Exhibit 4.1
LOAN AGREEMENT
This Loan Agreement, dated as of October 22, 1998, is entered into by
and among Digital Courier Technologies, Inc., a Delaware corporation
("Borrower"), and those persons and entities listed on Exhibit "A" attached
hereto (collectively, "Lender").
SECTION 1. DEFINITIONS AND ACCOUNTING TERMS.
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1.1 Defined Terms. As used in this Agreement, the following
terms shall have the meanings set forth respectively after each:
"Agreement" means this Loan Agreement.
"Business Day" means any Monday, Tuesday, Wednesday, Thursday or Friday
which is not a Federal holiday.
"Default Rate" shall have the meaning set forth in the Note.
"Events of Default" means each of those events so designated in Section
7.1 of this Agreement.
"Governmental Agency" means any governmental or quasi-governmental
agency, authority, board, bureau, commission, department, instrumentality or
public body, court, administrative tribunal or public utility.
"Laws" means, collectively, all federal, state and local laws, rules,
regulations, ordinances and codes.
"Loan" means the loan to be made by Lender to Borrower pursuant to
Section 2 hereof.
"Loan Documents" means, collectively, this Agreement, the Note and the
Security Documents, in each case either as originally executed or as the same
may from time to time be supplemented, modified or amended.
"Maturity Date" means October 20, 1999.
"Note" means the promissory note of even date herewith, in the original
principal amount of One Million Two Hundred Thousand Dollars ($1,200,000.00),
executed by Borrower in favor of Lender to evidence the Loan, either as
originally executed or as it may from time to time be supplemented, modified or
amended.
"Person" means any entity, whether an individual, trustee, corporation,
partnership, trust, unincorporated organization or otherwise.
"Receivables" means, collectively, the following contract receivables
payable to Borrower: (i) from ▇▇▇▇▇▇▇▇ Web Holdings, LLC, a Delaware limited
liability company, in the amount of $378,172.00, plus contingent receivables of
up to $500,000.00, pursuant to an agreement dated July 15, 1998; (ii) from Focus
Direct, Inc., a Texas corporation, in the amount of $700,000.00, pursuant to an
agreement dated March 6, 1998; and (iii) from Random Games, Inc., in the amount
of $100,000.00, pursuant to a letter agreement dated July 16, 1998. Such term
includes all of Borrower's rights and interests in connection with the
agreements which give rise to the Receivables.
"Security Agreement" means the Security Agreement and Assignment of
Contract Receivables, dated October 20, 1998, executed by Borrower, by which the
Receivables are assigned to Lender as security for the Loan.
"Security Documents" means the Security Agreement and any other
mortgage, deed of trust, assignment of leases, security agreement or assignment
executed to secure the Note, either as originally executed or as they may from
time to time be supplemented, modified or amended.
1.2 Use of Defined Terms. Any defined term used in the plural shall
refer to all members of the relevant class, and any defined term used in the
singular shall refer to any number of the members of the relevant class. Any
reference to the Loan Documents and other instruments, documents and agreements
shall include such Loan Documents and other instruments, documents and
agreements as originally executed or as the same may be supplemented, modified
or amended.
1.3 Accounting Terms. All accounting terms not specifically defined in
this Agreement shall be construed in conformity with, and all financial data
required to be submitted by this Agreement shall be prepared in conformity with,
generally accepted accounting principles applied on a consistent basis.
1.4 Exhibits. All exhibits to this Agreement, either as now existing or
as the same may from time to time be supplemented, modified or amended, are
incorporated herein by this reference.
RECITALS
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Borrower has applied to Lender for a loan to finance working capital or
for other legitimate business purposes. Lender is willing to make the Loan to
Borrower on the terms and conditions contained in this Agreement and the other
Loan Documents.
SECTION 2. THE LOAN.
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2.1 Amount of the Loan. Subject to the terms and conditions
set forth in this Agreement, Lender agrees to make a loan (the "Loan") to
Borrower in the principal amount of One Million Two Hundred Thousand Dollars
($1,200,000.00) (the "Loan Amount").
2.2 Repayment of the Loan. The Loan shall be evidenced by the
Note, shall bear interest at the rate set forth in the Note, and shall be repaid
in accordance with the terms of the Note. The principal balance outstanding
under the Note, and all accrued and unpaid interest not sooner paid when due
under the Note, and all other indebtedness and obligations of Borrower owing
under any and all of the Loan Documents shall be due and payable in full on the
Maturity Date.
2.3 Prepayment. Borrower agrees that all loan fees and any
prepaid finance charges are fully earned as of the date hereof and will not be
subject to refund upon early payment (whether voluntary or as a result of
default). Subject to the foregoing, at any time prior to the Maturity Date,
Borrower may prepay this Note in full only; provided, however, in the event of
any prepayment within the first six (6) months of the term of the Loan, Borrower
shall pay to Lender, in addition to the principal balance of this Note and all
accrued but unpaid interest thereon, the amount necessary, when considered
together with all previously accrued interest, to pay to Lender a minimum of
four (4) months' interest on the entire Note Amount (the "Prepayment Fee"). The
Prepayment fee shall be payable whether the Loan is prepaid voluntarily or
involuntarily.
2.4 Assignment and Payment of Receivables. As security for the
repayment of the Loan, Borrower shall assign the Receivables to Lender. During
the term of the Loan, the obligors under the receivables shall pay any and all
payments due thereunder directly to Lender. As a condition to the closing of the
Loan, Borrower shall notify each such obligor in writing (the "Obligor
Notices"), in a form acceptable to Lender, (i) of the assignment of the
receivable to Lender, and (ii) including Borrower's instruction that, throughout
the term of the Loan, such obligor make all payments due on the Receivables to
Lender or to an account controlled solely by Lender. Until the Loan is fully
repaid, Borrower's instruction to the obligors to make all payments to Lender
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shall be irrevocable. Borrower shall also execute such Financing Statements or
other documents or instruments as Lender may reasonably require.
SECTION 3. CONDITIONS TO FUNDING.
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The obligation of Lender to fund the Loan is subject to the following
conditions precedent:
(a) Borrower shall, at its sole expense, deliver or
cause to be delivered to Lender, in form and substance
satisfactory to Lender:
(i) the original Note;
(ii) the original Security Agreement;
(iii) the original Obligor Notices;
(iv) Audited financial stastements of
Borrower as of June 30, 1998..
(v) such additional agreements,
certificates, reports, approvals, instruments, documents, financing statements,
consent and opinions as Lender may reasonably request.
SECTION 4. REPRESENTATIONS AND WARRANTIES BY BORROWER.
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4.1 Powers of Borrower. Borrower is a duly formed and validly
existing Delaware corporation and has all requisite power and authority to
conduct its business, to own its properties, and to execute, deliver and perform
all of its obligations under the Loan Documents.
4.2 Authority and Compliance with Instruments and Government
Regulations. The execution, delivery and performance by Borrower of all of their
obligations under each Loan Document have been duly authorized by all necessary
action and do not and will not:
(a) require any consent or approval not heretofore
obtained of any Person holding any security or interest or entitled to receive
any security or interest in Borrower;
(b) result in or require the creation or imposition
of any mortgage, deed of trust, pledge, lien,
security interest, claim, charge, right of others or other encumbrance of any
nature, other than under the Loan Documents, upon or with respect to any
property now owned or leased or hereafter acquired by Borrower;
(c) violate any provision of any Law, order, writ,
judgment, injunction, decree, determination or
award presently in effect having applicability to Borrower;
(d) result in a breach of or constitute a default
under, cause or permit the acceleration of any obligation owed under, or require
any consent under, any indenture or loan or credit agreement or any other
agreement lease or instrument to which Borrower is a party or by which Borrower
or any property of Borrower, is bound or affected; and
(e) Borrower is not in default in any respect that is
materially adverse to the interest of Lender or that would have any material
adverse effect on the financial condition of Borrower or the conduct of its
business under any Law, order, writ, judgment, injunction, decree,
determination, award, indenture, agreement, lease or instrument described in
Sections 4.2(c) and 4.2(d).
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4.3 No Governmental Approvals Required. No authorization,
consent, approval, order, license, exemption from, or filing, registration or
qualification with, any Governmental Agency is or will be required to authorize,
or is otherwise required in connection with:
(a) the execution and delivery by Borrower and the
performance by Borrower of the Loan Documents; or
(b) the creation of the liens, security interests or
other charges or encumbrances described in the Security Documents; except that
filing and/or recording may be required to perfect Lender's interest under the
Security Documents.
4.4 Binding Obligations. The Loan Documents, when executed and
delivered, will constitute the legal, valid and binding obligations of Borrower,
enforceable against them in accordance with their terms.
4.5 Financial Statements. Borrower has furnished to Lender a
copy of Borrower's audited financial statements dated June 30, 1998, and
Borrower represents and warrants to Lender that such financial statements
present fairly the financial position of Borrower as at the date thereof.
4.6 No Material Adverse Change. Borrower represents and
warrants to Lender that there has been no material adverse change in the
condition, financial or otherwise of Borrower since the date of the financial
statements described in Section 4.5; since that date Borrower has not entered
into any material transaction not disclosed in such financial statements;
Borrower does not have any material liabilities or contingent liabilities not
reflected or disclosed in such financial statements; and there are no material
mortgages, deeds of trust, pledges, liens, security interests, claims, charges,
right of others or encumbrances (including liens or retained security titles of
conditional vendors) of any nature whatsoever on any property of Borrower, and
no material indebtedness, not disclosed in such financial statements.
4.7 Tax Liability. Borrower has filed all tax returns
(federal, state and local) required to be filed and have paid all taxes shown
thereon to be due and all property taxes due, including interest and penalties,
if any. Borrower has established and are maintaining adequate reserves for tax
liabilities, if any.
4.8 Compliance with Laws. Borrower is in compliance in all
material respects with all Laws and other requirements applicable to their
business and have obtained all authorizations, consents, approvals, order,
licenses and exemptions from, and have accomplished all filings, registrations
or qualifications with, any Governmental Agency that are necessary for the
transaction of its business.
4.9 Litigation. There are no actions, suits or proceedings
pending or threatened against or affecting Borrower or any property of Borrower
before any Governmental Agency that would have a material adverse affect on the
Receivables or Borrower's ability to perform their obligations under the Loan
Documents.
4.10 Title to Property. The Borrower has good and merchantable
title to the all of its property and assets as disclosed in the financial
information provided Lender and there are no mortgages, liens, pledges or other
encumbrances of any character on said property, other than as set forth therein.
SECTION 5. AFFIRMATIVE AND NEGATIVE COVENANTS.
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Until payment of the Note in full and performance of all obligations of
Borrower under the Loan Documents, unless Lender otherwise consents in writing:
5.1 Compliance with Requirements. Borrower shall do all that
is necessary or appropriate to comply with any and all conditions, covenants,
restrictions, leases, easements, reservations, rights and rights-of-way and all
applicable Laws and other requirements relating to the Receivables, and obtain
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all necessary approvals, consents, licenses and permits of any Governmental
Agency, including without limitation those set forth in Section 4.8.
5.2 Payment of Taxes, Assessments and Charges. Borrower shall
pay, prior to delinquency, all taxes, assessments, charges and levies imposed by
any Governmental Agency which are or may become a lien affecting the Receivables
or any part thereof, except that Borrower shall not be required to pay and
discharge any tax, assessment, charge or levy that is being actively contested
in good faith by appropriate proceedings, as long as Borrower has established
and maintains reserves adequate to pay any liabilities contested pursuant to
this Section in accordance with generally accepted accounting principles and, by
reason of nonpayment, none of the property covered by the Security Documents or
the lien or security interest of Lender is in danger of being lost of forfeited.
5.3 Books and Records. Borrower shall: (a) maintain full and
complete books of account and other records reflecting the results of its
operations (in conjunction with any other business as well as specifically with
respect to the Receivables) in accordance with generally accepted accounting
principles applied on a consistent basis; and (b) permit Lender and its agents,
at any time and from time to time, to inspect and copy all of such books and
records, including without limitation any books and records pertaining to
Borrower.
5.4 Reporting and Requirements. Borrower shall cause to be
delivered to Lender, in form and detail satisfactory to Lender:
(a) promptly upon Borrower's learning thereof, notice
of:
(i) any litigation affecting or relating
to the Receivables;
(ii) any dispute between Borrower and
any Governmental Agency relating to the Receivables, the adverse determination
of which would adversely affect the Receivables;
(iii) any Event of Default or event which,
with the giving of notice and/or the passage of time, could become an Event of
Default; and
(iv) any change in the executive
management personnel of Borrower.
(b) promptly upon receipt thereof, any audited
financial information applicable to Borrower;
(c) such other information relating to Borrower,
and/or the Receivables as Lender may reasonably
request from time to time, including without limitation (i) tax returns, to be
provided concurrently with the filing thereof with the relevant government
authority or (ii) if Borrower receives an extension from the relevant government
authority for filing a tax return, satisfactory evidence of such extension.
5.5 Miscellaneous Covenants. Notwithstanding anything to the
contrary contained herein, prior to satisfaction of all amounts owed by Borrower
to Lender hereunder, Borrower shall not, without the express written consent of
Lender, which consent shall not be unreasonably withheld, (a) cease operations,
liquidate, merge or consolidate with any other entity, or (b) impair in any way
any of the Receivables.
SECTION 6. EVENTS OF DEFAULT AND REMEDIES UPON DEFAULT.
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6.1 Events of Default. The occurrence of any one or more of
the following, whatever the reason therefor, shall constitute an Event of
Default hereunder:
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(a) Borrower shall fail to pay any installment of
principal or interest on the Note within 5 days of when due, or any other amount
owing under this Agreement or the other Loan Documents; or
(b) Borrower shall fail to perform or observe in any
material respect any term, covenant or agreement contained in any of the Loan
Documents on its part to be performed or observed, other than the failure to
make a payment covered by Section 6.1(a), and such failure shall continue
uncured as of the earliest of thirty (30) calendar days after the occurrence of
such failure or ten (10) calendar days after written notice of such failure is
given by Lender to Borrower (the cure period set forth in this Section 6.1(b)
shall not apply to any other Events of Default); or
(c) any representation or warranty in any of the
Loan Documents or in any certificate, agreement, instrument or other document
made or delivered pursuant to or in connection with any of the Loan Documents
proves incorrect or to have been incorrect in any material respect when made; or
(d) Borrower, or any entity comprising Borrower, is
dissolved or liquidated, or otherwise ceases to exist, or all or substantially
all of the assets of Borrower are sold or otherwise transferred without Lender's
written consent; or
(e) Borrower is the subject of an order for relief
by the bankruptcy court, or is unable or admits in writing its inability to pay
its debts as they mature, or makes an assignment for the benefit of creditors;
or Borrower applies for or consents to the appointment of any receiver, trustee,
custodian, conservator, liquidator, rehabilitator or similar officer is
appointed without the application or consent of Borrower as the case may be, and
the appointment continues undischarged or unstayed for thirty (30) calendar
days; or Borrower institutes or consents to any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt, dissolution, custodianship,
conservatorship, liquidation, rehabilitation or similar proceedings relating to
it or to all or substantially all of its property under the Laws of any
jurisdiction or any similar proceeding is instituted without the consent of
Borrower and continues undismissed or unstayed for thirty (30) calendar days; or
any judgment, writ, attachment, execution or similar process is issued or levied
against or Borrower and is not released, vacated or fully bonded within thirty
(30) calendar days after its issue or levy; or
(f) there shall occur a material adverse change in
the financial condition of Borrower from its financial condition as of the date
of this Agreement, as determined by Lender in its reasonable discretion; or
(g) any Loan Document, at any time after its
execution and delivery and for any reason other than the agreement of Lender or
the satisfaction in full of all indebtedness and obligations of Borrower under
the Loan Documents, ceases to be in full force and effect or is declared to be
null and void by a court of competent jurisdiction; or Borrower claims that any
Loan Document is ineffective or unenforceable, in whole or in part, or denies
that it has any or further liability or obligation under any Loan Document
unless all indebtedness and obligations of Borrower thereunder have been fully
paid and performed; or
(h) any lien or security interest created by any
Security Document, at any time after the execution and delivery of that Security
Document and for any reason other than the agreement of Lender or the
satisfaction in full of all indebtedness and obligations of Borrower under the
Loan Documents, ceases or fails to constitute a valid, perfected and subsisting
first lien or security interest in and to the Receivables purported to be
covered thereby; or
(i) any Event of Default of any party under any of
the agreements which give rise to the Receivables.
6.2 Remedies Upon Default. Upon the occurrence of any Event of
Default, Lender may, at its option, do any or all of the following:
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(a) declare the principal of all amounts owing under
the Note, this Agreement and the other Loan Documents, including any other
obligations secured by the Security Documents, together with interest thereon,
to be forthwith due and payable, regardless of any other specified maturity or
due date, without notice of default, presentment or demand for payment, protest
or notice of nonpayment or dishonor, or other notices or demands of any kind or
character, and without the necessity of prior recourse to any security;
(b) terminate all rights of Borrower and obligations
of Lender under the Loan Documents;
(c) apply to any court of competent jurisdiction for
the appointment of a receiver;
(d) exercise any and all of its rights under the
Loan Documents, including but not limited to the right to take possession of and
foreclose on any security, and exercise any other rights with respect to any
security, whether under the Security Documents or any other agreement or as
provided by Law, all in such order and in such manner as Lender in its sole
discretion may determine.
6.3 Cumulative Remedies; No Waiver. All remedies of Lender
provided for herein are cumulative and shall be in addition to any and all other
rights and remedies provided in the other Loan Documents or provided by Law from
time to time. The exercise of any right or remedy by Lender hereunder shall not
in any way constitute a cure or waiver of any default hereunder or under any of
the other Loan Documents, nor invalidate any notice of default or any act done
pursuant to any such notice, nor prejudice Lender in the exercise of any rights
hereunder or under the Loan Documents. No waiver by Lender of any default by
Borrower hereunder shall be implied from any omission by Lender to take action
on account of such default if such default persists or is repeated, and no
express waiver shall affect any default other than the default expressly made
the subject of the waiver. Any such express waiver shall be operative only for
the time and to the extent therein stated. Any waiver of any covenant, term or
condition contained herein shall not be construed as a waiver of any subsequent
breach of the same covenant, term or condition. The consent or approval by
Lender to or of any act by Borrower requiring further consent or approval shall
not be deemed to waive or render unnecessary consent or approval to or of any
subsequent act.
SECTION 7. MISCELLANEOUS.
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7.1 Performance by Lender. In the event that Borrower shall
default in or fail to perform any of its obligations under the Loan Documents,
Lender shall have the right, but not the duty, without limitation upon any of
Lender's rights pursuant thereto, to perform the same, and Borrower agrees to
pay to Lender, on demand, all costs and expenses incurred by Lender in
connection therewith, including without limitation actual attorneys' fees,
together with interest thereon from the date of expenditure at the Default Rate.
7.2 Actions. Lender shall have the right to commence, appear
in, and defend any action or proceeding purporting to affect the rights or
duties of the parties hereunder or the payment of any funds, and in connection
therewith Lender may pay necessary expenses, employ counsel, and pay reasonable
attorneys' fees. Borrower agrees to pay to Lender, on demand, all costs and
expenses incurred by Lender in connection therewith, including without
limitation actual attorneys' fees, together with interest thereon from the date
of expenditure at the Default Rate.
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7.3 Nonliability of Lender. Borrower acknowledges and agrees
that:
(a) by accepting or approving anything required to
be observed, performed, fulfilled or given to Lender pursuant to the Loan
Documents, including any certificate, statement of profit and loss or other
financial statement, survey, appraisal, lease or insurance policy, Lender shall
not be deemed to have warranted or represented the sufficiency, legality,
effectiveness or legal effect of the same, or of any term, provision or
condition thereof, and such acceptance or approval thereof shall not constitute
a warranty or representation to anyone with respect thereto by Lender;
(b) the relationship of Borrower and Lender under
the Loan Documents is, and shall at all times remain, solely that of borrower
and lender, and Lender neither undertakes nor assumes any responsibility or duty
to Borrower or to any other Person with respect to the Receivables or Loan,
except as expressly provided in the Loan Documents; and notwithstanding any
other provision of the Loan Documents: (i) Lender is not, and shall not be
construed as, a partner, joint venturer, alter-ego, manager, controlling person
or other business associate or participant of any kind of Borrower and Lender
does not intend to ever assume such status; (ii) Lender's activities in
connection with the Loan Documents shall not be "outside the scope of the
activities of a lender of money" under Nevada law, as amended or recodified from
time to time; and (iii) Lender shall not be deemed responsible for or a
participant in any acts, omissions or decisions of Borrower; and
7.4 No Third Parties Benefitted. This Agreement is made for
the purpose of defining and setting forth certain obligations, rights and duties
of Borrower and Lender in connection with the Loan. It shall be deemed a
supplement to the Note and the Security Documents, and shall not be construed as
a modification of the Note or the Security Documents, except as provided herein.
It is made for the sole protection of Borrower and Lender, and Lender's
successors and assigns. No other Person shall have any rights of any nature
hereunder or by reason hereof.
7.5 Indemnity. Borrower indemnifies Lender against, and holds
Lender harmless from, any and all losses, damages (whether general, punitive or
otherwise), liabilities, claims, cause of action (whether legal, equitable or
administrative), judgments, court costs and legal or other expenses, including
attorneys' fees, which Lender may suffer or incur as a direct or indirect
consequence of: (a) Lender's performance of this Agreement or any of the Loan
Documents, including, without limitation, Lender's exercise or failure to
exercise any rights, remedies or powers in connection with this Agreement or any
of the Loan Documents but excluding charges and assessments by Governmental
Agencies imposed upon the Lender in the normal course of the Lender's business
such as taxes and regulatory fees; (b) Borrower's failure to perform any of
Borrower's obligations as and when required by this Agreement or any of the
other Loan Documents, including, without limitation, any failure, at any time,
of any representation or warranty of Borrower to be true and correct and any
failure by Borrower to satisfy any condition; (c) any claim or cause of action
of any kind by any Person to the effect that Lender is in any way responsible or
liable for any act or omission by Borrower, whether on account of any theory or
derivative liability or otherwise, including but not limited to any claim or
cause of action for fraud, misrepresentation, tort or willful misconduct; or (d)
any claim or cause of action of any kind by any Person which would have the
effect of denying Lender the full benefit or protection of any provision of this
Agreement or the Loan Documents but excluding charges and assessments by
Governmental Agencies imposed upon Lender in the normal course of Lender's
business such as taxes and regulatory fees. Lender's rights of indemnity shall
not be directly or indirectly limited, prejudiced, impaired or eliminated in any
way by any finding or allegation that Lender's conduct is active, passive or
subject to any other classification or that Lender is directly or indirectly
responsible under any theory of any kind, character or nature for any act or
omission by Borrower or any other Person. Notwithstanding the foregoing,
Borrower shall not be obligated to indemnify Lender with respect to any
intentional tort or act of gross negligence which Lender is personally
determined by the judgment or a court of competent jurisdiction (sustained on
appeal, if any) to have committed. Borrower shall pay any indebtedness arising
under this indemnity to Lender immediately upon demand by Lender together with
interest thereon from the date such indebtedness arises until paid at the
Default Rate. Borrower's duty to defend and indemnify Lender shall survive the
release and cancellation of the Note.
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7.6 All Advances Deemed Mandatory. Anything herein to the
contrary notwithstanding, it is specifically understood
and agreed that all funds furnished by Lender pursuant
hereto shall be deemed advanced by Lender under an
obligation to do so, regardless of the identity of the
person or persons to whom such funds are furnished.
7.7 Binding Effect; Assignment. This Agreement shall be
binding upon and inure to the benefit of Borrower and
Lender and their respective successors and assigns,
except that Borrower may not assign its rights or
interests or delegate any of its duties under this
Agreement or any of the other Loan Documents without the
prior written consent of Lender.
7.8 Amendments; Consents. No amendment, modification,
supplement, termination or waiver of any provision of this Agreement or any of
the other Loan Documents, and no consent to any departure by Borrower therefrom,
may in any event be effective unless in writing signed by Lender, and then only
in the specific instance and for the specific purpose given.
7.9 Costs, Expenses and Taxes. Borrower shall pay to Lender,
on demand:
(a) the attorneys' fees and out-of-pocket expenses
incurred by Lender in connection with the negotiation, preparation, execution,
delivery and administration of this Agreement and any other Loan Documents;
(b) the actual costs and expenses of Lender in
connection with any modification of any Loan Document or in connection with the
enforcement of this Agreement and any other Loan Document and any matter related
thereto, including the actual fees and out-of-pocket expenses of any legal
counsel, independent public accountants and other outside experts retained by
Lender; and
(c) all costs, expenses, fees, premiums and other
charges relating or arising with respect to the Loan Documents or any
transactions contemplated thereby or the compliance with any of the terms and
conditions thereof, including but not limited to appraisal fees, inspection
fees, cost review fees, recording fees filing fees, release or reconveyance
fees, and title insurance premiums.
All sums paid or expended by Lender under the terms of this Agreement and the
other Loan Documents shall be considered to be a part of the Loan. Except as
otherwise specifically stated herein, all such sums shall be secured by the
Security Documents, shall bear interest from the date of expenditure as if such
sums were advances under the Note, and shall be immediately due and payable by
Borrower upon demand.
7.10 Survival of Representations and Warranties. All
representations and warranties of Borrower contained herein or in any other Loan
Document shall survive the making of the Loan and the execution and delivery of
the Note, and are material and have been or will be relied upon by Lender,
notwithstanding any investigation made by Lender or on behalf of Lender. For the
purpose of the foregoing, all statements contained in any certificate,
agreement, financial statement, or other writing delivered by or on behalf of
Borrower pursuant hereto or to any other Loan Document or in connection with the
transactions contemplated hereby or thereby shall be deemed to be
representations and warranties of Borrower contained herein or in the other Loan
Documents, as the case may be.
7.11 Notices. All notices to be given pursuant to this
Agreement shall be sufficient if given by personal services, by guaranteed
overnight delivery services, by telex, telecopy or telegram or by being mailed
postage prepaid, certified or registered mail, return receipt requested, to the
described addresses of the parties hereto as set forth below, or to such other
address as a party may request in writing. Any time period provided in the
giving of any notice hereunder shall commence upon the date of personal service,
the date after delivery to the guaranteed overnight delivery service, the date
of sending the telex, telecopy or telegram or two (2) days after mailing
certified or registered mail.
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BORROWER'S ADDRESS: Digital Courier Technologies, Inc.
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▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Executive Vice President
LENDERS' ADDRESSES: ▇/▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇ & Roadhouse
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
WITH DUPLICATE NOTICE TO: ▇▇▇▇▇, Patterson, DeVore, Ales & Roadhouse
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
7.12 Further Assurances. Borrower shall, at its sole expense
and without expense to Lender, do such further acts and execute and deliver such
further documents as Lender from time to time may require for the purpose of
assuring and confirming unto Lender the rights hereby created or intended now or
hereafter so to be, or for carrying out the intention or facilitating the
performance of the terms of any Loan Document, or for assuring the validity of
any security interest or lien under any Security Document.
7.13 Governing Law. The Loan Documents shall be governed by,
and construed and enforced in accordance with, the laws of the State of Nevada.
7.14 Severability of Provisions. Any provision in any Loan
Document that is held to be inoperative, unenforceable or invalid shall be
inoperative, unenforceable or invalid without affecting the remaining
provisions, and to this end the provisions of all Loan Documents are declared to
be severable.
7.15 Assignment or Sale of Participations by Lender. Lender
may, at any time, sell, transfer, assign or grant participations in the Loan and
in the Loan Documents and Lender may forward to such participant and prospective
participant all documents and information relating to the Loan and to Borrower,
whether furnished by Borrower or otherwise, as Lender determines necessary or
desirable. Lender may otherwise disclose the terms of the Loan for any
reasonable or bona fide purpose.
7.16 Headings. Section headings in this Agreement are included
for convenience of reference only and are not part of this Agreement for any
other purpose.
7.17 Time of the Essence. Time is of the essence.
-14-
7.18 Counterparts. This Agreement may be executed in
counterparts.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
BORROWER:
Digital Courier Technologies, Inc.,
a Delaware corporation
By:/s/ ▇▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Executive Vice President
SECURITIES PURCHASE AGREEMENT
Among
DIGITAL COURIER TECHNOLOGIES, INC.,
▇▇▇▇▇ ▇▇▇▇▇▇▇ STRATEGIC GROWTH FUND, LTD.,
and
▇▇▇▇▇ ▇▇▇▇▇▇▇ STRATEGIC GROWTH FUND, L.P.
Dated as of November 23, 1998
16
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is dated
as of November 23, 1998, among Digital Courier Technologies, Inc., a Delaware
corporation (the "Company"), ▇▇▇▇▇ ▇▇▇▇▇▇▇ Strategic Growth Fund, Ltd., a Cayman
Islands exempt company ("▇▇▇▇▇ ▇▇▇▇▇▇▇ Limited"), and ▇▇▇▇▇ ▇▇▇▇▇▇▇ Strategic
Growth Fund, L.P., a New York limited partnership ("▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇"). ▇▇▇▇▇
▇▇▇▇▇▇▇ Limited and ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇, are each referred to herein as a
"Purchaser" and are collectively referred to herein as the "Purchasers."
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers, and the
Purchasers desire to acquire from the Company, 400,000 units of the Company's
securities (the "Tranche A Units"), each Tranche A Unit to consist of one share
(each, a "Tranche A Share") of the Company's common stock, par value $.0001 per
share (the "Common Stock), and a warrant to purchase one share of Common Stock
(each, a "Tranche A Warrant"); and
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers, and the
Purchasers desire to acquire from the Company, 400,000 units of the Company's
securities (the "Tranche B Units" and, together with the Tranche A Units, the
"Units"), each Tranche B Unit to consist of one share (each, a "Tranche B Share"
and, together with the Tranche A Shares, the "Shares") of Common Stock and one
Warrant to purchase one share of Common Stock (a "Tranche B Warrant," and,
together with the Tranche A Warrants, the "Warrants").
IN CONSIDERATION of the mutual covenants contained in this
Agreement, the Company and each Purchaser agree as follows:
PURCHASE AND SALE OF THE UNITS
Purchase and Sale.
------------------
Subject to the terms and conditions set forth herein, the Company shall issue
and sell to the Purchasers, and the Purchasers, severally and not jointly, shall
purchase from the Company: On the Tranche A Closing Date (as defined below), an
aggregate of 400,000 Tranche A Units, for a purchase price of $4.50 per Tranche
A Unit or an aggregate purchase price of $1,800,000; and
(ii) On the Tranche B Closing Date (as defined
below), an aggregate of 400,000 Tranche B Units, for a purchase price of $7.00
per Tranche B Unit or an aggregate purchase price of $2,800,000.
Each Purchaser shall purchase that number of Units set forth opposite such
Purchaser's name in Schedule I attached hereto and each Purchaser shall deliver
to the Company the portion of the purchase price for each of the Tranche A Units
and the Tranche B Units as set forth next to its name on Schedule I.
The Closings.
-------------
The Tranche A Closing. The closing of the purchase and sale of the Tranche A
Units (the "Tranche A Closing") shall take place at the offices of Akin, Gump,
Strauss, ▇▇▇▇▇ & ▇▇▇▇, L.L.P., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or
by transmission by facsimile and overnight courier, immediately following the
execution hereof or such later date or different location as the parties shall
agree, but not prior to the date that the conditions set forth in Section 4.1
have been satisfied or waived by the appropriate party (the "Tranche A Closing
Date"). At the Tranche A Closing:
The Purchasers shall deliver to the Company an aggregate of $1,800,000 in United
States dollars in immediately available funds to an account designated in
writing by the Company; Within three (3) business days after the Tranche A
Closing Date, the Company shall deliver to ▇▇▇▇▇ ▇▇▇▇▇▇▇ Limited the
certificates representing the number of Tranche A Shares purchased by ▇▇▇▇▇
▇▇▇▇▇▇▇ Limited as set forth in Schedule I hereto;
The Company shall deliver to ▇▇▇▇▇ ▇▇▇▇▇▇▇ Limited a Warrant, substantially in
the form of Exhibit A hereto, representing the number of Tranche A Warrants
purchased by ▇▇▇▇▇ ▇▇▇▇▇▇▇ Limited as set forth in Schedule I hereto;
Within three (3) business days after the Tranche A Closing Date, the Company
shall deliver to ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ the certificates representing the number of
Tranche A Shares purchased by ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ as set forth in Schedule I
hereto;
The Company shall deliver to ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ a Warrant, substantially in the
form of Exhibit A hereto, representing the number of Tranche A Warrants
purchased by ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ as set forth in Schedule I hereto;
The parties shall execute and deliver each of the documents referred to in
Section 4.1 hereof; and The Company shall pay to ▇▇▇▇▇ ▇▇▇▇▇▇▇ Asset Management,
LLC ("▇▇▇▇▇ ▇▇▇▇▇▇▇ Asset") a fee of $25,000 (the "▇▇▇▇▇ ▇▇▇▇▇▇▇ Asset Fee") in
United States dollars in immediately available funds to an account designated in
writing by ▇▇▇▇▇ ▇▇▇▇▇▇▇ Asset.
The Tranche B Closing-Purchasers Option. Subject to the terms and conditions set
forth in Section 4.2 and elsewhere in this Agreement, the Purchasers shall have
the right at any time within 12 months of the Tranche A Closing to deliver a
written notice to the Company (a "Tranche B Notice") requiring the Company to
issue and sell any or all of the Tranche B Units. The closing of the purchase
and sale of the Tranche B Units (the "Tranche B Closing") shall take place in
the same manner as the Tranche A Closing, on the date after delivery of the
Tranche B Notice (the "Tranche B Date"); provided that in no case shall the
Tranche B Closing take place unless and until the conditions listed in Section
4.2 have been satisfied or waived by the appropriate party. At the Tranche B
Closing:
The Purchasers shall deliver to the Company an aggregate of the number of units
purchased by each of them multiplied by $7.00 (which amount shall not be greater
than $2,800,000) in United States dollars in immediately available funds to an
account designated in writing by the Company;
Within three (3) business days after the Tranche B Closing Date, the Company
shall deliver to ▇▇▇▇▇ ▇▇▇▇▇▇▇ Limited the certificates representing the number
of Tranche B Shares purchased by ▇▇▇▇▇ ▇▇▇▇▇▇▇ Limited as set forth in Schedule
I hereto;
The Company shall deliver to ▇▇▇▇▇ ▇▇▇▇▇▇▇ Limited a Warrant, substantially in
the form of Exhibit A hereto, representing the number of Tranche B Warrants
purchased by ▇▇▇▇▇ ▇▇▇▇▇▇▇ Limited as set forth in Schedule I hereto;
Within three (3) business days after the Tranche B Closing Date, the Company
shall deliver to ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ the certificates representing the number of
Tranche B Shares purchased by ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ as set forth in Schedule I
hereto;
The Company shall deliver to ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ a Warrant, substantially in the
form of Exhibit A hereto, representing the number of Tranche B; and Warrants
purchased by ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ as set forth in Schedule I hereto; and
The parties shall execute and deliver each of the documents referred to in
Section 4.2 hereof.
(a) The Tranche B Closing-Company's Option Subject to the
terms and conditions set forth in Section 4.2 and elsewhere in this Agreement,
the Company shall have the one time right at any time within 12 months of the
Tranche A Closing to deliver a written notice to the Company (a "Tranche B
Company Notice") requiring the Purchaser to purchase any or all of their pro
rata portion of the Tranche B Units. If the Company determines to exercise its
right under this Section 1.2(c), it shall notify the Purchasers ten (10) days
prior to the exercise of such right. The closing of the purchase and sale of the
Tranche B Units (the "Tranche B Closing") shall take place in the same manner as
the Tranche A Closing, on such date indicated in the Tranche B Company Notice
(the "Tranche B Date"); provided that in no case shall the Tranche B Closing
take place unless and until the conditions listed in Section 4.2 have been
satisfied or waived by the appropriate party. At the Tranche B Closing:
2
The Purchasers shall deliver to the Company an aggregate of the number of units
purchased by each of them multiplied by $7.00 (which amount shall not be greater
than $2,800,000) in United States dollars in immediately available funds to an
account designated in writing by the Company;
The Company shall deliver to ▇▇▇▇▇ ▇▇▇▇▇▇▇ Limited the certificates representing
the number of Tranche B Shares purchased by ▇▇▇▇▇ ▇▇▇▇▇▇▇ Limited as set forth
in Schedule I hereto;
The Company shall deliver to ▇▇▇▇▇ ▇▇▇▇▇▇▇ Limited a Warrant, substantially in
the form of Exhibit A hereto, representing the number of Tranche B Warrants
purchased by ▇▇▇▇▇ ▇▇▇▇▇▇▇ Limited as set forth in Schedule I hereto;
The Company shall deliver to ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ the certificates representing the
number of Tranche B Shares purchased by ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ as set forth in
Schedule I hereto;
The Company shall deliver to ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ a Warrant, substantially in the
form of Exhibit A hereto, representing the number of Tranche B; and Warrants
purchased by ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ as set forth in Schedule I hereto; and
The parties shall execute and deliver each of the documents referred to in
Section 4.2 hereof.
With respect to the Tranche B Units, in no event shall any
Purchaser have the right or be required to purchase Tranche B Units if the
aggregate number of shares of Common Stock beneficially owned by such Purchaser
and its affiliates would exceed 9.9% of the outstanding shares of the Common
Stock following such purchase. For purposes of this paragraph, beneficial
ownership shall be calculated in accordance with Section 13(d) of the Exchange
Act.
REPRESENTATIONS AND WARRANTIES
Representations, Warranties and Agreements of the Company. The Company hereby
makes the following representations and warranties to each of the Purchasers:
Organization and Qualification. The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware,
with the requisite corporate power and authority to own and use its properties
and assets and to carry on its business as currently conducted. Except as set
forth in Schedule 2.1(a), the Company has no subsidiaries (collectively, the
"Subsidiaries"). Each of the Subsidiaries is a corporation duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, with the full corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted. Each
of the Company and the Subsidiaries is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which the nature
of the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, would not, individually or in the aggregate, (x) adversely
affect the legality, validity or enforceability of any of this Agreement or the
Transaction Documents (as defined below) or any of the transactions contemplated
thereby, (y) have or result in a material adverse effect on the results of
operations, assets, prospects, or financial condition of the Company and its
Subsidiaries, taken as a whole or (z) adversely impair the Company's ability to
perform fully on a timely basis its obligations under any Transaction Document
(any of (x), (y) or (z), being a "Material Adverse Effect").
Authorization; Enforcement. The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by this
Agreement and the Warrants and the Registration Rights Agreement (as defined
below) (collectively, the "Transaction Documents"), and otherwise to carry out
its obligations hereunder and thereunder. The execution and delivery of each of
this Agreement and the Transaction Documents by the Company and the consummation
by it of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action and no further action is required
by the Company, its Board of Directors or its stockholders. Each of this
Agreement and the Transaction Documents has been duly executed by the Company
and when delivered in accordance with the terms hereof will constitute the valid
and binding obligation of the Company enforceable against the Company in
3
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
Capitalization. As of the date hereof and immediately prior to the Tranche A
Closing Date, the authorized capital stock of the Company is as set forth in
Schedule 2.1(c). The issuance and sale of all interests in such capital stock
have been in compliance with all applicable federal and state securities laws.
No shares of Common Stock are entitled to preemptive or similar rights, nor is
any holder of the Common Stock entitled to preemptive or similar rights arising
out of any agreement or understanding with the Company by virtue of any of this
Agreement or the Transaction Documents. Except by virtue of this Agreement or as
disclosed in Schedule 2.1(c), other than the Warrants, there are no outstanding
options, warrants, rights to subscribe to, calls or commitments of any character
whatsoever relating to securities, rights or obligations convertible into or
exchangeable for, or giving any person any right to subscribe for or acquire any
shares of Common Stock, or contracts, commitments, understandings, or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. No anti-dilution or similar adjustment
provision of securities of the Company will be triggered by the issuance of the
Units except as described on Schedule 2.1(c). The Company is not subject
(contingent or otherwise) to repurchase or otherwise acquire or retire any units
of its capital stock or any security convertible into or exchangeable for any of
its capital stock. Except as specifically disclosed in the SEC Documents (as
defined below), no Person or group of related Persons beneficially owns (as
determined pursuant to Rule 13d-3 promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) or has the right to acquire by
agreement with or by obligation binding upon the Company beneficial ownership of
in excess of 5% of the Common Stock. "Person" means an individual or
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
Authorization and Validity; Issuance of Shares. All of the Shares and the
Warrants have been duly authorized, and when delivered against payment therefor
as contemplated hereby, will be validly issued, fully paid and non-assessable
free and clear of all liens, encumbrances and rights of first refuals ("Liens")
and will not be subject to any preemptive or similar rights. The shares of
Common Stock issuable upon exercise of the Warrants (the "Underlying Shares")
are and will at all times hereafter continue to be duly authorized and reserved
for issuance and upon issuance the Underlying Shares will be validly issued,
fully paid and nonassessable free and clear of all Liens.
No Conflicts. The execution, delivery and performance of this Agreement and the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not (i) conflict
with or violate any provision of the articles of incorporation, bylaws or other
charter documents of the Company or any of the Subsidiaries, (ii) subject to
obtaining the consents referred to in Section 2.1(f), conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument (evidencing a Company or Subsidiary debt or otherwise) to which the
Company or any Subsidiary is a party or by which any property or asset of the
Company or any Subsidiary is bound or affected, or (iii) result in a violation
of any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company or any
Subsidiary is subject (including Federal and state securities laws and
regulations), or by which any material property or asset of the Company or any
Subsidiary is bound or affected.
Consents and Approvals. Except as specifically set forth in Schedule 2.1(f),
neither the Company nor any Subsidiary is required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other person in connection with the execution,
delivery and performance by the Company of this Agreement or the Transaction
Documents, other than (i) the filing of a registration statement with the
Securities and Exchange Commission (the "Commission"), which shall be filed in
accordance with and in the time periods set forth in the Registration Rights
Agreement, (ii) the application(s) or any letter(s) acceptable to the National
Market System of the Nasdaq Stock Market ("Nasdaq") for the listing of the
Shares and Underlying Shares with Nasdaq (and with any other national securities
exchange or market on which the Common Stock is then listed), and (iii) any
filings, notices or registrations under applicable state securities laws
(together with the consents, waivers, authorizations, orders, notices and
filings referred to in Schedule 2.1(f), the "Required Approvals").
4
Litigation; Proceedings. Except as specifically set forth in Schedule 2.1(g),
there is no action, suit, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries or any of their respective properties before
or by any court, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) which (i) adversely affects or
challenges the legality, validity or enforceability of any of this Agreement or
the Transaction Documents or (ii) would individually or in the aggregate, have a
Material Adverse Effect.
No Default or Violation. Except as set forth on Schedule 2.1 (h), neither the
Company nor any Subsidiary (i) is in default under or in violation or breach of
any indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound, (ii) is in
violation of any order of any court, arbitrator or governmental body applicable
to, or (iii) is in violation of any statute, rule or regulation of any
governmental authority to which it is subject.
Disclosure; Absence of Certain Changes. Neither this Agreement, the Schedules to
this Agreement, the Transaction Documents nor the SEC Documents contains any
untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements made herein and therein, in light of
the circumstances under which they were made, not misleading. Except as
disclosed in Schedule 2.1(i) or the SEC Documents filed on ▇▇▇▇▇ at least five
business days prior to the date hereof, since December 31, 1997 there has been
no material adverse change and no material adverse development in the business,
properties, operations, financial condition, liabilities or results of
operations or, insofar as can reasonably be foreseen, prospects of the Companies
or the Subsidiaries. The Company has not taken any steps, and does not currently
expect to take any steps, to seek protection pursuant to any bankruptcy law nor
does the Company or any of its Subsidiaries have any knowledge or reason to
believe that its creditors intend to initiate involuntary bankruptcy
proceedings. No event, liability, development or circumstance has occurred or
exists, or is contemplated to occur, with respect to the Company or its
Subsidiaries or their respective business, properties, operations or financial
condition or, insofar as can reasonably be foreseen, prospects, that would be
required to be disclosed by the Company under applicable securities laws on a
registration statement (including by way of incorporation by reference) filed
with the SEC, on the date this representation is made or deemed to be made,
relating to an issuance and sale by the Company of its Common Stock and which
has not been publicly disclosed.
Private Offering. The Company and all Persons acting on its behalf have not
directly or indirectly made, and will not make, offers or sales of any
securities or solicited any offers to buy any security under circumstances that
would require registration of the Units, the Shares, the Warrants or the
Underlying Shares or the issuance of such securities under the Securities Act of
1933, as amended (the "Act"). The issuance of the Units, the Shares, the
Warrants and the Underlying Shares to the Purchasers will not be integrated with
any other issuance of the Company's securities (past, current, or future) that
would violate any securities laws exemptions under the Act or otherwise
adversely affect the Purchasers' ability to resell the Units, the Shares, the
Warrants or the Underlying Shares under the Act. Subject to the accuracy and
completeness of the representations and warranties of the respective Purchasers
contained in Section 2.2 hereof, the offer and sale by the Company to the
Purchasers of the Units is exempt from the registration requirements of the Act.
SEC Documents ; Financial Statements. The Common Stock of the Company is
registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The Company has filed all reports required to be
filed by it under the Exchange Act, including pursuant to Section 13, 14 or
15(d) thereof (the foregoing materials being collectively referred to herein as
the "SEC Documents"), on a timely basis or has received a valid extension of
such time of filing and has filed any such SEC Documents prior to the expiration
of any such extension.. As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the Act and the Exchange Act
and the rules and regulations of the Commission promulgated thereunder, and none
of the SEC Documents, when filed, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. All material agreements to which the
Company or any Subsidiary is a party or to which the property or assets of the
Company or any Subsidiary are subject have been filed as exhibits to the SEC
Documents as required. The financial statements of the Company included in the
SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved,
except as may be otherwise specified in such financial statements or the notes
thereto, and fairly present in all material respects the financial position of
5
the Company as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal year-end audit adjustments.
Investment Company. The Company is not, and is not controlled by or under common
control with an affiliate (an "Affiliate") of an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
Broker's Fees. Except for a $25,000 fee paid to ▇▇▇▇▇ ▇▇▇▇▇▇▇ Asset upon
execution of that certain letter agreement dated November __, 1998 between the
Company and ▇▇▇▇▇ ▇▇▇▇▇▇▇ Asset and an additional fee of $25,000 payable by the
Company to ▇▇▇▇▇ ▇▇▇▇▇▇▇ Asset at the Tranche A Closing and as otherwise
disclosed on Schedule 2.1(m), no fees or commissions or similar payments with
respect to the transactions contemplated by this Agreement or the Transaction
Documents have been paid or will be payable by the Company to any broker,
financial advisor, finder, investment banker, or bank. The Purchasers shall have
no obligation with respect to any fees or with respect to any claims made by or
on behalf of other Persons for fees of a type contemplated in this Section
2.1(m) that may be due in connection with the transactions contemplated by this
Agreement and the Transaction Documents.
Form S-3 Eligibility. The Company is, and at the Tranche A Closing Date and the
Tranche B Closing Date will be, eligible to register securities (including the
Shares and the Underlying Shares) for resale with the Commission under Form S-3
(or any successor form) promulgated under the Securities Act.
Listing and Maintenance Requirements Compliance. The principal market on which
the Common Shares are currently traded is Nasdaq. Except as disclosed in
Schedule 2.1(o), since the date that the Company has been listed on Nasdaq, the
Company has not received notice (written or oral) from Nasdaq (or any stock
exchange, market or trading facility on which the Common Stock is or has been
listed (or on which it has been quoted)) to the effect that the Company is not
in compliance with the listing or maintenance requirements of such market or
exchange. The Company is not aware of any facts which would reasonably lead to
delisting or suspension of the Common Stock by Nasdaq. After giving effect to
the transactions contemplated by this Agreement and the Transaction Documents,
the Company believes that it is and will be in compliance with all such
maintenance requirements.
Patents and Trademarks. The Company or its Subsidiaries have, or have rights to
use, all patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses and rights (collectively, the
"Intellectual Property Rights") which are necessary for use in connection with
its business, as currently conducted and as described in the SEC Documents. To
the best knowledge of the Company, there is no existing infringement by another
Person of any of the Intellectual Property Rights which are necessary for use in
connection with the Company's business which would individually or in the
aggregate, have a Material Adverse Effect and the Company is not infringing on
any other person's Intellectual Property Rights.
Employee Relations. Neither the Company nor any of its Subsidiaries is involved
in any union labor dispute nor, to the knowledge of the Company or any of its
Subsidiaries, is any such dispute threatened. Neither the Company nor any of its
Subsidiaries is a party to a collective bargaining agreement, and the Company
and its Subsidiaries believe that relations with their employees are good.
Except as set forth on Schedule 2.1(q), no executive officer (as defined in Rule
501(f) of the Act) has notified the Company that such officer intends to leave
the Company or otherwise terminate such officer's employment with the Company.
Registration Rights; Rights of Participation. Except as described on Schedule
2.1(r) hereto, (i) the Company has not granted or agreed to grant to any Person
any rights (including "piggy-back" registration rights) to have any securities
of the Company registered with the Commission or any other governmental
authority which has not been satisfied and (ii) no Person, including, but not
limited to, current or former shareholders of the Company, underwriters, brokers
or agents, has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by this Agreement or any Transaction Document. Title. Except as
disclosed in Schedule 2.1(s), the Company and the Subsidiaries have good and
marketable title in fee simple to all real property and personal property owned
by them which is material to the business of the Company and its Subsidiaries,
in each case free and clear of all Liens, except for Liens that do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and the
Subsidiaries. Any real property and facilities held under lease by the Company
and the Subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere with the
use made and proposed to be made of such property and buildings by the Company
and the Subsidiaries.
6
Permits. The Company and the Subsidiaries possess all certificates,
authorizations, licenses, easements, consents, approvals, orders and permits
necessary to own, lease and operate their respective properties and to conduct
their respective businesses as currently conducted except where the failure to
possess such permits would not, individually or in the aggregate, have a
Material Adverse Effect ("Material Permits"), and there is no proceeding
pending, or, to the knowledge of the Company, threatened relating to the
revocation, modification, suspension or cancellation of any Material Permit.
Neither the Company nor any of the Subsidiaries is in conflict with or default
or violation of any Material Permit.
Insurance. The Company and each of its Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in the
businesses in which the Company and its Subsidiaries are engaged. Neither the
Company nor any such Subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverages as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business.
Internal Accounting Controls. The Company and each of the Subsidiaries maintain
a system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
Tax Status; Firpta. The Company and each of the Subsidiaries has made or filed
all federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject (unless and only to the
extent that the Company and each of its Subsidiaries has set aside on its books
provisions reasonably adequate for the payment of all unpaid and unreported
taxes) and has paid all taxes and other governmental assessments and charged
that are material in amount, shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith and has set
aside on it books provisions reasonably adequate for the payment of all taxes
for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount claimed to
be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim. The Company is not a "United States
real property holding corporation" within the meaning of Section 847(c)(2) of
the Internal Revenue Code of 1986, as amended.
Transactions With Affiliates. Except as set forth on Schedule 2.1(x), none of
the officers, directors, or employees of the Company is presently a party to any
transaction with the Company or any of its Subsidiaries (other than for services
as employees, officers and directors), including any contract, agreement or
other arrangement providing for the furnishing of services to or by, providing
for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge
of the Company, any corporation, partnership, trust or entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner other than transactions that would not
require disclosure under Section 404 of Regulation S-K of the Act and the
Exchange Act.
Application to Takeover Protection. The Company and its Board of Directors have
taken all necessary action, if any, in order to render inapplicable any control
share acquisition, business combination or other similar anti-takeover provision
under the laws of the state of its incorporation which is or could become
applicable to the Purchasers as a result of the transactions contemplated by
this Agreement or the Transaction Documents. None of the transactions
contemplated by this Agreement or the Transaction Documents, including the
exercise of the Warrants will trigger any poison pill provisions of any of the
Company's stockholders' rights or similar agreements.
(b) Environmental Laws. The Company and its Subsidiaries (i)
are in compliance with any and all applicable foreign, federal, state and local
laws and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permits, licenses or other approvals would not result in
a Material Adverse Effect.
(c) Foreign Corrupt Practices. Neither the Company, nor any of
its Subsidiaries, nor any director, officer, agent, employee or other person
7
acting on behalf of the Company or any of its Subsidiaries has, in the course of
its actions for, or on behalf of, the Company used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee form corporate funds;
materially violated or is in material violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or made any unlawful bribe,
rebate, payoff, influence payment, kickback or other unlawful payment to any
foreign or domestic government official or employee.
Representations and Warranties of the Purchasers. Each of the Purchasers,
severally and not jointly, hereby represents and warrants to the Company as
follows:
Organization; Authority. Such Purchaser is a corporation duly incorporated or a
limited liability company or limited partnership duly formed, validly existing
and in good standing under the laws of the jurisdiction of its incorporation or
formation with the requisite power and authority, corporate or otherwise, to
enter into and to consummate the transactions contemplated hereby and by the
Registration Rights Agreement and otherwise to carry out its obligations
hereunder and thereunder. The purchase by such Purchaser of the Units hereunder
has been duly authorized by all necessary action on the part of such Purchaser.
Each of this Agreement and the Registration Rights Agreement has been duly
executed and delivered by such Purchaser and constitutes the valid and legally
binding obligation of such Purchaser, enforceable against such Purchaser in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights generally and to general principles
of equity.
Investment Intent. Such Purchaser is acquiring the Units for its own account for
investment purposes only and not with a view to or for distributing or reselling
the Units, the Shares, the Warrants or the Underlying Shares or any part thereof
or interest therein in violation of any securities laws; provided, however, that
by making the representations herein, such Purchaser does not agree to hold any
of the Units, the Shares, the Warrants or the Underlying Shares for any minimum
or other specific term and reserves the right to dispose of the securities at
any time in accordance with or pursuant to a registration statement or an
exemption under the Act.
Purchaser Status. At the time such Purchaser was offered the Units, and at the
Tranche A Closing Date and the Tranche B Closing Date, (i) it was and will be an
"accredited investor" as defined in Rule 501 under the Act or (ii) such
Purchaser, either alone or together with its representatives, had and will have
such knowledge, sophistication and experience in business and financial matters
so as to be capable of evaluating the merits and risks of the prospective
investment in the Units.
Reliance. Each Purchaser understands and acknowledges that (i) the Units are
being offered and sold to the Purchaser without registration under the Act in a
private placement that is exempt from the registration provisions of the Act
under Section 4(2) of the Act or Regulation D promulgated thereunder and (ii)
the availability of such exemption, depends in part on, and the Company will
rely upon the accuracy and truthfulness of, the representations set forth in
this Section 2.2 and such Purchaser hereby consents to such reliance.
The Company acknowledges and agrees that the Purchasers make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
OTHER AGREEMENTS
3.1 Transfer Restrictions.
----------------------
If any Purchaser should decide to dispose of the Units, the Shares, the Warrants
or the Underlying Shares held by it, each Purchaser understands and agrees that
it may do so only pursuant to an effective registration statement under the Act,
to the Company or pursuant to an available exemption from the registration
requirements of the Act. The Company shall announce any material non-public
information it legally obligated to announce on or prior to the Effective Date
(as defined in the Registration Rights Agreement) of the registration statement
filed pursuant to the Registration Rights Agreement and shall not enter into any
subsequent non-disclosure agreements that would prevent it from announcing any
such information that otherwise legally could have been announced on or prior to
the Effective Date. In connection with any transfer of any Units, Shares,
Warrants or Underlying Shares other than pursuant to an effective registration
statement or to the Company, the Company may require the transferor thereof to
provide to the Company a written opinion of counsel experienced in the area of
United States securities laws selected by the transferor, the form and substance
of which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such transferred securities
under the Act. Notwithstanding the foregoing, the Company hereby consents to and
8
agrees to register (i) any transfer of the Units, the Shares, the Warrants or
the Underlying Shares by one Purchaser to another Purchaser, and agrees that no
documentation other than executed transfer documents shall be required for any
such transfer, and (ii) any transfer by any Purchaser to an Affiliate of such
Purchaser or to an Affiliate of another Purchaser, or any transfer among any
such Affiliates, provided that transferee certifies to the Company that it is an
"accredited investor" as defined in Rule 501(a) under the Act. Any such
transferee shall be bound by the terms of this Agreement and shall have the
rights of a Purchaser under this Agreement and the Registration Rights
Agreement. Each Purchaser agrees to the imprinting, so long as is required by
this Section 3.1(b), of the following legend on the Shares, the Warrants, and
the Underlying Shares:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE ACT.
Neither the Shares, the Warrants, nor the Warrant Underlying
Shares shall contain the legend set forth above if (i) the issuance of any of
such securities occurs at any time while the Registration Statement is effective
under the Act and the issuance is covered by such Registration Statement, (ii)
in the opinion of counsel to the Company experienced in the area of United
States securities laws such legend is not required under applicable requirements
of the Act (including judicial interpretations and pronouncements issued by the
staff of the Commission) or (iii) in the opinion of counsel to the Company
experienced in the area of United States securities laws such Shares, Warrants
or Underlying Shares may be sold pursuant to Rule 144. The Company agrees that
it will provide each Purchaser, upon request, with a certificate or certificates
representing Shares, Warrants or Underlying Shares, free from such legend at
such time as such legend is no longer required hereunder.
Stop Transfer Instruction. Except as otherwise required by law, the Company may
not make any notation on its records or give instructions to any transfer agent
of the Company which enlarge the restrictions of transfer set forth in Section
3.1.
Furnishing of Information. As long as any Purchaser owns the Units, the Shares,
the Warrants or the Underlying Shares and until the second anniversary of the
Tranche B Closing Date, the Company will cause the Common Stock to continue at
all times to be registered under 12(g) of the Exchange Act, will timely file (or
obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to Section 13, 14 or 15(d) of the Exchange Act and promptly furnish the
Purchasers with true and complete copies of all such filings and will not take
any action or file any document (whether or not permitted by the Exchange Act or
the rules thereunder) to terminate or suspend such reporting and filing
obligations. The Company further covenants that it will take such further action
as any holder of the Units, the Shares, the Warrants or the Underlying Shares
may reasonably request, all to the extent required from time to time to enable
such Person to sell the Units, the Shares, the Warrants or the Underlying Shares
without registration under the Act within the limitation of the exemptions
provided by Rule 144 promulgated under the Act.
Blue Sky Laws. In accordance with the Registration Rights Agreement, the Company
shall qualify the Shares and the Underlying Shares under the securities or Blue
Sky laws of such jurisdictions as the Purchasers may request and shall continue
such qualification at all times through the third anniversary of the Tranche B
Closing Date. Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Act) that would be integrated with the offer or sale of the
9
Units, the Shares, the Warrants or the Underlying Shares in a manner that would
require the registration under the Act of the sale the Units, of the Shares, the
Warrants, the Underlying Shares or Underlying Shares to any Purchaser. Listing
and Reservation of Shares and Underlying Shares.
The Company shall (i) not later than 15 days after the Tranche A Closing Date
and as soon as practicable after any Tranche B Closing Date prepare and file
with the Nasdaq (as well as any other national securities exchange or market on
which the Common Stock is then listed) an additional shares listing application
or a letter acceptable to Nasdaq covering and listing a number of shares of
Common Stock which is at least equal the aggregate amount of Shares and
Underlying Shares sold in the Tranche A Closing or Tranche B Closing, as
applicable, (ii) take all steps necessary to cause the Underlying Shares to be
approved for listing on Nasdaq (as well as on any other national securities
exchange or market on which the Common Stock is then listed) as soon as possible
thereafter and (iii) provide to the Purchasers evidence of such listing. Neither
the Company nor any of its Subsidiaries shall take any action which may result
in the delisitng or suspension of the Common Stock on Nasdaq. The Company shall
promptly provide to each Purchaser copies of any notices it receives from the
Nasdaq regarding the continued eligibility of the Common Stock for listing on
such automated quotation system.
The Company at all times shall reserve shares of its authorized but unissued
Common Stock for issuance the number of shares of Common Stock which would be
issuable upon exercise of the Warrants. Shares of Common Stock reserved for
issuance upon the exercise of the Warrants as set forth in Section 3.7(a) shall
be allocated pro rata to each of the Purchasers in accordance with the amount of
Units issued and delivered to such Purchaser at the Tranche A Closing and
Tranche B Closing, as applicable.
Notice of Breaches.
The Company and each Purchaser shall give prompt written notice to the other of
any breach by it of any representation, warranty or other agreement contained in
this Agreement or in the Registration Rights Agreement, as well as any events or
occurrences arising after the date hereof and prior to the Tranche A Closing or
the Tranche B Closing Date, as applicable, which would reasonably be likely to
cause any representation or warranty or other agreement of such party, as the
case may be, contained herein to be incorrect or breached as of such Closing
Date provided such notice will not constitute material non-public information.
However, no disclosure by either party pursuant to this Section 3.7 shall be
deemed to cure any breach of any representation, warranty or other agreement
contained herein or in the Registration Rights Agreement.
Notwithstanding the generality of Section 3.7(a), the Company shall promptly
notify, provided such notification will not constitute material non-public
information, each Purchaser of any notice or claim (written or oral) that it
receives from any lender of the Company or any Subsidiary to the effect that the
consummation of the transactions contemplated hereby and by the Registration
Rights Agreement violates or would violate any written agreement or
understanding between such lender and the Company or any Subsidiary, and the
Company shall promptly furnish by facsimile to the Purchasers a copy of any
written statement in support of or relating to such claim or notice. The default
by any Purchaser of any of its obligations, representations or warranties under
this Agreement or the Registration Rights Agreement shall not be imputed to, and
shall have no effect upon, any other Purchaser or affect the Company's
obligations under this Agreement any Transaction Document to any non-defaulting
Purchaser.
Future Financings. Except for (i) the issuance of securities upon exercise or
conversion fo the Company's options, warrants or other convertible securities
outstanding as of the date hereof or (ii) the grant of additional options or
warrants, or the issuance of additional securities, under any Company stock
option or restricted stock plan for the benefit of the Company's employees or
directors, if the Company shall issue any equity securities (including any debt
financing with an equity component) (the "Future Financing") prior to the
Effectiveness Date for the Tranche A Shares and the Underlying Common Shares for
the Tranche A Warrant, at an effective price per share of less than $4.50 per
share (such price the "Future Share Price"), than the Company shall issue to the
Purchasers additonal Common Stock such that the effective price per share paid
by the Purchasers at the Tranche A Closing shall equal the Future Share Price,
and the definition of Tranche A Shares shall include such additional shares.
Use of Proceeds. The Company shall use all of the proceeds from the sale of the
Units for working capital and general corporate purposes and not for the
satisfaction of any portion of Company borrowings outside the normal course of
business or to redeem Company equity or equity-equivalent securities. Pending
application of the proceeds of this placement in the manner permitted hereby,
the Company will invest such proceeds in interest bearing accounts and/or
short-term, investment grade interest bearing securities.
10
Reimbursement. In the event that any Purchaser, other than by reason of its
gross negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by or against any person, including
shareholders of the Company, in connection with or as a result of (a) any
misrepresentation or breach of any representation or warranty made by the
Company in this Agreement or the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby, (b) any breach of any
covenant, agreement or obligation of the Company contained in this Agreement or
the Transaction Documents or any other certificate, instrument or document
hereby or thereby, or (c) any cause of action, suit or claim brought or made
against such Purchaser and arising out of or resulting from the execution,
delivery, performance or enforcement of this Agreement or the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby, the Company will reimburse such Purchaser for its legal and other
actual out-of-pocket expenses (including the cost of any investigation and
preparation) incurred in connection therewith. The reimbursement obligations of
the Company under this paragraph shall be in addition to any liability which the
Company may otherwise have, shall extend upon the same terms and conditions to
any affiliate of the Purchasers and partners, directors, agents, employees and
controlling persons (if any), as the case may be, of the Purchasers and any such
affiliate, and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Company, the Purchasers and
any such affiliate and any such Person. The Company also agrees that neither the
Purchasers or any such Affiliates, partners, directors, agents, employees or
controlling persons shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the Company in connection with or
as a result of the consummation of this Agreement or any of the Transaction
Documents except to the extent that any losses, claims, damages, liabilities or
expenses incurred by the Company result from the gross negligence or willful
misconduct of such Purchaser or entity in connection with the transactions
contemplated by this Agreement or the Registration Rights Agreement. To the
extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment and
satisfaction of its obligations hereunder which is permissable under applicable
law.
Transactions With Affiliates. So long as any Units, Shares, Warrants or
Underlying Shares are held by any Purchaser, the Company shall not, and shall
cause each of its Subsidiaries not to, enter into, amend, modify or supplement
any agreement, transaction, commitment or arrangement with any of its respective
officers, directors, Persons who were officers or directors at any time during
the previous two years, stockholders who beneficially own 5% or more of the
Common Stock, or Affiliates or with any individual related by blood, marriage or
adoption to any such individual or with any entity in which any such entity or
individual owns a 5% or more beneficial interest (each a "Related Party"),
except for (a) customary employment arrangements and benefit programs on
reasonable terms, (b) any agreement, transaction, commitment or arrangement on
an arms-length basis on terms no less favorable than terms which would have been
obtained from a person other than such Related Party, or (c) any agreement,
transaction, commitment or arrangement which is approved by a majority of the
disinterested directors of the Company. For purposes hereof, any director who is
also an officer of the Company or any Subsidiary of the Company shall not be a
disinterested director with respect to any such agreement, transaction,
commitment or arrangement. "Affiliate" for purposes of this Section 3.13 only
means, with respect to any person or entity, another person or entity that,
directly or indirectly, (i) has a 5% or more equity interest in that person or
entity, (ii) has 5% or more common ownership with that person or entity, (iii)
controls that person or entity, or (iv) shares common control with that person
or entity. "Control" or "controls" for purposes hereof means that a person or
entity has the power, direct or indirect, to conduct or govern the policies of
another person or entity.
Transfer Agent Instructions. The Company shall issue irrevocable instructions to
its transfer agent, and any subsequent transfer agent, to issue certificates,
registered in the name of each Purchaser or its respective nominee(s), for the
Shares and the Underlying Shares in such amounts as specified from time to time
by each Purchaser to the Company in the form attached hereto as Exhibit B (the
"Irrevocable Transfer Agent Instructions"). Prior to registration of the Shares
and Underlying Shares under the Act, all such certificates shall bear the
restrictive legend specified in Section 3.1(b) of this Agreement. The Company
warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 3.14, and stop transfer instructions to
give effect to Section 3.1 hereof (in the case of the Underlying Shares, prior
to registration of the Underlying Shares under the Act) will be given by the
Company to its transfer agent and that the Units, the Shares, the Warrants and
the Underlying Shares shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and the
11
Registration Rights Agreement. If a Purchaser provides the Company with an
opinion of counsel, in form and substance reasonably satisfactory to the
Company, to the effect that a public sale, assignment or transfer of the Units,
the Shares, the Warrants and the Underlying Shares may be made without
registration under the Act or the Purchaser provides the Company with reasonable
assurances that the Units, the Shares, the Warrants and the Underlying Shares
can be sold pursuant to Rule 144 without any restriction as to the number of
securities acquired as of a particular date that can then be immediately sold,
the Company shall permit the transfer, and, in the case of the Shares and the
Underlying Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by such
Purchaser and without any restrictive legend. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the
Purchasers by violating the intent and purpose of the transactions contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 3.14 will be inadequate and agrees,
in the event of a beach or threatened breach by the Company of the provisions of
this Section 3.14, that the Purchasers, shall be entitled, in addition to all
other available remedies, to an order and/or injunction restraining any breach
and requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.
Filing of Form 8K. On or before the 3rd business day following each of the
Tranche A Closing Date and the Tranche B Closing Date, the Company shall file
Form 8-K with the Commission describing the terms of the transaction
contemplated by this Agreeement and the Transaction Documents in the form
required by the Exchange Act.
conditions
(a) Conditions Precedent to the Obligation of the Company to Sell the Tranche A
Units. The obligation of the Company to sell the Tranche A Units (and to pay the
▇▇▇▇▇ ▇▇▇▇▇▇▇ Asset Fee) hereunder is subject to the satisfaction or waiver
(with prior written notice to each Purchaser) by the Company, at or before the
Tranche A Closing, of each of the following conditions:
Accuracy of the Purchasers' Representations and Warranties. The representations
and warranties of each Purchaser in this Agreement shall be true and correct in
all material respects as of the date when made and as of the Tranche A Closing
Date;
Performance by the Purchasers. Each Purchaser shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by such Purchaser at or prior to the Tranche A Closing; and
No Injunction. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement or the
Transaction Documents.
Conditions Precedent to the Obligation of the Purchasers to Purchase the Tranche
A Units. The obligation of each Purchaser hereunder to acquire and pay for the
Tranche A Units is subject to the satisfaction or waiver by such Purchaser, at
or before the Tranche A Closing, of each of the following conditions:
Accuracy of the Company's Representations and Warranties. The representations
and warranties of the Company set forth in this Agreement and in the
Registration Rights Agreement shall be true and correct in all respects as of
the date when made and as of the Tranche A Closing Date;
Performance by the Company. The Company shall have performed, satisfied and
complied in all respects with all covenants, agreements and conditions required
by this Agreement to be performed, satisfied or complied with by the Company at
or prior to the Tranche A Closing;
No Injunction. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement and the
Transaction Documents;
No Suspensions of Trading in Common Stock. The trading in the Common Stock shall
not have been suspended by the Commission or on Nasdaq which suspension shall
remain in effect;
Listing of Common Stock. Nasdaq shall have approved, if required, for listing
upon notice of issuance the Shares and the Underlying Shares;
12
Required Approvals. All Required Approvals shall have been obtained other than
those relating solely to the Tranche B Units;
Shares of Common Stock. The Company shall have duly reserved the number of
Underlying Shares required by this Agreement and the Transaction Documents to be
reserved for issuance upon the exercise of the Tranche A Warrants;
Change of Control. No Change of Control shall have occurred between the date
hereof and the Tranche A Closing Date. "Change of Control" means the occurrence
of any of (i) an acquisition after the date hereof by an individual or legal
entity or "group" (as described in Rule 13d-5(b)(1) promulgated under the
Exchange Act), other than the Purchasers or any of their Affiliates, of in
excess of 50% of the voting securities of the Company, (ii) a replacement of
more than one-half of the members of the Company's Board of Directors which is
not approved by those individuals who are members of the Board of Directors on
the date hereof in one or a series of related transactions, (iii) the merger of
the Company with or into another entity, consolidation or sale of all or
substantially all of the assets of the Company in one or a series of related
transactions or (iv) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the events set
forth above in (i), (ii) or (iii);
Transfer Agent Instructions. The Irrevocable Transfer Agent Instructions, in the
form of Exhibit B attached hereto, shall have been delivered to and acknowledged
in writing by the Company's transfer agent; and
(i) America Online Payable. Purchasers shall be satisfied, in
their sole discretion, with the future resolution of the payments due to America
Online Inc.
Documents and Certificates. At the Tranche A Closing, the Company shall have
delivered to the Purchasers, the following in form and substance reasonably
satisfactory to the Purchasers: An opinion of the Company's legal counsel in the
form attached hereto as Exhibit C dated as of the Tranche A Closing Date;
A stock certificate(s) representing the number of Tranche A Shares purchased by
such Purchaser as set forth next to such Purchaser's name on Schedule I,
registered in the name of such Purchaser, each in form satisfactory to the
Purchaser;
A Warrant(s) representing the Tranche A Warrants purchased by such Purchaser as
set forth next to such Purchaser's name on Schedule I, registered in the name of
such Purchaser;
The Company shall have executed and delivered the Registration Rights Agreement;
Officer's Certificate. An Officer's Certificate dated the Tranche A Closing Date
and signed by an executive officer of the Company confirming the accuracy of the
Company's representations, warranties and covenants as of such Closing Date and
confirming the compliance by the Company with the conditions precedent set forth
in this Section 4.1 as of the Tranche A Closing Date.
Secretary's Certificate. A Secretary's Certificate dated the Tranche A Closing
Date and signed by the Secretary or Assistant Secretary of the Company
certifying (A) that attached thereto is a true and complete copy of the
Certificate of Incorporation of the Company, as in effect on the Tranche A
Closing Date, (B) that attached thereto is a true and complete copy of the
by-laws of the Company, as in effect on the Tranche A Closing Date and (C) that
attached thereto is a true and complete copy of the resolutions duly adopted by
the Board of Directors of the Company authorizing the execution, delivery and
performance this Agreement and of the Transaction Documents, and that such
resolutions have not been modified, rescinded or revoked.
(a) Conditions Precedent to the Obligation of the Company to Sell the Tranche B
Units. The obligation of the Company to sell the Tranche B Units hereunder is
subject to the satisfaction or waiver (with prior written notice to each
Purchaser) by the Company, at or before the Tranche B Closing, of each of the
following conditions:
Accuracy of the Purchasers' Representations and Warranties. The representations
and warranties of each Purchaser in this Agreement shall be true and correct in
all material respects as of the date when made and as of the Tranche B Closing
Date Date (except for representations and warranties that speak as of a specific
date); Performance by the Purchasers. Each Purchaser shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by such Purchaser at or prior to the Tranche B Closing; and
No Injunction. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement and the
Transaction Documents.
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Conditions Precedent to the Obligation of the Purchasers to Purchase the Tranche
B Units. The obligation of each Purchaser hereunder to acquire and pay for the
Tranche B Units is subject to the satisfaction or waiver by each Purchaser, at
or before the Tranche B Closing, of each of the following conditions:
Tranche A. The Tranche A Closing shall have occurred;
Accuracy of the Company's Representations and Warranties. The representations
and warranties of the Company contained herein and in the Registration Rights
Agreement shall be true and correct in all respects as of the date when made and
as of the Tranche B Closing Date (except for representations and warranties that
speak as of a specific date);
Performance by the Company. The Company shall have performed, satisfied and
complied in all respects with all covenants, agreements and conditions required
by this Agreement and the Transfer Documents to be performed, satisfied or
complied with by the Company at or prior to the Tranche B Closing Date;
No Injunction. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court of governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement and
theTransfer Documents;
(ii) Registration Statements for Tranche A. The Registration
Statement with respect to the Tranche A Shares and the Underlying Shares with
respect to the Tranche A Warrant shall have been declared effective under the
Act by the SEC; and on the Tranche B Closing such Registration Statement shall
be effective, not subject to any stop order and not be subject to any suspension
pursuant to Section 3(p) of the Registration Rights Agreement, and shall have
been effective and shall not have been subject to any stop order for the thirty
(30) business days prior to such Closing Date and no stop order shall be pending
or threatened as at such Closing Date.
Adverse Changes. Since the date of the financial statements included in the
Company's Quarterly Report on Form 10-Q or Annual Report on Form 10-K, whichever
is more recent, last filed prior to the date of this Agreement, no event which
had a Material Adverse Effect shall have occurred which is not disclosed on any
Schedule hereto or otherwise in writing to each of the Purchasers;
Litigation. No litigation shall have been instituted or threatened against the
Company which could reasonably be expected to, individually or in the aggregate,
have a Material Adverse Effect;
Management. There shall have been no substantial changes in the position or
responsibilities of the Chief Executive Officer and the Chief Financial Officer
of the Company;
No Suspensions of Trading in Common Stock. The trading in the Common Stock shall
not have been suspended by the Commission or on Nasdaq (except for any
suspension of trading of limited duration solely to permit dissemination of
material information regarding the Company);
Listing of Common Stock. The Common Stock, including the Shares and the
Underlying Shares shall have been at all times since the date hereof, and on the
Tranche B Closing Date be, listed for trading on Nasdaq, or other exchange
acceptable to Purchasers;
Required Approvals. All Required Approvals shall have been obtained.
Shares of Common Stock. The Company shall have duly reserved the number of
Underlying Shares required by this Agreement to be reserved for issuance upon
exercise of the Tranche B Warrants.
Change of Control. No Change of Control in the Company shall have occurred;
Common Stock Price. The Per Share Market Value of the Common Stock shall have
been more than $7.00 per share for at least 15 consecutive trading days prior to
the Tranche B Closing Date and at least $7.00 on the day before the Tranche B
Closing Date. The "Per Share Market Value" means on any particular date the
closing bid price per share of the Common Stock on such date on Nasdaq or other
registered national stock exchange on which the Common Stock is then listed or
if there is no such price on such date, then the closing bid price on such
exchange or quotation system on the date nearest preceding such date; and
Transfer Agent Instructions. The Irrevocable Transfer Agent Instructions, in the
form of Exhibit D attached hereto, shall have been delivered to and acknowledged
in writing by the Company's transfer agent.
Documents and Certificates. At the Tranche B Closing, the Company shall have
delivered to the Purchasers, the following in form and substance reasonably
satisfactory to the Purchasers: An opinion of the Company's legal counsel, in
substantially the form attached hereto as Exhibit C dated as of the Tranche B
Closing Date;
14
A stock certificate(s) representing the Tranche B Shares purchased by such
Purchaser as set forth next to such Purchaser's name on Schedule I, registered
in the name of such Purchaser, each in form satisfactory to the Purchaser;
a Warrant(s) representing the Tranche B Warrants being purchased at by such
Purchaser as set forth next to such Purchaser's name on Schedule I, registered
in the name of such Purchaser;
Officer's Certificate. The Company shall deliver to the Purchasers an Officer's
Certificate dated the Tranche B Closing Date and signed by an executive officer
of the Company confirming the accuracy of the Company's representations,
warranties and covenants as of the Tranche B Closing Date and confirming the
compliance by the Company with the conditions precedent set forth in this
Section 4.2(b) as of the Tranche B Closing Date.
Secretary's Certificate. A Secretary's Certificate Dated the Tranche B Closing
Date and signed by the Secretary or Assistant Secretary of the Company
certifying (A) that attached thereto is a true and complete copy of the
Certificate of Incorporation of the Company, as in effect on the Tranche B
Closing Date, (B) that attached thereto is a true and complete copy of the
bylaws of the Company, as in effect on the Tranche B Closing Date and (C) that
attached thereto is a true and complete copy of the resolutions duly adopted by
the Board of Directors of the Company authorizing the execution, delivery and
performance of the Agreement and the Transaction Documents and that such
resolutions have not been modified, rescinded or revoked.
MISCELLANEOUS
Fees and Expenses. Except as set forth in the Registration Rights Agreement and
as otherwise set forth in this Agreement, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all stamp and other taxes and duties levied in connection with the
issuance of the Shares and the Underlying Shares pursuant hereto.
Entire Agreement; Amendments. This Agreement, together with the Exhibits and
Schedules hereto and the Registration Rights Agreement contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters.
Notices. Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be deemed to have been received (a) upon
hand delivery (receipt acknowledged) or delivery by telex (with correct answer
back received), telecopy or facsimile (with transmission confirmation report) at
the address or number designated below (if received by 7:00 p.m. EST where such
notice is to be received), or the first business day following such delivery (if
delivered on a business day after during normal business hours where such notice
is to be received) or (b) on the second business day following the date of
mailing by express courier service, fully prepaid, addressed to such address, or
upon actual receipt of such mailing, whichever shall first occur. The addresses
for such communications are (i) if to the Company to Digital Courier
Technologies, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, fax no. (▇▇▇) ▇▇▇ ▇▇▇▇ and (ii) if to any Purchaser to
the address as set forth on Schedule II hereto with copies to Akin, Gump,
Strauss, ▇▇▇▇▇ & ▇▇▇▇, L.L.P., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attn: ▇▇▇▇▇ ▇▇▇▇, fax no. (▇▇▇) ▇▇▇-▇▇▇▇, or such other address as may be
designated in writing hereafter, in the same manner, by such Person.
Amendments; Waivers. No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by both the
Company and the Purchasers; or, in the case of a waiver, by the party against
whom enforcement of any such waiver is sought. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter. Notwithstanding the foregoing, no
such amendment shall be effective to the extent that it applies to less than all
of the holders of the Units outstanding. The Company shall not offer or pay any
consideration to a Purchaser for consenting to such an amendment or waiver
unless the same consideration is offered to each Purchaser and the same
consideration is paid to each Purchaser which consents to such amendment or
waiver.
Headings; Interpretive Matters. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof. No provision of this Agreement will be
interpreted in favor of, or against, any of the parties hereto by reason of the
extent to which any such party or its counsel participated in the drafting
thereof or by reason of the extent to which any such provision is inconsistent
with any prior draft hereof or thereof.
15
Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted assigns. The Company
may not assign this Agreement or any rights or obligations hereunder without the
prior written consent of each of the Purchasers. The Purchasers may assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Company, except that any assignees must make the representations
and warranties set forth in Section 2.2 and otherwise comply with the terms of
this Agreement otherwise applicable to its assignor. This provision shall not
limit a Purchaser's right to transfer securities in accordance with all of the
terms of this Agreement or under the Registration Rights Agreement.
No Third-Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns and is not
for the benefit of, nor may any provision hereof be enforced by, any other
person.
Governing Law. This Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York without regard to the
principles of conflicts of law thereof. Each party hereby irrevocably submits to
the nonexclusive jurisdiction of the state and federal courts sitting in the
City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consent to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
Survival. The agreements, covenants, representations, warranties and provisions
contained in this Agreement shall survive the delivery of the Units pursuant to
this Agreement and each closing hereunder and any exercise of the Warrants.
Execution. This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
Publicity. The Company and each Purchaser shall consult with each other in
issuing any press releases or otherwise making public statements with respect to
the transactions contemplated hereby and neither party shall issue any such
press release or otherwise make any such public statement without the prior
written consent of the other, which consent shall not be unreasonably withheld
or delayed, except that no prior consent shall be required if such disclosure is
required by law, in which such case the disclosing party shall provide the other
party with prior notice of such public statement. The Company shall not publicly
or otherwise disclose the names of any of the Purchasers without each such
Purchaser's prior written consent, except that no prior consent shall be
required if such disclosure is required by law and Purchasers have had prior
review of such disclosure.
Severability. In case any one or more of the provisions of this Agreement shall
be invalid or unenforceable in any respect, the validity and enforceability of
the remaining terms and provisions of this Agreement shall not in any way be
affecting or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision which shall be a reasonable substitute therefor, and
upon so agreeing, shall incorporate such substitute provision in this Agreement.
Remedies. In addition to being entitled to exercise all rights provided herein
or granted by law, including recovery of damages, the Purchasers will be
entitled to specific performance of the obligations of the Company under this
Agreement or the Transaction Documents without the showing of economic loss and
without any bond or other security being required. Each of the Company and the
Purchasers (severally and not jointly) agree that monetary damages would not be
adequate compensation for any loss incurred by reason of any breach of its
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
Independent Nature of Purchasers' Obligations and Rights. The obligations of
each Purchaser hereunder is several and not joint with the obligations of the
other Purchasers hereunder, and no Purchaser shall be responsible in any way for
the performance of the obligations of any other Purchaser hereunder. Nothing
contained herein or in any other agreement or document delivered at any closing,
16
and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed
to constitute the Purchasers as a partnership, an association, a joint venture
or any other kind of entity, or create a presumption that the Purchasers are in
any way acting in concert with respect to such obligations or the transactions
contemplated by this Agreement. Each Purchaser shall be entitled to protect and
enforce its rights, including without limitation the rights arising out of this
Agreement or out of the Transaction Documents, and it shall not be necessary for
any other Purchaser to be joined as an additional party in any proceeding for
such purpose.
Payment Set Aside. To the extent that the Company makes a payment or payment to
the Purchasers hereunder or pursuant to the Registration Rights Agreement or the
Purchasers enforce or exercise their rights hereunder or thereunder, and such
payment or payments or the proceeds of such enforcement or exercise or any part
thereof are subsequently invalidated, declared fraudulent or preferential, set
aside, recovered from, disgorged by or are required to be refunded, repaid or
otherwise restored to the Company, a trustee, receiver or any other Person under
any law (including, without limitation, any bankruptcy law, state or federal
law, common law or equitable cause of action), then to the extent of any such
restoration the obligation or part thereof originally intended to be satisfied
shall be revived and continued in full force and effect as if such payment had
not been made or such enforcement or setooff had not occurred.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
SIGNATURE PAGE FOLLOWS]
17
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
DIGITAL COURIER TECHNOLOGIES, INC.
By:
-------------------------------
Name:
Title:
▇▇▇▇▇ ▇▇▇▇▇▇▇ STRATEGIC
GROWTH FUND, LTD.
By:
-------------------------------
Name:
Title:
▇▇▇▇▇ ▇▇▇▇▇▇▇ STRATEGIC
GROWTH FUND, L.P.
By:
-------------------------------
Name:
Title:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT.
November 23, 1998
260,000 shares Warrant No. A-1
DIGITAL COURIER TECHNOLOGIES, INC.
STOCK PURCHASE WARRANT
Registered Owner:
This certifies that, for value received, Digital Courier Technologies,
Inc., a Delaware corporation, the ("Company") grants the following rights to the
Registered Owner, or assigns, of this Warrant:
1. Issue. Upon tender (as defined in section 5 hereof) to the Company,
the Company shall issue to the Registered Owner, ▇▇▇▇▇ ▇▇▇▇▇▇▇ Strategic Growth
Fund, Ltd., or assigns, up to the number of shares specified in paragraph 2
hereof of fully paid and nonassessable shares of Common Stock, par value $.0001
per share ("Common Stock"), that the Registered Owner, or assigns, is otherwise
entitled to purchase.
2. Number of Shares. The total number of shares of Common Stock that
the Registered Owner, or assigns, of this Warrant is entitled to receive upon
exercise of this Warrant is 260,000 shares of Common Stock, subject to
adjustment from time to time as set forth in paragraph 6 below. The Company
shall at all times reserve and hold available sufficient shares of Common Stock
to satisfy all conversion and purchase rights represented by outstanding
convertible securities, options and warrants, including this Warrant. The
Company covenants and agrees that all shares of Common Stock that may be issued
upon the exercise of this Warrant shall, upon issuance, be duly and validly
issued, fully paid and nonassessable, and free from all taxes, liens and charges
with respect to the purchase and the issuance of the shares.
3. Exercise Price. (a) The initial exercise price of this Warrant, the
price at which the shares of stock issuable upon exercise of this Warrant may be
purchased, is $5.53, and upon the six-month anniversary of the date hereof,
shall be adjusted as set forth in section 3(b) hereof, and subject to adjustment
from time to time pursuant to the provisions of paragraph 6 below (the "Exercise
Price").
(b) At 5:00 p.m. on May 24, 1998 (the "Reset Date"), the Exercise
Price shall be adjusted to be equal to the lesser of (i) $5.53, or (ii) the
average Per Share Market Value during any five (5) consecutive Trading Days
during the period of the 22 Trading Days immediately preceding the Reset Date.
The Registered Owner shall send written notice to the Company of the Exercise
Price, as adjusted pursuant to this paragraph, together with computation of such
adjusted Exercise Price and the computation of the average Per Share Market
Value for each such five-day period, no later than the second (2nd) Business Day
19
after the Reset Date. The Exercise Price shall be deemed to be adjusted to such
new Exercise Price unless the Company notifies the Registered Owner within one
(1) Business Day after receipt of such written notice from the Registered Owner
that the Company disagrees with the computation of such adjustment. If the
Registered Owner and the Company fail to agree upon the adjusted Exercise Price
within one (1) Business Day after the Company has given such notice, the
Exercise Price shall be computed promptly by a securities firm acceptable to
both the Registered Owner and the Company, and such computation shall be final.
4. Exercise Period. This Warrant may only be exercised beginning on
November 23, 1998 and up to and including November 22, 2003 (the "Exercise
Period"). If not exercised during this period, this Warrant and all rights
granted under this Warrant shall expire and lapse.
5. Tender. This Warrant may be exercised, in whole or in part, by
actual delivery of (i) the Exercise Price in cash, (ii) a duly executed Warrant
Exercise Form, a copy of which is attached to this Warrant as Exhibit A,
properly executed by the Registered Owner, or assigns, of this Warrant, and
(iii) by surrender of this Warrant. The payment and Warrant Exercise Form must
be delivered, personally or by mail, to the registered office of the Company.
Documents sent by mail shall be deemed to be delivered when they are received by
the Company.
6. Further Adjustment of Exercise Price.
(a) If the Company, at any time while this Warrant is outstanding,
(a) shall pay a stock dividend on its Common Stock, (b) subdivide outstanding
shares of Common Stock into a larger number of shares, (c) combine outstanding
shares of Common Stock into a smaller number of shares, or (d) issue by
reclassification of shares of Common Stock any shares of capital stock of the
Company, the Exercise Price shall be multiplied by a fraction the numerator of
which shall be the number of shares of Common Stock (excluding treasury shares,
if any) outstanding before such event and the denominator of which shall be the
number of shares of Common Stock outstanding after such event. Any adjustment
made pursuant to this paragraph (6)(a) shall become effective immediately after
the record date for the determination of shareholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.
(b) If the Company, at any time while this Warrant is outstanding,
shall issue rights or warrants to all of the holders of Common Stock entitling
them to subscribe for or purchase shares of Common Stock at a price per share
less than the Per Share Market Value of Common Stock at the record date
mentioned below, the Exercise Price shall be multiplied by a fraction, the
denominator of which shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding on the date of issuance of such rights or
warrants plus the number of additional shares of Common Stock offered for
subscription or purchase, and the numerator of which shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding on the
date of issuance of such rights or warrants plus the number of shares which the
aggregate offering price of the total number of shares so offered would purchase
at such Per Share Market Value. Such adjustment shall be made whenever such
rights or warrants are issued, and shall become effective immediately after the
record date for the determination of shareholders entitled to receive such
rights or warrants. However, upon the expiration of any right or warrant to
purchase Common Stock the issuance of which resulted in an adjustment in the
Exercise Price pursuant to this paragraph (6)(b), if any such right or warrant
shall expire and all or any portion thereof shall not have been exercised, the
Exercise Price shall immediately upon such expiration be re-computed and
effective immediately upon such expiration be increased to the price which it
would have been (but reflecting any other adjustments in the Exercise Price made
pursuant to the provisions of section (g) after the issuance of such rights or
warrants) had the adjustment of the Exercise Price made upon the issuance of
such rights or warrants been made on the basis of offering for subscription or
purchase only that number of shares of Common Stock (if any) actually purchased
upon the exercise of such rights or warrants actually exercised.
(c) If the Company, at any time while this Warrant is outstanding,
shall distribute to all of the holders of Common Stock evidences of its
20
indebtedness or assets or rights or warrants to subscribe for or purchase any
security (excluding those referred to in paragraphs 6(a) and (b) above), then in
each such case the Exercise Price at which the Warrant shall thereafter be
exercisable shall be determined by multiplying the Exercise Price in effect
immediately prior to the record date fixed for determination of shareholders
entitled to receive such distribution by a fraction the denominator of which
shall be the Per Share Market Value of Common Stock determined as of the record
date mentioned above, and the numerator of which shall be such Per Share Market
Value of the Common Stock on such record date less the then fair market value at
such record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
the Board of Directors in good faith; provided, however, that in the event of a
distribution exceeding ten percent (10%) of the net assets of the Company, such
fair market value shall be determined by a nationally recognized or major
regional investment banking firm or firm of independent certified public
accountants of recognized standing (an "Appraiser") selected in good faith by
the Registered Owner of the Warrant; and provided, further, that the Company,
after receipt of the determination by such Appraiser shall have the right to
select an additional Appraiser meeting the same qualifications, in good faith,
in which case the fair market value shall be equal to the average of the
determinations by each such Appraiser. Such adjustment shall be made whenever
any such distribution is made and shall become effective immediately after the
record date mentioned above.
(d) All calculations under this section 6 shall be made to the
nearest cent or the nearest l/l00th of a share, as the case may be.
(e) Whenever the Exercise Price is adjusted pursuant to paragraphs
6(a), (b) or (c), the Company shall promptly mail to the holder of the Warrant,
a notice setting forth the Exercise Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment.
(f) In case of (A) any reclassification of the Common Stock, (B)
any consolidation or merger of the Company with or into another person pursuant
to which (i) a majority of the Company's Board of Directors will not constitute
a majority of the board of directors of the surviving entity or (ii) less than
51% of the outstanding shares of the capital stock of the surviving entity will
be held by the same shareholders of the Company prior to such reclassification,
consolidation or merger, (C) the sale or transfer of all or substantially all of
the assets of the Company, (D) any compulsory share exchange pursuant to which
the Common Stock is converted into other securities, cash or property, (E)
suspension from listing or delisting of the Common Stock from the National
Market System of the Nasdaq Stock Market or any other exchange on which the
Common Stock is listed for a period of five consecutive days, (F) the Company's
notice to any registered owner of the Tranche A Warrants or the Tranche B
Warrants, including by way of public announcement, at any time, of its
intention, for any reason, not to comply with proper requests for the exercise
of any such warrants, or (G) a breach by the Company of any representation,
warranty, covenant or other term or condition of the Purchase Agreement, the
Registration Rights Agreement or any other agreement, document, certificate or
other instrument delivered in connection with the transactions contemplated
thereby or hereby, except to the extent that such breach would not have a
Material Adverse Effect (as defined in Section 2.1(a) of the Purchase Agreement)
and except, in the case of a breach of a covenant which is curable, only if such
breach continues for a period of at least ten days after the Company knows or
reasonably should have known of the existence of such breach (clauses (A)
through (G) above referred to as a "Redemption Event"), the holder of the
Warrant shall have the right thereafter to exercise the Warrant for the shares
of stock and other securities, cash and property receivable upon or deemed to be
held by holders of Common Stock following such Redemption Event, and the holder
of the Warrant shall be entitled upon such event to receive such amount of
securities, cash or property as the shares of the Common Stock of the Company
into which the Warrant could have been converted immediately prior to such
Redemption Event would have been entitled.
(g) If:
A. the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
21
B. the Company shall declare a special nonrecurring cash dividend
on or a redemption of its Common Stock; or
C. the Company shall authorize the granting to the holders of the
Common Stock rights or warrants to subscribe for or purchase any
shares of capital stock of any class or of any rights; or
D. the approval of any shareholders of the Company shall be
required in connection with any reclassification of the Common
Stock of the Company, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially
all of the assets of the Company, of any compulsory share of
exchange whereby the Common Stock is converted into other
securities, cash or property; or
E. the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the
Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of exercise of this Warrant, and shall cause to be mailed to the
holder of this Warrant at its address as it shall appear below, at least 30
calendar days prior to the applicable record or effective date hereinafter
specified, a notice (provided such notice shall not include any material
non-public information) stating (x) the date on which a record is to be taken
for the purpose of such dividend, distribution, redemption, rights or warrants,
or if a record is not to be taken, the date as of which the holders of Common
Stock of record to be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of which it is expected
that holders of Common Stock of record shall be entitled to exchange their
shares of Common Stock for securities, cash or other property deliverable upon
such reclassification, consolidation, merger, sale, transfer or share exchange;
provided, however, that the failure to mail such notice or any defect therein or
in the mailing thereof shall not affect the validity of the corporate action
required to be specified in such notice.
(h) Adjustment to Exercise Price. In order to prevent dilution of
the rights granted under this Warrant, the Exercise Price will be
subject to adjustment from time to time as provided in this Section
6(h).
(i) Adjustment of Exercise Price upon Issuance of Common Stock. If
at any time prior to the one year anniversary of the Reset Date, the
Company issues or sells, or is deemed to have issued or sold, any shares
of Common Stock (other than the Underlying Shares or shares of Common
Stock deemed to have been issued by the Company in connection with an
Approved Stock Plan (as defined below) or shares of Common Stock
issuable upon the exercise of any options or warrants outstanding on the
date hereof and listed in Schedule 2.1(c) of the Purchase Agreement) for
a consideration per share less than the Exercise Price in effect
immediately prior to such issuance or sale, then immediately after such
issue or sale, the Exercise Price then in effect shall be reduced to an
amount equal to the consideration per share of Common Stock of such
issuance or sale. If at any time prior to the one year anniversary of
the Reset Date, the Company issues or sells, or is deemed to have issued
or sold, any shares of Common Stock (other than Underlying Shares,
shares of Common Stock deemed to have been issued by the Company in
connection with an Approved Stock Plan (as defined below) or shares of
Common Stock issuable upon the exercise of any options or warrants
outstanding on the date hereof and listed in Schedule 2.1(c) of the
Purchase Agreement or shares of Common Stock issued or deemed to have
been issued as consideration for an acquisition by the Company of a
license or of a division, assets or business (or stock constituting any
portion thereof) from another person) for a consideration per share
which is (A) greater than the Exercise Price in effect immediately prior
to such issuance or sale and (B) less the average of the Per Share
Market Values on the five consecutive Trading Days immediately preceding
the date of such issuance or sale (the price in this clause (B) is
herein referred to as "Market Price"), then immediately after such issue
or sale, the Exercise Price then in effect shall be reduced to an amount
equal to the product of (x) the Exercise Price in effect immediately
prior to such issue or sale and (y) the quotient determined by dividing
22
(1) the sum of (I) the product of (A) the Market Price and (B) the
number of shares of Common Stock Deemed Outstanding (as defined below)
immediately prior to such issue or sale, and (II) the consideration, if
any, received by the Company upon such issue or sale, by (2) the product
of (I) the Market Price and (II) the number of shares of Common Stock
Deemed Outstanding (as defined below) immediately after such issue or
sale; provided that no adjustment shall be made if such adjustment would
result in an increase of the Exercise Price in effect immediately prior
to such issuance or sale. For purposes of determining the adjusted
Exercise Price under this Section 6(h)(i), the following shall be
applicable:
(A) Issuance of Options. If at any time prior to the
one year anniversary of the Reset Date, the Company in any manner
grants any rights or options to subscribe for or to purchase Common
Stock or any stock or other securities convertible into or exchangeable
for Common Stock (such rights or options being herein called "Options"
and such convertible or exchangeable stock or securities being herein
called "Convertible Securities") and the price per share for which
Common Stock is issuable upon the exercise of such Options or upon
conversion or exchange of such Convertible Securities is less than the
Exercise Price in effect immediately prior to such grant, then the
Exercise Price shall be adjusted to equal the price per share for which
Common Stock is issuable upon the exercise of such Options or upon the
conversion or exchange of such Convertible Securities. If at any time
prior to the one year anniversary of the Reset Date, the Company in any
manner grants any Options (other than Underlying Shares, shares of
Common Stock deemed to have been issued by the Company in connection
with an Approved Stock Plan (as defined below) or shares of Common
Stock issuable upon the exercise of any options or warrants outstanding
on the date hereof and listed in Schedule 2.1(c) of the Purchase
Agreement and the price per share for which Common Stock is issuable
upon exercise of such Options or upon the conversions or exchange of
such Convertible Securities is (A) greater than the Exercise Price in
effect immediately prior to such issuance or sale and (B) less Market
Price, then immediately after such issue or sale, the Exercise Price
then in effect shall be reduced to an amount equal to the product of
(x) the Exercise Price in effect immediately prior to such grant and
(y) the quotient determined by dividing (1) the sum of (I) the product
of (A) the Market Price and (B) the number of shares of Common Stock
Deemed Outstanding (as defined below) immediately prior to such issue
or sale, and (II) the consideration, if any, received by the Company
upon such issue, sale, grant, exercise, conversion or exchange, by (2)
the product of (I) the Market Price and (II) the number of shares of
Common Stock Deemed Outstanding (as defined below) immediately after
such grant; provided that no adjustment shall be made if such
adjustment would result in an increase of the Exercise Price in effect
immediately prior to such grant. No adjustment of the Exercise Price
shall be made upon the actual issuance of such Common Stock or of such
Convertible Securities upon the exercise of such Options or upon the
actual issuance of such Common Stock upon conversion or exchange of
such Convertible Securities.
(B) Issuance of Convertible Securities. If at any
time prior to the one year anniversary of the Reset Date, the Company
in any manner issues or sells any Convertible Securities and the price
per share for which Common Stock is issuable upon such conversion or
exchange is less than the Exercise Price in effect immediately prior to
issuance or sale, then the Exercise Price shall be adjusted to equal
the price per share for which Common Stock is issuable upon the
conversion or exchange of such Convertible Securities. If at any time
prior to the one year anniversary of the Reset Date, the Company issues
or sells, or is deemed to have issued or sold, any Convertible
Securities and the price per share for which Common Stock issuable upon
conversion or exchange of such Convertible Securities is (A) greater
than the Exercise Price in effect immediately prior to such issuance or
sale and (B) less the Market Price, then immediately after such issue
or sale, the Exercise Price then in effect shall be reduced to an
amount equal to the product of (x) the Exercise Price in effect
immediately prior to such issue or sale and (y) the quotient determined
by dividing (1) the sum of (I) the product of (A) the Market Price and
(B) the number of shares of Common Stock Deemed Outstanding (as defined
below) immediately prior to such issue or sale, and (II) the
consideration, if any, received by the Company upon such issue or sale,
by (2) the product of (I) the Market Price and (II) the number of
shares of Common Stock Deemed Outstanding (as defined below)
immediately after such issue or sale; provided that no adjustment shall
be made if such adjustment would result in an increase of the Exercise
Price in effect immediately prior to such issuance or sale. No
23
adjustment of the Exercise Price shall be made upon the actual issue of
such Common Stock upon conversion or exchange of such Convertible
Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment of
the Exercise Price had been or are to be made pursuant to other
provisions of this Section 6(h)(i), no further adjustment of the
Exercise Price shall be made by reason of such issue or sale.
(C) Change in Option Price or Rate of Conversion. If
there is a change at any time in (i) the purchase price provided for in
any Options, (ii) the additional consideration, if any, payable upon
the issue, conversion or exchange of any Convertible Securities or
(iii) the rate at which any Convertible Securities are convertible into
or exchangeable for Common Stock, then the Exercise Price in effect at
the time of such change shall be readjusted to the Exercise Price which
would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or changed conversion rate, as the case may
be, at the time initially granted, issued or sold; provided that no
adjustment shall be made if such adjustment would result in an increase
of the Exercise Price then in effect.
(D) Certain Definitions. For purposes of determining
the adjusted Exercise Price under this Section 6(h)(i), the following
terms have meanings set forth below:
(I) "Approved Stock Plan" shall mean any
contract, plan or agreement which has been approved by the Board of
Directors of the Company, pursuant to which the Company's securities
may be issued to any employee, officer, director or consultant.
(II) "Common Stock Deemed Outstanding"
means, at any given time, the number of shares of Common Stock issued
and outstanding at such time, plus the number of shares of Common Stock
deemed to be outstanding pursuant to Sections 6(h)(i)(A) and 6(h)(i)(B)
hereof regardless of whether the Options or Convertible Securities are
actually exercisable at such time, but excluding any shares of Common
Stock issuable upon exercise of the Warrants.
(E) Effect on Exercise Price of Certain
Events. For purposes of determining
the adjusted Exercise Price under this
Section 6(h)(i), the following shall
be applicable:
(I) Calculation of Consideration Received.
If any Common Stock, Options or Convertible Securities are issued or sold or
deemed to have been issued or sold for cash, the consideration received therefor
will be deemed to be the net amount received by the Company therefor. In case
any Common Stock, Options or Convertible Securities are issued or sold for a
consideration other than cash, the amount of the consideration other than cash
received by the Company will be the fair value of such consideration, except
where such consideration consists of securities, in which case the amount of
consideration received by the Company will be the arithmetic average of the Per
Share Market Values of such security for the five (5) consecutive Trading Days
immediately preceding the date of receipt. In case any Common Stock, Options or
Convertible Securities are issued to the owners of the non-surviving entity in
connection with any merger in which the Company is the surviving entity the
amount of consideration therefor will be deemed to be the fair value of such
portion of the net assets and business of the non-surviving entity as is
attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair value of any consideration other than cash or securities
will be determined jointly by the Company and the registered owners of a
majority of the Underlying Shares of Tranche A Warrants and the Tranche B
Warrants then outstanding. If such parties are unable to reach agreement within
ten (10) days after the occurrence of an event requiring valuation (the
"Valuation Event"), the fair value of such consideration will be determined
within forty-eight (48) hours of the tenth (10th) day following the Valuation
Event by an Appraiser selected by the Company. The determination of such
Appraiser shall be binding upon all parties absent manifest error.
(II) Integrated Transactions. In case any
Option is issued in connection with the issue or sale of other securities of the
24
Company, together comprising one integrated transaction in which no
specific consideration is allocated to such Options by the parties
thereto, the Options will be deemed to have been issued for an
aggregate consideration of $.01.
(III) Treasury Shares. The number of shares of Common
Stock outstanding at any given time does not include shares owned or
held by or for the account of the Company, and the disposition of any
shares so owned or held will be considered an issue or sale of Common
Stock.
(IV) Record Date. If the Company takes a record of
the holders of Common Stock for the purpose of entitling them (1) to
receive a dividend or other distribution payable in Common Stock,
Options or in Convertible Securities or (2) to subscribe for or
purchase Common Stock, Options or Convertible Securities, then such
record date will be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution
or the date of the granting of such right of subscription or purchase,
as the case may be.
(ii) Certain Events. If any event occurs of the type
contemplated by the provisions of Section 6(h)(i)
(subject to the exceptions stated therein) but not
expressly provided for by such provisions (including,
without limitation, the granting of stock
appreciation rights, phantom stock rights or other
rights with equity features), then the Company's
Board of Directors will make an appropriate
adjustment in the Exercise Price so as to protect the
rights of the Registered Holder, or assigns, of this
Warrant; provided, however, that no such adjustment
will increase the Exercise Price as otherwise
determined pursuant to this Section 6(h).
7. Call Option. If, at any time during the Exercise Period, the Per
Share Market Value equals or exceeds an amount equal to 200% of the
Exercise Price at such time for a period of 15 consecutive business
days, then the Company shall have the right during the 6 month period
commencing on the first business day after such 15-day period, upon
written notice to the Registered Owner, to cause such Registered Owner
to exercise this Warrant in full by delivering to the Company the
Exercise Price in cash, the Warrant Exercise Form and this Warrant as
specified in section 5 hereof within the period of ten (10) business
days commencing on the Registered Owner's receipt of such notice;
provided, however, that the Company can exercise the right specified in
this section 7 only if, in addition to the conditions specified herein,
there is an effective registration statement under the Securities Act
relating to the shares of Common Stock issuable upon the exercise of
this Warrant so that the Registered Owner may freely offer and sell
such shares of Common Stock without further registration under the
Securities Act or compliance with Rule 144 thereunder or any other
exemptive provision or rule thereunder so long as the Registered Owner
is not an Affiliate of the Company.
8. Definitions. Capitalized terms used herein and not otherwise defined
herein shall have the meanings given to such terms in the Purchase Agreement. As
used in this Warrant, the following terms have the following meanings:
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," controlling" and "controlled" have meanings
correlative to the foregoing.
"Appraiser" has the meaning assigned to it in section 6(c) hereof.
25
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the state of
New York generally are authorized or required by law or other government actions
to close.
"Common Stock" means the shares of the Company's Common Stock, par
value $.0001 per share.
"Company" means Digital Courier Technologies, Inc., a Delaware
corporation.
"Convertible Securities" has the meaning assigned to it in section
6(h)(i)(A) hereof.
"Exercise Period" has the meaning assigned to it the section 4 hereof.
"Exercise Price" has the meaning assigned to it in section 3 hereof
"Market Price" has the meaning assigned to it in section 6(h)(i)
hereof.
"Options" has the meaning assigned to it in section 6(h)(i)(A) hereof.
"Per Share Market Value" means on any particular date (i) the closing
bid price per share of the Common Stock on such date on the National Market
System of the Nasdaq Stock Market or other registered national stock exchange on
which the Common Stock is then listed or if there is no such price on such date,
then the closing bid price on such exchange or quotation system on the date
nearest preceding such date, or (ii) if the Common Stock is not listed then on
the National Market System of the Nasdaq Stock Market or any registered national
stock exchange, the closing bid price for a share of Common Stock in the
over-the-counter market, as reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (iii) if the Common
Stock is not then publicly traded the fair market value of a share of Common
Stock as determined by an Appraiser selected in good faith by the holder of this
Warrant; provided, however, that the Company, after receipt of the determination
by such Appraiser, shall have the right to select an additional Appraiser, in
which case, the fair market value shall be equal to the average of the
determinations by each such Appraiser; and provided, further that all
determinations of the Per Share Market Value shall be appropriately adjusted for
any stock dividends, stock splits or other similar transactions during such
period.
"Purchase Agreement" means that certain Securities Purchase Agreement,
dated November 23, 1998, among the Company, ▇▇▇▇▇ ▇▇▇▇▇▇▇ Strategic Growth Fund,
Ltd. and ▇▇▇▇▇ ▇▇▇▇▇▇▇ Strategic Growth Fund, L.P.
"Redemption Event" has the meaning assigned to it in section 6(f)
hereof.
"Registered Owner" means ▇▇▇▇▇ ▇▇▇▇▇▇▇ Strategic Growth Fund, Ltd or
such other Person as shown on the records of the Company as being the registered
owner of this Warrant.
"Registration Rights Agreement" means that certain Registration Rights
Agreement, dated November 23, 1998, among the Company, ▇▇▇▇▇ ▇▇▇▇▇▇▇ Strategic
Growth Fund, Ltd. and ▇▇▇▇▇ ▇▇▇▇▇▇▇ Strategic Growth Fund, L.P.
"Trading Day(s)" means any day on which the primary market on which
shares of Common Stock are listed is open for trading.
26
"Tranche A Warrant" means the warrant issuable at the Tranche A
Closing.
"Tranche B Warrant" means the warrant issuable at the Tranche B Closing.
"Underlying Shares" has the meaning assigned to it in section 2.1(d) of
the Purchase Agreement.
9. Registration Rights. The Company will undertake the registration of
the Common Stock into which such Warrants are exercisable at such times and upon
such terms pursuant to the provisions of the Registration Rights Agreement dated
November 23, 1998 by and among the Company, ▇▇▇▇▇ ▇▇▇▇▇▇▇ Strategic Growth Fund,
L.P. and ▇▇▇▇▇ ▇▇▇▇▇▇▇ Strategic Growth Fund, Ltd.
10.Reservation of Underlying Shares. The Underlying Shares are and
will at all times hereafter continue to be duly authorized and reserved for
issuance pursuant to this Warrant.
11.Notices. All notices or other communications required hereunder
shall be in writing and shall be sent either (i) by courier, or (ii) by telecopy
as well as by registered or certified mail, and shall be regarded as properly
given in the case of a courier upon actual delivery to the proper place of
address; in the case of telecopy, on the day following the date of transmission
if properly addressed and sent without transmission error to the correct number
and receipt is confirmed by telephone within 48 hours of the transmission; in
the case of a letter for which a telecopy could not be successfully transmitted
or receipt of which could not be confirmed as herein provided, three days after
the registered or certified mailing date if the letter is properly addressed and
postage prepaid; and shall be regarded as properly addressed if sent to the
parties or their representatives at the addresses given below:
To the Company: Digital Courier Technologies, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
To the holder: ▇▇▇▇▇ ▇▇▇▇▇▇▇ Strategic Growth Fund, Ltd.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or such other address as any of the above may have furnished to the other
parties in writing by registered mail, return receipt requested.
[signature page follows]
27
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer as of the date first set forth above.
DIGITAL COURIER TECHNOLOGIES, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
28
EXHIBIT A
Warrant Exercise Form
---------------------
TO: DIGITAL COURIER TECHNOLOGIES, INC.
The undersigned hereby: (1) irrevocably subscribes for and offers to
purchase _______ shares of Common Stock of Digital Courier Technologies, Inc.,
pursuant to Warrant No. ___ heretofore issued to ___________________ on
____________, 1998; (2) encloses a payment of $__________ for these shares at a
price of $____ per share (as adjusted pursuant to the provisions of the
Warrant); and (3) requests that a certificate for the shares be issued in the
name of the undersigned and delivered to the undersigned at the address
specified below.
Date: -------------------------
Investor Name: -------------------------
Taxpayer Identification
Number: -------------------------
By: -------------------------
Printed Name: -------------------------
Title: -------------------------
Address: -------------------------
-------------------------
-------------------------
Note: The above signature should correspond exactly with
the name on the face of this Warrant Certificate or
with the name of assignee appearing in assignment
form below.
AND, if said number of shares shall not be all the shares purchasable under the
within Warrant, a new Warrant Certificate is to be issued in the name of said
undersigned for the balance remaining of the shares purchasable thereunder less
any fraction of a share paid in cash and delivered to the address stated above.
