<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT
Under Section 13 or 15(d) of the Securities Exchange Act of 1934
FOR THE QUARTER ENDED MARCH 31, 2000
Commission File No. 0-30124
SONUS COMMUNICATION HOLDINGS, INC.
A Delaware corporation
IRS Employer Identification No. 54-1939577
1600 Wilson Blvd, Suite 1008, Arlington, VA 22209
Telephone - (703) 527- 8860
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---------- --------
Common stock $.0001 par value,
7,098,071 shares outstanding
as of May 10, 2000
<PAGE> 2
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
SONUS COMMUNICATION HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 2000 1999
-------------- -----------
(unaudited) (audited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $692,304 $ 234,688
Accounts receivable, net 731,144 31,936
Installment sales receivable, net of unearned
profit of $105,286 at 3/31/00 and $106,134 at 12/31/99,
respectively 185,936 187,430
Loan receivable - 150,000
Prepaid expenses 323,579 166,572
---------- ----------
TOTAL CURRENT ASSETS 1,932,963 770,626
PROPERTY AND EQUIPMENT, net 1,140,873 721,905
EXCESS OF PURCHASE PRICE OVER ASSETS ACQUIRED, net 4,514,058 -
OTHER ASSETS 225,839 62,062
---------- ----------
TOTAL ASSETS $7,813,733 $1,554,593
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $1,562,363 $ 382,045
Vendor equipment payable - 364,666
Lease obligation and note payable, current portion 350,979 87,399
Due to shareholders 71,000 113,000
Accrued expenses 330,104 42,510
---------- ----------
TOTAL CURRENT LIABILITIES 2,314,446 989,620
Long-term debt, net of current portion 940,390 109,550
Other noncurrent liabilities 43,000 43,000
---------- ----------
TOTAL LIABILITIES 3,297,836 1,142,170
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.0001 par value 710 460
Additional paid-in capital 7,498,381 2,476,488
Subscriptions received - 135,000
Accumulated deficit (2,983,194) (2,199,525)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 4,515,897 412,423
---------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $7,813,733 $1,554,593
========== ===========
</TABLE>
See notes to condensed consolidated financial statements
-1-
<PAGE> 3
SONUS COMMUNICATION HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31,
-----------------------
2000 1999
---- ----
<S> <C> <C>
OPERATING INCOME:
Telecommunication services $ 165,475 $ 237,261
Installment sales 2,342 5,177
------------- -------------
Total 167,817 242,438
------------- -------------
OPERATING EXPENSES
Direct expenses 372,394 383,766
General & administrative 589,542 113,133
Merger related costs - 172,491
-------------- -------------
961,936 669,390
LOSS FROM OPERATIONS (794,119) (426,952)
OTHER INCOME
Interest income, net 10,450 461
-------------- -------------
LOSS BEFORE INCOME TAXES (783,669) (426,491)
Provision for income taxes - -
-------------- -------------
NET LOSS $ (783,669) $ (426,491)
============== =============
Basic and diluted loss per common share $ (0.13) $ (0.12)
============== =============
Shares used in per share calculation 5,970,963 3,584,980
============== =============
</TABLE>
See notes to condensed consolidated financial statements
-2-
<PAGE> 4
SONUS COMMUNICATION HOLDINGS, INC. AND SUBSIDIARIES
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Common Stock
------------------ Paid-in Subscription Accumulated
Shares Amount Capital Received Deficit Total
------- ------ --------- -------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1999 4,598,850 $ 460 $2,476,488 $ 135,000 $(2,199,525) $ 412,423
Sale of common shares 1,433,364 143 1,782,429 (135,000) 1,647,572
Shares issued for acquisition of
Empire One Telecommunications, Inc. 1,065,857 107 3,197,464 3,197,571
Waiver of compensation payable 42,000 42,000
Net loss - - - - (783,669) (783,669)
--------- -------- ---------- --------- --------- ---------
Balance March 31, 2000 7,098,071 $ 710 $7,498,381 $ - $(2,983,194) $ 4,515,897
========= ======== ========== ========= ============ ===========
</TABLE>
See notes to condensed consolidated financial statements
-3-
<PAGE> 5
SONUS COMMUNICATION HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Quarter ended March 31,
-----------------------
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(783,669) $ (426,491)
Adjustments to reconcile net loss to net cash (used in)
operating activities:
Depreciation 49,326 16,537
Common shares issued for services rendered - 90,000
Time contributed in lieu of salary 42,000 -
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (37,144) 19,865
Decrease in installment sales receivable 1,494 3,301
(Increase) in prepaid expenses (76,121) (7,366)
Increase in accounts payable 25,215 34,922
(Decrease) in vendor equipment payable - (34,627)
Increase in accrued expenses 9,062 37,878
----------- ----------
NET CASH USED IN OPERATING ACTIVITIES (769,837) (265,981)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (16,913) (323,930)
Investment in purchased business, net of cash acquired (334,298) -
Deposits for equipment and circuits - (33,062)
---------- -----------
NET CASH USED IN INVESTING ACTIVITIES (351,211) (356,992)
CASH FLOWS FROM FINANCING ACTIVITIES:
Private placement of common shares, net 1,647,572 626,634
Repurchase of founder shares (42,000) -
Payment of lease obligation for network equipment (26,908) -
----------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,578,664 626,634
NET INCREASE IN CASH AND CASH EQUIVALENTS 457,616 3,661
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 234,688 1,002
---------- ----------
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR $ 692,304 $ 4,663
========== ==========
SUPPLEMENTAL INFORMATION
Cash payments for interest $ - $ -
========== ==========
Cash payments for taxes $ - $ -
========== ==========
</TABLE>
The Company issued 1,065,857 shares of its common stock in exchange for all the
outstanding shares of Empire One Telecommunications in a stock-for-stock
transaction recorded under the purchase method of accounting. See footnote 3 for
more details.
See notes to condensed consolidated financial statements
-4-
<PAGE> 6
SONUS COMMUNICATION HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months
Ended March 31, 2000 and 1999
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements apply to the
Company and its wholly-owned subsidiaries and reflect all adjustments which
are, in the opinion of management, necessary for a fair presentation of the
Company's consolidated financial position as of March 31, 2000 and the
results of operations and changes in cash flows for the three months ended
March 31, 2000 and 1999. The results of operations for such periods,
however, are not necessarily indicative of the results to be expected for a
full fiscal year. This Form 10-QSB should be read in conjunction with the
Form 10-KSB for the fiscal year ended December 31, 1999. The financial
statements as of and for the three months ended March 31, 2000 have been
reviewed by our auditors.
2. FINANCING
In January, 2000, the Company completed its offering of 1,851,504 shares
of common stock at $1.35 per share. The aggregate offering price was $2.5
million with the Company realizing $2,246,000 in cash proceeds. The
offering was completed in three pieces with the first closing occurring in
November 1999 for 418,140 shares resulting in gross proceeds of $564,000
and net proceeds to the Company of $502,000. The second closing occurred
on January 5, 2000 for 1,088,939 shares and net proceeds to the company of
$1,327,000. The final closing occurred on January 27, 2000 for 344,425
shares resulting in gross proceeds of $465,000 and net proceeds to the
Company of $417,000. The difference between gross proceeds and net
proceeds reflects expenses of approximately $11,000 with the remaining
being the cash portion of the investment banking fees. At December 31,
1999, the Company had received $135,000 of the proceeds which were shown
as subscriptions received.
L. Flomenhaft & Co. ("Flomenhaft") acted as the Company's investment banker
for this financing. For the services rendered, Flomenhaft and a nominee of
Flomenhaft received cash fees of approximately $180,000 plus five-year
common stock purchase warrants to acquire a total of 257,762 shares of the
Company's common stock at an exercise price of $1.35 per share. The per
share exercise price of the warrants was set at the same value as the
common shares sold in the offering.
3. ACQUISITION
On November 15, 1999, the Company signed a definitive merger agreement to
acquire Empire One Telecommunications, Inc. ("EOT") subject to regulatory
and EOT shareholder approval. EOT is a domestic Competitive Local Exchange
Carrier ("CLEC"), Interexchange Carrier and Internet Service Provider that
offers a full range of services including local, long-
-5-
<PAGE> 7
distance, internet access and web hosting services to ethnic communities
located mostly in New York City and California. The customer base has
traditionally been mostly Chinese and Irish groups with EOT launching a
campaign in March 2000 aimed at the Russian speaking communities in the
New York metropolitan area.
To acquire EOT, the Company agreed to exchange 1,065,857 shares of common
stock in exchange for all the outstanding common shares of EOT plus
assumption of debt. The shares were valued at $3.00 per share. Shareholder
approval and all regulatory approvals were received during the first
quarter of 2000 and the merger was completed at the end of March 2000. The
acquisition was accounted for under the purchase accounting rules and as a
result, the balance sheet of EOT has been consolidated with the Company as
of March 31, 2000. The Company recognized the difference between the
purchase price and the net assets of EOT as Excess Purchase Price Over Net
Assets Acquired on the balance sheet. The operations of EOT will be
consolidated with those of the Company beginning April 1, 2000. The
proforma results of operations for each of the quarters ended March 31,
2000 and 1999, respectively, are shown below. These statements do not
purport to represent what the actual results of operations would have been
for the Company had the merger been consummated at the beginning of the
period, is not indicative of actual results and does not purport to
represent what the results of operations of the combined entity may be in
the future.
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31, 2000
(Unaudited)
Historical
--------------------------------
Sonus EOT Adjustments Combined
--------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Revenues $167,817 $1,219,705 $ - $1,387,522
-------- ---------- ---------- ----------
Operating expenses:
Direct expenses 372,394 946,389 1,318,783
General & administrative 589,542 770,364 1,359,906
Amortization of cost over
assets acquired - - 71,550 71,550
---------- ---------- ---------- ----------
961,936 1,716,753 71,550 2,750,239
---------- ---------- ---------- -----------
Loss from operations (794,119) (497,048) (71,550) (1,362,717)
Other income (expenses) 10,450 (27,475) - (17,025)
---------- ----------- ---------- -----------
Net loss $(783,669) $(524,523) $ (71,550) $(1,379,742)
========== ========== ========== ============
</TABLE>
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<PAGE> 8
QUARTER ENDED MARCH 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Historical
--------------------------------
Sonus EOT Adjustments Combined
------ ---- ----------- --------
<S> <C> <C> <C> <C>
Revenues $242,438 $1,195,832 $ - $1,438,270
-------- ---------- ---------- ----------
Operating expenses:
Direct expenses 383,766 645,155 1,028,921
General & administrative 113,133 519,260 632,393
Amortization of cost over assets acquired - - 71,550 71,550
------------ ---------- ---------- ----------
496,899 1,164,415 71,550 1,732,864
------------ ---------- ---------- ----------
Income (loss) from operations (254,461) 31,417 (71,550) (294,594)
Other income (expenses) (172,030) (10,573) - (182,603)
------------ --------- ---------- ---------
Net income (loss) $(426,491) $ 20,844 $ (71,550) $(477,197)
============ ========== ========== =========
</TABLE>
-7-
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
The Private Securities Litigation Reform Act provides a "safe harbor" for
forward-looking statements. Certain statements included in this Form 10-QSB are
forward-looking and are based on the Company's current expectations and are
subject to a number of risks and uncertainties that could cause actual results
to differ materially from results expressed or implied in any forward-looking
statements made by, or on behalf of the Company. The Company assumes no
obligation to update any forward-looking statements contained herein or that may
be made from time to time by, or on behalf of, the Company.
For the first quarter of 2000, revenues were $168,000 compared to $242,000 for
the first quarter of 1999. At the end of the fourth quarter of 1999, the Company
made the decision due in part to increased competition resulting in declining
margins in its international long distance business, to focus its resources
primarily on developing the ethnic markets of Empire One Telecommunications.
During the first quarter, fewer resources were devoted to the international long
distance business that the Company had been focusing on during 1999. As a
result, the Company became less competitive in its international long distance
business and on the Republic of Georgia circuit in particular. This resulted in
revenue on the Georgia circuit of approximately $55,000 for the first quarter of
2000. This route was the only revenue generating circuit for the first quarter
of 1999. The Company has continued to experience declines in the price it is
able to charge customers of its international long distance business.
During the fourth quarter of 1999, the Company sporadically carried traffic on
its newly established circuit into Southwest Asia and because of the political
turmoil, the circuit was not operational at the end of 1999. The circuit was
partially re-established late in March 2000 and additional capacity was
re-established during the second quarter of 2000. The result of this has been to
generate only minimal revenue from this circuit during the first quarter of
2000.
Direct expenses were $373,000 for the first quarter of 2000 compared to $384,000
for the first quarter of 1999. Approximately $132,000, or 35%, of the 2000
expenses were call termination costs and $146,000, or 38%, is for satellite
utilization fees which are attributable to carrying traffic. The satellite
utilization fees are incurred even if there is no network traffic while the call
termination fees vary directly with the amount of network traffic carried.
General and Administrative expenses were $590,000 for the first quarter of 2000
compared to $113,000 for the first quarter of 1999. The Company began adding
additional personnel during the first quarter of 1999 in order to expand the
Company's network and to support the administrative needs of being a public
company. At the end of the first quarter of 1999, there were five employees. For
the first quarter of 2000, there were 10 employees. The increase in salary
expense accounts for $121,000 of the increase in expenses. During the third
quarter of 1999, the Company hired an investor relations firm and also agreed to
pay its investment banker a monthly fee as part of its fee for the services
being performed. These two items together account for an additional $104,000 of
the increase. Legal and accounting fees were
-8-
<PAGE> 10
$112,000 higher in the 2000 first quarter as compared to 1999 first quarter as
a result of work associated with the preparation of a registration statement
relating to common shares originally issued during 1999 and the acquisition of
Empire One Telecommunications, Inc. and for the fees associated with the annual
audit. Additionally, there was an increase in travel and office expenses that
accounts for the remaining difference.
In the first quarter of 1999, the Sonus Communications merger with and into The
Park Group (see the Company's Form 10-KSB filed March 29, 2000 for details) was
completed. The costs associated with this were shown as merger related expenses
and amounted to $172,000 in the first quarter of 1999. There were no equivalent
expenses in 2000.
In January 2000, the Company sold common shares that raised $1.7 million in
cash. This was invested when not needed for operations and generated $10,000 of
interest income in the quarter. There was no equivalent investment in the first
quarter of 1999.
As a result of the above, the Company lost $784,000 in the first quarter of 2000
compared to $424,000 for 1999.
LIQUIDITY
The Company has limited cash resources. A failure to obtain financing within
the next two weeks will have a material adverse effect on the Company, its
business, financial condition and results of operations, and will impair the
Company's ability to continue as a going concern. There can be no assurances
that financing can be obtained within the next two weeks, or as to the terms
(if any) on which financing could be obtained, or that the Company can continue
in business thereafter if such financing is not obtained.
In January 2000, the Company completed the financing begun in November 1999 by
selling 1,433,364 shares of its common stock at $1.35 per share resulting in net
proceeds to the Company of $1,647 000. See the Footnotes to Consolidated
Financial Statements for more details related to this transaction. L. Flomenhaft
& Co, Inc., in conjunction with Hudson Allen & Co. acted as investment bankers
for this offering and received cash fees of $179,704 (of which $123,304 relates
to the January 2000 closings) and common stock purchase warrants to purchase
257,762 shares (of which 195,042 relate to the January 2000 closings) of the
Company's common stock at the per share price of the offering of $1.35 per
share.
At the time the above offering was conducted, it was anticipated that
additional financing would be needed. As of the end of April 2000, no
additional financing had been completed although as discussed below,
discussions were on-going with potential financing sources.
At the end of March 2000, the Company had received all approvals, including
regulatory and shareholder approvals, necessary to complete the acquisition of
Empire One Telecommunications. The purchase price of $3,197,451 was paid by
issuing 1,065,817 shares of the Company's common stock valued at $3.00 per
share. The acquisition was recorded using the purchase method of accounting and
as a result, the Company recorded the difference between the net assets of EOT
and the purchase price as an intangible asset called Excess Purchase Price Over
Net Assets Acquired.
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<PAGE> 11
This is expected to be amortized over 15 years resulting in an annual non-cash
amortization of $286,000.
As noted above, the Company is in discussions with potential investors
to invest in the Company. If successful, the Company expects that these
investors may invest between $2 million and $4 million in the Company. As of
the end of April, negotiations on the terms of any investment had not been
completed. There is no assurance that the Company will be able to reach
agreement with these potential investors or that the terms will be acceptable
to the Company.
Empire One Telecommunications sub-leases its current facility from a company
that is in bankruptcy. Although EOT has been paying the rent, EOT has been
notified that the lease is being terminated and that EOT must vacate the space.
EOT is currently trying to negotiate enough time to allow EOT to relocate the
business to another facility. The expectation is that EOT will have to be out of
its current space no later than July 31, 2000. EOT has located adequate space
within New York City and is currently negotiating the lease. One of the
provisions is for a security deposit of approximately $271,000. Until financing
is obtained, the Company does not have the ability to fund this security
deposit. There are no assurances that the Company will be able to complete the
negotiations for the office space in time to move the operations before having
to vacate the current space or that financing can be completed in time to make
the required security deposit or at all.
The Company anticipates that in order to grow the subscriber base of EOT, and to
provide for the necessary personnel and infrastructure to support such growth,
the Company will require substantial additional funds. It is anticipated that
the Company will have to continue to raise funds in the public and private
markets to have enough cash to pay for this expected expansion and to continue
to fund current operations. There is no assurance that the Company will be able
to raise additional funds or that any public offering of its securities will be
made. If the financing noted above is not received on a timely basis, the
operations of the Company may be substantially impaired.
Part II. OTHER INFORMATION
Item 2. CHANGES IN SECURITIES
In January 2000, the Company sold a total 1,433,364 shares of its common stock
in a private placement to accredited investors through L. Flomenhaft & Co in
conjunction with Hudson Allen & Co. who acted as investment bankers. As a result
of such sales, the investment bankers received a total of $123,304 and 195,042
Common Stock purchase warrants. The Common Stock purchase warrants are
exercisable at $1.35 per share, the price at which the common shares were sold.
The sale of the common shares was exempt from registration under the Securities
Act pursuant to Section 4(2) of the Securities Act and under Rule 506 of
Regulation D promulgated under the Securities Act. The Company relied upon
representations and warranties made by investors in the subscription agreements
executed by them
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<PAGE> 12
On March 29, 2000, the Company completed the acquisition of Empire One
Telecommunications, Inc. (EOT) by issuing 1,065,857 shares of its common stock
in exchange for all the outstanding common shares of EOT. The transaction was
exempt pursuant to Section 4(2) of the Securities Act and under Rule 505 of
Regulation D promulgated under the Securities Act. The Company relied upon
representations and warranties made by certain shareholders of EOT and upon
Statements of Accredited Investors signed by certain of the shareholders and
delivered to the Company at the time of the merger. Ferris, Baker Watts, Inc.
acting as the investment banker received $100,000 plus a Common Stock Purchase
Warrant to acquire 323,500 shares of the Company's common stock.
As part of the transaction, the three founders of EOT each received common stock
purchase options to purchase 150,000 shares of the Company's common stock. The
options are exercisable at $3.00 per share and vest over three years.
-11-
<PAGE> 13
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
Exhibit No. Description
----------- -----------
2.1 Agreement and Plan of Merger by and among the
Company, Empire One Telecommunications, Inc. and EOT
Acquisition Corporation dated November 27, 1999,
previously filed as Exhibit 2.3 to the registration
statement on Form SB-2 filed on December 7, 1999, as
amended by Amendment No. 1 filed on March 22, 2000,
incorporated herein by reference.
3.1 Certificate of Merger of Empire One
Telecommunications into EOT Acquisition Corporation
filed with the Secretary of State of the State of
Delaware on March 29, 2000.
3.2 Certificate of Merger of Empire One
Telecommunications, Inc. with and into EOT
Acquisition Corporation filed with the Department of
State of the State of New York on March 29, 2000.
4.1 Placement Agent Warrants issued to L. Flomenhaft &
Co., Inc. dated January 5, 2000.
4.2 Placement Agent Warrants issued to Hudson Allen &
Co. dated January 5, 2000.
4.3 Placement Agent Warrants issued to L. Flomenhaft &
Co., Inc. dated January 27, 2000.
4.4 Warrants issued to Ferris Baker Watts, Inc. dated
March 29, 2000.
4.5 Registration Rights Agreement between the Company
and certain shareholders of Empire One
Telecommunications, Inc.
10.1 Collateral Note made as of March 29, 2000 by the
Company in favor of Citizens Telecommunications
Company
10.2 Security Agreement dated March 29, 2000 among the
Company, Empire One Telecommunications, Inc. and
Citizens Telecommunications Company
10.3 Consent and Release Agreement dated March 29, 2000
among the Company, EOT Acquisition Corporation,
Empire One Telecommunications, Inc., Citizens
Telecommunications Company, W. Todd Coffin and John
K. Friedman
15 Auditors Letter
27 Financial Data Schedule
REPORTS ON FORM 8-K
NONE
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
SONUS COMMUNICATION HOLDINGS, INC
---------------------------------
(Registrant)
DATE: MAY 17, 2000 BY: /s/ W. Todd Coffin
-----------------------------
W. Todd Coffin
President and Chief Executive Officer
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<PAGE> 14
DATE: MAY 17, 2000 BY: /s/ Richard D. Rose
-----------------------
Richard D. Rose
Chief Financial Officer
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<PAGE> 15
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
2.1 Agreement and Plan of Merger by and among the
Company, Empire One Telecommunications, Inc. and EOT
Acquisition Corporation dated November 27, 1999,
previously filed as Exhibit 2.3 to the registration
statement on Form SB-2 filed on December 7, 1999, as
amended by Amendment No. 1 filed on March 22, 2000,
incorporated herein by reference.
3.1 Certificate of Merger of Empire One
Telecommunications into EOT Acquisition Corporation
filed with the Secretary of State of the State of
Delaware on March 29, 2000.
3.2 Certificate of Merger of Empire One
Telecommunications, Inc. with and into EOT
Acquisition Corporation filed with the Department of
State of the State of New York on March 29, 2000.
4.1 Placement Agent Warrants issued to L. Flomenhaft &
Co., Inc. dated January 5, 2000.
4.2 Placement Agent Warrants issued to Hudson Allen &
Co. dated January 5, 2000.
4.3 Placement Agent Warrants issued to L. Flomenhaft &
Co., Inc. dated January 27, 2000.
4.4 Warrants issued to Ferris Baker Watts, Inc. dated
March 29, 2000.
4.5 Registration Rights Agreement between the Company and
certain shareholders of Empire One
Telecommunications, Inc.
10.1 Collateral Note made as of March 29, 2000 by the
Company in favor of Citizens Telecommunications
Company
10.2 Security Agreement dated March 29, 2000 among the
Company, Empire One Telecommunications, Inc. and
Citizens Telecommunications Company
10.3 Consent and Release Agreement dated March 29, 2000
among the Company, EOT Acquisition Corporation,
Empire One Telecommunications, Inc., Citizens
Telecommunications Company, W. Todd Coffin and John
K. Friedman
15 Auditors Letter
27 Financial Data Schedule
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<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF MERGER
OF
EMPIRE ONE TELECOMMUNICATIONS, INC.
with and into
EOT ACQUISITION CORPORATION
Pursuant to Section 252(c) of the General Corporation Law of the State
of Delaware, EOT Acquisition Corporation, Sonus Communication Holdings, Inc.
and Empire One Telecommunications, Inc. do hereby certify to the following
facts relating to the merger of Empire One Telecommunications, Inc. with and
into EOT Acquisition Corporation (the "Merger"):
FIRST: That the name and state of incorporation of each constituent
corporation which is a party to the Merger is as follows:
<TABLE>
<CAPTION>
Name State of Incorporation
---- ----------------------
<S> <C>
Empire One Telecommunications, Inc. ("Merging Corporation") New York
EOT Acquisition Corporation ("Surviving Corporation") Delaware
</TABLE>
SECOND: That an agreement of merger (the "Merger Agreement")
by and among Merging Corporation, Surviving Corporation, Sonus Communication
Holdings, Inc. (the "Parent Corporation") and certain stockholders of the
Merging Corporation named in the Merger Agreement has been approved, adopted,
certified, executed and acknowledged by Parent Corporation and Surviving
Corporation in accordance with the requirements of subsection 252(c) of the
Delaware General Corporation Law (the "DGCL") and, pursuant to subsection
252(c) of the DGCL, by Merging Corporation in accordance with Section 904 of
the New York Business Corporation Law (the "NYBCL"). The stockholders of
Surviving Corporation have adopted the Merger Agreement pursuant to 251(c) of
the DGCL by unanimous written consent and, in accordance with Section 251(c) of
the DGCL, the stockholders of Merging Corporation have duly adopted the Merger
Agreement by the affirmative vote of the requisite number of stockholders at a
special meeting of stockholders duly called, noticed and held at which a quorum
of stockholders was at all times present and voting, as required under Section
903 of the NYBCL. The approval of stockholders of Parent Corporation was not
required under subsection 252(c) of the DGCL.
THIRD: The name of the surviving corporation in the Merger is EOT
Acquisition Corporation (the "Surviving Corporation").
FOURTH: The certificate of incorporation of EOT Acquisition
Corporation shall be the certificate of incorporation of the Surviving
Corporation; provided, however, that that the certificate of incorporation of
EOT Acquisition Corporation shall be amended hereby to delete Article 1 in its
entirety and replace in lieu thereof the following:
<PAGE> 2
1. NAME
The name of the corporation is Empire One Telecommunications,
Inc. (the "Corporation").
FIFTH: The executed Merger Agreement is on file at the principal
place of business of the Surviving Corporation, located at 1600 Wilson Blvd.,
Arlington, Virginia 22209.
SIXTH: A copy of the Merger Agreement will be furnished by the
Surviving Corporation, on request and without cost, to any stockholder of any
constituent corporation.
SEVENTH: The total number of authorized shares of capital stock of
the Merging Corporation prior to the Merger was 1,000,000 shares of common
stock, par value $.0001 per share.
[the rest of this page is intentionally left blank]
<PAGE> 3
IN WITNESS WHEREOF, Empire One Telecommunications, Inc., Sonus
Communication Holdings, Inc. and EOT Acquisition Corporation have caused this
Certificate of Merger to be duly executed in their corporate names as of this
29th day of March, 2000.
<TABLE>
<S> <C> <C>
[SEAL] EMPIRE ONE TELECOMMUNICATIONS, INC.,
a New York corporation
Attest: By: /s/ John Friedman
----------------------- -----------------------------------
Secretary President
[SEAL] EOT ACQUISITION CORPORATION,
a Delaware corporation
Attest: By: /s/ W. Todd Coffin
----------------------- -----------------------------------
Secretary President
[SEAL] SONUS COMMUNICATION HOLDINGS, INC.
a Delaware corporation
Attest: By: /s/ W. Todd Coffin
----------------------- -----------------------------------
Secretary President
</TABLE>
<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF MERGER
OF
EMPIRE ONE TELECOMMUNICATIONS, INCORPORATED
INTO
EOT ACQUISITION CORPORATION
UNDER SECTION 907 OF THE BUSINESS CORPORATION LAW
It is hereby certified, upon behalf of each of the constituent
corporations herein named, as follows:
FIRST: The Board of Directors of each of the constituent
corporations has duly adopted a plan of merger setting forth the terms and
conditions of the merger of said corporations.
SECOND: The name of the foreign constituent corporation, which
is to be the surviving corporation, and which is hereinafter sometimes referred
to as the "surviving corporation", is EOT Acquisition Corporation. The
jurisdiction of its incorporation is Delaware; and the date of its
incorporation is October 26, 1999. An Application for Authority in the State
of New York of the surviving constituent corporation to transact business as a
foreign corporation therein was filed with the Department of State of the State
of New York on December 22, 1999.
THIRD: The name of the domestic constituent corporation, which
is being merged into the surviving constituent corporation, and which is
hereinafter sometimes referred to as the "merging constituent corporation", is
Empire One Telecommunications, Incorporated. The date upon which its
certificate of incorporation was filed by the Department of State is March 22,
1994.
FOURTH: As to each constituent corporation, the plan of merger
sets forth the designation and number of outstanding shares of each class and
series, the specification of the classes and series entitled to vote on the
plan of merger, and the specification of each class and series entitled to vote
as a class on the plan of merger, as follows:
EMPIRE ONE TELECOMMUNICATIONS, INCORPORATED
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Number of Classes and series
Designation of each outstanding Designation of class and entitled to
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
outstanding class and series shares series of shares entitled to
of shares of each class vote vote as a class
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common shares 159,250 Not applicable Not applicable
- ------------------------------------------------------------------------------------------------------------
</TABLE>
EOT ACQUISITION CORPORATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Designation of each Number of Designation of class and Classes and series
outstanding class and series outstanding shares series of shares entitled to entitled to vote
of shares of each class vote as a class
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common shares 1,000 Not applicable Not applicable
- ------------------------------------------------------------------------------------------------------------
</TABLE>
FIFTH: The merger herein certified was authorized in respect
of the merging constituent corporation by the vote of holders of outstanding
shares of the corporation entitled to vote on the plan of merger, having not
less than the minimum requisite proportion of votes, all in accordance with
section 903 of the Business Corporation Law of the State of New York.
SIXTH: The merger herein certified is permitted by the laws
of the jurisdiction of incorporation of the surviving constituent corporation
and is in compliance with said laws.
SEVENTH: The surviving constituent corporation agrees that it
may be served with process in the State of New York in any action or special
proceeding for the enforcement of any liability or obligation of the surviving
constituent corporation, for the enforcement of any liability or obligation of
the surviving constituent corporation for which the surviving constituent
corporation is previously amenable to suit in the State of New York, and for
the enforcement, as provided in the Business Corporation Law of the State of
New York, of the right of shareholders of the merging constituent corporation
to receive payment for their shares against the surviving constituent
corporation.
EIGHTH: The surviving constituent corporation agrees that,
subject to the provisions of section 623 of the Business Corporation Law of the
State of New York, it will promptly pay to the shareholders of the merging
constituent corporation the amount, if any, to which they shall be entitled
under the provisions of the Business Corporation Law of the State of New York,
relating to the rights of shareholders to receive payment for their shares.
NINTH: The surviving constituent corporation hereby
designates the Secretary of State of the State of New York as its agent upon
whom process against it may be served in the manner set forth in paragraph (b)
of section 306 of the Business Corporation Law of the State of New York in any
action or special proceeding. The post office address without the State of New
York to which the said Secretary of State shall mail a copy of any process
against the surviving
8
<PAGE> 3
corporation served upon him or her is: EOT Acquisition Corporation, 1600 Wilson
Blvd., Suite 10008, Arlington, VA 22209.
TENTH: The merging domestic corporation hereby certifies that
all fees and taxes (including penalties and interest) administered by the
Department of Taxation and Finance of the State of New York which are now due
and payable by the domestic corporation have been paid and a cessation
franchise tax report (estimated or final) through the anticipated date of
merger has been filed by the domestic corporation. The said report, if
estimated, is subject to amendment. The surviving foreign corporation agrees
that it will within thirty days after the filing of the certificate of merger
file the cessation tax report, if an estimated report was previously filed, and
promptly pay to the Department of Taxation and Finance of the State of New York
all fees and taxes (including penalties and interest), if any, due to the said
Department of Taxation and Finance by the domestic corporation.
9
<PAGE> 4
Signed on March __, 2000.
EMPIRE ONE TELECOMMUNICATIONS,
INCORPORATED., a New York corporation
By: /s/ Brad Lewis
------------------------------------------
Name: Brad Lewis
Title: Executive Vice President
By: /s/ John K. Friedman
------------------------------------------
Name: John K. Friedman
Title: Secretary
EOT ACQUISITION CORPORATION,
a Delaware corporation
By: /s/ W. Todd Coffin
------------------------------------------
Name: W. Todd Coffin
Title: President & CEO
By: /s/ R. D. Rose
------------------------------------------
Name: Richard D. Rose
Title: Secretary
<PAGE> 1
EXHIBIT 4.1
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES OR BLUE SKY LAWS AND MAY
NOT BE OFFERED, SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED
EXCEPT (1) PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES WHICH IS EFFECTIVE UNDER THE ACT OR (2) PURSUANT TO AN
AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING TO THE
DISPOSITION OF SECURITIES AND (3) IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES AND BLUE SKY LAWS.
WARRANT
WARRANT TO PURCHASE ONE HUNDRED TEN THOUSAND FIVE HUNDRED AND THREE
(110,503) SHARES OF COMMON STOCK
OF SONUS COMMUNICATION HOLDINGS, INC.
DATE OF ISSUANCE: JANUARY 5, 2000
NO.__________
THIS CERTIFIES that, for value received, L. Flomenhaft & Co., Inc., or
its assigns (in either case, the "Holder") is entitled to purchase, subject to
the provisions of this Warrant, from SONUS COMMUNICATION HOLDINGS, INC., a
Delaware corporation (the "Company"), at the price per share set forth in
Section 8 hereof, the number of shares of the Company's common stock, $.0001
par value per share (the "Common Stock"), set forth in Section 7 hereof. This
Warrant is referred to herein as the "Warrant" and the shares of Common Stock
issuable pursuant to the terms hereof are sometimes referred to herein as
"Warrant Shares". Capitalized terms used but not defined herein shall have the
respective meanings accorded such terms in the Subscription Agreement.
Section 1. Exercise of Warrant. To exercise this Warrant in
whole or in part, the Holder shall deliver to the Company at its principal
office, (a) a written notice, in substantially the form of the exercise notice
attached hereto (the "Exercise Notice"), of the Holder's election to exercise
this Warrant, which notice shall specify the number of shares of Common Stock
to be purchased, (b) a check in the amount of the aggregate exercise price for
the Warrant Shares being purchased, and (c) this Warrant. The Company shall as
promptly as practicable, and in any event within twenty (20) days after
delivery to the Company of (i) the Exercise Notice, (ii) the check mentioned
above, and (iii) this Warrant, execute and deliver or cause to be executed and
delivered, in accordance with such notice, a certificate or certificates
representing the aggregate number of shares of Common Stock specified in such
notice, provided the Warrants specified in such notice have vested on or prior
to the date such notice is delivered. If the Holder elects to purchase, at any
time, less than the number of shares of Common Stock then purchasable under the
terms of this Warrant, the Company shall issue to the Holder a new Warrant
exercisable into the number of remaining shares of Common Stock purchasable
under this Warrant. Each certificate representing Warrant Shares shall bear
the legend or legends required by applicable securities laws as well as such
other legend(s) the Company requires to be included on certificates for its
Common Stock. The Company shall pay all expenses, taxes and other charges
payable in connection with the preparation, issuance and delivery of such stock
certificates except that, in case such stock certificates shall be registered
in a name or names other than the name of the Holder, funds sufficient to pay
all stock transfer taxes that are payable upon the issuance of such stock
certificate or certificates shall be paid by the Holder at the time of
delivering the Exercise Notice. All shares of Common Stock issued upon the
exercise of this Warrant shall be validly issued, fully paid, and
nonassessable. This Warrant may be exercised on
-2-
<PAGE> 2
multiple occasions in amounts not less than 15% of the original amount issued
before the expiration of its term as described in this Section 1. This Warrant
will expire on January 5, 2005 (the "Expiration Date").
Section 2. Reservation of Shares. The Company hereby covenants
that at all times during the term of this Warrant there shall be reserved for
issuance such number of shares of its Common Stock as shall be required to be
issued upon exercise of this Warrant.
Section 3. Fractional Shares. This Warrant may be exercised only
for a whole number of shares of Common Stock, and no fractional shares or scrip
representing fractional shares shall be issuable upon the exercise of this
Warrant.
Transfer of Warrant and Warrant Shares. The Holder may sell, pledge,
hypothecate, or otherwise transfer this Warrant, in whole or in part, only in
accordance with and subject to the terms and conditions set forth in the
Subscription Agreement and then only if such sale, pledge, hypothecation, or
transfer is made in compliance with the Act or pursuant to an available
exemption from registration under the Act relating to the disposition of
securities, and is made in accordance with applicable State securities laws.
Loss of Warrant. Upon receipt by the Company of evidence satisfactory to it
of the loss, theft, or destruction of this Warrant, and of indemnification
satisfactory to it, or upon surrender and cancellation of this Warrant, if
mutilated, the Company will execute and deliver a new Warrant of like tenor.
Rights of the Holder. No provision of this Warrant shall be construed as
conferring upon the Holder the right to vote, consent, receive dividends or
receive notice other than as expressly provided herein. Prior to exercise, no
provision hereof, in the absence of affirmative action by the Holder to
exercise this Warrant, and no enumeration herein of the rights or privileges of
the Holder, shall give rise to any liability of the Holder for the purchase
price of any Warrant Shares or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
Number of Warrant Shares. This Warrant shall be exercisable for up to One
Hundred Ten Thousand Five Hundred and Three (110,503) shares of the Company's
Common Stock, as adjusted in accordance with this Agreement.
Exercise Price; Redemption; Adjustment of Warrants. Determination of Exercise
Price. The per share purchase price (the "Exercise Price") for each of the
Warrant Shares purchasable under this Warrant shall be equal to One Dollar and
Thirty Five Cents ($1.35).
(b) Redemption of Warrants. The Warrants are redeemable by the
Company at $0.05 per Warrant (the "Redemption Price"), upon 20 days notice, at
the discretion of the Company, when the following three conditions have been
met: (i) a registration statement has been filed under the Securities Act
covering the resale of the Shares, Warrants and the Warrant Shares, and such
registration statement is effective, (ii) a public market has developed for the
Common Stock, and (iii) the bid price of the Common Stock has closed at $4.50
or higher for ten consecutive trading days. Redemption of the Warrants shall
be automatically effective and the Warrants shall be deemed cancelled upon the
Company's delivery of the Redemption Price to the Holder in accordance with
this Agreement. Upon receipt of the Redemption Price, Holder agrees to return
any evidence of the Warrants to the Company.
(c) Adjustments for Stock Dividends, Distributions and
Subdivisions. If the Company at any time or from time to time after the
original issue date shall declare or pay any dividend or distribution on the
Common Stock payable in Common Stock, or effect a subdivision of the
outstanding shares of Common Stock into a greater number of shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in Common
Stock), then the number of shares of Common Stock into which this Warrant is
exercisable shall be increased to an amount which is equal to the product of
(i) the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the stock dividend, distribution or subdivision, as the
case may be, and (ii) a fraction, the numerator of which is equal to the number
of shares of Common Stock issued and outstanding after giving effect to such
stock dividend, distribution or subdivision, and the denominator of which is
the number of shares of Common Stock issued and outstanding prior to such stock
dividend, distribution or subdivision. If the outstanding shares
-3-
<PAGE> 3
of Common Stock shall be divided or increased because of a stock dividend or
distribution, by stock split or otherwise, into a greater number of shares of
Common Stock, the Exercise Price in effect immediately prior to such dividend,
distribution or division shall, concurrently with the effectiveness of such
division, dividend or distribution, be proportionately decreased.
-4-
<PAGE> 4
(d) Adjustments for Combinations or Consolidation of Common Stock.
If the outstanding shares of Common Stock shall be combined or consolidated, by
reclassification, reverse stock split or otherwise, into a lesser number of
shares of Common Stock, then the number of shares of Common Stock into which
this Warrant is exercisable shall be decreased to an amount which is equal to
the product of (i) the number of shares of Common Stock for which this Warrant
is exercisable immediately prior to combination or consolidation, as the case
may be, and (ii) a fraction, the numerator of which is equal to the number of
shares of Common Stock issued and outstanding after giving effect to such
combination or consolidation, and the denominator of which is the number of
shares of Common Stock issued and outstanding prior to such combination or
consolidation. If the outstanding shares of Common Stock shall be combined or
consolidated, by reclassification, reverse stock split or otherwise, into a
lesser number of shares of Common Stock, the Exercise Price in effect
immediately prior to such combination or consolidation shall, concurrently with
the effectiveness of such combination or consolidation, be proportionately
increased.
(e) Adjustment for Mergers or Reorganization, etc. In case of any
consolidation or merger of the Company with or into another corporation or the
conveyance of all or substantially all of the assets of the Company to another
corporation, this Warrant shall be exercisable into the number of shares of
stock or other securities or property to which a holder of the number of shares
of Common Stock of the Company deliverable upon exercise of this Warrant would
have been entitled upon such consolidation, merger or conveyance; and, in any
such case, appropriate adjustment (as determined by the Board of Directors of
the Company) shall be made in the application of the provisions herein set
forth with respect to the rights and interest thereafter of the holder of this
Warrant, to the end that the provisions set forth herein shall thereafter be
applicable, as nearly as reasonable may be, in relation to any shares of stock
or other property thereafter deliverable upon the exercise of this Warrant.
(f) No Impairment. The Company will not, through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 8 and in the taking of all
such action as may be necessary or appropriate in order to protect the exercise
rights of the holder of this Warrant against impairment.
(g) Issue Taxes. The Company shall pay any and all issue and
other taxes that may be payable in respect of any issue or delivery of shares
of Common Stock on exercise of this Warrant, in whole or in part; provided,
however, that the Company shall not be obligated to pay any transfer taxes
resulting from any transfer requested by any holder in connection with any such
exercise.
(h) Reservation of Stock Issuable Upon Conversion. The Company
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
exercise of this Warrant, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the exercise of this Warrant; and if
at any time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the exercise of this Warrant, the Company will take
all appropriate corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
(i) Fractional Shares. No fractional share shall be issued upon
the exercise, in whole or in part, of this Warrant. If any exercise in whole
or in part of this Warrant would result in the issuance of a fraction of a
share of Common Stock, the Company shall, in lieu of issuing any fractional
share, pay the holder otherwise entitled to such fraction a sum in cash equal
to the fair market value of such fraction on the date of exercise (as
determined in good faith by the Board of Directors of the Company).
Section 9. Certain Distributions. In case the Company shall, at
any time, prior to the Expiration Date set forth in Section 1 hereof, declare
any distribution of its assets to holders of its Common Stock as a partial
liquidation, distribution or by way of return of capital, other than as a
dividend payable out of earnings or any surplus legally available for
dividends, then the Holder shall be
-5-
<PAGE> 5
entitled, upon the proper exercise of this Warrant in whole or in part prior to
the effecting of such declaration, to receive, in addition to the shares of
Common Stock issuable on such exercise, the amount of such assets (or at the
option of the Company a sum equal to the value thereof at the time of such
distribution to holders of Common Stock as such value is determined by the
Board of Directors of the Company in good faith), which would have been payable
to the Holder had it been a holder of record of such shares of Common Stock on
the record date for the determination of those holders of Common Stock entitled
to such distribution.
Section 10. Dissolution or Liquidation. In case the Company
shall, at any time prior to the Expiration Date set forth in Section 1 hereof,
dissolve, liquidate or wind up its affairs, the Holder shall be entitled, upon
the proper exercise of this Warrant in whole or in part and prior to any
distribution associated with such dissolution, liquidation, or winding up, to
receive on such exercise, in lieu of the shares of Common Stock to which the
Holder would have been entitled, the same kind and amount of assets as would
have been distributed or paid to the Holder upon any such dissolution,
liquidation or winding up, with respect to such shares of Common Stock had the
Holder been a holder of record of such share of Common Stock on the record date
for the determination of those holders of Common Stock entitled to receive any
such dissolution, liquidation, or winding up distribution.
Section 11. Reclassification or Reorganization. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), the Company shall cause effective provision to be
made so that the Holder shall have the right thereafter by exercising this
Warrant, to purchase the kind and amount of shares of stock and other
securities and property receivable upon such reclassification, capital
reorganization or other change, by a holder of the number of shares of Common
Stock which might have been purchased upon exercise of this Warrant immediately
prior to such reclassification or change. Any such provision shall include
provision for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Warrant. The foregoing
provisions of this Section 11 shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common
Stock. In the event that in any such capital reorganization, reclassification,
or other change, additional shares of Common Stock shall be issued in exchange,
conversion, substitution or payment, in whole or in part, for or of a security
of the Company other than Common Stock, any amount of the consideration
received upon the issue thereof being determined by the Board of Directors of
the Company shall be final and binding on the Holder.
Section 12. Miscellaneous.
(a) Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of, and be binding upon, the respective
successors and assigns of the parties, except to the extent otherwise provided
herein. Nothing in this Agreement, express or implied, is intended to confer
upon any party, other than the parties hereto or their respective successors
and assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided in this Agreement.
(b) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the principles of conflict of laws thereof.
(c) Counterparts; Delivery by Facsimile. This Agreement may
be executed in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. Delivery of this Agreement may be effected by facsimile.
(d) Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(e) Notices. Unless otherwise provided, any notice required
or permitted hereunder shall be given by personal service upon the party to be
notified, by nationwide overnight delivery service or upon deposit with the
United States Post Office, by certified mail, return receipt requested and:
-6-
<PAGE> 6
i. if to the Company, addressed to SONUS
COMMUNICATION HOLDINGS, INC., 1600 Wilson Blvd., Suite 1008, Arlington,
Virginia 22209, Attention: W. Todd Coffin, with a copy to Cecil E. Martin, III,
Esquire, McGuire, Woods Battle & Booth LLP, Seven Saint Paul Street, Suite
1000, Baltimore, Maryland 21202- 1626, or at such other address as the Company
may designate by notice to each of the Investors in accordance with the
provisions of this Section; and
ii. if to the Warrant holder, at the address
indicated on the signature pages hereof, or at such other addresses as such
Holder may designate by notice to the Company in accordance with the provisions
of this Section.
(f) Amendments and Waivers. Any term of this Agreement may
be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either prospectively or
retroactively), only with the written consent of the Company and a majority in
interest of the Holders.
(g) Entire Agreement. This Agreement and the Subscription
Agreement (including the exhibits and schedules hereto) constitute the entire
agreement among the parties hereto with respect to the subject matter hereof
and thereof and supersede all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the parties hereto.
-7-
<PAGE> 7
IN WITNESS WHEREOF, the undersigned hereby sets is hand and seal this
__ day of _____, 2000.
SONUS COMMUNICATION HOLDINGS, INC.
By: /s/ W. Todd Coffin
-------------------------------------
Name: W. Todd Coffin
Title: Chief Executive Officer
Investor Name: L. Flomenhaft & Co., Inc.
Investor Address:
-------------------------
-8-
<PAGE> 8
EXERCISE NOTICE
Dated: _____________________
The undersigned hereby irrevocably elects to exercise his, her or its
right to purchase _________ shares of the common stock, $.0001 par value per
share (the "Common Stock"), of SONUS COMMUNICATION HOLDINGS, INC., a Delaware
corporation (the "Company"), such right being pursuant to a Warrant dated
_________, 2000, and as issued to the undersigned by the Company, and remits
herewith the sum of $______ in payment for same in accordance with the Exercise
Price specified in Section 8 of said Warrant.
<PAGE> 9
ASSIGNMENT FORM
Dated: _____________________
For value received ____________________ hereby sells, assigns and
transfers unto
Name: ____________________________________________
(Please typewrite or print block letters)
Address: ______________________________________________
______________________________________________
and appoints: ______________________________________________
______________________________________________
Attorney to transfer the said Warrant on the books of SONUS COMMUNICATION
HOLDINGS, INC. with full power of substitution in the premises.
Signature: ______________________________
-10-
<PAGE> 1
EXHIBIT 4.2
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES OR BLUE SKY LAWS AND MAY
NOT BE OFFERED, SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED
EXCEPT (1) PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES WHICH IS EFFECTIVE UNDER THE ACT OR (2) PURSUANT TO AN
AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING TO THE
DISPOSITION OF SECURITIES AND (3) IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES AND BLUE SKY LAWS.
WARRANT
WARRANT TO PURCHASE THIRTY TWO THOUSAND EIGHT HUNDRED AND SEVENTY FIVE
(32,875) SHARES OF COMMON STOCK
OF
SONUS COMMUNICATION HOLDINGS, INC.
DATE OF ISSUANCE: JANUARY 5, 2000
NO.__________
THIS CERTIFIES that, for value received, Hudson Allen & Co., or its
assigns (in either case, the "Holder") is entitled to purchase, subject to the
provisions of this Warrant, from SONUS COMMUNICATION HOLDINGS, INC., a Delaware
corporation (the "Company"), at the price per share set forth in Section 8
hereof, the number of shares of the Company's common stock, $.0001 par value
per share (the "Common Stock"), set forth in Section 7 hereof. This Warrant is
referred to herein as the "Warrant" and the shares of Common Stock issuable
pursuant to the terms hereof are sometimes referred to herein as "Warrant
Shares". Capitalized terms used but not defined herein shall have the
respective meanings accorded such terms in the Subscription Agreement. Hudson
Allen & Co. hereby represents and warrants to the Company that it is an
accredited investor within the meaning of Rule 501 of Regulation D promulgated
under the Securities Act of 1933 (the "Securities Act"), as amended or that
each beneficial owner of Hudson Allen & Co. is an accredited investor within
the meaning of the Securities Act, as of the date hereof.
Section 4. Exercise of Warrant. To exercise this Warrant in
whole or in part, the Holder shall deliver to the Company at its principal
office, (a) a written notice, in substantially the form of the exercise notice
attached hereto (the "Exercise Notice"), of the Holder's election to exercise
this Warrant, which notice shall specify the number of shares of Common Stock
to be purchased, (b) a check in the amount of the aggregate exercise price for
the Warrant Shares being purchased, and (c) this Warrant. The Company shall as
promptly as practicable, and in any event within twenty (20) days after
delivery to the Company of (i) the Exercise Notice, (ii) the check mentioned
above, and (iii) this Warrant, execute and deliver or cause to be executed and
delivered, in accordance with such notice, a certificate or certificates
representing the aggregate number of shares of Common Stock specified in such
notice, provided the Warrants specified in such notice have vested on or prior
to the date such notice is delivered. If the Holder elects to purchase, at any
time, less than the number of shares of Common Stock then purchasable under the
terms of this Warrant, the Company shall issue to the Holder a new Warrant
exercisable into the number of remaining shares of Common Stock purchasable
under this Warrant. Each certificate representing Warrant Shares shall bear
the legend or legends required by applicable securities laws as well as such
other legend(s) the Company requires to be included on certificates for its
Common Stock. The Company shall pay all expenses, taxes and other charges
payable in connection with the preparation, issuance and delivery of such stock
certificates except that, in case such stock certificates shall be
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registered in a name or names other than the name of the Holder, funds
sufficient to pay all stock transfer taxes that are payable upon the issuance
of such stock certificate or certificates shall be paid by the Holder at the
time of delivering the Exercise Notice. All shares of Common Stock issued upon
the exercise of this Warrant shall be validly issued, fully paid, and
nonassessable. This Warrant may be exercised on multiple occasions in amounts
not less than 15% of the original amount issued before the expiration of its
term as described in this Section 1. This Warrant will expire on January 5,
2005 (the "Expiration Date").
Section 5. Reservation of Shares. The Company hereby covenants
that at all times during the term of this Warrant there shall be reserved for
issuance such number of shares of its Common Stock as shall be required to be
issued upon exercise of this Warrant.
Section 6. Fractional Shares. This Warrant may be exercised only
for a whole number of shares of Common Stock, and no fractional shares or scrip
representing fractional shares shall be issuable upon the exercise of this
Warrant.
Transfer of Warrant and Warrant Shares. The Holder may sell, pledge,
hypothecate, or otherwise transfer this Warrant, in whole or in part, only in
accordance with and subject to the terms and conditions set forth in the
Subscription Agreement and then only if such sale, pledge, hypothecation, or
transfer is made in compliance with the Act or pursuant to an available
exemption from registration under the Act relating to the disposition of
securities, and is made in accordance with applicable State securities laws.
Loss of Warrant. Upon receipt by the Company of evidence satisfactory to it
of the loss, theft, or destruction of this Warrant, and of indemnification
satisfactory to it, or upon surrender and cancellation of this Warrant, if
mutilated, the Company will execute and deliver a new Warrant of like tenor.
Rights of the Holder. No provision of this Warrant shall be construed as
conferring upon the Holder the right to vote, consent, receive dividends or
receive notice other than as expressly provided herein. Prior to exercise, no
provision hereof, in the absence of affirmative action by the Holder to
exercise this Warrant, and no enumeration herein of the rights or privileges of
the Holder, shall give rise to any liability of the Holder for the purchase
price of any Warrant Shares or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
Number of Warrant Shares. This Warrant shall be exercisable for up to Thirty
Two Thousand Eight Hundred Seventy Five (32,875) shares of the Company's Common
Stock, as adjusted in accordance with this Agreement.
Exercise Price; Redemption; Adjustment of Warrants.
Determination of Exercise Price. The per share purchase price (the
"Exercise Price") for each of the Warrant Shares purchasable under this Warrant
shall be equal to One Dollar and Thirty Five Cents ($1.35).
(b) Redemption of Warrants. The Warrants are redeemable by the
Company at $0.05 per Warrant (the "Redemption Price"), upon 20 days notice, at
the discretion of the Company, when the following three conditions have been
met: (i) a registration statement has been filed under the Securities Act
covering the resale of the Shares, Warrants and the Warrant Shares, and such
registration statement is effective, (ii) a public market has developed for the
Common Stock, and (iii) the bid price of the Common Stock has closed at $4.50
or higher for ten consecutive trading days. Redemption of the Warrants shall
be automatically effective and the Warrants shall be deemed cancelled upon the
Company's delivery of the Redemption Price to the Holder in accordance with
this Agreement. Upon receipt of the Redemption Price, Holder agrees to return
any evidence of the Warrants to the Company.
(c) Adjustments for Stock Dividends, Distributions and
Subdivisions. If the Company at any time or from time to time after the
original issue date shall declare or pay any dividend or distribution on the
Common Stock payable in Common Stock, or effect a subdivision of the
outstanding shares of Common Stock into a greater number of shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in Common
Stock), then the number of shares of Common Stock into which this Warrant is
exercisable shall be increased to an amount which is equal to the product of
(i) the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the stock dividend,
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distribution or subdivision, as the case may be, and (ii) a fraction, the
numerator of which is equal to the number of shares of Common Stock issued and
outstanding after giving effect to such stock dividend, distribution or
subdivision, and the denominator of which is the number of shares of Common
Stock issued and outstanding prior to such stock dividend, distribution or
subdivision. If the outstanding shares of Common Stock shall be divided or
increased because of a stock dividend or distribution, by stock split or
otherwise, into a greater number of shares of Common Stock, the Exercise Price
in effect immediately prior to such dividend, distribution or division shall,
concurrently with the effectiveness of such division, dividend or distribution,
be proportionately decreased.
(d) Adjustments for Combinations or Consolidation of Common Stock.
If the outstanding shares of Common Stock shall be combined or consolidated, by
reclassification, reverse stock split or otherwise, into a lesser number of
shares of Common Stock, then the number of shares of Common Stock into which
this Warrant is exercisable shall be decreased to an amount which is equal to
the product of (i) the number of shares of Common Stock for which this Warrant
is exercisable immediately prior to combination or consolidation, as the case
may be, and (ii) a fraction, the numerator of which is equal to the number of
shares of Common Stock issued and outstanding after giving effect to such
combination or consolidation, and the denominator of which is the number of
shares of Common Stock issued and outstanding prior to such combination or
consolidation. If the outstanding shares of Common Stock shall be combined or
consolidated, by reclassification, reverse stock split or otherwise, into a
lesser number of shares of Common Stock, the Exercise Price in effect
immediately prior to such combination or consolidation shall, concurrently with
the effectiveness of such combination or consolidation, be proportionately
increased.
(e) Adjustment for Mergers or Reorganization, etc. In case of any
consolidation or merger of the Company with or into another corporation or the
conveyance of all or substantially all of the assets of the Company to another
corporation, this Warrant shall be exercisable into the number of shares of
stock or other securities or property to which a holder of the number of shares
of Common Stock of the Company deliverable upon exercise of this Warrant would
have been entitled upon such consolidation, merger or conveyance; and, in any
such case, appropriate adjustment (as determined by the Board of Directors of
the Company) shall be made in the application of the provisions herein set
forth with respect to the rights and interest thereafter of the holder of this
Warrant, to the end that the provisions set forth herein shall thereafter be
applicable, as nearly as reasonable may be, in relation to any shares of stock
or other property thereafter deliverable upon the exercise of this Warrant.
(f) No Impairment. The Company will not, through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 8 and in the taking of all
such action as may be necessary or appropriate in order to protect the exercise
rights of the holder of this Warrant against impairment.
(g) Issue Taxes. The Company shall pay any and all issue and
other taxes that may be payable in respect of any issue or delivery of shares
of Common Stock on exercise of this Warrant, in whole or in part; provided,
however, that the Company shall not be obligated to pay any transfer taxes
resulting from any transfer requested by any holder in connection with any such
exercise.
(h) Reservation of Stock Issuable Upon Conversion. The Company
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
exercise of this Warrant, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the exercise of this Warrant; and if
at any time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the exercise of this Warrant, the Company will take
all appropriate corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
(i) Fractional Shares. No fractional share shall be issued upon
the exercise, in whole or in part, of this Warrant. If any exercise in whole
or in part of this Warrant would result in the issuance of a
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fraction of a share of Common Stock, the Company shall, in lieu of issuing any
fractional share, pay the holder otherwise entitled to such fraction a sum in
cash equal to the fair market value of such fraction on the date of exercise
(as determined in good faith by the Board of Directors of the Company).
Section 9. Certain Distributions. In case the Company shall, at
any time, prior to the Expiration Date set forth in Section 1 hereof, declare
any distribution of its assets to holders of its Common Stock as a partial
liquidation, distribution or by way of return of capital, other than as a
dividend payable out of earnings or any surplus legally available for
dividends, then the Holder shall be entitled, upon the proper exercise of this
Warrant in whole or in part prior to the effecting of such declaration, to
receive, in addition to the shares of Common Stock issuable on such exercise,
the amount of such assets (or at the option of the Company a sum equal to the
value thereof at the time of such distribution to holders of Common Stock as
such value is determined by the Board of Directors of the Company in good
faith), which would have been payable to the Holder had it been a holder of
record of such shares of Common Stock on the record date for the determination
of those holders of Common Stock entitled to such distribution.
Section 10. Dissolution or Liquidation. In case the Company
shall, at any time prior to the Expiration Date set forth in Section 1 hereof,
dissolve, liquidate or wind up its affairs, the Holder shall be entitled, upon
the proper exercise of this Warrant in whole or in part and prior to any
distribution associated with such dissolution, liquidation, or winding up, to
receive on such exercise, in lieu of the shares of Common Stock to which the
Holder would have been entitled, the same kind and amount of assets as would
have been distributed or paid to the Holder upon any such dissolution,
liquidation or winding up, with respect to such shares of Common Stock had the
Holder been a holder of record of such share of Common Stock on the record date
for the determination of those holders of Common Stock entitled to receive any
such dissolution, liquidation, or winding up distribution.
Section 11. Reclassification or Reorganization. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), the Company shall cause effective provision to be
made so that the Holder shall have the right thereafter by exercising this
Warrant, to purchase the kind and amount of shares of stock and other
securities and property receivable upon such reclassification, capital
reorganization or other change, by a holder of the number of shares of Common
Stock which might have been purchased upon exercise of this Warrant immediately
prior to such reclassification or change. Any such provision shall include
provision for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Warrant. The foregoing
provisions of this Section 11 shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common
Stock. In the event that in any such capital reorganization, reclassification,
or other change, additional shares of Common Stock shall be issued in exchange,
conversion, substitution or payment, in whole or in part, for or of a security
of the Company other than Common Stock, any amount of the consideration
received upon the issue thereof being determined by the Board of Directors of
the Company shall be final and binding on the Holder.
Section 12. Miscellaneous.
(a) Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of, and be binding upon, the respective
successors and assigns of the parties, except to the extent otherwise provided
herein. Nothing in this Agreement, express or implied, is intended to confer
upon any party, other than the parties hereto or their respective successors
and assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided in this Agreement.
(b) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the principles of conflict of laws thereof.
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<PAGE> 5
(c) Counterparts; Delivery by Facsimile. This Agreement may
be executed in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. Delivery of this Agreement may be effected by facsimile.
(d) Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(e) Notices. Unless otherwise provided, any notice required
or permitted hereunder shall be given by personal service upon the party to be
notified, by nationwide overnight delivery service or upon deposit with the
United States Post Office, by certified mail, return receipt requested and:
i. if to the Company, addressed to SONUS
COMMUNICATION HOLDINGS, INC., 1600 Wilson Blvd., Suite 1008, Arlington,
Virginia 22209, Attention: W. Todd Coffin, with a copy to Cecil E. Martin, III,
Esquire, McGuire, Woods Battle & Booth LLP, Seven Saint Paul Street, Suite
1000, Baltimore, Maryland 21202- 1626, or at such other address as the Company
may designate by notice to each of the Investors in accordance with the
provisions of this Section; and
ii. if to the Warrant holder, at the address
indicated on the signature pages hereof, or at such other addresses as such
Holder may designate by notice to the Company in accordance with the provisions
of this Section.
(f) Amendments and Waivers. Any term of this Agreement may
be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either prospectively or
retroactively), only with the written consent of the Company and a majority in
interest of the Holders.
(g) Entire Agreement. This Agreement and the Subscription
Agreement (including the exhibits and schedules hereto) constitute the entire
agreement among the parties hereto with respect to the subject matter hereof
and thereof and supersede all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the parties hereto.
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<PAGE> 6
IN WITNESS WHEREOF, the undersigned hereby sets is hand and seal this
__ day of _____, 2000.
SONUS COMMUNICATION HOLDINGS, INC.
By: /s/ W. Todd Coffin
-------------------------------------
Name: W. Todd Coffin
Title: Chief Executive Officer
Investor Name: Hudson Allen & Co.
Investor Address:
-------------------------
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<PAGE> 7
EXERCISE NOTICE
Dated: _____________________
The undersigned hereby irrevocably elects to exercise his, her or its
right to purchase _________ shares of the common stock, $.0001 par value per
share (the "Common Stock"), of SONUS COMMUNICATION HOLDINGS, INC., a Delaware
corporation (the "Company"), such right being pursuant to a Warrant dated
_________, 2000, and as issued to the undersigned by the Company, and remits
herewith the sum of $______ in payment for same in accordance with the Exercise
Price specified in Section 8 of said Warrant.
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<PAGE> 8
ASSIGNMENT FORM
Dated: _____________________
For value received ____________________ hereby sells, assigns and
transfers unto
Name: ____________________________________________
(Please typewrite or print block letters)
Address: _______________________________________
_______________________________________
and appoints: _______________________________________
_______________________________________
Attorney to transfer the said Warrant on the books of SONUS COMMUNICATION
HOLDINGS, INC. with full power of substitution in the premises.
Signature: ______________________________
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<PAGE> 1
EXHIBIT 4.3
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES OR BLUE SKY LAWS AND MAY
NOT BE OFFERED, SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED
EXCEPT (1) PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES WHICH IS EFFECTIVE UNDER THE ACT OR (2) PURSUANT TO AN
AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING TO THE
DISPOSITION OF SECURITIES AND (3) IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES AND BLUE SKY LAWS.
WARRANT
WARRANT TO PURCHASE FIFTY ONE THOUSAND SIX HUNDRED SIXTY FOUR
(51,664) SHARES OF COMMON STOCK
OF
SONUS COMMUNICATION HOLDINGS, INC.
DATE OF ISSUANCE: JANUARY 27, 2000
NO.__________
THIS CERTIFIES that, for value received, L. Flomenhaft & Co., Inc., or
its assigns (in either case, the "Holder") is entitled to purchase, subject to
the provisions of this Warrant, from SONUS COMMUNICATION HOLDINGS, INC., a
Delaware corporation (the "Company"), at the price per share set forth in
Section 8 hereof, the number of shares of the Company's common stock, $.0001
par value per share (the "Common Stock"), set forth in Section 7 hereof. This
Warrant is referred to herein as the "Warrant" and the shares of Common Stock
issuable pursuant to the terms hereof are sometimes referred to herein as
"Warrant Shares". Capitalized terms used but not defined herein shall have the
respective meanings accorded such terms in the Subscription Agreement.
Section 7. Exercise of Warrant. To exercise this Warrant in
whole or in part, the Holder shall deliver to the Company at its principal
office, (a) a written notice, in substantially the form of the exercise notice
attached hereto (the "Exercise Notice"), of the Holder's election to exercise
this Warrant, which notice shall specify the number of shares of Common Stock
to be purchased, (b) a check in the amount of the aggregate exercise price for
the Warrant Shares being purchased, and (c) this Warrant. The Company shall as
promptly as practicable, and in any event within twenty (20) days after
delivery to the Company of (i) the Exercise Notice, (ii) the check mentioned
above, and (iii) this Warrant, execute and deliver or cause to be executed and
delivered, in accordance with such notice, a certificate or certificates
representing the aggregate number of shares of Common Stock specified in such
notice, provided the Warrants specified in such notice have vested on or prior
to the date such notice is delivered. If the Holder elects to purchase, at any
time, less than the number of shares of Common Stock then purchasable under the
terms of this Warrant, the Company shall issue to the Holder a new Warrant
exercisable into the number of remaining shares of Common Stock purchasable
under this Warrant. Each certificate representing Warrant Shares shall bear
the legend or legends required by applicable securities laws as well as such
other legend(s) the Company requires to be included on certificates for its
Common Stock. The Company shall pay all expenses, taxes and other charges
payable in connection with the preparation, issuance and delivery of such stock
certificates except that, in case such stock certificates shall be registered
in a name or names other than the name of the Holder, funds sufficient to pay
all stock transfer taxes that are payable upon the issuance of such stock
certificate or certificates shall be paid by the Holder at the time of
delivering the Exercise Notice. All shares of Common Stock issued upon the
exercise of this Warrant shall be validly issued, fully paid, and
nonassessable. This Warrant may be exercised on
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multiple occasions in amounts not less than 15% of the original amount issued
before the expiration of its term as described in this Section 1. This Warrant
will expire on January 27, 2005 (the "Expiration Date").
Section 8. Reservation of Shares. The Company hereby covenants
that at all times during the term of this Warrant there shall be reserved for
issuance such number of shares of its Common Stock as shall be required to be
issued upon exercise of this Warrant.
Section 9. Fractional Shares. This Warrant may be exercised only
for a whole number of shares of Common Stock, and no fractional shares or scrip
representing fractional shares shall be issuable upon the exercise of this
Warrant.
Transfer of Warrant and Warrant Shares. The Holder may sell, pledge,
hypothecate, or otherwise transfer this Warrant, in whole or in part, only in
accordance with and subject to the terms and conditions set forth in the
Subscription Agreement and then only if such sale, pledge, hypothecation, or
transfer is made in compliance with the Act or pursuant to an available
exemption from registration under the Act relating to the disposition of
securities, and is made in accordance with applicable State securities laws.
Loss of Warrant. Upon receipt by the Company of evidence satisfactory to it
of the loss, theft, or destruction of this Warrant, and of indemnification
satisfactory to it, or upon surrender and cancellation of this Warrant, if
mutilated, the Company will execute and deliver a new Warrant of like tenor.
Rights of the Holder. No provision of this Warrant shall be construed as
conferring upon the Holder the right to vote, consent, receive dividends or
receive notice other than as expressly provided herein. Prior to exercise, no
provision hereof, in the absence of affirmative action by the Holder to
exercise this Warrant, and no enumeration herein of the rights or privileges of
the Holder, shall give rise to any liability of the Holder for the purchase
price of any Warrant Shares or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
Number of Warrant Shares. This Warrant shall be exercisable for up to Fifty
One Thousand Six Hundred and Sixty Four (51,664) shares of the Company's Common
Stock, as adjusted in accordance with this Agreement.
Exercise Price; Redemption; Adjustment of Warrants. Determination of Exercise
Price. The per share purchase price (the "Exercise Price") for each of the
Warrant Shares purchasable under this Warrant shall be equal to One Dollar and
Thirty Five Cents ($1.35).
(b) Redemption of Warrants. The Warrants are redeemable by the
Company at $0.05 per Warrant (the "Redemption Price"), upon 20 days notice, at
the discretion of the Company, when the following three conditions have been
met: (i) a registration statement has been filed under the Securities Act
covering the resale of the Shares, Warrants and the Warrant Shares, and such
registration statement is effective, (ii) a public market has developed for the
Common Stock, and (iii) the bid price of the Common Stock has closed at $4.50
or higher for ten consecutive trading days. Redemption of the Warrants shall
be automatically effective and the Warrants shall be deemed cancelled upon the
Company's delivery of the Redemption Price to the Holder in accordance with
this Agreement. Upon receipt of the Redemption Price, Holder agrees to return
any evidence of the Warrants to the Company.
(c) Adjustments for Stock Dividends, Distributions and
Subdivisions. If the Company at any time or from time to time after the
original issue date shall declare or pay any dividend or distribution on the
Common Stock payable in Common Stock, or effect a subdivision of the
outstanding shares of Common Stock into a greater number of shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in Common
Stock), then the number of shares of Common Stock into which this Warrant is
exercisable shall be increased to an amount which is equal to the product of
(i) the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the stock dividend, distribution or subdivision, as the
case may be, and (ii) a fraction, the numerator of which is equal to the number
of shares of Common Stock issued and outstanding after giving effect to such
stock dividend, distribution or subdivision, and the denominator of which is
the number of shares of Common Stock issued and outstanding prior to such stock
dividend, distribution or subdivision. If the outstanding shares
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<PAGE> 3
of Common Stock shall be divided or increased because of a stock dividend or
distribution, by stock split or otherwise, into a greater number of shares of
Common Stock, the Exercise Price in effect immediately prior to such dividend,
distribution or division shall, concurrently with the effectiveness of such
division, dividend or distribution, be proportionately decreased.
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<PAGE> 4
(d) Adjustments for Combinations or Consolidation of Common Stock.
If the outstanding shares of Common Stock shall be combined or consolidated, by
reclassification, reverse stock split or otherwise, into a lesser number of
shares of Common Stock, then the number of shares of Common Stock into which
this Warrant is exercisable shall be decreased to an amount which is equal to
the product of (i) the number of shares of Common Stock for which this Warrant
is exercisable immediately prior to combination or consolidation, as the case
may be, and (ii) a fraction, the numerator of which is equal to the number of
shares of Common Stock issued and outstanding after giving effect to such
combination or consolidation, and the denominator of which is the number of
shares of Common Stock issued and outstanding prior to such combination or
consolidation. If the outstanding shares of Common Stock shall be combined or
consolidated, by reclassification, reverse stock split or otherwise, into a
lesser number of shares of Common Stock, the Exercise Price in effect
immediately prior to such combination or consolidation shall, concurrently with
the effectiveness of such combination or consolidation, be proportionately
increased.
(e) Adjustment for Mergers or Reorganization, etc. In case of any
consolidation or merger of the Company with or into another corporation or the
conveyance of all or substantially all of the assets of the Company to another
corporation, this Warrant shall be exercisable into the number of shares of
stock or other securities or property to which a holder of the number of shares
of Common Stock of the Company deliverable upon exercise of this Warrant would
have been entitled upon such consolidation, merger or conveyance; and, in any
such case, appropriate adjustment (as determined by the Board of Directors of
the Company) shall be made in the application of the provisions herein set
forth with respect to the rights and interest thereafter of the holder of this
Warrant, to the end that the provisions set forth herein shall thereafter be
applicable, as nearly as reasonable may be, in relation to any shares of stock
or other property thereafter deliverable upon the exercise of this Warrant.
(f) No Impairment. The Company will not, through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 8 and in the taking of all
such action as may be necessary or appropriate in order to protect the exercise
rights of the holder of this Warrant against impairment.
(g) Issue Taxes. The Company shall pay any and all issue and
other taxes that may be payable in respect of any issue or delivery of shares
of Common Stock on exercise of this Warrant, in whole or in part; provided,
however, that the Company shall not be obligated to pay any transfer taxes
resulting from any transfer requested by any holder in connection with any such
exercise.
(h) Reservation of Stock Issuable Upon Conversion. The Company
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
exercise of this Warrant, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the exercise of this Warrant; and if
at any time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the exercise of this Warrant, the Company will take
all appropriate corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
(i) Fractional Shares. No fractional share shall be issued upon
the exercise, in whole or in part, of this Warrant. If any exercise in whole
or in part of this Warrant would result in the issuance of a fraction of a
share of Common Stock, the Company shall, in lieu of issuing any fractional
share, pay the holder otherwise entitled to such fraction a sum in cash equal
to the fair market value of such fraction on the date of exercise (as
determined in good faith by the Board of Directors of the Company).
Section 9. Certain Distributions. In case the Company shall, at
any time, prior to the Expiration Date set forth in Section 1 hereof, declare
any distribution of its assets to holders of its Common Stock as a partial
liquidation, distribution or by way of return of capital, other than as a
dividend payable out of earnings or any surplus legally available for
dividends, then the Holder shall be
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<PAGE> 5
entitled, upon the proper exercise of this Warrant in whole or in part prior to
the effecting of such declaration, to receive, in addition to the shares of
Common Stock issuable on such exercise, the amount of such assets (or at the
option of the Company a sum equal to the value thereof at the time of such
distribution to holders of Common Stock as such value is determined by the
Board of Directors of the Company in good faith), which would have been payable
to the Holder had it been a holder of record of such shares of Common Stock on
the record date for the determination of those holders of Common Stock entitled
to such distribution.
Section 10. Dissolution or Liquidation. In case the Company
shall, at any time prior to the Expiration Date set forth in Section 1 hereof,
dissolve, liquidate or wind up its affairs, the Holder shall be entitled, upon
the proper exercise of this Warrant in whole or in part and prior to any
distribution associated with such dissolution, liquidation, or winding up, to
receive on such exercise, in lieu of the shares of Common Stock to which the
Holder would have been entitled, the same kind and amount of assets as would
have been distributed or paid to the Holder upon any such dissolution,
liquidation or winding up, with respect to such shares of Common Stock had the
Holder been a holder of record of such share of Common Stock on the record date
for the determination of those holders of Common Stock entitled to receive any
such dissolution, liquidation, or winding up distribution.
Section 11. Reclassification or Reorganization. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), the Company shall cause effective provision to be
made so that the Holder shall have the right thereafter by exercising this
Warrant, to purchase the kind and amount of shares of stock and other
securities and property receivable upon such reclassification, capital
reorganization or other change, by a holder of the number of shares of Common
Stock which might have been purchased upon exercise of this Warrant immediately
prior to such reclassification or change. Any such provision shall include
provision for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Warrant. The foregoing
provisions of this Section 11 shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common
Stock. In the event that in any such capital reorganization, reclassification,
or other change, additional shares of Common Stock shall be issued in exchange,
conversion, substitution or payment, in whole or in part, for or of a security
of the Company other than Common Stock, any amount of the consideration
received upon the issue thereof being determined by the Board of Directors of
the Company shall be final and binding on the Holder.
Section 12. Miscellaneous.
(a) Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of, and be binding upon, the respective
successors and assigns of the parties, except to the extent otherwise provided
herein. Nothing in this Agreement, express or implied, is intended to confer
upon any party, other than the parties hereto or their respective successors
and assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided in this Agreement.
(b) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the principles of conflict of laws thereof.
(c) Counterparts; Delivery by Facsimile. This Agreement may
be executed in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. Delivery of this Agreement may be effected by facsimile.
(d) Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(e) Notices. Unless otherwise provided, any notice required
or permitted hereunder shall be given by personal service upon the party to be
notified, by nationwide overnight delivery service or upon deposit with the
United States Post Office, by certified mail, return receipt requested and:
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i. if to the Company, addressed to SONUS
COMMUNICATION HOLDINGS, INC., 1600 Wilson Blvd., Suite 1008, Arlington,
Virginia 22209, Attention: W. Todd Coffin, with a copy to Cecil E. Martin, III,
Esquire, McGuire, Woods Battle & Booth LLP, Seven Saint Paul Street, Suite
1000, Baltimore, Maryland 21202- 1626, or at such other address as the Company
may designate by notice to each of the Investors in accordance with the
provisions of this Section; and
ii. if to the Warrant holder, at the address
indicated on the signature pages hereof, or at such other addresses as such
Holder may designate by notice to the Company in accordance with the provisions
of this Section.
(f) Amendments and Waivers. Any term of this Agreement may
be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either prospectively or
retroactively), only with the written consent of the Company and a majority in
interest of the Holders.
(g) Entire Agreement. This Agreement and the Subscription
Agreement (including the exhibits and schedules hereto) constitute the entire
agreement among the parties hereto with respect to the subject matter hereof
and thereof and supersede all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the parties hereto.
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<PAGE> 7
IN WITNESS WHEREOF, the undersigned hereby sets is hand and seal this
__ day of _____, 2000.
SONUS COMMUNICATION HOLDINGS, INC.
By: /s/ W. Todd Coffin
-----------------------------------
Name: W. Todd Coffin
Title: Chief Executive Officer
Investor Name: L. Flomenhaft & Co., Inc.
Investor Address:
-------------------------
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<PAGE> 8
EXERCISE NOTICE
Dated: _____________________
The undersigned hereby irrevocably elects to exercise his, her or its
right to purchase _________ shares of the common stock, $.0001 par value per
share (the "Common Stock"), of SONUS COMMUNICATION HOLDINGS, INC., a Delaware
corporation (the "Company"), such right being pursuant to a Warrant dated
_________, 2000, and as issued to the undersigned by the Company, and remits
herewith the sum of $______ in payment for same in accordance with the Exercise
Price specified in Section 8 of said Warrant.
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<PAGE> 9
ASSIGNMENT FORM
Dated: _____________________
For value received ____________________ hereby sells, assigns and
transfers unto
Name: ____________________________________________
(Please typewrite or print block letters)
Address: _______________________________________
_______________________________________
and appoints: _______________________________________
_______________________________________
Attorney to transfer the said Warrant on the books of SONUS COMMUNICATION
HOLDINGS, INC. with full power of substitution in the premises.
Signature: ______________________________
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<PAGE> 1
EXHIBIT 4.4
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES OR BLUE SKY LAWS AND MAY
NOT BE OFFERED, SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED
EXCEPT (1) PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES WHICH IS EFFECTIVE UNDER THE ACT OR (2) PURSUANT TO AN
AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING TO THE
DISPOSITION OF SECURITIES AND (3) IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES AND BLUE SKY LAWS.
WARRANT
WARRANT TO PURCHASE 323,500 SHARES OF COMMON STOCK
OF
SONUS COMMUNICATION HOLDINGS, INC.
DATE OF ISSUANCE: MARCH 29, 2000
THIS CERTIFIES that, for value received, Ferris, Baker Watts, Incorporated, a
________________ corporation, or its assigns ("Warrant Holder") is entitled to
purchase, subject to the provisions of this Warrant, from SONUS COMMUNICATION
HOLDINGS, INC., a Delaware corporation (the "Company"), at the price per share
set forth in Section 8 hereof, the number of shares of the Company's common
stock, $.0001 par value per share (the "Common Stock"), set forth in Section 7
hereof. This Warrant is referred to herein as the "Warrant" and the shares of
Common Stock issuable pursuant to the terms hereof are sometimes referred to
herein as "Warrant Shares".
Section 10. Exercise of Warrant. To exercise this Warrant in whole
or in part, WARRANT HOLDER shall deliver to the Company at its principal
office, (a) a written notice, in substantially the form of the exercise notice
attached hereto (the "Exercise Notice"), of the WARRANT HOLDER's election to
exercise this Warrant, which notice shall specify the number of shares of
Common Stock to be purchased, (b) a check in the amount of the aggregate
exercise price for the Warrant Shares being purchased, and (c) this Warrant.
The Company shall as promptly as practicable, and in any event within twenty
(20) days after delivery to the Company of (i) the Exercise Notice, (ii) the
check mentioned above, and (iii) this Warrant, execute and deliver or cause to
be executed and delivered, in accordance with such notice, a certificate or
certificates representing the aggregate number of shares of Common Stock
specified in such notice, provided the Warrants specified in such notice have
vested on or prior to the date such notice is delivered. If WARRANT HOLDER
elects to purchase, at any time, less than the number of shares of Common Stock
then purchasable under the terms of this Warrant, the Company shall issue to
WARRANT HOLDER a new Warrant exercisable into the number of remaining shares of
Common Stock purchasable under this Warrant. Each certificate representing
Warrant Shares shall bear the legend or legends required by applicable
securities laws as well as such other legend(s) the Company requires to be
included on certificates for its Common Stock. The Company shall pay all
expenses, taxes and other charges payable in connection with the preparation,
issuance and delivery of such stock certificates issued in the
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<PAGE> 2
name of Warrant Holder. If stock certificates are issued in a name other than
Warrant Holder, Warrant Holder shall pay any additional expenses. This Warrant
will expire at 5:00 EST on March 28, 2005 (the "Expiration Date").
Section 11. Reservation of Shares. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the exercise of this Warrant, such
number of its shares of Common Stock as shall from time to time be sufficient
to effect the exercise of this Warrant; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to
effect the exercise of this Warrant, the Company will take all appropriate
corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
Section 12. Fractional Shares. This Warrant may be exercised only
for a whole number of shares of Common Stock, and no fractional shares or scrip
representing fractional shares shall be issuable upon the exercise of this
Warrant.
Transfer of Warrant and Warrant Shares. WARRANT HOLDER may sell, pledge,
hypothecate, or otherwise transfer this Warrant, in whole or in part, only if
such sale, pledge, hypothecation, or transfer is made in compliance with the
Act or pursuant to an available exemption from registration under the Act
relating to the disposition of securities, and is made in accordance with
applicable State securities laws.
Loss of Warrant. Upon receipt by the Company of evidence satisfactory to it
of the loss, theft, or destruction of this Warrant, and of indemnification
satisfactory to it, or upon surrender and cancellation of this Warrant, if
mutilated, the Company will execute and deliver a new Warrant of like tenor.
Rights of WARRANT HOLDER. No provision of this Warrant shall be construed as
conferring upon WARRANT HOLDER the right to vote, consent, receive dividends or
receive notice other than as expressly provided herein. Prior to exercise, no
provision hereof, in the absence of affirmative action by WARRANT HOLDER to
exercise this Warrant, and no enumeration herein of the rights or privileges of
WARRANT HOLDER, shall give rise to any liability of WARRANT HOLDER for the
purchase price of any Warrant Shares or as a stockholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
Number of Warrant Shares. This Warrant shall be exercisable for up to
323,500 shares of the Company's Common Stock, as adjusted in accordance with
this Agreement.
Exercise Price; Redemption; Adjustment of Warrants.
Determination of Exercise Price. The per share purchase price (the
"Exercise Price") for each of the Warrant Shares purchasable under this Warrant
shall be equal to Two Dollars ($2.00).
(c) Adjustments for Stock Dividends, Distributions and
Subdivisions. If the Company at any time or from time to time after the
original issue date shall declare or pay any dividend or distribution on the
Common Stock payable in Common Stock, or effect a subdivision of the
outstanding shares of Common Stock into a greater number of shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in Common
Stock), then the number of shares of Common Stock into which this Warrant is
exercisable shall be increased to an amount which is equal to the product of
(i) the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the stock dividend, distribution or subdivision, as the
case may be, and (ii) a fraction, the numerator of which is equal to the number
of shares of
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<PAGE> 3
Common Stock issued and outstanding after giving effect to such stock dividend,
distribution or subdivision, and the denominator of which is the number of
shares of Common Stock issued and outstanding prior to such stock dividend,
distribution or subdivision. If the outstanding shares of Common Stock shall be
divided or increased because of a stock dividend or distribution, by stock
split or otherwise, into a greater number of shares of Common Stock, the
Exercise Price in effect immediately prior to such dividend, distribution or
division shall, concurrently with the effectiveness of such division, dividend
or distribution, be proportionately decreased.
(d) Adjustments for Combinations or Consolidation of Common Stock.
If the outstanding shares of Common Stock shall be combined or consolidated, by
reclassification, reverse stock split or otherwise, into a lesser number of
shares of Common Stock, then the number of shares of Common Stock into which
this Warrant is exercisable shall be decreased to an amount which is equal to
the product of (i) the number of shares of Common Stock for which this Warrant
is exercisable immediately prior to combination or consolidation, as the case
may be, and (ii) a fraction, the numerator of which is equal to the number of
shares of Common Stock issued and outstanding after giving effect to such
combination or consolidation, and the denominator of which is the number of
shares of Common Stock issued and outstanding prior to such combination or
consolidation. If the outstanding shares of Common Stock shall be combined or
consolidated, by reclassification, reverse stock split or otherwise, into a
lesser number of shares of Common Stock, the Exercise Price in effect
immediately prior to such combination or consolidation shall, concurrently with
the effectiveness of such combination or consolidation, be proportionately
increased.
(e) Adjustment for Mergers or Reorganization, etc. In case of any
consolidation or merger of the Company with or into another corporation or the
conveyance of all or substantially all of the assets of the Company to another
corporation, this Warrant shall be exercisable into the number of shares of
stock or other securities or property to which a holder of the number of shares
of Common Stock of the Company deliverable upon exercise of this Warrant would
have been entitled upon such consolidation, merger or conveyance.
(f) No Impairment. The Company will not, through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 8 and in the taking of all
such action as may be necessary or appropriate in order to protect the exercise
rights of the holder of this Warrant against impairment.
(g) Issue Taxes. The Company shall pay any and all issue and
other taxes that may be payable in respect of any issue or delivery of shares
of Common Stock on exercise of this Warrant to the Warrant Holder, in whole or
in part.
(h) Cashless Exercise. WARRANT HOLDER shall have the right to
pay all or a portion of the Exercise Price by making a "Cashless Exercise", (in
a written request similar in form to Exhibit B attached) in which case the
portion of the Exercise Price to be so paid shall be paid by reducing the
number of Warrant Shares otherwise issuable pursuant to this Warrant in
accordance with the formula set forth below so that the number of Warrant
Shares to be issued to WARRANT HOLDER as a result of a Cashless Exercise shall
therefore be:
<TABLE>
<S> <C> <C>
(Fair Market Value Per Share - Exercise Price per Warrant Share X the number of Warrant
Fair Market Value Per Share Shares otherwise
issuable
</TABLE>
Within ten (10) days of receipt of an election to exercise this Warrant
specifying a Cashless Exercise, the Company shall provide to Warrant Holder in
writing its determination of the fair
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<PAGE> 4
market value per share of Common Stock. "Fair Market Value" means the average
closing price of a share of Common Stock for the five (5) consecutive trading
days preceding such date on the principal national securities exchange
(including the Nasdaq National Market and Small Cap Market) on which the shares
of Common Stock are listed or admitted to trading or, if not listed or admitted
to trading on any national securities exchange (including the Nasdaq National
Market or Small Cap Market), the average of the closing prices during such
5-day period in the over-the-counter market as furnished by Nasdaq.
(i) Fractional Shares. No fractional share shall be issued upon
the exercise, in whole or in part, of this Warrant. If any exercise in whole
or in part of this Warrant would result in the issuance of a fraction of a
share of Common Stock, the Company shall, in lieu of issuing any fractional
share, pay the holder otherwise entitled to such fraction a sum in cash equal
to the fair market value of such fraction on the date of exercise (as
determined in good faith by the Board of Directors of the Company).
Section 9. Reclassification or Reorganization. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), the Company shall cause effective provision to be
made so that WARRANT HOLDER shall have the right thereafter by exercising this
Warrant, to purchase the kind and amount of shares of stock and other
securities and property receivable upon such reclassification, capital
reorganization or other change, by a holder of the number of shares of Common
Stock which might have been purchased upon exercise of this Warrant immediately
prior to such reclassification or change. Any such provision shall include
provision for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Warrant. The foregoing
provisions of this Section 9 shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common
Stock
Section 10. Piggy Back Registration Rights.
a) Definitions. As used herein the following defined
terms shall have the following respective meanings:
(i) "Common Stock" has the meaning set forth in
the Recitals.
(ii) "Holder(s)" means the holder(s) of Warrants
or Warrant Shares.
(ii) "Indemnified Party" has the meaning set forth
in Section 10(f)(iii).
(iii) "Indemnifying Party" has the meaning set
forth in Section 10(f)(iii).
(iv) The terms "register," "registered" and
"registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act.
(v) "Prospectus" means a preliminary and
definitive prospectus and all amendments and supplements thereto.
(vi) "SEC" means the Securities and Exchange
Commission.
(vii) "Securities Act" means the Securities Act of
1933, as amended.
b. Piggy Back Registration.
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<PAGE> 5
(i) If the Company shall hereafter determine to
register any of its securities, either for its own account or the account of a
security holder or holders, in a registration statement covering the sale of
Common Stock to the general public pursuant to a public offering (except with
respect to any registration filed on Form S-8, Form S-4 or any successor forms
thereto or forms analogous therewith and except for the registration statement
on Form SB-2 filed December 7, 1999), the Company will: (A) give to each
Holder written notice thereof (the "Filing Notice") at least 30 days before
filing; provided, however, in the case of a registration statement on Form
SB-1, the Company shall be required to give each Holder written notice of the
proposed filing thereof promptly after a decision to make such filing has been
made and in no event less than ten business days prior to filing; and (B) use
its best efforts to include in such registration (and any related qualification
under blue sky laws) and in any underwriting involved therein, the Warrant
Shares specified in a written request or requests by the Holders, made within
15 days after delivery of the Filing Notice, or, in the case of a registration
statement on Form SB-1, within seven business days after receipt of the Filing
Notice, by any Holder(s), except to the extent limited by the other terms of
this Section 10.
(ii) The right of any Holder to registration pursuant
to this Section 10 shall be conditioned upon such Holder's participation in the
underwriting (if an underwriting is pursued). All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by the Company,
which shall contain standard lock-up provisions which will be negotiated with
the lead underwriter in writing. Notwithstanding any other provision of this
Section, if the underwriter determines that marketing factors require a
limitation of the number of securities to be underwritten, the Company shall so
advise all Holders of Warrant Shares which would otherwise be registered and
underwritten pursuant hereto, and the Company shall include in such
registration first the number of securities requested to be sold by the Company
together with the number of securities requested to be sold by the security
holders exercising demand registration rights with respect to such
registration, if any, and the number of securities requested to be sold by
security holders exercising registration rights superior to the registration
rights of the Holders, then the number of Shares requested to be included in
the registration which, in the opinion of such underwriter, can be sold, pro
rata among all Holders thereof and all other shareholders of the Company that
have other contractual rights with respect to the registration of securities
held by such shareholders (the "Other Holders") in proportion, as nearly as
practicable, to the respective amounts of securities held by such Holders and
Other Holders at the time of filing the registration statement, with further
proportional allocations among the Holders and Other Holders if any such Holder
or Other Holder has requested less than all such Shares it is entitled to
register
c. Demand Registration.
(i) Subject to the terms and conditions of this
Warrant, Holders of not less than fifty one percent (51%) of the aggregate
number of Warrant Shares issuable upon exercise of this Warrant (and all other
Warrants issued upon transfer of this Warrant) may request, by delivering to
the Company written notice making such request and signed by such Holders (the
"Demand Notice"), that the Company file a registration statement under the
Securities Act on an appropriate form covering the Warrant Shares requested to
be included in such registration in accordance with the terms of this Section
10(c).
(ii) Within 20 days after receipt of a Demand Notice
determined to be sufficient by the Company, the Company shall send a written
notice (the "Company Demand Notice") to all Holders other than Holders having
signed the Demand Notice (the "Other
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<PAGE> 6
Holders") inquiring whether such Holders wish their Warrant Shares to be
registered in such registration. The Company shall use its best efforts to
file, as soon as practicable following the date of the Company Demand Notice, a
registration statement covering the Warrant Shares specified in the Demand
Notice and in written responses delivered to the Company by the Other Holders,
which written responses must be delivered within 20 days after receipt by the
Other Holder(s) of the Company Notice. The Company shall furnish each Holder
and Other Holder desiring to sell its Warrant Shares such number of
Prospectuses as may be reasonably requested.
(iii) Anything to the contrary in this Section 10
notwithstanding: (i) the Company is not and shall not be obligated to file any
registration statement (A) until the date which is sixty (60) days after the
date hereof, or (ii) the Company shall not be obligated to file any
registration statement if the Company, in the exercise of its reasonable good
faith judgement, determines that such registration would interfere with any
material financing, acquisition, disposition, corporate reorganization or other
material transaction involving the Company or any of its subsidiaries or
because public disclosure thereof would be required prior to the time such
disclosure might otherwise be required, in which case the Company shall delay
the registration request for only as long as would be required to disclose the
event at issue.
(iv) The Company shall be obligated to prepare and
file no more than one registration statement pursuant to this Section 10(c).
(iv) In the event of an underwritten offering, the
managing underwriter or underwriters of an underwritten public offering covered
by these demand registration rights shall be selected by the Company and be
reasonably acceptable to Holders of a majority of Warrant Shares to be included
in the registration.
(v) If any Holder's Warrant Shares are to be included
in any registration statement, such Holder shall furnish to the Company such
information as the Company may reasonably request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in this Warrant.
d. Expenses of Registration. All expenses incurred in
connection with any registration or qualification pursuant to this Agreement,
including, without limitation, all registration, filing and qualification fees,
printing expenses, fees and disbursements of counsel for the Company, and
expenses and fees of any special audits incidental to or required by such
registration, shall be borne by the Company; provided, however, that the
Company shall not be required to pay fees of legal counsel of the Holders, or
underwriters' commissions relating to the Warrant Shares. e.
Registration Procedures. In the case of each registration effected by the
Company pursuant to this Warrant, the Company will keep each Holder
participating therein advised in writing as to the initiation of such
registration (and any state qualifications) and as to the completion thereof.
Other than with respect to a registration statement filed upon exercise of the
demand registration rights set forth in Section 10(c) hereof, the Company may
decline to file a registration statement after giving notice to each Holder, or
withdraw any registration after filing and after such notice, but prior to the
effectiveness thereof, provided that the Company shall promptly notify each
Holder in writing of any such action and provided further that the Company
shall bear all expenses incurred by such Holder or otherwise in connection with
such withdrawn registration. Upon receipt of written notice from the Company
that any registration statement or Prospectus contains an untrue statement of a
material fact or an omission to state a material fact required to be stated in
a registration statement or Prospectus or necessary to make the statements in a
registration statement or Prospectus not misleading, each Holder shall
forthwith discontinue disposition of Warrant Shares until such Holder has
received copies of the
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<PAGE> 7
supplemented or amended Prospectus, or until such Holder is advised in writing
by the Company that the use of the Prospectus may be resumed, and, if so
directed by the Company, such Holder shall deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Warrant Shares current at
the time of receipt of such notice.
f. Indemnification.
(i) The Company will indemnify each Holder of
Warrant Shares included in the registration, each of the Holder's officers,
directors, partners and employees, and each person controlling such Holder,
with respect to such registration or qualification effected pursuant to this
Warrant, against all claims, losses, damages, and liabilities (or actions in
respect thereto) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any Prospectus, registration
statement or other document incident to any such registration or qualification,
or based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading (each a "Misstatement") or any violation by the Company of any rule
or regulation promulgated pursuant to any Federal, state or common law rule or
regulation including, without limitation, the Securities Act, applicable to the
Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance and will
reimburse each such Holder, each of the Holder's officers, directors, partners
and employees, and each person controlling such Holder, for any legal and any
other reasonable expenses incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, including
reasonable attorneys' fees and expenses; provided, however, that the Company
will not be liable in any such case to the extent that any such claim, loss,
damage or liability arises out of or is based on any untrue statement or
omission based upon and in conformity with written information furnished to the
Company by such Holder. Such indemnity shall be effective notwithstanding any
investigation made by or on behalf of any Holder or any such officer, director,
partner, employee, or controlling person and shall survive any transfer by the
same of the Shares. The foregoing notwithstanding, the Company shall not be
liable to the extent that any such claim, loss, damage or liability arises out
of or is based upon a Misstatement or alleged Misstatement made in any
Prospectus if (i) such Holder failed to send or deliver a copy of the
Prospectus with or prior to the delivery of written confirmation of the sale of
Shares giving rise to such claim, loss, damage or liability and (ii) the
Prospectus would have corrected such Misstatement. In addition, the Company
shall not be liable to the extent that any such claim, loss, damage or
liability arises out of or is based upon a Misstatement or alleged Misstatement
in a Prospectus, (i) if such Misstatement or alleged Misstatement is corrected
in an amendment or supplement to such Prospectus and (ii) having previously
been furnished by or on behalf of the Company with copies of the Prospectus as
so amended or supplemented, such Holder thereafter fails to deliver such
Prospectus as so amended or supplemented prior to or concurrently with the sale
to the person who purchased Shares from such Holder and who is asserting such
claim, loss, damage or liability.
(ii) Each Holder will, if Shares held by or issuable
to such Holder are included in the securities as to which such registration or
qualification is being effected, indemnify the Company, each of its directors,
officers and employees, each person who controls the Company, and each other
such Holder, each of such other Holder's officers, directors, partners and
employees, and each person controlling such other Holder, against all claims,
losses, damages and liabilities (or actions in respect thereto) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, Prospectus or other
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<PAGE> 8
document, or any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse the Company, such Holders, such directors,
officers, partners, employees or persons for any legal or any other reasonable
expenses incurred in connection with investigating or defending any such claim,
loss, damage, liability or action, including reasonable attorneys' fees and
expenses, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, Prospectus or other document in reliance
upon and in conformity with written information furnished to the Company by
such Holder. Notwithstanding the foregoing, the liability of any such Holder
shall not exceed an amount equal to the proceeds realized by each such Holder
of Shares sold as contemplated herein. Such indemnity shall be effective
notwithstanding any investigation made by or on behalf of the Company, any such
director, officer, partner, employee, or controlling person and shall survive
the transfer of such securities by such Holder.
(iii) Each party entitled to indemnification under
this Section 10 (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party") promptly after
such Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought. Unless in the reasonable judgment of the Indemnified Party a
conflict of interest may exist between the Indemnifying Party and the
Indemnified Party, the Indemnifying Party shall be permitted to assume the
defense of any such claim or any litigation resulting therefrom; provided,
however, that in any event counsel for the Indemnifying Party or Indemnified
Party who shall conduct the defense of such claim or litigation as provided
above shall be approved by the other Party (which approval shall not be
unreasonably withheld), and such other Party may participate in such defense at
such Party's expense; provided, further, that the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying
Party of its obligations under this Paragraph 6 unless such failure shall have
had a material adverse effect on the Indemnifying Party's ability to defend
such claim.
(iv) The Indemnified Party shall make no settlement
of any claim or litigation which would give rise to liability on the part of
the Indemnifying Party under any indemnity contained in this Section without
the written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed, and no Indemnifying Party shall make any
settlement of any such claim or litigation without the consent of the
Indemnified Party, which consent shall not be unreasonably withheld or delayed.
If a firm offer is made to settle a claim or litigation defended by the
Indemnified Party and the Indemnified Party notifies the Indemnifying Party in
writing that the Indemnified Party desires to accept and agree to such offer,
but the Indemnifying Party elects not to accept or agree to such offer within
ten days after receipt of written notice from the Indemnified Party of the
terms of such offer, then, in such event, the Indemnified Party shall continue
to contest or defend such claim or litigation and, if such claim or litigation
is within the scope of the Indemnifying Party's indemnity contained in this
Section, the Indemnified Party shall be indemnified pursuant to the terms
hereof. If a firm offer is made to settle a claim or litigation defended by
the Indemnifying Party and the Indemnifying Party notifies the Indemnified
Party in writing that the Indemnifying Party desires to accept and agree to
such offer, but the Indemnified Party elects not to accept or agree to such
offer within ten days after receipt of written notice from the Indemnifying
Party of the terms of such offer, then, in such event, the Indemnified Party
may continue to contest or defend such claim or litigation and, in such event,
the total maximum liability of the Indemnifying Party to indemnify or otherwise
reimburse the Indemnified Party in accordance with this Agreement with respect
to such claim or litigation shall be limited to
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and shall not exceed the amount of such settlement offer, plus reasonable
out-of-pocket costs and expenses (including reasonable fees and disbursements
of counsel) to the date of notice that the Indemnifying Party desired to accept
such settlement offer.
(v) The indemnification payments required pursuant
to this Section 10 for expenses of the investigation or defense of a claim or
lawsuit shall be made from time to time during the course of the investigation
or defense, as the case may be, upon submission of reasonably sufficient
documentation that any such expenses have been incurred.
g. Information by Holder. The Holder or Holders of Warrant
Shares included in any registration shall furnish to the Company such written
information regarding such Holder or Holders and the distribution proposed by
such Holder or Holders as the Company may reasonably request in writing and as
shall be required in connection with any registration or qualification referred
to in this Agreement. The Company agrees to include in any such registration
statement all information concerning the Holders and their distribution which
the Holders shall reasonably request.
h. Termination. The registration rights granted pursuant to
this Section 10 shall terminate with respect to any Holder on the date on which
the Holder may sell such Holder's Warrant Shares pursuant to Rule 144 under the
Securities Act or, with respect to any such Holder, on the date on which such
Holder's Warrant Shares have been registered pursuant to a registration
statement filed with the SEC and which has become effective.
Section 11. Representations and Warranties of the Company. The
Company hereby represents and warrants to Warrant Holder as follows as of the
date hereof:
a. Organization, Good Standing and Qualification. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, and has all requisite power and
authority to carry on its business as now conducted. The Company is duly
qualified to transact business, and is in good standing, in each U.S.
jurisdiction in which the failure to so qualify would have a material adverse
effect on its business.
b. Capitalization. The authorized capital of the Company
consists of 100,000,000 shares of common stock and, on the date hereof,
7,098,071 shares of Common Stock are issued and outstanding.
c. Authorization. All action on the part of the Company
necessary for the authorization, execution and delivery of this Agreement, the
performance of all obligations of the Company hereunder and the authorization,
issuance and delivery of the Warrants, to the extent that the foregoing
requires performance on or prior to the Closing, has been taken or will be
taken on or prior to the Closing, and the Company has all requisite power and
authority to enter into this Agreement.
Section 12. Representations and Warranties of Warrant Holder.
Warrant Holder hereby represents and warrants to the Company as follows as of
the date hereof:
a. Organization; Good Standing; Power and Authority; Binding
Obligation. Warrant Holder has full power and authority to enter into this
Agreement, and, if Warrant Holder is a corporation (i) such Warrant Holder is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, and has all requisite power and
authority to carry on its business as now conducted, and (ii) all action on the
part of WARRANT HOLDER necessary for the authorization, execution and delivery
of this Agreement, the performance of all obligations of WARRANT HOLDER
hereunder has been taken, and WARRANT HOLDER has all requisite power and
authority to enter into this
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Agreement. This Agreement has been duly executed and delivered by Warrant
Holder and, assuming due authorization, execution and delivery by the Company,
constitutes Warrant Holder's valid and legally binding obligation enforceable
against WARRANT HOLDER in accordance with its terms, subject to the effect of
any applicable bankruptcy, reorganization, insolvency (including, without
limitation, all laws relating to fraudulent transfers), moratorium or similar
laws affecting creditors' rights generally, subject, as to enforceability, to
the effect of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and subject
to the effect of applicable securities laws as to rights of indemnification.
b. Purchase Entirely for Own Account, Etc.. The Warrants and
shares of Common Stock underlying the Warrants (the "Warrant Shares") to be
purchased by Warrant Holder hereunder will be acquired for investment for
Warrant Holder's own account, not as a nominee or agent, and not with a view to
the resale or distribution of any part thereof. Warrant Holder has no present
intention of selling, granting any participation in, or otherwise distributing
the Warrants or the Warrant Shares. Warrant Holder does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or
grant participations to any person with respect to the Warrants or the Warrant
Shares. WARRANT HOLDER has not construed the contents of this Agreement, or
any additional agreement with respect to the proposed investment in the
Warrants or any prior or subsequent communications from the Company, or any of
its officers, employees or representatives, as investment, tax or legal advice
or as information necessarily applicable to such Warrant Holder's particular
financial situation. WARRANT HOLDER has consulted its own financial advisor,
tax advisor, legal counsel and accountant, as necessary or desirable, as to
matters concerning his investment in the Warrants and Warrant Shares.
c. Disclosure. Warrant Holder has received or reviewed all
the information which such Warrant Holder has requested for the purposes of
determining the merits of the Warrants as an investment. Warrant Holder has
read and understands the Risk Factors attached to this Warrant as Exhibit A.
Warrant Holder has had an opportunity to ask questions and receive answers from
the Company regarding Sonus, the Company and their respective business,
operations and financial condition and the terms and conditions of this
Warrant, and answers have been provided to Warrant Holder's full satisfaction.
Warrant Holder has fully reviewed all corporate and governance documents of the
Company and such other documents, which Warrant Holder feels is necessary or
appropriate prior to purchase of the Warrant, understands all relevant terms
and has asked all questions and received answers thereto to Warrant Holder's
full satisfaction. If deemed necessary by Warrant Holder, Warrant Holder has
consulted with a professional advisor who has provided Warrant Holder with
advice concerning terms. WARRANT HOLDER ACKNOWLEDGES AND AGREES THAT THE
PURCHASE OF THE WARRANTS AND WARRANT SHARES INVOLVES A HIGH DEGREE OF RISK,
INCLUDING, WITHOUT LIMITATION, THOSE SET FORTH ON EXHIBIT A, AND MAY RESULT IN
A LOSS OF THE ENTIRE AMOUNT INVESTED. WARRANT HOLDER FURTHER ACKNOWLEDGES AND
AGREES THAT THERE IS ONLY A LIMITED PUBLIC MARKET FOR THE WARRANT SHARES OF THE
COMPANY. THERE IS NO ASSURANCE THAT THE COMPANY'S OPERATIONS WILL RESULT IN
REVENUES OR BE PROFITABLE OR THAT A MORE LIQUID PUBLIC MARKET FOR THE WARRANT
SHARES WILL DEVELOP AT ANY TIME.
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d. Accredited Investor. Warrant Holder is an accredited
investor as defined in Rule 501(a) of Regulation D promulgated under the 1933
Act. The information provided by Warrant Holder on the Statement of Accredited
Investor, attached hereto as Exhibit B, is true, correct and complete in all
respects. Warrant Holder is capable of bearing the economic risk of an
investment in the Warrants, including the possible loss of Warrant Holder's
entire investment. Warrant Holder has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of an investment in the Warrant offered hereby. If other than an
individual, Warrant Holder has not been organized solely for the purpose of
acquiring the Warrants.
e. Restricted Securities. Warrant Holder understands that
the Warrants received hereunder, as well as the Warrant Shares, are "restricted
securities" as defined in the Securities Act, and that under federal and state
securities laws the Shares and Warrant Shares may be resold without
registration under the Securities Act only in certain limited circumstances.
Warrant Holder is familiar with Rule 144 promulgated by the Securities and
Exchange Commission (the "Commission") under the Securities Act, and
understands the resale limitations imposed thereby and by the Securities Act
generally. Warrant Holder also acknowledges that the Warrants and Warrant
Shares are subject to significant restrictions on transfer, pledge or
hypothecation.
f. Legends. It is understood that certificates or other
evidence of the Warrants and Warrant Shares may bear the following legend, as
well as any legend required by the laws of any state:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION
STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH
ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED PURSUANT TO A VALID
EXEMPTION THEREFROM UNDER THE SECURITIES ACT OF 1933."
g. Consents and Approvals; No Conflict. (i) The execution
and delivery of this Agreement by WARRANT HOLDER does not, and the performance
of this Agreement by WARRANT HOLDER will not, require any consent, approval,
authorization or other action by, or filing with or notification to, any
governmental or regulatory authority.
(ii) The execution, delivery and performance of this
Agreement by WARRANT HOLDER does not (A) in the case of any Warrant Holder that
is not an individual, conflict with or violate the charter or by-laws,
partnership or other governing documents of such Warrant Holder, or (B)
conflict with or violate any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award applicable to WARRANT HOLDER.
Section 13. Miscellaneous.
(a) Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of, and be binding upon, the respective
successors and assigns of the parties, except to the extent otherwise provided
herein. Nothing in this Agreement, express or implied, is intended to confer
upon any party, other than the parties hereto or their respective successors
and assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided in this Agreement.
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(b) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the principles of conflict of laws thereof.
(c) Counterparts; Delivery by Facsimile. This Agreement may
be executed in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. Delivery of this Agreement may be effected by facsimile.
(d) Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(e) Notices. Unless otherwise provided, any notice required
or permitted hereunder shall be given by personal service upon the party to be
notified, by nationwide overnight delivery service or upon deposit with the
United States Post Office, by certified mail, return receipt requested and:
i. if to the Company, addressed to SONUS
COMMUNICATION HOLDINGS, INC., 1600 Wilson Blvd., Suite 1008, Arlington,
Virginia 22209, Attention: W. Todd Coffin, with a copy to Cecil E. Martin, III,
Esquire, McGuire, Woods Battle & Booth LLP, Seven Saint Paul Street, Suite
1000, Baltimore, Maryland 21202- 1626, or at such other address as the Company
may designate by notice to Warrant Holder in accordance with the provisions of
this Section; and
ii. if to WARRANT HOLDER, at the address indicated
on the signature pages hereof, or at such other addresses as Warrant Holder may
designate by notice to the Company in accordance with the provisions of this
Section.
(f) Amendments and Waivers. Any term of this Agreement may
be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either prospectively or
retroactively), only with the written consent of the Company and Warrant
Holder.
(g) Entire Agreement. This Agreement and the Subscription
Agreement (including the exhibits and schedules hereto) constitute the entire
agreement among the parties hereto with respect to the subject matter hereof
and thereof and supersede all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the parties hereto.
IN WITNESS WHEREOF, the undersigned hereby sets his hand and seal this
29th day of March, 2000.
SONUS COMMUNICATION HOLDINGS, INC.
By: /s/ Richard D. Rose
------------------------------------
Name: Richard D. Rose
Title: Chief Financial Officer
FERRIS, BAKER WATTS, INCORPORATED
By:
------------------------------------
Name:
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Title:
Address:
--------------------------
--------------------------
--------------------------
.
-
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EXERCISE NOTICE
Dated: _____________________
The undersigned hereby irrevocably elects to exercise his, her or its
right to purchase _________ shares of the common stock, $.0001 par value per
share (the "Common Stock"), of SONUS COMMUNICATION HOLDINGS, INC., a Delaware
corporation (the "Company"), such right being pursuant to a Warrant issued
March 29, 2000, and as issued to the undersigned by the Company, and remits
herewith the sum of $______ in payment for same in accordance with the Exercise
Price specified in Section 8 of said Warrant.
<PAGE> 15
ASSIGNMENT FORM
Dated: _____________________
For value received ____________________ hereby sells, assigns and
transfers unto
Name: ____________________________________________
(Please typewrite or print block letters)
Address: ____________________________________________
____________________________________________
and appoints: ____________________________________________
____________________________________________
Attorney to transfer the said Warrant on the books of SONUS COMMUNICATION
HOLDINGS, INC. with full power of substitution in the premises.
Signature: ______________________________
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<PAGE> 16
CASHLESS EXERCISE FORM
To: Sonus Communication Holdings, Inc
The undersigned hereby irrevocably elects a cashless exercise of the right of
purchase represented by the attached Warrant with respect to __________________
Warrant Shares, as provided for in Section 8 (h) thereof.
Please issue a certificate or certificates for such shares of Common Stock
issuable pursuant hereto in the name of the Warrant Holder as also shown below.
Please pay in cash any fractional share that results from such calculation.
Note: The signature below should correspond exactly with the name shown on
page one of the Warrant as Warrant Holder.
Date: Name:
----------------------------------- ----------------------------
(Please print name)
Social Security Number or
Other tax identification number:
- ---------------------------------------- -------------------------
Signature
3
<PAGE> 17
EXHIBIT A
RISK FACTORS
The risk factors included in the Form SB-2/A filed with the Securities
and Exchange Commission on March 22, 2000 are incorporated by reference into
this warrant.
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<PAGE> 18
EXHIBIT B
STATEMENT OF ACCREDITED INVESTOR
To: SONUS COMMUNICATION HOLDINGS, INC. (the "Company")
Ladies and Gentlemen:
The undersigned hereby refers to the Warrants executed and delivered
to the Company by the undersigned as of the date herewith. In connection with
the issuance of the Warrants, the undersigned hereby represents and warrants
that such individual or entity meets at least one of the tests listed on the
attached Addendum I for an "accredited investor" (as such term is defined under
Regulation D promulgated pursuant to the Securities Act of 1933, as amended).
Dated: , 2000
Very truly yours,
FERRIS, BAKER WATTS, INCORPORATED
-----------------------------------
Authorized Signature
Name:
Title:
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<PAGE> 19
ADDENDUM I
NOTE: "Accredited Investors" are accorded special status under the
federal securities laws. Individuals who hold certain positions with an issuer
or its affiliates, or who have certain minimum individual income or certain
minimum net worth (each as described below) may qualify as Accredited
Investors. Partnerships, corporations or other entities may qualify as
Accredited Investors if they fulfill certain financial and other standards, or
if all of their equity owners have incomes and/or net worth which qualify them
individually as Accredited Investors, and trusts may qualify as Accredited
Investors if they meet certain financial and other tests (as described below).
You may qualify as an Accredited Investor under Regulation D
promulgated under the Securities Act of 1933 (the "Securities Act") if you meet
any of the following tests:
FOR INDIVIDUALS ONLY
1. You are a director or an executive officer of SONUS
COMMUNICATION HOLDINGS, INC. An "executive officer" is the president, any vice
president in charge of a principal business unit, division or function (such as
sales, administration or finance), any other officer who performs a policy
making function or any other person who performs similar policy making
functions for SONUS COMMUNICATION HOLDINGS, INC.
OR
2. You had individual income (exclusive of any income
attributable to your spouse) of more than $200,000 in 1998 and 1999 and
reasonably expect to have an individual income in excess of $200,000 in 2000,
or your spouse and you had a joint income in excess of $300,000 in 1998 and
1999, and you reasonably expect to have a joint income in excess of $300,000 in
2000. For purposes hereof, income means adjusted gross income, as reported for
federal income tax purposes, increased by the following amounts: (i) the amount
of any tax exempt interest income under Section 103 of the Internal Revenue
Code (the "Code") received, (ii) the amount of losses claimed as a limited
partner in a limited partnership as reported on Schedule E of Form 1040, (iii)
any deduction claimed for depletion under Section 611 of the Code or (iv) any
amount by which income has been reduced in arriving at adjusted gross income
pursuant to the provisions of Section 1202 of the Code. In determining
personal income, however, unrealized capital gains should not be included.
OR
3. You have an individual net worth, or your spouse and you have
a combined net worth, in excess of $1,000,000. For purposes of this statement,
"net worth" means the excess of total assets at fair market value, including
home, home furnishings and automobiles, over total liabilities.
FOR TRUSTS ONLY
4. The Trust has total assets in excess of $5,000,000, was not
formed for the specific purpose of acquiring securities of SONUS COMMUNICATION
HOLDINGS, INC., and the purchase of such securities is directed by a person
with such knowledge and experience in financial and business matters that he is
capable of evaluating the risks and merits of the prospective investment in
such securities.
FOR CORPORATIONS, PARTNERSHIPS OR OTHER PURCHASING ENTITIES
5. Any corporation, partnership, limited liability company or
limited liability partnership not formed for the specific purpose of acquiring
securities of SONUS COMMUNICATION HOLDINGS, INC., with total assets in excess
of $5,000,000.
6
<PAGE> 20
OR
6. All equity owners of the purchasing entity are Accredited
Investors.
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<PAGE> 1
EXHIBIT 4.5
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), is dated as of
________________ __, 200__, by and between SONUS COMMUNICATION HOLDINGS, INC., a
Delaware corporation (the "COMPANY"), the Principal Stockholders (within the
meaning of the Merger Agreement defined below), and the stockholders of Empire
One Telecommunications, Inc., a New York corporation, who agree to be bound by
this Agreement listed on Schedule A attached hereto and incorporated by
reference herein (each a "STOCKHOLDER" and collectively, the "STOCKHOLDERS").
WHEREAS, pursuant to the terms of that certain Merger Agreement of even
date herewith by and between the Company, EOT Acquisition Corporation, a
Delaware corporation ("Acquisition"), Empire One Telecommunications, Inc., a New
York corporation ("Empire One"), the Stockholder and certain other stockholders
of Empire One (the "MERGER AGREEMENT"), the Stockholder will receive, pursuant
to the conditions of the Merger Agreement, _________ shares of the Company's
Common Stock, par value $.0001 per share (the "COMMON STOCK") upon the
consummation of the merger of Empire One into Acquisition (the "Merger"); and
WHEREAS, in order to induce the Stockholder to enter into the Merger
Agreement and/or vote for the Merger contemplated thereby, the Company desires
to grant registration rights to the Stockholder for the shares of Common Stock
to be received in the Merger in accordance with the terms and conditions hereof;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereto agree as follows:
1. DEFINITIONS. As used herein the following defined terms shall have the
following respective meanings:
(a) "CAPITAL STOCK" means the Company's Common Stock and any other
class of common stock created by the Company in the future.
(b) "COMMON STOCK" has the meaning set forth in the Recitals.
(c) "HOLDERS" means any person or entity to whom shares of Capital
Stock were issued pursuant to the Merger Agreement and which agrees to be
bound by this Agreement.
(d) "INDEMNIFIED PARTY" has the meaning set forth in subparagraph
6(c).
(e) "INDEMNIFYING PARTY" has the meaning set forth in subparagraph
6(c).
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<PAGE> 2
(f) The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to
a registration effected by preparing and filing a registration statement
in compliance with the Securities Act.
(g) "REGISTRABLE SECURITIES" means all shares of Capital Stock of
the Company issued pursuant to the Merger Agreement.
(h) "SEC" means the Securities and Exchange Commission.
(i) "SECURITIES ACT" means the Securities Act of 1933, as amended.
2. RESERVED.
3. COMPANY REGISTRATION.
(a) If the Company, at any time after the completion of the next
registration of Capital Stock under the Securities Act to occur following
the date hereof, shall determine to register any of its securities,
either for its own account or the account of a security holder or
holders, in a registration statement covering the sale of Capital Stock
to the general public pursuant to an underwritten public offering (except
with respect to any registration filed on Form S-8, Form S-4 or any
successor forms thereto), the Company will: (i) give to each Holder
written notice thereof at least 45 days before filing; provided, however,
in the case of a Registration Statement on Form S-3, the Company shall be
required to give each Holder written notice of the proposed filing
thereof promptly after a decision to make such filing has been made and
in no event less than ten business days prior to filing; and (ii) use its
best efforts to include in such registration (and any related
qualification under blue sky laws) and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made within 15 days after receipt of such written notice from
the Company, or, in the case of a Registration Statement on Form S-3,
within seven business days after receipt of such written notice, by any
Holder or Holders, except as set forth in subparagraph 3(b) below. The
notice referred to in this subparagraph shall include a list of the
jurisdictions in which the Company intends to attempt to qualify such
securities under the applicable blue sky or other state securities laws.
(b) The right of any Holder to registration pursuant to this
Paragraph 3 shall be conditioned upon such Holder's participation in the
underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together
with the Company) enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting by
the Company, and may, at their option, require that any or all the
representations and warranties by, and the covenants and other agreements
on the part of, the Company to and for the benefit of such underwriter
shall also be made to and for the benefit of such Holders. Such Holders
shall not be required to make any representations or warranties to or
agreements with the Company or the underwriter other than those relating
to such Holders, their Registrable Securities and their intended methods
of distribution and information about such Holders provided by such
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<PAGE> 3
Holders for use in the registration statement. Upon the written request
of the managing underwriter of any underwritten offering of the Company's
securities, a Holder of Registrable Securities shall not sell, make any
short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any Registrable Securities (other than those included in such
registration) without the prior written consent of such managing
underwriter for a period (not to exceed 30 days before the effective date
and 75 days thereafter) that such managing underwriter reasonably
determines is necessary in order to effect the underwritten public
offering. Notwithstanding any other provision of this Paragraph 3, if the
underwriter determines that marketing factors require a limitation of the
number of shares to be underwritten, the Company shall so advise all
Holders of Registrable Securities which would otherwise be registered and
underwritten pursuant hereto, and the Company shall include in such
registration first the number of shares requested to be sold by the
Company together with the number of shares requested to be sold by the
persons and entities exercising demand registration rights with respect
to such registration, if any, then the number of shares of Registrable
Securities requested to be included in the registration which, in the
opinion of such underwriter, can be sold, pro rata among all Holders
thereof and all other shareholders of the Company that have contractual
rights with respect to the registration of shares of Capital Stock held
by such shareholders (the "Other Holders") in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by
such Holders and Other Holders at the time of filing the registration
statement, with further proportional allocations among the Holders and
Other Holders if any such Holder or Other Holder has requested less than
all such Registrable Securities it is entitled to register.
4. EXPENSES OF REGISTRATION. All expenses incurred in connection with any
registration or qualification pursuant to this Agreement, including,
without limitation, all registration, filing and qualification fees,
printing expenses, fees and disbursements of counsel for the Company, and
expenses and fees of any special audits incidental to or required by such
registration, shall be borne by the Company; provided, however, that the
Company shall not be required to pay fees of legal counsel of the
Holders, or underwriters' discounts or commissions relating to
Registrable Securities (such underwriters' fees, discounts or commissions
to be borne by the Holders, on a pro rata basis, based on the number of
shares of Registrable Securities sold by each of them).
5. REGISTRATION PROCEDURES. In the case of each registration effected by
the Company pursuant to this Agreement, the Company will keep each Holder
participating therein advised in writing as to the initiation of such
registration (and any state qualifications) and as to the completion
thereof. The Company may decline to file a Registration Statement after
giving notice to each Holder, or withdraw any registration after filing
and after such notice, but prior to the effectiveness thereof, provided
that the Company shall promptly notify each Holder in writing of any such
action and provided further that the Company shall bear all expenses
incurred by such Holder or otherwise in connection with such withdrawn
registration. Upon receipt of written notice from the Company that a
registration statement or prospectus contains a Misstatement (as defined
below), each Holder of Registrable Securities shall forthwith discontinue
disposition of Registrable Securities until such Holder has received
copies of the supplemented or amended prospectus, or until such Holder is
advised in writing by the Company that the use of the
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<PAGE> 4
prospectus may be resumed, and, if so directed by the Company, such
Holder shall deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in such Holder's
possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice.
6. INDEMNIFICATION.
(a) The Company will indemnify each Holder of Registrable
Securities, each of the Holder's officers, directors, partners and
employees, and each person controlling such Holder, with respect to such
registration or qualification effected pursuant to this Agreement and in
which Registrable Securities of the Holders are included, against all
claims, losses, damages, and liabilities (or actions in respect thereto)
arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, registration
statement or other document incident to any such registration or
qualification, or based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, or any violation by the
Company of any rule or regulation promulgated pursuant to any Federal,
state or common law rule or regulation including, without limitation, the
Securities Act, applicable to the Company and relating to action or
inaction required of the Company in connection with any such
registration, qualification or compliance and will reimburse each such
Holder, each of the Holder's officers, directors, partners and employees,
and each person controlling such Holder, for any legal and any other
reasonable expenses incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, including
reasonable attorneys' fees and expenses; provided, however, that the
Company will not be liable in any such case to the extent that any such
claim, loss, damage or liability arises out of or is based on any untrue
statement or omission based upon and in conformity with written
information furnished to the Company by such Holder. Such indemnity shall
be effective notwithstanding any investigation made by or on behalf of
any Holder or any such officer, director, partner, employee, or
controlling person and shall survive any transfer by the same of the
Registrable Securities. The foregoing notwithstanding, the Company shall
not be liable to the extent that any such claim, loss, damage or
liability arises out of or is based upon an untrue statement of a
material fact or an omission to state a material fact required to be
stated in a registration statement or prospectus or necessary to make the
statements in a registration statement, prospectus or preliminary
prospectus not misleading (a "Misstatement") or alleged Misstatement made
in any preliminary prospectus if (i) such Holder failed to send or
deliver a copy of the Prospectus with or prior to the delivery of written
confirmation of the sale of Registrable Securities giving rise to such
claim, loss, damage or liability and (ii) the prospectus would have
corrected such Misstatement. In addition, the Company shall not be liable
to the extent that any such claim, loss, damage or liability arises out
of or is based upon a Misstatement or alleged Misstatement in a
prospectus, (i) if such Misstatement or alleged Misstatement is corrected
in an amendment or supplement to such prospectus and (ii) having
previously been furnished by or on behalf of the Company with copies of
the prospectus as so amended or supplemented, such Holder thereafter
fails to deliver such prospectus as so amended or supplemented prior to
or concurrently with the sale to the person who
11
<PAGE> 5
purchased a Registrable Security from such Holder and who is asserting
such claim, loss, damage or liability.
(b) Each Holder will, if Registrable Securities held by or
issuable to such Holder are included in the securities as to which such
registration or qualification is being effected, indemnify the Company,
each of its directors, officers and employees, each person who controls
the Company, and each other such Holder, each of such other Holder's
officers, directors, partners and employees, and each person controlling
such other Holder, against all claims, losses, damages and liabilities
(or actions in respect thereto) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus or other document, or any
omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company, such Holders, such directors,
officers, partners, employees or persons for any legal or any other
reasonable expenses incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, including
reasonable attorneys' fees and expenses, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus or other document in reliance upon and in
conformity with written information furnished to the Company by such
Holder. Notwithstanding the foregoing, the liability of any such Holder
shall not exceed an amount equal to the proceeds realized by each such
Holder of Registrable Securities sold as contemplated herein. Such
indemnity shall be effective notwithstanding any investigation made by or
on behalf of the Company, any such director, officer, partner, employee,
or controlling person and shall survive the transfer of such securities
by such Holder.
(c) Each party entitled to indemnification under this Paragraph 6
(the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought. Unless in the reasonable judgment of the Indemnified Party
a conflict of interest may exist between the Indemnifying Party and the
Indemnified Party, the Indemnifying Party shall be permitted to assume
the defense of any such claim or any litigation resulting therefrom;
provided, however, that in any event counsel for the Indemnifying Party
or Indemnified Party who shall conduct the defense of such claim or
litigation as provided above shall be approved by the other Party (which
approval shall not be unreasonably withheld), and such other Party may
participate in such defense at such Party's expense; provided, further,
that the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under
this Paragraph 6 unless such failure shall have had a material adverse
effect on the Indemnifying Party's ability to defend such claim.
(d) The Indemnified Party shall make no settlement of any claim or
litigation which would give rise to liability on the part of the
Indemnifying Party under any indemnity contained in this Paragraph 6
without the written consent of the Indemnifying Party, which consent
shall not be unreasonably withheld or delayed, and no Indemnifying Party
shall make any settlement of any such claim or litigation without the
consent of the Indemnified
12
<PAGE> 6
Party, which consent shall not be unreasonably withheld or delayed. If a
firm offer is made to settle a claim or litigation defended by the
Indemnified Party and the Indemnified Party notifies the Indemnifying
Party in writing that the Indemnified Party desires to accept and agree
to such offer, but the Indemnifying Party elects not to accept or agree
to such offer within ten days after receipt of written notice from the
Indemnified Party of the terms of such offer, then, in such event, the
Indemnified Party shall continue to contest or defend such claim or
litigation and, if such claim or litigation is within the scope of the
Indemnifying Party's indemnity contained in this Paragraph 6, the
Indemnified Party shall be indemnified pursuant to the terms hereof. If a
firm offer is made to settle a claim or litigation defended by the
Indemnifying Party and the Indemnifying Party notifies the Indemnified
Party in writing that the Indemnifying Party desires to accept and agree
to such offer, but the Indemnified Party elects not to accept or agree to
such offer within ten days after receipt of written notice from the
Indemnifying Party of the terms of such offer, then, in such event, the
Indemnified Party may continue to contest or defend such claim or
litigation and, in such event, the total maximum liability of the
Indemnifying Party to indemnify or otherwise reimburse the Indemnified
Party in accordance with this Agreement with respect to such claim or
litigation shall be limited to and shall not exceed the amount of such
settlement offer, plus reasonable out-of-pocket costs and expenses
(including reasonable fees and disbursements of counsel) to the date of
notice that the Indemnifying Party desired to accept such settlement
offer.
(e) The indemnification payments required pursuant to this
Paragraph 6 for expenses of the investigation or defense of a claim or
lawsuit shall be made from time to time during the course of the
investigation or defense, as the case may be, upon submission of
reasonably sufficient documentation that any such expenses have been
incurred.
7. INFORMATION BY HOLDER. The Holder or Holders of Registrable Securities
included in any registration shall furnish to the Company such written
information regarding such Holder or Holders and the distribution
proposed by such Holder or Holders as the Company may reasonably request
in writing and as shall be required in connection with any registration
or qualification referred to in this Agreement. The Company agrees to
include in any such registration statement all information concerning the
Holders and their distribution which the Holders shall reasonably
request.
8. CHANGES; WAIVER; ASSIGNMENT. The terms and provisions of this
Agreement may not be modified, amended or assigned, except that they may
be modified, amended or assigned with the written consent of (i) the
Company and (ii) the Holders of a majority of the Registrable Securities
outstanding. None of the terms and provisions of this Agreement may be
waived except in writing by the person so waiving.
9. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Delaware, without
giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the
State of Delaware.
13
<PAGE> 7
10. NOTICE. All notices, requests and other communications hereunder must
be in writing and will be deemed to have been duly given only if
delivered personally against written receipt or by facsimile transmission
or mailed by prepaid first class certified mail, return receipt
requested, or delivered by a nationally recognized overnight courier
service prepaid, to the parties at the following addresses or facsimile
numbers: If to the Company, to:
Sonus Communication Holdings, Inc.
1600 Wilson Boulevard, Suite 1008
Arlington, Virginia 22209
Attention: Rick D. Rose
Telecopier: 703-527-8865
with a copy to:
Cecil E. Martin, III, Esquire
McGuire, Woods, Battle & Boothe LLP
7 St. Paul Street, Suite 1000
Baltimore, Maryland 21202
Telecopier: 410-659-4535
If to the Holders, to the address listed as the most recent address of
such Holders on the books and records of Empire One Telecommunications,
Inc.
with a copy to:
David E. Bronston, Esquire
Wolf, Block, Schorr and Solis-Cohen LLP
250 Park Avenue
New York, New York 10177
Telecopier: 212-986-0604
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given
upon delivery, (ii) if delivered by facsimile transmission to the
facsimile number as provided for in this Section, be deemed given upon
receipt, (iii) if delivered by mail in the manner described above to the
address as provided in this Section, be deemed given on the earlier of
the fourth Business Day following mailing or upon receipt and (iv) if
delivered by overnight courier to the address as provided for in this
Section, be deemed given on the earlier of the first Business Day
following the date sent by such overnight courier or upon receipt (in
each case regardless of whether such notice, request or other
communication is received by any other Person to whom a copy of such
notice is to be delivered pursuant to this Section). Any party from time
to time may change its address, facsimile number or other information for
the purpose of notices to that party by giving notice specifying such
change to the other parties hereto.
14
<PAGE> 8
11. TERMINATION. This Agreement shall terminate with respect to any
Holder on the date on which the Holder may sell all of such Holder's
Registrable Securities pursuant to Rule 144 under the Securities Act
within any 90 day period or, with respect to any such Holder, on the date
on which all of such Holder's Registrable Securities have been registered
pursuant to a registration statement filed with the Commission and which
has become effective.
12. Arbitration.
(a) Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association by an arbitration panel consisting of three
persons, one selected by Sonus, one selected by the Principal
Stockholders and the third selected by mutual agreement of the first two
arbitrators selected, and judgement upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.
(b) The arbitration shall be held in Washington, D.C. if brought
by Target or any of the Principal Stockholders and in New York City if
brought by Acquisition or Sonus.
(c) All fees, costs and expenses (including reasonable attorneys'
fees and expenses) incurred by a party that prevails on any issue in any
arbitration commenced hereunder or in any judicial proceeding seeking to
enforce this Agreement to arbitrate disputes or seeking to enforce any
order or award of any arbitration hereunder shall be assessed against the
party or parties that do not prevail on such issue or issues.
14. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original and which together shall constitute a
single agreement. This Agreement may be delivered by facsimile.
15. HEADINGS. The headings of the Paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute a
part hereof.
16. SEVERABILITY. If any provision or any portion of any provision of
this Agreement shall be held to be void or unenforceable, the remaining
portions of this Agreement shall continue in full force and effect.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed by their authorized officers as of the day and year first above
written.
SONUS COMMUNICATION HOLDINGS, INC.
By: /s/ W. Todd Coffin
------------------------------------
Name: W. Todd Coffin
Title: CEO
15
<PAGE> 9
[NAME OF HOLDER]
By:
------------------------------------
Name:
Title:
16
<PAGE> 1
EXHIBIT 10.1
COLLATERAL NOTE
(hereinafter the 'Collateral Note")
<TABLE>
<S> <C>
Borrowers: Sonus Communication Holdings, Inc. Lender: Citizens Telecommunications Company
1600 Wilson Boulevard, Suite 1008 3 High Ridge Park
Arlington, VA 22209 Stamford, CT 06905
and
Empire One Telecommunications, Inc.
254 West 31st Street
New York, NY 10001
Principal Amount: $358,461.88 Interest Rate: 10.5% Date of Collateral Note:
March 29, 2000
</TABLE>
For value received, the undersigned, SONUS COMMUNICATION HOLDINGS, INC.
jointly and severally with its wholly owned subsidiary, EMPIRE ONE
TELECOMMUNICATIONS, INC. ("Borrowers") both Delaware corporations, promise to
pay to CITIZENS TELECOMMUNICATIONS COMPANY, ("Lender") or order, the principal
amount of Three Hundred Fifty Eight Thousand Four Hundred Sixty One and 88/100
Dollars ($358,461.88), together with interest thereon. Said sum shall be paid in
the following manner:
Borrowers will pay this Collateral Note in eleven (11) payments as follows: one
irregular payment of Nineteen Thousand Eight Hundred and Eighty Three Dollars
and Eight Four Cents (19,883.84) on April 1, 2000, nine regular payments of
Thirteen Thousand Eight Hundred Ten and 98/100 Dollars ($13,810.98) each and one
irregular last payment of Two Hundred Thirty-Five Thousand Seven Hundred
Sixty-Eight and 77/100 Dollars ($229,695.83). Borrower's first payment is due
April 1, 2000, and all subsequent payments are due on the first day of each
month thereafter until the full amount of the principal and interest is paid.
Borrower's final payment due March 1, 2001, will be for all principal and
accrued interest not yet paid. Payments include principal and interest. Interest
on this Collateral Note is computed on a 360 day year simple interest basis;
that is, by applying the ratio of the annual interest rate over a year of 360
days, multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding using a 360 day year. Unless
otherwise agreed or required by applicable law, payments will be applied first
to accrued unpaid interest, then to principal, and any remaining amount to any
unpaid collection costs and late charges. A schedule of principal and interest
payments is attached hereto as Attachment 3.
Conditions Precedent to Release of Proceeds by Lender
1
<PAGE> 2
(a) Lender shall have received evidence that this Collateral Note, the Security
Agreement, and the Stock Pledge and Escrow Agreement have been duly authorized,
executed, and delivered by Borrower to Lender; and
(b) All guaranties required by Lender for the Loan shall have been executed by
each guarantor listed below, delivered to Lender, and be in full force and
effect. The guarantors are:
<TABLE>
<CAPTION>
Guarantor Title
--------- -----
<S> <C>
JOHN K. FRIEDMAN COO of SONUS Communication Holdings, Inc and
CEO of Empire One Telecommunications, Inc.
W. TODD COFFIN CEO of SONUS Communication Holdings, Inc.
</TABLE>
SECURITY. Borrowers have granted Lender a security interest, to secure the
payment of this note, in the following property: all of the undersigned
corporations' now owned and hereafter acquired accounts, including, but not
limited to, accounts receivable and contract rights, client base list, chattel
paper, documents and instruments and the right to receive payment under them.
Every maker, endorser, and guarantor of this Collateral Note, or the
obligation represented by it, waives, in the event of default, presentment,
demand, notice, protest, and all other demands and notices in connection with
the delivery, acceptance, performance, or enforcement of this Collateral Note,
assents to any extension or postponement of the time of payment or any other
indulgence, to any substitution, exchange or release of collateral, and/or to
the addition or the release of any other party or persons primarily or
secondarily liable. Lender agrees to grant a cure period of ten (10) business
days after written notice of default has been given to the undersigned
corporation. Subject to this opportunity to cure, this Collateral Note will
automatically accelerate in the event of default and all amounts will become
immediately due and payable.
This Collateral Note dated March 29, 2000 replaces the Collateral Note dated
April 4, 1997 by and between Empire One Telecommunications, Inc. (a predecessor
New York corporation) and Citizens Telecommunications Company. Upon the
execution of this note by the Parties hereto, the Collateral Note dated April 4,
1997 will be considered satisfied.
The undersigned will pay (i) on demand all costs of collection and (ii)
reasonable attorneys' fees, incurred or paid by the holder in enforcing this
Collateral Note on default. As herein used, the word "holder" shall mean the
payee or other endorsee of
2
<PAGE> 3
this Collateral Note, who is in possession of it, or the bearer of it, if this
Collateral Note is at the time payable to the bearer.
SONUS COMMUNICATION HOLDINGS, INC.
By: /s/ W. Todd Coffin
--------------------------------------
W. Todd Coffin
Chief Executive Officer
EMPIRE ONE TELECOMMUNICATIONS, INC.
By: /s/ John K. Friedman
--------------------------------------
John K. Friedman
Chief Executive Officer
3
<PAGE> 1
EXHIBIT 10.2
SECURITY AGREEMENT
(hereinafter the "Security Agreement")
Dated: March 29, 2000
Section One
Promise to Pay; Collateral
Security Agreement
Sonus Communication Holdings, Inc. a Delaware corporation located at
1600 Wilson Boulevard, Suite 1008, Arlington, Virginia 22209, jointly and
severally with Empire One Telecommunications, Inc., a Delaware corporation,
located at 254 West 31st Street, New York, New York 10001 ("Borrowers"), have
delivered that certain Collateral Note of even date herewith ("Collateral
Note") to Citizens Telecommunications Company ("Secured Party"), in the
principal amount of Three Hundred Fifty Eight Thousand Four Hundred Sixty One
and 88/100 Dollars ($358,461.88), payable as follows:
In order to secure payment of the Collateral Note, Borrowers hereby
grant to Secured Party a security interest in the following collateral: all of
Sonus Communication Holdings, Inc. and Empire One Telecommunications, Inc.'s
now owned and hereafter acquired accounts, including, but not limited to,
accounts receivable and contract rights, client base list, chattel paper,
documents and instruments and the right to receive payment under them (the
"Collateral").
Section Two
Events of Default
At the option of the Secured Party, all obligations shall become
immediately due and payable upon the occurrence of any of the following events
of default and the expiration of the applicable cure period:
(a) Default in the payment or performance of any payment liability or
payment obligation of any of the undersigned, or of any maker, endorser, or
guarantor of any liability or obligation of any of the undersigned to the
Secured Party;
<PAGE> 2
(b) Death, dissolution, termination of existence, insolvency, business
failure, appointment of a receiver of any part of the property of, assignment
for the benefit of creditors by, or the commencement of any proceedings under
any bankruptcy or insolvency laws by or against, any maker, endorser, or
guarantor of the Collateral Note (except for the filing of any involuntary
petition under bankruptcy laws that is set aside or withdrawn or ceases to be
in effect within thirty (30) days of such filing);
(c) Any representation or warranty or any other statement of a material
fact herein or in any writing, certificate, report, or statement at any time
furnished to Secured Party pursuant to or in connection with this Security
Agreement, or otherwise, is false or misleading in any material respect.
Secured Party agrees to grant a cure period of ten (10) business days
after written notice of default has been given to the undersigned corporation.
A notice of default shall be deemed delivered if mailed by registered or
certified mail or sent by courier or express service guaranteeing overnight
delivery to the Borrowers and the Guarantors at the addresses first above given
or such other address as the Borrowers and Guarantors may from time to time
designate in writing.
Section Three
Remedies on Default
Upon the occurrence of any such events of default, which have not been
cured within the applicable cure period, and at any later time, the Secured
Party shall have the following remedies:
(a) The Secured Party may, (subject to the provisions of the Stock
Pledge and Escrow Agreement of even date herewith, a copy of which is attached
hereto as Exhibit A) at its option, transfer at any time to itself or to its
nominee any securities pledged as collateral, and receive the income from such
securities, and hold the income as security, or apply it on the principal or
interest due under the Collateral Note;
(b) any deposits or other sums any time credited by or due from the
Secured Party to any maker, endorser, or guarantor of the Collateral Note, and
any securities or other property of any maker, endorser, or guarantor in
possession of the Secured Party, may at all times be held and treated as
collateral security for the payment of the obligations. The Secured Party shall
apply or set off such deposits or other sums against the obligations at any
time in the case of makers, but only with respect to matured liabilities in the
case of endorsers or guarantors;
(c) the Secured Party may at its option, demand, sue for, collect, or
make any compromise or settlement it deems desirable with reference to
collateral held;
(d) all the remedies of a secured party under the New York Uniform
Commercial Code.
2
<PAGE> 3
Section Four
Notice of Sale
Unless the collateral is perishable or threatens to decline speedily in
value or is of a type customarily sold on a recognized market, the Secured Party
will give the undersigned reasonable notice of the time and place of any public
sale of such collateral, or of the time after which any private sale or other
intended disposition is to be made. The requirement of reasonable notice shall
be met if such notice is mailed, postage prepaid, to the undersigned at the
address given below at least twenty (20) calendar days before the time of the
sale or disposition.
Section Five
No Waiver
No delay or omission on the part of the Secured Party in exercising any
right under the Collateral Note or this Security Agreement shall operate as a
waiver of such right or of any other right under the Collateral Note or this
Security Agreement. A waiver on any one occasion shall not be construed as a bar
to or a waiver of any such right and/or remedy on any future occasion.
Section Six
Governing Law
This Security Agreement and all rights and obligations under this
Security Agreement, including matters of construction, validity, and
performance, shall be governed by the law of the State of New York. Secured
Party and Borrowers hereby waive the right to any jury trial in any action,
proceeding, or counterclaim brought by either Secured Party or Borrowers against
the other.
Section Seven
Representations, Covenants and Warranties
As inducement to Citizens Telecommunications Company to accept the
Collateral Note, the undersigned represent, covenant and warrant that:
a) other terms and conditions and promises of the makers herein:
i) Sonus Communication Holdings, Inc. will provide quarterly and
yearend consolidated financial statements within forty-five (45)
days of the end of each quarter, and year-end financial
statements within ninety (90) days of the end of the Borrowers'
fiscal year;
3
<PAGE> 4
Section Seven
Representations, Covenants and Warranties (continued)
ii) all balance sheets, earnings statements and other financial
data (including footnotes thereto) which have been or may
hereafter be furnished to Citizens Telecommunications Company to
induce it to enter into this Security Agreement or otherwise in
connection with it, do or shall fairly represent the financial
condition of the Borrowers and the results of its operations as
of the dates or the periods for which the same are furnished
(subject in the case of unaudited quarterly reports to year end
adjustments), and all other information, reports and other papers
and data furnished to Secured Party are or shall be at the time
the same are so furnished accurate and correct in all material
respects and that Generally Accepted Accounting Principles (GAAP)
shall be used in preparation of any and all such financial
statements;
iii) Borrowers shall not merge this business out of existence
without the written consent of Secured Party. Borrowers shall not
enter into any dispositive sales, transfers, assignments or
leases that are not in the ordinary course of business and that
exceed One Hundred Thousand Dollars ($100,000) without the
written consent of Secured Party. Borrowers shall not incur any
additional debt or credit facility (which shall not include sales
of unsecured debt securities or convertible debt securities) in
an amount exceeding $100,000 without the written consent of
Secured Party which consent shall not be withheld unless Secured
Party reasonably believes its security will be impaired;
vi) this Security Agreement, the Collateral Note, and all related
documents are binding upon Borrowers as well as upon Borrowers'
successors, representatives and assigns, are legally enforceable
in accordance with their respective terms; and are not in
contravention of law or of any order, rule or regulation
applicable to Borrowers, or any existing agreement or instrument
of Borrowers.
b) That Sonus Communication Holdings, Inc. and Empire One Telecommunications,
Inc. are duly organized and existing in good standing in and under the law of
the State of Delaware and Empire One Telecommunications is duly qualified to do
business in the State of New York and all other states in which it does or will
carry out business, except where the lack of such qualification would not
reasonably be expected to have a material adverse affect.
4
<PAGE> 5
c) That the Collateral Note and this Security Agreement have been duly
authorized by the Board of Directors of Empire One Telecommunications, Inc. and
Sonus Communication Holdings, Inc. and by all required corporate action, have
been duly executed and delivered by the Borrowers and constitutes its legal,
valid and binding agreement and obligation, except as the enforceability thereof
may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws relating to the enforcement of creditors'
rights generally and by general principles of equity.
d) That Borrowers shall execute all additional documentation and do all other
things reasonably required by Secured Party to perfect its security interest in
the collateral, including, but not limited to:
i) The Stock Pledge and Escrow Agreement delivered herewith;
ii) UCC Forms 1; and
iii) Physical delivery of the shares of stock, as outlined
herein, in Sonus Communication Holdings, Inc. held by W. Todd Coffin and John K.
Friedman to John Churchill, Esq. at VVinthrop, Stimson, Putnam & Roberts ("Stock
Pledge Escrow Agent") at One Battery Park Plaza, New York, New York 10004,
pursuant to the Stock Pledge and Escrow Agreement between Secured Party,
Borrowers, and Stock Pledge Escrow Agent.
e) Sonus Communication Holdings, Inc. represents and warrants that it has
not granted any prior security interest in or to the Collateral owned by it,
and Empire One Telecommunications, Inc. represents and warrants that it has not
granted any prior security interest in or to the Collateral owned by it.
All representations, covenants and warranties herein shall survive any
expiration, termination or cancellation of this Security Agreement and shall
continue to bind the undersigned, their successors, heirs and assigns.
Section Eight
Amendments
This Security Agreement, the Collateral Note, and any related documents,
constitute the entire understanding and agreement of the parties as to the
matters set forth in this Security Agreement. No alteration of or amendment to
this Security Agreement shall be effective unless given in writing and signed by
the party or parties to be charged or bound by the alteration or amendment.
5
<PAGE> 6
Section Nine
Notice
Any notice required or permitted to be given by either Borrowers or
Secured Party under this Security Agreement shall be in writing and shall be
personally delivered, sent by overnight courier service or sent by certified or
registered letter or by telecopy confirmed by registered or certified letter to
the other Party at its address set forth below. If mailed, notices will be
deemed effective three (3) working days after deposit, postage prepaid, in the
mail.
To Secured Party:
Attn: Suzann B. Duffy
Citizens Telecommunications Company
3 High Ridge Park
Stamford, Connecticut 06905
with a copy to the Legal Department at the same address;
To Borrower (Empire One Telecommunications, Inc.):
Attn: John K. Friedman
Empire One Telecommunications, Inc.
254 West 31st Street
New York, NY 10001
with a copy to:
David Bronston, Esquire
Wolf, Block, Shore and Solis-Choen LLP
250 Park Avenue
New York, NY 10177
To Borrower (SONUS Communication Holdings, Inc.)
Richard D. Rose
Chief Financial Officer
SONUS Communication Holdings, Inc.
6
<PAGE> 7
1600 Wilson Boulevard, Suite 1008
Arlington, VA 22209
With a copy to:
Cecil E. Martin III, Esquire
McGuire Woods, Battle & Boothe LLP
7 St. Paul Street, Suite 1000
Baltimore, MD 21202
Section Ten
Severability
If a court of competent jurisdiction finds any provision of this
Security Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any such
offending provision shall be deemed to be modified to be within the limits of
enforceability or validity; however, if the offending provision cannot be so
modified, it shall be stricken and all other provisions of this Security
Agreement in all other respects shall remain valid and enforceable.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS SECURITY AGREEMENT,
AND BORROWER AGREES TO ITS TERMS. THIS SECURITY AGREEMENT IS DATED AS OF March
29, 2000.
BORROWER:
SONUS COMMUNICATION HOLDINGS, INC.
By: /s/ W. Todd Coffin
-------------------------------
W. Todd Coffin
Chief Executive Officer
EMPIRE ONE TELECOMMUNICATIONS, INC.
By: /s/ John K. Friedman
-------------------------------
John K. Friedman
Chief Executive Officer
SECURED PARTY:
CITIZENS TELECOMMUNICATIONS COMPANY
7
<PAGE> 8
By: /s/ Charles J. Weiss
-------------------------------
Its: Secretary
------------------------------
8
<PAGE> 1
EXHIBIT 10.3
CONSENT AND RELEASE AGREEMENT
This Consent and Release Agreement (this "Agreement") is entered into
this 29th day of March, 2000, by and among Citizens Telecommunications Company,
Inc., a Delaware corporation ("Citizens"), Sonus Communication Holdings, Inc.,
a Delaware corporation ("Sonus"), EOT Acquisition Corporation, a Delaware
corporation and wholly-owned subsidiary of Sonus ("New EOT"), Empire One
Telecommunications, Inc., a New York corporation ("Old EOT"), W. Todd Coffin
("Coffin"), and John K. Friedman ("Friedman").
WHEREAS, on April 4, 1997, Old EOT entered into a Collateral Note (the
"Old Note") and Security Agreement (the "Old Security Agreement") with
Citizens;
WHEREAS, Friedman, Paul A. Butler ("Butler") and Bradley D. Lewis
("Lewis" and, together with Butler, the "EOT Principals"), entered into a
Personal Guaranty (the "Old Guaranty") and Stock Pledge Agreement (the "Old
Stock Pledge") dated April 4, 1997 (the Old Note, Old Security Agreement, Old
Guaranty and Old Stock Pledge, together with any other ancillary and/or
predecessor documents, are sometimes collectively referred to herein as the Old
Loan Documents);
WHEREAS, Old EOT entered into a merger agreement (the "Merger
Agreement") with Sonus dated November 15, 1999, pursuant to which Old EOT
proposes to merge with and into New EOT;
WHEREAS, in consideration for the consent and approval granted herein
and as part of the transactions contemplated hereby, the Old Loan Documents,
including but not limited to the Old Note, will be terminated and deemed
satisfied and Sonus and New EOT will enter into the New Loan Documents (as
defined below) including but not limited to the New Note (as defined below)
with Citizens with new collateral to be substituted for the collateral given to
secure the Old Note.
WHEREAS, New EOT will be the surviving corporation following the merger
and, as part of the merger, may change its name to "Empire One
Telecommunications, Inc."; and
WHEREAS, the Old Loan Documents require the consent of Citizens to
consummate the transactions contemplated by the Merger Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, each of the parties hereto
agree as follows:
1. Citizens hereby provides its consent to and approval of the consummation
of the transactions contemplated by the Merger Agreement and the
ancillary documents to be entered into in connection therewith,
including but not limited to the consummation of the merger of Old EOT
with and into New EOT, with New EOT to be the surviving
<PAGE> 2
corporation following the merger, and waives any and all defaults,
violations, conflicts and other breaches, if any, of the Old Loan
Documents in connection therewith.
2. As soon as practicable following receipt by Sonus of proof of filing
and acceptance of the Articles of Merger to be filed with the State of
New York and the Certificate of Merger to be filed with the State of
Delaware pursuant to the Merger Agreement (i) Sonus, New EOT and
Citizens shall execute and deliver to one another that certain
Collateral Note attached hereto as Exhibit A (the "New Note") and
Security Agreement attached hereto as Exhibit B (the "New Security
Agreement"); and (ii) Coffin, Friedman and Citizens shall execute and
deliver to one another that certain Personal Guaranty attached hereto
as Exhibit C (the "New Guaranty") and Stock Pledge Agreement attached
hereto as Exhibit D (the "New Stock Pledge" and, together with the New
Note, New Security Agreement and New Guaranty, collectively, the "New
Loan Documents").
3. Upon the execution and delivery of the New Loan Documents as described
in Section 2 hereof (i) each of the Old Loan Documents, together with
any and all other documents, agreements (oral or written), notes,
guarantees or other writings evidencing or purporting to evidence any
obligations of Old EOT or any of the EOT Principals (or any of their
respective successors, affiliates or assigns), including but not
limited to the Old Guaranty, shall immediately terminate and thereafter
become null and void, and all obligations and liabilities thereunder
shall be fully and unconditionally released and deemed satisfied in
full, it being understood that Citizens' rights with respect to the
parties hereto shall thereafter be pursuant to the New Loan Documents
only; (ii) Citizens shall release from escrow or cause to be released
from escrow any and all Old EOT shares held pursuant to the Old Stock
Pledge Agreement, and cause the same to be delivered to Cecil E.
Martin, III, Esquire, on or prior to the closing date of the
transactions contemplated by the Merger Agreement, to be held in escrow
by Mr. Martin until the New Loan Documents have been executed and
delivered to Citizens; and (iii) Citizens shall file a UCC-3 to
terminate the financing statement bearing number 972562 94 and listing
Citizens Telecommunications Company as secured party and Empire One
Telecommunications, Inc. as Debtor, and take all such further action as
may be necessary to terminate its security interest in, and any and all
other rights to or financing statements filed covering, any assets or
other collateral in each jurisdiction (other than "now owned and
hereafter acquired accounts, including, but not limited to, accounts
receivable and contract rights, client base list, chattel paper,
documents and instruments and the right to receive payment under them"
of New EOT and/or Sonus); and (iv) Sonus and New EOT shall execute and
deliver to Citizens a UCC-1 financing statement covering Sonus' and New
EOT's "now owned and hereafter acquired accounts, including, but not
limited to, accounts receivable and contract rights, client base list,
chattel paper, documents and instruments and the right to receive
payment under them".
4. Each party hereto shall take such further action including but not
limited to the execution of such further documents, releases, consents
and other agreements as may be reasonably requested by the other party
or parties to evidence the effect and effectuate the intent of this
Agreement.
<PAGE> 3
5. All notices, requests and other communications hereunder must be in
writing and will be deemed to have been duly given only if delivered
personally against written receipt or by facsimile transmission or
mailed by prepaid first class certified mail, return receipt requested,
or delivered by a nationally recognized overnight courier service
prepaid, to the parties at the following addresses or facsimile
numbers:
(a) If to Sonus or EOT Acquisition, to:
Sonus Communication Holdings, Inc.
1600 Wilson Boulevard, Suite 1008
Arlington, Virginia 22209
Attention: Richard D. Rose
Telecopier: 703-527-8865
with a copy to:
Cecil E. Martin, III, Esquire
McGuire, Woods, Battle & Boothe LLP
7 St. Paul Street, Suite 1000
Baltimore, Maryland 21202
Telecopier: 410-659-4535
(b) If to the EOT Principals, to:
Empire One Telecommunications, Inc.
254 West 31st Street
New York, New York 10001
Attention: John K. Friedman
Telecopier: 212-904-1032
with a copy to:
David E. Bronston, Esquire
Wolf, Block, Schorr and Solis-Cohen LLP
250 Park Avenue
New York, New York 10177
Telecopier: 212-986-0604
(c) If to Citizens, to:
Richard Tettelbaum, Esquire
Citizens Communications
1400 16th Street, NW
Washington, DC 20036
Telecopier: 202-483-9277
with a copy to:
<PAGE> 4
Suzann Duffy
Citizens Communication
3 High Ridge Park
Stamford, CT 06905
Telecopier: 203-614-6633
All such notices, requests and other communications will (i) if
delivered personally to the address as provided in this Section, be
deemed given upon delivery, (ii) if delivered by facsimile transmission
to the facsimile number as provided for in this Section, be deemed
given upon receipt, (iii) if delivered by mail in the manner described
above to the address as provided in this Section, be deemed given on
the earlier of the third business day following mailing or upon receipt
and (iv) if delivered by overnight courier to the address as provided
for in this Section, be deemed given on the earlier of the first
business day following the date sent by such overnight courier or upon
receipt (in each case regardless of whether such notice, request or
other communication is received by any other person to whom a copy of
such notice is to be delivered pursuant to this Section). Any party
from time to time may change its address, facsimile number or other
information for the purpose of notices to that party by giving notice
specifying such change to the other parties hereto.
6. This Agreement and the Exhibits hereto supersede all prior discussions
and agreements between the parties with respect to the subject matter
hereof and thereof and contain the sole and entire agreement between
the parties hereto with respect to the subject matter hereof. This
Agreement may be amended, supplemented or modified only by a written
instrument duly executed by or on behalf of each of the parties hereto.
7. Any term or condition of this Agreement may be waived at any time by
the party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly
executed by or on behalf of the party waiving such term.
8. Neither this Agreement nor any right, interest or obligation hereunder
may be voluntarily assigned by any party hereto without the prior
written consent of the other parties hereto, and any attempt to do so
will be void. Subject to the preceding sentence, this Agreement is
binding upon, inures to the benefit of and is enforceable by the
parties hereto and their respective heirs, executors, personal
representatives, successors and assigns.
9. If any provision of this Agreement is held to be illegal, invalid or
unenforceable under any present or future law, and if the rights or
obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be
fully severable, (b) this Agreement will be construed and enforced as
if such illegal, invalid or unenforceable provision had never comprised
a part hereof, (c) the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by the
illegal, invalid or unenforceable provision or by its severance here
from and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically
<PAGE> 5
as a part of this Agreement a legal, valid and enforceable provision as
similar in terms to such illegal, invalid or unenforceable provision as
may be possible.
10. This Agreement shall be governed by and construed in accordance with
the domestic laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of New
York.
11. This Agreement may be executed in any number of counterparts, each of
which will be deemed an original, but all of which together will
constitute one and the same instrument. This Agreement may be executed
and delivered by facsimile transmission.
12. Butler and Lewis shall be deemed to be third-party beneficiaries of this
Agreement and shall be entitled to the benefit of and to enforce their
rights hereunder to the same extent as if they had been made a party
hereto.
<PAGE> 6
IN WITNESS WHEREOF, the parties have executed this Consent and Release
Agreement by their duly authorized representatives on the date first set forth
above:
CITIZENS TELECOMMUNICATIONS CO., INC.
By: /s/ Charles J. Weiss
-----------------------------------------
Name: Charles J. Weiss
Title: Secretary
EOT ACQUISITION CORP.
By: /s/ W. Todd Coffin
-----------------------------------------
Name: W. Todd Coffin
Title: President and Chief Executive Officer
SONUS COMMUNICATION HOLDINGS, INC.
By: /s/ W. Todd Coffin
-----------------------------------------
Name: W. Todd Coffin
Title: President and Chief Executive Officer
EMPIRE ONE TELECOMMUNICATIONS, INC.
By: /s/ John K. Friedman
-----------------------------------------
Name: John K. Friedman
Title: Chief Executive Officer
/s/ John K. Friedman
--------------------------------------------
John K. Friedman
<PAGE> 1
EXHIBIT 15
REVIEW REPORT ON INTERIM CONDENSED FINANCIAL STATEMENTS
Board of Directors and Stockholders
Sonus Communication Holdings, Inc.
Arlington, VA
We have reviewed the accompanying condensed consolidated balance sheet,
statements of operations and statements of cash flows of Sonus Communication
Holdings, Inc. as of March 31, 2000 and for the three month periods then ended.
These financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
/s/ LAZAR LEVINE & FELIX LLP
LAZAR LEVINE & FELIX LLP
New York, New York
May 11, 2000
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS LEGEND CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY FOR THE FIRST QUARTER ENDED
MARCH 31, 2000 INCLUDED IN THE COMPANY'S FORM 10-QSB
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) STATEMENTS
</LEGEND>
<CIK> 0000791219
<NAME> SONUS COMMUNICATIONS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 692,304
<SECURITIES> 0
<RECEIVABLES> 754,723
<ALLOWANCES> (23,579)
<INVENTORY> 0
<CURRENT-ASSETS> 1,932,963
<PP&E> 1,386,159
<DEPRECIATION> (245,286)
<TOTAL-ASSETS> 7,813,733
<CURRENT-LIABILITIES> 2,314,446
<BONDS> 0
0
0
<COMMON> 710
<OTHER-SE> 4,515,187
<TOTAL-LIABILITY-AND-EQUITY> 7,813,733
<SALES> 0
<TOTAL-REVENUES> 167,817
<CGS> 0
<TOTAL-COSTS> 372,394
<OTHER-EXPENSES> 575,736
<LOSS-PROVISION> 3,356
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (783,669)
<INCOME-TAX> 0
<INCOME-CONTINUING> (783,669)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (783,669)
<EPS-BASIC> (0.13)
<EPS-DILUTED> 0
</TABLE>
