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EXHIBIT 4.2
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of February
5, 1998, by and among CyberCash, Inc., a Delaware corporation, with
headquarters located at 0000 Xxxxxx Xxxxxxx, Xxxxx Xxxxx, Xxxxxx, Xxxxxxxx
00000 ("COMPANY"), and each of the purchasers set forth on the signature pages
hereto (the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Rule
506 under Regulation D ("REGULATION D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of
1933, as amended (the "1933 ACT");
B. The Company has authorized a new series of preferred stock, designated
as its Series D Convertible Preferred Stock (the "PREFERRED STOCK"), having the
rights, preferences and privileges set forth in the Certificate of
Designations, Rights and Preferences attached hereto as EXHIBIT "A" (the
"CERTIFICATE OF DESIGNATION");
C. The Preferred Stock is convertible into shares of Common Stock, par
value $.001 per share, of the Company (the "COMMON STOCK"), upon the terms and
subject to the limitations and conditions set forth in the Certificate of
Designation;
D. The Company has authorized the issuance to the Buyers of investment
options, in the form attached hereto as "EXHIBIT B", to purchase an aggregate
of Seven Hundred Eight Thousand Three Hundred Eighty-Two (708,382) shares of
Common Stock (the "INVESTMENT OPTIONS");
E. The Buyers desire to purchase and the Company desires to issue and
sell, upon the terms and conditions set forth in this Agreement, (i) an
aggregate of thirty thousand (30,000) shares of Preferred Stock, and (ii)
Investment Options to purchase an aggregate of Seven Hundred Eight Thousand
Three Hundred Eighty-Two (708,382) shares of Common Stock for an aggregate
purchase price of Thirty Million Dollars ($30,000,000);
F. Each Buyer wishes to purchase, upon the terms and conditions stated in
this Agreement, the number of shares of Preferred Stock and Investment Options
set forth immediately below its name on the signature pages hereto; and
G. Contemporaneous with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement, in
the form attached hereto as EXHIBIT "C" (the "REGISTRATION RIGHTS AGREEMENT"),
pursuant to which the Company has agreed to provide certain registration rights
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws;
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NOW THEREFORE, the Company and each of the Buyers (severally and not
jointly) hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
a. Purchase of Preferred Shares. The Company shall
issue and sell to each Buyer and each Buyer severally agrees to purchase from
the Company such number of shares of Series D Preferred Stock (collectively,
together with any Preferred Stock issued in replacement thereof or as a
dividend thereon or otherwise with respect thereto in accordance with the terms
thereof, the "PREFERRED SHARES") and Investment Options and at the aggregate
purchase price with respect to the First Closing (as defined below) and the
Second Closing (as defined below) (each, a "PURCHASE PRICE" and collectively,
the "PURCHASE PRICES") as is set forth immediately below such Buyer's name on
the signature pages hereto. The issuance, sale and purchase of the Preferred
Shares and Investment Options shall take place at two (2) closings, the first
of which is hereinafter referred to as the "FIRST CLOSING" and the second of
which is referred to as the "SECOND CLOSING". The aggregate number of
Preferred Shares to be issued at the First Closing is Fifteen Thousand (15,000)
and the aggregate number of Investment Options to be issued at the First
Closing is Three Hundred Fifty-Four Thousand One Hundred Ninety-One (354,191)
for an aggregate purchase price of Fifteen Million Dollars ($15,000,000) and
the aggregate number of Preferred Shares to be issued at the Second Closing is
Fifteen Thousand (15,000) and the aggregate number of Investment Options to be
issued at the Second Closing is Three Hundred Fifty-Four Thousand One Hundred
Ninety-One (354,191) for an aggregate purchase price of Fifteen Million Dollars
($15,000,000). Subject to the satisfaction (or waiver) of the conditions
thereto set forth in Section 6 and Section 7 below, (i) at the First Closing,
the Company shall issue and sell to each Buyer and each Buyer shall purchase
from the Company the number of Preferred Shares and Investment Options which
such Buyer is purchasing hereunder and as set forth below such Buyer's name on
the signature pages hereto for a price equal to 50% of the aggregate of the
Purchase Prices and (ii) at the Second Closing the Company shall issue and sell
to each Buyer and each Buyer shall purchase from the Company of the aggregate
number of Preferred Shares and Investment Options which such Buyer is
purchasing hereunder and as set forth below such Buyer's name on the signature
pages hereto for a price equal to fifty percent (50%) of the aggregate of the
Purchase Prices.
b. Form of Payment. On each Closing Date (as defined
below), (i) each Buyer shall pay the purchase price for the Preferred Shares
and Investment Options to be issued and sold to it at the applicable Closing by
wire transfer of immediately available funds to the Company, in accordance with
the Company's written wiring instructions, against delivery of a duly executed
certificate(s) representing number of Preferred Shares and Investment Options
which such Buyer is purchasing, and (ii) the Company shall deliver such
certificate(s) and Investment Options against delivery of such purchase price.
c. Closing Date. Subject to the satisfaction (or
waiver) of the conditions thereto set forth in Section 6 and Section 7 below,
the date and time of the issuance and sale of the Preferred Shares pursuant to
this Agreement (the "CLOSING DATE") shall be (i) in the case of the First
Closing 10:00 a.m. Eastern Time on February 5, 1998 and (ii) in the case of the
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Second Closing, 10:00 a.m. Eastern Time as soon as practicable (but no less
than two (2) days) following the satisfaction (or waiver) of the conditions to
such closing set forth in Section 7(b) below or, in such case, such other
mutually agreed upon time. Each Closing shall occur on each Closing Date at
the offices of the Company at 0000 Xxxxxx Xxxxxxx, Xxxxx Xxxxx, Xxxxxx,
Xxxxxxxx 00000.
2. BUYERS' REPRESENTATIONS AND WARRANTIES.
Each Buyer severally (and not jointly) represents and warrants to the
Company solely as to such Buyer that:
a. Investment Purpose. The Buyer is purchasing the
Preferred Shares and the shares of Common Stock issuable upon conversion
thereof (the "CONVERSION SHARES"), the Investment Options and the shares of
Common Stock issuable upon exercise thereof (the "INVESTMENT OPTION SHARES"
and, collectively with the Preferred Shares, Conversion Shares and Investment
Options, the "SECURITIES") for its own account for investment only and not with
a view towards the public sale or distribution thereof. Pursuant to Section
2(a) of the Registration Rights Agreement, the Company has agreed to file a
registration statement for the resale of the Conversion Shares and Investment
Option Shares, and further acknowledges the Buyer may sell the Conversion
Shares in accordance therewith.
b. Accredited Investor Status. The Buyer is an
"accredited investor" as that term is defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. The Buyer understands that
the Securities are being offered and sold to it in reliance upon specific
exemptions from the registration requirements of United States federal and
state securities laws and that the Company is relying upon the truth and
accuracy of, and the Buyer's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Buyer set forth herein in
order to determine the availability of such exemptions and the eligibility of
the Buyer to acquire the Securities.
d. Information. The Buyer and its advisors, if any,
have been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by the Buyer or its advisors. The Buyer
and its advisors, if any, have been afforded the opportunity to ask questions
of the Company and have received what the Buyer believes to be satisfactory
answers to any such inquiries. Neither such inquiries nor any other due
diligence investigation conducted by Buyer or any of its advisors or
representatives shall modify, amend or affect Buyer's right to rely on the
Company's representations and warranties contained in Section 3 below. The
Buyer understands that its investment in the Securities involves a significant
degree of risk and that the market price of the Common Stock has been volatile
and that no representation is being
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made as to the future value of the Common Stock. The Buyer has the knowledge
and experience in financial and business matters as to be capable of evaluating
the merits and risks of an investment in the Securities and has the ability to
bear the economic risks of an investment in the Securities.
e. Governmental Review. The Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of the
Securities.
f. Transfer or Resale. The Buyer understands that (i)
the Securities have not been and, except as provided in the Registration Rights
Agreement, are not being registered under the 1933 Act or any applicable state
securities laws, and may not be transferred unless (a) subsequently included in
an effective registration statement under the 1933 Act, or (b) the Buyer shall
have delivered to the Company an opinion of counsel (which opinion shall be
reasonably acceptable to the Company) to the effect that the Securities to be
sold or transferred may be sold or transferred pursuant to an exemption from
such registration or (c) sold pursuant to Rule 144 promulgated under the 1933
Act (or a successor rule); (ii) any sale of such Securities made in reliance on
Rule 144 may be made only in accordance with the terms of said Rule and
further, if said Rule is not applicable, any resale of such Securities under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the 0000 Xxx)
may require compliance with some other exemption under the 1933 Act or the
rules and regulations of the SEC thereunder; and (iii) neither the Company nor
any other person is under any obligation to register such Securities under the
1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder (in each case, other than pursuant to
the Registration Rights Agreement). Notwithstanding the foregoing, each Buyer
may pledge the Securities as collateral in connection with a bona fide margin
account or other lending arrangement in the ordinary course of Buyer's business
provided that such Buyer concludes that such pledge is exempt from the
registration requirements under the 1933 Act.
g. Legends. The Buyer understands that the Preferred
Shares and Investment Options and until such time as the Conversion Shares and
Investment Option Shares have been registered under the 1933 Act, as
contemplated by the Registration Rights Agreement, the Conversion Shares and
Investment Option Shares may bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of the
certificates for such Securities):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
securities have been acquired for investment and may not be sold,
transferred or assigned in the absence of an effective registration
statement for the securities under said Act, or an opinion of
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counsel, in form, substance and scope reasonably acceptable to the
Company, that registration is not required under said Act."
The legend set forth above shall be removed and the Company shall
issue a certificate without such legend to the holder of any Security upon
which it is stamped, if, unless otherwise required by applicable state
securities laws, (a) such Security is registered for sale under an effective
registration statement filed under the 1933 Act, or (b) such holder provides
the Company with an opinion of counsel, in form, substance and scope reasonably
acceptable to the Company, to the effect that a public sale or transfer of such
Security may be made without registration under the 1933 Act and such Security
is so sold or transferred or (c) such holder provides the Company with
reasonable assurances that such Security can be sold pursuant to Rule 144(k)
under the 1933 Act (or a successor rule thereto) without any restriction as to
the number of Securities acquired as of a particular date that can then be
immediately sold. The Buyer agrees (and each person to whom the Buyer
transfers Securities in a private transaction shall agree as a condition to the
consummation of such transaction) to sell all Securities, including those
represented by a certificate(s) from which the legend has been removed, in
compliance with applicable prospectus delivery requirements, if any.
h. Authorization; Enforcement. This Agreement and the
Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of the Buyer and are valid and binding agreements of
the Buyer enforceable in accordance with their terms.
i. Residency. The Buyer is a resident of the
jurisdiction set forth immediately below such Buyer's name on the signature
pages hereto.
j. No General Solicitation. The Buyer has not been
offered the Securities by any form of general solicitation or general
advertising.
k. Nasdaq Rule 4460(i). The Buyer acknowledges that the
Company will be unable to issue Common Stock in excess of 19.99% of the
Company's currently outstanding Common Stock upon conversion of the Preferred
Shares and, to the extent integrated with the Series D Preferred Stock,
exercise of the Investment Options, in the absence of (i) the approval of the
issuance of the Preferred Shares by the Company's stockholders; (ii) a waiver
by The Nasdaq Stock Market of the provisions of Nasdaq Marketplace Rule 4460(i)
("RULE 4460(I)"); or (iii) the provisions of Rule 4460(i) no longer being
applicable to the Company, including where the Common Stock of the Company is
no longer listed on The Nasdaq Stock Market or other securities exchange or
quotation system which required stockholder approval for issuances similar to
those required by Rule 4460(i).
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Buyer that:
a. Organization and Qualification. The Company and each
of its Subsidiaries (as defined below), if any, is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated, with full power and authority
(corporate and other) to own, lease, use and operate its properties and to
carry on its business as and where now owned, leased, used, operated and
conducted. SCHEDULE 3(A) sets forth a list of all of the Subsidiaries of the
Company and the jurisdiction in which each is incorporated. The Company and
each of its Subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the nature of
the business conducted by it makes such qualification necessary except where
the failure to be so qualified or in good standing would not have a Material
Adverse Effect. "MATERIAL ADVERSE EFFECT" means any material adverse effect on
the operations, assets, financial condition or prospects of the Company or its
Subsidiaries, if any, taken as a whole, or on the transactions contemplated
hereby or by the agreements or instruments to be entered into in connection
herewith. "SUBSIDIARIES" means any corporation or other organization, whether
incorporated or unincorporated, in which the Company owns, directly or
indirectly, any equity or other ownership interest and in which such ownership
interest entitles the Company to elect a majority of the Board of Directors or
similar governing body.
b. Authorization; Enforcement. (i) The Company has all
requisite corporate power and authority to file and perform its obligations
under the Certificate of Designation and to enter into and perform this
Agreement, the Registration Rights Agreement and the Investment Options and to
consummate the transactions contemplated hereby and thereby and to issue the
Securities, in accordance with the terms hereof and thereof, (ii) the execution
and delivery of this Agreement and the Registration Rights Agreement by the
Company and the consummation by it of the transactions contemplated hereby and
thereby (including without limitation the filing of the Certificate of
Designation, the issuance of the Preferred Shares and the Investment Options
and the issuance and reservation for issuance of the Conversion Shares and
Investment Option Shares issuable upon conversion or exercise thereof) have
been duly authorized by the Company's Board of Directors and no further consent
or authorization of the Company, its Board of Directors, or its shareholders is
required (except as contemplated hereby), (iii) this Agreement has been duly
executed and delivered and, prior to the Closing, the Certificate of
Designation will have been duly filed by the Company, and (iv) each of this
Agreement and the Certificate of Designation constitutes, and upon execution
and delivery by the Company of the Registration Rights Agreement and the
Investment Options, such instrument will constitute, a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with
its terms.
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c. Capitalization. As of January 30, 1998, the
authorized capital stock of the Company consists of (i) 25,000,000 shares of
Common Stock of which, 11,056,068 shares are issued and outstanding, 2,526,844
shares are reserved for issuance upon conversion of the Series C Convertible
Preferred Stock (the "SERIES C PREFERRED STOCK"), 2,944,197 shares are reserved
for issuance pursuant to the Company's stock option plans, 441,100 shares are
reserved for issuance pursuant to the Company's employee stock purchase plan,
50,000 shares are reserved for issuance pursuant to securities (other than the
Preferred Shares and the Investment Options) exercisable for, or convertible
into or exchangeable for shares of Common Stock and 3,582,700 shares are
reserved for issuance upon conversion of the Preferred Shares and exercise of
the Investment Options issued in respect of the First Closing and, prior to the
Second Closing, if applicable, a number of shares will be reserved equal to two
(2) times the number of shares of Common Stock then issuable upon conversion of
the Preferred Shares and exercise of the Investment Options issued in respect
of the Second Closing (each subject to adjustment pursuant to the Company's
covenant set forth in Section 4(h) below); and (ii) 5,000,000 shares of
preferred stock, of which 13,500 shares of Series C Preferred Stock are issued
and outstanding. All of such outstanding shares of capital stock are, or upon
issuance will be, duly authorized, validly issued, fully paid and
nonassessable. No shares of capital stock of the Company are subject to
preemptive rights or any other similar rights of the stockholders of the
Company or any liens or encumbrances imposed through the actions or failure to
act of the Company (except with respect to the Series C Preferred Stock).
Except as disclosed in SCHEDULE 3(C), as of the effective date of this
Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe for, puts, calls, rights of first refusal, agreements,
understandings, claims or other commitments or rights of any character
whatsoever relating to, or securities or rights convertible into or
exchangeable for any shares of capital stock of the Company or any of its
Subsidiaries, or arrangements by which the Company or any of its Subsidiaries
is or may become bound to issue additional shares of capital stock of the
Company or any of its Subsidiaries, and (ii) there are no agreements or
arrangements under which the Company or any of its Subsidiaries is obligated to
register the sale of any of its or their securities under the 1933 Act (except
the Registration Rights Agreement and the registration rights agreement dated
August 1, 1997 with respect to the Series C Preferred Stock) and (iii) there
are no anti-dilution or price adjustment provisions contained in any security
issued by the Company (or in any agreement providing rights to security
holders) that will be triggered by the issuance of the Preferred Shares or
Conversion Shares or the Investment Options and the Investment Option Shares.
The Company has furnished to the Buyer true and correct copies of the Company's
Certificate of Incorporation as in effect on the date hereof ("CERTIFICATE OF
INCORPORATION"), the Company's By-laws, as in effect on the date hereof (the
"BY-LAWS"), and the terms of all securities convertible into or exercisable for
Common Stock of the Company and the material rights of the holders thereof in
respect thereto.
d. Issuance of Shares. The Preferred Shares, Conversion
Shares and Investment Option Shares are duly authorized and, upon issuance in
accordance with the terms of this Agreement (including the issuance of the
Conversion Shares upon conversion of the
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Preferred Shares in accordance with the Certificate of Designation and the
issuance of the Investment Option Shares upon exercise of the Investment
Options in accordance with the terms thereof) will be validly issued, fully
paid and non-assessable, and free from all taxes, liens and charges with
respect to the issue thereof and shall not be subject to preemptive rights or
other similar rights of stockholders of the Company. The term Conversion
Shares includes the shares of Common Stock issuable upon conversion of the
Preferred Shares, including without limitation, such additional shares, if any,
as are issuable as a result of the events described in Section 2(c) of the
Registration Rights Agreement. The Company understands and acknowledges the
potentially dilutive effect to the Common Stock of the issuance of the
Conversion Shares and Investment Option Shares upon conversion or exercise of
the Preferred Shares and the Investment Options. The Company further
acknowledges that its obligation to issue Conversion Shares upon conversion of
the Preferred Shares and Investment Option Shares upon exercise of the
Investment Options in accordance with this Agreement, the Investment Options
and the Certificate of Designation is absolute and unconditional regardless of
the dilutive effect that such issuance may have on the ownership interests of
other stockholders of the Company (except to the extent stockholder approval is
required hereunder).
e. No Conflicts. The execution, delivery and
performance of this Agreement, the Registration Rights Agreement and the
Investment Option by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation,
the filing of the Certificate of Designation and the issuance and reservation
for issuance of the Conversion Shares and Investment Option Shares) will not
(i) conflict with or result in a violation of any provision of the Certificate
of Incorporation or By-laws or (ii) violate or conflict with, or result in a
breach of any provision of, or constitute a default (or an event which with
notice or lapse of time or both could 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 or any of its
Subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or any of its Subsidiaries or by which
any property or asset of the Company or any of its Subsidiaries is bound or
affected (except for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in
the aggregate, have a Material Adverse Effect). Neither the Company nor any of
its Subsidiaries is in violation of its Certificate of Incorporation, By-laws
or other organizational documents and neither the Company nor any of its
Subsidiaries is in default (and no event has occurred which with notice or
lapse of time or both could put the Company or any of its Subsidiaries in
default) under, and neither the Company nor any of its Subsidiaries has taken
any action or failed to take any action that would give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a
party or by which any property or assets of the Company or any of its
Subsidiaries is bound or affected, except for possible defaults as would not,
individually or in the aggregate, have a Material Adverse Effect. The
businesses of the Company and its Subsidiaries, if any, are not being
conducted, and shall not
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be conducted so long as a Buyer owns any of the Securities, in violation of any
law, ordinance or regulation of any governmental entity. Except as
specifically contemplated by this Agreement and as required under the 1933 Act
and any applicable state securities laws and the rules of the Nasdaq National
Market ("NASDAQ"), the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court
or governmental agency or any regulatory or self regulatory agency in order for
it to execute, deliver or perform any of its obligations under this Agreement,
the Registration Rights Agreement or the Investment Options in accordance with
the terms hereof or thereof. Except as disclosed in SCHEDULE 3(E), all
consents, authorizations, orders, filings and registrations which the Company
is required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof. The Company is not in violation of
the listing requirements of Nasdaq and does not reasonably anticipate that the
Common Stock will be delisted by Nasdaq in the foreseeable future. The Company
is unaware of any facts or circumstances which might reasonably be expected to
give rise to any of the foregoing.
f. SEC Documents, Financial Statements. Since December
31, 1995, the Company has timely filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC pursuant
to the reporting requirements of the Exchange Act of 1934, as amended (the
"1934 ACT") (all of the foregoing filed prior to the date hereof and all
exhibits included therein and financial statements and schedules thereto and
documents (other than exhibits) incorporated by reference therein, being
hereinafter referred to herein as the "SEC DOCUMENTS"). The Company has
delivered to each Buyer true and complete copies of the SEC Documents, except
for such exhibits and incorporated documents. As of their respective dates,
the SEC Documents complied in all material respects with the requirements of
the 1934 Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time
they were filed with the SEC, 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. As of their respective dates, the
financial statements of the Company included in the SEC Documents complied as
to form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto. Such
financial statements have been prepared in accordance with generally accepted
accounting principles, consistently applied, during the periods involved
(except (i) as may be otherwise indicated in such financial statements or the
notes thereto, or (ii) in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed or summary
statements) and fairly present in all material respects the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). Except as set forth in the financial
statements of the Company included in the SEC Documents, the Company has no
liabilities, contingent or otherwise, other than (i) liabilities incurred in
the ordinary course of business subsequent to December 31, 1996 and (ii)
obligations under contracts and
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commitments incurred in the ordinary course of business and not required under
generally accepted accounting principles to be reflected in such financial
statements, which, individually or in the aggregate, are not material to the
financial condition or operating results of the Company.
g. Absence of Certain Changes. Except for losses
incurred in the ordinary course of business that have been publicly disclosed
prior to the date hereof, since December 31, 1996, there has been no material
adverse change and no material adverse development in the assets, liabilities,
business, properties, operations, financial condition, results of operations or
prospects of the Company or any of its Subsidiaries. For purposes of this
Agreement, the terms "material adverse change" and "material adverse
development" shall exclude continuing losses that are consistent with the
Company's historical losses.
h. Absence of Litigation. There is no action, suit,
claim, proceeding, inquiry or investigation before or by any court, public
board, government agency, self-regulatory organization or body pending or, to
the knowledge of the Company or any of its Subsidiaries, threatened against or
affecting the Company or any of its Subsidiaries that could have a Material
Adverse Effect. SCHEDULE 3(H) contains a complete list and summary description
of any pending or threatened proceeding against or affecting the Company or any
of its Subsidiaries, without regard to whether it would have a Material Adverse
Effect.
i. Patents, Copyrights, etc. The Company and each of
its Subsidiaries owns or possesses the requisite licenses or rights to use all
patents, patent rights, inventions, know-how, trade secrets, trademarks,
service marks, service names, trade names and copyrights ("INTELLECTUAL
PROPERTY") necessary to enable it to conduct its business as now operated (and,
except as set forth in SCHEDULE 3(I) hereof, to the best of the Company's
knowledge, as presently contemplated to be operated in the future); there is no
claim or action by any person pertaining to, or proceeding pending, or to the
Company's knowledge threatened which challenges the right of the Company or of
a Subsidiary with respect to any Intellectual Property necessary to enable it
to conduct its business as now operated (and, except as set forth in SCHEDULE
3(I) hereof, to the best of the Company's knowledge, as presently contemplated
to be operated in the future); to the best of the Company's knowledge, the
Company's or its Subsidiaries, current and intended products, services and
processes do not infringe on any Intellectual Property or other rights held by
any person; and the Company is unaware of any facts or circumstances which
might give rise to any of the foregoing. The Company and each of its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of their Intellectual Property.
j. No Materially Adverse Contracts, Etc. Neither the
Company nor any of its Subsidiaries is subject to any charter, corporate or
other legal restriction, or any judgment, decree, order, rule or regulation
which in the judgment of the Company's officers has or is expected in the
future to have a Material Adverse Effect. Neither the Company nor any of its
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Subsidiaries is a party to any contract or agreement which in the judgment of
the Company's officers has or is expected to have a Material Adverse Effect.
k. Tax Status. Except as set forth on SCHEDULE 3(K),
the Company and each of its 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 charges 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
its 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.
l. Certain Transactions. Except as set forth on
SCHEDULE 3(L) and except for arm's length transactions pursuant to which the
Company or any of its Subsidiaries makes payments in the ordinary course of
business upon terms no less favorable than the Company or any of its
Subsidiaries could obtain from third parties and other than the grant of stock
options disclosed on SCHEDULE 3(C), 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 other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director,
trustee or partner.
m. Disclosure. All information relating to or
concerning the Company or any of its Subsidiaries set forth in this Agreement
and provided to the Buyers pursuant to Section 2(d) hereof and otherwise in
connection with the transactions contemplated hereby is, taken as a whole, true
and correct in all material respects and the Company has not omitted to state
any material fact necessary in order to make the statements made herein or
therein, in light of the circumstances under which they were made, not
misleading. Except for the transactions contemplated hereby, no event or
circumstance has occurred or exists with respect to the Company or any of its
Subsidiaries or its or their business, properties, prospects, operations or
financial conditions, which, under applicable law, rule or regulation, requires
public disclosure or announcement by the Company but which has not been so
publicly announced or disclosed (assuming for this purposes that the Company's
reports filed under the 1934 Act are being incorporated into an effective
registration statement filed by the Company under the 1933 Act).
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n. Acknowledgment Regarding Buyers' Purchase of
Preferred Shares. The Company acknowledges and agrees that the Buyers are
acting solely in the capacity of arm's length purchasers with respect to this
Agreement and the transactions contemplated hereby. The Company further
acknowledges that no Buyer is acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to this Agreement and the
transactions contemplated hereby and any advice given by any Buyer or any of
their respective representatives or agents in connection with this Agreement
and the transactions contemplated hereby is merely incidental to the Buyers,
purchase of the Preferred Shares. The Company further represents to each Buyer
that the Company's decision to enter into this Agreement has been based solely
on the independent evaluation of the Company and its representatives.
o. No Integrated Offering. Neither the Company, nor any
of its affiliates, nor any person acting on its or their behalf, has directly
or indirectly made any offers or sales in any security or solicited any offers
to buy any security under circumstances that would require registration under
the 1933 Act of the issuance of the Securities to the Buyers. The issuance of
the Securities to the Buyers will not be integrated with any other issuance of
the Company's securities (past, current or future) which requires stockholder
approval under the rules of The Nasdaq Stock Market.
p. No Brokers. The Company has taken no action which
would give rise to any claim by any person for brokerage commissions, finder's
fees or similar payments relating to this Agreement or the transactions
contemplated hereby, except for dealings with Concorde Capital Corporation
Limited and Xxxxxxxx Capital Corporation, whose commissions and fees will be
paid for by the Company.
q. Permits; Compliance. The Company and each of its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and to
carry on its business as it is now being conducted (collectively, the "COMPANY
PERMITS"), and there is no action pending or, to the knowledge of the Company,
threatened regarding suspension or cancellation of any of the Company Permits.
Neither the Company nor any of its Subsidiaries is in conflict with, or in
default or violation of, any of the Company Permits or any law or regulation,
except for any such conflicts, defaults or violations which, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect. During the period commencing on December 31, 1996 and ending on the
date hereof, neither the Company nor any of its Subsidiaries has received any
notification with respect to possible conflicts, defaults or violations of
applicable laws, except for notices relating to possible conflicts, defaults or
violations, which conflicts, defaults or violations would not have a Material
Adverse Effect.
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r. Environmental Matters.
(i) Except as set forth in SCHEDULE 3(R), there
are, to the Company's knowledge, with respect to the Company or any of its
Subsidiaries or any predecessor of the Company, no past or present violations
of Environmental Laws (as defined below), releases of any material into the
environment, actions, activities, circumstances, conditions, events, incidents,
or contractual obligations which may give rise to any common law environmental
liability or any liability under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 or similar federal, state, local or
foreign laws and neither the Company nor any of its Subsidiaries has received
any notice with respect to any of the foregoing, nor is any action pending or,
to the Company's knowledge, threatened in connection with any of the foregoing.
The term "ENVIRONMENTAL LAWS" means all federal, state, local or foreign laws
relating to pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata), including, without limitation, laws relating to
emissions, discharges, releases or threatened releases of chemicals, pollutants
contaminants, or toxic or hazardous substances or wastes (collectively,
"HAZARDOUS MATERIALS") into the environment, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, as well as all authorizations,
codes, decrees, demands or demand letters, injunctions, judgments, licenses,
notices or notice letters, orders, permits, plans or regulations issued,
entered, promulgated or approved thereunder.
(ii) Other than those that are or were stored,
used or disposed of in compliance with applicable law, no Hazardous Materials
are contained on or about any real property currently owned, leased or used by
the Company or any of its Subsidiaries, and no Hazardous Materials were
released on or about any real property previously owned, leased or used by the
Company or any of its Subsidiaries during the period the property was owned,
leased or used by the Company or any of its Subsidiaries, except in the normal
course of the Company's or any of its Subsidiaries' business.
(iii) Except as set forth in SCHEDULE 3(R), there
are no underground storage tanks on or under any real property owned, leased or
used by the Company or any of its Subsidiaries that are not in compliance with
applicable law.
s. Title to Property. The Company and its Subsidiaries
own no real property and have good and marketable title to all 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, encumbrances and
defects except such as are described in SCHEDULE 3(S) or such as would not have
a Material Adverse Effect. Any real property and facilities held under lease
by the Company and its Subsidiaries are held by them under valid, subsisting
and enforceable leases with such exceptions as would not have a Material
Adverse Effect.
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t. 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
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not have a Material Adverse Effect.
u. Internal Accounting Controls. The Company and each
of its Subsidiaries maintain a system of internal accounting controls
sufficient, in the judgment of the Company's board of directors, 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.
4. COVENANTS.
a. Best Efforts. The parties shall use their best
efforts to satisfy timely each of the conditions described in Section 6 and 7
of this Agreement.
b. Form D; Blue Sky Laws. The Company agrees to file a
Form D with respect to the Securities as required under Regulation D and to
provide a copy thereof to each Buyer promptly after such filing. The Company
shall, on or before the Closing Date with respect to the First Closing, take
such action as the Company shall reasonably determine is necessary to qualify
the Securities for sale to the Buyers at the applicable closing pursuant to
this Agreement under applicable securities or "blue sky" laws of the states of
the United States (or to obtain an exemption from such qualification), and
shall provide evidence of any such action so taken to each Buyer on or prior to
the Closing Date with respect to the First Closing.
c. Reporting Status; Eligibility to Use Form S-3. The
Company's Common Stock is registered under Section 12(g) of the 1934 Act. So
long as any Buyer beneficially owns any of the Securities, the Company shall
timely file all reports required to be filed with the SEC pursuant to the 1934
Act, and the Company shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would permit such termination; provided, however, that
the Company shall be permitted to terminate its status as an issuer required to
file reports under the 1934 Act in the event the Company merges or consolidates
with or sells all or substantially all of its assets to a corporation which is
a publicly traded corporation whose common stock is listed for trading on the
NYSE,
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Nasdaq or AMEX. The Company currently meets, and will take all necessary
action to continue to meet, the "registrant eligibility" requirements set forth
in the general instructions to Form S-3.
d. Use of Proceeds. The Company shall use the proceeds
from the sale of the Preferred Shares and the Investment Options for working
capital and to fund acquisitions and strategic investments. Pending such uses,
the Company will invest the proceeds in short-term and investment grade
obligations.
e. Additional Equity Capital; Right of First Refusal.
Subject to the exceptions described below, the Company agrees that during the
period beginning on the date hereof and ending one hundred eighty (180) days
following the Closing Date in respect of the First Closing and ninety (90) days
following the Closing Date in respect of the Second Closing (the "LOCK-UP
PERIODS"), the Company will not, without the prior written consent of a
majority-in-interest of the Buyers, negotiate or contract with any party to
obtain additional equity financing (including debt financing with an equity
component). In addition, subject to the exceptions described below, the
Company will not conduct any equity financing (including debt with an equity
component) ("FUTURE OFFERINGS") during the period beginning on the last day of
the Lock-Up Periods and ending one hundred eighty (180) days thereafter unless
it shall have first delivered to each Buyer, at least fifteen (15) business
days prior to the closing of such Future Offering, written notice describing
the proposed Future Offering, including the terms and conditions thereof, and
providing each Buyer an option during the ten (10) day period following
delivery of such notice to purchase its pro rata share (based on the ratio that
the number of Preferred Shares purchased by it hereunder bears to the aggregate
number of Preferred Shares purchased hereunder) of the securities being offered
in the Future Offering on the same terms as contemplated by such Future
Offering (the limitations referred to in this and the immediately preceding
sentence are collectively referred to as the "CAPITAL RAISING LIMITATIONS").
The Capital Raising Limitations shall not apply to any transaction involving
(i) issuances of securities in a firm commitment underwritten public offering
(excluding a continuous offering pursuant to Rule 415 under the 0000 Xxx) or
(ii) issuances of securities in connection with a merger, consolidation or sale
of assets, or in connection with any strategic partnership or joint venture
(the primary purpose of which is not to raise equity capital), or in connection
with the disposition or acquisition of a business, product or license by the
Company. The Capital Raising Limitations also shall not apply to 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 to the grant
of additional options or warrants, or the issuance of additional securities,
under any Company stock option or restricted stock plan existing on the date
hereof or, if established hereafter, approved by a majority of the Company's
disinterested directors or the issuance of Common Stock at the market price
prevailing on the date of issuance to employees and directors wishing to
purchase additional shares on terms approved by a majority of the disinterested
members of the Board of Directors.
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f. Expenses. The Company shall reimburse Xxxx Xxxx
Capital Management, L.P. ("RGC") for all expenses incurred by it in connection
with the negotiation, preparation, execution, delivery and performance of this
Agreement and the other agreements to be executed in connection herewith,
including, without limitation, attorneys' and consultants' fees and expenses.
The Company's obligation to reimburse RGC's expenses under this Section 4(f)
shall be limited to Twenty Thousand Dollars ($20,000).
g. Financial Information. The Company agrees to send
the following reports to each Buyer holding Preferred Shares: (i) within ten
(10) days after the filing with the SEC, a copy of its Annual Report on Form
10-K, its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K;
(ii) within one (1) day after release, copies of all press releases issued by
the Company or any of its Subsidiaries; and (iii) contemporaneously with the
making available or giving to the stockholders of the Company, copies of any
notices or other information the Company makes available or gives to such
stockholders.
h. Reservation of Shares. The Company shall at all
times have authorized, and reserved for the purpose of issuance, a sufficient
number of shares of Common Stock to provide for the full conversion of the
outstanding Preferred Shares and issuance of the Conversion Shares in
connection therewith (based on the Conversion Price of the Preferred Shares in
effect from time to time). The Company shall not reduce the number of shares
of Common Stock reserved for issuance upon conversion of the Preferred Shares
without the consent of each Buyer, which consent will not be unreasonably
withheld. The Company shall use its best efforts at all times to maintain the
number of shares of Common Stock so reserved for issuance at no less than two
(2) times the number that is then actually issuable upon full conversion of the
Preferred Shares (based on the Conversion Price of the Preferred Shares in
effect from time to time) and full exercise of the Investment Options and the
issuance of the Investment Option Shares in connection therewith (based on the
Exercise Price of the Investment Options in effect from time-to-time). If at
any time the number of shares of Common Stock authorized and reserved for
issuance is below the number of Conversion Shares and Investment Option Shares
issued and issuable upon conversion or exercise of the Preferred Shares and the
Investment Options, the Company will promptly take all corporate action
necessary to authorize and reserve a sufficient number of shares, including,
without limitation, calling a special meeting of shareholders to authorize
additional shares, in the case of an insufficient number of authorized shares,
and using its best efforts to obtain shareholder approval of an increase in
such authorized number of shares.
i. Listing. The Company shall promptly secure the
listing of the Conversion Shares upon each national securities exchange or
automated quotation system, if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance) and shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all
Conversion Shares and the Investment Option Shares from time to time issuable
upon conversion or exercise of the Preferred Shares and the Investment Options.
The Company will obtain and
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maintain the listing and trading of its Common Stock on Nasdaq, the Nasdaq
SmallCap Market ("NASDAQ SMALLCAP"), the New York Stock Exchange ("NYSE"), or
the American Stock Exchange ("AMEX") and will comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or rules of
the National Association of Securities Dealers ("NASD") and such exchanges, as
applicable. The Company shall promptly provide to each Buyer copies of any
notices it receives from Nasdaq regarding the continued eligibility of the
Common Stock for listing on Nasdaq.
j. Solvency. The Company (both before and after giving
effect to the transactions contemplated by this Agreement) is solvent and
currently the Company has no information that would lead it to reasonably
conclude that the Company would not have, nor does it intend to take any action
that would impair, its ability to pay its debts from time to time incurred in
connection therewith as such debts mature. The Company did not receive a
qualified opinion from its auditors with respect to its most recent fiscal year
end and does not anticipate or know of any basis upon which its auditors might
issue a qualified opinion in respect of its current fiscal year.
k. Stockholder Approval. The Company shall hold an
annual or special meeting of its stockholders no later than June 30, 1998 and
use its best efforts to obtain at such meeting such approvals of the Company's
stockholders as may be required to issue all of the shares of Common Stock
issuable upon conversion or exercise of, or otherwise with respect to, the
Preferred Shares, the Series C Convertible Preferred Stock and the Investment
Options in accordance with Rule 4460(i) (or any successor rule thereto which
may then be in effect) (the "STOCKHOLDER APPROVAL"). The Company shall comply
with the filing and disclosure requirements of Section 14 under the Exchange
Act in connection with the solicitation, acquisition and disclosure of such
Stockholder Approval. The Company represents and warrants that its Board of
Directors has approved, and will recommend that the Company's stockholders
approve, the proposal contemplated by this Section 4(k) and shall so indicate
such recommendation in the proxy statement used to solicit such Stockholder
Approval. The Company shall use its best efforts to cause its officers and
directors to vote in favor of the proposal contemplated by this Section 4(k).
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its transfer agent
to issue certificates, registered in the name of each Buyer or its nominee, for
the Conversion Shares and Investment Option Shares in such amounts as specified
from time to time by each Buyer to the Company upon proper conversion or
exercise of the Preferred Shares and Investment Options (the "IRREVOCABLE
TRANSFER AGENT INSTRUCTIONS"). Prior to registration of the Conversion Shares
and Investment Option Shares under the 1933 Act, all such certificates shall
bear the restrictive legend specified in Section 2(g) of this Agreement. The
Company warrants that, assuming the Buyers are not "affiliates" of the Company
under applicable federal securities law, no instruction
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other than the Irrevocable Transfer Agent Instructions referred to in this
Section 5, the notification by the Company to the transfer agent of the
conversion of the Preferred Shares or the exercise of the Investment Options
and stop transfer instructions to give effect to Section 2(f) hereof (in the
case of the Conversion Shares and Investment Option Shares, prior to the
effectiveness of the registration statement relating to the Conversion Shares
and Investment Option Shares under the 1933 Act), will be given by the Company
to its transfer agent and that the Securities 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. Nothing in
this Section shall affect in any way the Buyer's obligations and agreement set
forth in Section 2(g) hereof to comply with all applicable prospectus delivery
requirements, if any, upon resale of the Securities. If a Buyer provides the
Company with an opinion of counsel, reasonably satisfactory to the Company in
form, substance and scope, that registration of a resale by such Buyer of any
of the Securities is not required under the 1933 Act, the Company shall permit
the transfer, and, in the case of the Conversion Shares, promptly instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by such Buyer. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the
Buyers, by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5 will be inadequate and agrees,
in the event of a breach or threatened breach by the Company of the provisions
of this Section, that the Buyers shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and requiring
immediate transfer, without the necessity of showing economic loss and without
any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the
Preferred Shares and Investment Options to a Buyer at each of the First Closing
and Second Closing, as applicable is subject to the satisfaction, at or before
the Closing Date in respect of such closing, of each of the following
conditions thereto, provided that these conditions are for the Company's sole
benefit and may be waived by the Company at any time in its sole discretion.
a. With respect to the First Closing and Second Closing:
(i) The applicable Buyer shall have executed this
Agreement and the Registration Rights Agreement, and delivered the same to the
Company.
(ii) The applicable Buyer shall have delivered the
applicable Purchase Price in accordance with Section 1(b) above.
(iii) The Certificate of Designation shall have
been accepted for filing with the Secretary of State of Delaware.
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(iv) The representations and warranties of the
applicable Buyer shall be true and correct in all material respects as of the
date when made and as of each Closing Date as though made at that time (except
for representations and warranties that speak as of a specific date), and the
applicable Buyer shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the applicable Buyer
at or prior to each Closing Date.
(v) No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority
over the matters contemplated hereby which prohibits the consummation of any of
the transactions contemplated by this Agreement.
b. With respect to the Second Closing:
(i) The closing bid price of the Common Stock on
the Nasdaq Stock Market or the principal securities exchange or quotation
system on which the Common Stock is traded on the trading day immediately
preceding the Closing Date with respect to the Second Closing is equal to or
greater than $13.76.
(ii) The stockholders of the Company shall have
approved the matter set forth in Section 4(k).
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Preferred
Shares at each of the First Closing and the Second Closing, as applicable, is
subject to the satisfaction, at or before the Closing Date in respect of such
closing of each of the following conditions, provided that these conditions are
for such Buyer's sole benefit and may be waived by such Buyer at any time in
its sole discretion:
a. With respect to the First Closing and the Second
Closing:
(i) The Company shall have executed this Agreement
and the Registration Rights Agreement, and delivered the same to the Buyer.
(ii) The Certificate of Designation shall have been
accepted for filing with the Secretary of State of Delaware, and a copy thereof
certified by such Secretary of State shall have been delivered to such Buyer.
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(iii) The Company shall have delivered to such Buyer
duly executed certificates (in such denominations as the Buyer shall request)
representing the Preferred Shares and the Investment Options being so purchased
in accordance with Section 1(b) above.
(iv) The Irrevocable Transfer Agent Instructions, in
form and substance satisfactory to a majority-in-interest of the Buyers, shall
have been delivered to and acknowledged in writing by the Company's Transfer
Agent.
(v) The representations and warranties of the
Company shall be true and correct in all material respects as of the date when
made and as of each Closing Date as though made at such time (except for
representations and warranties that speak as of a specific date) and the
Company shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or prior to each
Closing Date. The Buyer shall have received a certificate or certificates,
executed by the chief executive officer of the Company, dated as of each
Closing Date, to the foregoing effect and as to such other matters as may be
reasonably requested by such Buyer including, but not limited to certificates
with respect to the Company's Certificate of Incorporation, By-laws and Board
of Directors' resolutions relating to the transactions contemplated hereby.
(vi) No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority
over the matters contemplated hereby which prohibits the consummation of any of
the transactions contemplated by this Agreement.
(vii) The Conversion Shares and Investment Option
Shares shall have been authorized for quotation on Nasdaq and trading in the
Common Stock on Nasdaq shall not have been suspended by the SEC or Nasdaq.
(viii) The Buyer shall have received an opinion of
the Company's counsel, dated as of each Closing Date, in form, scope and
substance reasonably satisfactory to the Buyer and in substantially the same
form as EXHIBIT "D" attached hereto.
(ix) The Buyer shall have received an officer's
certificate described in Section 3(c) above, dated as of each Closing Date.
(x) Xxxxxxx Xxxxxx and Xxxxxx Xxxxx shall have
agreed to vote in favor of the matter set forth in Section 4(k).
b. With respect to the Second Closing:
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(i) The registration statement(s) filed by the
Company pursuant to Section 2(a) of the Registration Rights Agreement covering
the resale of the Registrable Securities (as defined in the Registration Rights
Agreement) underlying the Preferred Shares and the Investment Options issued or
issuable at the First Closing and the Second Closing and shall be effective and
no stop order shall have been issued in respect thereof.
(ii) Since the Closing Date in respect of the
First Closing, there has been no material adverse change and no material
adverse development in the assets, liabilities, business, properties,
operations, financial condition results of operations or prospects of the
Company or any of its Subsidiaries.
(iii) At any time on or after the 90th day
following the Closing Date in respect to the First Closing, the closing bid
price of the Common Stock on the Nasdaq Stock Market or the principal
securities exchange or quotation system on which the Common Stock is traded
shall be equal to or greater than $13.76 for any five (5) consecutive trading
days and the Company provides notice to the Buyers to that effect.
(iv) The closing bid price of the Common Stock on
the Nasdaq Stock Market or the principal securities exchange or quotation
system on which the Common Stock is traded on the trading day immediately
preceding the Closing Date with respect to the Second Closing is equal to or
greater than $13.76.
(v) Ninety (90) days shall have elapsed since the
Closing Date with respect to the First Closing and no more than one (1) year
shall have elapsed since the Closing Date with respect to the First Closing.
(vi) The stockholders of the Company shall have
approved the matter set forth in Section 4(k).
8. STANDSTILL AGREEMENT.
Each Buyer agrees that, for a period beginning on the date hereof and
ending twelve (12) months following the date on which it no longer owns any
Preferred Shares or Conversion Shares, it will not, directly or indirectly
(unless in any such cases specifically invited in writing to do so by the Board
of Directors of the Company), do any of the following:
(i) except as acquired pursuant to or otherwise
contemplated by this Agreement, the Certificate of Designation and the
Investment Options or as a result of any stock split, stock dividend or similar
recapitalization by the Company, acquire, offer to acquire, or agree to acquire
by purchase or otherwise, individually or by joining a partnership, limited
partnership, syndicate or other "group" (as such term is used in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (any such act, to "acquire"), any
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securities of the Company entitled to vote, or securities convertible into or
exercisable or exchangeable for such securities (collectively, "Voting
Securities") if, after such acquisition, the Buyer would beneficially own 10%
or more of the total combined voting power of the Company's Voting Securities
then outstanding;
(ii) form, join, participate in or encourage the
formation of a partnership, limited partnership, syndicate or other group for
the purpose of acquiring, holding or disposing of Voting Securities;
(iii) make, or in any way participate in, directly
or indirectly, any "solicitation" of "proxies" (as such terms are defined or
used in Regulation 14A under the Exchange Act) or become a "participant" in any
"election contest" (as such terms are defined or used in Rule 14a-11 under the
Exchange Act) with respect to the Company, or initiate, propose or otherwise
solicit stockholders of the Company for the approval of one or more stockholder
proposals with respect to the Company or induce or attempt to induce any other
person to initiate any stockholder proposal;
(iv) deposit any Voting Securities into a voting
trust or subject them to any voting agreement or other agreement or arrangement
with respect to the voting of such Voting Securities;
(v) otherwise act, directly or indirectly, alone
or in concert with others, to seek to control the management, Board of
Directors, policies or affairs of the Company, or solicit, propose, seek to
effect or negotiate with any other person with respect to any form of business
combination transaction with the Company or any affiliate thereof, or any
restructuring, recapitalization or similar transaction with respect to the
Company or any affiliate thereof, or announce or disclose an intent, purpose,
plan or proposal with respect to the Company or any voting securities
inconsistent with the provisions of this Agreement, including an intent,
purpose, plan or proposal that is conditioned on or would require the Company
to waive the benefit of or amend any provision of this Agreement, or assist,
participate in, facilitate or encourage or solicit any effort or attempt by any
person to do or seek to do any of the foregoing; and
(vi) encourage or render advice to or make any
recommendation or proposal to any person, or directly or indirectly
participate, aid and abet or otherwise induce any person to engage in any of
the actions prohibited by this Section 8 or to engage in any actions
inconsistent with such prohibitions.
9. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of Delaware without
regard to the principles of conflict of laws. The parties hereto hereby submit
to the exclusive jurisdiction of the United States
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Federal Courts located in Delaware with respect to any dispute arising under
this Agreement, the agreements entered into in connection herewith or the
transactions contemplated hereby or thereby.
b. Counterparts; Signatures by Facsimile. This
Agreement may be executed in two or more counterparts, all of which 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.
This Agreement, once executed by a party, may be delivered to the other party
hereto by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
c. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. If any provision of this Agreement
shall be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Buyer
makes any representation, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be waived or amended other
than by an instrument in writing signed by the party to be charged with
enforcement.
f. Notices. Any notices required or permitted to be
given under the terms of this Agreement shall be sent by certified or
registered mail (return receipt requested) or delivered personally or by
courier (including a recognized overnight delivery service) or by facsimile and
shall be effective five days after being placed in the mail, if mailed by
regular U.S. mail, or upon receipt, if delivered personally or by courier
(including a recognized overnight delivery service) or by facsimile, in each
case addressed to a party. The addresses for such communications shall be:
If to the Company:
CyberCash, Inc.
0000 Xxxxxx Xxxxxxx, Xxxxx Xxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Chief Financial Officer
Facsimile: (000) 000-0000
23
24
With copy to:
Xxxxx & Xxxxxxx, L.L.P.
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Silver, Esq.
Facsimile: (000) 000-0000
If to a Buyer: To the address set forth immediately below such
Buyer's name on the signature pages hereto.
Each party shall provide notice to the other party of any change in
address.
g. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
assigns. Neither the Company nor any Buyer shall assign this Agreement or any
rights or obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, any Buyer may assign its rights hereunder to any
person that purchases Securities in a private transaction from a Buyer
(including a pledge of the Securities as collateral in connection with a bona
fide margin account or other lending arrangement in the ordinary course of
Buyer's business) or to any of its "affiliates," as that term is defined under
the 1934 Act, without the consent of the Company.
h. 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.
i. Survival. The representations and warranties of the
Company and the agreements and covenants set forth in Sections 3, 4, 5, 8 and 9
shall survive the closing hereunder notwithstanding any due diligence
investigation conducted by or on behalf of the Buyers. The Company agrees to
indemnify and hold harmless each of the Buyers and all their officers,
directors, partners, employees and agents for loss or damage arising as a
result of or related to any breach or alleged breach by the Company of any of
its representations, warranties and covenants set forth in Sections 3 and 4
hereof or any of its covenants and obligations under this Agreement or the
Registration Rights Agreement, including advancement of expenses as they are
incurred.
j. Publicity. The Company and each of the Buyers shall
have the right to review a reasonable period of time before issuance of any
press releases, SEC, Nasdaq or NASD filings, or any other public statements
with specifically relating to the transactions contemplated hereby provided
that the Company shall be permitted, without prior approval of the Buyers, to
24
25
make any press release or SEC, Nasdaq or NASD filings with respect to the
transactions as may be required by applicable law and regulations.
k. 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.
l. No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied
against any party.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused
this Agreement to be duly executed as of the date first above written.
CYBERCASH, INC.
By: /s/ XXXXX X. XXXXXX
-----------------------------------------------
Xxxxx X. Xxxxxx
Chief Financial Officer
RGC INTERNATIONAL INVESTORS, LDC
By: Xxxx Xxxx Capital Management, L.P.
By: RGC General Partner Corp.
By: /s/ XXXX X. XXXXXXXX
-----------------------------------------------
Xxxx X. Xxxxxxxx
Managing Director
RESIDENCE: Cayman Islands
ADDRESS:
c/o Xxxx Xxxx Capital Management, L.P.
Three Bala Plaza East
000 Xx. Xxxxxx Xxxx
Xxxxx 000
Xxxx Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
AGGREGATE SUBSCRIPTION AMOUNT:
First Closing
-------------
Number of Shares of Series D Convertible Preferred Stock: 10,000
Number of Investment Options 236,127
Aggregate Purchase Price: $10,000,000
Second Closing
--------------
Number of Shares of Series D Convertible Preferred Stock: 10,000
Number of Investment Options 236,127
Aggregate Purchase Price: $10,000,000
26
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HALIFAX FUND, L.P.
By: Palladin Group L.P., as attorney-in-fact
By: Palladin Capital Management LLC,
its general partner
By: /s/ XXXXXX XXXXXX
-----------------------------------------------
Xxxxxx Xxxxxx
Managing Director
RESIDENCE: Cayman Islands
ADDRESS:
c/o Palladin Group L.P.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
AGGREGATE SUBSCRIPTION AMOUNT:
First Closing
-------------
Number of Shares of Series D Convertible Preferred Stock: 5,000
Number of Investment Options 118,064
Aggregate Purchase Price: $5,000,000
Second Closing
--------------
Number of Shares of Series D Convertible Preferred Stock: 5,000
Number of Investment Options 118,064
Aggregate Purchase Price: $5,000,000
27
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SCHEDULE 3(a)
Subsidiary Jurisdiction of Incorporation
---------- -----------------------------
CyberCash India Private Limited India
Reston Parkway I, Inc. Delaware
Reston Parkway II, Inc. Delaware
CyberCash International C.V. Netherlands
CC International B.V. Netherlands
CyberCash Japan C.V. Netherlands
CyberCash K.K. Japan
CyberCash GmbH Germany
CyberCash Asia Limited Hong Kong
29
SCHEDULE 3(c)
(i)(A) Options to purchase 1,908,857 shares of common stock were
outstanding under the 1995 Stock Option Plan as of January 30,
1998.
(B) Options to purchase 42,158 shares of common stock were outstanding
under the 1995 Non-Employee Directors' Stock Option Plan as of
January 30, 1998.
(C) Participating employees have rights to purchase common stock under
the Employee Stock Purchase Plan.
(D) Carnegie Mellon University holds warrants to purchase 50,000
shares of common stock.
(E) Holders of the Series C Convertible Preferred Stock have certain
rights under the Securities Purchase Agreement dated as of August
1, 1997, including a right of first refusal with respect to equity
financings by the Company.
(ii)(A) Amended and Restated Investors' Rights Agreement dated as of
August 24, 1995 by and among CyberCash, Inc. and the other
signatories thereto, as amended on September 29, 1995.
(B) Common Stock Purchase Agreement dated as of February 15, 1996 by
and between CyberCash, Inc. and Softbank Holdings, Inc.
(C) Warrant Certificate dated as of March 21, 1997.
(D) Subscription Agreement dated as of March 21, 1997 by and between
CyberCash, Inc. and Carnegie Mellon University.
(E) Registration Rights Agreement dated as of August 1, 1997 by and
among CyberCash, Inc. and the Investors (as defined therein).
(iii) None.
30
SCHEDULE 3(e)
None.
31
SCHEDULE 3(h)
None.
32
SCHEDULE 3(i)
Digicash bv has registered the trademark "CyberCash" in the Benelux
countries on an "intent-to-use" basis. Digicash has filed an application,
based on the Benelux registration, to register the CyberCash xxxx in the
United States. The United States Patent and Trademark Office has issued
an office action denying the registration but has not taken final action
on the registration application.
33
SCHEDULE 3(k)
None.
34
SCHEDULE 3(l)
None.
35
SCHEDULE 3(r)
None.
36
SCHEDULE 3(s)
None.
