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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
July 1, 1998
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(Date of Earliest Event Reported)
Objective Communications, Inc.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 000-22235 52-1707962
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(State of (Commission (I.R.S. Employer
Incorporation) File Number) Identification Number)
50 International Drive, Portsmouth, New Hampshire 03801
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(Address of Principal Executive Offices) (Zip Code)
(603) 334-6700
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(Registrant's Telephone Number, Including Area Code)
N/A
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
On July 2, 1998, Objective Communications, Inc., a Delaware corporation
(the "Company") announced that, based on preliminary financial results, the
Company does not expect to recognize any revenues in the second quarter of 1998,
because of delays in product functionality. The Company's Board of Directors
also announced that the Company has taken steps designed to significantly cut
expenditures and permit the Company to achieve long-term performance objectives,
including a significant reduction in the number of Company employees. On July
1, 1998, the Company reduced total employees to an estimated 88 full-time
employees, from an estimated 130. The Company also began to implement new
cash-management practices throughout the Company in an effort to reduce
corporate expenses.
The Board of Directors also announced that, as the Company focuses on
bringing a fully functional VidPhone system to market, Steven A. Rogers, the
founder and technical visionary of the Company and currently its President and
Chief Executive Officer, will move to assume responsibilities for Chief
Technology Officer and Vice President of Engineering. Subsequently, on July 6,
1998, the Company announced the appointment of Jim Bunker as the Interim
President and Chief Executive Officer, who will assume responsibility for
general corporate oversight.
The Company also announced a new financing with a number of investors to
purchase 5% Convertible Debentures due 2003, the terms of which are discussed in
detail below.
Private Placement of $3,125,000 Principal Amount of 5% Convertible Debentures
due 2003
The following is a summary description of material agreements to which the
Company is subject. This description is not complete, and is subject in its
entirety to the provisions of the complete documents, copies of which are filed
herewith as Exhibits 4.1, 4.2, 4.3, 4.4, 4.5 and 4.6.
Effective as of July 8, 1998, the Company issued $3,125,000 aggregate
principal amount 5% Convertible Debentures due 2003 (the "Debentures") pursuant
to a Subscription Agreement to purchase $2,500,000 aggregate principal amount of
Debentures dated as of July 1, 1998, executed by certain institutional investors
(the "Institutional Investors") and accepted by the Company, and Subscription
Agreements to purchase $625,000 aggregate principal amount of Debentures
executed by Messrs. Clifford M. Kendall, Eugene R. Cacciamani, Marc S. Cooper,
and Richard T. Liebhaber, directors of the Company, Messrs. James F. Bunker,
Roger A. Booker and Robert H. Emery and Ms. Mary C. Murphy, executive officers
of the Company, and certain other investors, including outside consultants to
the Company (collectively, the "Additional Investors" and together with the
Institutional Investors, the "Investors") and accepted by the Company. The
Debentures accrue interest at the rate of 5.0% per annum, payable quarterly in
arrears, and the interest is payable either in cash or in the issuance of
additional Debentures, at the option of the Company. The Debentures are senior
in right of payment to substantially all existing and future indebtedness of the
Company.
The Debentures held by the Institutional Investors may be redeemed by the
Company, at its option, at any time on or before October 5, 1998. The
Debentures held by the Additional Investors are subject to mandatory redemption
by the Company on January 5, 1999, provided that the Company has previously
redeemed the Debentures held by the Institutional Investors. The Debentures are
redeemable at a redemption price per Debenture equal to 110% of the principal
amount of the Debenture, plus any accrued and unpaid interest thereon. Upon
such redemption, if any, the Company also is obligated to issue to the
Institutional Investors warrants to purchase an aggregate of up to 125,000
shares of common stock of the Company, par value $.01 per share (the "Common
Stock"), and to the Additional Investors warrants to purchase an aggregate of
up to 50,000 shares of Common Stock, all at an exercise price of $11.00 per
share (subject to adjustment as provided therein).
The Investors also have agreed that, prior to October 6, 1998, neither
they nor their affiliates will take a "short" position in the Company's Common
Stock, unless at the time the position is taken the price per share of the
Common Stock as reported on the Nasdaq National Market is greater than $10.87.
If such Debentures have not previously been redeemed by the Company,
the Debentures issued to the Institutional Investors are convertible
into shares of Common Stock of the Company, at the option of the holder, in
whole or in part, at any time on or after October 6, 1998. If such Debentures
have not previously been redeemed by the Company, the Debentures issued to the
Additional Investors are convertible into shares of Common Stock of the
Company, in whole or in part, at the option of the holder any time after
January 5, 1999. The conversion rate at which the Debentures are convertible
into shares of Common Stock is the lesser of a fixed or floating conversion
rate, determined by dividing the principal amount of the Debentures plus any
accrued and unpaid interest by a conversion price equal to the lesser of $10.87
or the average of the three lowest closing prices of the Common Stock on its
principal exchange during the 12 trading days immediately preceding the date
upon which the Company is notified of such conversion (the "Conversion Rate").
The Company has agreed to register, on or before August 29, 1998, the
shares of Common Stock issuable upon conversion of the Debentures and the
exercise of any warrants held by the Investors.
On or after July 8, 2003 (the "Maturity Date"), the Company has the option
to cause any outstanding Debentures to be automatically converted into shares of
Common Stock pursuant to the Conversion Rate, or to redeem all outstanding
Debentures at a redemption price equal to the principal amount of the
Debentures, plus any accrued and unpaid interest thereon.
The Company intends to use the proceeds from the purchase of the
Debentures for general corporate purposes.
This Current Report on Form 8-K and the press releases filed as exhibits
hereto include forward-looking statements that may involve a number of risks and
uncertainties. Actual results may vary significantly based on a number of
factors, including, but not limited to, risks in product and technology
development, market acceptance of new products and continuing product demand,
the impact of competitive products and pricing, changing economic conditions,
including changes in short-term interest rates and other risk factors detailed
in the Company's other filings with the Securities and Exchange Commission.
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<TABLE>
<CAPTION>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Exhibit No. Description of Exhibit
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<S> <C>
4.1 Form of Subscription Agreement, dated as of July 1, 1998, by
and among Objective Communications, Inc. (the "Company") and
Leonardo, L.P., AG Super Fund International Partners, L.P.,
Raphael, L.P., AGR Halifax Fund, Ltd., Ramius Fund, Ltd., and
GAM Arbitrage Investments, Inc. (collectively, the
"Institutional Investors").
4.2 Form of Subscription Agreement, dated as of July 8, 1998,
by and among the Company and each of Messrs. Clifford M.
Kendall, Eugene R. Cacciamani, Marc S. Cooper, Richard T.
Liebhaber, James F. Bunker, Roger A. Booker, and Robert H.
Emery, Ms. Mary C. Murphy, and certain other investors
including outside consultants to the Company (collectively,
the "Additional Investors" and together with the
Institutional Investors, the "Investors").
4.3 Form of 5% Convertible Debenture due 2003, dated as of July
8, 1998, issued by the Company to the Institutional
Investors.
4.4 Form of 5% Convertible Debenture due 2003, dated as of July
8, 1998, issued by the Company to the Additional Investors.
4.5 Form of Warrant to Purchase Shares of Common Stock, $.01
par value per share, for issuance by the Company to the
Investors upon early redemption of the 5% Convertible
Debentures due 2003.
4.6 Form of Registration Rights Agreement, dated as of July 8,
1998, by and among the Company and the Investors.
99.1 Press release issued by the Company on July 2, 1998.
99.2 Press release issued by the Company on July 6, 1998.
99.3 Press release issued by the Company on July 14, 1998.
</TABLE>
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
OBJECTIVE COMMUNICATIONS, INC.
Date: July 16, 1998 By: /s/ Robert H. Emery
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Robert H. Emery
Vice President, Administration and Finance
614791-02
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EXHIBIT 4.1
SUBSCRIPTION AGREEMENT
This Subscription Agreement (the "Agreement"), dated as of July 1,
1998, has been executed by the undersigned (the "Subscriber") in connection
with the offering and sale (the "Offering") of an aggregate of up to $2,500,000
aggregate principal amount 5% Convertible Debentures due 2003 (the
"Debentures") of Objective Communications, Inc., a Delaware corporation (the
"Company"), for a purchase price of $10,000 per Debenture, convertible into
shares of common stock, par value $.01 per share of the Company (the "Common
Stock"), and possessing such other rights and preferences as are set forth in
the form of debenture attached hereto as EXHIBIT A (the "Form of Debenture").
The solicitation of this Agreement and, if accepted by the Company, the offer
and sale of the Debentures, are being made in reliance upon the provisions of
Regulation D ("Regulation D") promulgated by the Securities and Exchange
Commission (the "SEC") under the United States Securities Act of 1933, as
amended (the "Securities Act"). The Debentures and the Common Stock issuable
upon conversion thereof are sometimes collectively referred to in this
Agreement as the "Securities."
The Common Stock issuable upon conversion of the Debentures is
sometimes referred to in this Agreement as the "Underlying Stock." Upon the
terms and subject to the conditions set forth herein, the Subscriber hereby
agrees to purchase, and the Company hereby agrees to issue and sell the
aggregate principal amount of Debentures set forth in this Agreement at the
aggregate purchase price set forth in Section 14. In consideration of the
mutual promises, representations, warranties and conditions set forth hereto,
and intending to be legally bound hereby, the Company and the Subscriber hereby
agree as follows:
1. Agreement to Subscribe; the Subscriber
1.1 Purchase and Issuance of Debentures. On the basis of the
representations and warranties contained in this Agreement and subject
to the terms and conditions hereinafter set forth, the Subscriber
hereby subscribes for the specified aggregate principal amount of
Debentures upon and subject to the conditions set forth elsewhere in
this Agreement and at the aggregate purchase price set forth in
Section 14. The closing of the purchase (the "Closing") shall occur
on July 8, 1998 (the "Closing Date"); provided that (a) the purchase
price has been delivered by the Subscriber to the Company, a mutually
acceptable escrow agent or as otherwise agreed between the parties (in
immediately available funds via a wire transfer pursuant to
instructions previously delivered for such purpose), (b) the principal
amount of Debentures subscribed for hereby shall have been issued and
delivered by the Company to the Subscriber, a mutually acceptable
escrow agent or as otherwise agreed between the parties and (c) all
other conditions precedent to the obligations of the Subscriber and
the Company set forth herein shall have been satisfied or waived in
writing.
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1.2 Nature of the Subscriber. The Subscriber is either purchasing the
Debentures for its own account or as an agent for a principal (under a
discretionary or similar account), in which case all of the
representations, warranties, covenants and agreements of the
Subscriber herein shall be deemed to apply to such principals and not
to the Subscriber and to have been made by such principal and not by
the Subscriber. In such case, the Subscriber so acting as agent
represents and warrants that (a) its principals have confirmed to the
Subscriber the accuracy of such representations and warranties with
respect to its principals, and (b) the Subscriber has full authority
to act on behalf of its principals in executing and delivering this
Agreement and consummating the transactions contemplated hereby.
1.3 Conditions Precedent to the Obligation of the Company to Sell the
Debentures. The obligation hereunder of the Company to issue and sell
the Debentures to the Subscriber is subject to the satisfaction, at or
before the Closing, of each of the conditions set forth below. Each
of these conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion.
(a) Accuracy of the Subscriber's Representations and Warranties.
The representations and warranties of the Subscriber shall be
true and correct as of the date when made and in all material
respects as of the Closing Date as though made at each such
time.
(b) Performance by the Subscriber. The Subscriber shall have
performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the
Subscriber at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits the consummation of
any of the transactions contemplated by this Agreement, and no
valid proceeding shall have been commenced which may have the
effect of prohibiting or adversely affecting any of the
transactions contemplated hereby.
(d) Legal Investment. At the time of the Closing, the purchase of
the Securities by the Subscriber shall be legally permitted by
all statutes, rules and regulations to which the Subscriber
and the Company are subject.
(e) Officer's Certificate. The Subscriber shall have delivered to
the Company a certificate in form and substance reasonably
satisfactory to the Company, executed by an authorized
representative of the Subscriber, to the effect that all the
conditions to the Closing shall have been satisfied and that
the representations and warranties of the Subscriber contained
in the Agreement are true and correct in all material respects
on and as of the date hereof with the same force and effect as
though such representations and warranties had been made on
the date hereof.
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1.4 Conditions Precedent to the Obligation of the Subscriber to Purchase
the Debentures. The obligation of the Subscriber hereunder to acquire
and pay for the Debentures is subject to the satisfaction, at or
before the Closing, of each of the following conditions. Each of these
conditions is for the Subscriber's sole benefit and may be waived in
writing by the Subscriber at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company shall be true
and correct as of the date when made and in all material
respects as of the Closing Date as though made at each such
time.
(b) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all
covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits or adversely effects
any of the transactions contemplated by this Agreement, and no
proceeding shall have been commenced which may have the effect
of prohibiting or adversely affecting any of the transactions
contemplated hereby.
(d) Adverse Changes. For the period from December 31, 1997 until
Closing, except as (i) publicly disclosed in Company press
releases or filings (the "Exchange Act Reports") pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), (ii) issued or made on or prior to the date hereof
listed on Schedule 1.4(d) hereto (collectively, "Prior Public
Disclosures"), or (iii) disclosed to the Subscriber and
acknowledged in writing by the Company and the Subscriber, no
event shall have occurred or be threatened to occur which has
had or is likely to have a Material Adverse Effect (as defined
in Section 3.6 hereof) on the Company; provided, however, that
the parties hereto acknowledge and agree that the Subscriber
has had an opportunity to review the draft press release of
the Company dated July 1, 1998, a copy of which is attached
hereto as part of Schedule 1.4(d), and that the Subscriber has
had an opportunity to ask questions of the Company regarding,
and receive all information requested with respect to, the
matters discussed therein, and that the events discussed
therein shall be deemed by the parties hereto not to
constitute a Material Adverse Change that would give rise to
the Subscriber the right not to acquire and pay for the
Debentures.
(e) No Suspension of Trading in or Delisting of Common Stock. The
trading in the Common Stock shall not have been suspended by
the SEC or the National Association of Securities Dealers,
Inc. (the "NASD"); the Common Stock shall
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not have been delisted from the Nasdaq National Market (the
"Nasdaq NM"); and trading in securities generally as reported
by the Nasdaq NM shall not have been suspended or limited or
minimum prices shall not have been established on securities
whose trades are reported by the Nasdaq NM.
(f) Legal Opinion. The Company shall have delivered to the
Subscriber opinions of independent counsel to the Company,
each substantially in the form of EXHIBIT C attached hereto.
(g) Officer's Certificate. The Company shall have delivered to
the Subscriber a certificate in form and substance reasonably
satisfactory to the Subscriber, executed by an executive
officer of the Company, to the effect that all the conditions
to the Closing shall have been satisfied and that the
representations and warranties of the Company contained in the
Agreement are true and correct in all respects on and as of
the date hereof with the same force and effect as though such
representations and warranties had been made on the date
hereof.
(h) Registration Rights Agreement. The Company and the Subscriber
shall have entered into the Registration Rights Agreement
contemplated by Section 5.1.
(i) Debentures. The Company shall have executed the Debentures
substantially in the form attached hereto in the Form of
Debenture.
(j) Reservation of Shares. The Company shall have reserved such
number of shares of Common Stock as required pursuant to
Section 5.2.
(k) Legal Investment. At the time of the Closing, the purchase of
the Securities by the Subscriber shall be legally permitted by
all statutes, rules and regulations to which the Subscriber
and the Company are subject.
(l) Co-Investment. Certain officers and/or directors of the
Company shall have completed, or shall complete simultaneously
with the Closing, a purchase of at least $500,000 aggregate
principal amount of the Company's 5% Senior Promissory Notes
which shall have terms substantially similar to those set
forth in Exhibit B hereto.
(m) Amount of Investment. The Subscriber shall be obligated to
purchase the lesser of (i) $2,500,000 aggregate principal
amount of the Debentures or (ii) the aggregate principal
amount of Debentures equal to 15% of the market capitalization
of the Company determined one business day prior to the
Closing Date.
(n) Other Matters. The Company shall have delivered to the
Subscriber a certificate of good standing and tax status of
the Company certified as of a recent date by the Secretary of
State of the State of Delaware, and from each other
jurisdiction in which the Company is qualified to do business.
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2. Representations and Warranties of Subscriber
The Subscriber represents and warrants to the Company that:
2.1 No Government Recommendation or Approval. The Subscriber understands
that no United States federal or state agency or similar agency of any
other country, has passed upon or made any recommendation or
endorsement of the Company or of the Offering.
2.2 Intent. The Subscriber is purchasing the Securities for its own
account and not with a view towards distribution and the Subscriber
has no present arrangement to sell the Debentures or the Underlying
Stock to or through any person or entity; provided, however, that by
making the representation herein, the Subscriber does not agree to
hold the Securities for any minimum or other specific term and
reserves the right to dispose of the Securities at any time in
accordance with federal and state securities laws applicable to such
disposition. The Subscriber understands that the Securities must be
held indefinitely unless such Securities are subsequently registered
under the Securities Act or an exemption from registration is
available. The Subscriber has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act.
2.3 Sophisticated Investor. The Subscriber is an "accredited investor"
(as defined in Rule 501 of Regulation D), and the Subscriber has such
experience in business and financial matters that it is capable of
evaluating the merits and risks of an investment in the Securities.
The Subscriber acknowledges that the Securities are speculative,
illiquid and involve a high degree of risk.
2.4 Independent Investigation. The Subscriber, in making the decision to
purchase the Debentures subscribed for hereunder, has relied upon an
independent investigation made by it and/or its representatives and
has not relied on any information or representations made by third
parties or on any oral or written representations or assurances from
the Company or any representative or agent of the Company other than
as set forth in this Agreement, the Registration Rights Agreement, the
Debenture and the Prior Public Disclosures. The Subscriber has had a
reasonable opportunity to ask questions of, and receive answers and
documents from, the Company concerning the Company and the Offering.
The Subscriber acknowledges that the price and terms of the Debentures
offered hereby have been determined by negotiation based in part on
the market price for the Common Stock, and that it does not
necessarily bear any relationship to the assets, book value or
potential performance of the Company or any other recognized criteria
of value.
2.5 Authority. This Agreement has been duly authorized and validly
executed and delivered by the Subscriber and is a valid and binding
agreement enforceable in accordance with its terms, subject to general
principles of equity and to bankruptcy or other laws affecting the
enforcement of creditors' rights generally.
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2.6 No Legal Advice from Company. The Subscriber acknowledges that it has
had the opportunity to review this Agreement and the transactions
contemplated by this Agreement with its own legal counsel and
investment and tax advisors. Except for any statements or
representations of the Company made in this Agreement, the
Registration Rights Agreement, the Debenture and the legal opinion
called for by Section 1.4 hereof, the Subscriber is relying solely on
such counsel and advisors and not on any statements or representations
of the Company or any of its representatives or agents for legal, tax
or investment advice with respect to this investment, the transactions
contemplated by this Agreement or the securities laws of any
jurisdiction.
2.7 No Brokers. The Subscriber has taken no action which would give rise
to any claim by any person for brokerage commissions, finder's fees or
similar payments by the Company relating to this Agreement or the
transactions contemplated hereby.
2.8 Not an Affiliate. The Subscriber is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of Securities Act) of
the Company.
2.9 Reliance on Representations and Warranties. The Subscriber
understands that the Debentures are being offered and sold to it in
reliance on specific provisions of United States federal and state
securities laws and that the Company is relying upon the truth and
accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Subscriber set forth in this
Agreement in order to determine the applicability of such provisions.
3. Representations and Warranties of Company
The Company represents and warrants to the Subscriber that:
3.1 Company Status. The Company has registered its Common Stock pursuant
to Section 12(g) of the Exchange Act, is in full compliance with all
reporting requirements of the Exchange Act, and the Company has
maintained all requirements for the continued listing of its Common
Stock, and such Common Stock is currently listed, on the Nasdaq NM.
3.2 Current Public Information. The Exchange Act Reports are the only
filings made by the Company with the SEC since March 31, 1998 pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act. The
Exchange Act Reports have been filed with the SEC on a timely basis.
3.3 No Directed Selling Efforts or General Solicitation in Regard to this
Transaction. The Company has not conducted any general solicitation
(as that term is used in Regulation D) with respect to any of the
Securities, nor has it made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that
would require registration of the Securities under the Securities Act.
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3.4 Valid Issuance of Capital Stock. (a) The Company has an authorized
capitalization consisting of 30,000,000 shares of Common Stock, par
value $.01 per share, and 2,500,000 shares of preferred stock, par
value $.01 per share. The Company has issued and outstanding on the
date hereof (i) 5,741,035 shares of Common Stock, none of which shares
are held in treasury and (ii) no shares of preferred stock. As of the
date hereof, the Company has outstanding the following securities
convertible into or exercisable or exchangeable for Common Stock (the
"Derivative Securities"): warrants to purchase 732,332 shares of
Common Stock and options to purchase 1,548,700 shares of Common Stock.
From the date hereof to the Closing, there will be no changes in the
authorized capital stock or Derivative Securities, except as
contemplated by this Agreement and except upon the exercise of
outstanding Derivative Securities.
(b) All of the issued shares of capital stock of the Company have
been duly and validly authorized and issued and are fully paid and
non-assessable; prior to the Closing Date, the Debentures shall be
authorized; the shares of Underlying Stock issuable upon conversion of
the Debentures, when issued and delivered in accordance with the terms
of the Debentures, will be duly and validly issued, obligations of the
Company enforceable against the Company in accordance with their
terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of
equity (regardless of whether such enforceability is considered in a
proceeding at equity or at law) and shares of Common Stock have been
duly reserved for issuance upon the exercise thereof pursuant to the
conversion rights set forth in the Debentures; and the holders of
outstanding capital stock of the Company are not and shall not be
entitled to preemptive or other rights afforded by the Company to
subscribe for the capital stock or other securities of the Company as
a result of the sale of the Debentures or the issuance of Underlying
Stock upon the conversion thereof. Other than as set forth in this
Section and the 500,000 shares of Series A Convertible Preferred
Stock, par value $.01 per share, previously authorized by the board of
directors of the Company (the "Board of Directors"), there are no
classes or series of preferred stock authorized, issued or reserved
for issuance. There currently are no shares of Series A Preferred
Stock, par value $.01 per share, of the Company issued and
outstanding. The Company will not issue any shares of its Series A
Preferred Stock, par value $.01 per share, for so long as the
Debentures remain outstanding.
3.5 Dilution. The number of shares of Common Stock issuable upon
conversion of the Debentures may increase substantially in certain
circumstances, including, but not necessarily limited to, the
circumstance wherein the trading price of the Common Stock declines
prior to conversion of the Debentures. The Company's executive
officers and directors have studied and fully understand the nature of
the Securities being sold hereby and recognize that they have a
potentially dilutive effect. The Board of Directors has concluded, in
its good faith business judgment, that such issuance is in the best
interest of the Company. The Company specifically acknowledges that
its obligation to issue the shares of Common Stock upon conversion of
the Debentures is binding upon the
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Company and enforceable regardless of the dilution such issuance may
have on the ownership interests of other stockholders of the Company.
3.6 Organization and Qualification. The Company is a corporation duly
incorporated and existing in good standing under the laws of the State
of Delaware and has the requisite corporate power to own its
properties and assets and to carry on its business as now being
conducted. The Company does not have any subsidiaries. The Company
is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification
necessary other than those in which the failure so to qualify would
not have a Material Adverse Effect. "Material Adverse Effect" means
any material adverse effect on the business, operations, properties or
financial condition of the Company.
3.7 Authorization; Enforcement. (a) The Company has the requisite
corporate power and authority to enter into and perform this Agreement
and the Registration Rights Agreement, to issue the Debentures in
accordance with the terms hereof and to perform its obligations under
the terms of the Debentures; (b) the execution and delivery of this
Agreement and the Registration Rights Agreement, the issuance and
delivery of the Debentures and the consummation by the Company of the
transactions contemplated hereby and thereby have been duly authorized
by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors or stockholders
is required (except the stockholder approval which may be required
under the non-quantitative maintenance requirements for Nasdaq NM
issuers); (c) this Agreement has been, and on or before the Closing
Date the Registration Rights Agreement and the Debentures will be,
duly executed and delivered by the Company; and (d) this Agreement
constitutes, and upon execution and delivery thereof the Registration
Rights Agreement and the Debentures shall constitute legal, valid and
binding obligations of the Company enforceable against the Company in
accordance with their respective terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, or similar laws
relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general
application.
3.8 Corporate Documents. The Company has furnished or made available to
the Subscriber true and correct copies of the Company's Certificate of
Incorporation as in effect on the date hereof (the "Certificate of
Incorporation"), and the Company's By-Laws, as in effect on the date
hereof (the "By-Laws"; together with the Certificate of Incorporation,
the "Charter Documents"), certified in each case by the Secretary of
the Company.
3.9 No Conflicts. The execution, delivery and performance of this
Agreement, including the conversion of the Debentures into Common
Stock of the Company, the Registration Rights Agreement the issuance
of the Debentures and the Underlying Stock upon conversion of the
Debentures and the consummation by the Company of the transactions
contemplated hereby and thereby do not and will not (i) result in a
violation of the Charter Documents or (ii) result in the creation of
any lien, charge, security interest or encumbrance upon any of the
assets of the Company pursuant to the terms or provisions
8
<PAGE> 9
of or, conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the
Company is a party, or result in a violation of any federal, state,
local or foreign law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations)
applicable to the Company or by which any property or asset of the
Company is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have a Material
Adverse Effect). The business of the Company is not being conducted
in violation of any law, ordinance or regulations of any governmental
entity, except for violations or potential violations which either
individually or in the aggregate do not and will not have a Material
Adverse Effect. The Company is not required under federal, state or
local law, rule or regulation in the United States to obtain any
consent, authorization or order of, or make any filing or registration
with, any court or governmental or self-regulatory agency in order for
it to execute, deliver or perform any of its obligations under this
Agreement or the Registration Rights Agreement or issue and sell the
Debentures or the Underlying Stock in accordance with the terms hereof
and thereof (other than any SEC, NASD, Nasdaq NM or state securities
filings which may be required to be made by the Company subsequent to
the Closing and any registration statement which may be filed pursuant
to the Registration Rights Agreement).
3.10 Exchange Act Reports. The Company has delivered or made available to
the Subscriber true and complete copies of the Exchange Act Reports
(including, without limitation, proxy information and solicitation
materials). As of their respective dates, the Exchange Act Reports
complied (and as of its effective date, the Registration Statement for
the Underlying Stock will comply) in all material respects with the
requirements of the Exchange Act (or in the case of such Registration
Statement, the Securities Act) and the rules and regulations of the
SEC promulgated thereunder and other applicable federal, state and
local laws, rules and regulations, and none of the Exchange Act
Reports contained (and, as of its effective date, such Registration
Statement will not contain) any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
financial statements of the Company included in the Exchange Act
Reports or incorporated by reference in the Registration Statement
comply in all material respects as to form with applicable accounting
requirements and the published rules and regulations of the SEC or
other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during
the periods involved (except (a) as may be otherwise indicated in such
financial statements or the notes thereto or (b) in the case of
unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly
present in all material respects the financial position of the Company
as of the dates thereof and the results of operations and cash flows
for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit
9
<PAGE> 10
adjustments). The Company has timely filed (including filing such
documents by incorporation by reference) all agreements or documents
to which the Company is a party that are required to be filed as
exhibits to the Exchange Act Reports.
3.11 No Material Adverse Change. Since December 31, 1997, the date through
which the most recent Annual Report of the Company on Form 10-KSB has
been prepared and filed with the SEC, except as disclosed in the Prior
Public Disclosures or as disclosed by the Company to the Subscriber
and acknowledged in writing by the Subscriber, no Material Adverse
Effect has occurred or exists with respect to the Company; provided,
however, that the parties hereto acknowledge and agree that the
Subscriber has had an opportunity to review the draft press release of
the Company dated July 1, 1998, a copy of which is attached hereto as
part of Schedule 1.4(d), and that the Subscriber has had an
opportunity to ask questions of the Company regarding, and receive all
information requested with respect to, the matters discussed therein,
and that the events discussed therein shall be deemed by the parties
hereto not to constitute a Material Adverse Change or breach of any
representation or warranty of the Company made herein.
3.12 No Brokers. The Company has not taken any action which would give
rise to a claim by any person for brokerage commissions, finder's fees
or similar payments by the Subscriber relating to this Agreement or
the transactions contemplated hereby.
3.13 Effectiveness of SEC Filings. The SEC has not issued any stop order
or other order suspending the effectiveness of any registration
statement filed by the Company under the Exchange Act or the
Securities Act.
3.14 No Material Litigation Proceedings. Except as disclosed in the
Exchange Act Reports, the Company is not a party to or the subject of
any litigation, arbitration or other proceeding which if adversely
determined would individually or in the aggregate have a Material
Adverse Effect. There is no action, suit, proceeding or investigation
pending, or, to the knowledge of the Company, threatened, against the
Company before or by any court, regulatory body or administrative
agency or any other governmental agency or body, domestic or foreign,
or any action, suit, proceeding or investigation pending, or, to the
knowledge of the Company, threatened, which challenges the validity of
any action taken by the Company or to be taken pursuant to or in
connection with this Agreement, the Registration Rights Agreement or
the issuance of the Debentures.
3.15 Governmental Approvals. Each of the products that the Company
currently offers and each component of each such product the Company
has been subjected to a verification procedure and/or registered
pursuant to equipment registration with the United States Federal
Communications Commission (the "FCC"), to the extent that such
verification or registration is required.
3.16 Intellectual Property. The Company has full and exclusive right,
title and interest in and to the patents set forth on Schedule 3.16A.
The Company has filed the patent applications set forth on Schedule
3.16B. There is (i) no pending or, to the knowledge of the Company,
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<PAGE> 11
threatened claim or challenge of or proceeding for infringement,
misuse or misappropriation of or interference with any intellectual
property owned, licensed or controlled by any third party arising out
of any product or process now being used, manufactured or distributed,
or ever having been used, manufactured or distributed at any time
previously, by or on behalf of the Company and (ii) no pending or
threatened or potential claim, challenge or proceeding by the Company
against any third party for infringement, misuse or misappropriation
of or interference with any intellectual property owned, licensed or
controlled by the Company.
3.17 No Integration. Neither the Company nor any of its affiliates nor any
person acting on the Company's behalf has, directly or indirectly, at
any time within the past six (6) months made, nor will any such party
make within six (6) months of the Closing Date, any offer or sale of
any security or solicitation of any offer to buy any security under
circumstances that would eliminate the availability of the exemption
from registration under Regulation D under the Securities Act in
connection with the offer and sale of the Securities as contemplated
hereby.
4. Covenants of the Subscriber
4.1 Resales. The Subscriber shall not make any offers or sales of the
Securities other than pursuant to a registration statement under the
Securities Act or pursuant to an exemption from registration under the
Securities Act. The Subscriber will comply with applicable prospectus
delivery requirements.
4.2 Low Trades; Short Sales. The Subscriber covenants and agrees that it
will not, directly or through any affiliate, on any trading day used
in the calculation of the Floating Conversion Price (as defined in the
Debentures) or any other trading day used for any purpose in valuation
pursuant to the Debentures, (a) create the lowest reported sales price
on the Nasdaq NM for the Common Stock or (b) offer to sell shares of
Common Stock at a price lower than the then prevailing bid price for
the Common Stock on the Nasdaq NM. The Subscriber covenants and
agrees that during the 90 days following the Closing Date it will not
take a "short" position in the Common Stock unless at the time such
position is taken, the price per share of the Common Stock as reported
on Nasdaq NM is greater than the Fixed Conversion Price (as defined in
the Debenture).
5. Covenants of the Company. For so long as any of the Debentures remain
outstanding, the Company covenants to the Subscriber as follows:
5.1 Registration Rights. The Company will file within 60 days of the date
hereof, and use its best efforts to cause to become effective, as
promptly as possible, but in no event later than 120 days after the
date hereof, a registration statement ("Registration Statement") on
Form S-3 under the Securities Act covering the resale of the
Underlying Stock issuable on conversion of the Debentures and any
shares of Common Stock issuable upon the exercise of warrants (the
"Warrants") issued by the Company upon redemption of the Debentures
(such shares, the "Underlying Warrant Shares") and shall take all
action
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<PAGE> 12
necessary to qualify the Underlying Stock and the Underlying Warrant
Shares under all applicable state "blue sky" laws, in accordance with
terms of the Registration Rights Agreement (the "Registration Rights
Agreement") in the form of EXHIBIT D hereto, which the Company and the
Subscriber shall enter into at the Closing of this Agreement.
5.2 Reservation of Common Stock. As of the Closing, the Company will
reserve and the Company shall continue to reserve and keep available
at all times, free of preemptive rights, shares of Common Stock for
the purpose of enabling the Company to satisfy two times the number of
shares necessary to satisfy any obligation to issue shares of its
Common Stock upon conversion of the Debentures as if all the
Debentures were converted as of the Closing, plus such additional
number of shares of Common Stock as may be issued upon exercise of the
Warrants. The number of shares so reserved may be reduced by the
number of shares actually delivered pursuant to conversion of a
portion of the Debentures (provided that in no event shall the number
of shares so reserved be less than one and a half times the number
required to satisfy the remaining conversion rights on the unconverted
Debentures) and the number of shares so reserved shall be increased to
reflect stock splits and stock dividends and distributions.
5.3 Listing of Underlying Shares. The Company hereby agrees, promptly
following the Closing of the transaction contemplated by this
Agreement, to take such action to cause the Underlying Stock (and the
Underlying Warrant Shares, if any) to be listed on Nasdaq NM as
promptly as possible but no later than the effective date of the
Registration Statement referred to in Section 5.1. The Company
further agrees, if the Company applies to have the Common Stock traded
on any other principal stock exchange or market, that it will include
in such application the Underlying Stock (and the Underlying Warrant
Shares, if any) and will take such other action as is necessary to
cause the Underlying Stock (and the Underlying Warrant Shares, if any)
to be listed on such other exchange or market as promptly as possible.
5.4 Exchange Act Registration. The Company will cause its Common Stock to
continue to be registered under Section 12(g) of the Exchange Act,
will comply in all respects with its reporting and filing obligations
under the Exchange Act, and will not take any action or file any
document (whether or not permitted by the Exchange Act or the rules
thereunder) to terminate or suspend such registration or to terminate
or suspend its reporting and filing obligations under the Exchange
Act. The Company will take all action necessary to continue the
listing and trading of its Common Stock on the Nasdaq NM and will
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the NASD and Nasdaq NM.
5.5 Restrictions on Transferability; Legends on Certificates; Transfer
Agent Instructions.
(a) The Subscriber acknowledges and agrees that the Debentures
and, when issued, the shares of Underlying Stock, will be issued
pursuant to a private placement exemption from the registration
requirements imposed by the Securities Act and applicable state
securities laws and, as such, constitute "restricted securities" under
such laws and may
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<PAGE> 13
not be resold without registration under the Securities Act and state
securities laws or pursuant to an exemption from such registration
requirements. The Subscriber represents that it is familiar with the
Securities Act and the rules and regulations promulgated thereunder as
presently in effect, including, without limitation, Rule 144
promulgated under the Securities Act, and the requirements of
applicable state securities laws and understands the limitations on
resale of the Securities imposed thereby. Without in any way limiting
the representations set forth above, the Subscriber further
acknowledges and agrees not to sell or transfer any portion of the
Debentures or the Underlying Stock unless (i) there is then an
effective registration statement under the Securities Act and
applicable state securities laws covering such proposed transfer and
such transfer is made pursuant to such registration statement and
otherwise in accordance with applicable securities laws, or (ii) the
shares are transferred or sold in an exempt transaction under the
Securities Act and applicable state securities laws and the Subscriber
provides the Company and, if required, its counsel or transfer agent,
with an opinion of counsel to such effect, which legal opinion shall
in form and substance be reasonably acceptable to the Company.
(b) The Subscriber acknowledges and agrees that, in light of the
fact that the Debentures and the Underlying Stock constitute
"restricted securities" the certificates representing such shares will
bear a restrictive legend indicating the resale limitations imposed
upon such Securities and that the stock transfer books of the Company
(including any such books maintained on the Company's behalf by the
transfer agent for its Common Stock) will bear a notation to such
effect.
(c) The Company agrees that it will provide the transfer agent for
its Common Stock with transfer agent instructions consistent with and
reflecting the foregoing. The Company covenants and agrees that,
promptly following execution and delivery of this Agreement, it will
provide instructions to the transfer agent for its Common Stock, such
instructions to be in form and substance reasonably acceptable to the
Subscriber, to facilitate trades of the Underlying Stock and to permit
the Subscriber to timely deliver within the required settlement period
certificates representing such shares in connection with any transfer
or disposition of the Underlying Stock. The Subscriber and the
Company acknowledge and agree that their respective obligations
pursuant to this Section 5.5 are subject to compliance by each of them
with applicable securities laws.
The Company covenants that it will use its best efforts to cause the
Company's transfer agent to deliver certificates representing shares
issued in connection with a transfer of Underlying Stock as promptly
as practicable but in no event later than three business days after
delivery by the Subscriber of all required documentation in respect of
such transfer. The Company covenants that it will use its best
efforts to cause the Company's transfer agent to deliver unlegended
certificates representing shares of Underlying Stock or Underlying
Warrant Shares, if any, delivered in connection with a transfer of
underlying stock as promptly as practicable but in no event later than
three business days after delivery by the Subscriber of all required
documentation in respect of such transfer, including a representation
by the Subscriber to the Company and/or the transfer agent that
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<PAGE> 14
such shares are being delivered in connection with a sale pursuant to
an effective resale registration statement.
5.6 Corporate Existence. The Company will take all steps necessary to
preserve and continue the corporate existence of the Company.
5.7 Right of First Refusal. In the event that at any time or from time to
time during the six (6) month period immediately following the Closing
Date, the Company proposes to issue or sell in a private placement any
of its equity or debt securities which are convertible into or
exchangeable for its Common Stock (other than (i) securities issued or
sold pursuant to an underwritten public offering by the Company, (ii)
securities issued or sold or in connection with a merger or
consolidation or sale of all or substantially all of the Company's
assets, (iii) securities issued under or pursuant to the Company's
existing 1994 Stock Option Plan or 1996 Stock Incentive Plan, (iv)
securities issued upon exercise of outstanding warrants or options and
(v) securities issued to any unaffiliated third party that is a
strategic partner and which involves the issuance of securities and
one or more of the following: a transfer of technology, the sale by
the Company of products or services, or the purchase by the Company of
the products or services of such third party, whether singly or
together with other securities, then the Company shall give written
notice (the "Proposal Notice") to the Subscriber of such proposed
issuance, specifying the terms and conditions thereof in reasonable
detail, and the Subscriber shall have the right, exercisable by
written notice delivered within 10 business days of the date of
receipt by the Subscriber of the Proposal Notice, to subscribe for and
purchase all (or, if agreed to by the investor to which such
additional securities are being offered and sold, such lesser portion
as the Subscriber shall specify in writing) of the Common Stock or
other securities proposed to be issued, on the same terms and
conditions specified in the Proposal Notice. Notwithstanding the
foregoing, this Section 5.7 shall not apply if the Company issues or
sells, in a private placement, any equity securities; provided that
if such equity securities are convertible into or exchangeable for its
Common Stock or any other convertible security, the terms and
conditions of such securities are no more favorable to the investor
than those evidenced hereby; and provided further that (a) the
investors in such private placement are subject to a six (6) month
restriction on the resale of such securities and (b) the Company shall
have delivered to the Subscriber a certificate in form and substance
reasonably satisfactory to the Subscriber, executed by an executive
officer of the Company, to the effect that such offer and sale of
additional securities will not eliminate the availability of the
exemption from registration under Regulation D under the Securities
Act of the offer and sale of the Securities evidenced hereby.
5.8 Use of Proceeds. The Company shall use all the proceeds received from
the sale of the Securities pursuant to this Agreement for general
corporate purposes, including working capital.
5.9 Rule 144A Information. The Company will (i) make available, upon
request, to any holder of Securities and any prospective purchaser
thereof designated by such a holder, upon the request of such holder
or prospective purchaser, the information required to be
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<PAGE> 15
provided to such holder or prospective purchaser by Rule 144A(d)(4)
under the Securities Act and (ii) update such information from time to
time in order to prevent such information from becoming false and
misleading and will take such other actions as are necessary to ensure
that the safe harbor exemption from the registration requirements of
the Securities Act under Rule 144A is and will be available for
resales of the Debentures or Underlying Stock conducted in accordance
with Rule 144A.
5.10 Notice of Adverse Change. The Company will notify the Subscriber
promptly (but in any event within seven days) after becoming aware of
the existence of any condition or event which has had a Material
Adverse Effect on the Company.
5.11 Dividends and Distributions. The Company shall not make or fix a
record date for the determination of holders of Common Stock or other
equity securities or declare a cash dividend or other distribution
payable in cash or property of the Company, until the Company has
delivered to the Subscriber all of the shares of Common Stock issuable
upon conversion of the Debentures or paid all sums of cash due to such
Subscriber upon redemption of the Debentures, as applicable, such that
after such delivery or payment upon any such conversion or redemption
no more than 10% of the Debentures issued on the Closing Date remain
outstanding; provided, however, that nothing in this Section 5.11
shall prevent or restrict the right of the Company to declare and pay
dividends on such securities payable in the form of shares of Common
Stock.
5.12 Filing of Current Report on Form 8-K. On or before the second
business day following the Closing Date, the Company shall file a
Current Report on Form 8-K with the SEC in a form reasonably
acceptable to the Subscriber describing the terms of the transaction
consummated at the Closing.
5.13 Form D. The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy
thereof to the Subscriber promptly after such filing.
5.14 Governmental Approvals. The Company covenants and agrees that it will
expeditiously take all steps necessary to obtain FCC verification
and/or equipment registrations for its new products and components
included in its new products prior to their introduction, to the
extent such verification or registration is required.
5.15 Public Disclosures. At the time the resale registration statement of
the Company becomes effective, the Company will not have provided to
the Subscriber any information which, according to applicable law,
rule or regulation, should have been disclosed publicly by the Company
but which has not been so disclosed.
6. Legends; Subsequent Transfer of Securities; Denominations
6.1 Legend. The Company will issue one or more certificates evidencing
the Debentures in the name of the Subscriber and in such number of
shares to be specified by the Subscriber
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<PAGE> 16
prior to (or from time to time subsequent to) Closing. The
Debentures, and any shares of Common Stock issued upon conversion
thereof, will bear the following legend (the "Legend"):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY
NOT BE SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
Following the effectiveness of the Registration Statement, the Company
will issue certificates representing the Securities without the Legend
to any transferee other than holders who are "affiliates" of the
Company (as such term is defined under the Securities Act), promptly
upon request, if (i) the holder thereof is permitted to dispose of
such Securities pursuant to Rule 144(k) under the Securities Act, (ii)
the Securities are sold to a purchaser or purchasers in a transaction
exempt from registration under the Securities Act, as evidenced by an
opinion of counsel to the transferor delivered and reasonably
satisfactory in form and substance to the Company or (iii) the
Securities are sold to a purchaser or purchasers pursuant to an
effective registration statement and the prospectus delivery
requirements under the Securities Act are met.
6.2 Subscriber's Compliance. Nothing in this Section 6 shall affect in
any way the Subscriber's obligations and agreement to comply with all
applicable securities laws upon resale of the Securities.
6A. Payment Set Aside
To the extent that the Company makes a payment or payments to the
Subscriber hereunder or pursuant to the Registration Rights Agreement
or the Debenture or the Subscriber enforces or exercises its rights
hereunder or thereunder, and such payment or payments or the proceeds
of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or
otherwise restored to the Company, a trustee, receiver or any other
person under any law (including, without limitation, any bankruptcy
law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part
thereof originally intended to be satisfied shall be revived and
continued in full force and effect as if such payment had not been
made or such enforcement or set-off had not occurred.
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7. Governing Law; Jurisdiction
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW OR CHOICE OF LAW, EXCEPT FOR MATTERS ARISING UNDER
THE SECURITIES ACT OR THE EXCHANGE ACT WHICH MATTERS SHALL BE
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH SUCH LAWS.
8. Assignment; Entire Agreement; Amendment
8.1 Assignment. Neither this Agreement nor any rights hereunder may be
assigned by either party without the prior written consent of the
other party hereto; provided, however, the Subscriber may assign its
rights under this Agreement to an affiliate of the Subscriber who
agrees to be bound by the terms hereof. To the extent that the
Subscriber assigns this Agreement with the prior written consent of
the Company or to an affiliate of the Subscriber, the provisions of
this Agreement, the Debenture and the Registration Rights Agreement
shall inure to the benefit of, and be enforceable by, any transferee
of any of the Securities purchased by the Subscriber hereunder with
respect to the Securities held by such person.
8.2 Entire Agreement; Amendment. This Agreement, the Debenture, the
Registration Rights Agreement and the other documents delivered
pursuant hereto and thereto constitute the full and entire
understanding and agreement between the parties with regard to the
subjects hereof and thereof, and no party shall be liable or bound to
any other party in any manner by any warranties, representations or
covenants except as specifically set forth in this Agreement or
therein. Except as expressly provided in this Agreement, neither this
Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party
against whom enforcement of any such amendment, waiver, discharge or
termination is sought.
9. Publicity
The Company and the Subscriber agree that neither of them will
disclose or include in any public announcement, any information in
respect of the transactions contemplated herein, including, without
limitation, the name of the Subscriber, without the prior written
consent of the other party hereto, except that nothing herein shall
prevent or impede the right of either party to make such disclosure as
is required by law or applicable regulation, to the extent that it
determines in good faith, that it is legally obligated to do so;
provided, however, the Company shall file with the SEC a Form 8-K
pursuant to Section 5.12 herein. Except as may be required by law,
the Company and the Subscriber shall consult with each other before
issuing any press release or otherwise making any public statements
with respect to this Agreement and shall not issue any such press
release or make any such public statement prior to such consultation.
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<PAGE> 18
10. Notices, Etc.; Expenses; Indemnity
10.1 Notices. Any notice, demand or request required or permitted to be
given by either the Company or the Subscriber pursuant to the terms of
this Agreement shall be in writing and shall be deemed given when
delivered personally, by overnight courier service or by facsimile,
with a hard copy to follow by overnight or two day courier, addressed
to the other party at the address of the party set forth at the end of
this Agreement or such other address as a party may request by
notifying the other in writing. Copies of all notices to the
Subscriber shall be sent to its designee or representative and copies
of all notices to the Company shall be sent to its Vice President,
Finance and Administration, or to such other corporate officer as it
may hereafter designate.
10.2 Costs and Expenses. The Company shall be responsible for the
Subscriber's legal fees and expenses, due and payable at Closing,
incurred in connection with entering into this Agreement and the
transactions contemplated hereby, but not to exceed $35,000.
10.3 Indemnification. Each party shall indemnify the other against any
loss, cost or damages (including reasonable attorney's fees and
expenses) incurred as a result of such parties' breach of any
representation, warranty, covenant or agreement in this Agreement.
11. Counterparts
This Agreement may be executed in any number of counterparts, each of
which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one
instrument.
12. Survival; Severability
The representations, warranties, covenants and agreements of the
parties hereto shall survive the Closing for a period of one year
notwithstanding any due diligence investigation conducted by or on
behalf of the Subscriber; provided, however that representations,
warranties, covenants and agreements which, by their terms survive for
a period longer than one year shall survive for such longer period, as
elsewhere set forth in this Agreement. In the event that any
provision of this Agreement becomes or is declared by a court of
competent jurisdiction to be illegal, unenforceable or void, this
Agreement shall continue in full force and effect without said
provision; provided that no such severability shall be effective if it
materially changes the economic benefit of this Agreement to any
party.
13. 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.
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14. Amount
The undersigned hereby subscribes for $2,500,000 aggregate principal
amount of Debentures.
[SIGNATURE PAGES FOLLOW]
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<TABLE>
<S> <C>
Subscriber's Representative Name of the Subscriber:
---------------------------
- ---------------------------
Name:
By:
- ---------------------------- By:
Address ------------------------------------
- ----------------------------
Telephone
Date of Subscription:
----------------------
- ---------------------------
Fax Place of Execution: New York
Place of Organization or Citizenship:
Place of Residency and/or Principal Place of
Business
---------------------------------------
---------------------------------------
Attn:
---------------------------------
(Telephone):
--------------------------
(Fax):
--------------------------------
Registration instructions:
(Name) (Please Print)
-----------------
</TABLE>
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THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE 1ST DAY OF JULY,
1998.
OBJECTIVE COMMUNICATIONS, INC.
By:
------------------------------------
Name:
Title:
Address: 50 International Drive
Portsmouth, N.H. 03801
[EXHIBITS OMITTED]
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<PAGE> 1
EXHIBIT 4.2
SUBSCRIPTION AGREEMENT
This Subscription Agreement (the "Agreement"), dated as of July 8,
1998, has been executed by the undersigned (the "Subscriber") in connection
with the offering and sale (the "Offering") of an aggregate of up to $625,000
aggregate principal amount 5% Convertible Debentures due 2003 (the
"Debentures") of Objective Communications, Inc., a Delaware corporation (the
"Company"), for a purchase price of $10,000 per Debenture, convertible into
shares of common stock, par value $.01 per share of the Company (the "Common
Stock"), and possessing such other rights and preferences as are set forth in
the form of debenture attached hereto as EXHIBIT A (the "Form of Debenture").
The solicitation of this Agreement and, if accepted by the Company, the offer
and sale of the Debentures, are being made in reliance upon the provisions of
Regulation D ("Regulation D") promulgated by the Securities and Exchange
Commission (the "SEC") under the United States Securities Act of 1933, as
amended (the "Securities Act"). The Debentures and the Common Stock issuable
upon conversion thereof are sometimes collectively referred to in this
Agreement as the "Securities."
The Common Stock issuable upon conversion of the Debentures is
sometimes referred to in this Agreement as the "Underlying Stock." Upon the
terms and subject to the conditions set forth herein, the Subscriber hereby
agrees to purchase, and the Company hereby agrees to issue and sell the
aggregate principal amount of Debentures set forth in this Agreement at the
aggregate purchase price set forth in Section 14. In consideration of the
mutual promises, representations, warranties and conditions set forth hereto,
and intending to be legally bound hereby, the Company and the Subscriber hereby
agree as follows:
1. Agreement to Subscribe; the Subscriber
1.1 Purchase and Issuance of Debentures. On the basis of the
representations and warranties contained in this Agreement and subject
to the terms and conditions hereinafter set forth, the Subscriber
hereby subscribes for the specified aggregate principal amount of
Debentures upon and subject to the conditions set forth elsewhere in
this Agreement and at the aggregate purchase price set forth in
Section 14. The closing of the purchase (the "Closing") shall occur
on July 8, 1998 (the "Closing Date"); provided that (a) the purchase
price has been delivered by the Subscriber to the Company, a mutually
acceptable escrow agent or as otherwise agreed between the parties (in
immediately available funds via a wire transfer pursuant to
instructions previously delivered for such purpose), (b) the principal
amount of Debentures subscribed for hereby shall have been issued and
delivered by the Company to the Subscriber, a mutually acceptable
escrow agent or as otherwise agreed between the parties and (c) all
other conditions precedent to the obligations of the Subscriber and
the Company set forth herein shall have been satisfied or waived in
writing.
<PAGE> 2
1.2 Nature of the Subscriber. The Subscriber is purchasing the Debentures
for its own account.
1.3 Conditions Precedent to the Obligation of the Company to Sell the
Debentures. The obligation hereunder of the Company to issue and sell
the Debentures to the Subscriber is subject to the satisfaction, at or
before the Closing, of each of the conditions set forth below. Each
of these conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion.
(a) Accuracy of the Subscriber's Representations and Warranties.
The representations and warranties of the Subscriber shall be
true and correct as of the date when made and in all material
respects as of the Closing Date as though made at each such
time.
(b) Performance by the Subscriber. The Subscriber shall have
performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the
Subscriber at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits the consummation of
any of the transactions contemplated by this Agreement, and no
valid proceeding shall have been commenced which may have the
effect of prohibiting or adversely affecting any of the
transactions contemplated hereby.
(d) Legal Investment. At the time of the Closing, the purchase of
the Securities by the Subscriber shall be legally permitted by
all statutes, rules and regulations to which the Subscriber
and the Company are subject.
(e) Officer's Certificate. The Subscriber shall have delivered to
the Company a certificate in form and substance reasonably
satisfactory to the Company, executed by an authorized
representative of the Subscriber, to the effect that all the
conditions to the Closing shall have been satisfied and that
the representations and warranties of the Subscriber contained
in the Agreement are true and correct in all material respects
on and as of the date hereof with the same force and effect as
though such representations and warranties had been made on
the date hereof.
1.4 Conditions Precedent to the Obligation of the Subscriber to Purchase
the Debentures. The obligation of the Subscriber hereunder to acquire
and pay for the Debentures is subject to the satisfaction, at or
before the Closing, of each of the following conditions. Each of these
conditions is for the Subscriber's sole benefit and may be waived in
writing by the Subscriber at any time in its sole discretion.
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<PAGE> 3
(a) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company shall be true
and correct as of the date when made and in all material
respects as of the Closing Date as though made at each such
time.
(b) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all
covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits or adversely effects
any of the transactions contemplated by this Agreement, and no
proceeding shall have been commenced which may have the effect
of prohibiting or adversely affecting any of the transactions
contemplated hereby.
(d) No Suspension of Trading in or Delisting of Common Stock. The
trading in the Common Stock shall not have been suspended by
the SEC or the National Association of Securities Dealers,
Inc. (the "NASD"); the Common Stock shall not have been
delisted from the Nasdaq National Market (the "Nasdaq NM");
and trading in securities generally as reported by the Nasdaq
NM shall not have been suspended or limited or minimum prices
shall not have been established on securities whose trades are
reported by the Nasdaq NM.
(e) Legal Opinion. The Company shall have delivered to the
Subscriber opinions of independent counsel to the Company,
each substantially in the form of EXHIBIT B attached hereto.
(f) Officer's Certificate. The Company shall have delivered to
the Subscriber a certificate in form and substance reasonably
satisfactory to the Subscriber, executed by an executive
officer of the Company, to the effect that all the conditions
to the Closing shall have been satisfied and that the
representations and warranties of the Company contained in the
Agreement are true and correct in all respects on and as of
the date hereof with the same force and effect as though such
representations and warranties had been made on the date
hereof.
(g) Registration Rights Agreement. The Company and the Subscriber
shall have entered into the Registration Rights Agreement
contemplated by Section 5.1.
(h) Debentures. The Company shall have executed the Debentures
substantially in the form attached hereto in the Form of
Debenture.
(i) Reservation of Shares. The Company shall have reserved such
number of shares of Common Stock as required pursuant to
Section 5.2.
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<PAGE> 4
(j) Legal Investment. At the time of the Closing, the purchase of
the Securities by the Subscriber shall be legally permitted by
all statutes, rules and regulations to which the Subscriber
and the Company are subject.
(k) Co-Investment. The Company shall have completed, or shall
complete simultaneously with the Closing the purchase of at
least $2,500,000 aggregate principal amount of the Debentures.
(l) Other Matters. The Company shall have delivered to the
Subscriber a certificate of good standing and tax status of
the Company certified as of a recent date by the Secretary of
State of the State of Delaware, and from each other
jurisdiction in which the Company is qualified to do business.
2. Representations and Warranties of Subscriber
The Subscriber represents and warrants to the Company that:
2.1 No Government Recommendation or Approval. The Subscriber understands
that no United States federal or state agency or similar agency of any
other country, has passed upon or made any recommendation or
endorsement of the Company or of the Offering.
2.2 Intent. The Subscriber is purchasing the Securities for his, her or
its own account and not with a view towards distribution and the
Subscriber has no present arrangement to sell the Debentures or the
Underlying Stock to or through any person or entity; provided,
however, that by making the representation herein, the Subscriber does
not agree to hold the Securities for any minimum or other specific
term, except to the extent required by federal securities laws
including, without limitation, Section 16(b) of the Securities
Exchange Act of 1934, as amended, and regulations promulgated
thereunder. The Subscriber reserves the right to dispose of the
Securities at any time in accordance with federal and state securities
laws applicable to such disposition. The Subscriber understands that
the Securities must be held indefinitely unless such Securities are
subsequently registered under the Securities Act or an exemption from
registration is available. The Subscriber has been advised or is
aware of the provisions of Rule 144 promulgated under the Securities
Act.
2.3 Sophisticated Investor. The Subscriber is an "accredited investor"
(as defined in Rule 501 of Regulation D), and the Subscriber has such
experience in business and financial matters that it is capable of
evaluating the merits and risks of an investment in the Securities.
The Subscriber acknowledges that the Securities are speculative,
illiquid and involve a high degree of risk.
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<PAGE> 5
2.4 Independent Investigation. The Subscriber, in making the decision to
purchase the Debentures subscribed for hereunder, has relied upon an
independent investigation made by him, her or it and/or his, her or
its representatives and has not relied on any information or
representations made by third parties or on any oral or written
representations or assurances from the Company or any representative
or agent of the Company other than as set forth in this Agreement, the
Registration Rights Agreement, the Debenture and the Prior Public
Disclosures. The Subscriber has had a reasonable opportunity to ask
questions of, and receive answers and documents from, the Company
concerning the Company and the Offering. The Subscriber acknowledges
that the price and terms of the Debentures offered hereby have been
determined by negotiation based in part on the market price for the
Common Stock, and that it does not necessarily bear any relationship
to the assets, book value or potential performance of the Company or
any other recognized criteria of value.
2.5 Authority. If the Subscriber is an entity, this Agreement has been
duly authorized and validly executed and delivered by the Subscriber
and is a valid and binding agreement enforceable in accordance with
its terms, subject to general principles of equity and to bankruptcy
or other laws affecting the enforcement of creditors' rights
generally. If the Subscriber is a natural person, he or she is a bona
fide resident of the State contained in the address set forth on the
signature page of this Agreement as the undersigned's home address; at
least 21 years of age; and legally competent to execute this
Subscription Agreement.
2.6 No Legal Advice from Company. The Subscriber acknowledges that he,
she or it has had the opportunity to review this Agreement and the
transactions contemplated by this Agreement with its own legal counsel
and investment and tax advisors. Except for any statements or
representations of the Company made in this Agreement, the
Registration Rights Agreement, the Debenture and the legal opinion
called for by Section 1.4 hereof, the Subscriber is relying solely on
such counsel and advisors and not on any statements or representations
of the Company or any of its representatives or agents for legal, tax
or investment advice with respect to this investment, the transactions
contemplated by this Agreement or the securities laws of any
jurisdiction.
2.7 No Brokers. The Subscriber has taken no action which would give rise
to any claim by any person for brokerage commissions, finder's fees or
similar payments by the Company relating to this Agreement or the
transactions contemplated hereby.
2.8 Reliance on Representations and Warranties. The Subscriber
understands that the Debentures are being offered and sold to it in
reliance on specific provisions of United States federal and state
securities laws and that the Company is relying upon the truth and
accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Subscriber set forth in this
Agreement in order to determine the applicability of such provisions.
5
<PAGE> 6
3. Representations and Warranties of Company
The Company represents and warrants to the Subscriber that:
3.1 Company Status. The Company has registered its Common Stock pursuant
to Section 12(g) of the Exchange Act, is in full compliance with all
reporting requirements of the Exchange Act, and the Company has
maintained all requirements for the continued listing of its Common
Stock, and such Common Stock is currently listed, on the Nasdaq NM.
3.2 Current Public Information. The Exchange Act Reports are the only
filings made by the Company with the SEC since March 31, 1998 pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act. The
Exchange Act Reports have been filed with the SEC on a timely basis.
3.3 No Directed Selling Efforts or General Solicitation in Regard to this
Transaction. The Company has not conducted any general solicitation
(as that term is used in Regulation D) with respect to any of the
Securities, nor has it made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that
would require registration of the Securities under the Securities Act.
3.4 Valid Issuance of Capital Stock. (a) The Company has an authorized
capitalization consisting of 30,000,000 shares of Common Stock, par
value $.01 per share, and 2,500,000 shares of preferred stock, par
value $.01 per share. The Company has issued and outstanding on the
date hereof (i) 5,741,035 shares of Common Stock, none of which shares
are held in treasury and (ii) no shares of preferred stock. As of the
date hereof, the Company has outstanding the following securities
convertible into or exercisable or exchangeable for Common Stock (the
"Derivative Securities"): warrants to purchase 732,332 shares of
Common Stock and options to purchase 1,548,700 shares of Common Stock.
From the date hereof to the Closing, there will be no changes in the
authorized capital stock or Derivative Securities, except as
contemplated by this Agreement and except upon the exercise of
outstanding Derivative Securities.
(b) All of the issued shares of capital stock of the Company have
been duly and validly authorized and issued and are fully paid and
non-assessable; prior to the Closing Date, the Debentures shall be
authorized; the shares of Underlying Stock issuable upon conversion of
the Debentures, when issued and delivered in accordance with the terms
of the Debentures, will be duly and validly issued obligations of the
Company enforceable against the Company in accordance with their
terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of
equity (regardless of whether such enforceability is considered in a
proceeding at equity or at law) and shares of Common Stock have been
duly reserved for issuance upon the exercise thereof pursuant to the
conversion rights set forth in the Debentures; and the holders of
outstanding capital stock of the Company are not and shall not be
entitled to preemptive or other rights afforded by the Company to
6
<PAGE> 7
subscribe for the capital stock or other securities of the Company as
a result of the sale of the Debentures or the issuance of Underlying
Stock upon the conversion thereof. Other than as set forth in this
Section and the 500,000 shares of Series A Convertible Preferred
Stock, par value $.01 per share, previously authorized by the board of
directors of the Company (the "Board of Directors"), there are no
classes or series of preferred stock authorized, issued or reserved
for issuance. There currently are no shares of Series A Preferred
Stock, par value $.01 per share, of the Company issued and
outstanding. The Company will not issue any shares of its Series A
Preferred Stock, par value $.01 per share, for so long as the
Debentures remain outstanding.
3.5 Dilution. The number of shares of Common Stock issuable upon
conversion of the Debentures may increase substantially in certain
circumstances, including, but not necessarily limited to, the
circumstance wherein the trading price of the Common Stock declines
prior to conversion of the Debentures. The Company's executive
officers and directors have studied and fully understand the nature of
the Securities being sold hereby and recognize that they have a
potentially dilutive effect. The Board of Directors has concluded, in
its good faith business judgment, that such issuance is in the best
interest of the Company. The Company specifically acknowledges that
its obligation to issue the shares of Common Stock upon conversion of
the Debentures is binding upon the Company and enforceable regardless
of the dilution such issuance may have on the ownership interests of
other stockholders of the Company.
3.6 Organization and Qualification. The Company is a corporation duly
incorporated and existing in good standing under the laws of the State
of Delaware and has the requisite corporate power to own its
properties and assets and to carry on its business as now being
conducted. The Company does not have any subsidiaries. The Company
is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification
necessary other than those in which the failure so to qualify would
not have a Material Adverse Effect. "Material Adverse Effect" means
any material adverse effect on the business, operations, properties or
financial condition of the Company.
3.7 Authorization; Enforcement. (a) The Company has the requisite
corporate power and authority to enter into and perform this Agreement
and the Registration Rights Agreement, to issue the Debentures in
accordance with the terms hereof and to perform its obligations under
the terms of the Debentures; (b) the execution and delivery of this
Agreement and the Registration Rights Agreement, the issuance and
delivery of the Debentures and the consummation by the Company of the
transactions contemplated hereby and thereby have been duly authorized
by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors or stockholders
is required (except the stockholder approval which may be required
under the non-quantitative maintenance requirements for Nasdaq NM
issuers); (c) this Agreement has been, and on or before the Closing
Date the Registration Rights Agreement and the Debentures will be,
duly executed and delivered by the Company; and (d) this Agreement
constitutes, and upon execution and delivery thereof the Registration
Rights Agreement
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<PAGE> 8
and the Debentures shall constitute legal, valid and binding
obligations of the Company enforceable against the Company in
accordance with their respective terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, or similar laws
relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general
application.
3.8 Corporate Documents. The Company has furnished or made available to
the Subscriber true and correct copies of the Company's Certificate of
Incorporation as in effect on the date hereof (the "Certificate of
Incorporation"), and the Company's By-Laws, as in effect on the date
hereof (the "By-Laws"; together with the Certificate of Incorporation,
the "Charter Documents"), certified in each case by the Secretary of
the Company.
3.9 No Conflicts. The execution, delivery and performance of this
Agreement, including the conversion of the Debentures into Common
Stock of the Company, the Registration Rights Agreement the issuance
of the Debentures and the Underlying Stock upon conversion of the
Debentures and the consummation by the Company of the transactions
contemplated hereby and thereby do not and will not (i) result in a
violation of the Charter Documents or (ii) result in the creation of
any lien, charge, security interest or encumbrance upon any of the
assets of the Company pursuant to the terms or provisions of or,
conflict with, or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the
Company is a party, or result in a violation of any federal, state,
local or foreign law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations)
applicable to the Company or by which any property or asset of the
Company is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have a Material
Adverse Effect). The business of the Company is not being conducted
in violation of any law, ordinance or regulations of any governmental
entity, except for violations or potential violations which either
individually or in the aggregate do not and will not have a Material
Adverse Effect. The Company is not required under federal, state or
local law, rule or regulation in the United States to obtain any
consent, authorization or order of, or make any filing or registration
with, any court or governmental or self-regulatory agency in order for
it to execute, deliver or perform any of its obligations under this
Agreement or the Registration Rights Agreement or issue and sell the
Debentures or the Underlying Stock in accordance with the terms hereof
and thereof (other than any SEC, NASD, Nasdaq NM or state securities
filings which may be required to be made by the Company subsequent to
the Closing and any registration statement which may be filed pursuant
to the Registration Rights Agreement).
3.10 Exchange Act Reports. The Company has delivered or made available to
the Subscriber true and complete copies of the Exchange Act Reports
(including, without limitation, proxy information and solicitation
materials). As of their respective dates, the Exchange Act Reports
complied (and as of its effective date, the Registration Statement for
the
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<PAGE> 9
Underlying Stock will comply) in all material respects with the
requirements of the Exchange Act (or in the case of such Registration
Statement, the Securities Act) and the rules and regulations of the
SEC promulgated thereunder and other applicable federal, state and
local laws, rules and regulations, and none of the Exchange Act
Reports contained (and, as of its effective date, such Registration
Statement will not contain) any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
financial statements of the Company included in the Exchange Act
Reports or incorporated by reference in the Registration Statement
comply in all material respects as to form with applicable accounting
requirements and the published rules and regulations of the SEC or
other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during
the periods involved (except (a) as may be otherwise indicated in such
financial statements or the notes thereto or (b) in the case of
unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly
present in all material respects the financial position of the Company
as of the dates thereof and the results of operations and cash flows
for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). The Company has
timely filed (including filing such documents by incorporation by
reference) all agreements or documents to which the Company is a party
that are required to be filed as exhibits to the Exchange Act Reports.
3.11 No Brokers. The Company has not taken any action which would give
rise to a claim by any person for brokerage commissions, finder's fees
or similar payments by the Subscriber relating to this Agreement or
the transactions contemplated hereby.
3.12 Effectiveness of SEC Filings. The SEC has not issued any stop order
or other order suspending the effectiveness of any registration
statement filed by the Company under the Exchange Act or the
Securities Act.
3.13 No Material Litigation Proceedings. Except as disclosed in the
Exchange Act Reports, the Company is not a party to or the subject of
any litigation, arbitration or other proceeding which if adversely
determined would individually or in the aggregate have a Material
Adverse Effect. There is no action, suit, proceeding or investigation
pending, or, to the knowledge of the Company, threatened, against the
Company before or by any court, regulatory body or administrative
agency or any other governmental agency or body, domestic or foreign,
or any action, suit, proceeding or investigation pending, or, to the
knowledge of the Company, threatened, which challenges the validity of
any action taken by the Company or to be taken pursuant to or in
connection with this Agreement, the Registration Rights Agreement or
the issuance of the Debentures.
3.14 Governmental Approvals. Each of the products that the Company
currently offers and each component of each such product the Company
has been subjected to a verification
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<PAGE> 10
procedure and/or registered pursuant to equipment registration with
the United States Federal Communications Commission (the "FCC"), to
the extent that such verification or registration is required.
3.15 Intellectual Property. The Company has full and exclusive right,
title and interest in and to the patents set forth on Schedule 3.16A.
The Company has filed the patent applications set forth on Schedule
3.16B. There is (i) no pending or, to the knowledge of the Company,
threatened claim or challenge of or proceeding for infringement,
misuse or misappropriation of or interference with any intellectual
property owned, licensed or controlled by any third party arising out
of any product or process now being used, manufactured or distributed,
or ever having been used, manufactured or distributed at any time
previously, by or on behalf of the Company and (ii) no pending or
threatened or potential claim, challenge or proceeding by the Company
against any third party for infringement, misuse or misappropriation
of or interference with any intellectual property owned, licensed or
controlled by the Company.
3.16 No Integration. Neither the Company nor any of its affiliates nor any
person acting on the Company's behalf has, directly or indirectly, at
any time within the past six (6) months made, nor will any such party
make within six (6) months of the Closing Date, any offer or sale of
any security or solicitation of any offer to buy any security under
circumstances that would eliminate the availability of the exemption
from registration under Regulation D under the Securities Act in
connection with the offer and sale of the Securities as contemplated
hereby.
4. Covenants of the Subscriber
4.1 Resales. The Subscriber shall not make any offers or sales of the
Securities other than pursuant to a registration statement under the
Securities Act or pursuant to an exemption from registration under the
Securities Act. The Subscriber will comply with applicable prospectus
delivery requirements.
4.2 Low Trades; Short Sales. The Subscriber covenants and agrees that it
will not, directly or through any affiliate, on any trading day used
in the calculation of the Floating Conversion Price (as defined in the
Debentures) or any other trading day used for any purpose in valuation
pursuant to the Debentures, (a) create the lowest reported sales price
on the Nasdaq NM for the Common Stock or (b) offer to sell shares of
Common Stock at a price lower than the then prevailing bid price for
the Common Stock on the Nasdaq NM. The Subscriber covenants and
agrees that during the 90 days following the Closing Date it will not
take a "short" position in the Common Stock unless at the time such
position is taken, the price per share of the Common Stock as reported
on Nasdaq NM is greater than the Fixed Conversion Price (as defined in
the Debenture).
5. Covenants of the Company. For so long as any of the Debentures remain
outstanding, the Company covenants to the Subscriber as follows:
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<PAGE> 11
5.1 Registration Rights. The Company will file within 60 days of the date
hereof, and use its best efforts to cause to become effective, as
promptly as possible, but in no event later than 120 days after the
date hereof, a registration statement ("Registration Statement") on
Form S-3 under the Securities Act covering the resale of the
Underlying Stock issuable on conversion of the Debentures and any
shares of Common Stock issuable upon the exercise of warrants (the
"Warrants") issued by the Company upon redemption of the Debentures
(such shares, the "Underlying Warrant Shares") and shall take all
action necessary to qualify the Underlying Stock and the Underlying
Warrant Shares under all applicable state "blue sky" laws, in
accordance with terms of the Registration Rights Agreement (the
"Registration Rights Agreement") in the form of EXHIBIT C hereto,
which the Company and the Subscriber shall enter into at the Closing
of this Agreement.
5.2 Reservation of Common Stock. As of the Closing, the Company will
reserve and the Company shall continue to reserve and keep available
at all times, free of preemptive rights, shares of Common Stock for
the purpose of enabling the Company to satisfy two times the number of
shares necessary to satisfy any obligation to issue shares of its
Common Stock upon conversion of the Debentures as if all the
Debentures were converted as of the Closing, plus such additional
number of shares of Common Stock as may be issued upon exercise of the
Warrants. The number of shares so reserved may be reduced by the
number of shares actually delivered pursuant to conversion of a
portion of the Debentures (provided that in no event shall the number
of shares so reserved be less than one and a half times the number
required to satisfy the remaining conversion rights on the unconverted
Debentures) and the number of shares so reserved shall be increased to
reflect stock splits and stock dividends and distributions.
5.3 Listing of Underlying Shares. The Company hereby agrees, promptly
following the Closing of the transaction contemplated by this
Agreement, to take such action to cause the Underlying Stock (and the
Underlying Warrant Shares, if any) to be listed on Nasdaq NM as
promptly as possible but no later than the effective date of the
Registration Statement referred to in Section 5.1. The Company
further agrees, if the Company applies to have the Common Stock traded
on any other principal stock exchange or market, that it will include
in such application the Underlying Stock (and the Underlying Warrant
Shares, if any) and will take such other action as is necessary to
cause the Underlying Stock (and the Underlying Warrant Shares, if any)
to be listed on such other exchange or market as promptly as possible.
5.4 Exchange Act Registration. The Company will cause its Common Stock to
continue to be registered under Section 12(g) of the Exchange Act,
will comply in all respects with its reporting and filing obligations
under the Exchange Act, and will not take any action or file any
document (whether or not permitted by the Exchange Act or the rules
thereunder) to terminate or suspend such registration or to terminate
or suspend its reporting and filing obligations under the Exchange
Act. The Company will take all action necessary to continue the
listing and trading of its Common Stock on the Nasdaq NM and will
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the NASD and Nasdaq NM.
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5.5 Restrictions on Transferability; Legends on Certificates; Transfer
Agent Instructions.
(a) The Subscriber acknowledges and agrees that the Debentures
and, when issued, the shares of Underlying Stock, will be issued
pursuant to a private placement exemption from the registration
requirements imposed by the Securities Act and applicable state
securities laws and, as such, constitute "restricted securities" under
such laws and may not be resold without registration under the
Securities Act and state securities laws or pursuant to an exemption
from such registration requirements. The Subscriber represents that
he, she or it is familiar with the Securities Act and the rules and
regulations promulgated thereunder as presently in effect, including,
without limitation, Rule 144 promulgated under the Securities Act, and
the requirements of applicable state securities laws and understands
the limitations on resale of the Securities imposed thereby. Without
in any way limiting the representations set forth above, the
Subscriber further acknowledges and agrees not to sell or transfer any
portion of the Debentures or the Underlying Stock unless (i) there is
then an effective registration statement under the Securities Act and
applicable state securities laws covering such proposed transfer and
such transfer is made pursuant to such registration statement and
otherwise in accordance with applicable securities laws, or (ii) the
shares are transferred or sold in an exempt transaction under the
Securities Act and applicable state securities laws and the Subscriber
provides the Company and, if required, its counsel or transfer agent,
with an opinion of counsel to such effect, which legal opinion shall
in form and substance be reasonably acceptable to the Company.
(b) The Subscriber acknowledges and agrees that, in light of the
fact that the Debentures and the Underlying Stock constitute
"restricted securities" the certificates representing such shares will
bear a restrictive legend indicating the resale limitations imposed
upon such Securities and that the stock transfer books of the Company
(including any such books maintained on the Company's behalf by the
transfer agent for its Common Stock) will bear a notation to such
effect.
(c) The Company agrees that it will provide the transfer agent for
its Common Stock with transfer agent instructions consistent with and
reflecting the foregoing. The Company covenants and agrees that,
promptly following execution and delivery of this Agreement, it will
provide instructions to the transfer agent for its Common Stock, such
instructions to be in form and substance reasonably acceptable to the
Subscriber, to facilitate trades of the Underlying Stock and to permit
the Subscriber to timely deliver within the required settlement period
certificates representing such shares in connection with any transfer
or disposition of the Underlying Stock. The Subscriber and the
Company acknowledge and agree that their respective obligations
pursuant to this Section 5.5 are subject to compliance by each of them
with applicable securities laws.
The Company covenants that it will use its best efforts to cause the
Company's transfer agent to deliver certificates representing shares
issued in connection with a transfer of Underlying Stock as promptly
as practicable but in no event later than three business days
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<PAGE> 13
after delivery by the Subscriber of all required documentation in
respect of such transfer. The Company covenants that it will use its
best efforts to cause the Company's transfer agent to deliver
unlegended certificates representing shares of Underlying Stock or
Underlying Warrant Shares, if any, delivered in connection with a
transfer of underlying stock as promptly as practicable but in no
event later than three business days after delivery by the Subscriber
of all required documentation in respect of such transfer, including a
representation by the Subscriber to the Company and/or the transfer
agent that such shares are being delivered in connection with a sale
pursuant to an effective resale registration statement.
5.6 Corporate Existence. The Company will take all steps necessary to
preserve and continue the corporate existence of the Company.
5.7 Use of Proceeds. The Company shall use all the proceeds received from
the sale of the Securities pursuant to this Agreement for general
corporate purposes, including working capital.
5.8 Rule 144A Information. The Company will (i) make available, upon
request, to any holder of Securities and any prospective purchaser
thereof designated by such a holder, upon the request of such holder
or prospective purchaser, the information required to be provided to
such holder or prospective purchaser by Rule 144A(d)(4) under the
Securities Act and (ii) update such information from time to time in
order to prevent such information from becoming false and misleading
and will take such other actions as are necessary to ensure that the
safe harbor exemption from the registration requirements of the
Securities Act under Rule 144A is and will be available for resales of
the Debentures or Underlying Stock conducted in accordance with Rule
144A.
5.9 Notice of Adverse Change. The Company will notify the Subscriber
promptly (but in any event within seven days) after becoming aware of
the existence of any condition or event which has had a Material
Adverse Effect on the Company.
5.10 Dividends and Distributions. The Company shall not make or fix a
record date for the determination of holders of Common Stock or other
equity securities or declare a cash dividend or other distribution
payable in cash or property of the Company, until the Company has
delivered to the Subscriber all of the shares of Common Stock issuable
upon conversion of the Debentures or paid all sums of cash due to such
Subscriber upon redemption of the Debentures, as applicable, such that
after such delivery or payment upon any such conversion or redemption
no more than 10% of the Debentures issued on the Closing Date remain
outstanding; provided, however, that nothing in this Section 5.10
shall prevent or restrict the right of the Company to declare and pay
dividends on such securities payable in the form of shares of Common
Stock.
5.11 Filing of Current Report on Form 8-K. On or before the second
business day following the Closing Date, the Company shall file a
Current Report on Form 8-K with the SEC in
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<PAGE> 14
a form reasonably acceptable to the Subscriber describing the terms of
the transaction consummated at the Closing.
5.12 Form D. The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy
thereof to the Subscriber promptly after such filing.
5.13 Governmental Approvals. The Company covenants and agrees that it will
expeditiously take all steps necessary to obtain FCC verification
and/or equipment registrations for its new products and components
included in its new products prior to their introduction, to the
extent such verification or registration is required.
6. Legends; Subsequent Transfer of Securities; Denominations
6.1 Legend. The Company will issue one or more certificates evidencing
the Debentures in the name of the Subscriber and in such number of
shares to be specified by the Subscriber prior to (or from time to
time subsequent to) Closing. The Debentures, and any shares of Common
Stock issued upon conversion thereof, will bear the following legend
(the "Legend"):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY
NOT BE SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
Following the effectiveness of the Registration Statement, the Company
will issue certificates representing the Securities without the Legend
to any transferee other than holders who are "affiliates" of the
Company (as such term is defined under the Securities Act), promptly
upon request, if (i) the holder thereof is permitted to dispose of
such Securities pursuant to Rule 144(k) under the Securities Act, (ii)
the Securities are sold to a purchaser or purchasers in a transaction
exempt from registration under the Securities Act, as evidenced by an
opinion of counsel to the transferor delivered and reasonably
satisfactory in form and substance to the Company or (iii) the
Securities are sold to a purchaser or purchasers pursuant to an
effective registration statement and the prospectus delivery
requirements under the Securities Act are met.
6.2 Subscriber's Compliance. Nothing in this Section 6 shall affect in
any way the Subscriber's obligations and agreement to comply with all
applicable securities laws upon resale of the Securities.
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<PAGE> 15
6A. Payment Set Aside
To the extent that the Company makes a payment or payments to the
Subscriber hereunder or pursuant to the Registration Rights Agreement
or the Debenture or the Subscriber enforces or exercises its rights
hereunder or thereunder, and such payment or payments or the proceeds
of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or
otherwise restored to the Company, a trustee, receiver or any other
person under any law (including, without limitation, any bankruptcy
law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part
thereof originally intended to be satisfied shall be revived and
continued in full force and effect as if such payment had not been
made or such enforcement or set-off had not occurred.
7. Governing Law; Jurisdiction
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW OR CHOICE OF LAW, EXCEPT FOR MATTERS ARISING UNDER
THE SECURITIES ACT OR THE EXCHANGE ACT WHICH MATTERS SHALL BE
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH SUCH LAWS.
8. Assignment; Entire Agreement; Amendment
8.1 Assignment. Neither this Agreement nor any rights hereunder may be
assigned by either party without the prior written consent of the
other party hereto; provided, however, the Subscriber may assign its
rights under this Agreement to an affiliate of the Subscriber who
agrees to be bound by the terms hereof. To the extent that the
Subscriber assigns this Agreement with the prior written consent of
the Company or to an affiliate of the Subscriber, the provisions of
this Agreement, the Debenture and the Registration Rights Agreement
shall inure to the benefit of, and be enforceable by, any transferee
of any of the Securities purchased by the Subscriber hereunder with
respect to the Securities held by such person.
8.2 Entire Agreement; Amendment. This Agreement, the Debenture, the
Registration Rights Agreement and the other documents delivered
pursuant hereto and thereto constitute the full and entire
understanding and agreement between the parties with regard to the
subjects hereof and thereof, and no party shall be liable or bound to
any other party in any manner by any warranties, representations or
covenants except as specifically set forth in this Agreement or
therein. Except as expressly provided in this Agreement, neither this
Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party
against whom enforcement of any such amendment, waiver, discharge or
termination is sought.
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<PAGE> 16
9. Publicity
The Company and the Subscriber agree that neither of them will
disclose or include in any public announcement, any information in
respect of the transactions contemplated herein, including, without
limitation, the name of the Subscriber, without the prior written
consent of the other party hereto, except that nothing herein shall
prevent or impede the right of either party to make such disclosure as
is required by law or applicable regulation, to the extent that it
determines in good faith, that it is legally obligated to do so;
provided, however, the Company shall file with the SEC a Form 8-K
pursuant to Section 5.12 herein. Except as may be required by law,
the Company and the Subscriber shall consult with each other before
issuing any press release or otherwise making any public statements
with respect to this Agreement and shall not issue any such press
release or make any such public statement prior to such consultation.
10. Notices, Etc.; Expenses; Indemnity
10.1 Notices. Any notice, demand or request required or permitted to be
given by either the Company or the Subscriber pursuant to the terms of
this Agreement shall be in writing and shall be deemed given when
delivered personally, by overnight courier service or by facsimile,
with a hard copy to follow by overnight or two day courier, addressed
to the other party at the address of the party set forth at the end of
this Agreement or such other address as a party may request by
notifying the other in writing. Copies of all notices to the
Subscriber shall be sent to its designee or representative and copies
of all notices to the Company shall be sent to its Vice President,
Finance and Administration, or to such other corporate officer as it
may hereafter designate.
10.2 Costs and Expenses. Each party to this Agreement shall be responsible
for his, her or its costs and expenses; including, without limitation,
legal fees.
10.3 Indemnification. Each party shall indemnify the other against any
loss, cost or damages (including reasonable attorney's fees and
expenses) incurred as a result of such parties' breach of any
representation, warranty, covenant or agreement in this Agreement.
11. Counterparts
This Agreement may be executed in any number of counterparts, each of
which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one
instrument.
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<PAGE> 17
12. Survival; Severability
The representations, warranties, covenants and agreements of the
parties hereto shall survive the Closing for a period of one year
notwithstanding any due diligence investigation conducted by or on
behalf of the Subscriber; provided, however that representations,
warranties, covenants and agreements which, by their terms survive for
a period longer than one year shall survive for such longer period, as
elsewhere set forth in this Agreement. In the event that any
provision of this Agreement becomes or is declared by a court of
competent jurisdiction to be illegal, unenforceable or void, this
Agreement shall continue in full force and effect without said
provision; provided that no such severability shall be effective if it
materially changes the economic benefit of this Agreement to any
party.
13. 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.
14. Amount
The undersigned hereby subscribes for $__________ aggregate principal
amount of Debentures.
[SIGNATURE PAGES FOLLOW]
17
<PAGE> 18
Name of the Subscriber:
------------------------
<TABLE>
<S> <C>
Name:
By:
- ---------------------------- By:
Address ----------------------------------------
- ----------------------------
Telephone
Date of Subscription:
----------------------
- ---------------------------
Fax Place of Execution:
------------
Place of Organization or Citizenship:
--------------------------------------------
Place of Residency and/or Principal Place of Business
-----------------------------------
-----------------------------------
Attn:
-----------------------------
(Telephone):
----------------------
(Fax):
----------------------------
Registration instructions:
(Name) (Please Print)
-------------
</TABLE>
18
<PAGE> 19
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE 8TH DAY OF JULY,
1998.
OBJECTIVE COMMUNICATIONS, INC.
By:
--------------------------------
Name:
Title:
Address: 50 International Drive
Portsmouth, N.H. 03801
[EXHIBITS OMITTED]
19
<PAGE> 1
EXHIBIT 4.3
(FACE OF DEBENTURE)
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED WITHIN THE "UNITED STATES" OR TO "U.S. PERSONS"
(AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. THE HOLDER OF THIS
SECURITY, BY ITS ACCEPTANCE HEREOF, REPRESENTS, ACKNOWLEDGES AND AGREES FOR THE
BENEFIT OF THE COMPANY THAT: (I) IT HAS ACQUIRED A "RESTRICTED" SECURITY WHICH
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT; (II) IT WILL NOT OFFER, SELL
OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE WHICH IS ONE YEAR AFTER
THE DATE OF ORIGINAL ISSUANCE HEREOF EXCEPT (A) TO OBJECTIVE COMMUNICATIONS,
INC., (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, OR
(D) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AS CONFIRMED IN AN OPINION OF COUNSEL ACCEPTABLE IN FORM
AND SUBSTANCE TO THE ISSUER OF THIS SECURITY AND, IN EACH CASE, IN ACCORDANCE
WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION; AND (III) IT WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THIS SECURITY OF THE RESALE
RESTRICTIONS SET FORTH IN CLAUSE (II) ABOVE. ANY OFFER, SALE OR OTHER
DISPOSITION PURSUANT TO THE FOREGOING CLAUSE (II)(D) IS SUBJECT TO THE RIGHT OF
THE ISSUER OF THIS SECURITY TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATIONS OR OTHER INFORMATION ACCEPTABLE TO THEM IN FORM AND SUBSTANCE.
<PAGE> 2
OBJECTIVE COMMUNICATIONS, INC.
(Incorporated in the State of Delaware)
5% CONVERTIBLE DEBENTURE DUE 2003
No. R-_______________ U.S. $____________
Objective Communications, Inc., a corporation duly
incorporated and existing under the laws of the State of Delaware (the
"Company"), for value received, hereby promises to pay to
, or
registered assigns, the principal sum of United States Dollars on July 8, 2003
(the "Maturity Date"), subject to earlier redemption by the Company. The
Debentures will be convertible into common stock, par value $.01 per share, of
the Company on the terms and subject to the conditions hereinafter set forth,
on or after ninety (90) days after the date of issuance. The Debentures will
accrue interest at a rate of 5% per annum, due and payable quarterly in
arrears, on the last day of March, June, September and December of each year,
commencing September 30, 1998, as described further under the Terms and
Conditions of the Debentures. Interest hereon shall be calculated on the basis
of a 360 day year.
Reference is hereby made to the further provisions of this
Debenture set forth under the Terms and Conditions of the Debentures on the
reverse hereof, which further provisions shall for all purposes have the same
effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Debenture to
be duly executed in its corporate name by the manual or facsimile signature of
a duly authorized signatory, as attested to by another duly authorized
signatory of the Company.
Dated: July 8, 1998
OBJECTIVE COMMUNICATIONS, INC.
By:
--------------------------
Name:
Title:
ATTEST:
By:
----------------------------------
Name:
Title:
2
<PAGE> 3
[Reverse]
Terms and Conditions of the Debentures
1. General.
(a) This Debenture is one of a duly authorized issue of Debentures
of the Company in original aggregate principal amount of $3,125,000 designated
as its 5% Convertible Debenture due 2003 (herein called the "SECURITIES").
(b) The Securities are issuable, without coupons, in principal
denominations of U.S. $10,000 and integral multiples thereof. The Securities,
and transfers thereof, shall be in registered form as provided in Section 2
hereof. The registered holder of a Security shall (to the fullest extent
permitted by applicable law) be treated at all times, by all persons and for
all purposes as the absolute owner of such Security, regardless of any notice
of ownership, theft or loss or of any writing thereon.
2. Interest. (a) Each Debenture shall be entitled to
receive, cumulative annual interest at the rate of 5.0% per annum on the
principal amount thereof. Such interest shall be due and payable quarterly in
arrears on the last day of March, June, September and December of each year
(each, an "INTEREST PAYMENT DATE"), commencing on September 30, 1998. Interest
shall accrue daily from the Issuance Date (as defined herein), whether or not
earned or declared, until such Debenture has been converted or redeemed as
herein provided. To the extent interest is not paid on the applicable Interest
Payment Date, such interest shall be cumulative and shall compound quarterly
until the date of payment of such interest. The interest so payable will be
paid to the person in whose name the Debentures (or one or more predecessor
shares) are registered on the records of the Company regarding registration and
transfers of the Debentures (the "DEBENTURE"); provided, however, that the
Company's obligation to a transferee of a Debenture arises only if such
transfer, sale or other disposition is made in accordance with the terms and
conditions hereof and the Subscription Agreement, dated as of the Issuance
Date, by and between the Company and the Subscribers set forth on the signature
pages thereof (the "SUBSCRIPTION AGREEMENT").
(b) The interest is payable in such coin or currency of
the United States of America as at the time of payment is legal tender, to the
person in whose name the applicable Debenture is duly registered on the
Debenture Register (the "HOLDER") on the tenth day prior to the applicable
Interest Payment Date and at the address last appearing on the Debenture
Register as designated in writing by such Holder thereof from time to time;
provided, however, that, in lieu of paying such interest in coin or currency,
the Company may, at its option, in full or in part, pay interest on the
Debentures on any Interest Payment Date by increasing the Debentures by the
amount of such interest such that the sum of (i) the amount of such increase in
the principal amount of the Debentures and (ii) the amount of cash interest
paid in part, if any, is equal to the amount of the cash interest which would
otherwise be paid on such Interest Payment Date if such
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<PAGE> 4
interest were paid entirely in cash. Any such increase in the principal amount
of the Debenture (plus the amount of cash interest, if any, paid together
therewith) shall constitute full payment of such interest. When any interest
is added to the principal amount of the Debenture, such interest shall, for all
purposes of the Debenture, be deemed to be part of the principal amount of the
Debenture for purposes of determining interest thereafter payable hereunder and
amounts thereafter convertible into Common Stock hereunder, and all references
herein to the principal amount of the Debenture shall mean the principal amount
of the Debenture, as adjusted pursuant to these provisions.
(c) If the Company shall elect to pay any part of an
interest payment by increasing the principal amount of the Debenture as
described in Paragraph 2(b), the Company will provide notice setting forth the
new principal amount of the Debenture to each Holder (an "INTEREST NOTICE") on
or prior to the applicable Interest Payment Date.
(d) If the cash interest due hereunder is not paid or the
Interest Notice is not delivered to each Holder within ten (10) calendar days
after the applicable Interest Payment Date, the Company shall no longer have
the right to choose the method by which interest is paid, and each Holder may
elect either cash interest payments or interest payable by increasing the
principal amount of the Debenture.
(e) Except as specifically provided herein, an election
by the Company to pay interest, in full or in part, in cash on any Interest
Payment Date shall not preclude the Company from electing any other available
alternative in respect of all or any portion of any subsequent interest
payment.
(f) So long as any Debentures are outstanding, no
dividends, including, without limitation, dividends or distributions paid in
shares of, or options, warrants or rights to subscribe for, or purchase shares
of, equity securities of the Company (whether with respect to dividends or upon
liquidation, dissolution, winding up or otherwise), including Common Stock or
any debt securities on a parity with the Debentures (whether with respect to
dividends or upon liquidation, dissolution or winding up) (collectively, the
"PARITY SECURITIES"), shall be declared or paid or set apart for payment or
other distribution upon the equity securities or the Parity Securities, nor
shall any equity securities or Parity Securities be redeemed, purchased or
otherwise acquired for any consideration (or any monies to be paid to, or made
available for, a sinking fund for the redemption of any shares of any such
stock) by the Company, directly or indirectly (except by conversion to, or
exchange for, equity securities or Parity Securities, respectively), unless, in
each case, (i) the full cumulative interest on all outstanding Debentures has
been paid or (ii) otherwise consented to by the holders of not less than
two-thirds (2/3) of the then outstanding aggregate principal amount of
Debentures (in original aggregate principal amount of $3,125,000); provided,
however, the restrictions set forth in this Paragraph 1(f) shall not apply to
dividends payable in shares of Common Stock.
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<PAGE> 5
3. Senior Debt; Rank.
(a) Without the prior express written consent of
the holders of not less than two-thirds (2/3) of the then outstanding aggregate
principal amount of Debentures (in original aggregate principal amount of
$3,125,000), the Company shall not hereafter (i) issue any Debentures, (ii)
authorize or issue any debt securities of senior rank to the Debentures in
respect of interest rights or priority of payment, (iii) authorize or issue any
Parity Securities with terms and conditions more favorable than the terms
herein, or (iv) authorize or make any amendment to the Company's Certificate of
Incorporation or By-laws, which would materially and adversely affect the
rights or relative priority of the Holders of the Debentures relative to the
holders of Parity Securities or the holders of any other class of capital
stock.
(b) In the event of the merger, consolidation or
other business combination of the Company with or into another corporation, the
Debentures shall maintain their relative powers provided for herein and no
merger, consolidation or other business combination shall result inconsistent
therewith.
4. Transfers. The Debentures have been issued subject
to investment representations of the original purchaser of such shares and may
be transferred or exchanged only in compliance with the Securities Act of 1933,
as amended (the "ACT"), and applicable state securities laws. Prior to due
presentment for transfer of each Debenture, the Company may treat the Holder as
the owner thereof for the purpose of receiving payments as herein provided and
all other purposes, and the Company shall not be affected by notice to the
contrary.
4A. Definitions. For purposes hereof the following
definitions shall apply:
"AGGREGATE YIELD" shall mean for each of the Debentures, the
sum of (a) the principal amount thereof, plus (b) accrued but unpaid interest
thereon.
"CLOSING PRICE" shall mean the price of one share of Common
Stock determined as follows:
(a) If the Common Stock is listed on the Nasdaq
National Market or The Nasdaq SmallCap Market (collectively, "NASDAQ"), the
closing bid price, as reported by Bloomberg, L.P. on the date of valuation (or,
if there is no closing bid price for such date, the most recent previous
closing bid price);
(b) If the Common Stock is listed on a national
securities exchange, the last reported closing price on such exchange on the
date of valuation (or, if there is no last reported closing price on that date,
the most recent previous closing bid price);
5
<PAGE> 6
(c) If neither (a) nor (b) apply, but the Common
Stock is quoted in the over-the-counter market on the pink sheets or bulletin
board, the closing bid price on the date of valuation; and
(d) If none of clause (a), (b) or (c) above
applies, the market value as determined by a nationally recognized investment
banking firm or other nationally recognized financial advisor retained in good
faith by the Board of Directors of the Company for such purpose, taking into
consideration among other factors, the earnings history, book value and
prospects for the Company, and the prices at which shares or Common Stock
recently have been traded. Such determination shall be conclusive and binding
on all persons.
"COMMON STOCK" shall mean the common stock, par value $0.01
per share, of the Company.
"CONVERSION PRICE" shall mean an amount that is equal to the
lesser of (a) the Fixed Conversion Price or (b) the Floating Conversion Price,
unless otherwise specified herein.
"CONVERSION RATE" shall mean the number of shares of Common
Stock issuable upon conversion of each $10,000 aggregate principal amount of
the Debentures determined by the application of the following formula where D
equals the accrued but unpaid interest as to such aggregate amount of
Debentures (not previously added to the principal amount of the Debentures
pursuant to Paragraph 2 hereof) as of the Holder Conversion Date (as defined in
Paragraph 6):
Principal Amount + D
---------------------------------
Conversion Price
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
"FIXED CONVERSION PRICE" shall mean the average of (i) the
amount of 140% of the average of the Closing Price during the 5 days prior to
July 1, 1998; and (ii) the amount of 140% of the average of the Closing Price
during the 5 days prior to the Issuance Date; provided, however, that if the
Company offers, sells, contracts to sell or otherwise issues or agrees to issue
any convertible debt or convertible equity securities of the Company, in a
private placement transaction (other than pursuant to any existing stock or
option or similar existing equity-based compensation plan for employees,
officers, directors or consultants), with a maximum conversion price per share
of Common Stock of an amount less than the Fixed Conversion Price, then the
"Fixed Conversion Price" shall mean such lower conversion price for the
Debentures not yet converted. The Fixed Conversion Price shall also be subject
to adjustment from time to time ratably for any events set forth in Paragraph 9
hereof.
"FLOATING CONVERSION PRICE" shall mean the average of the
three (3) lowest Closing Prices during the Valuation Period.
6
<PAGE> 7
"ISSUANCE DATE" shall mean the initial date of issuance of the
Debentures.
"PERSON" means and includes an individual, a partnership, a
joint venture, a corporation, a company, a trust, an unincorporated
organization and a government or any department or agency thereof.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration
Rights Agreement, dated as of the Issuance Date, by and between the Company and
the Purchasers named therein.
"REGISTRATION STATEMENT" shall mean the registration statement
filed by the Company with the SEC to register the shares of Common Stock
issuable upon conversion of the Debentures.
"SEC" shall mean the Securities and Exchange Commission and
any successor entity thereto.
"TRIGGERING EVENT" means the occurrence of any of the
following events:
(a) the Common Stock is either delisted or
suspended from trading on Nasdaq, The New York Stock Exchange, Inc. or The
American Stock Exchange, Inc. for a period of five (5) consecutive trading
days, or any such delisting or suspension is threatened in writing or pending
(excluding disruptions from business announcements that result in any halt(s)
in trading of not more than one day on each occasion) and other than as a
result of the suspension of trading in securities on such market in general; or
(b) any money judgment (including any arbitration
award, but only if reduced to a judgment, but excluding any arbitration award
rewarded in respect of such proceedings commenced pursuant to Paragraphs 5A(d)
and 8(h)), writ or warrant of attachment, or similar process in excess of Seven
Hundred and Fifty Thousand Dollars ($750,000) in the aggregate shall be entered
or filed against the Company, its subsidiaries or any of their properties or
other assets and which shall remain unpaid, unvacated, unbonded or unstayed for
a period of sixty (60) days or in any event later than ten (10) days prior to
the date of any proposed sale thereunder.
"VALUATION PERIOD" shall mean the twelve (12) trading days
immediately preceding, but not including, the Holder Conversion Date (as
defined herein), subject to adjustment from time to time ratably for any events
set forth in Paragraph 8 hereof that occur during such twelve (12) trading day
period.
5. Paragraph 5 Transactions. (a) If at any time (i)
there occurs any merger, consolidation or other business combination of the
Company, with or into any other corporation,
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<PAGE> 8
entity or person (whether or not the Company is the surviving corporation) or
there occurs any other corporate reorganization or transaction or series of
related transactions, and as a result thereof the shareholders of the Company
pursuant to such merger, consolidation, reorganization or other transaction own
in the aggregate less than 50% of the voting power and common equity of the
ultimate parent corporation or other entity surviving or resulting from such
merger, consolidation, reorganization or other transaction, (ii) the Company
transfers all or substantially all of the Company's assets to another
corporation or other entity or person, or (iii) a purchase, tender or exchange
offer is made to and accepted by the holders of more than 50% of the
outstanding shares of Common Stock (each of the foregoing items (i) to (iii), a
"PARAGRAPH 5 TRANSACTION"), then the Holders of the Debentures then outstanding
may participate in any such transaction as a class with the common stockholders
on the same basis as if the Debentures had been converted one day prior to the
announcement date (or record date for such distribution, dividend or offer) of
such transaction.
(b) At the option of each Holder, the Company
shall redeem all or any portion of such Holder's Debentures effective as of the
effective date of a Paragraph 5 Transaction, and the Holder shall be entitled
to receive a redemption price per $100 principal amount of Debentures being
redeemed equal to 112.5% of the Aggregate Value. Each Holder shall be entitled
to make an election for redemption at any time up to five (5) days prior to the
effective date of any Paragraph 5 Transaction; provided, however, at the
discretion of such Holder, such Holder may, at any time, elect to convert its
Debentures into fully paid, validly issued and nonassessable shares of Common
Stock in accordance with the terms of Paragraph 6 hereof, for such number of
shares of Common Stock as determined by the application of the Conversion Rate
so long as the Company has not redeemed such Debentures.
5A. Optional Redemption Upon a Triggering Event. At the
option of each Holder, the Company shall redeem all or any portion of such
Holder's outstanding Debentures effective as of the date of the occurrence of a
Triggering Event, and the Holder shall be entitled to receive a redemption
price per $100 principal amount of Debentures being redeemed equal to 130% of
the Aggregate Value. Each Holder shall be entitled to make an election for
redemption at any time following thirty (30) days after the occurrence of a
Triggering Event; provided, however, at the discretion of such Holder, such
Holder may, at any time, elect to convert its Debentures into fully paid,
validly issued and nonassessable shares of Common Stock in accordance with the
terms of Paragraph 6 hereof, for such number of shares of Common Stock as
determined by the application of the Conversion Rate so long as the Company has
redeemed such Debentures. In addition to the foregoing, upon the occurrence of
a Triggering Event, and only for the period that such Triggering Event remains
uncured, the Company will pay each Holder 2.0% per month on the outstanding
principal amount of the Debentures. Any such interest which is not paid when
due shall accrue interest until paid at the rate from time to time applicable
to interest on the Debentures as to which such Triggering Event has occurred.
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<PAGE> 9
5B. Mechanics of Redemption.
(a) In order to redeem any Debentures (in whole
or in part), the applicable Holder shall surrender the certificate(s)
representing the Debentures to be redeemed, by either overnight courier or
two-day courier, to the principal office of the Company, and shall give written
notice in the form of EXHIBIT 1 hereto (the "REDEMPTION NOTICE") by facsimile
(with the original of such notice forwarded with the foregoing courier) to the
Company at such office to the effect that such Holder elects to have redeemed
the principal amount of Debentures (plus accrued but unpaid interest thereon)
specified therein; provided, however, that the Company shall not be obligated
to pay the applicable redemption price unless either the certificate(s)
evidencing the Debentures being redeemed is delivered to the Company as
provided above, or if the Holder notifies the Company that such certificate(s)
has been lost, stolen or destroyed and follows such procedures as are set forth
in Paragraph 17. If less than all the principal amount represented by such
certificate or certificates are to be redeemed, the Company shall issue and
deliver to or on the order of the holder thereof, at the expense of the
Company, a new certificate or certificates representing the unredeemed amount,
to the same extent as if the certificate theretofore representing such
unredeemed principal amount had not been surrendered on redemption.
(b) The Company shall use its best efforts to pay
the applicable redemption price within three (3) business days after receipt by
the Company of the Redemption Notice and such certificate(s) evidencing the
principal amount of Debentures being redeemed, or after receipt of such
agreement and indemnification set forth in Paragraph 17, to such Holder,
together with a certificate, certified by an appropriate officer of the
Company, setting forth the calculation of the redemption price (the "REDEMPTION
CERTIFICATE") and, if appropriate, a certificate evidencing the principal
amount of the Debentures covered by the submitted certificate(s) not submitted
for redemption; provided that in the case where more than one Holder submits
Debenture certificates for redemption simultaneously and the Company is unable
to redeem all of the Debentures submitted for such redemption, the Company
shall redeem an amount from each Holder equal to each Holder's pro rata
principal amount (based on principal amount of Debentures held by each Holder
relative to outstanding) of all Debentures being redeemed.
(c) If the Company shall fail to redeem all of
the Debentures submitted for redemption (other than pursuant to a dispute as to
the calculation of the applicable redemption price), in addition to any remedy
each Holder may have under this Debenture, the Subscription Agreement and the
Registration Rights Agreement, the applicable redemption price payable in
respect of such unredeemed principal amount of Debentures shall bear interest
at the rate of 2.0% per month (pro rated for partial periods) until such
redemption price is paid in full. Until the Company pays such unpaid
redemption price in full to a Holder, such Holder shall have the option, in
lieu of redemption, to require the Company to promptly return to such Holder
the aggregate principal amount of Debentures submitted for redemption by such
Holder and for which the applicable redemption price has not been paid, by
sending written notice thereof to the Company via facsimile (a "REVOCATION
NOTICE"). Upon the Company's receipt of such Revocation Notice and prior to
payment in full of the applicable redemption price to such Holder, (i) the
Redemption
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<PAGE> 10
Notice shall be null and void with respect to the principal amount of the
Debentures submitted for redemption and for which the applicable redemption
price has not been paid, (ii) the Company shall immediately return any
Debentures submitted to the Company for redemption for which the applicable
redemption price has not been paid, and (iii) the Fixed Conversion Price of
those returned shares shall be adjusted to the lesser of (A) the Conversion
Price as in effect on the date on which the Revocation Notice is delivered to
the Company and (B) the Closing Price with the lowest dollar value during the
period beginning on the date on which the Notice of Redemption is delivered to
the Company and ending on the date on which the Revocation Notice is delivered
to the Company.
(d) Notwithstanding the foregoing, in the event
of a dispute as to the determination of the calculation of the applicable
redemption price, the amount of the redemption price that is not in dispute
shall be promptly paid to the Holder in accordance with Paragraph 5B(a) hereof.
The Holder shall then be entitled, within sixty (60) days of receipt of either
the Redemption Certificate or Redemption Notice, to submit such dispute to the
American Arbitration Association for resolution according to the then
applicable rules thereof, which determination shall be final and binding on all
parties. If it shall be determined that a Holder shall receive additional
monies in respect of such redemption, the Company shall deliver to such Holder
such amount within three (3) business days of written notice of such
determination. The cost of such proceeding shall be shared 50% by the Holder
involved in such dispute and 50% by the Company, except that the prevailing
party, as determined by the arbitrator presiding over the arbitration, shall be
entitled to recover reasonable attorneys' fees, in addition to other costs and
expenses and any other available remedy.
5C. Redemption at the Option of the Company. (a)
To the extent the Company shall have funds legally available for such
redemption, the Company may, provided that the notice provisions set forth in
Paragraph 5C hereof have been complied with, redeem, at its option, the
Debentures, at any time within ninety (90) days of the Issuance Date, in whole,
at a redemption price per Debentures equal to 110% of the Aggregate Yield plus
warrants to purchase 125,000 shares of Common Stock at an exercise price of
$11.00 per share; such warrants to be substantially in the form of EXHIBIT 3
attached hereto.
(b) Notice of the Company's intention to redeem
the Debentures pursuant to this Paragraph 5C shall be given not less than ten
(10) business days prior to the date of redemption by first class mail, postage
prepaid, to the Holders. Each such notice shall state: (i) a redemption date
that is not less than ten (10) business days following the date of mailing of
the notice (each, a "REDEMPTION DATE"); (ii) the place or places where the
certificates representing the Debentures are to be surrendered for payment of
the redemption price; and (iii) the redemption price and the calculation of
such price (the "COMPANY REDEMPTION NOTICE").
(c) After a Company Redemption Notice is given
pursuant to Paragraph 5C(b), upon surrender in accordance with such notice of
Debentures, such Debentures shall be redeemed by the Company at the redemption
price on the Redemption Date.
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<PAGE> 11
6. Conversion at the Option of the Holder. Subject to
the limitations of Paragraph 13, the Holder shall have the following conversion
rights:
(a) Holder's Right to Convert. Debentures shall
be convertible at any time on or after ninety (90) days after the Issuance
Date, in whole or in part, at the option of the Holder thereof, into fully
paid, validly issued and nonassessable shares of Common Stock in accordance
with the terms herein for such number of shares of Common Stock as determined
by the application of the Conversion Rate.
(b) Mechanics of Conversion. In order to convert
any Debentures (in whole or in part) into full shares of Common Stock, the
applicable Holder shall surrender the stock certificate(s) representing the
Debentures to be converted, by either overnight courier or two-day courier, to
the principal office of the Company, and shall give written notice in the form
of EXHIBIT 2 (the "CONVERSION NOTICE") by facsimile (with the original of such
notice forwarded with the foregoing courier) to the Company at such office to
the effect that such Holder elects to have converted principal amount of
Debentures (plus accrued but unpaid interest thereon) specified therein (such
notice and election shall be irrevocable by the Holder); provided, however,
that the Company shall not be obligated to issue certificate(s) evidencing
shares of Common Stock issuable upon such conversion unless either the
certificate(s) evidencing the Debentures being converted is delivered to the
Company as provided above, or if the Holder notifies the Company that such
certificate(s) has been lost, stolen or destroyed, such Holder follows such
procedures as are set forth in Paragraph 17. If less than all of the principal
amount represented by such certificate or certificates is to be converted, the
Company shall issue and deliver to or on the order of the Holder thereof, at
the expense of the Company, a new certificate or certificates representing the
unconverted principal amount, to the same extent as if the certificate
theretofore representing such unconverted principal amount had not been
surrendered on conversion. The effective date of conversion (the "HOLDER
CONVERSION DATE") shall be deemed to be the date on which the Company receives
by facsimile the Conversion Notice.
(c) The Company shall use its best efforts to
issue and deliver within three (3) business days after receipt by the Company
of such certificate(s) evidencing the Debentures being converted, or after
receipt of the affidavit, agreement and indemnification as set forth in
Paragraph 17, to such Holder, or to its designee, certificates for the number
of shares of Common Stock to which such Holder shall be entitled hereunder or,
if requested by the Holder, issue such shares in electronic format (i.e.,
DWAC), together with a certificate, certified by an appropriate officer of the
Company, setting forth the calculation of the Conversion Rate and, if
appropriate, a certificate evidencing the principal amount of Debentures
covered by the submitted for conversion. The person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder of such shares of Common Stock on
the Holder Conversion Date.
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<PAGE> 12
(d) Each certificate representing Debentures
surrendered to the Company for conversion pursuant to this Paragraph 6 shall,
on the Holder Conversion Date and subject to issuance of the shares of Common
Stock issuable upon conversion thereof, be canceled and retired by the Company.
Upon issuance of the shares of Common Stock issuable upon conversion of the
Debentures pursuant to this Paragraph 6, the Debentures formerly represented
thereby shall be deemed to be canceled and shall no longer be considered to be
issued and outstanding for any purpose, including without limitation, for
purposes of accruing interest thereon. Such principal amount outstanding
shall be retired and shall not be subject to reissuance by the Company.
7. Maturity.
(a) On the date that is the fifth anniversary of the
Issuance Date, or such later date to which such date has been extended pursuant
to Paragraph 16 hereof (the "MATURITY DATE"), the Company shall have the
option, in its sole and absolute discretion, to either (i) cause the Debentures
then outstanding to be automatically converted into that number of fully paid,
validly issued and nonassessable shares of Common Stock determined in
accordance with the terms of this Debenture certificate by application of the
then applicable Conversion Rate; or (ii) redeem all of Debentures then
outstanding at the Aggregate Value per share.
(b) In the event that the Company elects, pursuant
to paragraph 7(a) of this Certificate, to cause the outstanding Debentures to
be converted into shares of Common Stock, the Company shall give the Holders
written notice of such election not less than ten (10) days prior to the
Maturity Date, and such written notice shall specify (i) the Maturity Date, and
(ii) the place or places to which certificates representing the Debentures are
to be surrendered for conversion. Such conversion shall be effected as of the
Maturity Date in accordance with and pursuant to the terms of this certificate
at the then applicable Conversion Rate and in accordance with the procedures
set forth in Section 6(b) of this certificate; provided, however, that the
Holder shall not be obligated to provide the Conversion Notice to the Company.
(c) In the event that the Company elects, pursuant
to paragraph 7(a) of this certificate, to redeem the outstanding Debentures,
the Company shall give the Holders written notice of such election not less
than ten (10) days prior to the Maturity Date, and such written notice shall
specify (i) the Maturity Date, (ii) the place or places to which certificates
representing the Debentures are to be surrendered for redemption, and (iii) the
redemption price, which shall be equal to the Aggregate Yield per $10,000
principal amount of Debentures as of the Maturity Date. In order to redeem any
Debentures, the applicable Holder shall surrender the stock certificate(s)
representing the Debentures called for redemption, by either overnight courier
or two-day courier, to the place or places specified in the written notice of
redemption, including the written notice in the form of EXHIBIT 1 herein, and
the Company shall redeem such Debentures (plus any accrued but unpaid interest
thereon) on the Maturity Date; provided, however, that the Company shall not be
obligated to pay the applicable redemption price unless either the certificate
evidencing the Debentures being redeemed is delivered to the Company as
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<PAGE> 13
provided above, or if the Holder notifies the Company that such certificate(s)
has been lost, stolen or destroyed and follows such procedures as are set forth
in Paragraph 17.
(d) Each certificate representing Debentures
surrendered to the Company for conversion or redemption pursuant to this
Paragraph 7 shall, on the Maturity Date and subject to issuance of the shares
of Common Stock issuable upon conversion or payment or setting aside for
payment of the redemption price payable upon redemption, as the case may be, be
canceled and retired by the Company. Upon issuance of the shares of Common
Stock issuable upon conversion of the Debentures pursuant to this Paragraph 7,
or payment or setting aside for payment of the redemption price payable upon
redemption of the Debentures pursuant to this Paragraph 7, as the case may be,
the Debentures formerly represented thereby shall be deemed to be canceled and
shall no longer be considered to be issued and outstanding for any purpose,
including without limitation, for purposes of accruing interest thereon.
(e) If the Company elects to cause the Debentures
to be converted pursuant to this Paragraph 7, the Company shall use its best
efforts to issue and deliver within three (3) business days after receipt by
the Company of the Debentures, or after receipt of the affidavit, agreement and
indemnification described in Paragraph 18, to all Holders, or to their
designee, a certificate for the number of shares of Common Stock to which each
Holder shall be entitled hereunder or, if requested by the Holder, issue such
shares in electronic format (i.e., DWAC), together with a certificate,
certified by an appropriate officer of the Company, setting forth the
calculation of the Conversion Rate. The person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder of such shares of Common Stock on the
Maturity Date. If the Company elects to cause the Debentures to be converted
pursuant to this Paragraph 7, the Maturity Date shall be deemed a "Holder
Conversion Date" for purposes of the Debentures.
8. Stock Splits; Dividends; Adjustments;
Reorganizations.
(a) Stock Splits and Combinations. The Company
shall not effect any stock split, subdivision or combination with an effective
date within thirty (30) trading days of the Maturity Date.
(b) Certain Dividends and Distributions. The
Company shall not make, or fix a record date for the determination of holders
of Common Stock or other securities entitled to receive, a dividend or other
distribution payable in additional shares of Common Stock, with an effective
date within thirty (30) trading days of the Maturity Date.
(c) Adjustment for Other Dividends and
Distributions. In the event the Company at any time or from time to time after
the Issuance Date makes, or fixes a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other distribution
payable in securities of the Company other than shares of Common Stock, then
and in each such event, provision shall be made so that the Holders shall
receive upon conversion of their
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<PAGE> 14
Debentures pursuant to Paragraphs 6 and 7 hereof, in addition to the number of
shares of Common Stock receivable thereupon, the amount of such other
securities of the Company to which a Holder on the relevant record or payment
date, as applicable, of the number of shares of Common Stock so receivable upon
conversion would have been entitled, plus any dividends or other distributions
which would have been received with respect to such securities had such Holder
thereafter, during the period from the date of such event to and including the
Holder Conversion Date, retained such securities, subject to all other
adjustments called for during such period under this Paragraph 8 with respect
to the rights of the Holders. For purposes of this Paragraph 8(c), the number
of shares of Common Stock so receivable upon conversion by the Holder shall be
deemed to be that number which the Holder would have received upon conversion
of the Debentures if the Holder Conversion Date had been the day preceding the
date upon which the Company announced the making of such dividend or other
distribution.
(d) Adjustment of Floating Conversion Price upon
Issuance of Convertible Securities. If the Company in any manner issues or
sells securities that are convertible into or exchangeable for Common Stock at
a price which varies with the market price of the Common Stock (the formulation
for such variable price being herein referred to as the "VARIABLE PRICE") and
such Variable Price is not calculated using the same formula used to calculate
the Floating Conversion Price in effect immediately prior to the time of such
issue or sale, the Company shall provide written notice thereof via facsimile
and overnight courier to each holder of the Debentures ("VARIABLE NOTICE") on
the date of issuance of such convertible securities. If the holders of shares
of Debentures representing at least two-thirds (2/3) of the then outstanding
principal amount of the Debentures (in original aggregate principal amount of
$3,125,000) provide written notice via facsimile and overnight courier (the
"VARIABLE PRICE ELECTION NOTICE") to the Company within five (5) business days
of receiving a Variable Notice that such holders desire to replace the Floating
Conversion Price then in effect with the Variable Price described in such
Variable Notice, then from and after the date of the Company's receipt of the
Variable Price Election Notice the Floating Conversion Price will automatically
be replaced with the Variable Price (together with such modifications to this
Certificate of Designations as may be required to give full effect to the
substitution of the Variable Price for the Floating Conversion Price). In the
event that a holder delivers a Conversion Notice at any time after the
Company's issuance of convertible securities with a Variable Price but before
such holder's receipt of the Company's Variable Notice, then such holder shall
have the option by written notice to the Company to rescind such Conversion
Notice or to have the Conversion Price be equal to such Variable Price for the
conversion effected by such Conversion Notice.
(e) Adjustment for Reclassification, Exchange and
Substitution. In the event that at any time or from time to time after the
Issuance Date, the Common Stock issuable upon the conversion of the Debentures
is changed into the same or a different number of shares of any class or
classes of stock, whether by recapitalization, reclassification or otherwise
(other than a subdivision or combination of shares or stock dividend or
reorganization provided for elsewhere in this Paragraph 8 or Paragraph 5
Transaction), then and in each such event each Holder shall thereafter have the
right upon conversion to receive the kind and amount of shares of stock and
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<PAGE> 15
other securities, cash and property receivable upon such recapitalization,
reclassification or other change, by holders of the number of shares of Common
Stock which the Holder of Debentures would have received had it converted such
shares immediately prior to such recapitalization, reclassification or other
change, at the Conversion Price then in effect (the kind, amount and price of
such stock and other securities to be subject to adjustments as herein
provided). Prior to the consummation of any recapitalization, reclassification
or other change contemplated hereby, the Company will make appropriate
provision (in form and substance satisfactory to the Holders of a majority of
the Debentures then outstanding) to ensure that each of the Holders of the
Debentures will thereafter have the right to acquire and receive in lieu of or
in addition to (as the case may be) the shares of Common Stock otherwise
acquirable and receivable upon the conversion of such Holder's Debentures, such
shares of stock, securities or assets that would have been issued or payable in
such recapitalization, reclassification or other change with respect to or in
exchange for the number of shares of Common Stock which would have been
acquirable and receivable upon the conversion of such Holder's Debentures had
such recapitalization, reclassification or other change not taken place
(without taking into account any limitations or restrictions on the timing or
amount of conversions). In the event of such recapitalization,
reclassification or other change, the formulae set forth herein for conversion
and redemption shall be equitably adjusted to reflect such change in number of
shares or, if shares of a new class of stock are issued, to reflect the market
price of the class or classes of stock (applying the same factors used in
determining the Conversion Price for shares of Common Stock) issued in
connection with the above described events.
(f) Reorganization. If at any time or from time
to time after the Issuance Date there is a capital reorganization of the Common
Stock (other than a recapitalization, subdivision, combination,
reclassification or exchange of shares provided for elsewhere in this Paragraph
8) then, as a part of such reorganization, provisions shall be made so that the
Holders shall thereafter be entitled to receive upon conversion of its
Debentures the number of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock deliverable upon
conversion would have been entitled to receive had the holder of Debentures
converted such shares immediately prior to such capital reorganization, at the
Conversion Price then in effect. In any such case, appropriate adjustments
shall be made in the application of the provisions of this Paragraph 8 with
respect to the rights of the Holders after such capital reorganization to the
extent that the provisions of this Paragraph 8 shall be applicable after that
event and be as equivalent as may be practicable, including, by way of
illustration and not limitation, by equitably adjusting the formulae set forth
herein for conversion and redemption to reflect the market price of the
securities or property (applying the same factors used in determining the
Conversion Price for shares of Common Stock) issued in connection with the
above described events.
(g) Certain Events. If any event occurs of the
type contemplated by the provisions of this Paragraph 8 but not expressly
provided for by such provisions, then the Company's Board of Directors will
make an appropriate adjustment in the Conversion Price so as
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<PAGE> 16
to protect the rights of the holders of the Debentures; provided, however, that
no such adjustment will increase the Conversion Price as otherwise determined
pursuant to this Paragraph 8.
(h) Dispute. In the event of a dispute between a
Holder and the Company with respect to any of the adjustments required pursuant
to the provisions of this Paragraph 8, such Holder shall be entitled to receive
the number of shares of Common Stock as to which no dispute exists and, within
sixty (60) days of receipt of the Schedule of Computations (as defined below),
to submit such dispute to the American Arbitration Association for resolution
according to the then applicable rules thereof, which determination shall be
final and binding on all parties. If it shall be determined that a Holder
should have received additional shares of Common Stock or other securities upon
such conversion (the "UNDELIVERED SHARES") then, within three (3) trading days
of receipt of written notice of such determination, the Company shall issue to
such Holder that number of additional shares of Common Stock or other
securities as shall have a value, based upon the then Conversion Price for
shares of Common Stock, as shall equal the Undelivered Shares times the
Conversion Price for shares of Common Stock on the date of conversion. The
cost of such proceeding shall be shared 50% by the Holder involved in such
dispute and 50% by the Company, except that the prevailing party, as determined
by the arbitrator presiding over the arbitration, shall be entitled to recover
reasonable attorney's fees, in addition to other costs and expenses and any
other available remedy.
(i) Schedule of Computations. The Company shall
provide written notice to the Holders of all adjustments pursuant to this
Paragraph 8 shall be notified within three (3) trading days of the occurrence
thereof and such notice shall be accompanied by a schedule setting forth a
detailed calculation of such adjustments (the "SCHEDULE OF COMPUTATIONS"). If
so requested by a Holder, the Company shall provide to such Holder within ten
(10) trading days of its request therefor a certificate of concurrence to the
Schedule of Computations by the independent certified public accountants of the
Company.
9. Fractional Shares. No fractional shares of Common
Stock or scrip representing fractional shares of Common Stock shall be issuable
hereunder. The number of shares of Common Stock that are issuable upon any
conversion shall be rounded up or down to the nearest whole share.
10. Reservation of Stock; Conversion Default.
(a) Reservation Requirement. The Company shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock such number of shares of Common Stock as shall be
necessary for the purpose of effecting the conversion of Debentures, which
shares shall be free of preemptive rights, for the purpose of enabling the
Company to satisfy any obligation to issue shares of its Common Stock, or other
securities, upon conversion of all Debentures pursuant hereto. The Company
shall initially reserve a number of
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<PAGE> 17
shares of Common Stock equal to two times the number of shares necessary to
satisfy its obligations on conversion of the Debentures if all such shares were
converted on the Issuance Date.
(b) Default. If the Company (i) notifies a
Holder via facsimile or pursuant to a public disclosure, including, but not
limited to a press release, that the Company cannot, or does not intend to, or
(ii) fails to, issue shares of Common Stock registered for resale under the
Registration Statement for any reason (a "CONVERSION DEFAULT"), including,
without limitation, because the Company (x) does not have a sufficient number
of shares of Common Stock or other securities authorized and available, or (y)
is otherwise prohibited by applicable law or by the rules and regulations of
any stock exchange, interdealer quotation system or other self-regulatory
organization with jurisdiction over the Company or its securities, including
without limitation the Exchange Cap (as defined in Paragraph 13), from issuing
all of the Common Stock which is to be issued to a Holder, then the Company
shall issue as many shares of Common Stock as it is able to issue in accordance
with such Holder's Conversion Notice, and with respect to the unconverted
principal amount of Debentures, notify the Holder of such failure (a "DEFAULT
NOTICE") which notice shall indicate (I) the reason why the Company is unable
to fully satisfy such holder's Conversion Notice, (II) the principal amount of
Debentures which cannot be converted and (III) the applicable mandatory
redemption price (as calculated pursuant to the terms below). Such Holder must
within ten (10) business days of (i) receipt of such Default Notice or (ii)
becoming aware of such Conversion Default, deliver written notice via facsimile
to the Company ("REMEDIES NOTICE") of its election pursuant to this Paragraph
10.
(c) Each Holder pursuant to such Default Notice
shall have the following options, at its election: (i) the right to demand
from the Company immediate redemption of its Debentures in cash at 125% of the
Aggregate Yield; (ii) void its Conversion Notice and have returned the
nonconverted Debentures that were to be converted pursuant to such Holder's
Conversion Notice; or (iii) if the Company's inability to fully convert the
Debentures is pursuant to the Exchange Cap described in Paragraph 10(b)(ii)(y),
require the Company to use its best efforts to take all steps necessary in
order to exceed such Exchange Cap; provided, however, the Holder may elect any
of the other options set forth in this Paragraph 10(c) if the Company shall
fail to be able to exceed such Exchange Cap within 45 days of the Company's
receipt of the applicable Remedies Notice. Notwithstanding the foregoing, no
Remedies Notice may be delivered by a Holder subsequent to receipt by such
Holder of notice from the Company (sent by overnight or two-day courier with a
copy sent by facsimile) of the availability of sufficient shares of Common
Stock or other securities to perfect conversion (a "POST-DEFAULT CONVERSION")
of all the Debentures; provided that such rights as set forth herein and
election as set forth in the Remedies Notice shall be reinstated if the Company
shall thereafter fail to perfect such Post-Default Conversion by delivery of
Common Stock certificates or certificates representing other securities in
accordance with the applicable provisions hereof and payment of all accrued and
unpaid interest in cash with respect thereto within five (5) days of delivery
of the notice of Post-Default Conversion.
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(d) In addition to the foregoing, upon a
Conversion Default, the dividend rate on all of the Debentures (including
Debentures for which a Conversion Notice has not yet been sent), shall for the
period during which such Debentures have not been duly converted or redeemed as
herein provided, the Company will pay each Holder 2.0% per month on the
outstanding principal amount of the Debentures until such Debentures have been
duly converted or redeemed as herein provided; provided, however, that if the
Company's inability to fully convert Debentures is pursuant to Paragraph
10(b)(ii)(y) above, the Company shall have sixty (60) days to cure such default
prior to giving rise to the right of the Holder to exercise remedies pursuant
to this Section 10, including, without limitation, the right to receive
additional interest. Any such interest which is not paid when due shall accrue
interest until paid at the rate from time to time applicable to interest on the
Debentures as to which the Conversion Default has occurred.
11. Taxes. The Company shall pay any and all taxes
attributable to the issuance and delivery of Common Stock or other securities
upon conversion of the Debentures.
12. Voting Rights. The Holders shall have no voting
rights, except as required by law, including but not limited to the Delaware
General Corporation Law, and as expressly provided herein.
13. Limitation on Number of Conversion Shares. (a) The
Company shall not be obligated to issue upon conversion of the Debentures, in
the aggregate, more than a number of shares of Common Stock equal to 19.99% of
the number of shares of Common Stock outstanding on the Issuance Date (such
amount to be proportionately and equitably adjusted from time to time in the
event of stock splits, stock dividends, combinations, reverse stock splits,
reclassification, capital reorganization and similar events relating to the
Common Stock) (the "EXCHANGE CAP"), if issuance of a larger number of shares of
Common Stock would constitute a breach of the Company's obligations under the
rules or regulations of Nasdaq or any other principal securities exchange or
market upon which the Common Stock is or becomes traded. The Exchange Cap
shall be allocated among the Holders pro rata based on the total principal
amount outstanding of the Debentures.
(b) Notwithstanding anything to the contrary
contained herein, after giving effect to the issuance of Common Stock pursuant
to each Conversion Notice, the total number of shares of Common Stock deemed
beneficially owned by the Holder submitting such Conversion Notice (excluding
shares that might otherwise be deemed beneficially owned by reason of the
conversion right in the Debentures owned by such Holder), together with all
shares of Common Stock deemed beneficially owned by such Holder's "affiliates"
as defined in Rule 144 of the Securities Act, shall not exceed 4.99% of the
total issued and outstanding shares of the Common Stock.
14. No Reissuance of Debentures. No shares of Debentures
acquired by the Company by reason of redemption, purchase, conversion or
otherwise shall be reissued.
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15. No Impairment. The Company shall not intentionally
take any action which would impair the rights and privileges of the Debentures
set forth herein or the rights of the Holders thereof.
16. Registration Suspension. In the event that at any
time or from time to time any Registration Statement is suspended or trading in
the Common Stock on Nasdaq is suspended for a period of time (excluding
disruptions from business announcements that result in any halt(s) in trading
of not more than one (1) day on each occasion) and other suspension of trading
on such market in general (each, a "BLACKOUT PERIOD"), the Maturity Date
hereunder shall be extended for a period equal to l.5 times the number of days
in such Blackout Period. Furthermore, additional provisions pertaining to the
suspension of effectiveness of such registration statement set forth in
Paragraph 5A of the Registration Rights Agreement shall be applicable in the
event of a Blackout Period, and such provisions as specifically incorporated by
reference herein.
17. Replacement Certificate. In the event that any
Holder notifies the Company that a stock certificate evidencing Debentures has
been lost, stolen, destroyed or mutilated, the Company shall issue a
replacement stock certificate evidencing the Debentures identical in tenor and
date (or if such certificate is being issued for shares not covered in a
redemption or conversion, in the applicable tenor and date) to the original
stock certificate evidencing the Debentures, provided that the Holder executes
and delivers to the Company an affidavit of lost stock certificate and an
agreement reasonably satisfactory to the Company to indemnify the Company from
any loss incurred by it in connection with such Debenture certificate;
provided, however, the Company shall not be obligated to re-issue replacement
certificates if the Holder contemporaneously requests the Company to convert or
redeem the full principal amount evidenced by such lost, stolen, destroyed or
mutilated certificate.
18. Notices. All notices to the holders of Debentures
will be mailed to registered holders of Debentures at their registered
addresses as the same shall appear in the Debenture Security Register on the
day fifteen days prior to such mailing.
19. Governing Law. The Debentures shall be governed by
and construed in accordance with the laws of the State of New York, without
giving effect to principles of conflicts of law.
20. Countersignature and Registration. This Debenture
shall not become valid or obligatory for any purpose until the Debentures shall
have been duly executed by the Company and such signature attested to by an
authorized Officer thereof.
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<PAGE> 20
21. Warranty of the Company. The Company hereby
certifies and warrants that all acts, conditions and things required to be done
and performed and to have happened precedent to the creation and issuance of
this Debenture, and to constitute the same legal, valid and binding obligations
of the Company enforceable in accordance with their terms, have been done and
performed and have happened in due and strict compliance with all applicable
laws.
22. Descriptive Headings. The descriptive headings
appearing herein are for convenience of reference only and shall not alter,
limit or define the provisions hereof.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
[EXHIBITS OMITTED]
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<PAGE> 1
EXHIBIT 4.4
(FACE OF DEBENTURE)
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED WITHIN THE "UNITED STATES" OR TO "U.S. PERSONS"
(AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. THE HOLDER OF THIS
SECURITY, BY ITS ACCEPTANCE HEREOF, REPRESENTS, ACKNOWLEDGES AND AGREES FOR THE
BENEFIT OF THE COMPANY THAT: (I) IT HAS ACQUIRED A "RESTRICTED" SECURITY WHICH
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT; (II) IT WILL NOT OFFER, SELL
OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE WHICH IS ONE YEAR AFTER
THE DATE OF ORIGINAL ISSUANCE HEREOF EXCEPT (A) TO OBJECTIVE COMMUNICATIONS,
INC., (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, OR
(D) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AS CONFIRMED IN AN OPINION OF COUNSEL ACCEPTABLE IN FORM
AND SUBSTANCE TO THE ISSUER OF THIS SECURITY AND, IN EACH CASE, IN ACCORDANCE
WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION; AND (III) IT WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THIS SECURITY OF THE RESALE
RESTRICTIONS SET FORTH IN CLAUSE (II) ABOVE. ANY OFFER, SALE OR OTHER
DISPOSITION PURSUANT TO THE FOREGOING CLAUSE (II)(D) IS SUBJECT TO THE RIGHT OF
THE ISSUER OF THIS SECURITY TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATIONS OR OTHER INFORMATION ACCEPTABLE TO THEM IN FORM AND SUBSTANCE.
<PAGE> 2
OBJECTIVE COMMUNICATIONS, INC.
(Incorporated in the State of Delaware)
5% CONVERTIBLE DEBENTURE DUE 2003
No. R- U.S. $
--------------- ------------
Objective Communications, Inc., a corporation duly
incorporated and existing under the laws of the State of Delaware (the
"Company"), for value received, hereby promises to pay to
, or
registered assigns, the principal sum of United States Dollars on July 8, 2003
(the "Maturity Date"), subject to earlier redemption by the Company. The
Debentures will be convertible into common stock, par value $.01 per share, of
the Company on the terms and subject to the conditions hereinafter set forth,
after the date that is one-hundred and eighty-one (181) days after the date of
issuance. The Debentures will accrue interest at a rate of 5% per annum, due
and payable quarterly in arrears, on the last day of March, June, September and
December of each year, commencing September 30, 1998, as described further
under the Terms and Conditions of the Debentures. Interest hereon shall be
calculated on the basis of a 360 day year.
Reference is hereby made to the further provisions of this
Debenture set forth under the Terms and Conditions of the Debentures on the
reverse hereof, which further provisions shall for all purposes have the same
effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Debenture to
be duly executed in its corporate name by the manual or facsimile signature of
a duly authorized signatory, as attested to by another duly authorized
signatory of the Company.
Dated: July 8, 1998
OBJECTIVE COMMUNICATIONS, INC.
By:
--------------------------------
Name:
Title:
ATTEST:
By:
----------------------------------
Name:
Title:
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<PAGE> 3
[Reverse]
Terms and Conditions of the Debentures
1. General.
(a) This Debenture is one of a duly authorized issue of Debentures
of the Company in original aggregate principal amount of $3,125,000, designated
as its 5% Convertible Debenture due 2003 (herein called the "SECURITIES").
(b) The Securities are issuable, without coupons, in principal
denominations of U.S. $10,000 and integral multiples thereof. The Securities,
and transfers thereof, shall be in registered form as provided in Section 2
hereof. The registered holder of a Security shall (to the fullest extent
permitted by applicable law) be treated at all times, by all persons and for
all purposes as the absolute owner of such Security, regardless of any notice
of ownership, theft or loss or of any writing thereon.
2. Interest. (a) Each Debenture shall be entitled to
receive, cumulative annual interest at the rate of 5.0% per annum on the
principal amount thereof. Such interest shall be due and payable quarterly in
arrears on the last day of March, June, September and December of each year
(each, an "INTEREST PAYMENT DATE"), commencing on September 30, 1998. Interest
shall accrue daily from the Issuance Date (as defined herein), whether or not
earned or declared, until such Debenture has been converted or redeemed as
herein provided. To the extent interest is not paid on the applicable Interest
Payment Date, such interest shall be cumulative and shall compound quarterly
until the date of payment of such interest. The interest so payable will be
paid to the person in whose name the Debentures (or one or more predecessor
shares) are registered on the records of the Company regarding registration and
transfers of the Debentures (the "DEBENTURE"); provided, however, that the
Company's obligation to a transferee of a Debenture arises only if such
transfer, sale or other disposition is made in accordance with the terms and
conditions hereof and the Subscription Agreement, dated as of the Issuance
Date, by and between the Company and the Subscribers set forth on the signature
pages thereof (the "SUBSCRIPTION AGREEMENT").
(b) The interest is payable in such coin or currency of
the United States of America as at the time of payment is legal tender, to the
person in whose name the applicable Debenture is duly registered on the
Debenture Register (the "HOLDER") on the tenth day prior to the applicable
Interest Payment Date and at the address last appearing on the Debenture
Register as designated in writing by such Holder thereof from time to time;
provided, however, that, in lieu of paying such interest in coin or currency,
the Company may, at its option, in full or in part, pay interest on the
Debentures on any Interest Payment Date by increasing the Debentures by the
amount of such interest such that the sum of (i) the amount of such increase in
the principal amount of the Debentures and (ii) the amount of cash interest
paid in part, if any, is equal to the amount of the cash interest which would
otherwise be paid on such Interest Payment Date if such
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<PAGE> 4
interest were paid entirely in cash. Any such increase in the principal amount
of the Debenture (plus the amount of cash interest, if any, paid together
therewith) shall constitute full payment of such interest. When any interest
is added to the principal amount of the Debenture, such interest shall, for all
purposes of the Debenture, be deemed to be part of the principal amount of the
Debenture for purposes of determining interest thereafter payable hereunder and
amounts thereafter convertible into Common Stock hereunder, and all references
herein to the principal amount of the Debenture shall mean the principal amount
of the Debenture, as adjusted pursuant to these provisions.
(c) If the Company shall elect to pay any part of an
interest payment by increasing the principal amount of the Debenture as
described in Paragraph 2(b), the Company will provide notice setting forth the
new principal amount of the Debenture to each Holder (an "INTEREST NOTICE") on
or prior to the applicable Interest Payment Date.
(d) If the cash interest due hereunder is not paid or the
Interest Notice is not delivered to each Holder within ten (10) calendar days
after the applicable Interest Payment Date, the Company shall no longer have
the right to choose the method by which interest is paid, and each Holder may
elect either cash interest payments or interest payable by increasing the
principal amount of the Debenture.
(e) Except as specifically provided herein, an election
by the Company to pay interest, in full or in part, in cash on any Interest
Payment Date shall not preclude the Company from electing any other available
alternative in respect of all or any portion of any subsequent interest
payment.
(f) So long as any Debentures are outstanding, no
dividends, including, without limitation, dividends or distributions paid in
shares of, or options, warrants or rights to subscribe for, or purchase shares
of, equity securities of the Company (whether with respect to dividends or upon
liquidation, dissolution, winding up or otherwise), including Common Stock or
any debt securities on a parity with the Debentures (whether with respect to
dividends or upon liquidation, dissolution or winding up) (collectively, the
"PARITY SECURITIES"), shall be declared or paid or set apart for payment or
other distribution upon the equity securities or the Parity Securities, nor
shall any equity securities or Parity Securities be redeemed, purchased or
otherwise acquired for any consideration (or any monies to be paid to, or made
available for, a sinking fund for the redemption of any shares of any such
stock) by the Company, directly or indirectly (except by conversion to, or
exchange for, equity securities or Parity Securities, respectively), unless, in
each case, (i) the full cumulative interest on all outstanding Debentures has
been paid or (ii) otherwise consented to by the holders of not less than
two-thirds (2/3) of the then outstanding aggregate principal amount of
Debentures (in original aggregate principal amount of $3,125,000); provided,
however, the restrictions set forth in this Paragraph 1(f) shall not apply to
dividends payable in shares of Common Stock.
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<PAGE> 5
3. Senior Debt; Rank.
(a) Without the prior express written consent of
the holders of not less than two-thirds (2/3) of the then outstanding aggregate
principal amount of Debentures (in original aggregate principal amount of
$3,125,000), the Company shall not hereafter (i) issue any Debentures, (ii)
authorize or issue any debt securities of senior rank to the Debentures in
respect of interest rights or priority of payment, (iii) authorize or issue any
Parity Securities with terms and conditions more favorable than the terms
herein, or (iv) authorize or make any amendment to the Company's Certificate of
Incorporation or By-laws, which would materially and adversely affect the
rights or relative priority of the Holders of the Debentures relative to the
holders of Parity Securities or the holders of any other class of capital
stock.
(b) In the event of the merger, consolidation or
other business combination of the Company with or into another corporation, the
Debentures shall maintain their relative powers provided for herein and no
merger, consolidation or other business combination shall result inconsistent
therewith.
4. Transfers. The Debentures have been issued subject
to investment representations of the original purchaser of such shares and may
be transferred or exchanged only in compliance with the Securities Act of 1933,
as amended (the "ACT"), and applicable state securities laws. Prior to due
presentment for transfer of each Debenture, the Company may treat the Holder as
the owner thereof for the purpose of receiving payments as herein provided and
all other purposes, and the Company shall not be affected by notice to the
contrary.
4A. Definitions. For purposes hereof the following
definitions shall apply:
"AGGREGATE YIELD" shall mean for each of the Debentures, the
sum of (a) the principal amount thereof, plus (b) accrued but unpaid interest
thereon.
"CLOSING PRICE" shall mean the price of one share of Common
Stock determined as follows:
(a) If the Common Stock is listed on the Nasdaq
National Market or The Nasdaq SmallCap Market (collectively, "NASDAQ"), the
closing bid price, as reported by Bloomberg, L.P. on the date of valuation (or,
if there is no closing bid price for such date, the most recent previous
closing bid price);
(b) If the Common Stock is listed on a national
securities exchange, the last reported closing price on such exchange on the
date of valuation (or, if there is no last reported closing price on that date,
the most recent previous closing bid price);
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<PAGE> 6
(c) If neither (a) nor (b) apply, but the Common
Stock is quoted in the over-the-counter market on the pink sheets or bulletin
board, the closing bid price on the date of valuation; and
(d) If none of clause (a), (b) or (c) above
applies, the market value as determined by a nationally recognized investment
banking firm or other nationally recognized financial advisor retained in good
faith by the Board of Directors of the Company for such purpose, taking into
consideration among other factors, the earnings history, book value and
prospects for the Company, and the prices at which shares or Common Stock
recently have been traded. Such determination shall be conclusive and binding
on all persons.
"COMMON STOCK" shall mean the common stock, par value $0.01
per share, of the Company.
"CONVERSION PRICE" shall mean an amount that is equal to the
lesser of (a) the Fixed Conversion Price or (b) the Floating Conversion Price,
unless otherwise specified herein.
"CONVERSION RATE" shall mean the number of shares of Common
Stock issuable upon conversion of each $10,000 aggregate principal amount of
the Debentures determined by the application of the following formula where D
equals the accrued but unpaid interest as to such aggregate amount of
Debentures (not previously added to the principal amount of the Debentures
pursuant to Paragraph 2 hereof) as of the Holder Conversion Date (as defined in
Paragraph 6):
Principal Amount + D
---------------------------------
Conversion Price
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
"FIXED CONVERSION PRICE" shall mean the average of (i) the
amount of 140% of the average of the Closing Price during the 5 days prior to
July 1, 1998; and (ii) the amount of 140% of the average of the Closing Price
during the 5 days prior to the Issuance Date; provided, however, that if the
Company offers, sells, contracts to sell or otherwise issues or agrees to issue
any convertible debt or convertible equity securities of the Company, in a
private placement transaction (other than pursuant to any existing stock or
option or similar existing equity-based compensation plan for employees,
officers, directors or consultants), with a maximum conversion price per share
of Common Stock of an amount less than the Fixed Conversion Price, then the
"Fixed Conversion Price" shall mean such lower conversion price for the
Debentures not yet converted. The Fixed Conversion Price shall also be subject
to adjustment from time to time ratably for any events set forth in Paragraph 9
hereof.
"FLOATING CONVERSION PRICE" shall mean the average of the
three (3) lowest Closing Prices during the Valuation Period.
6
<PAGE> 7
"ISSUANCE DATE" shall mean the initial date of issuance of the
Debentures.
"PERSON" means and includes an individual, a partnership, a
joint venture, a corporation, a company, a trust, an unincorporated
organization and a government or any department or agency thereof.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration
Rights Agreement, dated as of the Issuance Date, by and between the Company and
the Purchasers named therein.
"REGISTRATION STATEMENT" shall mean the registration statement
filed by the Company with the SEC to register the shares of Common Stock
issuable upon conversion of the Debentures.
"SEC" shall mean the Securities and Exchange Commission and
any successor entity thereto.
"TRIGGERING EVENT" means the occurrence of any of the
following events:
(a) the Common Stock is either delisted or
suspended from trading on Nasdaq, The New York Stock Exchange, Inc. or The
American Stock Exchange, Inc. for a period of five (5) consecutive trading
days, or any such delisting or suspension is threatened in writing or pending
(excluding disruptions from business announcements that result in any halt(s)
in trading of not more than one day on each occasion) and other than as a
result of the suspension of trading in securities on such market in general; or
(b) any money judgment (including any arbitration
award, but only if reduced to a judgment, but excluding any arbitration award
rewarded in respect of such proceedings commenced pursuant to Paragraphs 5A(d)
and 8(h)), writ or warrant of attachment, or similar process in excess of Seven
Hundred and Fifty Thousand Dollars ($750,000) in the aggregate shall be entered
or filed against the Company, its subsidiaries or any of their properties or
other assets and which shall remain unpaid, unvacated, unbonded or unstayed for
a period of sixty (60) days or in any event later than ten (10) days prior to
the date of any proposed sale thereunder.
"VALUATION PERIOD" shall mean the twelve (12) trading days
immediately preceding, but not including, the Holder Conversion Date (as
defined herein), subject to adjustment from time to time ratably for any events
set forth in Paragraph 8 hereof that occur during such twelve (12) trading day
period.
5. Paragraph 5 Transactions. (a) If at any time (i)
there occurs any merger, consolidation or other business combination of the
Company, with or into any other corporation,
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<PAGE> 8
entity or person (whether or not the Company is the surviving corporation) or
there occurs any other corporate reorganization or transaction or series of
related transactions, and as a result thereof the shareholders of the Company
pursuant to such merger, consolidation, reorganization or other transaction own
in the aggregate less than 50% of the voting power and common equity of the
ultimate parent corporation or other entity surviving or resulting from such
merger, consolidation, reorganization or other transaction, (ii) the Company
transfers all or substantially all of the Company's assets to another
corporation or other entity or person, or (iii) a purchase, tender or exchange
offer is made to and accepted by the holders of more than 50% of the
outstanding shares of Common Stock (each of the foregoing items (i) to (iii), a
"PARAGRAPH 5 TRANSACTION"), then the Holders of the Debentures then outstanding
may participate in any such transaction as a class with the common stockholders
on the same basis as if the Debentures had been converted one day prior to the
announcement date (or record date for such distribution, dividend or offer) of
such transaction.
(b) At the option of each Holder, the Company
shall redeem all or any portion of such Holder's Debentures effective as of the
effective date of a Paragraph 5 Transaction, and the Holder shall be entitled
to receive a redemption price per $100 principal amount of Debentures being
redeemed equal to 112.5% of the Aggregate Value. Each Holder shall be entitled
to make an election for redemption at any time up to five (5) days prior to the
effective date of any Paragraph 5 Transaction; provided, however, at the
discretion of such Holder, such Holder may, at any time, elect to convert its
Debentures into fully paid, validly issued and nonassessable shares of Common
Stock in accordance with the terms of Paragraph 6 hereof, for such number of
shares of Common Stock as determined by the application of the Conversion Rate
so long as the Company has not redeemed such Debentures.
5A. Optional Redemption Upon a Triggering Event. At the
option of each Holder, the Company shall redeem all or any portion of such
Holder's outstanding Debentures effective as of the date of the occurrence of a
Triggering Event, and the Holder shall be entitled to receive a redemption
price per $100 principal amount of Debentures being redeemed equal to 130% of
the Aggregate Value. Each Holder shall be entitled to make an election for
redemption at any time following thirty (30) days after the occurrence of a
Triggering Event; provided, however, at the discretion of such Holder, such
Holder may, at any time, elect to convert its Debentures into fully paid,
validly issued and nonassessable shares of Common Stock in accordance with the
terms of Paragraph 6 hereof, for such number of shares of Common Stock as
determined by the application of the Conversion Rate so long as the Company has
redeemed such Debentures. In addition to the foregoing, upon the occurrence of
a Triggering Event, and only for the period that such Triggering Event remains
uncured, the Company will pay each Holder 2.0% per month on the outstanding
principal amount of the Debentures. Any such interest which is not paid when
due shall accrue interest until paid at the rate from time to time applicable
to interest on the Debentures as to which such Triggering Event has occurred.
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<PAGE> 9
5B. Mechanics of Redemption.
(a) In order to redeem any Debentures (in whole
or in part), the applicable Holder shall surrender the certificate(s)
representing the Debentures to be redeemed, by either overnight courier or
two-day courier, to the principal office of the Company, and shall give written
notice in the form of EXHIBIT 1 hereto (the "REDEMPTION NOTICE") by facsimile
(with the original of such notice forwarded with the foregoing courier) to the
Company at such office to the effect that such Holder elects to have redeemed
the principal amount of Debentures (plus accrued but unpaid interest thereon)
specified therein; provided, however, that the Company shall not be obligated
to pay the applicable redemption price unless either the certificate(s)
evidencing the Debentures being redeemed is delivered to the Company as
provided above, or if the Holder notifies the Company that such certificate(s)
has been lost, stolen or destroyed and follows such procedures as are set forth
in Paragraph 17. If less than all the principal amount represented by such
certificate or certificates are to be redeemed, the Company shall issue and
deliver to or on the order of the holder thereof, at the expense of the
Company, a new certificate or certificates representing the unredeemed amount,
to the same extent as if the certificate theretofore representing such
unredeemed principal amount had not been surrendered on redemption.
(b) The Company shall use its best efforts to pay
the applicable redemption price within three (3) business days after receipt by
the Company of the Redemption Notice and such certificate(s) evidencing the
principal amount of Debentures being redeemed, or after receipt of such
agreement and indemnification set forth in Paragraph 17, to such Holder,
together with a certificate, certified by an appropriate officer of the
Company, setting forth the calculation of the redemption price (the "REDEMPTION
CERTIFICATE") and, if appropriate, a certificate evidencing the principal
amount of the Debentures covered by the submitted certificate(s) not submitted
for redemption; provided that in the case where more than one Holder submits
Debenture certificates for redemption simultaneously and the Company is unable
to redeem all of the Debentures submitted for such redemption, the Company
shall redeem an amount from each Holder equal to each Holder's pro rata
principal amount (based on principal amount of Debentures held by each Holder
relative to outstanding) of all Debentures being redeemed.
(c) If the Company shall fail to redeem all of
the Debentures submitted for redemption (other than pursuant to a dispute as to
the calculation of the applicable redemption price), in addition to any remedy
each Holder may have under this Debenture, the Subscription Agreement and the
Registration Rights Agreement, the applicable redemption price payable in
respect of such unredeemed principal amount of Debentures shall bear interest
at the rate of 2.0% per month (pro rated for partial periods) until such
redemption price is paid in full. Until the Company pays such unpaid
redemption price in full to a Holder, such Holder shall have the option, in
lieu of redemption, to require the Company to promptly return to such Holder
the aggregate principal amount of Debentures submitted for redemption by such
Holder and for which the applicable redemption price has not been paid, by
sending written notice thereof to the Company via facsimile (a "REVOCATION
NOTICE"). Upon the Company's receipt of such Revocation Notice and prior to
payment in full of the applicable redemption price to such Holder, (i) the
Redemption
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<PAGE> 10
Notice shall be null and void with respect to the principal amount of the
Debentures submitted for redemption and for which the applicable redemption
price has not been paid, (ii) the Company shall immediately return any
Debentures submitted to the Company for redemption for which the applicable
redemption price has not been paid, and (iii) the Fixed Conversion Price of
those returned shares shall be adjusted to the lesser of (A) the Conversion
Price as in effect on the date on which the Revocation Notice is delivered to
the Company and (B) the Closing Price with the lowest dollar value during the
period beginning on the date on which the Notice of Redemption is delivered to
the Company and ending on the date on which the Revocation Notice is delivered
to the Company.
(d) Notwithstanding the foregoing, in the event
of a dispute as to the determination of the calculation of the applicable
redemption price, the amount of the redemption price that is not in dispute
shall be promptly paid to the Holder in accordance with Paragraph 5B(a) hereof.
The Holder shall then be entitled, within sixty (60) days of receipt of either
the Redemption Certificate or Redemption Notice, to submit such dispute to the
American Arbitration Association for resolution according to the then
applicable rules thereof, which determination shall be final and binding on all
parties. If it shall be determined that a Holder shall receive additional
monies in respect of such redemption, the Company shall deliver to such Holder
such amount within three (3) business days of written notice of such
determination. The cost of such proceeding shall be shared 50% by the Holder
involved in such dispute and 50% by the Company, except that the prevailing
party, as determined by the arbitrator presiding over the arbitration, shall be
entitled to recover reasonable attorneys' fees, in addition to other costs and
expenses and any other available remedy.
5C. Mandatory Redemption. (a) To the extent the
Company shall have funds legally available for such redemption, and provided
that the Company has previously redeemed the $2.5 million principal amount of
the Debentures issued on the Issuance Date, the Company shall, provided that
the notice provisions set forth in Paragraph 5C hereof have been complied with,
redeem the $625,000 aggregate original principal amount of the Debentures, on
the date that is one-hundred and eighty-one (181) days from the Issuance Date,
in whole, at a redemption price per Debentures equal to 110% of the Aggregate
Yield plus warrants to purchase 50,000 shares of Common Stock at an exercise
price of $11.00 per share; such warrants to be substantially in the form of
EXHIBIT 3 attached hereto.
(b) Notice of the Company's intention to redeem
the Debentures pursuant to this Paragraph 5C shall be given not less than ten
(10) business days prior to the date of redemption by first class mail, postage
prepaid, to the Holders. Each such notice shall state: (i) a redemption date
that is not less than ten (10) business days following the date of mailing of
the notice (each, a "REDEMPTION DATE"); (ii) the place or places where the
certificates representing the Debentures are to be surrendered for payment of
the redemption price; and (iii) the redemption price and the calculation of
such price (the "COMPANY REDEMPTION NOTICE").
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(c) After a Company Redemption Notice is given
pursuant to Paragraph 5C(b), upon surrender in accordance with such notice of
Debentures, such Debentures shall be redeemed by the Company at the redemption
price on the Redemption Date.
6. Conversion at the Option of the Holder. Subject to
the limitations of Paragraph 13, the Holder shall have the following conversion
rights:
(a) Holder's Right to Convert. Debentures shall
be convertible at any time after the date that is one-hundred and eighty-one
(181) days after the Issuance Date, in whole or in part, at the option of the
Holder thereof, into fully paid, validly issued and nonassessable shares of
Common Stock in accordance with the terms herein for such number of shares of
Common Stock as determined by the application of the Conversion Rate.
(b) Mechanics of Conversion. In order to convert
any Debentures (in whole or in part) into full shares of Common Stock, the
applicable Holder shall surrender the stock certificate(s) representing the
Debentures to be converted, by either overnight courier or two-day courier, to
the principal office of the Company, and shall give written notice in the form
of EXHIBIT 2 (the "CONVERSION NOTICE") by facsimile (with the original of such
notice forwarded with the foregoing courier) to the Company at such office to
the effect that such Holder elects to have converted principal amount of
Debentures (plus accrued but unpaid interest thereon) specified therein (such
notice and election shall be irrevocable by the Holder); provided, however,
that the Company shall not be obligated to issue certificate(s) evidencing
shares of Common Stock issuable upon such conversion unless either the
certificate(s) evidencing the Debentures being converted is delivered to the
Company as provided above, or if the Holder notifies the Company that such
certificate(s) has been lost, stolen or destroyed, such Holder follows such
procedures as are set forth in Paragraph 17. If less than all of the principal
amount represented by such certificate or certificates is to be converted, the
Company shall issue and deliver to or on the order of the Holder thereof, at
the expense of the Company, a new certificate or certificates representing the
unconverted principal amount, to the same extent as if the certificate
theretofore representing such unconverted principal amount had not been
surrendered on conversion. The effective date of conversion (the "HOLDER
CONVERSION DATE") shall be deemed to be the date on which the Company receives
by facsimile the Conversion Notice.
(c) The Company shall use its best efforts to
issue and deliver within three (3) business days after receipt by the Company
of such certificate(s) evidencing the Debentures being converted, or after
receipt of the affidavit, agreement and indemnification as set forth in
Paragraph 17, to such Holder, or to its designee, certificates for the number
of shares of Common Stock to which such Holder shall be entitled hereunder or,
if requested by the Holder, issue such shares in electronic format (i.e.,
DWAC), together with a certificate, certified by an appropriate officer of the
Company, setting forth the calculation of the Conversion Rate and, if
appropriate, a certificate evidencing the principal amount of Debentures
covered by the submitted for conversion. The person or persons entitled to
receive the shares of Common Stock issuable
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<PAGE> 12
upon such conversion shall be treated for all purposes as the record holder of
such shares of Common Stock on the Holder Conversion Date.
(d) Each certificate representing Debentures
surrendered to the Company for conversion pursuant to this Paragraph 6 shall,
on the Holder Conversion Date and subject to issuance of the shares of Common
Stock issuable upon conversion thereof, be canceled and retired by the Company.
Upon issuance of the shares of Common Stock issuable upon conversion of the
Debentures pursuant to this Paragraph 6, the Debentures formerly represented
thereby shall be deemed to be canceled and shall no longer be considered to be
issued and outstanding for any purpose, including without limitation, for
purposes of accruing interest thereon. Such principal amount outstanding
shall be retired and shall not be subject to reissuance by the Company.
7. Maturity.
(a) On the date that is the fifth anniversary of the
Issuance Date, or such later date to which such date has been extended pursuant
to Paragraph 16 hereof (the "MATURITY DATE"), the Company shall have the
option, in its sole and absolute discretion, to either (i) cause the Debentures
then outstanding to be automatically converted into that number of fully paid,
validly issued and nonassessable shares of Common Stock determined in
accordance with the terms of this Debenture certificate by application of the
then applicable Conversion Rate; or (ii) redeem all of Debentures then
outstanding at the Aggregate Value per share.
(b) In the event that the Company elects, pursuant
to paragraph 7(a) of this Certificate, to cause the outstanding Debentures to
be converted into shares of Common Stock, the Company shall give the Holders
written notice of such election not less than ten (10) days prior to the
Maturity Date, and such written notice shall specify (i) the Maturity Date, and
(ii) the place or places to which certificates representing the Debentures are
to be surrendered for conversion. Such conversion shall be effected as of the
Maturity Date in accordance with and pursuant to the terms of this certificate
at the then applicable Conversion Rate and in accordance with the procedures
set forth in Section 6(b) of this certificate; provided, however, that the
Holder shall not be obligated to provide the Conversion Notice to the Company.
(c) In the event that the Company elects, pursuant
to paragraph 7(a) of this certificate, to redeem the outstanding Debentures,
the Company shall give the Holders written notice of such election not less
than ten (10) days prior to the Maturity Date, and such written notice shall
specify (i) the Maturity Date, (ii) the place or places to which certificates
representing the Debentures are to be surrendered for redemption, and (iii) the
redemption price, which shall be equal to the Aggregate Yield per $10,000
principal amount of Debentures as of the Maturity Date. In order to redeem any
Debentures, the applicable Holder shall surrender the stock certificate(s)
representing the Debentures called for redemption, by either overnight courier
or two-day courier, to the place or places specified in the written notice of
redemption, including the written notice in the form of EXHIBIT 1 herein, and
the Company shall redeem such
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<PAGE> 13
Debentures (plus any accrued but unpaid interest thereon) on the Maturity Date;
provided, however, that the Company shall not be obligated to pay the
applicable redemption price unless either the certificate evidencing the
Debentures being redeemed is delivered to the Company as provided above, or if
the Holder notifies the Company that such certificate(s) has been lost, stolen
or destroyed and follows such procedures as are set forth in Paragraph 17.
(d) Each certificate representing Debentures
surrendered to the Company for conversion or redemption pursuant to this
Paragraph 7 shall, on the Maturity Date and subject to issuance of the shares
of Common Stock issuable upon conversion or payment or setting aside for
payment of the redemption price payable upon redemption, as the case may be, be
canceled and retired by the Company. Upon issuance of the shares of Common
Stock issuable upon conversion of the Debentures pursuant to this Paragraph 7,
or payment or setting aside for payment of the redemption price payable upon
redemption of the Debentures pursuant to this Paragraph 7, as the case may be,
the Debentures formerly represented thereby shall be deemed to be canceled and
shall no longer be considered to be issued and outstanding for any purpose,
including without limitation, for purposes of accruing interest thereon.
(e) If the Company elects to cause the Debentures
to be converted pursuant to this Paragraph 7, the Company shall use its best
efforts to issue and deliver within three (3) business days after receipt by
the Company of the Debentures, or after receipt of the affidavit, agreement and
indemnification described in Paragraph 18, to all Holders, or to their
designee, a certificate for the number of shares of Common Stock to which each
Holder shall be entitled hereunder or, if requested by the Holder, issue such
shares in electronic format (i.e., DWAC), together with a certificate,
certified by an appropriate officer of the Company, setting forth the
calculation of the Conversion Rate. The person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder of such shares of Common Stock on the
Maturity Date. If the Company elects to cause the Debentures to be converted
pursuant to this Paragraph 7, the Maturity Date shall be deemed a "Holder
Conversion Date" for purposes of the Debentures.
8. Stock Splits; Dividends; Adjustments;
Reorganizations.
(a) Stock Splits and Combinations. The Company
shall not effect any stock split, subdivision or combination with an effective
date within thirty (30) trading days of the Maturity Date.
(b) Certain Dividends and Distributions. The
Company shall not make, or fix a record date for the determination of holders
of Common Stock or other securities entitled to receive, a dividend or other
distribution payable in additional shares of Common Stock, with an effective
date within thirty (30) trading days of the Maturity Date.
(c) Adjustment for Other Dividends and
Distributions. In the event the Company at any time or from time to time after
the Issuance Date makes, or fixes a record date for
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<PAGE> 14
the determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in securities of the Company other than shares of
Common Stock, then and in each such event, provision shall be made so that the
Holders shall receive upon conversion of their Debentures pursuant to
Paragraphs 6 and 7 hereof, in addition to the number of shares of Common Stock
receivable thereupon, the amount of such other securities of the Company to
which a Holder on the relevant record or payment date, as applicable, of the
number of shares of Common Stock so receivable upon conversion would have been
entitled, plus any dividends or other distributions which would have been
received with respect to such securities had such Holder thereafter, during the
period from the date of such event to and including the Holder Conversion Date,
retained such securities, subject to all other adjustments called for during
such period under this Paragraph 8 with respect to the rights of the Holders.
For purposes of this Paragraph 8(c), the number of shares of Common Stock so
receivable upon conversion by the Holder shall be deemed to be that number
which the Holder would have received upon conversion of the Debentures if the
Holder Conversion Date had been the day preceding the date upon which the
Company announced the making of such dividend or other distribution.
(d) Adjustment of Floating Conversion Price upon
Issuance of Convertible Securities. If the Company in any manner issues or
sells securities that are convertible into or exchangeable for Common Stock at
a price which varies with the market price of the Common Stock (the formulation
for such variable price being herein referred to as the "VARIABLE PRICE") and
such Variable Price is not calculated using the same formula used to calculate
the Floating Conversion Price in effect immediately prior to the time of such
issue or sale, the Company shall provide written notice thereof via facsimile
and overnight courier to each holder of the Debentures ("VARIABLE NOTICE") on
the date of issuance of such convertible securities. If the holders of shares
of Debentures, including the holders of shares of Debentures who purchased of
up to $2.5 million aggregate principal amount of such Debentures, representing
at least two-thirds (2/3) of the outstanding principal amount of the Debentures
then outstanding Debentures (in original aggregate principal amount of
$3,125,000), provide written notice via facsimile and overnight courier (the
"VARIABLE PRICE ELECTION NOTICE") to the Company within five (5) business days
of receiving a Variable Notice that such holders desire to replace the Floating
Conversion Price then in effect with the Variable Price described in such
Variable Notice, then from and after the date of the Company's receipt of the
Variable Price Election Notice the Floating Conversion Price will automatically
be replaced with the Variable Price (together with such modifications to this
Certificate of Designations as may be required to give full effect to the
substitution of the Variable Price for the Floating Conversion Price). In the
event that a holder delivers a Conversion Notice at any time after the
Company's issuance of convertible securities with a Variable Price but before
such holder's receipt of the Company's Variable Notice, then such holder shall
have the option by written notice to the Company to rescind such Conversion
Notice or to have the Conversion Price be equal to such Variable Price for the
conversion effected by such Conversion Notice.
(e) Adjustment for Reclassification, Exchange and
Substitution. In the event that at any time or from time to time after the
Issuance Date, the Common Stock issuable
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<PAGE> 15
upon the conversion of the Debentures is changed into the same or a different
number of shares of any class or classes of stock, whether by recapitalization,
reclassification or otherwise (other than a subdivision or combination of
shares or stock dividend or reorganization provided for elsewhere in this
Paragraph 8 or Paragraph 5 Transaction), then and in each such event each
Holder shall thereafter have the right upon conversion to receive the kind and
amount of shares of stock and other securities, cash and property receivable
upon such recapitalization, reclassification or other change, by holders of the
number of shares of Common Stock which the Holder of Debentures would have
received had it converted such shares immediately prior to such
recapitalization, reclassification or other change, at the Conversion Price
then in effect (the kind, amount and price of such stock and other securities
to be subject to adjustments as herein provided). Prior to the consummation of
any recapitalization, reclassification or other change contemplated hereby, the
Company will make appropriate provision (in form and substance satisfactory to
the Holders of a majority of the Debentures then outstanding) to ensure that
each of the Holders of the Debentures will thereafter have the right to acquire
and receive in lieu of or in addition to (as the case may be) the shares of
Common Stock otherwise acquirable and receivable upon the conversion of such
Holder's Debentures, such shares of stock, securities or assets that would have
been issued or payable in such recapitalization, reclassification or other
change with respect to or in exchange for the number of shares of Common Stock
which would have been acquirable and receivable upon the conversion of such
Holder's Debentures had such recapitalization, reclassification or other change
not taken place (without taking into account any limitations or restrictions on
the timing or amount of conversions). In the event of such recapitalization,
reclassification or other change, the formulae set forth herein for conversion
and redemption shall be equitably adjusted to reflect such change in number of
shares or, if shares of a new class of stock are issued, to reflect the market
price of the class or classes of stock (applying the same factors used in
determining the Conversion Price for shares of Common Stock) issued in
connection with the above described events.
(f) Reorganization. If at any time or from time
to time after the Issuance Date there is a capital reorganization of the Common
Stock (other than a recapitalization, subdivision, combination,
reclassification or exchange of shares provided for elsewhere in this Paragraph
8) then, as a part of such reorganization, provisions shall be made so that the
Holders shall thereafter be entitled to receive upon conversion of its
Debentures the number of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock deliverable upon
conversion would have been entitled to receive had the holder of Debentures
converted such shares immediately prior to such capital reorganization, at the
Conversion Price then in effect. In any such case, appropriate adjustments
shall be made in the application of the provisions of this Paragraph 8 with
respect to the rights of the Holders after such capital reorganization to the
extent that the provisions of this Paragraph 8 shall be applicable after that
event and be as equivalent as may be practicable, including, by way of
illustration and not limitation, by equitably adjusting the formulae set forth
herein for conversion and redemption to reflect the market price of the
securities or property (applying the same factors used in determining the
Conversion Price for shares of Common Stock) issued in connection with the
above described events.
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<PAGE> 16
(g) Certain Events. If any event occurs of the
type contemplated by the provisions of this Paragraph 8 but not expressly
provided for by such provisions, then the Company's Board of Directors will
make an appropriate adjustment in the Conversion Price so as
to protect the rights of the holders of the Debentures; provided, however, that
no such adjustment will increase the Conversion Price as otherwise determined
pursuant to this Paragraph 8.
(h) Dispute. In the event of a dispute between a
Holder and the Company with respect to any of the adjustments required pursuant
to the provisions of this Paragraph 8, such Holder shall be entitled to receive
the number of shares of Common Stock as to which no dispute exists and, within
sixty (60) days of receipt of the Schedule of Computations (as defined below),
to submit such dispute to the American Arbitration Association for resolution
according to the then applicable rules thereof, which determination shall be
final and binding on all parties. If it shall be determined that a Holder
should have received additional shares of Common Stock or other securities upon
such conversion (the "UNDELIVERED SHARES") then, within three (3) trading days
of receipt of written notice of such determination, the Company shall issue to
such Holder that number of additional shares of Common Stock or other
securities as shall have a value, based upon the then Conversion Price for
shares of Common Stock, as shall equal the Undelivered Shares times the
Conversion Price for shares of Common Stock on the date of conversion. The
cost of such proceeding shall be shared 50% by the Holder involved in such
dispute and 50% by the Company, except that the prevailing party, as determined
by the arbitrator presiding over the arbitration, shall be entitled to recover
reasonable attorney's fees, in addition to other costs and expenses and any
other available remedy.
(i) Schedule of Computations. The Company shall
provide written notice to the Holders of all adjustments pursuant to this
Paragraph 8 shall be notified within three (3) trading days of the occurrence
thereof and such notice shall be accompanied by a schedule setting forth a
detailed calculation of such adjustments (the "SCHEDULE OF COMPUTATIONS"). If
so requested by a Holder, the Company shall provide to such Holder within ten
(10) trading days of its request therefor a certificate of concurrence to the
Schedule of Computations by the independent certified public accountants of the
Company.
9. Fractional Shares. No fractional shares of Common
Stock or scrip representing fractional shares of Common Stock shall be issuable
hereunder. The number of shares of Common Stock that are issuable upon any
conversion shall be rounded up or down to the nearest whole share.
10. Reservation of Stock; Conversion Default.
(a) Reservation Requirement. The Company shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock such number of
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<PAGE> 17
shares of Common Stock as shall be necessary for the purpose of effecting the
conversion of Debentures, which shares shall be free of preemptive rights, for
the purpose of enabling the Company to satisfy any obligation to issue shares
of its Common Stock, or other securities, upon conversion of all Debentures
pursuant hereto. The Company shall initially reserve a number of
shares of Common Stock equal to two times the number of shares necessary to
satisfy its obligations on conversion of the Debentures if all such shares were
converted on the Issuance Date.
(b) Default. If the Company (i) notifies a
Holder via facsimile or pursuant to a public disclosure, including, but not
limited to a press release, that the Company cannot, or does not intend to, or
(ii) fails to, issue shares of Common Stock registered for resale under the
Registration Statement for any reason (a "CONVERSION DEFAULT"), including,
without limitation, because the Company (x) does not have a sufficient number
of shares of Common Stock or other securities authorized and available, or (y)
is otherwise prohibited by applicable law or by the rules and regulations of
any stock exchange, interdealer quotation system or other self-regulatory
organization with jurisdiction over the Company or its securities, including
without limitation the Exchange Cap (as defined in Paragraph 13), from issuing
all of the Common Stock which is to be issued to a Holder, then the Company
shall issue as many shares of Common Stock as it is able to issue in accordance
with such Holder's Conversion Notice, and with respect to the unconverted
principal amount of Debentures, notify the Holder of such failure (a "DEFAULT
NOTICE") which notice shall indicate (I) the reason why the Company is unable
to fully satisfy such holder's Conversion Notice, (II) the principal amount of
Debentures which cannot be converted and (III) the applicable mandatory
redemption price (as calculated pursuant to the terms below). Such Holder must
within ten (10) business days of (i) receipt of such Default Notice or (ii)
becoming aware of such Conversion Default, deliver written notice via facsimile
to the Company ("REMEDIES NOTICE") of its election pursuant to this Paragraph
10.
(c) Each Holder pursuant to such Default Notice
shall have the following options, at its election: (i) the right to demand
from the Company immediate redemption of its Debentures in cash at 125% of the
Aggregate Yield; (ii) void its Conversion Notice and have returned the
nonconverted Debentures that were to be converted pursuant to such Holder's
Conversion Notice; or (iii) if the Company's inability to fully convert the
Debentures is pursuant to the Exchange Cap described in Paragraph 10(b)(ii)(y),
require the Company to use its best efforts to take all steps necessary in
order to exceed such Exchange Cap; provided, however, the Holder may elect any
of the other options set forth in this Paragraph 10(c) if the Company shall
fail to be able to exceed such Exchange Cap within 45 days of the Company's
receipt of the applicable Remedies Notice. Notwithstanding the foregoing, no
Remedies Notice may be delivered by a Holder subsequent to receipt by such
Holder of notice from the Company (sent by overnight or two-day courier with a
copy sent by facsimile) of the availability of sufficient shares of Common
Stock or other securities to perfect conversion (a "POST-DEFAULT CONVERSION")
of all the Debentures; provided that such rights as set forth herein and
election as set forth in the Remedies Notice shall be reinstated if the Company
shall
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<PAGE> 18
thereafter fail to perfect such Post-Default Conversion by delivery of Common
Stock certificates or certificates representing other securities in accordance
with the applicable provisions hereof and payment of all accrued and unpaid
interest in cash with respect thereto within five (5) days of delivery of the
notice of Post-Default Conversion.
(d) In addition to the foregoing, upon a
Conversion Default, the dividend rate on all of the Debentures (including
Debentures for which a Conversion Notice has not yet been sent), shall for the
period during which such Debentures have not been duly converted or redeemed as
herein provided, the Company will pay each Holder 2.0% per month on the
outstanding principal amount of the Debentures until such Debentures have been
duly converted or redeemed as herein provided; provided, however, that if the
Company's inability to fully convert Debentures is pursuant to Paragraph
10(b)(ii)(y) above, the Company shall have sixty (60) days to cure such default
prior to giving rise to the right of the Holder to exercise remedies pursuant
to this Section 10, including, without limitation, the right to receive
additional interest. Any such interest which is not paid when due shall accrue
interest until paid at the rate from time to time applicable to interest on the
Debentures as to which the Conversion Default has occurred.
11. Taxes. The Company shall pay any and all taxes
attributable to the issuance and delivery of Common Stock or other securities
upon conversion of the Debentures.
12. Voting Rights. The Holders shall have no voting
rights, except as required by law, including but not limited to the Delaware
General Corporation Law, and as expressly provided herein.
13. Limitation on Number of Conversion Shares. The
Company shall not be obligated to issue upon conversion of the Debentures, in
the aggregate, more than a number of shares of Common Stock equal to 19.99% of
the number of shares of Common Stock outstanding on the Issuance Date (such
amount to be proportionately and equitably adjusted from time to time in the
event of stock splits, stock dividends, combinations, reverse stock splits,
reclassification, capital reorganization and similar events relating to the
Common Stock) (the "EXCHANGE CAP"), if issuance of a larger number of shares of
Common Stock would constitute a breach of the Company's obligations under the
rules or regulations of Nasdaq or any other principal securities exchange or
market upon which the Common Stock is or becomes traded. The Exchange Cap
shall be allocated among the Holders pro rata based on the total principal
amount outstanding of the Debentures.
14. No Reissuance of Debentures. No shares of Debentures
acquired by the Company by reason of redemption, purchase, conversion or
otherwise shall be reissued.
15. No Impairment. The Company shall not intentionally
take any action which would impair the rights and privileges of the Debentures
set forth herein or the rights of the Holders thereof.
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<PAGE> 19
16. Registration Suspension. In the event that at any
time or from time to time any Registration Statement is suspended or trading in
the Common Stock on Nasdaq is suspended for a period of time (excluding
disruptions from business announcements that result in any halt(s) in trading
of not more than one (1) day on each occasion) and other suspension of trading
on such market in general (each, a "BLACKOUT PERIOD"), the Maturity Date
hereunder shall be extended for a period equal to l.5 times the number of days
in such Blackout Period. Furthermore, additional provisions pertaining to the
suspension of effectiveness of such registration statement set forth in
Paragraph 5A of the Registration Rights Agreement shall be applicable in the
event of a Blackout Period, and such provisions as specifically incorporated by
reference herein.
17. Replacement Certificate. In the event that any
Holder notifies the Company that a stock certificate evidencing Debentures has
been lost, stolen, destroyed or mutilated, the Company shall issue a
replacement stock certificate evidencing the Debentures identical in tenor and
date (or if such certificate is being issued for shares not covered in a
redemption or conversion, in the applicable tenor and date) to the original
stock certificate evidencing the Debentures, provided that the Holder executes
and delivers to the Company an affidavit of lost stock certificate and an
agreement reasonably satisfactory to the Company to indemnify the Company from
any loss incurred by it in connection with such Debenture certificate;
provided, however, the Company shall not be obligated to re-issue replacement
certificates if the Holder contemporaneously requests the Company to convert or
redeem the full principal amount evidenced by such lost, stolen, destroyed or
mutilated certificate.
18. Compliance With Federal and State Securities Laws.
Notwithstanding any other provision in this Debenture, the Holder shall
exercise its rights of conversion and redemption hereunder in accordance with
Federal and state securities laws then applicable to it, including, without
limitation, any restrictions to which the Holder may then be subject as an
"affiliate" of the Company (as defined in the Securities Act), if applicable.
19. Notices. All notices to the holders of Debentures
will be mailed to registered holders of Debentures at their registered
addresses as the same shall appear in the Debenture Security Register on the
day fifteen days prior to such mailing.
20. Governing Law. The Debentures shall be governed by
and construed in accordance with the laws of the State of New York, without
giving effect to principles of conflicts of law.
21. Countersignature and Registration. This Debenture
shall not become valid or obligatory for any purpose until the Debentures shall
have been duly executed by the Company and such signature attested to by an
authorized Officer thereof.
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<PAGE> 20
22. Warranty of the Company. The Company hereby
certifies and warrants that all acts, conditions and things required to be done
and performed and to have happened precedent to the creation and issuance of
this Debenture, and to constitute the same legal, valid and binding obligations
of the Company enforceable in accordance with their terms, have been done and
performed and have happened in due and strict compliance with all applicable
laws.
23. Descriptive Headings. The descriptive headings
appearing herein are for convenience of reference only and shall not alter,
limit or define the provisions hereof.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
[EXHIBITS OMITTED]
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EXHIBIT 4.5
FORM OF WARRANT
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES
NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE
TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE
COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES WHICH
OPINION IS REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE
OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE
SECURITIES LAWS.
THE TRANSFER OF THIS WARRANT IS
RESTRICTED AS DESCRIBED HEREIN.
OBJECTIVE COMMUNICATIONS, INC.
Warrant for the Purchase of Shares of Common Stock,
$.01 par value per share
THIS WARRANT EXPIRES ON [FIVE YEARS FROM THE DATE OF ISSUANCE]
__________ Shares
THIS CERTIFIES that, for value received,
________________________ with an address at _______________________________
(including any transferee, the "Holder"), is entitled to subscribe for and
purchase from Objective Communications, Inc., a Delaware corporation (the
"Company"), upon the terms and conditions set forth herein, at any time or from
time to time before 5:00 P.M. on [FIVE YEARS FROM THE DATE OF ISSUANCE],
Eastern time (the "Exercise Period"), ________ shares of the Company's Common
Stock, $.01 par value per share ("Common Stock"), at a price equal to $11.00
per share (the "Exercise Price").
As used herein the term "this Warrant" shall mean and include
this Warrant and any Warrant or Warrants hereafter issued as a consequence of
the exercise or transfer of this Warrant in whole or in part.
The number of shares of Common Stock issuable upon exercise of
this Warrant (the "Warrant Shares") and the Exercise Price may be adjusted as
herein set forth.
<PAGE> 2
1. (a) This Warrant may be exercised during the
Exercise Period, as to the whole or any lesser number of whole Warrant Shares,
by the surrender of this Warrant (with the election at the end hereof duly
executed) to the Company at its office at Objective Communications, Inc., 50
International Drive, Portsmouth, New Hampshire 03801, or at such other place as
is designated in writing by the Company. Subject to Section 1(b) hereof, such
executed election must be accompanied by payment in an amount equal to the
Exercise Price multiplied by the number of Warrant Shares for which this
Warrant is being exercised. Such payment may be made by wire transfer or by
certified or bank cashier's check payable to the order of the Company, or as
provided in Section 1(b) hereof.
(b) All or any part of this Warrant may be
exercised on a "cashless" basis, by stating in the Exercise Notice such
intention and either (x) the maximum number (the "Maximum Number") of shares of
Common Stock the Holder desires to purchase in consideration of cancellation of
Warrants in payment for such exercise, or (y) the amount of then outstanding
principal and accrued interest under Notes submitted with such Exercise Notice,
to be deemed to be prepaid pursuant to such exercise. The number of shares of
Common Stock the Holder shall receive (the "Cashless Exercise Number") upon
such exercise pursuant to clause (x) of this Section 1(b) shall equal the
difference between the Maximum Number and the quotient that is obtained when
the product of the Maximum Number and the then current Exercise Price is
divided by the then Current Market Price per share (as hereinafter defined).
The amount credited toward the payment due from the Holder upon such exercise
in respect of prepayment of Notes pursuant to clause (y) of this Section 1(b)
shall equal the amount of principal and interest deemed prepaid thereby.
2. Upon each exercise of the Holder's rights to purchase
Warrant Shares, the Holder shall be deemed to be the holder of record of the
Warrant Shares issuable upon such exercise, notwithstanding that the transfer
books of the Company shall then be closed or certificates representing such
Warrant Shares shall not then have been actually delivered to the Holder. The
Company shall use its best efforts to issue and deliver within three (3) days
after each such exercise of this Warrant a certificate representing the Warrant
Shares issuable upon such exercise, registered in the name of the Holder or its
designee, or, if requested by the Holder, issue such shares in electronic
format (i.e., DWAC). If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the right of the Holder to purchase the
balance of the Warrant Shares (or portions thereof) subject to purchase
hereunder.
3. (a) Any Warrants issued upon the transfer or
exercise in part of this Warrant shall be numbered and shall be registered in a
Warrant Register as they are issued. The Company shall be entitled to treat
the registered holder of any Warrant on the Warrant Register as the owner in
fact thereof for all purposes and shall not be bound to recognize any equitable
or other claim to or interest in such Warrant on the part of any other person,
and shall not be liable for any registration or transfer of Warrants which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or transfer, or
with the knowledge of such facts that its participation therein amounts to bad
faith. This
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<PAGE> 3
Warrant shall be transferable only on the books of the Company upon delivery
thereof duly endorsed by the Holder or by its duly authorized attorney or
representative, or accompanied by proper evidence of succession, assignment, or
authority to transfer. In all cases of transfer by an attorney, executor,
administrator, guardian, or other legal representative, duly authenticated
evidence of his or its authority shall be produced. Upon any registration of
transfer, the Company shall deliver a new Warrant or Warrants to the person or
entity entitled thereto. This Warrant may be exchanged, at the option of the
Holder thereof, for another Warrant, or other Warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of Warrant Shares (or portions thereof), upon surrender
to the Company or its duly authorized agent. Notwithstanding the foregoing,
the Company shall have no obligation to cause Warrants to be transferred on its
books to any person if, in the opinion of counsel to the Company, such transfer
does not comply with the provisions of the Securities Act of 1933, as amended
(the "Act"), and the rules and regulations thereunder.
(b) The Holder acknowledges that it has been
advised by the Company that neither this Warrant nor the Warrant Shares have
been registered under the Act, that this Warrant is being or has been issued
and the Warrant Shares may be issued on the basis of the statutory exemption
provided by Section 4(2) of the Act or Regulation D promulgated thereunder, or
both, relating to transactions by an issuer not involving any public offering.
The Holder acknowledges that it has been informed by the Company of, or is
otherwise familiar with, the nature of the limitations imposed by the Act and
the rules and regulations thereunder on the transfer of securities. In
particular, the Holder agrees that no sale, assignment or transfer of this
Warrant or the Warrant Shares issuable upon exercise hereof shall be valid or
effective, and the Company shall not be required to give any effect to any such
sale, assignment or transfer, unless (i) the sale, assignment or transfer of
this Warrant or such Warrant Shares is registered under the Act, it being
understood that neither this Warrant nor such Warrant Shares are currently
registered for sale and that the Company has no obligation or intention to so
register this Warrant or such Warrant Shares except as specifically provided
herein, or (ii) this Warrant or such Warrant Shares are sold, assigned or
transferred in accordance with all the requirements and limitations of Rule 144
under the Act, it being understood that Rule 144 is not available at the time
of the original issuance of this Warrant for the sale of this Warrant or such
Warrant Shares and that there can be no assurance that Rule 144 sales will be
available at any subsequent time, or (iii) such sale, assignment, or transfer
is otherwise exempt from registration under the Act.
(c) Following any assignment or other transfer
resulting in the issuance of warrants to purchase Warrant Shares purchasable
hereunder to more than one person or entity, all elections that may be made by
the Holders under such warrants shall be made by written notice of Holders
representing rights to purchase a majority of the Warrant Shares for which such
warrants are then exercisable.
4. The Company shall at all times reserve and keep
available out of its authorized and unissued Common Stock, solely for the
purpose of providing for the exercise of the rights to purchase all Warrant
Shares granted pursuant to this Warrant, such number of shares of Common Stock
as shall, from time to time, be sufficient therefor. The Company
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<PAGE> 4
covenants that all shares of Common Stock issuable upon exercise of this
Warrant, upon receipt by the Company of the full Exercise Price therefor, shall
be validly issued, fully paid, nonassessable, and free of preemptive rights.
5. (a) In case the Company shall at any time after
the date this Warrant is first issued (i) declare a dividend on the outstanding
Common Stock of the Company payable in shares of its Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then, in each case, the Exercise Price,
and the number of Warrant Shares issuable upon exercise of this Warrant, in
effect at the time of the record date for such dividend or of the effective
date of such subdivision, or combination, shall be proportionately adjusted so
that the Holder after such time shall be entitled to receive the aggregate
number and kind of shares for such consideration which, if such Warrant had
been exercised immediately prior to such time at the then-current exercise
price, it would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, or combination. Such adjustment shall be
made successively whenever any event listed above shall occur.
(b) In case the Company shall issue or fix a
record date for the issuance to all holders of Common Stock of rights, options,
or warrants to subscribe for or purchase Common Stock (or securities
convertible into or exchangeable for Common Stock) at a price per share (or
having a conversion or exchange price per share, if a security convertible into
or exchangeable for Common Stock) less than the Current Market Price (as
thereinafter defined) per share of Common Stock on such record date, then, in
each case, the Exercise Price shall be adjusted by multiplying the Exercise
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding on
such record date plus the number of shares of Common Stock which the aggregate
offering price of the total number of shares of Common Stock so to be offered
(or the aggregate initial conversion or exchange price of the convertible or
exchangeable securities so to be offered) would purchase at such Current Market
Price and the denominator of which shall be the number of shares of Common
Stock outstanding on such record date plus the number of additional shares of
Common Stock to be offered for subscription or purchase (or into which the
convertible or exchangeable securities so to be offered are initially
convertible or exchangeable); provided, however, that no such adjustment shall
be made which results in an increase in the Exercise Price. Such adjustment
shall become effective at the close of business on such record date; provided,
however, that, to the extent the shares of Common Stock (or securities
convertible into or exchangeable for shares of Common Stock) are not delivered,
the Exercise Price shall be readjusted after the expiration of such rights,
options, or warrants (but only with respect to Warrants exercised after such
expiration), to the Exercise Price which would then be in effect had the
adjustments made upon the issuance of such rights, options, or warrants been
made upon the basis of delivery of only the number of shares of Common Stock
(or securities convertible into or exchangeable for shares of Common Stock)
actually issued. In case any subscription price may be paid in consideration
part or all of which shall be in a form other than cash, the value of such
consideration shall be as determined in good faith by the board of directors of
the Company, whose determination shall be conclusive absent manifest error.
Shares of Common Stock owned by or held for the account of the Company or any
4
<PAGE> 5
majority-owned subsidiary shall not be deemed outstanding for the purpose of
any such computation.
(c) In case the Company shall distribute to all
holders of Common Stock (including any such distribution made to the
stockholders of the Company in connection with a consolidation or merger in
which the Company is the continuing corporation) evidences of its indebtedness,
cash (other than any cash dividend which, together with any cash dividends paid
within the 12 months prior to the record date for such distribution, does not
exceed 5% of the Current Market Price at the record date for such distribution)
or assets (other than distributions and dividends payable in shares of Common
Stock), or rights, options, or warrants to subscribe for or purchase Common
Stock, or securities convertible into or changeable for shares of Common Stock
(excluding those with respect to the issuance of which an adjustment of the
Exercise Price is provided pursuant to Section 5(b) hereof), then, in each
case, the Exercise Price shall be adjusted by multiplying the Exercise Price in
effect immediately prior to the record date for the determination of
stockholders entitled to receive such distribution by a fraction, the numerator
of which shall be the Current Market Price per share of Common Stock on such
record date, less the fair market value (as determined in good faith by the
board of directors of the Company, whose determination shall be conclusive
absent manifest error) of the portion of the evidences of indebtedness or
assets so to be distributed, or of such rights, options, or warrants or
convertible or exchangeable securities, or the amount of such cash, applicable
to one share, and the denominator of which shall be such Current Market Price
per share of Common Stock. Such adjustment shall become effective at the close
of business on such record date.
(d) In case the Company shall issue shares of
Common Stock or rights, options, or warrants to subscribe for or purchase
Common Stock, or securities convertible into or exchangeable for Common Stock
(excluding shares, rights, options, warrants, or convertible or exchangeable
securities issued or issuable (i) in any of the transactions with respect to
which an adjustment of the Exercise Price is provided pursuant to Sections
5(a), 5(b), or 5(c) above, (ii) upon any issuance of securities pursuant to
this offering of Warrants and Notes or the exercise of securities so issued,
(iii) upon exercise of this Warrant or any other outstanding warrants issued by
the Company, (iv) upon any adjustment of the number of shares of Common Stock
issuable upon exercise of the Warrants pursuant to the Preamble hereof, or (v)
upon issuance or exercise of stock options granted to the directors or
employees of the Company pursuant to the Company's 1994 Stock Option Plan or
1996 Stock Incentive Plan) at a price per share (determined, in the case of
such rights, options, warrants, or convertible or exchangeable securities, by
dividing (x) the total amount received or receivable by the Company in
consideration of the sale and issuance of such rights, options, warrants, or
convertible or exchangeable securities, plus the minimum aggregate
consideration payable to the Company upon exercise, conversion, or exchange
thereof, by (y) the maximum number of shares covered by such rights, options,
warrants, or convertible or exchangeable securities) lower than the Current
Market Price per share of Common Stock, in effect immediately prior to such
issuance, then the Exercise Price shall be reduced on the date of such issuance
to a price (calculated to the nearest cent) determined by multiplying the
Exercise Price in effect
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<PAGE> 6
immediately prior to such issuance by a fraction, (1) the numerator of which
shall be an amount equal to the sum of (A) the number of shares of Common Stock
outstanding immediately prior to such issuance plus (B) the quotient obtained
by dividing the consideration received by the Company upon such issuance by
such Current Market Price, and (2) the denominator of which shall be the total
number of shares of Common Stock outstanding immediately after such issuance;
provided, however, that no such adjustment shall be made which results in an
increase in the Exercise Price. For the purposes of such adjustments, the
maximum number of shares which the holders of any such rights, options,
warrants, or convertible or exchangeable securities shall be entitled to
initially subscribe for or purchase or convert or exchange such securities into
shall be deemed to be issued and outstanding as of the date of such issuance,
and the consideration received by the Company therefor shall be deemed to be
the consideration received by the Company for such rights, options, warrants,
or convertible or exchangeable securities, plus the minimum aggregate
consideration or premiums stated in such rights, options, warrants, or
convertible or exchangeable securities to be paid for the shares covered
thereby. No further adjustment of the Exercise Price shall be made as a result
of the actual issuance of shares of Common Stock on exercise of such rights,
options, or warrants or on conversion or exchange of such convertible or
exchangeable securities. On the expiration or the termination of such rights,
options, or warrants, or the termination of such right to convert or exchange,
the Exercise Price shall be readjusted (but only with respect to this Warrant
if exercised after such expiration or termination) to such Exercise Price as
would have obtained had the adjustments made upon the issuance of such rights,
options, warrants, or convertible or exchangeable securities been made upon the
basis of the delivery of only the number of shares of Common Stock actually
delivered upon the exercise of such rights, options, or warrants or upon the
conversion or exchange of any such securities; and on any change of the number
of shares of Common Stock deliverable upon the exercise of any such rights,
options, or warrants or conversion or exchange of such convertible or
exchangeable securities or any change in the consideration to be received by
the Company upon such exercise, conversion, or exchange, including, without
limitation, a change resulting from the antidilution provisions thereof. In
case the Company shall issue shares of Common Stock or any such rights,
options, warrants, or convertible or exchangeable securities for a
consideration consisting, in whole or in part, of property other than cash or
its equivalent, then the "price per share" and the "consideration received by
the Company" for purposes of the first sentence of this Section 5(d) shall be
as determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error. Shares of Common
Stock owned by or held for the account of the Company or any majority-owned
subsidiary shall not be deemed outstanding for the purpose of any such
computation.
(e) For the purpose of any computation under this
Section 5, the "Current Market Price" per share of Common Stock on any date
shall be deemed to be the average of the daily closing prices for the 30
consecutive trading days immediately preceding the date in question. The
closing price for each day shall be the last reported closing sales price or
the last reported closing bid price, as the case may be, on the principal
national securities exchange (including, for purposes hereof, the Nasdaq
National Market) on which the Common Stock is listed or admitted to trading or,
if the Common Stock is not listed or admitted to trading on any national
securities exchange, the highest reported bid price for the Common
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<PAGE> 7
Stock as furnished by the National Association of Securities Dealers, Inc.
through Nasdaq or a similar organization if Nasdaq is no longer reporting such
information. If on any such date the Common Stock is not listed or admitted to
trading on any national securities exchange and is not quoted by Nasdaq or any
similar organization, the fair value of a share of Common Stock on such date,
as determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error, shall be used.
(f) No adjustment in the Exercise Price shall be
required if such adjustment is less than $.05; provided, however, that any
adjustments which by reason of this Section 5 are not required to be made shall
be carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 5 shall be made to the nearest cent or to the
nearest one-thousandth of a share, as the case may be.
(g) In any case in which this Section 5 shall
require that an adjustment in the Exercise Price be made effective as of a
record date for a specified event, the Company may elect to defer, until the
occurrence of such event, issuing to the Holder, if the Holder exercised this
Warrant after such record date, the shares of Common Stock, if any, issuable
upon such exercise over and above the shares of Common Stock, if any, issuable
upon such exercise on the basis of the Exercise Price in effect prior to such
adjustment; provided, however, that the Company shall deliver to the Holder a
due bill or other appropriate instrument evidencing the Holder's right to
receive such additional shares upon the occurrence of the event requiring such
adjustment.
(h) Upon each adjustment of the Exercise Price as
a result of the calculations made in Sections 5(b), 5(c), or 5(d) hereof, this
Warrant shall thereafter evidence the right to purchase, at the adjusted
Exercise Price, that number of shares (calculated to the nearest thousandth)
obtained by dividing (A) the product obtained by multiplying the number of
shares purchasable upon exercise of this Warrant prior to adjustment of the
number of shares by the Exercise Price in effect prior to adjustment of the
Exercise Price by (B) the Exercise Price in effect after such adjustment of the
Exercise Price.
(i) Whenever there shall be an adjustment as
provided in this Section, the Company shall within three (3) trading days of
the occurrence of such adjustment cause written notice thereof to be sent by
certified mail, postage prepaid, to the Holder, at its address as it shall
appear in the Warrant Register, which notice shall be accompanied by a schedule
setting forth a detailed calculation of such adjustment (the "Schedule of
Computations"). If so requested by the Holder, the Company shall provide to
such Holder within ten (10) days of its request therefor a certificate of
concurrence to the Schedule of Computations by the independent certified public
accountants of the Company.
(j) The Company shall not be required to issue
fractions of shares of Common Stock or other capital stock of the Company upon
the exercise of this Warrant. If any fraction of a share would be issuable on
the exercise of this Warrant (or specified portions thereof), the Company shall
purchase such fraction for an amount in cash equal to the same
7
<PAGE> 8
fraction of the Current Market Price of such share of Common Stock on the date
of exercise of this Warrant.
6. (a) In case of any consolidation with or merger
of the Company with or into another corporation (other than a merger or
consolidation in which the Company is the surviving or continuing corporation),
or in case of any sale, lease, or conveyance to another corporation of the
property and assets of any nature of the Company as an entirety or
substantially as an entirety, such successor, leasing, or purchasing
corporation, as the case may be, shall (i) execute with the Holder an agreement
providing that the Holder shall have the right thereafter to receive upon
exercise of this Warrant solely the kind and amount of shares of stock and
other securities, property, cash, or any combination thereof receivable upon
such consolidation, merger, sale, lease, or conveyance by a holder of the
number of shares of Common Stock for which this Warrant might have been
exercised immediately prior to such consolidation, merger, sale, lease, or
conveyance, and (ii) make effective provision in its certificate of
incorporation or otherwise, if necessary, to effect such agreement. Such
agreement shall provide for adjustments which shall be as nearly equivalent as
practicable to the adjustments in Section 5.
(b) In case of any reclassification or change of
the shares of Common Stock issuable upon exercise of this Warrant (other than a
change in par value or from no par value to a specified par value, or as a
result of a subdivision or combination, but including any change in the shares
into two or more classes or series of shares), or in case of any consolidation
or merger of another corporation into the Company in which the Company is the
continuing corporation and in which there is a reclassification or change
(including a change to the right to receive cash or other property) of the
shares of Common Stock (other than a change in par value, or from no par value
to a specified par value, or as a result of a subdivision or combination, but
including any change in the shares into two or more classes or series of
shares), the Holder shall have the right thereafter to receive upon exercise of
this Warrant solely the kind and amount of shares of stock and other
securities, property, cash, or any combination thereof receivable upon such
reclassification, change, consolidation, or merger by a holder of the number of
shares of Common Stock for which this Warrant might have been exercised
immediately prior to such reclassification, change, consolidation, or merger.
Thereafter, appropriate provision shall be made for adjustments which shall be
as nearly equivalent as practicable to the adjustments in Section 5.
(c) The above provisions of this Section 6 shall
similarly apply to successive reclassifications and changes of shares of Common
Stock and to successive consolidations, mergers, sales, leases, or conveyances.
7. In case at any time the Company shall propose to:
(a) pay any dividend or make any distribution on
shares of Common Stock in shares of Common Stock or make any other distribution
(other than regularly scheduled cash dividends which are not in a greater
amount per share than the most recent such cash dividend) to all holders of
Common Stock; or
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<PAGE> 9
(b) issue any rights, warrants, or other
securities to all holders of Common Stock entitling them to purchase any
additional shares of Common Stock or any other rights, warrants, or other
securities; or
(c) effect any reclassification or change of
outstanding shares of Common Stock, or any consolidation, merger, sale, lease,
or conveyance of property, described in Section 6 hereof; or
(d) effect any liquidation, dissolution, or
winding-up of the Company; or
(e) take any other action which would cause an
adjustment to the Exercise Price;
then, and in any one or more of such cases, the Company shall give written
notice thereof, by certified mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Warrant Register, mailed at least 15
days prior to (i) the date as of which the holders of record of shares of
Common Stock to be entitled to receive any such dividend, distribution, rights,
warrants, or other securities are to be determined, (ii) the date on which any
such reclassification, change of outstanding shares of Common Stock,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up is expected to become effective, and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange their shares for securities or other property, if any,
deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up, or (iii) the date of such other action which would
require an adjustment to the Exercise Price; provided, however, notwithstanding
the foregoing, the Company shall not provide the Holder with any information
required by this Section 7 if, in the reasonable opinion of the Company, such
information would constitute material non-public information.
8. The issuance of any shares or other securities upon
the exercise of this Warrant, and the delivery of certificates or other
instruments representing such shares or other securities, shall be made without
charge to the Holder for any tax or other charge in respect of such issuance.
The Company shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of any
certificate in a name other than that of the Holder and the Company shall not
be required to issue or deliver any such certificate unless and until the
person or persons requesting the issue thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
9. The Warrant Shares issued upon exercise of this
Warrant shall be subject to a stop transfer order and the certificate or
certificates evidencing such Warrant Shares shall bear the following legend:
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<PAGE> 10
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS
AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT
WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE
HOLDER OF SUCH SECURITIES, WHICH OPINION IS REASONABLY SATISFACTORY TO THE
COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR
TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS."
The Company covenants that it will use its best efforts to cause the Company's
transfer agent to deliver certificates representing shares issued in connection
with a transfer of the Warrant Shares as promptly as practicable but in no
event later than three (3) business days after delivery by the Holder of all
required documentation in respect of such transfer. The Company covenants that
it will use its best efforts to cause the Company's transfer agent to deliver
unlegended certificates representing the Warrant Shares, if any, delivered in
connection with a transfer of such Warrant Shares as promptly as practicable
but in no event later than three (3) business days after delivery by the Holder
of all required documentation in respect of such transfer, including a
representation by the Holder to the Company and/or the transfer agent that such
shares are being delivered in connection with a sale pursuant to an effective
resale registration statement.
10. Upon receipt of evidence satisfactory to the Company
of the loss, theft, destruction, or mutilation of this Warrant (and upon
surrender of any Warrant if mutilated), including an affidavit of the Holder
that this Warrant has been lost, stolen, destroyed or mutilated, together with
an indemnity against any claim that may be made against the Company on account
of such lost, stolen, destroyed or mutilated Warrant, and upon reimbursement of
the Company's reasonable incidental expenses, the Company shall execute and
deliver to the Holder a new Warrant of like date, tenor, and denomination.
11. The Holder of this Warrant shall not have solely on
account of such status, any rights of a stockholder of the Company, either at
law or in equity, or to any notice of meetings of stockholders or of any other
proceedings of the Company, except as provided in this Warrant.
12. This Warrant shall be construed in accordance with
the laws of the State of Delaware applicable to contracts made and performed
within such State, without regard to principles governing conflicts of law.
13. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested, or by Federal Express, Express Mail
or similar overnight delivery or courier service or delivered
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<PAGE> 11
(in person or by telecopy, telex or similar telecommunications equipment)
against receipt to the party to whom it is to be given, (i) if to the Company,
at its address at Objective Communications, Inc., 50 International Drive,
Portsmouth, New Hampshire 03801, Attention: President and Chief Executive
Officer, with a copy to: Shaw Pittman Potts & Trowbridge, 1501 Farm Credit
Drive, McLean, Virginia 22102, Attention: Ellen Grady, (ii) if to the Holder,
at its address set forth on the first page hereof, or (iii) in either case, to
such other address as the party shall have furnished in writing in accordance
with the provisions of this Section 13. Notice to the estate of any party
shall be sufficient if addressed to the party as provided in this Section 13.
Any notice or other communication given by certified mail shall be deemed given
at the time of certification thereof, except for a notice changing a party's
address which shall be deemed given at the time of receipt thereof. Any notice
given by other means permitted by this Section 13 shall be deemed given at the
time of receipt thereof.
14. No course of dealing and no delay or omission on the
part of the Holder in exercising any right or remedy shall operate as a waiver
thereof or otherwise prejudice the Holder's rights, powers or remedies. No
right, power or remedy conferred by this Warrant upon the Holder shall be
exclusive of any other right, power or remedy referred to herein or now or
hereafter available at law, in equity, by statute or otherwise, and all such
remedies may be exercised singly or concurrently.
15. This Warrant may be amended only by a written
instrument executed by the Company and the Holder hereof. Any amendment shall
be endorsed upon this Warrant, and all future Holders shall be bound thereby.
Dated:
-------------
OBJECTIVE COMMUNICATIONS, INC.
-----------------------------
Name:
Title:
[Seal]
- -------------------------------------
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<PAGE> 12
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Warrant.)
FOR VALUE RECEIVED, _____________________ hereby sells,
assigns, and transfers unto _________________ a Warrant to purchase __________
shares of Common Stock, $.01 par value per share, of Objective Communications,
Inc. (the "Company"), together with all right, title, and interest therein, and
does hereby irrevocably constitute and appoint ___________________ attorney to
transfer such Warrant on the books of the Company, with full power of
substitution.
Dated:
-----------------
Name of Holder: --------------------
----------------------------
Signature
----------------------------
Print Name
----------------------------
Title (if entity)
----------------------------
Signature Guarantee
NOTICE
The signature on the foregoing Assignment must correspond to
the name as written upon the face of this Warrant in every particular, without
alteration or enlargement or any change whatsoever.
12
<PAGE> 13
To: Objective Communications, Inc.
50 International Drive
Portsmouth, New Hampshire 03801
ELECTION TO EXERCISE
The undersigned hereby exercises its rights to purchase
_______ Warrant Shares covered by the within Warrant, and tenders payment
herewith in the aggregate amount of $________, including (i) $_______ by
certified or bank cashier's check, (ii) $_________ by deemed prepayment of
Notes held by _________, and/or (iii) cancellation of Warrants to purchase ___
Warrant Shares based upon a Maximum Number (as therein defined) of ______, in
accordance with the terms thereof, and requests that certificates for such
securities be issued in the name of, and delivered to:
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- -----------------------------------------------------------------
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant and the remaining portion of the within Warrant
be not cancelled in payment of the Exercise Price, that a new Warrant for the
balance of the Warrant Shares covered by the within Warrant be registered in
the name of, and delivered to, the undersigned at the address stated below.
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- -----------------------------------------------------------------
(Print Name, Address and Social Security
or Tax Identification Number)
13
<PAGE> 14
Name of Holder:
--------------------------
Dated:
----------------- -----------------------------------
Signature
-----------------------------------
Print Name
-----------------------------------
Title (if entity)
Address:
------------------------------------------------------------------------
-----------------------------------
Signature Guarantee
14
<PAGE> 1
EXHIBIT 4.6
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT ("Registration Rights
Agreement") entered into as of July 8, 1998, by and between the purchasers set
forth on the signature pages hereof (each a "Purchaser," and collectively, the
"Purchasers") and Objective Communications, Inc., a Delaware corporation, with
offices at 50 International Drive, Portsmouth, New Hampshire 03801 (the
"Company").
W I T N E S S E T H:
WHEREAS, pursuant to Subscription Agreements, dated as of July
1, 1998 and as of the date hereof (the "Agreement"), by and between the Company
and the Purchasers, the Company has agreed to sell, and the Purchasers have
agreed to purchase $3,125,000 aggregate principal amount of 5% Convertible
Debentures due 2003 of the Company (the "Debentures") for a purchase price of
$10,000 per Debenture and with such other rights as are set forth in the form
of debenture (the "Form of Debenture");
WHEREAS, the Debentures are convertible into shares of the
Company's common stock, par value $.01 per share (the "Underlying Debenture
Shares"); and
WHEREAS, pursuant to the terms of, and in partial
consideration for, the Purchasers' purchase of the Debentures, the Company has
agreed to provide the Purchasers with certain registration rights with respect
to Underlying Debenture Shares and any shares of the Company's common stock
underlying warrants (the "Warrants") issuable to the Purchasers upon redemption
by the Company of the Debentures as described in the Form of Debenture (such
shares are referred to as the "Underlying Warrant Shares," and, together with
the "Underlying Debenture Shares," the "Shares") as set forth in this
Registration Rights Agreement;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in the
Agreement and this Registration Rights Agreement, the Company and the
Purchasers agree as follows:
1. Certain Definitions. As used in this Registration
Rights Agreement, the following terms shall have the following respective
meanings, and terms not otherwise defined herein shall have their respective
meanings as assigned to them in the Agreement:
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
"Holder" shall include the applicable Purchaser and any
transferee of the Debentures, Shares or Registrable Securities which have not
been sold to the public, to whom the registration rights conferred by this
Registration Rights Agreement have been transferred in compliance with Section
12 of this Registration Rights Agreement.
<PAGE> 2
"Person" means and includes an individual, a partnership, a
joint venture, a corporation, a company, a trust, an unincorporated
organization and a government or any department or agency thereof.
"Prospectus" means the prospectus relating to the Underlying
Debenture Shares issuable upon conversion of the Debentures or the Underlying
Warrant Shares issuable upon exercise of the Warrants, as applicable, as filed
with the Commission pursuant to Rule 424(b) under the Securities Act or, if no
such filing is required, the form of final prospectus relating to the
Underlying Debenture Shares or the Underlying Warrant Shares included in the
Registration Statement, as the case may be, at the time the Registration
Statement is declared effective by the Commission, in either case, including
all material, if any, incorporated by reference therein.
The terms "register," "registered" and "registration" shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the effectiveness of
such registration statement.
"Registration Expenses" shall mean all expenses to be incurred
by the Company in connection with Purchasers' exercise of their registration
rights under this Registration Rights Agreement, including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, and the accounting fees
and expenses (excluding the compensation of regular employees of the Company,
which shall be paid in any event by the Company), excluding any brokerage,
sales or underwriting commission or compensation associated with the offer and
sale of the Registrable Securities which shall be paid by the Purchasers. With
respect to the "due diligence" examination of the Company, the Registration
Expenses shall include only fees and disbursements for one (1) designated
counsel for all the Holders of Debentures.
"Registration Statement" shall have the meaning set forth in
Section 2(a) herein.
"Registrable Securities" shall mean any Shares or other
securities issued or issuable to the Purchasers or any Holder upon the
conversion of any Debentures, or any Shares or other securities issued or
issuable to the Purchasers or any Holder upon the exercise of the Warrants.
"Regulation D" shall mean Regulation D as promulgated pursuant
to the Securities Act, and as it may be subsequently amended.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Selling Expenses" shall mean all brokerage fees, underwriting
discounts and selling commissions applicable to the offer and sale of
Registrable Securities and all fees and disbursements of counsel for Holders.
2. Registration Requirements. The Company shall use its
diligent best efforts to effect the registration of the Registrable Securities
contemplated by the Agreement (including,
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<PAGE> 3
without limitation, the execution of an undertaking to file post-effective
amendments, appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations issued
under the Securities Act) as would permit or facilitate the sale or
distribution of all the Registrable Securities in the manner (including manner
of sale) and in all states reasonably requested by the Holders under a
broad-based plan of distribution reasonably acceptable to the Holders. Such
best efforts by the Company shall include, without limitation, the following:
(a) The Company shall, as soon as practicable
after the date hereof but in no event later than 60 days after the
date hereof, file (i) a registration statement with the Commission
pursuant to Rule 415 under the Securities Act on Form S-3 under the
Securities Act (or in the event that the Company is ineligible to use
such form, such other form as the Company is eligible to use under the
Securities Act) covering the Registrable Securities so requested to be
registered (the "Registration Statement"); (ii) such blue sky filings
as shall have been requested by the Holders; and (iii) any required
filings with the National Association of Securities Dealers, Inc., the
Nasdaq National Market, or such other exchange or market on which the
Shares are traded. Thereafter, the Company shall use its best efforts
to have such Registration Statement and other filings declared
effective as promptly as practicable.
(b) If after 120 days from the date hereof, the
Registration Statement has not been declared effective by the
Commission, the Holders shall have, in addition to, and without
limiting, any other rights they may have at law, in equity or under
the Debentures, the Agreement or this Registration Rights Agreement
(including the right to specific performance), the right to receive,
as liquidated damages, an amount equal to 2% of the Stated Value (as
defined in the Debenture), in cash, for each 30-day period after such
120-day period that such Registration Statement is not effective
(which payment shall be pro rated for any period of less than 30
days). In addition to the foregoing, if after 180 days from the date
hereof, the Registration Statement has not been declared effective by
the Commission, then upon demand of any Holder, the Company shall
redeem all or any specified portion of the Debentures held by such
Holder at a redemption price equal to 130% of the sum of (x) the
principal amount thereof, plus (y) accrued but unpaid interest
thereon, if any, together with all other payments due under this
Section 2(b) and under the Debentures and the Agreement.
(c) If the Holders intend to distribute the
Registrable Securities covered by the Registration Statement by means
of an underwriting, the Holders shall so advise the Company. The
Holders will have the right to select the investment bankers for such
underwriting subject to such investment bankers being reasonably
satisfactory to the Company.
(d) The Company shall enter into such customary
agreements (including a customary underwriting agreement with the
underwriter or underwriters, if any) and take all such other
reasonable actions in connection therewith in order to
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<PAGE> 4
expedite or facilitate the disposition of such Registrable Securities.
If the Registrable Securities are being offered and sold in an
underwritten offering, the Company shall:
(i) make such representations and
warranties to the Holders and the underwriter or underwriters, if any,
in form, substance and scope as are customarily made by issuers to
underwriters in secondary underwritten offerings;
(ii) cause to be delivered to the sellers
of Registrable Securities and the underwriter or underwriters, if any,
opinions of counsel to the Company, dated the date of delivery of any
Registrable Securities sold pursuant to the Registration Statement
(which opinions (in form, scope and substance), shall be reasonably
satisfactory to the managing underwriter or underwriters, if any)
addressed to the Holders and each underwriter, if any, covering the
matters customarily covered in opinions requested in secondary
underwritten offerings and, in the case of an underwritten offering,
such other matters as may be reasonably requested by the Holders;
(iii) cause to be delivered, immediately
prior to the effectiveness of the Registration Statement (and, in the
case of an underwritten offering, at the time of delivery of any
Registrable Securities sold pursuant thereto), a "comfort" letter from
the Company's independent certified public accountants addressed to
the Holders and each underwriter, if any, stating that such
accountants are independent public accountants within the meaning of
the Securities Act and the applicable published rules and regulations
thereunder, and otherwise in customary form and covering such
financial and accounting matters as are customarily covered by letters
of the independent certified public accountants delivered in
connection with secondary underwritten public offerings;
(iv) if an underwriting agreement is
entered into, the same shall set forth in full the indemnification and
contribution provisions and procedures of Sections 6 and 7 with
respect to all parties to be indemnified pursuant to such sections;
and
(v) the Company shall deliver such
documents and certificates as may be reasonably requested by
the Holders of the Registrable Securities being sold or the managing
underwriter or underwriters, if any, to evidence compliance with
clause (i) above and with any customary conditions contained in the
underwriting agreement, if any, or other agreement entered into by the
Company; the foregoing in this Section 2(d) shall be done at each
closing under such underwriting or similar agreement or as and to the
extent required thereunder; provided, however, the foregoing in
Section 2(d) shall be required on only one (1) occasion.
(e) The Company shall make available for
inspection by a representative or representatives of the Holders, any
underwriter participating in any disposition pursuant to a
Registration Statement, and any attorney or accountant retained by
such Holders or underwriter, all financial and other records customary
for such purposes, pertinent corporate documents and properties of the
Company, and cause the
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<PAGE> 5
Company's officers, directors and employees to supply all information
reasonably requested by any such representative, underwriter, attorney
or accountant in connection with such Registration Statement. The
Holders will agree to keep all non-public information supplied to it
confidential until such information is included in the Registration
Statement filed with the Commission.
3. Expenses of Registration. All Registration Expenses
incurred in connection with any registration, qualification or compliance with
registration pursuant to this Registration Rights Agreement shall be borne by
the Company, and all Selling Expenses shall be borne by the Holders.
4. Registration on Form S-3. The Company shall use its
best efforts to qualify for registration on Form S-3 or any comparable or
successor form or forms, or in the event that the Company is ineligible to use
such form, such form as the Company is eligible to use under the Securities
Act.
5. Registration Procedures. In the case of each
registration effected by the Company pursuant to this Registration Rights
Agreement, the Company will keep the Holders advised in writing as to the
initiation of each registration and as to the completion thereof. At its
expense, the Company will use its best efforts to:
(a) Keep such registration effective for the
period ending at the earlier of the following: (i) thirty-six (36)
months after the later date of the date hereof or the date on which
the Warrants are issued by the Company, or (ii) the time the Holders
have completed their distribution of the Shares.
(b) Furnish such number of prospectuses, and
amendments and supplements thereto, and other documents incident
thereto as any Holder from time to time may reasonably request.
(c) Prepare and file with the Commission such
amendments and post-effective amendments to the Registration Statement
as may be necessary to keep such Registration Statement effective for
the applicable period; cause the related Prospectus to be supplemented
by any required Prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 under the Securities Act; and comply with
the provisions of the Securities Act applicable to it with respect to
the disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the intended
methods of disposition by the sellers thereof set forth in such
Registration Statement or supplement to such Prospectus.
(d) Notify each Holder of Registrable Securities
included in the Registration Statement, counsel for the Holders and
the managing underwriters, if any, promptly, and (if requested by any
such Person) confirm such notice (a "Notice") in writing, (1) when a
Prospectus or any Prospectus supplement or post-effective amendment
has been filed, and, with respect to a Registration Statement or any
post-effective amendment, when the same has become effective, (2) of
the issuance by
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<PAGE> 6
the Commission of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that
purposes, (3) if at any time the representations and warranties of the
Company contained in agreements contemplated by Section 2(d) cease to
be true and correct, (4) of the receipt by the Company of any
notification with respect to the suspension of the qualification of
any of the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose, (5) of
the happening of any event as a result of which the Prospectus
included in the Registration Statement (as then in effect) contains
any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements
therein (in the case of the Prospectus or any preliminary Prospectus,
in light of the circumstances under which they were made) not
misleading and (6) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be
appropriate or that there exist circumstances not yet disclosed to the
public which make further sales under such Registration Statement
inadvisable pending such disclosure and post-effective amendment.
(e) Upon the occurrence of any event contemplated
by Section 5(d)(2) through (6) and immediately upon the expiration of
any Blocking Period (as defined in Section 5A), prepare, if the
occurrence of such event or period requires such preparation, a
supplement or post-effective amendment to the Registration Statement
or related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities being sold
thereunder, such Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading.
(f) Make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of the
Registration Statement, or the lifting of any suspension of the
qualification of any of the Registrable Securities for sale in any
jurisdiction, at the earliest possible moment.
(g) Ensure that all Registrable Securities
subject to the Registration Statement shall at all times be registered
or qualified for offer and sale under the securities or blue sky laws
of such jurisdictions as any Holder or underwriter reasonably requests
in writing; use its best efforts to keep each such registration or
qualification effective, including through new filings or amendments
or renewals, during the period such Registration Statement is required
to be kept effective and do any and all other acts or things necessary
or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by the applicable Registration
Statement; provided, however, that the Company will not be required to
qualify to do business or take any action that would subject it to
taxation or general service of process in any jurisdiction where it is
not then so qualified or subject.
(h) Use its best efforts to cause the Registrable
Securities covered by the Registration Statement to be registered with
or approved by the National Association
-6-
<PAGE> 7
of Securities Dealers, Inc. as may be necessary to enable the seller
or sellers thereof or the underwriter or underwriters, if any, to
consummate the disposition of such Registrable Securities in
accordance with the chosen method or methods of distribution.
(i) Cause all Registrable Securities included in
such Registration Statement to be listed, by the date of first sale of
Registrable Securities pursuant to such Registration Statement, on the
principal securities exchange or automated interdealer system on which
the same type of securities of the Company are then listed or traded.
5A. Suspensions of Effectiveness. The Company may
suspend dispositions under the Registration Statement and notify the Holders
that they may not sell the Registrable Securities pursuant to any Registration
Statement or Prospectus (a "Blocking Notice") if the Company's board of
directors determines in its reasonable good faith judgment that the Company's
obligation to ensure that such Registration Statement and Prospectus are
current and complete would require the Company to take actions that might
reasonably be expected to have a materially adverse detrimental effect on the
Company and its stockholders; provided that the Company shall diligently and
expeditiously take all actions it reasonably determines to be necessary or
advisable to cause such Prospectus to be current and complete and to remove
such suspension pursuant to a Blocking Notice or the Notice described below or
as a result of the circumstances described in Section 5(d)(2) through (6)
within sixty (60) days. Each Holder agrees by acquisition of the Registrable
Securities that, upon receipt of a Blocking Notice or "Notice" from the Company
of the existence of any fact of the kind described in the following sentence,
such Holder shall not dispose of, sell or offer for sale the Registrable
Securities pursuant to the Registration Statement until such Holder receives
(i) copies of the supplemented or amended Prospectus, or until counsel for the
Company shall have determined that such disclosure is not required due to
subsequent events, (ii) notice in writing (the "Advice") from the Company that
the use of the Prospectus may be resumed and (iii) copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus.
Pursuant to the immediately preceding sentence, the Company may provide such
Notice to such Holder upon the determination by the Company of the existence of
any fact or the happening or any event that makes any statement of a material
fact made in the Registration Statement, the Prospectus, any amendment or
supplement thereto, or any document incorporated by reference therein untrue in
any material respect, or that requires the making of any additions to or
changes in the Registration Statement or the Prospectus, in order to make the
statements therein not misleading in any material respect. If so directed by
the Company in connection with any such notice, each Holder will 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 that was current immediately prior to the time of receipt of such
notice. In the event the Company shall give any such Blocking Notice or
Notice, the time regarding the effectiveness of such Registration Statement set
forth in Section 5(a) and the Maturity Date of the Debentures (as defined
therein) and the expiration date of the Warrants shall be extended by one and
one-half (1-1/2) times the number of days during the period from and including
the date of the giving of such Blocking Notice or Notice to and including the
date when the Holders shall have received the copies of the supplemented or
amended Prospectus, the Advice and any additional or supplemental filings that
are incorporated by reference in the Prospectus. Delivery of a Blocking
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<PAGE> 8
Notice or Notice and the related suspension of any Registration Statement shall
not constitute a default under this Registration Rights Agreement and shall not
create any obligation to pay liquidated damages under Section 2 hereof.
However, if the Holder's ability to sell under the Registration Statement is
suspended for more than the sixty (60) day period described above (whether or
not consecutive) during any twelve (12) month period (an "Excess Blocking
Period"), then during the period of such suspension, the Company will pay each
Holder 2.0% per month on the outstanding principal amount of the Debentures
following the beginning of an Excess Blocking Period until the Excess Blocking
Period terminates. In addition, if the Excess Blocking Period continues for
more than an aggregate of 180 days in any 360-day period, then at Holder's
option, the Company shall redeem Holder's Debentures at a redemption price
equal to 130% of the sum of (x) the principal amount thereof plus (y) accrued
and unpaid interest thereon to the date of redemption, together with all
payments due under this Section and the Agreement.
6. Indemnification.
(a) Company Indemnity. The Company will indemnify each
Holder, each of its officers, directors and partners, and each person
controlling such Holder within the meaning of Section 15 of the Securities Act
and the rules and regulations thereunder with respect to which registration,
qualification or compliance has been effected pursuant to this Registration
Rights Agreement, and each underwriter, if any, and each person who controls,
within the meaning of Section 15 of the Securities Act and the rules and
regulations thereunder, any underwriter, against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, 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 the Securities Act or any state securities law or in either
case, any rule or regulation thereunder 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 Holder, each
of its officers, directors and partners, and each person controlling such
Holder, each such underwriter and each person who controls any such
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating and defending any such claim, loss, damage,
liability or action, provided that the Company will not be liable in any such
case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission (or alleged
untrue statement or omission) that is made in reliance upon and in conformity
with written information furnished to the Company by such Holder or the
underwriter for use therein. The indemnity agreement contained in this Section
6(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Company (which consent will not be unreasonably withheld).
(b) Holder Indemnity. Each Holder will, if Registrable
Securities held by it are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify the
Company, each of its directors, officers, partners, and each underwriter,
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<PAGE> 9
if any, of the Company's securities covered by such a registration statement,
each person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act and the rules and regulations thereunder, each
other Holder (if any), and each of their officers, directors and partners, and
each person controlling such other Holder within the meaning of Section 15 of
the Securities Act and the rules and regulations thereunder against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering
circular 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
statement therein not misleading, and will reimburse the Company and such other
Holders and their directors, officers and partners, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating and defending any such claim, loss, damage, liability or
action, 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, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Company by such Holder for use therein; provided that no Holder shall be
liable under this indemnity for an amount in excess of the net proceeds
received by such Holder from the sale of the Registrable Securities pursuant to
such registration statement. The indemnity agreement contained in this Section
6(b) shall not apply to amounts paid in settlement of any such claims, losses,
damages or liabilities if such settlement is effected without the consent of
such Holder (which consent shall not be unreasonably withheld).
(c) Procedure. Each party entitled to indemnification
under this Article (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, and shall permit the Indemnifying Party to assume the defense of
any such claim in any litigation resulting therefrom; provided that counsel for
the Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not be unreasonably withheld), and the Indemnified Party
may participate in such defense at the Indemnified 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
Section 6 except to the extent that the Indemnifying Party is materially and
adversely affected by such failure to provide notice. The Indemnifying Party
shall not, in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys (in addition to any local counsel) at any time for such Indemnified
Party; provided, however, that if separate firm(s) of attorneys are required
due to a conflict of interest, then the Indemnifying Party shall be liable for
the reasonable fees and expenses of each such separate firm. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation. Each Indemnified Party
shall furnish such information regarding itself or the claim in question as an
Indemnifying Party may
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<PAGE> 10
reasonably request in writing and as shall be reasonably required in connection
with the defense of such claim and litigation resulting therefrom.
7. Contribution. (a) If the indemnification provided
for in Section 6 herein is unavailable to the Indemnified Parties in respect of
any losses, claims, damages or liabilities referred to herein (other than by
reason of the exceptions provided therein), then each such Indemnifying Party,
in lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such losses, claims,
damages or liabilities (i) as between the Company on the one hand and the
Holder or underwriters, as the case may be, on the other, in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Holder or underwriters, as the case may be, on the other from
the offering of the Registrable Securities, or if such allocation is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only such relative benefits but also the relative fault of the Company on
the one hand and of the Holder or underwriters, as the case may be, on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations and (ii) as between the Company on the one hand and the Holder
on the other, in such proportion as is appropriate to reflect the relative
fault of the Company and of the Holder in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations.
(b) The relative benefits received by the Company on the
one hand and the Holders or the underwriters, as the case may be, on the other
shall be deemed to be in the same proportion as the proceeds from the offering
(net of underwriting discounts and commissions but before deducting expenses)
received by the Company from the initial sale of the Registrable Securities by
the Company to the Holders pursuant to this Registration Rights Agreement bear
to the net proceeds received by the Holders from the sale of Registrable
Securities pursuant to the Registration Statement or the total underwriting
discounts and commissions received by the underwriters as set forth in the
table on the cover page of the Prospectus, as the case may be. The relative
fault of the Company on the one hand and of the Holders or underwriters, as the
case may be, on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company, by the Holders or by the underwriters.
(c) In no event shall the obligation of any Indemnifying
Party to contribute under this Section 7 exceed the amount that such
Indemnifying Party would have been obligated to pay by way of indemnification
if the indemnification provided for under clauses (a) or (b) of Section 6
hereof had been available under the circumstances.
(d) The Company and the Holders agree that it would not
be just and equitable if contribution pursuant to this Section 7 were
determined by pro rated allocation (even if the Holders or the underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take account the equitable considerations referred to
in the immediately preceding paragraphs. The amount paid or payable by an
Indemnified Party as a result of the losses, claims, damages and liabilities
referred to in the immediately preceding
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<PAGE> 11
paragraphs shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, no Holder or underwriter
shall be required to contribute any amount in excess of the amount by which (i)
in the case of such Holder, the total price at which the shares of Common Stock
offered by such Holder and distributed to the public, or offered to the public,
exceed the amount paid by such Holder for the underlying Debentures converted
into such shares of Common Stock, (ii) in the case of an underwriter, the total
price at which the Registrable Securities purchased by it and distributed to
the public were offered to the public exceeds, in any such case, the amount of
any damages that the Holders or underwriter have otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
8. Changes in Common Stock. If, and as often as, there
is any change in the Common Stock by way of a stock split, stock dividend,
combination or reclassification, or through a merger, consolidation,
reorganization or recapitalization, or by any other means, appropriate
adjustment shall be made in the provisions hereof so that the rights and
privileges granted hereby shall continue with respect to the Common Stock as so
changed.
9. Rule 144 Reporting. With a view to making available
the benefits of certain rules and regulations of the Commission which may at
any time permit the sale of the Shares to the public without registration, at
all times after 90 days after any registration statement covering a public
offering of securities of the Company under the Securities Act shall have
become effective, the Company agrees to:
(a) make and keep public information available,
as those terms are understood and defined in Rule 144 under the
Securities Act;
(b) use its best efforts to file with the
Commission in a timely manner all reports and other documents required
of the Company under the Securities Act and the Exchange Act; and
(c) furnish to each Holder forthwith upon request
a written statement by the Company as to its compliance with the
reporting requirements of such Rule 144 and of the Securities Act and
the Exchange Act, a copy of the most recent annual or quarterly report
of the Company, and such other reports and documents so filed by the
Company as such holder may reasonably request in availing itself of
any rule or regulation of the Commission allowing such Holder to sell
any Shares without registration.
10. Rule 416. The Company and the Purchasers each
acknowledge that an indeterminate number of Registrable Securities shall be
registered pursuant to Rule 416 under the Securities Act so as to include in
such Registration Statement any and all Registrable Securities which may become
issuable (i) to prevent dilution resulting from stock splits, stock dividends
or similar transactions and (ii) if permitted by law, by reason of reductions
in the Conversion Price
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<PAGE> 12
(as defined in the Debenture) of the Debentures in accordance with the terms of
thereof, including, without limitation, the terms which case the Floating
Conversion Price (as defined in the Debenture) to decrease as the price of the
Common Stock decreases (collectively, the "Rule 416 Securities"). In this
regard, the Company agrees to use all reasonable efforts to ensure that the
maximum number of Registrable Securities which may be registered pursuant to
Rule 416 under the Securities Act are covered by the Registration Statement
and, absent guidance from the Commission or other definitive authority to the
contrary, the Company shall use all reasonable efforts to affirmatively support
and not to take any position adverse to the position that the Registration
Statement filed hereunder covers all of the Rule 416 Securities.
11. Survival. The indemnity and contribution agreements
contained in Sections 6 and 7 and the representations and warranties of the
Company referred to in Section 2(d)(i) shall remain operative and in full force
and effect regardless of (a) any termination of this Registration Rights
Agreement or any underwriting agreement, (b) any investigation made by or on
behalf of any Indemnified Party or by or on behalf of the Company and (c) the
consummation of the sale or successive resales of the Registrable Securities.
12. Information by Holder. Each Holder shall promptly
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any
registration, qualification or compliance referred to in this Registration
Rights Agreement; provided, however, each Holder shall be given at least ten
(10) days to respond to such request. All information provided to the Company
by such Holder shall be accurate and complete in all material respects and such
Holder shall promptly notify the Company if any such information becomes
incorrect or incomplete. If such Holder does not timely provide such
information as is determined by the Company to be required by the Securities
Act to be included in the Registration Statement and is requested, the Company
may exclude the Registrable Securities of such Holder from the Registration
Statement without breach of this Registration Rights Agreement and such Holder
shall not be entitled to the liquidated damages contemplated by Section 2(b) to
the extent that such delay in the Registration Statement becoming effective is
caused by such failure to timely provide information unless such Holder shall
be able to demonstrate to the Company's satisfaction that such failure to
timely provide did not proportionately contribute to the event giving rise to
the damages obligation; provided, however, at least one (1) day's prior written
notice of the Company's intention to exclude the Registrable Securities of such
Holder from the Registration Statement shall be given to each Holder.
13. Transfer or Assignment of Registration Rights. The
rights granted to the Purchasers by the Company under this Registration Rights
Agreement to cause the Company to register Registrable Securities, may be
transferred or assigned to a transferee or assignee together with any transfer
or assignment of the Registrable Securities, provided that the Company is given
written notice by any applicable Holder at the time of or within twenty (20)
days after said transfer or assignment, stating the name and address of said
transferee or assignee and identifying the securities with respect to which
such registration rights are being transferred or assigned, and
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<PAGE> 13
provided further that the transferee or assignee of such rights agrees in
writing to be bound by this Registration Rights Agreement.
14. Representations and Warranties of the Company. The
Company represents and warrants that there are no agreements, understandings or
commitments, oral or written, between the Company and the holders of its
securities pursuant to which such holders have a right to require the Company
to register or qualify any of its securities under the Securities Act or any
applicable state securities laws, except for the rights granted to the holders
of warrants to purchase an aggregate of 341,707 shares of Common Stock issued
by the Company in private placements in 1995 and 1996 and the rights granted to
Steven A. Rogers to register 946,582 shares of Common Stock.
15. Miscellaneous.
(a) Entire Agreement. This Registration Rights Agreement,
the Agreement and the Debentures contain the entire understanding and agreement
of the parties, and may not be modified or terminated except by a written
agreement signed by the parties.
(b) Notices. Any notice, demand or request required or
permitted to be given by either the Company or the Purchaser pursuant to the
terms of this Registration Rights Agreement shall be in writing and shall be
deemed given when delivered personally, by overnight courier service or by
facsimile, with a hard copy to follow by overnight or two day courier,
addressed to the other party at the address of the party set forth at the end
of this Registration Rights Agreement or such other address as a party may
request by notifying the other in writing. Copies of all notices (a) to the
Purchaser shall be sent to the address set forth on the signature pages hereof,
(b) to a Holder other than Purchaser, shall be sent to the address thereof
furnished by like notice to the Company, and (c) to the Company shall be sent
to Robert H. Emery, Vice President, Finance and Administration, 50
International Drive, Portsmouth, New Hampshire 03801, Telecopy: (603)
334-2212, with a copy to Ellen Canan Grady, Shaw Pittman Potts & Trowbridge,
1501 Farm Credit Drive, McLean, Virginia 22102, Telecopy: (703) 821-2397, or
to such other corporate officer as it may hereafter designate.
(c) Gender of Terms. All terms used herein shall be
deemed to include the feminine and the neuter, and the singular and the plural,
as the context requires.
(d) GOVERNING LAW; CONSENT OF JURISDICTION. THIS
REGISTRATION RIGHTS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW OR CHOICE OF LAW EXCEPT FOR MATTERS ARISING UNDER THE
SECURITIES ACT OR THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, WHICH
MATTERS SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH SUCH LAWS.
(e) Severability. Notwithstanding any provision of this
Registration Rights Agreement, neither the Company nor any other party hereto
shall be required to take any action which would be in violation of any
applicable Federal or state securities law. The invalidity or unenforceability
of any provision of this Registration Rights Agreement in any jurisdiction
shall not affect the validity, legality or enforceability of any other
provision of this Registration Rights
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<PAGE> 14
Agreement in such jurisdiction or the validity, legality or enforceability of
this Registration Rights Agreement, including any such provision, in any other
jurisdiction, it being intended that all rights and obligations of the parties
hereunder shall be enforceable to the fullest extent permitted by law.
(f) Further Assurances. Each of the parties hereto shall
execute such documents and other papers and perform such further acts as may be
reasonably required or desirable to carry out the provisions of this
Registration Rights Agreement and the transactions contemplated hereby.
(g) No Inconsistent Agreements. The Company will not
hereafter enter into any agreement which is inconsistent with the rights
granted to the Holders in this Registration Rights Agreement.
(h) Titles. The titles used in this Registration Rights
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Registration Rights Agreement.
(i) Counterparts. This Registration Rights Agreement may
be executed in any number of counterparts, each of which shall be enforceable
against the parties actually executing such counterparts and all of which
together constitute one instrument.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this
Registration Rights Agreement to be duly executed as of the date first above
written.
OBJECTIVE COMMUNICATIONS, INC.
By:
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<PAGE> 1
EXHIBIT 99.1
NEWS RELEASE
FOR IMMEDIATE RELEASE
Contact: Robert H. Emery, Vice President, Finance and Administration
(703) 227-3061
Contact: Vincent Daniels/John Nesbit, Lippert/Heilshorn & Associates,Inc.
(212) 838-3777
OBJECTIVE COMMUNICATIONS ANNOUNCES PRELIMINARY SECOND
QUARTER RESULTS; FINANCING ARRANGEMENT
Portsmouth, New Hampshire, July 1, 1998-Objective Communications, Inc. (Nasdaq
National Market: OCOM) announced today that, based on preliminary financial
results, the Company does not expect to recognize any revenues in the second
quarter of 1998, because of delays in product functionality. Objective
Communications has developed and is marketing the VidPhone system, a video
conferencing system that offers video conferencing, video broadcast, and video
retrieval to desktop computers and boardroom video conference room systems using
the telephone wiring. The Company announced that, late in the second quarter, it
experienced delays in completing product development; certain key product
functions are taking longer to complete than originally forecast by the Company.
In particular, development of two key functions required for wide area
connectivity are taking longer than originally anticipated to achieve full
functionality. Based on the current status of product development, the Company
estimates that a fully integrated VidPhone system with wide-area networking
which the Company believes will meet customer expectations will be ready for
shipment in the third quarter of 1998. Steven Rogers, Chief Executive Officer
and President, stated that "the VidPhone system is the first video PBX designed
from the ground-up and is a complex technical product. While the Company is
disappointed about the delays in product development, the Company is confident
that there are no unresolvable technical issues."
Objective Communications' Board of Directors also announced that the Company has
taken steps designed to significantly cut expenditures and permit the Company to
achieve long-term performance objectives. The strategy implemented by the Board
of Directors includes a significant reduction in the number of Company
employees. Effective today, the Company will reduce total employees to an
estimated 88 full-time employees, from an estimated 130. The Company also
announced implementation of significant cash-management practices throughout the
Company in an effort to reduce corporate expenses.
The Board of Directors also announced that, as the Company focuses on bringing a
fully functional VidPhone system to market, Steven A. Rogers, the founder and
technical visionary of the Company and currently its President and Chief
Executive Officer, will move to assume responsibilities of Chief Technology
Officer and Vice President of
<PAGE> 2
Engineering. The Board is in final negotiations with an interim Chief Executive
Officer candidate to assume responsibility for general corporate oversight and
expects to announce new management early next week. The Company also will begin
a search for a new full-time Chief Executive Officer and is considering
appropriate other changes in the senior management of the Company to execute
more effectively and offer a fully functional, competitive product by the end of
the third quarter of 1998. Cliff Kendall, Chairman of the Board of Directors,
stated that "the Board is carefully monitoring the status of the Company's
product development efforts and will continue to monitor progress closely over
the next ninety days. The Board of Directors will not hesitate to make
additional changes, if necessary, to dramatically improve corporate
performance."
The Company also announced today that it has signed an agreement with a number
of institutional investors to purchase $2.5 million 5% Convertible Debentures
due 2003. The Company has the right to repay the debentures within 90 days. In
connection with the financing, Cliff Kendall, Chairman of the Board of Directors
stated that "Directors and management have confidence in the current prospects
of the business and a number of current directors and executive officers have
committed to lend the Company an additional $500,000." The Company currently
expects to fund the financing transactions next week.
In addition, the Company will seek additional long-term financing or a strategic
investment to provide additional cash for continued operations. The Company has
had some preliminary discussions with potential sources of such financings, and
although it does not currently have any commitments to provide the necessary
financing, the Company believes that it will be successful in its financing
efforts.
Objective Communications developed the patented VidPhone system that supports
high quality cost-effective video broadcast, retrieval and conferencing to
desktops and conference rooms, over the same wire used by existing telephone
systems. The Company is marketing and selling the VidPhone system through
channel partners, which include telephone companies, PBX manufacturers,
networking integrators and other value added resellers. The Company's common
stock is listed on the Nasdaq National Market under the symbol OCOM.
Except for the historical information herein, the matters discussed in this news
release include forward-looking statements that may involve a number of risks
and uncertainties. Actual results and future events may vary significantly based
on a number of factors, including, but not limited to, risks in product and
technology development, market acceptance of new products and continuing product
demand, the impact of competitive products and pricing, changing economic
conditions and other risk factors detailed in the Company's most recent
quarterly report and other filings with the Securities and Exchange Commission.
<PAGE> 1
EXHIBIT 99.2
[OBJECTIVE COMMUNICATIONS LOGO]
NEWS RELEASE
FOR RELEASE: IMMEDIATE
PRESS CONTACT: GAIL SMART, OBJECTIVE COMMUNICATIONS - (603) 334-6791
INVESTOR CONTACT: VINCENT DANIELS, LIPPERT HEILSHORN IR - (212) 838-3777
OBJECTIVE COMMUNICATIONS, INC.
ANNOUNCES ACTING PRESIDENT AND CEO
INDUSTRY VETERAN BRINGS MARKET DEVELOPMENT, CORPORATE TURNAROUND,
VIDEO PRODUCT EXPERTISE
PORTSMOUTH, NH - JULY 6, 1998 -- Objective Communications, Inc. (NASDAQ
NM: OCOM) today announced the appointment of James F. Bunker as acting
president and chief executive officer. Bunker, an experienced industry
executive who has driven successful corporate turnarounds at several technology
companies including General Instrument and M/A-COM, officially assumes the
position today.
Objective, a pioneer in the emerging video communications market, develops
and markets the VidPhone System(R), which delivers three key services --
multipoint videoconferencing, access and retrieval of stored video and video
distribution -- to desktops and conference rooms via the same twisted pair
telephone wiring already installed in businesses and organizations.
With more than three decades of experience as a high-technology senior
executive, Bunker brings considerable expertise in market development,
strategic planning and business management. As a Division General Manager and
corporate marketing executive at M/A-COM, Bunker built the Company's
VideoCipher Division into the satellite and cable television industry
standard. Bunker subsequently sold the unit to General Instrument in 1986.
Five years later, he was recruited by General Instrument to run the Division as
president and general manager. In that capacity, Bunker managed an impressive
turnaround, taking the Division to revenues of $300 million with extremely high
profit margins.
<PAGE> 2
OBJECTIVE ANNOUNCES ACTING CEO/PAGE TWO
"Jim is an experienced, hands-on manager who knows how to drive
emerging businesses," said Objective's Chairman of the Board Cliff Kendall.
"He will help Objective deliver products to the market on time consistently.
Moreover, his track record in the technology industry is outstanding,
demonstrating proven market development and video product delivery -- expertise
that will be critical to the Company moving forward," said Kendall.
Kendall said that Bunker, a turnaround expert, will lead the Company
through a critical transition period that is expected to take 6-12 months.
Prior to joining Objective, Bunker ran a management consulting firm
which provided counsel to both emerging technology companies and businesses in
transition. In this capacity, Bunker counseled several start-up firms,
including Assured Digital, Inc.
Previously, Bunker served as President of General Instrument's
VideoCipher Division from 1991-1994, where supervised the development of a new
digital compression technology, known as DigiCipher for the cable industry and
helped establish the new HDTV standard for the U.S.
Bunker held a variety of senior management positions at M/A-COM, Inc.,
a leading provider of microwave components, satellite and terrestrial
transmission systems. At M/A-COM, Bunker was responsible for several major
acquisitions and divestitures.
"I'm joining Objective at a pivotal time in the industry -- when key
markets are just realizing how high-quality, low-cost real-time video
communications can transform their businesses. Our VidPhone System is the
first to provide multiple application TV-quality video to the desktop over the
existing telephone wiring infrastructure -- with a level of clarity only
surpassed by human contact. The market potential for this approach is enormous
and we have the right product at the right time to tap that potential," said
Bunker.
As CEO, Bunker will oversee timely product delivery and
commercialization as well as improve operational management.
"I'm optimistic about our ability to move the VidPhone System into key
markets that seek an alternative to traditional videoconferencing systems, that
lack quality, cost-effectiveness and ease of use and integration," he said.
<PAGE> 3
OBJECTIVE ANNOUNCES NEW CEO/PAGE THREE
ABOUT OBJECTIVE COMMUNICATIONS, INC.
Objective Communications is the first company to deliver a total,
real-time video communications solution that includes videoconferencing, video
distribution and video on demand all in one integrated system -- the VidPhone
System. Based on the patented VidModem(TM) technology, the VidPhone System uses
standard twisted pair telephone wiring to bring TV-quality video to desktops,
meeting rooms, lobbies, operating rooms -- anywhere there is a phone jack. More
than just a high-quality videoconferencing solution, the VidPhone System
combines live broadcasts, point-to-point and multipoint videoconferencing,
visual collaboration, video on demand, wide area ISDN and ATM connectivity to
provide organizations with a total video communications solution.
Objective's patented technology and unique video networking architecture
represent a dramatic departure from traditional videoconferencing systems.
These systems monopolize corporate networks and incur significant telephone
infrastructure upgrades and line charges -- while delivering mediocre video
quality. These have been major barriers which have hindered the widespread
adoption of video solutions in global markets. The Company's common stock is
listed on the NASDAQ National Market under the symbol "OCOM." Find us on the
World Wide Web at www.objectivecom.com.
VidPhone System is a registered trademark of Objective Communications,
Inc. VidModem is a trademark of Objective Communications, Inc.
###
Except for the historical information herein, the matters discussed in this
news release include forward-looking statements that may involve a number of
risks and uncertainties. Actual results and future events may vary
significantly based on a number of factors, including, but not limited to,
risks in product and technology development, market acceptance of new products
and continuing product demand, the impact of competitive products and pricing,
changing economic conditions and other risk factors detailed in the Company's
most recent quarterly report and other filings with the Securities and Exchange
Commission.
<PAGE> 1
EXHIBIT 99.3
NEWS RELEASE
FOR RELEASE: IMMEDIATE
Investor Contact: John Heilshorn
Lippert Heilshorn
212-838-3777
OBJECTIVE COMMUNICATIONS CLOSES FINANCING
Company Secures $3.125 Million
PORTSMOUTH, NH, July 13, 1998. Objective Communications, Inc. (NASDAQ NM: OCOM)
today announced it has closed on its $3.125 million in financing to support
continued operations. This was completed through an agreement with two
institutional investors, affiliated parties, members of Objective's Board of
Directors as well as the new and existing management of the Company. The
Company has the right to repay substantially all of the debentures within 90
days. Terms of this agreement will be released in a form 8K.
"Participation by directors and management demonstrates the confidence we have
in the prospects of the Company," said Jim Bunker, recently appointed interim
CEO and President. "We are optimistic about the potential of the emerging video
communications market and the role Objective Communications will play in it,"
he said.
Objective, a pioneer in the emerging video communications market, develops and
markets the VidPhone System, which delivers three video services - multipoint
videoconferencing, access and retrieval of stored video and video distribution
- -- to desktops and conference rooms via the same twisted pair telephone wiring
already installed in businesses and organizations.
About Objective Communications, Inc.
Objective Communications is the first company to deliver a total
real-time video communications solution that includes videoconferencing, video
distribution and video on demand all in one integrated system -- the VidPhone
System. Based on the patented VidModem technology, the VidPhone System uses
standard twisted pair telephone wiring to bring TV-quality video to desktops,
meeting rooms, lobbies, operating rooms -- anywhere there is a phone jack. More
than just a high-quality videoconferencing solution, the VidPhone System
combines live broadcasts, point-to-point and multipoint videoconferencing,
visual collaboration, video on demand, wide area ISDN and ATM connectivity to
provide organizations with a total video communications solution.
<PAGE> 2
The Company's stock is listed on the NASDAQ National Market under the
symbol of "OCOM." Find us on the World Wide Web at www.objectivecom.com.
