EXHIBIT 4.1
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THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") OR THE SECURITIES COMMISSION OF ANY STATE
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND APPLICABLE STATE SECURITIES LAWS. THIS SUBSCRIPTION
AGREEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER
TO BUY THE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
WOULD BE UNLAWFUL. THE SECURITIES MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR
ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS, OR IN A TRANSACTION
WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF THE SECURITIES ACT AND
UNDER PROVISIONS OF APPLICABLE STATE SECURITIES LAWS.
7% CONVERTIBLE DEBENTURE
SUBSCRIPTION AGREEMENT
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DATAMETRICS CORPORATION
THIS 7% CONVERTIBLE DEBENTURE SUBSCRIPTION AGREEMENT (this"Agreement")
is executed in reliance upon an exemption under the Securities and Exchange
Commission ("SEC"), under the Securities Act of 1933, as amended (the "Act").
This Agreement has been executed by the undersigned in connection with
the private placement of the 7% Convertible Debentures (hereinafter referred to
as the "Debentures") of DATAMETRICS CORPORATION (American Stock Exchange symbol
"DC"), with an address at 00X Xxxxxxx Xxxx, Xx. 0000, Xxxxxxx Xxxx, XX 00000, a
corporation organized under the laws of the State of Delaware, USA (hereinafter
referred to as the "Company"). The terms on which the Debentures may be
converted into common stock of the Company, $0.01 par value per share, (the
"Common Stock") and the other terms of the Debentures are set forth in the form
of the 7% Convertible Debenture due July 24, 2001 annexed hereto as Exhibit A
(the "Form of Debenture"). The offer and sale of the Debentures, and the Common
Stock underlying the Debentures (collectively the "Securities"), are being made
in reliance upon an exemption under the Act. The Closing Date shall be
determined in accordance with Sections 13, 14 and 15 herein.
Each of the entities listed on Schedule A annexed hereto (the
"Subscribers") hereby represents and warrants to, and agrees with the Company as
follows:
SECTION 1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
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1.1 CLOSING. The Company will sell and the Subscribers will buy, in
reliance upon the representations and warranties of the Company and Subscribers
contained in this Agreement and the Form of Debenture, upon the terms and
conditions set forth herein and therein, that principal amount of Debentures set
forth next to their names on Schedule A for an aggregate purchase price of One
Million ($1,000,000) U.S. Dollars (the "Purchase Price"). The proceeds of the
sale of the Debentures will be used only for working capital purposes and not
for the payment of any senior or secured debt.
1.2 FORM OF PAYMENT. The Subscribers shall pay the Purchase Price by
delivering good funds in United States Dollars by wire transfer in escrow to
Xxxxxxxxx, Xxxxxxxxx & Xxxx, LLP, the Escrow Agent, against delivery of the
original Debentures to the Escrow Agent, as per a separate Escrow Agreement,
annexed hereto as Exhibit B) as payment in full for their portion of the
Securities.
1.3 WIRE INSTRUCTIONS. Wire instructions for Xxxxxxxxx, Xxxxxxxxx &
Xxxx, LLP are as follows:
Chase Manhattan Bank, N.A.
ABA No. 000000000
For the Account of:
United States Trust Company of New York
Account No. 000-0-000000
In favor of:
Xxxxxxxxx, Xxxxxxxxx & Xxxx, LLP Attorney Escrow Account
Account No. 59-01383
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE SUBSCRIBERS.
Subscribers each acknowledge, represent, warrant and agree as follows:
2.1 ORGANIZATION AND AUTHORIZATION. Each of the Subscribers is duly
incorporated or organized and validly existing in the state or country of its
incorporation or organization and has all requisite power and authority to
subscribe for and purchase and hold the Securities and to enter into this
Agreement. The decision to subscribe for Debentures and the execution and
delivery of this Agreement by the Subscribers, the performance by the
Subscribers of their obligations hereunder and the consummation by the
Subscribers of the transactions contemplated hereby have been duly authorized
and requires no other proceedings on the part of the Subscribers. The
undersigned signatories have all right, power and authority to execute and
deliver this Agreement on behalf of the Subscribers. This Agreement has been
duly executed and delivered by the Subscribers and, assuming the execution and
delivery hereof and acceptance hereof by the Company, constitutes the legal,
valid and binding obligations of the Subscribers, enforceable against the
Subscribers in accordance with its terms.
2.2 EVALUATION OF RISKS. Each of the Subscribers has such knowledge
and experience in financial and business matters as to be capable of evaluating
the merits and risks of, and bearing the
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economic risks entailed by, an investment in the Company and of protecting its
interests in connection with this transaction. They each recognize that their
investment in the Company involves a high degree of risk and could result in the
complete loss of their investment.
2.3 INDEPENDENT COUNSEL. Each of the Subscribers acknowledge that they
have been advised to consult with their own attorney regarding legal matters
concerning the Company and their investment in the Securities and to consult
with their tax advisor regarding the tax consequences of acquiring the
Securities.
2.4 DISCLOSURE DOCUMENTATION. Each of the Subscribers has each
received and reviewed copies of the Company's reports and registration
statements filed under the Securities Exchange Act of 1934, as amended (the
"1934 Act"), and the Act, including the Company's 10-Ks, 10-Qs, 8-K's, and
registration statements filed by the Company since June 1, 1997 (collectively,
the "Reports"). Except for the Reports, the Subscribers are not relying on any
other information relating to the offer and sale of the Securities. Subscribers
acknowledge that the Company has offered to make available any additional public
information that the Subscribers may reasonably request, including technical
information, and other material public information about the Company and
Subscribers have been offered the Company's full and unconditional cooperation
in making such information available to Subscribers and acknowledge that the
Company has recommended that the Subscribers request and review such information
prior to making an investment decision. Except as set forth in herein, no oral
or written representations have been made, or oral or written information
furnished to the undersigned, the Subscribers or their advisors, if any, in
connection with the offering of the Securities which were or are in any way
inconsistent with the Reports.
2.5 OPPORTUNITY TO ASK QUESTIONS. Each of the Subscribers has had a
reasonable opportunity to ask questions of and receive answers from the Company
concerning the Company and the offering of the Securities, and all such
questions, if any, have been answered to the full satisfaction of each of the
Subscribers.
2.6 REPORTS CONSTITUTE SOLE REPRESENTATIONS. Except as set forth in
the Reports and elsewhere herein, no representations or warranties have been
made to Subscribers by (a) the Company or any agent, employee or affiliate of
the Company or (b) any other person, and in entering into this transaction
Subscribers are not relying upon any information, other than that contained in
the Reports and the results of independent investigation by Subscribers.
2.7 EACH OF THE SUBSCRIBERS IS AN ACCREDITED INVESTOR. All of the
Subscribers are "Accredited Investors", as defined under Regulation D, and
represent and warrant that they are included within one or more of the following
categories of "Accredited Investors."
(i) Any bank as defined in Section 3(a)(2) of the Act, or any
savings and loan associated or other institution as defined in
Section 3(a)(5)A of the Act whether acting in its individual
or fiduciary capacity; any broker or dealer registered
pursuant to Section 15 of the 1934 Act; any insurance company
as defined in Section 2(13) of the Act;
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any investment company registered under the Investment Company
Act of 1940 or a business development company as defined in
Section 2(a)(48) of that Act; any Small Business Investment
Company licensed by the U.S. Small Business Administration
under Section 301(c) or (d) of the Small Business Act of 1958;
any plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or
its political subdivision, for the benefits of its employees
if such plan has total assets in excess of $5,000,000; and
employee benefit plan within the meaning of Title I of the
Employee Retirement Income Security Act of 1974 if the
investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such Act, which is either a bank, savings and
loan association, insurance company, or registered investment
advisor, or if the employee benefit plan has total assets in
excess of $5,000,000;
(ii) Any private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;
(iii) Any organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar
business trust, or partnership, not formed for the specific
purpose of acquiring the securities offered, with total assets
in excess of $5,000,000;
(iv) Any director, executive officer, or general partner of the
Company, or any director, executive officer, or general
partner of a general partner of that issuer;
(v) Any natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of his purchase
exceeds $1,000,000;
(vi) Any natural person who had an individual income in excess of
$200,000 in each of the two (2) most recent years or joint
income with that person's spouse in excess of $300,000 in each
of those years and has a reasonable expectation of reaching
that same income level in the current year;
(vii) Any trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities
offered, whose purchase is directed by a sophisticated person
as described in Section 230.506(b)(2)(ii) of Regulation D
under the Act;
(viii) Any entity in which all of the equity owners are accredited
investors; and
(ix) Any self-directed employee benefit plan with investment
decisions made solely by persons that are accredited investors
within the meaning of Rule 501 of Regulation D promulgated
under the Act.
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2.8 NO REGISTRATION, REVIEW OR APPROVAL. Each of the Subscribers
acknowledges and understands that the limited private offering and sale of
Securities pursuant to this Agreement has not been reviewed or approved by the
SEC or by any state securities commission, authority or agency, and is not
registered under the Act or under the securities or "blue sky" laws, rules or
regulations of any state. Each of the Subscribers acknowledges, understands and
agrees that the Securities are being offered and sold hereunder pursuant to (i)
a private placement exemption to the registration provisions of the Act pursuant
to Section 3(b) or Section 4(2) of such Act, and (ii) a similar exemption to the
registration provisions of applicable state securities laws. Each of the
Subscribers understands that the Company is relying upon the truth and accuracy
of the representations, warranties, agreements, acknowledgments and
understandings of the Subscribers set forth herein in order to determine the
applicability of such exemptions and the suitability of the Subscribers to
acquire the Securities.
2.9 INVESTMENT INTENT. Without limiting their ability to resell the
Securities pursuant to an effective registration statement under the Act, each
of the Subscribers is acquiring the Securities solely for its own account and
not with a view to the distribution, assignment or resale to others. Each of the
Subscribers understands and agrees that it may have to bear the economic risk of
its investment in the Securities for an indefinite period of time.
2.10 NO ADVERTISEMENTS. The Subscribers are not subscribing for the
Securities as a result of or subsequent to any advertisement, article, notice or
other communication published in any newspaper, magazine, or similar media or
broadcast over television or radio, or presented at any seminar or meeting.
2.11 REGISTRATION RIGHTS. The parties have entered into a Registration
Rights Agreement (Exhibit C).
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
acknowledges, represents, warrants and agrees as follows:
3.1 ORGANIZATION/QUALIFICATION. The Company is a corporation duly
organized and validly existing under the laws of the State of Delaware and is in
good standing under such laws. The Company has all requisite corporate power and
authority to own, lease and operate its properties and assets, and to carry on
its business as presently conducted. The Company is qualified to do business as
a foreign corporation in each jurisdiction in which the ownership of its
property or the nature of its business requires such qualification, except where
its failure to be so qualified would not have a material adverse effect on the
Company.
3.2 ACCURACY OF REPORTS AND INFORMATION. Except as otherwise disclosed
herein or in any schedule hereto, the Company is in compliance, to the extent
applicable, with all reporting obligations under either Section 12(b), 12(g) or
15(d) of the 1934 Act, and shall maintain such status on a timely basis. The
Company has registered its Common Stock pursuant to Section 12 of the 1934 Act
and the Common Stock is listed and trades on the American Stock Exchange. [The
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Company has filed all material required to be filed pursuant to all reporting
obligations, under either Section 13(a) or 15(d) of the 1934 Act during the
twelve (12) months immediately preceding the offer and sale of the Securities
(or for such shorter period that the Company has been required to file such
material).]
3.3 SEC FILINGS/FULL DISCLOSURE. None of the Company's filings with
the Securities and Exchange Commission contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein in light of the circumstances under
which they were made, not misleading. The Company has timely filed all requisite
forms, reports and exhibits thereto with the Securities and Exchange Commission.
There is no fact known to the Company (other than general economic conditions
known to the public generally) that has not been publicly disclosed by the
Company or disclosed in writing to each of the Subscribers which (i) could
reasonably be expected to have a material adverse effect on the condition
(financial or otherwise) or on the earnings, business affairs, properties, or
assets of the Company (a "Material Adverse Effect"), or (ii) could reasonably be
expected to materially and adversely affect the ability of the Company to
perform its obligations pursuant to this Agreement.
3.4 AUTHORIZATION. The Company has all requisite corporate right,
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. All corporate action on the part of the
Company, its directors and stockholders necessary for the authorization,
execution, delivery and performance of this Agreement by the Company, the
authorization, sale, issuance and delivery of the Securities and the performance
of the Company's obligations hereunder has been taken. This Agreement has been
duly executed and delivered by the Company and constitutes a legal, valid and
binding obligation of the Company enforceable in accordance with its terms,
subject to laws of general application relating to bankruptcy, insolvency and
the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies, and to limitations of public
policy as they may apply to the indemnification provisions set forth in this
Agreement. Upon their issuance and delivery in accordance with this Agreement,
the Securities will be validly issued, fully paid and nonassessable and will be
free of any liens or encumbrances; provided, however, that the Securities are
subject to restrictions on transfer under state and/or federal securities laws.
The issuance and sale of the Securities will not give rise to any preemptive
right or right of first refusal or right of participation on behalf of any
person.
3.5 NO CONFLICT. The execution and delivery of this Agreement do not,
and the consummation of the transactions contemplated hereby will not result in
any violation of, or default, or give rise to a right of termination,
cancellation or acceleration of any material obligation or to a loss of a
material benefit, under, any provision of the Certificate of Incorporation, and
any amendments thereto, Bylaws, and any amendments thereto of the Company or any
material mortgage, indenture, lease or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company, its properties or
assets and which (i) would reasonably be expected to have a Material Adverse
Effect, or (ii) could reasonably be expected to materially and adversely affect
the ability of the Company to perform its obligations pursuant to this
Agreement.
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3.6 NO UNDISCLOSED LIABILITIES OR EVENTS. The Company has no
liabilities or obligations, other than those disclosed in the Reports, this
Agreement or those incurred in the ordinary course of the Company's business
since June 15, 1998, which individually or in the aggregate, would (i)
reasonably be expected to have a Material Adverse Effect, or (ii) reasonably be
expected to materially and adversely affect the ability of the Company to
perform its obligations pursuant to this Agreement. Except as set for in Section
3.24, to the knowledge of the Company, no event or circumstance has occurred or
exists with respect to the Company which (i) could reasonably be expected to
have a Material Adverse Effect, or (ii) could reasonably be expected to
materially and adversely affect the ability of the Company to perform its
obligations pursuant to this Agreement.
3.7 NO DEFAULT. Except as set forth in Section 3.24, the Company is
not in default in the performance or observance of any material obligation,
agreement, covenant or condition contained in any indenture, mortgage, deed of
trust or other material instrument or agreement to which it is a party or by
which it is or its property is bound, and neither the execution, nor the
delivery by the Company, nor the performance by the Company of its obligations
under this Agreement or the Exhibits annexed hereto, including the conversion
provision of the Debentures will result in the breach or violation of any of the
terms or provisions of, or constitute a default or result in the creation or
imposition of any lien or charge on any assets or properties of the Company
under, any material indenture, mortgage, deed of trust or other agreement
applicable to the Company or instrument to which the Company is a party or by
which it is bound or any statute or the Certificate of Incorporation or by-laws
of the Company, or any decree, judgment, order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Company or its
properties, or the Company's listing agreement for its Common Stock (it being
understood that it will be necessary for the Company to file an additional
listing application with the American Stock Exchange to list the Common Stock
issuable pursuant to the Debenture), which individually or in the aggregate (i)
could reasonably be expected to have a Material Adverse Effect, or (ii) could
reasonably be expected to materially and adversely affect the ability of the
Company to perform its obligations pursuant to this Agreement.
3.8 ABSENCE OF EVENTS OF DEFAULT. Except as set forth in the Reports
and this Agreement (including all Exhibits annexed hereto), no default, as
defined in the respective agreement to which the Company is a party, and no
event which, with the giving of notice or the passage of time or both, would
become a default, has occurred and is continuing, which would (i) reasonably be
expected to have a Material Adverse Effect, or (ii) could reasonable be expected
to materially and adversely affect the ability of the Company to perform its
obligations pursuant to this Agreement.
3.9 GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization
of or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with the valid execution and
delivery of this Agreement (including all Exhibits annexed hereto), or the
offer, sale or issuance of the Securities, or the consummation of any other
transaction contemplated hereby, except as may be required by applicable
securities laws.
3.10 INTELLECTUAL PROPERTY RIGHTS. Except as disclosed in the Reports,
the Company has
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sufficient trademarks, trade names, patent rights, copyrights and licenses to
conduct its business as presently conducted in the Reports. Except as disclosed
in the Reports, to the knowledge of the Company, neither the Company nor its
services is infringing or will infringe any trademark, trade name, patent right,
copyright, license, trade secret or other similar right of others currently in
existence; and there is no claim being made against the Company regarding any
trademark, trade name, patent, copyright, license, trade secret or other
intellectual property right which could (i) reasonably be expected to have a
Material Adverse Effect, or (ii) could reasonably be expected to materially and
adversely affect the ability of the Company to perform its obligations pursuant
to this Agreement.
3.11 MATERIAL CONTRACTS. Except as set forth in the Reports and in
Section 3.24, the agreements to which the Company is a party described in the
Reports are valid agreements, in full force and effect, and the Company is not
in breach or default under any of such agreements which could (i) reasonably be
expected to have a Material Adverse Effect, or assets of the Company, or (ii)
could reasonably be expected to materially and adversely affect the ability of
the Company to perform its obligations pursuant to this Agreement.
3.12 LITIGATION. Except as disclosed in the Reports, there is no
action, proceeding or investigation pending, or to the Company's knowledge
threatened, against the Company which might result, either individually or in
the aggregate, in any Material Adverse Effect. The Company is not a party to or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality which could (i) reasonably be
expected to have a Material Adverse Effect, or (ii) could reasonably be expected
to materially and adversely affect the ability of the Company to perform its
obligations pursuant to this Agreement.
3.13 TITLE TO ASSETS. Except as set forth in Reports, the Company has
good and marketable title to all properties and material assets described in the
Reports as owned by it, free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest other than such as are not material to
the business of the Company.
3.14 SUBSIDIARIES. Except as disclosed in the Reports, the Company
does not presently own or control, directly or indirectly, any interest in any
other corporation, partnership, association or other business entity.
3.15 REQUIRED GOVERNMENTAL PERMITS. The Company is in possession of
and operating in material compliance with all authorizations, licenses,
certificates, consents, orders and permits from state, federal and other
regulatory authorities which are material to the conduct of its business, all of
which are valid and in full force and effect.
3.16 LISTING. The Company will maintain the listing of its Common
Stock on the American Stock Exchange, the successors thereto, or other organized
United States market or quotation system. The Company has not received any
notice, oral or written, affecting its continued listing on such Exchange and
the Company will take no action which would impact its continued
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listing or eligibility of the Company for such listing. The Company is in full
compliance with the requirements for listing on the American Stock Exchange.
3.17 OTHER OUTSTANDING SECURITIES/FINANCING RESTRICTIONS. Except as
disclosed in the Reports, the Company has no outstanding restricted shares, or
shares of Common Stock sold under Regulation S, Regulation D or outstanding
under any other exemption from registration, which are available for sale as
unrestricted ("free trading") stock.
3.18 REGISTRATION ALTERNATIVE. The Company covenants and agrees that
for so long as any of the Common Stock issuable upon conversion of the
Debentures remains outstanding and continues to be "restricted securities"
within the meaning of Rule 144 under the Act, the Company shall cooperate in all
reasonable respects in order to permit resales of the underlying Common Stock
pursuant to Rule 144 under the Act. The Company and the Subscribers shall upon
conversion of the Debentures, provide the Transfer Agent any and all papers
necessary to complete the transfer under Rule 144, including, but not limited
to, opinions of counsel to the Transfer Agent, and the Company shall continue to
file all material required to be filed pursuant to Sections 13(a) or 15(d) of
the 0000 Xxx.
3.19 CAPITALIZATION. The authorized capital stock of the Company
consists of 40,000,000 shares of Common Stock, $0.01 par value per share, of
which 15,564,580 are outstanding. There are 5,000,000 shares of Preferred Stock
authorized and none outstanding. All issued and outstanding shares of Common
Stock have been duly authorized, validly issued and fully paid and
nonassessable.
3.20 DILUTION. The Company is aware and acknowledges that conversion
of the Debentures would cause dilution to existing stockholders and could
significantly increase the outstanding number of shares of Common Stock.
3.21 EMPLOYEE RELATIONS. The Company is not involved in any labor
dispute, nor, to the knowledge of the Company, is any such dispute threatened.
None of the Company's employees is a member of a union and the Company believes
that its relations with its employees are good.
3.22 ENVIRONMENTAL LAWS. To its knowledge, the Company is (i) in
compliance with any and all foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants and which the Company knows are applicable to it ("Environmental
Laws"), (ii) has received all permits, licenses or other approvals required
under applicable Environmental Laws to conduct its business, and (iii) is in
compliance with all terms and conditions of any such permit, license or
approval, except in each case where one failure to do so could reasonably be
expected to have a Material Adverse Effect.
3.23 INSURANCE. The Company is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the businesses
in which the Company is engaged. The Company has no
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reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires, or obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not materially and adversely affect the condition, financial or otherwise,
or the earnings, business or operation of the Company.
3.24 REPRESENTATIONS. Notwithstanding any other provision hereof, the
Subscribers understand and acknowledge that the Company is in material default
under its senior bank facility with Imperial Bank and under its $1,850,000
Senior Subordinated Secured Debentures due May 25, 1998.
SECTION 4. FURTHER REPRESENTATIONS AND WARRANTIES OF THE COMPANY. For
so long as any Securities held by any of the Subscribers remain outstanding, the
Company acknowledges, represents, warrants and agrees as follows:
(i) It will reserve from its authorized but unissued shares of
Common Stock a sufficient number of shares of Common Stock to
permit the conversion in full of all of the outstanding
Securities.
(ii) It will permit the Subscribers to exercise their right to
convert the Debentures pursuant to the terms contained in the
Debentures.
SECTION 5. OPINION OF COUNSEL. Each of the Subscribers shall, upon the
Closing, receive an opinion from counsel to the Company as to the matters set
forth in Exhibit D.
SECTION 6. OPINION OF COUNSEL UPON CONVERSION/TRANSFER. The Company
will obtain for each Subscriber, at the Company's expense, any and all opinions
of counsel which may reasonably be required in order to permit the issuance (and
transfer) of the shares of Common Stock upon conversion of the Debentures,
subject only to receipt of a Notice of Conversion in the form of Exhibit E and
receipt by counsel of such representations, warranties, and documents as are
determined by such counsel to be necessary to comply with applicable securities
laws, duly executed by the Subscriber which shall be satisfactory to the
Transfer Agent, directing the Transfer Agent to remove the legend from the
Common Stock certificate in connection with a sale of such Common Stock, if the
Registration Statement has been declared effective by the SEC or another
exemption is available for resale.
SECTION 7. RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the SEC which may at any time
permit the sale of the Securities to the public without registration, the
Company agrees, for so long as the Securities are held by the Subscribers, to
take such action as is necessary to:
(i) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Act, at all times
after the effective date on which the Company becomes subject
to the reporting requirements of the Act or the 1934 Act;
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(ii) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934
Act;
(iii) furnish to each Subscriber forthwith, upon request, a written
statement by the Company as to its compliance with the
reporting requirements of said Rule 144, and of the Act and
the 1934 Act, a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents of
the Company and other information in the possession of or
reasonably obtainable by the Company as each Subscriber may
reasonably request in availing itself of any rule or
regulation of the SEC allowing any Subscriber to sell any such
Securities without registration.
SECTION 8. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
SUBSCRIBERS. Each of the Subscribers, and the Company represent, warrant,
covenant, and agree to the other the following with respect to itself:
8.1 SUBSCRIPTION AGREEMENT. This Agreement has been duly authorized,
validly executed and delivered on behalf of the Company and each of the
Subscribers, and is a valid and binding agreement, enforceable in accordance
with its terms, subject to general principles of equity and to bankruptcy or
other laws affecting the enforcement of creditors' rights generally.
8.2 NO-CONFLICT. The execution and delivery of this Agreement do not,
and the consummation of the transactions contemplated hereby will not, conflict
with, or result in any violation of, or default (with or without notice or lapse
of time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or to a loss of a material benefit, under any
provision of the Certificate of Incorporation, and any amendments thereto,
bylaws and any amendments thereto of any Subscriber or any material mortgage,
indenture, lease or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree statute, law, ordinance, rule or
regulation applicable to any Subscriber, or its respective properties or assets.
8.3 APPROVALS. Neither the Company, nor any Subscriber, is aware of
any authorization, approval or consent of any governmental body which is legally
required for the Company's issuance and sale of the Securities to the
Subscribers.
8.4 INDEMNIFICATION. The Company and each of the Subscribers agrees to
indemnify the other, and to hold the other harmless, from and against any and
all losses, damages, liabilities, costs and expenses (including reasonable
attorneys' fees) which the other may sustain or incur in connection with the
breach by the indemnifying party of any representation, warranty or covenant
made by it in this Agreement.
8.5 TRANSFER RESTRICTIONS/CONVERSION HOLDING PERIOD. Refer to the
Debenture annexed hereto as Exhibit A.
8.6 SHORT SELLING RESTRICTIONS. The Subscribers shall be entitled to
accumulate and
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maintain a short position in the Common Stock subject to the following terms and
conditions:
(i) during the five trading days immediately preceding each
Conversion Date as is set forth in the following sentence. The
short position which the Subscribers may accumulate on a daily
basis during this period shall be limited to ten (10%) percent
per day of the principal amount of the Debenture being
converted with the short positions being cumulative during
this five trading day period. Irrespective of whether there
are concurrent or contemporaneous Conversion Dates within the
same five trading day period, the Subscribers may accumulate
and maintain short positions on all such conversions
independently of each other in accordance with the terms of
this section; and/or
(ii) in the event the closing price of the Common Stock is US$4.75
(or higher) the Subscribers, on a pro rata basis, may
initiate, or add to, a short position on the next trading day
in an amount equal to the average daily total composite volume
of the previous twenty (20) trading days on all exchanges
and/or markets as reported by Bloomberg, L.P.
(iii) In no event shall this Section require the Subscribers to
cover any short sales that they may have made for short
selling pursuant to this Section.
8.7 RIGHT OF FIRST REFUSAL. The Company agrees that should it elect to
enter into a transaction for additional debt or equity financing (other than
debt financing from a bank or financial institution) within the later of two
hundred and forty (240) days after the Closing Date or (ii) the Effective Date,
the Company will give each Subscriber written notice of the terms and conditions
of such offer (the "ROFR Notice"). Each Subscriber shall have a right of first
refusal to commit to provide the funds pursuant to the terms as outlined in the
ROFR Notice pro rata on the basis of the Debentures purchased by such
Subscriber. Each Subscriber shall have five (5) business days to reply in
writing after receipt of the ROFR Notice from the Company. Such reply may be
sent via facsimile, receipt confirmed. In the event such written reply is not
received by the Company within such five (5) business day period and provided
that the Subscribers provide the full amount of such financing by the date
specified in the ROFR Notice, the Company shall have the right to conclude a
transaction with another investor or investors provided the transaction is not
materially different from that outlined to the Subscriber as provided herein
above.
SECTION 9. RESTRICTIONS ON SHARE ISSUANCES.
9.1 RESTRICTIONS ON CONVERSION OF DEBENTURE. Each Subscriber or any
subsequent holder of the Debenture (the "Holder") shall be prohibited from
converting any portion of the Debenture which would result in any Subscriber or
Holder being deemed the beneficial owner, in accordance with the provisions of
Rule 13d-3 of the 1934 Act, as amended, of 4.99% or more of the then issued and
outstanding Common Stock of the Company.
-12-
9.2 LIMITATION ON SHARE ISSUANCE. Notwithstanding anything to the
contrary contained herein or in the Debentures, the number of shares of Common
Stock of the Company issuable pursuant to the Debentures shall not exceed
3,097,351 shares (being 19.9% of the 15,564,580 shares of Common Stock issued
and outstanding on the date hereof). In the event the number of shares of Common
Stock of the Company issuable pursuant to the Debentures exceeds 2,334,687
shares (being 15% of the 15,564,580 shares of Common Stock issued and
outstanding on the date hereof), the Company agrees that it shall, as promptly
as the circumstances permit, call a stockholders meeting for the purpose of
approving below market price issuances of Common Stock to the Subscribers in
excess of 2,334,687. In the event that the aforementioned proposal is not
ratified by the stockholders and the number of shares issuable under the
Debentures exceeds 3,097,351, the Company will seek a waiver from the American
Stock Exchange to permit such issuances. If the Company is unable to obtain the
waiver within twenty (20) days of applying therefor, the Company will, at its
option, either (i) delist the Common Stock from the American Stock Exchange and
include the Common Stock for quotation on the OTC Bulletin Board or (ii) pay to
the Subscribers the "Economic Benefit" of that number of shares of Common Stock
that would have been issuable to the Subscribers above 3,097,351 shares. The
"Economic Benefit" is defined as the number of shares of Common Stock issuable
to the Subscribers pursuant to the Debentures in excess of 3,097,351, multiplied
by the average closing Bid Price for the five trading days preceding the tenth
(10th) trading day after the aforementioned stockholder meeting. The "Economic
Benefit" will be paid within thirty (30) days after such tenth (10th) trading
day.
SECTION 10. REGISTRATION OR EXEMPTION REQUIREMENTS. Each of the
Subscribers acknowledges and understands that the Securities may not be resold
or otherwise transferred except in a transaction registered under the Act and
any applicable state securities laws or unless an exemption from such
registration is available. Each of the Subscribers understands that the
Securities will be imprinted with a legend that prohibits the transfer of the
Securities unless (i) they are registered under applicable securities laws or
such registration is not required, or (ii) if the transfer is pursuant to an
exemption from registration, an opinion of counsel reasonably satisfactory to
the Company is obtained to the effect that the transaction is so exempt.
SECTION 11. LEGEND. The certificates representing the Securities shall
be subject to a legend restricting transfer under the Act, such legend to be
substantially as follows:
"THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). SUCH SECURITIES MAY NOT BE OFFERED OR SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT."
The certificates representing these Securities, and each certificate
issued in transfer thereof, will also bear any legend required under any
applicable state securities law.
SECTION 12. STOCK DELIVERY INSTRUCTIONS. The Debenture Certificates
shall be delivered to each of the Subscribers on a delivery versus payment basis
as set forth in the Escrow Agreement.
-13-
SECTION 13. CLOSING DATE. The date the Escrow Agent (i) receives the
Securities and the Purchase Price, and (ii) the conditions set forth in Sections
14 and 15, and the terms and conditions of the Escrow Agreement (Exhibit B)
herein are satisfied or waived, shall be the Closing (the "Closing Date").
SECTION 14. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. Each of the
Subscribers understands that the Company's obligation to sell the Debentures is
conditioned upon:
(i) The receipt and acceptance by the Company of this Subscription
Agreement and all Exhibits duly executed by all other parties
thereto;
(ii) Delivery into escrow by each of the Subscribers of good
cleared funds as payment in full for the purchase of the
Securities;
(iii) All representations and warranties of each of the Subscribers
contained herein shall remain true and correct as of the
Closing Date; and
(iv) The Company shall have obtained all permits and qualifications
required by any state for the offer and sale of the
Debentures, or shall have the availability of exemptions
therefrom. At the Closing Date, the sale and issuance of the
Debentures and the proposed issuance of the Common Stock
underlying the Debentures shall be legally permitted by all
laws and regulations to which each of the Subscribers and the
Company are subject.
SECTION 15. CONDITIONS TO SUBSCRIBER'S OBLIGATION TO PURCHASE. The
Company understands that each of the Subscriber's obligation to purchase the
Debentures is conditioned upon:
(i) Acceptance by the Company of each of the Subscriber's
Subscription Agreement in the form hereof and due execution by
all parties of the Exhibits hereto;
(ii) Delivery into escrow of the original Securities as described
herein;
(iii) All representations and warranties of the Company contained
herein shall remain true and correct in all material respects
as of the Closing Date;
(iv) Receipt of opinion of counsel substantially in the form of
Exhibit D annexed hereto;
(v) The Company shall have obtained all permits and qualifications
required by any state for the offer and sale of the Debentures
or shall have the availability of exemptions therefrom. At the
Closing Date, the sale and issuance of the Debentures shall be
legally permitted by all laws and regulations to which the
Company and each of the Subscribers are subject.
-14-
SECTION 16. MISCELLANEOUS.
16.1 GOVERNING LAW/JURISDICTION. This Agreement will be construed and
enforced in accordance with and governed by the laws of the State of New York,
except for matters arising under the Act, without reference to principles of
conflicts of law. Each of the parties consents to the jurisdiction of the US
District Court for the Southern District of the State of New York in connection
with any dispute arising under this Agreement and hereby waives, to the maximum
extent permitted by law, any objection, including any objection based on forum
non conveniens, to the bringing of any such proceeding in such jurisdiction.
Each party hereby agrees that if another party to this Agreement obtains a
judgment against it in such a proceeding, the party which obtained such judgment
may enforce same by summary judgment in the courts of any state or country
having jurisdiction over the party against whom such judgment was obtained, and
each party hereby waives any defenses available to it under local law and agrees
to the enforcement of such a judgment. Each party to this Agreement irrevocably
consents to the service of process in any such proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to such party
at its address set forth herein. Nothing herein shall affect the right of any
party to serve process in any other manner permitted by law.
16.2 CONFIDENTIALITY. The Company and each of the Subscribers agrees
to keep confidential and not to disclose to or use for the benefit of any third
party the terms of this Agreement (including the names of the Subscribers) or
any other information which at any time is communicated by the other party as
being confidential without the prior written approval of the other party;
provided, however, that this provision shall not apply to information which, at
the time of disclosure, is already part of the public domain (except by breach
of this Agreement) and information which is required to be disclosed by law. If
for any reason the transactions contemplated by this Agreement are not
consummated, each of the parties hereto shall keep confidential any such
information obtained from any other party, including the names of the
Subscribers (except information publicly available or in such party's domain
prior to the date hereof, and except as required by court order) and shall
promptly return to the other parties all schedules, documents, instruments, work
papers or other written information, without retaining copies thereof,
previously furnished by it as a result of this Agreement or in connection
herewith.
16.3 FACSIMILE/COUNTERPARTS/ENTIRE AGREEMENT. Except as otherwise
stated herein, in lieu of the original, a facsimile transmission or copy of the
original shall be as effective and enforceable as the original. This Agreement
may be executed in counterparts which shall be considered an original document
and which together shall be considered a complete document. This Agreement and
Exhibits hereto constitute the entire agreement between the Subscribers and the
Company with respect to the subject matter hereof. This Agreement may be amended
only by a writing executed by all parties.
16.4 SEVERABILITY. In the event that any provision of this Agreement
becomes or is
-15-
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that no such severability shall be effective if it
materially changes the economic benefit of this Agreement to any party.
16.5 RELIANCE BY COMPANY. Each of the Subscribers represents to the
Company that the representations and warranties of each Subscriber contained
herein are complete and accurate and may be relied upon by the Company in
determining the availability of an exemption from registration under federal and
state securities laws in connection with a private offering of securities.
16.6 LEGAL FEES AND EXPENSES. Each of the parties shall pay its own
fees and expenses (including the fees of any accountants, appraisers or others
engaged by such party) in connection with this Agreement and the transactions
contemplated hereby, except that the Company agrees to pay on the Closing Date,
out of the Purchase Price, fees, in cash, to Goldstein, Goldstein, & Xxxx, LLP
the sum equal of $17,500.
16.7 AUTHORIZATION. Each of the parties hereto represents that the
individual executing this Agreement on its behalf has been duly and
appropriately authorized to execute the Agreement.
16.8 NOTICES. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received), (b) on the second business day following the date of mailing by
reputable courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur or (c) on the fifth
business day following date of mailing by registered or certified mail, return
receipt requested, postage prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:
(i) If to the Company:
Datametrics Corporation
00X Xxxxxxx Xxxx No. 3305
Xxxxxxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxx, CEO
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
-16-
With a copy to:
Xxxx Xxxxxx & Xxxxx LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(ii) If to the Subscribers, at the addresses and numbers listed on
Schedule A annexed hereto.
Any party hereto may from time to time change its address or
facsimile number for notices under this Section by giving at
least ten (10) days' prior written notice of such changed
address or facsimile number to the other party hereto.
16.9 ADJUSTMENTS. Any references to the price of the Common Stock
shall be adjusted proportionately to reflect any adjustments due to the payment
of a stock dividend, stock split, combination of shares or any other similar
event prior to the closing.
[Remainder of Page Intentionally Left Blank]
[Signature Page Follows]
-17-
IN WITNESS WHEREOF, this 7% Convertible Debenture Subscription
Agreement was duly executed on the date first written below.
Agreed to and Accepted on
this 24th day of July 1998
DATAMETRICS CORPORATION
By: /s/ Xxxxxx Xxxxxx
-------------------------------
Name: Xxxxxx Xxxxxx
Title: Vice President and
Chief Financial Officer
LITTLE WING, L.P.
By: /s/ Bic Xxxxxx
----------------------------------
Name: Bic Xxxxxx
Title: Authorized Signatory
TRADEWINDS FUND LTD.
By: /s/ Bic Xxxxxx
----------------------------------
Name: Bic Xxxxxx
Title: Authorized Signatory
LITTLE WING TOO, L.P.
By: /s/ Bic Xxxxxx
----------------------------------
Name: Bic Xxxxxx
Title: Authorized Signatory
-18-
SCHEDULE A
LIST OF PURCHASERS
------------------
LITTLE WING, L.P.
-----------------
Little Wing, L.P.
x/x Xxxxxxx Xxxx.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
$540,000
TRADEWINDS FUND LTD.
--------------------
Tradewinds Fund Ltd.
x/x Xxxxxxx Xxxx.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
$400,000
LITTLE WING TOO, L.P.
---------------------
Little Wing Too, L.P.
x/x Xxxxxxx Xxxx.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
$60,000
-19-
EXHIBITS
(OMITTED)
-20-
