SECURED SUBORDINATED DEBENTURE
$________ Farmingdale, New York
November 30, 1995
VTX Electronics Corp., a corporation duly organized and
existing under the laws of the State of Delaware (herein called the
"Company"), for value received, hereby promises to pay to the order
of [name of investor] or registered assigns the principal amount of
______________________ ($_______) Dollars on December 1, 2000, in
such coin or currency of the United States of America as at the
time of payment shall be legal tender for public and private debts,
at the principal office of the Company, in Farmingdale, New York
and to pay interest (computed on the basis of a 360-day year of
twelve 30-day months) at said office, in like coin or currency, on
the unpaid portion of said principal amount from the date hereof,
quarterly on the first day of September, December, March and June
in each year, commencing on March 1, 1996, at the rate of interest
from time to time equal to the "prime rate" as publically announced
from time to time in the Wall Street Journal plus two percent (2%)
per annum adjusted monthly on the first business day of each month
until such unpaid portion of such principal amount shall have
become due and payable and thereafter at the greater of such prime
rate plus six percent (6%) or eighteen percent (18%) per annum
thereafter and, so far as may be lawful, on any overdue installment
of interest at the rate of the greater of such prime rate plus six
percent (6%) or eighteen percent (18%) per annum. This Debenture
may be prepaid at any time after one year from original issuance,
in whole or in part, with no penalty, only with the prior written
consent of the Holder of this Debenture.
par 1. The Agreement; Exchanges and Transfers of the
Debenture.
par 1.1. The Agreement. This Debenture (herein called
the "Debenture") is one of several identical Debentures in the
aggregate principal amount of $1,237,500 (collectively called the
"Debentures") issued pursuant to a Capitalization Agreement dated
November 29, 1995 (herein called the "Agreement") between the
Company and the investors named therein.
par 1.2. Register; Transfer or Exchange of Debentures.
The Company shall keep at its office or agency maintained in
Farmingdale, New York a register in which the Company shall provide
for the registration of Debentures and for the registration of
transfer of Debentures. The Holder of any Debenture may, at its
option and either in person or by duly authorized attorney,
surrender the same for registration of transfer or exchange at such
office and, without expense to such Holder (other than transfer
taxes, if any), receive in exchange therefor a new Debenture or
Debentures, dated as of the date to which interest has been paid on
the Debenture or Debentures so surrendered, each in the principal
amount of $10,000 or any integral multiple thereof, for the same
aggregate unpaid principal amount as the Debenture or Debentures so
surrendered for transfer or exchange and each registered in such
name or names as may be designated by such Holder. Every Debenture
so made and delivered in exchange for any Debenture shall in all
other respects be in the same form and have the same terms as the
Debenture so surrendered for transfer or exchange.
par 1.3. Loss, Theft, Destruction or Mutilation of
Debentures. Upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of any
Debenture and, in the case of any such loss, theft or destruction,
upon receipt of an indemnity bond in such reasonable amount as the
Company may determine (or if such Debenture is held by the original
Holder, of an unsecured indemnity agreement reasonably satisfactory
to the Company) or, in the case of any such mutilation, upon
surrender and cancellation of such Debenture, the Company will make
and deliver, in lieu of such lost, stolen, destroyed or mutilated
Debenture, a new Debenture of like tenor and unpaid principal
amount and dated as of the date to which interest has been paid on
the Debenture so lost, stolen, destroyed or mutilated.
par 1.4. Registered Holders. The Company may deem and
treat the person in whose name any Debenture is registered as the
absolute owner and holder of such Debenture for the purpose of
receiving payment of the principal of and interest on such
Debenture and for the purpose of any notices, waivers or consents
thereunder, whether or not such Debenture shall be overdue, and the
Company shall not be affected by notice to the contrary. Payments
with respect to any Debenture shall be made only to the registered
Holder thereof.
par 2. Surrender of the Debenture.
par 2.1. Surrender of Debentures. (a) The Company may,
as a condition of payment of all or any of the principal of, and
interest on, this Debenture, in whole or in part, require the
holder to present this Debenture for notation of such payment and,
if this Debenture be paid in full, require the surrender hereof.
(b) Anything herein to the contrary
notwithstanding, the entire principal plus accrued interest amount
of this Debenture, or any part hereof, may be surrendered to the
Company by the Holder for redemption and cancellation as payment of
the exercise price of any warrant to acquire common stock of the
Company. If less than the entire principal amount of this
Debenture is so surrendered and redeemed, a new Debenture in the
remaining outstanding principal amount shall be redelivered to the
Holder.
par 3. Covenants.
par 3.1. To Pay Principal and Interest. The Company
covenants and agrees to pay principal and interest on this
Debenture in accordance with the terms hereof.
par 3.2. Maintenance of Company Office. The Company
will maintain an office in Farmingdale, New York in its current
facility where notices, presentations and demands to or upon the
Company in respect of the Debenture may be given or made or such
other place as a majority in principal amount of the Debentures
shall consent to in writing.
par 3.3. To Keep Books. The Company will, and will
cause all subsidiaries, to keep proper books of record and account
in which full, true and correct entries will be made of its
transactions in accordance with generally accepted accounting
principles.
par 3.4. Payment of Taxes; Corporate Existence;
Maintenance of Properties. The Company will, and will cause each
of its subsidiaries to,
A. pay and discharge promptly or cause to be paid and
discharged promptly all taxes, assessments and governmental charges
or levies imposed upon it or upon its income or profits or upon any
of its property, real, personal or mixed, or upon any part thereof,
before the same shall become in default, as well as all lawful
claims for labor, materials and supplies which, if unpaid, might by
law become a lien or change upon its property; provided, however,
that neither the Company nor any subsidiary shall be required to
pay any such tax, assessment, charge, levy or claim if the amount,
applicability or validity thereof shall currently be contested in
good faith by appropriate proceedings and if the Company or such
subsidiary, as the case may be, shall have set aside on its books
reserves (provided for and segregated to the extent required by
generally accepted accounting principles) deemed by it adequate
with respect thereto;
B. maintain and keep or cause to be maintained and kept its
properties in good repair, working order and condition, and from
time to time make or cause to be made all needful and proper
repairs, renewals, replacements and improvements so that the
business carried on in connection therewith may be properly and
advantageously conducted at all times.
par 3.5. To Insure. The Company will, and will cause
each of its subsidiaries to maintain insurance in such extent and
against such hazards and liabilities as is commonly maintained by
companies similarly situated.
par 3.6. Sale, Merger or Consolidation by Company. The
Company will not sell, lease, transfer or otherwise dispose of any
substantial part of its properties and assets or consolidate with
or merge into any person or permit any person to merge into it.
par 3.7. Additional Debt. The Company shall not
issue or incur any debt senior to, or parri passu with, the
Debentures.
par 4. [Intentionally omitted].
par 5. Subordination. (a) "Senior Debt" means (i)
all indebtedness for principal and interest, including interest
accruing during the period of any bankruptcy and other amounts
payable under the terms of such Senior Debt, of the Company to
Congress Financial Corporation ("Congress") under that certain
Accounts Financing Agreement (Security Agreement) dated December
31, 1992 and the Covenant Supplement to Accounts Financing
Agreement (Security Agreement) dated December 31, 1992 and all
amounts owing to Sterling Commercial Capital, Inc., First Well
Street SBIC, L.P., Fundex Capital Corp. and Tappan Zee Capital
Corp. under that certain Loan Agreement dated March 31, 1994,
Mortgage dated March 31, 1994 and Security Agreement dated March
31, 1994.
(b) The Company covenants and agrees, and each
Holder of this Debenture, by his acceptance hereof likewise
covenants and agrees that the payment of the principal of, interest
and all other amounts payable on this Debenture shall be
subordinated in accordance with the provisions of this paragraph 5 and each
holder of any of the Debenture, whether upon original issue or upon
transfer or assignment thereof, accepts and agrees to be bound by
such provisions. This Debenture, shall, to the extent and in the
manner hereinafter in this paragraph 5 set forth, be subordinated and
subject in right of payment to the prior payment in full of all
Senior Debt of the Company.
(c) Upon any payment or distribution of assets or
securities of the Company of any kind or character, whether in
cash, property or securities, upon any dissolution or winding up or
total or partial liquidation or reorganization of the Company
whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all Senior Debt of the Company
shall first be paid in cash or cash equivalents, before the holder
of this Debenture shall be entitled to receive any assets or
securities (other than shares of stock of the Company, as
reorganized or readjusted or securities of the Company, or of any
other corporation provided for by a plan of reorganization or
readjustment, junior to, or the payment of which is subordinated at
least to the extent provided in this paragraph 5 to the payment of, all
Senior Debt of the Company, which may at the time be outstanding or
any securities issued in respect thereof under any such plan of
reorganization or readjustment) in respect of the Debentures (for
principal, interest or other amounts); and upon any such
dissolution or winding up or liquidation or reorganization, any
payment or distribution of assets or securities of the Company, of
any kind or character, whether in cash, property or securities
(other than as aforesaid), to which the Holders of the Debentures
would be entitled, except for the provisions of this paragraph 5, shall be
made by the Company, or by any receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making such payment or
distribution, directly to the holders of Senior Debt of the
Company, or their representatives to the extent necessary to pay
all such Senior Debt of the Company, after giving effect to any
concurrent payment or distribution to or for the holders of such
Senior Debt.
(d) No demand, declaration, acceleration or direct
or indirect payment, prepayment or enforcement of principal of this
Debenture may be made or done until the Senior Debt is finally paid
in full, provided, however, demand for payment and acceleration may
be made after 180 days following an Event of Default. Also, no
direct or indirect payment of or on account of this Debenture
(including without limitation principal, interest and premiums)
shall be made if, at the time of such payment or immediately after
giving effect thereto, (i) there shall exist a default in the
payment of any amount (including without limitation principal,
interest and premiums) payable by the Company in respect of any
Senior Debt (any default referred to in this clause (i) herein
called a "Monetary Default"), or (ii) the Company receives a notice
from a holder of any Senior Debt that there exists a default or an
Event of Default other than a Monetary Default in respect of any
Senior Debt (any default or Event of Default specified in this
clause (ii) herein called a "Non-Monetary Default"). If the
Company receives any notice of a Non-Monetary Default, a subsequent
notice given within 360 days from the date of the giving of the
first notice relating to the same Non-Monetary Default on the same
issue of Senior Debt shall not be effective for the purposes of
this paragraph. Notwithstanding the occurrence of a Non-Monetary
Default (but subject to the provisions of Section 5(c) above and
clause (i) of the second sentence of this Section 5(d)), the
Company shall resume payments on and distribution in respect of
interest and other amounts (but not principal) on this Debenture
when: (1) the Non-Monetary Default is cured or waived, or (2) 180
days after the giving of the aforementioned notice of the
occurrence of such Non-Monetary Default (unless during such 180 day
period the maturity of the Senior Debt is accelerated, or such
indebtedness otherwise comes due, and is not paid in full), but in
any event only if this paragraph 5 otherwise permits the payments or
acquisition at the time of such payment.
(e) In the event that, notwithstanding the
foregoing, the holder of any Debenture shall have received any
payment or distribution of assets or securities of the Company of
any kind or character, whether in cash, property or securities
(other than as expressly permitted by this paragraph 5) in contravention of
the terms of the subordination contained herein before all Senior
Debt of the Company is paid in full, then and in such event, such
payment or distribution of assets or securities of the Company
shall be held in trust for and paid over or delivered to the holder
of Senior Debt of the Company, for application to the payment of
all Senior Debt of the Company, remaining unpaid to the extent
necessary to pay in full in cash the principal of and the premium
(if any) and interest and such other amounts on such Senior Debt of
the Company, in accordance with its terms, after giving effect to
any concurrent payment or distribution to holders of such Senior
Debt of the Company.
(f) If any Event of Default occurs (under
circumstances when the provisions of paragraph 5(c) shall not be
applicable) with respect to the Company and as a result this
Debenture is declared due and payable, and such declaration has not
been rescinded or annulled, all principal and premium, if any, of
all Senior Debt of the Company then due, or thereafter declared to
be due, pursuant to the terms of such Senior Debt at such time, and
all interest and such other amounts then due upon such Senior Debt
shall first be paid in full before any payment is made on account
of principal or interest or other amounts on any Debenture.
(g) Subject to the prior payment in full of all
Senior Debt of the Company, the Holder of this Debenture shall be
subrogated to the rights of the holders of such Senior Debt to
receive payments or distributions of assets or securities of the
Company with respect to payments or distributions to the holders of
Senior Debt by or on behalf of the Company to which the Holder of
this Note would be entitled except for the provisions of this paragraph 5,
applicable to Senior Debt until the principal of and interest on
the Debenture shall be paid in full; provided, however, that all
payments of principal and interest on this Debenture which were
permitted under the provisions of this paragraph 5 at the time made shall
remain the property of the Holder of this Debenture and shall not
be subject to recapture by the holders of the Senior Debt. For
purposes of such subrogation, no such payments or distributions to
the holders of Senior Debt by or on behalf of the Company, to which
the Holder of this Debenture would be entitled, except for the
provisions of this paragraph 5, and no such payments or distributions
pursuant to the provisions of this paragraph 5 to or for the benefit of the
holders of Senior Debt of the Company, by the Holder of Debenture,
shall, as between the Company, its creditors other than the holders
of their respective Senior Debt, as the case may be, and the
Holders of this Debenture, be deemed to be a payment by the
Company, to or on account of Senior Debt and no such payments or
distribution to the Holders of Debentures by virtue of the
subrogation herein provided for shall, as between the Company, its
creditors other than the Holders of their respective Senior Debt
and the Holders of the Debentures, be deemed to be a payment by the
Company, on account of such Senior Debt, it being understood that
the provisions of this paragraph 5 are solely for the purpose of defining
the relative rights of the Holders of the Debentures, on the one
hand, and the holders of Senior Debt of the Company, on the other
hand. Nothing contained in this is intended to or shall impair,
as between the Company and the Holders of Debentures, the
obligation of the Company, which is unconditional and absolute, to
pay to the Holders of the Debentures the principal of and interest
on the Debentures, as and when the same shall become due and
payable in accordance with their terms, or to affect (except to the
extent specifically provided above in this paragraph) the relative
rights of the Holders of the Debentures and creditors of the
Company, other than the Holders of Senior Debt of the Company, nor
shall anything herein prevent the Holder of any Debentures from
exercising all remedies otherwise permitted by applicable law upon
default under this Debenture, subject to the rights, if any, under
this paragraph 5, of the Holders of Senior Debt of the Company, in respect
of assets or securities of the Company, of any kind or character,
whether cash, property or securities, received upon the exercise of
any such remedy.
(h) Upon any payment or distribution of assets or
securities of the Company referred to in this paragraph 5, the Holders of
this Debenture shall be entitled to rely upon any order or decree
of a court of competent jurisdiction in which such dissolution,
winding up, liquidation or reorganization proceedings are pending,
and upon a certificate of the receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making any such payment
or distribution, delivered to the Holders of the Debentures for
purpose of ascertaining the persons entitled to participate in such
distribution, the holders of Senior Debt and other indebtedness of
the Company, the amount thereof or payable thereon, the amount or
amounts paid or distributed thereon and all other facts pertinent
thereto or to this paragraph 5.
(i) No right of any present or future holder of any
Senior Debt of the Company, to enforce 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, in good faith, by any Holder, or by any
noncompliance by the Company, with the terms, provisions and
covenants of this Debenture regardless of any knowledge thereof any
such Holder may have or otherwise be charged with.
(j) The provisions of this paragraph 5 are intended to be
for the benefit of, and shall be enforceable directly by, the
holders of Senior Debt of the Company.
par 6. Events of Default.
par 6.1. Events of Default. If one or more of the
following events, herein called Events of Default, shall happen for
any reason whatsoever and whether such happening shall be voluntary
or involuntary or come about or be effected by operation of law or
pursuant to or in compliance with any judgment, decree or order of
any court of any order, rule or regulation of any administrative or
governmental body) and be continuing:
(a) Default shall be made in the payment of the
principal of any Debenture, when and as the same shall become due
and payable,whether at maturity or at a date fixed for prepayment
or by acceleration or otherwise; or
(b) Default shall be made in the payment of any
installment of interest on any Debenture according to its tenor
when and as the same shall become due and payable and such default
shall continue for a period of 10 days; or
(c) Default shall be made in the due observance or
performance of any covenant, condition or agreement on the part of
the Company contained in this Debenture; or
(d) The Company shall be adjudicated a bankrupt or
insolvent, or shall consent to the appointment of a receiver,
trustee or liquidator of itself or of any material part of its
property, or shall admit in writing its inability to pay its debts
generally as they come due, or shall make a general assignment for
the benefit of creditors, or shall file a voluntary petition or an
answer seeking reorganization or arrangement in a proceeding under
any bankruptcy law (as now or hereafter in effect) or an answer
admitting the material allegations of a petition filed against the
Company in any such proceeding, or shall, by voluntary petition,
answer or consent, seek relief under the provisions of any other
now existing or future bankruptcy or other similar law providing
for the reorganization or winding up of corporations, or the
Company or its directors or majority stockholders shall take action
looking to the dissolution or liquidation of the Company; or
(e) An order, judgment or decree shall be entered
by any court of competent jurisdiction appointing, without the
consent of the Company, a receiver, trustee or liquidator of the
Company or of any material part of its property, and such receiver,
trustee or liquidator shall not have been removed or discharged
within 90 days thereafter, or any material part of the property of
the Company shall, in any judicial proceeding, be sequestered and
shall not be returned to the possession of the Company within 90
days thereafter; or
(f) A petition against the Company in a proceeding
under any bankruptcy law (as now or hereinafter in effect) shall be
filed and shall not be dismissed within 30 days after such filing,
or, in case the approval of such petition by a court of competent
jurisdiction is required, shall be filed and approved by such a
court as properly filed and such approval shall not be withdrawn or
the proceeding dismissed within 30 days thereafter, or if, under
the provisions of any other similar law providing for
reorganization or winding up of corporations and which may apply to
the Company, any court of competent jurisdiction, custody or
control of the Company or of any material part of its property and
such jurisdiction, custody or control shall not be relinquished or
terminated within 30 days thereafter; or
(h) The Company shall (x) be declared in default in
the payment of principal or interest on any evidence of
indebtedness for money borrowed (other than the Debentures) or
other material obligations and such default shall continue for more
than the period of grace, if any, therein specified, unless such
default shall have been cured or waived prior to such indebtedness
becoming or being declared to be due and payable prior to its
stated maturity, or (y) default shall continue for more than the
period of grace, if any, therein specified, or (z) default in the
performance or observance of any other term, condition or agreement
contained in any such evidence of indebtedness for money borrowed
or in any agreement relating thereto if as a result of such default
such evidence of indebtedness is declared to be due and payable
prior to its stated maturity;
then, in any such event, any registered Holder or Holders of the
Debentures may declare the Debenture or Debentures held by it or
them to be immediately due and payable and upon such declaration
the same shall become and be immediately due and payable, together
with accrued interest thereon, anything in the Debentures to the
contrary notwithstanding.
par 6.2. Suits for Enforcement. In case any one or more
of the Events of Default specified in paragraph 6.1 shall happen and be
continuing, each Holder of a Debenture which may, pursuant to the
provisions of paragraph 6.1, declare the Debenture or Debentures held by it
to be immediately due and payable, may proceed to protect and
enforce its rights by suit in equity, action at law and/or by other
appropriate proceeding, whether for the specific performance (to
the extent permitted by law) of any covenant or agreement contained
in this Debenture, such Debenture or in aid of the exercise of any
power granted in this Debenture, such Debenture, or may proceed to
enforce the payment of such Debenture or to enforce any other legal
or equitable right of holder of such Debenture. If, pursuant to
the provisions of par 6.1 or of this paragraph 6.2, the holder of any Debenture
shall demand payment thereof or take any action in respect of a
default or an Event of Default, the Company will forthwith give
written notice, addressed as provided in paragraph 6.4, to the other Holders
of Debentures, specifying such action and the nature of the default
or Event of Default. Nothing contained in this paragraph 6.2 or in paragraph
6.1 shall in any manner impair that absolute and unconditional right of
each holder of a Debenture to receive payment of the principal of
and interest, on such Debenture when the same shall become due and
payable in accordance with the terms thereof, and to institute suit
for the enforcement of such payment.
par 6.3. Remedies Cumulative. No remedy herein
conferred upon the Holder of any Debenture is intended to be
exclusive of any other remedy, and each and every such remedy shall
be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by
statute or otherwise.
par 6.4. Remedies Not Waived. No course of dealing
between the Company and any Holder of a Debenture shall operate as
a waiver of any right of such Holder hereunder or under such
Xxxxxxxxx, and no delay on the part of such Holder in exercising
any right hereunder or thereunder shall so operate.
par 7. [Intentionally omitted]
par 8. Security. This Debenture is secured by, and
entitled to the benefits of, that certain Mortgage dated as of
November 28, 1995 and Security Agreement dated as of November 28,
1995 made by the Company for the benefit of the holders of the
Debentures.
par 9. Costs of Collection. In case of a default in
the payment of any principal of or interest on this Debenture, the
Company will pay to the Holder hereof such further amount as shall
be sufficient to cover the costs and expenses of collection,
including (without limitation) reasonable attorneys' fees.
par 10. Legend. Each Debenture shall bear the
following legend:
The Securities represented by this certificate have
not been registered under the Securities Act of 1933, as amended,
or registered or qualified under the "blue sky" laws of any State.
The securities may not be pledged, hypothecated, assigned, sold or
transferred unless registered under that Act and registered or
qualified under the blue sky laws as may be applicable or unless,
in the opinion of counsel reasonably satisfactory to the Company,
exemptions from such laws are available.
par 11. Covenants Bind Successors and Assigns. All the
covenants, stipulations, promises and agreements in this Debenture
contained by or on behalf of the Company shall bind its successors
and assigns, whether so expressed or not.
par 12. Governing Law. This Debenture shall be
governed by and construed in accordance with the laws of the State
of New York.
par 13. Notice. Any notice pursuant to this Debenture
shall be effected on the day delivered by hand and receipted, the
second business day after delivery to a recognized overnight
courier service or seven days after delivery to the United States
Post Office, proper postage prepaid sent registered or certified
mail, return receipt requested, addressed as follows:
If to the holder at the address shown on the register
maintained by the Company pursuant to par 1.2 of this Debenture.
If to the Company:
00 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxx Xxxx 00000
par 14. Waiver of Jury Trial. THE COMPANY HEREBY
WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE
ARISING UNDER OR RELATING TO THIS DEBENTURE AND AGREES THAT ANY
SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
par 15. Headings. The headings of the sections and
subsections of this Debenture are inserted for convenience only and
do not constitute a part of this Debenture.
IN WITNESS WHEREOF, VTX Electronics Corp. has caused this
Debenture to be signed in its corporate name by one of its officers
thereunto duly authorized and this Debenture to be dated as of the
day and year first above written.
VTX ELECTRONICS CORP.
By:________________________
