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EXHIBIT 4.1
SUBSCRIPTION AGREEMENT
This Subscription Agreement (the "Agreement"), dated as of July 1,
1998, has been executed by the undersigned (the "Subscriber") in connection
with the offering and sale (the "Offering") of an aggregate of up to $2,500,000
aggregate principal amount 5% Convertible Debentures due 2003 (the
"Debentures") of Objective Communications, Inc., a Delaware corporation (the
"Company"), for a purchase price of $10,000 per Debenture, convertible into
shares of common stock, par value $.01 per share of the Company (the "Common
Stock"), and possessing such other rights and preferences as are set forth in
the form of debenture attached hereto as EXHIBIT A (the "Form of Debenture").
The solicitation of this Agreement and, if accepted by the Company, the offer
and sale of the Debentures, are being made in reliance upon the provisions of
Regulation D ("Regulation D") promulgated by the Securities and Exchange
Commission (the "SEC") under the United States Securities Act of 1933, as
amended (the "Securities Act"). The Debentures and the Common Stock issuable
upon conversion thereof are sometimes collectively referred to in this
Agreement as the "Securities."
The Common Stock issuable upon conversion of the Debentures is
sometimes referred to in this Agreement as the "Underlying Stock." Upon the
terms and subject to the conditions set forth herein, the Subscriber hereby
agrees to purchase, and the Company hereby agrees to issue and sell the
aggregate principal amount of Debentures set forth in this Agreement at the
aggregate purchase price set forth in Section 14. In consideration of the
mutual promises, representations, warranties and conditions set forth hereto,
and intending to be legally bound hereby, the Company and the Subscriber hereby
agree as follows:
1. Agreement to Subscribe; the Subscriber
1.1 Purchase and Issuance of Debentures. On the basis of the
representations and warranties contained in this Agreement and subject
to the terms and conditions hereinafter set forth, the Subscriber
hereby subscribes for the specified aggregate principal amount of
Debentures upon and subject to the conditions set forth elsewhere in
this Agreement and at the aggregate purchase price set forth in
Section 14. The closing of the purchase (the "Closing") shall occur
on July 8, 1998 (the "Closing Date"); provided that (a) the purchase
price has been delivered by the Subscriber to the Company, a mutually
acceptable escrow agent or as otherwise agreed between the parties (in
immediately available funds via a wire transfer pursuant to
instructions previously delivered for such purpose), (b) the principal
amount of Debentures subscribed for hereby shall have been issued and
delivered by the Company to the Subscriber, a mutually acceptable
escrow agent or as otherwise agreed between the parties and (c) all
other conditions precedent to the obligations of the Subscriber and
the Company set forth herein shall have been satisfied or waived in
writing.
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1.2 Nature of the Subscriber. The Subscriber is either purchasing the
Debentures for its own account or as an agent for a principal (under a
discretionary or similar account), in which case all of the
representations, warranties, covenants and agreements of the
Subscriber herein shall be deemed to apply to such principals and not
to the Subscriber and to have been made by such principal and not by
the Subscriber. In such case, the Subscriber so acting as agent
represents and warrants that (a) its principals have confirmed to the
Subscriber the accuracy of such representations and warranties with
respect to its principals, and (b) the Subscriber has full authority
to act on behalf of its principals in executing and delivering this
Agreement and consummating the transactions contemplated hereby.
1.3 Conditions Precedent to the Obligation of the Company to Sell the
Debentures. The obligation hereunder of the Company to issue and sell
the Debentures to the Subscriber is subject to the satisfaction, at or
before the Closing, of each of the conditions set forth below. Each
of these conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion.
(a) Accuracy of the Subscriber's Representations and Warranties.
The representations and warranties of the Subscriber shall be
true and correct as of the date when made and in all material
respects as of the Closing Date as though made at each such
time.
(b) Performance by the Subscriber. The Subscriber shall have
performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the
Subscriber at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits the consummation of
any of the transactions contemplated by this Agreement, and no
valid proceeding shall have been commenced which may have the
effect of prohibiting or adversely affecting any of the
transactions contemplated hereby.
(d) Legal Investment. At the time of the Closing, the purchase of
the Securities by the Subscriber shall be legally permitted by
all statutes, rules and regulations to which the Subscriber
and the Company are subject.
(e) Officer's Certificate. The Subscriber shall have delivered to
the Company a certificate in form and substance reasonably
satisfactory to the Company, executed by an authorized
representative of the Subscriber, to the effect that all the
conditions to the Closing shall have been satisfied and that
the representations and warranties of the Subscriber contained
in the Agreement are true and correct in all material respects
on and as of the date hereof with the same force and effect as
though such representations and warranties had been made on
the date hereof.
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1.4 Conditions Precedent to the Obligation of the Subscriber to Purchase
the Debentures. The obligation of the Subscriber hereunder to acquire
and pay for the Debentures is subject to the satisfaction, at or
before the Closing, of each of the following conditions. Each of these
conditions is for the Subscriber's sole benefit and may be waived in
writing by the Subscriber at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company shall be true
and correct as of the date when made and in all material
respects as of the Closing Date as though made at each such
time.
(b) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all
covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits or adversely effects
any of the transactions contemplated by this Agreement, and no
proceeding shall have been commenced which may have the effect
of prohibiting or adversely affecting any of the transactions
contemplated hereby.
(d) Adverse Changes. For the period from December 31, 1997 until
Closing, except as (i) publicly disclosed in Company press
releases or filings (the "Exchange Act Reports") pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), (ii) issued or made on or prior to the date hereof
listed on Schedule 1.4(d) hereto (collectively, "Prior Public
Disclosures"), or (iii) disclosed to the Subscriber and
acknowledged in writing by the Company and the Subscriber, no
event shall have occurred or be threatened to occur which has
had or is likely to have a Material Adverse Effect (as defined
in Section 3.6 hereof) on the Company; provided, however, that
the parties hereto acknowledge and agree that the Subscriber
has had an opportunity to review the draft press release of
the Company dated July 1, 1998, a copy of which is attached
hereto as part of Schedule 1.4(d), and that the Subscriber has
had an opportunity to ask questions of the Company regarding,
and receive all information requested with respect to, the
matters discussed therein, and that the events discussed
therein shall be deemed by the parties hereto not to
constitute a Material Adverse Change that would give rise to
the Subscriber the right not to acquire and pay for the
Debentures.
(e) No Suspension of Trading in or Delisting of Common Stock. The
trading in the Common Stock shall not have been suspended by
the SEC or the National Association of Securities Dealers,
Inc. (the "NASD"); the Common Stock shall
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not have been delisted from the Nasdaq National Market (the
"Nasdaq NM"); and trading in securities generally as reported
by the Nasdaq NM shall not have been suspended or limited or
minimum prices shall not have been established on securities
whose trades are reported by the Nasdaq NM.
(f) Legal Opinion. The Company shall have delivered to the
Subscriber opinions of independent counsel to the Company,
each substantially in the form of EXHIBIT C attached hereto.
(g) Officer's Certificate. The Company shall have delivered to
the Subscriber a certificate in form and substance reasonably
satisfactory to the Subscriber, executed by an executive
officer of the Company, to the effect that all the conditions
to the Closing shall have been satisfied and that the
representations and warranties of the Company contained in the
Agreement are true and correct in all respects on and as of
the date hereof with the same force and effect as though such
representations and warranties had been made on the date
hereof.
(h) Registration Rights Agreement. The Company and the Subscriber
shall have entered into the Registration Rights Agreement
contemplated by Section 5.1.
(i) Debentures. The Company shall have executed the Debentures
substantially in the form attached hereto in the Form of
Debenture.
(j) Reservation of Shares. The Company shall have reserved such
number of shares of Common Stock as required pursuant to
Section 5.2.
(k) Legal Investment. At the time of the Closing, the purchase of
the Securities by the Subscriber shall be legally permitted by
all statutes, rules and regulations to which the Subscriber
and the Company are subject.
(l) Co-Investment. Certain officers and/or directors of the
Company shall have completed, or shall complete simultaneously
with the Closing, a purchase of at least $500,000 aggregate
principal amount of the Company's 5% Senior Promissory Notes
which shall have terms substantially similar to those set
forth in Exhibit B hereto.
(m) Amount of Investment. The Subscriber shall be obligated to
purchase the lesser of (i) $2,500,000 aggregate principal
amount of the Debentures or (ii) the aggregate principal
amount of Debentures equal to 15% of the market capitalization
of the Company determined one business day prior to the
Closing Date.
(n) Other Matters. The Company shall have delivered to the
Subscriber a certificate of good standing and tax status of
the Company certified as of a recent date by the Secretary of
State of the State of Delaware, and from each other
jurisdiction in which the Company is qualified to do business.
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2. Representations and Warranties of Subscriber
The Subscriber represents and warrants to the Company that:
2.1 No Government Recommendation or Approval. The Subscriber understands
that no United States federal or state agency or similar agency of any
other country, has passed upon or made any recommendation or
endorsement of the Company or of the Offering.
2.2 Intent. The Subscriber is purchasing the Securities for its own
account and not with a view towards distribution and the Subscriber
has no present arrangement to sell the Debentures or the Underlying
Stock to or through any person or entity; provided, however, that by
making the representation herein, the Subscriber does not agree to
hold the Securities for any minimum or other specific term and
reserves the right to dispose of the Securities at any time in
accordance with federal and state securities laws applicable to such
disposition. The Subscriber understands that the Securities must be
held indefinitely unless such Securities are subsequently registered
under the Securities Act or an exemption from registration is
available. The Subscriber has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act.
2.3 Sophisticated Investor. The Subscriber is an "accredited investor"
(as defined in Rule 501 of Regulation D), and the Subscriber has such
experience in business and financial matters that it is capable of
evaluating the merits and risks of an investment in the Securities.
The Subscriber acknowledges that the Securities are speculative,
illiquid and involve a high degree of risk.
2.4 Independent Investigation. The Subscriber, in making the decision to
purchase the Debentures subscribed for hereunder, has relied upon an
independent investigation made by it and/or its representatives and
has not relied on any information or representations made by third
parties or on any oral or written representations or assurances from
the Company or any representative or agent of the Company other than
as set forth in this Agreement, the Registration Rights Agreement, the
Debenture and the Prior Public Disclosures. The Subscriber has had a
reasonable opportunity to ask questions of, and receive answers and
documents from, the Company concerning the Company and the Offering.
The Subscriber acknowledges that the price and terms of the Debentures
offered hereby have been determined by negotiation based in part on
the market price for the Common Stock, and that it does not
necessarily bear any relationship to the assets, book value or
potential performance of the Company or any other recognized criteria
of value.
2.5 Authority. This Agreement has been duly authorized and validly
executed and delivered by the Subscriber and is a valid and binding
agreement enforceable in accordance with its terms, subject to general
principles of equity and to bankruptcy or other laws affecting the
enforcement of creditors' rights generally.
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2.6 No Legal Advice from Company. The Subscriber acknowledges that it has
had the opportunity to review this Agreement and the transactions
contemplated by this Agreement with its own legal counsel and
investment and tax advisors. Except for any statements or
representations of the Company made in this Agreement, the
Registration Rights Agreement, the Debenture and the legal opinion
called for by Section 1.4 hereof, the Subscriber is relying solely on
such counsel and advisors and not on any statements or representations
of the Company or any of its representatives or agents for legal, tax
or investment advice with respect to this investment, the transactions
contemplated by this Agreement or the securities laws of any
jurisdiction.
2.7 No Brokers. The Subscriber has taken no action which would give rise
to any claim by any person for brokerage commissions, finder's fees or
similar payments by the Company relating to this Agreement or the
transactions contemplated hereby.
2.8 Not an Affiliate. The Subscriber is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of Securities Act) of
the Company.
2.9 Reliance on Representations and Warranties. The Subscriber
understands that the Debentures are being offered and sold to it in
reliance on specific provisions of United States federal and state
securities laws and that the Company is relying upon the truth and
accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Subscriber set forth in this
Agreement in order to determine the applicability of such provisions.
3. Representations and Warranties of Company
The Company represents and warrants to the Subscriber that:
3.1 Company Status. The Company has registered its Common Stock pursuant
to Section 12(g) of the Exchange Act, is in full compliance with all
reporting requirements of the Exchange Act, and the Company has
maintained all requirements for the continued listing of its Common
Stock, and such Common Stock is currently listed, on the Nasdaq NM.
3.2 Current Public Information. The Exchange Act Reports are the only
filings made by the Company with the SEC since March 31, 1998 pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act. The
Exchange Act Reports have been filed with the SEC on a timely basis.
3.3 No Directed Selling Efforts or General Solicitation in Regard to this
Transaction. The Company has not conducted any general solicitation
(as that term is used in Regulation D) with respect to any of the
Securities, nor has it made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that
would require registration of the Securities under the Securities Act.
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3.4 Valid Issuance of Capital Stock. (a) The Company has an authorized
capitalization consisting of 30,000,000 shares of Common Stock, par
value $.01 per share, and 2,500,000 shares of preferred stock, par
value $.01 per share. The Company has issued and outstanding on the
date hereof (i) 5,741,035 shares of Common Stock, none of which shares
are held in treasury and (ii) no shares of preferred stock. As of the
date hereof, the Company has outstanding the following securities
convertible into or exercisable or exchangeable for Common Stock (the
"Derivative Securities"): warrants to purchase 732,332 shares of
Common Stock and options to purchase 1,548,700 shares of Common Stock.
From the date hereof to the Closing, there will be no changes in the
authorized capital stock or Derivative Securities, except as
contemplated by this Agreement and except upon the exercise of
outstanding Derivative Securities.
(b) All of the issued shares of capital stock of the Company have
been duly and validly authorized and issued and are fully paid and
non-assessable; prior to the Closing Date, the Debentures shall be
authorized; the shares of Underlying Stock issuable upon conversion of
the Debentures, when issued and delivered in accordance with the terms
of the Debentures, will be duly and validly issued, obligations of the
Company enforceable against the Company in accordance with their
terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of
equity (regardless of whether such enforceability is considered in a
proceeding at equity or at law) and shares of Common Stock have been
duly reserved for issuance upon the exercise thereof pursuant to the
conversion rights set forth in the Debentures; and the holders of
outstanding capital stock of the Company are not and shall not be
entitled to preemptive or other rights afforded by the Company to
subscribe for the capital stock or other securities of the Company as
a result of the sale of the Debentures or the issuance of Underlying
Stock upon the conversion thereof. Other than as set forth in this
Section and the 500,000 shares of Series A Convertible Preferred
Stock, par value $.01 per share, previously authorized by the board of
directors of the Company (the "Board of Directors"), there are no
classes or series of preferred stock authorized, issued or reserved
for issuance. There currently are no shares of Series A Preferred
Stock, par value $.01 per share, of the Company issued and
outstanding. The Company will not issue any shares of its Series A
Preferred Stock, par value $.01 per share, for so long as the
Debentures remain outstanding.
3.5 Dilution. The number of shares of Common Stock issuable upon
conversion of the Debentures may increase substantially in certain
circumstances, including, but not necessarily limited to, the
circumstance wherein the trading price of the Common Stock declines
prior to conversion of the Debentures. The Company's executive
officers and directors have studied and fully understand the nature of
the Securities being sold hereby and recognize that they have a
potentially dilutive effect. The Board of Directors has concluded, in
its good faith business judgment, that such issuance is in the best
interest of the Company. The Company specifically acknowledges that
its obligation to issue the shares of Common Stock upon conversion of
the Debentures is binding upon the
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Company and enforceable regardless of the dilution such issuance may
have on the ownership interests of other stockholders of the Company.
3.6 Organization and Qualification. The Company is a corporation duly
incorporated and existing in good standing under the laws of the State
of Delaware and has the requisite corporate power to own its
properties and assets and to carry on its business as now being
conducted. The Company does not have any subsidiaries. The Company
is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification
necessary other than those in which the failure so to qualify would
not have a Material Adverse Effect. "Material Adverse Effect" means
any material adverse effect on the business, operations, properties or
financial condition of the Company.
3.7 Authorization; Enforcement. (a) The Company has the requisite
corporate power and authority to enter into and perform this Agreement
and the Registration Rights Agreement, to issue the Debentures in
accordance with the terms hereof and to perform its obligations under
the terms of the Debentures; (b) the execution and delivery of this
Agreement and the Registration Rights Agreement, the issuance and
delivery of the Debentures and the consummation by the Company of the
transactions contemplated hereby and thereby have been duly authorized
by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors or stockholders
is required (except the stockholder approval which may be required
under the non-quantitative maintenance requirements for Nasdaq NM
issuers); (c) this Agreement has been, and on or before the Closing
Date the Registration Rights Agreement and the Debentures will be,
duly executed and delivered by the Company; and (d) this Agreement
constitutes, and upon execution and delivery thereof the Registration
Rights Agreement and the Debentures shall constitute legal, valid and
binding obligations of the Company enforceable against the Company in
accordance with their respective terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, or similar laws
relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general
application.
3.8 Corporate Documents. The Company has furnished or made available to
the Subscriber true and correct copies of the Company's Certificate of
Incorporation as in effect on the date hereof (the "Certificate of
Incorporation"), and the Company's By-Laws, as in effect on the date
hereof (the "By-Laws"; together with the Certificate of Incorporation,
the "Charter Documents"), certified in each case by the Secretary of
the Company.
3.9 No Conflicts. The execution, delivery and performance of this
Agreement, including the conversion of the Debentures into Common
Stock of the Company, the Registration Rights Agreement the issuance
of the Debentures and the Underlying Stock upon conversion of the
Debentures and the consummation by the Company of the transactions
contemplated hereby and thereby do not and will not (i) result in a
violation of the Charter Documents or (ii) result in the creation of
any lien, charge, security interest or encumbrance upon any of the
assets of the Company pursuant to the terms or provisions
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of or, conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the
Company is a party, or result in a violation of any federal, state,
local or foreign law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations)
applicable to the Company or by which any property or asset of the
Company is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have a Material
Adverse Effect). The business of the Company is not being conducted
in violation of any law, ordinance or regulations of any governmental
entity, except for violations or potential violations which either
individually or in the aggregate do not and will not have a Material
Adverse Effect. The Company is not required under federal, state or
local law, rule or regulation in the United States to obtain any
consent, authorization or order of, or make any filing or registration
with, any court or governmental or self-regulatory agency in order for
it to execute, deliver or perform any of its obligations under this
Agreement or the Registration Rights Agreement or issue and sell the
Debentures or the Underlying Stock in accordance with the terms hereof
and thereof (other than any SEC, NASD, Nasdaq NM or state securities
filings which may be required to be made by the Company subsequent to
the Closing and any registration statement which may be filed pursuant
to the Registration Rights Agreement).
3.10 Exchange Act Reports. The Company has delivered or made available to
the Subscriber true and complete copies of the Exchange Act Reports
(including, without limitation, proxy information and solicitation
materials). As of their respective dates, the Exchange Act Reports
complied (and as of its effective date, the Registration Statement for
the Underlying Stock will comply) in all material respects with the
requirements of the Exchange Act (or in the case of such Registration
Statement, the Securities Act) and the rules and regulations of the
SEC promulgated thereunder and other applicable federal, state and
local laws, rules and regulations, and none of the Exchange Act
Reports contained (and, as of its effective date, such Registration
Statement will not contain) any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
financial statements of the Company included in the Exchange Act
Reports or incorporated by reference in the Registration Statement
comply in all material respects as to form with applicable accounting
requirements and the published rules and regulations of the SEC or
other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during
the periods involved (except (a) as may be otherwise indicated in such
financial statements or the notes thereto or (b) in the case of
unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly
present in all material respects the financial position of the Company
as of the dates thereof and the results of operations and cash flows
for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit
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adjustments). The Company has timely filed (including filing such
documents by incorporation by reference) all agreements or documents
to which the Company is a party that are required to be filed as
exhibits to the Exchange Act Reports.
3.11 No Material Adverse Change. Since December 31, 1997, the date through
which the most recent Annual Report of the Company on Form 10-KSB has
been prepared and filed with the SEC, except as disclosed in the Prior
Public Disclosures or as disclosed by the Company to the Subscriber
and acknowledged in writing by the Subscriber, no Material Adverse
Effect has occurred or exists with respect to the Company; provided,
however, that the parties hereto acknowledge and agree that the
Subscriber has had an opportunity to review the draft press release of
the Company dated July 1, 1998, a copy of which is attached hereto as
part of Schedule 1.4(d), and that the Subscriber has had an
opportunity to ask questions of the Company regarding, and receive all
information requested with respect to, the matters discussed therein,
and that the events discussed therein shall be deemed by the parties
hereto not to constitute a Material Adverse Change or breach of any
representation or warranty of the Company made herein.
3.12 No Brokers. The Company has not taken any action which would give
rise to a claim by any person for brokerage commissions, finder's fees
or similar payments by the Subscriber relating to this Agreement or
the transactions contemplated hereby.
3.13 Effectiveness of SEC Filings. The SEC has not issued any stop order
or other order suspending the effectiveness of any registration
statement filed by the Company under the Exchange Act or the
Securities Act.
3.14 No Material Litigation Proceedings. Except as disclosed in the
Exchange Act Reports, the Company is not a party to or the subject of
any litigation, arbitration or other proceeding which if adversely
determined would individually or in the aggregate have a Material
Adverse Effect. There is no action, suit, proceeding or investigation
pending, or, to the knowledge of the Company, threatened, against the
Company before or by any court, regulatory body or administrative
agency or any other governmental agency or body, domestic or foreign,
or any action, suit, proceeding or investigation pending, or, to the
knowledge of the Company, threatened, which challenges the validity of
any action taken by the Company or to be taken pursuant to or in
connection with this Agreement, the Registration Rights Agreement or
the issuance of the Debentures.
3.15 Governmental Approvals. Each of the products that the Company
currently offers and each component of each such product the Company
has been subjected to a verification procedure and/or registered
pursuant to equipment registration with the United States Federal
Communications Commission (the "FCC"), to the extent that such
verification or registration is required.
3.16 Intellectual Property. The Company has full and exclusive right,
title and interest in and to the patents set forth on Schedule 3.16A.
The Company has filed the patent applications set forth on Schedule
3.16B. There is (i) no pending or, to the knowledge of the Company,
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threatened claim or challenge of or proceeding for infringement,
misuse or misappropriation of or interference with any intellectual
property owned, licensed or controlled by any third party arising out
of any product or process now being used, manufactured or distributed,
or ever having been used, manufactured or distributed at any time
previously, by or on behalf of the Company and (ii) no pending or
threatened or potential claim, challenge or proceeding by the Company
against any third party for infringement, misuse or misappropriation
of or interference with any intellectual property owned, licensed or
controlled by the Company.
3.17 No Integration. Neither the Company nor any of its affiliates nor any
person acting on the Company's behalf has, directly or indirectly, at
any time within the past six (6) months made, nor will any such party
make within six (6) months of the Closing Date, any offer or sale of
any security or solicitation of any offer to buy any security under
circumstances that would eliminate the availability of the exemption
from registration under Regulation D under the Securities Act in
connection with the offer and sale of the Securities as contemplated
hereby.
4. Covenants of the Subscriber
4.1 Resales. The Subscriber shall not make any offers or sales of the
Securities other than pursuant to a registration statement under the
Securities Act or pursuant to an exemption from registration under the
Securities Act. The Subscriber will comply with applicable prospectus
delivery requirements.
4.2 Low Trades; Short Sales. The Subscriber covenants and agrees that it
will not, directly or through any affiliate, on any trading day used
in the calculation of the Floating Conversion Price (as defined in the
Debentures) or any other trading day used for any purpose in valuation
pursuant to the Debentures, (a) create the lowest reported sales price
on the Nasdaq NM for the Common Stock or (b) offer to sell shares of
Common Stock at a price lower than the then prevailing bid price for
the Common Stock on the Nasdaq NM. The Subscriber covenants and
agrees that during the 90 days following the Closing Date it will not
take a "short" position in the Common Stock unless at the time such
position is taken, the price per share of the Common Stock as reported
on Nasdaq NM is greater than the Fixed Conversion Price (as defined in
the Debenture).
5. Covenants of the Company. For so long as any of the Debentures remain
outstanding, the Company covenants to the Subscriber as follows:
5.1 Registration Rights. The Company will file within 60 days of the date
hereof, and use its best efforts to cause to become effective, as
promptly as possible, but in no event later than 120 days after the
date hereof, a registration statement ("Registration Statement") on
Form S-3 under the Securities Act covering the resale of the
Underlying Stock issuable on conversion of the Debentures and any
shares of Common Stock issuable upon the exercise of warrants (the
"Warrants") issued by the Company upon redemption of the Debentures
(such shares, the "Underlying Warrant Shares") and shall take all
action
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necessary to qualify the Underlying Stock and the Underlying Warrant
Shares under all applicable state "blue sky" laws, in accordance with
terms of the Registration Rights Agreement (the "Registration Rights
Agreement") in the form of EXHIBIT D hereto, which the Company and the
Subscriber shall enter into at the Closing of this Agreement.
5.2 Reservation of Common Stock. As of the Closing, the Company will
reserve and the Company shall continue to reserve and keep available
at all times, free of preemptive rights, shares of Common Stock for
the purpose of enabling the Company to satisfy two times the number of
shares necessary to satisfy any obligation to issue shares of its
Common Stock upon conversion of the Debentures as if all the
Debentures were converted as of the Closing, plus such additional
number of shares of Common Stock as may be issued upon exercise of the
Warrants. The number of shares so reserved may be reduced by the
number of shares actually delivered pursuant to conversion of a
portion of the Debentures (provided that in no event shall the number
of shares so reserved be less than one and a half times the number
required to satisfy the remaining conversion rights on the unconverted
Debentures) and the number of shares so reserved shall be increased to
reflect stock splits and stock dividends and distributions.
5.3 Listing of Underlying Shares. The Company hereby agrees, promptly
following the Closing of the transaction contemplated by this
Agreement, to take such action to cause the Underlying Stock (and the
Underlying Warrant Shares, if any) to be listed on Nasdaq NM as
promptly as possible but no later than the effective date of the
Registration Statement referred to in Section 5.1. The Company
further agrees, if the Company applies to have the Common Stock traded
on any other principal stock exchange or market, that it will include
in such application the Underlying Stock (and the Underlying Warrant
Shares, if any) and will take such other action as is necessary to
cause the Underlying Stock (and the Underlying Warrant Shares, if any)
to be listed on such other exchange or market as promptly as possible.
5.4 Exchange Act Registration. The Company will cause its Common Stock to
continue to be registered under Section 12(g) of the Exchange Act,
will comply in all respects with its reporting and filing obligations
under the Exchange Act, and will not take any action or file any
document (whether or not permitted by the Exchange Act or the rules
thereunder) to terminate or suspend such registration or to terminate
or suspend its reporting and filing obligations under the Exchange
Act. The Company will take all action necessary to continue the
listing and trading of its Common Stock on the Nasdaq NM and will
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the NASD and Nasdaq NM.
5.5 Restrictions on Transferability; Legends on Certificates; Transfer
Agent Instructions.
(a) The Subscriber acknowledges and agrees that the Debentures
and, when issued, the shares of Underlying Stock, will be issued
pursuant to a private placement exemption from the registration
requirements imposed by the Securities Act and applicable state
securities laws and, as such, constitute "restricted securities" under
such laws and may
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not be resold without registration under the Securities Act and state
securities laws or pursuant to an exemption from such registration
requirements. The Subscriber represents that it is familiar with the
Securities Act and the rules and regulations promulgated thereunder as
presently in effect, including, without limitation, Rule 144
promulgated under the Securities Act, and the requirements of
applicable state securities laws and understands the limitations on
resale of the Securities imposed thereby. Without in any way limiting
the representations set forth above, the Subscriber further
acknowledges and agrees not to sell or transfer any portion of the
Debentures or the Underlying Stock unless (i) there is then an
effective registration statement under the Securities Act and
applicable state securities laws covering such proposed transfer and
such transfer is made pursuant to such registration statement and
otherwise in accordance with applicable securities laws, or (ii) the
shares are transferred or sold in an exempt transaction under the
Securities Act and applicable state securities laws and the Subscriber
provides the Company and, if required, its counsel or transfer agent,
with an opinion of counsel to such effect, which legal opinion shall
in form and substance be reasonably acceptable to the Company.
(b) The Subscriber acknowledges and agrees that, in light of the
fact that the Debentures and the Underlying Stock constitute
"restricted securities" the certificates representing such shares will
bear a restrictive legend indicating the resale limitations imposed
upon such Securities and that the stock transfer books of the Company
(including any such books maintained on the Company's behalf by the
transfer agent for its Common Stock) will bear a notation to such
effect.
(c) The Company agrees that it will provide the transfer agent for
its Common Stock with transfer agent instructions consistent with and
reflecting the foregoing. The Company covenants and agrees that,
promptly following execution and delivery of this Agreement, it will
provide instructions to the transfer agent for its Common Stock, such
instructions to be in form and substance reasonably acceptable to the
Subscriber, to facilitate trades of the Underlying Stock and to permit
the Subscriber to timely deliver within the required settlement period
certificates representing such shares in connection with any transfer
or disposition of the Underlying Stock. The Subscriber and the
Company acknowledge and agree that their respective obligations
pursuant to this Section 5.5 are subject to compliance by each of them
with applicable securities laws.
The Company covenants that it will use its best efforts to cause the
Company's transfer agent to deliver certificates representing shares
issued in connection with a transfer of Underlying Stock as promptly
as practicable but in no event later than three business days after
delivery by the Subscriber of all required documentation in respect of
such transfer. The Company covenants that it will use its best
efforts to cause the Company's transfer agent to deliver unlegended
certificates representing shares of Underlying Stock or Underlying
Warrant Shares, if any, delivered in connection with a transfer of
underlying stock as promptly as practicable but in no event later than
three business days after delivery by the Subscriber of all required
documentation in respect of such transfer, including a representation
by the Subscriber to the Company and/or the transfer agent that
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such shares are being delivered in connection with a sale pursuant to
an effective resale registration statement.
5.6 Corporate Existence. The Company will take all steps necessary to
preserve and continue the corporate existence of the Company.
5.7 Right of First Refusal. In the event that at any time or from time to
time during the six (6) month period immediately following the Closing
Date, the Company proposes to issue or sell in a private placement any
of its equity or debt securities which are convertible into or
exchangeable for its Common Stock (other than (i) securities issued or
sold pursuant to an underwritten public offering by the Company, (ii)
securities issued or sold or in connection with a merger or
consolidation or sale of all or substantially all of the Company's
assets, (iii) securities issued under or pursuant to the Company's
existing 1994 Stock Option Plan or 1996 Stock Incentive Plan, (iv)
securities issued upon exercise of outstanding warrants or options and
(v) securities issued to any unaffiliated third party that is a
strategic partner and which involves the issuance of securities and
one or more of the following: a transfer of technology, the sale by
the Company of products or services, or the purchase by the Company of
the products or services of such third party, whether singly or
together with other securities, then the Company shall give written
notice (the "Proposal Notice") to the Subscriber of such proposed
issuance, specifying the terms and conditions thereof in reasonable
detail, and the Subscriber shall have the right, exercisable by
written notice delivered within 10 business days of the date of
receipt by the Subscriber of the Proposal Notice, to subscribe for and
purchase all (or, if agreed to by the investor to which such
additional securities are being offered and sold, such lesser portion
as the Subscriber shall specify in writing) of the Common Stock or
other securities proposed to be issued, on the same terms and
conditions specified in the Proposal Notice. Notwithstanding the
foregoing, this Section 5.7 shall not apply if the Company issues or
sells, in a private placement, any equity securities; provided that
if such equity securities are convertible into or exchangeable for its
Common Stock or any other convertible security, the terms and
conditions of such securities are no more favorable to the investor
than those evidenced hereby; and provided further that (a) the
investors in such private placement are subject to a six (6) month
restriction on the resale of such securities and (b) the Company shall
have delivered to the Subscriber a certificate in form and substance
reasonably satisfactory to the Subscriber, executed by an executive
officer of the Company, to the effect that such offer and sale of
additional securities will not eliminate the availability of the
exemption from registration under Regulation D under the Securities
Act of the offer and sale of the Securities evidenced hereby.
5.8 Use of Proceeds. The Company shall use all the proceeds received from
the sale of the Securities pursuant to this Agreement for general
corporate purposes, including working capital.
5.9 Rule 144A Information. The Company will (i) make available, upon
request, to any holder of Securities and any prospective purchaser
thereof designated by such a holder, upon the request of such holder
or prospective purchaser, the information required to be
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provided to such holder or prospective purchaser by Rule 144A(d)(4)
under the Securities Act and (ii) update such information from time to
time in order to prevent such information from becoming false and
misleading and will take such other actions as are necessary to ensure
that the safe harbor exemption from the registration requirements of
the Securities Act under Rule 144A is and will be available for
resales of the Debentures or Underlying Stock conducted in accordance
with Rule 144A.
5.10 Notice of Adverse Change. The Company will notify the Subscriber
promptly (but in any event within seven days) after becoming aware of
the existence of any condition or event which has had a Material
Adverse Effect on the Company.
5.11 Dividends and Distributions. The Company shall not make or fix a
record date for the determination of holders of Common Stock or other
equity securities or declare a cash dividend or other distribution
payable in cash or property of the Company, until the Company has
delivered to the Subscriber all of the shares of Common Stock issuable
upon conversion of the Debentures or paid all sums of cash due to such
Subscriber upon redemption of the Debentures, as applicable, such that
after such delivery or payment upon any such conversion or redemption
no more than 10% of the Debentures issued on the Closing Date remain
outstanding; provided, however, that nothing in this Section 5.11
shall prevent or restrict the right of the Company to declare and pay
dividends on such securities payable in the form of shares of Common
Stock.
5.12 Filing of Current Report on Form 8-K. On or before the second
business day following the Closing Date, the Company shall file a
Current Report on Form 8-K with the SEC in a form reasonably
acceptable to the Subscriber describing the terms of the transaction
consummated at the Closing.
5.13 Form D. The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy
thereof to the Subscriber promptly after such filing.
5.14 Governmental Approvals. The Company covenants and agrees that it will
expeditiously take all steps necessary to obtain FCC verification
and/or equipment registrations for its new products and components
included in its new products prior to their introduction, to the
extent such verification or registration is required.
5.15 Public Disclosures. At the time the resale registration statement of
the Company becomes effective, the Company will not have provided to
the Subscriber any information which, according to applicable law,
rule or regulation, should have been disclosed publicly by the Company
but which has not been so disclosed.
6. Legends; Subsequent Transfer of Securities; Denominations
6.1 Legend. The Company will issue one or more certificates evidencing
the Debentures in the name of the Subscriber and in such number of
shares to be specified by the Subscriber
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prior to (or from time to time subsequent to) Closing. The
Debentures, and any shares of Common Stock issued upon conversion
thereof, will bear the following legend (the "Legend"):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY
NOT BE SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
Following the effectiveness of the Registration Statement, the Company
will issue certificates representing the Securities without the Legend
to any transferee other than holders who are "affiliates" of the
Company (as such term is defined under the Securities Act), promptly
upon request, if (i) the holder thereof is permitted to dispose of
such Securities pursuant to Rule 144(k) under the Securities Act, (ii)
the Securities are sold to a purchaser or purchasers in a transaction
exempt from registration under the Securities Act, as evidenced by an
opinion of counsel to the transferor delivered and reasonably
satisfactory in form and substance to the Company or (iii) the
Securities are sold to a purchaser or purchasers pursuant to an
effective registration statement and the prospectus delivery
requirements under the Securities Act are met.
6.2 Subscriber's Compliance. Nothing in this Section 6 shall affect in
any way the Subscriber's obligations and agreement to comply with all
applicable securities laws upon resale of the Securities.
6A. Payment Set Aside
To the extent that the Company makes a payment or payments to the
Subscriber hereunder or pursuant to the Registration Rights Agreement
or the Debenture or the Subscriber enforces or exercises its rights
hereunder or thereunder, and such payment or payments or the proceeds
of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or
otherwise restored to the Company, a trustee, receiver or any other
person under any law (including, without limitation, any bankruptcy
law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part
thereof originally intended to be satisfied shall be revived and
continued in full force and effect as if such payment had not been
made or such enforcement or set-off had not occurred.
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7. Governing Law; Jurisdiction
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW OR CHOICE OF LAW, EXCEPT FOR MATTERS ARISING UNDER
THE SECURITIES ACT OR THE EXCHANGE ACT WHICH MATTERS SHALL BE
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH SUCH LAWS.
8. Assignment; Entire Agreement; Amendment
8.1 Assignment. Neither this Agreement nor any rights hereunder may be
assigned by either party without the prior written consent of the
other party hereto; provided, however, the Subscriber may assign its
rights under this Agreement to an affiliate of the Subscriber who
agrees to be bound by the terms hereof. To the extent that the
Subscriber assigns this Agreement with the prior written consent of
the Company or to an affiliate of the Subscriber, the provisions of
this Agreement, the Debenture and the Registration Rights Agreement
shall inure to the benefit of, and be enforceable by, any transferee
of any of the Securities purchased by the Subscriber hereunder with
respect to the Securities held by such person.
8.2 Entire Agreement; Amendment. This Agreement, the Debenture, the
Registration Rights Agreement and the other documents delivered
pursuant hereto and thereto constitute the full and entire
understanding and agreement between the parties with regard to the
subjects hereof and thereof, and no party shall be liable or bound to
any other party in any manner by any warranties, representations or
covenants except as specifically set forth in this Agreement or
therein. Except as expressly provided in this Agreement, neither this
Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party
against whom enforcement of any such amendment, waiver, discharge or
termination is sought.
9. Publicity
The Company and the Subscriber agree that neither of them will
disclose or include in any public announcement, any information in
respect of the transactions contemplated herein, including, without
limitation, the name of the Subscriber, without the prior written
consent of the other party hereto, except that nothing herein shall
prevent or impede the right of either party to make such disclosure as
is required by law or applicable regulation, to the extent that it
determines in good faith, that it is legally obligated to do so;
provided, however, the Company shall file with the SEC a Form 8-K
pursuant to Section 5.12 herein. Except as may be required by law,
the Company and the Subscriber shall consult with each other before
issuing any press release or otherwise making any public statements
with respect to this Agreement and shall not issue any such press
release or make any such public statement prior to such consultation.
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10. Notices, Etc.; Expenses; Indemnity
10.1 Notices. Any notice, demand or request required or permitted to be
given by either the Company or the Subscriber pursuant to the terms of
this Agreement shall be in writing and shall be deemed given when
delivered personally, by overnight courier service or by facsimile,
with a hard copy to follow by overnight or two day courier, addressed
to the other party at the address of the party set forth at the end of
this Agreement or such other address as a party may request by
notifying the other in writing. Copies of all notices to the
Subscriber shall be sent to its designee or representative and copies
of all notices to the Company shall be sent to its Vice President,
Finance and Administration, or to such other corporate officer as it
may hereafter designate.
10.2 Costs and Expenses. The Company shall be responsible for the
Subscriber's legal fees and expenses, due and payable at Closing,
incurred in connection with entering into this Agreement and the
transactions contemplated hereby, but not to exceed $35,000.
10.3 Indemnification. Each party shall indemnify the other against any
loss, cost or damages (including reasonable attorney's fees and
expenses) incurred as a result of such parties' breach of any
representation, warranty, covenant or agreement in this Agreement.
11. Counterparts
This Agreement may be executed in any number of counterparts, each of
which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one
instrument.
12. Survival; Severability
The representations, warranties, covenants and agreements of the
parties hereto shall survive the Closing for a period of one year
notwithstanding any due diligence investigation conducted by or on
behalf of the Subscriber; provided, however that representations,
warranties, covenants and agreements which, by their terms survive for
a period longer than one year shall survive for such longer period, as
elsewhere set forth in this Agreement. In the event that any
provision of this Agreement becomes or is declared by a court of
competent jurisdiction to be illegal, unenforceable or void, this
Agreement shall continue in full force and effect without said
provision; provided that no such severability shall be effective if it
materially changes the economic benefit of this Agreement to any
party.
13. Titles and Subtitles
The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or
interpreting this Agreement.
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14. Amount
The undersigned hereby subscribes for $2,500,000 aggregate principal
amount of Debentures.
[SIGNATURE PAGES FOLLOW]
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Subscriber's Representative Name of the Subscriber:
---------------------------
---------------------------
Name:
By:
---------------------------- By:
Address ------------------------------------
----------------------------
Telephone
Date of Subscription:
----------------------
---------------------------
Fax Place of Execution: New York
Place of Organization or Citizenship:
Place of Residency and/or Principal Place of
Business
---------------------------------------
---------------------------------------
Attn:
---------------------------------
(Telephone):
--------------------------
(Fax):
--------------------------------
Registration instructions:
(Name) (Please Print)
-----------------
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THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE 1ST DAY OF JULY,
1998.
OBJECTIVE COMMUNICATIONS, INC.
By:
------------------------------------
Name:
Title:
Address: 00 Xxxxxxxxxxxxx Xxxxx
Xxxxxxxxxx, X.X. 00000
[EXHIBITS OMITTED]
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