<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 4, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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OBJECTIVE COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3669 54-1707962
(State or other jurisdiction of (Primary Standard Institutional (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
<TABLE>
<S> <C>
OBJECTIVE COMMUNICATIONS, INC. ROBERT H. EMERY
50 INTERNATIONAL DRIVE 50 INTERNATIONAL DRIVE
PORTSMOUTH, NEW HAMPSHIRE 03801 PORTSMOUTH, NEW HAMPSHIRE 03801
(603) 334-6700 (603) 334-6700
(Address, including zip code, and (Name, address, including zip code,
telephone number, including area code, of and telephone number, including
Registrant's principal executive offices) area code, of agent for service)
</TABLE>
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Copy to:
ELLEN C. GRADY, ESQ.
SHAW PITTMAN POTTS & TROWBRIDGE
1501 FARM CREDIT DRIVE
MCLEAN, VIRGINIA 22102
(703) 790-7946
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
possible after the effective date of this registration statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, other than securities offered only in connection with dividend
or reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, as amended, check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE (1) OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, $.01 par value..... 921,242 shares(2) $3.625 $3,339,502 $9,851.50
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(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) under the Securities Act, based upon the average of the high
and low prices for the Registrant's Common Stock on the Nasdaq National
Market on August 31, 1998.
(2) Represents (i) 746,242 shares of Common Stock issuable upon the conversion
of the $3,125,000 aggregate principal amount of 5% Cumulative Convertible
Debentures due 2003 (the "5% Convertible Debentures"), issued in a private
placement in July 1998 (the "Conversion Shares"), (ii) 125,000 shares and
50,000 shares of Common Stock issuable upon the exercise of warrants that
may be issued by the Registrant on or before October 6, 1998 and on January
5, 1999, upon the optional redemption by the Company of the 5% Convertible
Debentures on such dates. The number of Conversion Shares is currently
indeterminable. However, for purposes of calculating the number of shares of
Common Stock included in this registration statement, the Company calculated
the number of Conversion Shares based on an assumed conversion price of
$4.19, which is the average of the three lowest closing prices of the Common
Stock on the Nasdaq National Market for the twelve trading days preceding
August 31, 1998. The actual number of shares of Common Stock issuable upon
conversion of the 5% Convertible Debentures is not calculable until such
conversion occurs, and could be materially more or less than the number of
shares registered hereunder.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
EXPLANATORY NOTE
This Registration Statement on Form S-3 (Registration No. 333- ) (the
"Registration Statement") of Objective Communications, Inc. (the "Company")
registers 921,242 shares of Common Stock for resale by the holders thereof. Such
shares represent (i) 746,242 shares of Common Stock issuable upon the conversion
of the $3,125,000 aggregate principal amount of 5% Cumulative Convertible
Debentures due 2003 (the "5% Convertible Debentures") issued in a private
placement in July 1998 (the "Conversion Shares"), and (ii) 125,000 shares and
50,000 shares of Common Stock issuable upon the exercise of warrants that may be
issued by the Company on or before October 6, 1998, and on January 5, 1999, upon
the optional redemption by the Company of the 5% Convertible Debentures on such
dates. The number of Conversion Shares is not currently calculable and cannot be
calculated until conversion of the 5% Convertible Debentures, because it is
based on a conversion price that is equal to the lesser of (a) a "Fixed
Conversion Price" of $10.87 per share, or (b) a "Floating Conversion Price"
calculated based on the average of the three lowest closing prices during the
twelve trading days preceding the date of conversion. The number of shares
issuable upon such conversion will vary inversely with the market price of the
Common Stock. However, for purposes of calculating the number of shares of
Common Stock included in this registration statement, the Company calculated the
number of Conversion Shares based on an assumed conversion price of $4.19, which
is the average of the three lowest closing prices of the Common Stock on the
Nasdaq National Market for the twelve trading days preceding August 31, 1998.
The actual number of shares of Common Stock issuable upon conversion of the 5%
Convertible Debentures could be materially more or less than the number of
shares registered hereunder. All of the Conversion Shares will be sold for the
accounts of the selling stockholders and the Company will receive no proceeds
therefrom.
<PAGE> 3
PROSPECTUS
OBJECTIVE COMMUNICATIONS, INC.
921,242 SHARES
COMMON STOCK
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The Prospectus relates to the offering (the "Offering") by certain selling
stockholders identified herein (the "Selling Stockholders") of 921,242 shares
(the "Shares") of Common Stock, par value $.01 per share, of Objective
Communications, Inc. (the "Company"), which may be sold from time to time by the
Selling Stockholders on or after the date of this Prospectus. The 921,242 shares
of Common Stock registered pursuant to the Registration Statement of which this
Prospectus constitutes a part consist of (i) 746,242 shares issuable upon
conversion of the $3,125,000 aggregate principal amount of the Company's
outstanding 5% Cumulative Convertible Debentures due 2003 (the "5% Convertible
Debentures") issued in a private placement in July 1998, and (ii) 125,000 shares
and 50,000 shares of Common Stock (the "Debenture Warrant Shares") issuable upon
the exercise of warrants (the "Debenture Warrants") that may be issued by the
Company on or before October 6, 1998, and on January 5, 1999, upon the optional
redemption by the Company of the 5% Convertible Debentures on such dates. The
number of Conversion Shares offered hereby is an estimate based on an assumed
conversion price of $4.19 per share, which is the average of the three lowest
closing prices of the Common Stock on the Nasdaq National Market for the twelve
trading days preceding August 31, 1998. This number is subject to adjustment and
could be materially more or less than the estimate depending on a variety of
factors, certain of which are outside the control of the Company, including,
without limitation, the future market price of the Common Stock and the decision
of the holders of the 5% Convertible Debentures as to when and in what amounts
to convert their 5% Convertible Debentures. The estimate set forth in this
Prospectus is not intended to constitute a prediction as to future market price
of the Common Stock or when and in what amounts holders of the 5% Convertible
Debentures will elect to convert such debentures. See "Risk Factors -- Effect of
Conversion of the 5% Convertible Debentures" and "Description of Securities --
5% Cumulative Convertible Debentures Due 2003." The actual number of shares of
Common Stock issuable upon conversion of the 5% Convertible Debentures could be
materially more or less than the number of shares registered hereunder.
The Common Stock is traded on the Nasdaq National Market under the symbol
OCOM. On August 31, 1998, the closing price of the Common Stock as reported on
the National Market of the National Association of Securities Dealers Automated
Quotation System ("Nasdaq") was $3.25 per share.
The Company will not receive any proceeds from sales of the Shares. See
"Selling Stockholders."
No underwriting arrangements have been entered into by the Selling
Stockholders. The distribution of the Shares by the Selling Stockholders may be
effected from time to time in transactions on the Nasdaq National Market in
negotiated transactions, through the writing of options on the Shares, or a
combination of such methods of sale, at fixed prices that may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices, or at negotiated prices. The Selling Stockholders may
effect such transactions by the sale of the Shares to or through broker-dealers,
and such broker-dealers may receive compensation in the form of discounts,
concessions or commissions from the Selling Stockholders and/or the purchasers
of the Shares for whom such broker-dealers may act as agent or to whom they may
sell as principal, or both. Usual and customary or specifically negotiated
brokerage fees or commissions may be paid by the Selling Stockholders in
connection with the sales of the Shares.
The Selling Stockholders and intermediaries through whom the Shares are
sold may be deemed "underwriters" within the meaning of the Securities Act, with
respect to the securities offered and any profits realized or commissions
received may be deemed underwriting compensation.
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK AND IMMEDIATE AND SUBSTANTIAL DILUTION AND SHOULD BE CONSIDERED CAREFULLY
AND ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE
"RISK FACTORS" BEGINNING ON PAGE 5 OF THIS PROSPECTUS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is September 4, 1998.
<PAGE> 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company with the
Securities and Exchange Commission (the "Commission") (File No. 000-22235) and
are incorporated herein by reference and made a part hereof:
(1) The Company's Registration Statement on Form 8-A filed with the
Commission on March 13, 1997 registering the Common Stock of the Company
under Section 12(g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act");
(2) The Company's Annual Report on Form 10-KSB for the year ended
December 31, 1997;
(3) The Company's Quarterly Report on Form 10-QSB for the quarter
ended March 31, 1998;
(4) The Company's Current Report on Form 8-K dated April 15, 1998;
(5) The Company's Proxy Statement dated April 23, 1998 for its 1998
Annual Meeting of Stockholders;
(6) The Company's Current Report on Form 8-K dated July 16, 1998;
(7) The Company's Quarterly Report on Form 10-QSB for the quarter
ended June 30, 1998; and
(8) All documents filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the
date of this Prospectus and prior to termination of the Offering of Shares
to which this Prospectus relates.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be supplemented, modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document that also is or is
deemed to be incorporated by reference herein supplements, modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so supplemented, modified or superseded, to constitute
a part of this Prospectus.
This Prospectus incorporates documents by reference which are not included
herein or delivered herewith. Copies of these documents, except for the exhibits
to such documents (unless the exhibits are specifically incorporated by
reference in such documents), are available upon request without charge.
Requests should be directed to Objective Communications, Inc., 50 International
Drive, Portsmouth, New Hampshire 03801, Attention: Secretary, telephone: (603)
334-6700.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements and notes thereto set forth in and
incorporated by reference in this Prospectus. Certain statements contained in
this Prospectus constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. All such forward-looking
statements involve known and unknown risks, uncertainties or other factors which
may cause actual results, performance or achievement of the Company to be
materially different from any future results, performance or achievement
expressed or implied by such forward-looking statements. Factors that might
cause such a difference include the risks identified under "Risk Factors."
THE COMPANY
Objective Communications designs, develops and markets the first high
quality, cost-effective video network system that supports video broadcast,
retrieval of stored video and multi-party conferencing to and from desktop
personal computers and conference rooms over the same wire used by the
telephone. The Company's VidPhone(R) system enables simultaneous transmission of
full-duplex S-VHS quality full-motion video, stereo audio, and high speed data.
The VidPhone(R) system has imperceptible video and audio latency within an
enterprise. Because the VidPhone(R) system uses the same wiring to the desktop
as the telephone and is independent of the Local Area Network ("LAN"), no
additional wiring or LAN management is required. In addition, the VidPhone(R)
system requires minimal processing power. The Company introduced the VidPhone(R)
system in July 1997 and currently has arrangements with 13 resellers to market
and resell the VidPhone(R) system, including Sprint Communications Corporation,
L.P. ("Sprint"), Unisys Corp. ("Unisys") and Bell Atlantic Corp. ("Bell
Atlantic"). To date, the Company has recognized minimal revenues from the sale
of the VidPhone(R) system and its components.
The Company's operations prior to 1998 related primarily to organizational
activities, including research and development, the development of its initial
products, recruiting management and technical personnel, and raising capital.
During 1998, the Company has continued to focus on product development and
enhancing its sales and marketing capabilities, while continuing to recruit
management and technical personnel, particularly to support its sales and
marketing efforts.
The Company is marketing the VidPhone(R) system through telephone product
and service providers that will resell it as an enhancement to existing
telephone systems. These providers offer sales, service and support
organizations, have relationships with virtually every business telephone user
in the world, and enjoy a high level of customer loyalty. These distribution
channels have a mature customer base which is generally receptive to system
upgrades. In July 1998, Sprint renewed for an additional year an agreement
entered into with the Company in July 1997, under which agreement Sprint has
agreed to resell the Company's video network products worldwide. The Company
also has an arrangement with Bell Atlantic under which it will market and resell
the VidPhone(R) system to the U.S. Department of Defense (the "DOD") and related
agencies. Additionally, the Company has a memorandum of understanding with
Unisys, expiring in September 1998, under which Unisys is testing and evaluating
the Company's products for marketing and resale by Unisys internationally. The
Company currently anticipates that Unisys will enter into a reseller agreement
with the Company, but there can be no assurance that an agreement with Unisys
will be reached.
In April 1997, the Company completed its initial public offering of
2,070,000 shares of Common Stock at an initial public offering price of $5.50
per share (the "Initial Offering"). The Company received approximately $9.5
million in net proceeds from the Initial Offering. In November 1997, the Company
completed a follow-on public offering of 1,000,000 shares of Common Stock at a
public offering price of $23.125 per share (the "Follow-On Offering") and
received approximately $21.0 million in net proceeds. In July 1998, the Company
completed a private placement of 5% Convertible Debentures with certain
institutional, affiliated and other investors, from which it received gross
proceeds of approximately $3.125 million. Conversion Shares issuable upon
conversion of the 5% Convertible Debentures and the Debenture Warrant Shares, if
any such shares are issuable, are being offered for resale by the holders
thereof pursuant to this Prospectus and the Registration Statement of which this
Prospectus constitutes a part. In August 1998, the Company completed a private
placement of 209,091 shares of 5% Cumulative Convertible Series B Preferred
Stock, par value $.01
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per share (the "Series B Preferred Stock"), at a price of $5.50 per share, and
warrants to purchase 52,273 shares of Common Stock at an exercise price of $6.00
per share (the "Series B Warrants"). The Company received $1.15 million in gross
proceeds from such offering. See "Description of Securities."
The Company was incorporated in Delaware on October 5, 1993 by Steven A.
Rogers, its founder, Vice President of Engineering and Chief Technology Officer.
The Company's executive offices are located at 50 International Drive,
Portsmouth, New Hampshire, 03801. The Company's telephone number is (603)
334-6700.
RECENT DEVELOPMENTS
To date, the Company has not generated substantial revenues from the sale
of its products and services. The Company did not earn any revenues from the
sale of products or services during 1997, and recognized only $110,505 in
revenues from the sale of products during the first half of 1998. The Company
currently expects that it will recognize operating revenues in the second half
of 1998, but is unable to predict when such revenues will be recognized or the
amount that will be recognized, which will depend on customer acceptance of
products shipped to date and certain other factors, including the timing of
customer payments, which are beyond the control of the Company. In addition, the
Company expects to continue to incur substantial operating expenses in the
future to support its product development efforts, enhance its sales and
marketing capabilities and organization and for other selling, general and
administrative expenses. Through June 30, 1998, the Company had cumulative
losses since inception of approximately $29.1 million. The Company expects to
incur additional operating losses for the foreseeable future, and does not
expect that its products will achieve initial customer acceptance until, at the
earliest, the fourth quarter of 1998. The Company's results of operations may
vary significantly from quarter to quarter during the period of product
introduction and initial sales.
The Company has experienced delays in completing product development. The
Company shipped the first VidPhone(R) systems in the fourth quarter of 1997 and
shipments continued during the first quarter of 1998. However, the products
shipped did not achieve complete customer functionality, and the Company has
continued to work on product functionality and enhancements. During late July
and early August 1998, at the request of the Company, 27 VidPhone(R) systems
were returned to the Company by a reseller for upgrade, and the reseller's order
was cancelled at its request. On August 13, 1998, the Company announced the
introduction of Release 1.4, which added additional features to the VidPhone(R)
system, including ISDN and ATM wide area connectivity. Release 1.4 is being
installed at strategic partner and evaluation customer sites for resale and
internal use. The Company is in the process of upgrading all of the VidPhone(R)
systems manufactured to date and the upgraded switches will be returned to
inventory. The Company will pay the costs of the upgrade.
In July 1998, the Company implemented new cash-management practices in an
effort to reduce corporate expenses. On July 1, 1998, the Company significantly
reduced its personnel to 88 from approximately 130, and closed its Northern
Virginia sales office. To date, the Company has financed operations principally
through public and private sales of debt and equity, including the private
placement in July 1998 of the 5% Convertible Debentures, $625,000 of which was
purchased by certain directors, executive officers and other affiliates of the
Company. The Company believes that its existing resources will be sufficient to
fund operations through October 1998 and is seeking additional sources of debt
or equity financing.
The Company also announced in July 1998 that James F. Bunker has been
elected President and Chief Executive Officer of the Company. Mr. Bunker is an
experienced industry executive who has driven successful corporate turnarounds
at several technology companies including General Instrument and M/A-COM. Mr.
Steven A. Rogers, who is the founder of the Company and its former President and
CEO, was elected as the Company's Chief Technology Officer and Vice President of
Engineering, as the Company continues to focus on product development and
meeting customer expectations regarding functionality.
Objective Communications(R), VidPhone(R) and TeleDraw(R) are registered
trademarks of the Company and ObjectiveView(TM), TeleShare(TM), TeleWord(TM) and
VidModem(TM) are trademarks of the Company. This Prospectus also contains
trademarks and trade names of other companies.
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RISK FACTORS
An investment in the shares of Common Stock offered by this Prospectus
involves a high degree of risk. Prospective purchasers of the Common Stock
offered hereby should carefully review the following risk factors as well as
other information set forth in this Prospectus. The risks described below and
elsewhere in this Prospectus are not intended to be an exhaustive list of the
general or specific risks involved, but merely identify certain risks that are
now foreseen by the Company.
LIMITED OPERATING HISTORY; ABSENCE OF OPERATING REVENUES
The Company was incorporated in October 1993 and has a limited operating
history. The Company's operations prior to 1998 related primarily to
organizational activities, including research and development, the development
of its initial products, recruiting management and technical personnel, and
raising capital. During 1998, the Company has continued to focus on product
development and enhancing its sales and marketing capabilities, while continuing
to recruit management and technical personnel, particularly to support its sales
and marketing efforts. The VidPhone(R) system has been offered for sale to
customers only since July of 1997, and limited deliveries of the VidPhone(R)
system have been made to date. In November 1997, the Company shipped its first
VidPhone(R) system, fulfilling part of an outstanding purchase order from a
reseller, and continued commercial production and installation of the initial
VidPhone(R) systems in the first quarter of 1998. Only two VidPhone(R) systems
have been sold under existing orders to date and the Company has not recognized
any revenues for such orders because payment has not yet been received. The
Company does not currently have any additional orders for the VidPhone(R) system
and cannot predict when and in what quantities such orders, if any, will be
made.
The Company has not generated substantial revenues from the sale of the
VidPhone(R) system or its components. The Company did not earn any revenues from
the sale of products or services during 1997, and recognized only $110,505 in
revenues from the sale of products during the first half of 1998. The Company
currently expects that it will recognize operating revenues in the second half
of 1998, but is unable to predict when such revenues will be recognized or the
amount that will be recognized, which will depend on customer acceptance of
products shipped to date and certain other factors, including the timing of
customer payments, which are beyond the control of the Company. The Company's
business strategy is to sell its products, particularly the VidPhone(R) system,
to resellers and end-users and intends to continue to devote substantially all
of its efforts to product development, production, sales and support of the
VidPhone(R) system. The Company's business and its growth may continue to be
subject to expenses, delays and risks inherent in the establishment of a new
business enterprise, including limited capital, delays in product development,
cost overruns and uncertain market acceptance. There can be no assurance that
the Company will succeed in addressing any or all of these risks and the failure
to do so would have a material adverse effect on the Company's business,
financial condition and operating results.
LACK OF LIQUIDITY; NEED FOR ADDITIONAL FINANCING
The Company anticipates that its existing financial resources will be
sufficient to continue to fund its operating and capital requirements through
October 1998. The Company does not expect to generate substantial cash from
operations during this period. Cash flows from operations are not currently
expected to be substantial until at least the fourth quarter of 1998, and are
not expected to be sufficient to fund the Company's operations until at least
the latter half of 1999. Management anticipates that the Company will continue
to experience negative cash flows from operations for the foreseeable future
until its products achieve commercial acceptance. As reflected in the financial
statements of the Company for the year ended December 31, 1997, and the report
of the Company's independent auditors thereon, the Company has suffered
recurring losses from operations and has a working capital and an accumulated
deficit that raise doubt about its ability to continue as a going concern. As a
result of the Company's recurring losses and current cash position, the Company
is currently pursuing additional sources of debt and equity financing. The
Company has required substantial funding through debt and equity financings
since its inception and, historically, has been successful in obtaining debt and
equity financing from unaffiliated third parties. However, the Company does not
currently have any commitments for debt or equity financing and accordingly,
there can be no assurance
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that it will be successful in its efforts to secure additional financing on
terms acceptable to the Company, or at all.
Changes in the market in which the Company operates, in the Company's
business, or in its business plan could affect the Company's capital
requirements. These changes could create the need to raise additional moneys
earlier than expected in order to fund its operations or expansion, to develop
new or enhanced products or to respond to competitive pressures. The Company's
future capital requirements will depend on many factors, including the cost of
manufacturing and marketing activities, its ability to market its products
successfully, the size of its research and development programs, the length of
time required to collect accounts receivable, and competing technological and
market developments. If the Company were to raise additional funds through the
issuance of equity or convertible debt securities, stockholders could experience
substantial dilution and such securities could have rights, preferences and
privileges senior to those of the holders of the Company's Common Stock. There
can be no assurance that the Company will be able to raise required funds, or
that any such funds will be available on terms favorable to, or acceptable to,
the Company. The lack of availability of adequate funds, or the lack of
availability of funds on terms acceptable to the Company, would have a material
adverse effect on the Company's business, financial condition and operating
results.
LOSSES SINCE INCEPTION; ACCUMULATED DEFICIT; EXPECTATION OF CONTINUING LOSSES
To date, the Company has incurred substantial losses from operations and
had an accumulated deficit of approximately $29.1 million through June 30, 1998.
As a result of recurring losses from operations, negative cash flows from
operations and the accumulated deficit, the report of the Independent
Accountants on the Financial Statements of the Company contains an explanatory
paragraph related to the Company's ability to continue as a going concern. The
Company is currently pursuing additional debt and equity financing alternatives.
The Company has required substantial funding through debt and equity financings
since its inception and, historically, has been successful in obtaining debt and
equity financing from unaffiliated third parties. However, the Company does not
currently have any commitments for debt or equity financing and accordingly,
there can be no assurance that it will be successful in its efforts to secure
additional financing on terms acceptable to the Company, or at all.
The Company expects to continue to incur operating losses until the
Company's products achieve commercial acceptance. Most of the revenues earned by
the Company from its inception through December 31, 1997 were generated by
consulting services provided by the Company, not by its primary business. The
Company has not generated substantial revenues to date from sales of its
products, including the VidPhone(R) system and did not recognize any revenues
during the year ended December 31, 1997. The Company recognized only $110,505 in
revenues from the sale of products during the first half of 1998. The Company's
ability to recognize operating revenues in the future will depend on a number of
factors, including customer acceptance of products shipped and installed to
date, the Company's ability to generate new sales of products and secure
customer acceptance, and the timing of customer payments, certain of which are
beyond the control of the Company.
EFFECT OF CONVERSION OF THE 5% CONVERTIBLE DEBENTURES
Potential Dilution. The exact number of shares of Common Stock issuable
upon conversion of the 5% Convertible Debentures depends on the conversion price
in effect at the time of the conversion. Because the conversion price is equal
to the lesser of (i) a fixed conversion price of $10.87 per share (the "Fixed
Conversion Price"), or (ii) a floating conversion price equal to the average of
the three lowest closing prices of the Common Stock over the twelve trading days
preceding the date of conversion (the "Floating Conversion Price"), the number
of shares issuable upon such conversion will vary inversely with the market
price of the Common Stock. Holders of the Common Stock will be diluted by any
issuances of Common Stock upon conversion of the 5% Convertible Debentures and
may be substantially diluted depending upon the market price of the Common
Stock. See "Description of Securities -- 5% Cumulative Convertible Debentures
due 2003."
$2.5 million aggregate principal amount of 5% Convertible Debentures first
become convertible on October 6, 1998, and the remaining $625,000 aggregate
principal amount of 5% Convertible Debentures first become convertible on
January 5, 1999. Subject to certain conditions, the Company has the right to
redeem
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the 5% Convertible Debentures during the period preceding the first date upon
which such debentures can be converted, at a redemption price equal to 110% of
the face value. If the Company exercises its right to redeem the 5% Convertible
Debentures, then it is obligated to issue to the holders thereof the Debenture
Warrants. As noted above, the exact number of shares of Common Stock issuable
upon conversion of the 5% Convertible Debentures cannot currently be determined
and will vary inversely with the market price of the Common Stock. The extent to
which the current holders of the Common Stock will be diluted by issuances of
Common Stock upon conversion of the 5% Convertible Debentures will depend on a
number of factors, including without limitation the future market price of the
Common Stock and the timing of conversion of the 5% Convertible Debentures. The
potential effects of any such dilution on the existing stockholders of the
Company include the significant diminution of the current stockholders' economic
and voting interests in the Company. In addition, pursuant to the terms of the
Subscription Agreements relating to the 5% Convertible Debentures and depending
upon the conversion price, the Company may be required to register additional
shares of Common Stock to cover conversion of the 5% Convertible Debentures. The
registration and sale of such additional shares of Common Stock of the Company
or the prospect thereof could have a material adverse effect on the market price
of the Common Stock.
Potential Liquidated Damages Claims. Pursuant to the Subscription
Agreements relating to the issuance of the 5% Convertible Debentures and the
Registration Rights Agreements by and between the Company and the holders of the
5% Convertible Debentures, the Company has agreed to use its best efforts to
have the registration statement of which this Prospectus constitutes a part
declared effective by October 6, 1998, or if the registration statement is
subject to review by the Commission, as soon as possible thereafter and in any
event by October 28, 1998. If the registration statement is not declared
effective within such time, then in addition to other rights of the holders, the
Company will be required to make a cash payment to the holders of the 5%
Convertible Debentures equal to 2% of the stated value of the 5% Convertible
Debentures (as defined in the debentures), in cash, for each 30-day period after
such 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 December 27, 1998, the registration statement has not been
declared effective, then upon demand of any holder of the 5% Convertible
Debentures, 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.
The Company cannot predict when the registration statement will be declared
effective by the Commission, which will depend on a number of factors many of
which are beyond the control of the Company. The payment to the holders of the
5% Convertible Debentures of the cash penalty described above, or the obligation
to redeem the 5% Convertible Debentures at 130% of the principal amount thereof,
plus accrued interest, would have a material adverse effect on the Company's
business, financial condition and future prospects.
DEVELOPMENT OF NEW PRODUCTS; INDUSTRY ACCEPTANCE
Because of the technological complexity of its products, the Company may
experience delays from time to time in completing the development of existing
and introducing new or enhanced products. The inability of the Company to
complete product development, respond to changing market conditions,
technological developments, evolving industry standards or changing customer
requirements, or the development of competing technology or products that render
the Company's services less desirable or obsolete would have a material adverse
effect on the Company's business, financial condition and operating results. The
Company has completed initial development and production of the basic
VidPhone(R) system, but continues to develop system enhancements and new product
functions. VidPhone(R) systems also are being used as demonstration units to
support sales and marketing initiatives. However, the VidPhone(R) system is
newly introduced and has not yet achieved customer acceptance. There can be no
assurance that the Company will be successful in achieving customer and
commercial acceptance of the VidPhone(R) system, or that its development
initiatives will be successful. The failure of the Company to achieve success in
such initiatives would have a material adverse effect on the Company's business,
financial condition and operating results. The Company's ability to design,
develop, test, introduce and support new products that meet changing customer
needs and that respond to technological developments and emerging industry
standards is crucial to the Company's success. The Company's products
incorporate certain technical standards, and current and future sales of the
Company's
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products will depend on industry acceptance of such standards. While the Company
has developed the VidPhone(R) system to be compatible with the standards
currently promulgated by leading industry participants and groups, widespread
adoption of a proprietary or closed standard could preclude market acceptance of
the Company's products. There can be no assurance that the Company will be
successful in developing and introducing its proposed products or new products
that meet changing customer needs and in responding to technological changes or
evolving industry standards in a timely manner, or at all. Furthermore, there
can be no assurance that the standards upon which the Company's products are or
will be based will be accepted by the industry or that products or technologies
developed by others will not render the Company's products or services
uncompetitive or obsolete.
RISKS OF DISTRIBUTION; RELIANCE ON THIRD-PARTY RESELLERS
The Company's distribution strategy is to establish relationships with
major resellers of telephony products. Because these distributors generally have
large, captive customer bases, the Company believes that they will be able to
resell VidPhone(R) systems in large volume, without competing with one another.
However, to date the Company has arrangements with only 13 resellers. In July
1997, the Company entered into a one-year agreement with Sprint pursuant to
which Sprint has agreed to use commercially reasonable efforts to resell the
Company's video networking products worldwide. In July 1998, this agreement was
renewed for one year. The Company also has an arrangement with Bell Atlantic
pursuant to which Bell Atlantic will offer the Company's products to customers
under certain telecommunications contracts that Bell Atlantic has with the DOD
and related contracting agencies. Additionally, the Company has a memorandum of
understanding with Unisys, expiring in September 1998, under which Unisys is
testing and evaluating the Company's products for marketing and resale by Unisys
internationally. The Company currently anticipates that Unisys will enter into a
reseller agreement with the Company, but there can be no assurance that an
agreement with Unisys will be reached. The Company has sold only a limited
number of VidPhone(R) system components under such reseller arrangements, and to
date has recognized minimal revenues from such sales. The Company does not
currently have any additional orders for VidPhone(R) systems. The process of
developing and maintaining reseller relationships is complex, and there can be
no assurance that the Company will be able to maintain existing relationships or
establish relationships with other major resellers of telephony products.
Further, there can be no assurance that the resellers of telephony products with
which the Company contracts will be successful in marketing and reselling the
Company's products, maintaining their customer bases, or competing with other
resellers.
A significant portion of the Company's future revenues is expected to be
attributable to sales to third-party resellers, particularly telephone product
and service providers. The Company's future performance will depend to a
significant degree upon the extent to which these resellers incorporate the
Company's products and services as part of their product and service offerings
to end users and succeed in marketing and reselling the Company's products. The
failure of these resellers to succeed in the marketplace, or the failure of the
Company's products to perform favorably in and become an accepted component of
the product and service offerings of resellers, will have a material adverse
effect on the Company's business, financial condition and operating results.
DEPENDENCE ON EMERGING MARKET FOR VIDEO APPLICATIONS TECHNOLOGY
The market for video communications products is at an early stage of
development, is rapidly evolving and is characterized by an increasing number of
market entrants who have introduced or are developing competing products and
services. As is typical for a new and rapidly evolving industry, demand for and
market acceptance of recently introduced products and services are subject to a
high level of uncertainty. While the number of businesses utilizing video
applications has grown, the video applications market has thus far not developed
as rapidly as predicted by some and it is not known whether this market will
continue to develop such that sufficient demand for the Company's products and
services will emerge and become sustainable. The Company expects that
substantially all of its future revenues will be derived from sales of the
VidPhone(R) system and related software sales and customer service to businesses
or government organizations. However, as of December 31, 1997, the Company had
not recognized any revenues from sales of the VidPhone(R) system, and recognized
only $110,505 in operating revenues during the six months ended June 30, 1998.
There can be
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no assurance the Company will be successful in its efforts to market and sell
its products and services. Further, corporations or government agencies that
have already invested substantial resources in video conferencing systems may be
resistant to or slow to adopt a new suite of products. If the market for video
applications fails to develop or develops more slowly than expected, or if the
Company's products, in particular the VidPhone(R) system, do not achieve
acceptance by a significant number of businesses and government organizations,
the Company's business, financial condition and operating results will be
materially and adversely affected.
UNCERTAIN PROTECTION OF INTELLECTUAL PROPERTY
The Company's success will depend, in part, on its ability to protect the
hardware and software products that it develops with patents, licenses and other
intellectual property rights. Toward that end, the Company intends to continue
to seek patents, trademarks and copyrights on certain of its inventions and
proprietary processes. The Company relies in part on trademark, copyright and
trade secret law to protect its intellectual property in the U.S. and abroad.
The degree of protection provided by patents is uncertain and involves complex
legal and factual questions for which important legal principles are largely
unresolved.
Part of the Company's proprietary VidPhone(R) system technology is covered
by a U.S. patent (No. 5,621,455) issued in April 1997, which relates to a method
and apparatus for transmitting video information over telephone wires.
Corresponding foreign patent applications on the VidPhone(R) system technology
are pending in China, Canada, Mexico, Europe, Japan and Taiwan. Additionally,
variations of the basic VidPhone(R) system technology are covered by a U.S.
patent (No. 5,786,844) issued in July 1998. The Company is also currently
prosecuting a patent application covering the VidPhone(R) system's networking
and switching technology. The Company cannot currently predict when it will
receive a dispositive ruling from the U.S. Patent and Trademark Office
concerning this patent application. The Company is in the process of preparing
additional U.S. patent applications directed to various improvements in the
field of video conferencing. The Company expects to file approximately six to
nine new U.S. patent applications in 1998 covering these improvements, but it
does not expect to receive any notice from the U.S. Patent and Trademark Office
for at least one year after filing. The Company also has registered its
trademarks Objective Communications(R), VidPhone(R) and TeleDraw(R) and the
registration for the trademark for VidModem(TM) is pending.
The process of seeking patent and trademark protection can be long and
expensive, and there can be no assurance that patents and trademarks will issue
from currently pending or future applications or that any patents or trademarks
that are issued will be of sufficient scope to provide meaningful protection or
any commercial advantage to the Company. In the future, the Company may receive
communications alleging possible infringement of patents or other intellectual
property rights of others, although it is not presently aware of any basis for
such claims. Litigation, which could result in substantial cost to and diversion
of efforts by the Company, might be necessary to enforce patents or other
intellectual property rights owned by the Company or to determine the scope and
validity of other parties' proprietary rights. The failure to obtain necessary
patents, licenses or other rights or involvement in litigation arising from
infringement claims could have a material adverse effect on the Company.
A number of companies have developed technologies, filed patent
applications or received patents on technologies that may be related to, or
competitive with, the Company's technologies. Many of these entities are larger
and have significantly greater resources than the Company. Given the rapid
development of technology in the telecommunications industry, there also can be
no assurance that the Company's existing or future products do not or will not
infringe upon the existing or future proprietary rights of others. Any such
infringement could have a material adverse effect on the Company's business,
financial condition and operating results.
LIMITED MARKETING EXPERIENCE; NEED TO ESTABLISH PARTNERING RELATIONSHIPS; NEED
FOR ADDITIONAL PERSONNEL
As of August 31, 1998, the Company had only 11 full-time sales and
marketing employees. It will have to further develop its sales and marketing
force to establish distribution channels to resellers, collaborators, licensees
and others. The Company's ability to build its customer base and achieve market
acceptance will depend on its ability to establish an effective internal sales
organization and establish strategic marketing relationships with third-party
distributors. There can be no assurance, however, that the Company will be able
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to create awareness of, and demand for, its products through its marketing
efforts. The failure by the Company to develop its marketing capabilities,
internally or through distributors and resellers, would have a material adverse
effect on the Company's business, financial condition and operating results.
Further, there can be no assurance that the development of such marketing
capabilities will lead to sales of the Company's products and services or
proposed products and services. In the event that the Company is able to enter
into satisfactory distribution arrangements with third parties, it is
anticipated that the Company will be largely dependent upon the third parties'
marketing efforts for the foreseeable future. While the Company believes that
such third-party distribution arrangements will enable it to lower its marketing
costs and expenses, the Company's revenues under such arrangements will be lower
than they would be if the Company directly marketed the VidPhone(R) system.
The success of the Company will depend on its ability to hire, train and
retain additional qualified sales and marketing personnel. The Company will
compete with other companies with greater financial and other resources to
attract such qualified personnel. There can be no assurance that the Company
will be able to hire personnel to support the Company's sales and marketing
efforts.
RISKS ASSOCIATED WITH RAPID GROWTH AND WITH THE COMPANY'S BUSINESS PLAN AND
STRATEGY
Execution of the Company's business plan and strategy could place
significant strain on its limited management, administrative, operational,
financial and other resources. There can be no assurance that the Company will
be able to implement its strategy or manage its operations successfully. The
inability of the Company to manage its growth would have a material adverse
effect on the Company's business, financial condition and operating results.
The Company has formulated its business plan and strategy based upon
certain assumptions of management regarding the size of the video communications
market and the estimated price of and level of acceptance of the Company's
products and services. There can be no assurance that these assumptions will
prove to be correct. Any future success of the Company will depend upon many
factors, including: technological advances and product obsolescence; levels of
competition, including the entry into the market of additional competitors and
increased success by existing competitors; changes in general economic
conditions; increases in operating costs including costs of production,
supplies, personnel or equipment; changes in requirements and regulations
promulgated by the Federal Communications Commission (the "FCC") or other
applicable U.S. federal and state regulatory authorities; and reduced margins
caused by competitive pressures and other factors.
DEPENDENCE ON THIRD PARTIES FOR MANUFACTURING
The Company entered into a manufacturing agreement in February 1998 with
Sanmina Corporation to outsource the manufacture and assembly of components used
in its VidPhone(R) system. Several other manufacturers are producing smaller
sub-assemblies and components for the Company pursuant to arrangements that the
Company enters into on a per-project basis. There can be no assurance that the
Company will be able to continue to negotiate acceptable arrangements with such
manufacturers, or, if negotiated, that such arrangements will be on terms and
conditions favorable to the Company. Any difficulties encountered with
third-party manufacturers could result in product defects, production delays,
cost overruns, or the inability to fulfill orders on a timely basis, which could
have a material adverse effect on the Company's business, financial condition
and operating results.
COMPETITION
The market for the Company's products and services is new, highly
competitive and rapidly evolving. The Company's principal competitors in the
video conferencing market are PictureTel Corporation, VTEL Corp., Intel, and
Polycom. The Company believes that PictureTel currently has the largest market
share in both the group video conferencing and desktop segments of the video
conferencing market. In addition, in the market for desktop video conferencing,
the Company also expects to compete with Multi Media Access Corporation ("MMAC")
and First Virtual, each of which is a relatively new market entrant focusing on
enterprise video networking. The Company also believes that other entrants will
continue to emerge in this market. Competitors in the video broadcast market
include cable television and direct satellite broadcast system
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providers. The Company is not aware of any current significant competitors in
the video retrieval market. The Company competes with each of the companies
listed above and also expects to compete with new market entrants. Most of the
companies with which the Company will compete have longer operating histories,
greater name recognition, larger customer bases and significantly greater
financial, technical and marketing resources than the Company. There can be no
assurance that the Company will have the financial resources, technical
expertise or manufacturing, marketing, distribution and support capabilities to
compete successfully against such competitors.
Furthermore, there can be no assurance that other companies will not
develop technologies such as those offered by the Company, technologies superior
to the Company's or alternative capabilities which meet the same needs of
customers. There can be no assurance that the Company will have the resources
required to respond effectively to market or technological changes. In addition,
there can be no assurance that the effect of competitive pressures will not
change the demand for, or pricing of, the Company's products and services. To
the extent that competitors achieve performance, price or other selling
advantages, the Company's business, financial condition and operating results
would be materially and adversely affected.
DEPENDENCE ON KEY PERSONNEL
The Company's performance is substantially dependent upon the continued
efforts and abilities of its key managerial and technical personnel,
particularly Mr. James F. Bunker, President and Chief Executive Officer, and Mr.
Steven A. Rogers, the Company's founder and Chief Technology Officer. The loss
of the services of Mr. Bunker, Mr. Rogers or any of the Company's other key
management or technical personnel would have a material adverse effect on the
Company. The Company currently has an employment and non-competition agreement
with Mr. Bunker and Mr. Rogers, and has a key person life insurance policy on
Mr. Rogers. However, the Company does not currently have any employment
agreements with, or key person insurance policies on, any of its other executive
officers, key employees or consultants. In order to support its anticipated
growth, the Company will need to recruit, hire, train and retain additional
qualified personnel. The competition for qualified technical and management
personnel is intense and there can be no assurance that the Company will be able
to attract or retain qualified personnel in the future. The Company is dependent
upon its ability to retain and motivate highly qualified personnel, especially
its existing senior management and technical personnel. The inability of the
Company to retain its existing or attract and retain additional personnel could
have a material adverse effect on the Company. The Company completed the
relocation of its headquarters to Portsmouth, New Hampshire, north of Boston,
Massachusetts, in late 1997. Portsmouth, New Hampshire is an area with a high
concentration of technology companies and technology professionals, from which
the Company expects to be able to recruit additional employees. However, there
can be no assurance that the Company will be able to hire or retain qualified
personnel.
FLUCTUATIONS IN OPERATING RESULTS
The Company's operating results may vary significantly from quarter to
quarter or year to year, depending on factors such as the timing of product
development, the timing of increased research and development, the timing of
sales and marketing expenses, the timing and size of orders and the introduction
of new products by the Company. Consequently, revenues or profits may vary
significantly from quarter to quarter or year to year, and revenues or profits
in any period will not necessarily be predictive of results in subsequent
periods. A significant portion of the Company's revenues in any quarter may be
derived from a limited number of large, non-recurring product sales, which may
cause significant variations in quarterly revenues. The Company also believes
that the purchase of its products is relatively discretionary and declines in
general economic conditions could precipitate significant reductions in
corporate spending for information technology, which could result in delays or
cancellations of orders for the Company's products.
GOVERNMENT REGULATION
The VidPhone(R) switch component of the Company's VidPhone(R) system and
the VidModem(TM) are required to comply with certain regulations promulgated by
the FCC under Parts 2, 15 and 68 of the FCC's regulations, which relate to radio
frequency devices and to terminal equipment that is connected to the public
switched telephone network ("PSTN"). Pursuant to Part 15 of the FCC's
regulations, the Company has
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determined that the VidModem(TM) is an unintentional radiator that constitutes a
Class A digital device that may be operated without an individual license. Under
Parts 2 and 15 of the FCC's regulations, the Company will be required to follow
a verification procedure consisting of a self-certification by the Company that
the radio frequency device complies with applicable Part 15 regulations. The
Company has already had the VidModem(TM) formally tested by a qualified,
independent testing facility, and it was found to comply with such regulatory
requirements. Under Part 2 of the FCC's regulations, the Company has the option
of ensuring compliance with the applicable technical specifications at the
location of a business end-user after installation. Pursuant to Part 68 of the
FCC's regulations, the Company will need to obtain equipment registration from
the FCC for certain VidPhone(R) system components that are connected to the
PSTN. The majority of the Company's products will not involve connection to the
PSTN. For those applications requiring connection to the PSTN, the Company will
be required to register the VidPhone(R) switch as terminal equipment under Part
68 of the FCC's regulations. The Company has filed an application under Part 68
and has received the requisite equipment registration. Although the Company has
designed its initial line of products to conform with all applicable guidelines
and regulations, there can be no assurance that the Company's products will
actually meet such requirements, or that the Company will be able to obtain and
maintain in effect all necessary FCC or other governmental approvals required to
permit the Company to market its products. Additionally, there can be no
assurance that future governmental regulations will not adversely affect the
Company's products or technology.
CONTROL BY EXISTING STOCKHOLDERS
Following completion of the Offering, Mr. Steven A. Rogers will
beneficially own, and the directors and executive officers of the Company will
beneficially own in the aggregate, 14.8% and 30.7%, respectively, of the
outstanding shares of Common Stock. As a result of such ownership, Mr. Rogers,
acting individually, and such holders, if they act in concert, will be able to
exert significant influence in the election of the Company's Board of Directors
and the determination of all other matters requiring approval by the
stockholders of the Company.
POTENTIAL INFLUENCE BY CERTAIN STOCKHOLDERS
Pursuant to agreements with the Company or Mr. Steve A. Rogers, three
parties have the right to designate one nominee each for election as a member of
the Board of Directors. To the extent that such contractual rights are
exercised, such stockholders may be able to exercise substantial influence over
decisions of the Company's Board of Directors and the Company's business.
POSSIBILITY OF NASDAQ DELISTING
The Company's Common Stock currently is quoted on the Nasdaq National
Market. The continued quotation of the Company's Common Stock on the Nasdaq
National Market is conditioned upon the Company maintaining certain asset,
capitalization or income tests and stock price tests established by The Nasdaq
Stock Market, Inc. To maintain eligibility for continued quotation on the Nasdaq
National Market, the Company is required to maintain either (i) net tangible
assets in excess of $4.0 million and a bid price of at least $1.00 per share or
(ii) a market capitalization of at least $50.0 million or total assets and total
revenues of $50.0 million each, and a bid price of at least $5.00 per share. The
Company believes that it will continue to meet these tests set forth by Nasdaq.
If the Company fails any of the applicable tests, the Common Stock may be
delisted from quotation on such system. The effects of delisting include the
limited release of the market prices of the Company's securities and limited
news coverage of the Company. Delisting may restrict investors' interest in the
Common Stock and materially and adversely affect the trading market and prices
for the Common Stock and the Company's ability to issue additional securities or
to secure additional financing.
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Future sales of Common Stock following the Offering could adversely affect
the market price of the Common Stock. Currently, the Company has 5,741,035
shares of Common Stock outstanding. Upon the completion of the Offering, and
assuming conversion of the 5% Convertible Debentures and that the Debenture
Warrants are not issued and, thus, no Debenture Warrant Shares are outstanding,
as of the date of this Prospectus the Company would have 6,487,277 shares of
Common Stock outstanding. Of such shares, 5,102,942 shares of Common Stock,
consisting of (i) the 1,130,000 shares sold or saleable pursuant to a
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registration statement on Form S-3 filed by the Company in April 1998 (the
"Bridge Shares") to permit resale by the holders thereof, (ii) the 1,000,000
shares sold in the Follow-On Offering, (iii) the 2,070,000 shares sold in the
Initial Offering, (iv) 156,700 shares previously resold in reliance on Rule 144
("Rule 144") under the Securities Act of 1933, as amended (the "Securities
Act"), (v) the 746,242 Shares registered for offering and resale by the holders
thereof pursuant to this registration statement, will be transferable without
restriction by persons other than "affiliates" of the Company, subject to
certain lock-up arrangements with Barington Capital Group, LP ("Barington"). The
Debenture Warrants have not been issued and will not be issued unless the 5%
Convertible Debentures are redeemed by the Company pursuant to the terms of such
debentures. The remaining 1,384,335 shares of Common Stock are "restricted
securities" under Rule 144 and may not be sold other than in accordance with
Rule 144, or pursuant to an effective registration statement under the
Securities Act or an exemption from such registration requirement. The holders
of 2,312,606 shares of Common Stock (including the 921,242 Shares offered and
sold in this Offering, the 261,364 shares of Common Stock underlying the Series
B Preferred Stock and the Series B Warrants, and the 1,130,000 Bridge Shares)
also have certain registration rights.
Of the shares of Common Stock outstanding upon completion of the Offering,
1,289,744 shares of Common Stock available for sale in the public market are
limited by restrictions under lock-up agreements entered into with Barington in
connection with the Initial Offering. Under these agreements, the holders of
warrants to purchase 175,000 shares of Common Stock have agreed not to sell or
otherwise dispose of any of their shares of Common Stock until April 8, 1999,
without the prior written consent of Barington and NationsBanc Montgomery
Securities, subject to certain limited exceptions. Sales of substantial amounts
of the Common Stock in the public market, whether by purchasers in the Offering
or other stockholders of the Company, or the perception that such sales could
occur, may adversely affect the market price of the Common Stock.
EFFECT OF OPTIONS AND WARRANTS ON STOCK PRICE
The Company has reserved (i) 300,000 shares of Common Stock for issuance to
key employees, officers and consultants upon the exercise of options granted
under the 1994 Stock Option Plan, (ii) 1,447,690 shares of Common Stock for
issuance to directors, executive officers and key employees upon the exercise of
options granted or to be granted under the 1996 Stock Incentive Plan, (iii)
190,000 shares of Common Stock for issuance upon the exercise of options granted
to certain directors of the Company, (iv) 125,000 shares of Common Stock for
issuance upon the exercise of an option granted to Barington in December 1997,
(v) 921,242 shares of Common Stock for issuance upon conversion of the 5%
Convertible Debentures (two times the number of shares of Common Stock issuable
upon conversion of the 5% Convertible Debentures at the time of issuance) and
exercise of the Debenture Warrants, and (vi) 261,364 shares of Common Stock for
issuance upon conversion of the Series B Preferred Stock and exercise of the
Series B Warrants. In addition, the Company also has reserved 912,332 shares of
Common Stock for issuance upon exercise of other outstanding warrants and
options. The registration statement of which this Prospectus constitutes a part,
registers for resale by the Selling Stockholders the 746,242 shares of Common
Stock to be issued by the Company upon conversion of the 5% Convertible
Debentures and the 175,000 shares of Common Stock issuable upon exercise of the
Debenture Warrants. The Debenture Warrants have not been issued and will not be
issued unless the Company redeems the 5% Convertible Debentures pursuant to the
terms of such debentures. Shares of Common Stock issuable upon the exercise of
outstanding warrants, outstanding options, options that may be issued in the
future under the Company's 1996 Stock Incentive Plan, and options granted to
directors could hinder future financings. In addition, certain holders of such
securities have certain registration rights, and the sale of shares of Common
Stock upon exercise of such rights or the availability of such shares for sale
could adversely affect the market price of the Common Stock.
VOLATILITY OF STOCK PRICE
The market price of the shares of the Company's Common Stock has been and
may in the future be highly volatile. Factors such as operating results,
announcements by the Company or its competitors concerning products, patents and
technology, governmental regulatory actions, events affecting technology
companies generally and general market conditions may have a significant impact
on the market price of the
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Common Stock and could cause it to fluctuate substantially. In addition, stock
markets have from time to time experienced significant price and volume
fluctuations that have particularly affected the market prices for the common
stock of technology companies. These broad market fluctuations could adversely
affect the market price of the Common Stock. Further, there will be a relatively
small number of shares of Common Stock trading publicly following the Offering.
Accordingly, stockholders may experience difficulty selling or otherwise
disposing of shares of Common Stock at favorable prices, or at all.
LIMITATION ON UTILIZATION OF INCOME TAX LOSS CARRYFORWARDS
Based on the equity transactions consummated by the Company during 1996 and
early 1997, the Company may have undergone an "ownership change" within the
meaning of Section 382 of the Internal Revenue Code of 1986, as amended (the
"Code"). Under Section 382 of the Code, upon undergoing an ownership change, the
Company's right to use its then existing income tax loss carryforwards as of the
date of the ownership change is limited during each future year to a percentage
of the fair market value of the Company's outstanding capital stock immediately
before the ownership change. The Company expects that its ability to utilize its
net operating loss carryforwards to offset future taxable income will be limited
annually in the future. The Company has a full valuation allowance against its
net deferred tax asset.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION
AND THE DELAWARE GENERAL
CORPORATION LAW
The Company is subject to certain anti-takeover provisions of the General
Corporation Law of the State of Delaware (the "GCL"), which could have the
effect of discouraging, delaying or preventing a change in control of the
Company. In addition, the Company's Second Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation") contains provisions that may
have the effect of discouraging certain transactions involving an actual or
threatened change in control of the Company. Such provisions include a provision
in the Certificate of Incorporation which grants to the Board of Directors the
authority to issue up to 2,500,000 shares of preferred stock in one or more
series and to fix the powers, preferences and rights of each such series without
further stockholder action. The issuance in the future of any such preferred
stock could have the effect of diluting the purchasers of the Common Stock
offered hereby, discouraging unsolicited acquisition proposals or making it more
difficult for a third party to commence such an acquisition.
LIMITATION ON LIABILITY OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation provides for the indemnification
of the Company's directors and officers to the fullest extent permitted under
the GCL. As permitted by the GCL, the Company's Certificate of Incorporation
provides that directors of the Company shall not be personally liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty as
a director, except (i) for any breach of the director's duty of loyalty to the
Company or its stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or violation of law; (iii) for acts or
omissions relating to prohibited dividends or distributions or the purchase or
redemption of stock; or (iv) for any transaction from which the director derives
an improper personal benefit. However, insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers or persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable. The Company also has obtained directors' and
officers' liability insurance with respect to liabilities arising out of certain
matters, including matters arising under the Securities Act.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the 921,242
Shares of Common Stock, which are being offered for sale by the Selling
Stockholders for their own account, except that the Selling Stockholders will be
obligated to pay the Company and the Company will receive the exercise price
upon the exercise of the Debenture Warrants, if any such Debenture Warrants are
issued by the Company. See "Description of Securities -- Debenture Warrants,"
and "Plan of Distribution."
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<PAGE> 17
SELLING STOCKHOLDERS
The following table sets forth certain information provided to the Company
by each Selling Stockholder regarding the beneficial ownership of shares of
Common Stock by each Selling Stockholder as of August 31, 1998. Unless otherwise
noted, each stockholder named has sole voting and investment power with respect
to such shares, subject to community property laws, where applicable.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
PRIOR TO THE BENEFICIAL OWNERSHIP
OFFERING(1)(2) AFTER THE OFFERING(1)
--------------------- NUMBER OF ---------------------
NUMBER SHARES NUMBER
NAME OF SELLING STOCKHOLDER OF SHARES PERCENT BEING SOLD(2) OF SHARES PERCENT
--------------------------- ---------- -------- ------------- ---------- --------
<S> <C> <C> <C> <C> <C>
James F. Bunker(3).......................... 5,970 *% 5,970 -- --%
Eugene R. Cacciamani(4)..................... 34,588 * 2,388 32,200 *
Marc S. Cooper(5)........................... 188,170 2.8 5,970 182,200 2.7
Clifford M. Kendall(6)...................... 88,980 1.4 23,880 65,100 1.0
Richard T. Liebhaber(7)..................... 71,013 1.1 23,880 47,133 *
Roger A. Booker(8).......................... 22,661 * 1,194 21,467 *
Robert H. Emery(9).......................... 56,270 * 5,970 50,300 *
Mary C. Murphy(10).......................... 7,970 * 5,970 2,000 *
AG Super Fund International Partners,
L.P.(11).................................. 17,910 * 17,910 -- --
AGR Halifax Fund, Ltd.(12)(13).............. 298,496 4.6 298,496 -- --
Kenneth Baronoff(14)........................ 2,388 * 2,388 -- --
Concetta Capotorto, custodian for Alexandra
Capotorto, UTMA/NJ(15).................... 5,970 * 5,970 -- --
GAM Arbitrage Investments, Inc.(16)......... 17,910 * 17,910 -- --
Scott Greiper(17)........................... 8,582 * 3,582 5,000 *
John W. Heilshorn(18)....................... 16,940 * 11,940 5,000 *
Carl G. Kleidman(19)........................ 4,388 * 2,388 2,000 *
Leonardo, L.P.(20).......................... 155,218 2.4 155,218 -- --
Kenneth F. Logue(21)........................ 34,773 * 11,940 22,833 *
Allan R. Lyons(22).......................... 35,370 * 5,970 29,400 *
William R. Maines(23)....................... 8,970 * 5,970 3,000 *
James Mitarotonda(24)....................... 5,970 * 5,970 -- --
Jerald S. Politzer(25)...................... 23,470 * 5,970 17,500 *
Ramius Fund, Ltd.(13)(26)................... 71,639 1.1 71,639 -- --
Raphael, L.P.(27)........................... 35,819 * 35,819 -- --
Raymond D. Rice Revocable Trust dated
4/11/96(28)............................... 49,773 * 11,940 37,833 *
</TABLE>
- ---------------
* Less than one percent
(1) Applicable percentage of ownership is based on 6,487,277 shares of Common
Stock outstanding as of August 31, 1998 and assuming completion of the
Offering. The number of shares of Common Stock outstanding as of August 31,
1998 assumes (i) the conversion of the 5% Convertible Debentures and the
issuance of 746,242 shares of Common Stock upon exercise of such debentures
and (ii) that the Debenture Warrants are not issued and, thus, no Debenture
Warrant Shares are outstanding. The Debenture Warrants will not be issued
unless the Company redeems the 5% Convertible Debentures pursuant to the
terms of such debentures. The "Beneficial Ownership After the Offering"
columns in the above table assume that each Selling Stockholder sells all
of his, her or its shares of Common Stock offered hereby in the Offering.
Because each of the Selling Stockholders may sell all, some or none of
their shares, the number and percentage of shares of Common Stock
beneficially owned after the Offering may be more or less than the
information presented in the above table. Beneficial ownership is
determined in accordance with the rules of the Commission. For each
beneficial owner, shares of
15
<PAGE> 18
Common Stock subject to options or conversion rights exercisable within
sixty days of August 31, 1998 are deemed outstanding.
(2) Beneficial ownership for each Selling Stockholder includes the shares of
Common Stock issuable upon conversion of the Company's 5% Convertible
Debentures. The number of shares of Common Stock issuable upon the
conversion of the 5% Convertible Debentures represents an estimate assuming
(i) a conversion price of $4.19, which is the average of the three lowest
trading days preceding August 31, 1998, and (ii) that the Debenture
Warrants are not issued and, thus, no Debenture Warrant Shares are
outstanding. The actual number of shares of Common Stock issued upon
conversion of the 5% Convertible Debentures depends on the conversion
price, which cannot be predicted by the Company at this time. The
conversion rate of the 5% Convertible Debentures is determined by dividing
the principal amount of the 5% Convertible Debentures plus any accrued and
unpaid interest by a conversion price equal to the lesser of (i) the Fixed
Conversion Price of $10.87, or (ii) a Floating Conversion Price equal to
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. In addition,
the 5% Convertible Debentures may not be converted into Common Stock if,
following such conversion the holder thereof, together with affiliates of
such holder, would be the beneficial owner of 4.99% or more of the Common
Stock. See "Description of Securities -- 5% Cumulative Convertible
Debentures due 2003." For purposes of the above table, beneficial ownership
by Selling Stockholders has been calculated without regard to that
restriction.
(3) Consists of 5,970 shares of Common Stock issuable upon conversion of the 5%
Convertible Debentures which are held by Mr. Bunker indirectly through a
limited partnership with respect to which Mr. Bunker exercises voting and
disposition power. Excludes 2,000 shares of Common Stock issuable upon
exercise of Debenture Warrants at an exercise price of $6.00 per share, if
such warrants are issued.
(4) Includes 22,200 shares of Common Stock issuable upon the exercise of
options and 2,388 shares of Common Stock issuable upon conversion of the 5%
Convertible Debentures. Excludes 800 shares of Common Stock issuable upon
exercise of Debenture Warrants at an exercise price of $6.00 per Share, if
such warrants are issued.
(5) Consists of 180,000 shares of Common Stock that may be acquired upon
exercise of the Barington option (the "Barington Option"), 2,200 shares of
Common Stock issuable upon the exercise of other options and 5,970 shares
of Common Stock issuable upon conversion of the 5% Convertible Debentures.
Excludes 2,000 shares of Common Stock issuable upon exercise of Debenture
Warrants at an exercise price of $6.00 per share, if such warrants are
issued. The Barington Option is held by Barington Capital Group, LP and was
granted by the Company in connection with the Initial Offering in April,
1997. Mr. Cooper also is a stockholder in LNA Capital Corp., the corporate
general partner of Barington. Includes options to acquire 27,000 shares of
Common Stock which Cross Connect, L.L.C. has the right to acquire under
certain conditions. Cross Connect, L.L.C. is not affiliated with Barington
or Mr. Cooper and Mr. Cooper disclaims beneficial ownership of the 27,000
shares of Common Stock that may be acquired upon exercise of such options.
(6) Includes 40,100 shares of Common Stock issuable upon the exercise of
options and 23,880 shares of Common Stock issuable upon conversion of the
5% Convertible Debentures. Excludes 8,000 shares of Common Stock issuable
upon exercise of Debenture Warrants at an exercise price of $6.00 per
share, if such warrants are issued.
(7) Includes 19,633 shares of Common Stock issuable upon the exercise of
options, 2,500 shares of Common Stock issuable upon the exercise of
warrants and 23,880 shares of Common Stock issuable upon conversion of the
5% Convertible Debentures. Excludes 8,000 shares of Common Stock issuable
upon exercise of Debenture Warrants at an exercise price of $6.00 per
share, if such warrants are issued.
(8) Consists of 21,467 shares of Common Stock issuable upon the exercise of
options and 1,194 shares of Common Stock issuable upon conversion of the 5%
Convertible Debentures. Excludes 400 shares of Common Stock issuable upon
exercise of Debenture Warrants at an exercise price of $6.00 per share, if
such warrants are issued.
16
<PAGE> 19
(9) Includes 39,467 shares of Common Stock issuable upon the exercise of
options, 5,833 shares of Common Stock issuable upon the exercise of
warrants and 5,970 shares of Common Stock issuable upon conversion of the
5% Convertible Debentures. Excludes 2,000 shares of Common Stock issuable
upon exercise of Debenture Warrants at an exercise price of $6.00 per
share, if such warrants are issued.
(10) Consists of 10,100 shares of Common Stock issuable upon the exercise of
options and 5,970 shares of Common Stock issuable upon conversion of the
5% Convertible Debentures. Excludes 2,000 shares of Common Stock issuable
upon exercise of Debenture Warrants at an exercise price of $6.00 per
share, if such warrants are issued.
(11) Consists of 17,910 shares of Common Stock issuable upon conversion of the
5% Convertible Debentures. Excludes 3,750 shares of Common Stock issuable
upon exercise of Debenture Warrants at an exercise price of $6.00 per
share, if such warrants are issued.
(12) Consists of 298,496 shares of Common Stock issuable upon conversion of the
5% Convertible Debentures. Excludes 62,500 shares of Common Stock issuable
upon exercise of Debenture Warrants at an exercise price of $6.00 per
share, if such warrants are issued.
(13) AG Ramius Partners, LLC ("AG Ramius"), a registered investment advisor,
acts pursuant to contract as discretionary investment advisor for several
Selling Stockholders, holding voting and dispositive powers with respect to
securities acquired for their accounts. In such capacity, AG Ramius may be
considered a beneficial owner of shares of Common Stock that such Selling
Stockholders have the right to acquire through conversion of the 5%
Convertible Debentures in the principal amount of $1,550,000 beneficially
owned by such holders. The amount shown does not reflect certain
limitations as to the maximum number of shares of Common Stock issuable to
any stockholder and its affiliates. Moreover, the amount does not reflect
shares of Common Stock issuable on conversion of 5% Convertible Debentures
in an aggregate principal amount of $950,000 held by certain holders whose
accounts are managed on a discretionary basis by Angelo, Gordon & Co., LP,
a registered investment advisor that is one of the members of AG Ramius.
(14) Consists of 2,388 shares of Common Stock issuable upon conversion of the 5%
Convertible Debentures. Excludes 800 shares of Common Stock issuable upon
exercise of Debenture Warrants at an exercise price of $6.00 per share, if
such warrants are issued.
(15) Consists of 5,970 shares of Common Stock issuable upon conversion of the 5%
Convertible Debentures. Excludes 2,000 shares of Common Stock issuable upon
exercise of Debenture Warrants at an exercise price of $6.00 per share, if
such warrants are issued.
(16) Consists of 17,910 shares of Common Stock issuable upon conversion of the
5% Convertible Debentures. Excludes 3,750 shares of Common Stock issuable
upon exercise of Debenture Warrants at an exercise price of $6.00 per
share, if such warrants are issued.
(17) Consists of 3,582 shares of Common Stock issuable upon conversion of the 5%
Convertible Debentures. Excludes 1,200 shares of Common Stock issuable upon
exercise of Debenture Warrants at an exercise price of $6.00 per share, if
such warrants are issued.
(18) Consists of 11,940 shares of Common Stock issuable upon conversion of the
5% Convertible Debentures. Excludes 4,000 shares of Common Stock issuable
upon exercise of Debenture Warrants at an exercise price of $6.00 per
share, if such warrants are issued.
(19) Consists of 2,388 shares of Common Stock issuable upon conversion of the 5%
Convertible Debentures. Excludes 800 shares of Common Stock issuable upon
exercise of Debenture Warrants at an exercise price of $6.00 per share, if
such warrants are issued.
(20) Consists of 155,218 shares of Common Stock issuable upon conversion of the
5% Convertible Debentures. Excludes 32,500 shares of Common Stock issuable
upon exercise of Debenture Warrants at an exercise price of $6.00 per
share, if such warrants are issued.
(21) Consists of 11,940 shares of Common Stock issuable upon conversion of the
5% Convertible Debentures. Excludes 4,000 shares of Common Stock issuable
upon exercise of Debenture Warrants at an exercise price of $6.00 per
share, if such warrants are issued.
17
<PAGE> 20
(22) Consists of 5,970 shares of Common Stock issuable upon conversion of the 5%
Convertible Debentures. Excludes 2,000 shares of Common Stock issuable upon
exercise of Debenture Warrants at an exercise price of $6.00 per share, if
such warrants are issued.
(23) Consists of 5,970 shares of Common Stock issuable upon conversion of the 5%
Convertible Debentures. Excludes 2,000 shares of Common Stock issuable upon
exercise of Debenture Warrants at an exercise price of $6.00 per share, if
such warrants are issued.
(24) Consists of 5,970 shares of Common Stock issuable upon conversion of the 5%
Convertible Debentures. Excludes 2,000 shares of Common Stock issuable upon
exercise of Debenture Warrants at an exercise price of $6.00 per share, if
such warrants are issued.
(25) Consists of 5,970 shares of Common Stock issuable upon conversion of the 5%
Convertible Debentures. Excludes 2,000 shares of Common Stock issuable upon
exercise of Debenture Warrants at an exercise price of $6.00 per share, if
such warrants are issued.
(26) Consists of 71,639 shares of Common Stock issuable upon conversion of the
5% Convertible Debentures. Excludes 15,000 shares of Common Stock issuable
upon exercise of Debenture Warrants at an exercise price of $6.00 per
share, if such warrants are issued.
(27) Consists of 35,819 shares of Common Stock issuable upon conversion of the
5% Convertible Debentures. Excludes 7,500 shares of Common Stock issuable
upon exercise of Debenture Warrants at an exercise price of $6.00 per
share, if such warrants are issued.
(28) Consists of 11,940 shares of Common Stock issuable upon conversion of the
5% Convertible Debentures. Excludes 4,000 shares of Common Stock issuable
upon exercise of Debenture Warrants at an exercise price of $6.00 per
share, if such warrants are issued.
The registration of the Shares under the Securities Act shall not be deemed
an admission by the Selling Stockholders or the Company that the Selling
Stockholders are underwriters for purposes of the Securities Act of any Shares
offered under this Prospectus.
LOW TRADES; SHORT SALES
The Selling Stockholders have agreed that, they will not, directly or
through an affiliate, on any trading day used in the calculation of the
"Floating Conversion Price" (as defined in the 5% Convertible Debentures) or any
other trading day used for any purpose in valuation pursuant to such debentures,
(a) create the lowest reported sales price on the Nasdaq National Market 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 National
Market. In addition, the Selling Stockholders 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 the Fixed Conversion Price of $10.87. See "Description of
Securities -- 5% Cumulative Convertible Debentures Due 2003."
18
<PAGE> 21
CERTAIN RELATIONSHIPS BETWEEN THE COMPANY
AND CERTAIN SELLING STOCKHOLDERS
Barington Capital Group, L.P. Barington, an investment banking firm, acted
as the placement agent of the Company in connection with the private placement
of $2.0 million aggregate principal amount of Bridge Notes and Bridge Warrants
to purchase 500,000 shares of Common Stock at an exercise price of $3.30 (the
"Bridge Financing"). The Bridge Financing was completed in November 1996. As
partial compensation for services provided in that offering, Barington received
warrants to purchase up to 50,000 shares of Common Stock at an exercise price of
$3.30 per share, which warrants were forfeited upon consummation of the Initial
Offering. In addition, Barington also received a fee of $200,000 for placement
services provided in connection with the Bridge Financing, which fee represented
10% of the gross proceeds raised in the Bridge Financing, and was reimbursed for
certain other expenses.
Barington also acted as the placement agent of the Company in connection
with the private placement of 250,000 shares of Series A Convertible Preferred
Stock, par value $.01 per share, and Warrants to purchase up to an additional
50,000 shares of Common Stock in December 1996 (the "Series A Warrants") and
250,000 shares of Series A Preferred Stock and Series A Warrants to purchase
50,000 shares of Common Stock in January 1997 for aggregate gross proceeds to
the Company of $2.0 million. As compensation for services provided in that
private placement, the Company paid Barington a fee of $140,000, which fee
represented 7.0% of the gross proceeds raised in the private placement.
Barington acted as an underwriter of the Follow-On Offering and was the
underwriter of the Initial Offering, for which it received underwriting
discounts and commissions totaling approximately $1.6 million. In addition,
Barington received a non-accountable expense allowance of $341,550, and was
issued the Barington Option to acquire 180,000 shares of Common Stock of the
Company at the Initial Offering. This Barington Option is exercisable for a
period of five years beginning on April 8, 1997 at an exercise price of $9.08
per share of Common Stock.
In December, 1997 Barington received an option to acquire 125,000 shares of
Common Stock at an exercise price of $13.813 per share of Common Stock, the fair
market value of the Common Stock on the date of grant. Such option was granted
in consideration of business and financial services, including investment
banking services and consulting with respect to mergers and acquisitions, to be
provided to the Company over a two-year period.
For a period of five years following the completion of the Initial Offering
on April 8, 1997, the Company has agreed to use its best efforts (including the
solicitation of proxies, if necessary) to elect one designee of Barington to the
Board of Directors of the Company. Marc S. Cooper, Vice Chairman of Barington,
has served as a director of the Company since April 1997 and currently is a
member of the Executive and Audit Committees of the Board of Directors. Mr.
Cooper was elected to the Board pursuant to this agreement.
In July 1998, the Company issued $3,125,000 aggregate principal amount 5%
Convertible Debentures due 2003 pursuant to Subscription Agreements dated as of
July 1, 1998, and July 8, 1998. Certain of the subscribers were directors,
executive officers and consultants to the Company, including Mr. Marc Cooper, a
director of the Company and Vice Chairman of Barington. Mr. Cooper owns
principal amount of 5% Convertible Debentures. In addition, other principals and
employees of Barington beneficially own in the aggregate $50,000 principal
amount of 5% Convertible Debentures. In addition, if the Company exercises on
January 5, 1998, its right to redeem the $625,000 aggregate principal amount of
the 5% Convertible Debentures, the Company is obligated to issue to Mr. Cooper,
individually, and all Barington principals and employees in the aggregate
(including Mr. Cooper), Debenture Warrants to purchase 5,970 and 17,910 shares
of Common Stock of the Company, respectively, at an exercise price of $6.00 per
share, and expiring five years from the date of issuance.
John B. Torkelsen and PVR Securities, Inc. John B. Torkelsen, President of
PVR and its affiliate, PVR Securities, Inc. ("PVR Securities"), has served as a
director of the Company since March 1996 and is a member of the Nominating
Committee of the Board of Directors. PVR Securities acted as the placement agent
of the Company in connection with the private placements in June 1995 and August
1996, of 50 units
19
<PAGE> 22
and 19.11 units, respectively, to accredited investors (the "PVR Investors")
(the "PVR Offering"). Each unit sold consisted of 5,000 shares of Common Stock
and warrants to purchase an additional 5,000 shares of Common Stock at $8.00 per
share. In the private placement conducted by PVR Securities, the Company issued
345,536 shares of Common Stock and warrants to acquire 345,536 shares of Common
Stock at an exercise price of $8.00 per share. Aggregate gross proceeds to the
Company from the offering were $2,073,222.
As partial compensation for services provided in the private placement, the
Company issued to Mr. Torkelsen, President of PVR Securities, warrants to
purchase an aggregate of 69,106 shares of Common Stock. Of such warrants, the
exercise price for warrants to acquire 34,553 shares of Common Stock was
originally $6.60 per share, and the exercise price for warrants to acquire
34,553 shares of Common Stock was originally $8.80 per share (the "PVR
Warrants"). In addition, as compensation for financial advisory and other
services rendered in connection with the private placement, the Company paid PVR
Securities a fee of approximately $150,000.
Each PVR Investor was also given the opportunity to purchase from Steven A.
Rogers, the Chief Executive Officer and President of the Company, 2,500 shares
of Common Stock for each unit purchased in the private placement, at a price of
$2.00 per share. In connection with such transaction, PVR Investors in the
private placement purchased an aggregate of 172,583 shares of Common Stock from
Mr. Rogers for aggregate consideration of $345,166.
As part of the private placement of securities managed by PVR Securities,
between May 1995 and May 1996, the Company also issued to certain investors (the
"Debt Inducement Investors"), in a private placement, warrants to purchase an
aggregate of 102,332 shares of Common Stock at an exercise price of $8.00 per
share, in order to induce such investors to extend loans to the Company. These
debt transactions were considered by the Company to be part of its overall
financing activities during this time period, and were necessary because the
equity financing being raised in the PVR Offering was not obtained as quickly as
originally contemplated by the Company.
In January 1997, the Company issued and sold to Acorn Technology Partners,
L.P. ("Acorn") 250,000 shares of Series A Preferred Stock, which converted to
Common Stock on a one-to-one basis upon the Initial Offering, and warrants to
purchase 50,000 shares of Common Stock at an exercise price of $4.00 per share,
for aggregate gross proceeds of $1,000,000. Mr. Torkelsen was the President and
Manager of the general partner of Acorn. In September 1997, Acorn distributed
its holdings of the Company's securities to PVR. PVR served as the investment
advisor to Acorn.
In addition, PVR, a corporation of which Mr. Torkelsen, a director of the
Company, serves as the President, loaned the Company an aggregate of $320,000
during 1995. The loan accrued interest at a fixed rate of 7% per annum. As an
inducement to PVR to extend the loan to the Company, the Company issued to Mr.
Torkelsen warrants to purchase 53,333 shares of Common Stock at an original
exercise price of $8.00 per share. In June 1995, PVR converted the outstanding
principal amount of and the accrued interest on the loan to Common Stock and
warrants. In connection with the loan conversion, Mr. Torkelsen invested an
additional $160,000 in the Company. In the loan conversion transaction, the
Company issued to Mr. Torkelsen 60,361 shares of Common Stock and warrants to
purchase 60,361 shares of Common Stock, to Mrs. Pamela R. Torkelsen 10,000
shares of Common Stock and warrants to purchase 10,000 shares of Common Stock,
and to PVR 10,000 shares of Common Stock and warrants to purchase 10,000 shares
of Common Stock. All common stock was issued at $6.00 per share, and all
warrants to purchase Common Stock were issued with an original exercise price of
$8.00 per share.
In connection with the private placement of equity securities of the
Company by PVR Securities, Mr. Torkelsen, a director of the Company, and Mr.
Steven A. Rogers, a director and the President and Chief Executive Officer of
the Company, entered into an agreement that provides that, for a five-year
period beginning December 5, 1995, each of them will vote any shares of Common
Stock that he controls for the election to the Board of Directors of an
individual nominated by the other and on a best efforts basis will seek
additional votes for the other party's nominee. Mr. Torkelsen was elected to the
Board pursuant to this agreement. In addition, Mr. Torkelsen agreed, subject to
his fiduciary obligations to the Company, to vote for
20
<PAGE> 23
Mr. Rogers to continue his position as President and Chief Executive Officer of
the Company during the term of the voting agreement.
Additional Transactions with PVR Investors. In January 1997, the Company
offered to certain investors the opportunity to exchange existing warrants to
purchase shares of Common Stock in the Company for new warrants to purchase
shares of Common Stock. The purpose of the warrant exchange was to induce such
investors to enter into lock-up arrangements with Barington, the underwriter of
the Initial Offering, and into agreements consolidating such investors'
registration rights with those granted by the Company to other investors, and so
that the investment by such investors in the Company would be on terms and
conditions that more closely reflect the terms and conditions upon which other
investors invested in the Company during a comparable time period.
For the investors who participated in the warrant exchange transaction, the
effect of the warrant exchange was to cause investors who previously had
purchased shares of Common Stock in the Company to purchase such shares at an
effective purchase price of $4.00 per share, and to cause investors who
previously had received warrants to purchase shares of Common Stock in the
Company, to exchange such warrants for warrants with an exercise price of $4.00
per share.
As a result of the warrant exchange transaction, the Company issued an
aggregate of 165,267 shares of Common Stock and new warrants to purchase an
aggregate of 336,707 shares of Common Stock at an exercise price of $4.00 per
share. As described in detail below, the new warrants to purchase 336,707 shares
of Common Stock consist of (i) warrants to purchase 165,269 shares of Common
Stock issued to PVR Investors, (ii) warrants to purchase 69,106, shares of
Common Stock issued to Mr. Torkelsen, a director of the Company and President of
PVR Securities, and (iii) warrants to purchase 102,332 shares of Common Stock
issued to the Debt Inducement Investors. The Company did not receive any
additional cash proceeds or consideration other than the securities exchanged by
the investors in the warrant exchange.
In January 1997, the Company offered to each of the PVR Investors the
opportunity to exchange their existing warrants, representing the right to
purchase an aggregate of 345,536 shares of Common Stock at an exercise price of
$8.00 per share, for new warrants representing the right to purchase
approximately one-half of the number of shares of Common Stock at an exercise
price of $4.00 per share. In exchange for warrants to purchase an aggregate of
330,536 shares of Common Stock at an exercise price of $8.00 per share, the
Company issued warrants to purchase an aggregate of 165,269 shares of Common
Stock at an exercise price of $4.00 per share. One PVR Investor holding warrants
to purchase 15,000 shares of Common Stock chose not to participate in the
warrant exchange transaction and to retain such warrants with an exercise price
of $8.00 per share. As part of the warrant exchange, each PVR Investor who
accepted the Company's offer also was issued by the Company an additional 2,500
shares of Common Stock for each unit purchased in the PVR Offering, for no
additional consideration. The Company issued an aggregate of 165,267 additional
shares of Common Stock to the PVR Investors in the warrant exchange. Each PVR
Investor also agreed to sign an agreement with the Company relating to
registration rights and a lock-up agreement with Barington, the underwriter of
the Initial Offering. In connection with the Follow-On Offering, Barington
conveyed to NationsBanc Montgomery Securities all rights and responsibilities
under this agreement.
As part of the warrant exchange, in order to restructure the transaction in
which the PVR Investors originally purchased shares of Common Stock from Mr.
Rogers at a below-market price per share to terms and conditions more closely
reflecting market terms and conditions, each PVR Investor who had originally
purchased shares of Common Stock from Mr. Rogers at a purchase price of $2.00
per share, also was required to pay Mr. Rogers an additional $2.00 for each
share originally purchased from him. Mr. Rogers received an aggregate of
$340,166 from PVR Investors in connection with the warrant exchange.
Also as part of the warrant exchange, the Company issued to Mr. Torkelsen,
a director of the Company and President of PVR Securities, new warrants to
purchase an aggregate of 69,106 shares of Common Stock at $4.00 per share, in
exchange for the warrants to purchase 34,553 shares of Common Stock at an
exercise price of $6.60 per share, and the warrants to purchase 34,553 shares of
Common Stock at an exercise price of $8.80 per share, previously issued to Mr.
Torkelsen as compensation for services in the private placement managed by PVR
Securities.
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As part of the warrant exchange, the Company also exchanged warrants to
purchase an aggregate of 102,332 shares of Common Stock held by the Debt
Inducement Investors at an exercise price of $8.00 per share, for warrants to
purchase 102,332 shares at an exercise price of $4.00 per share.
Applewood Associates, L.P. In December 1996, the Company issued and sold
to Applewood Associates, L.P. ("Applewood") 250,000 shares of Series A Preferred
Stock, which converted to Common Stock on a one-to-one basis upon the Initial
Offering, and warrants to purchase 50,000 shares of Common Stock at an exercise
price of $4.00 per share, for aggregate gross proceeds of $1,000,000. Pursuant
to a voting agreement, dated December 19, 1996 by and among Applewood, Acorn and
Steven A. Rogers, entered into in connection with the private placement of the
Series A Preferred Stock and the Series A Warrants by the Company to Applewood
and Acorn, Anthony M. Agnello was elected to the Board of Directors in January
1996. Subject to certain percentage ownership requirements, Mr. Rogers agreed,
pursuant to such voting agreement, to vote his shares of Common Stock to elect
as a director the nominee of Applewood and Acorn. Mr. Agnello serves on the
Compensation Committee of the Board of Directors.
Issuance of 5% Convertible Debentures. On July 8, 1998, the Company issued
$3.125 million aggregate principal amount of 5% Convertible Debentures pursuant
to a Subscription Agreement to purchase $2.5 million aggregate principal amount
of 5% Convertible 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 5% Convertible 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, Robert H. Emery, and Ms. Mary
C. Murphy, executive officers of the Company, and certain outside investors,
including outside consultants to the Company (collectively, the "Additional
Investors" and together with the Institutional Investors, the "Investors") and
accepted by the Company. Following the issuance of the 5% Convertible
Debentures, the following executive officers and directors of the Company hold
beneficially the principal amount of such debentures indicated: Mr.
Bunker -- $25,000; Mr. Booker -- $5,000; Mr. Emery -- $25,000; Ms.
Murphy -- $25,000; Mr. Kendall -- $100,000; Mr. Cacciamani -- $10,000; Mr.
Cooper -- $25,000; and Mr. Liebhaber -- $100,000. The offering, issuance and
sale of the 5% Convertible Debentures to certain directors and executive
officers was a condition precedent to the consummation of the financing with the
Institutional Investors, and was approved by the full Board of Directors of the
Company, with the directors participating in the proposed financing abstaining
from voting.
DESCRIPTION OF SECURITIES
The following information is in addition to information regarding the
Company's outstanding securities, consisting of Common Stock, par value $.01 per
share, and Preferred Stock, par value $.01 per share, contained elsewhere in the
Company's filings with the Commission and incorporated herein by reference. See
"Incorporation of Certain Documents by Reference." The following information is
summary in nature and is qualified in its entirety by reference to the
instruments defining the rights of the holders of such securities, copies of
which are filed as exhibits to the Registration Statement of which this
Prospectus constitutes a part and which are available from the Commission.
5% CUMULATIVE CONVERTIBLE DEBENTURES DUE 2003
Interest. Each 5% Convertible Debenture is entitled to receive cumulative
annual interest at the rate of 5.0% per annum on the principal amount thereof,
payable quarterly in arrears on the last day of March, June, September and
December of each year, commencing on September 30, 1998. Interest accrues daily
from the date of issuance of the 5% Convertible Debentures, until such debenture
has been converted or redeemed. Interest is payable in cash, or the Company may,
at its option, in full or in part, pay interest on the Debentures on any
interest payment date by increasing the 5% Convertible Debentures by the amount
of such interest. When any interest is added to the principal amount of the 5%
Convertible Debentures, such interest shall be deemed to be part of the
principal amount of the debenture for purposes of determining interest
thereafter payable and amounts thereafter convertible into Common Stock.
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<PAGE> 25
Seniority; Liquidation Preference. The Company's outstanding $3.125
million principal amount of 5% Convertible Debentures are senior in right of
payment to substantially all existing and future indebtedness of the Company and
to the Company's equity securities. If at any time (i) there occurs any merger,
consolidation or other business combination of the Company, with or into any
other corporation, 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 stockholders 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), an
"Extraordinary Transaction"), then the holders of the 5% Convertible Debentures
then outstanding may participate in any such transaction as a class with the
common stockholders on the same basis as if the 5% Convertible Debentures had
been converted one day prior to the announcement date (or record date for such
distribution, dividend or offer) of such transaction.
Redemption. At the option of each holder, the Company shall redeem all or
any portion of such holder's 5% Convertible Debentures effective as of the
effective date of an Extraordinary Transaction, and the holder shall be entitled
to receive a redemption price per $100 principal amount of 5% Convertible
Debentures being redeemed equal to 112.5% of the aggregate principal amount of
the 5% Convertible Debentures, plus accrued and unpaid interest thereon. 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 Extraordinary Transaction;
provided, however, at the discretion of such holder, such holder may, at any
time, elect to convert its 5% Convertible Debentures into fully paid, validly
issued and nonassessable shares of Common Stock in accordance with the terms of
such debentures, for such number of shares of Common Stock as determined by the
application of the Conversion Rate (as defined therein) so long as the Company
has not redeemed such 5% Convertible Debentures.
At the option of each holder, the Company also is obligated to redeem all
or any portion of such holder's outstanding 5% Convertible Debentures effective
as of the date of the occurrence of certain "Triggering Events" (as defined
below), and the holder shall be entitled to receive a redemption price per $100
principal amount of 5% Convertible Debentures being redeemed equal to 130% of
the principal amount of the 5% Convertible Debentures, plus accrued and unpaid
interest. For purposes of the 5% Convertible Debentures, the following
constitute "Triggering Events:" (i) 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; (ii) any
money judgment, 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; or (iii) a default or
event of default (as defined in the 5% Convertible Debentures) shall have
occurred and remain uncured following the applicable cure period under such
debentures. 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 5% Convertible Debentures into fully paid, validly
issued and nonassessable shares of Common Stock in accordance with the terms of
the debentures, for such number of shares of Common Stock as determined by the
application of the Conversion Rate (as defined therein) so long as the Company
has not 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 is obligated to pay each holder 2.0% per
month on the outstanding principal amount of the 5% Convertible 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 5% Convertible Debentures
as to which such Triggering Event has occurred.
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In addition, the 5% Convertible Debentures are redeemable at the option of
the Company in certain circumstances. The 5% Convertible Debentures held by the
Institutional Investors may be redeemed by the Company, at its option, at any
time on or before September 29, 1998. The 5% Convertible 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 5%
Convertible Debentures held by the Institutional Investors. The 5% Convertible
Debentures are redeemable at a redemption price per 5% Convertible 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 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 up to 50,000 shares of Common Stock at an exercise price
of $11.00 per share (subject to adjustment as provided therein). See
"-- Debenture Warrants" below.
Conversion Privileges. In addition, at any time on or after September 29,
1998, the Institutional Investors may, in whole or in part, convert the 5%
Convertible Debentures into shares of Common Stock. The Debentures issued to the
Additional Investors are convertible, in whole or in part, at the option of the
holder any time after January 5, 1999. The conversion rate of the 5% Convertible
Debentures is determined by dividing the principal amount of the 5% Convertible
Debentures plus any accrued and unpaid interest by a conversion price equal to
the lesser of (i) the Fixed Conversion Price of $10.87, or (ii) a Floating
Conversion Price equal to 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 number of shares of Common Stock issuable upon
conversion of the 5% Convertible Debentures is subject to adjustment in certain
events, including without limitation a reclassification, reorganization or
exchange of the Company's Common Stock.
If the Company cannot, or does not intend to, or fails to, issue shares of
Common Stock registered for resale 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 from issuing all of the Common Stock which is to be issued to a
holder, then the Company is obligated to 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 5% Convertible Debentures, notify
the holder of such failure (a "Default Notice"). Each holder who receives a
Default Notice has 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 principal amount thereof, plus accrued and unpaid interest; (ii) void its
notice of conversion and have returned the nonconverted 5% Conversion Debentures
that were to be converted; or (iii) if the Company's inability to fully convert
the 5% Convertible Debentures is pursuant to the Exchange Cap provision
described below, require the Company to use its best efforts to take all steps
necessary in order to exceed such Exchange Cap.
In addition to the foregoing, upon a Conversion Default, the Company will
pay each holder of the 5% Convertible Debentures (including debentures for which
a conversion notice has not yet been sent), for the period during which such 5%
Convertible Debentures have not been duly converted or redeemed as herein
provided, 2.0% per month on the outstanding principal amount of the 5%
Convertible 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 the subsection (y) above, the Company
has sixty (60) days to cure such default prior to giving rise to the right of
the Holder to exercise remedies, including, without limitation, the right to
receive additional interest.
Voting Rights. Holders of 5% Convertible Debentures have no voting rights,
except as required by law and as expressly provided in the 5% Convertible
Debentures.
Limitation on Number of Conversion Shares. The Company is not obligated to
issue upon conversion of the 5% Convertible Debentures, in the aggregate, more
than a number of shares of Common Stock equal to
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<PAGE> 27
19.99% of the number of shares of Common Stock outstanding on the date on which
the 5% Convertible Debentures were issued (as 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 of the 5% Convertible Debentures pro rata based
on the total principal amount outstanding of the Debentures.
After giving effect to the issuance of Common Stock pursuant to each notice
of conversion, 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 5% Convertible 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 under the Securities Act), shall not exceed 4.99% of the
total issued and outstanding shares of the Common Stock.
Registration Rights. The Company has agreed to register on a Form S-3
under the Securities Act of 1933, as amended, the shares of Common Stock
issuable upon conversion of the 5% Convertible Debentures and the exercise of
any Debenture Warrants held by the Investors.
Maturity. On or after July 8, 2003 (the "Maturity Date"), the Company will
have the option to cause the outstanding 5% Convertible Debentures to be
automatically converted to shares of Common Stock pursuant to the Conversion
Rate, or to redeem all outstanding 5% Convertible Debentures at a redemption
price equal to the principal amount of the 5% Convertible Debentures plus any
accrued and unpaid interest thereon.
DEBENTURE WARRANTS
In connection with the issuance of the 5% Convertible Debentures, if the
Company exercises its option to redeem the $2.5 million principal amount of 5%
Convertible Debentures issued to the Institutional Investors on or before
September 29, 1998, and the $625,000 principal amount of 5% Convertible
Debentures issued to the Additional Investors on January 5, 1998, then the
Company is obligated to issue to the Investors the Debentures Warrants to
purchase an aggregate of 175,000 shares of Common Stock. Of such Debenture
Warrants, warrants to purchase 125,000 shares of Common Stock are issuable to
the Institutional Investors and warrants to purchase 50,000 shares of Common
Stock are issuable to the Additional Investors. The Debenture Warrants are
exercisable for a period of five years from the date of issuance and are
exercisable at an exercise price of $6.00 per share.
SERIES B PREFERRED STOCK
In August 1998, the Company issued to certain unaffiliated investors in a
private placement 209,091 shares of Series B Preferred Stock and warrants to
purchase an aggregate of 52,237 shares of Common Stock at an exercise price of
$6.00 per share. The shares of Series B Preferred Stock and Series B Warrants
were issued at an exercise price of $5.50 per share, resulting in gross proceeds
to the Company of $1.15 million.
Dividends. The holders of shares of Series B Preferred Stock are entitled
to receive, in preference to the holders of Junior Securities (as defined
herein), cumulative annual dividends at the rate of 5.0% per annum on the stated
value per share of Series B Preferred Stock (the "Stated Value"), initially
$5.50 per share. Such dividends are payable in additional shares of Series B
Preferred Stock, annually in arrears on the annual anniversary of the issuance
date. Dividends accumulate daily on each share of Series B Preferred Stock from
the issuance date, whether or not earned or declared, until such share of Series
B Preferred Stock has been converted or redeemed. To the extent dividends are
not paid on the applicable dividend payment date, such dividends shall be
cumulative and shall compound annually until the date of payment.
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Seniority; Liquidation Preference. The Series B Preferred Stock The Series
B Preferred Stock, with respect to rights upon liquidation, winding up or
dissolution, and dividend rights, rank senior and prior in right to (i) the
Common Stock, and (ii) any other equity interest (including, without limitation,
options and warrants) in the Company that by its terms ranks junior to the
Series B Preferred Stock ("Junior Securities"). The Series B Preferred Stock,
with respect to rights upon liquidation, winding up or dissolution, and dividend
rights, ranks pari passu with (i) any series of preferred stock hereafter
created, unless such series by its terms ranks junior to the Series B Preferred
Stock, and (ii) any other equity interest in the Company hereafter created that
by its terms ranks on a par with or pari passu with the Series B Preferred Stock
("Parity Securities"). Without the prior express written consent of the holders
of not less than two-thirds ( 2/3) of the then outstanding shares of Series B
Preferred Stock, the Company shall not hereafter (i) issue any additional shares
of Series B Preferred Stock, (ii) authorize or issue any capital stock that is
of senior rank to the Series B Preferred Stock in respect of dividend rights or
the preferences as to distributions and payments upon the liquidation,
dissolution, winding up or otherwise of the Company, (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 Series B Preferred Stock relative to
the holders of Parity Securities or the holders of any other class of capital
stock. In the event of the merger, consolidation or other business combination
of the Company with or into another corporation, the Series B Preferred Stock
shall maintain its relative powers, designations and preferences and no merger,
consolidation or other business combination shall cause a result inconsistent
therewith.
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of the Series B Preferred Stock are
entitled to receive in cash out of the assets of the Company, whether from
capital or from earnings available for distribution to its stockholders, before
any amount shall be paid to the holders of any Common Stock or any Junior
Securities, an amount per share of Series B Preferred Stock equal to the
Aggregate Value (as defined in the Certificate of Designations of the Series B
5% Cumulative Convertible Preferred Stock; provided that, if funds are
insufficient to pay the full amount due to the holders and any holders of Parity
Securities, then each holder and each holder of Parity Securities shall receive
a ratable percentage of such funds in accordance with respective amounts that
would be payable in full to such holder as a liquidation preference, in
accordance with their respective Certificate of Designations, Preferences and
Rights.
Voting Rights. The holders of the Series B Preferred Stock have no voting
rights, except as required by law and as expressly provided the Certificate of
Designations of the Series B 5% Cumulative Convertible Preferred Stock.
Conversion. Shares of Series B Preferred Stock are convertible at any time
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 (as hereinafter
defined). The conversion rate of the Series B Preferred Stock is the number of
shares of Common Stock issuable upon conversion of each share of Series B
Preferred Stock determined by dividing the Stated Value of such shares of Series
B Preferred Stock, plus accumulated but unpaid dividends (whether or not earned
or declared) for each share of Series B Preferred Stock (not previously added to
the Stated Value) as of the conversion date, by the conversion price (as
hereinafter defined). The initial conversion price is $5.50 per share, subject
to adjustment in certain events, including without limitation a
reclassification, reorganization or exchange of the Company's Common Stock.
The shares of Series B Preferred Stock are subject to automatic conversion,
without further action on the part of the holder or the Company, if for fifteen
(15) consecutive trading days subsequent to the issuance date the closing price
of one share of Common Stock has equaled or exceeded $11.00 per share.
Registration Rights. The Company has agreed to register on a Form S-3
under the Securities Act of 1933, as amended, the shares of Common Stock
issuable upon conversion of the Series B Preferred Stock and the exercise of the
Series B Warrants.
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Maturity. On the date that is the sixth anniversary of the Issuance Date
(the "Maturity Date"), the Company has the option, in its sole and absolute
discretion, to either (i) cause the shares of Series B Preferred Stock 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 the Certificate of Designations by application of the then
applicable Conversion Rate; or (ii) redeem all of the shares of Series B
Preferred Stock then outstanding at the Aggregate Value per share.
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<PAGE> 30
PLAN OF DISTRIBUTION
The distribution of the Shares by the Selling Stockholders, or by pledgees,
donees, transferees or other successors in interest may be effected from time to
time in transactions on the Nasdaq National Market in negotiated transactions or
other exchanges or in the over-the-counter market, or otherwise at prices and at
terms then prevailing or at prices related to the then current market price, or
in negotiated transactions. The Shares may be sold by one or more of the
following: (i) a block trade in which the broker or dealer so engaged will
attempt to sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction; (ii) purchases by a broker or
dealer as principal and resale by such broker or dealer for its account pursuant
to this Prospectus; (iii) an exchange distribution in accordance with the rules
of such exchange; and (iv) ordinary brokerage transactions and transactions in
which the broker solicits purchasers. In addition, any securities covered by
this Prospectus which qualify for sale pursuant to Rule 144 may be sold under
Rule 144 rather than pursuant to this Prospectus. From time to time and subject
to certain contractual limitations, the Selling Stockholders may engage in short
sales, short sales versus the box, puts and calls and other transactions in
securities of the issuer or derivatives thereof, and may sell and deliver the
shares in connection therewith. See "Selling Stockholders -- Low Trades; Short
Sales." Broker-dealers through which transactions involving the Shares are
effected may receive compensation in the form of discounts, concessions or
commissions from the Selling Stockholders and/or the purchasers of the Shares
for whom such broker-dealers may act as agent or to whom they may sell as
principal, or both. Usual and customary or specifically negotiated brokerage
fees or commissions may be paid by the Selling Stockholders in connection with
sales of the Shares. No underwriting arrangements have been entered into by the
Selling Stockholders.
In effecting sales, brokers or dealers engaged by the Selling Stockholders
may arrange for other brokers or dealers to participate. Brokers or dealers will
receive commissions or discounts from Selling Stockholders in amounts to be
negotiated immediately prior to the sale. The Selling Stockholders and agents
who execute orders on their behalf may be deemed to be underwriters as that term
is defined in Section 2(11) of the Securities Act and a portion of any proceeds
of sales and discounts, commissions or other compensation may be deemed to be
underwriting compensation for purposes of the Securities Act. The Company has
agreed to indemnify the Selling Stockholders against certain liabilities,
including liabilities under the Securities Act.
ADDITIONAL INFORMATION
The Company is subject to the information requirements of the Exchange Act,
and, in accordance therewith, files reports and other information with the
Commission. Such reports, proxy statements, and other information can be
inspected without charge at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549;
Seven World Trade Center, 13th Floor, New York, New York 10048; and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
may be obtained from the public reference section of the Commission, 450 Fifth
Street, N.W., Washington, D.C., 20549, at prescribed rates. The Registration
Statement is also publicly available through the Commission's web site located
at http://www.sec.gov. The Common Stock of the Company is quoted on the Nasdaq
National Market and other information concerning the Company can be inspected at
the office of the Nasdaq National Market, 1735 K Street, N.W., Washington, D.C.
20006-1500.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act with respect to the shares of Common Stock offered
hereby. This Prospectus, which constitutes a part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement,
certain terms of which are omitted in accordance with the rules and regulations
of the Commission. Statements contained in this Prospectus as to the contents of
any contract or other documents are not necessarily complete, and in each
instance, reference is made to the copy of such contract or documents filed as
an exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference and the exhibits and schedules thereto. For
further information regarding the Company and the Shares, reference is hereby
made to the Registration Statement and such exhibits and schedules which may be
obtained from the Commission at its principal office in Washington, D.C. upon
payment of the fees prescribed by the Commission.
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LEGAL MATTERS
The validity of the Common Stock offered hereby and legal matters will be
passed upon for the Company by Shaw Pittman Potts & Trowbridge, Washington,
D.C., a partnership including professional corporations.
EXPERTS
The financial statements and schedule incorporated in this Prospectus by
reference to the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1997 have been included herein in reliance on the report of
PricewaterhouseCoopers, LLP independent accountants, given on the authority of
that firm as experts in accounting and auditing.
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- ------------------------------------------------------
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NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SHARES OF
COMMON STOCK TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF, ANY
PERSON IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATES AS OF WHICH SUCH
INFORMATION IS FURNISHED.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents by
Reference........................... 2
Prospectus Summary.................... 3
Risk Factors.......................... 5
Use of Proceeds....................... 14
Selling Stockholders.................. 15
Certain Relationships between the
Company and Certain Selling
Stockholders........................ 19
Plan of Distribution.................. 28
Additional Information................ 28
Legal Matters......................... 29
Experts............................... 29
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
921,242 SHARES
[OBJECTIVE COMMUNICATIONS LOGO]
OBJECTIVE
COMMUNICATIONS, INC.
COMMON STOCK
SEPTEMBER 4, 1998
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 33
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses to be incurred by the
Registrant in connection with the issuance and distribution of the securities
registered hereby, all of which expenses are estimates.
<TABLE>
<CAPTION>
DESCRIPTION AMOUNT
----------- -------
<S> <C>
Blue Sky fees and expenses (including fees of counsel)...... $ 2,000
Transfer Agent and Registrar's fees......................... 1,000
Printing expenses........................................... 10,000
Legal fees and expenses (other than blue sky)............... 15,000
Accounting fees and expenses................................ 8,000
Miscellaneous............................................... 2,000
-------
Total............................................. $38,000
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The GCL provides that a corporation may limit the liability of each
director to the corporation or its stockholders for monetary damages, except for
liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii) in
respect of certain unlawful dividend payments or stock redemptions or
repurchases; and (iv) for any transaction from which the director derived an
improper personal benefit. The Second Amended and Restated Certificate of
Incorporation (the "Certificate") of the Registrant provides for the elimination
and limitation of the personal liability of directors of the Registrant for
monetary damages to the fullest extent permitted by the GCL.
In addition, the Certificate provides that if the GCL is amended to
authorize the further elimination or limitation of the liability of a director,
then the liability of the directors of the Registrant shall be eliminated or
limited to the fullest extent permitted by the GCL, as so amended. The effect of
this provision is to eliminate the right of the Registrant and its stockholders
(through stockholders' derivative suits on behalf of the Registrant) to recover
monetary damages against a director for breach of the fiduciary duty of care as
a director (including breaches resulting from negligent or grossly negligent
behavior) except in the situations described in clauses (i) through (iv) above.
The provision does not limit or eliminate the rights of the Registrant or any
stockholder to seek non-monetary relief such as an injunction or rescission in
the event of a breach of a director's duty of care. In addition, the Certificate
provides that the Registrant shall, to the fullest extent permitted by the GCL,
as amended from time to time, indemnify each of its currently acting and former
directors, officers, employees and agents.
ITEM 16. EXHIBITS.
The following is a list of all exhibits filed as a part of this
Registration Statement on Form S-3, including those incorporated herein by
reference.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
3.1 Amended and Restated Certificate of Incorporation of the
Registrant (Incorporated by reference to Exhibit 3.1
forming a part of the Registrant's Registration Statement
on Form SB-2 (File No. 333-20625) filed with the
Securities and Exchange Commission under the Securities
Act of 1933, as amended).
</TABLE>
II-1
<PAGE> 34
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
3.2 Amended and Restated Bylaws of the Registrant (Incorporated
by reference to Exhibit 3.2 forming a part of the
Registrant's Registration Statement on Form SB-2 (File
No. 333-20625) filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended).
4.1 Form of Warrant for the Purchase of Shares of Common Stock,
issued in connection with the private placement of
$2,000,000 aggregate principal amount of Bridge Notes
(Incorporated by reference to Exhibit 3.4 forming a part
of the Registrant's Registration Statement on Form SB-2.
(File No. 333-20625) filed with the Securities and
Exchange Commission under the Securities Act of 1933, as
amended).
4.2 Form of Warrant to Purchase Common Stock of the Registrant,
issued in connection with the private placement of units
in June 1995 and August 1996 (Incorporated by reference
to Exhibit 3.5 forming a part of the Registrant's
Registration Statement on Form SB-2 (File No. 333-20625)
filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended).
4.3 Form of Warrants for the Purchase of 100,000 Shares of
Common Stock, $.01 par value per share issued in
connection with the private placement of Series A
Convertible Preferred Stock and warrants in December 1996
and January 1997 (Incorporated by reference to Exhibit
3.7 forming a part of the Registrant's Registration
Statement on Form SB-2 (File No. 333-20625) filed with
the Securities and Exchange Commission under the
Securities Act of 1933, as amended).
4.4 Form of Option for the Purchase of 180,000 Shares of Common
Stock issued to Barington Capital Group, L.P.
(Incorporated by reference to Exhibit 3.8 forming a part
of the Registrant's Registration Statement on Form SB-2
(File No. 333-20625) filed with the Securities and
Exchange Commission under the Securities Act of 1933, as
amended).
4.5 Form of Stock Option Agreement, dated December 18, 1997, by
and between the Registrant and Barington Capital Group,
L.P. (Incorporated by reference to Exhibit 10.8 forming a
part of the Registrant's Current Report on Form 10-KSB
for the year ended December 31, 1997).
4.6 Specimen certificate evidencing shares of Common Stock of
the Registrant (Incorporated by reference to Exhibit 4.2
to the Registrant's Registration Statement on Form SB-2
(File No. 333-20625) filed with the Securities and
Exchange Commission under the Securities Act of 1933, as
amended).
4.7 Form of 5% Convertible Debentures due 2003 of the Registrant
(Incorporated by reference to Exhibits 4.3 and 4.4
forming a part of the Company's Current Report on Form
8-K dated July 1, 1998 and filed July 16, 1998 with the
Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended).
4.8 Form of Warrants to be issued upon redemption of the 5%
Cumulative Convertible Debentures due 2003 of the
Registrant (Incorporated by reference to Exhibit 4.5
forming a part of the Company's Current Report on Form
8-K dated July 1, 1998 and filed July 16, 1998 with the
Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended).
4.9 Specimen certificate evidencing shares of the Series B 5%
Cumulative Convertible Preferred Stock of the Company.
4.10 Certificate of Designations of the Company's Series B 5%
Cumulative Convertible Preferred Stock of the Company.
4.11 Form of Warrant issued in connection with the Series 5%
Cumulative Convertible Stock of the Company.
5 Opinion of Shaw, Pittman, Potts & Trowbridge as to the
legality of the securities being registered.
23.1 Consent of Shaw, Pittman, Potts & Trowbridge (included as
part of Exhibit 5).
</TABLE>
II-2
<PAGE> 35
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
23.2 Consent of PricewaterhouseCoopers LLP
24 Power of Attorney (included on signature page to the
Registration Statement).
</TABLE>
ITEM 28. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement.
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the change in
the volume and price represent no more than 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) To include any material information the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration statement;
(2) That, for determining any liability under the Securities Act, each
such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be a part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 36
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies it has reasonable grounds to believe it meets all the
requirements for filing this Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the County of Rockingham, New Hampshire, on September 4, 1998.
OBJECTIVE COMMUNICATIONS, INC.
(Registrant)
By: /s/ JAMES F. BUNKER
----------------------------------
James F. Bunker
President and Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints James F. Bunker and Robert H. Emery and each of
them, his true and lawful attorney-in-fact and agents, with full power of
substitution and resubstitution, for and in his name, place and stead, in any
and all capacities to sign any and all amendments (including post-effective
amendments) to this Registration Statement and any or all other documents in
connection therewith, and to file the same, with all exhibits thereto, with the
Securities and Exchange Commission, granting unto said authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as might or could be
done in person, hereby ratifying and confirming all said attorney-in-fact and
agents or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JAMES F. BUNKER President and Chief September 4, 1998
- ----------------------------------------------------- Executive Officer
James F. Bunker (Principal Executive
Officer)
/s/ ROBERT H. EMERY Vice President of September 4, 1998
- ----------------------------------------------------- Administration and
Robert H. Emery Finance and Secretary
(Principal Financial
and Accounting Officer)
/s/ CLIFFORD M. KENDALL Chairman of the Board of September 4, 1998
- ----------------------------------------------------- Directors
Clifford M. Kendall
/s/ STEVEN A. ROGERS Director September 4, 1998
- -----------------------------------------------------
Steven A. Rogers
/s/ ANTHONY M. AGNELLO Director September 4, 1998
- -----------------------------------------------------
Anthony M. Agnello
/s/ ROBERT L. BARNETT Director September 4, 1998
- -----------------------------------------------------
Robert L. Barnett
/s/ DONALD W. BARRETT Director September 4, 1998
- -----------------------------------------------------
Donald W. Barrett
</TABLE>
II-4
<PAGE> 37
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ EUGENE R. CACCIAMANI Director September 4, 1998
- -----------------------------------------------------
Eugene R. Cacciamani
/s/ MARC S. COOPER Director September 4, 1998
- -----------------------------------------------------
Marc S. Cooper
/s/ LINCOLN D. FAURER Director September 4, 1998
- -----------------------------------------------------
Lincoln D. Faurer
/s/ RICHARD T. LIEBHABER Director September 4, 1998
- -----------------------------------------------------
Richard T. Liebhaber
/s/ ROY C. NASH Director September 4, 1998
- -----------------------------------------------------
Roy C. Nash
/s/ JOHN B. TORKELSEN Director September 4, 1998
- -----------------------------------------------------
John B. Torkelsen
</TABLE>
II-5
<PAGE> 38
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
3.1 Amended and Restated Certificate of Incorporation of the
Registrant (Incorporated by reference to Exhibit 3.1
forming a part of the Registrant's Registration Statement
on Form SB-2 (File No. 333-20625) filed with the
Securities and Exchange Commission under the Securities
Act of 1933, as amended).
3.2 Amended and Restated Bylaws of the Registrant (Incorporated
by reference to Exhibit 3.2 forming a part of the
Registrant's Registration Statement on Form SB-2 (File
No. 333-20625) filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended).
4.1 Form of Warrant for the Purchase of Shares of Common Stock,
issued in connection with the private placement of
$2,000,000 aggregate principal amount of Bridge Notes
(Incorporated by reference to Exhibit 3.4 forming a part
of the Registrant's Registration Statement on Form SB-2
(File No. 333-20625) filed with the Securities and
Exchange Commission under the Securities Act of 1933, as
amended).
4.2 Form of Warrant to Purchase Common Stock of the Registrant,
issued in connection with the private placement of units
in June 1995 and August 1996 (Incorporated by reference
to Exhibit 3.5 forming a part of the Registrant's
Registration Statement on Form SB-2 (File No. 333-20625)
filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended).
4.3 Form of Warrants for the Purchase of 100,000 Shares of
Common Stock, $.01 par value per share, issued in
connection with the private placement of Series A
Convertible Preferred Stock and warrants in December 1996
and January 1997 (Incorporated by reference to Exhibit
3.7 forming a part of the Registrant's Registration
Statement on Form SB-2 (File No. 333-20625) filed with
the Securities and Exchange Commission under the
Securities Act of 1933, as amended).
4.4 Form of Option for the Purchase of 180,000 Shares of Common
Stock issued to Barington Capital Group, L.P.
(Incorporated by reference to Exhibit 3.8 forming a part
of the Registrant's Registration Statement on Form SB-2
(File No. 333-20625) filed with the Securities and
Exchange Commission under the Securities Act of 1933, as
amended).
4.5 Form of Stock Option Agreement, dated December 18, 1997, by
and between the Registrant and Barington Capital Group,
L.P. (Incorporated by reference to Exhibit 10.8 forming a
part of the Registrant's Annual Report on Form 10-KSB for
the year ended December 31, 1997).
4.6 Specimen certificate evidencing shares of Common Stock of
the Registrant (Incorporated by reference to Exhibit 4.2
to the Registrant's Registration Statement on Form SB-2
(File No. 333-20625) filed with the Securities and
Exchange Commission under the Securities Act of 1933, as
amended).
4.7 Form of 5% Convertible Debentures due 2003 of the Registrant
(Incorporated by reference to Exhibits 4.3 and 4.4
forming a part of the Company's Current Report on Form
8-K dated July 1, 1998 and filed July 16, 1998 with the
Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended).
4.8 Form of Warrants to be issued upon redemption of the 5%
Cumulative Convertible Debentures due 2003 of the
Registrant (Incorporated by reference to Exhibit 4.5
forming a part of the Company's Current Report on Form
8-K dated July 1, 1998 and filed July 16, 1998 with the
Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended).
4.9 Specimen certificate evidencing shares of the Series B 5%
Cumulative Convertible Preferred Stock of the Company.
</TABLE>
<PAGE> 39
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
4.10 Certificate of Designations of the Company's Series B 5%
Cumulative Convertible preferred stock of the Company.
4.11 Form of Warrant issued in connection with the Series 5%
Cumulative Convertible Stock of the Company.
5 Opinion of Shaw, Pittman, Potts & Trowbridge as to the
legality of the securities being registered.
23.1 Consent of Shaw, Pittman, Potts & Trowbridge (included as
part of Exhibit 5).
23.2 Consent of PricewaterhouseCoopers LLP
24 Power of Attorney (included on signature page to the
Registration Statement).
</TABLE>
<PAGE> 1
EXHIBIT 4.9
OBJECTIVE COMMUNICATIONS, INC.
TOTAL AUTHORIZED ISSUE See Reverse for
807,693 SHARES $.01 PER SHARE PAR VALUE Certain Definitons
SERIES B
5% CUMULATIVE CONVERTIBLE PREFERRED STOCK
THIS IS TO CERTIFY THAT SPECIMEN IS THE OWNER OF (NUMBER OF SHARES)
------------- ----------------------
fully paid and non-assessable shares of the above Corporation transferable only
on the books of the Corporation by the holder hereof in person or by duly
authorized Attorney upon surrender of this Certificate properly endorsed.
WITNESS, the seal of the Corporation and the signatures of its duly authorized
officers.
DATED (DATE)
- ------------------------- -------------------------
SECRETARY PRESIDENT
<PAGE> 2
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ______ Custodian _______
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
Act_______________
JT TEN - as joint tenants with right of (State)
survivorship and not as tenants
in common
Additional abbreviations may also be used though not in the above list
</TABLE>
For value received _______ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------- Shares
represented by the within Certificate, and do hereby irrevocably
constitute and appoint
- ----------------------------------------------------------------------- Attorney
to transfer the said Shares on the books of the within named
Corporation with full power of substitution in the premises.
Dated 19
--------------------- -------
In presence of
------------------------------------
- ---------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME
AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE> 1
EXHIBIT 4.10
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES B 5% CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
OBJECTIVE COMMUNICATIONS, INC.
Objective Communications, Inc. (the "COMPANY") a corporation organized
and existing under the General Corporation Law of the State of Delaware (the
"DGCL"), does hereby certify that, pursuant to authority conferred upon the
Board of Directors of the Company by the Certificate of Incorporation of the
Company, and pursuant to Section 151 of the DGCL, the Board of Directors of
the Company at a meeting duly held, adopted resolutions (i) authorizing a
series of the Company's previously authorized preferred stock, par value
$0.01 per share, and (ii) providing for the designations, preferences and
relative, participating, optional or other rights, and the qualifications,
limitations or restrictions thereof, of the shares of Series B 5% Cumulative
Convertible Preferred Stock of the Company, as follows:
RESOLVED, that the Company is authorized to issue up to Nine-Hundred
and Fifty-Four Thousand Five-Hundred and Forty-Five (954,545) shares of
Series B 5% Cumulative Convertible Preferred Stock (the "SERIES B PREFERRED
STOCK"), par value $0.01 per share, with an initial stated value of $5.50 per
share (the "STATED VALUE"), which shall have the following powers,
designations, preferences and other special rights:
1. Dividends. (a) Each share of Series B Preferred Stock
shall be entitled to receive, in preference to the holders of Junior
Securities (as defined herein), cumulative annual dividends at the rate of
5.0% per annum on the Stated Value thereof. Such dividends shall be due and
payable annually in arrears on the annual anniversary date of the date on
which the shares of Series B Preferred Stock are issued (the "DATE OF
ISSUANCE") (each, a "DIVIDEND PAYMENT DATE"), commencing in 1999. Dividends
shall accumulate daily on each share of Series B Preferred Stock from the
Issuance Date (as defined herein), whether or not earned or declared, until
such share of Series B Preferred Stock has been converted or redeemed as
herein provided. To the extent dividends are not paid on the applicable
Dividend Payment Date, such dividends shall be cumulative and shall compound
annually until the date of payment of such dividends. The dividends so
payable will be paid to the person in whose name the applicable shares of
Series B Preferred Stock (or one or more predecessor shares) are registered
on the records of the Company regarding registration and transfers of the
Series B Preferred Stock (the "PREFERRED STOCK REGISTER"); provided, however,
that the Company's obligation to a transferee of a share of Series B
Preferred Stock arises only if such transfer, sale or other disposition is
made in accordance with the terms and conditions hereof and the Subscription
Agreement, by and between the Company and the Subscribers set forth on the
signature pages thereof (the "SUBSCRIPTION AGREEMENT").
<PAGE> 2
(b) The dividends are payable in shares of Series B
Preferred Stock to the person in whose name the applicable share(s) of Series
B Preferred Stock is duly registered on the Preferred Stock Register (the
"HOLDER") on the tenth day prior to the applicable Dividend Payment Date and
at the address last appearing on the Preferred Stock Register as designated
in writing by such Holder thereof from time to time. Such dividends on the
shares of Series B Preferred Stock shall be paid on any Dividend Payment Date
by increasing the Stated Value of the Series B Preferred Stock by the amount
of such dividend such that the amount of such increase in the Stated Value is
equal to the amount of the cash dividend which would otherwise be paid on
such Dividend Payment Date if such dividend were to be paid in cash. Any
such increase in the Stated Value shall constitute full payment of such
dividend. When any dividend is added to the Stated Value, such dividend
shall, for all purposes of the Series B Preferred Stock, be deemed to be part
of the Stated Value for purposes of determining dividends thereafter payable
hereunder and amounts thereafter convertible into Common Stock hereunder, and
all references herein to the Stated Value shall mean the Stated Value, as
adjusted pursuant to these provisions.
(c) The Company will provide notice setting forth the new
Stated Value to each Holder (a "DIVIDEND NOTICE") within fifteen (15) days
subsequent to the applicable Dividend Payment Date.
2. Preferred Rank.
(a) The Series B Preferred Stock shall, with respect to
rights upon liquidation, winding up or dissolution, and dividend rights rank
senior and prior in right to (i) each class of common stock, par value $.01
per share (the "Common Stock") of the Corporation, and (ii) any other equity
interest (including without limitation, warrants, stock appreciation rights,
phantom stock rights, or other rights with equity participation features, or
exercisable for or convertible into such capital stock or equity interests)
in the Corporation that by its terms ranks junior to the Series B Preferred
Stock (all such classes or series of capital stock or other equity interests
referred to in clauses (i) and (ii) hereof are collectively referred to as
"JUNIOR SECURITIES").
(b) The Series B Preferred Stock shall, with respect to
rights upon liquidation, winding up or dissolution, and dividend rights be
pari passu with (i) any series of preferred stock hereafter created, unless
such series by its terms ranks junior to the Series B Preferred Stock, and
(ii) any other equity interest (including without limitation, warrants, stock
appreciation rights, phantom stock rights, or other rights with equity
participation features, or exercisable for or convertible into such capital
stock or equity interests) in the Corporation hereafter created that by its
terms ranks on a par with or pari passu with the Series B Preferred Stock
(all such classes or series of capital stock or other equity interests
referred to in clauses (i) and (ii) hereof are collectively referred to as
"PARITY SECURITIES").
(c) Without the prior express written consent of the
holders of not less than two-thirds (2/3) of the then outstanding shares of
Series B Preferred Stock, the Company shall not hereafter (i) issue any
additional shares of Series B Preferred Stock, (ii) authorize or issue any
capital stock that is of senior rank to the Series B Preferred Stock in
respect of dividend rights or the preferences as to distributions and
payments upon the liquidation, dissolution,
2
<PAGE> 3
winding up or otherwise of the Company, (iii) authorize or issue any Parity
Securities (as hereinafter defined) 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 Series B Preferred
Stock relative to the holders of Parity Securities or the holders of any other
class of capital stock.
(c) In the event of the merger, consolidation or other
business combination of the Company with or into another corporation, the
Series B Preferred Stock shall maintain its relative powers, designations and
preferences provided for herein and no merger, consolidation or other
business combination shall cause a result inconsistent therewith.
3. Transfers. The shares of Series B Preferred Stock 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 share of
Series B Preferred Stock, 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.
4. Definitions. For purposes hereof the following definitions
shall apply:
"AGGREGATE VALUE" shall mean for each share of Series B Preferred
Stock, the sum of (a) the Stated Value thereof, plus (b) accumulated but
unpaid dividends thereon (whether or not earned or declared).
"AUTOMATIC CONVERSION EVENT" shall mean that for fifteen (15)
consecutive trading days subsequent to the Issuance Date the Closing Price of
one share of Common Stock has equalled or exceeded $11.00.
"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);
(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
3
<PAGE> 4
(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 $5.50. The Conversion Price shall
be subject to adjustment from time to time ratably for any events set forth
in Paragraph 8 hereof.
"CONVERSION RATE" shall mean the number of shares of Common Stock
issuable upon conversion of each share of Series B Preferred Stock determined
by the application of the following formula where D equals the accumulated
but unpaid dividends (whether or not earned or declared) for each share of
Series B Preferred Stock (not previously added to the Stated Value pursuant
to Paragraph 1 hereof) as of the Automatic Conversion Date (as defined in
Paragraph 6A) or Holder Conversion Date (as defined in Paragraph 6B):
Stated Value + D
----------------------
Conversion Price
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"ISSUANCE DATE" shall mean the initial date of issuance of the
Series B Preferred Stock.
"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 shares of Series B Preferred Stock.
"SEC" shall mean the Securities and Exchange Commission and any
successor entity thereto.
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<PAGE> 5
5. Paragraph 5 Transactions. If at any time (i) there occurs
any merger, consolidation or other business combination of the Company, with
or into any other corporation, 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 Series B Preferred
Stock then outstanding may participate in any such transaction as a class
with the common stockholders on the same basis as if the Series B Preferred
Stock had been converted one day prior to the announcement date (or record
date for such distribution, dividend or offer) of such transaction.
6A. Automatic Conversion. (a) In the event that an Automatic
Conversion Event occurs, all shares of Series B Preferred Stock then
outstanding shall be automatically converted into fully paid, validly issued
and nonassessable shares of Common Stock determined in accordance with the
terms of this Certificate of Designations by application of the then
applicable Conversion Rate. For purposes hereof the date of conversion shall
be the trading date immediately succeeding the Automatic Conversion Event
(the "AUTOMATIC CONVERSION DATE").
(b) Upon the Company's determination that an Automatic
Conversion Event has occurred, the Company shall give the Holders written
notice of such event within fifteen (15) days subsequent to the Automatic
Conversion Date. Such notice shall specify (i) the Automatic Conversion Date
and (ii) the place or places to which stock certificates representing the
shares of Series B Preferred Stock are to be surrendered for conversion.
Such conversion shall be effected as of the Automatic Conversion Date in
accordance with and pursuant to the terms of this Certificate of Designations
and in accordance with the procedures set forth in Section 6B(b) of this
certificate; provided however, that the Holder shall not be obligated to
provide the Conversion Notice to the Company.
(c) 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 Automatic
Conversion Date.
(d) Each certificate representing shares of Series B
Preferred Stock surrendered to the Company for conversion pursuant to this
Paragraph 6A shall, on the Automatic Conversion Date and subject to issuance
of the shares of Common Stock issuable upon conversion be cancelled and
retired by the Company.
6B. Conversion at the Option of the Holder. The Holder shall
have the following conversion rights:
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<PAGE> 6
(a) Shares of Series B Preferred Stock shall be
convertible at any time 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) In order to convert any shares of Series B Preferred
Stock (in whole or in part) into full shares of Common Stock, the applicable
Holder shall surrender the stock certificate(s) representing the shares of
Series B Preferred Stock 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 1 (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 the number of shares of Series B Preferred Stock (plus
accumulated but unpaid dividends 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 stock
certificate(s) evidencing the shares of Series B Preferred Stock 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
16. If fewer than all of the shares 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 shares, to the same
extent as if the certificate theretofore representing such unconverted shares
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
stock certificate(s) evidencing the shares of Series B Preferred Stock being
converted, or after receipt of the affidavit, agreement and indemnification
as set forth in Paragraph 16, 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 new stock certificate evidencing the
number of shares of Series B Preferred Stock, if any, not covered by the
Conversion Notice. 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.
(d) Each certificate representing shares of Series B
Preferred Stock surrendered to the Company for conversion pursuant to this
Paragraph 6B 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 Series B Preferred Stock pursuant to this Paragraph
6B, the shares of Series B Preferred Stock 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
accumulating dividends thereon. Such
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<PAGE> 7
shares of Series B Preferred Stock shall be retired and shall not be subject to
reissuance by the Company.
7. Maturity.
(a) On the date that is the sixth anniversary of the
Issuance Date (the "MATURITY DATE"), the Company shall have the option, in
its sole and absolute discretion, to either (i) cause the shares of Series B
Preferred Stock 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 Certificate of Designations
by application of the then applicable Conversion Rate; or (ii) redeem all of
the shares of Series B Preferred Stock then outstanding at the Aggregate
Value per share.
(b) In the event that the Company elects, pursuant to
paragraph 7(a) of this Certificate of Designation, to cause the outstanding
shares of Series B Preferred Stock 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
stock certificates representing the shares of Series B Preferred Stock 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 of Designation at the then applicable Conversion Rate and in
accordance with the procedures set forth in Section 6B(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 of Designation, to redeem the outstanding
shares of Series B Preferred 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,
(ii) the place or places to which stock certificates representing the Series
B Preferred Stock are to be surrendered for redemption, and (iii) the
redemption price, which shall be equal to the Aggregate Value per share of
Series B Preferred Stock as of the Maturity Date. In order to redeem any
share of Series B Preferred Stock, the applicable Holder shall surrender the
stock certificate(s) representing the share of Series B Preferred Stock
called for redemption, by either overnight courier or two-day courier, to the
place or places specified in the written notice of redemption, and the
Company shall redeem such shares of Series B Preferred Stock (plus any
accumulated but unpaid dividend 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 share of Series
B Preferred Stock 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 16.
(d) Each certificate representing shares of Series B
Preferred Stock 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
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<PAGE> 8
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 shares of
Series B Preferred Stock pursuant to this Paragraph 7, or payment or setting
aside for payment of the redemption price payable upon redemption of the shares
of Series B Preferred Stock pursuant to this Paragraph 7, as the case may be,
the shares of Series B Preferred Stock 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
accumulating dividends thereon.
(e) If the Company elects to cause the Series B Preferred
Stock 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 stock certificate(s) evidencing the shares of
Series B Preferred Stock, or after receipt of the affidavit, agreement and
indemnification described in Paragraph 16, 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 Series B Preferred
Stock to be converted pursuant to this Paragraph 7, the Maturity Date shall
be deemed a "Holder Conversion Date" for purposes of the Series B Preferred
Stock.
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 Issuances. (i) 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 Conversion Price is otherwise
provided for pursuant to this Section 8, (ii) upon any issuance of securities
pursuant to this offering of Series B Preferred Stock or the related warrants
granted in connection therewith or the exercise or conversion of securities
so issued, (iii) upon exercise of any other outstanding warrants or
convertible securities issued by the Company, or (iv) 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 Conversion Price shall be reduced on the date of such issuance to a price
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<PAGE> 9
(calculated to the nearest cent) determined by multiplying the Conversion
Price in effect 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 Conversion
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 Conversion 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 Conversion Price
shall be readjusted (but only with respect to the Series B Preferred Stock if
converted after such expiration or termination) to such Conversion 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 8(b)(i) 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.
(ii) For the purpose of any computation under this
Section 8(b), 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.
(iii) No adjustment in the Conversion Price shall be
required if such adjustment is less than $.05; provided, however, that any
adjustments which by reason of this
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<PAGE> 10
Section 8(b) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 8(b)
shall be made to the nearest cent or to the nearest one-thousandth of a share,
as the case may be.
(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 Series B Preferred Stock 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 Automatic
Conversion Date or 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 Series B Preferred Stock if the
Automatic Conversion Date or 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 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 Series B
Preferred Stock 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 a
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 shares of Series B Preferred
Stock 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 to ensure
that each of the Holders of the Series B Preferred Stock 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 Series B Preferred Stock, 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 Series B
Preferred Stock 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
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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.
(e) 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 shares of
Series B Preferred Stock 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 shares of Series B Preferred Stock 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.
(f) 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 Series B Preferred Stock; provided, however, that no such
adjustment will increase the Conversion Price as otherwise determined
pursuant to this Paragraph 8.
(g) 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.
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(h) Schedule of Computations. The Company shall provide
written notice to the Holders of all adjustments pursuant to this Paragraph 8
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. 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 shares of Series B Preferred
Stock, 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 shares of Series B
Preferred Stock pursuant hereto.
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 Series B Preferred Stock.
12. Voting Rights. The Holders shall have no voting rights,
except as required by law, including but not limited to the DGCL, and as
expressly provided herein.
13. Liquidation, Dissolution, Winding-Up. (a) In the event of
any voluntary or involuntary liquidation, dissolution or winding up of the
Company, the Holders shall be entitled to receive in cash out of the assets
of the Company, whether from capital or from earnings available for
distribution to its stockholders (the "PREFERRED FUNDS"), before any amount
shall be paid to the Holders of any Common Stock or any Junior Securities, an
amount per share of Series B Preferred Stock equal to the Aggregate Value
(the "LIQUIDATION VALUE"); provided that, if the Preferred Funds are
insufficient to pay the full amount due to the Holders and any holders of
Parity Securities, then each Holder and each Holder of Parity Securities
shall receive a ratable percentage of the Preferred Funds in accordance with
respective amounts that would be payable in full to such holder as a
liquidation preference, in accordance with their respective Certificate of
Designations, Preferences and Rights.
(b) The purchase or redemption by the Company of stock of
any class, in any manner permitted by law, shall not, for the purposes
hereof, be regarded as liquidation, dissolution or winding up of the
Company. Neither the consolidation or merger of the Company with or into any
other person, nor the sale or transfer by the Company of less than
substantially all of its assets, shall, for the purposes hereof, be deemed to
be a liquidation, dissolution or winding up of the Company.
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(c) No Holder shall be entitled to receive any amounts
with respect thereto upon my liquidation, dissolution or winding up of the
Company other than the amounts provided for herein.
14. No Reissuance of Series B Preferred Stock. No shares of
Series B Preferred Stock acquired by the Company by reason of redemption,
purchase, conversion or otherwise shall be reissued and all such Series B
Preferred Stock shall be retired.
15. No Impairment. The Company shall not intentionally take
any action which would impair the rights and privileges of the Series B
Preferred Stock set forth herein or the rights of the Holders thereof.
16. Replacement Certificate. In the event that any Holder
notifies the Company that a stock certificate evidencing shares of Series B
Preferred Stock has been lost, stolen, destroyed or mutilated, the Company
shall issue a replacement stock certificate evidencing the shares of Series B
Preferred Stock 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
Series B Preferred Stock, 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 Series B Preferred Stock stock
certificate; provided, however, the Company shall not be obligated to
re-issue replacement stock 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.
17. Compliance With Federal and State Securities Laws.
Notwithstanding any other provision in this Certificate of Designations, 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 Act), if
applicable.
18. Notices. All notices to the Holders of Series B Preferred
Stock will be mailed to registered holders of Series B Preferred Stock at
their registered addresses as the same shall appear in the Preferred Stock
Register on the day fifteen days prior to such mailing.
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19. Descriptive Headings. The descriptive headings appearing
herein are for convenience of reference only and shall not alter, limit or
define the provisions hereof.
IN WITNESS WHEREOF, the Company has caused this Certificate of
Designation to be duly executed by an officer thereunto duly authorized this
___ day of __________, 1998.
OBJECTIVE COMMUNICATIONS, INC.
By:
-----------------------------
Name:
Title:
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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EXHIBIT 1
CONVERSION NOTICE
Reference is made to the Certificate of Designations, Preferences and Rights
(the "CERTIFICATE OF DESIGNATION") of Objective Communications, Inc., a
Delaware corporation (the "COMPANY"). In accordance with and pursuant to the
Certificate of Designation, the undersigned hereby elects to have the Company
convert the number of shares of Series B Cumulative Convertible Preferred
Stock, par value $.01 per share (the "SERIES B PREFERRED STOCK"), of the
Company, indicated below into shares of Common Stock, par value $.01 per
share (the "COMMON STOCK"), of the Company, by tendering the stock
certificate(s) representing the Series B Preferred Stock specified below as
of the date specified below.
Date of Conversion:
--------------------------------
Number of Series B Preferred Stock
to be converted:
--------------------------------
Stock Certificate no(s). of Series B
Preferred Stock to be converted:
--------------------------------
Please confirm the following information:
Conversion Price:
--------------------------------
Please issue the Common Stock and, if applicable, any check drawn on an
account of the Company into which the Series B Preferred Stock are being
converted in the following name and to the following address:
Issue to:
--------------------------------
--------------------------------
--------------------------------
--------------------------------
Facsimile Number:
--------------------------------
Authorization:
--------------------------------
By:
-----------------------------
Title:
--------------------------
Dated:
-----------
15
<PAGE> 1
EXHIBIT 4.11
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 $6.00 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.
W I T N E S S E T H
<PAGE> 2
A. This Warrant is one of several warrants being issued in connection with
the Company's sale and issuance (the "Offering") of ___________ shares of Series
B 5% Cumulative Convertible Preferred Stock (the "Series B Preferred Stock").
Such Warrant, together with the other warrants purchased in connection with the
Offering of Series B Preferred Stock, entitle the holders to subscribe for and
purchase a total of _______________ shares of the Company's Common Stock.
B. 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.
1. 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. 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.
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 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
2
<PAGE> 3
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 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
3
<PAGE> 4
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 majority-owned subsidiary shall not be deemed outstanding
for the purpose of any such computation.
(c) 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) or 5(b), above, (ii) upon
any issuance of securities pursuant to
4
<PAGE> 5
this offering of Warrants and Series B Preferred Stock or
the exercise or conversion 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 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
5
<PAGE> 6
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(c) 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.
(d) 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 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.
(e) 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.
(f) 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.
(g) Upon each adjustment of the Exercise Price as a result of the
calculations made in Sections 5(b) or 5(c) 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
6
<PAGE> 7
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.
(h) 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.
(i) 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 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
7
<PAGE> 8
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
(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
<PAGE> 9
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:
"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.
9
<PAGE> 10
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 (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:
10
<PAGE> 11
Title:
[Seal]
- -------------------------------------
11
<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, by certified
or bank cashier's check, in the aggregate amount of $________ 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, 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 5
September 4, 1998
Objective Communications, Inc.
50 International Drive
Portsmouth, New Hampshire 03801
Ladies and Gentlemen:
We have acted as counsel for Objective Communications, Inc., a
Delaware corporation (the "Company"), in connection with preparation and filing
by the Company with the Securities and Exchange Commission of the Registration
Statement on Form S-3 under the Securities Act of 1933, as amended (the
"Registration Statement"), relating to the sale, from time to time, by certain
selling stockholders identified in such Registration Statement (the "Selling
Stockholders"), or pledgees, donees, transferees or other successors in
interest, in the manner described in the prospectus (the "Prospectus") which
forms a part of the Registration Statement, of up to an aggregate of 921,242
shares of common stock, par value $.01 per share, of the Company (the "Common
Stock"). The shares of Common Stock registered under the Registration Statement
consist of (i) 746,242 shares of Common Stock issuable upon the conversion of
the $3.125 million aggregate principal amount of 5% Cumulative Convertible
Debentures due 2003 (the "5% Convertible Debentures") issued by the Company in a
private placement in July 1998, and (ii) 175,000 shares of Common Stock issuable
upon the exercise of warrants that may be issued by the Company upon the
optional redemption by the Company of the 5% Convertible Debentures.
Based upon our examination of the originals or copies of such
documents, corporate records, certificates of officers of the Company and such
other instruments as we have deemed necessary, and upon the laws as presently in
effect, we are of the opinion that the shares of Common Stock to be sold by the
Selling Stockholders in the manner described in the Prospectus under the
captions "Selling Stockholders" and "Plan of Distribution" have been duly
authorized for issuance by the Company and, upon issuance and delivery in
accordance with the terms described in the Prospectus, will be validly issued,
fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus.
Sincerely,
Shaw, Pittman, Potts & Trowbridge
By: Ellen C. Grady, P.C.
/s/ ELLEN C. GRADY
----------------------------------
By: Ellen C. Grady, President
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement of
Objective Communications, Inc. (a development stage enterprise) on Form S-3
(file No. 333-_____) of our report dated February 20, 1998 which includes an
explanatory paragraph on the Company's ability to continue as a going concern,
on our audits of the financial statements of Objective Communications, Inc. as
of December 31, 1997 and 1996, and for each of the three years in the period
ended December 31, 1997 and for the period October 5, 1993 (date of inception)
to December 31, 1997, which report is included in Objective Communications, Inc.
Annual Report on Form 10-KSB. We also consent to the reference to our firm under
the caption "Experts."
/s/ PRICEWATERHOUSECOOPERS LLP
-------------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 4, 1998
