EXHIBIT 4
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AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT
THIS AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT (this
"Agreement") is made as of December 1, 2006 by and between Vertical
Communications, Inc., a Delaware corporation (the "Company"), and the investors
set forth on Exhibit A attached hereto (individually, an "Investor" and
collectively, the "Investors").
WITNESSETH:
WHEREAS, the Company and certain Investors previously entered into that
certain Securities Purchase Agreement, dated as of October 18, 2006 (the
"Original Purchase Agreement") pursuant to which the Company agreed to sell to
certain Investors and such Investors agreed to purchase from the Company (the
"Offering"), (i) 22,000 shares (the "Shares") of the Company's Series E
Convertible Preferred Stock, par value $1.00 per share (the "Series E Preferred
Stock") at a price per share of $1,000.00, (ii) warrants to purchase an
aggregate of 20,754,717 shares of common stock, par value $0.01 per share (the
"Common Stock") with an initial exercise price of $0.58 per share (the "Tranche
I Warrants"), and (iii) additional warrants to purchase an aggregate of
20,754,717 shares of Common Stock with an initial exercise price of $0.58 per
share (the "Tranche II Warrants," and together with the Tranche I Warrants, the
"Warrants"), for a total purchase price of $22,000,000 (the "Purchase Price")
pursuant to the terms of this Agreement;
WHEREAS, the Company has agreed to sell and certain additional
investors listed on Exhibit A have agreed to purchase an aggregate of 5,400
additional shares of Series E Preferred Stock (the "Additional Shares") and
warrants to purchase an aggregate of 5,094,341 shares of Common Stock (the
"Additional Warrants") on identical terms and conditions as set forth herein;
WHEREAS, the sale of the Additional Shares constitutes a Future
Financing Transaction (as such term is defined in the Original Purchase
Agreement) and the parties hereto desire to amend and restate the Original
Purchase Agreement in its entirety in order to reflect the satisfaction of the
Future Financing Transaction provisions of the Original Purchase Agreement;
WHEREAS, the parties desire, by the execution and delivery of this
Agreement, to amend and restate the Original Purchase Agreement in its entirety
(i) to incorporate the Additional Shares in the definition of "Shares" as used
herein; (ii) to reflect that, as a result of the Future Financing Transaction
having occurred, the Tranche II Warrants are void ab initio, and to amend all
references in the Original Purchase Agreement to "Warrants" to refer only to the
Tranche I Warrants and the Additional Warrants; and (iii) to amend the
definition of "Purchase Price" to refer to an aggregate purchase price of
$27,400,000;
WHEREAS, concurrently with the execution of the Original Purchase
Agreement, the Company, Vertical Acquisition Sub, Inc., a wholly owned
subsidiary of the Company ("Acquisition Sub") and Vodavi Technology, Inc.
("Vodavi") executed an Agreement and Plan of Merger (the "Merger Agreement")
pursuant to which, as a condition to the transactions contemplated by the
Original Purchase Agreement and this Agreement, Vodavi shall merge with
Acquisition Sub (with Vodavi being the surviving corporation thereof) and Vodavi
will become a wholly owned subsidiary of the Company (the "Merger"); and
WHEREAS, the parties hereto desire to enter into this Agreement for the
purpose of setting forth certain representations, warranties and covenants made
by each to the other as an inducement to the
execution and delivery of this Agreement and the conditions precedent to the
consummation of the transactions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
provisions, agreements and covenants contained herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE SHARES
1.1 Authorization and Sale of the Shares and Warrants. Subject to the
terms and conditions set forth in this Agreement, the Company has authorized the
sale of (a) up to 33,000 shares of Series E Preferred Stock, and (b) warrants to
purchase an aggregate of 25,849,059 shares of the Company's Common Stock
pursuant to the Warrants (of which the Investors set forth on Exhibit A have
committed to purchase the amounts set forth thereon). The shares of Common Stock
issuable upon conversion of the Shares are referred to herein as the "Conversion
Shares". The shares of Common Stock issuable upon the exercise of the Warrants
are referred to herein as the "Warrant Shares".
1.2 Agreement to Sell and Purchase the Shares and the Warrants. Subject
to the terms and conditions of this Agreement, each Investor, severally and not
jointly, agrees to purchase at the Closing (as such term is defined in Section
1.3 hereof), and the Company agrees to issue and sell to each such Investor at
the Closing, for the purchase price set forth opposite each such Investor's name
on Exhibit A attached hereto, that number of Shares and Warrants set forth
opposite each such Investor's name on Exhibit A attached hereto.
1.3 Delivery of the Shares and Warrants at Closing.
(a) The completion of the purchase and sale of the Shares and
the Warrants (the "Closing") shall occur immediately following consummation of
the Merger (the "Closing Date") at the offices of Xxxxxxx Procter LLP, 00 Xxxxx
Xxxxxx, Xxxxxx, XX 00000 or at such other place as may be mutually agreed by the
Company and the Investors. At the Closing, the Company shall (i) deliver to the
Investors one or more stock certificates representing the number of Shares set
forth on Exhibit A, each such certificate to be registered in the name of each
Investor or, if so indicated on the signature page of this Agreement, in the
name of a nominee designated by such Investor (at the address of each Investor
set forth on the signature pages hereto); and (ii) deliver to each Investor a
Warrant substantially in the form attached hereto as Exhibit B to purchase the
number of shares of Common Stock set forth opposite each such Investor's name on
Exhibit A or, if so indicated on the signature page of this Agreement, in the
name of a nominee designated by such Investor.
(b) The Company's obligation to issue the Shares and the
Warrants to the Investors shall be subject to the following conditions, any one
or more of which may be waived by the Company:
(i) receipt by the Company of a wire transfer of
funds to an account designated by the Company in the full amount of the Purchase
Price for all of the Shares and Warrants being purchased hereunder as set forth
on Exhibit A;
(ii) consummation of the Merger; and
(iii) the accuracy of the representations and
warranties made by the Investors and the satisfaction of
the undertakings of the Investors to be fulfilled prior to the Closing.
(c) The Investors' obligations to purchase the Shares and the
Warrants shall be subject to the following conditions, any one or more of which
may be waived by any Investor hereunder as to itself only:
(i) consummation of the Merger on terms and
conditions satisfactory to the Investors;
(ii) consummation of the transaction, contemplated by
the Credit Agreement and related Security Agreement, dated as of October 16,
2006 (the "Credit Agreement"), by and among the Company, Vertical Communications
Acquisition Corp., Acquisition Sub, on one hand, and Columbia Partners, L.L.C.
Investment Management and NEIPF, L.P. (collectively, "Lender"), on terms and
conditions satisfactory to the Investors;
(iii) the Company shall have caused the Certificate
of Powers, Designations, Preferences and Rights of the Series E Preferred Stock
in substantially the form attached hereto as Exhibit C (the "Certificate of
Designations") to be duly adopted and approved by the Company's Board of
Directors (the "Board of Directors") and to be duly filed with the Secretary of
State of Delaware (and the Investors shall have received written confirmation of
the same certified by the Secretary of State of Delaware);
(iv) the Company having authorized, unissued and
unreserved shares sufficient to permit issuance of all of the Shares proposed to
be sold hereunder;
(v) the representations and warranties of the Company
set forth herein shall be true, correct and complete as of the Closing Date in
all respects (except for representations and warranties that speak as of a
specific date, which representations and warranties shall be true, correct and
complete as of such date);
(vi) performance and compliance by the Company with
all covenants, agreements obligations and conditions required to be performed on
or before the date hereof;
(vii) the execution of a Consent and Waiver Agreement
(as defined in the Original Purchase Agreement); and
(viii) the Investors shall have received such
documents as the Investors shall reasonably have requested, including, a
standard opinion of Company counsel as to the matters set forth in the form
attached as Exhibit D hereto and as to exemption from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
of the sale of the Shares. The Warrants, the Merger Agreement, the Credit
Agreement, the Certificate of Designations and the Consent and Waiver Agreement
shall collectively be referred to herein as the "Ancillary Agreements."
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2. Except as disclosed by the Company in a written Disclosure Schedule
provided by the Company to the Investors (the "Disclosure Schedule"), the
Company hereby represents, warrants and covenants to the Investors, as follows:
2.1 Organization. The Company is duly organized and validly existing in
good standing under the laws of the jurisdiction of its organization. Each of
the Company and its Subsidiaries (as such term is defined in Rule 405 under the
Securities Act) has all requisite corporate power and authority to own, operate
and occupy its properties and to conduct its business as presently conducted and
as described in the documents filed by the Company under the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated thereunder
(the "Exchange Act"), since June 30, 2004 through the date hereof, including,
without limitation, its most recent report on Form 10-K (the "Exchange Act
Documents") and is registered or qualified to do business and in good standing
in each jurisdiction in which the nature of the business conducted by it or the
location of the properties owned or leased by it requires such qualification and
where the failure to be so qualified would have a material adverse effect upon
the condition (financial or otherwise), results of operations, business or
business prospects, properties or operations of the Company and its
Subsidiaries, considered as one enterprise (a "Material Adverse Effect"), and no
proceeding to which the Company or any Subsidiary is a party has been instituted
in any such jurisdiction, revoking, limiting or curtailing, or seeking to
revoke, limit or curtail, such power and authority or qualification.
2.2 Due Authorization and Valid Issuance. The Company has all requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement and the Ancillary Agreements, and this Agreement and the
Ancillary Agreements have been duly authorized and validly executed and
delivered by the Company and constitutes the legal, valid and binding agreement
of the Company enforceable against the Company in accordance with its terms,
except as rights to indemnity and contribution may be limited by state or
federal securities laws or the public policy underlying such laws, 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 in equity or at law). The Shares and the Warrants being purchased
by the Investors hereunder will, and the Conversion Shares and the Warrant
Shares, upon issuance and payment therefor pursuant to the terms hereof or
thereof, as applicable, be duly authorized, validly issued, fully-paid and
nonassessable.
2.3 Non-Contravention. The execution and delivery of this Agreement and
the Ancillary Agreements, the issuance and sale of the Shares under this
Agreement, the issuance of the Conversion Shares upon conversion of the Shares,
the issuance of the Warrants and the issuance of the Warrant Shares upon
exercise of the Warrants, the fulfillment of the terms of this Agreement and the
Ancillary Agreements and the consummation of the transactions contemplated
hereby and thereby do not and will not (a) conflict with or constitute a
violation of, or default (with the passage of time or otherwise) under, (i) any
bond, debenture, note or other evidence of indebtedness, lease, contract,
indenture, mortgage, deed of trust, loan agreement, joint venture or other
agreement or instrument to which the Company or any Subsidiary is a party or by
which it or any of its Subsidiaries or their respective properties are bound,
(ii) the charter, by-laws or other organizational documents of the Company or
any Subsidiary, or (iii) any law, administrative regulation, ordinance or order
of any court or governmental agency, arbitration panel or authority applicable
to the Company or any Subsidiary or their respective properties, except in the
case of clauses (i) and (iii) for any such conflicts, violations or defaults
which are not reasonably likely to have a Material Adverse Effect or (b) result
in the creation or imposition of any lien, encumbrance, claim, security interest
or restriction whatsoever upon any of the material properties or assets of the
Company or any Subsidiary or an acceleration of indebtedness pursuant to any
obligation, agreement or condition contained in any bond, debenture, note or any
other evidence of indebtedness or any indenture, mortgage, deed of trust or any
other agreement or instrument to which the Company or any Subsidiary is a party
or by which any of them is bound or to which any of the material property or
assets of the Company or any Subsidiary is subject. No consent, approval,
authorization or other order of, or registration, qualification or filing with,
any regulatory body, administrative agency, or other governmental body or any
other
person is required for the execution and delivery of this Agreement or the
Ancillary Agreements by the Company, the valid issuance and sale of the Shares
to be sold pursuant to this Agreement, the issuance of the Conversion Shares
upon conversion of the Shares, the issuance of the Warrants and the issuance of
the Warrant Shares upon exercise of the Warrants, and the performance by the
Company of its other obligations hereunder and thereunder, other than such as
have been made or obtained, and except for any post-closing securities filings
or notifications required to be made under federal or state securities laws.
2.4 Capitalization. The capitalization of the Company as of October 15,
2006 is as set forth on Schedule 2.4, increased as set forth in the next
sentence. The Company has not issued any capital stock since that date other
than pursuant to (a) employee benefit plans disclosed in the Exchange Act
Documents, or (b) outstanding warrants, options or other securities disclosed in
the Exchange Act Documents. The Company has authorized, unissued, unreserved and
undesignated shares of preferred stock sufficient to sell all Shares proposed to
be issued under this Agreement. The designations, powers, preferences, rights
qualifications, limitations and restrictions in respect of the Series E
Preferred Stock are as set forth in the Certificate of Designations, and all
such designations, powers, preferences, rights, qualifications, limitations and
restrictions are valid, binding and enforceable and in accordance with all
applicable laws. The Shares to be sold pursuant to this Agreement, the
Conversion Shares to be issued upon conversion of the Shares, the Warrants and
the Warrant Shares to be issued upon exercise of the Warrants have all been duly
authorized, and when issued and paid for in accordance with the terms of this
Agreement, upon conversion of the Shares or upon exercise of the Warrants, as
applicable, will be duly and validly issued, fully paid and nonassessable. The
Shares and the Warrants shall represent approximately 49.1% of the outstanding
capital stock of the Company immediately following the Closing (calculated on a
fully diluted basis). The outstanding shares of capital stock of the Company
have been duly and validly issued and are fully paid and nonassessable, have
been issued in compliance with all federal and state securities laws, and were
not issued in violation of any preemptive rights or similar rights to subscribe
for or purchase securities. Except as set forth in or contemplated by the
Exchange Act Documents, there are no outstanding rights (including, without
limitation, preemptive rights), warrants or options to acquire, or instruments
convertible into or exchangeable for, any unissued shares of capital stock or
other equity interest in the Company or any Subsidiary, or any contract,
commitment, agreement, understanding or arrangement of any kind to which the
Company is a party or of which the Company has knowledge and relating to the
issuance or sale of any capital stock of the Company or any Subsidiary, any such
convertible or exchangeable securities or any such rights, warrants or options.
Without limiting the foregoing and except as provided herein, no preemptive
right, co-sale right, right of first refusal, registration right, or other
similar right exists with respect to the Shares and the Warrants or the issuance
and sale thereof, the issuance of the Conversion Shares upon conversion of the
Shares or the Warrant Shares upon exercise of the Warrants. No further approval
or authorization of any stockholder, the Board of Directors of the Company or
others is required for the issuance and sale of the Shares and the Warrants. The
Company owns the entire equity interest in each of its Subsidiaries, free and
clear of any pledge, lien, security interest, encumbrance, claim or equitable
interest, other than as described in the Exchange Act Documents. Except as
disclosed in the Exchange Act Documents, there are no stockholders agreements,
voting agreements or other similar agreements with respect to the Common Stock
to which the Company is a party or, to the knowledge of the Company, between or
among any of the Company's stockholders.
2.5 Legal Proceedings; Disagreements with Advisors. There is no
material legal or governmental proceeding pending or, to the knowledge of the
Company, threatened to which the Company or any Subsidiary is or may be a party
or of which the business or property of the Company or any Subsidiary is subject
that is not disclosed in the Exchange Act Documents. There are no disagreements
of any kind presently existing, or reasonably anticipated by the Company to
arise, between the accountants and lawyers formerly or presently employed by the
Company and the Company is current with respect to any fees owed to its
accountants and lawyers.
2.6 No Violations. Neither the Company nor any Subsidiary is in
violation of (a) its charter, bylaws, or other organizational document; (b) in
violation of any law, administrative regulation, ordinance or order of any court
or governmental agency, arbitration panel or authority applicable to the Company
or any Subsidiary, which violation, individually or in the aggregate, would be
reasonably likely to have a Material Adverse Effect; or (c) is in default (and
there exists no condition which, with the passage of time or otherwise, would
constitute a default) in the performance of any bond, debenture, note or any
other evidence of indebtedness in any indenture, mortgage, deed of trust or any
other agreement or instrument to which the Company or any Subsidiary is a party
or by which the Company or any Subsidiary is bound or by which the properties of
the Company or any Subsidiary are bound, which would be reasonably likely to
have a Material Adverse Effect.
2.7 Governmental Permits, Etc. With the exception of the matters which
are dealt with separately in Sections 2.1, 2.12, 2.13, and 2.14, each of the
Company and its Subsidiaries has all necessary franchises, licenses,
certificates and other authorizations from any foreign, federal, state or local
government or governmental agency, department, or body that are currently
necessary for the operation of the business of the Company and its Subsidiaries
as currently conducted and as described in the Exchange Act Documents except
where the failure to currently possess could not reasonably be expected to have
a Material Adverse Effect.
2.8 Intellectual Property. Except as specifically disclosed in the
Exchange Act Documents (a) each of the Company and its Subsidiaries owns or
possesses sufficient rights to use all patents, patent rights, trademarks,
copyrights, licenses, inventions, trade secrets, trade names and know-how
(collectively, "Intellectual Property") described or referred to in the Exchange
Act Documents as owned or possessed by it or that are necessary for the conduct
of its business as now conducted or as proposed to be conducted as described in
the Exchange Act Documents, except where the failure to currently own or possess
would not have a Material Adverse Effect, (b) neither the Company nor any of its
Subsidiaries is infringing, or has received any notice of, or has any knowledge
of, any asserted infringement by the Company or any of its Subsidiaries of, any
rights of a third party with respect to any Intellectual Property that,
individually or in the aggregate, would have a Material Adverse Effect and (c)
neither the Company nor any of its Subsidiaries has received any notice of, or
has any knowledge of, infringement by a third party with respect to any
Intellectual Property rights of the Company or of any Subsidiary that,
individually or in the aggregate, would have a Material Adverse Effect. Except
as specifically disclosed in the Exchange Act Documents, all software
applications and portions of applications, including, without limitation,
interfaces, functions, and class definitions included in whole or in part in any
Company Software (as hereinafter defined) are either: (a) owned by the Company,
(b) currently in the public domain or otherwise available for use, modification
and distribution by the Company without a license from or the approval or
consent of any third party, or (c) licensed or otherwise used by the Company
pursuant to the terms of valid, binding written agreements (a "Software
Contract"). Except as specifically disclosed in the Exchange Act Documents, no
Software Contract creates, or purports to create, obligations or immunities with
respect to any intellectual property rights of the Company enforceable in any
jurisdiction of the world, including but not limited to, obligations requiring
the disclosure or distribution of all or a portion of the source code for any
Company Software. For purposes of this Agreement, "Company Software" means any
and all computer programs or portions thereof owned, licensed, distributed,
copied, modified, displayed, sublicensed or otherwise used by the Company in
connection with the operation of its business as now conducted or as now
proposed to be conducted as described in the Exchange Act Documents.
2.9 Financial Statements; Solvency; Obligations to Related Parties.
(a) The financial statements of the Company and the related
notes contained in the Exchange Act Documents present fairly, in accordance with
U.S. generally accepted accounting principles ("GAAP"), the financial position
of the Company and its Subsidiaries as of the dates indicated, and the results
of its operations and cash flows for the periods therein specified consistent
with the books and records of the Company and its Subsidiaries except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which are not expected to be material in amount
except as otherwise described in the Exchange Act Documents. Such financial
statements (including the related notes) have been prepared in accordance with
GAAP applied on a consistent basis throughout the periods therein specified,
except as may be disclosed in the notes to such financial statements, or in the
case of unaudited statements, as may be permitted by the Securities and Exchange
Commission (the "SEC") on Form 10-Q under the Exchange Act and except as
disclosed in the Exchange Act Documents. The other financial information
contained in the Exchange Act Documents has been prepared on a basis consistent
with the financial statements of the Company.
(b) The (i) fair saleable value of the Company's assets
exceeds the amount that will be required to be paid on or in respect of the
Company's existing liabilities and other obligations as such matures or is
otherwise payable; (ii) Company's assets do not constitute unreasonably small
capital to carry on its business for the current fiscal year as now conducted
and as proposed to be conducted taking into account the current and projected
capital requirements of the business conducted by the Company and projected
capital availability; and (iii) current cash flow of the Company, together with
the proceeds the Company would receive upon liquidation of its assets, after
taking into account all anticipated uses of such amounts, would be sufficient to
pay all such liabilities and obligations when such is required to be paid. The
Company does not intend to incur liabilities and other obligations beyond its
ability to pay such as they mature or are required to be paid. The Company has
no knowledge of any facts or circumstances which lead it to believe that it will
be required to file for reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction, and has no present intention to so
file.
(c) Except as set forth in any Exchange Act Documents, there
are no obligations of the Company to officers, directors, stockholders or
employees of the Company other than:
(i) for payment of salary for services rendered and
for bonus payments;
(ii) reimbursements for reasonable expenses incurred
on behalf of the Company;
(iii) for other standard employee benefits made
generally available to all employees (including stock option agreements
outstanding under any stock option plan approved by the Board of Directors);
(iv) obligations listed in the Company's financial
statements; and
(v) under applicable laws.
(d) Except as described above or in any Exchange Act Filings,
(i) none of the officers, directors or, to the best of the Company's knowledge,
key employees or stockholders of the Company or any members of their immediate
families, are indebted to the Company, individually or in the aggregate, in
excess of $60,000; and (ii) none of the officers, directors or, to the best of
the Company's knowledge, key employees have any direct or indirect ownership
interest in any firm or corporation with which the Company is affiliated or with
which the Company has a business relationship, or any firm or corporation which
competes with the Company, other than passive investments in publicly traded
companies (representing less than one percent (1%) of such company)
which may compete with the Company. Except as described above, no officer,
director, or any member of their immediate families, is, directly or indirectly,
interested in any material contract with the Company and no agreements,
understandings or proposed transactions are contemplated between the Company and
any such person. Except as set forth in any Exchange Act Documents, the Company
is not a guarantor or indemnitor of any indebtedness of any other person, firm
or corporation.
2.10 No Material Adverse Change. Except as disclosed in the Exchange
Act Documents, since March 31, 2006, there has not been (a) any material adverse
change in the financial condition or results of operations of the Company and
its Subsidiaries considered as one enterprise, (b) any material adverse event
affecting the Company or its Subsidiaries, (c) any obligation, direct or
contingent, that is material to the Company and its Subsidiaries considered as
one enterprise, incurred by the Company, except obligations incurred in the
ordinary course of business or with respect to the transactions contemplated by
this Agreement or the Merger Agreement or Credit Agreement, (d) any dividend or
distribution of any kind declared, paid or made on the capital stock of the
Company or any of its Subsidiaries, or (e) any loss or damage (whether or not
insured) to the physical property of the Company or any of its Subsidiaries
which has been sustained which has a Material Adverse Effect.
2.11 Disclosure. The representations and warranties of the Company
contained in this ARTICLE II as of the date hereof and as of the Closing Date,
do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Company understands and confirms that the Investors will rely on
the foregoing representations in effecting transactions in the securities of the
Company.
2.12 Exchange Act and OTCBB Compliance. The Company's Common Stock is
registered pursuant to Section 12(g) of the Exchange Act and is quoted on The
Nasdaq Stock Market, Inc.'s OTC Bulletin Board quotation service (the "OTCBB"),
and the Company has taken no action designed to, or likely to have the effect
of, terminating the registration of the Common Stock under the Exchange Act or
removal from quotation of the Common Stock from the OTCBB, nor has the Company
received any notification that the SEC, the OTCBB or the National Association of
Securities Dealers, Inc. ("NASD") is contemplating terminating such registration
or quotation, except as disclosed in the Exchange Act Documents.
2.13 Reporting Status. The Company has filed in a timely manner all
documents that the Company was required to file under the Exchange Act during
the twelve (12) months preceding the date of this Agreement. The following
documents complied as to form in all material respects with the SEC's
requirements as of their respective filing dates, and the information contained
therein as of the date thereof did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein in light of the circumstances under which they
were made not misleading:
(a) all Forms 10-K, 10-Q, 8-K (including any and all
amendments thereto) and all Definitive Proxy Statements on Schedule 14A and
additional Definitive Proxy Materials filed with the SEC since June 30, 2006;
and
(b) all other documents, if any, filed by the Company with the
SEC since June 30, 2006.
2.14 Issuance and Quotation. The Company shall comply with all
requirements of the NASD and the SEC with respect to the issuance of the Shares,
the Conversion Shares, the Warrants and the
Warrant Shares and the OTCBB with respect to the quotation of the Conversion
Shares and the Warrant Shares on the OTCBB.
2.15 No Manipulation of Stock. The Company has not taken and will not,
in violation of applicable law, take, any action designed to or that might
reasonably be expected to cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the Shares,
the Warrant Shares and the Conversion Shares.
2.16 Company Not an "Investment Company". The Company has been advised
of the rules and requirements under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The Company is not, and immediately
after receipt of payment for the Shares and the Warrants will not be, an
"investment company" within the meaning of the Investment Company Act and shall
conduct its business in a manner so that it will not become subject to the
Investment Company Act.
2.17 Foreign Corrupt Practices; Embargoed Person.
(a) Neither the Company, nor to the knowledge of the Company,
any agent or other person acting on behalf of the Company, has (i) directly or
indirectly, corruptly used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose to the
extent required by law any contribution made by the Company (or made by any
person acting on its behalf of which the Company is aware) which is in violation
of law, or (iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.
(b) None of the funds or other assets of the Company
constitute or shall constitute property of, or shall be beneficially owned,
directly or indirectly, by any person with whom U.S. persons are restricted from
engaging in financial or other transactions under United States law, including,
but not limited to, the International Emergency Economic Powers Act, 50 U.S.C.
ss. 1701 ET SEQ., The Trading with the Enemy Act, 50 U.S.C. App. 1 ET SEQ., and
any executive orders or regulations promulgated under any such United States
laws (each, an "Embargoed Person"), with the result that the investments
evidenced by the Shares are or would be in violation of law and (i) no Embargoed
Person has or shall have any interest of any nature whatsoever in the Company
with the result that the investments evidenced by the Shares are or would be in
violation of law; and (ii) none of the funds of the Company are or shall be
derived from any unlawful activity with the result that the investments
evidenced by the Shares are or would be in violation of law; provided, that with
respect to the covenants contained in this Section 2.17(b), the Company may
assume that the Investors are not Embargoed Persons. The Company certifies that,
to the Company's knowledge, the Company has not been designated, and is not
owned or controlled, by an Embargoed Person.
2.18 Accountants. To the Company's knowledge, KPMG LLP and Xxxxxx
Xxxxxxxx & Company, Ltd, each of whom the Company expects will express their
respective opinion with respect to the financial statements to be incorporated
by reference from the Company's Annual Report on Form 10-K for the year ended
June 30, 2004, 2005 and/or 2006, as applicable, into the Registration Statement
(as defined below) and the prospectus which forms a part thereof, are
independent accountants as required by the Securities Act and the rules and
regulations promulgated thereunder and are registered with the Public Company
Accounting Oversight Board.
2.19 Contracts. The contracts filed as exhibits to the Exchange Act
Documents are in full force and effect on the date hereof, and neither the
Company nor, to the Company's knowledge, any other
party to such contracts is in breach of or default under any of such contracts
which would have a Material Adverse Effect. The Company has filed with the SEC
all contracts and agreements required to be filed by the Exchange Act.
2.20 Taxes. The Company has filed all necessary federal, state and
foreign income and franchise tax returns due to be filed as of the date hereof
and has paid or accrued all taxes shown as due thereon, and the Company has no
knowledge of a tax deficiency which has been or might be asserted or threatened
against it which would have a Material Adverse Effect.
2.21 Transfer Taxes. On the Closing Date, all stock transfer or other
taxes (other than income taxes) which are required to be paid in connection with
the sale and transfer of the Shares to be sold to the Investor hereunder will
be, or will have been, fully paid or provided for by the Company and all laws
imposing such taxes will be or will have been fully complied with.
2.22 Private Offering. Assuming the correctness of the representations
and warranties of the Investors set forth in ARTICLE V hereof, the offer and
sale of Shares and Warrants hereunder is exempt from registration under the
Securities Act. The Company has not in the past nor will it hereafter take any
action to sell, offer for sale or solicit offers to buy any securities of the
Company which would bring the offer, issuance or sale of the Shares and the
Warrants as contemplated by this Agreement, within the provisions of Section 5
of the Securities Act, unless such offer, issuance or sale was or shall be
within the exemptions of Section 4 of the Securities Act. Neither the Company
nor any person acting on behalf of the Company has offered or sold any of the
Shares and/or the Warrants by any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Securities Act).
The Company has offered the Shares and Warrants for sale only to the Investors
and certain other "accredited investors" within the meaning of Rule 501 of
Regulation D under the Securities Act.
2.23 Controls and Procedures. The Company is in material compliance
with all provisions of the Xxxxxxxx-Xxxxx Act of 2002 which are applicable to it
as of the Closing Date. The Company has established and maintains an effective
system of internal control over financial reporting (as such term is defined in
the Exchange Act ) regarding the reliability of financial reporting and
preparation of financial statements for external purposes in accordance with
GAAP and includes policies and procedures that (i) pertain to maintenance of
records that in reasonable detail accurately and fairly reflect the transactions
and dispositions of the assets of the issuer; (ii) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial
statements in accordance with GAAP, and that receipts and expenditures of the
issuer are being made only in accordance with authorizations of management and
directors of the issuer; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition
of the issuer's assets that could have a Material Adverse Effect on the
financial statements. Except as set forth in the Exchange Act Documents, the
Company has established and maintains disclosure controls and procedures (as
defined in Exchange Act) that are effective in ensuring that information
required to be disclosed by the Company in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported, within
the time periods specified in the SEC's rules and forms, including, without
limitation, controls and procedures designed to ensure that information required
to be disclosed by the Company in the reports that it files or submits under the
Act is accumulated and communicated to the Company's management, including its
principal executive and principal financial officers, or persons performing
similar functions, as appropriate to allow timely decisions regarding required
disclosure. The Company's certifying officers have evaluated the effectiveness
of the Company's disclosure controls and procedures and presented in the
applicable Exchange Act Documents their conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the periods covered by
such Exchange Act Documents based on such evaluation. Since the last such
evaluation date, there has been no change in the Company's internal control over
financial reporting that has materially affected, or is reasonably likely to
materially affect,
the Company's internal control over financial reporting, and no significant
deficiencies or material weaknesses in internal controls over financial
reporting, or other factors that could significantly affect the Company's
internal control over financial reporting, have been identified.
2.24 Merger Agreement and Credit Agreement. Each of the representations
and warranties of each party to (i) the Merger Agreement (including, without
limitation, those of Vodavi), as qualified by the disclosure schedule provided
by Vodavi, were true and correct in all respects when made and will be true and
correct in all material respects at the time of the consummation of the Merger,
and (ii) the Credit Agreement (including, without limitation, those of the
Company), as qualified by the disclosure schedule provided by the Company, were
true and correct in all respects when made and will be true and correct in all
material respects at the time of the consummation of the transactions
contemplated by the Credit Agreement. The execution, delivery and performance by
the Company of each of the Merger Agreement and the Credit Agreement and the
consummation by the Company of the transactions contemplated thereby, were
within the powers of the Company and were duly authorized by all necessary
action of the Company. The Merger Agreement and the Credit Agreement each
constitutes a valid and binding agreement of the Company enforceable against the
Company in accordance with their respective terms, except to the extent that the
validity or binding nature of either agreement may be subject or affected by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or conveyance or other laws relating to or affecting the rights of
creditors generally, or the availability of any equitable or other specific
remedy upon breach of such agreements, or public policy. Upon consummation of
the Merger, the Company will be, subject to the terms and conditions of the
Merger Agreement, the sole stockholder of Vodavi.
ARTICLE III
AFFIRMATIVE COVENANTS OF THE COMPANY
3. The Company hereby covenants (i) with respect to Section 3.3, with
all of the Investors for so long as such Investors beneficially own any Shares
and/or Conversion Shares and/or Warrant Shares, (ii) with respect to Section
3.1, with those Investors who, after the issuance and sale of the Shares and the
Warrants pursuant to this Agreement, will beneficially own at least 30% of the
Common Stock (calculated on a fully diluted basis) (the "30% Investors") for so
long as such Investors beneficially own at least 30% of the Common Stock
(calculated on a fully diluted basis); (iii) in addition to and not in lieu of
the foregoing with respect to Sections 3.1-3.2 and Sections 3.4-3.7, M/C Venture
Partners for so long as M/C Venture Partners owns at least 50% of the Shares
initially purchased by it hereunder, as follows:
3.1 Right of First Refusal.
(a) Right of First Refusal. The Company shall not issue, sell
or exchange, agree or obligate itself to issue, sell or exchange, or reserve or
set aside for issuance, sale or exchange, in a transaction not involving a
public offering, any (i) shares of Common Stock, (ii) any other equity security
of the Company, including without limitation, preferred shares, (iii) any debt
security of the Company (other than debt with no equity feature) including
without limitation, any debt security which by its terms is convertible into or
exchangeable for any equity security of the Company, (iv) any security of the
Company that is a combination of debt and equity, or (v) any option, warrant or
other right to subscribe for, purchase or otherwise acquire any such equity
security or any such debt security of the Company, unless in each case the
Company shall have first offered to sell such securities (the "Offered
Securities") to the 30% Investors and each other person or entity, if any, that
has such a right (each an "Offeree" and collectively, the "Offerees") as
follows: Each Offeree shall have the right to purchase (x) that portion of the
Offered Securities as the number of
shares of Common Stock then held (including shares then issuable upon the
exercise or conversion of outstanding securities) by such Offeree bears to the
total number of shares of issued and outstanding Common Stock of the Company
calculated on a fully diluted basis to include (i) the total number of shares of
Common Stock subject to outstanding awards granted under stock plans of the
Company and (ii) the total number of shares that could be issued upon the
exercise or conversion of outstanding securities (the "Basic Amount"), and (y)
such additional portion of the Offered Securities as such Offeree shall indicate
it will purchase should the other Offerees subscribe for less than their Basic
Amounts (the "Undersubscription Amount"), at a price and on such other terms as
shall have been specified by the Company in writing delivered to such Offeree
(the "Offer"), which Offer by its terms shall remain open and irrevocable for a
period of twenty (20) days from receipt of the offer.
(b) Notice of Acceptance. Notice of each Offeree's intention
to accept, in whole or in part, any Offer made shall be evidenced by a writing
signed by such Offeree and delivered to the Company prior to the end of the
20-day period of such offer, setting forth such of the Offeree's Basic Amount as
such Offeree elects to purchase and, if such Offeree shall elect to purchase all
of its Basic Amount, such Undersubscription Amount as such Offeree shall elect
to purchase (the "Notice of Acceptance"). If the Basic Amounts subscribed for by
all Offerees are less than the total Offered Securities, then each Offeree who
has set forth Undersubscription Amounts in its Notice of Acceptance shall be
entitled to purchase, in addition to the Basic Amounts subscribed for, all
Undersubscription Amounts it has subscribed for; provided, however, that should
the Undersubscription Amounts subscribed for exceed the difference between the
Offered Securities and the Basic Amounts subscribed for (the "Available
Undersubscription Amount"), each Offeree who has subscribed for any
Undersubscription Amount shall be entitled to purchase only that portion of the
Available Undersubscription Amount as the Undersubscription Amount subscribed
for by such Offeree bears to the total Undersubscription Amounts subscribed for
by all Offerees, subject to rounding by the Board of Directors to the extent it
reasonably deems necessary.
(c) Conditions to Acceptances and Purchase.
(i) Permitted Sales of Refused Securities. In the
event that Notices of Acceptance are not given by the Offerees in respect of all
the Offered Securities, the Company shall have ninety (90) days from the
expiration of the period set forth above to close the sale of all or any part of
such Offered Securities as to which a Notice of Acceptance has not been given by
the Offerees (the "Refused Securities") to the Person or Persons specified in
the Offer, but only for cash and otherwise in all respects upon terms and
conditions, including, without limitation, unit price and interest rates, which
are no more favorable, in the aggregate, to such other person or persons or less
favorable to the Company than those set forth in the Offer.
(ii) Reduction in Amount of Offered Securities. In
the event the Company shall propose to sell less than all the Refused Securities
(any such sale to be in the manner and on the terms specified above), then each
Offeree may, at its sole option and in its sole discretion, reduce the number
of, or other units of the Offered Securities specified in its respective Notices
of Acceptance to an amount which shall be not less than the amount of the
Offered Securities which the Offeree elected to purchase pursuant to (b) above
multiplied by a fraction, (i) the numerator of which shall be the amount of
Offered Securities which the Company actually proposes to sell, and (ii) the
denominator of which shall be the amount of all Offered Securities the Company
proposed to sell in its writing delivered pursuant to Section 3.1(a) above. In
the event that any Offeree so elects to reduce the number or amount of Offered
Securities specified in its respective Notices of Acceptance, the Company may
not sell or otherwise dispose of more than the reduced amount of the Offered
Securities until such securities have again been offered to the Offerees in
accordance with Section 3.1(a).
(iii) Closing. Upon the closing, which shall include
full payment to the Company, of the sale to such other person or persons of all
or less than all the Refused Securities, the
Offerees shall purchase from the Company, and the Company shall sell to the
Offerees, the number of Offered Securities specified in the Notices of
Acceptance, as reduced pursuant to Section 3.1(b) above if the Offerees have so
elected, upon the terms and conditions specified in the Offer. The purchase by
the Offerees of any Offered Securities is subject in all cases to the
preparation, execution and delivery by the Company and the Offerees of a
purchase agreement relating to such Offered Securities reasonably satisfactory
in form and substance to the Company and the Offerees and their respective
counsel.
(d) Further Sale. In each case, any Offered Securities not
purchased by the Offerees or other person or persons in accordance with Section
3.1(c)(iii) above may not be sold or otherwise disposed of until they are again
offered to the Offerees under the procedures specified in Section
3.1(c)(i)-(iii) above.
(e) Exceptions. The rights of the Investors under this Section
3.1 shall not apply to:
(i) Common Stock issued as a stock dividend to
holders of Common Stock or upon any subdivision or combination of shares of
Common Stock;
(ii) any capital stock or derivative thereof granted
to an employee, director or consultant under a stock plan approved by the Board
of Directors and the Company's stockholders;
(iii) any securities issued as consideration for the
acquisition of another entity by the Company by merger or share exchange
(whereby the Company owns no less than 51% of the voting power of the surviving
entity) or purchase of substantially all of such entity's stock or assets, if
such acquisition is approved by the Board of Directors;
(iv) any securities issued in connection with a
strategic partnership, joint venture or other similar
agreement, provided that the purpose of such arrangement is not primarily the
raising of capital and that such arrangement is approved unanimously by the
Board of Directors;
(v) any securities issued to a financial institution
in connection with a bank loan or lease with such financial institution provided
that such is approved unanimously by the Board of Directors;
(vi) securities issuable upon the exercise or
conversion of securities outstanding on the Closing Date; and
(vii) the Shares, the Warrants, the Conversion Shares
issued upon conversion of the Shares and the Warrant Shares issued upon the
exercise of the Warrants.
3.2 Further Assurances. The Company hereby agrees to take all further
actions, execute all further documents and perform all further things necessary
to give effect to the provisions of this Agreement and consult with and keep
informed, and shall cause the appropriate officers, directors and legal counsel
to consult with and keep informed, legal counsel to the Investors (including,
without limitation, legal counsel to M/C Venture Partners) including, but not
limited to the status of the proposed Merger and Credit Agreement.
3.3. Registration of the Shares; Compliance with the Securities Act.
(a) Registration Procedures and Other Matters. The Company
shall:
(i) subject to receipt of necessary information from
the Investors (for purposes of this Section 3.3 only, "Investors" shall include
the holder of warrants issued in connection with the Credit Agreement) after
prompt request from the Company to the Investors to provide such information,
prepare and file with the SEC within 210 days after the consummation of the
Merger (the date such registration statement is filed, the "Filing Date"), a
registration statement on Form S-3 or Form S-1 (the "Registration Statement") to
enable the resale of the Conversion Shares and the Warrant Shares (for purposes
of this Section 3.3 only, the term "Warrant Shares" shall include shares of
Common Stock issuable upon exercise of the Warrants and any warrants to purchase
Common Stock issued in connection with the Credit Agreement), as applicable, by
the Investors from time to time through any quotation system on which the Common
Stock is quoted or listed, if applicable, or in privately-negotiated
transactions (as used in this Section 3.3 and in Section 3.7 only, the term
"Conversion Shares" shall include any securities into which the Conversion
Shares are reclassified after the date hereof);
(ii) use its best efforts, subject to receipt of
necessary information from the Investors after prompt request from the Company
to the Investors, to provide such information (provided that failure on the part
of one Investor shall not relieve the Company from its obligation to use best
efforts with respect to complying Investors), to cause the Registration
Statement to become effective as soon as reasonably practicable after (A) being
informed by the staff of the SEC (the "Staff") that the Staff has decided not to
review the Registration Statement, or (B) being informed by the Staff that the
Staff have no further comments on such Registration Statement (the date the
Registration Statement is initially declared effective by the SEC, the
"Effective Date"), such efforts to include, without limiting the generality of
the foregoing, preparing and filing with the SEC in such period any financial
statements that are required to be filed prior to the effectiveness of such
Registration Statement; and, in the event that the filing referred to in Section
3.3(a)(i) above is on a form other than Form S-3, the Company shall use its best
efforts, subject to receipt of necessary information from the Investors after
prompt request from the Company to the Investors to provide such information
(provided that failure on the part of one Investor shall not relieve the Company
from its obligation to use best efforts with respect to complying Investors), to
prepare and file with the SEC, as soon as reasonably practicable after the
Company first becomes eligible to file a registration statement on Form S-3, a
registration statement on Form S-3 (the "S-3 Registration Statement") to enable
the resale of the Conversion Shares and the Warrant Shares by the Investors from
time to time through any quotation system on which the Common Stock is quoted or
listed or in privately-negotiated transactions; and to use its best efforts to
cause the S-3 Registration Statement to become effective as soon as reasonably
practicable thereafter, such efforts to include, without limiting the generality
of the foregoing, preparing and filing with the SEC as promptly as reasonably
practicable any financial statements that are required to be filed prior to the
effectiveness of such S-3 Registration Statement (the term "Registration
Statement" shall mean the Form S-1 Registration Statement until the S-3
Registration Statement is declared effective by the SEC, after which time it
shall mean the S-3 Registration Statement).
(iii) use its best efforts to prepare and file with
the SEC such amendments and supplements to the Registration Statement and the
Prospectus (as used herein, the term "Prospectus" shall mean (1) the prospectus
included in any Registration Statement, as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Conversion Shares covered by such Registration Statement and by all other
amendments and supplements to the prospectus, including post-effective
amendments and all material incorporated by reference in such prospectus, and
(2) any "free writing prospectus" as defined in Rule 163 under the Securities
Act) used in connection therewith as may be necessary to keep the Registration
Statement current, effective and free from any material misstatement or omission
to state a material fact for a period not exceeding, with respect to each
Investor's Conversion Shares or Warrant Shares purchased hereunder, the earlier
of (x) the date on which such Investor may sell all Conversion Shares or Warrant
Shares then held by the Investor without restriction by the volume limitations
of Rule 144(e) of the Securities Act and (y) such time as all
Conversion Shares or Warrant Shares held by such Investor have been sold
pursuant to a registration statement;
(iv) comply with Rule 172 of the Securities Act and
(x) advise the Investors promptly of any failure by the Company to satisfy the
conditions of such Rule 172 and (y) promptly furnish to the Investors with
respect to the Conversion Shares or Warrant Shares registered under the
Registration Statement such number of copies of the Registration Statement,
Prospectuses and Preliminary Prospectuses in conformity with the requirements of
the Securities Act and such other documents as the Investors may reasonably
request, in order to facilitate the public sale or other disposition of all or
any of the Conversion Shares or Warrant Shares by the Investors;
(v) file documents required of the Company for blue
sky clearance in states specified in writing by any Investor and use its best
efforts to maintain such blue sky qualifications during the period the Company
is required to maintain the effectiveness of the Registration Statement pursuant
to Section 3.3(a)(iii); PROVIDED, HOWEVER, that the Company shall not be
required to qualify to do business or consent to service of process in any
jurisdiction in which it is not now so qualified or has not so consented;
(vi) bear all expenses in connection with the
procedures in paragraph (i) through (v), (viii) and the last paragraph of this
Section 3.3(a) and the registration of the Conversion Shares and Warrant Shares
pursuant to the Registration Statement;
(vii) advise the Investors, promptly after it shall
receive notice or obtain knowledge of the issuance of any stop order by the SEC
delaying or suspending the effectiveness of the Registration Statement or of the
initiation or threat of any proceeding for that purpose; and it will promptly
use its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal at the earliest possible moment if such stop order should be issued;
and
(viii) provide a "Plan of Distribution" section of
the Registration Statement substantially in the form attached hereto as Exhibit
E hereto (subject to the comments of the SEC).
Notwithstanding anything to the contrary herein, (i) the Registration
Statement shall cover only the Conversion Shares, the Warrant Shares and any
other securities with respect to which the Company has registration obligations
as of the date hereof. In no event at any time before the Registration Statement
becomes effective shall the Company publicly announce or file any other
registration statement, other than registrations on Form S-8, without the prior
written consent of each individual holder (together with any Affiliates of such
holder) of 30% of the Series E Preferred Stock to be purchased pursuant to this
Agreement (the "30% Investors' Consent").
The Company understands that the Investors disclaim being underwriters,
but any Investor being deemed an underwriter by the SEC shall not relieve the
Company of any obligations it has hereunder; PROVIDED, HOWEVER that if the
Company receives notification from the SEC that a Investor is deemed an
underwriter, then the period by which the Company is obligated to submit an
acceleration request to the SEC shall be extended to the earlier of (a) the 90th
day after such SEC notification, or (b) 120 days after the initial filing of the
Registration Statement with the SEC.
Within three (3) business days of the Effective Date, the Company shall
advise its transfer agent that the shares are subject to an effective
registration statement and can be reissued free of restrictive legend upon
notice of a sale by a Investor and confirmation by such Investor that it has
complied with the prospectus delivery requirements, provided that the Company
has not advised the transfer agent orally or in writing that the registration
statement has been suspended; PROVIDED, HOWEVER, in the event the
Company's transfer agent requires an opinion of counsel to the Company for an
such reissuance, within three business days of any such request for an opinion
by the transfer agent, the Company shall cause its counsel to issue a blanket
opinion to the transfer agent stating the foregoing.
(b) Transfer of Conversion and Warrant Shares After
Registration; Suspension.
(i) Each Investor, severally and not jointly, agrees
that it will not effect any disposition of the Conversion Shares or the Warrant
Shares or its right to purchase the Conversion Shares or the Warrant Shares that
would constitute a sale within the meaning of the Securities Act except as
contemplated in the Registration Statement referred to in Section 3.3(a) and as
described below or as otherwise permitted by law, and that it will promptly
notify the Company of any material changes in the information set forth in the
Registration Statement regarding the Investor or its plan of distribution.
(ii) Except in the event that paragraph (iii) below
applies, the Company shall (A) if deemed necessary by the Company, prepare and
file from time to time with the SEC a post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or a supplement
or amendment to any document incorporated therein by reference or file any other
required document so that such Registration Statement will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
so that such Prospectus will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading; (B) provide the Investors copies of any documents filed
pursuant to Section 3.3(b)(ii)(A); and (C) inform each Investor that the Company
has complied with its obligations in Section 3.3(b)(ii)(A) (or that, if the
Company has filed a post-effective amendment to the Registration Statement which
has not yet been declared effective, the Company will notify the Investor to
that effect, will use its best efforts to secure the effectiveness of such
post-effective amendment as promptly as possible and will promptly notify the
Investor pursuant to Section 3.3(b)(ii)(A) hereof when the amendment has become
effective).
(iii) Subject to paragraph (iv) below, in the event
(A) of any request by the SEC or any other federal or state governmental
authority during the period of effectiveness of the Registration Statement for
amendments or supplements to a Registration Statement or related Prospectus or
for additional information; (B) of the issuance by the SEC or any other federal
or state governmental authority of any stop order suspending the effectiveness
of a Registration Statement or the initiation of any proceedings for that
purpose; (C) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Conversion Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; or (D) of any event or
circumstance which, upon the advice of its counsel, necessitates the making of
any changes in the Registration Statement or Prospectus, or any document
incorporated or deemed to be incorporated therein by reference, so that, in the
case of the Registration Statement, it will not contain any untrue statement of
a material fact or any omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and that in
the case of the Prospectus, it will not contain any untrue statement of a
material fact or any omission to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; then the Company shall
deliver a notice in writing to each Investor (the "Suspension Notice") to the
effect of the foregoing and, upon receipt of such Suspension Notice, the
Investor will refrain from selling any Conversion Shares pursuant to the
Registration Statement (a "Suspension") until the Investor's is advised in
writing by the Company that the Suspension is no longer effective. In the event
of any Suspension, the Company will use its best efforts to cause the Suspension
to be terminated as soon as reasonably practicable within twenty (20) business
days after the delivery of a Suspension Notice to the Investors. In addition to
and without limiting any other remedies (including,
without limitation, at law or at equity) available to the Investors, each
Investor shall be entitled to specific performance in the event that the Company
fails to comply with the provisions of this Section 3.3(b)(iii).
(iv) Notwithstanding the foregoing paragraphs of this
Section 3.3(b), the Investors shall not be prohibited from selling Conversion
Shares or the Warrant Shares under the Registration Statement as a result of
Suspensions on more than two occasions of not more than thirty (30) days each in
any twelve (12) month period, unless, in the good faith judgment of the
Company's Board of Directors, upon the advice of counsel, the sale of Conversion
Shares or Warrant Shares under the Registration Statement in reliance on this
Section 3.3(b)(iv) would be reasonably likely to cause a violation of the
Securities Act or the Exchange Act and result in liability to the Company.
(v) Provided that a Suspension is not then in effect,
any Investor may sell Conversion Shares or Warrant Shares under the Registration
Statement upon compliance with its obligations under this Section 3.3.
(vi) In the event of a sale of Conversion Shares or
Warrant Shares by a Investor pursuant to the Registration Statement, the
Investor must also deliver to the Company's transfer agent, with a copy to the
Company, a Certificate of Subsequent Sale substantially in the form attached
hereto as Exhibit F, so that the Conversion Shares or Warrant Shares, as
applicable, may be properly transferred.
(c) Indemnification.
(i) For the purposes of this Section 3.3(c):
(A) the term "Selling Stockholder" shall
include each Investor and any Affiliate of such Investor;
(B) the term "Registration Statement" shall
include the Prospectus in the form first filed with the SEC pursuant to Rule
424(b) of the Securities Act or filed as part of the Registration Statement at
the time of effectiveness if no Rule 424(b) filing is required, exhibit,
supplement or amendment included in or relating to the Registration Statement
referred to in Section 3.3(a); and
(C) the term "untrue statement" shall
include any untrue statement or alleged untrue statement, or any omission or
alleged omission to state in the Registration Statement a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
(ii) The Company agrees to indemnify and hold
harmless each Selling Stockholder from and against any losses, claims, damages
or liabilities to which such Selling Stockholder may become subject (under the
Securities Act or otherwise) insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon (A) any breach of the representations or warranties of the Company
contained in this Section 3.3 or failure to comply with the covenants and
agreements of the Company contained in this Section 3.3, (B) any untrue
statement of a material fact contained in the Registration Statement as amended
at the time of effectiveness or any omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(C) any failure by the Company to fulfill any undertaking included in the
Registration Statement as amended at the time of effectiveness, and the Company
will reimburse such Selling Stockholder for any reasonable legal or other
expenses reasonably incurred in investigating, defending or preparing to defend
any such action,
proceeding or claim, or preparing to defend any such action, proceeding or
claim, PROVIDED, HOWEVER, that the Company shall not be liable in any such case
to the extent that such loss, claim, damage or liability arises out of, or is
based upon, an untrue statement made in such Registration Statement or any
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading in reliance upon and in conformity with
written information furnished to the Company by or on behalf of such Selling
Stockholder specifically for use in preparation of the Registration Statement or
the failure of such Selling Stockholder to comply with its covenants and
agreements contained in Section 3.3(b) hereof respecting sale of the Conversion
Shares or, in the event the Company has advised the Investors in writing that
the Company does not meet the conditions for using Rule 172 of the Securities
Act and has provided the Investors with a copy of a current Prospectus, any
statement or omission in any earlier Prospectus that is corrected in the
Prospectus so delivered to the Investors and delivered to the Selling
Stockholder prior to the pertinent sale or sales by the Selling Stockholder. The
Company shall reimburse each Selling Stockholder for the amounts provided for
herein on demand as such expenses are incurred.
(iii) Each Investor, severally but not jointly,
agrees to indemnify and hold harmless the Company (and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act,
each officer of the Company who signs the Registration Statement and each
director of the Company) from and against any losses, claims, damages or
liabilities to which the Company (or any such officer, director or controlling
person) may become subject (under the Securities Act or otherwise), insofar as
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of, or are based upon, (A) any failure to comply with
the covenants and agreements contained in Section 3.3(b) hereof respecting sale
of the Conversion Shares or Warrant Shares, or (B) any untrue statement of a
material fact contained in the Registration Statement or any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading if such untrue statement or omission was made in reliance
upon and in conformity with written information furnished by or on behalf of
such Investor specifically for use in preparation of the Registration Statement,
and such Investor will reimburse the Company (or such officer, director or
controlling person), as the case may be, for any legal or other expenses
reasonably incurred in investigating, defending or preparing to defend any such
action, proceeding or claim; PROVIDED, HOWEVER that such Investor's obligation
to indemnify the Company shall be limited to the net amount received by such
Investor from the sale of the Conversion Shares or Warrant Shares giving rise to
such obligation.
(iv) Promptly after receipt by any indemnified person
of a notice of a claim or the beginning of any action in respect of which
indemnity is to be sought against an indemnifying person pursuant to this
Section 3.3(c), such indemnified person shall notify the indemnifying person in
writing of such claim or of the commencement of such action, but the omission to
so notify the indemnifying person will not relieve it from any liability which
it may have to any indemnified person under this Section 3.3(c) (except to the
extent that such omission materially and adversely affects the indemnifying
person's ability to defend such action) or from any liability otherwise than
under this Section 3.3(c). Subject to the provisions hereinafter stated, in case
any such action shall be brought against an indemnified person, the indemnifying
person shall be entitled to participate therein, and, to the extent that it
shall elect by written notice delivered to the indemnified person promptly after
receiving the aforesaid notice from such indemnified person, shall be entitled
to assume the defense thereof, with counsel reasonably satisfactory to such
indemnified person. After notice from the indemnifying person to such
indemnified person of its election to assume the defense thereof, such
indemnifying person shall not be liable to such indemnified person for any legal
expenses subsequently incurred by such indemnified person in connection with the
defense thereof, PROVIDED, HOWEVER, that if there exists or shall exist a
conflict of interest that would make it inappropriate, in the opinion of counsel
to the indemnified person, for the same counsel to represent both the
indemnified person and such indemnifying person or any affiliate or associate
thereof, the indemnified person shall be entitled to retain its own counsel at
the reasonable expense of such indemnifying person; PROVIDED, HOWEVER, that no
indemnifying person shall
be responsible for the fees and expenses of more than one separate counsel
(together with appropriate local counsel) for all indemnified parties. In no
event shall any indemnifying person be liable in respect of any amounts paid in
settlement of any action unless the indemnifying person shall have approved the
terms of such settlement; PROVIDED that such consent shall not be unreasonably
withheld. No indemnifying person shall, without the prior written consent of the
indemnified person, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified person is or could have been a
party and indemnification could have been sought hereunder by such indemnified
person, unless such settlement includes an unconditional release of such
indemnified person from all liability on claims that are the subject matter of
such proceeding.
(v) If the indemnification provided for in this
Section 3.3(c) is unavailable to or insufficient to hold harmless an indemnified
person under subsection (ii) or (iii) above in respect of any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) referred
to therein, then each indemnifying person shall contribute to the amount paid or
payable by such indemnified person as a result of such losses, claims, damages
or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the Company on the one hand and the
applicable Investor, as well as any other Selling Shareholders under such
registration statement on the other in connection with the statements or
omissions or other matters which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault shall be determined by reference
to, among other things, in the case of an untrue statement, whether the untrue
statement relates to information supplied by the Company on the one hand or an
Investor, or other Selling Stockholder on the other and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement. The Company and each Investor, severally but not jointly,
agree that it would not be just and equitable if contribution pursuant to this
subsection (v) were determined by pro rata allocation (even if the Investor and
other Selling Stockholders were treated as one entity for such purpose) or by
any other method of allocation which does not take into account the equitable
considerations referred to above in this subsection (v). The amount paid or
payable by an indemnified person as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this subsection
(v) shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified person in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this subsection (v),
each Investor shall not be required to contribute any amount in excess of the
amount by which the net amount received by such Investor from the sale of the
Conversion Shares or the Warrant Shares to which such loss relates exceeds the
amount of any damages which such Investor has otherwise been required to pay by
reason of such untrue statement. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Each Investor's obligations in this subsection to
contribute shall be in proportion to its sale of Conversion Shares or Warrant
Shares to which such loss relates and shall not be joint with any other Selling
Stockholders.
(vi) The parties to this Agreement hereby acknowledge
that they are sophisticated business persons who were represented by counsel
during the negotiations regarding the provisions hereof including, without
limitation, the provisions of this Section 3.3(c), and are fully informed
regarding said provisions. They further acknowledge that the provisions of this
Section 3.3(c) fairly allocate the risks in light of the ability of the parties
to investigate the Company and its business in order to assure that adequate
disclosure is made in the Registration Statement as required by the Securities
Act and the Exchange Act. The parties are advised that federal or state public
policy as interpreted by the courts in certain jurisdictions may be contrary to
certain of the provisions of this Section 3.3(c), and the parties hereto hereby
expressly waive and relinquish any right or ability to assert such public policy
as a defense to a claim under this Section 3.3(c) and further agree not to
attempt to assert any such defense.
(d) Termination of Conditions and Obligations. The conditions
precedent imposed by Section 5.5 or this Section 3.3 upon the transferability of
the Conversion Shares or Warrant Shares shall cease and terminate as to any
particular number of the Conversion Shares or Warrant Shares when such
Conversion Shares or Warrant Shares shall have been effectively registered under
the Securities Act and sold or otherwise disposed of in accordance with the
intended method of disposition set forth in the Registration Statement covering
such Conversion Shares or Warrant Shares, at the time such Shares are eligible
for sale pursuant to Rule 144(k) (and the Investor provides the Company with
such reasonable and appropriate customary representations as may be reasonably
requested by the Company) or at such time as an opinion of counsel reasonably
satisfactory to the Company shall have been rendered to the effect that such
conditions are not necessary in order to comply with the Securities Act.
(e) Information Available. So long as the Registration
Statement is effective covering the resale of Conversion Shares or Warrant
Shares owned by any Investor, the Company will furnish to such Investors, upon
the reasonable request of a Investor, an adequate number of copies of the
Prospectuses to supply to any other party requiring such Prospectuses; and upon
the reasonable request of such Investor, the President or the Chief Financial
Officer of the Company (or an appropriate designee thereof) will meet with such
Investor or a representative thereof at the Company's headquarters to discuss
all information relevant for disclosure in the Registration Statement covering
the Conversion Shares or Warrant Shares and will otherwise cooperate with any
Investor conducting an investigation for the purpose of reducing or eliminating
such Investor's exposure to liability under the Securities Act, including the
reasonable production of information at the Company's headquarters; PROVIDED,
that the Company shall not be required to disclose any confidential information
to or meet at its headquarters with any Investor until and unless the Investor
shall have entered into a confidentiality agreement in form and substance
reasonably satisfactory to the Company with the Company with respect thereto.
3.4 Delivery of Shares; Liquidated Damages. The Company and each
Investor agree that such Investor will suffer damages if the Company fails to
fulfill its obligations pursuant to Section 1.3 hereof and that it would not be
possible to ascertain the extent of such damages with precision. Accordingly,
the Company hereby agrees to pay liquidated damages to each Investor if the
Company fails to deliver to the Investors the stock certificates evidencing the
Shares and the Warrants being purchased by the Investors hereunder within three
(3) business days after the date hereof (such an event, a "Covenant Default").
The Company shall pay an amount in cash equal to 1% of the aggregate purchase
price paid by the Investors pursuant to this Agreement (the "Liquidated
Damages") in connection with a Covenant Default, on the business day following
the Covenant Default, and each 30th day thereafter until the certificates
evidencing the Shares and the Warrants purchased by the Investors hereunder have
been delivered to the Investors. Notwithstanding the foregoing, all periods
shall be tolled during delays directly caused by the action or inaction of the
Investor, and the Company shall have no liability to any Investor in respect of
any such delay. The Liquidated Damages payable herein shall apply on a pro rata
basis for any portion of a 30-day period of a Covenant Default.
3.5 Reservation of Shares of Common Stock. From and after the Closing
Date, the Company will at all times reserve and keep available, solely for
issuance and delivery upon the conversion of the Shares and exercise of the
Warrants, all Common Stock issuable from time to time upon such conversion and
exercise. If at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of the Shares and/or
exercise of the Warrants without limitation of any remedies available to any
Investor, the Company will forthwith take such corporate action (and shall use
its best efforts to cause the Company's stockholders to take such action) as may
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purposes. The Company
shall obtain any authorization, consent, approval or other action by, or make
any filing with, any court or administrative body that may be required under
applicable state
securities laws in connection with the issuance of shares of Common Stock upon
conversion of the Shares and exercise of the Warrants.
3.6 Extinguishment of Prior Debt. Prior to the Closing Date, the
Company shall have completely satisfied and extinguished all of its payment
obligations and amounts due to (i) Silicon Valley Bank ("SVB") pursuant to that
certain Loan and Security Agreement, dated as of September 28, 2005 ("SVB Loan
Agreement"), including, without limitation the promissory notes made to SVB in
connection therewith, and (ii) Comdial Corporation ("Comdial"), pursuant to that
certain Promissory Note, dated as of September 28, 2005 (the "Comdial Note"),
made by the Company to Comdial, and the Company shall have no further
obligations under the SVB Loan Agreement or the Comdial Note (and 30% Investors
shall have received evidence in writing of such satisfaction and extinguishment
from the Company).
3.7 Removal of Legends. Upon the earlier of (i) registration of the
Conversion Shares and the Warrant Shares for sale pursuant to Section 3.3 or
(ii) Rule 144(k) becoming available with respect to an Investor's Conversion
Shares and/or Warrant Shares, the Company shall, (A) deliver to the transfer
agent for the Common Stock (the "Transfer Agent") irrevocable instructions that
the Transfer Agent shall reissue a certificate representing shares of Common
Stock without legends upon receipt by such Transfer Agent of the legended
certificates for such shares, together with either (1) a customary
representation by such Investor that Rule 144(k) of the Securities Act applies
to the shares of Common Stock represented thereby or (2) the Certificate of
Subsequent Sale in substantially the form of Exhibit F hereto, and (B) cause its
counsel to deliver to the Transfer Agent one or more blanket opinions to the
effect that the removal of such legends in such circumstances may be effected
under the Securities Act. From and after the earlier of such dates, upon an
Investor's written request, the Company shall promptly cause certificates
evidencing such Investor's securities to be replaced with certificates which do
not bear such restrictive legends, and Conversion Shares subsequently issued
upon conversion of the Shares or the due exercise of the Warrants shall not bear
such restrictive legends. When the Company is required to cause unlegended
certificates to replace previously issued legended certificates, if unlegended
certificates are not delivered to an Investor within three (3) business days of
submission by that Investor of legended certificate(s) to the Transfer Agent as
provided above (or to the Company, in the case of the Warrants), the Company
shall be liable to such Investor for a penalty equal to 1% of the aggregate
purchase price of the Conversion Shares evidenced by such certificate(s) for
each thirty (30) day period (or portion thereof) beyond such three (3) business
day period that the unlegended certificates have not been so delivered; provided
that in no event shall the aggregate amount of cash to be paid to such Investor
pursuant to this Section 3.7 exceed 9% of such aggregate purchase price.
3.8 Board and Committee Configuration.
(a) Size. The Board of Directors following the consummation of
the Merger shall consist of, and be fixed at, eight (8) members. If the Merger
is not consummated, the Board of Directors shall consist of, and be fixed at,
seven (7) members.
(b) Membership - Post-Merger. Immediately following the
Closing, the members of the Board of Directors shall consist of (and the Company
agrees to nominate for election) (i) the chief executive officer of the Company
who shall serve as a Class II director, currently Xxxxxxx X. Xxxxxxxx, (ii) one
member who shall serve as a Class II director designated by the written consent
of the majority-in-interest of the shares of Common Stock held by the investors
(including the affiliated assignees of such investors, the "Series B Investors")
named on the signature pages to the Company's Series B purchase agreement dated
as of August 8, 2001 that were acquired upon the conversion of the shares of
Series B Preferred Stock held by them pursuant to the terms of the Consent,
Waiver and Amendment Agreement dated September 25, 2004 (the "2004 Consent"),
acting as a single class, currently Xxxxxx X. Xxxxxxxx, (iii) one member who
shall serve as a Class II director designated by the written consent of the
majority-in-
interest of the shares of Common Stock held by the investors (including the
affiliated assignees of such investors, the "Series C Investors") named on the
signature pages to the Company's Series C purchase agreement dated as of June
27, 2003, as amended that were acquired upon the conversion of the shares of
Series C Preferred Stock held by them pursuant to the terms of the 2004 Consent,
acting as a single class, currently R. Xxxxx Xxxxxxxxxx, (iv) two members who
shall serve as Class III directors designated in writing by M/C Venture
Partners, currently Xxxx X. Xxxxxxx and Xxxxxxx X. Xxxxxx, (v) two non-executive
members who shall serve as Class I directors designated by the mutual agreement
of M/C Venture Partners and the Board of Directors (reflected by approval of the
Board of Directors (or its Nominating or Corporate Governance committee) of a
written designation by M/C Venture Partners), provided that each such
non-executive member has relevant industry experience (each, an "Industry
Director"), which such Industry Directors are currently Xxxxxxx X. Xxxxxx and
Xxxxxxx X. Xxxxxx, and (vi) subject to the consummation of the Merger, one
member who shall serve as a Class I director designated in writing, by LG-Nortel
Co., Ltd. ("LG").
(c) Membership - Post-Annual Meeting. Following the date which
is six months from the Closing Date, the members of the Board of Directors shall
consist of (and the Company agrees to nominate for election) (i) the chief
executive officer of the Company who shall serve as a Class II director, (ii)
one member who shall serve as a Class II director designated by the written
consent of (A) Special Situations Fund III, L.P. and its Affiliates
(collectively, "SSF") so long as SSF and its Affiliates continue to beneficially
own at least 50% of the shares of Common Stock acquired by SSF and its
Affiliates upon the conversion of the shares of Series B Preferred Stock held by
them pursuant to the terms of the 2004 Consent or (B) in the event that SSF is
not entitled to appoint a director pursuant to clause (A), the
majority-in-interest of the shares of Common Stock held by the Series B and C
Investors that were acquired by them upon the conversion, pursuant to the terms
of the 2004 Consent, of the shares of Series B Preferred Stock and Series C
Preferred Stock held by them, acting as a single class, (iii) two members who
shall serve as Class III directors designated in writing by M/C Venture Partners
(at least one of whom shall be an Industry Director), (iv) three Industry
Directors who shall serve as Class I directors designated by the mutual
agreement of M/C Venture Partners and the Board of Directors (reflected by
approval of the Board of Directors (or its Nomination or Corporate Governance
committee) of a written designation by M/C Venture Partners) and (v) subject to
the Merger having been consummated, one member who shall serve as a Class I
director designated in writing, by LG.
(d) Term. The directors to be elected shall serve for terms in
accordance with the Company's bylaws.
(e) Vacancy. A vacancy in any directorship provided for
pursuant to Sections 3.8(b) and (c) hereof shall be filled or in accordance with
such Sections 3.8(b) and (c) by a director designated by the persons or entities
that hold the right to designate such person under Sections 3.8(b) and (c).
(f) Committees. The Company shall maintain Compensation, Audit
and Nominating or Corporate Governance committees, and the Investors' designees
shall be entitled to membership on the Compensation and Nominating or Corporate
Governance committees.
3.9 Prior Round Liquidated Damages. The Company shall property account
for and record as a liability on the Company's balance sheet all accrued and
unpaid liquidated damages payable with respect to prior financings (which the
Company hereby acknowledges remain outstanding).
ARTICLE IV
NEGATIVE COVENANTS OF THE COMPANY
For so long as any shares of Series E Preferred Stock are issued and
outstanding, the Company hereby covenants with (i) M/C Venture Partners that so
long as M/C Venture Partners owns at least 50% of the Shares initially purchased
by it hereunder and (ii) with respect to Sections 4.6 and 4.11, with all of the
30% Investors for so long as such Investors beneficially own at least 30% of the
Common Stock (calculated on a fully diluted basis), in addition to any other
vote required by law or the Company's certificate of incorporation without the
prior written consent of M/C Venture Partners, the Company will not:
4.1 Change in Control; Sale of Assets; Merger. Enter into any
transaction, or series of related transactions, constituting a Change of Control
(or agree to enter into any such transaction or series of related transactions,
or permit any Subsidiary to do so). For purposes of this Section 4.1, "Change of
Control" shall mean the existence or occurrence of any of the following: (a) the
sale, conveyance or disposition of all or substantially all of the assets of the
Company; (b) the effectuation of a transaction or series or related transactions
in which more than fifty percent (50%) of the voting power of the Company is
disposed of (other than as a direct result of normal, uncoordinated trading
activities in the Common Stock generally); (c) the consolidation, merger or
other business combination of the Company with or into any other entity,
immediately following which the prior stockholders of the Company fail to own,
directly or indirectly, at least fifty percent (50%) of the voting equity of the
surviving entity; and (d) a transaction or series of related transactions in
which any person or group, other than the Investors and their affiliates,
acquires more than fifty percent (50%) of the voting equity of the Company,
PROVIDED, that the Company shall not be deemed to have violated this Section
4.1(d) in the event the Investors sell, convey or transfer more than 50% of the
outstanding equity securities of the Company to an unaffiliated third party.
4.2 Creation of Senior or Pari Passu Equity; Issuance of Equity
Securities. Create or authorize the creation of any additional class or series
of shares of stock (or any debt security which by its terms is convertible into
or exchangeable for any equity security of the Company and any security which is
a combination of debt and equity) unless the same ranks junior to the Common
Stock as to dividends and the distribution of assets on the liquidation,
dissolution or winding up of the Company; or issue, or agree to issue, any
equity security (or any security convertible, exercisable or exchangeable for or
into any equity security) of the Company other than securities set forth in
Section 3.1(e). Notwithstanding any other provision of this Agreement, the
Company shall not issue any shares of the Series E Preferred Stock except for
the Shares.
4.3 Repurchases, Redemptions, Dividends. Purchase or redeem, or set
aside any sums for the purchase or redemption of, or pay any dividend or make
any distribution on, any shares of capital stock of the Company or permit any
Subsidiary to do any of the foregoing, except for (1) dividends or other
distributions payable on the Common Stock solely in the form of additional
shares of Common Stock; (2) redemption of the Shares as contemplated by the
Certificate of Designations and/or the Company's certificate of incorporation;
(3) the dividends and/or distributions with respect to the Shares contemplated
by the Certificate of Designations and/or the Company's certificate of
incorporation, as amended; and (4) the repurchase of shares of Common Stock from
employees or consultants at the original purchase price thereof pursuant to
awards granted prior to the date hereof under a stock plan approved by the Board
of Directors.
4.4 Transfers of Intellectual Property. Transfer any ownership or
interest in, or material rights relating to, or the granting of any liens or
encumbrances on, any of the Intellectual Property to any person or entity which
is not a member of the consolidated group of the Company and its Subsidiaries;
PROVIDED, HOWEVER, that this restriction shall not apply to transfers of
Intellectual Property accomplished in the ordinary course of business (such as
pursuant to software license agreements in the ordinary course of business).
4.5 Liquidation or Dissolution. Consent to or effect any liquidation,
dissolution or winding up of the Company or any recapitalization or
reorganization of the Company, or permit any Subsidiary to do any of the
foregoing.
4.6 Change in Size of Board. Increase or decrease the number of
directors constituting the size of the Board of Directors from eight (8)
members.
4.7 Change to Charter/By-laws. Amend, alter or repeal any provision of
the certificate of incorporation or by-laws of the Company.
4.8 Change in Nature of Business. Make, or permit any Subsidiary to
make, any change in the nature of its business in the Exchange Act Documents
existing on the Closing Date.
4.9 Restrictions on Indebtedness. Create, incur, assume or suffer to
exist, or permit any Subsidiary to create, incur, assume or suffer to exist, any
liability with respect to indebtedness for money borrowed which exceeds, in the
aggregate, $3,000,000, PROVIDED that indebtedness for borrowed money assumed,
guaranteed, endorsed or upon which the Company or any Subsidiary has otherwise
become directly or contingently liable on, shall count as indebtedness for money
borrowed for the purpose of this restriction.
4.10 Change in Authorized Capital Stock. Increase or decrease in the
authorized amount of any shares of capital stock of the Company, whether any
such change shall be by means of amendment to the Company's certificate of
incorporation or by merger, consolidation or otherwise.
4.11 No Disparate Voting Rights. Take any action, including, without
limitation, amendments to the Certificate of Incorporation, that would enable
any holder of a share of capital stock of the Company to vote such shares on any
matter at a rate exceeding the number of votes that such share would be entitled
to had it been purchased at a purchase price equal to one share of Common Stock
of the Company on the date of its purchase (and the Company shall not use
indebtedness to evade this covenant).
4.12 Issuance of Compensatory Equity Awards. Grant any options or other
rights to purchase capital stock except to employees, directors and consultants
as authorized by vote of the Board of Directors or its Compensation Committee,
if such committee has been formed.
4.13 Adjustments to Warrants. Take any action which would cause any
adjustment under Section 8 of the Warrants.
4.14 Credit Agreement. Amend the Credit Agreement or the warrants
issued in connection therewith, or take any action that would cause any increase
in the number of shares of Common Stock for which such warrants may be
exercised.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTORS
5. Each Investor, severally and not jointly, represents and warrants
to, and covenants with, the Company that:
5.1 Authorization. The Investor has all requisite power and authority
to execute, deliver and perform its obligations under this Agreement. The
execution of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary action on the
part of such Investor and this Agreement has been duly executed and delivered
and constitutes the valid and binding obligation of the Investor enforceable in
accordance with its terms, except as rights to indemnity and contribution may be
limited by state or federal securities laws or the public policy underlying such
laws, 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 in equity or at law).
5.2 Purchase Entirely for Own Account. The Shares and Warrants to be
purchased by the Investor will be acquired for investment for the Investor's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof in violation of the Securities Act, and such
Investor has no present intention of selling, granting any participation in, or
otherwise distributing the same. Such Investor does not have any contract,
undertaking, agreement, or arrangement with any person to sell, transfer, or
grant participation to any person with respect to any of the Shares or the
Warrants. Nothing contained herein shall be deemed a representation or warranty
by such Investor to hold the Shares, Warrants or any Conversion Shares for any
period of time.
5.3 Disclosure of Information. The Investor acknowledges that it has
received all the information that it has requested relating to the Company and
the purchase of the Shares and the Warrants. The Investor further represents
that it has had an opportunity to ask questions and receive answers from the
Company regarding the terms and conditions of the offering of the Shares and the
Warrants. The foregoing, however, does not limit or modify the representations
and warranties of the Company in this Agreement or the right of the Investor to
rely thereon.
5.4 Accredited Investor. The Investor is an "accredited investor"
within the meaning of Rule 501 of Regulation D under the Securities Act, as
presently in effect and the Investor is also knowledgeable, sophisticated and
experienced in making, and is qualified to make decisions with respect to the
transactions contemplated hereby.
5.5 Restricted Securities. Investor understands that the Shares and
Warrants that it is purchasing is characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired from the Company
in a transaction not involving a public offering, and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act, only in certain limited circumstances. In this connection,
the Investor represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the
Securities Act.
5.6 Legends. It is understood that the certificates evidencing the
Conversion Shares and Warrant Shares shall bear a legend, reading substantially
as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
THE SECURITIES LAWS OF ANY STATE AND ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AS SET FORTH IN THIS CERTIFICATE. THE SECURITIES
REPRESENTED HEREBY MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED,
HYPOTHECATED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES
LAWS
EXCEPT PURSUANT TO RULE 144(K) OR PURSUANT TO AN OPINION OF COUNSEL,
REASONABLY ACCEPTABLE TO COUNSEL FOR THE COMPANY, TO THE EFFECT THAT
THE PROPOSED SALE, TRANSFER, OR DISPOSITION MAY BE EFFECTUATED WITHOUT
REGISTRATION UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS."
5.7 Investor Questionnaire. The Investor covenants to execute and
deliver to the Company at or promptly following the Closing an investor
questionnaire supplied by the Company to facilitate the registration of the
Conversion Shares and the Warrant Shares pursuant to the registration rights set
forth herein and the information contained therein shall be true and correct.
5.8 Prohibited Transactions. During the last thirty (30) days prior to
the date hereof, neither such Investor nor any Affiliate of such Investor which
(a) had knowledge of the transactions contemplated hereby, (b) has or shares
discretion relating to such Investor's investments or trading or information
concerning such Investor's investments, including in respect of the Securities,
or (c) is subject to such Investor's review or input concerning such Affiliate's
investments or trading (collectively, "Trading Affiliates") has, directly or
indirectly, effected or agreed to effect any short sale, whether or not against
the box, established any "put equivalent position" (as defined in Rule 16a-1(h)
under the Exchange Act) with respect to the Conversion Shares or Warrant Shares,
granted any other right (including, without limitation, any put or call option)
with respect to the Conversion Shares or Warrant Shares or with respect to any
security that includes, relates to or derived any significant part of its value
from the Conversion Shares or Warrant Shares or otherwise sought to hedge its
position in the Conversion Shares or Warrant Shares (each, a "Prohibited
Transaction"). Prior to the earliest to occur of the termination of this
Agreement or the Effective Date, such Investor shall not, and shall cause its
Trading Affiliates not to, engage, directly or indirectly, in a Prohibited
Transaction. Such Investor acknowledges that the representations, warranties and
covenants contained in this Section 5.8 are being made for the benefit of the
Investors as well as the Company and that each of the other Investors shall have
an independent right to assert any claims against such Investor arising out of
any breach or violation of the provisions of this Section 5.8.
5.9 Restrictions on Certain Payments. The Investor acknowledges and
agrees that, pursuant to the provisions of the Credit Agreement, the Company
will be prohibited from (a) paying or declaring any dividends on or with respect
to the Shares (except for dividends payable solely in stock of the Company) or
(b) redeeming, retiring, purchasing or otherwise acquiring any of the Shares
until such time as all indebtedness under the Credit Agreement, and any
extensions, renewals or refinancings thereof, has been repaid in full, without,
in any case, obtaining the prior written consent of Lender.
ARTICLE VI
SURVIVAL; INDEMNITY
6.1 Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Company herein
shall survive the execution of this Agreement, the delivery to the Investors of
the Shares and Warrants being purchased and the payment therefor; provided, that
the representations and warranties of the parties hereunder shall only survive
for a period of one year following the Closing Date.
6.2 Indemnity. Company agrees to indemnify and hold each Investor, and
its respective directors, managers, officers, shareholders, members, partners,
affiliates, employees, attorneys and agents (each, an "Indemnified Person"),
harmless from and against any and all suits, actions, proceedings,
claims, damages, losses, liabilities and expenses of any kind or nature
whatsoever (including attorneys' fees and disbursements and other costs of
investigation or defense, including those incurred upon any appeal) which may be
instituted or asserted against or incurred by any such Indemnified Person as the
result of their investment in the Shares and Warrants under this Agreement or
with respect to any breach (or alleged breach) of any representation, warranty
or covenant of the Company contained in this Agreement or with respect to the
execution, delivery, enforcement, performance and administration of, or in any
other way arising out of or relating to, this Agreement or transactions
contemplated by or referred to herein and any actions or failures to act with
respect to any of the foregoing, except to the extent that any such indemnified
liability is finally determined by a court of competent jurisdiction to have
resulted from such Indemnified Person's gross negligence or willful misconduct.
The Company shall reimburse each Investor for amounts provided for herein on
demand as such expenses are incurred. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE
OR LIABLE TO THE COMPANY OR TO ANY OTHER PARTY OR TO ANY SUCCESSOR, ASSIGNEE OR
THIRD PARTY BENEFICIARY OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY
THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES
WHICH MAY BE ALLEGED AS A RESULT OF THEIR INVESTMENT IN THE SHARES AND WARRANTS
UNDER THIS AGREEMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED
HEREUNDER. THE COMPANY SHALL NOT BE RESPONSIBLE OR LIABLE TO ANY INDEMNIFIED
PERSON OR TO ANY OTHER PARTY OR TO ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY
BENEFICIARY OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH
PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY, CONSEQUENTIAL OR SPECIAL DAMAGES
WHETHER OR NOT SUCH DAMAGES WERE REASONABLY FORESEEABLE.
ARTICLE VII
MISCELLANEOUS
7.1 Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be mailed (a) if within the United States
by first-class registered or certified airmail, or nationally recognized
overnight express courier, postage prepaid, or by facsimile, or (b) if delivered
from outside the United States, by International Federal Express or facsimile,
and shall be deemed given and received (i) if delivered by first-class
registered or certified mail, three business days after so mailed, (ii) if
delivered by nationally recognized overnight carrier, one business day after so
mailed, (iii) if delivered by International Federal Express, two business days
after so mailed, (iv) if delivered by facsimile, upon electronic confirmation of
receipt and shall be delivered as addressed as follows:
(a) if to the Company, to:
Vertical Communications, Inc.
Xxx Xxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxx, Chief Executive Officer
(b) with a copy to:
Xxxxxxx Xxxxx LLP
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
(c) if to the Investors, at their respective addresses on the
signature page hereto, or at such other address or addresses as may have been
furnished to the Company in writing, with a copy to counsel to M/C Venture
Partners:
Goodwin | Procter LLP
Exchange Place
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxx, Esq.
7.2 Changes. This Agreement may not be modified, waived or amended
except pursuant to an instrument in writing signed by the Company and with
Investors constituting the 30% Investors' Consent (provided, that, if such
modification, waiver or amendment does not equally affect all Investors to whom
such modification, waiver or amendment is applicable (taking into account the
relative ownership interests of such Investors), such modification, waiver or
amendment must be signed by all Investors).
7.3 Headings. The headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be part of this Agreement.
7.4 Severability. In case any provision contained in this Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
7.5 Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of New York. Each of the parties hereto irrevocably submits to the
exclusive jurisdiction of the courts of the State of New York located in New
York County and the United States District Court for the Southern District of
New York for the purpose of any suit, action, proceeding or judgment relating to
or arising out of this Agreement and the transactions contemplated hereby.
Service of process in connection with any such suit, action or proceeding may be
served on each party hereto anywhere in the world by the same methods as are
specified for the giving of notices under this Agreement. Each of the parties
hereto irrevocably consents to the jurisdiction of any such court in any such
suit, action or proceeding and to the laying of venue in such court. Each party
hereto irrevocably waives any objection to the laying of venue of any such suit,
action or proceeding brought in such courts and irrevocably waives any claim
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO
REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND
REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.
7.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.
7.7 Press Release. The Company shall on the Closing Date issue a press
release disclosing the material terms of the transactions contemplated hereby
(including at least the number of Shares sold and proceeds therefrom).
7.8 Prior Agreements. This Agreement constitutes the entire agreement
between the parties and supersedes any prior understandings or agreements
(including without limitation oral agreements) concerning the purchase and sale
of the Shares and the Warrants.
7.9 Costs, Expenses and Taxes. The Company agrees to pay the reasonable
out-of-pocket costs and expenses of M/C Venture Partners incurred in connection
with the transactions contemplated by this Agreement, including the reasonable
fees and expenses of Xxxxxxx Procter LLP, special counsel for M/C Venture
Partners, as well as the reasonable fees and out-of-pocket expenses of legal
counsel, independent public accountants, technical professionals and other
outside experts retained by M/C Venture Partners in connection with the
transactions contemplated by this Agreement and the amendment or enforcement of
this Agreement.
7.10 Transfer of Rights. All covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
(including without limitation transferees of any Shares, Warrants, Conversion
Shares and/or Warrant Shares), whether so expressed or not.
7.11 Independent Nature of Investors' Obligations and Rights. The
obligations of each Investor under this Agreement are several and not joint with
the obligations of any other Investor, and no Investor shall be responsible in
any way for the performance of the obligations of any other Investor under this
Agreement. Nothing contained herein or in any other document, and no action
taken by any Investor pursuant thereto, shall be deemed to constitute the
Investors as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Investors are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by this Agreement. Each Investor shall be entitled to independently
protect and enforce its rights, including without limitation, the rights arising
out of this Agreement or out of the other related documents, and it shall not be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. Each Investor has been represented by its own
separate legal counsel in their review and negotiation of this Agreement. The
Company has elected to provide all Investors with the same terms and documents
for the convenience of the Company and not because it was required or requested
to do so by the Investors.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
VERTICAL COMMUNICATIONS, INC.
By: /s/ XXX XXXXXXXXX
-----------------------
Name: Xxx Xxxxxxxxx
Title: Chief Financial Officer
INVESTOR:
By: /s/ XXXXXXX X. XXXXXXXX
Print Name: Xxxxxxx X. Xxxxxxxx
Address: c/o Vertical Communications, Inc.
Xxx Xxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Tax ID No.:
Contact name:
Telephone: (000) 000-0000
Name in which shares should be registered
(if different):
INVESTOR: LG-Nortel Co. Ltd.
By: /s/ XXXXX XXXXX
Print Name: Xxxxx Xxxxx
Title: CFO/LG-Nortel
Address: GS Xxxxx 0xx Xxxxx
000 Xxxxxx-xxxx
Xxxxxxx-xx, Xxxxx
000-000, Xxxxx
Tax ID No.: 000-00-00000
Contact name: Xxx Xxx Xxxx
Telephone: 00-0-0000-0000
Name in which shares should be registered
(if different):
INVESTOR: Special Situations Fund III, L.P.
By: /s/ XXXXX GREENHOUSE
Print Name: Xxxxx Greenhouse
Title: General Partner
Address: 000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Tax ID No.: 00-0000000
Contact name: Xxxxxxxx Xxxxx
Telephone: (000) 000-0000
Name in which shares should be registered
(if different):
INVESTOR: Special Situations Cayman Fund,
L.P.
By: /s/ XXXXX GREENHOUSE
Print Name: Xxxxx Greenhouse
Title: General Partner
Address: 000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Tax ID No.: 00-0000000
Contact name: Xxxxxxxx Xxxxx
Telephone: (000) 000-0000
Name in which shares should be registered
(if different):
INVESTOR: Special Situations Private Equity
Fund, L.P.
By: /s/ XXXXX GREENHOUSE
Print Name: Xxxxx Greenhouse
Title: General Partner
Address: 000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Tax ID No.: 00-0000000
Contact name: Xxxxxxxx Xxxxx
Telephone: (000) 000-0000
Name in which shares should be registered
(if different):
INVESTOR: Special Situations Technology
Fund, L.P.
By: /s/ XXXXX GREENHOUSE
Print Name: Xxxxx Greenhouse
Title: General Partner
Address: 000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Tax ID No.: 00-0000000
Contact name: Xxxxxxxx Xxxxx
Telephone: (000) 000-0000
Name in which shares should be registered
(if different):
INVESTOR: Special Situations Technology Fund
II, L.P.
By: /s/ XXXXX GREENHOUSE
Print Name: Xxxxx Greenhouse
Title: General Partner
Address: 000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Tax ID No.: 00-0000000
Contact name: Xxxxxxxx Xxxxx
Telephone: (000) 000-0000
Name in which shares should be registered
(if different):
INVESTOR: Special Situations Fund III QP,
L.P.
By: /s/ XXXXX GREENHOUSE
Print Name: Xxxxx Greenhouse
Title: General Partner
Address: 000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Tax ID No.: 00-0000000
Contact name: Xxxxxxxx Xxxxx
Telephone: (000) 000-0000
Name in which shares should be registered
(if different):
INVESTOR: M/C Venture Partners V, L.P.
By: M/C VP, LLC, its General Partner
By: /s/ XXXXXXX X. XXXXXX
Print Name: Xxxxxxx X. Xxxxxx
Title: General Partner
Address: 00 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Tax ID No.:
Contact name:
Telephone: (000) 000-0000
Name in which shares should be registered
(if different):
INVESTOR: M/C Venture Investors, LLC
By: /s/ XXXXXXX X. XXXXXX
Print Name: Xxxxxxx X. Xxxxxx
Title: Managing Member
Address: 00 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Tax ID No.:
Contact name:
Telephone: (000) 000-0000
Name in which shares should be registered
(if different):
INVESTOR: Chestnut Venture Partners, L.P.
By: Chestnut Street Partners, Inc., its
General Partner
By: /s/ XXXXXXX X. XXXXXX
Print Name: Xxxxxxx X. Xxxxxx
Title: Duly Authorized Signatory
Address: 00 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Tax ID No.:
Contact name:
Telephone: (000) 000-0000
Name in which shares should be registered
(if different):
INVESTOR: Xxxxxxx Xxxxxxxxxxxxx
By: /s/ XXXXXXX XXXXXXXXXXXXX
Print Name: Xxxxxxx Xxxxxxxxxxxxx
Title:
Address: 00 Xxxx Xx.
Xxxxxxxx, XX 00000
Tax ID No.: ###-##-####
Contact name:
Telephone: (000) 000-0000
Name in which shares should be registered
(if different):
same
INVESTOR: Xxxxxxxxxx Xxxxxxxxxxxxx
By: /s/ XXXXXXXXXX XXXXXXXXXXXXX
Print Name: Xxxxxxxxxx Xxxxxxxxxxxxx
Title:
Address: 00 Xxxx Xx.
Xxxxxxxx, XX 00000
Tax ID No.: ###-##-####
Contact name: Xxxxxxxxxx Xxxxxxxxxxxxx
Telephone: (000) 000-0000
Name in which shares should be registered
(if different):
same
INVESTOR: West Laurelhurst LLC
By: /s/ XXXXX X. XXXXXX
Print Name: Xxxxx X. Xxxxxx
Title: Managing Member
Address: c/o Xxxxx Xxxxxx
Xxxxxxx Xxxxx & Xxxxx
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000-0000
Tax ID No.: 00-0000000
Contact name: Xxxxx Xxxxxx/Xxxxx Xxxxxx
Telephone: LB 000-000-0000
PB 000-000-0000
Name in which shares should be registered
(if different):
INVESTOR: Pathfinder Ventures IV, L.L.C.
By: RRS Investments II, L.L.C., an Arizona
limited liability company
By: Xxxxxxxxxx Revocable Trust, its Manager
By: /s/ R. XXXXX XXXXXXXXXX
Print Name: R. Xxxxx Xxxxxxxxxx, its Trustee
Address: Pathfinder Ventures IV, L.L.C.
c/o RRS & Company
0000 X. 00xx Xxxxxx, Xxxxx X-000
Xxxxxxx, XX 00000
Tax ID No.: 00-0000000
Contact name: R. Xxxxx Xxxxxxxxxx
Telephone: (000) 000-0000
Name in which shares should be registered
(if different):
EXHIBIT A
SCHEDULE OF INVESTORS
---------------------
Investors Shares Warrants Purchase Price
----------------------------------------------------- -------- ------------ -----------------
M/C Venture Partners(1)
M/C Venture Partners V, L.P. 9,437 8,902,516 $ 9,437,000.00
M/C Venture Investors, LLC 176 166,667 $ 176,000.00
Chestnut Venture Partners, L.P. 387 364,780 $ 387,000.00
----------------------------------------------------- -------- ------------ -----------------
M/C Venture Partners Total 10,000 9,433,963 $ 10,000,000.00
----------------------------------------------------- -------- ------------ -----------------
Pathfinder Ventures IV, L.L.C. 5,000 4,716,981 $ 5,000,000.00
----------------------------------------------------- -------- ------------ -----------------
Xxxxxxx X. Xxxxxxxx 500 471,698 $ 500,000.00
----------------------------------------------------- -------- ------------ -----------------
LG-Nortel Co., Ltd. 6,500 6,132,076 $ 6,500,000.00
===================================================== ======== ============ =================
Additional Investors Shares Warrants Purchase Price
----------------------------------------------------- -------- ------------ -----------------
Special Situations Funds III QP, L.P. 1,250 1,179,246 $ 1,250,000.00
Special Situations Funds III, L.P. 100 94,340 $ 100,000.00
Special Situations Cayman Fund, L.P. 425 400,943 $ 425,000.00
Special Situations Private Equity Fund, L.P. 425 400,943 $ 425,000.00
Special Situations Technology Fund, L.P. 50 47,170 $ 50,000.00
Special Situations Technology Fund II, L.P. 250 235,849 $ 250,000.00
Pathfinder Ventures IV, L.L.C. 2,250 2,122,642 $ 2,250,000.00
West Laurelhurst LLC 500 471,698 $ 500,000.00
Xxxxx Xxxxxxx 50 47,170 $ 50,000.00
Xxxxxxx Xxxxxxxxxxxxx 50 47,170 $ 50,000.00
Xxxxxxxxxx Xxxxxxxxxxxxx 50 47,170 $ 50,000.00
===================================================== ======== ============ =================
TOTALS 27,400 25,849,059 $ 27,400,000.00
----------------------------------------------------- -------- ------------ -----------------
(1) For purposes of this Agreement, the entities listed below are collectively
referred to as "M/C Venture Partners".
EXHIBIT B
FORM OF WARRANT
EXHIBIT C
CERTIFICATE OF DESIGNATIONS
EXHIBIT D
FORM OF COMPANY COUNSEL OPINION
EXHIBIT E
Plan of Distribution
The selling stockholders, which as used herein includes donees,
pledgees, transferees or other successors-in-interest selling shares of common
stock or interests in shares of common stock received after the date of this
prospectus from a selling stockholder as a gift, pledge, partnership
distribution or other transfer, may, from time to time, sell, transfer or
otherwise dispose of any or all of their shares of common stock or interests in
shares of common stock on any stock exchange, market or trading facility on
which the shares are traded or in private transactions. These dispositions may
be at fixed prices, at prevailing market prices at the time of sale, at prices
related to the prevailing market price, at varying prices determined at the time
of sale, or at negotiated prices.
The selling stockholders may use any one or more of the following
methods when disposing of shares or interests therein:
- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- block trades in which the broker-dealer will attempt to sell the
shares as agent, but may position and resell a portion of the block as principal
to facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
- an exchange distribution in accordance with the rules of the
applicable exchange;
- privately negotiated transactions;
- short sales effected after the date the registration statement of
which this Prospectus is a part is declared effective by the SEC;
- through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;
- broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per
share;
- a combination of any such methods of sale; and
- any other method permitted pursuant to applicable law.
The selling stockholders may, from time to time, pledge or grant a
security interest in some or all of the shares of common stock owned by them
and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell the shares of common stock, from
time to time, under this prospectus, or under an amendment to this prospectus
under Rule 424(b)(3) or other applicable provision of the Securities Act
amending the list of selling stockholders to include the pledgee, transferee or
other successors in interest as selling stockholders under this prospectus. The
selling stockholders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors in
interest will be the selling beneficial owners for purposes of this prospectus.
In connection with the sale of our common stock or interests therein,
the selling stockholders may enter into hedging transactions with broker-dealers
or other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume. The selling
stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The selling
stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).
The aggregate proceeds to the selling stockholders from the sale of the
common stock offered by them will be the purchase price of the common stock less
discounts or commissions, if any. Each of the selling stockholders reserves the
right to accept and, together with their agents from time to time, to reject, in
whole or in part, any proposed purchase of common stock to be made directly or
through agents. We will not receive any of the proceeds from this offering. Upon
any exercise of the warrants by payment of cash, however, we will receive the
exercise price of the warrants.
The selling stockholders also may resell all or a portion of the shares
in open market transactions in reliance upon Rule 144 under the Securities Act
of 1933, provided that they meet the criteria and conform to the requirements of
that rule.
The selling stockholders and any underwriters, broker-dealers or agents
that participate in the sale of the common stock or interests therein may be
"underwriters" within the meaning of Section 2(11) of the Securities Act. Any
discounts, commissions, concessions or profit they earn on any resale of the
shares may be underwriting discounts and commissions under the Securities Act.
Selling stockholders who are "underwriters" within the meaning of Section 2(11)
of the Securities Act will be subject to the prospectus delivery requirements of
the Securities Act.
To the extent required, the shares of our common stock to be sold, the
names of the selling stockholders, the respective purchase prices and public
offering prices, the names of any agents, dealer or underwriter, any applicable
commissions or discounts with respect to a particular offer will be set forth in
an accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this prospectus.
In order to comply with the securities laws of some states, if
applicable, the common stock may be sold in these jurisdictions only through
registered or licensed brokers or dealers. In addition, in some states the
common stock may not be sold unless it has been registered or qualified for sale
or an exemption from registration or qualification requirements is available and
is complied with.
We have advised the selling stockholders that the anti-manipulation
rules of Regulation M under the Exchange Act may apply to sales of shares in the
market and to the activities of the selling stockholders and their affiliates.
In addition, we will make copies of this prospectus (as it may be supplemented
or amended from time to time) available to the selling stockholders for the
purpose of satisfying the prospectus delivery requirements of the Securities
Act. The selling stockholders may indemnify any broker-dealer that participates
in transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act.
We have agreed to indemnify the selling stockholders against
liabilities, including liabilities under the Securities Act and state securities
laws, relating to the registration of the shares offered by this prospectus.
We have agreed with the selling stockholders to keep the registration
statement of which this prospectus constitutes a part effective until the
earlier of (1) such time as all of the shares covered by this prospectus have
been disposed of pursuant to and in accordance with the registration statement
or (2) the date on which the shares may be sold pursuant to Rule 144(k) of the
Securities Act.
EXHIBIT F
CERTIFICATE OF SUBSEQUENT SALE
------------------------------
[Name and Address of Transfer Agent]
RE: Sale of Shares of Common Stock of Artisoft, Inc. (the "Company")
pursuant to the Company's Prospectus dated _____________, ____ (the
"Prospectus")
Dear Sir/Madam:
The undersigned hereby certifies, in connection with the sale of shares
of Common Stock of the Company included in the table of Selling Shareholders in
the Prospectus, that the undersigned has sold the shares pursuant to the
Prospectus and in a manner described under the caption "Plan of Distribution" in
the Prospectus and that such sale complies with all securities laws applicable
to the undersigned, including, without limitation, the Prospectus delivery
requirements of the Securities Act of 1933, as amended.
Selling Shareholder (the beneficial owner): ____________________________________
Record Holder (e.g., if held in name of nominee): ______________________________
Restricted Stock Certificate No.(s): ___________________________________________
Number of Shares Sold: _________________________________________________________
Date of Sale: __________________________________________________________________
In the event that you receive a stock certificate(s) representing more
shares of Common Stock than have been sold by the undersigned, then you should
return to the undersigned a newly issued certificate for such excess shares in
the name of the Record Holder and BEARING A RESTRICTIVE LEGEND. Further, you
should place a stop transfer on your records with regard to such certificate.
Very truly yours,
Dated: ____________________ By: _______________________________
Print Name: _______________________
Title: ____________________________
cc: [Company Name and Address]
