SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT, dated as of December 3, 1997, by and
between V-ONE CORPORATION, a Delaware corporation, with headquarters located at
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company"),
and ADVANTAGE FUND II LTD., a British Virgin Islands corporation (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Buyer wishes to purchase, upon the terms and subject
to the conditions of this Agreement, shares of non-voting, convertible preferred
stock of the Company which will be convertible into units consisting of (1)
shares of Common Stock, $.001 par value (the "Common Stock"), of the Company and
(2) Common Stock Purchase Warrants to purchase shares of Common Stock (the
"Warrants"); and
WHEREAS, the Company and the Buyer are executing and delivering
this Agreement in reliance upon the exemption from securities registration
afforded by Rule 506 of Regulation D as promulgated by the Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 Act");
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
(a) SUBSCRIPTION. The Buyer hereby agrees to purchase from the Company the
number of shares (the "Preferred Shares") of Series A Convertible Preferred
Stock, $.001 par value (the "Preferred Stock"), of the Company set forth on the
signature page of this Agreement, having the terms and conditions as set forth
in the form of Certificate of Designations of the Series A Convertible Preferred
Stock attached hereto as ANNEX I (the "Certificate of Designations") at the
price per share and for the aggregate purchase price set forth on the signature
page of this Agreement. The purchase price for the Preferred Shares shall be
payable in United States Dollars. The shares of Common Stock issuable upon
conversion of the Preferred Shares are referred to herein as the "Conversion
Shares." The shares of Common Stock issuable in payment of dividends on the
Preferred Shares are referred to herein as the "Dividend Shares". The shares of
Common Stock issuable upon exercise of the Warrants are referred to herein as
the "Warrant Shares." The Conversion Shares, the Dividend Shares and the Warrant
Shares are referred to herein collectively as the "Common Shares." The Common
Shares and the Preferred Shares are referred to herein collectively as the
"Shares."
(b) FORM OF PAYMENT. The Buyer shall pay the purchase price for the Preferred
Shares by delivering good funds in United States Dollars to the escrow agent
(the "Escrow Agent") identified in the Joint Escrow Instructions attached hereto
as ANNEX II (the "Joint Escrow Instructions"). Such delivery of funds shall be
made against delivery by the Company of the certificates for the Preferred
Shares registered in the name of the Buyer. Promptly following payment by the
Buyer to the Escrow Agent of the purchase price of the Preferred Shares, but in
no event later than two Business Days after such payment, the Company shall
deliver certificates for the Preferred Shares, registered in the name of the
Buyer, to the Escrow Agent. The certificates for the Preferred Shares shall be
delivered by the Company to the Escrow Agent on a delivery against payment basis
at the closing. By signing this Agreement, the Buyer and the Company each agrees
to all of the terms and conditions of, and becomes a party to, the Joint Escrow
Instructions, all of the provisions of which are incorporated herein by this
reference as if set forth in full. As used in this Agreement, the term "Business
Day" means any day other than a Saturday, Sunday or other day on which
commercial banks in The City of New York are authorized or required by law to
remain closed.
(c) METHOD OF PAYMENT. Payment of the purchase price for the Preferred Shares
shall be made by wire transfer of funds to:
Citibank, N.A.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
ABA#▇▇▇▇▇▇▇▇▇
For credit to A/C#37179446
For credit to the account of ▇▇▇▇▇ ▇. ▇▇▇▇▇ Attorney Escrow Account
Reference: Advantage/V-One
Not later than 4:00 p.m., New York City time, on the date which is three
Business Days after the Company shall have executed and delivered this Agreement
and returned a signed counterpart of this Agreement to the Buyer or its legal
counsel, the Buyer shall deposit with the Escrow Agent the aggregate purchase
price for the Preferred Shares.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.
The Buyer represents and warrants to, and covenants and agrees
with, the Company as follows:
(a) PURCHASE FOR INVESTMENT. The Buyer is purchasing the Preferred Shares for
its own account for investment only and not with a view towards the public sale
or distribution thereof;
(b) ACCREDITED INVESTOR. The Buyer is an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act by
reason of Rule 501(a)(3);
(c) REOFFERS AND RESALES. All subsequent offers and sales of the Shares by the
Buyer shall be made pursuant to registration of the Shares being offered and
sold under the 1933 Act or pursuant to an exemption from registration;
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(d) COMPANY RELIANCE. The Buyer understands that the Preferred Shares are being
offered and sold, and the Common Shares and the Warrants are being offered, to
it in reliance on 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 Preferred Shares and
to receive an offer of the Common Shares and the Warrants;
(e) INFORMATION PROVIDED. 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 Preferred
Shares and the offer of the Common Shares and the Warrants which have been
requested by the Buyer; the Buyer and its advisors, if any, have been afforded
the opportunity to ask questions of the Company and have received complete and
satisfactory answers to any such inquiries; without limiting the generality of
the foregoing, the Buyer has had the opportunity to obtain and to review the
Company's (1) Annual Report on Form 10-K for the fiscal year ended December 31,
1996, (2) Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997,
June 30, 1997 and September 30, 1997 and (3) proxy statement for the Company's
1997 Annual Meeting of Stockholders, in each case as filed with the SEC
(collectively, the "SEC Reports"); and the Buyer understands that its investment
in the Shares involves a high degree of risk;
(f) ABSENCE OF APPROVALS. The Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Shares; and
(g) SUBSCRIPTION AGREEMENT. This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Buyer and is a valid and binding
agreement of the Buyer enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.
3. COMPANY REPRESENTATIONS, WARRANTIES, ETC.
The Company represents and warrants to, and covenants and agrees
with, the Buyer that:
(a) ORGANIZATION AND AUTHORITY. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has all requisite corporate power and authority to (i) own, lease and
operate its properties and to carry on its business as now being conducted, and
(ii) to execute, deliver and perform its obligations under this Agreement, the
Registration Rights Agreement, the form of which is attached hereto as ANNEX III
(the "Registration Rights Agreement"), the Certificate of Designations, the
Transfer Agent Instructions, the form of which is attached hereto as ANNEX IV
(the "Transfer Agent Instructions"), and the other agreements to be executed and
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delivered by the Company in connection herewith, and to consummate the
transactions contemplated hereby and thereby. The Company is duly qualified to
do business as a foreign corporation and is in good standing in all
jurisdictions wherein such qualification is necessary and where failure so to
qualify could have a material adverse effect on the business, properties,
operations, condition (financial or other), results of operations or prospects
of the Company. The Company has no subsidiaries.
(b) CAPITALIZATION. The authorized capital stock of the Company currently
consists of (a) 33,333,333 shares of Common Stock of which 13,070,235 shares
were outstanding on December 1, 1997, all of which are fully paid and
nonassessable; and (b) 13,333,333 shares of Preferred Stock, $.001 par value, of
which 4,000 shares will be designated as Series A Convertible Preferred Stock
and issued pursuant to this Agreement; and on the Closing Date (as defined
herein) there will be (x) no material increase from December 1, 1997 in the
number of shares of Common Stock outstanding (except for shares issued upon the
exercise of options and warrants outstanding on the date hereof or options or
similar rights granted subsequent to the date of this Agreement pursuant to the
Company's 1996 Incentive Stock Plan) and (y) no shares of preferred stock
outstanding except as issued pursuant to this Agreement. As of December 1, 1997,
the Company had outstanding options and warrants entitling the holders to
purchase 2,884,507 shares of Common Stock. Other than as set forth in the
preceding sentence (and other than options that may be granted subsequent to the
date of this Agreement under the Company's 1996 Incentive Stock Plan), the
Company does not have outstanding any material amount of securities (or
obligations to issue any such securities) convertible into, exchangeable for or
otherwise entitling the holders thereof to acquire shares of Common Stock,
except as disclosed in the SEC Reports. The outstanding shares of Common Stock
and outstanding options, warrants and other securities to purchase Common Stock
have been duly authorized and validly issued. None of such outstanding shares of
Common Stock, options, warrants and other securities has been issued in
violation of the preemptive rights of any securityholder of the Company. The
offers and sales of the outstanding shares of Common Stock and options, warrants
and other rights to acquire Common Stock were at all relevant times either
registered under the 1933 Act and applicable state securities laws or exempt
from such requirements, except for such non-compliance with state securities
laws which have not had and will not have a material adverse effect on the
business, properties, operations, condition (financial or other), results of
operations or prospects of the Company or the transactions contemplated by this
Agreement. Except as set forth on SCHEDULE 3(B), no holder of any of the
Company's securities has any rights, "demand," "piggy-back" or otherwise, to
have such securities registered by reason of the intention to file, filing or
effectiveness of the Registration Statement (as defined in the Registration
Rights Agreement).
(c) CONCERNING THE SHARES. The Shares have been duly authorized and the
Preferred Shares, when issued and paid for in accordance with this Agreement,
and the Common Shares, when issued upon conversion of the Preferred Shares, in
payment of dividends thereon or upon exercise of the Warrants, as the case may
be, will be duly and validly issued, fully paid and non-assessable and will not
subject the holder thereof to personal liability by reason of being such holder.
There are no preemptive or similar rights of any stockholder of the Company or
any other person to acquire any of the Shares. The Common Stock is listed for
trading on the Nasdaq National Market ("Nasdaq") and (1) the Company and the
Common Stock meet the criteria for continued listing and trading on Nasdaq; (2)
the Company has not been notified since October 24, 1996 by Nasdaq of any
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failure or potential failure to meet the criteria for continued listing and
trading on Nasdaq and (3) no suspension of trading in the Common Stock is in
effect. The Company knows of no reason that the Common Shares will not be
eligible for listing on Nasdaq.
(d) SUBSCRIPTION AGREEMENT; WARRANTS; REGISTRATION RIGHTS AGREEMENT; TRANSFER
AGENT INSTRUCTIONS. This Agreement, the Warrants, the Registration Rights
Agreement and the Transfer Agent Instructions have been duly and validly
authorized by the Company, this Agreement has been duly executed and delivered
on behalf of the Company and this Agreement is, and the Warrants, the
Registration Rights Agreement and the Transfer Agent Instructions, when executed
and delivered by the Company, will be, valid and binding obligations of the
Company enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally and limits upon rights to indemnity.
(e) NON-CONTRAVENTION. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the issuance of the Preferred
Shares as contemplated by this Agreement and the other transactions contemplated
by this Agreement, the Warrants, the Registration Rights Agreement, the terms of
the Preferred Stock and the Transfer Agent Instructions do not and will not
conflict with or result in a breach by the Company of any of the terms or
provisions of, or constitute a default under, the certificate of incorporation
or the by-laws of the Company, or any indenture, mortgage, deed of trust or
other material agreement or instrument to which the Company is a party or by
which it or any of its properties or assets are bound which would have a
material adverse effect on the Company or any applicable law, rule or regulation
or any applicable decree, judgment or order of any court, United States federal
or state regulatory body, administrative agency or other governmental body
having jurisdiction over the Company or any of its properties or assets which
would have a material adverse effect on the Company.
(f) APPROVALS. No authorization, approval or consent of any court, governmental
body, regulatory agency, self-regulatory organization, or stock exchange or
market or the stockholders of the Company is required to be obtained by the
Company for (1) the execution, delivery and performance by the Company of this
Agreement, the Registration Rights Agreement (except such authorization of the
SEC as is required with respect to accelerating the effectiveness of any
registration statement filed pursuant thereto) and the Transfer Agent
Instructions, (2) the issuance and sale of the Preferred Shares as contemplated
by this Agreement, (3) the issuance of Common Shares and Warrants on conversion
of the Preferred Shares and (4) the issuance of Common Shares on exercise of the
Warrants.
(g) INFORMATION PROVIDED. The information provided by or on behalf of the
Company to the Buyer in connection with the transactions contemplated by the
Agreement, including, without limitation, the information referred to in Section
2(e) of this Agreement, does not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. The Company has not filed any reports with the SEC under the
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Securities Exchange Act of 1934, as amended (the "1934 Act"), since December 31,
1996 other than the SEC Reports.
(h) ABSENCE OF CERTAIN CHANGES. Since December 31, 1996, there has been no
material adverse change and no material adverse development in the business,
properties, operations, condition (financial or other), results of operations or
prospects of the Company, except as disclosed in the SEC Reports.
(i) ABSENCE OF CERTAIN PROCEEDINGS. There is no action, suit or proceeding,
before or by any court, public board or body or governmental agency pending or,
to the knowledge of the Company or any of its subsidiaries, threatened against
the Company and, to the knowledge of the Company, there is no inquiry or
investigation before or by any court, public board or body or governmental
agency pending or threatened against the Company, in any such case wherein an
unfavorable decision, ruling or finding could have a material adverse effect on
the business, properties, operations, condition (financial or other), results of
operations or prospects of the Company or the transactions contemplated by this
Agreement or any of the documents contemplated hereby or which could adversely
affect the validity or enforceability of, or the authority or ability of the
Company to perform its obligations under, this Agreement or any of such other
documents; the Company does not have pending before the SEC any request for
confidential treatment of information and to the best of the Company's knowledge
no such request will be made by the Company prior to the time the Registration
Statement relating to the Common Shares which is contemplated by the
Registration Rights Agreement is first ordered effective by the SEC; and to the
best of the Company's knowledge there is not pending or contemplated, and there
has been no, investigation by the SEC involving the Company or any director or
officer of the Company.
(j) PROPERTIES. The Company has good title to all property real and personal
(tangible and intangible) and other assets owned by it, free and clear of all
security interests, charges, mortgages, liens or other encumbrances, except such
as are described in the SEC Reports or such as do not materially interfere with
the use of such property made, or proposed to be made, by the Company. The
leases, licenses or other contracts or instruments under which the Company
leases, holds or is entitled to use any property, real or personal, are valid,
subsisting and enforceable with only such exceptions as do not materially
interfere with the use of such property made, or proposed to be made, by the
Company. The Company has not received notice of any material violation of any
applicable law, ordinance, regulation, order or requirement relating to its
owned or leased properties.
(k) LABOR RELATIONS. No material labor problem exists or, to the knowledge of
the Company, is imminent with respect to any of the employees of the Company.
(l) SEC FILINGS. The Company has timely filed all required forms, reports and
other documents with the SEC. All of such forms, reports and other documents
complied, when filed, in all material respects, with all applicable requirements
of the 1933 Act and the 1934 Act.
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(m) ABSENCE OF BROKERS, FINDERS, ETC. No broker, finder or similar person is
entitled to any commission, fee or other compensation by reason of the
transactions contemplated by this Agreement other than as disclosed in writing
by the Company to the Buyer with respect to one such person prior to execution
and delivery of this Agreement by the Buyer, and the Company shall pay, and
indemnify and hold harmless the Buyer from, any claim made against the Buyer by
any person for any such commission, fee or other compensation.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
(a) TRANSFER RESTRICTIONS. The Buyer acknowledges that (1) the Preferred Shares
and the Warrants have not been and are not being registered under the provisions
of the 1933 Act and, except as provided in the Registration Rights Agreement,
the Common Shares have not been and are not being registered under the 1933 Act,
and may not be transferred unless (A) subsequently registered thereunder or (B)
the Buyer shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Shares or Warrants to be sold or transferred may be sold or transferred pursuant
to an exemption from such registration; (2) any resale of Shares or Warrants
made in reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any such resale of Shares or Warrants under circumstances in which
the seller, or the person through whom the resale is made, may be deemed to be
an underwriter, as that term is used in the 1933 Act, may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (3) neither the Company nor any other person is under any
obligation to register the Shares (other than registration of the resale of the
Common Shares pursuant to the Registration Rights Agreement) or the Warrants
under the 1933 Act or to comply with the terms and conditions of any exemption
thereunder (other than pursuant to Section 4(d) hereof and pursuant to the
Registration Rights Agreement).
(b) RESTRICTIVE LEGENDS. (1) The Buyer acknowledges and agrees that the
certificates for the Preferred Shares shall bear restrictive legends in
substantially the following form (and a stop-transfer order may be placed
against transfer of the Preferred Shares):
These securities have not been registered under the Securities Act of
1933, as amended (the "Act"), or any state securities laws. The sale to
the holder of these securities and of the shares of common stock and
warrants issuable upon conversion of these securities are not covered by
a registration statement under the Act or registration under state
securities laws. These securities have been acquired, and such shares of
common stock and warrants must be acquired, for investment only and may
not be sold, transferred or assigned in the absence of registration of
the resale thereof or an opinion of counsel reasonably acceptable to the
Company that such registration is not required.
(2) The Buyer acknowledges and agrees that the certificates for
the Warrants shall bear restrictive legends in substantially the following form
(and a stop-transfer order may be placed against transfer of the Warrants):
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This security has not been registered under the Securities Act of 1933,
as amended (the "Act"), or any state securities laws. The sale to the
holder of this security and of the shares of common stock issuable upon
exercise of this security are not covered by a registration statement
under the Act or registration under state securities laws. This security
has been acquired, and such shares of common stock must be acquired, for
investment only and may not be sold, transferred or assigned in the
absence of registration of the resale thereof or an opinion of counsel
reasonably acceptable to the Company that such registration is not
required.
(3) The Buyer further acknowledges and agrees that until such
time as the Common Shares have been registered for resale under the 1933 Act as
contemplated by the Registration Rights Agreement, the certificates for the
Common Shares issued upon conversion of the Preferred Shares, payment of
dividends thereon and exercise of the Warrants may bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of the certificates for the Common Shares):
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"). The securities
have been acquired for investment and may not be resold, transferred or
assigned in the absence of an effective registration statement for the
securities under the Act, or an opinion of counsel reasonably acceptable
to the Company that registration is not required under said Act.
(4) Once the Registration Statement required to be filed by the
Company pursuant to Section 2 of the Registration Rights Agreement has been
declared effective, thereafter (1) upon request of the Buyer the Company will
substitute certificates without restrictive legend for certificates for any
Common Shares issued prior to the date such Registration Statement is declared
effective by the SEC which bear such restrictive legend and remove any
stop-transfer restriction relating thereto promptly, but in no event later than
three days after surrender of such certificates by the Buyer and (2) the Company
shall not place any restrictive legend on certificates for Common Shares issued
on conversion of the Preferred Shares, payment of dividends thereon or exercise
of the Warrants or impose any stop-transfer restriction thereon.
(c) REGISTRATION RIGHTS AGREEMENT. The parties hereto agree to enter into the
Registration Rights Agreement on or before the Closing Date.
(d) FORM D; BLUE SKY LAWS. The Company agrees to file a Form D with respect to
the Shares and the Warrants as required under Regulation D and to provide a copy
thereof to the Buyer promptly after such filing. The Buyer agrees to cooperate
with the Company in connection with such filing and, upon request of the
Company, to provide all information relating to the Buyer reasonably required
for such filing.
(e) AUTHORIZATION FOR TRADING; REPORTING STATUS. On or before the Closing Date,
the Company shall file a notification for listing of additional shares with the
Nasdaq and shall provide evidence of such filing to the Buyer. So long as the
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Buyer beneficially owns any of the Preferred Shares, the Common Shares or the
Warrants, the Company shall file all reports required to be filed with the SEC
pursuant to Section 13 or 15(d) of 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.
(f) USE OF PROCEEDS. Neither the Company nor any subsidiary of the Company owns
or has any present intention of acquiring any "margin stock" as defined in
Regulation G (12 CFR Part 207) of the Board of Governors of the Federal Reserve
System ("margin stock"), other than the acquisition of shares of Common Stock
surrendered to the Company in payment of the exercise price or tax obligations
incurred in connection with the grant, vesting or exercise of a stock option or
other award granted by the Company to any of its employees, directors or
consultants pursuant to its stock incentive plans or in connection with a loan
made to any such persons pursuant to such plans which acquisition is made
pursuant to the requirements of Regulation G governing margin stock. The
proceeds of sale of the Preferred Shares will be used for general working
capital purposes and in the operation of the Company's business, and up to
$2,000,000 thereof may be used to finance certain acquisitions of assets or
businesses. None of such proceeds will be used, directly or indirectly (1)
(other than financing its subsidiaries in the ordinary course of business) to
make any loan to or investment in any other person or (2) for the purpose,
whether immediate, incidental or ultimate, of purchasing or carrying any margin
stock or for the purpose of maintaining, reducing or retiring any indebtedness
which was originally incurred to purchase or carry any stock that is currently a
margin stock or for any other purpose which might constitute the transactions
contemplated by this Agreement a "purpose credit" within the meaning of such
Regulation G. Neither the Company nor any agent acting on its behalf has taken
or will take any action which might cause this Agreement or the transactions
contemplated hereby to violate Regulation G, Regulation T or any other
regulation of the Board of Governors of the Federal Reserve System or to violate
the 1934 Act, in each case as in effect now or as the same may hereafter be in
effect.
(g) BLUE SKY LAWS. On or before the Closing Date, the Company shall take such
action as shall be necessary to qualify, or to obtain an exemption for, the
Preferred Shares for sale to the Buyer pursuant to this Agreement and the Common
Shares and Warrants for issuance to the Buyer on conversion of the Preferred
Shares under such of the securities or "blue sky" laws of jurisdictions as shall
be applicable to the sale of the Preferred Shares pursuant to this Agreement and
the issuance to the Buyer of Common Shares and Warrants on conversion of the
Preferred Shares and the issuance of Common Shares on exercise of the Warrants.
The Company shall furnish copies of all filings, applications, orders and grants
or confirmations of exemptions relating to such securities or "blue sky" laws on
or prior to the Closing Date.
(g) CERTAIN EXPENSES. Whether or not the closing occurs, the Company shall pay
or reimburse the Buyer for all reasonable expenses (including, without
limitation, legal fees and expenses of counsel to the Buyer) incurred by the
Buyer, not in excess of $15,000, in connection with this Agreement and the
transactions contemplated hereby.
(i) CERTAIN ISSUANCES OF SECURITIES. (1) Unless the Company obtains Stockholder
Approval (as defined in the Certificate of Designations) or a waiver thereof
from Nasdaq, the Company will not issue any shares of Common Stock or shares of
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any other series of preferred stock or other securities convertible into,
exchangeable for or otherwise entitling the holder to acquire shares of Common
Stock which would be subject to the requirements of Rule 4460(i) of the Nasdaq
(or any successor or replacement provision thereof) and which would be
integrated with the sale of the Preferred Shares to the Buyer or the issuance of
Common Shares upon conversion thereof or upon exercise of the Warrants for
purposes of Rule 4460(i) of the Nasdaq (or any successor or replacement
provision thereof).
(2) During the period from the date of this Agreement to the date
on which the Registration Statement (as defined in the Registration Rights
Agreement) shall have been effective with the SEC for 90 consecutive days, the
Company shall not offer, sell, contract to sell or issue (or engage any person
to assist the Company in taking any such action) any equity securities or
securities convertible into, exchangeable for or otherwise entitling the holder
to acquire, any Common Stock at a price below the market price of the Common
Stock on the date of such issuance or acquisition ("Discounted Securities").
(3) Subject to the restrictions in Section 4(i)(1) above, during
the period from the date of execution and delivery of this Agreement to the date
which is one year after the Closing Date (as hereinafter defined), the Company
shall not offer, sell, contract to sell or issue (or engage any person to assist
the Company in taking any such action) any Discounted Securities without giving
the Buyer the first right to acquire the Discounted Securities on the same terms
at which the Discounted Securities are to be offered to other investors. The
Company shall give notice to the Buyer of the detailed terms of the Discounted
Securities proposed to be issued and such other information as requested by the
Buyer within three Business Days after receipt of such notice. The Buyer may by
notice to the Company exercise such right of first refusal at any time until the
later of (x) ten Business Days after such notice from the Company to the Buyer
and (y) two Business Days after the Company provides such additional information
as shall have timely been requested by the Buyer.
(4) Notwithstanding the provisions of clauses (2) and (3) above
of this Section 4(i), nothing therein shall prohibit the Company from issuing
securities (x) pursuant to compensation plans for employees, directors,
officers, advisers or consultants of the Company and in accordance with the
terms of such plans as in effect as of the date of this Agreement or (y) upon
exercise of conversion, exchange, purchase or similar rights issued, granted or
given by the Company and outstanding as of the date of this Agreement.
(j) BEST EFFORTS. Each of the parties shall use its best efforts timely to
satisfy each of the conditions to the other party's obligations to sell and
purchase the Preferred Shares set forth in Section 7 or 8, as the case may be,
of this Agreement on or before the Closing Date.
5. TRANSFER AGENT INSTRUCTIONS; CONVERSION PROCEDURE.
(a) TRANSFER AGENT INSTRUCTIONS. Promptly following the delivery by the Buyer of
the aggregate purchase price for the Preferred Shares in accordance with Section
1(c) hereof, and in any event prior to the Closing Date, the Company will (1)
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execute and deliver the Transfer Agent Instructions substantially in the form
attached hereto as ANNEX IV to and thereby irrevocably instruct, American Stock
Transfer & Trust Company, as Transfer Agent and Registrar (the "Transfer
Agent"), to issue certificates for the Common Shares from time to time upon
conversion of the Preferred Shares and exercise of the Warrants in such amounts
as specified from time to time (x) to the Transfer Agent in the Notices of
Conversion surrendered in connection with such conversions and referred to in
Section 5(b) of this Agreement and (y) upon exercise of the Warrants in such
amounts as specified from time to time to the Transfer Agent in the Form of
Subscription to be attached to the Warrants and surrendered in connection with
such exercises, and (2) appoint the Transfer Agent the conversion agent for the
Preferred Stock and the exercise agent for the Warrants. The certificates for
the Common Shares may bear the restrictive legend specified in Section 4(b) of
this Agreement prior to registration of the resale of the Common Shares under
the 1933 Act. The certificates for the Common Shares shall be registered in the
name of the Buyer or its nominee and in such denominations to be specified by
the Buyer in connection with each conversion of Preferred Shares or exercise of
Warrants, as the case may be. The Company warrants that no instruction other
than (x) such instructions referred to in this Section 5, (y) stop transfer
instructions to give effect to Section 4(a) hereof prior to registration of the
resale of the Common Shares under the 1933 Act and (z) the instructions required
by Section 3(n) of the Registration Rights Agreement will be given by the
Company to the Transfer Agent and that the Common Shares shall otherwise be
freely transferable on the books and records of the Company as and to the extent
provided in this Agreement. If the Transfer Agent seeks the Company's
concurrence in connection with a notice of conversion or warrant exercise, the
Company will immediately give such concurrence except to the extent the Company
notifies the Transfer Agent and the Buyer of manifest error in such notice of
conversion or warrant exercise in accordance with the Certificate of
Designations, the Warrants and the Transfer Agent Instructions. Nothing in this
Section 5(a) shall limit in any way the Buyer's obligations and agreement to
comply with the registration requirements of all applicable securities laws upon
any resale of Shares or Warrants by the Buyer. If the Buyer provides the Company
with an opinion of counsel reasonably satisfactory in form, scope and substance
to the Company that registration of a resale by the Buyer of any of the Shares
or the Warrants in accordance with clause (1)(B) of Section 4(a) of this
Agreement is not required under the 1933 Act, the Company shall permit the
transfer of such Shares and Warrants and, in the case of the Common Shares,
promptly, but in no event later than three days after receipt of such opinion,
instruct the Company's transfer agent to issue upon transfer one or more share
certificates in such name and in such denominations as specified by the Buyer.
Nothing in this Section 5(a) shall limit the obligations of the Company under
Section 3(n) of the Registration Rights Agreement.
(b) CONVERSION PROCEDURE. In connection with the exercise of conversion rights
relating to the Preferred Shares, the Buyer or any subsequent holder of the
Preferred Shares shall complete, sign and furnish to the Transfer Agent a Notice
of Conversion in the form attached hereto as ANNEX V, which shall be deemed to
satisfy all requirements of the Certificate of Designations with respect to any
exercise of conversion rights by the Buyer or any such holder.
6. CLOSING DATE.
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The date and time of the issuance and sale of the Preferred
Shares (the "Closing Date") shall be 12:00 noon, New York City time, on the date
which is one Business Day after the date on which the Buyer has deposited the
purchase price for the Preferred Shares with the Escrow Agent in accordance with
Section 1(c) hereof, or such other mutually agreed to time. The closing shall
occur on the Closing Date at the offices of the Escrow Agent.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL AND ISSUE.
The Buyer understands that the Company's obligation to sell the
Preferred Shares to the Buyer pursuant to this Agreement is conditioned upon the
satisfaction of the following conditions precedent on or before the Closing Date
(any or all of which may be waived by the Company in its sole discretion):
(a) The receipt and acceptance by the Company of this Agreement
as evidenced by execution of this Agreement by the Company and delivery of an
executed counterpart of this Agreement to the Buyer or its legal counsel;
(b) Delivery by the Buyer to the Escrow Agent of good funds as
payment in full of an amount equal to the purchase price for the Preferred
Shares in accordance with Section 1(c) hereof; and
(c) The accuracy on the Closing Date of the representations and
warranties of the Buyer contained in this Agreement as if made on the Closing
Date and the performance by the Buyer on or before the Closing Date of all
covenants and agreements of the Buyer required to be performed on or before the
Closing Date.
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase
the Preferred Shares on the Closing Date is conditioned upon the satisfaction of
the following conditions precedent on or before the Closing Date (any or all of
which may be waived by the Buyer in its sole discretion):
(a) Delivery by the Company to the Escrow Agent of the
certificates for the Preferred Shares in accordance with this Agreement;
(b) The accuracy on the Closing Date of the representations and
warranties of the Company contained in this Agreement as if made on the Closing
Date and the performance by the Company on or before the Closing Date of all
covenants and agreements of the Company required to be performed on or before
the Closing Date and receipt by the Buyer of a certificate, dated the Closing
Date, of the Chief Executive Officer or the Chief Financial Officer of the
Company confirming such matters and such other matters as the Buyer may
reasonably request;
(c) The receipt by the Buyer of confirmation of the filing with
the Secretary of State of the State of Delaware of the Certificate of
Designations;
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(d) The receipt by the Buyer of a certificate, dated the Closing
Date, of the Secretary of the Company certifying (1) the certificate of
incorporation and by-laws of the Company as in effect on the Closing Date, (2)
all resolutions of the Board of Directors (and committees thereof) of the
Company relating to this Agreement and the transactions contemplated hereby and
(3) such other matters as reasonably requested by the Buyer; and
(e) Receipt by the Buyer on the Closing Date of an opinion of
counsel for the Company, dated the Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer, to the effect set forth in ANNEX VI
attached hereto.
9. MISCELLANEOUS.
(a) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York.
(b) This Agreement may be executed in counterparts and by the
parties hereto on separate counterparts, all of which together shall constitute
one and the same instrument. A facsimile transmission of this Agreement bearing
a signature on behalf of a party hereto shall be legal and binding on such
party. Although this Agreement is dated as of the date first set forth above,
the actual date of execution and delivery of this Agreement by each party is the
date set forth below such party's signature on the signature page hereof. Any
reference in this Agreement or in any of the documents executed and delivered by
the parties hereto in connection herewith to the date of execution and delivery
of this Agreement shall be deemed a reference to the later of such dates set
forth below each party's respective signature on the signature page hereof.
(c) The headings, captions and footers of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
(d) 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) This Agreement may be amended only by an instrument in
writing signed by the party to be charged with enforcement.
(f) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, or any course of dealings between the parties, shall not operate as a
waiver thereof or an amendment hereof, nor shall any single or partial exercise
of any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof or
exercise of any other right or power.
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(g) Any notices required or permitted to be given under the terms
of this Agreement shall be sent by mail or delivered personally (which shall
include telephone line facsimile transmission with answer back confirmation) or
by courier and shall be effective five days after being placed in the mail, if
mailed, or upon receipt, if delivered personally or by courier, in the case of
the Company addressed to the Company at its address shown in the introductory
paragraph of this Agreement, Attention: Chief Executive Officer (telephone line
facsimile transmission number (▇▇▇) ▇▇▇-▇▇▇▇) or, in the case of the Buyer, at
its address or telephone line facsimile transmission number shown on the
signature page of this Agreement, with a copy to Genesee International, Inc.,
▇▇▇▇▇ ▇.▇. ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ (telephone
line facsimile transmission number (▇▇▇) ▇▇▇-▇▇▇▇) or such other address or
telephone line facsimile transmission number as a party shall have provided by
notice to the other party in accordance with this provision. The Buyer hereby
designates as its address for any notice required or permitted to be given to
the Buyer pursuant to the Certificate of Designations the address shown on the
signature page of this Agreement, with a copy to: Advantage Fund II Ltd., c/o
Genesee International, Inc., 10500 ▇.▇. ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ (facsimile number (▇▇▇) ▇▇▇-▇▇▇▇), until the Buyer shall
designate another address for such purpose.
(h) Prior to the Closing Date, the Buyer shall have the right to
assign its rights and obligations under this Agreement with respect to the
purchase of all or any portion of the Preferred Shares, provided any such
assignee, by written instrument duly executed by such assignee, assumes all
obligations of the Buyer hereunder with respect to the purchase of the portion
of the Preferred Shares so assigned and makes the same representations and
warranties with respect thereto as the Buyer makes in this Agreement (and states
its address and the location of its principal place of business for purposes of
complying with state securities laws), whereupon the Buyer shall be relieved of
any further obligations, responsibilities and liabilities with respect to the
purchase of all or the portion of the Preferred Shares the obligation for the
purchase of which has been so assigned. In the case of any such assignment, the
Company shall agree in writing with such assignee to make available to such
assignee the benefits of the Registration Rights Agreement with respect to the
Common Shares issuable on conversion of the Preferred Shares with respect to
which the purchase under this Agreement has been so assigned. Any transfer of
the Preferred Shares by the Buyer after the Closing Date shall be made in
accordance with Section 4(a).
(i) The respective representations, warranties, covenants and
agreements of the Buyer and the Company contained in this Agreement or made by
or on behalf of them, respectively, pursuant to this Agreement shall survive the
delivery of payment for the Preferred Shares and shall remain in full force and
effect regardless of any investigation made by or on behalf of them or any
person controlling or advising any of them.
(j) This Agreement and its Annexes set forth the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersede all prior agreements and understandings, whether written or oral, with
respect thereto.
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(k) The Buyer shall have the right to terminate this Agreement by
giving notice to the Company at any time at or prior to the Closing Date if:
(1) the Company shall have failed, refused, or been unable at or
prior to the date of such termination of this Agreement to perform any
of its obligations hereunder;
(2) any other condition of the Buyer's obligations hereunder is
not fulfilled; or
(3) the closing shall not have occurred on a Closing Date on or
before December 10, 1997, other than solely by reason of a breach of
this Agreement by the Buyer.
Any such termination shall be effective upon the giving of notice thereof by the
Buyer. Upon such termination, the Buyer shall have no further obligation to the
Company hereunder and the Company shall remain liable for any breach of this
Agreement or the other documents contemplated hereby which occurred on or prior
to the date of such termination.
(l) 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.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of the
dates set forth below.
NUMBER OF SHARES: 4,000
PRICE PER SHARE: $1,000.00
AGGREGATE PURCHASE PRICE: $4,000,000.00
ADVANTAGE FUND II LTD.
By: /S/ ▇.▇. ▇▇ ▇▇▇▇▇
---------------------------------
▇.▇. ▇▇ ▇▇▇▇▇
President
Date: DECEMBER 8, 1997
--------------------------------
Address: ▇/▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ Antilles
Facsimile No.: 011-599-9732-2008
V-ONE CORPORATION
By: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President & CFO
Date: DECEMBER 8, 1997
--------------------------------
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SCHEDULE 3(B)
1. Exchange Agreement between Virtual Open Network Environment Corporation and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ dated May 29, 1996 (up to 182,300 shares of Common Stock).
2. Exchange and Purchase Agreement between Virtual Open Network Environment
Corporation and the ▇▇▇ ▇▇▇▇▇▇▇▇ Trust dated April 9, 1996 (up to 109,856
shares of Common Stock).
3. Exchange and Purchase Agreement between Virtual Open Network Environment
Corporation and Golden Eagle Partners dated April 25, 1996 (up to 45,506
shares of Common Stock).
4. Exchange and Purchase Agreement between Virtual Open Network Environment
Corporation and Edgehill Capital Management, L.P. dated April __, 1996 (up
to 45,506 shares of Common Stock).
5. Exchange and Purchase Agreement between Virtual Open Network Environment
Corporation and ▇▇▇▇ ▇. ▇▇▇▇ ▇▇ dated April 29, 1996 (up to 13,665 shares of
Common Stock).
6. Exchange and Purchase Agreement between Virtual Open Network Environment
Corporation and ▇▇▇▇▇▇ ▇. Fine dated April 10, 1996 (up to 9,488 shares of
Common Stock).
7. Exchange and Purchase Agreement between Virtual Open Network Environment
Corporation and ▇▇▇▇▇▇▇ ▇▇▇▇▇ dated April __,1996 (up to 12,151 shares of
Common Stock).
8. Exchange and Purchase Agreement between Virtual Open Network Environment
Corporation and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ dated May 29, 1996 (up to 54,662 shares of
Common Stock).
9. Exchange and Purchase Agreement between Virtual Open Network Environment
Corporation and ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇ dated April 8, 1996 (up to 48,854
shares of Common Stock).
10. Exchange and Purchase Agreement between Virtual Open Network Environment
Corporation and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ dated April __,1996 (up to 253,920 shares of
Common Stock).
11. Exchange and Purchase Agreement between Virtual Open Network Environment
Corporation and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ dated April __,1996. This agreement relates
to shares held by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ individually and by the ▇▇▇▇▇▇▇ Trust,
▇▇▇▇▇▇▇ Page, Trustee (up to 87,873 shares of Common Stock in the
aggregate).
12. Exchange and Purchase Agreement between Virtual Open Network Environment
Corporation and ▇▇▇▇▇ ▇. ▇▇▇▇▇ dated April 9, 1996 (up to 85,428 shares of
Common Stock).
13. Registration Rights Agreement dated June 18, 1996 between Virtual Open
Network Environment Corporation and JMI Equity Fund II, L.P.
14. The Registration Rights Agreement to be dated as of the Closing Date between
V-ONE Corporation and ▇▇▇▇▇▇▇ Capital Partners, Ltd.