EXHIBIT 4.1
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 PURCHASE AGREEMENT DATED AS OF JULY 29, 1997 AMONG THE
COMPANY AND THE PURCHASERS NAMED THEREIN.
CLASS A 13% CONVERTIBLE SENIOR
SUBORDINATED PAY-IN-KIND DEBENTURE DUE 1999
[Date of Issuance]
LOGIMETRICS, INC., a Delaware corporation (the "Company"), hereby promises
to pay to the order of [name of purchaser] (together with its, his or her
successors and assigns, the "Holder") the principal amount of
_____________________ Dollars ($______________)in lawful money of the United
States, together with interest thereon calculated from the date hereof and
payable in accordance with the provisions of this debenture ("Debenture").
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.
This Debenture may be surrendered for transfer or exchange by the Holder
hereof upon surrender of this Debenture, together with a properly completed bond
power or other instrument of transfer, and any required signature guarantees, at
the office of the Company set forth in Section 11 hereof. Upon proper surrender,
the Company shall issue one or more replacement Debentures of like tenor
registered in the names and in the denominations requested by the surrendering
Holder and dated the date of issuance thereof; provided, however, that (i)
appropriate adjustments shall be made to reflect the date of issue and principal
amount of each such replacement Debenture, (ii) the aggregate principal amount
of all Debentures, excluding Accrued Interest Debentures (as defined below),
shall be limited to $3,583,333, and (iii) no Debenture shall be issued in a
principal amount of less than $50,000 unless in connection with a transfer
resulting from the complete liquidation of the original Holder of this
Debenture. All Debentures shall rank pari passu.
1. Payment of Interest. Subject to subparagraph 6(c)(xviii)(C) hereof,
interest will accrue from the date hereof at the rate of thirteen percent (13%)
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 [first interest payment date following
the issuance date] and quarterly thereafter, in arrears, on the 15th day of
[January], the
15th day of [April], the 15th day of [July] and the 15th day of [October] (each,
an "Interest Payment Date") 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.
On each Interest Payment Date other than the Due Date (as defined below),
in payment of the interest due on this Debenture on such Interest Payment Date,
the Company shall deliver to the Holder of this Debenture a new Debenture (an
"Accrued Interest Debenture"), in the form of this Debenture, dated such
Interest Payment Date (and bearing interest from such Interest Payment Date) and
having a principal amount corresponding to the interest due on this Debenture on
such Interest Payment Date. On the Due Date, in payment of the interest due on
this Debenture on such date, the Company shall deliver, at the option of the
Holder, either (a) a cash payment in such amount, or (b) the number of shares of
Common Stock, par value $.01 per share ("Common Stock"), into which Accrued
Interest Debentures would be convertible pursuant to Section 6 hereof if Accrued
Interest Debentures had been issued to the Holder on the Due Date in payment of
such interest and such Accrued Interest Debentures were converted by the Holder
immediately thereafter. Unless the Holder gives the Company not less than 10
days' prior written notice of the exercise of such option, the Holder shall be
deemed to have irrevocably elected to receive payment of such interest in cash
on the Due Date. Any exercise or deemed exercise of such option shall be binding
on any subsequent Holder of this Debenture.
2. Payment of Principal on Debenture.
(a) Scheduled Payments. The Company will repay the principal amount of this
Debenture on [two years from date of issue] [date] ("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 (including, for this purpose, the Accrued Interest
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 affecting the price of the Common Stock.
All such prepayments shall be applied pro rata to all of the Debentures. At the
option of the Holder, interest accrued on the prepaid amount to the date of
payment shall be paid either (a) in cash or (b) by the issuance by the Company
to
the Holder of shares of Common Stock into which Accrued Interest Debentures
would be convertible pursuant to Section 6 hereof if Accrued Interest Debentures
had been issued to the Holder on such date in payment of such interest and such
Accrued Interest Debentures were converted by the Holder immediately thereafter.
Unless the Holder gives the Company not less than 10 days' prior written notice
of the exercise of such option, the Holder shall be deemed to have irrevocably
elected to receive payment of such interest in cash. Any exercise or deemed
exercise of such option shall be binding on any subsequent Holder of this
Debenture.
(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, other than the issuance of Accrued Interest Debentures, 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 $640,000.04 Restated and Amended Term Loan Note, dated
April 25, 1997, and (B) that certain $2,200,000 Sixth Restated and Amended
Revolving Credit Note, dated April 25, 1997, 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 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 this Debenture, shall
impair the obligation of the Company, which is absolute and unconditional, to
pay to the Holder the principal of and interest on this Debenture as and when
the same shall become due and payable in accordance with the terms hereof.
(h) Advances in Reliance. The Holder of this Debenture, by its
acceptance hereof, 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 this
Debenture, 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 the Holder of this Debenture
(including the obligation to pay the Accrued Interest Debentures when due) are
secured by certain Collateral to the extent provided in the Amended and Restated
Security Agreement, dated as of March 7, 1996, as amended and restated as of
July 29, 1997 ("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 _____________
(___________) shares of 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, at the Company's principal office at 00 Xxxxxxx
Xxxxx, Xxxxxxx, 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. At the option of
the Holder, such accrued but unpaid interest shall be paid either (a) in cash or
(b) by the issuance by the Company to the Holder of shares of Common Stock into
which Accrued Interest Debentures would be convertible pursuant to Section 6
hereof if Accrued Interest Debentures had been issued to the Holder on such date
in payment of such interest and such Accrued Interest Debentures were converted
by the Holder immediately thereafter. Unless the Holder gives the Company not
less than 10 days' prior written notice of the exercise of such option, the
Holder shall be deemed to have irrevocably elected to receive payment of such
interest in cash. Any exercise or deemed exercise of such option shall be
binding on any subsequent Holder of this Debenture.
(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 the
exercise or conversion of (i) the Debentures (and any replacement Debenture or
Debentures issued upon transfer or exchange of this Debenture), (ii) any Accrued
Interest Debentures (and any replacement Accrued Interest Debenture or Accrued
Interest Debentures issued upon transfer or exchange of the Accrued Interest
Debentures), (iii) the Company's Amended and Restated Class B 13% Convertible
Senior Subordinated Pay-in-Kind Debentures due 1999 (the "Class B Debentures")
(and any replacement Class B Debenture or Class B Debentures issued upon
transfer or exchange of the Class B Debentures), (iv) any additional securities
issued in lieu of cash interest otherwise payable on the Class B Debentures (the
"Class B Accrued Interest Debentures") (and any replacement Class B Accrued
Interest Debenture or Class B Accrued Interest Debentures issued upon transfer
or exchange of the Class B Accrued Interest Debentures), (v) securities
outstanding on the date hereof, (vi) awards made pursuant to the Company's Stock
Compensation Program (the "Plan"), (vii) awards made pursuant to any incentive
compensation plan or arrangement approved by the Company's Board of Directors or
by the Compensation Committee of the Company's Board of Directors, (viii) the
Company's Series G Warrants, (ix) the Company's Series H Warrants, or (x) the
Company's Series I Warrants) (such securities, collectively, the "Subject
Securities") for a consideration per share less than $.52 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 other
than the Subject 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
and other assets) 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 in
good faith 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 are 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 issuance 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) On or prior to [90 days after date of issuance]
[date], the Company will file a registration statement ("Registration
Statement") with the Securities and Exchange Commission ("SEC") covering
the shares of Common Stock issuable upon conversion of the Debentures and
any Accrued Interest Debentures (and covering such other securities as the
Company shall determine in its sole discretion) (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 until the earlier
of (i) seven years from the date it is declared effective by the SEC, or
(ii) the sale of all of the Registrable Securities.
(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; provided, however,
that by accepting this Debenture, the Holder agrees, if requested
by the managing underwriter(s) in connection with an underwritten
public offering of the Company's equity securities, to enter into
a customary agreement with such managing underwriter(s) not to
offer for sale or sell its, his or her Registrable Securities for
up to 180 days after such offering. 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"), any person deemed to be an
underwriter of the Registrable Securities 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, which shall not be unreasonably withheld.
(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 convert his, her or its Debentures or 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 day following the
date of issuance hereof] [date], or (b) the Registration Statement has not
been declared effective by the SEC on or prior to [the 180th day following
the date of issuance hereof] [date], the annual interest rate on the
Debentures shall be the rate per annum ("Default Rate") which is 13%
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 seventeen 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 Holder 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,
consistently applied ("GAAP") 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 the Holder 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 the 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 the Holder may reasonably require;
(viii) immediately give notice to the Holder 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:
(i) At the end of each fiscal quarter, the Company shall maintain
a Tangible Net Worth of (-3,042,322) or greater (as calculated in
accordance with GAAP). 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; and
(ii) At the end of each fiscal quarter, the Company shall report
a net income (gross income less taxes and extraordinary items) of not less
than $1.00.
(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
outstanding on the date hereof; (C) indebtedness represented by the
Company's 13% Senior Subordinated Interest Note (the "Note") (and any
replacement Note or Notes issued upon transfer or exchange of the Note),
(D) indebtedness represented by the Debentures (and any replacement
Debenture or Debentures issued upon transfer or exchange of the
Debentures); (E) indebtedness represented by the Accrued Interest
Debentures (and any replacement Accrued Interest Debenture or Accrued
Interest Debentures issued upon transfer or exchange of the Accrued
Interest Debentures); (F) indebtedness represented by the Class B
Debentures (and any replacement Class B Debenture or Class B Debentures
issued upon transfer or exchange of the Class B Debentures); (G)
indebtedness represented by the Class B Accrued Interest Debentures (and
any replacement Class B Accrued Interest Debenture or Class B Accrued
Interest Debentures issued upon transfer or exchange of the Class B Accrued
Interest Debentures); and (H) 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 the Debentures, (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 (collectively,
"Permitted Indebtedness");
(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 Permitted Indebtedness; (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 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 1986,
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
(excluding awards granted under the Plan or under an incentive compensation
plan or arrangement approved by the Company's Board of Directors or by the
Compensation Committee of the Company's Board of Directors) 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), (D) loans made to
Xxxxxx X. Xxxxxxxxxx and Xxxxxx Deutsch in the aggregate principal amount
of $162,950 existing on the date hereof, and (E) loans made to Xxxxxx X.
Xxxxxx and Xxxxxxx Xxxxxxx in the aggregate amount of $675,000 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 director and compensation arrangements with
Affiliates serving as officers and/or directors of the Company approved by
the Company's Board of Directors 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
this 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 this 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 constitute a valid and perfected
lien and security interest in and to the Collateral (as defined therein) or
the Company shall take any position inconsistent therewith or any of the
provisions of the Security Agreement that permit the Holder to exercise its
remedies thereunder 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 representation or warranty made by the Company in the
Purchase Agreement, dated July 29, 1997 between the Company and the
original Holder of this Debenture, the Security Documents (as defined in
such Purchase Agreement), or any other certificate or instrument delivered
in connection therewith shall have been untrue in any material respect when
made; or
(x) the Registration Statement shall not have become effective
[within 270 days after the date hereof] [on or prior to [date]].
(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 Debentures.
(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, 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 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, 00 Xxxxxxx Xxxxx, Xxxxxxx,
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 the 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 the 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
the Holder, or collected by the 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 the 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 the 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 Class A 13%
Convertible Senior Subordinated Pay-in-Kind Debenture this ___ day of
____________, 199__.
LOGIMETRICS, INC.
By: ______________________________
Name: Xxxxxxx X. Brand
Title: Chief Executive Officer
EXHIBIT A
ELECTION TO CONVERT
(All capitalized terms used and not otherwise
defined herein shall have the meanings
assigned to them in the Class A 13% Convertible Senior
Subordinated Pay-in-Kind Debentures)
LogiMetrics, Inc.
00 Xxxxxxx Xxxxx
Xxxxxxx, Xxx Xxxx 00000
TO WHOM IT MAY CONCERN:
The undersigned registered owner of the attached Class A 13% Convertible
Senior Subordinated Pay-in-Kind 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__
