EXHIBIT 3.1(A)
SONUS COMMUNICATIONS, INC.
Stock Subscription Agreement
Dated as of January 14, 1999
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SONUS COMMUNICATIONS, INC.
0000 XXXXXXX XXXX.
XXXXXXXXXXX, XXXXXXXX 00000-0000
January 14, 1999
Dear Purchaser:
Sonus Communications, Inc., a Virginia corporation (the "Company"),
agrees with you as follows:
SECTION 1. AUTHORIZATION OF SHARES; DEFINED TERMS.
SECTION 1.1 AUTHORIZATION OF SHARES. The Company has authorized the
issuance and sale to you of that certain number of shares of common stock of the
Company, par value $.001 per share, as is listed next to your name on EXHIBIT 1,
attached hereto and incorporated herein by reference (the "Shares"). The Shares
shall be evidenced by one or more stock certificates which shall be
substantially in the form set out in EXHIBIT 2.
SECTION 1.2 DEFINED TERMS. Capitalized terms, when used in this
Agreement and listed on EXHIBIT 3 attached hereto incorporated herein by
reference, shall have the respective meanings ascribed to them in EXHIBIT 3.
SECTION 2. SALE AND PURCHASE OF SHARES.
Subject to the terms and conditions of this Agreement, the Company will
issue and sell the Shares to you at Closing (as hereinafter defined) and you
will purchase the Shares from the Company at Closing, for the purchase price set
forth next to your name on Exhibit 1 (the "Purchase Price"), to be paid to the
Company at Closing in immediately available funds.
SECTION 3. CLOSING.
The sale and purchase of the Shares to be purchased by you hereunder
shall occur at the offices of X. Xxxxxxxxxx & Co., Incorporated 000 X. 00xx
Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000 at 10:00 a.m. New York time, at a
closing (the "Closing") on January 21, 1999 or on such other Business Day
thereafter on or prior to __________________ as may be agreed upon by the
Company and you. At the Closing, the Company will deliver to you one or more
stock certificates evidencing the Shares to be purchased by you, registered in
your name (or in the name of your nominee), against delivery by you to the
Company or its order of immediately available funds in the amount of the
Purchase Price therefor by wire to the account of the Company in accordance with
the wire transfer instructions set forth on EXHIBIT 1 attached hereto. If, at
the Closing, the Company shall fail to tender the Shares to you as provided
above in this Section 3, or any of the conditions specified in Section 4 shall
not have been fulfilled to your satisfaction, you shall, at your election, be
relieved of all further obligations under this Agreement, without thereby
waiving any rights you may have by reason of such failure or such
nonfulfillment.
SECTION 4. REPRESENTATIONS OF THE PURCHASER.
You represent and warrant to the Company as of the date hereof that:
SECTION 4.1. PURCHASE FOR INVESTMENT. You are purchasing the Shares for
your own account and not with a view to the distribution thereof. You understand
that the Shares have not been registered under the Securities Act and may be
resold only if registered pursuant to the provisions of the Securities Act of
1933, as amended (the "Securities Act") or any applicable state securities laws
or if an exemption from registration is available, and that the Company is not
required to register the Shares except as expressly required pursuant to this
Agreement. You understand and acknowledge the risks associated with purchasing
the Shares and acknowledge that you have had the opportunity to ask, have asked,
and have received satisfactory answers to any and all questions you had
concerning
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the Company and its business and financial circumstances. You have received that
certain Confidential Information Memorandum addressed to you (the "Memorandum")
and understand its contents. Unless sold pursuant to an effective registration
statement, you agree not to dispose of any Shares until counsel for the Company
shall have delivered a written opinion to the Company that the intended
disposition is permissible pursuant to an exemption from the Securities Act or
any applicable state securities act, or the rules and regulations thereunder.
You understand and acknowledge that your investment in the Shares is a
speculative investment that is not liquid, and you acknowledge that you have
adequate means of providing for current needs and personal contingencies and
have no need for liquidity with respect to the Shares. You understand that each
of the stock certificates evidencing the Shares shall bear a legend stating that
the Shares have not been registered under the Securities Act or any state
securities laws and may not be transferred unless registered under the
Securities Act or pursuant to an exemption from federal and state securities
laws and regulations. You acknowledge that except as specifically set forth in
this Agreement and the Memorandum, no oral or written promises or
representations with respect to the Company or the Shares have been made to you
by any Person connected with the Company. You have no reason to anticipate any
change in your personal circumstances, financial or otherwise, that would
require or cause you to seek to sell the Shares. You understand that no market
exists for the Shares and that there can be no assurances that any market will
exist in the future for the Shares, and therefore it may not be possible to
liquidate the Shares in the event of an emergency.
SECTION 4.2 ACCREDITED INVESTOR. As of the date hereof, you are an
accredited investor (within the meaning of Rule 501 of Regulation D promulgated
under the Securities Act) by virtue of being any one or more of the following:
(i) a corporation with total assets in excess of $5 million not formed for the
specific purpose of acquiring the securities offered, (ii) any director or
executive officer of the issuer of the securities, (iii) any natural person
whose individual net worth, or joint net worth with that person's spouse, at the
time of purchase exceeds $1,000,000, or (iv) any natural person who had an
individual income in excess of $200,000 in each of the two most recent years or
whose joint income with that person's spouse was in excess of $300,000 in each
of those years and has a reasonable expectation of reaching the same income
level in the current year, and (v) any entity in which all of the equity owners
are accredited investors. You have such knowledge and experience in financial
and business matters that you are capable of evaluating the merits and risks of
your investment in the Company. You hereby covenant that you will transfer, sell
or assign the Shares, if at all, only to a Person which (i) is an accredited
investor with the capacity to enter into an investment vehicle of this kind and
which has knowledge of the business risks associated with an investment of this
kind, and (ii) has made to the Company those representations set forth in this
Section of this Agreement prior to the consummation of such transfer, sale or
assignment.
SECTION 4.3. SOURCE OF FUNDS. You represent that at least one of the
following statements is an accurate representation as to each source of funds (a
"Source") to be used by you to pay the Purchase Price:
(a) if you are an insurance company, the Source to be used by
you is an "insurance company general account" within the meaning of Department
of Labor Prohibited Transaction Exemption ("PTE") 95-60 and there is no
"employee benefit plan" (within the meaning of Section 3(3) of ERISA or Section
4975(e)(1) of the Code), treating as a single plan, all plans maintained by the
same employer or employee organization, with respect to which the amount of the
general account reserves and liabilities for all contracts held by or on behalf
of such plan, exceed ten percent (10%) of the total reserves and liabilities of
such general account (exclusive of separate account liabilities) plus surplus,
as set forth in the NAIC Annual Statement filed with your state of domicile; or
(b) if you are an insurance company, the Source does not
include assets allocated to any separate account maintained by you in which any
employee benefit plan (or its related trust) has any interest, other than a
separate account that is maintained solely in connection with your fixed
contractual obligations under which the amounts payable, or credited, to such
plan and to any participant or beneficiary of such plan (including any
annuitant) are not affected in any manner by the investment performance of the
separate account; or
(c) the Source is either (i) an insurance company pooled
separate account, within the meaning of PTE 90-1 (issued January 29, 1990), or
(ii) a bank collective investment fund, within the meaning of the PTE 91-38
(issued July 12, 1991) and, except as you have disclosed to the Company in
writing pursuant to this paragraph (c), no employee benefit plan or group of
plans maintained by the same employer or employee organization beneficially owns
more than 10% of all assets allocated to such pooled separate account or
collective investment fund; or
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(d) the Source constitutes assets of an "investment fund"
(within the meaning of Part V of the QPAM Exemption) managed by a "qualified
professional asset manager" or "QPAM" (within the meaning of Part V of the QPAM
Exemption), no employee benefit plan's assets that are included in such
investment fund, when combined with the assets of all other employee benefit
plans established or maintained by the same employer or by an affiliate (within
the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the
same employee organization and managed by such QPAM, exceed 20% of the total
client assets managed by such QPAM, the conditions of Part I(c) and (g) of the
QPAM Exemption are satisfied, neither the QPAM nor a Person controlling or
controlled by the QPAM (applying the definition of "control" in Section V(e) of
the QPAM Exemption) owns a 5% or more interest in the Company and (i) the
identity of such QPAM and (ii) the names of all employee benefit plans whose
assets are included in such investment fund have been disclosed to the Company
in writing pursuant to this paragraph (d); or
(e) the Source is a governmental plan; or
(f) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee benefit plans,
each of which has been identified to the Company in writing pursuant to this
paragraph (f); or
(g) the Source does not include assets of any employee benefit
plan, other than a plan exempt from the coverage of ERISA.
SECTION 4.4. RESIDENCY. You are a resident of California, Missouri or
New York.
SECTION 5. PIGGY-BACK REGISTRATION RIGHTS.
SECTION 5.1. PIGGY-BACK REGISTRATION RIGHTS. In the event that the
Company shall register any of its common stock, par value $1.00 per share (a
"Registered Offering"), either for its own account or the account of any other
holder or holders of equity securities of the Company, other than (i) a
registration relating solely to employee benefit plans, (ii) a registration
relating solely to a Rule 145 transaction, or (iii) an initial public offering
of the Company, the Company will provide you with written notice thereof within
90 days of the filing date of the first registration statement filed in
connection with the Registered Offering (the "Company Notice"), and, subject to
the other terms and conditions set forth in this Section 5, include in such
registration (and any related qualification under blue sky laws or other
compliance) and any underwriting involved therein, those Shares specified in a
written request or requests made by you to the Company within 10 days after
receipt of the Company Notice.
SECTION 5.2 UNDERWRITTEN REGISTERED OFFERING. If the Registered
Offering of which the Company gives notice is for a registered public offering
involving an underwriting, the Company shall so advise you as a part of the
Company Notice. In such event, your rights to registration pursuant to Section
5.1 shall be conditioned upon your participation in such underwriting, and the
inclusion of your Shares in the underwriting shall be limited to the extent
provided herein. You shall (together with the Company and the other holders
distributing their securities through such underwriting, if any) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by the Company. Notwithstanding any other provision of
this Section 5, if the managing underwriter determines that marketing factors
require a limitation of the number of shares to be underwritten, the managing
underwriter may limit the number of your Shares to be included in such
registration to such number of your Shares which the managing underwriter
determines can be included in such underwriting without reducing the number of
shares to be sold by the Company pursuant to such underwriting. In such event,
the Company shall so advise you and the number of shares (other than shares
being registered by the Company) that may be included in the registration and
underwriting shall be allocated among all the holders of the Company's shares
wishing to participate in the Registered Offering in proportion, as nearly as
practicable, to the respective amounts of shares held by such holders at the
time of filing the Registration Statement. To facilitate the allocation of
shares in accordance with the above provisions, the Company may round the number
of shares allocated to any holder to the nearest 100 shares. If you disapprove
of the terms of any such underwriting, you may elect to withdraw therefrom by
written notice to the Company and the managing underwriter. Any securities
excluded or withdrawn from such underwriting shall be withdrawn from such
registration, and shall not be transferred in a public
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distribution prior to 180 days after the effective date of the registration
statement relating thereto, or such other shorter period of time as the
underwriters may require.
SECTION 5.3 TERMINATION OR WITHDRAWAL OF REGISTRATION BY COMPANY. The
Company shall have the right to terminate or withdraw any Registered Offering or
other registration prior to the effectiveness of such registration whether or
not you have elected to include your Shares in such registration.
SECTION 5.4 REGISTRATION EXPENSES. All registration expenses incurred
in connection with registrations pursuant to this Section 5 shall be borne by
the Company. Unless otherwise stated, all selling expenses relating to your
Shares shall be borne by you.
SECTION 5.5 OTHER OBLIGATIONS OF THE COMPANY. In the case of each
registration, qualification or compliance effected by the Company pursuant to
this Agreement, the Company will keep you advised in writing as to the
initiation of each registration, qualification and compliance and as to the
completion thereof. At its expense the Company will:
(i) prepare and file with the Commission a registration
statement with respect to such securities and use reasonable best efforts to
cause such registration statement to become and remain effective for at least
one hundred twenty (120) days or until the distribution described in the
registration statement has been completed, whichever first occurs; and
(ii) furnish to you, should you choose to participate in such
registration, and to the underwriters of the securities being registered such
reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents you and/or the
underwriters may reasonably request in order to facilitate the public offering
of such securities.
SECTION 5.6 INDEMNIFICATION. You agree, if any of your Shares are
included in the securities as to which such registration, qualification or
compliance is being effected, to indemnify the Company, each of its directors
and officers, each underwriter, if any, of the Company's securities covered by
such a registration statement, each Person who controls the Company or such
underwriter within the meaning of Section 15 of the Securities Act, and each
other such holder, each of its officers and directors and each Person
controlling such holder within the meaning of Section 15 of the Securities Act,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company, such holders, such directors, officers, Persons, underwriters or
control Persons for any legal or any other expenses reasonably incurred, as such
expenses are incurred, in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by you which is
signed by you and stated to be specifically for use therein. Notwithstanding the
foregoing, your liability under this subsection shall be limited in an amount
equal to the initial price of the shares sold by you, unless such liability
arises out of or is based on willful misconduct by you.
SECTION 5.7 INDEMNIFICATION PROCEDURE. Each party entitled to
indemnification under this Section (the "Indemnified Party") shall give notice
to the party required to provide indemnification (the "Indemnifying Party")
after such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom, provided that
counsel for the Indemnifying Party, who shall conduct the defense of such claim
or litigation, shall be approved by the Indemnified Party (whose approval shall
not unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement, unless the failure
to give such notice is materially prejudicial to an Indemnifying Party's ability
to defend such action, and provided further that the Indemnifying Party shall
not assume the defense for matters as to which there is a conflict of interest
or separate and different defenses. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of
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any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
SECTION 5.8 UNDERWRITING AGREEMENT. In the event the terms of this
Section 5 conflict with the terms of any underwriting agreement in connection
with any registration hereunder, the terms of such underwriting agreement shall
control.
SECTION 5.9 INFORMATIONAL REQUIREMENTS. If your Shares are to be
included in any Registered Offering, you shall furnish to the Company such
information as the Company may request in writing and as shall be required in
connection with any registration, qualification or compliance referred to in
this Agreement.
SECTION 5.10 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the
Company to register Shares hereunder may be assigned to any transferee or
assignee in connection with any permitted transfer or assignment of Shares,
provided written notice thereof is promptly given to the Company and the
transferee agrees to be bound by the provisions of this Section 5.
SECTION 5.11 TERMINATION OF REGISTERED RIGHTS. The rights granted
pursuant to this Section 5 shall terminate at such time as the Company has
registered your Shares in a Registered Offering or other registration.
SECTION 5.12 DIVIDEND IN LIEU OF REGISTRATION RIGHTS. In the event the
Company becomes obligated to register your Shares under the terms of this
Section 5 and does not make a reasonable, good faith attempt to register your
Shares within 30 days after the Company becomes obligated to register your
Shares under this Agreement, for any reason other than:
(i) because the Company, in the exercise of its reasonable
good faith judgement, determines that such registration would have a material
adverse effect on the business, prospects, finances or operations of the
Company; or
(ii) because the Company determines, in its reasonable good
faith judgment, that such registration would interfere with any material
financing, acquisition, disposition, corporate reorganization or other material
transaction involving the Company or any of its subsidiaries or because public
disclosure thereof would be required prior to the time such disclosure might
otherwise be required, or when the Company is in possession of material
information that it deems advisable not to disclose in a registration statement;
then the Company shall pay you a monthly stock dividend, commencing on
the 30th day after the date of such failure and continuing until such time as
your Shares are registered, in an amount of shares of Common Stock equal to 5%
of the number of Shares purchased under this Agreement. YOU AGREE THAT THE
AFOREMENTIONED STOCK DIVIDEND IS IN LIEU OF ANY AND ALL OF YOUR RIGHTS AND
REMEDIES WITH RESPECT TO A FAILURE BY THE COMPANY TO REGISTER YOUR SHARES IN
ACCORDANCE WITH THIS AGREEMENT, WHETHER AT LAW OR IN EQUITY.
SECTION 6. REGISTRATION OF SHARES.
The Company shall keep at its principal executive office a register for
the registration and transfer of the Shares. The Person in whose name the Shares
are registered shall be deemed and treated as the owner and holder thereof for
all purposes hereof, and the Company shall not be affected by any notice or
knowledge to the contrary.
SECTION 7. PAYMENT OF DIVIDENDS NOT REQUIRED.
Dividends on the Shares may be paid, in the sole discretion of the
Board of Directors of the Company, when, as and if declared by the Board of
Directors. You shall not have any preemptive or other rights to acquire any
shares or other securities of the Company by virtue of your ownership of Shares.
Your proportionate ownership of the Company may be diluted by various corporate
and other actions including, without limitation, mergers, acquisitions,
additional issuances of shares of capital stock or other securities of the
Company, recapitalizations, distributions and other events.
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SECTION 8. ENTIRE AGREEMENT.
This Agreement and the Memorandum embody the entire agreement and
understanding between you and the Company and supersede all prior agreements and
understandings relating to the subject matter hereof.
SECTION 9. AMENDMENT AND WAIVER.
This Agreement may be amended, and the observance of any term hereof
may be waived (either retroactively or prospectively), with (and only with) the
written consent of both you and the Company.
SECTION 10. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by facsimile if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address specified in
Exhibit 1, or at such other address as you or it shall have specified to the
Company in writing,
(ii) if to the Company, to the Company at its address set forth at the
beginning hereof, to the attention of Xxxxxxx X. Xxxx, or at such other address
as the Company shall have specified to you or the record transferee of your
Shares in writing.
Notices under this Section 10 will be deemed given when sent in accordance with
the terms of this Section.
SECTION 11. CONFIDENTIAL INFORMATION.
For the purposes of this Section 11, "Confidential Information" means
information delivered to you by or on behalf of the Company in connection with
the transactions contemplated by or otherwise pursuant to this Agreement that is
proprietary in nature, provided that such term does not include information that
(a) was publicly known or otherwise known to you prior to the time of such
disclosure, (b) subsequently becomes publicly known through no act or omission
by you or any Person acting on your behalf, or (c) otherwise becomes known to
you other than through disclosure by the Company. You will maintain the
confidentiality of such Confidential Information in accordance with procedures
adopted by you in good faith to protect confidential information of third
parties delivered to you, provided that you may deliver or disclose Confidential
Information to (i) your directors, officers, employees, agents, attorneys and
Affiliates (to the extent such disclosure reasonably relates to the
administration of the investment represented by your Shares), (ii) your
financial advisors and other professional advisors who agree to hold
confidential the Confidential Information substantially in accordance with the
terms of this Section 14, or (iii) any other Person or entity to which such
delivery or disclosure is required in response to any subpoena or other legal
process or in connection with any litigation to which you are a party or if such
disclosure is made pursuant to a final, non-appealable order of any court having
jurisdiction over you.
SECTION 12. MISCELLANEOUS.
SECTION 12.1. SUCCESSORS AND ASSIGNS. All covenants and other
agreements contained in this Agreement by or on behalf of any of the parties
hereto bind and inure to the benefit of their respective successors and assigns
(including, without limitation, any subsequent holder of Shares) whether so
expressed or not.
SECTION 12.2. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.
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SECTION 12.3 CONSTRUCTION. Each covenant contained herein shall be
construed (absent express provision to the contrary) as being independent of
each other covenant contained herein, so that compliance with any one covenant
shall not (absent such an express contrary provision) be deemed to excuse
compliance with any other covenant. Where any provision herein refers to action
to be taken by any Person, or which such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person.
SECTION 12.4. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original but all of which
together shall constitute one instrument. Each counterpart may consist of a
number of copies hereof, each signed by less than all, but together signed by
all, of the parties hereto.
SECTION 12.5. GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the internal law of the State of Virginia, excluding choice-of-law principles of
the Commonwealth of Virginia that would require the application of the laws of a
jurisdiction other than Virginia.
* * * * *
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If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
SONUS COMMUNICATIONS, INC.
By /s/ Xxxxxxx X. Xxxx
------------------------------------------
Xxxxxxx X. Xxxx, Chief Executive Officer
The foregoing is hereby
agreed to as of the
date thereof.
/s/ Purchaser
-------------------------
[Purchaser]
Name:
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As used in this Agreement, the following terms have the respective
meanings set forth below:
"AFFILIATE" means, with respect to any Person, any other Person (i)
directly or indirectly controlling or controlled by or under direct or indirect
common control with such Person or (ii) directly or indirectly owning or holding
five percent (5%) or more of the equity interest in such Person. For purposes of
this definition, "control" when used with respect to any Person means the power
to direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day
on which commercial banks in New York City are required or authorized to be
closed.
"CODE" means the Internal Revenue Code of 1986, as amended, and any
successor thereto, as interpreted by the rules and regulations issued
thereunder, in each case as in effect from time to time. References to sections
of the Code shall be construed also to refer to any successor sections.
"COMPANY" means Sonus Communications, Inc., a Virginia corporation.
"DEFAULT" means an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.
"MATERIAL", when used in connection with the Company, means material in
relation to the business, operations, affairs, financial condition, assets, or
properties of the Company and its Subsidiaries taken as a whole.
"PERSON" means an individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust, or other enterprise
(whether or not incorporated) or any Governmental Authority.
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EXHIBIT 3.1(B)
PLACEMENT AGENT AGREEMENT
January 14, 1999
X. Xxxxxxxxxx & Co. Incorporated
000 Xxxx 00xx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
1. INTRODUCTION.
Sonus Communications, Inc., a Virginia corporation (the "Company"), hereby
engages you, X. Xxxxxxxxxx & Co. (also sometimes referred to herein as the
"Agent") as placement agent in connection with (i) the sale of a minimum
$400,000 aggregate principal amount of the Company's common stock (the "Common
Stock"), par value $0.01 per share (the "Minimum Offering"), and up to $750,000
aggregate principal amount of Common Stock (the "Maximum Offering" and, together
with the Minimum Offering, the "Initial Offering"), in each case at a price of
at least $1.00 per share, and (ii) in the event of successful completion of the
Minimum Offering on or before March 1, 1999, the sale of up to an additional
$10.0 million aggregate amount of the Company's securities (the "Securities")
(with the price and nature of the Securities to be determined by mutual
agreement of the Company and the Agent) in a secondary placement (the "Secondary
Placement"), all on the terms and conditions set forth in this Placement Agent
Agreement (the "Agreement").
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents, warrants, and agrees that:
(i) A Private Placement Memorandum dated January __, 1999, with respect
to the Initial Placement, together with the exhibits thereto (collectively, the
"Initial Memorandum"), copies of which have heretofore been delivered to you,
has been prepared by the Company in conformity with the requirements of Rule 506
of Regulation D ("Regulation D") of the rules and regulations of the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Act").
(ii) In the event a the Secondary Placement is initiated by the Company
and Agent, A Private Placement Memorandum relating to the Secondary Placement
will be prepared by the Company in conformity with the requirements of Rule 506
of Regulation D or other applicable exemption from registration under the Act.
The Initial Memorandum and the Secondary Memorandum are collectively referred to
herein as the "Memoranda", each a "Memorandum."
(iii) As of the date of each Memorandum, such Memorandum does not and
will not include 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
and at all times subsequent thereto up to and including the respective Closing
Date (as hereinafter defined): (a) each Memorandum and any amendments or
supplements thereto contain and will contain all material statements and
information required to be included therein by Regulation D or other applicable
exemption from registration under the Act, (b) no Memoranda and no amendment or
supplement thereto includes or will include any untrue statement of a material
fact or omit or will omit to state any material fact necessary to make the
statements therein in light of the circumstances under which they were made not
misleading, and (c) no Memoranda and no supplemental sales material supplied or
approved in writing by the Company (when read in conjunction with a Memorandum,
whether designated only for broker-dealer use or otherwise) includes or will
include any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein in the light of the circumstances under
which they were made not misleading; provided, however, that the foregoing
representations, warranties, and agreements shall not apply to information
contained herein or omitted from any Memorandum, any such amendment or
supplement or supplemental sales material in reliance upon, and in conformity
with, information furnished to the Company by you for use in the preparation
thereof.
1
(iv) Subsequent to the respective dates as of which information is
given in a Memorandum, and except as set forth or contemplated in such
Memorandum, including the financial statements and the notes thereto, neither
the Company nor any of its affiliated companies (the "Affiliates") has or will
have incurred any material liabilities or obligations, direct or contingent, nor
entered into any material transactions, except in either case in the ordinary
course of business, and there has not and will not have been any material
adverse change, or to the knowledge of the Company, any development involving a
prospective material adverse change (so far as the Company may now reasonably
foresee), in the condition (financial or otherwise), business, prospects, or
results of operations of the Company or any of the Affiliates nor has the
Company declared, paid, or made any dividend or distribution of any kind on its
capital stock.
(v) The financial statements, together with the related notes, set
forth in each respective Memorandum fairly present, on the basis stated therein
and on the date of such financial statements, the financial position of the
Company and its consolidated subsidiaries at the respective dates therein
specified and their consolidated results of operations for the periods then
ended, subject to, in the case of financial statements respecting interim
periods, normal year-end adjustments. Such statements and related notes will be
prepared in accordance with generally accepted accounting principles applied on
a consistent basis except as may be set forth in each respective Memorandum.
(vi) All action required to be taken by the Company as a condition to
the due and proper authorization, issuance, sale, and delivery of the Common
Stock or other Securities (including any Securities issuable upon conversion of
any convertible Securities) of the Company to subscribers therefor in accordance
with the terms of this Agreement, and the applicable Memorandum prior to the
Closing Date (as herein defined), will have been taken; and upon the payment of
the consideration for the Common Stock or other Securities specified in the
Memorandum, such Common Stock or other Securities will be duly and validly
issued, fully paid, and nonassessable. Any Securities issuable upon conversion
of any convertible Securities will be duly authorized and when issued and
delivered upon such conversion as provided in a Memorandum will be duly and
validly issued, fully paid, and nonassessable. Upon issuance and delivery of the
Common Stock or any convertible Securities and payment of the purchase price as
herein contemplated, and issuance and delivery of shares of Common Stock or
other Securities upon conversion of the convertible Securities in accordance
with the terms thereof, purchasers will acquire title to the shares of Common
Stock or other Securities as the case may be, free and clear of any liens,
pledges, encumbrances, security interests, and claims whatsoever, except for
liens, pledges, encumbrances, security interests, and claims created by such
purchasers.
(vii) The Company has been duly organized and is validly existing and
in good standing as a corporation under the laws of the Commonwealth of
Virginia, with power and authority (corporate and other) to own or lease its
properties and to conduct its business as described in the Memoranda; each of
the Affiliates is duly organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation; the Company and each of the
Affiliates is duly qualified to do business and in good standing as a foreign
corporation in all other jurisdictions in which its ownership or leasing of
properties, or the conduct of its business requires or may require such
qualification where the failure to be so qualified would have a material adverse
effect on the Company; the Company and each of its Affiliates is in possession
of and operating in compliance in all material respects with all franchises,
grants, authorizations, licenses, permits, easements, consents, certificates,
and orders required for the conduct of their respective businesses as described
in the Memoranda, where the failure to possess or comply therewith would have a
material adverse effect upon the Company's condition (financial or otherwise),
business, or results of operations. The outstanding shares of capital stock of
each of the Affiliates owned by the Company have been duly authorized and
validly issued, are fully paid and nonassessable, and are owned by the Company
or another Affiliate thereof free and clear of all liens, encumbrances, and
security interests, except as disclosed in the respective Memoranda.
(viii) At January __, 1999, the authorized, issued, and outstanding
shares of capital stock of the Company are as follows:
PAR SHARES SHARES
--- ------ ------
TITLE VALUE AUTHORIZED OUTSTANDING
----- ----- ---------- -----------
Common Stock $0.001 100,000,000 3,250,000
2
The outstanding shares of Common Stock of the Company are duly
authorized, validly issued, fully paid, and nonassessable. Except as set forth
Schedule 2 (viii) attached hereto, the Company has not granted or issued, or
agreed to grant or issue, any options, warrants or similar rights to acquire or
receive any of the authorized but unissued shares of its capital stock or any
securities convertible into shares of its capital stock. To the Company's
knowledge and except as set forth in the respective Memorandum, no person holds
of record or beneficially 5% or more of the outstanding shares of the capital
stock of the Company. Except as set forth above and in the respective
Memorandum, there are no outstanding agreements or understandings to which the
Company is a party with respect to the sale of any shares of the Common Stock of
the Company. The capital stock of the Company conforms in all material respects
to the description thereof contained in the Memorandum.
(ix) Except as disclosed in each respective Memorandum as of the date
of such Memoranda, there are no legal or governmental proceedings pending to
which the Company or any Affiliate is a party or of which any of its properties
are the subject, which, if determined adversely to the Company or such
Affiliate, would individually or in the aggregate result in a material adverse
change in the condition (financial or otherwise), business or results of
operations of the Company or such Affiliate; nor are any such proceedings
threatened, to the knowledge of the Company as of the date of each respective
Memorandum.
(x) Neither the Company nor any Affiliate is in violation of its
articles of incorporation or bylaws, or is in default, or with the giving of
notice or lapse of time or both, would be in default, in the performance of any
material obligation, agreement, or condition contained in any lease, license,
material contract, indenture, or loan agreement or in any bond, debenture, note,
or any other evidence of indebtedness, except as set forth in a Memorandum and
except for such defaults as would not have a material adverse effect on the
Company. Except for such conflicts, violations and defaults that would not have
a material adverse affect on the Company, the execution, delivery and
performance of this Agreement, the incurrence of the obligations herein and the
consummation of the transactions contemplated herein and in the Memoranda will
not conflict with or result in a breach of, or default under, the articles of
incorporation or bylaws of the Company, or any material loan agreement,
mortgage, deed of trust, indenture, or other agreement or instrument to which
the Company is a party or by which it is bound, except to the extent that the
same have been, or prior to the Closing Date will be, waived or cured, or, to
the knowledge of the Company, any law, statute, order, rule, administrative
regulation, or decree of any court, or governmental agency or body having
jurisdiction over the Company or its properties or result in the creation or
imposition of any lien, charge, claim, or encumbrance upon any property or asset
of the Company, except for such as would not have a material adverse affect on
the Company.
(xi) There are no preemptive rights or other rights to subscribe for or
to purchase, or any restriction upon the voting or transfer of, any such shares
of Common Stock pursuant to the Company's articles of incorporation, bylaws, or
any agreement or other instrument to which the Company is a party, except as set
forth in the Memoranda. The offering or sale of the Common Stock or such other
Securities as contemplated in this Agreement will not give rise to any rights
for or relating to the registration of any such shares of Common Stock other
than the registration rights described in the Memoranda.
(xii) To the Company's knowledge, this Agreement has been duly and
validly authorized, executed and delivered by or on behalf of the Company and
constitutes a legal, valid, and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium, rearrangement, liquidation, receivership, or similar laws relating
to or affecting creditors' rights generally and except as enforceability of the
indemnity and contribution provisions contained in Section 7 may be limited by
applicable law or principles of public policy.
(xiii) Except as otherwise stated in each respective Memorandum
(including the financial statements and notes thereto included therein), the
Company and each Affiliate has good title, free and clear of all liens and
encumbrances, to all of the personal property referred to in the Memorandum as
being owned by it except liens and encumbrances that are not material in the
aggregate and do not materially interfere with the conduct of the business of
the Company and its Affiliates, and, except as otherwise stated in each
respective Memorandum, has valid and binding leases to the real and/or personal
property described in such Memorandum as under lease to it with such exceptions
as do not materially interfere with the conduct of the business of, or the use
of such property by, the Company and of the Affiliates taken as a whole.
3
(xiv) To the knowledge of the Company, neither the Company nor any of
its Affiliates is in violation of any law, ordinance, governmental rule,
regulation, or permit, or court decree to which it may be subject and has not
failed to obtain any license, permit, franchise, or other governmental
authorization necessary to the ownership of its property or to the conduct of
its business, which violation or failure to obtain would have any material
adverse effect on the condition (financial or other), properties or results of
operations of the Company.
(xv) All consents, approvals, authorizations and orders of any court or
governmental authority or agency required to be obtained by the Company for the
consummation by the Company of the transactions contemplated by this Agreement,
if any, have been obtained, except where the lack of any such consent, approval,
authorization or order would not have a material adverse effect on the condition
(financial or other), properties or results of operations of the Company. The
Company has obtained all of the licenses and authorizations required under the
Communications Act and the FCC Regulations (the "FCC Authorizations") for the
operation of the Company's business as now currently conducted and as proposed
to be conducted by the Company, and no further FCC Authorization is necessary
for the continuation of the operation of the Company's business as now currently
conducted or so proposed to be conducted. Each FCC Authorization is valid for
the full term thereof, and the Company has no reason to believe that any FCC
Authorization will not be renewed for a full and customary term in the ordinary
course with no materially adverse conditions (except with respect to general
rule-making and similar matters relating generally to telecommunications
companies). There is not pending (or, to the Company's knowledge, threatened)
any action by or before the FCC to revoke, cancel, rescind, modify, or refuse to
renew in the ordinary course any FCC Authorization, and there is not now
pending, issued or outstanding (or, to the Company's knowledge, threatened) by
or before the FCC, any investigation, order to show cause, cease and desist
order, notice of violation, notice of apparent liability, or notice of
forfeiture, petition or complaint with respect to the Company, its business or
any FCC Authorization. The Company is operating in compliance with the FCC
Authorizations, the Communications Act and the FCC Regulations, except in such
respects as do not, and could not reasonably be expected to, in the aggregate,
materially interfere with the conduct of the business of the Company.
(xvi) The Company has not made during the past six months, and will not
make throughout the Offering Period (as herein defined) or during any six-month
period commencing on a Closing Date, any offer to sell or sale of any Common
Stock or other security, other than offers to sell and sales of securities under
employee benefit plans, securities issued in connection with acquisitions or
other securities that will not invalidate the exemption from registration relied
on to offer and sell the common stock and the securities pursuant to the
respective Memoranda.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF X. XXXXXXXXXX & CO.,
INCORPORATED.
You represent and warrant to, and covenant and agree with the Company,
that:
(i) As of the date of each respective Memorandum, to your knowledge,
the section of the Memorandum titled "Plan of Distribution" will not include any
untrue statement of a material fact known to you or omit to state a material
fact known to you 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) You have been duly organized and are validly existing and in good
standing as a corporation under the laws of the State of New York, with power
and authority (corporate and other) to perform your obligations under this
Agreement and as contemplated by each Memorandum. You are a broker-dealer
registered and in good standing under the Securities Exchange Act of 1934, as
amended, and under the securities or Blue Sky laws of each state in which the
Common Stock or other Securities are being offered or sold by you, and you are a
member in good standing of the National Association of Securities Dealers, Inc.
You are in possession of and operating in compliance with all authorizations,
licenses, permits, consents, certificates and orders required for the
performance of your duties under this Agreement and as contemplated by each
Memorandum.
(iii) There are no legal or governmental proceedings pending, or to
your knowledge threatened, to which you are or may be made a party or of which
any of your properties is or may be made the subject, which, if determined
adversely to you, would individually or in the aggregate materially and
adversely affect your ability to perform your obligations under this Agreement.
4
(iv) There are no facts or circumstances relating to your directors or
officers which would give rise to a prohibition or restriction under the terms
of Rule 502(b)(2)(iii) adopted under Regulation D.
No consent, approval, authorization or order of any court or
governmental authority or agency is required for the performance by you of your
obligations under this Agreement or as contemplated by each Memorandum, except
such as may be required by the National Association of Securities Dealers, Inc.
or under Regulation D or state securities or Blue Sky laws.
To the your knowledge, this Agreement has been duly and validly
authorized, executed and delivered by or on behalf of the you and constitutes a
legal, valid, and binding obligation of the X. Xxxxxxxxxx & Company,
Incorporated, enforceable against you in accordance with its terms, except as
such enforceability may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium, rearrangement, liquidation,
receivership, or similar laws relating to or affecting creditors' rights
generally and except as enforceability of the indemnity and contribution
provisions contained in Section 7 may be limited by applicable law or principles
of public policy.
The Agent shall not violate any Federal or State securities law, rule
or regulation in connection with the Initial Offering and Secondary Placement.
4. OFFERING AND SALE OF THE SECURITIES.
(a) On the basis of the representations, warranties, and covenants
herein contained, but subject to the terms and upon the conditions herein set
forth, you are hereby appointed the exclusive selling agent of the Company
during the offering periods specified in each Memorandum (each an "Offering
Period") for the purpose of finding subscribers on behalf of the Company for the
securities to be offered and sold in the Initial Placement and the Secondary
Placement, on a best efforts basis pursuant to Rule 506 of Regulation D or such
other applicable exemption from registration under the Act. Subject to the
performance by the Company of all its material obligations to be performed
hereunder, and to the material completeness and accuracy of all the
representations and warranties contained herein, you hereby accept such agency
and agree on the terms and conditions herein set forth to use your best efforts
during each Offering Period to find subscribers for up to $750,000 aggregate
principal amount of the Company's Common Stock in the Initial Placement and up
to an additional $10.0 million aggregate principal amount of the Company's
Securities in the Secondary Placement. Your exclusive agency hereunder is
terminable only as provided in Section 11 hereof. Unless and until this
Agreement is terminated, the Company shall not employ any other placement agent
without first obtaining your express written consent.
(b) In connection with the performance of your obligations under this
Agreement, you may engage, for the account of the Company, the services of one
or more broker-dealers ("Additional Agents") who are members of the National
Association of Securities Dealers, Inc. and who are acceptable to the Company,
and, as compensation for their services, shall pay to such Additional Agents an
amount to be negotiated between you and such Additional Agents. Such amount will
be paid to the Additional Agents by you only out of the commissions received by
you in respect of sales of Common Stock or other Securities as described in
paragraph (f) of this Section 4, and the Company shall have no obligation to any
Additional Agent respecting any such payment. The arrangements, if any, between
the Company, you, and any Additional Agent shall be set forth in an Additional
Agent Agreement ("Additional Agent Agreement"), which shall provide, among other
things, that such Additional Agent shall be deemed to have agreed to the matters
set forth herein as if the Additional Agent were a signatory hereof. Nothing
contained in this Agreement or in the Additional Agent Agreement shall be deemed
to constitute the Additional Agents, if any, as your agents, and you shall not
be liable to the Company in respect of the performance by the Additional Agents,
if any, of any representations, warranties or covenants of such Additional
Agents contained herein or in the Additional Agent Agreement.
(c) Each subscriber in either the Initial Placement or the Secondary
Placement must complete and execute a copy of the Subscription Agreement,
attached hereto as Exhibit A (the "Subscription Agreement"), an Investor's
Questionnaire and, if necessary, a Purchaser Representative Certificate. Upon
receipt, you shall hold the Subscription Agreements for safekeeping and deposit
all funds delivered to you into a segregated subscription escrow account as
described in the respective Memorandum.
5
(d) Each Memorandum shall designate a time, place and method for the
payment and receipt of subscriptions for the Common Stock or other Securities
offered thereby, and each shall provide for one or more closings at a time, date
and place as shall be agreed upon between you and the Company (each a "Closing
Date").
(e) As compensation for your services, on each Closing Date a cash
commission will be paid to you, with respect to subscriptions accepted equal to
10% of the aggregate dollar amount invested. Such commissions shall be paid to
you on each Closing Date by bank wire transfer payable in Federal Funds (same
day funds) or, at your election, all or part of such commission shall be paid to
you in shares of Common Stock at a price equal to the price per share of Common
Stock paid by the investors in the respective placement. Any shares of Common
Stock paid to you pursuant to this paragraph (e) shall be registered for resale,
along with the shares of Common Stock issuable upon exercise of the Agent's
Warrants (hereinafter defined), in accordance with the terms set forth in
paragraph (g) of this Section 4. The Company agrees to reimburse you for your
reasonable expenses in accordance with Section 6 hereof.
(f) Neither you, the Company, nor any Additional Agent shall, directly
or indirectly, pay or award any finder's fees, commissions or other compensation
to any person engaged by a potential investor for investment advice as an
inducement to such advisor to advise the purchase of the Company's Common Stock
or other Securities; provided, however, that, subject to Section 4(b), normal
sales commissions payable to a registered broker-dealer or other properly
licensed person for selling the Company's Common Stock or other Securities shall
not be prohibited hereby.
On each Closing Date, as further consideration for your services
hereunder, the Company will issue to you a common stock purchase warrant (the
"Agent's Warrant") in the form attached hereto as EXHIBIT B granting you the
right to purchase from the Company for a period of five years a number of shares
of Common Stock equal to 15% of the number of shares of Common Stock issued in
connection with the respective closing. In the event convertible Securities are
issued, the Agent's Warrant shall be exercisable for the number of shares of
Common Stock equal to 15% of the number of shares of Common Stock issuable upon
conversion of such convertible Securities. The exercise price for each Agent's
Warrant shall be equal to the price per share of Common Stock paid by the
investors in the respective placement. Each Agent's Warrant may be exercised for
cash or in a "cashless" transaction where the number of shares issuable pursuant
to the Warrant shall be determined by multiplying (i) the number of shares
issuable under the warrant by (ii) a fraction, the numerator of which is equal
to the fair market value of the Company's common stock minus the warrant's
exercise price, and the denominator of which is equal to the fair market value
of the Company's common stock. The "fair market value" of the Common Stock shall
be the closing bid price of the Company's Common Stock on the trading day prior
to the exercise (if closing bid prices for the Common Stock are reported; and if
not so reported, the "fair market value" shall be a price reasonably determined
by a mutually agreed upon independent appraiser. Each Agent's Warrant shall be
deemed fully earned upon issuance thereof.
If the Company completes a merger with The Park Group, Ltd. or another
transaction pursuant to which a class of equity securities of the Company or its
successor becomes registered under Section 12 of the Securities Act, and the
Company becomes obligated to file periodic reports under Section 13 of the
Exchange Act ("a Qualifying Corporate Transaction"), then the Company will file
a registration statement to register the resale of the shares of common stock
issuable upon exercise of the Agent's Warrants on the earlier of (x) three
months following the date of completion of the Qualifying Corporate Transaction,
or (y) the first date on which the Company may file such a registration
statement in accordance with all applicable State and Federal securities laws.
If within one year from the date of this Agreement, the Company has not
completed a Qualifying Corporate Transaction, then holders' of Agents Warrants
shall be entitled to receive (i) a special semi-annual dividend for a period of
seven years or until the Company completes a Qualifying Corporate Transaction,
whichever is earlier, consisting of such holders respective pro rata shares of
the Company's retained earnings as if the Agent's Warrants received hereunder
had been exercised prior to the date of such dividend, provided that you and
your assigns shall apply all such dividends (up to the amount of the aggregate
exercise price of the Agent's Warrants) to exercise the Agent's Warrants
received hereunder in payment of the exercise price therefore, and (ii)
semi-annual financial statements prepared by management and audited by the
Company's independent accounting firm, consisting of an audited balance sheet,
income statement, statement of cash flows, statement of changes in equity and
notes thereto.
6
Retained earnings, for the purpose of calculating the special dividend
hereunder, will be calculated assuming that the Founders' individual annual
compensation is capped at $125,000 per year.
(h) In the event an investor or potential investor who has been
introduced to the Company by you participates in any additional financing
arrangements with the Company within 24 months following the end of the Offering
Period with respect to the Secondary Placement (or, if there is no Secondary
Placement, within 24 months following the termination of this Agreement pursuant
to Section 11), the Company will pay you compensation relating to such
additional financing arrangements in accordance with paragraphs (e) and (g) of
this Section 4, to the extent of such investor's participation.
(i) You will prepare and file such statements and reports as are or may
be required to enable the Common Stock or other Securities, as the case may be,
to be qualified for sale under the securities laws of such jurisdictions as you
may designate.
(j) You will advise the Company if you become aware of any material
change in the facts and circumstances subsequent to the date of the Memorandum
relating to the offer and sale of the Common Stock or other Securities, as the
case may be, as described in the Memorandum.
(k) You will not make a general solicitation with respect to either the
Initial Placement or the Secondary Placement.
5. COVENANTS AND AGREEMENTS OF THE COMPANY.
The Company covenants and agrees with you that:
(a) If at any time after the date of a Memorandum and prior to
expiration of its Offering Period, any event relating to or affecting the
Company or any of its Affiliates occurs as a result of which such Memorandum
would include an untrue statement of a material fact, or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the Company will
promptly notify you thereof and will prepare an amended or supplemented offering
memorandum which will correct such statement or omission. For purposes of this
paragraph (a), the Company will furnish such information with respect to itself
as you may from time to time reasonably request.
(b) The Company will promptly deliver to you as many copies of the
Initial Placement Memorandum, the Secondary Placement Memorandum and any
amendments or supplements to such Memorandum as you may reasonably request.
(c) The Company will cooperate with you to enable the Securities to be
qualified for sale under the securities laws of such jurisdictions as you may
designate, subject to approval by the Company, and at your request will make
such applications and furnish such information as may be required of it for that
purpose; provided, however, that you and the Company shall first determine
whether an exemption from registration under the National Securities Markets
Improvement Act of 1996, as amended, or an alternative exemption is available in
each such jurisdiction and the Company shall not be required to qualify to do
business or to file a general consent to service of process in any such
jurisdiction. It will, from time to time, prepare and file such statements and
reports as are or may be required to perfect such exemption or to continue such
qualifications in effect for so long a period as you may reasonably request for
the distribution of the Common Stock or other Securities.
(d) The Company will file all reports required by Regulation D with
regard to sales of the Common Stock or other Securities, as the case may be, and
use of the proceeds therefrom; provided that you provide all information as to
purchasers of the Common Stock or other Securities required for such filings.
(e) For a period of two years from the last Closing Date or until such
time as the Company consummates a qualifying corporate transaction, the Company
will deliver to you (i) copies of the financial statements furnished by the
Company to shareholders and each other report furnished by the Company to
shareholders, (ii) as soon as practicable after they are available, copies of
any other reports (financial or other) which the Company shall publish or
otherwise make generally available to the Company's shareholders as such and
(iii) as
7
soon as they are available, copies of any reports and financial statements
required to be furnished to or filed with the Commission.
(f) The Company will not issue an amount of employee incentive stock
options exceeding 15% of the total number of shares of Common Stock issued and
outstanding as of the date hereof. In addition, the Company will not issue more
than 25% of the incentive stock options to the shareholders listed on EXHIBIT C
hereto (such shareholders being herein referred to as the "Founders").
(g) From and after the first Closing Date pursuant to the Initial
Placement, and continuing thereafter for so long as you beneficially own not
less than five percent of the Company's Common Stock, you will have the right to
designate one member of the Company's Board of Directors. The Founders agree
that they will enter into a voting agreement with you at the first Closing Date
of the Initial Placement on terms reasonably requested by you and appropriate
for the implementation of the agreements set forth in this paragraph.
(h) If within one year from the date of this Agreement, the Company has
not completed a Qualifying Corporate Transaction, then the holders who acquired
securities in the Initial Placement and the Secondary Placement (and who are not
Founders) shall be entitled to receive: (i) a special semi-annual dividend
consisting of their pro rata share of the Company's retained earnings for a
period of seven years or until the Company completes a Qualifying Corporate
Transaction, whichever is earlier; and (ii) semi-annual financial statements
prepared by management and audited by the Company's independent accounting firm,
consisting of an audited balance sheet, income statement, statement of cash
flows, statement of changes in equity and notes thereto. Retained earnings, for
the purpose of calculating the special dividend hereunder, will be calculated
assuming that the Founders' individual annual compensation is capped at $125,000
per year. The Company and the Founders agree that they will enter into a
shareholders agreement with you on the first Closing Date of the Initial
Placement on terms reasonably requested by you and appropriate for the
implementation of the agreements set forth in this paragraph.
(i) The Company shall not pay aggregate salaries (including any and all
forms of compensation) to the Founders in excess of $125,000 per year to each
Founder until such time as the Company achieves $500,000 or more in fully taxed
net income in each of two consecutive fiscal quarters. The Founders further
agree that their compensation shall be determined by a compensation committee of
the Board of Directors, which shall be comprised of non-employee members of the
Board of Directors.
(j) The Founders agree that in the event the Company's fully taxed net
income does not exceed $250,000 in the quarter ending December 31, 1999, each of
the Founders shall return to the Company's capital stock, as a contribution to
capital, 25% of the number shares of Common Stock held by each of them as set
forth on EXHIBIT C hereto. The Founders further agree to deposit such number of
shares in escrow until such time as an audit by the Company's independent
certified public accountants on the financial statements for the year ending
December 31, 1999 is released and such accountants certify that the Company's
fully taxed net income exceeded $250,000 in the quarter ending December 31,
1999.
6. PAYMENT OF EXPENSES.
The Company will promptly pay all of the Agent's reasonable costs, fees
and expenses in connection with the Agent's services to the Company, including
(but not limited to) all expenses and taxes incident to the sale and delivery of
the Company's securities, all expenses incident to the printing of copies of the
Memoranda, any supplemental sales material supplied or approved in writing by
the Company, any amendments or supplements thereto, and this Agreement and
furnishing the same to you, all legal, filing and printing fees and expenses
incurred in connection with qualification of the Common Stock and any other
Securities for sale under the laws of such jurisdictions as you may designate,
the fees and disbursements of counsel and accountants for the Company, your
reasonable out-of-pocket expenses incurred in connection with this Agreement,
preparing to market, and marketing the Company's securities (including
reasonable fees and disbursements of your counsel incurred in connection with
this Agreement, the Consulting Agreement, the Initial Placement and the
Secondary Placement, of which a nonrefundable $15,000 retainer shall be paid to
your counsel at the first Closing Date of the Initial Placement. Exclusive of
legal fees hereunder, reimbursement under this section shall not exceed $10,000
without the prior written approval of the Company.
8
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless you, each
Additional Agent and each person, if any, who controls you or such Additional
Agent within the meaning of the Act, against any losses, claims, damages,
liabilities, or expenses (including, unless the Company elects to assume the
defense as hereinafter provided, the reasonable cost of investigating and
defending against any claims therefor and counsel fees incurred in connection
therewith), joint or several, which (1) are based on the ground or alleged
ground that a Memorandum (as from time to time amended or supplemented) or any
supplemental sales material supplied or approved in writing by the Company
provided that such supplemental sales material is accompanied with or preceded
by a Memorandum, includes or allegedly includes an untrue statement of material
fact or omits to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading (unless such statement or omission was made in reliance upon, and in
conformity with, information expressly furnished to the Company by you or any
Additional Agent for use in the preparation thereof and such information relates
to the obligations of the Agent or such Additional Agent), or (2) arise out of
the Company's material breach of a representation or warranty or covenant or
agreement contained in this Agreement; provided that in no case is the Company
to be liable with respect to any claims made against you, such Additional Agent
or any such controlling person unless you, such Additional Agent or such
controlling person shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon you, such
Additional Agent, or such controlling person, but failure to notify the Company
of any such claim shall not relieve it from any liability that it may have to
you, such Additional Agent, or such controlling person otherwise than on account
of the indemnity agreement contained in this paragraph; provided further that
the liability of the Company under this Section 7 shall not exceed the total
price paid to the Company for the Common Stock or other Securities, as the case
may be, net of any placement commissions but before deducting any expenses of
the respective private placement. The Company will be entitled to participate at
its own expense in the defense, or if it so elects, to assume the defense of any
suit brought to enforce any such liability, but, if the Company elects to assume
the defense, such defense shall be conducted by counsel chosen by it. In the
event the Company elects to assume the defense of any such suit and retain such
counsel, you, such Additional Agent, or such controlling person or persons,
defendant or defendants in the suit, may retain additional counsel but shall
bear the fees and expenses of such counsel unless (i) the Company shall have
specifically authorized the retaining of such counsel or (ii) the parties to
such suit include you, such Additional Agent, or such controlling person or
persons, and the Company and you, such Additional Agent, or such controlling
person or persons have been advised by counsel that one or more material legal
defenses may be available to you or them that may not be available to the
Company in which case the Company shall not be entitled to assume the defense of
such suit notwithstanding its obligation to bear the reasonable fees and
expenses of such counsel. In no event shall the Company be liable for the fees
and expenses of more than one counsel for all indemnified parties in connection
with any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. The
Company shall not be liable to indemnify any person for any settlement of any
such claim effected without its consent which shall not be unreasonably
withheld. This indemnity agreement will be in addition to any liability which
the Company might otherwise have.
(b) You and each Additional Agent agree to indemnify and hold harmless
the Company, each of the Company's officers, directors, and each other person,
if any, who controls the Company within the meaning of the Act, against any
losses, claims, damages, liabilities, or expenses (including, unless you or such
Additional Agent elects to assume the defense, the reasonable cost of
investigating and defending against any claims therefor and counsel fees
incurred in connection therewith), joint or several, which (1) may be based on
the ground or alleged ground that the Memorandum (as from time to time amended
and supplemented) or any supplemental sales material used by you or such
Additional Agent, includes or allegedly includes an untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which it was made, not
misleading, but only insofar as such statement or omission was made in reliance
upon, and in conformity with, information expressly furnished to the Company by
you or an Additional Agent for use in the preparation thereof and such
information relates to the obligations of the Placement Agent or such Additional
Agent (and for the purposes of this Section (b), the Company agrees that the
Agent has furnished no information for use in the preparation of the Initial
Memorandum), (2) arise out of any acts or omissions by you that cause the
Initial Placement or the Secondary Placement to involve a public offering under
Section 4(2) of the Act or your failure to be properly licensed to sell the
Company's securities, or (3) arise out of your material breach of a
representation or warranty or covenant or agreement contained in this Agreement;
provided, however, that in no case are you or any Additional Agent to be liable
with respect to any claims made against the Company or any such person against
9
whom the action is brought unless the Company or such person shall have notified
you or such Additional Agent, as the case may be, in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Company or such person, but
failure to notify you or such Additional Agent of such claim shall not relieve
you or such Additional Agent from any liability that you or such Additional
Agent may have to the Company or such person otherwise than on account of the
indemnity agreement contained in this paragraph. You or such Additional Agent
shall be entitled to participate at your or its expense in the defense, or if
you or such Additional Agent so elects, to assume the defense of any suit
brought to enforce any such liability, but, if you or such Additional Agent
elects to assume the defense, such defense shall be conducted by counsel chosen
by you or such Additional Agent, as the case may be. In the event that you or
such Additional Agent elects to assume the defense of any such suit and retain
such counsel, the Company, said officers and directors and any person or
persons, defendant or defendants in the suit, may retain additional counsel but
shall bear the fees and expenses of such counsel unless (i) you shall have
specifically authorized the retaining of such counsel or (ii) the parties to
such suit include you, such Additional Agent or such controlling person or
persons, and the Company and you, such Additional Agent, or such controlling
person or persons have been advised by counsel that one or more material legal
defenses may be available to the Company that may not be available to you or
them in which case you shall not be entitled to assume the defense of such suit
notwithstanding your obligation to bear the reasonable fees and expenses of such
counsel. You or such Additional Agent shall not be liable to indemnify any
person for any settlement of any such claim effected without your or its consent
which consent shall not be unreasonably withheld. This indemnity agreement will
be in addition to any liability which you or any Additional Agent might
otherwise have.
(c) If the indemnification provided for in this Section 7 is
unavailable, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) in such proportion as is
appropriate to reflect not only the relative benefits received by the Company on
one hand and you and the Additional Agents, if any, on the other from either the
Initial Placement or the Secondary Placement, but also the relative fault of the
Company on the one hand and you and the Additional Agents, if any, on the other
in connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities, or expenses (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and you and the Additional Agents, if
any, on the other, shall be deemed to be in the same proportion as the total net
proceeds from the Initial Placement or the Secondary Placement, as the case may
be, received by the Company, bear to the total selling commissions and the value
of the Agent Warrant received by you and the Additional Agents, if any. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company, you or an Additional Agent, the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission, and whether a party breached a representation or warranty or covenant
or agreement contained in this Agreement. The Company and you agree that it
would not be just and equitable if contribution were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, liabilities or
expenses (or actions in respect thereof) referred to above shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such claim.
Notwithstanding the provisions of this paragraph (c), (1) you shall not be
required to contribute any amount in excess the cash commissions actually
received by you less the amount of any damages which you have otherwise been
required to pay by reason of an untrue or alleged untrue statement or omission
or alleged omission by the Company, and (2) the Company shall not be required to
contribute any amount in excess the total net proceeds actually received by the
Company in connection with the Initial Placement and the Secondary Placement,
less the amount of any damages which you have otherwise been required to pay by
reason of an untrue or alleged untrue statement or omission or alleged omission
by the Company. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
8. SURVIVAL OF INDEMNITIES, REPRESENTATIONS, WARRANTIES. ETC.
The respective indemnities, covenants, agreements, representations,
warranties, and other statements of you and the Company as set forth in this
Agreement or made by them respectively, pursuant to this Agreement, shall remain
in full force and effect, regardless of any investigation made by or on behalf
of you, the Company or any of
10
the officers or directors of the Company or any controlling person, and shall
survive delivery of and payment for the Company's securities.
9. CONDITIONS OF YOUR OBLIGATIONS.
Your obligations hereunder are subject to the accuracy in all material
respects at and (except as otherwise stated herein) as of the date hereof and at
and as of each respective Closing Date, of the representations and warranties
made herein by the Company, to the compliance in all material respects at and as
of each respective Closing Date by the Company with its covenants and agreements
herein contained and other provisions hereof to be satisfied at or prior to the
respective Closing Date and to the following additional conditions:
(a) You shall not have stated in writing prior to a Closing Date to the
Company that the respective Memorandum, or any amendment or supplement thereto
contains an untrue statement of fact which, in your opinion, is material, or
omits to state a material fact which, in your opinion, is necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) You shall have received from XxXxxxx Xxxxx Battle & Xxxxxx, LLP,
counsel for the Company, an opinion, dated the Closing Date, substantially to
the effect set forth in EXHIBIT D hereto.
(c) You shall have received a certificate, dated as of each respective
Closing Date, of the Chief Executive Officer or the President:
(i) No injunction preventing or suspending the use of the
Memorandum has been issued, and, to the knowledge of the signers, no proceedings
for that purpose have been instituted or are pending or contemplated under the
Act or any state securities laws;
(ii) To the knowledge of the signers, the representations and
warranties of the Company in this Agreement are true and correct in all material
respects at and as of the Closing Date, and the Company has complied in all
material respects with all the agreements and satisfied in all material respects
all the conditions on its part to be performed or satisfied at or prior to the
Closing Date;
(iii) To the knowledge of the signers, no litigation has been
instituted or threatened against the Company or any of the Affiliates of a
character required to be disclosed in the Memorandum that is not so disclosed;
and
(iv) Except as disclosed in the respective Memorandum between
the date of this Agreement and such Closing Date, there has not been any
material adverse change, or to the knowledge of the Company, any development
involving a prospective material adverse change (so far as the Company may now
reasonably foresee), in the condition (financial or otherwise), business,
prospects, or results of operations of the Company and the Affiliates taken as a
whole.
(d) The Company shall have furnished to you such additional
certificates as you may have reasonably requested as to the accuracy, at and as
of the respective Closing Date, of the representations and warranties made
herein by it, as to compliance at and as of the respective Closing Date by it
with its covenants and agreements herein contained and other provisions hereof
to be satisfied at or prior to the respective Closing Date and as to other
conditions to your obligations hereunder.
(e) There shall not have been any material adverse change in any legal
proceedings or regulatory actions pending or the commencement of similar actions
which, if determined adversely to the Company, would have a material adverse
effect on the condition (financial or otherwise), business, property, or results
of operations of the Company.
If any of the conditions provided for in this Section 9 shall not have
been satisfied when and as required by this Agreement, this Agreement may be
terminated by you by notifying the Company of such termination in writing at or
prior to the respective Closing Date, but you shall be entitled to waive any of
such conditions.
10. EFFECTIVE DATE.
11
This Agreement shall become effective at 8:00 A.M., New York Time, on
the date hereof.
11. TERMINATION.
In the event of any termination of this Agreement under this or any
other provision of this Agreement, there shall be no liability of any party to
this Agreement to any other party, other than as provided in Sections 6, 7 and
8.
This Agreement may be terminated after it becomes effective by:
(A) the Company if (i) the Minimum Offering designated in the
Memorandum for the Initial Placement is not fully subscribed for on or before
March 1, 1999, or (ii) the minimum offering designated in the Memorandum for the
Secondary Placement is not fully subscribed on or before December 31, 1999; and
(B) you by notice to the Company (i) if at or prior to the respective
Closing Date trading in securities on the New York Stock Exchange, American
Stock Exchange, or Nasdaq Stock Market shall have been suspended or minimum or
maximum prices shall have been established on either such exchange or stock
market, or a banking moratorium shall have been declared by the State of New
York or United States authorities (unless such suspension is made pending
completion of the sale of the Common Stock or other Securities, at which time,
such suspension will be lifted); (ii) if at or prior to any Closing Date there
shall have been an outbreak of hostilities between the United States and any
foreign power, or of any other insurrection or armed conflict involving the
United States which, in your judgment, makes it impracticable or inadvisable to
offer or sell the Common Stock or other Securities; (iii) if there shall have
been any development or prospective development involving particularly the
business or properties or securities of the Company or the transactions
contemplated by this Agreement, which, in your reasonable good faith judgment,
makes it impracticable or inadvisable to offer or deliver the Common Stock or
other Securities on the terms contemplated by any Memorandum, or (iv) if there
shall be any litigation or regulatory action, pending or threatened against or
involving the Company, which, in your reasonable good faith judgment, makes it
impracticable or inadvisable to offer or deliver the Common Stock or other
Securities on the terms contemplated by the applicable Memorandum.
If, and only if, the Company terminates this Agreement for any reason
or either the Initial Placement or Secondary Placement fails to close because of
the Company's breach of any representations or warranties contained in this
Agreement or the Company's failure to fulfill its covenants and agreements
contained in this Agreement, the Company shall pay for all actual expenses
incurred by you as provided in Sections 4(f) and 6 hereof, less the amounts
previously paid to you by the Company, which shall be in addition to all amounts
previously paid to you and any amounts payable to you pursuant to Sections 4(f),
6, or 7 hereof.
12. NOTICES.
All communications hereunder shall be in writing and, if sent to you or
any Additional Agent shall be mailed, delivered or telegraphed and confirmed to
you, at 000 Xxxx 00xx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, Attention:
Xxx Xxxxxxxxxx; or if sent to the Company shall be mailed, delivered or
telegraphed and confirmed to the Company, at 0000 Xxxxxxx Xxxxxxxxx,
Xxxxxxxxxxx, Xxxxxxxx 00000, Attention: Xxxxxxx X. Xxxx, President.
13. SUCCESSORS.
This Agreement shall inure to the benefit of and be binding upon you,
any Additional Agents, the Company and their respective successors and legal
representatives. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person other than the persons mentioned in the
preceding sentence any legal or equitable right, remedy or claim under or in
respect of this Agreement, or any provisions herein contained, this Agreement
and all conditions and provisions hereof being intended to be and being for the
sole and exclusive benefit of such persons and for the benefit of no other
person; except that the representations, warranties, covenants, agreements and
indemnities of the Company contained in this Agreement shall also be for the
benefit of the person or persons, if any, who control you or any Additional
Agent within the meaning of Section 15 of the Act, and your and any Additional
Agent's indemnities shall also be for the benefit of each officer and director
of the Company and the person or persons, if any, who control the Company within
the meaning of Section 15 of the Act.
14. APPLICABLE LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
12
If the foregoing correctly sets forth our understanding please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this letter and your acceptance shall constitute a binding agreement between us.
Very truly yours,
SONUS COMMUNICATIONS, INC.
By: /s/ Xxxxxxx X. Xxxx
-------------------------------------------
Xxxxxxx X. Xxxx, Chief Executive Officer
Accepted and delivered in New York, New York as of the date first above written
X. XXXXXXXXXX & CO. INCORPORATED
By: /s/ Xxx Xxxxxxxxxx
------------------------------------
Xxx Xxxxxxxxxx, Vice President
Agreed to by the Founders:
/s/ Xxxxxxx X. Xxxx
-------------------------
Xxxxxxx X. Xxxx
/s/ Nana Maraneli
-------------------------
Nana Maranelli
13
EXHIBIT 3.1(C)
SHAREHOLDERS' AGREEMENT
This Shareholders' Agreement (the "Agreement") is entered into as of
January 21, 1999, by and among Sonus Communications, Inc., a Virginia
corporation (the "Company"), the shareholders of record of the Company as of the
date hereof (each a "Shareholder" and collectively the "Shareholders") and X.
Xxxxxxxxxx & Co., Incorporated, G-V Capital Corp. and Xxxxxxxx Xxxxxx (each a
"Warrantholder" and collectively the "Warrantholders"), holders of certain
warrants to purchase shares of the Company's common stock, par value $.001 (the
"Common Stock").
WHEREAS, the Company has entered into that certain Placement Agent
Agreement dated January 14, 1999 (the "Placement Agent Agreement") by and
between the Company and X. Xxxxxxxxxx & Co., Incorporated, as placement agent,
pursuant to which (i) the Company became obligated to enter into this Agreement
and to provide for a special semi-annual dividend to be paid to the Shareholders
and the Warrantholders upon the failure of the Company to complete a Qualifying
Corporate Transaction (as defined therein) within one year of the date of the
Placement Agent Agreement, (ii) the Company became obligated to issue certain
placement agent warrants to X. Xxxxxxxxxx & Co., Incorporated, as placement
agent, and its assigns (the "Agents Warrants"), (iii) in the event the Company
completes a Qualifying Corporate Transaction (as defined therein), to file a
registration statement to register the resale of the shares of the Company's
common stock issuable upon exercise of the Agents Warrants, upon the terms and
conditions set forth therein (the "Agents Warrants Filing Obligation"), and (iv)
Xxxxxxx X. Xxxx and Xxxx Xxxxxxxx (the "Founders") agreed that in the event the
Company's fully taxed net income does not exceed $250,000 in the quarter ending
December 31, 1999, each of the Founders shall return to the Company's capital
stock, as a contribution to capital, 25% of the number shares of Common Stock
held by each of them as set forth on EXHIBIT C to the Placement Agent Agreement,
and further agreed to deposit such number of shares in escrow until such time as
an audit by the Company's independent certified public accountants on the
financial statements for the year ending December 31, 1999 is released and such
accountants certify that the Company's fully taxed net income exceeded $250,000
in the quarter ending December 31, 1999 (the "Escrow and Forfeiture
Obligations");
WHEREAS, the Company has entered into that certain Consulting Agreement
dated January 14, 1999 (the "Consulting Agreement") by and between the Company
and X. Xxxxxxxxxx & Co., Incorporated, as consultant, which provides, among
other things, (i) for the issuance of certain consulting warrants (the
"Consulting Warrants") to X. Xxxxxxxxxx & Co., Incorporated, the exercise price
of which is adjusted downward in the event that the Company consummates a
Qualifying Corporate Transaction (as defined therein) on or before March 1,
1999, and (ii) that, in the event the Company completes a Qualifying Corporate
Transaction (as defined therein), the Company will file a registration statement
to register the resale of the shares of the Company's common stock issuable upon
exercise of the Consulting Warrants (the "Consulting Warrants Filing
Obligation");
WHEREAS, it is the Company's present intention to enter into an
agreement and plan of merger providing for a merger of Sonus Park Acquisitions,
Inc., a Virginia corporation ("Sonus Park") and wholly-owned subsidiary of The
Park Group, Ltd., a Colorado corporation ("Park"), with and into the Company,
pursuant to which the Shareholders would receive shares of Park in a one-for-one
exchange for their holdings of the Company's common stock (the "Proposed
Merger");
WHEREAS, the Company, the Shareholders and the Warrantholders desire to
confirm that the Proposed Merger would qualify as a Qualifying Corporate
Transaction within the meaning of the Placement Agent Agreement and the
Consulting Agreement;
WHEREAS, the Consulting Warrants and the Agents Warrants provide, among
other things, for certain demand and piggy-back registration rights as set forth
in the Consulting Agreement and the Placement Agent Agreement, respectively (the
"Warrantholder Registration Rights") with respect to the Common Stock underlying
the same;
WHEREAS, the Company has entered into subscription agreements (each a
"Subscription Agreement" and collectively the "Subscription Agreements") with
each of the Shareholders providing, among other things, for piggy-
1
back registration rights (the "Shareholder Registration Rights") with respect to
the Shareholders' shares of Common Stock, all as set forth more fully in the
Subscription Agreements;
WHEREAS, the Company and the Shareholders desire to provide that the
Warrantholder Registration Rights, the Shareholder Registration Rights, the
Consulting Warrants Filing Obligation and the Agents Warrants Filing Obligation
shall, upon consummation of the Proposed Merger, cease to be obligations of the
Company and become, from and after the effective time of the Proposed Merger,
obligations of Park;
NOW, THEREFORE, IN EXCHANGE FOR THE MUTUAL PROMISES CONTAINED HEREIN
AND FOR GOOD AND VALUABLE CONSIDERATION, THE AMOUNT AND SUFFICENCY OF WHICH IS
HEREBY ACKNOWLEDGED, IT IS HEREBY AGREED:
Section 1. AMENDMENT TO DEFINITION OF QUALIFYING CORPORATE TRANSACTION.
The term "Qualifying Corporate Transaction", as used in both the Consulting
Agreement and the Placement Agent Agreement, shall be deemed to, and shall
include, the Proposed Merger, and at the effective time of the Proposed Merger,
a Qualifying Corporate Transaction shall be deemed to have occurred. The
Consulting Agreement and the Placement Agent Agreement are hereby amended to the
extent necessary to provide for the same.
Section 2. NOVATION OF OBLIGATION TO REGISTER SHARES. Upon the
effective time of the Proposed Merger, the Warrantholder Registration Rights, as
set forth in the Consulting Agreement and the Placement Agent Agreement, and the
Shareholder Registration Rights, as set forth in the Subscription Agreements,
shall cease to be the obligations of the Company and shall, from and after the
effective time of the Proposed Merger, become the obligations of Park. The
Consulting Agreement, Placement Agent Agreement and each of the Subscription
Agreements are hereby amended to the extent necessary to provide for the same.
Section 3. NOVATION OF FILING OBLIGATIONS. Upon the effective time of
the Proposed Merger, the Agents Warrants Filing Requirement, as set forth in the
Placement Agent Agreement, and the Consulting Warrants Filing Requirement, as
set forth in the Consulting Agreement, shall cease to be the obligations of the
Company and shall, from and after the effective time of the Proposed Merger,
become the obligations of Park. The Consulting Agreement and Placement Agent
Agreement are hereby amended to the extent necessary to provide for the same.
Section 4. SPECIAL SEMI-ANNUAL DIVIDEND. If, by January 14, 2000, the
Company has not completed (i) a merger with the Park Group Ltd., or an affilite
thereof including, without limitation, Sonus Park, or (ii) another transaction
pursuant to which a class of equity securities of the Company or its successor
becomes registered under Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the Company becomes obligated to file periodic
reports under Section 13 of the Exchange Act, then Shareholders shall be
entitled to receive, and the Company and/or its successor hereby agrees and
commits to pay and deliver: (i) a special semi-annual dividend in an amount
equal to (x) the Company's retained earnings generated during the most recent
semi-annual period (ending on June 30 and December 31 in each year), multiplied
by (y) a fraction, the numerator of which is the number of shares held by such
Shareholder, and the denominator of which is the aggregate number of shares held
by all Shareholders plus the aggregate number of shares issuable upon exercise
of the Consulting Warrants and the Agents Warrants, for a period of seven years
beginning with the semi-annual period ending June 30, 2000, or until the Company
completes such a transaction, whichever is earlier; and (ii) semi-annual
financial statements prepared by management and audited by the Company's
independent accounting firm, consisting of an audited balance sheet, income
statement, statement of cash flows, statement of changes in equity and notes
thereto. Retained earnings, for the purpose of calculating the special dividend
hereunder, will be calculated assuming that Xxxxxxx X. Xxxx'x and Xxxx
Xxxxxxxx'x individual annual compensation is capped at $125,000 per year.
Section 5. ESCROW AND FORFEITURE OBLIGATIONS. At the effective time of
the Proposed Merger and upon the conversion of the Founders' shares of Common
Stock (the "Founders' Shares") into shares of Park common stock, par value
$.0001 per share, the Escrow and Forfeiture Obligations of the Founders, as set
forth in the Placement Agent Agreement, shall cease to pertain to the Founders'
Shares but shall, in lieu thereof, pertain to the shares of Park received by the
Founders upon such conversion, to the same extent as the Escrow and Forfeiture
Obligations pertained to the Founders' Shares. The Placement Agent Agreement is
hereby amended to the extent necessary to provide for the same.
2
Section 6. MISCELLANEOUS.
(a) APPLICABLE LAW. This Agreement shall be interpreted, construed and
enforced in accordance with the laws of the State of Virginia, without regard to
principles of conflicts of law.
(b) PAYMENT OF EXPENSES. Except as otherwise set forth herein, each of
the parties hereto shall bear its respective expenses incurred by it in
connection with the negotiation and execution of this Agreement and any related
documents and the consummation of the transactions contemplated by this
Agreement.
(c) FINAL AGREEMENT. This Agreement constitutes the entire Agreement
between the parties with respect to the subject matter hereof, superseding all
prior oral or written agreements and understandings.
(d) AMENDMENT. This Agreement may be amended only by a written document
signed and properly authorized by each of the parties hereto.
(e) EXECUTION IN COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall constitute an original and all of which
shall together constitute one and the same instrument.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their permitted successors and
assigns. This Agreement shall be freely assignable by the Company to Park at the
effective time of the Proposed Merger, and shall inure to the benefit of the the
Company and its successors and assigns.
(g) NOTICE. Any notice or other communication given or required
pursuant to this Agreement by any party to any other party shall be deemed
properly given if the notice is in writing and is personally delivered or is
mailed by registered or certified mail, postage prepaid, return receipt
requested or by other delivery service providing evidence of delivery to the
following:
If to the Company: 00000 Xxxxxxx Xxxx.
Xxxxxxxxxxx, Xxxxxxxx 00000
With a copy to: Clive X.X. X'Xxxxx
McGuire, Woods, Battle & Xxxxxx LLP
0000 Xxxxxxxxxxx Xxx., X.X.
Xxxxx 0000
Xxxxxxxxxx, X.X. 00000
If to the Shareholders or Warrantholders, then to their respective
addresses as listed on the books and records of the Company, or to such other
address as any party may hereafter furnish to the other parties.
(h) INVALIDITY OR UNENFORCEABILITY. If any provision of this Agreement
is deemed to be invalid or unenforceable in whole or in part, such provision, to
the extent that it is invalid or unenforceable, shall be deemed struck from the
Agreement and shall not affect the validity or enforceability of any other
provision hereof. In addition, the parties agree that a court having
jurisdiction may revise any provision determined to be invalid or unenforceable
to the extent required to make it valid and enforceable consistent with the
intention of the parties and, if a court will not do so, the parties agree to
negotiate a provision having an effect as close as permitted by applicable law
to the provision determined to be invalid or unenforceable and to incorporate
such substitute provision in the Agreement.
(i) ASSIGNMENT. This Agreement shall be assignable by the Company to
Park at the effective time of the Proposed Merger, or by the Company to its
successors by operation of law.
(j) EFFECTIVENESS. This Agreement shall become effective immediately
upon execution by the Company and at least one other party set forth below, and
shall bind the Company and such other party thereafter.
3
This Agreement shall become effective with respect to additional parties
immediately upon such additional party's execution hereof.
(k) AUTHORIZED SIGNATORIES. Each of the persons signing below for
persons or entities other than themselves have been duly authorized by the
person or entity for whom they are signing to take such acts.
IN WITNESS WHEREOF, the undersigned hereby set their hands on the date
first set forth above:
SONUS COMMUNICATIONS, INC.
------------------------------
Xxxxxxx X. Xxxx, CEO
Shareholders:
/s/ Shareholders
------------------------------
4
EXHIBIT 3.1(D)
THIS DEBENTURE AND THE SHARES OF COMMON STOCK OF SONUS COMMUNICATION HOLDINGS,
INC., A DELAWARE CORPORATION (THE "BORROWER") INTO WHICH THIS DEBENTURE SHALL
BECOME CONVERTIBLE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT AND
ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL SATISFACTORY TO THE
BORROWER THAT SUCH REGISTRATION IS NOT REQUIRED.
No.____________
SONUS COMMUNICATION HOLDINGS, INC.
10% CONVERTIBLE DEBENTURE
May 5, 0000
Xxx Xxxx, Xxx Xxxx
$_____________
FOR VALUE RECEIVED, Sonus Communication Holdings, Inc., a Delaware
corporation ("Borrower"), promises to pay to the order of ,
with an address at ("Lender") the principal sum of
Dollars ($ ), together with interest accrued
thereon at an interest rate equal to ten percent (10%) per annum, on demand
made by Lender at any time after the 180th day following the date first set
forth above; PROVIDED, that Lender shall give Borrower ten (10) days prior
written notice of such demand for payment; PROVIDED, FURTHER, that all of
Lender's rights and interest under this Debenture, including, without
limitation, Lender's right to receive payments of principal and interest
hereunder, shall be fully satisfied, and all amounts to which Lender are, or
would otherwise become, entitled to hereunder, shall be fully satisfied, upon
conversion of this Debenture in accordance with the terms hereof on the
Conversion Date. Anything to the contrary herein notwithstanding, no payment
of principal or interest shall be required to be made by Borrower in the
event this Debenture is converted into shares of Common Stock in accordance
with the terms of this Debenture prior to the 180th day following the date
first set forth above.
Notwithstanding any other provision hereof, interest paid or becoming
due hereunder shall in no event exceed the maximum rate permitted by applicable
law. Both principal and interest are payable in lawful money of the United
States of America to the Lender at the address above indicated.
Any amount of principal hereof which is not paid when due, whether upon
demand, by acceleration or otherwise, shall bear interest from the day when due
until such principal amount is paid in full, payable on demand after ten (10)
days prior written notice, at an interest rate equal at all times to ten percent
(10%) per annum.
The undersigned shall have the right to prepay the principal of this
Debenture in whole at any time or in part, from time to time, all without
penalty, provided that all accrued and unpaid interest through such payment date
shall have been paid prior to or simultaneously therewith.
This Debenture is one of a series of Debentures, which are identical
but for principal amounts, issued by the Borrower as part of investment units
offered and sold by the Borrower, and which Debentures are denoted as the 10%
Convertible Debentures of Borrower.
Any reference herein to the subsidiaries of the Borrower shall include
both direct and indirect subsidiaries of the Borrower, including, without
limitation, Sonus Communications, Inc., a Virginia corporation.
1
Except as otherwise stated herein, the undersigned, for itself and its
respective successors and assigns, hereby waives presentment, demand, notice,
protest and all other demands and notices in connection with the delivery,
acceptance, performance or endorsement of this Debenture.
This Debenture and the provisions hereof are to be construed according
to, and are governed by, the laws of the State of Delaware, without regard to
principles of conflicts of laws thereof, and this Debenture is further subject
to the following additional provisions:
1. EVENTS OF DEFAULT. (a) If one or more of the following events
(herein called "Events of Default") shall have occurred and be continuing, that
is to say:
(i) If the Borrower shall default in the payment of
the principal or interest of any Debenture after the same shall become due
and payable, and such default shall not have been remedied within thirty (30)
days after written notice thereof to Borrower; or
(ii) If the Borrower or any of its subsidiaries shall
(1) commence any proceeding or other action relating to it in bankruptcy or seek
reorganization, arrangement, readjustment of its debts, dissolution,
liquidation, winding-up, composition or any other relief under the U.S.
Bankruptcy Code, or under any other insolvency, reorganization, liquidation,
dissolution, arrangement, composition, readjustment of debt or any other similar
act or law, of any jurisdiction; or (2) admit the material allegations of any
petition or pleading in connection with any such proceeding; or (3) apply for,
or consent or acquiesce to, the appointment of a receiver, conservator, trustee
or similar officer for it or for all or a substantial part of its property; or
(4) make a general assignment for the benefit of creditors; or (5) be unable, or
admit in writing that it is unable, to pay its debts as they mature; or (6) have
any of the foregoing proceedings commenced against it by a third party and such
proceeding or proceedings are not vacated within thirty (30) days;
then the holder of this Debenture may, at any time thereafter, at its option by
written notice to the Borrower, declare the principal and all accrued interest
thereon to be immediately due and payable, and thereupon the same shall become
so due and payable, without presentment, demand, protest or notice, all of which
are hereby waived by the Borrower.
(b) NON-WAIVER AND OTHER REMEDIES. No course of dealing or
delay on the part of any holder of the Debentures in exercising any right shall
operate as a waiver thereof or otherwise prejudice the right of any holder. No
remedy conferred hereby shall be exclusive of any other remedy referred to
herein or now or hereafter available at law, in equity, by statute or otherwise.
In case of any Event of Default, Borrower will reimburse the holder of this
Debenture for its reasonable attorneys' fees incurred in connection with the
enforcement of its rights hereunder.
2. CONVERSION.
(a) MANDATORY CONVERSION.
(i) All principal hereof, as well as all accrued
interest on this Debenture (the "Outstanding Amount") shall, upon the first
closing of a private placement (the "Private Placement") of common stock of the
Company ("Common Stock") occurring after the date of this Debenture (the date of
such first closing being hereinafter referred to as the "Conversion Date"), be
automatically and mandatorily converted, without any further action on the part
of the holder hereof, in the Private Placement, into such number of shares of
Common Stock (the "Conversion Shares") as is equal to (A) the Outstanding
Amount, divided by (B) 1.5, or if different, the price per share of shares
offered in the Private Placement (the "Conversion Price"). The Conversion Price
shall be subject to adjustment as hereinafter provided.
(ii) Upon conversion of this Debenture, the holder
hereof shall be entitled to shares of common stock of the Company (the
"Additional Shares") in addition to the Conversion Shares, in an amount equal to
one-half of the number of Conversion Shares into which this Debenture was
converted pursuant to subsection 2(a)(i) immediately above.
2
(iii) Upon such mandatory conversion, the holder of
this Debenture shall surrender this Debenture, duly endorsed, at the office
of the Borrower. The Borrower shall, as soon as practicable thereafter, issue
and deliver to such holder of this Debenture, or to his nominee or nominees, a
certificate or certificates evidencing the Conversion Shares and the Additional
Shares. Anything to the contrary in this Debenture notwithstanding, any and all
obligations of Borrower and Sonus Communications, Inc. hereunder shall be fully
satisfied by and upon conversion of this Debenture in accordance with the terms
hereof. Upon the issuance of such shares, this Debenture shall be marked "FULLY
PAID AND SATISFIED".
(b) ADJUSTMENT FOR MERGER OR REORGANIZATION, ETC. In case of
any consolidation or merger of the Borrower with or into another corporation, or
the conveyance of all or substantially all of the assets of the Borrower to
another corporation, or upon a stock split, stock dividend, consolidation or
like event, this Debenture shall thereafter be convertible (to the extent such
conversion is required hereunder) into the number of shares of stock or other
securities or property to which a holder of the same number of shares of Common
Stock deliverable upon conversion of this Debenture would have been entitled
upon such event; and, in any such case, appropriate adjustment shall be made to
the Conversion Price to the extent that the provisions set forth herein shall be
thereafter applicable in relation to any shares of stock or other property
thereafter deliverable upon the conversion of the Debenture.
(c) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 2,
the Borrower at its expense promptly shall compute such adjustment or
readjustment and furnish to the holder of this Debenture a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based.
(d) FURTHER ADJUSTMENTS. In case at any time conditions arise
which in the opinion of the Board of Directors or in the opinion of the holders
of Debentures representing a majority of shares of Common Stock underlying all
such outstanding Debentures, are not adequately covered by the provisions of
this Section 2, or which might materially and adversely affect the rights of the
holders of the Debentures in connection with the mandatory conversion of the
Debentures, then the Board of Directors shall appoint a firm of independent
certified public accountants of recognized national or regional standing, who
shall give their opinion upon the adjustment, if any, necessary with respect to
the Conversion Price, so as to preserve the conversion rights of the holders of
the Debentures. Upon receipt of such opinion, the Board of Directors forthwith
shall make the adjustments described therein.
3. COVENANTS OF BORROWER. The Borrower covenants and agrees that for so
long as this Debenture shall remain outstanding it:
(a) will cause to be reserved and kept available out of its
authorized and unissued shares of Common Stock such number of shares that will
be sufficient to permit the conversion in full of all outstanding Debentures;
(b) will take all such action as may be necessary to ensure
that all shares of Common Stock delivered upon conversion of the Debentures
shall, at the time of delivery of the certificates for such shares, be duly and
validly authorized, issued, fully paid and non-assessable;
(c) will duly and punctually pay, or cause to be paid, the
principal and interest on this Debenture on the date(s) on which such principal,
premium (if any) and interest comes due;
(d) will preserve and keep in full force and effect its
corporate existence and that of each of its subsidiaries;
(e) will cause all properties used or useful in the conduct of
its business and that of its subsidiaries to be maintained and kept in good
condition, repair and working order (reasonable wear and tear excluded);
(f) will not declare or pay any cash dividend or other
distribution on the Common Stock or make, or directly or indirectly assume, any
liability or obligation in connection with any distribution of any sort in
respect to its Common Stock; and
3
(g) will not sell, lease, convey or transfer its properties or
assets or those of any of its subsidiaries as an entirety, or substantially as
an entirety, to any person other than in the ordinary course of business, or
merge or consolidate with any other business or person without the consent of
the holder of this Debenture, which consent shall not be unreasonably withheld.
SONUS COMMUNICATION HOLDINGS, INC.
By: /s/ W. Xxxx Xxxxxx
-------------------------------------
W. Xxxx Xxxxxx, CEO
AGREED TO AND ACCEPTED BY HOLDER:
/s/ Holder
-----------------------------
Name:
4
EXHIBIT 3.1(E)
PROPOSED INVESTOR'S NAME:____________________
AGREEMENT NUMBER:__________
DEBENTURE
PURCHASE AGREEMENT
DATED AS OF MAY 5, 1999
BY AND BETWEEN
SONUS COMMUNICATION HOLDINGS, INC.
AND
EACH OF THE PURCHASERS LISTED IN
SCHEDULE A ANNEXED HERETO
1
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") OR THE
SECURITIES COMMISSION OF ANY STATE, NOR HAS ANY SUCH COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS DEBENTURE PURCHASE AGREEMENT OR ITS EXHIBITS OR
SCHEDULES (THE "PURCHASE AGREEMENT"). ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE PURCHASE OF THE SECURITIES OFFERED HEREBY AND DESCRIBED IN THIS PURCHASE
AGREEMENT INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS AND CERTAIN
INFORMATION CONCERNING THE COMPANY" SET FORTH AS EXHIBIT B HERETO. PROSPECTIVE
INVESTORS SHOULD CAREFULLY READ THIS PURCHASE AGREEMENT IN ORDER TO EVALUATE THE
RISKS INVOLVED IN LIGHT OF THEIR INVESTMENT OBJECTIVES AND FINANCIAL RESOURCES.
IN MAKING AN INVESTMENT DECISION, PROSPECTIVE INVESTORS MUST RELY ON THEIR OWN
EVALUATION OF THE COMPANY, THE 10% CONVERTIBLE DEBENTURES (THE "DEBENTURES")
OFFERED HEREBY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS
INVOLVED. THIS PURCHASE AGREEMENT AND ITS EXHIBITS AND SCHEDULES CONTAIN
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE SECURITIES ACT OF 1933, AS
AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "1933 ACT")
AND THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND THE RULES AND
REGULATIONS PROMULGATED THEREUNDER. THE COMPANY'S ACTUAL RESULTS AND ACTIVITIES
COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS
AS A RESULT OF THE RISK FACTORS DESCRIBED IN "RISK FACTORS AND CERTAIN
INFORMATION CONCERNING THE COMPANY" SET FORTH AS EXHIBIT B HERETO AND OTHER
FACTORS INCLUDED ELSEWHERE IN THIS PURCHASE AGREEMENT.
NO REPRESENTATIONS, WARRANTIES, OR ASSURANCES OF ANY KIND ARE MADE OR SHOULD BE
INFERRED WITH RESPECT TO THE ECONOMIC RETURN OR THE TAX CONSEQUENCES WHICH MAY
BE REALIZED BY A PURCHASER OF THE DEBENTURES OFFERED HEREBY. PROSPECTIVE
INVESTORS SHOULD NOT CONSTRUE THE CONTENTS OF THIS PURCHASE AGREEMENT OR ANY
COMMUNICATION, WHETHER WRITTEN OR ORAL, FROM THE COMPANY OR ITS OFFICERS,
DIRECTORS, EMPLOYEES OR AGENTS, AS LEGAL, TAX, ACCOUNTING OR OTHER EXPERT
ADVICE. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR COUNSEL, ACCOUNTANTS AND
OTHER PROFESSIONAL ADVISORS AS TO THE LEGAL, TAX, ACCOUNTING AND RELATED MATTERS
CONCERNING THEIR INVESTMENT IN THE DEBENTURES.
THE DEBENTURES ARE BEING OFFERED ONLY TO ACCREDITED INVESTORS WHO ARE CAPABLE OF
BEARING THE ECONOMIC RISKS OF THIS INVESTMENT, INCLUDING THE RISK OF LOSING
THEIR ENTIRE ORIGINAL INVESTMENT, AND WHO, INDIVIDUALLY OR THROUGH A PURCHASER
REPRESENTATIVE, HAVE SUCH KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS
MATTERS THAT THEY ARE CAPABLE OF EVALUATING THE MERITS AND RISKS OF AN
INVESTMENT IN THESE SECURITIES.
THE SECURITIES OFFERED HEREBY ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
AN EXEMPTION THEREFROM. PROSPECTIVE INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THEIR INVESTMENT FOR AN INDEFINITE
PERIOD OF TIME.
EACH RECIPIENT OF THIS PURCHASE AGREEMENT IS ENCOURAGED TO AVAIL ITSELF OF THE
OPPORTUNITY TO ASK QUESTIONS OF, AND RECEIVE ANSWERS FROM, THE COMPANY
CONCERNING ITS BUSINESS OPERATIONS, THE TERMS AND CONDITIONS OF THIS OFFERING,
AND TO OBTAIN ADDITIONAL INFORMATION, TO THE EXTENT THAT IT IS POSSESSED OR
OBTAINABLE WITHOUT UNREASONABLE EFFORT OR EXPENSE, NECESSARY TO VERIFY THE
2
ACCURACY OF THE INFORMATION IN THIS PURCHASE AGREEMENT. ANY PROSPECTIVE
INVESTORS HAVING ANY QUESTIONS REGARDING THIS OFFERING OR DESIRING ANY
ADDITIONAL INFORMATION OR DOCUMENTS TO VERIFY OR SUPPLEMENT THE INFORMATION
CONTAINED HEREIN SHOULD CONTACT W. XXXX XXXXXX, CHIEF EXECUTIVE OFFICER AT SONUS
COMMUNICATION HOLDINGS, INC., 0000 XXXXXX XXXX., XXXXX 0000, XXXXXXXXX, XXXXXXXX
00000.
THERE IS NO PUBLIC OR OTHER MARKET FOR THE DEBENTURES OF THE COMPANY OFFERED
HEREBY OR FOR THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION THEREOF (THE
"CONVERSION SHARES") NOR CAN THERE BE ANY ASSURANCE THAT SUCH MARKET WILL
DEVELOP AFTER THE COMPLETION OF THIS OFFERING OR AT ANY OTHER TIME.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PURCHASE AGREEMENT AND ANY INFORMATION OR REPRESENTATIONS
NOT CONTAINED HEREIN OR IN THE DOCUMENTS FURNISHED BY THE COMPANY AS
CONTEMPLATED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY OR ON
BEHALF OF THE COMPANY. THE DELIVERY OF THIS PURCHASE AGREEMENT AT ANY TIME DOES
NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
ITS DATE.
THE DISTRIBUTION OF THIS PURCHASE AGREEMENT AND THE OFFERING OF THE DEBENTURES
IN CERTAIN JURISDICTIONS MAY BE RESTRICTED BY LAW. PERSONS INTO WHOSE POSSESSION
THIS PURCHASE AGREEMENT COMES ARE REQUIRED BY THE COMPANY TO INFORM THEMSELVES
ABOUT AND OBSERVE ANY SUCH RESTRICTIONS. THIS PURCHASE AGREEMENT DOES NOT
CONSTITUTE AN OFFER OR SOLICITATION IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT LAWFUL, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO.
NO ACTION HAS BEEN OR WILL BE TAKEN BY THE COMPANY THAT WOULD PERMIT A PUBLIC
OFFERING OF THE DEBENTURES OR THE CONVERSION SHARES OR THE CIRCULATION OR
DISTRIBUTION OF THIS PURCHASE AGREEMENT OR ANY OFFERING MATERIAL IN RELATION TO
THE DEBENTURES OR THE CONVERSION SHARES IN ANY COUNTRY OR JURISDICTION WHERE
ACTION FOR THAT PURPOSE IS REQUIRED.
THIS PURCHASE AGREEMENT HAS BEEN PREPARED SOLELY FOR THE BENEFIT OF PROSPECTIVE
INVESTORS INTERESTED IN THE PROPOSED PRIVATE PLACEMENT OF THE DEBENTURES AND
CONSTITUTES AN OFFER ONLY IF THE NAME OF THE PROSPECTIVE INVESTOR APPEARS IN THE
APPROPRIATE SPACE PROVIDED ON THE COVER HEREOF. DISTRIBUTION OF THIS PURCHASE
AGREEMENT TO ANY PERSON OTHER THAN SUCH PROSPECTIVE INVESTOR AND THOSE PERSONS
RETAINED TO ADVISE SUCH PROSPECTIVE INVESTOR WITH RESPECT THERETO IS
UNAUTHORIZED, AND ANY REPRODUCTION OF THIS PURCHASE AGREEMENT, IN WHOLE OR IN
PART, OR THE DIVULGENCE OF ANY OF ITS CONTENTS, WITHOUT THE PRIOR WRITTEN
CONSENT OF SONUSCOMMUNICATION HOLDINGS, INC. IS PROHIBITED.
3
DEBENTURE PURCHASE AGREEMENT
THIS DEBENTURE PURCHASE AGREEMENT (the "Agreement") is made as of the
5th day of May, 1999, by and among SONUS COMMUNICATION Holdings, Inc., a
Delaware corporation (the "Company"), and the investors listed on Schedule A
attached hereto and made a part hereof (the "Investors").
W I T N E S S E T H
WHEREAS, the Company desires to sell to the Investors up to an
aggregate of $400,000 in principal amount of the Company's 10% Convertible
Debentures in the form attached hereto as Exhibit A (the "Debentures"), subject
to the terms and conditions set forth herein; and
WHEREAS, the Investors desire to purchase such Debentures.
NOW, THEREFORE, in consideration for the mutual covenants and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. PURCHASE AND SALE OF DEBENTURES.
a. SALE AND ISSUANCE. Subject to the terms and conditions of
this Agreement, each Investor agrees, severally but not jointly, to purchase at
the Closing (as hereinafter defined), and the Company agrees to sell and issue
at the Closing, that principal amount of Debentures set forth opposite each such
Investor's name on Schedule A attached hereto for the purchase price set forth
on Schedul A (the "Purchase Price"), to be paid by immediately available funds
or cashier's check, and delivered to the Company upon execution and delivery
hereof by Investor.
b. OFFERING; NO MINIMUM. The offering of the Debentures
("Offering") shall be conducted by the Company without any compensation being
paid to a broker or placement agent. There is no minimum to the Offering, and
Closings will be held at the Company's discretion upon receipt of subscriptions
and acceptance thereof by the Company. An executed Agreement, together with the
Purchase Price and the fully completed Statement of Accredited Investor attached
hereto as Exhibit C (the "Statement of Accredited Investor"), should be returned
to the Company. This Offering shall terminate on May 31, 1999, unless extended
by the Company in its sole discretion for a period of up to 60 additional days
(the "Termination Date"). Payments shall be held in escrow pursuant to the terms
of this Agreement. Payment held in escrow will not bear interest. The Company
reserves the right, in its sole discretion, to reject any subscription in whole
or in part. This Purchase Agreement will be binding upon and enforceable against
the Company only when countersigned by an authorized agent of the Company.
c. CLOSINGS. The purchase and sale of the Debentures shall
take place at one or multiple closings at the Law Offices of Xxxxx X. Xxxxxxx,
00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, upon receipt of subscriptions
acceptable by the Company and at such time as is mutually agreeable to X.
Xxxxxxxxxx & Co., Incorporated ("Placement Agent") and the Company, or at such
other time and place as the Company may designate (the "Closing" or "Closings");
provided that all Closings shall take place no later than the Termination Date.
At each Closing, the Company shall deliver to the Investors the Debentures,
against delivery to the Company by each such Investor of its Purchase Price, a
fully completed Statement of Accredited Investor and signature pages to this
Agreement.
d. PAYMENT AND ESCROW. If paying by cashier's check, make
check payable to "X. Xxxxxxxxxx & Co., Inc. Escrow Account For Sonus
Communication Holdings, Inc.". If wiring funds, please wire transfer to:
ABA # ______________
Commercial Bank of New York, 000 Xxxxxxxx,
Xxx Xxxx, XX 00000
For Credit To: X. Xxxxxxxxxx & Co., Inc. Escrow For Sonus
Communication Holdings, Inc.
Account # ____________
4
Placement Agent will hold subscription payments received in escrow in the
aforementioned account until such time as Placement Agent and the Company agree
to close the transactions contemplated by this Agreement which shall be within
90 days of the receipt of payment, unless such proceeds are returned to the
Investor by the Placement Agent.
e. CONVERTABILITY FEATURE. The Debentures shall be convertible
into shares of Common Stock of the Company in accordance with the terms and
conditions of the Debenture, attached hereto as Exhibit A.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to each Investor as follows:
a. ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and has all requisite power and authority to
carry on its business as now conducted. The Company is duly qualified to
transact business, and is in good standing, in each U.S. jurisdiction in which
the failure to so qualify would have a material adverse effect on its business.
b. CAPITALIZATION. The authorized capital of the Company
consists of 100,000,000 shares of common stock and, after Closing and assuming
all necessary action on the part of American Securities Transfer & Trust, Inc.,
acting as transfer agent for the Company, to duly record the transactions on the
books and records of the Corporation as contemplated by that certain letter
agreement attached to this Agreement as Exhibit E, by and among the Company,
Xxxxxxx X. Xxxx, Xxxx Xxxxxxxx and X. Xxxxxxxxxx & Co., Incorporated (the
"Letter Agreement"), all of which transactions have, if required, been
authorized by the Board of Directors of the Company, 3,342,385 shares will then
be currently issued and outstanding.
c. AUTHORIZATION. All action on the part of the Company
necessary for the authorization, execution and delivery of this Agreement, the
performance of all obligations of the Company hereunder and the authorization,
issuance and delivery of the Debentures being sold hereunder, to the extent that
the foregoing requires performance on or prior to the Closing, has been taken or
will be taken on or prior to the Closing, and the Company has all requisite
power and authority to enter into this Agreement.
d. LITIGATION. No claim, action, proceeding or investigation
is pending, or to the best knowledge of the Company threatened, which seeks to
delay or prevent the consummation of the transactions contemplated hereby, or
which would be reasonably likely to adversely affect the Company's ability to
consummate the transactions contemplated hereby, or which would have a material
adverse effect on the business, prospects, property, condition (financial or
otherwise) or operations of the Company.
3. REPRESENTATIONS AND WARRANTIES OF INVESTORS. Each Investor hereby
represents and warrants to the Company as follows:
a. ORGANIZATION; GOOD STANDING; POWER AND AUTHORITY; BINDING
OBLIGATION. Investor has full power and authority to enter into this Agreement,
and, for those Investors which are corporations (i) such Investor is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, and has all requisite power and
authority to carry on its business as now conducted, and (ii) all action on the
part of the Investor necessary for the authorization, execution and delivery of
this Agreement, the performance of all obligations of the Investor hereunder,
including, without limitation, the payment of the purchase price for the
Debentures being sold such Investor hereunder has been taken, and the Investor
has all requisite power and authority to enter into this Agreement. This
Agreement has been duly executed and delivered by Investor and, assuming due
authorization, execution and delivery by the Company, constitutes Investor's
valid and legally binding obligation enforceable against the Investor in
accordance with its terms, subject to the effect of any applicable bankruptcy,
reorganization, insolvency (including, without limitation, all laws relating to
fraudulent transfers), moratorium or similar laws affecting creditors' rights
generally, subject, as to enforceability, to the effect of general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law) and subject to the effect of applicable securities laws as
to rights of indemnification.
5
b. PURCHASE ENTIRELY FOR OWN ACCOUNT, ETC.. The Debentures to
be purchased by Investor hereunder will be acquired for investment for
Investor's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof. Investor has no present intention of
selling, granting any participation in, or otherwise distributing the Debentures
or the Conversion Shares. Investor does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to any person with respect to the Debentures or the Conversion
Shares. The Investor has not construed the contents of this Agreement, or any
additional agreement with respect to the proposed investment in the Debentures
or any prior or subsequent communications from the Company, or any of its
officers, employees or representatives, as investment, tax or legal advice or as
information necessarily applicable to such Investor's particular financial
situation. The Investor has consulted its own financial advisor, tax advisor,
legal counsel and accountant, as necessary or desirable, as to matters
concerning his investment in the Debentures.
c. DISCLOSURE. Investor has received or reviewed all the
information which such Investor has requested for the purposes of determining
the merits of the Debentures as an investment. Investor has read and understands
the Risk Factors and Certain Information Concerning the Company, attached hereto
as Exhibit B. Investor also has received and reviewed a copy of the Company's
unaudited financial statements for the period ended February 29, 1999, attached
hereto as Exhibit D (the "Unaudited Financials"). Investor understands and
acknowledges that Exhibit B contains a discussion of certain financial and other
developments which have occurred since February 29, 1999, the effects of which
are not reflected in the Unaudited Financials and which may have a material
adverse effect on the Sonus, the Company and their respective financial
conditions. The Company plans to provide each of the Investors with audited
financial statements as soon as practicable after such statements become
available from the Company's auditors.
Investor has had an opportunity to ask questions and receive
answers from the Company regarding the Company, its business, operations and
financial condition and the terms and conditions of this offering of Debentures,
and answers have been provided to Investor's full satisfaction. Investor has
fully reviewed all corporate and governance documents of the Company and such
other documents which Investor feels is necessary or appropriate prior to
purchase of the Debentures, understands all relevant terms and has asked all
questions and received answers thereto to Investor's full satisfaction. If
deemed necessary by Investor, Investor has consulted with a professional advisor
who has provided Investor with advice concerning terms. INVESTOR ACKNOWLEDGES
AND AGREES THAT THE PURCHASE OF THE DEBENTURES INVOLVES A HIGH DEGREE OF RISK,
INCLUDING, WITHOUT LIMITATION, THOSE SET FORTH ON EXHIBIT B HERETO, AND MAY
RESULT IN A LOSS OF THE ENTIRE AMOUNT INVESTED. EACH INVESTOR FURTHER
ACKNOWLEDGES AND AGREES THAT THERE IS NO PUBLIC MARKET FOR THE DEBENTURES OR THE
CONVERSION SHARES OR ANY OTHER SECURITIES OF THE COMPANY. THERE IS NO ASSURANCE
THAT THE COMPANY'S OPERATIONS WILL RESULT IN REVENUES OR BE PROFITABLE OR THAT A
PUBLIC MARKET FOR THE DEBENTURES OR THE CONVERSION SHARES WILL DEVELOP AT ANY
TIME.
d. ACCREDITED INVESTOR. Investor is an accredited investor as
defined in Rule 501(a) of Regulation D under the 1933 Act. The information
provided by Investor on the Statement of Accredited Investor, attached hereto as
Exhibit C, is true and correct in all respects. Investor is capable of bearing
the economic risk of an investment in the Debentures, including the possible
loss of Investor's entire investment. Investor has such knowledge and experience
in financial or business matters that it is capable of evaluating the merits and
risks of an investment in the Debentures and Conversion Shares offered hereby.
If other than an individual, Investor has not been organized solely for the
purpose of acquiring the Debentures.
e. RESTRICTED SECURITIES. Investor understands that the
Debentures being purchased hereunder, as well as the Conversion Shares, are
"restricted securities" as defined in the 1933 Act, and that under federal and
state securities laws the Debentures or Conversion Shares may be resold without
registration under the 1933 Act only in certain limited circumstances. Investor
is familiar with Rule 144 promulgated by the Securities and Exchange Commission
(the "Commission") under the 1933 Act, and understands the resale limitations
imposed thereby and by the 1933 Act generally. Investor also acknowledges that
the Debentures and Conversion Shares are subject to significant restrictions on
transfer, pledge or hypothecation.
f. LEGENDS. It is understood that certificates or other
evidence of the Debentures and Conversion Shares may bear the following legend,
as well as any legend required by the laws of any state:
6
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION
STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH
ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED PURSUANT TO A VALID
EXEMPTION THEREFROM UNDER THE SECURITIES ACT OF 1933."
g. CONSENTS AND APPROVALS; NO CONFLICT.
(i) The execution and delivery of this Agreement by
the Investor does not, and the performance of this Agreement by the Investor
will not, require any consent, approval, authorization or other action by, or
filing with or notification to, any governmental or regulatory authority.
(ii) The execution, delivery and performance of this
Agreement by the Investor does not (A) in the case of any Investor that is
not an individual, conflict with or violate the charter or bylaws, partnership
or other governing documents of such Investor, or (B) except as would not have a
material adverse effect on the ability of the Investor to consummate the
transactions contemplated by this Agreement, conflict with or violate any law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award applicable to the Investor.
4. COVENANT OF INVESTORS. Each Investor hereby covenants with the
Company that, without in any way limiting the representations set forth in
Section 3 above, Investor shall not make any disposition of all or any portion
of the Debentures and Conversion Shares unless and until:
a. there is then in effect a registration statement under the
1933 Act covering such proposed disposition, and such disposition is made in
accordance with such registration statement; or
b. such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and, if
requested by the Company, such Investor shall have furnished the Company with an
opinion of counsel, in form and substance satisfactory to the Company, that such
disposition will not require registration of the Shares under the 1933 Act.
5. CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING. The obligations of
each Investor hereunder are subject to, and contingent upon, the fulfillment, on
or before each Closing, of each of the following conditions, the waiver of which
shall not be effective against any Investor who does not consent in writing
thereto:
a. REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 hereof shall be true and
correct on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the date of such
Closing.
b. PERFORMANCE. The Company shall have performed and complied
with all agreements, obligations and covenants contained in this Agreement that
are required to be performed or complied with by it on or before the Closing;
provided that the obligations of the Investors shall not be subject to or
contingent upon the issuance by the Company of the Debentures to the persons or
entities set forth on Schedule A attached hereto who have not performed or
tendered the performance of their obligations required to be performed under
this Agreement on or prior to the Closing.
c. DELIVERY OF DEBENTURES The Company shall have delivered to
the Investor a Debenture in the form attached hereto as Exhibit A, and in such
amount as set forth opposite each such Investor's name on Schedule A attached
hereto.
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to each Investor hereunder are subject to and contingent upon the
fulfillment by such Investor, on or before the Closing, of each of the following
conditions:
7
a. REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each Investor contained herein shall be true and correct on and as
of the Closing with the same effect as though such representations and
warranties had been made on and as of the date of such Closing.
b. PAYMENT OF PURCHASE PRICE BY INVESTORS. Each Investor shall
have delivered to the Company the Purchase Price specified in Schedule A
attached hereto, in the manner specified in Section 1.b. hereof.
c. STATEMENT OF ACCREDITED INVESTOR. Each Investor shall have
delivered to the Company a Statement of Accredited Investor in the form set
forth in Exhibit C attached hereto, and the information provided therein shall
be complete and correct on and as of the Closing with the same effect as though
such information had been provided as of the date of such Closing.
7. MISCELLANEOUS.
a. SURVIVAL OF WARRANTIES. The representations, warranties and
covenants of the Investors contained in this Agreement shall survive the
execution and delivery of this Agreement and the Closing.
b. SUCCESSORS AND ASSIGNS. This Agreement may not be assigned
by any party hereto. The terms and conditions of this Agreement shall inure to
the benefit of, and be binding upon, the respective successors of the parties.
Nothing in this Agreement, express or implied, is intended to confer upon any
party, other than the parties hereto or their respective successors, any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
c. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the principles of conflict of laws thereof.
d. COUNTERPARTS; DELIVERY BY FACSIMILE. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument. Delivery
of this Agreement may be effected by facsimile.
e. TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
f. NOTICES. Unless otherwise provided, any notice required or
permitted hereunder shall be given by personal service upon the party to be
notified, by nationwide overnight delivery service or upon deposit with the
United States Post Office, by certified mail, return receipt requested and:
i. if to the Company, addressed to SONUS
COMMUNICATION HOLDINGS, INC., 0000 Xxxxxx Xxxx., Xxxxx 0000, Xxxxxxxxx, Xxxxxxxx
00000, Attention: W. Xxxx Xxxxxx, with a copy to Xxxxx X. Xxxxxx, III, Esquire,
XxXxxxx, Xxxxx Battle & Booth LLP, Seven Saint Xxxx Street, Suite 1000,
Baltimore, Maryland 21202-1626, or at such other address as the Company may
designate by notice to each of the Investors in accordance with the provisions
of this Section 7.f.; and
ii. if to the Investors, at their respective
addresses indicated on the signature pages hereof, or at such other addresses as
any one or more Investors may designate by notice to the Company in accordance
with the provisions of this Section 7.f.
g. EXPENSES. Irrespective of whether a Closing is effected,
the Company and the Investors shall pay all of their own costs and expenses
incurred with respect to the negotiation, execution, delivery and performance of
this Agreement. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorney's fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
h. AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either prospectively or
retroactively), only with the written consent of the Company and a majority in
interest of the Investors.
8
i. SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provisions shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision were so excluded, and this Agreement shall be
otherwise enforceable in accordance with its terms.
j. ENTIRE AGREEMENT. This Agreement (including the exhibits
and schedules hereto) constitutes the entire agreement among the parties hereto
with respect to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties hereto.
k. AMENDMENT. This Agreement may be amended or modified only
by an instrument in writing signed by the Company and by Investors adversely
affected by any such amendment or modification.
9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SONUS COMMUNICATION HOLDINGS, INC.
By: /s/ W. Xxxx Xxxxxx
--------------------------------------
W. Xxxx Xxxxxx
President and Chief Executive Officer
[Investor Signature Pages Follow]
10
EXHIBIT 3.1(F)
ARTICLES OF MERGER
OF
SONUS PARK ACQUISITIONS, INC.
WITH AND INTO
SONUS COMMUNICATIONS, INC.
Sonus Communications, Inc., a Virginia corporation (the "Surviving
Corporation"), hereby submits these Articles of Merger for the purpose of
merging Sonus Park Acquisitions, Inc., a Virginia corporation (the "Merging
Corporation"), with and into the Surviving Corporation:
I. The Plan of Merger attached hereto as EXHIBIT A has been duly
recommended, adopted and approved by the respective boards of directors of each
of the Surviving Corporation, the Merging Corporation and the Parent
Corporation, and was submitted to and approved by all of the shareholders of the
Surviving Corporation and Merging Corporation by unanimous written consent, all
in accordance with the applicable requirements of the Virginia Stock Corporation
Act.
II. The surviving corporation is Sonus Communications, Inc.
This the 26th day of February, 1999:
SURVIVING COMPANY:
SONUS COMMUNICATIONS, INC.
By: /s/ Nana Maraneli
------------------------------
Nana Maraneli, President
MERGING CORPORATION:
SONUS PARK ACQUISITIONS, INC.
By: /s/ Xxxxxxx Xxxxxx
------------------------------
Xxxxxxx Xxxxxx, President
1
EXHIBIT A
PLAN OF MERGER
OF
SONUS PARK ACQUISITIONS, INC.
AND
SONUS COMMUNICATIONS, INC.
February 26, 1999
A. ENTITIES PARTY TO THE PLAN OF MERGER.
The corporations party to this Plan of Merger (the "Plan of Merger")
are (i) Sonus Park Acquisitions, Inc., a Virginia corporation (the "Merging
Corporation") and, prior to the Effective Time, a wholly-owned subsidiary of The
Park Group, Ltd., a Colorado corporation (the "Parent Corporation"), (ii) the
Parent Corporation, and (iii) Sonus Communications, Inc., a Virginia corporation
(the "Surviving Corporation"). At the Effective Time (hereinafter defined) of
the merger set forth herein (the "Merger"), the Merging Corporation will merge
with and into the Surviving Corporation, and the Surviving Corporation will
become a wholly-owned subsidiary of the Parent Corporation, subject to the terms
and conditions set forth in this Plan of Merger.
B. NAME OF SURVIVING CORPORATION.
After the Merger, the Surviving Company will continue to have the name
"Sonus Communications, Inc."
C. MERGER AND EFFECTIVE TIME; CESSATION OF CORPORATE EXISTENCE.
The Merger will be effected subject to the terms and conditions of this
Plan of Merger when Articles of Merger in accordance with this Plan of Merger
are filed with and accepted by the State Corporation Commission of the
Commonwealth of Virginia (the "Effective Time"). At the Effective Time, the
corporate existence of the Merging Corporation will cease, and the corporate
existence of the Surviving Corporation will continue.
D. RIGHTS AND LIABILITIES OF SURVIVING CORPORATION.
At the Effective Time, the Merger shall have the effects on the Merging
Corporation, the Surviving Corporation, and the holders of shares of capital
stock of each as stated in Section 13.1-721 of the Virginia Stock Corporation
Act, in addition to the effects expressly described in this Plan of Merger.
E. CONVERSION AND EXCHANGE OF SHARES.
The manner and basis of converting (i) the outstanding shares of the
Merging Corporation into shares of the Surviving Corporation, (ii) the
outstanding shares, and outstanding rights to acquire shares of the Surviving
Corporation, into shares of the Parent Corporation and warrants of the Parent
Corporation, respectively, and (iii) the treatment of shares of capital stock of
the Parent Corporation at the Effective Time is as follows:
1. CONVERSION OF SURVIVING CORPORATION SHARES. At the Effective Time,
each one (1) share of common stock of the Surviving Corporation, par value $.001
per share, issued and outstanding at the Effective Time (each such share being
collectively referred to herein as an "Old Sonus Share", and all four million
(4,000,000) of such shares issued and outstanding at the Effective Time being
collectively referred to herein as the "Old Sonus Shares"), shall be
automatically converted, by operation of law, into one (1) share of common stock
of the Parent Corporation, par value $.0001 per share (each such share being
collectively referred to herein as a "Merger Share", and all four million
(4,000,000) of such shares being collectively referred to herein as the "Merger
Shares"), without any further act on the part of the holder thereof, the
Surviving Corporation or the Parent Corporation. No other property, shares,
other securities or consideration of any type will be distributed or issued in
connection with or as a result of the Merger. At the Effective Time, the Parent
Corporation shall assume all of the rights and obligations
2
pertaining to the Old Sonus Shares including, without limitation, all
registration rights relating to the Old Sonus Shares, which, from and after the
Effective Time, shall cease to be the obligations of the Surviving Corporation.
All stock certificates issued by the Surviving Corporation and representing any
Old Sonus Shares (each an "Old Sonus Certificate" and collectively the "Old
Sonus Certificates"), shall be deemed from and after the Effective Time to
represent such number of Merger Shares as is equal to the number of Old Sonus
Shares set forth in such Old Sonus Certificate and, upon surrender of any Old
Sonus Certificate by holders thereof to the Parent Corporation, such holders
shall be immediately entitled to one or more new stock certificates issued by
the Parent Corporation representing such number of Merger Shares (the "Merger
Share Certificates").
2. CONVERSION OF MERGING CORPORATION SHARES. Immediately upon the
conversion of the Old Sonus Shares into the Merger Shares at the Effective Time,
as provided in Section E.1. above, each one (1) share of common stock of the
Merging Corporation, no par value per share, issued and outstanding at the
Effective Time (each such share being collectively referred to herein as an "Old
Acquisition Share", and all one thousand (1,000) of such shares being
collectively referred to herein as the "Old Acquisition Shares"), shall be
automatically converted, by operation of law, into one thousand (1,000) shares
of common stock of the Surviving Corporation, par value $.001 per share (each
such share being collectively referred to herein as a "New Sonus Share", and all
one thousand (1,000) of such shares being collectively referred to herein as the
"New Sonus Shares"), without any further act on the part of the Parent
Corporation, as holder thereof, the Merging Corporation or the Surviving
Corporation. No other property, shares, other securities or consideration of any
type will be distributed or issued in connection with or as a result of the
Merger. The stock certificate issued by the Merging Corporation to the Parent
Corporation, as sole shareholder of the Merging Corporation, and representing
the Old Acquisition Shares (the "Old Acquisition Certificate"), shall be deemed
from and after the Effective Time to represent 1,000 New Sonus Shares and, upon
surrender of the Old Acquisition Certificate by the Parent Corporation to the
Surviving Corporation, the Parent Corporation shall be immediately entitled to
one or more new stock certificates representing, in the aggregate, 1,000 New
Sonus Shares.
3. CONVERSION OF WARRANTS TO PURCHASE SURVIVING CORPORATION SHARES. At
the Effective Time, all warrants to purchase shares of common stock of the
Surviving Corporation, par value $.001 per share, granted and outstanding at the
Effective Time (each such warrant an "Old Warrant", and such warrants being
collectively referred to herein as "Old Warrants"), shall be automatically
converted, by operation of law, into and shall become a warrant to purchase an
identical number of shares of common stock of the Parent Corporation, par value
$.0001 per share, exercisable at the same price and subject to the same terms
and conditions as each Old Warrant (such warrants being collectively referred to
herein as the "New Warrants"), without any further act on the part of the
holders thereof, the Parent Corporation, or the Surviving Corporation. At the
Effective Time, the Parent Corporation shall assume all of the rights and
obligations set forth in the Old Warrants including, without limitation, all
registration rights relating to shares underlying such Old Warrants, which, from
and after the Effective Time shall cease to be the obligations of the Surviving
Corporation. No other property, shares, other securities or consideration of any
type will be distributed or issued in respect of the Old Warrants in connection
with or as a result of the Merger or by the Surviving Corporation in respect of
the Warrants from and after the Effective Time. The Old Warrants issued by the
Surviving Corporation shall be deemed from and after the Effective Time to
represent New Warrants and, upon surrender of the Old Warrants, the holders
thereof shall be immediately entitled to New Warrants to purchase such number of
shares of common stock of the Parent Corporation, par value $.0001 per share, as
is equal to the number of shares of common stock of the Surviving Corporation as
set forth in the Old Warrant, exercisable at the same price and subject to the
same terms and conditions as each Old Warrant.
4. The 347,954 shares of common stock of the Parent Corporation, par
value $.0001 per share, issued and outstanding prior to the Effective Time shall
not be converted, exchanged or otherwise effected by the Merger, except as
herein expressly set forth.
F. CONDITIONS OF MERGER. The Merger is conditioned on the following:
1. That the parties to this Plan of Merger have not suffered an
uninsured loss on account of fire, flood, accident, or other calamity of such a
character as to interfere materially with the continuous operation of their
businesses or materially affect adversely their condition, financial or
otherwise, regardless of whether or not such loss shall have been insured.
3
2. That no material transactions shall have been entered into by the
parties to this Plan of Merger other than transactions in the ordinary course of
business between the date of their last financial statements and the Effective
Time, other than as referred to in certain documents.
3. Except as disclosed to the other parties, that no material adverse
change in the aggregate shall have occurred in the financial condition of the
parties to this Plan of Merger since the date of their last financial
statements.
4. That none of the properties or assets of the parties shall have been
sold or otherwise disposed of other than in the ordinary course of business
during such period, except with the written consent of the other parties.
5. That the parties shall have performed and complied with the
provisions and conditions of this Agreement on their respective part to be
performed and complied with prior to the Effective Time, and that certain
representations and warranties made by the parties are true and correct in all
material respects, both when made and as of the Effective Time.
6. That this Plan of Merger shall have been approved by appropriate
corporate action of the parties to this Plan of Merger and that corporate votes
and resolutions to that effect have been delivered by each party to the others
prior to the date of this Plan of Merger.
7. That there shall have been full compliance with the applicable
securities or "blue sky" laws and regulations of any state or other governmental
body having jurisdiction over the Merger, which have not been preempted by
Federal law or with respect to which a claim of preemption could reasonably be
made.
8. That the parties hereto shall have received certain opinions of
counsel satisfactory to such parties in form and substance.
9. That the Parent Corporation shall have held a meeting of its Board
of Directors at which meeting all of its directors shall have resigned seriatim
and the persons designated by the Surviving Corporation shall have been elected
as directors of the Parent Corporation, and that the Parent Corporation shall
have provided the Surviving Corporation with a certified copy of the actions
taken at such meeting.
G. NO AMENDMENTS TO ARTICLES OF INCORPORATION; DIRECTORS AND OFFICERS.
Neither the Articles of Incorporation nor the Bylaws of the Surviving
Corporation, both as amended to the Effective Time, shall be hereby amended. The
directors and officers of Sonus Communications, Inc. shall remain the directors
and officers of the Surviving Corporation after the Effective Time and until
their successors shall have been duly elected and qualified.
H. SHAREHOLDER APPROVAL.
This Plan of Merger has been duly recommended and adopted by the boards
of directors, and submitted to and approved by all of the shareholders, of both
the Surviving Corporation and the Merging Corporation, all in accordance with
the applicable requirements of the Virginia Stock Corporation Act, and has been
duly authorized and approved by the Parent Corporation.
I. ABANDONMENT.
This Plan of Merger may be abandoned at any time prior to the Effective
Time (i) by the Merging Corporation, acting by its board of directors, in the
event of the failure of any condition of the Merger running in favor of the
Merging Corporation, (ii) by the Surviving Corporation, acting by its board of
directors, in the event of the failure of any condition of the Merger running in
favor of the Surviving Corporation, (iii) by the Parent Corporation, acting by
its board of directors, in the event of the failure of any condition of the
Merger running in favor of the Parent Corporation, and (iv) by the mutual
consent of the Merging Corporation, the Parent Corporation and the Surviving
Corporation, acting by their respective boards of directors. In the event of
abandonment of this Plan of Merger, the same shall become wholly void and of no
effect and there shall be no further liability or
4
obligation hereunder on the part of either the Merging Corporation, the Parent
Corporation or the Surviving Corporation or their respective Boards of
Directors.
J. AMENDMENTS.
To the extent permitted by law, this Plan of Merger may be amended by a
subsequent writing signed by the parties hereto; provided, however, that after
the shareholders of either the Surviving Corporation or the Merging Corporation
have approved this Plan of Merger, the provisions of Article E hereof relating
to the consideration to be exchanged for shares or warrants of the Surviving
Corporation and the shares of the Merging Corporation shall not be amended so as
to decrease the amount or change the form of such consideration without the
further approval of the shareholders entitled to receive such consideration.
K. FURTHER ASSURANCES.
As and when requested by the Surviving Corporation or by its successors
or assigns, the Merging Corporation and the Parent Corporation shall execute and
deliver or cause to be executed and delivered all such deeds, instruments, and
certificates and will take or cause to be taken all such further action as the
Surviving Corporation may deem necessary or desirable in order to (i) vest in
and confirm title to and possession of all property to be acquired by the
Surviving Corporation as a result of the Merger, (ii) vest and confirm title to
and in the Merger Shares, and (iii) cause the Merger Shares to be issued in the
Merger and to be deemed duly authorized, validly issued, fully paid and
non-assessable shares of the Parent Corporation, and otherwise to carry out the
intent and purposes hereof. The officers and directors of the Merging
Corporation, the Parent Corporation and the Surviving Corporation are fully
authorized in the name of the Merging Corporation, the Parent Corporation and
the Surviving Corporation to take any and all such action.
L. FILING OF ARTICLES OF MERGER.
As soon as practicable after the date hereof, the Surviving Company
shall deliver to the State Corporation Commission of the Commonwealth of
Virginia for filing articles of merger meeting the requirements of applicable
law and in accordance with the terms hereof.
IN WITNESS WHEREOF, the parties hereto have made and executed this Plan
of Merger as of the day and year first above written.
SONUS COMMUNICATIONS, INC.
By: /s/ Nana Maraneli
--------------------------------
Nana Maraneli, President
THE PARK GROUP, LTD.
By: /s/ Xxxxxxx Xxxxxx
--------------------------------
Xxxxxxx Xxxxxx, President
SONUS PARK ACQUISITION CORP.
By: /s/ Xxxxxxx Xxxxxx
--------------------------------
Xxxxxxx Xxxxxx, President
5
EXHIBIT 3.1(G)
ARTICLES OF MERGER
OF
THE PARK GROUP, LTD.
WITH AND INTO
SONUS COMMUNICATION HOLDINGS, INC.
Sonus Communication Holdings, Inc., a Delaware corporation (the
"Surviving Corporation") and The Park Group, Ltd., a Colorado corporation (the
"Merging Corporation") hereby submit these Articles of Merger for the purpose of
merging the Merging Corporation into the Surviving Corporation:
I. The following Agreement and Plan of Merger was duly adopted by the
board of directors of the Surviving Corporation on April 7, 1999, duly adopted
by the board of directors of the Merging Corporation on February 27, 1999,
recommended and submitted to the shareholders of the Merging Corporation, and
approved by the requisite vote by the shareholders of the Merging Corporation on
April 12, 1999, all in the manner prescribed by the Delaware General Corporation
Law and the in accordance with Section 0-000-000 of the Colorado Corporation
Code, as amended (the "Colorado Corporation Code"):
AGREEMENT AND PLAN OF MERGER
OF
THE PARK GROUP, LTD.
WITH AND INTO
SONUS COMMUNICATION HOLDINGS, INC.
April 12, 1999
A. CORPORATIONS PARTICIPATING IN MERGER.
1. PARTIES TO MERGER. The Park Group, Ltd., a Colorado
corporation (the "Merging Corporation") is the parent corporation and
Sonus Communication Holdings, Inc., a Delaware corporation (the
"Surviving Corporation") is the subsidiary corporation. At the
Effective Time (as defined herein), the Merging Corporation will merge
with and into the Surviving Corporation, pursuant Section 0-000-000 of
the Colorado Corporation Code, relating to the merger of parent and
subsidiary corporations, and in accordance with the Delaware General
Corporation Law.
2. MERGER OF PARENT AND SUBSIDIARY. The Merging Corporation
owns all 100 of the issued and outstanding shares of capital stock of
the Surviving Corporation.
B. NAME OF SURVIVING CORPORATION.
After the merger contemplated by this Agreement and Plan of
Merger (the "Plan of Merger"), the Surviving Corporation will have the
name "Sonus Communication Holdings, Inc."
1
C. MERGER; EFFECTIVE TIME.
The merger of the Merging Corporation into the Surviving
Corporation (the "Merger") will be effected pursuant to the terms and
conditions of this Plan of Merger. Upon the merger's becoming
effective, the corporate existence of the Merging Corporation will
cease, and the corporate existence of the Surviving Corporation will
continue. The Certificate of Incorporation of Sonus Communication
Holdings, Inc. shall be the Certificate of Incorporation of the
Surviving Corporation. The time when the merger becomes effective is
April 16, 1999 at 12:00 a.m. (herein referred to as the "Effective
Time").
D. CONVERSION AND EXCHANGE OF SHARES.
At the Effective Time, the outstanding shares of the
corporations participating in the Merger will be converted and
exchanged in the following manner and on the following basis:
1. SURVIVING CORPORATION. Given that the Merging Corporation
is the sole shareholder of the Surviving Corporation, each share of the
Surviving Corporation issued to the Merging Corporation shall, at the
Effective Time, be automatically cancelled without any further act on
the part of the Merging Corporation or the Surviving Corporation.
2. MERGING CORPORATION. Each one (1) share of the Merging
Corporation issued and outstanding (or representing a share of the
Merging Corporation) at the Effective Time shall be automatically
converted into and exchanged for one (1) share of the Surviving
Corporation.
3. SURRENDER AND CANCELLATION OF SHARE CERTIFICATES. Each
holder of a certificate representing shares to be converted, exchanged
or cancelled in the merger will surrender such certificate at the
Effective Time. Each such certificate shall be marked cancelled and
placed in the books and records of the Merging Corporation and the
Surviving Corporation and, in the case of the surrender of any stock
certificate evidencing shares of the Merging Corporation (the "Old Park
Certificates") or a certificate entitling the holder to receive a
certificate evidencing shares of the Merging Corporation, a new stock
certificate (the "New Certificate") evidencing such number of shares as
is equal to the number of shares represented by the Old Certificate so
surrendered shall be issued.
E. AMENDMENTS TO ARTICLES OF INCORPORATION.
The Certificate of Incorporation of the Surviving Corporation
shall not be amended hereby.
F. EFFECTIVE TIME AND FILING OF ARTICLES OF MERGER.
The merger of the Merging Corporation with and into the
Surviving Corporation will become effective at the Effective Time. As
soon as practicable after the date hereof, the Surviving Corporation
shall deliver for filing articles of merger setting forth this Plan of
Merger to the Secretary of State of Colorado and a certificate of
merger to the Secretary of State of Delaware.
* * *
II. The Merging Corporation owns all of the outstanding capital stock
of the Surviving Corporation.
III. Approval of the merger by the shareholders of the Surviving
Corporation is not required under the Delaware General Corporation Law or the
Colorado Corporation Code. The Merger is permitted by the Delaware General
Corporation Law and the Surviving Corporation has complied with the Delaware
General Corporation Law in effecting the Merger in all respects.
2
IV. The Merging Corporation has complied with the applicable provisions
of Sections 0-000-000 to 0-000-000 of the Colorado Corporation Code in all
respects.
V. The address of the principal office of the Surviving Corporation is
00000 Xxxxxxx Xxxx., Xxxxxxxxxxx, Xxxxxxxx 00000. The Surviving Corporation has
complied with Section 0-000-000 of the Colorado Corporation Code.
VI. The Merging Corporation has 4,347,954 shares of common stock, par
value $.0001 per share, issued and outstanding, which shares constitute all of
the issued and outstanding shares of capital stock of the Merging Corporation
and all of which are entitled to vote on the Merger as one voting group (the
"Shareholders").
VII. The number of votes cast for the Plan of Merger was sufficient for
approval by the Shareholders in accordance with the Colorado Corporation Code.
VIII. The Surviving Corporation hereby authorizes service of process on
it in connection with any proceeding based on a cause of action arising with
respect to the Merger of the Merging Corporation into the Surviving Corporation
by registered or certified mail, return receipt requested, to the address of the
principal office of the Surviving Corporation as set forth in these Articles of
Merger or as last changed by notice delivered to the Secretary of State for
filing.
IX. Notwithstanding that these Articles of Merger may be filed prior to
such date, the Effective Time of these Articles of Merger shall be April 16,
1999 at 12:00 a.m., which effective date complies with Section 7-111-104(5) of
the Colorado Corporation Code.
The forgoing is certified and signed on this the 12th day of April,
1999:
MERGING CORPORATION: SURVIVING CORPORATION:
THE PARK GROUP, LTD. SONUS COMMUNICATION HOLDINGS, INC.
By: /s/ Nana Maraneli By: Xxxxxxx X. Xxxx
------------------------ --------------------------
Name: Nana Maraneli Name: Xxxxxxx X. Xxxx
Title: President Title: President
3
EXHIBIT 3.1(h)
CERTIFICATE OF MERGER
OF
THE PARK GROUP, LTD INTO
SONUS COMMUNICATION HOLDINGS, INC.
(UNDER SECTION 252 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE)
SONUS COMMUNICATION HOLDINGS, INC., a Delaware Corporation
("Corporation") hereby certifies that:
(1) The name and jurisdiction of incorporation of each of the
constituent corporations are as follows:
(a) The Park Group, Ltd., a Colorado corporation; and
(b) Sonus Communication Holdings, Inc., a Delaware corporation.
(2) An agreement of merger has been approved, adopted, certified,
executed and acknowledged by The Park Group, Ltd. and by Sonus Communication
Holdings, Inc., all in accordance with the provisions of subsection (c) of
Section 252 of the General Corporation Law of the State of Delaware.
(3) The name of the surviving corporation is Sonus Communication
Holdings, Inc.
(4) The certificate of incorporation of Sonus Communication Holdings,
Inc. shall be the certificate of incorporation of the surviving corporation.
(5) The surviving corporation is a corporation incorporated under the
General Corporation Law of the State of Delaware.
(6) The executed agreement of merger is on file at the principal place
of business of Sonus Communication Holdings, Inc., the mailing address of which
is 0000 Xxxxxxx Xxxxxxxxx, Xxxxxxxxxxx, Xxxxxxxx 00000-0000.
(7) A copy of the agreement of merger will be furnished by Sonus
Communication Holdings, Inc., on request and without cost, to any stockholder of
The Park Group, Ltd. or Sonus Communication Holdings, Inc.
(8) The authorized capital stock of The Park Group, Ltd. is
1,000,000,000 shares of common stock, $.0001 par value per share, and
100,000,000 shares of preferred stock.
(9) This Certificate, and the merger contemplated hereby, shall not
become effective until 12:00 a.m. on April 16, 1999.
IN WITNESS WHEREOF, Sonus Communication Holdings, Inc. has caused this
certificate to be signed by Xxxxxxx X. Xxxx, it authorized President, on the
12th day of April, 1999.
SONUS COMMUNICATION HOLDINGS, INC.
By: /s/ Xxxxxxx X. Xxxx
---------------------------------
Xxxxxxx X. Xxxx, President
1
EXHIBIT 3.1(i)
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
ANY STATE SECURITIES OR BLUE SKY LAWS AND MAY NOT BE OFFERED, SOLD, TRANSFERRED,
HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT (1) PURSUANT TO A REGISTRATION
STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER THE ACT OR
(2) PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING
TO THE DISPOSITION OF SECURITIES AND (3) IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES AND BLUE SKY LAWS.
WARRANT
WARRANT TO PURCHASE ____________ SHARES OF COMMON STOCK
OF
SONUS COMMUNICATION HOLDINGS, INC.
Date of Issuance: ___________
THIS CERTIFIES that, for value received, _____________, or his assigns
(in either case, the "Holder") is entitled to purchase, subject to the
provisions of this Warrant, from SONUS COMMUNICATION HOLDINGS, INC., a Delaware
corporation (the "Company"), at the price per share set forth in Section 8
hereof, the number of shares of the Company's common stock, $.0001 par value per
share (the "Common Stock"), set forth in Section 7 hereof. This Warrant is
referred to herein as the "Warrant" and the shares of Common Stock issued
pursuant to the terms hereof are sometimes referred to herein as "Warrant
Shares".
1. EXERCISE OF WARRANT; VESTING OF WARRANT.
(a) EXERCISE OF WARRANT. To exercise this Warrant in whole or
in part, the Holder shall deliver to the Company at its principal office, (a) a
written notice, in substantially the form of the exercise notice attached hereto
(the "Exercise Notice"), of the Holder's election to exercise this Warrant,
which notice shall specify the number of shares of Common Stock to be purchased,
(b) a check in the amount of the aggregate exercise price for the Warrant Shares
being purchased, and (c) this Warrant. The Company shall as promptly as
practicable, and in any event within twenty (20) days after delivery to the
Company of (i) the Exercise Notice, (ii) the check mentioned above, and (iii)
this Warrant, execute and deliver or cause to be executed and delivered, in
accordance with such notice, a certificate or certificates representing the
aggregate number of shares of Common Stock specified in such notice, provided
the Warrants specified in such notice have vested on or prior to the date such
notice is delivered. If the Holder elects to purchase, at any time, less than
the number of shares of Common Stock then purchasable under the terms of this
Warrant, the Company shall issue to the Holder a new Warrant exercisable into
the number of remaining shares of Common Stock purchasable under this Warrant.
Each certificate representing Warrant Shares shall bear the legend or legends
required by applicable securities laws as well as such other legend(s) the
Company requires to be included on certificates for its Common Stock. The
Company shall pay all expenses, taxes and other charges payable in connection
with the preparation, issuance and delivery of such stock certificates except
that, in case such stock certificates shall be registered in a name or names
other than the name of the Holder, funds sufficient to pay all stock transfer
taxes that are payable upon the issuance of such stock certificate or
certificates shall be paid by the Holder at the time of delivering the Exercise
Notice. All shares of Common Stock issued upon the exercise of this Warrant
shall be validly issued, fully paid, and nonassessable. This Warrant may be
exercised on multiple occasions before the expiration of its term as described
in this Section 1. This Warrant will expire on fifth anniversary of the issuance
date set forth above (the "Expiration Date").
(b) VESTING OF WARRANT. This Warrant shall vest as follows:
__________________.
2. RESERVATION OF SHARES. The Company hereby covenants that at all
times during the term of this Warrant there shall be reserved for issuance such
number of shares of its Common Stock as shall be required to be issued upon
exercise of this Warrant.
1
3. FRACTIONAL SHARES. This Warrant may be exercised only for a whole
number of shares of Common Stock, and no fractional shares or scrip representing
fractional shares shall be issuable upon the exercise of this Warrant.
4. TRANSFER OF WARRANT AND WARRANT SHARES. The Holder may freely sell,
pledge, hypothecate, or otherwise transfer this Warrant, in whole or in part,
and any or all of the Warrant Shares; provided that any such sale, pledge,
hypothecation, or transfer is made in compliance with the Act or pursuant to an
available exemption from registration under the Act relating to the disposition
of securities, and is made in accordance with applicable State securities laws.
5. LOSS OF WARRANT. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, or destruction of this Warrant, and of
indemnification satisfactory to it, or upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor.
6. RIGHTS OF THE HOLDER. No provision of this Warrant shall be
construed as conferring upon the Holder the right to vote, consent, receive
dividends or receive notice other than as expressly provided herein. No
provision hereof, in the absence of affirmative action by the Holder to exercise
this Warrant, and no enumeration herein of the rights or privileges of the
Holder, shall give rise to any liability of the Holder for the purchase price of
any Warrant Shares or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
7. NUMBER OF WARRANT SHARES. This Warrant shall be exercisable for up
to 125,000 shares of the Company's Common Stock, as adjusted in accordance with
this Agreement.
8. EXERCISE PRICE; ADJUSTMENT OF WARRANTS; MISCELLANEOUS.
(a) DETERMINATION OF EXERCISE PRICE. The per share purchase
price (the "Exercise Price") for each of the Warrant Shares purchasable under
this Warrant shall be equal to One Dollar and Fifty Cents ($1.50).
(b) ADJUSTMENTS FOR STOCK DIVIDENDS, DISTRIBUTIONS AND
SUBDIVISIONS. If the Company at any time or from time to time after the original
issue date shall declare or pay any dividend or distribution on the Common Stock
payable in Common Stock, or effect a subdivision of the outstanding shares of
Common Stock into a greater number of shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in Common Stock),
then the number of shares of Common Stock into which this Warrant is exercisable
shall be increased to an amount which is equal to the product of (i) the number
of shares of Common Stock for which this Warrant is exercisable immediately
prior to the stock dividend, distribution or subdivision, as the case may be,
and (ii) a fraction, the numerator of which is equal to the number of shares of
Common Stock issued and outstanding after giving effect to such stock dividend,
distribution or subdivision, and the denominator of which is the number of
shares of Common Stock issued and outstanding prior to such stock dividend,
distribution or subdivision. If the outstanding shares of Common Stock shall be
divided or increased because of a stock dividend or distribution, by stock split
or otherwise, into a greater number of shares of Common Stock, the Exercise
Price in effect immediately prior to such dividend, distribution or division
shall, concurrently with the effectiveness of such division, dividend or
distribution, be proportionately decreased.
(c) ADJUSTMENTS FOR COMBINATIONS OR CONSOLIDATION OF COMMON
STOCK. If the outstanding shares of Common Stock shall be combined or
consolidated, by reclassification, reverse stock split or otherwise, into a
lesser number of shares of Common Stock, then the number of shares of Common
Stock into which this Warrant is exercisable shall be decreased to an amount
which is equal to the product of (i) the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to combination or
consolidation, as the case may be, and (ii) a fraction, the numerator of which
is equal to the number of shares of Common Stock issued and outstanding after
giving effect to such combination or consolidation, and the denominator of which
is the number of shares of Common Stock issued and outstanding prior to such
combination or consolidation. If the outstanding shares of Common Stock shall be
combined or consolidated, by reclassification, reverse stock split or otherwise,
into a lesser number of shares of Common Stock, the Exercise Price in effect
immediately prior to such combination or consolidation shall, concurrently with
the effectiveness of such combination or consolidation, be proportionately
increased.
2
(d) ADJUSTMENT FOR MERGERS OR REORGANIZATION, ETC. In case of
any consolidation or merger of the Company with or into another corporation or
the conveyance of all or substantially all of the assets of the Company to
another corporation, this Warrant shall be exercisable into the number of shares
of stock or other securities or property to which a holder of the number of
shares of Common Stock of the Company deliverable upon exercise of this Warrant
would have been entitled upon such consolidation, merger or conveyance; and, in
any such case, appropriate adjustment (as determined by the Board of Directors
of the Company) shall be made in the application of the provisions herein set
forth with respect to the rights and interest thereafter of the holder of this
Warrant, to the end that the provisions set forth herein shall thereafter be
applicable, as nearly as reasonable may be, in relation to any shares of stock
or other property thereafter deliverable upon the exercise of this Warrant.
(e) NO IMPAIRMENT. The Company will not, through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 8 and in the taking of all
such action as may be necessary or appropriate in order to protect the exercise
rights of the holder of this Warrant against impairment.
(f) ISSUE TAXES. The Company shall pay any and all issue and
other taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on exercise of this Warrant, in whole or in part; provided,
however, that the Company shall not be obligated to pay any transfer taxes
resulting from any transfer requested by any holder in connection with any such
exercise.
(g) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the exercise of this
Warrant, such number of its shares of Common Stock as shall from time to time be
sufficient to effect the exercise of this Warrant; and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the exercise of this Warrant, the Company will take such corporate action
as may, in the opinion of its counsel, be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as shall be
sufficient for such purpose.
(h) FRACTIONAL SHARES. No fractional share shall be issued
upon the exercise, in whole or in part, of this Warrant. If any exercise in
whole or in part of this Warrant would result in the issuance of a fraction of a
share of Common Stock, the Company shall, in lieu of issuing any fractional
share, pay the holder otherwise entitled to such fraction a sum in cash equal to
the fair market value of such fraction on the date of exercise (as determined in
good faith by the Board of Directors of the Company).
(i) CASHLESS EXERCISE. The Holder shall have the right to pay
all or a portion of the Exercise Price by making a "Cashless Exercise", in which
case the portion of the Exercise Price to be so paid shall be paid by reducing
the number of Warrant Shares otherwise issuable pursuant to this Warrant in
accordance with the formula set forth below so that the number of Warrant Shares
to be issued to the Holder as a result of a Cashless Exercise shall therefore
be:
(FAIR MARKET VALUE PER SHARE-EXERCISE PRICE PER WARRANT SHARE) X the number of Warrant Shares
--------------------------------------------------------------
Fair Market Value Per Share otherwise issuable
* Within ten (10) days of receipt of an election to exercise this
Warrant specifying a Cashless Exercise, the Company shall provide to the Holder
in writing its determination of the fair market value per share of Common Stock
(including the basis therefor), which shall be determined by the Board of
Directors of the Company and shall be binding on the Holder unless the Holder
objects thereto in writing within ten (10) business days of the Holder's receipt
of such determination. In the event the Company and the Holder cannot agree on
the amount of the fair market value per share of Common Stock within ten (10)
business days of the date of the Holder's delivery of its objection, such amount
shall be determined by an appraiser experienced in making such determinations
mutually selected by the Board of Directors of the Company and the Holder, the
fees and expenses of which shall be paid by the Company. (The fair market value
per share of Common Stock determined in accordance with this procedure is
referred to above as the "Fair Market Value Per Share").
3
9. CERTAIN DISTRIBUTIONS. In case the Company shall, at any time, prior
to the Expiration Date set forth in Section 1 hereof, make any distribution of
its assets to holders of its Common Stock as a partial liquidation, distribution
or by way of return of capital, other than as a dividend payable out of earnings
or any surplus legally available for dividends, then the Holder shall be
entitled, upon the exercise of this Warrant in whole or in part and prior to
such distribution, to receive, in addition to the shares of Common Stock
issuable on such exercise, the amount of such assets (or at the option of the
Company a sum equal to the value thereof at the time of such distribution to
holders of Common Stock as such value is determined by the Board of Directors of
the Company in good faith), which would have been payable to the Holder had it
been a holder of record of such shares of Common Stock on the record date for
the determination of those holders of Common Stock entitled to such
distribution.
10. DISSOLUTION OR LIQUIDATION. In case the Company shall, at any time
prior to the Expiration Date set forth in Section 1 hereof, dissolve, liquidate
or wind up its affairs, the Holder shall be entitled, upon the exercise of this
Warrant in whole or in part and prior to any distribution associated with such
dissolution, liquidation, or winding up, to receive on such exercise, in lieu of
the shares of Common Stock to which the Holder would have been entitled, the
same kind and amount of assets as would have been distributed or paid to the
Holder upon any such dissolution, liquidation or winding up, with respect to
such shares of Common Stock had the Holder been a holder of record of such share
of Common Stock on the record date for the determination of those holders of
Common Stock entitled to receive any such dissolution, liquidation, or winding
up distribution.
11. RECLASSIFICATION OR REORGANIZATION. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), the Company shall cause effective provision to be
made so that the Holder shall have the right thereafter by exercising this
Warrant, to purchase the kind and amount of shares of stock and other securities
and property receivable upon such reclassification, capital reorganization or
other change, by a holder of the number of shares of Common Stock which might
have been purchased upon exercise of this Warrant immediately prior to such
reclassification or change. Any such provision shall include provision for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Warrant. The foregoing provisions of this
Section 11 shall similarly apply to successive reclassifications, capital
reorganizations and changes of shares of Common Stock. In the event that in any
such capital reorganization, reclassification, or other change, additional
shares of Common Stock shall be issued in exchange, conversion, substitution or
payment, in whole or in part, for or of a security of the Company other than
Common Stock, any amount of the consideration received upon the issue thereof
being determined by the Board of Directors of the Company shall be final and
binding on the Holder.
SECTION 12. PIGGY-BACK REGISTRATION RIGHTS.
(a) In the event that the Company shall register any of its
common stock, par value $.0001 per share under the Securities Act of 1933 (a
"Registered Offering"), either for its own account or the account of any other
holder or holders of equity securities of the Company, other than (i) a
registration relating solely to employee benefit plans, (ii) a registration
relating solely to a Rule 145 transaction, (iii) a registration in which the
only equity security being registered is capital stock issuable upon conversion
of convertible (or exchange of exchangeable) debt securities which are also
being registered, or (iv) an initial public offering by the Company of Common
Stock, the Company will provide you with written notice thereof within 90 days
of the filing date of the first registration statement filed in connection with
the Registered Offering (the "Company Notice"), and, subject to the other terms
and conditions set forth in this Section 12, include in such registration (and
any related qualification under blue sky laws or other compliance) and any
underwriting involved therein, the Warrant Shares (collectively, the
"Registrable Securities") specified in a written request or requests made by you
to the Company within 10 days after receipt of the Company Notice.
(b) If the Registered Offering of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise you as a part of the Company Notice. In such event, your
rights to registration pursuant to Section 12(a) shall be conditioned upon your
participation in such underwriting, and the inclusion of your Registrable
Securities in the underwriting shall be limited to the extent provided herein.
You shall (together with the Company and the other holders distributing their
securities through
4
such underwriting, if any) enter into an underwriting agreement in customary
form with the managing underwriter selected for such underwriting by the
Company. Notwithstanding any other provision of this Section 12, if the managing
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, the managing underwriter may limit the number of
your Registrable Securities to be included in such registration to such number
of your Registrable Securities which the managing underwriter determines can be
included in such underwriting without reducing the number of shares to be sold
by the Company pursuant to such underwriting. In such event, the Company shall
so advise you and the number of shares (other than shares being registered by
the Company) that may be included in the registration and underwriting shall be
allocated among all the holders of the Company's shares wishing to participate
in the Registered Offering in proportion, as nearly as practicable, to the
respective amounts of shares held by such holders at the time of filing the
Registration Statement. To facilitate the allocation of shares in accordance
with the above provisions, the Company may round the number of shares allocated
to any holder to the nearest 100 shares. If you disapprove of the terms of any
such underwriting, you may elect to withdraw therefrom by written notice to the
Company and the managing underwriter. Any securities excluded or withdrawn from
such underwriting shall be withdrawn from such registration, and shall not be
transferred in a public distribution prior to 180 days after the effective date
of the registration statement relating thereto, or such other shorter period of
time as the underwriters may require.
(c) The Company shall have the right to terminate or withdraw
any Registered Offering or other registration prior to the effectiveness of such
registration whether or not you have elected to include your Registrable
Securities in such registration.
(d) All registration expenses incurred in connection with
registrations pursuant to this Section 12 shall be borne by the Company. Unless
otherwise stated, all selling expenses relating to your Registrable Securities
shall be borne by you.
(e) In the case of each registration, qualification or
compliance effected by the Company pursuant to this Agreement, the Company will
keep you advised in writing as to the initiation of each registration,
qualification and compliance and as to the completion thereof. At its expense
the Company will:
(i) prepare and file with the Commission a
registration statement with respect to such securities and use reasonable best
efforts to cause such registration statement to become and remain effective for
at least one hundred twenty (120) days or until the distribution described in
the registration statement has been completed, whichever first occurs; and
(ii) furnish to you, should you choose to participate
in such registration, and to the underwriters of the securities being
registered such reasonable number of copies of the registration statement,
preliminary prospectus, final prospectus and such other documents you and/or the
underwriters may reasonably request in order to facilitate the public offering
of such securities.
(f) You agree, if any of your Registrable Securities are
included in the securities as to which such registration, qualification or
compliance is being effected, to indemnify the Company, each of its directors
and officers, each underwriter, if any, of the Company's securities covered by
such a registration statement, each Person who controls the Company or such
underwriter within the meaning of Section 15 of the Securities Act, and each
other such holder, each of its officers and directors and each Person
controlling such holder within the meaning of Section 15 of the Securities Act,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company, such holders, such directors, officers, Persons, underwriters or
control Persons for any legal or any other expenses reasonably incurred, as such
expenses are incurred, in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by you.
Notwithstanding the foregoing, your liability under this subsection shall be
limited in an amount equal to the initial price of the Registrable Securities
sold by you, unless such liability arises out of or is based on willful
misconduct by you.
5
(g) Each party entitled to indemnification under this Section
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") after such Indemnified Party has
actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Agreement, unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action,
and provided further that the Indemnifying Party shall not assume the defense
for matters as to which there is a conflict of interest or separate and
different defenses. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
(h) In the event the terms of this Section 12 conflict with
the terms of any underwriting agreement in connection with any registration
hereunder, the terms of such underwriting agreement shall control.
(i) If your Registrable Securities are to be included in any
Registered Offering, you shall furnish to the Company such information as the
Company may request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Agreement.
(j) The rights granted pursuant to this Section 12 shall
terminate at such time as the Company has registered your Registrable Securities
in a Registered Offering or other registration. Broker may exercise its
piggy-back registration rights granted under this Section 12 not more than two
(2) times.
13. APPLICABLE LAW. This Warrant shall be construed in accordance with
the laws of the State of Delaware without giving effect to the conflicts of law
provisions of such laws.
IN WITNESS WHEREOF, the undersigned hereby sets is hand and seal this
__ day of _____, 1999.
SONUS COMMUNICATION HOLDINGS, INC.
By: ___________________________________
Name:
Title:
6
EXHIBIT 3.1(j)
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES OR BLUE SKY LAWS AND MAY
NOT BE OFFERED, SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED
EXCEPT (1) PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES WHICH IS EFFECTIVE UNDER THE ACT OR (2) PURSUANT TO AN
AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING TO THE
DISPOSITION OF SECURITIES AND (3) IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES AND BLUE SKY LAWS.
PLACEMENT AGENT WARRANT
WARRANT TO PURCHASE __________ SHARES OF COMMON STOCK
OF
SONUS COMMUNICATIONS, INC.
Date of Issuance: January 21, 1999
THIS CERTIFIES that, for value received, ____________ (the
"Placement Agent"), or its assigns (each a "Holder" and collectively, the
"Holders") are entitled to purchase, subject to the provisions of this Warrant,
from SONUS COMMUNICATIONS, INC., a Virginia corporation (the "Company"), at the
price set forth in Section 8 hereof, the number of shares of the Company's
common stock, $.001 par value per share (the "Common Stock"), set forth in
Section 7 hereof. This Placement Agent Warrant, together with all warrants
issued in replacement hereof and warrants held by Holders in respect hereof, are
referred to herein as the "Warrant" and the shares of Common Stock issued
pursuant to the terms of the Warrant are sometimes referred to herein as
"Warrant Shares". The Warrant is issued in accordance with the terms of that
certain Placement Agent Agreement by and between the Company and the Placement
Agent of event date herewith.
SECTION 1. EXERCISE OF WARRANT. To exercise this Warrant in whole or in
part, the Holder shall deliver to the Company at its principal office, (a) a
written notice, in substantially the form of the exercise notice attached hereto
(the "Exercise Notice"), of the Holder's election to exercise this Warrant,
which notice shall specify the number of shares of Common Stock to be purchased,
(b) a check or money wire transfer in the amount of the aggregate exercise price
for the Warrant Shares being purchased, and (c) this Warrant. The Company shall
as promptly as practicable, and in any event within twenty (20) days after
delivery to the Company of (i) the Exercise Notice, (ii) the check mentioned
above, and (iii) this Warrant, execute and deliver or cause to be executed and
delivered, in accordance with such notice, a certificate or certificates
representing the aggregate number of shares of Common Stock specified in such
notice. If the Holder elects to purchase, at any time, less than the number of
shares of Common Stock then purchasable under the terms of this Warrant, the
Company shall issue to the Holder a new Warrant exercisable into the number of
remaining shares of Common Stock purchasable under this Warrant. Each
certificate representing Warrant Shares shall bear the legend or legends
required by applicable securities laws as well as such other legend(s) the
Company requires to be included on certificates for its Common Stock. Such
certificate or certificates shall be deemed to have been issued and such holder
or any other person so designated to be named therein shall be deemed for all
purposes to have become a holder of record of such shares as of the date the
Exercise Notice is delivered to the Company. The Company shall pay all expenses,
taxes and other charges payable in connection with the preparation, issuance and
delivery of such stock certificates except that, in case such stock certificates
shall be registered in a name or names other than the name of the Holder, funds
sufficient to pay all stock transfer taxes that are payable upon the issuance of
such stock certificate or certificates shall be paid by the Holder at the time
of delivering the Exercise Notice. All shares of Common Stock issued upon the
exercise of this Warrant shall be validly issued, fully paid, and nonassessable.
This Warrant may be exercised on multiple occasions before the expiration of its
term as described in this Section 1. This Warrant, and any warrants issued in
replacement of this Warrant, will expire on fifth anniversary of the issuance
date set forth above (the "Expiration Date").
1
SECTION 2. RESERVATION OF SHARES. The Company hereby covenants that at
all times during the term of this Warrant there shall be reserved for issuance
such number of shares of its Common Stock as shall be required to be issued upon
exercise of this Warrant.
SECTION 3. .FRACTIONAL SHARES. This Warrant may be exercised only for a
whole number of shares of Common Stock, and no fractional shares or scrip
representing fractional shares shall be issuable upon the exercise of this
Warrant.
SECTION 4. TRANSFER OF WARRANT AND WARRANT SHARES. The Holder may
freely sell, pledge, hypothecate, or otherwise transfer this Warrant, in whole
or in part, and any or all of the Warrant Shares; provided that any such sale,
pledge, hypothecation, or transfer is made in compliance with the Act or
pursuant to an available exemption from registration under the Act relating to
the disposition of securities, and is made in accordance with applicable State
securities laws.
SECTION 5. LOSS OF WARRANT. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, or destruction of this Warrant, and of
indemnification satisfactory to it, or upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor.
SECTION 6. RIGHTS OF THE HOLDER. No provision of this Warrant shall be
construed as conferring upon the Holder the right to vote, consent, receive
dividends or receive notice other than as expressly provided herein. No
provision hereof, in the absence of affirmative action by the Holder to exercise
this Warrant, and no enumeration herein of the rights or privileges of the
Holder, shall give rise to any liability of the Holder for the purchase price of
any Warrant Shares or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
SECTION 7. NUMBER OF WARRANT SHARES. This Warrant shall be exercisable
for up to 78,750 shares of the Company's Common Stock in accordance with the
terms of the Placement Agent Agreement, as adjusted as provided herein.
SECTION 8. EXERCISE PRICE AND ADJUSTMENT OF NUMBER OF WARRANT SHARES
ISSUABLE.
(a) Determination of Exercise Price. The per share purchase
price (the "Exercise Price") for each of the Warrant Shares purchasable under
this Warrant shall be equal to $1.00 in accordance with the Placement Agent
Agreement, as adjusted in accordance with Section 8(b) below.
(b) ADJUSTMENT OF EXERCISE PRICE. In the event of an
adjustment under Section 8(c) or Section 9 of the number of Warrant Shares
issuable upon exercise of this Warrant, the Exercise Price shall be adjusted to
an amount which is equal to the product of: (i) the Exercise Price immediately
prior to such adjustment, and (ii) a fraction, the numerator of which is the
number of Warrant Shares issuable pursuant to this Warrant immediately after
giving effect to such adjustment, and the denominator of which is the number of
Warrant Shares issuable pursuant to this Warrant immediately prior to such
adjustment.
(c) ADJUSTMENT TO NUMBER OF WARRANT SHARES ISSUABLE. If (i)
the Company at any time or from time to time after the issuance date set forth
above shall declare or pay any dividend on the Common Stock payable in Common
Stock, or effect a subdivision of the outstanding shares of Common Stock into a
greater number of shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in Common Stock), or (ii) the outstanding shares of
Common Stock shall be combined or consolidated, by reclassification, reverse
stock split or otherwise, into a lesser number of shares of Common Stock , then,
and in any such event, the number of Warrant Shares which the Holder shall be
entitled to receive upon exercise of the Warrant following such event shall be
equal to the product of (i) the number of Warrant Shares which the Holder was
entitled to receive upon exercise of the Warrant prior to such event, and (ii) a
fraction, the numerator of which is the number of issued and outstanding shares
of Common Stock after giving effect to such event, and the denominator of which
is the number of issued and outstanding shares of Common Stock immediately prior
to such event.
(d) ADJUSTMENT OF WARRANT SHARES FOR MERGERS OR
REORGANIZATION, ETC. In case of any consolidation or merger of the Company with
or into another corporation or the conveyance of all or substantially all
2
of the assets of the Company to another corporation, other than a Qualifying
Transaction (as used herein, such capitalized term shall have the meaning
provided such term in the Placement Agent Agreement), this Warrant shall be
exercisable into the number of shares of stock or other securities or property
to which a holder of the number of shares of Common Stock of the Company
deliverable upon exercise of this Warrant would have been entitled upon such
consolidation, merger or conveyance; and, in any such case, appropriate
adjustment (as determined by the Board of Directors of the Company) shall be
made in the application of the provisions herein set forth with respect to the
rights and interest thereafter of the holder of this Warrant, to the end that
the provisions set forth herein (including provisions with respect to changes in
and other adjustments of the Exercise Price) shall thereafter be applicable, as
nearly as reasonable may be, in relation to any shares of stock or other
property thereafter deliverable upon the exercise of this Warrant.
(e) NO IMPAIRMENT. The Company will not, through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 8 and in the taking of all
such action as may be necessary or appropriate in order to protect the exercise
rights of the holder of this Warrant against impairment.
(f) NOTICE OF RECORD DATE. In the event that the Company shall
propose at any time:
(i) to declare any dividend or distribution upon its
Common Stock, whether in cash, property, stock or other securities, whether or
not a regular cash dividend and whether or not out of earnings or earned
surplus;
(ii) to offer for subscription pro rata to the
holders of any class or series of its stock any additional shares of stock of
any class or series or other rights;
(iii) to effect any reclassification or
recapitalization of its Common Stock outstanding involving a change in the
Common
Stock; or
(iv) to merge or consolidate with or into any other
corporation, or sell, lease or convey all or substantially all of its
property or business, or to liquidate, dissolve or wind up; or
(v) to conduct a public offering, then in connection
with each such event, the Company shall send to the holder of this Warrant at
least 20 days' prior written notice of the date on which a record shall be taken
for such dividend, distribution or subscription rights (and specifying the date
on which the holders of Common Stock shall be entitled thereto) or for
determining rights to vote in respect of the matter as referred to above. Each
such written notice shall be given by first class mail, postage prepaid,
addressed to the holder of this Warrant at the address for each such holder as
shown on the books of the Company.
(g) ISSUE TAXES. The Company shall pay any and all issue and
other taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on exercise of this Warrant, in whole or in part; provided,
however, that the Company shall not be obligated to pay any transfer taxes
resulting from any transfer requested by any holder in connection with any such
exercise.
(h) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the exercise of this
Warrant, such number of its shares of Common Stock as shall from time to time be
sufficient to effect the exercise of this Warrant; and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the exercise of this Warrant, the Company will take such corporate action
as may, in the opinion of its counsel, be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as shall be
sufficient for such purpose.
3
(i) FRACTIONAL SHARES. No fractional share shall be issued
upon the exercise, in whole or in part, of this Warrant. If any exercise in
whole or in part of this Warrant would result in the issuance of a fraction of a
share of Common Stock, the Company shall, in lieu of issuing any fractional
share, pay the holder otherwise entitled to such fraction a sum in cash equal to
the fair market value of such fraction on the date of exercise (as determined in
good faith by the Board of Directors of the Company).
(j) CASHLESS EXERCISE. The Holder shall have the right to pay
all or a portion of the Exercise Price by making a "Cashless Exercise" pursuant
to this Section, in which case the portion of the Exercise Price to be so paid
shall be paid by reducing the number of Warrant Shares otherwise issuable
pursuant to this Warrant in accordance with the formula set forth below so that
the number of Warrant Shares to be issued to the Holder as a result of a
Cashless Exercise shall therefore be:
(FAIR MARKET VALUE PER SHARE-EXERCISE PRICE PER WARRANT SHARE) X the number of Warrant Shares
--------------------------------------------------------------
Fair Market Value Per Share otherwise issuable
*Within ten (10) days of receipt of an election to exercise this
Warrant specifying a Cashless Exercise, the Company shall provide to the Holder
in writing its determination of the fair market value per share of Common Stock
(including the basis therefor), which shall be determined by the Board of
Directors of the Company and shall be binding on the Holder unless the Holder
objects thereto in writing within ten (10) business days of the Holder's receipt
of such determination. In the event the Company and the Holder cannot agree on
the amount of the fair market value per share of Common Stock within ten (10)
business days of the date of the Holder's delivery of its objection, such amount
shall be determined by an appraiser experienced in making such determinations
mutually selected by the Board of Directors of the Company and the Holder, the
fees and expenses of which shall be paid by the Company. (The fair market value
per share of Common Stock determined in accordance with this procedure is
referred to above as the "Fair Market Value Per Share").
SECTION 9. RECLASSIFICATION OR REORGANIZATION. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of an
action described more particularly in Section 8(c) hereof), the Company shall
cause effective provision to be made so that the Holder shall have the right
thereafter by exercising this Warrant, to purchase the kind and amount of shares
of stock and other securities and property receivable upon such
reclassification, capital reorganization or other change, by a holder of the
number of shares of Common Stock which might have been purchased upon exercise
of this Warrant immediately prior to such reclassification or change. Any such
provision shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Warrant. The foregoing provisions of this Section shall similarly apply to
successive reclassifications, capital reorganizations and changes of shares of
Common Stock. In the event that in any such capital reorganization,
reclassification, or other change, additional shares of Common Stock shall be
issued in exchange, conversion, substitution or payment, in whole or in part,
for or of a security of the Company other than Common Stock, any amount of the
consideration received upon the issue thereof being determined by the Board of
Directors of the Company shall be final and binding on the Holder.
SECTION 10. PIGGY-BACK REGISTRATION RIGHTS.
(a) GRANT OF PIGGY-BACK RIGHTS. In the event that the Company
shall register any of its common stock, par value $.001 per share (a "Registered
Offering"), either for its own account or the account of any other holder or
holders of equity securities of the Company, other than (i) a registration
relating solely to employee benefit plans, (ii) a registration relating solely
to a Rule 145 transaction, (iii) a registration in which the only equity
security being registered is capital stock issuable upon conversion of
convertible (or exchange of exchangeable) debt securities which are also being
registered, or (iv) an initial public offering of the Company, the Company will
provide you with written notice thereof within 90 days of the filing date of the
first registration statement filed in connection with the Registered Offering
(the "Company Notice"), and, subject to the other terms and conditions set forth
in this Section, include in such registration (and any related qualification
under blue sky laws or other compliance) and any underwriting involved therein,
the Warrant Shares (collectively, the "Registrable Securities") specified in a
written request or requests made by the Holders to the Company within 10 days
after receipt of the Company Notice.
4
(b) UNDERWRITTEN REGISTERED OFFERING. If the Registered
Offering of which the Company gives notice is for a registered public offering
involving an underwriting, the Company shall so advise you as a part of the
Company Notice. In such event, your rights to registration pursuant to this
Section 10 shall be conditioned upon your participation in such underwriting,
and the inclusion of your Registrable Securities in the underwriting shall be
limited to the extent provided herein. You shall (together with the Company and
the other holders distributing their securities through such underwriting, if
any) enter into an underwriting agreement in customary form with the managing
underwriter selected for such underwriting by the Company. Notwithstanding any
other provision of this Section 10, if the managing underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may limit the number of your Registrable
Securities to be included in such registration to such number of your
Registrable Securities which the managing underwriter determines can be included
in such underwriting without reducing the number of shares to be sold by the
Company pursuant to such underwriting. In such event, the Company shall so
advise you and the number of shares (other than shares being registered by the
Company) that may be included in the registration and underwriting shall be
allocated among all the holders of the Company's shares wishing to participate
in the Registered Offering in proportion, as nearly as practicable, to the
respective amounts of shares held by such holders at the time of filing the
Registration Statement. To facilitate the allocation of shares in accordance
with the above provisions, the Company may round the number of shares allocated
to any holder to the nearest 100 shares. If you disapprove of the terms of any
such underwriting, you may elect to withdraw therefrom by written notice to the
Company and the managing underwriter. Any securities excluded or withdrawn from
such underwriting shall be withdrawn from such registration, and shall not be
transferred in a public distribution prior to 180 days after the effective date
of the registration statement relating thereto, or such other shorter period of
time as the underwriters may require.
(c) TERMINATION AND WITHDRAWAL OF REGISTRATION. The Company
shall have the right to terminate or withdraw any Registered Offering or other
registration prior to the effectiveness of such registration whether or not you
have elected to include your Registrable Securities in such registration.
(d) EXPENSES. All registration expenses incurred in connection
with registrations pursuant to this Section 10 shall be borne by the Company.
Unless otherwise stated, all selling expenses relating to your Registrable
Securities shall be borne by you.
(e) NOTIFICATION REQUIREMENTS. In the case of each
registration, qualification or compliance effected by the Company under this
Section 10 in which the Holder participates, the Company will keep such Holder
advised in writing as to the initiation of each registration, qualification and
compliance and as to the completion thereof. At its expense the Company will:
(i) to the extent required under this Agreement,
prepare and file with the Commission a registration statement with respect
to such securities and use reasonable best efforts to cause such registration
statement to become and remain effective for at least one hundred twenty (120)
days or until the distribution described in the registration statement has been
completed, whichever first occurs; and
(ii) furnish to such Holder, should such Holder
participate in such registration, and to the underwriters of the securities
being registered such reasonable number of copies of the registration statement,
preliminary prospectus, final prospectus and such other documents you and/or the
underwriters may reasonably request in order to facilitate the public offering
of such securities.
(f) UNDERWRITING AGREEMENT GOVERNS. In the event the terms of
this Section 10 conflict with the terms of any underwriting agreement in
connection with any registration hereunder, the terms of such underwriting
agreement shall control.
(g) INFORMATION. If your Registrable Securities are to be
included in any Registered Offering, you shall furnish to the Company such
information as the Company may request in writing and as shall be required in
connection with any registration, qualification or compliance referred to in
this Agreement.
(h) TERMINATION. The rights granted pursuant to this Section
10 shall terminate at such time as the Company has registered your Registrable
Securities in a Registered Offering or other registration. Holders may exercise
its piggy-back registration rights granted under this Section 10 not more than
two (2) times.
5
SECTION 11. DEMAND REGISTRATION.
(a) DEFINITION OF REGISTRATION STATEMENT. "Registration
Statement" shall mean any registration statement under the Securities Act on an
appropriate form (which form shall be available for the sale of the Registrable
Securities in accordance with the intended method or methods of distribution
thereof and shall include all financial statements required by the SEC to be
filed therewith) which covers Registrable Securities pursuant to the provisions
of this Agreement, including the Prospectus included in such registration
statement, amendments (including post-effective amendments) and supplements to
such registration statement, and all exhibits to and all material incorporated
by reference in such registration statement.
(b) GRANT OF DEMAND REGISTRATION RIGHTS. Upon the completion
of a Qualifying Transaction, the Holders of Registrable Securities constituting
at least fifty one percent (51%) of the aggregate number of (i) Registrable
Securities issued upon exercise of the Warrants granted pursuant to the
Consulting Agreement entered into by and between the Company and X. Xxxxxxxxxx &
Co., Incorporated, and (ii) securities issued upon exercise of the warrants
granted and to be granted pursuant to that certain Placement Agent Agreement
entered into by and between the Company and X. Xxxxxxxxxx & Co., Incorporated,
may request at any time that the Company file a registration statement under the
Securities Act on an appropriate form (which form shall be available for the
sale of the Registrable Securities in accordance with the intended method or
methods of distribution thereof and shall include all financial statements
required by the SEC to be filed therewith), other than Form S-1 (a "Registration
Statement"), covering the shares of Registrable Securities that are the subject
of such request; provided, however, that the Company shall not become obligated
to file any Registration Statement until the earlier of (i) three months
following the date of completion of the Qualifying Transaction, or (ii) the
first date on which the Company may file such a registration statement in
accordance with all applicable State and Federal securities laws.
(c) NUMBER OF DEMAND REGISTRATIONS. The Company shall be
obligated to prepare, file and cause to become effective pursuant to this
Section no more than one Registration Statement; provided, however, that a
Registration Statement shall not be counted hereunder unless it becomes
effective and is maintained effective in accordance with the requirements
specified in this Section.
(d) REQUIRED THRESHOLDS. The Company shall not be obligated to
prepare, file and cause to become effective pursuant to this Section a
Registration Statement on Form S-1. The Company shall not be obligated to
prepare, file and cause to become effective any Registration Statement if such
demand is made less than 90 days after the effective date of the Company's most
recent registration statement for shares of Common Stock (other than a
Registration Statement on Form S-4 or Form S-8 or any successor forms thereto).
(e) UNDERWRITER'S CUTBACK. If the public offering of
Registrable Securities is to be underwritten and, in the good faith judgment of
the managing underwriter, the inclusion of all the Registrable Securities
requested to be registered hereunder would interfere with the successful
marketing of a smaller number of such shares of Registrable Securities, the
number of shares of Registrable Securities to be included shall be reduced
(except for shares of Registrable Securities offered by the Company) to such
smaller number with the participation in such offering to be pro rata among the
Holders of Registrable Securities other than the Company requesting such
registration, based upon the number of shares of Registrable Securities owned by
such Holders. Any shares that are thereby excluded from the offering shall be
withheld from the market by the Holders thereof for a period (not to exceed 30
days prior to the effective date and 75 days thereafter) that the managing
underwriter reasonably determines is necessary in order to effect the
underwritten public offering.
(f) MANAGING UNDERWRITER. The managing underwriter or
underwriters of any underwritten public offering covered by a Demand
Registration shall be selected by the Company.
(g) BLACK-OUT PERIODS OF INVESTOR. Notwithstanding anything
herein to the contrary, (i) the Company shall have the right, exercisable once,
to require the Holders not to sell under a Demand Registration or to suspend the
effectiveness thereof (but not for a period exceeding 90 days in any calendar
year) if the Company determines, in its good faith judgment, that such offering
or continued effectiveness would interfere with any material financing,
acquisition, disposition, corporate reorganization or other material transaction
involving the Company or any of its subsidiaries or public disclosure thereof
would be required prior to the time such disclosure
6
might otherwise be required, or when the Company is in possession of material
information that it deems advisable not to disclose in a registration statement.
(h) EXPENSES. All registration expenses incurred in connection
with registrations pursuant to this Section 11 shall be borne by the Company.
Unless otherwise stated, all selling expenses relating to your Registrable
Securities shall be borne by you.
(i) UNDERWRITING AGREEMENT GOVERNS. In the event the terms of
this Section 11 conflict with the terms of any underwriting agreement in
connection with any registration hereunder, the terms of such underwriting
agreement shall control.
(j) INFORMATION. If your Registrable Securities are to be
included in any Registered Offering, you shall furnish to the Company such
information as the Company may request in writing and as shall be required in
connection with any registration, qualification or compliance referred to in
this Agreement.
(k) TERMINATION. The rights granted pursuant to this Section
11 shall terminate at such time as the Company has registered your Registrable
Securities in a Registered Offering or other registration. The demand
registration rights granted under this Section 11 may be exercised only by
demand of Holders of at least fifty one percent (51%) of the sum of (i) Warrant
Shares which are Registrable Securities, and (ii) shares of Common Stock of the
Company issuable upon exercise of the warrants granted pursuant to the
Consulting Agreement. The demand registration rights granted under this Section
11 and the registration rights granted pursuant to the warrants granted in
connection with the Consulting Agreement, including, without limitiation,
Section 11 of the Consulting Warrant of even date herewith, shall all be deemed
to be exercised simultaneously by a proper exercise under either the this
Warrant or the Consulting Warrant, and may be exercised not more than once in
the aggregate.
SECTION 12. INDEMNIFICATION.
(a) INDEMNIFICATION. The Holders agree, if any of Holders'
Registrable Securities are included in the securities as to which such
registration, qualification or compliance is being effected, to indemnify the
Company, each of its directors and officers, each underwriter, if any, of the
Company's securities covered by such a registration statement, each Person who
controls the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such holder, each of its officers and directors
and each Person controlling such holder within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company, such holders, such directors, officers, Persons, underwriters or
control Persons for any legal or any other expenses reasonably incurred, as such
expenses are incurred, in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by you.
Notwithstanding the foregoing, your liability under this subsection shall be
limited in an amount equal to the initial price of the Registrable Securities
sold by you, unless such liability arises out of or is based on willful
misconduct by you.
(b) INDEMNIFICATION PROCEDURE. Each party entitled to
indemnification under this Section (the "Indemnified Party") shall give notice
to the party required to provide indemnification (the "Indemnifying Party")
after such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom, provided that
counsel for the Indemnifying Party, who shall conduct the defense of such claim
or litigation, shall be approved by the Indemnified Party (whose approval shall
not be unreasonably withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement, unless the failure
to give such notice is materially prejudicial to an Indemnifying Party's ability
to
7
defend such action, and provided further that the Indemnifying Party shall not
assume the defense for matters as to which there is a conflict of interest or
separate and different defenses. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation.
SECTION 13. REDEMPTION. The Company shall have the authority to redeem
this Warrant at any time.
SECTION 14. APPLICABLE LAW. This Warrant shall be construed in
accordance with the laws of the Commonwealth of Virginia without giving effect
to the conflicts of law provisions of such laws.
SONUS COMMUNICATIONS, INC.
By: /S/ XXXXXXX X. XXXX
------------------------------
Xxxxxxx X. Xxxx
Chief Executive Officer
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