EXHIBIT 10.6
UNIT PURCHASE AGREEMENT
UNIT PURCHASE AGREEMENT, dated March 7, 1996, by and between LogiMetrics,
Inc., a Delaware corporation (the "Company"), and Cerberus Partners, L.P., a
Delaware limited partnership (the "Purchaser").
W I T N E S S E T H:
WHEREAS, on the terms and subject to the conditions set forth herein, the
Company desires to sell to the Purchaser, and the Purchaser desires to purchase
from the Company, an aggregate of 30 units (the "Units"), each Unit consisting
of (i) $50,000 in principal amount of the Company's 12% Convertible Senior
Subordinated Debentures due December 31, 1998 (the "Debentures") convertible
into 84,746 shares of Common Stock, par value $.01 per share (the "Common
Stock"), of the Company, subject to adjustment in certain circumstances (each
Debenture to be in substantially the form of Exhibit A hereto), and (ii) a
Series C Detachable Warrant (collectively, the "Warrants") exercisable at any
time prior to March 7, 2003 to purchase 84,746 shares of Common Stock, subject
to adjustment in certain circumstances, at an exercise price of $.01 per share
(each Warrant to be in substantially the form of Exhibit B hereto); and
WHEREAS, simultaneously herewith, the Company is entering into an amended
and restated credit facility (the "Credit Facility") with North Fork Bank (the
"Bank") pursuant to which, among other things, the Bank will make available to
the Company up to $2,200,000 in revolving credit loans maturing on October 1,
1997 and a $800,000 term loan maturing on December 31, 1998; and
WHEREAS, the Credit Facility will be secured by a perfected, first priority
security interest in all of the assets of the Company; and
WHEREAS, the Company has agreed to secure its obligations under the
Debentures by granting to the Purchaser (and any subsequent holder of the
Debentures) a perfected security interest in all of the assets of the Company,
junior only to the security interest securing the Credit Facility (and any
authorized replacement thereof); and
WHEREAS, in order to evidence the grant of the security interest described
above, the Company has executed and delivered to the Purchaser one or more
security agreements and related documents (the "Security Documents" and,
together with this Agreement, the Debentures and the Warrants, the "Transaction
Documents") and will take all other action necessary or advisable in relation
thereto; and
WHEREAS, simultaneously herewith, the Company proposes to sell to one or
more accredited investors a minimum of 15 and a maximum of 30 units (the
"Preferred Stock Units"), each Preferred Stock Unit consisting of (i) one share
of the Company's Preferred Stock, par value $.01 per share (the "Preferred
Stock"), designated as Series A 12% Cumulative Convertible Redeemable Preferred
Stock, stated value $50,000 per share (the "Convertible Preferred Stock"),
convertible into 94,340 shares of Common Stock, subject to adjustment in certain
circumstances,
and (ii) a Series D Detachable Warrant (collectively, the "Series D Warrants")
exercisable at any time prior to March 7, 2003 to purchase 94,340 shares of
Common Stock, subject to adjustment in certain circumstances, at an exercise
price of $.01 per share; and
WHEREAS, the Company has entered into a financial advisory agreement (the
"Advisory Agreement") with ▇▇▇▇▇▇, ▇▇▇▇▇ & Co., LLC ("▇▇▇▇▇▇ Teman") and SFM
Group, Ltd. ("SFM") pursuant to which, in return for certain advisory services
to be rendered by ▇▇▇▇▇▇ ▇▇▇▇▇ and SFM in connection with the issuance of the
Units and the Preferred Stock Units, the Company has agreed to pay certain cash
fees to ▇▇▇▇▇▇ Teman and SFM and issue to ▇▇▇▇▇▇ ▇▇▇▇▇ and SFM Series E
Detachable Warrants (collectively, the "Series E Warrants") exercisable at any
time prior to March 7, 2003 to purchase an aggregate of 1,000,000 shares of
Common Stock, subject to adjustment in certain circumstances, at an exercise
price of $.40 per share; and
WHEREAS, in connection with the transactions contemplated hereby, the
Company has entered into an employment agreement with ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (the
"▇▇▇▇▇ Agreement") pursuant to which ▇▇. ▇▇▇▇▇ will become the Chairman of the
Board, President and Chief Executive Officer of the Company and will receive
options (the "▇▇▇▇▇ Options") to purchase 1,000,000 shares of Common Stock,
subject to adjustment in certain circumstances, at exercise prices ranging from
$.40 to $4.00 per share; and
WHEREAS, in connection with the issuance of the Units and the Preferred
Stock Units, the Company is amending the terms of its outstanding 12%
Convertible Subordinated Debentures due July 14, 1997 (as so amended, the "1995
Debentures"), and the related Series A Warrants (as so amended, the "Series A
Warrants"), each of which is exercisable at any time prior to July 14, 2002 to
purchase 40,000 shares of Common Stock, subject to adjustment in certain
circumstances, at an exercise price of $.25 per share, and the Series B Warrants
(as so amended, the "Series B Warrants"), each of which is exercisable at any
time prior to July 14, 2002 to purchase 1,500,000 shares of Common Stock,
subject to adjustment in certain circumstances, at an exercise price of $.25 per
share to provide, among other things, that (i) the 1995 Debentures will be
junior to the Debentures in right of payment, (ii) interest on the Debentures
will be payable quarterly and (iii) that the issuance and exercise of the
Debentures, the Series C Warrants, the Convertible Preferred Stock, the Series D
Warrants, the Series E Warrants and the ▇▇▇▇▇ Options will not trigger certain
anti-dilution adjustments in respect of the 1995 Debentures, the Series A
Warrants and the Series B Warrants (collectively, the "Restructuring"); and
WHEREAS, in order to facilitate the issuance of the Units and the Preferred
Stock Units, the Board of Directors of the Company has unanimously approved an
amendment to the Company's Certificate of Incorporation (the "Amendment")
pursuant to which the Company's authorized shares of capital stock would consist
of 35,000,000 shares of Common Stock, par value $.01 per share, and 200 shares
of Preferred Stock, par value $.01 per share.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein,
and intending to be legally bound, the parties hereto agree as follow:
Article I
Purchase and Sale of Units
Section 1.1. Purchase and Sale of Units. Upon the terms and subject to the
conditions of this Agreement, on the date hereof the Company shall issue and
sell to the Purchaser, and the Purchaser shall purchase from the Company, Thirty
(30) Units at a purchase price of Fifty Thousand Dollars ($50,000) per Unit, for
a total aggregate purchase price of One Million Five Hundred Thousand Dollars
($1,500,000) (the "Purchase Price").
Section 1.2. Closing. The closing of the transactions contemplated hereby
(the "Closing") shall take place at the offices of the Company at 10:00 a.m. on
the date hereof, or at such other time and place as the parties hereto may
mutually agree. The time and date of the Closing is hereinafter referred to as
the "Closing Date."
Section 1.3. Payment for and Delivery of the Units. At the Closing, the
Purchaser shall pay the Purchase Price in immediately available funds by wire
transfer to an account previously designated by the Company. The Company shall
execute, issue and deliver to the Purchaser (i) the Debentures and (ii)
certificates representing the Warrants.
Article II
Representations and Warranties of the Company
The Company represents and warrants to the Purchaser as follows:
Section 2.1. Organization and Qualification; No Material Subsidiaries. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the corporate power and
authority to own or lease its property and assets and to carry on its business
as presently conducted, and is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the failure to be
so qualified and in good standing would result in a material adverse change in
the business, financial condition, results of operations or prospects (financial
and other) of the Company (a "Material Adverse Change"). The Company has
previously provided to the Purchaser true and complete copies of (i) its
Certificate of Incorporation and all amendments thereto and (ii) its by-laws as
currently in effect. The Company does not own any material amount of any shares
of stock of any corporation or any equity interest in a partnership, joint
venture or other business entity, and the Company does not control or have the
right (whether or not presently exercisable) to control any other corporation,
partnership, joint venture or other business entity by means of ownership,
management contract or otherwise, other than its ownership of 100% of the issued
and outstanding shares of the capital stock of LogiMetrics FSC Inc., which
subsidiary is not material to the Company.
Section 2.2. Authorization. (a) The Company has the corporate power and
authority to execute and deliver this Agreement and the other Transaction
Documents and to perform its
obligations hereunder and thereunder, all of which have been duly authorized by
all requisite corporate action. Each of this Agreement, the Security Agreement
and the other Security Documents has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms.
(b) The Debentures have been duly authorized and, when issued in accordance
with the terms hereof, will have been duly executed, issued and delivered and
will constitute valid and legally binding obligations of the Company,
enforceable in accordance with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles. After giving effect to the Amendment, the Company has sufficient
authorized and unissued shares of Common Stock reserved for issuance upon the
conversion of the Debentures in accordance with their terms. The shares of
Common Stock issuable upon the conversion of the Debentures will, when issued in
accordance with the terms of the Debentures, be duly authorized, validly issued,
fully paid and non-assessable.
(c) The Warrants have been duly authorized and, when issued in accordance
with the terms hereof, will have been duly executed, issued and delivered and
will constitute valid and legally binding obligations of the Company,
enforceable in accordance with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles. After giving effect to the Amendment, the Company has sufficient
authorized and unissued shares of Common Stock reserved for issuance upon the
exercise of the Warrants in accordance with their terms. The shares of Common
Stock issuable upon the exercise of the Warrants will, when issued in accordance
with the terms of the Warrants (including the payment of the exercise price
specified therein), be duly authorized, validly issued, fully paid and
non-assessable.
(d) Except for the issuance of the Convertible Preferred Stock, the Series
A Warrants, the Series B Warrants, the Series D Warrants, the Series E Warrants
and the ▇▇▇▇▇ Options as expressly contemplated hereby, the issuance of the
Units, the conversion of the Debentures and the exercise of the Warrants will
not (i) require the Company to issue any shares of its capital stock or any
security exercisable for or convertible or exchangeable into shares of its
capital stock to any person, or (ii) after giving effect to the Restructuring,
require any adjustment in the exercise price or number of shares of the
Company's capital stock issuable upon the exercise of the 1995 Debentures, the
Convertible Preferred Stock, the Series A Warrants, the Series B Warrants, the
Series D Warrants, the Series E Warrants, the ▇▇▇▇▇ Options or any other
outstanding or currently contemplated convertible security of the Company
Section 2.3. Non-contravention. Neither the execution and delivery of this
Agreement and the other Transaction Documents by the Company nor the performance
by the Company of its obligations hereunder and thereunder will (i) contravene
any provision contained in the Company's Certificate of Incorporation or
by-laws, (ii) violate or result in a breach (with or without the lapse of time,
the giving of notice or both) of or constitute a default under (A) any contract,
agreement, commitment, indenture, mortgage, lease, pledge, note, license, permit
or other instrument or obligation or (B) any judgment, order, decree, law, rule
or regulation or other restriction of any governmental authority, in each case
to which the Company is a party or by which it is bound or to which any of its
assets or properties are subject, (iii) result in the creation or imposition of
any lien, claim, charge, mortgage, pledge, security interest, equity,
restriction or other encumbrance (collectively, "Encumbrances") on any of the
Company's assets or properties, except as expressly contemplated by the Credit
Facility and the Security Documents, or (iv) result in the acceleration of, or
permit any person to accelerate or declare due and payable prior to its stated
maturity, any material obligation of the Company.
Section 2.4. No Consents. No notice to, filing with, or authorization,
registration, consent or approval of any governmental authority or other person
is necessary for the execution, delivery or performance of this Agreement or the
other Transaction Documents by the Company or the consummation of the
transactions contemplated hereby or thereby by the Company, except for such
filings and registrations as may be required under applicable securities laws.
The offer and sale of the Units does not require registration under the
provisions of the Securities Act of 1933, as amended (the "Securities Act"), or
any applicable state securities or "blue sky" laws.
Section 2.5. Capitalization of the Company. After giving effect to the
Amendment and prior to the transactions contemplated hereby, the Company's
authorized capital stock consists solely of 35,000,000 authorized shares of
Common Stock, of which 2,860,602 shares were issued and outstanding as of the
date hereof; and 200 shares of Preferred Stock, of which, as of the date hereof,
no shares were issued and outstanding. No shares of the Company's capital stock
are held as treasury shares. In addition, as of the date hereof and after giving
effect to the Restructuring, (i) the Company has $300,000 in aggregate principal
amount of the 1995 Debentures issued and outstanding which are presently
convertible into an aggregate of 1,200,000 shares of Common Stock at a current
conversion price of $.25 per share, (ii) the Company has Series A Warrants
outstanding to purchase an aggregate of 600,000 shares of Common Stock at a
current exercise price of $.25 per share, (iii) the Company has Series B
Warrants outstanding to purchase an aggregate of 1,500,000 shares of Common
Stock at a current exercise price of $.25 per share, and (iv) the Company has
certain other stock options outstanding to purchase an aggregate of 400,000
shares of Common Stock at an exercise price of $.10 per share. Except as set
forth above, and except for the Warrants, the Debentures, the Convertible
Preferred Stock, the Series D Warrants, the Series E Warrants and the ▇▇▇▇▇
Options, the Company does not have (i) any shares of Common Stock or Preferred
Stock reserved for issuance, or (ii) any outstanding option, warrant, right,
call or commitment relating to its capital stock or any outstanding securities
or obligations convertible into or exchangeable for, or giving any person any
right to subscribe for or acquire from it, any shares of its capital stock
(collectively, "Company Securities"). There are no outstanding obligations of
the Company to repurchase, redeem or otherwise acquire any Company Securities.
There are no pre-emptive or other subscription rights with respect to any shares
of the Company's capital stock or any securities convertible into or
exchangeable for shares of the Company's capital stock and all of the issued and
outstanding shares of capital stock of the Company have been duly authorized,
validly issued, are fully paid and are nonassessable. All of the Company's
outstanding securities were offered, issued, sold and delivered by the Company
in compliance with all applicable state and federal securities laws. None of
such securities were issued in violation of any pre-emptive or subscription
rights of any person.
Section 2.6. SEC Reports; Approval of Amendment. (a) The Company has
delivered to the Purchaser a true and complete copy of each report, schedule and
registration statement, including the exhibits thereto (but excluding exhibits
incorporated therein by reference), filed by the Company with the Securities and
Exchange Commission (the "Commission") since January 1, 1995, which are all the
documents that the Company was required to file with the Commission since that
date and through the date hereof (all of such documents collectively, the "SEC
Documents"). As of their respective dates, the SEC Documents complied as to form
in all material respects with the requirements of the Securities Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as the case
may be, and the rules and regulations of the Commission thereunder. As of their
respective dates, except to the extent that information contained therein has
been revised or superseded by a later filed SEC Document, none of the SEC
Documents 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. The financial statements of the Company included in the SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto, have been prepared in accordance with generally accepted
accounting principles (except as may be indicated in the notes thereto or, in
the case of the unaudited statements, as permitted by Form 10-Q) and fairly
present (subject, in the case of the unaudited statements, to normal, recurring
audit adjustments) 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.
(b) The proxy statement, dated January 29, 1996 (including any amendments
or supplements thereto), submitted to the stockholders of the Company in
connection with the approval of the Amendment (the "Proxy Statement") contained,
as of the date of mailing and as of the date of the stockholders' meeting
relating thereto (the "Stockholders' Meeting"), the information required by the
Exchange Act and the rules and regulations of the Commission thereunder. As of
the date of mailing and as of the time of the Stockholders' Meeting, the Proxy
Statement did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The Company has complied with the requirements of all
federal and state securities or "blue sky" laws and the rules and regulations
under such laws with respect to the Amendment and any solicitation of proxies in
connection therewith.
(c) The stockholders approved the Amendment at the Stockholders' Meeting by
the vote required under applicable law. The Company has filed an appropriate
Certificate of Amendment reflecting the Amendment with the Secretary of State of
the State of Delaware and the Amendment has become effective.
Section 2.7. Private Placement Memorandum. As of its date and as of the
date hereof, the Private Placement Memorandum, dated February 5, 1996, relating
to the offering of the Preferred Stock Units (the "Memorandum") complied with
all applicable provisions of the Securities Act and the rules and regulations of
the Commission thereunder and as of such dates
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading. Other than the Memorandum, the term sheets
relating to the Preferred Stock Units and the Units (true and complete copies of
which have previously been delivered to the Purchaser) and the SEC Documents
(collectively, the "Placement Materials"), the Company has not and will not
distribute any offering material in connection with the offer or sale of the
Units, the Preferred Stock Units or any of the other securities being issued on
the date hereof. There is no document or contract of a character required to be
described in the Memorandum which is not so described.
Section 2.8. Absence of Certain Developments. Since September 30, 1995,
there has not been any Material Adverse Change. Except as disclosed in the
Placement Materials and except for this Agreement and the transactions
contemplated hereby, since September 30, 1995 the Company has conducted its
business in the ordinary and usual course consistent with past practices.
Section 2.9. Governmental Authorizations; Licenses; Etc. Except as
disclosed in the Placement Materials, the business of the Company has been
operated in compliance with applicable laws, rules, regulations, codes,
ordinances, orders, policies and guidelines of all governmental authorities
(excluding Environmental Laws which are specifically covered in Section 2.13
hereof), except for violations which, individually or in the aggregate, would
not result in a Material Adverse Change. Except as disclosed in the Placement
Materials, the Company has all permits, licenses, approvals, certificates and
other authorizations, and has made all notifications, registrations,
certifications and filings with all governmental authorities, necessary or
advisable for the operation of its business as currently conducted. Except as
disclosed in the Placement Materials, to the Company's best knowledge there is
no action, case or proceeding pending or overtly threatened by any governmental
authority with respect to (i) any alleged violation by the Company or its
affiliates of any law, rule, regulation, code, ordinance, order, policy or
guideline of any governmental authority, or (ii) any alleged failure by the
Company or its affiliates to have any permit, license, approval, certification
or other authorization required in connection with the operation of the business
of the Company.
Section 2.10. Litigation. Except as disclosed in the Placement Materials,
there are no lawsuits, actions, proceedings, claims, orders or investigations
pending or, to the Company's best knowledge, overtly threatened against the
Company (i) relating to the Company, its business or any product alleged to have
been manufactured or sold by the Company, (ii) seeking to enjoin the
transactions contemplated hereby, or (iii) which, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Change.
Section 2.11. Undisclosed Liabilities. Other than those reflected in the
financial statements included in the Placement Materials, there are no material
liabilities of the Company of any kind or nature whatsoever, whether known or
unknown, absolute, accrued, contingent or otherwise, or whether due or to become
due, which are required to be disclosed on financial statements prepared in
accordance with generally accepted accounting principles, other than liabilities
incurred in the ordinary course of business consistent with past practices since
September 30, 1995.
Section 2.12. Taxes. Except as disclosed in the Placement Materials, all
federal, state, county, local and foreign tax returns and reports of the Company
required to be filed have been duly filed. Except as disclosed in the Placement
Materials, all federal, state, county, local, foreign and any other taxes
(including all income, withholding and employment taxes), assessments (including
interest and penalties), fees and other governmental charges with respect to the
employees, properties, assets, income or franchises of the Company have been
paid or duly provided for, or are being contested in good faith by appropriate
proceedings as previously disclosed to the Purchaser in writing and adequate
reserves therefor have been established pursuant to generally accepted
accounting principles, or have arisen after the date hereof in the ordinary
course of business.
Section 2.13. Environmental Matters. Except as disclosed in the Placement
Materials, to the Company's best knowledge (i) the business of the Company is
being conducted in compliance with all applicable Environmental Laws, (ii) the
real property currently owned or operated by the Company (including, without
limitation, soil, groundwater or surface water on or under the properties and
buildings thereon) (the "Affected Property") does not contain any Regulated
Substance other than as permitted under applicable Environmental Laws, (iii) the
Company has not received any notice from any governmental authority that the
Company may be a "potentially responsible party" (as such term is defined under
the Comprehensive Environmental Response, Compensation and Control Act, 42
U.S.C. section 9601, et seq.) in connection with any waste disposal site or
facility used by the Company, (iv) the Company and the Affected Property are not
presently subject to a suit or judgment arising under any Environmental Law, and
(v) all documents filed by or on behalf of the Company with any governmental
authority pursuant to any Environmental Law in connection with the transactions
contemplated hereby were true, correct and complete in all material respects and
did not omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
As used herein, "Environmental Laws" means any federal, state and local
law, statute, ordinance, rule, regulation, license, permit, authorization,
approval, consent, court order, judgment, decree, injunction, code, requirement
or agreement with any governmental authority, (x) relating to pollution (or the
cleanup thereof or the filing of information with respect thereto), human health
or the protection of air, surface water, ground water, drinking water supply,
land (including land surface or subsurface), plant and animal life or any other
natural resource, or (y) concerning exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production or disposal of Regulated Substances, in each case as amended and as
now or hereafter in effect. The term Environmental Law includes, without
limitation, (i) the Comprehensive Environmental Response Compensation and
Liability Act of 1980, the Water Pollution Control Act, the Clean Air Act, the
Clean Water Act, the Solid Waste Disposal Act (including the Resource
Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste
Amendments of 1984), the Toxic Substances Control Act, the Insecticide,
Fungicide and Rodenticide Act, the Occupational Safety and Health Act of 1970,
each as amended and as now or hereafter in effect, and (ii) any common law or
equitable doctrine (including, without limitation, injunctive relief and tort
doctrines such as negligence, nuisance, trespass and strict liability) that may
impose liability or obligations for injuries or damages due to
or threatened as a result of the presence of, exposure to, or ingestion of, any
Regulated Substance.
As used herein, "Regulated Substances" means pollutants, contaminants,
hazardous or toxic substances, compounds or related materials or chemicals,
hazardous materials, hazardous waste, flammable explosives, radon, radioactive
materials, asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls, petroleum and petroleum products (including, but not limited to,
waste petroleum and petroleum products) as regulated under applicable
Environmental Laws.
Section 2.14. Proprietary Rights. Except as disclosed in the Placement
Materials, the Company owns and possesses all right, title and interest in the
patents, patent registrations, patent applications, trademarks, service marks,
trademark and service ▇▇▇▇ registrations and applications therefor, copyrights,
copyright registrations, copyrights applications, trade names, corporate names,
technology, inventions, computer software, data and documentation (including
electronic media), product drawings, trade secrets, know-how, customer lists,
processes, other intellectual property and proprietary information or rights
used in the business of the Company as presently conducted; and permits,
licenses or other agreements to or from third parties regarding the foregoing
(collectively, the "Proprietary Rights"). Except as disclosed in the Placement
Materials, to the Company's best knowledge, there is not pending or overtly
threatened against the Company any claim by any third party contesting the
validity, enforceability, use or ownership of any Proprietary Right. Except as
disclosed in the Placement Materials, to the Company's best knowledge, the
Company has not received any notice of any infringement or misappropriation by,
or conflict with, any third party with respect to any of the Proprietary Rights.
Section 2.15. Books and Records. The stock records of the Company fairly
and accurately reflect in all material respects the record ownership of all of
the outstanding shares of the Company's capital stock. The other books and
records of the Company, including financial records and books of account, are
complete and accurate in all material respects and have been maintained in
accordance with sound business practices.
Section 2.16. Brokers. With the exception of fees and expenses owed to
▇▇▇▇▇▇ ▇▇▇▇▇ and SFM pursuant to the Advisory Agreement, no person is or will be
entitled to a broker's, finder's, investment banker's, financial adviser's or
similar fee from the Company in connection with this Agreement or any of the
transactions contemplated hereby. The fees and expenses of ▇▇▇▇▇▇ Teman and SFM
are the sole responsibility of, and shall be paid by, the Company.
Section 2.17. Use of Proceeds. The Company will use the net proceeds of the
sale of the Units as provided in Exhibit C attached hereto.
Section 2.18. Absence of Questionable Payments. Neither the Company nor any
affiliate, director, officer, employee, agent, representative or other person
acting on behalf of the Company has: (i) used any corporate or other funds for
unlawful contributions, payments, gifts or entertainment, or made any unlawful
expenditures relating to political activities to government
officials or others, or (ii) accepted or received any unlawful contributions,
payments, gifts or expenditures.
Section 2.19. Accuracy of Representations. No representation or warranty
made by the Company in this Agreement or any document delivered, or to be
delivered, by or on behalf of the Company pursuant hereto contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained herein or therein not misleading. There is no fact or
circumstance that the Company has not disclosed to the Purchaser in writing that
the Company presently believes has resulted, or could reasonably be expected to
result, in a Material Adverse Change or could reasonably be expected to have a
material adverse effect on the ability of the Company to perform its obligations
under this Agreement.
Article III
Representations and Warranties of the Purchaser
The Purchaser hereby represents and warrants to the Company as follows:
Section 3.1. Organization. The Purchaser is a limited partnership, duly
organized, validly existing and in good standing under the laws of the state of
Delaware.
Section 3.2. Authorization. The Purchaser has the partnership power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder, all of which have been duly authorized by all requisite partnership
action. This Agreement has been duly authorized, executed and delivered by the
Purchaser and constitutes a valid and binding agreement of the Purchaser,
enforceable against the Purchaser in accordance with its terms.
Section 3.3. Access to Information. The Purchaser has received copies of
the Placement Materials. In addition, the Purchaser and its purchaser
representatives, if any, have had an opportunity to ask questions of and receive
answers from representatives of the Company concerning the business of the
Company, its condition and prospects (financial and other) and the terms and
conditions of the offering of the Units.
Section 3.4. Accredited Investor. The Purchaser is an "Accredited Investor"
as such term is defined in Rule 501 of the rules and regulations of the
Commission promulgated under the Securities Act (an "Accredited Investor").
Section 3.5. Investment Intent. (a) The Purchaser is acquiring the Units
for its own account for investment only and not for or with a view to resale or
distribution, except to Permitted Transferees (as defined herein). The Purchaser
has not entered into any contract, undertaking, agreement or arrangement with
any person (other than a Permitted Transferee) to sell, transfer or pledge to
such person or anyone else the Units, or the Debentures and the Warrants
constituting a part thereof and the Purchaser has no present plans or intentions
to enter into any such contract, undertaking, agreement or arrangement.
(b) The Purchaser has the financial ability to bear the economic risk of
losing its entire investment in the Units, is prepared to bear the economic risk
of its investment in the Units for an indefinite time and can afford to sustain
a complete loss of its investment in the Units.
(c) The overall commitment of the Purchaser to investments which are not
readily marketable is not disproportionate to its net worth, and an investment
in the Units will not cause such overall commitment to become excessive. The
Purchaser's need for diversification in its investment portfolio will not be
impaired by an investment in the Company.
(d) The Purchaser has adequate means of satisfying its short term needs for
cash and has no present need for liquidity which would require it to sell its
Units, or any interest therein.
(e) The Purchaser has substantial experience in making investment decisions
of this type and/or is relying on its own advisors in making this investment
decision and, therefore, either alone or together with its advisors, has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of an investment in the Company.
(f) The Purchaser understands that the Units constitute restricted
securities within the meaning of Rule 144 promulgated under the Securities Act,
and that none of the Units, or any interest therein, may be sold except pursuant
to an effective registration statement under the Securities Act or in a
transaction exempt from registration under the Securities Act, and understands
the meaning and effect of such restriction.
(g) The Purchaser has considered and, to the extent the Purchaser believed
such discussion was necessary, discussed with its professional legal, tax and
financial advisers the suitability of an investment in the Company for the
Purchaser's particular tax and financial situation and the Purchaser has
determined that the Units are a suitable investment for it.
(h) THE PURCHASER UNDERSTANDS THAT AN INVESTMENT IN THE UNITS BEING
PURCHASED BY IT INVOLVES A HIGH DEGREE OF RISK, INCLUDING WITHOUT LIMITATION,
RISKS RELATING TO THE COMPANY'S CONTINUING NEED FOR ADDITIONAL CAPITAL, THE
COMPANY'S NEED FOR LIQUIDITY, THE EFFECTS OF COMPETITION, THE COMPANY'S RELIANCE
ON KEY PERSONNEL, THE COMPANY'S DEPENDENCE ON TECHNOLOGY AND TECHNOLOGICAL
INNOVATION, THE RESTRICTIONS ON TRANSFER OF THE UNITS, AS WELL AS SIMILAR
RESTRICTIONS ON TRANSFERS OF THE SECURITIES COMPRISING THE UNITS, POTENTIAL
CONFLICTS OF INTEREST AND RELATED PARTY TRANSACTIONS INVOLVING THE COMPANY AND
THE DIRECTORS AND OFFICERS OF THE COMPANY, AND THE SUCCESSFUL CONSUMMATION OF
THE COMPANY'S BUSINESS AND OPERATING STRATEGY.
Article IV
Restrictions on Transfer
Section 4.1. Limited Transferability. The Units, the Debentures and the
Warrants constituting the Units and the shares of Common Stock issuable upon the
conversion of the Debentures and the exercise of the Warrants (the "Issuable
Shares") shall not be transferable except in accordance with the provisions of
this Article IV, which provisions are intended to insure compliance with the
provisions of the Securities Act in respect of the transfer of any of such
securities.
Section 4.2. Restrictive Legend. The Debentures and any certificates or
other instrument representing the Warrants or the Issuable Shares shall (unless
otherwise permitted by the provisions of Section 4.4 below) be stamped or
otherwise imprinted with the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND CANNOT BE
SOLD OR TRANSFERRED UNLESS AND UNTIL THEY ARE SO REGISTERED OR UNLESS
AN EXEMPTION UNDER SUCH ACT OR LAWS IS AVAILABLE. THE TRANSFERABILITY
OF THESE SECURITIES IS FURTHER SUBJECT TO THE PROVISIONS OF A UNIT
PURCHASE AGREEMENT DATED AS OF MARCH 7, 1996 BY AND BETWEEN THE
COMPANY AND CERBERUS PARTNERS, L.P.
For purposes of this Article IV, any references to "Debentures," "Warrants"
or "Issuable Shares" shall include any other securities issued in respect of any
of such securities.
Section 4.3. Restrictions on Transfer. (a) Subject to the provisions of
Section 4.4, the Debentures, the Warrants and the Issuable Shares shall not be
transferred, and the Company shall not be required to register any transfer
thereof on the books of the Company, unless such transfer is made pursuant to an
effective registration statement, in compliance with Rule 144, or pursuant to
another exemption under the Securities Act; provided, however, that the Company
shall not be required to register any transfer in the event any securities are
offered or sold otherwise than pursuant to an effective registration statement
or pursuant to Rule 144 unless the Company shall have received an opinion of
counsel to the Purchaser, reasonably satisfactory to the Company, that such
transfer does not require registration under the Securities Act or applicable
state securities laws. Notwithstanding the foregoing, the Purchaser may freely
transfer at any time, or from time to time, the Debentures, the Warrants and/or
the Issuable Shares, or any interest therein, to (i) any general partner of the
Purchaser, (ii) any limited partner of the Purchaser, (iii) any other fund,
account or other entity managed, directly or indirectly, by the general partner
of the Purchaser or any general partner of the general partner of the Purchaser,
or (iv) the respective subsidiaries and affiliates of any of the foregoing,
provided that any such transferee specified in clauses (i) through (iv) above is
an Accredited Investor (each, a "Permitted Transferee") without
complying with the provisions of this Article IV (a "Permitted Transfer") and
the Company shall, or shall cause any registrar or transfer agent to, promptly
register any such Permitted Transfer on the books of the Company; provided,
however, that in connection with any such Permitted Transfer, the Permitted
Transferee shall represent to the Company that it is an Accredited Investor and
shall agree in writing to be bound by the provisions of this Article IV.
(b) In addition to the restrictions set forth in paragraph (a) above, for a
period of 150 days after the Closing (the "Restrictive Period"), the Purchaser
shall not sell, assign, transfer or otherwise dispose of the Debentures or any
interest therein (a "Transfer") (other than a Permitted Transfer) without the
prior written consent of the Company which may be withheld by the Company in its
sole discretion if, as a result thereof, the Purchaser would beneficially own
(as defined in Section 5.1(d)) less than 50% of the Debentures then outstanding.
Subject to the restrictions set forth in paragraph (a) above, from and after the
end of the Restrictive Period, the Purchaser may Transfer all or a portion of
the Debentures, or any interest therein, without the consent of the Company.
Section 4.4. Lapse of Restrictions; Removal of Legends. The restrictions on
transfer set forth in Section 4.3 relating to the Warrants and the Issuable
Shares shall lapse upon the effectiveness of the registration statement relating
thereto which the Company is required to file and maintain effective as
specified therein. From and after the effective date of such registration
statement, the Purchaser shall be entitled to exchange the Warrants and any
certificates representing Issuable Shares for replacement Warrants or
certificates not bearing the restrictive legend set forth in Section 4.2 above.
Article V
Board Representation
Section 5.1. Board Representation. (a) So long as the "Purchaser Group" (as
defined below) beneficially owns at least 10% of the issued and outstanding
shares of Common Stock, the Purchaser shall have the right to designate one
individual to serve on the Board of Directors of the Company; provided, however,
that if the Purchaser Group ceases at any time to beneficially own an aggregate
of at least 10% of the issued and outstanding shares of Common Stock, the rights
set forth in this Section 6.2 shall immediately terminate and shall not re-vest
if at any time thereafter the Purchaser Group beneficially owns an aggregate of
10% or more of the issued and outstanding shares of Common Stock. After the
Closing, promptly upon receipt of a request by the Purchaser, the Company shall
take all action necessary to increase the size of the Board of Directors by one
director and to appoint the person designated by the Purchaser to fill the
vacancy caused by such increase in the size of the Board of Directors. The term
of such designee shall continue until the next succeeding annual meeting of
shareholders of the Company and until his successor is duly elected and
qualified. Thereafter, so long as the Purchaser continues to have the right to
designate a member of the Company's Board of Directors pursuant to this Section
5.1, the Company shall use its best efforts to cause the designee or such other
person designated by the Purchaser from time to time (who shall be reasonably
satisfactory to the Company; provided, however, that any officer of the
Purchaser shall be deemed to be satisfactory
to the Company) (the "Purchaser Representative") to be elected to the Board of
Directors of the Company at any succeeding annual meeting of the shareholders of
the Company or, if the election of directors occurs other than pursuant to a
meeting of shareholders, to otherwise effect the election of the Purchaser
Representative as a director.
(b) In the event that the Purchaser Representative resigns, is unable to
serve as a director or is removed, with or without cause, the Purchaser shall
give written notice to the Secretary of the Company designating a replacement
Purchaser Representative. Promptly upon receipt of such notice, the Company
shall use its best efforts to fill the resulting vacancy by causing the person
designated in the notice to be appointed to fill such vacancy.
(c) In the event that the Purchaser Group shall, at any time, cease to
beneficially own at least 10% of the issued and outstanding Common Stock, the
Purchaser Representative shall be deemed to have resigned as a director
effective as of the date the Purchaser Group's aggregate beneficial ownership of
Common Stock first falls below 10% and shall cease to be a member of the Board
of Directors; provided, however, that such person's participation in the
deliberations of the Board of Directors subsequent to the date of his
termination as a director shall not affect in any respect any corporate action
which has been approved by a majority of the remaining members of the Board of
Directors, whether at a meeting at which a quorum of the Board of Directors
(excluding the Purchaser Representative for this purpose) was present or
pursuant to a written consent signed by the remaining directors.
(d) As used herein, the term "beneficial owner" (and, with correlative
meanings, "beneficially own" and "beneficial ownership") of any interest means a
person or entity who, together with his or its affiliates, is or may be deemed a
beneficial owner of such interest for purposes of Rule 13d-3 or 13d-5 under the
Exchange Act or who, together with his or its affiliates, has the right to
become such a beneficial owner of such interest (whether such right is
exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding, or upon the exercise, conversion or
exchange of any warrant, right or other instrument, or otherwise. As used
herein, the term "Purchaser Group" means the Purchaser and all Permitted
Transferees of the Purchaser.
Article VI
Deliveries at Closing
Section 6.1. Deliveries by the Company. Prior to or at the Closing, the
Company shall deliver to the Purchaser the following in form and substance
reasonably satisfactory to the Purchaser's counsel:
(a) a certificate of the President or a Vice President of the Company,
dated the date hereof, to the effect that (i) the person signing such
certificate is familiar with this Agreement, (ii) all representations and
warranties made by the Company in this Agreement are true, correct and complete
in all material respects as of the Closing, (iii) the Company has duly performed
or complied with, in all material respects, all of the covenants, obligations
and agreements to be
performed or complied with by it under the terms of this Agreement on or prior
to or at Closing, and (iv) there has been no Material Adverse Change or
prospective change which could reasonably be expected to result in a Material
Adverse Change since September 30, 1995;
(b) a certificate of the Secretary or Assistant Secretary of the Company,
dated the date hereof, as to the incumbency of any officer of the Company
executing this Agreement or any document related thereto and covering such other
matters as the Purchaser may reasonably request;
(c) a certified copy of the resolutions of the Company's Board of Directors
authorizing the execution, delivery and consummation of this Agreement and the
transactions contemplated hereby;
(d) the Debentures and the Warrants, duly executed, issued and delivered by
the Company and registered in such names as the Purchaser may request;
(e) a duly executed counterpart of the Credit Facility;
(f) a duly executed counterpart of the Security Documents and such
assurances of the perfection, priority and status of the security interests
granted thereby as the Purchaser may request;
(g) a duly executed counterpart of the Advisory Agreement;
(h) a duly executed counterpart of the ▇▇▇▇▇ Agreement;
(i) evidence that the Company has completed the Restructuring and the
offering of at least 15 Preferred Stock Units, the Series E Warrants and the
▇▇▇▇▇ Options;
(j) a certified copy of the Amendment;
(k) evidence that (i) ▇▇▇▇▇▇ Deutsch and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ have resigned as
directors of the Company effective as of the Closing, (ii) the size of the Board
of Directors of the Company has been increased to six members, and (iii) ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ have been elected as directors
of the Company, effective as of the Closing;
(l) an opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇-▇▇▇▇▇▇, counsel to the Company, covering
such matters as the Purchaser may reasonably request; and
(m) such other documents or instruments as the Purchaser reasonably
requests to effect the transactions contemplated hereby.
Section 6.2. Deliveries by the Purchaser. Prior to or at the Closing, the
Purchaser shall deliver to the Company the following in form and substance
reasonably satisfactory to the Company's counsel:
(a) a certificate of a Managing Director of the Purchaser, dated the date
hereof, to the effect that (i) the person signing such certificate is familiar
with this Agreement, (ii) all representations and warranties made by the
Purchaser are true, correct and complete in all material respects as of the
Closing, and (iii) the Purchaser has duly performed or complied with, in all
material respects, all of the covenants, obligations and agreements to be
performed or complied with by it under the terms of this Agreement on or prior
to or at the Closing;
(b) a certificate of a Managing Director of the Purchaser, dated the date
hereof, as to the incumbency of any officer of the Partnership executing this
Agreement or any document related thereto and covering such other matters as the
Company may reasonably request;
(c) evidence that the Purchase Price has been paid in full; and
(d) such other documents or instruments as the Company reasonably requests
to effect the transactions contemplated hereby.
ARTICLE VII
Survival, Amendment and Waiver
Section 7.1. Survival of Representations and Warranties. The
representations and warranties contained in this Agreement or any certificate
delivered in connection herewith shall survive the Closing and shall apply with
respect to claims asserted in writing within one year of the Closing. The
provisions of this Section 7.1 shall not limit any covenant or agreement of the
parties hereto which, by its terms, contemplates performance after the Closing.
Section 7.2. Amendments. This Agreement may be amended by the parties
hereto, at any time prior to the Closing, in the case of the Company, by action
taken by its Board of Directors and, in the case of the Purchaser, by action
taken by its general partner. This Agreement (including the provisions of this
Section 7.2) may not be amended or modified except by an instrument in writing
signed on behalf of all of the parties hereto.
Section 7.3. Extension; Waiver. At any time prior to Closing, the parties
hereto, in the case of the Company, by action taken by its Board of Directors
and, in the case of the Purchaser, by action taken by its general partner, may
(i) extend the time for performance of any of the obligations or other acts of
the other parties hereto, (ii) waive any inaccuracies in the representations and
warranties of the other parties hereto contained herein or in any document
delivered pursuant hereto, and (iii) waive compliance with any of the agreements
of the other parties hereto or satisfaction of any of the conditions to such
party's obligations contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. The failure of a party
hereto to assert any of its rights hereunder shall not constitute a waiver of
such rights.
ARTICLE VIII
Miscellaneous
Section 8.1. Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be delivered personally, by
facsimile or sent by certified, registered or express air mail, postage prepaid,
and shall be deemed given when so delivered personally, or by facsimile, or if
mailed, two days after the date of mailing, as follows:
If to the Company: ▇▇▇-▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Executive Officer
With a copy to: ▇▇▇▇▇▇ & ▇▇▇▇▇▇-▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇, Esq.
If to the Purchaser: Cerberus Partners, L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇▇▇▇, Sandler, Kohl,
▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
or to such other address as any party hereto shall notify the other parties
hereto (as provided above) from time to time.
Section 8.2. Expenses. The Company shall pay its own expenses incident to
this Agreement and the transactions contemplated herein. The Company shall be
responsible for and shall pay the expenses of the Purchaser incident to this
Agreement and the transactions contemplated herein as provided in the Letter,
dated March 5, 1996 (the "Letter"), from the Company to the Purchaser.
Section 8.3. Governing Law; Consent to Jurisdiction. This Agreement shall
be governed by, and construed in accordance with, the internal laws of the State
of Delaware, without reference to the choice of law principles thereof.
Section 8.4. Assignment; Successors and Assigns; No Third Party Rights.
This Agreement may not be assigned by operation of law or otherwise, and any
attempted assignment shall be null and void; provided, however, that the
Purchaser may assign this Agreement (or any interest herein) to one or more
Permitted Transferees. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, successors, assigns
and legal representatives. This Agreement shall be for the sole benefit of the
parties to this Agreement and their respective heirs, successors, assigns and
legal representatives and is not intended, nor shall be construed, to give any
Person, other than the parties hereto and their respective heirs, successors,
assigns and legal representatives, any legal or equitable right, remedy or claim
hereunder.
Section 8.5. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original agreement, but all of which together
shall constitute one and the same instrument.
Section 8.6. Titles and Headings. The titles and headings in this Agreement
are for reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 8.7. Entire Agreement. This Agreement and the Letter together
constitute the entire agreement among the parties with respect to the matters
covered hereby and supersede all previous written, oral or implied
understandings among them with respect to such matters.
Section 8.8. Severability. The invalidity of any portion hereof shall not
affect the validity, force or effect of the remaining portions hereof. If it is
ever held that any restriction hereunder is too broad to permit enforcement of
such restriction to its fullest extent, such restriction shall be enforced to
the maximum extent permitted by law.
Section 8.9. No Strict Construction. Each of the parties hereto acknowledge
that this Agreement has been prepared jointly by the parties hereto, and shall
not be strictly construed against either party.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
LOGIMETRICS, INC.
By: /s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
______________________________
Name:▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: President
CERBERUS PARTNERS, L.P.
By: Cerberus Associates, L.P.,
its General Partner
By: /s/▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
______________________________
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: General Partner
EXHIBIT A
FORM OF DEBENTURE
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND CANNOT BE SOLD OR TRANSFERRED
UNLESS AND UNTIL THEY ARE SO REGISTERED OR UNLESS AN EXEMPTION UNDER SUCH ACT OR
LAWS IS AVAILABLE. THE TRANSFERABILITY OF THESE SECURITIES IS FURTHER SUBJECT TO
THE PROVISIONS OF A UNIT PURCHASE AGREEMENT DATED AS OF MARCH 7, 1996 BY AND
BETWEEN THE COMPANY AND CERBERUS PARTNERS, L.P.
12% CONVERTIBLE SENIOR SUBORDINATED DEBENTURE
March 7, 1996
LOGIMETRICS, INC., a Delaware corporation (the "Company"), hereby promises
to pay to the order of Cerberus Partners, L.P. (together with its, his or her
successors and assigns, the "Holder") the principal amount of fifty thousand
dollars ($50,000) together with interest thereon calculated from the date hereof
in accordance with the provisions of this debenture ("Debenture").
This Debenture is one of a series of 12% Convertible Senior Subordinated
Debentures ("Debentures") the principal of which aggregates one million five
hundred thousand dollars ($1,500,000). All Debentures rank pari passu.
By accepting this Debenture, the Holder agrees that the obligations of the
Company to the Holder under this Debenture shall be subordinated only to the
Senior Debt (as hereinafter defined) of the Company, all upon the terms set
forth in paragraph 4 hereof.
1. Payment of Interest. Subject to subparagraph 6(c)(xviii)(C) hereof,
interest will accrue from the date hereof at the rate of twelve percent (12%)
per annum on the unpaid principal amount of this Debenture outstanding from time
to time on the basis of a 360-day year for the actual number of days elapsed.
Subject to paragraph 4 hereof, the Company will pay to the Holder all accrued
and unpaid interest on this Debenture on June 15, 1996 and quarterly thereafter,
in arrears, on the 15th day of September, the 15th day of December, the 15th day
of March and the 15th day of June to and including the earlier to occur of the
Conversion Date (hereinafter defined) or the
Due Date (hereinafter defined). Interest will accrue at the greater of the
Default Rate (hereinafter defined) and the rate of fifteen percent (15%) per
annum on any principal payment past due under this Debenture and, unless
prohibited under applicable law (and if so prohibited then only to the extent
not so prohibited), on any interest which has not been paid on the date on which
it is due and payable (without giving effect to any applicable grace periods or
paragraph 4 hereof) until such time as payment therefor is actually delivered to
the Holder.
2. Payment of Principal on Debenture.
(a) Scheduled Payments. The Company will repay the principal amount of
this Debenture on December 31, 1998 ("Due Date").
(b) Optional Prepayment. At any time after nine months from the date
hereof, provided that the Registration Statement (hereinafter defined) is
effective and available for sales of Registrable Securities (hereinafter
defined) thereunder, the Company may at any time hereafter prepay, without
premium or penalty, all (but not less than all) of the outstanding principal
amount of the Debentures, together with interest accrued on such prepaid amount
to the date of payment; provided (i) the average closing price of the Company's
Common Stock on days the Common Stock traded during the 120-day period
immediately preceding the date of the notice provided for in paragraph (c)
hereinbelow shall have been not less than $5.00, and (ii) the closing price of
the Common Stock for each of the 30 trading days immediately preceding the date
of such notice shall have been not less than $5.00, adjusted in each case for
stock splits, stock dividends or other similar transactions effecting the price
of the Common Stock. No Debenture may be prepaid unless all Debentures are
prepaid.
(c) Notice of Prepayment. The Company will give written notice of its
election to prepay this Debenture to the Holder in person or by registered or
certified mail, return receipt requested, at least thirty (30) and not more than
forty-five (45) days prior to the date of prepayment. On the date of prepayment
specified in the Company's notice, the Company will deliver to the Holder of
this Debenture in person or by registered or certified mail, return receipt
requested, a cashier's or certified check for the entire outstanding principal
amount being prepaid, together with all accrued interest thereon through the
date of prepayment.
3. Intentionally Omitted.
4. Subordination. The Company's payment, whether voluntary or involuntary,
whether in cash, property, securities or otherwise and whether by
application of offset or otherwise (hereinafter "Payment") of any of its
obligations under this Debenture shall be subject to the following restrictions:
(a) Subordination to Senior Debt. Anything in this Debenture to the
contrary notwithstanding, the obligations of the Company in respect of the
principal of and interest (including any premium or penalty) on this Debenture
and any other amounts due under this Debenture (the "Subordinated Debt") shall
be subordinate and junior in right of payment, to the extent and in the manner
hereinafter set forth, to the Senior Debt. "Senior Debt", when used with respect
to the Company, means (i) the Company's indebtedness to North Fork Bank ("Bank")
under (A) that certain $800,000 Further Restated, Increased and Amended Term
Loan Note, dated March 7, 1996, and (B) that certain $2,200,000 Fifth Restated
and Amended Revolving Credit Note, dated March 7, 1996, in each case, together
with interest thereon and (ii) renewals, extensions, refinancings, deferrals,
restructurings, amendments, modifications and waivers of the indebtedness
described in clause (i) above.
(b) Default on Senior Debt. So long as the Senior Debt has not been
paid in full, if there shall occur a default in the payment when due of any
amount due and owing on account of Senior Debt (any of the foregoing being a
"Senior Debt Default") then, from and after the receipt of written notice
thereof from the holder of Senior Debt unless and until such Senior Debt Default
shall have been remedied or waived the Company will not make any Payment on any
Subordinated Debt, and the Holders of Subordinated Debt will not receive or
accept any direct or indirect Payment in respect thereof, and the Company may
not redeem or otherwise acquire any Subordinated Debt.
(c) Changes in Senior Debt. Any holder of Senior Debt may, at any time
and from time to time, without the consent of, or notice to, the Holder and
without incurring responsibility to the Holder, and without impairing or
releasing the obligations of the Holder hereunder:
(i) Change the manner, place or terms of payment or change or
extend the time of payment of or renew or alter the Senior Debt or any
portion thereof; provided, however, that without the written consent of the
Majority Holders (hereinafter defined) the principal amount of and interest
rate applicable from time to time to Senior Debt may not be increased
(other than pursuant to the terms of the Senior Debt as such terms existed
on the date of issuance hereof);
(ii) Sell, exchange, release or otherwise deal with any
collateral securing the Senior Debt or any other property by whomsoever at
any
time pledged or mortgaged to secure, or however securing, the Senior Debt
or any portion thereof; and
(iii) Apply any sums by whomsoever paid or however released to
the Senior Debt or any portion thereof.
(d) Consent to Senior Debt. By acceptance of this Debenture, the
Holder hereby consents to the making of Senior Debt and hereby acknowledges that
each current and future holder of Senior Debt has relied, and in the future will
rely, upon the terms of this Debenture. The holders of Senior Debt shall have no
liability to the Holder and the Holder hereby waives any claim which it may have
now or hereafter against any holder of Senior Debt arising from any and all
actions which any holder of Senior Debt may take or omit to take in good faith
with regard to the Senior Debt or its rights or obligations hereunder.
(e) Payments in Trust. Until the Senior Debt has been repaid in full,
in the event the Holder shall receive any Payment in contravention of the
provisions of this paragraph 4 including, Payments arising under the
subordination provisions of any other indebtedness of the company, the Holder
shall hold all such Payments so received in trust for the holders of Senior Debt
and shall forthwith turn over all such Payments to the holders of Senior Debt in
the form received (except for the endorsement or assignment of the Holder as
necessary, without recourse or warranty) to be applied to payment of the Senior
Debt whether or not then due and payable. Any Payment so received in trust and
turned over to the holders of Senior Debt shall not be deemed a Payment in
satisfaction of the Subordinated Debt by the Company.
(f) Payment in full of Senior Debt; Subrogation. If any payment or
distribution to which a Holder of Subordinated Debt would otherwise have been
entitled but for the provisions of this paragraph 4 shall have been applied,
pursuant to the provisions of this paragraph 4, to the payment of Senior Debt,
then and in such case, the Holder of the Subordinated Debt (i) shall be entitled
to receive from the holders of Senior Debt at the time outstanding any payments
or distributions received by such holders of Senior Debt in excess of the amount
sufficient to pay all Senior Debt in cash in full (whether or not then due), and
(ii) following payment of the Senior Debt in full, shall be subrogated to any
right of the holders of Senior Debt to receive any and all further payments or
distributions applicable to Senior Debt, until all the Subordinated Debt shall
have been paid in full. If the Holder of the Subordinated Debt shall have been
subrogated to the rights of the holders of Senior Debt due to the operation of
this paragraph 4(f), the Company agrees to take all such reasonable actions as
are requested by such Holders of the Subordinated Debt in order to cause such
Holders to
be able to obtain payments from the Company with respect to such subrogation
rights as soon as possible.
(g) No Impairment of the Company's Obligations. Nothing contained in
this paragraph 4, as between the Company and the Holder of the Subordinated
Debt, shall impair the obligation of the Company, which is absolute and
unconditional, to pay to the Holder the principal of and interest on the
Subordinated Debt as and when the same shall become due and payable in
accordance with the terms hereof.
(h) Advances in Reliance. The Holder of the Subordinated Debt, by its
acceptance thereof, agrees that each holder of Senior Debt has advanced funds or
may in the future advance funds in reliance upon the terms and conditions
hereof.
(i) Non-Waiver of Rights. No right of any holder of Senior Debt to
enforce its right of subordination as herein provided shall at any time in any
way be prejudiced or impaired by any act or failure to act on the part of the
Company, or by any act or failure to act by any such holder, or by any
non-compliance by the Company with the terms, provisions and covenants of the
Subordinated Debt, regardless of any knowledge thereof any such holder may have
or be otherwise charged with.
(j) Recaptured Payments. Any Payments received by a holder of Senior
Debt from the Company or the Holder which, in connection with an Insolvency
Event or Proceeding (hereinafter defined), is required to be remitted to the
payor or the bankrupt estate shall not be deemed a Payment to such holder of
Senior Debt for all purposes hereunder.
5. Security. The obligations of the Company to Holders of the Debentures
are secured pursuant to a Security Agreement of even date ("Security Agreement")
made by the Company in favor of Holders of the Debentures. In addition to all
rights and remedies provided herein, Holders of the Debentures are entitled to
the benefits provided in the Security Agreement. By accepting this Debenture,
the Holder hereof agrees to be bound by the terms of the Security Agreement.
6. Conversion Rights.
(a) The Holder of this Debenture has the right (the "Conversion
Right"), exercisable at his, her or its option at any time during which the
principal amount of this Debenture is outstanding, to convert this Debenture,
but only in whole, into eighty four thousand seven hundred forty-six (84,746)
shares of the Company's Common Stock, par value $.01 per share ("Common Stock"),
subject to adjustment in certain circumstances as provided herein.
(b) The Conversion Right is exercisable upon surrender of this
Debenture, together with a conversion notice, in the form attached hereto as
Exhibit A, duly executed and completed, evidencing the election of the Holder to
exercise the Conversion Right, to the Company's principal office at ▇▇▇-▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇. The registered owner of this Debenture
shall become the record Holder of the shares of Common Stock issuable upon
conversion as of the date of exercise of the Conversion Right (the "Conversion
Date"). The shares issued in connection with the Conversion Right shall be
registered initially in the name of the Holder, and delivered to the Holder no
later than two (2) business days after receipt of a properly completed
conversion notice. Upon conversion, the Company shall pay to the Holder accrued
but unpaid interest on this Debenture up to, but excluding, the Conversion Date.
(c) In case, at any time or from time to time after the date of
issuance of this Debenture ("Issuance Date"), the Company shall issue or sell
shares of its Common Stock (other than any Common Stock issuable upon (i)
conversion of the Debentures, (ii) exercise of those certain Amended and
Restated Series A Warrants dated March 7, 1996 to purchase 600,000 shares of
Common Stock ("Series A Warrants"), (iii) exercise by each of ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ Deutsch (the "Principals") of his option to purchase
100,000 shares of Common Stock at a price of $.10 per share ("Principals'
Options"), (iv) exercise of those certain Amended and Restated Series B Warrants
dated March 7, 1996 to purchase 1,500,000 shares of Common Stock ("Series B
Warrants"), (v) conversion of the Company's $300,000 Amended and Restated 12%
Convertible Subordinated Debentures ("1995 Debentures"), (vi) exercise of those
certain Series C Warrants dated March 7, 1996 to purchase an aggregate of
2,542,380 shares of Common Stock ("Series C Warrants"), (vii) exercise of those
certain Series D Warrants dated March 7, 1996 to purchase an aggregate of
2,830,200 shares of Common Stock ("Series D Warrants"), (viii) exercise of those
certain Series E Warrants dated March 7, 1996 to purchase 1,000,000 shares of
the Company's Common Stock ("Series E Warrants" and together with the Series A,
B, C and D Warrants, "Warrants"), (ix) exercise of those certain Stock Options,
dated March 7, 1996 to purchase 1,000,000 shares of Common Stock issued to
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("▇▇▇▇▇ Options") and (x) conversion of the Company's up to 30
shares of Series A 12% Cumulative Convertible Redeemable Preferred Stock
("Preferred Stock" and together with the 1995 Debentures, the Senior
Subordinated Debentures, the Warrants, the ▇▇▇▇▇ Options, the Principals'
Options and any shares of Common Stock issuable upon conversion or exercise
thereof, the "Subject Securities")) for a consideration per share less than $.30
per share ("Trigger Price"), or, if a Pro Forma Adjusted Trigger Price
(hereinafter defined) shall be in effect as provided below in this
paragraph (c), then less than such Pro Forma Adjusted Trigger Price per share,
then and in each such
case the Holder of this Debenture, upon the conversion hereof as provided in
paragraph (a) hereof, shall be entitled to receive, in lieu of the shares of
Common Stock theretofore receivable upon the conversion of this Debenture, a
number of shares of Common Stock determined by (a) dividing the Trigger Price by
a Pro Forma Adjusted Trigger Price per share to be computed as provided below in
this paragraph (c), and (b) multiplying the resulting quotient by the number of
shares of Common Stock into which this Debenture is then convertible. A Pro
Forma Adjusted Trigger Price per share shall be the price computed (to the
nearest cent, a fraction of half cent or more being considered a full cent):
by dividing (i) the sum of (x) the result obtained by multiplying
the number of shares of Common Stock of the Company outstanding
immediately prior to such issue or sale by the Trigger Price (or,
if a Pro Forma Adjusted Trigger Price shall be in effect, by such
Price), and (y) the consideration, if any, received by the
Company upon such issue or sale, by (ii) the number of shares of
Common Stock of the Company outstanding immediately after such
issue or sale.
For the purpose of this paragraph (c):
(i) In case the Company splits its Common Stock or shall declare
any dividend, or make any other distribution, upon any stock of the Company
of any class payable in Common Stock, or in any stock or other securities
directly or indirectly convertible into or exchangeable for Common Stock
(any such stock or other securities being hereinafter called "Convertible
Securities"), such split, declaration or distribution shall be deemed to be
an issue or sale (as of the record date for such split, dividend or other
distribution), without consideration, of such Common Stock or such
Convertible Securities, as the case may be.
(ii) In case the Company shall issue or sell any Convertible
Securities other than the Subject Securities, there shall be determined the
price per share for which Common Stock is issuable upon the conversion or
exchange thereof, such determination to be made by dividing (a) the total
amount received or receivable by the Company as consideration for the issue
or sale of such Convertible Securities, plus the minimum aggregate amount
of additional consideration, if any, payable to the Company upon the
conversion or exchange thereof, by (b) the maximum number of shares of
Common Stock of the
Company issuable upon the conversion or exchange of all such Convertible
Securities.
If the price per share so determined shall be less than the
Trigger Price (or, if a Pro Forma Adjusted Trigger Price shall be in
effect, less than such Price) as of the date of such issue or sale, then
such issue or sale shall be deemed to be an issue or sale for cash (as of
the date of issue or sale of such Convertible Securities) of such maximum
number of shares of Common Stock at the price per share so determined,
provided that, if such Convertible Securities shall by their terms provide
for an increase or increases, with the passage of time, in the amount of
additional consideration, if any, payable to the Company, or in the rate of
exchange, upon the conversion or exchange thereof, the Pro Forma Adjusted
Trigger Price per share shall, forthwith upon any such increase becoming
effective, be readjusted to reflect the same, and provided, further, that
upon the expiration of such rights of conversion or exchange of such
Convertible Securities, if any thereof shall not have been exercised, the
Pro Forma Adjusted Trigger Price per share shall forthwith be readjusted
and thereafter be the price which it would have been had an adjustment been
made on the basis that the only shares of Common Stock so issued or sold
were those issued or sold upon the conversion or exchange of such
Convertible Securities, and that they were issued or sold for the
consideration actually received by the Company upon such conversion or
exchange, plus the consideration, if any, actually received by the Company
for the issue or sale of all such Convertible Securities which shall have
been converted or exchanged.
(iii) In case the Company shall grant any rights or options to
subscribe for, purchase or otherwise acquire Common Stock of any class
other than the Subject Securities, there shall be determined the price per
share for which Common Stock is issuable upon the exercise of such rights
or options, such determination to be made by dividing (a) the total amount,
if any, received or receivable by the Company as consideration for the
granting of such rights or options, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the exercise
of such rights or options, by (b) the maximum number of shares of Common
Stock issuable upon the exercise of such rights or options.
If the price per share so determined shall be less than the
Trigger Price (or, if a Pro Forma Adjusted Trigger Price shall be in
effect, less than such Price) as of the date of such issue or sale, then
the granting of such rights or options shall be deemed to be an issue or
sale for cash (as of the date of the granting of such rights or options) of
such maximum number of shares of
Common Stock at the price per share so determined, provided that, if such
rights or options shall by their terms provide for an increase or
increases, with the passage of time, in the amount of additional
consideration, if any, payable to the Company upon the exercise thereof,
the Pro Forma Adjusted Trigger Price per share shall, forthwith upon any
such increase becoming effective, be readjusted to reflect the same, and
provided, further, that upon the expiration of such rights or options, if
any thereof shall not have been exercised, the Pro Forma Adjusted Trigger
Price per share shall forthwith be readjusted and thereafter be the price
which it would have been had an adjustment been made on the basis that the
only shares of Common Stock so issued or sold were those issued or sold
upon the exercise of such rights or options and that they were issued or
sold for the consideration actually received by the Company upon such
exercise, plus the consideration, if any, actually received by the Company
for the granting of all such rights or options, whether or not exercised.
(iv) In case the Company shall grant any rights or options to
subscribe for, purchase or otherwise acquire Convertible Securities, such
Convertible Securities shall be deemed, for the purposes of subparagraph
(iii) above, to have been issued or sold for the total amount received or
receivable by the Company as consideration for the granting of such rights
or options plus the minimum aggregate amount of additional consideration,
if any, payable to the Company upon the exercise of such rights or options,
provided that, upon the expiration of such rights or options, if any
thereof shall not have been exercised, the Pro Forma Adjusted Trigger Price
per share shall forthwith be readjusted and thereafter be the price which
it would have been had an adjustment been made upon the basis that the only
Convertible Securities so issued or sold were those issued or sold upon the
exercise of such rights or options and that they were issued or sold for
the consideration actually received by the Company upon such exercise, plus
the consideration, if any, actually received by the Company for the
granting of all such rights or options, whether or not exercised.
(v) In case any shares of stock or other securities, other than
Common Stock of the Company, shall at any time be receivable upon the
conversion of this Debenture, and in case any additional shares of such
stock or any additional such securities (or any stock or other securities
convertible into or exchangeable for any such stock or securities) shall be
issued or sold for a consideration per share such as to dilute the purchase
rights evidenced by this Debenture, then and in each such case the Pro
Forma Adjusted Trigger Price per share shall forthwith be adjusted,
substantially in the manner provided for above in this paragraph (c), so as
to protect the holder of this Debenture against the effect of such
dilution.
(vi) In case any shares of Common Stock or Convertible Securities
or any rights or options to subscribe for, purchase or otherwise acquire
any Common Stock or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to be the amount
received by the Company therefor, after deducting any expenses incurred and
any underwriting or similar commissions, compensation or concessions paid
or allowed by the Company in connection with such issue or sale.
(vii) In case any shares of Common Stock or Convertible
Securities or any rights or options to subscribe for, purchase or otherwise
acquire any Common Stock or Convertible Securities shall be issued or sold
for a consideration other than cash (or a consideration which includes
cash, if any cash constitutes a part of the assets of a corporation or
business substantially all of the assets of which are being received a such
consideration) then, for the purpose of this paragraph (c), the Board of
Directors of the Company shall promptly determine the fair value of such
consideration, and such Common Stock, Convertible Securities, rights or
options shall be deemed to have been issued or sold on the date of such
determination in good faith. Such value shall not be more than the amount
at which such consideration is recorded in the books of the Company for
accounting purposes except in the case of an acquisition accounted for on a
pooling of interest basis. In case any Common Stock or Convertible
Securities or any rights or options to subscribe for, purchase or otherwise
acquire any Common Stock or Convertible Securities shall be issued or sold
together with other stock or securities or other assets of the Company for
a consideration which covers both, the Board of Directors of the Company
shall promptly determine what part of the consideration so received is to
be deemed to be the consideration for the issue or sale of such Common
Stock or Convertible Securities or such rights or options.
The Company covenants and agrees that, should any determination
of fair value of consideration or of allocation of consideration be made by
the Board of Directors of the Company, pursuant to this subparagraph (vii),
it will, not less than seven (7) days after any and each such
determination, deliver to the holder of this Debenture a certificate signed
by the President or a Vice President and the Treasurer or an Assistant
Treasurer of the Company reciting such value as thus determined and setting
forth the nature of the transaction for which such determination was
required to be made, the nature of any consideration, other than cash, for
which Common Stock, Convertible Securities, rights or options have been or
are to be issued, the basis for its valuation, the number of shares of
Common Stock which have been or are to be
issued, and a description of any Convertible Securities, rights or options
which have been or are to be issued, including their number, amount and
terms.
(viii) In case the Company shall take a record of the holders of
shares of its stock of any class for the purpose of entitling them (a) to
receive a dividend or a distribution payable in Common Stock or in
Convertible Securities, or (b) to subscribe for, purchase or otherwise
acquire Common Stock or Convertible Securities, then such record date shall
be deemed to be the date of the issue or sale of the Common Stock issued or
sold or deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution, or the date of the
granting of such rights of subscription, purchase or other acquisition, as
the case may be.
(ix) The number of shares of Common Stock outstanding at any
given time shall include shares issuable in respect of scrip certificates
issued in lieu of fractions of shares of Common Stock, but shall exclude
shares in the treasury of the Company.
(x) Following each computation or readjustment of a Pro Forma
Adjusted Trigger Price as provided in this paragraph (c), the newly
computed or adjusted Pro Forma Adjusted Trigger Price shall remain in
effect until a further computation or readjustment thereof is required by
this paragraph (c).
(xi) In case at any time or from time to time after the Issuance
Date the holders of the Common Stock of the Company of any class (or any
other shares of stock or other securities at the time receivable upon the
exercise of this Debenture) shall have received, or, on or after the record
date fixed for the determination of eligible stockholders, shall have
become entitled to receive:
(A) other or additional stock or other securities or
property (other than cash) by way of dividend;
(B) any cash paid or payable out of capital or paid-in
surplus or surplus created as a result of a revaluation of property by
way of dividend; or
(C) other or additional (or less) stock or other securities
or property (including cash) by way of stock-split, spin-off,
split-off, split-up, reclassification, combination of shares or
similar corporate rearrangement;
(other than additional shares of Common Stock issued to holders of Common Stock
as a stock dividend or stock-split, adjustments in respect of which shall be
covered by the provisions of this paragraph (c)), then in each case the holder
of this Debenture, upon the conversion hereof as provided in paragraph (a)
hereof, shall be entitled to receive, in lieu of, or in addition to, as the case
may be, the shares theretofore receivable upon the conversion of this Debenture,
the amount of stock or other securities or property (including cash in the cases
referred to in clauses (B) and (C) above) which such holder would hold on the
date of such exercise if, on the Issuance Date, he, she or it had been the
holder of record of the number of shares of Common Stock of the Company into
which this Debenture is convertible and had thereafter, during the period from
the Issuance Date to and including the date of such conversion, retained such
shares and/or all other or additional (or less) stock or other securities or
property (including cash in the cases referred to in clauses (B) and (C) above)
receivable by him, her or it as aforesaid during such period, giving effect to
all adjustments called for during such period by paragraph (c) and subparagraph
(xii) hereof.
(xii) In case of any reorganization of the Company (or any other
corporation the stock or other securities of which are at the time
deliverable on the conversion of this Debenture) after the date hereof, or
in case, after such date, the Company (or any such other corporation) shall
consolidate with or merge into another corporation or convey all or
substantially all its assets to another corporation, then and in each such
case the holder of this Debenture, upon the conversion hereof as provided
in paragraph (a) hereof, at any time after the consummation of such
reorganization, consolidation, merger or conveyance, shall be entitled to
receive the stock or other securities or property to which such holder
would have been entitled upon such consummation if such holder had
converted this Debenture immediately prior thereto, all subject to further
adjustments as provided for herein; in each such case, the terms of this
Debenture shall be applicable to the shares of stock or other securities or
property receivable upon the conversion of this Debenture after such
consummation.
(xiii) The Company will not, by amendment of its charter or
through reorganization, consolidation, merger, dissolution, sale of assets
or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Debenture, but will at all times in
good faith assist in the carrying out of all such terms and in the taking
of all such action as may be necessary or appropriate in order to protect
the rights of the holder hereof against dilution or other impairment.
Without limiting the generality of the foregoing, the Company will not
increase the par value of any shares of stock
receivable upon the conversion of this Debenture above the amount payable
therefor upon such exercise, and at all times will take all such action as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and non-assessable stock upon the conversion of
this Debenture.
(xiv) In each case of an adjustment in the number of shares of
Common Stock or other stock, securities or property receivable on the
conversion of this Debenture, at the request of the holder of this
Debenture the Company at its expense shall promptly cause independent
public accountants of recognized standing, selected by the Company, to
compute such adjustment in accordance with the terms of this Debenture and
prepare a certificate setting forth such adjustment and showing in detail
the facts upon which such adjustment is based, including a statement of (A)
the consideration received or to be received by the Company for any
additional shares issued or sold or deemed to have been issued or sold, (B)
the number of shares of Common Stock outstanding or deemed to be
outstanding and (C) the Pro Forma Adjusted Trigger Price. The Company will
forthwith mail a copy of each such certificate to the holder of this
Debenture.
(xv) In case:
(A) the Company shall take a record of the holders of its
Common Stock (or other stock or securities at the time deliverable
upon the conversion of this Debenture) for the purpose of entitling or
enabling them to receive any dividend (other than a cash or stock
dividend at the same rate as the rate of the last cash or stock
dividend theretofore paid) or other distribution, or to exercise any
preemptive right pursuant to the Company's charter, or to receive any
right to subscribe for or purchase any shares of stock of any class or
any other securities, or to receive any other right; or
(B) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any
consolidation or merger of the Company with or into another
corporation, or any conveyance of all or substantially all of the
assets of the Company to another corporation; or
(C) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company;
then, and in each such case, the Company will mail or cause to be mailed to the
holder of this Debenture a notice specifying, as the case may be, (i) the date
on which a record is to be taken for the purpose of such dividend, distribution
or right, and stating the amount and character of such dividend, distribution or
right, or (ii) the date on which such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding up is to
take place, and the times, if any is to be fixed, as of which the holders of
record of Common Stock (or such other stock or securities at the time
deliverable upon the exercise of this Debenture) shall be entitled to exchange
their shares of Common Stock of any class (or such other stock or securities)
for reclassification, consolidation, merger, conveyance, dissolution,
liquidation or winding up or (iii) the amount and character of the stock or
other securities proposed to be issued or granted, the date of such proposed
issuance or grant and the persons or class of persons to whom such stock or
other securities ar to be offered, issued or granted. Such notice shall be
mailed at least thirty (30) days prior to the date therein specified.
(xvi) The Company will at all times reserve and keep available,
solely for insurance and delivery upon the conversion of this Debenture and
other similar Debentures, such shares of Common Stock and other stock,
securities and property as from time to time shall be issuable upon the
exercise of this Debenture and all other similar Debentures at the time
outstanding.
(xvii) Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Debenture and
(in the case of loss, theft or destruction) upon delivery of an indemnity
agreement in an amount reasonably satisfactory to it, or (in the case of
mutilation) upon surrender and cancellation thereof, the Company will
issue, in lieu thereof, a new Debenture of like tenor.
(xviii) (A) Within 90 days after the date hereof, the Company
will file a registration statement ("Registration Statement") with the
Securities and Exchange Commission ("SEC") covering the Subject Securities
(other than the Debentures, the 1995 Debentures and the Preferred Stock)
and the shares of Common Stock issuable upon conversion of the Debentures
and the Subject Securities (collectively "Registrable Securities"), and
will use its best efforts to cause the Registration Statement to become
effective on or prior to the ninetieth day after such filing and to keep
the Registration Statement effective for a period of seven years from the
date it is declared effective by the SEC.
(B) The following provisions shall be applicable to the
Registration Statement:
(aa) The Company will use its best efforts to cause the
Registration Statement to become effective as promptly as
possible, and if any stop order shall be issued by the SEC in
connection therewith to use its reasonable efforts to obtain the
removal of such order. Following the effective date of the
Registration Statement, the Company shall, upon the request of
the holder, forthwith supply such reasonable number of copies of
the Registration Statement, preliminary prospectus and prospectus
meeting the requirements of the Act, and other documents
necessary or incidental to a public offering of the Registrable
Securities, as shall be reasonably requested by the holder to
permit the holder to make a public distribution of its, his or
her Registrable Securities. The Company will use its reasonable
efforts to qualify the Registrable Securities for sale in such
states as the holder of Registrable Securities shall reasonably
request, provided that no such qualification will be required in
any jurisdiction where, solely as a result thereof, the Company
would be subject to service of general process or to taxation or
qualification as a foreign corporation doing business in such
jurisdiction. The obligations of the Company hereunder with
respect to the holder's Registrable Securities are expressly
conditioned on the holder's furnishing to the Company such
appropriate information concerning the holder, the holder's
Registrable Securities and the terms of the holder's offering of
such Registrable Securities as the Company may reasonably
request.
(bb) The Company shall pay all expenses incurred in
complying with the provisions of this subparagraph (xviii),
including, without limitation, all registration and filing fees
(including all expenses incident to filing with the National
Association of Securities Dealers, Inc.), printing expenses, fees
and disbursements of counsel to the Company, securities law and
blue sky fees and expenses and the expenses of any regular and
special audits incident to or required by any such registration.
All underwriting discounts and selling commissions applicable to
the sales of the Registrable Securities, and any state or federal
transfer taxes payable with respect to the sales of the
Registrable Securities and all fees and disbursements of counsel
for the
Holder, if any, in each case arising in connection with
registration of the Registrable Securities shall be payable by
the Holder.
(cc) In connection with the registration of the
Registrable Securities pursuant to this subparagraph (xviii), the
Company shall indemnify and hold harmless the Holder, its
affiliates, officers, directors, partners, employees, agents and
representatives, each person, if any, who controls the Holder
within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and any person claiming by or
through any of them (collectively, the "Indemnified Persons")
from and against all losses, claims, damages, expenses or
liabilities (or actions in respect thereof) arising out of or are
based upon any untrue statement of any material fact contained in
the Registration Statement or alleged untrue statement, under
which such securities were registered under the Securities Act,
any preliminary prospectus or final prospectus contained therein,
or any amendment or supplement thereto, or arise out of or are
based upon the omission to state therein a material fact required
to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they are made,
not misleading, or any violation by the Company of the Securities
Act, the Exchange Act or state securities or blue sky laws
applicable to the Company and relating to action or inaction
required of the Company in connection with such registration or
qualification under such state securities or blue sky laws; and
will reimburse the Indemnified Persons for any legal or any other
expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not
be liable in any such case to any Indemnified Person to the
extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or omission made in the
Registration Statement, said preliminary prospectus or said final
prospectus or said amendment or supplement or any document
incident thereto in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the
Holder.
(dd) The Holder will indemnify and hold harmless the
Company and each person, if any, who controls the Company
within the meaning of the Securities Act or the Exchange Act,
each officer of the Company who signs the Registration Statement
and each director of the Company from and against any and all
such losses, claims, damages or liabilities arising from any
untrue statement in, or omission from, the Registration
Statement, any such preliminary or final prospectus, amendment,
or supplement or document incident thereto if the statement or
omission in respect of which such loss, claim, damage or
liability is asserted was made in reliance upon and in conformity
with information furnished in writing to the Company by or on
behalf of the Holder for use in connection with the preparation
of the Registration Statement or such prospectus or amendment or
supplement thereof.
(ee) The reimbursements required by clauses (cc) and
(dd) shall be made by periodic payments during the course of the
investigation or defense as and when bills are received or
expenses incurred; provided, however, that to the extent that an
indemnified party receives periodic payments for legal or other
expenses during the course of an investigation or defense, and
such party subsequently received payments for such expenses from
any other parties to the proceeding, such payments shall be used
by the indemnified party to reimburse the indemnifying party for
such periodic payments. Any party which proposes to assert the
right to be indemnified under clause (cc) or (dd) will, promptly
after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim is to
be made against any indemnified party hereunder, notify each such
indemnifying party of the commencement of such action, suit or
proceeding, enclosing a copy of all papers served, but the
failure to so notify such indemnifying party of any such action,
suit or proceeding shall not relieve the indemnifying party from
any obligation which it may have to any indemnified party
hereunder unless and only to the extent that the indemnifying
party is prejudiced by said lack of notice. In case any such
action, suit or proceeding shall be brought against any
indemnified party and it shall notify the indemnifying party of
the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent that it shall wish,
jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel satisfactory to such
indemnified party, and after notice from the indemnifying party
to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party for any legal or other expense,
other than reasonable costs of investigation subsequently
incurred by such indemnified party in connection with the defense
thereof. The indemnified party shall have the right to employ its
own counsel in any such action, but the reasonable fees and
expenses of such counsel shall be at the expense of such
indemnified party, when and as incurred, unless (A) the
employment of counsel by such indemnified party has been
authorized by the indemnifying party, (B) the indemnified party
has reasonably concluded (based on advice of counsel), that there
may be legal defenses available to it that are different from or
in addition to those available to the indemnifying party, (C) the
indemnified party shall have reasonably concluded (based on
advice of counsel) that there may be a conflict of interest
between the indemnifying party and the indemnified party in the
conduct of defense of such action (in which case the indemnifying
party shall not have the right to direct the defense of such
action on behalf of the indemnified party), or (D) the
indemnifying party shall not in fact have employed counsel to
assume the defense of such action within 15 days after receipt of
notice of such action. An indemnifying party shall not be liable
for any settlement or any action or claim effected without its
consent.
(ff) If the indemnification provided for in this
subparagraph (xviii) is unavailable to any indemnified party
hereunder in respect of any losses, claims, damages, liabilities
or expenses referred to therein, then the indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to
the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the
indemnifying party and indemnified parties in connection with the
actions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and
indemnified parties shall be determined by reference to, among
other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by,
or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct
or prevent such action. The amount paid or payable by a party as
a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the
limitations set forth herein, any legal or other fees or expenses
reasonably incurred by such party in connection with any
investigation or proceeding.
(gg) The Company and the Holder agree that it would not
be just and equitable if contribution pursuant to clause (ff)
were determined by pro rata allocation or by any other method of
allocation that does not take account of the equitable
considerations referred to in the immediately preceding
paragraph. Notwithstanding any other provision hereof, in no
event shall the contribution obligation of the Holder be greater
in amount than the excess of (A) the dollar amount of net
proceeds received by the Holder upon the sale of the securities
giving rise to such contribution obligation over (B) the dollar
amount of any damages that the Holder has otherwise been required
to pay by reason of the untrue or alleged untrue statement or
omission or alleged omission giving rise to such obligation. No
person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such
fraudulent misrepresentation.
(hh) Neither the filing of the Registration Statement
by the Company pursuant to this Agreement nor the making of any
request for prospectuses by the holder shall impose upon the
holder any obligation to sell his, her or its Registrable
Securities.
(ii) The holder, upon receipt of notice from the
Company that an event has occurred which requires a
post-effective amendment to the Registration Statement or a
supplement to the prospectus included therein, shall promptly
discontinue the sale of his, her or its Registrable Securities
until the holder receives a copy of a supplemented or amended
prospectus from the Company, which the Company shall provide as
soon as practicable after such notice.
(C) In the event (a) the Registration Statement is not filed
by the Company with the SEC on or prior to the ninetieth (90th) day
after the date hereof, or (b) the Registration Statement has not been
declared
effective by the SEC on or prior to the one hundred eightieth (180th)
day after the date hereof, the annual interest rate on the Debentures
shall be the rate per annum ("Default Rate") which is 12% increased by
one and one-half percent (1-1/2%) per annum for the first three (3)
months immediately following the expiration of such ninety (90) day
period or one hundred eighty (180) day period, as the case may be, and
by an additional one-half of one percent (1/2%) per annum at the
beginning of each subsequent thirty (30) day period thereafter, until
such time as the requirements of clause (a) or (b) above, as the case
may be, have been satisfied, at which time all increases in the
interest rate borne by the Debentures resulting from the operation of
this sentence shall terminate and the interest rate borne by the
Debentures shall revert to the rate that otherwise would be in effect
but for the operation of this sentence; provided, however, that in no
event shall the interest rate borne by the Debentures exceed seventh
percent (17%) per annum pursuant to this sentence.
7. Covenants.
(a) Affirmative Covenants: The Company will, and with respect to the
agreements set forth in subsections (i) through (viii) hereof, will cause each
subsidiary to:
(i) with respect to its properties, assets and business, maintain
insurance against loss or damage, to the extent that property, assets and
businesses of similar character are usually so insured by companies
similarly situated and operating like properties, assets or businesses with
responsible insurance companies satisfactory to the Majority Holders said
insurance to indicate the Agent (as defined in the Security Agreement) as
an additional insured;
(ii) duly pay and discharge all taxes or other claims which might
become a lien upon any of its properties except to the extent that such
items are being in good faith appropriately contested;
(iii) maintain, preserve and keep its properties in good repair,
working order and condition, and make all reasonable repairs, replacements,
additions, betterments and improvements thereto;
(iv) conduct its business in substantially the same manner and in
substantially the same fields as such business is now carried on and
conducted;
(v) comply with all statutes, rules and regulations and maintain
its corporate existence;
(vi) provide the Holders with the following financial
information:
(A) annually, as soon as available, but in any event within
one hundred twenty (120) days after the last day of each fiscal year,
audited financial statements, including balance sheets as of the last
day of the fiscal year and statements of income and retained earnings
and changes in financial condition for such fiscal year each prepared
in accordance with generally accepted accounting principles ("GAAP"),
consistently applied for the period and prior periods by independent
Certified Public Accountants satisfactory to the Majority Holders;
(B) as soon as available, but in any event within forty-five
(45) days after the end of each fiscal quarter, internally prepared
financial statements of the Company each prepared in accordance with
GAAP and jobs-in-progress reports for said period and prior periods;
(C) within a reasonable time after a written request
therefor, such other financial data or information as such Holders may
reasonably request from time to time;
(D) at the same time as it delivers the financial statements
required under the provisions of subsections (A) and (B) hereof, a
certificate signed by the president or the chief financial, or
accounting, officer of the Company, to the effect that no Event of
Default hereunder or material default under any other agreement to
which the Company is a party or by which it is bound, or by which any
of its properties or assets may be affected, and no event which, with
the giving of notice or the lapse of time, or both, would constitute
such an Event of Default, has occurred;
(E) on a monthly basis, no later than the tenth (10th) day
after each such month, backlog reports and accounts receivable agings
of the Company;
(vii) permit each Holder to make or cause to be made, inspections
and audits of any books, records and papers of the Company and of any
parent or subsidiary thereof and to make extracts therefrom at all such
reasonable times and as often as such Holders may reasonably require;
(viii) immediately give notice to the Holders that an Event of
Default has occurred or that an event which, with the giving of notice or
lapse of time, or both, would constitute an Event of Default, has occurred
and specifying the action which the Company has taken and proposes to take
with respect thereto.
(b) Financial Covenants:
(1) at June 30, 1996, the Company shall maintain a Tangible Net
Worth equal to the greater of (a) $4,500,000, or (b) the sum of $4,500,000
and any net profit after taxes for the fiscal year ending June 30, 1996 (as
calculated in accordance with GAAP) less any preferred dividends (as such
shall have been declared during such fiscal year). At each fiscal year end
thereafter, the Company shall maintain a Tangible Net Worth equal to the
greater of (a) the required Tangible Net Worth required hereunder for the
immediately preceding fiscal year, or (b) the sum of said required Tangible
Net Worth and any net profit after taxes for the fiscal year then ending
(as calculated in accordance with GAAP) less any preferred dividends (as
such shall have been declared during such fiscal year). For purposes hereof
"Tangible Net Worth" shall mean, at any date, (i) the net book value of
assets (other than patents, patent rights, trademarks, trade names,
franchises, copyrights, licenses, permits, goodwill and other intangible
assets classified as such in accordance with GAAP) after all appropriate
adjustments in accordance with GAAP (including, without limitation,
reserves for doubtful receivables, obsolescence, depreciation and
amortization) plus (ii) subordinated indebtedness, in each case computed in
accordance with GAAP;
(2) As of each June 30 and December 31 of each fiscal year,
commencing with June 30, 1996, the Company shall maintain an excess of
Current Assets to Current Liabilities of not less than 2.75 to 1.0. For
purposes hereof, "Current Assets" shall be defined as the aggregate amount
of all current assets of the Company and its subsidiaries, including
prepaid items such as insurance, taxes, interest, commissions and rents as
may be properly classified as such in accordance with GAAP, other than
goodwill and such other assets as are properly classified as "intangible
assets" or deferred assets. In determining the value of assets hereunder,
investments in Persons other than subsidiaries
shall be taken at cost or fair market value, whichever is less. For
purposes hereof, "Current Liabilities" shall be defined as the aggregate
amount of all current liabilities of the Company and its subsidiaries
determined in accordance with GAAP;
(3) As of each June 30 and December 31 of each fiscal year,
commencing June 30, 1996, the Company shall maintain Working Capital of not
less than $5,500,000. For purposes hereof, Working Capital shall be defined
as Current Assets less Current Liabilities;
(4) As of each June 30 and December 31 of each fiscal year,
commencing June 30, 1996, the Company shall maintain a ratio of Total
Liabilities (calculated in accordance with GAAP excluding debt pursuant to
the Debentures as hereinafter defined) to Tangible Net Worth of not more
than 1.25 to 1.0;
(5) the Company shall maintain a Debt Service Coverage ratio of
not less than 1.05: 1 at fiscal year end June 30, 1996 and 1.20: 1 at
fiscal year end June 30, 1997. For purposes hereof "Debt Service Coverage"
shall be defined as earnings before interest taxes, depreciation and
amortization for the fiscal year ending on the date of determination
divided by the sum of current maturities of long term debt plus interest
expense whether paid or accrued plus preferred dividends declared during
such fiscal year (as all of the aforementioned are calculated in accordance
with GAAP).
(c) Negative Covenants: The Company will not, and will not permit any
subsidiary to:
(i) create, incur, assume or suffer to exist any liability for
borrowed money, except (A) indebtedness to the Bank or any other financial
institution constituting "Senior Debt" hereunder; (B) indebtedness
contemplated by the Debentures and the 1995 Debentures; (C) other
indebtedness for borrowed money (whether or not constituting a refinancing
of existing indebtedness) so long as (x) such indebtedness is not secured
by collateral securing repayment of this loan, (y) such indebtedness
contains provisions reasonably satisfactory to the Majority Holders
subordinating the payment of principal and interest thereon to the prior
payment of principal and interest on the Debentures, and (z) the incurrence
of which will not cause an Event of Default, or an event which with notice
or the lapse of time or both would constitute an Event of Default,
hereunder;
(ii) create, incur, assume or suffer to exist, any mortgage,
pledge, lien or encumbrance of or upon or security interest in, any of its
property or assets now owned or hereafter acquired except (A) mortgages,
liens, pledges and security interests securing Senior Debt and the
Debentures; (B) other liens, charges and encumbrances incidental to the
conduct of its business or the ownership of its property and assets which
are not incurred in connection with the borrowing of money or the obtaining
of advances or credit and which do not materially impair the use thereof in
the operation of its business; (C) liens for taxes or other governmental
charges which are not delinquent or which are being contested in good faith
and for which a reserve shall have been established in accordance with
GAAP; (D) liens granted to secure purchase money financing of equipment,
provided such liens are limited to the equipment financed; and (E) liens
granted to refinance unencumbered equipment provided such liens are limited
to the equipment refinanced and the incurrence of which will not cause a
default hereunder or in any other Senior Debt;
(iii) assume, endorse, be or become liable for or guarantee the
obligations of any other person except by the endorsement of negotiable
instruments for deposit or collection in the ordinary course of business;
(iv) (A) terminate any pension plan so as to result in any
material liability to The Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA (the "PBGC"), (B) engage in or
permit any person to engage in any "prohibited transaction" (as defined in
Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1954,
as amended) involving any pension plan which would subject the Company to
any material tax, penalty or other liability, (C) incur or suffer to exist
any material "accumulated funding deficiency" (as defined in Section 302 of
ERISA), whether or not waived, involving any pension plan, or (D) allow or
suffer to exist any event or condition, which presents a material risk of
incurring a material liability to the PBGC by reason of termination of any
pension plan;
(v) amend, supplement or modify the terms of the Subject
Securities or increase the outstanding amount of any Subject Securities
without the prior consent of the Majority Holders;
(vi) enter into any merger or consolidation unless the Company
shall be the surviving entity in any such merger or consolidation, and
after giving effect to the transaction no Event of Default and no event
which with the giving of notice or passage of time or both would constitute
an Event of Default shall have occurred and be continuing, or liquidate,
wind-up or dissolve
itself or sell, transfer or lease or otherwise dispose of all or any
substantial part of its assets;
(vii) lend or advance money, credit or property to or invest in
(by capital contribution, loan, purchase or otherwise) any firm,
corporation, or other person except (A) investments in United States
Government obligations and certificates of deposit of any bank institution
with combined capital and surplus of at least $200,000,000, (B) trade
credit, (C) security deposits, or acquire or otherwise cause any other
entity to become a subsidiary of the Company (as used herein the term
"subsidiary" means any corporation or other organization, whether
incorporated or unincorporated, of which the Company or any other
subsidiary of the Company beneficially owns a majority of the voting or
economic interests) and (D) indebtedness to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇
Deutsch in the aggregate amount of $60,000 existing on the date hereof;
(viii) declare or pay any dividends or distributions on account
of its capital stock or purchase, redeem, retire or otherwise acquire any
of its capital stock or any securities convertible into, exchangeable for,
or giving any person the right to acquire or otherwise subscribe for, any
shares of the Company's capital stock; provided, however, that so long as
no Event of Default or event which, with the giving of notice, the lapse of
time, or both would constitute an Event of Default hereunder has occurred
and is continuing, the Company may pay regular quarterly dividends on the
Preferred Stock in accordance with the terms thereof; or
(ix) engage in any transaction with any person or entity who
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the Company (an
"Affiliate"), other than ordinary director and compensation arrangements
with Affiliates serving as officers and/or directors of the Company and
other than transactions with Affiliates entered into in the ordinary course
of business on terms which are at least as favorable to the Company as
those available from unrelated third parties. As used herein, the term
"control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of the
Company, whether through the ownership of voting securities, by contract or
otherwise, and the terms "controlled" and "controlling" have meanings
correlative thereto.
8. Events of Default.
(a) Definition. For the purposes of this Debenture, an Event of Default
hereunder will be deemed to have occurred if:
(i) the Company fails to pay the principal amount of this Debenture
when due (whether upon the Due Date, upon acceleration or otherwise),
whether or not such payment is prohibited by paragraph 4 hereof;
(ii) the Company fails to pay any interest, premium or penalty on the
Debenture when due and such failure has continued for a period of ten (10)
days;
(iii) the Company fails to perform or observe the provisions set forth
in Paragraphs 7(b) or 7(c) hereof;
(iv) the Company fails to perform or observe any provision contained
in the Debenture or the Security Agreement (other than those specifically
covered by the other provisions of this paragraph 8(a)) and, if such
failure is capable of being cured, such failure continues for a period of
30 days after the Company's receipt of written notice thereof;
(v) the Company shall have failed to pay when due any amount due and
owing under any indebtedness of the Company for borrowed money or any other
default or event of default shall have occurred (and shall have continued
beyond the expiration of any applicable grace period) under any
indebtedness of the Company for borrowed money which would permit the
holder thereof to accelerate the maturity thereof or there shall have been
an acceleration of the stated maturity of any indebtedness of the Company
for borrowed money;
(vi) the Security Agreement shall at any time after its execution and
delivery and for any reason cease to be effective to constitute a valid and
perfected lien and security interest in and to the Collateral (as defined
therein) or if any of the provisions of the Security Agreement that permit
the Secured Party (as defined therein) to exercise its remedies in
accordance with the Uniform Commercial Code of the State of New York cease
to be in full force and effect;
(vii) the Company makes an assignment for the benefit of creditors or
admits in writing its inability to pay its debts generally as they become
due; or an order, judgment or decree is entered adjudicating the Company as
bankrupt or insolvent; or any order for relief with respect to the
Company is entered under the Federal Bankruptcy Code; or the Company
petitions or applies to any tribunal for the appointment of a custodian,
trustee, receiver or liquidator of the Company or of any substantial part
of the assets of the Company, or commences any proceeding relating to the
Company under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction
("Insolvency Event or Proceeding"); or any such petition or application is
filed, or any such proceeding is commenced, against the Company and either
(y) the Company by any act indicates its approval thereof, consents thereto
or acquiescence therein or (z) such petition application or proceeding is
not dismissed within 60 days;
(viii) a final judgment which in the aggregate with other outstanding
final judgments against the Company exceeds $250,000 shall be rendered
against the Company and within 90 days after entry thereof, such judgment
is not discharged or execution thereof stayed pending appeal, or within 90
days after the expiration of such stay, such judgment is not discharged;
(ix) any person or "group" (as defined in Rule 13d-5 promulgated under
the Exchange Act), other than SFM Group, Ltd. or ▇▇▇▇▇▇, ▇▇▇▇▇ & Company,
L.L.C., acquires or otherwise obtains the right (whether by contract,
through the ownership of securities or pursuant to any proxy or consent
arrangement, voting trust or otherwise) to appoint, elect or cause the
election of a majority of the Board of Directors of the Company;
(x) any representation or warranty made by the Company in the Unit
Purchase Agreement, dated March 7, 1996 between the Company and the
original Holder of this Debenture, the Security Documents (as defined in
such Unit Purchase Agreement), or any other certificate or instrument
delivered in connection therewith shall have been untrue in any material
respect when made; or
(xi) the Registration Statement shall not have become effective within
270 days after the date hereof.
(b) Consequences of Events of Default.
(i) If any Event of Default (other than the type described in
subparagraph 8(a)(vii) above) has occurred, the Holder or Holders of
Debentures representing a majority of the aggregate principal amount of
Debentures then outstanding (the "Majority Holders") may demand (by written
notice delivered to the Company) immediate payment of all or any portion of
the outstanding
principal amount of the Debentures owed by such Holder or Holders. If such
Majority Holders demand immediate payment of all or any portion of such
Holder's or Holders' Debentures, the Company will, to the extent permitted
under the provisions of paragraph 4 hereof, immediately pay to such Holder
or Holders the principal amount of the Debentures requested to be paid
(plus accrued interest hereon). If an Event of Default of the type
described in subparagraph 8(a)(vii) above has occurred, then all of the
outstanding principal amount of the Debentures shall automatically be
immediately due and payable without any action on the part of any Holders
of the Debenture.
(ii) If an Event of Default has occurred, each Holder of the
Debentures will also have any other rights which such Holder may have
pursuant to applicable law, in each case provided such rights are
consistent with the provisions of paragraph 4 hereof.
9. Amendment and Waiver. Except as otherwise expressly provided herein, the
provisions of this Debenture may be amended and the Company may take any action
herein prohibited and exercise all remedies available to them under the Security
Agreement, or omit to perform any act herein required to be performed by it,
only if the Company has obtained the written consent of the Majority Holders,
provided, however, neither the interest rate or principal amounts payable under
the Debentures, the dates on which interest or principal under the Debentures is
due nor the obligations to make payments on the Debentures on a pro rata basis
shall be amended without the prior written consent of each Holder affected
thereby, and of each holder of Senior Debt, and further provided, however, that
any amendment or waiver which might in any way adversely affect the holders of
Senior Debt, including, but not limited to, any amendment or waiver affecting
the provisions of paragraph 4 or this paragraph 9 shall require the prior
written consent of each holder of Senior Debt. Any amendment or waiver effected
in accordance with this paragraph 9 shall be binding upon each Holder of this
Debenture and each future Holder of this Debenture.
10. Cancellation. After all principal and accrued interest at any time owed
on this Debenture has been paid in full, this Debenture will be surrendered to
the Company for cancellation and will not be reissued.
11. Place of Payment. Payments of principal and interest are to be
delivered to the Holder at the office of the Company, ▇▇▇-▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or to such other address or to the attention of such
other Person as specified by prior written notice to the Company.
12. Waiver of Presentment, Demand and Dishonor. The Company hereby waives
presentment for payment, protest, demand, notice of protest, notice of
non-payment and diligence with respect to this Debenture, and waives and
renounces all rights to the benefit of any statute of limitations or any
moratorium, appraisement, exemption or homestead now provided or that hereafter
may be provided by any federal or applicable state statute, including but not
limited to exemptions provided by or allowed under the Federal Bankruptcy Code,
both as to itself and as to all of its property, whether real or personal,
against the enforcement and collection of the obligations evidenced by this
Debenture and any and all extensions, renewals and modifications hereof.
No failure on the part of the Holder hereof or of any other Debentures to
exercise any right or remedy hereunder with respect to the Company, whether
before or after the happening of an Event of Default, shall constitute a waiver
of any future Event of Default or of any other Event of Default. No failure to
accelerate the debt of the Company evidenced hereby by reason of an Event of
Default or indulgence granted from time to time shall be construed to be a
waiver of the right to insist upon prompt payment thereafter; or shall be deemed
to be a novation of this Debenture or a reinstatement of such debt evidenced
hereby or a waiver of such right of acceleration or any other right, or be
construed so as to preclude the exercise of any right Holder may have, whether
by the laws of the state governing this Debenture, by agreement or otherwise;
and the Company hereby expressly waives the benefit of any statute or rule of
law or equity that would produce a result contrary to or in conflict with the
foregoing.
13. Usury. The Holder and the Company intend that the obligations evidenced
by this Debenture conform strictly to the applicable usury laws from time to
time in force. All agreements between the Company and Holder, whether now
existing or hereafter arising and whether oral or written, hereby are expressly
limited so that in no contingency or event whatsoever, whether by acceleration
of maturity hereof or otherwise, shall the amount paid or agreed to be paid to
Holder, or collected by Holder, by or on behalf of the Company for the use,
forbearance or detention of the money to be loaned to the Company hereunder or
otherwise, or for the payment or performance of any covenant or obligation
contained herein of the Company to Holder, or in any other document evidencing,
securing or pertaining to such indebtedness evidenced hereby, exceed the maximum
amount permissible under applicable usury law. If under any circumstances
whatsoever fulfillment of any provision hereof or any other document, at the
time performance of such provisions shall be due, shall involve transcending the
limit of validity prescribed by law, then, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity; and if under any
circumstances Holder ever shall receive from or on behalf of the Company an
amount deemed interest, by applicable law, which would exceed the highest lawful
rate, such amount that would be excessive interest under applicable usury laws
shall be applied to the reduction of the Company's principal amount owing
hereunder and not to the payment of interest, or if such excessive interest
exceeds the unpaid balance of principal and such other indebtedness, the excess
shall be deemed to have been a payment made by mistake and shall be refunded to
the Company or to any other person making such payment on the Company's behalf.
14. Governing Law. The validity, construction and interpretation of this
Debenture will be governed by the internal laws, but not the law of conflicts
and choices of law, of the State of New York.
IN WITNESS WHEREOF, the Company has executed and delivered this 12%
Convertible Senior Subordinated Debenture this 7th day of March, 1996.
LOGIMETRICS, INC.
By:_____________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: President
EXHIBIT A
ELECTION TO CONVERT
(All capitalized terms used and not otherwise
defined herein shall have the meanings
assigned to them in the 12% Convertible Senior
Subordinated Debenture)
LogiMetrics, Inc.
▇▇▇-▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
TO WHOM IT MAY CONCERN:
The undersigned registered owner of the attached 12% Convertible Senior
Subordinated Debenture hereby irrevocably exercises the option to convert such
Debenture into Common Stock of LogiMetrics, Inc. in accordance with the terms
thereof, and directs that any shares issuable and deliverable upon the
conversion be issued in the name of and delivered to the undersigned.
_________________________________________________________
[Name of Debentureholder]
Dated: ______________, 199_
EXHIBIT B
FORM OF WARRANT
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND CANNOT BE SOLD OR TRANSFERRED
UNLESS AND UNTIL THEY ARE SO REGISTERED OR UNLESS AN EXEMPTION UNDER SUCH ACT
OR LAWS IS AVAILABLE. THE TRANSFERABILITY OF THESE SECURITIES IS FURTHER
SUBJECT TO THE PROVISIONS OF A UNIT PURCHASE AGREEMENT DATED AS OF
MARCH 7, 1996 BY AND BETWEEN THE COMPANY AND CERBERUS PARTNERS, L.P.
LOGIMETRICS, INC.
Common Stock Purchase Warrant
Series C
LOGIMETRICS, INC. (the "Company"), a Delaware corporation, hereby certifies
that, for value received, Cerberus Partners, L.P., or assigns, is entitled,
subject to the terms set forth below, to purchase from the Company Eighty Four
Thousand Seven Hundred Forty Six (84,746) fully paid and non-assessable shares
of Common Stock of the Company, at a purchase price, subject to the provisions
of Paragraph 3 hereof, of one cent ($.01) per share (the "Purchase Price") at
any time prior to the seventh anniversary of the original date of issuance
hereof. The number and character of such shares are subject to adjustment as
provided below, and the term "Common Stock" shall mean, unless the context
otherwise requires, the stock or other securities or property at the time
deliverable upon the exercise of this Warrant. This Warrant is herein called the
"Warrant". This Warrant is one of a series of warrants to purchase 2,542,080
shares of Common Stock ("Series C Warrants").
1. EXERCISE OF WARRANT. The purchase rights evidenced by this Warrant shall
be exercised by the holder hereof ("Holder") surrendering this Warrant, with the
form of subscription at the end hereof duly executed by such Holder, to the
Company at its office in Plainview, New York, accompanied by payment (in cash or
by certified or official bank check). This Warrant may be exercised for less
than the full number of shares of Common Stock at the time called for hereby, in
which case the number of shares receivable upon the exercise of this Warrant as
a whole, and the sum payable upon the exercise of this Warrant as a whole, shall
be proportionately reduced. Upon any such partial exercise, the Company at its
expense will forthwith issue to the Holder hereof a new Warrant or Warrants of
like tenor calling for the
number of shares of Common Stock as to which rights have not been exercised,
such Warrant or Warrants to be issued in the name of the Holder hereof or his
nominee.
2. DELIVERY OF STOCK CERTIFICATES ON EXERCISE. As soon as practicable after
the exercise of this Warrant and payment of the Purchase Price, and in any event
within five (5) days thereafter, the Company, at its expense, will cause to be
issued in the name of and delivered to the Holder hereof a certificate or
certificates for the number of fully paid and non-assessable shares or other
securities or property to which such Holder shall be entitled upon such
exercise, plus, in lieu of any fractional share to which such Holder would
otherwise be entitled, cash equal to such fraction multiplied by the then
current market value of one full share.
3. ADJUSTMENT FOR ISSUE OR SALE OF COMMON STOCK AT LESS THAN PURCHASE
PRICE. In case, at any time or from time to time after the date of issuance of
this Warrant ("Issuance Date"), the Company shall issue or sell shares of its
Common Stock (other than any Common Stock issuable upon (i) conversion of the
Company's Amended and Restated 12% Convertible Subordinated Debentures dated as
of July 14, 1995 ("1995 Debentures"), (ii) exercise of those certain Amended and
Restated Series A Warrants dated March 7, 1996 to purchase 600,000 shares of
Common Stock ("Series A Warrants"), (iii) exercise by each of ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ Deutsch (the "Principals") of their right to purchase
100,000 shares of Common Stock at a price of $.10 per share ("Principals'
Options"), (iv) exercise of those certain Amended and Restated Series B Warrants
dated March 7, 1996 to purchase 1,500,000 shares of Common Stock ("Series B
Warrants"), (v) conversion of the Company's 12% Convertible Senior Subordinated
Debentures dated March 7, 1996 ("Senior Subordinated Debentures"), (vi) exercise
of those certain Series D Warrants dated March 7, 1996 to purchase an aggregate
of 2,830,200 shares of Common Stock ("Series D Warrants"), (vii) exercise of
those certain Series E Warrants dated March 7, 1996 to purchase 1,000,000 shares
of the Company's Common Stock ("Series E Warrants" and together with the
Series A, B, C and D Warrants, "Warrants"), (viii) exercise of those certain
Stock Options, dated March 7, 1996 to purchase 1,000,000 shares of Common Stock
issued to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("▇▇▇▇▇ Options") and (ix) conversion of the
Company's 30 shares of Series A 12% Cumulative Convertible Redeemable Preferred
Stock ("Preferred Stock" and together with the 1995 Debentures, the Senior
Subordinated Debentures, the Warrants, the ▇▇▇▇▇ Options, the Principals'
Options and any shares of Common Stock issuable upon conversion or exercise
thereof, the "Subject Securities")), for a consideration per share less than
thirty cents ($.30) per share (the "Trigger Price") (or, if a Pro Forma Adjusted
Trigger Price shall be in effect as provided below in this Paragraph 3, then
less than such Pro Forma Adjusted Trigger Price per share), then and in each
such case the Holder of this Warrant, upon the exercise hereof as provided in
Paragraph 1 hereof, shall be entitled to receive, in lieu of the shares of
Common Stock theretofore receivable upon the exercise of this Warrant, a number
of shares of Common Stock determined by (a) dividing the Trigger Price by a Pro
Forma Adjusted Trigger Price per share to be computed as provided
below in this Paragraph 3, and (b) multiplying the resulting quotient by the
number of shares of Common Stock called for on the face of this Warrant. A Pro
Forma Adjusted Trigger Price per share shall be the price computed (to the
nearest cent, a fraction of half cent or more being considered a full cent):
by dividing (i) the sum of (x) the result obtained by
multiplying the number of shares of Common Stock of the
Company outstanding immediately prior to such issue or sale
by the Trigger Price (or, if a Pro Forma Adjusted Trigger
Price shall be in effect, by such Price), and (y) the
consideration, if any, received by the Company upon such
issue or sale, by (ii) the number of shares of Common Stock
of the Company outstanding immediately after such issue or
sale.
For the purpose of this Paragraph 3:
3.1. Stock Splits, Dividends, etc., in Common Stock or Convertible
Securities. In case the Company splits its Common Stock or shall declare any
dividend, or make any other distribution, upon any stock of the Company of any
class payable in Common Stock, or in any stock or other securities directly or
indirectly convertible into or exchangeable for Common Stock (any such stock or
other securities being hereinafter called "Convertible Securities"), such split,
declaration or distribution shall be deemed to be an issue or sale (as of the
record date for such split, dividend or other distribution), without
consideration, of such Common Stock or such Convertible Securities, as the case
may be.
3.2. Issuance or Sale of Convertible Securities. In case the Company shall
issue or sell any Convertible Securities other than the Subject Securities,
there shall be determined the price per share for which Common Stock is issuable
upon the conversion or exchange thereof, such determination to be made by
dividing (a) the total amount received or receivable by the Company as
consideration for the issue or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any, payable to the
Company upon the conversion or exchange thereof, by (b) the maximum number of
shares of Common Stock of the Company issuable upon the conversion or exchange
of all such Convertible Securities.
If the price per share so determined shall be less than the Trigger Price
(or, if a Pro Forma Adjusted Trigger Price shall be in effect, less than such
Price) as of the date of such issue or sale, then such issue or sale shall be
deemed to be an issue or sale for cash (as of the date of issue or sale of such
Convertible Securities) of such maximum number of shares of Common Stock at the
price per share so determined, provided that, if such Convertible Securities
shall by their terms provide for an increase or increases, with the passage of
time, in the amount of additional consideration, if any, payable to the Company,
or in the rate of exchange, upon the conversion or exchange thereof, the Pro
Forma Adjusted Trigger Price per share shall, forthwith upon any such increase
becoming effective, be readjusted to reflect the same, and provided, further,
that upon the expiration of such rights of conversion or exchange of such
Convertible Securities, if any thereof shall not have been exercised, the Pro
Forma Adjusted Trigger Price per share shall forthwith be readjusted and
thereafter be the price which it would have been had an adjustment been made on
the basis that the only shares of Common Stock so issued or sold were those
issued or sold upon the conversion or exchange of such Convertible Securities,
and that they were issued or sold for the consideration actually received by the
Company upon such conversion or exchange, plus the consideration, if any,
actually received by the Company for the issue or sale of all such Convertible
Securities which shall have been converted or exchanged.
3.3. Grant of Rights or Options for Common Stock. In case the Company shall
grant any rights or options to subscribe for, purchase or otherwise acquire
Common Stock of any class other than the Subject Securities, there shall be
determined the price per share for which Common Stock is issuable upon the
exercise of such rights or options, such determination to be made by dividing
(a) the total amount, if any, received or receivable by the Company as
consideration for the granting of such rights or options, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the exercise of such rights or options, by (b) the maximum number of shares
of Common Stock issuable upon the exercise of such rights or options.
If the price per share so determined shall be less than the Trigger Price
(or, if a Pro Forma Adjusted Trigger Price shall be in effect, less than such
Price) as of the date of such issue or sale, then the granting of such rights or
options shall be deemed to be an issue or sale for cash (as of the date of the
granting of such rights or options) of such maximum number of shares of Common
Stock at the price per share so determined, provided that, if such rights or
options shall by their terms provide for an increase or increases, with the
passage of time, in the amount of additional consideration, if any, payable to
the Company upon the exercise thereof, the Pro Forma Adjusted Trigger Price per
share shall, forthwith upon any such increase becoming effective, be readjusted
to reflect the same, and provided, further, that upon the expiration of such
rights or options, if any thereof shall not have been exercised, the Pro Forma
Adjusted Trigger Price per share shall forthwith be readjusted and thereafter be
the price which it would have been had an adjustment been made on the basis that
the only shares of Common Stock so issued or
sold were those issued or sold upon the exercise of such rights or options and
that they were issued or sold for the consideration actually received by the
Company upon such exercise, plus the consideration, if any, actually received by
the Company for the granting of all such rights or options, whether or not
exercised.
3.4. Grant of Rights or Options for Convertible Securities. In case the
Company shall grant any rights or options to subscribe for, purchase or
otherwise acquire Convertible Securities, such Convertible Securities shall be
deemed, for the purposes of subparagraph 3.2. above, to have been issued or sold
for the total amount received or receivable by the Company as consideration for
the granting of such rights or options plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the exercise of
such rights or options, provided that, upon the expiration of such rights or
options, if any thereof shall not have been exercised, the Pro Forma Adjusted
Trigger Price per share shall forthwith be readjusted and thereafter be the
price which it would have been had an adjustment been made upon the basis that
the only Convertible Securities so issued or sold were those issued or sold upon
the exercise of such rights or options and that they were issued or sold for the
consideration actually received by the Company upon such exercise, plus the
consideration, if any, actually received by the Company for the granting of all
such rights or options, whether or not exercised.
3.5. Dilution in Case of Other Stock or Securities. In case any shares of
stock or other securities, other than Common Stock of the Company, shall at any
time be receivable upon the exercise of this Warrant, and in case any additional
shares of such stock or any additional such securities (or any stock or other
securities convertible into or exchangeable for any such stock or securities)
shall be issued or sold for a consideration per share such as to dilute the
purchase rights evidenced by this Warrant, then and in each such case the Pro
Forma Adjusted Trigger Price per share shall forthwith be adjusted,
substantially in the manner provided for above in this Paragraph 3, so as to
protect the Holder of this Warrant against the effect of such dilution.
3.6. Expenses, etc., Deducted. In case any shares of Common Stock or
Convertible Securities or any rights or options to subscribe for, purchase or
otherwise acquire any Common Stock or Convertible Securities shall be issued or
sold for cash, the consideration received therefor shall be deemed to be the
amount received by the Company therefor, after deducting any expenses incurred
and any underwriting or similar commissions, compensation or concessions paid or
allowed by the Company in connection with such issue or sale.
3.7. Determination of Consideration. In case any shares of Common Stock or
Convertible Securities or any rights or options to subscribe for, purchase or
otherwise acquire any Common Stock or Convertible Securities shall be issued or
sold for a consideration other than cash (or a consideration which includes
cash, if any cash constitutes a part of the assets of a corporation or business
substantially all of the assets of which are being received a such
consideration) then, for the purpose of this Paragraph 3, the Board of Directors
of the Company shall promptly determine the fair value of such consideration,
and such Common Stock, Convertible Securities, rights or options shall be deemed
to have been issued or sold on the date of such determination in good faith.
Such value shall not be more than the amount at which such consideration is
recorded in the books of the Company for accounting purposes except in the case
of an acquisition accounted for on a pooling of interest basis. In case any
Common Stock or Convertible Securities or any rights or options to subscribe
for, purchase or otherwise acquire any Common Stock or Convertible Securities
shall be issued or sold together with other stock or securities or other assets
of the Company for a consideration which covers both, the Board of Directors of
the Company shall promptly determine what part of the consideration so received
is to be deemed to be the consideration for the issue or sale of such Common
Stock or Convertible Securities or such rights or options.
The Company covenants and agrees that, should any determination of fair
value of consideration or of allocation of consideration be made by the Board of
Directors of the Company, pursuant to this subparagraph 3.7, it will, not less
than seven (7) days after any and each such determination, deliver to the Holder
of this Warrant a certificate signed by the President or a Vice President and
the Treasurer or an Assistant Treasurer of the Company reciting such value as
thus determined and setting forth the nature of the transaction for which such
determination was required to be made, the nature of any consideration, other
than cash, for which Common Stock, Convertible Securities, rights or options
have been or are to be issued, the basis for its valuation, the number of shares
of Common Stock which have been or are to be issued, and a description of any
Convertible Securities, rights or options which have been or are to be issued,
including their number, amount and terms.
3.8. Record Date Deemed Issue Date. In case the Company shall take a record
of the Holders of shares of its stock of any class for the purpose of entitling
them (a) to receive a dividend or a distribution payable in Common Stock or in
Convertible Securities, or (b) to subscribe for, purchase or otherwise acquire
Common Stock or Convertible Securities, then such record date shall be deemed to
be the date of the issue or sale of the Common Stock issued or sold or deemed to
have been issued or sold upon the declaration of such dividend or the making of
such other distribution, or the date of the granting of such rights of
subscription, purchase or other acquisition, as the case may be.
3.9. Shares Considered Outstanding. The number of shares of Common Stock
outstanding at any given time shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock, but shall
exclude shares in the treasury of the Company.
3.10. Duration of Pro Forma Adjusted Trigger Price. Following each
computation or readjustment of a Pro Forma Adjusted Trigger Price as provided in
this Paragraph 3, the newly computed or adjusted Pro Forma Adjusted Trigger
Price shall remain in effect until a further computation or readjustment thereof
is required by this Paragraph 3.
4. ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK, PROPERTY, ETC.;
RECLASSIFICATIONS, ETC. In case at any time or from time to time after the
Issuance Date the Holders of the Common Stock of the Company of any class (or
any other shares of stock or other securities at the time receivable upon the
exercise of this Warrant) shall have received, or, on or after the record date
fixed for the determination of eligible stockHolders, shall have become entitled
to receive:
(a) other or additional stock or other securities or property (other
than cash) by way of dividend;
(b) any cash paid or payable out of capital or paid-in surplus or
surplus created as a result of a revaluation of property by way
of dividend; or
(c) other or additional (or less) stock or other securities or
property (including cash) by way of stock-split, spin-off,
split-off, split-up, reclassification, combination of shares or
similar corporate rearrangement;
(other than additional shares of Common Stock issued to Holders of Common Stock
as a stock dividend or stock-split, adjustments in respect of which shall be
covered by the provisions of Paragraph 3 hereof), then in each case the Holder
of this Warrant, upon the exercise hereof as provided in Paragraph 1 hereof,
shall be entitled to receive, in lieu of, or in addition to, as the case may be,
the shares theretofore receivable upon the exercise of this Warrant, the amount
of stock or other securities or property (including cash in the cases referred
to in clauses (b) and (c) above) which such Holder would hold on the date of
such exercise if, on the Issuance Date, he had been the Holder of record of the
number of shares of Common Stock of the Company called for on the face of this
Warrant and had thereafter, during the period from the Issuance Date to and
including the date of such exercise, retained such shares and/or all other or
additional (or less) stock or other securities or property (including cash in
the cases referred to in clauses (b) and (c) above) receivable by him as
aforesaid during such period, giving effect to all adjustments called for during
such period by Paragraphs 3 and 5 hereof.
5. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case of
any reorganization of the Company (or any other corporation the stock or other
securities of which are at the time deliverable on the exercise of this Warrant)
after the date hereof, or in case, after such date, the Company (or any such
other corporation) shall consolidate
with or merge into another corporation or convey all or substantially all its
assets to another corporation, then and in each such case the Holder of this
Warrant, upon the exercise hereof as provided in Paragraph 1 hereof, at any time
after the consummation of such reorganization, consolidation, merger or
conveyance, shall be entitled to receive the stock or other securities or
property to which such Holder would have been entitled upon such consummation if
such Holder had exercised this Warrant immediately prior thereto, all subject to
further adjustments as provided in Paragraphs 3 and 4 hereof; in each such case,
the terms of this Warrant shall be applicable to the shares of stock or other
securities or property receivable upon the exercise of this Warrant after such
consummation.
6. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its
charter or through reorganization, consolidation, merger, dissolution, sale of
assets or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
Holder hereof against dilution or other impairment. Without limiting the
generality of the foregoing, the Company will not increase the par value of any
shares of stock receivable upon the exercise of this Warrant above the amount
payable therefor upon such exercise, and at all times will take all such action
as may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and non-assessable stock upon the exercise of this
Warrant.
7. ACCOUNTANTS' CERTIFICATE AS TO ADJUSTMENTS. In each case of an
adjustment in the number of shares of Common Stock or other stock, securities or
property receivable on the exercise of this Warrant, at the request of the
Holder of this Warrant the Company at its expense shall promptly cause
independent public accountants of recognized standing, selected by the Company,
to compute such adjustment in accordance with the terms of this Warrant and
prepare a certificate setting forth such adjustment and showing in detail the
facts upon which such adjustment is based, including a statement of (a) the
consideration received or to be received by the Company for any additional
shares issued or sold or deemed to have been issued or sold, (b) the number of
shares of Common Stock outstanding or deemed to be outstanding and (c) the Pro
Forma Adjusted Trigger Price. The Company will forthwith mail a copy of each
such certificate to the Holder of this Warrant.
8. NOTICES OF RECORD DATE, ETC. In case:
(a) the Company shall take a record of the Holders of its Common
Stock (or other stock or securities at the time deliverable upon
the exercise of this Warrant) for the purpose of entitling or
enabling them to receive any dividend (other than a cash or stock
dividend at the same rate as the rate of the last cash or stock
dividend theretofore paid) or other distribution, or to
exercise any preemptive right pursuant to the Company's charter,
or to receive any right to subscribe for or purchase any shares
of stock of any class or any other securities, or to receive any
other right; or
(b) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any
consolidation or merger of the Company with or into another
corporation, or any conveyance of all or substantially all of the
assets of the Company to another corporation; or
(c) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then, and in each such case, the Company will mail or cause to be mailed to the
Holder of this Warrant a notice specifying, as the case may be, (i) the date on
which a record is to be taken for the purpose of such dividend, distribution or
right, and stating the amount and character of such dividend, distribution or
right, or (ii) the date on which such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding up is to
take place, and the times, if any is to be fixed, as of which the Holders of
record of Common Stock (or such other stock or securities at the time
deliverable upon the exercise of this Warrant) shall be entitled to exchange
their shares of Common Stock of any class (or such other stock or securities)
for reclassification, consolidation, merger, conveyance, dissolution,
liquidation or winding up or (iii) the amount and character of the stock or
other securities proposed to be issued or granted, the date of such proposed
issuance or grant and the persons or class of persons to whom such stock or
other securities ar to be offered, issued or granted. Such notice shall be
mailed at least thirty (30) days prior to the date therein specified.
9. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF WARRANTS. The
Company will at all times reserve and keep available, solely for insurance and
delivery upon the exercise of this Warrant and other similar Warrants, such
shares of Common Stock and other stock, securities and property as from time to
time shall be issuable upon the exercise of this Warrant and all other similar
Warrants at the time outstanding.
10. REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement in an amount reasonably satisfactory to it, or (in the case
of mutilation) upon surrender and cancellation thereof, the Company will issue,
in lieu thereof, a new Warrant of like tenor.
11. REMEDIES. The Company stipulates that the remedies at law of the Holder
of this Warrant in the event of any default by the Company in its performance of
or compliance
with any of the terms of this Warrant are not and will not be adequate, and that
the same may be specifically enforced.
12. NEGOTIABILITY, ETC. This Warrant is issued upon the following terms, to
all of which each taker or owner hereof consents and agrees:
(a) Title to this warrant may be transferred by endorsement (by the
Holder hereof executing the form of assignment at the end hereof
including guaranty of signature) and delivery in the same manner
as in the case of a negotiable instrument transferable by
endorsement and delivery.
(b) Any person in possession of this Warrant properly endorsed is
authorized to represent himself as absolute owner hereof and is
granted power to transfer absolute title hereto by endorsement
and delivery hereof to a bona fide purchaser hereof for value;
each prior taker or owner waives and renounces all of his
equities or rights in this Warrant in favor of every such bona
fide purchaser, and every such bona fide purchaser shall acquire
title hereto and to all rights represented hereby.
(c) Until this Warrant is transferred on the books of the Company,
the Company may treat the registered Holder of this Warrant as
the absolute owner hereof for all purposes without being affected
by any notice to the contrary.
13. SUBDIVISION OF RIGHTS. This Warrant (as well as any new warrants issued
pursuant to the provisions of this paragraph) is exchangeable, upon the
surrender hereof by the Holder hereof, at the principal office of the Company
for any number of new warrants of like tenor and date representing in the
aggregate the right to subscribe for and purchase the number of shares of Common
Stock of the Company which may be subscribed for and purchased hereunder.
14. REGISTRATION RIGHTS.
a. Registration. Within 90 days after the date hereof, the Company
will file a registration statement ("Registration Statement") with the
Securities and Exchange Commission ("SEC") covering the Warrants and shares of
Common Stock issuable upon conversion of the 1995 Debentures, the Senior
Subordinated Debentures and the Preferred Stock, and upon exercise of the
Warrants and the ▇▇▇▇▇ Options as well as Common Stock owned by the Principals
and issuable upon exercise of the Principals' Options (collectively "Registrable
Securities"), and will use its best efforts to cause the Registration Statement
to become effective
on or prior to the ninetieth day after such filing and to keep the Registration
Statement effective for a period of seven years from the date it is declared
effective by the SEC.
b. Additional Terms. Except as otherwise expressly stated herein, the
following provisions shall be applicable to the Registration Statement:
(i) The Company will use its best efforts to cause the
Registration Statement to become effective as promptly as possible, and if
any stop order shall be issued by the SEC in connection therewith to use
its reasonable efforts to obtain the removal of such order. Following the
effective date of the Registration Statement, the Company shall, upon the
request of the Holder, forthwith supply such reasonable number of copies of
the Registration Statement, preliminary prospectus and prospectus meeting
the requirements of the Act, and other documents necessary or incidental to
a public offering of the Registrable Securities, as shall be reasonably
requested by the Holder to permit the Holder to make a public distribution
of its, his or her Registrable Securities. The Company will use its
reasonable efforts to qualify the Registrable Securities for sale in such
states as the Holder of Registrable Securities shall reasonably request,
provided that no such qualification will be required in any jurisdiction
where, solely as a result thereof, the Company would be subject to service
of general process or to taxation or qualification as a foreign corporation
doing business in such jurisdiction. The obligations of the Company
hereunder with respect to the Holder's Registrable Securities are expressly
conditioned on the Holder's furnishing to the Company such appropriate
information concerning the Holder, the Holder's Registrable Securities and
the terms of the Holder's offering of such Registrable Securities as the
Company may reasonably request.
(ii) The Company shall pay all expenses incurred in complying
with the provisions of this Paragraph 14, including, without limitation,
all registration and filing fees (including all expenses incident to filing
with the National Association of Securities Dealers, Inc.), printing
expenses, fees and disbursements of counsel to the Company, securities law
and blue sky fees and expenses and the expenses of any regular and special
audits incident to or required by any such registration. All underwriting
discounts and selling commissions applicable to the sales of the
Registrable Securities, and any state or federal transfer taxes payable
with respect to the sales of the Registrable Securities and all fees and
disbursements of counsel for the Holder, if any, in each case arising in
connection with registration of the Registrable Securities shall be payable
by the Holder.
(iii) In connection with the registration of the Registrable
Securities pursuant to this Paragraph 14, the Company shall indemnify and
hold harmless the Holder, its affiliates, officers, directors, partners,
employees, agents and representatives,
each person, if any, who controls the Holder within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any
person claiming by or through any of them (collectively, the "Indemnified
Persons") from and against all losses, claims, damages, expenses or
liabilities (or actions in respect thereof) arising out of or are based
upon any untrue statement of any material fact contained in the
Registration Statement or alleged untrue statement, under which such
securities were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or
supplement thereto, or arise out of or are based upon the omission to state
therein a material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances under which they
are made, not misleading, or any violation by the Company of the Securities
Act, the Exchange Act or state securities or blue sky laws applicable to
the Company and relating to action or inaction required of the Company in
connection with such registration or qualification under such state
securities or blue sky laws; and will reimburse the Indemnified Persons for
any legal or any other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company will not be liable in any such
case to any Indemnified Person to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
omission made in the Registration Statement, said preliminary prospectus or
said final prospectus or said amendment or supplement or any document
incident thereto in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Holder.
(iv) The Holder will indemnify and hold harmless the Company and
each person, if any, who controls the Company within the meaning of the
Securities Act or the Exchange Act, each officer of the Company who signs
the Registration Statement and each director of the Company from and
against any and all such losses, claims, damages or liabilities arising
from any untrue statement in, or omission from, the Registration Statement,
any such preliminary or final prospectus, amendment, or supplement or
document incident thereto if the statement or omission in respect of which
such loss, claim, damage or liability is asserted was made in reliance upon
and in conformity with information furnished in writing to the Company by
or on behalf of the Holder for use in connection with the preparation of
the Registration Statement or such prospectus or amendment or supplement
thereof.
(v) The reimbursements required by clauses (iii) and (iv) shall
be made by periodic payments during the course of the investigation or
defense as and when bills are received or expenses incurred; provided,
however, that to the extent that an indemnified party receives periodic
payments for legal or other expenses during the
course of an investigation or defense, and such party subsequently received
payments for such expenses from any other parties to the proceeding, such
payments shall be used by the indemnified party to reimburse the
indemnifying party for such periodic payments. Any party which proposes to
assert the right to be indemnified under clause (iii) or (iv) will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim is to be made
against any indemnified party hereunder, notify each such indemnifying
party of the commencement of such action, suit or proceeding, enclosing a
copy of all papers served, but the failure to so notify such indemnifying
party of any such action, suit or proceeding shall not relieve the
indemnifying party from any obligation which it may have to any indemnified
party hereunder unless and only to the extent that the indemnifying party
is prejudiced by said lack of notice. In case any such action, suit or
proceeding shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate in and, to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying
party shall not be liable to such indemnified party for any legal or other
expense, other than reasonable costs of investigation subsequently incurred
by such indemnified party in connection with the defense thereof. The
indemnified party shall have the right to employ its own counsel in any
such action, but the reasonable fees and expenses of such counsel shall be
at the expense of such indemnified party, when and as incurred, unless (A)
the employment of counsel by such indemnified party has been authorized by
the indemnifying party, (B) the indemnified party has reasonably concluded
(based on advice of counsel), that there may be legal defenses available to
it that are different from or in addition to those available to the
indemnifying party, (C) the indemnified party shall have reasonably
concluded (based on advice of counsel) that there may be a conflict of
interest between the indemnifying party and the indemnified party in the
conduct of defense of such action (in which case the indemnifying party
shall not have the right to direct the defense of such action on behalf of
the indemnified party), or (D) the indemnifying party shall not in fact
have employed counsel to assume the defense of such action within 15 days
after receipt of notice of such action. An indemnifying party shall not be
liable for any settlement or any action or claim effected without its
consent.
(vi) If the indemnification provided for in this Paragraph 14 is
unavailable to any indemnified party hereunder in respect of any losses,
claims, damages, liabilities or expenses referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses in such
proportion
as is appropriate to reflect the relative fault of the indemnifying party
and indemnified parties in connection with the actions that resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party and indemnified parties shall be determined by reference to, among
other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission
to state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified parties, and the
parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such action. The amount paid or payable by a party as
a result of the losses, claims, damages, liabilities and expenses referred
to above shall be deemed to include, subject to the limitations set forth
herein, any legal or other fees or expenses reasonably incurred by such
party in connection with any investigation or proceeding.
(vii) The Company and the Holder agree that it would not be just
and equitable if contribution pursuant to clause (vi) were determined by
pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding any other provision hereof, in no
event shall the contribution obligation of the Holder be greater in amount
than the excess of (A) the dollar amount of proceeds received by the Holder
upon the sale of the securities giving rise to such contribution obligation
over (B) the dollar amount of any damages that the Holder has otherwise
been required to pay by reason of the untrue or alleged untrue statement or
omission or alleged omission giving rise to such obligation. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(viii) Neither the filing of the Registration Statement by the
Company pursuant to this Agreement nor the making of any request for
prospectuses by the Holder shall impose upon the Holder any obligation to
sell his, her or its Registrable Securities.
(ix) The Holder, upon receipt of notice from the Company that an
event has occurred which requires a post-effective amendment to the
Registration Statement or a supplement to the prospectus included therein,
shall promptly discontinue the sale of his, her or its Registrable
Securities until the Holder receives a copy of a supplemented or amended
prospectus from the Company, which the Company shall provide as soon as
practicable after such notice.
15. MAILING OF NOTICES, ETC. All notices and other communications from the
Company to the Holder of this Warrant shall be mailed by first-class certified
mail, postage
prepaid, to the address furnished to the Company in writing by the last Holder
of this Warrant who shall have furnished an address to the Company in writing.
16. HEADINGS, ETC. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect the meaning hereof.
17. CHANGE, WAIVER, ETC. Neither this Warrant nor any term hereof may be
changed, waived, discharged or terminated orally but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
18. GOVERNING LAW. This Series C Warrant shall be construed and enforced in
accordance with the laws of the State of New York.
LOGIMETRICS, INC.
By:_____________________
Dated: ▇▇▇▇▇ ▇, ▇▇▇▇
▇▇▇▇▇▇:
________________________________
[To be signed only upon exercise of Warrant]
To LOGIMETRICS, INC.:
The undersigned, the Holder of the within Series C Warrant, hereby
irrevocably elects to exercise the purchase right represented by such Warrant
for, and to purchase thereunder, ______________shares of Common Stock of
LOGIMETRICS, INC. and herewith makes payment of $___________ therefor, and
requests that the certificates for such shares be issued in the name of, and be
delivered to, ________________, whose address is _____________________.
Dated:
__________________________
________________________________________________________________________________
(Signature must conform in all respects to name of
Holder as specified on the face of the Warrant)
Address:
________________________________________________________________________________
[To be signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _________________________ the right represented by the within Series C
Warrant to purchase the _____________ shares of the Common Stock of LOGIMETRICS,
INC. to which the within Series C Warrant relates, and appoints
________________________ attorney to transfer said right on the books of
LOGIMETRICS, INC. with full power of substitution in the premises.
Dated:
________________________________________________________________________________
(Signature must conform in all respects to
name of Holder as specified on the face of
the Warrant)
Address:
________________________________________________________________________________
________________________________________________________________________________
In the presence of
______________________________________