EXHIBIT 2
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
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Regulation D of 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
will be triggered by the issuance of the Securities as described in the Offering
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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
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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
10
applicable federal and state securities laws), and the Company shall have paid
all taxes, if any, in respect of the original issuance thereof.
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.
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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
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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 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.
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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
15
threatening of any proceeding for that purpose and promptly use its best efforts
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.
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(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
17
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 be effective to the extent that it applies to less than all
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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.
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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
20
pursuant to 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]
21
IN WITNESS WHEREOF, the parties have executed this Subscription
Agreement as of the day and year first written above.
SUBSCRIBER**: CO-SUBSCRIBER**:
/s/ Xxxxxx X. Xxxx, Manager
----------------------------------- ------------------------------------------
Signature of Subscriber Signature of Co-Subscriber
Xxxx Ventures, LLC
----------------------------------- ------------------------------------------
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:/s/ Xxxxxxxx X. Xxxxxxx
------------------------------------
$3,000,000 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
