1
EXHIBIT B
SUBSCRIPTION AGREEMENT
NOTE: THREE COMPLETED AND EXECUTED COPIES OF THIS SUBSCRIPTION
AGREEMENT MUST BE RETURNED, AND THE ENTIRE PURCHASE PRICE FOR THE
PREFERRED STOCK SUBSCRIBED FOR MUST BE PAID AS SET FORTH HEREIN,
TO SUBSCRIBE FOR THIS OFFERING.
Name of Investor: Newlight Associates, L.P.
Number of Shares of Series A 8% Redeemable Convertible
Preferred Stock, $1.00 par value, at $3.0625 per Share:
99,755
Aggregate Purchase Price: $305,499.68
FOR RESIDENTS OF PENNSYLVANIA
THE SECURITIES ARE BEING SOLD AS PART OF A TRANSACTION WHICH IS
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE PENNSYLVANIA SECURITIES ACT OF
1972, AS AMENDED, PURSUANT TO SECTION 203(d) THEREOF.
SECTION 207(m) OF THE PENNSYLVANIA SECURITIES ACT OF 1972 ALSO
PROVIDES THAT EACH PERSON WHO ACCEPTS AN OFFER TO PURCHASE SECURITIES EXEMPTED
FROM REGISTRATION BY SECTION 203(d) DIRECTLY FROM THE ISSUER OR AFFILIATE OF THE
ISSUER WILL HAVE THE RIGHT TO WITHDRAW SUCH ACCEPTANCE WITHOUT INCURRING ANY
LIABILITY TO THE SELLER, THE UNDERWRITER (IF ANY) OR ANY OTHER PERSON WITHIN TWO
BUSINESS DAYS FROM THE DATE OF RECEIPT BY THE ISSUER OF SUCH PERSON'S WRITTEN
BINDING CONTRACT OF PURCHASE OR, IN THE CASE OF A TRANSACTION IN WHICH THERE IS
NO BINDING CONTRACT OF PURCHASE, WITHIN TWO BUSINESS DAYS AFTER SUCH PERSON
MAKES THE INITIAL PAYMENT FOR THE SECURITIES BEING OFFERED.
TIMELY NOTICE OF AN INTENTION TO WITHDRAW WILL BE DEEMED TO HAVE
BEEN GIVEN BY A PROSPECTIVE PURCHASER WITHIN THE TWO BUSINESS DAY PERIOD, IF,
DURING SUCH TWO-DAY PERIOD, SUCH NOTICE IN WRITING: (1) IS ACTUALLY RECEIVED BY
THE ISSUER OR ITS AFFILIATE; (2) IS DELIVERED TO A TELEGRAPH OR OTHER MESSAGE
SERVICE FOR TRANSMITTAL; (3) IS DEPOSITED IN THE UNITED STATES MAILS, AND IN THE
CASE OF (2) ABOVE, ALL TELEGRAPH, POSTAGE OR OTHER TRANSMITTAL FEES ARE PAID BY
THE SENDER AND NOTICE IS ADDRESSED TO THE PRESIDENT OF ACRODYNE COMMUNICATIONS,
INC. (THE "COMPANY").
PERSONS TO WHOM OFFERS OR SALES ARE MADE IN PENNSYLVANIA ARE FURTHER
ADVISED THAT A PENNSYLVANIA PURCHASER
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CANNOT SELL THE SECURITIES FOR A PERIOD OF TWELVE (12) MONTHS FROM THE DATE OF
PURCHASE EXCEPT AS PERMITTED BY THE PENNSYLVANIA SECURITIES ACT OF 1972.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), MAY BE PERMITTED TO DIRECTORS,
OFFICERS OR PERSONS CONTROLLING THE COMPANY, THE COMPANY IS AWARE THAT IN THE
OPINION OF THE SECURITIES AND EXCHANGE COMMISSION SUCH INDEMNIFICATION IS
AGAINST PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS THEREFORE UNENFORCEABLE.
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SUBSCRIPTION AGREEMENT, dated as of September 3, 1998, by and among
Acrodyne Communications, Inc., a Delaware corporation (the "Company"), and
certain investors executing counterparts of this Agreement (collectively, the
"Investors," or each individually, an "Investor").
W I T N E S S E T H:
WHEREAS, the Company desires to sell to the Investors, and the
Investors desire to purchase from the Company, an aggregate of 326,530 shares of
the Company's Series A 8% Redeemable Convertible Preferred Stock, par value
$1.00 per share (the "Preferred Stock"), at a purchase price of $3.0625 per
share, having the rights and preferences set forth in the Certificate of
Designation attached hereto as Exhibit A (the "Certificate of Designation"); and
WHEREAS, the Company is described in the Company's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1997 and Quarterly Report on
Form 10-QSB for the fiscal quarter ended June 30, 1998 (collectively the
"Reports") on file with the Securities and Exchange Commission (the
"Commission");
NOW, THEREFORE, the parties hereto agree as follows:
1. SUBSCRIPTION AND PAYMENT. Subject to the terms and conditions
herein set forth, the undersigned (the "Investor") hereby subscribes for the
number of shares of Preferred Stock set forth above. The Investor agrees to
deliver to the Company at the Closing (as defined below) the aggregate purchase
price set forth above, payable in immediately available funds, for the shares of
Preferred Stock subscribed for hereby.
2. CLOSING. The closing (the "Closing") of the purchase and sale of
the Preferred Stock (the "Offering") will occur at the offices of Xxxxxx, Xxxx &
Xxxxxxxx LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 on September 4, 1998 or
the earliest date thereafter on which the closing conditions specified in
Sections 7 and 8 of this Agreement have been satisfied or waived (any such date,
the "Closing Date"); provided, however, that if the Closing has not occurred by
September 8, 1998, then this Agreement will terminate and the Closing will not
take place. At the Closing, the Company will deliver to the Investor one
executed copy of this Agreement with a stock certificate representing the
Investor's ownership
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of the Preferred Stock subscribed for hereby. Similar Subscription Agreements
(all such agreements and this Subscription Agreement being collectively referred
to as the "Subscription Agreements") will be executed by each of the Investors.
3. TERMINATION OF OFFERING. The Investor understands and agrees that
it will not be entitled to exercise the rights of a shareholder of the Company
until an appropriate certificate representing the Preferred Stock for which the
Investor has subscribed has been issued to the Investor on the day of the
Closing. If (a) the Company has reasonably determined that an event has occurred
or a condition exists which could materially and adversely affect the business
or proposed business of the Company and that such possibility warrants
termination of the Offering, (b) the conditions to the Closing of the Offering
are not satisfied or (c) the Company elects to terminate the Offering, then the
Offering will be terminated, the Company will not issue the Preferred Stock and
the Company will not be entitled to payment of the purchase price for the
Preferred Stock.
4. REPRESENTATIONS AND WARRANTIES BY INVESTOR. The Investor hereby
represents and warrants to the Company that:
(a) It is an "accredited investor" as that term is defined in
Rule 501(a) under the Securities Act of 1933, as amended (the "Act").
(b) It has the requisite knowledge and experience in financial
and business matters to be capable of evaluating the merits and risks of an
investment in the Company.
(c) It has received and read the Reports and has evaluated the
risks of investing in the Company.
(d) It has been given the opportunity to ask questions of, and
receive answers from, the Company concerning the terms and conditions of the
Offering and to obtain additional information necessary to verify the accuracy
of the information contained in the Reports or such other information as it
desired in order to evaluate its investment.
(e) In making its decision to purchase the Preferred Stock
herein subscribed for, it has relied solely upon the Reports, the
representations, warranties, agreements, undertakings and acknowledgments of the
Company in this Agreement, and independent investigations made by the Company.
(f) It understands that an investment in the Company involves
certain risks and it has taken full cognizance of and understands such risks,
including those set forth in the Reports.
(g) It understands that neither the Preferred Stock nor the
shares of Common Stock of the Company, par value $.01 per share, into which the
Preferred Stock is convertible (the "Common Stock") has been registered under
the Act, and agrees that neither the Preferred Stock nor the Common Stock may be
sold, offered for sale, transferred, pledged, hypothecated or otherwise disposed
of except in compliance with the Act and subject to the terms of this
Subscription Agreement.
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(h) It understands that no federal or state agency has made
any finding or determination as to the fairness for investment in, or any
recommendation or endorsement of, the Preferred Stock.
(i) The Preferred Stock herein subscribed for is being
acquired by it in good faith solely for its own account, for investment purposes
and not with a view to subdivision, distribution or resale, and the Investor
will not sell or otherwise dispose of any shares of the Preferred Stock or
Common Stock, as the case may be, unless:
(i) it has advised the Company in writing that it
intends to dispose of such shares of Preferred Stock or Common
Stock, as the case may be, in a manner to be described in such
advice, and counsel reasonably acceptable to the Company has
delivered to the Company an opinion that registration is not
required under the Act or under any applicable securities laws
of any jurisdiction; or
(ii) a registration statement on an appropriate form
under the Act, or a post-effective amendment to such
registration statement, covering the proposed sale or other
disposition of such shares of Preferred Stock or Common Stock,
as the case may be, is in effect under the Act and such shares
of Preferred Stock or Common Stock or the proposed sale or
other disposition thereof have been registered or qualified
under applicable securities laws of any jurisdiction.
(j) The Investor undertakes to notify the Company as soon as
practicable of any material change in any representation, warranty or other
information relating to the Investor set forth herein which occurs prior to the
Closing in order to insure compliance of the Investor with the terms of this
Agreement.
(k) The Investor acknowledges and agrees that the certificates
representing the Preferred Stock and the Common Stock will bear the following
legend (unless not required under the Act):
"The securities represented by this certificate have not
been registered under the Securities Act of 1933 and may not
be sold, exchanged, hypothecated or transferred in any manner
except in compliance with that certain Subscription Agreement
dated as of September 3, 1998 among the Company and various
stockholders of the Company."
(l) The Investor also acknowledges that the Company may place
a stop transfer order against transfer of the Preferred Stock and the Common
Stock, if necessary in the Company's reasonable judgment in order to assure
compliance by the Investor with the terms of this Agreement.
(m) Each Investor located in the Commonwealth of Pennsylvania
further acknowledges and agrees that such Investor cannot sell the Preferred
Stock for a period of
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twelve (12) months from the date of purchase thereof except as permitted by the
Pennsylvania Securities Act of 1972.
(n) If the Investor is a partnership, corporation, trust or other
entity, the Investor represents and warrants that (i) the individual executing
this Agreement has appropriate authority to act on behalf of the Investor and
(ii) the Investor was not specifically formed to acquire the Preferred Stock
subscribed for hereby. If the Investor is a partnership, the Investor further
represents that the funds to make this investment were not derived from
additional capital contributions of the partners of such partnership made solely
for the purpose of enabling such partnership to purchase the Preferred Stock and
that such partnership was not formed solely for the purpose of enabling such
partnership to purchase the Preferred Stock.
(o) The foregoing representations, warranties, agreements,
undertakings and acknowledgments are made by the Investor with the intent that
they be relied upon in determining its suitability as a purchaser of Preferred
Stock.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Investor that:
(a) The Company has duly filed with the Commission all reports
required by the Securities Exchange Act of 0000 (xxx "Xxxxxxxx Xxx"). The
Company has furnished to the Investor true and correct copies of the Reports.
The Reports do not, as of the date on which they were signed, contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) The financial statements (including the related notes) of the
Company included in the Reports present fairly the financial position of the
Company as of the dates indicated and its results of operations for the periods
specified therein. All such financial statements have been prepared in
accordance with generally accepted accounting principles on a basis consistently
applied.
(c) Except as disclosed in the Reports, the Company does not have
any subsidiaries. The Company has been duly organized and validly existing as a
corporation in good standing under the laws of its jurisdiction of organization,
with full power and authority (corporate and other) to own its properties and
conduct its business as described in the Reports, and is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the character of the business conducted by it or the location of the
properties owned or leased by it makes such licenses, certificates and permits
from governmental authorities necessary for the conduct of its business as
described in the Reports.
(d) The authorized capital stock of the Company consists of (i)
1,000,000 shares of Preferred Stock, par value $ 1.00 per share, of which 6,500
shares are issued and outstanding, and (ii) 10,000,000 shares of Common Stock,
par value $.01 per share. At the date hereof there are 5,322,270 shares of
Common Stock issued and outstanding. In addition, at the date hereof there are
outstanding options and warrants exercisable for a total of 2,165,120 shares of
Common Stock. The Company has all requisite power and authority to
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issue, sell and deliver the Preferred Stock in accordance with and upon the
terms and conditions set forth in this Agreement and the Common Stock issuable
upon conversion of the Preferred Stock; and all corporate action required to be
taken by the Company for the due and proper authorization, issuance, sale and
delivery of the Preferred Stock and Common Stock has been validly and
sufficiently taken. The outstanding shares of Common Stock are, and the shares
of Common Stock issuable upon conversion of the Preferred Stock in accordance
with its terms will be, when issued, duly authorized, validly issued, fully paid
and nonassessable.
(e) Except as set forth in this Agreement, or as described in the
Reports, subsequent to the respective dates as of which information is given in
the Reports, the Company has not incurred any material liability or obligation,
direct or contingent, or entered into any material transaction, whether or not
in the ordinary course of business, and there has not been any material change
on a consolidated basis in the capital stock, or any material increase in the
short-term debt or long-term debt, or any material adverse change in the
condition (financial or other), business, key personnel, properties or results
of operations of the Company.
(f) The Company is not in violation of its Certificate of
Incorporation or Bylaws or in default in the performance of any material
obligation contained in any material agreement, indenture or other instrument.
The performance by the Company of its obligations under this Agreement and the
consummation of the transactions herein contemplated will not conflict with or
result in a breach of the Certificate of Incorporation or Bylaws of the Company,
or any material agreement, indenture or other instrument to which the Company is
a party or by which it is bound, or any law, rule, administrative regulation or
decree of any court or governmental authority having jurisdiction over the
Company or its properties, or result in the creation or imposition of any
material lien, charge, claim or encumbrance upon any property or asset of the
Company. Except as required by the Act and applicable state securities or blue
sky laws, no consent, approval, authorization or order of any court or
governmental authority is required in connection with the consummation of the
transactions contemplated by this Agreement. The rights granted to the Investors
hereunder do not in any way conflict with and are not inconsistent with any
rights granted to the holders of the Company's securities or debt instruments.
(g) The Common Stock issuable upon conversion of the Preferred
Stock, upon such issuance, will conform to the description thereof contained in
the Reports. There are no preemptive rights or other rights to subscribe for or
to purchase, or any restriction upon the voting or transfer of, any shares of
Common Stock pursuant to the Company's Certificate of Incorporation or Bylaws or
any agreement or other instrument to which the Company is a party. Neither the
Offering nor the sale of the Preferred Stock as contemplated in this Agreement
gives rise to any rights, other than those which have been waived, for or
relating to the registration of any shares of Common Stock (other than as
provided in Section 9 of this Agreement).
(h) The Company has full right, power and authority to enter into
this Agreement and this Agreement has been duly authorized, executed and
delivered by the
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Company and constitutes the legal, valid and binding agreement of the Company
enforceable against the Company in accordance with its terms.
(i) Except as otherwise stated in the Reports, the Company (A) has
good and marketable title (in fee simple, in the case of real property), free
and clear of all liens and encumbrances, to all of the material real and
personal property described in the Reports as being owned by it, except for any
liens and encumbrances which are not material in the aggregate and do not
materially interfere with the conduct of the business of the Company and (B) has
valid leases to the material real property described in the Reports as under
lease to it with such exceptions as do not materially interfere with the conduct
of the business of the Company.
(j) Except as set forth in the Reports, there are no actions, suits
or proceedings pending before or by any court or governmental agency or
authority, or any arbitrator, which seek to restrain or prohibit the
consummation of the transactions contemplated hereby or which might reasonably
be expected to result in any material adverse change in the condition (financial
or other), business or results of operations of the Company and, to the best of
the Company's knowledge, no such action, suit or proceeding has been threatened.
(k) The Company is not in violation of any law, ordinance,
governmental rule or regulation or court degree to which it may be subject and
the Company has not failed to obtain any license, permit, franchise or other
governmental authorization necessary to the ownership of its property or to the
conduct of its business, which violation or failure to obtain is likely to have
a material adverse effect on the condition (financial or other), business or
results of operations of the Company.
(l) Neither the Company nor any of its officers, employees or other
persons directly or indirectly affiliated with it has, either directly or
through an agent, sold or offered for sale or solicited offers to subscribe for
or buy, or approached potential investors for or otherwise negotiated in respect
of, the Preferred Stock, other than with the Investors, and neither the Company
nor any of its employees or other persons directly or indirectly affiliated with
it has, either directly or through an agent, participated in the organization or
management of any entity or has engaged or proposes during any time after the
Closing to engage in any other activity, in a manner or under circumstances that
would jeopardize the status of the Offering as an exempted transaction under the
Act or under the laws of any state in which it is represented by the Company
that the Offering may be made.
(m) No person is entitled to receive any commission, fee or
compensation from the Company for services rendered as placement agent or
otherwise in connection with the offer or sale of the Preferred Stock pursuant
to the Offering, except for S-A Partners which is entitled only to receive from
the Company the warrants described in Section 6(d).
6. COVENANTS OF THE COMPANY. The Company covenants with the Investor
that:
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(a) The Company will apply the net proceeds from the sale of the
Preferred Stock for general corporate purposes.
(b) At Closing, the Company will issue to the Investor a warrant for
the purchase of up to 152,750 shares of Common Stock, exercisable for seven (7)
years after the Closing Date, at an exercise price of $3.00 per share of Common
Stock, in the form of the Warrant Agreement attached hereto as Exhibit B (such
warrants, the "Investor Warrants").
(c) On each anniversary of the Closing Date, the Company will issue
to the Investor a warrant for the purchase of up to 45,825 shares of Common
Stock, exercisable for seven (7) years from the respective date of issuance of
such warrants, at an exercise price of $3.00 per share of Common Stock, in the
form of the Warrant Agreement attached hereto as Exhibit B (such warrants, the
"Additional Investor Warrants"); provided, however, that the Additional Investor
Warrants will be issued on any anniversary date of the Closing Date only to the
extent that the Preferred Stock held by the Investor is outstanding on such date
and has not been redeemed or converted and further provided that in the event of
such redemption or conversion, then the number of Additional Investor Warrants
issuable to the Investor shall be reduced pro tanto.
(d) At Closing, in consideration for being introduced to the
Investors, the Company will issue to S-A Partners a warrant for the purchase of
up to 25,000 shares of Common Stock, exercisable for seven (7) years after the
Closing Date at a warrant exercise price of $3.00 per share of Common Stock, in
the form of the Warrant Agreement attached hereto as Exhibit B (such warrants,
the "Finder Warrants" and, collectively with the Investor Warrants and the
Additional Investor Warrants, the "Warrants").
(e) The Company will, so long as the Investor is the holder of
Preferred Stock or Common Stock, furnish to the Investor, as soon as practicable
after the end of each fiscal year, an annual report with respect to such year
(including financial statements audited by independent public accountants) and,
as soon as practicable after the end of each quarterly period (other than the
last quarterly period) of each fiscal year, a statement (which need not be
audited) of the results of operations of the Company for such period, and, to
the extent not otherwise furnished, promptly upon the filing thereof, copies of
all reports filed by the Company with the Commission pursuant to the Exchange
Act.
(f) So long as the Investor is the holder of Preferred Stock or
Common Stock, the Company will permit any person designated by the Investor in
writing, at the sole expense of the Investor, to visit and inspect any of the
properties and books of account of the Company and to discuss its affairs,
finances and accounts with the principal officers of the Company, all at such
reasonable times and at such reasonable intervals as the Investor may reasonably
request; provided that the Company will not be required to reveal trade secrets
or information not reasonably pertinent to an evaluation of the credit of the
Company or compliance with this Agreement.
(g) The Company will at all times keep in reserve the number of
shares of its Common Stock issuable from time to time upon the conversion of all
the outstanding Preferred Stock.
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(h) So long as the Investor is the holder of Preferred Stock or
Common Stock, the Company will use its best efforts to continue its existence,
pay all applicable taxes and comply with all applicable laws.
(i) The Company undertakes to notify each Investor as soon as
practicable of any material change in any representation, warranty or other
information relating to the Company set forth herein which occurs prior to the
Closing.
(j) Neither the Company nor any of its employees or other persons
directly or indirectly affiliated with it will engage in any activity that would
jeopardize the status of the Offering as an exempt transaction under the Act or
under the laws of any state in which the Offering is made.
(k) The Company acknowledges that the representations, warranties,
agreements, undertakings and acknowledgments are made by the Company with the
intent that they be relied upon by each Investor in determining whether to
invest in the Preferred Stock.
7. CONDITIONS OF INVESTOR OBLIGATIONS. The Investor's obligations
under this Agreement are subject to the accuracy of the representations and
warranties of the Company made in Section 5 hereof in all material respects, to
the performance by the Company of its other obligations under this Agreement to
be performed at or prior to the Closing and to the following further conditions:
(a) At the Closing, the Investor will have received the favorable
opinion of counsel to the Company, dated the Closing Date and in form and
substance satisfactory to the Investor, to the effect that:
(i) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of organization, with full power and authority to own
its properties and conduct its business as described in the Reports,
and is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction in which the location of the
properties owned or leased by it, as known by such counsel, makes
such qualification necessary.
(ii) The authorized capital stock of the Company consists of
1,000,000 shares of preferred stock, par value $1.00 per share, and
10,000,000 shares of Common Stock, par value $.01 per share. The
Company has all requisite power and authority to issue, sell and
deliver the Preferred Stock in accordance with and upon the terms
and conditions set forth in this Agreement; and all corporate action
required to be taken by the Company for the due and proper
authorization, issuance, sale and delivery of the Preferred Stock
has been validly and sufficiently taken. Upon payment by the
Investor at the Closing of the purchase price for the shares of
Preferred Stock subscribed for hereby, the Preferred Stock (and the
Common Stock issuable upon conversion thereof), upon issuance and
delivery in the manner described in the Certificate
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of Designation attached hereto, will be duly authorized, validly
issued, fully paid and nonassessable. The Certificate of
Designation, in the form attached hereto, has been duly filed with
the Secretary of State of the State of Delaware and the resolutions
contained therein have been duly adopted by the Board of Directors
of the Company. There are no preemptive or other rights to subscribe
for or to purchase, nor any restriction upon the voting or transfer
of, any shares of Common Stock pursuant to the Company's Certificate
of Incorporation, Bylaws or any agreement or other instrument known
to such counsel to which the Company is a party except as described
in the Reports.
(iii) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby do not result
in a violation of, or constitute a default under, the Certificate of
Incorporation or Bylaws of the Company, or any material agreement,
indenture or other instrument known to such counsel to which the
Company is a party or by which it may be bound, or to which any
property of the Company is subject, nor will the performance by the
Company of its obligations hereunder violate any law, rule,
administrative regulation or decree known to such counsel of any
court, or any governmental agency or authority having jurisdiction
over the Company or its properties, or, to the knowledge of such
counsel, result in the creation or imposition of any material lien,
charge, claim or encumbrance upon any property or asset of the
Company. No consent, approval, authorization or other order of any
court, governmental agency or authority is required in connection
with the consummation of the transactions contemplated by this
Agreement, except such as have been obtained or as are contemplated
hereunder.
(iv) The Company has full legal right, power and authority to
enter into this Agreement. This Agreement has been validly
authorized, executed and delivered by the Company and constitutes a
legal, valid and binding agreement of the Company, enforceable in
accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and
similar laws relating to or affecting creditors' rights generally
and court decisions with respect thereto (provided that no opinion
need be expressed with respect to the application of equitable
principles in any proceeding, whether at law or in equity).
In expressing such opinion, such counsel may state (x) that, as to questions of
fact not independently established by such counsel, such counsel has relied on
certificates of the Company or its officers and of public officials, (y) that
such opinion is limited to the General Corporation Law of the State of Delaware,
the laws of the United States and the laws of the state in which such counsel
maintains its principal office, and that, in the event such principal office is
located outside of Pennsylvania, such counsel has assumed that the laws of the
Commonwealth of Pennsylvania are the same as the laws of the state in which such
principal office is located and (z) that, when reference is made in such opinion
to "knowledge" or to what is "known" to such counsel, such reference means the
actual knowledge of only those attorneys who have given substantive attention to
the representation of the Company and the
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preparation and negotiation of this Agreement and the Certificate of
Designation attached hereto.
(b) At the Closing, the Investor will have received a certificate,
dated the date thereof and signed by the Chairman of the Board and President of
the Company to the effect that:
(i) The representations and warranties of the Company in this
Agreement are true and correct in all material respects, as if made
at and as of the Closing Date, and the Company has complied with all
the agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to the Closing Date; and
(ii) The signer of said certificate has carefully examined the
Reports and after giving effect to all amendments or supplements
thereto, on the Closing Date, such Reports does not include any
untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading.
(c) The Certificate of Designation for the Preferred Stock will have
been duly filed with the Secretary of State of the State of Delaware.
(d) If any of the conditions specified in this Section 7 have not
been fulfilled in all material respects when and as required by this Agreement
to be fulfilled, the Investor may cancel this Agreement and all its obligations
under this Agreement by notifying the Company of such cancellation in writing or
by telegram or by facsimile at any time at or before the Closing and any such
cancellation will be without liability or obligation of any party to any other
party (except in the case of willful breach).
8. CONDITIONS OF OBLIGATIONS OF THE COMPANY. The obligations of the
Company under this Agreement are subject to the accuracy of the representations
and warranties of the Investor made in Section 4 hereof in all material
respects, to the performance by the Investor of its other obligations under this
Agreement to be performed at or prior to the Closing and to the further
condition that all other Investors must concurrently make the investments
contemplated to be made in connection with this Offering. If any of the
conditions specified in this Section 8 have not been fulfilled in all material
respects when and as required by this Agreement to be fulfilled, the Company may
cancel this Agreement and all its obligations under this Agreement by notifying
the Investor of such cancellation in writing or by telegram at any time at or
before the Closing and any such cancellation will be without liability or
obligation of any party to any other party (except in the case of willful
breach).
9. REGISTRATION RIGHTS.
(a) "Registration Period" means the period between the date of this
Agreement and the earlier of (i) the date on which all of the shares of Common
Stock and the Common Stock into which the Warrants are exercisable
(collectively, the "Registrable Securities") have been sold in transactions
where the transferee is not subject to securities law resale restrictions and
(ii) the date on which the Registrable Securities (in the opinion of
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Investor's counsel) may be immediately sold without registration and free of
restrictions on transfer.
(b) "Registration Statement" means a registration statement of the
Company filed with the Securities and Exchange Commission (the "SEC") under the
Securities Act.
(c) The terms "register", "registered", and "registration" refer to
a registration effected by preparing and filing a Registration Statement in
compliance with the Securities Act and applicable rules and regulations
thereunder and pursuant to Rule 415 under the Securities Act, and the
declaration or ordering of effectiveness of such Registration Statement by the
SEC.
(d) The Company represents and warrants that it meets the
requirements for the use of Form S-3 and the Company will file all reports
required to be filed by the Company with the SEC in a timely manner so as to
maintain such eligibility for the use of Form S-3.
(e) Within ninety (90) days following the Closing Date, the Company
will prepare and file a Registration Statement on Form S-3 with the SEC,
registering all of the Registrable Securities for resale. To the extent
allowable under the Securities Act and the Rules promulgated thereunder, the
Registration Statement will include the Registrable Securities and such
indeterminate number of additional shares of Common Stock as may become issuable
pursuant to this Agreement and/or upon exercise of the Warrants to prevent
dilution resulting from stock splits, stock dividends or similar transactions.
The Registration Statement (and each amendment or supplement thereto) will be
provided to, and subject to the reasonable approval of, the Investors and their
counsel. The Company will use its best efforts to cause such Registration
Statement to be declared effective by the SEC as soon as practicable after
filing. Such best efforts will include, but not be limited to, promptly
responding to all comments received from the staff of the SEC. Should the
Company receive notification from the SEC that the Registration Statement will
receive no action or no review from the SEC, the Company will cause such
Registration Statement to become effective within five (5) business days of such
SEC notification. Once declared effective by the SEC, the Company will cause
such Registration Statement to remain effective throughout the Registration
Period.
(f) The Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein) filed by the Company may
not contain any untrue statements of a material fact or omit to state a material
fact required to be stated therein, or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading. The
Company will prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period and, during such period, will comply with the provisions of
the Securities Act with respect to the disposition of all Registrable Securities
of the Company covered by the Registration Statement until such time as all of
such Registrable Securities have been
Page 20 of 98
13
disposed of in accordance with the intended methods of disposition by the
sellers thereof as set forth in the Registration Statement.
10. INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within the meaning of the
Securities Act or the Exchange Act, any underwriter (as defined in the
Securities Act) for the Investors, the directors, if any, of such underwriter
and the officers, if any, of such underwriter, and each person, if any, who
controls any such underwriter within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person"), against any losses, claims,
damages, expenses or liabilities (joint or several) (collectively, "Claims") to
which any of them become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such Claims (or actions or proceedings, whether commenced
or threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations in the Registration Statement, or
any post-effective amendment thereof, or any prospectus included therein:
(i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any
post-effective amendment thereof or the omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
(ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior
to the effective date of such Registration Statement, or contained
in the final prospectus (as amended or supplemented, if the Company
files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact
necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not
misleading, or
(iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act or any state securities law or any
rule or regulation (the matters in the foregoing clauses (i) through
(iii) being, collectively, "Violations").
Subject to the restrictions set forth in Section 10(c) with respect to the
number of legal counsel, the Company will reimburse the Investors and each such
underwriter or controlling person, promptly as such expenses are incurred and
are due and payable, for any legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 10(a):
Page 21 of 98
14
(A) will not apply to a Claim arising out of or based
upon a Violation which occurs in reliance upon and in
conformity with information furnished in writing to the
Company by any Indemnified Person or underwriter for such
Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus
was timely made available by the Company pursuant to this
Agreement hereof;
(B) with respect to any preliminary prospectus will not
inure to the benefit of any such person from whom the person
asserting any such Claim purchased the Registrable Securities
that are the subject thereof (or to the benefit of any person
controlling such person) if the untrue statement or omission
of material fact contained in the preliminary prospectus was
corrected in the prospectus, as then amended or supplemented,
if a prospectus was timely made available by the Company
pursuant to this Agreement; and
(C) will not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written
consent of the Company, which consent will not be unreasonably
withheld. Such indemnity will remain in full force and effect
regardless of any investigation made by or on behalf of the
Indemnified Persons and will survive the transfer of the
Registrable Securities by the Investors to this Agreement.
(b) In connection with any Registration Statement in which an
Investor is participating, each such Investor, severally and not jointly, agrees
to indemnify and hold harmless, to the same extent and in the same manner set
forth in Section 10(a), the Company, each of its directors, each of its officers
who signs the Registration Statement, each person, if any, who controls the
Company within the meaning of the Securities Act or the Exchange Act, any
underwriter and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any person who
controls such stockholder or underwriter within the meaning of the Securities
Act or the Exchange Act (collectively and together with an Indemnified Person,
an "Indemnified Party"), against any Claim to which any of them may become
subject, under the Securities Act, the Exchange Act or otherwise, insofar as
such Claim arises out of or is based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement, and such
Investor will promptly reimburse any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such Claim; provided,
however, that the indemnity agreement contained in this Section 10(b) will not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent will not be
unreasonably withheld; provided further, however, that the Investor will be
liable under this Section 10(b) for only that amount of a Claim as does not
exceed the net proceeds to such Investor as a result of the sale of Registrable
Securities pursuant to such Registration
Page 22 of 98
15
Statement. Such indemnity will remain in full force and effect regardless of any
investigation made by or on behalf of such Indemnified Party and will survive
the transfer of the Registrable Securities by the Investors pursuant to this
Agreement. Notwithstanding anything to the contrary contain herein, the
indemnification agreement contained in this Section 10(b) with respect to any
preliminary prospectus will not inure to the benefit of any Indemnified Party if
the untrue statement or omission of material fact contained in the preliminary
prospectus was corrected on a timely basis in the prospectus, as then amended or
supplemented.
(c) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 10 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party will, if a Claim in respect thereof is to be made against any indemnifying
party under this Section 10, deliver to the indemnifying party a written notice
of the commencement thereof and this indemnifying party will have the right to
participate in and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying parties;
provided, however, that an Indemnified Person or Indemnified Party will have the
right to retain its own counsel, with the fees and expenses to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified Person
or Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action will not relieve
such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this Section 10, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action. The
indemnification required by this Section 10 will be made by periodic payments of
the amount thereof during the course of the investigation or defense, as such
expense, loss, damage or liability is incurred and is due and payable. The
provisions of this Section 10 will survive the termination of this Agreement.
11. CONTRIBUTION.
(a) If the indemnification provided for in Section 10 herein is
unavailable to the Indemnified Parties in respect of any losses, claims, damages
or liabilities referred to herein (other than by reason of the exceptions
provided therein), then each such Indemnifying Party, in lieu of indemnifying
such Indemnified Party, will contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities as
between the Company on the one hand and any Investor on the other, in such
proportion as is appropriate to reflect the relative fault of the Company and of
such Investor in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative fault of the Company on the one hand and
of any Investor on the other will be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company or by such Investor.
Page 23 of 98
16
(b) In no event will the obligation of any Indemnifying Party to
contribute under this Section 11 exceed the amount that such Indemnifying Party
would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 10(a) or 10(b) hereof had been
available under the circumstances.
(c) The Company and the Investors agree that it would not be just
and equitable if contribution pursuant to this Section 11 were determined by pro
rata allocation (even if the Investors or the underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraphs. The amount paid or payable by an Indemnified Party as a
result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraphs will be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such Indemnified Party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this section, no Investor or
underwriter will be required to contribute any amount in excess of the amount by
which (i) in the case of any Investor, the net proceeds received by such
Investor from the sale of Registrable Securities or (ii) in the case of an
underwriter, the total price at which the Registrable Securities purchased by it
and distributed to the public were offered to the public exceeds, in any such
case, the amount of any damages that such Investor or underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
12. PUBLIC INFORMATION. With a view to making available to the
Investors the benefits of Rule 144 promulgated under the Securities Act or any
other similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to:
(a) File with the SEC in a timely manner and make and keep
available all reports and other documents required of the Company
under the Exchange Act so long as the Company remains subject to
such requirements and the filing and availability of such reports
and other documents is required for the applicable provisions of
Rule 144; and
(b) Furnish to each Investor so long as such Investor holds
Registrable Securities, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting
requirements of Rule 144 and the Exchange Act, (ii) a copy of the
most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company and (iii) such other
information as may be reasonably requested to permit the Investors
to sell such securities pursuant to Rule 144 without registration.
13. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to have the
Company register Registrable Securities pursuant to this Agreement will be
automatically assigned by the Investors to transferees or assignees of all or
any portion of such securities or Warrants exercisable into Registrable
Securities only if:
Page 24 of 98
17
(a) the Investor agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such
assignment,
(b) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of the name
and address of such transferee or assignee and the securities with
respect to which such registration rights are being transferred or
assigned,
(c) following such transfer or assignment, the further
disposition of such securities by the transferee or assignee is
restricted under the Securities Act and applicable state securities
laws,
(d) at or before the time the Company received the written
notice contemplated by clause (b) of this Section 13, the transferee
or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein,
(e) such transfer will have been made in accordance with the
applicable requirements of the Agreement, and
(f) such transferee will be an "accredited investor" as that
term is defined in Rule 501 of Regulation D promulgated under the
Securities Act.
14. EXPENSES. All reasonable legal expenses of the Investors
incurred in connection with this Offering up to a total of $15,000 will be borne
by the Company. Subject to the preceding sentence, each party hereto will bear
its own legal and other expenses incurred in connection with this Offering.
15. NOTICES.
(a) Any notice required to be given or delivered to the Investor
will be mailed first class, postage prepaid, return receipt requested, to such
Investor's address shown on the signature page hereof.
(b) Any notice required to be given or delivered to the Company will
be mailed first class, postage prepaid, return receipt requested, to:
Acrodyne Communications, Inc.
000 Xxxxxxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attn: President
with a copy to:
Xxxxxx, Xxxx & Xxxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
Page 25 of 98
18
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties and agreements hereunder will survive execution of this Agreement
and delivery of the Preferred Stock.
17. GOVERNING LAW. This Agreement and the rights and obligations of
the parties will be governed by and construed in accordance with the laws of the
New York applicable to contracts made and to be performed wholly within that
State.
Page 26 of 98
19
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement as of the date first above written.
NEWLIGHT ASSOCIATES, L.P.
Name of Subscriber
By:______________________________________
Name:
Title:
Address:
_____________________________________
_____________________________________
_____________________________________
Tax Identification Number:
_____________________________________
The terms of the foregoing
including the subscription
described therein are agreed
to and accepted as of the
date first above written:
ACRODYNE COMMUNICATIONS, INC.
By:________________________________________
Name: A. Xxxxxx Xxxxxxx
Title: Chairman and President
The terms of the foregoing,
insofar as they relate to
S-A Partners, are agreed
to and accepted as of the
date first above written:
S-A Partners
By:________________________________________
Name:
Title:
Page 27 of 98
20
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement as of the date first above written.
NEWLIGHT ASSOCIATES, L.P.
Name of Subscriber
By:______________________________________
Name:
Title:
Address:
_____________________________________
_____________________________________
_____________________________________
Tax Identification Number:
_____________________________________
The terms of the foregoing
including the subscription
described therein are agreed
to and accepted as of the
date first above written:
ACRODYNE COMMUNICATIONS, INC.
By:________________________________________
Name: A. Xxxxxx Xxxxxxx
Title: Chairman and President
The terms of the foregoing,
insofar as they relate to
S-A Partners, are agreed
to and accepted as of the
date first above written:
S-A Partners
By:________________________________________
Name:
Title:
Page 28 of 98
21
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement as of the date first above written.
NEWLIGHT ASSOCIATES, L.P.
Name of Subscriber
By:______________________________________
Name:
Title:
Address:
_____________________________________
_____________________________________
_____________________________________
Tax Identification Number:
_____________________________________
The terms of the foregoing
including the subscription
described therein are agreed
to and accepted as of the
date first above written:
ACRODYNE COMMUNICATIONS, INC.
By:________________________________________
Name: A. Xxxxxx Xxxxxxx
Title: Chairman and President
The terms of the foregoing,
insofar as they relate to
S-A Partners, are agreed
to and accepted as of the
date first above written:
S-A Partners
By:________________________________________
Name:
Title:
Page 29 of 98
22
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement as of the date first above written.
NEWLIGHT ASSOCIATES, L.P.
Name of Subscriber
By:______________________________________
Name:
Title:
Address:
_____________________________________
_____________________________________
_____________________________________
Tax Identification Number:
_____________________________________
The terms of the foregoing
including the subscription
described therein are agreed
to and accepted as of the
date first above written:
ACRODYNE COMMUNICATIONS, INC.
By:________________________________________
Name: A. Xxxxxx Xxxxxxx
Title: Chairman and President
The terms of the foregoing,
insofar as they relate to
S-A Partners, are agreed
to and accepted as of the
date first above written:
S-A Partners
By:________________________________________
Name:
Title:
Page 30 of 98
23
EXHIBIT A
[Form of Certificate of Designation]
Page 31 of 98
24
CERTIFICATE OF DESIGNATION, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS, OF THE
SERIES A 8% REDEEMABLE CONVERTIBLE PREFERRED STOCK
OF ACRODYNE COMMUNICATIONS, INC.
----------------
(Under Section 151 of the Delaware General Corporation Law)
----------------
We, A. Xxxxxx Xxxxxxx, Chairman of the Board and President, and
Xxxxxx X. Xxxxxxx, Secretary, of Acrodyne Communications, Inc., a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware (the "Company") in accordance with the provisions of Section
151 of the General Company Law of the State of Delaware, DO HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors by
the Certificate of Incorporation of said Company which was filed in the office
of the Secretary of State of the State of Delaware on May 3, 1991, said Board of
Directors, acting by unanimous written consent of all non-interested directors,
adopted a resolution providing for the authorization of a series of Preferred
Stock consisting of 326,530 shares designated Series A 8% Redeemable Convertible
Preferred Stock, which resolution is as follows:
"RESOLVED that, pursuant to Article FOURTH of the Certificate of
Incorporation of the Company, there be and hereby is authorized and created a
series of Preferred Stock, hereby designated as the Series A 8% Convertible
Redeemable Preferred Stock, to consist of 326,530 shares, par value of $1.00 per
share, having the designations, preferences and relative, participating,
optional and other special rights, qualifications, limitations and restrictions
as hereinafter set forth:
1. DESIGNATION. The designation of the Series of Preferred Stock
created hereby is Series A 8% Convertible Redeemable Preferred Stock (the
"Series A Preferred Stock"), and the number of shares constituting such series
is 326,530.
2. RANK.
(a) The Series A Preferred Stock will, with respect to dividend
rights, rights on redemption and rights on liquidation, winding up and
dissolution, rank prior to all classes of Common Stock of the Company and to
each other class of capital stock or series of preferred stock of the Company
hereafter created which does not expressly provide that it ranks senior to or on
a parity with the Series A Preferred Stock. All of such equity securities of the
Company to which the Series A Preferred Stock ranks prior are collectively
referred to herein as the "Junior Stock."
Page 32 of 98
25
(b) The Series A Preferred Stock will, with respect to dividend
rights, fights on redemption and rights on liquidation, winding up and
dissolution, rank on a parity with any class of capital stock or series of
preferred stock of the Company hereafter created which expressly provides that
it ranks on a parity with the Series A Preferred Stock. All of such equity
securities of the Company with which the Series A Preferred Stock ranks on a
parity are collectively referred to herein as the "Parity Stock." The Series A
Preferred Stock will rank junior, and is hereby deemed "Junior Stock" with
respect to, the Company's 8% Convertible Redeemable Preferred Stock issued on
March 29, 1996.
(c) The Series A Preferred Stock will, with respect to dividend
rights, rights on redemption and rights on liquidation, winding up and
dissolution, rank junior to each class of capital stock or series of preferred
stock of the Company hereafter created which expressly provides that it ranks
senior to the Series A Preferred Stock. All of such equity securities of the
Company to which the Series A Preferred Stock ranks junior are collectively
referred to herein as the "Senior Stock."
3. DIVIDENDS.
(a) The holders of Series A Preferred Stock will be entitled to
receive in preference to the holders of any Junior Stock, when, as and if
declared by the Board of Directors, out of funds legally available for the
payment thereof, dividends at the annual rate of 8% of Liquidation Value (as
defined below). Such dividends will be cumulative, will accumulate (whether or
not declared) from the date of issuance (the "Issue Date") and will be payable
on the last day of each calendar quarter (each such date being a "dividend
payment date" and each such quarterly period being a "dividend period"),
commencing September 30, 1998. The dividend amount payable in respect of each
share of Series A Preferred Stock on each dividend payment date (the "Dividend
Amount") will be computed by multiplying the applicable annual percentage rate
set forth above by a fraction the numerator of which will be the number of days
in the applicable dividend period and the denominator of which will be 365 and
multiplying the amount so obtained by the Liquidation Value.
(b) Dividends with respect to the Series A Preferred Stock may, at
the election of the Company, be paid in cash or in kind by the issuance of
additional shares of Series A Preferred Stock to the holders entitled hereto.
The number of shares of Series A Preferred Stock remitted to the holders in any
dividend payment shall be equal to the Dividend Amount divided by the
Liquidation Value (as defined in Section 4 below). Notwithstanding anything to
the contrary herein, the issuance of shares of Series A Preferred Stock for the
payment of dividends shall not require the vote of the holders of Series A
Preferred Stock.
(c) All dividends paid with respect to shares of the Series A
Preferred Stock to Section 3(a) hereof will be paid pro rata to the holders
entitled thereto.
Page 33 of 98
26
(d) Holders of shares of the Series A Preferred Stock will be
entitled to receive the dividends provided for in Section 3(a) hereof in
preference to and in priority over any dividends upon any of the Junior Stock.
(e) Each fractional share of Series A Preferred Stock outstanding
(if any) will be entitled to a ratably proportionate amount of all dividends
accruing with respect to each outstanding share of Series A Preferred Stock
pursuant to Section 3(a) hereof.
4. LIQUIDATION PREFERENCE.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, the holders of shares
of Series A Preferred Stock then outstanding will be entitled to be paid out of
the assets of the Company available for distribution to its stockholders an
amount equal to $3.0625 for each share of Series A Preferred Stock outstanding
(such amount, as it may be adjusted from time to time to give effect to any
stock splits or combinations, recapitalizations or other similar events, the
"Liquidation Value") plus an amount equal to all accumulated but unpaid
dividends thereon to the date fixed for the liquidation, dissolution or winding
up, before any payment is made or any assets distributed to the holders of any
of the Junior Stock.
(b) Except as provided in Section 4(a) hereof, holders of Series A
Preferred Stock will not be entitled to any distribution in the event of
liquidation, dissolution or winding up of the affairs of the Company. If the
assets of the Company are not sufficient to pay in full the liquidation payments
payable to the holders of outstanding shares of Series A Preferred Stock and any
shares of Parity Stock, then the holders of all such shares will share ratably
in accordance with the respective amounts to which the holders of outstanding
shares of Series A Preferred Stock and any Parity Stock would be entitled if all
amounts payable thereon were paid in full.
(c) The liquidation payment with respect to each outstanding
fractional share of Series A Preferred Stock (if any) will be equal to a ratably
proportionate amount of the liquidation payment with respect to each outstanding
share of Series A Preferred Stock.
5. REDEMPTION.
(a) The Series A Preferred Stock is redeemable, at the option of the
Company, at any time and from time to time, at a per share redemption price
equal to the Liquidation Value thereof, plus an amount equal to all accumulated
but unpaid dividends thereon to the date fixed for redemption.
(b) In the event the Company redeems shares of Series A Preferred
Stock, the following procedures will apply:
(i) Notice of redemption will be given by first class mail,
postage prepaid, mailed not less than 30 days nor more than 60 days
prior to the
Page 34 of 98
27
date on which shares of the Series A Preferred Stock are to be
redeemed (any such date, a "Redemption Date"), to all holders of
record of the shares to be redeemed at such holder's address as the
same appears on the stock register of the Company. Each such notice
will state (a) the Redemption Date, (b) the redemption price and (c)
the place or places where certificates for such shares are to be
surrendered for payment of the redemption price.
(ii) Notice having been mailed as aforesaid, from and after
the redemption date (unless the Company defaults on payment of the
redemption price of the shares called for redemption) said shares
will no longer be deemed to be outstanding, will have the status of
authorized but unissued shares of Series A Preferred Stock and will
not be reissued as shares of Series A Preferred Stock, and all
rights of the holders thereof as stockholders of the Company (except
the right to receive from the Company the redemption price) will
cease. Upon surrender, in accordance with said notice, of the
certificates for any shares so redeemed (properly endorsed or
assigned for transfer, if the Board of Directors of the Company so
requires and the notice so states), such shares will be redeemed by
the Company at the redemption price aforesaid.
6. CONVERSION.
(a) Each share of the Series A Preferred Stock is convertible at the
option of the holder thereof, at any time and from time to time, into fully paid
and non-assessable shares of Common Stock at the conversion price of $3.0625 per
share of Common Stock, subject to adjustment pursuant to Section 6(g) below (as
the same may be adjusted from time to time, the "Conversion Price"). The number
of shares of Common Stock issuable upon conversion of a share of Series A
Preferred Stock will be equal to the quotient of the Liquidation Value divided
by the Conversion Price at the time in effect.
(b) The shares of Common Stock deliverable upon conversion of shares
of Series A Preferred Stock will be Common Stock as constituted at the date of
conversion.
(c) Before any holder of Series A Preferred Stock becomes entitled
to convert the same into Common Stock, such holder must exercise its option to
convert by surrendering the certificate or certificates for such shares of
Series A Preferred Stock at the office of the Company (or such office or agency
of the Company as it reasonably designates), which certificate or certificates,
if the Company so requests, will be duly endorsed to the Company or in blank, or
accompanied by proper instruments of transfer to the Company or in blank, and
will give written notice to the Company that such holder elects so to convert
such shares of Series A Preferred Stock, and by stating in writing therein the
name or names in which such holder wishes the certificate or certificates for
Common Stock to be issued. Every such notice of election to convert will be
effective on the date completed and will constitute a contract between the
holder of such shares of Series A Preferred Stock and the Company, whereby such
holder will be deemed to subscribe for the amount of Common Stock which such
holder will be entitled to receive
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upon such conversion and, in satisfaction of such subscription, to deposit the
shares of Series A Preferred Stock to be converted and to release the Company
from all liability thereunder (except to deliver the shares deliverable upon
conversion thereof), and thereby the Company will be deemed to agree that the
amount paid to it for such shares of Series A Preferred Stock, together with the
surrender of the certificate or certificates therefor and the extinguishment of
liability thereof (except as aforesaid), will constitute full payment of such
subscription for Common Stock to be delivered upon such conversion.
(d) The Company will, as soon as practicable after such deposit of
certificates for the Series A Preferred Stock accompanied by the written notice
and the statement above prescribed, deliver at said office to the holder for
whose account such shares of Series A Preferred Stock were so surrendered, or to
such holder's nominee or nominees, certificates for the number of fall shares of
Common Stock to which such holder is to be entitled as aforesaid, together with
a cash adjustment of any fraction of a share as hereinafter provided, if not
evenly convertible. Subject to the following provisions of this paragraph, such
conversion will be deemed to have been made as of the date of such surrender of
the shares of Series A Preferred Stock to be converted, and at the Conversion
Price in effect at the date of such surrender; and the person or persons
entitled to receive the Common Stock deliverable upon conversion of such shares
of Series A Preferred Stock will be treated for all purposes as the record
holders of such Common Stock on such date. The Company will not be required to
convert any shares of Series A Preferred Stock while the stock transfer books of
the Company are closed for any purpose; but the surrender of shares of Series A
Preferred Stock for conversion during any period while such books are so closed
will become effective for conversion immediately upon reopening of such books,
as if the conversion had been made on the date such shares of Series A Preferred
Stock were surrendered, and at the Conversion Price in effect at the date of
such surrender.
(e) Upon any conversion of shares of Series A Preferred Stock, the
shares of Series A Preferred Stock so converted will have the status of
authorized and unissued shares of the Company's Series A Preferred Stock, and
the number of shares of Series A Preferred Stock which the Company has authority
to issue will not be decreased by the conversion of shares of Series A Preferred
Stock. The Company will at all times reserve and keep available, out of its
authorized and unissued stock and solely for the purpose of effecting the
conversion of the Series A Preferred Stock, such number of shares of its Common
Stock as will from time to time be sufficient, in the judgment of its Board of
Directors, to effect the conversion of all shares of Series A Preferred Stock
from time to time outstanding. The Company will from time to time, in accordance
with the laws of the State of Delaware, increase the authorized number of shares
of its Common Stock if, at any time, the number of authorized shares of its
Common Stock remaining unissued is not sufficient to permit the conversion of
all of the shares of Series A Preferred Stock then outstanding.
(f) The Company will pay any and all issue or other taxes that may
be payable in respect of any issue or delivery of shares of Common Stock on
conversion of shares of Series A Preferred Stock pursuant hereto. The Company
will not, however, be required to pay any tax which may be payable in respect of
any transfer involved in
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the issue and delivery of Common Stock in a name other than that in which the
shares of Series A Preferred Stock so converted were registered, and no such
issue or delivery will be made unless and until the person requesting such issue
has paid to the Company the amount of such tax or has established, to the
satisfaction of the Company, that such tax has been paid.
(g) The Conversion Price will be subject to the following
adjustments:
(i) If, at any time and from time to time after the date
hereof, the Company issues or sells any shares of Common Stock other
than the "Excluded Shares" (as defined in Section 6(h) below),
including by way of dividend on any Junior Stock of the Company,
without consideration or for a consideration per share less than the
Conversion Price in effect immediately prior to the issue or sale of
such additional shares, the Conversion Price in effect immediately
prior to such issue or sale will be reduced to an amount equal to
the quotient determined by dividing:
(A) an amount equal to the sum of (x) the product of (1)
the total number of shares of Common Stock outstanding
immediately prior to the date of such issue or sale of such
additional shares, multiplied by (2) the Conversion Price in
effect immediately prior to such issue or sale, plus (y) the
aggregate consideration, if any, received by the Company upon
such issue or sale, by
(B) the total number of shares of Common Stock
outstanding immediately after such issue or sale.
(ii) For purposes of Section 6(g)(i) above, the following
provisions will also be applicable:
(A) In the case of (x) the issue or sale of additional
shares of Common Stock for cash, the consideration received by
the Company therefor will be deemed to be the amount of cash
received by the Company or (y) the issue or sale of additional
shares of Common Stock for a consideration other than cash
(including services), the amount of the consideration other
than cash will be deemed to be the fair value of such
consideration as determined in good faith by the Board of
Directors of the Company, in either case without deduction
therefrom of any compensation or discount paid or allowed to
underwriters or dealers or others performing similar services
or for any expenses incurred in connection therewith.
(B) In case any shares of Common Stock (or any
"Convertible Securities" or "Rights" to purchase Common Stock
or Convertible Securities (as defined in subparagraph (C)
below)) are be issued in connection with any merger of another
Company into the Company, the amount of consideration therefor
will be deemed to be the fair value of the
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assets of such merged Company as determined by the Board of
Directors of the Company after deduction therefrom of all cash
and other consideration (if any) paid by the Company in
connection with such merger.
(C) If, at any time and from time to time after the date
hereof, the Company issues or grants any rights, warrants or
options (collectively, the "Rights") to subscribe for or to
purchase Common Stock, or to subscribe for or purchase any
indebtedness or shares of stock convertible into or
exchangeable for Common Stock (such convertible or
exchangeable stock or securities being called "Convertible
Securities"), whether or not such Rights are immediately
exercisable or any such Convertible Securities are immediately
convertible or exchangeable, and if the price per share for
which Common Stock is issuable upon the exercise of such
Rights or upon conversion or exchange of such Convertible
Securities (determined by dividing (a) the total amount, if
any, received or receivable by the Company as consideration
for the granting of such Rights plus the minimum aggregate
amount of additional consideration payable to the Company upon
the exercise of such Rights, plus, in the case of any such
Rights exercisable for Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable
upon the conversion or exchange of such Convertible
Securities, by (b) the total maximum number of shares of
Common Stock issuable upon the exercise of such Rights or upon
the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Rights) is less than the
Conversion Price in effect immediately prior to the time of
issue or grant of such Rights, then the total maximum number
of shares of Common Stock issuable upon the exercise of such
Rights or upon conversion or exchange of the total maximum
amount of such Convertible Securities issuable upon the
exercise of such Rights will (as of the date of granting of
such Rights) be deemed to be issued and outstanding and to
have been issued for such price per share.
(D) If, at any time and from time to time after the date
hereof, the Company issues or sells any Convertible
Securities, whether or not such Convertible Securities are
immediately convertible or exchangeable, and the price per
share for which Common Stock is issuable upon such conversion
or exchange (determined 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 total maximum number of shares of Common Stock issuable
upon the conversion or exchange of all such Convertible
Securities) is less than the Conversion Price in effect
immediately prior to the time of such issue or sale, then the
total maximum number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securities will
(as of the date of the
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issue or sale of such Convertible Securities) be deemed to be
outstanding and to have been issued for such price per share.
(E) In the case of the issuance of shares of Common
Stock or Convertible Securities as a stock dividend, the
aggregate number of shares of Common Stock or Convertible
Securities issued in payment of such dividend will be deemed
to have been issued at the close of business on the date fixed
for the determination of stockholders entitled to receive such
dividend and will be deemed to have been issued without
consideration.
(F) The number of shares of Common Stock at any time
outstanding will exclude all shares then owned or held by or
for the account of the Company.
(G) For the purposes of this Section 6(g), the term
"Common Stock" means (i) the class of stock designated as the
common stock of the Company at the date of the adoption of
these resolutions or (ii) any other class of stock resulting
from successive changes or reclassification of such common
stock consisting solely of change in par value, or from par
value to no par value, or from no par value to par value. In
the event that at any time, as a result of an adjustment made
pursuant to this Section 6(g), the holder of any share of
Series A Preferred Stock thereafter surrendered for conversion
becomes entitled to receive any shares of the Company other
than shares of its Common Stock, thereafter the number of such
other shares so receivable upon conversion of any such share
will be subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in this
Section 6(g), and all other provisions hereof with respect to
Common Stock will apply in like terms to any other shares.
(iii) If at any time, and from time to time after the date hereof,
the shares of Common Stock are subdivided into a greater number of shares
of Common Stock other than on account of or as a result of a dividend, the
Conversion Price in effect immediately prior to such subdivision will,
simultaneously with the effectiveness of such subdivision, be
proportionately reduced, and conversely, in case outstanding shares of
Common Stock are combined into a smaller number of shares of Common Stock,
the Conversion Price in effect immediately prior to such combination will,
simultaneously with the effectiveness of such combination, be
proportionately increased.
(iv) In case the Company makes any distribution of its assets upon
or with respect to its Common Stock, as a liquidating or partial
liquidating dividend, or other than as a dividend payable out of earnings
or retained earnings, each holder of Series A Preferred Stock will, upon
the conversion of such holder's Series A Preferred Stock after the record
date for such distribution or, in the absence of a record date, after the
date of such distribution receive, in addition to
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the shares of Common Stock covered by such conversion, the amount of such
assets (or, at the option of the Company, a sum equal to the value thereof
at the time of distribution as determined by the Board of Directors in
good faith) which would have been distributed to such holder if such
holder had converted such holder's Series A Preferred Stock immediately
prior to the record date for such distribution or, in the absence of a
record date, immediately prior to the date of such distribution.
(v) If the Conversion Price is adjusted upon the issuance of any
Right or any Convertible Securities pursuant to Section 6(g)(ii)(B),
6(g)(ii)(C) or 6(g)(ii)(D), the following will apply:
(A) If the purchase price provided for in any such Rights, or
the rate at which any such Convertible Securities are convertible
into or exchangeable for Common Stock, changes or a different
purchase price or rate becomes effective at any time or from time to
time (other than under or by reason of provisions designed to
protect against dilution), then, upon such change becoming
effective, the Conversion Price then in effect hereunder will
forthwith be increased or decreased to such Conversion Price as
would have been applicable had the adjustments made upon the
granting or issuance of such Rights or Convertible Securities been
made upon the basis of (1) the issuance of the number of shares of
Common Stock theretofore actually delivered upon the exercise of
such Rights or upon the conversion or exchange of such Convertible
Securities and the total consideration received therefor and (2) the
granting or issuance at the time of such change of any such Rights
or Convertible Securities then still outstanding for the
consideration, if any, received by the Company therefor and to be
received on the basis of such changed price, but in no event will
the Conversion Price be increased above what it was prior to the
original granting or issuance of such Rights or Convertible
Securities.
(B) On the expiration of any such Rights, or on the
termination of any right to convert or exchange any such Convertible
Securities, the Conversion Price will forthwith be readjusted to
such Conversion Price as would have been applicable had the
adjustment made upon the granting or issuance of such Rights or such
Convertible Securities been made upon the basis of the issuance or
sale of only the number of shares of Common Stock actually issued
upon the exercise of such Rights or upon the conversion or exchange
of such Convertible Securities.
(C) If the purchase price provided for in any such Rights, or
the rate at which any such Convertible Securities are convertible
into or exchangeable for Common Stock, changes at any time under or
by reason of any provision with respect thereto designed to protect
against dilution, then in case of the delivery of Common Stock upon
the exercise of any such Rights or upon conversion or exchange of
any such Convertible Securities, the Conversion Price then in effect
hereunder will forthwith be
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33
decreased to such Conversion Price as would have been applicable had
the adjustment made upon the issuance of such Rights or such
Convertible Securities been made upon the basis of the issuance of
(and the total consideration received for) the shares of Common
Stock delivered as aforesaid.
(vi) Whenever the Conversion Price is to be adjusted pursuant to the
provisions of this paragraph, the Company will forthwith mail to each
holder of Series A Preferred Stock a statement specifying the revised
Conversion Price resulting from such adjustment and the increase or
decrease, if any, in the number of shares purchasable at such price upon
the exercise of the Series A Preferred Stock and setting forth in
reasonable detail the method of calculation of such adjustment and the
facts upon which such calculation is based.
(vii) Notwithstanding anything contained herein to the contrary, no
adjustment in the Conversion Price will be made if the amount of such
adjustment is less than 1% of such price, but in such case any adjustment
that would otherwise be required then to be made will be made at the time
of, and together with, the next subsequent adjustment which, together with
any adjustment or adjustments so carried forward, will amount to not less
than 1% of the Conversion Price.
(viii) No fractional shares or scrip representing fractional shares
will be issued upon the conversion of any share of Series A Preferred
Stock. If more than one share of Series A Preferred Stock is surrendered
for conversion at one time by the same holder, the number of full shares
issuable upon conversion thereof will be computed on the basis of the
aggregate number of such shares so surrendered. If the conversion of any
share of Series A Preferred Stock results in a fraction, an amount equal
to such fraction multiplied by the Conversion Price of the Common Stock on
the day of conversion will be paid to such holder in cash by the Company.
(ix) (A) If any capital reorganization or reclassification of the
capital stock of the Company, or consolidation or merger of the Company
with another Company, or the sale of all or substantially all of its
assets to another Company is to be effected in such a way that holders of
Common Stock are to be entitled to receive stock, securities or assets
with respect to or in exchange for Common Stock, then, as a condition of
such reorganization, reclassification, consolidation, merger or sale,
lawful and adequate provisions must be made whereby each holder of Series
A Preferred Stock will thereafter have the right to receive, upon the
basis and upon the terms and conditions specified herein and in lieu of
the shares of the Common Stock of the Company immediately theretofore
issuable upon the conversion of the Series A Preferred Stock held by such
holder, such shares of stock, securities and assets as may be issued or
payable with respect to or in exchange for a number of outstanding shares
of such Common Stock equal to the number of shares of such stock
immediately theretofore issuable upon the conversion of the Series A
Preferred Stock held by such holder,
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34
had such reorganization, reclassification, consolidation, merger or sale
not taken place, and in any such case appropriate provision will be made
with respect to the rights and interests of the holders of the Series A
Preferred Stock to the end that the provisions hereof (including without
limitation provisions for adjustments of the Conversion Price) will
thereafter be applicable, as nearly as may be, in relation to any shares
of stock, securities and assets thereafter deliverable upon the conversion
of Series A Preferred Stock.
(B) The Company covenants and agrees that it will not effect
any such consolidation, merger or sale unless at the time of or
prior to such transaction the purchasing or successor Company or
other entity (if other than the Company) expressly assumes all of
the liabilities and obligations of the Company hereunder.
(h) Anything hereinabove to the contrary notwithstanding, no
adjustment to the Conversion Price will be made pursuant to Section 6(g) upon:
(i) the issuance or sale by the Company of any shares of Common
Stock or any rights, options, warrants or convertible securities (or any
rights or options to purchase convertible securities) pursuant to (A) a
redemption or conversion of the Series A Preferred Stock or (B) the
exercise, redemption or conversion of any warrants, options, rights or
convertible securities issued or outstanding on the Issue Date;
(ii) the issuance of shares of Common Stock to employees or
directors of the Company, the granting of stock options to such employees
or directors or the issuance of shares of Common Stock pursuant to the
exercise of any such options;
(iii) the issuance or sale of securities pursuant to the exercise of
rights, options or warrants, or conversion or exchange of convertible
securities hereafter issued for which an adjustment has previously been
made (or was not required to be made) pursuant to the provision of Section
6(g) hereof; and
(iv) any increase in the number of shares of Common Stock subject to
any right, option, warrant or convertible security referred to in
paragraph (i), (ii) or (iii) of this Section 6(h) pursuant to the
provisions of such right, option, warrant or convertible security designed
to protect against dilution.
Any securities referred to in this Section 6(h) as to which no adjustment is
required are referred to herein as the "Excluded Shares."
7. VOTING RIGHTS.
(a) Except as otherwise required by law, the Series A Preferred
Stock and Common Stock are hereby deemed to constitute one class for the purpose
of voting or giving consent in lieu of voting on all matters submitted for a
vote of the Company's stockholders or as to which such consent is sought. Each
holder in whose
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35
name shares of Series A Preferred Stock are registered on the record date for
determining the holders of Series A Preferred Stock entitled to vote at any
meeting of stockholders or adjournment thereof, or to consent to corporate
action in writing without a meeting, will be entitled to, at such meeting or
with respect to such action, the number of votes equal to the number of whole
shares of Common Stock into which the shares of Series A Preferred Stock
registered in the name of such holder on such record date are convertible.
(b) The Company will not, without the affirmative vote or consent of
the holders of a majority of the issued and outstanding Series A Preferred Stock
voting as a separate class, (A) create any Senior Stock or Parity Stock or (B)
amend, alter or repeal the Company's Certificate of Incorporation to adversely
affect the voting powers, rights or preferences of the Series A Preferred Stock,
or (C) for so long as at least 72,500 shares of Series A Preferred Stock are
outstanding, issue Common Stock or securities convertible into Common Stock in
any offering or series of related offerings to any person or any group (within
the meaning of Section 13(d)(3) of the Securities Exchange of 1934) which after
the issuance or conversion thereof would represent ten percent (10%) or more of
the then outstanding Common Stock (assuming for purposes of such calculation the
conversion of all securities and instruments convertible into Common Stock).
8. PREEMPTIVE RIGHTS.
For so long as at least 72,500 shares of Series A Preferred Stock
are outstanding, in the event of the proposed issuance of Common Stock, or
Convertible Securities or Rights (collectively, "Securities"), other than
Excluded Shares, the Investor shall have the right, on the same terms as those
of the proposal and during a period of thirty (30) days after the Company has
given notice to the Investor of such proposed issuance or granting, to purchase
a proportion of such Securities, equal to such Investor's proportionate
ownership of Common Stock (assuming the conversion of all Series A Preferred
Stock and all other Convertible Securities then issued) on a record date to be
determined by the Company, not more than thirty (30) days prior to such issuance
of granting. The price or prices for such Securities shall not be less favorable
than the price or prices at which such Securities are proposed to be offered for
sale or granted to others, without deduction of the expenses of and compensation
for the sale, underwriting or purchase of such Securities by underwriters or
dealers as may be paid by the Company. The provisions of this Section 8 will not
apply to the proposed issuance of Securities in a public offering registered
under the Securities Act of 1933.
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IN WITNESS WHEREOF, the undersigned have executed this certificate
as of September 2, 1998.
________________________________________
A. Xxxxxx Xxxxxxx
Chairman of the Board and President
________________________________________
Xxxxxx X. Xxxxxxx
Secretary
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EXHIBIT B
[Form of Warrant]
Page 45 of 98
