to become effective or close, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer or share
exchange; provided, however, that the failure to mail such notice or any defect
therein or in the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice.
(h) Adjustment to Exercise Price. In order to prevent dilution
of the rights granted under this Warrant, the Exercise Price will be subject to
adjustment from time to time as provided in this Section 6(h).
(i) Adjustment of Exercise Price upon Issuance of Common
Stock. If at any time prior to the one year anniversary of the Reset
Date, the Company issues or sells, or is deemed to have issued or sold,
any shares of Common Stock (other than the Underlying Shares or shares
of Common Stock deemed to have been issued by the Company in connection
with an Approved Stock Plan (as defined below) or shares of Common
Stock issuable upon the exercise of any options or warrants outstanding
on the date hereof and listed in Schedule 2.1(c) of the Purchase
Agreement) for a consideration per share less than the Exercise Price
in effect immediately prior to such issuance or sale, then immediately
after such issue or sale, the Exercise Price then in effect shall be
reduced to an amount equal to the consideration per share of Common
Stock of such issuance or sale. If at any time prior to the one year
anniversary of the Reset Date, the Company issues or sells, or is
deemed to have issued or sold, any shares of Common Stock (other than
Underlying Shares, shares of Common Stock deemed to have been issued by
the Company in connection with an Approved Stock Plan (as defined
below) or shares of Common Stock issuable upon the exercise of any
options or warrants outstanding on the date hereof and listed in
Schedule 2.1(c) of the Purchase Agreement or shares of Common Stock
issued or deemed to have been issued as consideration for an
acquisition by the Company of a license or of a division, assets or
business (or stock constituting any portion thereof) from another
person) for a consideration per share which is (A) greater than the
Exercise Price in effect immediately prior to such issuance or sale and
(B) less the average of the Per Share Market Values on the five
consecutive Trading Days immediately preceding the date of such
issuance or sale (the price in this clause (B) is herein referred to as
"Market Price"), then immediately after such issue or sale, the
Exercise Price then in effect shall be reduced to an amount equal to
the product of (x) the Exercise Price in effect immediately prior to
such issue or sale and (y) the quotient determined by dividing (1) the
sum of (I) the product of (A) the Market Price and (B) the number of
shares of Common Stock Deemed Outstanding (as defined below)
immediately prior to such issue or sale, and (II) the consideration, if
any, received by the Company upon such issue or sale, by (2) the
product of (I) the Market Price and (II) the number of shares of Common
Stock Deemed Outstanding (as defined below) immediately after such
issue or sale; provided that no adjustment shall be made if such
adjustment would result in an increase of the Exercise Price in effect
immediately prior to such issuance or sale. For purposes of determining
the adjusted Exercise Price under this Section 6(h)(i), the following
shall be applicable:
(A) Issuance of Options. If at any time prior to the
one year anniversary of the Reset Date, the Company in any manner
grants any rights or options to subscribe for or to purchase Common
Stock or any stock or other securities convertible into or exchangeable
for Common Stock (such rights or options being herein called "Options"
and such convertible or exchangeable stock or securities being herein
called "Convertible Securities") and the price per share for which
Common Stock is issuable upon the exercise of such Options or upon
conversion or exchange of such Convertible Securities is less than the
Exercise Price in effect immediately prior to such grant, then the
Exercise Price shall be adjusted to equal the price per share for which
Common Stock is issuable upon the exercise of such Options or upon the
conversion or exchange of such Convertible Securities. If at any time
prior to the one year anniversary of the Reset Date, the Company in any
51
manner grants any Options (other than Underlying Shares, shares of
Common Stock deemed to have been issued by the Company in connection
with an Approved Stock Plan (as defined below) or shares of Common
Stock issuable upon the exercise of any options or warrants outstanding
on the date hereof and listed in Schedule 2.1(c) of the Purchase
Agreement and the price per share for which Common Stock is issuable
upon exercise of such Options or upon the conversions or exchange of
such Convertible Securities is (A) greater than the Exercise Price in
effect immediately prior to such issuance or sale and (B) less Market
Price, then immediately after such issue or sale, the Exercise Price
then in effect shall be reduced to an amount equal to the product of
(x) the Exercise Price in effect immediately prior to such grant and
(y) the quotient determined by dividing (1) the sum of (I) the product
of (A) the Market Price and (B) the number of shares of Common Stock
Deemed Outstanding (as defined below) immediately prior to such issue
or sale, and (II) the consideration, if any, received by the Company
upon such issue, sale, grant, exercise, conversion or exchange, by (2)
the product of (I) the Market Price and (II) the number of shares of
Common Stock Deemed Outstanding (as defined below) immediately after
such grant; provided that no adjustment shall be made if such
adjustment would result in an increase of the Exercise Price in effect
immediately prior to such grant. No adjustment of the Exercise Price
shall be made upon the actual issuance of such Common Stock or of such
Convertible Securities upon the exercise of such Options or upon the
actual issuance of such Common Stock upon conversion or exchange of
such Convertible Securities.
(B) Issuance of Convertible Securities. If at any
time prior to the one year anniversary of the Reset Date, the Company
in any manner issues or sells any Convertible Securities and the price
per share for which Common Stock is issuable upon such conversion or
exchange is less than the Exercise Price in effect immediately prior to
issuance or sale, then the Exercise Price shall be adjusted to equal
the price per share for which Common Stock is issuable upon the
conversion or exchange of such Convertible Securities. If at any time
prior to the one year anniversary of the Reset Date, the Company issues
or sells, or is deemed to have issued or sold, any Convertible
Securities and the price per share for which Common Stock issuable upon
conversion or exchange of such Convertible Securities is (A) greater
than the Exercise Price in effect immediately prior to such issuance or
sale and (B) less the Market Price, then immediately after such issue
or sale, the Exercise Price then in effect shall be reduced to an
amount equal to the product of (x) the Exercise Price in effect
immediately prior to such issue or sale and (y) the quotient determined
by dividing (1) the sum of (I) the product of (A) the Market Price and
(B) the number of shares of Common Stock Deemed Outstanding (as defined
below) immediately prior to such issue or sale, and (II) the
consideration, if any, received by the Company upon such issue or sale,
by (2) the product of (I) the Market Price and (II) the number of
shares of Common Stock Deemed Outstanding (as defined below)
immediately after such issue or sale; provided that no adjustment shall
be made if such adjustment would result in an increase of the Exercise
Price in effect immediately prior to such issuance or sale. No
adjustment of the Exercise Price shall be made upon the actual issue of
such Common Stock upon conversion or exchange of such Convertible
Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment of
the Exercise Price had been or are to be made pursuant to other
provisions of this Section 6(h)(i), no further adjustment of the
Exercise Price shall be made by reason of such issue or sale.
(C) Change in Option Price or Rate of Conversion. If
there is a change at any time in (i) the purchase price provided for in
any Options, (ii) the additional consideration, if any, payable upon
the issue, conversion or exchange of any Convertible Securities or
(iii) the rate at which any Convertible Securities are convertible into
or exchangeable for Common Stock, then the Exercise Price in effect at
the time of such change shall be readjusted to the Exercise Price which
would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or changed conversion rate, as the case may
be, at the time initially granted, issued or sold; provided that no
adjustment shall be made if such adjustment would result in an increase
of the Exercise Price then in effect.
(D) Certain Definitions. For purposes of determining
the adjusted Exercise Price under this Section 6(h)(i), the following
terms have meanings set forth below:
(I) "Approved Stock Plan" shall mean any
contract, plan or agreement which has been approved by the Board of
Directors of the Company, pursuant to which the Company's securities
may be issued to any employee, officer, director or consultant.
52
(II) "Common Stock Deemed Outstanding" means, at
any given time, the number of shares of Common Stock issued and
outstanding at such time, plus the number of shares of Common Stock
deemed to be outstanding pursuant to Sections 6(h)(i)(A) and 6(h)(i)(B)
hereof regardless of whether the Options or Convertible Securities are
actually exercisable at such time, but excluding any shares of Common
Stock issuable upon exercise of the Warrants.
(E) Effect on Exercise Price of Certain Events. For
purposes of determining the adjusted Exercise Price under this Section
6(h)(i), the following shall be applicable:
(I) Calculation of Consideration Received. If
any Common Stock, Options or Convertible Securities are issued or sold
or deemed to have been issued or sold for cash, the consideration
received therefor will be deemed to be the net amount received by the
Company therefor. In case any Common Stock, Options or Convertible
Securities are issued or sold for a consideration other than cash, the
amount of the consideration other than cash received by the Company
will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of
consideration received by the Company will be the arithmetic average of
the Per Share Market Values of such security for the five (5)
consecutive Trading Days immediately preceding the date of receipt. In
case any Common Stock, Options or Convertible Securities are issued to
the owners of the non-surviving entity in connection with any merger in
which the Company is the surviving entity the amount of consideration
therefor will be deemed to be the fair value of such portion of the net
assets and business of the non-surviving entity as is attributable to
such Common Stock, Options or Convertible Securities, as the case may
be. The fair value of any consideration other than cash or securities
will be determined jointly by the Company and the Registered Owners of
a majority of the Underlying Shares of Tranche C Warrants and the
Tranche D Warrants then outstanding. If such parties are unable to
reach agreement within ten (10) days after the occurrence of an event
requiring valuation (the "Valuation Event"), the fair value of such
consideration will be determined within forty-eight (48) hours of the
tenth (10th) day following the Valuation Event by an Appraiser selected
by the Company. The determination of such Appraiser shall be binding
upon all parties absent manifest error.
(II) Integrated Transactions. In case any Option
is issued in connection with the issue or sale of other securities of
the Company, together comprising one integrated transaction in which no
specific consideration is allocated to such Options by the parties
thereto, the Options will be deemed to have been issued for an
aggregate consideration of $.01.
(III) Treasury Shares. The number of shares of
Common Stock outstanding at any given time does not include shares
owned or held by or for the account of the Company, and the disposition
of any shares so owned or held will be considered an issue or sale of
Common Stock.
(IV) Record Date. If the Company takes a record
of the holders of Common Stock for the purpose of entitling them (1) to
receive a dividend or other distribution payable in Common Stock,
Options or in Convertible Securities or (2) to subscribe for or
purchase Common Stock, Options or Convertible Securities, then such
record date will be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution
or the date of the granting of such right of subscription or purchase,
as the case may be.
(ii) Certain Events. If any event occurs of the type
contemplated by the provisions of Section 6(h)(i) (subject to
the exceptions stated therein) but not expressly provided for
by such provisions (including, without limitation, the
granting of stock appreciation rights, phantom stock rights or
other rights with equity features), then the Company's Board
of Directors will make an appropriate adjustment in the
Exercise Price so as to protect the rights of the Registered
Owner, or assigns, of this Warrant; provided, however, that no
such adjustment will increase the Exercise Price as otherwise
determined pursuant to this Section 6(h).
7. Call Option. If, at any time during the Exercise Period, the Per
Share Market Value equals or exceeds an amount equal to 200% of the Exercise
Price at such time for a period of 30 consecutive Trading Days, then the Company
shall have the right during the 6 month period commencing on the first business
day after such 30-day period, upon written notice to the Registered Owner, to
53
cause such Registered Owner to exercise this Warrant in full by delivering to
the Company the Exercise Price in cash, the Warrant Exercise Form and this
Warrant as specified in section 5 hereof within the period of ten (10) business
days commencing on the Registered Owner's receipt of such notice; provided,
however, that the Company can exercise the right specified in this section 7
only if, in addition to the conditions specified herein, there is an effective
registration statement under the Securities Act relating to the shares of Common
Stock issuable upon the exercise of this Warrant so that the Registered Owner
may freely offer and sell such shares of Common Stock without further
registration under the Securities Act or compliance with Rule 144 thereunder or
any other exemptive provision or rule thereunder so long as the Registered Owner
is not an Affiliate of the Company; provided, further, that in no event shall
the Company cause the Registered Owner to deliver the Warrant Shares pursuant to
this Section 7 on any day which is prior to the 15th calendar day of the month
in which such call option is exercised..
8. Definitions. Capitalized terms used herein and not otherwise defined
herein shall have the meanings given to such terms in the Purchase Agreement. As
used in this Warrant, the following terms have the following meanings:
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," controlling" and "controlled" have meanings
correlative to the foregoing.
"Appraiser" has the meaning assigned to it in section 6(c) hereof.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the state of
New York generally are authorized or required by law or other government actions
to close.
"Common Stock" means the shares of the Company's Common Stock, par
value $.0001 per share.
"Company" means Digital Courier Technologies, Inc., a Delaware
corporation.
"Convertible Securities" has the meaning assigned to it in section
6(h)(i)(A) hereof.
"Exercise Period" has the meaning assigned to it the section 4 hereof.
"Exercise Price" has the meaning assigned to it in section 3 hereof
"Market Price" has the meaning assigned to it in section 6(h)(i)
hereof.
"Options" has the meaning assigned to it in section 6(h)(i)(A) hereof.
"Per Share Market Value" means on any particular date (i) the closing
bid price per share of the Common Stock on such date on the National Market
System of the Nasdaq Stock Market or other registered national stock exchange on
which the Common Stock is then listed or if there is no such price on such date,
then the closing bid price on such exchange or quotation system on the date
nearest preceding such date, or (ii) if the Common Stock is not listed then on
the National Market System of the Nasdaq Stock Market or any registered national
stock exchange, the closing bid price for a share of Common Stock in the
over-the-counter market, as reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (iii) if the Common
Stock is not then publicly traded the fair market value of a share of Common
Stock as determined by an Appraiser selected in good faith by the holder of this
Warrant; provided, however, that the Company, after receipt of the determination
by such Appraiser, shall have the right to select an additional Appraiser, in
which case, the fair market value shall be equal to the average of the
54
determinations by each such Appraiser; and provided, further that all
determinations of the Per Share Market Value shall be appropriately adjusted for
any stock dividends, stock splits or other similar transactions during such
period.
"Purchase Agreement" means that certain Securities Purchase Agreement,
dated as of March 3, 1999 and as subsequently amended, among the Company, Xxxxx
Xxxxxxx Strategic Growth Fund, Ltd. and Xxxxx Xxxxxxx Strategic Growth Fund,
L.P.
"Redemption Event" has the meaning assigned to it in section 6(f)
hereof.
"Registered Owner" means Xxxxx Xxxxxxx Strategic Growth Fund, X.xx. or
such other Person as shown on the records of the Company as being the registered
owner of this Warrant.
"Registration Rights Agreement" means that certain Registration Rights
Agreement, dated as of March 3, 1999 and as subsequently amended, among the
Company, Xxxxx Xxxxxxx Strategic Growth Fund, Ltd. and Xxxxx Xxxxxxx Strategic
Growth Fund, L.P.
"Trading Day(s)" means any day on which the primary market on which
shares of Common Stock are listed is open for trading.
"Tranche C Warrant" means the warrant issuable at the Tranche C
Closing.
"Tranche D Warrant" means the warrant issuable at the Tranche D
Closing.
"Underlying Shares" has the meaning assigned to it in section 2.1(d) of
the Purchase Agreement.
9. Registration Rights. The Company will undertake the registration of
the Common Stock into which such Warrants are exercisable at such times and upon
such terms pursuant to the provisions of the Registration Rights Agreement.
10. Reservation of Underlying Shares. The Underlying Shares are and
will at all times hereafter continue to be duly authorized and reserved for
issuance pursuant to this Warrant.
11. Notices. All notices or other communications required hereunder
shall be in writing and shall be sent either (i) by courier, or (ii) by telecopy
as well as by registered or certified mail, and shall be regarded as properly
given in the case of a courier upon actual delivery to the proper place of
address; in the case of telecopy, on the day following the date of transmission
if properly addressed and sent without transmission error to the correct number
and receipt is confirmed by telephone within 48 hours of the transmission; in
the case of a letter for which a telecopy could not be successfully transmitted
or receipt of which could not be confirmed as herein provided, three days after
the registered or certified mailing date if the letter is properly addressed and
postage prepaid; and shall be regarded as properly addressed if sent to the
parties or their representatives at the addresses given below:
To the Company: Digital Courier Technologies, Inc.
000 Xxxxx Xxxxxx, Xxxxx 000
X.X. Xxx 0000
Xxxx Xxxx, Xxxx 00000
Attn: Xxxxxxxx Xxxxxxx
Phone: 000-000-0000
Fax: 000-000-0000
To the Registered
Owner: Xxxxx Xxxxxxx Strategic Growth Fund, Ltd.
000 Xxxx 00xx Xxxxxx, 00xx Floor
55
New York, New York 10019
Attn: Xxxx Xxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
with copies to: Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
or such other address as any of the above may have furnished to the other
parties in writing by registered mail, return receipt requested.
12. Restriction on Exercise by Either the Registered Owner or the
Company. Notwithstanding anything herein to the contrary, in no event shall any
Registered Owner or the Company have the right or be required to exercise this
Warrant if as a result of such exercise the aggregate number of shares of Common
Stock beneficially owned by such Registered Owner and its Affiliates would
exceed 9.99% of the outstanding shares of the Common Stock following such
exercise. For purposes of this Section 12, beneficial ownership shall be
calculated in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended. The provisions of this Section 12 may be waived by a
Registered Owner as to itself (and solely as to itself) upon not less than 65
days prior written notice to the Company, and the provisions of this Section 12
shall continue to apply until such 65th day (or later, if stated in the notice
of waiver).
[SIGNATURE PAGE FOLLOWS]
56
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer as of the date first set forth above.
DIGITAL COURIER TECHNOLOGIES, INC.
By:
-------------------------------
Name:
Title:
EXHIBIT A
Warrant Exercise Form
TO: DIGITAL COURIER TECHNOLOGIES, INC.
The undersigned hereby: (1) irrevocably subscribes for and offers to
purchase _______ shares of Common Stock of Digital Courier Technologies, Inc.,
pursuant to Warrant No. ___ heretofore issued to ___________________ on
____________, 1998; (2) encloses a payment of $__________ for these shares at a
price of $____ per share (as adjusted pursuant to the provisions of the
Warrant); and (3) requests that a certificate for the shares be issued in the
name of the undersigned and delivered to the undersigned at the address
specified below.
Date:
---------------------------------------
Investor Name:
---------------------------------------
Taxpayer Identification
---------------------------------------
Number:
---------------------------------------
By:
---------------------------------------
Printed Name:
---------------------------------------
Title:
---------------------------------------
Address:
---------------------------------------
---------------------------------------
---------------------------------------
Note: The above signature should correspond exactly with the
name on the face of this Warrant Certificate or with
the name of assignee appearing in assignment form
below.
AND, if said number of shares shall not be all the shares purchasable under the
within Warrant, a new Warrant Certificate is to be issued in the name of said
undersigned for the balance remaining of the shares purchasable thereunder less
any fraction of a share paid in cash and delivered to the address stated above.
58
Exhibit C
[Irrevocable Transfer Agent Instruction]
March 4, 1999
American Securities Transfer & Trust, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, XX 00000
ATTENTION: XX XXXXXXXX
Re: IRREVOCABLE INSTRUCTIONS
Dear Jo,
Reference is made to that certain Securities Purchase Agreement (the
"Purchase Agreement") to be entered into among Digital Courier Technologies,
Inc., a Delaware corporation (the "Company") and the purchasers named therein
(collectively, the "Holders") pursuant to which the Company is issuing to the
Holders shares of its Common Stock, par value $.0001 per share (the "Common
Stock"), Series A Convertible Preferred Stock and Series B Convertible Preferred
Stock (together the "Preferred Stock"), and Tranche C Warrants and Tranche D
Warrants (together, the "Warrants"). The Preferred Stock will be convertible
into shares of Common Stock and the Warrants will be exercisable for shares of
the Common Stock. Capitalized terms not otherwise defined herein have the
meanings given them in the Purchase Agreement.
This letter will serve as our irrevocable authorization and direction
to you (provided that you are the transfer agent of the Company at such time)
upon a Holder's conversion of Preferred Stock or exercise of a Warrant, to issue
to the Holder so converting or exercising, the shares of Common Stock issuable
upon such conversion or exercise (the "Underlying Shares"), provided that you
have received either (1) an executed and completed Notice of Conversion form and
an a letter or other written authorization from an authorized officer of the
Company stating that the Company has received the Preferred Stock certificate to
be converted or (2) an executed and completed Form of Exercise of the Warrant
from a Holder and a letter or other written authorization from an authorized
officer of the Company stating that the Company has received payment of the
exercise price for the Warrants. You are hereby instructed to place the
following legend on certificates evidencing the Underlying Shares unless (x) you
are in receipt of written confirmation from counsel to the Company that a
registration statement covering resales of the Underlying Shares has been
declared effective by the Securities and Exchange Commission ("SEC") under the
Securities Act of 1933, as amended (the "Securities Act") or (y) you are in
59
receipt of written confirmation from counsel to the Company that such Underlying
Shares otherwise may be issued without a securities legend restricting transfer
thereby, which share certificates shall not bear any legend:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE ACT.
The Company from time to time may notify you to place stop-transfer restrictions
on the certificates for the Underlying Shares in the event a prospectus covering
the Underlying Shares is no longer current and cannot be used.
Please be advised that the Holders are relying on this letter as an
inducement to enter into the Purchase Agreement and, accordingly, each Holder is
a third-party beneficiary to these instructions.
Very truly yours,
DIGITAL COURIER TECHNOLOGIES, INC.
By:
---------------------------
Xxxxxxx X. Xxxxxx
Vice President-Legal
60
Exhibit D
[Company's Legal Opinion]
March 3, 1999
Xxxxx Xxxxxxx Strategic Growth Fund, Ltd.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Xxxxx Xxxxxxx Strategic Growth Fund, L. P.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Re: Purchase of Units of Securities of Digital Courier
Technologies, Inc. (the Company")
Ladies and Gentlemen:
I am an attorney-at-law and am duly authorized to practice law in the
State of California. I am presently in-house counsel to the Company and have
acted as such in connection with the above-referenced transaction. In such
capacity, I have examined the following documents:
(a) Securities Purchase Agreement, dated March 3, 1999, among the Company
and the Purchasers (the "Purchase Agreement;" all capitalized terms otherwise
not defined herein have the meanings assigned to them in the Purchase
Agreement);
(b) The Registration Rights Agreement;
(c) The Warrants;
(d) The Company's Restated and Amended Certificate of Incorporation and its
Bylaws, including the Certificate of Designation of Convertible Preferred Stock,
Series A (the "Certificate of Designation").
The Purchase Agreement, the Registration Rights
Agreement, the Certificate of Designation and the Warrants are
hereinafter collectively referred to as the "Transaction
Documents."
In addition, I have reviewed such other documents, made such
investigation of fact, examined such questions of law, and done such other
things as I have deemed necessary in order to render this opinion.
I am of the opinion that:
1. Each of the Company and its Subsidiaries is a corporation, duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with the requisite corporate power and
authority to own and use its properties and assets and to carry on its
business as currently conducted. The Company has no subsidiaries other than
the Subsidiaries. Each of the Company and the Subsidiaries is duly
61
qualified to do business and is in good standing as a foreign corporation
in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary.
62
2. The Company has the requisite corporate power and authority to enter into
and consummate the transactions contemplated by each of the Transaction
Documents and otherwise to carry out its obligations thereunder. The
execution and delivery of each of the Transaction Documents by the Company
and the consummation by it of the transactions contemplated thereby have
been duly authorized by all necessary action on the part of the Company.
Each of the Transaction Documents has been duly executed and delivered by
the Company and constitutes the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or
by other equitable principles of general application.
3. The execution, delivery and performance of the Transaction Documents by the
Company and the consummation by the Company of the transactions
contemplated by such agreements do not and will not (i) conflict with or
violate any provision of its Certificate of Incorporation or Bylaws, (ii)
conflict with, or constitute a default (or an event which 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
agreement, indenture or instrument to which the Company is a party, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restrictions of any court or governmental
authority to which the Company is subject (including Federal and state
securities laws and regulations), or by which any property or asset of the
Company is bound or affected. The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any
governmental authority.
4. Neither the Company nor any Subsidiary is required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing
or registration with, any court or other Federal, state, local or other
governmental authority or other person in connection with the execution,
delivery and performance by the Company of the Transaction Documents. Based
on the representations and warranties of the Company set forth in Section
2.1 of the Purchase Agreement and assuming the accuracy of the
representations and warranties of the Purchasers set forth in Section 2.2
of the Purchase Agreement, the offer, issuance and sale of the shares of
Preferred Stock, Common Stock and the Warrants to the Purchasers pursuant
to the Purchase Agreement are exempt from the registration requirements of
the Securities Act.
5. To my knowledge, the Company has filed all reports required to be filed by
it under the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for the three years preceding the date hereof (the "SEC
Documents") on a timely basis. As of their respective dates, the SEC
Documents complied in all material respects as to form with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Securities and Exchange Commission promulgated
thereunder.
6. There is no pending or threatened action, suit or proceeding before any
court or governmental agency, authority or body or any arbitrator involving
the Company or any of its Subsidiaries which, if adversely decided, could
reasonably be expected to have a material adverse effect on the issuance of
the shares of Preferred Stock, Common Stock or the Warrants or the
consummation of the transactions contemplated by the Transaction Documents.
7. All of the Company's issued and outstanding capital stock has been duly
authorized, validly issued and is fully paid and non-assessable as of the
date hereof.
63
8. The Company has full corporate power and authority to issue, sell and
deliver the shares of Preferred Stock and Common Stock pursuant to the
Purchase Agreement, the Warrants and the Warrant Stock.
9. The Company has duly authorized and reserved for issuance such number of
shares of Common Stock as are issuable upon conversion of the Preferred
Stock or exercise of the Warrants in accordance with the terms of the
Transaction Documents. When issued by the Company in accordance with the
terms of the Transaction Documetns, the Underlying Shares will be validly
issued, fully paid and non-assessable.
The foregoing opinion applies only with respect to the laws of the
State of California as applied by courts located in California and the Federal
laws of the United States of America, and I express no opinion with respect to
the laws of any other jurisdiction. With respect to the opinion set forth in
paragraph 2 above, I call you attention to the fact that the Transaction
Documents are governed by New York law. As I am not rendering any opinion with
respect to New York law, I have not examined the question of whether the
Transaction Documents are enforceable under New York law, nor have I examined
the question of what law would govern the interpretation or enforcement of the
Transaction Documents. If the Transaction Documents were governed by California
law, they would be enforceable against the Company in accordance with their
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application
This opinion is solely for the benefit of the Purchasers and may not
be relied upon in any manner by any other person or entity without our express
written consent.
Very truly yours,
Xxxxxx Xxxxxx
Vice President-Legal
64
