THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND CANNOT
BE SOLD OR TRANSFERRED UNLESS AND UNTIL THEY ARE SO REGISTERED OR
UNLESS AN EXEMPTION UNDER SUCH ACT OR LAWS IS AVAILABLE. THE
TRANSFERABILITY OF THESE SECURITIES IS FURTHER SUBJECT TO THE
PROVISIONS OF A UNIT PURCHASE AGREEMENT DATED AS OF MARCH 7, 1996
BY AND BETWEEN THE COMPANY AND CERBERUS PARTNERS, L.P.
12% CONVERTIBLE SENIOR SUBORDINATED DEBENTURE
March 7, 1996
LOGIMETRICS, INC., a Delaware corporation (the "Company"),
hereby promises to pay to the order of Cerberus Partners, L.P.
(together with its, his or her successors and assigns, the
"Holder") the principal amount of fifty thousand dollars
($50,000) together with interest thereon calculated from the date
hereof in accordance with the provisions of this debenture
("Debenture").
This Debenture is one of a series of 12% Convertible Senior
Subordinated Debentures ("Debentures") the principal of which
aggregates one million five hundred thousand dollars
($1,500,000). All Debentures rank pari passu.
By accepting this Debenture, the Holder agrees that the
obligations of the Company to the Holder under this Debenture
shall be subordinated only to the Senior Debt (as hereinafter
defined) of the Company, all upon the terms set forth in
paragraph 4 hereof.
1. Payment of Interest. Subject to subparagraph
6(c)(xviii)(C) hereof, interest will accrue from the date hereof
at the rate of twelve percent (12%) per annum on the unpaid
principal amount of this Debenture outstanding from time to time
on the basis of a 360-day year for the actual number of days
elapsed. Subject to paragraph 4 hereof, the Company will pay to
the Holder all accrued and unpaid interest on this Debenture on
June 15, 1996 and quarterly thereafter, in arrears, on the 15th
day of September, the 15th day of December, the 15th day of March
and the 15th day of June to and including the earlier to occur of
the Conversion Date (hereinafter defined) or the Due Date
(hereinafter defined). Interest will accrue at the greater of
the Default Rate (hereinafter defined) and the rate of fifteen
percent (15%) per annum on any principal payment past due under
this Debenture and, unless prohibited under applicable law (and
if so prohibited then only to the extent not so prohibited), on
any interest which has not been paid on the date on which it is
due and payable (without giving effect to any applicable grace
periods or paragraph 4 hereof) until such time as payment
therefor is actually delivered to the Holder.
2. Payment of Principal on Debenture.
(a) Scheduled Payments. The Company will repay the
principal amount of this Debenture on December 31, 1998 ("Due
Date").
(b) Optional Prepayment. At any time after nine
months from the date hereof, provided that the Registration
Statement (hereinafter defined) is effective and available for
sales of Registrable Securities (hereinafter defined) thereunder,
the Company may at any time hereafter prepay, without premium or
penalty, all (but not less than all) of the outstanding principal
amount of the Debentures, together with interest accrued on such
prepaid amount to the date of payment; provided (i) the average
closing price of the Company's Common Stock on days the Common
Stock traded during the 120-day period immediately preceding the
date of the notice provided for in paragraph (c) hereinbelow
shall have been not less than $5.00, and (ii) the closing price
of the Common Stock for each of the 30 trading days immediately
preceding the date of such notice shall have been not less than
$5.00, adjusted in each case for stock splits, stock dividends or
other similar transactions effecting the price of the Common
Stock. No Debenture may be prepaid unless all Debentures are
prepaid.
(c) Notice of Prepayment. The Company will give
written notice of its election to prepay this Debenture to the
Holder in person or by registered or certified mail, return
receipt requested, at least thirty (30) and not more than forty-
five (45) days prior to the date of prepayment. On the date of
prepayment specified in the Company's notice, the Company will
deliver to the Holder of this Debenture in person or by
registered or certified mail, return receipt requested, a
cashier's or certified check for the entire outstanding principal
amount being prepaid, together with all accrued interest thereon
through the date of prepayment.
3. Intentionally Omitted.
4. Subordination. The Company's payment, whether
voluntary or involuntary, whether in cash, property, securities
or otherwise and whether by application of offset or otherwise
(hereinafter "Payment") of any of its obligations under this
Debenture shall be subject to the following restrictions:
(a) Subordination to Senior Debt. Anything in this
Debenture to the contrary notwithstanding, the obligations of the
Company in respect of the principal of and interest (including
any premium or penalty) on this Debenture and any other amounts
due under this Debenture (the "Subordinated Debt") shall be
subordinate and junior in right of payment, to the extent and in
the manner hereinafter set forth, to the Senior Debt. "Senior
Debt", when used with respect to the Company, means (i) the
Company's indebtedness to North Fork Bank ("Bank") under (A) that
certain $800,000 Further Restated, Increased and Amended Term
Loan Note, dated March 7, 1996, and (B) that certain $2,200,000
Fifth Restated and Amended Revolving Credit Note, dated March 7,
1996, in each case, together with interest thereon and (ii)
renewals, extensions, refinancings, deferrals, restructurings,
amendments, modifications and waivers of the indebtedness
described in clause (i) above.
(b) Default on Senior Debt. So long as the Senior
Debt has not been paid in full, if there shall occur a default in
the payment when due of any amount due and owing on account of
Senior Debt (any of the foregoing being a "Senior Debt Default")
then, from and after the receipt of written notice thereof from
the holder of Senior Debt unless and until such Senior Debt
Default shall have been remedied or waived the Company will not
make any Payment on any Subordinated Debt, and the Holders of
Subordinated Debt will not receive or accept any direct or
indirect Payment in respect thereof, and the Company may not
redeem or otherwise acquire any Subordinated Debt.
(c) Changes in Senior Debt. Any holder of Senior Debt
may, at any time and from time to time, without the consent of,
or notice to, the Holder and without incurring responsibility to
the Holder, and without impairing or releasing the obligations of
the Holder hereunder:
(i) Change the manner, place or terms of
payment or change or extend the time of payment of or renew
or alter the Senior Debt or any portion thereof; provided,
however, that without the written consent of the Majority
Holders (hereinafter defined) the principal amount of and
interest rate applicable from time to time to Senior Debt
may not be increased (other than pursuant to the terms of
the Senior Debt as such terms existed on the date of
issuance hereof);
(ii) Sell, exchange, release or otherwise deal
with any collateral securing the Senior Debt or any other
property by whomsoever at any time pledged or mortgaged to
secure, or however securing, the Senior Debt or any portion
thereof; and
(iii) Apply any sums by whomsoever paid or
however released to the Senior Debt or any portion thereof.
(d) Consent to Senior Debt. By acceptance of this
Debenture, the Holder hereby consents to the making of Senior
Debt and hereby acknowledges that each current and future holder
of Senior Debt has relied, and in the future will rely, upon the
terms of this Debenture. The holders of Senior Debt shall have
no liability to the Holder and the Holder hereby waives any claim
which it may have now or hereafter against any holder of Senior
Debt arising from any and all actions which any holder of Senior
Debt may take or omit to take in good faith with regard to the
Senior Debt or its rights or obligations hereunder.
(e) Payments in Trust. Until the Senior Debt has been
repaid in full, in the event the Holder shall receive any Payment
in contravention of the provisions of this paragraph 4 including,
Payments arising under the subordination provisions of any other
indebtedness of the company, the Holder shall hold all such
Payments so received in trust for the holders of Senior Debt and
shall forthwith turn over all such Payments to the holders of
Senior Debt in the form received (except for the endorsement or
assignment of the Holder as necessary, without recourse or
warranty) to be applied to payment of the Senior Debt whether or
not then due and payable. Any Payment so received in trust and
turned over to the holders of Senior Debt shall not be deemed a
Payment in satisfaction of the Subordinated Debt by the Company.
(f) Payment in full of Senior Debt; Subrogation. If
any payment or distribution to which a Holder of Subordinated
Debt would otherwise have been entitled but for the provisions of
this paragraph 4 shall have been applied, pursuant to the
provisions of this paragraph 4, to the payment of Senior Debt,
then and in such case, the Holder of the Subordinated Debt (i)
shall be entitled to receive from the holders of Senior Debt at
the time outstanding any payments or distributions received by
such holders of Senior Debt in excess of the amount sufficient to
pay all Senior Debt in cash in full (whether or not then due),
and (ii) following payment of the Senior Debt in full, shall be
subrogated to any right of the holders of Senior Debt to receive
any and all further payments or distributions applicable to
Senior Debt, until all the Subordinated Debt shall have been paid
in full. If the Holder of the Subordinated Debt shall have been
subrogated to the rights of the holders of Senior Debt due to the
operation of this paragraph 4(f), the Company agrees to take all
such reasonable actions as are requested by such Holders of the
Subordinated Debt in order to cause such Holders to be able to
obtain payments from the Company with respect to such subrogation
rights as soon as possible.
(g) No Impairment of the Company's Obligations.
Nothing contained in this paragraph 4, as between the Company and
the Holder of the Subordinated Debt, shall impair the obligation
of the Company, which is absolute and unconditional, to pay to
the Holder the principal of and interest on the Subordinated Debt
as and when the same shall become due and payable in accordance
with the terms hereof.
(h) Advances in Reliance. The Holder of the
Subordinated Debt, by its acceptance thereof, agrees that each
holder of Senior Debt has advanced funds or may in the future
advance funds in reliance upon the terms and conditions hereof.
(i) Non-Waiver of Rights. No right of any holder of
Senior Debt to enforce its right of subordination as herein
provided shall at any time in any way be prejudiced or impaired
by any act or failure to act on the part of the Company, or by
any act or failure to act by any such holder, or by any
non-compliance by the Company with the terms, provisions and
covenants of the Subordinated Debt, regardless of any knowledge
thereof any such holder may have or be otherwise charged with.
(j) Recaptured Payments. Any Payments received by a
holder of Senior Debt from the Company or the Holder which, in
connection with an Insolvency Event or Proceeding (hereinafter
defined), is required to be remitted to the payor or the bankrupt
estate shall not be deemed a Payment to such holder of Senior
Debt for all purposes hereunder.
5. Security. The obligations of the Company to Holders of
the Debentures are secured pursuant to a Security Agreement of
even date ("Security Agreement") made by the Company in favor of
Holders of the Debentures. In addition to all rights and
remedies provided herein, Holders of the Debentures are entitled
to the benefits provided in the Security Agreement. By accepting
this Debenture, the Holder hereof agrees to be bound by the terms
of the Security Agreement.
6. Conversion Rights.
(a) The Holder of this Debenture has the right (the
"Conversion Right"), exercisable at his, her or its option at any
time during which the principal amount of this Debenture is
outstanding, to convert this Debenture, but only in whole, into
eighty four thousand seven hundred forty-six (84,746) shares of
the Company's Common Stock, par value $.01 per share ("Common
Stock"), subject to adjustment in certain circumstances as
provided herein.
(b) The Conversion Right is exercisable upon surrender
of this Debenture, together with a conversion notice, in the form
attached hereto as Exhibit A, duly executed and completed,
evidencing the election of the Holder to exercise the Conversion
Right, to the Company's principal office at 000-00 Xxxxxx Xxxxxx,
Xxxxxxxxx, Xxx Xxxx 00000. The registered owner of this
Debenture shall become the record Holder of the shares of Common
Stock issuable upon conversion as of the date of exercise of the
Conversion Right (the "Conversion Date"). The shares issued in
connection with the Conversion Right shall be registered
initially in the name of the Holder, and delivered to the Holder
no later than two (2) business days after receipt of a properly
completed conversion notice. Upon conversion, the Company shall
pay to the Holder accrued but unpaid interest on this Debenture
up to, but excluding, the Conversion Date.
(c) In case, at any time or from time to time after
the date of issuance of this Debenture ("Issuance Date"), the
Company shall issue or sell shares of its Common Stock (other
than any Common Stock issuable upon (i) conversion of the
Debentures, (ii) exercise of those certain Amended and Restated
Series A Warrants dated March 7, 1996 to purchase 600,000 shares
of Common Stock ("Series A Warrants"), (iii) exercise by each of
Xxxxxx X. Xxxxxxxxxx and Xxxxxx Deutsch (the "Principals") of his
option to purchase 100,000 shares of Common Stock at a price of
$.10 per share ("Principals' Options"), (iv) exercise of those
certain Amended and Restated Series B Warrants dated March 7,
1996 to purchase 1,500,000 shares of Common Stock ("Series B
Warrants"), (v) conversion of the Company's $300,000 Amended and
Restated 12% Convertible Subordinated Debentures ("1995
Debentures"), (vi) exercise of those certain Series C Warrants
dated March 7, 1996 to purchase an aggregate of 2,542,380 shares
of Common Stock ("Series C Warrants"), (vii) exercise of those
certain Series D Warrants dated March 7, 1996 to purchase an
aggregate of 2,830,200 shares of Common Stock ("Series D
Warrants"), (viii) exercise of those certain Series E Warrants
dated March 7, 1996 to purchase 1,000,000 shares of the Company's
Common Stock ("Series E Warrants" and together with the Series A,
B, C and D Warrants, "Warrants"), (ix) exercise of those certain
Stock Options, dated March 7, 1996 to purchase 1,000,000 shares
of Common Stock issued to Xxxxxxx X. Xxxxx ("Xxxxx Options") and
(x) conversion of the Company's up to 30 shares of Series A 12%
Cumulative Convertible Redeemable Preferred Stock ("Preferred
Stock" and together with the 1995 Debentures, the Senior
Subordinated Debentures, the Warrants, the Xxxxx Options, the
Principals' Options and any shares of Common Stock issuable upon
conversion or exercise thereof, the "Subject Securities")) for a
consideration per share less than $.30 per share ("Trigger
Price"), or, if a Pro Forma Adjusted Trigger Price (hereinafter
defined) shall be in effect as provided below in this
paragraph (c), then less than such Pro Forma Adjusted Trigger
Price per share, then and in each such case the Holder of this
Debenture, upon the conversion hereof as provided in
paragraph (a) hereof, shall be entitled to receive, in lieu of
the shares of Common Stock theretofore receivable upon the
conversion of this Debenture, a number of shares of Common Stock
determined by (a) dividing the Trigger Price by a Pro Forma
Adjusted Trigger Price per share to be computed as provided below
in this paragraph (c), and (b) multiplying the resulting quotient
by the number of shares of Common Stock into which this Debenture
is then convertible. A Pro Forma Adjusted Trigger Price per
share shall be the price computed (to the nearest cent, a
fraction of half cent or more being considered a full cent):
by dividing (i) the sum of (x) the result
obtained by multiplying the number of shares
of Common Stock of the Company outstanding
immediately prior to such issue or sale by
the Trigger Price (or, if a Pro Forma
Adjusted Trigger Price shall be in effect, by
such Price), and (y) the consideration, if
any, received by the Company upon such issue
or sale, by (ii) the number of shares of
Common Stock of the Company outstanding
immediately after such issue or sale.
For the purpose of this paragraph (c):
(i) In case the Company splits its Common
Stock or shall declare any dividend, or make any other
distribution, upon any stock of the Company of any class
payable in Common Stock, or in any stock or other securities
directly or indirectly convertible into or exchangeable for
Common Stock (any such stock or other securities being
hereinafter called "Convertible Securities"), such split,
declaration or distribution shall be deemed to be an issue
or sale (as of the record date for such split, dividend or
other distribution), without consideration, of such Common
Stock or such Convertible Securities, as the case may be.
(ii) In case the Company shall issue or sell
any Convertible Securities other than the Subject
Securities, there shall be determined the price per share
for which Common Stock is issuable upon the conversion or
exchange thereof, such determination to be made by dividing
(a) the total amount received or receivable by the Company
as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the
conversion or exchange thereof, by (b) the maximum number of
shares of Common Stock of the Company issuable upon the
conversion or exchange of all such Convertible Securities.
If the price per share so determined shall be
less than the Trigger Price (or, if a Pro Forma Adjusted
Trigger Price shall be in effect, less than such Price) as
of the date of such issue or sale, then such issue or sale
shall be deemed to be an issue or sale for cash (as of the
date of issue or sale of such Convertible Securities) of
such maximum number of shares of Common Stock at the price
per share so determined, provided that, if such Convertible
Securities shall by their terms provide for an increase or
increases, with the passage of time, in the amount of
additional consideration, if any, payable to the Company, or
in the rate of exchange, upon the conversion or exchange
thereof, the Pro Forma Adjusted Trigger Price per share
shall, forthwith upon any such increase becoming effective,
be readjusted to reflect the same, and provided, further,
that upon the expiration of such rights of conversion or
exchange of such Convertible Securities, if any thereof
shall not have been exercised, the Pro Forma Adjusted
Trigger Price per share shall forthwith be readjusted and
thereafter be the price which it would have been had an
adjustment been made on the basis that the only shares of
Common Stock so issued or sold were those issued or sold
upon the conversion or exchange of such Convertible
Securities, and that they were issued or sold for the
consideration actually received by the Company upon such
conversion or exchange, plus the consideration, if any,
actually received by the Company for the issue or sale of
all such Convertible Securities which shall have been
converted or exchanged.
(iii) In case the Company shall grant any rights
or options to subscribe for, purchase or otherwise acquire
Common Stock of any class other than the Subject Securities,
there shall be determined the price per share for which
Common Stock is issuable upon the exercise of such rights or
options, such determination to be made by dividing (a) the
total amount, if any, received or receivable by the Company
as consideration for the granting of such rights or options,
plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the
exercise of such rights or options, by (b) the maximum
number of shares of Common Stock issuable upon the exercise
of such rights or options.
If the price per share so determined shall be
less than the Trigger Price (or, if a Pro Forma Adjusted
Trigger Price shall be in effect, less than such Price) as
of the date of such issue or sale, then the granting of such
rights or options shall be deemed to be an issue or sale for
cash (as of the date of the granting of such rights or
options) of such maximum number of shares of Common Stock at
the price per share so determined, provided that, if such
rights or options shall by their terms provide for an
increase or increases, with the passage of time, in the
amount of additional consideration, if any, payable to the
Company upon the exercise thereof, the Pro Forma Adjusted
Trigger Price per share shall, forthwith upon any such
increase becoming effective, be readjusted to reflect the
same, and provided, further, that upon the expiration of
such rights or options, if any thereof shall not have been
exercised, the Pro Forma Adjusted Trigger Price per share
shall forthwith be readjusted and thereafter be the price
which it would have been had an adjustment been made on the
basis that the only shares of Common Stock so issued or sold
were those issued or sold upon the exercise of such rights
or options and that they were issued or sold for the
consideration actually received by the Company upon such
exercise, plus the consideration, if any, actually received
by the Company for the granting of all such rights or
options, whether or not exercised.
(iv) In case the Company shall grant any rights
or options to subscribe for, purchase or otherwise acquire
Convertible Securities, such Convertible Securities shall be
deemed, for the purposes of subparagraph (iii) above, to
have been issued or sold for the total amount received or
receivable by the Company as consideration for the granting
of such rights or options plus the minimum aggregate amount
of additional consideration, if any, payable to the Company
upon the exercise of such rights or options, provided that,
upon the expiration of such rights or options, if any
thereof shall not have been exercised, the Pro Forma
Adjusted Trigger Price per share shall forthwith be
readjusted and thereafter be the price which it would have
been had an adjustment been made upon the basis that the
only Convertible Securities so issued or sold were those
issued or sold upon the exercise of such rights or options
and that they were issued or sold for the consideration
actually received by the Company upon such exercise, plus
the consideration, if any, actually received by the Company
for the granting of all such rights or options, whether or
not exercised.
(v) In case any shares of stock or other
securities, other than Common Stock of the Company, shall at
any time be receivable upon the conversion of this
Debenture, and in case any additional shares of such stock
or any additional such securities (or any stock or other
securities convertible into or exchangeable for any such
stock or securities) shall be issued or sold for a
consideration per share such as to dilute the purchase
rights evidenced by this Debenture, then and in each such
case the Pro Forma Adjusted Trigger Price per share shall
forthwith be adjusted, substantially in the manner provided
for above in this paragraph (c), so as to protect the holder
of this Debenture against the effect of such dilution.
(vi) In case any shares of Common Stock or
Convertible Securities or any rights or options to subscribe
for, purchase or otherwise acquire any Common Stock or
Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the
amount received by the Company therefor, after deducting any
expenses incurred and any underwriting or similar
commissions, compensation or concessions paid or allowed by
the Company in connection with such issue or sale.
(vii) In case any shares of Common Stock or
Convertible Securities or any rights or options to subscribe
for, purchase or otherwise acquire any Common Stock or
Convertible Securities shall be issued or sold for a
consideration other than cash (or a consideration which
includes cash, if any cash constitutes a part of the assets
of a corporation or business substantially all of the assets
of which are being received a such consideration) then, for
the purpose of this paragraph (c), the Board of Directors of
the Company shall promptly determine the fair value of such
consideration, and such Common Stock, Convertible
Securities, rights or options shall be deemed to have been
issued or sold on the date of such determination in good
faith. Such value shall not be more than the amount at
which such consideration is recorded in the books of the
Company for accounting purposes except in the case of an
acquisition accounted for on a pooling of interest basis.
In case any Common Stock or Convertible Securities or any
rights or options to subscribe for, purchase or otherwise
acquire any Common Stock or Convertible Securities shall be
issued or sold together with other stock or securities or
other assets of the Company for a consideration which covers
both, the Board of Directors of the Company shall promptly
determine what part of the consideration so received is to
be deemed to be the consideration for the issue or sale of
such Common Stock or Convertible Securities or such rights
or options.
The Company covenants and agrees that, should
any determination of fair value of consideration or of
allocation of consideration be made by the Board of
Directors of the Company, pursuant to this subparagraph
(vii), it will, not less than seven (7) days after any and
each such determination, deliver to the holder of this
Debenture a certificate signed by the President or a Vice
President and the Treasurer or an Assistant Treasurer of the
Company reciting such value as thus determined and setting
forth the nature of the transaction for which such
determination was required to be made, the nature of any
consideration, other than cash, for which Common Stock,
Convertible Securities, rights or options have been or are
to be issued, the basis for its valuation, the number of
shares of Common Stock which have been or are to be issued,
and a description of any Convertible Securities, rights or
options which have been or are to be issued, including their
number, amount and terms.
(viii) In case the Company shall take a record of
the holders of shares of its stock of any class for the
purpose of entitling them (a) to receive a dividend or a
distribution payable in Common Stock or in Convertible
Securities, or (b) to subscribe for, purchase or otherwise
acquire Common Stock or Convertible Securities, then such
record date shall be deemed to be the date of the issue or
sale of the Common Stock issued or sold or deemed to have
been issued or sold upon the declaration of such dividend or
the making of such other distribution, or the date of the
granting of such rights of subscription, purchase or other
acquisition, as the case may be.
(ix) The number of shares of Common Stock
outstanding at any given time shall include shares issuable
in respect of scrip certificates issued in lieu of fractions
of shares of Common Stock, but shall exclude shares in the
treasury of the Company.
(x) Following each computation or readjustment
of a Pro Forma Adjusted Trigger Price as provided in this
paragraph (c), the newly computed or adjusted Pro Forma
Adjusted Trigger Price shall remain in effect until a
further computation or readjustment thereof is required by
this paragraph (c).
(xi) In case at any time or from time to time
after the Issuance Date the holders of the Common Stock of
the Company of any class (or any other shares of stock or
other securities at the time receivable upon the exercise of
this Debenture) shall have received, or, on or after the
record date fixed for the determination of eligible
stockholders, shall have become entitled to receive:
(A) other or additional stock or other
securities or property (other than cash) by way of
dividend;
(B) any cash paid or payable out of capital
or paid-in surplus or surplus created as a result of a
revaluation of property by way of dividend; or
(C) other or additional (or less) stock or
other securities or property (including cash) by way of
stock-split, spin-off, split-off, split-up,
reclassification, combination of shares or similar
corporate rearrangement;
(other than additional shares of Common Stock issued to holders
of Common Stock as a stock dividend or stock-split, adjustments
in respect of which shall be covered by the provisions of this
paragraph (c)), then in each case the holder of this Debenture,
upon the conversion hereof as provided in paragraph (a) hereof,
shall be entitled to receive, in lieu of, or in addition to, as
the case may be, the shares theretofore receivable upon the
conversion of this Debenture, the amount of stock or other
securities or property (including cash in the cases referred to
in clauses (B) and (C) above) which such holder would hold on the
date of such exercise if, on the Issuance Date, he, she or it had
been the holder of record of the number of shares of Common Stock
of the Company into which this Debenture is convertible and had
thereafter, during the period from the Issuance Date to and
including the date of such conversion, retained such shares
and/or all other or additional (or less) stock or other
securities or property (including cash in the cases referred to
in clauses (B) and (C) above) receivable by him, her or it as
aforesaid during such period, giving effect to all adjustments
called for during such period by paragraph (c) and subparagraph
(xii) hereof.
(xii) In case of any reorganization of the
Company (or any other corporation the stock or other
securities of which are at the time deliverable on the
conversion of this Debenture) after the date hereof, or in
case, after such date, the Company (or any such other
corporation) shall consolidate with or merge into another
corporation or convey all or substantially all its assets to
another corporation, then and in each such case the holder
of this Debenture, upon the conversion hereof as provided in
paragraph (a) hereof, at any time after the consummation of
such reorganization, consolidation, merger or conveyance,
shall be entitled to receive the stock or other securities
or property to which such holder would have been entitled
upon such consummation if such holder had converted this
Debenture immediately prior thereto, all subject to further
adjustments as provided for herein; in each such case, the
terms of this Debenture shall be applicable to the shares of
stock or other securities or property receivable upon the
conversion of this Debenture after such consummation.
(xiii) The Company will not, by amendment of its
charter or through reorganization, consolidation, merger,
dissolution, sale of assets or any other voluntary action,
avoid or seek to avoid the observance or performance of any
of the terms of this Debenture, but will at all times in
good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder
hereof against dilution or other impairment. Without
limiting the generality of the foregoing, the Company will
not increase the par value of any shares of stock receivable
upon the conversion of this Debenture above the amount
payable therefor upon such exercise, and at all times will
take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully
paid and non-assessable stock upon the conversion of this
Debenture.
(xiv) In each case of an adjustment in the
number of shares of Common Stock or other stock, securities
or property receivable on the conversion of this Debenture,
at the request of the holder of this Debenture the Company
at its expense shall promptly cause independent public
accountants of recognized standing, selected by the Company,
to compute such adjustment in accordance with the terms of
this Debenture and prepare a certificate setting forth such
adjustment and showing in detail the facts upon which such
adjustment is based, including a statement of (A) the
consideration received or to be received by the Company for
any additional shares issued or sold or deemed to have been
issued or sold, (B) the number of shares of Common Stock
outstanding or deemed to be outstanding and (C) the Pro
Forma Adjusted Trigger Price. The Company will forthwith
mail a copy of each such certificate to the holder of this
Debenture.
(xv) In case:
(A) the Company shall take a record of the
holders of its Common Stock (or other stock or
securities at the time deliverable upon the conversion
of this Debenture) for the purpose of entitling or
enabling them to receive any dividend (other than a
cash or stock dividend at the same rate as the rate of
the last cash or stock dividend theretofore paid) or
other distribution, or to exercise any preemptive right
pursuant to the Company's charter, or to receive any
right to subscribe for or purchase any shares of stock
of any class or any other securities, or to receive any
other right; or
(B) of any capital reorganization of the
Company, any reclassification of the capital stock of
the Company, any consolidation or merger of the Company
with or into another corporation, or any conveyance of
all or substantially all of the assets of the Company
to another corporation; or
(C) of the voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then, and in each such case, the Company will mail or
cause to be mailed to the holder of this Debenture a
notice specifying, as the case may be, (i) the date on
which a record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount
and character of such dividend, distribution or right,
or (ii) the date on which such reorganization,
reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding up is to take
place, and the times, if any is to be fixed, as of
which the holders of record of Common Stock (or such
other stock or securities at the time deliverable upon
the exercise of this Debenture) shall be entitled to
exchange their shares of Common Stock of any class (or
such other stock or securities) for reclassification,
consolidation, merger, conveyance, dissolution,
liquidation or winding up or (iii) the amount and
character of the stock or other securities proposed to
be issued or granted, the date of such proposed
issuance or grant and the persons or class of persons
to whom such stock or other securities ar to be
offered, issued or granted. Such notice shall be
mailed at least thirty (30) days prior to the date
therein specified.
(xvi) The Company will at all times reserve and
keep available, solely for insurance and delivery upon the
conversion of this Debenture and other similar Debentures,
such shares of Common Stock and other stock, securities and
property as from time to time shall be issuable upon the
exercise of this Debenture and all other similar Debentures
at the time outstanding.
(xvii) Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction
or mutilation of this Debenture and (in the case of loss,
theft or destruction) upon delivery of an indemnity
agreement in an amount reasonably satisfactory to it, or (in
the case of mutilation) upon surrender and cancellation
thereof, the Company will issue, in lieu thereof, a new
Debenture of like tenor.
(xviii) (A) Within 90 days after the date hereof,
the Company will file a registration statement
("Registration Statement") with the Securities and
Exchange Commission ("SEC") covering the Subject
Securities (other than the Debentures, the 1995
Debentures and the Preferred Stock) and the shares of
Common Stock issuable upon conversion of the Debentures
and the Subject Securities (collectively "Registrable
Securities"), and will use its best efforts to cause
the Registration Statement to become effective on or
prior to the ninetieth day after such filing and to
keep the Registration Statement effective for a period
of seven years from the date it is declared effective
by the SEC.
(B) The following provisions shall be
applicable to the Registration Statement:
(aa) The Company will use its best
efforts to cause the Registration Statement to
become effective as promptly as possible, and if
any stop order shall be issued by the SEC in
connection therewith to use its reasonable efforts
to obtain the removal of such order. Following
the effective date of the Registration Statement,
the Company shall, upon the request of the holder,
forthwith supply such reasonable number of copies
of the Registration Statement, preliminary
prospectus and prospectus meeting the requirements
of the Act, and other documents necessary or
incidental to a public offering of the Registrable
Securities, as shall be reasonably requested by
the holder to permit the holder to make a public
distribution of its, his or her Registrable
Securities. The Company will use its reasonable
efforts to qualify the Registrable Securities for
sale in such states as the holder of Registrable
Securities shall reasonably request, provided that
no such qualification will be required in any
jurisdiction where, solely as a result thereof,
the Company would be subject to service of general
process or to taxation or qualification as a
foreign corporation doing business in such
jurisdiction. The obligations of the Company
hereunder with respect to the holder's Registrable
Securities are expressly conditioned on the
holder's furnishing to the Company such
appropriate information concerning the holder, the
holder's Registrable Securities and the terms of
the holder's offering of such Registrable
Securities as the Company may reasonably request.
(bb) The Company shall pay all expenses
incurred in complying with the provisions of this
subparagraph (xviii), including, without
limitation, all registration and filing fees
(including all expenses incident to filing with
the National Association of Securities Dealers,
Inc.), printing expenses, fees and disbursements
of counsel to the Company, securities law and blue
sky fees and expenses and the expenses of any
regular and special audits incident to or required
by any such registration. All underwriting
discounts and selling commissions applicable to
the sales of the Registrable Securities, and any
state or federal transfer taxes payable with
respect to the sales of the Registrable Securities
and all fees and disbursements of counsel for the
Holder, if any, in each case arising in connection
with registration of the Registrable Securities
shall be payable by the Holder.
(cc) In connection with the registration
of the Registrable Securities pursuant to this
subparagraph (xviii), the Company shall indemnify
and hold harmless the Holder, its affiliates,
officers, directors, partners, employees, agents
and representatives, each person, if any, who
controls the Holder within the meaning of the
Securities Act of 1933, as amended (the
"Securities Act"), or the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and any
person claiming by or through any of them
(collectively, the "Indemnified Persons") from and
against all losses, claims, damages, expenses or
liabilities (or actions in respect thereof)
arising out of or are based upon any untrue
statement of any material fact contained in the
Registration Statement or alleged untrue
statement, under which such securities were
registered under the Securities Act, any
preliminary prospectus or final prospectus
contained therein, or any amendment or supplement
thereto, or arise out of or are based upon the
omission to state therein a material fact required
to be stated therein or necessary to make the
statements made therein, in light of the
circumstances under which they are made, not
misleading, or any violation by the Company of the
Securities Act, the Exchange Act or state
securities or blue sky laws applicable to the
Company and relating to action or inaction
required of the Company in connection with such
registration or qualification under such state
securities or blue sky laws; and will reimburse
the Indemnified Persons for any legal or any other
expenses reasonably incurred by them in connection
with investigating or defending any such loss,
claim, damage, liability or action; provided,
however, that the Company will not be liable in
any such case to any Indemnified Person to the
extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue
statement or omission made in the Registration
Statement, said preliminary prospectus or said
final prospectus or said amendment or supplement
or any document incident thereto in reliance upon
and in conformity with written information
furnished to the Company by or on behalf of the
Holder.
(dd) The Holder will indemnify and hold
harmless the Company and each person, if any, who
controls the Company within the meaning of the
Securities Act or the Exchange Act, each officer
of the Company who signs the Registration
Statement and each director of the Company from
and against any and all such losses, claims,
damages or liabilities arising from any untrue
statement in, or omission from, the Registration
Statement, any such preliminary or final
prospectus, amendment, or supplement or document
incident thereto if the statement or omission in
respect of which such loss, claim, damage or
liability is asserted was made in reliance upon
and in conformity with information furnished in
writing to the Company by or on behalf of the
Holder for use in connection with the preparation
of the Registration Statement or such prospectus
or amendment or supplement thereof.
(ee) The reimbursements required by
clauses (cc) and (dd) shall be made by periodic
payments during the course of the investigation or
defense as and when bills are received or expenses
incurred; provided, however, that to the extent
that an indemnified party receives periodic
payments for legal or other expenses during the
course of an investigation or defense, and such
party subsequently received payments for such
expenses from any other parties to the proceeding,
such payments shall be used by the indemnified
party to reimburse the indemnifying party for such
periodic payments. Any party which proposes to
assert the right to be indemnified under clause
(cc) or (dd) will, promptly after receipt of
notice of commencement of any action, suit or
proceeding against such party in respect of which
a claim is to be made against any indemnified
party hereunder, notify each such indemnifying
party of the commencement of such action, suit or
proceeding, enclosing a copy of all papers served,
but the failure to so notify such indemnifying
party of any such action, suit or proceeding shall
not relieve the indemnifying party from any
obligation which it may have to any indemnified
party hereunder unless and only to the extent that
the indemnifying party is prejudiced by said lack
of notice. In case any such action, suit or
proceeding shall be brought against any
indemnified party and it shall notify the
indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to
participate in and, to the extent that it shall
wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified
party, and after notice from the indemnifying
party to such indemnified party of its election so
to assume the defense thereof, the indemnifying
party shall not be liable to such indemnified
party for any legal or other expense, other than
reasonable costs of investigation subsequently
incurred by such indemnified party in connection
with the defense thereof. The indemnified party
shall have the right to employ its own counsel in
any such action, but the reasonable fees and
expenses of such counsel shall be at the expense
of such indemnified party, when and as incurred,
unless (A) the employment of counsel by such
indemnified party has been authorized by the
indemnifying party, (B) the indemnified party has
reasonably concluded (based on advice of counsel),
that there may be legal defenses available to it
that are different from or in addition to those
available to the indemnifying party, (C) the
indemnified party shall have reasonably concluded
(based on advice of counsel) that there may be a
conflict of interest between the indemnifying
party and the indemnified party in the conduct of
defense of such action (in which case the
indemnifying party shall not have the right to
direct the defense of such action on behalf of the
indemnified party), or (D) the indemnifying party
shall not in fact have employed counsel to assume
the defense of such action within 15 days after
receipt of notice of such action. An indemnifying
party shall not be liable for any settlement or
any action or claim effected without its consent.
(ff) If the indemnification provided for
in this subparagraph (xviii) is unavailable to any
indemnified party hereunder in respect of any
losses, claims, damages, liabilities or expenses
referred to therein, then the indemnifying party,
in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by
such indemnified party as a result of such losses,
claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the
relative fault of the indemnifying party and
indemnified parties in connection with the actions
that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other
relevant equitable considerations. The relative
fault of such indemnifying party and indemnified
parties shall be determined by reference to, among
other things, whether any action in question,
including any untrue or alleged untrue statement
of a material fact or omission or alleged omission
to state a material fact, has been made by, or
relates to information supplied by, such
indemnifying party or indemnified parties, and the
parties' relative intent, knowledge, access to
information and opportunity to correct or prevent
such action. The amount paid or payable by a
party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall
be deemed to include, subject to the limitations
set forth herein, any legal or other fees or
expenses reasonably incurred by such party in
connection with any investigation or proceeding.
(gg) The Company and the Holder agree
that it would not be just and equitable if
contribution pursuant to clause (ff) were
determined by pro rata allocation or by any other
method of allocation that does not take account of
the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding
any other provision hereof, in no event shall the
contribution obligation of the Holder be greater
in amount than the excess of (A) the dollar amount
of net proceeds received by the Holder upon the
sale of the securities giving rise to such
contribution obligation over (B) the dollar amount
of any damages that the Holder has otherwise been
required to pay by reason of the untrue or alleged
untrue statement or omission or alleged omission
giving rise to such obligation. No person guilty
of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person
who was not guilty of such fraudulent
misrepresentation.
(hh) Neither the filing of the
Registration Statement by the Company pursuant to
this Agreement nor the making of any request for
prospectuses by the holder shall impose upon the
holder any obligation to sell his, her or its
Registrable Securities.
(ii) The holder, upon receipt of notice
from the Company that an event has occurred which
requires a post-effective amendment to the
Registration Statement or a supplement to the
prospectus included therein, shall promptly
discontinue the sale of his, her or its
Registrable Securities until the holder receives a
copy of a supplemented or amended prospectus from
the Company, which the Company shall provide as
soon as practicable after such notice.
(C) In the event (a) the Registration
Statement is not filed by the Company with the SEC on
or prior to the ninetieth (90th) day after the date
hereof, or (b) the Registration Statement has not been
declared effective by the SEC on or prior to the one
hundred eightieth (180th) day after the date hereof,
the annual interest rate on the Debentures shall be the
rate per annum ("Default Rate") which is 12% increased
by one and one-half percent (1-1/2%) per annum for the
first three (3) months immediately following the
expiration of such ninety (90) day period or one
hundred eighty (180) day period, as the case may be,
and by an additional one-half of one percent (1/2%) per
annum at the beginning of each subsequent thirty (30)
day period thereafter, until such time as the
requirements of clause (a) or (b) above, as the case
may be, have been satisfied, at which time all
increases in the interest rate borne by the Debentures
resulting from the operation of this sentence shall
terminate and the interest rate borne by the Debentures
shall revert to the rate that otherwise would be in
effect but for the operation of this sentence;
provided, however, that in no event shall the interest
rate borne by the Debentures exceed seventh percent
(17%) per annum pursuant to this sentence.
7. Covenants.
(a) Affirmative Covenants: The Company will, and with
respect to the agreements set forth in subsections (i) through
(viii) hereof, will cause each subsidiary to:
(i) with respect to its properties, assets and
business, maintain insurance against loss or damage, to the
extent that property, assets and businesses of similar
character are usually so insured by companies similarly
situated and operating like properties, assets or businesses
with responsible insurance companies satisfactory to the
Majority Holders said insurance to indicate the Agent (as
defined in the Security Agreement) as an additional insured;
(ii) duly pay and discharge all taxes or other
claims which might become a lien upon any of its properties
except to the extent that such items are being in good faith
appropriately contested;
(iii) maintain, preserve and keep its properties
in good repair, working order and condition, and make all
reasonable repairs, replacements, additions, betterments and
improvements thereto;
(iv) conduct its business in substantially the
same manner and in substantially the same fields as such
business is now carried on and conducted;
(v) comply with all statutes, rules and
regulations and maintain its corporate existence;
(vi) provide the Holders with the following
financial information:
(A) annually, as soon as available, but in
any event within one hundred twenty (120) days after
the last day of each fiscal year, audited financial
statements, including balance sheets as of the last day
of the fiscal year and statements of income and
retained earnings and changes in financial condition
for such fiscal year each prepared in accordance with
generally accepted accounting principles ("GAAP"),
consistently applied for the period and prior periods
by independent Certified Public Accountants
satisfactory to the Majority Holders;
(B) as soon as available, but in any event
within forty-five (45) days after the end of each
fiscal quarter, internally prepared financial
statements of the Company each prepared in accordance
with GAAP and jobs-in-progress reports for said period
and prior periods;
(C) within a reasonable time after a
written request therefor, such other financial data or
information as such Holders may reasonably request from
time to time;
(D) at the same time as it delivers the
financial statements required under the provisions of
subsections (A) and (B) hereof, a certificate signed by
the president or the chief financial, or accounting,
officer of the Company, to the effect that no Event of
Default hereunder or material default under any other
agreement to which the Company is a party or by which
it is bound, or by which any of its properties or
assets may be affected, and no event which, with the
giving of notice or the lapse of time, or both, would
constitute such an Event of Default, has occurred;
(E) on a monthly basis, no later than the
tenth (10th) day after each such month, backlog reports
and accounts receivable agings of the Company;
(vii) permit each Holder to make or cause to be
made, inspections and audits of any books, records and
papers of the Company and of any parent or subsidiary
thereof and to make extracts therefrom at all such
reasonable times and as often as such Holders may reasonably
require;
(viii) immediately give notice to the Holders
that an Event of Default has occurred or that an event
which, with the giving of notice or lapse of time, or both,
would constitute an Event of Default, has occurred and
specifying the action which the Company has taken and
proposes to take with respect thereto.
(b) Financial Covenants:
(1) at June 30, 1996, the Company shall maintain
a Tangible Net Worth equal to the greater of (a) $4,500,000,
or (b) the sum of $4,500,000 and any net profit after taxes
for the fiscal year ending June 30, 1996 (as calculated in
accordance with GAAP) less any preferred dividends (as such
shall have been declared during such fiscal year). At each
fiscal year end thereafter, the Company shall maintain a
Tangible Net Worth equal to the greater of (a) the required
Tangible Net Worth required hereunder for the immediately
preceding fiscal year, or (b) the sum of said required
Tangible Net Worth and any net profit after taxes for the
fiscal year then ending (as calculated in accordance with
GAAP) less any preferred dividends (as such shall have been
declared during such fiscal year). For purposes hereof
"Tangible Net Worth" shall mean, at any date, (i) the net
book value of assets (other than patents, patent rights,
trademarks, trade names, franchises, copyrights, licenses,
permits, goodwill and other intangible assets classified as
such in accordance with GAAP) after all appropriate
adjustments in accordance with GAAP (including, without
limitation, reserves for doubtful receivables, obsolescence,
depreciation and amortization) plus (ii) subordinated
indebtedness, in each case computed in accordance with GAAP;
(2) As of each June 30 and December 31 of each
fiscal year, commencing with June 30, 1996, the Company
shall maintain an excess of Current Assets to Current
Liabilities of not less than 2.75 to 1.0. For purposes
hereof, "Current Assets" shall be defined as the aggregate
amount of all current assets of the Company and its
subsidiaries, including prepaid items such as insurance,
taxes, interest, commissions and rents as may be properly
classified as such in accordance with GAAP, other than
goodwill and such other assets as are properly classified as
"intangible assets" or deferred assets. In determining the
value of assets hereunder, investments in Persons other than
subsidiaries shall be taken at cost or fair market value,
whichever is less. For purposes hereof, "Current
Liabilities" shall be defined as the aggregate amount of all
current liabilities of the Company and its subsidiaries
determined in accordance with GAAP;
(3) As of each June 30 and December 31 of each
fiscal year, commencing June 30, 1996, the Company shall
maintain Working Capital of not less than $5,500,000. For
purposes hereof, Working Capital shall be defined as Current
Assets less Current Liabilities;
(4) As of each June 30 and December 31 of each
fiscal year, commencing June 30, 1996, the Company shall
maintain a ratio of Total Liabilities (calculated in
accordance with GAAP excluding debt pursuant to the
Debentures as hereinafter defined) to Tangible Net Worth of
not more than 1.25 to 1.0;
(5) the Company shall maintain a Debt Service
Coverage ratio of not less than 1.05 : 1 at fiscal year end
June 30, 1996 and 1.20 : 1 at fiscal year end June 30, 1997.
For purposes hereof "Debt Service Coverage" shall be defined
as earnings before interest taxes, depreciation and
amortization for the fiscal year ending on the date of
determination divided by the sum of current maturities of
long term debt plus interest expense whether paid or accrued
plus preferred dividends declared during such fiscal year
(as all of the aforementioned are calculated in accordance
with GAAP).
(c) Negative Covenants: The Company will not, and
will not permit any subsidiary to:
(i) create, incur, assume or suffer to exist
any liability for borrowed money, except (A) indebtedness to
the Bank or any other financial institution constituting
"Senior Debt" hereunder; (B) indebtedness contemplated by
the Debentures and the 1995 Debentures; (C) other
indebtedness for borrowed money (whether or not constituting
a refinancing of existing indebtedness) so long as (x) such
indebtedness is not secured by collateral securing repayment
of this loan, (y) such indebtedness contains provisions
reasonably satisfactory to the Majority Holders
subordinating the payment of principal and interest thereon
to the prior payment of principal and interest on the
Debentures, and (z) the incurrence of which will not cause
an Event of Default, or an event which with notice or the
lapse of time or both would constitute an Event of Default,
hereunder;
(ii) create, incur, assume or suffer to exist,
any mortgage, pledge, lien or encumbrance of or upon or
security interest in, any of its property or assets now
owned or hereafter acquired except (A) mortgages, liens,
pledges and security interests securing Senior Debt and the
Debentures; (B) other liens, charges and encumbrances
incidental to the conduct of its business or the ownership
of its property and assets which are not incurred in
connection with the borrowing of money or the obtaining of
advances or credit and which do not materially impair the
use thereof in the operation of its business; (C) liens for
taxes or other governmental charges which are not delinquent
or which are being contested in good faith and for which a
reserve shall have been established in accordance with GAAP;
(D) liens granted to secure purchase money financing of
equipment, provided such liens are limited to the equipment
financed; and (E) liens granted to refinance unencumbered
equipment provided such liens are limited to the equipment
refinanced and the incurrence of which will not cause a
default hereunder or in any other Senior Debt;
(iii) assume, endorse, be or become liable for
or guarantee the obligations of any other person except by
the endorsement of negotiable instruments for deposit or
collection in the ordinary course of business;
(iv) (A) terminate any pension plan so as to
result in any material liability to The Pension Benefit
Guaranty Corporation established pursuant to Subtitle A of
Title IV of ERISA (the "PBGC"), (B) engage in or permit any
person to engage in any "prohibited transaction" (as defined
in Section 406 of ERISA or Section 4975 of the Internal
Revenue Code of 1954, as amended) involving any pension plan
which would subject the Company to any material tax, penalty
or other liability, (C) incur or suffer to exist any
material "accumulated funding deficiency" (as defined in
Section 302 of ERISA), whether or not waived, involving any
pension plan, or (D) allow or suffer to exist any event or
condition, which presents a material risk of incurring a
material liability to the PBGC by reason of termination of
any pension plan;
(v) amend, supplement or modify the terms of
the Subject Securities or increase the outstanding amount of
any Subject Securities without the prior consent of the
Majority Holders;
(vi) enter into any merger or consolidation
unless the Company shall be the surviving entity in any such
merger or consolidation, and after giving effect to the
transaction no Event of Default and no event which with the
giving of notice or passage of time or both would constitute
an Event of Default shall have occurred and be continuing,
or liquidate, wind-up or dissolve itself or sell, transfer
or lease or otherwise dispose of all or any substantial part
of its assets;
(vii) lend or advance money, credit or property
to or invest in (by capital contribution, loan, purchase or
otherwise) any firm, corporation, or other person except (A)
investments in United States Government obligations and
certificates of deposit of any bank institution with
combined capital and surplus of at least $200,000,000, (B)
trade credit, (C) security deposits, or acquire or otherwise
cause any other entity to become a subsidiary of the Company
(as used herein the term "subsidiary" means any corporation
or other organization, whether incorporated or
unincorporated, of which the Company or any other subsidiary
of the Company beneficially owns a majority of the voting or
economic interests) and (D) indebtedness to Xxxxxx X.
Xxxxxxxxxx and Xxxxxx Deutsch in the aggregate amount of
$60,000 existing on the date hereof;
(viii) declare or pay any dividends or
distributions on account of its capital stock or purchase,
redeem, retire or otherwise acquire any of its capital stock
or any securities convertible into, exchangeable for, or
giving any person the right to acquire or otherwise
subscribe for, any shares of the Company's capital stock;
provided, however, that so long as no Event of Default or
event which, with the giving of notice, the lapse of time,
or both would constitute an Event of Default hereunder has
occurred and is continuing, the Company may pay regular
quarterly dividends on the Preferred Stock in accordance
with the terms thereof; or
(ix) engage in any transaction with any person
or entity who directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under
common control with, the Company (an "Affiliate"), other
than ordinary director and compensation arrangements with
Affiliates serving as officers and/or directors of the
Company and other than transactions with Affiliates entered
into in the ordinary course of business on terms which are
at least as favorable to the Company as those available from
unrelated third parties. As used herein, the term "control"
means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and
policies of the Company, whether through the ownership of
voting securities, by contract or otherwise, and the terms
"controlled" and "controlling" have meanings correlative
thereto.
8 Events of Default.
(a) Definition. For the purposes of this Debenture,
an Event of Default hereunder will be deemed to have occurred if:
(i) the Company fails to pay the principal
amount of this Debenture when due (whether upon the Due
Date, upon acceleration or otherwise), whether or not such
payment is prohibited by paragraph 4 hereof;
(ii) the Company fails to pay any interest,
premium or penalty on the Debenture when due and such
failure has continued for a period of ten (10) days;
(iii) the Company fails to perform or observe
the provisions set forth in Paragraphs 7(b) or 7(c) hereof;
(iv) the Company fails to perform or observe
any provision contained in the Debenture or the Security
Agreement (other than those specifically covered by the
other provisions of this paragraph 8(a)) and, if such
failure is capable of being cured, such failure continues
for a period of 30 days after the Company's receipt of
written notice thereof;
(v) the Company shall have failed to pay when
due any amount due and owing under any indebtedness of the
Company for borrowed money or any other default or event of
default shall have occurred (and shall have continued beyond
the expiration of any applicable grace period) under any
indebtedness of the Company for borrowed money which would
permit the holder thereof to accelerate the maturity thereof
or there shall have been an acceleration of the stated
maturity of any indebtedness of the Company for borrowed
money;
(vi) the Security Agreement shall at any time
after its execution and delivery and for any reason cease to
be effective to constitute a valid and perfected lien and
security interest in and to the Collateral (as defined
therein) or if any of the provisions of the Security
Agreement that permit the Secured Party (as defined therein)
to exercise its remedies in accordance with the Uniform
Commercial Code of the State of New York cease to be in full
force and effect;
(vii) the Company makes an assignment for the
benefit of creditors or admits in writing its inability to
pay its debts generally as they become due; or an order,
judgment or decree is entered adjudicating the Company as
bankrupt or insolvent; or any order for relief with respect
to the Company is entered under the Federal Bankruptcy Code;
or the Company petitions or applies to any tribunal for the
appointment of a custodian, trustee, receiver or liquidator
of the Company or of any substantial part of the assets of
the Company, or commences any proceeding relating to the
Company under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation
law of any jurisdiction ("Insolvency Event or Proceeding");
or any such petition or application is filed, or any such
proceeding is commenced, against the Company and either (y)
the Company by any act indicates its approval thereof,
consents thereto or acquiescence therein or (z) such
petition application or proceeding is not dismissed within
60 days;
(viii) a final judgment which in the aggregate
with other outstanding final judgments against the Company
exceeds $250,000 shall be rendered against the Company and
within 90 days after entry thereof, such judgment is not
discharged or execution thereof stayed pending appeal, or
within 90 days after the expiration of such stay, such
judgment is not discharged;
(ix) any person or "group" (as defined in Rule
13d-5 promulgated under the Exchange Act), other than SFM
Group, Ltd. or Xxxxxx, Xxxxx & Company, L.L.C., acquires or
otherwise obtains the right (whether by contract, through
the ownership of securities or pursuant to any proxy or
consent arrangement, voting trust or otherwise) to appoint,
elect or cause the election of a majority of the Board of
Directors of the Company;
(x) any representation or warranty made by the
Company in the Unit Purchase Agreement, dated March 7, 1996
between the Company and the original Holder of this
Debenture, the Security Documents (as defined in such Unit
Purchase Agreement), or any other certificate or instrument
delivered in connection therewith shall have been untrue in
any material respect when made; or
(xi) the Registration Statement shall not have
become effective within 270 days after the date hereof.
(b) Consequences of Events of Default.
(i) If any Event of Default (other than the
type described in subparagraph 8(a)(vii) above) has
occurred, the Holder or Holders of Debentures representing a
majority of the aggregate principal amount of Debentures
then outstanding (the "Majority Holders") may demand (by
written notice delivered to the Company) immediate payment
of all or any portion of the outstanding principal amount of
the Debentures owed by such Holder or Holders. If such
Majority Holders demand immediate payment of all or any
portion of such Holder's or Holders' Debentures, the Company
will, to the extent permitted under the provisions of
paragraph 4 hereof, immediately pay to such Holder or
Holders the principal amount of the Debentures requested to
be paid (plus accrued interest hereon). If an Event of
Default of the type described in subparagraph 8(a)(vii)
above has occurred, then all of the outstanding principal
amount of the Debentures shall automatically be immediately
due and payable without any action on the part of any
Holders of the Debenture.
(ii) If an Event of Default has occurred, each
Holder of the Debentures will also have any other rights
which such Holder may have pursuant to applicable law, in
each case provided such rights are consistent with the
provisions of paragraph 4 hereof.
9. Amendment and Waiver. Except as otherwise expressly
provided herein, the provisions of this Debenture may be amended
and the Company may take any action herein prohibited and
exercise all remedies available to them under the Security
Agreement, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written
consent of the Majority Holders, provided, however, neither the
interest rate or principal amounts payable under the Debentures,
the dates on which interest or principal under the Debentures is
due nor the obligations to make payments on the Debentures on a
pro rata basis shall be amended without the prior written consent
of each Holder affected thereby, and of each holder of Senior
Debt, and further provided, however, that any amendment or waiver
which might in any way adversely affect the holders of Senior
Debt, including, but not limited to, any amendment or waiver
affecting the provisions of paragraph 4 or this paragraph 9 shall
require the prior written consent of each holder of Senior Debt.
Any amendment or waiver effected in accordance with this
paragraph 9 shall be binding upon each Holder of this Debenture
and each future Holder of this Debenture.
10. Cancellation. After all principal and accrued interest
at any time owed on this Debenture has been paid in full, this
Debenture will be surrendered to the Company for cancellation and
will not be reissued.
11. Place of Payment. Payments of principal and interest
are to be delivered to the Holder at the office of the Company,
000-00 Xxxxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxx 00000, or to such other
address or to the attention of such other Person as specified by
prior written notice to the Company.
12. Waiver of Presentment, Demand and Dishonor. The
Company hereby waives presentment for payment, protest, demand,
notice of protest, notice of non-payment and diligence with
respect to this Debenture, and waives and renounces all rights to
the benefit of any statute of limitations or any moratorium,
appraisement, exemption or homestead now provided or that
hereafter may be provided by any federal or applicable state
statute, including but not limited to exemptions provided by or
allowed under the Federal Bankruptcy Code, both as to itself and
as to all of its property, whether real or personal, against the
enforcement and collection of the obligations evidenced by this
Debenture and any and all extensions, renewals and modifications
hereof.
No failure on the part of the Holder hereof or of any
other Debentures to exercise any right or remedy hereunder with
respect to the Company, whether before or after the happening of
an Event of Default, shall constitute a waiver of any future
Event of Default or of any other Event of Default. No failure to
accelerate the debt of the Company evidenced hereby by reason of
an Event of Default or indulgence granted from time to time shall
be construed to be a waiver of the right to insist upon prompt
payment thereafter; or shall be deemed to be a novation of this
Debenture or a reinstatement of such debt evidenced hereby or a
waiver of such right of acceleration or any other right, or be
construed so as to preclude the exercise of any right Holder may
have, whether by the laws of the state governing this Debenture,
by agreement or otherwise; and the Company hereby expressly
waives the benefit of any statute or rule of law or equity that
would produce a result contrary to or in conflict with the
foregoing.
13. Usury. The Holder and the Company intend that the
obligations evidenced by this Debenture conform strictly to the
applicable usury laws from time to time in force. All agreements
between the Company and Holder, whether now existing or hereafter
arising and whether oral or written, hereby are expressly limited
so that in no contingency or event whatsoever, whether by
acceleration of maturity hereof or otherwise, shall the amount
paid or agreed to be paid to Holder, or collected by Holder, by
or on behalf of the Company for the use, forbearance or detention
of the money to be loaned to the Company hereunder or otherwise,
or for the payment or performance of any covenant or obligation
contained herein of the Company to Holder, or in any other
document evidencing, securing or pertaining to such indebtedness
evidenced hereby, exceed the maximum amount permissible under
applicable usury law. If under any circumstances whatsoever
fulfillment of any provision hereof or any other document, at the
time performance of such provisions shall be due, shall involve
transcending the limit of validity prescribed by law, then, ipso
facto, the obligation to be fulfilled shall be reduced to the
limit of such validity; and if under any circumstances Holder
ever shall receive from or on behalf of the Company an amount
deemed interest, by applicable law, which would exceed the
highest lawful rate, such amount that would be excessive interest
under applicable usury laws shall be applied to the reduction of
the Company's principal amount owing hereunder and not to the
payment of interest, or if such excessive interest exceeds the
unpaid balance of principal and such other indebtedness, the
excess shall be deemed to have been a payment made by mistake and
shall be refunded to the Company or to any other person making
such payment on the Company's behalf.
14. Governing Law. The validity, construction and
interpretation of this Debenture will be governed by the internal
laws, but not the law of conflicts and choices of law, of the
State of New York.
IN WITNESS WHEREOF, the Company has executed and delivered
this 12% Convertible Senior Subordinated Debenture this 7th day
of March, 1996.
LOGIMETRICS, INC.
By: /s/ Xxxxxx X. Xxxxxxxxxx
-------------------------------
Name:
Title: President
EXHIBIT A
ELECTION TO CONVERT
(All capitalized terms used and not otherwise
defined herein shall have the meanings
assigned to them in the 12% Convertible Senior
Subordinated Debenture)
LogiMetrics, Inc.
000-00 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
TO WHOM IT MAY CONCERN:
The undersigned registered owner of the attached 12%
Convertible Senior Subordinated Debenture hereby irrevocably
exercises the option to convert such Debenture into Common Stock
of LogiMetrics, Inc. in accordance with the terms thereof, and
directs that any shares issuable and deliverable upon the
conversion be issued in the name of and delivered to the
undersigned.
-------------------------------------------
[Name of Debentureholder]
Dated:_________________, 199_
