EXHIBIT 4.1
COMDIAL CORPORATION
PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT (this "Subscription Agreement")
made as of this 27th day of September, 2002 between Comdial Corporation, a
corporation organized under the laws of the State of Delaware with offices at
000 Xxxxxxxxx Xxxx, Xxxxxxxx, Xxxxxxx 00000 (the "Company"), and the undersigned
(the "Subscriber").
WHEREAS, the Company desires to issue in a private placement to "accredited
investors" (the "Placement") a minimum of 100 (the "Minimum Offering") and a
maximum of 140 (the "Maximum Offering") units ("Units") (or fractions thereof)
on the terms and conditions set forth herein and in the related Confidential
Offering Memorandum (together with all the Exhibits thereto, the "Memorandum"),
and the Subscriber desires to acquire the number of Units set forth on the
signature page hereof; and
WHEREAS, the Maximum Offering may be increased without notice to the
Subscribers by up to 20 Units at the discretion of Commonwealth Associates,
L.P., the placement agent for the Placement (the "Placement Agent") for the
purpose of covering over-subscriptions; and
WHEREAS, each Unit shall consist of: (i) $100,000 principal amount of 7%
senior subordinated secured convertible promissory notes substantially in the
form attached as Exhibit (ii) to the Memorandum (the "Notes") and (ii) two-year
warrants (the "Warrants") substantially in the forms attached as Exhibit (iii)
to the Memorandum to purchase 500,000 shares of Common Stock (the "Warrant
Shares") at an exercise price of $.01 per share; and
WHEREAS, Warrants to purchase 100,000 Warrant Shares included in each Unit
shall be subject to forfeiture in the event the Notes are repaid in full within
18-months after the initial closing of the Placement (the "Initial Closing");
and
WHEREAS, up to 40 Units of the Placement may be purchased by investors upon
cancellation of outstanding 7% senior subordinated secured promissory notes
issued by the Company in June, July and August 2002; and
WHEREAS, concurrently with the Initial Closing, the Company may issue to a
lender (the "Concurrent Loan") up to $2,000,000 principal amount of 12% senior
subordinated secured promissory notes (the "Senior Notes") and two-year warrants
to purchase 275,000 shares of common stock for each $100,000 of Senior Notes
(the "Senior Note Warrants") as described in the supplement to the Memorandum
dated September 18, 2002 (the term Warrants and Warrant Shares as used in this
Subscription Agreement shall be deemed to include the Senior Note Warrants and
the shares issuable upon exercise thereof); and
WHEREAS, the Minimum Offering and the Maximum Offering shall be reduced in
the event and to the extent of the Concurrent Loan; and
WHEREAS, the Notes shall be (i) secured by a junior lien on the Company's
assets pursuant to the terms of a security agreement in the form attached as
Exhibit (iv) to the Memorandum (the "Security Agreement") and (ii) subject to
any subordination agreements with the Company's senior lender and the holder of
the Senior Note in the forms to be delivered (collectively, the "Subordination
Agreement"); and
WHEREAS, the Company can force conversion of the Notes into shares of the
Company's common stock at the conversion rate of $.33 per share (subject to
adjustment) on the terms and subject to the conditions set forth in the Notes
(the "Automatic Conversion Shares"); and
WHEREAS, the Warrant Shares and Automatic Conversion Shares are entitled to
registration rights on the terms set forth in this Subscription
Agreement; and
WHEREAS, the Subscriber is delivering simultaneously herewith a completed
confidential investor questionnaire (the "Questionnaire").
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants hereinafter set forth, the parties hereto do hereby agree as follows:
I. SUBSCRIPTION FOR UNITS AND REPRESENTATIONS BY AND COVENANTS OF SUBSCRIBER
1.1 Subscription for Units. Subject to the terms and conditions hereinafter
set forth, the Subscriber hereby subscribes for and agrees to purchase from the
Company such number of Units as is set forth upon the signature page hereof at a
price equal to $100,000 per Unit and the Company agrees to sell such Units to
the Subscriber for said purchase price. The purchase price is payable by
certified or bank check made payable to "American Stock Transfer & Trust Company
as escrow agent for Comdial Corporation" or by wire transfer of funds,
contemporaneously with the execution and delivery of this Subscription
Agreement. American Stock Transfer & Trust Company (the "Escrow Agent") shall
act as such in accordance with the terms and conditions of an escrow agreement
to be entered into among the Placement Agent, the Company and the Escrow Agent.
1.2 Reliance on Exemptions. The Subscriber acknowledges that the Placement
has not been reviewed by the United States Securities and Exchange Commission
(the "SEC") or any state agency because of the Company's representations that
this is intended to be a nonpublic offering exempt from the registration
requirements of the Securities Act of 1933, as amended (the "1933 Act") and
state securities laws. The Subscriber understands that the Company is relying in
part upon the truth and accuracy of, and the Subscriber's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Subscriber set forth herein and in the Questionnaire in order to determine
the availability of such exemptions and the eligibility of the Subscriber to
acquire the Units.
1.3 Investment Purpose. The Subscriber represents that the Notes and
Warrants comprising the Units are being purchased for its own account, for
investment purposes only and not for distribution or resale to others in
contravention of the registration requirements of the 1933 Act. The Subscriber
agrees that it will not sell or otherwise transfer the Notes, the Warrants, the
Warrant Shares or, if applicable, the Automatic Conversion Shares (collectively,
the "Securities") unless they are registered under the 1933 Act or unless an
exemption from such registration is available.
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1.4 Accredited Investor. The Subscriber represents and warrants that it is
an "accredited investor" as such term is defined in Rule 501 of Regulation D
promulgated under the 1933 Act, as indicated by its responses to the
Questionnaire, and that it is able to bear the economic risk of any investment
in the Units. The Subscriber further represents and warrants that the
information furnished in the Questionnaire is accurate and complete in all
material respects.
1.5 Risk of Investment. The Subscriber recognizes that the purchase of
Units involves a high degree of risk in that: (i) an investment in the Company
is highly speculative and only investors who can afford the loss of their entire
investment should consider investing in the Company and the Securities; (ii)
transferability of the Securities is limited; and (iii) the Company may require
substantial additional funds to operate its business and there can be no
assurance that the Maximum Offering will be completed or that any other funds
will be available to the Company, in addition to all of the other risks set
forth in the Company's SEC Documents (as defined in Section 2.5 hereof).
1.6 Information. The Subscriber acknowledges that the Company has made
available for its review: (a) the Company's Annual Report on Form 10-K for the
year ended December 31, 2001, (b) the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended March 31, 2002, (c) the Company's Proxy Statement
for the annual meeting of shareholders held on May 17, 2002, (d) the Company's
Proxy Statement for the special meeting of shareholders to be held on August 26,
2002, (e) the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 2002, and (f) the Company's Current Reports on Form 8-K filed
with the SEC on April 10, 2002, July 5, 2002, July 24, 2002, August 5, 2002,
August 7, 2002, August 27, 2002 and September 6, 2002 and hereby represents
that: (i) the Subscriber has been furnished by the Company during the course of
this transaction with all information regarding the Company which it has
requested; and (ii) that the Subscriber has been afforded the opportunity to ask
questions of and receive answers from duly authorized officers of the Company
concerning the terms and conditions of the Placement, and any additional
information which it has requested, if any.
1.7 No Representations. The Subscriber hereby represents that, except as
expressly set forth in (a) this Subscription Agreement, (b) the Memorandum, (c)
the Notes, (d) the Warrants, (e) the Security Agreement, (f) the Subordination
Agreement, and (g) all exhibits, schedules and appendices which are part of the
aforementioned documents, (collectively, the "Offering Documents"), no
representations or warranties have been made to the Subscriber by the Company or
any agent, employee or affiliate of the Company, including the Placement Agent,
and in entering into this transaction the Subscriber is not relying on any
information other than that contained in the Offering Documents, the SEC
Documents and the results of independent investigation by the Subscriber.
1.8 Tax Consequences. The Subscriber acknowledges that the Placement may
involve tax consequences and that the contents of the Offering Documents do not
contain tax advice or information. The Subscriber acknowledges that he must
retain his own professional advisors to evaluate the tax and other consequences
of an investment in the Units.
1.9 Transfer or Resale. The Subscriber understands that Rule 144 (the
"Rule") promulgated under the 1933 Act requires, among other conditions, a
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one-year holding period prior to the resale (in limited amounts) of securities
acquired in a non-public offering without having to satisfy the registration
requirements under the 1933 Act. The Subscriber understands and hereby
acknowledges that the Company is under no obligation to register the securities
comprising the Units under the 1933 Act, with the exception of certain
registration rights covering the resale of the Warrant Shares and Automatic
Conversion Shares set forth in Article V hereof.
1.10 Legends. The Subscriber understands that the certificates or other
instrument representing the Securities, until such time as they have been
registered under the 1933 Act, shall bear a restrictive legend in substantially
the following form (and a stop-transfer order may be placed against transfer of
such certificates or other instruments):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR (B) AN OPINION OF
COUNSEL, IN A REASONABLY ACCEPTABLE FORM, THAT REGISTRATION IS
NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES
LAWS, OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
The legend set forth above shall be removed and the Company shall issue a
certificate or other instrument without such legend to the holder of the
Securities upon which it is stamped, if (a) such Securities are being sold by
the holder pursuant to an effective registration statement under the 1933 Act,
(b) such holder delivers to the Company an opinion of counsel, in a reasonably
satisfactory and acceptable form to the Company directed to the Company or
expressly providing that the Company may rely thereon, that a disposition of the
Securities is being made pursuant to an exemption from such registration, or (c)
such holder provides the Company with reasonable assurance that a disposition of
the Securities will be made pursuant to the Rule.
1.11 No General Solicitation. The Subscriber represents that the Subscriber
was not induced to invest by any of the following: (i) any advertisement,
article, notice or other communication published in any newspaper, magazine or
similar media or broadcast over the news or radio; and (ii) any seminar or
meeting whose attendees were invited by any general solicitation or advertising.
1.12 Validity; Enforcement. If the Subscriber is a corporation,
partnership, trust or other entity, the Subscriber represents and warrants that:
(a) it is authorized and otherwise duly qualified to purchase and hold the
Units; and (b) that this Subscription Agreement has been duly and validly
authorized, executed and delivered and constitutes the legal, binding and
enforceable obligation of the undersigned.
1.13 Address. The Subscriber hereby represents that the address of
Subscriber furnished by the Subscriber at the end of this Subscription Agreement
is the undersigned's principal residence if the Subscriber is an individual or
its principal business address if it is a corporation or other entity.
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1.14 No Hedging Transactions. The Subscriber hereby agrees not to engage in
any Hedging Transaction until such time as the Warrant Shares have been
registered for resale under the 1933 Act or may otherwise be sold in the public
market without an effective registration statement under the 1933 Act. "Hedging
Transaction" means any short sale (whether or not against the box) or any
purchase, sale or grant of any right (including, without limitation, any put or
call option) with respect to any security (other than a broad-based market
basket or index) that includes, relates to or derives any significant part of
its value from the Company's Common Stock or any rights, warrants, options or
other securities that are convertible into, or exercisable or exchangeable for,
Common Stock.
1.15 Placement Agent. The Subscriber agrees that neither the Placement
Agent or any of its directors, officers, employees or agents shall be liable to
any Subscriber for any action taken or omitted to be taken by it in connection
therewith, except for willful misconduct or gross negligence.
1.16 Foreign Subscriber. If the Subscriber is not a United States person,
such Subscriber hereby represents that it has satisfied itself as to the full
observance of the laws of its jurisdiction in connection with any invitation to
subscribe for the Securities comprising the Units or any use of this
Subscription Agreement, including: (a) the legal requirements within its
jurisdiction for the purchase of the Units; (b) any foreign exchange
restrictions applicable to such purchase; (c) any governmental or other consents
that may need to be obtained; and (d) the income tax and other tax consequences,
if any, that may be relevant to the purchase, holding, redemption, sale or
transfer of the Securities. Such Subscriber's subscription and payment for, and
his or her continued beneficial ownership of the Securities, will not violate
any applicable securities or other laws of the Subscriber's jurisdiction.
1.17 NASD Member. The Subscriber acknowledges that if it is a Registered
Representative of a NASD member firm, the Subscriber must give such firm notice
required by the NASD's Rules of Fair Practice, receipt of which must be
acknowledged by such firm on the signature page hereof.
1.18 Board Designee. The Subscriber agrees that the Placement Agent shall
have the right, on behalf of the Subscribers, to choose the individual designee
to the Company's board of directors which the investors in the Placement have
the right to designate under the terms described in the Memorandum. The
Subscriber hereby authorizes the Placement Agent to make that choice unless and
until the Required Holders (as defined in Section 5.2 hereof) advise the
Placement Agent or the Company in writing of their choice of an alternate
designee.
II. REPRESENTATIONS BY THE COMPANY
The Company represents and warrants to the Subscriber, except as set forth in
the disclosure schedules attached hereto:
2.1 Securities Law Compliance. The offer, offer for sale, and sale of the
Units have not been registered under the 1933 Act. The Units are to be offered,
offered for sale and sold in reliance upon the exemptions from the registration
requirements of Section 4 of the 1933 Act. The Company will use its best efforts
to conduct the Placement in compliance with the requirements of Regulation D of
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the General Rules and Regulations under the 1933 Act and applicable state "blue
sky" laws, and the Company will file all appropriate notices of offering with
the SEC. The Company has prepared the Offering Documents. The Offering Documents
will not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading. If at any time prior to
the completion of the Placement or other termination of this Subscription
Agreement any event shall occur as a result of which it might become necessary
to amend or supplement the Offering Documents so that they do not include any
untrue statement of any material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances then existing, not misleading, the Company will promptly notify
the Subscriber and will supply the Subscriber with amendments or supplements
correcting such statement or omission.
2.2 Organization and Qualification. The Company is duly organized and
validly existing in good standing under the laws of the jurisdiction in which it
is organized, and has the requisite power and authorization to own its
properties and to carry on its business as now being conducted except as may be
provided by the Company's agreements with Bank of America. The Company is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not have
a Material Adverse Effect. As used in this Subscription Agreement, "Material
Adverse Effect" means any material adverse effect on the business, properties,
assets, operations, results of operations, financial condition or prospects of
the Company, or on the transactions contemplated hereby, or by the other
Offering Documents or the agreements and instruments to be entered into in
connection herewith or therewith, or on the authority or ability of the Company
to perform its obligations under the Offering Documents. The Company does not
have any operating subsidiaries other than as set forth in Schedule 2.4 to this
Agreement and all of the non-operating subsidiaries are wholly-owned by the
Company.
2.3 Capitalization. The authorized, issued and outstanding capital stock of
the Company prior to the consummation of the transactions contemplated hereby is
set forth in Schedule 2.3 to this Subscription Agreement. All of such
outstanding shares have been and are, or upon issuance will be duly authorized,
validly issued, fully paid and non-assessable. Except as disclosed in Schedule
2.3, (i) no shares of the Company's capital stock are subject to preemptive
rights under Delaware law or any other similar rights or any liens or
encumbrances suffered or permitted by the Company; (ii) there are no outstanding
debt securities issued by the Company; (iii) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for, any shares of capital stock of the Company, or contracts, commitments,
understandings or arrangements by which the Company is or may become bound to
issue additional shares of capital stock of the Company or options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for, any
shares of capital stock of the Company; (iv) there are no agreements or
arrangements under which the Company is obligated to register the sale of any of
their securities under the 1933 Act; (v) there are no outstanding securities of
the Company that contain any redemption or similar provisions, and there are no
contracts, commitments, understandings or arrangements by which the Company is
or may become bound to redeem a security of the Company; (vi) there are no
securities or instruments containing anti-dilution or similar provisions that
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will be triggered by the issuance of the Securities as described in the Offering
Documents that shall not have been waived prior to the Initial Closing; and
(vii) the Company does not have any stock appreciation rights or "phantom stock"
plans or agreements or any similar plan or agreement. To the knowledge of the
Company, all prior sales of securities of the Company were either registered
under the 1933 Act and applicable state securities laws or exempt from such
registration, and, to the knowledge of the Company, no security holder has any
rescission rights with respect thereto.
2.4 Subsidiaries and Investments. Other than as set forth in Schedule 2.4
to this Subscription Agreement, the Company has no subsidiaries, and the Company
does not own, directly or indirectly, any capital stock or other equity
ownership or proprietary interests in any other corporation, association, trust,
partnership, joint venture or other entity.
2.5 SEC Documents; Financial Statements. Since December 31, 2001, the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the Securities Exchange Act of 1934 (the "Exchange Act") (all of the
foregoing filed prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the "SEC Documents"). The
Company has made available to the Subscriber or its representatives copies of
the SEC Documents. As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Exchange Act and the rules
and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with the
SEC, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (a) as may be
otherwise indicated in such financial statements or the notes thereto, or (b) in
the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments that would not be material). The Company has no reason to believe
its independent auditors will withhold their consent to the inclusion of their
audit opinion concerning the Company's financial statements which are to be
included in any Registration Statement.
2.6 Absence of Changes. Since June 30, 2002, other than as set forth in the
SEC Documents and Schedule 2.6 to this Subscription Agreement, the Company has
not (i) incurred any debts, obligations or liabilities, absolute, accrued,
contingent or otherwise, whether due or to become due, except current
liabilities incurred in the usual and ordinary course of business and consistent
with past practices, having individually or in the aggregate a Material Adverse
Effect, (ii) made or suffered any changes in its contingent obligations by way
of guaranty, endorsement (other than the endorsement of checks for deposit in
the usual and ordinary course of business), indemnity, warranty or otherwise,
(iii) discharged or satisfied any liens or paid any obligation or liability
other than current liabilities shown on the balance sheet dated as of June 30,
2002, and current liabilities incurred since the date of the balance sheet dated
as of June 30, 2002, in each case in the usual and ordinary course of business
8
and consistent with past practices, (iv) mortgaged, pledged or subjected to lien
any of its assets, tangible or intangible, (v) sold, transferred or leased any
of its assets except in the usual and ordinary course of business and consistent
with past practices, (vi) cancelled or compromised any debt or claim, or waived
or released any right, of material value, (vii) suffered any physical damage,
destruction or loss (whether or not covered by insurance) adversely affecting
the properties, business or prospects of the Company, (viii) entered into any
transaction other than in the usual and ordinary course of business except for
this Subscription Agreement and the other Offering Documents and the related
agreements referred to herein and therein, (ix) encountered any labor
difficulties or labor union organizing activities, (x) made or granted any wage
or salary increase or entered into any employment agreement, (xi) issued or sold
any shares of capital stock or other securities or granted any options with
respect thereto, or modified any equity security of the Company, (xii) declared
or paid any dividends on or made any other distributions with respect to, or
purchased or redeemed, any of its outstanding equity securities, (xiii) suffered
or experienced any change in, or condition affecting, its condition (financial
or otherwise), properties, assets, liabilities, business operations, results of
operations or prospects other than changes, events or conditions in the usual
and ordinary course of its business and consistent with past practices, having
(either by itself or in conjunction with all such other changes, events and
conditions) a Material Adverse Effect or (xiv) made any change in the accounting
principles, methods or practices followed by it or depreciation or amortization
policies or rates theretofore adopted.
2.7 Title. Except as set forth in or contemplated by Schedule 2.7 to this
Subscription Agreement, the Company has good and marketable title to all
properties and assets owned by it, free and clear of all liens, charges,
encumbrances or restrictions, except such as are not significant or important in
relation to the Company's business; all of the material leases and subleases
under which the Company is the lessor or sublessor of properties or assets or
under which the Company holds properties or assets as lessee or sublessee are in
full force and effect, and the Company is not in default in any material respect
with respect to any of the terms or provisions of any of such leases or
subleases, and no material claim has been asserted by anyone adverse to rights
of the Company as lessor, sublessor, lessee or sublessee under any of the leases
or subleases mentioned above, or affecting or questioning the right of the
Company to continued possession of the leased or subleased premises or assets
under any such lease or sublease. The Company owns or leases all such properties
as are necessary to its operations as described in the Offering Documents.
2.8 Proprietary Rights. Except as set forth on Schedule 2.8, the Company
owns, or is duly licensed to use or possess, or possesses exclusive and
enforceable rights to use all patents, patent applications, trademarks, service
marks, copyrights, trade secrets, processes, formulations, technology or
know-how used in the conduct of its business (the "Proprietary Rights"). Except
as set forth on Schedule 2.8 to this Subscription Agreement, the Company has not
received any notice of any claims, nor does it have any knowledge of any
threatened claims, and knows of no facts which would form the basis of any
claim, asserted by any person to the effect that the sale or use of any product
or process now used or offered by the Company or proposed to be used or offered
by the Company infringes on any patents or infringes upon the use of any such
Proprietary Rights of another person and, to the best of the Company's
knowledge, no others have infringed the Company's Proprietary Rights.
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2.9 Litigation. Except as set forth in or contemplated by Schedule 2.9 to
this Subscription Agreement, there is no material action, suit, investigation,
customer complaint, claim or proceeding at law or in equity by or before any
arbitrator, court, governmental instrumentality or agency, self-regulatory
organization or body or public board now pending or, to the knowledge of the
Company, threatened against the Company of any of the Company's officers or
directors in their capacities as such (or basis therefor known to the Company),
the adverse outcome of which would have a Material Adverse Effect. Except as set
forth on Schedule 2.9, the Company is not subject to any judgment, order, writ,
injunction or decree of any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign that have a Material Adverse Effect.
2.10 Non-Defaults; Non-Contravention. Except as set forth in or
contemplated by Schedule 2.10 to this Subscription Agreement, the Company is not
in violation of or default under, nor will the execution and delivery of this
Subscription Agreement or any of the other Offering Documents or consummation of
the transactions contemplated herein or therein result in a violation of or
constitute a default in the performance or observance of any obligation under:
(i) its Certificate of Incorporation, or its By-laws; or (ii) any indenture,
mortgage, contract, material purchase order or other agreement or instrument to
which the Company is a party or by which it or its property is bound, where such
violation or default would have a Material Adverse Effect; or (iii) any material
order, writ, injunction or decree of any court of any Federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign (including, to the Company's knowledge,
federal and state securities laws and regulations ),where such violation or
default would have a Material Adverse Effect, and there exists no condition,
event or act that constitutes a default under any of the foregoing, which in
either case would have a Material Adverse Effect.
2.11 Taxes. The Company has filed all tax returns that are required to be
filed by it or otherwise met its disclosure obligations to the relevant agencies
and all such returns are true and correct. The Company has paid or adequately
provided for all tax liabilities of the Company as reflected on such returns or
pursuant to any assessments received by it or that it is obligated to withhold
from amounts owing to any employee, creditor or third party. The Company has
properly accrued all taxes required to be accrued by GAAP consistently applied.
The income tax returns of the Company have not been audited by any government or
regulatory authorities with in the last five years. The Company has not waived
any statute of limitations with respect to taxes or agreed to any extension of
time with respect to any tax assessment or deficiency.
2.12 Compliance With Laws; Licenses, Etc. Except as set forth on Schedule
2.12, the Company has not received notice of any violation of or noncompliance
with any laws, ordinances, regulations and orders applicable to its business
that would have a Material Adverse Effect and that has not been cured. The
Company has all material licenses and permits and other governmental
certificates, authorizations and permits and approvals (collectively,
"Licenses") required by every government or regulatory body for the operation of
its business as currently conducted and the use of its properties. The Licenses
are in full force and effect and to the Company's knowledge no violations
currently exist in respect of any License and no proceeding is pending or
threatened to revoke or limit any thereof.
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2.13 Authorization; Enforcement; Validity. The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Subscription Agreement and the other Offering Documents, to file and
perform its obligations under the Offering Documents, and to issue the
Securities in accordance with the terms of the Offering Documents. The execution
and delivery of the Offering Documents by the Company and the consummation by
the Company of the transactions contemplated by the Offering Documents,
including without limitation the issuance of the Securities, have been duly
authorized by the Company's board of directors and no further consent or
authorization is required by the Company, its board of directors or its
stockholders. This Section 2.13 is subject to the exceptions set forth on
Schedule 2.13.
2.14 Authorization of Securities. The issuance, sale and delivery of the
Notes and the Warrants have been duly authorized by all requisite corporate
action of the Company. When so issued, sold and delivered in accordance with the
Offering Documents for the consideration set forth therein, the Notes and the
Warrants will be duly executed, issued and delivered and will constitute valid
and legal obligations of the Company enforceable in accordance with their
respective terms and, in each case, will not be subject to preemptive or any
other similar rights of the stockholders of the Company or others which rights
shall not have been waived prior to the Initial Closing. Prior to the Initial
Closing, the Warrant Shares will be duly reserved for issuance upon exercise of
all or any of the Warrants and when so issued, sold, paid for and delivered for
the consideration set forth in the Offering Documents, the Warrant Shares will
be validly issued and outstanding, fully paid and nonassessable, and not subject
to preemptive or any other similar rights of the stockholders of the Company or
others which rights shall not have been waived prior to the Initial Closing.
This Section 2.14 is subject to the exceptions set forth on Schedule 2.14.
2.15 Exemption from Registration. Assuming the accuracy of the information
provided by the respective Subscribers in the Subscription Agreements, the offer
and sale of the Units pursuant to the terms of this Subscription Agreement are
exempt from the registration requirements of the 1933 Act and the rules and
regulations promulgated thereunder. To the Company's knowledge, the Company is
not disqualified from the exemption under Regulation D by virtue of the
disqualifications contained in Rule 505(b)(2)(iii) or Rule 507 promulgated
thereunder.
2.16 Registration Rights. Except as set forth in Schedule 2.16 to this
Subscription Agreement, no person has any right to cause the Company to effect
registration under the 1933 Act of any securities of the Company.
2.17 Brokers. Neither the Company nor any of its officers, directors,
employees or stockholders has employed any broker or finder in connection with
the transactions contemplated by this Subscription Agreement.
2.18 Title to Securities. When the Notes and the Warrants have been duly
delivered to the purchasers participating in the Placement and payment shall
have been made therefor, the several purchasers shall receive from the Company
good and marketable title to such securities free and clear of all liens,
encumbrances and claims whatsoever (with the exception of claims arising through
the acts or omissions of the purchasers and except as arising from applicable
federal and state securities laws), and the Company shall have paid all taxes,
if any, in respect of the original issuance thereof.
11
2.19 Takeover Protections; Rights Agreement. The Company and the Board have
taken all necessary action, if any, in order to render inapplicable any control
share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the
Certificate of Incorporation or the laws of the state of its incorporation which
is or could become applicable to the Subscriber as a result of the transactions
contemplated by this Subscription Agreement, including without limitation, the
Company's issuance of the Securities and the Subscriber's ownership of the
Securities. The Company has not adopted a shareholder rights plan or similar
arrangement relating to accumulations of beneficial ownership of Common Stock or
a change in control of the Company. Notwithstanding the forgoing, the Company's
certificate of incorporation allows for the issuance of blank check preferred
stock without the vote of its stockholders.
2.20 Right of First Refusal. No person, firm or other business entity is a
party to any agreement, contract or understanding, written or oral entitling
such party to a right of first refusal with respect to offerings by the Company
other than Commonwealth Associates, L.P.
2.21 Consents. Except as contemplated by this Subscription Agreement, to
the Company's knowledge, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency or any regulatory or self-regulatory agency in order for it
to execute, deliver or perform any of its obligations under or contemplated by
the Offering Documents. Except as otherwise provided in the Offering Documents,
all consents, authorizations, orders, filings and registrations that the Company
is required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof. The Company is unaware of any facts or
circumstances that might prevent the Company from obtaining or effecting any of
the foregoing.
2.22 No General Solicitation. None of the Company, any of its affiliates,
and, to the Company's knowledge, any person acting on its behalf, has engaged in
any form of general solicitation or general advertising (within the meaning of
Regulation D under the 0000 Xxx) in connection with the offer or sale of the
Securities.
2.23 No Integrated Offering. None of the Company, any of its affiliates,
and any person acting on its behalf has, directly or indirectly, made any offers
or sales of any security or solicited any offers to buy any security, under
circumstances that would require registration of the Securities under the 1933
Act or cause the Placement to be integrated with prior offerings by the Company
for purposes of the 1933 Act or any applicable stockholder approval provisions,
including without limitation, under the rules and regulations of any exchange or
automated quotation system on which any of the securities of the Company are
listed or designated, if such integration would adversely impact the Company's
ability to complete the Placement or any subsequent registration of the
securities underlying the Units. None of the Company, its affiliates and any
person acting on its behalf have taken any action or steps referred to in the
preceding sentence that would require registration of any of the Securities
under the 1933 Act or cause the Placement to be integrated with other offerings.
12
2.24 Foreign Corrupt Practices. Neither the Company nor any director,
officer, agent, employee or other person acting on behalf of the Company has, in
the course of its actions for, or on behalf of, the Company, (i) used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic government official or employee from
corporate funds, (ii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended, or (iii) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.
III. TERMS OF SUBSCRIPTION
3.1 Offering Period. The offering period for the Placement will continue
until the earlier of (a) 11:59 PM Eastern time on September 27, 2002 or (b)the
sale of the Maximum Offering (the "Termination Date"). Provided the Minimum
Offering shall have been subscribed for on or prior to the Termination Date,
funds representing the sale thereof shall have cleared, and all conditions to
closing in the Agency Agreement have been satisfied or waived and neither the
Company nor the Placement Agent have notified the other that they do not intend
to effect the closing of the Minimum Offering. The Initial Closing shall take
place at the offices of counsel to the Placement Agent, Loeb & Loeb, 000 Xxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or such other location as mutually agreed to
by the Company and the Placement Agent within three business days thereafter. At
the Initial Closing, payment for the Units issued and sold by the Company shall
be made against delivery of the Notes and the Warrants comprising such Units.
Subsequent closings (each of which shall be deemed a "Closing" hereunder) shall
take place at any time prior to the Termination Date as may be mutually agreed
to by the Company and the Placement Agent. The date of the last closing of the
Placement is hereinafter referred to as the "Final Closing" and the date of any
Closing hereunder is hereinafter referred to as a "Closing Date."
3.2 Expenses. Simultaneously with payment for and delivery of the Units at
each Closing, the Company shall pay to the Placement Agent a cash fee equal to
7% of the gross proceeds of the Units sold and shall issue to the Placement
Agent and its designees five-year warrants (the "Agent's Warrants") to purchase
that number of shares of Common Stock as equals 10% of the Warrant Shares
issuable upon exercise of the Warrants sold in the Offering at an exercise price
of $.01 per share. The Company shall also reimburse the Placement Agent for
actual out-of-pocket expenses incurred in connection with the Offering,
including, without limitation, the reasonable fees and expenses of its counsel
(Loeb & Loeb LLP), due diligence investigation expenses, travel and mailing
expenses. The Company shall also pay all expenses in connection with the
qualification of the Securities under the blue sky laws of the states which the
Placement Agent shall designate, including legal fees, filing fees and
disbursements of Placement Agent's counsel in connection with such blue sky
matters.
3.3 Escrow. Pending the sale of the Units, all funds paid hereunder shall
be deposited by the Company in escrow with the Escrow Agent. If the Company
shall not have obtained the Minimum Offering on or before the Termination Date,
then this subscription shall be void and all funds paid hereunder by the
Subscriber, without interest, shall be promptly returned to the Subscriber,
subject to Section 3.5 hereof.
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3.4 Certificates. The Subscriber hereby authorizes and directs the Company,
upon each Closing in the Offering, to deliver the Notes and Warrants to be
issued to such Subscriber pursuant to this Subscription Agreement either (a) to
the Subscriber's address indicated in the Questionnaire, or (b) directly to the
Subscriber's account maintained with the Placement Agent, if any.
3.5 Return of Funds. The Subscriber hereby authorizes and directs the
Company to return any funds for unaccepted subscriptions to the same account
from which the funds were drawn, including any customer account maintained with
the Placement Agent.
IV. CONDITIONS TO CLOSING. The Subscriber's obligation
to purchase the Units is subject to the satisfaction
of the following conditions, any one or more of
which may be waived or modified by the Subscribers.
4.1 Bank Restructuring. ComVest Venture Partners, L.P. or the Company, as
its assignee, shall have completed the acquisition of the debt and shares of
preferred stock held by Bank of America, N.A (collectively, the "BOA Debt") and
the BOA Debt shall have been restructured on terms acceptable to the Company and
the Placement Agent.
4.2 New Proceeds. The Company (or the Escrow Agent, as applicable) will
have received at least $10,000,000 in the aggregate from this Placement, a new
senior credit facility and amounts available under letters of credit posted on
the Company's behalf by Bank of America, N.A or a new senior lender.
4.3 Material Adverse Event. There shall not have occurred, at any time
prior to the closing of this subscription (i) any domestic or international
event, act or occurrence that has materially disrupted, or in the Subscriber's
opinion will in the immediate future materially disrupt, the securities markets;
(ii) a general suspension of, or a general limitation on prices for, trading in
securities on the New York Stock Exchange or the Nasdaq - Amex Stock Exchange;
(iii) any outbreak of major hostilities or other national or international
calamity; (iv) any banking moratorium declared by a state or federal authority;
(v) any moratorium declared in foreign exchange trading by major international
banks or other persons; (vi) any material interruption in the mail service or
other means of communication within the United States; (vii) any material
adverse change in the business, properties, assets, results of operations, or
financial condition of the Company; or (viii) any material adverse change in the
market for securities in general or in political, financial, or economic
conditions.
4.4 Increase in Authorized Capital Stock. The Company shall have obtained
approval from the Board and the written consent of holders of a majority of the
Company's outstanding Common Stock of an increase in the number of authorized
shares of Common Stock to not less than 500,000,000.
V. REGISTRATION RIGHTS
5.1 Automatic Registration. The Company hereby agrees with the holders of
the Securities or their transferees (other than a transferee who acquires shares
pursuant to Rule 144 or an effective registration statement) (collectively, the
"Holders") that no later than four months following the date of the Initial
Closing, the Company shall prepare and file a registration statement under the
1933 Act with the SEC covering the resale of the Warrant Shares and, if
applicable, the Automatic Conversion Shares (collectively, the "Reserved
Shares"), and the Company will use its reasonable best efforts to cause such
registration to become effective within three months thereafter. In the event
14
that the Company's registration statement has not been declared effective by the
SEC within seven months following the date of the Initial Closing or if the
registration statement has been suspended beyond 60 days in any one instance or
a total of 90 days in any 365-day period, the Company shall pay to the Holders a
cash fee equal to 1.5% of the principal amount of the Notes until such time as
the registration is effective or the suspension ceases and the prospectus may be
used. The Company's obligation to keep the registration statement effective
shall continue until the earlier of (a) the date that all of the Reserved Shares
have been sold pursuant to Rule 144 under the 1933 Act or an effective
registration statement, or (b) such time as the Reserved Shares are eligible for
immediate resale pursuant to Rule 144(k) under the 0000 Xxx.
5.2 "Piggyback" Registration Rights. At any time after the Initial Closing,
if the Company shall determine to proceed with the actual preparation and filing
of a new registration statement under the 1933 Act in connection with the
proposed offer and sale of any of its securities by it or any of its security
holders (other than a registration statement on Form X-0, X-0 or other limited
purpose form), the Company will give written notice of its determination to all
record holders of the Reserved Shares. Upon the written request from any Holders
(the "Requesting Holders"), within 15 days after receipt of any such notice from
the Company, the Company will, except as herein provided, cause all of the
Reserved Shares covered by such request (the "Requested Stock") held by the
Requesting Holders to be included in such registration statement, all to the
extent requisite to permit the sale or other disposition by the prospective
seller or sellers of the Requested Stock; provided, further, that nothing herein
shall prevent the Company from, at any time, abandoning or delaying any
registration. If any registration pursuant to this Section 5.2 shall be
underwritten in whole or in part, the Company may require that the Requested
Stock be included in the underwriting on the same terms and conditions as the
securities otherwise being sold through the underwriters. In such event, the
Requesting Holders shall, if requested by the underwriters, execute an
underwriting agreement containing customary representations and warranties by
selling stockholders and a lock-up on Reserved Shares not being sold. If in the
good faith judgment of the managing underwriter of such public offering the
inclusion of all of the Requested Stock would reduce the number of shares to be
offered by the Company or interfere with the successful marketing of the shares
of stock offered by the Company, the number of shares of Requested Stock
otherwise to be included in the underwritten public offering may be reduced pro
rata (by number of shares) among the Requesting Holders and all other holders of
registration rights who have requested inclusion of their securities or excluded
in their entirety if so required by the underwriter. To the extent only a
portion of the Requested Stock is included in the underwritten public offering,
those shares of Requested Stock which are thus excluded from the underwritten
public offering and any other securities of the Company held by such holders
shall be withheld from the market by the Holders thereof for a period, not to
exceed 90 days, which the managing underwriter reasonably determines is
necessary in order to effect the underwritten public offering. The obligation of
the Company under this Section 5.2 shall not apply after the earlier of (a) the
date that all of the Reserved Shares have been sold pursuant to Rule 144 under
the 1933 Act or an effective registration statement, or (b) such time as the
Reserved Shares are eligible for immediate resale pursuant to Rule 144(k) under
the 1933 Act.
15
5.3 Registration Procedures. To the extent required by Sections 5.1 or 5.2,
the Company
will:
(a) prepare and file with the SEC a registration statement with
respect to such securities, and use its reasonable best efforts to cause such
registration statement to become and remain effective;
(b) prepare and file with the SEC such amendments to such registration
statement and supplements to the prospectus contained therein as may be
necessary to keep such registration statement effective;
(c) furnish to the Holders participating 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 as such underwriters may reasonably request in order to
facilitate the public offering of such securities;
(d) use its reasonable best efforts to register or qualify the
securities covered by such registration statement under such state securities or
blue sky laws of such jurisdictions as the Holders may reasonably request in
writing within 20 days following the original filing of such registration
statement, except that the Company shall not for any purpose be required to
execute a general consent to service of process or to qualify to do business as
a foreign corporation in any jurisdiction wherein it is not so qualified;
(e) notify the Holders, promptly after it shall receive notice
thereof, of the time when such registration statement has become effective or a
supplement to any prospectus forming a part of such registration statement has
been filed;
(f) notify the Holders promptly of any request by the SEC for the
amending or supplementing of such registration statement or prospectus or for
additional information;
(g) prepare and file with the SEC, promptly upon the request of any
Holders, any amendments or supplements to such registration statement or
prospectus which, in the opinion of counsel for such Holders (and concurred in
by counsel for the Company), is required under the 1933 Act or the rules and
regulations thereunder in connection with the distribution of Common Stock by
such Holders;
(h) prepare and promptly file with the SEC and promptly notify such
Holders of the filing of such amendment or supplement to such registration
statement or prospectus as may be necessary to correct any statements or
omissions if, at the time when a prospectus relating to such securities is
required to be delivered under the 1933 Act, any event shall have occurred as
the result of which any such prospectus or any other prospectus as then in
effect would include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading; and
(i) advise the Holders, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the SEC
suspending the effectiveness of such registration statement or the initiation or
threatening of any proceeding for that purpose and promptly use its best efforts
16
to prevent the issuance of any stop order or to obtain its withdrawal if such
stop order should be issued.
The Holders shall cooperate with the Company in providing the information
necessary to effect the registration of their Reserved Shares, including
completion of customary questionnaires. Failure to do so may result in exclusion
of such Holders' Reserved Shares from the registration statement.
5.4 Expenses.
(a) With respect to the any registration required pursuant to Section
5.1 or 5.2 hereof, all fees, costs and expenses of and incidental to such
registration, inclusion and public offering (as specified in paragraph (b)
below) in connection therewith shall be borne by the Company, provided, however,
that the Holders shall bear their pro rata share of the underwriting discount
and commissions and transfer taxes.
(b) The fees, costs and expenses of registration to be borne by the
Company as provided in paragraph (a) above shall include, without limitation,
all registration, filing, and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for the Company, fees of counsel to the
Holders (not to exceed $15,000 in the aggregate) and all legal fees and
disbursements and other expenses of complying with state securities or blue sky
laws of any jurisdictions in which the securities to be offered are to be
registered and qualified (except as provided in 5.4(a) above). Fees and
disbursements of counsel for the Holders in excess of $15,000 and any other
expenses incurred by the Holders not expressly included above shall be borne by
the Holders (on a pro rata basis if and to the extent required by state
securities laws).
5.5 Indemnification.
(a) The Company will indemnify and hold harmless each Holder of
Reserved Shares which are included in a registration statement pursuant to the
provisions of Sections 5.1 and 5.2 hereof, its directors and officers, and any
underwriter (as defined in the 0000 Xxx) for such Holder and each person, if
any, who controls such Holder or such underwriter within the meaning of the 1933
Act, from and against, and will reimburse such Holder and each such underwriter
and controlling person with respect to, any and all loss, damage, liability,
cost and expense to which such Holder or any such underwriter or controlling
person may become subject under the 1933 Act or otherwise, insofar as such
losses, damages, liabilities, costs or expenses are caused by any untrue
statement or alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, damage, liability,
cost or expenses arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission so made in conformity with
information furnished by or on behalf of such Holder, such underwriter or such
controlling person in writing specifically for use in the preparation thereof.
17
(b) Each Holder of Reserved Shares included in a registration pursuant
to the provisions of Sections 5.1 or 5.2 hereof will indemnify and hold harmless
the Company, its directors and officers, any controlling person and any
underwriter from and against, and will reimburse the Company, its directors and
officers, any controlling person and any underwriter with respect to, any and
all loss, damage, liability, cost or expense to which the Company or any
controlling person and/or any underwriter may become subject under the 1933 Act
or otherwise, insofar as such losses, damages, liabilities, costs or expenses
are caused by any untrue statement or alleged untrue statement of any material
fact contained in such registration statement, any prospectus contained therein
or any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was so made in reliance upon and in
strict conformity with written information furnished by or on behalf of such
Holder specifically for use in the preparation thereof.
(c)Promptly after receipt by an indemnified party pursuant to the
provisions of paragraph (a) or (b) of this Section 5.5 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of said paragraph
(a) or (b), promptly notify the indemnifying party of the commencement thereof;
but the omission to so notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise under this
Section except to the extent the defense of the claim is prejudiced. In case
such action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party shall
have the right to participate in, and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party,
provided, however, if counsel for the indemnifying party concludes that a single
counsel cannot under applicable legal and ethical considerations, represent both
the indemnifying party and the indemnified party, the indemnified party or
parties have the right to select separate counsel to participate in the defense
of such action on behalf of such indemnified party or parties; provided that
there shall be no more than one such separate counsel. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party pursuant to the provisions of said paragraph (a) or (b) for any legal or
other expense subsequently incurred by such indemnified party in connection with
the defense thereof other than reasonable costs of investigation, unless (i) the
indemnified party shall have employed counsel in accordance with the provisions
of the preceding sentence, (ii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after the notice of the commencement
of the action or (iii) the indemnifying party has, in its sole discretion,
authorized the employment of counsel for the indemnified party at the expense of
the indemnifying party.
VI. MISCELLANEOUS
6.1 Notice. Any notices, consents, waivers or other communications required
or permitted to be given under the terms of this Subscription Agreement must be
in writing and will be deemed to have been delivered: (a) upon receipt, when
delivered personally, (b) upon receipt, when sent by facsimile (provided
18
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party), or (c) one (1) business day after deposit
with an overnight courier service, in each case properly addressed to the party
to receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company:
Comdial Corporation
000 Xxxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxx, Chief Financial Officer
With a copy to:
Xxxxxxxxx Traurig, LLP
MetLife Building
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Annex
If to the Subscriber, to its address and facsimile number set forth at the end
of this Subscription Agreement, or to such other address and/or facsimile number
and/or to the attention of such other person as specified by written notice
given to the Company five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (a) given by the recipient of such notice,
consent, waiver or other communication, (b) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission, or (c)
provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (a), (b) or (c) above, respectively.
6.2 Entire Agreement; Amendment. This Subscription Agreement supersedes all
other prior oral or written agreements between the Subscriber, the Company,
their affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Subscription Agreement and the instruments referenced
herein contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor the Subscriber makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Subscription Agreement may be amended or waived other than by an instrument
in writing signed by the Company and the holders of at least a majority of the
principal amount of the Notes then outstanding or if prior to the Closing, the
Subscribers purchasing at least a majority of the Units to be purchased at the
Closing (the "Required Holders"), or if the Notes have been repaid or converted
in full, the holders of at least a majority of the Reserved Shares then
outstanding. Without the written consent of all holders, no such amendment shall
19
be effective to the extent that it applies to less than all of the holders of
the Securities then outstanding on a uniform non-discriminatory basis or
increases the liability of a holder.
6.3 Severability. If any provision of this Subscription Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Subscription Agreement in that jurisdiction or the validity or
enforceability of any provision of this Subscription Agreement in any other
jurisdiction.
6.4 Governing Law; Jurisdiction; Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Subscription
Agreement shall be governed by the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of New
York. Each party hereby irrevocably submits to the exclusive jurisdiction of the
federal courts sitting in the Southern District of New York, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Subscription Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law. Each party
hereby irrevocably waives any right it may have, and agrees not to request, a
jury trial for the adjudication of any dispute hereunder or in connection with
or arising out of this Subscription Agreement or any transaction contemplated
hereby.
6.5 Headings. The headings of this Subscription Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Subscription Agreement.
6.6 Successors And Assigns. This Subscription Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Notes and Warrants. The Company shall
not assign this Subscription Agreement or any rights or obligations hereunder
without the prior written consent of the holders of at least a majority the
Securities then outstanding, except by merger or consolidation. The Subscriber
may assign some or all of its rights hereunder without the consent of the
Company, provided, however, that any such assignment shall not release the
Subscriber from its obligations hereunder unless such obligations are assumed by
such assignee and the Company has consented to such assignment and assumption,
which consent shall not be unreasonably withheld.
6.7 Survival. The representations and warranties of the Company and the
Subscriber contained in Articles I and II and the agreements set forth in this
Article VI shall survive the Final Closing for a period of two years.
20
6.8 Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Subscription Agreement and the consummation of
the transactions contemplated hereby.
6.9 No Strict Construction. The language used in this Subscription
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party, notwithstanding anything herein to the contrary.
6.10 Legal Representation. The Subscriber acknowledges that: (a) it has
read this Subscription Agreement and the exhibits hereto; (b) it understands
that the Company has been represented in the preparation, negotiation, and
execution of this Subscription Agreement by Xxxxxxxxx Xxxxxxx, LLP, counsel to
the Company; (c) it understands that the Placement Agent has been represented by
Loeb & Loeb LLP and that such counsel has not represented and is not
representing any other Subscriber; (d) it has either been represented in the
preparation, negotiation, and execution of this Subscription Agreement by legal
counsel of its own choice, or has chosen to forgo such representation by legal
counsel after being advised to seek such legal representation; and (e) it
understands the terms and consequences of this Subscription Agreement and is
fully aware of its legal and binding effect.
6.11 Expenses of Enforcement. The Company shall pay all fees and expenses
(including reasonable fees and expenses of counsel and other professionals)
incurred by the Subscriber or any successor holder of Securities in enforcing
any of its rights and remedies under this Subscription Agreement.
6.12 Confidentiality; Required Press Release. The Subscriber agrees that it
shall keep confidential and not divulge, furnish or make accessible to anyone,
the confidential information concerning or relating to the business or financial
affairs of the Company, if any, contained in the Offering Documents to which it
becomes privy until such information has been publicly disclosed by the Company
or until such information is no longer material. The Company agrees that within
two business days after the closing of the Placement, it shall issue a press
release which shall set forth all of the material terms of the Placement,
including pricing.
6.13 Counterparts. This Subscription Agreement may be executed in two or
more identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
6.14 Increase in Authorized Shares. The Company hereby agrees that it will
(a) file an information statement with the SEC with respect to the increase in
its authorized shares described in Section 4.4 hereof within ten (10) business
days after the Initial Closing; (b) mail such information statement to its
stockholders five (5) days after clearance by the SEC; (c) file an amendment to
its certificate of incorporation effecting such increase twenty (20) days after
the date of such mailing; and (d) immediately thereafter reserve for issuance a
sufficient number of shares to provide for conversion of the Notes pursuant to
21
Section 6 thereof (assuming a lowest possible conversion price of $.05 per
share).
6.15 Notice to Residents of Florida: The Notes and the Warrants offered
herein have not been registered with the Florida Division of Securities.
Pursuant to Florida Statutes, Section 517.061(11)(a)(5), an investor may elect,
within three (3) business days after delivery of their Subscription Agreement
and the purchase price for the Notes and the Warrants, to withdraw their
subscription and receive a full refund (without interest) of such purchase
price. This withdrawal will be without any further liability to any person. To
accomplish such withdrawal, an investor should send a letter or telegram to the
Company, indicating the intention to withdraw, postmarked prior to the end of
the third business day after delivery of funds to the Company, return receipt
requested, to ensure that it is received and to evidence the time when it is
mailed. Any oral requests for rescission should be accompanied by a request for
written confirmation that the oral request was received on a timely basis.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties have executed this Subscription Agreement
as of the day and year first written above.
SUBSCRIBER**: CO-SUBSCRIBER**:
-------------------------------- --------------------------------
Signature of Subscriber Signature of Co-Subscriber
-------------------------------- --------------------------------
Name of Subscriber [please print] Name of Co-Subscriber [please print]
-------------------------------- --------------------------------
Address of Subscriber Address of Co-Subscriber
-------------------------------- --------------------------------
Social Security or Taxpayer Social Security or Taxpayer Identification
Identification Number of Subscriber Number of Co-Subscriber
-------------------------------------------------------------------
Name of Holder(s) as it should appear on the security certificates*
[please print]
*Please provide the exact names that you wish to see on the certificates (1)For
individuals, print full name of subscriber. (2) For joint, print full name of
subscriber and all co-subscribers.
(3) For corporations, partnerships, LLC, print full name of entity, including
"&," "Co.," "Inc.," "etc.," "LLC," "LP," etc.
(4) For Trusts, print trust name (please contact your trustee for the exact name
that should appear on the certificates). (5) For XXX account maintained at
Commonwealth, print "Wexford Clearing Corp. as C/F FBO [client name]."
LRX- Subscription Accepted:
-------------------------------------
Subscriber's Account Number at Comdial Corporation
Commonwealth Associates, if applicable
Dollar Amount of Units Subscribed For: By:
Name: Xxxxxxxx X. Xxxxxxx
$ Title: Chief Executive Officer
$
Amount of Unit Subscription Accepted
** If Subscriber is a Registered The undersigned NASD member firm
Representative with an NASD member acknowledges receipt of the notice
firm or an affiliated person of an required by Rule 3040 of the NASD
NASD member firm, have the Conduct Rules.
acknowledgment to the right signed
by the appropriate party
------------------------------------
Name of NASD Member
By
-------------------------------
Authorized Officer Accepted
